Calif. Restaurants Launch COVID-19 Suits For Permit Refunds

By Joyce Hanson
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Law360 (January 13, 2021, 7:02 PM EST) -- Restaurant owners in Orange County, California, have hit county and state authorities with a COVID-19-related suit claiming they're slapped unfairly with fees for liquor licenses and health permits at the same time that civil orders threaten their businesses by forcing them to reduce operations.

Costa Mesa, California-based Pizzeria Ortica LLC, the lead plaintiff in the proposed class action filed Tuesday in state court, says the Orange County restaurants seek refunds and have joined forces with eateries that have launched similar suits in four other counties. All across California, restaurants face unprecedented challenges to stay open and maintain cash reserves while dealing with a slew of new operating restrictions during the pandemic, the suits say.

The pizzeria stressed that it doesn't dispute government closure orders based on concerns about public health and safety, but it does object to being ceaselessly charged with business permit and licensing fees, taxes, and lateness penalties levied by county and state entities as it struggles to stay afloat.

"This action does not dispute the propriety of the health and safety orders, it simply demands fairness," Pizzeria Ortica said. "Each member of this class has complied with the law and have closed in whole or in part as required by the orders. The class does not — for the purpose of this action — dispute the propriety of the orders. If the government closed or limited plaintiffs' business operations, it must return the fees, taxes and charges that it should have never been allowed to collect during this pandemic."

Proposed class actions from restaurant owners were also filed in San Diego, San Francisco and Sacramento counties Tuesday, and one was filed in Los Angeles County in December, according to a spokesperson for the counties.

Plaintiffs law firm Kabateck LLP said additional class actions will be filed in the coming weeks in Alameda, Contra Costa, Monterey, Placer, Riverside and San Bernardino counties as restaurants respond to government policies that restrict operations while authorities still require fee payment in full.

"The defendants are collecting these fees while at the same time ordering the business to shut down or drastically limit operations," lead plaintiff attorney Brian S. Kabateck said in a statement. "We are encouraged, however, that some entities have reached out to say they are willing to do the right thing and return these fees and we're hopeful other counties will follow suit."

California counts nearly 60,000 restaurants, which employ about 1.5 million workers, and nearly every one in the state is banned from operating in-person dining, Kabateck added in his statement. He did not respond to a request for further comment Wednesday.

Jot Condie, president and CEO of the California Restaurant Association, noted in a statement that restaurants have modified their business operations, reduced hours, and temporarily or permanently closed down in the past 10 months.

"Still, restaurateurs are expected to pay burdensome state and local fees as if they were not forced to shut down or eliminate in-person dining," Condie said. "This action delivers a clear message about the willingness of restaurants to go the distance to recover fees. We expect thousands of restaurants will be willing to join the class action in their respective counties with the aim of total reimbursement for the fees and taxes that were inappropriately levied."

The suit claims violations of California government code sections 53720 and 53723, which require voter approval of local government taxes.

"The continued imposition and collection of the Orange County public health permit and licensing fees or tax without voter approval is an ongoing and continuous violation, which is violated anew with each collection ... from plaintiffs," the suit says, while acknowledging that the governments deny the contention that the permits, fees and taxes are invalid.

Representatives for Orange County did not immediately respond Wednesday to requests for comment. A spokesperson for the California Department of Alcoholic Beverage Control declined to comment.

The suit also asserts violations of the California Constitution's Proposition 218, known as the "Right to Vote on Taxes Act," and the state's business and professions code.

Pizzeria Ortica seeks money damages, a court declaration that the permit fees and taxes are invalid, and injunctive relief preventing the county and state from levying fees, taxes and other charges against the proposed class.

The pizzeria is represented by Brian S. Kabateck, Shant A. Karnikian and Marina R. Pacheco of Kabateck LLP.

Counsel information for the government entities was unavailable Wednesday.

The case is Pizzeria Ortica LLC v. County Of Orange, Orange County Health Care Agency and California Department Of Alcohol Beverage Control, case number 30-2021-01178203-CU-MC-CXC, in the Superior Court of the State of California, County of Orange.

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