Illegal Pete’s Didn’t Pass Delaware’s LLC Name Smell Test (Sexxymofo Inc. And Illegal People Touring Inc. Did, Though)

(Photo: CPR / Kegan Warner)
photo: Illegal Pete's 2

Delaware officials won't allow popular Colorado-based restaurant chain Illegal Pete's to convert to a Delaware limited liability company because the company's name has "a negative connotation," according to a federal lawsuit filed this week.

But state Division of Corporations records show that Delaware officials have signed off on plenty of questionable, even tasteless, entity names.

Illegal Pete's is a 23-year-old restaurant chain known for its burritos. The company is named in honor of its founder's father, who is described on Illegal Pete's website as "a bit of a good-natured hell-raiser in his day." The company has nine locations in Colorado and two in Arizona.

While Delaware officials deem "Illegal Pete's" too offensive to be included in the state's roster of some 1.3 million business entity names, they've expressed no qualms about "Illegal Civilization Inc." or "Illegal People Touring Inc."

State officials also don't hate "Hate Date Inc.," ''Hate Media LLC" or even "I Hate Chitlins LLC."

Other non-offensive corporate food offerings include "Hot Asian Buns LLC," ''Crabby Dick's Delaware Inc.," ''Killer Beverages LLC," ''The Drunk'n Baker LLC," and even "Murder on the Menu Inc."

Delaware bureaucrats also weren't turned off by "Sexy Selfies Inc." or "Sexxymofo Inc.," and they didn't impose capital punishment on "Violent Heart LLC," ''Kill The Lucky Ones LLC," ''Murder Inc." or "Bloody Murder Sports Incorporated."

Officials, however, could not stomach "Illegal Pete's," a name that has also drawn the ire of some activists in Colorado and Arizona who believe it is offensive to Hispanics and conjures up anti-immigrant feelings.

"Our restaurant group has been frustrated by Delaware's misinterpretation that the group's name is in any way intended as derogatory, which is not the case and has never been the case," attorney David Finger said in an email Wednesday. "There is in fact a specific background for the name which has nothing to do with Delaware's insistence, and that background has been provided to the state."

"We hope to resolve this unfortunate confusion as quickly as possible," Finger added.

A spokesman for Delaware's Department of State, which oversees the Division of Corporations, said the agency does not comment on pending litigation.

The dispute began last October, when the company submitted paperwork to become a Delaware limited liability company, joining the expansive universe of business entities who call Delaware home for legal purposes.

But according to the lawsuit filed Monday, Corporation Sections Manager Margaret Magnusen informed a company representative by phone that the application would be rejected. She followed up with an email noting that Delaware law allows her office to reject a filing if the use of a corporate name "might cause harm to the interests of the public or the state."

"As it stands, the document will be rejected unless a modification is made to the name," Magnusen wrote.

Attorneys for Illegal Pete's contend that the language cited by Magnusen about harm to the public refers only to situations in which a company that is not overseen by the state banking commissioner wants to use the word "bank" in its name. The lawsuit said the decision was "arbitrary and capricious," depriving the company of its "liberty interest of expression and free speech" and its right to due process under the Fourteenth Amendment.

The complaint also alleges that the state's refusal to file the business formation certificates is "unlawful viewpoint and content discrimination" that violates the First Amendment.