Judge: Ronald F. Frank, Case: 22TRCV00901, Date: 2023-03-10 Tentative Ruling
Case Number: 22TRCV00901 Hearing Date: March 10, 2023 Dept: 8
Tentative Ruling¿
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HEARING DATE: March 10, 2023¿¿
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CASE NUMBER: 22TRCV00901
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CASE NAME: Benjamin R.
Murti; and Ashika Devi v. Thor Motor Coach, et al. .¿¿¿ ¿¿
MOVING PARTY: Defendants, THOR Motor Coach, Inc., erroneously sued as
“THOR Motor Coach” and Giant Inland Empire RV Center, Inc. dba Giant RV Colton
erroneously sued as “Giant RV Colton”
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RESPONDING PARTY: Plaintiffs, Benjamin Murti and Ashika Devi
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TRIAL DATE: None
Set.
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MOTION:¿ (1) Motion to Stay Action on
Grounds of Inconvenient Forum
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Tentative Rulings: (1) Motion to Stay DENIED due to
unconscionable terms in the
¿ agreement
I. BACKGROUND¿¿
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A. Factual¿¿
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On October 2, 2022, Plaintiffs Benjamin R. Murti and
Ashika Devi filed this action against THOR Motor Coach, Giant RV Colton, and
DOES 1 through 10. The Complaint alleges a cause of action based on violation
of Song-Beverly Consumer Warranty Act.
B. Procedural¿¿
On
February 7, 2023, Defendants filed this action for motion to stay based on
inconvenient forum. On February 7, 2023, Defendants also filed a joinder of
Giant Inland Empire RV Center, Inc. dba Giant RV Colton’s in support of THOR
Motor Coach, Inc’s motion to stay action. On February 27, 2023, Plaintiffs
filed an opposition with numerous declarations. On March 3, 2023, Defendants
filed a reply brief.
II. EVIDENTIARY OBJECTIONS
Defendant filed Evidentiary Objections against
Plaintiff’s Evidence:
Sustain: none, but the Court gives very little weight to
the experiences of other customers who purchased their motor homes form other dealers
as bearing on the legal questions raised by the motion to stay
Overrule: all
III. ANALYSIS¿
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A. Legal Standard
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The
Court has inherent authority to stay proceedings to promote judicial efficiency
or if the ends of justice so require. (Freiberg v. City of Mission Viejo (1995)
33 Cal. App. 4th 1484, 1489.) In determining whether an action should be
stayed, the court should generally consider “the following factors: (1) the
interest of the [party opposing the stay] in proceeding expeditiously with this
litigation or any particular aspect of it, and the potential prejudice to [the
party opposing the stay] of a delay; (2) the burden which any particular aspect
of the proceedings may impose on [the party seeking the stay]; (3) the
convenience of the court in the management of its cases, and the efficient use
of judicial resources; (4) the interests of persons not parties to the civil
litigation; and (5) the interest of the public in the pending civil and
criminal litigation.” (Bains v. Moores (2009) 172 Cal. App. 4th 445, 483.)
“When
a court upon motion of a party or its own motion finds that in the interest of
substantial justice an action should be heard in a forum outside this state,
the court shall stay or dismiss the action in whole or in part on any
conditions that may be just.” (Code Civ. Proc., § 410.30, subd. (a).) With
regard to a contract dispute in which the parties’ agreement contains a forum
selection clause, the threshold issue in a forum non conveniens motion is
“whether the forum selection clause is mandatory or permissive.” (Animal
Film, LLC v. D.E.J. Productions, Inc.¿(2011) 193 Cal.App.4th 466,
471.) A mandatory clause is ordinarily given effect without any analysis
of convenience—the only question is whether enforcement is unreasonable. (Id.)
The
responding party on a motion to enforce a mandatory forum selection clause has
the burden to establish unreasonability by showing the selected forum would be.
(Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th
191, 199; Cal-State Business Products & Services, Inc. v. Ricoh
(1993) 12 Cal.App.4th 1666, 1679) (quoting Smith, Valentino & Smith,
Inc. v. Superior Court of Los Angeles (1976) 17 Cal.3d 491, 494.) "Neither
inconvenience nor the additional expense of litigation in the selected forum is
a factor to be considered. However, a forum selection clause will not be
enforced if to do so would bring about a result contrary to the public policy
of this state." (Intershop, supra, p. 199-200.) The opposing
party's burden on a motion to enforce a mandatory forum selection clause is to
demonstrate that the contractually selected forum would be unavailable or
unable to accomplish substantial justice or that no rational basis exists for
the choice of forum. (Smith, Valentino & Smith, Inc. v. Superior
Court (1976) 17 Cal.3d 491, 496 – 497; CQL Original Products, Inc. v
National Hockey League Players' Assn. (1995) 39 Cal.App.4th 1347, 1354; Intershop
Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 199 – 200.)
California favors forum selection agreements only so long as
they are procured freely and voluntarily, with the place chosen having some
logical nexus to one of the parties or the dispute, and so long as California
consumers will not find their substantial legal rights significantly impaired
by their enforcement. (America Online, Inc. v. Superior Court
(2001) 90 Cal.App.4th 1, 12.)
B. Discussion
Here, Defendant asserts that the
“Thor Motor Coach Warranty Guide” (“THOR’s Limited Warranty”) which accompanied
the THOR vehicle purchased by plaintiffs contains a provision that requires all
actions relating to alleged breaches of that warranty be brought in the state
of manufacture, which is the state of Indiana. Defendants assert that because
the forum selection clause in THOR’s Limited Warranty and the Warranty
Registration, is mandatory and because an Indiana court can provide the relief
plaintiffs are seeking, the burden falls on plaintiffs to demonstrate that
enforcement of the clause is unreasonable. Defendants contend that if plaintiffs
are unable to meet this burden, which requires more than inconvenience or
increased expenses to them, this court should grant this motion and stay this
action to allow plaintiffs to file their lawsuit in the proper forum–a court in
Indiana.
Mandatory
Forum Selection Clause
Here, THOR’s Limited Warranty
states:
“EXCLUSIVE
JURISDICTION FOR DECIDING LEGAL DISPUTES RELATING TO ALLEGED BREACH OF EXPRESS
WARRANTY AND BREACH OF IMPLIED WARRANTIES ARISING BY OPERATION OF LAW AS WELL
AS THOSE RELATING TO REPRESENTATIONS OF ANY NATURE MUST BE FILED IN A STATE
ORFEDERAL COURT WITHIN THE STATE OF MANUFACTURE, WHICH IS INDIANA.”
Defendants argue that by using the term “exclusive,”
the forum selection clause in THOR’s Limited Warranty and Warranty Registration
leaves no doubt that purchasers can bring warranty-based claims, such as the
one pled by Plaintiffs here, against THOR in only certain courts-those in
Indiana. Defendants also note that the language in THOR’s Limited Warranty and
Warranty Registration is significantly more restrictive than the forum
selection clauses found to be permissive because it does not simply reflect that
the parties have submitted to the jurisdiction of Indiana courts. Rather,
Defendants contend that the verbiage identifies the sole courts in which
jurisdiction over cases such as the present lawsuit rests. As such, Defendants
argue that the forum selection clause in THOR’s Limited Warranty and Warranty
Registration should be viewed as mandatory and this Court should enforce it by
staying this action to allow plaintiffs to file their complaint in the proper
forum which is in Indiana.
Defendants also argue that the mandatory forum
selection clause is enforceable and cites to Net2Phone, Inc. v. Superior
Court (2003) 109 Cal.App.4th 583. There, customers who wanted to use those
services were required to download software and had to accept an “End User
License Agreement” and a “Terms of Use”. Consumer Cause, on behalf of consumers
allegedly aggrieved by Net2Phone’s practice of “rounding up” to the nearest
minute for billing of telephone calls, filed suit in California superior court.
Citing a forum selection clause in the “End User License Agreement” and the
“Terms of Use” that all disputes with it be brought in New Jersey, Net2Phone
filed a motion to stay or dismiss the action which the trial court denied. The
appellate court disagreed and found the forum selection clause was enforceable:
“The fact that the forum selection clause may have been a ‘take it or leave it’
proposition, and not vigorously ‘bargained for’ as Consumer Cause contends,
does not make the clause unenforceable.” (109 Cal.App.4th at 588-89.) “A forum
selection clause need not be subject to negotiation to be enforceable.” (Drulias
v. 1st Century Bancshares, Inc. (2018) 30 Cal.App.5th 696, 707.)
However, Net2Phone is distinguishable. The plaintiff who filed the Business 7
Professions Code §17200 claim against Net2Phone sustained no injury itself, and
the 2-1 appellate court recognized that if the unfair competition action had
been brought by a public prosecutor it would not have held the
prosecutor to be subject to the forum selection clause. Implicitly, it appears the
appellate court had concerns about Common Cause’s standing to sue. Further, the Unfair Competition Law under which
Common Cause brought the suit does not contain an anti-waiver provision like
the Song-Beverly Act here, or the CLRA construed in America OnLine, or
Labor Code provision construed in Verdugo. The New Jersey law to be applied in the Net2Phone
forum was substantially similar to California law, rather than the substantially
stronger and more consumer oriented laws to be applied here or in Verdugo
or America OnLine. Net2Phone
did not consider an unconscionability analysis either, other than the brief
mention of the take-it or leave-it issue that other courts have considered an
indicia of procedural unconscionability.
Accordingly, this Court finds the more analogous precedent to be America
OnLine and Verdugo, not Net2Phone.
Defendants argue that there cannot be a dispute that
the forum selection clause was disclosed at the time of plaintiffs’ purchase of
the Subject Vehicle in light of plaintiffs having signed the Warranty
Registration in which they affirmed they had “received, read and agreed to the
terms and conditions of the Thor Motor Coach Limited Warranty and the Thor
Motor Coach Structural Limited Warranty. . .” applicable to the product prior
to purchase and that they “[understood] and agree[d] to the forum selection
clause and choice of law clause set forth in the Thor Motor Coach Limited
Warranty and the Thor Motor Coach Structural Limited Warranty.” But Plaintiff’s declaration belies that argument. It is precid=sely why contracts of adhesion
have elements of unconscionability, i.e., they often contain assertions that
are factually untrue or misleading. The
Court recognizes, however, that the forum selection clause appears directly
above plaintiffs’ signatures in bold font on the Warranty Registration form. As
such, Defendants argue that because THOR’s Limited Warranty and Warranty
Registration were provided at the time of the sale of the Subject Vehicle (even
if in a cabinet insider the motor home rather than being presented in the
customer’s hands for review), and because the forum selection clause in the
limited express warranty is mandatory, all actions relating to alleged breaches
of the warranty must be brought in Indiana.
Lastly, Defendants argue that Plaintiffs’ rights under
Song-Beverly will be preserved if this case goes forward in Indiana. Defendants
concede that the California legislature made, with certain exceptions, a
buyer’s rights under Song-Beverly essentially unwaivable,. However, THOR has assertedin its moving papers
that it will offer to stipulate that Song-Beverly will apply to Plaintiffs’
warranty claims pursued in an action in Indiana and that they will not oppose a
request by Plaintiffs after the case is moved for trial to Indiana that the
Indiana court utilize Song-Beverly to adjudicate those claims. Defendant notes
that the Verdugo court observed there had been an option available to
the defendant to ensure that plaintiff’s substantive rights would not have been
lost if the forum selection clause were to be enforced:
[Defendant] could
have eliminated any doubt about which law would apply to [plaintiff’s] claims
by stipulating to have the Texas courts apply California law, but it did not do
so. Instead, [defendant] acknowledged Texas might apply California law while
simultaneously minimizing the significance of the California statutory rights
on which [plaintiff] bases her claims. [Defendant] therefore has not shown
[plaintiff’s] unwaivable statutory rights will not be diminished
. . . .
[Defendant] could
have eliminated any uncertainty on which law a Texas court would apply by
stipulating to have a Texas court apply California law in deciding
[plaintiff’s] claims, but [defendant] did not do so. Instead, [defendant] has
preserved its ability to argue to a Texas court that it should apply Texas law,
and [defendant] has hinted at its intention to do so by downplaying the
significance of the statutory rights [plaintiff] seeks to enforce through this
action.
(Id.
at 145, 158.) Here, there remain doubts. Defendants are not stipulating unequivocally
that California substantive law will apply in Indiana; rather, they indicate
they will not oppose a motion by Plaintiffs to the Indiana judge. But what guarantee will Plaintiffs have that the
judge in Indiana will grant Plaintiffs’ hypothetical motion, a possibility contemplated
by Defendants’ moving papers at p. 11 in seeking a stay rather than a dismissal
of the California lawsuit? What if the
Indiana judge elects to enforce Thor’s jury waiver as a “procedural” rather a “substantive”
right? What if the Indiana judge finds
that a treble damages penalty in a warranty suit is contrary to Indian public
policy, or if the Indiana judge requires a higher level of proof than a preponderance
to awared a quasi-punitive civil penalty?
In their opposition, Plaintiffs argue that Defendant
bears the burden of showing that Plaintiffs freely and voluntarily agreed to
the forum selection clause. While Plaintiff concedes that ordinarily, the party
opposing enforcement of a forum selection clause bears the burden of proving
why it should not be enforced, “that burden is reversed when the claims at
issue are based on unwaivable rights created by California statutes.” (Verdugo
v. Alliant Group L.P. (2015)
237 Cal.App.4th 141, 147 [burden is reversed when the claims at issue are based upon unwaivable rights created
by California statutes].) As such, Plaintiff asserts that under Verdugo,
Defendants are the ones who bear the burden of showing the
contractually-designed forum will not diminish the substantive rights afforded
under California law.
Here, Plaintiffs
assert that Defendants have not met their burden and have failed to provide
evidence showing Plaintiffs freely and voluntarily agreed to the forum
selection clause. Plaintiffs note that Defendants claim that their signatures
on the Warranty Registration form at the time of purchase affirms they
received, read, and agreed to the provisions in Thor’s 16-page Warranty Guide,
prior to purchasing the vehicle. However, Plaintiff argues that under Civil
Code section 2984.3, any documents that Plaintiffs signed purporting to have
received another document merely creates a rebuttable presumption. Plaintiffs provided
a declaration attesting to the fact that the Warranty Guide was not presented
to, or read by Plaintiffs before they signed the purchase contract or the
Warranty Registration form because the Guide was inside the motorhome, in a binder,
and not discovered by Plaintiffs until after the purchase. (Murti
Decl., ¶ 4.) As such, Plaintiffs argue
that they could not have agreed to the terms and conditions of the Warranty
Guide prior to purchase. Plaintiffs also cite to the Declaration by Jay
Bensiek, responsible for reviewing, completing, and executing “all documents
associated with the purchase,” who does not state Plaintiffs ever received the
Warranty Guide, or read the Warranty Guide provisions, or were apprised of the
contents of the Warranty Guide prior to signing the purchase contract. (Bensiek
Decl., ¶ 1-3.) In fact, Plaintiff argues that Giant RV’s normal procedure is to
not present the Warranty Guide to consumer at the time of purchase (citing,
Murti Decl., ¶ 4; Aquino Decl., ¶ 3; Griffey Decl., ¶ 3, 4; Lathorp Decl., ¶ 2;
Wonacott Decl., ¶ 3; 4 Tulcaro Decl., ¶ 3, 4.)
The Court discounts the “me too” declarations as evidence of a “normal
procedure” since the Court is more concerned with what actually occurred
here.
The weight
of the evidence here is that Mr. Murti did not read and was not shown the Warranty
Guide and that the forum selection clause is contained in a contract of
adhesion that required that he bring any lawsuit regarding his Thor motorhome
or Thor warranty in Indiana, rather than the state in which he lived, purchased,
and attempted to have serviced the motor home.
The weight of the evidence here is that no one from the selling
dealership discussed, disclosed, or even mentioned to him that by signing a
warranty registration page he was giving up the California statutory right to
have a jury decide any disputes concerning his Thor warranty, that he was
waiving his right to a refund or replacement remedy, that he was foregoing the
right to pursue a civil penalty in the event of a willful violation of his California
statutory rights, that he was promising to give notice of breach of warranty to
Thor within a short time period, that Thor could require him to deliver the motor
home to Thor in Indiana rather than to a Thor authorized service and repair facility
in California, and that he was waiving California’s four-year statute of
limitations in which to bring suit. All
of those waivers of substantive consumer rights are against the public policy
of California under Civil Code § 1790.1; see America Online, Inc. v.
Superior Court (2001) 90 Cal.App.4th 1, 5 [“Enforcement of the
contractual forum selection and choice of law clauses would be the functional
equivalent of a contractual waiver of the consumer protections under the CLRA
and, thus, is prohibited under California law].) The Song-Beverly Act contains a virtually
identical provision as the one applied in America On Line under a similar
consumer protection law in the Consumer Legal Remedies Act.
Plaintiffs argue that the warranty contains
unconscionable provisions that violate California law. The Court agrees. Here, Plaintiffs assert that it was
procedurally unconscionable for Defendants to force Plaintiffs into signing a
document that Defendants knew stated Plaintiffs had read and understood the
Warranty Guide when they had not even seen the Guide. (Murti Decl., ¶ 4.) Further, the Thor warranty contains substantively
unconscionable terms as discussed above that run afoul of significant legal
rights to which a California retail purchaser of a motor home or other consumer
goods is entitled under the Song-Beverly Consumer Warranty Act. It also is substantively unconscionable for a
California plaintiff represented by a California lawyer to be required to foot
the bill for transportation and lodging in Indiana during motion and trial proceedings
in Indiana. Courts have found provisions
such as Thor’s, which curtail the statute of limitations so drastically, to be
unconscionable. (Martinez v. Master
Protection Corp. (2004) 118 Cal.App.4th 107, 117; see Amin v.
Advanced Sterilization Products Services Inc. (C.D. Cal. Jan. 7, 2019) 2019
WL 2912862 at *7.)
Unconscionability
is a valid defense to a petition to compel arbitration (Sonic-Calabasas A,
Inc. v. Moreno (2013) 57 Cal.4th 1109, 1143), and is also a defense to enforcement
of other contract provisions. The core concern of the unconscionability
doctrine is the “absence of meaningful choice on the part of one of the parties
together with contract terms which are unreasonably favorable to the other
party.” (Sonic-Calabasas, supra, 57 Cal.4th at 1145.) The
unconscionability doctrine ensures that contracts—particularly contracts of adhesion—do
not impose terms that have been variously described as overly harsh, unduly
oppressive, so one-sided as to shock the conscience, or unfairly one-sided. (Id.)
Procedural
and substantive unconscionability must both be present for a court to exercise
its discretion to refuse to enforce a contract or clause under the doctrine of
unconscionability. (Armendariz v. Foundation Health Psychcare Services, Inc.
(2000) 24 Cal.4th 83, 114.) But they need not be present in the same degree;
the more substantively oppressive the contract term, the less evidence of
procedural unconscionability is required to conclude that the term is
unenforceable, and vice versa. (Id.)
However, when there is no other indication of oppression other than the
adhesive aspect of an agreement, the degree of procedural unconscionability is
low. (Serpa v. California Surety Investigations, Inc. (2013) 215
Cal.App.4th 695, 704.) Here, both procedural
and substantive unconscionability have been shown by Plaintiffs to exist to at
least a moderate degree, rendering the forum and choice of law provisions
unenforceable in the exercise of this Court’s discretion.
Plaintiffs assert that Defendants’
offer to stipulate to application of California law in an Indiana Court does
not cure the unenforceability of the choice of law and forum selection clause.
Plaintiffs argue that such a clause is legally invalid, and for Indiana courts
to choose to apply or not. Plaintiffs argue that Defendants concede this by
arguing that a stay in this court, rather than a dismissal of the complaint,
will enable Plaintiffs to "return to this court if an Indiana court
declines to apply the substantive procedures of the Song-Beverly Act to their
claims." (Mtn. at p. 11.) The Court
concurs with Plaintiffs’ argument that a procedurally and substantively unconscionable
contract cannot be cured by the offer Defendants tendered in their moving
papers. The Court does not rule out the
possibility of a more robust offer curing the deficiencies outlined in this tentative
ruling, and the Court encourages the parties to discuss a negotiated offer that
would more completely remedy the unconscionable nature of the Thor contract
while preserving Thor’s forum selection of an Indiana courtroom. But the offer articulated in Defendants
moving papers is not, in the Court’s view, sufficient to overcome the numerous unconscionable
aspects. Perhaps that is why, despite
over three and one-half decades of appellate decisions under Song-Beverly, none
have addressed a warrantor’s effort to compel the California purchaser or
lessee to bring the vehicle, the litigation, and the trial into a remote forum
applying that forum’s substantive law.