Honolulu is asking for dismissal of a 2021 federal lawsuit filed by the owners of a Chinatown nightclub and a guide to the islands catering to the LGBTQ+ community in which they alleged anti-gay discrimination by investigators working for the Honolulu Liquor Commission.

Filed on behalf of Scarlet Honolulu Inc. and Gay Island Guide LLC, the complaint names two HLC investigators — Jacob Fears and Catherine Fontaine — who, along with other investigators working for the city, allegedly engaged in an “ongoing campaign of unlawful, un­constitutional, and highly discriminatory anti-gay harassment of Scarlet, Gay Island Guide, and generally, the Honolulu LGBTQ+ community” that lasted more than six years, according to the complaint and attorney James DiPasquale.

The complaints in this case include allegations of bias made by a city worker at the gay nightclub starting nearly eight years ago.

On Oct. 24, 2015, during a fundraiser for the Life Foundation, a Hawaii AIDS nonprofit organization, an HLC investigator arrived to inspect Scarlet’s Tiki Bar. The investigator was overtly homophobic, aggressive and unprofessional throughout his inspection, which concluded with him shutting down Scarlet under claim that the Tiki Bar was not authorized under its license, according to court documents.

Four days later, Scarlet’s owners allegedly learned the investigator was not authorized to shutter a business, triggering an internal investigation into whether Scarlet was legally permitted to operate the Tiki Bar in its establishment, “causing significant financial damage.”

More than five years later and largely due to the COVID-19 pandemic, Scarlet was closed for most of 2020 and 2021, but was permitted to operate for five weeks in June and July 2020. Due to administrative and scheduling issues, Scarlet opened for only eight days during that time frame, and was inspected by HLC six times in eight days.

Other “non-gay-identified venues were not similarly targeted,” such as the District Nightclub, which was inspected once between June 1 and July 31, 2020, the complaint states.

The city was in court Friday before Chief Judge Derrick Watson arguing its motion filed May 5 for a summary judgment to move the case beyond a trial and resolve the matter outright.

In defense of actions taken by HLC and its investigators, lawyer Lex R. Smith, representing the city, said a person had passed out in front of the nightclub in 2021.

“A decision was made to inspect the premises,” Smith said, adding there was “nothing unusual about the fact that that was done in this case. I don’t see a civil rights violation in that incident; the Commission had the right to inspect.”

During the COVID-19 pandemic and subsequent social distancing measures, Smith said HLC became responsible for COVID-19 rules and regulations at nightclubs, bars and restaurants serving alcohol. He added that two investigators went to Scarlet to investigate the premises during that time period.

“When they went there they saw all kinds of violations of the (COVID-19) order,” he said, adding the nightclub was shut down.

And, as a matter of state law, Smith noted that HLC investigators “may enter any licensed premise at any time” to conduct inspections.

Moreover, Smith argued that investigators for HLC — including Fears and Fontaine — were always acting in their professional capacity and that ultimately their part to play in this case should be dismissed.

But plaintiff’s attorney DiPasquale contended the city could not support its claims.

To that point he used HLC’s own data and records to show “a systemic and prolonged effort by HLC to target LGBTQ+” businesses and the community. Among those, DiPasquale noted there are approximately 1,500 total licensees or establishments serving alcohol to patrons in Honolulu.

Of those, seven are deemed LGBTQ+ businesses.

He said the seven establishments were inspected 63 times in 2020 alone — or nine times per establishment — while hundreds of other alcohol-serving establishments in that same year were either inspected only once or not inspected at all.

“Inspections are greater for gay establishments,” DiPasquale said.

He also said that in 2020 HLC came to call the inspections of bars — including Scarlet Honolulu, in particular — “The Chinatown Patrol,” in which 122 inspections were conducted at the 12 to 20 licensed establishments in that part of town.

According to the plaintiff’s complaint, Peter Nakagawa, HLC’s chief investigator, testified that the high concentration of Chinatown patrols was due to the large number of registered complaints in the Chinatown area.

But DiPasquale cited daily activity reports, or logs, used exclusively by HLC showing that in 2020, out of 249 registered complaints, only 10 related to a Chinatown business.

A year later, of the 256 registered complaints, only five related to a Chinatown business.

The city’s lawyer, however, disputed the validity of these numbers.

“The statistical data is not credible,” Smith said, adding that “nobody has named a statistical expert in this case.”

Ultimately, Chief Judge Watson thanked both sides and said he’d render a decision on this case in about two weeks’ time.

Of late, HLC has made further news with focus over ongoing problems of chronic understaffing, a history of low morale and poor training and procedures for its in-field investigators to follow.

On June 29, Hui Chen, a strategic adviser to Honolulu’s managing director, offered scathing results of a months-long review of HLC’s policies and practices in enforcing liquor laws on Oahu. The commission approved the review in February after “ongoing complaints” relating to its Enforcement Services Section.

Among the issues, there were seven active liquor enforcement investigators as of Feb. 15, according to the review, which is one-third of the investigator positions available.

At the time, there were 1,463 businesses licensed with HLC, or 209 licensed businesses for every investigator.

Meanwhile, significant and unexplained enforcement and inspection discrepancies between geographical areas were discovered.

For example, between January 2016 and March of this year, there were 1,027 inspections of businesses in the ZIP code area that includes Pearl City but only 275 in the Waianae ZIP code area, even though both contain about the same number of licensed liquor establishments.

And according to the review, complaints to the HLC spiked in 2020 and 2021 at the height of the COVID-19 pandemic, when rules around social gatherings, business hours and liquor sales were constantly shifting.

After Friday’s court hearing, DiPasquale told the Honolulu-Star Advertiser via email that he hopes to see the city’s motion to dismiss his plaintiff’s lawsuit quashed.

“And for us to get our day in court (i.e. trial) so that we can show just how broken this agency is,” he said.

DiPasquale added that he and his clients were “very happy with the recommendations by Hui Chen” with regard to HLC.

“We believe that the City Council, Mayor, and even the HLC commissioners want change,” he said. “Beyond that, implementing the recommendations by Hui Chen is the goal.”

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Star-Advertiser staff writers Peter Boylan and Mark Ladao contributed to this report.