Bill Text: AZ SB1241 | 2011 | Fiftieth Legislature 1st Regular | Engrossed
Bill Title: Motor vehicle dealers; franchises
Spectrum: Bipartisan Bill
Status: (Passed) 2011-04-13 - Governor Signed [SB1241 Detail]
Download: Arizona-2011-SB1241-Engrossed.html
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House Engrossed Senate Bill |
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State of Arizona Senate Fiftieth Legislature First Regular Session 2011
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SENATE BILL 1241 |
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AN ACT
amending sections 28‑4412, 28‑4451, 28‑4457 and 28‑4458, Arizona Revised Statutes; amending title 28, chapter 10, article 5, Arizona Revised Statutes, by adding sections 28‑4461, 28‑4462 and 28‑4463; relating to motor vehicle dealers.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 28-4412, Arizona Revised Statutes, is amended to read:
28-4412. Guaranty disclosure; used motor vehicles; definition
A. Before the consummation of the sale of a used motor vehicle, a motor vehicle dealer shall:
1. Provide each purchaser with a written statement that:
(a) Indicates whether or not an express warranty or guaranty is associated with the used motor vehicle.
(b) Is distinguished from the body of the sales agreement through the use of either bold‑faced type or bold‑faced type of a color other than that used in the body of the agreement.
(c) States "as is ‑‑ not expressly warranted or guaranteed", if the used motor vehicle to be sold is not expressly warranted or guaranteed.
(d) Explicitly states the nature and extent of the express warranty or guaranty, if the used motor vehicle to be sold is expressly warranted or guaranteed.
(e) States "as is ‑‑ not guaranteed to pass vehicle emissions inspection. Vehicle not eligible for certificate of waiver and must be repaired to meet emissions standards", if the used motor vehicle is a disabled vehicle that is offered for sale at a wholesale public auction with an auctioneer who is a licensed used motor vehicle dealer and if the vehicle does not comply with the requirements prescribed in section 49‑542.
2. Direct the purchaser's attention to the written statement.
B. This section does not negate any implied warranties otherwise applicable to the sale of a used motor vehicle, including the implied warranty of merchantability described in section 44‑1267.
C. Before the seller attempts to sell a motor vehicle the seller shall possess the title to the motor vehicle and the title shall be in the seller's name.
D. Notwithstanding any other provision of this section or title 12, chapter 6, article 9, a motor vehicle dealer that sells a used motor vehicle to another motor vehicle dealer or for the sole purpose of being legally destroyed or dismantled does not have a duty to inspect a used motor vehicle for defects or damage before the sale. This subsection does not negate any duties owed by a licensed motor vehicle dealer to its retail customers.
D. e. For the purposes of this section, "disabled vehicle" means a motor vehicle that cannot operate on its own motive power.
Sec. 2. Section 28-4451, Arizona Revised Statutes, is amended to read:
28-4451. Product liability; audits; vehicle exports
A. Each manufacturer shall file with the director a copy of the delivery and preparation obligations required to be performed by a dealer before delivery of new motor vehicles to buyers. These delivery and preparation obligations constitute the dealer's only responsibility for the product liability as between the dealers and the manufacturer.
B. Any mechanical, body or parts defects arising from any express or implied warranties of the manufacturer constitute the manufacturer's product or warranty liability.
C. The manufacturer shall reasonably compensate an authorized dealer who performs work to rectify the manufacturer's product or warranty defects or delivery and preparation obligations.
D. The dealer shall furnish the purchaser of a new vehicle with a signed copy of the manufacturer's delivery and preparation requirements indicating that all of the requirements have in fact been performed.
E. The manufacturer shall pay the cost of the manufacturer's delivery, warranty and preparation requirements.
F. The manufacturer, factory branch, distributor or distributor branch may reasonably and periodically audit a new motor vehicle dealer to determine the validity of paid claims for dealer compensation or any charge‑backs for warranty parts or service compensation. Audits shall only be for the one year six month period immediately following the date of the payment. This limitation does not apply if the manufacturer reasonably suspects fraud.
G. The manufacturer, factory branch, distributor or distributor branch shall reserve the right to reasonable periodic audits to determine the validity of paid claims for dealer compensation or any charge‑backs for consumer or dealer incentives. Audits shall only be for a two one year period immediately following the date of the payment. This limitation does not apply if the manufacturer reasonably suspects fraud.
H. If a dealer sells or leases a vehicle to a customer who exports the vehicle to a foreign country, unless the manufacturer proves that the dealer knew or reasonably should have known that the vehicle would be exported, a manufacturer shall not do any of the following:
1. Refuse to sell, allocate or deliver new motor vehicles to the dealer.
2. Charge back to or withhold payments or other things of value from the dealer that the dealer otherwise would be eligible for under an incentive program or contest.
3. Prevent a dealer from participating in any sales promotion or program.
4. Take an adverse action against a dealer, including reducing vehicle allocations or terminating or threatening to terminate a dealer.
I. There is a rebuttable presumption that the dealer described in subsection H did not know or should not have reasonably known that the vehicle described in subsection H would be exported. The presumption may be rebutted by a preponderance of the evidence that the dealer knew or should have reasonably known that the vehicle was to be exported.
Sec. 3. Section 28-4457, Arizona Revised Statutes, is amended to read:
28-4457. Franchise termination, cancellation or nonrenewal; good cause; changes
A. Notwithstanding the terms, provisions or conditions of an agreement or franchise, the following are not good cause for the termination, cancellation or nonrenewal of a franchise:
1. The change of ownership of the franchisee's dealership. This paragraph does not authorize a change in ownership that would have the effect of the sale of the franchise without the manufacturer's or distributor's consent. The consent shall not be unreasonably withheld. The burden of establishing the reasonableness is on the franchisor.
2. The fact that the franchisee refused to purchase or accept delivery of a new motor vehicle, parts or accessories or any other commodity or service not ordered by the franchisee.
B. Notwithstanding the terms, provisions or conditions of an agreement or franchise and subject to subsection F, paragraph 2, in the event of the sale or transfer of ownership of the franchisee's dealership by sale or transfer of the business or by stock transfer to the dealer's qualified spouse, son or daughter, the franchisor shall give effect to the change in the franchise unless the transfer of the franchisee's license under this chapter is denied or the new owner is unable to obtain a license under this chapter, as the case may be.
C. B. If a franchisor enters into or attempts to enter into a franchise, whether on termination or cancellation, on refusal to renew another franchise or on the establishment of an additional new motor vehicle dealership in a community where the same line‑make is then represented, without first complying with this chapter, a license under this chapter shall not be issued to that franchisee or proposed franchisee to engage in the business of selling new motor vehicles that are manufactured or distributed by that franchisor.
D. C. In determining whether good cause has been established for terminating, canceling or not renewing a franchise, the administrative law judge shall consider the existing circumstances, including the following:
1. Amount of business transacted by the franchisee.
2. Investment necessarily made and obligations incurred by the franchisee in the performance of the franchisee's part of the franchise.
3. Permanency of the investment.
4. Whether it is injurious to the public welfare for the business of the franchisee to be discontinued.
5. Whether the franchisee has adequate new motor vehicle facilities, equipment, parts and qualified management, sales and service personnel to reasonably provide consumer care for the new motor vehicles sold at retail by the franchisee and any other new motor vehicle of the same line‑make.
6. Whether the franchisee refuses to honor warranties of the franchisor to be performed by the franchisee if the franchisor reimburses the franchisee for the warranty work performed by the franchisee.
7. Except as provided in subsection A:
(a) Failure by the franchisee to substantially comply with those requirements of the franchise that are determined by the administrative law judge to be reasonable and material.
(b) Bad faith by the franchisee in complying with those terms of the franchise that are determined by the administrative law judge to be reasonable and material.
E. D. If failure by the franchisee to substantially comply with a reasonable and material provision of the franchise relates to the performance of sales or service by the franchisee, good cause is established if all of the following are true:
1. The franchisor notifies the franchisee of the failure in writing.
2. The notice states that it is provided for failure of performance pursuant to this chapter.
3. The franchisee is provided a reasonable opportunity in which to exert good faith efforts to carry out the provisions of the franchise. The reasonable opportunity provided shall be over a period of at least one hundred eighty days.
4. The franchisee does not demonstrate substantial compliance with the franchisor's performance standards during that period and the failure to demonstrate compliance is not due to factors controlled by the franchisor.
F. E. In determining whether good cause has been established for entering into an additional franchise for the same line‑make the administrative law judge shall consider the existing circumstances including the following:
1. Amount of business transacted by other franchisees of the same line‑make in that community.
2. Investment necessarily made and obligations incurred by other franchisees of the same line‑make in that community in the performance of their part of their franchises.
3. Whether the franchisees of the same line‑make in that community are providing adequate consumer care for the new motor vehicle products of the line‑make, including the adequacy of new motor vehicle dealer sales and service facilities, equipment, supply of parts and qualified management, sales and service personnel.
4. The economic impact on existing franchisees of the same line‑make due to the addition of a franchise.
5. The effect on the retail motor vehicle business and the consuming public.
F. On the termination or nonrenewal of a franchise for any reason, including the cessation of a line‑make but not including a voluntary termination of the franchise agreement by the franchisee or a termination by the franchisor based on good cause as determined pursuant to this section, the franchisor must do all of the following:
1. Pay the franchisee being terminated the fair market value of the franchise as of the date of the notice of termination or nonrenewal or twelve months before the date of notice, whichever is greater. The fair market value shall be the goodwill value of the franchisee's franchise in the franchisee's community as of the relevant date.
2. Reimburse the franchisee for the cost of any facility upgrades and renovations required by the franchisor within three years before the termination or nonrenewal less any offsets actually received by the franchisee from the franchisor toward the upgrades or renovations, including stipends, credits and other subsidies.
3. Repurchase any data processing programs, software and equipment required by the franchisor for communication of sales, service, warranty or other information to the franchisor or report data to the franchisor that meets the following criteria:
(a) Was used by the franchisee exclusively for the line‑make vehicle covered by the dealer agreement being terminated or not renewed.
(b) Was purchased by the franchisee in the three year period before the termination or nonrenewal of the dealer agreement or was leased by the franchisee before the effective date of the termination or nonrenewal, except that the franchisor shall only be responsible for payments under the lease for a period not to exceed three years.
4. Pay to the franchisee an amount equal to twelve months rent at the fair market rental value for the real property, except that if the real property is LEASED from a third party who is unrelated to the franchisee, the amount to be paid by the franchisor shall equal twelve months rent pursuant to the current lease of the real property in effect at the time of the termination or nonrenewal. If the termination or nonrenewal relates to fewer than all of the franchises operated by the franchisee at a single location, the amount to be paid by the franchisor pursuant to this paragraph shall be based on the percentage of the total square footage attributed to the franchise being terminated or not renewed at the time of the termination or nonrenewal.
5. Compensate the franchisee for all new, unused and undamaged parts listed in the manufacturer's current parts catalog and still in the original merchandising packaging. The prices for the parts are the prices in effect as of the effective date of the termination or nonrenewal of the franchise, less any applicable allowances, credits or subsidies actually received by the franchisee from the franchisor.
6. Compensate the franchisee for the fair market value of all undamaged, except for ordinary wear and tear, and unmodified special tools, equipment and signage that are required by the franchisor and that are acquired by the franchisee within the three year period before the termination or nonrenewal.
7. Compensate the franchisee at the dealer's net acquisition cost for all new, undamaged, unmodified and unsold vehicle inventory of the current model year and one model year before that is acquired from the manufacturer or from another same line‑make dealer in the ordinary course of business before the effective date of the termination or nonrenewal if the vehicle has less than five hundred miles registered on the odometer.
G. Payments made pursuant to subsection F are in addition to any other payments required by the laws of this state or the applicable franchise agreement. Payments shall be made to the franchisee no later than ninety days after the effective date of the termination or nonrenewal of the dealer agreement and a showing that the franchisee can deliver good and clear title to the items described in subsection F.
Sec. 4. Section 28-4458, Arizona Revised Statutes, is amended to read:
28-4458. Coercion prohibited
A. A manufacturer of new motor vehicles, factory branch, distributor, distributor branch, field representative, officer or agent or any representative of a manufacturer of new motor vehicles, factory branch, distributor, distributor branch, field representative, officer or agent shall not coerce or attempt to coerce a new motor vehicle dealer to either:
1. Accept delivery of a new motor vehicle or vehicles, parts or accessories for the vehicle or vehicles or any other commodities that the dealer has not ordered.
2. Enter into an agreement with the manufacturer, factory branch, distributor, distributor branch or representative of the manufacturer, factory branch, distributor or distributor branch.
3. Do any other act unfair to the dealer by threatening to cancel or not renew a franchise existing between the manufacturer, factory branch, distributor, distributor branch or representative of the manufacturer, factory branch, distributor or distributor branch and the dealer.
4. Construct, renovate or make substantial alterations to the dealer's facilities unless the manufacturer, factory branch, distributor, distributor branch or representative of the manufacturer, factory branch, distributor or distributor branch is able to demonstrate that the changes are reasonable and justifiable in light of current and reasonably foreseeable economic conditions, the availability of additional vehicle allocation and the dealer's market for the sale of vehicles or unless the alteration is reasonably required to effectively display and service a vehicle based on the technology of the vehicle.
5. Enter into a real property use or site control agreement as a condition of awarding a franchise, adding a line-make or dealer agreement to an existing new motor vehicle dealer, renewing a dealer agreement, approving the sale or transfer of the ownership of a dealership or approving the relocation of a dealership. This paragraph does not apply to a real property use or site control agreement if either of the following is offered to and accepted by the dealer without coercion or condition in exchange for a real property use or site control agreement:
(a) fair and reasonable monetary consideration.
(b) separate and valuable consideration that may be calculated to a sum certain.
B. A manufacturer, factory branch, distributor, distributor branch or field representative or an officer, agent or representative of a manufacturer, factory branch, distributor, distributor branch or field representative shall not require, coerce or attempt to coerce any new motor vehicle dealer in this state to refrain from participation in the management of, investment in or acquisition of any other line‑make of new motor vehicle or related products unless justified by reasonable business considerations.
C. A manufacturer, factory branch, distributor, distributor branch, field representative or officer shall not coerce or attempt to coerce a motor vehicle dealer and a manufacturer shall not do either of the following:
1. Release to any outside party any confidential financial information of the dealer that may be provided from time to time by the dealer.
2. Release to the general public average or composite prices, identified as such, based in whole or in part on such financial information.
D. Information described in subsection C, paragraphs 1 and 2 shall not be released without the express written consent of the dealer, except that it may be released:
1. Pursuant to subpoena or as otherwise required by law in any administrative, judicial or arbitration proceeding or in any law enforcement investigation.
2. To a law enforcement agency, provided, however, except that this exception does not apply to personal financial information.
E. A manufacturer, importer or distributor shall not adopt, change, establish or implement a plan or system for the allocation, scheduling or delivery of new motor vehicles, parts or accessories to its motor vehicle dealers that is not fair, reasonable and equitable or modify an existing plan or system for the allocation, scheduling or delivery of new motor vehicles, parts or accessories in a manner that causes the plan or system to be unreasonable, unfair or inequitable. On the request of a franchisee, a manufacturer, importer or distributor shall disclose in writing to the franchisee the basis on which new motor vehicles, parts and accessories are allocated, scheduled and delivered among the manufacturer's, importer's or distributor's dealers of the same line‑make.
F. A manufacturer, factory branch, distributor, distributor branch or field representative or an officer, agent or representative of a manufacturer, factory branch, distributor, distributor branch or field representative shall not require a dealer or condition the awarding of a franchise, the addition of a line-make, the renewal of a franchise, the approval of the relocation of a franchise or the approval of a sale or transfer of a franchise on the willingness of a dealer or a proposed dealer or owner of an interest in the dealership facility to construct, renovate or maintain exclusive facilities, personnel or showroom area dedicated to a particular line-make if the imposition of such a requirement would be unreasonable in light of the existing circumstances, including the manufacturer's reasonable business considerations, present economic and market conditions and forecasts for future economic and market conditions in the dealer's retail territory. The manufacturer, factory branch, distributor, distributor branch or field representative has the burden of proof to demonstrate that its demand for exclusivity is justified by reasonable business considerations and is reasonable in light of the dealer's circumstances. This subsection does not apply to a voluntary agreement between a dealer and a manufacturer if separate and valuable consideration was offered and accepted. The renewal of a franchise agreement does not, by itself, constitute separate and valuable consideration. The manufacturer has the burden of proof to show by a preponderance of the evidence that the dealer entered into a voluntary agreement regarding exclusivity.
G. Any condition, stipulation or provision in a franchise or distributorship agreement purporting to bind any person acquiring or holding a franchise or distributorship to waive compliance with any provision of this Chapter or any other law of this State is void except that a person who is acquiring or holding a franchise or distributorship is not prohibited under this section from electing in writing, at or after the time a dispute arises, from using any voluntary dispute resolution procedure, from entering into any voluntary agreement to settle legitimate disputes between the disputed parties or from entering into any agreement waiving any provision of this chapter or any other law of this State for which the franchisee receives separate and valid consideration at the time of the execution of the waiver.
Sec. 5. Title 28, chapter 10, article 5, Arizona Revised Statutes, is amended by adding sections 28-4461, 28-4462 and 28-4463, to read:
28-4461. Right of designated family member to succeed in ownership
A. Any owner of a new motor vehicle dealer may appoint by will or any other written instrument that is approved by the manufacturer a designated family member to succeed in the ownership interest of the owner of the new motor vehicle dealer.
B. Unless there is good cause for refusal to honor succession on the part of the manufacturer, any designated family member of a deceased or incapacitated owner of a new motor vehicle dealer may succeed to the ownership interest of the owner of the new motor vehicle dealer under the existing franchise if both of the following apply:
1. The designated family member gives the manufacturer written notice of the family member's intention to succeed to the ownership interest of the owner of the new motor vehicle dealer within ninety days after the owner's death or incapacity.
2. The designated family member agrees to be bound by all terms and conditions of the franchise.
C. The manufacturer may request, and a designated family member shall provide within forty-five days after the manufacturer's request, personal financial and business experience data that are reasonably necessary to determine whether the succession should be honored.
28-4462. Refusal to honor succession to ownership; notice required
A. If a manufacturer believes that good cause exists for refusing to honor the succession to ownership interest of the owner of a new motor vehicle dealer by a family member of a deceased or incapacitated owner of a new motor vehicle dealer under the existing franchise agreement, the manufacturer, not more than sixty days after the receipt of either the notice that is prescribed by section 28‑4461, subsection B or any personal or financial data that the manufacturer has requested pursuant to section 28‑4461, whichever is received later, may serve on the designated family member notice of its refusal to honor the succession and of its intent to discontinue the existing franchise with the dealer no sooner than one hundred twenty days after the notice is served.
B. The notice of refusal and discontinuance must state the specific grounds for the refusal to honor the succession and of the manufacturer's intent to discontinue the existing franchise with the new motor vehicle dealer no sooner than one hundred twenty days after the notice is served.
C. If the notice of refusal and discontinuance is not timely served on the designated family member, the franchise shall continue in effect subject to termination only as otherwise permitted by this Chapter.
D. If there is a conflict between the written instrument filed by the motor vehicle dealer with the manufacturer designating a certain person as the motor vehicle dealer's successor and this Section, the written instrument filed with the manufacturer governs.
28-4463. Burden of proof and consideration
In determining whether good cause for the refusal to honor the succession exists, the manufacturer:
1. Has the burden of Proving that the successor is a person who is not of good moral character or does not meet the franchisor's existing and reasonable standards, including financial standards.
2. Must consider the volume of sales and service of the new motor vehicle dealer using uniformly applied minimum business experience standards in the market area.
