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                  HB 414
FRANCHISE ACT FOR VEHICLE DEALERS
     1996 GENERAL SESSION
    STATE OF UTAH
    Sponsor: Christine R. Fox
        AN ACT RELATING TO COMMERCE; CREATING THE NEW AUTOMOBILE FRANCHISE ACT; DEFINING TERMS; CREATING THE UTAH MOTOR VEHICLE FRANCHISE BOARD; ESTABLISHING POWERS AND DUTIES OF BOARD; ESTABLISHING FEES; REQUIRING REGISTRATION; ESTABLISHING ADMINISTRATIVE PENALTIES; PROVIDING FOR ADMINISTRATIVE HEARINGS; REGULATING CONDUCT OF FRANCHISORS AND THEIR RELATIONSHIP TO FRANCHISEES; REGULATING THE TRANSFER OR SUCCESSION OF FRANCHISES; REGULATING LIABILITY FOR DAMAGE TO VEHICLES IN TRANSIT; REGULATING ISSUANCE, TERMINATION, NONRENEWAL, AND RELOCATION OF FRANCHISES; AND REPEALING PREVIOUS AUTOMOBILE FRANCHISE ACT.
This act affects sections of Utah Code Annotated 1953 as follows:
ENACTS:
                    13-14-101 , Utah Code Annotated 1953
                    13-14-102 , Utah Code Annotated 1953
                    13-14-103 , Utah Code Annotated 1953
                    13-14-104 , Utah Code Annotated 1953
                    13-14-105 , Utah Code Annotated 1953
                    13-14-106 , Utah Code Annotated 1953
                    13-14-107 , Utah Code Annotated 1953
                    13-14-201 , Utah Code Annotated 1953
                    13-14-202 , Utah Code Annotated 1953
                    13-14-203 , Utah Code Annotated 1953
                    13-14-204 , Utah Code Annotated 1953
                    13-14-205 , Utah Code Annotated 1953
                    13-14-301 , Utah Code Annotated 1953
                    13-14-302 , Utah Code Annotated 1953
                    13-14-303 , Utah Code Annotated 1953
                    13-14-304 , Utah Code Annotated 1953
                    13-14-305 , Utah Code Annotated 1953
                    13-14-306 , Utah Code Annotated 1953
                    13-14-307 , Utah Code Annotated 1953
REPEALS:
                    13-14-1 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-2 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-3 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-4 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-5 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-6 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-7 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-8 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-9 , as enacted by Chapter 154, Laws of Utah 1979
                    13-14-10 , as enacted by Chapter 154, Laws of Utah 1979
Be it enacted by the Legislature of the state of Utah:
    Section 1. Section 13-14-101 is enacted to read:
    CHAPTER 14. NEW AUTOMOBILE FRANCHISE ACT
    Part 1. General Administration
     13-14-101 .   Title -- Legislative purpose.
     (1) This chapter shall be cited as the "New Automobile Franchise Act."
     (2) The Legislature finds that:
     (a) The distribution and sales of new motor vehicles through franchise arrangements in the state vitally affects the general economy of the state, the public interest, and the public welfare. A substantial inequality of bargaining power between motor vehicle franchisors and motor vehicle franchisees enables a franchisor:
     (i) to compel a franchisee to execute agreements that contain terms and conditions that a franchisee generally would not be agreed to absent the compulsion and duress that arise out of the inequality of bargaining power; and
     (ii) in some cases to terminate a franchise without good cause, or to force a franchisee out of business by the use of unfair practices.
     (b) Termination of franchises, without good cause or by unfair means:
     (i) diminishes competition and, as a result, leads to higher retail prices and fewer purchase options;
     (ii) adversely affects communities that depend on a franchisee to make available motor vehicles for sale or lease and to provide warranty work and other services related to vehicles; and
     (iii) undercuts expectations of consumers concerning the availability of future services including warranty work from the franchisee.
     (c) To promote the public welfare and in the exercise of the state's police powers, it is necessary to establish statutory guidelines regulating the relationship between franchisors and franchisees in the motor vehicle industry.
    Section 2. Section 13-14-102 is enacted to read:
     13-14-102 .   Definitions.
     As used in this chapter:
     (1) "Board" means the Utah Motor Vehicle Franchise Board created in Section 13-14-103 .
     (2) "Dealership" means a site or location in this state:
     (a) at which a franchisee conducts the business of a new motor vehicle dealer; and
     (b) that is identified as a new motor vehicle dealer's principal place of business for licensing purposes under Section 41-3-204 .
     (3) "Department" means the Department of Commerce.
     (4) "Executive director" means the executive director of the Department of Commerce.
     (5) "Franchise" or "franchise agreement" means a written agreement, for a definite or indefinite period, in which:
     (a) a person grants to another person a license to use a trade name, trademark, service mark,
or related characteristic; and
     (b) there is a community of interest in the marketing of new motor vehicles, new motor vehicle parts, and services related to the sale or lease of new motor vehicles at wholesale or retail.
     (6) "Franchisee" means a person to whom a new motor vehicle dealer franchise is issued.
     (7) "Franchisor" means a person who grants a new motor vehicle franchise to another person, and includes:
     (a) the manufacturer or distributor that has issued the franchise;
     (b) an intermediate distributor; and
     (c) an agent, officer, or field or area representative of the franchisor.
     (8) "Line-make" means the motor vehicles that are offered for sale, lease, or distribution under a common name, trademark, service mark, or brand name of the franchisor, or manufacturer of the motor vehicle.
     (9) "Motor vehicle" means:
     (a) a travel trailer as defined in Section 41-1a-102 ;
     (b) a motor vehicle as defined in Section 41-3-102 ;
     (c) a semitrailer as defined in Section 41-1a-102 ; and
     (d) a trailer as defined in Section 41-1a-102 .
     (10) "New motor vehicle" has the same meaning as defined in Section 41-3-102 .
     (11) "New motor vehicle dealer" is a person who is licensed under Subsection 41-3-202 (1)(a).
     (12) "Recreational vehicle" has the same meaning as defined in Section 41-20-1 excluding the term "truck camper."
     (13) (a) "Relevant market area," except for recreational vehicles, means:
     (i) the county in which a dealership is to be established or relocated; and
     (ii) the area within a ten aeronautical miles radius from the site of the new or relocated dealership.
     (b) "Relevant market area," as concerns the sale of recreational vehicles, means:
     (i) the county in which the dealership is to be established or relocated; and
     (ii) the area within a 35 aeronautical miles radius of the new or relocated dealership.
     (14) "Sale, transfer, or assignment" means any disposition of a franchise or an interest in a franchise, with or without consideration, including a bequest, inheritance, gift, exchange, lease, or license.
    Section 3. Section 13-14-103 is enacted to read:
     13-14-103 .   Utah Motor Vehicle Franchise Board -- Creation -- Appointment of members -- Chair -- Quorum -- Conflict of interest.
     (1) There is created with the department the Utah Motor Vehicle Franchise Board that consists of:
     (a) the executive director or the executive director's designee;
     (b) six members appointed by the executive director, with the concurrence of the governor as follows:
     (i) two members of the general public;
     (ii) one motorcycle or recreational motor vehicle franchisee; and
     (iii) one new motor vehicle franchisee from each of the three congressional districts of the state as the districts were constituted on January 1, 1996; and
     (c) one member designated by the American Automobile Manufacturer's Association.
     (2) (a) In accordance with Subsection (1), the executive director shall appoint three of the initial members of the board to one-year terms and three of the initial members of the board to two-year terms. No more than two of the members appointed to two-year terms shall be franchisees.
     (b) At the expiration of the initial terms under Subsection (2)(a), the executive director shall appoint a member to a term of two years.
     (c) In the event of a vacancy on the board, the executive director with the concurrence of the governor, shall appoint an individual to complete the unexpired term of the member whose office is vacant.
     (d) A member may not be appointed to more than two consecutive terms.
     (3) (a) The executive director or the executive director's designee shall be the chair of the board.
     (b) The department shall keep a record of all hearings, proceedings, transactions, communications, and official acts of the board.
     (4) Five or more members of the board constitute a quorum for the transaction of business. The action of a majority of the members of the board is considered the action of the board.
     (5) (a) A member of the board may not participate as a member of the board in a proceeding or hearing:
     (i) involving the member's licensed business or employer; or
     (ii) when a member, the member's business, or employer has a pecuniary interest in the outcome or other conflict of interest concerning an issue before the board.
     (b) If a member of the board is disqualified under Subsection (5)(a), the chair shall select a replacement to act on the issue before the board.
     (6) Except for the executive director or the executive director's designee, an individual may not be appointed or serve on the board while holding any other elective or appointive state or federal office.
     (7) The members of the board shall serve without compensation.
     (8) The department shall provide necessary staff support to the board.
    Section 4. Section 13-14-104 is enacted to read:
     13-14-104 .   Powers and duties of the board.
     The board has the regulatory jurisdiction to administer and enforce this chapter and shall:
     (1) make rules in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, concerning administrative proceedings before the board; and
     (2) conduct adjudicative proceedings required by this chapter in accordance with Title 63, Chapter 46b, Administrative Procedures Act.
    Section 5. Section 13-14-105 is enacted to read:
     13-14-105 .   Registration -- Fees.
     (1) A franchisee or franchisor doing business in this state shall:
     (a) annually register or renew its registration with the department in a manner established by the department in collaboration with the board; and
     (b) pay an annual fee in an amount determined by the department in accordance with Sections 13-1-2 and 63-38-3.2 .
     (2) The department, in collaboration with the board, shall register or renew the registration of a franchisee or franchisor if the franchisee or franchisor complies with this chapter and rules made by the department under this chapter.
     (3) A franchisee or franchisor registered under this section shall comply with this chapter and any rules made by the department under this chapter including any amendments to this chapter or the rules made after a franchisee or franchisor enter into a franchise agreement.
     (4) The fee imposed under Subsection (1)(b) shall be collected by the department and deposited into the Commerce Service Fund.
     (5) Notwithstanding Subsection (1), an agent, officer, or field or area representative of a franchisor does not need to be registered under this section if the franchisor is registered under this section.
    Section 6. Section 13-14-106 is enacted to read:
     13-14-106 .   Administrative enforcement.
     (1) If after a hearing the board determines that a person has violated this chapter or any rule made under this chapter, it may, in accordance with Title 63, Chapter 46b, Administrative Procedures Act:
     (a) issue a cease and desist order; and
     (b) recommend an administrative fine.
     (2) (a) In determining the amount and appropriateness of an administrative fine, the board shall consider:
     (i) the gravity of the violation;
     (ii) any history of previous violations; and
     (iii) any attempt made by the person to retaliate against another person for seeking relief under this chapter or other federal or state law relating to the motor vehicle industry.
     (b) In addition to any other action permitted under Subsection (1), the department may file an action with a court seeking to enforce the order of the board and pursue the board's
recommendation of a fine in an amount not to exceed $5,000:
     (i) for each day a person violates an order of the board; or
     (ii) if a person repeats the same violation within 48 months of a previous violation.
    Section 7. Section 13-14-107 is enacted to read:
     13-14-107 .   Administrative hearings.
     (1) (a) A person may request action by the board in accordance with this chapter and with Title 63, Chapter 46b, Administrative Procedures Act to:
     (i) remedy a violation of this chapter; or
     (ii) obtain approval of an act regulated by this chapter.
     (b) A person shall request action by the board by filing an application for hearing in a form approved by the board.
     (2) (a) The board shall conduct all adjudicative proceedings in accordance with Title 63, Chapter 46b, Administrative Procedures Act.
     (b) An order or decision issued by the board shall comply with Section 63-46b-10 .
     (3) The board shall apportion in a fair and equitable manner between the parties any costs of the adjudicative proceeding, including reasonable attorney's fees subject to final approval by a court.
    Section 8. Section 13-14-201 is enacted to read:
    Part 2. Franchises in General
     13-14-201 .   Prohibited Acts by Franchisors -- Disclosures.
     (1) A franchisor may not in this state:
     (a) require a franchisee to order or accept delivery of any new motor vehicle, part, accessory, equipment, or other item not otherwise required by law that is not voluntarily ordered by the franchisee;
     (b) require a franchisee to participate monetarily in any advertising campaign or contest, or purchase any promotional materials, display devises, or display decorations or materials;
     (c) require a franchisee to change the capital structure of the franchisee's dealership or the means by or through which the franchisee finances the operation of the franchisee's dealership, if
the dealership at all times meets reasonable capital standards determined by and applied in a nondiscriminatory manner by the franchisor;
     (d) require a franchisee to refrain from participating in the management of, investment in, or acquisition of any other line of new motor vehicles or related products, if:
     (i) the franchisee maintains a reasonable line of credit for each make or line of vehicles; and
     (ii) complies with reasonable capital and facilities requirements of the franchisor;
     (e) require a franchisee to prospectively agree to a release, assignment, novation, waiver, or estoppel that would:
     (i) relieve a franchisor from any liability imposed by this chapter; or
     (ii) require any controversy between the franchisee and a franchisor to be referred to a third party if the decision by the third party would be binding;
     (f) require a franchisee to change the location of the principal place of business of the franchisee's dealership or make any substantial alterations to the dealership premises, if the change or alterations would be unreasonable;
     (g) coerce or attempt to coerce a franchisee to join, contribute to, or affiliate with an advertising association;
     (h) require, coerce, or attempt to coerce a franchisee to enter into an agreement with the franchisor or do any other act that is unfair or prejudicial to the franchisee, by threatening to cancel a franchise agreement or other contractual agreement or understanding existing between the franchisor and franchisee;
     (i) adopt, change, establish, modify, or implement a plan or system for the allocation, scheduling, or delivery of new motor vehicles, parts, or accessories to its franchisees so that the plan or system is not fair, reasonable, and equitable;
     (j) increase the price of any new motor vehicle that the franchisee has ordered from the franchisor and for which there exists at the time of the order a bona fide sale to a retail purchaser if the order was made prior to the franchisee's receipt of an official written price increase notification;
     (k) fail to indemnify and hold harmless its franchisee against any judgment for damages or settlement approved in writing by the franchisor:
     (i) including court costs and attorneys' fees arising out of actions, claims, or proceedings including those based on:
     (A) strict liability;
     (B) negligence;
     (C) misrepresentation;
     (D) express or implied warranty;
     (E) revocation as described in Section 70A-2-608 ; or
     (F) rejection as described in Section 70A-2-602 ; and
     (ii) to the extent the judgment or settlement relates to alleged defective or negligent actions by the franchisor;
     (l) threaten or coerce a franchisee to waive or forbear its right to protest the establishment or relocation of a same line-make franchisee in the relevant market area of the affected franchisee;
     (m) fail to ship monthly to a franchisee, if ordered by the franchisee, the number of new motor vehicles of each make, series, and model needed by the franchisee to achieve a percentage of total new vehicle sales of each make, series, and model equitably related to the total new vehicle production or importation being achieved nationally at the time of the order by each make, series, and model covered under the franchise agreement;
     (n) require or otherwise coerce a franchisee to under-utilize the franchisee's existing facilities;
     (o) fail to include in any franchise agreement the following language or language to the effect that: "If any provision in this agreement contravenes the laws or regulations of any state or other jurisdiction where this agreement is to be performed, or provided for by such laws or regulations, the provision is considered to be modified to conform to such laws or regulations, and all other terms and provisions shall remain in full force.";
     (p) engage in the distribution, sale, offer for sale, or lease of a new motor vehicle to purchasers who acquire the vehicle in this state except through a franchisee with whom the franchisor has established a written franchise agreement, if the franchisor's trade name, trademark, service mark, or related characteristic is an integral element in the distribution, sale, offer for sale,
or lease; or
     (q) authorize or permit a person to perform warranty service repairs on motor vehicles, except warranty service repairs:
     (i) by a franchisee with whom the franchisor has entered into a franchise agreement for the sale and service of the franchisor's motor vehicles; or
     (ii) on owned motor vehicles by a person or government entity who has purchased new motor vehicles pursuant to a franchisor's or manufacturer's fleet discount program.
     (2) Notwithstanding Subsection (1)(q), a franchisor may authorize or permit a person to perform warranty service repairs on motor vehicles if the warranty services is for a franchisor of recreational vehicles.
     (3) Subsection (1)(a) does not prevent the franchisor from requiring that a franchisee carry a reasonable inventory of:
     (a) new motor vehicle models offered for sale by the franchisor; and
     (b) parts to service the repair of the new motor vehicles.
     (4) Subsection (1)(d) does not prevent a franchisor from:
     (a) requiring that a franchisee maintain separate sales personnel or display space; or
     (b) refusing to permit a combination of new motor vehicle lines, if justified by reasonable business considerations.
     (5) Upon the written request of any franchisee, a franchisor shall disclose in writing to the franchisee the basis on which new motor vehicles, parts, and accessories are allocated, scheduled, and delivered among the franchisor's dealers of the same line-make.
    Section 9. Section 13-14-202 is enacted to read:
     13-14-202 .   Sale or transfer of ownership.
     (1) (a) The franchisor shall give effect to the change in a franchise agreement as a result of an event listed in Subsection (1)(b):
     (i) subject to Subsection 13-14-305 (2)(b); and
     (ii) unless exempted under Subsection (2).
     (b) The franchisor shall give effect to the change in a franchise agreement pursuant to
Subsection (1)(a) for the:
     (i) sale of a dealership;
     (ii) contract for sale of a dealership;
     (iii) transfer of ownership of a franchisee's dealership by sale, transfer of the business, or by stock transfer; or
     (iv) change in the executive management of the franchisee's dealership.
     (2) A franchisor is exempted from the requirements of Subsection (1) if:
     (a) the transferee is denied, or would be denied, a new motor vehicle franchisee's license pursuant to Title 41, Chapter 3, Motor Vehicle Business Regulation Act; or
     (b) the proposed sale or transfer of the business or change of executive management will be substantially detrimental to the distribution of franchisor's new motor vehicles or to competition in the relevant market area, provided that the franchisor has given written notice to the franchisee within 60 days following receipt by the franchisor of the following:
     (i) a copy of the proposed contract of sale or transfer executed by the franchisee and the proposed transferee;
     (ii) a completed copy of the franchisor's written application for approval of the change in ownership or executive management, if any, including the information customarily required by the franchisor; and
     (iii) (A) a written description of the business experience of the executive management of the transferee in the case of a proposed sale or transfer of the franchisee's business; or
     (B) a written description of the business experience of the person involved in the proposed change of the franchisee's executive management in the case of a proposed change of executive management.
     (3) For purposes of this section, the refusal by the franchisor to accept a proposed transferee who is of good moral character and who otherwise meets the written, reasonable, and uniformly applied standards or qualifications, if any, of the franchisor relating to the business experience of executive management and financial capacity to operate and maintain the dealership required by the franchisor of its franchisees is presumed to be unreasonable and undertaken without good cause.
     (4) (a) If after receipt of the written notice from the franchisor described in Subsection (1) the franchisee objects to the franchisor's refusal to accept the proposed sale or transfer of the business or change of executive management, the franchisee may file an application for a hearing before the board up to 60 days from the date of receipt of the notice.
     (b) After a hearing, the board shall determine, and enter an order providing that:
     (i) the proposed transferee or change in executive management shall be approved or may not be approved for specified reasons; or
     (ii) a proposed transferee or change in executive management is approved if specific conditions are timely satisfied.
     (c) The franchisee shall have the burden of proof with respect to all issues raised by the franchisee's application for a hearing as provided in this section. During the pendency of the hearing, the franchise agreement shall continue in effect in accordance with its terms.
     (d) The board shall expedite, upon written request, any determination sought under this section.
    Section 10. Section 13-14-203 is enacted to read:
     13-14-203 .   Succession to franchise.
     (1) (a) A successor, including a family member of a deceased or incapacitated franchisee, who is designated by the franchisee may succeed the franchisee in the ownership and operation of the dealership under the existing franchise agreement if:
     (i) the designated successor gives the franchisor written notice of an intent to succeed to the rights of the deceased or incapacitated franchisee in the franchise agreement within 180 days after the franchisee's death or incapacity;
     (ii) the designated successor agrees to be bound by all of the terms and conditions of the franchise agreement; and
     (iii) the designated successor meets the criteria generally applied by the franchisor in qualifying franchisees.
     (b) A franchisor may refuse to honor the existing franchise agreement with the designated successor only for good cause.
     (2) The franchisor may request in writing from a designated successor the personal and financial data that is reasonably necessary to determine whether the existing franchise agreement should be honored. The designated successor shall supply the personal and financial data promptly upon the request.
     (3) (a) If a franchisor believes that good cause exists for refusing to honor the requested succession, the franchisor shall serve upon the designated successor notice of its refusal to approve the succession, within 60 days after the later of:
     (i) receipt of the notice of the designated successor's intent to succeed the franchisee in the ownership and operation of the dealership; or
     (ii) the receipt of the requested personal and financial data.
     (b) Failure to serve the notice pursuant to Subsection (3)(a) is considered approval of the designated successor and the franchise agreement is considered amended to reflect the approval of the succession the day following the last day the franchisor can serve notice under Subsection (3)(a).
     (4) The notice of the franchisor provided in Subsection (3) shall state the specific grounds for the refusal to approve the succession and that discontinuance of the franchise agreement shall take effect not less than 180 days after the date the notice of refusal is served unless the proposed successor files an application for hearing under Subsection (6).
     (5) (a) This section does not prevent a franchisee from designating a person as the successor by written instrument filed with the franchisor.
     (b) If a franchisee files an instrument under Subsection (5)(b), the instrument governs the succession rights to the management and operation of the dealership subject to the designated successor satisfying the franchisor's qualification requirements as described in this section.
     (6) (a) If a franchisor serves a notice of refusal to a designated successor pursuant to Subsection (3), the designated successor may, within the 180-day period provided in Subsection (4), file with the board an application for a hearing to determine whether or not good cause exists for the refusal.
     (b) If application for a hearing is timely filed, the franchisor shall continue to honor the franchise agreement until after:
     (i) the requested hearing has been concluded;
     (ii) a decision is rendered by the board; and
     (iii) the applicable appeal period has expired following a decision by the board.
    Section 11. Section 13-14-204 is enacted to read:
     13-14-204 .   Franchisor's obligations related to service -- Franchisor audits -- Time limits.
     (1) Each franchisor shall specify in writing to each of its franchisees licensed as a new motor vehicle dealer in this state:
     (a) the franchisee's obligations for new motor vehicle preparation, delivery, and warranty service on its products;
     (b) the schedule of compensation to be paid to the franchisee for parts, work, and service; and
     (c) the time allowance for the performance of work and service.
     (2) (a) The schedule of compensation described in Subsection (1) shall include reasonable compensation for diagnostic work, as well as repair service, parts, and labor.
     (b) Time allowances described in Subsection (1) for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work to be performed.
     (3) (a) In the determination of what constitutes reasonable compensation under this section, the principal factor to be considered is the prevailing wage rates being paid by franchisees in the relevant market area in which the franchisee is doing business.
     (b) Compensation of the franchisee for warranty service work may not be less than the amount charged by the franchisee for like parts and service to retail or fleet customers, if the amounts are reasonable.
     (4) A franchisor may not fail to:
     (a) perform any warranty obligation;
     (b) include in written notices of franchisor's recalls to new motor vehicle owners and franchisees the expected date by which necessary parts and equipment will be available to franchisees for the correction of the defects; or
     (c) compensate any of the franchisees for repairs effected by the recall.
     (5) If a franchisor disallows a franchisee's claim for a defective part, alleging that the part is not defective, the franchisor at its option shall:
     (a) return the part to the franchisee at the franchisor's expense; or
     (b) pay the franchisee the cost of the part.
     (6) (a) A claim made by a franchisee pursuant to this section for labor and parts shall be paid within 30 days after its approval.
     (b) A claim shall be either approved or disapproved by the franchisor within 30 days after receipt of the claim on a form generally used by the franchisor and containing the generally required information. Any claim not specifically disapproved of in writing within 30 days after the receipt of the form is considered to be approved and payment shall be made within 30 days.
     (7) Warranty service audits of franchisee records may be conducted by the franchisor on a reasonable basis.
     (8) A franchisee's claim for warranty compensation may not be denied except for good cause such as performance of nonwarranty repairs, lack of material documentation, fraud, or misrepresentation.
     (9) (a) Any charge backs for warranty parts or service compensation and service incentives shall only be enforceable for the 12-month period immediately following the date the payment for warranty reimbursement was made by the franchisor.
     (b) Except as provided in Subsection (9)(c), all charge backs levied by a franchisor for sales compensation or sales incentives arising out of the sale or lease of a motor vehicle sold by a franchisee shall be compensable only if written notice of the charge back is received by the franchisee within 24 months immediately following the date when payment for the sales compensation was made by the franchisor.
     (c) The time limitations of this Subsection (9) do not preclude charge backs for any fraudulent claim that was previously paid.
    Section 12. Section 13-14-205 is enacted to read:
     13-14-205 .   Liability for damages to motor vehicles in transit -- Disclosure required.
     (1) (a) A franchisee is solely liable for damage to a new motor vehicle after delivery by and acceptance from the carrier.
     (b) A delivery receipt or bill of lading, or similar document, signed by a franchisee is evidence of a franchisee's acceptance of a new motor vehicle.
     (2) A franchisor is liable for all damage to a motor vehicle before delivery to and acceptance by the franchisee, including that time in which the vehicle is in the control of a carrier or transporter.
     (3) A franchisor shall disclose to the franchisee any repairs made prior to delivery.
     (4) Notwithstanding Subsections (1), (2), and (3), the franchisee is liable for damage to a new motor vehicle after delivery to the carrier or transporter if the franchisee selected:
     (a) the method and mode of transportation; and
     (b) the carrier or transporter.
    Section 13. Section 13-14-301 is enacted to read:
    Part 3. Restrictions on Termination, Relocation, and Establishment of Franchises      13-14-301 .   Termination or noncontinuance of franchise.
     (1) Except as provided in Subsection (2), a franchisor may not terminate or refuse to continue a franchise agreement unless:
     (a) the franchisee has received written notice from the franchisor 60 days before the effective date of termination or noncontinuance setting forth the specific grounds for termination or noncontinuance that are relied on by the franchisor as establishing good cause for the termination or noncontinuance;
     (b) the franchisor has good cause for termination or noncontinuance; and
     (c) the franchisor is willing and able to comply with Section 13-14-307 .
     (2) A franchisor may terminate a franchise, without complying with Subsection (1) if:
     (a) for a particular line-make the franchisor or manufacturer discontinues that line-make;
     (b) the franchisee's license as a new motor vehicle dealer is revoked under Title 41, Chapter 3, Motor Vehicle Business Regulation Act; or
     (c) upon a mutual written agreement of the franchisor and franchisee.
     (3) (a) At any time before the effective date of termination or noncontinuance of the
franchise, the franchisee may apply to the board for a hearing on the merits, and following notice to all parties concerned, the hearing shall be promptly held as provided in Section 13-14-304 .
     (b) A termination or noncontinuance subject to a hearing under Subsection (3)(a) may not become effective until final determination of the issue by the board and the applicable appeal period has lapsed.
    Section 14. Section 13-14-302 is enacted to read:
     13-14-302 .   Issuance of additional franchises -- Relocation of existing franchisees.
     (1) (a) Except as provided in Subsection (2), a franchisor shall comply with Subsection (1)(b) if the franchisor seeks to:
     (i) enter into a franchise establishing a motor vehicle dealership within a relevant market area where the same line-make is represented by another franchisee; or
     (ii) relocate an existing motor vehicle dealership.
     (b) (i) If a franchisor seeks to take an action listed Subsection (1)(a), prior to taking the action, the franchisor shall in writing notify the board and each franchisee in that line-make in the relevant market area that the franchisor intends to take an action described in Subsection (1)(a).
     (ii) The notice required by Subsection (1)(b)(i) shall:
     (A) specify the good cause on which it intends to rely for the action; and
     (B) be delivered by registered or certified mail.
     (c) Within 45 days of receiving notice required by Subsection (1)(b), any franchisee that is required to receive notice under Subsection (1)(b) may protest to the board the establishing or relocating of the dealership. When a protest is filed, the board shall inform the franchisor that:
     (i) a timely protest has been filed;
     (ii) a hearing is required;
     (iii) the franchisor may not establish or relocate the proposed dealership until the board has held a hearing; and
     (iv) the franchisor may not establish or relocate a proposed dealership if the board determines that there is not good cause for permitting the establishment or relocation of the dealership.
     (d) If multiple protests are filed under Subsection (1)(c), hearings may be consolidated to expedite the disposition of the issue.
     (2) Subsection (1) does not apply to a relocation that is:
     (a) less than one aeronautical mile from the existing location of the franchisee's dealership; and
     (b) within the same county.
     (3) For purposes of this section:
     (a) relocation of an existing franchisee's dealership in excess of one mile from its existing location is considered the establishment of an additional franchise in the line-make of the relocating franchise; and
     (b) the reopening in a relevant market area of a dealership that has not been in operation for one year or more is considered the establishment of an additional motor vehicle dealership.
    Section 15. Section 13-14-303 is enacted to read:
     13-14-303 .   Effect of terminating a franchise.
     If under Section 13-14-301 the board permits a franchisor to terminate or not continue a franchise and prohibits the franchisor from entering into a franchise for the sale of new motor vehicles of a line-make in a relevant market area, the franchisor may not enter into a franchise for the sale of new motor vehicles of that line-make in the specified relevant market area unless the franchisor first establishes in a hearing before the board that there has been a change of circumstances so that the relevant market area at the time of the establishment of the new franchise agreement can reasonably be expected to support the new franchisee.
    Section 16. Section 13-14-304 is enacted to read:
     13-14-304 .   Hearing regarding termination, relocation, or establishment of franchises.
     (1) (a) Within ten days of receiving an application from a franchisee under Subsection 13-14-301 (3) challenging its franchisor's right to terminate or not continue a franchise, or an application under Subsection 13-14-302 (1) challenging the establishment or relocation of a franchise, the board shall:
     (i) enter an order designating the time and place for the hearing; and
     (ii) send by certified or registered mail, with return receipt requested, a copy of the order to:
     (A) the applicant;
     (B) the franchisor; and
     (C) if the application involves the establishment of a new franchise or the relocation of an existing dealership, to all franchisees in the relevant market area engaged in the business of offering to sell or lease the same line-make.
     (b) A copy of an order mailed under Subsection (1)(a) shall be addressed to the franchisee at the place where the franchisee's business is conducted.
     (2) Any person who can establish to the board an interest in the application may intervene as a party to the hearing, whether or not that person receives notice.
     (3) Any person may appear and testify on the question of the public interest in the termination or noncontinuation of a franchise or in the establishment of an additional franchise.
     (4) (a) Any hearing ordered under Subsection (1) shall be conducted no later than 120 days after the application for hearing is filed. A final decision on the challenge shall be made by the board no later than 30 days after the hearing.
     (b) Failure to comply with the time requirements of Subsection (4)(a) is considered a determination that the franchisor acted with good cause or, in the case of a protest of a proposed establishment or relocation of a dealer, that good cause exists for permitting the proposed additional or relocated new motor vehicle dealer, unless:
     (i) the delay is caused by acts of the franchisor or the additional or relocating franchisee; or
     (ii) the delay is waived by the parties.
     (5) The franchisor has the burden of proof to establish that under the provisions of this chapter it should be granted permission to:
     (a) terminate or not continue the franchise;
     (b) enter into a franchise agreement establishing an additional franchise; or
     (c) relocate the dealership of an existing franchisee.
    Section 17. Section 13-14-305 is enacted to read:
     13-14-305 .   Evidence to be considered in determining cause to terminate or discontinue.

     (1) In determining whether a franchisor has established good cause for terminating or not continuing a franchise agreement, the board shall consider:
     (a) the amount of business transacted by the franchisee, as compared to business available to the franchisee;
     (b) the investment necessarily made and obligations incurred by the franchisee in the performance of the franchisee's part of the franchise agreement;
     (c) the permanency of the investment;
     (d) whether it is injurious or beneficial to the public welfare or public interest for the business of the franchisee to be disrupted;
     (e) whether the franchisee has adequate motor vehicle sales and service facilities, equipment, vehicle parts, and qualified service personnel to reasonably provide for the needs of the consumer for the new motor vehicles handled by the franchisee and has been and is rendering adequate services to the public;
     (f) whether the franchisee refuses to honor warranties of the franchisor under which the warranty service work is to be performed pursuant to the franchise agreement, if the franchisor reimburses the franchisee for the warranty service work;
     (g) failure by the franchisee to substantially comply with those requirements of the franchise agreement that are determined by the board to be reasonable and material and not in violation of this chapter;
     (h) evidence of bad faith by the franchisee in complying with those terms of the franchise agreement that are determined by the board to be reasonable and material and not in violation of this chapter;
     (i) prior misrepresentation by the franchisee in applying for the franchise;
     (j) transfer of any ownership or interest in the franchise without first obtaining approval from the franchisor or the board; and
     (k) any other factor the board considers relevant.
     (2) Notwithstanding any franchise agreement, the following do not constitute good cause,
as used in this chapter for the termination or noncontinuation of a franchise:
     (a) the sole fact that the franchisor desires greater market penetration or more sales or leases of new motor vehicles;
     (b) the change of ownership of the franchisee's dealership or the change of executive management of the franchisee's dealership unless the franchisor proves that the change of ownership or executive management will be substantially detrimental to the distribution of the franchisor's motor vehicles; or
     (c) the fact that the franchisee has justifiably refused or declined to participate in any conduct covered by Section 13-14-201 .
     (3) For purposes of Subsection (2), "substantially detrimental" includes the failure of any proposed transferee to meet the objective criteria applied by the franchisor in qualifying franchisees at the time of application.
    Section 18. Section 13-14-306 is enacted to read:
     13-14-306 .   Evidence to be considered in determining cause to relocate or establish a new franchised dealership.
     In determining whether a franchisor has established good cause for relocating an existing franchisee or establishing a new franchised dealership for the same line-make in a given relevant market area, the board shall consider:
     (1) the amount of business transacted by other franchisees of the same line-make in that relevant market area, as compared to business available to the franchisees;
     (2) the investment necessarily made and obligations incurred by other franchisees of the same line-make in that relevant market area in the performance of their part of their franchisee agreements;
     (3) the permanency of the existing and proposed investment;
     (4) whether it is injurious or beneficial to the public welfare or public interest for an additional franchise to be established; and
     (5) whether the franchisees of the same line-make in that relevant market area are providing adequate service to consumers for the motor vehicles of the line-make, which shall include the
adequacy of the motor vehicle sale and service facilities, equipment, supply of vehicle parts, and qualified service personnel.
    Section 19. Section 13-14-307 is enacted to read:
     13-14-307 .   Franchisors' repurchase obligations upon termination or noncontinuation of franchise.
     (1) Upon the termination or noncontinuation of a franchise by the franchisor, the franchisor shall pay the franchisee:
     (a) the franchisee's cost of new, undamaged, and unsold motor vehicles in the franchisee's inventory acquired from the franchisor or another franchisee of the same line-make representing both the current model year at the time of termination or noncontinuation and the immediately prior model year vehicles:
     (i) plus any charges made by the franchisor, for distribution, delivery, or taxes;
     (ii) plus the franchisee's cost of any accessories added on the vehicle; and
     (iii) less all allowances paid or credited to the franchisee by the franchisor;
     (b) the franchisee's cost of new and undamaged motor vehicles in the franchisee's inventory of demonstrator vehicles, reduced by 1% for each 1000 miles registered on the demonstrator vehicle's odometer:
     (i) plus any charges made by the franchisor for distribution, delivery, or taxes;
     (ii) plus the franchisee's cost of any accessories added on the vehicles; and
     (iii) less all allowances paid or credited to the franchisee by the franchisor;
     (c) the cost of all new, undamaged, and unsold supplies, parts, and accessories as set forth in the franchisor's catalog at the time of termination or noncontinuation for the supplies, parts, and accessories, less all allowances paid or credited to the franchisee by the franchisor;
     (d) the fair market value, but not less than the franchisee's depreciated acquisition cost of each undamaged sign owned by the franchisee that bears a common name, trade name, or trademark of the franchisor if acquisition of the sign was recommended or required by the franchisor;
     (e) the fair market value, but not less than the franchisee's depreciated acquisition cost of all special tools, equipment, and furnishings acquired from the franchisor or sources approved by the
franchisor that were recommended or required by the franchisor and are in good and usable condition; and
     (f) the cost of transporting, handling, packing, and loading motor vehicles, supplies, parts, accessories, signs, special tools, equipment, and furnishings.
     (2) The franchisor shall pay the franchisee the amounts specified in Subsection (1) within 90 days after the tender of the property to the franchisor if the franchisee:
     (a) has clear title to the property; and
     (b) is in a position to convey title to the franchisor.
     (3) If repurchased inventory, equipment, or demonstrator vehicles are subject to a security interest, the franchisor may make payment jointly to the franchisee and to the holder of the security interest.
    Section 20. Repealer.
    This act repeals:
    Section 13-14-1 , Short title -- Definitions.
    Section 13-14-2 , Legislative findings.
    Section 13-14-3 , Termination or refusal to continue franchise -- Notice of intent and specific grounds.
    Section 13-14-4 , Good cause for modifying, replacing, terminating or refusing to continue franchise -- Circumstances considered.
    Section 13-14-5 , Establishment or relocation of franchise within existing franchise area -- Notice of intent and specific grounds.
    Section 13-14-6 , Establishment or relocation of franchise within existing franchise area -- Necessity of notice and good cause.
    Section 13-14-7 , Enjoining violation of notice requirement.
    Section 13-14-8 , Enjoining violation of good cause requirement.
    Section 13-14-9 , Good cause for establishment or relocation of franchise within existing franchise area -- Circumstances considered.
    Section 13-14-10 , Compensation of franchisees for warranty work.


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