8-2414. Cancellation, termination or nonrenewal of franchise agreements between dealers and manufacturers or distributors; cause; hearing; burden of proof; compensation upon termination; effect of non
8-2414
8-2414. Cancellation, termination or nonrenewal of franchise agreements
between dealers and manufacturers
or distributors; cause; hearing; burden of proof; compensation upon
termination;
effect of noncompliance by manufacturer or distributor.
(a) No franchise agreement entered into between a vehicle dealer and a first or
second stage manufacturer or distributor may be cancelled, terminated or
not renewed by the first or second stage manufacturer or distributor
unless 90 days notice has been given to the
vehicle dealer and
the director, which notice must state in full the reasons and causes for
the cancellation, termination or nonrenewal of such franchise agreement,
except that in the event of a showing of fraud, insolvency or failure to
perform in the ordinary course of business, a notice of not less than 15
days may be approved by the director, with notice thereof to such
vehicle dealer and upon written application by such first or second
stage manufacturer or distributor. A notice required under this subsection
shall be given by certified mail and the period of time given in the notice
prior to cancellation, termination or nonrenewal shall be computed from
the date of mailing thereof.
(b) A vehicle dealer, within a period of time equal to that provided for
in the notice filed pursuant to subsection (a), may file a
complaint with the director against a first or second stage manufacturer
or distributor challenging the reasons and causes given for the proposed
cancellation, termination or nonrenewal of the franchise agreement. Upon a
complaint being filed, the director shall promptly set the matter for
public hearing, in accordance with K.S.A. 8-2411, and amendments
thereto, for the
purpose of determining whether there has been a violation of K.S.A. 8-2410,
and amendments thereto, or whether good
cause exists for
cancellation, termination or nonrenewal of the franchise agreement.
Notwithstanding
the provisions of K.S.A. 8-2411, and amendments thereto, the hearing may
be set for a time which is not less than the number of days provided in
the notice given pursuant to subsection (a), from the date the director
gives notice thereof.
(c) The franchise agreement shall remain in full force and effect pending
the
determination by the director of the issues involved as provided by this
act. If the director determines that the first or second stage
manufacturer or distributor is acting in violation of this act or that good
cause does not exist for the
proposed action, the director
shall order for the franchise agreement to be kept in full force and effect.
(d) The burden of proof shall be on the first
or second stage manufacturer or distributor to show that it did not act
arbitrarily or
unreasonably and that good cause did exist for the proposed cancellation,
termination or nonrenewal of the franchise agreement.
The director shall order that the franchise agreement may be
cancelled, terminated or not renewed if the director finds, after a hearing
that the licensed vehicle dealer is acting in violation of this act or
that the judgment of the first or second stage manufacturer or
distributor is with good cause and the vehicle dealer's
default is material.
(e) (1) In the event of cancellation, termination or nonrenewal of a
franchise agreement, good cause as used in this section shall mean the failure
of the new vehicle dealer to effectively carry out the performance provisions
of the franchise agreement if all of the following have occurred:
(A) The new vehicle dealer was given notice by the first or second stage
manufacturer or distributor of the failure prior to the notice of cancellation,
termination or nonrenewal as required by subsection (a);
(B) the notification stated that the notice of failure of performance was
provided pursuant to this article;
(C) the new vehicle dealer was afforded a reasonable opportunity to
carry out the franchise agreement; and
(D) the failure continued for more than one year after the date notification
was given.
(2) In the event of cancellation, termination or nonrenewal of a franchise
agreement, good cause shall not exist where there has been a violation by the
first or second stage manufacturer or distributor of K.S.A. 8-2410, and
amendments thereto. Additionally, notwithstanding any agreement, the following
alone shall not constitute good cause for the termination, cancellation or
nonrenewal of a franchise agreement:
(A) A change in ownership of the new vehicle dealer's dealership. This
subparagraph does not authorize any change in ownership which would have the
effect of a sale or an assignment of the franchise agreement or a change in the
principal management of the dealership without the first or second stage
manufacturer's or distributor's prior written consent;
(B) the refusal of the new vehicle dealer to purchase or accept delivery of
any new motor vehicles, parts, accessories or any other commodity or services
not ordered by the new vehicle dealer;
(C) the fact that the new vehicle dealer owns, has an investment in,
participates in the management of or holds a franchise agreement for the sale
or service of another make or line of new motor vehicles, or that the new
vehicle dealer has established another make or line of new motor vehicles or
service in the same dealership facilities as those of the first or second stage
manufacturer or distributor
which existed on or before February 1, 1996, or is approved in writing by the
first or second stage manufacturer or distributor;
(D) the fact that the new vehicle dealer sells or transfers ownership of the
dealership or sells or transfers capital stock in the dealership to the new
vehicle dealer's spouse, son or daughter, except that the sale or transfer
shall not have the effect of a sale or an assignment of the franchise agreement
without the first or second stage manufacturer's or distributor's prior written
consent.
(f) (1) In event of cancellation, termination or nonrenewal of a franchise
agreement, the first or second stage manufacturer or distributor shall pay the
new vehicle dealer, at a minimum:
(A) Dealer net acquisition cost for any new, undamaged and unsold new motor
vehicle inventory purchased from the first or second stage manufacturer or
distributor within 12 months prior to the receipt of notice of termination,
cancellation or nonrenewal, provided the new motor vehicle has less than 500
miles registered on the odometer, not including mileage incurred in delivery to
the new vehicle dealer or in transporting the vehicle between dealers for sale
or delivery, plus any cost to the new vehicle dealer for returning the vehicle
inventory to the first or second stage manufacturer or distributor;
(B) the dealer price listed in the current list or catalog or, if
unavailable, the list or catalog actually utilized within the 12 months
previous to termination, cancellation or nonrenewal, as the case may be, for
any new, unused and undamaged parts, supplies, and accessories acquired from a
first or second stage manufacturer, or distributor, or a source approved or
recommended by it, less applicable allowances specified in advance of dealer
purchase, plus 5% of the catalog or list price, as the case may be, for the
cost of packing and returning the parts, supplies and accessories to the first
or second stage manufacturer or distributor. Parts, supplies or accessories
which are reconditioned or subject to reconditioning or rebuilding or other
return in the ordinary course of business which are considered to be core parts
in the trade practice and usage of the industry shall be valued for payment
purposes at their core value, the price listed in the catalog or list
referenced above or the amount paid for expedited return of core parts,
whichever is higher;
(C) fair market value for furnishings
required to be purchased by the first or second stage manufacturer or
distributor
and signs
which bear the trademark or trade name of the first or second stage
manufacturer or distributor which were required or recommended to be
purchased or
leased from
the first or second stage manufacturer or distributor, or their approved
sources;
(D) dealer cost for special tools and equipment required to be purchased or
leased by the
first or second stage manufacturer or distributor within three years of the
date of termination, cancellation or nonrenewal;
(E) the cost of transporting, handling, packing and loading of
signs, special tools, equipment and
furnishings.
(2) Upon termination, cancellation or nonrenewal of a franchise agreement by
the first or second stage manufacturer or distributor, the first or second
stage manufacturer or distributor shall also pay to the new vehicle dealer a
sum equal to the current fair rental value of its established place of business
for a period of one year from the effective date of termination, cancellation
or nonrenewal, or the remainder of the lease, whichever is less. If the new
vehicle dealer owns the dealership facilities, the first or second stage
manufacturer or distributor shall pay the new vehicle dealer a sum equivalent
to the reasonable rental value of the dealership facilities for one year
or until the facilities are leased or sold, whichever is less. The rental
payment required under this subsection is only required to the extent that the
established place of business was being used for activities under the franchise
agreement and only to the extent such facilities were not leased for unrelated
purposes. The first or second stage manufacturer or distributor shall not be
required to make the payment set forth under this subsection if the basis of
the cancellation, termination or nonrenewal of such franchise agreement under
this act is due to conviction of the dealer of a felony or any crime involving
moral turpitude, or if the dealer has been adjudged guilty of the violation of
any law of any state or the United States in connection with such person's
operation as a dealer.
(3) To the extent the franchise agreement provides for payment or
reimbursement to the new vehicle dealer in excess of that specified in this
section, the provisions of the franchise agreement shall control.
(4) The first or second stage manufacturer or distributor shall pay the new
vehicle dealer the sums specified in this subsection within 90 days after the
tender of the property, subject to the new vehicle dealer
providing evidence of good and clear title upon return of the property
to the first or second stage
manufacturer or distributor.
(5) Nothing in this subsection shall preclude or prohibit the first or
second stage manufacturer or distributor or vehicle dealer from agreeing to
other terms for additional payment or reimbursement, except that such terms
shall include, at a minimum, the payment or reimbursement requirements
contained in this subsection.
(g) Failure of the first or second stage manufacturer or distributor to give
proper notice or maintain the franchise agreement in full force and effect
pending determination by the director pursuant to this act, or to abide by the
final order of the director, shall be cause for the director to refuse to issue
a license to a replacement vehicle dealer or to a dealership which would be
conducting business in the same trade area and selling the same make of
vehicles where the vehicle dealer in question was engaged in business.
History: L. 1980, ch. 36, § 14; L. 1981, ch. 48, § 10; L. 1983,
ch. 43, § 3;
L. 1996, ch. 128, § 1; Apr. 11.