Letter of the Law: May 2011

IN THIS ISSUE:

Liability for Serving Alcohol

Offer of Judgment in Nevada

How to Collect on a Bad Debt

Liability for Serving Alcohol

By: Brendan J. Coughlin

Concern about serving alcohol to drivers who later cause injury is not just for the holidays anymore. The recent case of Ennabe v. Manosa (2010) 190 Cal.App. 4th 707, emphasizes just how greatly California law in this area is changing. And as instructive as the case is, review has been granted by the State Supreme Court, meaning the case is not citable, and the last word on the subject has yet to be published.

Plaintiffs filed a wrongful death civil action on behalf of themselves and the estate of their son. The principal defendant was a twenty year old who hosted a house party at a vacant rental residence owned by her parents. Procedurally, the case was before the Court of Appeal because the trial court below granted defendant's motion for summary judgment. Plaintiffs did not appeal the granting of summary judgment in favor of defendant's parents. In reviewing the lower decision, the factual allegations of the case and the record were reviewed in the light most favorable to the plaintiffs.

The house party in question was publicized to defendant's friends and non-friends by word-of-mouth, telephone and text messaging. The majority of the people at the party were under age twenty-one. It was claimed that defendant's friends used fake identification to purchase alcoholic beverages. Some guests brought their own alcoholic beverages to the party. There were several cases of beer, three to four bottles of tequila and rum, and a cooler of hard alcoholic beverages mixed with fruit juice, known as "jungle juice." Unfamiliar party goers were charged from $3 to $5 to enter. Some of the money collected was used to buy more alcohol.

Decedent, the plaintiffs' son, arrived at the party in a state of obvious intoxication, and continued to drink. Similarly, another guest also arrived at the party in a state of obvious intoxication, and continued to drink. This guest acted in a rowdy and belligerent manner. After this guest harassed female guests and dropped his pants several times, he was asked to leave the party. In driving away, this guest struck plaintiffs' son, who died a week later of injuries. The driver was convicted of a felony in connection with the death, and was sentenced to fourteen years in prison.

The case involves analysis of Civil Code § 1714, and Business and Professions Code § 25602.1. The Court noted that Civil Code § 1714 provides broad immunity from civil liability to a social host who furnishes alcoholic beverages to any person. Civil Code § 1714 states that it was the intent of the legislature with this law to abrogate the holdings of several cases expanding social server liability, and to reinstate the prior judicial interpretation "that the furnishing of alcohol beverages is not the proximate cause of injuries resulting from intoxication, but rather the consumption of alcoholic beverages is the proximate cause of injuries inflicted upon another by an intoxicated person."

Business and Profession Code § 25602.1 is relevant to this discussion because it provides that a social host loses his immunity if he or she "sells, or causes to be sold, any alcoholic beverages, to any intoxicated minor."

In Ennabe, the Court of Appeal found that charging admission to a party was not a sale within the meaning of the exception to social host immunity, and that defendant was not required to be licensed within the meaning of Section 25602.1, although she charged a fee to unknown and uninvited guests.

The Court of Appeal therefore affirmed the trial court's granting of summary judgment in favor of the hostess. But the California Supreme Court sees something in this case that it wants to review. And just as significantly, on January 1, 2011, an amended version of Civil Code § 1714 took effect which reads "Nothing in subdivision (c) shall preclude a claim against a parent, guardian, or another adult who knowingly furnishes alcoholic beverages at his or her residence to a person under 21 years of age, in which case, notwithstanding subdivision (b), the furnishing of the alcoholic beverage may be found to be the proximate cause of resulting injuries or death."

Clearly, this is an area of law in a state of flux. For the present, liability is expanding relating chiefly to the service of minors. Unfortunately, it is not difficult to imagine situations in which an employer or parent could find themselves with important questions on this topic.

The attorneys at Kring & Chung are available to address all issues and concerns related to work safety and holiday parties, as well as other insurance, employer or employee issues. Moreover, if you or someone you know recently was involved in an accident involving alcohol, do not hesitate to contact Brendan Coughlin at Kring & Chung to discuss your questions.

Offer of Judgment in Nevada

By: Merielle Enriquez

The Offer of Judgment can be an effective tool in getting an opposing party to seriously consider the settlement of a case. Rule 68 of the Nevada Rules of Civil Procedure and Nevada Revised Statute §17.115 provides that any party may serve an Offer of Judgment to any other party at any time more than 10 days before trial begins. The purpose of an Offer of Judgment is to "save time and money for the court system, the parties, and the taxpayer by rewarding the party who makes a reasonable offer and punishing the party who refuses to accept such an offer..." Albios v. Horizon Communities, 122 Nev. 409 (2006).

Once an Offer of Judgment is made, it stays open for 10 days and cannot be withdrawn by the offering party. If the Offer of Judgment is not accepted within 10 days, the offer is automatically withdrawn. The parties may stipulate to keep the Offer of Judgment open for longer than 10 days, which may help in facilitating settlement negotiations.

However, if the party who rejects an Offer of Judgment fails to obtain a more favorable judgment than the Offer of Judgment, the refusing party may be liable for the fees and costs incurred by the offering party from the date the Offer of Judgment is served.

Example No. 1: A defendant makes an Offer of Judgment to a plaintiff in a negligence lawsuit to settle for $50,000. Plaintiff rejects the Offer and takes the matter to trial. At trial, plaintiff obtains a judgment of $40,000. Since the judgment is not "more favorable" to the plaintiff than the Offer of Judgment, then the plaintiff could potentially be liable for defendant's fees and costs incurred from the date the Offer of Judgment is made.

Example No. 2: A defendant makes an Offer of Judgment to plaintiff in a negligence case in the amount of $100,000. Plaintiff rejects the Offer and takes the matter to trial. At trial, plaintiff obtains a judgment of $125,000, but plaintiff is also found to be 30% contributorily negligent. Since Nevada is a modified comparative negligence jurisdiction, Plaintiff's judgment is reduced by 30% of $125,000, leaving $87,500. Since the resulting judgment is not "more favorable" to the plaintiff than the amount of the Offer of Judgment, the plaintiff may potentially be liable for defendant's fees and costs incurred from the date the Offer of Judgment is served.

Example No. 3: A plaintiff makes an Offer of Judgment to defendant in a Negligence case in the amount of $50,000. Defendant rejects the Offer and takes the matter to trial. At trial, plaintiff obtains a judgment in the amount of $75,000. Since defendant failed to obtain a judgment that is "more favorable" than the previously served Offer of Judgment, the defendant could potentially be liable for plaintiff's fees and costs incurred from the date the Offer of Judgment was served.

Other considerations in making an Offer of Judgment:

  • The last valid Offer of Judgment in time extinguishes all prior offers of judgment. In other words, if multiple Offers of Judgment are made during the course of litigation to the same party, the last Offer of Judgment in time extinguishes all prior offers and will serve as the court's baseline.
  • Unapportioned Offers of Judgment are typically invalid unless the damages are derivative of the plaintiff's injuries or there is a single common theory of liability claimed by all plaintiffs to whom the offer is made. NRS §17.115(9)(b).
  • Consider whether you want to include or exclude costs and prejudgment interest from your Offer of Judgment. Unless specifically excluded, the Court will include pre-offer prejudgment interest along with the principal judgment amount when comparing the judgment obtained and an Offer of Judgment. McCrary v. Bianco, 122 Nev. 102 (2006).

When considering serving an Offer of Judgment, it is therefore important to consider the opposing party's likelihood of success at trial, what the opposing party may reasonably settle for, and what you are reasonably willing to offer for an out of court settlement of your case. Offers of judgments remain a good strategy in motivating an opposing party to engage in settlement negotiations.

How to Collect on a Bad Debt

By: Laura C. Hess

Question: One of my customers has an account receivable that is more than 120 days past due. It is not returning my calls. How can I collect?

Answer: The first thing to do is find out why the customer has not paid. If the customer is withholding payment because it is unsatisfied with your product or service, then you should try to work out those issues by investigating the complaint and providing a discount or replacement, if appropriate. If you still cannot reach an agreement, you should offer going to mediation to try to resolve the dispute outside of court. Otherwise, if you start a collection action when the customer has a complaint, the customer will likely respond by filing a cross-complaint against you.

If the customer is just avoiding paying, you should have a lawyer send a demand letter to the customer advising that you may file a collection action if the balance is not paid by a certain date.

If the customer does not respond to the demand letter, and you have security for the debt, then you should have your lawyer file a lawsuit to foreclose on the security interest. For instance, you may have a security interest in the products that you sold to the customer. In this situation, it is important to act as quickly as possible, before the customer does something with the security interest to try to prevent you from recovering it.

If you do not have any security for the debt, then the next step is to have your lawyer find out whether the customer has filed for bankruptcy protection. If the customer has filed for bankruptcy, you will need to file a notice of claim with the bankruptcy trustee and get in line with all of the customer's other creditors.

If the customer has not filed for bankruptcy, then your next step is to file a collection lawsuit. In most jurisdictions, you can usually file in small claims court if the amount owed is up to $7,500 if the plaintiff is a natural person or up to $5,000 if the plaintiff is an entity. Small claims court is great because it is inexpensive and you can get a judgment fairly quickly. You cannot have a lawyer represent you in small claims court, but you can have a lawyer help you fill out the paperwork.

In situations where the customer owes you more than $7,500, you will need to hire a lawyer to file the collection lawsuit in the regular court. Sometimes you can get a pretrial writ of attachment to freeze the money in the defendant's bank account pending trial. Again, the key here is to act very quickly. If the defendant figures out what you are trying to do, it could move the money out of its bank account to try to keep you from freezing its assets.

The lawyers at Kring & Chung can help you collect on your accounts. Call us if you can use some help with your collections.

Attorney Advertising. This client newsletter is a periodical publication of Kring & Chung, LLP and should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have. Any tax information or written tax advice contained herein (including any attachments) is not intended to be and cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

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