MISSISSIPPI LEGISLATURE

2000 Regular Session

To: Finance

By: Senator(s) Little

AN ACT TO CREATE SECTION 63-17-80, MISSISSIPPI CODE OF 1972, TO REQUIRE LICENSE FOR MOTOR VEHICLE LESSORS; TO CREATE SECTION 63-17-84, MISSISSIPPI CODE OF 1972, TO REQUIRE A MOTOR VEHICLE MANUFACTURER TO GIVE REASONABLE NOTICE TO A MOTOR VEHICLE DEALER IF A MOTOR VEHICLE MANUFACTURER REQUIRES SUBSTANTIAL RENOVATION TO DEALERSHIP AS A CONDITION TO RENEWING OR EXTENDING DEALER FRANCHISE; TO GIVE MOTOR VEHICLE MANUFACTURER RIGHT OF FIRST REFUSAL UNDER CERTAIN CHANGES IN DEALER OWNERSHIP; TO REQUIRE NOTICE TO DEALER PRIOR TO MODIFICATION OF FRANCHISE AGREEMENT; TO AUTHORIZE WARRANTY AUDITS; TO AMEND SECTION 63-17-75, MISSISSIPPI CODE OF 1972, TO REQUIRE SURETY BOND FOR NEW MOTOR VEHICLE DEALERS; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. The following provision shall be codified as Section 63-17-80, Mississippi Code of 1972:

63-17-80. It is unlawful for a motor vehicle lessor or any agent, employee or representative thereof: (a) to represent and to offer for lease any new motor vehicle in Mississippi without first obtaining a new motor vehicle dealer license, or (b) to lease or offer to lease a new motor vehicle from an unlicensed location.

SECTION 2. The following provision shall be codified as Section 63-17-84, Mississippi Code of 1972:

63-17-84. (1) A manufacturer shall not condition the renewal or extension of a franchise on a new motor vehicle dealer's substantial renovation of the dealer's place of business or on the construction, purchase, acquisition or rental of a new place of business by the new motor vehicle dealer, unless the manufacturer notifies the dealer in writing of its intent to impose such a condition within a reasonable time prior to the effective date of the proposed renewal or extension, but in no case less than one hundred eighty (180) days, and shows good cause to the commission the need for such demand in view of the need to service the public and the economic conditions existing in the motor vehicle industry at the time such action would be required of the new motor vehicle dealer.

(2) A manufacturer or distributor shall have a right of first refusal to acquire the new vehicle dealer's assets or ownership in the event of a proposed change of ownership that results in a person owning more than fifty percent (50%) of the new motor dealer's ownership, or a transfer that results in a person owning more than fifty percent (50%) of the new motor vehicle dealer's assets, if all the following are met:

(a) In order to exercise the right of first refusal, the manufacturer or distributor shall notify the motor vehicle dealer in writing within sixty (60) days of its receipt of the completed application forms and related information generally utilized by the manufacturer or distributor to conduct its review of such a proposal, and a copy of all agreements regarding the proposed transfer, assignment or sale;

(b) The exercise of the right of first refusal will result in the dealer and dealer's owners receiving consideration, terms and conditions that are either the same as or greater than that which they have contracted to receive in connection with the proposed change of the dealer's ownership or the transfer of the dealer's assets;

(c) The proposed change of the dealership's ownership or the transfer of the dealer's assets does not involve the transfer of assets or the transfer or issuance of stock by the dealer or one or more dealer owners to any one of the following:

(i) A designated family member or members, including the spouse, child or grandchild, spouse of a child or grandchild, brother, sister or parent of the dealer owner, or one or more dealer owners;

(ii) A manager employed by the dealer in the dealership during the previous five (5) years and is otherwise qualified as a dealer operator;

(iii) A partnership or corporation controlled by any of the family members described in clause (C.)(i);

(iv) A trust arrangement established or to be established for the purpose of allowing the new motor vehicle dealer to continue to qualify as such pursuant to the manufacturer's or distributor's standards, or provides for the succession of the franchise agreement to designated family members or qualified management in the event of the death or incapacity of the dealer or its principal owner or owners.

(d) The exercise of a right of first refusal by a manufacturer or distributor eliminated any requirement under the dealer agreement or applicable law that the manufacturer evaluate, process or respond to the underlying proposed transfer by approving or rejecting the proposal, and is not subject to challenge as a rejection or denial of a proposed transfer.

(e) A manufacturer or distributor of motor vehicles that directly or indirectly owns or operated a new motor vehicle dealership, in whole or in part, shall not discriminate against any other motor vehicle dealer in the same line-make in any matter governed by the franchise, including, but not limited to, the sale or allocation of vehicles or other franchisor products, or the execution of dealer programs or benefits.

(3) If a manufacturer or distributor believes that good cause exists for refusing to honor the succession of a deceased or incapacitated dealer, the manufacturer or distributor may, not more than sixty (60) days following receipt of notice of the designated successor's intent to succeed or receipt from the designated successor of such personal or financial data as is reasonably necessary to determine the qualifications of the designated successor, whichever is later, serve upon the designated successor notice of its refusal to honor the succession and of its intent to discontinue the existing franchise with the dealer not earlier than one hundred twenty (120) days from the date such notice is served.

(4) No person shall modify a franchise agreement during the term of the agreement or upon its renewal if the modification substantially and adversely affects the motor vehicles dealer's rights obligations, investment or return on investment without giving sixty (60) days' written notice of the proposed modification to the motor vehicle dealer and show good cause to the commission.

(5) The manufacturer or distributor may reasonably and periodically audit a new motor vehicle dealer to determine the validity of paid claims for dealer compensation or any charge-backs for warranty parts or service compensation or consumer or dealer incentives. Audits shall only be for the twenty-four-month period immediately following the date of payment. This limitation does not apply if the manufacturer/distributor reasonably suspects fraud, and provide the dealer with information, upon which suspicion is based.

SECTION 3. Section 63-17-75, Mississippi Code of 1972, is amended as follows:

63-17-75. Within ninety (90) days after July 1, 1970, all persons who on July 1, 1970, are engaged in a business or occupation for which a license is required under the Mississippi Motor Vehicle Commission Law shall make application on forms prescribed by the commission for their respective licenses. All such persons shall be permitted, without a license, to continue to engage in the business or occupation for which a license is applied for until the license is either granted or, in case it is denied, until the applicant has exhausted or has had an opportunity to exhaust all of his remedies under Section 63-17-99. No person not engaged in a business or occupation requiring such a license on July 1, 1970, shall be permitted to engage in such business or occupation until he shall have first obtained a license to engage in such business or occupation.

Applications for said licenses shall be verified by the oath or affirmation of the applicants and shall be on forms prescribed by the commission and furnished to such applicants, and shall contain such information as the commission deems necessary to enable it to fully determine the qualifications and eligibility of the several applicants to receive the license or licenses applied for. The commission shall require that there be set forth in each such application information relating to the applicant's financial standing, the applicant's business integrity, whether the applicant has an established place of business and is primarily engaged in the pursuit, avocation, or business for which a license or licenses is applied for, and whether the applicant is able to properly conduct the business for which a license or licenses is applied for, and such other pertinent information consistent with the safeguarding of the public interest and public welfare. Applications for license as a motor vehicle dealer must, in addition to the foregoing, also be accompanied by the filing with the commission of a bona fide contract or franchise then in effect between the applicant and a manufacturer, distributor or wholesaler of the new motor vehicle or vehicles proposed to be dealt in, unless such contract or franchise has already been filed with the commission in connection with a previous application made by such applicant, in which event the applicant shall, in lieu of again filing the contract or franchise, identify same by appropriate reference and file all revisions and additions, if any, which have been made to said contract or franchise. The applicant must furnish satisfactory evidence that he or it maintains adequate space in the building or structure wherein his or its established business is conducted for the display of new motor vehicles, or he will have such facilities within a reasonable time after receiving a license, and that he or it has or will have adequate facilities in said building or structure for the repair and servicing of motor vehicles and the storage of new parts and accessories for same. However, the failure to furnish the evidence called for in the preceding sentence shall not constitute sufficient cause for denying a license to any motor vehicle dealer who on July 1, 1970, was an enfranchised new motor vehicle dealer in this state of a manufacturer, distributor or wholesaler of new motor vehicles and who continued to be such a dealer from such date until application was made for a license as a motor vehicle dealer.

New applications for licenses as new motor vehicles dealer must, in addition to the foregoing, also be accompanied by the filing with the commission of a corporate surety bond in the penal sum of Twenty-five Thousand Dollars ($25,000.00) on a bond form approved by the commission. However, an applicant for licenses at multiple locations may choose to provide a corporate surety bond in the penal sum of One Hundred Thousand Dollars ($100,000.00) covering all licensed locations of the same capacity in lieu of separate bonds for each location.

The bond shall be in effect upon the applicant being licensed and shall be conditioned upon his complying with the provisions of this chapter. The bond shall be an indemnity for any loss sustained by any person by reason of the acts of the person bonded when those acts constitute grounds for the suspension or revocation of license. The bond shall be executed in the name of the State of Mississippi for the benefit of any aggrieved party. The aggregate liability of the surety for any claimants, regardless of the number of years this bond is in force or has been in effect, shall not exceed the amount of the bond. The proceeds of the bond shall be paid upon receipt by the commission of a final judgment from a Mississippi court of competent jurisdiction against the principal and in favor of an aggrieved party.

SECTION 4. This act shall take effect and be in force from and after July 1, 2000.