## Facts

- Under federal “Special Impact” programs, the U.S. Department of Labor funded contracts with local businesses to provide training and employment to disadvantaged residents of a designated East Los Angeles area.
- Socoma Companies, Inc., Lady Fair Kitchens, Inc., and Monarch Electronics International, Inc. each contracted with the U.S. Secretary of Labor to renovate and operate facilities and to provide job training and at least one year of employment to specified numbers of certified residents.
- A state agency certified over 2,000 individuals as “disadvantaged hardcore unemployed residents” eligible for participation; the plaintiffs were among those certified.
- Plaintiffs alleged the companies failed to perform by not providing the required facilities, training, or one-year employment, while receiving federal funds.
- Plaintiffs brought a class action for damages, claiming third-party beneficiary status and seeking lost wages and training value.
- The trial court sustained defendants’ general demurrers without leave to amend and dismissed with prejudice; the Court of Appeal affirmed.

## Issues

1. Whether certified disadvantaged residents for whom the government contracted to provide training and employment were intended third-party beneficiaries entitled to sue for damages for the contractors’ nonperformance.
2. Whether the complaints stated a viable claim under California third-party beneficiary doctrine when the contracts provided enforcement and remedies primarily for the government.

## Decision

- The California Supreme Court affirmed the judgments of dismissal.
- The Court held plaintiffs were incidental beneficiaries, not intended third-party beneficiaries, of the government–contractor agreements.
- Because the contracts did not express an intent to make contractors liable in damages to certified residents, plaintiffs had no right of recovery for breach.
- Sustaining the general demurrers without leave to amend was proper.

## Legal Principles

- A nonparty may enforce a contract only if it was made expressly for that person’s benefit; an expectation of benefit from performance is insufficient without manifested intent to create enforceable rights.
- In government contracts undertaken to carry out statutory programs, members of the public (even a defined class expected to benefit) are ordinarily incidental beneficiaries unless the contract clearly provides otherwise.
- Contractual remedies running to the government—such as termination rights, recoupment/refund provisions, and liquidated damages payable to the government—support an inference that enforcement was intended to be governmental rather than by private damages actions.

## Conclusion

The court held that federal job-training and employment contracts designed to aid certified disadvantaged residents did not, absent clear contractual language creating private enforcement rights, confer third-party beneficiary standing to sue contractors for damages; the residents were incidental beneficiaries and the dismissals were affirmed.


Martinez v. Socoma Cos., Inc., 11 Cal. 3d 394 (Cal. 1974)