A BILL TO BE ENTITLED
AN ACT to CLARIFY DEALER TERMINATION ASSISTANCE RIGHTS.
The General Assembly of North Carolina enacts:
SECTION 1. 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:
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(6)	Notwithstanding the terms, provisions or conditions of any franchise or notwithstanding the terms or provisions of any waiver, to terminate, cancel or fail to renew any franchise with a licensed new motor vehicle dealer unless the manufacturer has satisfied the notice requirements of subparagraph c. and the Commissioner has determined, if requested in writing by the dealer within (i) the time period specified in G.S. 20‑305(6)c.1.II., III., or IV., as applicable, or (ii) the effective date of the franchise termination specified or proposed by the manufacturer in the notice of termination, whichever period of time is longer, and after a hearing on the matter, that there is good cause for the termination, cancellation, or nonrenewal of the franchise and that the manufacturer has acted in good faith as defined in this act regarding the termination, cancellation or nonrenewal. When such a petition is made to the Commissioner by a dealer for determination as to the existence of good cause and good faith for the termination, cancellation or nonrenewal of a franchise, the Commissioner shall promptly inform the manufacturer that a timely petition has been filed, and the franchise in question shall continue in effect pending the Commissioner's decision. The Commissioner shall try to conduct the hearing and render a final determination within 180 days after a petition has been filed. If the termination, cancellation or nonrenewal is pursuant to G.S. 20‑305(6)c.1.III. then the Commissioner shall give the proceeding priority consideration and shall try to render his final determination no later than 90 days after the petition has been filed. Any parties to a hearing by the Commissioner under this section shall have a right of review of the decision in a court of competent jurisdiction pursuant to Chapter 150B of the General Statutes. Any determination of the Commissioner under this section finding that good cause exists for the nonrenewal, cancellation, or termination of any franchise shall automatically be stayed during any period that the affected dealer shall have the right to judicial review or appeal of the determination before the superior court or any other appellate court and during the pendency of any appeal; provided, however, that within 30 days of entry of the Commissioner's order, the affected dealer provide such security as the reviewing court, in its discretion, may deem appropriate for payment of such costs and damages as may be incurred or sustained by the manufacturer by reason of and during the pendency of the stay. Although the right of the affected dealer to such stay is automatic, the procedure for providing such security and for the award of damages, if any, to the manufacturer upon dissolution of the stay shall be in accordance with G.S. 1A‑1, Rule 65(d) and (e). No such security provided by or on behalf of any affected dealer shall be forfeited or damages awarded against a dealer who obtains a stay under this subdivision in the event the ownership of the affected dealership is subsequently transferred, sold, or assigned to a third party in accordance with this subdivision or subdivision (4) of this section and the closing on such transfer, sale, or assignment occurs no later than 180 days after the date of entry of the Commissioner's order. Furthermore, unless and until the termination, cancellation, or nonrenewal of a dealer's franchise shall finally become effective, in light of any stay or any order of the Commissioner determining that good cause exists for the termination, cancellation, or nonrenewal of a dealer's franchise as provided in this paragraph, a dealer who receives a notice of termination, cancellation, or nonrenewal from a manufacturer as provided in this subdivision shall continue to have the same rights to assign, sell, or transfer the franchise to a third party under the franchise and as permitted under G.S. 20‑305(4) as if notice of the termination had not been given by the manufacturer. Any franchise under notice or threat of termination, cancellation, or nonrenewal by the manufacturer which is duly transferred in accordance with G.S. 20‑305(4) shall not be subject to termination by reason of failure of performance or breaches of the franchise on the part of the transferor.
a.	Notwithstanding the terms, provisions or conditions of any franchise or the terms or provisions of any waiver, good cause shall exist for the purposes of a termination, cancellation or nonrenewal when:
1.	There is a failure by the new motor vehicle dealer to comply with a provision of the franchise which provision is both reasonable and of material significance to the franchise relationship provided that the dealer has been notified in writing of the failure within 180 days after the manufacturer first acquired knowledge of such failure;
2.	If the failure by the new motor vehicle dealer relates to the performance of the new motor vehicle dealer in sales or service, then good cause shall be defined as the failure of the new motor vehicle dealer to comply with reasonable performance criteria established by the manufacturer if the new motor vehicle dealer was apprised by the manufacturer in writing of the failure; and
I.	The notification stated that notice was provided of failure of performance pursuant to this section;
II.	The new motor vehicle dealer was afforded a reasonable opportunity, for a period of not less than 180 days, to comply with the criteria; and
III.	The new motor vehicle dealer failed to demonstrate substantial progress towards compliance with the manufacturer's performance criteria during such period and the new motor vehicle dealer's failure was not primarily due to economic or market factors within the dealer's relevant market area which were beyond the dealer's control.
b.	The manufacturer shall have the burden of proof under this section.
c.	Notification of Termination, Cancellation and Nonrenewal. –
1.	Notwithstanding the terms, provisions or conditions of any franchise prior to the termination, cancellation or nonrenewal of any franchise, the manufacturer shall furnish notification of termination, cancellation or nonrenewal to the new motor vehicle dealer as follows:
I.	In the manner described in G.S. 20‑305(6)c2 below; and
II.	Not less than 90 days prior to the effective date of such termination, cancellation or nonrenewal; or
III.	Not less than 15 days prior to the effective date of such termination, cancellation or nonrenewal with respect to any of the following:
A.	Insolvency of the new motor vehicle dealer, or filing of any petition by or against the new motor vehicle dealer under any bankruptcy or receivership law;
B.	Failure of the new motor vehicle dealer to conduct its customary sales and service operations during its customary business hours for seven consecutive business days, except for acts of God or circumstances beyond the direct control of the new motor vehicle dealer;
C.	Revocation of any license which the new motor vehicle dealer is required to have to operate a dealership;
D.	Conviction of a felony involving moral turpitude, under the laws of this State or any other state, or territory, or the District of Columbia.
IV.	Not less than 180 days prior to the effective date of such termination, cancellation, or nonrenewal which occurs 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, assignment, merger, consolidation, combination, joint venture, redemption, operation of law or otherwise; or the termination, suspension, or cessation of a part or all of the business operations of the manufacturers, factory branch, distributor, or distributor branch; or discontinuance of the sale of the product line 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.
V.	Unless the failure by the new motor vehicle dealer relates to the performance of the new motor vehicle dealer in sales or service, not more than one year after the manufacturer first acquired knowledge of the basic facts comprising the failure.
2.	Notification under this section shall be in writing; shall be by certified mail or personally delivered to the new motor vehicle dealer; and shall contain:
I.	A statement of intention to terminate, cancel or not to renew the franchise;
II.	A detailed statement of all of the material reasons for the termination, cancellation or nonrenewal; and
III.	The date on which the termination, cancellation or nonrenewal takes effect.
3.	Notification provided in G.S. 20‑305(6)c1II of 90 days prior to the effective date of such termination, cancellation or renewal may run concurrent with the 180 days designated in G.S. 20‑305(6)a2II provided the notification is clearly designated by a separate written document mailed by certified mail or personally delivered to the new motor vehicle dealer.
d.	Payments.
1.	Notwithstanding the terms of any franchise, agreement, or waiver, upon  the termination, nonrenewal or cancellation of any franchise by the manufacturer or distributor,  the cessation of business or the termination, nonrenewal, or cancellation of any franchise by any new motor vehicle dealer located in this State, or upon any of the occurrences set forth in G.S. 20‑305(6)c.1.IV., the manufacturer or distributor shall purchase from and compensate the new motor vehicle dealer  for all of the following:
I.	Each new motor vehicle within the new motor vehicle dealer's inventory that is of a line‑make manufactured or distributed by the manufacturer or distributor,  which has not been substantially altered or damaged to the prejudice of the manufacturer or distributor while in the new motor vehicle dealer's possessionand for which no certificate of title has been issued. New motor vehicles shall be purchased by the manufacturer or distributor from the new motor vehicle dealer at the dealer's net cost. For purposes of this sub-subdivision, "net cost" is defined as the dealer's cost plus any charges by the manufacturer or distributor for distribution, delivery, advertising, and taxes less all allowances paid to the dealer by the manufacturer or distributor. In addition, the manufacturer or distributor shall be entitled to discount the net cost paid by the new motor vehicle dealer based on the odometer mileage of each new motor vehicle at the time of its purchase from the dealer by the manufacturer or distributor, to be determined as follows: 
(i)	Vehicles with 0‑1,000 miles shall be compensated at the new motor vehicle dealer's net cost without any discount on the basis of odometer mileage. 
(ii)	Vehicles with 1,001‑6,000 miles shall be compensated at the new motor vehicle dealer's net cost, reduced by the net discount value of each mile in excess of 1,000 miles, where "net discount value" is determined according to the following formula: net cost to the dealer multiplied by total mileage in excess of 1,000 miles divided by 100,000.
(iii)	Vehicles with more than 6,000 miles – no obligation on the part of the manufacturer or distributor to purchase. 
(iv)	Any mileage on a motor vehicle recorded by a manufacturer or distributor or agent of a manufacturer or distributor prior to its physical delivery to a motor vehicle dealer shall not be included in the discount calculation. 
II.	Unused, undamaged and unsold supplies and parts purchased from the manufacturer or distributor or sources approved by the manufacturer or distributor, at  the current catalogue price, less any applicable discounts, provided such supplies and parts are currently offered for sale by the manufacturer or distributor in its current parts catalogs and are in salable condition;
III.	Equipment, signs, and furnishings that have not been substantially altered or damaged and that have been required by the manufacturer or distributor to be purchased by the new motor vehicle dealer from the manufacturer or distributor, or their approved sources. 
IV.	Special tools that have not been substantially altered or damaged and that have been required by the manufacturer or distributor to be purchased by the new motor vehicle dealer from the manufacturer or distributor, or their approved sources within five years immediately preceding the termination, nonrenewal or cancellation of the franchise. The amount of compensation which shall be paid to the new motor vehicle dealer by the manufacturer or distributor shall be the net acquisition price if the item was acquired in the 12 months preceding the date of receipt of the dealer's request for compensation; seventy-five percent (75%) of the net acquisition price if the item was acquired between 13 and 24 months preceding the dealer's request for compensation; fifty percent (50%) of the net acquisition price if the item was acquired between 25 and 36 months preceding the dealer's request for compensation; twenty-five percent (25%) of the net acquisition price if the item was acquired between 37 and 60 months preceding the dealer's request for compensation.
2.	 The compensation provided above shall be paid by the manufacturer or distributor not later than 90 days  after the manufacturer or distributor has received notice in writing from or on behalf of the new motor vehicle dealer specifying the elements of compensation requested by the dealer; provided the new motor vehicle dealer has, or can obtain, clear title to the inventory and has conveyed, or can convey, title and possession of the same to the manufacturer or distributor. Within 10 days after receipt of the dealer's written request for compensation, the manufacturer or distributor shall send the dealer detailed written instructions and forms required by the manufacturer or distributor to effectuate the receipt of the compensation requested by the dealer. The manufacturer or distributor shall be obligated to pay or reimburse the dealer for any transportation charges associated with the repurchase obligations of the manufacturer or distributor under this sub‑subparagraph. The manufacturer or distributor may not charge the dealer any handling, restocking, or other similar costs or fees associated with items repurchased by the manufacturer under this sub‑subparagraph.
3.	In addition to the other payments set forth in this section, if a termination, cancellation, or nonrenewal is premised upon any of the occurrences set forth in G.S. 20‑305(6)c.1.IV., then the manufacturer or distributor shall be liable to the dealer for an amount at least equivalent to the fair market value of the franchise on (i) the date the franchisor announces the action which results in termination, cancellation, or nonrenewal; or (ii) the date the action which results in termination, cancellation, or nonrenewal first became general knowledge; or (iii) the day 12 months prior to the date on which the notice of termination, cancellation, or nonrenewal is issued, whichever amount is higher. Payment is due not later than 90 days after the manufacturer or distributor has received notice in writing from, or on behalf of, the new motor vehicle dealer specifying the elements of compensation requested by the dealer. If the termination, cancellation, or nonrenewal is due to a manufacturer's change in distributors, the manufacturer may avoid paying fair market value to the dealer if the new distributor or the manufacturer offers the dealer a franchise agreement with terms acceptable to the dealer.
e.	Dealership Facilities Assistance upon Termination, Cancellation or Nonrenewal.
In the event of the occurrence of any of the events specified in G.S. 20‑305(6)d.1. above: 
1.	Subject to paragraph 3, if the new motor vehicle dealer is leasing the dealership facilities from a lessor other than the manufacturer or distributor, the manufacturer or distributor shall pay the new motor vehicle dealer a sum equivalent to the rent for the unexpired term of the lease or three year's rent, whichever is less, or such longer term as is provided in the franchise agreement between the dealer and manufacturer; except that, in the case of motorcycle dealerships, the manufacturer shall pay the new motor vehicle dealer the sum equivalent to the rent for the unexpired term of the lease or one year's rent, whichever is less, or such longer term as provided in the franchise agreement between the dealer and manufacturer; or
2.	Subject to paragraph 3, if the new motor vehicle dealer owns the dealership facilities, the manufacturer or distributor shall pay the new motor vehicle dealer a sum equivalent to the reasonable rental value of the dealership facilities for three years, or for one year in the case of motorcycle dealerships.
3.	In order to be entitled to facilities assistance from the manufacturer or distributor, as provided in this paragraph e., the dealer, owner, or lessee, as the case may be, shall have the obligation to mitigate damages by listing the demised premises for lease or sublease with a licensed real estate agent within 30 days after the effective date of the termination of the franchise and thereafter by reasonably cooperating with said real estate agent in the performance of the agent's duties and responsibilities. In the event that the dealer, owner, or lessee is able to lease or sublease the demised premises, the dealer shall be obligated to pay the manufacturer the net revenue received from such mitigation up to the total amount of facilities assistance which the dealer has received from the manufacturer pursuant to sub‑subdivisions 1. and 2. To the extent and for such uses and purposes as may be consistent with the terms of the lease, a manufacturer who pays facilities assistance to a dealer under this paragraph e. shall be entitled to occupy and use the dealership facilities during the years for which the manufacturer shall have paid rent under sub‑subdivisions 1. and 2.
4.	In the event the termination relates to fewer than all of the franchises operated by the dealer at a single location, the amount of facilities assistance which the manufacturer or distributor is required to pay the dealer under this sub‑subdivision shall be based on the proportion of gross revenue received from the sale and lease of new vehicles by the dealer and from the dealer's parts and service operations during the three years immediately preceding the effective date of the termination (or any shorter period that the dealer may have held these franchises) of the line‑makes being terminated, in relation to the gross revenue received from the sale and lease of all line‑makes of new vehicles by the dealer and from the total of the dealer's and parts and service operations from this location during the same three‑year period.
5.	The compensation required for facilities assistance under this paragraph e. shall be paid by the manufacturer or distributor within 90 days after the manufacturer or distributor has received notice in writing from, or on behalf of, a new motor vehicle dealer specifying the elements of compensation requested by the dealer.
f.	The provisions of sub‑subdivisions d. and e. of this subdivision shall also apply when a manufacturer or distributor provides public notice or notifies one of its franchised dealers located in this State that it intends to either phase out the dealer's franchise or terminate the dealer's franchise at a later date, or when a manufacturer or distributor provides public notice or notice to any of its franchised or licensed dealers located in this State that any of the occurrences set forth in G.S. 20‑305(6)c.1.IV. has occurred or may reasonably be expected to occur in the future, so as to either render a dealer's franchised business substantially unmarketable, or saleable only at prices significantly below its fair market value prior to the date any of the occurrences set forth in G.S. 20‑305(6)c.1.IV., either having occurred in the past or to occur in the future, became public knowledge.
g.	A franchise shall continue in full force and operation notwithstanding a change, in whole or in part, of an established plan 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 deemed to be a change of an established plan or system of distribution.
Upon the occurrence of the change, the Division shall deny an application of a manufacturer, factory branch, distributor, or distributor branch for a license or license renewal unless the applicant for a license as a manufacturer, factory branch, distributor, or distributor branch offers to each motor vehicle dealer who is a party to a franchise for that line‑make a new franchise agreement containing substantially the same provisions which were contained in the previous franchise agreement or files an affidavit with the Division acknowledging its undertaking to assume and fulfill the rights, duties, and obligations of its predecessor under the previous franchise agreement.
h.	The rights provided to new motor vehicle dealers in sub‑subdivisions d. and e. of this subdivision shall be in addition to any other rights afforded dealers under any franchise or agreement. It shall be unlawful for a manufacturer or distributor to condition making any of the payments required in sub‑subdivisions d. and e. of this subdivision on the willingness of a new motor vehicle dealer to waive any of the dealer's rights provided by this or any other law. It shall be unlawful for a manufacturer or distributor to offer any renewal or subsequent franchise or other agreement relating to the sale of motor vehicles or motor vehicle parts or accessories, or relating to the service of motor vehicles, which is conditioned on the willingness of a new motor vehicle dealer to waive any of the dealer's rights provided by this or any other law. Any waiver of rights executed by any new motor vehicle dealer in favor of a manufacturer or distributor which violates or is inconsistent with any of the terms or provisions of this Chapter shall be void.
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SECTION 2.  This act is effective when it becomes law.
SECTION 3.  If any provision of this act or its application is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provisions or application, and to this end the provisions of this act are severable.