Taxpayers May Feel Lead Paint Pain

Published July 15, 2008

Suing paint companies for creating a “public nuisance” by selling lead paint 50 or 100 years ago was called “jackpot justice” for the private law firms who stood to collect huge contingent fees. Now it’s risky business for the State of Ohio and its taxpayers.

Following their July 1 slam-dunk victory in the Rhode Island lead paint case, attention is turning to how the companies can recover their huge costs of defending against that frivolous lawsuit. The City of Columbus’s decision last week (7/8) to drop its clone lead paint case was therefore a wise one. But the State of Ohio’s decision to plunge ahead with its suit risks sanctions taxpayers ultimately would have to pay.

The Rhode Island Supreme Court ruled the public nuisance case brought by that state, instigated by the private contingent fee law firm the state hired, had no legal basis, violated well-established Rhode Island law, and should have been tossed out of court eight years ago. The suit sought at least $2.4 billion from the paint company defendants to pay for removing lead paint from about 240,000 private homes in the state. The private attorney fees would have amounted to about $40 million.

Legal fees cost the defendants–Sherwin-Williams and two other companies–tens of millions of dollars, and Sherwin-Williams’ stock lost $1.8 billion in market capitalization after the 2006 jury verdict in the state’s favor, which the state high court has now reversed.

The court criticism of the case was blistering. Lead paint in private homes is a private injury, not a public nuisance, no matter how many homes are involved, the court found. Further, the court said, a defendant who has no “control” over the paint in privately owned homes cannot be held liable for it.

“The law of public nuisance never before has been applied to products, however harmful” because other remedies exist for them, the court said. “In declining to adopt such a widespread expansion of the law, we are mindful of the words of Edmund Burke that ‘bad laws are the worst sort of tyranny.'”

Furthermore, the court in Rhode Island found dramatic declines in childhood lead poisoning thanks to existing abatement programs aimed at property owners. The same is true in Ohio, where, according to the Centers for Disease Control, 2.3 percent of children tested in 2006 were found to have lead poisoning, compared to 16.55 percent of children tested in 1996.

The Rhode Island opinion is an open invitation to the defendants to move for financial sanctions under Rhode Island’s Rule 11. That rule says when attorneys sign a pleading, they certify that to the best of their “knowledge, information, and belief there is good ground to support it.” Ohio law is identical.

The paint companies understand this. “The defendants will take a very close look at our right to recover the cost of litigation,” attorney Charles H. Moellenberg, who represented Sherwin-Williams, told the press in Rhode Island. Legal blogger Jane Genova predicts class-action suits by paint company shareholders whose stock lost value due to the litigation. If Ohio loses its case, which seems likely, the taxpayers could be on the hook for all of these losses.

It’s one thing for lawyers to certify there is “good ground” for a case when no court has ruled otherwise. But the rulings throwing out the public nuisance theory in product cases (which have their own separate liability laws) are piling up in other states. These rulings were a huge red flag to the City of Columbus and should be one to the state–and especially to Ohio taxpayers.

Maureen Martin ([email protected]), an attorney, is senior fellow for legal affairs for The Heartland Institute, which filed an amicus brief in this case on behalf of the defendants in the Rhode Island case.