Unpublished Disposition, 855 F.2d 864 (9th Cir. 1988)

No. 87-2694.

United States Court of Appeals, Ninth Circuit.

Before SCHROEDER and WIGGINS, Circuit Judges, and ALBERT LEE STEPHENS,^**  Jr., District Judge.

MEMORANDUM^* 

Appellants Yarnevich and his wife appeal the district court's summary judgment against them. Yarnevich worked for Budd Company (Budd) in Michigan during the early 1980s. Budd Financial Corporation (BFC) is a wholly owned subsidiary of Budd and acts as a captive financier for Budd's equipment sales. From 1980 through 1984, a number of related companies ("Sundance") borrowed approximately 11 million dollars from BFC.

In 1982, Yarnevich was asked to transfer to Phoenix in part to help Sundance pay its indebtedness to BFC. In 1983, Sundance and BFC signed a "Master Agreement" which consolidated Sundance's indebtedness and changed repayment terms in exchange for more control over operations by BFC. Under the terms of the agreement, BFC acquired a lien over all Sundance assets, the right to choose the CEO, and the authority to approve expenditures over $5,000 and major changes in the business. In addition, Sundance pledged stock to BFC and agreed to vote that stock to elect two-thirds of the board of directors according to BFC's direction.

Yarnevich resigned from BFC and accepted the CEO position at Sundance. He claims that he accepted because of representations by his superior, McBrearty, that BFC would support Yarnevich's attempts to save Sundance from financial ruin, and that BFC or Budd would rehire Yarnevich if Sundance went out of business. However, Yarnevich did not seek more specific details concerning these promises and did not put any of these promises in his employment agreement with Sundance; his contract stated only that Sundance could terminate him for abuse of trust or if Sundance defaulted on any of its obligations to BFC.

Yarnevich was CEO for fifteen months during which he and other Sundance employees had sole authority over operational decisions at Sundance, although Yarnevich often consulted with McBrearty. Sundance was not timely on its loan payments and by late 1984, over $300,000 in employment taxes were also unpaid. BFC extended Sundance another two million dollars during that time. In January, 1985, BFC foreclosed on Sundance's loans and asked Yarnevich to sign a consent agreement to the foreclosure. Yarnevich refused, but signed after consulting his attorney. Yarnevich left Sundance; he never requested that BFC or Budd rehire him.

Yarnevich sued appellees in state court for breach of contract, wrongful termination, wrongful interference with contract and fraud and misrepresentation; appellees removed. Fifteen months after the filing of the complaint, and only seventeen days before the pretrial statement was due, appellants moved to amend. The district court allowed addition of Budd as a defendant but refused to allow addition of claims for negligence and bad faith. The district court later granted appellees' motion for summary judgment on all claims.

Appellants' breach of contract, wrongful termination and misrepresentation claims are based on allegations that BFC was the alterego of Sundance and that it caused Sundance to breach appellant's employment contract. The corporate veil between two companies will be pierced only if the dominant company has total control and dominion over the subsidiary company. Ize Nantan Bagona, Ltd. v. Scalia, 118 Ariz. 439, 442, 577 P.2d 725, 729 (Ct.App.1978); Savage v. Royal Prop., Inc., 4 Ariz.App. 116, 118, 417 P.2d 925, 927 (1966). The subsidiary company must manifest no separate corporate interests of its own and function solely to achieve the purposes of the dominant company. Kilkenny v. Arco Marine, Inc., 800 F.2d 853, 859 (9th Cir. 1986), cert. denied, 107 S. Ct. 1575 (1987).

In this case, appellants have not made any showing that BFC was the alterego of Sundance. Although Yarnevich alleges that he consulted with McBrearty on Sundance decisions, he admits that he alone made operating decisions for the company. In addition, there was no evidence that BFC dictated which creditors to pay or when to pay them, nor evidence that Sundance could not decide when to acquire assets or liabilities up to $5,000 without BFC's approval. Finally, although Sundance agreed to provide BFC with its monthly financial statements and access to its books, this agreement was consistent with BFC's creditor-debtor relationship with Sundance. See Krivo Indus. Supply Co. v. National Distillers & Chem. Corp., 483 F.2d 1098, 1105-06 (5th Cir. 1973). Appellants have failed to show any facts suggesting that BFC totally dominated Sundance and therefore cannot prove an alterego relationship.

Appellants' breach of contract, wrongful termination and fraud and misrepresentation claims all stand on the theory that BFC, as Sundance's alterego, was Yarnevich's employer liable for the above actions. Because appellants' allegations of an alterego relationship fail, appellants' three claims based on that alleged relationship also fail.

Appellants also claim wrongful interference by BFC with contractual relations, assuming that BFC was not Sundance's alterego. The elements of a wrongful interference claim are the existence of a valid contract, knowledge of the relationship on the part of the interferer, intentional interference causing termination of the relationship and damage to the party whose relationship has been terminated. Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 386, 710 P.2d 1025, 1041 (1985). Yarnevich argues that he was wrongfully terminated from Sundance because of BFC's fraudulent foreclosure. However, Yarnevich's contract stated that he could be immediately terminated if he abused Sundance's trust or if Sundance was not current on its obligations to BFC. At the time of the foreclosure, employment taxes had not been paid and Sundance was grievously behind in its loan payments. Therefore, under Yarnevich's employment contract, Sundance had every right to terminate him.

In addition, BFC's loan contract contained a clause stating that any waiver by BFC of timely loan payments from Sundance would not limit BFC's rights. Even if BFC's foreclosure somehow interfered with Yarnevich's contractual relationship with Sundance, a plaintiff must show that the interferer's conduct was somehow improper. Id. In this case, BFC had every right to foreclose on Sundance given its wretched credit history. Therefore, appellants' wrongful interference claim was properly dismissed on summary judgment.

Appellants finally argue that the district court erred by not allowing them to amend their complaint. However, their motion to amend came only seventeen days before the pretrial statement was due. The district court did not abuse its discretion by deciding that appellants could not add two entirely new claims that late in the game. Gabrielson v. Montgomery Ward & Co., 785 F.2d 762, 765 (9th Cir. 1986).

AFFIRMED.