February 28, 2006

Damages denied in landmark lead paint case

By David Ortiz

PROVIDENCE, Rhode Island (Reuters) - A judge on Tuesday
denied punitive damage claims against three U.S. companies in a
landmark lead paint case that had been expected to trigger a
flurry of similar claims against the industry.

Rhode Island's case could influence court decisions in
other states, counties and cities where lead-poisoning lawsuits
are pending, and has drawn similarities with
multi-billion-dollar judgments against tobacco makers.

The three former lead paint makers -- Sherwin-Williams Co.,
NL Industries Inc. and Millennium Holdings LLC -- were found
liable by a jury last week for creating a "public nuisance" and
must clean up contaminated paint in the state, which could cost
as much as $3 billion. A judge will determine the clean-up cost
at a future date.

On top of clean-up costs, state prosecutors had argued that
Rhode Island Superior Court Judge Michael Silverstein should
allow a jury to set punitive damages.

"This court believes it has no alternative but to deny the
punitive damage claims of the state as a matter of law,"
Silverstein told the court before dismissing the jury.

Rhode Island accused paint manufacturers of covering up the
risk of lead paint, especially to children, in their lawsuit
filed in 1999, the first to hold paint makers responsible.

"We're disappointed that he took away punitive damages but
we're not surprised," Jack McConnell, a lawyer for the state,
told reporters. "This case has always been about abating the
problem, to rid the state of this nuisance once and for all,
and that's what the jury awarded."

The stock price of Sherwin-Williams, the nation's largest
paint maker and best known for its Dutch Boy, Krylon and Duron
paint brands, shot up 7 percent, or $2.96, to $45.55 on the New
York Stock Exchange after the judge's ruling. Shares in NL
Industries leapt 4.2 percent.

Before Tuesday, Sherwin-Williams's stock had dropped about
19 percent since the jury gave its verdict on February 22.

Lead paint was banned by the U.S. government in 1978 after
studies showed it caused health problems in children, including
learning disabilities and permanent brain damage.

But it remains widespread, especially in older homes in the
northeastern United States. Rhode Island children routinely
test above the national average for blood-lead levels.

Rhode Island authorities say more than 30,000 children were
poisoned by lead paint in the state, with an estimated 200,000
to 300,000 homes contaminated by the paint.

The National Paint & Coatings Association, an industry
group that represents about 300 paint makers, has expressed
confidence that the companies would win an appeal. Its Web site
gives details of lead-pigment cases that have taken place in 17
states since the U.S. ban.

"If you read the ruling, it really speaks to the fact that
these cases are not really fair and there are better ways to
address the problem," said Tom Graves, the association's
general counsel. He said the denial of damages "bespeaks why
the case at hand is going to be reversible on appeal."

The paint companies deny they are directly responsible,
saying landlords, not paint makers, should be held accountable
for conditions that expose children to lead.

(Additional reporting by Ben Berkowitz in New York and
Karen Jacobs in Atlanta)