WASHINGTON/WINSTON-SALEM, N.C. (Reuters) - A fight between the Obama administration and North Carolina over a state law limiting public bathroom access for transgender people escalated on Monday as both sides sued each other, trading accusations of civil rights violations and government overreach. 
 
 A sign protesting a recent North Carolina law restricting transgender bathroom access adorns the bathroom stalls at the 21C Museum Hotel in Durham, North Carolina May 3, 2016. REUTERS/Jonathan Drake 
 
 The U.S. Justice Department’s complaint asked a federal district court in North Carolina to declare that the state is violating the 1964 Civil Rights Act and order it to stop enforcing the ban. 
 
 Hours earlier, North Carolina’s Republican governor, Pat McCrory, and the state’s secretary of public safety sued the agency in a different federal court in North Carolina, accusing it of “baseless and blatant overreach.” 
 
 The so-called bathroom law, passed in March and known as HB 2, prohibits people from using public restrooms not corresponding to their biological sex. 
 
 It has thrust North Carolina into the center of a national debate over equality and privacy, and has now led the state into what could be a long and costly legal battle with the U.S. government. 
 
 Americans are divided over how public restrooms should be used by transgender people, according to a Reuters/Ipsos poll, with 44 percent saying people should use them according to their biological sex and 39 percent saying they should be used according to the gender with which they identify. 
 
 By passing the law, North Carolina became the first state in the country to ban people from using multiple occupancy restrooms or changing rooms in public buildings and schools that do not match the sex on their birth certificate. 
 
 U.S. Attorney General Loretta Lynch said on Monday the department “retains the option” of curtailing federal funding to North Carolina unless it backs down. 
 
 “None of us can stand by when a state enters the business of legislating identity and insists that a person pretend to be something or someone that they are not,” Lynch said at a news conference, comparing the measure to Jim Crow-era racial discrimination laws and bans on same-sex marriage. 
 
 Lynch said the department is monitoring other U.S. jurisdictions that have passed or considered laws similar to North Carolina’s but declined to say whether the agency was planning any action against them. 
 
 White House spokesman Josh Earnest called the North Carolina law “mean-spirited” but McCrory said in his complaint that it is “common sense privacy policy.” 
 
 North Carolina Republicans say the law stops men from posing as transgender to gain access to women’s restrooms. 
 
 BILLIONS AT STAKE 
 
 North Carolina stands to lose $4.8 billion in funds, mainly educational grants, if it does not back down, according to an analysis by lawyers at the University of California, Los Angeles Law School. 
 
 The Justice Department’s complaint named the state of North Carolina, McCrory, the state’s Department of Public Safety and the University of North Carolina system as defendants. 
 
 The 17-campus University of North Carolina system says it takes federal non-discrimination laws very seriously but must also adhere to state laws like HB 2. 
 
 “In these circumstances, the University is truly caught in the middle,” UNC President Margaret Spellings said. 
 
 McCrory told reporters that North Carolina had been forced to pass the law after the Charlotte city council passed an ordinance that allowed transgender people access to bathrooms based on gender identity in public and private buildings. 
 
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 “We’re taking the Obama admin to court. They’re bypassing Congress, attempting to rewrite law & policies for the whole country, not just NC,” McCrory wrote on Twitter. 
 
 The Republican leaders of North Carolina’s state legislature also sued the U.S. government over the law on Monday, hours after McCrory’s lawsuit. 
 
 The law is also being challenged in federal district court by critics including the American Civil Liberties Union. ||||| A spokeswoman for the Justice Department, Dena Iverson, said on Sunday that there were “ongoing” discussions after officials “received requests from multiple parties for an extension of the deadline in our May 6 letters,” which were signed by the department’s top civil rights lawyer, Vanita Gupta. 
 
 In her letter to Mr. McCrory, Ms. Gupta said the Justice Department had concluded that the law, which bars people from using public restrooms that do not correspond with the gender listed on their birth certificates, breached the Civil Rights Act of 1964. Mr. McCrory signed the measure, commonly referred to as House Bill 2, into law on March 23, hours after the General Assembly approved it during a one-day special session. 
 
 Businesses and gay rights groups have criticized the measure and demanded its full repeal, and the bathroom provision has emerged as a particular concern to officials in Washington, who have said that the federal government might someday seek to withhold billions of dollars in aid to North Carolina. 
 
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 Ms. Gupta did not make such an explicit threat in her letter to Mr. McCrory, in which she said the state was “engaged in a pattern or practice of discrimination against its employees.” She gave the governor until Monday to notify the Justice Department whether he would “remedy these violations of Title VII,” which prohibits sex discrimination, and noted that the government could “apply to the appropriate court for an order that will ensure compliance with Title VII.” 
 
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 Ms. Gupta sent a similar letter to the University of North Carolina, which must also respond by Monday. 
 
 Mr. McCrory’s bid for additional time is an extension of the argument that Republican leaders in North Carolina have been making for days: that the Justice Department imposed an excessively hasty deadline to determine the future of a law they contend is crucial to public safety and privacy. 
 
 The federal government, Mr. McCrory said, had given North Carolina just “three working days to respond to a pretty complex letter and to a pretty big threat” and that state officials “don’t think three working days is enough to respond to such a threat.” 
 
 A spokesman for Roy Cooper, the Democratic candidate for governor and the state’s attorney general, criticized Mr. McCrory’s stand. 
 
 “Governor McCrory signed HB2 into law in the dark of night after passing it in just 12 hours, and now complains when he’s given five days to defend it,” the spokesman, Ford Porter, said in a statement. “The governor needs to undo this law now and stop playing politics with our economy.” 
 
 Mr. Cooper has refused to defend the law in federal court. 
 
 Although the General Assembly will reconvene before Mr. McCrory must submit his reply on Monday, there is virtually no chance that lawmakers will change the law by 5 p.m. The speaker of the State House of Representatives, Tim Moore, said last week that the deadline would “come and go” without action by the Republican-controlled legislature. 
 
 “I think we all as legislators have a duty to make sure that we analyze everything, that we look to see what our legal arguments are to counter what the Obama administration is trying to do and see what other things can be done,” Mr. Moore said. ||||| (CNN) The United States and North Carolina tangled over transgender rights on Monday, with the Justice Department filing a civil rights lawsuit over the state's so-called bathroom bill and state officials defiantly filing suits against the federal directive to stop the implementation of the controversial legislation. 
 
 Also, a major player in North Carolina -- the state's public university system -- defied the governor and legislature and told the Justice Department on Monday it intends to act "in compliance with federal law" as it relates to House Bill 2, known as HB2. 
 
 The Justice Department seeks declaratory relief and threatens to curtail federal funding to the North Carolina Department of Public Safety and the University of North Carolina. 
 
 With hundreds of millions of dollars in funding at stake, UNC System President Margaret Spellings said longstanding policy prohibits university personnel from discriminating on the basis of, among other things, gender identity, sex, or sexual orientation. 
 
 Attorney General Loretta Lynch, announcing the U.S. legal action to reporters on Monday, cast the bathroom bill issue as the latest civil rights struggle of the era. 
 
 "It was not so very long ago that states, including North Carolina, had other signs above restrooms, water fountains, and on public accommodations, keeping people out based on a distinction without a difference. We've moved beyond those dark days," Lynch said. 
 
 The act bans people from using public bathrooms that do not correspond with their biological sex. Since its passage in March, North Carolina has become a national battleground on the issue of transgender rights. It has drawn a flurry of condemnation from civil liberties groups, LGBT advocates and major businesses. It has also won praise from groups like the Family Research Council. 
 
 JUST WATCHED Donald Trump against North Carolina bathroom bill Replay More Videos ... MUST WATCH Donald Trump against North Carolina bathroom bill 02:27 
 
 After the law's passage, musicians Bruce Springsteen, Demi Lovato, Nick Jonas, and the bands Pearl Jam and Boston canceled concerts in the state. Those cancellations have cost one major venue nearly $200,000 in ticket sales. 
 
 PayPal and Deutsche Bank have both canceled plans to expand into North Carolina. 
 
 The Justice Department said last week that "access to sex-segregated restrooms and other workplace facilities consistent with gender identity is a term, condition or privilege of employment. Denying such access to transgender individuals, whose gender identity is different from their gender assigned at birth, while affording it to similarly situated non-transgender employees, violates Title VII," a section of the Civil Rights Act prohibiting discrimination against workers on the basis of sex, race, color, national origin, and religion. 
 
 The federal government demanded the state "remedy" the act or risk being in violation of federal law. 
 
 Instead, North Carolina officials filed a lawsuit calling the Justice Department's position a "radical reinterpretation of Title VII of the Civil Rights Act." Top state legislators, Phil Berger and Tim Moore, also filed a complaint against the Justice Department. 
 
 But Lynch on Monday said the legislature and governor put the state in "direct opposition to federal laws prohibiting discrimination on the basis of sex and gender identity. More to the point, they created state-sponsored discrimination against transgender individuals who simply seek to engage in the most private of functions in a place of safety and security, a right taken for granted by most of us." 
 
 After the federal government asked the state to certify by the end of the day Monday that it would not comply with or implement the bill's restriction on bathroom access, Lynch said the state requested an extension and that had been under "active consideration." 
 
 Instead, the governor and the state chose another course: a lawsuit. 
 
 "But instead of replying to our offer or providing a certification, this morning, the state of North Carolina and its governor chose to respond by suing the Department of Justice. As a result of their decisions, we are now moving forward," Lynch said. 
 
 The federal suit also says the state is in violation of Title IX, the Education Acts Amendment of 1972 that bans gender discrimination in education, and the Violence Against Women Reauthorization Act that outlaws discrimination on the basis of sex. 
 
 "This action is about a great deal more than bathrooms," Lynch said. "This is about the dignity and the respect that we accord our fellow citizens and the laws that we as a people and as a country have enacted to protect them." 
 
 JUST WATCHED Loretta Lynch's North Carolina bathroom bill statement Replay More Videos ... MUST WATCH Loretta Lynch's North Carolina bathroom bill statement 07:03 
 
 Lynch said there have been "discriminatory responses to historic moments of progress": the Jim Crow laws that followed the Emancipation Proclamation, the resistance to Brown V. Board of Education, and the "proliferation of state bans on same-sex unions that were intended to stifle any hope that gay and lesbian Americans might one day be afforded the right to marry." 
 
 "That right, of course, is now recognized as a guarantee embedded in our Constitution. And in the wake of that historic triumph, we have seen bill after bill in state after state taking aim at the LGBT community," she said. 
 
 She told transgender people that the Obama administration "will do everything we can to protect you going forward." 
 
 'Not a protected class' 
 
 McCrory's communications director Josh Ellis said after Lynch's remarks that the governor is "appropriately seeking legal certainty to a complex issue impacting employers and students throughout the country" but "in contrast, the attorney general is using divisive rhetoric to advance the Obama administration's strategy of making laws that bypass the constitutional authority of Congress and our courts." 
 
 The act puts in place a statewide policy that bans individuals from using public bathrooms that do not correspond to their biological sex and stops cities from passing anti-discrimination ordinances to protect gay and transgender identity. That power is reserved for the state under the new law. 
 
 North Carolina officials defend the act and said it doesn't violate federal law. The state also said the United States didn't give the state enough time to deal with the matter. 
 
 McCrory said Monday that he requested an additional two weeks to respond but was told he would be granted one week, and only if he issued a statement concurring with the Justice Department. 
 
 The lawsuit filed by the governor and Public Safety Secretary Frank Perry calls the demand that the state "remedy" the legislation by Monday or risk being in violation of federal law "a baseless and blatant overreach" and said it is making a "radical reinterpretation of Title VII of the Civil Rights Act." 
 
 McCrory's argument also said the state of North Carolina hasn't been given enough time to respond and that the federal government is overstepping its authority. 
 
 JUST WATCHED Us + public bathrooms? It's complicated Replay More Videos ... MUST WATCH Us + public bathrooms? It's complicated 01:32 
 
 In a Monday news conference, McCrory blamed the city of Charlotte for raising the issue of gender identity and public restrooms. The matter was not on the state's agenda, he said, until the city imposed a mandate that "caused major privacy concerns about males entering female facilities and females entering male facilities." 
 
 Because, he said, this is now a national issue -- and could affect every U.S. company with more than 15 employees -- McCrory called on Congress to revisit the anti-discrimination provisions under Titles VII and IX. 
 
 "Our nation is one nation, especially when it comes to fighting discrimination, which I wholeheartedly support," McCrory said. 
 
 North Carolina homes in on Title VII in its lawsuit, saying precedence is clear: "Transgender status is not a protected class under Title VII," and it cites a half-dozen cases that it says back its stance. Only Congress can change this, the lawsuit says. 
 
 JUST WATCHED Does North Carolina law endanger transgender citizens? Replay More Videos ... MUST WATCH Does North Carolina law endanger transgender citizens? 02:46 
 
 Even if the state felt transgender individuals were afforded federal protection, the Justice Department demands overstep, the state suit says, because the law "allows accommodations based on special circumstances, including but not limited to transgender individuals." 
 
 In a statement announcing the lawsuit, McCrory said the federal government was trying to tell every government agency and company employing more than 15 people "that men should be allowed to use a women's locker room, restroom or shower facility." 
 
 He said later that the "new, complex and emotional issue" pitted privacy against equality. 
 
 The lawsuit emphasizes that no one is facing discrimination because the law applies equally to everyone. 
 
 "All state employees are required to use the bathroom and changing facilities assigned to a person of their same biological sex, regardless of gender identity, or transgender status," it says. 
 
 We're taking the Obama admin to court. They're bypassing Congress, attempting to rewrite law & policies for the whole country, not just NC. — Pat McCrory (@PatMcCroryNC) May 9, 2016 
 
 The lawsuit filed by Berger, North Carolina Senate president pro tempore and Moore, state House Speaker, reflected the views of many of the bill's supporters that people "expect to encounter only other people of the same biological sex" when they are in intimate setting such as public bathrooms. 
 
 It says the "ideological extremity -- and utter unworkability -- of the department's position on the issues in this case is astonishing."
– Monday's the day that the Justice Department has demanded to hear back from North Carolina on whether the state is going to enforce its contentious public restroom law, Reuters reports. The feds had warned the state via a trio of letters last week that the law—which requires transgender individuals to use bathrooms that match up with the gender they were designated at birth—flouts civil rights and is discriminatory, and could lead to a federal lawsuit. One of the letters gave Gov. Pat McCrory until the close of business Monday to offer his solution to "remedy the situation," per CNN. But although McCrory has indicated he'll respond by day's end, the governor appears to be digging his heels in to stick by House Bill 2, the AP notes, potentially risking both the suit and funding for his state. UCLA School of Law attorneys estimate up to $4.8 billion in funding, mainly in the form of educational grants, could be at risk. During an appearance on Fox News Sunday, McCrory called the government a "bully" and framed the deadline as "unrealistic," per CNN. Roy Cooper, the state's Democratic AG, scoffed at the time complaint, reports the New York Times: "Governor McCrory signed HB2 into law in the dark of night after passing it in just 12 hours, and now complains when he's given five days to defend it." McCrory had been offered a one-week extension if he had conceded the law is discriminatory. On Fox News he rejected that option. "I'm not going to publicly announce that something discriminates, which is agreeing with their letter, because we're really talking about a letter in which they're trying to define gender identity, and there is no clear definition of gender identity."