A lawsuit against new legislation aimed at cleaning up Pennsylvania's takeout liquor stores has been turned over to federal court.

The Asian-American Licensed Beverage Association and a half-dozen takeout establishments recently filed suit against the state's Liquor Control Board over Act 39, the resolution that requires takeout stores to acquire a $300 permit to continue to do business. Before applying to the LCB for the new permit, owners of Philadelphia businesses that sell beer by the six-pack must first be approved by City Council, a process that costs owners an additional $300. So, it'll now cost business owners $600 a year for the right to sell beer should the suit fail.

The Asian-American group's chairman, Adam Xu, is fighting against the legislation, sent to Philly from Gov. Ed Rendell's office, on behalf of takeout owners who claim the resolution denies their constitutional right of equal protection.

"All other licensees in Pennsylvania don't have to pay a fee for the state and city," says Xu.

LCB spokeswoman Molly McGowan says the act singles out businesses in first-class city areas, a qualification that only applies to Philadelphia in the commonwealth. That explanation did little to sooth the nerves of takeout vendors.

"The problem is if [the bill] goes through everyone's gonna lose their livelihood," said Bill Castelberg, director of sales for Origlio Beverage distributors in the Northeast at a recent public hearing in City Hall on the matter. He was among more than 200 protesters there.

The act calls for a license-approval process; once a request for a new permit is filed, council has 45 days to reject the applicant. If owners do not receive a rejection notice within that time, they are automatically approved to apply for a permit from the LCB. Council considered the first batch of protested stores on Oct. 20, and rejected 17 of the 39 applicants.

According to McGowan, there were a total of 1,950 liquor licenses in Philadelphia in December 2004. Of this number, 130 were issued to delis and stop-and-go eating places, which can only sell beer. Nuisance stores, and not neighborhood-friendly taprooms with takeout, are the target of this act, say bill supporters.

"The council believed granting those applicants would have adversely affected the neighborhoods," explained Steve Masters, a council staff attorney. "Council seemed very responsive to the community and when the community came together with the applicants, the council usually approved them on the conditional agreements."

If rejected, owners can appeal to Common Pleas court. If an owners' appeal is denied, he or she must wait a full year before reapplying.

The controversy and debate circling Act 39 has also erupted among council members.

According to Councilwoman Jannie Blackwell, more than 300 store owners have signed agreements promising not to sell alcohol to minors, rolling papers or other drug paraphernalia.

"They do their best to work with us and this is an unfortunate situation," Blackwell said recently. However, Councilwoman Marian Tasco favored the bill, claiming past attempts at cleaning up takeouts had failed.

"We've tried to cut down on the issues raised by neighbors who have had to live daily with the noise and drugs," said Tasco, "but it's been unsuccessful."

Councilman James Kenney said the conflict over Act 39 was the state's fault for not conducting the law properly and for issuing too many liquor licenses to deli owners over the past 15 years.

"How do you expect the owners to deal with this problem if the police don't even do it?" Kenney said. "The Liquor Control Board in Pennsylvania is ultimately the one to blame."

"Once they have the licenses, it's up to the state police to enforce and make sure they are still complying with the law," McGowan said.

Despite the pending lawsuit, Act 39 is a major step for angry community members who are fed up with the noise, drug sales, pornographic pictures and other low-life activities that accompany many of the city's takeouts.

"Our kids are going in these places to buy a Hug [drink] and they have to see all this liquor," said Tracy Gordon of Southwest Philadelphia.

One neighborhood activist from Strawberry Mansion has been compiling her own report on the city's stop-and-go's. She has accumulated a stack of pictures that document liquor license violations from stores along Ridge Avenue, West Girard Avenue, and North 18th, West York and Bouvier streets. In one picture a woman is sitting on the front stoop of a stop-and-go sipping from a Styrofoam cup. In another, folding chairs are chained up in a corner, violating the state law that requires a minimum of 30 seats.

"I don't think our community is asking too much to have these places clean up," said the woman, who asked her name not be used in this story. "The real reality is that they're not in compliance with the law."

Still, many liquor-store owners wish the city would close down the shops and delis with violations rather than penalize the entire group.

"We want to find out how to take out the bad apples from this industry and enforce existing law to control stop-and-go's," Xu said.

Gregg DiPipi, manager of Glam, a restaurant and lounge on Chestnut Street, has been in the bar business for the past 15 years. He says Act 39 is an ineffective law passed by legislators to appease voters who have been frustrated with dirty, loud liquor stores.

"The new law is going to accomplish nothing. It's feel-good legislation," says DiPipi, adding laws are already in place and just need reinforcing.

The Oct. 31 deadline to obtain the new permit is frozen pending the outcome of the lawsuit, which is waiting to be reviewed by the federal court. If Act 39 is upheld, stop-and-go owners who have not gotten the permit will have to stop selling takeout beer.