Monthly Archives: December 2015

Safe Harbor From Murky Waters in the Supply Chain

seafood

**Nestle Defends Class Action in the Central District of California with Successful Motion to Dismiss and Sets Valuable Precedent With California Transparency in Supply Chains Act Safe Harbor Defense** . . .                                                                                                                                                                                                                                    

The California Transparency in Supply Chains Act of 2010, requires retailers doing business in California to make specific disclosures on its website about efforts it makes to “eradicate slavery and human trafficking from its direct supply chain.” (Cal. Civ. Code § 1714.43).  In our prior post on this topic we noted the Transparency Act applies to large retailers (those with $100 million in worldwide sales).  Id.  And that the Transparency Act’s focus is on information – the retailer must disclose what efforts it takes to: verify the risks of human trafficking and slavery in its supply chain; audit its suppliers; certify its suppliers’ compliance with laws regarding slavery and human trafficking; maintain internal policies and procedures on the subject; and train its management on these policies and procedures.  Id.  Important to note, the Act does not require that a retailer actually do any of these things – the mandate is to inform the public what efforts are made.  The point of the Transparency Act is consumer empowerment – to give consumers who are concerned about the topic a point of reference  – and ultimately give the market the ability to reward or punish retailers who are (or are not) doing enough.  Nestle USA was one of the first companies to be tested by the Plaintiffs’ bar on whether the Transparency Act created more than an obligation to inform the public about its efforts to eradicate the problem – and whether there is an implied legal obligation to inform the public about the actual occurrences or risk in its supply chain of human slavery or trafficking.  See Barber v. Nestle USA, Inc., No. SACV1501364CJCAGRX, (C.D. Cal.).  The case involved Nestle USA’s branded pet food which sources seafood from Thai fisheries.  The court took judicial notice that it has been reported widely the Thai fishing industry is notorious for having widespread forced and other inhumane labor practices.  Plaintiffs alleged that they would not have purchased Nestle USA’s products if they knew of that connection and therefore that the defendant had violated California’s CLRA (Cal. Civ. Code § 1750 et seq.); FAL (Cal. Bus. & Prof. Code § 17500 et seq.; and UCL (Cal. Bus. & Prof. Code § 17200 et seq.).  However, Nestle USA cited to its compliance with the Transparency Act – to the fact that it had informed the public of its efforts – and therefore that it was squarely within a consumer law “safe harbor.”  A “safe harbor” is the concept articulated by the California Supreme Court that a defendant cannot be liable under the UCL for unlawful conduct if it is doing something that “the Legislature has permitted . . .  or considered a situation and concluded no action should lie.” Cel-Tech Comms., Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 182 (Cal. 1999.).  The doctrine has been applied widely to California consumer laws.  Alvarez v. Chevron Corp., 656 F.3d 925, 933–34 (9th Cir. 2011) (applying the safe harbor doctrine to CLRA claims); Pom Wonderful LLC v. Coca Cola Co., No. CV 08-06237 SJO(FMOx), 2013 WL 543361, at *5 (C.D. Cal. Apr. 16, 2013) (applying the safe harbor doctrine to FAL claims).  Nestle USA argued that Plaintiffs could not make an end run around the legislature by making it liable for disclosures that were fully compliant with the Transparency Act.  The district court agreed holding that Plaintiff may not “simply impose their own notions of the day as to what is fair or unfair” – that the “California Legislature considered the situation of regulating disclosure by companies with possible forced labor in their supply lines and determined that only the limited disclosure mandated by § 1714.43 is required.”  Barber v. Nestle USA, Inc., No. SACV1501364CJCAGRX, 2015 WL 9309553, at *4 (C.D. Cal. Dec. 9, 2015).  Accordingly, it granted Nestle USA’s motion to dismiss.  Id.

This dismissal sets an important precedent for the defense bar: Costco has been sued in the Northern District of California under similar circumstances with respect to its sale of seafood sourced from Thailand.  Sud. v. Costco Wholesale Corp., No. 3:15-cv-03783 (N.D. Cal).  Costco’s Motion to Dismiss is currently pending.  Chocolate manufacturers have faced similar lawsuits with respect to slave and child labor in the cocoa supply chain: Mars has been sued in the Central District of California (Wirth v. Mars, Inc., No. 8:15-cv-1470 (C.D. Cal September 10, 2015) and in the Northern District (Hodson v. Mars, Inc., No. 4:15-cv-04450-DMR (N.D. Cal. September 28, 2015).  Hershey’s has also been sued in the Northern District of California (Dana v. The Hershey Company, No. 3:15-cv-04453 (N.D. Cal. September 28, 2015).  Mars’ Motion to Dismiss has been filed in its cases and a decision is currently pending.

 

 

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False Advertising to the Dogs

**Record Payout By Blue Buffalo in Multi District Pet Food Class Settlement sparked by Nestle Purina Competitor Law Suit** . . .                                                                                                                                                                                                                                            

Competitor lawsuits give class action plaintiffs a helpful leg-up.  See Prior post.  The Blue Buffalo matter is a good case in point.  Blue Buffalo makes pet food which was advertised, amongst other things, as not containing animal by-products or grain.  According to Blue Buffalo’s main competitor Nestle Purina that advertising claim is not true.  Nestlé Purina PetCare Company v. Blue Buffalo Company Ltd., Civil Case No. 4:14-cv-008590 (E.D. Mo. May 6, 2014) Compl. ECF No. 2, see also First Amended Compl. (Nov. 13, 2014) ECF No. 104.  Nestle Purina’s claim was that its own lab testing of the Blue Buffalo’s products found – contrary to the advertising – both poultry by-products and grain.  And indeed, during discovery, Nestle Purina claims that it found smoking gun emails between Blue Buffalo’s suppliers and brokers about by-products in the supply chain (and unfortunately for Blue Buffalo the emails literally used the phrase “smoking gun”).  See 4:14-cv-00859-RWS, Doc. #. 77-1 (E.D. Mo. Oct. 10, 2014).  The inevitable consumer led class actions ensued (using the Nestle Purina claims and findings as their model)–: Fisher et al v. The Blue Buffalo Company, Ltd. et al, Case No. 14-cv-5937 (C.D. Cal.); Teperson et al v. The Blue Buffalo Company, Ltd et al, Case No. 14-cv-1682, (S.D. Cal.); Delre et al v. Blue Buffalo Co., Ltd, Case No. 14-cv-768, (D. Ct.); Renna et al v. Blue Buffalo Co., Ltd., Case No. 14-cv-833, (D. Ct.); Mackenzie et al v. The Blue Buffalo Company, Ltd., Inc., Case No. 14-cv-80634, (S.D. Fl.); Stone et al v. Blue Buffalo Company Ltd., Case No. 14-cv-520, (S.D. Ill.); Keil et al v. Blue Buffalo Company, Ltd., Case No. 14-cv-880, (E.D. Mo.); Hutchison et al v. Blue Buffalo Company, Ltd., Case No. 14-cv-1070, (E.D. Mo.); Andacky et al v. The Blue Buffalo Company, Ltd., Case No. 14-cv-2938, (E.D. N.Y.).  Blue Buffalo in turn counterclaimed against Nestle Purina asking for an injunction to stop Nestle Purina from its advertising attacking Blue Buffalo’s practices.  And when the “smoking gun” appeared, Blue Buffalo sued the third party companies who allegedly supplied it with by-product material.  The various class complaints were transferred after a Multi District Litigation Panel hearing to federal court in Missouri.  In re Blue Buffalo Co., Ltd. Marketing and Sales Practice Litigation Case No. 4:14-md-02562-RWS (E.D. Mo.).   On December 9, 2015 class settlement and class certification approval was filed.  ECF No. 159.  The court, preliminarily approved the certification and settlement a week later.  ECF No. 164.  The fairness hearing is set for May 19, 2016.  Nestle Purina is trumpeting the $32 million settlement as the “largest pet food class action settlement in history.” Interestingly, Blue Buffalo fought most of the litigation at the same time as listing its IPO.  The class action’s impact on the IPO is unclear – the shares gained 38 percent on the issue’s first full day of trading on the Nasdaq in July 2015.  That said, pursuant to the settlement Blue Buffalo will take a charge against Q4 2015 earnings of $32 million. In the third quarter, the company’s net profit totaled $27 million.

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Hitting Back at Class Settlement Objectors

**Plaintiff Class Counsel Seek Sanctions Against Alleged “Lawyer-Driven” Objections to its Becks Beer Settlement**

Plaintiff’s Class Counsel have been successfully using the threat of sanctions to ward off late game class objectors.  See prior post.  Another recent case has highlighted the issue.  In 2013 Beck’s Beer was sued under the theory that it’s packaging claims such as “originated in Germany” with “German quality” and “export bier” implied that the beer was a German import.  And certainly while that was true at one time, after 2008 the Beck’s Beer label was sold to the Belgian brewer Interbrew which later merged with American giant Anheuser Busch – and production of the beer moved to the U.S (in fact Beck’s Beer is brewed in the same facility as the synonymous American: Budweiser).  Plaintiff’s sued on allegations of false advertising and a class settlement was reached in June 2015: the settlement allowed a maximum award of $50 per household (less for those consumers without proof of purchase).  Marty v. Anheuser-Busch Companies, 1:13-cv-23656-JJO (S.D. Fl. June 18, 2015) ECF No. 149.  The class settlement was capped at $20 million and the attorneys’ fees were set at $3.5 million.  Id.  Class member Rene Muller (through his counsel Stephen Field) filed a settlement objection – claiming, generally, that the settlement terms were inflated and that attorney fees were too high.  Id. at ECF No. 161 (September 29, 2015).  The Court considered the objection, held a fairness hearing and overruled the objections.  Id. at ECF No. 171 (October 22, 2015).  It then granted final settlement approval.  Id. at ECF No. 172 (October 22, 2015).  Class counsel however were not satisfied – they took the deposition of Muller who (class counsel alleges) revealed that he generally knew nothing about the case, or the settlement, or his objection and was interested merely in a payoff (similar to a payoff he had received in a previous class action objection).  Id. at ECF No. 174 (November 12, 2015).  As such – class counsel sought sanctions against Muller’s attorney Stephen Field under 28 U.S.C. § 1927 which provides that: “[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.”  Id.  Essentially, class counsel has argued that the only rational explanation for the objectors threadbare knowledge of his objection – was that the attorney Stephen Field put him up to it – in hope of a hefty settlement.  Id.  Field has opposed the Motion for Sanctions, amongst other things, noting the inherent irony of Plaintiff’s class counsel (who seek to get paid to settle suits) asking for sanctions against him for doing inherently the same thing.  Id. at ECF No. 177 (November 30, 2015).  The matter of sanctions is currently under advisement.

 

 

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