Diaz v. Thor Motor Coach, Inc.

Summary

The California Court of Appeal, Second Appellate District, Division Eight, reversed an order staying the plaintiffs’ Song-Beverly Consumer Warranty Act action based on a forum-selection clause requiring litigation in Indiana. The court held that the clause was unenforceable because it was part of warranty provisions that violated California’s unwaivable consumer-protection rights, and Thor’s offer to stipulate to application of the Act in Indiana did not cure the defect. The court directed the trial court to deny the motion to stay and awarded the plaintiffs their appellate costs.

Holdings

1. A forum-selection clause in a motorhome warranty is unenforceable when it is part of a warranty scheme containing a choice-of-law provision that would preclude application of California law and diminish the consumer's unwaivable rights under the Song-Beverly Consumer Warranty Act.
2. A defendant's offer to stipulate that California's Song-Beverly Act will apply in a foreign forum does not cure a legally defective warranty or establish that enforcement of the forum-selection clause will preserve the consumer's unwaivable California rights.
3. Even assuming the unlawful warranty provisions could be severed, severance would not further the interests of justice because it would protect only consumers who challenge the provisions in California, leave other consumers exposed to the provisions, and incentivize continued use of unlawful warranty terms.
4. The trial court abused its discretion by enforcing Thor's forum-selection clause and staying the Diazes' California action.

Questions Presented

1. Whether Thor's Indiana forum-selection clause was enforceable when the warranty also contained an Indiana choice-of-law provision that could waive or diminish the Diazes' unwaivable rights under the Song-Beverly Consumer Warranty Act.
2. Whether Thor's offer to stipulate that the Song-Beverly Act and California jury-trial rights would apply in Indiana cured the warranty's public-policy and unconscionability defects or otherwise established that litigation in Indiana would not diminish the Diazes' California rights.
3. Whether the trial court properly granted a stay based on the forum-selection clause.

Disposition

reversed