DTO Law Secures Victory on Behalf of American Honda Motor, Inc.

In Shernaman Enterprises, Inc., et al. v. American Honda Motor, Inc., Case No. 20STCV24375 (LA Sup. Ct.), DTO Law secured a victory on behalf of client American Honda Motor, Inc. (“AHM”) when Superior Court Judge Rafael Ongkeko sustained DTO’s demurrer without leave to amend.

In 2006, Plaintiff Daniel McCullen, the owner of a Honda motorcycle, injured himself in an accident in Missouri. In 2011, he sued AHM and its authorized dealer, Shernaman, claiming the motorcycle had a design flaw. AHM vigorously defended itself in the Missouri action, ultimately securing a dismissal with prejudice. Shernaman, on the other hand, did not defend itself at all. Instead, after falling into default, it entered into a special agreement, permitted by a Missouri statute, with McCullen. The agreement provided McCullen would take judgment against Shernaman in the amount of approximately $11 million; in return, McCullen agreed to execute the judgment against Shernaman’s insurers and indemnitors only. The Missouri judgment issued in 2014.

McCullen first sought to enforce the judgment against Shernaman’s insurers in Missouri, but that lawsuit failed. He then sued AHM in Missouri, alleging it was Shernaman’s indemnitor. After Shernaman was added as a plaintiff, the lawsuit was dismissed because the dealer agreement between Shernaman and Honda required any suit between them to be filed in California.

In a last-ditch effort, in 2020, McCullen and Shernaman filed a lawsuit against AHM in California. Shernaman claimed AHM had failed to indemnify it as required by the Honda dealer agreement, and McCullen argued he was allowed to execute his judgment against AHM as part of a “Creditor’s Suit” claim.

On behalf of AHM, DTO Law filed a demurrer, arguing that: (i) the dealer agreement contained a valid choice-of-law provision identifying California law; (ii) the choice-of-law provision included California’s statute of limitations; (iii) the statute of limitations had expired as to all of Plaintiffs’ claims; and (iv) Plaintiffs could not avail themselves of California’s borrowing statute to displace California law with Missouri’s law, which had a longer limitations period.

After considering AHM’s demurrer, the Court agreed with AHM’s statute of limitations argument and found Shernaman had failed to bring its breach of contract within the statutory time period of four years. Therefore, all of its claims were time-barred. Further, because a Creditor’s Suit borrows the limitation period from the underlying cause of action, McCullen’s claim was similarly time-barred. The Court therefore sustained AHM’s demurrer without leave to amend, and judgment was entered in AHM’s favor.