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Two cases involving challenges to the Trump Administration's Executive Orders on Diversity, Equity, and Inclusion (DEI) are making waves in the federal appellate courts—each raising fundamental questions about the scope and legality of the Administration's policy direction.
Fourth Circuit: Lifted Injunction
On February 6, 2026, the Fourth Circuit Court of Appeals reversed a district court injunction that had blocked enforcement of President Trump's Executive Orders targeting DEI in federal funding. The suit, led by the City of Baltimore, challenged several provisions as unconstitutional and had initially resulted in a nationwide halt to implementation of key provisions, including the DEI certification and termination requirements. We previously reported on the district court litigation and injunction here.
The appellate court vacated the preliminary injunction and remanded the case for further proceedings. The panel found plaintiffs lacked standing to challenge the "enforcement threat" provision of the orders, as they could not demonstrate an injury beyond generalized fear of government retribution. While the plaintiffs did have standing to challenge the termination and certification provisions, the court held they failed to show a "substantial risk that application of the provisions will lead to suppression of speech." Speculative fears or the mere prospect of future government action, such as completion of an internal report, did not establish the kind of harm required for a justiciable case.
Importantly, the ruling clarified that the President retains broad authority to set funding priorities. As the opinion put it, "Whether that's sound policy or not isn't our call. We ask only whether the policy is unconstitutionally vague for funding recipients." The requirement for federal grantees to certify compliance with federal antidiscrimination laws "gave [the court] some pause, but not enough" to warrant an injunction, especially since no plaintiff had experienced actual funding withdrawal or punitive enforcement. The court underscored that facial constitutional challenges require concrete injury—and organizations may still challenge specific enforcement actions if agencies misapply the policy. As the Fourth Circuit concluded:
Facial invalidation again 'is, manifestly, strong medicine.' ... Here, it proved too strong. We therefore vacate the district court's order granting plaintiffs' motion for a preliminary injunction, and remand for further proceedings.
Seventh Circuit: What Is Illegal DEI?
Meanwhile, in a significant parallel action, the Seventh Circuit recently confronted the Trump Administration in oral argument over the same Executive Orders. This case, brought by Chicago Women in Trades, highlights ongoing anxieties about compliance and definitions. We have been closely tracking this case, discussed here and here.
During argument, appeals judges pressed Deputy Assistant Attorney General Eric McArthur to explain precisely what the Administration considered "illegal DEI." One judge observed, "Programs that have been seen as combating historical discrimination were suddenly characterized as violating anti-discrimination laws, with no definition as to how and when DEI programs will fall on the illegal side of the analysis. What type of DEI activities are still lawful, if any? Are there any?" The pointed question reflects the uncertainty faced by nonprofits, employers, and educational institutions the compliance status of which has been thrown into doubt.
McArthur asserted that the Executive Orders do not render all DEI activities unlawful and pointed to a Department of Justice memo from July 29, 2025 (see our blog post here), which outlines examples of conduct deemed illegal under federal anti-discrimination laws. However, the panel remained skeptical, noting that neither in court briefings nor in oral argument had the government provided a clear definition—leaving organizations without meaningful guidance.
Common Threads: Uncertainty, Lack of Clear Standards
The issues raised in the Seventh Circuit echo those in the Fourth: both courts are concerned about vague criteria and the absence of actionable guidance. Organizations with DEI initiatives—once encouraged or permitted under prior federal policies—now operate in legal limbo, unsure where the boundaries lie. Broad characterizations of "illegal DEI" are inadequate without concrete criteria and transparent enforcement protocols, and both courts have suggested that, unless the government clarifies the scope, affected entities will continue to navigate an uncertain landscape with potentially significant consequences under the False Claims Act.
Together, these appellate proceedings highlight a growing judicial skepticism regarding the Trump Administration's DEI regulatory climate. Courts are demanding concrete definitions and parameters to ensure organizations working to promote inclusion are not left in the dark about how federal guidelines apply to their work. As the legal challenges progress, the need for policymakers to provide clarity and specificity has never been more urgent. Ballard Spahr's Labor and Employment Group frequently advises employers on issues related to labor employment and policy. We will continue to monitor the Administration's agenda and the impact of further anti-discrimination laws and interpretation. Please contact us if we can assist you with these matters.
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