Cause of Action: Dram Shop (Carruthers v. Edwards, COA, Pub. 8/10/2012)

In this published decision from the COA, not only is the Dram Shop Act addressed as a normal cause of action for bar’s liability for serving too much alcohol to a patron, but the constitutionality of the act is affirmed AND some creative drafting to pursue claim against the property owner under the dram shop, common law negligence, and landlord liability.

 

ACREE, CHIEF JUDGE: Appellant Monica Carruthers was injured when Lucas Watson, a patron of Foolish Heart, Inc., d/b/a/ Froggy’s Sports Bar, purportedly drove his vehicle while intoxicated, striking Carruthers in Foolish Heart’s parking lot. Carruthers filed suit against several individuals, including Appellees Max and Lois Ann Edwards, the owners of the premises on which Foolish Heart is located. The issue in the case before us may be summarized as this: what liability can be imputed to an owner of real property, on which a bar or similar establishment is operated by a tenant, when a patron of that bar consumes alcohol and, thereafter, drives a motor vehicle causing injury or death to a third party? Following a careful review, we affirm the McCracken Circuit Court’s July 28, 2011 order granting the Appellees’ motion to dismiss Carruthers’ complaint for failing to state a claim upon which relief may be granted.

DRAM SHOP:

We first address whether Carruthers’ complaint stated a valid claim under the Dram Shop Act against the Appellees. Kentucky’s Dram Shop Act, KRS 413.241, provides, in pertinent part:

(1) The General Assembly finds and declares that the consumption of intoxicating beverages, rather than the serving, furnishing, or sale of such beverages, is the proximate cause of any injury, including death and property damage, inflicted by an intoxicated person upon himself or another person.

(2) [N]o person holding a permit under KRS 243.030, 243.040, 243.050, nor any agent, servant, or employee of the person, who sells or serves intoxicating beverages to a person over the age for the lawful purchase thereof, shall be liable to that person or to any other person . . . for any injury suffered off the premises . . . because of the intoxication of the person to whom the intoxicating beverages were sold or served, unless a reasonable person under the same or similar circumstances should know that the person served is already intoxicated at the time of serving.

The parties first dispute the continuing validity of the Dram Shop Act following this Court’s recent opinion Taylor v. King, 345 S.W.3d 237 (Ky. App. 2010). In Taylor, this Court declared unconstitutional KRS 413.241’s provision governing proximate cause “to the extent it would prevent a fact-finder from determining whether an injury was a foreseeable consequence of a dram shop’s improper service of alcohol.” Id. at 244. In so doing, we explained “the legislative finding regarding proximate causation in KRS 413.241(1) intrudes upon the fact- finding role of the courts[.]” Id. at 243. Accordingly, in light of Taylor, KRS 431.241(1)’s presumption or imputation of proximate cause no longer exists. Id.

The relevant sections of KRS 413.241 “imposing liability upon a dram shop or its creation of a priority of liability between the dram shop and the intoxicated tortfeasor[,]” however, remain unchanged. Id. at 244. KRS 413.241 still imposes a duty upon a dram shop and its employees, before selling or serving alcohol to a person, to use their powers of observation to perceive readily visible warning signs that a person is intoxicated, and to refrain from serving or selling alcohol to that patron. KRS 413.241(2). If the dram shop or its employees fail to perceive, or simply ignore, those warning signs, the dram shop may be held liable pursuant to KRS 413.241 provided the dram shop’s negligent conduct is also the proximate cause of the plaintiff’s injuries. Id.; Taylor, 345 S.W.3d at 244.

In sum, while Taylor struck down as unconstitutional the presumption of proximate cause codified in KRS 423.241(1), it neither addressed nor held the remainder of KRS 413.241 unconstitutional. 345 S.W.3d at 244. Dram shop liability – under specifically delineated circumstances – still exists in this Commonwealth, as does the statutory limitation on liability. See KRS 413.241(2).

Carruthers next argues that if the circuit court based its order dismissing her complaint on the Dram Shop Act, the order is erroneous as a matter of law and must be reversed because, in Carruthers’ view, she asserted a valid Dram Shop Act claim against the Appellees. We disagree because Carruthers’ complaint cannot be read as asserting such a claim under the Dram Shop Act against these Appellees.

The statute addresses two types of persons: a dram shop (and its servers) who serve alcohol to an intoxicated person, and the intoxicated person the dram shop serves. KRS 423.241(2). It does not create or comment upon the liability of a third-party who fits neither description. Although Appellees run their own dram shop, they served no alcohol to Watson. We conclude that no purpose intended by our Legislature’s passage of the Dram Shop Act would be served by imposing liability upon a lessor who simply holds title to property on which his properly licensed lessee engages in the regulated sale of intoxicating liquors. See Robinson v. Walker, 211 N.E.2d 488, 491 (Ill. App. 1965). Therefore, the complaint failed to state a claim based upon the Dram Shop Act.

COMMON LAW:

Carruthers asserts in her brief that, “because the allegations in the Complaint must be taken as true, it must be accepted that the Edwards were personally involved in the operation of [Foolish Heart d/b/a] Froggy’s.” We have carefully read the claim against the Appellees, including those other portions of the complaint incorporated by reference, and we do not agree. The relationship between Appellees and Foolish Heart was that between lessor and lessee. There is no reasonable reading of the complaint that asserts any further connection, by contract or conduct, indicating that the Appellees had any say whatsoever in the operation of Froggy’s. If a common law claim upon which relief can be granted against Appellees exists, it must be based either: (1) upon their status as owners of the premises, or (2) upon their own negligence.

We find no common law claim based on Appellees’ status as owners of the premises.

“It cannot be disputed that as a general rule the landlord is not liable for the negligent acts of his tenant.” Green v. Asher Coal Min. Co., 377 S.W.2d 68, 69 (Ky. 1964). However, there are exceptions to the general rule. These exceptions “arise in those cases where the condition or use of the premises is so potentially harmful that the courts will not permit the owner to hide behind a lease.” Asher Coal, 377 S.W.2d at 70. Kentucky courts have never determined that, by their nature, establishments serving intoxicating beverages pursuant to a license issued and regulated by the Commonwealth are “so potentially harmful.” Id.; Taylor, 345 S.W.3d at 240.

Although Carruthers does not cite Restatement (Second) of Torts § 379A, we believe her asserted claim is most consistent with that section. Kentucky has not embraced the articulation of the tort described in § 379A4, though it is consistent with Asher Coal.

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