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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
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
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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.
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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.
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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."
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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).
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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).
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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).
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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).
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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.
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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...)
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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.
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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.
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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.
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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.
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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.
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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))).
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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...)
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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.
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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] . . . .").
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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.
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