Attorneys general from 19 states and Washington, D.C. filed a lawsuit in federal court in Baltimore challenging how federal agencies have implemented an executive order that aims to eliminate diversity, equity and inclusion initiatives among federal contractors, including many state entities that hold federal contracts.
The complaint contends that more than two dozen agencies have begun adding contract clauses that bar "any racially discriminatory DEI activities" but did so without providing notice or clarifying precisely what those restrictions encompass. The new terms derive from a March executive order directing agencies to adopt such language, part of a broader push by President Trump to remove DEI programs from the scope of federal contracting.
The states assert that the agencies’ approach sidesteps the procedural safeguards required by federal law. Specifically, the lawsuit accuses implementing agencies of acting in an arbitrary and capricious manner and of failing to solicit public comment before appending language from the executive order into contract terms. The state plaintiffs are asking the court to block federal agencies from imposing the contested clauses.
The filing notes that state agencies routinely enter into contracts with the federal government and that the states involved collectively hold billions of dollars in existing federal contracts. Citing federal estimates referenced by the Massachusetts attorney general’s office, the complaint says the order could touch as many as 640,000 contracts and subcontracts involving more than 34,000 unique contractors nationwide.
Massachusetts Attorney General Andrea Joy Campbell, whose office brought the suit along with counterparts in California, Illinois, New Jersey and other states, criticized the administration’s handling of the changes. "This is yet another example of haphazard actions designed to confuse and intimidate rather than provide clear guidance to people and businesses - in this case federal contractors," Campbell said in a statement.
The legal challenge joins an earlier case filed in the same Baltimore federal court in April by groups representing university faculty and minority business owners. That separate suit contends the executive order infringes contractors’ free-speech rights under the First Amendment and includes a motion for a preliminary injunction to halt the order while the litigation proceeds.
The states’ lawsuit names more than two dozen federal agencies that have added the new contract terms, though it does not allege those agencies followed notice-and-comment procedures before doing so. The complaint relies on the Administrative Procedure Act as the legal basis for claiming the agencies' actions were improper and seeks judicial intervention to prevent the contested contract language from taking effect.
The White House and the U.S. Department of Justice did not immediately respond to requests for comment on the lawsuit.
Debate over DEI has become sharply polarized. Civil rights advocates argue that DEI practices are intended to remedy historic inequities affecting marginalized groups, including women, LGBTQ people and racial and ethnic minorities. Opponents, including President Trump and many conservative voices, maintain that DEI programs can be discriminatory toward groups such as white people and men and that such programs may undercut merit-based decision-making.
The current litigation is set against a series of executive actions by the administration beginning last year aimed at eliminating DEI programs across multiple domains of the federal landscape, including within the federal government itself, higher education, federal contractors and recipients of federal grants. Those actions also included repeal of a 1965 executive order that had required federal contractors to take affirmative steps to recruit and hire minorities and women.
The case has been docketed as Maryland v. Hegseth in the U.S. District Court for the District of Maryland, No. 1:26-cv-02322. The filing lists attorneys for the state plaintiffs, including James Luh of the Maryland Attorney General's Office, Alexis Piazza of the California Attorney General's Office and Paul Berks of the Illinois Attorney General's Office, among others. The federal government had not yet listed counsel in the court filing at the time the complaint was filed.
This litigation will determine whether agencies must reverse course and follow formal rulemaking procedures when altering contract terms that affect thousands of contractors and billions of dollars in state and federal procurement. For the states and the contracting community, the dispute raises immediate questions about which contract provisions will remain enforceable while the litigation proceeds and about how agencies should communicate and implement policy changes tied to executive directives.