Sherwin-Williams Comments on Rhode Island Trial Court Decision.

Business Editors

CLEVELAND--(BUSINESS WIRE)--April 4, 2001

The Sherwin-Williams Company (NYSE:SHW) believes that the Rhode Island trial court's decision issued on Monday, April 2, has been significantly misinterpreted and misunderstood.

The decision is, in Sherwin-Williams' view, an important victory for Sherwin-Williams and the other defendant companies. Though it is rare to win any part of a preliminary motion to dismiss, because of very strict legal standards, the court threw out at this early stage the bulk of the plaintiff's claims. All of the substantial factual and legal hurdles which have been presented in prior cases remain before the case can proceed to trial. Other plaintiffs have consistently failed to clear these hurdles in prior cases. The court's opinion allows Sherwin-Williams to discover the facts to support its main defenses. Sherwin-Williams is also confident that, when the Attorney General's remaining claims are tested during the next step of fact discovery, they, too, will fail.

Sherwin-Williams has been frequently asked certain questions about the Rhode Island opinion. Sherwin-Williams' responses to these questions follows.

Q: The Attorney General of Rhode Island has said that the court's opinion is a major victory and an important breakthrough for claims against the former manufacturers of lead pigment. Is that true?

A: No. In fact, the court dismissed a large part of the State's claims against Sherwin-Williams and the other defendant companies. It is very rare to have any claims dismissed on an early motion to dismiss because the legal standard is extremely strict. The court must accept all facts alleged in the complaint as true and also must resolve all doubts in favor of the plaintiff. Therefore, it is significant that the court rejected substantial portions of the claims asserted in the complaint.

Q: What claims were dismissed?

A: All common law tort claims for strict liability, negligence, negligent misrepresentation and fraud based on alleged injuries to individuals were dismissed, as were all claims seeking to recover special education costs and a claim asking for equitable relief on behalf of children. The court also ruled that no pre-1970 alleged conduct could be used to prove any claim under Rhode Island's unfair trade practices act. This is significant because the purported misconduct alleged in the complaint took place before 1970.

Q: Why did the court allow some claims to remain?

A: The court found that the remaining claims raised questions of fact that procedurally could not be decided at this preliminary stage. The court was required to assume that all of the facts alleged in the complaint were true for purposes of this preliminary motion. The court could not, and did not, decide those questions of fact at this time.

Q: What claims remain?

A: The remaining claims are public nuisance, unjust enrichment, indemnity, civil conspiracy and unfair trade practices.

Q: Has the court's opinion stripped the defendants of any defenses?

A: No. Although the court ruled that the statute of limitations defense cannot be asserted against claims involving the State's public rights and the statute of repose was held not to apply to bar any of the State's claims, these rulings are appealable by Sherwin-Williams and the other defendant companies. The opinion preserves all other defenses successfully asserted by Sherwin-Williams and the other companies in other cases.

Q: What are the next steps in the lawsuit?

A: The parties will begin discovery, which is the judicial process used to discover facts from each other. Sherwin-Williams will be able to obtain documents from the State, take depositions of the State's witnesses and ask written questions to find facts of importance to defend against the State's claims.

Q: The Attorney General has said that the court has cleared the case to proceed to trial and that a trial could begin within a year. Is he correct?

A: No, the court has not cleared the case to proceed to trial. The plaintiff still has many hurdles to clear before the case can proceed to trial and it is highly unlikely that a trial would begin within a year. The process of discovery, by way of example, has taken almost 10 years in the case brought by the City of New York and the New York City Housing Authority. As a result of the facts learned through the discovery process in that case, the City of New York voluntarily dismissed all of its claims, and the Housing Authority has voluntarily dismissed all of its claims but for two out of its over 300 housing projects. The facts revealed the lack of merit to those claims that were dismissed, as well as the fault and responsibility of the City of New York and Housing Authority for neglected, badly maintained lead paint. We believe that discovery will raise many hurdles for Rhode Island's claims, too.

In addition, Sherwin-Williams will have many opportunities to win the case before trial. As facts are discovered, Sherwin-Williams will have the opportunity to present motions asking the court to throw out the remaining claims before trial, either because of lack of evidence to support those claims or because the law does not allow the claim. Therefore, it is entirely wrong to say that the court has cleared the case for trial. The court has only allowed some of the claims to proceed to the next preliminary stage of fact discovery. That discovery could take years to complete.

Q: Is the Rhode Island court's opinion a watershed decision that is unique for Sherwin-Williams and the other companies?

A: Not at all. The Attorney General's claims are very similar to those made by other plaintiffs in the past. Other earlier cases have alleged claims for nuisance, unjust enrichment, indemnity, unfair trade practices and civil conspiracy. The same factual defenses and themes used successfully in other cases should apply to this case.

Q: What is a public nuisance claim and what defenses are available against this claim?

A: A nuisance is the use of one's property in a way that interferes with public health or safety, such as a house of drugs or a leaching landfill. Public nuisance claims are typically brought against illegal activities. Here, in contrast, lead products were lawful when sold; in fact, lead pigment when sold and used decades ago was seen as the best product on the market, and federal and state governments typically required its use. As the Rhode Island legislature has found, lead paint was an "approved use."

Moreover, a public nuisance claim can only be made against the person who created or maintained the nuisance on the property. Here, lead paint can become a nuisance only when it is so badly maintained that it creates paint chips, flakes or dust. Property owners are responsible under Rhode Island law to maintain their properties, including any lead paint. Therefore, property owners, not product manufacturers, have the obligation under Rhode Island law to prevent or abate any nuisance arising from lead paint.

Also, the plaintiff must prove for each property for which it seeks to recover damages, among other things, that Sherwin-Williams made the lead pigment found on that property, the lead paint was in a hazardous condition, Sherwin-Williams was responsible for creating the hazardous condition, the hazardous condition caused the alleged damages, and the reasonable amount of the damages caused by the hazardous condition. Proof of product identification and injury causation are still required. There are currently no scientific methods in existence to identify the specific manufacturer of lead pigment found at a specific property.

Q: What are the defenses to the claims for unjust enrichment and indemnity?

A: These claims are based on concepts of equity, so all of Sherwin-Williams' factual defenses apply. In addition, defenses to these claims will show the fault and responsibility of the State as well as other persons for failing to maintain old lead paint. Finally, there are a host of legal defenses, such as avoidable consequences, unclean hands, estoppel, failure to mitigate damages, failure to maintain the product and useful life of the product.

Q: Is the State's claim for conspiracy new and different from prior cases?

A: Absolutely not. It is the same conspiracy claim that the Maryland courts threw out after reviewing all of the purported evidence presented by plaintiffs there. The Maryland courts ruled that there was no evidence to substantiate the conspiracy claim and no evidence to back up the alleged concealment of health risks of lead paint to children. The Maryland courts were impressed by the long history of responsible corporate conduct, including the no-strings-attached, published medical research sponsored by companies at prestigious institutions such as Harvard and Johns Hopkins since the 1920s and the industry's role in passing a voluntary national standard in 1955 that aimed at removing interior residential lead paint from the market over 20 years before the federal government acted to ban it.

Q: Did the Rhode Island opinion address the theory of market share liability among the defendants?

A: No. The Attorney General of Rhode Island has not raised the theory of market share liability.

Q: Doesn't the Rhode Island lawsuit present a new risk to Sherwin-Williams by alleging joint and several liability, so that the Company could be liable for all of the damages?

A: No, past cases filed against Sherwin-Williams have also alleged joint and several liability based on theories such as conspiracy, alternative liability and concert of action. These theories have not succeeded in prior cases. Moreover, Rhode Island follows a rule of comparative negligence. Under this rule, Sherwin-Williams would only be liable for the percentage of fault accorded to it when compared to the fault of plaintiff and all other parties in the lawsuit.

The Sherwin-Williams Company will continue to vigorously defend itself and expects to be vindicated in the claims brought by the State of Rhode Island and all other actions relating to its historical manufacture and sale of lead pigments and lead-based paints.

This press release contains certain "forward-looking statements" with respect to earnings and other matters. These forward-looking statements are based upon management's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company, that could cause actual results to differ materially from such statements. These risks, uncertainties and other factors include such things as: general business conditions; strengths of retail economies and the growth in the coatings industry; the inherent uncertainties in pending and future litigation; the affect of any legislation and administrative regulations related to the lead pigment and lead-based paint litigation; and other risks and uncertainties described from time to time in the Company's reports filed with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.