Costco Ducks Slave Labor Claims in 9th Circuit

SAN FRANCISCO (CN) – The 9th Circuit held on Friday that Costco could not be held liable for selling products that may have been partially produced by slave labor, saying the plaintiff did not rely on the company’s representations about policing human rights abuses in its supply chain.

“Here, the plaintiffs have not pled reliance on Costco’s alleged misrepresentations,” wrote a three-judge panel in a terse 4-page unpublished opinion. “Even if construed as an affirmative misrepresentation claim, the plaintiffs’ complaint was correctly dismissed.”

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.”

“It’s disappointing,” said Sud’s attorney Anne Murphy, of Cotchett, Pitre & McCarthy in Burlingame, California. “We hoped that the court would see things differently.”

But Murphy said she also saw a sliver of hope in the decision, in that if consumers do rely on supply chain disclosures in making their purchases, that case could survive the motion to dismiss phase.

Furthermore, Murphy said she believes even trying a case about slave labor in the supply chain of major companies represents an important method of highlighting the issue.

“It is important for consumers to be bringing these types of cases, as it sheds light on the problem of human trafficking and slavery,” she said.

Along with the reliance issue, the panel ruled that because slave labor wasn’t related to the central functionality of the prawns, the claims were invalid. Additionally, the plaintiffs attempted to tether their claims to a legislative policy.

“Here, the plaintiffs identify the anti-slavery policy of the United Nations Declaration of Human Rights as the relevant legislative policy,” the panel wrote. “But in Hodsdon we held that ‘there is not a close enough nexus’ between the UNDHR and the failure to include disclosures on product labeling.”

Hodsdon v Mars, argued in front of the Ninth Circuit last year, involved similar claims of a company’s duty to disclose the labor practices in their supply chain. The case was similarly dismissed by a U.S. District Court judge and the dismissal was affirmed by a 9th Circuit panel.

In the present case, 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.

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.

“There have been positive developments on this issue,” Murphy said.

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.

U.S. District Court Judge Jeffrey White originally dismissed the case in January 2017.

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

Similarly, the panel said the issue of forced labor in supply chains was tragic, but the claims did not clear the legal standards necessary, doomed by the fact that Sud did not rely on the labor practices of Costco when buying the prawns, while the items themselves did not present a threat to consumer safety.

Costco did not respond to requests for comment on Friday.

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