Bankord v. DeRock

• Decision Date: 23 June 1976
• Docket Number: Civ. No. C76-3002.
• Citation: 423 F. Supp. 602
• Parties: John A. BANKORD and Mayleen L. Bankord, Plaintiffs, v. Richard DeROCK, Individually and d/b/a Leon's Tap, Defendant.
• Court: U.S. District Court — Northern District of Iowa

423 F. Supp. 602

John A. BANKORD and Mayleen L. Bankord, Plaintiffs, v. Richard DeROCK, Individually and d/b/a Leon's Tap, Defendant.

Civ. No. C76-3002.

United States District Court, N. D. Iowa, C. D.

June 23, 1976.

Timothy J. Walker, James Q. Blomgren, Des Moines, Iowa, for plaintiffs.

Gerry M. Rinden, Rock Island, Ill., Warren L. DeVries, Mason City, Iowa, for defendant.

HANSON, Chief Judge.

This case involves a novel question of the extraterritorial application of Iowa's Dram Shop Act.¹ The matter is presented to the Court by way of the defendant's motion to dismiss pursuant to Rule 12(b), Federal Rules of Civil Procedure.

Factually, this case developed as follows: The plaintiffs, John and Mayleen Bankord, husband and wife, are residents and citizens of Minnesota. On January 16, 1974, John Bankord was injured near Glenville, Minnesota in an automobile accident with Clyde Francis Hatch. According to the plaintiffs' complaint, which the Court must accept as true for purposes of considering defendant's motion to dismiss,² Hatch was intoxicated at the time of the accident and the intoxication was a proximate cause of the accident. The complaint further alleges Hatch was sold or given intoxicating liquor by the defendant which was a proximate cause of his intoxication at the time of the accident. The defendant, Richard DeRock, is a resident and citizen of Iowa and holds a liquor license for the premises known as Leon's Tap in Mason City, Iowa.

Jurisdiction is based upon diversity of citizenship, the amount in controversy exceeding $10,000 exclusive of interest and costs. 28 U.S.C. § 1332 (1970). The Court in this case must apply Iowa law, including its conflict of laws. Guaranty Trust Co. of New York v. York, 326 U.S. 99, 108, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945); Klaxton Co. v. Stentor, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).

The precise issue before the Court is whether the Iowa Dram Shop Act's civil liability provisions apply to a situation where the alleged intoxication occurred in Iowa but the injury giving rise to the cause of action occurred in another state. Since the plaintiffs have predicated their cause of action solely on the Act, the resolution of the extraterritorial effect issue is concomitantly determinative of the ruling on defendant's motion to dismiss.

As previously indicated, the Iowa Supreme Court has had no occasion to determine the extraterritorial effect of the Act.³ However, the Court, sitting in its capacity as another court of Iowa, finds some guidance from state and federal decisions in other jurisdictions.

A survey of the relevant decisional law reveals a split of authority on the extraterritorial effect of state dram shop acts. The determinative factor in analyzing the effect accorded such acts is the nature of the dram shop acts, i. e., whether penal or remedial, in juxtaposition to the appropriate choice of law principles.

Illinois courts have consistently refused extraterritorial application of the Illinois dram shop act; the rationale based upon the courts' characterization of the act as penal in nature. See Waynick v. Chicago's Last Department Store, 269 F.2d 322 (7th Cir. 1959), cert. denied, 362 U.S. 903, 80 S.Ct. 611, 4 L.Ed.2d 554 (1960); Butler v. Wittland, 18 Ill.App.2d 578, 153 N.E.2d 106 (1958); Eldredge v. Don Beachcomber, Inc., 342 Ill.App. 151, 95 N.E.2d 512 (1950). Similarly, New York courts have refused to accord extraterritorial effect to the New York act. Goodwin v. Young, 34 Hun 252 (N.Y.1884).

Other jurisdictions, however, have permitted actions based on local dram shop acts where the injury was sustained in another jurisdiction. These courts have generally characterized the state act as regulatory and remedial in nature, and have permitted extraterritorial application irrespective of otherwise pertinent choice of law principles. See Trapp v. 4-10 Investment Corporation, 424 F.2d 1261 (8th Cir. 1970) (North Dakota law: Zucker v. Vogt, 200 F.Supp. 340 (D.Conn.1961) (Connecticut law), aff'd 329 F.2d 426 (2nd Cir. 1964); Schmidt v. Driscoll Hotel, 249 Minn. 376, 82 N.W.2d 365 (1957).

In Schmidt, Minnesota plaintiffs were injured in Wisconsin by an auto driver, Sorrenson, after he became intoxicated in defendant's Minnesota tavern. The Minnesota Supreme Court, on appeal from the lower court's dismissal, initially noted the established choice of law rule, lex loci delicti,⁴ seemingly would require application of Wisconsin law and thereby preclude the plaintiff's cause of action. The court further stated that the case involved two distinct wrongs — the defendant's liquor sales in Minnesota and Sorrenson's negligence causing the vehicular accident in Wisconsin — and that neither wrong would be actionable under the defendant's limited view of Wisconsin and Minnesota law. However, the court reiterated the remedial policies of the Minnesota Civil Damage Act, Minn. Stat.Ann. § 340.95, and held that:

We feel that the principles in Restatement, Conflict of Laws, §§ 377 and 378, should not be held applicable to fact situations such as the present to bring about the result described and that a determination to the opposite effect would be more in conformity with principles of equity and justice. Here all parties involved were residents of Minnesota. Defendant was licensed under its laws and required to operate its establishment in compliance therewith. Its violation of the Minnesota statutes occurred here, and its wrongful conduct was complete within Minnesota when, as a result thereof, Sorrenson became intoxicated before leaving its establishment. The consequential harm to plaintiff, a Minnesota citizen, accordingly should be compensated for under M.S.A. § 340.95 which furnishes him a remedy against defendant for its wrongful acts. By this construction, no greater burden is placed upon defendant than was intended by § 340.95.

Schmidt v. Driscoll Hotel, supra, 82 N.W.2d at 368.

Similarly, in Zucker v. Vogt, supra, the court considered a situation under the Connecticut Dram Shop Act involving New York plaintiffs, a Connecticut tavern owner and a fatal auto accident in New York. The defendant vigorously contended the court must look to New York law when applying Connecticut conflicts of law, and further that New York will not give extra-territorial effect to a breach of Connecticut's Dram Shop Act. The district court, however, noted that the Connecticut act had consistently been interpreted as providing a remedy, and held:

When this state has an interest in deterring violations of the Dram Shop Act ... and when it commits the power of its courts ... to serve its interest in providing compensation for injuries to persons in consequence of such breaches it is deemed unlikely that the Connecticut courts would judicially refuse to serve those interests in this case in order to mechanically conform to the conceptualistic territorial view of torts as set forth in the Conflicts of Laws Restatement § 377.

* * * * * *

Here it is difficult to see how the harmony between different states which is the fundamental basis for the whole doctrine of conflict of laws could be adversely affected by holding, as I believe the highest courts of Connecticut would, that the plaintiff may recover damages for injuries sustained as a result of violation by the defendant of the provisions of the Connecticut Dram Shop Act.

200 F.Supp. at 342-43.

Many states, including, Iowa, have in recent years abandoned the narrow lex loci approach espoused in Restatement, Conflicts § 377, and have adopted a significant contacts or relationships approach, as set forth in Restatement (Second) of Conflicts, §§ 145, 146 (1971), to choice of law situations. See, e. g., Trapp v. 4-10 Investment Corporation, supra; Fuerste v. Bemis, 156 N.W.2d 831 (Iowa 1968). The interrelationship between the most significant contacts rule and extraterritorial application of a state dram shop act was explored in Trapp v. 4-10 Investment Corporation, supra. That case involved liquor sales in North Dakota to minor residents of Minnesota causally resulting in an auto accident in Minnesota. The Minnesota plaintiffs sought relief under the North Dakota Dram Shop Act, which is virtually identical to Iowa's. Initially, the Eighth Circuit upheld the district court's adoption of the most significant contacts approach, and proceeded to hold:

The North Dakota Dram Shop Act is both regulatory and remedial in nature. ...

* * * * * *

Both the remedial and the regulatory purposes of the North Dakota state are best carried out by its application to the facts litigated here. The prohibited sale of liquor to a minor is not denied. We conclude that under the "significant contacts" rule, North Dakota has the most "significant" interest in the present litigation and that North Dakota would apply its own Dram Shop Act under the facts of this case. citations omitted. We further observe that such a result does not contravene the interests of policies of Minnesota, which also has a dram shop act.

424 F.2d at 1265.

The distinction between these cases, and their choice of law analysis is slight. In Schmidt and Zucker, the courts found that the underlying policies of the dram shop acts afforded a sound basis for extraterritorial application irrespective of the choice of law principle, lex loci delicti. In Trapp, however, the court applied the controlling choice of law analysis and found that the strong policy considerations and interests of the act preponderated over other pertinent contacts or relationships.⁵

The Iowa Dram Shop Act, like the North Dakota statute in Trapp, has generally been construed as regulatory and remedial in nature. Wendelin v. Russell, 259 Iowa 1152, 147 N.W.2d 188 (1966). The court in Wendelin, supra, explained that the primary purpose of the Act is "to place a hand of restraint upon those licensed or permitted by law to sell or supply intoxicants to others and protect the public, but above all to provide an...