BILL NUMBER: SB 424	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senators Padilla, Florez, and Harman
   (Coauthor: Assembly Member Fuentes)

                        FEBRUARY 26, 2009

   An act to add Section 11713.13 to the Vehicle Code, relating to
vehicles.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 424, as introduced, Padilla. Vehicles: manufacturers and
distributors.
   (1) Existing law generally requires a manufacturer branch,
remanufacturer, remanufacturer branch, distributor, distributor
branch, transporter, or dealer of vehicles to be licensed by the
Department of Motor Vehicles. Under existing law, it is unlawful for
a manufacturer, manufacturer branch, distributor, or distributor
branch to, among other things, dishonor a warranty, rebate, or other
incentive offered to the public or a dealer, as specified, or to
unfairly discriminate in favor of a dealership owned or controlled,
in whole or part, by a manufacturer or an entity that controls or is
controlled by a manufacturer or distributor.
   This bill would enact the Dealer Franchise Fairness Act of 2009
and would prohibit a manufacturer, manufacturer branch, distributor,
or distributor branch from preventing, or attempting to prevent, by
contract or otherwise, a dealer from acquiring, adding, or
maintaining a sales or service operation for another line-make of
motor vehicles at the same or expanded facility at which the dealer
currently operates a dealership, provided that the dealer complies
with any reasonable facilities requirements of the manufacturer or
distributor, or requiring a dealer to establish or maintain exclusive
facilities, personnel, or display space if the imposition of the
requirement would be unreasonable in light of all existing
circumstances, including economic conditions. In any proceeding under
these provisions in which the reasonableness of a facility
requirement is an issue, the manufacturer or distributor would have
the burden of proof.
   The bill would also prohibit additional specified unlawful acts by
a manufacturer, manufacturer branch, distributor, or distributor
branch against a dealer.
   (2) Under existing law, a violation of the above provisions
relating to occupational licensing and business regulations in the
Vehicle Code is a misdemeanor.
   Because this bill would create a new crime, it would impose a
state-mandated local program.
   (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) The distribution, sale, and service of new motor vehicles in
the State of California vitally affects the general economy of this
state and the public welfare.
   (b) The new motor vehicle franchise system, which operates within
a strictly defined and highly regulated statutory scheme, assures the
consuming public of a well-organized distribution system for the
availability and sale of new motor vehicles throughout the state;
provides a network of quality warranty, recall, and repair facilities
to maintain those vehicles; and creates a cost-effective method for
the state to police those systems through the licensing and
regulation of private sector franchisors and franchisees.
   (c) In 2008, over 125 new motor vehicle dealerships closed their
doors in California. Those closures triggered job losses in the
communities those dealerships served; diminished sales tax and other
tax revenues for those communities; reduced the number of service
bays necessary to perform warranty, recall, and other service
repairs; and weakened interbrand and intrabrand price competition for
consumers.
   (d) Many of those closures stemmed from the expense of
unreasonable franchisor facilities requirements that denied dealers
enough flexibility to configure their dealerships in a manner that
would have permitted them to remain in business and continue to
service the needs of their communities and customers.
   (e) It is the intent of this act to ensure that new motor vehicle
dealers are treated fairly by their franchisors, that facility
requirements imposed by franchisors are reasonable, that assistance
for dealers upon termination, nonrenewal, or cancellation of a
franchise is adequate, and that dealers are properly indemnified for
actions of auto manufacturers or distributors that are beyond their
control.
  SEC. 2.  This act shall be known and may be cited as the "Dealer
Franchise Fairness Act of 2009."
  SEC. 3.  Section 11713.13 is added to the Vehicle Code, to read:
   11713.13.   It is unlawful and a violation of this code for any
manufacturer, manufacturer branch, distributor, or distributor branch
licensed under this code to do, directly or indirectly through an
affiliate, any of the following:
   (a) Prevent, or attempt to prevent, by contract or otherwise, a
dealer from acquiring, adding, or maintaining a sales or service
operation for another line make of motor vehicles at the same or
expanded facility at which the dealer currently operates a
dealership, provided that the dealer complies with any reasonable
facilities requirements of the manufacturer or distributor.
   (b) Require a dealer to establish or maintain exclusive
facilities, personnel, or display space if the imposition of the
requirement would be unreasonable in light of all existing
circumstances, including economic conditions. In any proceeding under
this subdivision or subdivision (a) in which the reasonableness of a
facility requirement is an issue, the manufacturer or distributor
shall have the burden of proof.
   (c) Require, by contract or otherwise, a dealer to make a material
alteration, expansion, or addition to any dealership facility,
unless the required alteration, expansion, or addition is reasonable
in light of all existing circumstances, including economic
conditions. In any proceeding in which a required facility
alteration, expansion, or addition is an issue, the manufacturer or
distributor shall have the burden of proof.
   (d) Fail to pay to a dealer, within 90 days of termination,
cancellation, or nonrenewal of a franchise, all of the following:
   (1) The dealer cost, plus any charges made by the manufacturer or
distributor for vehicle distribution or delivery and the cost of any
dealer-installed original equipment accessories, less any amount
invoiced to the vehicle and paid by the manufacturer or distributor
to the dealer, for all new and undamaged vehicles in the dealer's
inventory that were acquired by the dealer from the manufacturer,
distributor, or another new motor vehicle dealer franchised to sell
vehicles of the same line-make, within 24 months of termination,
cancellation, or nonrenewal of the franchise.
   (2) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
   (3) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of such
sign was recommended or required by the manufacturer or distributor.
   (4) The fair market value of all special tools, computer systems,
and equipment that were recommended, required, or purchased from the
manufacturer or distributor that are in usable condition, excluding
normal wear and tear.
   (5) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
   (e) Fail, upon demand, to indemnify any existing or former
franchisee and the franchisee's successors and assigns from any and
all damages sustained and attorneys fees and other expenses
reasonably incurred by the franchisee that result from or relate to
any claim made or asserted by a third party against the franchisee to
the extent the claim results from any of the following:
   (1) The condition, characteristics, manufacture, assembly, or
design of any vehicle, parts, accessories, tools, or equipment, or
the selection or combination of parts or components manufactured or
distributed by the manufacturer or distributor.
   (2) Service systems, procedures, or methods the franchisor
required or recommended the franchisee to use.
   (3) Improper use of nonpublic personal information obtained from a
franchisee concerning any consumer, customer, or employee of the
franchisee.
   (4) Any act or omission of the manufacturer or distributor for
which the franchisee would have a claim for contribution or indemnity
under applicable law or under the franchise, irrespective of and
without regard to any prior termination or expiration of the
franchise.
  SEC. 4.  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.