Costco Ducks Suit Over Slave-Harvested Prawns

OAKLAND, Calif. (CN) – A federal judge on Tuesday dismissed with prejudice a class action claiming Costco sold prawns harvested with slave labor, despite the company’s policy banning human rights abuses in its supply chain.

Lead plaintiff Monica Sud sued Costco in August 2015, claiming the retail giant buys farmed prawns from Thailand and other parts of Southeast Asia knowing they are produced with slave labor on unregistered “ghost ships.”

In an 18-page ruling, U.S. District Judge Jeffery White found Sud failed to plead she relied on any false or misleading statements by Costco or that any nondisclosure of information posed a safety risk to consumers.

Sud claimed Costco hid material facts from consumers by citing its supplier code of conduct on its website, which states the company prohibits human rights abuses in its supply chain.

While Costco could have warned consumers in that statement that it sells prawns purportedly “tainted by labor abuses,” White found Sud failed to show that she read or relied on that disclosure before purchasing prawns.

The failure to establish reliance negates arguments that Costco misrepresented or omitted facts from the published statement, White said.

White also cited prior rulings on lawsuits over chocolatiers that didn’t disclose the use of child and slave labor in their supply chains. Those rulings support a finding that the duty to disclose does not extend to any practice that might affect a consumer’s purchasing decisions, White said.

In Hodson v. Mars and McCoy v. Nestle, two Northern District of California judges ruled last year the duty to disclose only applies to practices that may cause a product to be defective or pose a danger to consumers.

White said he agrees with U.S. Magistrate Judge Joseph Spero’s reasoning in McCoy v. Nestle that “some bright-line limitation on a manufacturer’s duty to disclose is sound policy, given the difficulty of anticipating exactly what information some customers might find material to their purchasing decisions and wish to see on product labels.”

White concluded it would be futile to grant Sud a second chance to amend her complaint. He previously dismissed the suit with leave to amend one year ago.

White dismissed the case with prejudice and entered judgment in favor of Costco.

Sud had also named prawn suppliers Charoen Pokphand Foods, a Thailand corporation, and C.P. Food Products, a Maryland corporation, as co-defendants in the lawsuit.

Last year, the Associated Press won a Pulitzer Prize for its investigation into the widespread use of slave labor in Southeast Asia’s multibillion-dollar fishing industry.

In February 2016, former President Barack Obama signed the Trade Facilitation and Trade Enforcement Act, which enables stricter enforcement of an 87-year-old U.S. ban on importing goods made by children or slaves.

Costco states on its website that it is an active member of the Seafood Sustainable Supply Chain Task Force, which is working with the Thai government to implement a verification system to trace the source of fish sold to retailers and to enforce a code of conduct for fishing vessels.

Bob Nelson of Costco and Sud’s attorney, Anne Murphy of Cotchett, Pitre & McCarthy in Burlingame, California, did not immediately return phone calls seeking comment Wednesday afternoon.