Monica Sud v. Costco

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 20, 2018
• Docket: 17-15307
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUL 20 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

MONICA SUD, individually, and on behalf No. 17-15307 of all others similarly situated and CECILIA JACOBO, individually, and on behalf of all D.C. No. 4:15-cv-03783-JSW others similarly situated,

Plaintiffs-Appellants, MEMORANDUM*

v.

COSTCO WHOLESALE CORPORATION, a Washington Corporation,

Defendant-Appellee,

and

CHAROEN POKPHAND FOODS, PCL, a Bangkok, Thailand Corporation and C.P. FOOD PRODUCTS, INC., a Maryland Corporation,

Defendants.

Appeal from the United States District Court for the Northern District of California Jeffrey S. White, District Judge, Presiding

Argued and Submitted June 12, 2018 San Francisco, California

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Before: SCHROEDER, GOULD, and DIAZ,** Circuit Judges.

Tragically, forced labor still infects the supply chains of many of the goods

that American consumers buy. Here, the plaintiffs contend that California

consumer protection laws impose a duty on Costco to disclose forced labor in the

supply chain of prawns sold at Costco stores.1 The district court granted Costco’s

motion to dismiss. Reviewing the dismissal de novo, we affirm.

Insofar as the plaintiffs’ claims are premised on omissions, our decision in

Hodsdon v. Mars, Inc., 891 F.3d 857 (9th Cir. 2018), controls the outcome. In

Hodsdon we held that a seller of goods has a duty to disclose only product defects

that relate to the “central functionality” of the product. Id. at 863. Slave labor in a

product’s supply chain does not relate to the central functionality of a food product

such as the shrimp at issue here. See id. at 864. The plaintiffs’ claims under the

CLRA, the unlawful and fraudulent prongs of the UCL,2 and the FAL all require

** The Honorable Albert Diaz, United States Circuit Judge for the U.S. Court of Appeals for the Fourth Circuit, sitting by designation. 1 Plaintiffs assert that Costco violated the Unfair Competition Law (UCL), Cal. Bus. and Prof. Code § 17200 et seq., the Consumer Legal Remedies Act (CLRA), Cal. Civ. Code § 1750 et seq., and the False Advertising Law (FAL), Cal. Bus. & Prof. Code § 17500 et seq. 2 The UCL prohibits "any unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof. Code § 17200. As in Mars plaintiffs here assert that Costco’s failure to disclose was unlawful under the UCL because that failure to disclose violated the CLRA. Because we hold that Costco did not violate the CLRA, we also hold that it did not violate the unlawful prong of the UCL.

2 showing that Costco had a duty to disclose forced labor in the product supply

chain. Id. at 865, 867–68.

To bring a claim under the unfair prong of the UCL, a plaintiff must show

either that the supposed unfairness is “tethered” to a legislative policy, or that it is

immoral, unethical, oppressive, unscrupulous, or injurious to consumers. Scripps

Clinic v. Superior Court, 134 Cal. Rptr. 2d 101, 116 (Cal. Ct. App. 2003). Here,

the plaintiffs identify the anti-slavery policy of the United Nations Declaration of

Human Rights (UNDHR) as the relevant legislative policy. 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. 891 F.3d at 867. We also held that

“failure to disclose information [the defendant] had no duty to disclose in the first

place is not substantially injurious, immoral, or unethical.” Id. The plaintiffs have

not stated a claim under the unfair prong of the UCL.

The plaintiffs try to differentiate this case from Hodsdon on grounds that

they have pled affirmative misrepresentations, whereas Hodsdon involved only

omissions. Specifically, the plaintiffs point to Costco’s website statements about

its supplier code of conduct, and the steps that Costco would take to curtail human

trafficking in its supply chain. Under the relevant California consumer protection

statutes, however, the plaintiffs can recover on an affirmative misrepresentation

theory only if they relied on the defendant’s representations. In re Tobacco II

3 Cases, 207 P.3d 20, 39 (Cal. 2009) (UCL); Tucker v. Pac. Bell Mobile Servs., 145

Cal. Rptr. 3d 340, 357 (Cal. Ct. App. 2012) (CLRA); Kwikset Corp. v. Superior

Court, 246 P.3d 877, 884, 888 (Cal. 2011) (FAL). Here, the plaintiffs have not

pled reliance on Costco’s alleged misrepresentations. Even if construed as an

affirmative misrepresentation claim, the plaintiffs’ complaint was correctly

dismissed. Our recent decision in Davidson v. Kimberly-Clark Corp., 889 F.3d

956 (9th Cir. 2018), does not change this result with regard to injunctive relief. In

that case we held that “a previously deceived consumer may have standing to seek

an injunction against false advertising or labeling.” Id. at 969. But the plaintiffs

here did not rely on Costco’s statements and were not previously deceived by

them.

AFFIRMED.