Thoughts on the Navy / Fukushima Litigation

There’s an important lawsuit currently pending in federal court in San Diego. In this post, I’ll provide a brief summary and then highlight an intriguing legal question that the parties haven’t addressed.

First the summary: Two months ago, a class of U.S. Navy sailors filed an amended complaint against Tokyo Electric Power Company (“TEPCO”), the operator of the nuclear reactors in Fukushima that melted down after an earthquake-induced tsunami destroyed their power systems in March 2011. Within days of the earthquake, the U.S. Navy sent the USS Ronald Reagan to provide humanitarian aid to victims, but inadvertently exposed dozens of sailors to allegedly high levels of radiation in the process. Press reports suggest that the carrier sailed into a plume of radioactive steam a couple of miles off the coast, and that the crew drank and bathed in desalinated seawater that was irradiated. The claimed effects include reproductive problems, leukemia, ulcers, brain cancer, and thyroid illnesses, among others. Upon return from the mission, one sailor allegedly began to lose his eyesight. Another gave birth to a child with multiple birth defects. Some observers believe that the Ronald Reagan–a $6 billion vessel–is now too radioactive to keep in service. According to the complaint, TEPCO is responsible because the company knew about the high levels of radiation emitting from the reactors but nevertheless failed to inform the public, including the ship’s crew. Claims include negligence; strict liability for design defect, failure to warn, and ultra-hazardous activities; public and private nuisance; and intentional infliction of emotional distress. As remedies, the plaintiffs have demanded compensation for lost wages, punitive damages, and a $1 billion fund for medical care. Last month TEPCO filed a motion to dismiss on the basis of international comity, forum non conveniens, the political question doctrine, and various alleged deficiencies in the prima facie case.

As the plaintiffs prepare to respond to TEPCO’s motion, I’d like to draw attention to one issue that TEPCO hasn’t raised: choice of law. The sailors’ claims appear to rely exclusively on the tort law of California, but it’s not clear that California law should apply. After all, the alleged exposure happened in Japan as a result of the acts of a Japanese corporation. One might reasonably assume that Japanese law governs in such circumstances. To resolve this issue, the district court would have to apply California’s choice of law rules, in accordance with the Supreme Court’s decision in Klaxon Co. v. Stentor Electric Manufacturing Co. Those rules would in turn require the court to ask three questions in deciding between the substantive laws of California and Japan: (1) Is Japanese law materially different from California’s? (2) If there’s a material difference, what are the respective interests of Japan and California in having their own law apply? And (3), if Japan and California both have an interest in the application of their own law, which jurisdiction’s interest would suffer the greatest impairment if the court chose to apply the law of the other? I’ll address these questions in order, while assuming for the sake of brevity that the plaintiffs’ claims are all valid as a matter of California law.

Starting with the first question, Japanese law provides for the strict liability of nuclear power plant operators in the event of nuclear damage from radiation exposure. To that extent, Japanese law is similar to the rule of strict liability on which the plaintiffs rely. But there are also material differences. For example, the complaint seeks punitive damages–a remedy that is unavailable in Japan. In fact, Japan’s opposition to punitive damages is such that Japanese courts often refuse to cooperate in the enforcement of foreign punitive damages awards even if the awards are appropriate under the law of the jurisdiction where they were obtained. Further, the complaint names “Does 1 through 200″ as additional defendants alongside TEPCO, but Japan’s Act on Compensation for Nuclear Damage channels liability exclusively to TEPCO as the power plant’s operator. Even assuming that relevant Japanese and California laws are otherwise identical, these differences mean that the choice of law could play a major role in shaping the extent of the plaintiffs’ recovery.

The next task, then, would be to identify the respective interests of Japan and California in having their own laws apply. Japan has a few. One is nexus–the lawsuit challenges the conduct of a Japanese corporation in Japan, for injuries apparently suffered in Japanese territorial waters. Another is financial–the Japanese government’s role in rescuing TEPCO and ensuring the availability of compensation to victims suggests that Japan has a significant financial interest in the outcome of the litigation. Still another interest is that the suit could complicate efforts to provide uniform levels of compensation to victims with commensurate injuries. The application of California law would mean that the sailors, if successful, are entitled to far more than Japanese victims who have suffered similar or perhaps even more extensive harms, given the jurisdictions’ differing approaches to punitive damages. Differential treatment could in turn generate significant dissatisfaction and resentment among victims in Japan. On the other side, California has an interest in deterring foreign torts that harm California residents.

The final challenge under California’s choice of law doctrine would be to weigh the competing interests. To me, it’s not entirely clear how the federal court would rule on the issue if TEPCO had raised it. Japan’s interests seem to be numerically superior, but California’s is nevertheless significant. I offer no conclusion on this point, other than to say that neither view seems unreasonable.

Given the potential significance of choice of law, one wonders why it’s not in TEPCO’s motion. My guess is that the omission isn’t an accident. Most likely, TEPCO purposefully chose to focus instead on forum non conveniens, for two reasons. First, forum non would would be a bigger win in the sense that it results in immediate dismissal, while a choice of Japanese law would not. Second, there’s a tension between forum non and choice of law doctrine that makes it a little awkward to raise the issues simultaneously. To persuade the court to dismiss, TEPCO has to show that the Japanese judicial system is an adequate alternative forum that’s capable of redressing the plaintiffs’ alleged injuries. But to persuade the court to apply Japanese law, TEPCO would first have to highlight material differences between the relevant laws of California and Japan, as explained above. Doing this while also arguing forum non would force TEPCO to walk a fine line, arguing that Japanese law is different but not too different from the California alternative.

As the choice of law analysis illustrates, this case is fascinating for a lot of reasons and worth following. I look forward to seeing the plaintiffs’ response and the court’s ruling on the motion.

Cross-posted on Ryan Scoville’s blog.

[This article was first published on the Network on April 21, 2014.]

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