Sullivan v. Finn

• Court: District Court, N.D. California
• Decided: December 4, 2019
• Docket: 3:17-cv-05799
• Status: Unknown

Opinion

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 KELLEEN F. SULLIVAN, et al., Case No. 3:17-cv-05799-WHO

8 Plaintiffs, ORDER GRANTING IN PART AND 9 v. DENYING IN PART MOTION FOR JUDGMENT ON THE PLEADINGS 10 STEPHEN A. FINN, et al., Re: Dkt. No. 70 Defendants. 11

12 13 Siblings and plaintiffs Kelleen and Ross Sullivan aim to show that defendant Stephen 14 Finn,1 Kelleen’s ex-husband, breached his fiduciary duty as a fellow shareholder in their family 15 winery, the Sullivan Vineyards Corporation (“SVC”) and Sullivan Vineyards Partnership 16 (“SVP”). To pursue their claims, the Sullivans must allege harm that is more than incidental to the 17 harm Finn undeniably caused to SVC and SVP, which settled a bankruptcy case earlier this year. 18 Before me is Finn’s motion for judgment on the pleadings of the first amended complaint. As set 19 forth below, I conclude that the Sullivans allege at least some harm that stands apart. 20 Accordingly, I will grant the motion in part and deny it in part. 21 BACKGROUND 22 I. FACTUAL HISTORY 23 The Sullivans allege that from 2011 to 2016, Finn took a series of actions to obtain control 24 over SVC and SVP, drive the business into debt, and accrue credit in his favor. The first amended 25 complaint (“FAC”) alleges that while Kelleen and Finn were engaged, Finn began harassing 26

27 1 The Sullivans also bring claims against Trust Company of America, Inc. (“TCA”), a company in 1 Kelleen and Ross’s mother Joanna to sell him her interests in SVC and SVP. FAC ¶ 22. During 2 this time, he convinced Joanna to stop making payments on SVC’s loan from the Bank of 3 Alameda (“Alameda Bank Note”), and she did so. Id. ¶ 24. Finn then purchased the Alameda 4 Bank Note at a discount. Id. While Finn and Kelleen were on their honeymoon, Joanna informed 5 Finn that she would not sell him her interests in the companies; Finn’s lawyers then sent Joanna a 6 notice requiring that she pay the principal and fees on the overdue Alameda Bank Note within nine 7 days or face foreclosure. Id. ¶ 25. Joanna then agreed to sell Finn her shares in SVC and SVP, 8 giving him a 48.57% interest in SVC and a 49.9% interest in SVP.2 Id. ¶¶ 25-26. 9 In March 2012, Finn secured a loan from Silicon Valley Bank on behalf of SVC and SVP 10 (“the SVB Note”). Id. ¶ 29. Finn misrepresented to Kelleen and Ross that he would personally 11 guarantee the loan, meaning that they would not be personally liable. Id. ¶ 30. Instead, Finn’s 12 guarantee meant that after Kelleen regained control of Finn’s shares after their divorce, she and 13 Ross could not refinance the debt without Finn’s approval. Id. ¶ 30. 14 Also in March 2012, Ross approved warrants that would allow Finn to obtain an additional 15 25% interest in SVP for $200,000 payable to SVP, and an additional 10% interest in SVC for 16 $50,000 payable to SVC. Id. ¶¶ 31, 33. Finn assured the Sullivans that he had no intention of 17 exercising the warrants and that they would lapse when the business’s financial health improved. 18 Id. ¶ 31. In May 2014, Finn exercised the warrants, which gave him a majority interest in both 19 SVC and SVP. Id. ¶ 35. Because of Finn’s exercise of the warrants, “the interests of Kelly and 20 Ross [in SVC and SVP] were each decreased by almost 10%.” Id. ¶¶ 36, 37. 21 On May 17, 2012, SVC and SVP executed a Subordinated Secured Grid Promissory Note 22 (“the Grid Note”) for Finn’s benefit. Id. ¶ 38. Finn led the Sullivans to believe that the Grid Note 23 capped loan advances at $500,000 and that a partner other than Finn would have to approve loan 24 advances from him. Id. ¶¶ 40, 41. With these understandings, they approved the Grid Note. Id. ¶ 25 44. Instead, the Grid Note had no cap, and individuals who reported to Finn had the power to 26 authorize borrowing. Id. ¶ 41. The Sullivans were not aware that if they wanted to refinance the 27 1 SVP Note, they would have to secure Finn’s approval as to the Grid Note. Id. ¶ 42. 2 Finn used the Grid Note to cause SVC and SVP to become indebted to him in the amount 3 of $4,600,000. Id. ¶ 45. This action violated the debt limit of the Purchase Agreement between 4 Joanna and Finn, which capped loans from Finn at $500,000. Id. “Finn’s actions in violating the 5 debt limit of the Purchase Agreement effectively rendered the ownership interests of Plaintiffs 6 nearly worthless because they were saddled with untenable debt, while his interest remained intact 7 because the debt was owed to him.” Id. ¶ 45. No disinterested SVP partner approved these 8 advances. Id. ¶ 48. Kelleen and Ross were not aware of them until after June 2015. Id. 9 Also under Finn’s direction, SVP reported in its 2013 and 2014 tax returns that it had paid 10 interest on the Grid Note. Id. ¶ 50. He had SVP issue him K-1s to support deductions on his 11 personal returns. Id. The Sullivans did not receive the same benefit. Id. In May 2013, Finn fired 12 Ross as SVC’s CEO. Id. ¶ 60. He gave excessive compensation to an unqualified replacement 13 team. Id. ¶¶ 60-66. 14 On October 7, 2015, the pending divorce between Kelleen and Finn became final, and the 15 Colorado court awarded Finn’s interests in SVC and SVP to Kelleen. Id. ¶ 70. The SVC 16 shareholders immediately removed Finn from the board, along with an individual he had 17 appointed. Id. Despite losing his interest in the companies, Finn “continued to participate in 18 management of SVC and SVP and exercised discretionary authority relating to both,” meaning he 19 “continued to have fiduciary duties.” Id. ¶¶ 71, 79. He told one employee to “‘spend as she 20 wished.’” Id. ¶ 80. Finn “continued to hold himself out as holding a fiduciary position, in court 21 and in his dealings with financial institutions.” Id. ¶ 83. 22 After the divorce, several employees Finn had hired quit their positions within SVC and 23 SVP and then filed wrongful termination lawsuits against the companies at Finn’s direction. Id. ¶¶ 24 87-88. Finn paid the employees’ legal expenses for those cases. Id. ¶ 88. The Sullivans and other 25 family members have been forced to initiate litigation against Finn. Id. ¶ 92 (listing litigation 26 costs for which Kelleen has not been reimbursed). Kelleen also incurred legal fees defending 27 against the first suit Finn initiated in this Court. Id. ¶ 93. 1 “stating only that Plaintiffs ‘weren’t Finn.’” Id. ¶ 89. In April 2016, Finn convinced SVB to sell 2 the SVB Note to him. Id. ¶ 90. In the summer of 2016, Finn initiated foreclosure proceedings 3 against SVC and SVP with respect to the SVB Note and the Grid Note. Id. ¶ 91. 4 II. PROCEDURAL HISTORY 5 The Sullivans initiated this case on October 6, 2017. Dkt. No. 1. Finn then moved to 6 transfer the case to bankruptcy court, where the Honorable Roger L. Efremsky was presiding over 7 a matter involving the same nucleus of facts. Dkt. No. 19. On March 8, 2018, I issued a short 8 order on Finn’s motion to transfer. Order on Mot. to Transfer [Dkt. No. 41]. After issuing that 9 Order, I referred the case to the Hon. Dennis Montali for settlement. Dkt. No. 42. The parties 10 were not able to reach a global settlement, but eventually Chapter 11 Trustee Timothy Hoffman 11 “negotiated a compromise involving all principal parties in the Bankruptcy Cases save for the 12 Sullivans.” Request for Judicial Notice3 (“RJN”) Ex. B [Dkt. No. 51-2], Declaration of Aron 13 Oliner (“Oliner Decl.”) ¶ 18. On April 3, 2019, Hoffman filed an application for an order 14 authorizing him to enter into that compromise on behalf of SVC and SVP. RJN Ex. A [Dkt. No. 15 51-1]. Bankruptcy Judge Roger L. Efremsky issued such authorization on May 20, 2019. RJN 16 Ex. C [Dkt. No. 51-3]. 17 In the settlement, the Trustee, acting on behalf of SVC and SVP, released all claims that 18 were within his power to release: “For the avoidance of doubt, the Trustee is providing the Settling 19 Creditors with the broadest possible release he may provide on behalf of the Estates . . . .” RJN 20 Ex. B4 ECF p.9–17 (“Settlement Agreement” or “Agreement”) 4. The Agreement went on to note, 21 “The Trustee is not releasing any Claims held directly and exclusively by Ross Sullivan or Kelleen 22 Sullivan as individuals but the Trustee is releasing Claims of the Estate that could discharge 23 derivative or indirect claims by Ross Sullivan or Kelleen Sullivan . . . .” Id. The parties then 24

25 3 Addressing Finn’s first motion for judgment on the pleadings, I granted his request for judicial notice of certain documents filed in the parties’ bankruptcy proceeding in the United States 26 Bankruptcy Court for the Northern District of California, entitled In re Sullivan Vineyards Corporation and In re Sullivan Vineyards Partnership, N.D. Cal. Bankruptcy Court Case No 17- 27 10065-RLE-11. 1 stipulated to dismiss with prejudice the adversary bankruptcy proceeding. RJN Ex. D [Dkt. No. 2 51-4]. 3 On June 12, 2019, Finn filed a motion for judgment on the pleadings, arguing that the 4 complaint alleged no harm distinct from the harm to SVC and SVP. Dkt. No. 50. On September 5 6, 2019, I denied that motion but dismissed the complaint with leave to amend to allege claims 6 that were independent of the corporations’ claims. Dkt. No. 67. The Sullivans filed a first 7 amended complaint (“FAC”) on September 26, 2019, and on October 10 Finn moved for judgment 8 on the pleadings. Motion (“Mot.”) [Dkt. No. 70]. 9 LEGAL STANDARD 10 A motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) 11 utilizes the same standard as a motion to dismiss for failure to state a claim under Federal Rule of 12 Civil Procedure 12(b)(6). Cafasso, United States ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 13 1047, 1055 n.4 (9th Cir. 2011). Under both provisions, the court must accept the facts alleged in 14 the complaint as true and determine whether they entitle the plaintiff to a legal remedy. Chavez v. 15 United States, 683 F.3d 1102, 1108 (9th Cir. 2012) (citation omitted). Either motion may be 16 granted only when it is clear that “no relief could be granted under any set of facts that could be 17 proven consistent with the allegations.” McGlinchy v. Shull Chem. Co., 845 F.2d 802, 810 (9th 18 Cir. 1988) (citations omitted). Dismissal may be based on the absence of a cognizable legal theory 19 or the absence of sufficient facts alleged under a cognizable legal theory. Robertson v. Dean 20 Witter Reynolds, Inc., 749 F. 2d 530, 534 (9th Cir. 1984). 21 A plaintiff’s complaint must allege facts to state a claim for relief that is plausible on its 22 face. See Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009). A claim has “facial plausibility” when the 23 party seeking relief “pleads factual content that allows the court to draw the reasonable inference 24 that the defendant is liable for the misconduct alleged.” Id. Although the court must accept as 25 true the well-pleaded facts in a complaint, conclusory allegations of law and unwarranted 26 inferences will not defeat an otherwise proper motion. See Sprewell v. Golden State Warriors, 27 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s obligation to provide the ‘grounds’ of his 1 elements of a cause of action will not do. Factual allegations must be enough to raise a right to 2 relief above the speculative level.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) 3 (citations and footnote omitted). 4 DISCUSSION 5 The Sullivans raise new allegations in support of their claims for breach of fiduciary duty 6 and for aiding and abetting breach of fiduciary duty along with pleading new claims for fraud and 7 intentional infliction of emotional distress (“IIED”). As was true in the last round of Finn’s 8 motion, there is no dispute that the Settlement Agreement resolved all claims for damage to SVC 9 and SVP and that it expressly did not release the Sullivans’ individual claims, to the extent they 10 exist. See Oppo. 7; Reply 6. The question before me is whether the Sullivans have plausibly 11 pleaded individual claims that stand separate and apart from the damages Finn’s actions caused to 12 SVP and SVC. Finn also challenges the Sullivans’ fraud claim for lack of particularity and 13 Kelleen’s new IIED claim for being outside the statute of limitations and for failing to allege any 14 sufficiently outrageous conduct. 15 A. Breach of Fiduciary Duty 16 A shareholder may bring an individual rather than derivative action “only if the damages 17 were not incidental to an injury to the corporation.” Nelson v. Anderson, 72 Cal. App. 4th 111, 18 124 (1999), as modified on denial of reh’g (June 14, 1999). A personal claim “originate[s] in 19 circumstances independent of [the plaintiff’s] status as a shareholder.” Hilliard v. Harbour, 12 20 Cal. App. 5th 1006, 1015 (Ct. App. 2017), review denied (Sept. 13, 2017) (citing Nelson, 72 Cal. 21 App. 4th at 124). By contrast, an action is derivative “if the gravamen of the complaint is injury to 22 the corporation, or to the whole body of its stock and property without any severance or 23 distribution among individual holders, or it seeks to recover assets for the corporation or to 24 prevent the dissipation of its assets.” Jones v. H. F. Ahmanson & Co., 1 Cal. 3d 93, 106 (1969) 25 (internal quotation marks and citation omitted). “[T]he pivotal question is whether the injury is 26 incidental to or an indirect result of a direct injury to the corporation or to the whole body of its 27 stock or property.” Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). 1 plaintiff alleged “that he was deprived of a fair share of the corporation’s profits as a result of 2 defendants’ generous payment of excessive compensation to themselves.” Jara v. Suprema 3 Meats, Inc., 121 Cal. App. 4th 1238, 1258 (2004) (noting that the defendants admitted on cross- 4 examination that the bonuses were designed to reduce the profits that had to be shared with the 5 plaintiff). Unlike in Jones, where the allegedly wrongful conduct “had no effect whatever on the 6 underlying business,” the excessive compensation “did have the potential of damaging the 7 business.” Id. (discussing Jones, 1 Cal. 3d at 106). But the plaintiff did not argue the business 8 would have performed better but for the wrongful conduct; instead, his claim was based on his 9 own lack of access to the business’s profits. Jara, 121 Cal. App. 4th at 1258. 10 Turning to the instant case, I conclude that some of the Sullivans’ theories of breach 11 survive while others do not. The allegations related to the Alameda Bank Note and the warrants 12 cannot proceed because the individual harm alleged is simply too wound up in harm to the 13 business. The Sullivans allege Finn purchased the Alameda Bank Note at a discount allegedly in 14 order to bully Joanna Sullivan into selling her shares. See Oppo. 6 (citing FAC ¶ 24). Because 15 this conduct occurred prior to Finn’s purchase of Joanna’s interests, he was not a shareholder of 16 SVC and SVP and thus owed no fiduciary duty to Kelleen and Ross. The Sullivans also raise 17 Finn’s decision to exercise the warrants despite having told them that he would not do so. 18 Although this action allegedly caused each of the Sullivans’ interests to go down by almost 10%, 19 there is no individual injury because all of Finn’s shares reverted back to Kelleen after the October 20 2015 divorce. See FAC ¶¶ 36, 37; Reply 3. The Sullivans assert that they still experienced an 21 injury because the recovered shares were in a state of diminished value, but that harm is 22 indistinguishable from the harm felt by the body of stock as a whole due to Finn’s conduct. These 23 theories fail. 24 The allegations related to the Grid Note survive in part for two reasons. First, the amended 25 complaint alleges that Finn used SVP’s interest payments on the Grid Note to support deductions 26 on his personal tax returns. FAC ¶ 50. He did not allow the Sullivans access to those same tax 27 benefits related to the Grid Note. Id. Second, the Sullivans allege that the Grid Note was 1 see also id. ¶ 45 (noting that “the debt was owed to [Finn]”). For this reason, Finn’s conduct 2 stands apart from cases where mere mismanagement of a corporation is alleged: his actions 3 created a debt that was owed to Finn himself. It is beyond dispute that Finn’s actions harmed the 4 business5—which makes this case closer than some the parties have cited—but the Sullivans also 5 allege a distinct harm caused to them. Through both the tax deductions and the credit in his favor, 6 Finn allegedly claimed a benefit for himself without giving the Sullivans access to the same. 7 The allegations related to attorney fees also survive. The Sullivans assert that Kelleen was 8 forced to pay to defend against sham claims brought at Finn’s behest. FAC ¶¶ 87-88, 92. Finn 9 first counters that the American Rule bars Kelleen’s recovery of attorney fees. Mot. 10-11. That 10 is wrong. The Sullivans do not seek attorney fees during the course of a case against Finn; rather, 11 they seek money damages for breach of fiduciary duty, as measured by the attorney fees Kelleen 12 paid in previous cases. See Oppo. 10. While Finn also criticizes the Sullivans’ failure to cite 13 authority showing that attorney fees are recoverable for a breach of fiduciary duty claim, he cites 14 no authority establishing that attorney fees would not be recoverable as money damages. See 15 Reply 4. 16 Finn next asserts that he owed the Sullivans no fiduciary duty when the alleged attorney 17 fee damages occurred, because he and Kelleen had divorced and he was no longer a shareholder of 18 SVC and SVP. It is true that there was no obvious fiduciary duty after Finn lost his interests and 19 was removed from his leadership positions within SVC and SVP. But at this stage of the case the 20 Sullivans need not prove that Finn owed them a fiduciary duty; they need only have pleaded a 21 theory under which such a duty survived the divorce. 22 The FAC pleads that Finn held himself out to financial institutions and employees as 23 retaining his position of authority and control, meaning he still owed a fiduciary duty. FAC ¶¶ 71, 24 79, 83. In their opposition to Finn’s motion, the Sullivans cite cases suggesting they might be able 25 to show a duty “undertaken by agreement.” Under California law, there are two types of fiduciary 26

27 5 The Sullivans may not proceed with any theories of breach that rely on harm to the business, 1 duties: “those imposed by law and those undertaken by agreement.” GAB Bus. Servs., Inc. v. 2 Lindsey & Newsom Claim Servs., Inc., 83 Cal. App. 4th 409, 416 (2000), as modified (Sept. 14, 3 2000), as modified on denial of reh’g (Sept. 26, 2000), and disapproved of on other grounds 4 by Reeves v. Hanlon, 33 Cal. 4th 1140, 95 P.3d 513 (2004). “A fiduciary duty is undertaken by 5 agreement when one person enters into a confidential relationship with another.” Id. at 417. 6 “Generally, the existence of a confidential relationship is a question of fact for the jury or the trial 7 court.” Barbara A. v. John G., 145 Cal. App. 3d 369, 383 (1983). 8 In Barbara A., the court faced “unique facts” that compelled it to submit to the jury the 9 question of the bounds of a fiduciary relationship. Id. at 384. The plaintiff in that case alleged 10 damages stemming from an attorney-client relationship that became sexual. Id. at 374-75. The 11 court decided against determining as a matter of law that the attorney owed the client a fiduciary 12 duty with respect to all his relations with her. Id. at 384. Instead, the existence of a confidential 13 relationship was “more properly a question of fact for the jury, or court, who [could] better assess 14 whether the legal relationship was dominant or whether the parties functioned on a more equal 15 basis in their personal relations.” Id. 16 Here, too, the factual scenario alleged is unusual. The Sullivans assert that Finn 17 maintained influence over SVC and SVP because of the Grid Note, for which he was creditor, and 18 because of his relationship with the Silicon Valley Bank. I need not decide now that the Sullivans 19 will be able to show a fiduciary duty existed; I need only decide based on the complaint whether 20 such a possibility is entirely foreclosed. I cannot conclude that is the case. 21 For all of these reasons, the Sullivans can proceed with their individual breach of fiduciary 22 duty claims based on the theories set forth above. 23 B. Fraud, Aiding and Abetting Fraud, and Unfair Business Practices 24 Finn moves for judgment on the fraud, aiding and abetting fraud, and unfair business 25 practices causes of action on the same grounds. Because the Sullivans’ breach of fiduciary duty 26 claims survive in part, these claims also survive on those same narrow grounds. 27 C. Particularity of Fraud Allegations 1 by Federal Rule of Civil Procedure 9(b). Instead, according to Finn, the FAC “alleg[es] only in 2 general terms that Finn made certain misrepresentations.” Mot. 14. 3 Rule 9(b) of the Federal Rules of Civil Procedure requires plaintiffs to plead fraud with 4 particularity. FED. R. CIV. P. 9(b). The complaint must identify “the circumstances constituting 5 fraud so that the defendant can prepare an adequate answer from the allegations.” Bosse v. 6 Crowell Collier & MacMillan, 565 F.2d 393, 397 (9th Cir. 1973). The information should include 7 “the time, place, and specific content of the false representations as well as the identities of the 8 parties to the misrepresentation.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 9 1393, 1401 (9th Cir. 1986). 10 The Sullivans allege that Finn made seven fraudulent misrepresentations to them. FAC ¶ 11 146. He represented that (1) his personal guarantee of the SVB Note would relieve them of 12 personal liability, (2) he had no intention of exercising the warrants, (3) under the terms of the 13 Grid Note an SVP partner other than Finn was required to request advances, (4) under the terms of 14 the Grid Note a disinterested officer of SVC was required to request advances, (5) total advances 15 under the Grid Note were limited to $500,000, (6) other agreements were in place pursuant to 16 which an SVP partner other than Finn was required to request advances under the Grid Note, and 17 (7) other agreements were in place pursuant to which a disinterested officer of SVC was required 18 to request advances under the Grid Note. Id. Only some of these allegations include harm that 19 stands apart from the harms to the businesses, but those that survive are sufficient to satisfy the 20 heightened pleading standard for fraud. They allege who (Finn) made what (the specific 21 misrepresentations above), to whom (Kelleen and Ross), and when (May 2012). 22 D. IIED 23 The FAC alleges that during their marriage, Finn “engaged in repeated acts of verbal abuse 24 and contempt” toward Kelleen, that he threatened to kill her, that he committed adultery, and that 25 he brought prostitutes into their home. FAC ¶ 139. Finn knew that she was “vulnerable to 26 emotional distress,” and his conduct caused her to experience “severe anguish, fright, horror, 27 nervousness, anxiety, humiliation, shock[,] and severe emotional distress” within two years of 1 IIED has three elements: “(1) extreme and outrageous conduct by the defendant with the 2 intention of causing, or reckless disregard of the probability of causing, emotional distress; (2) the 3 plaintiff suffered severe or extreme emotional distress; and (3) the plaintiff’s injuries were actually 4 and proximately caused by the defendant’s outrageous conduct.” Cochran v. Cochran, 65 Cal. 5 App. 4th 488, 494 (1998). To meet the first element, the conduct “must be so extreme as to 6 exceed all bounds of that usually tolerated in a civilized community.” Id. (internal quotation 7 marks omitted). No cause of action lies for “‘mere insults, indignities, threats, annoyances, petty 8 oppressions, or other trivialities.’” Id. at 496 (quoting Rest. 2d Torts § 46, com. d). Although 9 outrageous conduct must be assessed on a case-by-case basis, “the appellate courts have affirmed 10 orders which sustained demurrers on the ground that the defendant’s alleged conduct was not 11 sufficiently outrageous.” Id. at 494. No cause of action for IIED lies where feuding in an intimate 12 relationship include “hostile unpleasantries” and death threats not accompanied by steps to carry 13 out those threats or “make [them] appear more real.” Id. at 498. 14 Taking Kelleen’s allegations as true, I will assume that she has stated a claim for IIED. 15 However, the statute of limitations applies to bar her claim. 16 The marriage between Kelleen and Finn ended on October 7, 2015, meaning that 17 outrageous acts she describes occurred well prior to that date. The complaint was filed October 6, 18 2017. A two-year statute of limitations from California Code of Civil Procedure section 335.1 19 applies to claims for IIED. See Pugliese v. Superior Court, 146 Cal. App. 4th 1444, 1450 (2007). 20 The Sullivans nevertheless argue that the statute of limitations does not bar their claims because 21 “an action for intentional infliction of emotional distress does not accrue until plaintiff has been 22 severely impacted by the emotional distress.” Oppo. 13. 23 The Sullivans rely on Murphy to support their argument. In that case, the court noted that 24 “the conduct complained of [was] continuing in nature encompassing a period of several years and 25 the emotional distress alleged [was] also of a continuing nature.” Murphy v. Allstate Ins. Co., 83 26 Cal. App. 3d 38, 51 (1978). Two questions of fact prevented the court from concluding that the 27 plaintiffs’ cause of action had accrued at a time that meant the suit was barred. Id. First, there 1 outrageous.” Jd. Second, there was a question over the point at which “the plaintiff's emotional 2 distress [had become] sufficiently severe.” Id. 3 Here, the FAC specifically alleges that Finn’s conduct occurred during the course of his 4 || marriage to Kelleen, so the former question of fact is not present. And it is not plausible that her 5 alleged severe emotional distress did not arise prior to the day her divorce became final. In this 6 || regard, the Sullivans’ reliance on Pooshs v. Philip Morris USA, Inc., 51 Cal. 4th 788, 802 (2011) 7 is entirely unpersuasive. There, the Supreme Court of California determined that a claim was not 8 || barred as a matter of law insofar as it was based on a distinct disease that in fact surfaced within 9 the statute of limitations period. Jd. By contrast, claims based on the diseases that had been 10 || diagnosed earlier were barred. Id. at 801, 796. Although smoking had caused all of the alleged 11 injuries, plaintiff could not have been expected to sue for damages related to a disease prior to that 12 || disease surfacing. See id. at 802. By contrast here, the same alleged conduct caused Kelleen the 5 13 same alleged injury, namely severe emotional distress. See id. at 801 (emphasizing that “the 14 || injuries arose at different times and were separate from one another”). Accordingly, an TED 3 15 || cause of action accrued prior to two years before the date of the original complaint. Finn is 16 || entitled to judgment on the HED claim. CONCLUSION 18 For these reasons, Finn’s motion is GRANTED as to the ITED claim. It is DENIED as to 19 || the remaining claims. The Sullivans may proceed only on the theories approved herein. 20 A Case Management Conference is set for January 14, 2020 at 2 p.m. A Joint Case 21 Management Statement shall be filed no later than January 7, 2020, setting forth a proposed 22 || calendar for case through trial and raising any other issues that may impede (or enhance) an 23 expeditious resolution of this matter. 24 IT IS SO ORDERED. 25 Dated: December 4, 2019 26 . 27 28 l Tam H. Orrick United States District Judge