Law And More

Value Investor Todd Sullivan Advises Former Lead Paint Inc. To Fight Back

Value investor Todd Sullivan sizes up opportunities in the financial marketplace.  Increasingly, he sees that companies' stock and image take a hit before, during and after litigation. Here's what Sullivan, who publishes ValuePlays, recommends that companies do when the lawyers come on the scene.

Todd Sullivan, value investor:

"Companies need to attack.  Punching bags get beat up.  So, there's no question but to go on the offense and educate the public.  Let's consider the former lead paint producers and marketers such as Sherwin-Williams, NL Industries and DuPont. So far, there are at least three facts that the public does not yet know about this whole issue.  They are:

• Master painters demanded lead-based paint, and government experts described that kind of paint as the 'best choice for house owners' because it was washable and durable.
• Federal and state governments recommended, and often specified its use - in the 1920s, the 1930s, and all the way to the 1970s. 
• No U.S. public health official or government - federal, state or local - advocated restricting the use of lead in house paint until 1949. That was when public health investigations in Baltimore first identified the risks to children from chipping and peeling lead in poorly maintained homes.  The federal government did not ban the use of lead-based house paint until the end of the 1970s."

I asked Sullivan where the public can get these facts.

"The public can go to:

http://www.leadlawsuits.com/index.php?s=home

http://www.cdc.gov/nceh/lead/surv/stats.html

http://www.manhattan-institute.org/html/lead_paint.htm

Pet Loss - The Law Hasn't Caught Up

Plaintiffs who lost their cats and dogs during the recent Menu Foods melamine contamination probably won't be receiving much in emotional damages.   

Today in THE WALL STREET JOURNAL, Sara Schaefer Munoz explains how civil law hasn't caught up with the changing role pets play in our lives.  In many states animal companions are still treated legally as property.  During a lawsuit, individual or class action, the most that can be expected is compensation for their market value.  Some states, points out Munoz, do allow for noneconomic damages in the case of negligence.  But it ain't much.  Tennessee caps those at $5000.

This will have to change.  What might accelerate the legal recognition of the human-animal bond is to have "CSI-Miami" do an episode on tracking down the source of pet-food contamination. The character played by David Caruso can head up the investigation. 

Inside The Beltway Provides Input on Milwaukee Lawsuit

Someone Inside The Beltway who wishes to be identified as an "observer" has agreed to comment on the upcoming lead paint between the city of Milwaukee and NL Industries beginning in late May.   This observer has three things to say:

1. According to a MILWAUKEE JOURNAL-SENTINEL article by Greg J. Borowski, July 21, 2000, "Seeing to expose city responsibility for childhood lead poisoning problems in Milwaukee - which is poised to sue the paint industry - the U.S. Chamber of Commerce filed a massive open records request.  The U.S. Chamber of Commerce labeled its action the 'Sunshine Express.' 

"Among other documents, the request seeks records on city guidelines for dealing with lead in homes, the cleanup history of city-owned properties, fix-up orders issued on private homes and information on cases in which parents and guardians may have failed to seek proper treatment for a lead-poisoned child ... Earlier this year, an opinion from City Attorney Grant Langley labeled pursuing the lead lawsuit 'problematic.'  Langley said ... the report from the outside attorneys, which offers a fairly optimistic view of success, is not inconsistent [however] with the earlier view from his office. 'They indicated we'll be making some law in the courts if it is brought,' he said.  'They said that Wisconsin, in terms of the law, is more advantageous, but there are some issues that have to be addressed [by the court] for the suit to be successful.'"

2.  The November 9, 2004 appeals decision which reversed the trial court's dismissal of the City's subsequent lawsuit carried on contingency by New York-D.C. plaintiffs firms' axis, indicated that proving actual causation [i.e. that defendants' products were "substantial factors" in causing  the purported public nuisance] is obviated as "it is a community-wide health threat which is the alleged public nuisance, and the city can prove community-wide marketing and sales by defendants in the city of Milwaukee" and that is sufficient to create a basis "upon which a jury could conclude that defendants  knowingly caused this nuisance by selling lead paint in Milwaukee and promoting its use there." 

"We likewise conclude that the extent and effect of promotion of lead paint sales by both defendants and their knowledge of the potential hazards of the paint is an issue of material fact for the jury."  Further, "there are genuine issues of material fact concerning each defendant's involvement in an alleged conspiracy to promote and accomplish the sale of lead-based paint, knowing of potentially hazardous properties.  These disputed issues of material fact preclude summary judgment."

While defendants argued that the city has no standing to recover restitution from defendants on behalf of private property owners, rather than the public as a whole, which is another way of illuminating that there is no public right, at issue, and thus the case cannot support the public nuisance claim to begin with, the appeals court ruled: "Details of the cost of the abatement program and the benefits conferred on the city have not been fully developed for this court's review."  Thus, it merely constitutes more disputed facts that require resolution via trial.

3.  The Sunshine Express [July 21, 2000 Open Records Requests Relating to Lead-Based Paint Hazards] was essentially stone-walled by the city.  "Disputed material facts" is the coin of the realm phrase for keeping this fishing expedition going, while the city, its contingency lawyers, and the appellate courts in Wisconsin continue to stock the pond by "making some law in the courts."   

Business - Have Your Case Tried In Delaware, Not Rhode Island

No surprise, at least for lead paint watchers, the state of Rhode Island ranks in 35th place in terms of how business perceives the nation's states as to their tort liability systems.  Delaware ranks 1st.  Ohio, where Attorney General Marc Dann has been aggressive on the public nuisance front, ranks 24th.

These findings are from the 2007 State Liability Systems Ranking Study conducted for the U.S. Chamber Institute for Legal Reform.  Those surveyed included the in-house general counsel and other senior corporate litigators.

Populism or Faux Populism - Here's The Deal

Those who do the industrial-strength influencing can't decide if our era is dominated by populism or faux populism.  But they do agree that populist actions and symbolism work.  Think U.S. Senator Fred Thompson connecting with the people from a flatbed truck.  Think Motley Rice attorney Jack McDonnell telling just about everyone that his mother said, "If you make a mess, you have to clean it up."

That's why I'm convinced that the public perception side of the lead paint public nuisance saga isn't going to get won via think tanks and elite media. 

Yes, part of that fight will take place in courts of law.  And lawyers are needed.  But we all know that law is just one institution in a society.  There are plenty more.  And those plenty more are increasingly being persuaded by populism or maybe faux populism.  Whatever.

But that whatever includes the voice and grassroots efforts of the people.  No it doesn't hurt and it can help to have Think Tank X issue a research report on the cost of frivolous lawsuits and for THE WALL STREET JOURNAL to publish an opinion-editorial on the subject.  But, those are no longer as powerful and certainly not enough.

What do I suggest?  Before the trial against NL Industries in Milwaukee begins in late May, why not reach into the churches and synagogues and have a conversation about the impact of this kind of litigation on jobs and the standard of living?  How about going to public housing and asking residents what are their priorities - and helping them with those?  And how about asking for volunteers among those certified to make residences lead-safe to "clean up the mess?"  McConnell is right: There is a mess.  And the people want it cleaned up.  That requires action, not studies, not op-eds. 

Milwaukee Trial Against NL Industries - But All The Usual Suspects Beware

The Milwaukee trial, scheduled to begin May 23rd, is against NL Industries.  As we recall, NL Industries was and still is one of the three defendants in the Rhode island lead paint trial.  Incidentally, the defendant acquitted in that trial - ARCO - could find itself back in court.  The state of RI appealed that win to the RI Supreme Court.

Although the Milwaukee trial is about NL Industries, all the usual suspects have to be monitoring this one.  Off-the-record, one of this blog's key legal experts comments:

"Wisconsin is a mine field for all the usual defendants in the lead paint litigation saga.  That's because it has risk contribution theory and joint and several liability.  That potential for exposure and heavy losses to the pigment companies should give them more concern than what has happened or could happen in Rhode Island. 

"If NL Industries loses in Wisconsin, the other usual suspects have plenty to worry about and, in Thomas, which is slated for trial later this year, all the defendants are in play.

"Based on the formal and informal conversations at the Mealey's lead conference last week in Chicago, Illinois, it appears that the plaintiff attorneys predict Wisconsin as a place in which they can win and win big."

RI Special Master, Sherwin-Williams' Earnings & Are We Headed to Federal Court

Value investor Todd Sullivan, who operates ValuePlays.com, opines on-the-record on recent developments in the lead paint litigation saga:

"The fact that David Jacobs will be state witness in Milwaukee ought to automatically disqualify him for the 'Special Master' post in the Rhode Island case as his bias will be on display.  It is my opinion these cases will eventually find themselves sitting on the door step of the Federal Court where the plaintiff cases as well as the States' contingency fee arrangements are tossed.

"in a rather telling event on the earnings call last week for Sherwin-Williams, the question of lead paint litigation scenario was not even broached by a single analyst after a brief one minute overview of it by management.  Not a single question.  It would appear even Wall Street sees the eventual outcome of this litigation."

Based in Massachusetts, Todd Sullivan can be reached at Valueplays@gamail.com.

Lead Paint Watch Turns to Milwaukee - MILWAUKEE JOURNAL-SENTINEL Avoids Morphing into Public Nuisance

We lead paint watchers now turn our eyes to Milwaukee, Wisconsin.  At the end of May, there will be yet another high-profile trial against NL Industries. 

Part of the reason this particular bit of litigation has been getting the spotlight - and will get plenty more of it - is the allegation that David Jacobs is a paid state witness in the trial.  Back in New England, the state of Rhode Island recommended Jacobs as the special master in the abatement part of the verdict in the landmark RI lead paint trial.  At the Mealey's lead paint conference last week in Chicago, Illinois, defense attorneys were buzzing about that. And sources tell me, the plaintiff attorneys didn't deny it. 

But if some of us wind up in Wisconsin to participate in or observe this trial, we can't expect that the newspaper covering it will be tucked safely behind our porch door.  No way is that going to happen.  Be prepared.

At the largest newspaper in WI, THE MILWAUKEE JOURNAL-SENTINEL, a policy decision has been made.  On April 23rd, Sheila Davidson, Vice President of Circulation, announced , reports Jim Romenesko of Poynter Forums, that the daily newspaper will not longer be "inserted in the door, a delivery box or other location."  Instead, it will "now be bagged and placed on the porch of your doorstep of your home."

The reason?  You got it.  Fear of liability.  Davidson goes on to say, the critical "reason for the new delivery policy is to insure distributor safety and to protect our subscribers from liability issues."

No question in my mind, THE MILWAUKEE JOURNAL-SENTINEL had a good shot at morphing into a public nuisance.  Fortunately, it has taken precautions to avoid this hazard. Smart thinking, Davidson et al.

Walter Olson of Overlawyered.com flagged us on this important policy change in the delivery procedures in Wisconsin.

Lead Paint - Hottest Litigation Story of 21st Century

The proceedings conducted in association with the lead paint litigation may be as exciting as watching paint dry but the issues surrounding it aren't.  More and more legal experts, not directly connected with the plaintiffs or defendants, are referring to this litigation, threats of litigation and appeals of the rulings and verdicts as "the hottest legal story going on in the U.S."

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Off-the-record, here's what one legal expert opines:

"I would say that the lead paint litigation is THE story of the 21st century, with the possible exception of liability lawsuits against the food and soda industries.  But indeed this lead pigment litigation is sort of the mother of all these other kinds of liability lawsuits.  The only real differences are that the lead paint litigation is configured as a public nuisance complaint and there is the additional issue of contingency-fee arrangements between a government agency and a private law firm or firms.

"Yes, the tobacco litigation had some of these elements of lead paint except for the public nuisance part and the risk contribution/market share liability theory in the THOMAS case.  But the way that the lead paint litigation is being pursued  could have a massive effect on the way business is conducted, in the U.S. as a whole or at least in Wisconsin.  Can the legal system hold a company liable for products legally sold and regulated?  Now or way back when, as was the situation with lead pigments?

"And, yes, I am predicting that the Wisconsin case against Sherwin-Williams et al. will be closely watched.  It's set to begin at the end of May."

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Reader comment on this legal story of the 21st century welcome.  Please contact Mgenova981@aol.com.

Latest On The Lead Front - As of 4/23/07

The lead paint litigation story, threats of litigation, and appeals of verdicts from litigation may turn out to be the legal saga of the 21st century.  All that not only involves monster issues such as the constitutionality of state-private law firm contingency agreements, some of the best legal minds, but - it's turning out - plenty of emotion. 

Those at last week's Mealey's lead conference in Chicago, Illinois say there was lots of that: Emotion.  For this blog, information from Mealey Publications and Conferences Group has been timely, accurate and insightful.

One attendee at the Mealey conference told this blog, off-the-record:

"The litigation is getting intense for the plaintiff lawyers.  At the conference they spent an unusual amount of time portraying this litigation as 'David v Goliah' or sometimes even in stronger language such as 'you are either on the side of the children or on the side of big corporations with lots of money who did nothing with the knowledge that their product was poisonous.'

"Emotion also surrounded the contingency issue.  The consistent theme of the plaintiff lawyers was that it's not fair for the former lead paint companies to have so much money and state attorneys general to have no money with which to sue those paint companies on behalf of lead poisoned, brain damaged children.  Therefore, they contend, it's only 'right' that the state attorneys general or their counterparts on the city level be allowed to enter into any kind of contingent-fee agreement they need in order to pay for the litigation to hold those corporations responsible.'"

Other breaking news on the lead paint front has been:

• Yes, there will be an appeal for the contingent-fee ruling in California.  No timing has been given but the plaintiffs "are confident" they will win.  That's because the same appellate court which overturned summary judgment in favor of the paint companies will hear this contingent-fee appeal.

• The City of Milwaukee case against Sherwin-Williams, et al. will start at the end of May.  It has already become controversial because one of the paid state witnesses is allegedly David Jacobs.  Jacobs is the expert whom the state of Rhode Island recommended as the special master in the abatement part of the verdict in the RI lead paint trial.

• Don't look for an end to all the lead paint litigation, threat of litigation and appeals of rulings on litigation any time soon.  We're in this for the long haul.