Appellate panel considers fate of $1.15B lead paint verdict

SAN JOSE — A state appellate court panel grappled with a host of complex issues Thursday as they debated during oral arguments whether to uphold a judge’s $1.15 billion verdict in a lead paint public nuisance case against three companies.

Was there more than enough evidence during a 2013 trial to conclude, as seven counties and three cities contend, that three former lead paint manufacturers promoted and sold interior paint while knowing it would damage children’s brains?

Or was there insufficient evidence that advertisements caused consumers to use lead paint inside their homes, as NL Industries Inc., ConAgra Grocery Products Co. and the Sherwin-Williams Co. argue?

Did Santa Clara County Superior Court Judge James P. Kleinberg become a legislator, writing new law in declaring lead paint inside of homes to be a public nuisance and creating the $1.15 billion fund — financed by the companies — to remediate the problem? Or were those decisions within his power?

Was Kleinberg wrong to not require the counties and cities to show what percentage of each company’s lead pigment was in the paint in millions of homes, and then hold three companies jointly and severally liable for all relief? Or did proof of public nuisance not require such apportionment at trial?

Those were only some of the questions Justices Franklin D. Elia, Eugene M. Premo and Nathan D. Mihara discussed with attorneys during a 2½-hour oral argument. County of Santa Clara v. Atlantic Richfield Co., H040880.

“This case really did boil down to a product being found harmful decades after it was sold,” NL Industries Inc. lawyer Jameson Jones of Bartlit Beck Herman Palenchar & Scott LLP summed up, noting that Kleinberg admitted he held the defendants liable based on new science.

Raymond A. Cardozo of Reed Smith LLP, arguing for ConAgra, noted all other public nuisance cases are site-specific and no case says one can “stack up” individual homes to create a public nuisance.

“If you can’t stack up all of these individual locations — and every other [out-of-state] court has said that you can’t — then this causation theory can’t get off the ground,” he said. Courts in seven other states where similar public nuisance cases were brought against lead pigment manufacturers rejected them or saw them voluntarily dismissed.

In 2006, the 6th District Court of Appeal ruled that the trial court must follow a standard “distinct from and far more egregious than simply producing a defective product or failing to warn of a defective product” and proof of “affirmative” promotion.

Sherwin Williams attorney Paul “Mickey” Pohl of Jones Day said not a single Sherwin Williams ad for interior paint, introduced at trial, included the word “lead.”

“So, as we stand here after 17 years of litigation and argument, my client still doesn’t know the locations of the use of lead paint caused by promotion ‘far more egregious than simply producing a defective product,’” he told the justices.

Pohl also said that Santa Clara County Superior Court “is exercising jurisdiction over an unprecedented, unwise and unconstitutional program” in creating the remediation fund. “This was such a jurisdictional overreach, it’s going to put that county in the housing business forever,” he added.

But Danny Y. Chou, assistant county counsel for Santa Clara County, said Kleinberg was correct to find substantial evidence that the companies knew about lead paint’s hazards as far back as the early 20th century but promoted and sold the product for interior household use anyway, thereby causing the public nuisance.

The justices, he said, needed only to review Kleinberg’s weighing of the gravity of each defendant’s conduct against the social utility of their conduct. “By the late 1920s,” Chou told the justices, “each defendant has sufficient notice to render their conduct unreasonable.”

Elia, however, questioned how a company that stopped promoting lead paint in 1949 can be held liable for paint used from 1950 to 1980.

Chou replied that when the companies sold paint without telling customers it contained lead, the companies were promoting its use.

“So your position is they should have advised, just like warnings on cigarette packages … that this paint contains so many units of lead?” Elia asked.

“Or that they should have been clear that those paints were only for exterior use, not interior use,” Chou replied. “It was deceptive. Consumers were deceived by this.”

After a little more back and forth, Elia said, “Maybe I’m losing it, but I could not find an affirmative promotion of lead paint after 1949.”

Later, answering another question as to whether it was unfair to hold the companies to modern scientific knowledge, Chou said that under California law, “There’s no need for defendants to know the extent of the harm to occur; they just have to know the character of the harm.”

Finally, Chou addressed Kleinberg’s remedy of requiring the defendants to pay into the remediation fund, saying that it is hardly unprecedented since the federal Department of Housing and Urban Development does something similar with public housing.

In addition to Santa Clara County, Chou argued on behalf of the counties of Alameda, Los Angeles, Monterey, San Mateo, Solano and Ventura, as well as the cities of Oakland, San Francisco and San Diego.

Mary Alexander of Mary Alexander & Associates P.C., who did discovery and depositions for San Francisco in the trial case, said she felt good after Thursday’s arguments.

“It was important if the lead paint companies knew, and when they knew it,” she said. “There’s ample evidence they knew from the 1920s forward and still didn’t tell, even though they knew it was extremely harmful to children. That seemed to be important to the court.”

But attorney Fred J. Heistand of Sacramento, who wrote the Civil Justice Association of California’s amicus curiae brief in support of the defendants, saw Kleinberg’s ruling as an expansive overreach.

“This case will require, if they’re to give relief, a rewriting of public nuisance law,” he said. “It will become the new tort to right all wrongs.”