Dami Hospitality, LLC v. Industrial Claim Appeals Office

COLORADO COURT OF APPEALS 2017COA21
Court of Appeals No. 16CA0249
Industrial Claim Appeals Office of the State of Colorado
W.C. No. XX-XXXXXXX
Dami Hospitality, LLC,
Petitioner,
v.
Industrial Claim Appeals Office of the State of Colorado and Division of
Workers’ Compensation,
Respondents.
ORDER SET ASIDE AND CASE
REMANDED WITH DIRECTIONS
Division III
Opinion by JUDGE WEBB
Dunn and Davidson*, JJ., concur
Announced February 23, 2017
Law Offices of Daniel T. Goodwin, Daniel T. Goodwin, Caroline R. Kert, Paige
Orgel, Broomfield, Colorado, for Petitioner
No Appearance for Respondent Industrial Claim Appeals Office
Cynthia H. Coffman, Attorney General, Emmy A. Langley, Assistant Attorney
General, Denver, Colorado, for Respondent Division of Workers’ Compensation
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2016.
¶1 Is a fine of $841,200 imposed by the Division of Workers’
Compensation (the division) on a small employer for having failed
over several years to maintain workers’ compensation insurance
excessive under the Eighth Amendment?1 On the particular facts
presented, which include a failure to perform the required
fact-specific constitutional analysis, we answer this novel question
“yes.”
¶2 The employer, Dami Hospitality, LLC, appeals the fine as
unconstitutional, challenging the underlying statute both facially
and as applied; as contrary to other provisions of the Workers’
Compensation Act of Colorado, sections 8-40-101 to 8-47-209,
C.R.S. 2016 (the Act); and as a procedural due process violation.
¶3 We uphold the facial constitutionality of section 8-43-409,
C.R.S. 2016, the statute underlying the fine. But on an as-applied
basis, we conclude that because the Director of the division
(Director) failed to apply the excessive fine factors adopted under
the Eighth Amendment to the particular facts that Dami presented,
1 Because the wording of Colorado Constitution article II, section 20
is identical, we do not address it separately.
1
the fine must be set aside as excessive. We reject Dami’s remaining
contentions.
¶4 Therefore, we set aside the decision of the Industrial Claim
Appeals Office (Panel) affirming the Director’s decision and remand
the case to the Panel with directions to order the Director to
reconsider imposing a fine calculated according to this opinion.
I. Background and Procedural History
¶5 Dami operates a motel in Denver, Colorado. For a period in
2006, Dami failed to carry workers’ compensation insurance as
required by section 8-43-409. It was fined approximately $1200 for
that violation, paid the fine, and obtained the necessary insurance.
¶6 In 2014, the division notified Dami that it was again without
workers’ compensation insurance and had been for periods during
2006 and 2007, as well as from September 2010 through the date
of the division’s notice. The Director’s “Notice to Show Compliance”
advised Dami that within twenty days it had to answer an attached
questionnaire, had to submit documents establishing coverage, and
could “request a prehearing conference on the issue of default.”
Dami admits that it received this notice on June 28, 2014, but
denies having received a notice the division said had been sent four
2
months earlier. Although Dami obtained the necessary insurance
by July 9, 2014, it neither submitted a response to the Notice to
Show Compliance nor requested a prehearing conference.2
¶7 Information provided by the division’s coverage enforcement
unit — which Dami does not contest — showed that Dami had been
without coverage from August 10, 2006, through June 8, 2007, and
again from September 12, 2010, through July 9, 2014. On this
basis, the Director fined Dami from $250 to $400 per day, through
September 18, 2006. From September 19, 2006, through June 8,
2007, and from September 12, 2010, through July 9, 2014, Dami
was fined $500 per day. The Director calculated the fine based on
the formula adopted by the division under section 8-43-409(1)(b)(II)
in Department of Labor & Employment Rule 3-6, 7 Code Colo. Regs.
1101-3 (Rule 3-6), discussed in Part III.B below.
2 Section 8-43-409, C.R.S. 2016, requires the Director to notify an
employer “of the opportunity to request a prehearing conference on
the issue of default.” However, the statute does not define “default.”
Such a request must be made within twenty days of the notice.
And an employer is not entitled to a hearing as a matter of right.
Rather, “if necessary, the [D]irector may set the issue of the
employer’s default for hearing.” § 8-43-409(1) (emphasis added).
The statute is also silent whether the division may request a
hearing or the Director may hold one sua sponte.
3
¶8 Dami’s owner, Soon Pak, sent a letter to the Director captioned
“Petition to Review,” asking the Director to reconsider the fine. The
Director treated the letter as a petition to review his findings of fact,
conclusions of law, and order.
¶9 In the letter/petition, Ms. Pak explained that she “believed”
the insurance policies she obtained for the motel had “included the
required coverage.” She blamed her insurance agent for the lapse
in coverage, asserting that her trust “in insurance professionals to
quote and secure . . . competitive workmen’s compensation
insurance” was “obviously” misplaced. The petition also asked the
Director to reduce the penalty because “$842,000 is more that [sic]
my business grosses in one year. . . . My payroll each year is less
than $50,000 per year. . . . If the penalty stands as presented, I
have no choice but to declare personal and business bankruptcy
and go out of business.”
¶ 10 In a letter that Ms. Pak’s insurance agent submitted to the
Director, the agent accepted responsibility for the lack of workers’
compensation insurance: “I think I feel part of responsibility for this
matter that I did not tell about Worker’s Compensation and I will be
managing my client in the future. . . . Actually she confused
4
Property Insurance and Worker’s Compensation.” Later, Dami’s
counsel filed a brief in support of the petition to review. Attached to
the brief was Ms. Pak’s affidavit reiterating her reliance on the
insurance agent.
¶ 11 In a supplemental order following Dami’s petition and brief,
the Director again ordered Dami to pay the fine. He found that
because of the earlier fine, Dami had been aware of the need to
maintain insurance and failure to do so was within its control. As
for Dami’s asserted inability to pay, the Director concluded that
neither section 8-43-409 nor Rule 3-6(D) contains “an exclusion or
exemption from incurring and paying a fine based upon a
Respondent’s financial inability to pay.”
¶ 12 On Dami’s appeal of the supplemental order, the Panel
remanded the case to the Director. It held that the Director had
failed to consider the factors set out in Associated Business
Products v. Industrial Claim Appeals Office, 126 P.3d 323 (Colo. App.
2005), to protect against constitutionally excessive fines or
penalties. The Panel summarized those factors as follows:
 the degree of reprehensibility of the defendant’s misconduct;
5
 the disparity between the harm or potential harm suffered
and the fine to be assessed; and
 the difference between the fine imposed and the penalties
authorized or imposed in comparable cases.
¶ 13 Without taking additional evidence, the Director issued an
order on remand. Still, the Director did not analyze the factors that
Dami had presented under Associated Business Products. Instead,
he concluded that because Rule 3-6 inherently incorporates these
factors, no further consideration was necessary. Then for the third
time, the Director ordered Dami to pay a fine of $841,200.
¶ 14 Again, Dami appealed. But this time the Panel agreed with the
Director’s analysis and affirmed the order on remand. The Panel’s
decision is now before us.
II. Was Dami Deprived of Procedural Due Process?
¶ 15 Although procedural due process is not Dami’s primary
argument, we begin there because if Dami is correct, the fine must
be set aside and the broader constitutional issues would no longer
be ripe for decision. Courts “have a duty to decide constitutional
questions when necessary to dispose of the litigation before them.
But they have an equally strong duty to avoid constitutional issues
6
that need not be resolved in order to determine the rights of the
parties to the case under consideration.” Cty. Court v. Allen, 442
U.S. 140, 154 (1979); see also People v. Montour, 157 P.3d 489,
503-04 (Colo. 2007) (Under “the doctrine of constitutional
avoidance, . . . courts have a duty to interpret a statute in a
constitutional manner where the statute is susceptible to a
constitutional construction.”). However, we discern no due process
violation.
¶ 16 On procedural due process grounds, Dami challenges the
method by which it was notified that it lacked workers’
compensation insurance, explaining “common sense indicates that
simple notice by mail is not reasonable.” Alternatively, it argues
that a hearing should have been held before the fine was imposed.
Neither of these assertions provides a basis for setting aside the
Panel’s order.
¶ 17 The “fundamental requisites of procedural due process are
notice and the opportunity to be heard.” Kuhndog, Inc. v. Indus.
Claim Appeals Office, 207 P.3d 949, 950 (Colo. App. 2009).
¶ 18 The Director’s Notice to Show Compliance, informing Dami of
its “subsequent violation” of section 8-43-409 for failure to carry
7
workers’ compensation insurance, appears to have been mailed to
the address the division had on file for Dami. Dami does not point
to any evidence in the record that it had ever advised the division of
a new mailing address.
¶ 19 More importantly, despite Dami’s argument that notice was
inadequate, Ms. Pak admitted in her affidavit to the Director that
she had received a second notice in June 2014, just four months
after the first notice of subsequent violation had been mailed. Dami
does not assert that the passage of these four months created
constitutional prejudice. And when a party has received actual
notice of an agency’s action, the party cannot claim a procedural
due process violation based on an alleged defect in the method of
giving notice. See Amos v. Aspen Alps 123, LLC, 2012 CO 46, ¶¶ 1,
20 (“We conclude that when the parties received actual notice which
afforded them an opportunity to present their objections and no
prejudice resulted, we will not disturb a completed foreclosure
sale.”); see also Baker v. Latham Sparrowbush Assocs., 72 F.3d 246,
254 (2d Cir. 1995) (“If a party receives actual notice that apprises it
of the pendency of the action and affords an opportunity to
respond, the due process clause is not offended.”).
8
¶ 20 Dami’s assertion that a hearing should have been held fares
no better. In responding to the Notice to Show Compliance, Dami
never asked for a prehearing conference.3 Nor did Dami request a
remand hearing in its first appeal to the Panel. And Dami does not
offer any supporting authority or legal argument for the assertion
that despite its own inaction, a hearing should have been held.
¶ 21 Instead, Dami argues only that, “reading between the lines,”
the division failed to follow the Panel’s “suggestion” that the
Director hold a hearing. But “[g]iven the dearth of legal grounds
offered,” we decline to address this issue on its merits. Meza v.
Indus. Claim Appeals Office, 2013 COA 71, ¶ 38; see also Antolovich
v. Brown Grp. Retail, Inc., 183 P.3d 582, 604 (Colo. App. 2007)
(declining to address “underdeveloped arguments”).
¶ 22 For these reasons, we conclude that Dami has not articulated
a cognizable claim for due process violations based on either
inadequacy of the notice or failure to hold a hearing.
3 Dami did not contest the wording of the notice below and does not
do so on appeal. For that reason, we do not address what “you may
request a prehearing conference on the issue of default” would
mean to a reasonable person. Be that as it may, lack of a hearing
at which the record could have been more fully developed plagues
this appeal.
9
III. Was the Fine Imposed on Dami Constitutionally Excessive?
A. Dami’s Excessive Fine Arguments
¶ 23 Dami challenges the $841,200 fine on three grounds.
¶ 24 First, Dami argues that section 8-43-409 is unconstitutional
on its face. According to Dami, the General Assembly’s removal of a
penalty cap from the statute in 2005, plus the absence of any
statutory deadline within which the Director must notify an
employer that it is in violation of the mandate to carry workers’
compensation insurance, effectively grants the Director “complete
discretion regarding the timing of notice and thus the size of the
fine.” Dami points out that this lack of any deadline — combined
with the Director’s formulaic approach in imposing the fine —
resulted in a penalty grossly disproportionate both to the fines
anticipated by the legislature and to the risk of harm to Dami’s
employees.
¶ 25 Second, arguing unconstitutionality as applied, Dami asserts
that because the Director wrongly deemed the Associated Business
Products factors for weighing excessive fines incorporated into Rule
3-6, the Director abused his discretion in failing to apply the factors
to Dami’s particular situation.
10
¶ 26 Third, Dami argues that the fine is grossly disproportionate
both to its ability to pay and to the harm caused by the lack of
workers’ compensation insurance. It asserts the Director should
also have considered its ability to pay when weighing the
constitutionality of the fine.
¶ 27 Although we do not discern a facial flaw in the statute, we
conclude that its application violated Dami’s constitutional
protections against excessive fines. In so concluding, we agree with
Dami that because the constitutional factors are not sufficiently
incorporated into Rule 3-6, the Director abused his discretion in
failing to consider facts specific to Dami — including Dami’s ability
to pay — when he reimposed the fine after the Panel had directed
him to address the Associated Business Products factors.
B. Statutory and Regulatory Provisions at Issue
¶ 28 Dami was fined under section 8-43-409, which requires the
Director to order the violating employer “to cease and desist
immediately from continuing its business operations during the
period such default continues,” or
(b) For every day that the employer fails or has
failed to insure or to keep the insurance
required by articles 40 to 47 of this title in
11
force, allows or has allowed the insurance to
lapse, or fails or has failed to effect a renewal
of such coverage, impose a fine of:
....
(II) Not less than two hundred fifty dollars or
more than five hundred dollars for a second
and any subsequent violation.
§ 8-43-409(1).
¶ 29 To implement this provision, the division adopted Rule 3-6. As
pertinent here, the rule provides:
3-6 FINES FOR DEFAULTING EMPLOYER
(A) Following the Director’s determination that
an employer has failed to obtain the required
insurance or has failed to keep such insurance
in force or has allowed the insurance to lapse
or has failed to renew such insurance, the
Director will impose fines on the defaulting
employer and/or will compel the employer to
cease and desist its business operations.
....
(D) For the Director’s finding of an employer’s
second and all subsequent defaults in its
insurance obligations, daily fines from
$250/day up to $500/day for each day of
default will be assessed in accordance with the
following schedule of fines until the employer
complies with the requirements of the Workers’
Compensation Act regarding insurance or until
further order of the Director:
12
Class VII 1-20 Days $250/Day
Class VIII 21-25 Days $260/Day
Class IX 26-30 Days $280/Day
Class X 31-35 Days $300/Day
Class XI 36-40 Days $400/Day
Class XII 41 Days $500/Day
C. Facial Challenge to Section 8-43-409
¶ 30 “A law is void for vagueness where its prohibitions are not
clearly defined.” People v. Baer, 973 P.2d 1225, 1233 (Colo. 1999).
“Vague laws are unconstitutional and ‘offend due process because
they (1) fail to give fair notice of the conduct prohibited, and (2) do
not supply adequate standards for those who apply them in order to
prevent arbitrary and discriminatory enforcement.’” Denver Health
& Hosp. Auth. v. City of Arvada, 2016 COA 12, ¶ 14 (quoting Baer,
973 P.2d at 1233) (cert. granted in part Sept. 12, 2016). Even so, a
“facial challenge to a legislative Act is, of course, the most difficult
challenge to mount successfully, since the challenger must
establish that no set of circumstances exists under which the Act
would be valid.” United States v. Salerno, 481 U.S. 739, 745 (1987).
And at least in Colorado, “[t]he party challenging the facial
constitutionality of a statute has the burden of showing the statute
13
is unconstitutional beyond a reasonable doubt.” Hinojos-Mendoza
v. People, 169 P.3d 662, 668 (Colo. 2007).4
¶ 31 First, we reject Dami’s assertion that the absence of a penalty
cap renders the statute unconstitutional.5
¶ 32 For purposes of the Eighth Amendment, “[t]he notion of
punishment, as we commonly understand it, cuts across the
division between the civil and the criminal law.” Austin v. United
States, 509 U.S. 602, 610 (1993) (quoting United States v. Halper,
490 U.S. 435, 447-48 (1989)).
¶ 33 Numerous sentencing cases have held that the absence of a
maximum cap does not invalidate a statute. For example,
[s]uch a statute is not subject to the attack
that it is void because it is vague and
indefinite. There are many laws such as this
upon the statute books of the Federal
Government, as well as of the various states,
fixing a minimum sentence and leaving it
within the power of the court to fix the
maximum sentences. In every instance the
validity of such statutes has been upheld.
4 In Tabor Foundation v. Regional Trans. Dist., 2016 COA 102, our
supreme court has granted certiorari to consider this standard.
16SC639, 2017 WL 280826 (Colo. Jan. 23, 2017).
5 Section 8-43-409 was amended in 2005 to remove the cap that
had prohibited any penalty from “exceed[ing] the annual cost of the
insurance premium that would have been charged for such
employer.” Ch. 49, sec. 1, § 8-43-409, 2005 Colo. Sess. Laws 199.
14
Binkley v. Hunter, 170 F.2d 848, 849 (10th Cir. 1948); see also
United States v. Kuck, 573 F.2d 25, 26 (10th Cir. 1978) (“A
sentencing statute is not unconstitutional because of failure to
provide a maximum term.”).
¶ 34 In contrast, Dami has not cited authority holding a statute
that imposes a fine or penalty facially unconstitutional for lack of a
cap. Nor have we found any such authority in Colorado.
¶ 35 Looking outside of Colorado, the notion that the absence of a
maximum fine renders a statute facially unconstitutional
“represents the clear minority rule on the issue. In fact, the
majority of courts considering this issue have upheld the
constitutionality of statutes which set a minimum fine or
punishment but which do not prescribe a maximum fine or
punishment.” State v. Taylor, 70 S.W.3d 717, 721 (Tenn. 2002);
see, e.g., United States v. Hayes, 589 F.2d 811, 825 (5th Cir. 1979)
(“While the statute does not provide for a specific maximum
sentence in situations of life imprisonment for the principal, failure
to provide a clearer maximum possible sentence does not render the
statute constitutionally infirm. Leaving the determination of
15
maximum sentences to the court is not uncommon.”) (citation
omitted); Ex parte Robinson, 474 So. 2d 685, 686 (Ala. 1985); State
v. Nelson, 11 A.2d 856, 862 (Conn. 1940); Mannon v. State, 788
S.W.2d 315, 322 (Mo. Ct. App. 1990) (“A statute which fixes a
minimum punishment but provides no maximum term is neither
constitutionally invalid nor void because of indefiniteness.”).
¶ 36 Second, we reject Dami’s assertion that the absence of a
deadline for division action against an employer lacking insurance
— which allows the fine to ratchet up — renders the statute facially
unconstitutional. Again, Dami has not offered any cases
supporting its position. To the contrary, substantial authority
suggests the opposite.
¶ 37 To begin, the Supreme Court has upheld a court’s authority to
impose daily fines under a statute that lacked both a cap and a
deadline for notifying the offending parties of accumulating fines.
United States v. ITT Cont’l Baking Co., 420 U.S. 223, 243 (1975)
(remanding for recalculation of daily fines under the Clayton and
Federal Trade Commission Acts).
¶ 38 Likewise under Colorado law, daily penalties that accumulated
for continuing violations have been upheld. See Crowell v. Indus.
16
Claim Appeals Office, 2012 COA 30, ¶ 15 (“[W]hen there is ongoing
conduct, the continuation of the penalty is mandatory, rather than
discretionary.”); Pueblo Sch. Dist. No. 70 v. Toth, 924 P.2d 1094,
1100 (Colo. App. 1996) (mandating imposition of the penalty at a
“daily rate” where violation was continuing).
¶ 39 Some lower federal courts have taken the same approach. In
Center for Biological Diversity v. Marina Point Development
Associates, 434 F. Supp. 2d 789 (C.D. Cal. 2006), for example, the
defendants were found to have been in violation of the Clean Water
Act from at least October 2002 to 2006. Because they were subject
to daily penalties of $27,500 to $32,500 over the course of their
violations, “the maximum penalty” could have been as high as
“$15,445,000.” Id. at 799. The court imposed a penalty of $2500
for each day of violation “from October 7, 2002 to April 16, 2004,”
totaling $1,312,500. Id. at 800. Similarly, in Honey v. Dignity
Health, 27 F. Supp. 3d 1113 (D. Nev. 2014), daily penalties were
imposed against an employer for violating the notice provision in
the Consolidated Omnibus Budget Reconciliation Act (COBRA), 29
U.S.C. §§ 1161-1169 (2012). The court noted that it “ha[d]
discretion to impose a penalty and to set its amount, subject only to
17
a $110 per day statutorily set maximum.” Honey, 27 F. Supp. 3d at
1124.
¶ 40 None of the courts in these cases pondered whether the fines
should be tempered because the underlying statutes did not require
the regulating authorities to provide timely notice of a violation.
Instead, at least as best we can determine, like Rome burning as
Nero fiddled, fines mounted while the regulators said nothing.6
¶ 41 Given all this, we conclude that Dami has not met its burden
of showing that section 8-43-409 is facially unconstitutional beyond
a reasonable doubt. Even so, our inquiry does not end, as the
statute’s application in this case could still be unconstitutional.
D. As-Applied Constitutional Challenges to Fines
¶ 42 Dami’s as-applied challenge to section 8-43-409 differs from
its facial challenge to the statute.
6 To be sure, Dami might distinguish some of these cases on the
basis that the party fined could not dispute its knowledge of the
conduct triggering the fine. For example, Crowell v. Industrial Claim
Appeals Office, 2012 COA 30, involved the employer’s affirmative
action. In contrast, Dami maintains that it did not know the
insurance coverage had lapsed. But Dami’s alleged ignorance can
be addressed under reprehensibility, one of the factors from
Associated Business Products v. Industrial Claim Appeals Office, 126
P.3d 323 (Colo. App. 2005), as discussed in Part III.D.4.a below.
18
A plaintiff bringing an “as-applied” challenge
contends that the statute would be
unconstitutional under the circumstances in
which the plaintiff has acted or proposes to
act. If a statute is held unconstitutional “as
applied,” the statute may not be applied in the
future in a similar context, but the statute is
not rendered completely inoperative.
Sanger v. Dennis, 148 P.3d 404, 410 (Colo. App. 2006). “For
as-applied constitutional challenges, the question is whether the
challenging party can establish that the statute is unconstitutional
‘under the circumstances in which the plaintiff has acted or
proposes to act.’” Qwest Servs. Corp. v. Blood, 252 P.3d 1071, 1085
(Colo. 2011) (quoting Developmental Pathways v. Ritter, 178 P.3d
524, 534 (Colo. 2008)). Yet again, “the burden of establishing the
unconstitutionality of a statute, as applied, [is] beyond a reasonable
doubt.” People v. Gutierrez, 622 P.2d 547, 555 (Colo. 1981).
¶ 43 Statutory penalties, like those assessed under section
8-43-409, are subject to the constitutional prohibition against
excessive fines. See Associated Bus. Prods., 126 P.3d at 326;
Wolford v. Pinnacol Assurance, 81 P.3d 1079, 1084 (Colo. App.
2003), rev’d on other grounds, 107 P.3d 947 (Colo. 2005). The
Eighth Amendment provides that “[e]xcessive bail shall not be
19
required, nor excessive fines imposed, nor cruel and unusual
punishment inflicted.”
¶ 44 As a division of this court noted, the Supreme Court first
applied this provision to “civil cases where the government seeks, at
least in part, to punish a party” in 1993, when it announced Austin
v. United States, 509 U.S. 602 (1993). Toth, 924 P.2d at 1099-1100.
In Austin, the Supreme Court applied the Eighth Amendment to an
in rem civil forfeiture, noting that “the question is not . . . whether
forfeiture . . . is civil or criminal, but rather whether it is
punishment.” Austin, 509 U.S. at 610. After Austin, fines assessed
for non-criminal statutory violations have been subject to the
Eighth Amendment’s protections against excessive fines.
¶ 45 More recently, Colorado courts have applied the
constitutionally excessive limitation to civil fines. See Associated
Bus. Prods., 126 P.3d at 326; Boulder Cty. Apartment Ass’n v. City
of Boulder, 97 P.3d 332, 338 (Colo. App. 2004). But exactly when is
a fine excessive?
¶ 46 The Supreme Court has held that a civil fine is excessive “if it
is grossly disproportional to the gravity of a defendant’s offense.”
United States v. Bajakajian, 524 U.S. 321, 334 (1998). Likewise, a
20
division of this court has said that a penalty “is excessive if the
amount is so disproportionate to a defendants [sic] circumstances
that there can be no realistic expectation that the defendant will be
able to pay it.” Boulder Cty. Apartment Ass’n, 97 P.3d at 338.
¶ 47 This much is clear: the principle of proportionality
encompassed in the constitutional protection against excessive
fines “is that the punishment should fit the crime.” Id. at 337. Yet,
“[i]f this principle were as easy of application as it is of statement,
we should have little difficulty; but, like many another simple and
plain principle, its application to concrete facts is sometimes very
difficult.” Lovejoy v. Denver & Rio Grande R.R. Co., 59 Colo. 222,
229, 146 P. 263, 265 (1915). Taking up that task, we start with the
standard of review.
1. Standard of Review
¶ 48 The party challenging a fine bears the “the burden of proving
the fine is ‘grossly disproportionate.’” Associated Bus. Prods., 126
P.3d at 326 (quoting Toth, 924 P.2d at 1100). But deciding whether
that burden has been met implicates conflicting standards of
appellate review.
21
¶ 49 On the one hand, “when a punitive damages award is reviewed
for excessiveness under the Due Process Clause and the Eighth
Amendment, a de novo standard of review should be applied.” Id.
at 325. And as discussed in Part III.D.4 below, courts have applied
de novo the punitive damages criteria in deciding whether a civil
fine or penalty is excessive.
¶ 50 On the other hand, “[a] trial court enjoys considerable
discretion in assessing a penalty.” Colo. Dep’t of Pub. Health &
Env’t v. Bethell, 60 P.3d 779, 787 (Colo. App. 2002). Similarly, “[a]n
[administrative law judge] has discretion to determine the amount
of the penalty, provided that the amount does not exceed the
legislatively enacted penalty range.” Crowell, ¶ 17. And as
explained in the prior subsection, the statute before us no longer
caps the fine.
¶ 51 Likewise, as to statutes underlying civil penalties, “legislatures
have extremely broad discretion in setting the range of permissible
punishments for statutorily enumerated offenses and . . . judicial
decisions operating within the legislatively enacted guidelines are
typically reviewed for abuse of discretion.” Associated Bus. Prods.,
126 P.3d at 325 (citing Cooper Indus., Inc. v. Leatherman Tool Grp.,
22
Inc., 532 U.S. 424, 432 (2001)). And here, because the rule that the
Director applied tracks the statute, his decision enjoys the same
protection.
¶ 52 True, this case does not involve a punitive damages award, as
in Cooper Industries. But like the challenge in Associated Business
Products, Dami asks us to examine the excessiveness of a
“legislatively enacted penalt[y],” which is also reviewed de novo.
Associated Bus. Prods., 126 P.3d at 325.
¶ 53 An abuse of discretion occurs when the fact finder enters an
order that is unsupported by the evidence or misapplies or is
contrary to the law. Heinicke v. Indus. Claim Appeals Office, 197
P.3d 220, 222 (Colo. App. 2008). As has been so often stated,
discretion is abused when the decision “is manifestly arbitrary,
unreasonable, unfair, or misapplies the law.” Patterson v. BP Am.
Prod. Co., 2015 COA 28, ¶ 67.
¶ 54 Associated Business Products recognized — but did not resolve
— the tension between de novo review and review for an abuse of
discretion. And where a constitutional interest is in play,
sometimes the latter bleeds into the former. Cf. People v. Dunham,
2016 COA 73, ¶ 13 (“Ordinarily, we review a defendant’s preserved
23
contention that the trial court erred in limiting cross-examination of
a witness for an abuse of discretion. But where, as in this case, a
defendant contends that the trial court so excessively limited his
cross-examination of a witness as to violate the Confrontation
Clause, see U.S. Const. amend. VI, we review that contention de
novo.”) (citations omitted). In any event, we avoid reconciling this
tension because ultimately we conclude that the Director abused
his discretion by misapplying the law.
2. Constitutional Protections Afforded Corporations
¶ 55 In its answer brief, the division preliminarily questions
whether the Eighth Amendment’s excessive fines protections even
apply to corporations. The answer to this question is unresolved in
Colorado and unclear elsewhere. We conclude that corporations
enjoy these protections.
¶ 56 To begin, the cases relied on by the division, as well as the
opinions of several other courts, have assumed that corporations
are entitled to the Eighth Amendment’s protections. See, e.g.,
United States v. Pilgrim Mkt. Corp., 944 F.2d 14, 22 (1st Cir. 1991)
(“We will assume for purposes of our discussion that the eighth
amendment proscription against excessive fines applies to
24
corporations, although this is a very tenuous assumption.”); United
States v. Seher, 686 F. Supp. 2d 1323, 1327 n.2 (N.D. Ga. 2010)
(“The Court assumes that the corporate Defendants are entitled to
raise an Eighth Amendment challenge. Whether the protections of
the Eighth Amendment extend to a corporation is an open question
that remains unaddressed by this Circuit or the Supreme Court.”),
aff’d sub nom. United States v. Chaplin’s, Inc., 646 F.3d 846, 851
n.15 (11th Cir. 2011) (“Our analysis assumes, but does not hold,
that the Eighth Amendment applies to corporations. The Supreme
Court has never held that this amendment applies to
corporations.”).7
¶ 57 But despite these cases, we decline to reach the as-applied
Eighth Amendment question by the expedient of assuming without
deciding the preliminary constitutional question of whether Dami is
entitled to constitutional protection against excessive fines. Doing
so would be contrary to the doctrine of constitutional avoidance.
Cf. Allen, 442 U.S. at 154; Montour, 157 P.3d at 503-04. For the
7 Other courts have ignored the question altogether. See United
States v. Bucuvalas, 970 F.2d 937, 946 (1st Cir. 1992) (“We bypass
the unresolved question whether a corporation may assert an
Eighth Amendment claim.”), abrogated on other grounds by
Cleveland v. United States, 531 U.S. 12 (2000).
25
following reasons, we conclude that despite Dami’s corporate
status, it enjoys the Eighth Amendment’s protection.
¶ 58 Other divisions of this court that have examined the
constitutionality of fines imposed against corporate entities are
silent on this issue. See Associated Bus. Prods., 126 P.3d at 325-
27; Boulder Cty. Apartment Ass’n, 97 P.3d at 337-38. The opinions
do not indicate whether the issue was raised. But since these cases
were decided, the Supreme Court has extended other constitutional
protections to corporations. This tidal shift in constitutional law
leads us to resolve the issue for Dami.
¶ 59 In Citizens United v. Federal Election Commission, 558 U.S.
310 (2010), the Supreme Court extended First Amendment
protection for political speech to corporations. Id. at 342-43. The
Court “rejected the argument that political speech of corporations
or other associations should be treated differently under the First
Amendment simply because such associations are not ‘natural
persons.’” Id. at 343 (quoting First Nat’l Bank of Boston v. Bellotti,
435 U.S. 765, 776 (1978)). Declining to follow prior precedent that
had permitted limitations on corporate speech, Citizens United held
that “the Government may not suppress political speech on the
26
basis of the speaker’s corporate identity. No sufficient
governmental interest justifies limits on the political speech of
nonprofit or for-profit corporations.” Id. at 365.
¶ 60 Like the First Amendment, the Second Amendment, and the
Fourth Amendment, the wording of the Eighth Amendment is not
restricted to “natural persons.” See Second Amendment Arms v.
City of Chicago, 135 F. Supp. 3d 743, 761 (N.D. Ill. 2015)
(corporations may assert both First and Fourth Amendment
challenges); Geneva Coll. v. Sebelius, 929 F. Supp. 2d 402, 428
(W.D. Pa. 2013) (“[A] for-profit, secular corporation has standing to
assert the religious exercise claims of its owners in certain
circumstances . . . .”).
¶ 61 In sum, we are unable to discern a reason for limiting the
Eighth Amendment protection against excessive fines to natural
persons. After all, such fines adversely impact both corporations
and natural persons, and the financial condition of some persons
may be stronger than that of some corporations. Nor does the
division present one. Thus, we conclude that Dami’s status as a
corporation does not deprive it of Eighth Amendment protection.
27
3. Director’s Discretion
¶ 62 In his supplemental order, the Director assumed that section
8-43-409 and Rule 3-6 require a formulaic calculation of any fine.
Notwithstanding Dami’s claimed inability to pay such a large fine,
the Director concluded that neither the statute nor the rule
permitted consideration of an employer’s economic situation and
that fines imposed under the statute and rule were “not
discretionary.”
¶ 63 The Panel rejected the Director’s view in part. In its final
order, the Panel observed that Rule 3-6 mandates that fines “will be
assessed in accordance with the following schedule of fines until the
employer complies with the requirements of the Workers’
Compensation Act regarding insurance or until further order of the
Director.” (Emphasis added.) Embracing this language, the Panel
held that Rule 3-6 grants the Director authority to modify a fine
which would otherwise be “calculated solely on the basis of the
number of days involved.”
¶ 64 In its brief, the division acknowledges but does not contest the
Panel’s interpretation. Instead, the division argues that the
Director used his discretion “to determine which factor to prioritize”
28
and to consider “mitigating and aggravating factors” before
reimposing Dami’s fine in the supplemental order.
¶ 65 We give “due deference to the interpretation of the statute
adopted by the Panel as the agency charged with its enforcement.”
Berg v. Indus. Claim Appeals Office, 128 P.3d 270, 273 (Colo. App.
2005). In general, “an administrative agency’s interpretation of its
own regulations is generally entitled to great weight and should not
be disturbed on review unless plainly erroneous or inconsistent
with such regulations.” Jiminez v. Indus. Claim Appeals Office, 51
P.3d 1090, 1093 (Colo. App. 2002). “The Panel’s interpretation will
therefore be set aside only ‘if it is inconsistent with the clear
language of the statute or with the legislative intent.’” Zerba v.
Dillon Cos., 2012 COA 78, ¶ 37 (quoting Support, Inc. v. Indus. Claim
Appeals Office, 968 P.2d 174, 175 (Colo. App. 1998)).
¶ 66 We conclude that the Panel’s interpretation of the regulatory
language is reasonable. See id.; Support, Inc., 968 P.2d at 175.
Thus, the Director can modify a penalty under section 8-43-409
and Rule 3-6, although no reason for doing so is identified in the
rule or was addressed by the Panel.
29
¶ 67 At the same time, we disagree that Rule 3-6 adequately
incorporates the three factors articulated in Associated Business
Products. On remand, the Director concluded — and the Panel
agreed — that Rule 3-6 sufficiently incorporated these factors. He
explained as follows:
 as to the first factor, Rule 3-6 reflects reprehensibility because
the fine increases for a second violation;
 as to the second factor, because the risk to employees
increases the longer an employer is without insurance, the
rule recognizes the potential magnitude of the harm by
increasing the amount of the fine based on how long an
employer remains uninsured; and
 as to the third factor, by providing a uniform formula for fining
all noncomplaint employers, the rule assures uniformity in its
application while penalizing employers with longer periods of
noncoverage more heavily.
(Those factors are discussed fully in the following subsection of this
opinion.)
¶ 68 But these observations go only so far. For example, an
employer’s reasons for a second lapse of coverage may affect its
30
reprehensibility. The duration of that lapse will often be determined
by how much time passes between the lapse beginning and notice
of noncompliance from the division. And this timing dimension —
not addressed in either the statute or any regulation that has been
called to our attention — could erode uniformity.8
¶ 69 As addressed in the following subsection, to pass
constitutional muster the factors that the Panel ordered the
Director to consider must be applied on a case-by-case basis, with
due consideration given to each employer’s unique situation. For
this reason, we reject the Director’s and the Panel’s contrary
interpretations. See Solid Waste Agency of N. Cook Cty. v. U.S.
Army Corps of Eng’rs, 531 U.S. 159, 160 (2001) (rejecting doctrine
of agency deference “[w]here an administrative interpretation of a
statute would raise serious constitutional problems”).9
8 Disuniformity is not the only potential problem resulting from the
absence of a statutory or regulatory limitation of fines based on the
failure to afford an employer prompt notice of noncompliance. Lack
of such a limitation also invites future disputes over excessive fines.
9 The Panel’s interpretation also suffers from lack of consistency. If
Rule 3-6 already and adequately encompasses the Associated
Business Products factors, as the Panel ultimately held after
remand, then the Panel had no reason to remand to the Director for
him to consider those factors. See, e.g., Turney v. Civil Serv.
Comm’n, 222 P.3d 343, 352 (Colo. App. 2009) (“Although courts
31
¶ 70 With these conclusions in mind, we turn to the propriety and
proportionality of the fine imposed on Dami.
4. Applying the Associated Business Products Factors in Weighing
Whether a Fine Is Grossly Disproportionate and Thus
Constitutionally Excessive
¶ 71 Because the constitutional line demarcating an excessive fine
is “inherently imprecise” and “not marked by a mathematical
formula,” determining whether a fine is “grossly disproportionate”
can be difficult. Associated Bus. Prods., 126 P.3d at 326 (first
quoting Cooper Indus., 532 U.S. at 425; then quoting Toth, 924 P.2d
at 1100). But cases addressing the constitutional limitations on
punitive damages awards — from which the three Associated
Business Products factors evolved — provide context for doing so.
¶ 72 In BMW of North America, Inc. v. Gore, 517 U.S. 559, 575, 580,
583 (1996), the Supreme Court first articulated factors that should
be considered when weighing the “reasonableness of a punitive
damages award.” In deciding whether the constitutional line for an
excessive fine “has been crossed,” the Court later condensed these
factors by instructing lower courts to “focus[] on the same three
extend deference to an agency’s interpretation of its own rules, they
are not bound by it, particularly where the agency’s interpretation
is not uniform or consistent.”).
32
criteria: (1) the degree of the defendant’s reprehensibility or
culpability; (2) the relationship between the penalty and the harm to
the victim caused by the defendant’s actions; and (3) the sanctions
imposed in other cases for comparable misconduct.” Cooper Indus.,
532 U.S. at 425.
¶ 73 Although Gore and Cooper addressed only punitive damages,
the factors have been more broadly applied. As pertinent here, a
statutory damage award could be “devastatingly large . . . out of all
reasonable proportion to the actual harm suffered,” which could be
a “sufficiently serious case [that] the due process clause might be
invoked.” Parker v. Time Warner Entm’t Co., 331 F.3d 13, 22 (2d
Cir. 2003); see also St. Louis, Iron Mountain & S. Ry. Co. v. Williams,
251 U.S. 63, 66-67 (1919) (Although states have wide latitude in
setting penalties for statutory violations, states cannot impose
penalties “so severe and oppressive as to be wholly disproportioned
to the offense and obviously unreasonable.”). Not surprisingly,
Associated Business Products, 126 P.3d at 326, adopted the Gore
factors and applied them to statutory penalties and civil fines.10
10Associated Business Products, 126 P.3d at 326, quoted the
recitation of the factors in Cooper Industries, 532 U.S. at 425;
33
¶ 74 Dami asserts that the Director did not adequately apply these
factors in his supplemental decision. True, the Director discussed
the factors in his order on remand, although only after having been
directed to do so by the Panel. But recall the Director determined
that because the factors were incorporated into section 8-43-409
and Rule 3-6, no further fact-specific analysis was required. In our
view, this approach sells the necessary constitutional inquiry short.
¶ 75 When the Gore/Cooper Industries analysis has been applied by
divisions of this court and by courts in other jurisdictions, the
factors were examined in the context of the fined party’s actual
behavior. No less is required here.
¶ 76 Consider Associated Business Products, 126 P.3d at 324,
where an employer and its insurer were fined $24,900 for delaying
or failing to pay $107.79 in medical bills incurred by an injured
worker. A division of this court upheld the fine. In applying the
Gore factors, it noted that the employer’s and its insurer’s actions
met the reprehensibility factor because they had (1) previously been
fined for failing to pay bills; (2) showed a pattern of delaying
Cooper Industries summarized and compiled the factors articulated
in Gore, 517 U.S. at 575, 580, 583.
34
payment of the worker’s bills; (3) failed to adhere to orders requiring
them to pay for attendant care services, medical supplies, and
prescriptions; and (4) disobeyed an order requiring them to identify
the claims adjuster handling the file and provide a complete copy of
the claims file and payment records. Id. at 326. The division went
on to compare the fine to the range of penalties allowed under the
statute and found it to be “well below the maximum” daily fine. Id.
at 327.
¶ 77 Next consider Blood, 252 P.3d at 1094, where the Colorado
Supreme Court applied the Gore factors to decide whether an $18
million punitive damages award assessed against Qwest was
“excessive and disproportionate.” A jury had awarded the punitive
damages to a lineman who suffered grave injuries when the pole he
was climbing — owned by Qwest — collapsed and fell to the ground.
The court examined Qwest’s behavior de novo. It noted that Qwest
(1) lacked “a periodic pole inspection program,” which demonstrated
a “conscious indifference to the safety of linemen”; (2) had failed to
implement such an inspection program for five decades; and (3)
should have foreseen the plaintiff’s injuries caused by the collapse
of a pole due to rot as the natural result of never inspecting its
35
poles. Id. at 1095-97. Based on these particular facts, the court
affirmed the award.
¶ 78 Similarly, courts in other jurisdictions have applied the
Gore/Cooper Industries factors using a fact-specific analysis. See,
e.g., Lompe v. Sunridge Partners, LLC, 818 F.3d 1041, 1065-73
(10th Cir. 2016) (reducing a punitive damages award against an
apartment management company for tenant’s carbon monoxide
poisoning injuries on grounds that, under Gore factors, the amount
was excessive when compared to other carbon monoxide poisoning
cases); In re Exxon Valdez, 270 F.3d 1215, 1242 (9th Cir. 2001)
(rejecting a $5 billion punitive damages award against Exxon in part
because “there was no violence, no intentional spilling of oil (as in a
‘midnight dumping’ case), and no executive trickery to hide or
facilitate the spill”); People ex rel. Bill Lockyer v. Fremont Life Ins.
Co., 128 Cal. Rptr. 2d 463, 475-81 (Cal. Ct. App. 2002) (upholding
a civil penalty because it did not violate the Gore factors); In re
Marriage of Miller, 860 N.E.2d 519, 523-24 (Ill. App. Ct. 2006)
(comparing the $1,172,100 penalty imposed against an employer for
failure to garnish the wages of an employee who owed child support
against the maximum fine for the criminal offense of failing to pay
36
child support and concluding that the penalty was excessive), rev’d,
879 N.E.2d 292 (Ill. 2007) (reconsidering the factors in light of the
evidence and reinstating the $1,172,100 penalty).
¶ 79 We consider these decisions well reasoned and apply them
here. Thus, when Dami challenged the fine as constitutionally
excessive, the Director should have weighed the facts specific to
Dami. By failing to do so, the Director misapplied the law and
abused his discretion. See Patterson, ¶ 6; Heinicke, 197 P.3d at
222.
¶ 80 Even so, could we set aside the Panel’s final order upholding
the fine unless the Director’s failure to make a fact-specific inquiry
harmed Dami? After all, as the Director recognized, the formula in
Rule 3-6 gives limited voice to the Gore factors.
¶ 81 The record contains Dami’s written assertions and Ms. Pak’s
affidavit.11 In his supplemental order and order on remand, the
11As indicated, Ms. Pak’s affidavit explained that she relied on her
insurance agent to obtain and maintain all necessary insurance
coverages, but she asserted inability to pay the fine only in her
separate letter to the division, which served as Dami’s initial
petition to review. Of course, appellate courts may only consider
assertions that are supported by record evidence, McCall v. Meyers,
94 P.3d 1271, 1272 (Colo. App. 2004), and mere arguments of
counsel must be disregarded. Lucero v. People, 166 Colo. 233, 237,
37
Director accepted these assertions as true. The division did not
controvert any of this information before the Panel, nor does it do so
on appeal. And “a legal conclusion drawn by the Panel from
undisputed facts is a matter for the appellate court.” Coates, Reid
& Waldron v. Vigil, 856 P.2d 850, 856 (Colo. 1993). So, we apply
the Gore/Cooper Industries factors to those undisputed facts as
follows.
a. Reprehensibility
¶ 82 In a punitive damages case, our supreme court has adopted
the Supreme Court’s criteria for assessing reprehensibility:
The [United States Supreme] Court has
analyzed the Gore reprehensibility guidepost
according to the following five criteria:
the harm caused was physical as
opposed to economic; the tortious
conduct evinced an indifference to
or a reckless disregard of the health
or safety of others; the target of the
conduct had financial vulnerability;
the conduct involved repeated
actions or was an isolated incident;
and the harm was the result of
intentional malice, trickery, or
deceit, or mere accident.
442 P.2d 820, 822 (1968). But exactly what must be included in
such a petition to make a sufficient record is not resolved by
statute, regulation, or case law.
38
“The existence of any one of these [criterion]
weighing in favor of a plaintiff may not be
sufficient to sustain a punitive damages
award; and the absence of all of them renders
any award suspect.”
Blood, 252 P.3d at 1094-95 (quoting State Farm Mut. Auto. Ins. Co.
v. Campbell, 538 U.S. 408, 419 (2003)).
¶ 83 Dami said that it was unaware of the lapses of workers’
compensation insurance. The Director found that Dami should
have known about the lapses, but relied only on the prior violation
in doing so. Instead, the uncontroverted evidence provided in Ms.
Pak’s affidavit indicates she trusted her insurance agent to
maintain the necessary coverages. In turn, the agent agreed that
Ms. Pak was likely confused, that she did not realize she lacked the
insurance, and that he “did not tell” her Dami lacked workers’
compensation insurance.
¶ 84 These facts put Dami at the low end of the reprehensibility
scale. By any fair reading of Blood, Dami did not act with
“indifference to or reckless disregard for the safety of others,” nor
did it act with intentional malice, trickery or deceit.
39
b. Disparity Between Actual or Potential Harm
to Employees and the Fine
¶ 85 Dami submitted its unemployment records showing that it had
fewer than ten employees and its annual payroll was less than
$50,000. Dami also said that a workers’ compensation claim has
never been filed against it. The division could easily have
controverted the latter statement, but has not done so. This
information is significant in two ways.
¶ 86 First, because no claims have been filed against Dami, the
lack of workers’ compensation insurance did not actually harm any
of Dami’s employees.
¶ 87 Second, as for potential harm, Dami has few employees. Cf.
Blood, 252 P.3d at 1079, 1098 (noting that Qwest’s failure to
inspect any of its 157,000 poles for five decades endangered
“linemen and the public”). And Dami’s lengthy history with no
reported claims also suggests that the risk of injury to those few
employees is low.
¶ 88 Yes, as the Director observed, “an employer that continues to
operate without insurance for a lengthy period of time creates an
ever-growing risk that a worker will be injured and be forced to rely
40
solely on the employer to pay for the injury.” Because the record
does not include any evidence of particular risks arising from the
nature of Dami’s operations, however, this observation paints an
incomplete picture. Of course, all employees working for an
employer without workers’ compensation coverage are at financial
risk should an injury occur and the employer be unable or
unwilling to compensate the injured worker. But the magnitude of
that risk depends on the likelihood of severe or fatal injury.
¶ 89 As to that likelihood, the Director observed only that
housekeeping and maintenance work involved potentially heavy
lifting, which could lead to injury. But he did not refer to
industry-specific data from Colorado. Nor have we found any.
¶ 90 To fill this void, we have taken judicial notice of federal
government reports. Campbell v. Manchester Bd. of Sch. Dirs., 641
A.2d 352, 359 n.7 (Vt. 1994) (“The Court in Nyquist took judicial
notice of enrollment data from publicly available government
reports, exactly the type of information we have used here. See
Committee for Public Education & Religious Liberty v. Nyquist, 413
U.S. 756, 768 n. 23 (1973).”). According to the United States
Department of Labor’s most recent reports, the “leisure and
41
hospitality” industry ranks below the midpoint of other industries
for incidence of nonfatal workplace injuries and well below that
point for fatal injuries.12
c. Comparable Penalties
¶ 91 The record is barren of any evidence comparing Dami’s fine
against fines imposed on other uninsured employers. We cannot
fault Dami for this void because it would lack access to such
information. Nor has the division provided it.
¶ 92 Instead, Dami identifies a 2005 “State Fiscal Impact
Statement” related to the amendment of section 8-43-409, which
estimated that the total fines collected from all violators of the
statute in 2006-2007 would be “$200,000.” Further, Dami points
out that the General Assembly anticipated the average fine would
be $28,500, and that its fine exceeds this estimate by 2900%.13
12 The reports are released by the Bureau of Labor Statistics and
can be found at Bureau of Labor Statistics, Nonfatal Occupational
Injuries and Illnesses Requiring Days Away from Work, 2015 (Nov.
10, 2016), https://perma.cc/G4QQ-FM7V (nonfatal injuries); and
Bureau of Labor Statistics, Census of Fatal Occupational Injuries
Summary, 2015 (Dec. 16, 2016), https://perma.cc/Q7DF-XK7U
(fatal injuries).
13 Dami’s brief refers to a January 18, 2005, “State Fiscal Impact
Statement” and attaches a “Summary of Legislation under State
Revenues.” The Summary does not state from where it derived the
42
¶ 93 Even so, according to the Director, the fines imposed on
different employers must be similar because all of them were
imposed solely by applying the formula in Rule 3-6. This assertion,
even if accurate, accounts for only one-half of the process.
Although we have rejected Dami’s vagueness argument, we agree
that the more time that lapses before the division gives notice to an
uninsured employer, the more the fine will have mounted. Due to
this variable, significantly disparate fines could be imposed, despite
the Director’s formulaic approach.
5. Ability to Pay
¶ 94 Dami next argues that the Director should have considered its
ability to pay before imposing the penalty. As indicated, the
Director did not do so, asserting lack of statutory or regulatory
authority.
¶ 95 No Colorado case that Dami has cited, or that we have found,
requires that ability to pay be considered before imposing a civil
fine. However, Colorado courts consider ability to pay before
imposing criminal fines. See, e.g., People v. Stafford, 93 P.3d 572,
figures. In any event, the division does not contest the accuracy of
this information.
43
574 (Colo. App. 2004) (“[A] sentencing court must consider the
defendant’s financial status in determining the appropriate amount
of any fine to be levied.”); People v. Pourat, 100 P.3d 503, 507 (Colo.
App. 2004) (“[I]n imposing a fine, a trial court must consider a
defendant’s ability to pay.”).
¶ 96 As well, the United States Supreme Court has held that a
defendant’s ability to pay must be considered before a monetary
civil contempt sanction may be imposed. See United States v.
United Mine Workers of Am., 330 U.S. 258, 304 (1947) (“It is a
corollary of the above principles that a court which has returned a
conviction for contempt must, in fixing the amount of a fine to be
imposed as a punishment or as a means of securing future
compliance, consider the amount of defendant’s financial resources
and the consequent seriousness of the burden to that particular
defendant.”).
¶ 97 Other states have required that ability to pay be considered
before imposing a civil penalty. See Parisi v. Broward Cty., 769 So.
2d 359, 366 (Fla. 2000) (“[I]n imposing both criminal fines or
coercive civil contempt fines, the court must consider the financial
resources of the contemnor in setting the amount of the fine.”).
44
¶ 98 In a case remarkably similar to this one, the Minnesota Court
of Appeals listed ability to pay as one of the factors to be considered
before a fine could be imposed against an employer for failing to
carry workers’ compensation insurance. See State Dep’t of Labor &
Indus. v. Wintz Parcel Drivers, Inc., 555 N.W.2d 908, 913 (Minn. Ct.
App. 1996) (citing State v. Alpine Air Prods., Inc., 490 N.W.2d 888,
896-97 (Minn. Ct. App. 1992)), modified, 558 N.W.2d 480 (Minn.
1997). Wintz Parcel Drivers upheld a penalty against a trucking
firm in excess of $1.2 million for failure to carry workers’
compensation insurance. Although the opinion does not say how
many employees Wintz had or describe its financial status, the
court mentions that Wintz’s workers’ compensation insurance
premium for the uncovered period would likely have been over $1
million. Id.14
¶ 99 Guided by these authorities, we conclude that ability to pay
should be considered when determining whether a penalty imposed
against an employer for failure to carry workers’ compensation
insurance is constitutionally excessive.
14The record does not contain any comparable information for
Dami.
45
¶ 100 Ms. Pak’s letter asserted that Dami cannot afford to pay a fine
of $841,200, which would put it — and her — into bankruptcy. The
record does not include any contrary information. Nor does the
division argue otherwise.
¶ 101 Thus, although the Director did not exercise his statutory
power to seek a cease and desist order putting Dami out of
business, which Dami could have opposed, the fine indirectly
achieved this result. Still, the record does not fully describe Dami’s
financial condition, such as its net worth. For this reason, we are
unable to say whether Dami could pay a reduced fine.
¶ 102 Based on all of these facts, we conclude that the present
record shows the $841,200 fine to be excessive. In saying this
much, however, we take care to emphasize what we are not saying
— that a lower fine against Dami would necessarily also fail a
constitutional challenge. To the contrary, the constitutionality of
such a fine can be addressed only when that fine has been imposed
and any additional record is before us.
46
IV. Incorporating Provisions of Section 8-43-304
into Section 8-43-409
¶ 103 Dami next contests the fine by contending that provisions of
section 8-43-304, C.R.S. 2016, must be read into section 8-43-409.
In particular, Dami focuses on provisions in section 8-43-304 that
(1) grant a violator twenty days to cure a violation and thus avoid a
penalty, § 8-43-304(4); (2) require a party charging an opponent
with a violation to prove by clear and convincing evidence that the
violation occurred, § 8-43-304(4); and (3) mandate that a party
alleging a violation file a claim within one year of when it knew or
reasonably should have known of the alleged violation,
§ 8-43-304(5).
¶ 104 Based on these provisions, Dami argues that the fine must be
set aside because (1) it cured its failure to carry workers’
compensation insurance within twenty days; (2) the division did not
prove Dami’s violation by clear and convincing evidence; and (3) the
division did not file its notice of violation within one year of when
Dami’s violation should reasonably have been discovered. But
Dami’s conclusion fails because its premise that the provisions of
section 8-43-304 must be read into section 8-43-409 is flawed.
47
¶ 105 As with any statute, the provisions of the Act must be read
“harmoniously, reconciling conflicts where necessary.” Anderson v.
Longmont Toyota, Inc., 102 P.3d 323, 327 (Colo. 2004). But that
general principle does not give a reviewing court license to read
provisions from one statute into a different statute. To the
contrary, courts are expressly prohibited from reading provisions
into the Act. See Kraus v. Artcraft Sign Co., 710 P.2d 480, 482
(Colo. 1985) (“We have uniformly held that a court should not read
nonexistent provisions into the Colorado Workmen’s Compensation
Act.”).
¶ 106 Relying on Holliday v. Bestop, Inc., 23 P.3d 700, 705 (Colo.
2001), Dami argues that nothing in section 8-43-304 prohibits its
provisions from being read into section 8-43-409. Then Dami
insists that because the limiting phrase in section 8-43-304 — “for
which no penalty has been specifically provided” — only applies to
one of the four different acts giving rise to penalties under that
statute, the other three types of actions leading to penalties may be
read broadly and into section 8-43-409.
¶ 107 Holliday held as follows:
48
The legislature’s use of the disjunctive
conjunction “or” in section 8-43-304(1) plainly
demarcates four different acts giving rise to
penalties. The legislature’s use of “or” makes
clear that the statute penalizes the person
who: (1) “violates any provision of [the Workers’
Compensation Act],” (2) “does any act
prohibited thereby,” (3) “fails or refuses to
perform any duty lawfully enjoined within the
time prescribed by the director or panel, for
which no penalty has been specifically
provided,” or (4) “fails, neglects, or refuses to
obey any lawful order made by the director or
panel or any judgment or decree made by any
court as provided by said articles.”
23 P.3d at 705 (citation omitted) (quoting § 8-43-304(1)).
¶ 108 Thus, Holliday does not carry the weight that Dami places on
its shoulders. Had the General Assembly intended to incorporate a
cure provision, a limitation period, or a clear and convincing burden
of proof into section 8-43-409, it would have done so expressly.
Because it did not, we are not free to do so by judicial fiat. See City
of Loveland Police Dep’t v. Indus. Claim Appeals Office, 141 P.3d
943, 954-55 (Colo. App. 2006) (“If [the General Assembly] intended
to limit death benefits where the death results from mental
impairment, we conclude it would have done so expressly.”).
¶ 109 For these reasons, we decline to incorporate the provisions of
section 8-43-304 into section 8-43-409. Therefore, the Director was
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not obligated to credit Dami for curing the violation, was not
required to prove by clear and convincing evidence that Dami
violated section 8-43-409, and did not have to file notice of Dami’s
violation within one year of Dami’s lapse.
V. Conclusion
¶ 110 The fine must be set aside because the Director abused his
discretion when he failed to apply the Associated Business Products
factors — derived from Gore and Cooper Industries — to Dami’s
specific circumstances. Facts relevant to that application include
Dami’s ignorance that the required insurance had lapsed. While
not mandated by Gore, the failure to notify Dami of the lapse for
almost half a decade and Dami’s ability to pay are also relevant. On
remand, the fine may be recalculated, but only after these facts
have been weighed.
¶ 111 We conclude that Dami’s other contentions — challenging the
facial constitutionality of section 8-43-409, seeking to incorporate
the provisions of section 8-43-304 into section 8-43-409, and
alleging procedural due process violations — do not provide a basis
for setting aside the Panel’s final order affirming the Director’s
remand order.
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¶ 112 The Panel’s order is set aside and the case is remanded to the
Panel with directions to return it to the Director for recalculation of
Dami’s fine in accordance with this opinion.
JUDGE DUNN and JUDGE DAVIDSON concur.
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