The lawsuit was filed by the Michigan Restaurant & Lodging Association and two of its members: Heirloom Hospitality Group LLC, which operates three southeast Michigan restaurants, including Townhouse Detroit; and Hudsonville-based HIH Inc., operating as Suburban Inns,  which has eight hotels and four restaurants in west Michigan.

The group sued “out of desperation, and as a last measure,” Justin Winslow, president and CEO of the MRLA, told Bridge Michigan this week.

At issue is the directive made on Sunday by Robert Gordon, director of the Michigan Department of Health and Human Services. Amid escalating coronavirus cases and hospitalizations, the state reduced capacity for public gatherings and retail stores, closed high schools and postponed high school sports, and set new regulations for several businesses, including shuttering movie theaters and casinos. 

For restaurants and bars, the order forced them to close to indoor seating until Dec. 8, a move that Winslow said that will cause economic devastation in the $17.9 billion industry that already is one of the pandemic’s hardest-hit sectors. 

While outdoor seating and carryout remains available to the industry, an estimated 40 percent of restaurants will close during the order, Winslow said, and 250,000 employees are likely to be laid off.

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"We're at a point where we're eight months into this, we were shut for three months, and we've been operating with 50 percent capacity since then,” he said.

Gov. Gretchen Whitmer responded to the lawsuit Wednesday CNN, acknowledging the restaurant industry has "really had a tough year because of COVID," which she argued was made worse by a lack of coordinated national strategy.

The order was "really driven by our epidemiologist and our public health experts" who say "inherently dangerous situations are when you are inside with people from a different household, or many different households, for a prolonged period without a mask," Whitmer said.

"That's what happens in a restaurant."

While the judge denied a temporary injunction, a hearing is set for Nov. 30 to consider the wider lawsuit, which claims Gordon’s order is unconstitutional by “infringing on legislative authority” and not recognizing mandated separation of powers.

"We were disappointed not to have received a temporary restraining order of the DHHS order ... as it means several more restaurant workers will be losing their jobs in the coming days as restaurants remain closed,” Winslow said in a statement on Friday. 

“We look forward to the opportunity to make our case in court on Nov. 30 and remain hopeful for a positive outcome that more effectively balances risk and human toll across Michigan."

The lawsuit said the MDHHS ruling “Is neither neutral nor generally applicable and singles out restaurants while permitting indoor business operations at many other non-essential businesses, such as salons, gyms, tattoo parlors and retail establishments … with no rational basis for these exceptions.”

State outbreak data show rising cases among some sectors, like manufacturing, but just a handful from businesses like gyms and hair salons. Data released Monday by Michigan show zero retailers and patrons were affected by the most recent outbreaks, 17 from social gatherings, 59 in long-term care facilities and 57 in K-12 schools.

At the same time, Michigan bars were responsible for two new outbreaks and 10 ongoing outbreaks among 983 total in the state. Restaurants, as a group, had 19 new outbreaks and 23 ongoing cases.

Gordon, meanwhile, said in a statement Friday that similar measures have successfully stopped COVID surges in many other countries. "That’s why public health experts support the approach, and we believe these targeted and temporary steps are needed to avoid overwhelmed hospitals and death counts like we saw in the spring," he said. 

While the new order lasts for three weeks, and is being described by Gov. Whitmer’s administration as a "pause" rather than a shutdown, the restaurant industry fears the administration will continue the restrictions through the full holiday season. 

Michigan health officials haven’t stated a goal or metrics for what has to happen with cases for the restrictions to be lifted. 

Many restaurant owners "have zero cash reserves left in the bank," Winslow said, and unlike earlier closures, there is no promise of new federal stimulus funding for businesses or laid off employees. 

"I think the decimation of the industry will be so drastic after six or eight weeks of closure that there won't be much of one left to come back," Winslow said.

Other business leaders also are skeptical and fearful that the “pause”  will last for the stated three weeks. 

“We know it will take two to three weeks to slow acceleration [of the virus spread,]” Brian Calley, president of the Small Business Association of Michigan, told Bridge Michigan earlier this week.

“Do we know for sure that is the goal?  Or should we just expect that it’s more like eight or 10 or 12 weeks?”

Michigan started the year with approximately 17,000 restaurants. Roughly 2,000 restaurants have closed for good during the pandemic, according to the MRLA, which predicts as many as 6,000 more could permanently close by spring 2021 if there is a prolonged dining room shutdown.

The latest orders, the lawsuit said, “will absolutely lead to a catastrophic economic fallout. “

Alternatives were proposed by the restaurant industry, Winslow said. Last weekend, the MRLA proposed a plan to limit restaurants to 25 percent capacity and require 10 p.m. closure, and it told Whitmer's office it would publicly back those tightened regulations if adopted, Winslow said.  

The administration never responded, he said.

"And just to be clear, it was given specifically to the executive office of the governor, and given to Gordon himself," Winslow said.

The Paycheck Protection Program portion of the $2 trillion federal CARES Act gave the industry "a lifeblood" and an "cash infusion" that helped restaurants retain employees during the first COVID wave, Winslow said.

But funds for that program have run dry while negotiations over another stimulus package sputter in Washington, D.C., where Congress and the Trump administration have been unable to strike a deal.

"There's nothing similar to that that exists, so in other words, we've just been left as an industry to die," Winslow said. "And so all that's left is a legal challenge for the right to operate, because it's the only way one can secure livelihood."

Speaking to CNN, Whitmer urged federal officials to "get their act together" and approve additional stimulus support for businesses and restaurant workers.

"I have incredible empathy for what they're struggling with and yet we have to follow the epidemiology," the governor said.