Iowa Supreme Court Is "Sold" On Expanding Iowa's Dram Shop Law

A May 8, 2015 Iowa Supreme Court decision has clarified part of Iowa's dram shop law. The dram shop statute creates a special category of Des Moines personal injury cases. It applies to situations in which an intoxicated person injures someone. That intoxicated person is of course legally responsible for the injuries. And in certain situations involving persons or businesses who are licensed or permitted to sell alcohol, the persons or business who sold and served alcohol to the intoxicated person may also be liable for the injuries. 

The most common type of dram shop case involves Des Moines drunk driving accidents, but it can also apply to motorcycle accidentstruck accidents, pedestrian accidents, boating accidents, train accidents, and premises liability accidents. Let's use a Des Moines car accident involving an intoxicated driver as an example. If that driver became drunk after being sold and served alcoholic beverages at a bar, the bar could be liable under the dram shop law for the accident along with the driver.    

One of the requirements for dram shop liability is that the defendant must have "sold" the alcohol to the person who causes the injuries. The meaning of "sold" was the fighting issue in Sanford v. Fillenwarth. The Sanford family brought suit after Joseph Sanford was injured during a fight with another guest's adult son at an Okoboji resort. The other other guest's adult son had been served complimentary alcohol at the resort.

The resort convinced the trial court to dismiss the case before trial. The resort claimed that the dramshop statute only applies to the sale and service of alcoholic beverages and does not apply to impose liability when the alcoholic beverages were not sold but only served as an amenity of the resort. It also claimed no sale could have been made to the adult son because he was not a paying guest. The Sandfords countered that the statute is broad enough to include alcoholic beverages served by a resort as an amenity.

The Sanfords appealed the trial court's dismissal. The Iowa Supreme Court noted that the dram shop law's "sold and served" was added in 1986. Before then, the statute imposed liability on those "who shall sell or give" alcoholic beverages in violation of the dram shop law. That 1986 change meant that purely gratuitous undertakings no longer created liability under the statute. Thus the Iowa Legislature has drawn a line between a sale and a gift under the statute and has limited dramshop liability for licensees and permittees only when they sell and serve the alcoholic beverage to the intoxicated person who injured another person.

The Iowa Supreme Court considers several factors when determining whether there was a sale of alcoholic beverages. It looks for the presence of consideration, or something given in exchange for the alcohol, which is a basic element of the traditional notion of a sale. The court also looks for evidence of a payment, although payment may be implied from the circumstances.

The court concluded that the intent of the legislature under the dramshop statute was to capture all direct and indirect sales supported by consideration tangibly benefiting the licensee or permittee serving the alcohol. The alcohol the resort served in Sanford was one such indirect sale that could create liability under the dram shop law. The facts indicated that complimentary alcoholic beverages were part of the consideration for the hotel stay. The alcoholic beverages were advertised to prospective guests as one of the amenities of the stay. Therefore, this case is an example of the problem sought to be addressed by the legislature in imposing liability on licensees and permittees who sell and serve excessive liquor as part of their business. The resort served complimentary alcoholic beverages to its guests as part of its regular resort package, not as an isolated occasion. 

Also, as a more direct indication of the fact that guests were actually paying for complimentary alcohol, the resort didn't necessarily provide such amenities during the offseason when it offered discounted rates. As the court observed, this implies alcoholic beverages were not gratuitous. If an amenity is only provided at a specific price point and above, the necessary implication is that the cost of that amenity is only covered at the higher price point and is therefore part of the higher price.

The Iowa Supreme Court also had to address the issue of whether the resort "sold" alcohol to the nonpaying guest who injured Sanford during the fight, the adult son of the paying guest. The court decided that the son's status as a nonpaying guest made no difference to the resort's potential dram shop liability. The son was a third-party intended beneficiary of the amenities that came with the lodging his father purchased.  That was sufficient to extend the resort's possible liability to the son's conduct.

The court ultimately reversed the district court's dismissal. Under the circumstances of the case alcohol was "sold" within the dram shop's law meaning of that word. And because the complimentary alcohol was an amenity that extended to the paying guest's adult son, the complimentary alcohol was "sold" to the son to. For these reasons the case will be allowed to proceed to trial.

Harley Erbe