Academy of Hospitality Industry Attorneys 2007 Fall Meeting Policing Your Hospitality Business

1. Academy of Hospitality Industry Attorneys2007 Fall MeetingPolicing Your Hospitality Business Harlan C. Powell Webster Powell, P.C. 320 West Ohio, Suite 501 Chicago, Illinois 60610

2. Overview: 1. Dram Shop Liability Liquor License Liability Hospitality Risk Management

3. Dram Shop Liability

4. Origins • The term “dram shop” comes from 18th century businesses in England that sold liquor by the spoonful, called a dram. • The historic common law rule is that there is no cause of action for injuries arising out of the sale or gift of alcoholic beverages. • The rationale: the drinking of the intoxicant, not the furnishing of it, is the proximate cause of the intoxication and any resulting injury (see e.g., Charles v. Sigfried, 165 Ill. 2d 482, 486 (1995)).

5. Dram Shop Jurisdictions 8 States without dram shop laws: • Delaware • Kansas • Louisiana • Maryland • Nebraska • Nevada • South Dakota • Virginia

6. Dram Shop Jurisdictions 42 States (and D.C.) with dram shop laws:

7. Dram Shop Liability Substantial variation in laws around the U.S. • No liability (e.g., Nevada) • Liability only for injuries resulting from sales to obviously intoxicated minors (e.g., California) • “Obvious intoxication” test: the retailer knew, or should have known, that the customer was intoxicated, and therefore a danger to him/herself and others (e.g. New York) • Further definition of “obvious intoxication” standard, i.e., plaintiff must show person served demonstrated “significantly uncoordinated physical action or significant physical dysfunction” (e.g., Missouri)

8. Dram Shop Liability Substantial variation in laws around the U.S. • Stricter jurisdictions do away with the “known or should have known” standard; permits possible action against multiple defendants (e.g., Illinois) • Social host liability (i.e., persons supplying alcohol to minors are liable for injuries caused by intoxicated minor) growing in popularity (e.g., Illinois) • damages for such intangible elements (i.e., mental anguish, embarrassment, disgrace, and loss of companionship) recoverable in certain jurisdictions (e.g., Michigan)

10. Do They Work? • Michigan and Alaska have narrower laws than those promoted by advocacy groups, but have drunk-driving fatality rates below the national average. • Illinois’ fatality rate is above the national average, despite having one of the broadest dram shop laws Alcohol Control Policies and Motor Vehicle Fatalities, National Bureau of Economic Research Working Paper No. W3831 (1993)

11. The “Aramark” Case A New Jersey jury has assessed $105 million in compensatory and punitive damages against Aramark Corp., the nation's leading arena concessionaire, in the case of a girl paralyzed in a crash with a driver drunk on beer served at a Giants football game. New Jersey Law JournalJanuary 21, 2005

12. Know The Law In Your Jurisdiction • Does state follows common law rules? • Does state statute grant intoxicated persons and/or those injured by them ability to sue a retailer for injuries caused by intoxication? • Is there social host liability? Does reasonable reliance upon falsified I.D. constitute a defense? • Retail licensees with business in multiple states cannot “boilerplate” policies.

13. Liquor License Liability

14. Retail Hospitality: The Positives • In 2003, the hospitality industry (defined as bars, restaurants, nightclubs) brought in approximately $10 billion a year to New York City. http://www.audienceresearch.com/News/NightlifeEconomicImpact2003.pdf

15. Retail Hospitality: The Positives • In 2004, tourism in Illinois was responsible for approximately $7.7 billion in payroll income and generated $1.7 billion in state and local tax revenues. http://www.enjoyillinois.com/illinoismediacenter/pressreleases/2004/8.23.2004-EconomicImpact.pdf

16. Retail Hospitality: The Negatives

17. Response of Local Jurisdictions: New York Safer Nights, Safer City: Recommendations of NYC City Council From the Nightlife Safety Summit (Dec., 2006)

18. Response of Local Jurisdictions: New York Recommendations included: • Mandated use of security cameras • Legislation to limit due process in administrative license revocation hearings • Nuisance legislation for “problem” retail establishments • Police involvement in training of hospitality employees

19. Response of Local Jurisdictions: Chicago Chicago Late Hour Ordinance (Chi. Code §4-60-130) • Submission of exterior safety plan to prevent: • excessive noise • Loitering • criminal activity • traffic congestion • Plan must include provisions for: • exterior lighting • surveillance cameras to monitor building between 1:00 – 6:00 a.m. • Records available to police upon demand • employment of adequate security personnel

20. Response of Local Jurisdictions: Chicago Deleterious Impact Ordinances: (Chi. Code §§ 4-60­010; 040; 142; 180; 190-191; 195). License Applicants: • Deleterious Impact defined: (1) an adverse effect on the value of any property; (2) an increased risk of violations of law, or (3) risk of a substantial increase in noise, litter, or vehicular congestion. • Deleterious impact is presumed to exist whenever there have been a substantial number of arrests within 500 feet of the applicant’s premises within the previous two years, unless the applicant has adopted a plan of operation that will provide reasonable assurance that the issuance of the license will not have a deleterious impact. • Applicant must prove by clear and convincing evidence, that he has a plan of operation that will provide reasonable assurance that the issuance of the license will not have a deleterious impact. • Minimal number of residential objections can derail entire development plan

21. Response of Local Jurisdictions: Chicago Existing Licensees: • Have duty to take reasonable steps to correct “objectionable conditions” occurring at or adjacent to business during hours of operation and within one hour before and after business hours. • "Objectionable conditions" might include: (1) Disturbance of the peace; (2) Drinking in public; Harassment of passersby; (3) Loitering; (4) Lewd conduct; (5) Excessive loud noise. • "Reasonable steps" might include: (1) Calling the police in a timely manner; (2) Orally or in writing, directing persons to cease engaging in objectionable activities; (3) Making a good faith effort to remove items that facilitate loitering; (4) Attending police beat meetings and other similar city-sponsored informative meetings, etc. • Minimal number of residents can initiate “Nuisance” revocation

22. Response of Local Jurisdictions: Chicago Existing Licensees: • Have duty to take reasonable steps to correct “objectionable conditions” occurring at or adjacent to business during hours of operation and within one hour before and after business hours. • "Objectionable conditions" might include: (1) Disturbance of the peace; (2) Drinking in public; Harassment of passersby; (3) Loitering; (4) Lewd conduct; (5) Excessive loud noise. • "Reasonable steps" might include: (1) Calling the police in a timely manner; (2) Orally or in writing, directing persons to cease engaging in objectionable activities; (3) Making a good faith effort to remove items that facilitate loitering; (4) Attending police beat meetings and other similar city-sponsored informative meetings, etc.

23. Hospitality Risk Management

24. Security & Safety: Development and implementation of consistent comprehensive security plan results in patron safety.Liability Risk Management: Understanding primary factors of risk is the first step in developing effective security policies. Service: Hospitality is service. Develop levels of service to influence perception of brand quality and patron safety.Community Relations: Interaction with community, government, Industry peers.

25. Safety & Security • Selection of proper training. Requires an understanding of liability risk. • Implementation of training. Requires a commitment to service. Service, security and management all must know safety and security policies. Constant reinforcement is crucial. • Realization of tangible benefits. Requires a business to proactively create alliances with government, community groups, business associations.

26. Safety & Security Four General Areas of Responsibility: 1. Age Identification: Will task be managed at the door, at points of service, by servers? Is the venue open to minors? Is the venue an open floor plan? 2. Crowd Control: Is there a means to monitor occupancy? Are the separate entrances and exits? Are emergency exits clearly marked? Is there an emergency evacuation plan in place? 3. Conflict Resolution: Is there a way for security personnel to coordinate communication? Are there clearly defined policies for conflict resolution? Is there a positive relationship with law enforcement? 4. General Safety and Welfare: Is there a policy for assisting impaired individuals? Do security patrol off-premise areas? Is there a community outreach program available?

27. Liability Risk Management • Conduct a risk assessment. • Mission: How clearly is business mission defined and communicated? • Economic: How does the business meet its revenue goals? • Maintenance: How effectively does the business manage its appearance and overall impression of control? • Staff: How well does staff perform their duties? How consistently? • Community: How integrated is the business in the community?

28. Liability Risk Management • Low Risk: On-premise businesses (e.g., hotels, bars and restaurants) that sell alcoholic beverages as a secondary source of revenue. Typically characterized by some or all of the following: • Lunch service only • No separate lounge area • Limited seating of less than 100 • Owner available during most or all hours of operation • Caters to older clientele • Early closing hours • No entertainment, an obvious commitment to responsible beverage service policies.

29. Liability Risk Management • Medium Risk: On-premise business where alcoholic beverage sales are promoted, but not exclusively relied upon (e.g., nightclubs, taverns, casinos, etc.). Characterized by: • Separate lounge areas, • Live entertainment • Larger seating capacities • Varied clientele throughout the business week • Moderate rate of staff turnover (particularly among beverage servers)

30. Liability Risk Management • High risk: On-premise businesses dependent upon alcoholic beverage sales for continued economic viability (e.g., nightclubs, taverns) characterized by: • Beverage sales exceed food sales / no food sales • Caters to a young clientele • Generally accessed by automobile • Little direct owner involvement in management • High turnover of management and service staff • Young / inexperienced server staff • Low compensation compared to other similar businesses • Business dependent upon event or theme oriented hours of operation and/or third-party promoters

31. Liability Risk Management • www.gettips.com • www.smartserve.org • www.serveprogram.com • www.bassetcertification.org

32. Service Policy statements clearly articulate expectations to staff and generally following a similar pattern: Who: Who is responsible for the policy? What: What are they supposed to do? When: When are they supposed to do it? Where: Where do they get assistance? How: How are they compensated?

33. Service From Planning, Managing and Policing Hospitality Zones: A Practical Guide (Responsible Hospitality Institute, 2006)

34. Community Relations Establish positive relationships: • Consult periodically about emerging issue relating to any event that might lead to complaints or calls for police service. • Consider holding periodic “open house" events for neighbors to meet with staff, tour establishment, and review policies. • When building or renovating, consult with an engineer to install appropriate sound suppressions insulation and other measures. • Obtain a sound meter and measure db levels. • Monitor the area around establishment including public sidewalks, alleys, and parking area after closing. • Participate in trade association or community group meetings.

35. Community Relations Know your surroundings: • Zoning classification • Business neighbors • Residential neighbors • Community organizations • Law enforcement • Local government

36. Summary Defining the Ideal • Establish: Ideal behavior expected of customers, staff and management • Educate: Make accessible the information staff needs in an appropriate format. • Monitor: Install systems to monitor performance and record accomplishments or challenges. • Respond: Provide incentives, skill training or discipline depending upon performance. • Evaluate: Changes in the environment, economy, staff, demographics, regulations, etc. could contribute to deviation from the ideal. Adapt where necessary.

37. From Planning, Managing and Policing Hospitality Zones: A Practical Guide (Responsible Hospitality Institute, 2006)

38. From Planning, Managing and Policing Hospitality Zones: A Practical Guide (Responsible Hospitality Institute, 2006)