This section contains the nature of the case and procedural background.

P is an inmate in a prison owned and operated by D, a private company. P had never failed a prison drug test. The tester, PharmChem reported that P tested positive for marijuana. It 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. P was informed he was guilty and P immediately protested that in his seventeen years in prison, he had never failed a drug test. Without affording him a hearing, D officials sent P to administrative segregation because he was 'an immediate threat to the security of the facility.' P submitted a request for a drug retest. No retest was performed. P requested that a hearing advocate be appointed and met with the advocate in segregation. After twelve days in segregation, P appeared before a hearing officer. P's hearing advocate did not show up at the hearing, despite P's previous request. P was found guilty of illegal drug use and sentenced to thirty days in punitive segregation. P wanted an appeal and asked to have an independent laboratory retest the specimen. PharmChem, which had done the original test, would be doing the retest, and P 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. P spent thirty days in punitive segregation and lost his institutional job. P filed a grievance 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, and P passed the retest. It was ordered that all records of the discipline should be removed from P's file and destroyed. P never received a response to his grievance. P filed a complaint in Superior Court against D, several D employees and PharmChem. P argued a breach of contract in that inmates are intended third-party beneficiaries of D's contracts with the state and PharmChem. P claimed 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 rehire, and punitive damages. Ds moved to dismiss P's complaint for failure to state a claim arguing that P is not a third-party beneficiary. The court ruled for Ds and P appealed.

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