GE unlikely to face liability in Japanese nuclear crisis

By Andrew Longstreth

NEW YORK, April 1 (Reuters Legal) – The Japanese nuclear
crisis has created a public-relations headache for General
Electric Co (GE.N: Quote, Profile, Research), but the company so far has escaped any
legal fallout, and many experts expect it will continue to do
so.

GE designed the Mark 1 containment systems used in reactors
at the crippled Fukushima Daiichi power plant, and after a
magnitude 9 earthquake and a tsunami devastated northeast Japan
on March 11, vessels intended to protect the reactors came
under severe stress amidst explosions and fires and may have
leaked radiation.

In the three weeks since the disaster, no lawsuits are
known to have been filed against Fairfield, Connecticut-based
GE either in Japan or in the United States. While GE could face
lawsuits in the future, of course, any potential plaintiffs
would have to overcome high hurdles, according to a wide array
of legal experts, including nuclear law specialists and lawyers
who represent plaintiffs and defendants in mass-tort
litigation.

Japanese officials have not yet been able to assess the
performance of GE’s Mark 1 containment design. But critics have
pointed to concerns raised more than 30 years ago by GE
engineers and others about the design’s durability. GE says the
containment system has a “proven track record of safety and
reliability for over 40 years” and that systems in use
worldwide met international regulatory requirements when they
were constructed. The Japanese reactors using the GE
containment design were installed in the 1970s.

Even if GE’s containment system failed, its liability in
Japan appears limited. Japanese law channels liability for
nuclear accidents to the plant operator, which must maintain
120 billion yen ($1.2 billion) of insurance per site to cover
potential damages. If damages exceed that amount, the
government is required to pick up the tab. If the government
determines that the accident was caused by a “grave natural
disaster of an exceptional character or by an insurrection,” it
assumes all liability.

MAJOR OBSTACLES IN U.S. COURTS

It is not yet clear how, or if, the Japanese government and
plant operator, Tokyo Electric Power Co (9501.T: Quote, Profile, Research), will share
the financial burden from the nuclear disaster. Japanese
lawmakers have debated nationalizing TEPCO, which would nullify
any potential disagreement over cost sharing. A Reuters special
report published Tuesday revealed that Japanese regulators and
TEPCO failed to act on repeated warnings about the risks of an
earthquake or tsunami on the Fukushima plant.

In the United States, the Price-Anderson Act channels
liability for nuclear accidents to plant operators and the
government while insulating suppliers, but it only applies to
accidents at facilities in the United States and would not
shield GE from lawsuits in U.S. courts.

Japanese citizens injured in the disaster would face major
obstacles if they sue GE in a U.S. court, however. Over the
last few decades, U.S. courts have frequently invoked a legal
doctrine known as forum non conveniens, or “forum not
agreeing,” to dismiss cases involving injuries that occurred
overseas. In 1987, the U.S. Court of Appeals for the Second
Circuit dismissed lawsuits filed against Union Carbide by
victims of a toxic gas leak in Bhopal, India, considered one of
the worst industrial disasters of all time. In January, the
U.S. Court of Appeals for the Third Circuit cited the forum
doctrine when it upheld dismissal of lawsuits filed by hundreds
of Australians who were allegedly harmed by emissions from
three Alcoa refineries in Western Australia.

Mark Lanier, a Texas trial lawyer who frequently represents
plaintiffs in mass-tort cases, said the jurisdictional
challenges could discourage plaintiffs’ lawyers from filing
lawsuits. “I’m not saying it can’t be done but I think it’s
going to be really tough,” said Lanier.

U.S. LAWYERS “FOLLOWING THE SITUATION IN JAPAN” CLOSELY

GE could also be sued by American citizens or American
business interests claiming injury from radiation emitted from
the Japanese nuclear plant. So far, there have been no reports
of harmful levels of radiation reaching the United States, but
plaintiffs’ lawyers say they are monitoring it.

“We do a lot of radiation litigation and are following the
situation in Japan very closely,” said Stuart Smith, an
attorney with Smith Stag in New Orleans. “We have retained
experts to monitor the situation and advise us when and if
significant harm has occurred in territories owned or
controlled by the U.S.. That would create jurisdiction in U.S.
courts.”

Even if plaintiffs could establish jurisdiction in U.S.
courts, there is no guarantee that American law would apply. In
tort cases, U.S. courts tend to favor applying the law of the
country in which the injury occurred. Given Japan’s nuclear
liability law, that would likely be a death knell for
plaintiffs seeking to recover damages from GE.

If American law is applied, GE would still have strong
defenses. Tom Ajamie, an attorney who represents plaintiffs and
defendants in commercial litigation, said one of the biggest
obstacles for plaintiffs would be overcoming the so-called
foreseeability test. Under the test, plaintiffs would have to
show to show that defendants could have reasonably foreseen the
consequences resulting from the combination of a magnitude 9
earthquake and a tsunami.

“Many cases get tossed from the courts because they did not
meet the foreseeable standard,” said Ajamie. “What occurred in
Japan was a sequence of events that courts are not likely to
find was reasonably foreseeable.”

(Reporting by Andrew Longstreth of Reuters Legal;
Additional reporting by Moira Herbst of Reuters Legal; Editing
by Eric Effron and Amy Singer)

(This article first appeared on Westlaw News & Insight,
www.westlawnews.com)

GE unlikely to face liability in Japanese nuclear crisis