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COLUMN ONE : Japanese Discover the Lawsuit : More people are flouting traditional hatred of conflict by taking rivals to court--in the U.S. Practice raises fears that Japan may one day suffer the same woes that love of litigation has inflicted on America.

TIMES STAFF WRITER

Osaka businessman Tetsuya Nakato was among Japan’s big losers in the real estate roulette of the late 1980s, investing $4.4 million in a waterfront home in Honolulu that now is worth less than half that amount.

But while countless Japanese investors have stoically accepted such losses, he filed a lawsuit in U.S. courts accusing his real estate agent, the sellers and their agent of defrauding him and bringing shame upon his family.

Nakato’s brash legal challenge was hardly unusual in the United States, where courtrooms have become a venue for the airing of all manner of grievances. But it has been rare for the Japanese to press their conflicts in court, given the deeply ingrained societal barriers against such public confrontation.

Nakato is one of a growing number of Japanese citizens who are aggressively challenging their adversaries before U.S. judges and juries in hopes of reaping money, retribution or revenge. And legal experts and attorneys expect those numbers to increase as more Japanese are exposed to the U.S. legal system and as financial woes continue in recession-weary Japan.

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Many of these lawsuits are popping up in Los Angeles, Honolulu and New York, where Japanese invested billions of dollars in trophy real estate projects that have gone sour. But court records also show plaintiffs suing for fraud, patent infringement, defamation, wrongful termination and sexual harassment. In most cases, the defendants are Americans, although Japanese increasingly are suing other Japanese in this country when there is a U.S. angle to the case.

“When in Rome, do as the Romans do,” said Wayne Smith, a Los Angeles attorney who represents several large Japanese clients. “They’re [the Japanese] just beginning to see this.”

While such developments are certainly good news for lawyers, others view them with dismay.

The aversion to litigation is often cited as a factor in Japan’s economic success, symptomatic of a cultural preference for harmony and consensus that helped mobilize the nation after World War II.

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America’s legal system and its oft-lampooned armies of lawyers, by contrast, have been blamed for making this country unproductive and for teaching its citizens that they can avoid personal responsibility for their actions.

“They’re learning the American [way] that, if they have rights, they can sue,” said Los Angeles attorney Yasuhiro Fujita. “I don’t think it’s a desirable trend.”

The U.S. experience has triggered demands for tort reform and spawned cynical humor. Newspaper columnist Russell Baker wrote that the United States could easily defeat “Japan Inc.” by sending one American lawyer to Japan for every automobile the Japanese ship here.

Legal experts say it is too soon to know whether this new litigiousness by Japanese in U.S. courts will lead to change in Japan itself. But the number of lawsuits filed in Japan has been increasing throughout the postwar period, although it still ranks far below that in the United States.

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It didn’t take long, for example, for two Japanese shareholders to announce plans to sue Daiwa Bank’s top executives in Osaka courts for $1.1 billion after September’s disclosure that a trader in the bank’s New York office lost that amount on unauthorized bond deals.

Under the Japanese judicial system, there is no jury, no discovery process and no recovery for punitive damages. Judges--who undergo a rigorous selection and training process--pride themselves on keeping judgments uniform, and damage awards are generally smaller than in the United States.

Critics argue that the Japanese judicial system provides fewer protections for individual rights, discourages citizens from pursuing legitimate complaints against the government or big business, and gives too much power to judges and the police.

John Haley, director of the Asian Law Program at the University of Washington, said the exposure to foreign legal practices already has stimulated a debate in Japan about judicial reform, including about the merits of the jury system. The government implemented a tougher product-liability law this year at the urging of consumer rights activists.

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But Japanese journalist Masayuki Takeyama hopes to prevent America’s penchant for litigation from invading his home turf. In a new book, the Los Angeles-based newspaper correspondent pleads with other Japanese not to import a legal system that transforms accused murderers into TV stars and jurors into best-selling authors.

“Litigation Drowns America,” co-authored by Los Angeles attorney Julia Tachikawa, highlights the jaw-dropping excesses of the U.S. judicial system, from the 11-week jury selection process in the O.J. Simpson murder trial to the $2.7-million award (later reduced to $480,000) that an elderly woman scalded by hot coffee won from McDonald’s.

In August, the book was the top seller at the Los Angeles branch of the Kinokuniya bookstore in Little Tokyo.

As a lesson in contrasts, the book notes that California, with about one-fourth the population, has twice as many courts as the entire country of Japan.

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“America was born only 200 years ago, and they use the law itself as one of the measures to improve social life,” Takeyama said. “But Japan has more than 2,000 years of history. We have already established ways to solve our problems.”

Many U.S. attorneys are confident that the Japanese are not about to climb aboard the litigation bandwagon en masse. They say their Japanese clients, even those who eventually end up in court, still harbor a strong aversion to airing their problems in a courtroom, fearful that their pocketbooks and images will take a beating.

“The Japanese are still very, very reluctant [to sue],” said Tachikawa, who doesn’t agree with her co-author’s most strident criticisms of the U.S. legal system. “It’s a shame.”

She said she urges her Japanese clients not to fear going into the courtroom if they have legitimate cases.

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“I don’t think the Japanese should file frivolous lawsuits, but I do believe they should stand up for their rights,” she said.

The societal barriers to litigation in Japan date back centuries. In feudal times, the shoguns forced their followers to exhaust all other avenues before bringing problems to them. In the 1920s and ‘30s, a spate of lawsuits over land ownership prompted the Japanese government to pass a series of laws designed to force people into mediation.

Prominent Japanese sociologists have long argued that Japan’s racial homogeneity, religious beliefs and crowded conditions have fostered a concern for preserving social harmony that discourages public confrontations inside or outside the courtroom.

Taking legal action is viewed by many as an embarrassing admission that the less-public mechanisms for resolving problems have broken down. If a young couple has marital problems, an older family member visits and acts as a mediator. Solutions to business conflicts are hammered out in regular meetings between the top executives of the keiretsu , the loosely knit corporate groupings that dominate the economy.

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But the University of Washington’s Haley--author of an influential article, “The Myth of the Reluctant Litigant"--believes there are other reasons for the relative paucity of lawsuits. They include the government’s use of administrative procedures to handle issues typically resolved in U.S. courts, the widespread availability of mediators, the high cost of litigation and a judicial system too small to accommodate many lawsuits.

Also, because there is much more certainty built into the Japanese system about the outcome of a lawsuit, the parties are more willing to settle, according to Haley.

In the United States, the jury system encourages litigants in civil suits to gamble that they can win the sympathy of their peers and a big settlement. U.S. companies also are more likely to use the law as a strategic tool to protect their markets and scare off competitors.

When Japanese executives first began venturing across the Pacific in the 1960s and early ‘70s, they professed to be shocked at how quickly problems ended up in the courtroom. They opted to settle even frivolous complaints rather than go to court, garnering a reputation as easy targets for disgruntled customers, employees or business partners.

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“There was a perception that Japanese companies would simply roll over and settle to avoid the humiliation of being involved in a lawsuit,” said James Doane, a Seattle attorney specializing in Japan.

But the strong yen and the collapse of Japan’s bubble economy have placed new strains on profit margins and made it more difficult to justify writing off bad business investments without a fight. As the Japanese financial system comes under more pressure to clean up about $500 billion in bad loans, banks are moving more aggressively to foreclose on properties that are in arrears.

“They [the Japanese] won’t have the luxury to give away a little here and a little there,” said Dan Henderson, an expert on Japanese law teaching at the Hastings College of Law at UC San Francisco. “They’ll be bargaining to survive, and if they can’t survive, they’ll sue.”

In some industries, the larger Japanese companies are more savvy about U.S. laws and are increasingly willing to flex their legal muscles if they feel they can win. For example, high-technology firms are aggressively acquiring patents and suing companies that violate them.

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Smith, an attorney with Graham & James, is representing Yamaha Corp. of Japan, a leading manufacturer of electronic musical instruments, in a patent infringement lawsuit against Fremont-based ESS Technology. ESS denies the charge that it infringed on a Yamaha patent for a sound-generation technique known as FM synthesis.

Yamaha won an earlier patent infringement case against 10 defendants accused of manufacturing copycat products.

But Smith said that even his more emboldened Japanese clients are uncomfortable suing other Japanese, inside or outside Japan.

“It’s not because of any old boys’ network or club. It’s just because culturally, among the Japanese, it’s far more desirable to try and work out your dispute with some kind of negotiations,” he said.

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Yet that wall is showing some cracks too. In 1993, Sony Corp. filed patent infringement lawsuits against Funai Electric Co., a Japanese electronics firm, in both Japan and the United States. A federal judge in Oakland dismissed the lawsuit last year for lack of jurisdiction, and Sony eventually settled both lawsuits out of court.

Japanese plaintiffs have had mixed success trying to use the more generous U.S. courts to resolve conflicts originating in Japan. Several years after a 1985 crash of a Boeing 747 passenger jet in Japan killed 520, some of the victims’ families filed a lawsuit in Seattle against Japan Air Lines and Boeing Co. They argued that the case should be tried where Boeing has its headquarters and where the plane was built.

The defendants countered that the lawsuits belonged in Japan because the crash site was in Japan and most of the victims were Japanese. But a federal judge ruled that the case should remain in the United States.

Los Angeles resident Hiroe Clow has not been so lucky in her quest to seek relief in U.S. courts. Since 1993, she has been waging a legal battle against the high priest of a powerful Japanese Buddhist sect, the Nichiren Shoshu, in a Los Angeles courtroom. Clow is a follower of the Soka Gakkai, a Buddhist lay group based in Japan that was excommunicated by the high priest several years go.

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She filed two lawsuits in Los Angeles district court accusing the priest of defaming her in articles circulated in the United States, where the Soka Gakkai has a large following. In both cases, the court ruled that it did not have jurisdiction over the issue since the priest and his sect are based in Japan. Clow has appealed.

Tetsuya Nakato hoped he would fare better. Back in Japan, the unhappy investor could not collect money for any emotional distress he suffered as a result of his failed real estate transaction. But in his lawsuit in Honolulu, he asked for the return of his money plus compensation for pain and suffering.

While the venue was a U.S. courtroom, Nakato’s appeal was very Japanese. In his deposition, he explained that his multimillion-dollar loss not only caused financial hardship but, more importantly, destroyed his family’s reputation.

“I’m the only son to my mother, and there are only two of us in the family,” Nakato told the court, adding later: “Because of this tremendous loss, she was shocked, and that may be one of the reasons or causes that she died on Jan. 18, ’93, by heart failure. . . . I’m very ashamed of myself.”

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Centuries ago in Japan, the honorable way for Nakato to address his shame might have been a ritual suicide. But it was the 1990s in Honolulu, and he fought his battle in court. Last month, after spending three years and an unspecified amount in attorney fees, he settled his case on the eve of trial. The terms are confidential.


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