Bill Text: CA SB155 | 2013-2014 | Regular Session | Chaptered
Bill Title: Vehicles: motor vehicle manufacturers and distributors.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2013-10-03 - Chaptered by Secretary of State. Chapter 512, Statutes of 2013. [SB155 Detail]
Download: California-2013-SB155-Chaptered.html
BILL NUMBER: SB 155 CHAPTERED
BILL TEXT
CHAPTER 512
FILED WITH SECRETARY OF STATE OCTOBER 3, 2013
APPROVED BY GOVERNOR OCTOBER 3, 2013
PASSED THE SENATE SEPTEMBER 11, 2013
PASSED THE ASSEMBLY SEPTEMBER 10, 2013
AMENDED IN ASSEMBLY SEPTEMBER 6, 2013
AMENDED IN ASSEMBLY AUGUST 21, 2013
AMENDED IN ASSEMBLY JUNE 10, 2013
AMENDED IN SENATE MAY 7, 2013
AMENDED IN SENATE APRIL 22, 2013
AMENDED IN SENATE APRIL 4, 2013
INTRODUCED BY Senator Padilla
JANUARY 31, 2013
An act to amend Sections 3006, 3008, 3012, 3050, 3050.7, 3052,
3056, 3057, 3062, 3063, 3064, 3065, 3065.1, 3066, 3067, 3069.1,
11713.3, and 11713.13 of the Vehicle Code, relating to vehicles.
LEGISLATIVE COUNSEL'S DIGEST
SB 155, Padilla. Vehicles: motor vehicle manufacturers and
distributors.
Existing law establishes the New Motor Vehicle Board in the
Department of Motor Vehicles, and requires the board to hear and
decide certain protests presented by a motor vehicle franchisee.
Existing law prescribes procedures to be followed by franchisors,
franchisees, and the board regarding claims for warranty
reimbursement or incentive compensation. Existing law authorizes
franchisors to conduct audits of franchisee warranty records and
incentive records on a reasonable basis, and authorizes a franchisor
to audit the franchisee's incentive records for 18 months, and
warranty records for 12 months, after a claim is paid or credit
issued. Existing law prohibits the disapproval of franchisee claims
except for good cause, as specified, and requires that a notice of
disapproval state the specific grounds upon which the disapproval is
based. Existing law gives a franchisee one year from receipt of the
notice of disapproval of an incentive compensation payment to appeal
the disapproval to the franchisor and file a protest with the board.
This bill would revise these provisions to require, among other
things, the franchisor to provide the franchisee with the specific
grounds upon which any previously approved claims are disapproved
following an audit, and to prohibit a previously approved claim from
being charged back to the franchisee except under certain
circumstances, including when the claim is false or fraudulent. The
bill would require the franchisor to provide a reasonable appeal
process to allow the franchisee to respond to any disapproval with
additional supporting documentation or information rebutting the
disapproval or to cure noncompliance, as provided. The bill would
authorize the audit of a franchisee's incentive and warranty records
for 9 months after a claim is paid or credit is issued, as specified.
The bill would give a franchisee 6 months from the date of receipt
of a specified written notice to file a protest with the board, and
would specify that in the protest proceeding the franchisor has the
burden of proof.
Existing law requires every vehicle franchisor to properly fulfill
every warranty agreement made by it and adequately and fairly
compensate each of its franchisees for labor and parts used to
fulfill that warranty when the franchisee has fulfilled warranty
obligations of repair and servicing. Existing law also requires the
franchisor to file a copy of its warranty reimbursement schedule or
formula with the board, and requires the board to determine the
reasonableness of the warranty reimbursement schedule or formula if
the franchisee files a notice of protest with the board.
This bill would additionally require a franchisor to adequately
and fairly compensate each of its franchisees for labor and parts
used to provide diagnostic services under a warranty, and would
prohibit a franchisor from replacing, modifying, or supplementing a
warranty reimbursement schedule to impose a fixed percentage or other
reduction in the time and compensation allowed for warranty repairs
not attributable to a specific repair. The bill would also require,
if the board determines that the warranty reimbursement schedule or
formula fails to provide adequate compensation, the franchisor to
correct the failure by amending or replacing the warranty
reimbursement schedule and implementing the correction as to all
franchisees within 30 days after receipt of the board's order.
Existing law generally requires a manufacturer branch,
remanufacturer, remanufacturer branch, distributor, distributor
branch, transporter, or dealer of vehicles to be licensed by the
Department of Motor Vehicles. Under existing law, it is unlawful for
a manufacturer, manufacturer branch, distributor, or distributor
branch to engage in specified practices, including requiring a dealer
to make a material alteration, expansion, or addition to any
dealership facility, unless the required alteration, expansion, or
addition is reasonable in light of all existing circumstances,
including economic conditions.
This bill would prohibit a required facility alteration,
expansion, or addition from being deemed reasonable if it requires
that the dealer purchase goods or services from a specific vendor if
goods or services of a substantially similar kind, quality, and
general design concept are available from another vendor, except as
specified. The bill would also prohibit the establishment or
maintenance of a performance standard, sales objective, or program
for measuring a dealer's sales, service, or customer service
performance that may materially affect the dealer, including, but not
limited to, the dealer's right to payment under any incentive or
reimbursement program or establishment of working capital
requirements, unless certain requirements are satisfied. The bill
would also prohibit a manufacturer, manufacturer branch, distributor,
or distributor branch from taking or threatening to take any adverse
action against a dealer pursuant to a published 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, unless the dealer was provided an
export or sale-for-resale prohibition policy, in writing, prior to
the sale or lease and the dealer knew or should have known of the
customer's intent to export or resell the vehicle, as specified.
Because a violation of these provisions would be a crime, this bill
would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
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 affect 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) California franchise laws require manufacturers to provide
reasonable reimbursement to dealers for warranty work, but fail to
establish guidelines for determining whether a reimbursement is
reasonable. Unlike many states, California does not require
franchisors to provide an appeal process where dealers can dispute
warranty and incentive claim denials or audit chargebacks.
(d) Franchisors sometimes establish strict export policies where a
paid sales incentive is subject to being charged back in the event
that a vehicle is exported, even when the dealership did not know, or
in the exercise of reasonable diligence should not have known, of
the intended exportation. Unlike many states, California does not
prohibit those chargebacks in circumstances where the dealer did not
have knowledge of or reason to know of the intended exportation, such
as when the dealer has collected sales tax or the vehicle has been
registered.
(e) Many franchisors measure dealership sales, service, and
customer service performance against standards based upon performance
averages that may not adequately take into account a dealer's local
market. Unlike many states, California does not provide criteria for
the establishment of performance standards.
(f) Franchisors sometimes establish facility models that require
dealers to purchase goods or services from specific vendors even if a
dealer can obtain substantially similar goods or services from an
alternative local vendor.
(g) It is the intent of this act to ensure that new motor vehicle
dealers are treated fairly by their franchisors, that dealers are
reasonably compensated for performing warranty repairs on behalf of
their franchisor, that dealers are not subject to adverse action when
vehicles are exported and the dealer did not know or have reason to
know, that performance standards are reasonable, and that dealers be
allowed to obtain required goods or services through vendors of their
choosing.
SEC. 2. Section 3006 of the Vehicle Code is amended to read:
3006. The board shall organize and elect a president from among
its members for a term of one year at the first meeting of each year.
The newly elected president shall assume his or her duties at the
conclusion of the meeting at which he or she was elected. Reelection
to office during membership is unrestricted.
SEC. 3. Section 3008 of the Vehicle Code is amended to read:
3008. (a) All meetings of the board shall be open and public, and
all persons shall be permitted to attend any meeting of the board,
except that the board may hold executive sessions to deliberate on
the decision to be reached upon the evidence introduced in a
proceeding conducted in accordance with Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code.
(b) At all meetings of the board, open or executive, involving an
appeal from a decision of the Director of Motor Vehicles, the
director or his or her authorized representative may attend, present
the position of the department, and then shall absent himself or
herself from any executive session at the request of any member of
the board.
(c) Within the limitations of its powers and authority, and in the
event of disagreement between the board and the director regarding
the decision to be reached, the decision of the board shall be final.
SEC. 4. Section 3012 of the Vehicle Code is amended to read:
3012. Each member of the board shall receive a per diem of one
hundred dollars ($100) for each day actually spent in the discharge
of official duties, and he or she shall be reimbursed for traveling
and other expenses necessarily incurred in the performance of his or
her duties. The per diem and reimbursement shall be wholly defrayed
from funds that shall be provided in the annual budget of the
department.
SEC. 5. Section 3050 of the Vehicle Code is amended to read:
3050. The board shall do all of the following:
(a) Adopt rules and regulations in accordance with Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code governing those matters that are specifically
committed to its jurisdiction.
(b) Hear and determine, within the limitations and in accordance
with the procedure provided, an appeal presented by an applicant for,
or holder of, a license as a new motor vehicle dealer, manufacturer,
manufacturer branch, distributor, distributor branch, or
representative when the applicant or licensee submits an appeal
provided for in this chapter from a decision arising out of the
department.
(c) Consider any matter concerning the activities or practices of
any person applying for or holding a license as a new motor vehicle
dealer, manufacturer, manufacturer branch, distributor, distributor
branch, or representative pursuant to Chapter 4 (commencing with
Section 11700) of Division 5 submitted by any person. A member of the
board who is a new motor vehicle dealer may not participate in,
hear, comment, advise other members upon, or decide any matter
considered by the board pursuant to this subdivision that involves a
dispute between a franchisee and franchisor. After that
consideration, the board may do any one or any combination of the
following:
(1) Direct the department to conduct investigation of matters that
the board deems reasonable, and make a written report on the results
of the investigation to the board within the time specified by the
board.
(2) Undertake to mediate, arbitrate, or otherwise resolve any
honest difference of opinion or viewpoint existing between any member
of the public and any new motor vehicle dealer, manufacturer,
manufacturer branch, distributor, 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.
SEC. 6. Section 3050.7 of the Vehicle Code is amended to read:
3050.7. (a) The board may adopt stipulated decisions and orders,
without a hearing pursuant to Section 3066, to resolve one or more
issues raised by a protest or petition filed with the board. Whenever
the parties to a protest or petition submit a proposed stipulated
decision and 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.
SEC. 7. Section 3052 of the Vehicle Code is amended to read:
3052. (a) On or before the 10th day after the last day on which
reconsideration of a final decision of the department can be ordered,
the applicant or licensee may file an appeal with the executive
director of the board. The appeal shall be in writing and shall state
the grounds therefor. A copy of the appeal shall be mailed by the
appellant to the department, and the department shall thereafter be
considered as a party to the appeal. The right to appeal is not
affected by failure to seek reconsideration before the department.
(b) An appeal is considered to be filed on the date it is received
in the office of the executive director of the board, except that an
appeal mailed to the executive director by means of registered mail
is considered to be filed with the executive director on the postmark
date.
(c) The appeal shall be accompanied by evidence that the appellant
has requested the administrative record of the department and
advanced the cost of preparation of that record. The complete
administrative record includes the pleadings, all notices and orders
issued by the department, any proposed decision by an administrative
law judge, the exhibits admitted or rejected, the written evidence,
and any other papers in the case. All parts of the administrative
record requested by the appellant may be filed with the appeal
together with the appellant's points and authorities. If the board
orders the filing of additional parts of the administrative record,
the board may order prior payment by the appellant of the cost of
providing those additional parts.
(d) Except as provided in subdivisions (e) and (f), a decision of
the department may not become effective during the period in which an
appeal may be filed, and the filing of an appeal shall stay the
decision of the department until a final order is made by the board.
(e) When a decision has ordered revocation of a dealer's license,
the department may, on or before the last day upon which an appeal
may be filed with the board, petition the board to order the decision
of the department into effect.
(f) With respect to the department's petition filed pursuant to
subdivision (e), the department shall have the burden of proof. The
board shall act upon the petition within 14 days or prior to the
effective date of the department's decision, whichever is later. The
board may order oral argument on the petition before the board.
SEC. 8. Section 3056 of the Vehicle Code is amended to read:
3056. When the order reverses the decision of the department, the
board may direct the department to reconsider the matter in the
light of its order and may direct the department to take any further
action as is specially enjoined upon it by law. In all cases the
board shall enter its order within 60 days after the filing of the
appeal, except in the case of unavoidable delay in supplying the
administrative record, in which event the board shall make its final
order within 60 days after receipt of the record.
SEC. 9. Section 3057 of the Vehicle Code is amended to read:
3057. The board shall fix an effective date for its orders not
more than 30 days from the day the order is served upon the parties
or remand the case to the department for fixing an effective date. A
final order of the board shall be in writing and copies of the order
shall be delivered to the parties personally or sent to them by
registered mail. The order shall be final upon its delivery or
mailing and no reconsideration or rehearing by the board shall be
permitted.
SEC. 10. Section 3062 of the Vehicle Code is amended to read:
3062. (a) (1) Except as otherwise provided in subdivision (b), if
a franchisor seeks to enter into a franchise establishing an
additional motor vehicle dealership, or seeks to relocate an existing
motor vehicle dealership, that has a relevant market area within
which the same line-make is represented, the franchisor shall, in
writing, first notify the board and each franchisee in that line-make
in the relevant market area of the franchisor's intention to
establish an additional dealership or to relocate an existing
dealership. Within 20 days of receiving the notice, satisfying the
requirements of this section, or within 20 days after the end of an
appeal procedure provided by the franchisor, a franchisee required to
be given the notice may file with the board a protest to the
proposed dealership establishment or relocation described in the
franchisor's notice. If, within this time, a franchisee files with
the board a request for additional time to file a protest, the board
or its executive director, upon a showing of good cause, may grant an
additional 10 days to file the protest. When a protest is filed, the
board shall inform the franchisor that a timely protest has been
filed, that a hearing is required pursuant to Section 3066, and that
the franchisor may not establish the proposed dealership or relocate
the existing dealership until the board has held a hearing as
provided in Section 3066, nor thereafter, if the board has determined
that there is good cause for not permitting the establishment of the
proposed dealership or relocation of the existing dealership. In the
event of multiple protests, hearings may be consolidated to expedite
the disposition of the issue.
(2) If a franchisor seeks to enter into a franchise that
authorizes a satellite warranty facility to be established at, or
relocated to, a proposed location that is within two miles of a
dealership of the same line-make, the franchisor shall first give
notice in writing of the franchisor's intention to establish or
relocate a satellite warranty facility at the proposed location to
the board and each franchisee operating a dealership of the same
line-make within two miles of the proposed location. Within 20 days
of receiving the notice satisfying the requirements of this section,
or within 20 days after the end of an appeal procedure provided by
the franchisor, a franchisee required to be given the notice may file
with the board a protest to the establishing or relocating of the
satellite warranty facility. If, within this time, a franchisee files
with the board a request for additional time to file a protest, the
board or its executive director, upon a showing of good cause, may
grant an additional 10 days to file the protest. When a protest is
filed, the board shall inform the franchisor that a timely protest
has been filed, that a hearing is required pursuant to Section 3066,
and that the franchisor may not establish or relocate the proposed
satellite warranty facility until the board has held a hearing as
provided in Section 3066, nor thereafter, if the board has determined
that there is good cause for not permitting the satellite warranty
facility. In the event of multiple protests, hearings may be
consolidated to expedite the disposition of the issue.
(3) The written notice shall contain, on the first page thereof in
at least 12-point bold type and circumscribed by a line to segregate
it from the rest of the text, the following statement:
"NOTICE TO DEALER: You have the right to file a protest with the
NEW MOTOR VEHICLE BOARD in Sacramento and have a hearing on your
protest under the terms of the California Vehicle Code if you oppose
this action. You must file your protest with the board within 20 days
of your receipt of this notice, or within 20 days after the end of
any appeal procedure that is provided by us to you. If within this
time you file with the board a request for additional time to file a
protest, the board or its executive director, upon a showing of good
cause, may grant you an additional 10 days to file the protest."
(b) Subdivision (a) does not apply to either of the following:
(1) The relocation of an existing dealership to a location that is
both within the same city as, and within one mile from, the existing
dealership location.
(2) The establishment at a location that is both within the same
city as, and within one-quarter mile from, the location of a
dealership of the same line-make that has been out of operation for
less than 90 days.
(c) Subdivision (a) does not apply to a display of vehicles at a
fair, exposition, or similar exhibit if actual sales are not made at
the event and the display does not exceed 30 days. This subdivision
may not be construed to prohibit a new vehicle dealer from
establishing a branch office for the purpose of selling vehicles at
the fair, exposition, or similar exhibit, even though the event is
sponsored by a financial institution, as defined in Section 31041 of
the Financial Code or by a financial institution and a licensed
dealer. The establishment of these branch offices, however, shall be
in accordance with subdivision (a) where applicable.
(d) For the purposes of this section, the reopening of a
dealership that has not been in operation for one year or more shall
be deemed the establishment of an additional motor vehicle
dealership.
(e) As used in this section, the following definitions apply:
(1) "Motor vehicle dealership" or "dealership" means an authorized
facility at which a franchisee offers for sale or lease, displays
for sale or lease, or sells or leases new motor vehicles.
(2) "Satellite warranty facility" means a facility operated by a
franchisee where authorized warranty repairs and service are
performed and the offer for sale or lease, the display for sale or
lease, or the sale or lease of new motor vehicles is not authorized
to take place.
SEC. 11. Section 3063 of the Vehicle Code is amended to read:
3063. In determining whether good cause has been established for
not entering into a franchise or relocating an existing dealership of
the same line-make, the board shall take into consideration the
existing circumstances, including, but not limited to, all of the
following:
(a) Permanency of the investment.
(b) Effect on the retail motor vehicle business and the consuming
public in the relevant market area.
(c) Whether it is injurious to the public welfare for an
additional franchise to be established or an existing dealership to
be relocated.
(d) Whether the franchisees of the same line-make in the relevant
market area are providing adequate competition and convenient
consumer care for the motor vehicles of the line-make in the market
area, which shall include the adequacy of motor vehicle sales and
service facilities, equipment, supply of vehicle parts, and qualified
service personnel.
(e) Whether the establishment of an additional franchise would
increase competition and therefore be in the public interest.
(f) For purposes of this section, the terms "motor vehicle
dealership" and "dealership" shall have the same meaning as defined
in Section 3062.
SEC. 12. Section 3064 of the Vehicle Code is amended to read:
3064. (a) Every franchisor shall specify to its franchisees the
delivery and preparation obligations of the franchisees prior to
delivery of new motor vehicles to retail buyers. A copy of the
delivery and preparation obligations, which shall constitute the
franchisee's only responsibility for product liability between the
franchisee and the franchisor but shall not in any way affect the
franchisee's responsibility for product liability between the
purchaser and either the franchisee or the franchisor, and a schedule
of compensation to be paid to franchisees for the work and services
they shall be required to perform in connection with those delivery
and preparation obligations shall be filed with the board by
franchisors, and shall constitute the compensation as set forth on
the schedule. The schedule of compensation shall be reasonable, with
the reasonableness thereof being subject to the approval of the
board, if a franchisee files a notice of protest with the board. In
determining the reasonableness of the schedules, the board shall
consider all relevant circumstances, including, but not limited to,
the time required to perform each function that the dealer is
obligated to perform and the appropriate labor rate.
(b) Upon delivery of the vehicle, the franchisee shall give a copy
of the delivery and preparation obligations to the purchaser and a
written certification that the franchisee has fulfilled these
obligations.
SEC. 13. Section 3065 of the Vehicle Code is amended to read:
3065. (a) Every franchisor shall properly fulfill every warranty
agreement made by it and adequately and fairly compensate each of its
franchisees for labor and parts used to fulfill that warranty when
the franchisee has fulfilled warranty obligations of diagnostics,
repair, and servicing and shall file a copy of its warranty
reimbursement schedule or formula with the board. The warranty
reimbursement schedule or formula shall be reasonable with respect to
the time and compensation allowed to the franchisee for the warranty
diagnostics, repair, and servicing, and all other conditions of the
obligation. The reasonableness of the warranty reimbursement schedule
or formula shall be determined by the board if a franchisee files a
protest with the board. A franchisor shall not replace, modify, or
supplement the warranty reimbursement schedule to impose a fixed
percentage or other reduction in the time and compensation allowed to
the franchisee for warranty repairs not attributable to a specific
repair. A franchisor may reduce the allowed time and compensation
applicable to a specific warranty repair only upon 15 days' prior
written notice to the franchisee. Any protest challenging a reduction
in time and compensation applicable to specific parts or labor
operations shall be filed within six months following the franchisee'
s receipt of notice of the reduction, and the franchisor shall have
the burden of establishing the reasonableness of the reduction and
adequacy and fairness of the resulting compensation.
(b) In determining the adequacy and fairness of the compensation,
the franchisee's effective labor rate charged to its various retail
customers may be considered together with other relevant criteria. If
in a protest permitted by this section filed by any franchisee the
board determines that the warranty reimbursement schedule or formula
fails to provide adequate and fair compensation or fails to conform
with the other requirements of this section, within 30 days after
receipt of the board's order, the franchisor shall correct the
failure by amending or replacing the warranty reimbursement schedule
or formula and implementing the correction as to all franchisees of
the franchisor that are located in this state.
(c) If any franchisor disallows a franchisee's claim for a
defective part, alleging that the part, in fact, is not defective,
the franchisor shall return the part alleged not to be defective to
the franchisee at the expense of the franchisor, or the franchisee
shall be reimbursed for the franchisee's cost of the part, at the
franchisor's option.
(d) (1) All claims made by franchisees pursuant to this section
shall be either approved or disapproved within 30 days after their
receipt by the franchisor. Any claim not specifically disapproved in
writing within 30 days from receipt by the franchisor shall be deemed
approved on the 30th day. All claims made by franchisees under this
section and Section 3064 for labor and parts shall be paid within 30
days after approval.
(2) A franchisor shall not disapprove a claim unless the claim is
false or fraudulent, repairs were not properly made, repairs were
inappropriate to correct a nonconformity with the written warranty
due to an improper act or omission of the franchisee, or for material
noncompliance with reasonable and nondiscriminatory documentation
and administrative claims submission requirements.
(3) When any claim is disapproved, the franchisee who submits it
shall be notified in writing of its disapproval within the required
period, and each notice shall state the specific grounds upon which
the disapproval is based. The franchisor shall provide for a
reasonable appeal process allowing the franchisee at least 30 days
after receipt of the written disapproval notice to provide additional
supporting documentation or information rebutting the disapproval.
If disapproval is based upon noncompliance with documentation or
administrative claims submission requirements, the franchisor shall
allow the franchisee at least 30 days from the date of receipt of the
notice to cure any material noncompliance. If the disapproval is
rebutted, and material noncompliance is cured before the applicable
deadline, the franchisor shall approve the claim.
(4) If the franchisee provides additional supporting documentation
or information purporting to rebut the disapproval, attempts to cure
noncompliance relating to the claim, or otherwise appeals denial of
the claim and the franchisor continues to deny the claim, the
franchisor shall provide the franchisee with a written notification
of the final denial
within 30 days of completion of the appeal process, which shall
conspicuously state "Final Denial" on the first page.
(5) Failure to approve or pay within the above specified time
limits, in individual instances for reasons beyond the reasonable
control of the franchisor, shall not constitute a violation of this
article.
(6) Within six months after either receipt of the written notice
described in paragraph (3) or (4), whichever is later, a franchisee
may file a protest with the board for determination of whether the
franchisor complied with the requirements of this subdivision. In any
protest pursuant to this subdivision, the franchisor shall have the
burden of proof.
(e) (1) Audits of franchisee warranty records may be conducted by
the franchisor on a reasonable basis for a period of nine months
after a claim is paid or credit issued. A franchisor shall not select
a franchisee for an audit, or perform an audit, in a punitive,
retaliatory, or unfairly discriminatory manner. A franchisor may
conduct no more than one random audit of a franchisee in a nine-month
period. The franchisor's notification to the franchisee of any
additional audit within a nine-month period shall be accompanied by
written disclosure of the basis for that additional audit.
(2) Previously approved claims shall not be disapproved or charged
back to the franchisee unless the claim is false or fraudulent,
repairs were not properly made, repairs were inappropriate to correct
a nonconformity with the written warranty due to an improper act or
omission of the franchisee, or for material noncompliance with
reasonable and nondiscriminatory documentation and administrative
claims submission requirements. A franchisor shall not disapprove or
chargeback a claim based upon an extrapolation from a sample of
claims, unless the sample of claims is selected randomly and the
extrapolation is performed in a reasonable and statistically valid
manner.
(3) If the franchisor disapproves of a previously approved claim
following an audit, the franchisor shall provide to the franchisee,
within 30 days after the audit, a written disapproval notice stating
the specific grounds upon which the claim is disapproved. The
franchisor shall provide a reasonable appeal process allowing the
franchisee a reasonable period of not less than 30 days after receipt
of the written disapproval notice to respond to any disapproval with
additional supporting documentation or information rebutting the
disapproval and to cure noncompliance, with the period to be
commensurate with the volume of claims under consideration. If the
franchisee rebuts any disapproval and cures any material
noncompliance relating to a claim before the applicable deadline, the
franchisor shall not chargeback the franchisee for that claim.
(4) If the franchisee provides additional supporting documentation
or information purporting to rebut the disapproval, attempts to cure
noncompliance relating to the claim, or otherwise appeals denial of
the claim and the franchisor continues to deny the claim, the
franchisor shall provide the franchisee with a written notification
of the final denial within 30 days of completion of the appeal
process, which shall conspicuously state "Final Denial" on the first
page.
(5) The franchisor shall not chargeback the franchisee until 45
days after receipt of the written notice described in paragraph (3)
or paragraph (4), whichever is later. Any chargeback to a franchisee
for warranty parts or service compensation shall be made within 90
days of receipt of that written notice. If the franchisee files a
protest pursuant to this subdivision prior to the franchisor's
chargeback for denied claims, the franchisor shall not offset or
otherwise undertake to collect the chargeback until the board issues
a final order on the protest. If the board sustains the chargeback or
the protest is dismissed, the franchisor shall have 90 days
following issuance of the final order or the dismissal to make the
chargeback, unless otherwise provided in a settlement agreement.
(6) Within six months after either receipt of the written
disapproval notice or completion of the franchisor's appeal process,
whichever is later, a franchisee may file a protest with the board
for determination of whether the franchisor complied with this
subdivision. In any protest pursuant to this subdivision, the
franchisor shall have the burden of proof.
(f) If a false claim was submitted by a franchisee with the intent
to defraud the franchisor, a longer period for audit and any
resulting chargeback may be permitted if the franchisor obtains an
order from the board.
SEC. 14. Section 3065.1 of the Vehicle Code is amended to read:
3065.1. (a) All claims made by a franchisee for payment under the
terms of a franchisor incentive program shall be either approved or
disapproved within 30 days after receipt by the franchisor. When any
claim is disapproved, the franchisee who submits it shall be notified
in writing of its disapproval within the required period, and each
notice shall state the specific grounds upon which the disapproval is
based. Any claim not specifically disapproved in writing within 30
days from receipt shall be deemed approved on the 30th day.
(b) Franchisee claims for incentive program compensation shall not
be disapproved unless the claim is false or fraudulent, the claim is
ineligible under the terms of the incentive program as previously
communicated to the franchisee, or for material noncompliance with
reasonable and nondiscriminatory documentation and administrative
claims submission requirements.
(c) The franchisor shall provide for a reasonable appeal process
allowing the franchisee at least 30 days after receipt of the written
disapproval notice to respond to any disapproval with additional
supporting documentation or information rebutting the disapproval. If
disapproval is based upon noncompliance with documentation or
administrative claims submission requirements, the franchisor shall
allow the franchisee at least 30 days from the date of receipt of the
written disapproval notice to cure any material noncompliance. If
the disapproval is rebutted, and material noncompliance is cured
before the applicable deadline, the franchisor shall approve the
claim.
(d) If the franchisee provides additional supporting documentation
or information purporting to rebut the disapproval, attempts to cure
noncompliance relating to the claim, or otherwise appeals denial of
the claim, and the franchisor continues to deny the claim, the
franchisor shall provide the franchisee with a written notification
of the final denial within 30 days of completion of the appeal
process, which shall conspicuously state "Final Denial" on the first
page.
(e) Following the disapproval of a claim, a franchisee shall have
six months from receipt of the written notice described in either
subdivision (a) or (d), whichever is later, to file a protest with
the board for determination of whether the franchisor complied with
subdivisions (a), (b), (c), and (d). In any hearing pursuant to this
subdivision or subdivision (a), (b), (c), or (d), the franchisor
shall have the burden of proof.
(f) All claims made by franchisees under this section shall be
paid within 30 days following approval. Failure to approve or pay
within the above specified time limits, in individual instances for
reasons beyond the reasonable control of the franchisor, do not
constitute a violation of this article.
(g) (1) Audits of franchisee incentive records may be conducted by
the franchisor on a reasonable basis, and for a period of nine
months after a claim is paid or credit issued. A franchisor shall not
select a franchisee for an audit, or perform an audit, in a
punitive, retaliatory, or unfairly discriminatory manner. A
franchisor may conduct no more than one random audit of a franchisee
in a nine-month period. The franchisor's notification to the
franchisee of any additional audit within a nine-month period shall
be accompanied by written disclosure of the basis for that additional
audit.
(2) Previously approved claims shall not be disapproved and
charged back unless the claim is false or fraudulent, the claim is
ineligible under the terms of the incentive program as previously
communicated to the franchisee, or for material noncompliance with
reasonable and nondiscriminatory documentation and administrative
claims submission requirements. A franchisor shall not disapprove a
claim or chargeback a claim based upon an extrapolation from a sample
of claims, unless the sample of claims is selected randomly and the
extrapolation is performed in a reasonable and statistically valid
manner.
(3) If the franchisor disapproves of a previously approved claim
following an audit, the franchisor shall provide to the franchisee,
within 30 days after the audit, a written disapproval notice stating
the specific grounds upon which the claim is disapproved. The
franchisor shall provide a reasonable appeal process allowing the
franchisee a reasonable period of not less than 30 days after receipt
of the written disapproval notice to respond to any disapproval with
additional supporting documentation or information rebutting the
disapproval and to cure any material noncompliance, with the period
to be commensurate with the volume of claims under consideration. If
the franchisee rebuts any disapproval and cures any material
noncompliance relating to a claim before the applicable deadline, the
franchisor shall not chargeback the franchisee for that claim.
(4) If the franchisee provides additional supporting documentation
or information purporting to rebut the disapproval, attempts to cure
noncompliance relating to the claim, or otherwise appeals denial of
the claim, and the franchisor continues to deny the claim, the
franchisor shall provide the franchisee with a written notification
of the final denial within 30 days of completion of the appeal
process, which shall conspicuously state "Final Denial" on the first
page.
(5) The franchisor shall not chargeback the franchisee until 45
days after the franchisee receives the written notice described in
paragraph (3) or (4), whichever is later. If the franchisee cures any
material noncompliance relating to a claim, the franchisor shall not
chargeback the dealer for that claim. Any chargeback to a franchisee
for incentive program compensation shall be made within 90 days
after the franchisee receives that written notice. If the board
sustains the chargeback or the protest is dismissed, the franchisor
shall have 90 days following issuance of the final order or the
dismissal to make the chargeback, unless otherwise provided in a
settlement agreement.
(6) Within six months after either receipt of the written notice
described in paragraph (3) or (4), a franchisee may file a protest
with the board for determination of whether the franchisor complied
with this subdivision. If the franchisee files a protest pursuant to
this subdivision prior to the franchisor's chargeback for denied
claims, the franchisor shall not offset or otherwise undertake to
collect the chargeback until the board issues a final order on the
protest. In any protest pursuant to this subdivision, the franchisor
shall have the burden of proof.
(h) If a false claim was submitted by a franchisee with the intent
to defraud the franchisor, a longer period for audit and any
resulting chargeback may be permitted if the franchisor obtains an
order from the board.
SEC. 15. Section 3066 of the Vehicle Code is amended to read:
3066. (a) Upon receiving a protest pursuant to Section 3060,
3062, 3064, 3065, 3065.1, 3070, 3072, 3074, 3075, or 3076, the board
shall fix a time within 60 days of the order, and place of hearing,
and shall send by registered mail a copy of the order to the
franchisor, the protesting franchisee, and all individuals and groups
that have requested notification by the board of protests and
decisions of the board. Except in a case involving a franchisee who
deals exclusively in motorcycles, the board or its executive director
may, upon a showing of good cause, accelerate or postpone the date
initially established for a hearing, but the hearing may not be
rescheduled more than 90 days after the board's initial order. For
the purpose of accelerating or postponing a hearing date, "good cause"
includes, but is not limited to, the effects upon, and any
irreparable harm to, the parties or interested persons or groups if
the request for a change in hearing date is not granted. The board or
an administrative law judge designated by the board shall hear and
consider the oral and documented evidence introduced by the parties
and other interested individuals and groups, and the board shall make
its decision solely on the record so made. Chapter 4.5 (commencing
with Section 11400) of Part 1 of Division 3 of Title 2 of the
Government Code and Sections 11507.3, 11507.6, 11507.7, 11511,
11511.5, 11513, 11514, 11515, and 11517 of the Government Code apply
to these proceedings.
(b) In a hearing on a protest filed pursuant to Section 3060,
3062, 3070, or 3072, the franchisor shall have the burden of proof to
establish that there is good cause to modify, replace, terminate, or
refuse to continue a franchise. The franchisee shall have the burden
of proof to establish that there is good cause not to enter into a
franchise establishing or relocating an additional motor vehicle
dealership.
(c) Except as otherwise provided in this chapter, in a hearing on
a protest alleging a violation of, or filed pursuant to, Section
3064, 3065, 3065.1, 3074, 3075, or 3076, the franchisee shall have
the burden of proof, but the franchisor has the burden of proof to
establish that a franchisee acted with intent to defraud the
franchisor where that issue is material to a protest filed pursuant
to Section 3065, 3065.1, 3075, or 3076.
(d) A member of the board who is a new motor vehicle dealer may
not participate in, hear, comment, or advise other members upon, or
decide, a matter involving a protest filed pursuant to this article
unless all parties to the protest stipulate otherwise.
SEC. 16. Section 3067 of the Vehicle Code is amended to read:
3067. (a) The decision of the board shall be in writing and shall
contain findings of fact and a determination of the issues
presented. The decision shall sustain, conditionally sustain,
overrule, or conditionally overrule the protest. Conditions imposed
by the board shall be for the purpose of assuring performance of
binding contractual agreements between franchisees and franchisors or
otherwise serving the purposes of this article or Article 5
(commencing with Section 3070). If the board fails to act within 30
days after the hearing, within 30 days after the board receives a
proposed decision where the case is heard before an administrative
law judge alone, or within a period necessitated by Section 11517 of
the Government Code, or as may be mutually agreed upon by the
parties, then the proposed action shall be deemed to be approved.
Copies of the board's decision shall be delivered to the parties
personally or sent to them by registered mail, as well as to all
individuals and groups that have requested notification by the board
of protests and decisions by the board. The board's decision shall be
final upon its delivery or mailing and a reconsideration or
rehearing is not permitted.
(b) Notwithstanding subdivision (c) of Section 11517 of the
Government Code, if a protest is heard by an administrative law judge
alone, 10 days after receipt by the board of the administrative law
judge's proposed decision, a copy of the proposed decision shall be
filed by the board as a public record and a copy shall be served by
the board on each party and his or her attorney.
SEC. 17. Section 3069.1 of the Vehicle Code is amended to read:
3069.1. Sections 3060 to 3065.1, inclusive, do not apply to a
franchise authorizing a dealership, as defined in subdivision (d) of
Section 3072.
SEC. 18. Section 11713.3 of the Vehicle Code is amended to read:
11713.3. It is unlawful and a violation of this code for a
manufacturer, manufacturer branch, distributor, or distributor branch
licensed pursuant to this code to do, directly or indirectly through
an affiliate, any of the following:
(a) To refuse or fail to deliver in reasonable quantities and
within a reasonable time after receipt of an order from a dealer
having a franchise for the retail sale of a new vehicle sold or
distributed by the manufacturer or distributor, a new vehicle or
parts or accessories to new vehicles as are covered by the franchise,
if the vehicle, parts, or accessories are publicly advertised as
being available for delivery or actually being delivered. This
subdivision is not violated, however, if the failure is caused by
acts or causes beyond the control of the manufacturer, manufacturer
branch, distributor, or distributor branch.
(b) To prevent or require, or attempt to prevent or require, by
contract or otherwise, a change in the capital structure of a
dealership or the means by or through which the dealer finances the
operation of the dealership, if the dealer at all times meets
reasonable capital standards agreed to by the dealer and the
manufacturer or distributor, and if a change in capital structure
does not cause a change in the principal management or have the
effect of a sale of the franchise without the consent of the
manufacturer or distributor.
(c) To prevent or require, or attempt to prevent or require, a
dealer to change the executive management of a dealership, other than
the principal dealership operator or operators, if the franchise was
granted to the dealer in reliance upon the personal qualifications
of that person.
(d) (1) Except as provided in subdivision (t), to prevent or
require, or attempt to prevent or require, by contract or otherwise,
a dealer, or an officer, partner, or stockholder of a dealership, the
sale or transfer of a part of the interest of any of them to another
person. A dealer, officer, partner, or stockholder shall not,
however, have the right to sell, transfer, or assign the franchise,
or a right thereunder, without the consent of the manufacturer or
distributor except that the consent shall not be unreasonably
withheld.
(2) (A) For the transferring franchisee to fail, prior to the
sale, transfer, or assignment of a franchisee or the sale,
assignment, or transfer of all, or substantially all, of the assets
of the franchised business or a controlling interest in the
franchised business to another person, to notify the manufacturer or
distributor of the franchisee's decision to sell, transfer, or assign
the franchise. The notice shall be in writing and shall include all
of the following:
(i) The proposed transferee's name and address.
(ii) A copy of all of the agreements relating to the sale,
assignment, or transfer of the franchised business or its assets.
(iii) The proposed transferee's application for approval to become
the successor franchisee. The application shall include forms and
related information generally utilized by the manufacturer or
distributor in reviewing prospective franchisees, if those forms are
readily made available to existing franchisees. As soon as
practicable after receipt of the proposed transferee's application,
the manufacturer or distributor shall notify the franchisee and the
proposed transferee of information needed to make the application
complete.
(B) For the manufacturer or distributor, to fail, on or before 60
days after the receipt of all of the information required pursuant to
subparagraph (A), or as extended by a written agreement between the
manufacturer or distributor and the franchisee, to notify the
franchisee of the approval or the disapproval of the sale, transfer,
or assignment of the franchise. The notice shall be in writing and
shall be personally served or sent by certified mail, return receipt
requested, or by guaranteed overnight delivery service that provides
verification of delivery and shall be directed to the franchisee. A
proposed sale, assignment, or transfer shall be deemed approved,
unless disapproved by the franchisor in the manner provided by this
subdivision. If the proposed sale, assignment, or transfer is
disapproved, the franchisor shall include in the notice of
disapproval a statement setting forth the reasons for the
disapproval.
(3) In an action in which the manufacturer's or distributor's
withholding of consent under this subdivision or subdivision (e) is
an issue, whether the withholding of consent was unreasonable is a
question of fact requiring consideration of all the existing
circumstances.
(e) To prevent, or attempt to prevent, a dealer from receiving
fair and reasonable compensation for the value of the franchised
business. There shall not be a transfer or assignment of the dealer's
franchise without the consent of the manufacturer or distributor,
which consent shall not be unreasonably withheld or conditioned upon
the release, assignment, novation, waiver, estoppel, or modification
of a claim or defense by the dealer.
(f) To obtain money, goods, services, or another benefit from a
person with whom the dealer does business, on account of, or in
relation to, the transaction between the dealer and that other
person, other than for compensation for services rendered, unless the
benefit is promptly accounted for, and transmitted to, the dealer.
(g) (1) Except as provided in paragraph (3), to obtain from a
dealer or enforce against a dealer an agreement, provision, release,
assignment, novation, waiver, or estoppel that does any of the
following:
(A) Modifies or disclaims a duty or obligation of a manufacturer,
manufacturer branch, distributor, distributor branch, or
representative, or a right or privilege of a dealer, pursuant to
Chapter 4 (commencing with Section 11700) of Division 5 or Chapter 6
(commencing with Section 3000) of Division 2.
(B) Limits or constrains the right of a dealer to file, pursue, or
submit evidence in connection with a protest before the board.
(C) Requires a dealer to terminate a franchise.
(D) Requires a controversy between a manufacturer, manufacturer
branch, distributor, distributor branch, or representative and a
dealer to be referred to a person for a binding determination.
However, this subparagraph does not prohibit arbitration before an
independent arbitrator, provided that whenever a motor vehicle
franchise contract provides for the use of arbitration to resolve a
controversy arising out of, or relating to, that contract,
arbitration may be used to settle the controversy only if, after the
controversy arises, all parties to the controversy consent in writing
to use arbitration to settle the controversy. For the purpose of
this subparagraph, the terms "motor vehicle" and "motor vehicle
franchise contract" shall have the same meaning as defined in Section
1226 of Title 15 of the United States Code. If arbitration is
elected to settle a dispute under a motor vehicle franchise contract,
the arbitrator shall provide the parties to the arbitration with a
written explanation of the factual and legal basis for the award.
(2) An agreement, provision, release, assignment, novation,
waiver, or estoppel prohibited by this subdivision shall be
unenforceable and void.
(3) This subdivision does not do any of the following:
(A) Limit or restrict the terms upon which parties to a protest
before the board, civil action, or other proceeding can settle or
resolve, or stipulate to evidentiary or procedural matters during the
course of, a protest, civil action, or other proceeding.
(B) Affect the enforceability of any stipulated order or other
order entered by the board.
(C) Affect the enforceability of any provision in a contract if
the provision is not prohibited under this subdivision or any other
law.
(D) Affect the enforceability of a provision in any contract
entered into on or before December 31, 2011.
(E) Prohibit a dealer from waiving its right to file a protest
pursuant to Section 3065.1 if the waiver agreement is entered into
after a franchisor incentive program claim has been disapproved by
the franchisor and the waiver is voluntarily given as part of an
agreement to settle that claim.
(F) Prohibit a voluntary agreement supported by valuable
consideration, other than granting or renewing a franchise, that does
both of the following:
(i) Provides that a dealer establish or maintain exclusive
facilities, personnel, or display space or provides that a dealer
make a material alteration, expansion, or addition to a dealership
facility.
(ii) Contains no waiver or other provision prohibited by
subparagraph (A), (B), (C), or (D) of paragraph (1).
(G) Prohibit an agreement separate from the franchise agreement
that implements a dealer's election to terminate the franchise if the
agreement is conditioned only on a specified time for termination or
payment of consideration to the dealer.
(H) (i) Prohibit a voluntary waiver agreement, supported by
valuable consideration, other than the consideration of renewing a
franchise, to waive the right of a dealer to file a protest under
Section 3062 for the proposed establishment or relocation of a
specific proposed dealership, if the waiver agreement provides all of
the following:
(I) The approximate address at which the proposed dealership will
be located.
(II) The planning potential used to establish the proposed
dealership's facility, personnel, and capital requirements.
(III) An approximation of projected vehicle and parts sales, and
number of vehicles to be serviced at the proposed dealership.
(IV) Whether the franchisor or affiliate will hold an ownership
interest in the proposed dealership or real property of the proposed
dealership, and the approximate percentage of any franchisor or
affiliate ownership interest in the proposed dealership.
(V) The line-makes to be operated at the proposed dealership.
(VI) If known at the time the waiver agreement is executed, the
identity of the dealer who will operate the proposed dealership.
(VII) The date the waiver agreement is to expire, which may not be
more than 30 months after the date of execution of the waiver
agreement.
(ii) Notwithstanding the provisions of a waiver agreement entered
into pursuant to the provisions of this subparagraph, a dealer may
file a protest under Section 3062 if any of the information provided
pursuant to clause (i) has become materially inaccurate since the
waiver agreement was executed. Any determination of the
enforceability of a waiver agreement shall be determined by the board
and the franchisor shall have the burden of proof.
(h) To increase prices of motor vehicles that the dealer
had ordered for private retail consumers prior to the dealer's
receipt of the written official price increase notification. A sales
contract signed by a private retail consumer is evidence of the
order. In the event of manufacturer price reductions, the amount of
the reduction received by a dealer shall be passed on to the private
retail consumer by the dealer if the retail price was negotiated on
the basis of the previous higher price to the dealer. Price
reductions apply to all vehicles in the dealer's inventory that were
subject to the price reduction. Price differences applicable to new
model or series motor vehicles at the time of the introduction of new
models or series shall not be considered a price increase or price
decrease. This subdivision does not apply to price changes caused by
either of the following:
(1) The addition to a motor vehicle of required or optional
equipment pursuant to state or federal law.
(2) Revaluation of the United States dollar in the case of a
foreign-make vehicle.
(i) To fail to pay to a dealer, within a reasonable time following
receipt of a valid claim by a dealer thereof, a payment agreed to be
made by the manufacturer or distributor to the dealer by reason of
the fact that a new vehicle of a prior year model is in the dealer's
inventory at the time of introduction of new model vehicles.
(j) To deny the widow, widower, or heirs designated by a deceased
owner of a dealership the opportunity to participate in the ownership
of the dealership or successor dealership under a valid franchise
for a reasonable time after the death of the owner.
(k) To offer refunds or other types of inducements to a person for
the purchase of new motor vehicles of a certain line-make to be sold
to the state or a political subdivision of the state without making
the same offer to all other dealers in the same line-make within the
relevant market area.
(l) To modify, replace, enter into, relocate, terminate, or refuse
to renew a franchise in violation of Article 4 (commencing with
Section 3060) of Chapter 6 of Division 2.
(m) To employ a person as a representative who has not been
licensed pursuant to Article 3 (commencing with Section 11900) of
Chapter 4 of Division 5.
(n) To deny a dealer the right of free association with another
dealer for a lawful purpose.
(o) (1) To compete with a dealer in the same line-make operating
under an agreement or franchise from a manufacturer or distributor in
the relevant market area.
(2) A manufacturer, branch, or distributor or an entity that
controls or is controlled by, a manufacturer, branch, or distributor,
shall not, however, be deemed to be competing in the following
limited circumstances:
(A) Owning or operating a dealership for a temporary period, not
to exceed one year at the location of a former dealership of the same
line-make that has been out of operation for less than six months.
However, after a showing of good cause by a manufacturer, branch, or
distributor that it needs additional time to operate a dealership in
preparation for sale to a successor independent franchisee, the board
may extend the time period.
(B) Owning an interest in a dealer as part of a bona fide dealer
development program that satisfies all of the following requirements:
(i) The sole purpose of the program is to make franchises
available to persons lacking capital, training, business experience,
or other qualities ordinarily required of prospective franchisees and
the dealer development candidate is an individual who is unable to
acquire the franchise without assistance of the program.
(ii) The dealer development candidate has made a significant
investment subject to loss in the franchised business of the dealer.
(iii) The program requires the dealer development candidate to
manage the day-to-day operations and business affairs of the dealer
and to acquire, within a reasonable time and on reasonable terms and
conditions, beneficial ownership and control of a majority interest
in the dealer and disassociation of any direct or indirect ownership
or control by the manufacturer, branch, or distributor.
(C) Owning a wholly owned subsidiary corporation of a distributor
that sells motor vehicles at retail, if, for at least three years
prior to January 1, 1973, the subsidiary corporation has been a
wholly owned subsidiary of the distributor and engaged in the sale of
vehicles at retail.
(3) (A) A manufacturer, branch, and distributor that owns or
operates a dealership in the manner described in subparagraph (A) of
paragraph (2) shall give written notice to the board, within 10 days,
each time it commences or terminates operation of a dealership and
each time it acquires, changes, or divests itself of an ownership
interest.
(B) A manufacturer, branch, and distributor that owns an interest
in a dealer in the manner described in subparagraph (B) of paragraph
(2) shall give written notice to the board, annually, of the name and
location of each dealer in which it has an ownership interest, the
name of the bona fide dealer development owner or owners, and the
ownership interests of each owner expressed as a percentage.
(p) To unfairly discriminate among its franchisees with respect to
warranty reimbursement or authority granted to its franchisees to
make warranty adjustments with retail customers.
(q) To sell vehicles to a person not licensed pursuant to this
chapter for resale.
(r) To fail to affix an identification number to a park trailer,
as described in Section 18009.3 of the Health and Safety Code, that
is manufactured on or after January 1, 1987, and that does not
clearly identify the unit as a park trailer to the department. The
configuration of the identification number shall be approved by the
department.
(s) To dishonor a warranty, rebate, or other incentive offered to
the public or a dealer in connection with the retail sale of a new
motor vehicle, based solely upon the fact that an autobroker arranged
or negotiated the sale. This subdivision shall not prohibit the
disallowance of that rebate or incentive if the purchaser or dealer
is ineligible to receive the rebate or incentive pursuant to any
other term or condition of a rebate or incentive program.
(t) To exercise a right of first refusal or other right requiring
a franchisee or an owner of the franchise to sell, transfer, or
assign to the franchisor, or to a nominee of the franchisor, all or a
material part of the franchised business or of the assets of the
franchised business unless all of the following requirements are met:
(1) The franchise authorizes the franchisor to exercise a right of
first refusal to acquire the franchised business or assets of the
franchised business in the event of a proposed sale, transfer, or
assignment.
(2) The franchisor gives written notice of its exercise of the
right of first refusal no later than 45 days after the franchisor
receives all of the information required pursuant to subparagraph (A)
of paragraph (2) of subdivision (d).
(3) The sale, transfer, or assignment being proposed relates to
not less than all or substantially all of the assets of the
franchised business or to a controlling interest in the franchised
business.
(4) The proposed transferee is neither a family member of an owner
of the franchised business, nor a managerial employee of the
franchisee owning 15 percent or more of the franchised business, nor
a corporation, partnership, or other legal entity owned by the
existing owners of the franchised business. For purposes of this
paragraph, a "family member" means the spouse of an owner of the
franchised business, the child, grandchild, brother, sister, or
parent of an owner, or a spouse of one of those family members. This
paragraph does not limit the rights of the franchisor to disapprove a
proposed transferee as provided in subdivision (d).
(5) Upon the franchisor's exercise of the right of first refusal,
the consideration paid by the franchisor to the franchisee and owners
of the franchised business shall equal or exceed all consideration
that each of them were to have received under the terms of, or in
connection with, the proposed sale, assignment, or transfer, and the
franchisor shall comply with all the terms and conditions of the
agreement or agreements to sell, transfer, or assign the franchised
business.
(6) The franchisor shall reimburse the proposed transferee for
expenses paid or incurred by the proposed transferee in evaluating,
investigating, and negotiating the proposed transfer to the extent
those expenses do not exceed the usual, customary, and reasonable
fees charged for similar work done in the area in which the
franchised business is located. These expenses include, but are not
limited to, legal and accounting expenses, and expenses incurred for
title reports and environmental or other investigations of real
property on which the franchisee's operations are conducted. The
proposed transferee shall provide the franchisor a written
itemization of those expenses, and a copy of all nonprivileged
reports and studies for which expenses were incurred, if any, within
30 days of the proposed transferee's receipt of a written request
from the franchisor for that accounting. The franchisor shall make
payment within 30 days of exercising the right of first refusal.
(u) (1) To unfairly discriminate in favor of a dealership owned or
controlled, in whole or in part, by a manufacturer or distributor or
an entity that controls or is controlled by the manufacturer or
distributor. Unfair discrimination includes, but is not limited to,
the following:
(A) The furnishing to a franchisee or dealer that is owned or
controlled, in whole or in part, by a manufacturer, branch, or
distributor of any of the following:
(i) A vehicle that is not made available to each franchisee
pursuant to a reasonable allocation formula that is applied
uniformly, and a part or accessory that is not made available to all
franchisees on an equal basis when there is no reasonable allocation
formula that is applied uniformly.
(ii) A vehicle, part, or accessory that is not made available to
each franchisee on comparable delivery terms, including the time of
delivery after the placement of an order. Differences in delivery
terms due to geographic distances or other factors beyond the control
of the manufacturer, branch, or distributor shall not constitute
unfair competition.
(iii) Information obtained from a franchisee by the manufacturer,
branch, or distributor concerning the business affairs or operations
of a franchisee in which the manufacturer, branch, or distributor
does not have an ownership interest. The information includes, but is
not limited to, information contained in financial statements and
operating reports, the name, address, or other personal information
or buying, leasing, or service behavior of a dealer customer, and
other information that, if provided to a franchisee or dealer owned
or controlled by a manufacturer or distributor, would give that
franchisee or dealer a competitive advantage. This clause does not
apply if the information is provided pursuant to a subpoena or court
order, or to aggregated information made available to all
franchisees.
(iv) Sales or service incentives, discounts, or promotional
programs that are not made available to all California franchises of
the same line-make on an equal basis.
(B) Referring a prospective purchaser or lessee to a dealer in
which a manufacturer, branch, or distributor has an ownership
interest, unless the prospective purchaser or lessee resides in the
area of responsibility assigned to that dealer or the prospective
purchaser or lessee requests to be referred to that dealer.
(2) This subdivision does not prohibit a franchisor from granting
a franchise to prospective franchisees or assisting those franchisees
during the course of the franchise relationship as part of a program
or programs to make franchises available to persons lacking capital,
training, business experience, or other qualifications ordinarily
required of prospective franchisees.
(v) (1) To access, modify, or extract information from a
confidential dealer computer record, as defined in Section 11713.25,
without obtaining the prior written consent of the dealer and without
maintaining administrative, technical, and physical safeguards to
protect the security, confidentiality, and integrity of the
information.
(2) Paragraph (1) does not limit a duty that a dealer may have to
safeguard the security and privacy of records maintained by the
dealer.
(w) (1) To use electronic, contractual, or other means to prevent
or interfere with any of the following:
(A) The lawful efforts of a dealer to comply with federal and
state data security and privacy laws.
(B) The ability of a dealer to do either of the following:
(i) Ensure that specific data accessed from the dealer's computer
system is within the scope of consent specified in subdivision (v).
(ii) Monitor specific data accessed from or written to the dealer'
s computer system.
(2) Paragraph (1) does not limit a duty that a dealer may have to
safeguard the security and privacy of records maintained by the
dealer.
(x) (1) To unfairly discriminate against a franchisee selling a
service contract, debt cancellation agreement, maintenance agreement,
or similar product not approved, endorsed, sponsored, or offered by
the manufacturer, manufacturer branch, distributor, or distributor
branch or affiliate. For purposes of this subdivision, unfair
discrimination includes, but is not limited to, any of the following:
(A) Express or implied statements that the dealer is under an
obligation to exclusively sell or offer to sell service contracts,
debt cancellation agreements, or similar products approved, endorsed,
sponsored, or offered by the manufacturer, manufacturer branch,
distributor, or distributor branch or affiliate.
(B) Express or implied statements that selling or offering to sell
service contracts, debt cancellation agreements, maintenance
agreements, or similar products not approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate, or the failure to sell or offer to
sell service contracts, debt cancellation agreements, maintenance
agreements, or similar products approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate will have any negative consequences
for the dealer.
(C) Measuring a dealer's performance under a franchise agreement
based upon the sale of service contracts, debt cancellation
agreements, or similar products approved, endorsed, sponsored, or
offered by the manufacturer, manufacturer branch, distributor, or
distributor branch or affiliate.
(D) Requiring a dealer to actively promote the sale of service
contracts, debt cancellation agreements, or similar products
approved, endorsed, sponsored, or offered by the manufacturer,
manufacturer branch, distributor, or distributor branch or affiliate.
(E) Conditioning access to vehicles or parts, or vehicle sales or
service incentives upon the sale of service contracts, debt
cancellation agreements, or similar products approved, endorsed,
sponsored, or offered by the manufacturer, manufacturer branch,
distributor, or distributor branch or affiliate.
(2) Unfair discrimination does not include, and nothing shall
prohibit a manufacturer from, offering an incentive program to
vehicle dealers who voluntarily sell or offer to sell service
contracts, debt cancellation agreements, or similar products
approved, endorsed, sponsored, or offered by the manufacturer,
manufacturer branch, distributor, or distributor branch or affiliate,
if the program does not provide vehicle sales or service incentives.
(3) This subdivision does not prohibit a manufacturer,
manufacturer branch, distributor, or distributor branch from
requiring a franchisee that sells a used vehicle as "certified" under
a certified used vehicle program established by the manufacturer,
manufacturer branch, distributor, or distributor branch to provide a
service contract approved, endorsed, sponsored, or offered by the
manufacturer, manufacturer branch, distributor, or distributor
branch.
(4) Unfair discrimination does not include, and nothing shall
prohibit a franchisor from requiring a franchisee to provide, the
following notice prior to the sale of the service contract if the
service contract is not provided or backed by the franchisor and the
vehicle is of the franchised line-make:
"Service Contract Disclosure
The service contract you are purchasing is not provided or backed by
the manufacturer of the vehicle you are purchasing. The manufacturer
of the vehicle is not responsible for claims or repairs under this
service contract.
_____________________
Signature of Purchaser"
(y) 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 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. 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.
(z) As used in this section, "area of responsibility" is a
geographic area specified in a franchise that is used by the
franchisor for the purpose of evaluating the franchisee's performance
of its sales and service obligations.
SEC. 19. Section 11713.13 of the Vehicle Code is amended to read:
11713.13. It is unlawful and a violation of this code for any
manufacturer, manufacturer branch, distributor, or distributor branch
licensed under this code to do, directly or indirectly through an
affiliate, any of the following:
(a) Prevent, or attempt to prevent, by contract or otherwise, a
dealer from acquiring, adding, or maintaining a sales or service
operation for another line-make of motor vehicles at the same or
expanded facility at which the dealer currently operates a dealership
if the dealer complies with any reasonable facilities and capital
requirements of the manufacturer or distributor.
(b) Require a dealer to establish or maintain exclusive
facilities, personnel, or display space if the imposition of the
requirement would be unreasonable in light of all existing
circumstances, including economic conditions. In any proceeding 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
and advancements in vehicular technology. This subdivision does not
limit the obligation of a dealer to comply with any applicable health
or safety laws.
(1) A required facility alteration, expansion, or addition shall
not be deemed reasonable if it requires that the dealer purchase
goods or services from a specific vendor when goods or services of
substantially similar kind, quality, and general design concept are
available from another vendor. Notwithstanding the prohibitions in
this paragraph, a manufacturer, manufacturer branch, distributor, or
distributor branch may require the dealer to request approval for the
use of alternative goods or services in writing. Approval for these
requests shall not be unreasonably withheld, and the request shall be
deemed approved if not specifically denied in writing within 20
business days of receipt of the dealer's written request. This
paragraph does not authorize a dealer to impair or eliminate the
intellectual property or trademark rights of the manufacturer,
manufacturer branch, distributor, or distributor branch, or to permit
a dealer to erect or maintain signs that do not conform to the
intellectual property usage guidelines of the manufacturer,
manufacturer branch, distributor, or distributor branch. This
paragraph shall not apply to a specific good or service if the
manufacturer, manufacturer branch, distributor, or distributor branch
provides the dealer with a lump-sum payment or series of payments of
a substantial portion of the cost of that good or service, if the
payment is intended solely to reimburse the dealer for the purchase
of the specified good or service.
(2) In any proceeding in which a required facility alteration,
expansion, or addition is an issue, the manufacturer, manufacturer
branch, distributor, distributor branch, or affiliate shall have the
burden of proof.
(d) (1) Fail to pay to a dealer, within 90 days of termination,
cancellation, or nonrenewal of a franchise, all of the following:
(A) The dealer cost, plus any charges made by the manufacturer or
distributor for vehicle distribution or delivery and the cost of any
dealer-installed original equipment accessories, less any amount
invoiced to the vehicle and paid by the manufacturer or distributor
to the dealer, for all new and undamaged vehicles with less than 500
miles in the dealer's inventory that were acquired by the dealer from
the manufacturer, distributor, or another new motor vehicle dealer
franchised to sell vehicles of the same line-make, in the ordinary
course of business, within 18 months of termination, cancellation, or
nonrenewal of the franchise.
(B) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(C) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(D) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(E) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(2) This subdivision does not apply to a franchisor of a dealer of
new recreational vehicles, as defined in subdivision (a) of Section
18010 of the Health and Safety Code.
(3) This subdivision does not apply to a termination that is
implemented as a result of the sale of substantially all of the
inventory and fixed assets or stock of a franchised dealership if the
dealership continues to operate as a franchisee of the same
line-make.
(e) (1) (A) Fail to pay to a dealer of new recreational vehicles,
as defined in subdivision (a) of Section 18010 of the Health and
Safety Code, within 90 days of termination, cancellation, or
nonrenewal of a franchise for a recreational vehicle line-make, as
defined in Section 3072.5, the dealer cost, plus any charges made by
the manufacturer or distributor for vehicle distribution or delivery
and the cost of any dealer-installed original equipment accessories,
less any amount invoiced to the vehicle and paid by the manufacturer
or distributor to the dealer, for a new recreational vehicle when the
termination, cancellation, or nonrenewal is initiated by a
recreational vehicle manufacturer. This paragraph only applies to new
and unused recreational vehicles that do not currently have or have
had in the past, material damage, as defined in Section 9990, and
that the dealer acquired from the manufacturer, distributor, or
another new motor vehicle dealer franchised to sell recreational
vehicles of the same line-make in the ordinary course of business
within 12 months of the termination, cancellation, or nonrenewal of
the franchise.
(B) For those recreational vehicles with odometers, paragraph (1)
shall apply to only those vehicles that have no more than 1,500 miles
on the odometer, in addition to the number of miles incurred while
delivering the vehicle from the manufacturer's facility that produced
the vehicle for delivery to the dealer's retail location.
(C) Damaged recreational vehicles shall be repurchased by the
manufacturer provided there is an offset in value for damages, except
recreational vehicles that have or had material damage, as defined
in Section 9990, may be repurchased at the manufacturer's option
provided there is an offset in value for damages.
(2) Fail to pay to a dealer of new recreational vehicles, as
defined in subdivision (a) of Section 18010 of the Health and Safety
Code, within 90 days of termination, cancellation, or nonrenewal of a
franchise, all of the following:
(A) The dealer cost for all unused and undamaged supplies, parts,
and accessories listed in the manufacturer's current parts catalog
and in their original packaging, except that sheet metal may be
packaged in a comparable substitute for the original package.
(B) The fair market value of each undamaged sign owned by the
motor vehicle dealer and bearing a common name, trade name, or
trademark of the manufacturer or distributor if acquisition of the
sign was required or made a condition of participation in an
incentive program by the manufacturer or distributor.
(C) The fair market value of all special tools, computer systems,
and equipment that were required or made a condition of participation
in an incentive program by the manufacturer or distributor that are
in usable condition, excluding normal wear and tear.
(D) The dealer costs of handling, packing, loading, and
transporting any items or inventory for repurchase by the
manufacturer or distributor.
(f) (1) Fail, upon demand, to indemnify any existing or former
franchisee and the franchisee's successors and assigns from any and
all damages sustained and attorney's fees and other expenses
reasonably incurred by the franchisee that result from or relate to
any claim made or asserted by a third
party against the franchisee to the extent the claim
results from any of the following:
(A) The condition, characteristics, manufacture, assembly, or
design of any vehicle, parts, accessories, tools, or equipment, or
the selection or combination of parts or components manufactured or
distributed by the manufacturer or distributor.
(B) Service systems, procedures, or methods the franchisor
required or recommended the franchisee to use if the franchisee
properly uses the system, procedure, or method.
(C) Improper use or disclosure by a manufacturer or distributor of
nonpublic personal information obtained from a franchisee concerning
any consumer, customer, or employee of the franchisee.
(D) Any act or omission of the manufacturer or distributor for
which the franchisee would have a claim for contribution or indemnity
under applicable law or under the franchise, irrespective of and
without regard to any prior termination or expiration of the
franchise.
(2) This subdivision does not limit, in any way, the existing
rights, remedies, or recourses available to any person who purchases
or leases vehicles at retail.
(g) (1) Establish or maintain a performance standard, sales
objective, or program for measuring a dealer's sales, service, or
customer service performance that may materially affect the dealer,
including, but not limited to, the dealer's right to payment under
any incentive or reimbursement program or establishment of working
capital requirements, unless both of the following requirements are
satisfied:
(A) The performance standard, sales objective, or program for
measuring dealership sales, service, or customer service performance
is reasonable in light of all existing circumstances, including, but
not limited to, the following:
(i) Demographics in the dealer's area of responsibility.
(ii) Geographical and market characteristics in the dealer's area
of responsibility.
(iii) The availability and allocation of vehicles and parts
inventory.
(iv) Local and statewide economic circumstances.
(v) Historical sales, service, and customer service performance of
the line-make within the dealer's area of responsibility, including
vehicle brand preferences of consumers in the dealer's area of
responsibility.
(B) Within 30 days after a request by the dealer, the
manufacturer, manufacturer branch, distributor, distributor branch,
or affiliate provides a written summary of the methodology and data
used in establishing the performance standard, sales objective, or
program for measuring dealership sales or service performance. The
summary shall be in detail sufficient to permit the dealer to
determine how the standard was established and applied to the dealer.
(2) In any proceeding in which the reasonableness of a performance
standard, sales objective, or program for measuring dealership
sales, service, or customer service performance is an issue, the
manufacturer, manufacturer branch, distributor, distributor branch,
or affiliate shall have the burden of proof.
(3) As used in this subdivision, "area of responsibility" shall
have the same meaning as defined in subdivision (z) of Section
11713.3.
SEC. 20. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
