DEI in Flux: Fourth Circuit's Decision Resuscitates DEI Executive Orders

The U.S. Court of Appeals for the Fourth Circuit issued an order on March 14, 2025, lifting the nationwide injunction on President Donald Trump's executive orders (EOs) targeting diversity, equity and inclusion (DEI) programs. The unanimous ruling allows enforcement to proceed while legal challenges continue through the courts. This decision reverses (at least temporarily) the Feb. 21, 2025, nationwide injunction discussed in a previous Holland & Knight alert. (See "DEI Revived? Judge Issues Nationwide Injunction Against DEI-Based Executive Orders," Feb. 26, 2025.) The Fourth Circuit has jurisdiction over cases from federal district courts and federal administrative agencies in Maryland, North Carolina, South Carolina, Virginia and West Virginia.

The EOs targeting DEI programs include provisions to terminate "equity-related" grants or contracts, require certifications from government contractors and grantees regarding compliance (subject to penalty under the False Claims Act) and encourage the private sector to end illegal discrimination and preferences, as discussed in a previous Holland & Knight alert. (See "DEI on the Ropes? The Future of DEI in the Trump Administration," Feb. 10, 2025.)

The three-judge panel made an important distinction: Although actions taken by federal agencies pursuant to these EOs could be unconstitutional, the orders themselves are not unconstitutional on their face.

Each of the judges on the panel had a different perspective on the EOs.

Chief Judge Albert Diaz Asks: "What Could Be More American than That?"

Chief Judge Diaz agreed that the government had met its burden to justify a stay but felt compelled to address what he called "a monster in America's closet": the controversy surrounding DEI initiatives. He criticized the EOs for characterizing DEI policies as containing "dangerous, demeaning, and immoral race- and sex-based preferences" while failing to define DEI or its component terms. In defense of DEI principles, Judge Diaz argued that "people of good faith who work to promote diversity, equity, and inclusion deserve praise, not opprobrium." He maintained that embracing diversity acknowledges Americans' social identity, fostering equity opens opportunities for all, and practicing inclusion creates environments where everyone feels valued – asking rhetorically, "What could be more American than that?"

Judge Pamela Harris Emphasizes the Limited Scope of the EOs

Judge Harris clarified that the EOs have a "distinctly limited scope" and do not establish a blanket illegality of all DEI efforts. Rather, they apply only to conduct violating existing federal antidiscrimination law. However, Judge Harris included an important caveat: "What the Orders say on their face and how they are enforced are two different things." She warned that enforcement actions exceeding the orders' narrow scope could raise serious First Amendment and due process concerns. She explicitly distanced herself from the orders' anti-DEI rhetoric, endorsing Judge Diaz's view that those promoting DEI deserve praise rather than criticism.

Judge Allison Blair Jones Rushing Focuses on Judicial Restraint and Impartiality

Judge Rushing approached the case from a different perspective, focusing on judicial restraint and procedural concerns. She raised red flags about the scope of the district court's preliminary injunction, which "purported to enjoin nondefendants from taking action against nonplaintiffs." Judge Rushing questioned the ripeness of the lawsuit and plaintiffs' standing, noting that the case does not challenge any specific agency action implementing the orders. She emphasized that ignoring limits on judicial power transforms courts into "virtually continuing monitors of the wisdom and soundness of executive action." Judge Rushing expressed disapproval of her colleagues' commentary on DEI, stating that a judge's opinion that DEI programs "deserve praise, not opprobrium" should "play absolutely no part in deciding this case."

Next Steps for Contractors

• With the injunction lifted, executive agencies can now seek certifications from contractors and grant recipients regarding DEI compliance with federal antidiscrimination laws. Specific agency actions in implementing the EOs are not immune from further legal challenges.
• Government contractors within the Fourth Circuit's jurisdiction must comply with the EOs despite any other injunctions that may be in place outside of the Fourth Circuit's jurisdiction.
• Federal contractors and grant recipients should take notice of the legal consequences, including exposure to False Claims Act liability, when making the required certifications under these orders.
• Neither the previous injunction nor this Fourth Circuit ruling impacts President Trump's action eliminating affirmative action requirements for government contractors, as discussed in a previous Holland & Knight alert. (See "President Trump Ends Affirmative Action Requirements for Government Contractors," Jan. 23, 2025.)

As this legal landscape continues to evolve, federal contractors and grant recipients should continue review their DEI programs and policies to ensure they are in compliance with the EOs, especially before making any required certifications. Holland & Knight will continue to issue updates on the legal status of and any challenges to agency implementation of the EOs.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.