INSIGHT: US manufacturers win second big case

03 July 2008 16:35  [Source: ICIS news]

By Joe Kamalick


US state court brushes off paints liability caseWASHINGTON (ICIS news)--For the second time in as many weeks, US manufacturers - and paints and chemical producers in particular - have won a major court decision that will further shield them from fortune-hunting attorneys and state government officials.


On Tuesday the Supreme Court of Rhode Island overturned a lower state court ruling that had held paint companies liable for removal or other remediation of lead-based paints in homes, schools and other structures where children might be exposed.


Estimates of the cost of such a vast remediation effort were as high as $4bn (€2.5bn), according to attorneys involved in the case.


The case was initially filed by a private law firm on behalf of the State of Rhode Island in 1999 on grounds that lead in common interior house paints constitutes a public health hazard. 


Paint producers should be liable, the state argued, for related health costs and for removing lead paint where it still exists.


The US banned production of lead-based paints in 1978, but those paints still cover interiors in an unknown number of homes, schools or other enclosed facilities in the state.


The state government had sought massive compensation from US coatings manufacturers not on usual product liability grounds but on the basis that decades-old lead paint in homes and elsewhere constituted a “public nuisance” which made paint manufacturers liable.


To many, the Rhode Island suit was an effort by a state government to rake in billions of dollars worth of windfall revenue at the expense of industry where no liability exists.


The Rhode Island high court basically agreed.


“This is a tremendous victory, not only for the paint companies but for the entire business community,” said Don Evans, senior counsel at the American Chemistry Council (ACC).


The court win is significant for manufacturers in general, said Evans, because if the State of Rhode Island had won, the case would have set a precedent that could have opened almost any segment of product manufacturing to a barrage of “public nuisance” liability lawsuits.


“This was truly a matter that would have overwhelmed the business community in all sorts of areas,” Evans said.


The National Association of Manufacturers (NAM) also hailed the Rhode Island Supreme Court ruling, saying the decision “is a big win for anyone who is concerned with the growing misuse of public nuisance lawsuits”.


In the Rhode Island paints case, the state argued that the coatings manufacturers were liable for remediation costs because the left-over paints constituted a public nuisance, as when a company might take actions that block public access to a road or navigable waterway or vent emissions that pose health risks to a surrounding community.


The paints and coatings industry - joined by the chemistry council and NAM among others - argued that lead-based paints were legal and non-defective products when sold prior to the 1978 ban and that they were safe as used if maintained.


The defendants noted that landlords and other property owners who failed to maintain paint coatings - by allowing them to deteriorate, break off and chip - have properly been held liable in state courts.


Holding the original manufacturer liable under public nuisance law, industry argued, was akin to finding an automobile manufacturer responsible when a car owner caused damage or injury because he hadn’t maintained the brakes on his 20-year-old jalopy.


Thomas Graves, vice-president and general counsel at the National Paint and Coatings Association (NPCA), said the Rhode Island high court drew a proper distinction between public nuisance and public interest.


“It is in the public interest that children be protected from exposure to lead, but the court held that is a problem for the state legislature to discern and resolve,” Graves said, citing the Rhode Island ruling. 


Indeed, as the association pointed out in its brief, Rhode Island state policy and law, as in many other states, “puts the onus on the landlord to keep housing in lead-safe condition according to federal, state and local rules”.


Graves also noted that the Rhode Island high court found further that even if old interior paint were to be considered a public nuisance, the coatings manufacturers still could not be held liable under law because they were not in control of the product when it became a public nuisance.


As Rhode Island Supreme Court Chief Justice Frank Williams put it in the ruling:

“We conclude that the state has not and cannot allege any set of facts to support its public nuisance claim that would establish that defendants interfered with a public right or that defendants were in control of the lead pigment they, or their predecessors, manufactured at the time it caused harm to Rhode Island children.”

The Rhode Island ruling is similar to other public nuisance/liability cases that have been overturned recently in Missouri, New Jersey and Illinois, but for Graves the Rhode Island high court decision is the most damning.


“The Supreme Court in Rhode Island basically said that the trial court should have dismissed this case on its face, that it was an invalid exercise of authority by public enforcement officials who were pushed on by private plaintiff attorneys,” Graves said.


In the Rhode Island case, a private law firm essentially contracted with the state government to pursue the suit on the state’s behalf in hopes of winning a sizable portion of a multibillion dollar award if victorious.


But Graves believes that the Rhode Island high court’s ruling on this public nuisance legal gambit is so definitive and decisive that it will discourage any other states from launching similar get-rich litigation ventures.


With the Rhode Island ruling following other similar and equally unsuccessful efforts in Missouri, New Jersey and Illinois, said Graves, “the trend is clearly unfavourable for the plaintiff bar because the probability of a return on the investment is decreasing every year now”.


“This ruling will definitely chill other state attorneys general that were waiting for a decision in Rhode Island, and they will likely walk away from this now - and with good reason,” Graves said.


The win in Rhode Island followed by barely a week the 25 June ruling by the US Supreme Court in the nearly 20-year-old ExxonValdez oil spill case. 


In that landmark case, the federal high court decided that a $5bn punitive damages ruling against ExxonMobil for the 1989 oil spill was excessive, holding that as a general rule punitive damages should not exceed compensatory damages, which in the Exxon Valdez case were about $500m.


($1 = €0.63)


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By: Joe Kamalick
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