Merit Decision: Auto Accident Victim Cannot Recover from Strip Club for Injuries Caused by Intoxicated Dancer. Johnson v. Montgomery.

“Nothing in our precedents dictates that the word “person” be limited to patrons.”

Justice DeWine, majority opinion

“I am unable to join a majority decision that absolves from liability a liquor-permit holder who encourages the dancers in its club to drink alcohol in order to reap enormous profits from the drinks purchased for the dancers, does not monitor the intoxication level of the dancers, and then sends them out on the roads without ensuring that they are fit to drive.”

Justice O’Neill, dissent

On September 6, 2017, the Supreme Court of Ohio handed down a merit decision in Johnson v. Montgomery Slip Opinion No. 2017-Ohio-7445. In an opinion written by Justice DeWine, joined in full by Chief Justice O’Connor and Justices Kennedy and Fischer, the Court held that a liquor-permit holder is not liable for the off-premises injuries caused by one of its workers unless the permit holder, here a strip club, served that worker knowing she was intoxicated, which the record did not support in this case. Justices O’Donnell and French concurred in judgment only. Justice O’Neill dissented.  The case was argued April 6, 2017, at Morgan High School in Morgan County as part of the court’s off-site program.

Case Background

The Living Room is a strip club in the Dayton area, operated by Thirty-Eight Thirty. Michael C. Ferraro is the sole officer and shareholder of Thirty-Eight Thirty. Dancers who work at the Living Room are encouraged to drink to lessen their inhibitions, and most did so.  Customers are encouraged to buy drinks for the dancers, and the club charged more for those drinks. 95% of the club’s profits came from the sale of alcohol, and 30-40% of those sales were to customers for the dancers.  Montgomery’s working arrangement with the club was this: under contract with Thirty-Eight Thirty, she paid $30 a night to lease space to dance.  In return, she kept all tips. She received no wages or compensation from the club.

On the night in question, Montgomery left work in the early morning hours after admittedly ingesting cocaine that day, and drinking on the job. She drove herself home and no one tried to stop her. Montgomery struck a car in which appellant Nicole Johnson was a passenger.  Johnson was severely injured.

Johnson filed a common law negligence action against Montgomery, Ferraro, and Thirty-Eight Thirty, (for simplicity, “The Living Room” or “the Club”) and a Dram Shop Act violation claim against Ferraro and the Living Room. A default judgment was taken against Montgomery. The claims against Ferraro and the Living Room were tried to a jury.  At the end of Johnson’s case, a magistrate directed a verdict in favor of Ferraro and the Living Room on the Dram Shop claims, but allowed the common-law negligence claims to go to the jury.  The jury returned a verdict of over 2.8 million dollars in favor of Johnson on the negligence claim.  The trial judge adopted the magistrate’s decision and entered judgment on the jury’s verdict. Both sides appealed.

The issue pertinent here is the appeal by the Living Room and Ferraro on the common law negligence claims. They argued that there is no cause of action outside the Dram Shop Act in Ohio for negligently furnishing a tortfeasor intoxicating drinks, and the trial court should not have instructed the jury on common-law negligence. In a unanimous opinion, the Second District agreed, finding that the Dram Shop Act provided the exclusive cause of action against the Living Room, and the trial court should not have let the common-law negligence claim go the jury.  The judgment against the Living Room was reversed, which mooted the claim of Ferraro’s personal liability.

Read the oral argument preview of the case here and an analysis of the argument here.

Key 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…

(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.

R.C. 4301.01(A)(2) (Defining “sale” or “sell” as the “exchange, barter, gift, offer for sale, sale, distribution and delivery of any kind, and the transfer of title or possession of beer and intoxicating liquor either by constructive or actual delivery by any means or devices whatever . ..”)

State ex rel. Savarese v. Buckeye Local School Dist. Bd. of Edn., 74 Ohio St.3d 543, 545 (1996) (An unambiguous statute shall be applied as written.)

Sharp v. Union Carbide Corp., 38 Ohio St.3d 69, 70 (1988) (Undefined statutory terms are given their “plain, everyday meaning.”)

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.)

Goldfuss v. Davidson, 79 Ohio St.3d 116, 121 (1997) (Plain error review as applied to civil cases must be limited to “extremely rare cases where exceptional circumstances require its application to prevent a manifest miscarriage of justice, and where the error complained of, if left uncorrected, would have a material adverse effect on the character of, and public confidence in, judicial proceedings.”)

Merit Decision

The Dram Shop Act

The default rule under the Act is that a person cannot sue the liquor permit holder for injury resulting from the acts of an intoxicated person. That codified the common law principle that it was the drinking, not the serving, of alcohol that was the cause of injuries to a third party.  Under the plain language of the statute, the only cause of action against a liquor-permit holder arises when the permit holder or an employee knowingly sells alcohol to a visibly intoxicated person, or to an underaged drinker (not pertinent here.)

Person v. Patron

Johnson argued that the language of the Dram Shop Act limiting the liability of a permit holder to circumstances where it “knowingly sold intoxicating beverages to a noticeably intoxicated person” covered only the patrons of the establishment, not its workers–here, one of its dancers. The court rejected that argument, noting that nothing in its precedent requires the word “person” to be limited to “patrons.” “A patron or a customer is a person, as is a dancer, or a worker, or an independent contractor,” wrote DeWine, in concluding that an “intoxicated person” includes an “intoxicated worker.” Thus the court found no need to look beyond the plain meaning of the statute here.

Public Policy is for the Legislature

While acknowledging the horrors caused by drunk driving, DeWine wrote that it was for the legislature, not the court, to determine whether “public policy would be better served by a Dram Shop Act that applied only to a permit holder’s sales to its patrons.”

No Liability Under the Dram Shop Act in This Case

The crucial finding here was the unchallenged finding by the magistrate, as affirmed by the trial court, that Johnson was not noticeably intoxicated, which would be required to trigger liability against the Living Room here.

Bottom Line

The Dram Shop Act applies here. Ferraro and the Living Room cannot be held liable under common law negligence principles. The phrase “intoxicated person” in the Act includes any person, including workers, and not just the patrons of the establishment. And there was no proof that Montgomery was noticeably intoxicated.

Justice O’Neill’s Dissent

Justice O’Neill agrees that Johnson’s claim is limited to an action under the Dram Shop, and not under common law negligence. But he would find that directing a verdict against the Club and Ferraro on this claim was plain error, admittedly rare in civil cases.

To him the facts of this case show that Montgomery was encouraged to drink on the job and she drank until drunk the night of the accident. He would let the jury, not the magistrate, decide whether she was noticeably intoxicated by those who served her alcohol.

O’Neill also takes strong issue with the court validating a business plan that lets a liquor permit holder profit from patrons buying drinks for dancers, yet made no arrangements to make sure the dancers did not drive home drunk, and was particularly struck by the fact that 95% of the Club’s revenue came from alcohol sales. “Under the current law, bar owners can stick their heads in the sand and expect the Dram Shop Act to protect them from liability,” he wrote.

Case Syllabus

None

Concluding Observations

After argument, it was apparent that this was a clear win for the Living Room. I wrote, “the justices seemed skeptical about the distinction between persons and patrons, and about [Johnson’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 yet, the torts professor in me is sorry that the plaintiff didn’t try an admittedly novel application of the mode of operation theory at trial, which has gained limited traction in some states in slip and fall cases.  In that context, the plaintiff is relieved of the familiar burden of proving that the supermarket had actual or constructive notice of what was on the floor and how long it had been there.  Quoting from a 2007 Massachusetts high court case, with the mode of operation theory, “… a store owner will be liable to a plaintiff injured as a result of a dangerous condition caused by a third party only if the owner could reasonably foresee that the dangerous condition could occur, resulting from the owner’s chosen mode of operation, and the owner took inadequate steps to forestall resulting injuries.” That struck a chord with me. I know Ohio hasn’t gone there yet, even in slip and fall cases, and yet, I can certainly see how the Living Room’s business practice did exactly that.

 

 

 

 

 

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