In the case of Alida Star Gebser and Alida Jean McCullough v. Lago Vista Independent School District, 1997, the U.S Supreme Court ruled that a school district cannot be held financially liable under Title IX for teacher-student sexual harassment unless an official who has authority to address the harassment knows about it and is deliberately indifferent. The case arose when a middle-school student in Texas was sexually harassed by her teacher. Despite complaints from other students and parents about inappropriate behavior, no formal complaint was made until after the relationship became sexual. When informed, the school fired him immediately but argued they were not responsible as they had no prior knowledge of his misconducts with this particular student before firing him.

In the dissenting opinion for Gebser v. Lago Vista Independent School District, Justice Stevens argued that the majority's decision to limit Title IX liability was inconsistent with previous rulings and Congressional intent. He asserted that a school district should be held liable if it is deliberately indifferent to known acts of teacher-student harassment, regardless of whether an official policy exists or not. Furthermore, he contended that requiring actual notice to a school official who has authority to address discrimination effectively immunizes negligent conduct by schools and undermines Title IX's purpose - preventing sex-based discrimination in education programs receiving federal funds. In his view, this ruling could discourage victims from reporting abuse due to fear their complaints may not reach someone with sufficient authority under the Court’s standard.