H.B. 312 Enrolled

MOTOR VEHICLE DEALER FRANCHISE ACT AMENDMENTS
1997 GENERAL SESSION
STATE OF UTAH
Sponsor: Christine R. Fox
AN ACT RELATING TO COMMERCE AND TRADE; AMENDING PROVISIONS OF THE
NEW AUTOMOBILE FRANCHISE ACT; AMENDING DEFINITIONS; AMENDING
THE BOARD'S AUTHORITY TO BE ADVISORY ONLY; SPECIFYING THE DUTIES
OF THE ADVISORY BOARD AND THE EXECUTIVE DIRECTOR; CHANGING THE
MEMBERSHIP ON THE ADVISORY BOARD; PROVIDING A SEVERABILITY
CLAUSE; AND MAKING TECHNICAL CORRECTIONS.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
13-14-102, as enacted by Chapter 277, Laws of Utah 1996
13-14-103, as enacted by Chapter 277, Laws of Utah 1996
13-14-104, as enacted by Chapter 277, Laws of Utah 1996
13-14-105, as enacted by Chapter 277, Laws of Utah 1996
13-14-106, as enacted by Chapter 277, Laws of Utah 1996
13-14-107, as enacted by Chapter 277, Laws of Utah 1996
13-14-201, as enacted by Chapter 277, Laws of Utah 1996
13-14-204, as enacted by Chapter 277, Laws of Utah 1996
13-14-205, as enacted by Chapter 277, Laws of Utah 1996
13-14-307, as enacted by Chapter 277, Laws of Utah 1996
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 13-14-102 is amended to read:
13-14-102. Definitions.
As used in this chapter:
(1) "Board" means the Utah Motor Vehicle Franchise Advisory Board created in Section
13-14-103.
(2) "Dealership" means a site or location in this state:

(a) at which a franchisee conducts the business of a new motor vehicle dealer; and
(b) that is identified as a new motor vehicle dealer's principal place of business for licensing
purposes under Section 41-3-204.
(3) "Department" means the Department of Commerce.
(4) "Executive director" means the executive director of the Department of Commerce.
(5) "Franchise" or "franchise agreement" means a written agreement, for a definite or
indefinite period, in which:
(a) a person grants to another person a license to use a trade name, trademark, service mark,
or related characteristic; and
(b) [there is] a community of interest exists in the marketing of new motor vehicles, new
motor vehicle parts, and services related to the sale or lease of new motor vehicles at wholesale or
retail.
(6) "Franchisee" means a person to whom a new motor vehicle dealer franchise is issued.
(7) "Franchisor" means a person who grants a new motor vehicle franchise to another person,
and includes:
(a) the manufacturer or distributor that has issued the franchise;
(b) an intermediate distributor; and
(c) an agent, officer, or field or area representative of the franchisor.
(8) "Line-make" means the motor vehicles that are offered for sale, lease, or distribution
under a common name, trademark, service mark, or brand name of the franchisor, or manufacturer
of the motor vehicle.
(9) "Motor vehicle" means:
(a) a travel trailer as defined in Section 41-1a-102;
(b) a motor vehicle as defined in Section 41-3-102;
(c) a semitrailer as defined in Section 41-1a-102; and
(d) a trailer as defined in Section 41-1a-102.
(10) "New motor vehicle" has the same meaning as defined in Section 41-3-102.
(11) "New motor vehicle dealer" is a person who is licensed under Subsection

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41-3-202(1)(a).
(12) "Recreational vehicle" has the same meaning as defined in Section 41-20-1 excluding
the term "truck camper."
(13) (a) "Relevant market area," except for recreational vehicles, means:
(i) the county in which a dealership is to be established or relocated; and
(ii) the area within a ten aeronautical miles radius from the site of the new or relocated
dealership.
(b) "Relevant market area," [as concerns] for the sale of recreational vehicles, means:
(i) the county in which the dealership is to be established or relocated; and
(ii) the area within a 35 aeronautical miles radius of the new or relocated dealership.
(14) "Sale, transfer, or assignment" means any disposition of a franchise or an interest in a
franchise, with or without consideration, including a bequest, inheritance, gift, exchange, lease, or
license.
Section 2. Section 13-14-103 is amended to read:
13-14-103. Utah Motor Vehicle Franchise Advisory Board -- Creation -- Appointment
of members -- Chair -- Quorum -- Conflict of interest.
(1) There is created [with] within the department the Utah Motor Vehicle Franchise
Advisory Board that consists of:
(a) the executive director or the executive director's designee;
(b) six members appointed by the executive director, with the concurrence of the governor
as follows:
[(i) two members of the general public;]
[(ii)] (i) one motorcycle or recreational motor vehicle franchisee; [and]
[(iii)] (ii) [one] two new motor vehicle [franchisee] franchisees from [each of] among the
three congressional districts of the state as the districts were constituted on January 1, 1996, no more
than one of which shall be located in the same congressional district; and
[(c) one member designated by the American Automobile Manufacturer's Association.]
(iii) three members representing motor vehicle franchisors registered by the department

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pursuant to Section 13-14-105, or three members of the general public, none of whom shall be
related to any franchisee, or any combination of these representatives under this subsection.
(2) (a) In accordance with Subsection (1), the executive director shall appoint three of the
initial members of the advisory board to one-year terms and three of the initial members of the
advisory board to two-year terms. No more than two of the members appointed to two-year terms
shall be franchisees.
(b) At the expiration of the initial terms under Subsection (2)(a), the executive director shall
appoint a member to a term of two years.
(c) In the event of a vacancy on the advisory board, the executive director with the
concurrence of the governor, shall appoint an individual to complete the unexpired term of the
member whose office is vacant.
(d) A member may not be appointed to more than two consecutive terms.
(3) (a) The executive director or the executive director's designee shall be the chair of the
advisory board.
(b) The department shall keep a record of all hearings, proceedings, transactions,
communications, and [official acts] recommendations of the advisory board.
(4) [Five] Four or more members of the advisory board constitute a quorum for the
transaction of business. The action of a majority of the members of the advisory board is considered
the action of the advisory board.
(5) (a) A member of the advisory board may not participate as a board member [of the board]
in a proceeding or hearing:
(i) involving the member's licensed business or employer; or
(ii) when a member, [the] a member's business or family, or employer has a pecuniary
interest in the outcome or other conflict of interest concerning an issue before the advisory board.
(b) If a member of the advisory board is disqualified under Subsection (5)(a), the [chair]
executive director shall select a replacement to act on the issue before the advisory board.
(6) Except for the executive director or the executive director's designee, an individual may
not be appointed or serve on the advisory board while holding any other elective or appointive state

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or federal office.
(7) The members of the advisory board shall serve without compensation.
(8) The department shall provide necessary staff support to the advisory board.
Section 3. Section 13-14-104 is amended to read:
13-14-104. Powers and duties of the advisory board.
The advisory board has the [regulatory] jurisdiction to [administer and enforce] make
recommendations on the administration and enforcement of this chapter and shall:
(1) [make rules] conduct rulemaking proceedings in accordance with Title 63, Chapter 46a,
Utah Administrative Rulemaking Act, concerning administrative proceedings before the advisory
board; and
(2) conduct adjudicative proceedings required by this chapter in accordance with Title 63,
Chapter 46b, Administrative Procedures Act, for the purpose of making recommendations to the
executive director.
Section 4. Section 13-14-105 is amended to read:
13-14-105. Registration -- Fees.
(1) A franchisee or franchisor doing business in this state shall:
(a) annually register or renew its registration with the department in a manner established
by the department in collaboration with the advisory board; and
(b) pay an annual registration fee in an amount determined by the department in accordance
with Sections 13-1-2 and 63-38-3.2.
(2) The department, in collaboration with the advisory board, shall register or renew the
registration of a franchisee or franchisor if the franchisee or franchisor complies with this chapter
and rules made by the department under this chapter.
(3) A franchisee or franchisor registered under this section shall comply with this chapter
and any rules made by the department under this chapter including any amendments to this chapter
or the rules made after a franchisee or franchisor enter into a franchise agreement.
(4) The fee imposed under Subsection (1)(b) shall be collected by the department and
deposited into the Commerce Service Fund.

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(5) Notwithstanding Subsection (1), an agent, officer, or field or area representative of a
franchisor does not need to be registered under this section if the franchisor is registered under this
section.
Section 5. Section 13-14-106 is amended to read:
13-14-106. Administrative enforcement.
(1) [If after] After a hearing and after receipt of the advisory board's recommendation, if the
[board determines] executive director finds that a person has violated this chapter or any rule made
under this chapter, [it] the executive director may[, in accordance with Title 63, Chapter 46b,
Administrative Procedures Act]:
(a) issue a cease and desist order; and
(b) [recommend] assess an administrative fine.
(2) The executive director shall comply with Title 63, Chapter 46b, Administrative
Procedures Act, and shall consult with the advisory board prior to any order or assessment of fine.
[(2)] (3) (a) In determining the amount and appropriateness of an administrative fine, the
[board] executive director shall consider:
(i) the gravity of the violation;
(ii) any history of previous violations; and
(iii) any attempt made by the person to retaliate against another person for seeking relief
under this chapter or other federal or state law relating to the motor vehicle industry.
(b) In addition to any other action permitted under Subsection (1), the department may file
an action with a court seeking to enforce the executive director's order [of the board] and pursue the
[board's recommendation] executive director's assessment of a fine in an amount not to exceed
$5,000[: (i)] for each day a person violates an order of the [board; or] executive director.
[(ii) if a person repeats the same violation within 48 months of a previous violation.]
(4) Any person aggrieved by an adverse determination by the executive director may either
seek reconsideration of the order pursuant to Section 63-46b-13 of the Administrative Procedures
Act or seek judicial review of the order.
Section 6. Section 13-14-107 is amended to read:

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13-14-107. Administrative hearings.
(1) (a) A person may [request action by] commence an adjudicative proceeding before the
[board] executive director and the advisory board, in accordance with this chapter and with Title 63,
Chapter 46b, Administrative Procedures Act to:
(i) remedy a violation of this chapter; or
(ii) obtain approval of an act regulated by this chapter.
(b) A person shall [request action by] commence an adjudicative proceeding before the
executive director and the advisory board by filing [an application for hearing in a form approved
by the board] a request for agency action.
(2) (a) The advisory board shall conduct all adjudicative proceedings in accordance with
Title 63, Chapter 46b, Administrative Procedures Act, with a quorum of the advisory board members
in attendance.
(b) An order or decision issued by the [board] executive director shall comply with Section
63-46b-10.
(c) Any hearing under this chapter shall be conducted as an informal proceeding unless
otherwise designated as a formal proceeding pursuant to the provisions of Title 63, Chapter 46b,
Administrative Procedures Act.
(3) The advisory board shall apportion in a fair and equitable manner between the parties
any costs of the adjudicative proceeding, including reasonable attorney's fees subject to final
approval by a court.
Section 7. Section 13-14-201 is amended to read:
13-14-201. Prohibited acts by franchisors -- Disclosures.
(1) A franchisor may not in this state:
(a) require a franchisee to order or accept delivery of any new motor vehicle, part, accessory,
equipment, or other item not otherwise required by law that is not voluntarily ordered by the
franchisee;
(b) require a franchisee to participate monetarily in any advertising campaign or contest, or
purchase any promotional materials, display [devises] devices, or display decorations or materials;

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(c) require a franchisee to change the capital structure of the franchisee's dealership or the
means by or through which the franchisee finances the operation of the franchisee's dealership, if
the dealership at all times meets reasonable capital standards determined by and applied in a
nondiscriminatory manner by the franchisor;
(d) require a franchisee to refrain from participating in the management of, investment in,
or acquisition of any other line of new motor vehicles or related products, if:
(i) the franchisee maintains a reasonable line of credit for each make or line of vehicles; and
(ii) complies with reasonable capital and facilities requirements of the franchisor;
(e) require a franchisee to prospectively agree to a release, assignment, novation, waiver, or
estoppel that would:
(i) relieve a franchisor from any liability imposed by this chapter; or
(ii) require any controversy between the franchisee and a franchisor to be referred to a third
party if the decision by the third party would be binding;
(f) require a franchisee to change the location of the principal place of business of the
franchisee's dealership or make any substantial alterations to the dealership premises, if the change
or alterations would be unreasonable;
(g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
advertising association;
(h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with the
franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to cancel
a franchise agreement or other contractual agreement or understanding existing between the
franchisor and franchisee;
(i) adopt, change, establish, modify, or implement a plan or system for the allocation,
scheduling, or delivery of new motor vehicles, parts, or accessories to its franchisees so that the plan
or system is not fair, reasonable, and equitable;
(j) increase the price of any new motor vehicle that the franchisee has ordered from the
franchisor and for which there exists at the time of the order a bona fide sale to a retail purchaser if
the order was made prior to the franchisee's receipt of an official written price increase notification;

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(k) fail to indemnify and hold harmless its franchisee against any judgment for damages or
settlement approved in writing by the franchisor:
(i) including court costs and attorneys' fees arising out of actions, claims, or proceedings
including those based on:
(A) strict liability;
(B) negligence;
(C) misrepresentation;
(D) express or implied warranty;
(E) revocation as described in Section 70A-2-608; or
(F) rejection as described in Section 70A-2-602; and
(ii) to the extent the judgment or settlement relates to alleged defective or negligent actions
by the franchisor;
(l) threaten or coerce a franchisee to waive or forbear its right to protest the establishment
or relocation of a same line-make franchisee in the relevant market area of the affected franchisee;
(m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of new
motor vehicles of each make, series, and model needed by the franchisee to achieve a percentage of
total new vehicle sales of each make, series, and model equitably related to the total new vehicle
production or importation being achieved nationally at the time of the order by each make, series,
and model covered under the franchise agreement;
(n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
facilities;
(o) fail to include in any franchise agreement the following language or language to the effect
that: "If any provision in this agreement contravenes the laws or regulations of any state or other
jurisdiction where this agreement is to be performed, or provided for by such laws or regulations,
the provision is considered to be modified to conform to such laws or regulations, and all other terms
and provisions shall remain in full force.";
(p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to
purchasers who acquire the vehicle in this state except through a franchisee with whom the

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franchisor has established a written franchise agreement, if the franchisor's trade name, trademark,
service mark, or related characteristic is an integral element in the distribution, sale, offer for sale,
or lease; [or]
(q) engage in the distribution or sale of a recreational vehicle which is manufactured, rented,
sold, or offered for sale in this state without being constructed in accordance with the standards set
by the American National Standards Institute for recreational vehicles and evidenced by a seal or
plate attached to the vehicle; or
[(q)] (r) authorize or permit a person to perform warranty service repairs on motor vehicles,
except warranty service repairs:
(i) by a franchisee with whom the franchisor has entered into a franchise agreement for the
sale and service of the franchisor's motor vehicles; or
(ii) on owned motor vehicles by a person or government entity who has purchased new
motor vehicles pursuant to a franchisor's or manufacturer's fleet discount program.
(2) Notwithstanding Subsection (1)[(q)] (r), a franchisor may authorize or permit a person
to perform warranty service repairs on motor vehicles if the warranty services is for a franchisor of
recreational vehicles.
(3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee carry
a reasonable inventory of:
(a) new motor vehicle models offered for sale by the franchisor; and
(b) parts to service the repair of the new motor vehicles.
(4) Subsection (1)(d) does not prevent a franchisor from:
(a) requiring that a franchisee maintain separate sales personnel or display space; or
(b) refusing to permit a combination of new motor vehicle lines, if justified by reasonable
business considerations.
(5) Upon the written request of any franchisee, a franchisor shall disclose in writing to the
franchisee the basis on which new motor vehicles, parts, and accessories are allocated, scheduled,
and delivered among the franchisor's dealers of the same line-make.
Section 8. Section 13-14-204 is amended to read:

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13-14-204. Franchisor's obligations related to service -- Franchisor audits -- Time
limits.
(1) Each franchisor shall specify in writing to each of its franchisees licensed as a new motor
vehicle dealer in this state:
(a) the franchisee's obligations for new motor vehicle preparation, delivery, and warranty
service on its products;
(b) the schedule of compensation to be paid to the franchisee for parts, work, and service;
and
(c) the time allowance for the performance of work and service.
(2) (a) The schedule of compensation described in Subsection (1) shall include reasonable
compensation for diagnostic work, as well as repair service, parts, and labor.
(b) Time allowances described in Subsection (1) for the diagnosis and performance of
warranty work and service shall be reasonable and adequate for the work to be performed.
(3) (a) In the determination of what constitutes reasonable compensation under this section,
the principal factor to be considered is the prevailing wage rates being paid by franchisees in the
relevant market area in which the franchisee is doing business.
(b) Compensation of the franchisee for warranty service work may not be less than the
amount charged by the franchisee for like parts and service to retail or fleet customers, if the amounts
are reasonable. In the case of a recreational vehicle franchisee, reimbursement for parts used in the
performance of warranty repairs, including those parts separately warranted directly to the consumer
by a recreational vehicle parts supplier, may not be less than the franchisee's cost plus 20%. For
purposes of this Subsection (3)(b), the term "cost" shall be that same price paid by a franchisee to
a franchisor or supplier for the part when the part is purchased for a nonwarranty repair.
(4) A franchisor may not fail to:
(a) perform any warranty obligation;
(b) include in written notices of franchisor's recalls to new motor vehicle owners and
franchisees the expected date by which necessary parts and equipment will be available to
franchisees for the correction of the defects; or

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(c) compensate any of the franchisees for repairs effected by the recall.
(5) If a franchisor disallows a franchisee's claim for a defective part, alleging that the part
is not defective, the franchisor at its option shall:
(a) return the part to the franchisee at the franchisor's expense; or
(b) pay the franchisee the cost of the part.
(6) (a) A claim made by a franchisee pursuant to this section for labor and parts shall be paid
within 30 days after its approval.
(b) A claim shall be either approved or disapproved by the franchisor within 30 days after
receipt of the claim on a form generally used by the franchisor and containing the generally required
information. Any claim not specifically disapproved of in writing within 30 days after the receipt
of the form is considered to be approved and payment shall be made within 30 days.
(7) Warranty service audits of franchisee records may be conducted by the franchisor on a
reasonable basis.
(8) A franchisee's claim for warranty compensation may not be denied except for good cause
such as performance of nonwarranty repairs, lack of material documentation, fraud, or
misrepresentation.
(9) (a) Any charge backs for warranty parts or service compensation and service incentives
shall only be enforceable for the 12-month period immediately following the date the payment for
warranty reimbursement was made by the franchisor.
(b) Except as provided in Subsection (9)(c), all charge backs levied by a franchisor for sales
compensation or sales incentives arising out of the sale or lease of a motor vehicle sold by a
franchisee shall be compensable only if written notice of the charge back is received by the
franchisee within 24 months immediately following the date when payment for the sales
compensation was made by the franchisor.
(c) The time limitations of this Subsection (9) do not preclude charge backs for any
fraudulent claim that was previously paid.
Section 9. Section 13-14-205 is amended to read:
13-14-205. Liability for damages to motor vehicles in transit -- Disclosure required.

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(1) (a) A franchisee is solely liable for damage to a new motor vehicle after delivery by and
acceptance from the carrier.
(b) A delivery receipt or bill of lading, or similar document, signed by a franchisee is
evidence of a franchisee's acceptance of a new motor vehicle.
(2) A franchisor is liable for all damage to a motor vehicle before delivery to and acceptance
by the franchisee, including that time in which the vehicle is in the control of a carrier or transporter.
(3) (a) A franchisor shall disclose to the franchisee any repairs made prior to delivery, except
a recreational vehicle franchisor shall disclose to a recreational vehicle franchisee any repair made
to the vehicle prior to delivery only if:
(i) the cost of the repair exceeds 3% of the manufacturer's wholesale price, as measured by
retail repair costs; or
(ii) the repair is to the exterior sidewalls or roof of the vehicle, and repairs total over $500.
(b) Replacement of a recreational vehicle's glass, tires, wheels, audio equipment, in-dash
components, instrument panels, appliances, furniture, and components other than built-in cabinetry
contained in the vehicle's living quarters, is not considered a repair under this subsection if the
component replaced has been replaced with original manufacturers parts and materials.
(4) Notwithstanding Subsections (1), (2), and (3), the franchisee is liable for damage to a
new motor vehicle after delivery to the carrier or transporter if the franchisee selected:
(a) the method and mode of transportation; and
(b) the carrier or transporter.
Section 10. Section 13-14-307 is amended to read:
13-14-307. Franchisors' repurchase obligations upon termination or noncontinuation
of franchise.
(1) Upon the termination or noncontinuation of a franchise by the franchisor, the franchisor
shall pay the franchisee:
(a) the franchisee's cost of new, undamaged, and unsold motor vehicles in the franchisee's
inventory acquired from the franchisor or another franchisee of the same line-make representing both
the current model year at the time of termination or noncontinuation and the immediately prior

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model year vehicles[:], except only those recreational vehicles purchased within the 12 months
immediately preceding the date of termination or noncontinuation shall be repurchased:
(i) plus any charges made by the franchisor, for distribution, delivery, or taxes;
(ii) plus the franchisee's cost of any accessories added on the vehicle, except only those
recreational vehicle accessories that are listed in the franchisor's wholesale product literature as
options for that vehicle shall be repurchased; and
(iii) less all allowances paid or credited to the franchisee by the franchisor;
(b) the franchisee's cost of new and undamaged motor vehicles in the franchisee's inventory
of demonstrator vehicles, reduced by 1% for each 1000 miles registered on the demonstrator
vehicle's odometer[:], except recreational vehicles whose cost shall be reduced by 2% for each 1,000
miles registered on the odometer of demonstrator self-propelled recreational vehicles, exclusive of
miles incurred in delivery of the vehicle, and the cost of demonstrator nonself-propelled recreational
vehicles shall be reduced by 10% of the franchisee's vehicle cost:
(i) plus any charges made by the franchisor for distribution, delivery, or taxes;
(ii) plus the franchisee's cost of any accessories added on the vehicles, except only those
recreational vehicle accessories that are listed in the franchisor's wholesale product literature as
options for that vehicle shall be repurchased; and
(iii) less all allowances paid or credited to the franchisee by the franchisor;
(c) the cost of all new, undamaged, and unsold supplies, parts, and accessories as set forth
in the franchisor's catalog at the time of termination or noncontinuation for the supplies, parts, and
accessories, less all allowances paid or credited to the franchisee by the franchisor;
(d) the fair market value, but not less than the franchisee's depreciated acquisition cost of
each undamaged sign owned by the franchisee that bears a common name, trade name, or trademark
of the franchisor if acquisition of the sign was recommended or required by the franchisor[;]. If a
recreational vehicle franchisee has a sign with multiple manufacturers listed, the franchisor is only
responsible for its pro rata portion of the sign;
(e) the fair market value, but not less than the franchisee's depreciated acquisition cost of all
special tools, equipment, and furnishings acquired from the franchisor or sources approved by the

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franchisor that were recommended or required by the franchisor and are in good and usable
condition; and
(f) the cost of transporting, handling, packing, and loading motor vehicles, supplies, parts,
accessories, signs, special tools, equipment, and furnishings.
(2) The franchisor shall pay the franchisee the amounts specified in Subsection (1) within
90 days after the tender of the property to the franchisor if the franchisee:
(a) has clear title to the property; and
(b) is in a position to convey title to the franchisor.
(3) If repurchased inventory, equipment, or demonstrator vehicles are subject to a security
interest, the franchisor may make payment jointly to the franchisee and to the holder of the security
interest.
Section 11. Severability clause.
If any provision of this act, or the application of any provision to any person or circumstance,
is held invalid, the remainder of this act is given effect without the invalid provision or application.

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