Federal Court Vacates HHS and HUD Grant Conditions Tied to DEI and “Gender Ideology” Executive Orders
WHAT: In Rhode Island Coalition Against Domestic Violence v. Kennedy, the U.S. District Court for the District of Rhode Island granted summary judgment for a coalition of 22 nonprofit grantees, holding that a package of new grant conditions imposed by the U.S. Department of Health and Human Services (HHS) and the U.S. Department of Housing and Urban Development (HUD) was arbitrary and capricious under the Administrative Procedure Act (APA), and vacating them in full.
The challenged conditions (Conditions) were incorporated into grant terms and certifications across HHS and HUD programs and required grant recipients to, among other things, (1) comply with existing and future Executive Orders as directed by the agency; (2) refrain from using funds to promote “gender ideology” as defined in Executive Order 14168; and (3) certify compliance with all federal antidiscrimination laws, which the Administration has relied on to combat diversity, equity, and inclusion (DEI) policies.
The court held that the Conditions were arbitrary and capricious for three reasons. First, the agencies did not provide a reasoned explanation for the Conditions beyond seeking to align with the President’s Executive Orders, and implementation of Executive Orders, standing alone, does not relieve agencies of their obligation to engage in reasoned decision-making. Second, the agencies failed to consider the reliance interests of existing grantees who structured their programs around prior grant terms and conditions. Third, the agencies did not consider important practical difficulties grantees could face in understanding and complying with the Conditions.
WHEN: The court issued its decision on August 14, 2026, following an October 10, 2025 preliminary injunction that temporarily blocked the Conditions from taking effect.
WHAT IT MEANS FOR RECIPIENTS: The decision has several practical implications for HHS and HUD grantees and for federal grant recipients more broadly.
The vacatur applies to all recipients, not just the plaintiffs. The court vacated the Conditions rather than enjoining their application to the named plaintiffs. For now, the Conditions have no legal force against any HHS or HUD applicants or grant recipients. In other words, the agencies cannot require compliance, condition or withhold payment, terminate an award, or pursue enforcement (including under the False Claims Act (FCA)) based on the Conditions. That said, the Conditions will remain as written – though potentially unenforceable – terms in an executed agreement until the agency issues a modification. Grantees should be aware of this potential ambiguity and ensure they are adequately protecting themselves as a result, such as by requesting a modification or asking their Agreements Officer to confirm whether the Conditions apply.
The government will likely appeal or seek to adopt replacement conditions. The court concluded that the agencies’ actions were procedurally deficient, but it did not decide whether the agencies lacked authority to issue the grant conditions or whether the Conditions were unconstitutional. The ruling does not foreclose HHS or HUD from creating similar conditions in the future so long as the new conditions satisfy the APA’s requirements for reasoned decision-making. Based on the Administration’s recent trend of appealing adverse decisions, it is also possible that the government will appeal the decision to the First Circuit. Grantees should watch for a First Circuit appeal and reworked conditions surfacing in new notices of funding opportunity, award terms, and modifications to existing awards. Other agencies are apt to use this ruling as guidance to shore up their own intended changes to their grant terms and conditions.
DEI-related FCA risk continues, including through other agencies’ conditions. Although the court vacated HHS and HUD’s DEI conditions, federal agencies continue to pursue antidiscrimination and DEI-related compliance initiatives through other mechanisms, as covered in our previous alert here. Executive Order 14173 (signed January 21, 2025) directs agencies to require recipients to agree that their compliance with applicable federal antidiscrimination laws is material to the government’s payment decisions for the purposes of the FCA. The U.S. Department of Justice has also established a Civil Rights Fraud Initiative to pursue such claims, and in April 2026, announced its first DEI-related FCA settlement. Similar DEI-related conditions have appeared in other agencies’ grant and cooperative-agreement programs. So, grantees should continue to closely evaluate new opportunities and awards for other antidiscrimination and DEI-related certifications and representations and ensure their policies and practices satisfy any such requirements.
Wiley’s Federal Grants and Cooperative Agreements and Government Contracts practices have extensive experience helping recipients navigate changing federal grant terms, certifications, compliance requirements, and funding disputes. We will continue to monitor this case and related developments across federal financial assistance programs.
