Punitive damages award found unconstitutional.

For the first time, a federal appeals court has held that a punitive damages award violated the U.S. Constitution.

A three-judge panel of the Eighth Circuit Court of Appeals in December did what the U.S. Supreme Court has said it would allow but has never done itself:

The panel found that a punitive award was so out of proportion to actual damages that it ran afoul of the defendant's due process rights. (Pulla v. Amoco Oil Co., Nos. 94-4001, 95-1047,1995 WL 747259 (8th Cir. Dec. 19,1995).

The plaintiff's request for review by the full Eighth Circuit was denied. His attorneys are considering whether to take the case to the Supreme Court.

Trial lawyers have fought recent attempts by defendants to persuade courts to put constitutional limits on punitive damages. Larry Stewart, ATLA's immediate past president, urged trial lawyers not to "overreact" to Pulla. "The constitutional issue only arose because at trial Amoco's lawyers failed to preserve the excessiveness issue," he said.

The three-judge panel, led by former Supreme Court Justice Byron White, threw out an Iowa jury's $500,000 punitive damages award against Amoco Oil Co. The jury had awarded only $2 in actual damages to the plaintiff, Thaddeus Pulla.

Pulla, an employee in Amoco's credit card department in Des Moines, sued the company for age discrimination after he was demoted and transferred out of a supervisory position. He added a claim for invasion of privacy after learning that a coworker had searched his credit card records looking for evidence that Pulla had abused his sick leave.

The coworker found that Pulla had used his credit cards in restaurants and bars on days he called in sick. She passed the information on to her and Pulla's supervisor, who reprimanded her for conducting the search. Nevertheless, the supervisor notified the company's human resources department. From then on, Pulla was required to submit a doctor's note when he requested sick leave.

The jury rejected the discrimination claim but awarded damages for invasion of privacy, finding that the company had willfully disregarded Pulla's rights.

On appeal, the Eighth Circuit panel held that the punitive award was unreasonable because the search of Pulla's credit records was an isolated incident, not a company policy. The court noted that there was no evidence that anyone else's privacy was at risk.

"[T]his case is different from the gunman who fires into a crowd, but only breaks someone's glasses, or a manufacturer who puts several thousand potentially dangerous products into the marketplace, "White wrote. He distinguished Pulla's award from the $6.5 million punitive damages award in Hopkins v. Dow Corning Corp., a breast implant case. That award was upheld on appeal. (33 F.3d 1116 (9th Cir. 1994).

"In this case, given the limited offensiveness of Amoco's actions and the unlikelihood of any serious potential harm from its conduct," White wrote, "we hold that the 250,000 to 1 ratio between punitive and actual damages is excessive, unreasonable, and violative of due process."

Jim Rossi, a law professor at Florida State University who is assisting with Pulla's possible appeal, said the court disregarded the evidence. He said the jury found that Amoco was aware that its employees occasionally searched people's credit records and failed to stop the practice. "There clearly was a pattern here," he said.

"This is a complete replacement of the trial court's evaluation of the appropriateness of the award with [the panel's], said Rossi, whose father, I. John Rossi of Des Moines, represented Pulla at trial. "This is the danger of substantive due process."

Stewart downplayed the importance of the Eighth Circuit's decision, saying it will have little impact on future cases. "It is a rather limited holding that should riot apply in products liability cases, since those cases always involve the potential for future harm to others," he said.

"Pulla does underscore the importance in punitive damages cases of presenting evidence not only of the potential of harm to others but also of knowledge or complicity of top-level management or executives," Stewart added.