ZEM C.S.H.B. 2037 75(R)BILL ANALYSIS


CIVIL PRACTICES
C.S.H.B. 2037
By: Lewis, Ron
4-25-97
Committee Report (Substituted)



BACKGROUND 

Article 8911, V.T.C.S., requires that boat and boat motor manufacturers
have written supply agreements with the retail dealers who sell their
products in Texas.  The statute requires that the contracts address basic
supply terms and conditions and meet certain minimum standards, all in an
effort to promote fair dealing between the parties.  Article 8911 has
assisted the boating industry in addressing and resolving issues
pertaining to market areas, facility and inventory requirements, capital
requirements, performance standards, warranty work reimbursement, and
dealer succession.  Article 8911, however, does not address nonrenewal of
dealer agreements. As such, Texas dealers sometimes experience abrupt and
unfair nonrenewals, leaving them with large inventories or products and
parts, significant wasted brand identification expenses, and warranty work
requirements, without being a sanctioned dealer of the manufacturer.  This
also creates confusion for consumers attempting to procure warranty work. 

PURPOSE

The bill adds a provision to Article 8911 pertaining to the nonrenewal of
dealer agreements.  It establishes a procedure pursuant to which certain
notice must be provided before a nonrenewal can be effective. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency or
institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 3, Chapter 479, Acts of the 72nd Legislature,
Regular Session, 1991, (Article 8911, Vernon's Texas Civil Statutes), by
amending Subsections (c), (d), and (p) and adding Subsections (q) and (r)
as follows: 

(c)  requires a manufacturer or distributor to follow the same procedures
for nonrenewal of a contract with a dealer that are currently required for
terminating a contract, including: giving notice, opportunity to cure, and
showing good cause. 

 (d) defines "good cause."

(p)  provides that any person violating this Act forfeits the right to
conduct business in the state as a manufacturer, distributor or dealer 

(q)  provides that either party to a contract may opt to submit a
disagreement to binding arbitration; the judge presiding in the region in
which the dealer is located shall appoint the arbitrator; a decision must
be rendered by the arbitrator no later than the 30th day following the
appointment of the arbitrator; the arbitration shall be binding on both
parties and each party is to share in the cost equally and pay for its own
attorney's fees and experts 

(r)  provides that, if good cause for nonrenewal exists, the agreement is
to expire on the later of the date of the determination by the arbitrator
or the end of the agreement's term; if good cause is not found, the
agreement shall be renewed on the later of the date of the determination
by the arbitrator or the end of the agreement's term. 

SECTION 2.  Effective date: September 1, 1997.

SECTION 3.  Emergency clause.


COMPARISON OF ORIGINAL TO SUBSTITUTE

The committee substitute makes the following changes:

1.  Includes in Subsection (c) provisions for nonrenewal of contracts in
existing procedures for terminating contracts instead of creating a new
section for nonrenewal of contracts as in the bill as filed. 

2.  Amends Subsection (d) by redefining "good cause" and deleting language
excluding the fact that a dealer holds an agreement involving another
line, make or brand of a boat from the definition of good cause. 

3.  Makes provisions for binding arbitration in Subsection (q), but
directs the presiding judge of the administrative region in which the
dealer's business is located to appoint the arbitrator instead of the
Texas Parks and Wildlife Commission, as was specified in the bill as
filed.