The legislation was passed into law last year, even though the commission that oversees the state's liquor-control agency unsuccessfully lobbied Gov. Gary Herbert to veto the 197-page bill. The board cited concerns over the buying and selling of coveted liquor permits, which are in such short supply that bar licenses are not expected to become available for the next two years.
The Utah Hospitality Association filed the federal lawsuit in June, arguing that scarce liquor licenses and the happy-hour ban violated federal antitrust laws. The group amended its lawsuit in October, seeking a court order to stop the LDS Church from influencing lawmakers when drafting liquor laws.
State attorneys said the LDS Church's "practice of offering its view to legislators on liquor laws" does not violate the Utah and federal constitutions. In addition, both state and federal courts "have made it plain that religious leaders and organizations have a First Amendment right to comment upon proposed legislation."
LDS Church spokesman Scott Trotter said Friday in an email that Mormon leaders have not publicly taken a stand on proposed liquor laws.
"The Church of Jesus Christ of Latter-day Saints has always maintained its right to express its views on significant moral issues that directly affect its members and the community," he wrote. "While we have not taken a position on any proposed alcohol legislation, we have consistently cautioned against over-consumption, impaired driving and underage drinking."
Kenneth Wynn, a spokesman for the Hospitality Association and director of the liquor-control agency until his retirement in 2007, said, "In my 30 years of experience, I have firsthand knowledge that the LDS Church has influenced every piece of liquor legislation that the state has adopted over the past three decades."
Wynn, a Mormon, also argued that the so-called Domination Clause in the Utah Constitution prohibits church officials from interfering in state matters.
State attorneys argued that the Domination Clause, which states "no church may dominate the state or interfere with its functions," does not apply in this instance. State attorneys acknowledged that the Domination Clause "may be unique and expansive" but they said it cannot be used to void "a legal government act or election merely because it is consonant with a particular religious belief or advocated by religious leaders."
There is little history or Utah case law regarding the Domination Clause, state attorneys said, and there was little discussion on the issue during the 1895 Utah constitutional convention, whose framers wanted to overcome national perceptions that Utah was a de facto Mormon theocracy.
State attorneys also said Utah's happy-hour ban doesn't violate antitrust laws because it is applied uniformly.
Civil rights attorney Brian Barnard, who is not involved in the case, said any lawsuit challenging Utah's liquor laws "is a major uphill battle."
"States have a great deal of power in the regulation of liquor and with avoiding antitrust claims," he said. "But using antitrust laws [as an argument] is something that hasn't been tried before in Utah, so it will be interesting to see what the court does with this kind of a challenge."
State attorneys argued that even if state alcohol laws had violated the federal Sherman Antitrust Act, that law is trumped by the 21st Amendment, which repealed Prohibition and gave states broad powers to regulate intoxicating liquors.
The state also pointed to a 2005 report by the National Highway Traffic Safety Administration showing a significant correlation between lower drink prices and higher binge-drinking rates.
Utah attorneys said if the state ban on discount drinks does inhibit free-market competition, the prohibition is "more than outweighed by the state's interest in protecting against tragic loss of life from binge drinking or auto fatalities tied to drunk driving."
State attorneys also defended quotas on the number of bar and restaurant licenses as legal because the law is enforced uniformly. Eighteen applicants have been waiting for more than a year for bar permits to become available.