NL NL Industries Inc

By Alexandra Bruell 

When companies get in trouble over their advertisements, it usually happens quickly. In the case of Sherwin-Williams Co., it took more than a century.

The paint maker is fighting a California court ruling that ordered it and two other companies to collectively pay hundreds of millions of dollars in damages for promoting lead paint over several decades, when they allegedly knew or should have known it was hazardous. The litigation has highlighted Sherwin-Williams ads dating back to 1904.

Sherwin-Williams and its co-defendants in July petitioned the U.S. Supreme Court to take up the case, arguing that they were unaware of the health risks of lead before it became accepted science and are being improperly punished for truthful advertising about a product that was legal at the time. The federal government banned the use of lead paint in homes in 1978.

Companies already put their advertisements through a range of stress tests to ensure legal and regulatory compliance, adding careful wording and disclosures. But some advertising executives say the Sherwin-Williams ruling, if upheld, would raise the stakes, forcing marketers to consider whether advertising a product may open them to liability many years down the road.

That, in turn, could lead creative teams on Madison Avenue -- which wasn't implicated in the lead-paint litigation -- to exercise even more caution when dreaming up ads and bulk up on disclaimers.

"You can't demand companies to have clairvoyance," said Dan Jaffe, executive vice president of government relations for the Association of National Advertisers, a trade group of marketers that filed a brief in support of Sherwin-Williams. "It's the precedent we're concerned about. We believe that what they're doing in regard to Sherwin-Williams certainly would apply to many other categories."

The ruling could potentially affect advertising of a range of products that are subject to frequent studies about their health effects, including everyday food items and consumer products, some ad executives said. "We're constantly learning things about products we didn't think were of any concern," said Mr. Jaffe.

Harris Diamond, chief executive of McCann Worldgroup, a network of creative agencies owned by ad giant Interpublic Group of Cos., said while companies are always mindful of potential liability from ads, "I do think this is a reach that's further and more than we've seen in the past."

In some ways, the fight echoes the legal battle over tobacco marketing in the 1990s. In that case, government officials said there was clear evidence tobacco companies knew of the health risks of cigarettes and deceived the public. A massive settlement between state attorneys general and the tobacco firms resulted in significant restrictions on advertising and huge payments to states by the firms.

The health effects of lead are now well known. Exposure to it can affect physical and mental development in a variety of ways, especially in children, from behavioral and learning problems to slowed growth, according to the U.S. Environmental Protection Agency.

The state of California argued in its suit that several paint companies were aware of lead paint's toxicity for years while they marketed it. In the case of Cleveland-based Sherwin-Williams, the plaintiff referred to an internal communication in 1900 that described white lead -- which was used in paint -- as a "deadly cumulative poison." The defendants said they didn't have knowledge of risks now known to be associated with lead-based paint.

A California trial court ruled for the state in 2014, ordering Sherwin-Williams and two other companies involved in manufacturing and marketing lead paint in California, ConAgra Grocery Products Co. and NL Industries Inc., to pay $1.15 billion into a state fund that would go toward removing health hazards posed by lead paint in California homes.

An appeals court last year said the companies should only be liable for lead-paint usage before 1951 because there was "insufficient evidence" the defendants had promoted lead paint for interior use after 1950. This could reduce the damages to between $409 million and $730 million, according to a Sherwin-Williams filing.

But the appeals court upheld the substance of the ruling. It pointed to a Sherwin-Williams ad from 1904 that ran in the Los Angeles Times and San Diego Union. It contained images of paint cans with the company's SWP logo, along with the message, "Put S.W.P. on your house and you will get satisfaction and save money every time."

A spokeswoman for the law firm representing Sherwin-Williams said the company stopped making white-lead interior paint in 1943.

In their Supreme Court petitions, the defendants say the state ruling violates their rights to free speech and due process. The high court only takes up a fraction of cases. A lawyer for the California plaintiff said in a statement that there are no constitutional grounds for the high court to take up the case.

An executive at one packaged-goods company said the paint ruling could cause some marketers to shy away from advertising products with a long shelf life, or those that involve health claims like "allergen free." "That science could change over time," said the executive.

Advertisers may need to think more carefully about how every word in their ad is interpreted 50 years from now, said Gene Grabowski, a partner at crisis firm kglobal who has worked on lead-paint litigation for Sherwin-Williams and other paint companies in the past.

Companies could be "held accountable not just for making a product available, but for touting that product, for encouraging its use," he said.

Write to Alexandra Bruell at alexandra.bruell@wsj.com

(END) Dow Jones Newswires

September 02, 2018 07:14 ET (11:14 GMT)

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