By:  Brown                                             S.B. No. 849
         2001S0563/1                            
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the duties and authority of the Motor Vehicle Board of
 1-3     the Texas Department of Transportation and to the regulation of the
 1-4     sale of motor vehicles.
 1-5           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-6           SECTION 1.  Subdivisions (6) and (15), Section 1.03, Texas
 1-7     Motor Vehicle Commission Code (Article 4413(36), Vernon's Texas
 1-8     Civil Statutes), are amended to read as follows:
 1-9                 (6)  "Converter" means a person who prior to the retail
1-10     sale of a motor vehicle, assembles, installs, or affixes a body,
1-11     cab, or special equipment to a chassis, or who substantially adds,
1-12     subtracts from, or modifies a previously assembled or manufactured
1-13     motor vehicle other than a motor home.
1-14                 (15)  "Franchised dealer" means any person who holds a
1-15     franchised motor vehicle dealer's license [general distinguishing
1-16     number] issued by the Department pursuant to the terms of Chapter
1-17     503, Transportation Code, and who is engaged in the business of
1-18     buying, selling, or exchanging new motor vehicles and servicing or
1-19     repairing motor vehicles pursuant to the terms of a franchise and a
1-20     manufacturer's warranty at an established and permanent place of
1-21     business pursuant to a franchise in effect with a manufacturer or
1-22     distributor.
1-23           SECTION 2.  Subsections (b) and (c), Section 2.03, Texas
1-24     Motor Vehicle Commission Code (Article 4413(36), Vernon's Texas
1-25     Civil Statutes), are amended to read as follows:
 2-1           (b)  Except as provided by this section, the office of a
 2-2     member is automatically vacated and shall be filled as any other
 2-3     vacancy, if:
 2-4                 (1)  the member becomes a licensee under this Act;
 2-5                 (2)  the member acquires a substantial [an] interest in
 2-6     a business that manufactures, distributes, converts, leases, or
 2-7     sells motor vehicles;
 2-8                 (3)  the member becomes an [officer,] employee[,] or
 2-9     paid consultant of a trade association in the motor vehicle
2-10     industry; or
2-11                 (4)  a person related to the member within the first
2-12     degree by consanguinity or affinity, as determined under Chapter
2-13     573, Government Code, becomes an [officer,] employee[,] or paid
2-14     consultant of a trade association in the motor vehicle industry,
2-15     becomes a licensee under this Act, or acquires a substantial [an]
2-16     interest in a business that manufactures, distributes, converts,
2-17     leases, or sells motor vehicles.
2-18           (c)  Notwithstanding the terms of Subsection (b)  of this
2-19     section, the office of a member appointed to the board pursuant to
2-20     the terms of Section 2.02(b)(1) [2.02(c)(1)] of this Act is not
2-21     vacated by virtue of the fact that the member, or a person related
2-22     to the member within the first degree by consanguinity or affinity,
2-23     as determined under Chapter 573, Government Code, subsequently
2-24     acquires an interest in a dealership.
2-25           SECTION 3.  Subsection (d), Section 2.08, Texas Motor Vehicle
2-26     Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
 3-1     is amended to read as follows:
 3-2           (d)  A member of the board appointed pursuant to the terms of
 3-3     Section 2.02(b) [2.02(c)] of this Act may not vote on an issue
 3-4     involving a dispute in which both a dealer and a manufacturer are
 3-5     named parties.
 3-6           SECTION 4.  Subsection (c), Section 2.12, Texas Motor Vehicle
 3-7     Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
 3-8     is amended to read as follows:
 3-9           (c)  With regard to each complaint filed by the board for the
3-10     purpose of enforcing this Act [with the Commission], the board
3-11     [Commission] shall keep the following information:
3-12                 (1)  the date the complaint is filed;
3-13                 (2)  the name of the person filing the complaint;
3-14                 (3)  the subject matter of the complaint;
3-15                 (4)  a record of each person contacted in relation to
3-16     the complaint;
3-17                 (5)  a summary of the results of the review or
3-18     investigation of the complaint; and
3-19                 (6)  if the board [Commission] takes no action on the
3-20     complaint, an explanation of the reasons that no action was taken.
3-21           SECTION 5.  Subsection (a), Section 3.01, Texas Motor Vehicle
3-22     Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
3-23     is amended to read as follows:
3-24           (a)  The board has the exclusive [general and] original
3-25     [power and] jurisdiction to regulate all aspects of the
3-26     distribution, sale, and leasing of motor vehicles as provided by
 4-1     this Act and to do all things, whether specifically designated in
 4-2     this Act or implied herein, or necessary or convenient to the
 4-3     exercise of this power and jurisdiction, including the original
 4-4     jurisdiction to determine questions of its own jurisdiction.  In
 4-5     addition to the other duties placed on the board by this Act, the
 4-6     board shall enforce and administer the terms of Chapter 503,
 4-7     Transportation Code.
 4-8           SECTION 6.  Section 3.03, Texas Motor Vehicle Commission Code
 4-9     (Article 4413(36), Vernon's Texas Civil Statutes), is amended to
4-10     read as follows:
4-11           Sec. 3.03.  GENERAL BOARD [COMMISSION] POWERS.  (a)  The
4-12     board [Commission] shall have and may, in its discretion and
4-13     notwithstanding any other provision of law that is inconsistent
4-14     with this Act, exercise the powers set forth in this Act, and shall
4-15     have all other powers necessary, incidental, or convenient to carry
4-16     out its duties and effectuate its express powers and duties.  These
4-17     powers and duties include the power to initiate and conduct
4-18     proceedings, investigations, and hearings, administer oaths,
4-19     receive evidence and pleadings, issue subpoenas to compel the
4-20     attendance of any person, order the production of any tangible
4-21     property, including papers, records, and documents, make findings
4-22     of fact on all factual issues arising out of any proceeding
4-23     initiated under this Act, specify, govern, and control appearance,
4-24     practice, and procedure before the board [Commission], issue rules,
4-25     conclusions of law, decisions, including declaratory decisions or
4-26     orders, enter into contracts or execute instruments, retain
 5-1     counsel, utilize the services of the Attorney General of the State
 5-2     of Texas and thereafter institute and direct the conduct of legal
 5-3     proceedings in any forum or obtain other professional services as
 5-4     may be necessary and convenient, sanction for contempt, assess and
 5-5     collect fees and costs including attorney's fees, issue, suspend,
 5-6     and revoke licenses, prohibit and regulate acts and practices in
 5-7     connection with the distribution and sale of motor vehicles and
 5-8     warranty performance obligations, issue cease and desist orders in
 5-9     the nature of temporary and permanent injunctions, and levy civil
5-10     penalties.  Notwithstanding other law, the board has the authority
5-11     to enter an order necessary to implement the terms of this Act,
5-12     including an order requiring that a person:
5-13                 (1)  pay money to the board or another person;
5-14                 (2)  perform an act other than the payment of money; or
5-15                 (3)  refrain from performing an act.
5-16           (b)  The board may conduct hearings in contested cases
5-17     brought pursuant to, and as provided by, Chapter 503,
5-18     Transportation Code.  The procedures applicable to a hearing
5-19     conducted under this Subsection, and the disposition of a final
5-20     order after a hearing conducted under this Subsection, are those
5-21     applicable to a hearing conducted as provided by Section 6.07(e)(2)
5-22     of this Act.  A decision or final order issued under this
5-23     Subsection is final, and no appeal may, as a matter of right, be
5-24     made to the Texas Transportation Commission.  The board
5-25     [department] may adopt rules applicable to procedures, hearings,
5-26     and enforcement proceedings in an action brought pursuant to this
 6-1     Subsection.
 6-2           SECTION 7.  Subsection (a), Section 3.05, Texas Motor Vehicle
 6-3     Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
 6-4     is amended to read as follows:
 6-5           (a)  Whenever the Board has reason to believe, through
 6-6     receipt of a complaint or otherwise, that a violation of this Act
 6-7     or a Board rule, order, or decision has occurred or is likely to
 6-8     occur, the Board shall conduct an investigation unless it
 6-9     determines that a complaint is frivolous or for the purpose of
6-10     harassment.  If the Board's investigation establishes that a
6-11     violation of this Act or a Board rule, order, or decision has
6-12     occurred or is likely to occur, the Board shall institute
6-13     proceedings as it deems appropriate to enforce this Act or its
6-14     rules, orders, and decisions.  Notwithstanding other provisions of
6-15     this Act, the Board is not required to pay a filing fee when filing
6-16     a complaint or other enforcement action.
6-17           SECTION 8.  The Texas Motor Vehicle Commission Code (Article
6-18     4413(36), Vernon's Texas Civil Statutes), is amended by adding
6-19     Section 3.07B to read as follows:
6-20           Sec. 3.07B.  CERTAIN TIME LIMITS TOLLED DURING PENDENCY OF
6-21     MANDATORY MEDIATION PROCEEDINGS.  A time limit relating to board
6-22     proceedings imposed on the board or on a dealer by the terms of
6-23     this Act is tolled during the pendency of mandatory mediation
6-24     proceedings required by this Act or by a franchise agreement.
6-25           SECTION 9.  Subsection (a), Section 4.01, Texas Motor Vehicle
6-26     Commission Code (Article 4413(36), Vernon's Texas Civil Statutes),
 7-1     is amended to read as follows:
 7-2           (a)  Except as provided by this Section, no person shall
 7-3     engage in business as, serve in the capacity of, or act as a
 7-4     dealer, manufacturer, distributor, converter, representative,
 7-5     lessor, or lease facilitator in this State or perform or offer to
 7-6     perform repair services on a motor vehicle pursuant to the terms of
 7-7     a franchise and a motor vehicle manufacturer's warranty, whether or
 7-8     not the person sells or offers to sell motor vehicles at the same
 7-9     location, without obtaining a license therefor as provided in this
7-10     Act and the rules of the board [Commission].  All new license
7-11     applications shall be reviewed and, in the discretion of the board
7-12     [Commission], investigated to determine compliance with the
7-13     provisions of this Act.  License renewals may be administratively
7-14     granted unless protested.  Licenses issued by the board
7-15     [Commission] shall expire one year from date of issuance.  All
7-16     licenses and renewals thereof are issued subject to all provisions
7-17     of this Act and rules of the board [Commission] in effect upon the
7-18     date of issuance as well as all future provisions of this Act and
7-19     rules which may become effective during the term of the license.  A
7-20     lessor or lease facilitator is not required to obtain a lessor or
7-21     lease facilitator license or pay a license fee under this code if
7-22     the lessor or lease facilitator is a state or federally chartered
7-23     financial institution or a regulated subsidiary of a state or
7-24     federally chartered financial institution.  A trust or other entity
7-25     that owns an interest in a lease and the vehicle that is the
7-26     subject of the lease is not required to obtain a lessor license or
 8-1     lease facilitator license or pay a license fee with respect to a
 8-2     lease initiated, managed, serviced, and administered by a licensed
 8-3     lessor.  A franchised dealer licensed under this code is not
 8-4     required to obtain a lessor or lease facilitator license or pay a
 8-5     license fee under this code to engage in the business of leasing
 8-6     motor vehicles, including new motor vehicles, that the dealer is
 8-7     licensed to sell.  The board may issue a duplicate license for any
 8-8     license it issues, charge a fee for the issuance of a duplicate
 8-9     license, and adopt rules applicable to the issuance of a duplicate
8-10     license.
8-11           SECTION 10.  Subsection (c), Section 4.03, Texas Motor
8-12     Vehicle Commission Code (Article 4413(36), Vernon's Texas Civil
8-13     Statutes), is amended to read as follows:
8-14           (c)  Each application for a manufacturer's license shall
8-15     include an instrument setting forth the terms and conditions of all
8-16     warranty agreements in force and effect on the products it sells in
8-17     this State so that the board [Commission] may ascertain the degree
8-18     of protection afforded the retail purchasers of its products and
8-19     the obligations of its franchised dealers in connection therewith
8-20     as well as the basis for compensating its franchised dealers for
8-21     labor, parts and other expenses incurred in connection with such
8-22     manufacturer's warranty agreements.  Each application shall include
8-23     a statement regarding the manufacturer's compliance with Sections
8-24     5.02A, 5.02B, and 5.02C [Section 5.02] of this Act.  In addition,
8-25     each manufacturer's license application shall specify the delivery
8-26     and preparation obligations of its franchised dealers prior to
 9-1     delivery of a new motor vehicle to a retail purchaser and the
 9-2     schedule of compensation to be paid to its franchised dealers for
 9-3     the work and service performed by them in connection with such
 9-4     delivery.
 9-5           SECTION 11.  Subsection (a), Section 4.05, Texas Motor
 9-6     Vehicle Commission Code (Article 4413(36), Vernon's Texas Civil
 9-7     Statutes), is amended to read as follows:
 9-8           (a)  The annual license fees for licenses issued hereunder
 9-9     shall be as follows:
9-10                 (1)  For each manufacturer and distributor, $900 plus
9-11     $20 for each individual dealer franchised by the manufacturer or
9-12     distributor.
9-13                 (2)  For each franchised dealer who sold 200 or fewer
9-14     new motor vehicles during the preceding calendar year, $175.
9-15                 (3)  For each franchised dealer who sold more than 200,
9-16     but not more than 400, new motor vehicles during the preceding
9-17     calendar year, $275.
9-18                 (4)  For each franchised dealer who sold more than 400,
9-19     but not more than 800, new motor vehicles during the preceding
9-20     calendar year, $400.
9-21                 (5)  For each franchised dealer who sold more than 800
9-22     but not more than 1,200 new motor vehicles during the preceding
9-23     calendar year, $500.
9-24                 (6)  For each franchised dealer who sold more than
9-25     1,200 but not more than 1,600 new motor vehicles during the
9-26     preceding calendar year, $625.
 10-1                (7)  For each franchised dealer who sold more than
 10-2    1,600 new motor vehicles during the preceding calendar year, $750.
 10-3                (8)  For each location separate from his dealership at
 10-4    which a franchised dealer offers no motor vehicle for sale, but
 10-5    performs warranty service on vehicles the dealer is franchised and
 10-6    licensed to sell, $100.
 10-7                (9)  For each amendment to a [dealer's] license, $25.
 10-8                (10)  For each representative, $100.
 10-9                (11)  For each converter, $375.
10-10                (12)  For each lessor who leased 200 or fewer motor
10-11    vehicles during the preceding calendar year, $175.
10-12                (13)  For each lessor who leased more than 200 but not
10-13    more than 400 motor vehicles during the preceding calendar year,
10-14    $275.
10-15                (14)  For each lessor who leased more than 400 but not
10-16    more than 800 motor vehicles during the preceding calendar year,
10-17    $400.
10-18                (15)  For each lessor who leased more than 800 but not
10-19    more than 1,200 motor vehicles during the preceding calendar year,
10-20    $500.
10-21                (16)  For each lessor who leased more than 1,200 but
10-22    not more than 1,600 motor vehicles during the preceding calendar
10-23    year, $625.
10-24                (17)  For each lessor who leased more than 1,600 motor
10-25    vehicles during the preceding calendar year, $750.
10-26                (18)  For each lease facilitator, $375.
 11-1                (19)  For each duplicate license, $50.
 11-2          SECTION 12.  Subsection (a), Section 4.06, Texas Motor
 11-3    Vehicle Commission Code (Article 4413(36), Vernon's Texas Civil
 11-4    Statutes), is amended to read as follows:
 11-5          (a)  The board may deny an application for a license, revoke
 11-6    or suspend an outstanding license, or place on probation a person
 11-7    whose license has been suspended, or reprimand a licensee, for any
 11-8    of the following reasons:
 11-9                (1)  Unfitness of an applicant or licensee under
11-10    standards set out in this Act or in board rules.
11-11                (2)  Material misrepresentation in any application or
11-12    other information filed under this Act or board rules.
11-13                (3)  Failure to comply with this Act or any board rule
11-14    or order promulgated by the board.
11-15                (4)  Failure to maintain the qualifications for a
11-16    license.
11-17                (5)  Willfully defrauding any [retail] buyer.
11-18                (6)  Violation of any law relating to the sale,
11-19    distribution, financing, or insuring of motor vehicles.
11-20                (7)  Any act or omission by an officer, director,
11-21    partner, trustee, or other person acting in a representative
11-22    capacity for a licensee which act or omission would be cause for
11-23    denying, revoking, or suspending a license to an individual
11-24    licensee.
11-25                (8)  Failure to fulfill written agreements between the
11-26    licensee and a retail buyer of a motor vehicle.
 12-1          SECTION 13.  Subsection (b), Section 5.02, Texas Motor
 12-2    Vehicle Commission Code (Article 4413(36), Vernon's Texas Civil
 12-3    Statutes), is amended to read as follows:
 12-4          (b)  It is unlawful for any manufacturer, distributor, or
 12-5    representative to:
 12-6                (1)  Require or attempt to require any dealer to order,
 12-7    accept delivery of or pay anything of value, directly or
 12-8    indirectly, for any motor vehicle, appliance, part, accessory or
 12-9    any other commodity unless voluntarily ordered or contracted for by
12-10    such dealer.
12-11                (2)  Refuse or fail to deliver, in reasonable
12-12    quantities and within a reasonable time, to a dealer having a
12-13    franchise agreement for the retail sale of any motor vehicles sold
12-14    or distributed by such manufacturer, distributor, or
12-15    representative, any new motor vehicle or parts or accessories to
12-16    new motor vehicles as are covered by such franchise if such
12-17    vehicle, parts or accessories are publicly advertised as being
12-18    available for delivery or are actually being delivered; provided,
12-19    however, this provision is not violated if such failure is caused
12-20    by acts of God, work stoppage or delays due to strikes or labor
12-21    disputes, freight embargoes or other causes beyond the control of
12-22    the manufacturer, distributor, or representative.
12-23                (3)  Notwithstanding the terms of any franchise
12-24    agreement:
12-25                      (A)  Terminate or refuse to continue any
12-26    franchise with a dealer or directly or indirectly force or attempt
 13-1    to force a dealer to relocate or discontinue a line-make or parts
 13-2    or products related to that line-make unless all of the following
 13-3    conditions are met:
 13-4                            (i)  the dealer and the board have received
 13-5    written notice by registered or certified mail from the
 13-6    manufacturer, distributor, or representative not less than 60 days
 13-7    before the effective date of termination or noncontinuance setting
 13-8    forth the specific grounds for termination or noncontinuance; and
 13-9                            (ii)  the written notice contains on the
13-10    first page thereof a conspicuous statement which reads as follows:
13-11    "NOTICE TO DEALER:  YOU MAY BE ENTITLED TO FILE A PROTEST WITH THE
13-12    TEXAS MOTOR VEHICLE BOARD IN AUSTIN, TEXAS, AND HAVE A HEARING IN
13-13    WHICH YOU MAY PROTEST THE PROPOSED TERMINATION OR NONCONTINUANCE OF
13-14    YOUR FRANCHISE UNDER THE TERMS OF THE TEXAS MOTOR VEHICLE
13-15    COMMISSION CODE IF YOU OPPOSE THIS ACTION."; and
13-16                            (iii)  the manufacturer, distributor, or
13-17    representative has received the informed, written consent of the
13-18    affected dealer or the appropriate period for the affected dealer
13-19    to protest the proposed franchise termination or noncontinuance has
13-20    lapsed; or
13-21                            (iv)  if the affected dealer files a
13-22    protest with the board within the greater of (1) 60 days after
13-23    receiving its 60-day notice of proposed termination or
13-24    noncontinuance or (2) the time specified in such notice, the board
13-25    determines that the party seeking to terminate or not continue a
13-26    dealer's franchise has established by a preponderance of the
 14-1    evidence, at a hearing called by the board, that there is good
 14-2    cause for the proposed termination or noncontinuance.
 14-3                            (v)  Notwithstanding Subdivisions (3)(A)(i)
 14-4    and (3)(A)(iv) of this section, notice may be made not less than 15
 14-5    days prior to the effective date of termination or noncontinuance
 14-6    if a licensed dealer fails to conduct its customary sales and
 14-7    service operations during its customary business hours for seven
 14-8    consecutive business days unless such failure is caused by an act
 14-9    of God, work stoppage or delays due to strikes or labor disputes,
14-10    an order of the board, or other causes beyond the control of the
14-11    dealer.
14-12                      (B)  Whenever a dealer files a timely protest to
14-13    a proposed franchise termination or noncontinuance, the board shall
14-14    notify the party seeking to terminate or to not continue the
14-15    protesting dealer's franchise that a timely protest has been filed,
14-16    that a hearing is required in accordance with this Act, and that
14-17    the party who gave the dealer notice of termination or
14-18    noncontinuance of the franchise may not terminate or refuse to
14-19    continue the franchise until the board issues its final decision or
14-20    order.
14-21                      (C)  If a franchise is terminated or not
14-22    continued, another franchise in the same line-make will be
14-23    established within a reasonable time unless it is shown to the
14-24    board by a preponderance of the evidence that the community or
14-25    trade area cannot reasonably support such a dealership.  If this
14-26    showing is made, no dealer license shall be thereafter issued in
 15-1    the same area unless a change in circumstances is established.
 15-2                (4)  Notwithstanding the terms of any franchise
 15-3    agreement, modify or replace a franchise if the modification or
 15-4    replacement would adversely affect, to a substantial degree, the
 15-5    dealer's sales, investment, or obligations to provide service to
 15-6    the public, unless the manufacturer, distributor, or representative
 15-7    has first given the board and each affected dealer written notice
 15-8    by registered or certified mail of any such action 60 days in
 15-9    advance of the modification or replacement.  The written notice
15-10    shall contain on the first page thereof a conspicuous statement
15-11    which reads as follows:  "NOTICE TO DEALER:  YOU MAY BE ENTITLED TO
15-12    FILE A PROTEST WITH THE TEXAS MOTOR VEHICLE BOARD IN AUSTIN, TEXAS,
15-13    AND HAVE A HEARING IN WHICH YOU MAY PROTEST THE PROPOSED
15-14    MODIFICATION OR REPLACEMENT OF YOUR FRANCHISE UNDER THE TERMS OF
15-15    THE TEXAS MOTOR VEHICLE COMMISSION CODE IF YOU OPPOSE THIS ACTION."
15-16    Within the greater of (1) 60 days after receipt of such notice or
15-17    (2) the time specified in such notice, a dealer may file a protest
15-18    with the board and the modification or replacement shall not become
15-19    effective unless and until the board determines that the party
15-20    seeking to modify or replace a franchise has demonstrated by a
15-21    preponderance of the evidence that there is good cause for the
15-22    modification or replacement.  The prior franchise shall continue in
15-23    effect until the protest is resolved by the board.
15-24                (5)  Notwithstanding the terms of any franchise
15-25    agreement, in determining whether good cause has been established
15-26    for modifying, replacing, terminating, or refusing to continue a
 16-1    franchise, or for forcing or attempting to force a dealer to
 16-2    relocate or discontinue a line-make or parts or products related to
 16-3    that line-make, the board shall consider all the existing
 16-4    circumstances including, without limitation by the enumeration
 16-5    herein, all the following:
 16-6                      (A)  the dealer's sales in relation to the sales
 16-7    in the market;
 16-8                      (B)  the dealer's investment and obligations;
 16-9                      (C)  injury or benefit to the public;
16-10                      (D)  the adequacy of the dealer's service
16-11    facilities, equipment, parts, and personnel in relation to those of
16-12    other dealers of new motor vehicles of the same line-make;
16-13                      (E)  whether warranties are being honored by the
16-14    dealer;
16-15                      (F)  the parties' compliance with their franchise
16-16    agreement except to the extent that the franchise agreement is in
16-17    conflict with this Act; and
16-18                      (G)  the enforceability of the franchise
16-19    agreement from a public policy standpoint, including, without
16-20    limitation, issues of the reasonableness of the franchise
16-21    agreement's terms, oppression, adhesion, and the relative
16-22    bargaining power of the parties.
16-23          Good cause shall not be shown solely by the desire of a
16-24    manufacturer, distributor, or representative for market
16-25    penetration.
16-26                (6)  Use any false, deceptive or misleading
 17-1    advertising.
 17-2                (7)  Notwithstanding the terms of any franchise
 17-3    agreement, prevent any dealer from reasonably changing the capital
 17-4    structure of his dealership or the means by or through which he
 17-5    finances the operation thereof, provided that the dealer meets
 17-6    reasonable capital requirements.
 17-7                (8)  Notwithstanding the terms of any franchise
 17-8    agreement, fail to give effect to or attempt to prevent any sale or
 17-9    transfer of a dealer, dealership or franchise or interest therein
17-10    or management thereof except as provided by Section 5.01B.
17-11                (9)  Notwithstanding the terms of any franchise
17-12    agreement, require or attempt to require that a dealer assign to or
17-13    act as an agent for any manufacturer, distributor or representative
17-14    in the securing of promissory notes and security agreements given
17-15    in connection with the sale or purchase of new motor vehicles or
17-16    the securing of policies of insurance on or having to do with the
17-17    operation of vehicles sold.
17-18                (10)  Notwithstanding the terms of any franchise
17-19    agreement, fail or refuse, after complaint and hearing, to perform
17-20    the obligations placed on the manufacturer in connection with the
17-21    delivery, preparation and warranty of a new motor vehicle as
17-22    provided in the manufacturer's warranty, preparation, and delivery
17-23    agreements on file with the board.
17-24                (11)  Notwithstanding the terms of any franchise
17-25    agreement or provision of law in conflict with this section, the
17-26    dealer's delivery, preparation, and warranty obligations as filed
 18-1    with the board shall constitute the dealer's sole responsibility
 18-2    for product liability as between the dealer and manufacturer or
 18-3    distributor, and, except for a loss caused by the dealer's failure
 18-4    to adhere to these obligations, a loss caused by the dealer's
 18-5    negligence or intentional misconduct, or a loss caused by the
 18-6    dealer's modification of a product without manufacturer or
 18-7    distributor authorization, the manufacturer or distributor shall
 18-8    reimburse the dealer for all loss incurred by the dealer, including
 18-9    legal fees, court costs, and damages, as a result of the dealer
18-10    having been named a party in a product liability action.
18-11                (12)  Operate as a manufacturer, distributor, or
18-12    representative without a currently valid license from the board or
18-13    otherwise violate this Act or rules promulgated by the board
18-14    hereunder.
18-15                (13)  Notwithstanding the terms of any franchise
18-16    agreement, to prevent or refuse to honor the succession to a
18-17    dealership by any legal heir or devisee under the will of a dealer
18-18    or under the laws of descent and distribution of this State unless
18-19    it is shown to the board, after notice and hearing, that the result
18-20    of such succession will be detrimental to the public interest and
18-21    to the representation of the manufacturer or distributor; provided,
18-22    however, nothing herein shall prevent a dealer, during his
18-23    lifetime, from designating any person as his successor dealer, by
18-24    written instrument filed with the manufacturer or distributor.
18-25                (14)  Notwithstanding the terms of any franchise
18-26    agreement, require that a dealer pay or assume, directly or
 19-1    indirectly, any part of any refund, rebate, discount, or other
 19-2    financial adjustment made by the manufacturer, distributor, or
 19-3    representative to, or in favor of, any customer of a dealer, unless
 19-4    voluntarily agreed to by such dealer.
 19-5                (15)  Notwithstanding the terms of any franchise
 19-6    agreement, deny or withhold approval of a written application to
 19-7    relocate a franchise unless (A) the applicant has received written
 19-8    notice of the denial or withholding of approval within 60 days
 19-9    after receipt of the application containing information reasonably
19-10    necessary to enable the manufacturer or distributor to adequately
19-11    evaluate the application, and if (B) the applicant files a protest
19-12    with the board and the manufacturer or distributor establishes by a
19-13    preponderance of the evidence at a hearing called by the board that
19-14    the grounds for the denial or withholding of approval of the
19-15    relocation are reasonable.
19-16                (16)  Notwithstanding the terms of any franchise
19-17    agreement, fail to pay to a dealer or any lienholder in accordance
19-18    with their respective interest after the termination of a
19-19    franchise:
19-20                      (A)  the dealer cost of each new motor vehicle in
19-21    the dealer's inventory with mileage of 6,000 miles or less,
19-22    exclusive of mileage placed on the motor vehicle before it was
19-23    delivered to the dealer, reduced by the net discount value of each,
19-24    where "net discount value" is determined according to the following
19-25    formula:  net cost multiplied by total mileage, exclusive of
19-26    mileage placed on the motor vehicle before it was delivered to the
 20-1    dealer, divided by 100,000, and where "net cost" equals the dealer
 20-2    cost plus any charges by the manufacturer, distributor, or
 20-3    representative for distribution, delivery, and taxes, less all
 20-4    allowances paid to the dealer by the manufacturer, distributor, or
 20-5    representative for new, unsold, undamaged, and complete motor
 20-6    vehicles of current model year or one year prior model year in the
 20-7    dealer's inventory, except that if a vehicle cannot be reduced by
 20-8    the net discount value, the manufacturer or distributor shall pay
 20-9    the dealer the net cost of the vehicle;
20-10                      (B)  the dealer cost of each new, unused,
20-11    undamaged, and unsold part or accessory if the part or accessory is
20-12    in the current parts catalogue and is still in the original,
20-13    resalable merchandising package and in unbroken lots, except that
20-14    in the case of sheet metal, a comparable substitute for the
20-15    original package may be used, and if the part or accessory was
20-16    purchased by the dealer either directly from the manufacturer or
20-17    distributor or from an outgoing authorized dealer as a part of the
20-18    dealer's initial inventory;
20-19                      (C)  the fair market value of each undamaged sign
20-20    owned by the dealer which bears a trademark or tradename used or
20-21    claimed by the manufacturer, distributor, or representative if the
20-22    sign was purchased from or purchased at the request of the
20-23    manufacturer, distributor, or representative;
20-24                      (D)  the fair market value of all special tools,
20-25    data processing equipment, and automotive service equipment owned
20-26    by the dealer which were recommended in writing and designated as
 21-1    special tools and equipment and purchased from or purchased at the
 21-2    request of the manufacturer, distributor, or representative, if the
 21-3    tools and equipment are in usable and good condition except for
 21-4    reasonable wear and tear;
 21-5                      (E)  the cost of transporting, handling, packing,
 21-6    storing, and loading of any property subject to repurchase under
 21-7    this section;
 21-8                      (F)  except as provided by this subdivision, any
 21-9    sums due as provided by Paragraph (A) of this subdivision within 60
21-10    days after termination of a franchise and any sums due as provided
21-11    by Paragraphs (B) through (E) of this subdivision within 90 days
21-12    after termination of a franchise.  As a condition of payment, the
21-13    dealer is to comply with reasonable requirements with respect to
21-14    the return of inventory as are set out in the terms of the
21-15    franchise agreement.  A manufacturer or distributor shall reimburse
21-16    a dealer for the dealer's cost for storing any property covered by
21-17    this subdivision beginning 90 days following termination.  A
21-18    manufacturer or distributor shall reimburse a dealer for the
21-19    dealer's cost of storing any property covered by this subdivision
21-20    before the expiration of 90 days from the date of termination if
21-21    the dealer notifies the manufacturer or distributor of the
21-22    commencement of storage charges within that period.  On receipt of
21-23    notice of the commencement of storage charges, a manufacturer or
21-24    distributor may immediately take possession of the property in
21-25    question by repurchasing the property as provided by this
21-26    subdivision.  A manufacturer, distributor, or representative who
 22-1    fails to pay those sums within the prescribed time or at such time
 22-2    as the dealer and lienholder, if any, proffer good title prior to
 22-3    the prescribed time for payment, is liable to the dealer for:
 22-4                            (i)  the greatest of dealer cost, fair
 22-5    market value, or current price of the inventory;
 22-6                            (ii)  interest on the amount due calculated
 22-7    at the rate applicable to a judgment of a court; and
 22-8                            (iii)  reasonable attorney's fees and
 22-9    costs.
22-10                (17)  Notwithstanding the terms of any franchise
22-11    agreement, change its distributor, its method of distribution of
22-12    its products in this state, or its business structure or ownership
22-13    in a manner that results in the termination or noncontinuance of a
22-14    franchise without good cause.  The manufacturer, distributor, or
22-15    representative shall issue the same notice to the dealer and to the
22-16    board as is provided in Subdivisions (3)(A) and (B) of this section
22-17    and said same procedures shall apply to the parties.
22-18                (18)  Notwithstanding the terms of any franchise
22-19    agreement, require a dealer to submit to arbitration on any issue
22-20    unless the dealer and the manufacturer, distributor, or
22-21    representative and their respective counsel agree to arbitrate
22-22    after a controversy arises.  The arbitrator shall apply the
22-23    provisions of this Act in resolving the pertinent controversy.
22-24    Either party may appeal to the board a decision of an arbitrator on
22-25    the ground that the arbitrator failed to apply this Act.
22-26                (19)  Notwithstanding the terms of any franchise
 23-1    agreement, require that a dealer join, contribute to, or affiliate
 23-2    with, directly or indirectly, any advertising association.
 23-3                (20)  Notwithstanding the terms of a franchise
 23-4    agreement:
 23-5                      (A)  require adherence to unreasonable sales or
 23-6    service standards;
 23-7                      (B)  directly or indirectly, discriminate against
 23-8    a dealer or otherwise treat dealers differently as a result of a
 23-9    formula or other calculation or process intended to gauge the
23-10    performance of a dealership;
23-11                      (C)  unreasonably require that a dealer purchase
23-12    special tools or equipment; or
23-13                      (D)  fail to compensate a dealer for all costs
23-14    incurred by the dealer as required by the manufacturer in complying
23-15    with the terms of a product recall by the manufacturer or
23-16    distributor, including the costs, if any, incurred by the dealer in
23-17    notifying vehicle owners of the existence of the recall.
23-18                (21)  Discriminate unreasonably between or among
23-19    franchisees in the sale of a motor vehicle owned by the
23-20    manufacturer or distributor.
23-21                (22)  Directly or indirectly, or through a subsidiary
23-22    or agent, require, as a condition for obtaining financing for a
23-23    motor vehicle, the purchaser of a vehicle to purchase any product
23-24    other than the motor vehicle from the manufacturer or distributor,
23-25    or from an entity owned or controlled by the manufacturer or
23-26    distributor.
 24-1                (23)  Directly or indirectly, or through a subsidiary
 24-2    or agent, require, as a condition of its or its subsidiary's
 24-3    agreement to provide financing for a motor vehicle, that any
 24-4    insurance policy or service contract purchased by the motor vehicle
 24-5    purchaser be purchased from a specific source.
 24-6                (24)  Compel a dealer through a financing subsidiary of
 24-7    the manufacturer or distributor to agree to unreasonable operating
 24-8    requirements or directly or indirectly to terminate a dealer
 24-9    through the actions of a financing subsidiary of the manufacturer
24-10    or distributor.  This subdivision does not limit the right of a
24-11    financing entity to engage in business practices in accordance with
24-12    the usage of trade in retail and wholesale motor vehicle financing.
24-13                (25)  Notwithstanding the terms of a franchise
24-14    agreement, deny or withhold approval of a dealer's application to
24-15    add a line-make or parts or products related to that line-make
24-16    unless, within 60 days of receipt of the dealer's written
24-17    application to add the line-make, the manufacturer or distributor
24-18    gives the dealer written notice of the denial or withholding of
24-19    approval.  After receipt of notice, the dealer may file a protest
24-20    with the board.  If the dealer files a protest as provided by this
24-21    subdivision, the board may uphold the manufacturer's or
24-22    distributor's decision to deny or withhold approval of the addition
24-23    of the line-make only if the manufacturer or distributor proves by
24-24    a preponderance of the evidence that the denial or withholding of
24-25    approval was reasonable.  In determining whether or not the
24-26    manufacturer or distributor has met its burden to show that its
 25-1    denial or withholding of approval is reasonable, the board shall
 25-2    consider all existing circumstances, including, without limitation,
 25-3    the following:
 25-4                      (A)  the dealer's sales in relation to the sales
 25-5    in the market;
 25-6                      (B)  the dealer's investment and obligations;
 25-7                      (C)  injury or benefit to the public;
 25-8                      (D)  the adequacy of the dealer's sales and
 25-9    service facilities, equipment, parts, and personnel in relation to
25-10    those of other dealers of new motor vehicles of the same line-make;
25-11                      (E)  whether warranties are being honored by the
25-12    dealer agreement;
25-13                      (F)  the parties' compliance with their franchise
25-14    agreement to the extent that the franchise agreement is not in
25-15    conflict with this Act;
25-16                      (G)  the enforceability of the franchise
25-17    agreement from a public policy standpoint, including without
25-18    limitation, issues of the reasonableness of the franchise
25-19    agreement's terms, oppression, adhesion, and the relative
25-20    bargaining power of the parties;
25-21                      (H)  whether the dealer complies with reasonable
25-22    capitalization requirements or will be able to comply with
25-23    reasonable capitalization requirements within a reasonable time;
25-24                      (I)  the harm, if any, to the manufacturer if the
25-25    denial or withholding of approval is not upheld; and
25-26                      (J)  the harm, if any, to the dealer if the
 26-1    denial or withholding of approval is upheld.
 26-2                (26)  Fail or refuse to offer to its same line-make
 26-3    franchised dealers all models manufactured for that line-make, or
 26-4    require a dealer to pay any extra fee, purchase unreasonable
 26-5    advertising displays or other materials, or remodel, renovate, or
 26-6    recondition the dealer's existing facilities as a prerequisite to
 26-7    receiving a model or series of vehicles.
 26-8                (27)  Require a dealer to compensate the manufacturer
 26-9    or distributor for any court costs, attorney's fees, or other
26-10    expenses incurred in an administrative or civil proceeding arising
26-11    under this Act, except that this subdivision does not prohibit a
26-12    manufacturer and dealer from entering into an agreement to share
26-13    costs in a proceeding in which the dealer and manufacturer have the
26-14    same or similar interests.
26-15          SECTION 14.  This Act takes effect immediately if it receives
26-16    a vote of two-thirds of all the members elected to each house, as
26-17    provided by Section 39, Article III, Texas Constitution.  If this
26-18    Act does not receive the vote necessary for immediate effect, this
26-19    Act takes effect September 1, 2001.