Bill Summary – FastDemocracy

WEST VIRGINIA LEGISLATURE
REGULAR SESSION
                    Enrolled Senate Bill 173
 By Senators Phillips, Tarr, Oliverio, Swope, Roberts,
           Hamilton, Woodrum, and Stuart [Passed March 7, 2024; in effect 90 days from passage]
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  AN ACT to amend and reenact §17A-6A-3, §17A-6A-8a, §17A-6A-10, and §17A-6A9-18 of the
         Code of West Virginia, 1931, as amended, all relating generally to new motor vehicle
         dealers, distributors, wholesalers, manufacturers, factory branches, and distributor
         branches; defining terms; clarifying a manufacturer's obligations for warranty and recall
         reimbursement to a new motor vehicle dealer; restricting manufacturer and distributor right
         of first refusal; identifying and clarifying unlawful and prohibited practices; and clarifying
         statutory authority of dealer data systems vendor agreements.
     Be it enacted by the Legislature of West Virginia:
     ARTICLE 6A. NEW MOTOR VEHICLE DEALERS, DISTRIBUTORS, WHOLESALERS,
            AND                                                                    MANUFACTURERS.
     §17A-6A-3.                                                                                Definitions.
         For the purposes of this article, the words and phrases defined in this section have the
  meanings ascribed to them, except where the context clearly indicates a different meaning.
         (1) "Dealer agreement" means the franchise, agreement, or contract in writing between a
  manufacturer, distributor, and a new motor vehicle dealer which purports to establish the legal
  rights and obligations of the parties to the agreement or contract with regard to the operation and
  business of a new motor vehicle dealer, including, but not limited to, the purchase, lease, or sale of
  new motor vehicles, accessories, service, and sale of parts for motor vehicles where applicable.
         (2) "Designated family member" means the spouse, child, grandchild, parent, brother, or
  sister of a new motor vehicle dealer who is entitled to inherit the dealer's ownership interest in the
 new motor vehicle dealership under the terms of the dealer’s will, or who has otherwise been
 designated in writing by a deceased dealer to succeed the deceased dealer in the new motor
 vehicle dealership, or is entitled to inherit under the laws of intestate succession of this state. With
 respect to an incapacitated new motor vehicle dealer, the term means the person appointed by a
 court as the legal representative of the new motor vehicle dealer's property. The term also includes
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 the appointed and qualified personal representative and the testamentary trustee of a deceased
 new motor vehicle dealer. However, the term means only that designated successor nominated by
 the new motor vehicle dealer in a written document filed by the dealer with the manufacturer or
 distributor, if a document is filed.
         (3) "Distributor" means any person, resident, or nonresident who, in whole or in part, offers
 for sale, sells, or distributes any new motor vehicle to a new motor vehicle dealer or who maintains
 a factor representative, resident, or nonresident, or who controls any person, resident, or
 nonresident who, in whole or in part, offers for sale, sells, or distributes any new motor vehicle to a
 new motor vehicle dealer.
         (4) "Established place of business" means a permanent, enclosed commercial building
 located within this state easily accessible and open to the public at all reasonable times and at
 which the business of a new motor vehicle dealer, including the display and repair of motor
 vehicles, may be lawfully carried on in accordance with the terms of all applicable building codes,
 zoning, and other land-use regulatory ordinances and as licensed by the Division of Motor
 Vehicles.
         (5) "Factory branch" means an office maintained by a manufacturer or distributor for the
 purpose of selling or offering for sale vehicles to a distributor, wholesaler, or new motor vehicle
 dealer, or for directing or supervising, in whole or in part, factory or distributor representatives. The
 term includes any sales promotion organization maintained by a manufacturer or distributor which
 is engaged in promoting the sale of a particular make of new motor vehicles in this state to new
 motor vehicle dealers.
         (6) "Factory representative" means an agent or employee of a manufacturer, distributor, or
 factory branch retained or employed for the purpose of making or promoting the sale of new motor
 vehicles or for supervising or contracting with new motor vehicle dealers or proposed motor
 vehicle dealers.
         (7) "Good faith" means honesty in fact and the observation of reasonable commercial
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 standards of fair dealing in the trade.
         (8) "Manufacturer" means any person who manufactures or assembles new motor
 vehicles; or any distributor, factory branch, or factory representative and, in the case of a school
 bus, truck tractor, road tractor, or truck as defined in §17A-1-1 et seq. of this code, also means a
 person engaged in the business of manufacturing a school bus, truck tractor, road tractor or truck,
 their engines, power trains, or rear axles, including when engines, power trains or rear axles are
 not warranted by the final manufacturer or assembler, and any distributor, factory branch, or
 representative.
         (9) "Motor vehicle" means that term as defined in §17A-1-1 of this code, including a
 motorcycle, school bus, truck tractor, road tractor, truck, or recreational vehicle, all-terrain vehicle
 and utility terrain vehicle as defined in subsections (c), (d), (f), (h), (l), (nn) and (vv), respectively, of
 said section, but not including a farm tractor or farm equipment. The term "motor vehicle" also
 includes a school bus, truck tractor, road tractor, truck, its component parts, including, but not
 limited to, its engine, transmission, or rear axle manufactured for installation in a school bus, truck
 tractor, road tractor, or truck.
         (10) "New motor vehicle" means a motor vehicle which is in the possession of the
 manufacturer, distributor, or wholesaler, or has been sold only to a new motor vehicle dealer and
 on which the original title has not been issued from the new motor vehicle dealer.
         (11) "New motor vehicle dealer" or "dealer" means a person who holds a dealer agreement
 granted by a manufacturer or distributor for the sale of its motor vehicles, who is engaged in the
 business of purchasing, selling, leasing, exchanging, or dealing in new motor vehicles, service of
 said vehicles, warranty work, and sale of parts who has an established place of business in this
 state and is licensed by the Division of Motor Vehicles.
         (12) "The operation and business of a new motor vehicle dealer or dealership" includes
 selling, leasing, exchanging, or otherwise conveying a new motor vehicle at retail and performing
 warranty and recall work for a motor vehicle: Provided, That the provisions of this subdivision do
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 not apply to over the air updates.
         (13) "Person" means a natural person, partnership, corporation, association, trust, estate,
 or other legal entity.
         (14) "Proposed new motor vehicle dealer" means a person who has an application pending
 for a new dealer agreement with a manufacturer or distributor. "Proposed new motor vehicle
 dealer" does not include a person whose dealer agreement is being renewed or continued.
         (15) "Relevant market area" means the area located within a 20 air mile radius around an
 existing same line-make new motor vehicle dealership: Provided, That a 15 mile relevant market
 area as it existed prior to the effective date of this statute shall apply to any proposed new motor
 vehicle dealership as to which a manufacturer or distributor and the proposed new motor vehicle
 dealer have executed on or before the effective date of this statute a written agreement, including
 a letter of intent, performance agreement, or commitment letter concerning the establishment of
 the proposed new motor vehicle dealership.
     §17A-6A-8a.          Compensation to        dealers for service rendered.
          (a) Every motor vehicle manufacturer, distributor, or wholesaler, factory branch or
  distributor branch, or officer, agent, or representative thereof, shall:
          (1) Specify in writing to each of its dealers, the dealer's obligation for delivery, preparation,
  warranty, and factory recall services on its products;
          (2) Compensate the motor vehicle dealer for warranty and factory recall service required of
  the dealer by the manufacturer, distributor or wholesaler, factory branch or distributor branch, or
  officer, agent, or representative thereof;
          (3) Provide the dealer the schedule of compensation, which shall be reasonable, to be paid
  the dealer for parts, work, and service, including reasonable and adequate allowances for
 diagnostic time, including time communicating with the manufacturer, necessary for a qualified
 technician to perform the service, in connection with warranty and recall services and the time
 allowance for the performance of the diagnosis, work, and service. If a disagreement arises
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 between the manufacturer, distributor, or wholesaler, factory branch or distributor branch, and the
 dealer about the time allowance for the performance of the diagnosis, work, or service, the dealer
 shall submit a written request for modification of the time allowance, which shall be presumed
 reasonable. A manufacturer, distributor, or wholesaler, factory branch, or distributor branch shall
 not unreasonably deny a written request submitted by a new motor vehicle dealer for modification
 of a time allowance for a specific warranty repair, or a request submitted by a dealer for an
 additional time allowance for either diagnostic or repair work on a specific vehicle covered under
 warranty, provided the request includes any information and documentation reasonably required
 by the manufacturer, distributor, or wholesaler, factory branch, or distributor branch to assess the
 merits of the request; and
         (4) Provide compensation to a new motor vehicle dealer for assistance requested by a
 retail buyer or lessee whose vehicle was subjected to an over-the-air or remote change, repair, or
 update to any part, system, accessory, or function by the vehicle manufacturer or distributor, and
 performed at the dealership to satisfy the customer.
         (b) In no event may:
         (1) The schedule of compensation fail to compensate the dealers for the diagnosis, work,
 and services they are required to perform in connection with the dealer's delivery and preparation
 obligations, or fail to adequately and fairly compensate the dealers for labor, time, or rate, parts,
 and other expenses incurred by the dealer to perform under and comply with manufacturer's
 warranty agreements and factory recalls;
         (2) Any manufacturer, distributor, or wholesaler, or representative thereof, pay its dealers
 an amount of money for warranty or recall work that is less than that charged by the dealer to the
 retail customers of the dealer for nonwarranty and nonrecall work of the like kind; and
         (3) Any manufacturer, distributor, or wholesaler, or representative thereof, compensate for
 warranty and recall work based on a flat-rate figure that is less than what the dealer charges for
 retail work.
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        (c) It is a violation of this section for any manufacturer, distributor, wholesaler, or
 representative to require any dealer to pay in any manner, surcharges, limited allocation, audits,
 charge backs, or other retaliation if the dealer seeks to recover its nonwarranty retail rate for
 warranty and recall work.
        (d) The retail rate charged by the dealer for parts is established by the dealer submitting to
 the manufacturer or distributor 100 sequential nonwarranty customer-paid service repair orders
 that contain warranty-like parts or 90 consecutive days of nonwarranty customer-paid service
 repair orders that contain warranty-like parts covering repairs made no more than 180 days before
 the submission and declaring the average percentage markup. A dealer may decide to submit a
 single set of repair orders for the purpose of calculating both the labor rate and parts markup or
 submit separate sets of repair orders for a labor rate and parts markup calculation.
        (e) The retail rate customarily charged by the dealer for labor rate shall be established
 using the same process as provided under subsection (d) of this section and declaring the average
 labor rate. The average labor rate shall be determined by dividing the amount of the dealer's total
 labor sales by the number of total hours that generated those sales. If a labor rate and parts
 markup rate are simultaneously declared by the dealer, the dealer may use the same repair orders
 to complete each calculation as provided under subsection (d) of this section. A reasonable
 allowance for labor for diagnostic time shall be either included in the manufacturer’s labor time
 allowance or listed as a separate compensable item. A dealer may request additional time
 allowance for either diagnostic or repair time for a specific repair. The request shall not be
 unreasonably denied by the manufacturer.
         (f) In calculating the retail rate customarily charged by the dealer for parts and labor, the
 following work may not be included in the calculation:
         (1) Repairs for manufacturer or distributor special events, specials, or promotional
 discounts for customer repairs;
        (2) Parts sold at wholesale;
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         (3) Routine maintenance not covered under any retail customer warranty, including bulbs,
 batteries, fluids, filters, and belts not provided in the course of repairs;
         (4) Nuts, bolts, fasteners, and similar items that do not have an individual part number;
         (5) Tires; and
         (6) Vehicle reconditioning.
         (g) The average of the parts markup rates and labor rate is presumed to be reasonable and
 goes into effect 30 days following the manufacturer's approval. A manufacturer or distributor must
 approve or rebut the presumption by demonstrating that the submitted parts markup rate or labor
 rate is: (1) Fraudulent or inaccurate; (2) not established in accordance with this section; or (3)
 unreasonable in light of the practices of all other same line-make dealers in an economically
 similar area of the state offering the same line-make vehicles, not later than 30 days after the
 dealer's submission, or the dealer's submission shall be considered approved. If the average parts
 markup rate or average labor rate is disputed by the manufacturer or distributor, the manufacturer
 or distributor shall provide written notice to the new motor vehicle dealer stating the specific
 reasons for the rebuttal, providing a full explanation of the reasons for the allegation, and providing
 a copy of all calculations used by the manufacturer or distributor in determining the manufacturer
 or distributor's position. If the manufacturer's or distributor's objection is based on the accuracy or
 reasonableness of the dealer's rate submission, the manufacturer or distributor shall propose an
 adjustment of the average percentage parts markup or labor rate based on that rebuttal not later
 than 30 days after the dealer's submission. If the dealer does not agree with the manufacturer’s
 proposed average percentage parts markup or labor rate, the dealer may file a civil action in the
 circuit court for the county in which it operates not later than 90 days after dealer's receipt of the
 written notice of rebuttal or adjustment by the manufacturer or distributor. In the event a civil action
 is filed, the manufacturer or distributor has the burden of proof to establish, by a preponderance of
 the evidence, that the dealer's submitted parts markup rate or labor rate was fraudulent,
 inaccurate, not established in accordance with this section, or is unreasonable in light of the
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  practices of all other same line-make dealers in an economically similar area of the state offering
  the same line-make vehicles.
          (h) Each manufacturer, in establishing a schedule of compensation for warranty work,
  shall rely on the dealer's declaration of hourly labor rates and parts as stated in subsections (d),
  (e), and (f) of this section and may not obligate any dealer to engage in unduly burdensome or
  time-consuming documentation of rates or parts, including obligating dealers to engage in
  transaction-by-transaction or part-by-part calculations.
          (i) A dealer or manufacturer may demand that the average parts markup or average labor
  rate be calculated using the process provided under subsections (d) and (e) of this section;
 however, the demand for the average parts markup may not be made within 12 months of the last
 parts markup declaration and the demand for the average labor rate may not be made within 12
 months of the last labor rate declaration. If a parts markup or labor rate is demanded by the dealer
 or manufacturer, the dealer shall determine the repair orders to be included in the calculation
 under subsections (d) and (e) of this section.
         (j)