SF 638

1st Engrossment - 90th Legislature (2017 - 2018) Posted on 05/11/2018 04:26pm

A bill for an act
relating to commerce; motor vehicle franchises; regulating successor agreements;
providing unfair practices by manufacturers, distributors, and factory branches;
amending Minnesota Statutes 2016, sections 80E.11, subdivision 7; 80E.13.

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

Section 1.

Minnesota Statutes 2016, section 80E.11, subdivision 7, is amended to read:

Subd. 7.

Succession agreements.

deleted text begin Notwithstanding the foregoing, deleted text end new text begin A new motor vehicle
dealer may apply to a manufacturer, distributor, or factory branch to designate a proposed
dealer operator as a successor dealer to be established in the event of the death or incapacity
of the new motor vehicle dealer. A manufacturer, distributor, or factory branch may not
deny the proposed successor unless the proposed change would result in executive
management control by a person who is not of good moral character or who does not meet
the franchisor's existing reasonable capital standards or does not meet the franchisor's
uniformly applied minimum business experience standards to be a franchised new motor
vehicle dealer. If a manufacturer, distributor, or factory branch determines to deny a dealer's
application to name a successor, such denial must be in writing, must offer an explanation
of the grounds for the denial addressing the criteria contained in this subdivision, and must
be delivered to the new motor vehicle dealer within 90 days after the manufacturer,
distributor, or factory branch receives the completed application or documents customarily
used by the manufacturer, distributor, or factory branch for dealer actions described in this
subdivision. If a denial that meets the requirements of this subdivision is not sent within
the 90-day period, the manufacturer, distributor, or factory branch shall be deemed to have
given its consent to the proposed successor. new text end In the event the new motor vehicle dealer and
franchisor have duly executed an agreement concerning succession rights prior to the dealer's
death, the agreement shall be observed, even if it designates an individual other than the
surviving spouse or heirs of the franchised motor vehicle dealer. new text begin Notwithstanding the
foregoing, the franchisor shall not be required to accept a successor approved or deemed
approved under this section if the franchisor can demonstrate that the proposed successor,
at the time of the succession, would result in executive management control by a person
who is not of good moral character, or who does not meet the franchisor's existing reasonable
capital standards, or does not meet the franchisor's uniformly applied minimum business
experience standards to be a franchised new motor vehicle dealer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2016, section 80E.13, is amended to read:

80E.13 UNFAIR PRACTICES BY MANUFACTURERS, DISTRIBUTORS,
FACTORY BRANCHES.

It is unlawful and an unfair practice for a manufacturer, distributor, or factory branch
to engage in any of the following practices:

(a) delay, refuse, or fail to deliver new motor vehicles or new motor vehicle parts or
accessories in reasonable time and in reasonable quantity relative to the new motor vehicle
dealer's facilities and sales potential in the dealer's relevant market area, after having accepted
an order from a new motor vehicle dealer having a franchise for the retail sale of any new
motor vehicle sold or distributed by the manufacturer or distributor, if the new motor vehicle
or new motor vehicle parts or accessories are publicly advertised as being available for
delivery or actually being delivered. This clause is not violated, however, if the failure is
caused by acts or causes beyond the control of the manufacturer;

(b) refuse to disclose to any new motor vehicle dealer handling the same line make, the
manner and mode of distribution of that line make within the relevant market area;

(c) obtain money, goods, service, or any other benefit from any other person with whom
the dealer does business, on account of, or in relation to, the transaction between the dealer
and the other person, other than for compensation for services rendered, unless the benefit
is promptly accounted for, and transmitted to, the new motor vehicle dealer;

(d) increase prices of new motor vehicles which the new motor vehicle dealer had ordered
for private retail consumers prior to the dealer's receiving the written official price increase
notification. A sales contract signed by a private retail consumer shall constitute evidence
of each order if the vehicle is in fact delivered to that customer. In the event of manufacturer
price reductions, the amount of any reduction received by a dealer shall be passed on to the
private retail consumer by the dealer if the retail price was negotiated on the basis of the
previous higher price to the dealer;

(e) offer any refunds or other types of inducements to any new motor vehicle dealer for
the purchase of new motor vehicles of a certain line make without making the same offer
to all other new motor vehicle dealers in the same line make within geographic areas
reasonably determined by the manufacturer;

(f) release to any outside party, except under subpoena or in an administrative or judicial
proceeding involving the manufacturer or dealer, any business, financial, or personal
information which may be provided by the dealer to the manufacturer, without the express
written consent of the dealer or unless pertinent to judicial or governmental administrative
proceedings or to arbitration proceedings of any kind;

(g) deny any new motor vehicle dealer the right of free association with any other new
motor vehicle dealer for any lawful purpose;

(h) unfairly discriminate among its new motor vehicle dealers with respect to warranty
reimbursement or authority granted its new vehicle dealers to make warranty adjustments
with retail customers;

(i) compete with a new motor vehicle dealer in the same line make operating under an
agreement or franchise from the same manufacturer, distributor, or factory branch. A
manufacturer, distributor, or factory branch is considered to be competing when it has an
ownership interest, other than a passive interest held for investment purposes, in a dealership
of its line make located within the state. A manufacturer, distributor, or factory branch shall
not, however, be deemed to be competing when operating a dealership, either temporarily
or for a reasonable period, which is for sale to any qualified independent person at a fair
and reasonable price, or when involved in a bona fide relationship in which an independent
person has made a significant investment subject to loss in the dealership and can reasonably
expect to acquire full ownership and full management and operational control of the
dealership within a reasonable time on reasonable terms and conditions;

(j) prevent a new motor vehicle dealer from transferring or assigning a new motor vehicle
dealership to a qualified transferee. There shall be no transfer, assignment of the franchise,
or major change in the executive management of the dealership, except as is otherwise
provided in sections 80E.01 to 80E.17, without consent of the manufacturer, which shall
not be withheld without good cause. In determining whether good cause exists for
withholding consent to a transfer or assignment, the manufacturer, distributor, factory
branch, or importer has the burden of proving that the transferee is a person who is not of
good moral character or does not meet the franchisor's existing and reasonable capital
standards and, considering the volume of sales and service of the new motor vehicle dealer,
reasonable business experience standards in the market area. Denial of the request must be
in writing and delivered to the new motor vehicle dealer within 60 days after the manufacturer
receives the completed application customarily used by the manufacturer, distributor, factory
branch, or importer for dealer appointments. If a denial is not sent within this period, the
manufacturer shall be deemed to have given its consent to the proposed transfer or change.
In the event of a proposed sale or transfer of a franchise, the manufacturer, distributor,
factory branch, or importer shall be permitted to exercise a right of first refusal to acquire
the franchisee's assets or ownership if:

(1) the franchise agreement permits the manufacturer, distributor, factory branch, or
importer to exercise a right of first refusal to acquire the franchisee's assets or ownership
in the event of a proposed sale or transfer;

(2) the proposed transfer of the dealership or its assets is of more than 50 percent of the
ownership or assets;

(3) the manufacturer, distributor, factory branch, or importer notifies the dealer in writing
within 60 days of its receipt of the complete written proposal for the proposed sale or transfer
on forms generally utilized by the manufacturer, distributor, factory branch, or importer for
such purposes and containing the information required therein and all documents and
agreements relating to the proposed sale or transfer;

(4) the exercise of the right of first refusal will result in the dealer and dealer's owners
receiving the same or greater consideration with equivalent terms of sale as is provided in
the documents and agreements submitted to the manufacturer, distributor, factory branch,
or importer under clause (3);

(5) the proposed change of 50 percent or more of the ownership or of the dealership
assets does not involve the transfer or sale of assets or the transfer or issuance of stock by
the dealer or one or more dealer owners to a family member, including a spouse, child,
stepchild, grandchild, spouse of a child or grandchild, brother, sister, or parent of the dealer
owner; to a manager who has been employed in the dealership for at least four years and is
otherwise qualified as a dealer operator; or to a partnership or corporation owned and
controlled by one or more of such persons; and

(6) the manufacturer, distributor, factory branch, or importer agrees to pay the reasonable
expenses, including reasonable attorney fees, which do not exceed the usual customary and
reasonable fees charged for similar work done for other clients incurred by the proposed
new owner and transferee before the manufacturer, distributor, factory branch, or importer
exercises its right of first refusal, in negotiating and implementing the contract for the
proposed change of ownership or transfer of dealership assets. However, payment of such
expenses and attorney fees shall not be required if the dealer has not submitted or caused
to be submitted an accounting of those expenses within 20 days after the dealer's receipt of
the manufacturer, distributor, factory branch, or importer's written request for such an
accounting. The manufacturer, distributor, factory branch, or importer may request such an
accounting before exercising its right of first refusal. The obligation created under this clause
is enforceable by the transferee;

(k) threaten to modify or replace or modify or replace a franchise with a succeeding
franchise that would adversely alter the rights or obligations of a new motor vehicle dealer
under an existing franchise or that substantially impairs the sales or service obligations or
investments of the motor vehicle dealer;

(l) unreasonably deny the right to acquire factory program vehicles to any dealer holding
a valid franchise from the manufacturer to sell the same line make of vehicles, provided
that the manufacturer may impose reasonable restrictions and limitations on the purchase
or resale of program vehicles to be applied equitably to all of its franchised dealers. For the
purposes of this paragraph, "factory program vehicle" has the meaning given the term in
section 80E.06, subdivision 2;

(m) fail or refuse to offer to its same line make franchised dealers all models manufactured
for that line make, other than alternative fuel vehicles as defined in section 216C.01,
subdivision 1b. Failure to offer a model is not a violation of this section if the failure is not
arbitrary and is due to a lack of manufacturing capacity, a strike, labor difficulty, or other
cause over which the manufacturer, distributor, or factory branch has no control;

(n) require a dealer to pay an extra fee, or remodel, renovate, or recondition the dealer's
existing facilities, or purchase unreasonable advertising displays, training, tools, or other
materials, or to require the dealer to establish exclusive facilities or dedicated personnel as
a prerequisite to receiving a model or a series of vehicles;

(o) require a dealer new text begin by program, incentive provision, or otherwise new text end to adhere to
performance standards that are not applied uniformly to other similarly situated dealers.

A performance standard, sales objective, or program for measuring dealership performance
that may have a material effect on a dealer, including the dealer's right to payment under
any incentive or reimbursement program, and the application of the standard or program
by a manufacturer, distributor, or factory branch must be fair, reasonable, equitable, and
based on accurate information. new text begin Upon written request by any of its franchised dealers located
within Minnesota, a manufacturer, distributor, or factory branch must provide the method
or formula used by the manufacturer in establishing the sales volumes for receiving a rebate
or incentive and the specific calculations for determining the required sales volumes of the
inquiring dealer and any of the manufacturer's other Minnesota-franchised new motor vehicle
dealers of the same line make located within 75 miles of the inquiring dealer. Nothing
contained in this section requires a manufacturer, distributor, or factory branch to disclose
confidential business information of any of its franchised dealers or the required numerical
sales volumes that any of its franchised dealers must attain to receive a rebate or incentive.
An inquiring dealer may file a civil action as provided in section 80E.17 without a showing
of injury if a manufacturer, distributor, or factory branch fails to make the disclosure required
by this section.
new text end

A manufacturer, distributor, or factory branch has the burden of proving that the performance
standard, sales objective, or program for measuring dealership performance is fair deleted text begin and deleted text end new text begin , new text end
reasonable new text begin , and uniformly applied new text end under this deleted text begin subdivision deleted text end new text begin section new text end ;

(p) deleted text begin unreasonably reduce deleted text end new text begin assign or change new text end a dealer's area of sales effectiveness deleted text begin without
giving deleted text end new text begin arbitrarily or without due regard to the present pattern of motor vehicle sales and
registrations within the dealer's market. The manufacturer, distributor, or factory branch
must provide new text end at least 90 days' notice of the proposed deleted text begin reduction deleted text end new text begin change new text end . The change may
not take effect if the dealer commences a civil action new text begin within the 90 days' notice period new text end to
determine whether deleted text begin there is good cause for the change within the 90 days' notice period deleted text end new text begin the
manufacturer, distributor, or factory branch met its obligations under this section new text end . The burden
of proof in such an action shall be on the manufacturer or distributor new text begin . In determining at the
evidentiary hearing whether a manufacturer, distributor, or factory branch has assigned or
changed the dealer's area of sales effectiveness or is proposing to assign or change the
dealer's area of sales effectiveness arbitrarily or without due regard to the present pattern
of motor vehicle sales and registrations within the dealer's market, the court may take into
consideration the relevant circumstances, including, but not limited to:
new text end

new text begin (1) the traffic patterns between consumers and the same line make franchised dealers
of the affected manufacturer, distributor, or factory branch who are located within the
market new text end ; deleted text begin or
deleted text end

new text begin (2) the pattern of new vehicle sales and registrations of the affected manufacturer,
distributor, or factory branch within various portions of the area of sales effectiveness and
within the market as a whole;
new text end

new text begin (3) the growth or decline in population, density of population, and new car registrations
in the market;
new text end

new text begin (4) the presence or absence of natural geographical obstacles or boundaries, such as
rivers;
new text end

new text begin (5) the proximity of census tracts or other geographic units used by the affected
manufacturer, factory branch, distributor, or distributor branch in determining same line
make dealers' respective areas of sales effectiveness; and
new text end

new text begin (6) the reasonableness of the change or proposed change to the dealer's area of sales
effectiveness, considering the benefits and harm to the petitioning dealer, other same line
make dealers, and the manufacturer, distributor, or factory branch;
new text end

(q) to charge back, withhold payment, deny vehicle allocation, or take any other adverse
action against a dealer when a new vehicle sold by the dealer has been exported to a foreign
country, unless the manufacturer, distributor, or factory branch can show that at the time
of sale, the customer's information was listed on a known or suspected exporter list made
available to the dealer, or the dealer knew or reasonably should have known of the purchaser's
intention to export or resell the motor vehicle in violation of the manufacturer's export
policy. There is a rebuttable presumption that the dealer did not know or should not have
reasonably known that the vehicle would be exported or resold in violation of the
manufacturer's export policy if the vehicle is titled and registered in any state of the United
States new text begin ; or
new text end

new text begin (r) to require a dealer or prospective dealer by program, incentive provision, or otherwise
to construct improvements to its or a predecessor's facilities or to install new signs or other
franchisor image elements that replace or substantially alter improvements, signs, or
franchisor image elements completed within the preceding ten years that were required and
approved by the manufacturer, distributor, or factory branch, including any such
improvements, signs, or franchisor image elements that were required as a condition of the
dealer or predecessor dealer receiving an incentive or other compensation from the
manufacturer, distributor, or factory branch new text end .

new text begin This section shall not apply to a program or agreement that provides lump sum payments
to assist dealers in making facility improvements or to pay for signs or franchisor image
elements when such payments are not dependent on the dealer selling or purchasing specific
numbers of new vehicles and shall not apply to a program that is in effect with more than
one Minnesota dealer on the effective date of this section, nor to any renewal or modification
of such a program.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end