Ariz. Supreme Ct. Rejects Constitutional Challenge to Law that Limits Liquor Servers’ Liability

A divided Arizona Supreme Court upheld a state law that limits liability to bars and restaurants for damages caused by intoxicated patrons, overturning a jury verdict that would have awarded $800,000 to the family of a man who was killed in a crash caused by a drunken driver.

In a 4-1 decision Monday, the high court rejected arguments by the plaintiff that the state’s dram-shop liability law violated a provision of the state constitution that bars state lawmakers from passing laws that abrogate any right to bring a legal action that existed before Arizona became a state in 1912. The majority said establishments that sold liquor (dram shops) could not be held liable for over-serving patrons under the common law before statehood, so the statute did not abrogate any pre-existing rights.

The decision effectively repeals a standard that was created in 1983, when the state Supreme Court ruled that dram shops have a common law liability not to over-serve customers. The high court specifically overturned a 1995 state Court of Appeals decision that found the common law duty continued to exist even after state lawmakers passed the dram-shop law in 1986, which allowed liquor licensees to be held liable for damages if they served a customer who was “obviously intoxicated.”

Cesar Aguilera Villanueva became severely intoxicated during a night of heavy drinking at the Jaguars Club in Phoenix. He drove to a friend’s house to sober up and then went home and slept again for a short time. But Villanueva was still drunk when he woke up. He crashed into a car that was stopped a traffic light, killing Guadalupe Gastelum Suarez and Jesus O. Torres Guillen.

The victims’ families filed a wrongful death suit against Villanueva and JAI Dining Services, the owner of the Jaguar Club. A jury found that JAI was liable under the common-law standard of liability in that he was clearly impaired at the time of the crash. However, the jury also found that Villanueva was not “obviously intoxicated,” which is the standard established by the state’s dram-shop law, Section 4-311. The jury awardeddamages of $2 million, with 40% of that apportioned to JAI Dining.

The Court of Appeals overruled the trial court’s decision. The Supreme Court agreed with the Court of Appeals reasoning and remanded the case to the trial court with a directive to enter judgment in favor of JAI Dining.

Attorney Mick Levin, who wrote an amicus brief in favor of the plaintiffs, explained that essentially two standards have co-existed ever since the legislature passed the dram-shop liability law in 1986. He said the Supreme Court’s decision eliminates common law claims and leaves the statutory standard the only guidepost when determining liability.

Levin, who wrote his brief on behalf of the Homicide Survivors advocacy group, said cases will be difficult to prove. The statute defines “obviously intoxicated” to mean “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.”

“It essentially allows bars to serve as much as they want,” Levin said.

In a dissenting opinion, Vice Chief Justice Ann Timmer said the statute essentially requires a finding that a patron is “falling-down drunk” in order to hold a liquor licensee liable.

Attorney David L. Abney with the Ahwatukee Legal Office, who represented the accident victims on appeal, said the Supreme Court’s ruling opens the door for the state lawmakers to create roadblocks for pursuing tort claims of all types. He said there were no legal or medical malpractice actions before statehood, so nothing stops the legislature from imposing an impossibly high bar. Insurance bad-faith actions didn’t exist. Neither did strict product liability, he said.

“You can hear the champagne corks popping across the state,” Abney said.

Abney said plaintiff’s lawyers will find it very difficult to win any dram-shop claims with the standard of proof required under Section 4-311. He said bar staff are “very adept” at protecting one another and obscuring the truth.

“It’s a huge incentive to bars to serve as fast as they can, as much as they can,” he said.

The lead attorney representing JAI Dining, Eric M. Fraser with Osborn Maledon, said the decision brings “much needed clarity for the hospital industry in Arizona.”

“The standard for bars is in A.R.S. § 4-311, and requires 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,'” he said in an emailed statement. “The Arizona Legislature created this standard and the Supreme Court properly recognized that the Legislature has the power to delineate the proper standard. The standard the Legislature adopted is based on objective, observable criteria.”