Judge Robertson's judgment for Diane Schroer may be pathbreaking, but it's only one district court decision. What happens next? Here are some possibilities:
The government could decide not to appeal. Prof. Leonard observes that an appeal can't be taken here until a final order, which means the remedy phase must first be completed. That could take months, and as Prof. Hunter observes, by then there will be a new Attorney General, who may well decide not to appeal. They make a policy decision not to challenge the ruling; on the other hand, the government usually defends suits against federal agencies vigorously.
The D.C. Circuit is likely to reverse. The D.C. Circuit is one of the most conservative in the country; nine of its thirteen members are Republican appointees, and some are noted conservative ideologues. I would fully expect the D.C. Circuit to adhere to the "traditional concept of sex" approach of Ulane v. Eastern Airlines, 742 F.2d 1081 (7th Cir. 1984).
Other courts could choose to distinguish Schroer. Like Barnes in the Sixth Circuit, this case fits well into the sex stereotyping theory because it involves an employer's reaction to someone who is in the process of gender transition. In both cases, the employer first encounters the plaintiff as male and is prejudiced against her when confronted with her transition and her feminine gender presentation. A court might find that this theory doesn't apply when an employer has only known the plaintiff post-transition, and discrimination occurs when the employer later learns of the transition. In such a case, the court might see it more as discrimination because of the status of being transsexual rather than because of not conforming to expectations for the gender the employer initially saw them as. Then, the court would have to agree with Judge Robertson's theory that discrimination because of transsexuality as such is also sex discrimination, because transsexuality is an aspect of sex - and no other court has yet accepted this theory, even though it is clearly correct.
The Supreme Court could decline to hear the case. As Prof. Leonard observes, the Supreme Court in 2005 declined to hear a similar case out of the Sixth Circuit. However, this does not necessarily mean they will do the same thing again. The Justices may have thought that since the Sixth Circuit's decision represented a departure from older decisions by other circuits, and was based on Supreme Court precedent handed down since those earlier decisions, that the issue might resolve itself without the court's intervention. If the D.C. Circuit affirmed Judge Robertson's ruling, this confirm that the courts of appeals might just sort this out on their own. But if the D.C. Circuit were to reverse in this case, the situation would be different: a clear circuit split on the the application of the most recent applicable precedent.
And if the Supreme Court does hear the case? Gods only know. The Court has only ever heard one case involving a transgender plaintiff, and that 14-year-old decision tells us little about the Justices' predispositions in this area. (Farmer v. Brennan case held that it is unconstitutional for prison authorities to stand idle while prisoners suffer physical and sexual abuse, but set a high bar for such claims.) On the one hand, this is easily the most conservative high court in generations, but its record on employment discrimination is far from all bad; broad pro-employee rulings by the conservative Rehnquist Court made suits like this possible. Judge Robertson's opinion seems tailor-made to appeal to the Court's conservatives - particularly Justice Scalia - with its emphasis on the plain statutory text; it emphasizes that to rule the other way would require placing inferences about legislative intent about the logical meaning of the statute's words. I think this case could go either way before the high court, but it would be far preferable for Congress to clarify the matter first.