On February 6, 2026, the U.S. Court of Appeals for the Fourth Circuit vacated a nationwide preliminary injunction that had blocked key provisions of two January 2025 Executive Orders aimed at ending diversity, equity, and inclusion (DEI) programs within federal grant and contract processes. The plaintiffs, three entities that receive federal funds through contracts or grants, obtained the injunction on First and Fifth Amendment grounds.
The injunction had barred federal agencies from terminating “equity-related” grants and contracts and from requiring recipients to certify that they do not operate any DEI programs that violate applicable federal anti‑discrimination law, under threat of False Claims Act (FCA) liability.
The Fourth Circuit concluded the plaintiffs lacked standing to challenge one provision and were unlikely to succeed on their facial challenges to the others. The court stressed the narrowness of its ruling, which only addressed whether the Executive Orders are facially unconstitutional, and not the legality of specific DEI programs or any specific termination decision. The case was remanded, leaving the Executive Orders in effect.
Background
President Trump issued two Executive Orders in January 2025 that directed executive agencies to end DEI in federal grant and contract processes. See Exec. Order No. 14151, 90 Fed. Reg. 8339 (Jan 20, 2025); Exec. Order No. 14173, 90 Fed. Reg. 8633 (Jan. 21, 2025). At issue in the litigation were three provisions of the Executive Orders:
Termination Provision. The Termination Provision directs the termination of all DEI-related and environmental justice offices, positions, equity action plans, initiatives, programs, grants, and contracts, as well as related performance requirements for employees, contractors, and grantees.
Certification Provision. The Certification Provision requires federal grant and contract recipients to certify their compliance with federal anti-discrimination laws. It also makes this certification material to the government's payment decisions for FCA purposes.
Enforcement Threat Provision. The Enforcement Threat Provision directs agency heads to submit to the President plans to deter DEI programs or principles that constitute illegal discrimination or preferences.
Key Legal Findings
Standing and Ripeness. The Court found plaintiffs lacked standing to challenge the Enforcement Threat Provision and that their challenge was unripe, viewing it as an internal government directive with speculative effects. However, it found they had established standing and ripeness with respect to their challenge to the Termination and Certification Provisions because plaintiffs plausibly alleged concrete financial injuries and chilled speech risks.
Likelihood of Success. The Court found that plaintiffs were unlikely to succeed on the merits of their challenges to both the Termination and Certification Provisions but emphasized that both provisions could be challenged in specific enforcement contexts.
The Court determined that plaintiffs were unlikely to succeed on their facial vagueness challenge to the Termination Provision. It reasoned that the provision is a policy directive to government agencies, is limited “to the maximum extent allowed by law,” and operates in the context of government funding, which permits broader language than in a criminal statute or regulatory scheme.
Similarly, the Court concluded a facial First Amendment challenge to the Certification Provision was unlikely to succeed because it requires certifying compliance with existing laws and does not on its face suppress lawful speech or viewpoints. However, the Court noted the provision could be challenged as-applied if agencies misinterpret anti-discrimination law.
What This Means for Federal Contractors and Grantees
With the injunction vacated, federal agencies may proceed to terminate “equity-related” grants and contracts, and condition new funding on the revised compliance certifications. However, agencies remain constrained by existing law, and their termination or enforcement actions can be challenged on an as-applied basis.
Institutions receiving federal funds should audit their DEI initiatives, review grant and contract language for new or revised certification clauses, and evaluate potential exposure for programs that could be characterized as discriminatory.
Next Steps
Developments in this space are rapidly evolving as the administration continues to target DEI activities. Federal contractors and grant recipients should consult counsel regarding compliance strategies and risk assessments related to their DEI activities and federal funding. Our previous alerts can be found here, here, and here.
Our team at PLG, which includes former attorneys from the Departments of Education, Justice, and Health & Human Services, can assist clients in navigating these evolving regulatory and enforcement challenges, ensuring compliance with applicable civil rights laws and administrative requirements while honoring institutional values.
