New Case: Constructive Notice In Context of Premise Liability

A new case filed June 15, 2015 in the Circuit Court of Appeals of Tennessee at Knoxville found that vomit on the floor of a Hardee’s restaurant for approximately three minutes was a sufficient length of time to charge defendant with constructive notice of the dangerous condition.  The case at issue is styled Kyle Beverly, et al. v. Hardee’s Food Systems, LLC, No. E2014-02155-COA-R3-CV – FILED – June 15, 2015 (Tenn. Ct. App., April 14, 2015).

This appeal followed a successful summary judgment in the trial court, which found there was no evidence to support constructive knowledge on the part of the defendant.  The videotape from Hardee’s showed two employees were busy serving customers during the three minute time period the condition existed before the fall.  The trial court found (correctly in my opinion) the vomit did not existed on the floor long enough that the defendant, using ordinary care, should have discovered and corrected the unsafe condition.

Under Tennessee law, constructive notice is defined as “information or knowledge of a fact imputed by law to a person because he could have discovered the fact by proper diligence, and his situation was such as to cause upon him the duty of inquiring into it.”  See Hawks v. City of West Moreland, 960 S.W.2d 10, 15 (Tenn. 1997).  Plaintiff can prove constructive notice by presenting evidence that the condition existed for a length of time that the owner/occupier in the exercise of reasonable care, should have become aware of the condition.

In reversing the Trial Court below, the Court of Appeals found there was evidence in the record that “could potentially” establish constructive notice and, as a result, summary judgment was inappropriate.  Specifically, the Court found that there were factual considerations that should have been considered, e.g., the nature of the business, the revolving number of patrons, and the nature of the danger, its location, and the foreseeable consequences.  In considering these various factors, the Court found there were sufficient facts from which a reasonable jury could infer the condition existed for such a length of time that one exercising reasonable care would have discovered it.

Not all premise owners will be charged with constructive notice under the same circumstances presented by this case.  The fact that Hardee’s is a fast food restaurant definitely played a role in the Court’s decision as to what would be a reasonable response of an employee.  Nevertheless, this case reminds all premise owners of its responsibility to have periodic inspections.  The frequency of the inspections needs to be tailored to the type of business operation.  If you have questions or concerns regarding whether your business’ policies and procedures are adequate to prevent these types of claims, please do not hesitate to contact us directly.

Tennessee Spoliation of Evidence – Intentionality and Prejudice

The doctrine of spoliation of evidence can cause major problems for both plaintiffs and defendants in civil litigation.  Often times, months or years pass before the defendant is notified of a claim.  As a result, defendants may have no notice that there is a duty to preserve evidence relevant to future litigation until after the evidence is discarded, lost or destroyed during the normal course of business.  It is paramount, therefore, that businesses understand the rules associated with spoliation of evidence and adopt sound policies and procedures to (a) identify a potential claim; and (b) take reasonable steps to preserve evidence material to the claim.

As a general matter, spoliation of evidence permits a court to draw a negative inference against a party that has intentionally, and for improper purpose, destroyed, mutilated, lost, altered or concealed evidence.  Bronson v. Umphries, 138 S.W.3d 844, 854 (Tenn. Ct. App. 2003); Leatherwood v. Wadley, 121 S.W.3d 682, 703 (Tenn. Ct. App. 2003); Foley v. St. Thomas Hospital, 906 S.W.2d 448, 453-54 (Tenn. Ct. App. 1995)).  Federal courts in the Sixth Circuit also require some showing of intentional destruction of evidence before a spoliation sanction is appropriate.  Atkins v. Wolever, 554 F.3d 65 (6th Cir. 2012); Beaven v. U.S. Dept. of J., 622 F.3d 540 (6th Cir. 2010).

However, amendments to the Tennessee Rules of Procedure, as well as several unreported Tennessee cases, began calling into question the type of proof required before a court may impose a spoliation sanction.  Rule 37A.02 of the Tennessee Rules of Civil Procedure states that a sanction “… may be imposed upon a party or an agent of a party who discards, destroys, mutilates, alters, or conceals evidence.”  Tenn. R. Civ. Pro. 34A.02.  There is no culpable mind state included in this rule.  In Cincinnati Ins. Co. v. Mid-S. Drillers Supply, Inc., 2008 WL 220287 (Tenn. Ct. App., Jan. 25, 2008), the Tennessee Court of Appeals pointed out that “nowhere in Rule 34A does it state that a finding of intentional destruction of evidence is permitted before a trial can order sanctions under Rule 37.”  Id. at *4.  The court held “. . . the trial court has discretion to sanction a party by dismissal of its case where the party’s destruction of evidence severely prejudices an adverse party’s defense irrespective of whether the destruction was inadvertent or intentional.”  Id. at *1.

But, following the Cincinnati case, the Court of Appeals has repeatedly held that the doctrine of spoliation only permits a court to draw a negative inference against a party who has intentionally, and for improper purpose, destroyed, mutilated, lost, altered, or concealed evidence.  Fuller v. City of Memphis, 2012 WL 3201937, at *5 (Tenn. Ct. App., August 8, 2012); Hensley v. Duke, 2010 WL 845385, at *9 (Tenn. Ct. App., March 10, 2010); Kincade v. Jiffy Lube, 2008 WL 1970348, at *4 (Tenn. Ct. App., May 8, 2008).  In Fuller v. City of Memphis, the court reiterated that the negative inference only arises “… when the spoliation occurs in circumstances indicating fraud and a desire to suppress the truth.  It does not arise when the destruction was a matter of routine with no fraudulent intent.”  Id. at *5.

Accordingly, although the current status quo appears to require a showing of intent, it is clear that trial courts have wide discretion in determining the appropriate sanction to be imposed for discovery violations and that such discretion will only be set aside on appeal when the court has misconstrued or misapplied the controlling legal principal.  Mercer v. Vanderbilt University, Inc., 134 S.W.3d 121, 133 (Tenn. 2004).  Hopefully, the Tennessee Supreme Court will clarify what standard applies in determining whether or not a spoliation sanction is appropriate.  In the meantime, it is incredibly important for businesses to use due diligence to protect and preserve any evidence that may relate to civil litigation, including standardization of incident reports for all incidents involving injury on premises.  It is equally important that any incident reports be communicated to the appropriate risk managers for evaluation and appropriate action.

If your business needs advise concerning risk management or evidence preservation, please do not hesitate to contact me.

Dram Shop: New Tennessee Case Interpreting Dram Shop Act And Whether “Sale” Occurred.

There is a new case in Tennessee interpreting the language if Tennessee’s Dram Shop Act, Tenn. Code Ann. §§ 57-10-101102.  The case is Widner v. Chattanooga Entertainment, Inc. d/b/a Electric Cowboy, (Tenn. Ct. App., Nov. 4, 2014)(“Electric Cowboy”).  This was an appeal by the plaintiff following the trial court’s decision to grant summary judgment in favor of Electric Cowboy on the grounds that a “sale” had not occurred pursuant to the Tenn. Code Ann. § 57-10-102.  This case is significant because it addresses a difficult area of liability for commercial sellers of alcohol, i.e. under what circumstances can a restaurant or bar be responsible for the actions of a patron who never orders directly from an employee, but instead given drinks from a third party?

This new case needs to be considered together with Temlock v. McGinnis, 2006 WL 2032518 (Tenn. Ct. App., May 23, 2006)(“Temlock”), which was the first time the Court of Appeals provided guidance on how lower courts should analyze whether a “sale” had occurred pursuant to the Dram Shop Act.  In Temlock, the patron in question did not pay for the alcoholic beverages but ordered the beverages at a table directly from the wait staff.  In evaluating this case, the Temlock court established the following standard:

It was the clear intent and purpose of our legislature that a fact situation such as the one now before us constitutes a sale under the provisions of Tenn. Code Ann. § 57-10-102.  We hold that when a customer enters an establishment that sells alcoholic beverages such as beer, places his own order, has the alcohol he ordered delivered directly to him by the seller with the seller’s expectation of payment in return, and the customer who ordered the alcohol consumes that alcohol on seller’s premises, there is a sale to the customer under Tenn. Code Ann. § 57-10-102.  To hold otherwise would mean that a business could adopt a policy that in serving any group of more than one individual, only the one person in the group is to be allowed to “pay” for the alcohol ordered and consumed by all of the members in that party even though those other individuals directly ordered the alcohol from the seller’s wait staff, had the alcohol delivered by the seller’s wait staff directly to them, and they consumed the alcohol on the seller’s premises, and, the seller then would have no potential liability under Tenn. Code Ann. § 57-10-102 except as to the one person who paid.  Such a decision would be directly contrary to the clear intent and purposes of the legislature to hold such seller liable if it sells “alcohol to a minor or if the seller sold alcohol to an obviously intoxicated person and the sale was the proximate cause of the injury suffered by the third party.”

Id. at *5 (citing Biscan v. Brown, 160 S.W.3d 462, 472 (Tenn. 2004)).

In the Electric Cowboy, the Court of Appeals picked up where the Temlock case left off and clarified that merely furnishing alcohol does not give the commercial seller of alcohol sufficient opportunity to evaluate whether the patron is visibly intoxicated.  In Electric Cowboy, the facts showed the patron in question did not purchase or order alcoholic beverages from the wait staff.  Instead, she was provided shots of Tequila by several friends, and she was not with her friends when the Tequila shots were purchased.  Applying the standard in Temlock, the Court of Appeals granted summary judgment to the Electric Cowboy on the grounds that there was insufficient proof that a “sale” had occurred to the offending patron under Tenn. Code Ann. § 57-10-102.

Again, the significance of this case is that it provides a legal foundation for summary judgment motions in cases where there is no evidence that a direct sale to a patron who later causes injury to a third party.  If you represent bars and restaurants, or if you have been involved in crafting policies and procedures in Tennessee, this case needs to be considered closely.  If you have any questions regarding how this may affect your policies and practices, please do not hesitate to contact me.

Duty to Provide Security: General and Specific Threat of Third Party Criminal Conduct

The Tennessee Court of Appeals has penned a new decision addressing the duty of a bar to protect its patrons from the foreseeable criminal acts of third parties.  The case name is Nicole Goeser, et al., v. Live Holdings Corporation, et al., (No. M2012-01241-COA-R3-CV; September 4, 2013).  This appeal came out of Judge Hamilton Gayden’s court in Nashville after granting summary judgment to the defendants.

The facts are simple according to the opinion.  Ben and Nicole Goeser started a karaoke business in Nashville.  Hank Wise was a big fan of Nicole and, over time, developed an unhealthy crush.  At some point, he asked an “inappropriate” question about the status of Nicole’s marriage, which got him deleted from Nicole’s Myspace page.  At a subsequent event, Ben confronted Hank and asked him to kindly stay away from his wife.  Hank attended two additional events without issue.  Then, on a fateful Thursday night in 2009, Hank found Ben and Nicole at Johnny’s Bar and Grill located on the corner of Nolensville Road and Old Hickory Boulevard in Nashville.  Nicole told the manager of Johnny’s Bar and Grill that Hank was making her “uncomfortable” and she wanted him to leave.  When Hank was asked to leave, he stood up, unzipped his jacket, and shot Ben in the head several times.  Ben died instantly.

As is often the case, this criminal act turned into a civil lawsuit against the owners of the bar under a theory that the premise owner had a duty to protect Ben from the foreseeable criminal act of Hank.  Prior to trial, Judge Gayden dismissed the case on the grounds that the plaintiffs failed to demonstrate that the incident was foreseeable.  The plaintiffs appealed arguing that the bar breached its duty by failing to have a trained security guard working on the night of the murder or to give their employees adequate training to protect their guests.  The Court of Appeal affirmed Judge Gayden’s summary dismissal of the case.  In doing so, the court summarized several important cases in Tennessee and made an important distinction between cases involving “general threats” and “specific threats” of criminal acts that could, in turn, give rise to a duty to protect patrons from the criminal acts of third parties.

The court categorized McClung v. Delta Square Ltd. as a “general threat” case.  In McClung, a woman was abducted at gunpoint by a stranger in the parking lot of a Memphis shopping mall, and later raped and murdered.  There was no evidence the mall owners knew the incident was about to occur.  Still, the court in McClung found that there could be a duty owed if there was a general threat posed to patrons based on a variety of factors.  The court adopted a “balancing approach” which seeks to balance the degree of foreseeability of harm to the plaintiff against the burden that would be imposed on the defendant if it were required to engage in an alternative course of conduct that could have prevented the harm.  Here, the court articulated the following standard:

As a practical matter, the requisite degree of foreseeability essential to establish a duty to protect against criminal acts will almost always require that prior instances of crime have occurred on or in the immediate vicinity of defendant’s premises.  Courts must consider the location, nature, and extent of previous criminal activities and their similarity, proximity, or other relationship to the crime giving rise to the cause of action.  To hold otherwise would impose an undue burden upon merchants.

Id. at 902.

Following its discussion of McClung, the court of appeals then turned to cases involving “specific threats” of criminal conduct.  Here, the court states “[f]oreseeability may also arise from more specific knowledge, such as when an identifiable individual acts in such a way as to suggest criminal intentions or proclivities.”  Here, the court cited the well-known case of Giggers v. Memphis Housing Authority, which involved a public housing tenant shooting and killing another tenant.  The Giggers court found that that when an injury is not foreseeable, a criminal act by a third party constitutes “a superseding, intervening cause of harm, relieving the [defendant] of liability.”  Id. at 367.  However, because the shooter in Giggers had previously stabbed another tenant in his building, the court in Giggers found that the danger was foreseeable and that the defendant housing authority had a duty to take reasonable measures to protect its tenants from him.  The court also cited Staples v. CBL & Associates, Inc. as an additional example of a case involving a specific threat.

Turning to the facts of the case, the court of appeals found that there was no evidence Johnny’s Bar and Grill was located in a high-crime area.  The proof showed there had only been two prior fights at the bar before the incident in question.  So, the “general threat” theory did not trigger a duty to provide more security.  The court also found that there was no evidence Hank posed a “specific threat” that would have required Johnny’s Bar and Grill to act differently.  There was no knowledge Hank was a criminal or prone to violence.  None of Hank’s conduct leading up to the incident gave warning that he might act in a violent way.  Even though Nicole asked an employee to have Hank removed, the court did not see this fact alone as sufficient to trigger a duty to protect other patrons from Hank.

I like this decision for a number of reasons.  First, I appreciated the court making the distinction between “general threats” and “specific threats” that may give rise to a duty to act.  Not every bar or restaurant is required to or needs to have security.  This is a point often lost in this area of the law.  In Tennessee, businesses are not to be regarded as the insurers of their patrons’ safety.  So, unless you can point to prior criminal acts, the “general threat” theory should fail as a matter of law.  Second, just because you ask a patron to leave the premises does not mean the business is on notice of a “specific threat” of a criminal action.  This presupposes that individuals will act in violent and criminal ways when asked to leave the premise for whatever reason.  Frankly, this is just not the case in most settings and holding otherwise would put too great a burden on business owners to hire and train additional staff to protect against random acts of violence.

Tennessee Dram Shop Act: “Visibly Intoxicated” Exception

The plain language of T.C.A. § 57-10-102(2) requires a sale of an alcoholic beverage or beer to “a visibly intoxicated person.”  The adverb “visibly” means “capable of being seen” or “exposed to view.” Taking “visibly” together with “intoxicated”, the only logical conclusion is that Section 102(2) requires proof that the alleged intoxication was perceptible or capable of being seen by the server or bartender at the time of sale.

In order to apply this exception, there must be proof beyond a reasonable doubt that the restaurant or bar “sold” an alcoholic beverage to a patron when he was visibly intoxicated.  In Temlock v. McGinnis, the Tennessee Court of Appeals considered whether a “sale” was made pursuant to the Act when the patron ordered directly from the wait staff and the wait staff served the beer to the patron, but the patron did not pay for the beer.  The court found that whether the patron actually paid for the beer was not determinative of whether a “sale” had occurred.  The court held several factors should be considered in evaluating whether a sale had occurred, stating:

We hold that when a customer enters an establishment that sells alcoholic beverages such as beer, places his own alcohol order, has the alcohol he ordered delivered directly to him by the seller with the seller’s expectation of payment in return, and the customer who ordered the alcohol consumes that alcohol on the seller’s premises, there is a sale to that customer under Tenn. Code Ann. § 57-10-102. To hold otherwise would mean that a business could adopt a policy that in serving any group of more than one individual, only one person in the group is to be allowed to “pay” for the alcohol ordered and consumed by all other members in that party even though those other individuals directly ordered the alcohol from the seller’s wait staff, had the alcohol delivered by the seller’s wait staff directly to them, and they consumed the alcohol on the seller’s premises, and, the seller then would have no potential liability under Tenn. Code. Ann. § 57-10-102 except as to the one person who paid.

Proof of “visible intoxication” is a bit more complicated.  Amendments to T.C.A. § 57-10-102(2) demonstrate the intent of Tennessee’s Legislature to require clear proof of perceptible intoxication.  In 2009, T.C.A. § 57-10-102(2) was amended by deleting the language “obviously intoxicated” and substituting “visibly intoxicated.”  The previous use of “obviously intoxicated” opened the door for proof of intoxication by circumstantial evidence, such as blood alcohol content, time spent drinking, amount consumed, etc.  The legislature recognized that this type of evidence does not clearly demonstrate intoxication to a reasonable observer.  By making the change from “obviously” to “visibly,” the legislature clarified that claimants must show something more than circumstantial proof of intoxication.

Not convinced?  The Tennessee Alcoholic Beverage Commission also requires proof of “perceptible” intoxication.  In March of 2010, the ABC amended its rules and regulations and defined “visible intoxication” as:

An impairment of an individual’s mental or physical facilities, as a result of drug and/or alcohol consumption accompanied by a perceptible act, series of acts or by appearance of an individual, which clearly demonstrates such impairment.

It is important to note that the Tennessee Legislature granted authority to the ABC to promulgate rules to “… prevent intoxication-related deaths, injuries, and other damages through responsible alcohol serving practices and awareness.”  As a result, the ABC’s interpretation that “visible intoxication” requires proof of a “perceptible act” should be given some controlling weight unless the Court finds that it is arbitrary, capricious, or manifestly contrary to the statute.

“Presumptions” of intoxication established in Tennessee criminal statutes are not applicable in dram shop cases.  In Worley v. Weigels, the Tennessee Supreme Court stated the intent of the Tennessee Legislature in enacting the Dram Shop Act was to make a “… definite distinction between the basis for civil liability and the basis for criminal liability incident to the sale of alcoholic beverages.”  So, while criminal law creates a presumption of “impairment” when the individual’s blood alcohol content is .08% or more, this presumption cannot not used to impose strict liability in a civil context.