Source: https://www.jdsupra.com/legalnews/advancing-human-rights-claims-based-on-53663/
Timestamp: 2019-04-26 06:34:05+00:00

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Courts in California and Canada have emerged as testing grounds for advancing claims of forced labor in global supply chains. The plaintiffs’ approach is to make companies more accountable to “soft law” norms like the UN Guiding Principles on Business and Human Rights (the “UN Guiding Principles”).
For now, the California cases appear to have run their course as a result of the companies’ successful efforts to dismiss those actions. However, the Canadian cases are progressing, with two recent decisions strongly signaling Canadian courts’ willingness to allow non-Canadians to pursue money damages based on Canadian companies’ alleged human rights violations overseas.
In August and September 2015, consumers brought six class actions in California federal courts against companies based on their purported failure to disclose alleged forced labor in their supply chains in Thailand and West Africa.1 The legal claims in these cases were not grounded in the alleged labor violations themselves, but rather in the defendant companies’ purported failure to disclose to California consumers the use of forced labor or the “likelihood of forced labor” in supply chains. The plaintiffs argued that the companies’ various corporate statements, such as supplier codes of conduct, should have included these disclosures, especially since those corporate statements refer to such norms as the UN Guiding Principles, which emphasize the corporate duty to respect labor rights, and laws such as International Labour Organization (“ILO”) conventions on child labor.
California courts, however, have consistently rejected each of these six consumer protection-based cases by granting the respective defendant-companies’ motions to dismiss. The last of the six cases – Sud v. Costco, described in detail below – was dismissed in January 2017, thus reinforcing the position that these claims are not viable.
On January 24, 2017, largely following the rationale of other courts that have dismissed the five related cases, the Sud court dismissed the complaint on the grounds that Costco had no duty to disclose the information at issue.3 In doing so, the court determined that the plaintiffs could not pursue claims against Costco based on the company’s public statements that it prohibits slavery and human trafficking among its suppliers because, crucially, the plaintiffs had not alleged that they read or relied on those statements when they brought shrimp from Costco. As such, there was no evidence of reliance – a required element of the consumer protection claims under discussion.
Thus, with the dismissal of Sud, it appears that California’s courts have currently closed the door on this consumer protection-based approach to supply chain accountability litigation. Nonetheless, several of the plaintiffs in these cases have filed appeals, and it is possible that the Ninth Circuit may breathe new life into this line of cases.
Over the past several years, non-Canadian plaintiffs have filed multiple civil actions in Canada against multinational companies that are based or incorporated in Canada on the theory that international norms (such as the UN Guiding Principles) form a standard of care that, when violated, constitutes actionable negligence. Recent decisions in two of these Canadian cases confirm Canadian courts’ willingness to entertain these claims.
First, in Araya v. Nevsun Resources Ltd., a group of Eritreans sued Nevsun Resources Ltd. – a British Columbia company – over forced labor, slavery, and torture allegations involving its subsidiary operating company.4 Shortly thereafter, Nevsun applied to the court for an order staying the Canadian proceeding, arguing that Eritrea was the more appropriate forum; Nevsun also sought an order striking claims that Nevsun had violated customary international law, arguing that those claims are not cognizable under Canadian law.
A few months after the Nevsun decision, in January 2017, the Court of Appeal for British Columbia reached a similar conclusion with respect to a case brought by Guatemalan plaintiffs against another Canadian mining company.
In Garcia v. Tahoe Resources Inc., seven Guatemalan plaintiffs sued a British Columbia mining company, Tahoe Resources Inc., over actions by Tahoe’s private security personnel at the Escobal mine in southeast Guatemala.5 The plaintiffs were members of a community living near the mine and, in 2013, were protesting outside of the mine’s gates when private security personnel employed by Tahoe allegedly opened fire on the protesters. The plaintiffs argued that Tahoe’s security manager expressly or implicitly authorized the use of excessive force or, at the very least, was negligent in failing to stop it. The plaintiffs also argued that the company owed a duty of care based on the fact that it knew that its subsidiary’s security personnel failed to adhere to internationally accepted standards on the use of security personnel, including those standards in the UN Guiding Principles, to which the company had publicly committed.
However, on January 26, 2017, the Court of Appeal overruled the lower court’s decision and lifted the stay. After admitting some new evidence, the appellate court reconsidered whether Guatemala was the more appropriate forum and, based primarily on the following three factors, determined that it was not. First, the limitations period of the plaintiffs’ claims had already expired under Guatemala law, and the criminal proceeding (which plaintiffs could have joined) had stalled after Tahoe’s former security manager had fled the jurisdiction. Second, the civil discovery procedures under Guatemalan law were limited and cumbersome and would likely have placed the plaintiffs at a significant disadvantage in proving their claims. Lastly, Guatemala’s justice system was too weak and corrupt to offer the plaintiffs a fair trial against a corporation.
In Nevsun and Garcia, Canadian courts have signaled a willingness to permit non-Canadian plaintiffs to pursue monetary damages against Canadian-based multinational companies based on violations that allegedly occurred on foreign soil. What’s more, the Nevsun opinion suggests that Canadian law could allow foreign plaintiffs to pursue private rights of action against Canadian companies based on violations of customary international law, rather than a violation of a specifically Canadian statute or common law rule. Lastly, the forum analysis articulated by Garcia appears to be more friendly to foreign litigants than the overruled analysis used by the lower court, particularly if the litigants would otherwise be forced to pursue claims in a suspect judicial system.
Although the California consumer protection cases may have run their course, unless revived by the Ninth Circuit, the Canadian cases suggest that it is increasingly important that multinational companies monitor their supply chains, or they could face litigation at home over alleged malfeasance.
Plaintiffs will likely be heartened by these developments and in particular, the Canadian cases discussed above, and rely on them to further transform “soft law” into “hard law” in support of their efforts to impose international norms such as the UN Guiding Principles as a standard of care for multinationals operating overseas.
1 Wirth v. Mars, Inc., No. 15-cv-1470, 2016 U.S. Dist. LEXIS 14552 (C.D. Cal.); Sud v. Costco Wholesale Corp., No. 15-cv-03783 (N.D. Cal.); Barber v. Nestle USA, Inc., 154 F. Supp. 3d 954 (C.D. Cal.); Hodsdon v. Mars, Inc., 162 F. Supp. 3d 1016 (N.D. Cal.); Dana v. The Hershey Co., 2016 U.S. Dist. LEXIS 41594, No. 15-cv-04453 (N.D. Cal.); McCoy v. Nestle USA, Inc., 2016 U.S. Dist. LEXIS 41601, No. 15-cv-04451 (N.D. Cal.). For an in-depth discussion of these cases, see Stefan Marculewicz, Michael Congiu, John Kloosterman, and Lavanga Wijekoon, California Laws Are Being Used to Advance Human Rights Claims Based on Global Supply Chain Activities, Littler Insight (Oct. 14, 2015).
2 Cal. Bus. & Prof. Code §§ 17200, et seq.; Cal. Bus. & Prof. Code §§ 17500, et seq.; Cal. Civ. Code §§ 1750, et seq.
3 Sud v. Costco Wholesale Corp., No. 15-cv-03783 at Dkt. No. 93 (N.D. Cal.).
4 2016 BCSC 1856 (Sup. Ct. British Columbia Oct. 06, 2016). The courts of British Columbia had presumptive jurisdiction over the case because of Nevsun’s status as a British Columbia company. See id. at ¶ 226.
5 Garcia v. Tahoe Resources Inc., 2017 BCCA 39 (Ct. App. British Columbia Jan. 26, 2017).
6 See The U.S. Issues a National Action Plan on Responsible Business Conduct, Littler Insight (Jan. 17, 2017); see also Proposed French Law Would Impose New Due Diligence Obligations on Certain Employers and Their Supply Chains, Littler Insight, Littler Insight (Dec. 12, 2016).

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