Jane Doe I v. Wal-Mart Stores Inc

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JANE DOE I; JANE DOE II; JOHN 
DOE I; JOHN DOE II individually
and on behalf of Wal-Mart
workers in Shenzhen China; JANE
DOE III; JANE DOE IV, individually
and on behalf of Wal-Mart
workers in Dhaka, Bangladesh;
JANE DOE V; JANE DOE VI; JOHN
DOE III, individually and on behalf
of Wal-Mart workers in Bogor,
Indonesia; JANE DOE VII; JANE
DOE VIII individually and on
behalf of Wal-Mart workers in
No. 08-55706
Mastaphia Swaziland; JANE DOE
IX; JANE DOE X; JANE DOE XI;
JOHN DOE IV, individually and on
 D.C. No.
2:05-cv-07307-AG
behalf of Wal-Mart workers in OPINION
Managua and Sebaco, Nicaragua;
KRISTINE DALL; BRUCE REEVES;
CHRISTINE KAPOSY; SHARLOTTE
VILLACORTA, individually and on
behalf of similarly situated
California workers, c/o 8530
Stanton Avenue, Buena Park, CA
90622,
Plaintiffs-Appellants,
v.
WAL-MART STORES, INC.,
Defendant-Appellee.

8611
8612 DOE v. WAL-MART
Appeal from the United States District Court
for the Central District of California
Andrew J. Guilford, District Judge, Presiding
Argued and Submitted
May 8, 2009—Pasadena, California
Filed July 10, 2009
Before: Betty B. Fletcher, Raymond C. Fisher, and
Ronald M. Gould, Circuit Judges.
Opinion by Judge Gould
DOE v. WAL-MART 8615
COUNSEL
Terrence P. Collingsworth, Natacha Thys, Conrad & Scherer,
Washington, D.C.; Dan Stormer, Anne Richardson, Lisa
Holder, Hadsell & Stormer, Pasadena, California, for the
plaintiffs-appellants.
James N. Penrod, Thomas M. Peterson, Amy M. Spicer, Mor-
gan, Lewis & Bockius, San Francisco, California, for the
defendant-appellee.
Deborah J. La Fetra, Damien M. Schiff, Pacific Legal Foun-
dation, Sacramento, California, for the amicus Pacific Legal
Foundation.
Daniel J. Popeo, Richard A. Samp, Washington Legal Foun-
dation, Washington, D.C.; Michael A. Carvin, Daniel R.
Volkmuth, Jones Day, Washington, D.C., for the amicus
Washington Legal Foundation and Allied Educational Foun-
dation.
OPINION
GOULD, Circuit Judge:
The appellants were among the plaintiffs in the district
court and are employees of foreign companies that sell goods
to Wal-Mart Stores, Inc. (“Wal-Mart”). They brought claims
against Wal-Mart based on the working conditions in each of
their employers’ factories.1 These claims relied primarily on
a code of conduct included in Wal-Mart’s supply contracts,
specifying basic labor standards that suppliers must meet. The
district court dismissed the complaint for failure to state a
1
The complaint also included claims by California plaintiffs, who were
employees of Wal-Mart’s competitors. However, this appeal is brought
only by the foreign plaintiffs.
8616 DOE v. WAL-MART
claim under Federal Rule of Civil Procedure 12(b)(6). We
have jurisdiction under 28 U.S.C. § 1291, and we affirm.
I
Plaintiffs are employees of Wal-Mart’s foreign suppliers in
countries including China, Bangladesh, Indonesia, Swaziland,
and Nicaragua. Plaintiffs allege the following relevant facts,
which we take as true for purposes of this appeal:
In 1992, Wal-Mart developed a code of conduct for its sup-
pliers, entitled “Standards for Suppliers” (“Standards”). These
Standards were incorporated into its supply contracts with for-
eign suppliers. The Standards require foreign suppliers to
adhere to local laws and local industry standards regarding
working conditions like pay, hours, forced labor, child labor,
and discrimination. The Standards also include a paragraph
entitled “RIGHT OF INSPECTION”:
To further assure proper implementation of and com-
pliance with the standards set forth herein, Wal-Mart
or a third party designated by Wal-Mart will under-
take affirmative measures, such as on-site inspection
of production facilities, to implement and monitor
said standards. Any supplier which fails or refuses to
comply with these standards or does not allow
inspection of production facilities is subject to
immediate cancellation of any and all outstanding
orders, refuse [sic] or return [sic] any shipment, and
otherwise cease doing business [sic] with Wal-Mart.
Thus, each supplier must acknowledge that its failure to com-
ply with the Standards could result in cancellation of orders
and termination of its business relationship with Wal-Mart.
Wal-Mart represents to the public that it improves the lives
of its suppliers’ employees and that it does not condone any
violation of the Standards. However, Plaintiffs allege that
DOE v. WAL-MART 8617
Wal-Mart does not adequately monitor its suppliers and that
Wal-Mart knows its suppliers often violate the Standards.
Specifically, Plaintiffs claim that in 2004, only eight percent
of audits were unannounced, and that workers are often
coached on how to respond to auditors. Additionally, Plain-
tiffs allege that Wal-Mart’s inspectors were pressured to pro-
duce positive reports of factories that were not in compliance
with the Standards. Finally, Plaintiffs allege that the short
deadlines and low prices in Wal-Mart’s supply contracts force
suppliers to violate the Standards in order to satisfy the terms
of the contracts.
Plaintiffs filed a class action lawsuit in California Superior
Court in 2005 and Wal-Mart removed the case to federal court
based on diversity of citizenship. Plaintiffs then filed an
amended complaint in federal court, which is the complaint
relevant here. Wal-Mart filed a motion to dismiss under Fed-
eral Rule of Civil Procedure 12(b)(6) for failure to state a
claim. The district court granted the motion in a written order,
and judgment was entered on March 27, 2008.2 Plaintiffs
timely appealed.
2
The district court granted Wal-Mart’s motion to dismiss on April 2,
2007, but granted Plaintiffs 21 days’ leave to amend. Instead of amending,
Plaintiffs appealed; however, because no final judgment had been issued
the parties stipulated to dismiss that appeal. The parties returned to district
court and executed a stipulation stating that the April 2, 2007 order grant-
ing Wal-Mart’s motion to dismiss was a final judgment. Wal-Mart now
summarily contends that we might be without jurisdiction because the
stipulation executed in the district court did not expressly reserve Plain-
tiffs’ right to appeal. However, we conclude that we have jurisdiction
because it is readily apparent that Plaintiffs did not give their “actual con-
sent” to the entry of judgment on the merits against them; rather, they exe-
cuted the stipulation so that they would have a final judgment to appeal.
See Tapper v. Comm’r of Internal Revenue, 766 F.2d 401, 403 (9th Cir.
1985) (stating that we have jurisdiction when a stipulation is entered with-
out a party’s “actual consent” to judgment against that party).
8618 DOE v. WAL-MART
II
We review a dismissal under Rule 12(b)(6) de novo. Witt
v. Dep’t of the Air Force, 527 F.3d 806, 810 (9th Cir. 2008).
We take a plaintiff’s allegations in the complaint as true, but
we are “not required to indulge unwarranted inferences.”
Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049,
1064 (9th Cir. 2008).
III
Plaintiffs present four distinct legal theories, all of which
aim to establish that the Standards and California common
law provide substantive obligations that can be enforced by
the foreign workers against Wal-Mart: (1) Plaintiffs are third-
party beneficiaries of the Standards contained in Wal-Mart’s
supply contracts;3 (2) Wal-Mart is Plaintiffs’ joint employer;
(3) Wal-Mart negligently breached a duty to monitor the sup-
pliers and protect Plaintiffs from the suppliers’ working con-
ditions; (4) Wal-Mart was unjustly enriched by Plaintiffs’
mistreatment. Applying California law, we address each claim
in turn.
A
[1] We first address Plaintiffs’ third-party beneficiary the-
ory. The common law in California and elsewhere establishes
that, as recited in the applicable Restatement (Second) of
Contracts: “A promise in a contract creates a duty in the
promisor to any intended beneficiary to perform the promise,
and the intended beneficiary may enforce the duty.” Restate-
ment (Second) of Contracts § 304 (1981). However, the
3
The parties disputed before the district court whether California or
Arkansas law applies to Plaintiffs’ third-party beneficiary contract claim.
However, we need not now address that issue because the parties agree
that both states apply the Restatement (Second)’s approach to third-party
beneficiaries.
DOE v. WAL-MART 8619
Restatement also explains that a beneficiary is only “an
intended beneficiary if recognition of a right to performance
in the beneficiary is appropriate to effectuate the intention of
the parties . . . .” Restatement (Second) of Contracts § 302(1).
Contract interpretation is a question of law that we review de
novo. See Milenbach v. Comm’r of Internal Revenue, 318
F.3d 924, 930 (9th Cir. 2003).
Plaintiffs argue that Wal-Mart promised the suppliers that
it would monitor the suppliers’ compliance with the Stan-
dards, and that Plaintiffs are third-party beneficiaries of that
promise to monitor. Plaintiffs rely on this language in the
Standards: “Wal-Mart will undertake affirmative measures,
such as on-site inspection of production facilities, to imple-
ment and monitor said standards.” We agree with the district
court that this language does not create a duty on the part of
Wal-Mart to monitor the suppliers, and does not provide
Plaintiffs a right of action against Wal-Mart as third-party
beneficiaries.
[2] The language and structure of the agreement show that
Wal-Mart reserved the right to inspect the suppliers, but did
not adopt a duty to inspect them. The language on which
Plaintiffs rely is found in a paragraph entitled “Right of
Inspection,” contained in a two-page section entitled “Stan-
dards for Suppliers.” And after stating Wal-Mart’s intention
to enforce the Standards through monitoring, the paragraph
elaborates the potential consequences of a supplier’s failure to
comply with the Standards—Wal-Mart may cancel orders and
cease doing business with that supplier—but contains no com-
parable adverse consequences for Wal-Mart if Wal-Mart does
not monitor that supplier. Because, as we view the supply
contracts, Wal-Mart made no promise to monitor the suppli-
ers, no such promise flows to Plaintiffs as third-party benefi-
ciaries. See Marina Tenants Ass’n v. Deauville Marina Dev.
Co., 226 Cal. Rptr. 321, 327 (Cal. Ct. App. 1986) (“A third
party beneficiary cannot assert greater rights than those of the
promisee under the contract.”).
8620 DOE v. WAL-MART
[3] Plaintiffs alternatively argue that they are third-party
beneficiaries of the suppliers’ promises to maintain certain
working conditions, and that Plaintiffs may therefore sue
Wal-Mart. This theory fails because Wal-Mart was the prom-
isee vis-a-vis the suppliers’ promises to follow the Standards,
and Plaintiffs have not plausibly alleged a contractual duty on
the part of Wal-Mart that would extend to Plaintiffs. See Mar-
tinez v. Socoma Cos., 521 P.2d 841, 844-45 (Cal. 1974) (hold-
ing a “donee” third-party beneficiary may recover only
against the party that undertook a promise under the contract
for the benefit of the beneficiary).4
[4] Plaintiffs’ allegations are insufficient to support the
conclusion that Wal-Mart and the suppliers intended for
Plaintiffs to have a right of performance against Wal-Mart
under the supply contracts. See Restatement (Second) of Con-
tracts § 302(1). We therefore conclude that Plaintiffs have not
stated a claim against Wal-Mart as third-party beneficiaries of
any contractual duty owed by Wal-Mart, and we affirm the
district court’s dismissal of the third-party beneficiary con-
tract claim.
B
We next address Plaintiffs’ theory that Wal-Mart was
Plaintiffs’ joint employer, such that they can “sue Wal-Mart
directly for any breach of contract or violation of labor laws.”
We conclude, to the contrary, that Wal-Mart cannot be con-
sidered Plaintiffs’ employer on the facts alleged.
4
The Restatement does suggest that a promisee may be liable to a third-
party beneficiary when “the performance of the promise will satisfy an
obligation of the promisee to pay money to the beneficiary.” Restatement
(Second) of Contracts § 302(1)(a). The third-party creditor in such a case
is commonly known as a “creditor beneficiary.” Restatement (Second) of
Contracts § 302, cmt. d. However, Plaintiffs have alleged no prior obliga-
tion by Wal-Mart that could support finding a contractual duty owed to
Plaintiffs by Wal-Mart, and so the suppliers’ employees cannot be consid-
ered to be creditor beneficiaries.
DOE v. WAL-MART 8621
[5] The key factor to consider in analyzing whether an
entity is an employer is “the right to control and direct the
activities of the person rendering service, or the manner and
method in which the work is performed.” Serv. Employees
Int’l Union v. County of L.A., 275 Cal. Rptr. 508, 513 (Cal.
Ct. App. 1990) (internal quotations and citation omitted). “A
finding of the right to control employment requires . . . a com-
prehensive and immediate level of ‘day-to-day’ authority over
employment decisions.” Vernon v. State, 10 Cal. Rptr. 3d 121,
132 (Cal. Ct. App. 2004).
[6] Here, Plaintiffs’ allegations do not support the conclu-
sion that Wal-Mart is Plaintiffs’ employer. Plaintiffs’ general
statement that Wal-Mart exercised control over their day-to-
day employment is a conclusion, not a factual allegation
stated with any specificity. We need not accept Plaintiffs’
unwarranted conclusion in reviewing a motion to dismiss. See
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (stating
that “a plaintiff’s obligation to provide the grounds of his enti-
tlement to relief requires more than labels and conclusions,
and a formulaic recitation of the elements of a cause of action
will not do”) (internal quotation marks and alterations omit-
ted); Ashcroft v. Iqbal, 129 S. Ct. 1937, 1953 (2009) (holding
that the pleading requirements stated in Twombly apply in all
civil cases); Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir.
2004) (stating that “conclusory allegations of law and unwar-
ranted inferences are insufficient to defeat a motion to dis-
miss”). Plaintiffs allege specifically that Wal-Mart contracted
with suppliers regarding deadlines, quality of products, mate-
rials used, prices, and other common buyer-seller contract
terms. Such supply contract terms do not constitute an “imme-
diate level of ‘day-to-day’ ” control over a supplier’s employ-
ees so as to create an employment relationship between a
purchaser and a supplier’s employees. Vernon, 10 Cal. Rptr.
3d at 132.
Plaintiffs also allege that Wal-Mart exercised control over
their employment through Wal-Mart’s promise to monitor the
8622 DOE v. WAL-MART
suppliers and Wal-Mart’s system for monitoring. However,
we have already concluded that Wal-Mart undertook no duty
to monitor the suppliers and the monitoring and inspections
by Wal-Mart were performed to determine whether suppliers
were meeting their contractual obligations, not to direct the
daily work activity of the suppliers’ employees.
[7] Plaintiffs have provided no persuasive support for find-
ing a common law employment relationship between a pur-
chaser and its suppliers’ employees on the facts of this case.5
We conclude that the joint employer theory should here be
rejected, and we hold that Wal-Mart is not Plaintiffs’
employer.
C
We next address Plaintiffs’ negligence claims, which Plain-
tiffs bring under four distinct theories: third-party beneficiary
negligence, negligent retention of control, negligent undertak-
ing, and common law negligence. Whichever theory is
invoked, however, we conclude that Wal-Mart did not owe
Plaintiffs a common-law duty to monitor Wal-Mart’s suppli-
ers or to prevent the alleged intentional mistreatment of Plain-
tiffs by the suppliers. Without such a duty, Plaintiffs’
negligence theories do not state a claim. See Paz v. State, 994
P.2d 975, 980-81 (Cal. 2000) (“The threshold element of a
5
The cases cited by Plaintiffs regarding employment relationships are
inapposite. Some of Plaintiffs’ authorities rely on specific statutory and
regulatory schemes, like the Fair Labor Standards Act (“FLSA”), 29
U.S.C. §§ 201-219, that use a definition of “employer” inapplicable to this
context. See, e.g., Bureerong v. Uvawas, 922 F. Supp. 1450, 1467 (C.D.
Cal. 1996) (applying the FLSA’s definition of “employer,” which covers
entities “who might not qualify as [employers] under a strict application
of traditional agency law principles”). Other cases cited by Plaintiffs
involved significantly more control by the defendant over employment
decisions than existed in this case. See, e.g., Loomis Cabinet Co. v.
OSHRC, 20 F.3d 938, 942 (9th Cir. 1994) (where the alleged employer
“owned the workshop and all the equipment” and “participated to a great
extent in . . . hiring and firing”).
DOE v. WAL-MART 8623
cause of action for negligence is the existence of a duty . . .
.”).
[8] Plaintiffs’ “third-party beneficiary” negligence theory
relies on the assumption that Wal-Mart owes Plaintiffs a duty
under Wal-Mart’s supply contracts. Because we have already
determined that no legal obligation flows from Wal-Mart to
Plaintiffs under Wal-Mart’s supply contracts, Plaintiffs do not
state a claim for third-party beneficiary negligence.
[9] In order to state a claim for “negligent retention of con-
trol and supervision,” Plaintiffs must allege facts that, if
proven, would show that Wal-Mart exercised significant con-
trol over Plaintiffs and that “exercise of retained control affir-
matively contributed to the employee’s injuries.” Hooker v.
Dep’t of Transp., 38 P.3d 1081, 1083 (Cal. 2002) (emphasis
in original). We have already determined that Wal-Mart is not
Plaintiffs’ employer because Wal-Mart exercised minimal or
no control over the day-to-day work of Plaintiffs in the suppli-
ers’ foreign factories. Accordingly, we hold that Wal-Mart did
not owe Plaintiffs a special duty to protect Plaintiffs from the
suppliers’ alleged intentional misconduct.
[10] Plaintiffs’ “negligent undertaking” theory relies on the
assumption that Wal-Mart undertook to protect Plaintiffs, and
therefore Wal-Mart had to exercise reasonable care in moni-
toring the suppliers. See Delgado v. Trax Bar & Grill, 113
P.3d 1159, 1175 (Cal. 2005) (stating that one who “under-
takes to provide protective services to another” must exercise
a duty of care). This theory fails because, as we have already
concluded, Wal-Mart did not undertake any obligation to pro-
tect Plaintiffs. “[T]he scope of any duty assumed depends
upon the nature of the undertaking,” id., and here Wal-Mart
merely reserved the right to cancel its supply contracts if
inspections revealed contractual breaches by the suppliers.
Any inspections actually performed by Wal-Mart were there-
fore gratuitous, and do not independently impose a duty on
Wal-Mart to protect Plaintiffs. Id.8624 DOE v. WAL-MART
[11] Plaintiffs’ “common law negligence” claim provides
no additional ground for finding a duty on the part of Wal-
Mart. Wal-Mart had no duty to monitor the suppliers or to
protect Plaintiffs from the intentional acts the suppliers alleg-
edly committed. Thus, Plaintiffs’ theories sounding in negli-
gence do not state a claim. See Paz, 994 P.2d at 980-81.
D
[12] We turn finally to Plaintiffs’ claim of unjust enrich-
ment. Plaintiffs allege that Wal-Mart was unjustly enriched at
Plaintiffs’ expense by profiting from relationships with sup-
pliers that Wal-Mart knew were engaged in substandard labor
practices. Unjust enrichment is commonly understood as a
theory upon which the remedy of restitution may be granted.
See 1 GEORGE E. PALMER, LAW OF RESTITUTION § 1.1 (1st ed.
1978 & Supp. 2009); Restatement of Restitution § 1 (1937)
(“A person who has been unjustly enriched at the expense of
another is required to make restitution to the other.”). Califor-
nia’s approach to unjust enrichment is consistent with this
general understanding: “The fact that one person benefits
another is not, by itself, sufficient to require restitution. The
person receiving the benefit is required to make restitution
only if the circumstances are such that, as between the two
individuals, it is unjust for the person to retain it.” First
Nationwide Sav. v. Perry, 15 Cal. Rptr. 2d 173, 176 (Cal. Ct.
App. 1992) (emphasis in original).
[13] The lack of any prior relationship between Plaintiffs
and Wal-Mart precludes the application of an unjust enrich-
ment theory here. See Smith v. Pac. Props. & Dev. Corp., 358
F.3d 1097, 1106 (9th Cir. 2004) (noting that a party generally
may not seek to disgorge another’s profits unless “a prior rela-
tionship between the parties subject to and benefitting from
disgorgement originally resulted in unjust enrichment”).
Plaintiffs essentially seek to disgorge profits allegedly earned
by Wal-Mart at Plaintiffs’ expense; however, we have already
determined that Wal-Mart is not Plaintiffs’ employer, and we
DOE v. WAL-MART 8625
see no other plausible basis upon which the employee of a
manufacturer, without more, may obtain restitution from one
who purchases goods from that manufacturer. That is, the
connection between Plaintiffs and Wal-Mart here is simply
too attenuated to support an unjust enrichment claim. See,
e.g., Sperry v. Crompton Corp., 863 N.E.2d 1012, 1018 (N.Y.
2007) (holding that “the connection between the purchaser of
tires and the producers of chemicals used in the rubber-
making process is simply too attenuated to support” the pur-
chaser’s claim of unjust enrichment).
IV
In sum, we conclude that Plaintiffs have not stated a claim
against Wal-Mart.6 Wal-Mart had no legal duty under the
Standards or common law negligence principles to monitor its
suppliers or to protect Plaintiffs from the suppliers’ alleged
substandard labor practices. Wal-Mart is not Plaintiffs’
employer, and the relationship between Wal-Mart and Plain-
tiffs is too attenuated to support restitution under an unjust
enrichment theory.
AFFIRMED.
6
Because we have determined that Plaintiffs did not state a claim under
state law, we need not address Wal-Mart’s additional contentions that
United States domestic law does not apply and that foreign affairs preemp-
tion bars application of state law.