REGARDLESS OF what you think about tobacco companies, you should welcome last week's Supreme Court decision that repudiated an $80 million ruling against Philip Morris. Beyond question in this case was that the tobacco giant had misled Jesse Williams, a longtime cigarette smoker who died of lung cancer, into believing that smoking was not dangerous and that it therefore was culpable for his illness. The issue instead revolved around how the jury calculated the size of the punitive damages it awarded Mr. Williams's estate -- almost all of the $80 million package.
The majority held that the Oregon court considering the case should have made clear to the jury that it was not to punish Philip Morris directly for the harm it might have caused smokers other than Mr. Williams. During the trial, the plaintiff's lawyer asked the jury to consider the ill health the deceptively advertised product might have produced in other Oregonians. The result was a fat punitive award, though it is unclear how much the jury heeded the plaintiff's counsel when it settled on the amount. Regardless, the high court has set an important precedent: Defendants should not be punished for injuries they might have caused "strangers to the litigation," as Justice Stephen G. Breyer wrote in the majority opinion. Otherwise, they would not have a fair chance to defend themselves against the hypothetical harm they might have done to an unspecified number of people under varying conditions.
The question the court did not answer is whether the punitive award the jury handed down was "grossly excessive," a standard that the court established in the past but has not concretely defined. The court has indicated that punitive damages generally should be a single-digit multiple of the base compensation a jury awards a plaintiff. That vague standard and the current majority's sidestepping of the issue reflect the difficulty judges have had in establishing clear limits on the often outrageous size of punitive awards.
Capping punitive damages is a task suited for state legislatures, and it's one states should complete. States should also ensure that punitive damages -- meant to serve the public interest by punishing companies for wrongdoing, not to enrich plaintiffs -- go into public coffers.