Judge Jack Komar
Paint manufacturers won a major victory yesterday when a California Superior Court ruled that a county cannot hire outside attorneys on contingency when suing for damages for lead-paint removal.
One analyst following U.S paint-maker stocks says the ruling could prove "the seminal event in the lead paint litigation saga."
The Court heard Tuesday the case (No. 100CV788657) of Santa Clara County against seven paint manufacturers, including industry-leading Sherwin-Williams Co., over removing products containing lead. The county alleges such products constitute a "public nuisance."
Such cases are difficult to prosecute because most manufacturers stopped making such paint decades ago and plaintiffs cannot identity which company made which lead-based paint.
Rhode Island last year won a suit ordering three paint manufacturers to pay for clearing lead paint from around 250,000 homes at a cost of around $1 billion. The manufacturers have appealed to the state Supreme Court.
The Santa Clara ruling throws doubt on whether other suits against lead-paint makers will stick. The ruling "certainly will influence the decision making process of other jurisdictions contemplating similar actions," writes Todd Sullivan on equity-watch blogsite SeekingAlpha.
In this case the seven sought a court order barring contingency payments to private attorneys. They cited a Supreme Court ruling that such a practice is "antithetical to the standard of neutrality that an attorney representing the government must meet when prosecuting a public nuisance abatement action."
The Superior Court agreed. "If Defendants are entitled to neutral prosecution by government attorneys who are not operating under a contingent fee arrangement, then they are so entitled throughout the prosecution of this case," Judge Jack Komar wrote for the ruling.
The ruling is having an immediate impact in Ohio, where on Monday Attorney General Mark Dann filed a similar suit to that in Santa Clara against 10 paint companies. Gov. Ted Strickland vetoed a Republican-backed bill earlier this year that would have protected paint-makers from such suits.
Republican legislative leaders sued to overturn Strikland's veto and the case is now before the Ohio Supreme Court. Dann now faces strong pressure to drop the suit from Senate President Bill Harris and House Speaker Jon Husted, both Republicans.
In a joint statement they wrote: "This lawsuit would send the wrong message about our desire to bring business and jobs to our state. We need to build on ... progress, not take a step backward with lawsuits against Ohio employers."
And the Missouri Supreme Court will hear a similar case April 12, brought by the City of St. Louis against paint companies. A trial court ruled that manufacturers should pay "abatement of public nuisance" costs only for the 10-year statute of limitations period and dismissed all other claims by the city. The city appealed.
But after yesterday's ruling, all bets on the issue appear to be off. "It is obvious the tide is rapidly turning against this litigation," Sullivan concluded in today's entry.