WILMINGTON, Del. — Popular Boulder-based burrito chain Illegal Pete's is taking the Delaware Secretary of State's office to federal court over the denial of a limited liability corporation application. The state found the company's name offensive.
Illegal Pete's Inc. named Deputy Secretary of State Kristopher Knight and the Margaret Magnusen, the Secretary of State office's Corporations Section Manager, in their official capacities as defendants in this federal case.
9NEWS has left voicemail requests for comment for both the Delaware Secretary of State's office and Illegal Pete's. We will update this post when we hear back.
According to court documents, the burrito chain claims Knight and Magnusen were violating the company's free speech rights by denying their application because their name was found "offensive." The chain also claims part of the reason for the rejection was based on a misreading of Delaware state code.
Delaware's Secretary of State's office told Illegal Pete's they couldn't become an LLC because the "name has a negative connotation" and "might cause harm to the interests of the public of the state," according to the lawsuit.
READ THE FULL SUIT: Illegal Pete's v. Knight & Magnusen
WHAT THE SUIT ALLEGES
The suit argues that Illegal Pete's is named after the founder's father — Pete. The suit says Pete was known as a hellraiser in his day and provided moral support to his son — also named Pete — during the early days of the company. Illegal Pete's has been operating in Colorado and Arizona for the past 23 years.
According to court documents, on Oct. 30 of last year, Illegal Pete's submitted the necessary certificates to Delaware's Division of Corporations to become a limited liability company. An LLC can at its most basic level be thought of as a company where the owner is not considered liable for the debts of the business.
Less than a week later, court documents show staffers at Illegal Pete's were told by Magnusen over the phone that they wouldn't be allowed to form the corporation in Delaware because of the connotation of their company name.
In a follow-up email, Magnusen explained her reasoning. Per the court filing, Magnusen explained she was allowed to deny any company an LLC if her office found the potential name "might cause harm to the interests of the public" of Delaware.
Magnusen cited Title 8 of state law in her explanation. The suit points out the language in state code quoted by Magnusen refers specifically to banks. As in, banking institutions and only banking institutions.
In their suit, Illegal Pete's points out they are not a bank, but a burrito chain.
Three days after sending the follow-up email, the suit claims Magnusen reiterated over the phone that she was denying the company and added that Illegal Pete's "is not in the best interests of the people of Delaware." She added that Deputy Secretary of State Knight confirmed her decision.
On Nov. 9, Knight left a voicemail for Illegal Pete's brass saying his team thoroughly explained why they were denied and added the decision was not going to change.
In their request for relief, lawyers for Illegal Pete's claim that by denying the company an LLC on the grounds of "negative connotation" and "harmful to the public," the state violated the company's right to "expression and free speech."
The suit also alleges that by tying the Title 8 clause to Illegal Pete's, instead of just banks, Magnusen and Knight violated the company's Fourteenth Amendment right of due process.
The company wants the court to order they be granted the LLC and all attorneys' fees paid, per court documents.
This is not the first time the burrito chain has been in the spotlight for its name. Colorado residents will recall in 2014 when Illegal Pete's was trying to move into Fort Collins, a large contingent of Hispanic, Latino and local activists pushed for the company to change its name.
Colorlines, an advocacy magazine focusing on race issues, ran the headline, "Activists: Calling a Mexican restaurant 'Illegal Pete's' is racist." NBC News nationally went with "Arizona Latino Group Protests Name of 'Illegal Pete's' Restaurant Chain" for their report. Each of the stories — from the Coloradoan, NBC News, New York Times and Fox News — pointed out Illegal Pete's had already come under fire for their name.
In 2014, Pete Turner, Illegal Pete's owner, made the trip up to Fort Collins to try and assuage locals. According to our news partners the Fort Collins Coloradoan, some at the community meeting he attended compared the name to a racial slur directed at black Americans, hanging a Confederate flag in their window or calling their place "Smoking Lynching BBQ."
A change.org petition from the time with almost 3,000 signatures pointed out to Turner that "to you, 'illegal' is a playful and meaningless descriptor that gives your restaurant a memorable name; it creates a 'clever' brand. We are here to tell you that no longer will you be able to claim blissful ignorance and profit from racism."
The Fort Collins store opened up less than a month after that meeting at 320 Walnut Street.
A year after that, Illegal Pete's was again met with protests as they moved out-of-state into Tuscon, Arizona. Westword sought out supporters of the chain not long after the store went up — citing Turner as saying he might consider a name change, but probably not because it meant a lot to him.
One reader, claiming to be an ex-employee, pointed out how great Illegal Pete's is at so many things:
"For everyone that is not in the know, Illegal Pete’s has been an icon in Colorado for twenty years," reader Zack wrote. "Pete’s is not only celebrated for its quality food, but because Pete embodies everything that is great about independent restaurants."
He goes on: "Amazing food, amazing music, most importantly a dedication to its community."
This story will be updated.
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