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In November 2009, Tropical Storm Ida hit El Salvador, causing flooding, landslides, and the destruction of homes, roads, bridges, schools, health clinics, and other infrastructure. The United States Agency for International Development (USAID) provided $25 million in funding to rebuild damaged infrastructure. USAID retained Defendant CDM International Inc. (CDM) to conduct studies and assessment for the construction of eight schools and one health clinic (the “Projects”) and to create preliminary designs and technical specifications for these Projects. These preliminary designs were intended to constitute at least thirty percent of final designs for the Projects. Relying on the preliminary designs created by CDM, Plaintiff Arco Ingenieros, S.A. de C.V. (ARCO) submitted bids to act as the design-build contractor for the Projects. USAID awarded the Projects to ARCO.
ARCO filed suit against CDM, alleging that CDM produced defective site assessments and preliminary designs, which did not fulfill CDM’s obligations under its contract with USAID, causing ARCO to incur significant costs to complete its own contractual obligations to USAID. ARCO alleged that although it had no contractual privity with CDM, ARCO was an intended beneficiary of the CDM’s contract with USAID (the “CDM/USAID Contract”). CDM moved to dismiss the breach of contract cause of action under Federal Rule of Civil Procedure 12(b)(6).