“I’m a former bartender from Athens. So let me just suggest to you that if the alcohol comes off the shelf and goes into the glass, and goes into the mouth of the dancer, and the money goes into my pocket, are you telling me that’s not a sale?”
Justice O’Neill, to plaintiff’s counsel.
On April 6, 2017, the Supreme Court of Ohio heard oral argument in the case of Nichole Johnson v. Mary E. Montgomery et al., 2016-0790. At issue in this case is whether an innocent party injured by an intoxicated worker may pursue a claim of negligence against a liquor permit holder, outside the confines of Ohio’s Dram Shop Act, when that permit holder encouraged and profited from the intoxicated worker’s alcohol consumption. This case was argued at Morgan High School in Morgan County as part of the court’s off-site program.
Dancers who work at the Living Room, a Dayton area strip club, are encouraged to drink on the job. 80-85% of them do. The dancers are independent contractors pursuant to a contract with the Living Room. The Living Room makes a lot of money from the sale of overpriced drinks, and encourages its dancers to drink with patrons. But despite this policy, the club had no policy to see to it that intoxicated dancers got home safely and didn’t harm others on the highway.
Mary Montgomery worked as a dancer at the Living Room. On July 4, 2010, she left work in the early morning hours after admittedly drinking on the job. She drove herself home and no one tried to stop her. Due to her impairment, Montgomery struck another car on the interstate. Nichole Johnson was a passenger in that car. Johnson suffered numerous injuries as a result of the accident. She had multiple fractures, broken teeth, a lacerated liver, and a collapsed lung. She endured over ten surgeries and incurred hundreds of thousands of dollars in medical bills. Johnson filed claims against Montgomery, Thirty-Eight Thirty, Inc. d/b/a The Living Room (“the Living Room”), and Michael Ferrero, the sole owner and operator of the Living Room.
At trial, a directed verdict was granted on all Ohio Dram Shop Act (“the Act”) claims, and for claims against Ferrero. The court found that Johnson did not establish a sufficient basis to pierce the corporate veil. However, traditional claims of negligence were allowed to proceed against Montgomery and the Living Room. The jury found both defendants liable and awarded Johnson over $2.8 million in compensatory damages, plus $50,000 in punitive damages against Montgomery.
On the issue pertinent to this appeal, The Living Room appealed the court’s denial of its motion for a directed verdict. Montgomery did not participate in the appeal.
In a unanimous opinion authored by Judge Fain, and joined by Judges Donovan and Welbaum, the Second District reversed the trial court’s denial of the Living Room’s motion for directed verdict. The court found that the Dram Shop Act precluded the negligence claim raised by Johnson. Specifically, the Act “provides the exclusive cause of action against a liquor permit holder for injuries sustained as a result of the negligent conduct of a person who becomes intoxicated by alcohol furnished by the permit holder.”
Read the oral argument preview in the case here.
Key Statutes and Precedent
R.C. 4399.18 (Ohio’s Dram Shop Act) (Liability for acts of intoxicated person)
A person has a cause of action against a permit holder…for personal injury… caused by the negligent actions of an intoxicated person occurring off the premises… only when both of the following can be shown by a preponderance of the evidence:
(A)(1) (the permit holder or an employee of the establishment “knowingly sold an intoxicating beverage” to a “noticeably intoxicated person.”)
(B) The person’s intoxication proximately caused the personal injury, death, or property damage.
Siegel v Jozac Corp., No. 78465, 2001 Ohio App. Lexis 3306 (8th Dist.) (Allowed alternative theory of liability in workers’ compensation context when a server, who was encouraged to drink with patrons, was injured in a motor vehicle accident. Held that employer cannot profit from worker drinking on the job and then turn a blind eye to resulting harms.)
Mason v. Roberts, 33 Ohio St.2d 29 (1973) (At common law, it was the drinking, not the serving of alcohol that was deemed to constitute the proximate cause of the harm done to a third party. Case syllabus held that the Dram Shop Act does not provide the exclusive remedy against a liquor permit holder to recover damages for the death of a bar patron, and that generally such a claim is a question of fact for the jury. Superseded by amended statute.)
Klever v. Canton Sachsenheim, Inc., 86 Ohio St.3d 419 (1999) (Ohio historically refused to recognize claims against tavern owners for any injuries caused by their intoxicated patrons. Ohio’s Dram Shop Act embodies that general common law rule.)
Houston, Inc. v. Love, 92 S.W.3d 450, 452 (Tex. 2002) (Similar case regarding a dancer becoming intoxicated per the employer business plan. In these circumstances, dram shop laws do “not bar all common-law liability for any conduct by a seller toward its employee or independent contractor whenever alcohol is involved.”)
Bishop v. Carpenters Local Union No. 126, 2008-Ohio-2846, ¶ 22 (1st Dist.) (“[A]n action under R.C. 4399.18 is the sole remedy against a permit holder for the actions of an intoxicated person.”)
At Oral Argument
Douglas R. Cole, Organ Cole LLP, Columbus, for Appellant Nicole Johnson
Steven E. Bacon, Altick & Corwin Co., L.P.A., Dayton, for Appellee, The Living Room
The scope of Ohio’s Dram Shop Act extends only to cases involving intoxicated patrons, not intoxicated workers. Therefore, the Living Room should be held liable for the injuries to Nicole Johnson caused in an automobile accident by Mary Montgomery, an exotic dancer who worked at the Living Room strip club, and who became intoxicated on the job. If the court of appeals is affirmed, this would be the first case ever in which a court held that the Dram Shop Act applied in the context of intoxicated workers.
The operator of the strip club testified that he could easily have included a contract provision with the dancers dealing with how much drinking there would be on the job, but he didn’t. He testified that there was no limit on the amount dancers are permitted to drink while they are at the club. He also testified that he knew that 80-85% of the dancers who worked at the club were drinking on the job, often to lower their inhibition and perform their jobs more effectively. There was also testimony that waitresses are encouraged to prompt customers to buy drinks for the dancers. Montgomery never bought her own drinks.
The fundamental issue in this case is whether the Dram Shop Act is the exclusive remedy in this circumstance. If it is not, as Johnson argues, there is still the separate question of what alternative liability theories are available, which may turn to some extent on whether the intoxicated worker is an employee or an independent contractor, as Montgomery was. But with respect to the issue of whether the Act provides the exclusive remedy, it makes no difference.
In terms of statutory interpretation, the context of the statute limits the word “intoxicated person” to intoxicated patrons. The statute contemplates a transactional relationship between the permit holder and the intoxicated person, so in that context the intoxicated person has to be a patron; a person who engages in a transaction with the liquor permit holder to obtain alcohol. That is what the legislature intended. Patrons and workers are different in meaningful ways. Patrons are drinking as a result of their own independent choices, not because of the encouragement of the tavern owner or the permit holder.
In this context, there also was not a “sale” as required under the Dram Shop Act. Where the permit holder makes drinking on the job a part of the job, there is residual control retained, and the permit holder, here the Living Room, has a duty to take reasonable steps at the end of the night to be sure that the dancers get home in a way that is not a danger to themselves or others.
If there is any ambiguity to the statute, the court must look to the history and purpose of the Act and the common law backdrop against which it was enacted. There is no clear statement of intent to abrogate the traditional common law rule in dealing with cases involving the special relationship between an operator and its worker, as opposed to the narrower commercial relationship between an operator and a patron. The common law would prevent and punish what happened here.
If the Dram Shop Act does not apply, as Johnson urges, then the case must go forward under standard negligence principles. While selling alcohol to a noticeably intoxicated person is a requirement under the Dram Shop Act, and actual knowledge of intoxication is required, under standard negligence principles, it is not. As the jury was correctly instructed by the trial court, under standard negligence principles, a party is negligent if that party fails to take reasonable precautions to prevent foreseeable harm under the facts and circumstances known to that party at the time.
Living Room’s Argument
This case presents the question of when a person who is injured by the negligent acts of an intoxicated person has a cause of action against a permit holder when those injuries occur off the permit holder’s property. The court of appeals correctly found that the Dram Shop Act unambiguously answers this question. Pertinent to this case, it holds that there has to be a sale to a knowingly intoxicated person, and the intoxication is the proximate cause of the injuries to the third person.
The statute in this case covers Mary Montgomery. No matter how she received the alcohol in this case, it constituted a sale, covered by the Dram Shop Act, which provides the sole and exclusive remedy in this case. One of the reasons there was a directed verdict at trial on the Dram Shop claim is there was a failure of proof that Mary Montgomery was ever served an alcoholic beverage at a time when she was noticeably intoxicated. So there could be no liability for the permit holder under the Act. This is a common sense, bright line rule that allows permit holders to conduct their business and allows people to know when liability will be imposed, and when not. In looking at this rationale, there is no reason for a distinction between an intoxicated worker and patron.
This case is not an extension of the Act. It is simply an application of the statute as written. While other cases may have been decided on a more traditional customer relationship, the same rule applies in every situation. The permit holder has a duty not to serve a noticeably intoxicated person, whether that person is a patron, an employee, or an independent contractor. Furthermore, the purpose of the statute was to codify the common law. As written the statute is consistent with prior common law. It was enacted to limit liability. It accomplished that purpose, in this case, and that purpose is further accomplished by finding there is not a negligence cause of action existing outside the Act.
What Was On Their Minds
Patrons Versus Persons
Doesn’t the Act clearly apply when there is personal injury, death, or property damages caused by an intoxicated person, asked Justice DeWine?
Is an employee not a person, asked Justice O’Neill?
Employees versus Independent Contractors
Does it make any difference whether the worker was an employee of the corporation or an independent contractor, asked Justice O’Donnell? Was that judicially determined?
Was There a Sale of Alcohol?
Was the alcohol that was consumed sold to a patron, asked Justice Fischer? Ms. Montgomery never bought her own drinks?
Doesn’t the word “sold” include “supply,” asked Justice DeWine, commenting that the plaintiff seemed to want the court to take a lot of steps beyond the statutory language itself.
The Dram Shop Act
Was what happened an exception to the Dram Shop Act, asked Justice O’Donnell? The holding would be the Dram Shop Act does not apply to intoxicated workers? Are there any other jurisdictions that hold that, other than in a workers’ compensation context? Is this a case of first impression, whether the Act should be applied to workers? What was the ruling of the trial court on the application of the Dram Shop Act in this case?
How does the court get around the word “only” in the Act, asked Justice DeWine. Later he commented that it seemed clear that the language didn’t have to be someone who engages in a transaction because all kinds of people are “accomplice people,”’ buying drinks for others, and the like. Maybe the General Assembly wrote it too broadly, but they wrote it they way the wrote it, he said.
If the purpose of the Act is to stop bars from getting people intoxicated and going out and killing people, how can the court turn a blind eye when an employee gets into her vehicle, drives home intoxicated, jeopardizing lives of other motorists, asked Justice O’Neill? Is the Act to find nonliaiblity for employers? In this case the permit holder profited from the intoxication of the dancer. Why does that not fall under the Dram Shop theory? Haven’t all the elements of the Act been met in this case?
What about the fact that the dancer was not visibly intoxicated, asked Chief Justice O’Connor? Isn’t that a failure of proof under any of the circumstances for liability?
Was there evidence to show that the dancer was noticeably intoxicated, asked Justice O’Donnell?
Did anyone force her to drink on the job, asked Chief Justice O’Connor? Was it to her benefit to do so to increase her tips, as part of the business model of this establishment? Was it really her choice?
Common Law Negligence
Has the Act totally eclipsed the common law, asked Justice O’Donnell? Is the plaintiff’s theory that the owner of the Living Room wasn’t reasonable in dealing with the dancers’ driving in the early morning hours after work? And that this has nothing to do with the Act because it is the context of the employment that created the hazard?
Is there a higher scrutiny for patrons or whoever is consuming alcohol under the common law than under the Dram Shop Act, asked Chief Justice O’Connor? Is actual knowledge of intoxication required under a common law negligence theory?
How It Looks From The Bleachers
To Professor Emerita Bettman
Like a win for the Living Room. Despite his considerable skill as an oral advocate, I just don’t think former state solicitor Cole made a sale here. No pun intended. The justices seemed skeptical about the distinction between persons and patrons, and about Cole’s argument that what happened here wasn’t a sale. Also a hurdle for the plaintiff was the fact that there apparently wasn’t sufficient record evidence that Montgomery was visibly intoxicated. And although Mr. Cole tried hard to explain that wouldn’t matter if we are outside the Dram Shop Act, I don’t think he is going to get the court to go outside it. Hey, if it were me, retired torts professor with a notorious plaintiff’s heart, I’d give him a go at it. I think the worker distinction is an interesting one, with drinking on the job an apparent condition of employment. But I don’t think he has the votes. In fact, I’m not sure he has any, although Justice O’Donnell seemed sympathetic at times.
To Student Contributor Jefferson Kisor
Before I get started, I just want to applaud both Mr. Cole, for the appellant, and Mr. Bacon, for the appellees. They presented cogent arguments that were enjoyable to watch and comb through.
The outcome of this case largely depends on whether the court will take the holding from the Eighth District in Siegel v. Jovac Corp. and run with it, or simply stay within the confines of the express text of the statute.
Justice O’Neill addressed the importance of this case when referring to Siegel. “The Eighth District. . . talks about the public policy of the Dram Shop Act. And it just seems to me that we have to rule on that today. We can’t be turning a blind eye when that same employee gets into her vehicle, drives home intoxicated, jeopardizing lives of other motorists.” Isn’t the purpose of the Act to stop permit-holders from “getting people intoxicated and going out and killing people?”
That is a difficult question, and it has troubled me since I began reviewing this case. While Mr. Bacon asserted that the actual purpose was to limit liability, I cannot believe that the legislature would condone the systematic conduct described in the briefs about this strip club (and other alcohol providers). However, it appears that the law as written prevents a ruling in the name of public policy.
Speaking of the text of the Act, one of the more interesting issues was the distinction of person v. patron. Specifically, Mr. Cole’s explanation of the transactional relationship that was absent for a non-patron like Ms. Montgomery. However, during his rebuttal, the Chief Justice was quick to dispel his notion that responsibility should be shifted from the employee to the employer simply because of “encouragement.” As the Chief Justice noted, Ms. Montgomery was not forced to drink, she benefited from the drinking (directly and indirectly), and it was frankly “part of her business model.” It was Ms. Montgomery’s choice. While the residual control response was compelling, I do not think it is enough to convince a majority of the court to bypass the text of the Dram Shop Act.
The language is clear, despite the historical and contextual arguments presented. I find it unlikely that the court will consider: (i) Ms. Montgomery to not be a “person” under the Act, or (ii) that this was not a “sale” as defined by the General Assembly.
At the end of the day, “this isn’t a failure of the law, this is a failure of proof” – Mr. Bacon. There was not enough evidence to prove a violation of the Dram Shop Act at trial. Ms. Montgomery made a choice to drink and drive, and unfortunately for Ms. Johnson, the permit-holder did not breach its duty under the Act because she was not “noticeably intoxicated.” Which is why I am confident the court will affirm the Second District.