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School of Law
1045 W. Maple St.
Robert A. Leflar Law Center
Waterman Hall
University of Arkansas
Fayetteville, AR 72701

Phone: (479) 575-5601

Shannon v. Wilson and the Arkansas Dramshop Act of 1999

By · August 10, 2015 · 2015 Ark. L. Notes 1744
In categories: Business Law, Civil Litigation, Criminal Law, Insurance Law, Juvenile Justice & Child Welfare, Tort Law

On January 28, 1995 two young men (both age thirteen) were passengers in a Ford pickup truck driven by another young man age sixteen. The three of them drove up to a drive through window of a liquor store in Fayetteville, Arkansas and purchased a six pack of beer as well as a six pack of malt liquor. They were not asked to provide any proof of age. Sometime later the party stopped at a pool hall in St. Paul, where the sixteen year old exited the vehicle. The remaining boys stayed in the vehicle drinking the rest of the liquor. Eventually they departed. Shortly after 9:00 PM the Arkansas State Police were notified of an accident in Madison County. Upon their arrival at the scene they observed a pickup truck which had left the road, hit a fence, a telephone pole, and finally came to rest after hitting a tree. The two occupants were pronounced dead on the scene.

The executor of the estate of one of the boys brought a lawsuit against the liquor store, alleging that the sale of alcohol to these minors directly lead to the deaths which ensued. The circuit court judge granted the defendant’s motion to dismiss, noting that case law in Arkansas as stated in Carr v. Turner as well as other cases, clearly and consistently has held that in cases of this kind it is the consumption, and not the sale of the liquor, that was the proximate cause of the subsequent tragedy.[1] On appeal to the Arkansas Supreme Court, the dismissal of the case by the circuit court judge was overturned and the case was remanded for a trial on the merits.[2] This constituted a major change in the tort law of the state of Arkansas. Not long thereafter the Arkansas General Assembly enacted legislation which came to be known as the Arkansas Dramshop Act. This paper will attempt to summarize the reasons for the Supreme Court’s decision in the Shannon case, review the Dramshop Act, and provide an overview of the Arkansas cases on point decided in the ensuing years.

The case: Shannon v. Wilson, 947 S.W.2d 349 (Arkansas 1997):

The dismissal of this case by the Benton County Circuit Court was appealed to the Arkansas Supreme Court, which rendered its opinion on June 23, 1997. The Court began by noting that they “have continually stated that a dramshop act is the preferred measure to deal with this issue and that ‘such a measure should be the result of legislative action rather than of judicial interpretation.’”[3] However, the Court stated that since “there has been no action directly addressing this troublesome question…we will address this issue now.”[4] The court also noted that the rule in Carr[5] was judicially created, and that “when a judicially created rule becomes outmoded or unjust in its application, it is appropriate for the judiciary to modify it.”[6] With regards to the policy issue involved, the court stated that “the absolute rule of nonliability for vendors who sell alcohol to minors in violation of a criminal statute is unjust jurisprudence because the furnishing of alcohol to minors may seriously endanger the healthy, safety, and welfare of Arkansas minors. The doctrine of stare decisis is not a sufficient reason to preclude the recognition of liability.[7] The court also indicated that at this moment in history Arkansas is very much in the minority on this point of law. The court further noted that the sale of alcohol to a minor is illegal in Arkansas and therefore such a sale is evidence of negligence.[8] They concluded by stating that “it is our conclusion a licensed vendor’s violation of the statute prohibiting the sale of alcohol to minors is evidence of negligence to be submitted to a jury.”[9] In dissent, Justice Newbern argued that the matter should be left up to the will of the General Assembly of the state of Arkansas. He stated that:

…the change on which the majority opinion relies primarily is the fact that some courts have found ways in which to answer the question we have said should be addressed to the General Assembly. Being in a majority, like being politically correct, offers superficial comfort, but it may not be right in the long run. It is especially harmful to the stability of the system we serve for a court to legislate in an area it has consistently staked out as belonging to the legislatures.[10]

The Arkansas Dramshop Act: Act 1596 of 1999. It became law without the Governor’s signature on April 29, 1999

Two years after the Supreme Court’s decision in the Shannon case the General Assembly of the state of Arkansas passed a dramshop law, the first of its kind in the state of Arkansas. Here is a summary of the basic components of this law:

Ark. Code Ann. Sec. 16-126-103: Civil liability for sale of alcohol to a minor:

In cases where it has been proven that an alcoholic beverage retailer knowingly sold alcoholic beverages to a minor or sold under circumstances where such retailer reasonably should have known such purchaser was a minor, a civil jury may determine whether or not such knowing sale constituted the proximate cause of any injury to such minor, or to a third person, caused by such minor.

This portion of the statute deals with what occurred in the Shannon case. It completely supports the ruling of the Supreme Court in this case.

Ark. Code Ann. Sec. 16-126-104: Civil liability for sale of alcohol to clearly intoxicated person

In cases where it has been proven that an alcoholic beverage retailer knowingly sold alcoholic beverages to a person who was clearly intoxicated at the time of such sale or sold under circumstances where the retailer should have known the person was clearly intoxicated at the time of the sale, a civil jury may determine whether or not the sale constitutes a proximate cause of any subsequent injury to other persons. For purposes of this section, a person is considered clearly intoxicated when the person is so obviously intoxicated to the extent that, at the time of such sale, he presents a clear danger to others. It shall be an affirmative defense to civil liability under this section that an alcoholic beverage retailer had a reasonable belief that the person was not clearly intoxicated at the time of such sale or that the person would not be operating a motor vehicle while in the impaired state.

This portion of the statute deals with the sale by a retailer to a person clearly intoxicated who subsequently harms another person. The last sentence of the statute seems to suggest that the injury to a third person would have to be associated with the operation of a motor vehicle. The law does not cover injuries sustained by the intoxicated party himself / herself, nor does it specifically apply to non retailers.

Ark. Code Ann. Sec. 16-126-106: Consumption instead of sale as proximate cause of injury generally

Except in the knowing sale of alcohol to a minor or to a clearly intoxicated person, the General Assembly hereby finds and declares that the consumption of any alcoholic beverage, rather than the furnishing of any alcoholic beverage, is the proximate cause of injuries or property damage inflicted upon persons or property by a legally intoxicated person.

This portion of the law clearly constitutes a declaration by the General Assembly that the general rule of non liability by the provider of alcohol continues to exist in Arkansas, with limited exceptions associated with the sale of alcohol to a minor or to a clearly intoxicated person. Interestingly, this portion of the law includes the language “sale of alcohol to a minor or to a clearly intoxicated person,” whereas the first two portions of the law refer only to a sale by an “alcoholic beverage retailer.” Could it be argued that this section of the law extends civil liability to non retailers as well as to retailers? This question is answered in part in the following section.

Ark. Code Ann. Sec. 16-126-106: Immunity from civil

In no event will the act of providing alcoholic beverages to a person who can lawfully possess them by a social host, or other person who does not hold an alcoholic beverage vendor’s permit, constitute a proximate cause of any personal injuries or property damages which may be subsequently caused by an individual consuming any alcoholic beverages so provided.

This portion of the law completely rejects the doctrine of “social host” liability which currently exists in a few states, except with regard to the providing of alcohol to a minor. Thus, it would seem to invalidate the argument suggested in the previous section that non retailers may be held liable for providing alcohol to intoxicated persons. On the other hand, it would seem to support the argument that even non retailers can be held liable for providing alcohol to minors, to include not only damages sustained by intoxicated minors as well as to third parties injured by minors.

Cases decided after Shannon:

Jackson v. Cadillac Cowboy, Inc., 986 S.W.2d 410 (Arkansas 1999)

In this case the defendant, a licensed vendor of alcoholic beverages, allegedly served alcohol to a customer who they knew or should have known was intoxicated and intended to drive his motor vehicle while intoxicated. Not long after leaving the establishment the vehicle driven by the customer struck a vehicle driven by plaintiff Jackson, causing his death. In the ensuing lawsuit the trial court granted a motion to dismiss, based on existing Arkansas law. The judge held that the Shannon case only extended liability for the sale of alcohol to a minor. The Supreme Court agreed with this argument, but reversed and remanded anyway, stating that now they would go ahead and extend liability for the sale of alcohol to an obviously intoxicated person. Their reasoning in this case was similar to the Shannon case, and included the following:

We see no distinction between the two high risk groups of minors and intoxicated persons when it comes to causation. Just as the sale of alcohol to a minor may be one proximate cause of resulting injury, so may such sales to those who are intoxicated. Indeed, the abundant authority from other jurisdictions that we cited in Shannon were cases that involved minors as well as intoxicated persons.[11]

It is interesting to note that there were three dissenters in this case, including Chief Justice Arnold, who wrote the majority opinion in the Shannon case. Justice Corbin in dissent (with concurrence by Justices Arnold and Thornton) wrote the following:

This decision, in my estimation, is the most far-reaching judicial fiat I have seen in all of my thirty three years’ experience in the law…I joined the majority in Shannon because I, too, believed that there are strong public-policy reasons for preventing the sale of alcoholic beverages to minors. I cannot, however, join the majority here because I believe that it is unsound to base tort liability for vendors on nothing more than regulatory statutes that constitute “grounds for administrative sanctions.” Sec. 3-3-218(b)[12]

Justice Corbin also expressed concern that the precedent in the case at hand could later be extended to include tort liability for social hosts. He stated that:

…I shudder to think of the detrimental effect that this holding will have on the lifestyles of Arkansans – restaurants, hotels, private clubs, country clubs, VFW Halls, and Elks Clubs, to name but a few establishments, will be significantly affected by this decision.[13]

The Supreme Court’s decision in this case was rendered on March 18, 1999, and was followed a month later by the General Assembly passing the Arkansas Dramshop Act. Perhaps giving due consideration to Justice Corbin’s concerns, the legislation came out strongly against social host liability in the state of Arkansas.

The remand by the Supreme Court in the Jackson case was followed by a jury trial in Howard County. The jury held in favor of the plaintiff, and found the customer 75% at fault and the licensed vendor (Cadillac Cowboy) 25% at fault. The case was appealed a second time to the Supreme Court, which affirmed the judgment of the lower court. However, there was an interesting procedural issue associated with this case. After remand, but before the trial, the new Dramshop Act was passed by the General Assembly. Should the new statutory law be applied on remand? The trial court judge said “no” and issued instructions to the jury based on the Supreme Court’s opinion, rather than the newly adopted statute. The Supreme Court agreed, holding that the first opinion established the law of the case, and thus the judge’s instructions were correct. Justices Thornton and Corbin dissented on this point.

Tackett v. Merchant’s Security Patrol, 44 S.W.3d 349 (Ark. App. 2001)

This is a case which was decided on the basis of common law, not on the 1999 Dramshop Act. The events leading to the lawsuit occurred in 1993. The plaintiff was seriously injured and her daughter killed when their vehicle was struck by a vehicle driven by John Sargent. In the two hours prior to the collision Sargent had consumed at least three to four beers at Speedy’s Sport Spot in Fayetteville. Two security guards, employed by Merchant’s Security Patrol were present on the premises, although they denied seeing Sargent. The plaintiff filed suit against Merchant’s Security Patrol.[14] The basis of plaintiff’s claim against Merchant’s Security was the argument that its security guards forcibly evicted Sargent from the premises, thus requiring him to drive while intoxicated (in plaintiff’s amended complaint it was stated that the guards did not forcibly evict Sargent, but were negligent in allowing Sargent to leave the premises knowing that he was going to drive while intoxicated). A summary judgment in favor of the defendant was rendered by the circuit court, and the plaintiff appealed.

The Court of Appeals affirmed the summary judgment. The Court stated that “the first question that must be answered in a negligence case is what duty, if any, did the defendant owe to the plaintiff?…Ordinarily a person is under no duty to control the actions of another person, even though he has the practical ability to do so.”[15] The Court stated that even though a duty may have been owed by the guards to their employer or even possibly to the patrons of the establishment, “there is nothing to indicate that the duties were owed to anyone other than Speedy’s or perhaps Speedy’s patrons, i.e., persons and property on Speedy’s premises.”[16]

The Court then went on to consider the argument made by the plaintiff that security companies should be held to the same standard of liability as alcoholic beverage retailers, as set forth in Jackson v. Cadillac Club and Shannon v. Wilson. The Court rejected this argument, stating that:

Appellant’s argument fails to recognize that the legislature has not expressly imposed upon security guard agencies the same “high duty of care” required of alcoholic beverage vendors…We have found no language in the Act (Act 429 of 1977 and Act 792 of 1981), and appellant has cited us to none, that compares with the language the legislature used to impose an enhanced duty of care on the vendor of alcoholic beverages. Thus, we decline to extend the rationale in Shannon and Jackson to this case. [17]

As indicated previously, the 1999 Dramshop Act was not mentioned in the opinion.

Sluder v. Steak & Ale of Little Rock, Inc., 206 S.W.3d 213 (Arkansas 2005)

In this case the plaintiffs (Mr. and Mrs. Sluder) were patrons of Bennigan’s in Texarkana, and were socializing with a group hosted by Mr. Jon Beck. It was alleged that the bartenders frequently served alcohol to Mr. Beck and members of his party after they were inebriated. After leaving the party Mr. Sluder drove his vehicle off the road, struck a tree, and sustained severe injuries. A lawsuit was then filed by the Sluders against Steak and Ale of Little Rock (d/b/a Bennigan’s). The defendant filed a motion to dismiss, which was granted by the trial court judge. On appeal to the Supreme Court the judgment was affirmed.

The Court noted that the plaintiffs were not asserting a typical first party dramshop case (i.e., a claim that the person who became intoxicated and injured himself should have a right of action against the person providing the alcohol – without question a losing argument in Arkansas), but rather were claiming that the sale of alcoholic beverages was to Mr. Beck, not to the plaintiff Mr. Sluder. Under this analysis, Bennigan’s would be considered the “alcoholic beverage retailer,” Mr. Beck the “clearly intoxicated person,” and Sluder the “other person” who was injured. This argument, although creative, failed to carry the day. The Supreme Court stated that:

Appellant’s argument is misplaced…appellants’ complaint is deficient in that it fails to establish a sufficient nexus between the sale to Mr. Beck and the injury to Mr. Sluder. To establish a prima facie case under section 16-126-104 the plaintiff must allege that the intoxicated person, i.e., Mr. Beck, caused the injury. Appellants in this case failed to do so…Thus we hold that in order to sustain an action under section 16-126-104, appellants must establish in their pleadings a connection between the sale to a clearly intoxicated person and the subsequent injury to another person. To hold otherwise would produce an absurd result. We have said that we will not engage in interpretations that defy common sense and produce absurd results.[18]

Justice Glaze dissented in part. He fully agreed with the primary thrust of the opinion, and added the following:

Section 16-126-104 contains no language that even suggests that a guest or person who voluntarily becomes intoxicated and impaired should be able to sue the retailer / vendor furnishing the alcohol. Neither Arkansas case law nor statutory law provides such a remedy to a person whose own unlawful acts caused the injuries he sustained. As noted above, Sluder argues that he is the “other person” alluded to in Sec. 16-126-104, but nothing in Arkansas law provides a cause of action for personal injury of a voluntary inebriant.[19]

Justice Glaze’s dissent related only to the Court’s failure to expressly state that the dismissal was “with prejudice.” He feared that the plaintiff could rework the facts and allegations over and over in an attempt to state a cause of action. This prediction turned out to be somewhat justified, as the plaintiffs later filed an amended complaint, to which the defendant again moved for dismissal based on res judicata and expiration of the statute of limitations. The circuit judge again dismissed the complaint, and on the second appeal the Supreme Court held that when the plaintiffs chose to appeal the original dismissal of their complaint and the Supreme Court affirmed that dismissal, it became a dismissal with prejudice.[20]

Archer v. Sigma Tau Gamma Alpha Epsilon, 362 S.W.3d 303 (Arkansas 2010)

In this case a fraternity in Hot Springs held a social event which was attended by Antony Moore. Moore left the event intoxicated, and shortly thereafter negligently drove his car directly into a vehicle containing several members of the Archer family. Mr. Moore died at the scene, and several members of the Archer family were seriously injured. The Archers sued the fraternity which had sponsored the event (along with other defendants). The plaintiffs argued that since the fraternity charged an entry fee to attend the party, they should be treated as a retailer under Ark. Code. Ann Sec. 16-126-104. The fraternity argued that because they did not hold a license to sell alcoholic beverages they were merely “social hosts” and could not be held liable under Ark. Code Ann. Sec. 16-126-106. Agreeing with the argument made by the defendant fraternity, the circuit court judge granted a motion to dismiss.

On appeal the Supreme Court upheld the trial court judge’s dismissal of the case. The Court began by noting that the General Assembly very clearly “limited liability to alcoholic beverage retailers and, even then only under two specific fact situations.”[21] On this point the Archers argued that the defendant should have obtained an alcohol-vendor’s permit, and that their failure to do so should not excuse them from liability. This argument also was rejected by the Court, which stated:

While the statute itself does not define “alcoholic beverage retailer,” it is elementary that when interpreting the language in a statute, we give effect to the intent of the legislature…(W)here the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. Black’s Law Dictionary defines a retailer as a person or entity engaged in the business of selling personal property to the public or to consumers, as opposed to selling to those who intend to resell the items. Black’s Law Dictionary 1430 (9th ed. 2009). The Arkansas Alcoholic Beverage Control Division defines retailer in its rules and regulations as any person who holds a permit under any alcoholic beverage control law of the State of Arkansas to sell at retail controlled beverages to consumers only. See Sections 2.7 and 3.5 of the ABC Rules and Regulations. We cannot say, given the mere fact that the Sig Taus charged an entry fee to their party, that the Sig Taus were alcoholic beverage retailers under this statute. Therefore they may not be held to the standard that has, thus far, only been imposed on retailers.[22]

The Archers final argument on appeal was that the Dramshop Act was unconstitutional as applied in this case as it rewarded the fraternity for failing to obtain a license. Applying the “rational basis” test, the Court held that the response of the General Assembly to the decision of the Supreme Court in the Shannon case was clearly related to the government interest of preserving public peace, health and safety of the citizenry, and therefore the Dramshop Act could not be shown by the plaintiffs to be unconstitutional.

Mason and Garcia v. Chenal Country Club, 2010 Ark. App. 180, 2010 Ark. App. LEXIS 190 (Ark. App. 2010)

A country club in Little Rock held an “Oscar Night Party” as a fundraiser for a foundation. Tickets to the event were $125 each. The country club donated two bottles of wine for each table of ten patrons free of charge (the foundation paid the country club $50 for each attendee). Wilks, one of the attendees, did not purchase drinks from the cash bar, but apparently consumed enough of the wine donated by the country club to become intoxicated. He then left the event, and in short order the car that he was driving struck the plaintiff’s vehicle, causing both parties significant personal injury. The plaintiffs (James Mason and Robert Garcia) brought suit against the country club, alleging liability based on the Arkansas Dramshop Act. The circuit court judge issued a summary judgment in favor of the defendant country club, which was appealed to the Court of Appeals.

The Court of Appeals affirmed the summary judgment. Reviewing the Dramshop Act, the Court stated that the statute required that there be a “sale” of alcoholic beverages, and that the term “sale” was unambiguous. Citing the Uniform Commercial Code, the Court stated that a “sale consists in the passing of title from the seller to the buyer for a price.”[23] “Here, there was no such arrangement between Wilks and the Chenal Country Club, as they were not positioned as buyer and seller to each other. Thus, Chenal did not sell alcoholic beverages to Wilks.”[24] The Court concluded by making the following statement:

The statute speaks of an alcoholic beverage retailer knowingly selling alcoholic beverages to a clearly intoxicated person. To interpret the statute to create a cause of action where there was no buyer-seller relationship, where the person was one in a group of ten persons provided with two bottles of wine, and where there is no evidence that the person was intoxicated at the time the wine was provided or when the ticket was sold, would be to pass beyond the limitations of the statute and would constitute a policy decision. Matters of public policy, however, are generally within the purview of the legislature.[25]

Summary and Conclusions

When the Shannon case was decided in 1997 it was regarded by many as representing an attempt by the Court to legislate from the bench. This point was clearly made by the dissenting justice in the case. In the subsequent Jackson case two years later the dissenting justices described the majority’s opinion as representing the most far reaching judicial fiat they had observed in more than thirty years. There was also a prediction that the Shannon and Jackson cases would have a detrimental effect on the lifestyles of Arkansans, to include restaurants, hotels, and private clubs. However, the Dramshop Act passed by the General Assembly in 1999 may have had the effect of easing these concerns to some extent. In the reported appellate cases since the passage of the act, Arkansas courts have clearly indicated that the General Assembly has for the most part unambiguously stated the “basic rule” in Arkansas, which is non-liability for alcohol providers except in specifically described situations. Furthermore, in the years since the passage of the Dramshop Act there have been only three reported appellate decisions on this matter, and in every case there was a dismissal of the complaint by the circuit court judge and an affirmance by the appellate court. At least to date it would appear that dramshop cases in Arkansas are difficult ones for plaintiffs to win, which may in fact have been what the General Assembly had in mind when the Dramshop Act was made part of the law of the state of Arkansas.


Notes

[1] Carr v. Turner, 385 S.W.2d 656 (Ark. 1965) (sale by tavern owner to adult who became inebriated). Another case of note is Alpha Zeta Chapter of Pi Kappa Alpha Fraternity v. Sullivan, 740 S.W.2d 127 (Ark. 1987) (fraternity serving alcohol to a minor). The claims of the plaintiffs were dismissed in both cases.

[2] Just before the trial was scheduled to begin, the parties settled the case. The terms of the settlement were not disclosed.

[3] 947 S.W.2d at 352, citing Carr v. Turner, Note 1, supra.

[4] 947 S.W.2d at 352.

[5] Note 1, supra.

[6] 947 S.W.2d at 353.

[7] 947 S.W.2d at 353.

[8] 947 S.W.2d at 357, citing Rogers v. Stillman, 268 S.W.2d 614 (Ark. 1954).

[9] 947 S.W.2d at 358.

[10] 947 S.W.2d at 359, Justice Newbern, dissenting. For a more complete discussion of this case see the following article, written the summer after the decision was first handed down: Dramshop Liability in Arkansas: Illegal Sales of Liquor to Minors May Expose Alcohol Vendors to Expensive Liability, Shannon v. Wilson, 947 S.W.2d 349 (1997), 20 U. Ark. Little Rock L.J. 985, by Dustin McDaniel.

[11] 986 S.W.2d at 412.

[12] 986 S.W.2d at 416, 417, Justice Corbin, dissenting

[13] 986 S.W.2d at 419, Justice Corbin, dissenting

[14] It is unclear why Speedy’s Sport Spot was not named as a defendant; solvency issues may have been a factor.

[15] 44 S.W.3d at 352, citing Trammell v. Ramey, 329 S.W.2d 153 (Ark. 1959).

[16] 44 S.W.3d at 353.

[17] 44 S.W.3d at 354

[18] 206 S.W.3d at 217,

[19] 206 S.W.3d at 219, Justice Glaze, dissenting in part.

[20] Sluder v. Steak & Ale of Little Rock, Inc., 245 S.W.3d 115 (Ark. 2006)

[21] 362 S.W.3d at 308. The two situations are sale to a person clearly intoxicated, and sale to a minor.

[22] 362 S.W.3d at 308, 309.

[23] Ark. Code Ann. Sec. 4-2-106(1)

[24] 210 Ark. App. at 182.

[25] 210 Ark. App. at 182.

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