SF 761

1st Engrossment - 85th Legislature (2007 - 2008) 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; establishing registration requirements;
amending Minnesota Statutes 2006, sections 84.788, by adding a subdivision;
84.798, by adding a subdivision; proposing coding for new law as Minnesota
Statutes, chapter 80G.

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

ARTICLE 1

OUTDOOR SPORT EQUIPMENT FRANCHISES

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; watercraft as defined in section 86C.01; 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) If a dealership agreement is terminated, canceled, or
discontinued, 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) If a dealership agreement is terminated, canceled, or discontinued, 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 outdoor sport equipment 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 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, 2007, and apply to all dealership
agreements then in effect, which have no expiration date and which are continuing
contracts, and all other contracts entered into, amended, or renewed after August 1, 2007.
Any contract in force and effect on August 1, 2007, which terminates after that date and is
not renewed is governed by the law as it existed before August 1, 2007.
new text end

ARTICLE 2

SPORT EQUIPMENT REGISTRATION REQUIREMENTS

Section 1.

Minnesota Statutes 2006, section 84.788, is amended by adding a
subdivision to read:

new text begin Subd. 12. new text end

new text begin Proof of sales tax payment. new text end

new text begin A person applying for initial registration of
an off-highway motorcycle must provide a purchaser's certificate, showing a complete
description of the off-highway motorcycle, the seller's name and address, the full purchase
price of the off-highway motorcycle, and the trade-in allowance, if any. The certificate
must include information showing either (1) that the sales and use tax under chapter 297A
was paid or (2) the purchase was exempt from tax under chapter 297A. The commissioner
of public safety, in consultation with the commissioner and the commissioner of revenue,
shall prescribe the form of the certificate.
new text end

new text begin The certificate is not required if the applicant provides a receipt, invoice, or
other document that shows the off-highway motorcycle was purchased from a retailer
maintaining a place of business in this state as defined in section new text begin 297A.66, subdivision 1 new text end .
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for registrations after June 30, 2007.
new text end

Sec. 2.

Minnesota Statutes 2006, section 84.798, is amended by adding a subdivision
to read:

new text begin Subd. 11. new text end

new text begin Proof of sales tax payment. new text end

new text begin A person applying for initial registration of
an off-road vehicle must provide a purchaser's certificate, showing a complete description
of the off-road vehicle, the seller's name and address, the full purchase price of the off-road
vehicle, and the trade-in allowance, if any. The certificate must include information
showing either (1) that the sales and use tax under chapter 297A was paid or (2) the
purchase was exempt from tax under chapter 297A. The commissioner of public safety,
in consultation with the commissioner and the commissioner of revenue, shall prescribe
the form of the certificate.
new text end

new text begin The certificate is not required if the applicant provides a receipt, invoice, or other
document that shows the off-road vehicle was purchased from a retailer maintaining a
place of business in this state as defined in section new text begin 297A.66, subdivision 1 new text end .
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for registrations after June 30, 2007.
new text end