Supreme Court Rings Eight Bells and Ends Navy Sailor Fukushima Suit

Morgan Lewis - Up & Atom

Morgan Lewis - Up & Atom

The US Supreme Court rang eight bells on March 29, rejecting the petition by US Navy sailors to review last year’s Ninth Circuit decision upholding dismissal of their lawsuit in Cooper v. Tokyo Electric Power Co. Holdings Inc. The Supreme Court’s rejection ends the long-running litigation stemming from claims of injury by US Navy sailors deployed to Japan to provide humanitarian assistance after the March 2011 earthquake and tsunami off the coast of Japan. The sailors claimed injury from radiation emitted from the damaged Fukushima-Daichi power plant and sued plant operator Tokyo Electric Power Holdings Inc. (TEPCO) and reactor designer General Electric Company (GE) for negligence, strict product liability, and wrongful death.

As we have previously discussed, the Ninth Circuit had twice ruled on the sailors suit brought in the US District Court for the Southern District of California. In 2017, the Ninth Circuit affirmed the trial court’s refusal to grant TEPCO’s motion to dismiss on international comity and political questions grounds, rejecting TEPCO’s arguments that the Convention on Supplemental Compensation and international relations considerations barred the suit.

On remand to the trial court, TEPCO and GE again moved to dismiss before beginning discovery, arguing that the case should be dismissed on international comity grounds. In their second motions, TEPCO and GE focused their arguments on Japan’s comprehensive Act on Compensation for Nuclear Damage. The trial court granted the motions, and the plaintiffs appealed to the Ninth Circuit.

In its 2020 decision, the Ninth Circuit agreed with TEPCO’s and GE’s arguments that the sailors should have brought their claims in Japan. The Ninth Circuit’s 2020 decision focused on the “channeling” provision in the Japanese Act on Compensation that holds plant operators strictly liable for damages from nuclear incidents and states that “no other person shall be liable to compensate for damages.” The court therefore upheld the dismissal of GE with prejudice.

With respect to the trial court’s dismissal of claims against TEPCO, the Ninth Circuit’s 2020 decision focused on the fact that a choice of law analysis under California law would have required the trial court to apply Japanese law to decide the case. In reaching its decision, the Ninth Circuit considered an amicus brief filed by the Japanese government claiming that Japan had a policy interest in hearing all claims associated with the Fukushima-Daichi event. The court also cited to the Japanese government’s establishment of a domestic claims process backed by a commitment of more than $76 billion to compensate more than 21,000 victims of the event, and emphasized that the Cooper plaintiffs may be eligible for compensation in Japan under this process. Applying a multipart test that balanced the strength of the US and foreign government’s interests, the location of the event, the foreign policy interest, and the relative unfamiliarity of US courts with Japanese law, the Ninth Circuit upheld the dismissal of the plaintiffs’ claims against TEPCO on international comity grounds.

The Supreme Court’s rejection of the US Navy sailors’ petition concludes the litigation, but provides an opportunity for participants in the international nuclear industry, including the designers and developers of the next generation of nuclear reactors, to revisit some key takeaways from the Ninth Circuit’s 2020 decision. First, the Convention on Supplemental Compensation, which went into effect in 2015, will apply to lawsuits based on future nuclear incidents in parties to the convention. Second, international nuclear industry participants should fully understand the liability regime in foreign jurisdictions where they plan to conduct business, including any channeling provisions and the comprehensiveness of the statutory and regulatory regime in the foreign country. Suppliers should ensure they fully understand these liability regimes to evaluate the risks of participation in a commercial reactor project in a particular country and whether and how much additional financial protection the supplier should demand to compensate for taking on these risks.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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