The owners of a Chinatown nightclub and an LGBTQ+ guide to the islands who accused the Honolulu Liquor Commission and its investigators of anti-gay discrimination are seeking at least $5 million in damages when the case goes to trial after a judge denied parts of the city’s motion to dismiss the case.

Filed in 2021 on behalf of Scarlet Honolulu Inc. and Gay Island Guide LLC, the civil complaint alleges investigators, administrators and others 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 went on for more than six years, according to the complaint, Scarlet’s owner Robbie Baldwin, and their attorney, James D. DiPasquale.

Chief U.S. District Judge Derrick K. Watson on Thursday issued a 38-page order on the city’s motion to dismiss. The matter now proceeds to a bench trial, where Watson decides, starting Dec. 5.

“Plaintiffs have presented detailed, uncontroverted evidence showing a disparity in inspection rates — a discrepancy that can be deduced using rudimentary mathematical calculations. Defendants cite to no rule of evidence showing this data would be necessarily excluded,” Watson wrote. “Moreover, defendants could have presented their own facts to explain away the apparent disparity, but they did not do so. In fact, defendants did not refute the facts in Plaintiffs’ additional concise statement at all, deeming those facts admitted.”

DiPasquale told the Honolulu Star-Advertiser on Monday that his clients are preparing for trial and are seeking $2.5 million in damages plus an additional amount, no less than another $2.5 million, in punitive damages.

The ruling did dismiss all claims against two investigators in their official capacities.

“We are pleased with the fact that the court did agree with us on a number of points and rejected the claims against the individual city employees and some of the rulings in our favor that the court made,” Lex R. Smith, an attorney retained by the city, told the Star-Advertiser. “We actually think we have a pretty good chance at prevailing on everything else at trial.”

Watson wrote that the Liquor Commission and the city “have not shown, and it is not clear” that the statistical evidence detailing how inspectors disproportionately targeted LGBTQ+ venues would not be admissible at trial.

There are about 1,500 active liquor licensees in Hono­lulu — seven, including Scarlet, identifying as LGBTQ+ establishments — leaving approximately 1,493 non-LGBTQ+ licensees, according to the complaint and order.

From 2020 through 2021, “LGBTQ+ licensees were inspected by commission investigators at a higher rate than non-LGBTQ+ licensees,” read the order.

In 2020, 4,110 inspections were performed across the 1,500 with the 1,493 non-LGBTQ+ licensees inspected a total of 4,047 times, compared with 63 inspections for the seven LGBTQ+ licensees.

The non-LGBTQ+ rate of inspection was 2.7 inspections per licensee compared with nine inspections per licensee for LGBTQ+ establishments.

In 2020, LGBTQ+ license holders were inspected 333% more often than establishments that didn’t claim to cater to the LGBTQ+ community.

The trend continued in 2021 when the 1,493 non-LGBTQ+ licensees were inspected a total of 5,893 times and the LGBTQ+ licensees were looked at 49 times.

The non-LGBTQ+ rate of inspection was 3.9 inspections per licensee and the LGBTQ+ rate of inspection was seven inspections per licensee, meaning business that identified as LGBTQ+ were inspected 179% more often than non- LGBTQ+ license holders.

“Significantly, 4 out of the 7 LGBTQ+ licensees were closed down (not subject to inspection) for six out of twelve months in 2021. Thus, based on the facts in the record, it is fair to infer that the 179% comparison is an underestimate,” wrote Watson.

There is a “genuine dispute of material fact as to whether the (Liquor Commission) maintains an informal custom or practice of disproportionately targeting LGBTQ+ businesses for regulatory enforcement.”

Evidence of a “sweeping disparity between LGBTQ+ and non-LGBTQ+ inspection rates in the years 2020 and 2021 was presented, which may reflect repeated constitutional violations.”

There is also evidence of constitutional violations against both Scarlet and Gay Island Guide in 2020 and 2021, the judge wrote, including by investigators that did not result in discipline or dismissal.

“All of these potential violations share the same core stimulus: anti-LGBTQ+ animus by (Liquor Commission) leadership and employees. Therefore, taking the evidence in the light most favorable to plaintiffs for purposes of this (motion for summary judgement), the Court infers that a custom or practice of anti-LGBTQ+ discrimination exists within the HLC,” wrote Watson.

The policy “amounts to deliberate indifference” to the plaintiffs’ constitutional rights and was the “moving force” behind the constitutional violations they claim.

Inadequate training and a recognition of that lack of training by commission leadership is also evident, according to the order.

“There is evidence that HLC leaders were not only deliberately indifferent to the need for better training, but affirmatively perpetuated a culture of discriminatory behavior,” wrote Watson.

The commission voted Thursday to hire Salvador “Sal” Petilos as its next administrator.

Petilos has more than 10 years of liquor policy experience, having most recently served as the director for the Department of Alcoholic Beverage Control in Salt Lake City.

Scarlet owner Baldwin told the Star-Advertiser in an interview that Watson’s opinion left him feeling “validated” and optimistic heading to trial.

“When we filed it (the lawsuit) we were looking for change in this agency that is so clearly discriminatory,” said Baldwin. “I am not very optimistic, we’ve seen three new commissioners come in and now we see a new administrator coming in. This lawsuit has been going on for two years and they (the commission) have been defiant. Calling our accusations baseless. Going before the City Council and saying it was because of my personal views, I don’t know what that is, homophobia?”

This story has been updated with comments from Lex R. Smith, an attorney representing the city.