Fairfax County and Arlington school boards just cleared a major legal hurdle in their fight against the U.S. Department of Education, after a federal appeals court ruled Thursday that both districts can sue over transgender-student policies in Virginia federal court instead of a specialized claims court in Washington. The decision revives lawsuits that had stalled since earlier this year, when a district judge said the cases belonged elsewhere. Fairfax County's 2025 lawsuit sought payment of federal funds it said had previously been denied.
Appeals Court Reverses Lower Court on Where Case Belongs
The U.S. Court of Appeals for the Fourth Circuit, based in Richmond, issued a 2-1 ruling finding that Fairfax and Arlington may pursue their challenges in Virginia federal court rather than being forced exclusively into the U.S. Court of Federal Claims, according to Reuters. The ruling reverses an earlier order from U.S. District Judge Rossie Alston, who had ruled in Alexandria that the lawsuits belonged in the Court of Federal Claims because they involved money-damages claims arising from contracts with the Education Department. The Court of Federal Claims generally has jurisdiction over cases seeking monetary damages from the federal government, but the appeals court found the school boards' cases go well beyond that.
The appeals court found that the districts' cases include claims beyond money damages, including requests for injunctions barring future enforcement — meaning the fight isn't just about dollars, but about blocking the department from taking similar action against the districts going forward.
How the Dispute Started
The clash traces back to policies both districts adopted allowing transgender students to use bathrooms, locker rooms and other accommodations matching their gender identity. The Education Department concluded that bathroom policies allowing access based on gender identity violated Title IX. The department had first flagged Arlington's Policy Implementation Procedure on transgender students in February 2025, alleging that letting students use restrooms or locker rooms aligned with their gender identity ran afoul of Title IX.
Fairfax County and Arlington school boards each filed separate lawsuits in 2025 seeking declarations that their policies comply with Title IX and that the department had acted unlawfully. The Education Department, meanwhile, designated both districts as high-risk within the federal grant system that year and moved them to reimbursement-only payment status until they changed their policies.
Federal Funding on the Line
For Arlington, the high-risk designation meant federal funding would be provided only through reimbursement, the district said. The funding dispute put federal support for Arlington Public Schools at stake. The Fairfax designation similarly required that all Education Department funds going to that school system — including formula funding, discretionary grants and impact aid grants — be distributed only through reimbursement, according to the Civil Rights Litigation Clearinghouse.
The dispute concerns whether Arlington's policy complies with federal law and whether federal funding should remain subject to reimbursement-only terms.
A Broader Legal Battle Over Precedent
The two districts are challenging the Education Department's interpretation of Title IX, setting up a legal collision that the appellate ruling allows to proceed in federal court.
The litigation moved on parallel, overlapping tracks: both cases were dismissed at the district-court level for lack of subject-matter jurisdiction, then appealed to the Fourth Circuit, where they were consolidated for expedited consideration on October 10, per the Civil Rights Litigation Clearinghouse. The cases are now formally known as Fairfax County School Board v. McMahon, No. 25-2087, and Arlington School Board v. McMahon, No. 25-2107.
Part of a Wider Federal Push
The case fits into a broader pattern under President Donald Trump, whose administration has moved to curb legal protections for transgender people across many facets of American life, including education, Reuters reported. The administration's actions have also affected schools. The Education Department has also threatened to cut funding to schools in at least three other states over policies barring disclosure of students' transgender status to parents, and in September the administration sued to block public schools in Kansas City, Kansas, from facilitating transgender students' gender transitions.
For now, the Fourth Circuit's ruling simply means Fairfax and Arlington can keep fighting over whether their bathroom and locker-room policies can stand, and whether the reimbursement-only terms imposed on them last year were lawful in the first place.
