## Facts

- Gus Rathke, an Alaska prisoner, was housed at Florence Correctional Center in Arizona, a private facility operated by Corrections Corporation of America (CCA) under contract with the Alaska Department of Corrections.
- Rathke was ordered to provide a urine sample for drug testing; PharmChem, Inc., a private laboratory contracted by CCA, tested the sample.
- PharmChem used a THC-metabolite cutoff of 20 ng/ml (Arizona standard) instead of 50 ng/ml (the standard asserted to apply to Alaska inmates), and reported a positive result for marijuana.
- Rathke was told he was “guilty of THC” and was placed in segregation for 30 days without a hearing, purportedly due to an “immediate threat” to facility security; he also lost his prison job.
- Rathke alleged he was pressured not to appeal through threats of extended segregation and that grievances were not answered.
- A later retest using the 50 ng/ml cutoff was negative.
- Rathke sued, alleging breach of contract based on the Alaska–CCA agreement (including incorporated inmate-protective terms derived from the Cleary Final Settlement Agreement), asserted third-party-beneficiary rights under the CCA–PharmChem contract, and alleged constitutional violations arising from the disciplinary process and drug-testing result.

## Issues

1. Whether Alaska inmates housed in a private CCA facility are intended third-party beneficiaries of the Alaska–CCA contract such that they may sue CCA for breach of inmate-protective provisions.
2. Whether an inmate is an intended third-party beneficiary of the CCA–PharmChem drug-testing contract.
3. Whether CCA employees may be held personally liable for breach of the Alaska–CCA contract.
4. Whether the complaint adequately stated constitutional claims against CCA and its employees arising from the drug-test discipline and segregation.

## Decision

- The Alaska Supreme Court held that inmates may enforce certain provisions of the Alaska–CCA contract and vacated the dismissal of Rathke’s contract-based claims against CCA to the extent they relied on inmate-protective provisions incorporated from the Cleary settlement; the case was remanded.
- The court affirmed summary judgment for PharmChem, holding Rathke was not an intended third-party beneficiary of the CCA–PharmChem contract.
- The court affirmed dismissal of contract claims against individual CCA employees, holding employees are not personally liable for breach of their employer’s contract.
- The court vacated dismissal of constitutional claims against CCA and its employees, concluding the pro se pleadings adequately raised constitutional allegations that were not fully addressed below, and remanded for further proceedings.

## Legal Principles

- Third-party beneficiary status depends on whether recognizing an enforceable right in the asserted beneficiary effectuates the contracting parties’ intent, as shown by contract language and surrounding circumstances.
- When a state’s private-prison contract incorporates inmate-protective settlement terms that exist to secure enforceable rights for inmates, inmates may be intended beneficiaries of those incorporated provisions and may sue the private operator for breach of those provisions.
- A service contract between private entities does not create enforceable rights in inmates absent clear contractual language or context showing intent to benefit inmates.
- Corporate employees are not personally liable for their employer’s breach of contract unless they separately assume contractual obligations.
- Pro se prisoner pleadings are construed liberally; constitutional claims concerning disciplinary segregation and related procedures must be evaluated on their merits when adequately alleged.

## Conclusion

The court permitted Alaska inmates to enforce Cleary-derived protections incorporated into Alaska’s contract with a private prison operator, rejected third-party-beneficiary claims against a contracted testing laboratory, barred individual contract liability for CCA employees, and required further proceedings on Rathke’s constitutional claims arising from the drug-testing discipline and segregation.


Rathke v. Corrections Corp. of Am., Inc., 153 P.3d 303 (Alaska 2007)