Punitives Not Allowed Against Dram Shop.

March 6, 2007

The Court of Appeals in the published opinion, Jackson v. Duncan, et al., issued two important ruling regarding dram shop liability. First, it reiterated that apportionment of fault is not allowed against drams shops. Second, punitive damages are not recoverable. The Jackson case stems from an auto accident involving Jackson, a passenger in Duncan’s car. Both parties had been drinking at several nightclubs before the accident. Jackson sued Duncan, the Big Kahuna nightclub and its shareholders, Sweet and Sassy, Inc. d/b/a Ginger & Pickles, nightclub and its owner Tullar. Before trial Jackson settled with the Big Kahuna. The trial court allowed a four way apportionment against Duncan, the Big Kahuna, Jackson and Sweet and Sassy. The jury found negligence against all parties. It also awarded punitive damages against Sweet and Sassy and Tullar.

All the parties appealed, except the Big Kahuna, who for some reason was still listed as cross-appellee. Jackson contended that her 10% fault should be deducted from the total fault (100%) and that the remainder should be placed on Duncan. The dram shop defendants would then be vicariously liable for whatever portion Duncan could not pay? The dram shop defendants argued that apportionment simply was not available.

The Court of Appeals began by reviewing KRS 413.241, enacted in 1988 and commonly referred to as the Dram Shop Act. It noted that in DeStock # 14, Inc. v. Logsdon, 993 S.W.2d 952 (Ky. 1999), the Kentucky Supreme Court concluded that liability may be imposed upon a dram shop despite the statute’s language regarding proximate cause. It noted; “Liability is imposed on the intoxicated tortfeasor for his actions in injuring the plaintiff, while liability is imposed upon the dram shop for the entirely separate and “independently negligent” act of serving alcohol to the intoxicated tortfeasor before the accident.” “Thus, since the actions of the dram shop and the intoxicated tortfeasor are separate, the two “ought [not] to be considered in pari delicto.””

“It is because of these distinctions between the tortfeasor and the dram shop, that apportionment of fault between the injured party, the tortfeasor, and the dram shop is improper.” “The instruction should have required the jury to apportion fault between just Duncan and Jackson. Then, only after the jury found Duncan to have some percentage of fault, should the jury have determined whether the elements under KRS 413.241 were satisfied such that either or both dram shops could be held secondarily liable.” Because it was impossible to determine how the jury would have apportioned fault between Jackson and Duncan the Court of Appeal reversed and remanded the case for a new trial.

Both parties also appealed the award of punitive damages. The Court noted; “Kentucky law is clear that a plaintiff cannot recover punitive damages against a defendant unless that defendant’s conduct was the proximate cause of any injury to the plaintiff.” Since there can be no punitive damages absent proximate cause and since the legislature had removed proximate cause in dram shop liability, there could be no punitive damages awarded as a matter of law.

The Court found this holding to be consistent with the dram shop statute, which allowed recovery only for “injuries suffered” and not simply damages, which might encompass punitives. It also noted that the punitive damages statute and the dram shop act were adopted during the same legislative session, and it was reasonable to assume the legislature was aware of the punitive damages scheme when it adopted KRS 413.241.

A very well written and well grounded opinion, using existing case law to reach the correct result. It should be noted that the jury returned a verdict for punitives of $500,000.00 against Sweet and Sassy and Tullar only. Duncan was not included, despite his obvious intoxication. It also raises the question; Where does Jackson’s gross negligence, if any, play in an instruction and award of punitive damages?

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