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January 15, 2021

Order Up: Erie County, New York, Restaurants Prevail Against Indoor-Dining Ban

Western New York restaurants won a significant victory in their fight to reopen indoor dining during the COVID-19 pandemic, which has devastated so many eateries across the state. On January 13, 2021, Erie County Supreme Court Justice Henry J. Nowak issued an order granting a preliminary injunction authorizing a group of Erie County, New York, restaurants to reopen for indoor dining under COVID-19 Yellow Zone restrictions, despite being located in the more restrictive Orange Zone.

Affected restaurants, including the 90-plus petitioners in the action, saw indoor dining close on March 16, 2020. It was not until June 12, 2020, during phase three of reopening, that indoor dining was permitted to resume, subject to reduced capacity, face covering, and social-distancing restrictions. Increased outdoor dining space and guidance regarding service of food with alcoholic beverages followed later that summer. By October 6, 2020, New York State established its Cluster Action Initiative via Executive Order 202.68, establishing three classes of restrictions based on clusters of COVID-19 cases. Once the New York State Department of Health (DOH) identified a high-density cluster of cases, restrictions were placed in the cluster and surrounding areas. The three classes of restrictions were color coded: Red Zone, for the cluster itself, also known as a COVID-19 hot spot; Orange Zone, a moderate severity warning area; and Yellow Zone, a precautionary area.

On November 6, 2020, portions of Erie County were placed in a Yellow Zone, which permitted indoor dining with a four-person maximum per table. Other Yellow Zone restrictions were adopted by the DOH, including a restriction on hours of operation. However, by November 18, 2020, most of Erie County was designated an Orange Zone, where indoor dining was prohibited. This lawsuit followed on December 24, 2020, and was amended to include more restaurant petitioners on January 8, 2021.

While the petitioners offered a wide variety of legal arguments invoking the Takings Clause, the Equal Protection Clause, and Substantive and Procedural Due Process, under the US Constitution, the case turned on the arbitrary and capricious test under Article 78 of New York Civil Practice Law and Rules. Under this standard, Judge Nowak found that “the DOH clearly is not relying upon [COVID-19 positivity rates] data for their designations, as much of the Western Region has no designation at all and portions of Erie County remain in the Yellow Zone.” Judge Nowak also recognized the petitioners’ argument that only 1.43 percent of COVID-19 cases are traceable to restaurants and bars and noted the shortcomings of current contract tracing and testing methodologies.

Judge Nowak concluded that the court “cannot find evidence that the State had a rational basis to designate portions of Erie County as an Orange Zone on November 18, 2020.” Therefore, the petitioners met their burden, demonstrating a likelihood of success on the merits, irreparable injury absent injunctive relief in the loss of revenue and loss of goodwill that corresponds to a viable business, and the balance of equities in their favor. As a result, Judge Nowak issued a preliminary injunction allowing the petitioner restaurants to operate under Yellow Zone restrictions, thus authorizing indoor dining.

The victory for petitioners generated an immediate response from New York State. As a result of the petitioners’ victory, all New York State Orange Zone restaurants may open for limited indoor dining akin to Yellow Zone restaurants and subject to compliance with DOH’s November 9, 2020, guidance.

If you have any questions regarding this alert, please contact Ari Goldberg, associate, at agoldberg@barclaydamon.com; Corey Auerbach, partner, at cauerbach@barclaydamon.com; Scott Rogoff, partner, at srogoff@barclaydamon.com; or another member of the firm’s Hotels, Hospitality & Food Service Team.

We also have a specific team of Barclay Damon attorneys who are actively working on assessing regulatory, legislative, and other governmental updates related to COVID-19 and who are prepared to assist clients. Please contact Yvonne Hennessey, COVID-19 Response Team leader, at yhennessey@barclaydamon.com or any member of the COVID-19 Response Team at COVID-19ResponseTeam@barclaydamon.com.

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