$1 billion proposed class action in the U.S. ploughs ahead

Last week, the U.S. Ninth Circuit upheld a district court’s decision in Cooper v. Tokyo Electric Power to deny defendant Tokyo Electric Power Company’s motion to dismiss a proposed class action on the basis that the U.S. courts lack jurisdiction in the case.

Background of the case

This is a $1 billion proposed class action against Tokyo Electric Power Co. (“TEPCO”) commenced in the Southern District of California over alleged radiation injuries in the plaintiffs’ response to the 2011 Fukushima nuclear disaster following an earthquake and tsunami in March 2011 on Japan’s northeastern coast. The plaintiffs as members of the U.S. Navy were deployed near the Fukushima Daiichi Nuclear Power Plant (“FNPP”) as part of “Operation Tomodachi” to provide humanitarian aid.

The plaintiffs allege that when they arrived on the site, TEPCO provided false and misleading information regarding the extent of damage to the FNPP, and that TEPCO’s management knew of the risk of radiation exposure. The plaintiffs “claim that they and U.S. military officials were unaware of the extent of the radiation leak and that they would not have been deployed as close to the FNPP had TEPCO been forthcoming about the damage.” Further, the plaintiffs allege that “the U.S. military would not ordinarily discover such radiation absent sufficient warning.”

The court’s analysis of the jurisdiction of the U.S. courts

The government of Japan filed an amicus brief urging the Ninth Circuit to reverse the lower court decision, motivated by the concern that foreign proceedings could threaten Japan’s compensation scheme for all victims of the FNPP. The Japanese government had created a compensation scheme to address the claims (regardless of nationality) resulting from the FNPP leak, giving claimants the option to submit a claim directly to TEPCO, to the newly established Nuclear Damage Claim Dispute Resolution Center, or to a Japanese court.

Upon receiving this brief, the Ninth Circuit solicited the U.S. Department of State’s views, after which the U.S. Department submitted an amicus brief in support of the district court’s decision. The Ninth Circuit agreed with the U.S. Department’s position that “allowing the suit to continue in California is consistent with U.S. interests in promoting the Convention on Supplementary Compensation for Nuclear Damage (“CSC”).” As the court held, the U.S. is committed to global adherence to the CSC “as a global liability regime for handling claims arising out of nuclear incidents”.

With regards to TEPCO’s challenge of the district court’s decision on “international comity” grounds, the Ninth Circuit considered the lower court’s treatment of Japan’s interest in centralizing litigation in Japan as well as the U.S.’s interest in compensating its military service members, and held that the lower court did not abuse its discretion in weighing the competing policy interests.

TEPCO also argued the “political question” doctrine that the courts are not able to review the U.S. Navy’s decision to deploy the plaintiffs near the FNPP which allegedly involved a non-justiciable political question. The Ninth Circuit held that at this stage in the litigation, it was unable to undertake the “discriminating inquiry” necessary to determine if the case presented a political question because there were outstanding basic factual questions regarding the Navy’s operations during Operation Tomodachi.

The Ninth Circuit ultimately left the door open to the lower court revisiting some of the issues that TEPCO raised in its motion to dismiss such as the political question doctrine as the case develops and the interests of the governments evolve.

The Canadian context

The willingness of courts to allow class actions to proceed though they cover facts or parties extending beyond national borders reflected in the Tokyo Electric Power decision is a risk also faced by businesses or professional firms operating in Canada. Here, the plaintiff(s) must be able to show a “real and substantial connection” between the circumstances giving rise to the claim and the jurisdiction where the claim is brought. This is assessed by examining connections that may exist between the province selected for the litigation by the representative plaintiff and the parties or the matters in dispute.

We wrote before about “global” class actions and the risk of the court accepting a class proceeding despite very mixed connections with the jurisdiction. In the recent case, Excalibur Special Opportunities LP v Schwartz Levitsky Feldman LLP, the Ontario Court of Appeal certified a class action in which 98 percent of the proposed class members were non-residents of Ontario. A real and substantial connection between Ontario and the action was found by the majority because of connections with Ontario of the defendant and the work in issue that it had performed.

Both the Tokyo Electric Power and the Excalibur cases demonstrate the competing policy interests that are at play in global class actions and reflect the types of evidence and arguments relevant to jurisdiction that parties are advancing and courts considering. Given the relatively low threshold established for certification of a class proceeding in Canada, businesses and professional firms will need to be ready to persuasively advance evidence and arguments challenging jurisdiction where appropriate.