By: Huffman, Van de Putte S.B. No. 529
 
  (Hunter, Margo, Cook, Guillen, Woolley)
 
   
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the regulation of motor vehicle dealers, manufacturers,
  distributors, and representatives.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 2301.002, Occupations Code, is amended
  by adding Subdivision (27-a) to read as follows:
               (27-a)  "Property use agreement" means a contract,
  other than a franchise, between a franchised dealer and a
  manufacturer, distributor, or representative that grants the
  manufacturer, distributor, or representative the right to regulate
  the franchised dealer's use of the dealership and other facilities
  covered by the franchise.
         SECTION 2.  Section 2301.359, Occupations Code, is amended
  by amending Subsection (e) and adding Subsections (g), (h), and (i)
  to read as follows:
         (e)  A manufacturer or distributor may not unreasonably
  withhold approval of an application filed under Subsection (a).
  [It is unreasonable for a manufacturer or distributor to reject a
  prospective transferee who is of good moral character and who meets
  the written, reasonable, and uniformly applied standards or
  qualifications, if any, of the manufacturer or distributor relating
  to the prospective transferee's business experience and financial
  qualifications.]
         (g)  In determining whether to approve an application filed
  under Subsection (a), a manufacturer or distributor may consider:
               (1)  the prospective transferee's financial and
  operational performance as a franchised dealer, if the prospective
  transferee is or has been a franchised dealer;
               (2)  the prospective transferee's moral character; or
               (3)  the extent to which a prospective transferee
  satisfies any criteria developed by the manufacturer or distributor
  and made available to the prospective transferee, specifically to
  determine the business experience and financial qualifications of a
  prospective transferee.
         (h)  A manufacturer or distributor may consider the criteria
  developed under Subsection (g)(3) only if the criteria are in
  writing, are reasonable, and are uniformly applied in similar
  situations.
         (i)  It is unreasonable for a manufacturer or distributor to
  reject a prospective transferee who is of good moral character and
  who satisfies the criteria developed under Subsection (g)(3).
         SECTION 3.  Subsection (b), Section 2301.465, Occupations
  Code, is amended to read as follows:
         (b)  Notwithstanding the terms of any franchise, after the
  termination of a franchise, a manufacturer, distributor, or
  representative shall pay to a franchised dealer or any lienholder,
  in accordance with the interest of each, the following amounts:
               (1)  the dealer cost of each new motor vehicle in the
  dealer's inventory with mileage of 5,000 miles or less, exclusive
  of mileage placed on the vehicle before it was delivered to the
  dealer, reduced by the net discount value of each vehicle, except
  that if a vehicle cannot be reduced by the net discount value, the
  manufacturer or distributor shall pay the dealer the net cost of the
  vehicle;
               (2)  the dealer cost of each new, unused, undamaged,
  and unsold part or accessory that:
                     (A)  is in the current parts catalogue and is
  still in the original, resalable merchandising package and in an
  unbroken lot, except in the case of sheet metal, a comparable
  substitute for the original package may be used; and
                     (B)  was purchased by the dealer either directly
  from the manufacturer or distributor or from an outgoing authorized
  dealer as a part of the dealer's initial inventory;
               (3)  the fair market value of each undamaged sign owned
  by the dealer that bears a trademark or tradename used or claimed by
  the manufacturer, distributor, or representative and that was
  purchased from or at the request of the manufacturer, distributor,
  or representative;
               (4)  the fair market value of all special tools, data
  processing equipment, and automotive service equipment owned by the
  dealer that:
                     (A)  were recommended in writing and designated as
  special tools and equipment;
                     (B)  were purchased from or at the request of the
  manufacturer, distributor, or representative; and
                     (C)  are in usable and good condition except for
  reasonable wear and tear; [and]
               (5)  the cost of transporting, handling, packing,
  storing, and loading any property subject to repurchase under this
  section; and
               (6)  the depreciated value of computer software that
  was recommended and required in writing by the manufacturer,
  distributor, or representative.
         SECTION 4.  Subchapter J, Chapter 2301, Occupations Code, is
  amended by adding Section 2301.4651 to read as follows:
         Sec. 2301.4651.  ADDITIONAL PAYMENT TO FRANCHISED DEALER IN
  CERTAIN SITUATIONS. (a)  This section applies to a manufacturer,
  distributor, or representative that:
               (1)  terminates or discontinues a franchise by any
  means without complying with Section 2301.453; or
               (2)  regardless of whether the manufacturer,
  distributor, or representative complies with Section 2301.453,
  terminates or discontinues a franchise by:
                     (A)  discontinuing a line-make;
                     (B)  ceasing to do business in this state; or
                     (C)  changing the distributor or method of
  distribution of its products in this state.
         (b)  In addition to the duties placed on a manufacturer,
  distributor, or representative by Section 2301.465, a
  manufacturer, distributor, or representative to whom this section
  applies shall pay to the franchised dealer the following amounts as
  applicable:
               (1)  either:
                     (A)  the dealer's construction costs for a new
  dealership completed in the two years preceding the date of the
  termination or discontinuance described by Subsection (a); or
                     (B)  if the dealer does not have any costs
  described by Paragraph (A), the fair monthly rental value of the
  dealership payable in cash each month beginning on the first day of
  the first month following the date of the termination or
  discontinuance described by Subsection (a) and ending on the
  earlier of:
                           (i)  the first anniversary of the
  termination or discontinuance date; or
                           (ii)  the date on which the dealer no longer
  owns the dealership;
               (2)  the dealer's costs for upgrading or substantially
  altering a dealership if the upgrades or alterations were completed
  or added in the two years preceding the date of the termination or
  discontinuance described by Subsection (a); and
               (3)  an amount equal to the value of the goodwill
  associated with the franchise as it existed on the day before the
  earlier of:
                     (A)  the date of the termination or discontinuance
  described by Subsection (a); or
                     (B)  the date on which the manufacturer,
  distributor, or representative announced its intention to
  terminate or discontinue the franchise in a manner described by
  Subsection (a).
         (c)  A franchised dealer receiving money under Subsection
  (b)(1)(B) shall:
               (1)  make a reasonable effort to earn income from a
  dealership after a termination or discontinuance described by
  Subsection (a); and
               (2)  inform the manufacturer, distributor, or
  representative of the dealer's efforts under Subdivision (1) and of
  any income earned from the dealership.
         (d)  The amounts to be paid under Subsection (b)(1) or (2) to
  the dealer by a manufacturer, distributor, or representative shall
  be based on the percentage of the total square footage of the
  dealership attributable to sales, service, and parts suggested by a
  manufacturer or distributor and allocated to the franchise being
  terminated or discontinued at the time of the termination or
  discontinuance.
         (e)  A franchised dealer receiving money under Subsection
  (b)(1) or (2) shall mitigate damages by listing the dealership for
  lease or sublease with a real estate broker licensed under Chapter
  1101 not later than the 30th day after the effective date of the
  termination or discontinuance described by Subsection (a) and shall
  reasonably cooperate with the broker in the performance of the
  broker's duties.
         (f)  A manufacturer, distributor, or representative may
  reduce the amount of a payment made to a franchised dealer under
  Subsection (b)(1)(B) by the amount of any income earned by the
  dealer from the dealership during the month preceding the payment.
         (g)  The manufacturer, distributor, or representative, as
  appropriate, shall pay any amount described by Subsection
  (b)(1)(A), (b)(2), or (b)(3) not later than the 90th day after the
  date of the termination or discontinuance described by Subsection
  (a).
         (h)  An amount payable under Subsection (b)(1)(A) or (b)(2)
  does not include any tax depreciation benefit received by the
  franchised dealer or any amount previously paid to the franchised
  dealer by the manufacturer, distributor, or representative to
  subsidize the costs incurred by the dealer in performing the
  activities described by Subsection (b)(1)(A) or (b)(2).
         SECTION 5.  Section 2301.467, Occupations Code, is amended
  by amending Subsections (b) and (c) and adding Subsections (b-1)
  and (b-2) to read as follows:
         (b)  Notwithstanding the terms of any franchise, a
  manufacturer, distributor, or representative may not unreasonably
  require a franchised dealer to relocate, or to replace or
  substantially change, alter, or remodel the dealer's facilities.
  Except as provided by Subsections (b-1) and (b-2) [For purposes of
  this subsection], an act is reasonable if it is justifiable in light
  of current and reasonably foreseeable projections of economic
  conditions, financial expectations, and the market for new motor
  vehicles in the relevant market area.
         (b-1)  Except as necessary to comply with health or safety
  laws or to comply with technology requirements necessary to sell or
  service a line-make, it is unreasonable for a manufacturer,
  distributor, or representative to require a franchised dealer to
  construct a new dealership or to substantially change, alter, or
  remodel an existing dealership before the 10th anniversary of the
  date the construction of the dealership at that location was
  completed if the construction was in substantial compliance with
  standards or plans provided by a manufacturer, distributor, or
  representative or through a subsidiary or agent of the
  manufacturer, distributor, or representative.
         (b-2)  Except as necessary to comply with health or safety
  laws or to comply with technology requirements necessary to sell or
  service a line-make, it is unreasonable for a manufacturer,
  distributor, or representative to require a franchised dealer to
  substantially change, alter, or remodel an existing dealership
  before the 10th anniversary of the date that a prior change,
  alteration, or remodel of the dealership at that location was
  completed if the change, alteration, or remodel was in substantial
  compliance with standards or plans provided by a manufacturer,
  distributor, or representative or through a subsidiary or agent of
  the manufacturer, distributor, or representative.
         (c)  This [The prohibitions under this] section applies 
  [apply] to the relationship between a manufacturer, distributor, or
  representative and:
               (1)  a current franchisee of the manufacturer,
  distributor, or representative; [or]
               (2)  a successor of a current franchisee of the
  manufacturer, distributor, or representative; or
               (3)  a franchised dealer who is seeking to become a
  franchisee of the manufacturer, distributor, or representative.
         SECTION 6.  Subchapter J, Chapter 2301, Occupations Code, is
  amended by adding Section 2301.4671 to read as follows:
         Sec. 2301.4671.  FRANCHISE PROVISION ESTABLISHING
  RESTRICTION ON DEALER'S USE OF DEALERSHIP PROPERTY.
  Notwithstanding the terms of any franchise, a manufacturer,
  distributor, or representative may not:
               (1)  unreasonably limit or impair the ability of a
  franchised dealer to use the dealership property as the dealer
  considers appropriate;
               (2)  control the use of the dealership property after
  the franchise is terminated or discontinued; or
               (3)  at any time exercise exclusive control over the
  use of the dealership property.
         SECTION 7.  Section 2301.468, Occupations Code, is amended
  to read as follows:
         Sec. 2301.468.  INEQUITABLE TREATMENT OF [DISCRIMINATION
  AMONG] DEALERS OR FRANCHISEES. Notwithstanding the terms of a
  franchise, a [A] manufacturer, distributor, or representative may
  not[:
               [(1)     notwithstanding the terms of any franchise,
  directly or indirectly discriminate against a franchised dealer or
  otherwise] treat franchised dealers of the same line-make 
  differently as a result of the application of a formula or other
  computation or process intended to gauge the performance of a
  dealership or otherwise enforce standards or guidelines applicable
  to its franchised dealers in the sale of motor vehicles if, in the
  application of the standards or guidelines, the franchised dealers
  are treated unfairly or inequitably[; or
               [(2)     discriminate unreasonably between or among
  franchisees] in the sale of a motor vehicle owned by the
  manufacturer or distributor.
         SECTION 8.  Subchapter J, Chapter 2301, Occupations Code, is
  amended by adding Section 2301.4749 to read as follows:
         Sec. 2301.4749.  MANUFACTURER OR DISTRIBUTOR INCENTIVE
  PROGRAMS:  PAYMENT TO DEALER.  (a)  A manufacturer or distributor
  shall pay a dealer's claim filed under a manufacturer or
  distributor incentive program not later than the 30th day after the
  date the claim is approved.
         (b)  A claim is considered approved unless a manufacturer or
  distributor rejects the claim not later than the 31st day after the
  date of receipt of the claim by the manufacturer or distributor.
         (c)  The manufacturer or distributor shall provide the
  dealer with written notice of a rejection of a claim and the reasons
  for the rejection.
         SECTION 9.  The heading to Section 2301.475, Occupations
  Code, is amended to read as follows:
         Sec. 2301.475.  MANUFACTURER OR DISTRIBUTOR INCENTIVE
  PROGRAMS:  AUDIT OR CHARGEBACK.
         SECTION 10.  Subsection (a), Section 2301.475, Occupations
  Code, is amended to read as follows:
         (a)  Except as provided by Subsection (b), after the first
  anniversary of the [ending] date [of] a manufacturer or distributor
  pays a claim under Section 2301.4749, the [incentive program, a]
  manufacturer or distributor may not:
               (1)  charge back to a dealer money paid by the
  manufacturer or distributor as a result of the incentive program;
               (2)  charge back to a dealer the cash value of a prize
  or other thing of value awarded to the dealer as a result of the
  incentive program; or
               (3)  audit the records of a dealer to determine
  compliance with the terms of the incentive program, unless the
  manufacturer or distributor has reasonable grounds to believe the
  dealer committed fraud with respect to the incentive program.
         SECTION 11.  Subchapter J, Chapter 2301, Occupations Code,
  is amended by adding Sections 2301.480, 2301.481, and 2301.482 to
  read as follows:
         Sec. 2301.480.  DISCLOSURE OF CERTAIN INFORMATION. A
  manufacturer, distributor, or representative may not require that a
  franchised dealer provide to the manufacturer, distributor, or
  representative information regarding a customer, except to the
  extent that a specific item of information is necessary:
               (1)  for the sale or delivery of a new motor vehicle to
  a customer;
               (2)  for reasonable marketing purposes;
               (3)  to validate a claim and make payment under an
  incentive program;
               (4)  to support a dealer's claim for reimbursement for
  repairs performed under a manufacturer's warranty; or
               (5)  to satisfy a product recall or safety obligation.
         Sec. 2301.481.  PROPERTY USE AGREEMENT.  (a)  A
  manufacturer, distributor, or representative may not require that a
  dealer enter into a property use agreement as a condition of the
  manufacturer, distributor, or representative:
               (1)  entering into a franchise;
               (2)  approving a franchised dealer's application to add
  a line-make;
               (3)  approving a franchised dealer's application to
  relocate a franchise; or
               (4)  approving a sale or transfer of a dealer,
  dealership, or franchise.
         (b)  The following provisions in a property use agreement are
  void and unenforceable:
               (1)  a limitation on the franchised dealer's ability to
  add a line-make; or
               (2)  a provision that binds a franchised dealer's
  successor.
         (c)  A property use agreement expires on the earlier of:
               (1)  the date provided by the property use agreement;
  or
               (2)  the termination of the franchise between the
  parties to the property use agreement.
         (d)  This section applies to a subsidiary of, or a person
  controlled by, a manufacturer, distributor, or representative.
         Sec. 2301.482.  CERTAIN PROPERTY USE AGREEMENTS.
  (a)  Notwithstanding Section 2301.481(b)(1), and subject to this
  section, a dealer may enter into a property use agreement for cash
  consideration that grants the manufacturer or distributor the
  exclusive rights to direct the use of the dealership.
         (b)  In the event the dealer breaches the terms of the
  property use agreement described by Subsection (a) by altering the
  use of the property during the term of the agreement in violation of
  the agreement, the property use agreement is terminated and the
  dealer must reimburse the manufacturer or distributor in an amount
  determined by dividing the amount of the manufacturer's or
  distributor's cash consideration provided under Subsection (a) by
  the market value of the property identified in the original
  property use agreement at the time any necessary real estate has
  been purchased and any necessary construction has been completed,
  and multiplying the resulting quotient by the market value of the
  property at the time of the breach.
         (c)  For purposes of this section, the market value of
  property is to be determined by three appraisers chosen as follows:
               (1)  one selected by the affected manufacturer or
  distributor;
               (2)  one selected by the affected dealer; and
               (3)  one selected by mutual agreement of the
  manufacturer or distributor and the dealer.
         SECTION 12.  Subsection (a), Section 2301.522, Occupations
  Code, is amended to read as follows:
         (a)  In an action brought against a manufacturer or
  distributor under Subchapter J [Sections 2301.451-2301.474] by a
  franchised dealer whose franchise provides for arbitration in
  compliance with this chapter, the board shall order the parties to
  submit the dispute to mediation in the manner provided by this
  subchapter.
         SECTION 13.  Subsection (b), Section 2301.652, Occupations
  Code, is amended to read as follows:
         (b)  Except as provided by Subsection (c) and Sections
  2301.6521 and 2301.6522, a person has standing under this section
  to protest an application to establish or relocate a dealership if
  the person filing the protest is a franchised dealer of the same
  line-make whose dealership is located:
               (1)  in the county in which the proposed dealership is
  to be located; or
               (2)  within a 15-mile radius of the proposed
  dealership.
         SECTION 14.  Subchapter N, Chapter 2301, Occupations Code,
  is amended by adding Sections 2301.6521 and 2301.6522 to read as
  follows:
         Sec. 2301.6521.  RIGHT TO PROTEST:  CERTAIN RELOCATIONS.  
  (a)  In this section, "affected county" means:
               (1)  a county with a population of one million or more;
  or
               (2)  a county with a population of 500,000 or more but
  less than one million that is adjacent to a county with a population
  of one million or more.
         (b)  Notwithstanding any other provision of this chapter and
  except as provided by Subsection (d), a franchised dealer may
  protest an application to relocate a dealership from a location in
  an affected county to a location within the same affected county or
  an adjacent affected county only if the dealer is:
               (1)  a dealer of the same line-make as the relocating
  dealership and is in the affected county where the proposed
  dealership is being relocated and is nearest to the proposed
  relocation site, if no dealership of the same line-make as the
  relocating dealership is located within 15 miles of the proposed
  relocation site; or
               (2)  a dealer of the same line-make as the relocating
  dealership whose dealership location is within 15 miles of the
  proposed relocation site.
         (c)  If more than one dealership location is an equal
  distance from the proposed relocation site and each dealer and
  dealership location satisfies the requirements of Subsection
  (b)(1), each dealer may protest the relocation under Subsection
  (b)(1).
         (d)  A dealer may not protest an application to relocate a
  dealership under this section if the proposed relocation site is
  two miles or less from the dealership's current location.
         Sec. 2301.6522.  RIGHT TO PROTEST:  ECONOMICALLY IMPAIRED
  DEALER.  (a)  In this section, "economically impaired dealer" means
  a franchised dealer whose profitability has been, or is reasonably
  expected to be, substantially reduced at the dealer's current
  location, with no reasonable expectation of substantial
  improvement at that location, due to:
               (1)  a natural disaster;
               (2)  the exercise of eminent domain authority with
  respect to the dealership; or
               (3)  the sale of all or part of the dealership to a
  governmental entity under threat of the exercise of eminent domain
  authority.
         (b)  Notwithstanding any other provision of this chapter and
  except as provided by Subsections (c) and (d), a dealer may not
  protest the relocation of an economically impaired dealer if:
               (1)  the relocation is reasonably expected to be
  completed before the first anniversary of the date of the event
  described by Subsection (a); and
               (2)  the proposed relocation site is two miles or less
  from the economically impaired dealer's current location.
         (c)  A dealer of the same line-make as an economically
  impaired dealer whose dealership is nearest to the proposed
  relocation site of the economically impaired dealer may protest the
  relocation if the proposed relocation site is more than two miles
  closer to the protesting dealer's dealership than the site of the
  economically impaired dealer's current location.
         (d)  If more than one dealership location is an equal
  distance from the proposed relocation site and each dealer and
  dealership location satisfies the requirements of Subsection (c),
  each dealer may protest the relocation under Subsection (c).
         SECTION 15.  Subsection (a), Section 2301.805, Occupations
  Code, is amended to read as follows:
         (a)  Notwithstanding any other law, including Subchapter E,
  Chapter 17, Business & Commerce Code, in addition to the other
  remedies provided by this subchapter, a person may institute an
  action under Subchapter E, Chapter 17, Business & Commerce Code, or
  any successor statute to that subchapter, and is entitled to any
  procedure or remedy under that subchapter, if the person:
               (1)  has sustained damages as a result of a violation of
  Sections 2301.351-2301.354 or Section 2301.357; or
               (2)  is a franchised dealer who has sustained damages
  as a result of a violation of:
                     (A)  Subchapter J of this chapter [Sections
  2301.451-2301.474]; or
                     (B)  Subchapter E, Chapter 17, Business & Commerce
  Code.
         SECTION 16.  The change in law made by this Act applies only
  to an agreement entered into or renewed under Chapter 2301,
  Occupations Code, on or after the effective date of this Act.  An
  agreement entered into or renewed before the effective date of this
  Act is governed by the law in effect on the date the agreement was
  entered into or renewed, and the former law is continued in effect
  for that purpose.
         SECTION 17.  This Act takes effect September 1, 2011.