Dram-Shop Law vs. The GM vs. The Board
Greetings to all our loyal Club-management Pros and Experti-onados!
Here we go again with yet another difficult subject which unfortunately lands squarely within the lonely domain of the General Manager. From an outsider’s perspective, what job could be easier than running a private Club?
After all, the Club is filled with joy and fun every day and the GM is just the captain of all the festivities, right? In an adult world, though, having fun can go way too far and the consequences can be catastrophic.
We all know and accept there are serious and complex layers in your daily responsibilities. From labor management, environmental laws, vendor relations, accounting practices, and many more, there is hardly an item that you encounter in your work life that does not carry the weight of a serious liability exposure.
But there is a special one that you cannot control yourself and must be co-managed with the Board: dram-shop law (or liquor liability). Here, the intersection of “fun” and “control” are volatile legal matters that must somehow survive the whims of Club leaders — and in an emotionally charged arena.
The stark example of four tragic deaths after a private club golf outing proves that not all of us have learned our lessons.
What is Dram-Shop Law?
A “dram” refers to the original language describing drink service at bars and taverns. It represents a standardized measure of alcohol (much like a “shot”) as you might hear today. Drinks were measured and charged according to drams (1/8th of an ounce). A dram-shop, therefore, is merely a business which dispenses alcohol.
About 38 states have some form of dram-shop law which outlines a duty that is owed to third parties (the public) as a result of the negligent acts of patrons who consume alcohol in a licensed facility (your Club).
The liability for such activity is so broad that a separate insurance policy is often placed to provide protection. Severe bodily injury and death are often associated with these lawsuits.
Almost from the first moment a person consumes alcohol, it is assumed they lose the rational and independent means in which to make decisions which will protect themselves and the public from their negligence. Underage drinkers are another responsibility that license holders must assure are closely monitored.
It is under these concepts that the license-holder assumes liability for the acts and behavior of the patron.
This doesn’t mean the patron cannot become intoxicated, it means the business owner must take reasonable measures that nobody gets hurt and they stop serving any more alcohol to someone who appears to be intoxicated. This is why most operations regularly provide “ServSafe” or similar education to their employees.
More recently, states have pushed to extend liability to an even deeper level. In some cases, individual employees can be held personally liable: all the way down to the bartenders and servers who may act recklessly and over-serve.
This is designed to hold those most accountable, management/employees, as responsible protectors of the public good. It adds a whole new dimension to the service industry and it is no doubt helpful to our society.
Florida is one of the few states with a requirement that establishments refrain service to those who are “known” to be habitually addicted. It is this nuance that provides an extra point of responsibility to private Clubs who often know their patrons more intimately than most other operations.
Someone who has already faced disciplinary proceedings, arrests, or has a public record of abuse is a special point of fact that a Club is uniquely aware and must take into consideration when serving alcohol on their premises.
After all, wouldn’t a Club be more aware of a member’s record more than most?
Can a Club Really Dictate Member Consumption?
To many, the Club represents the “one place” where members can relax and enjoy the privileges of life without limits. Who has the right (especially the GM or staff) to tell members what to do at their own Club?
That’s true. That’s why when things get serious with alcohol abuse, the GM must rely on the Board to fulfill their legal responsibilities.
And this is also why GM’s can easily find themselves in a terribly difficult position. Who hasn’t faced the prospect of enforcing a liquor consumption problem with a popular, well-liked buddy of a Board member? Should that violator get a free pass? At all peril to the rest of the membership?
How do you balance the interests of the club’s Board, Members, and Staff while ensuring compliance with applicable laws? When a GM takes a principled and proper legal stand, they may face stiff resistance from the Board.
Yet the GM is obligated to protect the “business” which means preventing catastrophic liability claims against the common-assets of the membership.
A well-informed GM (and applicable staff) also understand they can be held personally responsible and liable for a dram-shop claim. Yet, they may be forced to risk the possible loss of their position by upholding those same obligations.
How would you respond if put into such a predicament? Let’s walk through a hypothetical discussion and see the possibilities.
Note: this article is a general discussion about a serious legal matter that you can not rely upon as legal advice in any form whatsoever. We are merely bringing up a sensitive management issue which should be further discussed with your own counsel.
What Happens in Your Clubhouse Doesn’t Stay in Your Clubhouse
There was no need for an ambulance. “Three innocent victims traveling in the other vehicle were gone in an instant” noted the report.
The drunken driver of the Infiniti also died. Four lives wasted. “The force of the 142 miles per hour crash was so immense that the vehicles and individuals were barely discernible, with pieces and parts of the vehicles scattered throughout an adjoining farm field,” the lawsuit states.
According to the claim, the Club organized the golf outing “to facilitate and/or encourage the consumption of large amounts of alcohol and unreasonable or reckless conduct.” And that “history and tradition” was an indicator some would get drunk, but the club did not monitor, control or prevent potential risk to others.
It accuses the Club of “…allowing young and inexperienced seasonal workers to serve the alcohol; not arranging transportation for those who’d be driving drunk…” and ignoring the fact that the driver was visibly intoxicated before he left the event.
Damages are not specified, but the U.S. Department of Transportation indicates that prevention of a single-fatality auto crash can be valued at $13 million. And, although the accused driver was not a member of the Club, it is difficult to fathom how liability could not reasonably land at their door. A liquor licensee has a much broader responsibility to the public regardless of one’s status as member or guest.
Sadly, this is not the only allegation of egregious liquor violations by a private Club. The industry is riddled with claims over the years — all accompanied by the tragic stories of the victims themselves. Forgetting liability and damages, what is the “right” thing to do as a responsible operator?
It is the ultimate responsibility of the GM, among others, to set the tone for compliance, adhere to regulations, and enforce the Club’s legal obligations. Or is it?
What happens when the Board gets their fingers caught in the mix?
When the Board Wants to “Call the Shots”
Through any reasonable interpretation, it is crucial to remember that the main responsibility of the GM is to protect the Club’s best business interests and ensure compliance with the law.
This responsibility is most likely written right into their employment contract.
A GM has more than a contract with the Club, however. They have a legal and implied responsibility to the public, the employees, vendors, guests, and a host of other related parties.
Imagine a GM purposely falsifying accounting records, abusing human resource policies, intentionally allowing a toxic leak, operating a pool without disinfection, serving contaminated food, or a host of other possibilities.
The real difference in dram-shop law to the others is that the GM must rely on the Board for full enforcement of the liquor laws. We don’t know of any club policy, mechanism, or procedure that allows the GM to take the independent remedial action of permanently barring or preventing a member from consuming alcohol.
The Board (alone) retains final control over disciplinary matters with the membership (and that even extends to guests). A bar owner can ban a patron. A Club GM most likely cannot.
On the other hand, it is expected that the GM and staff will take suitable measures (under extraordinary circumstances and in good faith) to prevent an immediate threat of potential loss/injury. Almost all Clubs have such a fail-safe option to handle an emergency situation and GM’s often provide such intervention.
But what happens when it is an ongoing and persistent issue? Or, when other factors are involved (drugs, medicines, mental capacity, etc.)? These complex and persistent problems must eventually face a reckoning with the Board if they are to be resolved.
When liquor law issues of the most serious nature bubble to the surface with the Board, don’t assume all the right things will happen.
Back-Room Deals and Rules Enforcement
Here’s a scenario. The management/staff appeal to the Board about being required to serve a habitually addicted member who has a public record of alleged substance abuse, DUI, and related offenses.
Over their previous few visits to the Club, they presented a clear danger to themself and others which even resulted in a second arrest. Video evidence and observations showed their complete incapacitation and near-collapse while within the club premises.
Prominent Board members viewed the evidence and were kept apprised of the deep legal implications as it unfolded in real time.
In response, a prominent member-attorney opines that courts cannot intervene in the disciplinary procedures between a private Club and one of its members. Well, of course we know it is well established the legal system has no interest in the internal affairs of a private social club as long as they diligently follow their established rules and procedures.
But this attorney argues (incredibly) that same legal restriction insulates the Club from the appeal by management/staff who now object to serving this member alcohol. In essence, the attorney claims the Board can avoid responsibility for the member's behavior by not acting at all!
The offending member seems the perfect poster-child for dram-shop laws. The obvious evidence and circumstances are overwhelming. Indeed, another Board member had even prodded the GM to request the Board’s assistance before someone is killed.
So, the GM worked behind the scenes on a corrective plan which included having the offending member’s spouse always accompanying them while at the Club to ensure they do not drive or possibly cause injury.
A perfect solution. No hearings, no disciplinary action, just an agreement recorded on the member file for informational purposes and possible legal defense. So far, so good.
However, it happens the members have deep ties to the Club’s President. And the attorney is related to another board member involved in those backroom conversations. Understanding the potential legal ramifications and danger to the public, the GM continued to pursue enforcement against the member.
What happens next? The GM’s contract renewal is suddenly terminated for supposed unrelated reasons. A surprise to the entire organization. No explanations. And the once-supportive Board member who encouraged the GM to take action disappears. The remaining staff is shocked into silence about the matter.
Was there precedence for the GM’s stance? Yes. At the same Club with a different member (much less serious incident) in the same year, the same Club President insisted upon a six-month suspension for alcohol abuse — which was summarily approved by the Board.
Obviously that member was not a longtime friend or business partner.
These sample episodes represent what can actually happen at your Club. Sometimes, the truth of disciplinary procedures and enforcement often depends on who you know on the Board, even when it means possibly breaking the law in the name of friendship. Where does that leave the GM?
The GM’s Perspective
In this example, the GM took the high road. With the fundamental ethical standards so desperately required in this industry, this GM took a truly principled stand.
Considering the possible alternatives (being held civilly liable for the death or maiming of innocent bystanders) at least our mythical GM sleeps well. The GM’s other option? A potential nightmare lawsuit lasting for years and the destruction of a decades-long career.
Carrying the lifetime weight of a possible catastrophe like the true story outlined at the start of this article https://tinyurl.com/2xarh3s2 is a sobering lesson.
They always say it can’t happen to you. Until it does. That real-life collision occurred at 4:56 p.m. on July 15, 2021. The Club did not see it coming. But they could have. Is there a date on the calendar for your next loss?
It is not always enough for club management to stay up to date with legal developments and regulations. Board members share in this responsibility by teaming with their professional staff and respecting the boundaries of both law and social responsibility. Your members deserve it!
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