If the six-person jury agrees with prosecutors, it could have a major impact on former makers of lead paint, or the companies that are their successors, according to industry experts. Lead paint was banned in 1978.

"There is an outside chance lead paint litigation could be the next major legal wave against corporate America," said Lehman Brothers analyst Tim Gerdeman.

Rhode Island, which has one of the highest rates of child lead poisoning in the nation, is suing some of the biggest names in U.S. manufacturing, including DuPont Co., the nation's No. 1 chemical company, and Sherwin-Williams Co., the No. 1 paint maker.

Other defendants include Atlantic Richfield, which was acquired by BP Plc, Cytec Industries, NL Industries Inc. and a unit of ConAgra Foods.

The legal front keeps expanding. The city of Chicago last week joined Milwaukee, San Francisco and St. Louis, in filing lawsuits against former lead paint makers.

REAL RISK

The case follows a wave of class-action suits against major U.S. companies, including high profile cases against Big Tobacco and asbestos litigation that helped drive W.R. Grace, Owens-Illinois and USG Corp., among others, into bankruptcy.

It is also the first of the 37 government cases filed since 1999 to go to trial, making it pivotal and closely watched by investors, legal experts and manufacturing executives.

"There is some risk in lead paint litigation and it is hard to say how the courts will go, but this risk is underappreciated by the market," said Prudent Bear Fund manager David Tice.

Lead paint was banned after studies showed it caused health problems in children, including learning disabilities and permanent brain damage.

Attorney General Sheldon Whitehouse of Rhode Island is trying to make the state the first to hold former lead paint manufacturers accountable for old paint in homes and buildings by declaring it a public nuisance.

"The people behind the lead-paint case are trying to turn it into the next tobacco settlement," said Brown University Professor Darrell West, an expert on Rhode Island politics.

Paint companies deny they are directly responsible for the chipping of lead paint, saying landlords, not the companies, should be held accountable for conditions that allow lead pigment to be exposed to children.

At a minimum, costs could be into the millions to put a fresh barrier coat of paint over any chipping lead paint, while total removal of the paint followed by a fresh coat would be significantly greater, said Gerdeman.

BP, Cytec, NL Industries and Sherwin-Williams either declined or were not immediately available to comment on whether they are setting aside reserves to cover any potential costs. DuPont and ConAgra said no reserves have been set.

ConAgra also said it believes that the unit named in the suit has no responsibilities for the allegations in the Rhode Island case.

COMPLEX CASE

Whitehouse, who is running for governor, has sued eight former lead paint manufacturers claiming they created a public nuisance by selling lead paint, a product that was widely used until the 1950s.

Lead paint poisoning is a problem in Rhode Island, acknowledges Tim Hardy, a lawyer at Kirkland & Ellis, which represents NL Industries. But it is only a problem in properties that have not been properly maintained, he said.

A successful prosecution could prove to be extremely difficult as no "smoking gun" appears to be evident, and many people believe that paint properly maintained by owners does not possess a hazard, said Gerdeman.

Prosecutors must first prove the presence of lead paint is a public nuisance. If the jury agrees, there will be a separate trial to determine if the defendants are liable. The first phase, which began last week, is expected to last six to 10 weeks.

Rhode Island children routinely test above the national average for blood-lead levels. Around 333,000 homes in Rhode Island contain lead paints, said state officials, who did not say how much it would cost to remove or clean up the paint.

But this may not be enough to sway the jury.

Courts don't like to adjudicate public nuisance cases without there being a clear casual relationship linking the nuisance to some specially affected interests, said Yale University Law School Professor Peter Schuck, an expert in mass toxic tort.

"In many ways, public nuisance suits are a Hail Mary pass when the other options aren't promising or don't work," said Schuck.