Rheinhart v. Nissan North AmericaRheinhart v. Nissan North America
CERTIFIED FOR PUBLICATION
Law Offices of Robert B. Mobasseri, Robert B. Mobasseri and David Alan Cooper for Plaintiff and Appellant.
Wilson Turner Kosmo, Robert Allen Shields and Hang Alexandra Do for Defendants and Respondents.
Rheinhart contends the court erred. He argues the settlement agreement and release violates
Though we reject the trial court‘s reading of
FACTUAL AND PROCEDURAL BACKGROUND
The material facts are undisputed. In June 2019, Rheinhart leased a new Nissan vehicle3 from Mossy Nissan, paying $6,000 at signing and agreeing to monthly payments of $214.36. Twice in July and once in August 2019 (when the vehicle had only 1,603 miles), he brought the vehicle back to Mossy Nissan, complaining about several issues, including on all three occasions malfunctioning of the rear-view camera screen. Between his first and second visits in July 2019, Rheinhart asked Nissan to repurchase the vehicle. Nissan declined to do so. Before Rheinhart‘s third visit in August 2019, Nissan offered to pay Rheinhart $2,000, then $2,500 as a compromise. When on August 20, 2019, Rheinhart counteroffered with a demand for $3,548.40, Nissan accepted it. Rheinhart retained the vehicle.
Nissan thereafter sent Rheinhart a written settlement agreement and release (the Release), which Rheinhart reviewed, asking questions about some of its language. In response, Nissan referred him to the Release‘s language that he “agrees he was given the opportunity to review this Release with a lawyer of his choice and acting on his behalf, and that he has read this Settlement Agreement and Release and fully understand [sic] it.” Rheinhart, who elected not to consult counsel, signed the Release on October 16, 2019. That same month, he received the settlement check from Nissan.
In part, the Release states that in consideration for Nissan‘s cash payment, Rheinhart “hereby release[s] and forever discharge[s] Nissan North America, Inc., and all its associated or affiliated companies . . . from any and all claims, lawsuits, liens, debts, dues, damages, judgments. executions and demands of every kind, whether currently known or unknown, and whether arising in the past or present . . . which relate to [Rheinhart‘s vehicle].” It further provides that Rheinhart “does not waive any unrelated personal injury or breach of warranty claims or causes of action, which may arise after the execution of this Release.” In the Release, Rheinhart agreed that in the event Nissan later repurchased his vehicle from him, the repurchase amount would be offset or reduced by the amount Nissan paid in consideration for the Release. The Release states that Nissan North America, Inc. would continue to honor the terms of the car‘s new vehicle limited warranty.
Nissan moved for summary judgment or alternatively summary adjudication of issues. In part, it argued all of the vehicle‘s nonconformities arising before October 16, 2019, were barred by the Release, which no facts showed was obtained by fraud, deception, misrepresentation, duress or undue influence. Nissan presented evidence that Rheinhart admitted he had read the Release and understood all of its provisions, that he was given an opportunity to review it with an attorney of his choice but did not, and that by signing the Release, he agreed to be bound by it.5
In opposition, Rheinhart argued the Release was void as a matter of law under
Overruling Nissan‘s objections, the trial court granted Nissan‘s motion. Observing there was no California authority applying the Act‘s antiwaiver provision, the court ruled “a reasonable and commonsense interpretation of
DISCUSSION
I. Standard of Review
The applicable review standards are settled: A motion for summary judgment “shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (
“[T]he placement and quantum of the burden of proof at trial [are] crucial for purposes of summary judgment.” (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 851.) How the parties moving for and opposing summary judgment may each carry their burden of persuasion and/or production depends on ”which [party] would bear what burden of proof at trial.” (Ibid.; Pollock v. Tri-Modal Distribution Services, Inc. (2021) 11 Cal.5th 918, 946.) Thus, a defendant moving for summary judgment on an affirmative defense has an initial burden of producing evidence to establish a prima facie showing of the nonexistence of any triable issue of material fact as to each element of that defense. (Aguilar, at p. 850;
We independently review the record and the trial court‘s determination, applying the same legal standard as the trial court to determine if there are genuine issues of material fact. (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003; Quidel Corporation v. Superior Court of San Diego County (2020) 57 Cal.App.5th 155, 164.) We are not bound by the trial court‘s stated reasoning or rationales. (County of San Diego v. Superior Court (2015) 242 Cal.App.4th 460, 467.) ” ’ [W]e view the evidence in a light favorable to the losing party . . . , liberally construing [the] evidentiary submission while strictly scrutinizing the moving party‘s own showing . . . .’ ” (Quidel, at p 164.) “[A]ny doubts as to the propriety of granting a summary judgment motion should be resolved in favor of the party opposing the motion.” (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 535; Quidel, at p. 164.)
II. The Act, Manufacturer Obligations and Buyer Remedies
The Act “was enacted to address the difficulties faced by consumers in enforcing express warranties. Consumers frequently were frustrated by the inconvenience of having to return goods to the manufacturer for repairs and by repeated unsuccessful attempts to remedy the problem. [Citation.] The Act protects purchasers of consumer goods by requiring specified implied warranties, placing strict limitations on how and when a manufacturer may disclaim those implied warranties, and providing mechanisms to ensure that manufacturers live up to the terms of any express warranty.” (Cummins, Inc. v. Superior Court (2005) 36 Cal.4th 478, 484.) For example, it requires manufacturers to make service and repair facilities available to carry out terms of express warranties, and time frames within which repairs under an express warranty must be provided. (Id. at pp. 484-485.)
Specifically, “[s]ection 1793.2, subdivision (d)(2) sets forth the manufacturer‘s affirmative obligation to ‘promptly’ repurchase or replace a defective vehicle it is unable to repair . . . .” (Kirzhner v. Mercedes-Benz USA, LLC, supra, 9 Cal.5th at p. 971.) Under that section, “if a manufacturer is ‘unable to service or repair a new motor vehicle . . . to conform to the applicable express warranties after a reasonable number of attempts, the manufacturer shall either promptly replace the new motor vehicle in accordance with subparagraph (A) or promptly make restitution to the buyer in accordance with subparagraph (B).’ In turn, the restitution remedy in
Once the duty to offer replacement or restitution arises, a manufacturer must “promptly” comply regardless of whether a buyer requests those remedies. (See Krotin v. Porsche Cars North America, Inc. (1995) 38 Cal.App.4th 294, 300, 302-303 [Song-Beverly Act “does not require consumers to take any affirmative steps to secure relief for the failure of a manufacturer to service or repair a vehicle to conform to applicable warranties—other than . . . permitting the manufacturer a reasonable opportunity to repair the vehicle“; “[T]he consumer‘s request [for replacement or restitution] is not mandated by any provision in the Act“].) Indeed, once the manufacturer‘s duty to promptly provide a replacement vehicle or restitution arises after a reasonable number of repair attempts, “the buyer no longer has the same ownership interest in the vehicle since the manufacturer can (and should) replace or repurchase it at any moment.” (Kirzhner v. Mercedes-Benz USA, LLC, supra, 9 Cal.5th at p. 980.) A buyer‘s unequivocal request for a “vehicle repurchase” is sufficient to trigger a manufacturer‘s duty to promptly make restitution. (Lukather v. General Motors, LLC (2010) 181 Cal.App.4th 1041, 1050.)
“[A] manufacturer‘s willful failure to promptly provide restitution or a replacement vehicle may result in an award of civil penalties pursuant to
The Act is ” ’ “manifestly a remedial measure, intended for the protection of the consumer [and] should be given a construction calculated to
III. Public Policies Concerning Settlement Agreements
California has a strong public policy favoring the voluntary settlement of disputes. (Monster Energy Co. v. Schechter (2019) 7 Cal.5th 781, 793; Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249, 260 [“the law favors settlements“]; Kaufman v. Goldman (2011) 195 Cal.App.4th 734, 745 (Kaufman); Osumi v. Sutton (2007) 151 Cal.App.4th 1355, 1359 [” [i]t is, of course, the strong public policy of this state to encourage the voluntary settlement of litigation“].) Settlement agreements “are highly favored as productive of peace and good will in the community, and reducing the expense and persistency of litigation.” (McClure v. McClure (1893) 100 Cal. 339, 343.)
Notwithstanding that policy, courts can declare settlement agreements and releases, which the law treats like any other contracts (Timney v. Lin (2003) 106 Cal.App.4th 1121, 1127), void and unenforceable on the basis of other public policies, illegality or unfairness. (City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747, 777 & fn. 53 [agreement purporting to release liability for future gross negligence against disabled child violates public policy and is unenforceable]; California State Auto. Assn. Inter-Ins. Bureau v. Superior Court (1990) 50 Cal.3d 658, 664 [court may reject a stipulated settlement that is contrary to public policy or that incorporates an erroneous rule of law]; Kaufman, supra, 195 Cal.App.4th at p. 746; Graylee v. Castro (2020) 52 Cal.App.5th 1107, 1114-1115 [courts cannot ” ‘endorse or enforce a provision in a settlement agreement or stipulation which is illegal, contrary to public policy, or unjust’ “], quoting Timney, at p. 1127; see generally Vitatech Internat., Inc. v. Sporn (2017) 16 Cal.App.5th 796, 807 [” ’ [A] court cannot validly enter a judgment or order which is void even if the parties agree to it’ “];
These principles apply to other types of favored contracts or contractual provisions. (See Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 146-147 (Verdugo) [California courts will not give effect to a contractual forum selection clause, normally favored under California law, ” ‘if to do so would substantially diminish the rights of California residents in a way that violates our state‘s public policy’ “; citing cases]; Wimsatt v. Beverly Hills Weight etc. Internat., Inc. (1995) 32 Cal.App.4th 1511, 1522 (Wimsatt); Hall v. Superior Court (1983) 150 Cal.App.3d 411, 417-418 [choice of forum clause in private securities agreement unenforceable as violating public policy].) ” ’ “A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.” ’ ” (Dunkin v. Boskey (2000) 82 Cal.App.4th 171, 183.)
To invalidate a contract on this ground, the public policy violation must be ” ’ “entirely plain . . . .” ’ ” (City of Santa Barbara v. Superior Court, supra, 41 Cal.4th at p. 777, fn. 53.) ” ’ ” ‘The power of the courts to declare a contract void for being in contravention of sound public policy . . . should be exercised only in cases free from doubt’ ” ’ ” (ibid.; Kaufman, supra, 195 Cal.App.4th at p. 746) and where the contract is ” ‘clearly injurious to the interests of society.’ ” (City of Santa Barbara, at p. 777, fn. 53.)
The court in Timney v. Lin, supra, 106 Cal.App.4th 1121 invalidated an otherwise illegal forfeiture clause despite the parties inclusion of it in a settlement agreement. (Id. at p. 1123 [“we hold that an illegal forfeiture provision is unenforceable, even if the illegal provision is included in a settlement agreement“].) The lower court had enforced the settlement agreement under
Timney held “even though there is a strong public policy favoring the settlement of litigation, this policy does not excuse a contractual clause that is otherwise illegal or unjust.” (Timney v. Lin, supra, 106 Cal.App.4th at p. 1127.) “[O]ur Supreme Court and other California courts have rejected the notion that a settlement judge may properly act to ‘approve’ an illegal contract and thereby shield it from invalidation. [Citations.] We have found
IV. The Effect of Statutory Antiwaiver Provisions
“A public policy that cannot be waived qualifies as fundamental.” (G Companies Management, LLC v. LREP Arizona, LLC (2023) 88 Cal.App.5th 342, 353.) Statutory antiwaiver provisions intended to promote consumer and other public protections, like
Such antiwaiver provisions in consumer protection laws are “[o]ne of the most important protections California offers its . . . citizens . . . .” (Wimsatt, supra, 32 Cal.App.4th at p. 1520; see also Verdugo, supra, 237 Cal.App.4th at p. 149.) In Wimsatt, involving California‘s Franchise Investment Law, the court held as a matter of first impression that when “determining the ‘validity and enforceability’ of forum selection provisions in franchise agreements,” a different set of burdens apply. (Id. at pp. 1521-1522.) Given legislative recognition of franchisees’ need for special protection, as well as the need to prevent easy circumvention of the antiwaiver statute, Wimsatt decided the law put the burden on the franchisor to show that litigation in the contract forum will not diminish in any way the substantive rights afforded California franchisees under California law. (Id. at p. 1522.)
It is useful to consider decisions assessing the impact of antiwaiver statutes on contractual provisions or contracts. This court in Crosno Construction, Inc. v. Travelers Casualty and Surety Company of America, supra, 47 Cal.App.5th 940 decided the issue in a summary judgment context, affirming a lower court‘s ruling invalidating a provision in a construction subcontract. The antiwaiver statute there,
Verdugo, supra, 237 Cal.App.4th 141 involved a mandatory forum selection clause in a plaintiff‘s employment agreement designating Texas as the exclusive forum for employment and other disputes. (Id. at pp. 144, 146.) Forum selection clauses are favored in California if voluntarily entered into and their enforcement is not unreasonable. (Handoush v. Lease Finance Group, LLC (2019) 41 Cal.App.5th 729, 734, quoting America Online Inc. v. Superior Court, supra, 90 Cal.App.4th at p. 11; Verdugo, at p. 147.) The plaintiff in Verdugo brought a class action, and the defendant successfully moved to stay or dismiss it under the forum selection clause, which the trial court found was enforceable. (Id. at p. 146.)
The appellate court reversed, holding the forum selection clause unenforceable as against public policy. (Verdugo, supra, 237 Cal.App.4th at pp. 144, 162, fn. 10.) Verdugo adopted Wimsatt‘s shifting burden rationale, explaining that ordinarily the party opposing enforcement of a forum selection clause bears the burden of proving why it should not be enforced. (Verdugo, at pp. 144, 147.) But that burden is reversed “when the claims at issue are based on unwaivable rights created by California statutes. In that situation, the party seeking to enforce the forum selection clause bears the burden to show litigating the claims in the contractually-designated forum ‘will not diminish in any way the substantive rights afforded . . . under California law.’ ” (Verdugo, supra, at p. 147; see also America Online, Inc. v. Superior Court, supra, 90 Cal.App.4th at p. 10 [party seeking enforcement must “prove that enforcement of the forum selection clause would not result in a significant diminution of rights“].)
The court observed all of the plaintiff‘s claims were based on Labor Code statutory rights (pertaining to when and how employers must (1) pay overtime and other forms of compensation, (2) provide meal and rest breaks, and (3) provide accurate wage statements), which were “important statutory rights the Legislature made unwaivable through an express antiwaiver provision.” (Verdugo, supra, 237 Cal.App.4th at p. 156; see
Verdugo explained that putting the burden of proof on the defendant was intended “to prevent the forum selection clause from operating as a waiver of [plaintiff‘s] unwaivable Labor Code rights . . . .” (Verdugo, supra, 237 Cal.App.4th at p. 151.) The court stated the forum selection clause at issue “has the potential to contravene an antiwaiver statute designed to protect California residents from business practices that do not meet Labor Code standards. If enforced, the forum selection clause would require [the plaintiff] to litigate her Labor Code wage claims in Texas, where the Employment Agreement‘s choice-of-law clause would require the court to apply Texas law unless a Texas court decides not to enforce the choice-of-law clause.” (Ibid.) Although the defendant contended that the Texas court would ” ‘most likely’ ” apply California law to employee‘s claims (id. at p. 158), it preserved its ability to argue to the Texas court that Texas law should apply. (Ibid.) Further, its arguments constituted “conclusory speculation” that did not satisfy its burden of proof. (Ibid.) “As explained above, [the defendant] must show enforcing the forum selection clause ‘will not diminish in any way’ [the plaintiff‘s] statutory rights.” (Ibid, quoting Wimsatt, supra, 32 Cal.App.4th at p. 1522 & America Online, supra, 90 Cal.App.4th at pp. 10-11.) The defendant “carefully avoid[ed] making any specific and definitive argument that Texas courts either have applied or will apply California wage and hour laws despite a choice-of-law clause designating Texas law.” (Verdugo, at p. 158.) Because the defendant declined the opportunity to eliminate uncertainty by refusing to stipulate that California law applied, the Court of Appeal held the forum-selection clause was unenforceable as against public policy. (Id. at pp. 160, 162, fn. 10.)
Reaching a different conclusion in landlord/tenant contexts, the First District, Division One Court of Appeal in Kaufman, supra, 195 Cal.App.4th 734 and Geraghty v. Shalizi (2017) 8 Cal.App.5th 593 (Geraghty) declined to invalidate settlement/lease buyout agreements despite an antiwaiver provision in a city rent ordinance providing “[a]ny waiver by a tenant of rights under this Chapter [except as provided in San Francisco Administrative Code section 37.10A, subdivision (g),] shall be void as contrary to public policy.” (Kaufman, at p. 744, italics omitted; S.F. Admin. Code, § 37.9, subd. (e); Geraghty, at p. 599.) Kaufman involved settlement of a landlord‘s unlawful detainer action against a tenant. (Kaufman, at pp. 737-738.) As part of the settlement, the tenant agreed to move out after seven years. (Id. at p. 738.) She also acknowledged she was waiving any future possession rights, including rights she might have under the ordinance. (Ibid.) Years later, in 2008, when the tenant would not leave, the landlord sued to enforce their settlement agreement. (Id. at pp. 738-739.) On the parties’ cross-motions, the trial court granted summary adjudication in the landlord‘s favor. (Id. at p. 739.)
On appeal, the tenant argued the settlement agreement‘s move-out provision was a void waiver of her rights under the rent ordinance, and enforcing the agreement would violate public policy. (Kaufman, supra, 195 Cal.App.4th at pp. 743-744.) The appellate court rejected the arguments and affirmed the order granting summary adjudication, holding the ordinance, which only voided waivers “in the context of an eviction or an owner move-in,” did not apply “to the settlement of a legal claim that was made for valuable consideration in return for termination of litigation.” (Id. at p. 745.) It continued: “Parties frequently settle landlord-tenant disputes, and move-out provisions are not uncommon. If [the antiwaiver provision] were deemed to apply to such move-out provisions, this would have a chilling effect on future settlements of unlawful detainer actions as landlords would have little incentive to enter into prelitigation negotiations.” (Ibid., fn. omitted.) The court concluded: “[W]e agree that the public policy in favor of protecting tenants is important. But the time to raise this issue is when a settlement agreement is negotiated with advice of counsel, not seven years after a tenant has enjoyed the benefits of the bargain.” (Id. at p. 746.)
Kaufman relied on the strong public policy favoring settlement of disputes, recognizing a contract should be voided only when the situation is free from doubt: ” ‘Freedom of contract is an important principle, and courts should not blithely apply public policy reasons to void contract provisions.’ ” (Id. at p. 745.) In reaching its holding, the Kaufman court
V. The Release Here Is Void as Against Public Policy
We apply Wimsatt and Verdugo to the circumstances here. That the Act is “strongly pro-consumer” (Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 990) is reflected in its above-referenced antiwaiver provision, which deems “contrary to public policy” and “unenforceable and void” “[a]ny waiver by the buyer of consumer goods of the provisions of this chapter, except as expressly provided in this chapter . . . .” (
Here, Rheinhart‘s right to remedies under the Act are substantive rights that the Legislature has declared unwaivable. Given the nature of those rights, Nissan‘s summary judgment burden was not just to establish the existence of
Under the principles discussed above, and the factual circumstances of this case, Nissan cannot meet this burden.12 It is undisputed that Rheinhart presented the rear-view camera issue to Nissan on three occasions, and that thereafter Nissan agreed to pay him $3,548.40 in compromise. There is no evidence that before Nissan presented Rheinhart with the settlement agreement that it advised him of the Act‘s replacement or restitution remedies or the fact Nissan had an affirmative obligation to offer those remedies once it engaged in a reasonable number of repair efforts. There is no indication Nissan‘s $3,548.40 settlement payment endeavored to approximate the vehicle‘s purchase price or other sums owed under the Act for reimbursement. There is no evidence otherwise that Rheinhart, who was unrepresented by counsel, was aware of his rights under the Act or its antiwaiver provision. He did not expressly waive his rights under the Act. The circumstances suggest unequal bargaining strength between a consumer unaware of his rights and a manufacturer seeking to circumvent its statutory obligations.
And Rheinhart is unlike the plaintiff in Kaufman, who was apparently represented by counsel at the time she entered into the settlement and release, which expressly acknowledged her rights under the rent ordinance. (Kaufman, supra, 195 Cal.App.4th at pp. 738, 746.) We decline to extend Kaufman (or Geraghty, which followed Kaufman) to these circumstances. In addition to
On this summary judgment record, the Release contravened Rheinhart‘s right to elect the Act‘s substantive remedies of replacement or restitution. On that basis, it is void as against public policy, and Nissan is not entitled to summary judgment on grounds the Release bars Rheinhart‘s claims as a matter of law.
We emphasize that our holding is not that
VI. Rheinhart‘s Unconscionability Argument
In view of our holding, we need not address Rheinhart‘s argument that the Release is unconscionable due to his unrepresented status.
DISPOSITION
The judgment is reversed. Rheinhart shall recover his costs on appeal.
O‘ROURKE, J.
WE CONCUR:
HUFFMAN, Acting P. J.
DO, J.