Have you dreamed about opening that little corner bar where everybody knows your name or unleashing your culinary talents in a trendy bistro named after your high school sweetheart? Prospective buyers of businesses that serve or sell alcohol should be aware of two recent decisions from the Ohio appellate courts.
One clarifies the degree of effort required of a purchaser to obtain transfer of a liquor permit. The second may create a new cause of action against owners for customers who have reached the age of majority (18), but are under the legal drinking age of 21, and who are injured as a result of becoming intoxicated on the premises.
In 22810 Lakeshore Corp. vs. XAM Inc., parties contracted for the purchase and sale of a bar in Euclid. The buyer agreed to use his best efforts to obtain transfer of the bar’s liquor permit and operated the bar under a management agreement pending the transfer of the permit and closing of the transaction. The buyer never secured transfer of the liquor permit and the seller sued him to cancel the agreement and to obtain damages.
The buyer’s defense was that it was legally impossible to get the permit transferred because of a state liquor regulation which prohibits an open door between a retail liquor establishment and a tavern (there was a liquor store next to the bar). However, evidence presented at trial indicated liquor control authorities would have been satisfied with nailing the connecting door shut. Evidence also revealed that although the contract required transfer of the permit within 90 days, the buyer waited 50 days before submitting the $100 transfer application fee.
The court was not persuaded by the “legal impossibility” defense, and finding that the buyer failed to use his best efforts to secure the permit transfer, cancelled the purchase agreement and concluded the seller could be entitled to damages.
Successfully completing the purchase of a business which sells liquor exposes the new owner to additional legal risks. In Klever v. Canton Sachsenheim, a 19-year-old was served alcohol at a wedding reception by the defendant and was subsequently killed in a drunk driving accident. His mother sued, claiming the defendant never verified her son’s age and was specifically told he was under age to drink legally.
Ohio’s 5th District Court of Appeals carved out an exception to the Ohio Supreme Court’s ruling in the current leading Ohio case on the matter, Smith v. The 10th Inning Inc., which held liquor permit holders not responsible for injuries sustained by intoxicated patrons off the premises and caused directly by their voluntary intoxication. The appellate court, finding that a customer under the state’s legal drinking age is not legally capable of making a decision to become voluntarily intoxicated, allowed the suit to proceed against the liquor permit holder.
Businesses that sell or serve liquor should ensure they have taken all necessary steps to secure a state liquor permit (or permit transfer), consult their insurance agents to confirm adequate liability coverage and scrupulously check customer identification when there is the slightest question about the patron’s age. SBN
Sharon L. Toerek is with Macedonio, Toerek & Box P.L.L., a Cleveland business law firm.
