On July 11, 1997, the Supreme Court affirmed a Tokyo High Court judgment
that dinied enforcement of a punitive damages award rendered by the California
State Court.
Before the California court, the plaintiff, a California corporation, alleged
that the defendant, a Japanese corporation, commited a fraud in connection
with a lease agreement, and the plaintiff sought actual and punitive damages.
The court granted both actual and punitive damages award and the judgment
became final after appeal to the appellate court.
In order to execute the judgment against the defendant in Japan, the plaintiff
sought a court order allowing its execution. Although the lower courts
allowed its execution only to the extent of the actual damages, they also
allowed execution of the award concerning the interest accrued from the
actual damages. Both parties appealed. However, the Supreme Court dismissed
both the appeals.
As the reason for the judgment, the Court stated that the punitive damages
award is against the public policy in Japan. As to the interest, the Court
recognized that it was not explicitly stated in the California court judgment.
According to the Court, however, a foreign judgment should be given the
same effect in Japan as it would have in that foreign country, once it
is allowed to be executed in Japan. Noting that, even without explicit
figures given in the award, execution of the actual damages award would
extend to the interest in California, the Supreme Court affirmed the lower
courts' judgment allowing execution of the award to extend to the interest.
Interestingly, the Court did not question the reasonableness of the interest rate applied to the actual damages. Under the Japanese law, the interest rate to be applied to damages of a tort is 5% a year. According to the finding by the lower courts, the rates applied by the California law are 7% and 10% depending on the time period. However, the Court accepted the rates without comment.