United Parcel Service Co. v. DNJ Logistic Group, Inc., 2017 WL 3097531 (2017)

Facts

  • UPS Worldwide Forwarding, Inc. (Worldwide Forwarding) contracted with United Parcel Service Company (UPS) for shipment of Worldwide Forwarding’s packages.
  • To move Worldwide Forwarding’s packages on routes that UPS did not fly, UPS entered into a separate agreement with DNJ Logistic Group, Inc. (DNJ).
  • Under the UPS–DNJ agreement, UPS transported certain Worldwide Forwarding packages to specified airports, and DNJ transferred those packages to other airlines for shipment to their final destinations.
  • Worldwide Forwarding was not a party to the UPS–DNJ agreement.
  • The agreement did not identify Worldwide Forwarding as an intended third-party beneficiary, and it also did not expressly bar third-party-beneficiary claims.
  • DNJ invoiced UPS weekly for its services under the agreement, but Worldwide Forwarding (not UPS) paid the invoices.
  • UPS and Worldwide Forwarding became concerned that DNJ was overbilling for services and sued DNJ for breach of contract.
  • DNJ moved to dismiss Worldwide Forwarding’s breach-of-contract claim, arguing Worldwide Forwarding lacked standing because it was neither a signatory nor an intended third-party beneficiary of the UPS–DNJ agreement.

Issues

  1. Whether Worldwide Forwarding, a non-signatory to the UPS–DNJ agreement, plausibly alleged that it was an intended third-party beneficiary with standing to sue DNJ for breach of that agreement under Kentucky law.
  2. Whether the complaint’s allegations—about the agreement’s function in transporting Worldwide Forwarding’s packages and Worldwide Forwarding’s payment of DNJ’s invoices—were enough to state a breach-of-contract claim that survives a Rule 12(b)(6) motion.

Decision

  • The court denied DNJ’s motion to dismiss Worldwide Forwarding’s breach-of-contract claim.
  • Accepting the complaint’s factual allegations as true, the court concluded that Worldwide Forwarding plausibly alleged it was an intended third-party beneficiary of the UPS–DNJ agreement.
  • The court treated the agreement’s alleged purpose—facilitating shipment of Worldwide Forwarding’s packages on non-UPS flight segments—along with the allegation that Worldwide Forwarding paid DNJ’s invoices, as facts supporting a reasonable inference that DNJ’s performance was meant to benefit Worldwide Forwarding directly, not merely incidentally.
  • The court found that the absence of language expressly naming Worldwide Forwarding as a beneficiary was not, by itself, enough at the pleading stage to defeat Worldwide Forwarding’s third-party-beneficiary theory, particularly where the agreement did not expressly disclaim third-party rights.
  • The court also rejected dismissal based on pleading-stage objections to damages, concluding that the complaint adequately alleged that overbilling caused harm, even if the precise amount would be developed later.

Legal Principles

  • A non-signatory may sue for breach of contract under Kentucky law if the contract and surrounding circumstances show the contracting parties intended to confer an enforceable benefit on that non-signatory; an incidental benefit is not enough.
  • Intent to benefit a third party may be shown through the contract’s purpose and the way the parties carried out performance; express identification of the third party in the contract is helpful but not always required.
  • On a Rule 12(b)(6) motion, the court accepts well-pleaded factual allegations as true and draws reasonable inferences in the plaintiff’s favor; dismissal is improper if the allegations make the claim plausible.
  • In a breach-of-contract action, damages are an element of the claim, but a plaintiff need not prove or precisely quantify damages at the motion-to-dismiss stage if the complaint plausibly alleges harm resulting from the alleged breach.

Conclusion

The court allowed Worldwide Forwarding’s contract claim to proceed because, based on the pleaded facts, it was plausible that the UPS–DNJ agreement was made to directly benefit Worldwide Forwarding’s shipments and that Worldwide Forwarding bore the cost of DNJ’s services, supporting intended third-party-beneficiary standing and a plausible claim for breach.