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separate and apart from plaintiffs' contract claims against Knudsen.
The origin of the claim for milk losses (raised in the
bankruptcy court and in claims against Knudsen's directors) was
Knudsen's breach of contract. However, the milk producers had no
contract with the banks. The origin of the claims in the milk
producers action against the banks was the Bank Defendants'
behavior. We think it significant that the settlement agreement
did not foreclose petitioners' rights to collect the full amount
of milk proceeds in other arenas. In fact, they did eventually
collect small amounts from the directors' insurance.8
We hold that the milk producers action was based upon tort
or tortlike rights.
Personal Injuries or Sickness
Finally, we examine whether the proceeds were paid "on
account of" the emotional harm done. Respondent argues they were
paid on account of Knudsen's default and not on account of
petitioners' emotional distress. We disagree. Petitioners'
8 See Banks v. United States, 81 F.3d 874 (9th Cir.
1996), where the Court of Appeals for the Ninth Circuit, the
court to which this case is appealable, held that a claim against
a union for breach of duty of fair representation is tortlike and
distinct from a claim against the employer for unjust discharge,
even though the settlement amount paid by the union was based on
an estimate of past and future wages. "Unions do not pay wages
to their members, and what the Union paid in settlement * * * did
not constitute wages", id. at 876, but damages to compensate the
taxpayer for its unfair and arbitrary treatment. Thus, the claim
against the union was tortlike. Here, we might say: "Banks
don't buy milk."
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