Act No. 57
(S.51)
Vermont's motor vehicle franchise laws
This act:
(1) Inserts legislative findings into 9 V.S.A. chapter 108, acknowledging the inequality of bargaining power between new motor vehicle franchisors and new motor vehicle franchisees in the state, whereby franchisors (manufacturers and distributors) are able to compel franchisees (dealers) to abide by contract provisions that would not be agreeable but for the inequality.
(2) Inserts into statute the definitions of the words board, coerce, franchisee, franchisor, fraud, line-make, and motor home, and amends definitions of several other words.
(3) Compels new motor vehicle manufacturers to compensate their new motor vehicle dealers for labor and parts for warranty repair work in accordance with retail amounts customarily charged for labor and like parts for nonwarranty work. The act establishes a formula for determining the meaning of "retail amounts customarily charged," and provides the manufacturers with the ability to audit warranty claims and incentive and reimbursement programs to ensure fairness to both sides in the auditing process.
(4) Makes it unlawful for a franchisor to own, operate, or control a motor vehicle warranty or service facility in the state except on an emergency or interim basis or in the event that no qualified applicant has applied for appointment as a dealer in a market previously served by a new motor vehicle dealer of that franchisor's line-make.
(5) Transfers jurisdiction over claims arising from the act from the superior court to the transportation board and assesses a biennial fee on franchisors and franchisees to fund the transportation board's work related to this act.
(6) Provides that the transportation board must conduct a hearing regarding the presence of good faith in and good cause for the termination, cancellation, or nonrenewal of a franchise by a franchisor. The act also provides a 90-day protest period for this good cause hearing.
(7) Defines "good cause" for termination, cancellation, or nonrenewal of a franchise by a franchisor and specifically sets forth circumstances that do not constitute good cause.
(8) Provides for no less than 180 days' notice of the termination, cancellation, or nonrenewal of a franchise due to circumstances that are not the fault of or within the control of the franchisee.
(9) Provides that, upon termination, cancellation, or nonrenewal of a franchise, the franchisor shall pay the franchisee for vehicles, parts, special tools and signs, subject to certain limitations, and for the transporting of these items. Further, if the termination, cancellation, or nonrenewal is the result of circumstances not the fault of or within the control of the franchisee, the franchisor shall pay the franchisee the fair market value of the franchise itself, also subject to certain limitations.
(10) Provides that, in instances in which termination, cancellation, or nonrenewal occurs as a result of circumstances not the fault of or within the control of the franchisee, the franchisor is obligated to pay the lease for dealership facilities for the unexpired term of the lease or for three years, whichever is less.
(11) Defines "reasonable facilities requirements" that impact a franchisee's ability to sell more than one line-make of new motor vehicles in the same dealership facility.
(12) Sets forth a protocol for a franchisee to follow in order to sell an additional line-make of new motor vehicles in that franchisee's dealership facility and provides a process by which a franchisor may protest a franchisee's proposal to sell an additional line-make.
(13) Provides that it is a manufacturer violation to unreasonably withhold consent to a change in the executive management of a dealership or to the sale of the dealership or its principal assets to a qualified buyer. Upon being notified of a proposed change or sale, the franchisor may withhold approval by showing that its decision to withhold consent is not arbitrary and is based upon the new manager's or owner's being unfit or unqualified.
(14) Provides that it is a manufacturer violation to engage in any action or failure to act if the action or failure to act is arbitrary, in bad faith, or discriminatory compared to similarly situated new motor vehicle dealers.
(15) Provides that it is a manufacturer violation to require a franchisee to agree to a term or condition of a franchise agreement that, concerning disputes arising from this act, requires the franchisee to waive trial by jury, consent to specific jurisdiction or venue, consent to arbitration or other binding alternative dispute resolution, agree to automatic payment of the franchisor's costs, attorney's fees, and other litigation expenses, or grants the manufacturer the option to purchase the franchise or its appurtenances.
(16) Provides that it is a manufacturer violation to impose unreasonable standards of performance or other unreasonable requirements on a franchisee.
(17) Requires a franchisor to make all models manufactured for its line-make available to all of its franchisees, and prohibits a franchisor for that purpose from requiring any franchisee to pay an additional fee, execute a separate franchise agreement, or make unreasonable facility improvements.
(18) Permits a franchisee or any officer, partner, or stockholder thereof to transfer his or her interest to any other person. If the transfer would have the effect of transferring control over the franchise, the franchisor must be notified and provided an opportunity to object.
(19) Prohibits a franchisor from using a promotional program or device or an incentive, payment or other benefit for the purpose of conferring benefits on certain franchisees. Promotional or incentive programs are permitted, however, if they apply to all competing franchisees across the state who sell the same line-make.
(20) Prohibits a franchisor from varying the vehicle price charged to a franchisee as against other franchisees based on various factors enumerated in 9 V.S.A. § 4097(21).
(21) Provides that it is a manufacturer violation to modify a franchise during the term of the franchise or upon its renewal if the franchisee's rights, obligations, investment, or return on investment would be adversely affected without providing 60 days' written notice. The act permits franchisees to protest proposed modifications, and the burden of establishing good cause lies with the franchisor. The act sets forth the factors prospectively contributing to good cause.
(22) Provides that it is a manufacturer violation to change the relevant market area of a franchisee without good cause.
(23) Provides that a manufacturer seeking to establish a new motor vehicle dealership or relocate an existing franchisee must first notify the transportation board and each potentially affected new motor vehicle dealer of the same line-make. The act requires that good cause exist to establish a new motor vehicle dealership or relocate an existing franchisee, to be determined by the transportation board. The board, when determining good cause, shall consider the impact the action would have on other existing franchisees. The manufacturer shall have the burden of proof in establishing the existence of good cause.
(24) Provides that actions under this act filed in civil court shall be stayed upon the filing of a complaint with the transportation board, as the holder of primary jurisdiction.
(25) Provides that the act applies to all persons who sell new motor vehicles in the state and to all written agreements between new motor vehicle franchisors and franchisees.
(26) Provides that appeals from decisions of the transportation board shall be taken to the superior court, with the exception of board decisions regarding the ability of a franchisee to offer for sale more than one line-make in a single dealership facility, which decisions shall be final.
(27) Sets forth the process by which matters arising from this act are heard by the transportation board.
(28) Establishes a four-year statute of limitations regarding actions arising from this act, with a tolling clause.
(29) Provides for a right of first refusal in favor of a manufacturer in the event of a proposed sale or transfer of all or substantially all dealership assets, subject to limitations. The act also establishes the protocol for effectuating a sale pursuant to a right of first refusal.
(30) Provides for severability within the terms of the act.
(31) Prohibits members of the transportation board from being employed by or having an ownership interest in a manufacturer, factory branch, distributor, or distributor branch or from being employed by or having an ownership interest in a new motor vehicle dealer or from being employed by an association of motor vehicle dealers, manufacturers, or distributors.
(32) Allocates $50,000.00 from the transportation fund to the transportation board for the purpose of implementing the provisions of this act.
(33) Orders the transportation board, by January 15, 2011, to report to the senate and house committees on transportation regarding the cost of administering the provisions of this act and, based upon that cost, to make recommendations regarding the amount of funding necessary to administer the act in the future. The act also requires the board to report these items to the senate and house committees on transportation on an ongoing basis, under the customary periodic review of motor vehicle fees.
(34) Orders the transportation board annually to request a line item appropriation for its duties under this act, separate from its other functions. The board shall base its request upon its expenditures for those duties during the prior fiscal year.
Date Signed by the Governor: June 1, 2009
Effective Date: July 1, 2009