SF 1430

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to commerce; regulating franchise agreements
between outdoor sport equipment dealers and
manufacturers; 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.07, 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 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; and motorcycles, as defined in section
65B.001, subdivision 5, and all attachments and repair parts for
all of this equipment.
new text end

new text begin Subd. 3. 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, partnership, corporation,
association, or other form of business enterprise engaged in the
manufacturing, assembly, or wholesale distribution 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. 4. 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, partnership, corporation, association, or other form of
business enterprise 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. 5. new text end

new text begin Dealership agreement. new text end

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

Sec. 2.

new text begin [80G.02] TERMINATIONS OR CANCELLATIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Good cause required. new text end

new text begin No outdoor sport
equipment manufacturer, directly or through an officer, agent,
or employee may terminate, cancel, fail to renew, or
substantially change the competitive circumstances of a
dealership agreement without good cause. "Good cause" means
failure by an outdoor sport equipment dealer to substantially
comply with essential and reasonable requirements imposed upon
the dealer by the dealership agreement, if the requirements are
not different from those requirements imposed on other similarly
situated dealers by their terms. In addition, good cause exists
whenever:
new text end

new text begin (1) without the consent of the outdoor sport equipment
manufacturer who shall not withhold consent unreasonably: (i)
the outdoor sport equipment dealer has transferred an interest
in the outdoor sport equipment dealership; (ii) there has been a
withdrawal from the dealership of an individual proprietor,
partner, major shareholder, or the manager of the dealership; or
(iii) there has been a substantial reduction in interest of a
partner or major stockholder;
new text end

new text begin (2) the outdoor sport equipment dealer has filed a
voluntary petition in bankruptcy or has had an involuntary
petition in bankruptcy filed against it, which has not been
discharged within 30 days after the filing, there has been a
closeout or 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 (3) 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 (4) 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 (5) 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 (6) 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 (7) the outdoor sport equipment dealer has engaged in
conduct which is injurious or detrimental to the dealer's
customers or to the public welfare; or
new text end

new text begin (8) 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, consistently fails to meet the
manufacturer's market penetration requirements.
new text end

new text begin Subd. 2. new text end

new text begin Notice. new text end

new text begin Except as otherwise provided in this
subdivision, an outdoor sport equipment manufacturer shall
provide an outdoor sport equipment dealer at least 90 days'
prior written notice of termination, cancellation, or nonrenewal
of the dealership agreement. The notice shall state all reasons
constituting good cause for the action and shall provide that
the dealer has 60 days in which to cure any claimed deficiency.
If the deficiency is rectified within 60 days, the notice is
void. The notice and right to cure provisions under this
section do not apply if the reason for termination,
cancellation, or nonrenewal is for any reason set forth in
subdivision 1, clauses (1) to (7).
new text end

new text begin Subd. 3. new text end

new text begin Obligation to repurchase. new text end

new text begin If a dealership
agreement is terminated, canceled, or discontinued, the outdoor
sport equipment manufacturer shall pay to the dealer, or credit
to the dealer's account if the dealer has an outstanding amount
owed to the manufacturer, an amount equal to 100 percent of the
net cost of all unused outdoor sport equipment in new condition
that has been purchased by the dealer from the manufacturer
within the 24 months immediately preceding notification by
either party of intent to terminate, cancel, or discontinue the
agreement. This amount must include transportation and
reasonable assembly charges that have been paid by the dealer,
or invoiced to the dealer's account by the manufacturer. The
dealer may elect to keep the merchandise instead of receiving
payment, if the contract gives the dealer this right.
new text end

new text begin Subd. 4. new text end

new text begin Repair parts. new text end

new text begin (a) The manufacturer shall pay
the dealer, or credit to the dealer's account if the dealer has
an outstanding amount owed to the manufacturer, the following:
new text end

new text begin (1) 95 percent of the current net prices on repair parts,
including superseded parts listed in current price lists or
catalogs in use by the manufacturer on the date of the
termination, cancellation, or discontinuance of the agreement;
new text end

new text begin (2) as to any parts not listed in current price lists or
catalogs, 100 percent of the invoiced price of the repair part
for which the dealer has an invoice if the parts had previously
been purchased by the dealer from the manufacturer and are held
by the dealer on the date of the termination, cancellation, or
discontinuance of the agreement or received by the dealer from
the manufacturer after that date;
new text end

new text begin (3) 50 percent of the most recently published price of all
other parts if the price list or catalog is not more than ten
years old as of the date of the termination, cancellation, or
discontinuance of the agreement;
new text end

new text begin (4) net cost less 20 percent per year depreciation for five
years following purchase of all data processing and
communications hardware and software the dealer purchased from
the manufacturer or an approved vendor of the manufacturer to
meet the minimum requirements for the hardware and software as
set forth by the manufacturer; and
new text end

new text begin (5) an amount equal to 75 percent of the net cost to the
dealer of specialized repair tools, including computerized
diagnostic hardware and software, and signage purchased by the
dealer pursuant to the requirements of the manufacturer.
Specialized repair tools or signage that have never been used
must be repurchased at 100 percent of the dealer's cost.
Specialized repair tools must be unique to the manufacturer's
product line, specifically required by the manufacturer, and
must be in complete and usable condition. The manufacturer may
require by contract or agreement that the dealer resell to the
manufacturer such specialized repair tools and signage for the
amounts established in this section or the amount specified in
the dealership agreement or contract or fair market value,
whichever is greater.
new text end

new text begin (b) The manufacturer shall pay the dealer, or credit to the
dealer's account if the dealer has an outstanding amount owed to
the manufacturer, an amount equal to five percent of the prices
required to be paid or credited by this subdivision for all
parts, data processing and communications hardware and software,
and specialized repair tools and signage returned for the
handling, packing, and loading of the parts, data processing and
communications hardware and software, and specialized repair
tools and signage back to the manufacturer unless the
manufacturer elects to perform inventory, packing, and loading
of the parts. Upon the payment or allowance of credit to the
dealer's account of the sum required by this subdivision, the
title to and right to possess the outdoor sport equipment passes
to the manufacturer. However, this section does not affect any
security interest that the manufacturer may have in the
inventory of the dealer.
new text end

new text begin Subd. 5. new text end

new text begin Payment; interest. new text end

new text begin Payment required to be made
under this section must be made not later than 60 days from the
date the outdoor sport equipment is received by the
manufacturer, and if not by then paid, the amount payable by the
manufacturer bears interest at the maximum rate allowed by law
from the date the agreement was terminated, canceled, or
discontinued until the date payment is received by the dealer.
new text end

new text begin Subd. 6. new text end

new text begin Notice of intent to return. new text end

new text begin In lieu of
returning the outdoor sport equipment to the manufacturer, the
dealer may advise the manufacturer that the dealer has outdoor
sport equipment that the dealer intends to return. The notice
of the dealer's intention to return must be in writing and sworn
to before a notary public as to the accuracy of the listing of
outdoor sport equipment and that all of the items are in usable
condition. The notice must include the name and business
address of the person or business who has possession and custody
of the items and where they may be inspected. The list may be
verified by the manufacturer. The notice must also state the
name and business address of the person or business who has the
authority to serve as the escrow agent of the dealer, to accept
payment or a credit to the dealer's account on behalf of the
dealer, and to release the outdoor sport equipment to the
manufacturer. The notice constitutes the appointment of the
escrow agent to act on the dealer's behalf.
new text end

new text begin Subd. 7. new text end

new text begin Manufacturer inspection. new text end

new text begin (a) The manufacturer
has 30 days from the date of the mailing of the notice under
subdivision 6, which must be by certified mail, in which to
inspect the outdoor sport equipment and verify the accuracy of
the dealer's list.
new text end

new text begin (b) The manufacturer shall, within ten days after
inspection:
new text end

new text begin (1) pay the escrow agent;
new text end

new text begin (2) give evidence that a credit to the account of the
dealer has been made if the dealer has an outstanding amount due
the manufacturer; or
new text end

new text begin (3) send to the escrow agent a "dummy credit list" and
shipping labels for the return of the outdoor sport equipment to
the manufacturer that are acceptable as returns.
new text end

new text begin Subd. 8. new text end

new text begin Payment or credit requirements. new text end

new text begin If the
manufacturer sends a credit list as provided under subdivision 7
to the escrow agent, payment or a credit against the dealer's
indebtedness in accordance with this subdivision for the
acceptable returns must accompany the credit list. On the
receipt of the payment, evidence of a credit to the account of
the dealer or the credit list with payment, the title to, and
the right to possess the outdoor sport equipment acceptable as
returns passes to the manufacturer. The escrow agent shall ship
or cause to be shipped the outdoor sport equipment acceptable as
returns to the manufacturer unless the manufacturer elects to
personally perform the inventory, packing, and loading of the
outdoor sport equipment. When the equipment has been received
by the manufacturer, notice of its receipt shall be sent by
certified mail to the escrow agent who shall then disburse 90
percent of the payment it has received, less its actual expenses
and a reasonable fee for its services, to the dealer. The
escrow agent shall keep the balance of the funds in the dealer's
escrow account until it is notified that an agreement has been
reached as to the nonreturnables. After being notified of the
agreement, the escrow agent shall disburse the remaining funds
and dispose of any remaining outdoor sport equipment as provided
in the agreement. If no agreement is reached in a reasonable
time, the escrow agent may refer the matter to an arbitrator who
has authority to resolve all unsettled issues in the dispute.
new text end

new text begin Subd. 9. new text end

new text begin Provisions of contract supplemented. new text end

new text begin This
section is supplemental to an agreement between the dealer and
the manufacturer covering the return of outdoor sport
equipment. The dealer may elect to pursue either the dealer's
contract remedy or the remedy provided in this section. An
election by the dealer to pursue the contract remedy does not
bar the dealer's right to the remedy provided in this section as
to the outdoor sport equipment not affected by the contract
remedy. Notwithstanding any contrary provision in this section,
the rights of a manufacturer to charge back to the dealer's
account amounts previously paid or credited as a discount
incident to the dealer's purchase of goods is not affected.
new text end

new text begin Subd. 10. new text end

new text begin Death of dealer; repurchase from heirs. new text end

new text begin In the
event of the death of the dealer or majority stockholder in a
corporation operating a dealership, the manufacturer shall,
unless the heir or heirs of the deceased agree to continue to
operate the dealership, repurchase the merchandise from the heir
or heirs upon the same terms and conditions as are otherwise
provided in this section. In the event the heir or heirs do not
agree to continue to operate the dealership, it shall be deemed
a cancellation or discontinuance of the contract by the dealer
under subdivision 1.
new text end

new text begin Subd. 11. new text end

new text begin Failure to pay sums specified on cancellation
of contracts; liability. new text end

new text begin In the event that a manufacturer, upon
the cancellation of a dealership agreement, fails or refuses to
make payment to the dealer or the dealer's heir or heirs as
required by this section, the manufacturer is liable in a civil
action to be brought by the dealer or the dealer's heir or heirs
for:
new text end

new text begin (1) 100 percent of the net cost of the outdoor sport
equipment;
new text end

new text begin (2) transportation and reasonable assembly charges, which
have been paid by the dealer;
new text end

new text begin (3) 95 percent of the current net price of repair parts,
100 percent of invoiced prices, and 50 percent of the price of
all other parts as provided in subdivision 4;
new text end

new text begin (4) payment for data processing and communication hardware
and software, or specialized repair tools or signage as outlined
in subdivision 4; and
new text end

new text begin (5) five percent for handling, packing, and loading, if
applicable.
new text end

new text begin Subd. 12. new text end

new text begin Exceptions. new text end

new text begin Unless a dealer has delivered
parts to an escrow agent pursuant to subdivision 6, this section
does not require the repurchase from a dealer of a repair part
where the dealer previously has failed to return the repair part
to the manufacturer after being offered a reasonable opportunity
to return the repair part at a price not less than:
new text end

new text begin (1) 100 percent of the net price of the repair part as
listed in the then-current price list or catalog;
new text end

new text begin (2) 100 percent of the invoiced price; and
new text end

new text begin (3) 50 percent of the most recent published price as
provided in subdivision 4.
new text end

new text begin This section does not require the repurchase from a dealer
of repair parts that have a limited storage life or are
otherwise subject to deterioration, such as rubber items,
gaskets, and batteries, unless those items have been purchased
from the manufacturer within the past two years; repair parts
which, because of their condition, are not resalable as new
parts without reconditioning; repair parts which have lost
required traceability for quality assurance requirements; and
repair parts that were marked nonreturnable or future
nonreturnable when the dealer ordered them.
new text end

Sec. 3.

new text begin [80G.03] VIOLATIONS.
new text end

new text begin (a) It is a violation of sections 80G.01 to 80G.07 for an
outdoor sport equipment manufacturer to coerce an outdoor sport
equipment dealer to accept delivery of outdoor sport equipment,
which the outdoor sport equipment dealer has not voluntarily
ordered.
new text end

new text begin (b) It is a violation of sections 80G.01 to 80G.07 for an
outdoor sport equipment manufacturer to:
new text end

new text begin (1) condition or attempt to condition the sale of outdoor
sport equipment on a requirement that the outdoor sport
equipment dealer also purchase other goods or services, except
that an outdoor sport equipment manufacturer may require the
dealer to purchase all parts reasonably necessary to maintain
the quality of operation in the field of any outdoor sport
equipment used in the trade area and telecommunication necessary
to communicate with the outdoor sport equipment manufacturer;
new text end

new text begin (2) coerce an outdoor sport equipment dealer into a refusal
to purchase the outdoor sport equipment manufactured by another
outdoor sport equipment manufacturer;
new text end

new text begin (3) discriminate in the prices charged for outdoor sport
equipment of like grade and quality sold by the outdoor sport
equipment manufacturer to similarly situated outdoor sport
equipment dealers. This clause does not prevent the use of
differentials, which make only due allowance for difference in
the cost of manufacture, sale, or delivery or for the differing
methods or quantities in which the outdoor sport equipment is
sold or delivered, by the outdoor sport equipment manufacturer;
or
new text end

new text begin (4) attempt or threaten to terminate, cancel, fail to
renew, or substantially change the competitive circumstances of
the dealership agreement if the attempt or threat is based on
the results of a natural disaster, including a sustained drought
in the dealership market area, a labor dispute, or other
circumstance beyond the dealer's control.
new text end

Sec. 4.

new text begin [80G.04] 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 reasonable 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 of 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 of
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.
new text end

new text begin Subd. 3. new text end

new text begin Posttermination 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
approve or disapprove the claim within 30 days of receipt.
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 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, to 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 dealer 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

Sec. 5.

new text begin [80G.05] 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, which is
inconsistent with sections 80G.01 to 80G.07 or that purports to
waive an outdoor sport equipment manufacturer's compliance with
sections 80G.01 to 80G.07 is void and unenforceable and does not
waive any rights which are provided to a person by sections
80G.01 to 80G.07.
new text end

Sec. 6.

new text begin [80G.06] REMEDIES.
new text end

new text begin If an outdoor sport equipment manufacturer violates
sections 80G.01 to 80G.07, an outdoor sport equipment dealer may
bring an action against the manufacturer in a court of competent
jurisdiction for damages sustained by the dealer as a
consequence of the manufacturer's violation, together with the
actual costs of the action, including reasonable attorney fees,
and the dealer also may be granted injunctive relief against
unlawful termination, cancellation, nonrenewal, or substantial
change of competitive circumstances. The remedies in this
section are in addition to any other remedies permitted by law.
new text end

Sec. 7.

new text begin [80G.07] APPLICABILITY.
new text end

new text begin Sections 80G.01 to 80G.06 are effective August 1, 2005, and
apply to all dealership agreements now in effect, which have no
expiration date and which are continuing contracts, and all
other contracts entered into, amended, or renewed after August
1, 2005. Any contract in force and effect on August 1, 2005,
which terminates after that date and is not renewed is governed
by the law as it existed before August 1, 2005.
new text end