The Trump administration’s crackdown on DEI in academia and the business world is about to hit a roadblock that was created by none other than Justice Clarence Thomas in a little-noticed Supreme Court decision last month.
Thomas undermined the Justice Department’s ability to use the False Claims Act to prosecute cases based on political or cultural preferences baked into government contracts, like minority hiring requirements. That just so happens to also be the very method that the White House has telegraphed it plans to use to forcefully eliminate diversity, equity, and inclusion programs at schools and companies that receive federal money.
“It is ironic that this conservative, Republican appointee may have laid a trap for this administration,” said David L. Douglass, a former federal prosecutor who specializes in False Claims Act litigation.
The high court on May 22 stood by the prosecution of a Pennsylvania man who used a front company owned by a Black woman to land a $150 million government contract with minority strings attached. Thomas agreed with his colleagues’ decision, but in a concurring opinion severely questioned whether a government’s political preferences were truly material — and thus prosecutable.
“The contracts in this case were for bridge repairs, not minority hiring. There are several reasons to think that the [disadvantaged business enterprise] provisions did not go ‘to the very essence of the bargain,’” he wrote, essentially saying that extra layers aren’t really directly related to the heart of a government contract for specific work.
But in doing so, Thomas undercut the very foundations that the DOJ relies on to build these kinds of cases, according to Zachary Cunha, a former federal prosecutor who serves on a team of attorneys that first spotted the potential ramifications of Thomas’ legal reasoning.
The False Claims Act got its start during the Civil War to crack down on “lame mules, rancid food, and guns that won’t fire,” Cunha told NOTUS. Senator Chuck Grassley made major revisions so it could target corruption in the military-industrial complex. Since then, it’s proven to be a go-to tool for the DOJ.
Anytime someone defrauds the government, whistleblowers are encouraged to expose the swindling because they’re promised a fat cut of whatever prosecutors recover — which can be a massive payday worth three times the fraud, plus penalties.
It’s a sharp enough axe that Trump has seen fit to swing it to cut DEI programs, dangling it as a threat against any entity that receives federal funds. The idea is that the government will start barring DEI programs in contracts, and if a college quietly keeps championing minorities, it could be accused of fraud.
Because these kinds of prosecutions often stem from insiders who want to expose their employers, there might already be several whistleblower lawsuits currently under seal that have sparked criminal investigations that aren’t yet public. Even before an indictment, universities and contractors could be facing administrative subpoenas and civil investigative demands to turn over official documents.
Lawyers told NOTUS Trump was likely the first president to issue an executive order specifically threatening to employ this law. Trump’s Day 2 anti-DEI executive order set the stage for Attorney General Pam Bondi’s Feb. 5 department memo outlining prosecutions meant for “ending illegal DEI,” which culminated in a May 19 memo tasking a “civil rights fraud initiative” to lead the charge.
“The federal government should not subsidize unlawful discrimination,” Deputy Attorney General Todd Blanche wrote in the recent memo.
Universities and government contractors who keep DEI programs around have a fighting chance. Existing case law already keeps the bar pretty high for prosecutors. Anyone receiving government money must lie with “actual knowledge,” “deliberate ignorance” or “reckless disregard.” Equally important is whether the misrepresentation is “material” because it “went to the very essence of the bargain.”
However, Thomas raised the bar even further when he authored a 2016 Supreme Court decision that essentially said the government can’t simply declare some provision of the deal is “material.”
“The government’s decision to expressly identify a provision as a condition of payment is relevant, but not automatically dispositive,” Thomas wrote then, seeking to rein in prosecutors. “The materiality standard is demanding. The False Claims Act is not ‘an all-purpose anti-fraud statute … or a vehicle for punishing garden variety breaches of contract or regulatory violations.’”
Thomas raised the bar on “materiality” again last month when he decoupled government civil rights requirements from “final work product,” stressing in the case before him that minority status “had no bearing” on an entity’s “ability to complete their projects.”
“That disconnect tends to support the conclusion that those requirements would not meet the ‘demanding’ materiality standard this court has articulated,” he wrote in Kousisis v. United States.
The Trump administration is now somewhat cornered, Douglass told NOTUS. If it wants to win in court and prove materiality, “they are going to have to establish the nexus between this ‘impermissible’ DEI program and the contractor’s performance.”
“They are going to have to attack the quality of the people on the contract. If I’m a defense attorney, I’m going to depose every person who touched that contract and dare the government to stand before a jury and say that Mrs. Williams, an African-American, 55-year-old woman, devoted her life to this company and got high performance reviews but she shouldn’t have been in the job.”
In light of Thomas’ concurrence, Cunha told NOTUS he expects the Trump administration to tweak its contracts.
“I would definitely expect to see federal agencies moving to impose new and more explicit conditions that they haven’t previously had in these awards,” he said.
On the other hand, he also thinks Thomas just gave defense lawyers all over the country a handy tool to fight the White House — something he called “fully and completely ironic.”
“I think you’re going to see it quoted in many if not all of the … motions to dismiss” cases, Cunha said.
Kirti Vaidya Reddy, a partner at a national law firm that represents several universities, acknowledged that Thomas’ concurrence “could potentially make it more difficult for prosecutors.” But she noted that the DOJ could argue that Thomas’ writings are merely a concurrence — not the full court’s actual decision.
“And the government may argue that diversity programs at their core are unconstitutional — and that’s why it’s not material,” she said.
So many of Trump’s executive actions and law enforcement priorities have quickly made their way up to the Supreme Court that Thomas, currently the oldest justice on the Supreme Court at 76, might get a chance to apply his own jurisprudence to the DEI debate. But there’s reason to think he might still go the other way, said Jason Marcus, an Atlanta lawyer who specializes in False Claims Act cases.
Just last week, Thomas took the opportunity to rail against “overt discrimination against those perceived to be in the majority,” weighing in on hiring practices in a concurrence that stretched on nearly 50% longer than the full court’s unanimous opinion.
“He is obsessed with ending DEI,” Marcus wrote to NOTUS. “He finds it to be unconstitutional. So he likely would have no issue distinguishing the opposite — i.e., ending DEI is a noble and constitutional pursuit that is material.”
Jose Pagliery is a reporter at NOTUS.