Bill Text: CA AB2107 | 2017-2018 | Regular Session | Amended

California Assembly Bill 2107 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: New Motor Vehicle Board.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Vetoed) 2018-09-30 - Vetoed by Governor. [AB2107 Detail]

Download: California-2017-AB2107-Amended.html

Amended IN Assembly April 03, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill

No. 2107

Introduced by Assembly Member Reyes

February 08, 2018

An act to amend Sections 3065, 3066, 11713.3, and 11713.13 of, to amend and repeal Sections 3050, 3050.1, and 3050.7 of, to add Sections 3065.2, 3065.25, and 3065.3 to, and to repeal Section 3085.10 of, the Vehicle Code, relating to ~~the New Motor Vehicle Board.~~ new motor vehicles.

LEGISLATIVE COUNSEL'S DIGEST

AB 2107, as amended, Reyes. New Motor Vehicle ~~Board: export or sale-for-resale prohibition policy protests.~~ Board.

Existing law establishes the New Motor Vehicle Board in the Department of Motor Vehicles, and requires the board to hear and decide certain protests presented by a motor vehicle franchisee in regard to a dispute with the vehicle manufacturer. Existing law, until January 1, 2019, authorizes the board to hear protests by an association challenging the legality of an export or sale-for-resale prohibition policy of a manufacturer, manufacturer branch, distributor, or distributor branch and establishes procedures for hearing those protests, as specified.

This bill would extend the operation of the provisions authorizing the board to hear these protests ~~by an association~~ and establishing the hearing procedures indefinitely. The bill would authorize the board to consider and make nonbinding findings regarding specified unlawful acts by a manufacturer or dealer that are relevant to a protest before the board. The bill would also require a party that has a matter before the board or plans to bring a matter before the board to wait until that matter is resolved before filing a related matter in court. The bill would toll any applicable statutes of limitation during resolution by the board and would require any related claim to be brought in a court in California and to be governed under California law.

Existing law requires a franchisor to fairly compensate for labor and parts used to fulfill warranty obligations.
This bill would instead require a franchisor to reimburse a franchisee according to a retail labor rate and retail parts rate established by each franchisee. The bill would prescribe the method by which a franchisee may establish or alter those reimbursement rates and would require the board to resolve any disputes regarding the calculation of those rates. The bill would prohibit specified actions by a franchisor related to the establishment of those reimbursement rates and would authorize the board, in resolving disputes, to order the franchisor to reimburse the franchisee 3 times the amount due in cases where the franchisor willfully violated those provisions.
The bill makes legislative findings and declarations and makes other conforming changes.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

The Legislature finds and declares all of the following:

(a) The distribution, sale, and service of new motor vehicles in California vitally affects the general economy of this state and the public welfare.
(b) The new motor vehicle franchise system, which operates within a strictly defined and highly regulated statutory scheme, assures the consuming public of a well-organized distribution system for the availability and sale of new motor vehicles throughout the state, provides a network of quality warranty, recall, and repair facilities to maintain those vehicles, and creates a cost-effective method for the state to police those systems through the licensing and regulation of private sector franchisors and franchisees.
(c) California franchise laws require manufacturers to provide reasonable reimbursement to dealers for warranty work, but fail to establish a clear procedure to determine whether a reimbursement is reasonable. Unlike many states that have addressed this issue, California does not require franchisees to be reimbursed for warranty work at a retail rate.
(d) California prohibits manufacturers from imposing chargebacks and other adverse actions on dealers when the dealer did not have knowledge of, or reason to know of, an intended exportation or resale of a vehicle. Despite this prohibition, some dealers continue to face adverse actions. To combat these violations, California has authorized associations to file protests with the New Motor Vehicle Board to enforce California law on export policies. This authority has proved to be an effective method to promote manufacturer compliance with California law but this authority is set to expire on January 1, 2019.
(e) California franchise laws were established to protect dealers from onerous franchisor facility upgrade requirements. However, these laws are undermined by manufacturer incentive policies that condition critical operating funding on burdensome and anticompetitive brand image compliance requirements.
(f) California franchise laws prohibit franchisors from unlawfully competing with their franchisees. However, some manufacturers are spinning-off specific vehicle models sold and serviced by existing franchisees into newly created separate brand franchises, and engaging in other behaviors that destabilize the motor vehicle franchise system. Additional authority is needed at the New Motor Vehicle Board to ensure a fair and equitable motor vehicle franchise system.
(g) Many manufacturers adopt and enforce policies affecting dealers that create substantial cost and expose dealers to potential liability, and some manufacturers require dealers to indemnify manufacturers when implementing illegal manufacturer policies. The integrity of California law is undermined by those polices.
(h) The New Motor Vehicle Board provides an effective means to resolve disputes between manufacturers and dealers because it provides staff and judges with subject matter expertise and a successful alternative dispute resolution program, which reduces a significant burden on the Superior Courts. However, some manufacturers are trying to circumvent the New Motor Vehicle Board authority by filing lawsuits against California franchisees in trial courts in other states.
(i) It is the intent of this act to ensure that new motor vehicle dealers are treated fairly by their franchisors, that dealers are reasonably compensated for performing warranty repairs on behalf of their franchisors, that manufacturers are discouraged from adopting and enforcing policies contrary to California law and regulation, that franchisors do not improperly compete against their dealers, that dealers are adequately protected from excessive facility upgrade requirements, that dealers can seek to address illegal manufacturer acts by filing protests at the New Motor Vehicle Board, and that manufacturers do not circumvent California laws and the New Motor Vehicle Board’s authority.

SECTION 1.SEC. 2.

Section 3050 of the Vehicle Code, as amended by Section 2 of Chapter 526 of the Statutes of 2015, is amended to read:

3050.

The board shall do all of the following:

(a) Adopt rules and regulations in accordance with Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code governing those matters that are specifically committed to its jurisdiction.

(b) Hear and determine, within the limitations and in accordance with the procedure provided, an appeal presented by an applicant for, or holder of, a license as a new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative when the applicant or licensee submits an appeal provided for in this chapter from a decision arising out of the department.

(c) Consider any matter concerning the activities or practices of any person applying for or holding a license as a new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative pursuant to Chapter 4 (commencing with Section 11700) of Division 5 submitted by any person. A member of the board who is a new motor vehicle dealer may not participate in, hear, comment, advise other members upon, or decide, any matter considered by the board pursuant to this subdivision that involves a dispute between a franchisee and franchisor. After that consideration, the board may do any one or any combination of the following:

(1) Direct the department to conduct investigation of matters that the board deems reasonable, and make a written report on the results of the investigation to the board within the time specified by the board.

(2) Undertake to mediate, arbitrate, or otherwise resolve any honest difference of opinion or viewpoint existing between any member of the public and any new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative.

(3) Order the department to exercise any and all authority or power that the department may have with respect to the issuance, renewal, refusal to renew, suspension, or revocation of the license of any new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative as that license is required under Chapter 4 (commencing with Section 11700) of Division 5.

(d) Hear and decide, within the limitations and in accordance with the procedure provided, a protest presented by a franchisee pursuant to Section 3060, 3062, 3064, 3065, 3065.1, 3065.2, 3065.3, 3070, 3072, 3074, 3075, or 3076. A member of the board who is a new motor vehicle dealer may not participate in, hear, comment, advise other members upon, or decide, any matter involving a protest filed pursuant to Article 4 (commencing with Section 3060), unless all parties to the protest stipulate otherwise.

(e) Hear and decide, within the limitations and in accordance with the procedure provided, a protest presented by an association challenging a policy of a manufacturer, manufacturer branch, distributor or distributor branch pursuant to Section 3085. A member of the board who is a new motor vehicle dealer may not participate in, hear, comment, advise other members upon, or decide, any matter involving a protest filed pursuant to Article 6 (commencing with Section 3085), unless all participants to the protest stipulate otherwise.

(f) In any hearing on a protest pursuant to this section, the board may consider any violation of Section 11713.2, 11713.3, or 11713.13 that has been alleged by a party to the hearing and may consider any evidence showing that such a violation did or did not occur in reaching its decision on the protest. Any findings made by the board regarding a violation of Section 11713.2, 11713.3, or 11713.13 shall be limited to the purposes of the matter before the board and shall not be binding on any other tribunal.
~~(f)~~

(g) (1) Notwithstanding subdivisions (c), (d), and (e), the courts have jurisdiction over all common law and statutory claims originally cognizable in the courts. For those claims, a party may initiate an action directly in any court of competent jurisdiction.

(2) Any claim brought pursuant to this section shall be commenced in California in a court of competent jurisdiction and the laws of the State of California shall govern that claim.
(3) On or after January 1, 2019, a party shall not file a claim pursuant to paragraph (1) if a protest arising from the same transaction or occurrence is pending before the board, and a party intending to file a protest with the board shall do so before filing a claim in court.
(4) All applicable limitation periods shall be tolled or extended upon the filing of a protest pursuant to this section and shall remain tolled or extended as to all parties to the protest until the 10th day following the decision of the board.
(5) Paragraphs (2), (3), and (4) do not apply to any claim brought in federal court under the subject matter jurisdiction of the federal courts.

SEC. 2.SEC. 3.

Section 3050 of the Vehicle Code, as added by Section 3 of Chapter 526 of the Statutes of 2015, is repealed.

SEC. 3.SEC. 4.

Section 3050.1 of the Vehicle Code, as amended by Section 4 of Chapter 526 of the Statutes of 2015, is amended to read:

3050.1.

(a) In a proceeding, hearing, or in the discharge of duties imposed under this chapter, the board, its executive director, or an administrative law judge designated by the board may administer oaths, take depositions, certify to official acts, and issue subpoenas to compel attendance of witnesses and the production of books, records, papers, and other documents in any part of the state.

(b) For purposes of discovery, the board or its executive director may, if deemed appropriate and proper under the circumstances, authorize the parties to engage in the civil action discovery procedures in Title 4 (commencing with Section 2016.010) of Part 4 of the Code of Civil Procedure, excepting the provisions of Chapter 13 (commencing with Section 2030.010) of that title. Discovery shall be completed no later than 15 days prior to the commencement of the proceeding or hearing before the board. This subdivision shall apply only to those proceedings or hearings involving a petition filed pursuant to subdivision (c), or protest filed pursuant to subdivision (d) or (e) of Section 3050. The board, its executive director, or an administrative law judge designated by the board may issue subpoenas to compel attendance at depositions of persons having knowledge of the acts, omissions, or events that are the basis for the proceedings, as well as the production of books, records, papers, and other documents.

SEC. 4.SEC. 5.

Section 3050.1 of the Vehicle Code, as added by Section 5 of Chapter 526 of the Statutes of 2015, is repealed.

SEC. 5.SEC. 6.

Section 3050.7 of the Vehicle Code, as amended by Section 6.1 of Chapter 526 of the Statutes of 2015, is amended to read:

3050.7.

(a) The board may adopt stipulated decisions and orders, without a hearing pursuant to Section 3066, 3080, or 3085.2, to resolve one or more issues raised by a protest or petition filed with the board. Whenever the parties to a protest or petition submit a proposed stipulated decision and order of the board, a copy of the proposed stipulated decision and order shall be transmitted by the executive director of the board to each member of the board. The proposed stipulated decision and order shall be deemed to be adopted by the board unless a member of the board notifies the executive director of the board of an objection thereto within 10 days after that board member has received a copy of the proposed stipulated decision and order.

(b) If the board adopts a stipulated decision and order to resolve a protest filed pursuant to Section 3060 or 3070 in which the parties stipulate that good cause exists for the termination of the franchise of the protestant, and the order provides for a conditional or unconditional termination of the franchise of the protestant, paragraph (2) of subdivision (a) of Section 3060 and paragraph (2) of subdivision (a) of Section 3070, which require a hearing to determine whether good cause exists for termination of the franchise, is inapplicable to the proceedings. If the stipulated decision and order provides for an unconditional termination of the franchise, the franchise may be terminated without further proceedings by the board. If the stipulated decision and order provides for the termination of the franchise, conditioned upon the failure of a party to comply with specified conditions, the franchise may be terminated upon a determination, according to the terms of the stipulated decision and order, that the conditions have not been met. If the stipulated decision and order provides for the termination of the franchise conditioned upon the occurrence of specified conditions, the franchise may be terminated upon a determination, according to the terms of the stipulated decision and order, that the stipulated conditions have occurred.

SEC. 6.SEC. 7.

Section 3050.7 of the Vehicle Code, as added by Section 7.1 of Chapter 526 of the Statutes of 2015, is repealed.

SEC. 8.

Section 3065 of the Vehicle Code is amended to read:

3065.

(a) Every franchisor shall properly fulfill every warranty agreement made by it and adequately and fairly compensate each of its franchisees for labor and parts used to ~~fulfill that warranty when the franchisee has fulfilled~~ satisfy the warranty obligations of the franchisor, including, but not limited to, diagnostics, repair, and servicing and shall file a copy of its warranty reimbursement schedule or formula with the board. The warranty reimbursement schedule or formula shall be reasonable with respect to the time and compensation allowed to the franchisee for the warranty diagnostics, repair, servicing, and all other conditions of the obligation, including costs directly associated with the disposal of hazardous materials that are associated with a recall repair. The reasonableness of the warranty reimbursement schedule or formula shall be determined by the board if a franchisee files a protest with the board. materials. A warranty reimbursement schedule is not reasonable unless it compensates a franchisee pursuant to subdivision (b). A franchisor shall not replace, modify, or supplement the warranty reimbursement schedule to impose a fixed percentage or other reduction in the time ~~and compensation~~ allowed to the franchisee for warranty repairs not attributable to a specific repair. A franchisor may reduce the allowed time ~~and compensation~~ applicable to a specific warranty repair only upon 15 days’ prior written notice to the franchisee. Any protest challenging a reduction in time ~~and compensation~~ applicable to specific parts or labor operations shall be filed within six months following the franchisee’s receipt of notice of the reduction, and the franchisor shall have the burden of establishing the reasonableness of the reduction and adequacy and fairness of the resulting ~~compensation.~~ reduction in time.

(b)In determining the adequacy and fairness of the compensation, the franchisee’s effective labor rate charged to its various retail customers may be considered together with other relevant criteria. If in a protest permitted by this section filed by any franchisee the board determines that the warranty reimbursement schedule or formula fails to provide adequate and fair compensation or fails to conform with the other requirements of this section, within 30 days after receipt of the board’s order, the franchisor shall correct the failure by amending or replacing the warranty reimbursement schedule or formula and implementing the correction as to all franchisees of the franchisor that are located in this state.
(b) A franchisor shall compensate each of its franchisees for parts and labor at rates not less than the franchisee’s retail labor rate and retail parts rate, as established pursuant to Section 3065.2.

(c) If any franchisor disallows a franchisee’s claim for a defective part, alleging that the part, in fact, is not defective, the franchisor shall return the part alleged not to be defective to the franchisee at the expense of the franchisor, or the franchisee shall be reimbursed for the franchisee’s cost of the part, at the franchisor’s option.

(d) (1) All claims made by franchisees pursuant to this section shall be either approved or disapproved within 30 days after their receipt by the franchisor. Any claim not specifically disapproved in writing within 30 days from receipt by the franchisor shall be deemed approved on the 30th day. All claims made by franchisees under this section and Section 3064 for labor and parts shall be paid within 30 days after approval.

(2) A franchisor shall not disapprove a claim unless the claim is false or fraudulent, repairs were not properly made, repairs were inappropriate to correct a nonconformity with the written warranty due to an improper act or omission of the franchisee, or for material noncompliance with reasonable and nondiscriminatory documentation and administrative claims submission requirements.

(3) When any claim is disapproved, the franchisee who submits it shall be notified in writing of its disapproval within the required period, and each notice shall state the specific grounds upon which the disapproval is based. The franchisor shall provide for a reasonable appeal process allowing the franchisee at least 30 days after receipt of the written disapproval notice to provide additional supporting documentation or information rebutting the disapproval. If disapproval is based upon noncompliance with documentation or administrative claims submission requirements, the franchisor shall allow the franchisee at least 30 days from the date of receipt of the notice to cure any material noncompliance. If the disapproval is rebutted, and material noncompliance is cured before the applicable deadline, the franchisor shall approve the claim.

(4) If the franchisee provides additional supporting documentation or information purporting to rebut the disapproval, attempts to cure noncompliance relating to the claim, or otherwise appeals denial of the claim and the franchisor continues to deny the claim, the franchisor shall provide the franchisee with a written notification of the final denial within 30 days of completion of the appeal process, which shall conspicuously state “Final Denial” on the first page.

(5) Failure to approve or pay within the above specified time limits, in individual instances for reasons beyond the reasonable control of the franchisor, shall not constitute a violation of this article.

(6) Within six months after either receipt of the written notice described in paragraph (3) or (4), whichever is later, a franchisee may file a protest with the board for determination of whether the franchisor complied with the requirements of this subdivision. In any protest pursuant to this subdivision, the franchisor shall have the burden of proof.

(e) (1) Audits of franchisee warranty records may be conducted by the franchisor on a reasonable basis for a period of nine months after a claim is paid or credit issued. A franchisor shall not select a franchisee for an audit, or perform an audit, in a punitive, retaliatory, or unfairly discriminatory manner. A franchisor may conduct no more than one random audit of a franchisee in a nine-month period. The franchisor’s notification to the franchisee of any additional audit within a nine-month period shall be accompanied by written disclosure of the basis for that additional audit.

(2) Previously approved claims shall not be disapproved or charged back to the franchisee unless the claim is false or fraudulent, repairs were not properly made, repairs were inappropriate to correct a nonconformity with the written warranty due to an improper act or omission of the franchisee, or for material noncompliance with reasonable and nondiscriminatory documentation and administrative claims submission requirements. A franchisor shall not disapprove or chargeback a claim based upon an extrapolation from a sample of claims, unless the sample of claims is selected randomly and the extrapolation is performed in a reasonable and statistically valid manner.

(3) If the franchisor disapproves of a previously approved claim following an audit, the franchisor shall provide to the franchisee, within 30 days after the audit, a written disapproval notice stating the specific grounds upon which the claim is disapproved. The franchisor shall provide a reasonable appeal process allowing the franchisee a reasonable period of not less than 30 days after receipt of the written disapproval notice to respond to any disapproval with additional supporting documentation or information rebutting the disapproval and to cure noncompliance, with the period to be commensurate with the volume of claims under consideration. If the franchisee rebuts any disapproval and cures any material noncompliance relating to a claim before the applicable deadline, the franchisor shall not chargeback the franchisee for that claim.

(5) The franchisor shall not chargeback the franchisee until 45 days after receipt of the written notice described in paragraph (3) or paragraph (4), whichever is later. Any chargeback to a franchisee for warranty parts or service compensation shall be made within 90 days of receipt of that written notice. If the franchisee files a protest pursuant to this subdivision prior to the franchisor’s chargeback for denied claims, the franchisor shall not offset or otherwise undertake to collect the chargeback until the board issues a final order on the protest. If the board sustains the chargeback or the protest is dismissed, the franchisor shall have 90 days following issuance of the final order or the dismissal to make the chargeback, unless otherwise provided in a settlement agreement.

(6) Within six months after either receipt of the written disapproval notice or completion of the franchisor’s appeal process, whichever is later, a franchisee may file a protest with the board for determination of whether the franchisor complied with this subdivision. In any protest pursuant to this subdivision, the franchisor shall have the burden of proof.

(f) If a false claim was submitted by a franchisee with the intent to defraud the franchisor, a longer period for audit and any resulting chargeback may be permitted if the franchisor obtains an order from the board.

(g)For purposes of this section, “warranty” includes a recall conducted pursuant to Sections 30118 to 30120, inclusive, of Title 49 of the United States Code. This subdivision is declaratory and not amendatory of existing law.

SEC. 9.

Section 3065.2 is added to the Vehicle Code, to read:

3065.2.
(a) A franchisee seeking to establish or modify its retail labor rate or retail parts rate shall, no more frequently than once per calendar year, do so by completing the following requirements:
(1) The franchisee shall submit in writing to the franchisor whichever of the following is fewer in number:
(A) One hundred sequential qualified repair orders.
(B) All qualified repair orders completed during any period of 90 consecutive days prior to the date of submission.
(2) The franchisee shall calculate its retail labor rate by determining the total charges for labor from the qualified repair orders submitted and dividing that amount by the total number of hours allowed pursuant to the franchisor’s time allowances that would be used to compensate the franchisee for the same work, had it been performed under warranty.
(3) The franchisee shall calculate its retail parts rate by determining the total charges for parts from the qualified repair orders submitted and dividing that amount by the franchisee’s total cost of the purchase of those parts.
(4) The franchisee shall provide notice to the franchisor of its retail labor rate and retail parts rate calculated in accordance with this subdivision.
(b) As used in subdivision (a), a “qualified repair order” is a repair order, closed at the time of submission, for work that was performed outside of the period of the manufacturer’s warranty and paid for by the customer, but that would have been covered by the warranty if the work had been required and performed during the period of warranty.
(c) For purposes of subdivision (a), qualified repair orders submitted under this subdivision shall be from a period occurring not more than 180 days before the submission. Repair orders submitted pursuant to this section may be transmitted electronically. A franchisee may submit any of the following:
(1) A single set of qualified repair orders for purposes of calculating both its retail labor rate and its retail parts rate.
(2) Separate sets of qualified repair orders at the same time for purposes of calculating its retail labor rate and its retail parts rate.
(3) A set of qualified repair orders for purposes of calculating only its retail labor rate or only its retail parts rate.
(d) In calculating the retail labor rate and retail parts rate under this section, the franchisee shall omit any charges included in a repair order from the calculation that do not reflect the franchisee’s retail customer-pay labor and parts rates, including, but not limited to, any of the following:
(1) Manufacturer, manufacturer branch, distributor, or distributor branch special events, specials, or promotional discounts for retail customer repairs.
(2) Parts sold, or repairs performed, at wholesale.
(3) Routine maintenance, including, but not limited to, the replacement of bulbs, fluids, filters, batteries, and belts that are not provided in the course of, and related to, a repair.
(4) Items that do not have individual part numbers including, but not limited to, nuts, bolts, and fasteners.
(5) Vehicle reconditioning.
(6) Accessories.
(7) Repairs of conditions caused by a collision, a road hazard, the force of the elements, vandalism, theft, or owner, operational, or third-party negligence or deliberate act.
(8) Parts sold or repairs performed for insurance carriers.
(9) Vehicle emission inspections required by law.
(10) Goodwill or policy repairs or replacements.
(11) Repairs for government agencies, insurance carriers, fleet owners or operators, or other third party payors.
(12) Repairs performed on vehicles of a line-make other than that for which the franchisee is franchised by the franchisor.
(13) Repairs with, or on, aftermarket parts.
(14) Replacement of or work on tires or related elements, including, but not limited to, front-end alignments and wheel or tire rotations.
(15) Repairs of motor vehicles owned by the franchisee or an employee thereof at the time of the repair.
(16) Sublet repairs.
(e) (1) A franchisor may contest to the franchisee the material accuracy of the retail labor rate or retail parts rate that was calculated by the franchisee under this section within 30 days after receiving notice from the franchisee. If the franchisor seeks to contest the retail labor rate or retail parts rate, the franchisor shall submit no more than one notification to the franchisee. The notification shall be limited to an assertion that the rate is materially inaccurate, and provide a full explanation of any and all reasons for the allegation, evidence substantiating the franchisor’s position, a copy of all calculations used by the franchisor in determining the franchisor’s position, and a proposed adjusted retail labor rate or retail parts rate, as applicable, on the basis of the qualified repair orders submitted by the franchisee. After submitting the notification, the franchisor shall not add to, expand, supplement, or otherwise modify any element of that notification, including, but not limited to, its grounds for contesting the retail parts rate or retail labor rate.
(2) If the franchisee agrees with the conclusions of the franchisor and any corresponding adjustment to the retail parts rate or retail labor rate, the franchisee may do so in writing and shall not be required to resubmit any repair orders. The new adjusted rate will be deemed effective as of the date of the franchisor’s receipt of the request submitted pursuant to subdivision (a).
(3) In the event the franchisor provides all of the information required by paragraph (1) to the franchisee, and the franchisee does not agree with the adjusted rate proposed by the franchisor, the franchisor shall pay the franchisee at the franchisor’s proposed adjusted retail parts rate or retail labor rate until a decision is rendered upon any board protest filed pursuant to subdivision (k), or until any mutual resolution between the franchisor and the franchisee. The franchisor’s proposed adjusted rate shall be deemed to be effective as of the 30th day after the franchisor’s receipt of the request submitted pursuant to subdivision (a).
(f) If the franchisor does not contest the retail parts rate or retail labor rate that was calculated by the franchisee, or if the franchisor fails to contest the rate pursuant to subdivision (e), within 30 days after receiving the request submitted by the franchisee pursuant to subdivision (a), the uncontested retail labor rate or retail parts rate shall take effect on the 30th day after the franchisor’s receipt of the request and the franchisor shall use the new retail labor rate or retail parts rate, or both, if applicable, to determine compensation to fulfill warranty obligations by the franchisee until the rate for parts or labor is modified by the franchisee pursuant to this section.
(g) When calculating the retail parts rate and retail labor rate, all of the following shall apply:
(1) The franchisor shall use time allowances for the diagnosis and performance of work and service that are reasonable and adequate for a qualified technician to perform the work or services.
(2) Any discounts not allocated on the face of a qualified repair order between parts and labor shall be allocated on a pro rata basis. Promotional reward program cash-equivalent pay methods shall not be considered discounts. The franchisor is prohibited from establishing or implementing a special part or component number for parts used in warranty work, if the result of the special part or component lowers compensation to the franchisee below that amount calculated pursuant to this section.
(3) If a qualified repair order is submitted with no charged labor rate, that repair order shall not be used in calculating the retail labor rate and the franchisor shall not attempt to unilaterally calculate or apply a labor rate for that repair order.
(h) When the franchisor is compensating the franchisee for the retail parts rate, all of the following shall apply:
(1) If the franchisor furnishes a part to a franchisee at no cost for use in performing warranty obligations, the franchisor shall compensate the franchisee the wholesale value of the part multiplied by the franchisee’s retail parts rate determined pursuant to this section.
(2) If the franchisor furnishes a part to a franchisee at a reduced cost for use in performing warranty obligations, the franchisor shall compensate the franchisee the wholesale value of the part multiplied by the franchisee’s retail parts rate determined pursuant to this section, plus the franchisee’s cost of the part.
(3) The wholesale value of the part, for purposes of this subdivision, shall be the greater of:
(A) The amount the franchisee paid for the part or a substantially identical part if already owned by the franchisee.
(B) The cost of the part shown in a current or prior franchisor’s established price schedule.
(C) The cost of a substantially identical part shown in a current or prior franchisor’s established price schedule.
(i) A franchisee’s retail labor rate or retail parts rate shall be calculated only using the method prescribed in this section. A franchisor shall not use or require a franchisee to use any other method including, but not limited to, any of the following:
(1) Substituting any other purported repair sample for that submitted or submittable by a franchisee.
(2) Imposing any method related to the establishment of a retail labor rate or retail parts rate that is unreasonable or time consuming, or require the use of information that is unreasonable or time consuming to obtain, including part-by-part or transaction-by-transaction calculations or utilization of the franchisee's financial statement.
(3) Unilaterally calculating a retail labor rate or retail parts rate for a franchisee.
(4) Using a franchisee’s sample, submitted for establishing or increasing its retail part rate, to establish or reduce the franchisee’s retail labor rate or using a franchisee’s sample, submitted for establishing or increasing its retail labor rate, to establish or reduce the franchisee’s retail parts rate.
(j) A franchisor shall not do any of the following:
(1) Attempt to influence a franchisee to implement or change the prices for which the franchisee sells parts or labor in retail repairs.
(2) Directly or indirectly, take or threaten to take any adverse action against a franchisee for, or dissuade or discourage any franchisee from, seeking compensation or exercising any right pursuant to this section, by any action including, but not limited to, the following:
(A) Assessing penalties, surcharges, or similar costs to a franchisee.
(B) Transfering or shifting any costs to a franchisee.
(C) Limiting allocation of vehicles or parts to a franchisee.
(D) Acting or failing to act, other than in good faith.
(E) Hindering, delaying, or rejecting the proper and timely payment of compensation due under this section to a franchisee.
(F) Establishing, implementing, enforcing, or applying any discriminatory policy, standard, rule, program, or incentive regarding compensation due under this section.
(G) Conducting or threatening to conduct any warranty, nonwarranty repair, or other service-related audit.
(3) Implement or continue a policy, procedure, or program to any of the franchisor’s franchisees for compensation which is inconsistent with this section.
(k) (1) If a franchisor fails to comply with this section or if a franchisee disputes the franchisor’s proposed adjusted retail labor rate or retail parts rate, the franchisee may file a protest with the board for a declaration of the franchisee’s retail labor rate or retail parts rate. The board may also declare that the franchisor willfully failed to comply with this section or did not have a substantial basis for its determination of the retail labor rate or retail parts rate under this section. In any protest under this section, the franchisor shall have the burden of proof that it complied with this section, that its determination of the retail labor rate or retail parts rate is materially accurate, and that the franchisee’s determination of the retail labor rate or retail parts rate is materially inaccurate.
(2) Upon a decision by the board pursuant to paragraph (1), the board shall order the franchisor to reimburse the franchisee for the difference between the amount the franchisee has actually received from the franchisor for fulfilled warranty obligations and the amount that the franchisee would have received if the franchisor had compensated the franchisee at the retail labor rate and retail parts rate as determined in accordance with this section. The franchisee may submit a request to the franchisor to calculate the unpaid warranty reimbursement compensation and the franchisor shall provide this calculation to the franchisee within 30 days after receipt of the request. The request for the calculation will also be deemed a request for payment of the unpaid warranty reimbursement compensation.
(3) If the board’s decision states that the franchisor willfully failed to comply with this section or did not have substantial basis for its determination, the board shall award three times the unpaid warranty reimbursement compensation amount.
(4) Any amount not paid within 30 days of a request for payment shall constitute a valid and enforceable civil judgment. The franchisee may also recover its actual expenses in bringing and maintaining an enforcement action, including its reasonable attorney fees.
(5) Either the franchisor or the franchisee may seek judicial review of the board’s determination pursuant to Section 3068.

SEC. 10.

Section 3065.25 is added to the Vehicle Code, immediately following Section 3065.2, to read:

3065.25.
As used in Sections 3065 and 3065.2, the following terms shall have the following meanings:
(a) “Parts” includes, but is not limited to, engine, transmission, and other part assemblies.
(b) “Warranty” includes a certified preowned warranty, a technical service bulletin, a customer service campaign, and a recall conducted pursuant to Sections 30118 to 30120, inclusive, of Title 49 of the United States Code.

SEC. 11.

Section 3065.3 is added to the Vehicle Code, to read:

3065.3.
(a) No franchisor shall establish or maintain a performance standard, sales objective, or program for measuring a dealer’s sales, service, or customer service performance that is inconsistent with the standards set forth in subdivision (g) of Section 11713.13.
(b) No franchisor shall compete against a franchisee in violation of subdivision (o) of Section 11713.3.
(c) No franchisor shall discriminate among its franchisees, restrict a franchisee’s ability to service, or require a franchisee to perform service in violation of subdivision (p) of Section 11713.3.
(d) A franchisee may file a protest with the board for determination of whether a franchisor has complied with subdivision (a), (b), or (c) and in that proceeding the franchisor shall have the burden of proof.

SEC. 12.

Section 3066 of the Vehicle Code is amended to read:

3066.

(a) Upon receiving a protest pursuant to Section 3060, 3062, 3064, 3065, or 3065.1, 3065.2, or 3065.3, the board shall fix a time within 60 days of the order, and place of hearing, and shall send by certified mail a copy of the order to the franchisor, the protesting franchisee, and all individuals and groups that have requested notification by the board of protests and decisions of the board. Except in a case involving a franchisee who deals exclusively in motorcycles, the board or its executive director may, upon a showing of good cause, accelerate or postpone the date initially established for a hearing, but the hearing shall not be rescheduled more than 90 days after the board’s initial order. For the purpose of accelerating or postponing a hearing date, “good cause” includes, but is not limited to, the effects upon, and any irreparable harm to, the parties or interested persons or groups if the request for a change in hearing date is not granted. The board or an administrative law judge designated by the board shall hear and consider the oral and documented evidence introduced by the parties and other interested individuals and groups, and the board shall make its decision solely on the record so made. Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code and Sections 11507.3, 11507.6, 11507.7, 11511, 11511.5, 11513, 11514, 11515, and 11517 of the Government Code apply to these proceedings.

(b) In a hearing on a protest filed pursuant to Section 3060 or 3062 the franchisor shall have the burden of proof to establish that there is good cause to modify, replace, terminate, or refuse to continue a franchise. The franchisee shall have the burden of proof to establish that there is good cause not to enter into a franchise establishing an additional motor vehicle dealership or relocating an existing motor vehicle dealership.

(c) Except as otherwise provided in this chapter, in a hearing on a protest alleging a violation of, or filed pursuant to, Section 3064, 3065, or 3065.1, the franchisee shall have the burden of proof, but the franchisor has the burden of proof to establish that a franchisee acted with intent to defraud the franchisor when that issue is material to a protest filed pursuant to Section 3065 or 3065.1.

(d) A member of the board who is a new motor vehicle dealer may not participate in, hear, comment, or advise other members upon, or decide, a matter involving a protest filed pursuant to this article unless all parties to the protest stipulate otherwise.

SEC. 7.SEC. 13.

Section 3085.10 of the Vehicle Code is repealed.

SEC. 14.

Section 11713.3 of the Vehicle Code is amended to read:

11713.3.

It is unlawful and a violation of this code for a manufacturer, manufacturer branch, distributor, or distributor branch licensed pursuant to this code to do, directly or indirectly through an affiliate, any of the following:

(a) To refuse or fail to deliver in reasonable quantities and within a reasonable time after receipt of an order from a dealer having a franchise for the retail sale of a new vehicle sold or distributed by the manufacturer or distributor, a new vehicle or parts or accessories to new vehicles ~~as are covered by the franchise,~~ that are of a make or model offered by the manufacturer or distributor to other franchisees in this state of the same line-make, if the vehicle, parts, or accessories are publicly advertised as being available for delivery or actually being delivered. This subdivision is not violated, however, if the failure is caused by acts or causes beyond the control of the manufacturer, manufacturer branch, distributor, or distributor branch.

(b) To prevent or require, or attempt to prevent or require, by contract or otherwise, a change in the capital structure of a dealership or the means by or through which the dealer finances the operation of the dealership, if the dealer at all times meets reasonable capital standards agreed to by the dealer and the manufacturer or distributor, and if a change in capital structure does not cause a change in the principal management or have the effect of a sale of the franchise without the consent of the manufacturer or distributor.

(c) To prevent or require, or attempt to prevent or require, a dealer to change the executive management of a dealership, other than the principal dealership operator or operators, if the franchise was granted to the dealer in reliance upon the personal qualifications of that person.

(d) (1) Except as provided in subdivision (t), to prevent or require, or attempt to prevent or require, by contract or otherwise, a dealer, or an officer, partner, or stockholder of a dealership, the sale or transfer of a part of the interest of any of them to another person. A dealer, officer, partner, or stockholder shall not, however, have the right to sell, transfer, or assign the franchise, or a right thereunder, without the consent of the manufacturer or distributor except that the consent shall not be unreasonably withheld.

(2) (A) For the transferring franchisee to fail, prior to the sale, transfer, or assignment of a franchisee or the sale, assignment, or transfer of all, or substantially all, of the assets of the franchised business or a controlling interest in the franchised business to another person, to notify the manufacturer or distributor of the franchisee’s decision to sell, transfer, or assign the franchise. The notice shall be in writing and shall include all of the following:

(i) The proposed transferee’s name and address.

(ii) A copy of all of the agreements relating to the sale, assignment, or transfer of the franchised business or its assets.

(iii) The proposed transferee’s application for approval to become the successor franchisee. The application shall include forms and related information generally utilized by the manufacturer or distributor in reviewing prospective franchisees, if those forms are readily made available to existing franchisees. As soon as practicable after receipt of the proposed transferee’s application, the manufacturer or distributor shall notify the franchisee and the proposed transferee of information needed to make the application complete.

(B) For the manufacturer or distributor, to fail, on or before 60 days after the receipt of all of the information required pursuant to subparagraph (A), or as extended by a written agreement between the manufacturer or distributor and the franchisee, to notify the franchisee of the approval or the disapproval of the sale, transfer, or assignment of the franchise. The notice shall be in writing and shall be personally served or sent by certified mail, return receipt requested, or by guaranteed overnight delivery service that provides verification of delivery and shall be directed to the franchisee. A proposed sale, assignment, or transfer shall be deemed approved, unless disapproved by the franchisor in the manner provided by this subdivision. If the proposed sale, assignment, or transfer is disapproved, the franchisor shall include in the notice of disapproval a statement setting forth the reasons for the disapproval.

(3) In an action in which the manufacturer’s or distributor’s withholding of consent under this subdivision or subdivision (e) is an issue, whether the withholding of consent was unreasonable is a question of fact requiring consideration of all the existing circumstances.

(e) To prevent, or attempt to prevent, a dealer from receiving fair and reasonable compensation for the value of the franchised business. There shall not be a transfer or assignment of the dealer’s franchise without the consent of the manufacturer or distributor. The manufacturer or distributor shall not unreasonably withhold consent or condition consent upon the release, assignment, novation, waiver, estoppel, or modification of a claim or defense by the dealer.

(f) To obtain money, goods, services, or another benefit from a person with whom the dealer does business, on account of, or in relation to, the transaction between the dealer and that other person, other than for compensation for services rendered, unless the benefit is promptly accounted for, and transmitted to, the dealer.

(g) (1) Except as provided in paragraph (3), to obtain from a dealer or enforce against a dealer an agreement, provision, release, assignment, novation, waiver, or estoppel that does any of the following:

(A) Modifies or disclaims a duty or obligation of a manufacturer, manufacturer branch, distributor, distributor branch, or representative, or a right or privilege of a dealer, pursuant to Chapter 4 (commencing with Section 11700) of Division 5 or Chapter 6 (commencing with Section 3000) of Division 2.

(B) Limits or constrains the right of a dealer to file, pursue, or submit evidence in connection with a protest before the board.

(D) Requires a controversy between a manufacturer, manufacturer branch, distributor, distributor branch, or representative and a dealer to be referred to a person for a binding determination. However, this subparagraph does not prohibit arbitration before an independent arbitrator, provided that whenever a motor vehicle franchise contract provides for the use of arbitration to resolve a controversy arising out of, or relating to, that contract, arbitration may be used to settle the controversy only if, after the controversy arises, all parties to the controversy consent in writing to use arbitration to settle the controversy. For the purpose of this subparagraph, the terms “motor vehicle” and “motor vehicle franchise contract” shall have the same meaning as defined in Section 1226 of Title 15 of the United States Code. If arbitration is elected to settle a dispute under a motor vehicle franchise contract, the arbitrator shall provide the parties to the arbitration with a written explanation of the factual and legal basis for the award.

(2) An agreement, provision, release, assignment, novation, waiver, or estoppel prohibited by this subdivision shall be unenforceable and void.

(3) This subdivision does not do any of the following:

(A) Limit or restrict the terms upon which parties to a protest before the board, civil action, or other proceeding can settle or resolve, or stipulate to evidentiary or procedural matters during the course of, a protest, civil action, or other proceeding.

(B) Affect the enforceability of any stipulated order or other order entered by the board.

(C) Affect the enforceability of any provision in a contract if the provision is not prohibited under this subdivision or any other law.

(D) Affect the enforceability of a provision in any contract entered into on or before December 31, 2011.

(E) Prohibit a dealer from waiving its right to file a protest pursuant to Section 3065.1 if the waiver agreement is entered into after a franchisor incentive program claim has been disapproved by the franchisor and the waiver is voluntarily given as part of an agreement to settle that claim.

(F) Prohibit a voluntary agreement supported by valuable consideration, other than granting or renewing a franchise, that does both of the following:

(i) Provides that a dealer establish or maintain exclusive facilities, personnel, or display space or provides that a dealer make a material alteration, expansion, or addition to a dealership facility.

(ii) Contains no waiver or other provision prohibited by subparagraph (A), (B), (C), or (D) of paragraph (1).

(G) Prohibit an agreement separate from the franchise agreement that implements a dealer’s election to terminate the franchise if the agreement is conditioned only on a specified time for termination or payment of consideration to the dealer.

(H) (i) Prohibit a voluntary waiver agreement, supported by valuable consideration, other than the consideration of renewing a franchise, to waive the right of a dealer to file a protest under Section 3062 for the proposed establishment or relocation of a specific proposed dealership, if the waiver agreement provides all of the following:

(I) The approximate address at which the proposed dealership will be located.

(II) The planning potential used to establish the proposed dealership’s facility, personnel, and capital requirements.

(III) An approximation of projected vehicle and parts sales, and number of vehicles to be serviced at the proposed dealership.

(IV) Whether the franchisor or affiliate will hold an ownership interest in the proposed dealership or real property of the proposed dealership, and the approximate percentage of any franchisor or affiliate ownership interest in the proposed dealership.

(V) The line-makes to be operated at the proposed dealership.

(VI) If known at the time the waiver agreement is executed, the identity of the dealer who will operate the proposed dealership.

(VII) The date the waiver agreement is to expire, which may not be more than 30 months after the date of execution of the waiver agreement.

(ii) Notwithstanding the provisions of a waiver agreement entered into pursuant to the provisions of this subparagraph, a dealer may file a protest under Section 3062 if any of the information provided pursuant to clause (i) has become materially inaccurate since the waiver agreement was executed. Any determination of the enforceability of a waiver agreement shall be determined by the board and the franchisor shall have the burden of proof.

(h) To increase prices of motor vehicles that the dealer had ordered for private retail consumers prior to the dealer’s receipt of the written official price increase notification. A sales contract signed by a private retail consumer is evidence of the order. In the event of manufacturer price reductions, the amount of the reduction received by a dealer shall be passed on to the private retail consumer by the dealer if the retail price was negotiated on the basis of the previous higher price to the dealer. Price reductions apply to all vehicles in the dealer’s inventory that were subject to the price reduction. Price differences applicable to new model or series motor vehicles at the time of the introduction of new models or series shall not be considered a price increase or price decrease. This subdivision does not apply to price changes caused by either of the following:

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

(2) Revaluation of the United States dollar in the case of a foreign-make vehicle.

(i) To fail to pay to a dealer, within a reasonable time following receipt of a valid claim by a dealer thereof, a payment agreed to be made by the manufacturer or distributor to the dealer by reason of the fact that a new vehicle of a prior year model is in the dealer’s inventory at the time of introduction of new model vehicles.

(j) To deny the widow, widower, or heirs designated by a deceased owner of a dealership the opportunity to participate in the ownership of the dealership or successor dealership under a valid franchise for a reasonable time after the death of the owner.

(k) To offer refunds or other types of inducements to a person for the purchase of new motor vehicles of a certain line-make to be sold to the state or a political subdivision of the state without making the same offer to all other dealers in the same line-make within the relevant market area.

(l) To modify, replace, enter into, relocate, terminate, or refuse to renew a franchise in violation of Article 4 (commencing with Section 3060) or Article 5 (commencing with Section 3070) of Chapter 6 of Division 2.

(m) To employ a person as a representative who has not been licensed pursuant to Article 3 (commencing with Section 11900) of Chapter 4 of Division 5.

(n) To deny a dealer the right of free association with another dealer for a lawful purpose.

(o) (1) To compete with a dealer in the same line-make operating under an agreement or franchise from a manufacturer or distributor in the ~~relevant market area.~~ state.

(2) A manufacturer, branch, or distributor, or an entity that controls or is controlled by a manufacturer, branch, or distributor, shall not, however, be deemed to be competing in the following limited circumstances:

(A) Owning or operating a dealership for a temporary period, not to exceed one year at the location of a former dealership of the same line-make that has been out of operation for less than six months. However, after a showing of good cause by a manufacturer, branch, or distributor that it needs additional time to operate a dealership in preparation for sale to a successor independent franchisee, the board may extend the time period.

(B) Owning an interest in a dealer as part of a bona fide dealer development program that satisfies all of the following requirements:

(i) The sole purpose of the program is to make franchises available to persons lacking capital, training, business experience, or other qualities ordinarily required of prospective franchisees and the dealer development candidate is an individual who is unable to acquire the franchise without assistance of the program.

(ii) The dealer development candidate has made a significant investment subject to loss in the franchised business of the dealer.

(iii) The program requires the dealer development candidate to manage the day-to-day operations and business affairs of the dealer and to acquire, within a reasonable time and on reasonable terms and conditions, beneficial ownership and control of a majority interest in the dealer and disassociation of any direct or indirect ownership or control by the manufacturer, branch, or distributor.

(C) Owning a wholly owned subsidiary corporation of a distributor that sells motor vehicles at retail, if, for at least three years prior to January 1, 1973, the subsidiary corporation has been a wholly owned subsidiary of the distributor and engaged in the sale of vehicles at retail.

(3) (A) A manufacturer, branch, and distributor that owns or operates a dealership in the manner described in subparagraph (A) of paragraph (2) shall give written notice to the board, within 10 days, each time it commences or terminates operation of a dealership and each time it acquires, changes, or divests itself of an ownership interest.

(B) A manufacturer, branch, and distributor that owns an interest in a dealer in the manner described in subparagraph (B) of paragraph (2) shall give written notice to the board, annually, of the name and location of each dealer in which it has an ownership interest, the name of the bona fide dealer development owner or owners, and the ownership interests of each owner expressed as a percentage.

(4) If the manufacturer, manufacturer branch, distributor, or distributor branch is also a franchisor, or an affiliate of a franchisor, it may not compete with any franchisee by directly or indirectly offering vehicles for sale, lease, or subscription, or offering branded parts of the same line-make for sale, unless these vehicles or branded parts are offered exclusively by franchisees. This paragraph shall not apply to vehicle rentals regulated pursuant to Chapter 1.5 (commencing with Section 1939.01) of Title 5 of Part 4 of Division 3 of the Civil Code.

(p) (1) To unfairly discriminate among its franchisees with respect to warranty reimbursement or authority granted to its franchisees to make warranty adjustments with retail customers.

(2) To restrict a franchisee’s ability to service any vehicle that was sold or leased by the franchisee as a new vehicle offered by the franchisor at the time the vehicle was sold or leased. For purposes of this subdivision, “restrict” shall include, but is not limited to, denying reimbursement for warranty work, performing work pursuant to a service contract branded by the franchisor or its affiliates, and limiting the franchisee’s ability to acquire parts or accessories for the vehicle.
(3) To require a franchisee to perform service repair or warranty work on any vehicle model that is not currently or previously available to the franchisee for sale or lease as a new vehicle.
(4) As used in this subdivision, “warranty” shall have the same meaning as defined in Section 3065.25.

(q) To sell vehicles to a person not licensed pursuant to this chapter for resale.

(r) To fail to affix an identification number to a park trailer, as described in Section 18009.3 of the Health and Safety Code, that is manufactured on or after January 1, 1987, and that does not clearly identify the unit as a park trailer to the department. The configuration of the identification number shall be approved by the department.

(s) To dishonor a warranty, rebate, or other incentive offered to the public or a dealer in connection with the retail sale of a new motor vehicle, based solely upon the fact that an autobroker arranged or negotiated the sale. This subdivision shall not prohibit the disallowance of that rebate or incentive if the purchaser or dealer is ineligible to receive the rebate or incentive pursuant to any other term or condition of a rebate or incentive program.

(t)To exercise a right of first refusal or other right requiring a franchisee or an owner of the franchise to sell, transfer, or assign to the franchisor, or to a nominee of the franchisor, all or a material part of the franchised business or of the assets of the franchised business unless all of the following requirements are met:
(1)The franchise authorizes the franchisor to exercise a right of first refusal to acquire the franchised business or assets of the franchised business in the event of a proposed sale, transfer, or assignment.
(2)The franchisor gives written notice of its exercise of the right of first refusal no later than 45 days after the franchisor receives all of the information required pursuant to subparagraph (A) of paragraph (2) of subdivision (d).
~~(3)The sale, transfer, or assignment being proposed relates to not less than all or substantially all of the assets of the franchised business or to a controlling interest in the franchised business.~~
(4)The proposed transferee is neither a family member of an owner of the franchised business, nor a managerial employee of the franchisee owning 15 percent or more of the franchised business, nor a corporation, partnership, or other legal entity owned by the existing owners of the franchised business. For purposes of this paragraph, a “family member” means the spouse of an owner of the franchised business, the child, grandchild, brother, sister, or parent of an owner, or a spouse of one of those family members. This paragraph does not limit the rights of the franchisor to disapprove a proposed transferee as provided in subdivision (d).
(5)Upon the franchisor’s exercise of the right of first refusal, the consideration paid by the franchisor to the franchisee and owners of the franchised business shall equal or exceed all consideration that each of them were to have received under the terms of, or in connection with, the proposed sale, assignment, or transfer, and the franchisor shall comply with all the terms and conditions of the agreement or agreements to sell, transfer, or assign the franchised business.
(6)The franchisor shall reimburse the proposed transferee for expenses paid or incurred by the proposed transferee in evaluating, investigating, and negotiating the proposed transfer to the extent those expenses do not exceed the usual, customary, and reasonable fees charged for similar work done in the area in which the franchised business is located. These expenses include, but are not limited to, legal and accounting expenses, and expenses incurred for title reports and environmental or other investigations of real property on which the franchisee’s operations are conducted. The proposed transferee shall provide the franchisor a written itemization of those expenses, and a copy of all nonprivileged reports and studies for which expenses were incurred, if any, within 30 days of the proposed transferee’s receipt of a written request from the franchisor for that accounting. The franchisor shall make payment within 30 days of exercising the right of first refusal.
(t) (1) To enforce a right of first refusal or option to purchase the franchisee’s business.
(2) To directly or indirectly condition the awarding of a franchise to a prospective new dealer, on the addition of a line-make or franchise to an existing dealer, the renewal of a franchise of an existing dealer, the approval of the relocation of an existing motor vehicle dealership, the termination of the franchise, or the approval of the sale or transfer of the ownership of a franchise on the willingness of a dealer, proposed new dealer, or owner of an interest in the dealership premises to enter into a site control or exclusive use agreement.
(3) Notwithstanding any other provision of law, a prospective licensee may enforce this subdivision in the same manner as any licensee.
(4) Any provision contained in any agreement that is inconsistent with this subdivision shall be voidable at the election of the affected dealer, prospective dealer, or owner of an interest in the dealership premises.
(5) As used in this subdivision, “site control agreement” and “exclusive use agreement” includes, but is not limited to, an agreement that results in any of the following:
(A) Requires the dealer to establish or maintain exclusive dealership facilities. “Facilities” includes, but is not limited to, premises, places, buildings, or structures.
(B) Restricts the ability of the dealer or the ability of the dealer’s lessor, in the event the dealership premises are being leased, to transfer, sell, lease, or change the use of the dealership premises, whether by sublease, lease, collateral pledge of lease, right of first refusal to purchase or lease, option to purchase, option to lease, or other similar agreement, regardless of the parties to the agreement.

(u) (1) To unfairly discriminate in favor of a dealership owned or controlled, in whole or in part, by a manufacturer or distributor or an entity that controls or is controlled by the manufacturer or distributor. Unfair discrimination includes, but is not limited to, the following:

(A) The furnishing to a franchisee or dealer that is owned or controlled, in whole or in part, by a manufacturer, branch, or distributor of any of the following:

(i) A vehicle that is not made available to each franchisee pursuant to a reasonable allocation formula that is applied uniformly, and a part or accessory that is not made available to all franchisees on an equal basis when there is no reasonable allocation formula that is applied uniformly.

(ii) A vehicle, part, or accessory that is not made available to each franchisee on comparable delivery terms, including the time of delivery after the placement of an order. Differences in delivery terms due to geographic distances or other factors beyond the control of the manufacturer, branch, or distributor shall not constitute unfair competition.

(iii) Information obtained from a franchisee by the manufacturer, branch, or distributor concerning the business affairs or operations of a franchisee in which the manufacturer, branch, or distributor does not have an ownership interest. The information includes, but is not limited to, information contained in financial statements and operating reports, the name, address, or other personal information or buying, leasing, or service behavior of a dealer customer, and other information that, if provided to a franchisee or dealer owned or controlled by a manufacturer or distributor, would give that franchisee or dealer a competitive advantage. This clause does not apply if the information is provided pursuant to a subpoena or court order, or to aggregated information made available to all franchisees.

(iv) Sales or service incentives, discounts, or promotional programs that are not made available to all California franchises of the same line-make on an equal basis.

(B) Referring a prospective purchaser or lessee to a dealer in which a manufacturer, branch, or distributor has an ownership interest, unless the prospective purchaser or lessee resides in the area of responsibility assigned to that dealer or the prospective purchaser or lessee requests to be referred to that dealer.

(2) This subdivision does not prohibit a franchisor from granting a franchise to prospective franchisees or assisting those franchisees during the course of the franchise relationship as part of a program or programs to make franchises available to persons lacking capital, training, business experience, or other qualifications ordinarily required of prospective franchisees.

(v) (1) To access, modify, or extract information from a confidential dealer computer record, as defined in Section 11713.25, without obtaining the prior written consent of the dealer and without maintaining administrative, technical, and physical safeguards to protect the security, confidentiality, and integrity of the information.

(2) Paragraph (1) does not limit a duty that a dealer may have to safeguard the security and privacy of records maintained by the dealer.

(w) (1) To use electronic, contractual, or other means to prevent or interfere with any of the following:

(A) The lawful efforts of a dealer to comply with federal and state data security and privacy laws.

(B) The ability of a dealer to do either of the following:

(i) Ensure that specific data accessed from the dealer’s computer system is within the scope of consent specified in subdivision (v).

(ii) Monitor specific data accessed from or written to the dealer’s computer system.

(2) Paragraph (1) does not limit a duty that a dealer may have to safeguard the security and privacy of records maintained by the dealer.

(x) (1) To unfairly discriminate against a franchisee selling a service contract, debt cancellation agreement, maintenance agreement, or similar product not approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate. For purposes of this subdivision, unfair discrimination includes, but is not limited to, any of the following:

(A) Express or implied statements that the dealer is under an obligation to exclusively sell or offer to sell service contracts, debt cancellation agreements, maintenance agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate.

(B) Express or implied statements that selling or offering to sell service contracts, debt cancellation agreements, maintenance agreements, or similar products not approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate, or the failure to sell or offer to sell service contracts, debt cancellation agreements, maintenance agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate will have any negative consequences for the dealer.

(C) Measuring a dealer’s performance under a franchise agreement based upon the sale of service contracts, debt cancellation agreements, maintenance agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate.

(D) Requiring a dealer to actively promote the sale of service contracts, debt cancellation agreements, maintenance agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate.

(E) Conditioning access to vehicles or parts, or vehicle sales or service ~~incentives~~ incentives, financing, or advancing of funds upon the sale of service contracts, debt cancellation agreements, maintenance agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate.

(F) Requiring a dealer to provide a disclosure or notice different from the notice set forth in paragraph (4) of this subdivision.

(2) Unfair discrimination does not include, and nothing shall prohibit a manufacturer from, offering an incentive program to vehicle dealers who voluntarily sell or offer to sell service contracts, debt cancellation agreements, or similar products approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch or affiliate, if the program does not provide vehicle sales or service incentives.

(3) This subdivision does not prohibit a manufacturer, manufacturer branch, distributor, or distributor branch from requiring a franchisee that sells a used vehicle as “certified” under a certified used vehicle program established by the manufacturer, manufacturer branch, distributor, or distributor branch to provide a service contract approved, endorsed, sponsored, or offered by the manufacturer, manufacturer branch, distributor, or distributor branch.

(4) Unfair discrimination does not include, and nothing shall prohibit a franchisor from requiring a franchisee to provide, the following notice prior to the sale of the service contract if the service contract is not provided or backed by the franchisor and the vehicle is of the franchised line-make:

“Service Contract Disclosure
The service contract you are purchasing is not provided or backed by the manufacturer of the vehicle you are purchasing. The manufacturer of the vehicle is not responsible for claims or repairs under this service contract.
_____________________
Signature of Purchaser”

(y) (1) 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 at least 48 hours before the sale or lease of the vehicle, 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. If the dealer causes the vehicle to be registered in this or any other state, and collects or causes to be collected any applicable sales or use tax due to this state, a rebuttable presumption is established that the dealer did not have reason to know of the customer’s intent to export or resell the vehicle. In a proceeding in which a challenge to an adverse action is at issue, the manufacturer, manufacturer branch, distributor, or distributor branch shall have the burden of proof by a preponderance of the evidence to show that the vehicle was exported or resold in violation of an export or sale-for-resale prohibition policy, that the prohibition policy was provided to the dealer in writing at least 48 hours prior to the sale or lease, and that the dealer knew or reasonably should have known of the customer’s intent to export the vehicle to a foreign country at the time of the sale or lease.

(2) An export or sale-for-resale prohibition policy shall not include a provision that expressly or implicitly requires a dealer to make further inquiries into a customer’s intent, identity, or financial ability to purchase or lease a vehicle based on any of the customer’s characteristics listed or defined in Section 51 of the Civil Code. A policy that is in violation of this paragraph is void and unenforceable.

(3) An export or sale-for-resale prohibition policy shall expressly include a provision stating the dealer’s rebuttable presumption if the dealer causes the vehicle to be registered in this or any other state and collects or causes to be collected any applicable sales or use tax. A policy that is in violation of this paragraph is void and unenforceable.

(4) For purposes of this subdivision, “adverse action” means any activity that imposes, either expressly or implicitly, a burden, responsibility, or penalty on a dealer, including, but not limited to, any audits, withholding of incentives, or monetary chargebacks, imposed by the manufacturer, manufacturer branch, distributor, distributor branch or through an affiliate.

(z) As used in this section, ~~“area~~ the following terms have the following meanings:

(1) “Affiliate” means a person who directly or indirectly through one or more intermediaries, controls, is controlled by, or is under the common direction and control with, another person. “Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of any person.

(2) “Area of responsibility” means a geographic area specified in a franchise that is used by the franchisor for the purpose of evaluating the franchisee’s performance of its sales and service obligations.

SEC. 15.

Section 11713.13 of the Vehicle Code is amended to read:

11713.13.

It is unlawful and a violation of this code for any manufacturer, manufacturer branch, distributor, or distributor branch licensed under this code to do, directly or indirectly through an affiliate, any of the following:

(a) Prevent, or attempt to prevent, by contract or otherwise, a dealer from acquiring, adding, or maintaining a sales or service operation for another line-make of motor vehicles at the same or expanded facility at which the dealer currently operates a dealership if the dealer complies with any reasonable facilities and capital requirements of the manufacturer or distributor.

(b) Require a dealer to establish or maintain exclusive facilities, personnel, or display space if the imposition of the requirement would be unreasonable in light of all existing circumstances, including economic conditions. In any proceeding in which the reasonableness of a facility or capital requirement is an issue, the manufacturer or distributor shall have the burden of proof.

(c) Require, by contract or otherwise, a dealer to make a material alteration, expansion, or addition to any dealership facility, unless the required alteration, expansion, or addition is reasonable in light of all existing circumstances, including economic conditions and advancements in vehicular technology. This subdivision does not limit the obligation of a dealer to comply with any applicable health or safety laws.

(1) A required facility alteration, expansion, or addition shall not be deemed reasonable if it requires that the dealer purchase goods or services from a specific vendor when goods or services of substantially similar kind, quality, and general design concept are available from another vendor. Notwithstanding the prohibitions in this paragraph, a manufacturer, manufacturer branch, distributor, or distributor ~~branch~~ branch, or affiliate may require the dealer to request approval for the use of alternative goods or services in writing. Approval for these requests shall not be unreasonably withheld, and the request shall be deemed approved if not specifically denied in writing within 20 business days of receipt of the dealer’s written request. This paragraph does not authorize a dealer to impair or eliminate the intellectual property or trademark rights of the manufacturer, manufacturer branch, distributor, or distributor branch, or affiliate, or to permit a dealer to erect or maintain signs that do not conform to the intellectual property usage guidelines of the manufacturer, manufacturer branch, distributor, or distributor ~~branch.~~ branch, or affiliate. Notwithstanding the foregoing, a manufacturer, manufacturer branch, distributor, distributor branch, or affiliate may not restrict the ability of a dealer to acquire signage at actual cost or restrict the ability of a dealer to erect or maintain signs by requiring the use of any specific vendor. This paragraph shall not apply to a specific good or service if the manufacturer, manufacturer branch, distributor, ~~or distributor branch~~ distributor branch. or affiliate provides the dealer with a lump-sum payment or series of payments of toward a substantial portion of the cost of that good or service, if the payment is intended solely to reimburse the dealer for the purchase of the specified good or service.

(2) In any proceeding in which a required facility alteration, expansion, or addition is an issue, the manufacturer, manufacturer branch, distributor, distributor branch, or affiliate shall have the burden of proof.

(3) A required facility alteration, expansion, or addition shall not be deemed reasonable if the facility has been modified within the last 15 years at a cost of more than one hundred thousand dollars ($100,000) and the modification was required, or was made for the purposes of complying with a franchisor’s brand image program, and was approved by the manufacturer, manufacturer branch, distributor, distributor branch, or affiliate.

(d) (1) Fail to pay to a dealer, within 90 days of termination, cancellation, or nonrenewal of a franchise, all of the following:

(A) The dealer cost, plus any charges made by the manufacturer or distributor for vehicle distribution or delivery and the cost of any dealer-installed original equipment accessories, less any amount invoiced to the vehicle and paid by the manufacturer or distributor to the dealer, for all new and undamaged vehicles with less than 500 miles in the dealer’s inventory that were acquired by the dealer from the manufacturer, distributor, or another new motor vehicle dealer franchised to sell vehicles of the same line-make, in the ordinary course of business, within 18 months of termination, cancellation, or nonrenewal of the franchise.

(B) The dealer cost for all unused and undamaged supplies, parts, and accessories listed in the manufacturer’s current parts catalog and in their original packaging, except that sheet metal may be packaged in a comparable substitute for the original package.

(C) The fair market value of each undamaged sign owned by the motor vehicle dealer and bearing a common name, trade name, or trademark of the manufacturer or distributor if acquisition of the sign was required or made a condition of participation in an incentive program by the manufacturer or distributor.

(D) The fair market value of all special tools, computer systems, and equipment that were required or made a condition of participation in an incentive program by the manufacturer or distributor that are in usable condition, excluding normal wear and tear.

(E) The dealer costs of handling, packing, loading, and transporting any items or inventory for repurchase by the manufacturer or distributor.

(2) This subdivision does not apply to a franchisor of a dealer of new recreational vehicles, as defined in subdivision (a) of Section 18010 of the Health and Safety Code.

(3) This subdivision does not apply to a termination that is implemented as a result of the sale of substantially all of the inventory and fixed assets or stock of a franchised dealership if the dealership continues to operate as a franchisee of the same line-make.

(e) (1) (A) Fail to pay to a dealer of new recreational vehicles, as defined in subdivision (a) of Section 18010 of the Health and Safety Code, within 90 days of termination, cancellation, or nonrenewal of a franchise for a recreational vehicle line-make, as defined in Section 3072.5, the dealer cost, plus any charges made by the manufacturer or distributor for vehicle distribution or delivery and the cost of any dealer-installed original equipment accessories, less any amount invoiced to the vehicle and paid by the manufacturer or distributor to the dealer, for a new recreational vehicle when the termination, cancellation, or nonrenewal is initiated by a recreational vehicle manufacturer. This paragraph only applies to new and unused recreational vehicles that do not currently have or have had in the past, material damage, as defined in Section 9990, and that the dealer acquired from the manufacturer, distributor, or another new motor vehicle dealer franchised to sell recreational vehicles of the same line-make in the ordinary course of business within 12 months of the termination, cancellation, or nonrenewal of the franchise.

(B) For those recreational vehicles with odometers, paragraph (1) shall apply to only those vehicles that have no more than 1,500 miles on the odometer, in addition to the number of miles incurred while delivering the vehicle from the manufacturer’s facility that produced the vehicle for delivery to the dealer’s retail location.

(C) Damaged recreational vehicles shall be repurchased by the manufacturer provided there is an offset in value for damages, except recreational vehicles that have or had material damage, as defined in Section 9990, may be repurchased at the manufacturer’s option provided there is an offset in value for damages.

(2) Fail to pay to a dealer of new recreational vehicles, as defined in subdivision (a) of Section 18010 of the Health and Safety Code, within 90 days of termination, cancellation, or nonrenewal of a franchise, all of the following:

(A) The dealer cost for all unused and undamaged supplies, parts, and accessories listed in the manufacturer’s current parts catalog and in their original packaging, except that sheet metal may be packaged in a comparable substitute for the original package.

(B) The fair market value of each undamaged sign owned by the motor vehicle dealer and bearing a common name, trade name, or trademark of the manufacturer or distributor if acquisition of the sign was required or made a condition of participation in an incentive program by the manufacturer or distributor.

(C) The fair market value of all special tools, computer systems, and equipment that were required or made a condition of participation in an incentive program by the manufacturer or distributor that are in usable condition, excluding normal wear and tear.

(D) The dealer costs of handling, packing, loading, and transporting any items or inventory for repurchase by the manufacturer or distributor.

(f) (1) Fail, upon demand, to indemnify any existing or former franchisee and the franchisee’s successors and assigns from any and all damages sustained and attorney’s fees and other expenses reasonably incurred by the franchisee that result from or relate to any claim made or asserted by a third party against the franchisee to the extent the claim results from any of the following:

(A) The condition, characteristics, manufacture, assembly, or design of any vehicle, parts, accessories, tools, or equipment, or the selection or combination of parts or components manufactured or distributed by the manufacturer or distributor.

(B) Service systems, procedures, or methods the franchisor required or recommended the franchisee to use if the franchisee properly uses the system, procedure, or method.

(C) Improper use or disclosure by a manufacturer or distributor of nonpublic personal information obtained from a franchisee concerning any consumer, customer, or employee of the franchisee.

(D) Any act or omission of the manufacturer or distributor for which the franchisee would have a claim for contribution or indemnity under applicable law or under the franchise, irrespective of and without regard to any prior termination or expiration of the franchise.

(E) Any act of the franchisee that was made pursuant to a requirement imposed on the franchisee by the manufacturer or distributor, or affiliate thereof, or by the terms of the franchise or any related agreement or policy.
(2) Require a franchisee to indemnify its franchisor, or any third party, for the actions of the franchisee that were made in furtherance of a franchisor’s policy, program, or requirement.
~~(2)~~

(3) This subdivision does not limit, in any way, the existing rights, remedies, or recourses available to any person who purchases or leases vehicles at retail.

(g) (1) Establish or maintain a performance standard, sales objective, or program for measuring a dealer’s sales, service, or customer service performance that may materially affect the dealer, including, but not limited to, the dealer’s right to payment under any incentive or reimbursement program or establishment of working capital requirements, unless ~~both~~ all of the following requirements are satisfied:

(A) The performance standard, sales objective, or program for measuring dealership sales, service, or customer service performance is reasonable in light of all existing circumstances, including, but not limited to, the following:

(i) Demographics in the dealer’s area of responsibility.

(ii) Geographical and market characteristics in the dealer’s area of responsibility.

(iii) The availability and allocation of vehicles and parts inventory.

(iv) Local and statewide economic circumstances.

(v) Historical sales, service, and customer service performance of the line-make within the dealer’s area of responsibility, including vehicle brand preferences of consumers in the dealer’s area of responsibility.

(B) The performance standard, sales objective, or program for measuring dealership sales, service, or customer service performance is not based, in whole or in part, on the number, amount, or value of retail customer repair orders in a franchisee’s service department.
(C) The performance standard, sales objective, or program for measuring dealership sales, service, or customer service performance is not based, in whole or in part, on the brand or type of parts used in retail customer repair orders.
(D) The performance standard, sales objective, or program for measuring dealership sales, service, or customer service performance does not require a franchisee to advance moneys, pay more than the wholesale price for vehicles or parts, or provide moneys to the franchisor as a condition of or for participation in any incentive or reimbursement program.
~~(B)~~

(E) Within 30 days after a request by the dealer, the manufacturer, manufacturer branch, distributor, distributor branch, or affiliate provides a written summary of the methodology and data used in establishing the performance standard, sales objective, or program for measuring dealership sales or service performance. The summary shall be in detail sufficient to permit the dealer to determine how the standard was established and applied to the dealer.

(2) In any proceeding in which the reasonableness of a performance standard, sales objective, or program for measuring dealership sales, service, or customer service performance is an issue, the manufacturer, manufacturer branch, distributor, distributor branch, or affiliate shall have the burden of proof.

(3) As used in this subdivision, “area of responsibility” shall have the same meaning as defined in subdivision (z) of Section 11713.3.

(h) Restrict the ability of a franchisee to select specific vendors for providing digital services, including, but not limited to, Web site and data management services.
(i) Restrict, limit, or discourage a franchisee from checking or verifying the applicability of a service bulletin or campaign to any vehicle.
(j) As used in this section, the following terms have the following meanings:
(1) “Affiliate” means a person who directly or indirectly through one or more intermediaries, controls, is controlled by, or is under the common direction and control with, another person. “Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of any person.
(2) “Facility” or “facilities” includes, but is not limited to, premises, places, buildings, or structures.

LegiScan Search

View Top 50 Searches

LegiScan Info

2024 Schedules

Price List

Voter Registration

Governor Deadlines &
Effective Dates

LegiScan Trends

View Top 50 National

FL H0293 Hurricane Protections for Homeowners' Associations

AZ SB1508 Licensure; dietitian nutritionists

OK SB1391 Oklahoma Water Resources Board; creating the Arkansas River Levee Improvement...

AL HB104 Crimes and offenses, further provides for the definition of "sexual co...

NY A09707 Allows the city of Syracuse, in the county of Onondaga, to impose a hotel...

US HCR100 Directing the Clerk of the House of Representatives to make a correction...

IA HF2299 A bill for an act relating to open records requests.

NJ A2196 Requires outdoor lighting fixtures installed or replaced by, or on behalf...

AL HB304 Calhoun County, repealed rules related to the Civil Service Board of the...

AZ HCR2058 Legislative districts; population; census; citizenship

Main menu