Standard Wire & Cable Co. v. AmeriTrust Corp.

• Decision Date: 22 September 1988
• Docket Number: No. CV 87-1630-AAH (Kx).,CV 87-1630-AAH (Kx).
• Citation: 697 F. Supp. 368
• Court: U.S. District Court — Central District of California
• Parties: STANDARD WIRE & CABLE CO., a California corporation, Dickran Hampikian, Betty A. Hampikian, Russell J. Skrable and Jerrilyn Skrable, Plaintiffs, v. AMERITRUST CORPORATION, a corporation; Ameritrust Company National Association, a corporation; AT Commercial Corporation, a corporation; Associates Corporation of North America, a corporation; and Associates Commercial Corporation, a Delaware corporation, Defendants. AMERITRUST CORPORATION, a corporation, Counterclaimant, v. STANDARD WIRE & CABLE CO., a California corporation, Dikran Hampikian, Russell J. Skrable, Betty A. Hampikian, and Jerrilyn Skrable, Counterdefendants. ASSOCIATES COMMERCIAL CORPORATION, a Delaware corporation, and Associates Corporation of North America, a corporation, Counterclaimants, v. STANDARD WIRE & CABLE CO., a California corporation, Dikran Hampikian, Russell J. Skrable, Betty A. Hampikian, and Jerrilyn Skrable, Counterdefendants.

697 F. Supp. 368

STANDARD WIRE & CABLE CO., a California corporation, Dickran Hampikian, Betty A. Hampikian, Russell J. Skrable and Jerrilyn Skrable, Plaintiffs, v. AMERITRUST CORPORATION, a corporation; Ameritrust Company National Association, a corporation; AT Commercial Corporation, a corporation; Associates Corporation of North America, a corporation; and Associates Commercial Corporation, a Delaware corporation, Defendants.

AMERITRUST CORPORATION, a corporation, Counterclaimant, v. STANDARD WIRE & CABLE CO., a California corporation, Dikran Hampikian, Russell J. Skrable, Betty A. Hampikian, and Jerrilyn Skrable, Counterdefendants.

ASSOCIATES COMMERCIAL CORPORATION, a Delaware corporation, and Associates Corporation of North America, a corporation, Counterclaimants, v. STANDARD WIRE & CABLE CO., a California corporation, Dikran Hampikian, Russell J. Skrable, Betty A. Hampikian, and Jerrilyn Skrable, Counterdefendants.

No. CV 87-1630-AAH (Kx).

United States District Court, C.D. California.

September 22, 1988.

COPYRIGHT MATERIAL OMITTED

Gary D. Stabile, Mullen & Stabile, Manhattan Beach, Cal., for plaintiffs.

Richard J. Stone, Geoffrey L. Bryan, Milbank, Tweed, Hadley & McCloy, Los Angeles, Cal., for AmeriTrust Corp., AmeriTrust Nat. Ass'n and AT Commercial Corp.

Gregory A. Long, Natalie Naftzger Davis, Mark D. Larsen, Sheppard, Mullin, Richter & Hampton, Los Angeles, Cal., for Associates Commercial Corp. and Associates Corp. of North America.

OPINION AND ORDER RE: DEFENDANTS' PRE-TRIAL MOTIONS

HAUK, Senior District Judge.

INTRODUCTION

Standard Wire & Cable Co. ("Standard") is a wholesale supplier of wire and cable products. In August 1984, Standard obtained a secured line of credit loan from defendant Associates Commercial Corp. ("Associates"). This loan was subsequently assumed by AmeriTrust Corp. ("AmeriTrust"), when it purchased the Business Loans Division of Associates in July 1986.

This dispute arises out of disagreements between the parties during the lending relationship and alleged fraud during the negotiation and performance stages of the loan. Standard filed a petition for Chapter 11 bankruptcy on March 13, 1987 and filed this suit against Associates (and its parent corporation) and AmeriTrust (and two subsidiary corporations) on March 16, 1987.

Standard filed a Supplemental and First Amended Complaint, which includes 25 causes of action, on November 30, 1987. The Associates and AmeriTrust groups of defendants, respectively, filed Answers and Counterclaims on January 29, 1988.

MOTIONS PENDING

Before the Court are the following 10 motions:

I. AmeriTrust's motion for partial summary judgment on plaintiffs' claims for intentional infliction of emotional distress, negligent infliction of emotional distress, RICO, tortious breach of the covenant of good faith and fair dealing, and the standing of the individual plaintiffs;

II. Associates' motion for summary judgment on causation, standing of the individual plaintiffs, tortious breach of the covenant of good faith and fair dealing, and the issues of the computer loan and sublines;

III. Associates' motion for summary judgment on plaintiffs' RICO claims;

IV. Associates' motion for summary judgment on plaintiffs' claims for intentional infliction of emotional distress and negligent infliction of emotional distress;

V. Associates Corp. of North America's (ACONA) motion to dismiss;

VI. Associates' motion to strike the jury trial demands of the individual plaintiffs;

VII. Associates' motion for leave to file an Amended Counterclaim against plaintiffs;

VIII. AmeriTrust's motion for leave to file an Amended Counterclaim against plaintiffs;

IX. Associates' motion for leave to file a Third-Party Complaint against Standard's accountants—Dodson & Miller, Artie Miller and Larry Dodson; and

X. AmeriTrust's motion for leave to file a Third-Party Complaint against Standard's accountants—Dodson & Miller, Artie Miller and Larry Dodson.¹

In addition, the Court considered and decided several issues sua sponte, as detailed below.

PARTIES

In addition to Standard, the Plaintiffs are Dickran Hampikian, Chairman of the Board and 50% shareholder of Standard; Betty Hampikian, his wife; Russell Skrable, President and 50% shareholder of Standard; and Jerrilyn Skrable, his wife.

The Associates defendants are Associates Commercial Corp. and its parent company, Associates Corp. of North America (ACONA). The AmeriTrust defendants are AmeriTrust Corp. and two wholly owned subsidiaries, AmeriTrust Company National Association and AT Commercial Corp.

FACTS

In August 1982 Hampikian and Skrable purchased Standard in a leveraged buyout. On April 19, 1984, Standard and Associates entered into a secured line of credit agreement. The major terms of the agreement included advances to Standard of up to 85% of its eligible accounts receivable; advances of up to 60% of its eligible inventory and a five-year term loan of $350,000 for a new computer system. Hampikian and Skrable executed personal guarantees on the loan, and issued deeds of trust on their family homes as collateral.

On July 1, 1986, the Business Loans Division of Associates — the division of Associates which extended the subject credit loan to Standard — was purchased by AmeriTrust Corp., which assigned the obligations and duties under the loan agreement with Standard to AmeriTrust Company National Association, a subsidiary of AmeriTrust Corp. A separate subsidiary, AT Commercial Corporation, was then created by AmeriTrust Corp. to manage the Standard loan.

Standard alleges in its Supplemental and First Amended Complaint ("Complaint") against the defendants, inter alia:

1) Associates made fraudulent misrepresentations to induce Standard to enter into the loan agreement;

2) Associates made a separate, oral agreement that the $350,000 computer loan could be funded after December 31, 1984, but then refused to do so;

3) in mid to late 1985 Associates imposed credit sub-lines (ceilings) of $4,000,000 on Standard's inventory and $2,000,000 on accounts receivable;

4) Associates deemed inventory previously "eligible" to be ineligible as security on advances;

5) AmeriTrust dealt with Standard in bad faith and did not recify problems Standard had experienced with Associates, as AmeriTrust had promised;

6) On August 20, 1986 AmeriTrust, without prior notice or discussion, gave Standard written notice of termination of the financing agreement, effective January 17, 1987, thus advancing the loan balance of $4.6 million to be immediately due and thereby forcing Standard into bankruptcy.

DISCUSSION

I. AmeriTrust's motion for partial summary judgment on plaintiffs' claims for intentional infliction of emotional distress, negligent infliction of emotional distress, RICO, tortious breach of the covenant of good faith and fair dealing, and the standing of the individual plaintiffs.

A. Emotional Distress Claims (Nos. 14, 15, 16, 17, 18, 19)

The individual plaintiffs contend that the actions of the defendants have caused plaintiffs to suffer emotional distress. The distress is allegedly the result of the bankruptcy of Standard and the foreclosure proceedings against the plaintiffs' homes.

1. Intentional Infliction of Emotional Distress (Nos. 14, 15, 16, 17)

The five requirements of a cause of action for intentional infliction of emotional distress are:

1) extreme and outrageous conduct by the defendant;

2) such conduct was intended or done in reckless disregard of the probability of severe emotional distress;

3) the plaintiff suffered severe emotional distress;

4) the plaintiff's severe emotional distress was caused by the defendant's conduct; and

5) the defendant's conduct was unprivileged.

E.g., Davidson v. City of Westminster, 32 Cal.3d 197, 209, 185 Cal.Rptr. 252, 649 P.2d 894 (1982).

Plaintiffs have failed to raise a triable issue of fact as to any of these requirements. Defendants' conduct did not include threats of physical harm, public harrassment or other such conduct which the cases require to be deemed "extreme and outrageous." See, e.g., Sanchez-Corea v. Bank of America, 38 Cal.3d 892, 215 Cal.Rptr. 679, 701 P.2d 826 (1985); cf. Gaffney v. Downey Savings & Loan Ass'n, 200 Cal.App.3d 1154, 246 Cal.Rptr. 421 (1988). The requisite intent is similarly lacking in the facts presented. The plaintiffs' distress—headaches, insomnia, anxiety, irritability—is not "severe" under California law. The actions of the defendants were privileged because done in pursuit of their lawful business interests, and not outrageous, as just mentioned.

Therefore, summary judgment is properly granted in favor of AmeriTrust and against the individual plaintiffs on their claims for intentional infliction of emotional distress, Nos. 14, 15, 16 and 17. MOTION GRANTED ON THIS GROUND.

2. Negligent Infliction of Emotional Distress (Nos. 18, 19)

Plaintiffs Hampikian and Skrable (the husbands) allege defendants' negligent conduct caused them to suffer emotional distress. In California, a claim for negligent infliction of emotional distress can be stated under one of two theories: 1) a plaintiff is a bystander and observes injury to a family member, Dillon v. Legg, 68 Cal.2d 728, 69 Cal.Rptr. 72, 441 P.2d 912 (1968), or 2) a plaintiff is a "direct victim" of a defendant's negligence, Molien v. Kaiser Foundation Hospitals, 27 Cal.3d 916, 167 Cal.Rptr. 831, 616 P.2d 813 (1980) (physician negligently diagnosed plaintiff's wife as having syphilis).

Plaintiffs assert that they are direct victims of defendants' breach of the covenant of good faith and fair dealing, thus giving rise to liability under Molien. This argument fails for several reasons. Primarily, plaintiffs cite no authority for the theory that breach of this covenant can compensate for a plaintiff's failure to prove a defendant's negligence. No negligence is alleged here. Nor is plaintiffs' distress sufficiently severe, as stated above. Rather, plaintiffs assert a...