Sec. 42-133v. Cancellation, termination or nonrenewal of franchise. "Good cause" requirement. Notice. Appeal.
Sec. 42-133v. Cancellation, termination or nonrenewal of franchise. "Good
cause" requirement. Notice. Appeal. (a) Notwithstanding the terms, provisions or
conditions of any franchise agreement and notwithstanding the terms or provisions of
any waiver, no manufacturer or distributor shall cancel, terminate or fail to renew any
franchise with a licensed dealer unless the manufacturer or distributor has satisfied the
notice requirement of subsection (d) of this section, has good cause for cancellation,
termination or nonrenewal and has acted in good faith.
(b) Notwithstanding the terms, provisions or conditions of any franchise or the terms
or provisions of any waiver, good cause exists for the purposes of a termination, cancellation or nonrenewal if:
(1) There is a failure by the dealer to comply with a provision of the franchise which
is both reasonable and of material significance to the franchise relationship, provided
that the dealer has been notified in writing of the failure within one hundred eighty days
after the manufacturer or distributor first acquired knowledge of such failure;
(2) If the failure by the dealer, defined in subdivision (1) of this subsection, relates
to the performance of the dealer in sales or service, then good cause shall be defined as
the failure of the dealer to comply with reasonable performance criteria established
by the manufacturer or distributor if the dealer was apprised by the manufacturer or
distributor in writing of such failure; and: (A) The notification stated that notice was
provided of failure of performance under this section; (B) the dealer was afforded a
reasonable opportunity, for a period of not less than six months, to comply with such
criteria; and (C) the dealer did not demonstrate substantial progress towards compliance
with the manufacturer's or distributor's performance criteria during such period.
(c) The manufacturer or distributor shall have the burden of proof under this section.
(d) Notwithstanding the terms, provisions or conditions of any franchise, prior to the
termination, cancellation or nonrenewal of any franchise, the manufacturer or distributor
shall furnish notification of such termination, cancellation or nonrenewal to the dealer
as follows: (1) In the manner described in subsection (e); and (2) not less than ninety
days prior to the effective date of such termination, cancellation or nonrenewal; or (3)
not less than fifteen days prior to the effective date of such termination, cancellation or
nonrenewal with respect to: (A) Insolvency of the dealer, or filing of any petition by or
against the dealer under any bankruptcy or receivership law; (B) failure of the dealer
to conduct customary sales and service operations during business hours for seven consecutive business days, except in circumstances beyond the direct control of the dealer;
(C) conviction of the dealer, or any owner thereof, of any felony which is punishable
by imprisonment; (D) suspension or revocation of any license which the new motor
vehicle dealer is required to have to operate a dealership; or (E) a fraudulent misrepresentation by the dealer to the manufacturer or distributor which is material to the franchise;
(4) not less than one hundred eighty days prior to the effective date of such termination
or cancellation if the manufacturer or distributor is discontinuing the sale of the product line.
(e) Notice under this section shall be in writing, sent by certified mail or personally
delivered to the dealer; and shall contain: (1) A statement of intention to terminate,
cancel or not to renew the franchise; (2) a statement of the reasons for the termination,
cancellation or nonrenewal; and (3) the date on which such termination, cancellation
or nonrenewal takes effect.
(f) No manufacturer or distributor shall terminate, cancel or fail to renew a dealer's
franchise for the failure or refusal of the dealer to do any of the following: (1) Failure
to meet sales quotas suggested by the manufacturer or distributor; (2) refusal to sell any
product at a price suggested by the manufacturer or distributor; (3) refusal to keep the
premises open and operating during those hours which are documented by the dealer
to be unprofitable to the dealer or to preclude the dealer from establishing his own hours
of operation beyond the hour of 10:00 p.m. and prior to 6:00 a.m.; (4) refusal to meet
unreasonable minimum standards and marketing guides, which include, but are not
limited to, capital, inventory, facility and personnel requirements; (5) refusal to give
the manufacturer or distributor financial records of the operation of the franchise which
are not related or necessary to the dealer's obligations under the franchise agreement.
Subdivisions (1) to (5), inclusive, shall not be deemed good cause under subsection (b)
of this section.
(g) If a franchisee brings an action in a court of competent jurisdiction to challenge
the cancellation, termination or nonrenewal of a franchise agreement by a manufacturer
or distributor under this section, such franchise agreement shall remain in full force and
effect and such franchisee shall retain all rights and remedies pursuant to the terms and
conditions of such franchise agreement, including, but not limited to, the right to sell
or transfer such franchisee's ownership interest, for a period of six months following a
final determination by the court of competent jurisdiction, unless extended by the court
of competent jurisdiction for good cause. This subsection shall not apply to a cancellation, termination or nonrenewal of a franchise agreement based upon any of the reasons
set forth in subdivision (3) of subsection (d) of this section.
(P.A. 82-445, S. 5, 15; P.A. 83-198, S. 5, 11; 83-304, S. 1, 2; P.A. 99-132.)
History: P.A. 83-198 subjected distributors to the provisions of this section; P.A. 83-304 added Subsec. (f) limiting
manufacturer's or distributor's ability to cancel, terminate or fail to remove a dealer's franchise; P.A. 99-132 added Subsec.
(g) re appeal of a cancellation, termination or nonrenewal of a franchise agreement.