PRINTER'S NO. 1383
No. 1131 Session of 1999
INTRODUCED BY MADIGAN, WENGER, BRIGHTBILL, HELFRICK, STOUT,
STAPLETON, HART, MUSTO, O'PAKE, LEMMOND, SLOCUM, COSTA,
GERLACH, WOZNIAK, BOSCOLA, WAUGH, PUNT AND KASUNIC,
OCTOBER 5, 1999
REFERRED TO AGRICULTURE AND RURAL AFFAIRS, OCTOBER 5, 1999
AN ACT
1 Amending the act of December 18, 1987 (P.L.412, No.86), entitled
2 "An act providing for the repurchase by the wholesaler,
3 manufacturer or distributor, from dealers or heirs of
4 dealers, of certain equipment, certain attachments and parts
5 held for sale upon termination of agreement whereby the
6 dealer agrees to maintain a stock of such implements,
7 attachments and parts, and for the repurchase of certain
8 tools," further providing for definition of "equipment," for
9 exceptions to dealer agreements and credits to dealer's
10 accounts; and providing for succession to franchise ownership
11 and for manufacturer's right of first refusal.
12 The General Assembly of the Commonwealth of Pennsylvania
13 hereby enacts as follows:
14 Section 1. The definition of "equipment" in section 2 of the
15 act of December 18, 1987 (P.L.412, No.86), known as the
16 Pennsylvania Fair Dealership Law, is amended to read:
17 Section 2. Definitions.
18 The following words and phrases when used in this act shall
19 have the meanings given to them in this section unless the
20 context clearly indicates otherwise:
21 * * *
1 "Equipment." Machines designed for or adapted and used for
2 agriculture, horticulture, floriculture, livestock raising,
3 silviculture, landscaping and grounds maintenance, industrial
4 construction equipment, even though incidentally operated or
5 used upon the highways, including, but not limited to, tractors,
6 farm implements, loaders, backhoes, lawn mowers, rototillers,
7 etc., and any business signs purchased by requirement of the
8 supplier which are less than five years old. The term shall not
9 include[:
10 (1) equipment manufactured solely for the purpose of
11 industrial construction; or
12 (2)] all-terrain vehicles as defined in 75 Pa.C.S. § 7702
13 (relating to definitions).
14 * * *
15 Section 2. Section 3(b)(2) and (c) of the act are amended
16 and subsection (c) is amended by adding a paragraph to read:
17 Section 3. Termination of dealer agreement.
18 * * *
19 (b) Exceptions.--A supplier may terminate, cancel or fail to
20 renew a dealer agreement if a dealer:
21 * * *
22 (2) Has transferred ownership interest in the dealership
23 without the manufacturer's or distributor's consent except as
24 provided in section 15.
25 * * *
26 (c) Other exceptions.--Subject to the provisions of this
27 subsection, a supplier, including any jobber and wholesaler even
28 though it may not have been the original supplier of such
29 equipment, may terminate, cancel or fail to renew a dealer
30 agreement under such conditions as may be provided for in the
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1 dealer agreement. When a dealer agreement is terminated or
2 canceled or has failed to be renewed by the supplier under a
3 condition provided for in the dealer agreement, other than a
4 condition set forth in subsection (b), the supplier, upon
5 written request of the dealer, shall pay to the dealer, or
6 credit to the dealer's account if the dealer has outstanding any
7 sums owing the supplier:
8 (1) A sum equal to 100% of the net cost of all equipment
9 that the dealer purchased from the supplier and not
10 previously sold and put into regular use or service preceding
11 notification by either party of intent to cancel, terminate
12 or fail to renew the dealer agreement.
13 (2) A sum equal to 100% of the current net price of
14 repair parts, including superseded repair parts, previously
15 purchased from the supplier and 75% of the current net price
16 of specialized repair tools previously purchased pursuant to
17 the requirements of the supplier and held by the dealer on
18 the date of termination, cancellation or failure to renew the
19 dealer agreement. In addition, the supplier shall pay the
20 dealer, or credit to the dealer's account if the dealer has
21 outstanding any sums owing the supplier, a sum equal to 5% of
22 the current net price of all repair parts, excluding incoming
23 freight cost, and specialized repair tools returned to the
24 supplier to compensate the dealer for the inventory, packing
25 and loading of the same to the supplier, provided that the
26 supplier may perform such inventory, packing and loading in
27 lieu of paying 5% to the dealer. Upon the payment or
28 allowance of credit to the dealer's account, as applicable,
29 in the sum required by this section, all of the dealer's
30 title and interest in and to the equipment, repair parts and
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1 specialized repair tools shall pass to the supplier, and the
2 supplier shall be entitled to the possession of the same.
3 Payments or allowance of credit to the dealer, as applicable,
4 required by this section shall be made no later than 90 days
5 after such termination, cancellation or discontinuance or 60
6 days after the supplier's receipt of the equipment, repair
7 parts or specialized repair tools.
8 (3) In the event a dealer terminates a dealer agreement,
9 the obligation of the supplier to repurchase equipment,
10 repair parts and specialized repair tools shall be governed
11 by the terms and conditions then in effect in the dealer
12 agreement between the supplier and the dealer and not by the
13 provisions of this act.
14 (4) A sum equal to 100% of the net cost of all computer
15 hardware and software including any vehicles equipped with
16 computer systems and/or diagnostic computers.
17 * * *
18 Section 3. The act is amended by adding sections to read:
19 Section 3.1. Succession to franchise ownership.
20 (a) Succession of ownership interest.--Notwithstanding the
21 terms of any franchise, any owner of a dealership may appoint,
22 by will or any other written instrument, a designated family
23 member, the spouse, child or grandchild, spouse of a child or
24 grandchild, brother, sister or parent of the dealer owner, or
25 qualified manager, who has been employed at the dealership for
26 at least two years, to succeed to the ownership interest of such
27 owner in the dealership.
28 (b) Consent to succession on part of manufacturer or
29 distributor.--Notwithstanding the terms of any franchise, unless
30 there exists good cause as provided for in section 3(b), to
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1 withhold consent to succession on the part of the manufacturer
2 or distributor, any designated family member or qualified
3 manager of the franchise location in question of a retiring,
4 deceased or incapacitated owner of a dealership may succeed to
5 the ownership interest of such owner under the existing
6 franchise, provided:
7 (1) The designated family member or qualified manager
8 furnishes written notice to the manufacturer or distributor
9 of his or her intention to succeed to the ownership of the
10 dealership within 60 days after the owner's retirement, death
11 or incapacity.
12 (2) The designated family member or qualified manager
13 agrees to be bound by all then existing terms and conditions
14 of the franchise.
15 (c) Submission of personal and financial information.--The
16 manufacturer or distributor may request, and the designated
17 family member or qualified manager shall promptly provide, such
18 personal and financial information as is reasonably necessary to
19 determine whether the succession will be honored.
20 (d) Withholding consent to succession.--If a manufacturer or
21 distributor believes that good cause exists to withhold consent
22 to the succession to the ownership of a dealership by a
23 designated family member or qualified manager of a retiring,
24 deceased or incapacitated owner of a dealership under the
25 existing franchise, the manufacturer or distributor must serve
26 written notice on the designated family member or qualified
27 manager of its refusal to honor the succession and intent to
28 discontinue the existing franchise with the dealer. Such notice
29 shall be served no later than 60 days after the manufacturer's
30 or distributor's receipt of:
19990S1131B1383 - 5 -
1 (1) notice of the designated family member's or
2 qualified manager's intent to succeed to the ownership of the
3 dealer; or
4 (2) any personal or financial information requested by
5 the manufacturer or distributor.
6 (e) Notice requirements.--The notice in subsection (d) shall
7 state the specific grounds to withhold consent to honor the
8 succession and the manufacturer's or distributor's intent to
9 discontinue the franchise with the dealer no sooner than 60 days
10 after the date the notice is served. The reasons given for the
11 disapproval or any explanation of those reasons by the
12 manufacturer or distributor shall not subject the manufacturer
13 or distributor to any civil liabilities unless the reasons given
14 or explanations made are malicious and published with the sole
15 intent to cause harm to the dealer or successor. If the notice
16 of refusal and discontinuance is not timely and properly served,
17 the franchise shall continue in effect, subject to termination
18 only as otherwise provided under this act.
19 (f) Protest requirements upon withholding of consent.--
20 Within 30 days after receipt of such notice or within 30 days
21 after the end of any appeal procedure provided by the
22 manufacturer or distributor, whichever is greater, the
23 designated family member or qualified manager may file with the
24 manufacturer to protest the withholding the consent to honor the
25 succession. When a protest is filed that manufacturer or
26 distributor shall not terminate or discontinue the existing
27 franchise until the manufacturer has held a hearing and issued a
28 written decision within 120 days of the filing of the protest
29 nor thereafter.
30 (g) Conflicts.--This act shall not preclude the owner of a
19990S1131B1383 - 6 -
1 dealership from designating any person as his or her successor
2 by written instrument filed with the manufacturer or
3 distributor. In the event of any conflict between such a written
4 instrument which has not been revoked by written notice from the
5 owner to the manufacturer or distributor, and this section, the
6 written instrument shall govern.
7 (h) Restriction.--This section shall not apply if the
8 successor will not agree to comply with an existing agreement
9 pertaining to transfer of ownership made between the
10 manufacturer or distributor and the dealer transferor or with a
11 new agreement containing substantially the same terms.
12 Section 3.2. Manufacturer right of first refusal.
13 A manufacturer or distributor shall be permitted to enact a
14 right of first refusal to acquire the dealer's assets or
15 ownership in the event of a proposed change of all or
16 substantially all ownership or transfer of all or substantially
17 all dealership assets if all of the following requirements are
18 met:
19 (1) To exercise its right of first refusal, the
20 manufacturer or distributor must notify the dealer in writing
21 within the 60-day or 75-day time limitations established
22 under this act.
23 (2) The exercise of the right of first refusal will
24 result in the dealer and dealer's owners receiving the same
25 or greater consideration as they have contracted to receive
26 in connection with the proposed change of all or
27 substantially all ownership or transfer of all or
28 substantially all dealership assets.
29 (3) The proposed change of all or substantially all
30 ownership or transfer of all or substantially all dealership
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1 assets does not involve the transfer of assets or the
2 transfer or issuance of stock by the dealer or one or more
3 dealer owners to a designated family member or members, the
4 spouse, child or grandchild, spouse of a child or grandchild,
5 brother, sister or parent of the dealer owner, of one or more
6 dealer owners or to a qualified manager or to a partnership
7 or corporation controlled by such persons.
8 (4) The manufacturer or distributor agrees to pay the
9 reasonable expenses, including reasonable attorney fees which
10 do not exceed the usual, customary and reasonable fees
11 charged for similar work done for other clients, incurred by
12 the proposed new owner and transferee prior to the
13 manufacturer's or distributor's exercise of its right of
14 first refusal in negotiating and implementing the contract
15 for the proposed change of all or substantially all ownership
16 or transfer of all or substantially all dealership assets.
17 Notwithstanding the foregoing, no payment of such expenses
18 and attorney fees shall be required if the dealer has not
19 submitted or caused to be submitted an accounting of those
20 expenses within 60 days of the dealer's receipt of the
21 manufacturer's or distributor's written request for such an
22 accounting. Such an accounting may be requested by a
23 manufacturer or distributor before exercising its right of
24 first refusal.
25 Section 10.1. Unlawful acts by manufacturers or distributors.
26 (a) Unlawful coercive acts.--It shall be a violation for any
27 manufacturer, factory branch, distributor, field representative,
28 officer, agent or any representative whatsoever of such
29 manufacturer, factory branch or distributor licensed under this
30 act to require, attempt to require, coerce or attempt to coerce
19990S1131B1383 - 8 -
1 any dealer in this Commonwealth to:
2 (1) Refrain from participation in the management of,
3 investment in or the acquisition of any other line of related
4 products. This paragraph does not apply unless the dealer
5 maintains a reasonable line of credit for each make or line
6 of equipment, the equipment dealer remains in compliance with
7 the franchise agreement and any reasonable facilities
8 requirements of the manufacturer or distributor, and no
9 change is made in the principal management of the dealer. The
10 reasonable facilities requirements shall not include any
11 requirement that a dealer establish or maintain exclusive
12 facilities, personnel or display space when such requirements
13 or any of them would be unreasonable in light of economic
14 conditions and would not otherwise be justified by reasonable
15 business considerations. Nothing in this paragraph shall
16 permit the addition of a line-make to the dealership
17 facilities without the written consent of the manufacturer or
18 distributor. Any consent required from the manufacturer or
19 distributor with regard to dualizing of two or more
20 franchises shall be granted or denied within 60 days of
21 receipt of a written request from the dealer.
22 (2) Expand, construct or significantly modify facilities
23 without assurances that the manufacturer or distributor will
24 provide a reasonable supply of equipment within a reasonable
25 time so as to justify such an expansion in light of the
26 market and economic conditions or require a separate facility
27 for the sale or service of a line-make of a new line if the
28 market and economic conditions do not clearly justify the
29 separate facility.
30 Section 4. This act shall take effect immediately.
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