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Experts weigh in on a recent Dram Shop Act ruling

Legal News Reporter

Published: December 8, 2017

Ohio’s Dram Shop Act, Revised Code 4399.18, states that a person injured by an intoxicated individual can seek damages from a liquor permit holder if the injuries occur on the property and were caused by the permit holder’s negligence or if the injuries happen off premises, but the permit holder “knowingly sold” alcohol to a “noticeably intoxicated” person or to someone under 21 and the person’s intoxication proximately caused the injuries.

In September 2017 the Ohio Supreme Court put liquor permit holders and others on notice that patrons are not the only “persons” covered by the act.

In its 6-1 decision in Johnson v. Montgomery the court affirmed that the Dram Shop Act is “the exclusive remedy for innocent persons injured off premises by an intoxicated person against liquor permit holders and excludes all other common law negligence claims against permit holders,” said Thomas Mazanec, a partner in the Cleveland office of Mazanec, Raskin & Ryder Co.

“The court concluded that according to the law it does not matter whether the intoxicated ‘person’ was a patron or a worker, the same standard applies,” and that “a liquor permit holder’s responsibility for serving intoxicated persons does not change if that person is a worker or an independent contractor,” said Mazanec.

According to court documents, on July 4, 2010 Mary Montgomery, a dancer/stripper working at Thirty-Eight Thirty doing business as The Living Room in Dayton left the club intoxicated after drinking alcoholic beverages purchased for her by her customers.

While driving toward her home in Springfield, she caused an accident on I-70 when she lost control of her car and collided with a vehicle driven by Eric Staeuble, forcing him into a brick wall and causing severe and permanent life-changing injuries to his front-seat passenger Nichole Johnson.

Johnson underwent 11 surgeries and months of physical and occupational therapy, totaling over $800,000.

She later filed a negligence action against Montgomery, Thirty-Eight Thirty as the liquor permit holder and Michael Ferraro, who owned The Living Room. The insurance company, Western Heritage, initially joined the suit, but prior to the trial the court granted summary judgment to Western Heritage, determining it had no duty to defend Thirty-Eight-Thirty or Ferraro. A default judgment was also rendered against Montgomery.

Magistrate David Fuchsman, who conducted the trial, granted a motion for a directed verdict that released Ferraro from personal liability, but overruled a defense motion for directed verdict on the issue of negligence.

The jury awarded Johnson close to $3 million in damages, determining that Montgomery and Thirty-Eight Thirty were each 50 percent liable for the injuries and damages.

Both parties appealed.

In April 2016, the 2nd District Court of Appeals reversed and vacated the judgment against Thirty-Eight Thirty, determining that the trial court erred in allowing the case to move forward as a common-law negligence action, ruling that the Dram Shop Act applied. The appeals court affirmed the other portions of the trial court judgment.

The Ohio Supreme Court agreed with the 2nd District ruling, determining that the phrase “intoxicated person” in Ohio’s Dram Shop Act, R.C. 4399.18, includes not only patrons but also workers, independent contractors, and others served by the permit holder.

“The plaintiff tried to argue that the dancer was not covered under the Dram Shop Act because she was not a patron, thus it was a case of negligence,” said Mazanec. “In this instance, the dancers were independent contractors not employees.

“The Ohio Supreme Court stated that the Dram Shop Act applied to any ‘person,’ therefore the dancer was covered under the Act.

“For Johnson to prove her claim under the Dram Shop Act, she had to show that Montgomery was exhibiting signs of intoxication, the club knew it and still served her,” said Mazanec. “There was no evidence proving that was the case, therefore Johnson could not prevail.”

He said the court determined that while the dancers were permitted to drink while on duty, and even encouraged to do so, they were not required to drink. Therefore, the club did not take on additional responsibility.

“I’ve had cases where toxicologists were brought in to testify,” Mazanec said. “They would use the blood alcohol level at the scene of the accident and say based on that result the person would have had to be showing signs of intoxication when they were leaving the establishment and/or when they were served in an attempt to prove the liquor permit holder knew the person was intoxicated when served.

“However, alcohol levels do not always accurately predict physical impairment because of a person’s own tolerance to alcohol.

“Not all courts will allow this testimony,” he said. “It will depend on the fact specifics and circumstances of each case.”

Mazanec said the Ohio Supreme Court decision did not expand liability.

However, he said the court did make it clear that patrons are not the only “persons” covered under the Dram Shop Act and that “the same high standard of proof to establish liability against the permit holder applies to any adult who is served.”

Neil Schor, a member of Harrington, Hoppe & Mitchell, said the Johnson decision will make it more difficult for a person injured by an intoxicated individual to pursue a claim under common law negligence.

“The Second District Court of Appeals and the Ohio Supreme Court held that the Dram Shop Act provided the exclusive cause of action against a permit holder, provided that the permit holder knowingly sold intoxicating beverages to a noticeably intoxicated person and the person’s intoxication proximately caused the injury,” said Schor, who is located in the firm’s Youngstown office.

However, he said the case did expand potential targets within the law to create expanded liability for liquor permit holders.

“Liquor permit holders must be careful in claiming any lack of knowledge of their independent contractors consumption of alcohol,” said Schor. “The dissenting justice, Judge William O’Neill, contended this was an outcome beyond comprehension because by nature of the strip club’s business, patrons purchased alcoholic beverages for dancers so they would interact with the patrons. The dancer also admitted that she was drunk on the night of the accident.”

Schor said given today’s world of cellphone recordings and social media posts there are additional resources available to plaintiffs who seek to prove a Dram Shop Act claim.

In addition, he said Mothers Against Drunk Driving, the Ohio Association for Justice and similar advocacy groups will likely push the Ohio legislature to create a law that would overturn “the seemingly harsh conclusion of the Johnson case--that an innocent passenger struck by an intoxicated employee and/or independent contractor of a business whose job duties include and/or are related to the consumption of alcohol cannot readily collect damages from the business.

“I expect the Ohio Legislature to look for ways to strike the correct balance between the right of the public to be free from the substantial risk created by drunk drivers and the rights of permit holders and their employees to work within the law,” Schor said.