BILL NUMBER: SB 424 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 18, 2009
AMENDED IN ASSEMBLY MAY 12, 2009
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 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 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: 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) 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.
(d) It is the intent of this act to ensure 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 the
control of dealers.
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
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:
(A) The dealer cost, plus any charges made by the manufacturer or
distributor for vehicle distribution or delivery and the cost of any
dealer-installed original equipment accessories, less any amount
invoiced to the vehicle and paid by the manufacturer or distributor
to the dealer, for all new and undamaged vehicles with less than 500
miles in the dealer's inventory that were acquired by the dealer from
the manufacturer, distributor, or another new motor vehicle dealer
franchised to sell vehicles of the same line-make, in the ordinary
course of business, within 18 months of termination, cancellation, or
nonrenewal of the franchise.
(B) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(C) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(D) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(E) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(2) This subdivision does not apply to a franchisor of a dealer of
new recreational vehicles, as defined in subdivision (a) of Section
18010 of the Health and Safety Code.
(3) This subdivision does not apply to a termination that is
implemented as a result of the sale of substantially all of the
inventory and fixed assets or stock of a franchised dealership if the
dealership continues to operate as a franchisee of the same
line-make.
(e) (1) (A) Fail to pay to a dealer of new recreational vehicles,
as defined in subdivision (a) of Section 18010 of the Health and
Safety Code, within 90 days of termination, cancellation, or
nonrenewal of a franchise for a recreational vehicle line-make, as
defined in Section 3072.5, the dealer cost, plus any charges made by
the manufacturer or distributor for vehicle distribution or delivery
and the cost of any dealer-installed original equipment accessories,
less any amount invoiced to the vehicle and paid by the manufacturer
or distributor to the dealer, for a new recreational vehicle
when the termination, cancellation or nonrenewal is initiated
by a recreational vehicle manufacturer. This paragraph only applies
to new and unused recreational vehicles that do not currently have or
have had in the past, material damage, as defined in Section 9990,
and that the dealer acquired from the manufacturer, distributor, or
another new motor vehicle dealer franchised to sell recreational
vehicles of the same line-make in the ordinary course of business
within 12 months of the termination, cancellation, or nonrenewal of
the franchise.
(B) For those recreational vehicles with odometers, paragraph (1)
shall apply to only those vehicles that have no more than 1,500 miles
on the odometer, in addition to the number of miles incurred while
delivering the vehicle from the manufacturer's facility that produced
the vehicle for delivery to the dealer's retail location.
(C) Damaged recreational vehicles shall be repurchased by the
manufacturer provided there is an offset in value for damages, except
recreational vehicles that have or had material damage, as defined
in Section 9990, may be repurchased at the manufacturer's option
provided there is an offset in value for damages.
(2) Fail to pay to a dealer of new recreational vehicles, as
defined in subdivision (a) of Section 18010 of the Health and Safety
Code, within 90 days of termination, cancellation, or nonrenewal of a
franchise, all of the following:
(A) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(B) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(C) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(D) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(f) (1) Fail, upon demand, to indemnify any
existing or former franchisee and the franchisee's successors and
assigns from any and all damages sustained and attorney's fees and
other expenses reasonably incurred by the franchisee that result from
or relate to any claim made or asserted by a third party against the
franchisee to the extent the claim results from any of the
following:
(1)
(A) The condition, characteristics, manufacture,
assembly, or design of any vehicle, parts, accessories, tools, or
equipment, or the selection or combination of parts or components
manufactured or distributed by the manufacturer or distributor.
(2)
(B) Service systems, procedures, or methods the
franchisor required or recommended the franchisee to use if the
franchisee properly uses the system, procedure, or method.
(3)
(C) Improper use or disclosure by a manufacturer or
distributor of nonpublic personal information obtained from a
franchisee concerning any consumer, customer, or employee of the
franchisee.
(4)
(D) Any act or omission of the manufacturer or
distributor for which the franchisee would have a claim for
contribution or indemnity under applicable law or under the
franchise, irrespective of and without regard to any prior
termination or expiration of the franchise.
(2) This subdivision does not limit, in any way, the existing
rights, remedies, or recourses available to any person who purchases
or leases vehicles at retail.
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.