Costco Wholesale Corp. was sued for selling farmed shrimp from Thailand, where slave labor and human trafficking in the fishing industry are widespread, and allegedly misleading U.S. consumers about it.

A California woman filed what may be the first such lawsuit against the retailer over liability for the Thai fishing industry. She cited state laws that bar companies from making false claims about illegal conduct in their supply chain, including human rights violations.

Costco’s purchases of Thailand’s farmed prawns, which are fed a diet of cheap fish caught at sea with unpaid, forced labor, helps prop up an industry whose practices are ignored by local authorities, according to the complaint filed Wednesday in San Francisco federal court.

“Human suffering cannot be ignored to enhance a company’s economic bottom line,” plaintiffs’ lawyer Niall McCarthy, of Cotchett, Pitre & McCarthy LLP, said in a statement. “California consumers are unknowingly supporting slave labor.”

Richard Galanti, a spokesman for Issaquah, Washington-based Costco, said in a statement that the company has been working closely with the Thai government, the Thai fishing industry and other retailers “to address the issues that have surfaced” over the past year.

The cooperation will continue, Galanti said, and any consumers who are dissatisfied with a Costco product “can return the item for a full refund.”

Costco closed at $145.17, down 0.3 percent after falling as much as 1.4 percent in Nasdaq trading.

Third Biggest

Thailand is the world’s third-biggest exporter of seafood, with annual sales of about $7.3 billion, according to the complaint. The Thai fishing industry, which extends into international waters around Indonesia, employs more than 650,000 people, mostly migrants who enter Thailand looking for work or who are taken there against their will, the lawyers said.

In its annual report examining human trafficking in 188 countries, the U.S. State Department in July cited concerns about slave labor in Thailand’s fishing industry and faulted the Thai government’s record in fighting exploitation.

The plaintiff in the California case, Monica Sud, cited news reports, documentaries and reports by London-based Environmental Justice Foundation. As a purchaser of shrimp from Costco, she seeks class action status on behalf of similar California consumers.

Torture, Killings

The rights group listed abuses at sea including torture, chaining of workers and killings of those who seek to escape illegal fishing vessels, known as ghost ships. Costco and its distributors aren’t accused of engaging in such practices.

Costco’s reputation for stocking high-quality products at bulk rates has helped it outperform Wal-Mart Stores Inc. and Target Corp. in recent years. Its comparable-store sales jumped 6 percent in its most recently reported quarter, and its profit topped analysts’ estimates.

The lawsuit also names as a defendant the U.S. distributor of the prawns, Columbia, Maryland-based CP Food Products Inc., and the company’s Thailand-based parent company, Charoen Pokphand Foods PCL, a “global conglomerate.'”

Costco’s relationship with CP Foods contradicts its public statements about slavery in the company’s supply chain, according to the complaint.

Costco Claims

“Costco publicly represents that it does not tolerate human trafficking and slavery in its supply chain, yet it continues to purchase the tainted farmed prawns from defendant CP Foods,” according to the complaint. “Any representation by Costco that slavery in the supply chain is not allowed is simply false.”

The situation may be a result of overfishing around Thailand, and the thin profit margins on farmed fish, the lawyers contend. Fishing companies that must go farther out to sea to catch cheap fish can no longer make a profit if they pay workers.

The lawsuit seeks to represent all California consumers of Costco shrimp products under a 2010 state law that sought to expose slavery in the supply chains of U.S. companies.

The lawsuit seeks an injunction barring Costco from selling products tainted by slave labor and requiring it to disclose tainted products in its supply chain. It also seeks to compensate purchasers of the shrimp products.

The case is Sud v. Costco Wholesale Corp., 15-cv-03783, U.S. District Court, Northern District of California (San Francisco).

–With assistance from Gregory Jarrett and Shannon Pettypiece in New York and Nicole Gaouette in Washington.