HF 413

1st Unofficial Engrossment - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

1.1A bill for an act

1.2relating to commerce; regulating franchise agreements between outdoor sport
1.3equipment dealers, manufacturers, and distributors;proposing coding for new
1.4law as Minnesota Statutes, chapter 80G.
1.5BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6    Section 1. [80G.01] DEFINITIONS.
1.7    Subdivision 1. Scope. For the purposes of sections 80G.01 to 80G.11, the terms
1.8defined in this section have the meanings given them.
1.9    Subd. 2. Dealership agreement. "Dealership agreement" means a written
1.10agreement of definite or indefinite duration between an outdoor sport equipment
1.11manufacturer and an outdoor sport equipment dealer or distributor that enables the dealer
1.12to purchase equipment from the manufacturer or dealer and provides for the rights and
1.13obligations of the parties with respect to the purchase or sale of outdoor sport equipment.
1.14    Subd. 3. Designated successor. "Designated successor" means one or more persons
1.15nominated by the dealer, in a written document filed by the dealer with the manufacturer
1.16or distributor at the time the dealership agreement is executed, to succeed the dealer in the
1.17event of the dealer's death or incapacity.
1.18    Subd. 4. Outdoor sport equipment. "Outdoor sport equipment" means
1.19snowmobiles as defined in section 84.81, subdivision 3; all-terrain vehicles as defined in
1.20section 84.92, subdivision 8; personal watercraft as defined in section 86B.005, subdivision
1.2114a; watercraft as defined in section 86C.01; and off-highway motorcycles, as defined in
1.22section 84.787, subdivision 7, and all attachments and repair parts for all of this equipment.
2.1    Subd. 5. Outdoor sport equipment dealer or dealer. "Outdoor sport equipment
2.2dealer" or "dealer" means a person engaged in acquiring outdoor sport equipment from a
2.3manufacturer and reselling the outdoor sport equipment at wholesale or retail.
2.4    Subd. 6. Outdoor sport equipment distributor or distributor. "Outdoor sport
2.5equipment distributor" means a person, other than a manufacturer, who offers for sale,
2.6sells, or distributes outdoor sport equipment to an outdoor sport equipment dealer or who
2.7maintains a factory representative, or who controls a person who offers for sale, sells,
2.8or distributes outdoor equipment to an outdoor sport equipment dealer. "Distributor"
2.9includes a wholesaler.
2.10    Subd. 7. Outdoor sport equipment manufacturer or manufacturer. "Outdoor
2.11sport equipment manufacturer" or "manufacturer" means a person engaged in the
2.12manufacture or assembly of outdoor sport equipment. The term also includes any
2.13successor in interest of the outdoor sport equipment manufacturer, including any purchaser
2.14of assets or stock, any surviving corporation resulting from a merger or liquidation, any
2.15receiver or assignee, or any trustee of the original outdoor sport equipment manufacturer.
2.16    Subd. 8. Person. "Person" means an individual, partnership, limited partnership,
2.17corporation, limited liability company, trustee of a trust, personal representative of an
2.18estate, or any other type of business entity.
2.19    Subd. 9. Proposed outdoor sport equipment dealer. "Proposed outdoor sport
2.20equipment dealer" or "proposed dealer" means a person who has an application for a new
2.21dealership agreement pending with a manufacturer or distributor. Proposed dealer does
2.22not include a person whose dealership agreement is being renewed or continued.

2.23    Sec. 2. [80G.02] DEALERSHIP AGREEMENT AND COMPLIANCE
2.24REQUIRED FOR SALE OR PURCHASE OF OUTDOOR SPORT EQUIPMENT.
2.25    A manufacturer or distributor shall not offer for sale to a new outdoor sport
2.26equipment dealer, and a new or proposed new outdoor sport equipment dealer shall not
2.27offer to purchase from a manufacturer, new outdoor sport equipment without first entering
2.28into a written dealership agreement and complying with all other applicable provisions of
2.29this act. The written agreement may provide for certain types of routine transactions to
2.30be done orally.

2.31    Sec. 3. [80G.03] CONTENTS OF DEALERSHIP AGREEMENT.
2.32    Each dealership agreement shall include, but is not limited to, all of the following:
2.33    (1) the territory or market area;
2.34    (2) the period of time covered by the dealership agreement;
3.1    (3) performance and marketing standards;
3.2    (4) notice provisions for termination, cancellation, or nonrenewal;
3.3    (5) obligations in the preparation and delivery of product and warranty service;
3.4    (6) disposition obligations upon termination, cancellation, or nonrenewal relating to
3.5inventory, equipment, furnishings, special tools, and required signs acquired within the 18
3.6months immediately prior to the date of termination, cancellation, or nonrenewal; and
3.7    (7) dispute resolution procedures.

3.8    Sec. 4. [80G.04] SALE, TRANSFER, EXCHANGE OF DEALERSHIP;
3.9CONSENT; CRITERIA; PROHIBITED CONDUCT.
3.10    (a) A manufacturer or distributor shall not unreasonably withhold consent to the
3.11sale, transfer, or exchange of a dealership to a person who meets the criteria, if any, set
3.12forth in the dealership agreement.
3.13    (b) Failure by a manufacturer or distributor to respond within 60 days after receipt of
3.14a written request by the dealer to the manufacturer or distributor for consent to the sale,
3.15transfer, or exchange of a dealership shall be considered consent to the request.

3.16    Sec. 5. [80G.05] INABILITY OF DESIGNATED SUCCESSOR TO SUCCEED
3.17OUTDOOR SPORT EQUIPMENT DEALER.
3.18    If a designated successor is not able to succeed the outdoor sport equipment dealer
3.19because of the designated successor's death or legal incapacity, the dealer may, at any time
3.20after that death or incapacity, execute and deliver to the manufacturer or distributor a new
3.21document nominating a designated successor.

3.22    Sec. 6. [80G.06] DESIGNATED SUCCESSOR OF DECEASED OR
3.23INCAPACITATED SPORT EQUIPMENT DEALER; NOTICE OF INTENT;
3.24EXISTING DEALERSHIP AGREEMENT; PERSONAL AND FINANCIAL DATA;
3.25NOTICE OF REFUSAL TO APPROVE SUCCESSION.
3.26    (a) A designated successor of a deceased or incapacitated new sport equipment
3.27dealer may succeed the dealer in the ownership or operation of the dealership under
3.28the existing dealership agreement if the designated successor gives the manufacturer
3.29or distributor written notice of the designated successor's intention to succeed to the
3.30dealership within 60 days after the dealer's death or incapacity and agrees to be bound by
3.31all of the terms and conditions of the dealership agreement. A manufacturer or distributor
3.32may refuse to honor the existing dealer agreement with the designated successor for good
3.33cause or on the basis of criteria agreed to in the existing dealership agreement.
4.1    (b) The manufacturer or distributor may request from a designated successor the
4.2personal and financial data necessary to determine whether the existing dealership
4.3agreement should be honored with the designated successor. Upon request, the designated
4.4successor shall supply the personal and financial data.
4.5    (c) Within 60 days after receiving the notice of the designated successor's intent
4.6to succeed the dealer in the ownership and operation of the dealership or within 60
4.7days after receiving the requested personal and financial data, whichever occurs last, if
4.8a manufacturer or distributor believes that good cause or other criteria agreed to in the
4.9existing dealership agreement exist for refusing to honor the succession, the manufacturer
4.10or distributor may provide written notice to the designated successor of its refusal to
4.11approve the succession.

4.12    Sec. 7. [80G.07] CANCELLATION AND ALTERATION OF DEALERSHIPS.
4.13    Subdivision 1. Termination by manufacturer or distributor. (a) No manufacturer
4.14or distributor, directly or through any officer, agent, or employee, may terminate, cancel,
4.15or fail to renew a dealership agreement without good cause.
4.16    (b) The burden of proving good cause is on the manufacturer or distributor.
4.17    (c) For purposes of this section, "good cause" means:
4.18    (1) failure by the dealer to comply substantially with essential and reasonable
4.19requirements imposed or sought to be imposed by the manufacturer or distributor,
4.20which requirements are not discriminatory as compared to requirements imposed by the
4.21manufacturer or distributor on other similarly situated dealers, either by the terms or in
4.22the manner of their enforcement;
4.23    (2) a substantial breach of the dealership agreement that the dealer has not cured
4.24within a reasonable time after notice of the breach by the manufacturer;
4.25    (3) without the consent of the outdoor sport equipment manufacturer, who shall not
4.26withhold consent unreasonably:
4.27    (i) the outdoor sport equipment dealer has transferred an interest in the outdoor
4.28sport equipment dealership;
4.29    (ii) there has been a withdrawal from the dealership of an individual proprietor,
4.30partner, major shareholder, or the manager of the dealership; or
4.31    (iii) there has been a substantial reduction in interest of a partner or major
4.32stockholder;
4.33    (4) the outdoor sport equipment dealer has filed a voluntary petition in bankruptcy or
4.34has had an involuntary petition in bankruptcy filed against it that has not been discharged
4.35within 30 days after the filing, there has been a closeout or other sale of a substantial part
5.1of the dealer's assets related to the outdoor sport equipment business, or there has been a
5.2commencement of dissolution or liquidation of the dealer;
5.3    (5) there has been a change without the prior written approval of the manufacturer,
5.4in the location of the dealer's principal place of business under the dealership agreement;
5.5    (6) the outdoor sport equipment dealer has defaulted under a chattel mortgage
5.6or other security agreement between the dealer and the outdoor sport equipment
5.7manufacturer, or there has been a revocation or discontinuance of a guarantee of the
5.8dealer's present or future obligations to the outdoor sport equipment manufacturer;
5.9    (7) the outdoor sport equipment dealer has failed to operate in the normal course of
5.10business for seven consecutive days or has otherwise abandoned the business;
5.11    (8) the outdoor sport equipment dealer has pleaded guilty to or has been convicted of
5.12a felony affecting the relationship between the dealer and manufacturer;
5.13    (9) the outdoor sport equipment dealer has engaged in conduct that is injurious or
5.14detrimental to the dealer's customers or to the public welfare; or
5.15    (10) the outdoor sport equipment dealer, after receiving notice from the manufacturer
5.16of its requirements for reasonable market penetration based on the manufacturer's
5.17experience in other comparable marketing areas, fails to meet the manufacturer's market
5.18penetration requirements.
5.19    Subd. 2. Termination by dealer. A dealer shall not terminate, cancel, or fail to
5.20renew a dealership agreement except on 90 days written notice to the manufacturer or
5.21distributor, unless a shorter period is agreed upon by the parties. This prohibition does not
5.22apply to a termination, cancellation, or failure to renew due to the death of the dealer or
5.23the death of an individual who is at least a 50 percent owner of the dealership.

5.24    Sec. 8. [80G.08] REPURCHASE OF INVENTORY REQUIRED.
5.25    (a) If a manufacturer or distributor terminates a dealer agreement as a result of any
5.26action, except for good cause under section 80G.07, the manufacturer or distributor shall
5.27repurchase the inventory as provided in this section. The dealer may keep part or all of the
5.28inventory if it desires to do so, and the manufacturer agrees in writing. If the dealer has an
5.29outstanding debt to the manufacturer or distributor, then the repurchase amount may be
5.30adjusted by the manufacturer to take into account those unpaid debts.
5.31    (b) After written notice by the dealer to the manufacturer or distributor in person
5.32or by registered or certified mail or by a commercial delivery service, return receipt
5.33requested, provided by the dealer within 30 days after termination of the dealer agreement,
5.34the manufacturer or distributor shall, within 30 days after receiving the notice, repurchase
6.1that inventory previously purchased from the manufacturer or distributor as provided in
6.2this section except as otherwise provided in paragraph (a).
6.3    (c) Upon payment within a reasonable time of the repurchase amount to the dealer,
6.4the title, if any, and the right of possession to the repurchased inventory transfers to the
6.5manufacturer or distributor.
6.6    (d) The repurchase amount for the inventory must be at least the amount the dealer
6.7paid for the inventory.

6.8    Sec. 9. [80G.09] WARRANTIES.
6.9    Subdivision 1. Application. This section applies to all warranty claims submitted
6.10by a dealer to an outdoor sport equipment manufacturer in which the outdoor sport
6.11equipment dealer has complied with the policies and procedures contained in the outdoor
6.12sport equipment manufacturer's warranty.
6.13    Subd. 2. Prompt payment. Claims filed for payment under warranty agreements
6.14must be approved or disapproved within 30 days after receipt by the outdoor sport
6.15equipment manufacturer. Unless the outdoor sport equipment dealer agrees to a later date,
6.16approved claims for payment must be paid within 30 days after approval. When a claim is
6.17disapproved, the outdoor sport equipment manufacturer shall notify the dealer within the
6.1830-day period stating the specific grounds on which the disapproval is based. Any claim
6.19not specifically disapproved within 30 days of receipt is deemed approved and must be
6.20paid within 30 days after the deemed approval.
6.21    Subd. 3. Post-termination claims. If, after termination of a dealership agreement, a
6.22dealer submits a warranty claim for warranty work performed before the effective date
6.23of the termination, the outdoor sport equipment manufacturer shall handle the claim as
6.24provided in subdivision 2.
6.25    Subd. 4. Compensation for warranty work. Warranty work performed by the
6.26dealer must be compensated in accordance with the reasonable and customary amount
6.27of time required to complete the work, expressed in hours and fractions of hours
6.28multiplied by the dealer's established customer hourly retail labor rate, which the dealer
6.29shall communicate to the outdoor sport equipment manufacturer before performing the
6.30warranty work.
6.31    Subd. 5. Expenses. Expenses expressly excluded under the outdoor sport equipment
6.32manufacturer's warranty to the customer must not be included in claims and are not
6.33required to be paid on requests for compensation from the dealer for warranty work
6.34performed.
7.1    Subd. 6. Compensation for parts. Payment for all parts used by the dealer in
7.2performing warranty work must be paid to the dealer in the amount equal to the dealer's
7.3net price for the parts, plus a minimum of 15 percent to reimburse the dealer for reasonable
7.4costs of doing business in performing warranty service on the outdoor sport equipment
7.5manufacturer's behalf, including, but not limited to, freight and handling costs.
7.6    Subd. 7. Adjustment for errors. The outdoor sport equipment manufacturer may
7.7adjust for errors discovered during audit, and if necessary, adjust claims paid in error.
7.8    Subd. 8. Alternate terms and conditions. A dealer may choose to accept alternate
7.9reimbursement terms and conditions in lieu of the requirements of subdivisions 2 to 7,
7.10provided there is a written dealership agreement between the outdoor sport equipment
7.11manufacturer and the dealer providing for compensation to the dealer for warranty labor
7.12costs either as:
7.13    (1) a discount in the pricing of the equipment to the dealer; or
7.14    (2) a lump-sum payment to the dealer.
7.15The discount or lump sum must be no less than five percent of the suggested retail price
7.16of the equipment. If the requirements of this subdivision are met and alternate terms
7.17and conditions are in place, subdivisions 2 to 7 do not apply and the alternate terms and
7.18conditions are enforceable.
7.19    Subd. 9. Warranty work on units not sold by the dealer. Upon request of the
7.20manufacturer or distributor, the dealer shall perform warranty repair work on units that
7.21were not sold by the dealer. Compensation for that work must be on the same terms and
7.22conditions otherwise required in this section.

7.23    Sec. 10. [80G.10] STATUS OF INCONSISTENT AGREEMENTS.
7.24    A term of a dealership agreement either expressed or implied, including a choice
7.25of law provision that is inconsistent with sections 80G.01 to 80G.11 or that purports to
7.26waive an outdoor sport equipment manufacturer's or distributor's compliance with sections
7.2780G.01 to 80G.11 is void and unenforceable and does not waive any rights provided to
7.28a person by sections 80G.01 to 80G.11.

7.29    Sec. 11. [80G.11] REMEDIES.
7.30    If either party to a dealership agreement violates any provision of sections 80G.01
7.31to 80G.11, the other party may bring an action against the alleged violator in a court
7.32of competent jurisdiction for damages sustained by the allegedly wronged party as a
7.33consequence of the violation, and the allegedly wronged party may also be granted
8.1injunctive relief against any action or inaction prohibited under sections 80G.01 to 80G.11.
8.2The remedies in this section are in addition to any other remedies permitted by law.

8.3    Sec. 12. [80G.12] APPLICABILITY.
8.4    Sections 80G.01 to 80G.11 are effective August 1, 2008, and apply to all dealership
8.5agreements entered into, amended, or renewed on or after that date. Any dealership
8.6agreement in force and effect on August 1, 2008, that has a stated expiration date after
8.7that date and is not renewed or amended on or after August 1, 2008, is not subject to
8.8sections 80G.01 to 80G.11. Sections 80G.01 to 80G.11 apply as of August 1, 2008, to any
8.9dealership agreement then in effect that has no stated expiration date.