The Volokh Conspiracy
Mostly law professors | Sometimes contrarian | Often libertarian | Always independent
Illegal Pete's is a Colorado-based Mexican restaurant chain; starting several years ago, the name has drawn controversy because some view it as an insulting reference to illegal aliens. (The restaurant owners disagree, and say the name was chosen "to convey the unique, countercultural atmosphere [the founder] wanted to foster" and was an homage to the founder's father, who was "a bit of a good-natured hell-raiser.")
The owners of Illegal Pete's wanted to make it a Delaware limited liability company, but the Delaware Secretary of State's office rejected the application, allegedly on the grounds that the name "has a negative connotation," and that
Title 8 [of the Delaware Code] permits this office to reject a filing if the use of a corporate name by a corporation "might cause harm to the interests of the public or the State as determined by the Division of Corporations in the Department of State". As it stands, the document will be rejected unless a modification is made to the name of the corporation in the certificate of conversation [sic] and in its certificate of incorporation.
Yesterday, Illegal Pete's sued the Secretary of State, arguing that the denial was unjustified by statute—which on its face applies only to names containing the word "bank"—and violates the Due Process Clause and the First Amendment.
And indeed, given the Supreme Court's decision in the Slants case (Matal v. Tam), the denial does violate the First Amendment. Matal holds that the government can't deny trademark registration to allegedly racially offensive marks. It follows that the government likewise can't deny certificates of incorporation (or LLC status) to business names that allegedly offensively refer to illegal aliens (or, for that matter, to marks that seem to praise illegal conduct, if that's the Secretary of State's objection).
The case reminds me of Kalman v. Cortes (E.D. Pa. 2010), which struck down a Pennsylvania ban on corporate names that contain "[w]ords that constitute blasphemy, profane cursing or swearing or that profane the Lord's name" (applied in that case to the name "I Choose Hell Productions"). But following Matal, the matter is even clearer.