Robert Hodsdon v. Mars, Inc. , 891 F.3d 857 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ROBERT HODSDON, on behalf of No. 16-15444
himself and all others similarly
situated, D.C. No.
Plaintiff-Appellant, 3:15-cv-04450 RS
v.
OPINION
MARS, INC., a Delaware
corporation; MARS CHOCOLATE
NORTH AMERICA LLC, a Delaware
company,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Richard Seeborg, District Judge, Presiding
Argued and Submitted December 7, 2017
Pasadena, California
Filed June 4, 2018
Before: A. Wallace Tashima, William A. Fletcher,
and Marsha S. Berzon, Circuit Judges.
Opinion by Judge Tashima
2 HODSDON V. MARS, INC.
SUMMARY*
California Law
The panel affirmed the district court’s dismissal of
plaintiff’s consumer protection claims in a putative class
action alleging that Mars, Inc., a chocolate manufacturer, had
a duty to disclose on its labels the labor practices that may
have tainted its supply chain.
Concerning plaintiff’s duty to disclose claims, the panel
held that California consumer protection laws did not obligate
Mars, Inc. to label its goods as possibly being produced by
child or slave labor. The panel further held that in the
absence of any affirmative misrepresentations by the
manufacturer, the manufacturer did not have a duty to
disclose the labor practices in question, even though they
were reprehensible, because they were not physical defects
that affected the central function of the chocolate products.
The panel concluded that, absent a duty to disclose, plaintiff’s
Consumers Legal Remedies Act, Unfair Competition Law,
and False Advertising Law claims were foreclosed.
The panel held that plaintiff’s claims failed under the
unfair prong of the Unfair Competition Law under either the
Cel-Tech test, Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel.
Co., 973 P.2d 527, 540 (Cal. 1999), or the South Bay test,
outlined in S. Bay Chevrolet v. Gen. Motors Acceptance
Corp., 85 Cal. Rptr. 2d 301, 316 (Ct. App. 1999).
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
HODSDON V. MARS, INC. 3
COUNSEL
Steve W. Berman (argued), Hagens Berman Sobol Shapiro
LLP, Seattle, Washington; Elaine T. Byszewski, Hagens
Berman Sobol Shapiro LLP, Pasadena, California; for
Plaintiff-Appellant.
Stephen D. Raber (argued), Richmond T. Moore, and Joelle
Perry Justus, Williams & Connolly LLP, Washington, D.C.,
for Defendants-Appellees.
Tina Charoenpong, Deputy Attorney General; Michele Van
Gelderen, Supervising Deputy Attorney General; Nicklas A.
Akers, Senior Assistant Attorney General; Office of the
Attorney General, Los Angeles, California; for Amicus
Curiae State of California.
OPINION
TASHIMA, Circuit Judge:
In this action, the putative class plaintiff alleges that
California consumer protection laws require certain food
manufacturers to disclose, on their products’ labels, that the
products’ supply chain may involve child or slave labor.
Regrettably, despite some efforts to eradicate the practices,
child labor and slave labor are modern-day scourges, and
manufacturers that source materials from around the world
may benefit from that illicit labor. This issue has gained
public attention in recent years such that many consumers
now consider in their purchasing decisions the labor practices
behind household products. In fact, some manufacturers have
decided to market their products as free of unsavory labor
4 HODSDON V. MARS, INC.
practices, and some legislatures have attempted to further
educate the public about modern-day slavery.
Nonetheless, the California consumer protection laws do
not obligate the defendants-appellees to label their goods as
possibly being produced by child or slave labor. In the
absence of any affirmative misrepresentations by the
manufacturer, we hold that the manufacturers do not have a
duty to disclose the labor practices in question, even though
they are reprehensible, because they are not physical defects
that affect the central function of the chocolate products.
One of the key issues in this case is the continued
viability of Wilson v. Hewlett-Packard Co., 668 F.3d 1136
(9th Cir. 2012). Defendants-appellees rely on Wilson to
argue that plaintiff-appellant has not alleged that defendants-
appellees had a duty to disclose because Wilson stands for the
premise that plaintiffs in pure omission cases must plead that
the undisclosed information created a safety hazard.
Plaintiff-appellant acknowledges the holding in Wilson, but
urges us to deviate from that precedent, arguing that
intervening California Courts of Appeal cases render our
interpretation of California law incorrect. It is true that recent
state-court cases have cast doubt on the breadth of this
Circuit’s precedent about the duty to disclose, but the facts
before us today do not compel us to reexamine that precedent
in this case. This is so because, even applying the tests from
the intervening California cases, Plaintiff cannot state a
claim. We therefore affirm the district court’s order of
dismissal.
HODSDON V. MARS, INC. 5
I. FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff-appellant Robert Hodsdon (“Plaintiff”) is a
California citizen who purchased defendants-appellees’
(together, “Mars”) chocolate products at retail stores and
viewed the labeling. Hodsdon alleges he would not have
bought the chocolate or would not have paid as much for it if
the manufacturer had disclosed, on the label itself, the
existence of child and slave labor in its supply chain.
The Ivory Coast (or Côte d’Ivoire) is the world’s largest
producer of cocoa beans, the raw ingredient for chocolate.
Like most chocolate manufacturers, Mars sources at least
some cocoa beans from the Ivory Coast. Some cocoa beans
from the Ivory Coast are produced using what the
International Labor Organization (“ILO”) calls “the worst
forms of child labour.” The Bureau of International Labor
Affairs of the U.S. Department of Labor describes the
situation in the Ivory Coast as follows:
[C]hildren . . . are working under conditions
of forced labor on Ivoirian cocoa farms . . . .
Some children are sold by their parents to
traffickers, some are kidnapped, and others
migrate willingly but fall victim to traffickers
who sell them to recruiters or farmers, where
they end up in conditions of bonded labor
. . . . Some children are forced to perform
dangerous tasks . . . .
Mars recognizes that its supply chains may be infected by
the worst forms of child labor, but does not disclose this on
its product labeling. However, in compliance with the
California Transparency in Supply Chains Act of 2010
6 HODSDON V. MARS, INC.
(“Supply Chains Act”), Mars does disclose on its website its
efforts to combat slavery and labor abuses in its supply
chain.1
Plaintiff brought this action under California’s Consumers
Legal Remedies Act (“CLRA”), Unfair Competition Law
(“UCL”), and False Advertising Law (“FAL”), alleging that
Mars has a duty to disclose on its labels the labor practices
that may taint its supply chain. Plaintiff’s CLRA claim is that
Mars misrepresented the source, characteristics, and standard
of the chocolate products by omitting information about labor
practices on its label. See Cal. Civ. Code § 1770(a)(2), (5),
(7). As to the UCL, Plaintiff claims that Mars’ conduct came
within the UCL’s prohibition on “any unlawful, unfair or
fraudulent business act or practice” by: (1) violating the
“unlawful” prong based on its violation of the CLRA;
(2) violating the “fraudulent” prong because it omitted
information about the forced labor at the point of sale; and
(3) violating the “unfair” prong because the omission
contravened legislative policy against child and slave labor,
1
The Supply Chains Act, Cal. Civ. Code § 1714.43, was enacted in
2010. The California Attorney General later described the requirements
of the Act:
This Act requires large retailers and manufacturers
doing business in California to disclose on their
websites their “efforts to eradicate slavery and human
trafficking from [their] direct supply chain for tangible
goods offered for sale.” . . . Companies subject to the
Act must post disclosures on their Internet websites
related to five specific areas: verification, audits,
certification, internal accountability, and training.
KAMALA D. HARRIS, CAL. DEP’T OF JUSTICE, THE CALIFORNIA
TRANSPARENCY IN SUPPLY CHAINS ACT: A RESOURCE GUIDE, i (2015).
HODSDON V. MARS, INC. 7
or because Mars’ “participation in a supply chain involving
[slave labor] is immoral, unethical, oppressive, unscrupulous
and injurious to consumers.” See Cal. Bus. & Prof. Code
§ 17200. Finally, Plaintiff’s FAL claim also is based on
Mars’ alleged failure to disclose its labor practices on its
label. See id. § 17500.
The district court dismissed the complaint for failure to
state a claim. Fed. R. Civ. P. 12(b)(6). Plaintiff has timely
appealed.
II. JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction under 28 U.S.C.
§ 1332(a). We have jurisdiction under 28 U.S.C. § 1291, and
review de novo the district court’s dismissal for failure to
state a claim. See Hinojos v. Kohl’s Corp., 718 F.3d 1098,
1103 (9th Cir. 2013).
III. ANALYSIS
A. Duty to Disclose
Plaintiff does not allege any affirmative misstatement and
relies solely on an omission theory of consumer fraud.
Omissions may be the basis of claims under California
consumer protections laws, but “to be actionable the omission
must be contrary to a representation actually made by the
defendant, or an omission of a fact the defendant was obliged
to disclose.” Daugherty v. Am. Honda Motor Co., 51 Cal.
Rptr. 3d 118, 126 (Ct. App. 2006) (emphasis added).
Mars argues that to establish a duty to disclose, under the
Ninth Circuit’s interpretation of California law, Plaintiff must
8 HODSDON V. MARS, INC.
always allege that the undisclosed information “caused an
unreasonable safety hazard.” Wilson, 668 F.3d at 1143.
Plaintiff urges us to rule that Wilson is no longer good law
after more recent California Courts of Appeal opinions, and
to apply the tests for duty to disclose from those cases. While
the recent California cases do cast doubt on whether Wilson’s
safety-hazard requirement applies in all circumstances, we
have no occasion in this case to consider whether the later
state-court cases have effectively overruled Wilson. This is
true because even applying Plaintiff’s proposed tests, derived
from his reading of the more recent California decisions, he
cannot state a claim. Specifically, Plaintiff has not
sufficiently alleged that the defect in question—the existence
of child labor in the supply chain—affects the central
functionality of the chocolate products. Therefore, without
either relying on or overruling Wilson, we hold that Plaintiff
has not established that Mars had a duty to disclose the labor
practices on its labels.
The primary California cases on which Plaintiff relies are
Collins v. eMachines, Inc., 134 Cal. Rptr. 3d 588 (Ct. App.
2011), and Rutledge v. Hewlett-Packard Co., 190 Cal. Rptr.
3d 411 (Ct. App. 2015). Plaintiff has not sufficiently alleged
that Mars has a duty to disclose under these cases.
In Collins, the plaintiffs were a putative class of
consumers that purchased eMachine computers. 134 Cal.
Rptr. 3d at 591. The plaintiffs complained that a floppy disk
controller defect, which manifested itself during the warranty
period, caused critical data corruption of the hard drive. Id.
at 591–92. Citing the four-prong test from LiMandri v.
Judkins, 60 Cal. Rptr. 2d 539 (Ct. App. 1997), the plaintiffs
asserted that eMachines had a duty to disclose the defect.
Collins, 134 Cal. Rptr. 3d at 593. The court explained:
HODSDON V. MARS, INC. 9
A failure to disclose a fact can constitute
actionable fraud or deceit in four
circumstances: (1) when the defendant is the
plaintiff’s fiduciary; (2) when the defendant
has exclusive knowledge of material facts not
known or reasonably accessible to the
plaintiff; (3) when the defendant actively
conceals a material fact from the plaintiff; and
(4) when the defendant makes partial
representations that are misleading because
some other material fact has not been
disclosed.
Id. (citing LiMandri, 60 Cal. Rptr. 2d at 543). The plaintiffs
in Collins argued that eMachines had a duty to disclose based
on either prong (2) or (3). Id. at 593.
The court held that the plaintiffs had stated a CLRA claim
under prong (2). Id. at 594. The fact of the defect was
material because a “reasonable consumer would deem it
important in determining how to act in the transaction at
issue,” id. at 593 (internal quotation and alterations omitted),
and “according to the complaint, eMachines knew of this
defect while plaintiffs did not, and, given the nature of the
defect, it was difficult to discover.”2 Id. at 594 (alteration
omitted). Further, Collins emphasized that the failure to
disclose the defect at issue supported a CLRA claim because
the defect “was central to the function of a computer as a
computer.” Id. at 595. In so holding, Collins distinguished
Daugherty—on which Wilson is based—by noting that the
2
The court also determined that plaintiffs’ complaint alleged that
eMachines actively concealed the defect. Collins, 134 Cal. Rptr. 3d at
594.
10 HODSDON V. MARS, INC.
defect in the case before it, unlike the defect in Daugherty,
resulted in damage to the computers during the warranty
period. See id. at 595. Collins, therefore, stands for the
premise that a manufacturer has a duty to disclose only
physical defects—not the means by which a product is
produced—that relate to a product’s central function and arise
during the warranty period.
The second case that Plaintiff relies upon is Rutledge,
another case involving computers. The plaintiffs there
alleged that Hewlett Packard (“HP”) actively concealed and
did not disclose that its laptops contained defective inverters
that would cause the screens to dim and darken during the
warranty period. Rutledge, 190 Cal. Rptr. 3d at 418. The
plaintiffs further alleged that HP made misrepresentations in
its press releases, that the plaintiffs relied on these statements,
and that the laptop screen is central to the function of the
laptop. See id. at 420–422. On summary judgment, the court
held that there was a triable issue about whether HP had a
duty to disclose the inverter defect. Id. at 422.
The court’s reasoning in Rutledge, however, is far from
clear. First, the court did not apply the LiMandri factors, as
Collins did, to determine whether defendants had an
obligation to disclose. Further, the section of the opinion on
the duty to disclose ultimately concludes that there is “a
triable issue of fact as to the nature of HP’s [affirmative]
representations, and whether that triggered a duty to disclose
the defect.” Id. at 422 (emphasis added). The opinion is thus
somewhat inconclusive on whether there was a duty to
disclose independent of HP’s affirmative representations
about its product. Finally, Rutledge seems to cite favorably
the holding in Collins that manufacturers have a duty to
HODSDON V. MARS, INC. 11
disclose a defect when it affects the central functionality of a
product. See id. at 421.
Rutledge, therefore, could be read as a case that stands for
any of the following propositions: (1) there is a duty to
disclose in light of affirmative representations; (2) there is a
duty to disclose defects that go to the central function of the
product; or (3) there is a duty to disclose defects that go to the
central function of the product and which arise during the
warranty period. Plaintiff cannot state a claim under any of
these interpretations.
While Collins and Rutledge are somewhat vague about
the test for determining whether a defendant has a duty to
disclose, they sanction a UCL omission claim when: the
plaintiff alleges that the omission was material; second, the
plaintiff must plead that the defect was central to the
product’s function; and third, the plaintiff must allege one of
the four LiMandri factors. See Collins, 134 Cal. Rptr. 3d at
593–95. Plaintiff argues that Mars had a duty to disclose
because information about labor practices is material to
consumers and—relying on the second prong of
LiMandri—because Mars had “superior knowledge” about
labor issues in its supply chain. Plaintiff, however, omits a
crucial element that Collins and Rutledge emphasize—that
the defect must relate to the central functionality of the
product.3
3
Plaintiff also cites Rubenstein v. Gap, Inc., 222 Cal. Rptr. 3d 397
(Ct. App. 2017). The plaintiffs in Rubenstein alleged that Gap violated the
consumer protection laws “based on Gap’s alleged misrepresentation in
using the Gap and Banana Republic brand names for [factory store] items
that had never been sold in traditional Gap and Banana Republic stores
and/or were of lesser quality, and also on Gap’s failure to disclose these
facts to consumers. Id. at 401. The court rejected the plaintiffs’ claims,
12 HODSDON V. MARS, INC.
First, we assume without deciding that the existence of
slave or child labor in a product’s supply chain is material to
consumers.
Second, however, Plaintiff fails to allege that the
existence of slave or child labor in the supply chain affects
the product’s central function. In Collins and Rutledge, the
plaintiffs were required to plead that the allegedly concealed
physical defect was central to the product’s function.4 Here,
reasoning that the plaintiffs did not “allege facts showing that the sales
history of factory store items is material to reasonable consumers.” It
further held that “any quality issues with factory store merchandise were
not in Gap’s exclusive knowledge.” Id. at 405.
Additionally, after oral argument in this case, the California Court of
Appeal, Fifth District, decided Gutierrez v. CarMax Auto Superstores
Cal., 228 Cal. Rptr. 3d 699 (Ct. App. 2018). In Gutierrez, the defendant
car dealer did not disclose that the car that the plaintiff purchased was
subject to a safety recall relating to the car’s braking and lighting systems.
The court held that the omitted information was material because it related
to safety concerns—which would be important to the reasonable
consumer. Id. at 705. Further, the court concluded that the car dealer had
a duty to disclose the recall because “CarMax made partial
representations about the vehicle’s braking and lighting systems and those
representations were likely to mislead for want of communication of the
facts about the recall.” Id. at 722–23. As Gutierrez is a partial
misrepresentation case, it does not affect the outcome of this purely
omissions-based case.
4
Neither Rubenstein nor Gutierrez mentions the “central
functionality” test, but their facts are consistent with requiring that the
alleged defect be physical and important to the product’s function. In
Gutierrez, the alleged omission related to a physical defect that created a
safety hazard. 228 Cal. Rptr. 3d at 723. In Rubenstein, the court
concluded that there were no “facts showing that the sales history of
factory store items is material to reasonable consumers.” 222 Cal. Rptr.
3d at 405.
HODSDON V. MARS, INC. 13
the alleged lack of disclosure about the existence of slave
labor in the supply chain is not a physical defect at all, much
less one related to the chocolate’s function as chocolate.
Plaintiff contends that he has “no practical use” for the
products tainted by slave or child labor, but the central
functionality of the product is not based on subjective
preferences about a product. A computer chip that corrupts
the hard drive, or a laptop screen that goes dark, renders those
products incapable of use by any consumer; some consumers
of chocolate are not concerned about the labor practices used
to manufacture the product. Thus, Plaintiff fails to establish
that Mars has a duty to disclose the issues in its supply chain.5
Nonetheless, even though we apply the more recent
California Courts of Appeal decisions, doing so does not
deprive Wilson of all vitality. The recent California cases
show that Wilson’s safety hazard pleading requirement is not
necessary in all omission cases, but that the requirement may
remain applicable in some circumstances. In other words,
Collins and Rutledge are not necessarily irreconcilable with
Wilson because, where the challenged omission does not
concern a central functional defect, the plaintiff may still
have to plead a safety hazard to establish that the defendant
5
The parties also dispute whether Plaintiff sufficiently pleaded that
Mars had knowledge that Plaintiff did not about the existence of child or
slave labor in the supply chain. Plaintiff argues that Mars need only have
“superior” knowledge over the consumer to satisfy the Limandri prong,
whereas Mars contends that the test is “exclusive” knowledge. While we
need not reach the issue here, Mars appears to have the better reading of
California law.
14 HODSDON V. MARS, INC.
had a duty to disclose.6 For example, even though we offer
no binding opinion on the issue, Wilson may still apply where
the defect in question does not go to the central functionality
of the product, but still creates a safety hazard. For this
reason, we are not convinced that the California Supreme
Court would rule that a plaintiff need never plead a safety
hazard. See Muniz v. United Parcel Serv., Inc., 738 F.3d 214,
219 (9th Cir. 2013) (“Decisions of the six [California] district
appellate courts are persuasive but do not bind each other or
us. We should nevertheless follow a published intermediate
state court decision regarding California law unless we are
convinced that the California Supreme Court would reject
it.”) (citations omitted). But see In re Watts, 298 F.3d 1077,
1084–86 (9th Cir. 2002) (O’Scannlain, J., concurring)
(questioning this Circuit’s practice of revisiting panel
decisions based on subsequent state intermediate appellate
opinions, especially where state appellate courts have
independent districts that do not follow one another’s
precedent).
Therefore, we hold that in this pure omissions case
concerning no physical product defect relating to the central
function of the chocolate and no safety defect, Plaintiff has
not sufficiently pleaded that Mars had a duty to disclose on its
labels the labor issues in its supply chain.7 Absent a duty to
6
For example, even though we offer no binding opinion on the issue,
Wilson may still apply where the defect in question does not go to the
central functionality of the product but still creates a safety hazard.
7
Plaintiff has an outstanding motion to certify the following question
to the California Supreme Court: “Must a pure omission-based consumer
deception claim under the UCL, FAL, and CLRA involve a safety concern
to be actionable?” Because Plaintiff cannot establish that Mars had a duty
to disclose, even if he is not required to plead a safety hazard, the answer
HODSDON V. MARS, INC. 15
disclose, Plaintiff’s CLRA, UCL and FAL claims are
foreclosed.
B. CLRA
Plaintiff alleges three separate violations of the CLRA,
namely that Mars’ failure to disclose on its labels information
about slave or child labor: (1) “[m]isrepresent[ed] the
source” of the products; (2) “[r]epresent[ed] that [the] goods
. . . have . . . characteristics . . . which they do not have”; and
(3) “[r]epresent[ed] that goods . . . are of a particular
standard.” Cal. Civ. Code § 1770(a)(2), (5), (7).
Again, “although a claim may be stated under the CLRA
in terms constituting fraudulent omissions, to be actionable
the omission must be contrary to a representation actually
made by the defendant, or an omission of a fact the defendant
was obliged to disclose.” Daugherty, 51 Cal. Rptr. 3d at 126.
As discussed above, Mars was not obliged to disclose issues
about its supply chain. Therefore, Mars did not violate the
CLRA.
C. UCL
The UCL prohibits “any unlawful, unfair or fraudulent
business act or practice.” Cal. Bus. & Prof. Code § 17200.
“Because Business & Professions Code § 17200 is written in
the disjunctive, it establishes three varieties of unfair
to Plaintiff’s question is not outcome-determinative. See Cal. R. of Court
8.548(a)(1) (“The [California] Supreme Court may decide a question of
California law if . . . [t]he decision could determine the outcome of a
matter pending in the requesting court.”). We therefore deny the motion
to certify the question.
16 HODSDON V. MARS, INC.
competition–acts or practices which are unlawful, or unfair,
or fraudulent.” Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel.
Co., 973 P.2d 527, 540 (Cal. 1999). Plaintiff claims that
Mars is liable under all three of the varieties.
1. Unlawful Prong
Plaintiff links his unlawful prong claim to Mars’ alleged
violation of the CLRA. As discussed above, Mars did not
violate the CLRA; thus, it did not violate the unlawful prong
of the UCL.
2. Fraudulent Prong
“[A] failure to disclose a fact one has no affirmative duty
to disclose is [not] ‘likely to deceive’ anyone within the
meaning of the UCL.” Daugherty, 51 Cal. Rptr. 3d at 128;
see also Berryman v. Merit Prop. Mgmt., Inc., 62 Cal. Rptr.
3d 177, 188 (Ct. App. 2007) (“Absent a duty to disclose, the
failure to do so does not support a claim under the fraudulent
prong of the UCL.”). Plaintiff does not state a claim under
this prong.
3. Unfair Prong
Unlike the other two UCL prongs, the lack of a duty to
disclose does not necessarily dispose of claims under the
unfair prong. “The UCL does not define the term ‘unfair.’ In
fact, the proper definition of ‘unfair’ conduct against
consumers ‘is currently in flux’ among California courts.”
Davis v. HSBC Bank Nev., N.A., 691 F.3d 1152, 1169 (9th
Cir. 2012) (quoting Lozano v. AT&T Wireless Servs., Inc.,
504 F.3d 718, 735 (9th Cir. 2007)). “Before Cel-Tech, courts
held that ‘unfair’ conduct occurs when that practice ‘offends
HODSDON V. MARS, INC. 17
an established public policy or when the practice is immoral,
unethical, oppressive, unscrupulous or substantially injurious
to consumers.’ ” Id. (citing S. Bay Chevrolet v. Gen. Motors
Acceptance Corp., 85 Cal. Rptr. 2d 301, 316 (Ct. App. 1999))
(“South Bay test”). The California Supreme Court, in Cel-
Tech, established a different, more concrete, definition of
unfair:
“[U]nfair” means “conduct that threatens an
incipient violation of an antitrust law, or
violates the policy or spirit of one of those
laws because its effects are comparable to or
the same as a violation of the law, or
otherwise significantly threatens or harms
competition.” It further required that “any
finding of unfairness to competitors under
section 17200 be tethered to some
legislatively declared policy or proof of some
actual or threatened impact on competition.”
Davis, 691 F.3d at 1169–70 (quoting Cel-Tech, 973 P.2d at
543–44) (emphasis added). The Cel-Tech test did not apply
to actions by consumers, but “some courts in California have
extended the Cel-Tech definition to consumer actions, while
others have applied the [South Bay test].” Id. at 1170; see
also Cel-Tech, 973 P.2d at 544 n.12. The parties here argue
under both the Cel-Tech and South Bay tests.
First, under the Cel-Tech test, Plaintiff contends that his
claims are “tethered” to the United Nations’ Universal
Declaration of Human Rights and the ILO’s Convention 182
(“Worst Forms of Child Labour Convention”)—the former
forbidding slavery and the latter forbidding the worst forms
of child labor. Plaintiff’s theory is that these international
18 HODSDON V. MARS, INC.
declarations demonstrate the “legislatively declared policy”
against child and slave labor. To determine whether
something is sufficiently “tethered” to a legislative policy for
the purposes of the unfair prong, California courts require a
close nexus between the challenged act and the legislative
policy. See Cel-Tech, 973 P.2d at 544 (holding that for an act
to be “unfair,” it must “threaten[]” a violation of law or
“violate[] the policy or spirit of one of those laws because its
effects are comparable to or the same as a violation of the
law”).
For example, in Gregory v. Albertson’s, Inc., 128 Cal.
Rptr. 2d 389 (Ct. App. 2002), the plaintiffs alleged that the
defendants violated the unfair prong of the UCL when the
defendant grocery store chain closed one location, but held
the lease and kept the property empty to prevent a competitor
from moving in. Id. at 395. Plaintiffs tried to tether
defendants’ actions to a policy against urban blight. See id.
(“[B]y keeping off the market the chief retail store in the
shopping center, the [defendants] have put in motion a
process of deterioration affecting the entire shopping center
that will inevitably produce the kind of blight that Health and
Safety Code section 33035 condemns . . . .”). The court
rejected plaintiffs’ argument that defendants’ decision to hold
onto one lease was sufficiently tethered to the policy against
community blight in § 33035. Id. at 395–96. Instead, the
court reasoned that § 33035 was part of a broader Community
Redevelopment Law, which established procedures for public
participation in the redevelopment of blighted areas, but did
not “call[] for a private remedy affecting a single parcel of
HODSDON V. MARS, INC. 19
property under the unfair competition law.” Id. at 395.8 In
other words, the challenged action was too far removed from
the legislative policy, as stated in the Community
Redevelopment Law, to be the tether for a claim under the
unfair prong. Id.; see also Scripps Clinic v. Superior Court,
134 Cal. Rptr. 2d 101, 117 (Ct. App. 2003) (holding that
plaintiffs did not state a claim under the unfair prong where
defendant medical center’s practice of not continuing to treat
patients who sued the center did not affect plaintiffs’
constitutional right to redress in court).
As the plaintiffs in Gregory pointed to a general policy
against urban blight, so too, Plaintiff here highlights a general
policy against child or slave labor. However, like in Gregory,
there is not a close enough nexus between the policy at
issue—here a policy against certain labor practices— and the
challenged action—here not placing disclosures on consumer
labels. Just as leaving one building empty may eventually
lead to blight, so too not labeling chocolate bars may
indirectly exacerbate slave labor in the supply chain;
however, the labeling of products is too far removed from the
U.N. and ILO policies to serve as the basis for a UCL claim.
As such, the U.N. Convention and the Worst Forms of Child
Labour Convention do not provide a tether here. Further,
requiring Mars to place labels on its products could arguably
impinge on the Supply Chains Act, which addresses
disclosure of labor abuses, but does not require labels on the
products themselves. Plaintiff cannot state an unfairness
prong claim under the Cel-Tech test.
8
Gregory also rejected plaintiffs’ tethering claim because “it would
impinge on a separate state policy favoring freedom of contract by the
parties to commercial real property leases.” 128 Cal. Rptr. 2d at 395
(quotation marks omitted).
20 HODSDON V. MARS, INC.
Plaintiff’s claims also fail under the South Bay test.
Mars’ failure to disclose information it had no duty to
disclose in the first place is not substantially injurious,
immoral, or unethical. See Bardin v. DaimlerChrysler Corp.,
39 Cal. Rptr. 3d 634, 643–44 (Ct. App. 2006) (holding that
the use of less expensive tubular steel exhaust manifolds did
not violate public policy because the defendant made no
representation about the composition of the manifolds and the
plaintiffs did not allege a safety concern or a violation of the
warranty). Plaintiff’s allegation that Mars’ participation in a
supply chain involving slave labor is “immoral” does not
suffice here, because Plaintiff is challenging the failure to
disclose. While the labor practices themselves are clearly
immoral, it is doubtful that failing to disclose on the label that
a product may be tainted by such labor practices is itself
immoral, especially when there is no specific duty to disclose
this information and the information is otherwise disclosed
under the Supply Chains Act. Further, the failure to disclose
is not substantially injurious because, as mentioned above,
information about slave and child labor is public knowledge,
accessible on Mars’ website—pursuant to the Supply Chains
Act. Therefore, under either test for the unfair prong of the
UCL, Plaintiff’s claims fail.
D. FAL
“California’s False Advertising Law makes it unlawful
for any person to ‘induce the public to enter into any
obligation’ based on a statement that is ‘untrue or misleading,
and which is known, or which by the exercise of reasonable
care should be known, to be untrue or misleading.’ ” Davis,
691 F.3d at 1161 (quoting Cal. Bus. & Prof. Code § 17500).
Whether an advertisement is misleading is determined by
asking whether a reasonable consumer would likely be
HODSDON V. MARS, INC. 21
deceived. See id. at 1162. Plaintiff’s FAL claims fail
because “a failure to disclose a fact one has no affirmative
duty to disclose is [not] ‘likely to deceive’ anyone.”
Daugherty, 51 Cal. Rptr. 3d at 128.9
IV. CONCLUSION
For the foregoing reasons, we affirm the judgment of the
district court dismissing Plaintiff Hodsdon’s CLRA, UCL,
and FAL claims with prejudice.
AFFIRMED.
9
Because we hold that Plaintiff has not pleaded a claim under the
CLRA, UCL, or FAL, we need not, and do not, reach any of Mars’ other
arguments in support of affirmance.