SB601 SUB1 eng2
Senate Bill 601 History
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Key: Green = existing Code. Red = new code to be enacted
ENGROSSED*
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 601
(By Senators Jenkins, Plymale, Kessler, Chafin, Unger, Oliverio,
Bailey, Minard, Green, Caruth, Stollings, Deem, Bowman, Hall,
Love, Yoder, Barnes, Helmick, Fanning, Foster, Hunter, Prezioso,
Edgell, McKenzie, Guills and White)
____________
[Originating in the Committee on the Judiciary;
reported February 21, 2007.]
____________
A BILL
to amend and reenact §
17A
-6A-3, 17-6A-10 and §17A-6A-12
of
the Code of West Virginia, 1931, as amended
, all relating to
the establishment or relocation of additional motor vehicle
dealers within a relevant market area; redefining "relevant
market area"; creating exceptions for certain relocations and
transfers; exceptions for purposes of adding dealerships to an
area; and providing notice requirements to existing dealers.
Be it enacted by the Legislature of West Virginia:
That §
17A
-6A-3, 17A-6A-10
and §
17A
-6A-12
of the Code of West
Virginia, 1931, as amended, be amended and reenacted
, all to read
as follows:
ARTICLE 6A. MOTOR VEHICLE DEALERS, DISTRIBUTORS, WHOLESALERS AND MANUFACTURERS.
§17A-6A-3. Definitions.
For the purposes of this article, the words and phrases
defined in this section have the meanings ascribed to them, except
where the context clearly indicates a different meaning.
(1) "Dealer Agreement" means the franchise, agreement or
contract in writing between a manufacturer, distributor and a new
motor vehicle dealer which purports to establish the legal rights
and obligations of the parties to the agreement or contract with
regard to the purchase, lease or sale of new motor vehicles,
accessories, service and sale of parts for motor vehicles.
(2) "Designated family member" means the spouse, child,
grandchild, parent, brother or sister of a deceased new motor
vehicle dealer who is entitled to inherit the deceased dealer's
ownership interest in the new motor vehicle dealership under the
terms of the dealer's will, or who has otherwise been designated in
writing by a deceased dealer to succeed the deceased dealer in the
new motor vehicle dealership, or is entitled to inherit under the
laws of intestate succession of this state. With respect to an
incapacitated new motor vehicle dealer, the term means the person
appointed by a court as the legal representative of the new motor
vehicle dealer's property. The term also includes the appointed
and qualified personal representative and the testamentary trustee
of a deceased new motor vehicle dealer. However, the term means
only that designated successor nominated by the new motor vehicle dealer in a written document filed by the dealer with the
manufacturer or distributor, if such a document is filed.
(3) "Distributor" means any person, resident or nonresident,
who, in whole or in part, offers for sale, sells or distributes any
new motor vehicle to a new motor vehicle dealer or who maintains a
factor representative, resident or nonresident, or who controls any
person, resident or nonresident, who, in whole or in part, offers
for sale, sells or distributes any new motor vehicle to a new motor
vehicle dealer.
(4) "Established place of business" means a permanent,
enclosed commercial building located within this state easily
accessible and open to the public at all reasonable times and at
which the business of a new motor vehicle dealer, including the
display and repair of motor vehicles, may be lawfully carried on in
accordance with the terms of all applicable building codes, zoning
and other land-use regulatory ordinances and as licensed by the
Division of Motor Vehicles.
(5) "Factory branch" means an office maintained by a
manufacturer or distributor for the purpose of selling or offering
for sale vehicles to a distributor, wholesaler or new motor vehicle
dealer, or for directing or supervising, in whole or in part,
factory or distributor representatives. The term includes any
sales promotion organization maintained by a manufacturer or
distributor which is engaged in promoting the sale of a particular
make of new motor vehicles in this state to new motor vehicle
dealers.
(6) "Factory representative" means an agent or employee of a
manufacturer, distributor or factory branch retained or employed
for the purpose of making or promoting the sale of new motor
vehicles or for supervising or contracting with new motor vehicle
dealers or proposed motor vehicle dealers.
(7) "Good faith" means honesty in fact and the observation of
reasonable commercial standards of fair dealing in the trade.
(8) "Manufacturer" means any person who manufactures or
assembles new motor vehicles; or any distributor, factory branch or
factory representative.
(9) "Motor vehicle" means that term as defined in section one,
article one of this chapter, including motorcycle and recreational
vehicle as defined in subsections (c) and (nn), respectively, of
said section, but not including a tractor or farm equipment.
(10) "New motor vehicle" means a motor vehicle which is in the
possession of the manufacturer, distributor or wholesaler, or has
been sold only to a new motor vehicle dealer and on which the
original title has not been issued from the new motor vehicle
dealer.
(11) "New motor vehicle dealer" means a person who holds a
dealer agreement granted by a manufacturer or distributor for the
sale of its motor vehicles, who is engaged in the business of
purchasing, selling, leasing, exchanging or dealing in new motor
vehicles, service of said vehicles, warranty work and sale of parts
who has an established place of business in this state and is
licensed by the Division of Motor Vehicles.
(12) "Person" means a natural person, partnership,
corporation, association, trust, estate or other legal entity.
(13) "Proposed new motor vehicle dealer" means a person who
has an application pending for a new dealer agreement with a
manufacturer or distributor. Proposed motor vehicle dealer does
not include a person whose dealer agreement is being renewed or
continued.
(14) "Relevant market area" means the area located within a
fifteen twenty air-mile radius around an existing same line-make
new motor vehicle dealership.
§17A-6A-10. Prohibited practices.
(1) A manufacturer or distributor may not require any new
motor vehicle dealer in this state to do any of the following:
(a) Order or accept delivery of any new motor vehicle, part or
accessory of the vehicle, equipment or any other commodity not
required by law which was not voluntarily ordered by the new motor
vehicle dealer. This section does not prevent the manufacturer or
distributor from requiring that new motor vehicle dealers carry a
reasonable inventory of models offered for sale by the manufacturer
or distributor;
(b) Order or accept delivery of any new motor vehicle with
special features, accessories or equipment not included in the list
price of the new motor vehicle as publicly advertised by the
manufacturer or distributor;
(c) Unreasonably participate monetarily in any advertising
campaign or contest, or purchase any promotional materials, display devices, display decorations, brand signs and dealer
identification, nondiagnostic computer equipment and displays, or
other materials at the expense of the new motor vehicle dealer;
(d) Enter into any agreement with the manufacturer or
distributor or do any other act prejudicial to the new motor
vehicle dealer by threatening to terminate a dealer agreement,
limit inventory, invoke sales and service warranty or other types
of audits or any contractual agreement or understanding existing
between the dealer and the manufacturer or distributor. Notice in
good faith to any dealer of the dealer's violation of any terms or
provisions of the dealer agreement is not a violation of this
article;
(e) Change the capital structure of the new motor vehicle
dealership or the means by or through which the dealer finances the
operation of the dealership if the dealership at all times meets
any reasonable capital standards determined by the manufacturer in
accordance with uniformly applied criteria;
(f) Refrain from participation in the management of,
investment in or the acquisition of any other line of new motor
vehicle or related products, provided that the dealer maintains a
reasonable line of credit for each make or line of vehicle, remains
in compliance with reasonable facilities requirements and makes no
change in the principal management of the dealer. Notwithstanding
the terms of any franchise agreement, a manufacturer or distributor
may not enforce any requirements, including facility requirements,
that a new motor vehicle dealer establish or maintain exclusive facilities, personnel or display space, when the requirements are
unreasonable considering current economic conditions and are not
otherwise justified by reasonable business considerations. The
burden of proving that current economic conditions or reasonable
business considerations justify exclusive facilities is on the
manufacturer or distributor and must be proven by a preponderance
of the evidence;
(g) Change the location of the new motor vehicle dealership or
make any substantial alterations to the dealership premises, where
to do so would be unreasonable; and
(h) Prospectively assent to a release, assignment, novation,
waiver or estoppel which would relieve any person from liability
imposed by this article or require any controversy between a new
motor vehicle dealer and a manufacturer or distributor to be
referred to a person other than the duly constituted courts of the
state or the United States, if the referral would be binding upon
the new motor vehicle dealer.
(2) A manufacturer or distributor may not do any of the
following:
(a) Fail to deliver new motor vehicles or new motor vehicle
parts or accessories within a reasonable time and in reasonable
quantities relative to the new motor vehicle dealer's market area
and facilities, unless the failure is caused by acts or occurrences
beyond the control of the manufacturer or distributor, or unless
the failure results from an order by the new motor vehicle dealer
in excess of quantities reasonably and fairly allocated by the manufacturer or distributor. No manufacturer or distributor may
penalize a new motor vehicle dealer for an alleged failure to meet
sales quotas where the alleged failure is due to actions of the
manufacturer or distributor;
(b) Refuse to disclose to a new motor vehicle dealer the
method and manner of distribution of new motor vehicles by the
manufacturer or distributor, including any numerical calculation or
formula used, nationally or within the dealer's market, to make the
allocations;
(c) Refuse to disclose to a new motor vehicle dealer the total
number of new motor vehicles of a given model, which the
manufacturer or distributor has sold during the current model year
within the dealer's marketing district, zone or region, whichever
geographical area is the smallest;
(d) Increase prices of new motor vehicles which the new motor
vehicle dealer had ordered and then eventually delivered to the
same retail consumer for whom the vehicle was ordered, if the order
was made prior to the dealer's receipt of the written official
price increase notification. A sales contract signed by a private
retail consumer and binding on the dealer is evidence of each
order. In the event of manufacturer or distributor price
reductions or cash rebates, the amount of any reduction or rebate
received by a dealer shall be passed on to the private retail
consumer by the dealer. Any price reduction in excess of five
dollars shall apply to all vehicles in the dealer's inventory which
were subject to the price reduction. A price difference applicable to new model or series motor vehicles at the time of the
introduction of the new models or the series is not a price
increase or price decrease. This subdivision does not apply to
price changes caused by the following:
(i) The addition to a motor vehicle of required or optional
equipment pursuant to state or federal law;
(ii) In the case of foreign made vehicles or components,
revaluation of the United States dollar; or
(iii) Any increase in transportation charges due to an
increase in rates charged by a common carrier and transporters;
(e) Offer any refunds or other types of inducements to any
dealer for the purchase of new motor vehicles of a certain
line-make to be sold to this state or any political subdivision of
this state without making the same offer available upon request to
all other new motor vehicle dealers of the same line-make;
(f) Release to an outside party, except under subpoena or in
an administrative or judicial proceeding to which the new motor
vehicle dealer or the manufacturer or distributor are parties, any
business, financial or personal information which has been provided
by the dealer to the manufacturer or distributor, unless the new
motor vehicle dealer gives his or her written consent;
(g) Deny a new motor vehicle dealer the right to associate
with another new motor vehicle dealer for any lawful purpose;
(h) Establish a new motor vehicle dealership which would
unfairly compete with a new motor vehicle dealer of the same
line-make operating under a dealer agreement with the manufacturer or distributor in the relevant market area. A manufacturer or
distributor shall not be considered to be unfairly competing if the
manufacturer or distributor is:
(i) Operating a dealership temporarily for a reasonable
period.
(ii) Operating a dealership which is for sale at a reasonable
price.
(iii) Operating a dealership with another person who has made
a significant investment in the dealership and who will acquire
full ownership of the dealership under reasonable terms and
conditions.
(i) A manufacturer may not, except as provided by this
section, directly or indirectly:
(i) Own an interest in a dealer or dealership;
(ii) Operate a dealership; or
(iii) Act in the capacity of a new motor vehicle dealer:
Provided, That a manufacturer may own an interest, other than stock
in a publicly held company, solely for investment purposes.
(j) A manufacturer or distributor may own an interest in a
franchised dealer, or otherwise control a dealership, for a period
not to exceed twelve months from the date the manufacturer or
distributor acquires the dealership if:
(i) The person from whom the manufacturer or distributor
acquired the dealership was a franchised dealer; and
(ii) The dealership is for sale by the manufacturer or
distributor at a reasonable price and on reasonable terms and
conditions;
(k) The twelve-month period may be extended for an additional
twelve months. Notice of any such extension of the original
twelve-month period must be given to any dealer of the same
line-make whose dealership is located in the same county, or within
fifteen twenty air miles of, the dealership owned or controlled by
the manufacturer or distributor prior to the expiration of the
original twelve-month period. Any dealer receiving the notice may
protest the proposed extension within thirty days of receiving
notice by bringing a declaratory judgment action in the circuit
court for the county in which the new motor vehicle dealer is
located to determine whether good cause exists for the extension;
(l) For the purpose of broadening the diversity of its dealer
body and enhancing opportunities for qualified persons who are part
of a group who have historically been under represented in its
dealer body, or other qualified persons who lack the resources to
purchase a dealership outright, but for no other purpose, a
manufacturer or distributor may temporarily own an interest in a
dealership if the manufacturer's or distributor's participation in
the dealership is in a bona fide relationship with a franchised
dealer who:
(i) Has made a significant investment in the dealership,
subject to loss;
(ii) Has an ownership interest in the dealership; and
(iii) Operates the dealership under a plan to acquire full
ownership of the dealership within a reasonable time and under
reasonable terms and conditions;
(m) Unreasonably withhold consent to the sale, transfer or
exchange of the dealership to a qualified buyer capable of being
licensed as a new motor vehicle dealer in this state;
(n) Fail to respond in writing to a request for consent to a
sale, transfer or exchange of a dealership within sixty days after
receipt of a written application from the new motor vehicle dealer
on the forms generally utilized by the manufacturer or distributor
for such purpose and containing the information required therein.
Failure to respond to the request within the sixty days is consent;
(o) Unfairly prevent a new motor vehicle dealer from receiving
reasonable compensation for the value of the new motor vehicle
dealership;
(p) Audit any motor vehicle dealer in this state for warranty
parts or warranty service compensation, service compensation,
service incentives, rebates or other forms of sales incentive
compensation more than twelve months after the claim for payment or
reimbursement has been made by the automobile dealer: Provided,
That the provisions of this subsection does not apply where a claim
is fraudulent. In addition, the manufacturer or distributor is
responsible for reimbursing the audited dealer for all copying,
postage and administrative costs incurred by the dealer during the
audit. Any charges to a dealer as a result of the audit must be
separately billed to the dealer;
(q) Unreasonably restrict a dealer's ownership of a dealership
through noncompetition covenants, site control, sublease,
collateral pledge of lease, right of first refusal, option to
purchase, or otherwise. A right of first refusal is created when:
(i) A manufacturer has a contractual right of first refusal to
acquire the new motor vehicle dealer's assets where the dealer
owner receives consideration, terms and conditions that are either
the same as or better than those they have already contracted to
receive under the proposed change of more than fifty percent of the
dealers's ownership.
(ii) The proposed change of the dealership's ownership or the
transfer of the new vehicle dealer's assets does not involve the
transfer of assets or the transfer or issuance of stock by the
dealer or one of the dealer's owners to one of the following:
(A) A designated family member of one or more of the dealer
owners;
(B) A manager employed by the dealer in the dealership during
the previous five years and who is otherwise qualified as a dealer
operator;
(C) A partnership or corporation controlled by a designated
family member of one of the dealers;
(D) A trust established or to be established:
(i) For the purpose of allowing the new vehicle dealer to
continue to qualify as such under the manufacturer's or
distributor's standards; or
(ii) To provide for the succession of the franchise agreement
to designated family members or qualified management in the event
of death or incapacity of the dealer or its principle owner or
owners.
(iii) Upon exercising the right of first refusal by a
manufacturer, it eliminates any requirement under its dealer
agreement or other applicable provision of this statute that the
manufacturer evaluate, process or respond to the underlying
proposed transfer by approving or rejecting the proposal, is not
subject to challenge as a rejection or denial of the proposed
transfer by any party.
(iv) Except as otherwise provided in this subsection, the
manufacturer or distributor agrees to pay the reasonable expenses,
including reasonable out-of-pocket professional fees which shall
include, but not be limited to, accounting, legal or appraisal
services fees that are incurred by the proposed owner or transferee
before the manufacturer's or distributor's exercise of its right of
first refusal. Payment of the expenses and fees for professional
services are not required if the dealer fails to submit an
accounting of those expenses and fees within twenty days of the
dealer's receipt of the manufacturer's or distributor's written
request for such an accounting. Such a written account of fees and
expenses may be requested by a manufacturer or distributor before
exercising its right of first refusal;
(r) Except for experimental low-volume not-for-retail sale
vehicles, cause warranty and recall repair work to be performed by
any entity other than a new motor vehicle dealer;
(s) Make any material change in any franchise agreement
without giving the new motor vehicle dealer written notice by
certified mail of the change at least sixty days prior to the
effective date of the change;
(t) Fail to reimburse a new motor vehicle dealer, at the
dealers regular rate, or the full and actual cost of providing a
loaner vehicle to any customer who is having a vehicle serviced at
the dealership if the provision of the loaner vehicle is required
by the manufacturer;
(u) Compel a new motor vehicle dealer through its finance
subsidiaries to agree to unreasonable operating requirements or to
directly or indirectly terminate a franchise through the actions of
a finance subsidiary of the franchisor. This subsection does not
limit the right of a finance subsidiary to engage in business
practices in accordance with the usage of trade in retail or
wholesale vehicle financing;
(v) Discriminate directly or indirectly between dealers on
vehicles of like grade or quantity where the effect of the
discrimination would substantially lessen competition; and
(w) Use or employ any performance standard that is not fair
and reasonable and based upon accurate and verifiable data made
available to the dealer.
(3) A manufacturer or distributor, either directly or through
any subsidiary, may not terminate, cancel, fail to renew or
discontinue any lease of the new motor vehicle dealer's established
place of business except for a material breach of the lease.
(4) Except as may otherwise be provided in this article, no
manufacturer or franchisor shall sell, directly or indirectly, any
new motor vehicle to a consumer in this state, except through a new
motor vehicle dealer holding a franchise for the line-make covering
such new motor vehicle. This subsection shall not apply to
manufacturer or franchisor sales of new motor vehicles to
charitable organizations, qualified vendors or employees of the
manufacturer or franchisor.
(5) Except when prevented by an act of God, labor strike,
transportation disruption outside the control of the manufacturer
or time of war, a manufacturer or distributor may not refuse or
fail to deliver, in reasonable quantities and within a reasonable
time, to a dealer having a franchise agreement for the retail sale
of any motor vehicle sold or distributed by the manufacturer, any
new motor vehicle or parts or accessories to new motor vehicles as
are covered by the franchise if the vehicles, parts and accessories
are publicly advertised as being available for delivery or are
actually being delivered. All models offered for sale by the
manufacturer, without any enrollment, surcharge, unreasonable
facility or building or any other unreasonable type of upgrade
requirement or acquisition fee, shall be available to the franchised dealer at no additional cost for that particular model
of vehicle.
§17A-6A-12. Establishment and relocation or establishment of
additional dealers.
(1) As used in this section, "relocate" and "relocation" do
not include the relocation of a new motor vehicle dealer within two
four miles of its established place of business or an existing new
motor vehicle dealer sells or transfers the dealership to a new
owner and the successor new motor vehicle dealership owner
relocates to a location within four miles of the seller's last open
new motor vehicle dealership location. The relocation of a new
motor vehicle dealer to a site within the area of sales
responsibility assigned to that dealer by the manufacturing branch
or distributor may not be within six air miles of another dealer of
the same line-make.
(2)Before a manufacturer or distributor enters into a dealer
agreement establishing or relocating a new motor vehicle dealer
within a relevant market area where the same line-make is
represented, the manufacturer or distributor shall give written
notice to each new motor vehicle dealer of the same line-make in
the relevant market area of its intention to establish an
additional dealer or to relocate an existing dealer within that
relevant market area.
(3) Within sixty days after receiving the notice provided for
in subsection (2) of this section, or within sixty days after the
end of any appeal procedure provided by the manufacturer or distributor, a new motor vehicle dealer of the same line-make
within the affected relative relevant market area may bring a
declaratory judgment action in the circuit court for the county in
which the new motor vehicle dealer is located to determine whether
good cause exists for the establishing or relocating of the a
proposed new motor vehicle dealer: Provided, That a new motor
vehicle dealer of the same line-make within the affected relevant
market area shall not be permitted to bring such an action if the
proposed relocation site would be further from the location of the
new motor vehicle dealer of the same line-make than the location
from which the dealership is being moved. Once an action has been
filed, the manufacturer or distributor may not establish or
relocate the proposed new motor vehicle dealer until the circuit
court has rendered a decision on the matter. An action brought
pursuant to this section shall be given precedence over all other
civil matters on the court's docket. The manufacturer has the
burden of proving that good cause exists for establishing or
relocating a proposed new motor vehicle dealer.
(4) This section does not apply to the reopening in a relevant
market area of a new motor vehicle dealer that has been closed or
sold within the preceding two years if the established place of
business of the new motor vehicle dealer is within two four miles
of the established place of business of the closed or sold new
motor vehicle dealer.
(5) In determining whether good cause exists for establishing
or relocating an additional new motor vehicle dealer for the same line-make, the court shall take into consideration the existing
circumstances, including, but not limited to, the following:
(a) Permanency and amount of the investment, including any
obligations incurred by the dealer in making the investment;
(b) Effect on the retail new motor vehicle business and the
consuming public in the relevant market area;
(c) Whether it is injurious or beneficial to the public
welfare;
(d) Whether the new motor vehicle dealers of the same line-
make in the relevant market area are providing adequate competition
and convenient consumer care for the motor vehicles of that line-
make in the market area, including the adequacy of motor vehicle
sales and qualified service personnel;
(e) Whether the establishment or relocation of the new motor
vehicle dealer would promote competition;
(f) Growth or decline of the population and the number of new
motor vehicle registrations in the relevant market area; and
(g) The effect on the relocating dealer of a denial of its
relocation into the relevant market area.