The expression "makes a federal case" means to exaggerate or make a big deal out of something that is not that important. The phrase comes from the legal jargon in the United States where a federal case involves a serious crime or violation that requires legal action at the federal level. So, when someone says that an event or situation is making a federal case out of it, they imply that the matter is being blown out of proportion or unnecessarily escalated. Some synonyms for the phrase include "blowing things out of proportion," "overreacting," "exaggerating," "dramatizing," and "creating a mountain out of a molehill".