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S05725 Summary:

Amd SS415, 463 & 465, V & T L
Relates to automobile manufacturers and unfair practices by franchisors.
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S05725 Text:

                STATE OF NEW YORK
                               2013-2014 Regular Sessions
                    IN SENATE
                                      June 7, 2013
        Introduced  by  Sen.  ZELDIN -- read twice and ordered printed, and when
          printed to be committed to the Committee on Transportation --  commit-
          tee  discharged, bill amended, ordered reprinted as amended and recom-
          mitted to said committee
        AN ACT to amend the vehicle and traffic law, in relation  to  automobile

          manufacturers and business practices by franchisors
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
     1    Section 1. Subdivision 5 of section 415 of the vehicle and traffic law
     2  is amended by adding a new paragraph b-2 to read as follows:
     3    b-2. A statement indicating any interest in the applicant's  franchise
     4  entity  by  a  person  or entity described in paragraph f of subdivision
     5  seven of this section.
     6    § 2. Paragraph f of subdivision 7 of section 415 of  the  vehicle  and
     7  traffic  law, as added by chapter 490 of the laws of 2008, is amended to
     8  read as follows:
     9    f. Except as provided in paragraph (bb) of subdivision two of  section
    10  four hundred sixty-three of this title:

    11    (i)  The  commissioner shall not issue any certificate of registration
    12  authorized by this section to any franchisor, manufacturer,  distributor
    13  branch or factory branch, as such [term is] terms are defined in section
    14  four hundred sixty-two of this title, or to any subsidiary, affiliate or
    15  controlled  entity  thereof, except that the commissioner may renew such
    16  certificate previously issued or otherwise  approved  to  operate  to  a
    17  franchisor prior to [May second, two thousand two] July first, two thou-
    18  sand  six.  Nothing  in this section shall preclude the establishment of
    19  such facilities necessary to continue the ongoing operation of any hold-
    20  er of a certificate of registration authorized by this section or other-

    21  wise approved to operate to a franchisor provided such original  certif-
    22  icate or approval was granted prior to July first, two thousand six.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        S. 5725--A                          2
     1    (ii)  On or after the effective date of this subparagraph, the commis-
     2  sioner shall not issue any certificate of  registration,  or  renew  any
     3  certificate,  unless  the  original  certificate  was issued before July
     4  first, two thousand six, to any motor vehicle dealer in which a franchi-
     5  sor, manufacturer, distributor, distributor branch or factory branch, as

     6  such  terms are defined in section four hundred sixty-two of this title,
     7  or any subsidiary, affiliate or controlled entity thereof, has acquired,
     8  or possesses, a controlling interest in the franchise entity except:
     9    (1) when operating such franchise  for  a  temporary  period,  not  to
    10  exceed one year, during the transition from one owner of the motor vehi-
    11  cle dealership to another, provided, however, that such temporary period
    12  may be extended once for an additional period not to exceed one year for
    13  good  cause.  Provided that for franchisors of house coaches, the period
    14  of temporary ownership of a franchised house  coach  dealership  may  be
    15  extended  in  one  year increments for good cause shown, except that the

    16  aggregate of such extensions shall not exceed five years; or
    17    (2) when operating such franchise temporarily under  a  plan  with  an
    18  independent individual who is obligated to make a significant investment
    19  in  the dealership that is subject to loss and has an ownership interest
    20  or expects to acquire  full  ownership  in  a  reasonable  period  under
    21  reasonable terms and conditions, provided that a reasonable period shall
    22  be presumed to not exceed eight years.
    23    §  3.  Subdivision  1 of section 463 of the vehicle and traffic law is
    24  amended by adding a new paragraph (e) to read as follows:
    25    (e) To  sell,  or  sell  exclusively  an  extended  service  contract,
    26  extended maintenance plan or similar product, including, but not limited

    27  to, gap products offered, endorsed or sponsored by the franchisor by the
    28  following means:
    29    (1)  by  a statement made by the franchisor that failure to do so will
    30  substantially and adversely impact the dealer; or
    31    (2) by a provision in a franchise agreement that the dealer  sell,  or
    32  sell exclusively an extended service contract, extended maintenance plan
    33  or similar product offered, endorsed or sponsored by the franchisor; or
    34    (3) by measuring the dealer's performance under the franchise based on
    35  the  sale  of  extended service contracts, extended maintenance plans or
    36  similar products offered, endorsed or sponsored by the  manufacturer  or
    37  distributor; or

    38    (4)  by  requiring  the  dealer  to  exclusively  promote  the sale of
    39  extended  service  contracts,  extended  maintenance  plans  or  similar
    40  products offered, endorsed or sponsored by the franchisor.
    41    Nothing in this section shall prohibit a franchisor from:
    42    (A) providing incentives to a dealer that makes the voluntary decision
    43  to sell or sell exclusively an extended service contract, extended main-
    44  tenance  plan  or  similar  product,  including, but not limited to, gap
    45  products offered, endorsed or sponsored by the franchisor, or
    46    (B) requiring that a dealer that sells an extended  service  contract,
    47  extended  maintenance  plan,  or  similar  product  that is not offered,

    48  endorsed or sponsored by the franchisor, disclose to  the  consumer  the
    49  disclosures  required  under section seven thousand nine hundred five of
    50  the insurance law, and a separate statement, acknowledged by the consum-
    51  er, that the extended service contract,  extended  maintenance  plan  or
    52  similar product is not offered, endorsed or sponsored by the franchisor,
    53  if that is the case.
    54    §  4. Paragraph (b) of subdivision 2 of section 463 of the vehicle and
    55  traffic law, as amended by chapter 490 of the laws of 2008,  is  amended
    56  to read as follows:

        S. 5725--A                          3
     1    (b)  To  directly  or indirectly coerce or attempt to coerce any fran-
     2  chised motor vehicle dealer to enter into any agreement with such  fran-

     3  chisor  or  officer, agent or other representative thereof, or to do any
     4  other act prejudicial to the monetary interests or  property  rights  of
     5  said  dealer  by threatening to [cancel any unexpired contractual agree-
     6  ment existing  between  such  franchisor  and]  terminate  said  dealer.
     7  Provided,  however, that good faith notice to any franchised motor vehi-
     8  cle dealer of said dealer's violation of any terms or provisions of such
     9  franchise shall not constitute a violation of this article.
    10    § 5. Paragraph (c) of subdivision 2 of section 463 of the vehicle  and
    11  traffic  law,  as amended by chapter 490 of the laws of 2008, is amended
    12  to read as follows:
    13    (c) (1) To condition the renewal or extension  of  a  franchise  on  a
    14  franchised motor vehicle dealer's substantial renovation of the dealer's

    15  place  of  business  or  on  the  construction, purchase, acquisition or
    16  rental of a new place of business by the franchised motor vehicle dealer
    17  unless the franchisor has advised the franchised motor vehicle dealer in
    18  writing of its intent to impose such a  condition  within  a  reasonable
    19  time  prior  to  the  effective  date of the proposed date of renewal or
    20  extension (but in no  case  less  than  one  hundred  eighty  days)  and
    21  provided  the  franchisor  demonstrates  the need for such change in the
    22  place of business and the reasonableness of such demand in view  of  the
    23  need  to  service the public and the economic conditions existing in the
    24  automobile industry at the time such action would  be  required  of  the
    25  franchised motor vehicle dealer. As part of any such condition the fran-
    26  chisor  shall  agree, in writing, to supply the dealer with a reasonable

    27  quantity and mix of additional new motor vehicles which,  as  determined
    28  by a reasonable analysis of market conditions, are projected to meet the
    29  sales levels necessary to support the increased overhead incurred by the
    30  franchised   motor   vehicle   dealer  by  reason  of  such  renovation,
    31  construction, purchase, acquisition or rental of a new  place  of  busi-
    32  ness.
    33    (2)  To  require  a franchised motor vehicle dealer to purchase goods,
    34  building materials, or services for  the  dealer's  place  of  business,
    35  including, but not limited to, office furniture, design features, floor-
    36  ing,  and  wall  coverings,  from  a  vendor chosen by the franchisor if
    37  goods, building materials, or services of substantially similar  quality
    38  and design are available from other sources, provided, however, that the

    39  goods  or  building materials are not subject to the franchisor's intel-
    40  lectual property or trademark rights and the  franchised  motor  vehicle
    41  dealer has received the franchisor's approval, which approval may not be
    42  unreasonably withheld. Nothing in this subdivision shall be construed to
    43  allow  a  franchised  motor  vehicle  dealer  to  impair  or eliminate a
    44  franchisor's intellectual property or trademark rights and  trade  dress
    45  usage  guidelines,  or  to  impair other intellectual property interests
    46  owned or controlled by the franchisor.
    47    (3) Except as necessary to comply with a health or safety law,  or  to
    48  comply  with  a  technology  requirement,  which is necessary to sell or

    49  service a motor vehicle that the  franchised  motor  vehicle  dealer  is
    50  authorized  or licensed by the franchisor to sell or service, to require
    51  a franchised motor vehicle dealer to construct a new dealer facility  or
    52  substantially  alter  or  remodel an existing dealer facility before the
    53  date that is ten years after the date the construction of the new dealer
    54  facility or such alteration or remodeling at that location was completed
    55  and shall continue with any successor owner provided such owner has been
    56  designated and approved by the franchisor in  the  franchise  agreement,

        S. 5725--A                          4
     1  and  such  construction, alteration or remodeling substantially complied

     2  with the franchisor's brand image standards or plans that the franchisor
     3  provided at the time the construction,  alteration,  or  remodeling  was
     4  completed.
     5    (i) As used in this subparagraph, "substantially alter":
     6    (A)  refers  to an alteration that has a major impact on the architec-
     7  tural features, characteristics, or integrity of a structure or lot; and
     8    (B) does not include routine maintenance, such as  interior  painting,
     9  reasonably  necessary to keep a dealership facility in attractive condi-
    10  tion.
    11    (ii) Nothing in this paragraph (c) shall prohibit a franchisor from:
    12    (A) continuing a facility improvement program that is in effect as  of
    13  the effective date of this paragraph with more than one franchised motor

    14  vehicle dealer in the state or to renewing or modifying such program; or
    15    (B)  providing  lump  sum  or regularly-scheduled payments to assist a
    16  franchised motor  vehicle  dealer  in  making  a  facility  improvement,
    17  including  construction, alteration or remodeling, or installing signage
    18  or a franchisor image element;
    19    (C) providing reimbursement to a franchised motor  vehicle  dealer  on
    20  reasonable,  written terms for a portion of the franchised motor vehicle
    21  dealer's cost of making a facility improvement, including  construction,
    22  alteration  or  remodeling, the purchase of goods, building materials or
    23  services, or installing signage or a franchisor image element.
    24    (4) To deny a franchised  motor  vehicle  dealer  a  franchisor  image

    25  element  payment, incentive or allowance if the franchised motor vehicle
    26  dealer, with the franchisor's approval, began construction,  alterations
    27  or  remodeling  intended  to  comply with the franchisor's image element
    28  program before the franchisor substantially changed  or  terminated  the
    29  program prior to the program's scheduled ending date provided the dealer
    30  is  otherwise eligible for program payments and provided that after such
    31  substantial change or termination, the compensation payable to the deal-
    32  er shall be limited to image element payments, incentives or  allowances
    33  that  the  dealer  would  have earned through program's scheduled ending
    34  date, provided that the dealer complies with all  program  requirements,

    35  and  provided,  further, that such program or payments are not otherwise
    36  prohibited by law or regulation.
    37    (5) To require or attempt to require a franchised motor vehicle dealer
    38  to establish or maintain exclusive dealership facilities  unless  justi-
    39  fied  by  current  and  reasonably  expected  future economic conditions
    40  existing in the dealer's relevant market area at the  time  the  request
    41  for  exclusive facilities is made; provided that the foregoing shall not
    42  restrict the terms and conditions of any agreement for which the  dealer
    43  has  voluntarily accepted valuable consideration separate from the fran-
    44  chised motor vehicle dealer's right to sell and service  motor  vehicles

    45  for the franchisor. The fact that local market share, facing competitive
    46  brand  dealerships have exclusive dealership facilities shall constitute
    47  evidence that current economic conditions may justify the requirement to
    48  establish and maintain exclusive dealership facilities.
    49    (6) To require a site control provision regarding the  dealer's  place
    50  of  business  to survive or continue after the termination of such deal-
    51  er's franchise if the termination is due to the discontinuation  of  the
    52  line-make that was the subject of the agreement.
    53    §  6. Paragraph (o) of subdivision 2 of section 463 of the vehicle and
    54  traffic law, as amended by chapter 490 of the laws of 2008,  is  amended
    55  to read as follows:

        S. 5725--A                          5

     1    (o)  (1)  Upon  a  termination of a franchise by a franchisor or fran-
     2  chised motor vehicle dealer under this article, to refuse  to  accept  a
     3  return of new and unused current model motor vehicle inventory which has
     4  been acquired from the franchisor, new and unused noncurrent model motor
     5  vehicle inventory which has been acquired from the franchisor within one
     6  hundred  [twenty]  eighty days of the effective date of the termination;
     7  supplies, parts, equipment,  signage,  special  tools,  and  furnishings
     8  purchased  from  the  franchisor  or  its  approved sources [and special
     9  tools]. The obligation of the franchisor, except with respect to signage
    10  shall be limited to the repurchase of the above property which is  unal-
    11  tered  and undamaged, in good and useable condition, and, in the case of

    12  supplies, parts and equipment to those items which are currently  listed
    13  in  the  franchisor's  supplies and parts list.  In the case of signage,
    14  the franchisor shall be obligated to repurchase any franchisor  required
    15  signage, purchased within the five years preceding termination and which
    16  is  in  good and useable condition less depreciation as set forth in the
    17  Internal Revenue Code of one-fifteenth of  the  initial  cost  per  year
    18  starting  the  year  following  the  dealer's  acquisition  of the item.
    19  Furthermore, the obligation of the  franchisor  to  repurchase  supplies
    20  upon  a  termination,  cancellation  or nonrenewal by a franchised motor
    21  vehicle dealer shall be limited to supplies mandated by the  franchisor.
    22  Parts eligible for repurchase shall include parts which have been renum-

    23  bered  in  the  current parts list but which are identical in design and
    24  material to the currently numbered part. The return rights afforded  the
    25  franchised  motor  vehicle  dealer under the provisions of the paragraph
    26  shall be in addition to those, if any, provided in the franchise  agree-
    27  ment.
    28    (2)  The franchisor shall pay fair and reasonable compensation for the
    29  above described property upon repurchase. In the case of new motor vehi-
    30  cle inventory, accessories and parts, fair and  reasonable  compensation
    31  shall  in no instance be less than the net acquisition price paid by the
    32  franchised motor vehicle dealer to the franchisor or its approved sourc-
    33  es. Upon a termination of a franchise by  a  franchisor,  within  thirty
    34  days  of  such  termination, the franchisor shall send to the franchised
    35  motor vehicle dealer instructions on the methodology by which the  fran-

    36  chised  motor  vehicle  dealer must ship the above described property to
    37  the franchisor; the franchisor shall then remit payment for such proper-
    38  ty to the franchised  motor  vehicle  dealer  within  sixty  days  after
    39  receipt of such property.
    40    (3)  Upon  a  termination of a franchise by a franchised motor vehicle
    41  dealer where the franchise consists primarily of  the  distribution  and
    42  sale of house coaches, the franchisor's repurchase obligations set forth
    43  in this paragraph shall not apply.
    44    (4)  In addition to any other requirements of this subdivision, in the
    45  event a franchisor terminates a franchise due to termination of  a  line
    46  make,  the  franchisor  shall  compensate  the dealer for any franchisor
    47  required  facility   construction,   alterations   or   remodeling,   or

    48  construction,  alterations  or  remodeling required for participation in
    49  any incentive programs which were completed by the dealer  within  three
    50  years  of  the date the franchisor announced the termination of the line
    51  make.  For the purposes of this section, completion shall be  deemed  to
    52  occur   at   the  later  of  the  franchisor's  final  approval  of  the
    53  construction, alterations, or remodeling or the issuance  of  a  certif-
    54  icate  of  occupancy. The compensation required under this section shall
    55  be in an amount equal to the dealer's cost  for  the  facility  upgrades
    56  less  any  assistance  provided  to the dealer within three years of the

        S. 5725--A                          6

     1  date the franchisor announced the termination of the line  make  by  the
     2  manufacturer or distributor, and less the amount for depreciation as set
     3  forth  in Internal Revenue Code of one thirty-ninth of the total initial
     4  cost  of such construction, alterations, or remodeling per year starting
     5  the year following the dealer's completion of the facility construction,
     6  alterations, or remodeling.
     7    (5) In addition to the requirements of subparagraph four of this para-
     8  graph, in the event a franchisor terminates a franchise due to a  termi-
     9  nation  of a line make, the franchisor shall compensate the dealer in an
    10  amount equal to the amount remaining on the terminated dealer's  manage-
    11  ment  computer  system lease or contract, or one year of lease payments,

    12  whichever is less if the dealer management computer system will no long-
    13  er be utilized as  a  result  of  the  termination  and  the  franchisor
    14  required the dealer to utilize the particular dealer management computer
    15  system.
    16    §  7. Paragraph (z) of subdivision 2 of section 463 of the vehicle and
    17  traffic law, as amended by chapter 490 of the laws of 2008,  is  amended
    18  to read as follows:
    19    (z)  To [charge back or otherwise hold liable a franchised motor vehi-
    20  cle dealer for sales incentives or charges related to a] refuse to allo-
    21  cate, sell, or deliver  motor  vehicles,  to  charge  back  or  withhold
    22  payments  or other things of value for which the franchisee is otherwise
    23  eligible, or to take or threaten to take any adverse  action  against  a

    24  franchised  motor  vehicle  dealer, in connection with or as a result of
    25  any new motor vehicle sold by the franchised motor  vehicle  dealer  and
    26  subsequently  exported,  providing  such  dealer can demonstrate that he
    27  exercised due diligence and that the sale was made in  good  faith  [and
    28  without knowledge] including that the dealer did not know nor reasonably
    29  should have known of the purchaser's intention to export the motor vehi-
    30  cle[,  or that such dealer reasonably relied on approvals from the fran-
    31  chisor to complete a sale]. A  franchised  motor  vehicle  dealer  which
    32  causes  a  new  motor  vehicle  to  be  registered in this state or in a
    33  foreign state and causes to be collected the appropriate sales  and  use

    34  tax,  or that reasonably relied on a franchisor to complete a sale shall
    35  be presumed to have exercised good faith and  due  diligence.  Prior  to
    36  taking  an  adverse  action,  including a charge back, as a result of an
    37  export, a franchisor shall provide  written  notice  to  the  franchised
    38  motor  vehicle  dealer of the adverse action, and, if a charge back, the
    39  specific amount of the charge back,  and  the  vehicle  or  vehicles  at
    40  issue. A dealer shall not be liable for the delivery of any vehicle sold
    41  through  a franchisor's fleet program for any such delivery in which the
    42  sale or lease was not initiated or negotiated  by  the  dealer  and  its
    43  function was to provide delivery on behalf of the franchisor.

    44    §  8.  Subdivision  2 of section 463 of the vehicle and traffic law is
    45  amended by adding three new paragraphs (ii), (jj) and (kk)  to  read  as
    46  follows:
    47    (ii)  To  allocate  new  motor  vehicles to a franchised motor vehicle
    48  dealer based on a program that differentiates between vehicle sales by a
    49  franchised motor vehicle dealer within a territory  or  geographic  area
    50  assigned  to  such dealer and vehicle sales outside of such territory or
    51  geographic area.
    52    (jj) To utilize a discriminatory, unreasonable,  arbitrary  or  unfair
    53  system of allocation of new motor vehicle inventory.  A franchisor shall
    54  communicate  its  system of allocation in writing in a clear and concise
    55  manner to all same line-make dealers located in this state.

        S. 5725--A                          7
     1    (kk) To refuse to disclose to any franchised motor vehicle dealer  the
     2  manner  and  mode  of  distribution  of vehicles in the franchised motor
     3  vehicle dealer's line make within the state, and an explanation  of  the
     4  allocation  system,  including  the  methodology  used,  in  a clear and
     5  comprehensible form.
     6    §  9.  Subdivision 1 of section 465 of the vehicle and traffic law, as
     7  amended by chapter 490 of the laws  of  2008,  is  amended  to  read  as
     8  follows:
     9    1.  Every  franchisor  shall  properly  fulfill any warranty agreement
    10  and/or franchisor's service contract and shall compensate  each  of  its
    11  franchised motor vehicle dealers for warranty parts and labor in amounts

    12  which  reflect  [fair  and]  reasonable  compensation for such work. All
    13  warranty claims and/or claims under a franchisor's service contract made
    14  by franchised motor vehicle dealers shall be  paid  within  thirty  days
    15  following  their  approval.  For  parts reimbursement, other than compo-
    16  nents,  systems,  fixtures,  appliances,  furnishings,  accessories  and
    17  features  of a house coach that are designed, used and maintained prima-
    18  rily for nonvehicular residential purposes, and for labor reimbursement,
    19  [fair and] reasonable compensation shall not be less than the price  and
    20  rate charged by the franchised motor vehicle dealer for like services to
    21  non-warranty and/or non-service contract customers. For purposes of this
    22  section,  the  price  and  rate  charged by the franchised motor vehicle
    23  dealer for parts may be established by submitting to the franchisor  one

    24  hundred  sequential  nonwarranty  customer-paid service repair orders or
    25  the number of sequential nonwarranty customer-paid service repair orders
    26  written within a ninety day period, whichever is less, covering  repairs
    27  made  no  more  than  one hundred eighty days before the submission, and
    28  declaring the price and rate, including average  markup  for  the  fran-
    29  chised motor vehicle dealer as its reimbursement rate. The reimbursement
    30  rate so declared shall go into effect thirty days following the declara-
    31  tion  and shall be presumed to be [fair and] reasonable, however a fran-
    32  chisor may rebut such presumption by showing that such  rate  so  estab-
    33  lished  is  [unfair  and]  unreasonable in light of the practices of all
    34  other franchised motor vehicle dealers in the vicinity offering the same
    35  line make. The franchised motor  vehicle  dealer  shall  not  request  a

    36  change  in  the  reimbursement rate more often than [twice] once in each
    37  calendar year. In establishing the labor reimbursement rate,  the  fran-
    38  chisor  shall not require a franchised motor vehicle dealer to establish
    39  said rate by a methodology, or by requiring information, that is  unduly
    40  burdensome  or time consuming to provide, including, but not limited to,
    41  a transaction by transaction calculation.   For  the  purposes  of  this
    42  section,  the following parts or types of repairs shall be excluded from
    43  the parts and/or labor calculations and the  franchisor's  reimbursement
    44  requirements under this section: (a) parts sold at wholesale; (b) tires;
    45  (c)  routine  maintenance not covered under any retail customer warranty

    46  such as fluids, filters and belts not provided in the course of repairs;
    47  (d) vehicle reconditioning; and (e) batteries  replaced  as  part  of  a
    48  routine maintenance operation. If the franchisor rejects the declaration
    49  or attempts to rebut the declaration because of an error in the dealer's
    50  submission,  the  franchisor  shall identify with specificity the reason
    51  for rejection and identify the error or errors within the submission. In
    52  the event the franchisor rejects or rebuts the dealer's initial declara-
    53  tion, the dealer shall have the opportunity, within sixty days to resub-
    54  mit the full and corrected declaration addressing the  alleged  error(s)
    55  identified by the franchisor.  The franchisor shall respond within sixty

    56  days. The one hundred eighty day requirement for the repair orders shall

        S. 5725--A                          8
     1  be stayed from the date of initial submission. In any action or proceed-
     2  ing  held  pursuant  to  this subdivision, the franchisor shall have the
     3  burden of proving that the rate declared by the dealer was  unreasonable
     4  as described in this subdivision and that the proposed adjustment of the
     5  average  percentage  markup or rejection of the submission is reasonable
     6  pursuant to the provisions of this subdivision.
     7    § 10. Subdivisions 3, 4, 6 and 7 of section 465  of  the  vehicle  and
     8  traffic law, as added by chapter 490 of the laws of 2008, are amended to
     9  read as follows:
    10    3.  No  franchisor  shall conduct an audit or charge back any warranty

    11  [or] payment, or any sales [incentive payment], advertising or marketing
    12  incentive payment ("incentive payments") or otherwise hold a  franchised
    13  motor  vehicle  dealer  liable  for  charges more than one year, or five
    14  years in the case of fraud, after the  date  the  franchisor  made  such
    15  payment  to the dealer, without providing a notice to a franchised motor
    16  vehicle dealer of, or a mechanism that makes available to  a  franchised
    17  motor  vehicle  dealer, information regarding errors or issues regarding
    18  such dealer's warranty, sales, advertising or marketing incentive claims
    19  that are the subject of the audit or chargeback. Nothing in this section
    20  shall be deemed to grant a dealer the right to access any file  held  by

    21  the  manufacturer evaluating such dealer. In connection with a claim for
    22  warranty reimbursements, the dealer's failure to document  properly  one
    23  part  of a warranty repair that contains more than one part shall not be
    24  the sole basis to charge back the entire repair.  A  manufacturer  shall
    25  not deny a claim submitted under this section based solely on a dealer's
    26  incidental  failure  to comply with a specific claim processing require-
    27  ment, a clerical error, or other administrative  technicality,  provided
    28  that the failure does not call into question the legitimacy of the claim
    29  and  that  the  dealer corrects the claim according to franchisor guide-
    30  lines.
    31    4. A franchisor shall not charge  a  dealer  back  subsequent  to  the

    32  payment  of a warranty [or], sales [incentive], advertising or marketing
    33  incentive claim unless a representative of the  franchisor  has  met  in
    34  person  at  the dealership, or by telephone, with an officer or employee
    35  of the dealer designated by the dealer and explained in detail the basis
    36  for each of the proposed charge backs and thereafter given the  dealer's
    37  representative  a  reasonable  opportunity at the meeting, or during the
    38  telephone call, to explain the dealer's position relating to each of the
    39  proposed charge backs. In the event the dealer was selected for audit or
    40  review on the basis that some or all of the dealer's claims were  viewed
    41  as  excessive  in  comparison to average, mean or aggregate data accumu-
    42  lated by the franchisor, or in relation to claims submitted by  a  group

    43  of  other  franchisees, the franchisor shall, at or prior to the meeting
    44  or telephone call with the dealer's representative, provide  the  dealer
    45  with  a written statement containing the basis or methodology upon which
    46  the dealer was selected for audit or review.
    47    6. A franchisor shall not deny or charge  back  a  sales  [incentive],
    48  advertising  or  marketing incentive payment made to a dealer unless the
    49  claim was materially false or fraudulent or [that] the dealer failed  to
    50  reasonably  substantiate  the  claim  [either]  in  accordance  with the
    51  manufacturer's reasonable procedures.
    52    7. After all internal dispute resolution  processes  provided  through
    53  the  franchisor  have been resolved, the franchisor shall give notice to

    54  the dealer of the final  amount  of  a  proposed  warranty  [or],  sales
    55  [incentive],  advertising  or  marketing  incentive  charge back. If the
    56  dealer institutes an action pursuant to this article within thirty  days

        S. 5725--A                          9
     1  of  receipt  of  such  notice, the proposed charge back shall be stayed,
     2  without bond, during the pendency of such action  and  until  the  final
     3  judgment  has  been  rendered in an adjudicatory proceeding or action as
     4  provided  in section four hundred sixty-nine of this article.  The fran-
     5  chisor shall not impose the chargeback, debit the dealer's  account,  or
     6  otherwise  seek  to  obtain all or any part of the chargeback funds from

     7  the dealer during the thirty-day period in  which  the  dealer  has  the
     8  opportunity to file an action as set forth above.
     9    §  11.  Severability.  If  any clause, sentence, paragraph, section or
    10  part of this act shall be adjudged by any court of  competent  jurisdic-
    11  tion  to be invalid and after exhaustion of all further judicial review,
    12  the judgment shall not affect, impair or invalidate the remainder there-
    13  of, but shall be confined in its  operation  to  the  clause,  sentence,
    14  paragraph,  section or part of this act directly involved in the contro-
    15  versy in which the judgment shall have been rendered.
    16    § 12. This act shall take effect immediately.
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