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A02431 Text:

                STATE OF NEW YORK
                               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.

        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

        A. 2431                             3
     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.
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