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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Perotti v. Corrections Corporation of America (12/14/2012) sp-6735

Perotti v. Corrections Corporation of America (12/14/2012) sp-6735

        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, email 

        corrections@appellate.courts.state.ak.us. 



                 THE SUPREME COURT OF THE STATE OF ALASKA 



BYRAN PEROTTI,                                  ) 

                                                )       Supreme Court No. S-13936 

                        Appellant,              ) 

                                                )       Superior Court No. 3AN-08-06992 CI 

        v.                                      ) 

                                                )       O P I N I O N 

CORRECTIONS CORPORATION                         ) 

OF AMERICA,                                     )      No. 6735 - December 14, 2012 

                                                ) 

                        Appellee.               ) 

                                                ) 



                Appeal from the Superior Court of the State of Alaska,  Third
 

                Judicial District, Anchorage, Frank A. Pfiffner, Judge.
 



                Appearances:       Byran    Perotti,   pro  se,   Seward,   Appellant.
 

                Daniel     T.  Quinn,    Richmond      &   Quinn,    Anchorage,      for
 

                Appellee.
 



                Before:      Carpeneti,     Chief   Justice,   Fabe,   Winfree,     and
 

                Stowers, Justices. [Christen, Justice, not participating.]
 



                FABE, Justice.
 

                WINFREE, Justice, with whom STOWERS, Justice, joins, concurring.
 



I.      INTRODUCTION 



                In   this   appeal   we   address   the   question   whether   monetary   damages   are 



available to a prisoner for violations of the terms of the 1990 judicial decree approving 



the Cleary Final Settlement Agreement.            In 2004 appellee Corrections Corporation of 


----------------------- Page 2-----------------------

America contracted with the State of Alaska to house Alaska inmates at Corrections 



Corporation's Red Rock Correctional Center in Eloy, Arizona.                  Byran Perotti was an 



Alaska inmate at Red Rock.          Perotti filed a complaint against Corrections Corporation 



alleging that Corrections Corporation violated provisions of its contract with the State, 



as well as various State Department of Corrections policies.               He asserted standing as a 



third-party beneficiary to the contract between the State and Corrections Corporation. 



He   based    his   standing   argument   on    his   status  as  a Cleary   class   member   and   the 



provisions of the  Cleary Final Settlement Agreement, which settled the class action 



involving various inmate claims against the State of Alaska, Department of Corrections 



(DOC).     Perotti's   complaint   sought   liquidated   damages   under   the   DOC-Corrections 



Corporation contract, as well as compensatory damages, nominal damages, and punitive 



damages. 



                Because the Cleary Final Settlement Agreement does not contemplate the 



award of monetary damages to enforce its provisions, we affirm the superior court's 



decision     granting    Corrections    Corporation's      motion    for   summary      judgment     and 



dismissing all of Perotti's claims. 



II.     FACTS AND PROCEEDINGS 



                In   1990   the   State   of   Alaska,   Department   of   Corrections   and   a   class   of 



prisoners reached a court-approved settlement, effectuated by judicial decree, known as 



the  Cleary  Final   Settlement   Agreement.        It   detailed   the   rights   of   current   and   future 

prisoners held in facilities owned or operated by the DOC.1 



                The Cleary Settlement provides that when overcrowding occurs, DOC must 



report to the superior court and present a plan to reduce the prison population.   In 1995 



DOC initiated a plan that sought to move prisoners to a private correctional facility in 



        1       We refer to the settlement and judicial decree as the Cleary Settlement. 



                                                  -2-                                               6735 


----------------------- Page 3-----------------------

Arizona, operated by Corrections Corporation of America, Inc.2                   The superior court 



approved   that   plan,   conditioned   on   the   private   prison's   compliance   with   the  Cleary 

Settlement.3 



                In 2004 DOC entered into a new contract with Corrections Corporation to 



place Alaska prisoners in its Red Rock Correctional Center.   The contract covers many 



of   the   same   topics   as   those   in   the  Cleary  Settlement.  The   contract   is   a   101-page 



document covering all the work "to be performed, completed and managed" at Red 



Rock, including "all facility, staff, prisoner transport, . . . food, prisoner medical and 

mental health treatment, [and] education."4 



                Byran   Perotti   was   an   Alaska   inmate   housed   at   Red   Rock   Correctional 



Center.    In August 2007 Perotti was removed from the general prison population and 



placed    in  segregation     pending    an   investigation    of  possible    possession    of  escape 



paraphernalia.     Perotti's administrative segregation lasted for four and a half months. 



Warden Frank Luna then increased Perotti's custody classification to "maximum" and 



ended his time in administrative segregation.  But because his custody classification was 



increased, the practical outcome was that Perotti remained in segregated housing. 



                While segregated, Perotti faced a range of restrictions, which isolated him, 



increased officer coverage over him, and required removal of his personal possessions. 



Perotti was restricted from using the telephone, accessing the law library and typewriter, 



having contact visits, and visiting with certain inmates. He was also subjected to random 



strip searches. 



        2       Smith v. Cleary, 24 P.3d 1245, 1247 (Alaska 2001).               
 



        3       Id. at 1247, 1250-51.
 



        4       2004 Contract, Corrections Corporation and DOC, Contract                  #205-4861.
 



                                                   -3-                                               6735 


----------------------- Page 4-----------------------

                Perotti filed a complaint with 17 claims against Corrections Corporation, 



nine of which alleged that Corrections Corporation had violated its contract with DOC 

during   Perotti's   time   in   administrative   segregation.5   In   five   of   Perotti's   remaining 



claims, he alleged that Corrections Corporation had notice of and violated DOC policies 



regarding   administrative   segregation,   punitive   segregation,   prisoner   grievances,   and 



visitation.      Perotti   also  alleged    that  Corrections     Corporation      had   violated    the 



indemnification   clause   of   the   contract,   in   which   Corrections   Corporation   agreed   to 



indemnify and defend the State against "any actions filed against it by a prisoner which 



challenge conditions of confinement operational policies, treatment by staff of other 



matters related to confinement at the Facility."           And Perotti claimed that Corrections 



Corporation employees had acted to "violate and do harm to the rights and interests of 



the plaintiff."  In his initial complaint, Perotti sought declaratory relief; injunctive relief 



through      removal     of    certain   Corrections      Corporation      employees;      liquidated, 



compensatory, and punitive damages; return or replacement of property; and costs and 



expenses of the litigation. 



        5       In   his  first  nine   causes   of   action,  Perotti   claimed    that  Corrections 



Corporation violated Sections 1.16, 3.30, and 4.03(I) of its contract with DOC which was 

entered into by the parties in 1994 and extensively revised in 2004.              In Section 1.16 of 

the contract, Corrections Corporation agreed that it would comply with "the laws of the 

State of Alaska and any regulations issued thereunder."              In Section 3.30, Corrections 

Corporation agreed not to "deprive any prisoner of legal right[s] which he would have 

if confined in a State of Alaska managed facility." And in Section 4.03(I), Corrections 

Corporation agreed to follow Alaska DOC Policies. 



                Two months after Perotti filed his complaint, in June 2008, Corrections 

Corporation and Alaska added an amendment to the contract which expressly denied any 

third-party benefit, stating that it "is not intended, and shall not be deemed or construed, 

to confer any rights, powers, benefits or privileges on any person or entity other than the 

parties to this Contract." 



                                                  -4-                                            6735
 


----------------------- Page 5-----------------------

               Corrections Corporation moved for summary judgment arguing:                 (1) that 



Perotti lacked standing as a third-party beneficiary; (2) that even if Perotti had standing, 



he did not exhaust the administrative remedies available to him for most of his claims; 



(3) that Corrections Corporation did not breach the contract; and (4) that Perotti had no 



recoverable     damages.     Superior     Court   Judge    pro  tem   Peter   Ashman     requested 



supplemental briefing on the question whether Perotti was a third-party beneficiary to 



the contract in light of our decision in Rathke v. Corrections Corporation of America, 



Inc. , in which we concluded that DOC still owed "legal duties to all Alaska inmates . . . 

detailed in the Cleary [Settlement]."6      Specifically, Judge Ashman asked the parties to 



provide briefing on: (1) the status of the Cleary Settlement; (2) whether Alaska prisoners 



retain rights under the Cleary Settlement; (3) whether DOC has authority to enter into 



contracts that avoid or supersede the Cleary Settlement requirements; and (4) whether 



a private entity contracting with DOC can enforce contract terms that avoid or supersede 



Cleary Settlement requirements. 



               The case was reassigned to Superior Court Judge Frank A. Pfiffner, who 



granted summary judgment to Corrections Corporation, dismissing all of Perotti's claims. 



The superior court did not reach the question whether Perotti, as a member of the Cleary 



Settlement, was a third-party beneficiary under the contract.  Instead, it found that most 



of   Perotti's  claims   could   be  dismissed    because   Perotti  had   failed  to  exhaust   his 



administrative remedies.      For the remaining claims, the superior court concluded that 



Perotti had no recoverable damages because Perotti   was   not an intended third-party 



beneficiary to the liquidated damages provision of the contract and because the Alaska 



Prison Litigation Reform Act, AS 09.19.200, barred Perotti's claims for prospective 



relief.   Finally,    the  superior   court   determined    that  Perotti   was   not  entitled   to 



        6       153 P.3d 303, 311 (Alaska 2007). 



                                                -5-                                            6735 


----------------------- Page 6-----------------------

compensatory damages because he had not "alleged or shown" any potential damages 



and that punitive damages were not recoverable for breach of contract unless the breach 



is a tort.   In determining that Perotti was not entitled to punitive damages, the superior 



court reasoned that "Perotti ha[d] not asserted a tort claim." 



                 Perotti    appeals,    claiming    that   he  is  a  third-party    beneficiary     to  the 



Corrections   Corporation   contract   with   DOC,   that   he   did   exhaust   his   administrative 



remedies,   that   AS   09.19.200   does   not   apply   to   his   suit,   and   that   his   claims   were 



erroneously   dismissed.        He   argues   that   he   is   entitled   to   all   categories   of   damages, 



including contractual liquidated damages, compensatory damages, nominal damages, and 



punitive damages. 



III.    STANDARD OF REVIEW 

                 Grants of summary judgment are reviewed de novo.7  We will affirm a grant 



of summary judgment if there are no genuine issues of material fact and if the movant 

is entitled to judgment as a matter of law.8           When making this determination, we draw 



all reasonable inferences in favor of the non-moving party.9 



                 Whether appellant is a third-party beneficiary of the contract is a question 

of contract interpretation to which we apply our independent judgment.10                        "We may 



affirm a grant of summary judgment on any basis appearing in the record."11 



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



        8        Id. 
 



        9        Id. 
 



        10       Jackson v. Barbero , 776 P.2d 786, 788 (Alaska 1989). 



        11       DeNardo v. GCI Commc'n Corp. , 983 P.2d 1288, 1290 (Alaska 1999). 



                                                    -6-                                               6735
 


----------------------- Page 7-----------------------

IV.     DISCUSSION 



                In his complaint, Perotti sought damages, declaratory relief, and injunctive 



relief, including the removal of certain Corrections Corporation employees from their 



duties.   Although the superior court granted summary judgment in favor of Corrections 



Corporation based on Perotti's failure to exhaust his administrative remedies for most 



of   his   claims,   it   concluded   (and   Corrections   Corporation   concedes)   that   Perotti   did 



exhaust his administrative remedies on his claims regarding telephone restriction and law 



library access.    But the superior court concluded that no relief was available to Perotti 



on the claims for which he had exhausted his administrative remedies because Perotti had 



not   demonstrated      any   compensable      injuries.  It   also  ruled   that  the  Alaska   Prison 

Litigation Reform Act12 barred Perotti's claims for prospective injunctive relief.  Finally, 



the superior court concluded that Perotti had no valid claim for punitive damages because 



he had not asserted any tort claims. 



                We affirm the superior court on the ground that none of the damages Perotti 



seeks as a third-party beneficiary to the contract between Corrections Corporation and 



DOC are available to him as a Cleary class member.   Because we conclude that Perotti 



is not entitled to damages for any of his breach of contract claims, we do not need to 

decide whether he exhausted his remedies for any of his other claims.13                And we affirm 



        12      AS 09.19.200. 



        13      Perotti argues that he has either exhausted his administrative remedies for 



his claims or is excused because exhaustion would have been futile.                  While we do not 

need to reach the question whether Perotti exhausted his administrative remedies for all 

of his individual claims, we nevertheless note that Corrections Corporation's screening 

out   of   several   of   Perotti's   claims   may   have   been   improper. The   Facility   Standards 

Officer stated he screened out grievances because they were frivolous or excessive, but 

these grounds are not listed among the 14 reasons why a grievance may be screened out 

under DOC Policy 808.03(VII)(d)(3)(a)-(n). 



                                                  -7-                                             6735
 


----------------------- Page 8-----------------------

the superior court's determination that there were no punitive damages on the ground 



that Perotti did not assert a cognizable tort claim. 



        A.	      Perotti Is Not Entitled To Compensatory Or Nominal Damages For 

                 Violations Of The Cleary Settlement.14 



                 As    a Cleary    class    member,     Perotti   relies  on  Rathke     v.  Corrections 



Corporation of America, Inc. to assert standing as a third-party beneficiary to those 



contract provisions between Corrections Corporation and DOC that were imported from 



the Cleary Settlement. Perotti claims that as a third-party beneficiary to those provisions, 



he is entitled to enforce violations of the contract through traditional contract remedies. 



He maintains that at the very least he is entitled to nominal damages for violations of the 



contractual provisions that are based on the Cleary Settlement provisions. 



                 In  Rathke ,   we   relied   on   Section   302   of   the   Restatement   (Second)   of 



Contracts to determine that prisoners are intended third-party beneficiaries to a contract 



between Corrections Corporation and DOC if the language in the contract was taken 



directly from the  Cleary Settlement or if the  Cleary Settlement was incorporated by 

reference     into  the   contract.15   Under     this  section    of  the  Restatement   (Second)        of 



Contracts, the parties to a contract must intend that a third party is a beneficiary of the 



contract: 



        14       Perotti   also   makes   several   claims   for   declaratory   and   injunctive   relief, 



including the removal of two Red Rocks Correctional Center employees, the return or 

replacement of personal papers, and various declarations of wrongdoing.  To the extent 

that he is seeking a declaration that the contract has been violated in order to receive 

damages, Perotti merely restates his claims for damages dealt with above. The remainder 

of   his   claims   are   moot   because   Perotti   is   no   longer   in   the   custody   of   Corrections 

Corporation, and he does not have standing to demand the termination of a correctional 

officer in any case. 



        15      Rathke v. Corr. Corp. of Am., Inc. , 153 P.3d 303, 310-11 (Alaska 2007). 



                                                    -8-	                                             6735
 


----------------------- Page 9-----------------------

                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.[16] 



In Rathke , we concluded that prisoners were third-party beneficiaries to the contract with 



Corrections Corporation of America because substantial sections of the contract were 



similar to the Cleary Settlement and because the Cleary Settlement was incorporated by 

reference into the contract:17 



                [P]ortions of the discipline section of the state/[Corrections 

                Corporation] contract . . . are virtually identical to the Cleary 

                [Settlement] . . . .   Given this identity of provisions between 

                the    [Cleary     Settlement]      and     the   state/[Corrections 

                Corporation]   contract,   we   conclude   that   the   prisoners   are 

                intended     third-party   beneficiaries   of  the   portions   of  the 

                contract     which    are   taken    directly   from     the   [Cleary 

                Settlement].[18] 



We     also  noted   that  preventing    prisoners   from    suing   Corrections    Corporation     for 



violations of the  Cleary Settlement would deny them "direct redress against the very 

institution charged with their day-to-day care and discipline."19  But the question remains 



whether   the   remedy   of   monetary   damages   is   available   for   violation   of   the Cleary 



Settlement's terms. 



        16      RESTATEMENT (SECOND) OF  CONTRACTS   302(1) (1979). 



        17      Rathke , 153 P.3d at 311. 



        18      Id. 



        19      Id. 



                                                 -9-                                            6735
 


----------------------- Page 10-----------------------

                In determining the status of third-party beneficiaries under a contract, "[t]he 

motives of the parties . . . are determinative."20     We examine the parties' objective intent 



rather than their subjective motives.21      "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."22    Here, Perotti claims an interest in the contract as a Cleary class member 



and claims the benefits of the terms of the Cleary Settlement that were incorporated into 



the contract with Corrections Corporation.   Thus, Corrections Corporation and the State 



intended to vindicate Perotti's interests as a Cleary class member only to the extent that 



his interests are articulated in the Cleary Settlement. 



                To    determine      what    relief   is  available    to   prisoners    under     the 



Cleary Settlement, we look to basic contract principles.  We have previously construed 

the Cleary Settlement as "following normal principles of contract interpretation."23             The 



goal of contract interpretation is to "determine and enforce the reasonable expectations 

of the parties."24  "The parties' expectations are assessed by examining the language used 



in the contract, case law interpreting similar language, and relevant extrinsic evidence, 

including the subsequent conduct of the parties."25 



        20     Howell v. Ketchikan Pulp Co. , 943 P.2d 1205, 1207 (Alaska 1997) (citing 



State v. Osborne, 607 P.2d 369, 371 (Alaska 1980)). 



        21     Rathke , 153 P.3d at 310 (citing RESTATEMENT  (SECOND) OF  CONTRACTS 



 302 cmt. b (1979)). 



        22     Id.   (internal  quotation    marks    omitted)   (citing  13  RICHARD     A.  LORD , 



WILLISTON ON CONTRACTS  37:8 (4th ed. 2000)). 



        23     Hertz v. State, Dep't of Corr. , 230 P.3d 663, 669 (Alaska 2010). 



        24     Norville v. Carr-Gottstein Foods Co. , 84 P.3d 996, 1004 (Alaska 2004). 



        25     Id.  (quoting Municipality   of   Anchorage   v.   Gentile ,   922   P.2d   248,   256 



                                                                                      (continued...) 



                                                -10-                                           6735
 


----------------------- Page 11-----------------------

                The Cleary Settlement is quite specific in describing the means by which 



it will be enforced.  The settlement agreement contains a section detailing the method by 



which   compliance   with   terms   of   the   agreement   is   to   be   supervised   by   a   standing 

compliance Monitor.26        In the section entitled "Future Monitoring, Modification And 



Enforcement Of This Agreement," the agreement addresses the available enforcement 



remedies     for  actions    "seeking    enforcement,     modification     or  interpretation"    of  the 



agreement,   as   well   as   actions   seeking   "to   hold   the   Department   [of   Corrections]   in 



contempt      for  alleged    violations    of  this  agreement."       The    agreement     details   the 



circumstances       under    which    DOC     will  be  held   in  contempt     for  violations   of   the 

agreement.27      Significantly,   this   enforcement   provision   contains   no   mention   of   the 



        25(...continued) 



(Alaska 1996)). 



        26      The Cleary Settlement states that the superior court will decide the need for 



continued active oversight after the report of the Monitor.              In 2001 the superior court 

received a report from the Monitor that the issues addressed by the Cleary litigation had 

been resolved, and decided that continued judicial oversight was unnecessary.                    Cleary 

v. Smith, No. 3AN-81-05274 CI (Alaska Super., July 3, 2001). 



        27      The relevant language reads: 



                Actions   seeking   to   hold   the   Department   in   contempt   for 

                alleged violations of this agreement shall be guided by the 

                principle that isolated instances of noncompliance which do 

                not reflect a pattern or practice of violations do not justify a 

                finding of contempt except in situations where unjustified 

                intentional violations are established. A pattern or practice of 

                violations is established by a showing of repeated violations 

                as to a particular inmate or inmates. 



Cleary Final Settlement and Order  IX. B. 3. 



                                                  -11-                                             6735
 


----------------------- Page 12-----------------------

payment of compensatory or nominal monetary damages for violations.28   Because the 



Cleary Settlement does not generally contemplate an award of monetary damages for 



violations   of   the   settlement,   Perotti   is   not   entitled   to   such   damages   as   a   third-party 



beneficiary of the Cleary-based provisions in the contract between DOC and Corrections 

Corporation.29    We emphasize that this holding is limited to prisoner claims for monetary 



damages for an institution's failure to abide by the Cleary Settlement; it does not, for 



        28      The Cleary Settlement does include at least one term that may lend itself 



to a specific claim for monetary damages. The Cleary Settlement directs payment of gate 

money to prisoners who leave the facility.           Cleary Final Settlement and Order  VI. J. 

In  Hertz   v.   State,   Department   of   Corrections ,   we   left   open   the   question   whether   a 

released prisoner who has been denied this gate money has a damage claim for past 

failure to pay these funds under the Cleary Settlement.             Hertz , 230 P.3d 663, 668 n.24 

(Alaska 2010).      We do not decide this question today, but we note that, in contrast to 

Perotti's claims for damages, there is a clear and precise measure of monetary damages 

for a violation of the gate money provision of the Cleary Settlement.                And if monetary 

damages were determined to be an appropriate remedy against DOC for such a claim, 

then    under   Rathke ,    a  third-party   beneficiary     to  the  contract    between     DOC     and 

Corrections Corporation could potentially enforce this same right against Corrections 

Corporation, if that contract had a similar gate money provision.                See Rathke v. Corr. 

Corp. of Am., Inc., 153 P.3d 303, 310-11 (Alaska 2007). We also point out that in Hertz , 

we held that "either party may move for relief from the [Cleary Settlement]," and that the 

settlement "gives broad discretion to the trial court to modify the agreement in the event 

of changed law or circumstances." Hertz , 230 P.3d at 669.  But it appears that DOC may 

have unilaterally vacated the gate money provision of the Cleary Settlement without the 

necessary court approval.  See id. at 664-68.   We do not reach the validity of that action 

in this appeal. 



        29      As a third-party beneficiary of the contract between DOC and Corrections 



Corporation,   Perotti   must   stand      in   the   shoes   of   DOC   in   an   action  to  enforce   the 

agreement against Corrections Corporation.             See State v. Osborne, 607 P.2d 369, 371 

(Alaska 1980).       Thus, Perotti may receive only the relief available to the contracting 

parties. 



                                                  -12-                                             6735
 


----------------------- Page 13-----------------------

example, limit a prisoner's ability to seek compensatory monetary damages in tort for 

injuries sustained while housed in a correctional institution.30 



        B.      Perotti Is Not Entitled To Liquidated Damages. 



                Perotti also claims that as a Cleary class member and third-party beneficiary 



to DOC's contract with Corrections Corporation, he is entitled to enforce the liquidated 

damages clauses in the corrections contract.31          But as we have reasoned in the context of 



Perotti's claim for compensatory and nominal damages, any finding under the Rathke 



standard that Perotti is a third-party beneficiary would only entitle him to the rights that 



he is owed by DOC under the Cleary Settlement.                Because the Cleary Settlement does 



not contain any provision for liquidated damages for violations of the agreement, and 



instead    contemplates      enforcement      by  a  contempt     order,   Perotti  is  not  entitled   to 



liquidated damages. 



                Moreover,   there   is   no   indication   that   Corrections   Corporation   or   DOC 



intended   to   extend   the   liquidated   damages   section   to   Perotti   under   the   contract.   In 



determining the status of third-party beneficiaries under a contract, "[t]he motives of the 



        30      See, e.g., Hertz v. Beach , 211 P.3d 668, 682 (Alaska 2009) (reversing a 



grant of summary judgment on a medical malpractice claim against a prison dentist); 

Kanayurak v. North Slope Borough , 677 P.2d 893, 899 (Alaska 1984) (holding that a 

duty   of   care   is   owed   even   to   prisoners   who   injure   themselves);   Wilson   v.   City   of 

Kotzebue , 627 P.2d 623, 628 (Alaska 1981) (holding that prisoners are owed a duty of 

care comparable to the duty of care owed by common carriers to passengers). 



        31      The   liquidated   damages   clause   of   the   contract   states   in   relevant   part: 



"Subject to the notice and cure provisions specified in this section 3.35, in the event of 

a Breach by contractor described in this section, the State may withhold as a liquidated 

damage the amounts designated in Appendix E from any amounts owed contractor." 

2004 Contract, Corrections Corporation and DOC, Contract #205-4861. 



                                                  -13-                                             6735
 


----------------------- Page 14-----------------------

parties . . . are determinative."32       We examine the parties' objective intent rather than 



their subjective motives.33       "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."34 



                 For example, in Howell v. Ketchikan Pulp Co. , a subcontractor claimed that 



he   was   a   third-party   beneficiary   of   a   contract   between   Ketchikan   Pulp   Co.   and   his 

employer.35     The contract contained an indemnification clause between Ketchikan Pulp 



Co. and the subcontractor's employer.36            We concluded that the indemnification clause 



was intended to allocate between Ketchikan Pulp Co. and the employer any liability for 



claims   by   third   parties,   rather   than   to   allow  direct   claims   by   third   parties   against 

Ketchikan Pulp Co.37        We quoted approvingly the superior court's conclusion that 



                 [i]n this case it would be impossible for a reasonable jury to 

                 conclude that one of the purposes of the contract between 

                 General   Electric   and   Ketchikan   [Pulp   Co.]   was   to   benefit 

                 Steven Howell. . . . The [indemnity provisions] simply show 

                 efforts   to   reallocate   liability   between   the   two   contracting 



        32       Howell v. Ketchikan Pulp Co. , 943 P.2d 1205, 1207 (Alaska 1997) (citing 



State v. Osborne, 607 P.2d 369, 371 (Alaska 1980)). 



        33       Rathke v. Corr. Corp. of Am., Inc. , 153 P.3d 303, 310 (Alaska 2007) (citing 



RESTATEMENT (SECOND) OF  CONTRACTS  302 cmt. b (1979)). 



        34       Id.   (internal   quotation    marks    omitted)    (citing   13   RICHARD     A.  LORD , 



WILLISTON ON CONTRACTS  37:8 (4th ed. 2000)). 



        35       943 P.2d at 1206. 



        36       Id. 



        37       Id. at 1207-08. 



                                                    -14-                                              6735
 


----------------------- Page 15-----------------------

                 parties - for their benefit - not that of third parties such as 

                 plaintiff.[38] 



Thus, in Howell , we read the indemnification clause between the two primary parties to 



the contract as merely a way of allocating risk between them, not as expressing the intent 



that a third party would be able to sue on the contract.  Similarly, the liquidated damages 



in   the   contract   between   DOC   and   Corrections   Corporation   are   designed   to   reduce 



litigation costs between those parties.           Perotti has made no showing that the liquidated 



damages clause was intended to benefit him. 



                 Because third-party beneficiary status under Rathke only grants prisoners 



those rights that they would have had under the Cleary Settlement, Perotti cannot collect 



liquidated damages under the Corrections Corporation contract with DOC. 



        C.       Perotti Is Not Entitled To Punitive Damages. 



                 Perotti   included     two   claims    in  his  complaint     alleging    that   individual 



employees      were "negligent[]" and "beyond mere[ly] negligen[t]" in their conduct and 



that they acted "with the knowledge their actions would violate and do harm to the rights 



and interests of the plaintiff."   Perotti describes the harm to his "rights and interests" as 



his   "protectable   property   and   contractual   interest   in   the   enforcement   of   the    Cleary 



[Settlement]."     Although the superior court concluded that Perotti failed to assert a tort 



claim,   Perotti   maintains   that   he   alleged   the   tort   of   "intentional   interference   with   a 



contract."    But Perotti's allegation that Corrections Corporation employees interfered 



with his "protectable property and contract interest[s]," is merely a restatement of his 



argument that the contract between Corrections Corporation and DOC was breached and 



that   he   was   a  beneficiary     of  that  contract.   Although      the  Corrections     Corporation 



employees' conduct, such as denying Perotti access to the law library, may have been in 



        38       Id. at 1207. 



                                                    -15-                                                 6735 


----------------------- Page 16-----------------------

violation of the  Cleary Settlement, that conduct does not, standing alone, constitute a 



separate tort upon which punitive damages could be based. And absent a cognizable tort, 

punitive   damages   are   not   recoverable   for   breach   of   contract.39 Thus,   Perotti   is   not 



entitled to punitive damages. 



V.      CONCLUSION 



                For these reasons, we AFFIRM the judgment of the superior court. 



        39      Reeves v. Alyeska   Pipeline   Serv.   Co. ,   56   P.3d   660,   671   (Alaska   2002) 



("[W]e follow the Restatement's position that '[p]unitive damages are not recoverable' 

for a breach of contract unless the conduct constituting the breach is also a tort for which 

punitive damages are recoverable." (quoting RESTATEMENT  (SECOND) OF  CONTRACTS 

 355 (1979))). 



                                                 -16-                                           6735
 


----------------------- Page 17-----------------------

WINFREE, Justice, with whom STOWERS, Justice, joins, concurring. 



                I agree with today's decision.        I write separately to express my hope that 



we now   have completed the third-party-beneficiary detour and are back on the road 

contemplated by the Cleary Settlement.1 



                As today's decision discusses, the 1990  Cleary  Settlement detailed the 



prison-condition   rights   of   current   and   future   prisoners   held   in   correctional   facilities 



owned or operated by the State of Alaska, Department of Corrections (DOC).   The 



settlement also provided that in the event of prisoner overcrowding, DOC was to report 



to the superior court and present a plan to reduce the prison population.  After being held 



in   contempt   for   exceeding   the   allowable   prison   population,   DOC   sought   to   transfer 

prisoners to a private correctional facility in Arizona.2            The superior court ultimately 



conditioned approval of the prisoner transfer on "the state's continued compliance with 

[the Cleary Settlement] in the Arizona prison."3           This court affirmed the superior court's 



order   as   within   its   broad   discretion   under   the  Cleary  Settlement,4    emphasizing   that 



although the settlement provisions were a binding   final judgment on DOC, material 



changes      in  circumstances     could    lead  to  vacation    or  modification      and   that  future 



implementation and enforcement would be based on the Cleary Settlement's intent in 

light of then-existing conditions.5 



        1       Cleary   v.   Smith,   No.   3AN-81-05274,   Final   Settlement   Agreement   and 



Order (Alaska Super., Sept. 21, 1990). 



        2       Smith v. Cleary, 24 P.3d 1245, 1247 (Alaska 2001). 



        3       Id. at 1250. 



        4       Id. at 1249-51. 



        5       Id. at 1249, 1251.      It nonetheless appears DOC has unilaterally modified 



                                                                                          (continued...) 



                                                  -17- 


----------------------- Page 18-----------------------

                 In obvious response to the condition imposed by the superior court, DOC's 



contract     with   the  Arizona     prison   facility   included    a  number     of  prison-condition 

provisions mirroring the Cleary Settlement.6            An Alaska inmate in the Arizona facility 



then sued the facility on a breach of contract theory, asserting third-party-beneficiary 

status under DOC's contract with the Arizona facility.7            The superior court dismissed the 



claim, concluding that the prisoner had rights under the Cleary Settlement but was not 

a   third-party-beneficiary   of   DOC's   contract   with   the   facility.8    This   court   reversed, 



concluding that Alaska prisoners in the Arizona facility were third-party-beneficiaries 



of the DOC contract terms incorporating the prison-condition provisions in the Cleary 

Settlement.9    The court believed this conclusion was required to ensure "redress against 



the very institution charged with their day-to-day care and discipline,"10 and held that the 



        5(...continued) 



at least one aspect of the Cleary Settlement without seeking court approval - DOC no 

longer   honors   the  Cleary  Settlement   provision   requiring   payment   of   gate   money   to 

released     prisoners.     See    Cleary    v.  Smith,  No.    3AN-81-05274,        Final     Settlement 

Agreement and Order  VI.J (Alaska Super., Sept. 21, 1990); cf. Hertz v. State, Dep't of 

Corr., 230 P.3d 663, 664-65, 668 (Alaska 2010) (holding DOC's decision to stop issuing 

gate   money   as   required   by  Cleary  Settlement   was   not   proper   subject   of   action   for 

prospective injunctive relief by individual prisoner in light of Alaska Prison Litigation 

Reform Act (AS 09.19.200)).            The efficacy of DOC's unilateral modification of the 

Cleary Settlement has not come before us. 



        6       See   Rathke   v.   Corr.   Corp.   of   Am.,   Inc.,  153   P.3d   303,   309-11   (Alaska 



2007). 



        7       Id. at 307, 309-11. 



        8       Id. at 307, 311. 



        9       Id. at 311. 



        10      Id. 



                                                   -18- 


----------------------- Page 19-----------------------

prisoner had the right to sue the Arizona facility for violations of the Cleary Settlement 

provisions in the contract.11 



                 It seems unlikely that DOC inserted the Cleary provisions in the contract 



with the private prison to benefit inmates - it is far more likely that DOC inserted those 

provisions to protect itself from liability for violations of the Cleary settlement.12                It also 



seems unlikely that this court intended prisoners in the Arizona facility to have more 



enforcement rights under the Cleary Settlement than prisoners in DOC's facilities, and 



the court did not discuss how it envisioned third-party-beneficiary enforcement or the 



remedies that might be available.           But after today's decision it should be clear that the 



enforcement mechanism for prison conditions mandated by the Cleary Settlement is the 



settlement      agreement      itself,  and    that  regardless     of   prisoner    location,    prisoners' 



enforcement rights should be against DOC, not a direct action against a particular facility 



or its staff. 



                 DOC owes all Alaska prisoners legal duties under the Cleary Settlement, 

and facility compliance with the Cleary Settlement is DOC's responsibility.13                     If a DOC 



facility or a private contracting facility outside of Alaska is not in compliance with the 



Cleary Settlement's prison-condition provisions, then, as today's decision recognizes, 



DOC   should   be   subject   to   contempt   sanctions   or   injunctive   relief   under   the  Cleary 



         11      Id. 



         12      See, e.g., Ennen v. Integon Indem. Corp. , 268 P.3d 277, 284 (Alaska 2012) 



(addressing third-party beneficiary status in insurance contract context and explaining 

that   "[t]he   insured   did   not   purchase   the   policy   with   the   intention   to   benefit   the   tort 

victim; rather, the insured purchased the policy to protect the insured from tort liability. 

Thus, the tort victim is only an incidental beneficiary"). 



         13      Rathke , 153 P.3d at 311 ("The state owes legal duties to all Alaska inmates, 



including those housed like Rathke at the CCA's Florence, Arizona, facility.                          These 

duties are detailed in the Cleary [Settlement] . . . ."). 



                                                    -19- 


----------------------- Page 20-----------------------

Settlement, in the Cleary case before the superior court.14              In my view Rathke 's holding 



regarding third-party-beneficiary status is infirm at best, but now has little import in light 

of today's decision.15      The result is the same - Perotti has no claim for damages against 



the   Arizona   facility   or   its   employees   for   alleged   violations   of   the   prison-condition 



provisions of the Cleary Settlement. Although today's decision did not need to reach the 



question of injunctive relief against the Arizona facility, a similar result seems logical. 



        14       I do not foreclose the possibility of a separate direct cause of action against 



DOC for breach of specific terms of the Cleary Settlement providing for payments to be 

made to prisoners.        See, e.g.,  Cleary v. Smith, No. 3AN-81-05274, Final Settlement 

Agreement and Order  VI.J (Alaska Super., Sept. 21, 1990) (providing for payment of 

gate money to released prisoners); cf. Hertz, 230 P.3d at 668 (holding inmate not entitled 

to prospective injunctive relief regarding gate money). 



        15       I   do   not   foreclose   the   remote   possibility   that   DOC   would   enter   into   a 



contract with a prison facility outside of Alaska that requires the facility to fulfill the 

Cleary Settlement mandate for payment of gate money, in which case prisoners likely 

would be third-party-beneficiaries of that contract provision.  Such a provision is not in 

the prison contract in this case, and, in light of DOC's decision to not honor the Cleary 

Settlement provision for payment of gate money, it seems unlikely that such a provision 

would find its way into a subsequent contract. 



                                                    -20- 

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