In a landmark decision, the California Court of Appeal has reversed a lower court's ruling that enforced a forum selection clause in favor of an out-of-state corporation, highlighting the importance of protecting consumers' statutory rights. The case, filed by Kenneth and Janet Lathrop against Thor Motor Coach, Inc., was heard in the Superior Court of Los Angeles County on October 7, 2024. The plaintiffs argued that enforcing the clause would violate California public policy by diminishing their rights under state consumer protection laws.
The case arose after the Lathrops purchased a motorhome from Thor Motor Coach in May 2021 for over $212,000. They alleged that Thor and other defendants failed to repair defects or replace the vehicle as required under California's Song-Beverly Consumer Warranty Act and Consumer Legal Remedies Act (CLRA). Thor sought to move the case to Indiana based on a forum selection clause in their warranty agreement. However, the appellate court found that enforcing this clause would undermine unwaivable California statutory rights.
Thor had acknowledged that certain provisions of their warranty were unenforceable under California law but offered to stipulate that California law would apply if the case were moved to Indiana. Despite this offer, the appellate court ruled that such stipulations could not remedy the fundamental issue: allowing corporations to impose forum selection clauses with unenforceable terms undermines consumer protections. "Requiring consumers to litigate in Indiana would substantially diminish their rights," wrote Justice Segal for the court.
The Lathrops contended they did not freely agree to the forum selection clause and challenged its enforceability on grounds of unconscionability. The appellate court agreed, emphasizing that companies should not include illegal clauses in contracts only to later offer stipulations when challenged. This practice could deter consumers from pursuing valid claims due to logistical challenges or lack of awareness about their rights.
The appellate decision also highlighted procedural issues with how trial courts handle cases involving unwaivable statutory rights. It clarified that when such rights are at stake, defendants bear the burden of proving that transferring litigation will not diminish these rights—a standard Thor failed to meet.
The plaintiffs seek relief including damages for breach of warranty and violations of consumer protection statutes. They aim for restitution or replacement of their defective motorhome along with compensation for incidental damages.
Representing Kenneth and Janet Lathrop are attorneys Lawrence J. Hutchens and Shay Dinata-Hanson. Defending Thor Motor Coach are attorneys from Horvitz & Levy including Lisa Perrochet and Shane H. McKenzie alongside Bravo Law Group’s Dolores E. Gonzales and James R. Robertson. The case was presided over by Judge John A. Torribio with Case ID B331970.