407.825. Unlawful practices.
Unlawful practices.
407.825. Notwithstanding the terms of any franchise agreement, theperformance, whether by act or omission, by a motor vehicle franchisor of anyor all of the following acts enumerated in this section* are hereby defined asunlawful practices, the remedies for which are set forth in section 407.835:
(1) To engage in any conduct which is capricious, in bad faith, orunconscionable and which causes damage to a motor vehicle franchisee or to thepublic; provided, that good faith conduct engaged in by motor vehiclefranchisors as sellers of new motor vehicles or parts or as holders ofsecurity interest therein, in pursuit of rights or remedies accorded tosellers of goods or to holders of security interests pursuant to theprovisions of chapter 400, RSMo, uniform commercial code, shall not constituteunfair practices pursuant to sections 407.810 to 407.835;
(2) To coerce any motor vehicle franchisee to accept delivery of any newmotor vehicle or vehicles, equipment, parts or accessories therefor, or anyother commodity or commodities which such motor vehicle franchisee has notordered after such motor vehicle franchisee has rejected such commodity orcommodities. It shall not be deemed a violation of this section for a motorvehicle franchisor to require a motor vehicle franchisee to have an inventoryof parts, tools, and equipment reasonably necessary to service the motorvehicles sold by a motor vehicle franchisor; or new motor vehicles reasonablynecessary to meet the demands of dealers or the public or to display to thepublic the full line of a motor vehicle franchisor's product line;
(3) To unreasonably refuse to deliver in reasonable quantities andwithin a reasonable time after receipt of orders for new motor vehicles, suchmotor vehicles as are so ordered and as are covered by such franchise and asare specifically publicly advertised by such motor vehicle franchisor to beavailable for immediate delivery; provided, however, the failure to deliverany motor vehicle shall not be considered a violation of sections 407.810 to407.835 if such failure is due to an act of God, work stoppage, or delay dueto a strike or labor difficulty, shortage of products or materials, freightdelays, embargo or other cause of which such motor vehicle franchisor shallhave no control;
(4) To coerce any motor vehicle franchisee to enter into any agreementwith such motor vehicle franchisor or to do any other act prejudicial to suchmotor vehicle franchisee, by threatening to cancel any franchise or anycontractual agreement existing between such motor vehicle franchisor and motorvehicle franchisee; provided, however, that notice in good faith to any motorvehicle franchisee of such motor vehicle franchisee's violation of anyprovisions of such franchise or contractual agreement shall not constitute aviolation of sections 407.810 to 407.835;
(5) To terminate, cancel or refuse to continue any franchise withoutgood cause, directly or indirectly through the actions of the franchisor,unless such new motor vehicle franchisee substantially defaults in theperformance of such franchisee's reasonable and lawful obligations under suchfranchisee's franchise, or such new motor vehicle franchisor discontinues thesale in the state of Missouri of such franchisor's products which are thesubject of the franchise. In determining whether good cause exists, theadministrative hearing commission shall take into consideration the existingcircumstances, including, but not limited to, the following factors:
(a) The franchisee's sales in relation to sales in the market;
(b) The franchisee's investment and obligations;
(c) Injury to the public welfare;
(d) The adequacy of the franchisee's service facilities, equipment,parts and personnel in relation to those of other franchisees of the sameline-make;
(e) Whether warranties are being honored by the franchisee;
(f) The parties' compliance with their franchise agreement;
(g) The desire of a franchisor for market penetration or a market study,if any, prepared by the franchisor or franchisee are two factors which may beconsidered;
(h) The harm to the franchisor;
(6) To prevent by contract or otherwise, any motor vehicle franchiseefrom changing the capital structure of the franchisee's franchise of suchmotor vehicle franchisee or the means by or through which the franchiseefinances the operation of the franchisee's franchise, provided the motorvehicle franchisee at all times meets any reasonable capital standards agreedto between the motor vehicle franchisee and the motor vehicle franchisor andgrants to the motor vehicle franchisor a purchase money security interest inthe new motor vehicles, new parts and accessories purchased from the motorvehicle franchisor;
(7) (a) To** prevent, by contract or otherwise, any sale or transfer ofa franchisee's franchise or franchises or interest or management thereof;provided, if the franchise specifically permits the franchisor to approve ordisapprove any such proposed sale or transfer, a franchisor shall only beallowed to disapprove a proposed sale or transfer if the interest being soldor transferred when added to any other interest owned by the transfereeconstitutes fifty percent or more of the ownership interest in the franchiseand if the proposed transferee fails to satisfy any standards of thefranchisor which are in fact normally relied upon by the franchisor prior toits entering into a franchise, and which relate to the proposed management orownership of the franchise operations or to the qualification, capitalization,integrity or character of the proposed transferee and which are reasonable. Afranchisee may request, at any time, that the franchisor provide a copy of thestandards which are normally relied upon by the franchisor to evaluate aproposed sale or transfer and a proposed transferee;
(b) The franchisee and the prospective franchisee shall cooperate fullywith the franchisor in providing information relating to the prospectivetransferee's qualifications, capitalization, integrity and character;
(c) In the event of a proposed sale or transfer of a franchise, thefranchisor shall be permitted to exercise a right of first refusal to acquirethe franchisee's assets or ownership if:
a. The franchise agreement permits the franchisor to exercise a right offirst refusal to acquire the franchisee's assets or ownership in the event ofa proposed sale or transfer;
b. Such sale or transfer is conditioned upon the franchisor orfranchisee entering a franchise agreement with the proposed transferee;
c. The exercise of the right of first refusal shall result in thefranchisee and the franchisee's owners receiving the same or greaterconsideration and the same terms and conditions as contracted to receive inconnection with the proposed sale or transfer;
d. The sale or transfer does not involve the sale or transfer to animmediate member or members of the family of one or more franchisee owners,defined as a spouse, child, grandchild, spouse of a child or grandchild,brother, sister or parent of the franchisee owner, or to the qualifiedmanager, defined as an individual who has been employed by the franchisee forat least two years and who otherwise qualifies as a franchisee operator, or apartnership or corporation controlled by such persons; and
e. The franchisor agrees to pay the reasonable expenses, includingattorney's fees which do not exceed the usual, customary and reasonable feescharged for similar work done for other clients, incurred by the proposedtransferee prior to the franchisor's exercise of its right of first refusal innegotiating and implementing the contract for the proposed sale or transfer ofthe franchise or the franchisee's assets. Notwithstanding the foregoing, nopayment of such expenses and attorney's fees shall be required if thefranchisee has not submitted or caused to be submitted an accounting of thoseexpenses within fourteen days of the franchisee's receipt of the franchisor'swritten request for such an accounting. Such accounting may be requested by afranchisor before exercising its right of first refusal;
(d) For determining whether good cause exists for the purposes of thissubdivision, the administrative hearing commission shall take intoconsideration the existing circumstances, including, but not limited to, thefollowing factors:
a. Whether the franchise agreement specifically permits the franchisorto approve or disapprove any proposed sale or transfer;
b. Whether the interest to be sold or transferred when added to anyother interest owned by the proposed transferee constitutes fifty percent ormore of the ownership interest in the franchise;
c. Whether the proposed transferee fails to satisfy any standards of thefranchisor which are in fact normally relied upon by the franchisor prior toits entering into a franchise, and which related to the proposed management orownership of the franchise operations or to the qualification, capitalization,integrity or character of the proposed transferee which are reasonable;
d. Injury to the public welfare;
e. The harm to the franchisor;
(8) To prevent by contract or otherwise any motor vehicle franchiseefrom changing the executive management of the motor vehicle franchisee'sbusiness, except that any attempt by a motor vehicle franchisor to demonstrateby giving reasons that such change in executive management will be detrimentalto the distribution of the motor vehicle franchisor's motor vehicles shall notconstitute a violation of this subdivision;
(9) To impose unreasonable standards of performance upon a motor vehiclefranchisee;
(10) To require a motor vehicle franchisee at the time of entering intoa franchise arrangement to assent to a release, assignment, novation, waiveror estoppel which would relieve any person from liability imposed by sections407.810 to 407.835;
(11) To prohibit directly or indirectly the right of free associationamong motor vehicle franchisees for any lawful purpose;
(12) To provide any term or condition in any lease or other agreementancillary or collateral to a franchise, which term or condition directly orindirectly violates the provisions of sections 407.810 to 407.835;
(13) Upon any termination, cancellation or refusal to continue anyfranchise or any discontinuation of any line-make or parts or products relatedto such line-make by a franchisor, fail to pay reasonable compensation to afranchisee as follows:
(a) Any new, undamaged and unsold vehicle in the franchisee's inventoryof either the current model year or purchased from the franchisor within onehundred twenty days prior to receipt of a notice of termination or nonrenewal,provided the vehicle has less than five hundred miles registered on theodometer, including mileage incurred in delivery from the franchisor or intransporting the vehicle between dealers for sale, at the dealer's netacquisition cost, plus any cost to the dealer for returning the vehicleinventory to the franchisor;
(b) The franchisee's cost of each new, unused, undamaged and unsold partor accessory if the part or accessory is in the current parts catalog, lessapplicable allowances, plus five percent of the catalog price of the part forthe cost of packing and returning the part to the franchisor. In the case ofsheet metal, a comparable substitute for the original package may be used.Reconditioned or core parts shall be valued at their core value, the pricelisted in the current parts catalog or the amount paid for expedited return ofcore parts, whichever is higher. If the part or accessory was purchased bythe franchisee from an outgoing authorized franchisee, the franchisor shallpurchase the part for either the price in the current parts catalog or thefranchisee's actual purchase price of the part, whichever is less. In thecase of parts which no longer appear in the current parts catalog, thefranchisor may purchase the part for either the price in the last version ofthe parts catalog in which the part appeared or the franchisee's actualpurchase price of the part, whichever is less. The franchisee shall maintainaccurate records regarding the actual purchase price of parts bought from anoutgoing authorized franchisee. In the absence of such records, thefranchisor is not required to purchase parts which are not in the currentparts catalog;
(c) The depreciated value determined pursuant to generally acceptedaccounting principles of each undamaged sign owned by the franchisee whichbears a trademark or trade name used or claimed by the franchisor if the signwas purchased from, or purchased at the request of, the franchisor;
(d) The fair market value of all special tools, data processingequipment and automotive service equipment owned by the franchisee which wererecommended in writing and designated as special tools and equipment andpurchased from, or purchased at the request of, the franchisor within threeyears of the termination of the franchise, if the tools and equipment are inusable and good condition, except for reasonable wear and tear;
(e) Except as provided in paragraph (a) of this subdivision, the cost oftransporting, handling, packing, storing and loading of any property subjectto repurchase pursuant to this section shall not exceed reasonable andcustomary charges; and
(f) The franchisor shall pay the franchisee the amounts specified inthis subdivision within ninety days after the tender of the property subjectto the franchisee providing evidence of good and clear title upon return ofthe property to the franchisor. The franchisor shall remove the propertywithin one hundred eighty days after the tender of the property from thefranchisee's property. Unless previous arrangements have been made and agreedupon, the franchisee is under no obligation to provide insurance for theproperty left after one hundred eighty days;
(14) To prevent or refuse to honor the succession to a franchise orfranchises by any legal heir or devisee under the will of a franchisee, underany written instrument filed with the franchisor designating any person as theperson's successor franchisee, or pursuant to the laws of descent anddistribution of this state; provided:
(a) Any designated family member of a deceased or incapacitatedfranchisee shall become the succeeding franchisee of such deceased orincapacitated franchisee if such designated family member gives the franchisorwritten notice of such family member's intention to succeed to the franchiseor franchises within one hundred twenty days after the death or incapacity ofthe franchisee, and agrees to be bound by all of the terms and conditions ofthe current franchise agreement, and the designated family member meets thecurrent reasonable criteria generally applied by the franchisor in qualifyingfranchisees. A franchisee may request, at any time, that the franchisorprovide a copy of such criteria generally applied by the franchisor inqualifying franchisees;
(b) The franchisor may request from a designated family member suchpersonal and financial data as is reasonably necessary to determine whetherthe existing franchise agreement should be honored. The designated familymember shall supply the personal and financial data promptly upon the request;
(c) If the designated family member does not meet the reasonablecriteria generally applied by the franchisor in qualifying franchisees, thediscontinuance of the current franchise agreement shall take effect not lessthan ninety days after the date the franchisor serves the required notice onthe designated family member pursuant to subsection 4 of section 407.822;
(d) The provisions of this subdivision shall not preclude a franchiseefrom designating any person as the person's successor by written instrumentfiled with the franchisor, and if such an instrument is filed, it alone shalldetermine the succession rights to the management and operation of thefranchise; and
(e) For determining whether good cause exists, the administrativehearing commission shall take into consideration the existing circumstances,including, but not limited to, the following factors:
a. Whether the franchise agreement specifically permits the franchisorto approve or disapprove any successor;
b. Whether the proposed successor fails to satisfy any standards of thefranchisor which are in fact normally relied upon by the franchisor prior tothe successor entering into a franchise, and which relate to the proposedmanagement or ownership of the franchise operation or to the qualification,capitalization, integrity or character of the proposed successor and which arereasonable;
c. Injury to the public welfare;
d. The harm to the franchisor;
(15) To coerce, threaten, intimidate or require a franchisee under anycondition affecting or related to a franchise agreement, or to waive, limit ordisclaim a right that the franchisee may have pursuant to the provisions ofsections 407.810 to 407.835. Any contracts or agreements which contain suchprovisions shall be deemed against the public policy of the state of Missouriand are void and unenforceable. Nothing in this section shall prohibitvoluntary settlement agreements;
(16) To initiate any act enumerated in this subsection on grounds thatit has advised a franchisee of its intention to discontinue representation atthe time of a franchisee change or require any franchisee to enter into a sitecontrol agreement as a condition to initiating any act enumerated in thissubsection. Such condition shall not be construed to nullify an existing sitecontrol agreement for a franchisee's property;
(17) To require, coerce, or attempt to coerce any franchisee in thisstate to refrain from, or to terminate, cancel, or refuse to continue anyfranchise based upon participation by the franchisee in the management of,investment in or the acquisition of a franchise for the sale of any other lineof new vehicle or related products in the same or separate facilities as thoseof the franchisor. This subdivision does not apply unless the franchiseemaintains a reasonable line of credit for each make or line of new vehicle,the franchisee remains in compliance with the franchise and any reasonablefacilities requirements of the franchisor, and no change is made in theprincipal management of the franchisee. The reasonable facilities requirementshall not include any requirement that a franchisee establish or maintainexclusive facilities, personnel, or display space, when such requirements orany of them would not otherwise be justified by reasonable businessconsiderations. Before the addition of a line-make to the dealershipfacilities the franchisee must first request consent of the franchisor, ifrequired by the franchise agreement. Any decision of the franchisor withregard to dualing of two or more franchises shall be granted or denied withinsixty days of a written request from the new vehicle dealer. The franchiser'sfailure to respond timely to a dualing request shall be deemed to be approvalof the franchisee's request;
(18) To fail or refuse to offer to sell to all franchisees for aline-make every motor vehicle sold or offered for sale to any franchisee ofthat line-make. However, the failure to deliver any such motor vehicle shallnot be considered a violation of this section if the failure is not arbitrary,or is due to a lack of manufacturing capacity or to a strike or labordifficulty, a shortage of materials, a freight embargo or other cause overwhich the franchisor has no control. A franchisor may impose reasonablerequirements on the franchisee including, but not limited to, the purchase ofreasonable quantities of advertising materials, the purchase of special toolsrequired to properly service a motor vehicle, the undertaking of sales personor service person training related to the motor vehicle, the meeting ofreasonable display and facility requirements as a condition of receiving amotor vehicle, or other reasonable requirements; provided, that if afranchisor requires a franchisee to purchase essential service tools with apurchase price in the aggregate of more than seventy-five hundred dollars inorder to receive a particular model of new motor vehicle, the franchisor shallupon written request provide such franchisee with a good faith estimate inwriting of the number of vehicles of that particular model that the franchiseewill be allocated during that model year in which the tools are required to bepurchased.
(L. 1980 H.B. 1600 § 4, A.L. 1997 H.B. 516, A.L. 2001 H.B. 575)*Word "subsection" appears in original rolls.
**Word "to" does not appear in original rolls.
(1985) The "substantial default" of a franchisee's "reasonable and lawful obligations" could not be proven where franchisor could show no adverse impact on his business and where an exclusive space use requirement of franchise agreement was unreasonable in light of the fact that franchisor could not supply enough vehicles to utilize available space. G.A. Imports, Inc. v. Subaru Mid-America, Inc. (E.D.Mo.), 608 F.Supp. 1571.
(1986) Ninety-day notice requirement for cancellation of franchises contained in section 407.405, RSMo, held applicable to motor vehicle franchises. Maude v. General Motors Corp., 626 F.Supp. 1081 (W.D.Mo.).
(1995) "Capricious" is "impulsive; unpredictable". "Unconscionable" is "shockingly unfair or unjust". Thoroughbred Ford, Inc. v. Ford Motor Co., 908 S.W.2d 719 (Mo.App.E.D.).