Sud v. Costco Wholesale Corp.

229 F.Supp.3d 1075

Monica SUD, et al., Plaintiffs,

v.COSTCO WHOLESALE CORPORATION, et al., Defendants.

Case No. 15–cv–03783–JSW

United States District Court, N.D. California.

Signed January 24, 2017

Anne Marie Murphy, Shauna R. Madison, Niall Padraic McCarthy, Cotchett, Pitre & McCarthy, LLP, Burlingame, CA, Daniel Joseph Mulligan, Jenkins, Mulligan & Gabriel, LLP, San Diego, CA, Derek G. Howard, Derek G. Howard Law Firm, Inc., Mill Valley, CA, for Plaintiffs.

Robert Allan Mittelstaedt, Caroline Nason Mitchell, Craig Ellsworth Stewart, David L. Wallach, Jones Day, San Francisco, CA, Andrew David Yaphe, Brooke Alison Pyo, Christopher B. Hockett, Neal Alan Potischman, Davis Polk and Wardwell LLP, Menlo Park, CA, for Defendants.

ORDER GRANTING MOTIONS TO DISMISS FIRST AMENDED COMPLAINT

JEFFREY S. WHITE, United States District Judge

Now before the Court for consideration is the motion to dismiss filed by Defendants Charoen Pokphand Foods ("Charoen"), PCL, C.P. Food Products, Inc. ("CP Foods") (collectively the "CP Defendants"). Also before the Court is the motion to dismiss filed by Costco Wholesale Corporation ("Costco") (collectively "Defendants"). The Court has considered the parties' papers, relevant legal authority, and the record in this case, and it HEREBY GRANTS the motions, and it DISMISSES this case with prejudice.

BACKGROUND

A. Procedural History.

On August 19, 2015, Plaintiff Monica Sud ("Sud") filed this putative class action asserting claims under California's: Unfair Competition Law ("UCL"), Business and Professions Code sections 17200 et seq. ; False Advertising Law ("FAL"), Business and Professions Code sections 17500 et seq. ; and Consumer Legal Remedies Act ("CLRA"), Civil Code sections 1750 et seq. Each of these claims were based on allegations that Costco sold and the CP Defendants supplied prawns farmed in Thailand, for which the supply chain was tainted by slavery, human trafficking, and other illegal labor practices.

On January 15, 2016, the Court granted the Defendants' motion to dismiss on the basis that Sud lacked Article III standing, because she had not alleged facts to show that she purchased prawns that were a product of Thailand. (See Dkt. No. 76.) The Court gave Sud leave to amend to (1) expand the allegations to cover the purchase of prawns farmed in countries other than Thailand; (2) add her mother, Cecilia Jacobo ("Jacobo") as a class representative to such expanded claims; or (3) amend to include an additional class representative who could allege facts showing that he or she purchased prawns that are a product of Thailand. On February 19, 2016, Sud and Jacobo ("Plaintiffs") filed their First Amended Complaint ("FAC"), in which they assert a claim under the UCL against the Defendants. Plaintiffs also assert a claim under the FAL and under the CLRA against Costco.

B. Factual Background.

Plaintiffs allege that Costco sells farmed prawns that "come from Southeast Asia, including, but not limited to, the countries of Thailand, Indonesia, Vietnam, and Malaysia, and the international waters off these countries' coasts [.]" (FAC ¶ 5.) Plaintiffs allege the supply chain for these farmed prawns, specifically the fish used to create fishmeal for the framed prawns depends on slavery, human trafficking, and other labor abuses. Plaintiffs also allege that Charoen and CP Foods supply such prawns to Costco. (FAC ¶¶ 12–13, 16; see also id. , ¶¶ 80–134 (detailing facts underlying allegations regarding slavery, human trafficking and labor abuses).)

Plaintiffs allege that Defendants are aware the feed for the prawns comes from trash fish caught on boats that use slave labor or other illegal labor practices, including human trafficking. (See, e.g., id. ¶¶ 13, 15, 79, 196.) According to Plaintiffs, Costco publicly states on its website that it has a "supplier Code of Conduct which prohibits human rights abuses in our supply chain[.]" (Id. ¶ 19.) Plaintiffs allege these statements are misleading, because Costco continues to sell prawns that it knows are derived from a supply chain tainted by slavery, human trafficking and other human rights violations. Plaintiffs also allege Costco fails to advise consumers of this fact and allege that it "market[s] and sell[s] the product in packages which only advise that the contents are imported as a product from a foreign country...." (Id. ¶¶ 13, 15–19.)

Plaintiffs also allege the CP Defendants¹ are aware the fishmeal for prawns is tainted by slave labor, have made public statements that they are " ‘committed’ to ensuring that [their] supply chain is free from these human rights violations," continue to sell prawns tainted by these abuses, and fail to disclose that fact to California consumers. (See id. ¶¶ 8, 69–79.)

Plaintiffs each purchased prawns from Costco, which were sourced from Indonesia and Vietnam. (Id. ¶¶ 37–38, 41.) Plaintiffs expanded the allegations of their original complaint, and they now seek to represent a class of "persons and entities residing in California that [sic ], from at least 2011, through the present purchased frozen (or previously frozen) Southeast Asian farmed prawn products in the United States from Costco[.]" (Id. ¶ 187.) Plaintiffs allege they would not have purchased these prawns if they were aware of the facts regarding the supply chain. Plaintiffs also allege that they "would want to purchase farmed prawns from Defendants in the future but only if Defendants address the human rights abuses in their supply chains and couple that effort with full compliance with the California Transparency in Supply Chains Act² so that Plaintiffs can make informed purchasing decisions." (Id. ¶¶ 26, 42.)

The Court shall address additional facts as necessary in its analysis.

ANALYSIS

The facts described in the FAC are tragic and "raise significant ethical concerns." McCoy v. Nestle USA, Inc. , 173 F.Supp.3d 954, 956 (N.D. Cal. 2016) (discussing use of child labor in supply chain for cocoa products). The issue this Court faces, as others have before it, "is whether California law requires corporations to inform customers" of these facts "on their product packaging and point of sale advertising." Id. ; see also Hodsdon v. Mars, Inc. , 162 F.Supp.3d 1016 (N.D. Cal. 2016) (addressing allegations of child labor in supply chain for cocoa products); Dana v. The Hershey Company, Inc. , 180 F.Supp.3d 652 (N.D. Cal. 2016) (same); Wirth v. Mars Inc. , No. SA CV 15–1470–DOC (KESx), 2016 WL 471234 (C.D. Cal. Feb. 5, 2016) (addressing allegations of slave labor and forced labor in supply chain for seafood used in petfood); Barber v. Nestle USA, Inc. , 154 F.Supp.3d 954, (C.D. Cal. 2015) (same).³ The Court concludes Plaintiffs' claims cannot proceed.

A. The Court Grants the CP Defendants' Motion to Dismiss for Lack of Standing.

The CP Defendants move to dismiss the UCL claim, in part, for lack of Article III standing. Because this is a threshold issue, and because the Court finds it dispositive, it does not reach the CP Defendants' alternative arguments.⁴ The Court evaluates a motion to dismiss for lack of Article III standing under Rule 12(b)(1). See Maya v. Centex Corp. , 658 F.3d 1060, 1067 (9th Cir. 2011) ; White v. Lee , 227 F.3d 1214, 1242 (9th Cir. 2000). A motion to dismiss under Rule 12(b)(1) may be "facial or factual." Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). A facial attack on jurisdiction occurs when factual allegations of the complaint are taken as true. Federation of African Am. Contractors v. City of Oakland , 96 F.3d 1204, 1207 (9th Cir. 1996) ; see also Lujan v. Defenders of Wildlife , 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ("At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion dismiss, [courts] presume that general allegations embrace those specific facts that are necessary to support the claim.") (internal citation and quotations omitted). The plaintiff is then entitled to have those facts construed in the light most favorable to him or her. Federation of African Am. Contractors , 96 F.3d at 1207.

In order for Plaintiffs to establish standing, they must show they: "(1) suffered injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016) (citing Lujan , 504 U.S. at 560–61, 112 S.Ct. 2130 ). Plaintiffs must " ‘clearly allege ... facts demonstrating’ each element." Id. (quoting Warth v. Seldin , 422 U.S. 490, 518, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ). Plaintiffs allege that Costco sells prawns sourced by the CP Defendants. (FAC ¶ 72.) However, Plaintiffs do not allege that the prawns they purchased were sourced by either of the CP Defendants, and there are no facts in the FAC from which the Court could reasonably infer that is the case. A key component of Article III standing is "traceability, i.e., a causal connection between the injury and the actions" about which a plaintiff complains. Easter v. American West Financial , 381 F.3d 948, 961–62 (9th Cir. 2004) (finding that plaintiffs who could not trace injury to a particular defendant did not have standing to sue that defendant). Thus, in cases "where there are multiple defendants and multiple claims, there must exist at least one named plaintiff with Article III standing as to each defendant and each claim—but a single named plaintiff who can meet these criteria will suffice [.]" Reniger v. Hyundai Motor America , 122 F.Supp.3d 888, 895 (N.D. Cal. 2015).

In response to the CP Defendants' argument that, for this same reason, Plaintiffs lack statutory standing to pursue the UCL claim, Plaintiffs argue they "need not have purchased every product covered by the class," and that they have standing to assert this claim "regardless of the branding." (Dkt. No. 83, Opp. Br. at 22:6–7, 24:14–15.) Plaintiffs rely...