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.