Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 17

Hamlin v. Hampton Lumber Mills, Inc.
Supreme Court of Oregon, 349 Or. 526, 246 P.3d 1121 (2011).
FACTS Hampton Lumber Mills, Inc., operates a lumber mill in Oregon. Ken Hamlin, a temporary employee, was injured while working at the mill. The company never instructed Hamlin on how to "lock out" the machinery to clear jams safely and avoid injury. Nor did it issue him the locks necessary to do so. Instead, Hamlin was told to watch the other employees and to do what they did. On the night he was injured, Hamlin was told to stand in a specified location, which later was determined to be unsafe. When a board became wedged between a conveyor belt and a bin, Hamlin was told to grab the board, and the machinery caught his glove and mangled his thumb. Hamlin was hospitalized and unable to work for four months. During that time, the mill twice told Hamlin that his job was secure. The agency through which he had been hired also informed Hamlin that under Oregon law he had the right to be reinstated when he recovered. During his recovery, Hamlin received workers' compensation benefits, and he filed a complaint with the Oregon Occupational Safety and Health Administration (OR-OSHA, see Chapter 22). When he was ready to work, the mill refused to reinstate him on the ground that he was a "safety risk." Hamlin filed an action against the mill for failing to reinstate him and claimed that the mill was retaliating against him for filing a complaint with OR-OSHA. A jury awarded him lost wages of $6,000 and punitive damages of $175,000. The mill appealed, claiming that the punitive damages award was so "grossly excessive" that it violated due process. The appellate court agreed, finding that the ratio between the punitive and compensatory damages (plus interest) awarded in the case was 22:1-well outside the 4:1 ratio that the defendant asserted was appropriate in such cases. Hamlin appealed to the state supreme court.
ISSUE Can the award of punitive damages be significantly greater than the compensatory damages and still not violate due process?
DECISION Yes. The Supreme Court of Oregon reversed the decision of the state appellate court.
REASON The state's highest court looked at decisions of the United States Supreme Court that offered three "guideposts" to determining whether punitive damages were grossly excessive: (1) the degree to which a defendant's misconduct is reprehensible, (2) the disparity or ratio between the punitive and compensatory damages awards, and (3) how the punitive damages award compares with civil penalties authorized by statute for comparable misconduct. Although the ratio of compensatory to punitive damages is an important consideration in most cases, the state supreme court reasoned that it is not the only consideration. "A state may be unable to achieve its goals of deterrence and retribution if awards of punitive damages must, in all instances, be closely proportional to compensatory damages." The court found that when the compensatory damages award is small, the ratio between punitive and compensatory damages is of limited assistance in determining whether the amount of punitive damages violates due process. In this case, $6,000 in lost wages is a relatively small amount, but the mill's conduct was reprehensible because it acted in reckless disregard of its employees' safety. Moreover, the Oregon legislature has protected similar interests in workplace safety by requiring employers to reinstate injured workers and by authorizing punitive damages against employers who breach their obligations to employees. The court concluded that the ratio between the punitive and compensatory damages "is higher than would be constitutionally permissible if the compensatory damages were more substantial, but is not so high that it makes the award 'grossly excessive.' "
FOR CRITICAL ANALYSIS-Legal Consideration Why has the United States Supreme Court declined to articulate a hard-and-fast rule for when the ratio between compensatory and punitive damages is
too great?