few notes

From the facts you stated, this could be ugly.
You signed a legal and valid contract. It included an offer; you accepted the offer by signing it. The contract was in proper form. It was lawful, and it listed the consideration. In the contract, it specifically said that there would be penalties for driving out of the state. In fact, it was stated that the cost would be $1/mile.
You breached the contract by performance. The rental company accused you of driving the car to Nevada, and they had GPS to back up their claims.
In the current situation, the best solution is to pay for the penalties, but with compromise.
If they were to sue you, you have to go to the state court in CA, because that’s where you rent the car. The federal courts honor the state courts’ police in regards of jurisdiction. The cost of the lawsuit would be far more than the cost of paying the penalties.
You could negotiate the amount of penalties with the car rental company. But I believe with $.29/mike is probably the best deal you can get. Good luck and learn your lesson, always read the contract before you sign it, and ask for questions.