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Reversal brings victory to paint companies

BY Lisa Girard

The paint industry scored a major victory last month when the Rhode Island state Supreme Court reversed the first-ever jury verdict finding former lead paint companies liable for creating a public nuisance in homes across that state.

In a unanimous decision, the court ruled that Sherwin-Williams, NL Industries and Millennium Holdings—all found liable during the highly publicized 2006 trial—should not have to pay billions of dollars in cleanup costs. The 81-page decision said that the companies could not be penalized under the state’s public nuisance laws because they no longer controlled the paint after it was sold to consumers.

The state Supreme Court heard oral arguments—including some from representatives of the three paint companies—in May and made the reversal July 1. In dismissing the case, the court eliminated the state’s proposed $2.4 billion cleanup of roughly 240,000 older homes, which would have been funded by the companies.

In a statement, Charles H. Moellenberg Jr., a lawyer for Sherwin-Williams, called the ruling “a landmark victory for common sense and for responsible companies that did the right thing. The responsibility of making sure children aren’t exposed to lead paint remains squarely on property owners.”

For Rhode Island, it was another jolt in what has become a high-stakes battle to determine the paint industry’s responsibility in our nation’s lead paint problem. Lead paint poisoning has been particularly pervasive in older buildings where walls are peeling and children can ingest flaking chips or dust, leading to a variety of health problems.

The 2006 verdict in favor of the plaintiffs—the first victory against the paint industry—gave other states hope that they could win similar judgments. The reversal has had the opposite effect.

“The Rhode Island Supreme Court said that the judge—however well-intentioned on behalf of the public interest in eradicating childhood lead exposure in the state—should have dismissed the case at the outset,” Thomas Graves, vp and general counsel of the National Paint & Coatings Association (NPCA), told HCN.

“In order to bring a cause of action to abate a public nuisance, the state has an obligation to show that there has been an unreasonable interference with a public right and that the defendant is in control of the situation,” Graves said. “Here, the problem exists inside individual dwellings, and landlords and the property owners are in control of the circumstances, not ancient manufacturers of the product or raw material which purportedly causes the problem.”

According to Graves, both the state of Ohio and the city of Columbus, Ohio, withdrew their outstanding public nuisance lead cases in July in the wake of this decision, citing it as a compelling factor.

The reversal in the Rhode Island case was also seen as a major defeat for the law firm Motley Rice, a plaintiffs’ litigation firm that had represented the state on a contingency basis. Motley Rice is also involved in lead paint litigation in California and Wisconsin.

“The reversal is devastating for kids poisoned by lead,” lead attorney Jack McConnell told HCN. “We were on the cusp of finally solving this problem once and for all, and the Supreme Court snatched the public health solution away and all owed the wrong doers to get away with it.”

This see saw case has been in motion since 1999, when Rhode Island became the first state to file a lawsuit against paint manufacturers and the Lead Industries Association for creating a public nuisance. The first trial ended in a mistrial after seven weeks in 2002, when jurors were split 4 to 2 in favor of the paint companies. The case went to trial again in 2005, resulting in the longest civil case in Rhode Island history and a victory for the plaintiffs.

The use of lead paint was banned in the United States in 1978 after studies linked it to learning disabilities, mental retardation and even death in children. Similar lawsuits have failed in New York and Illinois, and the highest courts in New Jersey and Missouri rejected public nuisance lawsuits against the paint industry last year. A jury trial in Milwaukee ended in favor of NL Industries in 2007.

Still, litigation continues in California and Wisconsin. “While the Rhode Island decision is a seminal one, it does not toll the end of these suits altogether,” Graves said. “However, the 81-page decision certainly emphasizes that doctrinal requirements for public nuisance are not to be subsumed in a state’s zeal to accomplish what is really a public policy objective.”

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PRO Group makes key promotions

BY HBSDEALER Staff

Denver-based PRO Group has promoted Brendan Sullivan to director of merchandising, a new position, according to the company.

Sullivan is a 21-year industry veteran who has served in various merchandising and business development positions for Servistar/Coast To Coast and True Value prior to joining PRO Group in 2005.

“Brendan Sullivan’s experience and work style makes him ideally suited to a merchandising director role,” said Steve Synnott, president and CEO of PRO Group, in a statement. “Brendan has worked as a buyer and merchandise manager, and since he joined our company three years ago he has taken a leading role in providing progressive ideas and programs on the merchandising side.”

In addition, PRO Group managing director for the PRO Hardware and GardenMaster divisions, Shari Kalbach, has been named managing director for the company’s Farm Mart division, which supplies independent farm supply retailers.  

Kalbach joined PRO Group in 1997 and is responsible for all of the Group’s distributor relationships.  

“Shari Kalbach has a proven track record as a highly effective executive working with PRO Group distributor members,” Synnott said. “Adding Farm Mart to Shari Kalbach’s scope of work is a natural progression of her role. She excels working closely with our distributor members.”

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Design Within Reach narrows losses

BY HBSDEALER Staff

Design Within Reach, the San Francisco-based specialty home decor retailer with around 70 locations nationwide, saw net losses of $159 million, narrower than the $575 million in losses recorded in the same period last year.

Net sales for the second quarter decreased 3.7 percent to $47.3 million, compared with $49.1 million recorded in the year-ago period.

Still, the retailer saw an improvement in gross margin, a measurement of earnings that takes production and service costs into consideration — gross margin improved to 46.4 percent in the second quarter, compared with 44.3 percent in the same period last year.

In-store sales were $32.6 million, up 2.2 percent from last year. Sales from phone and the dwr.com Web site decreased 17.5 percent to $10.4 million.

DWR also said it predicted that “in light of the challenging economic environment, the company believes revenue will be flat year over year.”

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