Initiative opponents said they would appeal the ruling directly to the state Supreme Court, but the decision enables the state to continue to move forward with implementing it.
The initiative takes effect June 1.
Voters approved Initiative 1183 last fall to privatize liquor sales and dismantle Washington's state-run liquor system, which was formed in the 1930s in the aftermath of Prohibition. The measure, backed by retailing giant Costco, allows stores larger than 10,000 square feet to sell liquor, though it could allow smaller stores to sell liquor if there are no other outlets in a trade area.
Opponents filed suit, arguing that it violates state rules requiring initiatives to address only one subject because it included a provision to set aside $10 million for public safety.
Cowlitz County Superior Court Judge Stephen Warning ruled on March 2 that the measure addressed two subjects because of the public safety provision. He reversed that decision on Monday, granting the state's motion for summary judgment.
The state's rephrased argument shows "there is a well-established -- albeit negative -- relationship between public safety and liquor," Warning said.
"No one likes to say they're wrong," he said, "but I think I was previously."
The ruling enables the state to continue to consider liquor permits and take other steps toward implementing the measure, Senior Assistant Attorney General Mary Tennyson said.
Michael Subit, an attorney for the plaintiffs, expressed surprise with the ruling, saying that motions for reconsideration are almost never granted. He said he would appeal directly to the state Supreme Court.
"We think we're right, and we think the judge was right the first time," Subit said.
Subit filed suit in December on behalf of the Washington Association for Substance Abuse and Violence Prevention, the landlord to a state-owned liquor store in Cowlitz County and two Red Apple stores in Kitsap County.
A similar lawsuit in King County Superior Court, which was filed by unions whose members stand to lose their jobs if the initiative is implemented, was put on hold, pending the Cowlitz court decision.
Attorneys for both sides had expected the judge to hear arguments Monday on whether voters would have approved the initiative without the public safety provision. But he first heard arguments over whether to reconsider his earlier ruling.
David Burman, a Costco attorney, said the question is whether the court can conclude the initiative implicitly states public safety and liquor are related.
Subit argued that the first ruling should stand, saying it's not enough that there's a general link between public safety and alcohol.
"There's a link between a monkey and a banana, but they are not the same thing," he said.
Initiative opponents have 30 days to appeal.
Despite the lawsuits, Washington state officials have been moving forward with implementing the initiative. The state Liquor Control Board opened a public auction online on March 8 of its state-run liquor stores. The auction ends April 19.
Nearly 20 states control the retail or wholesale liquor business. Some, such as Iowa and West Virginia, have relinquished partial control in recent years, but Washington would be the first in that group to abandon the liquor business entirely.