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. §§ 57-10-101 – 102. 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.