HOUSE BILL 398
56th legislature - STATE OF NEW MEXICO - first session, 2023
Brian G. Baca and Gail Armstrong and Candy Spence Ezzell and Anthony Allison and Raymundo Lara
RELATING TO TRADE PRACTICES; ADDING A DEFINITION TO THE FRANCHISE TERMINATION ACT; REQUIRING NOTICE OF TERMINATION OF FRANCHISES; CLARIFYING APPLICABILITY OF THE FRANCHISE TERMINATION ACT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 57-23-1 NMSA 1978 (being Laws 1985, Chapter 229, Section 1) is amended to read:
"57-23-1. SHORT TITLE.--[This act] Chapter 57, Article 23 NMSA 1978 may be cited as the "Franchise Termination Act"."
SECTION 2. Section 57-23-2 NMSA 1978 (being Laws 1985, Chapter 229, Section 2) is amended to read:
"57-23-2. DEFINITIONS.--As used in the Franchise Termination Act:
A. "current price" means an amount equal to the price listed in the supplier's printed price list in effect when the franchise is terminated, less applicable trade and cash discounts;
B. "dealer cost" means an amount equal to the sum of the original invoice price that the dealer paid for inventory and the cost to the dealer of its delivery from the supplier to the dealer, less applicable discounts;
C. "dealer" means a person in the business of the retail sale of new or unused farm tractors, farm implements, utility tractors, industrial tractors, construction equipment, outdoor power equipment or the attachments to or repair parts for new or unused farm tractors, [or] farm implements, utility tractors, industrial tractors, construction equipment or outdoor power equipment;
D. "franchise" means a written or oral contract or agreement between a supplier and a dealer, that may be called a "dealership" or by any other name, by which the dealer is authorized to engage in the business of the retail sale of inventory [according to the methods and procedures prescribed by] purchased from the supplier;
E. "good cause" means the failure by a dealer to substantially comply with essential and reasonable requirements imposed upon the dealer by the franchise; provided that such requirements are not different from those requirements imposed on other similarly situated dealers, either by their terms or in the manner of their enforcement. "Good cause" exists when:
(1) the dealer has transferred a controlling ownership interest in the dealer's business without the supplier's written consent;
(2) it is found that:
(a) the dealer has filed a voluntary petition in bankruptcy or has had an involuntary petition in bankruptcy filed against the dealer that has not been discharged within thirty days after the filing;
(b) there has been a closeout or sale of a substantial part of the dealer's assets related to the business; or
(c) there has been a commencement of dissolution or liquidation of the dealer;
(3) there has been a deletion, addition or change in dealer locations without the prior written approval of the supplier;
(4) the dealer has materially defaulted under any chattel mortgage or other security agreement between the dealer and the supplier or there has been a revocation of any guarantee of the dealer's present or future obligations to the supplier; provided, however, that "good cause" shall not exist if a person revokes any guarantee in connection with or following the transfer of such person's entire ownership interest in the dealer unless the supplier requires the person to execute a new guarantee of the dealer's present or future obligations in connection with the transfer of ownership interest;
(5) the dealer has failed to operate in the normal course of business for seven consecutive days or has otherwise abandoned the dealer's business;
(6) the dealer has pleaded guilty to or has been convicted of a felony affecting the relationship between the dealer and supplier;
(7) the dealer has engaged in conduct that is injurious or detrimental to the dealer's customers or to the public welfare or the representation or reputation of the supplier's product; or
(8) the dealer has consistently failed to meet and maintain the supplier's requirements for reasonable standards and performance objectives, so long as the supplier has given the dealer reasonable standards and performance objectives that are based on the manufacturer's experience in other comparable market areas;
[E.] F. "inventory" means new or unused farm tractors, farm implements, utility tractors, industrial tractors, construction equipment, outdoor power equipment, attachments and repair parts that are provided by a supplier to a dealer under a franchise [agreement] and that were purchased within thirty-six months of the termination of the franchise or were listed in the supplier's current sales manual at the time of termination; and
[F.] G. "supplier" means a manufacturer, wholesaler or distributor of new or unused farm tractors, farm implements, utility tractors, [or] industrial tractors, construction equipment or outdoor power equipment or the attachments to or repair parts for that equipment."
SECTION 3. A new section of the Franchise Termination Act is enacted to read:
"[NEW MATERIAL] CONTENTS OF SUPPLIER NOTICE OF TERMINATION--SUPPLIER FAILURE TO APPROVE OR DENY REQUEST--DEATH OF DEALER--TERMINATION OF FRANCHISE.--
A. A dealer shall give a supplier at least thirty days' prior written notice of termination of a franchise. A supplier shall not terminate a franchise without good cause. The supplier shall have the burden of proof to establish that good cause exists.
B. Except as otherwise provided in this section, a supplier shall provide a dealer at least one hundred eighty days' prior written notice of termination of a franchise. The notice shall state all reasons constituting good cause for the termination and shall state that the dealer has sixty days in which to cure any claimed deficiency. If all claimed deficiencies are rectified within sixty days, the notice shall be void. A supplier shall not terminate a franchise for the reason set forth in Paragraph (8) of Subsection E of Section 57-23-2 NMSA 1978 unless the supplier gives the dealer notice of such action at least two years before the effective date of the action. If the dealer satisfies the supplier's requirements for reasonable standards or performance objectives before the expiration of the two-year notice period, the notice shall be void and the franchise will continue in full force and effect. The notice and right-to-cure provisions under this section shall not apply if the reason for termination is for any reason set forth in Paragraphs (1) through (7) of Subsection E of Section 57-23-2 NMSA 1978.
C. If a supplier has contractual authority to approve or deny a request for a sale or transfer of a dealer's business or an equity ownership interest in the dealer's business, the supplier shall approve or deny such a request within sixty days after receiving a written request from the dealer. If the supplier has neither approved nor denied the request within the sixty-day period, the request shall be deemed approved. The dealer's request shall include reasonable financial, personal background, character reference and work history information for the acquiring persons. If a supplier denies a request made pursuant to this subsection, the supplier shall provide the dealer with a written notice of the denial that states the reasons for the denial. A supplier may only deny a request based on the failure of the proposed transferees to meet the reasonable requirements consistently imposed by the supplier in determining approval of the transfer or approvals of new dealers.
D. If a dealer dies and the supplier has contractual authority to approve or deny a request for a sale or transfer of the dealer's business or equity ownership interest in the dealer's business, the dealer's estate or such other person with authority to transfer assets of the dealer shall have one hundred eighty days to submit to the supplier a written request for a sale or transfer of the business or equity ownership interest. If the request is timely submitted, the supplier shall approve or deny the request in accordance with Subsection C of this section. Notwithstanding anything to the contrary contained in the Franchise Termination Act, any attempt by the supplier to terminate the franchise as a result of the death of a dealer will be delayed until there has been compliance with the terms of this section or the one-hundred-eighty-day period has expired, as applicable."
SECTION 4. A new section of the Franchise Termination Act is enacted to read:
"[NEW MATERIAL] CHOICE OF LAW--ATTORNEY FEES--VALIDITY.--An attempted waiver of a provision of the Franchise Termination Act or application of the Franchise Termination Act shall be void. Any provision in a franchise that purports to elect the application of the law of a state other than this state shall be void. Any provision in a franchise that requires a dealer to pay attorney fees incurred by a supplier shall be void."
SECTION 5. A new section of the Franchise Termination Act is enacted to read:
"[NEW MATERIAL] SUPPLEMENTAL PROVISIONS.--The provisions of the Franchise Termination Act shall be supplemental to any franchise between the dealer and the supplier that provides the dealer with greater protection. The dealer may elect to pursue the dealer's contract remedy or the remedy provided by state law or both, and an election by the dealer to pursue such remedies shall not bar the dealer's right to exercise any other remedies that may be granted at law or in equity."
SECTION 6. A new section of the Franchise Termination Act is enacted to read:
"[NEW MATERIAL] CIVIL ACTIONS--ATTORNEY FEES.--If a supplier violates any provision of the Franchise Termination Act, a dealer may bring an action against such supplier in a court of competent jurisdiction for damages sustained by the dealer as a consequence of the supplier's violation, including damages for lost profits, together with the actual costs of the action, including the dealer's attorney and paralegal fees and costs of arbitrators. The dealer also may be granted injunctive relief against unlawful termination. The remedies set forth in this section shall not be deemed exclusive and shall be in addition to any other remedies permitted by law."
SECTION 7. APPLICABILITY.--The provisions of this act apply to:
A. all franchises now in effect that have no expiration date and are continuing contracts; and
B. all other franchises entered into or renewed after enactment of this act.
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