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Sunday, April 02, 2006

Law - How paint companies lost a multi-billion dollar lead paint suit

This Feb. 24 ILB entry included this quote from the AP:

Three former makers of lead paint are liable for a product that has poisoned Rhode Island children for years, a jury ruled in a verdict that could result in the companies paying millions in clean-up costs.

Wednesday's verdict came after a more-than-three-month trial in which Rhode Island -- the first state to sue the paint industry over lead -- argued that the substance has sickened tens of thousands of children, contaminated homes and burdened landlords.

Today the NY Times has the "story behind the story," a multi-page report by Julie Creswell. A few quotes:
ON a frigid night in January, lawyers for four of the nation's largest paint manufacturers gathered in a rented office space in downtown Providence, R.I., to strategize on how to counter contentions that their clients were to blame for the state's decades-old lead-contamination problem. * * *

In the end, the defense team agreed not to call a single witness, confident the jury would conclude that their clients did nothing wrong. After all, for almost two decades, paint makers had fought off many lawsuits that contended their products had contaminated homes across the country with lead. And not once in all those years had the industry lost — or even settled — a large suit like this. An earlier trial in Rhode Island ended in a hung jury.

But four weeks after the paint companies' lawyers decided not to mount a defense in this case, six jurors filed into Rhode Island Superior Court and declared that three of the four companies on trial — Sherwin-Williams, NL Industries and Millennium Holdings — were indeed liable for Rhode Island's lead-paint problem.

It was a surprising and devastating verdict for the industry, and the reaction was swift and severe. The stocks of the paint companies tumbled, wiping out billions of dollars in market value that afternoon. Investors worried that the clean-up costs in Rhode Island alone could total billions of dollars, and that the industry would now face a tidal wave of torts like those that have swept across the tobacco, asbestos and pharmaceutical industries.

The damages could range from zero, depending upon appeals, to potentially boundless "if additional states hop on the lawsuit bandwagon," wrote Ivy L. Zelman, a research analyst at Credit Suisse, in a report in which she announced that she was suspending her rating on Sherwin-Williams' stock.

The jury's decision was particularly shocking because none of the paint makers had sold a drop of lead-based residential paint — in Rhode Island or anywhere else in the United States — for nearly 30 years. There is also no proof that their paint was actually used on a wall in the state. Lastly, as the incidences of lead blood poisoning in children has dropped sharply, some people wonder if Rhode Island even has a lead-poisoning problem anymore.

So how did the paint companies lose this case?

Three defense lawyers interviewed for this article said that this was one of the most bizarre lawsuits and trials of their careers. They blame what they call Rhode Island's quirky public nuisance laws. They also contend that the judge overseeing the case had severely limited their ability to gather evidence and present a defense, and say that he may have given erroneous instructions to the jury. (All of this territory will no doubt be mined for likely appeals.)

But behind the scenes, several other factors may have played a role: the courtroom-strategy battles among the defense lawyers, for instance, and their hubris from never having lost a lawsuit before. Three of the six jurors interviewed for this article, for example, said they had been surprised and disappointed that the defense did not offer any witnesses to rebut the state's central allegation: that simply by having been in the business of making lead-based paint, companies contributed to what is now a pervasive public nuisance. "They could have brought their own witnesses up there," the jury's foreman, Gerald Lenau, said. "The fact is, the person you hear last does leave a lasting impression, but maybe they couldn't dispute anything." * * *

As painful and expensive as the case's outcome could be for the paint companies, it also raises issues that go far beyond that industry. In particular, should state officials be allowed to essentially outsource public-health and public-nuisance cases to private legal firms that will try the cases free but take a piece of any recoveries made? Seven years ago, Sheldon Whitehouse, then Rhode Island's attorney general, agreed to those terms. * * *

An even larger issue raised in this case is whether the nation's product-liability laws, which have set boundaries under which manufacturers can be held liable for defective products, could now be undermined by state public nuisance laws, a set of broad statutes with vague boundaries and limits.

Posted by Marcia Oddi on April 2, 2006 08:23 AM
Posted to Environment | General Law Related