LOS ANGELES (Legal Newsline) - Plaintiff Melanie Barber has, for the moment, lost the first in what is likely to be a wave of class action lawsuits challenging California’s Transparency in Supply Chains Act.
“This law is new,” Daniel Herling, an attorney in San Francisco at Mintz Levin told Legal Newsline. “This is the first time the courts have dealt with it.”
In Barber v. Nestle USA, Barber alleged that Nestle had violated consumer protection statutes by failing to disclose that some ingredients in its cat food products might have been sourced using forced labor.
According to court documents, some seafood used to make the Nestle product Fancy Feast is caught in the waters between Thailand and Indonesia.
A network of small fishing boats provide its catches to Nestle’s partner, Thai Union Frozen Products PCL. Court documents stated, “Both parties acknowledge that some proportion of the small fishing ships use forced labor, but that it is virtually impossible to say how pervasive the problem is.”
Barber alleged that she would not have purchased Fancy Feast if she had been aware that the product could have been sourced using forced labor. She brought suit under California’s Unfair Competition Law, the California Consumers Legal Remedies Act, and the False Advertising Law.
Nestle moved to dismiss the lawsuit under the Federal Rules of Civil Procedure.
“The defense said, we complied with the law. The law says all we have to do is disclose our efforts to ensure compliance, but we don’t have to disclose every single instance,” Herling said.
The court agreed with Nestle, finding that Nestle’s disclosures were protected under California’s safe harbor doctrine. The safe harbor doctrine shields companies from liability in cases in which the legislature has expressly permitted certain conduct or already made a decision regarding a situation.
In the case at hand, the court ruled that safe harbor was created by the California Transparency in Supply Chains Act of 2010. The act requires any retailer doing business in California and also having annual worldwide gross receipts exceeding $100 million to specifically disclose efforts to eradicate slavery and human trafficking as related to its supply chain.
“This law is not to clean up or straighten out supply chains,” Herling said. “But rather you have to disclose what efforts they’re taking.”
Judge Cormac Carney wrote, “Plaintiffs may wish – understandably – that the Legislature had required disclosures beyond the minimal ones required by [the statute]. But that is precisely the sort of legislative second-guessing that the safe harbor doctrine guards against.”
With several other cases pending that involve the Transparency in Supply Chains Act, the final impact of the case remains to be seen. Herling said the Barber ruling may result in “the plaintiffs going back and looking at how they allege the claim, to see if they can avoid having the same argument used against them.”
“It does indicate that companies are going to have to pay attention to this law because if they don’t there’s going to be, certainly, class actions,” Herling added.
“When the defense wins a case they have to win every case but the plaintiffs only have to win one.”
Barber has appealed the decision to the U.S. Court of Appeals for the Ninth Circuit. She is represented by Hagens Berman Sobol Shapiro.