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Sud v. Costco Wholesale Corp.

United States Court of Appeals for the Ninth Circuit

June 12, 2018, Argued and Submitted, San Francisco, California; July 20, 2018, Filed

No. 17-15307


 [*720]  MEMORANDUM2

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.3 The district court granted [**2]  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,4 and the FAL all require 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, 108 Cal. App. 4th 917, 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 [**3]  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.

 [*721]  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 Cases, 46 Cal. 4th 298, 93 Cal. Rptr. 3d 559, 207 P.3d 20, 39 (Cal. 2009) (UCL); Tucker v. Pac. Bell Mobile Servs., 208 Cal. App. 4th 201, 145 Cal. Rptr. 3d 340, 357 (Cal. Ct. App. 2012) (CLRA); Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 120 Cal. Rptr. 3d 741, 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 [**4]  advertising or labeling." Id. at 969. But the plaintiffs here did not rely on Costco's statements and were not previously deceived by them.

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731 Fed. Appx. 719 *; 2018 U.S. App. LEXIS 20258 **; 2018 WL 3490675

MONICA SUD, individually, and on behalf of all others similarly situated and CECILIA JACOBO, individually, and on behalf of all others similarly situated, Plaintiffs-Appellants, 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.


Prior History:  [**1] Appeal from the United States District Court for the Northern District of California. D.C. No. 4:15-cv-03783-JSW. Jeffrey S. White, District Judge, Presiding.

Sud v. Costco Wholesale Corp., 229 F. Supp. 3d 1075, 2017 U.S. Dist. LEXIS 9943 (N.D. Cal., Jan. 24, 2017)

Disposition: AFFIRMED.


chain, affirmative misrepresentation, forced labor, plaintiffs', consumers, unfair, prong, consumer protection, legislative policy, duty to disclose, functionality, injunction, omissions, unethical, deceived, disclose, labeling, immoral, pled