BILL NUMBER: AB 1178 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 9, 2015
PASSED THE ASSEMBLY SEPTEMBER 10, 2015
AMENDED IN SENATE SEPTEMBER 4, 2015
AMENDED IN SENATE AUGUST 17, 2015
AMENDED IN SENATE JULY 16, 2015
AMENDED IN SENATE JUNE 23, 2015
AMENDED IN ASSEMBLY JUNE 2, 2015
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Achadjian
FEBRUARY 27, 2015
An act to amend Section 11713.3 of, to amend, repeal, and add
Sections 3050, 3050.1, and 3050.7 of, and to add and repeal Article 6
(commencing with Section 3085) to Chapter 6 of Division 2 of, the
Vehicle Code, relating to vehicles.
LEGISLATIVE COUNSEL'S DIGEST
AB 1178, Achadjian. Vehicles: 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 in
regard to a dispute with the vehicle manufacturer.
This bill would, until January 1, 2019, authorize the board to
hear protests by an association challenging the legality of an export
or sale-for-resale prohibition policy of a manufacturer,
manufacturer branch, distributor, or distributor branch, and would
establish procedures for hearing those protests, as specified.
Existing law generally requires a manufacturer, distributor,
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 taking or threatening to
take any adverse action against a dealer pursuant to an export or
sale-for-resale prohibition because the dealer sold or leased a
vehicle to a customer who either exported the vehicle to a foreign
country or resold the vehicle in violation of the prohibition, unless
the export or sale-for-resale prohibition policy was provided to the
dealer in writing prior to the sale or lease, and the dealer knew or
reasonably should have known of the customer's intent to export or
resell the vehicle in violation of the prohibition at the time of
sale or lease. Existing law further provides that 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 reason to know of the customer's intent to export
or resell the vehicle. A violation of these provisions is a crime.
This bill would recast the provisions relating to export and
sale-for-resale prohibitions described above to provide that it would
be unlawful to take or threaten to take any adverse action against a
dealer pursuant to an export or sale-for-resale prohibition because
the dealer sold or leased a vehicle to a customer who either exported
the vehicle to a foreign country or resold the vehicle in violation
of the prohibition unless the export or sale-for-resale prohibition
policy was provided to the dealer in writing at least 48 hours before
the sale or lease of the vehicle and the dealer knew or reasonably
should have known of the customer's intent to export or resell the
vehicle in violation of the prohibition. The bill would provide that
a rebuttable presumption is established that the dealer did not have
reason to know 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. By expanding the scope
of an existing crime, this bill would impose a state-mandated local
program. The bill would, in any proceeding in which a challenge to an
adverse action is at issue, require the burden of proof to be on the
manufacturer, manufacturer branch, distributor, or distributor
branch. This bill would make additional technical, nonsubstantive
changes to those provisions and make related findings and
declarations.
This bill would incorporate additional changes to Sections 3050.7
and 11713.3 of the Vehicle Code made by this bill and AB 759 to take
effect if both bills are chaptered and this bill is chaptered last.
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.
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) Franchisors sometimes establish strict export policies when a
paid sales incentive is subject to being charged back or new vehicle
allocation is reduced when a vehicle is exported or resold, even when
the dealership did not know, or in the exercise of reasonable
diligence should not have known, of the intended exportation or
resale. In response, California franchise laws were recently updated
to prohibit chargebacks and other adverse actions in circumstances in
which the dealer did not have knowledge of, or reason to know of,
the intended exportation or resale.
(d) Despite California's franchise law acknowledging that the
dealer did not have knowledge or reason to know that a vehicle would
be exported or resold, at least one manufacturer is disregarding this
franchise law by imposing a strict liability export and
sale-for-resale policy against dealers. These actions impose severe
sanctions on dealers regardless of the fact that dealers are
collecting sales tax and registering these vehicles in California and
have no reasonable knowledge of the future fate of those vehicles.
(e) It is the intent of this act to ensure that new motor vehicle
dealers are treated fairly by their franchisors, to prohibit
franchisors from avoiding state franchise laws, and to ensure that
dealers are not subject to adverse action when the dealer did not
know or have reason to know vehicles are exported or resold.
SEC. 2. 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, 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, 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) Hear and decide, within the limitations and in accordance with
the procedure provided, a protest presented by an association
challenging a policy of a manufacturer, manufacturer branch,
distributor or distributor branch pursuant to Section 3085. 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 6 (commencing with
Section 3085), unless all participants to the protest stipulate
otherwise.
(f) Notwithstanding subdivisions (c), (d), and (e), 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.
(g) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 3. Section 3050 is added to the Vehicle Code, 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, 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, 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.
(f) This section shall become operative on January 1, 2019.
SEC. 4. Section 3050.1 of the Vehicle Code is amended to read:
3050.1. (a) In a proceeding, hearing, or in the discharge of
duties imposed under this chapter, the board, its executive director,
or an administrative law judge designated by the board may
administer oaths, take depositions, certify to official acts, and
issue subpoenas to compel attendance of witnesses and the production
of books, records, papers, and other documents in any part of the
state.
(b) For purposes of discovery, the board or its executive director
may, if deemed appropriate and proper under the circumstances,
authorize the parties to engage in the civil action discovery
procedures in Title 4 (commencing with Section 2016.010) of Part 4 of
the Code of Civil Procedure, excepting the provisions of Chapter 13
(commencing with Section 2030.010) of that title. Discovery shall be
completed no later than 15 days prior to the commencement of the
proceeding or hearing before the board. This subdivision shall apply
only to those proceedings or hearings involving a petition filed
pursuant to subdivision (c), or protest filed pursuant to subdivision
(d) or (e) of Section 3050. The board, its executive director, or an
administrative law judge designated by the board may issue subpoenas
to compel attendance at depositions of persons having knowledge of
the acts, omissions, or events that are the basis for the
proceedings, as well as the production of books, records, papers, and
other documents.
(c) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 5. Section 3050.1 is added to the Vehicle Code, to read:
3050.1. (a) In a proceeding, hearing, or in the discharge of
duties imposed under this chapter, the board, its executive director,
or an administrative law judge designated by the board may
administer oaths, take depositions, certify to official acts, and
issue subpoenas to compel attendance of witnesses and the production
of books, records, papers, and other documents in any part of the
state.
(b) For purposes of discovery, the board or its executive director
may, if deemed appropriate and proper under the circumstances,
authorize the parties to engage in the civil action discovery
procedures in Title 4 (commencing with Section 2016.010) of Part 4 of
the Code of Civil Procedure, excepting the provisions of Chapter 13
(commencing with Section 2030.010) of that title. Discovery shall be
completed no later than 15 days prior to the commencement of the
proceeding or hearing before the board. This subdivision shall apply
only to those proceedings or hearings involving a petition or protest
filed pursuant to subdivision (c) or (d) of Section 3050. The board,
its executive director, or an administrative law judge designated by
the board may issue subpoenas to compel attendance at depositions of
persons having knowledge of the acts, omissions, or events that are
the basis for the proceedings, as well as the production of books,
records, papers, and other documents.
(c) This section shall become operative on January 1, 2019.
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 or 3085.2, 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 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 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.
(c) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 6.1. 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, 3080, or 3085.2, 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 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 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.
(c) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 7. Section 3050.7 is added to the Vehicle Code, 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 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 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.
(c) This section shall become operative on January 1, 2019.
SEC. 7.1. Section 3050.7 is added to the Vehicle Code, to read:
3050.7. (a) The board may adopt stipulated decisions and orders,
without a hearing pursuant to Section 3066 or 3080, 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 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 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.
(c) This section shall become operative on January 1, 2019.
SEC. 8. Article 6 (commencing with Section 3085) is added to
Chapter 6 of Division 2 of the Vehicle Code, to read:
Article 6. Export and Sale-for-Resale Prohibition Hearings
3085. (a) An association may bring a protest challenging the
legality of an export or sale-for-resale prohibition policy of a
manufacturer, manufacturer branch, distributor, or distributor branch
at any time on behalf of two or more dealers subject to the
challenged policy pursuant to subdivision (y) of Section 11713.3.
(b) For the purpose of this article, an association is an
organization primarily owned by, or comprised of, new motor vehicle
dealers and that primarily represents the interests of dealers.
(c) Relief for a protest pursuant to this section is limited to a
declaration that an export or sale-for-resale prohibition policy of a
manufacturer, manufacturer branch, distributor, or distributor
branch violates the prohibitions of subdivision (y) of Section
11713.3. No monetary relief may be sought on behalf of the
association or any dealers represented by the association.
(d) In a protest pursuant to this section, the association shall
have the burden of proof to show that the challenged export or
sale-for-resale prohibition policy violates subdivision (y) of
Section 11713.3.
3085.2. (a) Upon receiving a protest pursuant to Section 3085,
the board shall fix a time and place of hearing within 60 days, and
shall send by certified mail a copy of the order to the manufacturer,
manufacturer branch, distributor, distributor branch, the protesting
association, and all individuals and groups that have requested
notification by the board of protests and decisions of the board. 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 3085, the
association shall have the burden of proof to establish a violation
of the applicable section by the subject manufacturer, manufacturer
branch, distributor, or distributor branch.
(c) 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.
3085.4. (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. The board shall act
within 30 days after the hearing, within 30 days after the board
receives a proposed decision when 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. Copies of the board's decision shall be
delivered to the parties personally or sent to them by certified
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.
3085.6. Either party may seek judicial review of final decisions
of the board. An appeal shall be filed within 45 days from the date
on which the final order of the board is made public and is delivered
to the parties personally or is sent to them by certified mail.
3085.8. The provisions of this article shall be applicable to any
association which is primarily owned by or comprised of new motor
vehicle dealers and acts on behalf of its new motor vehicle
franchisees.
3085.10. This article shall remain in effect only until January
1, 2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date.
SEC. 9. 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.
The manufacturer or distributor shall not unreasonably withhold
consent or condition consent 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) (1) To take or threaten to take any adverse action against a
dealer pursuant to an export or sale-for-resale prohibition because
the dealer sold or leased a vehicle to a customer who either exported
the vehicle to a foreign country or resold the vehicle in violation
of the prohibition, unless the export or sale-for-resale prohibition
policy was provided to the dealer in writing at least 48 hours before
the sale or lease of the vehicle, and the dealer knew or reasonably
should have known of the customer's intent to export or resell the
vehicle in violation of the prohibition. 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 reason to know of the customer's intent to export or resell
the vehicle. In a proceeding in which a challenge to an adverse
action is at issue, the manufacturer, manufacturer branch,
distributor, or distributor branch shall have the burden of proof by
a preponderance of the evidence to show that the vehicle was exported
or resold in violation of an export or sale-for-resale prohibition
policy, that the prohibition policy was provided to the dealer in
writing at least 48 hours prior to the sale or lease, and that the
dealer knew or reasonably should have known of the customer's intent
to export the vehicle to a foreign country at the time of the sale or
lease.
(2) An export or sale-for-resale prohibition policy shall not
include a provision that expressly or implicitly requires a dealer to
make further inquiries into a customer's intent, identity, or
financial ability to purchase or lease a vehicle based on any of the
customer's characteristics listed or defined in Section 51 of the
Civil Code. A policy that is in violation of this paragraph is void
and unenforceable.
(3) An export or sale-for-resale prohibition policy shall
expressly include a provision stating the dealer's rebuttable
presumption 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. A policy that is in violation of this
paragraph is void and unenforceable.
(z) As used in this section, "area of responsibility" means 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. 9.1. 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.
The manufacturer or distributor shall not unreasonably withhold
consent or condition consent 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) or Article 5 (commencing with Section 3070) 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) (1) To take or threaten to take any adverse action against a
dealer pursuant to an export or sale-for-resale prohibition because
the dealer sold or leased a vehicle to a customer who either exported
the vehicle to a foreign country or resold the vehicle in violation
of the prohibition, unless the export or sale-for-resale prohibition
policy was provided to the dealer in writing at least 48 hours before
the sale or lease of the vehicle, and the dealer knew or reasonably
should have known of the customer's intent to export or resell the
vehicle in violation of the prohibition. 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 reason to know of the customer's intent to export or resell
the vehicle. In a proceeding in which a challenge to an adverse
action is at issue, the manufacturer, manufacturer branch,
distributor, or distributor branch shall have the burden of proof by
a preponderance of the evidence to show that the vehicle was exported
or resold in violation of an export or sale-for-resale prohibition
policy, that the prohibition policy was provided to the dealer in
writing at least 48 hours prior to the sale or lease, and that the
dealer knew or reasonably should have known of the customer's intent
to export the vehicle to a foreign country at the time of the sale or
lease.
(2) An export or sale-for-resale prohibition policy shall not
include a provision that expressly or implicitly requires a dealer to
make further inquiries into a customer's intent, identity, or
financial ability to purchase or lease a vehicle based on any of the
customer's characteristics listed or defined in Section 51 of the
Civil Code. A policy that is in violation of this paragraph is void
and unenforceable.
(3) An export or sale-for-resale prohibition policy shall
expressly include a provision stating the dealer's rebuttable
presumption 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. A policy that is in violation of this
paragraph is void and unenforceable.
(z) As used in this section, "area of responsibility" means 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. 10. (a) Sections 6.1 and 7.1 of this bill incorporates
changes to Section 3050.7 of the Vehicle Code proposed by both this
bill and Assembly Bill 759. These sections shall only become
operative if (1) both bills are enacted and become effective on or
before January 1, 2016, (2) each bill amends or adds Section 3050.7
of the Vehicle Code, and (3) this bill is enacted after Assembly Bill
759, in which case Sections 6 and 7 of this bill shall not become
operative.
(b) Section 9.1 of this bill incorporates amendments to Section
11713.3 of the Vehicle Code proposed by both this bill and Assembly
Bill 759. It shall only become operative if (1) both bills are
enacted and become effective on or before January 1, 2016, (2) each
bill amends Section 11713.3 of the Vehicle Code, and (3) this bill is
enacted after Assembly Bill 759, in which case Section 9 of this
bill shall not become operative.
SEC. 11. 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.