TEPCO’s Liability To Japan

Welcome to Fukushima.

It’s been more than a year since the name TEPCO became synonymous with excessive corporate greed, mismanagement, fraud, government collusion, cover-ups, and reckless disregard for the health, safety and, welfare of the people of Japan, let alone the rest of the global community. In that time we’ve witnessed the company defy Japan’s newly decreed anti-gang law, where the energy giant has been outsourcing radiation cleanup duties to numerous contractors known to have underworld affiliations. During the first few weeks of the crisis, we shook our heads in awe, as TEPCO chief Shimizu was “hospitalized” for something as lame as dizziness, at the same time the corporation was facing total financial ruin, and the country of Japan confronted it’s worst crisis since World War II. We were shocked in disbelief when with the entire debacle was allowed to remain in TEPCO’s hands, even when it was more than clear, the company was in way over its head, as the entire world’s atomic energy overlords proved they never had any plan in place if something like a meltdown did in fact actually occur. And they still don’t!

We’ve seen the Japanese government demand the entire TEPCO board resign if they wished to receive yet another unwilling taxpayer supported cash infusion. A handout the country simply cannot afford. We’ve witnessed that same government finally admit that large swathes of Fukushima Prefecture will inevitably be uninhabitable forever, as they scramble to designate new No Go Zones. We heard the “officials” declare the crippled Daiichi reactors in cold shutdown” as they continue to burn out of control, even where they hadn’t yet been able to get close enough to Unit 3 to have made such a premature assessment. We beheld the media blackout on Tomohiku Suzuki, a reporter who went undercover, and put himself in harms way to infiltrate the plant, and document scores of egregious schemes including the continuance of falsifying safety records that place employees lives in peril by intentionally over exposing them to radiation, as Hitachi, and Toshiba purposely fail to work together, for the benefit of their corporations, and to the ruin of the Fukushima people.

We’ve learned the U.S. evacuation zone of 80 kilometers is far more appropriate, given the true extent of contamination revealed by university studies that continue to stream (scream) in. We know that many areas in, and around Iwaki, Fukushima City, Koriyama, and Mito should be off limits to anyone not wearing protective gear, as the experts, affirm that people who remain in these areas might as well be pitching a tent inside a nuclear power plant. Finally, we’ve read the reports where radiation from the failed plant has reached the International Date Line, some 4000 kilometers away the shores of Japan.

A newly constructed, and abandoned shopping center inside the 20km evacuation zone.

I could go on and on about the misdeeds, deceit, dishonesty, media collusion, and toothless watchdogs that continue to prove their truly incompetent demeanor. I could continue to malign the asinine blunderings courtesy of TEPCO, but that is not the true intention of this article.

Surprisingly, in spite of all the glaring defects, and the obvious laws that support TEPCO’s board facing criminal proceedings, if you’d give any credence to the TEPCO mouthpieces, you’d think the company was the true victim in all of this. You’d think that TEPCO was not responsible for any of this shameful, nuclear nightmare that Japan faces, and will continue to face for hundreds, if not thousands of years into the future. Of course TEPCO’s “claims of innocence” are made to appease the few shareholders that somehow managed to linger on through the endless electrical storm. Yes, ironically, despite all evidence to the contrary, the company denies any, and all culpability for destroying, as former Prime Minister Kan stated in an interview with The New York Times, “One third of Japan.”

For the sake of argument let’s take TEPCO’s unconscionable claim, on its face. Let’s pretend that TEPCO is not culpable for the nuclear nightmare. Let’s say that TEPCO has not been negligent in handling what has inevitably become the worst nuclear accident since Chernobyl, and quite possibly even worse than that. Only time will tell! Let’s ignore the fact that TEPCO shareholders have called for a shareholder’s compensation lawsuit against TEPCO’s top management for their failure of management duties. Let’s also disregard that Daini, which borders the 20km evacuation zone near Iwaki, had itself barely avoided a full meltdown, which would have heaped even more woes on the energy giant, the ineffectual nuclear agencies, the nation, and the world. Let’s do remember that the energy giant for years reaped huge profits, while fraudulently overcharging customers by 10%, and is the largest energy company in Japan, as well as the world’s largest privately held utility company, with deep pockets. Let’s also remember that Tokyo’s government has turned their back on TEPCO, and focused on Chubu Electric Power for their future energy needs.

For argument’s sake let’s say that TEPCO had always, and continues to be, an exemplary example of how a corporation ought to manage an energy facility that utilizes fuel rods, spent fuel, and the ungodly perilous MOX fuel, to do one thing; produce steam to turn a turbine, which produces electricity that is needlessly wasted on glitzy billboards nobody looks at, shop displays that assault the senses, tasteless pachinko parlor displays, and superfluous gadgets, all for the specialized suitability, and allure of the general masses that can no longer afford them.

Daini Nuclear Facility: First to report failure on 3.11.11.

Let’s concur with TEPCO’s board when they wrote to their shareholders on Jan. 13th, 2012 that, “There was no lack of due diligence (on the part of TEPCO) that would warrant a liabilities claim.” Finally, let us oppose Futaba mayor Idogawa who refutes TEPCO’s protective stance, “To say that (TEPCO) board members are not responsible makes a complete mockery of us.” He continued, “If they aren’t responsible, (for the nuclear disaster) why should we have to accept all this radiation? Whose fault is it that we’re living as evacuees? Isn’t the act of exposing us to all this radiation a crime? Isn’t it?” So, in that, we’ll also leave out the criminal elements, and criminal charges the corporation’s board should have already been arrested for, as it is clear that the District Attorney’s in all the prefectures that have been subjected to the harm caused by TEPCO, intend to do the same.

Alas, however, for TEPCO, whether they have committed no sin, or they have acted in reckless disregard of their corporate duties, and to the general public, as we all know they have, the issue of liability is sealed. It is a done deal! TEPCO is liable for any and all harm caused, be it an individual, a family, personal property, a business, agricultural land, or any, and all other claims that would arise against the company for allowing dangerous radiation isotopes to spew from its plant, and blanket a great portion of Japan’s once majestic landscape. The hard fact is that any plaintiff that files an action against TEPCO for any harm as a result of the nuclear “incident” would prevail under the tort doctrine of strict liability. TEPCO’s claim the “monster” from the sea caused their harm would be ineffectual, as there is no defense to ultra hazardous activities under the law.

Ultra hazardous activities

Ultra hazardous activities are defined as any action or process, which is so inherently dangerous that any person conducting the activity is strictly liable for any injury, caused by the activity. Ultra hazardous activities include the use of explosives, radioactive materials, and the storage of hazardous chemicals and materials, such as spent fuel rods.

Ultra hazardous activities present interesting liability issues. The Second Restatement of Torts uses the phrase ”abnormally dangerous” instead of the more traditionally used “ultra hazardous” term. Tort claims brought under a theory of strict liability are often defended under theories that the plaintiff assumed some type of risk of the ultra hazardous activity. However, contributory negligence is not a defense or mitigating factor to cases brought under a theory of ultra hazardous strict liability. The clear rule here is, if you bring a product to the marketplace, and that product is ultra hazardous, and it causes any harm, there is no defense available. The maker of that product, and any third-party within the chain of production, and distribution is liable for all damages that arise from that product, regardless of how properly the product was manufactured, or handled by the defendant.

The ultra hazardous doctrine, first enunciated in Rylands v. Fletcher, L.R. 3 H.L. 330 (1868), imposes liability for damage proximately caused by one who carries on an ultra hazardous activity. The modern theory of liability for ultra hazardous activity is that certain activities create such a serious risk of danger that it is justifiable to place all liability for any resultant loss on the person engaging in the activity, regardless of lack of culpability on their part. See Hulsey v. Elsinore Parachute Center, 168 Cal.App.3d 333 (1985). “One who engages in ultra hazardous activity may be found liable without a showing of negligence.”

Military reserve personnel preparing to enter the No Go Zone.

The essential elements of a claim of strict liability for ultra hazardous activities are as follows:

  1. The defendant carried on an ultra hazardous activity.
  2. The activity caused plaintiff to suffer injury, damage, loss or harm.
  3. The defendant recognized or should have recognized that plaintiff’s person or property was likely to be harmed by the activity or the unpreventable miscarriage of the activity.

In Green v. General Petroleum Corp. 205 Cal. 328 (1928), an oil well blew out through no fault of the defendant, and scattered debris onto plaintiffs’ property. The court held despite the fact that the defendant had not acted improperly, the defendant was still liable for all damages. The case has been generally interpreted as one involving strict liability for damages resulting from an ultra hazardous activity. In Luthringer v. Moore, 31 Cal.2d 489 (1948), the court held that one using hydro-cyanic gas in the fumigation of a building was absolutely liable to a person in an adjoining building who was injured by the escaping gas. The court applied the principle of Green, stating, “It is not significant that a property damage, as distinguished from a personal injury was involved. The important factor is that certain activities under certain conditions may be so hazardous to the public generally, and of such relative infrequent occurrence, that it may well call for strict liability as the best public policy.”

A brief history of product liability

Any student that attends law school is required to take a first year course in tort law. In this area of law there is one topic that receives a great deal of attention, and that is the subject of products liability. Products liability finds its way on every bar exam in both essay, and multiple choice format. Generally product liability laws apply to any manufacturer, or supplier of a product that has been designed in a defective manner, and unreasonably threatens the personal safety of the consumer.

In the landmark case of MacPherson v. Buick Motor Co., 111 N.E. 1050 (1916), the plaintiff was injured when one of the wooden wheels of his 1910 Buick Runabout collapsed. Buick manufactured the vehicle, but not the wheel. Buick denied liability because the plaintiff purchased the automobile from a dealer, not directly from the defendant.  The company also argued that they had made no contract with the plaintiff, therefore no privity existed between the two parties. The court disagreed and set in motion the mechanisms of the modern day products liability laws that corporations loathe today. The portion of the MacPherson opinion in which Justice Cardozo demolished the privity bar to recovery is as follows: “If the nature of a thing is such that it is reasonably certain to place life and limb in peril when negligently made, it is then a thing of danger. Its nature gives warning of the consequence to be expected. If to the element of danger there is added knowledge that the thing will be used by persons other than the purchaser, and used without new tests, then, irrespective of contract, the manufacturer of this thing of danger is under a duty to make it carefully. That is as far as we need to go for the decision of this case, If [the defendant] is negligent, where danger is to be foreseen, a liability will follow.”

A Koriyama junior high school having its contaminated topsoil removed.

Later American courts departed from the MacPherson standard, and decided that it was too harsh to require seriously injured consumer plaintiffs to prove negligence claims against manufacturers or retailers of products that were inadequately designed. To avoid having to deny such plaintiffs relief, courts began to look for facts in their cases, which they could characterize as an express or implied warranty from the manufacturer to the consumer. The doctrine of Res Ipsa Loquitur was also overextended to reduce the plaintiff’s burden of proof. Over time, the resulting legal fictions became increasingly strained.

The rise of strict liability

Of the various U.S. states, California was the first to throw away the fiction of a warranty, and to boldly assert the doctrine of strict liability for defective products. In Greenman v. Yuba Power Products, 59 Cal. 2d 57 (1963), Justice Traynor laid the foundation for strict liability with the following words: “Even if there is no negligence, public policy demands that responsibility be fixed wherever it will most effectively reduce the hazards to life and health inherent in defective products that reach the market. It is evident that the manufacturer can anticipate some hazards, and guard against the recurrence of others, as the public cannot. Those who suffer injury from defective products are unprepared to meet its consequences. The cost of an injury and the loss of time or health may be an overwhelming misfortune to the person injured, and a needless one, for the risk of injury can be insured by the manufacturer, and distributed among the public as a cost of doing business. It is to the public interest to discourage the marketing of products having defects that are a menace to the public. If such products nevertheless find their way into the market it is to the public interest to place the responsibility for whatever injury they may cause upon the manufacturer, who, even if he is not negligent in the manufacture of the product, is responsible for its reaching the market. However intermittently such injuries may occur and however haphazardly they may strike, the risk of their occurrence is a constant risk and a general one. Against such a risk there should be general and constant protection and the manufacturer is best situated to afford such protection.”

The year after Greenman, the Supreme Court of California proceeded to extend strict liability to all parties involved in the manufacturing, distribution, and sale of defective products, including retailers, and in 1969 made it clear that such defendants were liable not only to direct customers and users, but also to any innocent bystanders randomly injured by defective products.

Although the Greenman rule was carried over to most states via § 402A of the Second Restatement of Torts, the Supreme Court of California refused to adopt § 402A’s “unreasonably dangerous” limitation upon strict liability. Thus, strict liability in California is truly strict, in that the plaintiff need not show that the defect was unreasonable or dangerous.

Classes were in session at this contaminated high school in Fukushima.

The decision in Greenman not only obliterates any claim that TEPCO is not liable for the nuclear fiasco, it also brings the American company, that manufactured two of the three failing reactors into the suit. This legal process is known as an impleader, where a defendant may bring other parties (defendants) into a suit, so that any damages that may arise would be distributed among any defendant found liable. You would recognize one of these other defendants as a company that boasts, “bringing good things to life.” That same company that made 40 billion USD in 2010, and didn’t have to pay a single red cent in taxes for those profits. That company is General Electric the manufacturer of two of the failing reactors. Another impleaded defendant that would be thrown to the fray is Toshiba, the manufacturer of one of the other failed reactors.

Since the Greenman decision, many jurisdictions have been swayed by Justice Traynor’s arguments on behalf of the strict liability rule. These jurisdictions include the European Union, Australia, and Japan. Japan incorporated the Greenman doctrine into Japan’s Product Liability Act, Act No. 85 of 1994.

According to the World Nuclear Association, “Operators of nuclear power plants are liable for any damage caused by them, regardless of fault.” The concept in question here is where a corporation produces a product that is so inherently dangerous, that if it causes any harm to the end-user, the maker of that product is held strictly liable for any damages that arise, regardless of any negligent action or fault. This means even where a company has not engaged in any fault, they are still held accountable.

Even something other than the product itself can cause it to be defective. For example, improperly storing spent fuel rods. Dangerous products should also always carry a warning label that explains, in plain language how they should be handled, under what circumstances they are likely to cause harm, how to properly store those products, and what steps must be taken in an emergency involving the product.

One of a myriad of schools shutdown in the heart of Fukushima.

Instead of focusing on the behavior of the manufacturer (as in negligence), strict liability claims focus on the product itself. Under strict liability, the manufacturer is liable if the product is defective, even if the manufacturer was not negligent in making that product defective. The difficulty with negligence is that it requires the plaintiff to prove that the defendant’s conduct fell below the relevant standard of care. It’s quite a difficult, and expensive task to find, and retain quality expert witnesses who can establish the standard of care required, the breach, and causation of the plaintiff’s harm. This is exactly the reason that strict liability shifts the burden of proving causation from the plaintiff, over to the defendant, to prove their product did not cause the harm in question.

Whether TEPCO acted intentionally, recklessly, negligently, or exemplary does not matter. Under the Japan’s Product Liability Act, Act No. 85 of 1994, the laws of products liability are well defined. TEPCO is liable for any, and all damages caused by the three meltdowns, they tried so desperately to hide from the general public, for as long as they could, and regardless of the resulting harm to the public, it’s corporation’s reputation, and their shareholder’s investments. TEPCO, under the laws of Japan, is strictly liable for any damages, and must suffer the resulting consequences, by putting every single person, family, or entity harmed, back in the same position they were in, prior to the catastrophe that, in reality could have been avoided had TEPCO clearly understood, accepted, and honored their duty, not only to the shareholders that gave them the funds to expand their corporation to what it had been prior to 3.11.11, but also to the general public as a matter of public policy.

An evacuated community as far as the eyes can see.

This article originally ran in the March, 2012 edition of Japan Today magazine. http://japantoday.com/category/opinions/view/tepcos-liability-to-japan.