On Monday, the Center, along with the law firm Gibbs Mura, filed an amicus brief in the California Supreme Court in Lathrop v. Thor Motor Coach. The case centers on whether companies can use contract clauses to force consumers into another state’s courts, even when doing so strips away fundamental rights that California guarantees its residents.
Backstory: The Lathrops purchased a new motor home in California. After they found defects in their RV and the manufacturer failed to perform the repairs, they sued Thor Motor Coach alleging violations of the California’s Song-Beverly Act (CA Lemon Law) and Consumer Legal Remedies Act (CLRA) — both of which include rights that cannot be waived by contract. Thor, however, had included terms in its warranty requiring that any disputes be litigated in Indiana and that Indiana law govern the disputes, and moved to transfer the case out of California. Eventually, Thor offered not to oppose the application of the two California statutes in an Indiana court, while continuing to insist that the case be sent there. The Lathrops objected to the proposed stipulation, did not sign it, and resisted severance of the choice-of-law clause and enforcement of the forum selection provision.
Our brief: On behalf of 8 organizations that advocate for consumers, workers, and small businesses, we filed a friend-of-the-court brief that pointed out Thor’s stipulation to apply California law in Indiana does not solve the problem. Companies shouldn't be able to insert unlawful terms into contracts and then offer to abandon them only when a consumer successfully challenges those terms. And either way, consumers lose: those who read their warranty before filing will sue in Indiana without ever getting a stipulation, while those who file in California may still be forced to drop their case once litigating out-of-state proves too costly.
Though the case involves a motor home, the ruling could affect disputes over nearly any consumer product, from rice cookers to cars.
The brief urges the California Supreme Court to give effect to the legislature’s determination that certain rights are fundamental and cannot be waived. Specifically, the brief offers three responses to questions raised by the Court:
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A company seeking to send a case outside California bears the burden of showing that the consumer’s unwaivable California rights will remain fully effective in the out-of-state court.
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A unilateral, after-the-fact offer not to oppose the application of selected California laws does not automatically cure an unlawful contract.
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A court should not sever an unlawful choice-of-law provision simply to preserve a related forum-selection clause that would otherwise be unenforceable.
The brief was principally written by Hanne Jensen and Zeke Wald of Gibbs Mura LLP, along with Ted Mermin and Joy Donaldson of the Center. The brief was filed on behalf of the Alexander Community Law Center, the California Association For Microenterprise Opportunity (CAMEO), Community Legal Services In East Palo Alto, Consumer Watchdog, Consumer Federation Of California, Housing And Economic Rights Advocates (HERA), Public Counsel, and the Public Law Center.