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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Rathke v. Corrections Corporation of America, Inc. (02/23/2007) sp-6104

Rathke v. Corrections Corporation of America, Inc. (02/23/2007) sp-6104, 153 P3d 303

     Notice:   This opinion is subject to correction  before
     publication  in  the  Pacific  Reporter.   Readers  are
     requested to bring errors to the attention of the Clerk
     of  the  Appellate  Courts, 303  K  Street,  Anchorage,
     Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,


) Supreme Court No. S- 11885
Appellant, )
) Superior Court No.
v. ) 3AN-04-11813 CI
CARL RICHIE, D.H.O. SGT. ) No. 6104 - February 23, 2007
Appellees. )
          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Mark Rindner, Judge.

          Appearances:  Gus Rathke, pro  se,  Florence,
          Arizona.    Michael   D.   Corey,   Sandberg,
          Wuestenfeld & Corey, Anchorage, for  the  CCA
          Appellees.   Andrea  E.  Girolamo-Welp,  Lane
          Powell,    LLC,   Anchorage,   for   Appellee
          PharmChem, Inc.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          CARPENETI, Justice.

          After  serving thirty days in disciplinary  segregation
based  on  a  false positive drug test, and filing administrative
grievances  that  went  unanswered, a  state  prisoner  sued  his
jailers  and  drug  testers.  The superior  court  dismissed  the
prisoners  claims  against the private corrections  company  that
housed  him  under contract with the state, dismissed his  claims
against  the  private  companys employees,  and  granted  summary
judgment  to the drug testing company that reported the incorrect
drug  test  results.  Because the corrections companys  employees
are  not  liable  for  the  breach of a  contract  between  their
employer  and another party, and because the prisoner  is  not  a
third-party  beneficiary of the contract between the  corrections
company  and  the testing company, we affirm the superior  courts
resolution  of  these issues.  But because the prisoner  has  the
right to enforce the states contract with the corrections company
and  because  the  superior court did  not  address  all  of  the
prisoners claims, we vacate the superior courts orders  on  these
issues and remand for further proceedings.
          Gus  Rathke  is an Alaska inmate held at  the  Florence
Correctional Center, Central Arizona Detention Center  (Florence)
in  Florence,  Arizona,  which  is  owned  and  operated  by  the
Corrections  Corporation  of America  (CCA),  a  private  company
housing  Alaska inmates under contract with the Alaska Department
of  Corrections (the state).  Before April 2004 Rathke had  never
failed a prison drug test.  That month he was ordered to submit a
urine  sample.  The urinalysis was performed by PharmChem,  Inc.,
which  contracted  with CCA to perform drug testing  on  Florence
inmates.   PharmChem  reported that Rathke  tested  positive  for
marijuana.   PharmChem  reached this result  using  a  cutoff  of
twenty nanograms of THC metabolites (cannabinoids) per milliliter
of urine (ng/ml), which is the standard in Arizona.  However, the
appropriate  standard for Alaska inmates is 50 ng/ml.   On  April
29,  2004  a  guard  awakened Rathke following Rathkes  graveyard
shift as a chemical porter and took him to a prison official  who
notified  him that he was guilty of  THC.  Rathke protested  that
in  his  seventeen years in prison, he had never  failed  a  drug
test.  Without affording him a hearing, CCA officials sent Rathke
to  administrative segregation because he was an immediate threat
to the security of the facility.
          Once  in segregation, Rathke submitted a request for  a
drug  retest,  noting that he had never failed a  urinalysis  and
indicating  that [t]here is a mistake somewhere in  the  process,
since  the  only medication he took on a regular  basis  was  600
milligrams  of  ibuprofen  three times  a  day.   No  retest  was
performed.  Rathke requested that a hearing advocate be appointed
and met with the advocate in segregation.  Shortly afterwards,  a
CCA  substance abuse counselor informed Rathke that he  had  been
expelled from a substance abuse program.  On May 11, 2004,  after
twelve  days  in  segregation, Rathke appeared before  a  hearing
officer.   Rathkes  hearing advocate  did  not  show  up  at  the
hearing,  despite  Rathkes previous request.   Rathke  was  found
guilty  of  illegal  drug  use under  22  AAC  05.400(c)(7)2  and
sentenced  to thirty days in punitive segregation.  After  Rathke
was  sentenced,  the hearing officer asked him if  he  wanted  to
appeal.   Rathke reportedly told the officer that  he  wanted  to
          appeal and that he wanted both the original report and to have an
independent laboratory retest the specimen.  However, the hearing
officer  told  him  that PharmChem, which had done  the  original
test,  would be doing the retest, that Rathke would have  to  pay
forty-five  dollars  for the retest, and  that  an  appeal  would
result  in  sixty to ninety additional days in segregation  while
the matter was being reviewed.  According to Rathke, this coerced
him  to forgo his due process right to appeal because he did  not
want  to remain any longer in punitive segregation.  Rathke spent
thirty  days  in punitive segregation and lost his  institutional
          After  his  release from segregation,  Rathke  filed  a
grievance  with  the  Florence  administration  in  August  2004,
arguing  that the wrong standard was used for his drug urinalysis
and  that  he  had  been deprived of his right to  notice  and  a
hearing  before punishment.  A retest was done on the same  urine
sample using the Alaska standard; Rathke passed the retest.   The
Florence  institutional standards officer agreed that  the  first
test should have been conducted at 50 ng/ml and recommended that,
although  Rathke  did not appeal the decision  to  place  him  in
segregation, all records of the discipline should be removed from
Rathkes  file  and  destroyed.   Despite  these  recommendations,
Rathke never received a response to his grievance.
          Acting  on his own behalf, Rathke filed a complaint  in
Anchorage Superior Court in October 2004 against CCA, several CCA
employees    (including    the   Florence    warden,    standards
administrator,  two  disciplinary  hearing  officers,   and   two
security  chiefs), and PharmChem.  Rathke argued in his complaint
that  CCA,  the named CCA employees, and PharmChem  breached  the
contracts described above and violated his constitutional  rights
by   applying  the  incorrect  standard  to  his  urinalysis  and
instituting  unwarranted  disciplinary measures.   Rathke  argued
that Alaskan inmates incarcerated by CCA are intended third-party
beneficiaries  of its contracts with the state and  PharmChem  by
virtue  of the Cleary v. Smith final settlement agreement (Cleary
FSA),3  which is incorporated into the contract between  CCA  and
the  state.   He claimed (1) compensatory damages for lost  wages
incurred  during  his  thirty days in segregation,  and  for  the
ninety-day work hold job restriction that prevented him  from  an
earlier re-hire, and (2) punitive damages.  Rathke also sought an
injunction ordering CCA and PharmChem to stop the erroneous  drug
testing methods and a declaratory judgment that CCA and PharmChem
had breached their contracts and violated his due process rights.
Rathke  also sought apologies from the defendants to be  directed
to  the  parole  board, removal of records of the erroneous  drug
testing   and  punishment  from  his  institutional  files,   and
reinstatement in the CCA substance abuse program.
          In  November 2004 CCA and the named CCA employees moved
to  dismiss Rathkes complaint for failure to state a claim  under
Alaska  Civil Rule 12(b)(6), arguing that Rathke is not a  third-
party  beneficiary of CCAs contracts with the state or PharmChem.
Rathke  opposed  the motion.  Superior Court Judge  Mark  Rindner
granted  CCAs motion, ruling that prison inmates are not intended
third-party  beneficiaries  of  either  of  the  contracts.   The
          superior court also denied Rathkes motion for reconsideration.
          In  February 2005 PharmChem followed with a motion  for
judgment  on the pleadings, arguing that Rathke is not  a  third-
party  beneficiary of PharmChems contract with CCA.   Rathke  did
not oppose the motion.  The superior court granted the motion  in
March  2005,  treating it as a motion for summary judgment  since
PharmChem  submitted its contract with CCA as an exhibit  to  its
motion.   Rathke  later stated that he never received  PharmChems
motion  or  the  superior courts order granting  it.   PharmChems
motion contained a certificate that it was mailed to Rathke  when
the motion was filed.  The superior courts order granting summary
judgment  also  showed that it was mailed to Rathke.   PharmChems
attorney submitted an affidavit in July 2005 indicating that  she
had  verified Rathkes address.  Rathke submitted with  his  reply
brief to this court a listing of all legal mail [he] received  at
CCA  facility  in Florence, showing that he did not  receive  any
mail  from  either  the court or PharmChems attorney  during  the
relevant period of time.
          Rathke  appeals the superior courts rulings.  He argues
that the superior court erred in dismissing his complaint without
addressing all of his claims and in ruling that he is not a third-
party  beneficiary  to  CCAs contract  with  the  state  or  CCAs
contract with PharmChem.  He also argues that the superior  court
should  have given him an opportunity to amend his complaint  and
to oppose PharmChems motion for judgment on the pleadings.
          We  review de novo an order dismissing a complaint  for
failure  to state a claim under Civil Rule 12(b)(6).4  To survive
a  Rule 12(b)(6) motion it is enough that the complaint set forth
allegations  of  fact  consistent with and  appropriate  to  some
enforceable cause of action.5  We presume all factual allegations
of the complaint to be true and make all reasonable inferences in
favor of the non-moving party.6
          We  also  use the de novo standard to review grants  of
summary  judgment.7  As with Rule 12(b)(6) dismissals,  the  non-
moving   party  is  entitled  to  all  favorable  and  reasonable
inferences.8   We will affirm summary judgment where  no  genuine
issues  of  material  fact exist and where the  moving  party  is
entitled  to  judgment  as a matter of  law.9   Because  contract
interpretation  raises questions of law, we review  de  novo  the
superior  courts interpretation of the contracts  in  this  case,
including the Cleary FSA.10
     A.   Did  the  Superior  Court  Err  in  Dismissing  Rathkes
          Complaint   Without   Considering  His   Constitutional
          1.   Rathke   adequately   raised  his   constitutional
          Rathke  argues  that  the superior  court  should  have
considered  all of his claims before dismissing his  complaint.11
CCA  argues  that  Rathke failed to preserve  his  constitutional
claims  against it and its employees since he did not  raise  the
          constitutional claims in his opposition to CCAs motion to
          The  pleadings of  pro se litigants should be  held  to
less  stringent standards than those of lawyers.12  We have  held
that  where the essence of a pro se litigants argument is  easily
discerned  from his briefs, the trial court should  consider  the
pro  se  litigants argument, provided that the applicable law  is
well  established and the opposing party would not be  prejudiced
by the courts consideration of the issue.13
          Under these standards, Rathkes constitutional arguments
are  adequately raised.  Contrary to CCAs assertion  that  Rathke
did  not  raise  constitutional  claims,  Rathkes  brief  in  the
superior court in opposition to CCAs Rule 12(b)(6) motion  argued
that  CCAs  failure  to  abide by the terms  of  the  Cleary  FSA
violated  Alaska  inmates constitutional  rights.   In  addition,
Rathke  referred to the property int[e]rests in  the  Cleary  FSA
which  entitles the plaintiff, as a member of the Cleary class[,]
to  the  benefits and protections accorded under the Cleary  FSA,
which  he  earlier  characterized as constitutional.14   Finally,
neither  CCA  nor its employees has alleged that  they  would  be
prejudiced   by   our  consideration  of  Rathkes  constitutional
          2.   Rathke   raised  colorable  constitutional  claims
               against CCA and its employees.
            We  have  previously affirmed the right of  a  prison
inmate to sue the state and state prison officials for violations
of the inmates constitutional rights.  In Ferguson v. State, Dept
of  Corrections,15  we  held that prison  officials  violated  an
inmates  right  to  due process when they  expelled  him  from  a
rehabilitation program without a disciplinary hearing  and  based
on  a  single  unconfirmed urinalysis.16   We  held  that  Alaska
prisoners  have  an enforceable interest in rehabilitation  under
the  Alaska Constitution, article 1, section 12,17 of which  they
may  not be deprived without due process of law.18  Additionally,
in  Smith  v.  Cleary,19 we affirmed the right of Alaska  inmates
housed  by  CCA  in  Arizona to enforce  the  Cleary  FSA.20   We
therefore  hold  that Rathke is entitled to bring  constitutional
claims against CCA and its named employees.21
     B.   Did the Superior Court Err when It Ruled that Rathke Is
          Not an Intended Third-Party Beneficiary of the Contract
          Between the State and CCA?
          1.   Rathkes contract claim against CCA
          The  superior  court  ruled  that  Alaska  inmates   in
Florence  may  not  sue CCA for breach of its contract  with  the
state   since   the   inmates   are  not   intended   third-party
beneficiaries of the contract.  On appeal, Rathke argues that  he
is  an  intended third-party beneficiary by virtue of the  Cleary
FSA and its incorporation into the states contract with CCA.
          In  determining  whether a third party is  an  intended
beneficiary  of a contract, we refer to the Restatement  (Second)
of Contracts.22  According to  302:
          (1)  Unless otherwise agreed between promisor
          and  promisee, a beneficiary of a promise  is
          an  intended beneficiary if recognition of  a
          right  to  performance in the beneficiary  is
          appropriate  to effectuate the  intention  of
          the parties and either
               (a)  the performance of the promise will
          satisfy an obligation of the promisee to  pay
          money to the beneficiary; or
               (b)  the circumstances indicate that the
          promisee intends to give the beneficiary  the
          benefit of the promised performance.
          (2)   An   incidental   beneficiary   is    a
          beneficiary   who   is   not   an    intended
          When  applying these provisions, we have declared  that
the  motives  of the parties in executing a contract   especially
the promisee24  are determinative.25  A court looks to the parties
objective motive or intent, rather than their subjective motives.26
As  a  general  rule,  if  the promised performance  is  rendered
directly  to  the  beneficiary, the intent to benefit  the  third
party will be clearly manifested.27  For instance, with regard to
a  promise to pay money, where a contract exists between a debtor
and  a lender to pay the debtors debt to a creditor, if the  loan
contract  calls  for  the lender to pay a  sum  directly  to  the
creditor,  then  the  creditor is presumed  to  be  the  intended
beneficiary  of the contract, and thus the creditor  may  enforce
that  contract  against the lender.28   This  general  rule  also
applies  in  other contexts where the promisor  has  promised  to
perform  a duty which the promisee owes to the beneficiary.   The
Restatement  provides  the following  illustration  for   302:  B
promises  A to furnish support for As minor child C,  whom  A  is
bound  by  law  to  support.  C is an intended beneficiary  under
Subsection (1)(a).
          The  state  owes  legal duties to all  Alaska  inmates,
including those housed like Rathke at the CCAs Florence, Arizona,
facility.  These duties are detailed in the  Cleary FSA, which is
an  enforceable contract between Alaska inmates and the  state.29
In dismissing Rathkes claim, the superior court conceded that the
Cleary FSA gives certain rights to prisoners, but it denied third-
party  beneficiary  status to the prisoners with  regard  to  the
state/CCA  contract.  The court noted that the Cleary FSA  duties
run  only from the state to the inmates, while the duties in  the
contract between the state and CCA run only between the state and
CCA.  On this basis, the court concluded that state prisoners are
not third-party beneficiaries of the state/CCA contract.
           We disagree with the superior courts analysis.  First,
the  Cleary  settlement  is incorporated by  reference  into  the
state/CCA  contract.   Even  more, many  of  its  provisions  are
repeated  virtually  word  for word in  the  CCA  contract.   For
example,  portions  of the discipline section  of  the  state/CCA
contract,  allegedly  breached in  Rathkes  case,  are  virtually
identical to the Cleary FSA.  The Cleary FSA states:
          An  inmate  must  be  given  a  copy  of  any
          disciplinary reportregarding him or  her  not
          more than five working days after the alleged
          infraction,  or  the  date  the  prisoner  is
          identified  as  a suspect in the  infraction,
          whichever occurs later, unless the action  is
          likely to jeopardize an ongoing investigation
          by   the  Department  or  a  law  enforcement
          agency.  If an investigation is likely to  be
          jeopardized,  a  copy of the report  must  be
          given  to the inmate upon completion  of  the
          The state/CCA contract states:

          A   Prisoner  must  be  given  a  copy  of  a
          disciplinary  report  not  more   than   five
          working days after the infraction or the date
          the  Prisoner is identified as a  suspect  in
          the infraction, which ever occurs later.   If
          the investigation is likely to jeopardize  an
          ongoing  investigation  by  the  Alaska  DOC,
          CADC, or a law enforcement agency, the report
          must be given to the Prisoner upon completion
          of the investigation.
          Additionally,  the  Cleary FSA  states:  An  inmate  is
presumed innocent of an infraction until proven guilty,  and  the
Department   has   the  burden  of  establishing   guilt   by   a
preponderance of evidence. . . . The determination of the inmates
guilt  must be based only on evidence presented at the hearing.31
The  state/CCA  contract states: A prisoner is presumed  innocent
until  proven guilty by a preponderance of the evidence presented
at the hearing.
          Given  this identity of provisions between the FSA  and
the  state/CCA  contract,  we conclude  that  the  prisoners  are
intended  third-party  beneficiaries  of  the  portions  of   the
contract which are taken directly from the FSA.32
          The  result  of  the  superior courts  order  is  that,
although  Rathke may sue the state under the Cleary FSA,  he  may
not sue the state or CCA under identical provisions contained  in
the  state/CCA contract.   Such an interpretation denies Florence
inmates direct redress against the very institution charged  with
their day-to-day care and discipline.  Accordingly, we hold  that
Florence inmates also have the right to sue CCA for violations of
the Cleary FSA provisions contained in the CCAs contract with the
          2.   Rathkes contract claim against CCA employees
          We  turn  next  to Rathkes contract claim  against  the
individual CCA employees.  In Jones v. Central Peninsula  General
Hospital,34 we held that [g]enerally, an employee cannot be  held
liable  for  the  breach of a contract between the  employer  and
another  party.35   Thus, the superior court correctly  dismissed
Rathkes contract claim against individual CCA employees.
     C.   Did the Superior Court Err in Ruling that Rathke Is Not
          a  Third-Party Beneficiary to the Contract Between  CCA
          and PharmChem?
          Unlike CCAs contract with the state, its contract  with
          PharmChem does not refer to inmates or prisoners except in its
attachments.   Indeed,  it mentions only their  specimens  to  be
submitted  for testing.  Prisoners might be said to benefit  from
competent  drug  urinalysis results reported by  PharmChem  (when
those  results  are  negative),  but  given  the  fact  that  the
prisoners  are  not  even  mentioned  in  the  contract,  it   is
impossible  to say that the circumstances indicate that  [CCA  or
PharmChem]  intends  to give [the inmates]  the  benefit  of  the
promised performance.36  Accordingly, the superior court did  not
err in granting summary judgment to PharmChem on Rathkes contract
claim.37  PharmChem also argues that Rathke failed to preserve his
contract  claim  against  it because: (1)  he  failed  to  oppose
PharmChems motion for summary judgment; and (2) he failed to move
for  reconsideration once he allegedly learned of  the  grant  of
summary  judgment.   Because we agree with  the  superior  courts
ruling that Rathke is not an intended third-party beneficiary  of
the  contract between CCA and PharmChem, we decline to reach this
          We  AFFIRM  the superior courts order granting  summary
judgment  to  PharmChem on Rathkes contract claim and  its  order
dismissing  Rathkes contract claims against CCAs  employees.   We
VACATE  the superior courts order granting CCAs motion to dismiss
and   REMAND  this  case  to  the  superior  court  for   further
proceedings on Rathkes constitutional and contract claims against
CCA and his constitutional claims against CCAs named employees.
     1    Because this is an appeal from dismissal for failure to
state   a   claim,  we  presume  the  truth  of  Rathkes  factual
allegations.   See  Kollodge v. State,  757  P.2d  1024,  1025-26
(Alaska 1988).

     2    High-moderate infractions include the . . . possession,
use, or introduction of contraband . . . which directly threatens
the   security  of  the  facility,  such  as  excess   money   or
unauthorized drugs.  22 AAC 05.400(c)(7).

     3     Cleary  v.  Smith, No. 3AN-81-5274,  Final  Settlement
Agreement and Order (Alaska Super., Sept. 21, 1990).  The  Cleary
FSA  settled a class action by Alaska state prisoners challenging
conditions in state prisons.  The FSA contains detailed  facility
and  operational requirements; lists rights and opportunities  to
be afforded inmates, including rehabilitation programs; and lists
procedures   for   classification  of  prisoners,  administrative
segregation, other matters of discipline, and grievances.

     4    Kollodge, 757 P.2d at 1026 n.4.

     5    Id. at 1025-26.

     6    Id. at 1026.

     7    Midgett v. Cook Inlet Pre-Trial Facility, 53 P.3d 1105,
1110 (Alaska 2002).

     8    Id.

     9    Id.

     10     Smith  v.  Cleary, 24 P.3d 1245, 1247  (Alaska  2001)
(citing Hertz v. State, Dept of Corrs., 869 P.2d 154, 154 (Alaska
1994)).   See  also  Martech Const. Co.,  Inc.  v.  Ogden  Envtl.
Servs.,  Inc.,  852  P.2d  1146, 1149 (Alaska  1993)  (settlement
agreement interpreted in same manner as any contract).

     11          We address Rathkes constitutional claims in this
               section  and  his other claims in Parts  IV.B  and
               IV.C of this opinion.  Rathke also argues that the
               superior  court should have advised him  to  amend
               his  complaint  in order to cure any deficiencies.
               Because we determine that Rathke adequately raised
               his  constitutional claims, we  decline  to  reach
               this issue.
     12     Breck  v. Ulmer, 745 P.2d 66, 75 (Alaska 1987).   See
also  Estelle  v. Gamble, 429 U.S. 97, 106 (1976);  Wilkerson  v.
State,  Dept  of  Health & Soc. Servs., 993  P.2d  1018,  1021-22
(Alaska 1999).

     13     Wilkerson,  993 P.2d at 1022 (due process  and  equal
protection  arguments were sufficiently raised in superior  court
and preserved for appeal when pro se litigant argued that denying
his  [foster  care] license application on the basis  of  .  .  .
dismissed [criminal] charges unfairly and unjustly deprives [him]
of his rights).

     14    Internal quotation marks and emphasis omitted.

     15    816 P.2d 134 (Alaska 1991).

     16    Id. at 139-40.

     17     Article  1,  section 12, of the  Alaska  Constitution

          Excessive  bail  shall not be  required,  nor
          excessive   fines  imposed,  nor  cruel   and
          unusual   punishments   inflicted.   Criminal
          administration  shall  be  based   upon   the
          following:   the  need  for  protecting   the
          public,   community   condemnation   of   the
          offender,  the rights of victims  of  crimes,
          restitution  from  the  offender,   and   the
          principle of reformation.
(Emphasis added.)  See Ferguson, 816 P.2d at 139.

     18    816 P.2d at 139-40.

     19    24 P.3d 1245 (Alaska 2001).

     20    Id. at 1250-51.

     21     We note that in an action against a CCA employee  for
violation  of  federal constitutional rights, the employee  would
not  enjoy  the  qualified immunity accorded state  officials  to
damage suits under 42 U.S.C.  1983.  Hertz v. State, 22 P.3d 895,
903  (Alaska App. 2001) (citing Richardson v. McKnight, 521  U.S.
399, 412 (1997)).

     22    See, e.g., Kodiak Elec. Assn, Inc. v. DeLaval Turbine,
Inc., 694 P.2d 150, 154 (Alaska 1984).

     23    Restatement (Second) of Contracts  302 (1979).

     24     State  v.  Osborne, 607 P.2d 369, 371  (Alaska  1980)
(Ordinarily,  only  the  promisees . . . motives  are  relevant.)
(citing 4 A. Corbin, Corbin on Contracts  776 (1951)).  See  also
13  Williston  37:8 at 71 (According to the majority rule,  there
is   no  requirement  of  mutual  intent,  as  to  the  right  of
enforcement, on the part of the contracting parties; instead,  it
is the intent or purpose of the promisee who pays for the promise
that has been generally considered as governing . . . .).

     25     Osborne, 607 P.2d at 371. In Osborne, since  a  house
builders employee was not an intended third-party beneficiary  of
a  contract  between the house builder and the house  buyer,  the
employee could not collect unpaid wages from the buyer.  It  does
not  seem possible that [the house builder] negotiated a contract
to  build  a  house  so that he could confer  a  benefit  on  his
employees any more than he intended to benefit building suppliers
in  Fairbanks.  Id.  See also Howell v. Ketchikan Pulp  Co.,  943
P.2d  1205,  1207  (Alaska  1997).   In  that  case,  Howell,   a
pipefitter,  was employed by a contractor to repair a  boiler  on
Ketchikan Pulp Companys premises.  Howell was injured on the  job
and  attempted to recover from Ketchikan Pulp on the theory  that
he was a third-party beneficiary of Ketchikan Pulps contract with
Howells   employer,  which  included  an  indemnity  clause   for
liability  for injuries to the contractors employees.  In  ruling
in  favor of Ketchikan Pulp, we held that the parties drafted the
indemnity  clause  in  order to allocate  liability  and  protect
themselves  from  litigation,  not  to  benefit  the  contractors
employees.  Id.

     26     See  Restatement  (Second) of  Contracts   2  cmt.  b
(adopting external or objective standard for interpreting conduct
in order to determine parties intentions).

     27    13 Richard A. Lord, Williston on Contracts  37:8 at 70
(4th  ed.  2000).  See also id. at 68-69 ([U]nder the Restatement
(Second)  view,  a  party may be deemed an  intended  beneficiary
regardless  of  the  actual intentions of  the  parties,  a  view
consistent  with the objective theory of contracts generally,  in
that it places primary emphasis on the objective, rather than the
subjective intention of the parties.).

     28     Alaska  Contl,  Inc. v. Trickey, 933  P.2d  528,  533
(Alaska  1997)  (holding that contract to provide  borrower  with
funds  to  pay his debts did not give creditors right to  enforce
contract  as  third-party  beneficiaries  since  rights  vest  in
creditor  only when lender promises to make payment  directly  to
creditor; borrowers intervening agency disrupted any relationship
between creditor and lender).  See also 13 Williston  37:7 at 55.

     29    Smith v. Cleary, 24 P.3d at 1247 n.3, 1251.

     30     Cleary FSA at 59.

     31    Id. at 63.

     32     CCA has also promised to indemnify the state for  any
claims arising from the CCAs performance of the contract:

          CADC  shall  indemnify,  save  harmless   and
          defend  the  state,  its  officers,  and  its
          employees from any and all claims or  actions
          for  injuries  or  damages sustained  by  any
          person   or  property  arising  directly   or
          indirectly as a result of any act or omission
          of  CADC, subcontractor or anyone directly or
          indirectly   employed   by   them   in    the
          performance  of this contract, including  but
          not limited to:
          A)   Any  and  all  claims,  including  civil
               rights    claims   arising   from    the
               provisions  of this Contract,  including
               but  not limited to, any and all  claims
               arising from:
               1)   Any  breach or default on the  part
                    of  CADC in the performance of  the
                    Contract . . . .
     33     We  note  that the United States District  Court  for
Alaska has reached the opposite conclusion in a recent case based
on  Alaska contract law.  Miller v. Corrs. Corp. of America,  375
F.  Supp. 2d 889 (D. Alaska 2005) (federal jurisdiction based  on
diversity  of  citizenship).   To  the  extent  that  Miller   is
inconsistent  with  our  analysis of the third-party  beneficiary
question  presented  by  the  Cleary settlement  and  the  states
contract with CCA, we disagree with the decision.

     34    779 P.2d 783 (Alaska 1989).

     35    Id. at 791.

     36    Restatement (Second) of Contracts  302(1)(b).

     37     We  make  no  determination  as  to  whether  Rathkes
complaint  can be read to support a claim for negligence  against
PharmChem  (for failure to carry out testing duties as prescribed
in  the  contract).   On remand, if Rathkes  unresponsiveness  to
PharmChems motion for judgment on the pleadings is found  by  the
superior  court  to  be  excused, the  court  may  consider  this

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