U.S.-Style Class Actions Unlikely For Japanese Following Quake

ClassAction.org has reported previously on the spread of class action lawsuits around the world – including their introduction to South Korea and France, and the first successful case to reach settlement in Italy. Class action lawsuits work better in some legal systems than others, and their consumer-friendly nature means they can meet firm opposition from business leaders in some sectors.

The suggestion has been met with opposition from business leaders.

In Japan, mass litigation in its current form allows individuals who have incurred the same damages to come together to sue a defendant – but limits the settlement from any judgment to those involved in the litigation, rather than a wider class membership. Only individuals who have participated in the often costly and lengthy process are able to receive compensation. Following the Great Tohoku Earthquake of March 2011, and consequent lawsuits filed against the country’s largest electrical provider, Tepco, some are calling for the introduction of U.S.-style representative actions. It’s a controversial move, especially in a country with a strong, influential and conservative business sector. For the thousands of residents still affected by the quake’s destruction, though, it could be a game changer.

Roughly 1,700 individuals have filed four different lawsuits against Tokyo Electric Power Co. and the Japanese government, seeking redress for the devastation that continues to plague communities across multiple prefectures. The suits, filed in March on the second anniversary of the earthquake, are seeking a combined ¥5.5 billion. A further 1,000 plaintiffs are preparing to file an additional suit in the coming months.

Alternatives to legal action do exist in Japan, but critics say they are ineffective and fail to adequately compensate consumers. Direct application to Tepco for compensation involves large amounts of paperwork filled with difficult language and terms that are archaic for many modern Japanese speakers. Individuals must agree to Tepco’s own terms, and the agreement is allegedly biased in favor of the company. Many are reluctant to engage in a process with little chance of real return.

A second alternative, an out-of-court resolution, can be sought through a special center founded specifically to help with disputes between Tepco and consumers using third-party negotiators. Mediated settlements are not legally-binding, however, and either party can veto the process at will, making the long-term gain unreliable. The center has settled more than 3,000 cases, though it has processed more than 7,000. Many have been left without a final agreement.

And so it comes to legal action. Japan’s current mass litigation system allows only litigants to collect on judgments. Those taking part in mass lawsuits are responsible for collecting evidence and, crucially, coordinating their claims – a massive undertaking in cases involving hundreds, especially for those who are still recovering from the destruction and loss of the earthquake. It remains impossible for suits to be filed on behalf of unnamed members, and individuals cannot join a suit after the fact. U.S-style representative actions, the argument goes, would open up settlements to individuals without requiring the current burden on the court system and the complication of coordinating claims of people who often live many miles apart.

Class actions would also almost certainly lead to larger payouts and a higher collection rate following successful settlements. And that is why the suggestion has been met with opposition from business leaders.

Experts have pointed to the large number of Tepco customers who would benefit from a ‘free for all’ settlement, and the impact that would have on the company. If a precedent were set allowing Japanese plaintiffs to bypass the current system of opt-in, collaborative suits, the business community would be faced with the possibility of high payments; not something it welcomes. Critics also point out that representative actions would require those who do not wish to be covered by the settlement terms to opt-out, requiring the class representatives to go to lengths to advertise the suit. Conservative business leaders have strong links to government in Japan, and a move likely to be so unpopular among influential voices would face multiple challenges.

That the debate over representative actions has been brought about by so large a case as Tepco’s is, in many ways, a shame. The introduction of a bill to legalize new lawsuit formats might, in itself, have a fighting chance. With such large numbers of plaintiffs and such a large settlement on the table, tensions have been raised that make even small changes difficult to navigate. For now, class actions will remain a distinctly American lawsuit, and plaintiffs in the proposed Tepco case must work within the boundaries of Japanese law.