Is this sex discrimination?

A NY appellate court rejected a claim of sex discrimination against a landlord who refused to renew the lease of an AIDS education group because the group's transgender clients, born male, were using the women's room in the common areas of the building.

The panel ... said bathroom exclusion based on biological "gender" rather than "self-image" is not discrimination...

Emanuel Gold, lawyer for the landlord, the estate of Joseph Bruno, said he argued before the Appellate Division in May 2004 that, "If you're biologically a man, if you're born a man, then you use the men's room. There's no bias against anyone."

Gold said women and girls who worked in or visited other offices in the building were startled and frightened when they found men in the women's rest rooms.

"I don't think there's anybody in America who doesn't understand this," he said.

But [the plaintiff's lawyer Edward] Hernstadt said, "This is not a bathroom case."

"This is a case about whether transgendered people are covered under New York state and New York City civil rights laws," he said. "This decision does a disservice to the transgendered community."

I've seen arguments demanding that special bathrooms be set up to accommodate transgender persons, but this is different. This is denying people the right to chose which sex to identify with when they choose whether to use the men's or the women's room. The issue of frightening women and girls is interesting. Frightening only occurs if the person is perceived as a man. Should it matter how masculine or feminine the transgender person in question actually looks?

UPDATE: I’ve read the case, Hispanic Aids Forum v. Estate of Joseph Bruno. At the time the landlord refused to renew the lease, the New York State Human Rights Law mades it unlawful “to refuse to sell, rent, lease or otherwise deny to or withhold from any person . . . land or commercial space because of the race, creed, color, national origin, sex, age, disability, marital status, or familial status of such person or persons …” And the New York City Human Rights Law mades it unlawful ”to refuse to sell, rent, lease . . . or otherwise deny or to withhold from any person or group of persons land or commercial space . . . because of the actual or perceived race, creed, color, national origin, gender, age, disability, sexual orientation, marital status or alienage or citizenship status …” Later, in 2002, that City law was amended to specify that "gender" includes "a person's gender identity, self-image, appearance, behavior or expression, whether or not that gender identity, self-image, appearance, behavior or expression is different from that traditionally associated with the legal sex assigned to that person at birth.” The State Legislature rejected a similar amendment for the state statute. There was some question whether the law in force at the time protected transgender persons, but the court said it didn’t matter here, because even assuming it did, the plaintiff failed to state a claim:

[T]he complaint, as it stands, alleges not that the transgender individuals were selectively excluded from the bathrooms, which might trigger one or both of the Human Rights Laws, but that they were excluded on the same basis as all biological males and/or females are excluded from certain bathrooms -- their biological sexual assignment.”