The owners of dozens of liquor licenses across Arizona are demanding $12.5 million from Gov. Doug Ducey to settle their objection to his COVID-19 executive orders, including one which kept many bars and saloons closed after other liquor-serving establishments were allowed to open and another that prohibits police from citing a restaurant that sells liquor to-go in violation of state law.
On Monday, a notice of claim advised Ducey, the Arizona Department of Health Services, and the Arizona Department of Liquor Licenses and Control that 130 owners of Series 6 and Series 7 licenses intend to add a “regulatory takings” complaint to an ongoing lawsuit in Maricopa County Superior Court unless their financial demand is settled within 60 days.
A Series 6 license allows for the sale of beer, wine, and spirits, while a Series 7 license allows for the sale of beer and wine. Both licenses require no minimum revenue from food sales and are the only licenses which permit off-sale (to go) business.
Such licenses can cost 10 to 20 times more than a Series 12 held by a restaurant, which is prohibited by law from selling liquor on a to-go basis. In addition, Series 6 & 7 licenses can be bought, sold, transferred, even inherited, thus creating a property right.
Attorney Ilan Wurman is representing the licensees, who include owners of bars and saloons in every part of Arizona, including smaller communities such as Clifton, Sedona, Tombstone, Winslow, and Yuma, as well as dozens in the Tucson and Phoenix metropolitan areas.
The notice of claim (NOC) contends Ducey has engaged in a “taking” of the licensees’ property, in part by his Executive Order 2020-09 issued in March which allows Series 12 licensees to sell alcohol on a take-home basis in violation of state law. The governor has also barred the state liquor board and law enforcement officials from citing Series 12 licensees who violate the off-sale statute.
The claimants also contend they were “almost entirely closed down” by Ducey’s EO 2020-43 from June 29 through August 31, and that they have suffered financial losses because Ducey’s executive orders treat the Series 6 & 7 licensees unfairly compared to other businesses which hold a liquor license.
The same claimants filed a lawsuit in Maricopa County Superior Court on Aug. 26 challenged the governor’s statutory authority to enforce his executive orders. They requested an injunction blocking Ducey’s executive order so the establishments could open for Labor Day weekend, assuming they complied with health department COVID-19 protocols.
Their legal action only sought relief, not monetary damages. But now the NOC served on Ducey and state officials by Wurman on Monday starts a 60-day clock that must run before the lawsuit on behalf of the Series 6 & 7 licensees can be amended to include financial damages.
If Ducey does not reply within 60 days, his non-response is considered a denial of the claim. But the clock can stop early if Ducey denies the licensees claim in writing before the 60 days expire. That would allow Wurman to amend the existing lawsuit to pursue financial damages.
On Sept. 8, Judge Pamela Gates denied the bar owners’ injunction request. However, she expressed a “serious question” about whether the emergency powers cited by Ducey for enacting his executive orders permitted him to allow Series 12 restaurants to sell liquor on a to-go basis given that their licenses expressly forbid such sales.
Wurman’s clients have also received support from Attorney General Mark Brnovich, who filed a brief with Gates on the issue of Ducey’s authority to issue and enforce some of the COVID-19 executive orders.
Brnovich’s brief opined that Ducey “is not a lawmaker” and that his executive orders treating some liquor licensees differently was “fundamentally arbitrary and discriminatory.” It also contends Ducey appeared to have “contravened” the law by granting off-sale privileges to Series 12 license-holders, leaving open the question of what liability that could place on the state.
Ducey has retained a private attorney, Brett Johnson, to represent him in various challenges to the executive orders. The attorney has stated the governor’s authority to issue and enforce executive orders “is real” and even that some executive orders may still be in place at Christmas.
Johnson also caused some uproar when he told Gates during the Sept. 4 hearing that “there may be winners, there may be losers” stemming from the state’s official response to the “unprecedented” pandemic.