By Nixon S.B. No. 924 75R6047 BEM-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the operation of a motor home dealership by a motor 1-3 home manufacturer. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Section 5.02(b), Texas Motor Vehicle Commission 1-6 Code (Article 4413(36), Vernon's Texas Civil Statutes), is amended 1-7 to read as follows: 1-8 (b) It is unlawful for any manufacturer, distributor, or 1-9 representative to: 1-10 (1) Require or attempt to require any dealer to order, 1-11 accept delivery of or pay anything of value, directly or 1-12 indirectly, for any motor vehicle, appliance, part, accessory or 1-13 any other commodity unless voluntarily ordered or contracted for by 1-14 such dealer. 1-15 (2) Refuse or fail to deliver, in reasonable 1-16 quantities and within a reasonable time, to a dealer having a 1-17 franchise agreement for the retail sale of any motor vehicles sold 1-18 or distributed by such manufacturer, distributor, or 1-19 representative, any new motor vehicle or parts or accessories to 1-20 new motor vehicles as are covered by such franchise if such 1-21 vehicle, parts or accessories are publicly advertised as being 1-22 available for delivery or are actually being delivered; provided, 1-23 however, this provision is not violated if such failure is caused 1-24 by acts of God, work stoppage or delays due to strikes or labor 2-1 disputes, freight embargoes or other causes beyond the control of 2-2 the manufacturer, distributor, or representative. 2-3 (3) Notwithstanding the terms of any franchise 2-4 agreement: 2-5 (A) Terminate or refuse to continue any 2-6 franchise with a dealer or directly or indirectly force or attempt 2-7 to force a dealer to discontinue a line-make or parts or products 2-8 related to that line-make unless all of the following conditions 2-9 are met: 2-10 (i) the dealer and the Commission have 2-11 received written notice by registered or certified mail from the 2-12 manufacturer, distributor, or representative not less than 60 days 2-13 before the effective date of termination or noncontinuance setting 2-14 forth the specific grounds for termination or noncontinuance; and 2-15 (ii) the written notice contains on the 2-16 first page thereof a conspicuous statement which reads as follows: 2-17 "NOTICE TO DEALER: YOU MAY BE ENTITLED TO FILE A PROTEST WITH THE 2-18 TEXAS MOTOR VEHICLE COMMISSION IN AUSTIN, TEXAS, AND HAVE A HEARING 2-19 IN WHICH YOU MAY PROTEST THE PROPOSED TERMINATION OR NONCONTINUANCE 2-20 OF YOUR FRANCHISE UNDER THE TERMS OF THE TEXAS MOTOR VEHICLE 2-21 COMMISSION CODE IF YOU OPPOSE THIS ACTION."; and 2-22 (iii) the manufacturer, distributor, or 2-23 representative has received the informed, written consent of the 2-24 affected dealer or the appropriate period for the affected dealer 2-25 to protest the proposed franchise termination or noncontinuance has 2-26 lapsed; or 2-27 (iv) if the affected dealer files a 3-1 protest with the Commission within the greater of (1) 60 days after 3-2 receiving its 60-day notice of proposed termination or 3-3 noncontinuance or (2) the time specified in such notice, the 3-4 Commission determines that the party seeking to terminate or not 3-5 continue a dealer's franchise has established by a preponderance of 3-6 the evidence, at a hearing called by the Commission, that there is 3-7 good cause for the proposed termination or noncontinuance. 3-8 (v) Notwithstanding Subdivisions (3)(A)(i) 3-9 and (3)(A)(iv) of this section, notice may be made not less than 15 3-10 days prior to the effective date of termination or noncontinuance 3-11 if a licensed dealer fails to conduct its customary sales and 3-12 service operations during its customary business hours for seven 3-13 consecutive business days unless such failure is caused by an act 3-14 of God, work stoppage or delays due to strikes or labor disputes, 3-15 an order of the Commission, or other causes beyond the control of 3-16 the dealer. 3-17 (B) Whenever a dealer files a timely protest to 3-18 a proposed franchise termination or noncontinuance, the Commission 3-19 shall notify the party seeking to terminate or to not continue the 3-20 protesting dealer's franchise that a timely protest has been filed, 3-21 that a hearing is required in accordance with this Act, and that 3-22 the party who gave the dealer notice of termination or 3-23 noncontinuance of the franchise may not terminate or refuse to 3-24 continue the franchise until the Commission issues its final 3-25 decision or order. 3-26 (C) If a franchise is terminated or not 3-27 continued, another franchise in the same line-make will be 4-1 established within a reasonable time unless it is shown to the 4-2 Commission by a preponderance of the evidence that the community or 4-3 trade area cannot reasonably support such a dealership. If this 4-4 showing is made, no dealer license shall be thereafter issued in 4-5 the same area unless a change in circumstances is established. 4-6 (4) Notwithstanding the terms of any franchise 4-7 agreement, modify or replace a franchise with a succeeding 4-8 franchise if the modification or replacement would adversely 4-9 affect, to a substantial degree, the dealer's sales, investment, or 4-10 obligations to provide service to the public, unless the 4-11 manufacturer, distributor, or representative has first given the 4-12 Commission and each affected dealer written notice by registered or 4-13 certified mail of any such action 60 days in advance of the 4-14 modification or replacement. The written notice shall contain on 4-15 the first page thereof a conspicuous statement which reads as 4-16 follows: "NOTICE TO DEALER: YOU MAY BE ENTITLED TO FILE A PROTEST 4-17 WITH THE TEXAS MOTOR VEHICLE COMMISSION IN AUSTIN, TEXAS, AND HAVE 4-18 A HEARING IN WHICH YOU MAY PROTEST THE PROPOSED MODIFICATION OR 4-19 REPLACEMENT OF YOUR FRANCHISE WITH A SUCCEEDING FRANCHISE UNDER THE 4-20 TERMS OF THE TEXAS MOTOR VEHICLE COMMISSION CODE IF YOU OPPOSE THIS 4-21 ACTION." Within the greater of (1) 60 days after receipt of such 4-22 notice or (2) the time specified in such notice, a dealer may file 4-23 a protest with the Commission and the modification or replacement 4-24 shall not become effective unless and until the Commission 4-25 determines that the party seeking to modify or replace a franchise 4-26 with a succeeding franchise has demonstrated by a preponderance of 4-27 the evidence that there is good cause for the modification or 5-1 replacement. The prior franchise shall continue in effect until 5-2 the protest is resolved by the Commission. 5-3 (5) Notwithstanding the terms of any franchise 5-4 agreement, in determining whether good cause has been established 5-5 for modifying, replacing, terminating, or refusing to continue a 5-6 franchise, or for forcing or attempting to force a dealer to 5-7 discontinue a line-make or parts or products related to that 5-8 line-make, the Commission shall consider all the existing 5-9 circumstances including, without limitation by the enumeration 5-10 herein, all the following: 5-11 (A) the dealer's sales in relation to the sales 5-12 in the market; 5-13 (B) the dealer's investment and obligations; 5-14 (C) injury to the public welfare; 5-15 (D) the adequacy of the dealer's service 5-16 facilities, equipment, parts, and personnel in relation to those of 5-17 other dealers of new motor vehicles of the same line-make; 5-18 (E) whether warranties are being honored by the 5-19 dealer; 5-20 (F) the parties' compliance with their franchise 5-21 agreement; and 5-22 (G) the enforceability of the franchise 5-23 agreement from a public policy standpoint, including, without 5-24 limitation, issues of the reasonableness of the franchise 5-25 agreement's terms, oppression, adhesion, and the relative 5-26 bargaining power of the parties. 5-27 Good cause shall not be shown solely by the desire of a 6-1 manufacturer, distributor, or representative for market 6-2 penetration. 6-3 (6) Use any false, deceptive or misleading 6-4 advertising. 6-5 (7) Notwithstanding the terms of any franchise 6-6 agreement, prevent any dealer from reasonably changing the capital 6-7 structure of his dealership or the means by or through which he 6-8 finances the operation thereof, provided that the dealer meets 6-9 reasonable capital requirements. 6-10 (8) Notwithstanding the terms of any franchise 6-11 agreement, fail to give effect to or attempt to prevent any sale or 6-12 transfer of a dealer, dealership or franchise or interest therein 6-13 or management thereof unless, after complaint or protest, it is 6-14 demonstrated to the Commission after hearing that the result of any 6-15 such sale or transfer will be detrimental to the public or the 6-16 representation of the manufacturer or distributor. 6-17 (9) Notwithstanding the terms of any franchise 6-18 agreement, require or attempt to require that a dealer assign to or 6-19 act as an agent for any manufacturer, distributor or representative 6-20 in the securing of promissory notes and security agreements given 6-21 in connection with the sale or purchase of new motor vehicles or 6-22 the securing of policies of insurance on or having to do with the 6-23 operation of vehicles sold. 6-24 (10) Notwithstanding the terms of any franchise 6-25 agreement, fail or refuse, after complaint and hearing, to perform 6-26 the obligations placed on the manufacturer in connection with the 6-27 delivery, preparation and warranty of a new motor vehicle as 7-1 provided in the manufacturer's warranty, preparation, and delivery 7-2 agreements on file with the Commission. 7-3 (11) Notwithstanding the terms of any franchise 7-4 agreement, fail to compensate its dealers for the work and services 7-5 they are required to perform in connection with the dealer's 7-6 delivery and preparation obligations according to the agreements on 7-7 file with the Commission which must be found by the Commission to 7-8 be reasonable, or fail to adequately and fairly compensate its 7-9 dealers for labor, parts and other expenses incurred by such dealer 7-10 to perform under and comply with a manufacturer's or a 7-11 distributor's warranty agreement, or require, as a prerequisite to 7-12 the manufacturer's or distributor's payment of a claim for 7-13 reimbursement as required by this section, that a dealer file with 7-14 the manufacturer or distributor the actual time spent in the 7-15 performance of labor unless actual time is the basis for 7-16 reimbursement. In no event shall any manufacturer or distributor 7-17 pay its dealers an amount of money for warranty work that is less 7-18 than that charged by the dealer to the retail customers of the 7-19 dealer for nonwarranty work of like kind. All claims made by 7-20 dealers for compensation for delivery, preparation, and warranty 7-21 work shall be paid within 30 days after approval and shall be 7-22 approved or disapproved within 30 days after receipt. When any 7-23 claim is disapproved, the dealer shall be notified in writing of 7-24 the grounds for disapproval. No claim which has been approved and 7-25 paid may be charged back to the dealer unless it can be shown that 7-26 the claim was false or fraudulent, that the repairs were not 7-27 properly made or were unnecessary to correct the defective 8-1 condition, or that the dealer failed to reasonably substantiate the 8-2 claim in accordance with reasonable written requirements of the 8-3 manufacturer or distributor, if the dealer has been notified of the 8-4 requirements prior to the time the claim arose, and if the 8-5 requirements were in effect at the time the claim arose. A 8-6 manufacturer or distributor may not audit a claim after the 8-7 expiration of two years following the submission of the claim 8-8 unless the manufacturer or distributor has reasonable grounds to 8-9 suspect that a claim was fraudulent. Notwithstanding the terms of 8-10 a franchise agreement or provision of law in conflict with this 8-11 section, the dealer's delivery, preparation, and warranty 8-12 obligations as filed with the Commission shall constitute the 8-13 dealer's sole responsibility for product liability as between the 8-14 dealer and manufacturer or distributor, and, except for a loss 8-15 caused by the dealer's failure to adhere to these obligations, a 8-16 loss caused by the dealer's negligence or intentional misconduct, 8-17 or a loss caused by the dealer's modification of a product without 8-18 manufacturer or distributor authorization, the manufacturer or 8-19 distributor shall reimburse the dealer for all loss incurred by the 8-20 dealer, including legal fees, court costs, and damages, as a result 8-21 of the dealer having been named a party in a product liability 8-22 action. 8-23 (12) Operate as a manufacturer, distributor, or 8-24 representative without a currently valid license from the 8-25 Commission or otherwise violate this Act or rules promulgated by 8-26 the Commission hereunder. 8-27 (13) Notwithstanding the terms of any franchise 9-1 agreement, to prevent or refuse to honor the succession to a 9-2 dealership by any legal heir or devisee under the will of a dealer 9-3 or under the laws of descent and distribution of this State unless 9-4 it is shown to the Commission, after notice and hearing, that the 9-5 result of such succession will be detrimental to the public 9-6 interest and to the representation of the manufacturer or 9-7 distributor; provided, however, nothing herein shall prevent a 9-8 dealer, during his lifetime, from designating any person as his 9-9 successor dealer, by written instrument filed with the manufacturer 9-10 or distributor. 9-11 (14) Notwithstanding the terms of any franchise 9-12 agreement, require that a dealer pay or assume, directly or 9-13 indirectly, any part of any refund, rebate, discount, or other 9-14 financial adjustment made by the manufacturer, distributor, or 9-15 representative to, or in favor of, any customer of a dealer, unless 9-16 voluntarily agreed to by such dealer. 9-17 (15) Notwithstanding the terms of any franchise 9-18 agreement, deny or withhold approval of a written application to 9-19 relocate a franchise unless (A) the applicant has received written 9-20 notice of the denial or withholding of approval within 60 days 9-21 after receipt of the application containing information reasonably 9-22 necessary to enable the manufacturer or distributor to adequately 9-23 evaluate the application, and if (B) the applicant files a protest 9-24 with the Commission and the manufacturer or distributor establishes 9-25 by a preponderance of the evidence at a hearing called by the 9-26 Commission that the grounds for the denial or withholding of 9-27 approval of the relocation are reasonable. 10-1 (16) Notwithstanding the terms of any franchise 10-2 agreement, fail to pay to a dealer or any lienholder in accordance 10-3 with their respective interest after the termination of a 10-4 franchise: 10-5 (A) the dealer cost of each new motor vehicle in 10-6 the dealer's inventory with mileage of 6,000 miles or less, reduced 10-7 by the net discount value of each, where "net discount value" is 10-8 determined according to the following formula: net cost multiplied 10-9 by total mileage divided by 100,000, and where "net cost" equals 10-10 the dealer cost plus any charges by the manufacturer, distributor, 10-11 or representative for distribution, delivery, and taxes, less all 10-12 allowances paid to the dealer by the manufacturer, distributor, or 10-13 representative for new, unsold, undamaged, and complete motor 10-14 vehicles of current model year or one year prior model year in the 10-15 dealer's inventory, except that if a vehicle cannot be reduced by 10-16 the net discount value, the manufacturer or distributor shall pay 10-17 the dealer the net cost of the vehicle; 10-18 (B) the dealer cost of each new, unused, 10-19 undamaged, and unsold part or accessory if the part or accessory is 10-20 in the current parts catalogue and is still in the original, 10-21 resalable merchandising package and in unbroken lots, except that 10-22 in the case of sheet metal, a comparable substitute for the 10-23 original package may be used, and if the part or accessory was 10-24 purchased by the dealer either directly from the manufacturer or 10-25 distributor or from an outgoing authorized dealer as a part of the 10-26 dealer's initial inventory; 10-27 (C) the fair market value of each undamaged sign 11-1 owned by the dealer which bears a trademark or tradename used or 11-2 claimed by the manufacturer, distributor, or representative if the 11-3 sign was purchased from or purchased at the request of the 11-4 manufacturer, distributor, or representative; 11-5 (D) the fair market value of all special tools, 11-6 data processing equipment, and automotive service equipment owned 11-7 by the dealer which were recommended in writing and designated as 11-8 special tools and equipment and purchased from or purchased at the 11-9 request of the manufacturer, distributor, or representative, if the 11-10 tools and equipment are in usable and good condition except for 11-11 reasonable wear and tear; 11-12 (E) the cost of transporting, handling, packing, 11-13 storing, and loading of any property subject to repurchase under 11-14 this section; 11-15 (F) except as provided by this subdivision, any 11-16 sums due as provided by Paragraph (A) of this subdivision within 60 11-17 days after termination of a franchise and any sums due as provided 11-18 by Paragraphs (B) through (E) of this subdivision within 90 days 11-19 after termination of a franchise. As a condition of payment, the 11-20 dealer is to comply with reasonable requirements with respect to 11-21 the return of inventory as are set out in the terms of the 11-22 franchise agreement. A manufacturer or distributor shall reimburse 11-23 a dealer for the dealer's cost for storing any property covered by 11-24 this subdivision beginning 90 days following termination. A 11-25 manufacturer or distributor shall reimburse a dealer for the 11-26 dealer's cost of storing any property covered by this subdivision 11-27 before the expiration of 90 days from the date of termination if 12-1 the dealer notifies the manufacturer or distributor of the 12-2 commencement of storage charges within that period. On receipt of 12-3 notice of the commencement of storage charges, a manufacturer or 12-4 distributor may immediately take possession of the property in 12-5 question by repurchasing the property as provided by this 12-6 subdivision. A manufacturer, distributor, or representative who 12-7 fails to pay those sums within the prescribed time or at such time 12-8 as the dealer and lienholder, if any, proffer good title prior to 12-9 the prescribed time for payment, is liable to the dealer for: 12-10 (i) the greatest of dealer cost, fair 12-11 market value, or current price of the inventory; 12-12 (ii) interest on the amount due calculated 12-13 at the rate applicable to a judgment of a court; and 12-14 (iii) reasonable attorney's fees and 12-15 costs. 12-16 (17) Notwithstanding the terms of any franchise 12-17 agreement, change its distributor, its method of distribution of 12-18 its products in this state, or its business structure or ownership 12-19 in a manner that results in the termination or noncontinuance of a 12-20 franchise without good cause. The manufacturer, distributor, or 12-21 representative shall issue the same notice to the dealer and to the 12-22 Commission as is provided in Subdivisions (3)(A) and (B) of this 12-23 section and said same procedures shall apply to the parties. 12-24 (18) Notwithstanding the terms of any franchise 12-25 agreement, require a dealer to submit to arbitration on any issue 12-26 unless the dealer and the manufacturer, distributor, or 12-27 representative and their respective counsel agree to arbitrate 13-1 after a controversy arises. The arbitrator shall apply the 13-2 provisions of this Act in resolving the pertinent controversy. 13-3 Either party may appeal to the Commission a decision of an 13-4 arbitrator on the ground that the arbitrator failed to apply this 13-5 Act. 13-6 (19) Notwithstanding the terms of any franchise 13-7 agreement, require that a dealer join, contribute to, or affiliate 13-8 with, directly or indirectly, any advertising association. 13-9 (20) Notwithstanding the terms of a franchise 13-10 agreement: 13-11 (A) require adherence to unreasonable sales or 13-12 service standards; 13-13 (B) directly or indirectly, discriminate against 13-14 a dealer or otherwise treat dealers differently as a result of a 13-15 formula or other calculation or process intended to gauge the 13-16 performance of a dealership, except a sales contest or other 13-17 recognition program based on reasonable sales and service criteria; 13-18 (C) unreasonably require that a dealer purchase 13-19 special tools or equipment; or 13-20 (D) fail to compensate a dealer for all costs 13-21 incurred by the dealer as required by the manufacturer in complying 13-22 with the terms of a product recall by the manufacturer or 13-23 distributor, including the costs, if any, incurred by the dealer in 13-24 notifying vehicle owners of the existence of the recall. 13-25 (21) Discriminate unreasonably between or among 13-26 franchisees in the sale of a motor vehicle owned by the 13-27 manufacturer or distributor. 14-1 (22) Directly or indirectly, or through a subsidiary 14-2 or agent, require, as a condition for obtaining financing for a 14-3 motor vehicle, the purchaser of a vehicle to purchase any product 14-4 other than the motor vehicle from the manufacturer or distributor, 14-5 or from an entity owned or controlled by the manufacturer or 14-6 distributor. 14-7 (23) Directly or indirectly, or through a subsidiary 14-8 or agent, require, as a condition of its or its subsidiary's 14-9 agreement to provide financing for a motor vehicle, that any 14-10 insurance policy or service contract purchased by the motor vehicle 14-11 purchaser be purchased from a specific source. 14-12 (24) Compel a dealer through a financing subsidiary of 14-13 the manufacturer or distributor to agree to unreasonable operating 14-14 requirements or directly or indirectly to terminate a dealer 14-15 through the actions of a financing subsidiary of the manufacturer 14-16 or distributor. This subdivision does not limit the right of a 14-17 financing entity to engage in business practices in accordance with 14-18 the usage of trade in retail and wholesale motor vehicle financing. 14-19 (25) Operate as a dealer, other than a motor home 14-20 dealer, except on a temporary basis and only if: 14-21 (A) the dealership was previously owned by a 14-22 franchised dealer and is currently for sale at a reasonable price; 14-23 or 14-24 (B) the manufacturer, distributor, or 14-25 representative operates the dealership in a bona fide relationship 14-26 with a franchised dealer who is required to make a significant 14-27 investment in the dealership, subject to loss, and who reasonably 15-1 expects to acquire full ownership of the dealership under 15-2 reasonable terms and conditions. 15-3 (26) Notwithstanding the terms of a franchise 15-4 agreement, deny or withhold approval of a dealer's application to 15-5 add a line-make or parts or products related to that line-make 15-6 unless, within 60 days of receipt of the dealer's written 15-7 application to add the line-make, the manufacturer or distributor 15-8 gives the dealer written notice of the denial or withholding of 15-9 approval. After receipt of notice, the dealer may file a protest 15-10 with the Commission. If the dealer files a protest as provided by 15-11 this subdivision, the Commission may uphold the manufacturer's or 15-12 distributor's decision to deny or withhold approval of the addition 15-13 of the line-make only if the manufacturer or distributor proves by 15-14 a preponderance of the evidence that the denial or withholding of 15-15 approval was reasonable. In determining whether or not the 15-16 manufacturer or distributor has met its burden to show that its 15-17 denial or withholding of approval is reasonable, the Commission 15-18 shall consider all existing circumstances, including, without 15-19 limitation, the following: 15-20 (A) the dealer's sales in relation to the sales 15-21 in the market; 15-22 (B) the dealer's investment and obligations; 15-23 (C) injury to the public welfare; 15-24 (D) the adequacy of the dealer's sales and 15-25 service facilities, equipment, parts, and personnel in relation to 15-26 those of other dealers of new motor vehicles of the same line-make; 15-27 (E) whether warranties are being honored by the 16-1 dealer agreement; 16-2 (F) the parties' compliance with their franchise 16-3 agreement; 16-4 (G) the enforceability of the franchise 16-5 agreement from a public policy standpoint, including without 16-6 limitation, issues of the reasonableness of the franchise 16-7 agreement's terms, oppression, adhesion, and the relative 16-8 bargaining power of the parties; 16-9 (H) whether the dealer complies with reasonable 16-10 capitalization requirements or will be able to comply with 16-11 reasonable capitalization requirements within a reasonable time; 16-12 (I) the harm, if any, to the manufacturer if the 16-13 denial or withholding of approval is not upheld; and 16-14 (J) the harm, if any, to the dealer if the 16-15 denial or withholding of approval is upheld. 16-16 SECTION 2. The importance of this legislation and the 16-17 crowded condition of the calendars in both houses create an 16-18 emergency and an imperative public necessity that the 16-19 constitutional rule requiring bills to be read on three several 16-20 days in each house be suspended, and this rule is hereby suspended, 16-21 and that this Act take effect and be in force from and after its 16-22 passage, and it is so enacted.