What the original federal court judge did, according to the 9th circus opinion, was to recase the original invasion of privacy claim into a due process claim and then ruled that they had no due process claim.
But it is not a due process claim (14th ammendment). It is an unreasonable and warrantless search.
I recall reading this case several months ago. IIRC, the problem was amateur pleading on the part of the parents' counsel. And when the pleading was off, the parents asked the judges to read some fundamental right into the pleadings to survive a dismissal. The court refused to do this and sent them back to replead. As a general rule you cannot just toss some facts into the air and expect the court to decide what rights or laws are violated. You must plead specifically the right allegedly violated and back it up with evidence and precedent. This the parents failed to do. Technically speaking, the language everyone is upset about is dicta since the issue was not truly argued by both sides.