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[Introduced][Status][Bill Documents][Fiscal Note][Bills Directory]

S.B. 52 Enrolled

             1     

NEW MOTOR VEHICLE FRANCHISE

             2     
AMENDMENTS

             3     
2009 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Sheldon L. Killpack

             6     
House Sponsor: Rebecca D. Lockhart

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill modifies the New Automobile Franchise Act by amending provisions relating
             11      to new motor vehicle franchisor and franchisee requirements.
             12      Highlighted Provisions:
             13          This bill:
             14          .    amends definitions;
             15          .    provides that a franchisor may not require or otherwise coerce a franchisee to
             16      underutilize the franchisee's facilities by:
             17              .    requiring or otherwise coercing a franchisee to exclude or remove from the
             18      franchisee's facility operations the selling or servicing of a line-make of
             19      vehicles for which the franchisee has a franchise agreement to utilize the
             20      facilities; or
             21              .    prohibiting the franchisee from locating, relocating, or occupying a franchise or
             22      line-make in an existing facility owned or occupied by the franchisee that
             23      includes the selling or servicing of another franchise or line-make at the facility
             24      provided that the franchisee gives the franchisor written notice of the franchise
             25      co-location;
             26          .    amends the time frame for which written notice must be received by the franchisee
             27      for a charge back for sales compensation or sales incentives arising out of the sale
             28      or lease of a motor vehicle sold or leased by a franchisee to be compensable;
             29          .    repeals the provisions that provides that a franchisor may refuse to permit a


             30      combination of new motor vehicle lines, if justified by reasonable business considerations;
             31          .    provides that a franchisor may not terminate or refuse to continue the rights to sell
             32      and service a line-make unless the franchisor has complied with certain
             33      requirements;
             34          .    provides that upon the termination or noncontinuation of a franchise or a line-make
             35      by the franchise, the franchisor shall pay the franchisee for the franchisee's cost of
             36      new, undamaged, and unsold recreational vehicles in the franchisee's inventory
             37      acquired from the franchisor or another franchisee at the time of termination or
             38      noncontinuation and the immediately prior model year vehicles, instead of only
             39      those recreational vehicles purchased within the 12 months immediately preceding
             40      the date of termination or noncontinuation;
             41          .    provides that a franchisee may voluntarily terminate its franchise if the franchisee
             42      provides written notice to the franchisor at least 30 days prior to the termination;
             43          .    provides that a franchisor shall pay the franchisee certain costs for the termination
             44      or noncontinuation of a franchise or line-make except in certain circumstances; and
             45          .    makes technical changes.
             46      Monies Appropriated in this Bill:
             47          None
             48      Other Special Clauses:
             49          This bill provides an immediate effective date.
             50      Utah Code Sections Affected:
             51      AMENDS:
             52          13-14-102, as last amended by Laws of Utah 2008, Chapters 362 and 388
             53          13-14-201, as last amended by Laws of Utah 2008, Chapter 362
             54          13-14-204, as last amended by Laws of Utah 2004, Chapter 123
             55          13-14-301, as last amended by Laws of Utah 2005, Chapter 249
             56          13-14-307, as last amended by Laws of Utah 2008, Chapter 362
             57     


             58      Be it enacted by the Legislature of the state of Utah:
             59          Section 1. Section 13-14-102 is amended to read:
             60           13-14-102. Definitions.
             61          As used in this chapter:
             62          (1) "Advisory board" or "board" means the Utah Motor Vehicle Franchise Advisory
             63      Board created in Section 13-14-103 .
             64          (2) "Affiliate" has the meaning set forth in Section 16-10a-102 .
             65          (3) "Aftermarket product" means any product or service not included in the
             66      manufacturer's suggested retail price of the new motor vehicle, as that price appears on the
             67      label required by 15 U.S.C. Sec. 1232(f).
             68          (4) "Dealership" means a site or location in this state:
             69          (a) at which a franchisee conducts the business of a new motor vehicle dealer; and
             70          (b) that is identified as a new motor vehicle dealer's principal place of business for
             71      licensing purposes under Section 41-3-204 .
             72          (5) "Department" means the Department of Commerce.
             73          (6) "Executive director" means the executive director of the Department of Commerce.
             74          (7) (a) "Franchise" or "franchise agreement" means a written agreement, or in the
             75      absence of a written agreement, then a course of dealing or a practice for a definite or
             76      indefinite period, in which:
             77          [(a)] (i) a person grants to another person a license to use a trade name, trademark,
             78      service mark, or related characteristic; and
             79          [(b)] (ii) a community of interest exists in the marketing of new motor vehicles, new
             80      motor vehicle parts, and services related to the sale or lease of new motor vehicles at wholesale
             81      or retail.
             82          (b) "Franchise" or "franchise agreement" includes a sales and service agreement.
             83          (8) "Franchisee" means a person with whom a franchisor has agreed or permitted, in
             84      writing or in practice, to purchase, sell, or offer for sale new motor vehicles manufactured,
             85      produced, represented, or distributed by the franchisor.


             86          (9) "Franchisor" means a person who has, in writing or in practice, agreed with or
             87      permits a franchisee to purchase, sell, or offer for sale new motor vehicles manufactured,
             88      produced, represented, or distributed by the franchisor, and includes:
             89          (a) the manufacturer or distributor of the new motor vehicles;
             90          (b) an intermediate distributor; and
             91          (c) an agent, officer, or field or area representative of the franchisor.
             92          (10) "Lead" means the referral by a franchisor to a franchisee of a potential customer
             93      whose contact information was obtained from a franchisor's program, process, or system
             94      designed to generate referrals for the purchase or lease of a new motor vehicle, or for service
             95      work related to the franchisor's vehicles.
             96          (11) "Line-make" means:
             97          (a) for other than a recreational vehicle, the motor vehicles that are offered for sale,
             98      lease, or distribution under a common name, trademark, service mark, or brand name of the
             99      franchisor, or manufacturer of the motor vehicle; or
             100          (b) for a recreational vehicle, a specific series of recreational vehicle product that:
             101          (i) is identified by a common series trade name or trademark;
             102          (ii) is targeted to a particular market segment, as determined by decor, features,
             103      equipment, size, weight, and price range;
             104          (iii) has a length and floor plan that distinguish the recreational vehicle from other
             105      recreational vehicles with substantially the same decor, features, equipment, size, weight, and
             106      price;
             107          (iv) belongs to a single, distinct classification of recreational vehicle product type
             108      having a substantial degree of commonality in the construction of the chassis, frame, and
             109      body; and
             110          (v) a franchise agreement authorizes a dealer to sell.
             111          (12) "Mile" means 5,280 feet.
             112          (13) "Motor home" means a self-propelled vehicle, primarily designed as a temporary
             113      dwelling for travel, recreational, or vacation use.


             114          (14) (a) "Motor vehicle" means:
             115          (i) a travel trailer;
             116          (ii) except as provided in Subsection (14)(b), a motor vehicle as defined in Section
             117      41-3-102 ;
             118          (iii) a semitrailer as defined in Section 41-1a-102 ;
             119          (iv) a trailer as defined in Section 41-1a-102 ; and
             120          (v) a recreational vehicle.
             121          (b) "Motor vehicle" does not include:
             122          (i) a motorcycle as defined in Section 41-1a-102 ;
             123          (ii) an off-highway vehicle as defined in Section 41-3-102 ; and
             124          (iii) a small trailer as defined in Section 41-3-102 .
             125          (15) "New motor vehicle" means a motor vehicle as defined in Subsection (14) that
             126      has never been titled or registered and has been driven less than 7,500 miles, unless the motor
             127      vehicle is a trailer, travel trailer, or semitrailer, in which case the mileage limit does not apply.
             128          (16) "New motor vehicle dealer" is a person who is licensed under Subsection
             129      41-3-202 (1)(a) to sell new motor vehicles.
             130          (17) "Notice" or "notify" includes both traditional written communications and all
             131      reliable forms of electronic communication unless expressly prohibited by statute or rule.
             132          (18) (a) "Recreational vehicle" means a vehicular unit other than a mobile home,
             133      primarily designed as a temporary dwelling for travel, recreational, or vacation use, that is
             134      either self-propelled or pulled by another vehicle.
             135          (b) "Recreational vehicle" includes:
             136          (i) a travel trailer;
             137          (ii) a camping trailer;
             138          (iii) a motor home;
             139          (iv) a fifth wheel trailer; and
             140          (v) a van.
             141          (19) (a) "Relevant market area," except with respect to recreational vehicles, means:


             142          (i) the county in which a dealership is to be established or relocated; and
             143          (ii) the area within a ten-mile radius from the site of the new or relocated dealership.
             144          (b) "Relevant market area," with respect to recreational vehicles, means:
             145          (i) the county in which the dealership is to be established or relocated; and
             146          (ii) the area within a 35-mile radius from the site of the new or relocated dealership.
             147          (20) "Sale, transfer, or assignment" means any disposition of a franchise or an interest
             148      in a franchise, with or without consideration, including a bequest, inheritance, gift, exchange,
             149      lease, or license.
             150          (21) "Serve" or "served," unless expressly indicated otherwise by statute or rule,
             151      includes any reliable form of communication.
             152          (22) "Travel trailer," "camping trailer," or "fifth wheel trailer" means a portable
             153      vehicle without motive power, designed as a temporary dwelling for travel, recreational, or
             154      vacation use that does not require a special highway movement permit when drawn by a
             155      self-propelled motor vehicle.
             156          (23) "Written," "write," "in writing," or other variations of those terms shall include all
             157      reliable forms of electronic communication.
             158          Section 2. Section 13-14-201 is amended to read:
             159           13-14-201. Prohibited acts by franchisors -- Affiliates -- Disclosures.
             160          (1) A franchisor may not in this state:
             161          (a) except as provided in Subsection (3), require a franchisee to order or accept
             162      delivery of any new motor vehicle, part, accessory, equipment, or other item not otherwise
             163      required by law that is not voluntarily ordered by the franchisee;
             164          (b) require a franchisee to:
             165          (i) participate monetarily in any advertising campaign; or
             166          (ii) contest, or purchase any promotional materials, display devices, or display
             167      decorations or materials;
             168          (c) require a franchisee to change the capital structure of the franchisee's dealership or
             169      the means by or through which the franchisee finances the operation of the franchisee's


             170      dealership, if the dealership at all times meets reasonable capital standards determined by and
             171      applied in a nondiscriminatory manner by the franchisor;
             172          (d) require a franchisee to refrain from participating in the management of, investment
             173      in, or acquisition of any other line of new motor vehicles or related products, if the franchisee:
             174          (i) maintains a reasonable line of credit for each make or line of vehicles; and
             175          (ii) complies with reasonable capital and facilities requirements of the franchisor;
             176          (e) require a franchisee to prospectively agree to a release, assignment, novation,
             177      waiver, or estoppel that would:
             178          (i) relieve a franchisor from any liability, including notice and hearing rights imposed
             179      on the franchisor by this chapter; or
             180          (ii) require any controversy between the franchisee and a franchisor to be referred to a
             181      third party if the decision by the third party would be binding;
             182          (f) require a franchisee to change the location of the principal place of business of the
             183      franchisee's dealership or make any substantial alterations to the dealership premises, if the
             184      change or alterations would be unreasonable or cause the franchisee to lose control of the
             185      premises or impose any other unreasonable requirement related to the facilities or premises;
             186          (g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an
             187      advertising association;
             188          (h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with
             189      the franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening
             190      to cancel a franchise agreement or other contractual agreement or understanding existing
             191      between the franchisor and franchisee;
             192          (i) adopt, change, establish, modify, or implement a plan or system for the allocation,
             193      scheduling, or delivery of new motor vehicles, parts, or accessories to its franchisees so that
             194      the plan or system is not fair, reasonable, and equitable;
             195          (j) increase the price of any new motor vehicle that the franchisee has ordered from the
             196      franchisor and for which there exists at the time of the order a bona fide sale to a retail
             197      purchaser if the order was made prior to the franchisee's receipt of an official written price


             198      increase notification;
             199          (k) fail to indemnify and hold harmless its franchisee against any judgment for
             200      damages or settlement approved in writing by the franchisor:
             201          (i) including court costs and [attorneys'] attorney fees arising out of actions, claims, or
             202      proceedings including those based on:
             203          (A) strict liability;
             204          (B) negligence;
             205          (C) misrepresentation;
             206          (D) express or implied warranty;
             207          (E) revocation as described in Section 70A-2-608 ; or
             208          (F) rejection as described in Section 70A-2-602 ; and
             209          (ii) to the extent the judgment or settlement relates to alleged defective or negligent
             210      actions by the franchisor;
             211          (l) threaten or coerce a franchisee to waive or forbear its right to protest the
             212      establishment or relocation of a same line-make franchisee in the relevant market area of the
             213      affected franchisee;
             214          (m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of
             215      new motor vehicles of each make, series, and model needed by the franchisee to achieve a
             216      percentage of total new vehicle sales of each make, series, and model equitably related to the
             217      total new vehicle production or importation being achieved nationally at the time of the order
             218      by each make, series, and model covered under the franchise agreement;
             219          (n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing
             220      dealer facility or facilities[;], including by:
             221          (i) requiring or otherwise coercing a franchisee to exclude or remove from the
             222      franchisee's facility operations the selling or servicing of a line-make of vehicles for which the
             223      franchisee has a franchise agreement to utilize the facilities; or
             224          (ii) prohibiting the franchisee from locating, relocating, or occupying a franchise or
             225      line-make in an existing facility owned or occupied by the franchisee that includes the selling


             226      or servicing of another franchise or line-make at the facility provided that the franchisee gives
             227      the franchisor written notice of the franchise co-location;
             228          (o) fail to include in any franchise agreement the following language or language to
             229      the effect that: "If any provision in this agreement contravenes the laws or regulations of any
             230      state or other jurisdiction where this agreement is to be performed, or provided for by such
             231      laws or regulations, the provision is considered to be modified to conform to such laws or
             232      regulations, and all other terms and provisions shall remain in full force.";
             233          (p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to
             234      purchasers who acquire the vehicle in this state except through a franchisee with whom the
             235      franchisor has established a written franchise agreement, if the franchisor's trade name,
             236      trademark, service mark, or related characteristic is an integral element in the distribution,
             237      sale, offer for sale, or lease;
             238          (q) engage in the distribution or sale of a recreational vehicle that is manufactured,
             239      rented, sold, or offered for sale in this state without being constructed in accordance with the
             240      standards set by the American National Standards Institute for recreational vehicles and
             241      evidenced by a seal or plate attached to the vehicle;
             242          (r) except as provided in Subsection (2), authorize or permit a person to perform
             243      warranty service repairs on motor vehicles, except warranty service repairs:
             244          (i) by a franchisee with whom the franchisor has entered into a franchise agreement
             245      for the sale and service of the franchisor's motor vehicles; or
             246          (ii) on owned motor vehicles by a person or government entity who has purchased new
             247      motor vehicles pursuant to a franchisor's or manufacturer's fleet discount program;
             248          (s) fail to provide a franchisee with a written franchise agreement;
             249          (t) (i) except as provided in Subsection (1)(t)(ii) and notwithstanding any other
             250      provisions of this chapter:
             251          (A) unreasonably fail or refuse to offer to its same line-make franchised dealers all
             252      models manufactured for that line-make;
             253          (B) unreasonably require a dealer to:


             254          (I) pay any extra fee, remodel, renovate, recondition the dealer's existing facilities; or
             255          (II) purchase unreasonable advertising displays or other materials as a prerequisite to
             256      receiving a model or series of vehicles;
             257          (ii) notwithstanding Subsection (1)(t)(i), a recreational vehicle manufacturer may split
             258      a line-make between motor home and travel trailer products;
             259          (u) except as provided in Subsection (6), directly or indirectly:
             260          (i) own an interest in a new motor vehicle dealer or dealership;
             261          (ii) operate or control a new motor vehicle dealer or dealership;
             262          (iii) act in the capacity of a new motor vehicle dealer, as defined in Section 13-14-102 ;
             263      or
             264          (iv) operate a motor vehicle service facility;
             265          (v) fail to timely pay for all reimbursements to a franchisee for incentives and other
             266      payments made by the franchisor;
             267          (w) directly or indirectly influence or direct potential customers to franchisees in an
             268      inequitable manner, including:
             269          (i) charging a franchisee a fee for a referral regarding a potential sale or lease of any of
             270      the franchisee's products or services in an amount exceeding the actual cost of the referral;
             271          (ii) giving a customer referral to a franchisee on the condition that the franchisee agree
             272      to sell the vehicle at a price fixed by the franchisor; or
             273          (iii) advising a potential customer as to the amount that the potential customer should
             274      pay for a particular product;
             275          (x) fail to provide comparable delivery terms to each franchisee for a product of the
             276      franchisor, including the time of delivery after the placement of an order by the franchisee;
             277          (y) if personnel training is provided by the franchisor to its franchisees, unreasonably
             278      fail to make that training available to each franchisee on proportionally equal terms;
             279          (z) condition a franchisee's eligibility to participate in a sales incentive program on the
             280      requirement that a franchisee use the financing services of the franchisor or a subsidiary or
             281      affiliate of the franchisor for inventory financing;


             282          (aa) make available for public disclosure, except with the franchisee's permission or
             283      under subpoena or in any administrative or judicial proceeding in which the franchisee or the
             284      franchisor is a party, any confidential financial information regarding a franchisee, including:
             285          (i) monthly financial statements provided by the franchisee;
             286          (ii) the profitability of a franchisee; or
             287          (iii) the status of a franchisee's inventory of products;
             288          (bb) use any performance standard, incentive program, or similar method to measure
             289      the performance of franchisees unless the standard or program:
             290          (i) is designed and administered in a fair, reasonable, and equitable manner;
             291          (ii) if based upon a survey, utilizes an actuarially generally acceptable, valid sample;
             292      and
             293          (iii) is, upon request by a franchisee, disclosed and explained in writing to the
             294      franchisee, including:
             295          (A) how the standard or program is designed;
             296          (B) how the standard or program will be administered; and
             297          (C) the types of data that will be collected and used in the application of the standard
             298      or program;
             299          (cc) other than sales to the federal government, directly or indirectly, sell, lease, offer
             300      to sell, or offer to lease, a new motor vehicle or any motor vehicle owned by the franchisor,
             301      except through a franchised new motor vehicle dealer;
             302          (dd) compel a franchisee, through a finance subsidiary, to agree to unreasonable
             303      operating requirements, except that this Subsection (1)(dd) may not be construed to limit the
             304      right of a financing subsidiary to engage in business practices in accordance with the usage of
             305      trade in retail and wholesale motor vehicle financing;
             306          (ee) condition the franchisor's participation in co-op advertising for a product category
             307      on the franchisee's participation in any program related to another product category or on the
             308      franchisee's achievement of any level of sales in a product category other than that which is
             309      the subject of the co-op advertising;


             310          (ff) except as provided in Subsections (7) through (9), discriminate against a
             311      franchisee in the state in favor of another franchisee of the same line-make in the state:
             312          (i) by selling or offering to sell a new motor vehicle to one franchisee at a higher
             313      actual price, including the price for vehicle transportation, than the actual price at which the
             314      same model similarly equipped is offered to or is made available by the franchisor to another
             315      franchisee in the state during a similar time period;
             316          (ii) except as provided in Subsection (8), by using a promotional program or device or
             317      an incentive, payment, or other benefit, whether paid at the time of the sale of the new motor
             318      vehicle to the franchisee or later, that results in the sale of or offer to sell a new motor vehicle
             319      to one franchisee in the state at a higher price, including the price for vehicle transportation,
             320      than the price at which the same model similarly equipped is offered or is made available by
             321      the franchisor to another franchisee in the state during a similar time period;
             322          (iii) except as provided in Subsection (9), by failing to provide or direct a lead in a
             323      fair, equitable, and timely manner; or
             324          (iv) if the franchisee complies with any reasonable requirement concerning the sale of
             325      new motor vehicles, by using or considering the performance of any of its franchisees located
             326      in this state relating to the sale of the manufacturer's new motor vehicles in determining the:
             327          (A) dealer's eligibility to purchase program, certified, or other used motor vehicles
             328      from the manufacturer;
             329          (B) volume, type, or model of program, certified, or other used motor vehicles the
             330      dealer is eligible to purchase from the manufacturer;
             331          (C) price of any program, certified, or other used motor vehicles that the dealer is
             332      eligible to purchase from the manufacturer; or
             333          (D) availability or amount of any discount, credit, rebate, or sales incentive the dealer
             334      is eligible to receive from the manufacturer for the purchase of any program, certified, or other
             335      motor vehicle offered for sale by the manufacturer;
             336          (gg) (i) take control over funds owned or under the control of a franchisee based on the
             337      findings of a warranty audit or sales incentive audit unless the following conditions are


             338      satisfied:
             339          (A) the franchisor fully identifies in writing the basis for the franchisor's claim or
             340      charge back arising from the audit, including notifying the franchisee that the franchisee has
             341      20 days from the day on which the franchisee receives the franchisor's claim or charge back to
             342      assert a protest in writing to the franchisor identifying the basis for the protest;
             343          (B) the franchisee's protest shall inform the franchisor that the protest shall be
             344      submitted to a mediator in the state who is identified by name and address in the franchisee's
             345      notice to the franchisor;
             346          (C) if mediation is requested under Subsection (1)(gg)(i)(B), mediation shall occur no
             347      later than 30 days after the day on which the franchisor receives the franchisee's protest of a
             348      claim or charge back;
             349          (D) if mediation does not lead to a resolution of the protest, the protest shall be set for
             350      binding arbitration in the same venue in which the mediation occurred;
             351          (E) binding arbitration under Subsection (1)(gg)(i)(D) shall be conducted:
             352          (I) by an arbitrator mutually agreed upon by the franchisor and the franchisee; and
             353          (II) on a date mutually agreed upon by the franchisor and the franchisee, but shall be
             354      held no later than 90 days after the franchisor's receipt of the franchisee's notice of protest;
             355          (F) this Subsection (1)(gg)(i) applies exclusively to warranty audits and sales incentive
             356      audits;
             357          (G) Subsections (1)(gg)(i)(A) through (E) do not apply if the franchisor reasonably
             358      believes that the amount of the claim or charge back is related to a fraudulent act by the
             359      franchisee; and
             360          (H) [The] the costs of the mediator or arbitrator instituted under this Subsection
             361      (1)(gg) shall be shared equally by the franchisor and the franchisee.
             362          (ii) A franchisor may not require a franchisee to execute a written waiver of the
             363      requirements of Subsection (1)(gg)(i);
             364          (hh) coerce, or attempt to coerce a franchisee to purchase or sell an aftermarket
             365      product manufactured by the franchisor, or obtained by the franchisor for resale from a


             366      third-party supplier and the franchisor or its affiliate derives a financial benefit from the
             367      franchisee's sale or purchase of the aftermarket product as a condition to obtaining preferential
             368      status from the franchisor;
             369          (ii) through an affiliate, take any action that would otherwise be prohibited under this
             370      chapter; or
             371          (jj) impose any fee, surcharge, or other charge on a franchisee designed to recover the
             372      cost of a warranty repair for which the franchisee is paid by the franchisor.
             373          (2) Notwithstanding Subsection (1)(r), a franchisor may authorize or permit a person
             374      to perform warranty service repairs on motor vehicles if the warranty services is for a
             375      franchisor of recreational vehicles.
             376          (3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee
             377      carry a reasonable inventory of:
             378          (a) new motor vehicle models offered for sale by the franchisor; and
             379          (b) parts to service the repair of the new motor vehicles.
             380          (4) Subsection (1)(d) does not prevent a franchisor from[: (a)] requiring that a
             381      franchisee maintain separate sales personnel or display space[; or].
             382          [(b) refusing to permit a combination of new motor vehicle lines, if justified by
             383      reasonable business considerations.]
             384          (5) Upon the written request of any franchisee, a franchisor shall disclose in writing to
             385      the franchisee the basis on which new motor vehicles, parts, and accessories are allocated,
             386      scheduled, and delivered among the franchisor's dealers of the same line-make.
             387          (6) (a) A franchisor may engage in any of the activities listed in Subsection (1)(u), for
             388      a period not to exceed 12 months if:
             389          (i) (A) the person from whom the franchisor acquired the interest in or control of the
             390      new motor vehicle dealership was a franchised new motor vehicle dealer; and
             391          (B) the franchisor's interest in the new motor vehicle dealership is for sale at a
             392      reasonable price and on reasonable terms and conditions; or
             393          (ii) the franchisor is engaging in the activity listed in Subsection (1)(u) for the purpose


             394      of broadening the diversity of its dealer body and facilitating the ownership of a new motor
             395      vehicle dealership by a person who:
             396          (A) is part of a group that has been historically underrepresented in the franchisor's
             397      dealer body;
             398          (B) would not otherwise be able to purchase a new motor vehicle dealership;
             399          (C) has made a significant investment in the new motor vehicle dealership which is
             400      subject to loss;
             401          (D) has an ownership interest in the new motor vehicle dealership; and
             402          (E) operates the new motor vehicle dealership under a plan to acquire full ownership
             403      of the dealership within a reasonable period of time and under reasonable terms and
             404      conditions.
             405          (b) After receipt of the advisory board's recommendation, the executive director may,
             406      for good cause shown, extend the time limit set forth in Subsection (6)(a) for an additional
             407      period not to exceed 12 months.
             408          (c) A franchisor who was engaged in any of the activities listed in Subsection (1)(u) in
             409      this state prior to May 1, 2000, may continue to engage in that activity, but may not expand
             410      that activity to acquire an interest in any other new motor vehicle dealerships or motor vehicle
             411      service facilities after May 1, 2000.
             412          (d) Notwithstanding Subsection (1)(u), a franchisor may own, operate, or control a
             413      new motor vehicle dealership trading in a line-make of motor vehicle if:
             414          (i) as to that line-make of motor vehicle, there are no more than four franchised new
             415      motor vehicle dealerships licensed and in operation within the state as of January 1, 2000;
             416          (ii) the franchisor does not own directly or indirectly, more than a 45% interest in the
             417      dealership;
             418          (iii) at the time the franchisor first acquires ownership or assumes operation or control
             419      of the dealership, the distance between the dealership thus owned, operated, or controlled and
             420      the nearest unaffiliated new motor vehicle dealership trading in the same line-make is not less
             421      than 150 miles;


             422          (iv) all the franchisor's franchise agreements confer rights on the franchisee to develop
             423      and operate as many dealership facilities as the franchisee and franchisor shall agree are
             424      appropriate within a defined geographic territory or area; and
             425          (v) as of January 1, 2000, no fewer than half of the franchisees of the line-make within
             426      the state own and operate two or more dealership facilities in the geographic area covered by
             427      the franchise agreement.
             428          (7) Subsection (1)(ff) does not apply to recreational vehicles.
             429          (8) Subsection (1)(ff)(ii) does not prohibit a promotional or incentive program that is
             430      functionally available to all competing franchisees of the same line-make in the state on
             431      substantially comparable terms.
             432          (9) Subsection (1)(ff)(iii) may not be construed to:
             433          (a) permit provision of or access to customer information that is otherwise protected
             434      from disclosure by law or by contract between a franchisor and a franchisee; or
             435          (b) require a franchisor to disregard the preference volunteered by a potential customer
             436      in providing or directing a lead.
             437          (10) Subsection (1)(ii) does not limit the right of an affiliate to engage in business
             438      practices in accordance with the usage of trade in which the affiliate is engaged.
             439          Section 3. Section 13-14-204 is amended to read:
             440           13-14-204. Franchisor's obligations related to service -- Franchisor audits --
             441      Time limits.
             442          (1) Each franchisor shall specify in writing to each of its franchisees licensed as a new
             443      motor vehicle dealer in this state:
             444          (a) the franchisee's obligations for new motor vehicle preparation, delivery, and
             445      warranty service on its products;
             446          (b) the schedule of compensation to be paid to the franchisee for parts, work, and
             447      service; and
             448          (c) the time allowance for the performance of work and service.
             449          (2) (a) The schedule of compensation described in Subsection (1) shall include


             450      reasonable compensation for diagnostic work, as well as repair service, parts, and labor.
             451          (b) Time allowances described in Subsection (1) for the diagnosis and performance of
             452      warranty work and service shall be reasonable and adequate for the work to be performed.
             453          (3) (a) In the determination of what constitutes reasonable compensation under this
             454      section, the principal factor to be considered is the prevailing wage rates being paid by
             455      franchisees in the relevant market area in which the franchisee is doing business.
             456          (b) Compensation of the franchisee for warranty service work may not be less than the
             457      amount charged by the franchisee for like parts and service to retail or fleet customers, if the
             458      amounts are reasonable. In the case of a recreational vehicle franchisee, reimbursement for
             459      parts used in the performance of warranty repairs, including those parts separately warranted
             460      directly to the consumer by a recreational vehicle parts supplier, may not be less than the
             461      franchisee's cost plus 20%. For purposes of this Subsection (3)(b), the term "cost" shall be
             462      that same price paid by a franchisee to a franchisor or supplier for the part when the part is
             463      purchased for a nonwarranty repair.
             464          (4) A franchisor may not fail to:
             465          (a) perform any warranty obligation;
             466          (b) include in written notices of franchisor's recalls to new motor vehicle owners and
             467      franchisees the expected date by which necessary parts and equipment will be available to
             468      franchisees for the correction of the defects; or
             469          (c) compensate any of the franchisees for repairs effected by the recall.
             470          (5) If a franchisor disallows a franchisee's claim for a defective part, alleging that the
             471      part is not defective, the franchisor at its option shall:
             472          (a) return the part to the franchisee at the franchisor's expense; or
             473          (b) pay the franchisee the cost of the part.
             474          (6) (a) A claim made by a franchisee pursuant to this section for labor and parts shall
             475      be paid within 30 days after its approval.
             476          (b) A claim shall be either approved or disapproved by the franchisor within 30 days
             477      after receipt of the claim on a form generally used by the franchisor and containing the


             478      generally required information. Any claim not specifically disapproved of in writing within 30
             479      days after the receipt of the form is considered to be approved and payment shall be made
             480      within 30 days.
             481          (7) Warranty service audits of franchisee records may be conducted by the franchisor
             482      on a reasonable basis.
             483          (8) A franchisee's claim for warranty compensation may not be denied except for good
             484      cause such as performance of nonwarranty repairs, lack of material documentation, fraud, or
             485      misrepresentation.
             486          (9) (a) Any charge backs for warranty parts or service compensation and service
             487      incentives shall only be enforceable for the 12-month period immediately following the date
             488      the payment for warranty reimbursement was made by the franchisor.
             489          (b) Except as provided in Subsection (9)(c), all charge backs levied by a franchisor for
             490      sales compensation or sales incentives arising out of the sale or lease of a motor vehicle sold or
             491      leased by a franchisee shall be compensable only if written notice of the charge back is
             492      received by the franchisee within 12 months immediately following the sooner of:
             493          (i) the date when the sales incentive program terminates[, but no later than 24 months
             494      following]; or
             495          (ii) the date when payment for the sales compensation or sales incentive was made by
             496      the franchisor to the franchisee.
             497          (c) The time limitations of this Subsection (9) do not preclude charge backs for any
             498      fraudulent claim that was previously paid.
             499          Section 4. Section 13-14-301 is amended to read:
             500           13-14-301. Termination or noncontinuance of franchise.
             501          (1) Except as provided in Subsection (2), a franchisor may not terminate or refuse to
             502      continue a franchise agreement or the rights to sell and service a line-make pursuant to a
             503      franchise agreement, whether through termination or noncontinuance of the franchise,
             504      termination or noncontinuance of a line-make, or otherwise, unless:
             505          (a) the franchisee has received written notice from the franchisor 60 days before the


             506      effective date of termination or noncontinuance setting forth the specific grounds for
             507      termination or noncontinuance that are relied on by the franchisor as establishing good cause
             508      for the termination or noncontinuance;
             509          (b) the franchisor has good cause for termination or noncontinuance; and
             510          (c) the franchisor is willing and able to comply with Section 13-14-307 .
             511          (2) A franchisor may terminate a franchise, without complying with Subsection (1):
             512          [(a) if for a particular line-make the franchisor or manufacturer discontinues that
             513      line-make;]
             514          [(b)] (a) if the franchisee's license as a new motor vehicle dealer is revoked under Title
             515      41, Chapter 3, Motor Vehicle Business Regulation Act; or
             516          [(c)] (b) upon a mutual written agreement of the franchisor and franchisee.
             517          (3) (a) At any time before the effective date of termination or noncontinuance of the
             518      franchise, the franchisee may apply to the advisory board for a hearing on the merits, and
             519      following notice to all parties concerned, the hearing shall be promptly held as provided in
             520      Section 13-14-304 .
             521          (b) A termination or noncontinuance subject to a hearing under Subsection (3)(a) may
             522      not become effective until:
             523          (i) final determination of the issue by the executive director; and
             524          (ii) the applicable appeal period has lapsed.
             525          (4) A franchisee may voluntarily terminate its franchise if the franchisee provides
             526      written notice to the franchisor at least 30 days prior to the termination.
             527          Section 5. Section 13-14-307 is amended to read:
             528           13-14-307. Franchisor's obligations upon termination or noncontinuation of
             529      franchise or line-make.
             530          (1) Upon the termination or noncontinuation of a franchise or a line-make by the
             531      franchisor, the franchisor shall pay the franchisee:
             532          (a) the franchisee's cost of new, undamaged, and unsold motor vehicles in the
             533      franchisee's inventory acquired from the franchisor or another franchisee of the same


             534      line-make representing both the current model year at the time of termination or
             535      noncontinuation and the immediately prior model year vehicles[, except only those
             536      recreational vehicles purchased within the 12 months immediately preceding the date of
             537      termination or noncontinuation shall be repurchased]:
             538          (i) plus any charges made by the franchisor, for distribution, delivery, or taxes;
             539          (ii) plus the franchisee's cost of any accessories added on the vehicle, except only
             540      those recreational vehicle accessories that are listed in the franchisor's wholesale product
             541      literature as options for that vehicle shall be repurchased; and
             542          (iii) less all allowances paid or credited to the franchisee by the franchisor;
             543          (b) the franchisee's cost of new and undamaged motor vehicles in the franchisee's
             544      inventory of demonstrator vehicles, reduced by 1% for each 1000 miles registered on the
             545      demonstrator vehicle's odometer, except recreational vehicles whose cost shall be reduced by
             546      2% for each 1,000 miles registered on the odometer of demonstrator self-propelled recreational
             547      vehicles, exclusive of miles incurred in delivery of the vehicle, and the cost of demonstrator
             548      nonself-propelled recreational vehicles shall be reduced by 10% of the franchisee's vehicle
             549      cost:
             550          (i) plus any charges made by the franchisor for distribution, delivery, or taxes;
             551          (ii) plus the franchisee's cost of any accessories added on the vehicles, except only
             552      those recreational vehicle accessories that are listed in the franchisor's wholesale product
             553      literature as options for that vehicle shall be repurchased; and
             554          (iii) less all allowances paid or credited to the franchisee by the franchisor;
             555          (c) the cost of all new, undamaged, and unsold supplies, parts, and accessories as set
             556      forth in the franchisor's catalog at the time of termination or noncontinuation for the supplies,
             557      parts, and accessories, less all allowances paid or credited to the franchisee by the franchisor;
             558          (d) the fair market value, but not less than the franchisee's depreciated acquisition cost
             559      of each undamaged sign owned by the franchisee that bears a common name, trade name, or
             560      trademark of the franchisor if acquisition of the sign was recommended or required by the
             561      franchisor. If a recreational vehicle franchisee has a sign with multiple manufacturers listed,


             562      the franchisor is only responsible for its pro rata portion of the sign;
             563          (e) the fair market value, but not less than the franchisee's depreciated acquisition cost
             564      of all special tools, equipment, and furnishings acquired from the franchisor or sources
             565      approved by the franchisor that were recommended or required by the franchisor and are in
             566      good and usable condition;
             567          (f) the cost of transporting, handling, packing, and loading motor vehicles, supplies,
             568      parts, accessories, signs, special tools, equipment, and furnishings;
             569          (g) reasonable compensation to the franchisee for any cost incurred pertaining to the
             570      unexpired term of a lease agreement for the dealership's existing location;
             571          (h) the negotiated fair market value of the dealership premises, based on the fair
             572      market value of the real property, if the dealer opts to sell the dealership premises; and
             573          (i) compensate the franchisee for the blue sky or goodwill of the dealership, as
             574      determined in accordance with the applicable industry standards taking into consideration the
             575      effect that the timing of the manufacturer's announcement of discontinuance of a line make
             576      has or will have on future profitability of the dealership.
             577          (2) [If a franchise is terminated by the franchisor for cause as defined in Subsections
             578      13-14-301 (1)(b) and (2)(b),] Subsections (1)(g), (h), and (i) do not apply[.] if a franchise is
             579      terminated:
             580          (a) by the franchisor for cause as defined in Subsections 13-14-301 (1)(b) and (2)(a);
             581          (b) upon mutual written agreement of the franchisor and franchisee as provided in
             582      Subsection 13-14-301 (2)(b); or
             583          (c) upon voluntary termination by the franchisee as provided in Subsection
             584      13-14-301 (4).
             585          (3) The franchisor shall pay the franchisee the amounts specified in Subsection (1)
             586      within 90 days after the tender of the property to the franchisor if the franchisee:
             587          (a) has clear title to the property; and
             588          (b) is in a position to convey title to the franchisor.
             589          (4) If repurchased inventory, equipment, or demonstrator vehicles are subject to a


             590      security interest, the franchisor may make payment jointly to the franchisee and to the holder
             591      of the security interest.
             592          Section 6. Effective date.
             593          If approved by two-thirds of all the members elected to each house, this bill takes effect
             594      upon approval by the governor, or the day following the constitutional time limit of Utah
             595      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             596      the date of veto override.


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