S.B. 57 Enrolled

1

FRANCHISE LAW AMENDMENTS
2 2008 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Dan R. Eastman
5 House Sponsor: Stephen H. Urquhart
6
7 LONG TITLE
8 General Description:
9 This bill makes changes to Title 13, Chapter 14, New Automobile Franchise Act.
10 Highlighted Provisions:
11 This bill:
12 . defines terms;
13 . adds a member to the Utah Motor Vehicle Franchise Advisory Board;
14 . makes the executive director's decision in an adjudication under the chapter publicly
15 available;
16 . addresses a franchisor's control over a franchisee's place of business;
17 . prohibits discrimination by a franchisor against a franchisee under certain
18 circumstances;
19 . prohibits a franchisor from recovering the cost of a warranty repair through a fee or
20 other charge to the franchisee;
21 . requires a franchisor to meet a higher burden of proof to terminate or relocate a
22 franchise or to establish an additional franchise;
23 . requires the advisory board to consider any negative economic effect on an existing
24 franchisee when evaluating a new or relocated franchise;
25 . addresses a franchisor's obligations when a franchise is terminated or not continued;
26 . allows a private right of action for a violation of the chapter; and
27 . makes technical changes.
28 Monies Appropriated in this Bill:
29 None

30 Other Special Clauses:
31 None
32 Utah Code Sections Affected:
33 AMENDS:
34 13-14-102, as last amended by Laws of Utah 2005, Chapters 167 and 249
35 13-14-103, as last amended by Laws of Utah 2005, Chapter 249
36 13-14-104, as last amended by Laws of Utah 2005, Chapter 249
37 13-14-201, as last amended by Laws of Utah 2005, Chapters 167 and 249
38 13-14-304, as last amended by Laws of Utah 2005, Chapter 249
39 13-14-306, as last amended by Laws of Utah 2005, Chapter 249
40 13-14-307, as last amended by Laws of Utah 1997, Chapter 162
41 ENACTS:
42 13-14-308, Utah Code Annotated 1953
43 13-14-309, Utah Code Annotated 1953
44
45 Be it enacted by the Legislature of the state of Utah:
46 Section 1. Section 13-14-102 is amended to read:
47 13-14-102. Definitions.
48 As used in this chapter:
49 (1) "Advisory board" or "board" means the Utah Motor Vehicle Franchise Advisory
50 Board created in Section 13-14-103 .
51 (2) "Affiliate" has the meaning set forth in Section 16-10a-102 .
52 (3) "Aftermarket product" means any product or service not included in the
53 manufacturer's suggested retail price of the new motor vehicle, as that price appears on the label
54 required by 15 U.S.C. Sec. 1232(f).
55 (4) "Dealership" means a site or location in this state:
56 (a) at which a franchisee conducts the business of a new motor vehicle dealer; and
57 (b) that is identified as a new motor vehicle dealer's principal place of business for

58 licensing purposes under Section 41-3-204 .
59 (5) "Department" means the Department of Commerce.
60 (6) "Executive director" means the executive director of the Department of Commerce.
61 (7) "Franchise" or "franchise agreement" means a written agreement, or in the absence
62 of a written agreement, then a course of dealing or a practice for a definite or indefinite period,
63 in which:
64 (a) a person grants to another person a license to use a trade name, trademark, service
65 mark, or related characteristic; and
66 (b) a community of interest exists in the marketing of new motor vehicles, new motor
67 vehicle parts, and services related to the sale or lease of new motor vehicles at wholesale or
68 retail.
69 (8) "Franchisee" means a person with whom a franchisor has agreed or permitted, in
70 writing or in practice, to purchase, sell, or offer for sale new motor vehicles manufactured,
71 produced, represented, or distributed by the franchisor.
72 (9) "Franchisor" means a person who has, in writing or in practice, agreed with or
73 permits a franchisee to purchase, sell, or offer for sale new motor vehicles manufactured,
74 produced, represented, or distributed by the franchisor, and includes:
75 (a) the manufacturer or distributor of the new motor vehicles;
76 (b) an intermediate distributor; and
77 (c) an agent, officer, or field or area representative of the franchisor.
78 (10) "Lead" means the referral by a franchisor to a franchisee of a potential customer
79 whose contact information was obtained from a franchisor's program, process, or system
80 designed to generate referrals for the purchase or lease of a new motor vehicle, or for service
81 work related to the franchisor's vehicles.
82 (11) "Line-make" means:
83 (a) for other than a recreational vehicle, the motor vehicles that are offered for sale,
84 lease, or distribution under a common name, trademark, service mark, or brand name of the
85 franchisor, or manufacturer of the motor vehicle[.]; or

86 (b) for a recreational vehicle, a specific series of recreational vehicle product that:
87 (i) is identified by a common series trade name or trademark;
88 (ii) is targeted to a particular market segment, as determined by decor, features,
89 equipment, size, weight, and price range;
90 (iii) has a length and floor plan that distinguish the recreational vehicle from other
91 recreational vehicles with substantially the same decor, features, equipment, size, weight, and
92 price;
93 (iv) belongs to a single, distinct classification of recreational vehicle product type
94 having a substantial degree of commonality in the construction of the chassis, frame, and body;
95 and
96 (v) a franchise agreement authorizes a dealer to sell.
97 (12) "Mile" means 5,280 feet.
98 (13) "Motor home" means a self-propelled vehicle, primarily designed as a temporary
99 dwelling for travel, recreational, or vacation use.
100 (14) (a) "Motor vehicle" means:
101 (i) a travel trailer;
102 (ii) a motor vehicle as defined in Section 41-3-102 ;
103 (iii) a semitrailer as defined in Section 41-1a-102 ;
104 (iv) a trailer as defined in Section 41-1a-102 ; and
105 (v) a recreational vehicle.
106 (b) "Motor vehicle" does not include a motorcycle as defined in Section 41-1a-102 .
107 (15) "New motor vehicle" means a motor vehicle as defined in Subsection (14) that has
108 never been titled or registered and has been driven less than 7,500 miles, unless the motor
109 vehicle is a trailer, travel trailer, or semitrailer, in which case the mileage limit does not apply.
110 (16) "New motor vehicle dealer" is a person who is licensed under Subsection
111 41-3-202 (1)(a) to sell new motor vehicles.
112 (17) "Notice" or "notify" includes both traditional written communications and all
113 reliable forms of electronic communication unless expressly prohibited by statute or rule.

114 (18) (a) "Recreational vehicle" means a vehicular unit other than a mobile home,
115 primarily designed as a temporary dwelling for travel, recreational, or vacation use, that is either
116 self-propelled or pulled by another vehicle.
117 (b) "Recreational vehicle" includes:
118 (i) a travel trailer;
119 (ii) a camping trailer;
120 (iii) a motor home;
121 (iv) a fifth wheel trailer; and
122 (v) a van.
123 (19) (a) "Relevant market area," except with respect to recreational vehicles, means:
124 (i) the county in which a dealership is to be established or relocated; and
125 (ii) the area within a ten-mile radius from the site of the new or relocated dealership.
126 (b) "Relevant market area," with respect to recreational vehicles, means:
127 (i) the county in which the dealership is to be established or relocated; and
128 (ii) the area within a 35-mile radius from the site of the new or relocated dealership.
129 (20) "Sale, transfer, or assignment" means any disposition of a franchise or an interest in
130 a franchise, with or without consideration, including a bequest, inheritance, gift, exchange,
131 lease, or license.
132 (21) "Serve" or "served," unless expressly indicated otherwise by statute or rule,
133 includes any reliable form of communication.
134 (22) "Travel trailer," "camping trailer," or "fifth wheel trailer" means a portable vehicle
135 without motive power, designed as a temporary dwelling for travel, recreational, or vacation use
136 that does not require a special highway movement permit when drawn by a self-propelled motor
137 vehicle.
138 (23) "Written," "write," "in writing," or other variations of those terms shall include all
139 reliable forms of electronic communication.
140 Section 2. Section 13-14-103 is amended to read:
141 13-14-103. Utah Motor Vehicle Franchise Advisory Board -- Creation --

142 Appointment of members -- Alternate members -- Chair -- Quorum -- Conflict of interest.
143 (1) There is created within the department the Utah Motor Vehicle Franchise Advisory
144 Board that consists of:
145 (a) the executive director or the executive director's designee;
146 (b) [six] seven members appointed by the executive director, with the concurrence of
147 the governor as follows:
148 (i) one recreational motor vehicle franchisee;
149 (ii) [two] three new motor vehicle franchisees from different congressional districts in
150 the state; and
151 (iii) (A) three members representing motor vehicle franchisors registered by the
152 department pursuant to Section 13-14-105 ;
153 (B) three members of the general public, none of whom shall be related to any
154 franchisee; or
155 (C) three members consisting of any combination of these representatives under this
156 Subsection (1)(b)(iii).
157 (2) (a) The executive director shall appoint, with the concurrence of the governor, three
158 alternate members, with one alternate from each of the designations set forth in Subsections
159 (1)(b)(i), (1)(b)(ii), and (1)(b)(iii), except that the new motor vehicle franchisee alternate or
160 alternates for the designation under Subsection (1)(b)(ii) may be from any congressional district.
161 (b) An alternate shall take the place of a regular advisory board member from the same
162 designation at a meeting of the advisory board where that regular advisory board member is
163 absent or otherwise disqualified from participating in the advisory board meeting.
164 (3) (a) (i) Members of the advisory board appointed under Subsections (1)(b) and (2)
165 [shall be] are appointed for a term of four years.
166 (ii) No specific term [shall apply] applies to the executive director or the executive
167 director's designee.
168 (b) The executive director may adjust the term of members who were appointed to the
169 advisory board prior to July 1, 2001, by extending the unexpired term of a member for up to

170 two additional years in order to insure that approximately half of the members are appointed
171 every two years.
172 (c) In the event of a vacancy on the advisory board of a member appointed under
173 Subsection (1)(b) or (2), the executive director with the concurrence of the governor, shall
174 appoint an individual to complete the unexpired term of the member whose office is vacant.
175 (d) A member may not be appointed to more than two consecutive terms.
176 (4) (a) The executive director or the executive director's designee [shall be] is the chair
177 of the advisory board.
178 (b) The department shall keep a record of all hearings, proceedings, transactions,
179 communications, and recommendations of the advisory board.
180 (5) (a) Four or more members of the advisory board constitute a quorum for the
181 transaction of business.
182 (b) The action of a majority of a quorum present is considered the action of the
183 advisory board.
184 (6) (a) A member of the advisory board may not participate as a board member in a
185 proceeding or hearing:
186 (i) involving the member's licensed business or employer; or
187 (ii) when a member, a member's business or family, or employer has a pecuniary
188 interest in the outcome or other conflict of interest concerning an issue before the advisory
189 board.
190 (b) If a member of the advisory board is disqualified under Subsection (6)(a), the
191 executive director shall select the appropriate alternate member to act on the issue before the
192 advisory board as provided in Subsection (2).
193 (7) Except for the executive director or the executive director's designee, an individual
194 may not be appointed or serve on the advisory board while holding any other elective or
195 appointive state or federal office.
196 (8) (a) (i) A member of the advisory board who is not a government employee shall
197 receive no compensation or benefits for the member's services, but may receive per diem and

198 expenses incurred in the performance of the member's official duties at the rates established by
199 the Division of Finance under Sections 63A-3-106 and 63A-3-107 .
200 (ii) A member may decline to receive per diem and expenses for the member's services.
201 (b) (i) A state government officer and employee member who does not receive salary,
202 per diem, or expenses from the member's agency for the member's service may receive per diem
203 and expenses incurred in the performance of the member's official duties at the rates established
204 by the Division of Finance under Sections 63A-3-106 and 63A-3-107 .
205 (ii) A state government officer and employee member may decline to receive per diem
206 and expenses for the member's service.
207 (9) The department shall provide necessary staff support to the advisory board.
208 Section 3. Section 13-14-104 is amended to read:
209 13-14-104. Powers and duties of the advisory board and the executive director.
210 (1) (a) Except as provided in Subsection 13-14-106 (3), the advisory board shall make
211 recommendations to the executive director on the administration and enforcement of this
212 chapter, including adjudicative and rulemaking proceedings.
213 (b) The executive director shall:
214 (i) consider the advisory board's recommendations; and
215 (ii) issue any final decision by the department.
216 (2) The executive director, in consultation with the advisory board, shall make rules for
217 the administration of this chapter in accordance with Title 63, Chapter 46a, Utah Administrative
218 Rulemaking Act.
219 (3) (a) An adjudicative proceeding under this chapter shall be conducted in accordance
220 with Title 63, Chapter 46b, Administrative Procedures Act.
221 (b) In an adjudicative proceeding under this chapter, any order issued by the executive
222 director:
223 (i) shall comply with Section 63-46b-10 , whether the proceeding is a formal or an
224 informal adjudicative proceeding under Title 63, Chapter 46b, Administrative Procedures Act;
225 and

226 (ii) if the order modifies or rejects a finding of fact in a recommendation from the
227 advisory board, shall be made on the basis of information learned from the executive director's:
228 (A) personal attendance at the hearing; or
229 (B) review of the record developed at the hearing.
230 (4) The executive director's decision under this section shall be made available to the
231 public.
232 Section 4. Section 13-14-201 is amended to read:
233 13-14-201. Prohibited acts by franchisors -- Affiliates -- Disclosures.
234 (1) A franchisor may not in this state:
235 (a) except as provided in Subsection (3), require a franchisee to order or accept delivery
236 of any new motor vehicle, part, accessory, equipment, or other item not otherwise required by
237 law that is not voluntarily ordered by the franchisee;
238 (b) require a franchisee to:
239 (i) participate monetarily in any advertising campaign; or
240 (ii) contest, or purchase any promotional materials, display devices, or display
241 decorations or materials;
242 (c) require a franchisee to change the capital structure of the franchisee's dealership or
243 the means by or through which the franchisee finances the operation of the franchisee's
244 dealership, if the dealership at all times meets reasonable capital standards determined by and
245 applied in a nondiscriminatory manner by the franchisor;
246 (d) require a franchisee to refrain from participating in the management of, investment
247 in, or acquisition of any other line of new motor vehicles or related products, if the franchisee:
248 (i) maintains a reasonable line of credit for each make or line of vehicles; and
249 (ii) complies with reasonable capital and facilities requirements of the franchisor;
250 (e) require a franchisee to prospectively agree to a release, assignment, novation,
251 waiver, or estoppel that would:
252 (i) relieve a franchisor from any liability, including notice and hearing rights imposed on
253 the franchisor by this chapter; or

254 (ii) require any controversy between the franchisee and a franchisor to be referred to a
255 third party if the decision by the third party would be binding;
256 (f) require a franchisee to change the location of the principal place of business of the
257 franchisee's dealership or make any substantial alterations to the dealership premises, if the
258 change or alterations would be unreasonable or cause the franchisee to lose control of the
259 premises or impose any other unreasonable requirement related to the facilities or premises;
260 (g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
261 advertising association;
262 (h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with
263 the franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to
264 cancel a franchise agreement or other contractual agreement or understanding existing between
265 the franchisor and franchisee;
266 (i) adopt, change, establish, modify, or implement a plan or system for the allocation,
267 scheduling, or delivery of new motor vehicles, parts, or accessories to its franchisees so that the
268 plan or system is not fair, reasonable, and equitable;
269 (j) increase the price of any new motor vehicle that the franchisee has ordered from the
270 franchisor and for which there exists at the time of the order a bona fide sale to a retail
271 purchaser if the order was made prior to the franchisee's receipt of an official written price
272 increase notification;
273 (k) fail to indemnify and hold harmless its franchisee against any judgment for damages
274 or settlement approved in writing by the franchisor:
275 (i) including court costs and attorneys' fees arising out of actions, claims, or
276 proceedings including those based on:
277 (A) strict liability;
278 (B) negligence;
279 (C) misrepresentation;
280 (D) express or implied warranty;
281 (E) revocation as described in Section 70A-2-608 ; or

282 (F) rejection as described in Section 70A-2-602 ; and
283 (ii) to the extent the judgment or settlement relates to alleged defective or negligent
284 actions by the franchisor;
285 (l) threaten or coerce a franchisee to waive or forbear its right to protest the
286 establishment or relocation of a same line-make franchisee in the relevant market area of the
287 affected franchisee;
288 (m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of new
289 motor vehicles of each make, series, and model needed by the franchisee to achieve a
290 percentage of total new vehicle sales of each make, series, and model equitably related to the
291 total new vehicle production or importation being achieved nationally at the time of the order by
292 each make, series, and model covered under the franchise agreement;
293 (n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
294 facilities;
295 (o) fail to include in any franchise agreement the following language or language to the
296 effect that: "If any provision in this agreement contravenes the laws or regulations of any state
297 or other jurisdiction where this agreement is to be performed, or provided for by such laws or
298 regulations, the provision is considered to be modified to conform to such laws or regulations,
299 and all other terms and provisions shall remain in full force.";
300 (p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to
301 purchasers who acquire the vehicle in this state except through a franchisee with whom the
302 franchisor has established a written franchise agreement, if the franchisor's trade name,
303 trademark, service mark, or related characteristic is an integral element in the distribution, sale,
304 offer for sale, or lease;
305 (q) engage in the distribution or sale of a recreational vehicle that is manufactured,
306 rented, sold, or offered for sale in this state without being constructed in accordance with the
307 standards set by the American National Standards Institute for recreational vehicles and
308 evidenced by a seal or plate attached to the vehicle;
309 (r) except as provided in Subsection (2), authorize or permit a person to perform

310 warranty service repairs on motor vehicles, except warranty service repairs:
311 (i) by a franchisee with whom the franchisor has entered into a franchise agreement for
312 the sale and service of the franchisor's motor vehicles; or
313 (ii) on owned motor vehicles by a person or government entity who has purchased new
314 motor vehicles pursuant to a franchisor's or manufacturer's fleet discount program;
315 (s) fail to provide a franchisee with a written franchise agreement;
316 (t) (i) except as provided in Subsection (1)(t)(ii) and notwithstanding any other
317 provisions of this chapter:
318 (A) unreasonably fail or refuse to offer to its same line-make franchised dealers all
319 models manufactured for that line-make;
320 (B) unreasonably require a dealer to:
321 (I) pay any extra fee, remodel, renovate, recondition the dealer's existing facilities; or
322 (II) purchase unreasonable advertising displays or other materials as a prerequisite to
323 receiving a model or series of vehicles;
324 (ii) notwithstanding Subsection (1)(t)(i), a recreational vehicle manufacturer may split a
325 line-make between motor home and travel trailer products;
326 (u) except as provided in Subsection (6), directly or indirectly:
327 (i) own an interest in a new motor vehicle dealer or dealership;
328 (ii) operate or control a new motor vehicle dealer or dealership;
329 (iii) act in the capacity of a new motor vehicle dealer, as defined in Section 13-14-102 ;
330 or
331 (iv) operate a motor vehicle service facility;
332 (v) fail to timely pay for all reimbursements to a franchisee for incentives and other
333 payments made by the franchisor;
334 (w) directly or indirectly influence or direct potential customers to franchisees in an
335 inequitable manner, including:
336 (i) charging a franchisee a fee for a referral regarding a potential sale or lease of any of
337 the franchisee's products or services in an amount exceeding the actual cost of the referral;

338 (ii) giving a customer referral to a franchisee on the condition that the franchisee agree
339 to sell the vehicle at a price fixed by the franchisor; or
340 (iii) advising a potential customer as to the amount that the potential customer should
341 pay for a particular product;
342 (x) fail to provide comparable delivery terms to each franchisee for a product of the
343 franchisor, including the time of delivery after the placement of an order by the franchisee;
344 (y) if personnel training is provided by the franchisor to its franchisees, unreasonably fail
345 to make that training available to each franchisee on proportionally equal terms;
346 (z) condition a franchisee's eligibility to participate in a sales incentive program on the
347 requirement that a franchisee use the financing services of the franchisor or a subsidiary or
348 affiliate of the franchisor for inventory financing;
349 (aa) make available for public disclosure, except with the franchisee's permission or
350 under subpoena or in any administrative or judicial proceeding in which the franchisee or the
351 franchisor is a party, any confidential financial information regarding a franchisee, including:
352 (i) monthly financial statements provided by the franchisee;
353 (ii) the profitability of a franchisee; or
354 (iii) the status of a franchisee's inventory of products;
355 (bb) use any performance standard, incentive program, or similar method to measure
356 the performance of franchisees unless the standard or program:
357 (i) is designed and administered in a fair, reasonable, and equitable manner;
358 (ii) if based upon a survey, utilizes an actuarially generally acceptable, valid sample; and
359 (iii) is, upon request by a franchisee, disclosed and explained in writing to the
360 franchisee, including:
361 (A) how the standard or program is designed;
362 (B) how the standard or program will be administered; and
363 (C) the types of data that will be collected and used in the application of the standard or
364 program;
365 (cc) other than sales to the federal government, directly or indirectly, sell, lease, offer to

366 sell, or offer to lease, a new motor vehicle or any motor vehicle owned by the franchisor, except
367 through a franchised new motor vehicle dealer;
368 (dd) compel a franchisee, through a finance subsidiary, to agree to unreasonable
369 operating requirements, except that this Subsection (1)(dd) may not be construed to limit the
370 right of a financing subsidiary to engage in business practices in accordance with the usage of
371 trade in retail and wholesale motor vehicle financing;
372 (ee) condition the franchisor's participation in co-op advertising for a product category
373 on the franchisee's participation in any program related to another product category or on the
374 franchisee's achievement of any level of sales in a product category other than that which is the
375 subject of the co-op advertising;
376 (ff) except as provided in Subsections (7) through (9), discriminate against a franchisee
377 in the state in favor of another franchisee of the same line-make in the state [by]:
378 (i) by selling or offering to sell a new motor vehicle to one franchisee at a higher actual
379 price, including the price for vehicle transportation, than the actual price at which the same
380 model similarly equipped is offered to or is made available by the franchisor to another
381 franchisee in the state during a similar time period;
382 (ii) except as provided in Subsection (8), by using a promotional program or device or
383 an incentive, payment, or other benefit, whether paid at the time of the sale of the new motor
384 vehicle to the franchisee or later, that results in the sale of or offer to sell a new motor vehicle to
385 one franchisee in the state at a higher price, including the price for vehicle transportation, than
386