Layoffs, shuttered programs, and a $1.19 billion fight – what HR should watch next
Layoffs, shuttered programs, and a billion-dollar fight over DEI: a federal judge just kept the lawsuit against the Education Department alive.
On May 27, 2026, US District Judge Tanya S. Chutkan ruled on the Department of Education's effort to dismiss two consolidated lawsuits brought by the Council for Opportunity in Education (COE). The court tossed several of COE's claims but kept the heart of the case intact: the challenge under the Administrative Procedure Act (APA). The Department will now have to defend its decision to pull or deny federal education grants on anti-DEI grounds.
The dispute is over TRIO and Student Support Services (SSS) grants, federal programs that, since the 1960s, have funded services for students from disadvantaged backgrounds. In summer 2025, the Department sent near-identical letters to certain COE member institutions, denying new SSS applications and issuing notices of grant non-continuation for existing TRIO grants.
According to the opinion, the denial letters told applicants their programs had not been selected because the Department's review identified potential conflicts with applicable nondiscrimination requirements and concluded the proposed activities took account of race in ways that conflicted with the Department's policy of prioritizing merit, fairness, and excellence in education. The non-continuation notices used similar language, telling grantees their programs violated the letter or purpose of federal civil rights law, conflicted with that same policy, undermined the well-being of the students they were meant to help, or amounted to an inappropriate use of federal funds.
For HR leaders, this is where the case turns concrete. The court's opinion notes that COE members submitted declarations describing shuttering programs, employee layoffs, and cuts to student services, all tied to their reliance on federal funding. The court leaned on that workforce fallout to find irreparable harm, the kind of evidence that turned an economic dispute into something a court could enjoin. In January 2026, Judge Chutkan granted a preliminary injunction, vacating the Department's denial and discontinuation decisions for identified COE members and ordering reconsideration in line with applicable laws and regulations.
The May 27 ruling did several things at once. The court dismissed COE's ultra vires and mandamus claims, finding them duplicative of the APA claims and citing well-settled rules that those theories are only available where no adequate alternative remedy exists. It dismissed standalone constitutional challenges in the TRIO case, applying Supreme Court precedent that bars plaintiffs from repackaging statutory claims as constitutional ones.
In the SSS case, however, the court allowed COE's APA-based constitutional claims to move forward, including arguments tied to the Take Care Clause and the Spending Clause that center on the alleged failure to obligate and expend $1.19 billion across all TRIO programs. The court granted COE's motion to file member declarations under seal, citing the members' legitimate privacy interests in keeping their association status confidential, and pointing to longstanding case law recognizing that interest. And the court denied COE's request to extend the preliminary injunction to 33 additional unnamed members who had not submitted evidence of harm, holding that preliminary relief must be tied to specific, documented injury.
For HR professionals, the case is one to watch. The Department's letters framed race-conscious program activities as inconsistent with federal civil rights law, the same statutes (Title VI and Title IX) that anchor a lot of corporate compliance work on discrimination and equal opportunity. Judge Chutkan's ruling does not decide the underlying legal question, but it keeps the challenge alive and forces the Department to defend its reading of civil rights law in open court.
The litigation will continue on the surviving claims.
