Caltex Plastics v. Lockheed Martin

Caltex 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. View "Caltex Plastics v. Lockheed Martin" on Justia Law