States challenge federal contractor DEI order over False Claims Act materiality

Sidley reports that 19 states and the District of Columbia sued on June 10 to challenge President Trump’s Executive Order No. 14398, which links DEI-related conduct by federal contractors to potential False Claims Act liability. The plaintiffs argue that simply labeling anti-DEI compliance as material conflicts with the Supreme Court’s Escobar materiality standard. DEI risk has moved from policy review into government-contracting, FCA and administrative-law territory. Federal contractors need privilege-protected reviews of DEI language, certifications, training, hiring processes and contract clauses while the litigation unfolds.