DECEMBER 11, 2000
LEGAL AFFAIRS

By: MICHELLE CONLIN with Mike France in New York


What's That Smell?

Faced with an alleged health hazard, Appleton Papers chose to wage war


The two private eyes jetted in from the West Coast to do a job in the sleepy town of Hatfield, Pa. Their mission: to stake out a then 49-year-old named Bonnie Hayden who had lived in the Starbucks-less burg all her life. For about a week, the detectives waited outside Hayden's two-story colonial on a quiet country lane like FBI agents running down the local mafioso. They followed the soft-spoken needlepointer everywhere and tried to interview everyone she knew.

These private eyes, according to Hayden's attorney, Martin Brigham, were hired in 1989 by Appleton Papers, a $1 billion business headquartered in Appleton, Wis., that was then owned by British American Tobacco Co. (BTI) Why did Appleton want to find out everything it could about this woman? Because in her job as a clerk processing paperwork for B&G Manufacturing, Hayden had handled massive mounts of Appleton's carbonless copy paper (CCP)--also used ubiquitously in credit-card receipts, Federal Express slips, report cards, and doctors' records.

B&G stored thousands of its CCP forms in Hayden's tightly packed office, where she and several co-workers noticed a sweet, sickly smell wafting off the paper and later began complaining of skin rashes, dry mouths, stinging eyes, headaches, and nausea. Hayden felt so sick from the fumes that she began visiting doctors, one of whom diagnosed her with formaldehyde sensitization, a potentially life-threatening condition that made her react allergically to the probable carcinogen. The physician linked Hayden's condition to her frequent exposure to CCP.

That's what led Hayden to sue Appleton, the world's largest producer of CCP, in 1986. She wasn't the only one worried about the paper. Since 1976, Appleton has faced hundreds of health inquiries and 15 personal-injury lawsuits, some of them with more than one plaintiff, from office workers employed by a diverse range of companies across the country (including a suit brought in 1982 by eight employees of BUSINESS WEEK parent The McGraw-Hill Companies). Appleton has settled about half of these claims, including McGraw-Hill's and Hayden's, though it says these were ''business decisions'' and in no way admissions of guilt. The rest of the suits were dropped or dismissed.

What the plaintiffs and their lawyers--along with other critics--allege is that Appleton has mounted a fearsome political, scientific, and public-relations campaign to conceal a potential health hazard involving its most profitable product. ''It's one big ugly secret,'' says plaintiff Rosemary Petralia, a former NCR business-form consultant from Merrimack, N.H., who became too ill to hold her job after working with CCP in the early 1990s.

Plaintiffs such as Petralia, who currently has no lawyer, say they object most to what they call Appleton's protracted war on anyone who perseveres long enough to haul the company into court. Plaintiffs say the company stops at nothing to intimidate them, amassing an army of scientists and lawyers to discredit their medical experts and outspending their meager resources. Plaintiffs are spied on and harassed, they contend, while their lawyers are stonewalled for months in their attempts to get company documents--only to receive, in one case, 2,000 of them the night before a crucial deposition.

That's for those who can even get far enough to secure a lawyer. The company would have a lot more complaints, critics say, if weren't so hard to make them. Since the established practice in the CCP industry is not to label the product, complainers often have to act like detectives to hunt down Appleton or any other manufacturer as the original maker--first by contacting the supplier and then by working their way up the distribution chain.

Plaintiffs say alleged victims are also forced to undergo bizarre, days-long medical exams, and, in the case of former plaintiff Nancy Rutigliano, asked to provide a list of sexual partners so the company could depose them--a request a judge denied. Rutigliano, a lesbian, says Appleton's thwarted effort to investigate her sexual past was an attempt to prove that she wasn't suffering from CCP exposure but rather from a sexually transmitted disease. ''They were trying to make me squirm in my sexuality and make it so humiliating that I would be too uncomfortable to get on the stand,'' says Rutigliano, who declined a settlement offer of $327,000 in 1995--an offer Appleton says it never authorized its insurer to make. The suit was later dismissed by a judge in the U.S. District Court of New Jersey who said the scientific evidence supporting her claim did not meet appropriate standards. Rutigliano says she couldn't afford to have her expert present in court to defend her scientific views.

Appleton denies the claims that it has gone to extreme lengths to defend itself, calling the allegations ''completely unfounded.'' Anita Hotchkiss, Appleton's outside counsel from the Morristown (N.J.)-based firm of Porzio, Bromberg & Newman, says the company's defense tactics are reasonable and typical in this kind of personal-injury litigation. ''We often depose anyone who may have relevant factual information about the plaintiff and his or her physical condition,'' says Hotchkiss, adding that private eyes can be ''critical tools in disproving the existence or severity of a plaintiff's claimed injury.'' Appleton also says that many of the indicting comments about the company come from a couple of dissatisfied plaintiffs waging a smear campaign in order to shake the company down for cash, something one of them has tried to do on several occasions since her suit was dismissed. Says Appleton's Assistant General Counsel Angela M. Tyczkowski: ''We are confident in the safety of our product and have good scientific reason to be confident.''

In truth, the science behind the claims is controversial. Evidence linking CCP to health symptoms has been building for at least two decades. Many doctors and scientists say CCP's chemical components, which include potential carcinogens and other toxins, can cause symptoms ranging from skin, eye, and mucous-membrane irritation to central nervous system depression, respiratory ailments, and brain damage. Some victims, doctors say, become so sick from CCP that they can never work again.

Appleton says the evidence that CCP is harmful is ''flawed'' and not medically credible and that doctors such as Hayden's who diagnose patients with CCP-related illnesses are engaging in ''junk science.'' As proof, Tyczkowski points to other reports, including two scientific reviews the company commissioned, that claim CCP is safe. The company also says its own workers have not had problems.

It's not as if filling out the occasional carbonless form puts everyone at risk. For most people, CCP will never cause trouble. But physicians estimate that at the very least, 10% of the population is especially sensitive to chemicals. So if one of those people were to use CCP extensively--especially in a poorly ventilated office--he or she could develop symptoms.

No matter how the dueling science plays out, critics say Appleton Papers went to extraordinary lengths to deny any possibility that its product could pose even the slightest harm--despite persistent complaints from consumers that it did and a growing body of research linking CCP to possible health problems published in such peer-reviewed medical journals as the Journal of the American Medical Assn., the American Industrial Hygiene Association Journal, and the American Journal of Epidemiology, among others. While Appleton has dismissed all claims of injury and has long told the public that CCP is safe, documents obtained by BUSINESS WEEK that are under a court-issued protective order stemming from a personal-injury suit indicate that at least at one point in time, the company did have safety concerns about CCP and its emission of formaldehyde.

Appleton says it has since studied such emissions from its CCP and concluded there was no cause for concern. What's more, Appleton says that in its history of product testing, it never performed tests that showed irritation in humans. Yet the court documents reveal that at least two company tests performed in 1970 and 1983 on a small sample of people show that CCP did cause irritation.

Appleton discredits those tests as ''primitive,'' ''inconclusive,'' and lacking in ''standard protocols.'' Says Tyczkowski: ''We have worked with some of the world's most competent scientists to help us come to the determination as to the safety of the product, and we are not going to be manipulated by false allegations.''

But Charles Schmidt, a former researcher at the University of Florida who is now employed by San Jose (Calif.)-based ThermoQuest, which makes scientific-testing equipment, published findings on CCP this year that reveal that many of the chemicals used to make the paper are toxic. As to Appleton's dismissal of the research showing CCP to be a potential health danger, Schmidt says: ''Chances are, even if those other studies are flawed, there are lots of data that point to there being a problem [with CCP]. Almost all the data that say there is no problem is somehow sponsored by the paper companies.'' Appleton says if it hadn't paid for those reviews of studies, no one else would have--and says it needs such evidence to prove its innocence.

The renewed attention to CCP comes as the Bridgestone/Firestone Inc. tire blowouts and the Food & Drug Administration's ban on phenylpropanolamine, a common ingredient in cold remedies and appetite suppressants, have thrust product liability under the public microscope. The lawsuits against Appleton are covered by the same aggressive protective orders that other companies, such as Firestone, have obtained from judges that lock up evidence far from public view. Such orders let companies such as Appleton keep every detail of the suits secret and preclude victims from ever talking about their settlements.

Appleton, like other companies, says it needs these orders to protect trade secrets, but critics such as Public Citizen and the Communications Workers of America (CWA) argue that much of what's placed under seal isn't confidential business information but details about the paper's safety that the public deserves to know. Says Hayden attorney Brigham: ''What's being protected is a source of embarrassment for Appleton Papers.''

The focus on CCP also comes on the heels of 3M Co.'s (MMM) decision last summer to yank its popular Scotchgard fabric protector, among other products, when alarms went off about the safety of a chemical component--even though no conclusive proof existed about harm to humans. But while the St. Paul (Minn.) manufacturer, with its arsenal of products, could afford to make such a bold move, which will result in an estimated $500 million loss in annual sales, it would be devastating for Appleton to do so. The company relies on CCP for 90% of its sales--a tough place to be in a digital world. Threatened by the spread of e-commerce and automation, the CCP market is shrinking by up to 8% a year. Appleton is a subsidiary of London-based Arjo Wiggins Appleton PLC (ARWGY), which is now owned by French holding company Worms & Cie. Says Arjo Wiggins Secretary Albert Dungate: ''We are fully aware of the allegations made against Appleton, and we are confident that the product is safe.''

But Appleton has other troubles. Along with more than 20 other paper companies, Appleton is defending itself in a lawsuit brought on behalf of alleged victims for violating a California law requiring all products containing carcinogens and toxins to be labeled. In addition to formaldehyde, according to the suit, CCP contains the carcinogens benzene and toluene diisocyanate, as well as the reproductive toxin toluene.

The safety issue has also twice drawn the scrutiny of the National Institute for Occupational Safety & Health (NIOSH). Dr. G. Kent Hatfield, the scientist who led the first NIOSH investigation, recommended in 1988 that NIOSH publish an alert notifying workers of potential health risks from exposure to CCP. But the agency backtracked and never issued any such warning, citing a lack of definitive evidence. NIOSH reopened its review in 1997 and says it will soon report its findings, though they have been delayed several times. Hatfield maintains today that ''workers, absolutely, should be warned.'' Meanwhile, nothing on CCP's packaging or its material safety data sheet (MSDS) gives users information about the paper's ingredients.

Finding out exactly what's in the paper requires a complicated patent review, which is what researcher Schmidt did in the mid-1990s. ''What we found was alarming,'' says Schmidt, whose findings were published this spring in the American Industrial Hygiene Association Journal. ''I would question if [some components] were safe.''

STONEWALLED. Schmidt and other researchers found that traces of a number of the paper's minor components might elicit adverse physiological reactions in some especially sensitive individuals, particularly those who use CCP for eight hours a day. The study also says that many of the chemicals in the paper are, to varying degrees, toxic and can cause skin, eye, respiratory, and digestive irritation as well as allergic reactions. Schmidt also found hydrocarbons in the paper that can depress the central nervous system. One of Appleton's consulting scientists, Dr. Robert G. Tardiff, CEO of Sapphire Group, a Washington (D.C.) consultant to industrial companies, says he believes the chemicals reported by Schmidt are in concentrations ''far too small to elicit any medical consequences.''

Since it produces 500,000 tons of CCP every year, Appleton says the 777 health inquiries it received from 1976 to 1986, for example, is a low number. The company kept track of these inquiries, noting the reported symptoms under the categories ''skin,'' ''headache,'' ''nausea,'' ''odor,'' ''breathing,'' ''eye,'' ''nose,'' ''mouth,'' and ''unspecified'' in a file prepared for the first NIOSH investigation. But despite the existence of these files, several sources who called Appleton say they were told that the company has never received any other complaints and that the product is perfectly safe, a claim the company denies. David LeGrande, occupational health and safety director of the CWA, says that in one instance in the early 1990s, Appleton, still claiming that its paper was harmless, recalled its CCP from C&P Telephone, now part of Verizon Communications, and replaced it with a new batch. When LeGrande requested information about the ingredients in the problem paper, Appleton stonewalled him, he says. ''We generally have no difficulty in getting accurate [information] from the manufacturer,'' LeGrande says, noting similar successful requests he has made to other companies. But Appleton, LeGrande says, wasn't ''willing to provide the information.'' Appleton says it provided other safety information to the telephone company.

For years, Appleton's standard response to allergy complaints was to send out a variation of a form letter stating that the paper is safe. What the letters didn't mention were the company's own tests, which showed irritation in humans. Appleton says those two tests, done in 1970 and 1983 with small numbers of healthy volunteers, are inconclusive. In the 1983 test, 16 of 24 people who handled and cut the paper had ''positive responses.'' Appleton discounts that study because 3 of the 16 people who had reactions to CCP also responded to plain paper. But 13 subjects reported mucous membrane (eye and nose) irritation from the carbonless paper, while only one had that reaction to the regular paper. The company says those 13 people were reacting to dust from cutting the paper and that no conclusion can be drawn as to whether symptoms resulted from ordinary exposure to the paper.

Appleton stopped performing such handling tests in favor of patch-testing the skin, citing those tests as more reliable, especially since they involve panels of about 100 people. But the patch tests do not test for mucous-membrane irritation--by far the most prevalent problem in Appleton's 1983 test. Appleton says its toxicologists say that the product is not expected to be a mucous-membrane irritant under normal conditions of use, though that opinion is disputed.

Almost since CCP's introduction in 1954, Appleton has known that its paper might pose health risks to workers. A 1958 animal test found that there was doubt as to whether or not repeated contact with carbonless paper might be harmful. Over the years, numerous other animal studies have shown that components in the paper can cause irritation, but the company says these tests were conducted at exaggerated levels and do not indicate a potential harm in humans.

The company's product-safety manager, Michael Stevens, concedes that he had concerns about CCP when he learned of a study at the University of Washington that investigated complaints of CCP irritation by the staff at Harbor View Hospital. After developing symptoms, nurses and doctors there refused to work anywhere near CCP and threatened to leave the hospital if it wasn't removed. The resulting study, known as the Gockel report, was published in June, 1981. It found that CCP emits formaldehyde, a probable carcinogen and known sensitizer, meaning it can make people allergic.

Stevens wrote a memo to his boss: ''If Gockel, et al.'s estimates are correct, we do have a real problem.'' Stevens, the memos show, knew that women were more sensitive to formaldehyde than men and that most of the people who used Appleton's CCP were female. Although Gockel's estimates for formaldehyde emission were below the U.S. Occupational Safety & Health Administration (OSHA) levels at the time, Stevens, the memos show, knew that sensitive individuals could be irritated at levels well below those limits.

Stevens notified his boss that the company should give full credence to the Gockel report. He immediately set about replicating the Gockel test using Appleton's own contract lab. The growing seriousness of the situation is evident in another Stevens memo, dated Nov. 9, 1981: ''As to the question of whether these levels of formaldehyde are significant, I must repeat that we have not seen massive irritation complaints from the field. Some of this non-complaining may be based upon ignorance. Once office workers become alerted to the possibility, we may be inundated with irritation complaints.'' Stevens went on to recommend that Appleton try to limit the amount of formaldehyde in its paper.

Despite the existence of these memos, Stevens insists that though he was initially concerned, his fears were soon quelled. While admitting that the company tests concurred with Gockel's, such tests don't have a relationship to an office environment, says Stevens. Instead, they were performed by putting paper in a glove box and testing for chemicals in a concentrated environment. ''That has nothing to do with what's in the office because you've limited the air so much,'' Stevens says, though S.W. ''Tony'' Horstman, another of the Gockel report researchers, disagrees. ''It says something about that office,'' Horstman says, adding that once the CCP was removed, ''voila, the symptoms vanished.'' Stevens notes that further testing by the company indicated barely detectable formaldehyde levels in a work situation.

Meanwhile, Appleton is awaiting word of NIOSH's second investigation. The first review is controversial to some critics, who allege that the agency may have sided too much with industry. According to several sources, shortly after NIOSH senior reviewer Hatfield notified the agency in 1988 that he thought the paper should carry an alert, the CCP industry, led by Appleton, created a firestorm concerning his recommendation. Appleton retained scientists from Harvard Medical School and Brigham & Women's Hospital to review all of the research that had been done. The resulting industry review said that the science establishing the link between worker symptoms and CCP was inconclusive. According to several sources, Hatfield was then pressured to back off his opinion. Shortly after that, NIOSH issued a finding that it could not conclude whether CCP was a danger or not. ''It was the agency's decision,'' says Hatfield, who is not working on NIOSH's current review.

IN-HOUSE. To help the public understand the current status of CCP, NIOSH director of education and information Paul Schulte points to a review paper the agency used in its analysis. The review is a critique of the existing studies that found a link between CCP and health symptoms. This review also says that NIOSH is expected to conclude that ''CCP is not a hazard to workers and has only a small possibility of producing mild and transient skin irritation.'' The review, written by Sapphire Group, was commissioned and paid for by Appleton Papers. Sapphire's Tardiff says his company's analysis is unbiased and objective.

One factor that may figure into NIOSH's decision is that complaints about CCP seem to have declined in recent years. The CWA's LeGrande believes that refinements in the chemical formulation of the paper may have made whatever was irritating people less pronounced. What's more, many companies, such as customer-service outfits, are now using computers or thermal paper. But LeGrande still considers CCP a possible danger.

Appleton says if that were true, its own workers would be suffering symptoms at, say, the manufacturing plant that sprawls through the town of Appleton. A pungent chemical smell hangs heavy in the air of the mostly automated facility, where giant rolls of paper spin through coaters to make the CCP. At the end of an hour-long plant tour, when asked what the smell was, an Appleton plant manager looked puzzled. ''Smell?'' he said. ''What smell? I don't smell anything.'' The problem is, many people who have worked with CCP, like Bonnie Hayden, do.



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