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 has tentatively settled.

The provisional agreement would see plaintiffs Scarlet Honolulu Inc. and Gay Island Guide LLC receive $670,000, and require mandated federal court oversight, among other reforms, over aspects of the troubled city agency solely charged with the power and authority to grant licenses for the manufacture, import or sale of liquor within the city and county.

The Honolulu City Council must vote to finalize the settlement agreement, an action that may occur in November.

Originally, the complaint had named two liquor commission 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.

After the city sought a motion to dismiss the Scarlet case last year, Chief U.S. District Judge Derrick K. Watson on Aug. 3, 2023, issued a 38-page order allowing the case to proceed to a bench trial.

But the judge’s prior ruling dismissed all claims against the two investigators — Fears and Fontaine — in their official capacities.

In preparing for trial in the Scarlet case, DiPasquale previously told the Honolulu Star-­Advertiser his clients sought $2.5 million in damages plus an additional amount, no less than another $2.5 million, in punitive damages.

The trial started in late September.

But by Oct. 8, seven days into the proceedings and following testimony from Scarlet co-owner Joseph Luna, who detailed specific instances of prior bigotry including the targeting of a transgender employee, the parties agreed to a resolution and were directed to Magistrate Judge Kenneth Mansfield for a “settlement on the record,” according to the nightclub’s co-owner Robbie Baldwin.

“We were ushered down to the magistrate in the middle of trial to state the settlement parameters on the record,” Baldwin told the Star-Advertiser. “Judge Mans­field agreed the court will do the monitoring. The lawyers are drafting the agreement.”

The city for its part declined to give details of the provisional settlement.

“As the settlement is still pending City Council approval, we are unable to provide any comment at this time,” Ian Scheuring, the mayor’s deputy communications director, told the Star-Advertiser.

According to Baldwin, terms of the tentative agreement largely involve changes to how liquor commission investigators operate. They include:

>> Quarterly monitoring and reporting required to the court to oversee the status of implementation of those changes.

>> Full implementation of the independent review report instituted by the city Managing Director’s Office and the commissioners at the time conducted by Hui Chen in 2023 pursuant to an agreed-upon but reasonable time frame. Chen, a strategic adviser to the city managing director, issued a scathing, months-long review that highlighted the liquor commission’s significant problems regarding its policies and practices used to enforce liquor laws on Oahu.

>> Full implementation of any and all outstanding city audit items since 2005.

>> A $670,000 payment to plaintiffs.

In addition, the tentative settlement will include use of body cameras by investigators, and use of a computerized “randomizer,” for selection of liquor licensees to be inspected randomly, according to Baldwin.

In a written statement, Baldwin said “one of the items we have wanted was having a federal monitor or consistent federal judicial review to ensure compliance of reforms.”

A status update on the settlement agreement is scheduled to be heard by Judge Mansfield on Nov. 7, according to case documents.

Meanwhile, liquor commission administrator Sal Petilos told the Star­-Advertiser that his agency is currently “addressing all of the system review recommendations,” which were announced over the summer.

“And our staff and leadership have been working diligently to fully implement those recommendations,” he said.

Petilos noted those efforts include “a reorganization of the HLC’s field services branch; increased and enhanced training opportunities for staff; encumbrance of funds for the development of new applications that will make possible the randomization of routine inspection and geolocation history data; and updates to the policies and procedures that guide our enforcement activities.”

But related litigation involving the city’s Liquor Commission is expected next year.

To that end, the city has asked for more legal fees to defend against a 2023 federal civil rights lawsuit alleging three investigators subjected another investigator, Jhumar Ray Waite, to discrimination, harassment and a hostile work environment based on his sexual orientation and race after starting his job with the city in 2022.

Filed in the U.S. District Court for the District of Hawaii, Waite’s complaint names defendants Fears, Fontaine and Glen Nishigata, and alleges the trio, in their official and individual capacities, violated portions of the Civil Rights Act of 1964 as well as state laws related to discrimination against Waite.

Waite — who has worked as a Honolulu liquor investigator since August 2022 — is gay and Filipino, the complaint states.

To fight this lawsuit, the city requested the Council adopt Resolution 249, which seeks an additional $115,000 be appropriated to pay law firm Kobayashi Sugita &Goda LLC to defend the city against the Waite civil lawsuit.

On Oct. 9, the Council unanimously granted the city’s funding request.

Scott Humber, the mayor’s communications director, previously told the Star-Advertiser the “city is vigorously defending against these claims and believes the evidence will demonstrate that the allegations are without merit.”

“The Waite case is currently in the discovery and motions practice phase,” he said. “The city has filed a motion for judgment on the pleadings requesting dismissal of the case.”

The trial is set to begin April 14, he added.

DiPasquale, Waite’s lawyer, said this case continues in part because no settlement was reached between his client and the city.

“They’ve offered pennies as far as we’re concerned,” DiPasquale previously told the Star-Advertiser, “and they just don’t really take it seriously.”