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Court of Appeal:
Agreement That Any Lawsuit Be Brought in Indiana Doesn’t Apply Under ‘Lemon Law’
Richardson Says Forum-Selection Provision Is Unconscionable
By a MetNews Staff Writer
A Californian who contractually agreed to litigate in Indiana any dispute with the maker/seller of her $130,543.61 motorhome is nonetheless entitled to maintain an action under the Song-Beverly Consumer Warranty Act—the state’s “lemon law”—in the Los Angeles Superior Court, Div. Two of the Court of Appeal for this district held Friday.
The agreement between the parties provided that “EXCLUSIVE JURISDICTION FOR DECIDING LEGAL DISPUTES RELATING TO THE LIMITED WARRANTY, AN ALLEGED BREACH OF WARRANTY, BREACH OF IMPLIED WARRANTIES, OR REPRESENTATIONS OF ANY KIND MUST BE FILED WITHIN THE STATE OF INDIANA.”
It doesn’t matter, Justice Anne K. Richardson wrote, that the RV manufacturer, Forest River, Inc., said, in moving for an order staying or dismissing the lawsuit brought by Jean Hardy:
“[T]he California Legislature made, with certain exceptions, a buyer’s rights under Song-Beverly essentially unwaivable.…Therefore, to allay any concerns in that regard. Forest River will stipulate by this motion that Song-Beverly will apply to plaintiffs warranty claims pursued in an action in Indiana and that it will not oppose a request that the Indiana court use Song-Beverly to adjudicate those allegations.”
Tsao’s Ruling
Relying upon that concession, Los Angeles Superior Court Judge Lee W. Tsao ordered the action stayed, declaring:
“Plaintiff argues that a stipulation to not oppose applying the Song-Beverly Act in Indiana will not preserve Plaintiffs 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.”
Tsao found that in light of rights under the Song-Beverly Act not being waivable, the burden was on Forest River to show that the forum-selection clause was not unconscionable. He reached the conclusion that “because Plaintiff signed the forum selection clause, the forum selection clause is not unconscionable, and Plaintiffs Song- Beverly rights can be readily preserved.”
Richardson’s Opinion
Richardson said that Tsao “correctly put the burden on Forest River,” but then “used the wrong standard in assessing whether Forest River met that burden.”
She said that “the time to look at a contract for unconscionability is as of the date it is written,” remarking:
“Whether Forest River is willing now to abide by the Song-Beverly Act, does not change the fact that the warranty as written, choosing Indiana law, is void and against public policy as to California consumers, and hence substantively unconscionable.” The jurist said the facts show that “the stronger party engaged in a systematic effort to secure a forum that would work to its advantage” and doing other than declare the choice of law provision a nullity “would function to condone an illegal scheme.”
Saying that “[a]t first blush” Tsao reached “a fair resolution,” Richardson wrote:
“[T]he seemingly neat solution of allowing the case to be transferred to Indiana subject to lifting the stay in California if the Indiana court declines to follow the Song-Beverly Act neither follows California law regarding when to adjudicate unconscionability and how to determine whether to sever the unenforceable provisions of a contract, nor aligns with basic principles of comity. Accordingly, we conclude the court improperly applied the correct legal standard and reverse for an order denying the motion.”
She added:
“The conclusions reached here do not mean that every case involving the Song-Beverly Act must be heard in California. We presume that other courts are capable of applying our state law….However, when reviewing a forum selection clause in the context of unwaivable rights, a court must first look to whether the forum selection clause was unconscionable, void, or violated public policy as of the time the agreement was made. If it was, then the court must consider whether to sever the unconscionable or void clauses from the agreement….However, in choosing whether to sever, unless there is a bilateral stipulation to which all parties agree, the court may not augment or reform the contract by issuing an order contrary to the agreement actually entered into by the parties.”
The case is Hardy v. Forest River, Inc., B331450.
Cerritos attorney Lawrence J. Hutchens and Shay Dinata of San Diego represented Hardy. Michael R. Halvorsen and Matthew A. Gardner of the Century City firm of Phillips, Spallas & Angstadt acted for Forest River.
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