Courts continue to address the constitutional parameters of punitive damages awards. This issue is of particular significance to insurance companies handling claims for bad faith. Insurers should take note of a recent decision from the Eastern District of Pennsylvania, where the Court enforced recent U.S. Supreme Court decisions in Gore v. BMW and State Farm v. Campbell ruling that few punitive damage awards that exceed a single digit ratio to compensatory damages can withstand constitutional scrutiny. In Dixon-Rollins v. Experian Information Solutions, Inc., 2010 WL3749454 (E.D. Pa., September 23, 2010), the plaintiff sued Trans Union, Inc. for repeatedly violating its statutory obligation under the Fair Credit Reporting Act ("FCRA"). After trial, the jury awarded the plaintiff $30,000 in compensatory damages and $500,000 punitive damages for Trans Union's willful violation of the FCRA. The ratio of punitive to compensatory damages was 16.67 to 1.

On Trans Union's post-trial motion, the Court slashed the award of punitive damages to $270,000, representing a 9 to 1 punitive to compensatory ratio. Even though there was overwhelming evidence that despite prior judicial rulings and warnings, Trans Union continued a practice of ongoing and repeated violations of the FCRA, the Court concluded that the punitive damages award should be significantly reduced. This decision shows that even in situations where the defendant's conduct is particularly egregious, the recent trend is that courts are generally reluctant to exceed the 9 to 1 ratio.

To learn more about this issue, contact Michael Hamilton at 215-358-5172 or mhamilton@nldhlaw.com.