ENROLLED
Senate Bill No. 376
(By Senators Oliverio, Wooton, Ball, Bowman, Dittmar, Fanning,
Hunter, Ross, Schoonover, Snyder, White, Wiedebusch, Deem, Kimble
and Scott)
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[Passed April 12, 1997; in effect ninety days from passage.]
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AN ACT to amend and reenact sections three, four, five, seven,
eight, ten and thirteen, article six-a, chapter seventeen-a of
the code of West Virginia, one thousand nine hundred thirty- one, as amended, all relating to motor vehicles, distributors,
wholesalers and manufacturers generally; providing
definitions; modifying requirements for cancellation of dealer
contracts and notification thereof; providing circumstances
not constituting good cause; modifying notice provisions;
modifying reasonable compensation to dealer upon termination
of agreement; providing prohibited practices; and modifying
obligations regarding warranties and limiting the period of
time for audits thereon.
Be it enacted by the Legislature of West Virginia:
That sections three, four, five, seven, eight, ten and
thirteen, article six-a, chapter seventeen-a of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be
amended and reenacted, all to read as follows:
ARTICLE 6A. MOTOR VEHICLE DEALERS, DISTRIBUTORS, WHOLESALERS AND
MANUFACTURERS.
§17A-6A-3. Definitions.
For the purposes of this article, the words and phrases
defined in this section have the meanings ascribed to them, except
where the context clearly indicates a different meaning.
"Dealer agreement" means the agreement or contract in writing
between a manufacturer, distributor, and a new motor vehicle
dealer, which purports to establish the legal rights and
obligations of the parties to the agreement or contract with regard
to the purchase, lease or sale of new motor vehicles, accessories,
service and sale of parts for motor vehicles.
"Designated family member" means the spouse, child,
grandchild, parent, brother or sister of a deceased new motor
vehicle dealer who is entitled to inherit the deceased dealer's
ownership interest in the new motor vehicle dealership under the
terms of the dealer's will, or who has otherwise been designated in
writing by a deceased dealer to succeed the deceased dealer in the
new motor vehicle dealership, or is entitled to inherit under the
laws of intestate succession of this state. With respect to an
incapacitated new motor vehicle dealer, the term means the person
appointed by a court as the legal representative of the new motor vehicle dealer's property. The term also includes the appointed
and qualified personal representative and the testamentary trustee
of a deceased new motor vehicle dealer. However, the term shall
mean only that designated successor nominated by the new motor
vehicle dealer in a written document filed by the dealer with the
manufacturer or distributor, if such a document is filed.
"Distributor" means any person, resident or nonresident, who,
in whole or in part, offers for sale, sells or distributes any new
motor vehicle to a new motor vehicle dealer or who maintains a
factory representative, resident or nonresident, or who controls
any person, resident or nonresident, who, in whole or in part,
offers for sale, sells or distributes any new motor vehicle to a
new motor vehicle dealer.
"Established place of business" means a permanent, enclosed
commercial building located within this state easily accessible and
open to the public at all reasonable times and at which the
business of a new motor vehicle dealer, including the display and
repair of motor vehicles, may be lawfully carried on in accordance
with the terms of all applicable building codes, zoning and other
land-use regulatory ordinances.
"Factory branch" means an office maintained by a manufacturer
or distributor for the purpose of selling or offering for sale,
vehicles to a distributor, wholesaler or new motor vehicle dealer,
or for directing or supervising, in whole or in part, factory or
distributor representatives. The term includes any sales promotion organization maintained by a manufacturer or distributor which is
engaged in promoting the sale of a particular make of new motor
vehicles in this state to new motor vehicle dealers.
"Factory representative" means an agent or employee of a
manufacturer, distributor or factory branch retained or employed
for the purpose of making or promoting the sale of new motor
vehicles or for supervising or contracting with new motor vehicle
dealers or proposed motor vehicle dealers.
"Good faith" means honesty in fact and the observation of
reasonable commercial standards of fair dealing in the trade.
"Manufacturer" means any person who manufactures or assembles
new motor vehicles; or any distributor, factory branch or factory
representative.
"Motor vehicle" means that term as defined in section one,
article one of this chapter, including motorcycle and recreational
vehicle as defined in subsections (c) and (nn), respectively, of
that section, but not including a tractor or farm equipment.
"New motor vehicle" means a motor vehicle which is in the
possession of the manufacturer, distributor or wholesaler, or has
been sold only to a new motor vehicle dealer and on which the
original title has not been issued from the new motor vehicle
dealer.
"New motor vehicle dealer" means a person who holds a dealer
agreement granted by a manufacturer or distributor for the sale of
its motor vehicles, who is engaged in the business of purchasing, selling, leasing, exchanging or dealing in new motor vehicles,
service of said vehicles, warranty work and sale of parts who has
an established place of business in this state.
"Person" means a natural person, partnership, corporation,
association, trust, estate or other legal entity.
"Proposed new motor vehicle dealer" means a person who has an
application pending for a new dealer agreement with a manufacturer
or distributor. Proposed motor vehicle dealer does not include a
person whose dealer agreement is being renewed or continued.
"Relevant market area" means:
(a) For a proposed new motor vehicle dealer or a new motor
vehicle dealer who plans to relocate his or her place of business
in a county having a population which is greater than thirty
thousand, the area within a radius of eight miles of the intended
site of the proposed or relocated dealer.
(b) For a proposed new motor vehicle dealer or a new motor
vehicle dealer who plans to relocate his or her place of business
in a county having a population which is not greater than thirty
thousand, the area within a radius of fifteen miles of the intended
site of the proposed or relocated dealer.
§17A-6A-4. Cancellation of dealer contract; notification.
(1) Notwithstanding any agreement, a manufacturer or
distributor shall not cancel, terminate, fail to renew or refuse to
continue any dealer agreement with a new motor vehicle dealer unless the manufacturer or distributor has complied with all of the
following:
(a) Satisfied the notice requirement of section seven of this
article;
(b) Acted in good faith;
(c) Engaged in full and open communication with franchised
dealer; and
(d) Has good cause for the cancellation, termination,
nonrenewal or discontinuance.
(2) Notwithstanding any agreement, good cause shall exist for
the purposes of a termination, cancellation, nonrenewal or
discontinuance under subdivision (d), subsection (1) of this
section when both of the following occur:
(a) There is a failure by the new motor vehicle dealer to
comply with a provision of the dealer agreement and the provision
is both reasonable and of material significance to the relationship
between the manufacturer or distributor and the new motor vehicle
dealer; and
(b) The manufacturer or distributor first acquired actual or
constructive knowledge of the failure not more than two years prior
to the date on which notification was given pursuant to section
seven of this article.
(3) If the failure by the new motor vehicle dealer to comply
with a provision of the dealer agreement relates to the performance
of the new motor vehicle dealer in sales or service, good cause shall exist for the purposes of a termination, cancellation,
nonrenewal or discontinuance under subsection (1) of this section
when the new motor vehicle dealer failed to effectively carry out
the performance provisions of the dealer agreement if all of the
following have occurred:
(a) The new motor vehicle dealer was given written notice by
the manufacturer or distributor of the failure;
(b) The notification stated that the notice of failure of
performance was provided pursuant to this article;
(c) The new motor vehicle dealer was afforded a reasonable
opportunity to exert good faith efforts to carry out the dealer
agreement; and
(d) The failure continued for more than one hundred eighty
days after the date notification was given pursuant to subdivision
(a) of this subsection.
§17A-6A-5. Circumstances not constituting good cause.
Notwithstanding any agreement, the following alone shall not
constitute good cause for the termination, cancellation, nonrenewal
or discontinuance of a dealer agreement under subdivision (d),
subsection (1), section four of this article:
(a) A change in ownership of the new motor vehicle dealer's
dealership. The subdivision does not authorize any change in
ownership which would have the effect of a sale or an assignment of
the dealer agreement or a change in the principal management of the dealership without the manufacturer's or distributor's prior
written consent.
(b) The refusal of the new motor vehicle dealer to purchase or
accept delivery of any new motor vehicle parts, accessories, or any
other commodity or services not ordered by the new motor vehicle
dealer.
(c) The fact that the new motor vehicle dealer owns, has an
investment in, participates in the management of, or holds a dealer
agreement for the sale of another make or line of new motor
vehicles, or that the new motor vehicle dealer has established
another make or line of new motor vehicles in the same dealership
facilities as those of the manufacturer or distributor:
Provided,
That the new motor vehicle dealer maintains a reasonable line of
credit for each make or line of new motor vehicles, and that the
new motor vehicle dealer remains in substantial compliance with the
terms and conditions of the dealer agreement and with any
reasonable facilities' requirements of the manufacturer or
distributor.
(d) The fact that the new motor vehicle dealer sells or
transfers ownership of the dealership or sells or transfers capital
stock in the dealership to the new motor vehicle dealer's spouse,
son or daughter:
Provided, That the sale or transfer shall not
have the effect of a sale or an assignment of the dealer agreement
or a change in the principal management of the dealership without the manufacturer's or distributor's prior written consent.
§17A-6A-7. Notice provisions.
Notwithstanding any agreement, prior to the termination,
cancellation, nonrenewal or discontinuance of any dealer agreement,
the manufacturer or distributor shall furnish notice of the
termination, cancellation, nonrenewal or discontinuance to the new
motor vehicle dealer as follows:
(a) Except as provided in subdivision (c) or (d) of this
subsection, notice shall be made not less than ninety days prior to
the effective date of the termination, cancellation, nonrenewal or
discontinuance.
(b) Notice shall be by certified mail to the new motor vehicle
dealer and shall contain the following:
(i) A statement of intention to terminate, cancel, not renew
or discontinue the dealer agreement.
(ii) A statement of the reasons for the termination,
cancellation, nonrenewal or discontinuance. Such statement shall
include, at a minimum, a complete explanation of each reason upon
which the manufacturer or distributor relies to support its
proposed action, along with all supporting documentation which is
material to the proposed action and available to the manufacturer
or distributor at the time of termination, cancellation, nonrenewal
or discontinuance.
(iii) The date on which the termination, cancellation, nonrenewal or discontinuance takes effect.
(c) Notwithstanding subdivision (a) of this subsection, notice
shall be made not less than fifteen days prior to the effective
date of the termination, cancellation, nonrenewal or discontinuance
for any of the following reasons:
(i) Insolvency of the new motor vehicle dealer, or the filing
of any petition by or against the new motor vehicle dealer under
any bankruptcy or receivership law.
(ii) Failure of the new motor vehicle dealer to conduct his or
her customary sales and service operations during his or her
customary business hours for seven consecutive business days.
(iii) Conviction of the new motor vehicle dealer or its
principal owners of a crime, but only if the crime is punishable by
imprisonment in excess of one year under the law under which the
dealer was convicted, or the crime involved theft, dishonesty or
false statement regardless of the punishment.
(iv) Revocation of a motor vehicle dealership license in
accordance with section eighteen, article six, chapter seventeen-a
of this code.
(v) A fraudulent misrepresentation by the new motor vehicle
dealer to the manufacturer or distributor, which is material to the
dealer agreement.
(d) Notwithstanding subdivision (a) of this subsection notice
shall be made not less than twelve months prior to the effective
date of a termination, cancellation, nonrenewal or discontinuance if a manufacturer or distributor discontinues production of the new
motor vehicle dealer's product line or discontinues distribution of
the product line in this state.
§17A-6A-8. Reasonable compensation to dealer.
(1) Upon the termination, cancellation, nonrenewal or
discontinuance of any dealer agreement, the new motor vehicle
dealer shall be allowed fair and reasonable compensation by the
manufacturer or distributor for the following:
(a) Any new motor vehicle inventory purchased from the
manufacturer or distributor, which has not been materially altered,
substantially damaged or driven for more than five hundred miles,
except that for any new motorcycle inventory purchased from the
manufacturer or distributor, that inventory must not have been
materially altered, substantially damaged or driven for more than
fifty miles.
(b) Supplies and parts inventory purchased from the
manufacturer or distributor and listed in the manufacturer's or
distributor's current parts catalog.
(c) Equipment, furnishings and signs purchased from the
manufacturer or distributor.
(d) Special tools purchased from the manufacturer or
distributor within three years of the date of termination,
cancellation, nonrenewal or discontinuance.
(2) Upon the termination, cancellation, nonrenewal or discontinuance of a dealer agreement by the manufacturer or
distributor, the manufacturer or distributor shall also pay to the
new motor vehicle dealer a sum equal to the current, fair rental
value of his or her established place of business for a period of
one year from the effective date of termination, cancellation,
nonrenewal or discontinuance, or the remainder of the lease,
whichever is less. However, the payment required by this
subsection shall not apply to any termination, cancellation,
nonrenewal or discontinuance made pursuant to subsection (c),
section five of this article.
§17A-6A-10. Prohibited practices.
(1) A manufacturer or distributor shall not require any new
motor vehicle dealer in this state to do any of the following:
(a) Order or accept delivery of any new motor vehicle, part or
accessory thereof, equipment or any other commodity not required by
law which was not voluntarily ordered by the new motor vehicle
dealer. This section shall not be construed to prevent the
manufacturer or distributor from requiring that new motor vehicle
dealers carry a reasonable inventory of models offered for sale by
the manufacturer or distributor.
(b) Order or accept delivery of any new motor vehicle with
special features, accessories or equipment not included in the list
price of the new motor vehicle as publicly advertised by the
manufacturer or distributor.
(c) Participate monetarily in any advertising campaign or
contest, or purchase any promotional materials, display devices or
display decorations or materials at the expense of the new motor
vehicle dealer.
(d) Enter into any agreement with the manufacturer or
distributor or do any other act prejudicial to the new motor
vehicle dealer by threatening to terminate a dealer agreement or
any contractual agreement or understanding existing between the
dealer and the manufacturer or distributor. Notice in good faith
to any dealer of the dealer's violation of any terms or provisions
of the dealer agreement shall not constitute a violation of this
article.
(e) Change the capital structure of the new motor vehicle
dealership or the means by or through which the dealer finances the
operation of the dealership if the dealership at all times meets
any reasonable capital standards determined by the manufacturer in
accordance with uniformly applied criteria.
(f) Refrain from participation in the management of,
investment in or the acquisition of any other line of new motor
vehicle or related products, provided that the dealer maintains a
reasonable line of credit for each make or line of vehicle, remains
in compliance with reasonable facilities requirements, and makes no
change in the principal management of the dealer.
(g) Change the location of the new motor vehicle dealership or
make any substantial alterations to the dealership premises, where to do so would be unreasonable.
(h) Prospectively assent to a release, assignment, novation,
waiver or estoppel which would relieve any person from liability
imposed by this article or require any controversy between a new
motor vehicle dealer and a manufacturer or distributor to be
referred to a person other than the duly constituted courts of the
state or the United States, if the referral would be binding upon
the new motor vehicle dealer.
(2) A manufacturer or distributor shall not do any of the
following:
(a) Fail to deliver new motor vehicles or new motor vehicle
parts or accessories within a reasonable time and in reasonable
quantities relative to the new motor vehicle dealer's market area
and facilities, unless the failure is caused by acts or occurrences
beyond the control of the manufacturer or distributor, or unless
the failure results from an order by the new motor vehicle dealer
in excess of quantities reasonably and fairly allocated by the
manufacturer or distributor. No manufacturer or distributor may
penalize a new motor vehicle dealer for an alleged failure to meet
sales quotas where the alleged failure is due to actions of the
manufacturer or distributor.
(b) Refuse to disclose to a new motor vehicle dealer the
method and manner of distribution of new motor vehicles by the
manufacturer or distributor.
(c) Refuse to disclose to a new motor vehicle dealer the total number of new motor vehicles of a given model, which the
manufacturer or distributor has sold during the current model year
within the dealer's marketing district, zone or region, whichever
geographical area is the smallest.
(d) Increase prices of new motor vehicles which the new motor
vehicle dealer had ordered and then eventually delivered to the
same retail consumer for whom the vehicle was ordered, if the order
was made prior to the dealer's receipt of the written official
price increase notification. A sales contract signed by a private
retail consumer and binding on the dealer shall constitute evidence
of each order. In the event of manufacturer or distributor price
reductions or cash rebates, the amount of any reduction or rebate
received by a dealer shall be passed on to the private retail
consumer by the dealer. Any price reduction in excess of five
dollars shall apply to all vehicles in the dealer's inventory which
were subject to the price reduction. A price difference applicable
to new model or series motor vehicles at the time of the
introduction of the new models or the series shall not be
considered a price increase or price decrease. This subdivision
shall not apply to price changes caused by the following:
(i) The addition to a motor vehicle of required or optional
equipment pursuant to state or federal law.
(ii) In the case of foreign made vehicles or components,
revaluation of the United States dollar.
(iii) Any increase in transportation charges due to an increase in rates charged by a common carrier and transporters.
(e) Offer any refunds or other types of inducements to any
dealer for the purchase of new motor vehicles of a certain line
make to be sold to this state or any political subdivision of this
state without making the same offer available upon request to all
other new motor vehicle dealers of the same line make.
(f) Release to an outside party, except under subpoena or in
an administrative or judicial proceeding to which the new motor
vehicle dealer or the manufacturer or distributor are parties, any
business, financial or personal information which has been provided
by the dealer to the manufacturer or distributor, unless the new
motor vehicle dealer gives his or her written consent.
(g) Deny a new motor vehicle dealer the right to associate
with another new motor vehicle dealer for any lawful purpose.
(h) Establish a new motor vehicle dealership which would
unfairly compete with a new motor vehicle dealer of the same line
make operating under a dealer agreement with the manufacturer or
distributor in the relevant market area. A manufacturer or
distributor shall not be considered to be unfairly competing if the
manufacturer or distributor is:
(i) Operating a dealership temporarily for a reasonable
period.
(ii) Operating a dealership which is for sale at a reasonable
price.
(iii) Operating a dealership with another person who has made a significant investment in the dealership and who will acquire
full ownership of the dealership under reasonable terms and
conditions.
(i) Unreasonably withhold consent to the sale, transfer or
exchange of the dealership to a qualified buyer capable of being
licensed as a new motor vehicle dealer in this state.
(j) Fail to respond in writing to a request for consent to a
sale, transfer or exchange of a dealership within sixty days after
receipt of a written application from the new motor vehicle dealer
on the forms generally utilized by the manufacturer or distributor
for such purpose and containing the information required therein.
Failure to respond to the request within the sixty days shall be
deemed to be consent.
(k) Unfairly prevent a new motor vehicle dealer from receiving
reasonable compensation for the value of the new motor vehicle
dealership.
(l) Audit any motor vehicle dealer in this state for warranty
parts or warranty service compensation, service compensation,
service incentives, rebates or other forms of sales incentive
compensation more than twelve months after the claim for payment or
reimbursement has been made by the automobile dealer:
Provided,
That the provisions of this subsection shall not apply where a
claim is fraudulent.
(3) A manufacturer or distributor, either directly or through any subsidiary, shall not terminate, cancel, fail to renew or
discontinue any lease of the new motor vehicle dealer's established
place of business except for a material breach of the lease.
§17A-6A-13. Obligations regarding warranties.
(1) Each new motor vehicle manufacturer or distributor shall
specify in writing to each of its new motor vehicle dealers
licensed in this state the dealer's obligations for preparation,
delivery and warranty service on its products. The manufacturer or
distributor shall compensate the new motor vehicle dealer for
warranty service required of the dealer by the manufacturer or
distributor. The manufacturer or distributor shall provide the new
motor vehicle dealer with the schedule of compensation to be paid
to the dealer for parts, work and service, and the time allowance
for the performance of the work and service.
(2) The schedule of compensation shall include reasonable
compensation for diagnostic work, as well as repair service and
labor. Time allowances for the diagnosis and performance of
warranty work and service shall be reasonable and adequate for the
work to be performed. In the determination of what constitutes
reasonable compensation under this section, the principal factor to
be given consideration shall be the prevailing wage rates being
paid by dealers in the community in which the dealer is doing
business, and in no event shall the compensation of a dealer for
warranty labor and parts be less than the rates charged by the dealer for like service to retail customers for nonwarranty service
and repairs, provided that such rates are reasonable. However, in
the case of a new motor vehicle dealer of motorcycles or
recreational vehicles, in no event may the compensation of a dealer
for warranty parts be less than the dealer's cost of acquiring the
part plus twenty percent.
(3) A manufacturer or distributor shall not do any of the
following:
(a) Fail to perform any warranty obligation.
(b) Fail to include in written notices of factory recalls to
new motor vehicle owners and dealers the expected date by which
necessary parts and equipment will be available to dealers for the
correction of the defects.
(c) Fail to compensate any of the new motor vehicle dealers
licensed in this state for repairs effected by the recall.
(4) All claims made by a new motor vehicle dealer pursuant to
this section for labor and parts shall be paid within thirty days
after their approval. All claims shall be either approved or
disapproved by the manufacturer or distributor within thirty days
after their receipt on a proper form generally used by the
manufacturer or distributor and containing the usually required
information therein. Any claim not specifically disapproved in
writing within thirty days after the receipt of the form shall be
considered to be approved and payment shall be made within thirty
days. The manufacturer has the right to initiate an audit of a claim within twelve months after payment and to charge back to the
new motor vehicle dealer the amount of any false, fraudulent or
unsubstantiated claim.