The Paint Industry Fights Back

Published July 3, 2007

The paint industry is engaged in a battle for its life.

Virtually unnoticed, except by a few Wall Street analysts, the paint industry is under an attack that rivals the one successfully launched a decade ago against “big tobacco.” Learning from the tobacco industry’s experiences, the paint industry is fighting claims its lead pigment-based paint is a “public nuisance.” And it’s working.

The industry has not produced or sold lead-based paint for 50 years. Paint made by any particular company cannot be linked to any particular property in any particular location. Human exposure to lead only occurs through property owners’ poor maintenance. But that hasn’t stopped government entities from bringing public nuisance suits in six states, seeking to recover costs of removing or sealing deteriorated lead-based paint applied decades ago to the interiors of buildings within their jurisdictions.

These cases have been instigated by plaintiffs’ class action law firms, fueled by the billions of dollars in legal fees they reaped in tobacco litigation. This enables them to take lead-based paint cases on a contingency basis, with government paying no up-front legal fees. These law firms are counting on recoveries in the multiple billions of dollars, with their hefty legal fees paid as a percentage of the amounts recovered.

Because there is such widespread exposure, it was not so far-fetched when billionaire tobacco lawyer Ron Motley said in 1999: “If I don’t bring the entire lead paint industry to its knees within three years, I will give them my [120-foot] boat.”

Obviously, Motley missed his 2002 deadline. And until about 18 months ago, the paint companies were winning, with a Rhode Island public nuisance case ending in a mistrial and Illinois courts rejecting public nuisance clone cases. In February 2006, however, a Rhode Island jury shocked the industry by returning a verdict for the state in a retrial of the first suit. Now on appeal to the Rhode Island Supreme Court, the verdict, if upheld, could cost the paint companies billions of dollars in abatement costs. The threat of repetition elsewhere is daunting.

In recent weeks, however, the supreme courts of New Jersey and Missouri threw out lead-based paint public nuisance cases, as did Illinois courts. On June 22, a Milwaukee jury found lead-based paint was a “public nuisance” – a term general enough to include almost any “offensive” conduct – but also found paint companies did not create such a nuisance by acting negligently, intentionally, or unreasonably in selling it decades ago. Last, in a major ruling that potentially defangs efforts to launch further lead-based paint litigation, a California trial court banned contingent fee agreements in government-initiated public nuisance cases. There are still cases pending in Ohio.

The lead-based paint cases seek to capitalize on the vaguely defined legal theory of “public nuisance,” first used in the tobacco cases. In Rhode Island, it is defined as anything that “unreasonably interferes” with “the health, safety, peace, comfort or convenience of the general community.” In Missouri, it is defined as “any unreasonable interference with the rights common to all members of the community in general and encompasses the public health, safety, peace, morals or convenience.” In Illinois, it is “the doing of or the failure to do something that injuriously affects the safety, health or morals of the public, or works some substantial annoyance, inconvenience or injury to the public.” To cut the length of this down, we might want to just give a general definition of “public nuisance” here, rather than a state-by-state one.

As Dean William Prosser, the nation’s leading expert on tort law, noted, “It has meant all things to all people, and has been applied indiscriminately to everything from an alarming advertisement to a cockroach baked in a pie.”

Traditionally, manufacturers are liable for damages if they sell defective or unreasonably dangerous products. Product liability is often “strict liability,” meaning manufacturers have few defenses. There are some limits, however. The product typically must have been the actual cause of injury to the consumer, and must reach the consumer in a defective or unreasonably dangerous state. And there are time limits on when such cases may be brought, usually running from the date of the injury, but sometimes extending 10 or 15 years from the date of the product sale. Thus, product liability law is a carefully orchestrated balance between the injured consumer’s right to recover damages and the manufacturer’s need for certainty and predictability of its potential liability.

And that is exactly why the plaintiffs’ trial bar pounced upon the public nuisance doctrine. Public nuisance law does away with all these pesky little problems, particularly the need for causation – linkage between the defective or dangerous product and the injury – and the time limitations on actions. Hence, paint companies have unlimited and perpetual liability, whether or not their paint was the actual cause of injury, and even if the painted surfaces were poorly maintained by property owners.

Fortunately, the courts in Missouri and New Jersey saw through this canard and held that public nuisance cases cannot be brought under their laws. And the jury in Milwaukee found the paint companies did nothing wrong in selling their products. Not only was that product lawful at the time, it was in great demand because it was durable and even washable.

The tobacco companies, faced with suits by 40 state attorneys general in the late 1990s, aided and abetted by contingent fee attorneys, caved in and agreed to pay a settlement that will total $246 billion over time. Faced with approximately the same potential liability, and with forces arrayed against them vowing to bring the industry “to its knees,” the paint industry must have been tempted to settle, if only to “stop the bleeding” from legal defense costs. The industry deserves credit for not giving in to this temptation. And anyone who has ever gone to a home-improvement center for a gallon of paint owes them a debt of gratitude. Think about this: What if you went to the store for paint and there wasn’t any?

Maureen Martin ([email protected]), an attorney, is senior fellow for legal affairs of The Heartland Institute.