Drinking While DrivingSales representatives of Bedlam Pharmaceuticals invited a client’s employee Fonda Looney to join them for lunch. After lunch and an afternoon of drinking at Sam n’ Ella’s Pub & Cafe, a heavily intoxicated Nurse Looney drove home at speeds up to 95 mph when she rammed into another car killing the infant in the passenger seat. Tests confirmed her blood-alcohol content was more than twice the presumed level of intoxication when the fatal accident took place. The mother of the deceased child filed a wrongful death lawsuit against Nurse Looney, her employer, Bedlam Pharmaceuticals, and Sam n’ Ella’s Pub & Cafe where Looney was wined and dined.

Can Bedlam Pharmaceuticals and their sales reps be held liable for injuries caused by Nurse Looney? How about Sam n’ Ella’s?

Liquor Liability Laws. In Texas, it is not likely that Bedlam Pharmaceuticals and their sales representatives will be held liable. Given the ultimate power of guests to control their own alcohol consumption and the absence of any legal right of the host to control the guest, the Texas Supreme Court finds any argument for shifting legal responsibility from the guest to the host, who merely makes alcohol available at social gatherings, unconvincing. In the absence of a promise to arrange a safe ride home, for example, the Texas Supreme Court has declined to impose a duty on social hosts to prevent their intoxicated guests from inflicting injury on others.

However, for Sam n’ Ella’s, there is a possibility of liability. The Texas Alcoholic Beverage Code, commonly known as the Dram Shop Act, provides that a person who sells or serves alcoholic beverages under a license or permit can be held liable for damages to others on proof that (1) it was apparent to the provider that the individual was obviously intoxicated so as to present a clear danger to himself/herself and others, and (2) the intoxication was the proximate cause of the damages suffered.

Not all states view the conduct of the social hosts the same as Texas. In a case deciding relative liabilities for a fatality under similar facts, The New Mexico Supreme Court recently concluded that its liquor liability act does permit a lawsuit against social hosts who recklessly provide alcohol to guests in a licensed establishment.

Tilting the Scales in Your Favor.  Be careful who you and your company wine and dine, and what is promised to your guests.

Tilting the Scales to Manage Your Legal Risk.  Either do not make promises to your guests about taking care of them if they get intoxicated, or, if you do, follow through. Although one does not generally have the duty to control another person or to aid a person in distress, one who chooses to exercise that control or provide the aid must do so responsibly and not make the circumstances worse.

Whitney Crowne Corporation dba Midnight Rodeo v. George Distributors, Inc., 950 S.W.2d 82 (Texas App-Amarillo 1997, _____).

Gina Delfino v. Don Griffo and Craffty, LLC dba Uptown Sports Bar & Grill, Opin. #2011-NMSC-015, in the Supreme Court of th Ste of New Mexico (April 8, 2011)

“Wining, Dining Clients Can be Costly for Firms,” Albuquerque Journal, Monday, May 23, 2011 by Scott Sandlin

Carter v. Abbyad, 299 S.W.3d 892 (Tex. App. Austin 2009, ___)

You may remember Dateless Dan from a couple of months ago. In a series of TV ads Dateless saw two beautiful women come to life in front of two truck drivers who were drinking Buzzard Breath beer. Dateless Dan was shocked when, after drinking a case of the beer, the two women failed to materialize. He sued the bottlers of Buzzard Breath for false advertising, claiming emotional distress, mental injury and financial loss in excess of $10,000. Before the case went to trial, the bottlers of Buzzard Breath beer offered Dateless $2,000 to settle, largely as a nuisance. After Dateless declined, the case went to trial. A jury awarded Dateless $0. Can Buzzard Breath Brewery make Dateless Dan pay the attorneys’ fees it paid to defend Dan’s claims?

Texas Legislature. Theoretically, but not in this case. This year’s session of the Texas Legislature made amendments to Texas law allowing parties to recover some amount of their attorneys’ fees and costs (which would not otherwise be recoverable) if

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    1. they make a settlement offer that complies with the statute, and
    2. the judgment that is ultimately rendered is “significantly less favorable to the rejecting party than was the settlement offer.”  Attorneys’ fees that might be recoverable are capped at 50% of a plaintiff’s economic damages or 100% of any noneconomic or punitive damages.

Therefore, the plaintiff never has to come out of pocket to pay any attorneys’ fees. Instead a plaintiff’s recovery is only reduced by any attorney’s fees that a defendant might be awarded. In this case, where the jury awarded Dateless $0, Buzzard Breath cannot “recover” any attorneys’ fees, whether awarded by the Court or not. Because plaintiff had no monetary recovery, there is nothing that Buzzard Breath can offset against.

When first filed, HB 274 promised sweeping changes potentially subjecting unsuccessful plaintiffs to the risk of personal liability for defendants’ fees. In the resulting law that will become effective September 1, 2011, plaintiffs who reject qualifying settlement offers risk having their entire recovery offset by the defendant’s fees; however, they still do not have to come out of pocket. Consumer advocates decried the House Bill as a sham because a successful plaintiff in a personal injury case cannot recover attorneys’ fees against an unreasonable defendant (attorneys’ fees are generally recoverable only in specific circumstances which do not include personal injury cases).

Had Buzzard Breath acted sooner it might have had the relief it wanted. The rule change allows for the early dismissal of lawsuits “that have no basis in law or in fact” by motion and without evidence. If Buzzard Breath requested dismissal before trial, the court must rule within 45 days. Unlike the settlement statute, whether the motion to dismiss is granted or denied, even in part, the court must award costs and reasonable fees to the winning side.

Tilting the Scales in Your Favor.  Assemble all your information, confer with your attorney and fully evaluate your case very early in the process. Assess your risks and your exposure to weigh the merits of an early settlement. Then, if your case is filed after September 1, 2011, consider whether these changes in the law might be beneficial for you to explore.

Tilting the Scales to Manage Your Legal Risk.  If you frequently use a contract in your business relationships, you might want to consider addressing the allocation of legal expenses if the contract is litigated. Beware the two edged sword if a prevailing party is awarded its attorneys’ fees.

Bjorn Free left Dallas for a 10 day photo safari.  While on his African adventure, Bjorn’s 20-year-old son, recently back from college and in need of a place to stay, agrees to house sit.  Upon his return and after getting rid of some serious jetlag, Bjorn goes through his giant pile of mail.  Hidden among the 73 catalogs and assorted bills, Bjorn opens a letter which contains a traffic citation for $75 for running a red light.  Apparently, the offense was caught by a red light traffic camera, and occurred while Bjorn was in Kenya and while Bjorn’s son was driving dad’s car.  Bjorn contests the ticket on the grounds that a police officer must be present in order to write a ticket and that he wasn’t even driving the car.  Will he win?

Not likely.  Texas has historically ranked very high when it comes to the number of red-light fatality accidents.  Accordingly, legislation was passed establishing procedures permitting municipalities to use cameras to cite owners of vehicles that illegally run red lights.  For the uninitiated, a red light camera system is connected to a traffic signal and to sensors that monitor traffic flow at the intersection.  The system monitors the intersection signal 24/7 and photos are taken of any vehicle entering the intersection after the signal has turned red.  A ticket is then generated and sent to the vehicle’s owner.  The bad news for Bjorn is that no police officer is needed to write the ticket and the owner, not the driver, of the vehicle may be ticketed for not more than $75.  The good news for Bjorn is that this offense is not a moving violation and will not be reported to his insurance company.  More good news – intersections monitored by red light cameras must have signage warning of their use and Texas has, so far, resisted the use of cameras to issue citations for speeding violations.

Titling The Scales In Your Favor

Vehicle owners can contest fines for running red lights in an administrative hearing.  A person found liable at an administrative hearing may then appeal the finding to a municipal court.  Also, exceptions exist if the offending vehicle was being test driven, had been sold or stolen.

Act of GodSara Subcontractor was hired by Jerry General Contractor to construct four masonry walls for the Citizen Canine dog kennel.  Prior to construction, the parties signed a contract and agreed that Sara Subcontractor would be paid $100,000 upon the erection of the 4 walls.  After erecting three of the walls, a freak tornado blows through the job site, knocking down the three walls.  Jerry General insists that Sara Contractor rebuild the walls at her cost.  Sara Subcontractor refuses, stating that the winds were an act of God and that she wants additional monies to rebuild the three walls.  Who is correct?

It depends upon the parties’ agreement.  “Force majeure” was historically a common law doctrine (developed by court precedent as opposed to a statute) used to describe circumstances like an act of God (e.g. earthquake or tornado) or an act of man (e.g. war or strike) that would excuse one party’s performance, or modify obligations, under a contact.  Under current Texas law, however, Sara Subcontractor’s duty to perform her contractual obligations is absolute in the absence of an express contractual force majeure clause.

Accordingly, the answer to who is liable will be found within the terms of the contract.  Simply because a contract is more burdensome to perform than originally anticipated does not excuse its performance.  If there is no force majeure clause, Sara Subcontractor’s performance under the agreement is absolute and she will be responsible for rebuilding the walls even if she must do so at an additional cost due to an act of God.

Tilting the Scales in Your Favor

Force majeure clauses allow parties to allocate risk and specify what events may suspend or excuse performance.  Do not assume that your company’s performance under a contract will be excused by some horrific, unforeseen event.  Courts will look to the four corners of the parties’ agreement to determine whether a parties’ contractual obligation will be excused due to an event.  An event is not a force majeure event unless the parties’ agreement says that it is.  Accordingly, include force majeure clauses in your agreements and customize those clauses to govern potential risks.

Dangers of Online GamblingFor Amarillo Slim, April 15th this year was much more than “Tax Day,” it was Black Friday when the Justice Department charged the owners of his favorite online poker sites PokerStars, Full Tilt, Absolute Poker and Ultimate Bet, with bank fraud and money laundering and shut them down. In addition to shutting down the websites, the US Attorney General froze Slim’s gaming bank accounts and upwards of $500 million in online poker accounts held by other US online poker players. This morning Amarillo realized that the Justice Department would likely get access to his gambling activities representing significant unreported tax dollars. Will the government likely try to go after Amarillo Slim for undeclared gambling winnings? Maybe so.

Gambling in the United States. The 2006 Unlawful Internet Gambling Enforcement Act prohibits gambling businesses from knowingly accepting bets over the Internet and prohibits banks from processing credit card payments and wire transfers related to gambling. Not surprisingly, banks were also a target on Black Friday because they purportedly enabled the gambling sites to launder money and sidestep the federal gambling laws.

What about Amarillo Slim and the IRS? IRS website Topic 419 – Gambling Income and Losses reminds that all gambling winnings must be reported. Moreover, it is likely that any US Attorney plea deal will require a “cooperation” agreement requiring Full Tilt and the other online sites to disclose its player lists with deposits, withdrawals and balances by year so that the IRS can confirm if all winnings were reported. If not, other issues might possibly include civil fraud penalties, willful failure to file, willful failure to pay, criminal tax evasion, civil penalties of up to 75%, plus interest, time in custody, and if Foreign Bank Account Reports were required and not paid, possible civil and criminal penalties under the Bank Secrecy Act.

Gambling in Texas. Online gambling may not be a crime expressly prohibited in Texas under the Texas Penal Code because there is an exception for gambling in a “private place,” like on your computer in the privacy of your home. If you are in an internet bar or other public place in Texas, it may well be a violation of Texas law in addition to the likely federal law violations mentioned above.

Tilting the Scales in Your Favor.  If you were an online gambler, you may want to speak with your attorney or tax preparer to determine whether you are at risk and a response appropriate for your circumstances.

Additional Resources:

The producers of Buzzard Breath ran a series of ads in which two beautiful women came to life in front of two truck drivers who were drinking the beer. Mesmerized by the commercial and dreaming of similar results, Dateless Dan bought a case of the beer, drank it, and failed to see two women materialize. Dateless sued the bottlers of Buzzard Breath for false advertising, claiming emotional distress, mental injury and financial loss in excess of $10,000. The court dismissed all claims. Can Buzzard Breath Brewery make Dateless Dan pay the attorneys’ fees it paid to defend Dan’s claims?Probably not. The losing side does not ordinarily have to pay the winning side’s attorney’s fees. In the United States, the general rule (called the “American Rule”) is that each party pays only their own attorney’s fees, regardless of whether they win or lose. This allows people to bring cases and lawsuits without the fear of incurring excessive costs if they lose the case. In contrast, in England and other countries, the losing side is often required to pay the other side’s attorney’s fees after losing a trial.

Texas Legislature. This session two Texas legislators filed “loser pays” bills in the Texas House and Senate respectively. Although similar, the bills are not identical in recommending the circumstances when a losing plaintiff would be required to pay the court costs of defendants when a court determines a lawsuit is groundless or a jury determines a suit is frivolous. Each proposal is a notable departure from the American rule, which is the general rule in Texas and the United States. Proponents of the American rule argue it is necessary to ensure that even the poorest litigants can access the courts. Hailed as tort-reformers, State Senator Joan Huffman and State Rep. Brandon Creighton, say adopting the “English rule” would cut down on frivolous lawsuits while encouraging defendants to settle meritorious claims.

In Texas, there are already exceptions to the American Rule that permit the prevailing party to recover attorney’s fees. The most common is when a contract or statute (law) specifically allows for payment of attorney’s fees to the winner.

Tilting the Scales in Your Favor. Add a provision to your contracts that permits the winning party to recover its attorneys’ fees. Be forewarned that’s a double-edged sword if you lose the lawsuit. Often you will find that the party who drafts the contract provides that only it recovers attorneys’ fees if it prevails at the courthouse. However, Texas courts are permitted to judge contracts for fairness and to change contract terms or even cancel such a provision if a judge decides the provision was not negotiated by two parties with equal bargaining power.

Tilting the Scales to Manage Your Legal Risk.  If you’re concerned or hopeful that the losing side would have to pay attorneys’ fees in your case, it’s generally a good idea to check (or ask your lawyer to check) if any exceptions apply to your particular case. Some states, like California, Wisconsin and Illinois have statutes providing the loser should pay the winner’s attorneys’ fees in cases with broader application than the exceptions currently permitted in Texas.

Les Plack, a dentist from Houston, took his family on a thrilling summer vacation to Baltimore, Maryland to fulfill his lifelong dream of visiting the National Museum of Dentistry.   Having collected his luggage at the Baltimore Washington International Airport, Plack headed to the Joy Ride Rental Car counter to rent a sporty Kia Sedona for the week.  After tendering his driver’s license and successfully declining the representatives attempt to up-sell Plack to a Nissan Xterra, Plack is asked whether he would like to buy rental car insurance for “only $4 per day.”  Plack remains firm and bravely initials the boxes declining coverage.  The next day, while only five minutes from the National Museum of Dentistry, Plack is involved in a serious accident, which totals the Kia.  Having declined coverage, Plack is informed by Joy Ride’s in-house counsel that they will look to him to pay for the damages or they will file suit.  Should Plack have purchased rental car insurance?

Probably not.  If Plack’s personal auto insurance includes collision and comprehensive coverage, than that coverage should transfer over to his rental with Joy Ride.  Also, if Plack pays for the rental car with his credit card, there is a good chance that the credit card might provide some type of car rental insurance as a cardholder benefit.  However, Plack’s auto insurance policy will probably not pay for Joy Ride’s “loss of use” claim.  In other words, a claim by Joy Ride for the rental fees lost while their Kia is in the shop for repairs.  Had Plack purchased Joy Ride’s insurance, “loss of use” would be covered.

Tilting the Scales in Your Favor:

To avoid uncertainty at the rental car counter and potential for claims against you by the insurance company, check with your insurance agent about rental car coverage.  Keep in mind that insurance under your personal auto policy or credit card may not cover a car driven on a business trip, cars driven in another country, or long term rentals.

Yesterday Alluring Allison drove her brand new 2011 BMW to Wally World. Wanting to avoid that first door ding, Allie parked her beloved Beamer away from the other cars. Little did she know that Robby Redneck was loading up his pickup truck just up the hill from her. After unloading all of his shopping carts Robby drove away without returning them to the cart corrals conveniently located in the parking lot. Sure enough, a gust of the wind sent two carts careening down the hill into Allie’s Beamer. Does Allie have a claim against Robby or Wally World and its errant shopping carts?

If she can find him, Allie has a claim against Robby for negligence. Although possible, Allie’s claim against Wally World is less certain. Underlying both claims is the legal concept of negligence. The general question is did either Robby or Wally World owe a duty to other shoppers like Allie to guard against the damage likely to result from a runaway shopping cart? When cart corrals are stationed in the parking areas, it is reasonable to conclude that all shoppers like Robby have a responsibility to leave their carts where they will not damage other cars. On a windy day, shoppers can expect that unattended carts will be a hazard if not placed in the corrals.

Wally World undoubtedly placed the cart corrals in the lot to avoid that very risk. Moreover, Wally World hired employees to round up loose carts and return them to the building for arriving shoppers. Finding Wally World, or any other retail owner, liable for a claim on their premises requires more than mere negligence. Allie must be an “invitee” to the parking lot, i.e., a shopper. And, Wally World must have some “knowledge” of the problem, probably more than knowing it is a busy shopping day and the wind is blowing hard. Nevertheless, if those circumstances are such that a judge or jury could conclude that they posed “an unreasonable risk of harm” that Wally World (through its supervisors and employees) knew or should have known about and should have protected Allie from but failed to do so, then Wally World could be found liable for Allie’s damages.

Tilting the Scales in Your Favor. There is probably a good reason why there are no Texas cases on these facts. Finding Robby and proving that it was his un-corralled shopping carts that hit Allie’s Beamer is likely to be difficult and time consuming. Moreover, convincing a judge or jury that Wally World knew or should have known and failed properly to respond to the dangerous conditions that caused the personal damage claim would be very difficult. Finally, the most likely reason why there are no Texas cases on this subject is that the likely amount of personal property damages is pretty low. This kind of claim, if filed as a lawsuit, would likely be in Small Claims / Justice of the Peace Court.

In a retail shopping center, both the “legal” and the courteous conduct is to leave your shopping cart in the corral. If you are Wally World you might want to redouble your shopping cart attendants in the parking lot on a very busy and/or a windy March day to round up the strays faster. If you have a new Beamer, you might want to consider which way the March winds are blowing and whether you are parked uphill or down from the likely direction the wind and the carts might be blowing.

This past Valentine’s Day, Chip Stone (a sculptor) gave his longtime girlfriend, Sarah Bellum (a neurosurgeon), an adorable 3-year-old Yorkshire Terrier that he rescued at the Dallas animal shelter.  Sarah immediately fell in love with the affectionate and docile 6-pound dog that the prior owner had, for some unknown reason, affectionately named Piranha.  This past weekend, Sarah took Piranha for a stroll through the Dallas Arboretum.  Piranha was off-leash but walking right next to Sarah.  What happened next is still a blur in Sarah’s mind, but apparently, Piranha spotted a young girl walking a large labradoodle about 50 yards away and made a mad dash towards the other dog.  In the melee that ensured, both the young girl and the labradoodle were seriously bitten.   Sarah is now fearful that the City may seize her precious Piranha and perhaps have the dog destroyed.  Moreover, Sarah is concerned that she may have personal liability.  Sarah recalls hearing that every dog gets “one free bite.”  Will this save Sarah and Piranha

Probably not.  Texas does indeed follow the “one free bite” rule.  Under the “one free bite” rule, if you have been bitten by a dog, the owner cannot be held liable for an injury caused by the first bite inflicted by their dog.  Nonetheless, Sarah will be considered liable for Piranha’s attack if: (1) she knew that Piranha had either already bitten someone or had the propensity to bite; (2) the attack was caused by Sarah’s negligence; (3) the attack was caused by a violation of an animal control law; or, (4) the attack was caused intentionally by Sarah.  In this case, even though Sarah did not know that Piranha had the propensity to bite, she can still be held liable for the attack because of her negligence and for not complying with Dallas’ leash law.  Even though Texas is classified as a “one free bite” state, it is likely that Sarah will be held civilly, and even potentially criminally, responsible for the injuries to the young girl and her dog.  Piranha may also be seized until a court decides what to do with her.

A bill was recently proposed in the Texas legislature that would require some dog owners to carry at least $100,000 in liability coverage if the owner has an un-neutered, male dog that is 20 pounds or heavier and that is not restrained at all times.  The insurance would be used to compensate victims for personal injury or property damage.

Ty Coon was furious after Tightwad Bank’s internal bank audit of Leaven and Earth’s books revealed the company’s inventory and accounts receivable levels materially lower than the company’s audited financial statements. Those financial statements, upon which Tightwad Bank relied, were prepared by Leaven and Earth’s outside auditors Cook, Books & Hyde and were a requirement when Leaven and Earth’s $5 million credit and loan facility came up for renewal. Ty called Leaven and Earth and advised that he was calling the $5 million loan because the financial statements did not disclose Leaven and Earth’s true financial position and were a breach of the loan agreement. Ty told Cook, Books & Hyde that because Leaven and Earth’s assets are insufficient to cover its loans, Tightwad Bank will sue Cook, Books & Hyde for negligent misrepresentation. Does Tightwad Bank have a good case against Cook, Books & Hyde?

Very possibly. Although Leaven and Earth signed the loan documents and received the loan proceeds, Tightwad Bank will argue that there would have been no loan or proceeds without the audited financial statements from Cook, Books and Hyde. Moreover, Ty Coon and his bank will take the position that Cook, Books and Hyde got the audit job only because of Tightwad Bank’s new credit requirements, and that Cook, Books & Hyde knew or should have known that the audit was being prepared expressly for that purpose.

The tort of negligent misrepresentation occurs when someone acting in the course of their business provides false information to guide others in a business transaction. That person is subject to liability for damages caused by another’s justifiable reliance if the person who provides the information failed to exercise reasonable care in obtaining or communicating the information. There are several important features to notice about the tort of negligent misrepresentation. First, it is restricted to business transactions. Second, the group who may sue for negligent misrepresentation is not everyone who relies upon it, but only those who the provider intended to rely or who he knew would rely on it. Third, the reliance must be justifiable. In other words, if the person who receives the information and relies upon it, but his reliance is unreasonable, then his claim for damages is either defeated or reduced. Finally, damages are restricted to actual monetary losses, not mental anguish.

Tilting the Scales in Your Favor. All the parties – Tightwad Bank, Leaven and Earth and Cook, Books & Hyde – would be better served to address what work was being done, for whom, and who was requiring / relying upon it. For example, while Cook, Books & Hyde’s engagement letter probably states that the report being delivered was only for Leaven and Earth and should not and could not be relied upon by anyone else, the bank would not be a party to the engagement letter. Finally, check your malpractice liability policy insurance policy. You may well have insurance coverage for such claims.