Orange County, Calif. Restaurants Seek Permit, Licensing Refunds Amid Pandemic-Related Closures

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A proposed class action alleges Orange County, California has refused to refund certain permit and licensing fees and taxes to restaurants despite state and local government orders mandating that the establishments remain closed or operate at a severely restricted capacity amid the coronavirus pandemic.

The 19-page lawsuit claims the defendants—Orange County, the Orange County Health Care Agency, and California’s Department of Alcohol Beverage Control—have continued to receive money from restaurants for public health permit and licensing fees, liquor license fees and late charges even though most eateries in the state continue to operate at limited capacity, if at all.

The case out of Orange County Superior Court stresses that the plaintiff, a Costa Mesa pizzeria, does not dispute the propriety of the government stay-at-home orders issued due to the pandemic but “simply demands fairness,” arguing that money collected by the state should be returned to proposed class members left to either pay a fee to operate or risk violating the law.

“If the government closed or limited Plaintiffs’ business operations, it must return the fees, taxes, and/or charges that it should have never been allowed to collect during this pandemic,” the lawsuit says, noting Orange County restaurants have done their part and complied with the orders by closing “in whole or in part.”

According to the case, a laundry list of executive and stay-at-home orders issued throughout 2020 have left California’s restaurants “in a constant state of limbo,” with most still struggling to survive under the weight of closures and operating restrictions. Despite these conditions, restaurants have been forced to continue paying permit and licensing fees or risk losing their licenses to operate—even though government orders had specifically prevented them from being able to run their businesses as usual, the suit says.

The lawsuit argues that the defendants’ failure to refund the fees amounts to a violation of California law, which requires that such fees be refunded “in the event that the license application is withdrawn or denied.”

Likewise, local ordinances stipulate that the County of Orange and the Orange County Health Care Agency charge health services fees “that are proportional to the reasonable expenses incurred when enforcing public health measures,” the case says, arguing that the taxes and fees charged to the county’s restaurants fail to meet that requirement.

As the suit tells it, the taxes charged to restaurants did not “fairly reflect that proportion of the taxed activity actually carried on” within the county, and were imposed without voter approval as required by state law.

The lawsuit echoes similar cases filed in San Diego, San Francisco, Sacramento and Los Angeles Counties and, according to the plaintiff’s counsel, will be followed in the coming weeks by litigation filed in Alameda, Contra Costa, Monterey, Placer, Riverside and San Bernardino Counties.

“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 to Law360. “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.”

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