George and Kathleen Knevelbaard, et al. - Page 24

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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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