“We agree with the district court that the language of the Standards does not create a duty on the part of Walmart to monitor the suppliers, and does not provide plaintiffs a right of action against Walmart as third-party beneficiaries.” —Gould, Circuit Judge 

Facts: Wal-Mart Stores, Inc. (Walmart) owns and operates a chain of large “big box” discount department and warehouse stores and is the largest company in the United States. Walmart is the largest importer in the United States of foreign produced goods. Walmart developed a code of conduct for its foreign suppliers entitled “Standards for Suppliers” (Standards). These Standards require foreign suppliers to adhere to local law and local industry working conditions such as pay, hiring forced labor, child labor, and discrimination. These Standards are incorporated into Walmart’s supply contracts with foreign suppliers. The Standards provide that Walmart may make on-site inspections of production facilities and permit Walmart to cancel orders with, or terminate, any foreign supplier that fails to comply with the Standards. Workers at foreign suppliers in China, Bangladesh, Indonesia, Swaziland, and Nicaragua who produce and sell goods to Walmart sued Walmart in U.S. district court. The foreign workers alleged that they were third-party beneficiaries to Walmart’s contract with its foreign suppliers and that they were due damages from Walmart for Walmart’s breach of the Standards. They alleged that their employers regularly violated the Standards, Walmart failed to investigate working conditions at foreign suppliers, knew that the standards were being violated, and failed to enforce the Standards contained in these contracts. The U.S. district court held that the plaintiffs were not intended third-party beneficiaries to Walmart’s contracts with its foreign suppliers and dismissed their lawsuit. The plaintiffs appealed. 

Issue: Are the foreign workers intended third-party beneficiaries under Walmart’s contracts with its foreign suppliers? 

Language of the Court: We agree with the district court that the language of the Standards does not create a duty on the part of Walmart to monitor the suppliers, and does not provide plaintiffs a right of action against Walmart as third-party beneficiaries. Plaintiffs’ allegations are insufficient to support the conclusion that Walmart and the suppliers intended for plaintiffs to have a right of performance against Walmart under the supply contracts. 

Decision: The U.S. court of appeals held that the plaintiff foreign workers were not intended third-party beneficiaries to Walmart’s contracts with its foreign suppliers. The U.S. court of appeals affirmed the dismissal of the plaintiffs’ case. 

Ethics Questions: Are Walmart’s Standards illusory if it does not consistently enforce them against foreign suppliers? Does Walmart owe a duty to require that its foreign suppliers provide the same protections to their workers as is provided to workers in the United States?