BILL NUMBER: SB 155 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Padilla
JANUARY 31, 2013
An act to amend Sections 3006, 3008, 3012, 3050, 3050.7, 3052,
3056, 3057, 3062, 3063, 3064, 3065, 3065.1, 3066, 3067, 3069.1,
11713.3, and 11713.13 of the Vehicle Code, relating to vehicles.
LEGISLATIVE COUNSEL'S DIGEST
SB 155, as introduced, Padilla. Vehicles: motor vehicle
manufacturers and distributors.
Existing law establishes the New Motor Vehicle Board in the
Department of Motor Vehicles, and requires the board to hear and
decide certain protests presented by a motor vehicle franchisee.
Existing law prescribes procedures to be followed by franchisors,
franchisees, and the board regarding claims for warranty
reimbursement or incentive compensation. Existing law authorizes
franchisors to conduct audits of franchisee warranty records and
incentive records on a reasonable basis, and authorizes a franchisor
to audit the franchisee's incentive records for 18 months, and
warranty records for 12 months, after a claim is paid or credit
issued. Existing law prohibits the disapproval of franchisee claims
except for good cause, as specified, and requires that a notice of
disapproval state the specific grounds upon which the disapproval is
based. Existing law gives a franchisee one year from receipt of the
notice of disapproval of an incentive compensation payment to appeal
the disapproval to the franchisor and file a protest with the board.
This bill would revise these provisions by, among other things,
requiring the franchisor to provide the franchisee with the specific
grounds upon which any previously approved claims will be charged
back, if the franchisor disapproves of a previously approved claim
after an audit, and would prohibit a previously approved claim from
being charged back to the franchisee except for good cause, as
specified. The bill would require the franchisor to provide a
reasonable appeal process to allow the franchisee to respond to any
disapproval with additional supporting documentation or information
rebutting the disapproval, as provided. The bill would authorize the
audit of a franchisee's records for 6 months afer a claim is paid or
credit is issued. The bill would give a franchisee one year from the
later of the date of receipt of the notice of disapproval or the
completion of any franchisor appeal process to file a protest with
the board, and would specify that in the protest proceeding the
franchisor has the burden of proof.
Existing law requires every vehicle franchisor to properly fulfill
every warranty agreement made by it and adequately and fairly
compensate each of its franchisees for labor and parts used to
fulfill that warranty when the franchisee has fulfilled warranty
obligations of repair and servicing. Existing law also requires the
franchisor to file a copy of its warranty reimbursement schedule or
formula with the board.
This bill would additionally require a franchisor to adequately
and fairly compensate each of its franchisees for labor and parts
used to provide diagnostic services under a warranty. The bill would
also require, if the warranty reimbursement schedule or formula
provides franchisee labor compensation on a flat-rate basis, the
franchisor to allow the franchisee to use a published, nationally
recognized, flat-rate labor time guide as the basis for determining
the amount of time allocable for warranty diagnostics and repairs if
the franchisee primarily uses the time guide to compute technician
flat-rate compensation and charges for nonwarranty labor.
Existing law generally requires a manufacturer branch,
remanufacturer, remanufacturer branch, distributor, distributor
branch, transporter, or dealer of vehicles to be licensed by the
Department of Motor Vehicles. Under existing law, it is unlawful for
a manufacturer, manufacturer branch, distributor, or distributor
branch to engage in specified practices, including requiring a dealer
to make a material alteration, expansion, or addition to any
dealership facility, unless the required alteration, expansion, or
addition is reasonable in light of all existing circumstances,
including economic conditions.
This bill would prohibit a required facility alteration,
expansion, or addition from being deemed reasonable if it requires
that the dealer purchase goods or services from a specific vendor if
substantially similar goods or services are available from another
vendor. The bill would also prohibit the establishing or maintaining
a performance standard, sales objective, or program for measuring a
dealer's sales, service, or customer service performance that may
materially affect the dealer, including, but not limited to, the
dealer's right to payment under any incentive or reimbursement
program, unless certain requirements are satisfied. The bill would
also prohibit a manufacturer, manufacturer branch, distributor, or
distributor branch from taking or threatening to take any adverse
action against a dealer because the dealer sold or leased a vehicle
to a customer who either exported the vehicle to a foreign country or
resold the vehicle, unless the adverse action is permitted by
contractual terms binding on the dealer and the dealer had actual
knowledge of the customer's intent to export or resell the vehicle,
as specified. Because a violation of these provisions would be a
crime, this bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) The distribution, sale, and service of new motor vehicles in
the State of California vitally affects the general economy of this
state and the public welfare.
(b) The new motor vehicle franchise system, which operates within
a strictly defined and highly regulated statutory scheme, assures the
consuming public of a well-organized distribution system for the
availability and sale of new motor vehicles throughout the state,
provides a network of quality warranty, recall, and repair facilities
to maintain those vehicles, and creates a cost-effective method for
the state to police those systems through the licensing and
regulation of private sector franchisors and franchisees.
(c) Over the past decade, franchisors have unilaterally and
gradually reduced the amount of flat-rate labor time allocable to
warranty repairs by an unreasonable amount, and have failed to
properly reimburse dealers for repairing vehicles to conform to the
warranty established by the franchisor. Over this period, franchisors
have also regularly denied dealer warranty and incentive program
claims for technical reasons without providing any rights to rebut
the denial or correct technical errors through reasonable appeal
processes, which has resulted in dealers not being reimbursed when
repairing vehicles under the manufacturer warranty or applying
incentive money to a sale.
(d) Franchisors implement punitive policies toward dealers when
vehicles sold by dealers end up being exported, even when the export
takes place without dealer knowledge, resulting in dealers being
charged back for incentive funding that the dealer accounted for in
making the initial sale.
(e) Franchisors measure dealership sales, service, and customer
service performance against standards that are established
unilaterally and without dealer input. Many of these performance
standards are based upon national or statewide performance averages
that bear no resemblance to a dealer's local market. Failure to
adhere to these standards can result in disqualification from
incentive programs, imposition of unrealistic working capital
requirements, and even termination of a franchise agreement.
(f) Franchisors frequently establish facility models that require
dealers to purchase goods or services from specific vendors, many of
which are located outside of the United States. Those requirements
are generally nonnegotiable, even if a dealer can obtain
substantially similar goods or services from a local California
vendor.
(g) It is the intent of this act to ensure that new motor vehicle
dealers are treated fairly by their franchisors, that dealers are
reasonably compensated for performing warranty repairs on behalf of
their franchisor, that dealers are not punished when vehicles are
exported without dealer knowledge, that performance standards take
into account local market conditions, and that dealers be allowed to
obtain required goods or services through vendors of their choosing.
SEC. 2. Section 3006 of the Vehicle Code is amended to read:
3006. The board shall organize and elect a president from among
its members for a term of one year at the first meeting of each year.
The newly elected president shall assume his or her
duties at the conclusion of the meeting at which he or she
was elected. Reelection to office during membership is unrestricted.
SEC. 3. Section 3008 of the Vehicle Code is amended to read:
3008. (a) All meetings of the board shall be open and public, and
all persons shall be permitted to attend any meeting of the board,
except that the board may hold executive sessions to deliberate on
the decision to be reached upon the evidence introduced in a
proceeding conducted in accordance with Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code.
(b) At all meetings of the board, open or executive, involving an
appeal from a decision of the Director of Motor Vehicles as
hereinafter provided for , the director or his or her
authorized representative may attend, present the position of
the department , and thereafter
then shall absent himself or herself from any
executive session at the request of any member of the board.
(c) Within the limitations of its powers and authority as
herein conferred , and in the event of disagreement
between the board and the director regarding the decision to be
reached as herein provided , the decision of the
board shall be final.
SEC. 4. Section 3012 of the Vehicle Code is amended to read:
3012. Each member of the board shall receive a per diem of one
hundred dollars ($100) for each day actually spent in the discharge
of official duties, and he or she shall be reimbursed for
his traveling and other expenses necessarily
incurred in the performance of his duties, which
or her duties. The per diem and reimbursement shall be
wholly defrayed from funds that shall be provided in the annual
budget of the department.
SEC. 5. Section 3050 of the Vehicle Code is amended to read:
3050. The board shall do all of the following:
(a) Adopt rules and regulations in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code governing those matters that are specifically
committed to its jurisdiction.
(b) Hear and determine, within the limitations and in accordance
with the procedure provided, an appeal presented by an applicant for,
or holder of, a license as a new motor vehicle dealer, manufacturer,
manufacturer branch, distributor, distributor branch, or
representative when the applicant or licensee submits an appeal
provided for in this chapter from a decision arising out of the
department.
(c) Consider any matter concerning the activities or practices of
any person applying for or holding a license as a new motor vehicle
dealer, manufacturer, manufacturer branch, distributor, distributor
branch, or representative pursuant to Chapter 4 (commencing with
Section 11700) of Division 5 submitted by any person. A member of the
board who is a new motor vehicle dealer may not participate in,
hear, comment, advise other members upon, or decide any matter
considered by the board pursuant to this subdivision that involves a
dispute between a franchisee and franchisor. After that
consideration, the board may do any one or any combination of the
following:
(1) Direct the department to conduct investigation of matters that
the board deems reasonable, and make a written report on the results
of the investigation to the board within the time specified by the
board.
(2) Undertake to mediate, arbitrate, or otherwise resolve any
honest difference of opinion or viewpoint existing between any member
of the public and any new motor vehicle dealer, manufacturer,
manufacturer branch, distributor branch, or representative.
(3) Order the department to exercise any and all authority or
power that the department may have with respect to the issuance,
renewal, refusal to renew, suspension, or revocation of the license
of any new motor vehicle dealer, manufacturer, manufacturer branch,
distributor, distributor branch, or representative as that license is
required under Chapter 4 (commencing with Section 11700) of Division
5.
(d) Hear and decide, within the limitations and in accordance with
the procedure provided, a protest presented by a franchisee pursuant
to Section 3060, 3062, 3064, 3065, or 3065.1
, 3070, 3072, 3074, 3075, or 3076 . A member of the board who
is a new motor vehicle dealer may not participate in, hear, comment,
advise other members upon, or decide, any matter involving a protest
filed pursuant to Article 4 (commencing with Section 3060), unless
all parties to the protest stipulate otherwise.
(e) Notwithstanding subdivisions (c) and (d), the courts have
jurisdiction over all common law and statutory claims originally
cognizable in the courts. For those claims, a party may initiate an
action directly in any court of competent jurisdiction.
SEC. 6. Section 3050.7 of the Vehicle Code is amended to read:
3050.7. (a) The board may adopt stipulated decisions and orders,
without a hearing pursuant to Section 3066, to resolve one or more
issues raised by a protest or petition filed with the board. Whenever
the parties to a protest or petition submit a proposed stipulated
decision and proposed order of the board, a copy
of the proposed stipulated decision and order shall be transmitted by
the executive director of the board to each member of the board. The
proposed stipulated decision and order shall be deemed to be adopted
by the board unless a member of the board notifies the executive
director of the board of an objection thereto within 10 days after
that board member has received a copy of the proposed stipulated
decision and order.
(b) If the board adopts a stipulated decision and order to resolve
a protest filed pursuant to Section 3060 or 3070 in which
the parties stipulate that good cause exists for the termination of
the franchise of the protestant, and the order provides for a
conditional or unconditional termination of the franchise of the
protestant, paragraph (2) of subdivision (a) of Section 3060 and
paragraph (2) of subdivision (a) of Section 3070 , which
requires require a hearing to determine
whether good cause exists for termination of the franchise, is
inapplicable to the proceedings. If the stipulated decision and order
provides for an unconditional termination of the franchise, the
franchise may be terminated without further proceedings by the board.
If the stipulated decision and order provides for the termination of
the franchise, conditioned upon the failure of a party to comply
with specified conditions, the franchise may be terminated upon a
determination, according to the terms of the stipulated decision and
order, that the conditions have not been met. If the stipulated
decision and order provides for the termination of the franchise
conditioned upon the occurrence of specified conditions, the
franchise may be terminated upon a determination, according to the
terms of the stipulated decision and order, that the stipulated
conditions have occurred.
SEC. 7. Section 3052 of the Vehicle Code is amended to read:
3052. (a) On or before the 10th day after the last day on which
reconsideration of a final decision of the department can be ordered,
the respondent applicant or licensee
may file an appeal with the executive director of the board. The
appeal shall be in writing and shall state the grounds therefor. A
copy of the appeal shall be mailed by the appellant to the
department, and the department shall thereafter be considered as a
party to the appeal. The right to appeal is not affected by failure
to seek reconsideration before the department.
(b) An appeal is considered to be filed on the date it is received
in the office of the executive director of the board, except that an
appeal mailed to the executive director by means of registered mail
is considered to be filed with the executive director on the postmark
date.
(c) The appeal shall be accompanied by evidence that the appellant
has requested the administrative record of the department and
advanced the cost of preparation of that record. The complete
administrative record includes the pleadings, all notices and orders
issued by the department, any proposed decision by an administrative
law judge, the exhibits admitted or rejected, the written evidence,
and any other papers in the case. All parts of the administrative
record requested by the appellant may be filed with the appeal
together with the appellant's points and authorities. If the board
orders the filing of additional parts of the administrative record,
the board may order prior payment by the appellant of the cost of
providing those additional parts.
(d) Except as provided in subdivisions (e) and (f), a decision of
the department may not become effective during the period in
which an appeal may be filed, and the filing of an appeal shall
stay the decision of the department until a final order is made by
the board.
(e) When a decision has ordered revocation of a dealer's license,
the department may, on or before the last day upon which an appeal
may be filed with the board, petition the board to order the decision
of the department into effect.
(f) With respect to the department's petition filed pursuant to
subdivision (e), the department shall have the burden of proof. The
board shall act upon the petition within 14 days or prior to the
effective date of the department's decision, whichever is later. The
board may order oral argument on the petition before the board.
Oral argument by telephone conference call with a quorum of
the board members present, either in person or by telephone, is
permitted.
SEC. 8. Section 3056 of the Vehicle Code is amended to read:
3056. When the order reverses the decision of the department, the
board may direct the reconsideration of
department to reconsider the matter in the light of its order
and may direct the department to take such any
further action as is specially enjoined upon it by law. In all
cases the board shall enter its order within 60 days after the
filing of the appeal, except in the case of unavoidable delay in
supplying the administrative record, in which event the board shall
make its final order within 60 days after receipt thereof
of the record .
SEC. 9. Section 3057 of the Vehicle Code is amended to read:
3057. The board shall fix an effective date for its orders not
more than 30 days from the day the order is served upon the parties
or remand the case to the department for fixing an effective date. A
final order of the board shall be in writing and copies
thereof of the order shall be delivered to the
parties personally or sent to them by registered mail. The
order shall be final upon its delivery or mailing and no
reconsideration or rehearing by the board shall be
permitted.
SEC. 10. Section 3062 of the Vehicle Code is amended to read:
3062. (a) (1) Except as otherwise provided in subdivision (b), if
a franchisor seeks to enter into a franchise establishing an
additional motor vehicle dealership within ,
or seeks to relocate an existing motor vehicle dealership, having
a relevant market area where within
which the same line-make is then
represented, or seeks to relocate an existing motor vehicle
dealership, the franchisor shall, in writing, first notify
the board and each franchisee in that line-make in the relevant
market area of the franchisor's intention to establish an additional
dealership or to relocate an existing dealership within or
into that market area . Within 20 days of receiving the
notice, satisfying the requirements of this section, or within 20
days after the end of an appeal procedure provided by the franchisor,
a franchisee required to be given the notice may file with the board
a protest to the establishing or relocating of the
dealership proposed dealership establishment or
relocation described in the franchisor's notice . If, within
this time, a franchisee files with the board a request for additional
time to file a protest, the board or its executive director, upon a
showing of good cause, may grant an additional 10 days to file the
protest. When a protest is filed, the board shall inform the
franchisor that a timely protest has been filed, that a hearing is
required pursuant to Section 3066, and that the franchisor may not
establish the proposed dealership or relocate the
proposed existing dealership until the board
has held a hearing as provided in Section 3066, nor thereafter, if
the board has determined that there is good cause for not permitting
the establishment of the proposed dealership or relocation of
the existing dealership. In the event of multiple protests,
hearings may be consolidated to expedite the disposition of the
issue.
(2) If a franchisor seeks to enter into a franchise that
authorizes a satellite warranty facility to be established at, or
relocated to, a proposed location that is within two miles of a
dealership of the same line-make, the franchisor shall first give
notice in writing of the franchisor's intention to establish or
relocate a satellite warranty facility at the proposed location to
the board and each franchisee operating a dealership of the same
line-make within two miles of the proposed location. Within 20 days
of receiving the notice satisfying the requirements of this section,
or within 20 days after the end of an appeal procedure provided by
the franchisor, a franchisee required to be given the notice may file
with the board a protest to the establishing or relocating of the
satellite warranty facility. If, within this time, a franchisee files
with the board a request for additional time to file a protest, the
board or its executive director, upon a showing of good cause, may
grant an additional 10 days to file the protest. When a protest is
filed, the board shall inform the franchisor that a timely protest
has been filed, that a hearing is required pursuant to Section 3066,
and that the franchisor may not establish or relocate the proposed
satellite warranty facility until the board has held a hearing as
provided in Section 3066, nor thereafter, if the board has determined
that there is good cause for not permitting the satellite warranty
facility. In the event of multiple protests, hearings may be
consolidated to expedite the disposition of the issue.
(3) The written notice shall contain, on the first page thereof in
at least 12-point bold type and circumscribed by a line to segregate
it from the rest of the text, the following statement:
"NOTICE TO DEALER: You have the right to file a protest with the
NEW MOTOR VEHICLE BOARD in Sacramento and have a hearing on your
protest under the terms of the California Vehicle Code if you oppose
this action. You must file your protest with the board within 20 days
of your receipt of this notice, or within 20 days after the end of
any appeal procedure that is provided by us to you. If within this
time you file with the board a request for additional time to file a
protest, the board or its executive director, upon a showing of good
cause, may grant you an additional 10 days to file the protest."
(b) Subdivision (a) does not apply to either of the following:
(1) The relocation of an existing dealership to a location that is
both within the same city as, and within one mile from, the existing
dealership location.
(2) The establishment at a location that is both within the same
city as, and within one-quarter mile from, the location of a
dealership of the same line-make that has been out of operation for
less than 90 days.
(c) Subdivision (a) does not apply to a display of vehicles at a
fair, exposition, or similar exhibit if actual sales are not made at
the event and the display does not exceed 30 days. This subdivision
may not be construed to prohibit a new vehicle dealer from
establishing a branch office for the purpose of selling vehicles at
the fair, exposition, or similar exhibit, even though the event is
sponsored by a financial institution, as defined in Section 31041 of
the Financial Code or by a financial institution and a licensed
dealer. The establishment of these branch offices, however, shall be
in accordance with subdivision (a) where applicable.
(d) For the purposes of this section, the reopening of a
dealership that has not been in operation for one year or more shall
be deemed the establishment of an additional motor vehicle
dealership.
(e) As used in this section, the following definitions apply:
(1) "Motor vehicle dealership" or "dealership" means an authorized
facility at which a franchisee offers for sale or lease, displays
for sale or lease, or sells or leases new motor vehicles.
(2) "Satellite warranty facility" means a facility operated by a
franchisee where authorized warranty repairs and service are
performed and the offer for sale or lease, the display for sale or
lease, or the sale or lease of new motor vehicles is not authorized
to take place.
SEC. 11. Section 3063 of the Vehicle Code is amended to read:
3063. In determining whether good cause has been established for
not entering into a franchise or relocating an
additional franchise for existing dealership of
the same line-make, the board shall take into consideration the
existing circumstances, including, but not limited to, all of the
following:
(a) Permanency of the investment.
(b) Effect on the retail motor vehicle business and the consuming
public in the relevant market area.
(c) Whether it is injurious to the public welfare for an
additional franchise to be established or an existing dealership
to be relocated .
(d) Whether the franchisees of the same line-make in that
the relevant market area are providing adequate
competition and convenient consumer care for the motor vehicles of
the line-make in the market area , which shall include the
adequacy of motor vehicle sales and service facilities, equipment,
supply of vehicle parts, and qualified service personnel.
(e) Whether the establishment of an additional franchise would
increase competition and therefore be in the public interest.
(f) For purposes of this section, the terms " motor vehicle
dealership" and "dealership" shall have the same meaning as defined
in Section 3062.
SEC. 12. Section 3064 of the Vehicle Code is amended to read:
3064. (a) Every franchisor shall specify to its franchisees the
delivery and preparation obligations of such
the franchisees prior to delivery of new motor vehicles to
retail buyers. A copy of the delivery and preparation obligations,
which shall constitute the franchisee's only responsibility for
product liability between the franchisee and the franchisor but
which shall not in any way affect the franchisee's
responsibility for product liability between the purchaser and
either the franchisee or the franchisor, and a schedule of
compensation to be paid to franchisees for the work and
services they shall be required to perform in connection with
such those delivery and preparation
obligations shall be filed with the board by franchisors, and shall
constitute the compensation as set forth on such
the schedule. The schedule of compensation shall be
reasonable, with the reasonableness thereof being subject to the
approval of the board, providing if a
franchisee files a notice of protest with the board. In determining
the reasonableness of the schedules, the board shall consider all
relevant circumstances, including, but not limited to, the time
required to perform each function that the dealer is obligated to
perform and the appropriate labor rate.
(b) Upon delivery of the vehicle, the franchisee shall give a copy
of the delivery and preparation obligations to the purchaser and a
written certification that he the franchisee
has fulfilled these obligations.
SEC. 13. Section 3065 of the Vehicle Code is amended to read:
3065. (a) Every franchisor shall properly fulfill every warranty
agreement made by it and adequately and fairly compensate each of its
franchisees for labor and parts used to fulfill that warranty when
the franchisee has fulfilled warranty obligations of
diagnostics, repair , and servicing and shall file a
copy of its warranty reimbursement schedule or formula with the
board. The warranty reimbursement schedule or formula shall be
reasonable with respect to the time and compensation allowed to
the franchisee for the warranty work
diagnostics, repair, and servicing, and all other conditions of
the obligation. If the warranty reimburs ement
schedule or formula provides compensation for franchisee labor on a
flat-rate basis, the franchisor shall allow the franchisee to use a
published, nationally recognized, flat-rate labor time guide as the
basis for determining the amount of time allocable for warranty
diagnostics and repairs if the franchisee primarily uses the time
guide to compute technician flat-rate compensation and charges for
nonwarranty labor. The reasonableness of the warranty
reimbursement schedule or formula shall be determined by the board if
a franchisee files a notice of protest with the
board.
(b) In determining the adequacy and fairness of the compensation,
the franchisee's effective labor rate charged to its various retail
customers may be considered together with other relevant criteria.
(c) If any franchisor disallows a franchisee's claim for a
defective part, alleging that the part, in fact, is not defective,
the franchisor shall return the part alleged not to be defective to
the franchisee at the expense of the franchisor, or the franchisee
shall be reimbursed for the franchisee's cost of the part, at the
franchisor's option.
(d) (1) All claims made by franchisees
pursuant to this section shall be either approved or disapproved
within 30 days after their receipt by the franchisor. Any claim not
specifically disapproved in writing within 30 days from receipt by
the franchisor shall be deemed approved on the 30th day.
When All claims made by franchisees under this section
and Section 3064 for labor and parts shall be paid within 30 days
after approval.
(2) A claim may only be disapproved for
good cause, including, but not limited to, when the claim is false
or fraudulent, repairs were not properly made, repairs were
inappropriate to correct a nonconformity with the written
warranty due to an improper act or omission of the franchisee, or for
material noncompliance with reasonable and nondiscriminatory
documentation and administrative claims submission requirements. A
franchisor shall not disapprove a claim based upon an extrapolation
from a sample of claims.
(3) When any claim is
disapproved, the franchisee who submits it shall be notified in
writing of its disapproval within the required period, and each
notice shall state the specific grounds upon which the disapproval is
based. All claims made by franchisees under this section
and Section 3064 for labor and parts shall be paid within 30 days
following approval. Failure The franchisor shall
provide for a reasonable appeal process allowing the
franchisee at least 30 days after
receipt of the written disapproval notice to provide additional
supporting documentation or information rebutting the disapproval. If
disapproval is based upon noncompliance with documentation or
administrative claims submission requirements, the franchisee shall
have 30 days from the date of receipt of the notice to
cure the noncompliance. If the disapproval is rebutted, or any
noncompliance is reasonably cured within that 30-day period, the
franchisor shall approve the claim.
(4) Failure to approve or pay
within the above specified time limits, in individual instances for
reasons beyond the reasonable control of the franchisor, shall not
constitute a violation of this article.
(5) Within one year after either receipt of the written
disapproval notice or completion of the franchisor's appeal process,
whichever is later, a franchisee may file a protest with the board
for determination of whether the franchisor complied with the
requirements of this subdivision. In any protest pursuant to this
subdivision, the franchisor shall have the burden of proof.
(e) (1) Audits of franchisee warranty
records may be conducted by the franchisor on a reasonable basis, and
for a period of 12 6 months after a
claim is paid or credit issued. Franchisee claims for
warranty compensation shall not be disapproved except for good cause,
such as performance of nonwarranty repairs, lack of material
documentation, or fraud. A reasonable basis for an
audit shall include, but not be limited to, a recent significant
deviation between the value or number of warranty claims made by the
franchisee and the average value or number of warranty claims made by
similarly sized dealers of the same line-make.
(2) Previously approved claims shall
not be disapproved and charged back to the franchisee
except for good cause, including, but not limited to, when the claim
is false or fraudulent, repairs were not properly made, repairs were
inappropriate to correct a nonconformity with the written warranty
due to an improper act or omission of the dealer, or for material
noncompliance with reasonable and nondiscriminatory documentation and
administrative claims submission requirements. A franchisor shall
not disapprove or chargeback a claim based upon an extrapolation from
a sample of claims.
(3) If the franchisor disapproves of a
previously approved claim following an audit, the franchisor shall
provide to the franchisee, within 30 days after the audit, a written
disapproval notice stating the specific grounds upon which the claim
is disapproved. The franchisor shall provide a reasonable
appeal process allowing the franchisee a reasonable period of not
less than 45 days after receipt of the written disapproval notice to
respond to any disapproval with additional supporting documentation
or information rebutting the disapproval, with the period to be
commensurate with the volume of claims under consideration. If the
franchisee rebuts any disapproval or reasonably cures any
noncompliance rel ating to a claim, the franchisor shall
not chargeback the franchisee for that claim.
(4) The franchisor shall not chargeback
the franchisee until 45 days after receipt of the written
disapproval notice or completion of the appeal process, whichever is
later. Any chargeback to a franchisee for warranty parts or
service compensation shall be made within 90 days of receipt of
the written disapproval notice or the completion of the
audit franchisor's appeal process, whichever
is later .
(5) Within one year after either
receipt of the written disapproval notice or completion of the
franchisor's appeal process, whichever is later, a franchisee may
file a protest with the board for determination of whether
the franchisor complied with this subdivision . If
a false claim was submitted by a franchisee with intent to defraud
the franchisor, a longer period for audit and any resulting
chargeback may be permitted if the franchisor obtains an order from
the board. In any protest p ursuant to this
subdivision, the franchisor shall have the burden of proof.
SEC. 14. Section 3065.1 of the Vehicle Code is amended to read:
3065.1. (a) All claims made by a franchisee for payment under the
terms of a franchisor incentive program shall be either approved or
disapproved within 30 days after receipt by the franchisor. When any
claim is disapproved, the franchisee who submits it shall be notified
in writing of its disapproval within the required period, and each
notice shall state the specific grounds upon which the disapproval is
based. Any claim not specifically disapproved in writing within 30
days from receipt shall be deemed approved on the 30th day.
Following
(b) Franchisee claims for incentive
program compensation shall not be disapproved except for good cause,
including, but not be limited to, when the claim is false or
fraudulent, ineligibility under the terms of the incentive program as
previously communicated to the franchisee, or material noncompliance
with reasonable and nondiscriminatory documentation and
administrative claims submission requirements. A franchisor shall not
disapprove a claim based upon an extrapolation from a sample of
claims.
(c) The franchisor shall provide for a
reasonable appeal process allowing the franchisee at least 30 days
after receipt of the written disapproval notice to respond to any
disapproval with additional supporting documentation or information
rebutting the disapproval. If disapproval is based solely
upon noncompliance with documentation or administrative claims
submission requirements, the franchisee shall have 30 days from the
date of receipt of the written disapproval notice to cure the
noncompliance. If the disapproval is rebutted, or any noncompliance
is reasonably cured within that 30-day period, the franchisor shall
approve the claim.
(d) Following the disapproval of
a claim, a franchisee shall have one year from receipt of
the notice of disapproval in which to appeal the disapproval to the
franchisor and either receipt of the written
disapproval notice or completion of the franchisor appeal process,
whichever is later, to file a protest with the board for
determination of whether the franchisor complied with this
subdivision. In any hearing pursuant to this subdivision, the
franchisor shall have the burden of proof . All
(e) All claims made by
franchisees under this section shall be paid within 30 days following
approval. Failure to approve or pay within the above specified time
limits, in individual instances for reasons beyond the reasonable
control of the franchisor, do not constitute a violation of this
article.
(b)
(f) Audits of franchisee incentive records may be
conducted by the franchisor on a reasonable basis, and for a period
of 18 6 months after a claim is paid or
credit issued. Franchisee claims for incentive program
compensation shall not be disapproved except for good cause, such as
ineligibility under the terms of the incentive program, lack of
material documentation, or fraud
(g) Previously approved claims shall not be disapproved and
charged back except for good cause, including, but not limited to,
when the claim is false or fraudulent, ineligibility under the terms
of the incentive program as previously communicated to the
franchisee, or material noncompliance with reasonable and
nondiscriminatory documentation and administrative claims submission
requirements. A franchisor shall not disapprove a claim or chargeback
a dealer for a claim based upon an extrapolation from a sample of
claims.
(h) If the franchisor disapproves of a
previously approved claim following an audit, the franchisor shall
provide to the franchisee, within 30 days after the audit, a written
disapproval notice stating the specific grounds upon which
the claim is disapproved. The franchisor shall provide a reasonable
appeal process allowing the franchisee a reasonable period of not
less than 45 days after receipt of the written disapproval notice to
respond to any chargeback with additional supporting documentation or
information rebutting the disapproval, with the period to be
commensurate with the volume of claims under consideration.
(i) The franchisor shall not chargeback
the franchisee until 45 days after the franchisee receives the
written disapproval notice or completion of the appeal process,
whichever is later. If the franchisee reasonably cures any
noncompliance relating to a claim, the franchisor shall not
chargeback the dealer for that claim . Any
chargeback to a franchisee for incentive program compensation
shall be made within 90 days of the completion of the audit.
If after the franchisee receives the written
disapproval notice or completes the franchisor's appeal process,
whichever is later.
(j) Within one year after either
receipt of the written disapproval notice or completion of the
franchisor appeal process, whichever is later, a franchisee may file
a protest with the board for determination of whether the franchisor
complied with this subdivision . If a false claim
was submitted by a franchisee with the intent to defraud the
franchisor, a longer period for audit and any resulting chargeback
may be permitted if the franchisor obtains an order from the board.
In any protest pursuant to this subdivision, the franchisor
shall have the burden of proof.
SEC. 15. Section 3066 of the Vehicle Code is amended to read:
3066. (a) Upon receiving a notice of protest
pursuant to Section 3060, 3062, 3064, 3065, 3065.1, 3070, 3072, 3074,
3075, or 3076, the board shall fix a time within 60 days of the
order, and place of hearing, and shall send by registered mail a copy
of the order to the franchisor, the protesting franchisee, and all
individuals and groups that have requested notification by the board
of protests and decisions of the board. Except in a case involving a
franchisee who deals exclusively in motorcycles, the board or its
executive director may, upon a showing of good cause, accelerate or
postpone the date initially established for a hearing, but the
hearing may not be rescheduled more than 90 days after the board's
initial order. For the purpose of accelerating or postponing a
hearing date, "good cause" includes, but is not limited to, the
effects upon, and any irreparable harm to, the parties or interested
persons or groups if the request for a change in hearing date is not
granted. The board or an administrative law judge designated by the
board shall hear and consider the oral and documented evidence
introduced by the parties and other interested individuals and
groups, and the board shall make its decision solely on the record so
made. Chapter 4.5 (commencing with Section 11400) of Part 1 of
Division 3 of Title 2 of the Government Code and Sections 11507.3,
11507.6, 11507.7, 11511, 11511.5, 11513, 11514, 11515, and 11517 of
the Government Code apply to these proceedings.
(b) In a hearing on a protest filed pursuant to Section 3060,
3062, 3070, or 3072, the franchisor shall have the burden of proof to
establish that there is good cause to modify, replace, terminate, or
refuse to continue a franchise. The franchisee shall have the burden
of proof to establish that there is good cause not to enter into a
franchise establishing or relocating an additional motor vehicle
dealership.
(c) In a hearing on a protest alleging a violation of, or filed
pursuant to, Section 3064, 3065, 3065.1, 3074, 3075, or 3076, the
franchisee shall have the burden of proof, but the franchisor has the
burden of proof to establish that a franchisee acted with intent to
defraud the franchisor where that issue is material to a protest
filed pursuant to Section 3065, 3065.1, 3075, or 3076.
(d) A member of the board who is a new motor vehicle dealer may
not participate in, hear, comment, or advise other members upon, or
decide, a matter involving a protest filed pursuant to this article
unless all parties to the protest stipulate otherwise.
SEC. 16. Section 3067 of the Vehicle Code is amended to read:
3067. (a) The decision of the board shall be in writing and shall
contain findings of fact and a determination of the issues
presented. The decision shall sustain, conditionally sustain,
overrule, or conditionally overrule the protest. Conditions imposed
by the board shall be for the purpose of assuring performance of
binding contractual agreements between franchisees and franchisors or
otherwise serving the purposes of this article or Article 5
(commencing with Section 3070) . If the board fails to act
within 30 days after the hearing, within 30 days after the board
receives a proposed decision where the case is heard before an
administrative law judge alone, or within a period necessitated by
Section 11517 of the Government Code, or as may be mutually agreed
upon by the parties, then the proposed action shall be deemed to be
approved. Copies of the board's decision shall be delivered to the
parties personally or sent to them by registered mail, as well as to
all individuals and groups that have requested notification by the
board of protests and decisions by the board. The board's decision
shall be final upon its delivery or mailing and a reconsideration or
rehearing is not permitted.
(b) Notwithstanding subdivision (c) of Section 11517 of the
Government Code, if a protest is heard by an administrative law judge
alone, 10 days after receipt by the board of the administrative law
judge's proposed decision, a copy of the proposed decision shall be
filed by the board as a public record and a copy shall be served by
the board on each party and his or her attorney.
SEC. 17. Section 3069.1 of the Vehicle Code is amended to read:
3069.1. Sections 3060 to 3065.1, inclusive, do not apply to a
franchise authorizing a dealership, as defined in paragraph
(1) of subdivision (e) (d) of
Section 3072.
SEC. 18. Section 11713.3 of the Vehicle Code is amended to read:
11713.3. It is unlawful and a violation of this code for a
manufacturer, manufacturer branch, distributor, or distributor branch
licensed pursuant to this code to do, directly or indirectly through
an affiliate, any of the following:
(a) To refuse or fail to deliver in reasonable quantities and
within a reasonable time after receipt of an order from a dealer
having a franchise for the retail sale of a new vehicle sold or
distributed by the manufacturer or distributor, a new vehicle or
parts or accessories to new vehicles as are covered by the franchise,
if the vehicle, parts, or accessories are publicly advertised as
being available for delivery or actually being delivered. This
subdivision is not violated, however, if the failure is caused by
acts or causes beyond the control of the manufacturer, manufacturer
branch, distributor, or distributor branch.
(b) To prevent or require, or attempt to prevent or require, by
contract or otherwise, a change in the capital structure of a
dealership or the means by or through which the dealer finances the
operation of the dealership, if the dealer at all times meets
reasonable capital standards agreed to by the dealer and the
manufacturer or distributor, and if a change in capital structure
does not cause a change in the principal management or have the
effect of a sale of the franchise without the consent of the
manufacturer or distributor.
(c) To prevent or require, or attempt to prevent or require, a
dealer to change the executive management of a dealership, other than
the principal dealership operator or operators, if the franchise was
granted to the dealer in reliance upon the personal qualifications
of that person.
(d) (1) Except as provided in subdivision (t), to prevent or
require, or attempt to prevent or require, by contract or otherwise,
a dealer, or an officer, partner, or stockholder of a dealership, the
sale or transfer of a part of the interest of any of them to another
person. A dealer, officer, partner, or stockholder shall not,
however, have the right to sell, transfer, or assign the franchise,
or a right thereunder, without the consent of the manufacturer or
distributor except that the consent shall not be unreasonably
withheld.
(2) (A) For the transferring franchisee to fail, prior to the
sale, transfer, or assignment of a franchisee or the sale,
assignment, or transfer of all, or substantially all, of the assets
of the franchised business or a controlling interest in the
franchised business to another person, to notify the manufacturer or
distributor of the franchisee's decision to sell, transfer, or assign
the franchise. The notice shall be in writing and shall include all
of the following:
(i) The proposed transferee's name and address.
(ii) A copy of all of the agreements relating to the sale,
assignment, or transfer of the franchised business or its assets.
(iii) The proposed transferee's application for approval to become
the successor franchisee. The application shall include forms and
related information generally utilized by the manufacturer or
distributor in reviewing prospective franchisees, if those forms are
readily made available to existing franchisees. As soon as
practicable after receipt of the proposed transferee's application,
the manufacturer or distributor shall notify the franchisee and the
proposed transferee of information needed to make the application
complete.
(B) For the manufacturer or distributor, to fail, on or before 60
days after the receipt of all of the information required pursuant to
subparagraph (A), or as extended by a written agreement between the
manufacturer or distributor and the franchisee, to notify the
franchisee of the approval or the disapproval of the sale, transfer,
or assignment of the franchise. The notice shall be in writing and
shall be personally served or sent by certified mail, return receipt
requested, or by guaranteed overnight delivery service that provides
verification of delivery and shall be directed to the franchisee. A
proposed sale, assignment, or transfer shall be deemed approved,
unless disapproved by the franchisor in the manner provided by this
subdivision. If the proposed sale, assignment, or transfer is
disapproved, the franchisor shall include in the notice of
disapproval a statement setting forth the reasons for the
disapproval.
(3) In an action in which the manufacturer's or distributor's
withholding of consent under this subdivision or subdivision (e) is
an issue, whether the withholding of consent was unreasonable is a
question of fact requiring consideration of all the existing
circumstances.
(e) To prevent, or attempt to prevent, a dealer from receiving
fair and reasonable compensation for the value of the franchised
business. There shall not be a transfer or assignment of the dealer's
franchise without the consent of the manufacturer or distributor,
which consent shall not be unreasonably withheld or conditioned upon
the release, assignment, novation, waiver, estoppel, or modification
of a claim or defense by the dealer.
(f) To obtain money, goods, services, or another benefit from a
person with whom the dealer does business, on account of, or in
relation to, the transaction between the dealer and that other
person, other than for compensation for services rendered, unless the
benefit is promptly accounted for, and transmitted to, the dealer.
(g) (1) Except as provided in paragraph (3), to obtain from a
dealer or enforce against a dealer an agreement, provision, release,
assignment, novation, waiver, or estoppel that does any of the
following:
(A) Modifies or disclaims a duty or obligation of a manufacturer,
manufacturer branch, distributor, distributor branch, or
representative, or a right or privilege of a dealer, pursuant to
Chapter 4 (commencing with Section 11700) of Division 5 or Chapter 6
(commencing with Section 3000) of Division 2.
(B) Limits or constrains the right of a dealer to file, pursue, or
submit evidence in connection with a protest before the board.
(C) Requires a dealer to terminate a franchise.
(D) Requires a controversy between a manufacturer, manufacturer
branch, distributor, distributor branch, or representative and a
dealer to be referred to a person for a binding determination.
However, this subparagraph does not prohibit arbitration before an
independent arbitrator, provided that whenever a motor vehicle
franchise contract provides for the use of arbitration to resolve a
controversy arising out of, or relating to, that contract,
arbitration may be used to settle the controversy only if, after the
controversy arises, all parties to the controversy consent in writing
to use arbitration to settle the controversy. For the purpose of
this subparagraph, the terms "motor vehicle" and "motor vehicle
franchise contract" shall have the same meaning as defined in Section
1226 of Title 15 of the United States Code. If arbitration is
elected to settle a dispute under a motor vehicle franchise contract,
the arbitrator shall provide the parties to the arbitration with a
written explanation of the factual and legal basis for the award.
(2) An agreement, provision, release, assignment, novation,
waiver, or estoppel prohibited by this subdivision shall be
unenforceable and void.
(3) This subdivision does not do any of the following:
(A) Limit or restrict the terms upon which parties to a protest
before the board, civil action, or other proceeding can settle or
resolve, or stipulate to evidentiary or procedural matters during the
course of, a protest, civil action, or other proceeding.
(B) Affect the enforceability of any stipulated order or other
order entered by the board.
(C) Affect the enforceability of any provision in a contract if
the provision is not prohibited under this subdivision or any other
law.
(D) Affect the enforceability of a provision in any contract
entered into on or before December 31, 2011.
(E) Prohibit a dealer from waiving its right to file a protest
pursuant to Section 3065.1 if the waiver agreement is entered into
after a franchisor incentive program claim has been disapproved by
the franchisor and the waiver is voluntarily given as part of an
agreement to settle that claim.
(F) Prohibit a voluntary agreement supported by valuable
consideration, other than granting or renewing a franchise, that does
both of the following:
(i) Provides that a dealer establish or maintain exclusive
facilities, personnel, or display space or provides that a dealer
make a material alteration, expansion, or addition to a dealership
facility.
(ii) Contains no waiver or other provision prohibited by
subparagraph (A), (B), (C), or (D) of paragraph (1).
(G) Prohibit an agreement separate from the franchise agreement
that implements a dealer's election to terminate the franchise if the
agreement is conditioned only on a specified time for termination or
payment of consideration to the dealer.
(H) (i) Prohibit a voluntary waiver agreement, supported by
valuable consideration, other than the consideration of renewing a
franchise, to waive the right of a dealer to file a protest under
Section 3062 for the proposed establishment or relocation of a
specific proposed dealership, if the waiver agreement provides all of
the following:
(I) The approximate address at which the proposed dealership will
be located.
(II) The planning potential used to establish the proposed
dealership's facility, personnel, and capital requirements.
(III) An approximation of projected vehicle and parts sales, and
number of vehicles to be serviced at the proposed dealership.
(IV) Whether the franchisor or affiliate will hold an ownership
interest in the proposed dealership or real property of the proposed
dealership, and the approximate percentage of any franchisor or
affiliate ownership interest in the proposed dealership.
(V) The line-makes to be operated at the proposed dealership.
(VI) If known at the time the waiver agreement is executed, the
identity of the dealer who will operate the proposed dealership.
(VII) The date the waiver agreement is to expire, which may not be
more than 30 months after the date of execution of the waiver
agreement.
(ii) Notwithstanding the provisions of a waiver agreement entered
into pursuant to the provisions of this subparagraph, a dealer may
file a protest under Section 3062 if any of the information provided
pursuant to clause (i) has become materially inaccurate since the
waiver agreement was executed. Any determination of the
enforceability of a waiver agreement shall be determined by the board
and the franchisor shall have the burden of proof.
(h) To increase prices of motor vehicles that the dealer had
ordered for private retail consumers prior to the dealer's receipt of
the written official price increase notification. A sales contract
signed by a private retail consumer is evidence of the order. In the
event of manufacturer price reductions, the amount of the reduction
received by a dealer shall be passed on to the private retail
consumer by the dealer if the retail price was negotiated on the
basis of the previous higher price to the dealer. Price reductions
apply to all vehicles in the dealer's inventory that were subject to
the price reduction. Price differences applicable to new model or
series motor vehicles at the time of the introduction of new models
or series shall not be considered a price increase or price decrease.
This subdivision does not apply to price changes caused by either of
the following:
(1) The addition to a motor vehicle of required or optional
equipment pursuant to state or federal law.
(2) Revaluation of the United States dollar in the case of a
foreign-make vehicle.
(i) To fail to pay to a dealer, within a reasonable time following
receipt of a valid claim by a dealer thereof, a payment agreed to be
made by the manufacturer or distributor to the dealer by reason of
the fact that a new vehicle of a prior year model is in the dealer's
inventory at the time of introduction of new model vehicles.
(j) To deny the widow, widower, or heirs designated by a deceased
owner of a dealership the opportunity to participate in the ownership
of the dealership or successor dealership under a valid franchise
for a reasonable time after the death of the owner.
(k) To offer refunds or other types of inducements to a person for
the purchase of new motor vehicles of a certain line-make to be sold
to the state or a political subdivision of the state without making
the same offer to all other dealers in the same line-make within the
relevant market area.
(l) To modify, replace, enter into, relocate, terminate, or refuse
to renew a franchise in violation of Article 4 (commencing with
Section 3060) of Chapter 6 of Division 2.
(m) To employ a person as a representative who has not been
licensed pursuant to Article 3 (commencing with Section 11900) of
Chapter 4 of Division 5.
(n) To deny a dealer the right of free association with another
dealer for a lawful purpose.
(o) (1) To compete with a dealer in the same line-make operating
under an agreement or franchise from a manufacturer or distributor in
the relevant market area.
(2) A manufacturer, branch, or distributor or an entity that
controls or is controlled by, a manufacturer, branch, or distributor,
shall not, however, be deemed to be competing in the following
limited circumstances:
(A) Owning or operating a dealership for a temporary period, not
to exceed one year at the location of a former dealership of the same
line-make that has been out of operation for less than six months.
However, after a showing of good cause by a manufacturer, branch, or
distributor that it needs additional time to operate a dealership in
preparation for sale to a successor independent franchisee, the board
may extend the time period.
(B) Owning an interest in a dealer as part of a bona fide dealer
development program that satisfies all of the following requirements:
(i) The sole purpose of the program is to make franchises
available to persons lacking capital, training, business experience,
or other qualities ordinarily required of prospective franchisees and
the dealer development candidate is an individual who is unable to
acquire the franchise without assistance of the program.
(ii) The dealer development candidate has made a significant
investment subject to loss in the franchised business of the dealer.
(iii) The program requires the dealer development candidate to
manage the day-to-day operations and business affairs of the dealer
and to acquire, within a reasonable time and on reasonable terms and
conditions, beneficial ownership and control of a majority interest
in the dealer and disassociation of any direct or indirect ownership
or control by the manufacturer, branch, or distributor.
(C) Owning a wholly owned subsidiary corporation of a distributor
that sells motor vehicles at retail, if, for at least three years
prior to January 1, 1973, the subsidiary corporation has been a
wholly owned subsidiary of the distributor and engaged in the sale of
vehicles at retail.
(3) (A) A manufacturer, branch, and distributor that owns or
operates a dealership in the manner described in subparagraph (A) of
paragraph (2) shall give written notice to the board, within 10 days,
each time it commences or terminates operation of a dealership and
each time it acquires, changes, or divests itself of an ownership
interest.
(B) A manufacturer, branch, and distributor that owns an interest
in a dealer in the manner described in subparagraph (B) of paragraph
(2) shall give written notice to the board, annually, of the name and
location of each dealer in which it has an ownership interest, the
name of the bona fide dealer development owner or owners, and the
ownership interests of each owner expressed as a percentage.
(p) To unfairly discriminate among its franchisees with respect to
warranty reimbursement or authority granted to its franchisees to
make warranty adjustments with retail customers.
(q) To sell vehicles to a person not licensed pursuant to this
chapter for resale.
(r) To fail to affix an identification number to a park trailer,
as described in Section 18009.3 of the Health and Safety Code, that
is manufactured on or after January 1, 1987, and that does not
clearly identify the unit as a park trailer to the department. The
configuration of the identification number shall be approved by the
department.
(s) To dishonor a warranty, rebate, or other incentive offered to
the public or a dealer in connection with the retail sale of a new
motor vehicle, based solely upon the fact that an autobroker arranged
or negotiated the sale. This subdivision shall not prohibit the
disallowance of that rebate or incentive if the purchaser or dealer
is ineligible to receive the rebate or incentive pursuant to any
other term or condition of a rebate or incentive program.
(t) To exercise a right of first refusal or other right requiring
a franchisee or an owner of the franchise to sell, transfer, or
assign to the franchisor, or to a nominee of the franchisor, all or a
material part of the franchised business or of the assets of the
franchised business unless all of the following requirements are met:
(1) The franchise authorizes the franchisor to exercise a right of
first refusal to acquire the franchised business or assets of the
franchised business in the event of a proposed sale, transfer, or
assignment.
(2) The franchisor gives written notice of its exercise of the
right of first refusal no later than 45 days after the franchisor
receives all of the information required pursuant to subparagraph (A)
of paragraph (2) of subdivision (d).
(3) The sale, transfer, or assignment being proposed relates to
not less than all or substantially all of the assets of the
franchised business or to a controlling interest in the franchised
business.
(4) The proposed transferee is neither a family member of an owner
of the franchised business, nor a managerial employee of the
franchisee owning 15 percent or more of the franchised business, nor
a corporation, partnership, or other legal entity owned by the
existing owners of the franchised business. For purposes of this
paragraph, a "family member" means the spouse of an owner of the
franchised business, the child, grandchild, brother, sister, or
parent of an owner, or a spouse of one of those family members. This
paragraph does not limit the rights of the franchisor to disapprove a
proposed transferee as provided in subdivision (d).
(5) Upon the franchisor's exercise of the right of first refusal,
the consideration paid by the franchisor to the franchisee and owners
of the franchised business shall equal or exceed all consideration
that each of them were to have received under the terms of, or in
connection with, the proposed sale, assignment, or transfer, and the
franchisor shall comply with all the terms and conditions of the
agreement or agreements to sell, transfer, or assign the franchised
business.
(6) The franchisor shall reimburse the proposed transferee for
expenses paid or incurred by the proposed transferee in evaluating,
investigating, and negotiating the proposed transfer to the extent
those expenses do not exceed the usual, customary, and reasonable
fees charged for similar work done in the area in which the
franchised business is located. These expenses include, but are not
limited to, legal and accounting expenses, and expenses incurred for
title reports and environmental or other investigations of real
property on which the franchisee's operations are conducted. The
proposed transferee shall provide the franchisor a written
itemization of those expenses, and a copy of all nonprivileged
reports and studies for which expenses were incurred, if any, within
30 days of the proposed transferee's receipt of a written request
from the franchisor for that accounting. The franchisor shall make
payment within 30 days of exercising the right of first refusal.
(u) (1) To unfairly discriminate in favor of a dealership owned or
controlled, in whole or in part, by a manufacturer or distributor or
an entity that controls or is controlled by the manufacturer or
distributor. Unfair discrimination includes, but is not limited to,
the following:
(A) The furnishing to a franchisee or dealer that is owned or
controlled, in whole or in part, by a manufacturer, branch, or
distributor of any of the following:
(i) A vehicle that is not made available to each franchisee
pursuant to a reasonable allocation formula that is applied
uniformly, and a part or accessory that is not made available to all
franchisees on an equal basis when there is no reasonable allocation
formula that is applied uniformly.
(ii) A vehicle, part, or accessory that is not made available to
each franchisee on comparable delivery terms, including the time of
delivery after the placement of an order. Differences in delivery
terms due to geographic distances or other factors beyond the control
of the manufacturer, branch, or distributor shall not constitute
unfair competition.
(iii) Information obtained from a franchisee by the manufacturer,
branch, or distributor concerning the business affairs or operations
of a franchisee in which the manufacturer, branch, or distributor
does not have an ownership interest. The information includes, but is
not limited to, information contained in financial statements and
operating reports, the name, address, or other personal information
or buying, leasing, or service behavior of a dealer customer, and
other information that, if provided to a franchisee or dealer owned
or controlled by a manufacturer or distributor, would give that
franchisee or dealer a competitive advantage. This clause does not
apply if the information is provided pursuant to a subpoena or court
order, or to aggregated information made available to all
franchisees.
(iv) Sales or service incentives, discounts, or promotional
programs that are not made available to all California franchises of
the same line-make on an equal basis.
(B) Referring a prospective purchaser or lessee to a dealer in
which a manufacturer, branch, or distributor has an ownership
interest, unless the prospective purchaser or lessee resides in the
area of responsibility assigned to that dealer or the prospective
purchaser or lessee requests to be referred to that dealer.
(2) This subdivision does not prohibit a franchisor from granting
a franchise to prospective franchisees or assisting those franchisees
during the course of the franchise relationship as part of a program
or programs to make franchises available to persons lacking capital,
training, business experience, or other qualifications ordinarily
required of prospective franchisees.
(v) (1) To access, modify, or extract information from a
confidential dealer computer record, as defined in Section 11713.25,
without obtaining the prior written consent of the dealer and without
maintaining administrative, technical, and physical safeguards to
protect the security, confidentiality, and integrity of the
information.
(2) Paragraph (1) does not limit a duty that a dealer may have to
safeguard the security and privacy of records maintained by the
dealer.
(w) (1) To use electronic, contractual, or other means to prevent
or interfere with any of the following:
(A) The lawful efforts of a dealer to comply with federal and
state data security and privacy laws.
(B) The ability of a dealer to do either of the following:
(i) Ensure that specific data accessed from the dealer's computer
system is within the scope of consent specified in subdivision (v).
(ii) Monitor specific data accessed from or written to the dealer'
s computer system.
(2) Paragraph (1) does not limit a duty that a dealer may have to
safeguard the security and privacy of records maintained by the
dealer.
(x) (1) To unfairly discriminate against a franchisee selling a
service contract, debt cancellation agreement, maintenance agreement,
or similar product not approved, endorsed, sponsored, or offered by
the manufacturer, manufacturer branch, distributor, or distributor
branch or affiliate. For purposes of this subdivision, unfair
discrimination includes, but is not limited to, any of the following:
(A) Express or implied statements that the dealer is under an
obligation to exclusively sell or offer to sell service contracts,
debt cancellation agreements, or similar products approved, endorsed,
sponsored, or offered by the manufacturer, manufacturer branch,
distributor, or distributor branch or affiliate.
(B) Express or implied statements that selling or offering to sell
service contracts, debt cancellation agreements, maintenance
agreements, or similar products not approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate, or the failure to sell or offer to
sell service contracts, debt cancellation agreements, maintenance
agreements, or similar products approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate will have any negative consequences
for the dealer.
(C) Measuring a dealer's performance under a franchise agreement
based upon the sale of service contracts, debt cancellation
agreements, or similar products approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate.
(D) Requiring a dealer to actively promote the sale of service
contracts, debt cancellation agreements, or similar products
approved, endorsed, sponsored, or offered by the manufacturer,
manufacturer branch, distributor, or distributor branch or affiliate.
(E) Conditioning access to vehicles or parts, or vehicle sales or
service incentives upon the sale of service contracts, debt
cancellation agreements, or similar products approved, endorsed,
sponsored, or offered by the manufacturer, manufacturer branch,
distributor, or distributor branch or affiliate.
(2) Unfair discrimination does not include, and nothing shall
prohibit a manufacturer from, offering an incentive program to
vehicle dealers who voluntarily sell or offer to sell service
contracts, debt cancellation agreements, or similar products
approved, endorsed, sponsored, or offered by the manufacturer,
manufacturer branch, distributor, or distributor branch or affiliate,
if the program does not provide vehicle sales or service incentives.
(3) This subdivision does not prohibit a manufacturer,
manufacturer branch, distributor, or distributor branch from
requiring a franchisee that sells a used vehicle as "certified" under
a certified used vehicle program established by the manufacturer,
manufacturer branch, distributor, or distributor branch to provide a
service contract approved, endorsed, sponsored, or offered by the
manufacturer, manufacturer branch, distributor, or distributor
branch.
(4) Unfair discrimination does not include, and nothing shall
prohibit a franchisor from requiring a franchisee to provide, the
following notice prior to the sale of the service contract if the
service contract is not provided or backed by the franchisor and the
vehicle is of the franchised line-make:
"Service Contract Disclosure
The service contract you are purchasing is not provided or backed by
the manufacturer of the vehicle you are purchasing. The manufacturer
of the vehicle is not responsible for claims or repairs under this
service contract.
_____________________
Signature of Purchaser"
(y) Take or threaten to take any adverse action against a dealer
because the dealer sold or leased a vehicle to a customer who either
exported the vehicle to a foreign country or resold the vehicle,
unless the adverse action is permitted by contractual terms binding
on the dealer and the dealer had actual knowledge of the customer's
intent to export or resell the vehicle. If the dealer causes the
vehicle to be registered in this or any other state, and collects or
causes to be collected any applicable sales or use tax due to this
state, a rebuttable presumption is established that the dealer did
not have actual knowledge of the customer's intent to export or
resell the vehicle.
(y)
( z) As used in this section, "area of
responsibility" is a geographic area specified in a franchise that is
used by the franchisor for the purpose of evaluating the franchisee'
s performance of its sales and service obligations.
SEC. 19. Section 11713.13 of the Vehicle Code is amended to read:
11713.13. It is unlawful and a violation of this code for any
manufacturer, manufacturer branch, distributor, or distributor branch
licensed under this code to do, directly or indirectly through an
affiliate, any of the following:
(a) Prevent, or attempt to prevent, by contract or otherwise, a
dealer from acquiring, adding, or maintaining a sales or service
operation for another line make of motor vehicles at the same or
expanded facility at which the dealer currently operates a dealership
if the dealer complies with any reasonable facilities and capital
requirements of the manufacturer or distributor.
(b) Require a dealer to establish or maintain exclusive
facilities, personnel, or display space if the imposition of the
requirement would be unreasonable in light of all existing
circumstances, including economic conditions. In any proceeding under
this subdivision or subdivision (a) in which the reasonableness of a
facility or capital requirement is an issue, the manufacturer or
distributor shall have the burden of proof.
(c) Require, by contract or otherwise, a dealer to make a material
alteration, expansion, or addition to any dealership facility,
unless the required alteration, expansion, or addition is reasonable
in light of all existing circumstances, including economic
conditions. A required facility alteration, expansion, or
addition shall not be deemed reasonable if it requires that the
dealer purchase goods or services from a specific vendor when
substantially similar goods or services are available from another
vendor. In any proceeding in which a required facility
alteration, expansion, or addition is an issue, the manufacturer
or distributor , manufacturer branch,
distributor, distributor branch, or affiliate shall have the
burden of proof.
(d) (1) Fail to pay to a dealer, within 90 days of termination,
cancellation, or nonrenewal of a franchise, all of the following:
(A) The dealer cost, plus any charges made by the manufacturer or
distributor for vehicle distribution or delivery and the cost of any
dealer-installed original equipment accessories, less any amount
invoiced to the vehicle and paid by the manufacturer or distributor
to the dealer, for all new and undamaged vehicles with less than 500
miles in the dealer's inventory that were acquired by the dealer from
the manufacturer, distributor, or another new motor vehicle dealer
franchised to sell vehicles of the same line-make, in the ordinary
course of business, within 18 months of termination, cancellation, or
nonrenewal of the franchise.
(B) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(C) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(D) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(E) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(2) This subdivision does not apply to a franchisor of a dealer of
new recreational vehicles, as defined in subdivision (a) of Section
18010 of the Health and Safety Code.
(3) This subdivision does not apply to a termination that is
implemented as a result of the sale of substantially all of the
inventory and fixed assets or stock of a franchised dealership if the
dealership continues to operate as a franchisee of the same
line-make.
(e) (1) (A) Fail to pay to a dealer of new recreational vehicles,
as defined in subdivision (a) of Section 18010 of the Health and
Safety Code, within 90 days of termination, cancellation, or
nonrenewal of a franchise for a recreational vehicle line-make, as
defined in Section 3072.5, the dealer cost, plus any charges made by
the manufacturer or distributor for vehicle distribution or delivery
and the cost of any dealer-installed original equipment accessories,
less any amount invoiced to the vehicle and paid by the manufacturer
or distributor to the dealer, for a new recreational vehicle when the
termination, cancellation, or nonrenewal is initiated by a
recreational vehicle manufacturer. This paragraph only applies to new
and unused recreational vehicles that do not currently have or have
had in the past, material damage, as defined in Section 9990, and
that the dealer acquired from the manufacturer, distributor, or
another new motor vehicle dealer franchised to sell recreational
vehicles of the same line-make in the ordinary course of business
within 12 months of the termination, cancellation, or nonrenewal of
the franchise.
(B) For those recreational vehicles with odometers, paragraph (1)
shall apply to only those vehicles that have no more than 1,500 miles
on the odometer, in addition to the number of miles incurred while
delivering the vehicle from the manufacturer's facility that produced
the vehicle for delivery to the dealer's retail location.
(C) Damaged recreational vehicles shall be repurchased by the
manufacturer provided there is an offset in value for damages, except
recreational vehicles that have or had material damage, as defined
in Section 9990, may be repurchased at the manufacturer's option
provided there is an offset in value for damages.
(2) Fail to pay to a dealer of new recreational vehicles, as
defined in subdivision (a) of Section 18010 of the Health and Safety
Code, within 90 days of termination, cancellation, or nonrenewal of a
franchise, all of the following:
(A) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(B) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(C) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(D) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(f) (1) Fail, upon demand, to indemnify any existing or former
franchisee and the franchisee's successors and assigns from any and
all damages sustained and attorney's fees and other expenses
reasonably incurred by the franchisee that result from or relate to
any claim made or asserted by a third party against the franchisee to
the extent the claim results from any of the following:
(A) The condition, characteristics, manufacture, assembly, or
design of any vehicle, parts, accessories, tools, or equipment, or
the selection or combination of parts or components manufactured or
distributed by the manufacturer or distributor.
(B) Service systems, procedures, or methods the franchisor
required or recommended the franchisee to use if the franchisee
properly uses the system, procedure, or method.
(C) Improper use or disclosure by a manufacturer or distributor of
nonpublic personal information obtained from a franchisee concerning
any consumer, customer, or employee of the franchisee.
(D) Any act or omission of the manufacturer or distributor for
which the franchisee would have a claim for contribution or indemnity
under applicable law or under the franchise, irrespective of and
without regard to any prior termination or expiration of the
franchise.
(2) This subdivision does not limit, in any way, the existing
rights, remedies, or recourses available to any person who purchases
or leases vehicles at retail.
(g) (1) Establish or maintain a performance standard, sales
objective, or program for measuring a dealer's sales, service, or
customer service performance that may materially affect the dealer,
including, but not limited to, the dealer's right to payment under
any incentive or reimbursement program, unless both of the following
requirements are satisfied:
(A) The performance standard, sales objective, or program for
measuring dealership sales, service, or customer service performance
is reasonable in light of all existing circumstances, including but
not limited to the following:
(i) Demographics in the dealer's area of responsibility.
(ii) Geographical characteristics that affect vehicle shopping
patterns in the dealer's area of responsibility.
(iii) The availability and allocation of vehicles and parts
inventory available to and provided to the dealer and the number of
units in operation of the line-make in the dealer's area of
responsibility.
(iv) Local, statewide, and national economic circumstances.
(v) Historical sales, service, and customer service performance of
the dealership and of the line-make within the dealer's area of
responsibility, including vehicle brand preferences of consumers in
the dealer's area of responsibility.
(B) The manufacturer, manufacturer branch, distributor,
distributor branch, or affiliate provides all information used in
establishing the performance standard, sales objective, or program
for measuring dealership sales or service performance within 20 days
upon request by the dealer.
(2) In any proceeding under this subdivision in which the
reasonableness of a performance standard, sales objective, or program
for measuring dealership sales, service, or customer service
performance is an issue, the manufacturer, manufacturer branch,
distributor, distributor branch, or affiliate shall have the burden
of proof.
(3) As used in this subdivision, "area of responsibility" shall
have the same meaning as defined in subdivision (z) of section
11713.3.
SEC. 20. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.