SF 406

1st Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:12am

A bill for an act
relating to commerce; regulating franchise agreements between outdoor sport
equipment dealers, manufacturers, and distributors; proposing coding for new
law as Minnesota Statutes, chapter 80G.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [80G.01] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Scope. new text end

new text begin For the purposes of sections 80G.01 to 80G.11, the terms
defined in this section have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Dealership agreement. new text end

new text begin "Dealership agreement" means a written
agreement of definite or indefinite duration between an outdoor sport equipment
manufacturer and an outdoor sport equipment dealer or distributor that enables the dealer
to purchase equipment from the manufacturer or dealer and provides for the rights and
obligations of the parties with respect to the purchase or sale of outdoor sport equipment.
new text end

new text begin Subd. 3. new text end

new text begin Designated successor. new text end

new text begin "Designated successor" means one or more persons
nominated by the dealer, in a written document filed by the dealer with the manufacturer
or distributor at the time the dealership agreement is executed, to succeed the dealer in the
event of the dealer's death or incapacity.
new text end

new text begin Subd. 4. new text end

new text begin Outdoor sport equipment. new text end

new text begin "Outdoor sport equipment" means
snowmobiles as defined in section 84.81, subdivision 3; all-terrain vehicles as defined
in section 84.92, subdivision 8; personal watercraft as defined in section 86B.005,
subdivision 14a; watercraft as defined in section 86B.005, subdivision 18; and off-highway
motorcycles, as defined in section 84.787, subdivision 7, and all attachments and repair
parts for all of this equipment.
new text end

new text begin Subd. 5. new text end

new text begin Outdoor sport equipment dealer or dealer. new text end

new text begin "Outdoor sport equipment
dealer" or "dealer" means a person engaged in acquiring outdoor sport equipment from a
manufacturer and reselling the outdoor sport equipment at wholesale or retail.
new text end

new text begin Subd. 6. new text end

new text begin Outdoor sport equipment distributor or distributor. new text end

new text begin "Outdoor sport
equipment distributor" means a person, other than a manufacturer, who offers for sale,
sells, or distributes outdoor sport equipment to an outdoor sport equipment dealer or who
maintains a factory representative, or who controls a person who offers for sale, sells,
or distributes outdoor equipment to an outdoor sport equipment dealer. "Distributor"
includes a wholesaler.
new text end

new text begin Subd. 7. new text end

new text begin Outdoor sport equipment manufacturer or manufacturer. new text end

new text begin "Outdoor
sport equipment manufacturer" or "manufacturer" means a person engaged in the
manufacture or assembly of outdoor sport equipment. The term also includes any
successor in interest of the outdoor sport equipment manufacturer, including any purchaser
of assets or stock, any surviving corporation resulting from a merger or liquidation, any
receiver or assignee, or any trustee of the original outdoor sport equipment manufacturer.
new text end

new text begin Subd. 8. new text end

new text begin Person. new text end

new text begin "Person" means an individual, partnership, limited partnership,
corporation, limited liability company, trustee of a trust, personal representative of an
estate, or any other type of business entity.
new text end

new text begin Subd. 9. new text end

new text begin Proposed outdoor sport equipment dealer. new text end

new text begin "Proposed outdoor sport
equipment dealer" or "proposed dealer" means a person who has an application for a new
dealership agreement pending with a manufacturer or distributor. Proposed dealer does
not include a person whose dealership agreement is being renewed or continued.
new text end

Sec. 2.

new text begin [80G.02] DEALERSHIP AGREEMENT AND COMPLIANCE
REQUIRED FOR SALE OR PURCHASE OF OUTDOOR SPORT EQUIPMENT.
new text end

new text begin A manufacturer or distributor shall not offer for sale to a new outdoor sport
equipment dealer, and a new or proposed new outdoor sport equipment dealer shall not
offer to purchase from a manufacturer, new outdoor sport equipment without first entering
into a written dealership agreement and complying with all other applicable provisions of
this chapter. The written agreement may provide for certain types of routine transactions
to be done orally.
new text end

Sec. 3.

new text begin [80G.03] CONTENTS OF DEALERSHIP AGREEMENT.
new text end

new text begin Each dealership agreement must include, but is not limited to, all of the following:
new text end

new text begin (1) the territory or market area;
new text end

new text begin (2) the period of time covered by the dealership agreement;
new text end

new text begin (3) performance and marketing standards;
new text end

new text begin (4) notice provisions for termination, cancellation, or nonrenewal;
new text end

new text begin (5) obligations in the preparation and delivery of product and warranty service;
new text end

new text begin (6) disposition obligations upon termination, cancellation, or nonrenewal relating to
inventory, equipment, furnishings, special tools, and required signs acquired within the 18
months immediately prior to the date of termination, cancellation, or nonrenewal; and
new text end

new text begin (7) dispute resolution procedures.
new text end

Sec. 4.

new text begin [80G.04] SALE, TRANSFER, EXCHANGE OF DEALERSHIP;
CONSENT; CRITERIA; PROHIBITED CONDUCT.
new text end

new text begin (a) A manufacturer or distributor shall not unreasonably withhold consent to the
sale, transfer, or exchange of a dealership to a person who meets the criteria, if any, set
forth in the dealership agreement.
new text end

new text begin (b) Failure by a manufacturer or distributor to respond within 60 days after receipt of
a written request by the dealer to the manufacturer or distributor for consent to the sale,
transfer, or exchange of a dealership is considered consent to the request.
new text end

Sec. 5.

new text begin [80G.05] INABILITY OF DESIGNATED SUCCESSOR TO SUCCEED
OUTDOOR SPORT EQUIPMENT DEALER.
new text end

new text begin If a designated successor is not able to succeed the outdoor sport equipment dealer
because of the designated successor's death or legal incapacity, the dealer may, at any time
after that death or incapacity, execute and deliver to the manufacturer or distributor a new
document nominating a designated successor.
new text end

Sec. 6.

new text begin [80G.06] DESIGNATED SUCCESSOR OF DECEASED OR
INCAPACITATED SPORT EQUIPMENT DEALER; NOTICE OF INTENT;
EXISTING DEALERSHIP AGREEMENT; PERSONAL AND FINANCIAL DATA;
NOTICE OF REFUSAL TO APPROVE SUCCESSION.
new text end

new text begin (a) A designated successor of a deceased or incapacitated new sport equipment
dealer may succeed the dealer in the ownership or operation of the dealership under
the existing dealership agreement if the designated successor gives the manufacturer
or distributor written notice of the designated successor's intention to succeed to the
dealership within 60 days after the dealer's death or incapacity and agrees to be bound by
all of the terms and conditions of the dealership agreement. A manufacturer or distributor
may refuse to honor the existing dealer agreement with the designated successor for good
cause or on the basis of criteria agreed to in the existing dealership agreement.
new text end

new text begin (b) The manufacturer or distributor may request from a designated successor the
personal and financial data necessary to determine whether the existing dealership
agreement should be honored with the designated successor. Upon request, the designated
successor shall supply the personal and financial data.
new text end

new text begin (c) Within 60 days after receiving the notice of the designated successor's intent
to succeed the dealer in the ownership and operation of the dealership or within 60
days after receiving the requested personal and financial data, whichever occurs last, if
a manufacturer or distributor believes that good cause or other criteria agreed to in the
existing dealership agreement exist for refusing to honor the succession, the manufacturer
or distributor may provide written notice to the designated successor of its refusal to
approve the succession.
new text end

Sec. 7.

new text begin [80G.07] CANCELLATION AND ALTERATION OF DEALERSHIPS.
new text end

new text begin Subdivision 1. new text end

new text begin Termination by manufacturer or distributor. new text end

new text begin (a) No manufacturer
or distributor, directly or through any officer, agent, or employee, may terminate, cancel,
or fail to renew a dealership agreement without good cause.
new text end

new text begin (b) The burden of proving good cause is on the manufacturer or distributor.
new text end

new text begin (c) For purposes of this section, "good cause" means:
new text end

new text begin (1) failure by the dealer to comply substantially with essential and reasonable
requirements imposed or sought to be imposed by the manufacturer or distributor,
which requirements are not discriminatory as compared to requirements imposed by the
manufacturer or distributor on other similarly situated dealers, either by the terms or in
the manner of their enforcement;
new text end

new text begin (2) a substantial breach of the dealership agreement that the dealer has not cured
within a reasonable time after notice of the breach by the manufacturer;
new text end

new text begin (3) without the consent of the outdoor sport equipment manufacturer, who shall not
withhold consent unreasonably:
new text end

new text begin (i) the outdoor sport equipment dealer has transferred an interest in the outdoor
sport equipment dealership;
new text end

new text begin (ii) there has been a withdrawal from the dealership of an individual proprietor,
partner, major shareholder, or the manager of the dealership; or
new text end

new text begin (iii) there has been a substantial reduction in interest of a partner or major
stockholder;
new text end

new text begin (4) the outdoor sport equipment dealer has filed a voluntary petition in bankruptcy or
has had an involuntary petition in bankruptcy filed against it that has not been discharged
within 30 days after the filing, there has been a closeout or other sale of a substantial part
of the dealer's assets related to the outdoor sport equipment business, or there has been a
commencement of dissolution or liquidation of the dealer;
new text end

new text begin (5) there has been a change without the prior written approval of the manufacturer,
in the location of the dealer's principal place of business under the dealership agreement;
new text end

new text begin (6) the outdoor sport equipment dealer has defaulted under a chattel mortgage
or other security agreement between the dealer and the outdoor sport equipment
manufacturer, or there has been a revocation or discontinuance of a guarantee of the
dealer's present or future obligations to the outdoor sport equipment manufacturer;
new text end

new text begin (7) the outdoor sport equipment dealer has failed to operate in the normal course of
business for seven consecutive days or has otherwise abandoned the business;
new text end

new text begin (8) the outdoor sport equipment dealer has pleaded guilty to or has been convicted of
a felony affecting the relationship between the dealer and manufacturer;
new text end

new text begin (9) the outdoor sport equipment dealer has engaged in conduct that is injurious or
detrimental to the dealer's customers or to the public welfare; or
new text end

new text begin (10) the outdoor sport equipment dealer, after receiving notice from the manufacturer
of its requirements for reasonable market penetration based on the manufacturer's
experience in other comparable marketing areas, fails to meet the manufacturer's market
penetration requirements.
new text end

new text begin Subd. 2. new text end

new text begin Termination by dealer. new text end

new text begin A dealer shall not terminate, cancel, or fail to
renew a dealership agreement except on 90 days written notice to the manufacturer or
distributor, unless a shorter period is agreed upon by the parties. This prohibition does not
apply to a termination, cancellation, or failure to renew due to the death of the dealer or
the death of an individual who is at least a 50 percent owner of the dealership.
new text end

Sec. 8.

new text begin [80G.08] REPURCHASE OF INVENTORY REQUIRED.
new text end

new text begin (a) If a manufacturer or distributor terminates a dealer agreement as a result of any
action, except for good cause under section 80G.07, the manufacturer or distributor shall
repurchase the inventory as provided in this section. The dealer may keep part or all of the
inventory if it desires to do so, and the manufacturer agrees in writing. If the dealer has an
outstanding debt to the manufacturer or distributor, then the repurchase amount may be
adjusted by the manufacturer to take into account those unpaid debts.
new text end

new text begin (b) After written notice by the dealer to the manufacturer or distributor in person
or by registered or certified mail or by a commercial delivery service, return receipt
requested, provided by the dealer within 30 days after termination of the dealer agreement,
the manufacturer or distributor shall, within 30 days after receiving the notice, repurchase
that inventory previously purchased from the manufacturer or distributor as provided in
this section except as otherwise provided in paragraph (a).
new text end

new text begin (c) Upon payment within a reasonable time of the repurchase amount to the dealer,
the title, if any, and the right of possession to the repurchased inventory transfers to the
manufacturer or distributor.
new text end

new text begin (d) The repurchase amount for the inventory must be at least the amount the dealer
paid for the inventory.
new text end

Sec. 9.

new text begin [80G.09] WARRANTIES.
new text end

new text begin Subdivision 1. new text end

new text begin Application. new text end

new text begin This section applies to all warranty claims submitted
by a dealer to an outdoor sport equipment manufacturer in which the outdoor sport
equipment dealer has complied with the policies and procedures contained in the outdoor
sport equipment manufacturer's warranty.
new text end

new text begin Subd. 2. new text end

new text begin Prompt payment. new text end

new text begin Claims filed for payment under warranty agreements
must be approved or disapproved within 30 days after receipt by the outdoor sport
equipment manufacturer. Unless the outdoor sport equipment dealer agrees to a later date,
approved claims for payment must be paid within 30 days after approval. When a claim is
disapproved, the outdoor sport equipment manufacturer shall notify the dealer within the
30-day period stating the specific grounds on which the disapproval is based. Any claim
not specifically disapproved within 30 days of receipt is deemed approved and must be
paid within 30 days after the deemed approval.
new text end

new text begin Subd. 3. new text end

new text begin Post-termination claims. new text end

new text begin If, after termination of a dealership agreement, a
dealer submits a warranty claim for warranty work performed before the effective date
of the termination, the outdoor sport equipment manufacturer shall handle the claim as
provided in subdivision 2.
new text end

new text begin Subd. 4. new text end

new text begin Compensation for warranty work. new text end

new text begin Warranty work performed by the
dealer must be compensated in accordance with the reasonable and customary amount
of time required to complete the work, expressed in hours and fractions of hours
multiplied by the dealer's established customer hourly retail labor rate, which the dealer
shall communicate to the outdoor sport equipment manufacturer before performing the
warranty work.
new text end

new text begin Subd. 5. new text end

new text begin Expenses. new text end

new text begin Expenses expressly excluded under the outdoor sport equipment
manufacturer's warranty to the customer must not be included in claims and are not
required to be paid on requests for compensation from the dealer for warranty work
performed.
new text end

new text begin Subd. 6. new text end

new text begin Compensation for parts. new text end

new text begin Payment for all parts used by the dealer in
performing warranty work must be paid to the dealer in the amount equal to the dealer's
net price for the parts, plus a minimum of 15 percent to reimburse the dealer for reasonable
costs of doing business in performing warranty service on the outdoor sport equipment
manufacturer's behalf, including, but not limited to, freight and handling costs.
new text end

new text begin Subd. 7. new text end

new text begin Adjustment for errors. new text end

new text begin The outdoor sport equipment manufacturer may
adjust for errors discovered during audit, and if necessary, adjust claims paid in error.
new text end

new text begin Subd. 8. new text end

new text begin Alternate terms and conditions. new text end

new text begin A dealer may choose to accept alternate
reimbursement terms and conditions in lieu of the requirements of subdivisions 2 to 7,
provided there is a written dealership agreement between the outdoor sport equipment
manufacturer and the dealer providing for compensation to the dealer for warranty labor
costs either as:
new text end

new text begin (1) a discount in the pricing of the equipment to the dealer; or
new text end

new text begin (2) a lump-sum payment to the dealer.
new text end

new text begin The discount or lump sum must be no less than five percent of the suggested retail price
of the equipment. If the requirements of this subdivision are met and alternate terms
and conditions are in place, subdivisions 2 to 7 do not apply and the alternate terms and
conditions are enforceable.
new text end

new text begin Subd. 9. new text end

new text begin Warranty work on units not sold by the dealer. new text end

new text begin Upon request of the
manufacturer or distributor, the dealer shall perform warranty repair work on units that
were not sold by the dealer. Compensation for that work must be on the same terms and
conditions otherwise required in this section.
new text end

Sec. 10.

new text begin [80G.10] STATUS OF INCONSISTENT AGREEMENTS.
new text end

new text begin A term of a dealership agreement either expressed or implied, including a choice
of law provision that is inconsistent with sections 80G.01 to 80G.11 or that purports to
waive an outdoor sport equipment manufacturer's or distributor's compliance with sections
80G.01 to 80G.11 is void and unenforceable and does not waive any rights provided to
a person by sections 80G.01 to 80G.11.
new text end

Sec. 11.

new text begin [80G.11] REMEDIES.
new text end

new text begin If either party to a dealership agreement violates any provision of sections 80G.01
to 80G.11, the other party may bring an action against the alleged violator in a court
of competent jurisdiction for damages sustained by the allegedly wronged party as a
consequence of the violation, and the allegedly wronged party may also be granted
injunctive relief against any action or inaction prohibited under sections 80G.01 to 80G.11.
The remedies in this section are in addition to any other remedies permitted by law.
new text end

Sec. 12.

new text begin [80G.12] APPLICABILITY.
new text end

new text begin Sections 80G.01 to 80G.11 are effective August 1, 2009, and apply to all dealership
agreements entered into, amended, or renewed on or after that date. Any dealership
agreement in force and effect on August 1, 2009, that has a stated expiration date after
that date and is not renewed or amended on or after August 1, 2009, is not subject to
sections 80G.01 to 80G.11. Sections 80G.01 to 80G.11 apply as of August 1, 2009, to any
dealership agreement then in effect that has no stated expiration date.
new text end