ORDER GRANTING MOTIONS TO DISMISS FIRST AMENDED COMPLAINT
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
Plaintiffs also allege the CP Defendants
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 Act
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.,
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.
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. —,
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 on a number of food labelling cases in which a defendant argued the plaintiff lacked standing to sue based on products the plaintiff had not purchased. In those cases, the issue'was whether the plaintiff had standing to sue based on products they had not purchased but which had been manufactured or marketed by the same defendant or defendants. In each case, at least one of the plaintiffs did allege they purchased at least one product from the defendant or defendants. In sum, there was no dispute the plaintiffs alleged an injury caused by and traceable to the defendant or defendants. See Brown v. The Hain Celestial Group, Inc.,
The McCoy and Hodsdon courts similarly concluded that the plaintiffs had standing under Article III. Again, in those cases, there was no dispute the plaintiffs purchased a product manufactured or marketed by any of the named defendants. See McCoy,
Accordingly, the Court GRANTS the CP Defendants’ motion to dismiss on this basis.
B. The Court Grants Costco’s Motion.
Costco argues: (1) it did not owe Plaintiffs a duty to disclose the information at issue; (2) the FAL does not apply to omissions; (3) the claims are barred by the safe harbor doctrine; and (4) Plaintiffs lack’ standing to seek injunctive relief. Because the Court finds the first two arguments dispositive, and because those arguments impact Plaintiffs’ ability to state a violation of any of the statutes at issue, the Court does not reach Costco’s alternative arguments.
On a motion to dismiss under Rule 12(b)(6), a court’s “inquiry is limited to the allegations in the complaint, which are accepted as true and construed in the light most favorable to the plaintiff.” Lazy Y Ranch LTD v. Behrens,
1. Reliance and Statutory Standing Under the CLRA, UCL and FAL.
The Court begins with Costco’s argument regarding reliance, because Plaintiffs
In order to show actual reliance, whether based on an affirmative misrepresentation or a material omission, Plaintiffs must demonstrate that the misrepresentation or omission was an “immediate cause of the injury-causing conduct.” Tobacco II,
In Daniel, the court identified two “sub-elements” a plaintiff must prove to show an omission was a substantial factor in a purchasing decision: awareness; and a change in behavior.
Plaintiffs allege Costco fails to include information about the labor abuses in the supply chain for farmed prawns on the packaging and, instead, states only that the prawns are a product of a given, country. (FAC ¶ 15.) There are sufficient allegations in the FAC from which the Court- could infer Plaintiffs relied on the statements on the packaging before they purchased the prawns at issue and, thus, that they have statutory standing to pursue their claims based on that omission.
However, Plaintiffs’ allegations regarding Costco’s conduct are based, in part, on the fact that Costco publishes a “Disclosure Regarding Human Trafficking and Anti-Slavery” (the “Disclosure”) on its website. They also are based on the fact that Costco advertises a supplier Code of Conduct, which, purports to prohibit the type of labor abuses described in the FAC. (FAC ¶¶ 18-20, 59-61.) According to Plaintiffs, through the Disclosure, Costco “affirmatively represents to consumers that it
While the Disclosure might have been a “plausible method” of disclosing the fact that Costco sells prawns “tainted” by labor abuses in the supply chain, neither Plaintiff alleges that she read or relied on the Disclosure before she purchased prawns from Costco. Therefore, to the extent their claims are based allegations that the Disclosure is misleading, either because it contains affirmative misrepresentations or because it omits information, Plaintiffs fail to allege facts to show reliance. Similarly, Plaintiffs have not alleged they read or relied on Costco’s Code of Conduct and, thus, fail to allege facts to show they relied on any affirmative statements in that Code. They also fail to allege facts to show they were aware of the Code, such that they could premise an omissions claim on it. See, e.g., Stanwood v. Mary Kay, Inc.,
Further, although in paragraph 207 Plaintiffs refer to generally “false statements in [Costco’s] television, radio, and print advertising, website, brochures, and ... other written and oral materials,” they do not allege with particularity any advertisements on which they relied. Plaintiffs also do not attempt to allege that Costco engaged in a long term advertising campaign about the practices at issue in the FAC, which might otherwise enable them to avoid pleading reliance on a particular advertisement with specificity. See Tobacco II,
In sum, notwithstanding Plaintiffs’ arguments that Costco has made affirmative misrepresentations or has made partial representations, their claims must be limited to alleged omissions from product packaging.
1. The Duty to Disclose.
Plaintiffs allege that, “[g]iven its representations about excluding slave labor from its chain of supply, ... Costco has'a duty to accurately disclose to consumers that slavery, forced labor and human trafficking have been tainting and continue to taint Costco’s supply chain for farmed prawns.” (FAC ¶ 25.) Costco moves to dismiss Plaintiffs claims under the UCL and the CLRA, in part, on the basis that it did not have a duty to disclose this information.
The UCL prohibits any “unlawful, unfair, or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. “Since section 17200 is [written] in the disjunctive, it establishes three separate types of unfair competition. The statute prohibits practices that are either ‘unfair’ or ‘unlawful,’ or ‘fraudulent.’ ” Pastoria v. Nationwide Ins.,
Plaintiffs allege Costco violated all three prongs of the UCL. The Court will address Plaintiffs’ claims under the unlawful and unfair prongs in more detail in Section B._, infra. In this portion of the Order, the Court focuses on the claims under the fraudulent prong. Under both the UCL and the CLRA, in order to determine whether a representation is misleading, a court evaluates whether members of the public are likely to be deceived. Tobacco II,
A plaintiff may base a UCL claim or a CLRA claim “in terms constituting fraudulent omissions, [but] to be actionable the omission must be contrary to a representation actually made by the defendant, or an omission of a fact that the defendant was obliged to disclose.” Daugherty v. Am. Honda Motor Co.,
In Wilson, the plaintiffs alleged the defendant was aware of, but concealed, a design defect that rendered certain of its laptop computers unusable and that posed a safety risk. Wilson,
In McCoy, the plaintiffs claims were essentially identical to the claims alleged in Hodsdon, although they named a different chocolate manufacturer as a defendant. McCoy,
Plaintiffs argue that Wilson’s holding is not as broad as Costco argues, and they urge the Court not to follow the reasoning set forth in McCoy, Hodsdon and Wirth. In support of this argument, Plaintiffs rely on the Stanwood case, supra. The Court does not find Plaintiffs’ reliance on Stan-wood persuasive. First, it “is not free to deviate from the Ninth Circuit’s construction of California law in Wilson absent subsequent interpretation from California’s courts that the interpretation was incorrect.” Rasmussen v. Apple Inc.,
Finally, the Court concurs with the McCoy court that “some bright-line limitation on a manufacturer’s duty to disclose is sound policy, given the difficulty of anticipating exactly what information some customers might find material to their purchasing decisions and wish to see on product labels.” McCoy,
Plaintiffs do not allege that the labor practices described in the FAC, while horrific, constitute a safety risk to consumers or constitute a product defect. On the facts of this case, Plaintiffs fail to show Costco had a duty to disclose the allegedly omitted information. Therefore, they fail to state a claim under the CLRA and fail to state a claim under the fraudulent prong of the UCL. McCoy,
As set forth in Falk, there are four circumstances that may give rise to a duty to disclose, only three of which are at issue in this case.
Plaintiffs also assert that Costco actively concealed the facts about the supply chain for its farmed prawns, but their argument on this point is focused on their assertion that Costco made partial representations. (See Opp. Br. at 6:25-10:21.) In addition, the FAC does not contain any facts that would support an inference that Costco actively concealed information about abuses in the supply chain for farmed prawns.
Third, Plaintiffs argue Costco made partial representations but suppressed other material facts. In the FAC, the Plaintiffs do allege Costco made partial representations, but those allegations pertain to the Disclosure and the Code of Conduct. Plaintiffs do not allege that they relied on those statements. In addition, Plaintiffs do not allege Costco made partial representations on the product packaging that are misleading absent a disclosure. The Court concludes they cannot rely on a partial representation theory to allege a duty to disclose.
Accordingly, the Court GRANTS Costco’s motion to dismiss on the basis that Plaintiffs fail to allege it had duty to disclose the information about labor abuses in the supply chain for farmed prawns from Southeast Asia on its product packaging.
2. The Court Dismisses the Remainder of the UCL Claim.
Plaintiffs also pursue claims against Costco under the unlawful and unfair prongs of the UCL. Costco argues that Plaintiffs
a. Unlawful prong.
The UGL’s unlawful prong proscribes “anything that can be properly called a business practice and that at the same time is forbidden by law.” Smith v. State Farm Mut. Auto. Ins. Co.,
Plaintiffs also allege that Costco’s conduct “in sourcing and selling farmed prawns actively contributes to the use of slave labor in violation of bans on such human trafficking enacted by the U.S., California and by international conventions, including but not limited to the Tariff Act of 1930[,] ... [t]he Anti-Trafficking in Persons Act, the UN Declaration on Human Rights, and California Penal Code § 236, § 237 et seq.,” and the Supply Chains Act. (FAC ¶ 195.) The Supply Chains Act does not clearly speak to product labels, and, to the extent Plaintiffs are attempting to suggest the Disclosure does not comply with the requirements of the Supply Chains Act, the Court also has concluded that Plaintiffs lack statutory standing to pursue claims based on the Disclosure. With respect to the remaining statutes and the Declaration of Human Rights cited in paragraph 195, Plaintiffs do not attempt to show how the allegations in the FAC support alleged violations of these laws in their opposition brief. Rather, they simply repeat the allegations set forth in the FAC. (Compare FAC ¶ 195 with Opp. Br. at 12:4-12.)
The Court concludes Plaintiffs fail to plead a violation of the UCL’s unlawful prong.
b. Unfair Prong.
The UCL also proscribes business practices that are “unfair,” but it does not define that term. In Cel-Tech Communications, Inc. v. Los Angeles Cellular Tel. Co., the California Supreme Court considered a number of definitions relied upon by the courts of appeal and found they were “too amorphous and provide too little guidance to courts and businesses.”
Such information [about the prospect for child labor- in the defendant’s supply chain] is, in fact, readily available to consumers on Mars’s website. Given that Hodson, like any other consumer, has access to information about the source of Mars’s cocoa beans, the absence of such information on the packaging is not “substantially injurious to consumers” or necessarily immoral. Granting that the labor practices at issue are immoral, there remains an important distinction between them and the actual harm for which Hodson seeks to recover, namely his purchase of Mars’s chocolate products absent any disclosure. Mars’s failure to disclose information it had no duty to disclose in the first place is not substantially injuries, immoral, or unethical[.]
Similarly, to the extent California courts require a UCL claim to be “tethered to specific constitutional, statutory, or regulatory provisions,” the Court concludes Plaintiffs’ allegations are not sufficient. See Boschma,
Accordingly, the Court GRANTS Co-steo’s motion to dismiss for these reasons as well.
3. The Court Dismisses the FAL Claim.
Costco moves to dismiss the FAL claim on the basis that the FAL does not apply to omissions. The FAL states, in part, that “[i]t is unlawful for any ... corporation ... with intent directly or indirectly to dispose of real or personal property ... to make or disseminate ... any statement ... which is known, or by the exercise of reasonable care should be known, to be untrue or misleading[.]” Cal. Bus. & Prof. Code § 17500. “[M]any courts have held a plaintiff who asserts that a business omitted a material fact in its advertisements, labels, or literature has not stated a claim under the FAL.” Hodsdon,
The Hodsdon court found these two lines of cases were “not necessarily discordant.” Id. It concluded that if “the crux of a plaintiff’s FAL claim is that the. defen
In McCoy, the court also found that the plaintiff failed to state a claim under the FAL. McCoy,
Plaintiffs here have not expressly limited their claims to pure omissions, and although the FAC includes allegations about partial or affirmative representations. However, as the Court has concluded, Plaintiffs do not allege they relied on those statements, and it is clear from the FAC that the crux of their claims is that Costco omitted information about labor abuses in its supply chain from the product packaging. That is, the “focus” of their “claim is on the message that does not appear on” Costco’s prawn product packaging. Id. at 1024 n.3 (emphasis in original). The Court finds the reasoning in McCoy and Hodsdon persuasive, and it concludes that when an FAL claim is based on pure omissions, it cannot proceed. Because Plaintiffs’ claims are limited to alleged omissions, they fail to state a claim under the FAL.
Accordingly, the Court GRANTS Costco’s motion to dismiss on this basis as well.
C. The Court Denies Plaintiffs Leave to Amend.
In general, if the allegations are insufficient to state a claim, a court should grant leave to amend, unless amendment would be futile. See, e.g. Reddy v. Litton Indus., Inc.,
CONCLUSION
For the foregoing reasons, the Court GRANTS the motions to dismiss, and it
IT IS SO ORDERED.
Notes
. Plaintiffs refer collectively throughout the FAC to the CP Defendants as CP Foods and do not clearly distinguish between these two defendants.
. California Civil Code § 1714.43.
. Each of these cases is currently on appeal to the United States Court of Appeals for the Ninth Circuit.
. The CP Defendants also move to dismiss for lack of personal jurisdiction, which is their primary argument, lack of statutory standing
. Plaintiffs also rely on Colucci v. ZonePerfect Nutrition Company, No. 12-CV-2907-SC,
. To the extent Plaintiffs rely on allegations of agency, conspiracy, aiding and abetting, and concerted actions to show they were injured by the CP Defendants, those allegations are mere legal conclusions couched as fact. (See FAC ¶¶ 48-50.) Cf. Easter,
.For that same reason, and assuming the Court could assert personal jurisdiction over either Charoen or CP Foods, Plaintiffs lack statutory standing under the UCL. Because they have not alleged they purchased prawns produced by either of the CP Defendants, they have not alleged facts showing they lost money or property as a result of the CP Defendants’ conduct.
. The standard is the same under the FAL. See Colgan,
. Although Gray is unpublished, the Court finds it instructive. The Ninth Circuit concluded the plaintiffs could not state a claim under the UCL or the CLRA, on a pure omissions theory, where they alleged the defendant failed to disclose internal fuel economy data, which plaintiffs alleged was contrary to EPA estimates. Gray,
.In Falk, the court held a failure to disclose can constitute actionable fraud under the CLRA in four circumstances: "(1) when the defendant is in a fiduciary relationship with the plaintiff; (2) when the defendant had exclusive knowledge of material facts not known to the plaintiff; (3) when the defendant actively conceals a material fact from the plaintiff; and (4) when the defendant makes partial representations but also suppresses some material fact.” Id.,
. The McCoy court also decided the Dana case, cited above. Because the Court's reasoning in Dana is substantially similar to, if not identical to the reasoning in McCoy, which is published, this Court has relied on McCoy.