Third Party Beneficiaries May Not Enforce Benefits Beyond Those Contractually Owed to Promisee

Doe v Wal-Mart Stores, Inc., 572 F3d 677 (9th Cir 2009)

Foreign suppliers contracting with Wal-Mart Stores are subject to a code of conduct Wal-Mart calls "Standards for Suppliers". Among the standards Wal-Mart requires is that suppliers must adhere to local laws and local industry standards in dealings with the supplier's employees. The suppliers are subject to on-site inspections by Wal-Mart to ensure compliance with the code of conduct.

Employees of Wal-Mart suppliers in China, Bangladesh, Indonesia, Swaziland, and Nicaragua brought a class action lawsuit against Wal-Mart suit in California superior court alleging inadequate compliance with the code of conduct, asserting that the employees of the suppliers were joint employees of both Wal-Mart and the suppliers, that the employees were third-party beneficiaries of the code of conduct, and that Wal-Mart breached its duty to conduct on-site inspections for the protection of the employees.

The district court hearing the case dismissed the case for failure to state a claim.

On appeal, the appellate court found that Wal-Mart's statement, "will undertake affirmative measures … to implement and monitor" did not create a duty for Wal-Mart. Wal-Mart was not promising to ensure its suppliers compliance with employment laws, and a third party beneficiary may not assert rights in excess of those contractually agreed upon. Marina Tenants Ass'n v. Deauville Marina Dev. Co., 181 CA3d 122, 132 (1986). Since Wal-Mart did not have a duty, the supplier employees could not rely upon their standing as third party beneficiaries to bring a cause of action. Further, without a duty, Wal-Mart cannot be negligent.

The appellate court affirmed the district court's dismissal.