senate Bill S6797A

Relates to automobile manufacturers and unfair practices by franchisors

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 11 / Mar / 2014
    • REFERRED TO TRANSPORTATION
  • 31 / Mar / 2014
    • AMEND AND RECOMMIT TO TRANSPORTATION
  • 31 / Mar / 2014
    • PRINT NUMBER 6797A
  • 06 / May / 2014
    • 1ST REPORT CAL.516
  • 07 / May / 2014
    • 2ND REPORT CAL.
  • 12 / May / 2014
    • ADVANCED TO THIRD READING
  • 02 / Jun / 2014
    • SUBSTITUTED BY A7844B

Summary

Relates to automobile manufacturers and unfair practices by franchisors.

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Bill Details

See Assembly Version of this Bill:
A7844B
Versions:
S6797
S6797A
Legislative Cycle:
2013-2014
Law Section:
Vehicle and Traffic Law
Laws Affected:
Amd ยงยง415, 463 & 465, V & T L

Votes

Sponsor Memo

BILL NUMBER:S6797A

TITLE OF BILL: An act to amend the vehicle and traffic law, in relation
to automobile manufacturers and business practices by franchisors

PURPOSE OF BILL:

To update provisions of the state's automobile dealer franchise law so
as to protect automobile dealers from arbitrary or unfair demands by
manufacturers.

SUMMARY OF PROVISIONS:

Section 1 amends subdivision 5 of section 415 of the vehicle and traffic
law by adding a new paragraph b-2 to clarify the extent of the interest
that a franchisor, including a manufacturer or distributor and other
listed entities, may have in an automobile dealer.

Section 2 makes several amendments to paragraph f of Subdivision 7 of
section 415 of the vehicle and traffic law. The amendments to subpara-
graphs (i) clarify the language of that subparagraph in accordance with
the intent of the legislature in enacting section 6 of Chapter 490 of
the Laws of 2008. This amendment makes clear that the prohibition on a
manufacturer owning or controlling a motor vehicle franchise is not
limited manufacturers owing dealerships of the same brand as those owned
by their franchisees, but is a prohibition on any manufacturer, without
regard to brand, and without regard to whether the manufacturer has
agreements with independent franchisees.

To avoid any ambiguity about the extent of the section 2 prohibition,
the amendment references not only franchisors, but also manufacturers,
distributors, distributor branches and factory branches, all terms
defined in section 462 of the vehicle and traffic law, and their subsid-
iaries, affiliates or controlled entities. As clarified, subparagraph
(i) prohibits the commissioner of motor vehicles from issuing a new
motor vehicle dealer certificate to any manufacturer in which a franchi-
sor has an interest, unless an applicable statutory exception applies.

Subparagraph (i) states the first of the exceptions, permitting the
renewal of certain certificates issued prior to July 1, 2006.

Subparagraph (ii) restates exceptions in current law that has been stat-
ed in section 463 of the vehicle and traffic law, including them now in
section 415 to clarify that the exception is to be applied and enforced
by the commissioner of motor vehicles.

Subparagraph (iii) adds a new exception, permitting the commissioner to
renew the new motor vehicle dealer certificate to a franchisor, manufac-
turer, etc. or its subsidiary, affiliate or controlled entity, provided
the certificate was first issued prior to March 26, 2014, and the
manufacturer, etc., produces only zero emission vehicles and has not
transferred ownership to an unrelated entity.

Section 3 amends subdivision 1 of section 463 of the vehicle and traffic
law by adding a new paragraph (e) to allow dealers to sell extended
service contracts of their choice and not necessarily those offered by a
franchisor.

Section 4 makes a technical change to paragraph (b) of subdivision 2 of
section 463 of the vehicle and traffic law.

Section 5 amends paragraph (c) of subdivision 2 of section 463 of the
vehicle and traffic law by adding new subparagraphs 2, 3 and 4 to
prohibit franchisors from forcing dealers to perform repeated facility
upgrades or rejecting materials or services that are chosen by dealers
that are substantially similar to those required by franchisors for
construction or upgrade projects.

Section 5 also adds a new subparagraph 5 under paragraph c of subdivi-
sion 2 of section 463 that prohibits a franchisor from requiring a deal-
er to operate dealership facilities that are exclusive to a particular
line make, unless such a restriction is justified by current and reason-
ably expected future economic conditions in the area of the dealership.

Section 5 also adds a new subparagraph 6 under paragraph (c) of subdivi-
sion 2 of section 463 that would prohibit a franchisor from requiring a
site control provision that would survive or continue after the termi-
nation of a dealership if the termination is due to the discontinuation
of the line-make.

Section 6 amends paragraph (o) of subdivision 2 of Section 463 of the
vehicle and traffic law to require franchisors to repurchase signage and
other items upon termination; reimbursement of facilities upgrades
occurring within three years of a termination without cause; and
reimbursement for liability on Dealer Management System contracts in the
event of a termination.

Section 7 amends paragraph (z) of subdivision 2 of section 463 of the
vehicle and traffic law to require notice prior to assessing charge-
backs for exported vehicles.

Section 8 amends subparagraph 2 of paragraph (bb) of subdivision 2 of
section 463 of the vehicle and traffic law to provide that the exception
stated in that subparagraph is not available to a franchisor, manufac-
turer, distributor or distributor branch that holds a new motor vehicle
dealer certificate pursuant to section 415 (7)(f)(iii).

Section 9 amends subdivision 2 of section 463 of the vehicle and traffic
law is amended by adding a new paragraph (ii) to require franchisors to
give credit to dealers, for inventory allocation purposes, for sales of
new motor vehicles to persons from areas outside a franchisees assigned
sales territory.

Section 9 also adds new paragraphs (jj) and (kk) to subdivision 2 of
section 463 of the vehicle and traffic law to require fair vehicle allo-

cations, disclosure, upon request, to dealers of the franchisor's vehi-
cle allocation methodology and the actual allocations to individual
dealers.

Section 10 amends subdivision 1 of section 465 of the vehicle and traf-
fic law to address issues that arose with the warranty reimbursement
provision of the law since its amendment in 2008.

Section 11 amends subdivisions 3 of section 465 of the vehicle and traf-
fic law to require franchisors to provide dealers with either a system
or a process that provides a franchised motor vehicle dealer particular-
ized information where the dealer may have been making errors in warran-
ty and sales submissions if the franchisor intends to audit the same.

Also amends subdivisions 4, 6 and 7 of section 465 of the vehicle and
traffic law to include sales and marketing payments into existing
chargeback protections.

Section 12 provides that if any provision of the bill is determined to
be invalid that such determination shall not invalidate the remainder of
the bill.

JUSTIFICATION:

In 1983, the state Legislature passed the Franchised Motor Vehicle Deal-
er Act (Chapter 815). In passing the Act, the Legislature found that the
distribution of motor vehicles within the state vitally affects its
general economy and therefore it is necessary to regulate motor vehicle
manufacturers, distributors and factory or distributor representatives.

The Act has been amended several times since 1983, including comprehen-
sive amendments in 2008. The provisions of this bill are necessary to
clarify the intent of the 2008 Act, add to it several provisions that
have become necessary following restructuring efforts by several automo-
bile manufacturers' as a result of the automotive industry crisis of
2008-2010, and to further minimize the possibility of arbitrary or
unfair demands in the franchisor-franchisee relationship so as to main-
tain the health and vitality of the retail automobile industry. The
amendments in section 2 of this legislation, in particular, provide
clarity to current law, underscoring the legislative intent that, except
in limited circumstances, motor vehicle franchises are not to be
controlled by manufacturers, and that the Commissioner of Motor Vehicles
may not issue new motor vehicle dealer licenses to franchisor-controlled
dealerships.

Preserving the franchise system ensures that important consumer benefits
remain in the market. For instance, the franchise system has worked well
as a low-cost means for the distribution and sale of motor vehicles in
the State. Independent franchised motor vehicle dealers provide consum-
ers with competition on price and service quality, as well as convenient
access to inventories of new automobiles and accessory products. Fran-
chised dealers also provide consumers with convenient access to warran-

ty, safety recall and repair services. Dealers also create a market for
used vehicles, aiding buyers in their next purchase by accepting trade-
in vehicles. Also, New York's broad network of independent franchised
dealers and their employees generate substantial economic activity,
activity that creates valuable businesses, and benefits the State in
jobs and taxes.

Given the benefits, the State has a compelling interest in ensuring the
continued viability of the motor vehicle franchise system.

LEGISLATIVE HISTORY:

New Legislation.

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

Immediately.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 6797--A

                            I N  S E N A T E

                             March 11, 2014
                               ___________

Introduced  by  Sen.  LIBOUS -- 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:

  Section 1. Subdivision 5 of section 415 of the vehicle and traffic law
is amended by adding a new paragraph b-2 to read as follows:
  B-2. A STATEMENT INDICATING ANY INTEREST IN THE APPLICANT'S  FRANCHISE
ENTITY  BY  A  PERSON  OR ENTITY DESCRIBED IN PARAGRAPH F OF SUBDIVISION
SEVEN OF THIS SECTION.
  S 2. Paragraph f of subdivision 7 of section 415 of  the  vehicle  and
traffic  law, as added by chapter 490 of the laws of 2008, is amended to
read as follows:
  f. EXCEPT AS PROVIDED IN PARAGRAPH (BB) OF SUBDIVISION TWO OF  SECTION
FOUR  HUNDRED  SIXTY-THREE  OF THIS TITLE AND SUBPARAGRAPH (III) OF THIS
PARAGRAPH:
  (I) The commissioner shall not issue any certificate  of  registration
authorized by this section to any franchisor, MANUFACTURER, DISTRIBUTOR,
DISTRIBUTOR  BRANCH  OR  FACTORY  BRANCH,  as  such  [term is] TERMS ARE
defined in section four hundred sixty-two  of  this  title,  OR  TO  ANY
SUBSIDIARY,  AFFILIATE  OR  CONTROLLED  ENTITY  THEREOF, except that the
commissioner may renew such certificate previously issued  or  otherwise
approved  to  operate to a franchisor prior to [May second, two thousand
two] JULY FIRST,  TWO  THOUSAND  SIX.  NOTHING  IN  THIS  SECTION  SHALL
PRECLUDE  THE ESTABLISHMENT OF SUCH FACILITIES NECESSARY TO CONTINUE THE
ONGOING OPERATION OF ANY HOLDER OF A CERTIFICATE OF REGISTRATION AUTHOR-
IZED BY THIS SECTION OR OTHERWISE APPROVED TO OPERATE  TO  A  FRANCHISOR
PROVIDED SUCH ORIGINAL CERTIFICATE OR APPROVAL WAS GRANTED PRIOR TO JULY
FIRST, TWO THOUSAND SIX.
  (II)  ON OR AFTER THE EFFECTIVE DATE OF THIS SUBPARAGRAPH, THE COMMIS-
SIONER SHALL NOT ISSUE ANY CERTIFICATE OF  REGISTRATION,  OR  RENEW  ANY

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11010-08-4

S. 6797--A                          2

CERTIFICATE,  UNLESS  THE  ORIGINAL  CERTIFICATE  WAS ISSUED BEFORE JULY
FIRST, TWO THOUSAND SIX, TO ANY MOTOR VEHICLE DEALER IN WHICH A FRANCHI-
SOR, MANUFACTURER, DISTRIBUTOR, DISTRIBUTOR BRANCH OR FACTORY BRANCH, AS
SUCH  TERMS ARE DEFINED IN SECTION FOUR HUNDRED SIXTY-TWO OF THIS TITLE,
OR ANY SUBSIDIARY, AFFILIATE OR CONTROLLED ENTITY THEREOF, HAS ACQUIRED,
OR POSSESSES, A CONTROLLING INTEREST IN THE FRANCHISE ENTITY EXCEPT:
  (1) WHEN OPERATING SUCH FRANCHISE  FOR  A  TEMPORARY  PERIOD,  NOT  TO
EXCEED ONE YEAR, DURING THE TRANSITION FROM ONE OWNER OF THE MOTOR VEHI-
CLE DEALERSHIP TO ANOTHER, PROVIDED, HOWEVER, THAT SUCH TEMPORARY PERIOD
MAY BE EXTENDED ONCE FOR AN ADDITIONAL PERIOD NOT TO EXCEED ONE YEAR FOR
GOOD  CAUSE.  PROVIDED THAT FOR FRANCHISORS OF HOUSE COACHES, THE PERIOD
OF TEMPORARY OWNERSHIP OF A FRANCHISED HOUSE  COACH  DEALERSHIP  MAY  BE
EXTENDED  IN  ONE  YEAR INCREMENTS FOR GOOD CAUSE SHOWN, EXCEPT THAT THE
AGGREGATE OF SUCH EXTENSIONS SHALL NOT EXCEED FIVE YEARS; OR
  (2) WHEN OPERATING SUCH FRANCHISE TEMPORARILY UNDER  A  PLAN  WITH  AN
INDEPENDENT INDIVIDUAL WHO IS OBLIGATED TO MAKE A SIGNIFICANT INVESTMENT
IN  THE DEALERSHIP THAT IS SUBJECT TO LOSS AND HAS AN OWNERSHIP INTEREST
OR EXPECTS TO ACQUIRE  FULL  OWNERSHIP  IN  A  REASONABLE  PERIOD  UNDER
REASONABLE TERMS AND CONDITIONS, PROVIDED THAT A REASONABLE PERIOD SHALL
BE PRESUMED TO NOT EXCEED EIGHT YEARS.
  (III)  NOTWITHSTANDING  ANY  OTHER  PROVISION OF THIS PARAGRAPH OR ANY
PROVISION OF PARAGRAPH (BB) OF SUBDIVISION TWO OF SECTION  FOUR  HUNDRED
SIXTY-THREE OF THIS TITLE, THE COMMISSIONER MAY RENEW ANY CERTIFICATE OF
REGISTRATION THAT WAS ISSUED TO A FRANCHISOR, MANUFACTURER, DISTRIBUTOR,
DISTRIBUTOR  BRANCH  OR  FACTORY  BRANCH,  AS  SUCH TERMS ARE DEFINED IN
SECTION FOUR HUNDRED SIXTY-TWO OF THIS  TITLE,  OR  TO  ANY  SUBSIDIARY,
AFFILIATE OR CONTROLLED ENTITY THEREOF, PRIOR TO MARCH TWENTY-SIXTH, TWO
THOUSAND  FOURTEEN; PROVIDED, HOWEVER, THAT SUCH FRANCHISOR, MANUFACTUR-
ER, DISTRIBUTOR, DISTRIBUTOR BRANCH OR FACTORY BRANCH,  OR  ANY  SUBSID-
IARY,  AFFILIATE  OR  CONTROLLED  ENTITY THEREOF, IS A MANUFACTURER THAT
MANUFACTURES OR ASSEMBLES EXCLUSIVELY ZERO EMISSIONS VEHICLES, OR  IS  A
SUBSIDIARY,  AFFILIATE, OR CONTROLLED ENTITY OF SUCH A MANUFACTURER; AND
PROVIDED FURTHER THAT A CONTROLLING INTEREST IN SUCH  ORIGINAL  FRANCHI-
SOR,  MANUFACTURER, DISTRIBUTOR, DISTRIBUTOR BRANCH OR FACTORY BRANCH OR
ANY SUBSIDIARY, AFFILIATE OR CONTROLLED ENTITY WAS NOT TRANSFERRED, SOLD
OR CONVEYED TO ANOTHER PERSON OR ENTITY, OTHER  THAN  TO  A  SUBSIDIARY,
AFFILIATE   OR  CONTROLLED  ENTITY  OF  SUCH  FRANCHISOR,  MANUFACTURER,
DISTRIBUTOR, DISTRIBUTOR BRANCH OR FACTORY BRANCH. FOR PURPOSES OF  THIS
PARAGRAPH,  ZERO  EMISSION VEHICLES SHALL HAVE THE SAME MEANING AS UNDER
PART TWO HUNDRED EIGHTEEN OF TITLE SIX OF THE NEW YORK CODE OF RULES AND
REGULATIONS.
  S 3. Subdivision 1 of section 463 of the vehicle and  traffic  law  is
amended by adding a new paragraph (e) to read as follows:
  (E)  TO  SELL,  OR  SELL  EXCLUSIVELY  AN  EXTENDED  SERVICE CONTRACT,
EXTENDED MAINTENANCE PLAN OR SIMILAR PRODUCT, INCLUDING, BUT NOT LIMITED
TO, GAP PRODUCTS OFFERED, ENDORSED OR SPONSORED BY THE FRANCHISOR BY THE
FOLLOWING MEANS:
  (1) BY A STATEMENT MADE BY THE FRANCHISOR THAT FAILURE TO DO  SO  WILL
SUBSTANTIALLY AND ADVERSELY IMPACT THE DEALER; OR
  (2)  BY  A PROVISION IN A FRANCHISE AGREEMENT THAT THE DEALER SELL, OR
SELL EXCLUSIVELY AN EXTENDED SERVICE CONTRACT, EXTENDED MAINTENANCE PLAN
OR SIMILAR PRODUCT OFFERED, ENDORSED OR SPONSORED BY THE FRANCHISOR; OR
  (3) BY MEASURING THE DEALER'S PERFORMANCE UNDER THE FRANCHISE BASED ON
THE SALE OF EXTENDED SERVICE CONTRACTS, EXTENDED  MAINTENANCE  PLANS  OR
SIMILAR  PRODUCTS  OFFERED, ENDORSED OR SPONSORED BY THE MANUFACTURER OR
DISTRIBUTOR; OR

S. 6797--A                          3

  (4) BY REQUIRING  THE  DEALER  TO  EXCLUSIVELY  PROMOTE  THE  SALE  OF
EXTENDED  SERVICE  CONTRACTS,  EXTENDED  MAINTENANCE  PLANS  OR  SIMILAR
PRODUCTS OFFERED, ENDORSED OR SPONSORED BY THE FRANCHISOR.
  NOTHING IN THIS SECTION SHALL PROHIBIT A FRANCHISOR FROM:
  (A) PROVIDING INCENTIVES TO A DEALER THAT MAKES THE VOLUNTARY DECISION
TO SELL OR SELL EXCLUSIVELY AN EXTENDED SERVICE CONTRACT, EXTENDED MAIN-
TENANCE  PLAN  OR  SIMILAR  PRODUCT,  INCLUDING, BUT NOT LIMITED TO, GAP
PRODUCTS OFFERED, ENDORSED OR SPONSORED BY THE FRANCHISOR, OR
  (B) REQUIRING THAT A DEALER THAT SELLS AN EXTENDED  SERVICE  CONTRACT,
EXTENDED  MAINTENANCE  PLAN,  OR  SIMILAR  PRODUCT  THAT IS NOT OFFERED,
ENDORSED OR SPONSORED BY THE FRANCHISOR, DISCLOSE TO  THE  CONSUMER  THE
DISCLOSURES  REQUIRED  UNDER SECTION SEVEN THOUSAND NINE HUNDRED FIVE OF
THE INSURANCE LAW, AND A SEPARATE STATEMENT, ACKNOWLEDGED BY THE CONSUM-
ER, THAT THE EXTENDED SERVICE CONTRACT,  EXTENDED  MAINTENANCE  PLAN  OR
SIMILAR PRODUCT IS NOT OFFERED, ENDORSED OR SPONSORED BY THE FRANCHISOR,
IF THAT IS THE CASE.
  S  4. Paragraph (b) of subdivision 2 of section 463 of the vehicle and
traffic law, as amended by chapter 490 of the laws of 2008,  is  amended
to read as follows:
  (b)  To  directly  or indirectly coerce or attempt to coerce any fran-
chised motor vehicle dealer to enter into any agreement with such  fran-
chisor  or  officer, agent or other representative thereof, or to do any
other act prejudicial to the monetary interests or  property  rights  of
said  dealer  by threatening to [cancel any unexpired contractual agree-
ment existing  between  such  franchisor  and]  TERMINATE  said  dealer.
Provided,  however, that good faith notice to any franchised motor vehi-
cle dealer of said dealer's violation of any terms or provisions of such
franchise shall not constitute a violation of this article.
  S 5. Paragraph (c) of subdivision 2 of section 463 of the vehicle  and
traffic  law,  as amended by chapter 490 of the laws of 2008, is amended
to read as follows:
  (c) (1) To condition the renewal or extension  of  a  franchise  on  a
franchised motor vehicle dealer's substantial renovation of the dealer's
place  of  business  or  on  the  construction, purchase, acquisition or
rental of a new place of business by the franchised motor vehicle dealer
unless the franchisor has advised the franchised motor vehicle dealer in
writing of its intent to impose such a  condition  within  a  reasonable
time  prior  to  the  effective  date of the proposed date of renewal or
extension (but in no  case  less  than  one  hundred  eighty  days)  and
provided  the  franchisor  demonstrates  the need for such change in the
place of business and the reasonableness of such demand in view  of  the
need  to  service the public and the economic conditions existing in the
automobile industry at the time such action would  be  required  of  the
franchised motor vehicle dealer. As part of any such condition the fran-
chisor  shall  agree, in writing, to supply the dealer with a reasonable
quantity and mix of additional new motor vehicles which,  as  determined
by a reasonable analysis of market conditions, are projected to meet the
sales levels necessary to support the increased overhead incurred by the
franchised   motor   vehicle   dealer  by  reason  of  such  renovation,
construction, purchase, acquisition or rental of a new  place  of  busi-
ness.
  (2)  TO  REQUIRE  A FRANCHISED MOTOR VEHICLE DEALER TO PURCHASE GOODS,
BUILDING MATERIALS, OR SERVICES FOR  THE  DEALER'S  PLACE  OF  BUSINESS,
INCLUDING, BUT NOT LIMITED TO, OFFICE FURNITURE, DESIGN FEATURES, FLOOR-
ING,  AND  WALL  COVERINGS,  FROM  A  VENDOR CHOSEN BY THE FRANCHISOR IF
GOODS, BUILDING MATERIALS, OR SERVICES OF SUBSTANTIALLY SIMILAR  QUALITY

S. 6797--A                          4

AND DESIGN ARE AVAILABLE FROM OTHER SOURCES, PROVIDED, HOWEVER, THAT THE
GOODS  OR  BUILDING MATERIALS ARE NOT SUBJECT TO THE FRANCHISOR'S INTEL-
LECTUAL PROPERTY OR TRADEMARK RIGHTS AND THE  FRANCHISED  MOTOR  VEHICLE
DEALER HAS RECEIVED THE FRANCHISOR'S APPROVAL, WHICH APPROVAL MAY NOT BE
UNREASONABLY WITHHELD. NOTHING IN THIS SUBDIVISION SHALL BE CONSTRUED TO
ALLOW  A  FRANCHISED  MOTOR  VEHICLE  DEALER  TO  IMPAIR  OR ELIMINATE A
FRANCHISOR'S INTELLECTUAL PROPERTY OR TRADEMARK RIGHTS AND  TRADE  DRESS
USAGE  GUIDELINES,  OR  TO  IMPAIR OTHER INTELLECTUAL PROPERTY INTERESTS
OWNED OR CONTROLLED BY THE FRANCHISOR.
  (3) EXCEPT AS NECESSARY TO COMPLY WITH A HEALTH OR SAFETY LAW,  OR  TO
COMPLY  WITH  A  TECHNOLOGY  REQUIREMENT,  WHICH IS NECESSARY TO SELL OR
SERVICE A MOTOR VEHICLE THAT THE  FRANCHISED  MOTOR  VEHICLE  DEALER  IS
AUTHORIZED  OR LICENSED BY THE FRANCHISOR TO SELL OR SERVICE, TO REQUIRE
A FRANCHISED MOTOR VEHICLE DEALER TO CONSTRUCT A NEW DEALER FACILITY  OR
SUBSTANTIALLY  ALTER  OR  REMODEL AN EXISTING DEALER FACILITY BEFORE THE
DATE THAT IS TEN YEARS AFTER THE DATE THE CONSTRUCTION OF THE NEW DEALER
FACILITY OR SUCH ALTERATION OR REMODELING AT THAT LOCATION WAS COMPLETED
AND SHALL CONTINUE WITH ANY SUCCESSOR OWNER PROVIDED SUCH OWNER HAS BEEN
DESIGNATED AND APPROVED BY THE FRANCHISOR IN  THE  FRANCHISE  AGREEMENT,
AND  SUCH  CONSTRUCTION, ALTERATION OR REMODELING SUBSTANTIALLY COMPLIED
WITH THE FRANCHISOR'S BRAND IMAGE STANDARDS OR PLANS THAT THE FRANCHISOR
PROVIDED AT THE TIME THE CONSTRUCTION,  ALTERATION,  OR  REMODELING  WAS
COMPLETED.
  (I) AS USED IN THIS SUBPARAGRAPH, "SUBSTANTIALLY ALTER":
  (A)  REFERS  TO AN ALTERATION THAT HAS A MAJOR IMPACT ON THE ARCHITEC-
TURAL FEATURES, CHARACTERISTICS, OR INTEGRITY OF A STRUCTURE OR LOT; AND
  (B) DOES NOT INCLUDE ROUTINE MAINTENANCE, SUCH AS  INTERIOR  PAINTING,
REASONABLY  NECESSARY TO KEEP A DEALERSHIP FACILITY IN ATTRACTIVE CONDI-
TION.
  (II) NOTHING IN THIS PARAGRAPH SHALL PROHIBIT A FRANCHISOR FROM:
  (A) CONTINUING A FACILITY IMPROVEMENT PROGRAM THAT IS IN EFFECT AS  OF
THE EFFECTIVE DATE OF THIS PARAGRAPH WITH MORE THAN ONE FRANCHISED MOTOR
VEHICLE DEALER IN THE STATE OR TO RENEWING OR MODIFYING SUCH PROGRAM; OR
  (B)  PROVIDING  LUMP  SUM  OR REGULARLY-SCHEDULED PAYMENTS TO ASSIST A
FRANCHISED MOTOR  VEHICLE  DEALER  IN  MAKING  A  FACILITY  IMPROVEMENT,
INCLUDING  CONSTRUCTION, ALTERATION OR REMODELING, OR INSTALLING SIGNAGE
OR A FRANCHISOR IMAGE ELEMENT;
  (C) PROVIDING REIMBURSEMENT TO A FRANCHISED MOTOR  VEHICLE  DEALER  ON
REASONABLE,  WRITTEN TERMS FOR A PORTION OF THE FRANCHISED MOTOR VEHICLE
DEALER'S COST OF MAKING A FACILITY IMPROVEMENT, INCLUDING  CONSTRUCTION,
ALTERATION  OR  REMODELING, THE PURCHASE OF GOODS, BUILDING MATERIALS OR
SERVICES, OR INSTALLING SIGNAGE OR A FRANCHISOR IMAGE ELEMENT.
  (4) TO DENY A FRANCHISED  MOTOR  VEHICLE  DEALER  A  FRANCHISOR  IMAGE
ELEMENT  PAYMENT, INCENTIVE OR ALLOWANCE IF THE FRANCHISED MOTOR VEHICLE
DEALER, WITH THE FRANCHISOR'S APPROVAL, BEGAN CONSTRUCTION,  ALTERATIONS
OR  REMODELING  INTENDED  TO  COMPLY WITH THE FRANCHISOR'S IMAGE ELEMENT
PROGRAM BEFORE THE FRANCHISOR SUBSTANTIALLY CHANGED  OR  TERMINATED  THE
PROGRAM PRIOR TO THE PROGRAM'S SCHEDULED ENDING DATE PROVIDED THE DEALER
IS  OTHERWISE ELIGIBLE FOR PROGRAM PAYMENTS AND PROVIDED THAT AFTER SUCH
SUBSTANTIAL CHANGE OR TERMINATION, THE COMPENSATION PAYABLE TO THE DEAL-
ER SHALL BE LIMITED TO IMAGE ELEMENT PAYMENTS, INCENTIVES OR  ALLOWANCES
THAT  THE  DEALER  WOULD  HAVE EARNED THROUGH PROGRAM'S SCHEDULED ENDING
DATE, PROVIDED THAT THE DEALER COMPLIES WITH ALL  PROGRAM  REQUIREMENTS,
AND  PROVIDED,  FURTHER, THAT SUCH PROGRAM OR PAYMENTS ARE NOT OTHERWISE
PROHIBITED BY LAW OR REGULATION.

S. 6797--A                          5

  (5) TO REQUIRE OR ATTEMPT TO REQUIRE A FRANCHISED MOTOR VEHICLE DEALER
TO ESTABLISH OR MAINTAIN EXCLUSIVE DEALERSHIP FACILITIES  UNLESS  JUSTI-
FIED  BY  CURRENT  AND  REASONABLY  EXPECTED  FUTURE ECONOMIC CONDITIONS
EXISTING IN THE DEALER'S RELEVANT MARKET AREA AT THE  TIME  THE  REQUEST
FOR  EXCLUSIVE FACILITIES IS MADE; PROVIDED THAT THE FOREGOING SHALL NOT
RESTRICT THE TERMS AND CONDITIONS OF ANY AGREEMENT FOR WHICH THE  DEALER
HAS  VOLUNTARILY ACCEPTED VALUABLE CONSIDERATION SEPARATE FROM THE FRAN-
CHISED MOTOR VEHICLE DEALER'S RIGHT TO SELL AND SERVICE  MOTOR  VEHICLES
FOR THE FRANCHISOR. THE FACT THAT LOCAL MARKET SHARE, FACING COMPETITIVE
BRAND  DEALERSHIPS HAVE EXCLUSIVE DEALERSHIP FACILITIES SHALL CONSTITUTE
EVIDENCE THAT CURRENT ECONOMIC CONDITIONS MAY JUSTIFY THE REQUIREMENT TO
ESTABLISH AND MAINTAIN EXCLUSIVE DEALERSHIP FACILITIES.
  (6) TO REQUIRE A SITE CONTROL PROVISION REGARDING THE  DEALER'S  PLACE
OF  BUSINESS  TO SURVIVE OR CONTINUE AFTER THE TERMINATION OF SUCH DEAL-
ER'S FRANCHISE IF THE TERMINATION IS DUE TO THE DISCONTINUATION  OF  THE
LINE-MAKE THAT WAS THE SUBJECT OF THE AGREEMENT.
  S  6. Paragraph (o) of subdivision 2 of section 463 of the vehicle and
traffic law, as amended by chapter 490 of the laws of 2008,  is  amended
to read as follows:
  (o)  (1)  Upon  a  termination of a franchise by a franchisor or fran-
chised motor vehicle dealer under this article, to refuse  to  accept  a
return of new and unused current model motor vehicle inventory which has
been acquired from the franchisor, new and unused noncurrent model motor
vehicle inventory which has been acquired from the franchisor within one
hundred  [twenty]  EIGHTY days of the effective date of the termination;
supplies, parts, equipment,  SIGNAGE,  SPECIAL  TOOLS,  and  furnishings
purchased  from  the  franchisor  or  its  approved sources [and special
tools]. The obligation of the franchisor, EXCEPT WITH RESPECT TO SIGNAGE
shall be limited to the repurchase of the above property which is  unal-
tered  and undamaged, in good and useable condition, and, in the case of
supplies, parts and equipment to those items which are currently  listed
in  the  franchisor's  supplies and parts list.  IN THE CASE OF SIGNAGE,
THE FRANCHISOR SHALL BE OBLIGATED TO REPURCHASE ANY FRANCHISOR  REQUIRED
SIGNAGE, PURCHASED WITHIN THE FIVE YEARS PRECEDING TERMINATION AND WHICH
IS  IN  GOOD AND USEABLE CONDITION LESS DEPRECIATION AS SET FORTH IN THE
INTERNAL REVENUE CODE OF ONE-FIFTEENTH OF  THE  INITIAL  COST  PER  YEAR
STARTING  THE  YEAR  FOLLOWING  THE  DEALER'S  ACQUISITION  OF THE ITEM.
Furthermore, the obligation of the  franchisor  to  repurchase  supplies
upon  a  termination,  cancellation  or nonrenewal by a franchised motor
vehicle dealer shall be limited to supplies mandated by the  franchisor.
Parts eligible for repurchase shall include parts which have been renum-
bered  in  the  current parts list but which are identical in design and
material to the currently numbered part. The return rights afforded  the
franchised  motor  vehicle  dealer under the provisions of the paragraph
shall be in addition to those, if any, provided in the franchise  agree-
ment.
  (2)  The franchisor shall pay fair and reasonable compensation for the
above described property upon repurchase. In the case of new motor vehi-
cle inventory, accessories and parts, fair and  reasonable  compensation
shall  in no instance be less than the net acquisition price paid by the
franchised motor vehicle dealer to the franchisor or its approved sourc-
es. Upon a termination of a franchise by  a  franchisor,  within  thirty
days  of  such  termination, the franchisor shall send to the franchised
motor vehicle dealer instructions on the methodology by which the  fran-
chised  motor  vehicle  dealer must ship the above described property to
the franchisor; the franchisor shall then remit payment for such proper-

S. 6797--A                          6

ty to the franchised  motor  vehicle  dealer  within  sixty  days  after
receipt of such property.
  (3)  Upon  a  termination of a franchise by a franchised motor vehicle
dealer where the franchise consists primarily of  the  distribution  and
sale of house coaches, the franchisor's repurchase obligations set forth
in this paragraph shall not apply.
  (4)  IN ADDITION TO ANY OTHER REQUIREMENTS OF THIS SUBDIVISION, IN THE
EVENT A FRANCHISOR TERMINATES A FRANCHISE DUE TO TERMINATION OF  A  LINE
MAKE,  THE  FRANCHISOR  SHALL  COMPENSATE  THE DEALER FOR ANY FRANCHISOR
REQUIRED  FACILITY   CONSTRUCTION,   ALTERATIONS   OR   REMODELING,   OR
CONSTRUCTION,  ALTERATIONS  OR  REMODELING REQUIRED FOR PARTICIPATION IN
ANY INCENTIVE PROGRAMS WHICH WERE COMPLETED BY THE DEALER  WITHIN  THREE
YEARS  OF  THE DATE THE FRANCHISOR ANNOUNCED THE TERMINATION OF THE LINE
MAKE.  FOR THE PURPOSES OF THIS SECTION, COMPLETION SHALL BE  DEEMED  TO
OCCUR   AT   THE  LATER  OF  THE  FRANCHISOR'S  FINAL  APPROVAL  OF  THE
CONSTRUCTION, ALTERATIONS, OR REMODELING OR THE ISSUANCE  OF  A  CERTIF-
ICATE  OF  OCCUPANCY. THE COMPENSATION REQUIRED UNDER THIS SECTION SHALL
BE IN AN AMOUNT EQUAL TO THE DEALER'S COST  FOR  THE  FACILITY  UPGRADES
LESS  ANY  ASSISTANCE  PROVIDED  TO THE DEALER WITHIN THREE YEARS OF THE
DATE THE FRANCHISOR ANNOUNCED THE TERMINATION OF THE LINE  MAKE  BY  THE
MANUFACTURER OR DISTRIBUTOR, AND LESS THE AMOUNT FOR DEPRECIATION AS SET
FORTH  IN INTERNAL REVENUE CODE OF ONE THIRTY-NINTH OF THE TOTAL INITIAL
COST OF SUCH CONSTRUCTION, ALTERATIONS, OR REMODELING PER YEAR  STARTING
THE YEAR FOLLOWING THE DEALER'S COMPLETION OF THE FACILITY CONSTRUCTION,
ALTERATIONS, OR REMODELING.
  (5) IN ADDITION TO THE REQUIREMENTS OF SUBPARAGRAPH FOUR OF THIS PARA-
GRAPH,  IN THE EVENT A FRANCHISOR TERMINATES A FRANCHISE DUE TO A TERMI-
NATION OF A LINE MAKE, THE FRANCHISOR SHALL COMPENSATE THE DEALER IN  AN
AMOUNT  EQUAL TO THE AMOUNT REMAINING ON THE TERMINATED DEALER'S MANAGE-
MENT COMPUTER SYSTEM LEASE OR CONTRACT, OR ONE YEAR OF  LEASE  PAYMENTS,
WHICHEVER IS LESS IF THE DEALER MANAGEMENT COMPUTER SYSTEM WILL NO LONG-
ER  BE  UTILIZED  AS  A  RESULT  OF  THE  TERMINATION AND THE FRANCHISOR
REQUIRED THE DEALER TO UTILIZE THE PARTICULAR DEALER MANAGEMENT COMPUTER
SYSTEM.
  S 7. Paragraph (z) of subdivision 2 of section 463 of the vehicle  and
traffic  law,  as amended by chapter 490 of the laws of 2008, is amended
to read as follows:
  (z) To [charge back or otherwise hold liable a franchised motor  vehi-
cle dealer for sales incentives or charges related to a] REFUSE TO ALLO-
CATE,  SELL,  OR  DELIVER  MOTOR  VEHICLES,  TO  CHARGE BACK OR WITHHOLD
PAYMENTS OR OTHER THINGS OF VALUE FOR WHICH THE FRANCHISEE IS  OTHERWISE
ELIGIBLE,  OR  TO  TAKE OR THREATEN TO TAKE ANY ADVERSE ACTION AGAINST A
FRANCHISED MOTOR VEHICLE DEALER, IN CONNECTION WITH OR AS  A  RESULT  OF
ANY  new  motor  vehicle sold by the franchised motor vehicle dealer and
subsequently exported, providing such dealer  can  demonstrate  that  he
exercised  due  diligence  and that the sale was made in good faith [and
without knowledge] INCLUDING THAT THE DEALER DID NOT KNOW NOR REASONABLY
SHOULD HAVE KNOWN of the purchaser's intention to export the motor vehi-
cle[, or that such dealer reasonably relied on approvals from the  fran-
chisor  to  complete  a  sale].  A franchised motor vehicle dealer which
causes a new motor vehicle to be  registered  in  this  state  or  in  a
foreign  state  and causes to be collected the appropriate sales and use
tax, OR THAT REASONABLY RELIED ON A FRANCHISOR TO COMPLETE A SALE  shall
be  presumed  to  have  exercised GOOD FAITH AND due diligence. PRIOR TO
TAKING AN ADVERSE ACTION, INCLUDING A CHARGE BACK, AS  A  RESULT  OF  AN
EXPORT,  A  FRANCHISOR  SHALL  PROVIDE  WRITTEN NOTICE TO THE FRANCHISED

S. 6797--A                          7

MOTOR VEHICLE DEALER OF THE ADVERSE ACTION, AND, IF A CHARGE  BACK,  THE
SPECIFIC  AMOUNT  OF  THE  CHARGE  BACK,  AND THE VEHICLE OR VEHICLES AT
ISSUE. A DEALER SHALL NOT BE LIABLE FOR THE DELIVERY OF ANY VEHICLE SOLD
THROUGH  A FRANCHISOR'S FLEET PROGRAM FOR ANY SUCH DELIVERY IN WHICH THE
SALE OR LEASE WAS NOT INITIATED OR NEGOTIATED  BY  THE  DEALER  AND  ITS
FUNCTION WAS TO PROVIDE DELIVERY ON BEHALF OF THE FRANCHISOR.
  S  8. Subparagraph 2 of paragraph (bb) of subdivision 2 of section 463
of the vehicle and traffic law, as amended by chapter 490 of the laws of
2008, is amended to read as follows:
  (2) when operating such franchise temporarily under  a  plan  with  an
independent individual who is obligated to make a significant investment
in  the dealership that is subject to loss and has an ownership interest
or expects to acquire  full  ownership  in  a  reasonable  period  under
reasonable terms and conditions, provided that a reasonable period shall
be  presumed  to  not  exceed  eight  years; PROVIDED, HOWEVER, THAT THE
EXCEPTION PROVIDED IN THIS SUBPARAGRAPH SHALL NOT APPLY TO ANY  FRANCHI-
SOR,  MANUFACTURER,  DISTRIBUTOR,  DISTRIBUTOR  BRANCH OR FACTORY BRANCH
THAT HOLDS A CERTIFICATE OR REGISTRATION PURSUANT TO SUBPARAGRAPH  (III)
OF  PARAGRAPH  F OF SUBDIVISION SEVEN OF SECTION FOUR HUNDRED FIFTEEN OF
THIS TITLE.
  S 9. Subdivision 2 of section 463 of the vehicle and  traffic  law  is
amended  by  adding  three new paragraphs (ii), (jj) and (kk) to read as
follows:
  (II) TO ALLOCATE NEW MOTOR VEHICLES  TO  A  FRANCHISED  MOTOR  VEHICLE
DEALER BASED ON A PROGRAM THAT DIFFERENTIATES BETWEEN VEHICLE SALES BY A
FRANCHISED  MOTOR  VEHICLE  DEALER WITHIN A TERRITORY OR GEOGRAPHIC AREA
ASSIGNED TO SUCH DEALER AND VEHICLE SALES OUTSIDE OF SUCH  TERRITORY  OR
GEOGRAPHIC AREA.
  (JJ)  TO  UTILIZE  A DISCRIMINATORY, UNREASONABLE, ARBITRARY OR UNFAIR
SYSTEM OF ALLOCATION OF NEW MOTOR VEHICLE INVENTORY.  A FRANCHISOR SHALL
COMMUNICATE ITS SYSTEM OF ALLOCATION IN WRITING IN A CLEAR  AND  CONCISE
MANNER TO ALL SAME LINE-MAKE DEALERS LOCATED IN THIS STATE.
  (KK)  TO REFUSE TO DISCLOSE TO ANY FRANCHISED MOTOR VEHICLE DEALER THE
MANNER AND MODE OF DISTRIBUTION OF  VEHICLES  IN  THE  FRANCHISED  MOTOR
VEHICLE  DEALER'S  LINE MAKE WITHIN THE STATE, AND AN EXPLANATION OF THE
ALLOCATION SYSTEM, INCLUDING  THE  METHODOLOGY  USED,  IN  A  CLEAR  AND
COMPREHENSIBLE FORM.
  S  10. Subdivision 1 of section 465 of the vehicle and traffic law, as
amended by chapter 490 of the laws  of  2008,  is  amended  to  read  as
follows:
  1.  Every  franchisor  shall  properly  fulfill any warranty agreement
and/or franchisor's service contract and shall compensate  each  of  its
franchised motor vehicle dealers for warranty parts and labor in amounts
which  reflect  [fair  and]  reasonable  compensation for such work. All
warranty claims and/or claims under a franchisor's service contract made
by franchised motor vehicle dealers shall be  paid  within  thirty  days
following  their  approval.  For  parts reimbursement, other than compo-
nents,  systems,  fixtures,  appliances,  furnishings,  accessories  and
features  of a house coach that are designed, used and maintained prima-
rily for nonvehicular residential purposes, and for labor reimbursement,
[fair and] reasonable compensation shall not be less than the price  and
rate charged by the franchised motor vehicle dealer for like services to
non-warranty and/or non-service contract customers. For purposes of this
section,  the  price  and  rate  charged by the franchised motor vehicle
dealer for parts may be established by submitting to the franchisor  one
hundred  sequential  nonwarranty  customer-paid service repair orders or

S. 6797--A                          8

the number of sequential nonwarranty customer-paid service repair orders
written within a ninety day period, whichever is less, covering  repairs
made  no  more  than  one hundred eighty days before the submission, and
declaring  the  price  and  rate, including average markup for the fran-
chised motor vehicle dealer as its reimbursement rate. The reimbursement
rate so declared shall go into effect thirty days following the declara-
tion and shall be presumed to be [fair and] reasonable, however a  fran-
chisor  may  rebut  such presumption by showing that such rate so estab-
lished is [unfair and] unreasonable in light of  the  practices  of  all
other franchised motor vehicle dealers in the vicinity offering the same
line  make.  The  franchised  motor  vehicle  dealer shall not request a
change in the reimbursement rate more often than [twice]  ONCE  in  each
calendar  year.  In establishing the labor reimbursement rate, the fran-
chisor shall not require a franchised motor vehicle dealer to  establish
said  rate by a methodology, or by requiring information, that is unduly
burdensome or time consuming to provide, including, but not limited  to,
a  transaction  by  transaction  calculation.   FOR THE PURPOSES OF THIS
SECTION, THE FOLLOWING PARTS OR TYPES OF REPAIRS SHALL BE EXCLUDED  FROM
THE  PARTS  AND/OR LABOR CALCULATIONS AND THE FRANCHISOR'S REIMBURSEMENT
REQUIREMENTS UNDER THIS SECTION: (A) PARTS SOLD AT WHOLESALE; (B) TIRES;
(C) ROUTINE MAINTENANCE NOT COVERED UNDER ANY RETAIL  CUSTOMER  WARRANTY
SUCH AS FLUIDS, FILTERS AND BELTS NOT PROVIDED IN THE COURSE OF REPAIRS;
(D)  VEHICLE  RECONDITIONING;  AND  (E)  BATTERIES REPLACED AS PART OF A
ROUTINE MAINTENANCE OPERATION. IF THE FRANCHISOR REJECTS THE DECLARATION
OR ATTEMPTS TO REBUT THE DECLARATION BECAUSE OF AN ERROR IN THE DEALER'S
SUBMISSION, THE FRANCHISOR SHALL IDENTIFY WITH  SPECIFICITY  THE  REASON
FOR REJECTION AND IDENTIFY THE ERROR OR ERRORS WITHIN THE SUBMISSION. IN
THE EVENT THE FRANCHISOR REJECTS OR REBUTS THE DEALER'S INITIAL DECLARA-
TION, THE DEALER SHALL HAVE THE OPPORTUNITY, WITHIN SIXTY DAYS TO RESUB-
MIT  THE  FULL AND CORRECTED DECLARATION ADDRESSING THE ALLEGED ERROR OR
ERRORS IDENTIFIED BY THE FRANCHISOR.  THE FRANCHISOR SHALL RESPOND WITH-
IN SIXTY DAYS. THE ONE HUNDRED EIGHTY DAY  REQUIREMENT  FOR  THE  REPAIR
ORDERS  SHALL  BE  STAYED  FROM  THE  DATE OF INITIAL SUBMISSION. IN ANY
ACTION OR PROCEEDING HELD PURSUANT TO THIS SUBDIVISION,  THE  FRANCHISOR
SHALL  HAVE  THE  BURDEN OF PROVING THAT THE RATE DECLARED BY THE DEALER
WAS UNREASONABLE AS DESCRIBED IN THIS SUBDIVISION AND THAT THE  PROPOSED
ADJUSTMENT  OF  THE  AVERAGE  PERCENTAGE  MARKUP  OR  REJECTION  OF  THE
SUBMISSION IS REASONABLE PURSUANT TO THE PROVISIONS OF THIS SUBDIVISION.
  S 11. Subdivisions 3, 4, 6 and 7 of section 465  of  the  vehicle  and
traffic law, as added by chapter 490 of the laws of 2008, are amended to
read as follows:
  3.  No  franchisor  shall conduct an audit or charge back any warranty
[or] PAYMENT, OR ANY sales [incentive payment], ADVERTISING OR MARKETING
INCENTIVE PAYMENT ("INCENTIVE PAYMENTS") or otherwise hold a  franchised
motor  vehicle  dealer  liable  for  charges more than one year, or five
years in the case of fraud, after the  date  the  franchisor  made  such
payment  to the dealer, WITHOUT PROVIDING A NOTICE TO A FRANCHISED MOTOR
VEHICLE DEALER OF, OR A MECHANISM THAT MAKES AVAILABLE TO  A  FRANCHISED
MOTOR  VEHICLE  DEALER, INFORMATION REGARDING ERRORS OR ISSUES REGARDING
SUCH DEALER'S WARRANTY, SALES, ADVERTISING OR MARKETING INCENTIVE CLAIMS
THAT ARE THE SUBJECT OF THE AUDIT OR CHARGEBACK. NOTHING IN THIS SECTION
SHALL BE DEEMED TO GRANT A DEALER THE RIGHT TO ACCESS ANY FILE  HELD  BY
THE  MANUFACTURER EVALUATING SUCH DEALER. IN CONNECTION WITH A CLAIM FOR
WARRANTY REIMBURSEMENTS, THE DEALER'S FAILURE TO DOCUMENT  PROPERLY  ONE
PART  OF A WARRANTY REPAIR THAT CONTAINS MORE THAN ONE PART SHALL NOT BE
THE SOLE BASIS TO CHARGE BACK THE ENTIRE REPAIR.  A  MANUFACTURER  SHALL

S. 6797--A                          9

NOT DENY A CLAIM SUBMITTED UNDER THIS SECTION BASED SOLELY ON A DEALER'S
INCIDENTAL  FAILURE  TO COMPLY WITH A SPECIFIC CLAIM PROCESSING REQUIRE-
MENT, A CLERICAL ERROR, OR OTHER ADMINISTRATIVE  TECHNICALITY,  PROVIDED
THAT THE FAILURE DOES NOT CALL INTO QUESTION THE LEGITIMACY OF THE CLAIM
AND  THAT  THE  DEALER CORRECTS THE CLAIM ACCORDING TO FRANCHISOR GUIDE-
LINES.
  4. A franchisor shall not charge  a  dealer  back  subsequent  to  the
payment  of a warranty [or], sales [incentive], ADVERTISING OR MARKETING
INCENTIVE claim unless a representative of the  franchisor  has  met  in
person  at  the dealership, or by telephone, with an officer or employee
of the dealer designated by the dealer and explained in detail the basis
for each of the proposed charge backs and thereafter given the  dealer's
representative  a  reasonable  opportunity at the meeting, or during the
telephone call, to explain the dealer's position relating to each of the
proposed charge backs. In the event the dealer was selected for audit or
review on the basis that some or all of the dealer's claims were  viewed
as  excessive  in  comparison to average, mean or aggregate data accumu-
lated by the franchisor, or in relation to claims submitted by  a  group
of  other  franchisees, the franchisor shall, at or prior to the meeting
or telephone call with the dealer's representative, provide  the  dealer
with  a written statement containing the basis or methodology upon which
the dealer was selected for audit or review.
  6. A franchisor shall not deny or charge  back  a  sales  [incentive],
ADVERTISING  OR  MARKETING INCENTIVE payment made to a dealer unless the
claim was materially false or fraudulent or [that] the dealer failed  to
reasonably  substantiate  the  claim  [either]  in  accordance  with the
manufacturer's reasonable procedures.
  7. After all internal dispute resolution  processes  provided  through
the  franchisor  have been resolved, the franchisor shall give notice to
the dealer of the final  amount  of  a  proposed  warranty  [or],  sales
[incentive],  ADVERTISING  OR  MARKETING  INCENTIVE  charge back. If the
dealer institutes an action pursuant to this article within thirty  days
of  receipt  of  such  notice, the proposed charge back shall be stayed,
without bond, during the pendency of such action  and  until  the  final
judgment  has  been  rendered in an adjudicatory proceeding or action as
provided in section four hundred sixty-nine of this article.  THE  FRAN-
CHISOR  SHALL  NOT IMPOSE THE CHARGEBACK, DEBIT THE DEALER'S ACCOUNT, OR
OTHERWISE SEEK TO OBTAIN ALL OR ANY PART OF THE  CHARGEBACK  FUNDS  FROM
THE  DEALER  DURING  THE  THIRTY-DAY  PERIOD IN WHICH THE DEALER HAS THE
OPPORTUNITY TO FILE AN ACTION AS SET FORTH ABOVE.
  S 12. Severability. If any clause,  sentence,  paragraph,  section  or
part  of  this act shall be adjudged by any court of competent jurisdic-
tion to be invalid and after exhaustion of all further judicial  review,
the judgment shall not affect, impair or invalidate the remainder there-
of,  but  shall  be  confined  in its operation to the clause, sentence,
paragraph, section or part of this act directly involved in the  contro-
versy in which the judgment shall have been rendered.
  S 13. This act shall take effect immediately.

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