By: Smith of Tarrant (Senate Sponsor - Watson) H.B. No. 2640
(In the Senate - Received from the House May 1, 2009;
May 4, 2009, read first time and referred to Committee on
Transportation and Homeland Security; May 14, 2009, reported
favorably, as amended, by the following vote: Yeas 7, Nays 0;
May 14, 2009, sent to printer.)
COMMITTEE AMENDMENT NO. 1 By: Watson
Amend H.B. 2640 (Engrossed version) as follows:
(1) On page 1, line 22, through page 1, line 50, strike
SECTION 2 and renumber subsequent SECTIONS accordingly
(2) On page 1, line 55, strike "(g) (3)".
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of motor vehicle manufacturers and
distributors.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 2301.257, Occupations Code, is amended
by adding Subsection (d) to read as follows:
(d) The act of filing an application under this section or a
form prescribed under this section does not establish the applicant
as a franchised dealer.
SECTION 2. Section 2301.359, Occupations Code, is amended
by amending Subsection (e) and adding Subsections (g), (h), and (i)
to read as follows:
(e) A manufacturer or distributor may not unreasonably
withhold approval of an application filed under Subsection (a).
[It is unreasonable for a manufacturer or distributor to reject a
prospective transferee who is of good moral character and who meets
the written, reasonable, and uniformly applied standards or
qualifications, if any, of the manufacturer or distributor relating
to the prospective transferee's business experience and financial
qualifications.]
(g) In determining whether to approve an application filed
under Subsection (a), a manufacturer or distributor may consider:
(1) whether a prospective transferee has been a
franchised dealer in this state;
(2) the moral character of the prospective transferee;
and
(3) the extent to which a prospective transferee meets
the criteria, if any, developed by the manufacturer or distributor
and made available to the prospective transferee, specifically to
determine the business experience and financial qualifications of a
prospective transferee.
(h) The criteria described by Subsection (g)(3) may be
applied by a manufacturer or distributor only if the criteria are
written, reasonable, and uniformly applied in similar situations.
(i) It is unreasonable for a manufacturer or distributor to
withhold approval of a prospective transferee who is of good moral
character and who meets the criteria described by Subsection
(g)(3).
SECTION 3. Section 2301.360(b), Occupations Code, is
amended to read as follows:
(b) In a protest under this section, the board must
determine whether the rejection was reasonable under the criteria
described by Section 2301.359(g)(3) [prospective transferee is
qualified]. The burden is on the manufacturer or distributor to
prove that the prospective transferee is not qualified under the
criteria. The board shall enter an order holding that the
prospective transferee either is qualified or is not qualified.
SECTION 4. Section 2301.464(a), Occupations Code, is
amended to read as follows:
(a) Not later than the 60th day before the date a franchised
dealer proposes to begin the relocation of a dealership, the dealer
must provide written notice of the dealer's intent to relocate to
the dealer's manufacturer, distributor, or representative. The
notice must be sent by certified mail, return receipt requested.
Notwithstanding the terms of any franchise, a manufacturer,
distributor, or representative may not deny or withhold approval of
a written application to relocate a franchise unless:
(1) the applicant receives written notice of the
denial or withholding of approval not later than the 60th day after
the date the application is received; and
(2) if the applicant files a protest with the board,
the board makes a determination of reasonable grounds under this
section.
SECTION 5. Section 2301.465, Occupations Code, is amended
by amending Subsections (a) and (b) and adding Subsections (h) and
(i) to read as follows:
(a) In this section:
(1) "Net cost" means the franchised dealer cost for a
new, unsold, undamaged, and complete motor vehicle [of the current
model year or the previous model year] in a dealer's inventory:
(A) plus any charges by the manufacturer,
distributor, or representative for distribution, delivery, and
taxes; and
(B) less all allowances paid to the franchised
dealer by the manufacturer, distributor, or representative.
(2) "Net discount value" is the net cost multiplied by
the total mileage, exclusive of mileage placed on the motor vehicle
before it was delivered to the dealer, divided by 100,000.
(b) Notwithstanding the terms of any franchise, after the
termination of a franchise, a manufacturer, distributor, or
representative shall pay to a franchised dealer or any lienholder,
in accordance with the interest of each, the following amounts:
(1) the dealer cost of each new motor vehicle in the
dealer's inventory with mileage of 5,000 [6,000] miles or less,
exclusive of mileage placed on the vehicle before it was delivered
to the dealer, reduced by the net discount value of each vehicle,
except that if a vehicle cannot be reduced by the net discount
value, the manufacturer or distributor shall pay the dealer the net
cost of the vehicle;
(2) the dealer cost of each new, unused, undamaged,
and unsold part or accessory that:
(A) is in the current parts catalogue and is
still in the original, resalable merchandising package and in an
unbroken lot, except in the case of sheet metal, a comparable
substitute for the original package may be used; and
(B) was purchased by the dealer either directly
from the manufacturer or distributor or from an outgoing authorized
dealer as a part of the dealer's initial inventory;
(3) the fair market value of each undamaged sign owned
by the dealer that bears a trademark or tradename used or claimed by
the manufacturer, distributor, or representative and that was
purchased from or at the request of the manufacturer, distributor,
or representative;
(4) the fair market value of all special tools, data
processing equipment, and automotive service equipment owned by the
dealer that:
(A) were recommended in writing and designated as
special tools and equipment;
(B) were purchased from or at the request of the
manufacturer, distributor, or representative; and
(C) are in usable and good condition except for
reasonable wear and tear; and
(5) the cost of transporting, handling, packing,
storing, and loading any property subject to repurchase under this
section.
(h) Notwithstanding any other law, this section does not
require a manufacturer, distributor, or representative to
repurchase a motor vehicle that:
(1) at the time of termination of the franchise had
been in the dealer's inventory for at least 24 months after the date
the dealer took delivery of the vehicle; or
(2) the dealer purchased not more than 30 days before
the date of termination of the franchise solely in anticipation of
the termination and, in the ordinary course of business, would not
have purchased.
(i) For purposes of this section, a sale of the assets or
stock of a dealership to a buyer who continues the operation of the
dealership is not a termination of a franchise.
SECTION 6. Section 2301.467, Occupations Code, is amended
to read as follows:
Sec. 2301.467. PROHIBITIONS: SALES STANDARDS, RELOCATIONS,
FACILITY CHANGES, PURCHASE OF EQUIPMENT. (a) Notwithstanding the
terms of any franchise, a manufacturer, distributor, or
representative may not:
(1) require adherence to unreasonable sales or service
standards; or
(2) unreasonably require a franchised dealer to
purchase special tools or equipment.
(b) Notwithstanding the terms of any franchise, a
manufacturer, distributor, or representative may not unreasonably
require a franchised dealer to relocate, or to replace or
substantially change, alter, or remodel the dealer's facilities.
For purposes of this subsection, an act is reasonable if it is
justifiable in light of current and reasonably foreseeable
projections of economic conditions, financial expectations, and
the market for new motor vehicles in the relevant market area.
(c) The prohibitions under this section apply to the
relationship between a manufacturer and:
(1) a current franchisee of the manufacturer; or
(2) a franchised dealer who is seeking to become a
franchisee of the manufacturer.
SECTION 7. Section 2301.472(d), Occupations Code, is
amended to read as follows:
(d) In determining whether a manufacturer or distributor
has established that the denial or withholding of approval is
reasonable, the board shall consider all existing circumstances,
including:
(1) the dealer's sales in relation to the sales in the
market;
(2) the dealer's investment and obligations;
(3) injury or benefit to the public;
(4) the adequacy of the dealer's sales and service
facilities, equipment, parts, and personnel in relation to those of
other dealers of new motor vehicles of the same line-make;
(5) whether warranties are being honored by the dealer
agreement;
(6) the parties' compliance with the franchise, except
to the extent that the franchise conflicts with this chapter;
(7) the enforceability of the franchise from a public
policy standpoint, including issues of the reasonableness of the
franchise's terms, oppression, adhesion, and the parties' relative
bargaining power;
(8) whether the dealer complies with reasonable
capitalization requirements or will be able to comply with
reasonable capitalization requirements within a reasonable time;
(9) any harm to the manufacturer or distributor if the
denial or withholding of approval is not upheld; [and]
(10) any harm to the dealer if the denial or
withholding of approval is upheld;
(11) the manufacturer's or distributor's investment
and obligations; and
(12) whether the denial or withholding of approval is
justified in light of current and reasonably foreseeable
projections of economic conditions, financial expectations, and
the market for new motor vehicles in the relevant market area.
SECTION 8. Section 2301.475, Occupations Code, is amended
by adding Subsection (c) to read as follows:
(c) Money paid by a manufacturer or distributor under an
incentive program may only be paid to a dealer, unless the dealer
agrees to the payment of the money to another person, including an
employee of the dealer, before the payment is made.
SECTION 9. Subchapter J, Chapter 2301, Occupations Code, is
amended by adding Section 2301.479 to read as follows:
Sec. 2301.479. ADVERSE ACTION IN CONNECTION WITH EXPORT OF
VEHICLE. (a) Except as otherwise provided by this section, a
manufacturer, distributor, or representative may not take an
adverse action against a franchised dealer because the franchised
dealer sells or leases a vehicle that is later exported to a
location outside the United States.
(b) A franchise provision that allows a manufacturer,
distributor, or representative to take adverse action against a
franchised dealer because the franchised dealer sells or leases a
vehicle that is later exported to a location outside the United
States is enforceable only if, at the time of the original sale or
lease, the dealer knew or reasonably should have known that the
vehicle would be exported to a location outside the United States.
(c) A franchised dealer is presumed to have no actual
knowledge that a vehicle the dealer sells or leases will be exported
to a location outside the United States if, under the laws of a
state of the United States:
(1) the vehicle is titled;
(2) the vehicle is registered; and
(3) applicable state and local taxes are paid for the
vehicle.
(d) The presumption under Subsection (c) may be rebutted by
direct, clear, and convincing evidence that the franchised dealer
had actual knowledge or reasonably should have known at the time of
the original sale or lease that the vehicle would be exported to a
location outside the United States.
(e) Except as otherwise permitted by this section, a
franchise provision that allows a manufacturer, distributor, or
representative to take adverse action against a franchised dealer
because the franchised dealer sells or leases a vehicle that is
later exported to a location outside the United States is void and
unenforceable.
SECTION 10. Sections 2301.652(a) and (c), Occupations Code,
are amended to read as follows:
(a) The board may deny an application for a license to
establish a dealership if, following a protest, the applicant fails
to establish good cause for establishing the dealership. In
determining good cause, the board shall consider:
(1) whether the manufacturer or distributor of the
same line-make of new motor vehicle is being adequately represented
as to sales and service;
(2) whether the protesting franchised dealer
representing the same line-make of new motor vehicle is in
substantial compliance with the dealer's franchise, to the extent
that the franchise is not in conflict with this chapter;
(3) the desirability of a competitive marketplace;
(4) any harm to the protesting franchised dealer;
[and]
(5) the public interest;
(6) any harm to the applicant; and
(7) current and reasonably foreseeable projections of
economic conditions, financial expectations, and the market for new
motor vehicles in the relevant market area.
(c) A franchised dealer may not protest an application to
relocate a dealership under this section if the proposed relocation
site is not:
(1) more than two miles [one mile] from the site where
the dealership is currently located; or
(2) closer to the franchised dealer than the site from
which the dealership is being relocated.
SECTION 11. (a) The change in law made by this Act applies
only to an agreement entered into or renewed under Chapter 2301,
Occupations Code, on or after the effective date of this Act. An
agreement entered into or renewed before the effective date of this
Act is governed by the law in effect on the date the agreement was
entered into or renewed, and the former law is continued in effect
for that purpose.
(b) The change in law made by this Act applies only to an
application filed under Chapter 2301, Occupations Code, on or after
the effective date of this Act. An application filed before that
date is governed by the law in effect on the date the application
was filed, and the former law is continued in effect for that
purpose.
SECTION 12. This Act takes effect September 1, 2009.
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