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El Palacio

El Palacio is located at 601 Main Street in downtown Klamath Falls.

Owners of Mexican restaurant El Palacio filed a $11.75 million federal lawsuit against Klamath Falls city officials alleging the city violated their 14th Amendment equal protection and due process constitutional rights by taking racist, punitive action, including a liquor license revocation, against the business.

The Oregon Liquor Control Commission revoked El Palacio’s liquor license in 2017 due to reports of fights inside and outside the bar and restaurant and at least one alcohol sale to minors. After a shift in ownership from previous owners Antonio and Elizabeth Cisneros to their son, Carlos Faiers, El Palacio renewed its license in 2018.

Grants Pass attorney Christopher Cauble and Portland attorney Kellie Furr filed the lawsuit on Feb. 28 in U.S. District Court in Medford on behalf of Antonio, Elizabeth and Faiers.

It names Klamath Falls Police Chief David Henslee, former City Planning Manager Erik Nobel, City Manager Nathan Cherpeski, City Councilor Kendall Bell and former City Councilor Bill Adams as defendants.

Cauble told the Herald and News his clients wanted to run their business peacefully without experiencing harassment or racism.

“I personally was sort of disgusted by what I saw happening by the City of Klamath Falls, and specifically the police department,” Cauble said. “The city is treating El Palacio different than other businesses.”

Cherpeski declined to comment for this story. Henslee did not reply to a Herald and News email request for comment.

Police tactics alleged

The lawsuit alleges the city, directed by Henslee, conspired to put El Palacio out of business between 2015 and 2017.

It claims KFPD tried and failed to close the restaurant down through a public nuisance declaration on two separate occasions, then implemented “disproportionately rigorous” policing tactics on the business.

Law enforcement drove by the restaurant every 15 minutes and conducted one to two walk-throughs per night, the lawsuit claims, but did not do so at other, nearby bars including The Pikey and Basin Martini Bar.

The lawsuit alleges Henslee directed his department to name El Palacio as the source of criminal events such as bar fights and violence when such activities occurred on city-owned lots and sidewalks.

El Palacio’s owners voluntarily implemented safety measures including hiring security personnel, keeping an incident log and not serving alcohol late into the night, the lawsuit claims.

Alleged racial bias

The lawsuit describes a 2017 conversation between the plaintiffs and Henlsee in which Henslee insinuated El Palacio’s customers, who are mostly minorities, were a “problematic element of the community.”

Henslee said customers at a bar across the street were good people, the lawsuit alleges, but El Palacio’s were “knuckleheads” and a “weed” that “cannot be pulled out by the leaf, but by the root.” El Palacio’s owners claim they had the same customers as other nearby bars.

KFPD started to report “erroneous” criminal activity associated with El Palacio to OLCC, the lawsuit claims, and Henslee sent a letter to OLCC in 2016 recommending the liquor license not be renewed.

OLCC relied on these reports and recommendations, the lawsuit claims, and revoked El Palacio’s liquor license for six months.

After the restaurant’s license was reinstated, later restrictions included a ban on alcohol sales after 10 p.m. and prohibition of Antonio and Elizabeth from entering or operating the business.

These restrictions devastated the business, the lawsuit claims. School-aged children in the family are regularly harassed, ridiculed and bullied, the lawsuit says, and Antontio suffered a stress-related heart attack incurring $74,000 in medical fees.

“Plaintiffs have suffered additional isolation in their community as their reputational damage has extended to their social circles,” the lawsuit claims.

The city “failed to apply its laws uniformly and has used race as a basis for making these decisions,” the lawsuit claims, through inconsistent enforcement actions across downtown drinking establishments and racial profiling of El Palacio’s owners.

Cauble told the Herald and News he thought the alleged racism was complex, and not just personal or institutional.

“I don’t think there’s a bunch of racists that live in Klamath Falls necessarily, but I think there is clearly a lack of decision-making to understand you can’t treat minorities different than others,” Cauble said. “That is what they are doing here.”

The owners are suing for $1,000,000 in economic damages, $750,000 in reputation and emotional damages, and $10,000,000 in punitive damages.