California Legal Brief

The Rule of Diaz v. Thor Motor Coach is that forum selection clauses in motorhome warranties are unenforceable as unconscionable when they are part of warranty agreements containing other illegal provisions that violate California's Song-Beverly Consumer Warranty Act, even when the manufacturer offers to stipulate not to enforce the illegal provisions in the out-of-state forum.

Appeal from order granting motion to stay in Superior Court, Los Angeles County.

Defendant Appellants were Edward Diaz and Linda Diaz — California consumers who purchased a Thor motorhome for over $400,000 and signed warranty documents containing Indiana forum selection, choice of law, and jury waiver clauses.

Defendant Respondents were Thor Motor Coach, Inc., Giant RV, and U.S. Bank — the manufacturer, dealer, and financing entity who sought to enforce the Indiana forum selection clause while offering to stipulate not to oppose application of California law in Indiana courts.

The suit sounded in violation of the Song-Beverly Consumer Warranty Act. The Diazes alleged the motorhome had defects that defendants failed to repair during the warranty period and failed to provide refund or replacement.

The key substantive facts leading to the suit were the Diazes purchased a Thor motorhome in 2021 from Giant RV in California for over $400,000, financing through U.S. Bank. They signed Thor's warranty registration form acknowledging receipt of warranty documents containing forum selection clauses designating Indiana as exclusive jurisdiction, choice of law provisions requiring Indiana law, and jury waiver clauses. The separate warranty guide contained these same provisions. When defects arose that allegedly could not be repaired, the Diazes sued under California's Song-Beverly Act.

The procedural result leading to the Appeal: The trial court granted Thor's motion to stay the California action, ruling that the Indiana forum selection clause was enforceable because Thor offered to stipulate not to oppose application of California law and jury trial rights in Indiana courts, and ordered Thor to sign such a stipulation.

The key question(s) on Appeal: Whether a forum selection clause in motorhome warranties is enforceable when the manufacturer offers to stipulate not to enforce choice of law and jury waiver provisions that violate California's Song-Beverly Consumer Warranty Act.

The Appellate Court held that forum selection clauses are unenforceable when they are part of warranty agreements containing illegal provisions that violate the Song-Beverly Act's anti-waiver provisions, because such clauses are substantively unconscionable as written and cannot be cured by post-hoc offers to stipulate, and severance would not serve the interests of justice as it would condone an illegal scheme and fail to protect less sophisticated consumers.

The case is inapplicable when the warranty documents do not contain choice of law or other provisions that violate California consumer protection statutes, when the forum selection clause stands alone without illegal accompanying provisions, or when there is evidence of a truly competitive market with meaningful alternatives free of such illegal provisions.

The case leaves open whether a manufacturer could meet its burden by demonstrating through conflict of law analysis that an out-of-state forum would provide the same or greater rights, and whether different results might apply to non-luxury consumer goods or in markets with proven competitive alternatives.