The Arizona Court of Appeals delivered a blow against the regulatory powers of the Arizona Department of Health Services by declaring on Sept. 30 that a luxury Phoenix tobacco shop and bar is exempt from the statewide smoking ban in public places.
The ruling overturns a Maricopa County Superior Court judge’s decision in March to back the department’s assertion that Magnum’s Cigar, Wine and Liquor Emporium’s inclusion of a bar nullified its exclusion from 2006 voter-approved Smoke-Free Act.
The act included several exceptions to the smoking ban, including retail tobacco shops that generate a majority of their sales from tobacco and related accessories. Under the law, retail tobacco shops must also have physical separations to prevent smoke from drifting into areas where smoking is prohibited.
The court found no basis for the department’s interpretation of the 2006 act that would forbid smoking in a tobacco shop that sells alcohol or also operates as a bar.
“Although the act specifies that the majority of a retail tobacco store’s sales must be from tobacco products and accessories, it places no restrictions on the source of the other 49.9 percent sales,” wrote Judge John Gemmill.
“I’m extraordinarily pleased and happy for me and my family,” said Amar Patel, who owns and operates the north Phoenix cigar lounge with his family. “It’s always what we felt was right and we felt that we were going to win this case.”
Although pleased with the result, Patel said the ordeal, which began in 2007, has been extremely costly for the business. He estimated his legal fees will reach more than $100,000, and he said the legal fight has made promoting his business an impossibility.
“Since this all started I haven’t been able to promote my business in any direction,” he said. “I haven’t been able to promote it as a cigar shop. I wasn’t able to promote it as a bar. This is what the state has cost us.”
Don Herrington, bureau chief of Epidemiology and Disease Control for DHS, said he was disappointed by the ruling and said the department is currently examining all of its options to stop smoking in all bars and restaurants.
But Herrington acknowledged the most likely avenue will be another trip to court, and not to the Legislature. That’s because amendments to voter-approved initiatives must be approved by a supermajority of legislators — a difficult hurdle, Herrington said.
Although the Smoke-Free Act carried an exemption for retail tobacco shops, Herrington said he is positive that voters in 2006 indicated they did not want smoking to occur in bars — as evidenced by the defeat of Prop. 206, a competing smoking measure that exempted restaurants and bars from a ban.
“The voters beat that proposal down,” he said. “We clearly think the voters want a smoke-free environment in all bars and restaurants.”
Kraig Marton, an attorney hired by Magnum’s, argued in court filings that DHS on numerous occasions approved the Patel family’s plans to add a bar to the business where patrons could smoke cigars, indicating it would be legal under act’s provisions and department guidelines.
Through public records requests, Marton secured internal e-mails from DHS employees, including Herrington, which indicated the department began consulting with the Attorney General’s Office to help determine how to stop smoking in businesses such as Magnum’s.
 “We haven’t found an absolute yet, but the current thinking is that we may use permitting/licensing as a key. Retail smoke shops are not required to have any specialized license, such as a liquor or food permit/license,” wrote Herrington, in an August 2007 e-mail. “…Hence we are thinking that a way to approach this is to say, ‘If you (a place of business) have any other specialized license, you do not qualify as a retail tobacco store.’”
The department ultimately settled on implementing a substantive policy statement, which banned smoking in retail tobacco shops that also served alcohol or food — a move that prompted Magnum’s attorneys to accuse the department of circumventing agency rulemaking procedures by refusing to seek public comment.
The issue of the department’s drafting, implementation and use of the substantive policy statement was not addressed in the Court of Appeals 18-page opinion. The ruling does require that the store produce evidence that sales of tobacco and related accessories produce a majority of the business’ revenues.