By Attorney General Dana Nessel
LANSING – Michigan Attorney General Dana Nessel joined a coalition of 20 attorneys general in suing the Trump administration over the addition of new terms to federal contracts (PDF) that – in the name of purging “diversity, equity, and inclusion” (DEI) from federal contracting – impose unclear and confusing requirements on contractors that may depart from antidiscrimination policies that contractors have followed for decades, and may threaten severe penalties on federal contractors without adequate notice of what is prohibited.
In their lawsuit, filed in the U.S. District Court for the District of Maryland, Attorney General Nessel and the coalition challenge the federal agencies’ rushed implementation of President Trump’s Executive Order No. 14398. The executive order, issued March 26, 2026, directs federal agencies to adopt new contract terms prohibiting federal contractors – including state agencies and instrumentalities – from engaging in “racially discriminatory DEI activities” in connection with their contract work.
In implementing the executive order, federal agencies took shortcuts around regular procedures designed to promote good government. For example, the agencies failed to invite comments from the public as required by law. Largely because of these shortcuts, contractors have no clear guidance on what the new contract terms require in practice, or whether or how the new requirements differ from existing laws that already prohibit racial discrimination. Contractors that fail to comply face severe penalties, including cancellation of their contracts, exclusion from all future federal contracts, and lawsuits under the False Claims Act. The confusing contract terms impose needless costs on contractors and threaten to chill lawful efforts to prevent, detect, and remedy discrimination.
“Unsurprisingly, the Trump administration is at it again – unlawfully sidestepping procedures to impose vague and confusing conditions on federal contracts,” said Attorney General Nessel. “The federal government rushed this process without providing clear guidance, so my colleagues and I are back in court to protect our states and ensure that resident services are not disrupted by these illegal demands.”
Michigan, with the federal government and the coalition states, collectively hold existing federal contracts worth billions of dollars. Federal agencies began adding the new terms into contracts in April 2026 and have been directed to modify existing contracts by July 24, 2026. The federal government estimates the order could affect as many as 640,000 contracts and subcontracts nationwide.
The coalition alleges that the federal agencies implementing the executive order violated the Administrative Procedure Act (APA) by failing to provide notice to the public or accept comments (as required by federal procurement law), exceeding their legal authority, and neglected to adequately explain or justify the new requirements. The lawsuit asks the court to hold the agencies’ actions unlawful and enjoin the agencies from imposing the new contract terms.
Joining Attorney General Nessel in filing the lawsuit are the attorneys general of California, Colorado, Connecticut, the District of Columbia, Hawaiʻi, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Oregon, Rhode Island, Vermont, Virginia, Washington, and Wisconsin.