STATE OF NEW YORK
________________________________________________________________________
2431
2019-2020 Regular Sessions
IN ASSEMBLY
January 22, 2019
___________
Introduced by M. of A. GANTT -- read once and referred to the Committee
on Transportation
AN ACT to amend the vehicle and traffic law, in relation to warranties
and sales incentives and certain technical provisions therein
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 465 of the vehicle and traffic law, as amended by
2 chapter 490 of the laws of 2008, subdivisions 1, 3, 4, 6 and 7 as
3 amended by chapter 26 of the laws of 2014, is amended to read as
4 follows:
5 § 465. Procedures relating to warranties and sales incentives. 1. (a)
6 Every franchisor shall properly fulfill any warranty agreement and/or
7 franchisor's service contract and shall compensate each of its fran-
8 chised motor vehicle dealers for warranty parts and labor in amounts
9 which reflect reasonable compensation for such work. All warranty claims
10 and/or claims under a franchisor's service contract made by franchised
11 motor vehicle dealers shall be paid within thirty days following their
12 approval. For the purposes of this section, warranty claims shall
13 include voluntary recalls established by the franchisor, and any recalls
14 pursuant to 49 U.S.C. 301. For parts reimbursement[,] (other than compo-
15 nents, systems, fixtures, appliances, furnishings, accessories and
16 features of a house coach that are designed, used and maintained prima-
17 rily for nonvehicular residential purposes[,]) and for labor reimburse-
18 ment, reasonable compensation shall not be less than the price and rate
19 charged by the franchised motor vehicle dealer for like parts or
20 services to non-warranty and/or non-service contract customers.
21 (b) For purposes of this section, [the price and rate charged by the
22 franchised motor vehicle dealer for parts may be established] the fran-
23 chised motor vehicle dealer may establish its warranty reimbursement
24 price and rate by submitting to the franchisor one hundred sequential
25 nonwarranty customer-paid service repair orders or the number of sequen-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD00139-01-9
A. 2431 2
1 tial nonwarranty customer-paid service repair orders written within a
2 ninety day period, whichever is less, covering repairs, regardless of
3 the reason for the repairs, made no more than one hundred eighty days
4 before the submission, and declaring the price and rate, including aver-
5 age markup [for] used by the franchised motor vehicle dealer as its
6 reimbursement rate.
7 (c) With regard to any submission by a franchised motor vehicle dealer
8 under this section, the following provisions shall apply: (i) the fran-
9 chised motor vehicle dealer shall determine the individual markup of
10 each qualifying part listed in the franchised motor vehicle dealer's
11 submission, which individual markups the franchised motor vehicle dealer
12 shall then average, which average of the individual markups shall deter-
13 mine the "average" markup to be used as the dealer's reimbursement rate;
14 (ii) the dealer may authorize any employee or representative of the
15 dealership to sign the dealer's declaration of a rate and to submit the
16 request for reimbursement by a manufacturer at that rate; (iii) it shall
17 be within the dealer's sole discretion as to the means by which the
18 necessary information is provided to the franchisor to support the aver-
19 age parts markup calculation; (iv) all manufacturers shall designate an
20 address to which their franchised dealers or representatives may submit
21 a request under this section, proof of mailing or delivery to such
22 address shall be sufficient evidence raising a presumption that such
23 request was delivered to the manufacturer; and (v) notwithstanding
24 anything contained in this section, the franchised motor vehicle dealer
25 shall include in its calculation those non-warranty customer paid-for
26 parts otherwise covered by the franchisor's warranty program, regardless
27 of the reason they were supplied to the non-warranty customer, including
28 parts routinely replaced as part of regular maintenance on a vehicle,
29 including, but not limited to belts, brakes, batteries, keys, transmit-
30 ters and transmitter batteries, windshield wipers, sealants, bulbs,
31 headlight and taillight lenses, fluids, pumps, filters and similar parts
32 provided, however, the franchised motor vehicle dealer shall not be
33 required in its submission to perform any of the following:
34 (1) list on any form, spreadsheet, or other compilation those repair
35 orders which do not contain parts that the dealer is relying on for the
36 calculation of the average markup;
37 (2) include in any calculation of its average markup tires, wheels,
38 any parts or items it actually used or provided in the repair of phys-
39 ical damage to the body or chassis of a vehicle, including, but not
40 limited to, body panels, windows (glass or other material), doors, bump-
41 ers, fenders, or similar items, or the paint or other finishing materi-
42 als for such items;
43 (3) include in any calculation of its average markup any parts or
44 items actually used or provided in the course of standard vehicle prepa-
45 ration for sale to a customer;
46 (4) include in any calculation of its average markup any parts actual-
47 ly provided internally to various departments within the franchised
48 motor vehicle dealership's business; and
49 (5) include in any calculation of its average markup any type of parts
50 provided by the franchisor only as a matter of "goodwill" rather than in
51 the course of regular warranty service.
52 (d) For purposes of this section, the price and rate charged by the
53 franchised motor vehicle dealer for labor may be established by submit-
54 ting one hundred sequential nonwarranty customer-paid service repair
55 orders, or the number of sequential nonwarranty customer-paid service
56 repair orders, written in the month preceding the submission, whichever
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1 is less, covering repairs, regardless of the reason for the repairs, and
2 dividing the amount of the dealer's total labor sales for retail custom-
3 er repairs by the number of total labor hours that generated those
4 sales, and declaring the resulting average labor rate for the franchised
5 motor vehicle dealer as its reimbursement rate. The franchised motor
6 vehicle dealer shall not use in any calculation of its labor rate any
7 labor conducted in the course of standard vehicle preparation for sale
8 to a customer, or in the course of internal service performed for vari-
9 ous departments within the franchised motor vehicle dealership's busi-
10 ness.
11 (e) The reimbursement rate so declared shall go into effect thirty
12 days following the declaration [and]. The declaration shall be presumed
13 to be [reasonable, however a franchisor may rebut such presumption by
14 showing that such rate so established is unreasonable in light of the
15 practices of all other franchised motor vehicle dealers in the vicinity
16 offering the same line make.] accurate when submitted as set forth under
17 this section providing a detailed, complete, written explanation of any
18 part or item included or omitted from the declaration calculation that
19 is not consistent with the provisions of this section to the franchised
20 motor vehicle dealer, within fifteen days of receipt by the franchisor
21 of the submission or any material amendment thereto along with the
22 return of the repair orders upon which the manufacturer is relying for
23 its objection or objections. The franchisor waives any right to rebut
24 the submission if the franchisor fails to provide the written explana-
25 tion described in this paragraph within the fifteen day period following
26 the motor vehicle dealer's submission. The franchised motor vehicle
27 dealer may choose to correct its submission based upon the franchisor's
28 written rebuttal without being required to make a completely new
29 submission, if done so within thirty days of receiving the franchisor's
30 written rebuttal. Any such amendment to the initial submission will
31 relate back to the date of the initial submission and any resulting
32 price or rate shall be paid by the franchisor retroactively, without
33 penalty, on all claims submitted by the franchised motor vehicle dealer
34 thirty days from the date of the initial submission. If the franchised
35 motor vehicle dealer does not agree with the franchisor's rebuttal, the
36 price or rate so declared shall become effective according to this
37 section unless the franchisor institutes an action pursuant to this
38 article, claiming that the franchised motor vehicle dealer has violated
39 the provisions of this section, within thirty days from the date of the
40 franchisee's response to the franchisor's rebuttal. The burden of proof
41 in any such action shall be on the franchisor.
42 (f) The franchised motor vehicle dealer shall not request a change in
43 the reimbursement rate more often than once in each calendar year.
44 (g) A franchisor who fails to reimburse warranty and labor claims
45 established pursuant to this section shall be liable to the franchised
46 motor vehicle dealer for all such claims at the price and rate submitted
47 by the franchisee from the time such submission was made. In addition,
48 any franchisor who fails to so reimburse such claims shall be subject to
49 a penalty of five hundred dollars per claim payable to the franchised
50 motor vehicle dealer. An additional penalty of one thousand dollars per
51 claim shall be payable to the franchised motor vehicle dealer for each
52 successive ten day period thereafter in which the claim is not reim-
53 bursed as required by this section. In order to ensure timely payment of
54 claims submitted under this section, a franchised motor vehicle dealer
55 may, beginning upon the expiration of the thirty day period established
56 by this section, withhold any payments owed to a franchisor equal to the
A. 2431 4
1 claims made by the franchised motor vehicle dealer, plus the penalty,
2 until the franchisor makes warranty and labor reimbursement pursuant to
3 this section. Any dealer who exercises such right shall not be deemed in
4 default of any obligations under the franchise or any other agreement
5 with the manufacturer or any subsidiary or affiliate of the manufactur-
6 er.
7 (h) In establishing the parts reimbursement or the labor reimbursement
8 rate, the franchisor shall not require a franchised motor vehicle dealer
9 to establish said rate by a methodology, or by requiring information,
10 that is unduly burdensome or time consuming to provide[, including, but
11 not limited to, a transaction by transaction calculation].
12 (i) In no event may a franchisor require a dealer to accept reimburse-
13 ment for parts based on the franchisor's suggested list price (whether
14 called MSRP or known by any other designation) in lieu of determining
15 and reimbursing a dealer at the dealer's average markup pursuant to this
16 section.
17 (j) In no event shall any franchisor retaliate or threaten to retali-
18 ate against a dealer for exercising its rights under this section or
19 under any other section of this article. Retaliation shall include, but
20 not be limited to, threatening to conduct, or conducting, an audit of
21 dealership records, threatening to withhold, or withholding, products,
22 allocations, or benefits from any dealer, or imposing additional costs
23 or penalties on any dealer that the manufacturer does not impose on
24 every dealer either within or without the state.
25 (k) A franchisor may not otherwise recover from a franchised motor
26 vehicle dealer the franchisor's costs for reimbursing a franchised motor
27 vehicle dealer for warranty parts and labor claims.
28 2. For the purposes of this section, the following parts or types of
29 repairs shall be excluded from the parts and/or labor calculations and
30 the franchisor's reimbursement requirements under this section: (a)
31 parts sold at wholesale; (b) tires; (c) routine maintenance not covered
32 under any retail customer warranty such as fluids, filters and belts not
33 provided in the course of repairs; (d) vehicle reconditioning; and (e)
34 batteries replaced as part of a routine maintenance operation. If the
35 franchisor rejects the declaration or attempts to rebut the declaration
36 because of an error in the dealer's submission, the franchisor shall
37 identify with specificity the reason for rejection and identify the
38 error or errors within the submission. In the event the franchisor
39 rejects or rebuts the dealer's initial declaration, the dealer shall
40 have the opportunity, within sixty days to resubmit the full and
41 corrected declaration addressing the alleged error or errors identified
42 by the franchisor. The franchisor shall respond within sixty days. The
43 one hundred eighty day requirement for the repair orders shall be stayed
44 from the date of initial submission. In any action or proceeding held
45 pursuant to this subdivision, the franchisor shall have the burden of
46 proving that the rate declared by the dealer was unreasonable as
47 described in this subdivision and that the proposed adjustment of the
48 average percentage markup or rejection of the submission is reasonable
49 pursuant to the provisions of this subdivision.
50 [2] 3. All warranty or sales incentive claims shall be either
51 approved or disapproved, within a reasonable amount of time. A reason-
52 able amount of time shall be: No less than thirty days after [their]
53 receipt. [When any such claim is disapproved the franchised motor vehi-
54 cle dealer shall be notified in writing of its disapproval within said
55 period. Each such notice shall state the specific grounds upon which the
A. 2431 5
1 disapproval is based. Failure to disapprove a claim within thirty days
2 shall be deemed approval] by the franchisor of a warranty claim; and
3 (b) No less than five business days from the date upon which the fran-
4 chised motor vehicle dealer provides notice to the franchisor certifying
5 the completion of a sale which qualifies under a sales incentive
6 program. A sale shall be considered completed upon delivery of the vehi-
7 cle to the customer.
8 [3] 4. No franchisor shall conduct an audit or charge back any
9 warranty payment, or any sales, advertising or marketing incentive
10 payment ("incentive payments") or otherwise hold a franchised motor
11 vehicle dealer liable for charges more than one year, or five years in
12 the case of fraud, after the date the franchisor made such payment to
13 the dealer, without providing a notice to a franchised motor vehicle
14 dealer of, or a mechanism that makes available to a franchised motor
15 vehicle dealer, information regarding errors or issues regarding such
16 dealer's warranty, sales, advertising or marketing incentive claims that
17 are the subject of the audit or chargeback. Nothing in this section
18 shall be deemed to grant a dealer the right to access any file held by
19 the manufacturer evaluating such dealer. In connection with a claim for
20 warranty reimbursements, the dealer's failure to document properly one
21 part of a warranty repair that contains more than one part shall not be
22 the sole basis to charge back the entire repair. A manufacturer shall
23 not deny a claim submitted under this section based solely on a dealer's
24 incidental failure to comply with a specific claim processing require-
25 ment, a clerical error, or other administrative technicality, provided
26 that the failure does not call into question the legitimacy of the claim
27 and that the dealer corrects the claim according to franchisor guide-
28 lines.
29 [4] 5. A franchisor shall not charge a dealer back subsequent to the
30 payment of a warranty, sales, advertising or marketing incentive claim
31 unless a representative of the franchisor has met in person at the deal-
32 ership, or by telephone, with an officer or employee of the dealer
33 designated by the dealer and explained in detail the basis for each of
34 the proposed charge backs and thereafter given the dealer's represen-
35 tative a reasonable opportunity at the meeting, or during the telephone
36 call, to explain the dealer's position relating to each of the proposed
37 charge backs. In the event the dealer was selected for audit or review
38 on the basis that some or all of the dealer's claims were viewed as
39 excessive in comparison to average, mean or aggregate data accumulated
40 by the franchisor, or in relation to claims submitted by a group of
41 other franchisees, the franchisor shall, at or prior to the meeting or
42 telephone call with the dealer's representative, provide the dealer with
43 a written statement containing the basis or methodology upon which the
44 dealer was selected for audit or review.
45 [5] 6. A franchisor shall not deny or charge back a payment for
46 warranty work claimed by the dealer unless the franchisor satisfies its
47 burden of proof that the dealer did not make a good faith effort to
48 comply with the reasonable written procedures of the franchisor or that
49 the dealer did not actually perform the work.
50 [6] 7. A franchisor shall not deny or charge back a sales, advertis-
51 ing or marketing incentive payment made to a dealer unless the claim was
52 materially false or fraudulent or the dealer failed to reasonably
53 substantiate the claim in accordance with the manufacturer's reasonable
54 procedures.
55 [7] 8. After all internal dispute resolution processes provided
56 through the franchisor have been resolved, the franchisor shall give
A. 2431 6
1 notice to the dealer of the final amount of a proposed warranty, sales,
2 advertising or marketing incentive charge back. If the dealer institutes
3 an action pursuant to this article within thirty days of receipt of such
4 notice, the proposed charge back shall be stayed, without bond, during
5 the pendency of such action and until the final judgment has been
6 rendered in an adjudicatory proceeding or action as provided in section
7 four hundred sixty-nine of this article. The franchisor shall not impose
8 the chargeback, debit the dealer's account, or otherwise seek to obtain
9 all or any part of the chargeback funds from the dealer during the thir-
10 ty-day period in which the dealer has the opportunity to file an action
11 as set forth above.
12 § 2. This act shall take effect immediately.
