January 21, 2009

Head Scratching Over Dram Shop Liability

Sometimes you just have to scratch your head. What the heck are these guys thinking? I always figure that the kids at least deserve the benefit of the doubt under the law, no matter how immature they act. After all, they are immature. Financially strong outfits like liquor stores and those who stand behind them don’t really need that same advantage.

In Sowinski v. Walker, the Alaska Supreme Court picked the liquor store over the children. The decision came out on New Year’s Eve, one of the biggest days of the year for selling and consuming booze. But why in the Court ruled the way it did has me stumped.

itch.jpgThe facts of Sowinski are sad but not surprising. Back in June of 1996, two 17 year old boys from Palmer, Alaska bought some booze from the DelRois Liquor Store. The liquor store, of course, was not supposed to sell alcohol to minors. Once it did so, the boys did something predictably boneheaded. They partied into the wee hours (it was just past the summer solstice) and then jumped on an ATV, taking a girl along for the ride. They roared off down an access road alongside the Knik River. The ATV ran into a cable that a nearby property owner had strung up to try to keep trespassers out. You can imagine what happened when three kids on a speeding ATV got clotheslined by a steel cable across the road. The two boys were killed and the girl was severely injured.

The families of the two boys sued a bunch of people, including the owners of the DelRois Liquor Store. The liquor store’s dram shop liability was clear under established Alaska law. According to the Alaska Supreme Court decision in Loeb v. Rasmussen, the liquor store could not reduce its own liability by the comparative fault of the underage drinkers. The three justice majority in Loeb followed a long, long line of cases saying that when a statute is meant to protect a particular group of people (here, minors), you can’t hold those people accountable for complicity in the violation of the law. The fault rests with the violator, which in Loeb was the liquor store that unlawfully sold the booze to begin with.

In spite of the Loeb case and the sound reasoning behind it that stretches back probably a couple of centuries, a three justice majority in Sowinski said that this rule no longer applied. The Sowinski majority concluded that Alaska’s subsequent embrace of pure several liability in the tort reform legislation meant the liquor store, which was legally obligated to know better, could shove off some of the liability onto the stupid kids. The fact that the liquor store was supposed to protect the children from their own stupidity cut no ice at all with the majority.

Chief Justice Fabe's dissenting opinion showed that the case did not have to come out this way. As the Chief Justice said, the majority entirely failed to address whether “more good than harm would result” from their decision doing away with Loeb. The public policy against underage drinking is an exceptionally strong one. Indeed, the public policy of protecting children in general runs up and down the length and breadth of Alaska law. A huge portion of the resources of this State are all devoted to trying to protect and promote the health and safety of Alaska’s children. At the same time, Alaska law closely regulates the franchisees to whom the State of Alaska itself has given the extraordinary privilege of selling alcohol. Transgressions that would not have much of an adverse effect on an ordinary business are enough to get a grog shop’s ticket pulled. So it seems doubtful that the public good is best served by letting a liquor seller point the finger at the kids when the liquor seller violates its legal obligations?

I have hunted through the tort reform statute. I found nothing that says pure several liability trumps all other public policy considerations. In fact, there is a sentence in the statutory definition of “fault” (AS 09.17.900) that says: “Legal requirements of casual relation apply both to fault as the basis for liability and to contributory fault.” Well, as recognized in Loeb, the established law was that a child’s purchase and consumption of alcohol did not meet the “legal requirements of casual relation” for purposes of “contributory fault.” Instead, the “casual relation” was all attributed to the liquor store that illegally sold the demon rum at the get-go.

So it's not hard to find room in tort reform statute to continue to protect Alaska’s kids over the liquor industry. And basic public policy must require the same. All of which leaves me scratching my head over Sowinski.

January 7, 2009

Ken Adams And Contract Drafting

Somehow it is comforting to know that there are contract geeks out there championing the cause of better contract writing.

The specific guy I’m thinking of is Kenneth A. Adams, who has written extensively on contract drafting. Adams teaches seminars and classes on the subject. He now maintains a website devoted to writing contracts. Adams used to be a real lawyer who had actual clients, but he packed that in to focus exclusively on becoming the Great and Powerful Contract Writing Wizard (“Great Contract Wonk”). Just like the late Herb Shaindlin, Adams has taken a personality defect and turned it into a career.

contract.jpgI have one of the Great Contract Wonk’s books. I often check out his website to stay up on the “hot” contract writing issues (an oxymoron, if ever there was one). The guy covers an awful lot of territory. Some of it is incredibly useful and bedrock fundamental for a practicing lawyer. Such as the real meaning of things like “materiality” and “material adverse change.” Some of it is almost entirely useless. Such as a two page discussion of why you see ‘curly’ quotation marks and ‘straight’ quotation marks in documents.

Adams is on a crusade to get the legalese out contracts. He discounts the use of stock legal phrases when he thinks a “redraft” will result in a better technical document. I am marching alongside Adams as to a general dislike of legalese – that "relatively plain English" thing -- but I do not accept his premise that a “redraft” of all the stock legal phrases is necessarily going to be better. In the real world lawyers don’t have time to fuss over all the minutiae. They have an obligation to get the paperwork out the door and the deal done. The client does not want to be charged for the time it takes to rewrite the stock phrases just to say the same thing a different way, or to clean up the stylistic defects that might exist.

Take one example. Almost every contract has an indemnity clause in it. The standard phrase used contains what amounts to the legal equivalent of a Holy Trinity: “indemnify, defend and hold harmless.” The Great Contract Wonk correctly states that the Holy Ghost in this arrangement -- “hold harmless” – is redundant. It does not have a distinct meaning from the Father, “indemnify.” But that does not mean I am going to spend my time going through every contract to strike it out. Doing so may very well trigger a pointless and protracted discussion with the other side as to what function “hold harmless” might possibly serve.

Besides, the word Adams favors using by itself – “indemnify” – is inherently ambiguous. As I mentioned before, it is not exactly clear under Alaska law whether “indemnity” means the sucker who has to pay out the money must cover just what the smart guy owes to a third party, or whether the smart guy’s own direct costs are also included. If you’re going to “redraft” the legalese as the Great Contract Wonk advocates, it would be far better to junk “indemnify” as well. You could use some plain English instead: “Sucker must reimburse smart guy for what he has to pay out to others as well as any direct costs and losses smart guy incurs.”

Adams also says that the Son of the legal trinity – “defend” – should be left out of the indemnity clause. He thinks defense can be addressed in a separate provision on the “indemnification procedures.” I part company with Adams on this point as well. Defense is something distinct from indemnity. For the smart guy to have the right to have the sucker hire a lawyer to defend the smart guy as the case is going along, the smart guy needs to keep “defend” in the mix. Otherwise, the smart guy may have to get his own lawyer to defend the case as it unfolds and worry about collecting for the expense after the fact.

But don’t get me wrong. I am not down on Ken Adams. As I said, a lot of what he covers is absolutely essential for a practicing lawyer to know. It’s laudable that there is a bold champion out there who is making a real effort to improve the writing lawyers use over and over again in their contracts. Yet, I can still disagree with the Master on some of the details of his approach. He may be the one, the true, Great Contract Wonk, but I ought to be able to a bit of a contract geek in my own right.