McCoy v. Nestle USA, Inc.

• Decision Date: 29 March 2016
• Docket Number: Case No. 15-cv-04451-JCS
• Citation: 173 F.Supp.3d 954
• Court: U.S. District Court — Northern District of California
• Parties: Elaine McCoy, Plaintiff, v. Nestle USA, Inc, Defendant.

173 F.Supp.3d 954

Elaine McCoy, Plaintiff,
v.
Nestle USA, Inc, Defendant.

Case No. 15-cv-04451-JCS

United States District Court, N.D. California.

Signed March 29, 2016

173 F.Supp.3d 955

Elaine T. Byszewski, Christopher Robert Pitoun, Hagens Berman Sobol Shapiro LLP, Pasadena, CA, Ashley A. Bede, Steve W. Berman, Hagens Berman Sobol Shapiro LLP, Seattle, WA, Kevin Kamuf Green, Hagens Berman Sobol Shapiro, San Diego, CA, for Plaintiff.

Bryan Alexander Merryman, Arash V. Sadat, White & Case LLP, Los Angeles, CA, for Defendant.

173 F.Supp.3d 956

ORDER GRANTING MOTION TO DISMISS

Re: Dkt. No. 16

JOSEPH C. SPERO, Chief Magistrate Judge

I. INTRODUCTION

“The use of child slave labor in the Ivory Coast is a humanitarian tragedy.”Doe I v. Nestle USA, Inc. , 766 F.3d 1013, 1016 (9th Cir.2014). The fact that major international corporations source ingredients for their products from supply chains involving slavery and the worst forms of child labor raises significant ethical questions. The issue before this Court, however, is whether California law requires corporations to inform customers of that fact on their product packaging and point of sale advertising. Every court to consider the issue has held that it does not. This Court agrees.

This is a putative class action in which Plaintiff Elaine McCoy claims that Defendant Nestlé USA, Inc. (“Nestlé”) violated California's Unfair Competition Law (“UCL,” Cal. Bus. & Prof. Code §§ 17200 –17210 ), Consumers Legal Remedies Act (“CLRA,” Cal. Civ. Code §§ 1750 –1784 ), and False Advertising Law (“FAL,” Cal. Bus. & Prof. Code §§ 17500 –17509 ) by failing to disclose on the packaging of Nestlé's chocolate products that some of the cocoa used therein originated at farms in Côte d'Ivoire (also known as the Ivory Coast) that use slave labor and the worst forms of child labor. Nestlé moves to dismiss all claims. The Court held a hearing on March 18, 2016.¹ For the reasons stated below, Nestlé's Motion is GRANTED, and this action is dismissed with prejudice.²

II. BACKGROUND

A. Allegations of the Complaint³

Côte d'Ivoire is the world's largest producer of cocoa beans, the raw ingredient for chocolate, and supplies 40% of global cocoa production and 47% of total imports to the United States. Compl. (dkt. 1) ¶¶ 20, 51. Slave labor and the worst forms of child labor are common in Ivorian cocoa production, as is well documented by United States government agencies, academic studies, nonprofit organizations, investigative journalists, and former laborers. Id. ¶¶ 5–9, 24–26, 33–47. Children are frequently injured in the course of dangerous work involving machetes, chemicals, and heavy loads, and workers (both children and adults) may be beaten, whipped, and locked in to prevent escape. Id. ¶¶ 24–26. The Ninth Circuit has also acknowledged the existence of such conditions. Id. ¶ 27; Doe I , 766 F.3d at 1016.

Nestlé is one of the largest food companies in the United States and sells a number of popular chocolate products. Id. ¶ 3. In 2001, members if the United States chocolate industry including Nestlé signed a voluntary protocol, negotiated by Representative Eliot Engel and Senator Tom Harkin, to develop standards for certifying chocolate produced without labor abuses. Id. ¶ 28. After failing to meet the initial 2005 deadline, the industry extended the self-imposed deadline to 2008, then to 2010, and then to 2020. Id. ¶¶ 30–32.

Despite adopting “Corporate Business Principles” that require ethical business

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practices in its supply chain and a “Supplier Code” that “strictly prohibit[s]” child labor and forced labor, Nestlé sources much of its chocolate from Côte d'Ivoire through a multi-level supply chain of independent growers, cooperatives, distributors, and other intermediaries. Id. ¶¶ 4, 11, 21, 50, 52, 60–66, 52. Nestlé acknowledges child and slave labor in its Ivorian supply chain, including children engaged in unsafe work, but does not disclose the existence of those labor abuses on its product labels. Id. ¶¶ 21, 53. Certain Nestlé products also advertise that Nestlé “works with [a certification program that does not permit child labor] to help improve the lives of cocoa farmers.” Id. ¶¶ 54–55. Although McCoy disputes the accuracy of that certification, her claims here are based only on Nestlé's omissions, not on any affirmative misrepresentations. Id. ¶ 57; Opp'n (dkt. 18) at 12 n.64.

McCoy “has purchased Nestlé Chocolate Products at various retail stores including Sam's Club and Safeway in and around Vacaville, and Fairfield, California from 2011 through present.” Id. ¶ 14. Citing studies showing that consumers will pay a premium for ethically produced coffee, clothing, and seafood, id. ¶¶ 67–71, McCoy alleges that she and other customers “would not have purchased Nestlé's Chocolate Products or paid as much for them” if Nestlé had disclosed labor violations on the product labels. Id. ¶ 11, see also id. ¶¶ 14, 49, 78, 93, 107, 118.

The Complaint includes three claims, under the UCL, the CLRA, and the FAL, respectively. The UCL claim is based on three separate theories arising from Nestlé's failure to disclose labor abuses in its supply chain on the packaging of its chocolate products: (1) the omission is “unlawful,” because it violates the CLRA, id. ¶ 86; (2) the omission is “unfair,” because the abusive labor practices themselves are immoral and the failure to disclose them impairs competition and prevents consumers from making informed decisions, id. ¶ 87; and (3) the omission is “fraudulent” because it is likely to deceive a reasonable consumer and the true facts would be material to reasonable consumer, id. ¶ 88. The CLRA claim asserts that Nestlé's failure to disclose labor abuses in its supply chain constitutes a misrepresentation of the “source, characteristics, and standard” of the products. Id. ¶ 103, see also id. ¶¶ 100–02 (citing Cal. Civ. Code § 1770(a)(2), (5), (7) ). The FAL claim asserts that Nestlé had a duty to disclose the labor abuses in its supply chain because it had superior knowledge as compared to customers, and because it made “partial representations and/or misrepresentations to the contrary.” Id. ¶ 114. In her Opposition, McCoy disclaims any theory of an obligation to disclose arising from partial misrepresentations. Opp'n at 12 n.64.

B. Procedural History

McCoy filed this action on September 28, 2015, seeking to represent herself and other similarly situated consumers who purchased Nestlé chocolate products in the last four years. See generally Compl. McCoy's counsel also represents plaintiffs who filed similar actions against two other large chocolate manufacturers, Mars and Hershey. See Hodsdon v. Mars, Inc. , No. 3:15–cv–04450–RS (N.D.Cal.); Dana v. The Hershey Company , No. 3:15–cv–04453 (N.D.Cal.). Defendants moved to dismiss in all three cases. Judge Seeborg granted the motion to dismiss in Hodsdon , as discussed in detail below. The undersigned heard argument on Hershey's motion in Dana concurrently with Nestlé's motion in the present case.⁴

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C. Parties' Arguments

Nestlé argues that the case must be dismissed for several reasons, starting with the safe harbor doctrine, which provides that plaintiffs cannot use California's consumer protection laws to pursue relief that is foreclosed by other, more specific statutes. Mot. (dkt. 16) at 8–11. According to Nestlé, the California Transparency in Supply Chains Act of 2010 (the “Supply Chains Act”) bars McCoy's claims because it regulates disclosures related to labor abuses in supply chains and does not require the disclosures McCoy seeks. Id. McCoy responds that the Supply Chains Act does not specifically permit Nestlé's omissions or bar McCoy's claims, and that the labor violations addressed by that statute (slavery and human trafficking) do not encompass all of the violations at issue here (which also include dangerous but non-slave child labor). Opp'n at 3–8.

Nestlé also argues that the Court should dismiss the case based on the doctrine of equitable abstention, because: (1) the economic policies at issue are better suited for resolution by legislative bodies or administrative agencies; (2) enforcement of injunctive relief would be unduly burdensome for the Court due to the need to monitor foreign labor conditions; and (3) the foreign relations issues implicated by McCoy's claims require a uniform federal policy and should be entrusted to the legislative or executive branch. Mot. at 11–13. McCoy argues that the subject matter of the case falls within the experience and competence of the Court, and that overseeing an injunction requiring Nestlé to change its labeling would not be unduly burdensome. Opp'n at 8–10.

Next, Nestlé argues that it has no duty to disclose labor conditions in its supply chain because the information at issue does not relate to product safety, and because Nestlé did not have exclusive knowledge, actively conceal the information, make misleading partial representations, or have a fiduciary relationship with McCoy. Mot. at 14–18. Nestlé contends that all of McCoy's claims fail because,...