A US employee association is being sued after restricting a Muslim man's membership over a row about a flag.
Munir Zanial let a property at a lake owned by the organisation for a Malaysian Independence Day party.
The FBI was alerted when an employee reported Muslim guests were displaying what was described as a US flag defaced with Islamic State group symbols.
The investigation ended when it emerged the flag was Malaysia's, but Mr Zanial was banned from hosting events.
The American Civil Liberties Union (ACLU) of Kansas has now filed a law suit accusing the Spirit Boeing Employees Association of "racial profiling and blatant religious discrimination".
Mr Zanial, a Muslim Malaysian aerospace engineer, was a paying member of the employee association when he rented the property to celebrate both Malaysian Independence Day and the end of Ramadan in September 2017.
According to the complaint, the party included guests of Indian-Malaysian ancestry with several women wearing hijabs.
The FBI closed its investigation the following month, but the law suit alleges that the employee association then hired a private investigator to look into the incident, and ended Mr Zanial's rental privileges without informing him.
The executive director of the ACLU of Kansas said: "To label someone a terrorist due to their appearance and their celebration of their heritage is shameful, but to continue to use that mislabel as grounds for blatant discrimination - even after it had been discredited by the FBI - is downright reprehensible."
The Spirit Boeing Employees Association has made no comment.