BILL NUMBER: SB 424 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 2, 2009
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 , and declaring the urgency thereof, to take effect
immediately .
LEGISLATIVE COUNSEL'S DIGEST
SB 424, as amended, Padilla. Vehicles: manufacturers and
distributors.
(1) Existing law generally requires a manufacturer,
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 if the dealer complies with any
reasonable facilities and capital requirements of the
manufacturer or distributor , or from
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.
(4) This bill would declare that it is to take effect immediately
as an urgency statute.
Vote: majority 2/3 . 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.
(c) Since January of 2008, over 170 new motor vehicle dealerships
have closed their doors in California. These closures have resulted
in job losses, diminished sales tax and other tax revenues, and a
reduction in the number of new motor vehicle dealerships that service
the consuming public.
(e)
(d) 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
the control of dealers .
SEC. 2. This act shall be known and may be
cited as the "Dealer Franchise Fairness Act of 2009."
SEC. 3. SEC. 2. 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 if the dealer complies
with any reasonable facilities and capital requirements
of the manufacturer or distributor.
(b) Require a dealer to establish or maintain exclusive
facilities, personnel, or display space if the imposition of the
requirement would be unreasonable in light of all existing
circumstances, including economic conditions. In any proceeding under
this subdivision or subdivision (a) in which the reasonableness of a
facility or capital requirement is an issue, the
manufacturer or distributor shall have the burden of proof.
(c) Require, by contract or otherwise, a dealer to make a material
alteration, expansion, or addition to any dealership facility,
unless the required alteration, expansion, or addition is reasonable
in light of all existing circumstances, including economic
conditions. 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) (1) Fail to pay to a dealer, within 90
days of termination, cancellation, or nonrenewal of a franchise, all
of the following:
(1)
(A) The dealer cost, plus any charges made by the
manufacturer or distributor for vehicle distribution or delivery and
the cost of any dealer-installed original equipment accessories, less
any amount invoiced to the vehicle and paid by the manufacturer or
distributor to the dealer, for all new and undamaged vehicles
with less than 500 miles in the dealer's inventory that were
acquired by the dealer from the manufacturer, distributor, or another
new motor vehicle dealer franchised to sell vehicles of the same
line-make, within 24 in the ordinary course
of business, within 18 months of termination, cancellation, or
nonrenewal of the franchise.
(2)
(B) The dealer cost for all unused and undamaged
supplies, parts, and accessories listed in the manufacturer's current
parts catalog and in their original packaging, except that sheet
metal may be packaged in a comparable substitute for the original
package.
(3)
(C) The fair market value of each undamaged sign owned
by the motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of
such sign was recommended or required by the manufacturer or
the sign was required or made a condition of
participation in an incentive program by the manufacturer or
distributor.
(4)
(D) The fair market value of all special tools,
computer systems, and equipment that were recommended,
required, or purchased from and equipment that were
required or made a condition of participation in an incentive program
by the manufacturer or distributor that are in usable
condition, excluding normal wear and tear.
(5)
(E) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(2) This subdivision does not apply to a termination that is
implemented as a result of the sale of substantially all of the
inventory and fixed assets or stock of a franchised dealership if the
dealership continues to operate as a franchisee of the same
line-make.
(e) 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 attorney'
s fees and other expenses reasonably incurred by the franchisee
that result from or relate to any claim made or asserted by a third
party against the franchisee to the extent the claim results from any
of the following:
(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 if the franchisee
properly uses the system, procedure, or method .
(3) Improper use or disclosure by a manufacturer or
distributor of nonpublic personal information obtained from a
franchisee concerning any consumer, customer, or employee of the
franchisee.
(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. SEC. 3. 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.
SEC. 4. This act is an urgency statute necessary
for the immediate preservation of the public peace, health, or safety
within the meaning of Article IV of the Constitution and shall go
into immediate effect. The facts constituting the necessity are:
In order to permit, as soon as possible, franchised new motor
vehicle dealers flexibility to configure their dealership facilities
in a manner that will permit them to remain in business and continue
to service the needs of their communities, it is necessary that this
act take effect immediately.