On January 21, 2026, the United States Department of Education ("ED" or the "Department") stipulated to the dismissal of its appeal in American Federation of Teachers, et al v. U.S. Department of Education, which had been pending in the United States Court of Appeals for the Fourth Circuit. The appeal followed ED's unsuccessful defense of its February 14, 2025 Dear Colleague Letter (the "DCL") and related guidance documents, including a widely cited FAQ, which resulted in enforcement of the DCL having been enjoined since shortly after its adoption.
Although ED has not yet released a public statement regarding its motivation(s) for the dismissal, popular news outlets have responded to the news by describing ED's enforcement of its views relative to diversity, equity, and inclusion ("DEI") as "dead." This reporting has led many colleges and universities to question whether they should re-think their approaches to DEI.
What You Need to Know
- Although the DCL has been enjoined for the better part of a year, ED has continued to advance an Administration-aligned approach to DEI.
- The stipulated dismissal leaves in place a District Court ruling that will lend support to institutions seeking to challenge enforcement actions taken against them.
- How this development affects your institution will depend on your institution's existing response; those institutions which have taken a nuanced approach to date may conclude that meaningful adjustment is not warranted.
The Administration Has Continued to Advance Its DEI-Related Agenda
In the nine months since enforcement of the DCL was enjoined, the Administration has continued to vigorously advance its agenda relating to DEI through a variety of methods, including parallel guidance from other agencies, such as the Department of Justice and Equal Employment Opportunity Commission; the withdrawal of guidance documents and executive orders from prior administrations, including recission of the 60-year-old Executive Order 11246 ("Equal Employment Opportunity"); expressing skepticism that disparate impact liability is a proper claim under Title VI; and, of particular relevance for ED, withdrawing hundreds of grants deemed to be inconsistent with administration priorities.
These efforts have not largely met with opposition in Congress. And, nearly half of all states – containing hundreds of public and private colleges and universities – have enacted "anti-DEI" laws of some kind, many within the past year.
How the Stipulation of Dismissal Affects the Litigation Landscape
The stipulated dismissal of ED's appeal leaves in place a ruling from the U.S. District Court for the District of Maryland that concluded the DCL was unlawful for numerous reasons, including non-compliance with the Administrative Procedures Act ("APA") and, of particular relevance, being unconstitutionally vague. The preservation of this ruling substantially increases the likelihood that institutions seeking to challenge other adverse action by the Administration on similar grounds may be successful.
Moreover, as we explained in our just-in-time response to the DCL in February 2025, no threat to revoke federal funding may be fulfilled until "(1) the Department first permits voluntary compliance; (2) the institution has had the opportunity for a hearing before an administrative law judge, and at the hearing there is a finding of noncompliance; (3) the Department presents a written report to a Senate committee (and 30 days thereafter elapse). Even then, the decision to revoke funding may be challenged in federal court." The AFT lawsuit challenged ED's DCL and related documents as, among other things, teeing up the revocation of funding without following these administrative steps. The District Court's ruling remaining in place is an encouraging sign for institutions seeking to challenge any such revocation.
Practical Significance for Your Institution
The Administration's approach to DEI-related issues has never primarily rested upon case law or any one document. The approach has been to blanket the landscape with a variety of Executive Orders, memos, guidance documents, and affirmative investigations, creating an atmosphere where, DCL or no DCL, institutions fear the potential loss of grants; the disruption and (human and financial) costs of investigation; and, depending on the institution, the risks of depressed applicant interest and alumni and donor support, and Board and state or local government intervention. Even with this appeal withdrawn, those concerns remain.
Moreover, many institutions will find that their action steps to date will largely dictate their next steps. Many institutions took a nuanced approach by discontinuing programs and activities which were likely non-compliant to begin with, as well as those which were counter to the legal interpretation expressed in the DCL and not mission-critical, while continuing others (intact or revised). Such institutions are unlikely to conclude that the voluntary dismissal of the appeal has a meaningful impact on their calculus. Institutions that took a more severe "anti-DEI" approach were frequently compelled to do so due to parallel state laws or other imperatives. Finally, those which took the approach of changing nothing unless mandated to do so will likely see no reason to do so now.
The Higher Education Group at Saul Ewing will keep a close eye on this issue and support colleges and universities as they continue to implement legally compliant strategies to provide all student and employees a welcoming and non-discriminatory environment. Please do not hesitate to contact the authors of this alert, or your regular Saul Ewing point(s) of contact, with any questions about the substance of this alert.
