Modern slavery lawsuits: an analysis

Silvia Mera – t: @silvia__mera

Law pic

The decision by American judges to dismiss two lawsuits accusing big companies of selling products that were the result of forced labour has sparked debate in recent months.

The first lawsuit, Sud v. Costco Wholesale Corporation et al, accused the giant retailer Costco of being aware that the prawns it bought from its Thai distributor, Charoen Pokphand Foods PCL, came from a supply chain dependent on ships involved in human trafficking and labour abuses. Monica Sud, a California resident, claimed that Costco did not sever business with Charoen even though the company’s California Transparency in Supply Chain Act statement rejects doing business with companies that allow human rights abuses. She also said that because Costco was not clear about the products’ tainted back history, its customers could not make informed decisions and were “unknowingly supporting slave labor.” In January 2016 the San Francisco Court dismissed the lawsuit. According to the plaintiff’s purchase history, Sud had not purchased prawns from Thailand – so her claimed injuries were hypothetical. Also, her lawyers had failed to specifically trace the prawns to the companies that were Costco’s suppliers, and to demonstrate that the retailer has a binding duty to inform its customers. On this basis, the court dismissed her appeal this past January.

A second, similar case involved Nestle, another retail giant. Nestle was brought to court over claims that it facilitated the use of forced child labour in Mali and chocolate farms in Cote d’Ivoire, violating the U.S. Alien Tort Claims Act. The case lasted for a decade. After a first dismissal based on precedent jurisdiction, the case was examined again on the basis that the plaintiffs had suitable reasons to accuse Nestle of “focusing on profit more than on human welfare.” However, the case was dismissed this past March, on the grounds that it was made by foreign plaintiffs over foreign allegations, and therefore did not belong in a U.S. court.

Under the California Transparency in Supply Chains Act, companies are encouraged to publicly inform their customers about their position when it comes to slavery in supply chains. However, it seems that with the dismissal of Sud, the court considered the lack of traceability within Costco prawn supplies – a weakness that the act aims to correct – as the company’s winning argument. Moreover, the judge’s decision proved that a voluntary statement – under a non-binding law – is not reason enough to hold a company accountable in front of its customers for actual exploitation. With the dismissal of Sud vs Costco, the last of a series of similar lawsuits, it appears that California’s courts have closed the door on claims on companies’ accountability for modern slavery in supply chains.

In Canada things seem to be different. Two lawsuits brought to Canadian courts by non-Canadians – accusing two British Columbia companies of exploitation in Eritrea and Guatemala – are proceeding. In contrast with the Nestle case, Canadian courts seem willing to permit foreign plaintiffs to pursue damages against Canadian-based multinational companies based on alleged violations on foreign soil. These developments take on added importance as the global community discusses transforming “soft laws” covering companies’ accountability into binding laws.

Some have said that the lawsuits’ logic worked against efforts for an enhanced industry-wide anti-slavery agenda. For example, the judge in the Nestle cocoa case took under serious consideration the retailer’s claim that “relying on corporate responsibility programs as relevant conduct would prevent companies from even creating these programs – if they fear they can be held accountable for trying to confront problems that these programs aim to solve.”

While the lawsuit was still pending, Nestle was praised not long ago by a part of the international anti-trafficking community for its self-reporting efforts. Nestle commented that lawsuits such as its own would interrupt this virtuous cycle by “freezing companies’ speech’” around forced labour solutions. Indeed, companies may feel disincentivized if they fear that disclosed information can be used against them in a lawsuit. Thomson Reuters recently stated in an article that “while the problem of slavery may not be unique, a company admitting it, is.”

If the “big ones” do not provide a good example, how is the industry going to follow? And, most important, what is the best strategy to free millions of victims enslaved in supply chain-related realities? “Name and fame” brands for disclosing sensitive and potentially dangerous information and publicly looking for solutions, or bring them to court under laws that are becoming more and more binding?