A federal court has vacated a sweeping Education Department directive that led to the cancellation of more than $600 million in teacher training grants tied to diversity, equity, and inclusion programming.
The U.S. District Court for the District of Massachusetts ruled on September 17, 2026, that the department’s February 2025 internal directive was arbitrary, capricious, and contrary to federal law.
Eight states, California, Colorado, Illinois, Maryland, Massachusetts, New Jersey, New York, and Wisconsin, prevailed on summary judgment in the case, formally captioned State of California et al. v. U.S. Dep’t of Education et al.
The court found the directive unlawful on two independent grounds under the Administrative Procedure Act and declined to reach the states’ constitutional claims.
Acting Secretary of Education Denise Carter had issued the directive on February 5, 2025, instructing department personnel to review and terminate grants deemed inconsistent with the administration’s priorities, identifying DEI as potentially constituting discriminatory practices.
Crucially, the directive never defined “DEI,” provided no examples of prohibited activities, and was not subjected to notice-and-comment rulemaking before taking effect across the department.
Seven Education Department personnel conducted grant reviews over roughly one week, after which the department terminated 104 of 109 Teacher Quality Partnership and Supporting Effective Educator Development grants.
The court identified four distinct defects making the directive arbitrary and capricious, including the failure to define DEI, the reversal of longstanding department policy without acknowledging the change, and the failure to weigh institutional reliance interests.
Defense counsel acknowledged at oral argument that the directive reached practices that do not violate civil rights law, including affirmative action, further undermining the legal basis for the terminations.
The court also found the directive contrary to three independent sources of law, including the governing grant statutes, the General Education Provisions Act’s notice-and-comment requirement, and the Uniform Guidance’s limits on post-award terminations.
The eight plaintiff states collectively held more than forty active grants totalling over $250 million, funding teacher recruitment, training, and retention in high-need and underserved school districts across universities, school districts, and nonprofits.
The court vacated the directive in its entirety, rejecting the Education Department’s argument that relief should be limited to the plaintiff states, holding that APA vacatur operates on the policy itself and is not party-restricted.
Legal analysts note the ruling carries significant implications for any employer operating within a federal funding relationship, not just those in the education sector.
The court’s finding that vagueness was fatal to the directive echoes challenges employers have faced since the executive orders were issued, as the administration has not drawn a clear line between lawful and unlawful DEI-related programmes and workforce policies.
The Uniform Guidance holding may, however, have a limited lifespan, as the Office of Management and Budget published a proposed rule on May 29, 2026, that would rewrite the relevant regulation to expressly authorise discretionary termination based on agency priorities at the time of termination.
Congress inserted a provision into the Continuing Resolution, known as Section 157, that delays implementation of the proposed OMB rule through December 11, 2026, while the rule itself is also expected to face its own legal challenges.
The ruling does not restore individual grant awards already terminated under the directive, as those claims must be filed separately with the Court of Federal Claims.
The Education Department retains the option to appeal, and its separate June 2025 guidance governing continuation awards remains in effect under a different regulatory authority.
This decision joins a growing pattern of federal courts blocking anti-DEI funding actions spanning the Education Department, the U.S. Department of Agriculture, and the federal contractor space more broadly.