FARGO — A Cass County District Court judge has sided with a local sports bar over a near three-year liquor license dispute, ordering the city of Fargo to change their tune over an ongoing disagreement involving the bar's percentages of sales.
In a recent ruling, Judge Nick Chase ordered the city of Fargo to reverse its decision that SouthTown PourHouse, 4281 45th St. S., violated the terms of its FA liquor license.
The Fargo Liquor Control Board first penalized Northstar Hospitality, which runs SouthTown PourHouse, in May 2020 for violating its FA liquor license, which requires at least 50% of its revenue come from the sale of food.
SouthTown PourHouse was selling 42% food and 58% alcohol, according to the city in court documents.
Northstar objected and claimed if the city factored in the pizza sold through their partnership with Duane’s Pizza — a neighboring business that works out of the same kitchen — then the business is well within the limits of the liquor license.
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The restaurant sold 53% food and 47% alcohol when including pizza sales, according to city documents.
Northstar appealed the liquor board's decision to the Fargo City Commission in July 2020, wherein city leaders upheld the board's decision that the bar violated its liquor license.
The restaurant then filed an appeal with the Cass County District Court, arguing the City Commission's decision was arbitrary and capricious, or there was not evidence to support the decision.
The district court sent the case back to City Commission to conduct a full review and hearing "for the initial determination on the alleged violation."
After a lengthy review, city commissioners in February 2022 voted unanimously to find SouthTown PourHouse in violation of its FA license, which required the restaurant to close one hour early for six months.
SouthTown PourHouse filed yet another appeal with district court, which brought about the judge's recent ruling backing the sports bar.
Despite the fact that SouthTown and Duane’s are two separate businesses, the court found that the two entities were merged to the point that, to the SouthTown customer, there is no difference when it comes to food sales.
“The court concludes that… the city erred in defining the SouthTown and Duane’s relationship on paper rather than how it operated in practice,” the order reads.
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The city's decision was “unreasonable," the court ruling added, because current ordinance doesn’t address business partnerships of this sort one way or another when it comes to liquor licenses, thus allowing SouthTown and Duane’s to collaborate on food sales.
The city did not treat SouthTown PourHouse unfairly, the court asserts, noting however the outcome of the situation was unfair to the business.
In response, the City Commission met in executive session with their attorney to discuss the litigation during a meeting on April 3.
While executive sessions are private, the city afterwards voted unanimously to rewrite the existing ordinance regarding inclusion of food sales from sources other than the licensee’s kitchen.
Amendments to the ordinance will more clearly outline the intention and interpretation behind the ordinance for businesses with an FA liquor license.
Under the revision, food that is sold to meet the food-to-alcohol licensing requirements must be prepared and sold by the license-holder's employees on the premises, according to Gregg Schildberger, Fargo's director of communications and governmental affairs.
Additionally, the ingredients must be purchased by the license holder.
However, SouthTown recently purchased licensing rights to make Duane's Pizza part of their business model, Schildberger said.
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"SouthTown will now purchase the ingredients for — and SouthTown's employees will prepare and sell — Duane's Pizza on SouthTown's premises," Schildberger said.
Although the city disagrees with the district court's decision, Schildberger said, SouthTown now appears to be in compliance with their liquor license after that purchase.
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