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Overview of the Dram Shop Act

The Texas Dram Shop Act, codified at § 2.02 of the Texas Alcohol and Beverage Code, states that an alcohol provider can be liable for the damages caused by an intoxicated person served by the provider. F.F.P. Operating Partners, L.P. v. Duenez, 237 S.W.3d 680, 683 (Tex. 2007); TEX. ALCO. BEV. CODE § 2.02. The Act provides that an individual may bring a cause of action against an establishment that is in the business of providing, selling, or serving an alcoholic beverage upon proof that (1) “at the time the provision occurred it was apparent to the provider that the individual being sold, served, or provided with an alcoholic beverage was obviously intoxicated to the extent that he presented a clear danger to himself and others; and (2) the intoxication of the recipient of the alcoholic beverage was a proximate cause of the damages suffered.” TEX. ALCO. BEV. CODE § 2.02. The Legislature enacted the Dram Shop Act to prevent alcohol providers from serving alcoholic beverages to persons who are obviously intoxicated and who may potentially cause injury to themselves or innocent members of the public. Duenez, 237 S.W.3d at 684.

Three elements of the Dram Shop Act

(1) The Dram Shop Act is the exclusive remedy for pursuing a suit against a provider for damages due to intoxication;

(2) for the provider to be liable, the person must be obviously intoxicated when the provider serves him alcohol;

(3) the intoxication of the patron must have been the proximate cause of the damages. Id. at 684-85; TEX. ALCO. BEV. CODE § 2.02(b).

“Upon a finding of liability, the statutes make dram shops responsible for the proportionate share of the injuries their conduct caused.” Duenez, 237 S.W.3d at 690. Although the Legislature has repeatedly amended the Dram Shop Act throughout the years, it has never “excluded a cause of action against a provider of alcohol from comparative or proportionate responsibility.” Id. at 692. Thus, “dram shops are responsible for the proportion of damages they cause or contribute to cause, as set forth in the Proportionate Responsibility Act.” Id.; TEX. CIV. PRAC. & REM. CODE § 33.003. However, this does not mean that a dram shop can never be held more liable than the patron who caused the injury. See, e.g., I–Gotcha, Inc. v. McInnis, 903 S.W.2d 829, 837 (Tex.App.Fort Worth 1995, writ denied) (jury found that the dram shop proximately caused fifty-one percent of the injuries); Venetoulias v. O’Brien, 909 S.W.2d 236, 239 (Tex.App.-Houston [14th Dist.] 1995, writ dism’d by agr.) (trial court found that the patron proximately caused thirty-three percent of the injuries and the dram shop thirty-three percent).

The Texas Supreme Court has construed the Dram Shop Act to disallow plaintiffs to recover punitive damages from alcohol providers who violate the Act. Steak & Ale of Texas, Inc. v. Borneman, 62 S.W.3d 898, 911. Because the language of the Dram Shop Act is silent on the issue of exemplary and punitive damages, the court looked to the exclusivity provisions and legislative intent to determine if a plaintiff could recover punitive damages. Id. at 911. The court stated that the “inclusion of the term ‘damages suffered’ shows legislative intent that dram shop liability extend only to compensatory damages,” thus barring any claim for punitive damages. Id. at 907. Additionally, the court explained that “exclusivity provisions,”1 along with the absence of specific language authorizing punitive damages, supports the finding that the legislature did not intend a plaintiff to be able to recover punitive damages under a dram shop action. Id. at 908. Finally, the court looked to the Alcohol and Beverage Code’s provisions of punishment to determine if punitive damages would be recoverable. Id. at 910. Because the Code allows the state to punish wrongdoers by revoking or suspending their liquor licenses, the court found that punitive damages would be double punishment and not consistent with the Code. Id. For the aforementioned reasons, the court concluded that “the legislature did not intend for punitive damages to be available for a violation of the Dram Shop Act. Id.

Safe Harbor Exception

The Dram Shop Act contains a section that eliminates the liability of an alcohol provider if the provider meets certain requirements. TEX. ALCO. BEV. CODE § 106.14(a). This “Safe Harbor” provision states, in relevant part:

(a) For purposes of this chapter and any other provision of this code relating to the sales, service, dispensing, or delivery of alcoholic beverages to a person who is not a member of a private club on the club premises, a minor, or an intoxicated person or the consumption of alcoholic beverages by a person who is not a member of a private club on the club premises, a minor, or an intoxicated person, the actions of an employee shall not be attributable to the employer if: (1) the employer requires its employees to attend a commission-approved seller training program; (2) the employee has actually attended such a training program; and (3) the employer has not directly or indirectly encouraged the employee to violate such law.

A provider need not knowingly or intentionally encourage an employee to violate the law; the provider may also negligently encourage its employees. Id. at 398. The court explains that “‘negligence’ means the doing of that which a person of ordinary prudence would not have done under the same or similar circumstances, or the failure to do that which a person of ordinary prudence would have done under the same or similar circumstances.” Id. A plaintiff can show encouragement by proving that the alcohol provider rewarded or knowingly condoned over-service of a patron, or by showing that “the provider engaged in behavior that reasonable provider should have known would constitute encouragement.” Id. For example, a provider may encourage its employees to violate the code by over-serving a patron himself, failing to punish over-service, or by setting a high sales quota without regard to the minimum number of patrons. Id.

Recommendation and Questions to Ask

The Dram Shop Act is the exclusive vehicle to sue an alcohol provider for the damages caused by a patron. So, the first thing we need to do is determine if the intoxication of the patron was the proximate cause of the damages suffered by the plaintiff. Then, we need to determine if and when the patron was obviously intoxicated such that he presented a clear and present danger to himself or others. If he was obviously intoxicated at any point during the evening, did a particular establishment serve him while he was in that state.

Once it has been established that there is a cause of action under the Dram Shop Act, we have to determine if the Safe Harbor provision protects any of the alcohol providers. We must:

  1. Check if the providers required each server to obtain a TABC license.
  2. Check if all the servers actually received TABC licenses, and if all servers were current on their licenses at the time of the accident.
  3. Determine if any of the providers “encouraged” over-service in any way.

If we can conclusively prove that the patron was obviously intoxicated, and that the intoxication was the proximate cause of the damages, the crux of the case will be if the providers “encouraged” over service. There is not much case law to determine what constitutes “encouragement,” only that it does not need to be “knowing or intentional”