San Francisco Finds Success Challenging Federal DEI-Related Grant Conditions: Implications of San Francisco v. DOJ

The City and County of San Francisco recently won a preliminary injunction preventing the Department of Justice (DOJ) from enforcing new diversity, equity, and inclusion (DEI)-related conditions on community policing grants. If your organization receives federal grants or contracts and supports DEI initiatives, this case offers important insights into ongoing legal battles over federal funding requirements.

Key Takeaways:

• Statutory Conflict: The District Court for the Northern District of California ruled that DEI restrictions imposed by DOJ were incompatible with the Community Policing Act’s statutory language concerning the recruitment and hiring of racial and ethnic minority groups and women, highlighting courts’ skepticism of grant conditions that clash with express statutory language.
• Limits on Executive Authority: The Court held that DOJ lacked statutory authority to add new conditions on topics like COVID-19 vaccinations, gender ideology, or DEI programs, making such additions vulnerable to legal challenges under the Administrative Procedure Act (APA).
• False Claims Act Risk: While the injunction blocks enforcement for now, DOJ’s position that anti-discrimination compliance is material to payment decisions may pose future liability risks for grant recipients.
• Jurisdictional Debate: DOJ’s Tucker Act argument—asserting that only the Court of Federal Claims has jurisdiction over such disputes—was rejected, but similar jurisdictional challenges are likely to persist until definitively resolved.
• Ongoing Uncertainty: The ruling is preliminary, and outcomes may differ for others; organizations with DEI initiatives receiving federal funding should closely monitor legal developments in this rapidly evolving area.

Another plaintiff has successfully secured a preliminary injunction temporarily blocking the federal government from adding new conditions related to DEI to congressionally authorized grants. On January 21, the District Court for the Northern District of California granted the City and County of San Francisco’s² request for a preliminary injunction related to new DEI-related grant conditions added by the DOJ Office of Community Oriented Policing Services (COPS) to funding programs related to community policing. The Court held that the new conditions directly contradicted the statutory language authorizing the grants and therefore Plaintiffs were likely to succeed on their claims under the APA. This case joins several recent decisions where courts have rejected new grant conditions related to DEI that contradict express statutory instructions.³

Background

The Government’s New Conditions

In January 2025, the Trump Administration published Executive Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity,⁴ which required all federal agencies to include in every contract or grant: 

• A term requiring contractors or grantees to agree that “compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” for purposes of the False Claims Act.
• A term requiring that contractors or grantees certify that they do not operate any “programs promoting DEI that violate any applicable Federal anti-discrimination laws.”

In July 2025, Attorney General Pam Bondi issued a memorandum titled Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination,⁵ identifying “best practices” for federal grant recipients to comply with federal anti-discrimination laws. The “guidance” includes:

• Using race, sex, or other protected characteristics for employment, program participation, resource allocation, or similar activities is unlawful, except in rare cases where such discrimination satisfies the relevant level of judicial scrutiny; and
• Facially neutral criteria such as “cultural competence,” “lived experience,” and geographic targeting that function as proxies for protected characteristics violate federal law if designed or applied with intent to advantage or disadvantage individuals based on protected characteristics.

The Community Policing Act 

The Community Policing Act authorizes the Attorney General to make grants related to public safety and community policing, including for the purposes of hiring and training law enforcement officers on some specific issues, including engaging individuals with mental illness and substance abuse issues.⁶ The statute requires each application for the grant to “provide assurances that the applicant will, to the extent practicable, seek, recruit, and hire members of racial and ethnic minority groups and women in order to increase their ranks within the sworn positions in the law enforcement agency.”⁷

In accordance with the Administration’s executive orders, DOJ added new conditions to the 2025 terms and conditions for grants administered under the Community Policing Act, which San Francisco and its fellow Plaintiffs argued were unlawful. These terms and conditions included: 

• Nondiscrimination/DEI Condition: Required all grant recipients to certify that compliance with all applicable federal civil rights and nondiscrimination laws is material to the government’s payment decision and that they “do not operate any programs (including any such programs having components relating to diversity, equity, and inclusion) that violate any applicable Federal civil rights or nondiscrimination laws.” 
• Executive Order Condition: Required recipients to certify that they “comply with all applicable federal laws and Presidential Memoranda and all Executive Orders by the President.” 
• Federal Funding Restrictions: Prohibited the use of grant funds to:
  • Directly or indirectly support institutions requiring students to receive COVID-19 vaccinations for in-person attendance;
  • Promote “gender ideology”;
  • Support projects that provide or advance “diversity, equity, inclusion, and accessibility, or environmental justice programs, services, or activities”; or
  • Benefit agencies that fail to protect public monuments, memorials, and statues from destruction or vandalism.⁸

The new terms and conditions also allowed the COPS Office to place a hold on the award and/or take other remedial actions if a grantee is found not to be in compliance with the funding restrictions. 

The Court Grants a Preliminary Injunction

Though the Plaintiffs argued that DOJ violated the Spending Clause and unconstitutionally encroached on Congress’s power by inserting new conditions not approved by Congress,⁹ the Court avoided these questions and granted a preliminary injunction based on Plaintiffs’ APA claims. The preliminary injunction prohibits the federal government from imposing or enforcing the challenged conditions on the Plaintiffs’ COPS grants and from withholding funding based on those conditions. 

The Court’s key findings included:

• No Statutory Basis for the Conditions: The Court found that Plaintiffs would likely prevail on their APA claim because no statutory provision related to the Community Policing Act authorized conditions related to COVID-19 vaccinations, “gender ideology,” protection of public monuments, or blanket compliance with executive orders, and that the government failed to identify any constitutional or statutory provision that authorized the COPS Office to impose the challenged conditions.¹⁰
• Conditions Conflict with Express Statutory Language: Because the Community Policing Act expressly mandates that grant applicants will seek to hire “racial and ethnic minority groups and women,” the Court found the challenged conditions to be “antithetical to an animating goal of the Community Policing Act.” As such, without statutory authority supporting the new conditions, DOJ could not modify the grant-authorizing statute’s requirements. 
• “A Regulation Is Not a Statute”: The government argued that its new conditions merely “reiterate[d] that recipients must comply with federal anti-discrimination law and executive orders”¹¹ and that other federal regulations governing DOJ grant-making activities required DOJ to incorporate “‘policy requirements,’ including those flowing from ‘executive order[s].’”¹² The Court rejected this defense by stating plainly that “a regulation is not a statute,” and DOJ inappropriately conflated the authority granted by agency regulation with statutes.¹³ And, while Plaintiffs are required to follow all federal laws, anti-discrimination and otherwise, that requirement did not authorize the government to insert new conditions into grants, particularly those that “stand in direct conflict with the plain text” of the grant-authorizing statute or that seek to “compel compliance . . . under threat of losing funding or even facing liability under the False Claims Act.”¹⁴

Implications

The Court’s order continues a trend of other recent federal court decisions involving DEI-related contractual or grant conditions.¹⁵ For those facing potential enforcement actions or defunding by DOJ, some key takeaways include:

• Express Statutory Conflicts: Courts are particularly skeptical of conditions that directly conflict with express statutory requirements contained in grant-authorizing statutes—here, the statutory mandate to recruit diverse candidates was deemed incompatible with conditions prohibiting DEI programs. Government contractors participating in federal programs that contain similar requirements should consider similar arguments in challenging new conditions.
• Absent Authority: Where grant-authorizing or other statutes do not provide the government with the authority to add conditions on specific topics, targets may be able to successfully argue—irrespective of other regulations or executive orders—that the administration is violating the APA by adding new conditions where non-compliance carries potential FCA liability. 
• False Claims Act Exposure Remains Unclear: The government’s position that compliance with anti-discrimination laws is material to payment decisions for False Claims Act purposes creates potential liability exposure for grant recipients. While this preliminary injunction blocks enforcement of the challenged conditions for these plaintiffs, DOJ may point to such language to evidence materiality in future cases. 
• Tucker Act Continues to Loom Over Cases Involving Federal Grants/Contracts: DOJ argued that the Northern District of California lacked jurisdiction to rule on the preliminary injunction because the Tucker Act¹⁶ vests authority in the Court of Federal Claims over suits based on “any express or implied contract with the United States.”¹⁷ DOJ cited California v. Trump and National Institutes of Health v. American Public Health Association, where the Supreme Court deployed similar reasoning while reinstating the termination of various education- and health-related grants after district courts had held that the cancellations likely violated the APA.¹⁸ The Court disagreed and held that Plaintiffs’ case is “rooted in statutory and constitutional commands, not contract obligations” and while the remedy might involve the payment of money without the burden of the challenged conditions, the Court distinguished such a remedy from a plaintiff seeking payment owed pursuant to a contract, which would implicate the Tucker Act.¹⁹ Other courts have recently drawn a similar distinction where lawsuits challenge the enforcement of a condition rather than a grant termination.²⁰ Still, given their recent Supreme Court success in the grant termination context, it is likely that DOJ will continue to raise the Tucker Act in grant condition cases until the matter of jurisdiction is definitively settled. 

Of course, the Court’s ruling is preliminary, and the ultimate resolution will have to wait until the case is complete. And, while the Plaintiffs here were successful, others challenging similar federal actions on DEI, including the implementation of executive orders or cancellation of grants, have failed or had injunctions stayed on appeal.²¹ Any potential targets of federal enforcement who maintain DEI programming and receive federal funding by grant or contract should continue to monitor these developments closely. 

¹ 25-cv-09277-JD, Dkt. No 49 (Jan. 21, 2026) (hereafter the Order).
² San Francisco was joined by the County of Santa Clara, the City of Tucson, and the City of San Diego as plaintiffs. 
³ See, e.g., Cnty. of Santa Clara v. Noem, No. 25-CV-08330-WHO, 2025 WL 3251660, at *1, *31, *36-38 (N.D. Cal. Nov. 21, 2025).
⁴ 90 Fed. Reg. 8633 (Jan. 21, 2025).
⁵ Memorandum from Pam Bondi, Attorney General, Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination, DOJ, 2, 3, 5, and 7 (July 29, 2025) available /https://www.justice.gov/ag/media/1409486/dl?inline=&utm_medium=email&utm_source=govdelivery.
⁶ 34 U.S.C. §§ 10381(b)(2), (19), (20), (24).
⁷ Id. § 10382(c)(11).
⁸ Order at 5-6.
⁹ Id. at 10.
¹⁰ Id. at 11
¹¹ Id. at 12.
¹² Id.
¹³ Id.
¹⁴ Id.
¹⁵ See e.g., City of Chicago v. United States Dep't of Just., No. 25 C 13863, 2026 WL 114294, at *7 (N.D. Ill. Jan. 15, 2026) (granting preliminary injunction and finding that new conditions inserted into COPS grant on immigration enforcement and DEI are unconstitutional violations of the separation of powers, the Spending Clause, and the APA); Martin Luther King, Jr. Cnty. v. Turner, 785 F. Supp. 3d 863, 868 (W.D. Wash. 2025) (granting preliminary injunction regarding new conditions concerning “gender ideology” and immigration enforcement inserted into several federal contracts, including Housing and Urban Development and the Department of Transportation, as unconstitutional and violations of the APA).
¹⁶ 28 USC § 1491(a)(1).
¹⁷ Defendants’ Opposition to Plaintiffs’ Motion for a Preliminary Injunction, San Francisco v. DOJ, 25-cv-09277-JD, Dkt. No 32 at 6 (Dec. 2, 2025).
¹⁸ Id. (citing 604 U.S. 650, 650, 145 S. Ct. 966, 968, 221 L. Ed. 2d 515 (2025); 145 S. Ct. 2658, 222 L. Ed. 2d 1191 (2025)).
¹⁹ Order at 9.
²⁰ City of Chicago, 2026 WL 114294, at *4.
²¹ See e.g., Nat'l Ass'n of Diversity Officers in Higher Educ. v. Trump, No. 25-1189, Dkt. No. 29 (4th Cir. Mar. 14, 2025) (staying grant of preliminary injunction based on vagueness of DEI related executive orders);
Nat'l Urb. League v. Trump, 783 F. Supp. 3d 61, 96 (D.D.C. 2025) (denying preliminary injunction based on vagueness, holding that conditions described in executive order required plaintiffs to follow anti-discrimination laws). 

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Amanda M. Santella, an O’Melveny partner licensed to practice law in the District of Columbia and Maryland; Natasha W. Teleanu, an O’Melveny partner licensed to practice law in New York; Tristan Morales, an O'Melveny partner licensed to practice law in the District of Columbia and California; Hannah E. Dunham, an O'Melveny counsel licensed to practice law in California and the District of Columbia; Evan Hindman, an O'Melveny counsel licensed to practice law in California and Washington; and Joshua Goode, an O’Melveny associate licensed to practice law in the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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