Mrs. Soon Pak manages Dami Hospitality, LLC, a company that runs hotels and motels in Colorado. Pak is a Korean immigrant with minimal proficiency in English. She relies on third‐party professionals to assist her in maintaining compliance with the myriad regulations that even native English speakers struggle to understand. Between 2006 and 2014, Dami’s insurance agent failed to renew the company’s worker’s compensation insurance, despite assuring Pak that Dami maintained full coverage.
In 2014, the state division of workers’ compensation gave notice that Dami’s policy had lapsed, and Pak immediately secured coverage without any employee suffering any harm. A few weeks later, the division imposed a fine of $841,200, calculated at a $25 – 500 daily rate that the division had allowed to accumulate for eight years before finally giving notice to the company. Put simply, the state assessed nearly a million‐dollar fine against a small corporation — which grosses less than a quarter of the total fine — for a violation that was solved immediately after notice was received, with no actual harm done to anyone.
However one defines “excessive,” this fine is excessive compared to Dami’s violation. To frame it in the worker’s comp context, if an employee is killed on a job, his dependent receives $250,000. That means the Colorado Labor Department considers the results of Dami’s lazy insurance agent to be worse than three workplace fatalities.
Dami sought relief in the Colorado courts, arguing that the fine violated the Excessive Fines Clause of the Eighth Amendment (which the U.S. Supreme Court held just this part term applies to the states). Cato filed an amicus brief supporting Dami before the Colorado Supreme Court, arguing that the excessive fines clause applies to corporations (which the state had been denying). The Colorado Supreme Court ruled that the Excessive Fines Clause does indeed apply to corporations and that a fine that is financially ruinous may be deemed unconstitutionally excessive, but that the total fine in this case cannot be considered in the aggregate. The question, the court said, is limited to evaluating whether each individual daily fine is financially ruinous. While the decision was favorable to Dami and Mrs. Pak in part, as one justice wrote in dissent, confining the excessiveness inquiry to the daily fine ($250-$500) misses the point of the constitutional exercise.
Both Colorado and Dami were unsatisfied with the ruling and have asked the U.S. Supreme Court to step in. The state has asked the Court to review (1) whether the Excessive Fines Clause applies to corporations at all, and (2) even if it does, whether the financial ruin the fine may cause is relevant to determining its excessiveness. Dami has filed a cross‐petition, asking the Court to take up both of those issues — to finally resolve all the issues in this expensive and time‐consuming enforcement action — and also to look at whether the fine must be considered in the aggregate.
The Supreme Court will review at its conference next week (January 10) whether to take up this case — which it should.