Senate Bill 1916

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    Florida Senate - 2000                                  SB 1916

    By Senator Latvala





    19-696C-00

  1                      A bill to be entitled

  2         An act relating to motor vehicle dealers;

  3         amending s. 320.61, F.S.; prohibiting the

  4         granting of a replacement application until the

  5         exhaustion of appellate remedies with respect

  6         to certain complaints against licensees;

  7         amending s. 320.64, F.S.; providing grounds for

  8         denying, suspending, or revoking a license;

  9         requiring the maintenance of certain records;

10         amending s. 320.641, F.S.; revising provisions

11         relating to the unfair cancellation of

12         franchise agreements; providing clarification

13         regarding when a complaint may be filed;

14         establishing a burden of proof standard;

15         providing standards for determining when an

16         agreement is unfair; amending s. 320.642, F.S.;

17         providing geographic area performance

18         standards; amending s. 320.643, F.S.;

19         prohibiting certain rights of first refusal;

20         amending s. 320.645, F.S.; restricting the

21         ownership of dealerships by licensees;

22         prohibiting licensees from receiving a motor

23         vehicle dealer's license; defining terms;

24         providing exceptions; amending s. 320.695,

25         F.S.; providing additional grounds for issuing

26         injunctions; providing an effective date.

27

28  Be It Enacted by the Legislature of the State of Florida:

29

30         Section 1.  Subsection (4) of section 320.61, Florida

31  Statutes, is amended to read:

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  1         320.61  Licenses required of motor vehicle

  2  manufacturers, distributors, importers, etc.--

  3         (4)  When a complaint of unfair cancellation of a

  4  dealer agreement is made by a motor vehicle dealer against a

  5  licensee and is in the process of being heard pursuant to ss.

  6  320.60-320.70 by the department, a no replacement application

  7  for such agreement may not shall be granted until a final

  8  decision is rendered by the department on the complaint and

  9  all appellate remedies have been exhausted by the licensee or

10  motor dealer of unfair cancellation.

11         Section 2.  Subsections (13) and (20) of section

12  320.64, Florida Statutes, are amended and subsections (24),

13  (25), (26), and (27) are added to that section to read:

14         320.64  Denial, suspension, or revocation of license;

15  grounds.--A license may be denied, suspended, or revoked

16  within the entire state or at any specific location or

17  locations within the state at which the applicant or licensee

18  engages or proposes to engage in business, upon proof that an

19  applicant or licensee has failed to comply with any of the

20  following provisions with sufficient frequency so as to

21  establish a pattern of wrongdoing on the part of the

22  applicant:

23         (13)  The applicant or licensee has refused to deliver,

24  in reasonable quantities and within a reasonable time, to any

25  duly licensed motor vehicle dealer who has an agreement with

26  such applicant or licensee for the retail sale of new motor

27  vehicles and parts for motor vehicles sold or distributed by

28  the applicant or licensee, any such motor vehicles or parts as

29  are covered by such agreement specifically publicly advertised

30  by such applicant or licensee to be available for immediate

31  delivery. Such refusal includes the failure to offer to its

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  1  same line-make franchised motor vehicle dealers all models

  2  manufactured for that line-make, or requiring a dealer to pay

  3  any extra fee, purchase unreasonable advertising displays or

  4  other materials, or remodel, renovate, or recondition the

  5  dealer's existing facilities, or provide exclusive facilities

  6  as a prerequisite to receiving a model or series of vehicles.

  7  However, the failure to deliver any motor vehicle or part will

  8  not be considered a violation of this section if the failure

  9  is due to act of God, work stoppage, or delay due to a strike

10  or labor difficulty, a freight embargo, product shortage, or

11  other cause over which the applicant or licensee has no

12  control. The failure to deliver parts or components for the

13  current and 5 preceding years' models within 60 days from date

14  of order shall be deemed prima facie unreasonable.

15         (20)  The applicant or licensee has established a

16  system of motor vehicle allocation or distribution or has

17  implemented a system of allocation or distribution of motor

18  vehicles to one or more of its franchised motor vehicle

19  dealers which is unfair, inequitable, unreasonably

20  discriminatory, or not supportable by reason and good cause

21  after considering the equities of the affected motor vehicles

22  dealer or dealers.

23         (a)  A licensee must maintain for 3 years records that

24  fully describe the method of allocation or distribution of

25  motor vehicles and records of the actual allocation or

26  distribution of mother vehicles which directly or indirectly

27  affect the allocation or distribution of motor vehicles to

28  motor vehicle dealers located within this state.

29         (b)  The records must be made available at no cost to a

30  motor vehicle dealer who has a franchise agreement with the

31  licensee and who has filed a complaint, pertinent to the

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  1  allocation or distribution of motor vehicles, with the

  2  department within 30 days after the date requested.

  3         (24)  The applicant or licensee has sold, or offered to

  4  sell, directly or indirectly, any motor vehicle to a purchaser

  5  in this state, except through a motor vehicle dealer who holds

  6  a franchise for the line-make of the motor vehicle. This

  7  subsection does not apply to an applicant or licensee exempted

  8  under s. 320.645(3).

  9         (25)  The applicant or licensee has conducted, or

10  attempted to conduct, an audit of a motor vehicle dealer for a

11  period in excess of 12 months prior to the date of the audit

12  with respect to a new vehicle or service warranty audit or to

13  a rebate or dealer incentive audit or has threatened to

14  conduct an audit in an attempt to coerce a motor vehicle

15  dealer to forego any rights granted under ss. 320.60-320.70.

16  These time limitations do not apply in the case of fraud that

17  has been proven in a court of competent jurisdiction.

18         (26)  The applicant or licensee has offered any

19  refunds, incentives, or other inducements to any person to

20  purchase new motor vehicles of a certain line-make to be sold

21  to the state or any political subdivision thereof or to any

22  other person without making the same offer to all motor

23  vehicle dealers in the state with the same line-make. Nothing

24  in this subsection prohibits a licensee from offering uniform

25  discounts, rebates, or incentives to all of its motor vehicle

26  dealers or from implementing reasonable regional marketing

27  programs. A regional marketing program is reasonable only if

28  it provides equal and measurable ability, based on credible

29  criteria, for all of the licensee's line-make dealers in the

30  state to qualify for participation. In instances of sales to a

31  commercial fleet account or motor vehicle leasing entity, any

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  1  subsidy, discount, incentive, or other inducement must be

  2  uniformly available to all of the licensee's line-make motor

  3  vehicle dealers in this state.

  4         (27)  Notwithstanding the terms of any franchise

  5  agreement, the applicant or licensee, by contract or

  6  otherwise, has in any way restricted, threatened, or attempted

  7  to restrict, a motor vehicle dealer from selling motor

  8  vehicles, replacement parts, or accessories to customers

  9  domiciled in another state or foreign country on a retail

10  basis. As used in this subsection, the term:

11         (a)  "Restricted" includes refusing to allocate, sell,

12  or deliver motor vehicles; refusing or withholding the payment

13  of money or other things of value or charging back to the

14  dealer under a sales promotion, program, or contest; or

15  preventing the motor vehicle dealer from participating in any

16  promotion, program, or contest offered by the licensee.

17         (b)  "Customer" is limited to domestic and foreign

18  residents who are the ultimate users of motor vehicles and who

19  are present at the dealership when the vehicle is purchased.

20         (c)  "Foreign" includes other states, districts,

21  territories, and possessions of the United States and

22  countries other than the United States.

23         Section 3.  Subsection (3) of section 320.641, Florida

24  Statutes, is amended to read:

25         320.641  Unfair cancellation of franchise agreements.--

26         (3)  Any motor vehicle dealer who receives a notice

27  from the licensee of its intent to discontinue, cancel, not

28  renew, modify, or replace the dealer's franchise agreement

29  whose franchise agreement is discontinued, canceled, not

30  renewed, modified, or replaced may, within the 90-day notice

31  period, file a petition or complaint for a determination of

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  1  whether such action is an unfair or prohibited

  2  discontinuation, cancellation, nonrenewal, modification, or

  3  replacement. In such action, the licensee has the burden of

  4  proving that the action is fair and not prohibited. Agreements

  5  and certificates of appointment shall continue in effect until

  6  final determination of the issues raised in such petition or

  7  complaint by the motor vehicle dealer, including the

  8  exhaustion of all appellate remedies by the licensee or motor

  9  vehicle dealer.  A discontinuation, cancellation, or

10  nonrenewal of a franchise agreement is unfair if it is not

11  clearly permitted by the franchise agreement; is not

12  undertaken in good faith; is not undertaken for good cause; or

13  is based on an alleged breach of the franchise agreement which

14  is not in fact a material and substantial breach. A

15  modification or replacement of a franchise agreement is unfair

16  if it is not clearly permitted by the franchise agreement; is

17  not undertaken in good faith; or is not undertaken for good

18  cause. The termination or threat of termination of a motor

19  vehicle dealer's franchise agreement, or any adverse action

20  against a dealer based in whole or in part on the failure of

21  the dealer to meet the performance goals of the manufacturer

22  when that failure is due to the failure of the franchisor to

23  supply, within a reasonable period of time, new motor vehicles

24  ordered by or allocated to the dealer, is unfair. As used in

25  this subsection, the term "good faith" means that the

26  provisions or standards relied upon by the licensee to

27  establish grounds for termination are reasonable and have been

28  applied by the licensee in a uniform, consistent, and

29  nondiscriminatory manner, considering action taken by the

30  licensee when similar conduct was committed by other motor

31  vehicle dealers; and the term "good cause" means a material

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  1  and substantial breach of the franchise agreement which is

  2  significantly detrimental to the licensee's business interest.

  3         Section 4.  Paragraph (b) of subsection (2) of section

  4  320.642, Florida Statutes, is amended to read:

  5         320.642  Dealer licenses in areas previously served;

  6  procedure.--

  7         (2)

  8         (b)  In determining whether the existing franchised

  9  motor vehicle dealer or dealers are providing adequate

10  representation in the community or territory for the

11  line-make, the department may consider evidence which may

12  include, but is not limited to:

13         1.  The impact of the establishment of the proposed or

14  relocated dealer on the consumers, public interest, existing

15  dealers, and the licensee; provided, however, that financial

16  impact may only be considered with respect to the protesting

17  dealer or dealers.

18         2.  The size and permanency of investment reasonably

19  made and reasonable obligations incurred by the existing

20  dealer or dealers to perform their obligations under the

21  dealer agreement.

22         3.  The reasonably expected market penetration of the

23  line-make motor vehicle for the community or territory

24  involved, after consideration of all factors that which may

25  affect the said penetration, including, but not limited to,

26  demographic factors such as age, income, import vehicle

27  penetration, education, size class preference, product

28  popularity, retail lease transactions, or other factors

29  affecting sales to consumers of the community or territory.

30  Furthermore, with respect to any geographic comparison area

31  used to evaluate the performance of the line-make for the

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  1  community or territory involved, or any part thereof, the

  2  comparison area must be reasonably similar demographically to

  3  the community or territory, including age, income, import

  4  vehicle penetration, education, size class preference, and

  5  product popularity. The comparison areas may not be smaller

  6  than a county. An identifiable plot within a community or

  7  territory may not be smaller than a county.

  8         4.  Any actions by the licensees in denying its

  9  existing dealer or dealers of the same line-make the

10  opportunity for reasonable growth, market expansion, or

11  relocation, including the availability of line-make vehicles

12  in keeping with the reasonable expectations of the licensee in

13  providing an adequate number of dealers in the community or

14  territory.

15         5.  Any attempts by the licensee to coerce the existing

16  dealer or dealers into consenting to additional or relocated

17  franchises of the same line-make in the community or

18  territory.

19         6.  Distance, travel time, traffic patterns, and

20  accessibility between the existing dealer or dealers of the

21  same line-make and the location of the proposed additional or

22  relocated dealer.

23         7.  Whether benefits to consumers will likely occur

24  from the establishment or relocation of the dealership which

25  the protesting dealer or dealers prove cannot be obtained by

26  other geographic or demographic changes or expected changes in

27  the community or territory.

28         8.  Whether the protesting dealer or dealers are in

29  substantial compliance with their dealer agreement.

30         9.  Whether there is adequate interbrand and intrabrand

31  competition with respect to said line-make in the community or

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  1  territory and adequately convenient consumer care for the

  2  motor vehicles of the line-make, including the adequacy of

  3  sales and service facilities.

  4         10.  Whether the establishment or relocation of the

  5  proposed dealership appears to be warranted and justified

  6  based on economic and marketing conditions pertinent to

  7  dealers competing in the community or territory, including

  8  anticipated future changes.

  9         11.  The volume of registrations and service business

10  transacted by the existing dealer or dealers of the same

11  line-make in the relevant community or territory of the

12  proposed dealership.

13         Section 5.  Subsection (3) is added to section 320.643,

14  Florida Statutes, to read:

15         320.643  Transfer, assignment, or sale of franchise

16  agreements.--

17         (3)  Notwithstanding the terms of a franchise

18  agreement, a licensee does not have and may not exercise a

19  right of first refusal with respect to any proposed transfer

20  of ownership governed by ss. 320.60-320.70. Any such right of

21  first refusal in a franchise agreement is void.

22         Section 6.  Section 320.645, Florida Statutes, is

23  amended to read:

24         320.645  Restriction upon ownership of dealership by

25  licensee.--

26         (1)  A No licensee, including a manufacturer or agent

27  of a manufacturer, or any parent, subsidiary, common entity,

28  or officer or representative of the licensee may not shall own

29  any interest in, control, or operate, either directly or

30  indirectly, a motor vehicle dealership in this state for the

31  sale or service of motor vehicles that which have been or are

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  1  offered for sale under a franchise agreement with a motor

  2  vehicle dealer in this state. A licensee may not be issued a

  3  motor vehicle dealer license pursuant to s. 320.27. However, a

  4  no such licensee will not be deemed to be in violation of this

  5  section:

  6         (a)  When operating a motor vehicle dealership for a

  7  temporary period, not to exceed 1 year, during the transition

  8  from one owner of the motor vehicle dealership to another;

  9         (b)  When operating a motor vehicle dealership

10  temporarily for the exclusive purpose of broadening the

11  diversity of its dealer body and enhancing opportunities for

12  qualified persons who are part of a group that has

13  historically been underrepresented in its dealer body, or for

14  other qualified persons who lack the resources to purchase or

15  capitalize a dealership outright, for a reasonable period, not

16  to exceed 1 year, or in a bona fide relationship with an

17  independent person, other than a licensee or its agent or

18  affiliate, who has made a significant investment that is

19  subject to loss in the dealership and who can reasonably

20  expect to acquire full ownership of the dealership on

21  reasonable terms and conditions; or

22         (c)  If the department determines, after a hearing on

23  the matter, pursuant to chapter 120, at the request of any

24  person, that there is no independent person available in the

25  community or territory to own and operate the motor vehicle

26  dealership in a manner consistent with the public interest.

27

28  In any such case in which paragraph (a) or paragraph (c)

29  applies, the licensee must continue to make the motor vehicle

30  dealership available for sale to an independent person at a

31  fair and reasonable price. Approval of the sale of such a

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  1  motor vehicle dealership to a proposed motor vehicle dealer

  2  must shall not be unreasonably withheld. The licensee must

  3  certify, in writing, to the department that the provisions of

  4  paragraph (b) have been satisfied for the purpose of complying

  5  with this section and that the relationship is not an attempt

  6  to own, operate, or control one or more dealerships.

  7         (2)  As used in the section, the term:

  8         (a)  "Agent" means a person who is employed by or

  9  affiliated with a licensee or who directly or through an

10  intermediary is controlled by or under common control of a

11  licensee.

12         (b)  "Control" means the direct or indirect possession

13  of the power to direct or cause the direction of the

14  management or policies of a person, whether through the

15  ownership of voting securities, by contract, or otherwise.

16         (c)  "Independent person" means a person who is not an

17  officer, director, or employee of the licensee or otherwise

18  associated with the licensee through agreements or

19  understanding, other than the franchise agreement.

20         (d)  "Reasonable terms and conditions" requires that

21  profits from dealership operation will be sufficient to allow

22  full ownership of the dealership by the independent person

23  within a reasonable time period not to exceed 10 years, absent

24  exceptional circumstances demonstrated by the independent

25  person or the licensee; that the independent person has

26  sufficient control to permit acquisition of ownership; and

27  that the relationship cannot be terminated to avoid full

28  ownership. The terms and conditions are not reasonable if they

29  preclude the independent person from an expedited purchase of

30  the dealership using a monetary source other than profits from

31  dealership operation.

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  1         (e)  "Significant investment" means a reasonable

  2  amount, considering the fair market value of the dealership,

  3  acquired and obtained from sources other than the licensee or

  4  any of its affiliates and not encumbered by the person's

  5  interest in the dealership.

  6         (3)(2)  This section does not apply to any dealership

  7  that is owned, controlled, or operated by a licensee on July

  8  1, 2000. This section shall not be construed to prohibit any

  9  licensee from owning or operating a motor vehicle dealership

10  in this state if such dealership was owned or operated by the

11  licensee on May 31, 1984.

12         Section 7.  Section 320.695, Florida Statutes, is

13  amended to read:

14         320.695  Injunction.--In addition to the remedies

15  provided in this chapter, and notwithstanding the existence of

16  any adequate remedy at law, the department, or any motor

17  vehicle dealer, association of motor vehicle dealers,

18  licensee, or association of licensees in the name of the

19  department and state and for the use and benefit of a the

20  motor vehicle dealer or licensee, may apply is authorized to

21  make application to any circuit court of the state for the

22  grant, upon a hearing and for cause shown, of a temporary or

23  permanent injunction, or both, restraining any person from

24  acting as a licensee under the terms of ss. 320.60-320.70

25  without being properly licensed hereunder, or from violating

26  or continuing to violate any of the provisions of ss.

27  320.60-320.70, or from failing or refusing to comply with the

28  requirements of this law or any rule or regulation adopted

29  hereunder.  Such injunction shall be issued without bond.  A

30  single act in violation of the provisions of ss. 320.60-320.70

31  shall be sufficient to authorize the issuance of an

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  1  injunction.  However, this statutory remedy shall not be

  2  applicable to any motor vehicle dealer after final

  3  determination by the department under s. 320.641(3).

  4         Section 8.  This act shall take effect July 1, 2000.

  5

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  7                          SENATE SUMMARY

  8    Revises provisions regarding the rights and remedies of
      motor vehicle dealers regarding their relationship with
  9    licensees. Establishes conduct standards for the
      licensees in such relationships. (See bill for details.)
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