Michigan Attorney General Dana Nessel has joined a coalition of 20 attorneys general in a lawsuit against the Trump administration regarding new requirements placed on federal contractors. The legal challenge, filed in the U.S. District Court for the District of Maryland, centers on the implementation of Executive Order No. 14398.
Issued on March 26, 2026, the executive order requires federal agencies to add terms to contracts that prohibit federal contractors, including state agencies, from participating in “racially discriminatory DEI activities.” The coalition argues that federal agencies rushed these new rules and bypassed standard government procedures, specifically the legal requirement to open the rules for public comment.
Because of this skipped step, the lawsuit claims contractors now lack clear guidance on how the new terms work in practice or how they differ from current anti-discrimination laws. The federal government estimates the order could impact up to 640,000 contracts and subcontracts across the country. Contractors who fail to comply with the new rules could face canceled contracts, bans on future federal work, and lawsuits under the False Claims Act.
“Unsurprisingly, the Trump administration is at it again – unlawfully sidestepping procedures to impose vague and confusing conditions on federal contracts,” Nessel said. “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.”
Federal agencies began adding the updated terms to contracts in April 2026 and have a directive to modify existing contracts by July 24, 2026. The states involved in the lawsuit collectively hold federal contracts worth billions of dollars.
The coalition states that federal agencies violated the Administrative Procedure Act by failing to provide public notice, skipping the required comment period, exceeding their legal authority, and failing to properly justify the new requirements. The lawsuit asks the court to declare the actions unlawful and block the agencies from enforcing the updated contract terms.
Joining Michigan in 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.
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