GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2001
S	2
SENATE BILL 470
Commerce Committee Substitute Adopted 4/25/01

Short Title:	Clarify MV Dealer Franchise Laws.	()	
Sponsors:	     	
Referred to:	     	
March 15, 2001

A BILL TO BE ENTITLED
AN ACT TO CLARIFY THE MOTOR VEHICLE DEALER FRANCHISE LAW. 

The General Assembly of North Carolina enacts:
SECTION 1.  Chapter 20 of the General Statutes is amended by adding a new section to read:
"§ 20-301.1.  Notice of additional charges against dealer's account; informal appeals procedure.
(a)	Notwithstanding the terms of any contract, franchise, novation, or agreement, it shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, to charge or assess one of its franchised dealers located in this State, or to charge or debit the account of such a dealer for goods, materials, or services, other than the published cost of new motor vehicles, and merchandise, tools, and equipment specifically ordered by the dealer, unless the dealer receives a detailed itemized description of the nature and amount of each such charge in writing at least 10 days prior to the date such charge or account debit is to become effective or due. For purposes of this subsection, the charges or debits for which prior written notice is required include, but are not limited to:  advertising or advertising materials; advertising or showroom displays; customer informational materials; computer or communications hardware or software; warranty reimbursement; sales incentives; parts; tools; signage; equipment; dealership operation guides and other materials; manufacturer catalog or program materials; internet programs or materials, and any additional charges or surcharges made or proposed for goods, materials, or services previously charged to the dealer.
(b)	Upon receipt of a notice given pursuant to or in satisfaction of subsection (a) of this section, in the event of a payment, reimbursement, or credit that is insufficient or inadequate under this Article or under the franchise, or in the event a new motor vehicle dealer discovers an actual or proposed charge or debit for which a manufacturer should have provided prior written notice under subsection (a) of this section, the dealer, if he believes the charge, payment, reimbursement, or credit to be unreasonable, or contrary to the provisions of this Article or the franchise, may challenge the charge, credit, or payment either by filing a petition before the Commissioner as provided in G.S. 20-301(b) or a civil action in any court of competent jurisdiction under G.S. 20-308.1. If the amount in controversy is less than or equal to ten thousand dollars ($10,000), the dealer may, in his discretion, prior to filing a petition before the Commissioner or civil action, use the informal dispute resolution procedure provided in subsection (c) of this section.
(c)	Any franchised new motor vehicle dealer who seeks to challenge an actual or proposed debit or charge to the dealer or to the dealer's account in an amount less than or equal to ten thousand dollars ($10,000) and that is in violation of this Article, contrary to the terms of the franchise, or unreasonable, or a payment, reimbursement, or credit which is insufficient or inadequate under this Article or under the franchise, the inadequacy or insufficiency of which is in an amount less than or equal to ten thousand dollars ($10,000), may, prior to filing a formal petition before the Commissioner as provided in G.S. 20-301(b) or a civil action in any court of competent jurisdiction under G.S. 20-308.1, request and obtain a mediated settlement conference as provided in this subsection.
(1)	It is the policy and purpose of this subsection to implement a system of settlement events that are designed to reduce the cost of litigation under this Article to the general public and the parties, to focus the parties' attention on settlement rather than on trial preparation, and to provide a structured opportunity for settlement negotiations to take place.
(2)	The dealer shall send a letter to the Commissioner by certified or registered mail, return receipt requested, identifying the actual or proposed charges the dealer seeks to challenge and the reason or basis for such challenge. The charges, payments, reimbursements, or credits challenged by the dealer need not be related, it being the intention of this subsection that multiple issues may be resolved in a single proceeding. The motor vehicle dealer shall send a copy of the letter to the affected manufacturer, factory branch, distributor, or distributor branch, addressed to the current district, zone, or regional manager in charge of overseeing the dealer's operations, or the registered agent for acceptance of legal process in this State. Unless the dealer specifically states in the letter that the dealer will be represented in the mediation by legal counsel, the matter shall be mediated by the mediator without the appearance of legal counsel by either the dealer or manufacturer. Upon the mailing of a letter to the Commissioner and the manufacturer under this subsection, any chargeback to or any payment required of a dealer by a manufacturer shall be stayed during the pendency of the mediation. Upon the mailing of a letter to the Commissioner and manufacturer under this subsection, any statute of limitation or other time limitation for filing a petition before the Commissioner or civil action shall be tolled during the pendency of the mediation.
(3)	Upon receipt of the written request of the motor vehicle dealer, the Commissioner shall appoint a mediator and send notice of that appointment to the parties. A person is qualified to serve as mediator as provided by this subdivision if the person is certified to serve as a mediator under Rule 8 of the North Carolina Rules Implementing Statewide Mediated Settlement Conferences in Superior Court Civil Actions and does not represent motor vehicle dealers or manufacturers, factory branches, distributors, or distributor branches. A mediator acting pursuant to this subdivision shall have judicial immunity in the same manner and to the same extent as a Judge of the General Court of Justice.
(4)	The parties shall by written agreement select a venue and schedule for the mediated settlement conference conducted under this subsection. If the parties are unable to agree on a venue and schedule, the mediator shall select a venue and schedule. Except by written agreement of all parties, a mediation proceeding and mediated settlement conference under this section shall be held in North Carolina.
(5)	In this subsection, "mediation" means a nonbinding forum in which an impartial person, the mediator, facilitates communication between parties to promote reconciliation, settlement, or understanding among them. A mediator may not impose his or her own judgment on the issues for that of the parties.
(6)	At least 10 days prior to the mediated settlement conference, the affected manufacturer, factory branch, distributor, or distributor branch, shall, by certified or registered mail, return receipt requested, send the mediator and the motor vehicle dealer a detailed response to the allegations raised in the dealer’s written request.
(7)	A mediation proceeding under this section shall be complete not later than the sixtieth day after the date of the Commissioner’s notice of the appointment of the mediator; this deadline may be extended by written agreement of the parties. The parties shall be solely responsible for the compensation and expenses of the mediator on a fifty-fifty basis. The Commissioner is not liable for the compensation paid or to be paid a mediator employed pursuant to this subdivision.
(8)	A party may attend a mediated settlement conference telephonically in lieu of personal appearance. If a party or other person required to attend a mediated settlement conference fails to attend without good cause, the Commissioner may impose upon the party or person any appropriate monetary sanction including, but not limited to, the payment of fines, attorneys' fees, mediator fees, expenses, and loss of earnings incurred by persons attending the conference.
(9)	If the mediation fails to result in a resolution of the dispute, the motor vehicle dealer may proceed as provided in G.S. 20-301(b) and G.S. 20-308.1. Upon the filing of such a petition or civil action, the affected manufacturer, manufacturer branch, distributor, or distributor branch shall not require payment from the dealer or debit or charge the dealer’s account unless and until a final judgment supporting such payment or charge has been rendered by the Commissioner or court. All conducted communications made during a mediation proceeding, including but not limited to those communications made during a mediated settlement conference, are presumed to be made in compromise negotiation and shall be governed by Rule 408 of the North Carolina Rules of Evidence."
SECTION 2.  G.S. 20‑305(30) reads as rewritten:
"(30)	To vary the price charged to any of its franchised new motor vehicle dealers located in this State for new motor vehicles based on the dealer's purchase of new facilities, supplies, tools, equipment, or other merchandise from the manufacturer, the dealer's relocation, remodeling, repair, or renovation of existing dealerships or construction of a new facility, the dealer's participation in training programs sponsored, endorsed, or recommended by the manufacturer, whether or not a dealer is dualed with one or more other line makes of vehicles, a dealer’s sales penetration or, except as provided in this subdivision, a dealer’s sales volume, a dealer’s level of sales or service customer satisfaction, a dealer’s purchase of advertising materials, signage, nondiagnostic computer hardware or software, communications devices, or furnishings, or a dealer’s participation in used vehicle inspection or certification, programs sponsored or endorsed by the manufacturer.
The price of the vehicle, for purposes of this subdivision shall include the manufacturer's use of rebates, credits, or other consideration which has the effect of causing a variance in the price of new motor vehicles offered to its franchised dealers located in the State.
Notwithstanding the foregoing, nothing in this subdivision shall be deemed to preclude a manufacturer from establishing sales contests or promotions which provide or award dealers or consumers rebates or  incentives; provided however, that the manufacturer complies with all of the following conditions:
a.	With respect to manufacturer to consumer rebates and incentives, the manufacturer’s criteria for determining eligibility shall:
1.	Permit all of the manufacturer’s franchised dealers in this State  to offer the rebate or incentive; and
2.	Be uniformly applied and administered to all eligible consumers.
b.	With respect to manufacturer to dealer rebates and incentives, the rebate or incentive program shall:
1.	Be based solely on the dealer’s actual or reasonably anticipated sales volume or on a uniform per vehicle sold or leased basis; and
2.	Be uniformly available, applied and administered to all of the manufacturer’s franchised dealers in this State; and
3.	Provide that any of the manufacturer’s franchised dealers in this State may, upon written request, obtain the method or formula used by the manufacturer in establishing the sales volume(s) for receiving the rebate(s) or incentive(s) and the specific calculation(s) for determining  the  required sales volume(s) of the inquiring dealer and any of the manufacturer’s other franchised dealers located within 75 miles of the inquiring dealer.
Nothing contained in this subdivision shall prohibit a manufacturer from providing assistance or encouragement to a franchised dealer to remodel, renovate, recondition, or relocate the dealer's existing facilities, provided that this assistance, encouragement, or rewards are not determined on a per vehicle basis.
It is unlawful for any manufacturer to charge or include the cost of any program or policy prohibited under this subdivision in the price of vehicles that the manufacturer sells to its franchised dealers or purchasers located in this State.
In the event that as of October 1, 1999, a manufacturer is currently was operating a program or had in effect a policy that varied the price charged to its franchised dealers located in this state in a manner which would violate this subdivision, it shall be lawful for that program or policy, or a program or policy similar thereto implemented after the effective date of this act, to continue in effect as to the manufacturer's franchised dealers located in this State until December 31, 2004. Any manufacturer shall be required to pay or otherwise compensate any franchise dealer who has earned the right to receive payment or other compensation under a program in accordance with the manufacturer's program or policy.
The provisions of this subdivision shall not be applicable to multiple or repeated sales of new motor vehicles made by a new motor vehicle dealer to a single purchaser under a bona fide fleet sales policy of a manufacturer, manufacturer branch, distributor, or distributor branch."
SECTION 3.  G.S. 20‑305.2(b) reads as rewritten:
"(b)	This section shall not apply to manufacturers or distributors of  trailers or semitrailers."
SECTION 4.  Chapter 20 of the General Statutes is amended by adding a new section to read:
"§ 20-305.6.  Unlawful for manufacturer or captive finance company to unfairly discriminate among dealers.
(a)	Notwithstanding the terms of any contract, franchise, novation, or agreement, it shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch to do any of the following:
(1)	Offer or distribute goods or services to one or more of its franchised dealers located in this State at a lower price or on a more favorable basis than is available to any of its other franchised dealers located in this State.
(2)	Treat its franchised dealers located in this State who have dualed facilities at which the vehicles distributed by the manufacturer are sold or serviced with one or more other line-makes of vehicles on a less favorable basis than it treats its dealers who exclusively sell vehicles distributed by that manufacturer.
(3)	Otherwise treat one or more of its franchised dealers located in this State on a more favorable basis than it treats any of its other franchised dealers located in this State.
(b)	Notwithstanding the terms of any contract, franchise, novation, or agreement, it shall be unlawful for any leasing company, finance company, or other lender that is owned, operated, or controlled by a manufacturer, factory branch, distributor, or distributor branch, to do any of the following:
(1)	Fail or refuse to permit any of the dealers franchised by that manufacturer, factory branch, distributor, or distributor branch in this State with whom that leasing company, finance company or other lender engages in business the opportunity to participate in any program or policy that offers the customers of participating dealers more favorable rates or terms than those available to the customers of that manufacturer’s other franchised dealers located in this State.
(2)	Unfairly discriminate among its franchised motor vehicle dealers located in this State with respect to the availability of credit, the terms of credit, availability of a lease, or terms of a lease available to a dealer’s customers. For purposes of this subdivision, evidence that a customer was denied credit or the extension of a lease from a lender covered by this section when the application was made through one dealer, but, within a 30-day period, the same customer was granted credit or the extension of a lease when the application was made through another dealer, shall constitute a prima facie case of unlawful discrimination in violation of this subdivision."
SECTION 5.  G.S. 20‑308.1 reads as rewritten:
"§ 20‑308.1.  Civil actions for violations.
(a)	Notwithstanding the terms, provisions or conditions of any agreement or franchise or other terms or provisions of any novation, waiver or other written instrument, any person who is or may be injured by a violation of a provision of this Article, or any party to a franchise who is so injured in his business or property by a violation of a provision of this Article relating to that franchise, or an arrangement which, if consummated, would be in violation of this Article may, notwithstanding the initiation or pendency of, or failure to initiate an administrative proceeding before the Commissioner concerning the same parties or subject matter, bring an action for damages and equitable relief, including injunctive relief, in any court of competent jurisdiction with regard to any matter not within the jurisdiction of the Commissioner or that seeks relief wholly outside the authority or jurisdiction of the Commissioner to award.
(b)	Where the violation of a provision of this Article can be shown to be willful, intentional,  malicious, or wanton, or if continued multiple violations of a provision or provisions of this Article occur, the court may award punitive damages, attorneys' fees and costs in addition to any other damages under this Article.
(c)	A new motor vehicle dealer, if he has not suffered any loss of money or property, may obtain final equitable relief if it can be shown that the violation of a provision of this Article by a manufacturer or distributor may have the effect of causing a loss of money or property.
(d)	 Any association that is comprised of a minimum of 400 motor vehicle dealerships, or a minimum of 10 motorcycle dealerships, substantially all of whom are new motor vehicle dealerships located within North Carolina, and which represents the collective interests of such members, shall have standing to file a petition before the Commissioner or a cause of action in the General Court of Justice of North Carolina for itself, or on behalf of any or all of its members. Such action may seek a determination whether one or more manufacturers, factory branches, distributors, or distributor branches doing business in this State has violated any of the provisions of this Article, or for the determination of any rights created or defined by this Article, so long as the association alleges an injury to the collective interest of its members cognizable under this section. A cognizable injury to the collective interest of the members of such an association shall be deemed to occur if a manufacturer, factory branch, distributor, or distributor branch doing business in this State has engaged in any conduct or taken any action which actually harms or affects all of the franchised new motor vehicle dealers holding franchises with that manufacturer, factory branch, distributor, or distributor branch in this State. With respect to any administrative or civil action filed by an association pursuant to this subsection, in no event shall the Commissioner or court enter an award of monetary damages in favor of the association."
SECTION 6.  G.S. 20‑305 reads as rewritten:
"§ 20‑305.  Coercing dealer to accept commodities not ordered; threatening to cancel franchise; preventing transfer of ownership; granting additional franchises; terminating franchises without good cause; preventing family succession.
It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative whatsoever of any of them:
…
(38)	Notwithstanding the terms, provisions or conditions of any agreement or franchise or other terms or provisions of any novation, waiver or other written instrument, to assign or change a new motor vehicle dealer’s area of responsibility under the franchise arbitrarily or without due regard to the present or projected future pattern of motor vehicle sales and registrations within the dealer’s market. A new motor vehicle dealer who believes that a manufacturer, factory branch, distributor, or distributor branch with whom the dealer has entered into a franchise has violated this subdivision may file a petition before the Commissioner as provided in G.S. 20-301(b) contesting the dealer’s assigned area of responsibility. At the hearing before the Commissioner, the affected manufacturer, factory branch, distributor, or distributor branch shall have the burden of proving that all portions of its current or proposed area of responsibility for the petitioning dealer are reasonable in light of the present or projected future pattern of motor vehicle sales and registrations within the dealer’s market. If a protest is or has been filed under G.S. 20-305(5) and the dealer’s area of responsibility is included in the relevant market area under the protest, any protest filed under this subdivision shall be consolidated with that protest for hearing and joint disposition of all of the protests.
(39)	Notwithstanding the terms, provisions, or conditions of any agreement or franchise or other terms or provisions of any novation, waiver or other written instrument, to require, coerce, or attempt to coerce any of its franchised dealers in this State to purchase or lease one or more signs displaying the name of the manufacturer or dealer:
a.	Upon unduly onerous or unreasonable terms or conditions;
b.	When the cost of the signage or its installation or maintenance would be unreasonable in light of the dealer’s reasonably anticipated sales volume of new motor vehicles manufactured or distributed by that manufacturer or current market or economic conditions;
c.	If the manufacturer’s signage requirements are inconsistent with the signage requirements of one or more other manufacturers whose line-makes of new motor vehicles are sold at the same facility;
d.	If installation of the additional signage would require removal or relocation of any of the dealer’s existing signs displaying the dealership’s name or the name of other line makes of new motor vehicles sold at the same facility; or
e.	If installation of the additional signage would violate local signage or zoning laws to which the dealer is subject.
Any provision of any agreement, franchise, waiver, novation, or any other written instrument which is in violation of this subdivision shall be deemed null and void and without force and effect."
SECTION 7.  If any clause or provision contained in this act shall be determined to be unconstitutional or unenforceable, that unconstitutionality or unenforceability shall not affect the validity of all remaining clauses or provisions not specifically determined to be unconstitutional or unenforceable.
SECTION 8.  Section 2 of this act becomes effective December 31, 2001.  All other sections of this act are effective when they become law.