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H.B. 312





Sponsor: Christine R. Fox

11    This act affects sections of Utah Code Annotated 1953 as follows:
12    AMENDS:
13         13-14-102, as enacted by Chapter 277, Laws of Utah 1996
14         13-14-103, as enacted by Chapter 277, Laws of Utah 1996
15         13-14-104, as enacted by Chapter 277, Laws of Utah 1996
16         13-14-105, as enacted by Chapter 277, Laws of Utah 1996
17         13-14-106, as enacted by Chapter 277, Laws of Utah 1996
18         13-14-107, as enacted by Chapter 277, Laws of Utah 1996
19         13-14-201, as enacted by Chapter 277, Laws of Utah 1996
20    Be it enacted by the Legislature of the state of Utah:
21        Section 1. Section 13-14-102 is amended to read:
22         13-14-102. Definitions.
23        As used in this chapter:
24        (1) "Board" means the Utah Motor Vehicle Franchise Advisory Board created in Section
25    13-14-103.
26        (2) "Dealership" means a site or location in this state:
27        (a) at which a franchisee conducts the business of a new motor vehicle dealer; and

1        (b) that is identified as a new motor vehicle dealer's principal place of business for
2    licensing purposes under Section 41-3-204.
3        (3) "Department" means the Department of Commerce.
4        (4) "Executive director" means the executive director of the Department of Commerce or
5    his designee.
6        (5) "Franchise" or "franchise agreement" means a written agreement, for a definite or
7    indefinite period, in which:
8        (a) a person grants to another person a license to use a trade name, trademark, service
9    mark, or related characteristic; and
10        (b) [there is] a community of interest exists in the marketing of new motor vehicles, new
11    motor vehicle parts, and services related to the sale or lease of new motor vehicles at wholesale
12    or retail.
13        (6) "Franchisee" means a person to whom a new motor vehicle dealer franchise is issued.
14        (7) "Franchisor" means a person who grants a new motor vehicle franchise to another
15    person, and includes:
16        (a) the manufacturer or distributor that has issued the franchise;
17        (b) an intermediate distributor; and
18        (c) an agent, officer, or field or area representative of the franchisor.
19        (8) "Line-make" means the motor vehicles that are offered for sale, lease, or distribution
20    under a common name, trademark, service mark, or brand name of the franchisor, or manufacturer
21    of the motor vehicle.
22        (9) "Motor vehicle" means:
23        (a) a travel trailer as defined in Section 41-1a-102;
24        (b) a motor vehicle as defined in Section 41-3-102;
25        (c) a semitrailer as defined in Section 41-1a-102; and
26        (d) a trailer as defined in Section 41-1a-102.
27        (10) "New motor vehicle" has the same meaning as defined in Section 41-3-102.
28        (11) "New motor vehicle dealer" is a person who is licensed under Subsection
29    41-3-202(1)(a).
30        (12) "Recreational vehicle" has the same meaning as defined in Section 41-20-1 excluding
31    the term "truck camper."

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1        (13) (a) "Relevant market area," except for recreational vehicles, means:
2        (i) the county in which a dealership is to be established or relocated; and
3        (ii) the area within a ten aeronautical miles radius from the site of the new or relocated
4    dealership.
5        (b) "Relevant market area," [as concerns] for the sale of recreational vehicles, means:
6        (i) the county in which the dealership is to be established or relocated; and
7        (ii) the area within a 35 aeronautical miles radius of the new or relocated dealership.
8        (14) "Sale, transfer, or assignment" means any disposition of a franchise or an interest in
9    a franchise, with or without consideration, including a bequest, inheritance, gift, exchange, lease,
10    or license.
11        Section 2. Section 13-14-103 is amended to read:
12         13-14-103. Utah Motor Vehicle Franchise Advisory Board -- Creation --
13     Appointment of members -- Chair -- Quorum -- Conflict of interest.
14        (1) There is created with the department the Utah Motor Vehicle Franchise Advisory
15    Board that consists of:
16        (a) the executive director [or the executive director's designee];
17        (b) six members appointed by the executive director, with the concurrence of the governor
18    as follows:
19        [(i) two members of the general public;]
20        [(ii)] (i) one motorcycle or recreational motor vehicle franchisee; [and]
21        [(iii)] (ii) [one] two new motor vehicle [franchisee] franchisees from [each of] among the
22    three congressional districts of the state as the districts were constituted on January 1, 1996; and
23        [(c)] (iii) [one member designated by] three members of the American Automobile
24    Manufacturer's Association, recommended by the association, or three members of the general
25    public, or any combination of these representatives under this subsection.
26        (2) (a) In accordance with Subsection (1), the executive director shall appoint three of the
27    initial members of the advisory board to one-year terms and three of the initial members of the
28    advisory board to two-year terms. No more than two of the members appointed to two-year terms
29    shall be franchisees.
30        (b) At the expiration of the initial terms under Subsection (2)(a), the executive director
31    shall appoint a member to a term of two years.

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1        (c) In the event of a vacancy on the advisory board, the executive director with the
2    concurrence of the governor, shall appoint an individual to complete the unexpired term of the
3    member whose office is vacant.
4        (d) A member may not be appointed to more than two consecutive terms.
5        (3) (a) The [executive director or the executive director's designee] members of the
6    advisory board shall [be] select the chair [of the board] from among its members.
7        (b) The department shall keep a record of all hearings, proceedings, transactions,
8    communications, and [official acts] recommendations of the advisory board.
9        (4) [Five] Four or more members of the advisory board constitute a quorum for the
10    transaction of business. The action of a majority of the members of the advisory board is
11    considered the action of the advisory board.
12        (5) (a) A member of the advisory board may not participate as a board member [of the
13    board] in a proceeding or hearing:
14        (i) involving the member's licensed business or employer; or
15        (ii) when a member, the member's business, or employer has a pecuniary interest in the
16    outcome or other conflict of interest concerning an issue before the advisory board.
17        (b) If a member of the advisory board is disqualified under Subsection (5)(a), the [chair]
18    executive director shall select a replacement to act on the issue before the advisory board.
19        (6) [Except for the executive director or the executive director's designee, an] An
20    individual may not be appointed or serve on the advisory board while holding any other elective
21    or appointive state or federal office.
22        (7) The members of the advisory board shall serve without compensation.
23        (8) The department shall provide necessary staff support to the advisory board.
24        Section 3. Section 13-14-104 is amended to read:
25         13-14-104. Powers and duties of the advisory board.
26        The advisory board has the [regulatory] jurisdiction to [administer and enforce] make
27    recommendations on the administration and enforcement of this chapter and shall:
28        (1) make rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking
29    Act, concerning administrative proceedings before the advisory board; and
30        (2) conduct adjudicative proceedings required by this chapter in accordance with Title 63,
31    Chapter 46b, Administrative Procedures Act, for the purpose of making recommendations to the

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1    executive director.
2        Section 4. Section 13-14-105 is amended to read:
3         13-14-105. Registration -- Fees.
4        (1) A franchisee or franchisor doing business in this state shall:
5        (a) annually register or renew its registration with the department in a manner established
6    by the department in collaboration with the advisory board; and
7        (b) pay an annual fee in an amount determined by the department in accordance with
8    Sections 13-1-2 and 63-38-3.2.
9        (2) The department, in collaboration with the advisory board, shall register or renew the
10    registration of a franchisee or franchisor if the franchisee or franchisor complies with this chapter
11    and rules made by the department under this chapter.
12        (3) A franchisee or franchisor registered under this section shall comply with this chapter
13    and any rules made by the department under this chapter including any amendments to this chapter
14    or the rules made after a franchisee or franchisor enter into a franchise agreement.
15        (4) The fee imposed under Subsection (1)(b) shall be collected by the department and
16    deposited into the Commerce Service Fund.
17        (5) Notwithstanding Subsection (1), an agent, officer, or field or area representative of a
18    franchisor does not need to be registered under this section if the franchisor is registered under this
19    section.
20        Section 5. Section 13-14-106 is amended to read:
21         13-14-106. Administrative enforcement.
22        (1) [If after] After a hearing, if the [board determines] executive director finds that a
23    person has violated this chapter or any rule made under this chapter, [it] the executive director
24    may[, in accordance with Title 63, Chapter 46b, Administrative Procedures Act]:
25        (a) issue a cease and desist order; and
26        (b) [recommend] assess an administrative fine.
27        (2) The executive director shall comply with Title 63, Chapter 46b, Administrative
28    Procedures Act, and shall consult with the advisory board prior to any order or assessment of fine.
29        [(2)] (3) (a) In determining the amount and appropriateness of an administrative fine, the
30    [board] executive director shall consider:
31        (i) the gravity of the violation;

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1        (ii) any history of previous violations; and
2        (iii) any attempt made by the person to retaliate against another person for seeking relief
3    under this chapter or other federal or state law relating to the motor vehicle industry.
4        (b) In addition to any other action permitted under Subsection (1), the department may file
5    an action with a court seeking to enforce the executive director's order [of the board] and pursue
6    the [board's recommendation] executive director's assessment of a fine in an amount not to exceed
7    $5,000[: (i)] for each day a person violates an order of the [board; or] executive director.
8        [(ii) if a person repeats the same violation within 48 months of a previous violation.]
9        (4) Any person aggrieved by an adverse determination by the executive director may either
10    seek reconsideration of the order pursuant to Section 63-46b-13 of the Administrative Procedures
11    Act or seek judicial review of the order.
12        Section 6. Section 13-14-107 is amended to read:
13         13-14-107. Administrative hearings.
14        (1) (a) A person may request action by the [board] executive director and the advisory
15    board, in accordance with this chapter and with Title 63, Chapter 46b, Administrative Procedures
16    Act to:
17        (i) remedy a violation of this chapter; or
18        (ii) obtain approval of an act regulated by this chapter.
19        (b) A person shall request action by the executive director and the advisory board by filing
20    an application for hearing in a form approved by the [board] department.
21        (2) (a) The [board] executive director shall conduct all adjudicative proceedings in
22    accordance with Title 63, Chapter 46b, Administrative Procedures Act, with the advisory board
23    members in attendance.
24        (b) An order or decision issued by the [board] executive director shall comply with Section
25    63-46b-10.
26        (c) Any hearing under this chapter shall be conducted as an informal proceeding unless
27    otherwise designated as a formal proceeding pursuant to the provisions of Title 63, Chapter 46b,
28    Administrative Procedures Act.
29        (3) The [board] executive director shall apportion in a fair and equitable manner between
30    the parties any costs of the adjudicative proceeding, including reasonable attorney's fees subject
31    to final approval by a court.

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1        Section 7. Section 13-14-201 is amended to read:
2         13-14-201. Prohibited Acts by Franchisors -- Disclosures.
3        (1) A franchisor may not in this state:
4        (a) require a franchisee to order or accept delivery of any new motor vehicle, part,
5    accessory, equipment, or other item not otherwise required by law that is not voluntarily ordered
6    by the franchisee;
7        (b) require a franchisee to participate monetarily in any advertising campaign or contest,
8    or purchase any promotional materials, display devises, or display decorations or materials;
9        (c) require a franchisee to change the capital structure of the franchisee's dealership or the
10    means by or through which the franchisee finances the operation of the franchisee's dealership,
11    if the dealership at all times meets reasonable capital standards determined by and applied in a
12    nondiscriminatory manner by the franchisor;
13        (d) require a franchisee to refrain from participating in the management of, investment in,
14    or acquisition of any other line of new motor vehicles or related products, if:
15        (i) the franchisee maintains a reasonable line of credit for each make or line of vehicles;
16    and
17        (ii) complies with reasonable capital and facilities requirements of the franchisor;
18        (e) require a franchisee to prospectively agree to a release, assignment, novation, waiver,
19    or estoppel that would:
20        (i) relieve a franchisor from any liability imposed by this chapter; or
21        (ii) require any controversy between the franchisee and a franchisor to be referred to a third
22    party if the decision by the third party would be binding;
23        (f) require a franchisee to change the location of the principal place of business of the
24    franchisee's dealership or make any substantial alterations to the dealership premises, if the change
25    or alterations would be unreasonable;
26        (g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
27    advertising association;
28        (h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with the
29    franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to cancel
30    a franchise agreement or other contractual agreement or understanding existing between the
31    franchisor and franchisee;

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1        (i) adopt, change, establish, modify, or implement a plan or system for the allocation,
2    scheduling, or delivery of new motor vehicles, parts, or accessories to its franchisees so that the
3    plan or system is not fair, reasonable, and equitable;
4        (j) increase the price of any new motor vehicle that the franchisee has ordered from the
5    franchisor and for which there exists at the time of the order a bona fide sale to a retail purchaser
6    if the order was made prior to the franchisee's receipt of an official written price increase
7    notification;
8        (k) fail to indemnify and hold harmless its franchisee against any judgment for damages
9    or settlement approved in writing by the franchisor:
10        (i) including court costs and attorneys' fees arising out of actions, claims, or proceedings
11    including those based on:
12        (A) strict liability;
13        (B) negligence;
14        (C) misrepresentation;
15        (D) express or implied warranty;
16        (E) revocation as described in Section 70A-2-608; or
17        (F) rejection as described in Section 70A-2-602; and
18        (ii) to the extent the judgment or settlement relates to alleged defective or negligent actions
19    by the franchisor;
20        (l) threaten or coerce a franchisee to waive or forbear its right to protest the establishment
21    or relocation of a same line-make franchisee in the relevant market area of the affected franchisee;
22        (m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of new
23    motor vehicles of each make, series, and model needed by the franchisee to achieve a percentage
24    of total new vehicle sales of each make, series, and model equitably related to the total new vehicle
25    production or importation being achieved nationally at the time of the order by each make, series,
26    and model covered under the franchise agreement;
27        (n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
28    facilities;
29        (o) fail to include in any franchise agreement the following language or language to the
30    effect that: "If any provision in this agreement contravenes the laws or regulations of any state or
31    other jurisdiction where this agreement is to be performed, or provided for by such laws or

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1    regulations, the provision is considered to be modified to conform to such laws or regulations, and
2    all other terms and provisions shall remain in full force.";
3        (p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to
4    purchasers who acquire the vehicle in this state except through a franchisee with whom the
5    franchisor has established a written franchise agreement, if the franchisor's trade name, trademark,
6    service mark, or related characteristic is an integral element in the distribution, sale, offer for sale,
7    or lease; [or]
8        (q) engage in the distribution or sale of a recreational vehicle which is manufactured,
9    rented, sold, or offered for sale in this state without being constructed in accordance with the
10    standards set by the American National Standards Institute for recreational vehicles and evidenced
11    by a seal or plate attached to the vehicle; or
12        [(q)] (r) authorize or permit a person to perform warranty service repairs on motor
13    vehicles, except warranty service repairs:
14        (i) by a franchisee with whom the franchisor has entered into a franchise agreement for
15    the sale and service of the franchisor's motor vehicles; or
16        (ii) on owned motor vehicles by a person or government entity who has purchased new
17    motor vehicles pursuant to a franchisor's or manufacturer's fleet discount program.
18        (2) Notwithstanding Subsection (1)[(q)] (r), a franchisor may authorize or permit a person
19    to perform warranty service repairs on motor vehicles if the warranty services is for a franchisor
20    of recreational vehicles.
21        (3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee carry
22    a reasonable inventory of:
23        (a) new motor vehicle models offered for sale by the franchisor; and
24        (b) parts to service the repair of the new motor vehicles.
25        (4) Subsection (1)(d) does not prevent a franchisor from:
26        (a) requiring that a franchisee maintain separate sales personnel or display space; or
27        (b) refusing to permit a combination of new motor vehicle lines, if justified by reasonable
28    business considerations.
29        (5) Upon the written request of any franchisee, a franchisor shall disclose in writing to the
30    franchisee the basis on which new motor vehicles, parts, and accessories are allocated, scheduled,
31    and delivered among the franchisor's dealers of the same line-make.

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1        Section 8. Severability clause.
2        If any provision of this act, or the application of any provision to any person or
3    circumstance, is held invalid, the remainder of this act is given effect without the invalid provision
4    or application.

Legislative Review Note
    as of 2-12-97 1:14 PM

A limited legal review of this bill raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel

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