Henkin v. Skane-Gripen A.B.
| Decision Date | 12 February 1993 |
| Docket Number | No. 91-3338,SKANE-GRIPEN,91-3338 |
| Parties | NOTICE: Seventh Circuit Rule 53(b)(2) states unpublished orders shall not be cited or used as precedent except to support a claim of res judicata, collateral estoppel or law of the case in any federal court within the circuit. Daniel J. HENKIN, Plaintiff-Appellant, v.A.B. and Bernhard Muskantor, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Before CUMMINGS, POSNER and FLAUM, Circuit Judges.
Daniel J. Henkin filed an amended complaint in May 1988 asserting diversity jurisdiction (28 U.S.C. § 1322(a)), federal question jurisdiction (28 U.S.C. § 1331), and jurisdiction under the Racketeering Influenced and Corrupt Organizations Act ("RICO") (18 U.S.C. § 1964(c)). However, the only remaining questions in this case arise through diversity of citizenship. Plaintiff is an Indiana citizen, defendant Skane-Gripen A.B. ("Skane") is a Swedish corporation, and defendant Bernhard Muskantor is a citizen of Sweden. 1
According to the amended complaint, plaintiff was the sole stockholder (or sole stockholder of the parent) of five companies, all headquartered in Elkhart, Indiana, that manufactured and sold musical instruments. Henkin claimed that he was forced to sell these companies for less than they were worth.
General Electric Credit Corporation ("GECC") became the prime secured lender of Henkin's companies in November of 1983 by extending to the firms a $35 million line of credit. Henkin began trying to sell the companies in 1984, but he was not successful and in 1985 GECC began pressing him to sell in the immediate future. GECC threatened that if the companies were not sold it would declare a default on its loans and foreclose on its security interests and guarantees. Consequently, in the spring and summer of 1985, Henkin began negotiations with Skane through its agent--defendant Muskantor--for the possible purchase of the five companies. The amended complaint asserted that in the summer of 1985 Skane delivered to Henkin a proposed purchase and sale agreement worth $6 million. In addition, Skane supposedly offered a twelve-year non-competition and consulting contract to Henkin for $50,000 per year. In an August 23 draft, Skane reduced the purchase price to $4.5 million.
Henkin alleged that Skane never really intended to pay those amounts. He claims that because of undue pressure from GECC, he was forced to agree on August 27, 1985, to a purchase and sale agreement for the five companies worth just one dollar. Henkin also complained that his consulting and no-compete contract was reduced to two annual installments of $50,000, which were to be followed by ten annual payments of $1,000. GECC is said to have pressured Henkin into selling his companies for this reduced amount by telling him that it would foreclose on $1.5 million in municipal bonds which Henkin had pledged as collateral. Henkin and Skane completed the deal on October 9, 1985, and--to make the humiliation complete--Henkin's consulting and no-compete contract was reduced even further to $1,000 per year for twelve years.
However, Henkin's complaint about having to sell his companies for one dollar does not tell the whole story. In addition to the dollar, Henkin received $920,000 in cash, his collateral was released, the companies' obligations to GECC under the loan agreements were forgiven, the firms were indemnified against certain claims and environmental liabilities, and Henkin was given the employment contract. Henkin's compensation actually totalled $3,430,000, an amount that plaintiff himself described as extremely profitable for him (R. Item 120 at 4, p. 4 of attached first memorandum and order, and p. 16 of second attached memorandum and order). Nor is it clear how Henkin could have been forced to accept Skane's supposedly paltry offer with Skane since, by his own admission, he was free to negotiate with other companies until the actual sale in October 1985.
On May 30, 1990, District Judge Miller handed down a memorandum opinion and order granting Skane and Muskantor's motion for summary judgment on Henkin's actual fraud claim but denying summary judgment on plaintiff's constructive fraud claim. The other issues were decided against Henkin. That memorandum and order are attached to this Court's order.
On August 7, 1991, Judge Miller released another memorandum opinion and order disposing of Henkin's constructive fraud claim 2 and refusing to reconsider the earlier order granting the Swedish defendants summary judgment on the issue of actual fraud. That memorandum and order is also attached. Final judgment in their favor on all issues was entered on September 3, 1991. This appeal concerns only the actual and constructive fraud issues.
Since we fully agree with Judge Miller's reasoning, there is no need to elaborate upon his attached memoranda and orders. We affirm the summary judgment in Skane's and Muskantor's favor.
ATTACHMENT
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
Daniel J. Henkin, Plaintiff
vs
General Electric Credit Corp., et al., Defendants
Cause No. S87-598
(May 30, 1990)
MEMORANDUM AND ORDER
This cause comes before the court on a motion for summary judgment filed by defendants Bernhard Muskantor and Skane-Gripen AB ("Skane-Gripen"). On February 2, 1990, the court granted summary judgment in favor of defendant General Electric Credit Corporation ("GECC"). 1 For the reasons that follow, the court finds that the remaining defendants' motion should be granted in part and denied in part.
This case arises out of allegations by plaintiff Daniel J. Henkin that defendants Skane-Gripen and Bernhard Muskantor forced him to sell his companies for less than they were worth. Mr. Henkin alleges that the defendants initially offered an inflated price for his companies which they never intended to pay, doing so to eliminate other potential buyers. Mr. Henkin also alleges that the defendants conspired with GECC to force Mr. Henkin to sell only to Skane-Gripen. Then, when Skane-Gripen knew that Mr. Henkin had no alternatives, the defendants took advantage of financial pressure being applied by GECC and arbitrarily reduced the price they were willing to pay for the companies. Mr. Henkin seeks compensatory and punitive damages for the economic injury he allegedly suffered.
Mr. Henkin's amended complaint contains numerous claims against the defendants. Claim Four alleges that GECC and Skane-Gripen conspired to cut out potential alternative purchasers of the Henkin companies. Claim Six alleges that Skane-Gripen and Mr. Muskantor breached an implied covenant of good faith and fair dealing. Claim Seven alleges that the defendants knowingly and intentionally misrepresented their true intentions when they provided Mr. Henkin with the initial Purchase Agreement and Consulting and Non-Competition Agreement. Claims Eight, Nine, and Ten allege that the defendants conduct violated the Racketeering Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1661 et seq. Claims Eleven and Twelve allege that Mr. Henkin is entitled to punitive damages due to the defendants acting in a malicious and fraudulent manner and contrary to public policy. Claim Thirteen alleges that Skane-Gripen converted Mr. Henkin's personal property. The court will address each of these claims separately.
Mr. Henkin's companies were all involved in the manufacture and sale of musical instruments. The operation of these companies was financed in November of 1983 through a $35 million line of credit with GECC. As a condition precedent to obtaining the credit line, Mr. Henkin pledged his municipal bond portfolio worth at least $1.5 million to GECC. Mr. Henkin's companies defaulted on their obligations to GECC under the loan agreements.
In 1984, Mr. Henkin began trying to sell his companies to a number of potential buyers and attempting to raise capital for his companies through several brokerage houses. In 1985, Bernhard Muskantor began negotiations on behalf of Skane-Gripen for the purchase of the Henkin companies. Mr. Henkin states that at their first meeting he advised Mr. Muskantor of pressure that GECC, the main secured lender of Henkin's companies, was putting on him and that he was being forced to sell his companies as a result of this pressure. Mr. Muskantor states that Mr. Henkin initially advised him that he was selling his companies for health reasons. As negotiations progressed with Bernhard Muskantor, Mr. Henkin continued to negotiate with other potential buyers. Two attorneys and a financial consultant represented Mr. Henkin throughout the negotiations with Skane-Gripen.
During the course of the negotiations and Skane-Gripen's investigation of the companies, several material items were discovered which reduced the price Skane-Gripen was willing to pay for the companies. Mr. Henkin contends that Skane-Gripen was aware of these items before the final draft of the purchase and sale agreement was prepared. As evidence of Skane-Gripen's intention to isolate Mr. Henkin from other potential purchasers, Mr. Henkin submitted a copy of a draft of the purchase and sale agreement dated August 23, 1985. This draft contains a sale price of $4.5 million. Mr. Henkin contends that four days later as a result of financial pressure from GECC (and not, he maintains, as the result of material facts justifying a reduction in the purchase price), the defendants arbitrarily reduced the price they were willing to pay to a "mere one dollar" as evidenced by the August 27, 1985 final draft of the purchase and sale agreement.
Skane-Gripen vehemently objects to the authenticity of the August 23, 1985 draft of the purchase and sale agreement. The defendants contend that the only evidence before the court is that material facts continued to be disclosed up to the final closing on October 9, 1985, 2...
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