California Lead Paint Case Would Pull the Rug Out from Under Small Business

Date: March 05, 2018

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Generally, regulatory standards are imposed prospectively. But, we have encountered troubling situations where the authorities sought retroactive application of new standards. For example, in Christopher v. Smithkline Beecham Corp, the U.S. Department of Labor reversed a long-standing interpretation of the Fair Labor Standards Act in arguing that employees (previously recognized as exempt from overtime requirements) should be classified as non-exempt. The good news in that case was that the Supreme Court rejected DOL’s interpretation, in part because—as NFIB argued in its amicus brief—it would have resulted in an “unfair surprise” for businesses that had relied on DOL’s prior interpretation.

In a similar vein, we recently filed in California v. Atlantic Richfield, now pending before the California Supreme Court. Here, a handful of district attorneys filed suit, alleging a common law nuisance against businesses over past conduct that was perfectly lawful at the time. The lawsuit seeks to impose retroactive liability for paint manufacturers by declaring lead paint a nuisance wherever it may be found—notwithstanding the Legislature’s judgment that lead paint is not a nuisance, where properly maintained in older buildings.

If that theory flies, then small business hardware stores may also be on the hook for funding the cost of removing lead paint from older buildings. Indeed, we’ve seen small merchants roped into asbestos lawsuits in this manner, decades after selling products that we have since come to understand as posing health risks. Regardless of how scrupulous a company may be in complying with extensive health and safety regulation, there is always a possibility that someone might file a lawsuit seeking to hold a manufacturer retroactively liable for products that science might someday call into question. Suppose for example that researchers should find a previously unknown link between coffee and some serious health condition. Should coffee roasters and coffee houses have to tread in fear of future lawsuits?

The other wrinkle in Atlantic Richfield is that it affects the rights of anyone who may own an older building in California because most buildings built before 1970 have at least trace amounts of lead paint. If lead paint is declared a “nuisance” under California law, ordinary owners will presumably have a duty to remediate, which is a costly process. This would put small business landlords on the hook for remediation costs. For all these reasons, the NFIB Small Business Legal Center argued in its brief that this lawsuit must be dismissed.

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