"The problem was [the commissioners] put a restriction in place that makes it operationally unfeasible," said owner Mario Marovic. "It makes the entire plan not worth doing."
Marovic said kicking out nearly 30 people to bring the occupancy down would hurt business.
"With the amount of competition there is for dining, people are going to go post things about you on social media," Marovic said. "We would go out of business."
His plight caught the attention of Councilman Rush Hill, who requested that the City Council take up the appeal. It has been scheduled for a public hearing April 26.
Malarky's maximum occupancy now is 91. Commissioners thought an additional 75 people leaving at 2 a.m., when the bar closes, could create problems for police and neighbors.
"Residents are constantly being disturbed, woken-up and having to deal with these alcohol-related problems," wrote Drew Wetherholt, who lives a few hundred feet from the pub on 30th Street. He organized some residents to speak at the commission meeting.
Police officials opposed the interior expansion plans. They predicted that the remodel would cause more noise and disturbances, and draw more police resources.
The project would add a 565-square-foot sit-down dining room, an enclosed patio on the north side of the building, and large signs on the front and sides of the building. The patio would close at 11 p.m.
Marovic, who also owns the Landmark Steakhouse in Corona del Mar, has lined up the Newport Beach Chamber of Commerce and others in support of the project. He said some of them are neighboring business owners and residents.