Chapter 660 Oregon Laws 1999

Session Law

AN ACT

HB 2735

Relating to motor vehicle dealership franchises; creating new provisions; and amending ORS 650.120, 650.130, 650.150, 650.155, 650.158 and 650.165.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 650.120 is amended to read:

650.120. For the purposes of ORS 650.120 to 650.170:

(1) "Dealer" means any person who has been issued a vehicle dealer certificate under ORS 822.020 and pursuant to a franchise from a manufacturer, distributor or importer engages in buying, selling, leasing or exchanging new motor vehicles [pursuant to a franchise from a manufacturer, distributor or importer].

(2) "Dealership" means the location from which a dealer buys, sells, leases, trades, stores, takes on consignment[,] or in any other manner deals in new motor vehicles.

(3)(a) "Distributor" means a person who sells or distributes motor vehicles to motor vehicle dealers.

(b) "Distributor" does not include a person who sells or distributes only motor vehicles with a gross vehicle weight rating of 8,500 pounds or more.

(4) "Franchise" means a contract or agreement under which:

(a) The franchisee is granted the right to sell, lease and exchange new motor vehicles manufactured, distributed or imported by the franchisor;

(b) The franchise is an independent business operating as a component of a distribution or marketing system prescribed in substantial part by the franchisor;

(c) The franchisee's business is substantially associated with the trademark, trade name, commercial symbol or advertisements designating the franchisor or the products distributed by the franchisor; [and]

(d) The franchisee's business is substantially reliant on the franchisor for a continued supply of motor vehicles, parts and accessories[.];

(e) The franchisee is granted the right to perform warranty repairs authorized by the franchisor; and

(f) The franchisee is granted the right to sell, install and exchange parts, equipment and accessories manufactured, distributed or imported by the franchisor for use in or on motor vehicles.

(5) "Franchisee" means a dealer to whom a franchise is granted.

(6) "Franchisor" means a manufacturer, distributor or importer who grants a franchise to a dealer.

(7)(a) "Importer" means a person who transports or arranges for the transportation of any foreign manufactured new motor vehicle into the United States for sale in this state.

(b) "Importer" does not include a person who transports or arranges for the transportation of any foreign manufactured new motor vehicle with a gross vehicle weight rating of 8,500 pounds or more into the United States for sale in this state.

(8)(a) "Manufacturer" means a person who manufactures or assembles motor vehicles or who manufactures or installs on previously assembled truck chassis special bodies or equipment, other than motor homes, [which] that when installed [form] forms an integral part of the motor vehicle and constitutes a major manufacturing alteration and which completed unit is owned by the manufacturer.

(b) "Manufacturer" does not include a person who manufactures only motor vehicles with a gross vehicle weight rating of 8,500 pounds or more.

(9) "Manufacturer's suggested retail price" means the retail price of the new motor vehicle suggested by the manufacturer, including the retail delivered price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the new motor vehicle at the time of delivery to the dealer that is not included within the retail price suggested by the manufacturer for the new motor vehicle without the accessory or optional equipment.

(10) "Motor home" means a motor vehicle that is designed to provide temporary living quarters and is built into an integral part of, or is permanently attached to, a self-propelled motor vehicle chassis or van. The vehicle must contain permanently installed independent life support systems and provide at least four of the following facilities:

(a) Cooking;

(b) Refrigeration or ice box;

(c) Self-contained toilet;

(d) Heating or air conditioning;

(e) A potable water supply system including a faucet and sink; or

(f) A separate 110-120 volt electrical power supply or liquid petroleum gas supply.

(11) "Relevant market area" means a circular area around an existing dealership of:

(a) Not less than a 10-mile radius from the dealership site;

(b) Not less than a 15-mile radius from the dealership site if the population is less than 250,000 within a 10-mile radius from an existing dealership and 150,000 or more within a 15-mile radius from an existing dealership;

(c) Not less than a 20-mile radius from the dealership site if the population is less than 150,000 within a 15-mile radius from an existing dealership; or

(d) The area of sales and service responsibility determined under the franchise agreement if the area is larger than the area provided for in paragraphs (a), (b) or (c) of this subsection.

[(9)] (12) "Replacement dealer" means any person who, at a dealership where the former dealer was franchised by the same manufacturer, distributor or importer, has been issued a vehicle dealer certificate under ORS 822.020 and pursuant to a franchise from a manufacturer, distributor or importer engages in buying, selling, leasing or exchanging new motor vehicles [pursuant to a franchise from a manufacturer, distributor or importer, and who does so at a dealership where the former dealer was franchised by the same manufacturer, distributor or importer].

SECTION 2. ORS 650.130 is amended to read:

650.130. Notwithstanding the terms of any franchise or other agreement, it shall be unlawful for any manufacturer, distributor or importer to:

(1) Require or attempt to require a dealer to accept delivery of any motor vehicle, part, accessory or any other commodity not voluntarily ordered by the dealer. This subsection shall not apply to recall safety and emissions campaign parts not voluntarily ordered by the dealer or any vehicle features, parts, accessories or other components mandated by federal, state or local law.

(2) Coerce or attempt to coerce a dealer to enter any agreement or sales promotion program by threatening to cancel the franchise of the dealer.

(3) Refuse or fail to deliver, within a reasonable time and in a reasonable quantity, any new motor vehicle, part or accessory covered by the franchise if the vehicle, part or accessory is advertised as being available for delivery or is being delivered to another dealer. This subsection is not violated, however, if a failure to deliver is the result of a cause beyond the control of the manufacturer, distributor or importer.

(4) Prevent or attempt to prevent a dealer from making reasonable changes in the capital structure of a dealership or the means by which the dealership is financed, provided that the dealer meets any reasonable capital requirement of the manufacturer, distributor or importer.

[(5) Unreasonably fail to give effect to, or attempt to prevent unreasonably, any sale or transfer of the ownership or management, or any interest in the ownership or management, of a dealer, dealership or franchise.]

[(6) Unreasonably fail to give effect to, or attempt to prevent unreasonably, the succession to a dealership by any legal heir or devisee under the will of a dealer or under the laws of descent and distribution of this state or under any written instrument filed with the manufacturer, distributor or importer during the dealer's lifetime. If such instrument is filed, the succession to the dealership shall be governed by the terms of such written instrument.]

[(7)] (5) Unreasonably refuse to compensate the dealer for work or services performed and expenses incurred in accordance with the dealer's delivery, preparation and warranty obligations under the terms of a franchise or agreement.

[(8)] (6) Coerce or attempt to coerce a dealer to participate monetarily in any advertising campaign or contest, or purchase any promotional materials, display devices or display decorations or materials at the expense of the dealer.

(7) Establish a maximum price a dealer may charge for motor vehicles.

(8) Initiate an audit to determine the validity of paid claims for dealer compensation or any charge-backs for warranty parts or service compensation more than one year following the date of payment. Parties shall cooperate to ensure that permitted audits are concluded within 90 days of initiation.

(9) Initiate an audit to determine the validity of paid claims for dealer compensation or any charge-backs for consumer or dealer incentives more than two years following the date of payment. Parties shall cooperate to ensure that permitted audits are concluded within 90 days of initiation.

(10) Unfairly compete with a dealer in any matters governed by the franchise including, but not limited to, the sale or allocation of vehicles or other franchisor products, or the execution of dealer programs or benefits. This subsection applies if the manufacturer, distributor or importer owns or controls a business that is a dealer in this state.

(11) Own, operate or control a business or enter into any contract, agreement or other written instrument permitting a person that is not a dealer to be compensated by the manufacturer, distributor or importer for performing warranty repairs and services if the business is located within a dealer's relevant market area. This subsection does not apply to warranty repairs and services provided for commercial or government fleets.

(12) Terminate, cancel, fail to renew or fail to approve the sale, transfer or assignment of any franchise agreement because the dealer owns, has an investment in, participates in the management of or holds a franchise agreement with another manufacturer, distributor or importer at a different dealership site, or has franchises with more than one manufacturer, distributor or importer sharing the same dealership site, facilities, personnel or display space before the effective date of this 1999 Act.

SECTION 3. ORS 650.150 is amended to read:

650.150. (1) A dealer may enjoin a manufacturer, distributor or importer from franchising an additional motor vehicle dealership of the same line-make within the dealer's relevant market area for good cause, provided that the dealer files a complaint with a court of competent jurisdiction within 60 days of receiving the notice specified in subsection (5) of this section. For purposes of this section, [an indication of the relevant market area shall be the area of sales and service responsibility designated in the dealer's franchise,] "relevant market area" shall have the meaning given that term in ORS 650.120, but other factors such as actual sales and service area shall be considered.

(2) A dealer may enjoin a manufacturer, distributor or importer from relocating an existing motor vehicle dealership of the same line-make within the dealer's relevant market area for good cause, provided that the dealer files a complaint with a court of competent jurisdiction within 60 days of receiving the notice specified in subsection (5) of this section. This subsection shall not apply to an existing dealership [which] or to the dealership of a replacement dealer that is relocating to a site within a [three-mile radius of its existing site] one-mile radius of its existing site if the relevant market area of the existing or replacement dealership is not more than 10 miles, within a two-mile radius of its existing site if the relevant market area of the existing or replacement dealership is not more than 15 miles and within a three-mile radius of the existing site if the relevant market area of the existing or replacement dealership is more than 15 miles.

(3) A dealer may enjoin a manufacturer, distributor or importer from franchising a replacement dealer to operate a dealership of the same line-make within the dealer's relevant market area for good cause, provided that the franchising of the replacement dealer has not occurred within one year of the expiration or termination of the former franchise and the dealer files a complaint with a court of competent jurisdiction within 60 days of receiving the notice specified in subsection (5) of this section. For the purposes of this section, [an indication of the relevant market area shall be the area of sales and service responsibility designated in the dealer's franchise,] "relevant market area" shall have the meaning given that term in ORS 650.120, but other factors such as actual sales and service area shall be considered.

(4) In determining whether good cause exists pursuant to subsection (1), (2) or (3) of this section, the court may consider all factors that the court considers relevant, but in any case shall consider the following factors:

(a) Whether threats or other coercive action, oral or written, were made to or taken against the dealer by the manufacturer, distributor or importer.

(b) Whether the dealer is asked to terminate one franchise in order to keep another franchise.

(c) Whether there will be an unjustifiable adverse effect upon existing dealers because of the grant of the new franchise or the relocation of an existing franchise. For purposes of this paragraph, the court may consider all factors that the court determines relevant, but in any case shall consider the following factors:

(A) The extent, nature and permanency of the investment of the existing motor vehicle dealers and the proposed motor vehicle dealer.

(B) The effect on the retail motor vehicle business in the relevant market area.

(d) The effect on consumers in the relevant market area. For purposes of this paragraph, the court may consider all factors that the court determines relevant, but in any case shall consider the following factors in the relevant market area:

(A) The adequacy and convenience of existing motor vehicle sales facilities and service facilities.

(B) The supply of motor vehicle parts and qualified service personnel.

(5) A manufacturer, distributor or importer must give an existing dealership at least 60 days' written notice prior to franchising a new dealership of the same line-make or authorizing the relocation of another dealership of the same line-make within the relevant market area of the existing dealership. Notice under this subsection must be given to all dealers of the same line-make within the [designated area of sales and service responsibility, or within a 10-mile radius of the site of the proposed new or relocated dealership, whichever is greater] relevant market area of the site of the proposed new or relocated dealership.

(6) If a dealer enjoins a manufacturer, distributor or importer under this section, the manufacturer, distributor or importer shall pay the dealer's court costs and attorney fees if the dealer prevails regardless of whether a new dealership was actually established.

SECTION 4. ORS 650.155 is amended to read:

650.155. (1) Notwithstanding the terms of any franchise, the manufacturer is liable for any and all damage to new motor vehicles before delivery to a carrier or transporter.

(2) Whenever a new motor vehicle is damaged in transit, the dealer shall:

(a) Notify the manufacturer of the damage within three business days from the date of delivery to the dealer or within any additional time as specified in the franchise; and

(b) Request from the manufacturer authorization to replace the components, parts and accessories damaged or to otherwise repair the damage.

(3) If the manufacturer refuses or fails to authorize repair of any damage within 10 days after receipt of notification under subsection (2) of this section, or within any additional time as specified in the franchise, ownership of the new motor vehicle shall revert to the manufacturer, and the new motor vehicle dealer shall have no obligation, financial or otherwise, with respect to the motor vehicle.

(4) A manufacturer shall disclose in writing to a dealer, at the time of delivery of a new motor vehicle, the nature and extent of any and all damage and post-manufacturing repairs.

(5) If the total value of repairs to a new motor vehicle by the manufacturer's authorized agent and a dealer equals or exceeds the amount specified under subsection (6) of this section, the manufacturer may either repurchase the motor vehicle from the dealer, or provide reasonable and adequate compensation to the dealer to assist in sale or disposition of the new motor vehicle, as long as the dealer has complied with all other contractual agreements with regard to damaged vehicles. If the manufacturer repurchases the motor vehicle, the dealer shall have no obligation, financial or otherwise, with respect to the motor vehicle.

(6) A dealer shall disclose, in writing, to a purchaser of the new motor vehicle prior to entering into a sales contract that the new motor vehicle has been damaged and repaired if the damage to the new motor vehicle exceeds [$300] $400, as calculated at the rate of the dealer's authorized warranty rate for labor and parts. Replacement of glass, tires, bumpers or any comparable nonwelded component is not considered damage and repair for purposes of this section. For purposes of this subsection, "comparable nonwelded component" does not include a fender, hood, trunk lid or door.

[(7) For purposes of this section, "manufacturer's suggested retail price" means the retail price of the new motor vehicle suggested by the manufacturer, including the retail delivered price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the new motor vehicle at the time of delivery to the new motor vehicle dealer which is not included within the retail price suggested by the manufacturer for the new motor vehicle.]

SECTION 5. ORS 650.158 is amended to read:

650.158. (1) Each manufacturer, distributor or importer shall specify in writing to each of its dealers in this state:

(a) The dealer's obligations for predelivery preparation and warranty service on motor vehicles of the manufacturer, distributor or importer;

(b) The schedule of compensation to be paid the dealer for parts, work and service in connection with predelivery preparation and warranty service; and

(2) A schedule of compensation shall include reasonable compensation for diagnostic work, repair service and labor. Time allowances for the diagnosis and performance of predelivery and warranty service shall be reasonable and adequate for the work to be performed. The hourly rate paid to a dealer shall not be less than the rate charged by the dealer to nonwarranty customers for nonwarranty service and repairs. Reimbursement for parts, other than parts used to repair the living facilities of motor homes, purchased by the dealer for use in performing predelivery and warranty service shall be the amount charged by the dealer to nonwarranty customers, as long as that amount is not unreasonable.

(3) A manufacturer, distributor or importer shall include, in written notices of vehicle recalls to motor vehicle owners and dealers, the expected date by which necessary parts and equipment will be available to the dealers for the correction of the defect or defects. A manufacturer, distributor or importer shall adequately compensate a dealer for repair service performed under the recall.

(4) All claims made by dealers under this section for labor and parts shall be paid or credited to the dealer within 30 days following their approval. All such claims shall be either approved or disapproved within 30 days after their receipt in the manner specified by the manufacturer, distributor or importer. Any claim not specifically disapproved in writing or through electronic communication within 30 days after receipt shall be considered approved, and payment shall be made within 30 days. The dealer shall be notified in writing of the grounds for disapproval of any claim. [For a period of two years following payment, the manufacturer, distributor or importer may reserve the right to audit claims and charge back the dealer for false or fraudulent claims or where the dealer failed to reasonably substantiate or properly submit the claim.]

SECTION 6. ORS 650.165 is amended to read:

650.165. It shall be a violation of ORS 650.120 to 650.170 for a franchisor to require a franchisee to agree to the inclusion of a term or condition in a franchise, or in any lease or agreement ancillary or collateral to a franchise, as a condition to the offer, grant or renewal of such franchise, lease or agreement, that:

(1) Requires the franchisee to waive trial by jury in actions involving the franchisor;

(2) Specifies the jurisdictions, venues or tribunals in which disputes arising with respect to the franchise, lease or agreement shall or shall not be submitted for resolution or otherwise prevents a franchisee from bringing an action in a particular forum otherwise available under the law; [or]

(3) Requires that disputes between the franchisor and franchisee be submitted to arbitration or to any other binding alternate dispute resolution procedure. However, any such franchise, lease or agreement may authorize the submission of a dispute to arbitration or to binding alternate dispute resolution if the franchisor and franchisee voluntarily agree to submit such dispute to arbitration or binding alternate dispute resolution at the time the dispute arises[.]; or

(4) Adversely alters to a substantial degree the rights and obligations of a franchisee under any existing franchise contract.

SECTION 7. Sections 8 and 9 of this 1999 Act are added to and made a part of ORS 650.120 to 650.170.

SECTION 8. (1) If a new motor vehicle becomes inoperative prior to being sold to a consumer, the franchisor is liable for the repair of the motor vehicle if the motor vehicle is inoperative due to a mechanical failure that is not the result of negligence on the part of the dealer.

(2) Whenever a new motor vehicle becomes inoperative, the dealer shall notify the franchisor and request authorization from the franchisor to repair the vehicle.

(3) If the franchisor refuses or fails to authorize repair of the inoperative motor vehicle within 30 business days after receiving notice under subsection (2) of this section, ownership of the new motor vehicle shall revert back to the franchisor, and the franchisee shall have no obligation, financial or otherwise, with respect to the motor vehicle.

(4) If the franchisor is unable to deliver to the franchisee the parts needed to repair an inoperative new motor vehicle within 30 business days after receiving notice under subsection (2) of this section, ownership of the new motor vehicle shall revert to the franchisor, and the franchisee shall have no obligation, financial or otherwise, with respect to the motor vehicle.

SECTION 9. (1) To transfer, assign or sell the ownership or management, or any interest in the ownership or management, of a dealer, dealership or franchise, the dealer shall notify the franchisor of the decision to transfer, assign or sell. The notice shall include completed application forms and related information generally used by the manufacturer, distributor or importer to conduct a review of transfers, assignments or sales and a copy of all agreements regarding the transfer, assignment or sale.

(2) Within 60 days of receiving notice sent under subsection (1) of this section, a franchisor shall send a notice by certified mail to the dealer. The notice sent under this subsection shall specify approval or disapproval of the transfer, assignment or sale. If the transfer, assignment or sale is disapproved, the notice shall set forth material reasons for the disapproval.

(3) A manufacturer, distributor or importer may not unreasonably withhold approval of a transfer, assignment or sale. It is unreasonable for a manufacturer, distributor or importer to reject a prospective transferee, assignee or buyer who is of good moral character and who otherwise meets the manufacturer's, distributor's or importer's written and reasonable standards or qualifications relating to the prospective transferee's, assignee's or buyer's:

(a) Business experience and performance; and

(b) Financial qualifications.

(4) If the manufacturer, distributor or importer does not respond within 60 days of receiving a notice sent under subsection (1) of this section, the transfer, assignment or sale shall be considered approved and shall take effect.

(5) A manufacturer, distributor or importer may exercise a right of first refusal if the right is included in the franchise agreement, the transfer, assignment or sale consists of more than 50 percent of the dealer's ownership of the franchise and all of the following requirements are met:

(a) The manufacturer, distributor or importer sends a notice by certified mail to the dealer within 60 days of receiving a notice under subsection (1) of this section specifying that the franchisor is exercising a right of first refusal.

(b) The exercise of the right of first refusal will result in the dealer and any owner of the dealer receiving consideration, terms and conditions that are either the same as or better than those contracted to receive under the transfer, assignment or sale.

(c) The transferee, assignee or buyer is not any of the following:

(A) Any of the following family members of any owner of the dealer:

(i) A spouse;

(ii) A child or stepchild;

(iii) A grandchild or stepgrandchild;

(iv) The spouse of a child, stepchild, grandchild or stepgrandchild;

(v) A brother or sister or a stepbrother or stepsister; or

(vi) A parent or stepparent;

(B) A manager employed by the dealer who is otherwise qualified to be a dealer;

(C) A partnership or corporation controlled by any of the family members listed in paragraph (c)(A) of this subsection; or

(D) A trust established or to be established:

(i) For the purposes of allowing the transferee, assignee or buyer to continue to qualify as such under the manufacturer's, distributor's or importer's standards; or

(ii) To provide for the succession of the franchise to qualified designated family members or a qualified manager in the event of the death or incapacity of the dealer.

(d) The manufacturer, distributor or importer pays the reasonable expenses, including attorney fees, that are incurred by the transferee, assignee or buyer before the manufacturer, distributor or importer exercises a right of first refusal. A manufacturer, distributor or importer may require the transferee, assignee or buyer to provide an accounting of expenses incurred prior to issuing payment.

SECTION 10. (1) Sections 8 and 9 of this 1999 Act and ORS 650.120, 650.130, 650.150, 650.155, 650.158 and 650.165, as amended by sections 1 to 6 of this 1999 Act:

(a) Apply to franchises entered into prior to, on or after the effective date of this 1999 Act; and

(b) Apply only to:

(A) Damages to new motor vehicles, successions, transfers, assignments or sales and relevant market area determinations occurring on or after the effective date of this 1999 Act;

(B) Actions for injunctive relief initiated by notice on or after the effective date of this 1999 Act; and

(C) Liabilities under section 8 of this 1999 Act incurred on or after the effective date of this 1999 Act.

(2) ORS 650.130 (12) applies to the relationship of a dealer with another manufacturer, distributor or importer entered into prior to, on or after the effective date of this 1999 Act.

Approved by the Governor July 13, 1999

Filed in the office of Secretary of State July 14, 1999

Effective date October 23, 1999

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