2009 California Vehicle Code - Section 3060-3069.1 :: Article 4. Hearings On Franchise Modification, Replacement, Termination, Refusal To Continue, Delivery And Preparation Obligations, And Warranty Reimbursement

3060.  (a) Notwithstanding Section 20999.1 of the Business and
Professions Code or the terms of any franchise, no franchisor shall
terminate or refuse to continue any existing franchise unless all of
the following conditions are met:
   (1) The franchisee and the board have received written notice from
the franchisor as follows:
   (A) Sixty days before the effective date thereof setting forth the
specific grounds for termination or refusal to continue.
   (B) Fifteen days before the effective date thereof setting forth
the specific grounds with respect to any of the following:
   (i) Transfer of any ownership or interest in the franchise without
the consent of the franchisor, which consent shall not be
unreasonably withheld.
   (ii) Misrepresentation by the franchisee in applying for the
franchise.
   (iii) Insolvency of the franchisee, or filing of any petition by
or against the franchisee under any bankruptcy or receivership law.
   (iv) Any unfair business practice after written warning thereof.
   (v) Failure of the motor vehicle dealer to conduct its customary
sales and service operations during its customary hours of business
for seven consecutive business days, giving rise to a good faith
belief on the part of the franchisor that the motor vehicle dealer is
in fact going out of business, except for circumstances beyond the
direct control of the motor vehicle dealer or by order of the
department.
   (C) The written notice shall contain, on the first page thereof in
at least 12-point bold type and circumscribed by a line to segregate
it from the rest of the text, one of the following statements,
whichever is applicable:
   [To be inserted when a 60-day notice of termination is given.]
   "NOTICE TO DEALER: You have the right to file a protest with the
NEW MOTOR VEHICLE BOARD in Sacramento and have a hearing in which you
may protest the termination of your franchise under provisions of
the California Vehicle Code. You must file your protest with the
board within 30 calendar days after receiving this notice or within
30 days after the end of any appeal procedure provided by the
franchisor or your protest right will be waived."
   [To be inserted when a 15-day notice of termination is given.]
   "NOTICE TO DEALER: You have the right to file a protest with the
NEW MOTOR VEHICLE BOARD in Sacramento and have a hearing in which you
may protest the termination of your franchise under provisions of
the California Vehicle Code. You must file your protest with the
board within 10 calendar days after receiving this notice or within
10 days after the end of any appeal procedure provided by the
franchisor or your protest right will be waived."
   (2) Except as provided in Section 3050.7, the board finds that
there is good cause for termination or refusal to continue, following
a hearing called pursuant to Section 3066. The franchisee may file a
protest with the board within 30 days after receiving a 60-day
notice, satisfying the requirements of this section, or within 30
days after the end of any appeal procedure provided by the
franchisor, or within 10 days after receiving a 15-day notice,
satisfying the requirements of this section, or within 10 days after
the end of any appeal procedure provided by the franchisor. When a
protest is filed, the board shall advise the franchisor that a timely
protest has been filed, that a hearing is required pursuant to
Section 3066, and that the franchisor may not terminate or refuse to
continue until the board makes its findings.
   (3) The franchisor has received the written consent of the
franchisee, or the appropriate period for filing a protest has
elapsed.
   (b) (1) Notwithstanding Section 20999.1 of the Business and
Professions Code or the terms of any franchise, no franchisor shall
modify or replace a franchise with a succeeding franchise if the
modification or replacement would substantially affect the franchisee'
s sales or service obligations or investment, unless the franchisor
has first given the board and each affected franchisee written notice
thereof at least 60 days in advance of the modification or
replacement. Within 30 days of receipt of the notice, satisfying the
requirement of this section, or within 30 days after the end of any
appeal procedure provided by the franchisor, a franchisee may file a
protest with the board and the modification or replacement does not
become effective until there is a finding by the board that there is
good cause for the modification or replacement. If, however, a
replacement franchise is the successor franchise to an expiring or
expired term franchise, the prior franchise shall continue in effect
until resolution of the protest by the board. In the event of
multiple protests, hearings shall be consolidated to expedite the
disposition of the issue.
   (2) The written notice shall contain, on the first page thereof in
at least 12-point bold type and circumscribed by a line to segregate
it from the rest of the text, the following statement:
   "NOTICE TO DEALER: Your franchise agreement is being modified or
replaced. If the modification or replacement will substantially
affect your sales or service obligations or investment, you have the
right to file a protest with the NEW MOTOR VEHICLE BOARD in
Sacramento and have a hearing in which you may protest the proposed
modification or replacement of your franchise under provisions of the
California Vehicle Code. You must file your protest with the board
within 30 calendar days of your receipt of this notice or within 30
days after the end of any appeal procedure provided by the franchisor
or your protest rights will be waived."

3061.  In determining whether good cause has been established for
modifying, replacing, terminating, or refusing to continue a
franchise, the board shall take into consideration the existing
circumstances, including, but not limited to, all of the following:
   (a) Amount of business transacted by the franchisee, as compared
to the business available to the franchisee.
   (b) Investment necessarily made and obligations incurred by the
franchisee to perform its part of the franchise.
   (c) Permanency of the investment.
   (d) Whether it is injurious or beneficial to the public welfare
for the franchise to be modified or replaced or the business of the
franchisee disrupted.
   (e) 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 has been and is
rendering adequate services to the public.
   (f) Whether the franchisee fails to fulfill the warranty
obligations of the franchisor to be performed by the franchisee.
   (g) Extent of franchisee's failure to comply with the terms of the
franchise.

3062.  (a) (1) Except as otherwise provided in subdivision (b), if a
franchisor seeks to enter into a franchise establishing an
additional motor vehicle dealership within a relevant market area
where the same line-make is then represented, or seeks to relocate an
existing motor vehicle dealership, the franchisor shall, in writing,
first notify the board and each franchisee in that line-make in the
relevant market area of the franchisor's intention to establish an
additional dealership or to relocate an existing dealership within or
into that market area. Within 20 days of receiving the notice,
satisfying the requirements of this section, or within 20 days after
the end of an appeal procedure provided by the franchisor, a
franchisee required to be given the notice may file with the board a
protest to the establishing or relocating of the dealership. If,
within this time, a franchisee files with the board a request for
additional time to file a protest, the board or its executive
director, upon a showing of good cause, may grant an additional 10
days to file the protest. When a protest is filed, the board shall
inform the franchisor that a timely protest has been filed, that a
hearing is required pursuant to Section 3066, and that the franchisor
may not establish or relocate the proposed dealership until the
board has held a hearing as provided in Section 3066, nor thereafter,
if the board has determined that there is good cause for not
permitting the dealership. In the event of multiple protests,
hearings may be consolidated to expedite the disposition of the
issue.
   (2) If a franchisor seeks to enter into a franchise that
authorizes a satellite warranty facility to be established at, or
relocated to, a proposed location that is within two miles of a
dealership of the same line-make, the franchisor shall first give
notice in writing of the franchisor's intention to establish or
relocate a satellite warranty facility at the proposed location to
the board and each franchisee operating a dealership of the same
line-make within two miles of the proposed location. Within 20 days
of receiving the notice satisfying the requirements of this section,
or within 20 days after the end of an appeal procedure provided by
the franchisor, a franchisee required to be given the notice may file
with the board a protest to the establishing or relocating of the
satellite warranty facility. If, within this time, a franchisee files
with the board a request for additional time to file a protest, the
board or its executive director, upon a showing of good cause, may
grant an additional 10 days to file the protest. When a protest is
filed, the board shall inform the franchisor that a timely protest
has been filed, that a hearing is required pursuant to Section 3066,
and that the franchisor may not establish or relocate the proposed
satellite warranty facility until the board has held a hearing as
provided in Section 3066, nor thereafter, if the board has determined
that there is good cause for not permitting the satellite warranty
facility. In the event of multiple protests, hearings may be
consolidated to expedite the disposition of the issue.
   (3) The written notice shall contain, on the first page thereof in
at least 12-point bold type and circumscribed by a line to segregate
it from the rest of the text, the following statement:
   "NOTICE TO DEALER: You have the right to file a protest with the
NEW MOTOR VEHICLE BOARD in Sacramento and have a hearing on your
protest under the terms of the California Vehicle Code if you oppose
this action. You must file your protest with the board within 20 days
of your receipt of this notice, or within 20 days after the end of
any appeal procedure that is provided by us to you. If within this
time you file with the board a request for additional time to file a
protest, the board or its executive director, upon a showing of good
cause, may grant you an additional 10 days to file the protest."
   (b) Subdivision (a) does not apply to either of the following:
   (1) The relocation of an existing dealership to a location that is
both within the same city as, and within one mile from, the existing
dealership location.
   (2) The establishment at a location that is both within the same
city as, and within one-quarter mile from, the location of a
dealership of the same line-make that has been out of operation for
less than 90 days.
   (c) Subdivision (a) does not apply to a display of vehicles at a
fair, exposition, or similar exhibit if actual sales are not made at
the event and the display does not exceed 30 days. This subdivision
may not be construed to prohibit a new vehicle dealer from
establishing a branch office for the purpose of selling vehicles at
the fair, exposition, or similar exhibit, even though the event is
sponsored by a financial institution, as defined in Section 31041 of
the Financial Code or by a financial institution and a licensed
dealer. The establishment of these branch offices, however, shall be
in accordance with subdivision (a) where applicable.
   (d) For the purposes of this section, the reopening of a
dealership that has not been in operation for one year or more shall
be deemed the establishment of an additional motor vehicle
dealership.
   (e) As used in this section, the following definitions apply:
   (1) "Motor vehicle dealership" or "dealership" means an authorized
facility at which a franchisee offers for sale or lease, displays
for sale or lease, or sells or leases new motor vehicles.
   (2) "Satellite warranty facility" means a facility operated by a
franchisee where authorized warranty repairs and service are
performed and the offer for sale or lease, the display for sale or
lease, or the sale or lease of new motor vehicles is not authorized
to take place.

3063.  In determining whether good cause has been established for
not entering into or relocating an additional franchise for the same
line-make, the board shall take into consideration the existing
circumstances, including, but not limited to, all of the following:
   (a) Permanency of the investment.
   (b) Effect on the retail motor vehicle business and the consuming
public in the relevant market area.
   (c) Whether it is injurious to the public welfare for an
additional franchise to be established.
   (d) Whether the franchisees of the same line-make in that relevant
market area are providing adequate competition and convenient
consumer care for the motor vehicles of the line-make in the market
area which shall include the adequacy of motor vehicle sales and
service facilities, equipment, supply of vehicle parts, and qualified
service personnel.
   (e) Whether the establishment of an additional franchise would
increase competition and therefore be in the public interest.

3064.  (a) Every franchisor shall specify to its franchisees the
delivery and preparation obligations of such franchisees prior to
delivery of new motor vehicles to retail buyers. A copy of the
delivery and preparation obligations, which shall constitute the
franchisee's only responsibility for product liability between the
franchisee and the franchisor but which shall not in any way affect
the franchisee's responsibility for product liability between the
purchaser and either the franchisee or the franchisor, and a schedule
of compensation to be paid franchisees for the work and services
they shall be required to perform in connection with such delivery
and preparation obligations shall be filed with the board by
franchisors, and shall constitute the compensation as set forth on
such schedule. The schedule of compensation shall be reasonable, with
the reasonableness thereof being subject to the approval of the
board, providing a franchisee files a notice of protest with the
board. In determining the reasonableness of the schedules, the board
shall consider all relevant circumstances, including, but not limited
to, the time required to perform each function that the dealer is
obligated to perform and the appropriate labor rate.
   (b) Upon delivery of the vehicle, the franchisee shall give a copy
of the delivery and preparation obligations to the purchaser and a
written certification that he has fulfilled these obligations.

3065.  (a) Every franchisor shall properly fulfill every warranty
agreement made by it and adequately and fairly compensate each of its
franchisees for labor and parts used to fulfill that warranty when
the franchisee has fulfilled warranty obligations of repair and
servicing and shall file a copy of its warranty reimbursement
schedule or formula with the board. The warranty reimbursement
schedule or formula shall be reasonable with respect to the time and
compensation allowed the franchisee for the warranty work and all
other conditions of the obligation. The reasonableness of the
warranty reimbursement schedule or formula shall be determined by the
board if a franchisee files a notice of protest with the board.
   (b) In determining the adequacy and fairness of the compensation,
the franchisee's effective labor rate charged to its various retail
customers may be considered together with other relevant criteria.
   (c) If any franchisor disallows a franchisee's claim for a
defective part, alleging that the part, in fact, is not defective,
the franchisor shall return the part alleged not to be defective to
the franchisee at the expense of the franchisor, or the franchisee
shall be reimbursed for the franchisee's cost of the part, at the
franchisor's option.
   (d) All claims made by franchisees pursuant to this section shall
be either approved or disapproved within 30 days after their receipt
by the franchisor. Any claim not specifically disapproved in writing
within 30 days from receipt by the franchisor shall be deemed
approved on the 30th day. When any claim is disapproved, the
franchisee who submits it shall be notified in writing of its
disapproval within the required period, and each notice shall state
the specific grounds upon which the disapproval is based. All claims
made by franchisees under this section and Section 3064 for labor and
parts shall be paid within 30 days following approval. Failure to
approve or pay within the above specified time limits, in individual
instances for reasons beyond the reasonable control of the
franchisor, shall not constitute a violation of this article.
   (e) Audits of franchisee warranty records may be conducted by the
franchisor on a reasonable basis, and for a period of 12 months after
a claim is paid or credit issued. Franchisee claims for warranty
compensation shall not be disapproved except for good cause, such as
performance of nonwarranty repairs, lack of material documentation,
or fraud. Any chargeback to a franchisee for warranty parts or
service compensation shall be made within 90 days of the completion
of the audit. If a false claim was submitted by a franchisee with
intent to defraud the franchisor, a longer period for audit and any
resulting chargeback may be permitted if the franchisor obtains an
order from the board.

3065.1.  (a) All claims made by a franchisee for payment under the
terms of a franchisor incentive program shall be either approved or
disapproved within 30 days after receipt by the franchisor. When any
claim is disapproved, the franchisee who submits it shall be notified
in writing of its disapproval within the required period, and each
notice shall state the specific grounds upon which the disapproval is
based. Any claim not specifically disapproved in writing within 30
days from receipt shall be deemed approved on the 30th day. Following
the disapproval of a claim, a franchisee shall have one year from
receipt of the notice of disapproval in which to appeal the
disapproval to the franchisor and file a protest with the board. All
claims made by franchisees under this section shall be paid within 30
days following approval. Failure to approve or pay within the above
specified time limits, in individual instances for reasons beyond the
reasonable control of the franchisor, do not constitute a violation
of this article.
   (b) Audits of franchisee incentive records may be conducted by the
franchisor on a reasonable basis, and for a period of 18 months
after a claim is paid or credit issued. Franchisee claims for
incentive program compensation shall not be disapproved except for
good cause, such as ineligibility under the terms of the incentive
program, lack of material documentation, or fraud. Any chargeback to
a franchisee for incentive program compensation shall be made within
90 days of the completion of the audit. If a false claim was
submitted by a franchisee with the intent to defraud the franchisor,
a longer period for audit and any resulting chargeback may be
permitted if the franchisor obtains an order from the board.

3066.  (a) Upon receiving a notice of protest pursuant to Section
3060, 3062, 3064, 3065, 3065.1, 3070, 3072, 3074, 3075, or 3076, the
board shall fix a time within 60 days of the order, and place of
hearing, and shall send by registered mail a copy of the order to the
franchisor, the protesting franchisee, and all individuals and
groups that have requested notification by the board of protests and
decisions of the board. Except in a case involving a franchisee who
deals exclusively in motorcycles, the board or its executive director
may, upon a showing of good cause, accelerate or postpone the date
initially established for a hearing, but the hearing may not be
rescheduled more than 90 days after the board's initial order. For
the purpose of accelerating or postponing a hearing date, "good cause"
includes, but is not limited to, the effects upon, and any
irreparable harm to, the parties or interested persons or groups if
the request for a change in hearing date is not granted. The board or
an administrative law judge designated by the board shall hear and
consider the oral and documented evidence introduced by the parties
and other interested individuals and groups, and the board shall make
its decision solely on the record so made. Chapter 4.5 (commencing
with Section 11400) of Part 1 of Division 3 of Title 2 of the
Government Code and Sections 11507.3, 11507.6, 11507.7, 11511,
11511.5, 11513, 11514, 11515, and 11517 of the Government Code apply
to these proceedings.
   (b) In a hearing on a protest filed pursuant to Section 3060,
3062, 3070, or 3072, the franchisor shall have the burden of proof to
establish that there is good cause to modify, replace, terminate, or
refuse to continue a franchise. The franchisee shall have the burden
of proof to establish that there is good cause not to enter into a
franchise establishing or relocating an additional motor vehicle
dealership.
   (c) In a hearing on a protest alleging a violation of, or filed
pursuant to, Section 3064, 3065, 3065.1, 3074, 3075, or 3076, the
franchisee shall have the burden of proof, but the franchisor has the
burden of proof to establish that a franchisee acted with intent to
defraud the franchisor where that issue is material to a protest
filed pursuant to Section 3065, 3065.1, 3075, or 3076.
   (d) A member of the board who is a new motor vehicle dealer may
not participate in, hear, comment, or advise other members upon, or
decide, a matter involving a protest filed pursuant to this article
unless all parties to the protest stipulate otherwise.

3067.  (a) The decision of the board shall be in writing and shall
contain findings of fact and a determination of the issues presented.
The decision shall sustain, conditionally sustain, overrule, or
conditionally overrule the protest. Conditions imposed by the board
shall be for the purpose of assuring performance of binding
contractual agreements between franchisees and franchisors or
otherwise serving the purposes of this article. If the board fails to
act within 30 days after the hearing, within 30 days after the board
receives a proposed decision where the case is heard before an
administrative law judge alone, or within a period necessitated by
Section 11517 of the Government Code, or as may be mutually agreed
upon by the parties, then the proposed action shall be deemed to be
approved. Copies of the board's decision shall be delivered to the
parties personally or sent to them by registered mail, as well as to
all individuals and groups that have requested notification by the
board of protests and decisions by the board. The board's decision
shall be final upon its delivery or mailing and a reconsideration or
rehearing is not permitted.
   (b) Notwithstanding subdivision (c) of Section 11517 of the
Government Code, if a protest is heard by an administrative law judge
alone, 10 days after receipt by the board of the administrative law
judge's proposed decision, a copy of the proposed decision shall be
filed by the board as a public record and a copy shall be served by
the board on each party and his or her attorney.

3068.  Either party may seek judicial review of final decisions of
the board. Time for filing for such review shall not be more than 45
days from the date on which the final order of the board is made
public and is delivered to the parties personally or is sent them by
registered mail.

3069.  The provisions of this article shall be applicable to all
franchises existing between dealers and manufacturers, manufacturer
branches, distributors and distributor branches at the time of its
enactment and to all such future franchises.

3069.1.  Sections 3060 to 3065.1, inclusive, do not apply to a
franchise authorizing a dealership, as defined in paragraph (1) of
subdivision (e) of Section 3072.