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On October 31, 2025, the U.S. District Court for the Western District of Washington halted enforcement of Section 3(b)(iv) of Executive Order 14173 (the "Diversity, Equity, and Inclusion (DEI) Order") and Section 3(g) of Executive Order (EO) 14168 (the "Gender Order") against the City of Seattle by granting a preliminary injunction.
In City of Seattle v. Trump, the court found the City of Seattle was likely to succeed on its Administrative Procedure Act claims, concluding that the challenged funding conditions exceeded statutory authority, implicated separation-of-powers principles, and were arbitrary and capricious.
The court ordered immediate remedial steps, declaring past implementation actions null and void and requiring a compliance status report within three days. The injunction is limited to the City of Seattle and does not extend nationwide; however, it sets the stage for future injunctive relief actions.
Quick Hits
- The U.S. District Court for the Western District of Washington rejected federal agency positions that treat DEI-oriented, race-neutral, and transgender facility access as presumptively unlawful, noting that those interpretations conflicted with established precedent.
- The court criticized EO 14173's "materiality" clause, which declared global compliance with all anti-discrimination laws per se material to False Claims Act payment, as boilerplate adopted without reasoned analysis, tailoring, or consideration of reliance interests.
- The court found EO 14168's "gender ideology" restriction undefined and likely to chill lawful activities and enable arbitrary enforcement, which is incompatible with effective grant administration.
Background
EO 14173 directs federal agencies to incorporate into all grants and contracts a clause requiring recipients of federal funds to certify compliance "in all respects" with "all applicable Federal anti-discrimination laws" and to agree that such compliance is "material" to payment decisions for False Claims Act (FCA) purposes. Federal agencies implemented this directive with the City of Seattle via standardized terms, including the April 2025 Federal Transit Administration Master Agreement, which deems anti-discrimination compliance material to payment and requires recipients to certify they do not operate DEI programs that violate applicable law.
EO 14168 directs agencies to ensure that federal funds do not "promote gender ideology." The U.S. Department of Housing and Urban Development (HUD) added this restriction to its grant terms with the City of Seattle and relied on the Homeless Assistance Act's catchall provision—which permits "such other terms and conditions" deemed "necessary for effective and efficient administration"—as the legal basis.
The City of Seattle alleged that these measures jeopardized substantial federal funding for programs central to public safety, infrastructure, and social services, and cited recent HUD disapprovals and agency communications that increase enforcement risk tied to the executive orders.
The Court's Analysis
Rejecting the government's contention that EO 14173 simply restates obligations under Title VI of the Civil Rights Act of 1964, the court found federal agencies redefining "discrimination" to match the Executive's view and using grant conditions and potential FCA liability to force recipients to follow that view. In particular, the court identified the U.S. Department of Transportation's statement that policies designed to achieve DEI goals "presumptively violate[] Federal law," and U.S. Department of Justice communications suggesting FCA risk for permitting transgender individuals to access facilities aligned with gender identity despite contrary appellate authority, and guidance treating race-neutral "proxies" as unlawful if intended to advance diversity goals. The court also identified direct conflicts between the DEI Order's thrust and statutory directions in HUD programs that require attention to historically disadvantaged groups.
Turning to EO 14168, the court held that HUD could not use the Homeless Assistance Act's catchall provision to add an ideological ban on "gender ideology." The catchall provision covers only operational requirements—administration, accountability, confidentiality, school enrollment, and financial reporting—so the ban, the court found, likely falls outside its scope.
On review of the challenged funding requirements, the court found that the federal agencies likely departed from settled civil rights law without explanation, conditioned funding on ideology rather than statutory purposes, declared global anti‑discrimination compliance "material" to FCA payment without reasoned analysis or regard for reliance interests, and imposed an undefined, "politically charged" "gender ideology" ban that invited arbitrary enforcement and chilled lawful activity. The court denied requests for a bond and for a stay of the injunction.
Next Steps
While the ruling immediately pertains to the City of Seattle, it signals a judicial skepticism toward executive efforts to reshape substantive civil rights standards or expand FCA liability through grant and contract boilerplate lacking clear congressional authorization and reasoned analysis. Employers may want to carefully review current and forthcoming award terms referencing EO 14173 or EO 14168 and align program and workplace policies with settled law and controlling precedent. Where terms are vague, overbroad, or untethered to statutory purposes, employers may consider seeking clarification or revision.
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