With the exception of DuPont agreeing to roughly double its contribution to the Children’s Health Forum as part of its let’s-not-call-it-a-settlement out of the case, the Rhode Island lead paint trial hasn’t been much in the local news lately. However, the national business and legal communities are still keenly watching to see what happens next.
NL Industries, Millennium Holdings, and Sherwin-Williams were found guilty last year of creating a “public nuisance” because they sold lead paint. They will likely appeal the verdict to Rhode Island’s Supreme Court. Grounds for appeal haven’t yet been specified, but past statements by the defendants’ lawyers and some recent legal analysis of the verdict suggest that an appeal will likely be based, at least in part, on the fact that the state never proved that the defendants sold more or less lead paint in Rhode Island than did any other manufacturer. The trial court, in fact, did not require the state to show that products sold by the defendants were the major source of the problem.
Jane Genova of the Law and More blog offers commentary from an unnamed “legal expert” on the likely outcome of an appeal. You might ask how an expert can analyze an appeal without knowing the grounds. The answer would be by knowing how Rhode Island works, regardless of the case…

It seems to them and to me that the RI Supreme Court likes to see gradual changes in the law and not those which could be interpreted as drastic. In general, this Court tends to offer narrow opinions in which it only decides the matters immediately in front of it. That’s to say: This Court hasn’t in the past used opinions to make broad social commentary.
However, the Court is likely to give deference to the RI legal community at large and considers standing and respect within that community to be very important. Sources say that the conundrum is this: The RI Supreme Court, according to past rulings and other statements, is not likely to be comfortable with Superior Court Justice Michael Silverstein’s decision in this case. That’s primarily because it is a broad expansion of the public nuisance legal concept. But, would the RI Supreme Court reverse this decision and risk contempt of the RI legal community? That’s hard to say.
Also, as most of us lead paint watchers know, RI is an old boys network in many ways. If the state Attorney General and or Judge Silverstein has strong enough pull with the legal community at least it could mean that the RI Supreme Court justices bite their tongues.

Another grounds for appeal, one that might be more difficult for the old boy network to ignore, may be based on the state’s argument during the trial that the number of new lead-poisoning cases per year in Rhode Island had become constant. The state argued this was evidence that the situation could not improve unless more active clean-up measures were undertaken. However, according to an extensive report on the history of lead paint related issues authored by Richard O. Faulk and John S. Gray and published by the Bureau of National Affairs (a privately-owned, legally-oriented publishing company), the state obtained updated evidence during the trial showing the number of new lead poisoning cases to be declining under existing remediation laws and regulations, but did not share this information with the court…

During the trial, the State and its experts relied on 2004 data to argue that Rhode Island’s lead-poisoning prevention programs had reached the limits of their effectiveness, that too many children still had elevated blood lead levels, and that elevated blood lead levels had ‘‘plateaued.’’
After the verdict was returned, the defendants complained about this argument for a fundamental reason – it was simply untrue. The truth is that there were 621 elevated blood lead levels in Rhode Island for all of 2005 (compared to 1,167 elevated blood lead levels in 2004), a drop of 47% from the previous year. The State knew these facts by not later than January 31, 2006 (during the trial) when Rhode Island’s Department of Health prepared a draft report documenting the 2005 numbers. Yet, after learning that the new 2005 data directly contradicted its theme of the ‘‘plateauing’’ of declining lead levels, the State still allowed its ‘‘special assistants’’ to continue claiming that a plateau existed. According to the defendants, this misrepresentation of facts is sufficient grounds for granting a new trial.
To compound the problem, neither the State nor its ‘‘special assistants’’ disclosed this relevant and critical information regarding the effectiveness of Rhode Island’s existing lead poisoning prevention program to the defendants after it became aware of the new data. The choice was made even though there was a discovery request seeking that very information. Defendants argue that the state breached its duty of candor to the Court and its Rule 26(e) duty to supplement its discovery responses. They claim that this undisclosed information was relevant to the heart of the issue in this trial — whether a public nuisance exists in Rhode Island — and was crucial to Defendants’ case.
To rebut this claim, the State and its special assistants claim that they were not obligated to supplement discovery because the Court ended discovery on May 30, 2005. Therefore, the State argues that the defendants were obligated to go to the judge to seek an order requiring the State to supplement its discovery.

And in a possible wild-card development, based on the many irregularities associated with this case (most notably, possible special treatment given to DuPont and the use of contingency-fee lawyers who are motivated to seek the most expensive remedy, not necessarily the most effective one) there is some loose talk beginning about the possibility of a Sherwin-Williams shareholder lawsuit against the state of Rhode Island and/or the Attorney General of Rhode Island and/or the contingency fee lawyers hired by the Attorney General…

What I would like to see for a change is a shareholder lawsuit against the State of Rhode Island for the financial harm we have suffered as owners. Our loss would be both the artificial stagnation of the stock price, the money spent on this litigation that cannot be used for corporate purposes or returned to us owners as a dividends or share repurchases and the time executives have spent on the litigation, not the selling of paint and coatings.

Jane Genova, again, quotes a “Wall Street expert” on whether a shareholder lawsuit could succeed…

I don’t see a shareholder suit against the state of Rhode Island as likely. However, damages from an unconstitutional act such as a contingency-based-lawsuit can be addressed to the plaintiff firm of Motley Rice and to possible Rhode Island parties who deemed to benefit. This could be highly likely given the possible missteps of Rhode Island Attorney General Patrick Lynch in what I perceive as alleged preferential treatment of DuPont. I will add this: The state of Rhode Island has a major hurdle to get past the contingency issue. From that, there could well be an onslaught of litigation directed at Attorney General Patrick Lynch and the plaintiff law firm of Motley Rice.

It’s not clear how likely a shareholder lawsuit really is, but it is clear that the chances of this all being resolved in a timescale of less than years is increasingly remote.