Thursday, April 5, 2007

Sherwin-Williams (SHW): A Momentous Legal Victory and an Acquisition

Yesterday in the Superior Court of California a decision in what may turn out to be the seminal event in the lead paint litigation saga was rendered. Defendants in the case had sought to have the contingency fee arrangement between the state and private attorneys ruled unconstitutional. The results of this case will have a dramatic impact on the current Rhode Island litigation under appeal and certainly will influence the decision making process of other jurisdictions contemplating similar actions. It also will either guide a decision for the RI Supreme Court, or, should the 'old boys' network prevail in Rhode Island once again, virtually assure the case ends up in Federal Court were the RI Superior Court rulings will be tossed. In his ruling, Judge Komar stated:

  • In People ex rel. Clancy v. Superior Court (1985) 39 Cal.3d 740 (“Clancy”), the California Supreme Court “evaluate[d] the propriety of a contingent fee arrangement between a city government and a private attorney whom it hired to bring abatement actions under the city’s nuisance ordinance.” (Clancy, 39 Cal.3d at 743.) The California Supreme Court explained that “the contingent fee arrangement between the City and Clancy is antithetical to the standard of neutrality that an attorney representing the government must meet when prosecuting a public nuisance abatement action. In the interests of justice, therefore, we must order Clancy disqualified from representing the City in the pending abatement action.”
  • Clancy is applicable to the instant case. Plaintiffs fail to persuasively distinguish Clancy, or otherwise persuasively articulate why their fee arrangements with outside counsel are proper. Plaintiffs’ main argument is that the government attorneys continue to retain and/or exercise decision-making authority and control over the litigation in this case.1 The fact remains, however, that outside counsel (i.e., Thornton & Naumes, Motley Rice LLC, and Mary Alexander and Associates for the City and County of San Francisco, and Cotchett, Pitre & McCarthy for most of the other public entities) are co-counsel in this case. They are performing work as attorneys for the plaintiff government entities, and consequently they are subject to the standard of neutrality articulated in Clancy. Oversight by the government attorneys does not eliminate the need for or requirement that outside counsel adhere to the standard of neutrality.
  • Moreover, as a practical matter, it would be difficult to determine (a) how much control the government attorneys must exercise in order for a contingent fee arrangement with outside counsel be permissible, (b) what types of decisions the government attorneys must retain control over, e.g., settlement or major strategy decisions, or also day-to-day decisions involving discovery and so forth, and (c) whether the government attorneys have been exercising such control throughout the litigation or whether they have passively or blindly accepted recommendations, decisions, or actions by outside counsel. Plaintiffs in their opposition characterize outside counsel as “collaborators.” (See Pls.’ Mem. Opp. Motion, at 8:21-22.) Given the inherent difficulties of determining whether or to what extent the prosecution of this nuisance action might or will be influenced by the presence of outside counsel operating under a contingent fee arrangement, outside counsel must be precluded from operating under a contingent fee agreement, regardless of the government attorneys’ and outside attorneys’ well-meaning intentions to have all decisions in this litigation made by the government attorneys.
  • Accordingly, Defendants’ motion for an order precluding Plaintiffs from retaining outside counsel under any agreement in which the payment of fees and costs is contingent on the outcome of the litigation is GRANTED.
It should also be noted here that one of the listed firms above, Motley Rice, is also the lead litigator in the Rhode Island case.

In Ohio, in response to the possibility of Ohio Attorney General Marc Dann filing a lawsuit against former lead paint companies Senate President Bill Harris (R-Ashland) and OH House Speaker Jon Husted (R-Kettering) issued the following statement:
  • "We strongly request that Attorney General Marc Dann not proceed with his lawsuit against paint manufacturers in Ohio. This lawsuit would send the wrong message about our desire to bring business and jobs to our state.
  • "We have made significant progress in attracting new investments and jobs to Ohio with our recently-passed legal and tax reforms - as evidenced by Ohio's number one ranking in Site Selection for investment in 2006. We need to build on this progress, not take a step backward with lawsuits against Ohio employers."

It is obvious the tide is rapidly turning against this litigation.

If that wasn't enough good news for Sherwin-Williams (SHW):

Close on the heels of acquiring city-based Nitco Paints, Sherwin-Williams plans to acquire two more local firms. The $7.1-billion US-based company, the second-largest paint maker in the world, has allocated around Rs 600 crore for the two acquisitions this fiscal, according to company sources. The DNA reported

The acquisition of Nitco Paints is just the beginning of Sherwin-Williams’ journey in India, Christopher Connor, chairman and CEO of Sherwin-Williams, told DNA Money on Wednesday. “There is more to come soon,” he said on the sidelines of an event to announce the acquisition of Nitco Paints.

Sources further said that Sherwin-Williams has drawn up a huge spread for India, involving exclusive retail outlets across the country and entering into exclusive tie-ups with leading real estate developers and builders for exterior paints Sanjiv Batra, CEO, Sherwin-Williams India, though, said, “I can’t disclose any future acquisition plans or fund allocations at this moment, but the company will grow at a rapid speed in the next few quarters.”

Sherwin-Williams is clearly on a path to become the largest paint company in the world. As the potential of lead paint litigation impact on the company fades away the stock will run.... it may start today

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