Dram Shop Liability
By: Matthew D. Quinn
It’s the holiday season, and everybody is enjoying get-togethers with family, friends, and work colleagues. The food is great and there’s plenty of it. For many, the same is true for alcohol: it’s ubiquitous, and unfortunately, many consume to excess. Accordingly, this seems like an opportune moment to generally discuss the scope of liability to injured third-parties (typically other drivers on the roadway) caused by overserving alcohol—i.e., the concept of “dram shop” liability.
Driving drunk is a deplorable act which is rightly condemned and punishable under the criminal law. Unsurprisingly, a drunk driver will likewise be subject to civil liability if he or she injures another traveler on the roadways. While extremely important, there’s nothing particularly novel about such liability. Dram shop liability, on the other hand, is fairly complex, but I hope that this blog post will provide a very general primer on the topic.
In broad terms, a person or business licensed or permitted to sell alcoholic beverages, or a social host serving alcoholic beverages, will be liable for the injuries of a third-party who was injured by an individual who knowingly served alcoholic beverages by a licensee/permittee or social host while in an intoxicated state. The slow development of this dram shop law is both interesting and instructive.
In fact, the concept of dram shop liability did not exist until relatively recently. Under the old common law, “it was not a tort to either sell or give intoxicating liquor to ordinary able-bodied men . . . . The reason usually given for this rule being that the drinking of the liquor, not the remote furnishing of it, was the proximate cause of the injury.” Hutchens v. Hankins, 63 N.C. App. 1, 5, 303 S.E.2d 584, 587 (1983).
But a sea change occurred in 1977, when the North Carolina General Assembly passed a statute declaring that it was unlawful for a person licensed to sell mixed alcoholic beverages knowingly to sell such beverages to an intoxicated person. N.C. Gen. Stat. § 18A-34(a)(2). (Chapter 18A was replaced with Chapter 18B in 1981, but the statutory prohibition against serving alcohol to intoxicated persons was incorporated into the new Chapter 18B. Hence, North Carolina law has continuously provided the following since 1981: “It shall be unlawful for a permittee or his employee or for an ABC store employee to knowingly sell or give alcoholic beverages to any person who is intoxicated.” N.C. Gen. Stat. § 18B-305(a).)
The first case to apply this new statutory prohibition was Chastain v. Litton Systems, Inc., 694 F.2d 957 (4th Cir. 1982). In Chastain, the defendant’s employee became intoxicated at a work-related Christmas party, drove through a red traffic light, and struck an automobile operated by the plaintiff. The Fourth Circuit recognized that North Carolina had recently adopted a statute “providing that it is unlawful for a person licensed to sell mixed alcoholic beverages knowingly to sell such beverages to an intoxicated person.” Id. at 960. While no North Carolina court had applied this new statute, the Fourth Circuit noted that “[o]ther courts have held that violation of such a law subjects the licensee to liability for torts of the intoxicated customer . . . . The rationale of these decisions is that these laws are safety regulations which impose a duty on the licensee, not only to the customer, but also to the public.” Id. at 960-61.
In light of North Carolina’s common law of tort liability and the then-new Chapter 18A, the Fourth Circuit determined that the defendant “was negligent if it failed to exercise ordinary care in furnishing, or permitting its employees to furnish, alcoholic beverages to [its employee] knowing that he had become intoxicated.” Id. at 962.
The next case to apply North Carolina’s new prohibition against serving alcohol to intoxicated persons was Hutchens v. Hankins, 63 N.C. App. 1, 303 S.E.2d 584 (1983). In Hutchens, a commercial licensee was accused of knowingly serving alcohol to an intoxicated customer, who subsequently injured plaintiff in an automobile collision. The Court of Appeals began its analysis by recognizing that no North Carolina court had considered the new statutory prohibition on knowingly serving alcohol to an intoxicated person. However, the Court of Appeals noted that, in Chastain, “the Fourth Circuit Court of Appeals concluded that under the law of torts as developed by our Supreme Court, civil liability will be imposed on a licensee who violates a law prohibiting the sale of alcoholic beverages to a person known to be intoxicated.” Id. at 6, 303 S.E.2d at 587 n.2. After citing this holding from Chastain, the Court of Appeals stated, “We agree with this analysis.” Id.
The Hutchens Court proceeded to reject the old common law rule that “the drinking of the liquor, not the remote furnishing of it, was the proximate cause of the injury” caused by the intoxicated person. Id. at 5, 303 S.E.2d at 587. Instead, the Court of Appeals concluded as follows:
To the extent that the common law rule of nonliability is based on concepts of proximate cause, we are persuaded by the reasoning of the cases that have abandoned that rule . . . . [A]n actor may be liable if his negligence is a substantial factor in causing an injury, and he is not relieved of liability because of the intervening act of a third person if such act was reasonably foreseeable at the time of his negligent conduct . . . .
Moreover, “If the likelihood that a third person may act in a particular manner is the hazard or one of the hazards which makes the actor negligent, such an act whether innocent, negligent, intentionally tortious or criminal does not prevent the actor from being liable for harm caused thereby.”
Id. at 11-12, 303 S.E.2d at 591 (quoting Vesely v. Sager, 486 P.2d 151, 158-59 (Cal. 1971)).
Based on these authorities, the Court of Appeals in Hutchens established the following rule: “Accordingly, we adopt the requirements of G.S. 18A-34 as the minimum standard of conduct for defendant-licensees, and hold that a violation of this statute can give rise to an action for negligence against the licensee by a member of the public who has been injured by the intoxicated customer.” Id. at 16, 303 S.E.2d at 591. Hutchens also required that, “before a violation of G.S. 18A-34 may be found, the plaintiff must allege and prove (1) that the patron was intoxicated and (2) that the licensee or permittee knew or should have known that the patron was in an intoxicated condition at the time he or she was served.” Id. at 18, 303 S.E.2d at 595.
Following Hutchens, North Carolina’s Appellate Courts continued to expand dram shop liability to a number of different circumstances. For instance, the North Carolina Supreme Court’s opinion in Hart v. Ivey, 332 N.C. 299, 420 S.E.2d 174 (1992) expanded liability for knowingly serving alcohol to intoxicated persons. Hart involved the knowing service of alcohol to intoxicated persons under twenty-one (21) years old by a social host, not a licensee or permitee. One of the minors subsequently caused an automobile collision. The Supreme Court held that, “As to the cause of action for liability under common law principles of negligence we hold that the plaintiffs have stated a cognizable claim.” Id. at 304, 420 S.E.2d at 177. The defendants in Hart complained that “there are many implications from establishing such a claim and we should not do so.” Id. at 305, 420 S.E.2d at 178. In response, the Supreme Court stated, “Our answer to this is that we are not recognizing a new claim. We are applying established negligence principles and under those principles the plaintiffs have stated claims.” Id. at 305-06, 420 S.E.2d at 178. “If proof of these allegations were offered into evidence, the jury could find from such evidence that the defendants had done something a reasonable man would not do and were negligent.” Id. at 305, 420 S.E.2d at 178.
Another interesting case was Estate of Mullis v. Monroe Oil Company, 349 N.C. 196, 505 S.E.2d 131 (1998). There, an ABC store and a convenience store sold alcohol to several underage persons. One of the minors, in an intoxicated state, drove an automobile into a tree and caused the deaths of several passengers. The Supreme Court held that:
Applying the foregoing principles developed in Hart and Camalier to the present case, we conclude that a common law negligence suit may be maintained against a commercial vendor, based on a sale of alcohol to an underage person, provided that the plaintiff in such a case presents sufficient evidence to satisfy all elements of a common law negligence suit, that is, duty, breach of duty, proximate cause, and damages. As was the case in Hart, we do not recognize a new cause of action but merely allow established negligence principles to be applied to the facts of plaintiff’s case.
Id. at 202, 505 S.E.2d at 135 (internal quotation marks omitted). Hence, Estate of Mullis continued the trend of expanding liability for permittees or licensees under traditional theories of common law negligence.
The Hall v. Toreros, II, Inc., 176 N.C. App. 309, 626 S.E.2d 861 (2006) case is instructive concerning the evidentiary showing required to prevail in a dram shop case. In Hall, a bar was accused of (1) knowingly serving an intoxicated person and (2) failing to take affirmative steps to stop that patron from operating an automobile. The intoxicated patron caused a fatal automobile collision.
After an initial trial in Hall, the jury determined that the bar did not “serv[e] alcoholic beverage[s] to [the patron] when it knew, or reasonably should have known that [he] was intoxicated at the time he was served.” Id. at 311, 626 S.E.2d at 864. However, the jury could not reach a verdict on whether the bar failed “to take affirmative precautionary measures” to prevent the patron from operating a motor vehicle. Id. Therefore, a second trial was held only on the “affirmative precautionary measures” issue. Id. at 312, 626 S.E.2d at 864. After a substantial jury verdict for the plaintiff, the trial court granted a motion for judgment notwithstanding the verdict because the plaintiff did not establish a legal duty to take “affirmative precautionary measures.” Id.
The Court of Appeals in Hall concluded that, under the facts presented, there was no legal duty to take “affirmative precautionary measures” to stop an intoxicated person from driving. Id. The Court expressly held that its opinion did not address the issue of liability for knowingly providing alcohol to an intoxicated person.
Most helpfully, the Court of Appeals in Hall provided the following summary of dram shop law:
With respect to the sale of alcoholic beverages by ABC licensed or permitted businesses, N.C.G.S. § 18B-305(a) (2003) provides that it is “unlawful for a permittee or his employee . . . to knowingly sell or give alcoholic beverages to any person who is intoxicated.” In Hutchens, after examining the general purposes of the statute, this Court “adopt[ed] the requirements of G.S. 18A–34 [now N.C.G.S. § 18B-305] as the minimum standard of conduct” for businesses having a license or permit to sell alcoholic beverages, and held that violation of the statute “can give rise to an action for negligence against the licensee [or permittee] by a member of the public who has been injured by the intoxicated customer.” 63 N.C. App. at 16, 303 S.E.2d at 593; see also Estate of Mullis v. Monroe Oil Co., 349 N.C. 196, 202, 505 S.E.2d 131, 135 (1998) (common law negligence claim may be maintained against commercial vendor based upon sale of alcohol to underage individual); Hart v. Ivey, 332 N.C. 299, 305, 420 S.E.2d 174, 178 (1992) (common law negligence claim may be maintained against social host based upon service of alcohol to intoxicated individual). However, in order to prevail in such an action, a plaintiff whose injury was proximately caused by a patron must also allege and prove “(1) that the patron was intoxicated and (2) that the licensee or permittee knew or should have known that the patron was in an intoxicated condition at the time he or she was served.” Hutchens, 63 N.C. App. at 18, 303 S.E.2d at 595.
Hall, 176 N.C. App. at 314-15, 626 S.E.2d at 865 (all citations and modifications contained within the original).
My hope is that this blog post hits the high points of dram shop liability—but no single blog post can address all of the many nuances of dram shop litigation. For instance, there are some interesting cases involving plaintiffs who were overserved alcohol by permitees/licensees and were injured as a result. Whether such plaintiffs can overcome a contributory negligence defense is an interesting concept that might justify a future blog post.