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July 1, 2008, 1:27 p.m. EDT

Rhode Island high court reverses ruling against paint companies

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By Donna Kardos

(Adds details throughout, including comment from Sherwin-Williams' attorney in the 14th paragraph, and updated stock price.)

The Rhode Island Supreme Court unanimously reversed a 2006 verdict against Sherwin-Williams Co. /zigman2/quotes/210069062/composite SHW +0.65% and two other paint manufacturers - NL Industries Inc. /zigman2/quotes/210222881/composite NL +1.95% and Millennium Holdings LLC - saying they cannot be held liable by the state for creating a public nuisance through their production and sale of lead paint.

The court said the trial justice in the 2006 case had erred by denying the defendants' motion to dismiss the case.

"More specifically, we conclude that the state has not and cannot allege any set of facts to support its public nuisance claim," the court said. It noted that such a claim would establish that the defendants interfered with a public right or were in control of the lead pigment they, or their predecessors, manufactured at the time it caused harm to Rhode Island children.

Shares of Sherwin-Williams rose 2% to $46.85 in recent trading, while NL was up 1.7% to $9.69.

The Rhode Island Supreme Court's Tuesday ruling also affirmed the 2006 verdict that Atlantic Richfield Co., which had been a fourth defendant in the case, was not liable.

The latest ruling comes as a big victory for the paint companies, while it represents a major setback for states that want manufacturers to pay billions to clean up the toxic product.

Still, Rhode Island's high court spelled out for the states how they might get the lead-paint makers to pay up after all, saying "proper means of commencing a lawsuit against a manufacturer of lead pigments for the sale of an unsafe product would be through a products liability action."

It noted that courts in other states "consistently have rejected product-based public nuisance suits against lead pigment manufacturers, expressing a concern that allowing such a lawsuit would circumvent the basic requirements of products liability law."

For Sherwin-Williams, the 2006 verdict had spawned worries about further litigation and associated costs, sending Sherwin-Williams' stock to two-year lows and slashing about $1.8 billion in market capitalization, or nearly one-third of its value at the time.

Tuesday's ruling does not "mean to minimize the severity of the harm that thousands of children in Rhode Island have suffered as a result of lead poisoning," the justices said in their opinion. "Our hearts go out to those children whose lives forever have been changed by the poisonous presence of lead."

But they added that "however grave the problem of lead poisoning is in Rhode Island, public nuisance law simply does not provide a remedy for this harm. The state has not and cannot allege facts that would fall within the parameters of what would constitute public nuisance under Rhode Island law."

In the 2006 case, the jury had found that the "cumulative presence of lead pigment in paints and coatings on buildings throughout the State of Rhode Island" constituted a public nuisance.

In addition, it found that Millennium, NL and Sherwin-Williams were liable for causing or substantially contributing to the creation of the public nuisance, and "be ordered to abate the public nuisance."

Charles H. Moellenberg, Jr., an attorney for Sherwin-Williams and speaking on behalf of it and Millennium, said, "It has taken nine years and two juries, but the Supreme Court's decision today puts public nuisance law in Rhode Island squarely in line with the overwhelming majority of jurisdictions of the United States."

Lead paint litigation is not unique to Rhode Island. Similar cases had also wound their way through the New Jersey and Wisconsin court systems. Rhode Island's high court noted in its opinion Tuesday that the New Jersey Supreme Court has likewise held that public nuisance was an improper cause of action.

-Contact: 201-938-5400

/zigman2/quotes/210069062/composite
US : U.S.: NYSE
$ 593.85
+3.84 +0.65%
Volume: 438,482
May 29, 2020 3:59p
P/E Ratio
34.30
Dividend Yield
0.90%
Market Cap
$53.92 billion
Rev. per Employee
$328,558
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/zigman2/quotes/210222881/composite
US : U.S.: NYSE
$ 3.13
+0.06 +1.95%
Volume: 15,045
May 29, 2020 3:59p
P/E Ratio
12.16
Dividend Yield
N/A
Market Cap
$152.61 million
Rev. per Employee
$216,119
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