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Am. Sub. S. B. No. 204 Corrected VersionCorrected Version
As Passed by the Senate
128th General Assembly | Regular Session | 2009-2010 |
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Cosponsors:
Senators Carey, Gibbs, Grendell, Husted, Jones, Morano, Niehaus, Patton, Schaffer, Widener, Schuring, Kearney, Buehrer, Harris, Hughes, Miller, D., Sawyer, Seitz, Turner, Wilson
A BILL
To amend sections 4517.01, 4517.52, 4517.54, 4517.55,
and 4517.59 and to enact sections 4517.541 and
4517.542 of the Revised Code relative to the
termination of franchises and prohibited acts
under the Motor Vehicle Dealers Law.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 4517.01, 4517.52, 4517.54, 4517.55,
and 4517.59 be amended and sections 4517.541 and 4517.542 of the
Revised Code be enacted to read as follows:
Sec. 4517.01. As used in sections 4517.01 to 4517.65 of the
Revised Code:
(A) "Persons" includes individuals, firms, partnerships,
associations, joint stock companies, corporations, and any
combinations of individuals.
(B) "Motor vehicle" means motor vehicle as defined in section
4501.01 of the Revised Code and also includes "all-purpose
vehicle" and "off-highway motorcycle" as those terms are defined
in section 4519.01 of the Revised Code. "Motor vehicle" does not
include a snowmobile as defined in section 4519.01 of the Revised
Code or manufactured and mobile homes.
(C) "New motor vehicle" means a motor vehicle, the legal
title to which has never been transferred by a manufacturer,
remanufacturer, distributor, or dealer to an ultimate purchaser.
(D) "Ultimate purchaser" means, with respect to any new motor
vehicle, the first person, other than a dealer purchasing in the
capacity of a dealer, who in good faith purchases such new motor
vehicle for purposes other than resale.
(E) "Business" includes any activities engaged in by any
person for the object of gain, benefit, or advantage either direct
or indirect.
(F) "Engaging in business" means commencing, conducting, or
continuing in business, or liquidating a business when the
liquidator thereof holds self out to be conducting such business;
making a casual sale or otherwise making transfers in the ordinary
course of business when the transfers are made in connection with
the disposition of all or substantially all of the transferor's
assets is not engaging in business.
(G) "Retail sale" or "sale at retail" means the act or
attempted act of selling, bartering, exchanging, or otherwise
disposing of a motor vehicle to an ultimate purchaser for use as a
consumer.
(H) "Retail installment contract" includes any contract in
the form of a note, chattel mortgage, conditional sales contract,
lease, agreement, or other instrument payable in one or more
installments over a period of time and arising out of the retail
sale of a motor vehicle.
(I) "Farm machinery" means all machines and tools used in the
production, harvesting, and care of farm products.
(J) "Dealer" or "motor vehicle dealer" means any new motor
vehicle dealer, any motor vehicle leasing dealer, and any used
motor vehicle dealer.
(K) "New motor vehicle dealer" means any person engaged in
the business of selling at retail, displaying, offering for sale,
or dealing in new motor vehicles pursuant to a contract or
agreement entered into with the manufacturer, remanufacturer, or
distributor of the motor vehicles.
(L) "Used motor vehicle dealer" means any person engaged in
the business of selling, displaying, offering for sale, or dealing
in used motor vehicles, at retail or wholesale, but does not mean
any new motor vehicle dealer selling, displaying, offering for
sale, or dealing in used motor vehicles incidentally to engaging
in the business of selling, displaying, offering for sale, or
dealing in new motor vehicles, any person engaged in the business
of dismantling, salvaging, or rebuilding motor vehicles by means
of using used parts, or any public officer performing official
duties.
(M) "Motor vehicle leasing dealer" means any person engaged
in the business of regularly making available, offering to make
available, or arranging for another person to use a motor vehicle
pursuant to a bailment, lease, sublease, or other contractual
arrangement under which a charge is made for its use at a periodic
rate for a term of thirty days or more, and title to the motor
vehicle is in and remains in the motor vehicle leasing dealer who
originally leases it, irrespective of whether or not the motor
vehicle is the subject of a later sublease, and not in the user,
but does not mean a manufacturer or its affiliate leasing to its
employees or to dealers.
(N) "Salesperson" means any person employed by a dealer or
manufactured home broker to sell, display, and offer for sale, or
deal in motor vehicles for a commission, compensation, or other
valuable consideration, but does not mean any public officer
performing official duties.
(O) "Casual sale" means any transfer of a motor vehicle by a
person other than a new motor vehicle dealer, used motor vehicle
dealer, motor vehicle salvage dealer, as defined in division (A)
of section 4738.01 of the Revised Code, salesperson, motor vehicle
auction owner, manufacturer, or distributor acting in the capacity
of a dealer, salesperson, auction owner, manufacturer, or
distributor, to a person who purchases the motor vehicle for use
as a consumer.
(P) "Motor vehicle show" means a display of current models of
motor vehicles whereby the primary purpose is the exhibition of
competitive makes and models in order to provide the general
public the opportunity to review and inspect various makes and
models of motor vehicles at a single location.
(Q) "Motor vehicle auction owner" means any person who is
engaged wholly or in part in the business of auctioning motor
vehicles.
(R) "Manufacturer" means a person who manufactures,
assembles, or imports motor vehicles, including motor homes, but
does not mean a person who only assembles or installs a body,
special equipment unit, finishing trim, or accessories on a motor
vehicle chassis supplied by a manufacturer or distributor.
(S) "Tent-type fold-out camping trailer" means any vehicle
intended to be used, when stationary, as a temporary shelter with
living and sleeping facilities, and that is subject to the
following properties and limitations:
(1) A minimum of twenty-five per cent of the fold-out portion
of the top and sidewalls combined must be constructed of canvas,
vinyl, or other fabric, and form an integral part of the shelter.
(2) When folded, the unit must not exceed:
(a) Fifteen feet in length, exclusive of bumper and tongue;
(b) Sixty inches in height from the point of contact with the
ground;
(d) One ton gross weight at time of sale.
(T) "Distributor" means any person authorized by a motor
vehicle manufacturer to distribute new motor vehicles to licensed
new motor vehicle dealers, but does not mean a person who only
assembles or installs a body, special equipment unit, finishing
trim, or accessories on a motor vehicle chassis supplied by a
manufacturer or distributor.
(U) "Flea market" means a market place, other than a dealer's
location licensed under this chapter, where a space or location is
provided for a fee or compensation to a seller to exhibit and
offer for sale or trade, motor vehicles to the general public.
(V) "Franchise" means any written agreement, contract, or
understanding between any motor vehicle manufacturer or
remanufacturer engaged in commerce and any motor vehicle dealer
that purports to fix the legal rights and liabilities of the
parties to such agreement, contract, or understanding.
(W) "Franchisee" means a person who receives new motor
vehicles from the franchisor under a franchise agreement and who
offers, sells, and provides service for such new motor vehicles to
the general public.
(X) "Franchisor" means a new motor vehicle manufacturer,
remanufacturer, or distributor who supplies new motor vehicles
under a franchise agreement to a franchisee.
(Y) "Dealer organization" means a state or local trade
association the membership of which is comprised predominantly of
new motor vehicle dealers.
(Z) "Factory representative" means a representative employed
by a manufacturer, remanufacturer, or by a factory branch
primarily for the purpose of promoting the sale of its motor
vehicles, parts, or accessories to dealers or for supervising or
contacting its dealers or prospective dealers.
(AA) "Administrative or executive management" means those
individuals who are not subject to federal wage and hour laws.
(BB) "Good faith" means honesty in the conduct or transaction
concerned and the observance of reasonable commercial standards of
fair dealing in the trade as is defined in division (S) of section
1301.01 of the Revised Code, including, but not limited to, the
duty to act in a fair and equitable manner so as to guarantee
freedom from coercion, intimidation, or threats of coercion or
intimidation; provided however, that recommendation, endorsement,
exposition, persuasion, urging, or argument shall not be
considered to constitute a lack of good faith.
(CC) "Coerce" means to compel or attempt to compel by failing
to act in good faith or by threat of economic harm, breach of
contract, or other adverse consequences. Coerce does not mean to
argue, urge, recommend, or persuade.
(DD) "Relevant market area" means any area within a radius of
ten miles from the site of a potential new dealership, except that
for manufactured home or recreational vehicle dealerships the
radius shall be twenty-five miles. The ten-mile radius shall be
measured from the dealer's established place of business that is
used exclusively for the purpose of selling, displaying, offering
for sale, or dealing in motor vehicles.
(EE) "Wholesale" or "at wholesale" means the act or attempted
act of selling, bartering, exchanging, or otherwise disposing of a
motor vehicle to a transferee for the purpose of resale and not
for ultimate consumption by that transferee.
(FF) "Motor vehicle wholesaler" means any person licensed as
a dealer under the laws of another state and engaged in the
business of selling, displaying, or offering for sale used motor
vehicles, at wholesale, but does not mean any motor vehicle dealer
as defined in this section.
(GG)(1) "Remanufacturer" means a person who assembles or
installs passenger seating, walls, a roof elevation, or a body
extension on a conversion van with the motor vehicle chassis
supplied by a manufacturer or distributor, a person who modifies a
truck chassis supplied by a manufacturer or distributor for use as
a public safety or public service vehicle, a person who modifies a
motor vehicle chassis supplied by a manufacturer or distributor
for use as a limousine or hearse, or a person who modifies an
incomplete motor vehicle cab and chassis supplied by a new motor
vehicle dealer or distributor for use as a tow truck, but does not
mean either of the following:
(a) A person who assembles or installs passenger seating, a
roof elevation, or a body extension on a recreational vehicle as
defined in division (Q) and referred to in division (B) of section
4501.01 of the Revised Code;
(b) A person who assembles or installs special equipment or
accessories for handicapped persons, as defined in section 4503.44
of the Revised Code, upon a motor vehicle chassis supplied by a
manufacturer or distributor.
(2) For the purposes of division (GG)(1) of this section,
"public safety vehicle or public service vehicle" means a fire
truck, ambulance, school bus, street sweeper, garbage packing
truck, or cement mixer, or a mobile self-contained facility
vehicle.
(3) For the purposes of division (GG)(1) of this section,
"limousine" means a motor vehicle, designed only for the purpose
of carrying nine or fewer passengers, that a person modifies by
cutting the original chassis, lengthening the wheelbase by forty
inches or more, and reinforcing the chassis in such a way that all
modifications comply with all applicable federal motor vehicle
safety standards. No person shall qualify as or be deemed to be a
remanufacturer who produces limousines unless the person has a
written agreement with the manufacturer of the chassis the person
utilizes to produce the limousines to complete properly the
remanufacture of the chassis into limousines.
(4) For the purposes of division (GG)(1) of this section,
"hearse" means a motor vehicle, designed only for the purpose of
transporting a single casket, that is equipped with a compartment
designed specifically to carry a single casket that a person
modifies by cutting the original chassis, lengthening the
wheelbase by ten inches or more, and reinforcing the chassis in
such a way that all modifications comply with all applicable
federal motor vehicle safety standards. No person shall qualify as
or be deemed to be a remanufacturer who produces hearses unless
the person has a written agreement with the manufacturer of the
chassis the person utilizes to produce the hearses to complete
properly the remanufacture of the chassis into hearses.
(5) For the purposes of division (GG)(1) of this section,
"mobile self-contained facility vehicle" means a mobile classroom
vehicle, mobile laboratory vehicle, bookmobile, bloodmobile,
testing laboratory, and mobile display vehicle, each of which is
designed for purposes other than for passenger transportation and
other than the transportation or displacement of cargo, freight,
materials, or merchandise. A vehicle is remanufactured into a
mobile self-contained facility vehicle in part by the addition of
insulation to the body shell, and installation of all of the
following: a generator, electrical wiring, plumbing, holding
tanks, doors, windows, cabinets, shelving, and heating,
ventilating, and air conditioning systems.
(6) For the purposes of division (GG)(1) of this section,
"tow truck" means both of the following:
(a) An incomplete cab and chassis that are purchased by a
remanufacturer from a new motor vehicle dealer or distributor of
the cab and chassis and on which the remanufacturer then installs
in a permanent manner a wrecker body it purchases from a
manufacturer or distributor of wrecker bodies, installs an
emergency flashing light pylon and emergency lights upon the mast
of the wrecker body or rooftop, and installs such other related
accessories and equipment, including push bumpers, front grille
guards with pads and other custom-ordered items such as painting,
special lettering, and safety striping so as to create a complete
motor vehicle capable of lifting and towing another motor vehicle.
(b) An incomplete cab and chassis that are purchased by a
remanufacturer from a new motor vehicle dealer or distributor of
the cab and chassis and on which the remanufacturer then installs
in a permanent manner a car carrier body it purchases from a
manufacturer or distributor of car carrier bodies, installs an
emergency flashing light pylon and emergency lights upon the
rooftop, and installs such other related accessories and
equipment, including push bumpers, front grille guards with pads
and other custom-ordered items such as painting, special
lettering, and safety striping.
As used in division (GG)(6)(b) of this section, "car carrier
body" means a mechanical or hydraulic apparatus capable of lifting
and holding a motor vehicle on a flat level surface so that one or
more motor vehicles can be transported, once the car carrier is
permanently installed upon an incomplete cab and chassis.
(HH) "Operating as a new motor vehicle dealership" means
engaging in activities such as displaying, offering for sale, and
selling new motor vehicles at retail, operating a service facility
to perform repairs and maintenance on motor vehicles, offering for
sale and selling motor vehicle parts at retail, and conducting all
other acts that are usual and customary to the operation of a new
motor vehicle dealership. For the purposes of this chapter only,
possession of either a valid new motor vehicle dealer franchise
agreement or a new motor vehicle dealers license, or both of these
items, is not evidence that a person is operating as a new motor
vehicle dealership.
(II) "Outdoor power equipment" means garden and small utility
tractors, walk-behind and riding mowers, chainsaws, and tillers.
(JJ) "Remote service facility" means premises that are
separate from a licensed new motor vehicle dealer's sales facility
by not more than one mile and that are used by the dealer to
perform repairs, warranty work, recall work, and maintenance on
motor vehicles pursuant to a franchise agreement entered into with
a manufacturer of motor vehicles. A remote service facility shall
be deemed to be part of the franchise agreement and is subject to
all the rights, duties, obligations, and requirements of Chapter
4517. of the Revised Code that relate to the performance of motor
vehicle repairs, warranty work, recall work, and maintenance work
by new motor vehicle dealers.
(KK) "Recreational vehicle" has the same meaning as in
section 4501.01 of the Revised Code.
Sec. 4517.52. (A) Each franchisor shall fulfill warranty and
recall obligations of repairing and servicing motor vehicles,
including all parts and components manufactured for installation
in any motor vehicle.
(B) Each franchisor shall compensate each of its franchisees
for labor and parts used to fulfill warranty and recall
obligations of repair and servicing at rates not less than the
rates charged by the franchisee to its retail customers for like
service and parts for nonwarranty work.
(C) Division (A) of this section shall not apply to
franchisors or franchisees who deal in recreational vehicles.
Sec. 4517.54. (A) Notwithstanding the terms, provisions, or
conditions of an existing franchise, no franchisor shall
terminate, cancel, or fail to continue or renew a franchise except
for good cause. This section governs any action or intent to
terminate, cancel, discontinue, or not renew a franchise whether
the franchise was entered into prior to or after the effective
date of this amendment.
(B) Each Except as otherwise provided in section 4517.541 of
the Revised Code, each franchisor proposing to terminate, cancel,
discontinue, or not renew a franchise shall send written notice by
certified mail of the proposed action to the franchisee at such
time as may be necessary to ensure that the notice is received no
later than ninety days before the effective date of the proposed
action, or no later than fifteen days before the effective date of
the proposed action when the proposed action is based upon any of
the following:
(1) Insolvency of the franchisee, or filing of any petition
by or against the franchisee under any bankruptcy or receivership
law;
(2) Any unlawful business practice after written warning
thereof;
(3) The franchisee has ceased business operations.
Each notice shall set forth the specific grounds for the
proposed termination, cancellation, or refusal to continue or
renew.
(C) Prior to the effective date of the proposed action, a
franchisee receiving written notice from a franchisor proposing to
terminate, cancel, discontinue, or not renew a franchise may file
a protest with the board against the franchisor's proposed action.
When such a protest has been filed, the board shall inform the
franchisor that a timely protest has been filed and that a hearing
is required pursuant to section 4517.57 of the Revised Code.
(D) A franchisor shall not terminate, cancel, discontinue, or
fail to renew a franchise before the holding of a hearing on any
protest filed under this section, or after the hearing, if the
board determines that good cause does not exist to terminate,
cancel, discontinue, or not renew the franchise.
Sec. 4517.541. (A) Each franchisor proposing to terminate,
cancel, discontinue, or not renew a franchise based upon any of
the following shall send written notice by certified mail of the
proposed action to the franchisee at such time as may be necessary
to ensure that the notice is received not later than twelve months
before the effective date of the proposed action, unless
prohibited by law or regulation:
(1) As a result of any change in ownership, operation, or
control of all or any part of the business of the manufacturer,
factory branch, distributor, or distributor branch, whether by
sale or transfer of assets, corporate stock or other equity
interest, or by assignment, merger, consolidation, combination,
joint venture, redemption, operation of law, or otherwise;
(2) The termination, suspension, or cessation of a part or
all of the business operations of the manufacturer, factory
branch, distributor, or distributor branch;
(3) Discontinuance of the sale of a line-make, series, brand
or class of vehicles or a change in distribution system by the
manufacturer, whether through a change in distributors or the
manufacturer's decision to cease conducting business through a
distributor altogether.
(B) Each notice described in division (A) of this section
shall set forth the specific grounds for the proposed termination,
cancellation, or refusal to continue or renew a franchise.
(C) This section shall not apply to franchisors or
franchisees who deal in recreational vehicles.
Sec. 4517.542. (A) Except as provided in division (A)(6)(c)
of this section, upon the termination, cancellation,
discontinuance, or nonrenewal of any franchise by the franchisor
pursuant to section 4517.541 of the Revised Code, the manufacturer shall pay fair and
reasonable compensation to the new motor vehicle dealer for at
least the following:
(1)(a) The franchisee's net acquisition cost for any new,
undamaged, unaltered, and unsold vehicle in the franchisee's
inventory of the current model year or the model year preceding
the current model year, purchased from the franchisor or another
franchisee of the same line-make in the ordinary course of
business prior to receipt of a notice of termination,
cancellation, discontinuance, or nonrenewal, provided the vehicle
has less than five hundred miles registered on the odometer,
including mileage incurred in delivery from the franchisor or in
transporting the vehicle between new motor vehicle dealers for
sale;
(b) Notwithstanding division (A)(1)(a) of this section, a
vehicle damaged prior to delivery to the franchisee by the
manufacturer or its agent shall be eligible for repurchase in
accordance with this section;
(c) The franchisor shall pay the fair and reasonable
compensation for the items described in division (A)(1) of this
section, including the franchisee's costs of handling, packing,
loading, and transporting an item for return to the franchisor,
within thirty days after the effective date of the termination,
cancellation, discontinuance, or nonrenewal so long as the
franchisee can provide evidence of good and clear title upon
return of the items to the franchisor. If there is a lien on the
property, the franchisor may make payment jointly to the
franchisee and any party having a security interest or ownership
interest in the property.
(2) The franchisee's net acquisition cost of each new,
unused, undamaged, and unsold part or accessory purchased from the
manufacturer or a source recommended or approved by the franchisor
if the part or accessory is in the current parts catalog. In the
case of sheet metal, a comparable substitute for the original
package may be used. If the part or accessory was purchased by the
franchisee from an outgoing authorized franchisee, the franchisor
shall purchase the part or accessory at the depreciated value
price or the price in the current parts catalog, whichever is
less.
(3) The franchisee's net acquisition cost of each undamaged
sign if the sign bears a common name, trade name, or trademark of
the manufacturer, the manufacturer required the new motor vehicle
dealer to acquire the sign, and the sign was acquired by the new
motor vehicle dealer from the manufacturer or a source approved by
the manufacturer. A manufacturer shall purchase from the new motor
vehicle dealer at fair market price poles or other hardware used
to erect a sign if the manufacturer required the sign to be free
standing and not include a trademark or trade name other than that
of the manufacturer. For purposes of division (A)(3) of this
section, fair market price is equal to the new motor vehicle
dealer's original cost, reduced by one-tenth of the original cost
for each year of ownership.
(4) The franchisee's net acquisition cost of all equipment,
special tools, automotive service equipment, and other items
bearing the manufacturer's trademark that were required by the
manufacturer or distributor, and purchased from the manufacturer
or a source recommended or approved by the manufacturer. The net
acquisition cost shall be reduced over a period of five years at a
rate of twenty per cent per year.
(5) The franchisor shall pay the fair and reasonable
compensation for the items described in divisions (A)(2), (3), and
(4) of this section, including the cost of handling, packing,
loading, and transporting an item for return to the franchisor,
within sixty days after the effective date of termination,
cancellation, discontinuance, or nonrenewal, so long as the
franchisee is able to provide evidence of good and clear title
upon return of the items to the franchisor. The franchisor may
make payment jointly to the franchisee and any party having a
security interest or ownership interest in the property.
(6)(a) Subject to division (A)(6)(b) of this section, fair
market value of the franchise that is at least equivalent to the
fair market value of the franchise on the day before the
manufacturer announces the action that results in termination,
cancellation, discontinuance, or nonrenewal.
(b) If the termination, cancellation, discontinuance, or
nonrenewal is due to a manufacturer's change in distributors, the
manufacturer may avoid paying fair market value to the new motor
vehicle dealer if the new distributor or the manufacturer offers
the new motor vehicle dealer a franchise agreement with terms
substantially similar to terms offered to other same line-make new
motor vehicle dealers.
(c) The manufacturer is only required to pay fair market
value of the franchise if the termination, cancellation,
discontinuance, or nonrenewal of the franchise agreement is the
result of an action described in division (A) of section 4517.541
of the Revised Code.
(B) In the event the franchisor does not pay the franchisee
the amounts specified within the time required by this section for
an involuntary termination, the manufacturer shall pay or
reimburse the new motor vehicle dealer for any costs of storing,
insuring, and floor planning any of the property described in this
section from the effective date of termination, cancellation,
discontinuance, or nonrenewal until the date the franchisee is
paid and the property is transported, in addition to
transportation charges associated with the manufacturer's
repurchase obligations. The manufacturer shall not charge the new
motor vehicle dealer any handling, restocking, or other similar
costs or fees associated with items repurchased by the
manufacturer under division (A) of this section.
(C) Dealership facilities assistance shall be paid as
follows:
(1) If the new motor vehicle dealer is leasing the dealership
facilities from the manufacturer or a subsidiary of the
manufacturer, the manufacturer or subsidiary shall forgive any
future lease obligations.
(2) Subject to division (C)(4) of this section, if the new
motor vehicle dealer is leasing the dealership facilities from a
lessor other than the manufacturer, the manufacturer shall pay the
new motor vehicle dealer a sum equivalent to the rent for the
unexpired term of the lease or twelve months' rent, whichever is
less.
(3) Subject to division (C)(4) of this section, if the new
motor vehicle dealer owns the dealership facilities, the
manufacturer shall pay the new motor vehicle dealer a sum
equivalent to the reasonable rental value of the dealership
facilities for twelve months.
(4) In order to be entitled to facilities assistance from the
manufacturer as provided in divisions (C)(2) and (3) of this
section, the new motor vehicle dealer shall mitigate damages by
listing the dealership facilities for lease or sublease with a
licensed real estate agent or retail industry broker within thirty
days after the effective date of the termination, cancellation,
discontinuance, or nonrenewal of the franchise and thereafter by
reasonably cooperating with the real estate agent or retail
industry broker in the performance of the agent's or broker's
duties. If the new motor vehicle dealer is able to lease or
sublease the dealership facilities, the new motor vehicle dealer
shall pay the manufacturer the net revenue received from the
mitigation up to the total amount of facilities assistance that
the new motor vehicle dealer has received from the manufacturer
pursuant to division (C)(2) or (3) of this section.
(5) If the termination, cancellation, discontinuance, or
nonrenewal relates to fewer than all of the franchises operated by
the new motor vehicle dealer at a single location, the amount of
facilities assistance that the manufacturer is required to pay the
new motor vehicle dealer under division (C) of this section shall
be based on the percentage of total square footage attributed to
the line-make being terminated, canceled, discontinued, or not
renewed.
(6) The manufacturer shall pay the dealership facilities
assistance under division (C) of this section within sixty days
after the effective date of termination, cancellation,
discontinuance, or nonrenewal. The franchisor may make payment
jointly to the franchisee and any party having a security interest
or ownership interest in the property.
(7) The manufacturer is not required to pay dealership
facilities assistance if the termination, cancellation,
discontinuance, or nonrenewal of the franchise agreement is the
result of insolvency of the franchisee or the filing of any
petition by or against the franchisee under any bankruptcy or
receivership law, is the result of any unlawful business practice
after written warning thereof, is the result of the franchisee
ceasing business operations, or is the result of the voluntary act
of the new motor vehicle dealer.
(D) This section and section 4517.541 of the Revised Code shall not apply to a termination,
cancellation, discontinuance, or nonrenewal of a franchise that
results from the sale of the assets or stock of the motor vehicle
dealership from a franchisee to a franchisee or prospective
franchisee.
(E) This section shall not apply to any noncoerced voluntary
termination. A franchisee that voluntarily terminates the
franchise agreement remains eligible for any termination
assistance provided for voluntary terminations in the franchisee's
franchise agreement with the franchisor.
(F) A franchise shall continue in full force and operation
notwithstanding a change, in whole or in part, of an established
plan of distribution or system of distribution of the motor
vehicles offered for sale under the franchise. The appointment of
a new manufacturer, factory branch, distributor, or distributor
branch for motor vehicles offered for sale under the franchise
agreement shall be considered to be a change of an established
plan of distribution or system of distribution.
(G) Disputes arising between a manufacturer or distributor
and a new motor vehicle dealer under this section and section 4517.541 of the Revised Code shall be
resolved by submitting the dispute to the manufacturer's internal
dispute resolution process if one is available. If no such process
exists, the dispute shall be submitted to a court of competent
jurisdiction. Either party may appeal the decision of the
manufacturer's internal dispute resolution process to a court of
competent jurisdiction.
(H) Nothing in this section or section 4517.541 of the Revised Code shall be construed as prohibiting
a manufacturer or distributor from changing, adding or deleting
models, specifications, model names, numbers or identifying marks,
or similar characteristics of the new vehicles it markets,
provided that the change, addition, or deletion does not result in
the termination or discontinuance of a line-make, series, brand,
or class of new vehicle.
(I) This section shall not apply to franchisors or
franchisees who deal in recreational vehicles.
(J) As used in this section:
(1) "Net acquisition cost" means the franchised dealer cost
for a new and unsold motor vehicle in a dealer's inventory plus
any charges by the manufacturer or distributor for destination,
distribution, or delivery, and taxes, less all allowances paid or
credited to the franchised dealer by the manufacturer or
distributor.
(2) "Line-make" means a collection of models, series, or
groups of motor vehicles manufactured by or for a particular
manufacturer, distributor, or importer that are offered for sale,
lease, or distribution pursuant to a common brand name or mark.
Multiple brand names or marks may constitute a single line-make,
but only when included in a common dealer agreement and when the
manufacturer, distributor, or importer offers such vehicles
bearing the multiple names or marks together, and not separately,
to its authorized dealers.
Sec. 4517.55. (A) In determining whether good cause has been
established by the franchisor for terminating, cancelling, or
failing to continue or renew a franchise, the motor vehicle
dealers board shall take into consideration the existing
circumstances, including, but not limited to:
(1) The amount of retail sales transacted by the franchisee
during a five-year period immediately preceding such notice as
compared to the business available to the franchisee;
(2) The investment necessarily made and obligations incurred
by the franchisee to perform its part of the franchise;
(3) The permanency of the franchisee's investment;
(4) Whether it is injurious or beneficial to the public
interest for the franchise to be modified or replaced, or the
business of the franchisee disrupted;
(5) Whether the franchisee has adequate motor vehicle sales
and service facilities, equipment, vehicle parts, and qualified
service personnel to reasonably provide for the needs of the
consumers for the motor vehicles handled by the franchisee, and is
rendering adequate service to the public;
(6) Whether the franchisee fails to fulfill the warranty
obligations of the franchisor required to be performed by the
franchisee;
(7) The extent and materiality of the franchisee's failure to
comply with the terms of the franchise and the reasonableness and
fairness of the franchise terms;
(8) Whether the owners of the new motor vehicle dealer had
actual knowledge of the facts and circumstances upon which
termination, cancellation, discontinuance, or nonrenewal is based;
(9) Whether the proposed termination, cancellation,
discontinuance, or nonrenewal constitutes discriminatory
enforcement of the franchise agreement.
(B) Notwithstanding the terms, conditions, or provisions of
any franchise or waiver, the following do not constitute
sufficient good cause for terminating, cancelling, or failing to
continue or renew a franchise:
(1) Refusal by the franchisee to purchase or accept delivery
of any new motor vehicle, parts, accessories, or any other
commodity or service not ordered by the franchisee;
(2) The fact that the franchisee or the owner of any interest
therein, owns, has an investment in, participates in the
management of, or holds a license for the sale of the same or any
other line-make of new motor vehicle;
(3) The sale, transfer, or issuance of any equity or
debenture issue, or the transfer or issuance of any security or
shares of stock in a new motor vehicle dealer to any person,
whenever the sale, issuance, or transfer does not result in a
change in the controlling ownership of the dealership;
(4) A change by the franchisee in the administrative or
executive management of the dealership;
(5) Failure of the franchisee to achieve any unreasonable or
discriminatory performance criteria;
(6) A loss of trust by the franchisor absent circumstances or
facts that would be a material breach of the franchise agreement
and that material breach is known and ratified by the owners of
the new motor vehicle dealer;
(7) The failure of a franchisee to maintain a motor vehicle
floor plan line of credit, unless the franchisee fails to maintain
a floor plan line of credit for one hundred twenty days or longer;
(8) The export of new motor vehicles to a foreign country,
absent evidence that the new motor vehicle dealer knew or should
have known that the vehicle was purchased for export. There shall
be a rebuttable presumption that a new motor vehicle dealer did
not know, or should not have known, that a vehicle was purchased
for export if the vehicle is titled in the United States.
(C) Divisions (B)(6) to (8) of this section shall not apply
to franchisors or franchisees who deal in recreational vehicles.
Sec. 4517.59. (A) Notwithstanding the terms, provisions, or
conditions of any agreement, franchise, or waiver, no franchisor
shall:
(A)(1) In acting or purporting to act under the terms,
provisions, or conditions of a franchise or in terminating,
canceling, or failing to renew a franchise, fail to act in good
faith;
(B)(2) Prevent a franchisee from changing administrative or
executive management, provided such personnel satisfy reasonable
and objective standards formulated and objectively applied by the
franchisor;
(C)(3) Restrict the sale of any equity or debenture issue or
the transfer of any securities in a dealership, or in any way
prevent or attempt to prevent the transfer, sale, or issuance of
shares of stock or debentures to any person, if the basic
financial requirements of the franchisor have been equalled at the
time of the execution of the franchise agreement and continued in
effect, and if the sale, transfer, or issuance does not have the
effect of accomplishing a sale of a controlling interest in the
dealership;
(D)(4) Coerce or threaten any franchisee by refusing or
failing to renew or extend a lease of premises where the fee or
right of possession is in the absolute control of the franchisor
and the franchisee upon request or demand of the franchisor fails
to expand its facilities, increase sales personnel, purchase more
parts or accept programs for sales and operation of the
franchisee's business, when such demand is not reasonable, fair,
and equitable under all circumstances, or tends to depreciate the
franchisee's equity;
(E)(5) Sell, lease, or rent goods or motor vehicles, or
render any service normally performed and required of franchisees
under the franchise agreement with the franchisor, in unfair
competition with the franchisee, except that this division does
not apply to a sale, lease, or rental to, or service performed
for, an agency of federal, state, or local government;
(F)(6) Coerce, or attempt to coerce, any franchisee to accept
delivery of any motor vehicle, parts, accessories, or any other
commodities connected therewith which are not ordered by said
franchisee; nor withhold or delay delivery of motor vehicles out
of the ordinary course of business; nor discriminate against any
franchisee in the allocation or through the withholding from
delivery of certain models of motor vehicles ordered by a
franchisee out of the ordinary course of business; nor unfairly
change or amend unilaterally a franchisee's allotment of motor
vehicles or quota in a sales contest, sales expectancy, or sales
penetration without reasonable cause; nor coerce a franchisee by
any means to participate or contribute to any local or national
advertising fund; nor employ any coercive techniques for any other
purposes such as obtaining franchisee participation in contests,
"giveaways," or other sales devices;
(G)(7) Coerce, or attempt to coerce, a franchisee by
threatening to award an additional franchise or agreement to
another person for the sale of its same product in the same area
of influence for the purposes of compelling such franchisee to
yield to demands of the franchisor for increased sales of the
franchisor's products, parts, expansion of facilities and
improvement of operations inconsistent with good business
practices of the franchisee;
(H)(8) Fail or refuse to make equally available to its same
line-make franchisees all motor vehicles, motor vehicle parts, or
other products manufactured for that line-make at the same actual
price, or to utilize any device including, but not limited to,
sales promotion plans or programs that result in such lesser
actual price. Division (A)(8) of this section shall not apply to
sales to a franchisee for resale to any unit of government or
donation or use by a franchisee in a driver education program.
Division (A)(8) of this section shall not prohibit the offering of
incentive programs or other discounts so long as such incentives
or discounts are reasonably available to all franchisees in this
state on a proportionately equal basis and are based on the sale
of individual vehicles and not increased for meeting a performance
standard unless the standard is reasonable considering all
existing circumstances.
A franchisor has not made a motor vehicle, motor vehicle
part, or other product available to all line-make franchisees if
the franchisor does any of the following:
(a) Requires a franchisee to remodel, renovate, or
recondition the new motor vehicle dealer's existing dealership
facilities as a prerequisite to receiving the model, part, or
product, unless reasonably necessary to accommodate the adequate
sale and service of a vehicle based on the technology of that
vehicle. As used in division (A)(8) of this section, "remodel,
renovate, and recondition" includes the requirement that a
franchisee purchase or lease unreasonably expensive advertising or
promotional displays or other similar materials.
(b) Requires a franchisee to pay an additional fee to receive
any model, part, or product within a franchisor's line-make;
(c) Requires a franchisee to accept additional inventory to
receive any model, part, or product within a franchisor's
line-make.
(9) Fail to either return a part to the franchisee, at the
franchisor's expense, or reimburse the franchisee for the
franchisee's cost of the part where a franchisor does not approve
a franchisee's claim for a defective part;
(I)(10) Fail to approve or disapprove any warranty or recall
claim submitted by a franchisee within forty-five days after
receipt from the franchisee. If a claim is not approved, the
franchisor shall immediately so notify in writing the franchisee
who submitted the claim and shall include in the notice the
specific grounds upon which the disapproval is based.
(J)(11) Fail to pay a franchisee within thirty days after
approval by the franchisor of any claim by a franchisee for labor
and parts made under sections division (B) of section 4517.52 and
section 4517.53 of the Revised Code. Any failure of a franchisor
to act on or pay a claim within the time limits specified by this
section that results from causes beyond the franchisor's
reasonable control does not constitute a violation of this
section.
(K)(12) Disclaim an otherwise valid warranty or recall claim
because the franchisee fails to submit or resubmit the claim
within a period of less than six months from the date on which the
service was rendered or parts supplied;
(L)(13) Unless otherwise authorized or required by the
"National Traffic and Motor Vehicle Safety Act," 49 U.S.C. 30101,
et seq. or any regulation adopted thereunder, the "Transportation
Recall, Enhancement, Accountability, and Documentation Act," 49
U.S.C. 30123, et seq. or any regulation adopted thereunder, or any
other federal law or regulation, provide reimbursement to any
individual or entity that is not a franchisee for labor and parts
used to fulfill warranty and recall work, unless the work is
required for emergency service, or is performed by a service
center owned by the manufacturer on employee- or company-owned
vehicles only, or the work is warranty service by employees of a
fleet operator on its own vehicles. Nothing in division (A)(13) of
this section shall prohibit a manufacturer from reimbursing a
franchisee of another line-make of the same manufacturer for labor
and parts used to fulfill warranty and recall work.
(14) Refuse to disclose to any new motor vehicle dealer who
handles the same line-make, the manner and mode of distribution of
that line-make within the same county, or if a line-make is
allocated among new motor vehicle dealers, refuse to disclose to
any new motor vehicle dealer that handles the same line-make the
system of allocation, including, but not limited to, a complete
breakdown by model, color, equipment, other items or terms, and a
concise listing of dealerships with an explanation of the
derivation of the allocation system including its mathematical
formula in a clear and comprehensible form;
(M)(15) Engage in any predatory practice or discriminate
against any new motor vehicle dealer including discriminating
against a franchisee, as compared to a same line-make franchisee,
with regard to motor vehicle allocation, motor vehicle sales
expectations, motor vehicle market penetration, motor vehicle
planning volume requirements, customer service satisfaction
requirements, dealership facility requirements, or dealer
capitalization requirements;
(N)(16) Prohibit a franchisee from acquiring a line-make of
new motor vehicles solely because it owns or operates a franchise
of the same line-make in a contiguous market;
(17) Use any financial services company or leasing company
owned in whole or part or controlled by the manufacturer or
distributor to accomplish what would otherwise be illegal conduct
on the part of the manufacturer or distributor pursuant to this
section. This section does not limit the right of the financial
services or leasing company to otherwise engage in regular
financial services or leasing business practices.
(18) Initiate a charge back without an audit or perform an
audit to confirm a warranty repair, sales incentive, or rebate
more than twelve months after the date of submission by the
franchisee, provided that these limitations shall not be effective
in the case of a fraudulent claim. Division (A)(18) of this
section does not preclude a charge back for any fraudulent claim
that was previously paid.
(19) Refuse to pay a franchisee for sales incentives, service
incentives, rebates, or other forms of incentive compensation
within thirty days after their approval by the manufacturer. The
franchisor shall either approve or disapprove each claim by the
franchisor within thirty days after receipt of the claim in a
proper form generally used by the franchisor. Any claims not
specifically disapproved in writing within thirty days after
receipt shall be considered to be approved.
(20) Reduce the amount to be paid to the new motor vehicle
dealer or charge a new motor vehicle dealer back subsequent to the
payment of the claim unless either of the following applies:
(a) The manufacturer shows that the claim lacks material
documentation or is false, fraudulent, or a misrepresentation. A
franchisor may not deny a claim based solely on a new motor
vehicle dealer's incidental failure to comply with a specific
claim processing requirement, such as a clerical error, that does
not put into question the legitimacy of the claim.
(b) The new motor vehicle dealer knew or should have known a
new motor vehicle was sold for export to a foreign country. There
shall exist a rebuttable presumption that a new motor vehicle
dealer did not know, or should not have known, that a vehicle was
sold for export to a foreign country if the motor vehicle is
titled in the United States.
No refusal to pay sales incentives, service incentives,
rebates, or other forms of incentive compensation, no reduction in
the amount to be paid to the new motor vehicle dealer, and no
charge back subsequent to the payment of a claim may be made until
the new motor vehicle dealer has had notice and an opportunity to
participate in all franchisor internal appeal processes as well as
all available legal processes. If a charge back is the subject of
adjudication, internal appeal, mediation, or arbitration, no
charge back shall be made until, in the case of an adjudication or
legal action, a final appealable order has been issued.
At the time submitted, the claim shall act as an immediate
automatic credit against future billings. Any ambiguity or
inconsistency in submission guidelines shall be construed against
the drafter. Any failure by a new motor vehicle dealer to exercise
its rights to reimbursement under this section does not create a
waiver of these rights. Any unreasonable denial, delay, or
restriction of a valid reimbursement claim shall subject the
manufacturer to interest in accordance with division (A) of
section 1343.03 of the Revised Code until paid.
(21) Prevent, attempt to prevent, prohibit, coerce, or
attempt to coerce, any new motor vehicle dealer from charging any
consumer any fee allowed to be charged by the dealer under Ohio
law;
(22) Require, coerce, or attempt to coerce any new motor
vehicle dealer in this state to change the capital structure of
the new motor vehicle dealer or the means by or through which the
new motor vehicle dealer finances the operation of the dealership
provided that:
(a) The new motor vehicle dealer at all times shall meet any
reasonable capital standards determined by the manufacturer in
accordance with uniformly applied criteria.
(b) No change in the capital structure shall cause a change
in the principal management or have the effect of a sale of the
franchise without the consent of the manufacturer or distributor,
and further provided that the manufacturer or distributor shall
not unreasonably withhold consent.
(23) Require, coerce, or attempt to coerce any new motor
vehicle dealer in this state to change location of the dealership,
or to make any substantial alterations to the dealership premises
or facilities, when to do so would be unreasonable, or without
written estimation of a sufficient supply of new motor vehicles so
as to justify the location change or alterations, in light of the
current market and economic conditions;
(24) Establish any performance standard or program for
measuring franchisee performance that may have a material impact
on a franchisee that is not fair, reasonable, and equitable, or
apply any such standard or program to a franchisee in a manner
that is not fair, reasonable, and equitable;
(25) Unreasonably require a franchisee to establish or
maintain exclusive sales facilities, sales display space,
personnel, service, parts, or administrative facilities for a
line-make, unless such exclusivity is reasonable and otherwise
justified by reasonable business considerations. In making that
determination, the franchisor shall take into consideration the
franchisee's satisfaction of facility requirements as required by
the franchise agreement. The franchisor shall have the burden of
proving that reasonable business considerations justify
exclusivity.
(26) Require or request a franchisee to waive any
requirements of this section.
(B) No franchisor shall discriminate among the franchisor's
dealers in any program that provides assistance to the
franchisor's dealers, including internet listings, sales leads,
warranty policy adjustments, marketing programs, and dealer
recognition programs. The franchisor shall not require a
franchisee to provide its customer lists or service files to the
franchisor, unless necessary for the sale and delivery of a new
motor vehicle to a consumer, to validate and pay consumer or
dealer incentives, or for the submission to the franchisor for any
services supplied by the franchisee for any claim for warranty
parts or repairs. Nothing in this division shall limit the
franchisor's ability to require or use customer information to
satisfy any safety or recall notice obligation.
(C) No franchise agreement shall require the franchisee to
pay the attorney's fees of a franchisor, waive any remedy or
defense available to the franchisee, require a motor vehicle
dealer to submit to arbitration or mediation to resolve a
controversy before the controversy arises, or waive any other
provisions of this chapter. Nothing in this division shall
preclude the parties from entering into a voluntary agreement to
arbitrate or mediate a controversy after it arises unless
otherwise precluded by law. Such an agreement shall require that
the dispute be heard in this state and that the arbitrator or
mediator apply the law of this state in resolving the controversy.
Either party may appeal a decision of an arbitrator in the court
of common pleas of Franklin county on the grounds that the
arbitrator failed to apply the law of this state.
(D) This section applies to any franchise whether entered
into prior to or after the effective date of this amendment.
Divisions (A)(8), (13), (16) to (25), (B), and (C) of this section
shall not apply to franchisors or franchisees who deal in
recreational vehicles.
Section 2. That existing sections 4517.01, 4517.52, 4517.54,
4517.55, and 4517.59 of the Revised Code are hereby repealed.
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