SB 413 — Clarify Motor Vehicle Dealer Laws.

GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 2017 S 21 SENATE BILL 413 Commerce and Insurance Committee Substitute Adopted 4/20/17 Short Title:

Senators B.

Jackson (Primary Sponsor);

Britt, Edwards, Horner, and Woodard.

Rules and Operations of the Senate March 29, 2017 A BILL TO BE ENTITLED AN ACT TO CLARIFY MOTOR VEHICLE DEALERS AND MANUFACTURERS LICENSING LAWS.

G.S.

20-305 is amended by adding a new subdivision to read:

"(50) To require, coerce, or attempt to coerce, any new motor vehicle dealer located in this State to change the location of its dealership, or to make any substantial alterations to its dealership premises or facilities, if the dealer (i) has changed the location of its dealership or made substantial alterations to its dealership premises or facilities within the preceding 10 years at a cost of more than one hundred thousand dollars ($100,000) over this 10-year period and (ii) the change in location or alteration was made at the request of, or with the knowledge, acquiescence, or approval of, the manufacturer, factory branch, distributor, or distributor branch.

For any dealer that did not change the location of its dealership or make substantial alterations to its dealership premises or facilities within the preceding 10 years at a cost of more than one hundred thousand dollars ($100,000), the dealer's obligation to change location of its dealership, or to make any substantial alteration to its *S413-v-1* General Assembly Of North Carolina Session 2017 dealership premises or facilities, at the request of a manufacturer, factory branch, distributor, or distributor branch, or to satisfy a requirement or condition of an incentive program sponsored by a manufacturer, factory branch, distributor, or distributor branch, shall be governed by the applicable provisions of subdivisions (4), (11), (12), (25), (30), (32), and (42) of this section." SECTION 3.

G.S.

20-305.1 reads as rewritten:

"§ 20-305.1.

Automobile dealer warranty and recall obligations.

(a) Each motor vehicle manufacturer, factory branch, distributor or distributor branch, shall specify in writing to each of its motor vehicle dealers licensed in this State the dealer's obligations for preparation, delivery and warrantydelivery, warranty, and recall service on its products, including any service performed under a maintenance plan, extended warranty, certified pre-owned warranty, or service contract issued by or through the manufacturer, factory branch, distributor, distributor branch, or any person or entity contracted or otherwise affiliated with the manufacturer, factory branch, distributor, or distributor branch.

The disclosure required under this subsection shall include the schedule of compensation to be paid suchthe dealers for parts, work, and service in connection with warrantypreparation, delivery, warranty, and recall service, and any services performed by the dealers under any warranty, maintenance plan, extended warranty, certified pre-owned warranty, or service contract issued by or through the manufacturer, factory branch, distributor, distributor branch, or any person or entity contracted or otherwise affiliated with the manufacturer, factory branch, distributor, or distributor branch, and the time allowances for the performance of suchthe work and service.

In no event shall suchthe schedule of compensation fail to include reasonable compensation for diagnostic work and associated administrative requirements as well as repair service and labor.

Time allowances for the performance of warrantypreparation, delivery, warranty, and recall work and serviceservice, and any services performed by the dealers under any warranty, maintenance plan, extended warranty, certified pre-owned warranty, or service contract issued by or through the manufacturer, factory branch, distributor, distributor branch, or any person or entity contracted or otherwise affiliated with the manufacturer, factory branch, distributor, or distributor branch, shall be reasonable and adequate for the work to be performed.

The compensation which must be paid under this section mustshall be reasonable, provided, however, that under no circumstances mayshall the reasonable compensation under this section be in an amount less than the dealer's current retail labor rate and the amount charged to retail customers for the manufacturer's or distributor's original parts for nonwarranty work of like kind, provided suchthe amount is competitive with the retail rates charged for parts and labor by other franchised dealers within the dealer's market.

… (a3) If a manufacturer or distributor furnishes a part or component to a dealer, at reduced or no cost, to use in performing repairs under a recall, campaign service action, or warranty repair, the manufacturer or distributor shall compensate the dealer for the part or component in the same manner as warranty parts compensation under this section by compensating the dealer on the basis of the dealer's average markup on the cost for the part or component as listed in the manufacturer's or distributor's price schedule less the cost for the part or component.

… (b) Notwithstanding the terms of any franchise agreement, it is unlawful for any motor vehicle manufacturer, factory branch, distributor, or distributor branch to fail to perform any of its warranty or recall obligations with respect to a motor vehicle, to fail to fully compensate its motor vehicle dealers licensed in this State for a qualifying used motor vehicle or warranty and recall parts other than parts used to repair the living facilities of recreational vehicles, at the prevailing retail rate according to the factors in subsection (a) of this section, or, in service in accordance with the schedule of compensation provided the dealer pursuant to subsection (a) Page 2 Senate Bill 413-First Edition General Assembly Of North Carolina Session 2017 above,of this section, or to otherwise recover all or any portion of its costs for compensating its motor vehicle dealers licensed in this State for warranty or recall parts and service either by reduction in the amount due to the dealer, or by separate charge, surcharge, or other imposition, and to fail to indemnify and hold harmless its franchised dealers licensed in this State against any judgment for damages or settlements agreed to by the manufacturer, including, but not limited to, court costs and reasonable attorneys' fees of the motor vehicle dealer, arising out of complaints, claims or lawsuits including, but not limited to, strict liability, negligence, misrepresentation, express or implied warranty, or recision or revocation of acceptance of the sale of a motor vehicle as defined in G.S.

25-2-608, to the extent that the judgment or settlement relates to the alleged defective negligent manufacture, assembly or design of new motor vehicles, parts or accessories or other functions by the manufacturer, factory branch, distributor or distributor branch, beyond the control of the dealer.

It is unlawful for any manufacturer, factory branch, distributor, or distributor branch that manufactures or distributes recreational vehicles to fail to fully compensate its dealers located in this State in accordance with this section for warranty work performed by the dealers related to all parts of the vehicle, including labor and parts used to repair the living facilities of the vehicle and any equipment, appliances, and other options included by the manufacturer, factory branch, distributor, or distributor branch in the purchase price paid by the dealer.

Any audit for warranty or recall parts or service compensationcompensation, including compensation for any service performed under any warranty, maintenance plan, extended warranty, certified pre-owned warranty, or service contract issued by or through the manufacturer, factory branch, distributor, distributor branch, or any person or entity contracted or otherwise affiliated with the manufacturer, factory branch, distributor, or distributor branch, shall only be for the 12-month period immediately following the date of the payment of the claim by the manufacturer, factory branch, distributor, or distributor branch.

Any audit for sales incentives, service incentives, rebates, or other forms of incentive compensation shall only be for the 12-month period immediately following the date of the payment of the claim by the manufacturer, factory branch, distributor, or distributor branch pursuant to a sales incentives program, service incentives program, rebate program, or other form of incentive compensation program.

Provided, however, these limitations shall not be effective in the case of fraudulent claims.

(b1) All claims made by motor vehicle dealers pursuant to this section for compensation for delivery, preparation, warrantywarranty, and recall workwork, including compensation for a qualifying used motor vehicle in accordance with subsection (i) of this section, labor, parts, and other expenses, shall be paid by the manufacturer within 30 days after receipt of claim from the dealer.

When any claim is disapproved, the dealer shall be notified in writing of the grounds for disapproval.

Any claim not specifically disapproved in writing within 30 days after receipt shall be considered approved and payment is due immediately.

No claim which has been approved and paid may be charged back to the dealer unless it can be shown that the claim was false or fraudulent, that the repairs were not properly made or were unnecessary to correct the defective condition, or the dealer failed to reasonably substantiate the claim either in accordance with the manufacturer's reasonable written procedures or by other reasonable means.

A manufacturer or distributor shall not deny a claim or reduce the amount to be reimbursed to the dealer as long as the dealer has provided reasonably sufficient documentation that the dealer:

… (c) In the event there is a dispute between the manufacturer, factory branch, distributor, or distributor branch, and the dealer with respect to any matter referred to in subsection (a), (b), (b1), (b2), (b3), or (d)(d), or (i) of this section, either party may petition the Commissioner in writing, within 30 days after either party has given written notice of the dispute to the other, for a hearing on the subject and the decision of the Commissioner shall be binding on the parties, subject to rights of judicial review and appeal as provided in Chapter 150B of the General Statutes;

provided, however, that nothing contained herein shall give the Commissioner any Senate Bill 413-First Edition Page 3 General Assembly Of North Carolina Session 2017 authority as to the content of any manufacturer's or distributor's warranty.

Upon the filing of a petition before the Commissioner under this subsection, any chargeback to or any payment required of a dealer by a manufacturer relating to warranty or recall parts or service compensation, including compensation paid to a dealer for any services performed under any warranty, maintenance plan, extended warranty, certified pre-owned warranty, or service contract issued by or through the manufacturer, factory branch, distributor, distributor branch, or any person or entity contracted or otherwise affiliated with the manufacturer, factory branch, distributor, or distributor branch, to compensation for a qualifying used motor vehicle, or to sales incentives, service incentives, rebates, other forms of incentive compensation, or the withholding or chargeback of other compensation or support that a dealer would otherwise be eligible to receivereceive, shall be stayed during the pendency of the determination by the Commissioner.

… (h) Right to Return Unnecessary Parts or Accessories.

– Notwithstanding the terms of any franchise agreement, it is unlawful for any motor vehicle manufacturer, factory branch, distributor, or distributor branch to deny a franchised new motor vehicle dealer the right to return any part or accessory that the dealer has not sold after 15 months where the part or accessory was not obtained through a specific order initiated by the franchised new motor vehicle dealerdealer, but instead was specified for, sold to, and shipped to the dealer pursuant to an automated ordering system, provided that suchthe part or accessory is in the condition required for return to the manufacturer, factory branch, distributor, or distributor branch and the dealer returns the part within 60 days of it becoming eligible under this subsection.

For purposes of this subsection, an "automated ordering system" shall be a computerized system required by the manufacturer that automatically specifies parts and accessories for sale and shipment to the dealer without specific order thereof initiated by the dealer.

The manufacturer, factory branch, distributor, or distributor branch shall not charge a restocking or handling fee for any part or accessory being returned under this subsection.

(i) Compensation for Used Motor Vehicle Recall.

– Notwithstanding the terms of any franchise or other agreement, it is unlawful for any motor vehicle manufacturer, factory branch, distributor, or distributor branch to fail to compensate a franchised motor vehicle dealer for any qualifying used motor vehicle in the inventory of a dealer authorized to sell new motor vehicles of the same line-make or by a dealer authorized to perform recall repairs on vehicles of the same line-make in the manner specified in this subsection.

The manufacturer, factory branch, distributor, or distributor branch shall compensate the dealer for any qualifying used motor vehicle in the inventory of the dealer at the rate of at least one and three-quarters percent (1.75%) per month, or any pro-rata portion of the month, of the value of the qualifying used motor vehicle.