PENNSYLVANIA LEGAL UPDATE
WINTER 2000 ISSUE

What is your legal liability when you serve alcoholic beverages to your guests?

Pennsylvania law provides that social hosts have no legal liability to adults to whom they serve alcohol. Nor do social hosts have any legal liability to persons injured by an intoxicated adult guest. This freedom from liability exists even if it can be proved that the host had some reason to believe that his or her guest was intoxicated or that an intoxicated guest might drive. The Pennsylvania courts have explained that "the great weight of authority supports the view that in the case of an ordinary able-bodied man it is the consumption of alcohol, rather than the furnishing of the alcohol, which is the proximate cause of any subsequent occurrence."

"Social hosts" include both private individuals and companies who hold parties or social events. If a company holds a holiday party for its employees or serves alcohol at a business meeting, it is not responsible to the employees or third parties for any injuries that may result due to intoxication. Likewise, where friends or family gather in private homes, the hosts are not responsible for the drinking of other adults.

Social hosts are legally liable to persons under the age of 21 to whom they knowingly serve alcohol, and they are also legally liable to anyone injured as a direct result of the underage drinker's intoxicated conduct. A social host is not solely liable for the consequences of an underage drinker's intoxication. Instead, the underage drinker's "contributory negligence" must also be considered in the litigation of any claims by the underage drinker or third parties.

Anyone under 21 years of age commits a criminal offense if he or she attempts to purchase, purchases, consumes, possesses, or transports any alcohol, liquor, or malt or brewed beverage, and an adult who furnishes any assistance is also criminally liable. A person commits a crime by serving any alcohol to a minor; it is not necessary that the minor have been served an amount sufficient to intoxicate him or her. Any person who serves minors "near beer" or mildly alcoholic beverages marketed as nonalcoholic is criminally liable. Most social hosts probably assume that furnishing beverages with just a trace of alcohol to minors is perfectly legal, but doing so is banned by the Pennsylvania Liquor Code.

Social hosts are not liable for serving underage drinkers unless they actually physically serve the underage drinkers or take substantial steps to assist someone else in organizing or providing liquor. It is only where social hosts know that minors are drinking or are "affirmatively negligent" that they are legally responsible. Social hosts can protect themselves by openly discouraging underage drinking, by clearly announcing that only adults may drink alcoholic beverages, and by stepping in and stopping any minor from drinking. Where a social host discovers that a minor has been drinking alcoholic beverages, the host should prevent the minor from driving. Dismissing a minor from a social event for drinking is risky, since his or her intoxication may not be apparent and sending the minor away may increase his or her exposure to danger.

Owners of property where alcohol is provided to minors are not legally liable if they had no actual knowledge that alcohol was being served and if there is no evidence that they were aware of, or had any involvement with, the party or event at which the minors were served. However, a social host who knowingly and intentionally allows premises over which he or she has control to be used for the purpose of consumption of alcohol by minors has created an unreasonable risk of intoxication of the minor guests. The social host may be liable for the minor guests' injuries or those caused to third parties if the use of the premises is a "substantial factor" in bringing about the intoxication of the minor guests.

A minor is considered incompetent under law to handle alcohol and cannot be held liable as a social host for furnishing alcohol to another minor. Thus, where the social host is underage, he or she has no civil liability to anyone who is subsequently injured as a result of someone's underage drinking.

Finally, liquor license holders and their employees are not treated the same as social hosts. Licensees and their employees must refrain from selling liquor to any visibly intoxicated individual. Where a liquor license holder is found responsible for serving an intoxicated customer, he or she can be sued both by the intoxicated customer and by anyone injured by the intoxicated customer's negligence.

When a Pennsylvania employer fired an employee for making personal use of the Internet during office hours, the employee was denied unemployment compensation. Employees forfeit their right to unemployment compensation if they are terminated for "willful misconduct" in the workplace. Where an employer has a clear policy about personal use of the Internet, employees who violate the policy cannot collect unemployment compensation if they are terminated.

Employers looking to establish policies about Internet use should put those policies in writing. While oral policies are legally enforceable, proving the existence and dissemination of a policy is easier if the policy is in writing and the employees are required to sign. Employees whose use of the Internet at work is restricted should examine their employer's policies carefully and realize that they may be at risk of losing their jobs without any access to unemployment benefits if they break the rules.

When you establish a bank account for a minor, you can retain ownership of the money or you can pass ownership to the child. If you establish an account in which you are designated the "custodian" of the money, you have transferred ownership to the child. The money is deemed to be property transferred under the Uniform Transfers to Minors Act and is owned by the donee-minor. The account is held under the child's Social Security number.

During the child's minority, until he or she is 21, the custodian holds, manages, and invests the money. Until the age of majority, the custodian may use the money for the child's reasonable needs. When the minor turns 21, the custodian must deliver the money and proceeds, plus accumulated interest and profit, to the individual. Unlike a trust for support or education, the proceeds of which must be used for the trust's stated purpose, money transferred under the Act generally may be used by the custodian for the child's support. It is, however, the custodian's duty to use the money only for the child's benefit.

If you establish an account "in trust" for a minor, the money in the account is not owned by the minor. Instead, such a trust account belongs to you, the trustee, during your lifetime. The long-recognized common-law trust, sometimes called a "Totten Trust," presumes that an account established in the depositor's name with his own money as trustee for another creates a mere tentative trust revocable at will until the depositor dies or completes the gift in his lifetime. This type of trust account is held under your social security number, and the periodic statement may designate the account as "ITF," meaning "in trust for."

A Pennsylvania court has ruled that a mentally retarded minor was improperly denied Supplemental Social Security benefits on the grounds that he was the owner of funds that were held in trust for him. In this case, the parents held certificates of deposit in their joint names in trust for their son. Since they did not make a gift or clearly create an irrevocable trust, the court held that the money did not belong to their son and did not limit his entitlement to Social Security benefits.

Sometimes, children are beneficiaries under irrevocable trust agreements. Where a trustee holds a child's property under a written trust agreement, the trustee must abide by all of the terms of the agreement regarding the permitted uses of the trust property. Trust money invested pursuant to a trust agreement is maintained in a trust account held under an employer identification number (EIN) issued by the IRS.

Parents may find themselves managing bank accounts that are established for the investment of personal injury proceeds for their children. Personal injury proceeds payable to minors are governed by court orders. While a lawsuit brought on behalf of a child is at first controlled by the child's parent or guardian, the court holds ultimate authority over whether a settlement is in a child's best interests. The court also has control over money paid in a settlement or after a verdict. Typically, court orders specify where parents may invest a child's money and what use, if any, can be made of the money during the child's minority.

When a young girl was awarded personal injury damages, a Pennsylvania court order designated a specific investment bank and type of account into which the child's personal injury proceeds were to be deposited. The child's father put the money into his and his wife's joint account and used it for his own purposes. When the child came of age, she sued her father and the bank that had accepted the check for deposit. The court held that both the father and his bank were responsible to the child for her settlement money since the bank improperly accepted the father's sole endorsement on a check specifically made out to be deposited into another bank for the child only and specifically requiring both the father's and the mother's endorsement.

Whether you invest for your children on your own initiative or in connection with an established trust or court order, be sure the accounts are properly structured. As to your own investing for your children, consider whether you or your child should be the owner of the money and be sure to take into account the tax consequences of ownership.

Where a pet is injured by a negligent driver, the pet's owner is entitled to recover the veterinary fees and expenses incurred in the pet's recovery. The owner of a pet also may recover damages for mental anguish resulting from someone's intentional, malicious destruction of the animal, based on a theory of intentional infliction of emotional distress.

Pennsylvania's solid waste management program is based on, and closely connected to, the federal solid waste regulatory plan. The federal plan requires that the states prohibit open dumping, regulate authorized disposal facilities, and encourage recycling. Pennsylvania's state plan provides for the disposal of solid wastes in an environmentally sound manner, the closing or upgrading of all existing open dumps, and a ban on the establishment of any new open dumps. All solid waste must be recycled or disposed of in sanitary landfills or through other environmentally sound disposal systems. For purposes of Pennsylvania's Solid Waste Management Act (SWMA), "solid waste" generally is any waste, including, but not limited to, municipal, residual, or hazardous wastes, including solid, liquid, semisolid, or contained gaseous materials. Pennsylvania's solid waste enforcement provisions are extensive. First, any violation of any provision of the SWMA, any rule or regulation of the Department of Environmental Protection (DEP), any order of the Department, or any term or condition of any permit constitutes a public nuisance. Any person or municipality committing such a violation is liable for the costs of cleanup of any pollution and any public nuisance caused by such violation. The Environmental Hearing Board and the courts have jurisdiction over actions to recover the costs of cleanup. The Commonwealth or any municipality that undertakes to clean up a public nuisance may recover its costs in a lawsuit.

Criminal penalties also exist. Recently, a contractor who was in the business of removing underground storage tanks was found to have dumped waste oil and to have handled and transported waste oil in violation of the law. He was prosecuted criminally and was sentenced to probation and substantial fines. Criminal liability under the SWMA is severe. Individuals and corporations are held strictly liable for illegal dumping, even by their employees and subcontractors. The courts have approved of the forfeiture of vehicles used for the illegal transportation of illegally dumped waste.

Strict liability may only extend to those who are responsible for obtaining proper waste disposal permits. Where an employee hired as a laborer buried tires in violation of the SWMA, his employer was held criminally liable but the employee was not. The Pennsylvania court held that employees do not have the authority or duty to obtain solid waste permits and thus generally have no criminal liability.

Employers engaged in the business of handling solid waste should realize that the handling of solid waste by their employees can lead to criminal liability for the company or even for the owner of the company. While the Pennsylvania courts have not extended that criminal liability to employees themselves, it is unclear whether employees may eventually be subject to criminal penalties.

Pennsylvania citizens are protected by stiff environmental laws regulating the dumping of solid waste. Suspected unlawful dumping should be reported to the local municipality or to the DEP. You will find an online complaint form at www.dep.state.pa.us or you can call your regional DEP office.

A Pennsylvania manufacturing company recently sued United Parcel Service (UPS) for its loss of over $395,000 in profits because UPS did not deliver the company's bid package on time. The company mailed a bid and samples of its product to a government agency in the Mid-West through UPS the day before the bid was due. The company's office manager spoke directly to the UPS driver and stressed the importance of timely delivery. UPS missed the next-day delivery, delivering the package one day late. Due to the missed deadline, the company lost the manufacturing contract. After investigating, the company discovered that if its samples had been reviewed and found acceptable its bid would likely have been accepted since its overall price was the lowest.

The company's lawsuit against UPS was dismissed. The UPS pre-printed shipping form clearly indicated that the package contents were insured up to $100 in value and that any special damages or consequential losses were not recoverable. The court found that the shipping form was a contract. While the print on the form was small and the office manager did not read or accept the language limiting UPS's liability, the court nevertheless found that the limiting language was binding.

Finding that UPS handles an "exceedingly high volume" of packages on a daily basis, the court observed that UPS was "justly entitled to reasonably limit their potential staggering monetary liability for the infinite possible panoply of consequential damages which could result from the failure to deliver one of those packages, due to the fact that the shipper has paid them a comparatively small sum of money for the package's delivery." The court concluded that it is unreasonable to expose any shipper to liability for enormous and unforeseeable damages in return for "an $11.75 shipment fee."