San Diego's Cowboy Star Restaurant Leads Local Claims Against State & County Demanding Refund Of Fees

October 28, 2020

San Diego County bars and restaurants, led by Cowboy Star in the East Village, are joining other California eateries in filing the prerequisite claims for a class-action lawsuit against state and local governments in order to recoup fees paid to them, including liquor licenses, health permits, and state tourism assessments. The claims come as restaurants across the state face unprecedented challenges to stay open and maintain cash reserves in the COVID-19 era.

"Small businesses in general and restaurants in particular have been disproportionately impacted by the state issued mandatory closings," wrote Jon Weber, co-owner of Cowboy Star restaurant and butcher shop in San Diego's East Village. "While some businesses were deemed 'essential', most, if not all small businesses and restaurants were considered 'non-essential' and forced to close. We get new guidance constantly on how to operate and every week we are faced with the possibility of rolling back a tier and being forced to close again. Our livelihood is on a week-by-week basis right now. Restaurants have been forced to get creative by investing in outdoor seating, or offering a to-go program just to keep the lights on and their staff employed. Businesses are revisiting and reimagining their financial plans, and analyzing where each dollar goes is relevant now more than ever. Requesting a refund for a portion of a fee we were required to pay but told it would be illegal to use is just another way we are getting creative. Refunding a portion of these fees is part of the investment that will pay for our future ability to keep our doors open and provide jobs and opportunities. We are happy to pay our fees to operate but it doesn’t make sense to be expected to pay these fees when we are forced to be closed."   

Cowboy Star was one of a handful of restaurants to premptively state they would not roll back restrictions in mid-September when speculation was mounting that California Gavin Newsom would announce San Diego County's move to the state's most restrictive tier of COVID-19 precautions. Ultimately, San Diego remained in the "red" second most stringent tier of restrictions, but restaurants remain limited to 25% capacity for indoor dining and many area bars are forced to remain closed if they do not serve food.

Around California, claims are being filed against the state and various counties seeking a refund for state and local fees paid to operate a bar or restaurant. Claims were filed this week in Los Angeles County, Orange County, San Diego County, Sacramento County, and Monterey County. As required by class action lawsuit procedure, the restaurants are giving notice against the state’s policy of restricting restaurant operations while still requiring the payment of full fees. Claimants will also file claims in San Francisco County, Fresno County, and Placer County in the coming days. The state has 45 days to respond. Filing a government claim is the first step before pursuing a class-action lawsuit. Currently, Cowboy Star in San Diego is the only claimant from the area, but other bars and restaurants are expected to join the lawsuit if fees are not returned. 

"Restaurant owners are obligated to pay these government fees just to operate, yet the same government entities who have collected those fees have forced these businesses to close their doors or drastically restrict operations due to the pandemic," said plaintiff attorney Brian Kabateck with Kabateck LLP. "We simply want the government to return those fees to those restaurants who followed the law and closed. It's offensive and tone deaf for these entities to enforce these rules and charge fees for licenses and permits these businesses can't use"

Restaurants have been hard hit with frequently changing restrictions set by the state. In many California counties, restaurants are banned from operating indoor dining rooms entirely, while in other counties like San Diego right now, the state permits indoor dining in a very limited capacity (25% in San Diego County). Owners have willingly adjusted their operations to comply with the closure orders. 

"I don’t see how the state can shutdown a business and expect them to pay their fees," commented San Diego County Supervisor Jim Desmond in response to the claim by Cowboy Star. "How does that make any sense? This continues to be more government overreach."

California is home to nearly 60,000 restaurants, which employ approximately 1.5 million workers. According to a recent survey of restaurant owners conducted by the California Restaurant Association, less than half of restaurants (41%) said that a 50% capacity limit would allow their establishments to remain viable. Also, 63% of respondents have not received any rent relief, while a staggering 76% say they need rent relief now. Thousands of eateries around the state have already closed permanently.

"We are just now reviewing this suit,"commented San Diego County Communications Officer Michael Workman. "However I must remind folks the county deferred those payments back in March. Yesterday the Board extended that until March 2021."

Minority-owned restaurants and workers are facing outsized hardships. Sixty percent of California restaurants are owned by people of color, and 50% of California restaurants are owned or partly-owned by women. Latinos, which have a significant presence in the California restaurant industry, have been especially hard hit economically by COVID. A recent news report featuring restaurant workers reported 71% of Latino households in Los Angeles County have experienced serious financial problems during the pandemic, compared overall with 52% of Black households and 37% of whites.

"Even when the restrictions are lifted, the devastating impact on the restaurant industry will extend for years," said Jot Condie, President and CEO of the California Restaurant Association. "Restaurants have not received any form of relief. Easing fees would help enable establishments to stay open and keep vulnerable workers employed."

The claimants, including Cowboy Star, are being represented by attorneys Brian S. Kabateck, Shant Karnikian and Marina R. Pacheco of the Los Angeles law firm Kabateck LLP. KBK is a nationally renowned plaintiff’s firm that litigates cases with an impressive record of success in the areas of personal injury, insurance bad faith, pharmaceutical litigation, wrongful death, class action, mass torts and disaster litigation. Restaurateurs or bar owners looking to learn more are directed to contact the attorneys who filed the claim and will file the class action lawsuit:  Kabateck LLP  213-217-5000; Brian Kabateck, Esq. <bsk@kbklawyers.com>;  Shant Karnikian, Esq. <sk@kbklawyers.com>; and Marina Pacheco, Esq. <mrp@kbklawyers.com>.

The full claims filed by Cowboy Star ownership against the State of California and County of San Diego are included below.