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GE unlikely to face liability in Japanese nuclear crisis
April 1, 2011 / 12:05 PM / 6 years ago

GE unlikely to face liability in Japanese nuclear crisis

NEW YORK, April 1 (Reuters Legal) - The Japanese nuclear crisis has created a public-relations headache for General Electric Co (GE.N), 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), 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

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