The Supreme Court today let stand a $3.5 million punitive-damages award won by a San Diego gas station operator against Atlantic Richfield Co. The justices, without comment, refused to hear arguments that the award, believed to be the second largest of its kind ever upheld in California courts, is unconstitutionally excessive. John V. Nielsen had operated an ARCO station as an independent dealer for 12 years before agreeing to convert his service station to a mini-market and self-service station in 1979. His lawsuit charged ARCO with fraudulently misrepresenting facts in connection with the conversion of his station. A state court jury awarded Nielsen $525,788 in compensatory damages _ $79,061 in out-of-pocket losses, $396,727 in lost anticipated profits and $50,000 for emotional distress. The jury also awarded him $3.5 million in punitive damages against ARCO. A state appeals court upheld the award except for the emotional-distress damages, and the California Supreme Court refused to hear ARCO's appeal. In the appeal acted on today, lawyers for ARCO argued that the huge punitive-damages award _ seven times the compensatory-damages award _ violates the Eighth Amendment's ban on ``excessive fines.'' No court has ever applied that constitutional principle to non-criminal cases. The Supreme Court in May passed up deciding in a Mississippi case whether the constitutional ban on ``excessive fines'' can be applied to personal-injury lawsuits. Some state legislatures, reacting to soaring insurance rates, in recent years have imposed ceilings on how much money can be recovered in personal-injury lawsuits. Lawyers for ARCO urged the justices to ``send a clear signal that the state courts must stop these gargantuan awards.'' But lawyers for Nielsen argued that the ARCO appeal should not be granted because the oil company's lawyers had not raised the ``excessive fines'' argument in state courts. The justices refused to address the punitive-damages issue in the Mississippi case decided earlier this month after noting that it had not been raised in state courts. ARCO's appeal did not challenge the $475,000 compensatory-damages award won by Nielsen. The case is Atlantic Richfield vs. Nielsen, 87-1196.