A dram shop law renders a dram shop liable for the harmful acts of its intoxicated customers when it overserves an intoxicated customer, and said customer then causes harm to a third-party victim as a result of his/her intoxication (e.g. a drunk driving accident). A dram shop is “[a] place where alcoholic beverages are sold; a bar or saloon.” Dram Shop, Black’s Law Dictionary (11th ed. 2019).
Judicial Evolution of Arizona Dram Shop Law
In Arizona, dram shop law has undergone significant changes from pre-statehood all the way until last year, 2023. Pre-1912 (i.e. pre-Statehood) Arizona did not recognize dram shop liability. “At common law . . . a tavern owner is not liable for injuries sustained off-premises by third persons as the result of the acts of an intoxicated patron, even though the tavern owner’s negligence in serving that patron was a contributing cause of the accident. See Cruse v. Aden, 127 Ill. 231, 234, 20 N.E. 73, 74 (1889); Waller’s Adm’r v. Collingsworth, 144 Ky. 3, 6, 137 S.W. 766, 767 (1911); 45 Am.Jur.2d, Intoxicating Liquors § 553 (1969).” Ontiveros v. Borak, 136 Ariz. 500, 512 (AZ S. Ct. 1983) overruled by statute. This all changed in 1983.
In 1983, the Arizona Supreme Court heard the case Ontiveros v. Borak, 136 Ariz. 500 (AZ S. Ct. 1983) overruled by statute wherein, for the first time, Arizona recognized dram shop liability. In Ontiveros, the Court acknowledged that the rule of nonliability for tavern owners had been the common law in Arizona. Id. at 504. However, the Court stated that “the common law, which is judge-made and judge-applied, can and will be changed when changed conditions and circumstances establish that it is unjust or has become bad public policy.” Id. As such, the Ontiveros Court held that the common law doctrine of tavern owner nonliability in Arizona was abolished and “Tavern owners and other licensed sellers in Arizona will be under a duty of care and may be held liable when they sell liquor to an intoxicated patron or customer under circumstances where the licensee or his employees know or should know that such conduct creates an unreasonable risk of harm to others who may be injured either on or off the premises. If the duty of care is breached, the seller will be liable for the damage caused by his negligence.” Id. at 513.
Ontiveros established a new cause of action and standard for dram shop liability: “know or should know.” This standard provided multiple different avenues to prove a tavern was liable. For instance, there may be video evidence that shows an intoxicated person stumbling. There could be testimony about words being slurred by a customer. The injured party could obtain the business records for the establishment, see how many drinks were served and argue the bar knew or should have known there was risk because of the amount of alcohol sold to a patron. This ruling set off a firestorm in the Arizona dram shop business community and the legislature responded.
Legislative Check and Balances to Judicial Dram Shop Modifications
In 1986, the Arizona legislature addressed the Ontiveros ruling via statute. It was responding to constituents, specifically bar owners, whose livelihoods were changed by the Ontiveros ruling. Legislative minutes from the 1986 session discuss one tavern owner who testified his insurance premiums jumped from $43,000 in 1983 (prior to Ontiveros) all the way to $113,000 in 1985 (post Ontiveros). The legislature enacted ARS §§ 4-311 and 4-312 to limit dram shop liability in Arizona.
In relevant part, ARS § 4-311 states, “A licensee is liable for property damage and personal injuries or is liable to a person who may bring an action for wrongful death … if a court or jury finds all of the following: 1. The licensee sold spirituous liquor either to a purchaser who was obviously intoxicated, or to a purchaser under the legal drinking age without requesting identification containing proof of age or with knowledge that the person was under the legal drinking age; 2. The purchaser consumed the spirituous liquor sold by the licensee; 3. The consumption of spirituous liquor was a proximate cause of the injury, death or property damage.” ARS § 4-311(A)(emphasis added). It defined “obviously intoxicated” as “inebriated to such an extent that a person’s physical faculties are substantially impaired and the impairment is shown by significantly uncoordinated physical action or significant physical dysfunction that would have been obvious to a reasonable person.” ARS § 4-311(D).
In an exercise of checks and balances on the Arizona Supreme Court, the legislature changed the standard for dram shop liability from a “knew or should have known” standard to “obviously intoxicated” shown by “significantly uncoordinated physical action or significant physical dysfunction.” This significantly restricted the standard and made proving dram shop liability much more difficult. For instance, instead of being able to review how many drinks a patron was served, now an injured person must prove the establishment saw significant impairment, regardless of how many drinks were served. In other words, even if a bar sold someone ten drinks in an hour, if there is not evidence the employees saw significant physical impairment, the injured party would not be entitled to dram shop liability.
In ARS § 4-312 the legislature abolished common law dram shop actions and made ARS § 4-311 the only way an injured person could recover actions for a tavern over serving a patron. ARS § 4-312(B). In 2023, these 1986 legislative amendments were tested in the Arizona Supreme Court. The majority opinion in Torres v. Jai Dining Servs. (Phoenix), Inc., 536 P. 3d 790 (AZ S. Ct. 2023) upheld the legislative amendments and explained the legislature was allowed to amend dram shop tort law.
The Arizona Supreme Court’s Acceptance of Legislation
In Torres, Cesar Aguilera Villanueva engaged in a night of heavy drinking at the Jaguars Club in Phoenix and got into a car accident killing two people. The victims’ families sued Villanueva for negligence and sued JAI Dining Services (“JAI”) the owner of Jaguars Club for statutory and common law dram shop liability. The jury found Villanueva liable for negligence but rendered a split verdict on the dram shop claims against JAI. The jury found JAI liable under common law dram shop recognized by the Supreme Court in Ontiveros for the “knows or should know” standard. However, the jury found JAI not liable under statutory dram shop in ARS 4-311(A)(1) which imposes liability on a liquor licensee that serves alcohol to a patron who is “obviously intoxicated.”
The Arizona Supreme Court had to determine whether the legislature could limit the common law liability decided in Ontiveros based on the Arizona Constitution’s anti-abrogation clause: “The right of action to recover damages for injuries shall never be abrogated, and the amount recovered shall not be subject to any statutory limitation.” ARIZ. CONST. art. XVIII, § 6. The clause guarantees the right to sue for damages for injuries and prohibits the abrogation of rights of action that existed at statehood.
The Court found that because the anti-abrogation clause only applies to rights of action that either existed at common law or find their basis in the common law at the time the constitution was adopted, the clause does not preserve the dram-shop action first recognized in Ontiveros. In other words, because there was no dram shop liability before 1912, and dram shop liability only came into existence in 1983, the legislature was allowed to abrogate common law dram shop liability.
Conclusion
By eliminating the common-law dram shop cause of action, the Torres ruling could have significant implications for tort law going forward. There is an open question about what the legislature can regulate going forward. For example, self-driving cars were not around prior to 1912. Can the legislature limit liability for self-driving cars or will the Arizona Supreme Court decide that injuries related to self-driving vehicles find their basis in the common law? Time will tell but there is a very real possibility that there will be additional litigation related to the legislature’s ability to limit tort liability in the future.