H. B. 4611

         (By Delegate Craig)

         [Introduced February 17, 2014; referred to the

         Committee on the Judiciary.]

A BILL to amend and reenact §17A-6A-1, §17A-6A-3, §17A-6A-4, §17A-6A-5, §17A-6A-6, §17A-6A-7, §17A-6A-8, §17A-6A-8a, §17A-6A-10, §17A-6A-11, §17A-6A-12, §17A-6A-13, §17A-6A-18, §17A-6A-19, §17A-6A-20 and §17A-6A-21, of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto seven new sections, designated §17A-6A-12a, §17A-6A-12b, §17A-6A-12c, §17A-6A-14a, §17A-6A-15, §17A-6A-16, and §17A-6A-17, all relating to motor vehicle dealers, distributors, wholesalers and manufacturers.

Be it enacted by the Legislature of West Virginia:

    That §17A-6A-1, §17A-6A-3, §17A-6A-4, §17A-6A-5, §17A-6A-6, §17A-6A-7, §17A-6A-8, §17A-6A-8a, §17A-6A-10, §17A-6A-11, §17A-6A-12, §17A-6A-13, §17A-6A-18, §17A-6A-19, §17A-6A-20 and §17A-6A-21, of the Code of West Virginia, 1931, as amended, be amended and reenacted; and that said code be amended by adding thereto seven new sections, designated §17A-6A-12a, §17A-6A-12b, §17A-6A-12c, §17A-6A-14a, §17A-6A-15, §17A-6A-16, and §17A-6A-17, all to read as follows:

ARTICLE 6A. MOTOR VEHICLE DEALERS, DISTRIBUTORS, WHOLESALERS AND MANUFACTURERS.

§17A-6A-1. Legislative finding.

    The Legislature finds and declares that the distribution and sale of motor vehicles in this state vitally affects the general economy and the public interest and welfare and that in order to promote the public interest and welfare and in exercise of its police power, it is necessary to regulate motor vehicle dealers, manufacturers, distributors, and representatives of vehicle manufacturers and distributors doing business in this state in order to avoid inequitable conduct and undue control of the independent new motor vehicle dealer by the vehicle manufacturer or distributor and to insure that dealers fulfill their obligations under their franchises and provide adequate and sufficient service to consumers generally, and to protect and preserve the investments and properties of the citizens and motor vehicle dealers of this State.

§17A-6A-3. Definitions.

    For the purposes of this article, the words and phrases defined in this section have the meanings ascribed to them, except where the context clearly indicates a different meaning.

    (1) “Dealer agreement” means the franchise, agreement or contract in writing between a manufacturer, distributor and a new motor vehicle dealer which purports to establish the legal rights and obligations of the parties to the agreement or contract with regard to the purchase, lease or sale of new motor vehicles, accessories, service and sale of parts for motor vehicles.

    (2) “Designated family member” means the spouse, child, grandchild, parent, brother or sister of a deceased new motor vehicle dealer who is entitled to inherit the deceased dealer’s ownership interest in the new motor vehicle dealership under the terms of the dealer’s will, or who has otherwise been designated in writing by a deceased dealer to succeed the deceased dealer in the new motor vehicle dealership, or is entitled to inherit under the laws of intestate succession of this state. With respect to an incapacitated new motor vehicle dealer, the term means the person appointed by a court as the legal representative of the new motor vehicle dealer’s property. The term also includes the appointed and qualified personal representative and the testamentary trustee of a deceased new motor vehicle dealer. However, the term means only that designated successor nominated by the new motor vehicle dealer in a written document filed by the dealer with the manufacturer or distributor, if such a document is filed.

    (3) “Distributor” means any person, resident or nonresident, who, in whole or in part, offers for sale, sells or distributes any new motor vehicle to a new motor vehicle dealer or who maintains a factor representative, resident or nonresident, or who controls any person, resident or nonresident, who, in whole or in part, offers for sale, sells or distributes any new motor vehicle to a new motor vehicle dealer.

    (4) “Established place of business” means a permanent, enclosed commercial building located within this state easily accessible and open to the public at all reasonable times and at which the business of a new motor vehicle dealer, including the display and repair of motor vehicles, may be lawfully carried on in accordance with the terms of all applicable building codes, zoning and other land-use regulatory ordinances and as licensed by the Division of Motor Vehicles.

    (5) “Factory branch” means an office maintained by a manufacturer or distributor for the purpose of selling or offering for sale vehicles to a distributor, wholesaler or new motor vehicle dealer, or for directing or supervising, in whole or in part, factory or distributor representatives. The term includes any sales promotion organization maintained by a manufacturer or distributor which is engaged in promoting the sale of a particular make of new motor vehicles in this state to new motor vehicle dealers.

    (6) “Factory representative” means an agent or employee of a manufacturer, distributor or factory branch retained or employed for the purpose of making or promoting the sale of new motor vehicles or for supervising or contracting with new motor vehicle dealers or proposed motor vehicle dealers.

    (7) “Good faith” means honesty in fact and the observation of reasonable commercial standards of fair dealing in the trade.

    (8) “Manufacturer” means any person who manufactures or assembles new motor vehicles, or any distributor, factory branch or factory representative. and, in the case of a school bus, truck tractor, road tractor or truck as defined in Section 1, Article 1 of Chapter 17A, also means a person engaged in the business of manufacturing a school bus, truck tractor, road tractor or truck, their engines, power trains or rear axles, including when such engines, power trains, or rear axles are not warranted by the final manufacturer or assembler, and any distributor, factory branch or representative. The term manufacturer also includes a captive finance source as herein defined in section 10(1)(k)(i) of this article.

    (9) “Motor vehicle” means that term as defined in section one, article one of this chapter, including motorcycle, school bus, truck tracter, road tractor, truck, and recreational vehicle, all-terrain vehicle, and utility terrain vehicle as defined in subsections (c), (d), (ff), (h), (i), and (nn) and (vv) respectively, of said section, but not including a farm tractor or farm equipment. The term “motor vehicle” shall also include, for a school bus, truck tractor, road tractor and truck, its component parts, including, but not limited to, its engine, transmission, or real axle manufactured for installation in a school bus, truck tractor, road tractor or truck.

    (10) “New motor vehicle” means a motor vehicle which is in the possession of the manufacturer, distributor or wholesaler, or has been sold only to a new motor vehicle dealer and on which the original title has not been issued from the new motor vehicle dealer.

    (11) “New motor vehicle dealer” means a person who holds a dealer agreement granted by a manufacturer or distributor for the sale of its motor vehicles, who is engaged in the business of purchasing, selling, leasing, exchanging or dealing in new motor vehicles, service of said vehicles, warranty work and sale of parts who has an established place of business in this state and is licensed by the Division of Motor Vehicles.

    (12) “Person” means a natural person, partnership, corporation, association, trust, estate or other legal entity.

    (13) “Proposed new motor vehicle dealer” means a person who has an application pending for a new dealer agreement with a manufacturer or distributor. “Proposed motor vehicle dealer” does not include a person whose dealer agreement is being renewed or continued.

    (14) “Relevant market area” means the area located within a twenty air-mile radius around an existing same line-make new motor vehicle dealership.

§17A-6A-4. Cancellation of dealer contract; notification.

    (1) Notwithstanding any agreement, a manufacturer or distributor shall not cancel, terminate, fail to renew or refuse to continue any dealer agreement with a new motor vehicle dealer unless the manufacturer or distributor has complied with all of the following:

    (a) Satisfied the notice requirement of section seven of this article;

    (b) Acted in good faith;

    (c) Engaged in full and open communication with franchised dealer; and

    (d) Has good cause for the cancellation, termination, nonrenewal or discontinuance.

    (2) Notwithstanding any agreement, good cause exists when a manufacturer or distributor can demonstrate termination is necessary due to a material breach of a reasonable term or terms of the agreement by a dealer when weighed against the interests of the dealer and the public. The burden of proof is on the manufacturer to prove good cause by a preponderance of the evidence. The interests of the dealer and the public shall include consideration of:

    (a) The relationship of the dealer’s sales to the sales in the relevant market;

    (b) The investment and financial obligations of the dealer under the terms of the franchise agreement;

    (c) The effect on the public cancellation of the franchise agreement would cause;

    (d) The adequacy of the dealer’s sales and service facilities, equipment, parts and personnel in relation to other dealers in the relevant market;

    (e) Whether the dealer is honoring existing warranties;

    (f) Whether the dealer is complying, or can comply within a reasonable time, with reasonable capitalization requirements; and

    (g) The dealer’s overall performance under the reasonable terms of the franchise agreement. This shall include the overall fairness of the agreement terms, the enforceability of the agreement and the relative bargaining power of the parties.

    (h) Whether the manufacturer provided the requested appropriate volumes and type of motor vehicles to the dealer, training, tools, parts and support to the dealer.

    (3) In addition to the requirements of subsection (2), if the failure by the new motor vehicle dealer to comply with a provision of the dealer agreement relates to the performance of the new motor vehicle dealer in sales or service, good cause exists for the purposes of a termination, cancellation, nonrenewal or discontinuance under subsection (1) of this section when the new motor vehicle dealer failed to effectively carry out the performance provisions of the dealer agreement if all of the following have occurred:

    (a) The new motor vehicle dealer was given written notice by the manufacturer or distributor of the failure;

    (b) The notification stated that the notice of failure of performance was provided pursuant to this article;

    (c) The new motor vehicle dealer was afforded a reasonable opportunity to exert good faith efforts to carry out the dealer agreement; and

    (d) The failure continued for more than three hundred sixty days after the date notification was given pursuant to subdivision (a) of this subsection.

§17A-6A-5. Circumstances not constituting good cause.

    Notwithstanding any agreement, the following alone shall not constitute good cause for the termination, cancellation, nonrenewal or discontinuance of a dealer agreement under subdivision (d), subsection (1), section four of this article:

    (a) A change in ownership of the new motor vehicle dealer's dealership. The subdivision does not authorize any change in ownership which would have the effect of a sale or an assignment of the dealer agreement or a change in the principal management of the dealership without the manufacturer's or distributor's prior written consent, which shall not be unreasonably or untimely withheld.

    (b) The refusal of the new motor vehicle dealer to purchase or accept delivery of any new motor vehicle parts, accessories, or any other commodity or services not ordered by the new motor vehicle dealer.

    (c) The fact that the new motor vehicle dealer owns, has an investment in, participates in the management of, or holds a dealer agreement for the sale of another make or line of new motor vehicles, or that the new motor vehicle dealer has established another make or line of new motor vehicles in the same dealership facilities as those of the manufacturer or distributor: Provided, That the new motor vehicle dealer maintains a reasonable line of credit for each make or line of new motor vehicles, and that the new motor vehicle dealer remains in substantial compliance with the terms and conditions of the dealer agreement and with any reasonable facilities' requirements of the manufacturer or distributor.

    (d) The fact that the new motor vehicle dealer sells or transfers ownership of the dealership or sells or transfers capital stock in the dealership to the new motor vehicle dealer's spouse, son or daughter: Provided, That the sale or transfer shall not have the effect of a sale or an assignment of the dealer agreement or a change in the principal management of the dealership without the manufacturer's or distributor's prior written consent.

§17A-6A-6. Burden of proof.

    For each termination, cancellation, nonrenewal or discontinuance, the manufacturer or distributor shall have the burden of proof by a preponderance of the evidence for showing that he or she has acted in good faith, that the notice requirement has been complied with, and that there was good cause by a preponderance of the evidence for the termination, cancellation, nonrenewal or discontinuance.

§17A-6A-7. Notice provisions.

    Notwithstanding any agreement, prior to the termination, cancellation, nonrenewal or discontinuance of any dealer agreement, the manufacturer or distributor shall furnish notice of the termination, cancellation, nonrenewal or discontinuance to the new motor vehicle dealer as follows:

    (a) Except as otherwise provided in this section, notice shall be made not less than one hundred twenty days prior to the effective date of the termination, cancellation, nonrenewal or discontinuance.

    (b) Notice shall be by certified mail with restrictive delivery to the new motor vehicle dealer principal and shall contain the following:

    (1) A statement of intention to terminate, cancel, not renew or discontinue the dealer agreement;

    (2) A detailed written statement of all reasons for the termination, cancellation, nonrenewal or discontinuance. The statement shall include, at a minimum, a complete explanation of each reason upon which the manufacturer or distributor relies to support its proposed action, along with all supporting documentation which is material to the proposed action and available to the manufacturer or distributor at the time of termination, cancellation, nonrenewal or discontinuance; and

    (3) The date on which the termination, cancellation, nonrenewal or discontinuance takes effect.

    (c) Notwithstanding subdivision (a) of this subsection, notice shall be made not less than thirty days prior to the effective date of the termination, cancellation, nonrenewal or discontinuance for any of the following reasons:

    (1) Insolvency of the new motor vehicle dealer or the filing of any petition by or against the new motor vehicle dealer under any bankruptcy or receivership law;

    (2) Failure of the new motor vehicle dealer to conduct his or her customary sales and service operations during his or her customary business hours for seven consecutive business days;

    (3) Conviction of the new motor vehicle dealer or its principal owners of a crime, but only if the crime is punishable by imprisonment in excess of one year under the law under which the dealer was convicted or the crime involved theft, dishonesty or false statement regardless of the punishment;

    (4) Revocation of a motor vehicle dealership license in accordance with section eighteen, article six of this chapter; or

    (5) A fraudulent misrepresentation by the new motor vehicle dealer to the manufacturer or distributor, which is material to the dealer agreement.

    (d) Notwithstanding subdivision (a) of this subsection, notice shall be made not less than twelve months prior to the effective date of a termination, cancellation, nonrenewal or discontinuance if a manufacturer or distributor discontinues production of the new motor vehicle dealer's product line or discontinues distribution of the product line in this state.

    (e) Except as provided in subdivision (c) of this subsection, any motor vehicle dealer who receives a notice of intent to discontinue, cancel or not renew a dealer agreement may, within a one hundred twenty-day notice period, file a petition or complaint for a determination of whether such action is an unfair or prohibited discontinuation, cancellation or nonrenewal. Dealer agreements and certificates of appointment shall continue in effect until a final determination of the issues raised in such petition or complaint by the motor vehicle dealer. A discontinuance, cancellation or nonrenewal is unfair if it is:

    (1) Not clearly permitted by the dealer agreement;

    (2) Not undertaken for good cause; or

    (3) Is based on an alleged breach of the franchise agreement which is not in fact a material and substantial breach.

    (f) No replacement dealer shall be named for this point or location to engage in business and the dealer’s agreement shall remain in effect until a final judgement is entered after all appeals are exhausted: Provided, That when a motor vehicle dealer appeals a decision upholding a discontinuation, cancellation or nonrenewal under subdivisions (f) and (g) of this section, the dealer agreement shall remain in effect pending exhaustion of all appeals only if the motor vehicle dealer establishes a likelihood of success on appeal and that the public interest will not be harmed by keeping the dealer agreement in effect pending entry of final judgement after such appeal. Provided, that when a motor vehicle dealer appeals a decision upholding a discontinuation, cancellation or nonrenewal under sub-section (c) of this section, the dealer agreement shall remain in effect pending exhaustion of all appeals only if the motor vehicle dealer establishes a likelihood of success on appeal and the public interest will not be harmed by keeping the dealer agreement in effect pending entry of final judgment after appeal.

    (g) If a transfer of ownership is proposed after a notice to discontinue, cancel or not renew a dealer agreement is received but, prior to the final determination, including exhaustion of all appellate remedies of a motor vehicle dealer’s complaint or petition contesting such action, the termination proceedings shall be stayed, without bond, during the period the transfer is being reviewed by the manufacturer or distributor. During the period that the transfer is being reviewed by the manufacturer or distributor, the dealer agreement shall remain in full force and effect, and the motor vehicle dealer shall retain all rights and remedies pursuant to the terms and conditions of the dealer agreement and applicable law. This shall include, but is not limited to, all rights of transfer under subdivision (2), section ten, article six-a, chapter seventeen of this code until such time as the manufacturer or distributor has accepted or rejected the proposed transfer. If the proposed transfer is rejected, the motor vehicle dealer shall retain all of its rights pursuant to section sixteen of said article to a judicial determination as to whether the manufacturer or distributor’s rejection is in compliance with the provisions of subdivision (2), section ten of said article and during the pendency of such judicial proceeding, and any related appellate proceedings, the termination proceedings shall remain stayed without bond, the dealer agreement shall remain in full force and effect and the motor vehicle dealer shall retain all rights and remedies pursuant to the terms and conditions of the dealer agreement and applicable law including all rights of transfer. If a transfer is approved by the manufacturer or distributor or mandated by law, the termination proceedings shall be dismissed with prejudice as moot.

§17A-6A-8. Reasonable compensation to dealer.

    (1) Upon the termination, cancellation, nonrenewal or discontinuance of any dealer agreement, the new motor vehicle dealer shall be allowed fair and reasonable compensation by the manufacturer or distributor for the following:

    (a) Any new motor vehicle inventory, manufactured for sale in the United States, purchased from the manufacturer, distributor or other dealers, which has not been materially altered, substantially damaged or driven for more than seven hundred fifty miles one thousand miles, except that for any new motorcycle, all terrain vehicle and utility terrain vehicle inventory purchased from the manufacturer or distributor, that inventory must not have been materially altered, substantially damaged or driven for more than fifty miles. For purposes of a school bus, truck tractor, road tractor or truck, materially altered does not include dealer add-ons, such as, but not limited to, racks, mud flaps, fifth wheel assemblies, dump or tank bodies.

    (b) Supplies, special tools, equipment and parts inventory at the published list price of, purchased from or at the direction of the manufacturer or distributor. Parts shall be restricted to those and listed in the manufacturer's or distributor's current parts catalog;

    (c) Equipment, current and prior model year marketing brochures and materials, furnishings and signs purchased or leased from, or at the direction of, the manufacturer or distributor at purchase price; and

    (d) Special computer software, hardware, license fees and other programs mandated by the manufacturer to provide training or communication with the manufacturer.

    (2) Upon the termination, cancellation, nonrenewal or discontinuance of a dealer agreement by the manufacturer or distributor, the manufacturer or distributor shall also pay to the new motor vehicle dealer a sum equal to the current, fair rental value of his or her established place of business for a period of three years from the effective date of termination, cancellation, nonrenewal or discontinuance, or the remainder of the lease, whichever is less. If the dealer, directly or indirectly, owns the dealership facility, the manufacturer shall pay the dealer a sum equal to the reasonable rental value of the dealership premises for three years. However, the dealer shall have the obligation to mitigate his or her damages, including, but not limited to, listing the facility with a commercial real estate agent and other reasonable steps to sell or lease the property. During this three-year period the manufacturer shall have the right to occupy and use the facilities until such time as the dealer is able to otherwise sell or lease the property to another party. The payment required by this subsection does not apply to any termination, cancellation, nonrenewal or discontinuance made pursuant to subsection (c), section five of this article.

    (3) In addition to the items listed in subsection (1) and (2), upon the termination, cancellation or nonrenewal where the manufacturer or distributor is discontinuing the sale of a product line, the manufacturer or distributor shall pay or provide to the motor vehicle dealer:

    (a) Compensation consistent with the length of time the dealer carried the line and the investment and timing thereof required by the manufacturer or distributor of the dealer; and

    (b) Support of the manufacturer’s or distributor’s warranty obligations by making parts available and compensating dealers for warranty parts and labor for five years: Provided, That the motor vehicle dealer has adequate facilities, trained personnel and equipment to perform warranty repairs; and

    (c) Any actual damages that can be proven by the dealer by a preponderance of the evidence; and

    (d) Any costs the dealer incurred for facility upgrades or alternations required by the manufacturer, distributor, or factory branch within the previous twelve years. This subdivision shall not apply if the manufacturer has provided the motor vehicle dealer with lump sum payments to assist dealer in making facility improvements or to pay for signs or manufacturer image elements when such payments are not dependent on the dealer selling or purchasing specific numbers of new motor vehicles, and such payments are equal to the entire cost of the facility improvements, signs or image elements.

    (e) Payment by the manufacturer to the dealer shall be made within ninety days. Thereafter, interest shall accumulate at the rate of twelve percent per annum.

§17A-6A-8a. Compensation to dealers for service rendered.

    (1) Every motor vehicle manufacturer, distributor or wholesaler, factory branch or distributor branch, or officer, agent or representative thereof, shall:

    (a) Specify in writing to each of its motor vehicle dealers, the dealer's obligation for delivery, preparation, warranty and factory recall services on its products;

    (b) Compensate the motor vehicle dealer for warranty and factory recall service required of the dealer by the manufacturer, distributor or wholesaler, factory branch or distributor branch or officer, agent or representative thereof; and

    (c) Provide the dealer the schedule of compensation to be paid the dealer for parts, work and service in connection with warranty and recall services and the time allowance for the performance of the work and service.

    (2) In no event may:

    (a) The schedule of compensation fail to compensate the dealers for the work and services they are required to perform in connection with the dealer's delivery and preparation obligations, or fail to adequately and fairly compensate the dealers for labor, parts and other expenses incurred by the dealer to perform under and comply with manufacturer's warranty agreements and factory recalls;

    (b) Any manufacturer, distributor or wholesaler, or representative thereof, pay its dealers an amount of money for warranty or recall work that is less than that charged by the dealer to the retail customers of the dealer for nonwarranty and nonrecall work of the like kind; and

    (c) Any manufacturer, distributor or wholesaler, or representative thereof, compensate for warranty and recall work based on a flat-rate figure that is less than what the dealer charges for retail work.

    (3) It is a violation of this section for any manufacturer, distributor, wholesaler or representative to require any dealer to pay in any manner, surcharges, limited allocation, audits, charge backs or other retaliation, if the dealer seeks to recover its nonwarranty retail rate for warranty and recall work.

    (4) The retail rate charged by the dealer for parts is established by the dealer submitting to the manufacturer or distributor one hundred sequential nonwarranty customer-paid service repair orders that contain warranty-like parts or ninety consecutive days of nonwarranty customer-paid service repair orders that contain warranty-like parts, whichever is less, covering repairs made no more than one hundred eighty days before the submission and declaring the average percentage markup.

    (5) The retail rate customarily charged by the dealer for labor must be established using the same process as provided under subsection (4) and declaring the average labor rate. The average labor rate must be determined by dividing the amount of the dealer’s total labor sales by the number of total hours that generated those sales. If a labor rate and parts markup rate simultaneously declared by the dealer, the dealer may use the same repair orders to complete each calculation as provided under subsection (4).

    (6) In calculating the retail rate customarily charged by the dealer for parts and labor, the following work may not be included in the calculation:

    (a) repairs for manufacturer or distributor special events, specials, or promotional discounts for retail customer repairs:

    (b) parts sold at wholesale;

    (c) routine maintenance not covered under any retail customer warranty, including fluids, filters, and belts not provided in the course of repairs;

    (d) nuts, bolts, fasteners, and similar items that do not have an individual part number;

    (e) tires; and

    (f) vehicle reconditioning.

    (7) The average of the parts markup rates and labor rate is presumed to be fair and reasonable and must go into effect thirty days following the manufacturer’s approval. A manufacturer or distributor may rebut the presumption by a preponderance of the evidence that a rate is unreasonable in light of the practices of all other franchised motor vehicle dealers in an economically similar area of the state offering the dealer’s declaration of the same line-make vehicles, not later than thirty days after submission. If the average parts markup rate or average labor rate is rebutted, or both, the manufacturer or distributor shall propose an adjustment of the average percentage markup based on that rebuttal not later than thirty days after submission.

    (8) Each manufacturer, in establishing a schedule of compensation for warranty work, shall rely on the vehicle dealer’s written schedule of hourly labor rates and parts and may not obligate any vehicle dealer to engage in unduly burdensome or time-consuming documentation of rates or parts, including obligating vehicle dealers to engage in transaction-by-transaction or part-by-part calculations.

    (9) A dealer or manufacturer may demand that the average parts markup or average labor rate be calculated using the process provided under subsections 4 and 5; however, the demand for the average parts markup may not be made within twelve months of the last parts markup declaration and the demand for the average labor rate may not be amide within twelve months of the last labor rate declaration. If a parts markup or labor rate is demanded by the dealer or manufacturer, the dealer shall determine the repair orders to be included in the calculation under subsection 4 and 5.

    (10) As it applies to a school bus, truck tractor, road tractor and truck as defined in Section 1, Article 1 of Chapter 17A, the manufacturer, distributor and/or O.E.M. supplier shall paid the dealer its incurred actual time at the retail labor rate for retrieving  a motor vehicle and returning a motor vehicle to dealer’s designated parking area.  Dealer will be paid $50.00 minimum for each operation that requires the use of each electronic tool, i.e. laptop computer.  The manufacturer or distributor cannot reduce what is paid to dealer for this retrieval or return time, or for the electronic tool charge. Dealer will be allowed to add to a completed warranty repair order three hours for every twenty-four hours the manufacturer, distributor and/or O.E.M. supplier makes the dealer stop working on a vehicle while the manufacturer, distributor and/or O.E.M. supplier decides how it wants the dealer to proceed with the repairs.

    (4)(11) All claims made by motor vehicle dealers pursuant to this section for compensation for delivery, preparation, warranty and recall work, including labor, parts and other expenses, shall be paid by the manufacturer within thirty days after approval and shall be approved or disapproved by the manufacturer within thirty days after receipt. When any claim is disapproved, the dealer shall be notified in writing of the grounds for disapproval. No claim which has been approved and paid may be charged back to the dealer unless it can be shown that the claim was false or fraudulent, that the repairs were not properly made or were unnecessary to correct the defective condition or the dealer failed to reasonably substantiate the claim in accordance with the written requirements of the manufacturer or distributor in effect at the time the claim arose. No charge back may be made until the dealer has had notice and an opportunity to support the claim in question. No otherwise valid reimbursement claims may be denied once properly submitted within manufacturers’ submission guidelines due to a clerical error or omission or based on a different level of technician technical certification or the dealer’s failure to subscribe to any manufacturer’s computerized training programs.

    (5)(12) Notwithstanding the terms of a franchise agreement or provision of law in conflict with this section, the dealer's delivery, preparation, warranty and recall obligations constitutes the dealer's sole responsibility for product liability as between the dealer and manufacturer, and, except for a loss caused by the dealer's failure to adhere to these obligations, a loss caused by the dealer's negligence or intentional misconduct or a loss caused by the dealer's modification of a product without manufacturer authorization, the manufacturer shall reimburse the dealer for all loss incurred by the dealer, including legal fees, court costs and damages, as a result of the dealer having been named a party in a product liability action.

§17A-6A-10. Prohibited practices.

    (1) A manufacturer or distributor may not require any new motor vehicle dealer in this state to do any of the following:

    (a) Order or accept delivery of any new motor vehicle, part or accessory of the vehicle, equipment or any other commodity not required by law which was not voluntarily ordered by the new motor vehicle dealer. This section does not prevent the manufacturer or distributor from requiring that new motor vehicle dealers carry a reasonable inventory of models offered for sale by the manufacturer or distributor;

    (b) Order or accept delivery of any new motor vehicle with special features, accessories or equipment not included in the list price of the new motor vehicle as publicly advertised by the manufacturer or distributor;

    (c) Unreasonably participate monetarily in any advertising campaign or contest, or purchase any promotional materials, display devices, display decorations, brand signs and dealer identification, nondiagnostic computer equipment and displays or other materials at the expense of the new motor vehicle dealer;

    (d) Enter into any agreement with the manufacturer or distributor or do any other act prejudicial to the new motor vehicle dealer by threatening to terminate a dealer agreement, limit inventory, invoke sales and service warranty or other types of audits or any contractual agreement or understanding existing between the dealer and the manufacturer or distributor. Notice in good faith to any dealer of the dealer's violation of any terms or provisions of the dealer agreement is not a violation of this article;

    (e) Change the capital structure or financial requirements of the new motor vehicle dealership without reasonable business justification in light of the dealer’s market, historical performance and compliance with prior capital structure or financial requirements and business necessity, or the means by or through which the dealer finances the operation of the dealership if the dealership at all times meets any reasonable capital standards determined by the manufacturer in accordance with uniformly applied criteria. The burden of proof shall be on the manufacturer to prove business justification by a preponderance of the evidence;

    (f) Refrain from participation in the management of, investment in or the acquisition of any other line of new motor vehicle or related products, provided that the dealer maintains a reasonable line of credit for each make or line of vehicle, remains in compliance with reasonable facilities requirements and makes no change in the principal management of the dealer. Notwithstanding the terms of any franchise agreement, a manufacturer or distributor may not enforce any requirements, including facility requirements, that a new motor vehicle dealer establish or maintain exclusive facilities, personnel or display space, when the requirements are unreasonable considering current economic conditions and are not otherwise justified by reasonable business considerations. The burden of proving that current economic conditions or reasonable business considerations justify exclusive facilities is on the manufacturer or distributor and must be proven by a preponderance of the evidence;

    (g) Change the location of the new motor vehicle dealership or make any substantial alterations to the dealership premises, where to do so would be unreasonable. The burden of proof is on the manufacturer or distributor to prove the reasonableness by a preponderance of the evidence; and

    (h) Prospectively assent to a waiver of a trial by jury, release, arbitration, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by this article or require any controversy between a new motor vehicle dealer and a manufacturer or distributor to be referred to a person other than the duly constituted courts of the this state or the United States, if the referral would be binding upon the new motor vehicle dealer the United States District Courts for the Southern and Northern Districts of West Virginia. Nothing contained herein shall prevent a motor vehicle dealer, after a civil action is filed, to enter into any agreement of settlement, arbitration, assignment or waiver of a trial by jury.

    (i) To coerce or require any dealer, whether by agreement, program, incentive provision, or otherwise, to construct improvements to its facilities or to install new signs or other franchisor image elements that replace or substantially alter those improvements, signs, or franchisor image elements completed within the preceding ten years that were required or approved by the manufacturer, factory branch, distributor, or distributor branch or one of its affiliates. If a manufacturer, factory branch, distributor, or distributor branch offers incentives, or other payments under a program offered after the effective date of this subdivision and available to more than one dealer in the state that are premised wholly or in part on dealer facility improvements or installation of franchisor signs or other franchisor image elements, a dealer that constructed improvements or installed signs or other franchisor image elements required by or approved by the manufacturer, factory branch, distributor, or distributor branch and completed within the ten years preceding the program shall be deemed to be in compliance with the program requirements pertaining to construction of facilities or installation of signs or other franchisor image elements that would replace or substantially alter those previously constructed or installed within that ten-year period. This subdivision shall not apply to a program that provides lump sum payments to assist dealers in making facility improvements or to pay for signs or franchisor image elements when such payments are not dependent on the dealer selling or purchasing specific numbers of new vehicles, and such payments are equal to the entire cost of the facility improvements, signs or image elements.

    (j) To condition the award, sale, transfer, relocation, or renewal of a franchise or dealer agreement or to condition sales, service, parts, or finance incentives upon site control or an agreement to renovate or make substantial improvements to a facility; provided, however, that voluntary and non-coerced acceptance of such conditions by the dealer in writing, including, but not limited to, a written agreement for which the dealer has accepted separate and valuable consideration, shall not constitute a violation.

    (k) To enter into a contractual requirement imposed by the manufacturer, distributor or a captive finance source as follows:

    (i) In this section, "captive finance source" means any financial source that provides automotive-related loans or purchases retail installment contracts or lease contracts for motor vehicles in this state, and is, directly or indirectly, owned, operated, or controlled by such manufacturer, factory branch, distributor, or distributor branch.

    (ii) It shall be unlawful for any manufacturer, factory branch, captive finance source, distributor, or distributor branch, or any field representative, officer, agent, or any representative of them, notwithstanding the terms, provisions, or conditions of any agreement or franchise, to require any of its franchised dealers located in this state to agree to any terms, conditions, or requirements in subparagraphs (a)-(h) in order for any dealer to sell to any captive finance source any retail installment contract, loan, or lease of any motor vehicles purchased or leased by any of the dealer's customers, or to be able to participate in, or otherwise, directly or indirectly, obtain the benefits of any consumer transaction incentive program payable to the consumer or the dealer and offered by or through any captive finance source:

    (a) Require a dealer to grant such captive finance source a power of attorney to do anything on behalf of the dealer other than sign the dealer's name on any check, draft, or other instrument received in payment or proceeds under any contract for the sale or lease of a motor vehicle that is made payable to the dealer but which is properly payable to the captive finance source, is for the purpose of correcting an error in a customer's finance application or title processing document, or is for the purpose of processing regular titling of the vehicle.

    (b) Require a dealer to warrant or guarantee the accuracy and completeness of any personal, financial, or credit information provided by the customer on the credit application and/or in the course of applying for credit other than to require that the dealer make reasonable inquiry regarding the accuracy and completeness of such information and represent that such information is true and correct to the best of the dealer's knowledge.

    (c)  Require a dealer to repurchase, pay off, or guaranty any contract for the sale or lease of a motor vehicle or to require a dealer to indemnify, defend, or hold harmless the captive finance source for settlements, judgments, damages, litigation expenses, or other costs or expenses incurred by such captive finance source unless the obligation to repurchase, pay off, guaranty, indemnify, or hold harmless resulted directly from (i) the subject dealer's material breach of the terms of a written agreement with the captive finance source or the terms for the purchase of an individual contract for sale or lease that the captive finance source communicates to the dealer before each such purchase, except to the extent the breached terms are otherwise prohibited under subparagraphs (a)-(h), or (ii) the subject dealer's violation of applicable law. However, for purposes of this section, the dealer may contractually obligate itself to warrant the accuracy of the information provided in the finance contract, but such warranty may only be enforced if the captive finance source gives the dealer a reasonable opportunity to cure or correct any errors in the finance contract where cure or correction is possible. For purposes of this section, any allegation by a third party that would constitute a breach of the terms of a written agreement between the dealer and a captive finance source shall be considered a material breach.

    (d) Notwithstanding the terms of any contract or agreement, treat a dealer's breach of an agreement between the dealer and a captive finance source with respect to the captive finance source's purchase of individual contracts for the sale or lease of a motor vehicle as a breach of such agreement with respect to purchase of other such contracts, nor shall such a breach in and of itself, constitute a breach of any other agreement between the dealer and the captive finance source, or between the dealer and any affiliate of such captive finance source.

    (e) Require a dealer to waive any defenses that may be available to it under its agreements with the captive finance source or under any applicable laws.

    (f) Require a dealer to settle or contribute any of its own funds or financial resources toward the settlement of any multiparty or class action litigation without obtaining the dealer's voluntary and written consent subsequent to the filing of such litigation.

    (g) Require a dealer to contribute to any reserve or contingency account established or maintained by the captive finance source, for the financing of the sale or lease of any motor vehicles purchased or leased by any of the dealer's customers, in any amount or on any basis other than the reasonable expected amount of future finance reserve chargebacks to the dealer's account. This section shall not apply to or limit:

    (1) Reasonable amounts reserved and maintained related to the sale or financing of any products ancillary to the sale, lease, or financing of the motor vehicle itself;

    (2) A delay or reduction in the payment of dealer's portion of the finance income pursuant to an agreement between the dealer and a captive finance source under which the dealer agrees to such delay or reduction in exchange for the limitation, reduction, or elimination of the dealer's responsibility for finance reserve chargebacks; or

    (3) A chargeback to a dealer, or offset of any amounts otherwise payable to a dealer by the captive finance source, for any indebtedness properly owing from a dealer to the captive finance source as part of a specific program covered by this section, the terms of which have been agreed to by the dealer in advance, except to the extent such chargeback would otherwise be prohibited by this section.

    (h) Require a dealer to repossess or otherwise gain possession of a motor vehicle at the request of or on behalf of the captive finance source. This section shall not apply to any requirements contained in any agreement between the dealer and the captive finance source wherein the dealer agrees to receive and process vehicles that are voluntarily returned by the customer or returned to the lessor at the end of the lease term.

    (i)  Any clause or provision in any franchise or agreement between a dealer and a manufacturer, factory branch, distributor, or distributor branch, or between a dealer and any captive finance source, that is in violation of or that is inconsistent with any of the provisions of this section shall be deemed null and void and without force and effect to the extent it violates this section.

    (iv) Any captive finance source who engages directly or indirectly in purposeful contacts within this state in connection with the offering or advertising the availability of financing for the sale or lease of motor vehicles within this state, or who has business dealings within this state, shall be subject to the provisions of this section and shall be subject to the jurisdiction of the courts of this state.

    (v) The applicability of this section shall not be affected by a choice of law clause in any agreement, waiver, novation, or any other written instrument.

    (vi) It shall be unlawful for a captive finance source to use any subsidiary corporation, affiliated corporation, or any other controlled corporation, partnership, association, or person to accomplish what would otherwise be illegal conduct under this section on the part of the captive finance source.

    (2) A manufacturer or distributor may not do any of the following:

    (a) Fail to deliver new motor vehicles or new motor vehicle parts or accessories within a reasonable time and in reasonable quantities relative to the new motor vehicle dealer's market area and facilities, unless the failure is caused by acts or occurrences beyond the control of the manufacturer or distributor, or unless the failure results from an order by the new motor vehicle dealer in excess of quantities reasonably and fairly allocated by the manufacturer or distributor. No manufacturer or distributor may penalize a new motor vehicle dealer for an alleged failure to meet sales quotas where the alleged failure is due to actions of the manufacturer or distributor;

    (b) Refuse to disclose to a new motor vehicle dealer the method and manner of distribution of new motor vehicles by the manufacturer or distributor, including any numerical calculation or formula used, nationally or within the dealer’s market, to make the allocations within thirty days of a request;

    (c) Refuse to disclose to a new motor vehicle dealer the total number of new motor vehicles of a given model, which the manufacturer or distributor has sold during the current model year within the dealer's marketing district, zone or region, whichever geographical area is the smallest within thirty days of a request;

    (d) Increase prices of new motor vehicles which the new motor vehicle dealer had ordered and then eventually delivered to the same retail consumer for whom the vehicle was ordered, if the order was made prior to the dealer's receipt of the written official price increase notification. A sales contract signed by a private retail consumer and binding on the dealer is evidence of each order. In the event of manufacturer or distributor price reductions or cash rebates, the amount of any reduction or rebate received by a dealer shall be passed on to the private retail consumer by the dealer. Any price reduction in excess of $5 shall apply to all vehicles in the dealer's inventory which were subject to the price reduction. A price difference applicable to new model or series motor vehicles at the time of the introduction of the new models or the series is not a price increase or price decrease. This subdivision does not apply to price changes caused by the following:

    (i) The addition to a motor vehicle of required or optional equipment pursuant to state or federal law;

    (ii) In the case of foreign made vehicles or components, revaluation of the United States dollar; or

    (iii) Any increase in transportation charges due to an increase in rates charged by a common carrier and transporters;

    (e) Offer any refunds or other types of inducements to any dealer for the purchase of new motor vehicles of a certain line-make to be sold to this state or any political subdivision of this state without making the same offer available upon request to all other new motor vehicle dealers of the same line-make;

    (f) Release to an outside party, except under subpoena or in an administrative or judicial proceeding to which the new motor vehicle dealer or the manufacturer or distributor are parties, any business, financial or personal information which has been provided by the dealer to the manufacturer or distributor, unless the new motor vehicle dealer gives his or her written consent;

    (g) Deny a new motor vehicle dealer the right to associate with another new motor vehicle dealer for any lawful purpose;

    (h) Establish a new motor vehicle dealership which would unfairly compete with a new motor vehicle dealer of the same line-make operating under a dealer agreement with the manufacturer or distributor in the relevant market area. A manufacturer or distributor shall not be considered to be unfairly competing if the manufacturer or distributor is:

    (i) Operating a dealership temporarily for a reasonable period.

    (ii) Operating a dealership which is for sale at a reasonable price.

    (iii) Operating a dealership with another person who has made a significant investment in the dealership and who will acquire full ownership of the dealership under reasonable terms and conditions;

    (i) A manufacturer may not, except as provided by this section, directly or indirectly:

    (i) Own an interest in a dealer or dealership;

    (ii) Operate a dealership; or

    (iii) Act in the capacity of a new motor vehicle dealer: Provided, That a manufacturer may own an interest, other than stock in a publicly held company, solely for investment purposes;

    (j) A manufacturer or distributor may own an interest in a franchised dealer, or otherwise control a dealership, for a period not to exceed twelve months from the date the manufacturer or distributor acquires the dealership if:

    (i) The person from whom the manufacturer or distributor acquired the dealership was a franchised dealer; and

    (ii) The dealership is for sale by the manufacturer or distributor at a reasonable price and on reasonable terms and conditions;

    (k) The twelve-month period may be extended for an additional twelve months. Notice of any such extension of the original twelve-month period must be given to any dealer of the same line-make whose dealership is located in the same county, or within twenty air miles of, the dealership owned or controlled by the manufacturer or distributor prior to the expiration of the original twelve-month period. Any dealer receiving the notice may protest the proposed extension within thirty days of receiving notice by bringing a declaratory judgment action in the circuit court for the county in which the new motor vehicle dealer is located to determine whether good cause exists for the extension;

    (l) For the purpose of broadening the diversity of its dealer body and enhancing opportunities for qualified persons who are part of a group who have historically been under represented in its dealer body, or other qualified persons who lack the resources to purchase a dealership outright, but for no other purpose, a manufacturer or distributor may temporarily own an interest in a dealership if the manufacturer’s or distributor’s participation in the dealership is in a bona fide relationship with a franchised dealer who:

    (i) Has made a significant investment in the dealership, subject to loss;

    (ii) Has an ownership interest in the dealership; and

    (iii) Operates the dealership under a plan to acquire full ownership of the dealership within a reasonable time and under reasonable terms and conditions;

    (m) Unreasonably withhold consent to the sale, transfer or exchange of the dealership to a qualified buyer capable of being licensed as a new motor vehicle dealer in this state;

    (n) Fail to respond in writing to a request for consent to a sale, transfer or exchange of a dealership within sixty days after receipt of a written application from the new motor vehicle dealer on the forms generally utilized by the manufacturer or distributor for such purpose and containing the information required therein. Failure to respond to the request within the sixty days is consent;

    (o) Unfairly prevent a new motor vehicle dealer from receiving reasonable compensation for the value of the new motor vehicle dealership;

    (p) Audit any motor vehicle dealer in this state for warranty parts or warranty service compensation, service compensation, service incentives, manufacturer rebates or other forms of sales incentive compensation more than twelve months after the claim for payment or reimbursement has been made by the automobile dealer. No charge back may be made until the dealer has had notice and an opportunity to support the claim in question. No otherwise valid reimbursements claims may be denied once properly submitted with the manufacturer’s submission guidelines due to clerical error or omission. Provided, That The provisions of this subsection do not apply where a claim is fraudulent. In addition, the manufacturer or distributor is responsible for reimbursing the audited dealer for all copying, postage and administrative costs incurred by the dealer during the audit. Any charges to a dealer as a result of the audit must be separately billed to the dealer;

    (q) Unreasonably restrict a dealer’s ownership of a dealership through noncompetition covenants, site control, sublease, collateral pledge of lease, right of first refusal, option to purchase, or otherwise. A right of first refusal is created when:

    (i) A manufacturer has a contractual right of first refusal to acquire the new motor vehicle dealer’s assets where the dealer owner receives consideration, terms and conditions that are either the same as or better than those they have already contracted to receive under the proposed change of more than fifty percent of the dealer’s ownership.

    (ii) The proposed change of the dealership’s ownership or the transfer of the new vehicle dealer’s assets does not involve the transfer of assets or the transfer or issuance of stock by the dealer or one of the dealer’s owners to one of the following:

    (A) A designated family member of one or more of the dealer owners;

    (B) A manager employed by the dealer in the dealership during the previous five years and who is otherwise qualified as a dealer operator;

    (C) A partnership or corporation controlled by a designated family member of one of the dealers;

    (D) A trust established or to be established:

    (i) For the purpose of allowing the new vehicle dealer to continue to qualify as such under the manufacturer’s or distributor’s standards; or

    (ii) To provide for the succession of the franchise agreement to designated family members or qualified management in the event of death or incapacity of the dealer or its principle owner or owners.

    (iii) Upon exercising the right of first refusal by a manufacturer, it eliminates any requirement under its dealer agreement or other applicable provision of this statute that the manufacturer evaluate, process or respond to the underlying proposed transfer by approving or rejecting the proposal, is not subject to challenge as a rejection or denial of the proposed transfer by any party.

    (iv) Except as otherwise provided in this subsection, the manufacturer or distributor agrees to pay the reasonable expenses, including reasonable out-of-pocket professional fees which shall include, but not be limited to, accounting, legal or appraisal services fees that are incurred by the proposed owner or transferee before the manufacturer’s or distributor’s exercise of its right of first refusal. Payment of the expenses and fees for professional services are not required if the dealer fails to submit an accounting of those expenses and fees within twenty days of the dealer’s receipt of the manufacturer’s or distributor’s written request for such an accounting. Such a written account of fees and expenses may be requested by a manufacturer or distributor before exercising its right of first refusal;

    (r) Except for experimental low-volume not-for-retail sale vehicles, cause warranty and recall repair work to be performed by any entity other than a new motor vehicle dealer;

    (s) Make any material or unreasonable change in any franchise agreement, including, but not limited to the dealer’s area of responsibility, without giving the new motor vehicle dealer written notice by certified mail of the change at least sixty days prior to the effective date of the change, and shall include an explanation of the basis for the alteration. This explanation shall include, but not be limited to, a reasonable and commercially acceptable copy of all information, data, evaluations, and methodology considered, reviewed, or relied on or based its decision on, to propose the change to the dealer’s area of responsibility. At any time prior to the effective date of an alteration of a new motor vehicle dealer's area of responsibility, and after the completion of any internal appeal process pursuant to the manufacturer's or distributor's policy manual, the motor vehicle dealer may petition the court to enjoin or prohibit the alteration. The court shall enjoin or prohibit the alteration of a motor vehicle dealer's area of responsibility unless the franchisor shows, by a preponderance of the evidence, that the alteration is reasonable and justifiable in light of market conditions. If a motor vehicle dealer petitions the court, no alteration to a motor vehicle dealer's area of responsibility shall become effective until a final determination by the court. If a new motor vehicle dealer's area of responsibility is altered, the manufacturer shall allow twenty-four months for the motor vehicle dealer to become sales effective prior to taking any action claiming a breach or nonperformance of the motor vehicle dealer's sales performance responsibilities;

    (t) Fail to reimburse a new motor vehicle dealer, at the dealer’s regular rate, or the full and actual cost of providing a loaner vehicle to any customer who is having a vehicle serviced at the dealership if the provision of the loaner vehicle is required by the manufacturer;

    (u) Compel a new motor vehicle dealer through its finance subsidiaries to agree to unreasonable operating requirements or to directly or indirectly terminate a franchise through the actions of a finance subsidiary of the franchisor. This subsection does not limit the right of a finance subsidiary to engage in business practices in accordance with the usage of trade in retail or wholesale vehicle financing;

    (v) Discriminate directly or indirectly between dealers on vehicles of like grade or quantity where the effect of the discrimination would substantially lessen competition; and

    (w) Use or employ any performance standard that is not fair and reasonable and based upon accurate and verifiable data made available to the dealer; and

    (X) Sell, offer to sell or sell exclusively an extended service contract, maintenance plan or similar product, including gap or other products, offered, endorsed or sponsored by the manufacturer or distributor by the following means:

    (i) By an act or statement that the manufacturer or distributor will in any manner impact the dealer, whether it is express or implied or made directly or indirectly.

    (ii) By a contract, or an express or implied offer of contract, made to the dealer on the condition that the dealer shall sell, offer to sell or sell exclusively an extended service contract, extended maintenance plan or similar product offered, endorsed or sponsored by the manufacturer or distributor.

    (iii) By measuring the dealer's performance under the franchise based on the sale of extended service contracts, extended maintenance plans or similar products offered, endorsed or sponsored by the manufacturer or distributor.

    (iv) By requiring the dealer to actively promote the sale of extended service contracts, extended maintenance plans or similar products offered, endorsed or sponsored by the manufacturer or distributor.

    (v) Nothing in this paragraph shall prohibit a manufacturer or distributor from providing incentive programs to a new vehicle dealer who makes the voluntary decision to offer to sell, sell or sell exclusively an extended service contract, extended maintenance plan or similar product offered, endorsed or sponsored by the manufacturer or distributor.

    (y) (i) Require a dealer to purchase goods or services from a vendor selected, identified, or designated by a manufacturer, factory branch, distributor, distributor branch, or one of its affiliates by agreement, program, incentive provision, or otherwise without making available to the dealer the option to obtain the goods or services of substantially similar quality and overall design from a vendor chosen by the dealer and approved by the manufacturer, factory branch, distributor, or distributor branch; provided that such approval shall not be unreasonably withheld, and further provided that the dealer's option to select a vendor shall not be available if the manufacturer or distributor provides substantial reimbursement for the goods or services offered. Substantial reimbursement is equal to or greater than sixty-five percent of the cost, which shall not be greater than the cost of reasonably available similar goods and services in close proximity to the dealer's market.

    (ii) To fail to provide to a dealer, when the manufacturer, factory branch, distributor, or distributor branch claims that a vendor chosen by the dealer cannot supply goods and services of substantially similar quality, a disclosure concerning the vendor selected, identified, or designated by the franchisor stating: (i) Whether the manufacturer, factory branch, distributor, distributor branch, or one of its affiliates, or any officer, director, or supervisory employee of the same, has an ownership interest, actual or beneficial, in the vendor and, if so, the percentage of the ownership interest; and (ii) whether the manufacturer, factory branch, distributor, distributor branch, or one of its affiliates has an agreement or arrangement by which the vendor pays to the manufacturer, factory branch, distributor, distributor branch, or one of its affiliates, or any officer, director, or supervisory employee of the same, any compensation and, if so, the basis and amount of the compensation to be paid as a result of any purchases by the dealer, whether it is to be paid by direct payment by the vendor or by credit from the vendor for the benefit of the recipient.

    (3) A manufacturer or distributor, either directly or through any subsidiary, may not terminate, cancel, fail to renew or discontinue any lease of the new motor vehicle dealer's established place of business except for a material breach of the lease.

    (4) Except as may otherwise be provided in this article, no manufacturer or franchisor shall sell, directly or indirectly, any new motor vehicle to a consumer in this state, except through a new motor vehicle dealer holding a franchise for the line-make covering such new motor vehicle. This subsection shall not apply to manufacturer or franchisor sales of new motor vehicles to charitable organizations, qualified vendors or employees of the manufacturer or franchisor.

    (5) Except when prevented by an act of God, labor strike, transportation disruption outside the control of the manufacturer or time of war, a manufacturer or distributor may not refuse or fail to deliver, in reasonable quantities and within a reasonable time, to a dealer having a franchise agreement for the retail sale of any motor vehicle sold or distributed by the manufacturer, any new motor vehicle or parts or accessories to new motor vehicles as are covered by the franchise if the vehicles, parts and accessories are publicly advertised as being available for delivery or are actually being delivered. All models offered for sale by the manufacturer, without any enrollment, surcharge, unreasonable facility or building or any other unreasonable type of upgrade requirement or acquisition fee, shall be available to the franchised dealer at no additional cost for that particular model of vehicle.

§17A-6A-11. Where motor vehicle dealer deceased or incapacitated.

    (1) Any designated family member of a deceased or incapacitated new motor vehicle dealer may succeed the dealer in the ownership or operation of the dealership under the existing dealer agreement if the designated family member gives the manufacturer or distributor written notice of his or her intention to succeed to the dealership within one hundred twenty days after the dealer's death or incapacity, agrees to be bound by all of the terms and conditions of the dealer agreement, and the designated family member meets the current criteria generally applied by the manufacturer or distributor in qualifying new motor vehicle dealers. A manufacturer or distributor may refuse to honor the existing dealer agreement with the designated family member only for good cause. In determining whether good cause exists for refusing to honor the agreement, the manufacturer or distributor has the burden of proving that the designated successor is a person who is not of good moral character or does not meet the manufacturer’s existing written, reasonable and uniformly applied standards for business experience and financial qualifications. The designated family member will have a minimum of one year to satisfy the manufacturer’s written and reasonable standards and financial qualifications for appointment as the dealer principal.

    (2) The manufacturer or distributor may request from a designated family member such personal and financial data as is reasonably necessary to determine whether the existing dealer agreement should be honored. The designated family member shall supply the personal and financial data promptly upon the request.

    (3) If a manufacturer or distributor believes that good cause exists for refusing to honor the succession, the manufacturer or distributor may, within forty-five days after receipt of the notice of the designated family member's intent to succeed the dealer in the ownership and operation of the dealership, or within forty-five days after the receipt of the requested personal and financial data, serve upon the designated family member notice of its refusal to approve the succession.

    (4) The notice of the manufacturer or distributor provided in subsection (3) above shall state the specific grounds for the refusal to approve the succession and that discontinuance of the agreement shall take effect not less than ninety days one hundred and eighty days after the date the notice is served.

    (5) If notice of refusal is not served within the sixty days provided for in subsection (3) of this section, the dealer agreement continues in effect and is subject to termination only as otherwise permitted by this article.

    (6) This section does not preclude a new motor vehicle dealer from designating any person as his or her successor by will or any other written instrument filed with the manufacturer or distributor, and if such an instrument is filed, it alone determines the succession rights to the management and operation of the dealership.

    (7) If the manufacturer challenges the succession, it maintains the burden of proof to show good cause by a preponderance of the evidence. If the person seeking succession files a civil action within the one hundred eighty days set forth in subsection (4), no action may be taken by the manufacturer contrary to the dealer agreement until such time as the civil action and any appeal has been exhausted. Provided, that when a motor vehicle dealer appeals a decision upholding a manufacturer’s decision to not allow succession based upon the designated person’s insolvency, conviction of a crime punishable by imprisonment in excess of one year under the law which the designated person was convicted or the crime involved theft, dishonesty, or false statement, regardless of the punishment, the dealer agreement shall remain in effect pending exhaustion of all appeals only if the motor vehicle dealer establishes a likelihood of success on appeal and the public interest will not be harmed by keeping the dealer agreement in effect pending entry of final judgment after such appeal.

§17A-6A-12. Establishment and relocation or establishment of additional dealers.

    (1) As used in this section, “relocate” and “relocation” do not include the relocation of a new motor vehicle dealer within four air miles of its established place of business or an existing new motor vehicle dealer sells or transfers the dealership to a new owner and the successor new motor vehicle dealership owner relocates to a location within four miles of the seller’s last open new motor vehicle dealership location. The relocation of a new motor vehicle dealer to a site within the area of sales responsibility assigned to that dealer by the manufacturing branch or distributor may not be within six air miles of another dealer of the same line-make.

    (2) Before a manufacturer or distributor enters into a dealer agreement establishing or relocating a new motor vehicle dealer within a relevant market area where the same line-make is represented, the manufacturer or distributor shall give written notice to each new motor vehicle dealer of the same line-make in the relevant market area of its intention to establish an additional dealer or to relocate an existing dealer within that relevant market area.

    (3) Within sixty days after receiving the notice provided in subsection (2) of this section, or within sixty days after the end of any appeal procedure provided by the manufacturer or distributor, a new motor vehicle dealer of the same line-make within the affected relevant market area may bring a declaratory judgment action in the circuit court for the county in which the new motor vehicle dealer is located to determine whether good cause exists for the establishing or relocating of the proposed new motor vehicle dealer: Provided, That a new motor vehicle dealer of the same line-make within the affected relevant market area shall not be permitted to bring such an action if the proposed relocation site would be further from the location of the new motor vehicle dealer of the same line-make than the location from which the dealership is being moved. Once an action has been filed, the manufacturer or distributor may not establish or relocate the proposed new motor vehicle dealer until the circuit court has rendered a decision on the matter. An action brought pursuant to this section shall be given precedence over all other civil matters on the court’s docket. The manufacturer has the burden of proving that good cause exists for establishing or relocating a proposed new motor vehicle dealer.

    (4) This section does not apply to the reopening in a relevant market area of a new motor vehicle dealer that has been closed or sold within the preceding two years if the established place of business of the new motor vehicle dealer is within four air miles of the established place of business of the closed or sold new motor vehicle dealer.

    (5) In determining whether good cause exists for establishing or relocating an additional new motor vehicle dealer for the same line-make, the court shall take into consideration the existing circumstances, including, but not limited to, the following:

    (a) Permanency and amount of the investment, including any obligations incurred by the dealer in making the investment;

    (b) Effect on the retail new motor vehicle business and the consuming public in the relevant market area;

    (c) Whether it is injurious or beneficial to the public welfare;

    (d) Whether the new motor vehicle dealers of the same line-make in the relevant market area are providing adequate competition and convenient consumer care for the motor vehicles of that line-make in the market area, including the adequacy of motor vehicle sales and qualified service personnel;

    (e) Whether the establishment or relocation of the new motor vehicle dealer would promote competition;

    (f) Growth or decline of the population and the number of new motor vehicle registrations in the relevant market area; and

    (g) The effect on the relocating dealer of a denial of its relocation into the relevant market area.

§17A-6A-12a. Restriction on Motor Vehicle Dealer’s Use of Dealership Property.

    Notwithstanding the terms of any dealer agreement, a manufacturer, distributor, or representative may not:

    (1) unreasonably limit or impair the ability of a franchised dealer to use the dealership property as the dealer considers appropriate;

    (2) control the use of the dealership property after the franchise is terminated or discontinued; or

    (3) at any time exercise exclusive control over the use of the dealership property.

§17A-6A-12b. Property Use Agreement.

    (a)  A manufacturer, distributor, or representative may not require that a dealer enter into a property use agreement as a condition of the manufacturer, distributor, or representative:

    (1) entering into a franchise;

    (2) approving a franchised dealer's application to add a line-make;

    (3) approving a franchised dealer's application to relocate a franchise; or

    (4) approving a sale or transfer of a dealer, dealership, or franchise.

    (b) The following provisions in a property use agreement are void and unenforceable:

    (1) a limitation on the franchised dealer's ability to add a line-make; or

    (2) a provision that binds a franchised dealer's successor.

    (c) A property use agreement expires on the earlier of:

    (1) the date provided by the property use agreement; or

    (2) the termination of the franchise between the parties to the property use agreement.

    (d)  This section applies to a subsidiary of, or a person controlled by, a manufacturer, distributor, or representative.

§17A-6A-12c. Certain Property Use Agreements.

    (a) Notwithstanding subsection (b)(1) of section twelve-b of this article, and subject to this section, a dealer may enter into a property use agreement for cash consideration that grants the manufacturer or distributor the exclusive rights to direct the use of the dealership.

    (b) In the event the dealer breaches the terms of the property use agreement described by Subsection (a) by altering the use of the property during the term of the agreement in violation of the agreement, the property use agreement is terminated and the dealer must reimburse the manufacturer or distributor in an amount determined by dividing the amount of the manufacturer's or distributor's cash consideration provided under subsection (a) by the market value of the property identified in the original property use agreement at the time any necessary real estate has been purchased and any necessary construction has been completed, and multiplying the resulting quotient by the market value of the property at the time of the breach.

    (c) For purposes of this section, the market value of property is to be determined by three appraisers chosen as follows:

    (1) one selected by the affected manufacturer or distributor;

    (2) one selected by the affected dealer; and

    (3) one selected by mutual agreement of the manufacturer or distributor and the dealer.

§17A-6A-13. Obligations regarding warranties.

    (1) Each new motor vehicle manufacturer or distributor shall specify in writing to each of its new motor vehicle dealers licensed in this state the dealer's obligations for preparation, delivery and warranty service on its products. The manufacturer or distributor shall compensate the new motor vehicle dealer for warranty service required of the dealer by the manufacturer or distributor. The manufacturer or distributor shall provide the new motor vehicle dealer with the schedule of compensation to be paid to the dealer for parts, work and service, and the time allowance for the performance of the work and service in a manner in compliance with section eight-a of this article.

    (2) The schedule of compensation shall include reasonable compensation for diagnostic work, as well as repair service and labor. Time allowances for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work to be performed. In the determination of what constitutes reasonable compensation under this section, the principal factor to be given consideration shall be the prevailing wage rates being paid by dealers in the community in which the dealer is doing business, and in no event may the compensation of a dealer for warranty labor and parts be less than the rates charged by the dealer for like service to retail customers for nonwarranty service and repairs, provided that the rates are reasonable. section eight-a of this article shall govern. However, in the case of a new motor vehicle dealer of motorcycles or recreational vehicles, in no event may the compensation of a dealer for warranty parts be less than the dealer’s cost of acquiring the part plus twenty percent.

    (3) A manufacturer or distributor may not do any of the following:

    (a) Fail to perform any warranty obligation;

    (b) Fail to include in written notices of factory recalls to new motor vehicle owners and dealers the expected date by which necessary parts and equipment will be available to dealers for the correction of the defects; or

    (c) Fail to compensate any of the new motor vehicle dealers licensed in this state for repairs effected by the recall.

    (4) All claims made by a new motor vehicle dealer pursuant to this section for labor and parts shall be paid within thirty days after their approval. All claims shall be either approved or disapproved by the manufacturer or distributor within thirty days after their receipt on a proper form generally used by the manufacturer or distributor and containing the usually required information therein. Any claim not specifically disapproved in writing within thirty days after the receipt of the form is considered to be approved and payment shall be made within thirty days. The manufacturer has the right to initiate an audit of a claim within twelve months after payment and to charge back to the new motor vehicle dealer the amount of any false, fraudulent or unsubstantiated claim, subject to the requirements of section eight-a of this article.

    (5) The manufacturer shall accept the return of any new and unused part, component or accessory that was ordered by the dealer, and shall reimburse the dealer for the full cost charged to the dealer for the part, component or accessory if the dealer returns the part and makes a claim for the return of the part within one year of the dealer’s receipt of the part, component or accessory and provides reasonable documentation, to include any changed part numbers to match new part numbers, provided that the part was ordered for a warranty repair.

§17A-6A-14a Open Account Protection.

    If there is a dispute between the manufacturer, factory branch, distributor, or distributor branch and the dealer with respect to any matter referred to this article, either party may notify, in writing, the other party of its request to challenge, through the manufacturer’s appeal process or the circuit courts of the State of West Virginia. A manufacturer, factory branch, distributor, or distributor branch may not collect chargebacks, fully or in part, either through direct payment or by charge to the dealer's account, for warranty parts or service compensation, including service incentives, sales incentives, other sales compensation, surcharges, fees, penalties, or any financial imposition of any type arising from an alleged failure of the dealer to comply with a policy of, directive from, or agreement with the manufacturer, factory branch, distributor, or distributor branch until thirty days following final notice of the amount charged to the dealer following all internal processes of the manufacturer, factory, factory branch, distributor, or distributor branch. Within thirty days following receipt of final notice, the dealer may, in writing, request a hearing or seek civil relief from the manufacturer’s appeal process or the circuit courts of the State of West Virginia . If a dealer requests a hearing or files a civil action, the manufacturer, factory branch, distributor, or distributor branch may not collect the chargeback, fully or in part, either through direct payment or by charge to the dealer's account, until the completion of the hearing or civil action, and all appeal, civil or otherwise, have been exhausted concerning the validity of the chargeback.

§17A-6A-15 Dealer Data, Obligation of Manufacturer, Vendors, Suppliers, and Others; Indemnification of Dealer.

    Notwithstanding any of the terms or provisions contained in this section or in any consent, authorization, release, novation, franchise, or other contract or agreement, whenever any manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party acting on behalf of or through or approved, referred, endorsed, authorized, certified, granted preferred status, or recommended by, any manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor requires that a new motor vehicle dealer provide any dealer, consumer, or customer data or information through direct access to a dealer’s computer system, the dealer is not required to provide, and may not be required to consent to provide in any written agreement, such direct access to its computer system. The dealer may instead provide the same dealer, consumer, or customer data or information specified by the requesting party by timely obtaining and pushing or otherwise furnishing the requested data to the requesting party in a widely accepted file format; provided that, when a dealer would otherwise be required to provide direct access to its computer system under the terms of a consent, authorization, release, novation, franchise, or other contract or agreement, a dealer that elects to provide data or information through other means may be charged a reasonable initial set-up fee and a reasonable processing fee based on the actual incremental costs incurred by the party requesting the data for establishing and implementing the process for the dealer. Any term or provision contained in any consent, authorization, release, novation, franchise, or other contract or agreement which is inconsistent with any term or provision contained in this subsection shall be voidable at the option of the dealer.

    Notwithstanding the terms or conditions of any consent, authorization, release, novation, franchise or other contract or agreement, every manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party acting on behalf of or through any manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, having electronic access to consumer or customer data or other information in a computer system utilized by a new motor vehicle dealer, or who has otherwise been provided consumer or customer data or information by the dealer, shall fully indemnify an hold harmless any dealer from all damages, costs, and expenses incurred by the dealer. Such indemnification by the manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party, whether working for these entities or not, includes, but is not limited to, judgments, settlements, fines penalties, litigation costs, defense costs, court costs, costs related to the disclosure of security breaches, and attorney fees arising out of complaints, claims, civil and administrative actions, and, to the fullest extent allowable under the law, governmental investigations and prosecutions to the extent caused by a security breach or the access, storage, maintenance, use, sharing, disclosure, or retention of the dealer’s consumer or customer data or other information or maintenance or services provided to any computer system utilized by a new motor vehicle dealer.

§17A-6A-16. Exports; Rebuttable Presumption on Behalf of Dealer.

    It shall be unlawful for a manufacturer or distributor 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 state or any other 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.

§17A-6A-17. Manufacturer performance standards; uniform application, prohibited practices.

    A manufacturer may not require dealer adherence to a performance standard or standards which are not applied uniformly to other similarly situated dealers. In addition to any other requirements of the law, the following shall apply:

    A performance standard, sales objective, or program for measuring dealer performance that may have a material effect on a dealer, including the dealer’s right to payment under any incentive or reimbursement program, and the application of the standard, sales objective or program by a manufacturer, distributor or factory branch, shall be fair, reasonable, equitable and based on accurate information.

    Prior to beginning any incentive or reimbursement program, the manufacturer shall provide in writing to each dealer of the same line-make that chooses to participate in the programe the dealer’s performance requirement or sales goal or objective, which shall include a reasonable and general explanation of the methodology, criteria, and calculations used.

    A manufacturer shall allocate an adequate supply of vehicles, appropriate to the market and season, to its dealers by series, product line, and model to assist the dealer in achieving any performance standards established by the manufacturer and distributor.

    A dealer that claims that the application of a performance standard, sales objective, or program for measuring dealership performance does not meet the standards listed in subsection (a) of this section, may seek relief and damages in the circuit courts of the State of West Virginia.

    The manufacturer or distributor has the burden of proving by a preponderance of the evidence that the performance standard, sales objective or program for measuring dealership performance complies with this Article.

§17A-6A-18. Indemnity.

    Notwithstanding the terms of any dealer agreement, a manufacturer or distributor shall indemnify and hold harmless its dealers for any reasonable expenses incurred, including damages, court costs and attorney's fees, arising solely out of complaints, claims or actions which relate to the manufacture, assembly, design of a new motor vehicle or other functions by the manufacturer or distributor beyond the control of the dealer, including, without limitation, the selection by the manufacturer or distributor of parts or components for the vehicle, and any damages to merchandise occurring prior to acceptance of the vehicle by the dealer to the dealer if the carrier is designated by the manufacturer or distributor, if the new motor vehicle dealer gives timely notice to the manufacturer or distributor of the complaint, claim or action.

§17A-6A-19. Actions at law; damages.

    (1) If a manufacturer or distributor terminates, cancels, fails to renew or discontinues a dealer agreement for other than good cause as defined in this article, or commits any other violation of this article, the new motor vehicle dealer adversely affected by the actions may bring an action for damages and equitable relief against the manufacturer or distributor. If the new motor vehicle dealer prevails, the dealer may recover, in addition to actual damages, treble damages up to three times the amount of the actual damages awarded, plus reasonable attorney’s fees, regardless of the amount in controversy. For the purposes of the award of attorney’s fees and costs, whenever the new motor vehicle dealer is seeking injunctive or other relief, the dealer may be considered to have prevailed when a judgment or other final order providing equitable relief is entered in its favor.

    (2) A manufacturer or distributor who violates this article is liable for all damages sustained by a new motor vehicle dealer as a result of the violation.

    (3) A manufacturer or distributor or new motor vehicle dealer may bring an action for declaratory judgment for determination of any controversy arising pursuant to this article.

    (4) Any corporation or association which is primarily owned by or composed of dealers and which primarily represents the interests of dealers has standing to file a petition or cause of action with the court of competent jurisdiction for itself or by, for or on behalf of any, or a group of, new motor vehicle dealers for any violation of this article or for the determination of any rights created by this article.

    (5) In addition to any county in which venue is proper in accordance with the Constitution and laws of this state, in any cause of action brought by a new motor vehicle dealer against a manufacturer or distributor for any violation of this article or for the determination of any rights created by the dealer’s franchise agreement, venue is proper in the county in which the dealer is engaged in the business of selling the products or services of the manufacturer or distributor.

§17A-6A-20. Injunctive relief.

    Upon proper application to the circuit court, a manufacturer or distributor or new motor vehicle dealer may obtain appropriate injunctive relief against termination, cancellation, nonrenewal or discontinuance of a dealer agreement or any other violation of this article. The court may grant injunctive relief or a temporary restraining order without bond.

§17A-6A-21. West Virginia law to apply.

    Notwithstanding the terms, provisions or requirements of any franchise agreement, contract or other agreement of any kind between a new motor vehicle dealer and a manufacturer or distributor, captive finance source, or any subsidiary, affiliate or partner of a manufacturer or distributor, the provisions of the Code of West Virginia apply to all such agreements and contracts. Any provisions in the agreements and contracts which violate the terms of this section are null and void.

    NOTE: The purpose of this bill is to update and clarify the article of the code relating to motor vehicle dealers, distributors, wholesalers and manufacturers.

    Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.

    Sections §17A-6A-12a; 12b; 12c; 14a; 15; 16 and 17 are new, therefore they have been completely underscored.

    Sections §17A-6A-18; 19 and 20 and 21 have been renumbered.