Georgia Court of Appeals Disallows Piercing the Corporate Veil in Dram Law Case

BarIn most circumstances, you cannot sue the actual owners of a corporation personally for the liabilities of the corporation. This is one of the key reasons that people use companies to insulate themselves from personal liability. Sometimes the company itself can be underfunded and the actual owner, very well off. In those circumstances, the Plaintiff may want to go after the owner. In this recent decision, the Court put some strict limits in place when trying to do that with a case where a bar let a drunk patron get on the roads.

When faced with this situation, plaintiffs will often attempt to “pierce the corporate veil” and impose personal liability on a corporation’s underlying shareholders. However, as the plaintiff in Barnes v. Smith, a recent decision from the Georgia Court of Appeals, now realizes, piercing the corporate veil may be far from a straightforward proposition.

The facts at the center of Barnes occurred on November 19, 2012. On that day, a patron arrived at Hank & Jerry’s Tavern in Rockdale County, Georgia at around 4 p.m. and had a beer and a shot of Jagermeister. The patron left the Tavern but returned at around 11 p.m. and again had half a beer as well as one and a half “Jagermeister bomb” drinks. The night bartender, who was also the supervisor at the Tavern that night and a personal acquaintance of the patron, noticed that the patron’s eyes were glassy and that he was acting belligerently. The bartender unsuccessfully attempted to take the patron’s keys and offered to either call him a cab or drive him home. In an effort to prevent the patron from leaving, the night bartender tried to lock the front door of the Tavern, but a different customer at the Tavern let the patron out in response to his belligerent conduct. The patron told the bartender that he would just rest in his car, which the bartender believed, but shortly thereafter, the patron drove away. The bartender knew that the patron should not be driving, but she did not call the police out of concern about getting the patron in legal trouble.

Shortly after leaving the Tavern, the patron’s vehicle collided with another vehicle being operated by the plaintiff in this action. The plaintiff’s vehicle overturned as a result of the collision, leading to serious injuries. Following the accident, the plaintiff then brought suit against DLN Enterprises, Inc. (“DLN”), which owns the Tavern, and Richard Smith, the sole shareholder of DLN, alleging claims under Georgia’s Dram Shop law, O.C.G.A. § 51-1-40, as well as negligent training and supervision claims. At the conclusion of discovery, Smith made a motion for partial summary judgment, arguing, inter alia, that there was no basis for piercing the corporate veil and thus making him personally liable in the claims at issue. The plaintiff opposed summary judgment, arguing that the facts underlying her negligent training and supervision claims provided a basis for piercing the corporate veil. The trial court granted Smith’s motion, and the plaintiff appealed.

Unfortunately, this appeal proved to be fruitless. First, the Court of Appeals summarily rejected the plaintiff’s argument that her negligent training and supervision claims provided a basis for piercing the corporate veil. Although Georgia law allows for piercing the corporate veil when the shareholder directly participated in the the commission of the tort at issue, the court found this rule inapplicable to negligent training and supervision claims because such negligent conduct does not constitute direct participation in the commission of the tort. See, e.g., Beasley v. A Better Gas Co., 269 Ga. App. 426, 429 (2004) (noting that a “[corporate officer]’s alleged failure to provide proper training to [employees] is not a sufficiently direct participation in a tort leading to [the plaintiff]’s injuries to expose [the corporate officer] to personal liability under Georgia law”). In addition, although the negligent supervision claims asserted against Smith were not predicated on piercing the corporate veil, the Court of Appeals ruled that they were also properly dismissed. Under Georgia law, a negligent supervision claim requires “sufficient evidence to establish that [an] employer reasonably knew or should have known of an employee’s tendencies to engage in certain behavior relevant to the injuries allegedly incurred by the plaintiff.” Novare Grp., Inc. v. Sarif, 290 Ga. 186, 190-91 (2011) (citation and punctuation omitted). In this case, the plaintiff failed to adduce evidence demonstrating that Smith was aware of the night bartender’s need for additional supervision or training based on her historical bartending practices. Since there was insufficient evidence to establish that Smith “knew or should have known” of the bartender’s proclivities, the Court of Appeal ruled that the negligent supervision claims were properly dismissed.

Although asserting personal liability can be difficult, it is not unattainable. Indeed, as the Court of Appeals noted in Barnes, personal liability can be found when the actor directly participates in the tort or if he or she runs the corporation in such a fashion that the corporation is essentially the alter ego of the actor. Given that piercing the corporate veil is sometimes necessary to assure full recovery in certain cases, those with claims against a corporation should always considering finding counsel with experience in the nuances of corporate law as it applies to negligence cases. The Atlanta dram shop attorneys at Christopher Simon Attorney at Law have represented many Georgia residents injured as a result of the negligent conduct of bar employees, and they can provide assistance with a possible claim. Indeed, if you have recently been injured by an intoxicated driver and are curious about your legal options, feel free to contact us and schedule a free case evaluation.

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