On December 21, 2016, the Iowa Court of Appeals issued an interesting decision under Iowa's dram shop law in Michelle Gorden v. Mitchell Enterprises, L.L.C. The fight was over whether the bar targeted by the lawsuit, "Cheers," had "sold" alcohol to the person who ended up assaulting the plaintiff who filed the lawsuit. That issue arose because the person doing the assaulting, Timothy Mitchell, owned the bar and didn't pay for the alcoholic beverages he drank there. The plaintiff, Michelle Gorden, tried everything she could to bring the case within Iowa's dram shop law, but ultimately failed.
First, a quick review of Iowa's dram shop statute, Iowa Code 123.92. The Dram Shop Act provides for liability against places like bars in certain instances: "Any person who is injured . . . by an intoxicated person . . . has a right of action for all damages . . . against any licensee or permittee . . . who sold and served any beer, wine, or intoxicating liquor to the intoxicated person when the licensee or permittee knew or should have known the person was intoxicated, or who sold to and served the person to a point where the licensee or permittee knew or should have known the person would become intoxicated." In short, Iowa’s dramshop statute provides a remedy against a licensee or permittee for injuries sustained as a result of the sale and service of alcohol to an intoxicated person. As the statute's language indicates, before dramshop liability may be imposed upon a permittee or a licensee, a plaintiff must prove, at a minimum, that an intoxicated person was both "sold" and "served" intoxicating liquor.
There was no dispute that Mitchell had been "served" alcohol at Cheers. The issue was whether that alcohol had been "sold" to him by his bar, as required to trigger application of Iowa's Dram Shop Act. Gorden conceded that Mitchell hadn't paid money for the alcohol. Instead, she argued several ways in which the provision of alcohol to Mitchell at his bar was the functional equivalent of a sale, including sale by inference, sale by prepayment, sale by barter, and sale by indirect payment. The court rejected each of those arguments.
The sale-by-inference theory allows plaintiffs in dram shop evidence to rely on circumstantial evidence to try to create an inference that the establishment at issue sold alcoholic beverages to the person who caused the incident that later led to the plaintiff's suit. That inference is usually applied when either the server of the alcohol or the person consuming it cannot be identified. A plaintiff need not produce the actual server or servers of the alcohol in order to prove a dramshop claim. A plaintiff may meet the “sold and served” requirement with proof that an establishment where alcohol is sold generally holds itself out as a place where persons are “served” in the ordinary sense of the word, i.e., one providing premises where orders are taken, patrons are waited on, and drinks are supplied in open containers. The court found the sale by inference theory inapplicable because everyone knew who had served the alcohol and who had consumed it and it was undisputed that Mitchell didn't pay for the alcohol. Those facts thus took Gorden's case outside the situation that the sale by inference cases were intended to cover.
Gorden also contended that Mitchell did pay for the alcohol in the sense that his business paid for it to be in the bar that he owned. The court didn't like that argument either. It said that the issue wasn't whether Mitchell had paid for the alcohol that was in his bar and served to his customers, but whether the bar had in turn sold that alcohol to Mitchell just like it did to his other customers.
Gordon further argued that there was a sale of alcohol from Mitchell's bar to Mitchell because he traded his labor at the bar for the alcohol. The court decided that there was insufficient evidence that Mitchell was receiving the alcohol from his bar as part of a bargain-for exchange of services. Therefore, the alcohol that Mitchell's bar sold him was gratuitous and not any type of compensation for his work at the bar.
Another argument made by Gorden was that Mitchell indirectly paid for the alcohol because, by receiving the alcohol without paying for it, he was reducing the bar's profits, which only he benefited from as the sole owner. The court's problem with this argument was that Mitchell's bar received no benefit from such a transaction, regardless of how it affected Mitchell as the bar's only owner. Under Iowa's Dram Shop Act, the establishment in question must receive some benefit from the purported "sale" (whatever nature that sale might take), or there's no dramshop claim.