Caltex Plastics v. Lockheed Martin, No. 14-55768 (9th Cir. 2016)
Annotate this CaseCaltex filed suit for breach of contract and unfair competition against Lockheed, arguing that some contracts between Lockheed and the United States government require Lockheed to use certain materials that only Caltex is authorized to supply, and that Caltex is therefore the intended third-party beneficiary of those contracts. Caltex also claims that Lockheed’s failure to use such materials is an unfair or unlawful business practice under California law. The district court dismissed Caltex’s complaint for failure to state a claim. The court held that the uniquely federal interest in the liability of defense contractors to third parties is sufficiently dominant to demand a uniform, federal rule. Thus, whether Caltex may sue Lockheed based upon Lockheed’s contracts with the federal government is governed by federal common law. In this case, Caltex has not sufficiently alleged that it is an intended third-party beneficiary of the contracts between Lockheed and the federal government. Caltex's allegations do not expressly state, nor even suggest, that Lockheed or the federal government intended to grant Caltex enforceable rights under their contracts. They also do not suggest that either party had Caltex in mind when drafting their contracts. The court held that, under federal common law, an incidental third-party beneficiary of a contract, such as Caltex, has no enforceable rights under that contract. Finally, Caltex has failed to state a plausible unlawful or unfair competition claim. The court affirmed the judgment.
Court Description: Government Contracts. The panel affirmed the district court’s dismissal for failure to state a claim of a complaint brought by Caltex Plastics, Inc. alleging breach of contract and unfair competition against Lockheed Martin Corporation, arising from contracts between Lockheed and the federal government. Caltex alleged it was the intended third-party beneficiary of the contracts between Lockheed and the federal government which required Lockheed to use certain materials that only Caltex was authorized to supply. The panel held that the issue of whether Caltex may sue Lockheed based upon Lockheed’s contracts with the federal government is governed by federal common law, rather than state law, because the uniquely federal interest in the liability of defense contractors to third parties is sufficiently dominant to demand a uniform, federal rule. The panel held that Caltex did not sufficiently allege that it is an intended third-party beneficiary of the contracts between Lockheed and the federal government. The panel held that the terms of the contract that Caltex pled did not plausibly suggest an entitlement to relief, and its allegations were insufficient to state a claim. CALTEX PLASTICS V. LOCKHEED MARTIN 3 Finally, the panel held that Caltex failed to state a plausible unlawful- or unfair-competition claim.
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