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Appeals Court Finds Choice-of-Forum Clause Unenforceable in Lemon-Law Case
By a MetNews Staff Writer
Div. Two of this district’s Court of Appeal has issued an opinion in a case brought under the state’s “lemon law” which appears destined for review by the California Supreme Court because it raises an issue already before that tribunal: the enforceability of a choice-of-forum clause in a contract for the purchase of a vehicle which specifies that proceedings be conducted in Indiana.
The latest opinion invalidating such a clause—in light of the express unwaivability of rights under the Song-Beverly Consumer Warranty Act—comes in an unpublished opinion by Justice Anne Richardson, filed Tuesday. That jurist wrote a published opinion in Hardy v. Forest River, Inc, filed Jan. 9, that reached the same conclusion.
So did Div. Seven of this district’s Court of Appeal in Lathrop v. Thor Motor Coach, Inc., filed Oct. 7, 2024. Justice John L. Segal authored that opinion.
The latest case is Severo v. Forest River, Inc., B336863.
Although the defendant in each of the cases was willing to stipulate that California law would be applied in the foreign jurisdiction, that, the opinions declare, does not suffice.
Representing the appellants in all three cases were Lawrence J. Hutchens of Cerritos and San Diego practitioner Shay Dinata-Hanson.
Rosales’s Ruling
Tuesday’s opinion reverses an order by Los Angeles Superior Court Judge Olivia Rosales. On Dec. 27, 2023, she granted defendant Forest River’s motion to stay proceedings in California while plaintiff Michael V. Severo Jr. litigates in the Hoosier state, saying:
“Defendant has met its burden of proving that the forum selection clause is enforceable because Plaintiff’s Song-Beverly Act rights can be readily preserved, and the forum selection clause is not unconscionable….Plaintiff argues that a stipulation to not oppose applying the Song-Beverly Act in Indiana will not preserve Plaintiff s rights because the Indiana court must determine whether to apply California Song-Beverly Act to the matter in Indiana. However, this concern can be remedied by staying this matter while the Indiana case is pending and should the Indiana court decline to apply the Song-Beverly Act, then Plaintiff can move to lift the stay on this matter.”
Rosales instructed that “Defendant is to sign a stipulation to not oppose the application of California law in Indiana courts.”
Richardson’s Opinion
Richardson wrote that the conclusion reached by Rosales “does not withstand scrutiny as it is directly contrary to California public policy.” She said, echoing a point raised by Segal in Lathrop:
“[R]ewriting a contract to conform to California law only after a party has sued does not further the interests of justice; it does not protect those consumers who, unaware of their unwaivable rights, either file suit in Indiana or are dissuaded from filing suit at all because of the forum selection clause, and it does nothing to provide an incentive to the company to modify its warranty to comply with California law.”
Addressing the feasibility of a Los Angeles judge declaring a resumption of jurisdiction here if an Indiana court were to fail to faithfully apply the Song-Beverly Act, Richardson raised a concern as to “at what point, the California trial court would or could entertain a motion to lift the stay.” She queried:
“Would it be proper to do so whenever the Indiana court made a ruling that Severo believed contrary to the requirements of the Song-Beverly Act, even though the Indiana court stated that it was following California law?”
Wording of Contract
Severo purchased a $230,840.80 trailer from Mike Thompson RV in Santa Fe Springs, a city in Los Angeles County. The warranty sets forth a choice-of-forum clause, reading:
“EXCLUSIVE JURISDICTION FOR DECIDING LEGAL DISPUTES RELATING TO THIS LIMITED WARRANTY, AN ALLEGED BREACH OF WARRANTY, BREACH OF IMPLIED WARRANTIES, OR REPRESENTATIONS OF ANY KIND MUST BE FILED IN THE COURTS WITHIN THE STATE OF INDIANA.”
There is also an Indiana choice of law clause.
Richardson said “that the request to stay the action pending transfer to Indiana to allow the Indiana court to apply California law is effectively a request to sever the choice of law provision from the agreement and enforce the forum selection clause.” The justice wrote that the California Supreme Court “has instructed that the time to look at a contract for unconscionability is as of the date it is written,” that the contract was unconscionable at the inception, and may not be judicially rewritten.
Supreme Court Decision
She remarked in a footnote:
“The California Supreme Court granted review of Lathrop and Hardy with briefing deferred pending decision in EpicentRx, Inc. v. Superior Court…. Subsequently, the Supreme Court issued its ruling in EpicentRx, holding that a ‘forum selection clause is not unenforceable simply because it requires the parties to litigate in a jurisdiction that does not afford civil litigants the same right to trial by jury as litigants in California courts enjoy.’…But the Supreme Court left standing cases…which struck down forum selection clauses based on substantive, statutory provisions rendering void the waiver of specific rights….As Lathrop, Hardy, and the instant case all rest on the analogous substantive and statutory antiwaiver provision set forth in the Song-Beverly Act, the Supreme Court’s ruling in EpicentRx does not change our analysis.”
Representing Forest River were Michael R. Halvorsen and Matthew A. Gardner of the West Los Angeles firm of Phillips, Spallas & Angstadt LLP.
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