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One Drink Too Many

A recent decision highlights expanding scope of dram shop liability

December 20, 2021 Photo

Those handling hospitality exposures are all too familiar with the potential crossroads of the reptile theory, social inflation, and dram shop liability. Overserving a patron who then gets behind the wheel of a vehicle exacerbates the liability analysis and is proverbial fuel for the trier of fact.

Across the nation, jurisdictions have tackled the issue with various statutory enactments. The multiple forms of dram shop liability statutes hold the establishments liable when their alleged over-service of a patron contributes or causes an accident that results in damages and injuries. Decisions interpreting the statutory schemes and resulting verdicts bring into focus potential exposure and defenses available. 

More people are getting behind the wheel  since securing a ride from services like Lyft or Uber can be challenging since drivers are in short supply. Holiday parties, which took a hiatus last year, have come back with full force after a pandemic sequestering. With this in mind, it is little wonder that those in the hospitality industry focused on a recent Arizona decision that addressed dram shop liability and potential defenses.  

Understanding Dram Shop Liability

Dram shop laws hold businesses liable for serving or selling alcoholic beverages to a person to the point where the person becomes intoxicated and, as a result, causes death or injury to another, or causes property damage as a result of their intoxication. The term “dram shop law” comes from the 18th century and reflects how the British measure alcohol. A “dram” is three-fourths of a teaspoon of alcohol. Dram shops were the pubs, taverns, and places that served alcohol to the public.

Under dram shop laws, third-party victims who suffer injury or death due to the actions of an intoxicated person may sue the establishment that overserved the person alcohol. Dram shop liability does not exist on a federal level and requires a state-by-state analysis. For states with these laws, establishments may be held liable under certain circumstances and in varying degrees (see sidebar, “Liquor Liability Laws”).

Notably, in Florida, liability is limited to injuries or deaths caused by “habitually addicted” persons rather than “visibly intoxicated,” as is indicated in other states. Another nuance occurs in Mississippi law. There, the establishment will only be liable for serving minors who later cause injuries if they were visibly intoxicated during their time at the bar or restaurant. Finally, in Missouri, the liability is limited to businesses that serve alcohol on the premises. In other words, under Missouri law, bars and restaurants can be liable, but liquor stores cannot, except under limited circumstances.

A few states limit liability even further and only allow liability against establishment owners if they serve alcohol to a minor who subsequently harms someone due to their intoxication. These states include Nebraska, Nevada, North Carolina, and Wisconsin. California limits this liability even more by only holding licensed establishments liable if they served minors who were “ visibly intoxicated” and later caused injuries to third parties.

Georgia requires that an establishment with a liquor license must “knowingly” serve alcohol to an underage person or visibly intoxicated adult or minor. In addition, the server also must have known that the patron would be driving soon.

In Michigan, the law requires anyone filing a suit for dram shop liability to not only sue the licensed establishment, but also name the intoxicated patron in their lawsuit.

Finally, in Texas, a minor is defined as someone under the age of 18 rather than 21 regarding dram shop liability. Anyone over 18, must have been served when “obviously intoxicated to the point that they presented a clear danger to themselves or others.”

Extending the Scope of Dram Shop Liability

Like other statutory enactments, challenges to dram shop liability are closely examined by those in the hospitality industry for exposure and liability analysis clues. An Arizona Supreme Court recently reversed a decision from the appeals court finding a club’s duty to the public did not end when an overserved and intoxicated patron arrived at home. The case, which involved an intoxicated patron who went home to rest, then resumed driving and ultimately killed two people in the process, was found to be within the club’s scope of risk for liability. An $800,000 verdict was reinstated, and the club found liable in part for the accident.

By way of further background, the patron, Cesar Villanueva, was kicked out of the Jaguar Gentleman’s Club owned by JAI Dining Services Inc. (JAI) after getting into an altercation with a club employee. Villanueva drove his truck to his brother’s home, where he remained for more than an hour. Thereafter, a friend used Villanueva’s truck to drive Villanueva, his girlfriend, and her friend to Villanueva’s house and drop off the truck. Once home, Villanueva slept for a short time before his girlfriend woke him, and he agreed to take her friend home. Still intoxicated, he violently rear-ended a car stopped at a red light at 86 mph, killing the two people inside. Villanueva was subsequently convicted of two counts of manslaughter, and he is currently serving a lengthy prison sentence.

JAI was required to conform to a certain standard of care and had a duty to exercise due care as a holder of a liquor license in serving alcohol to patrons who may later find themselves driving. To prove negligence per Ryan v. Napier (2018), a plaintiff must show that the tavern owner had a duty of care to its patrons as well as the public; that it breached that duty; and that its actions were the actual and proximate cause of the resulting injury.

As a liquor licensee, JAI had a duty to exercise due care in serving alcohol to patrons, including Villanueva. This duty existed not only for the protection of Villanueva and other guests, but also for protecting the traveling public using the roadways in the area who may be injured as a result of Villanueva’s intoxication.

In determining actual causation, the Arizona Supreme Court analyzed whether JAI’s actions helped cause the final result. In other words, would the deaths have occurred “but for” JAI’s role in the situation? JAI did not dispute actual causation but challenged proximate causation. The court framed proximate causation by asking whether JAI’s acts resulted in the deaths in a “natural and continuous sequence, unbroken by any efficient intervening cause.” An intervening cause occurs between the time of the defendant’s negligent act and the final injury. The independent act must be necessary in bringing about the harm.

JAI argued that Villanueva’s decision to resume driving at least an hour after arriving home was an independent and intervening cause of the car accident. His act of going home and taking a nap broke the chain of the natural sequence of events and relieved JAI of any subsequent liability. JAI claimed that its liability ended the moment Villanueva arrived safely home from its establishment. Extending the risk of liability beyond that, JAI argues, would open up a black hole of liability for liquor licensees.

The plaintiffs, however, argued that the risk of liability should stay with the patron as long as that person is still intoxicated and choosing to drive in that compromised condition. A temporary stop at home does not negate any liability on the part of the club for overserving a patron while in its care. The court sided with the plaintiffs.

The Arizona Supreme Court ultimately held that it was foreseeable that Villanueva would drive in an intoxicated state after being kicked out of the club for unruly behavior and could cause an accident. Of note, the Arizona Supreme Court also noted that the club manager in question did not attempt to separate Villanueva from his truck or offer him a safe ride home via taxi, Uber, or some other form of transportation. No one at the club took any action to prevent him from driving. This evidence, in addition to the lack of case law supporting the defendant’s position, resulted in the Arizona Supreme Court reinstating the prior decision of the lower court.

This case is noteworthy because it broadens the duty and scope of risk that a liquor licensee faces in Arizona dram shop cases. The duty and scope of risk now essentially runs until the time the intoxicated patron is sober. Whatever occurs between the time the overserved patron leaves an establishment until the time they are sober creates potential liability for liquor licensees in Arizona. With the glaring question surrounding the status of the patron’s sobriety, this could cause even more litigation in Arizona courts.

Arizona is an example of efforts among some states to establish the intervening cause as a defense for the server of alcohol. It is a harbinger of other efforts to explore defenses to dram shop liability in jurisdictions with statutes on the books. 

SIDEBAR 

Liquor Liability Laws

In the District of Columbia and the following states, bars and restaurants holding a liquor license can be held liable under their state statutes for selling alcohol to minors and continuing to serve alcoholic beverages to patrons who are visibly intoxicated.

•     Alabama

•     Alaska

•     Arizona

•     Arkansas

•     Colorado

•     Connecticut

•     D.C.

•     Florida

•     Hawaii

•     Illinois

•     Indiana

•     Iowa

•     Kentucky

•     Maine

•     Massachusetts

•     Minnesota

•     Mississippi

•     Missouri

•     Montana

•    New Hampshire

•     New Jersey

•     New Mexico

•     New York

•     North Dakota

•     Ohio

•     Oklahoma

•     Oregon

•     Pennsylvania

•     Rhode Island

•     South Carolina

•     Tennessee

•     Utah

•     Vermont

•     Washington

•     West Virginia

States that currently do not have dram shop laws include Delaware, Kansas, Louisiana, Maryland, South Dakota, Virginia, and Wyoming. Licensed liquor establishments in these states cannot be held liable for the actions of their intoxicated patrons. Most of these states do not have dram shop statutes, but Louisiana took it further and passed a law invalidating dram shop liability completely.

 

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About The Authors
Multiple Contributors
Stephen J. Henning

Stephen J. Henning is a founding partner at Wood Smith Henning & Berman LLP. shenning@wshblaw.com

Jodi Mullis

Jodi Mullis is a partner in Wood Smith Henning & Berman’s Phoenix office.  jlmullis@wshblaw.com

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