Megan McArdle: “Lead paint verdict sets dangerous precedent”

by Walter Olson on December 18, 2013

The Bloomberg View columnist discusses the new ruling by a California state judge that companies that once made lead paint, and their successors, owe a billion dollars plus to California counties and cities over marketing of lead paint as long ago as the 1920s and earlier. I’m quoted:

As Walter Olson of the Cato Institute noted to me in an e-mail, “Many of the key business decisions being sued over took place closer to Abraham Lincoln’s time than to our own, and if the companies had gone to twenty leading lawyers of the day and asked, `could this ever lead to nuisance liability under such-and-such facts’ would have been told `of course not.’” Can you really sue a company for doing something that was well within the law? Or, as in one case, a company that bought a company that did something that was well within the law? As Olson points out, “when ConAgra bought Beatrice Foods, most business observers never even realized there was the tiny sliver of a paint company in there among the household food brands, but that one little sliver of successor liability could far exceed the then-value of all the rest.”

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1 Jason 12.18.13 at 2:57 pm

My torts professor would fully support this ruling.

2 Jerry Vandesic 12.18.13 at 5:38 pm

“when ConAgra bought Beatrice Foods, most business observers never even realized there was the tiny sliver of a paint company in there among the household food brands, but that one little sliver of successor liability could far exceed the then-value of all the rest.”

Is the argument that their failure to notice that they bought this “sliver” of a company somehow mitigates their responsibility? That doesn’t seem right. Unless they bought just the assets of the paint company, wouldn’t they typically also now own the liabilities? Those liabilities might be large or small, and are not necessarily limited to the size of the sliver.

All that being said, I’m still not sure that the paint company should have liability for a product that they sold legally years ago. But if they do have liability, those liabilities should be the responsibility of acquirer.

3 Allan 12.18.13 at 5:43 pm

Because of a hazardous product people suffered injuries. Sales of that product produced profits.

I was just wondering who should bear the cost of this, if not the companies that made the products.

4 wfjag 12.18.13 at 6:56 pm

“Because of a hazardous product people suffered injuries.”

Lead based paint, except for certain limited industrial applications, has been banned since 1978. If someone ingests lead, chleation will quickly eliminate the lead from the body (and do so at low doses and safely — unlike the chelation treatments prescribed by quacks for treatment of autism, and involve hi, repeated doses that have killed).

Do you have a basis in science for your assertion?

Not to be ugly Allen, but I’ve tried cases involving this issue. The scare mongers have filled the press with horror stories about lead exposure. It is one of the easier hazards to avoid and abate, and to safely treat. However, government agencies with large numbers of public housing units want to pass the costs of this on to others, although, not infrequently, they have failed to take action to abate the hazards in their properties, despite knowing of the hazards for decades. And, since untreated lead exposure can cause a wide variety of problems, another of the set of costs state and local gov’t are trying to pass on are all of the uninsured medical care costs they bear (even if it is questionable whether they were caused by lead ingestion).

So, if you can cite me to references to support your statement, and which support the conclusion that businesses, or successor businesses, should have known of the dangers long ago, and so properly are held liable to day (e.g. akin to facts which supported liability of tobacco companies, which had good reasons to suspect there were serious health risks long before the warnings went on cigarette packages), then I’d like to see them. If not, then I suspect you’ve fallen victim to the “everyone knows” hype that frequently is associated with any type of “toxic tort” litigation.

5 Guy Chapman 12.18.13 at 8:28 pm

The problem for me is that this is basically legislating hindsight. Yes, the lead industry did push back hard against regulation, but that was visible primarily in the plumbing sector; removal of lead from interior paints was done long ago and the risk to humans from the exterior paints was low.

There are cases where “should have known better” applies, such as decorative textured coatings using asbestos long after it was know to be hazardous, but this does seem to me to be disproportionate and to fail to properly reflect the state of knowledge at the time.

6 ras 12.18.13 at 9:22 pm

Why arent all sales of US co’s done as asset sales, then?

7 Jerry Vandesic 12.19.13 at 12:15 am

“when ConAgra bought Beatrice Foods, most business observers never even realized there was the tiny sliver of a paint company in there among the household food brands, but that one little sliver of successor liability could far exceed the then-value of all the rest.”

Is the argument that their failure to notice that they bought this “sliver” of a company somehow mitigates their responsibility? That doesn’t seem right. Unless they bought just the assets of the paint company, wouldn’t they typically also now own the liabilities? Those liabilities might be large or small, and are not necessarily limited to the size of the sliver.

All that being said, I’m still not sure that the paint company should have liability for a product that they sold legally years ago. But if they do have liability, those liabilities should be the responsibility of the acquirer.

8 Xmas 12.19.13 at 6:35 pm

According to the best science of the time, lead based interior paint was much better than the fertile home for mold that is wallpaper. But I agree with Allen, companies that may or may not even be involved in the paint business anymore, really should know better than people who live in these home and have had to sign disclosures of lead paint when the bought or rented the place. (http://www2.epa.gov/lead/real-estate-disclosure) And besides, toxic molds certainly do not cause any sort of neurological issues, unlike lead paint.

Really, whomever came up with the “house” as a method of living is to blame for this state of affairs. Any company that manufacturers products that induce us to live in “homes” really should be sued for luring us into these toxic cysts chemical, electromagnetic and biological agents. Homes…pfftt…nothing but death traps, I say!

9 Alton 12.19.13 at 7:13 pm

“But if they do have liability, those liabilities should be the responsibility of the acquirer.”

Ok, but if with every such transaction, however small the sliver, comes billions of dollars of potential future unknown liabilities, fewer transactions will take place. Without willing buyers, businesses may have no choice but to dissolve. Not exactly a robust economic policy, at least not robust enough to fund ever expanding tort liabilities.

10 kimsch 12.20.13 at 12:03 am

The answer is right here: owe a billion dollars plus to California counties and cities

It’s all about the money.

11 Allan 12.20.13 at 10:46 am

wfjag,

I am unsure what you want me to defend. You admit that untreated exposure to lead can cause illness. That is my point.

My point is also that companies made profits on selling a toxic product (which was legal to sell at the time). At the very least, they should have to pay provable damages equal to the amount of profits. The problem is proving damages and profits.

If these companies who made profits are not required to help with abatement, that only leaves the taxpayers to clean up their mess. That is as bad a solution as bankrupting companies to pay.

12 No Name Guy 12.20.13 at 2:55 pm

Allan:

“(which was legal to sell at the time).”

This is the key point. THE PRODUCT WAS LEGAL, ergo there can’t be liability of a willing seller for selling it to a willing buyer.

Now, with hindsight, was is wise, at that time, to have this product be legal? Probably not. But that really doesn’t matter, since it was in fact a legal to do action (sell paint with lead) at that time.

Also, hello, McFly……am I the only one to recall that little clause in the Constitution….what is it again? Yeah, Ex Post Facto. This after the fact, retroactive liability goes against the plain English (or is that plain Latin) of the Constitution.

Also, why does everyone seem to think that problem X requires the taxpayers to foot the bill. It’s not the taxpayers responsibility to clean up / remove / abate this lead paint on private property. It’s the owners of the property – after all, they bought the property, as is, warts, lead paint and all – Caveat Emptor.

13 allan 12.20.13 at 5:36 pm

NNG,

Just because a product is legally sold does not mean that the seller is protected from liability. If the product is defective (as lead paint turned out to be), the manufacturer should be liable for damages.

As for abatement, many of the properties with lead paint are owned by the government. Hence, taxpayers will have to pay for clean up. For private property, why should the property owners have to pay for the manufacturer’s error?

14 Hugo S. Cunningham 12.20.13 at 5:58 pm

Allan–

For an unforeseen hazard and ex-post-facto change of public policy, taxpayer liability is indeed a superior alternative to a tort death star (modeled after asbestos law), looting pension funds and other investors largely at random, impoverishing the economy as a whole, enriching the corrupt and the undeserving.

If the public assumed responsibility, then the public would demand a cost-effective response, sparing much waste from the economy.

Since lead paint, chipping from badly-maintained walls, is swallowed only by small children, landlords could be given the right and duty to exclude small children from such units. If it was considered socially desirable to open more old housing stock to families with small children, then the government itself could pay to de-lead selected units on an as-needed basis. The government could also set out inspection standards under which well-maintained apartments with lead could be leased to families with small children. Most of the leaded stock could be rented as is, however, at lower rents, to those without small children, who would no longer be competing (and pushing up rent) for lead-free apartments.

15 No Name Guy 12.21.13 at 8:05 pm

How is lead paint defective Allan? Are you arguing that the mere fact that it contains lead makes it defective?

16 HFB 12.22.13 at 4:37 pm

NNG,

That’s exactly what they are arguing. It needs to be “defective” for this farce to succeed. This is about redefining words after the law is in place, “what the definition of ‘is’ is…” Maybe it’s more to the point that they should have defined every word in the law but that’s likely impossible.

The product was never meant to be ingested or inhaled in its final form…it was just part of the chemical breakdown due to color fastness, durability, etc.

Do we sue people for Radon? I mean the house should never have been built because the basement/crawlspace/foundation can cause Radon to seep into your home and poison you. Or, do we just get detectors, testers and air vents instead and deal with it?

17 Marty Murphy 12.22.13 at 7:52 pm

If I buy a house and there’s a body buried in the basement, am I guilty of murder? Am I guilty of hiding a body?

There’s got to be some common sense resolution or no one will buy anything anymore.

18 Allan 12.23.13 at 3:46 pm

I think our public policy is something like: “he who causes the harm should pay for the harm.” 60 years ago it was not illegal to dump or other bad stuff into a river. We then got rivers with a bunch of bad stuff in them (like the Hudson and Cayahoga). Are you suggesting that the compainies who did the (legal) dumping should not be resposible for the clean up?

19 No Name Guy 12.23.13 at 10:12 pm

Allan, yes, exactly that is what I am proposing – what was legal then, can cause no liability today. And it wasn’t considered a harm then – no changing of the rules after the fact. Change the rules for today and for the future, but no going back in time and “Monday morning quarterbacking” the decisions of yesterday (or is that ex post facto calling a different decision of “upon further review” and making adjustments to the score of the game on Tuesday).

How can I make an informed choice if what I do today that is perfectly legal all the sudden causes me untold liability in the future after the political winds shift? Or if new science discoveries indicate that what we thought was acceptable is no longer? Will YOU take on the unknown and unknowable liability for future changes in politics, science and environmental policy? How’d you like to have liability for all the trees that ‘you’ slaughtered to build your home with (or coal, or nat gas burned for electricity, or gasoline / diesel / jet fuel for all your travel)? After all, those trees are no longer absorbing CO2 and all those fossil fuels you personally burnt emitted kilotons of gas, so therefore are you to, after the fact, be held personally responsible for anthropogenic climate change (to pull one set of liability that I’m sure the greenies would LOVE to impose).

In Re HFG’s comment Allen, is gasoline defective? After all, if a little kid splashes it on themselves and it ignites (say by playing with matches), it’ll burn the crud out of them. A pretty nasty side effect, don’t you think? How about drain cleaner (ammonium hydroxide)? That stuff will (alkaline) burn the skin right off of you. Is that defective, is it doing exactly what it was designed to do (dissolve organic matter)? Doing that intended action in a clogged drain is what it was meant to do – that it can be accidentally misused and doing it in a childs eyes…does that make it defective? How about household pesticides, say rat poison? If a child gets into the stuff and drinks / eats it, does that make it defective since it can poison a human?

Apparently, white lead is a very good pigment that is easy to mix and color (per the wiki article) and has been known since the times of ancient Greece / Rome. The more modern Titanium dioxide is also a good white pigment that has the added advantage of being non-toxic. However, until TiO2 was a viable option AND lead was banned, again, how was white lead “defective” – it did what it was intended to do, and apparently quite well – act as a white paint pigment. Do we have better alternatives today than lead paint? Yes, yes we do. And lead paint should be banned from further use due to it’s now known side effects along with having a viable, safer alternative. Does that mean the product was “defective”? Heck no. Lead paint, back in the day, was no more a “defective” product than gasoline, drain cleaner or rat poison are today.

20 Allan 12.24.13 at 12:07 pm

Fair enough.

Apparently, you believe Navin (the Jerk) should have remained rich.

And the people who used asbestos in manufacturing should not be responsible for paying for their worker’s sickness.

At what point can we say liability accrues for lead paint?

And there is a tremendous difference between paint and gasoline, rat poison, and drain cleaner: the manufacturers thought lead paint (and asbestos) was safe, but they know that gasoline, rat poison, and drain cleaner (I would add antifreeze to the list) are dangerous when they manufacture it. Moreover, lead paint (and asbestos) is dangerous when used as intended, but gasoline, rat poison, and drain cleaner are not dangerous when used as intended.

21 Jerry Vandesic 12.24.13 at 3:37 pm

Marty Murphy: “If I buy a house and there’s a body buried in the basement, am I guilty of murder?”

I think it’s a bit of a stretch to compare this with a criminal activity like murder. A better example might be if you purchased a house with an unknown and leaking oil tank. As the new owner you would be liable to remedy the situation. Wouldn’t matter that you weren’t aware of the problem. Sure, you might be able to go after the seller, but ultimately the responsibility would be yours.

22 David M. Nieporent 12.26.13 at 4:19 pm

Allan: contrary to your claim, there is no danger from lead paint when used as intended. The danger comes from buildings that were poorly maintained, such that walls painted 50 years ago (or longer) are flaking and chipping. If the homeowners/landlords had repaired/repainted the walls sometime in the last thirty years, there’d be no problem. That is more analogous to a car’s brakes failing after 15 years, leading to a car accident — it’s not the manufacturer’s fault, but the user’s, for failing to maintain the car.

23 Allan 12.27.13 at 11:04 am

David,

I don’t think your analogy works. Brakes are supposed to go out and be replaced when they go bad. Not necessarilly so with paint. Do you think that paint sellers told their clients “hey, this paint won’t last long, so you have to replace it”? Probably not. Most likely, they claimed that their paint would last a long time, if not forever. It was likely a huge selling point.

I think this might be more like selling Coca Cola at the end of the 19th century with cocaine in it. The sellers said that it was good for the consumer, but it turned out not to be so.

But the question still remains. Assuming that paint sellers should not pay. And assuming that the (non-government) owners of buildings with lead pain would rather abandon them than remediate them. Who should pay for remediation?

I guess this is the same question as goes with oil plumes. Or with air pollution. Or with other environmental problems caused by products or actions that turned out to be really bad for the environment. Should companies who were doing nothing wrong at the time of pollution be forced to clean up their mess, or should the taxpayers bear the burden? My answer is that the polluters should be forced to disgorge their profits, then the taxpayers should take over. I don’t know how to get there, but, to me, it is the fairest result.

24 No Name Guy 12.27.13 at 1:39 pm

Allan

I’m sorry, but you’re going into fantasy land in asserting that paint lasts (or should last) forever. No paint seller would make such an assertion and I challenge you to cite evidence that lead paint (or for that matter, any paint no matter the formula) manufacturers made such a claim.

Anyone who is a home owner or has ever lived in an owned home knows that painting is one of those tasks that must happen on a regular basis. Some of us are smart enough to choose exteriors (for example) with minimal paint (cough, cough – vinyl siding in my case). But that doesn’t mean my home is paint free – nay…..the door surrounds, garage door, etc need to be painted every 5-10 years or so, and the interior while having longer stretches between paintings, has been done just recently – there were sufficient chips, dings and flakes over time, plus the general grunge of years of use.

Allan, your argument fails on a common sense / common knowledge basis. Everyone knows paint doesn’t last forever and that it must be maintained / touched up / replaced / repainted on a regular basis. Arguing otherwise is ridiculous on its face. Try a different tact if you persist in the claim that lead paint is inherently defective (since it doesn’t last forever in your construction – by that definition, ALL paint is defective since none of it lasts forever.)

25 gitarcarver 12.27.13 at 2:11 pm

Allan,

I think David’s brake analogy is spot on because of the point you make – both the brakes and the painted surfaces require maintenance to ensure optimum performance.

That being said, I am not sure that I see going solely after the makers of the paint for something they sold that was legal at the time.

You wrote: My answer is that the polluters should be forced to disgorge their profits, then the taxpayers should take over.

My response would be from what point in time would you ask they disgorge their profits? The profits a company is making now? The profits they made from the sale of the paint at the time? Both? As the government profited from the sale of the paint as well, why should they be left out of the equation until all other private funds are exhausted?

By that I mean if we hold the paint companies accountable for their product, should not the government who certified the products as being safe and enriched themselves be held accountable too?

Since the government seeks to interfere within the marketplace (and benefit from that interference) should they also not be held accountable?

If a company can essentially be sued out of existence because of legal actions, should not the government department that ruled those actions legal be held to the same standard? Should not the department’s budget be open to the same taking as that of a private company?

In other words, in the real world if I rely on the advice of an expert such as an engineer to build a building and the building collapses, both I and the engineer are held accountable.

However, if I rely on the government to certify a product and that product “goes south,” only I am held accountable.

In a utopian world, I see that as a double standard.

26 Allan 12.27.13 at 3:08 pm

The fact that lead paint was toxic did not suddenly appear in 1978. Rather, there was likely evidence beginning many decades before that lead paint could be poisonous. I would suspect that the lead paint manufacturers were making a nice profit and, consequently, downplaying the research results, lobby against anti-lead paint laws and regulations, and denying their product was unsafe. All the while, they were making profits.

To me, the question is not whether those companies should disgorge their profits, but how much of the profits they disgorge.

Saying that the government was promoting their product does not advance their cause. The government may well have been in the pocket of the manufacturers. It is very unlikely that the goverment (at least pre-Nader and pre-environmental laws) did anything to discourage this product.

The issue is not whether the paint manufacturers should pay for at least some of the abatement. The issue is how much they should pay.

Finally, as for how long the paint would last, I would suggest that the manufacturers overestimated the lifespan of their paint. Heck, even today manufacturers are claiming their paints will last forever.

27 Allan 12.27.13 at 3:18 pm

“We don’t deny documents show the companies were aware of the risks to workers in their plants in 1900, due to incredibly high exposures to lead,” said Tim Hardy, an attorney for NL Industries Inc. (formerly the National Lead Co.), makers of Dutch Boy paints and defendants in the trial. “That’s a very different thing from knowing how much lead is coming from where and might be a problem to children today.”

Mr. Hardy acknowledges that, more than 100 years ago, the industry knew lead paint was dangerous. His defense to the lawsuit is that we do not know for sure that the lead paint is causing the damage to children, as opposed to another cause. I think causation and actual damages are debateable. That the paint manufacturers knew their product was toxic is not debateable.

28 gitarcarver 12.27.13 at 6:40 pm

Allan,

The government may well have been in the pocket of the manufacturers. It is very unlikely that the goverment (at least pre-Nader and pre-environmental laws) did anything to discourage this product.

If the argument is that the government was in the pocket of the companies, then let’s save everyone the time and effort and just eliminate that part of the government as it seems not to serve any purpose.

If the argument is that the government failed to do its job and protect the people, then let’s eliminate that part of the government.

I know that sounds drastic but the scenario you are setting up and subscribing to seems to be one where the manufacture of a product gets no benefit or protection from government approval and / or the public gets not benefit or protection from government approval.

Lacking purpose, benefits of accountability, why have that department in the government at all?

Can’t we just shut the doors, save the money and move on down the road?

29 OBQuiet 12.31.13 at 1:26 am

Allan,

Knowing that exposure to high levels of Lead in the manufacturing process is dangerous is a very different thing than knowing that the end product is also dangerous. Farmers know that pesticide is dangerous but can be safely used (at least that is what the USDA currently says, who knows when we will decide to start picking the next pocket). CO2 is poisonous and can be dangerous to would with but is used almost everywhere. Should manufacturers avoid it just in case it will someday be found dangerous in the end products? How can the insure against liability when there no idea what it will be or what the legal system will look like when it comes up?

Also, I cannot remember ever seeing a paint that claimed to last forever. Even the ‘lifetime’ warranty” only would last about 50 years.

And I felt your criticism of the manufacture’s lobbying ignored the same being done by the tort lawyers now profiting from the litigation. Of course, the lawyers took the long view and set up the system so that they would train the folks responsible for later paying them, the judges.

In many ways, this seems like we are punishing the company for actions that were perfectly legal AND acceptable at the time. The modern theories of liability did not exist at the time of the defendants actions. So while no specific law was passed to punish them, the are being punished by changes in the law. It might not be ‘ex post facto’ but it has that feel to this non-lawyer.

30 Allan 12.31.13 at 10:24 am

Unabated lead paint causes harm to innocent folks, i.e., poor children. I think we can agree on that.

The question is how society should address that harm. One choice is to ignore it (the “screw the children” theory). Another choice is to have society pay for it (taxes, taxes, taxes). Another choice is to have the current owners pay for it (again, taxes, as government is the owner of much of the problem inventory and private owners will just abandon property). The final choice is to have the manufacturers pay for it (disgorge profits).

I think there are legitimate arguments to be made for each of the choices. My thinking is that the taxpayer should not be liable for the external costs of environmental pollution. I think this is a tough societal issue, generally. However, I think the answer should be, to the extent possible, “you polluted, you pay.”

31 DensityDuck 01.08.14 at 2:56 pm

Allan: “60 years ago it was not illegal to dump or other bad stuff into a river. We then got rivers with a bunch of bad stuff in them (like the Hudson and Cayahoga). Are you suggesting that the compainies who did the (legal) dumping should not be resposible for the clean up?”

hey guess what

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