Bill Text: TX SB529 | 2011-2012 | 82nd Legislature | Enrolled

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Bill Title: Relating to the regulation of motor vehicle dealers, manufacturers, distributors, and representatives.

Sponsorship: Moderate Partisan Bill (Republican 6-1)

Status: (Passed) 2011-05-27 - Effective on 9/1/11 [SB529 Detail]

Download: Texas-2011-SB529-Enrolled.html

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S.B. No. 529

AN ACT
relating to the regulation of motor vehicle dealers, manufacturers,
distributors, and representatives.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2301.002, Occupations Code, is amended
by adding Subdivision (27-a) to read as follows:
(27-a) "Property use agreement" means a contract,
other than a franchise, between a franchised dealer and a
manufacturer, distributor, or representative that grants the
manufacturer, distributor, or representative the right to regulate
the franchised dealer's use of the dealership and other facilities
covered by the franchise.
SECTION 2. Section 2301.359, Occupations Code, is amended
by amending Subsection (e) and adding Subsections (g), (h), and (i)
to read as follows:
(e) A manufacturer or distributor may not unreasonably
withhold approval of an application filed under Subsection (a).
[It is unreasonable for a manufacturer or distributor to reject a
prospective transferee who is of good moral character and who meets
the written, reasonable, and uniformly applied standards or
qualifications, if any, of the manufacturer or distributor relating
to the prospective transferee's business experience and financial
qualifications.]
(g) In determining whether to approve an application filed
under Subsection (a), a manufacturer or distributor may consider:
(1) the prospective transferee's financial and
operational performance as a franchised dealer, if the prospective
transferee is or has been a franchised dealer;
(2) the prospective transferee's moral character; or
(3) the extent to which a prospective transferee
satisfies any criteria developed by the manufacturer or distributor
and made available to the prospective transferee, specifically to
determine the business experience and financial qualifications of a
prospective transferee.
(h) A manufacturer or distributor may consider the criteria
developed under Subsection (g)(3) only if the criteria are in
writing, are reasonable, and are uniformly applied in similar
situations.
(i) It is unreasonable for a manufacturer or distributor to
reject a prospective transferee who is of good moral character and
who satisfies the criteria developed under Subsection (g)(3).
SECTION 3. Subsection (b), Section 2301.465, Occupations
Code, is amended to read as follows:
(b) Notwithstanding the terms of any franchise, after the
termination of a franchise, a manufacturer, distributor, or
representative shall pay to a franchised dealer or any lienholder,
in accordance with the interest of each, the following amounts:
(1) the dealer cost of each new motor vehicle in the
dealer's inventory with mileage of 5,000 miles or less, exclusive
of mileage placed on the vehicle before it was delivered to the
dealer, reduced by the net discount value of each vehicle, except
that if a vehicle cannot be reduced by the net discount value, the
manufacturer or distributor shall pay the dealer the net cost of the
vehicle;
(2) the dealer cost of each new, unused, undamaged,
and unsold part or accessory that:
(A) is in the current parts catalogue and is
still in the original, resalable merchandising package and in an
unbroken lot, except in the case of sheet metal, a comparable
substitute for the original package may be used; and
(B) was purchased by the dealer either directly
from the manufacturer or distributor or from an outgoing authorized
dealer as a part of the dealer's initial inventory;
(3) the fair market value of each undamaged sign owned
by the dealer that bears a trademark or tradename used or claimed by
the manufacturer, distributor, or representative and that was
purchased from or at the request of the manufacturer, distributor,
or representative;
(4) the fair market value of all special tools, data
processing equipment, and automotive service equipment owned by the
dealer that:
(A) were recommended in writing and designated as
special tools and equipment;
(B) were purchased from or at the request of the
manufacturer, distributor, or representative; and
(C) are in usable and good condition except for
reasonable wear and tear; [and]
(5) the cost of transporting, handling, packing,
storing, and loading any property subject to repurchase under this
section; and
(6) the depreciated value of computer software that
was recommended and required in writing by the manufacturer,
distributor, or representative.
SECTION 4. Subchapter J, Chapter 2301, Occupations Code, is
amended by adding Section 2301.4651 to read as follows:
Sec. 2301.4651. ADDITIONAL PAYMENT TO FRANCHISED DEALER IN
CERTAIN SITUATIONS. (a) This section applies to a manufacturer,
distributor, or representative that:
(1) terminates or discontinues a franchise by any
means without complying with Section 2301.453; or
(2) regardless of whether the manufacturer,
distributor, or representative complies with Section 2301.453,
terminates or discontinues a franchise by:
(A) discontinuing a line-make;
(B) ceasing to do business in this state; or
(C) changing the distributor or method of
distribution of its products in this state.
(b) In addition to the duties placed on a manufacturer,
distributor, or representative by Section 2301.465, a
manufacturer, distributor, or representative to whom this section
applies shall pay to the franchised dealer the following amounts as
applicable:
(1) either:
(A) the dealer's construction costs for a new
dealership completed in the two years preceding the date of the
termination or discontinuance described by Subsection (a); or
(B) if the dealer does not have any costs
described by Paragraph (A), the fair monthly rental value of the
dealership payable in cash each month beginning on the first day of
the first month following the date of the termination or
discontinuance described by Subsection (a) and ending on the
earlier of:
(i) the first anniversary of the
termination or discontinuance date; or
(ii) the date on which the dealer no longer
owns the dealership;
(2) the dealer's costs for upgrading or substantially
altering a dealership if the upgrades or alterations were completed
or added in the two years preceding the date of the termination or
discontinuance described by Subsection (a); and
(3) an amount equal to the value of the goodwill
associated with the franchise as it existed on the day before the
earlier of:
(A) the date of the termination or discontinuance
described by Subsection (a); or
(B) the date on which the manufacturer,
distributor, or representative announced its intention to
terminate or discontinue the franchise in a manner described by
Subsection (a).
(c) A franchised dealer receiving money under Subsection
(b)(1)(B) shall:
(1) make a reasonable effort to earn income from a
dealership after a termination or discontinuance described by
Subsection (a); and
(2) inform the manufacturer, distributor, or
representative of the dealer's efforts under Subdivision (1) and of
any income earned from the dealership.
(d) The amounts to be paid under Subsection (b)(1) or (2) to
the dealer by a manufacturer, distributor, or representative shall
be based on the percentage of the total square footage of the
dealership attributable to sales, service, and parts suggested by a
manufacturer or distributor and allocated to the franchise being
terminated or discontinued at the time of the termination or
discontinuance.
(e) A franchised dealer receiving money under Subsection
(b)(1) or (2) shall mitigate damages by listing the dealership for
lease or sublease with a real estate broker licensed under Chapter
1101 not later than the 30th day after the effective date of the
termination or discontinuance described by Subsection (a) and shall
reasonably cooperate with the broker in the performance of the
broker's duties.
(f) A manufacturer, distributor, or representative may
reduce the amount of a payment made to a franchised dealer under
Subsection (b)(1)(B) by the amount of any income earned by the
dealer from the dealership during the month preceding the payment.
(g) The manufacturer, distributor, or representative, as
appropriate, shall pay any amount described by Subsection
(b)(1)(A), (b)(2), or (b)(3) not later than the 90th day after the
date of the termination or discontinuance described by Subsection
(a).
(h) An amount payable under Subsection (b)(1)(A) or (b)(2)
does not include any tax depreciation benefit received by the
franchised dealer or any amount previously paid to the franchised
dealer by the manufacturer, distributor, or representative to
subsidize the costs incurred by the dealer in performing the
activities described by Subsection (b)(1)(A) or (b)(2).
SECTION 5. Section 2301.467, Occupations Code, is amended
by amending Subsections (b) and (c) and adding Subsections (b-1)
and (b-2) to read as follows:
(b) Notwithstanding the terms of any franchise, a
manufacturer, distributor, or representative may not unreasonably
require a franchised dealer to relocate, or to replace or
substantially change, alter, or remodel the dealer's facilities.
Except as provided by Subsections (b-1) and (b-2) [For purposes of
this subsection], an act is reasonable if it is justifiable in light
of current and reasonably foreseeable projections of economic
conditions, financial expectations, and the market for new motor
vehicles in the relevant market area.
(b-1) Except as necessary to comply with health or safety
laws or to comply with technology requirements necessary to sell or
service a line-make, it is unreasonable for a manufacturer,
distributor, or representative to require a franchised dealer to
construct a new dealership or to substantially change, alter, or
remodel an existing dealership before the 10th anniversary of the
date the construction of the dealership at that location was
completed if the construction was in substantial compliance with
standards or plans provided by a manufacturer, distributor, or
representative or through a subsidiary or agent of the
manufacturer, distributor, or representative.
(b-2) Except as necessary to comply with health or safety
laws or to comply with technology requirements necessary to sell or
service a line-make, it is unreasonable for a manufacturer,
distributor, or representative to require a franchised dealer to
substantially change, alter, or remodel an existing dealership
before the 10th anniversary of the date that a prior change,
alteration, or remodel of the dealership at that location was
completed if the change, alteration, or remodel was in substantial
compliance with standards or plans provided by a manufacturer,
distributor, or representative or through a subsidiary or agent of
the manufacturer, distributor, or representative.
(c) This [The prohibitions under this] section applies
[apply] to the relationship between a manufacturer, distributor, or
representative and:
(1) a current franchisee of the manufacturer,
distributor, or representative; [or]
(2) a successor of a current franchisee of the
manufacturer, distributor, or representative; or
(3) a franchised dealer who is seeking to become a
franchisee of the manufacturer, distributor, or representative.
SECTION 6. Subchapter J, Chapter 2301, Occupations Code, is
amended by adding Section 2301.4671 to read as follows:
Sec. 2301.4671. FRANCHISE PROVISION ESTABLISHING
RESTRICTION ON DEALER'S USE OF DEALERSHIP PROPERTY.
Notwithstanding the terms of any franchise, a manufacturer,
distributor, or representative may not:
(1) unreasonably limit or impair the ability of a
franchised dealer to use the dealership property as the dealer
considers appropriate;
(2) control the use of the dealership property after
the franchise is terminated or discontinued; or
(3) at any time exercise exclusive control over the
use of the dealership property.
SECTION 7. Section 2301.468, Occupations Code, is amended
to read as follows:
Sec. 2301.468. INEQUITABLE TREATMENT OF [DISCRIMINATION
AMONG] DEALERS OR FRANCHISEES. Notwithstanding the terms of a
franchise, a [A] manufacturer, distributor, or representative may
not[:
[(1) notwithstanding the terms of any franchise,
directly or indirectly discriminate against a franchised dealer or
otherwise] treat franchised dealers of the same line-make
differently as a result of the application of a formula or other
computation or process intended to gauge the performance of a
dealership or otherwise enforce standards or guidelines applicable
to its franchised dealers in the sale of motor vehicles if, in the
application of the standards or guidelines, the franchised dealers
are treated unfairly or inequitably[; or
[(2) discriminate unreasonably between or among
franchisees] in the sale of a motor vehicle owned by the
manufacturer or distributor.
SECTION 8. Subchapter J, Chapter 2301, Occupations Code, is
amended by adding Section 2301.4749 to read as follows:
Sec. 2301.4749. MANUFACTURER OR DISTRIBUTOR INCENTIVE
PROGRAMS: PAYMENT TO DEALER. (a) A manufacturer or distributor
shall pay a dealer's claim filed under a manufacturer or
distributor incentive program not later than the 30th day after the
date the claim is approved.
(b) A claim is considered approved unless a manufacturer or
distributor rejects the claim not later than the 31st day after the
date of receipt of the claim by the manufacturer or distributor.
(c) The manufacturer or distributor shall provide the
dealer with written notice of a rejection of a claim and the reasons
for the rejection.
SECTION 9. The heading to Section 2301.475, Occupations
Code, is amended to read as follows:
Sec. 2301.475. MANUFACTURER OR DISTRIBUTOR INCENTIVE
PROGRAMS: AUDIT OR CHARGEBACK.
SECTION 10. Subsection (a), Section 2301.475, Occupations
Code, is amended to read as follows:
(a) Except as provided by Subsection (b), after the first
anniversary of the [ending] date [of] a manufacturer or distributor
pays a claim under Section 2301.4749, the [incentive program, a]
manufacturer or distributor may not:
(1) charge back to a dealer money paid by the
manufacturer or distributor as a result of the incentive program;
(2) charge back to a dealer the cash value of a prize
or other thing of value awarded to the dealer as a result of the
incentive program; or
(3) audit the records of a dealer to determine
compliance with the terms of the incentive program, unless the
manufacturer or distributor has reasonable grounds to believe the
dealer committed fraud with respect to the incentive program.
SECTION 11. Subchapter J, Chapter 2301, Occupations Code,
is amended by adding Sections 2301.480, 2301.481, and 2301.482 to
read as follows:
Sec. 2301.480. DISCLOSURE OF CERTAIN INFORMATION. A
manufacturer, distributor, or representative may not require that a
franchised dealer provide to the manufacturer, distributor, or
representative information regarding a customer, except to the
extent that a specific item of information is necessary:
(1) for the sale or delivery of a new motor vehicle to
a customer;
(2) for reasonable marketing purposes;
(3) to validate a claim and make payment under an
incentive program;
(4) to support a dealer's claim for reimbursement for
repairs performed under a manufacturer's warranty; or
(5) to satisfy a product recall or safety obligation.
Sec. 2301.481. PROPERTY USE AGREEMENT. (a) A
manufacturer, distributor, or representative may not require that a
dealer enter into a property use agreement as a condition of the
manufacturer, distributor, or representative:
(1) entering into a franchise;
(2) approving a franchised dealer's application to add
a line-make;
(3) approving a franchised dealer's application to
relocate a franchise; or
(4) approving a sale or transfer of a dealer,
dealership, or franchise.
(b) The following provisions in a property use agreement are
void and unenforceable:
(1) a limitation on the franchised dealer's ability to
add a line-make; or
(2) a provision that binds a franchised dealer's
successor.
(c) A property use agreement expires on the earlier of:
(1) the date provided by the property use agreement;
or
(2) the termination of the franchise between the
parties to the property use agreement.
(d) This section applies to a subsidiary of, or a person
controlled by, a manufacturer, distributor, or representative.
Sec. 2301.482. CERTAIN PROPERTY USE AGREEMENTS.
(a) Notwithstanding Section 2301.481(b)(1), and subject to this
section, a dealer may enter into a property use agreement for cash
consideration that grants the manufacturer or distributor the
exclusive rights to direct the use of the dealership.
(b) In the event the dealer breaches the terms of the
property use agreement described by Subsection (a) by altering the
use of the property during the term of the agreement in violation of
the agreement, the property use agreement is terminated and the
dealer must reimburse the manufacturer or distributor in an amount
determined by dividing the amount of the manufacturer's or
distributor's cash consideration provided under Subsection (a) by
the market value of the property identified in the original
property use agreement at the time any necessary real estate has
been purchased and any necessary construction has been completed,
and multiplying the resulting quotient by the market value of the
property at the time of the breach.
(c) For purposes of this section, the market value of
property is to be determined by three appraisers chosen as follows:
(1) one selected by the affected manufacturer or
distributor;
(2) one selected by the affected dealer; and
(3) one selected by mutual agreement of the
manufacturer or distributor and the dealer.
SECTION 12. Subsection (a), Section 2301.522, Occupations
Code, is amended to read as follows:
(a) In an action brought against a manufacturer or
distributor under Subchapter J [Sections 2301.451-2301.474] by a
franchised dealer whose franchise provides for arbitration in
compliance with this chapter, the board shall order the parties to
submit the dispute to mediation in the manner provided by this
subchapter.
SECTION 13. Subsection (b), Section 2301.652, Occupations
Code, is amended to read as follows:
(b) Except as provided by Subsection (c) and Sections
2301.6521 and 2301.6522, a person has standing under this section
to protest an application to establish or relocate a dealership if
the person filing the protest is a franchised dealer of the same
line-make whose dealership is located:
(1) in the county in which the proposed dealership is
to be located; or
(2) within a 15-mile radius of the proposed
dealership.
SECTION 14. Subchapter N, Chapter 2301, Occupations Code,
is amended by adding Sections 2301.6521 and 2301.6522 to read as
follows:
Sec. 2301.6521. RIGHT TO PROTEST: CERTAIN RELOCATIONS.
(a) In this section, "affected county" means:
(1) a county with a population of one million or more;
or
(2) a county with a population of 500,000 or more but
less than one million that is adjacent to a county with a population
of one million or more.
(b) Notwithstanding any other provision of this chapter and
except as provided by Subsection (d), a franchised dealer may
protest an application to relocate a dealership from a location in
an affected county to a location within the same affected county or
an adjacent affected county only if the dealer is:
(1) a dealer of the same line-make as the relocating
dealership and is in the affected county where the proposed
dealership is being relocated and is nearest to the proposed
relocation site, if no dealership of the same line-make as the
relocating dealership is located within 15 miles of the proposed
relocation site; or
(2) a dealer of the same line-make as the relocating
dealership whose dealership location is within 15 miles of the
proposed relocation site.
(c) If more than one dealership location is an equal
distance from the proposed relocation site and each dealer and
dealership location satisfies the requirements of Subsection
(b)(1), each dealer may protest the relocation under Subsection
(b)(1).
(d) A dealer may not protest an application to relocate a
dealership under this section if the proposed relocation site is
two miles or less from the dealership's current location.
Sec. 2301.6522. RIGHT TO PROTEST: ECONOMICALLY IMPAIRED
DEALER. (a) In this section, "economically impaired dealer" means
a franchised dealer whose profitability has been, or is reasonably
expected to be, substantially reduced at the dealer's current
location, with no reasonable expectation of substantial
improvement at that location, due to:
(1) a natural disaster;
(2) the exercise of eminent domain authority with
respect to the dealership; or
(3) the sale of all or part of the dealership to a
governmental entity under threat of the exercise of eminent domain
authority.
(b) Notwithstanding any other provision of this chapter and
except as provided by Subsections (c) and (d), a dealer may not
protest the relocation of an economically impaired dealer if:
(1) the relocation is reasonably expected to be
completed before the first anniversary of the date of the event
described by Subsection (a); and
(2) the proposed relocation site is two miles or less
from the economically impaired dealer's current location.
(c) A dealer of the same line-make as an economically
impaired dealer whose dealership is nearest to the proposed
relocation site of the economically impaired dealer may protest the
relocation if the proposed relocation site is more than two miles
closer to the protesting dealer's dealership than the site of the
economically impaired dealer's current location.
(d) If more than one dealership location is an equal
distance from the proposed relocation site and each dealer and
dealership location satisfies the requirements of Subsection (c),
each dealer may protest the relocation under Subsection (c).
SECTION 15. Subsection (a), Section 2301.805, Occupations
Code, is amended to read as follows:
(a) Notwithstanding any other law, including Subchapter E,
Chapter 17, Business & Commerce Code, in addition to the other
remedies provided by this subchapter, a person may institute an
action under Subchapter E, Chapter 17, Business & Commerce Code, or
any successor statute to that subchapter, and is entitled to any
procedure or remedy under that subchapter, if the person:
(1) has sustained damages as a result of a violation of
Sections 2301.351-2301.354 or Section 2301.357; or
(2) is a franchised dealer who has sustained damages
as a result of a violation of:
(A) Subchapter J of this chapter [Sections
2301.451-2301.474]; or
(B) Subchapter E, Chapter 17, Business & Commerce
Code.
SECTION 16. The change in law made by this Act applies only
to an agreement entered into or renewed under Chapter 2301,
Occupations Code, on or after the effective date of this Act. An
agreement entered into or renewed before the effective date of this
Act is governed by the law in effect on the date the agreement was
entered into or renewed, and the former law is continued in effect
for that purpose.
SECTION 17. This Act takes effect September 1, 2011.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 529 passed the Senate on
April 28, 2011, by the following vote: Yeas 29, Nays 0, two
present not voting.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 529 passed the House on
May 10, 2011, by the following vote: Yeas 143, Nays 0, two
present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor