The Legal System Generally
Japan is a civil law country and the primary sources of laws are statutes and written rules. Case law is not binding precedent, but it can be persuasive to judges because judges must justify their decisions. There are no juries in Japanese civil courts. Although the country is based on civil law, the process is adversarial and judges will decide claims based on the information presented by the parties but they do have the power to order additional investigative measures if they deem it appropriate. There is no right to a jury trial and most civil liability cases are tried by either one or a panel of three judges, depending on the amount at stake and the complexity of the matter.
Japan does not currently have a class action system but it does have two procedural mechanisms that allow for group litigation: joinder and representative actions. Joinder and representative actions do not allow for actions of the magnitude of the typical U.S. class action, but they do allow for a wider array of group actions. Japan also allows for consumer group actions, but those actions may only be brought by qualified consumer groups and the actions may only seek injunctive relief.
Joinder of Claims
Joinder of claims proceedings are the predominant method used to bring multiparty actions in Japan. Joinder is a procedure that allows for the consolidation of claims between several parties into one single combined action. The Japanese Code of Civil Procedure provides that when the rights or liabilities for an action are common to more than one person or when actions are based on the same facts or laws, then the individuals may join together as co-litigants to either pursue or defend against a claim. Each party must give its authorization to be part of the proceeding. Typically this type of group action only involves a small number of parties but it is not unheard of to have several hundred people join together in an action. An action in joinder can only be commenced when it can be demonstrated that each individual lawsuit is economically viable.
In joinder, a limited number of lawyers will typically act jointly for the parties. In practice, the co-litigants will form one group and hire common lawyer(s). Documents appointing a new lawyer have to be executed by each party. Because the lawyers are representatives of all parties, each individual party is not required to appear in court. This multiparty action is maintained at the discretion of the court and the court can decide at any point to separate the claims if it decides that there are significant dissimilarities in the proceeding. Even if the court does not elect to separate the claims, there is no guarantee that the judgment will be the same for each party joined as a co-litigant. Even after joining in a multiparty claim, each party retains a right to settle their individual claim, withdraw, or appeal a judgment independently of the other co-litigants. Throughout the litigation procedure, each co-litigant’s actions are seen as independent of and do not affect the other co-litigants.
The Japanese Code of Civil Procedure provides that a number of individuals appoint one or more representatives to commence a proceeding on behalf of everyone. The group of people sharing the representative must share common interests. According to precedent, common interests include: 1) where the purposes, obligations, or liabilities of an action are common to more than one person, and 2) where the claim or defense is based on the same facts or laws. The representative party must be chosen from amongst the parties with a shared claim or defense. Once parties have chosen a representative, the parties will be withdrawn from the proceedings but the judgment will still pertain to them. Representatives have to be explicitly authorized by each represented party. Parties do not, however, actually have to initiate an individual complaint in court. Identifying and acquiring authorizations from potential parties limits the number of parties that can participate. Once the representative has been selected, the representative has the right to select a lawyer.
A new party can join the representative action if he can demonstrate that he shares a common interest in the claim. There are no restrictions or limitations on a party’s ability to either withdraw from the group action or change the representative.
A representative is free to withdraw from litigation or enter into a settlement agreement at their discretion. The decision or settlement agreement will, however, be shared by all represented parties.
Costs of Litigation
The losing party must pay its own and the prevailing party’s court fees but the court has discretion to adjust those fees. In practice, courts tend to avoid cost shifting and it is rare for the prevailing party to actually recoup its costs from the losing party.
There is no provision that the losing party must pay the prevailing party’s attorneys’ fees.
Japanese attorneys are prohibited from representing clients on a contingent fee basis and from advancing any court costs on a client’s behalf.
Third party funding of litigation costs and attorneys’ fees is allowed.
Kessler Topaz’s Experience in Japan
The Firm represents several of its clients who are currently parties to litigation in Tokyo against Olympus Corporation (“Olympus”) related to the revelation by Olympus that it was involved in a fraudulent scheme since 1998 aimed at removing toxic assets from its balance sheet under the cover of legitimate acquisitions. The Firm has taken an active role in the litigation and ongoing efforts to resolve the case.