Nature of the Case
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Facts
Ps are employees of D's foreign suppliers in countries including China, Bangladesh, Indonesia, Swaziland, and Nicaragua. In 1992, D developed a code of conduct for its suppliers, entitled 'Standards for Suppliers' (Standards). These Standards were incorporated into its supply contracts with foreign suppliers. They require foreign suppliers to adhere to local laws and local industry standards regarding working conditions like pay, hours, forced labor, child labor, and discrimination. D also obtained a right of inspection to implement and monitor said standards. Failure to allow an inspection or to comply with standards subjected the supplier to immediate termination. Immediately after establishing the standards D represented to the public that it improves the lives of its suppliers' employees and that it does not condone any violation of the Standards. Of course, the reality of implementation is a totally separate issue. Ps allege that D does not adequately monitor its suppliers and that D knows its suppliers often violate the Standards. In 2004, only eight percent of audits were unannounced, and workers are often coached on how to respond to auditors. Ps allege that D's inspectors were pressured to produce positive reports of factories that were not in compliance with the Standards. Ps also allege that the short deadlines and low prices in D's supply contracts force suppliers to violate the Standards in order to satisfy the terms of the contracts. Ps filed this class action against D claiming third party beneficiary status of the Standards. D filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. The district court granted the motion. Ps appealed.
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