A prime contractor terminated one of its subcontractors. The subcontractor filed suit alleging it was a third-party beneficiary of the prime contract, and that the government had breached the prime contract by directing the contractor to terminate the subcontract. The Court dismissed the case. The subcontractor did not directly benefit from the prime contract, it was not a third-party beneficiary, and it could not sue to enforce the prime contract.
R&R Conner Aviation, LLC v. United States, COFC No. 24-cv-0039
- Claim- The National Forest Foundation (NFF) contracted with the government for land management services. NFF subcontracted with R&R Conner Helicopters. While R&R was working on the project, the government directed NFF to terminate R&R's subcontract. R&R filed suit with the COFC alleging that it was a third-party beneficiary of the prime contract between the NFF and the government and that the government had breached by instructing NFF to terminate the subcontract.
- Motion to Dismiss- The government to dismiss, contending the court lacked subject matter jurisdiction and that R&R failed to state a claim because was not in privity with the government and did not qualify as a third-party beneficiary.
- Third-party Beneficiary - To prove third-party beneficiary status, the plaintiff must show the contract expressly or impliedly reflects a direct intent to benefit them. R&R argued it was beneficial because the government paid NFF with disbursements to a general fund, knowing subcontractors would be compensated from that fund. Â Additionally, R&R reasoned, it was a beneficiary because the government was heavily involved in the selection participation and performance monitoring of subcontractors.
- Decision- But the court found R&R had not established third-party beneficiary status. A subcontractor will only be considered a third-party beneficiary when it has direct access to government payments. Here, the government may have paid into a general fund, but R&R did not have direct access to the funds. Moreover, the contract contained no express language indicating an intention to benefit R&R or other subcontractors. R0&R Conner was neither in privity with the government nor an intended beneficiary of NFF’s contract with the government. The case was dismissed.
R&R Conner was represented by Lawson E. Fite of Schwabe, Williamson & Wyatt, P.C. The government was represented by Patrick Angulo, Brian M. Boynton, Patricia M. McCarthy, and L. Misha Preheim of the Department of Justice.
--Case summary by Alice Song, Pub K Extern