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Monday, February 17, 2020

$1B 'retroactive liability' lead paint case vs paint makers could pave way for overreach, Calif. appeals panel told

By Jonathan Bilyk | Aug 24, 2017

Law money 09

SAN JOSE, Calif. (Legal Newsline) - Lawyers for three current and former paint manufacturers on the hook for a $1.15 billion judgment over the presence of lead paint in more than 3 million California homes have asked a California appeals court to overturn that judgment, saying the judge overreached and trespassed on legal turf more properly reserved for lawmakers, and to rule otherwise would open a virtual Pandora’s box of further judicial abuses and other unforeseen harms on homeowners, businesses and taxpayers, alike.

In response, an attorney arguing for a collection of California county and city governments suing the once and current paint sellers told the appellate justices those concerns were overblown, and the trial court’s judgment was well-grounded in public nuisance law.

On Aug. 24, lawyers for the paintmakers and the California municipal governments squared off before a three-justice panel of the California Sixth District Appellate Court in San Jose, with more than $1 billion potentially on the line.

Sixth District Appellate Justices Eugene M. Premo, Franklin D. Elia and Nathan M. Mihara presided over the more than two hours of arguments before a courtroom packed with dozens of lawyers for the various parties, as well as local governmental officials and corporate representatives.

The hearing was the latest step in the 17-year history of the litigation, which dates to the turn of the century, when the counties of Alameda, Los Angeles, Montery, San Mateo, Santa Clara, Solano and Ventura, and the cities of Oakland, San Diego and San Francisco first filed suit against a number of paint manufacturers who had in the past manufactured and sold lead-based paint.

The municipal governments had argued the paint merchants should be held liable for promoting the use of the toxic lead paints inside homes and other residential buildings until lead-based paint was banned in 1978.

In 2013, at the end of a six-week trial and after 13 years of litigation, Santa Clara Superior Court Judge James Kleinberg, who has since retired, ruled for the municipalities, saying the manufacturers must pay to remove or otherwise abate lead paint in millions of homes because the presence of the paint alone constitutes a “public nuisance” under the law.

He later ordered three companies alone – NL Industries Inc., which sold paint under the Dutch Boy brand, The Sherwin-Williams Company and ConAgra Grocery Products, which at one time owned the Fuller paint brand – to pay $1.15 billion to fund a program to investigate homes for the presence of lead and remove lead paint from an estimated 3 million California homes.

The judgment prompted an appeal from the companies in 2015, eventually resulting in the Aug. 24 oral argument hearing before the Sixth District panel.

Attorneys for NL Industries, Sherwin-Williams and ConAgra used their time to paint a picture of a lower court judge who, in an “unprecedented” ruling, ignored the law and legal precedent to effectively establish a new lead remediation program, and order the three companies to fund it from their pockets on behalf of the entire paint industry.

Jameson Jones, of the firm of Bartlit Beck Herman Palenchar & Scott LLP, representing NL Industries, noted Judge Kleinberg “admitted” to “holding (the companies) retroactively liable” for selling lead-based paint in the first half of the 20th Century, when the full extent of the health hazards posed by lead were not scientifically known until established in studies in the latter half of the last century and the even in the early 2000s.

And further, Jones said, when the companies asked the municipal governments to substantiate the extent of the problem and determine why these three companies should be held responsible, they declined, instead leaving it to the judge to order the companies to pay $400 million to fund the investigative aspect of the court-ordered household lead paint abatement program.

Raymond Cardozo, of the firm of ReedSmith LLP, representing ConAgra, expanded on that argument, arguing the plaintiffs, despite the ruling of Judge Kleinberg, never established “causation” between the manufacture and sale of lead paint and any specific public nuisance under California nuisance law.

“Nuisance is location specific,” Cardozo said. “You can only be liable for the contamination you cause.”

To hold otherwise, he contended - pointing to decisions in other states, including Illinois - would “make any participant in any industry an insurer of the entire industry,” when perceived wrongs must be addressed as scientific understanding evolves or public sensibilities change years or even decades in the future.

He noted his client, ConAgra, had only held the Fuller paint brand for three years, before spinning the brand off to a subsidiary company and selling that company.

“And now, 30 years later, we have to clean up the whole lead paint problem because we touched one paint company at one time,” said Cardozo.

And attorney Paul “Mickey” Pohl, of the firm of Jones Day, representing Sherwin-Williams, argued the ruling bears not only ramifications for the paint makers and other manufacturers and retailers, but for homeowners and taxpayers, as well.

He noted the ruling would establish a publicly searchable database containing lists of properties in California which have been tested for the presence of lead point, and in which lead paint has been removed or otherwise abated.

Should homeowners decline an inspection or intrusive remediation work funded under the program, they could end up on a “blacklist,” he said, leading to a loss of property value and potentially of property tax revenue, as well.

Further, he said, such a public program funded not by taxpayers, but by three companies, effectively provides no incentive to “slum landlords” to keep up their properties, knowing the state, flush with the money from this special fund, would eventually perform the maintenance they have neglected.

“This (judgment) is the slum landlord relief act,” said Pohl.

A sweeping lead remediation program such as this is the “exclusive province of the legislature,” and not for the courts to order, Pohl said.

In response, Danny Chou, assistant county counsel for Santa Clara County, who argued on behalf of the plaintiffs, said the justices should brush off the potential harms envisioned by the companies’ lawyers, calling them a “parade of horribles,” which would not materialize.

The benefits of removing lead paint from homes would far outweigh the cost of the removal, he said, noting homeowners in California’s Bay Area communities had long known of the presence of lead paint in homes, and home values there have done nothing but grow exponentially in recent decades.

“There’s no evidence these things are happening,” said Chou.

Chou said the “public nuisance” finding rests on sound legal ground, as the lead paint in the homes should be treated as an environmental contamination.

“It is no different than if someone had introduced this contaminant into the water,” he said.

He argued the companies had long known the lead pigments used in the paint posed a significant health threat when applied to the interior of homes, particularly to children.

Yet the companies continued to sell the paints and market it for use on the interior of homes for many years, even as knowledge grew of the health risks of lead exposure. While such knowledge has expanded greatly in the past 30-40 years, Chou said the companies knew enough as far back as the 1920s, or even earlier, to have scaled back lead paint production, or at least to stop marketing it.

Now, he said, Judge Kleinberg was correct to declare the presence of lead paint a public nuisance and impose the remedy in his $1 billion judgment.

“Removing the lead paint is the solution,” said Chou.

But since there is “no government money available” to fund such a solution, Chou said the court was right to hold these paint makers who manufactured and sold the lead-based paints liable, and “make them clean it up.”

Justice Elia was particularly vocal during the hearing, questioning attorneys for both sides. He centered much of his questioning on the manner and timing of advertising and promotional campaigns conducted by the paint makers.

In 2006, the Sixth District justices had waded in on that question, ordering the lower courts to decide the case on the question of whether the companies had “affirmatively promoted white lead pigments for use in interior residential paint while knowing that such use would create a public health hazard.”

Elia pointed to evidence in the case record showing none of the companies had promoted lead paint specifically in any advertising after the late 1940s.

He questioned how the court could square that reality with the finding the three companies should be held liable for lead-based paint use from 1950-1980.

Chou, however, said the ads didn’t need to specifically mention lead to be counted as promotion of lead based paint. He pointed specifically to two ads from the early 1950s and 1960s promoting paint sold by Sherwin-Williams which was known to contain some amounts of lead. While the ads didn’t mention lead, Chou said the company knew they contained lead, and didn’t disclose it. Further, he said, the ads did not specify the lead-containing paints were only suitable for use on the exterior of homes.

He said such ads were “exploiting consumer confusion” and “deceived consumers” on the question of whether paints containing lead were safe to use in their homes.

Elia also questioned whether Kleinberg’s judgment, if allowed to stand, could open the door to other “nuisance” lawsuits years down the road against the makers of other products long believed to be safe, but which science may yet demonstrate to be harmful.

He questioned how much liability should current makers and sellers of products now considered to be beneficial or at least relatively harmless  “for something that occurs in the future.”

He chose sugar as his analogous product, but later said he “wishes (he) had never said that.”

The paint makers’ attorneys, however, seized on the analogy, also likening the use of lead in the 1800s and early 20th Century to the now ubiquitous presence of small amounts of chlorine in municipal drinking water as part of the drinking water sanitation and decontamination process.

“This could be a truly unbounded tort,” Jones argued.


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Organizations in this Story

Bartlit Beck Herman Palenchar and Scott LLPJones DayReed Smith LLPSanta Clara County Superior CourtConagra Brands, Inc.Santa Clara CountySherwin-Williams - Headquarters