Monica Sud v. Costco ( 2018 )

NOT FOR PUBLICATION FILED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.
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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.
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