PHOENIX -- The state government has the power to suspend business licenses for hiring undocumented workers, Arizona Attorney General Terry Goddard argued in a filing Friday. Goddard filed the motion for the state in a lawsuit opposing a recent statute that punishes Arizona businesses that "knowingly hire" undocumented workers. House Bill 2779 imposes sanctions including a 10-day license suspension for a first offense and permanent revocation for subsequent breaches. The suit was filed four months ago in Federal District Court by a range of interest groups led by the Arizona Contractors Association against Gov. Janet Napolitano. The groups argue HB2779 is an unconstitutional encroachment into federal jurisdiction and also violates businesses' due process rights. A second lawsuit against HB2779, filed last month by several social-activist groups including Mexican American Legal Defense Fund, was consolidated with the original suit on Sept. 14. Federal District Judge Neil Wake has promised to rule on the combined cases before the end of the year. Goddard's motion to Judge Wake stated that federal law gave the states exemptions from federal pre-empting in areas concerning business licensing, the Arizona Republic reported today. He claims the state also protects due process by giving employers notice and offering them a "fair hearing," the paper added. Judge Wake is expected to conduct a hearing on the lawsuit late this month or in early November, when he will rule on whether the law is unconstitutional or can be enacted. HB2779 is scheduled to go into effect on Jan. 1, 2008.