Human Trafficking, Corporate Liability, and the Courts

Several significant lawsuits addressing labor trafficking in supply chains have resolved in the past two months, creating important precedents in state anti-trafficking and consumer protection law as well as international human rights litigation.

A series of class action lawsuits brought in 2015 under California’s Transparency in Supply Chains Act and consumer protection laws found in favor of Hershey’s, Mars and Nestle. The Supply Chains Act went into effect in 2012 and these were the first cases brought under the statute. It obligates companies doing business in California that gross over $100 million worldwide to disclose their anti-trafficking policies on their websites.

The decisions make clear that the law only requires companies to report on their efforts to prevent human trafficking in their supply chains and not to disclose individual instances where they may have encountered it. The law does not require companies to change their anti-trafficking policies or to implement them if none are in place.

Consumers argued that they would not have bought the products (in the cases against Nestle, Mars, and Hershey, chocolate farmed by child slaves; in a separate case against only Nestle, cat food made using fishmeal caught by bonded laborers) if they had known that slave labor had gone into the production of the goods. On the plaintiffs’ false advertising and unfair competition claims, the courts found that companies do not have an obligation to disclose all “information that may have persuaded a consumer to make a different purchasing choice.” Rather, the law is meant to compel companies to disclose what efforts they are making to root out forced labor from their supply chains, but does not require changes in policies.

Nestle, the world’s largest food company in terms of revenue, has also been involved in a lawsuit brought by alleged trafficking victims under the Alien Tort Statute (ATS). The ATS allows foreign nationals to sue U.S. citizens in U.S. courts for violations of customary international law.

The ATS case was initiated in 2005, when three individuals from Mali claimed to have been enslaved as children on cocoa plantations in the Ivory Coast. They hold that Nestle, Archer-Daniels-Midland Co. (ADM), and Cargill had “aided and abetted” slavery, child labor, and torture by continuing to source cocoa from suppliers who the companies knew were engaged in labor trafficking (using force, fraud, or coercion to exploit workers). According to the complaint, the victims worked for up to 14 hours a day, six days a week, were frequently abused and tortured, and were never paid.

In 2010 a California district court dismissed the suit, ruling that corporations cannot be sued under the ATS, although corporations are generally considered persons in domestic corporate law. On appeal, the decision was reversed on grounds that corporations can be held liable under the ATS when acting “with the purpose to support child slavery.”

The Ninth Circuit Court of Appeals found that the defendant corporations could be held liable not for simply doing business with Ivorian farmers engaged in human trafficking, but for doing so in order to maximize their own profit. This motive brought an element of intentionality and purpose to the chocolate companies’ actions, which the court said may constitute aiding and abetting slavery.

The corporations then petitioned the Supreme Court to hear the case, and definitively decide the question of whether corporations can be sued under the ATS. The Supreme Court declined to hear the case, and thus the Ninth Circuit ruling stands. Nestle, ADM and Cargill must now return to the Circuit Court, where the case had been halted while the petition to the Supreme Court was pending.

A stark difference between the ATS and California’s Transparency in Supply Chains Act is that the ATS allows aliens to sue for violations of established, customary international law, which means that there are many offenses for which aggrieved plaintiffs can seek relief. The main obstacles facing ATS plaintiffs are often procedural and result in prolonged and complicated litigations. Courts also frequently deflect the substantive issues in ATS cases, ruling instead on technical grounds like plaintiffs’ right to sue particular foreign defendants in U.S. courts, or plaintiffs’ inability to plead their cases with enough specificity.

In contrast, the CA Transparency in Supply Chains Act is far more specific, mandating that companies disclose several of their business practices to the public, such as to what extent if any they audit and train suppliers. Consumer protection lawsuits are similarly limited, as the recent California cases show: companies have no obligation to have any specific policies or practices in place to combat slavery, so a company can be in compliance by stating they do not have any related policies.

Targeted legislation regulating more than just policy disclosure along with voluntary supply chain monitoring efforts are critical for eliminating forced labor from all corporate supply chains and ensuring that responsible businesses are operating on a level playing field.


Published on March 24, 2016


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