S T A T E O F N E W Y O R K
________________________________________________________________________
8034
I N S E N A T E
June 2, 2010
___________
Introduced by Sen. DILAN -- read twice and ordered printed, and when
printed to be committed 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:
Section 1. Section 465 of the vehicle and traffic law, as amended by
chapter 490 of the laws of 2008, is amended to read as follows:
S 465. Procedures relating to warranties and sales incentives. 1. (A)
Every franchisor shall properly fulfill any warranty agreement and/or
franchisor's service contract and shall compensate each of its fran-
chised motor vehicle dealers for warranty parts and labor in amounts
which reflect fair and reasonable compensation for such work. All
warranty claims and/or claims under a franchisor's service contract made
by franchised motor vehicle dealers shall be paid within thirty days
following their approval. FOR THE PURPOSES OF THIS SECTION, WARRANTY
CLAIMS SHALL INCLUDE VOLUNTARY RECALLS ESTABLISHED BY THE FRANCHISOR,
AND ANY RECALLS PURSUANT TO 49 U.S.C. 301. For parts reimbursement[,]
(other than components, systems, fixtures, appliances, furnishings,
accessories and features of a house coach that are designed, used and
maintained primarily for nonvehicular residential purposes[,]) and for
labor reimbursement, fair and reasonable compensation shall not be less
than the price and rate charged by the franchised motor vehicle dealer
for like PARTS OR services to non-warranty and/or non-service contract
customers.
(B) For purposes of this section, [the price and rate charged by the
franchised motor vehicle dealer for parts may be established] THE FRAN-
CHISED MOTOR VEHICLE DEALER MAY ESTABLISH ITS WARRANTY REIMBURSEMENT
PRICE AND RATE by submitting to the franchisor one hundred sequential
nonwarranty customer-paid service repair orders or the number of sequen-
tial nonwarranty customer-paid service repair orders written within a
ninety day period, whichever is less, covering repairs, REGARDLESS OF
THE REASON FOR THE REPAIRS, made no more than one hundred eighty days
before the submission, and declaring the price and rate, including aver-
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD17556-01-0
S. 8034 2
age markup [for] USED BY the franchised motor vehicle dealer as its
reimbursement rate.
(C) WITH REGARD TO ANY SUBMISSION BY A FRANCHISED MOTOR VEHICLE DEALER
UNDER THIS SECTION, THE FOLLOWING PROVISIONS SHALL APPLY: (I) THE FRAN-
CHISED MOTOR VEHICLE DEALER SHALL DETERMINE THE INDIVIDUAL MARKUP OF
EACH QUALIFYING PART LISTED IN THE FRANCHISED MOTOR VEHICLE DEALER'S
SUBMISSION, WHICH INDIVIDUAL MARKUPS THE FRANCHISED MOTOR VEHICLE DEALER
SHALL THEN AVERAGE, WHICH AVERAGE OF THE INDIVIDUAL MARKUPS SHALL DETER-
MINED THE "AVERAGE" MARKUP TO BE USED AS THE DEALER'S REIMBURSEMENT
RATE; (II) THE DEALER MAY AUTHORIZE ANY EMPLOYEE OR REPRESENTATIVE OF
THE DEALERSHIP TO SIGN THE DEALER'S DECLARATION OF A RATE AND TO SUBMIT
THE REQUEST FOR REIMBURSEMENT BY A MANUFACTURER AT THAT RATE; (III) IT
SHALL BE WITHIN THE DEALER'S SOLE DISCRETION AS TO THE MEANS BY WHICH
THE NECESSARY INFORMATION IS PROVIDED TO THE FRANCHISOR TO SUPPORT THE
AVERAGE PARTS MARKUP CALCULATION; (IV) ALL MANUFACTURERS SHALL DESIGNATE
AN ADDRESS TO WHICH ITS FRANCHISED DEALERS OR REPRESENTATIVES MAY SUBMIT
A REQUEST UNDER THIS SECTION, PROOF OF MAILING OR DELIVERY TO SUCH
ADDRESS SHALL BE SUFFICIENT EVIDENCE RAISING A PRESUMPTION THAT SUCH
REQUEST WAS DELIVERED TO THE MANUFACTURER; AND (V) NOTWITHSTANDING
ANYTHING CONTAINED IN THIS SECTION, THE FRANCHISED MOTOR VEHICLE DEALER
SHALL INCLUDE IN ITS CALCULATION THOSE NON-WARRANTY CUSTOMER PAID-FOR
PARTS OTHERWISE COVERED BY THE FRANCHISOR'S WARRANTY PROGRAM, REGARDLESS
OF THE REASON THEY WERE SUPPLIED TO THE NON-WARRANTY CUSTOMER, INCLUDING
PARTS ROUTINELY REPLACED AS PART OF REGULAR MAINTENANCE ON A VEHICLE,
INCLUDING, BUT NOT LIMITED TO BELTS, BRAKES, BATTERIES, KEYS, TRANSMIT-
TERS AND TRANSMITTER BATTERIES, WINDSHIELD WIPERS, BELTS, SEALANTS,
BULBS, HEADLIGHT AND TAILLIGHT LENSES, FLUIDS, PUMPS, FILTERS AND SIMI-
LAR PARTS PROVIDED, HOWEVER, THE FRANCHISED MOTOR VEHICLE DEALER SHALL
NOT BE REQUIRED IN ITS SUBMISSION TO PERFORM ANY OF THE FOLLOWING:
(1) LIST ON ANY FORM, SPREADSHEET, OR OTHER COMPILATION THOSE REPAIR
ORDERS WHICH DO NOT CONTAIN PARTS THAT THE DEALER IS RELYING ON FOR THE
CALCULATION OF THE AVERAGE MARKUP;
(2) INCLUDE IN ANY CALCULATION OF ITS AVERAGE MARKUP TIRES, WHEELS,
ANY PARTS OR ITEMS IT ACTUALLY USED OR PROVIDED IN THE REPAIR OF PHYS-
ICAL DAMAGE TO THE BODY OR CHASSIS OF A VEHICLE, INCLUDING, BUT NOT
LIMITED TO, BODY PANELS, WINDOWS (GLASS OR OTHER MATERIAL), DOORS, BUMP-
ERS, FENDERS, OR SIMILAR ITEMS, OR THE PAINT OR OTHER FINISHING MATERI-
ALS FOR SUCH ITEMS;
(3) INCLUDE IN ANY CALCULATION OF ITS AVERAGE MARKUP ANY PARTS OR
ITEMS ACTUALLY USED OR PROVIDED IN THE COURSE OF STANDARD VEHICLE PREPA-
RATION FOR SALE TO A CUSTOMER;
(4) INCLUDE IN ANY CALCULATION OF ITS AVERAGE MARKUP ANY PARTS ACTUAL-
LY PROVIDED INTERNALLY TO VARIOUS DEPARTMENTS WITHIN THE FRANCHISED
MOTOR VEHICLE DEALERSHIP'S BUSINESS; AND
(5) INCLUDE IN ANY CALCULATION OF ITS AVERAGE MARKUP ANY TYPE OF PARTS
PROVIDED BY THE FRANCHISOR ONLY AS A MATTER OF "GOODWILL" RATHER THAN IN
THE COURSE OF REGULAR WARRANTY SERVICE.
(D) FOR PURPOSES OF THIS SECTION, THE PRICE AND RATE CHARGED BY THE
FRANCHISED MOTOR VEHICLE DEALER FOR LABOR MAY BE ESTABLISHED BY SUBMIT-
TING ONE HUNDRED SEQUENTIAL NONWARRANTY CUSTOMER-PAID SERVICE REPAIR
ORDERS, OR THE NUMBER OF SEQUENTIAL NONWARRANTY CUSTOMER-PAID SERVICE
REPAIR ORDERS, WRITTEN IN THE MONTH PRECEDING THE SUBMISSION, WHICHEVER
IS LESS, COVERING REPAIRS, REGARDLESS OF THE REASON FOR THE REPAIRS, AND
DIVIDING THE AMOUNT OF THE DEALER'S TOTAL LABOR SALES FOR RETAIL CUSTOM-
ER REPAIRS BY THE NUMBER OF TOTAL LABOR HOURS THAT GENERATED THOSE
SALES, AND DECLARING THE RESULTING AVERAGE LABOR RATE FOR THE FRANCHISED
S. 8034 3
MOTOR VEHICLE DEALER AS ITS REIMBURSEMENT RATE. THE FRANCHISED MOTOR
VEHICLE DEALER SHALL NOT USE IN ANY CALCULATION OF ITS LABOR RATE ANY
LABOR CONDUCTED IN THE COURSE OF STANDARD VEHICLE PREPARATION FOR SALE
TO A CUSTOMER, OR IN THE COURSE OF INTERNAL SERVICE PERFORMED FOR VARI-
OUS DEPARTMENTS WITHIN THE FRANCHISED MOTOR VEHICLE DEALERSHIP'S BUSI-
NESS.
(E) The reimbursement rate so declared shall go into effect thirty
days following the declaration [and]. THE DECLARATION shall be presumed
to be [fair and reasonable, however a franchisor may rebut such presump-
tion by showing that such rate so established is unfair and unreasonable
in light of the practices of all other franchised motor vehicle dealers
in the vicinity offering the same line make.] ACCURATE WHEN SUBMITTED AS
SET FORTH UNDER THIS SECTION PROVIDING A DETAILED, COMPLETE, WRITTEN
EXPLANATION OF ANY PART OR ITEM INCLUDED OR OMITTED FROM THE DECLARATION
CALCULATION THAT IS NOT CONSISTENT WITH THE PROVISIONS OF THIS SECTION
TO THE FRANCHISED MOTOR VEHICLE DEALER, WITHIN FIFTEEN DAYS OF RECEIPT
BY THE FRANCHISOR OF THE SUBMISSION OR ANY MATERIAL AMENDMENT THERETO
ALONG WITH THE RETURN OF THE REPAIR ORDERS UPON WHICH THE MANUFACTURER
IS RELYING FOR ITS OBJECTION OR OBJECTIONS. THE FRANCHISOR WAIVES ANY
RIGHT TO REBUT THE SUBMISSION IF THE FRANCHISOR FAILS TO PROVIDE THE
WRITTEN EXPLANATION DESCRIBED IN THIS PARAGRAPH WITHIN THE FIFTEEN DAY
PERIOD FOLLOWING THE MOTOR VEHICLE DEALER'S SUBMISSION. THE FRANCHISED
MOTOR VEHICLE DEALER MAY CHOOSE TO CORRECT ITS SUBMISSION BASED UPON THE
FRANCHISOR'S WRITTEN REBUTTAL WITHOUT BEING REQUIRED TO MAKE A COMPLETE-
LY NEW SUBMISSION, IF DONE SO WITHIN THIRTY DAYS OF RECEIVING THE
FRANCHISOR'S WRITTEN REBUTTAL. ANY SUCH AMENDMENT TO THE INITIAL
SUBMISSION WILL RELATE BACK TO THE DATE OF THE INITIAL SUBMISSION AND
ANY RESULTING PRICE OR RATE SHALL BE PAID BY THE FRANCHISOR RETROACTIVE-
LY, WITHOUT PENALTY, ON ALL CLAIMS SUBMITTED BY THE FRANCHISED MOTOR
VEHICLE DEALER THIRTY DAYS FROM THE DATE OF THE INITIAL SUBMISSION. IF
THE FRANCHISED MOTOR VEHICLE DEALER DOES NOT AGREE WITH THE FRANCHISOR'S
REBUTTAL, THE PRICE OR RATE SO DECLARED SHALL BECOME EFFECTIVE ACCORDING
TO THIS SECTION UNLESS THE FRANCHISOR INSTITUTES AN ACTION PURSUANT TO
THIS ARTICLE, CLAIMING THAT THE FRANCHISED MOTOR VEHICLE DEALER HAS
VIOLATED THE PROVISIONS OF THIS SECTION, WITHIN THIRTY DAYS FROM THE
DATE OF THE FRANCHISEE'S RESPONSE TO THE FRANCHISOR'S REBUTTAL. THE
BURDEN OF PROOF IN ANY SUCH ACTION SHALL BE ON THE FRANCHISOR.
(F) The franchised motor vehicle dealer shall not request a change in
the reimbursement rate more often than twice in each calendar year.
(G) A FRANCHISOR WHO FAILS TO REIMBURSE WARRANTY AND LABOR CLAIMS
ESTABLISHED PURSUANT TO THIS SECTION SHALL BE LIABLE TO THE FRANCHISED
MOTOR VEHICLE DEALER FOR ALL SUCH CLAIMS AT THE PRICE AND RATE SUBMITTED
BY THE FRANCHISEE FROM THE TIME SUCH SUBMISSION WAS MADE. IN ADDITION,
ANY FRANCHISOR WHO FAILS TO SO REIMBURSE SUCH CLAIMS SHALL BE SUBJECT TO
A PENALTY OF FIVE HUNDRED DOLLARS PER CLAIM PAYABLE TO THE FRANCHISED
MOTOR VEHICLE DEALER. AN ADDITIONAL PENALTY OF ONE THOUSAND DOLLARS PER
CLAIM SHALL BE PAYABLE TO THE FRANCHISED MOTOR VEHICLE DEALER FOR EACH
SUCCESSIVE TEN DAY PERIOD THEREAFTER IN WHICH THE CLAIM IS NOT REIM-
BURSED AS REQUIRED BY THIS SECTION. IN ORDER TO ENSURE TIMELY PAYMENT OF
CLAIMS SUBMITTED UNDER THIS SECTION, A FRANCHISED MOTOR VEHICLE DEALER
MAY, BEGINNING UPON THE EXPIRATION OF THE THIRTY DAY PERIOD ESTABLISHED
BY THIS SECTION, WITHHOLD ANY PAYMENTS OWED TO A FRANCHISOR EQUAL TO THE
CLAIMS MADE BY THE FRANCHISED MOTOR VEHICLE DEALER, PLUS THE PENALTY,
UNTIL THE FRANCHISOR MAKES WARRANTY AND LABOR REIMBURSEMENT PURSUANT TO
THIS SECTION. ANY DEALER WHO EXERCISES SUCH RIGHT SHALL NOT BE DEEMED IN
DEFAULT OF ANY OBLIGATIONS UNDER THE FRANCHISE OR ANY OTHER AGREEMENT
S. 8034 4
WITH THE MANUFACTURER OR ANY SUBSIDIARY OR AFFILIATE OF THE MANUFACTUR-
ER.
(H) In establishing the PARTS REIMBURSEMENT OR THE labor reimbursement
rate, the franchisor shall not require a franchised motor vehicle dealer
to establish said rate by a methodology, or by requiring information,
that is unduly burdensome or time consuming to provide[, including, but
not limited to, a transaction by transaction calculation].
(I) IN NO EVENT MAY A FRANCHISOR REQUIRE A DEALER TO ACCEPT REIMBURSE-
MENT FOR PARTS BASED ON THE FRANCHISOR'S SUGGESTED LIST PRICE (WHETHER
CALLED MSRP OR KNOWN BY ANY OTHER DESIGNATION) IN LIEU OF DETERMINING
AND REIMBURSING A DEALER AT THE DEALER'S AVERAGE MARKUP PURSUANT TO THIS
SECTION.
(J) IN NO EVENT SHALL ANY FRANCHISOR RETALIATE OR THREATEN TO RETALI-
ATE AGAINST A DEALER FOR EXERCISING ITS RIGHTS UNDER THIS SECTION OR
UNDER ANY OTHER SECTION OF THIS ARTICLE. RETALIATION SHALL INCLUDE, BUT
NOT BE LIMITED TO, THREATENING TO CONDUCT, OR CONDUCTING, AN AUDIT OF
DEALERSHIP RECORDS, THREATENING TO WITHHOLD, OR WITHHOLDING, PRODUCTS,
ALLOCATIONS, OR BENEFITS FROM ANY DEALER, OR IMPOSING ADDITIONAL COSTS
OR PENALTIES ON ANY DEALER THAT THE MANUFACTURER DOES NOT IMPOSE ON
EVERY DEALER EITHER WITHIN OR WITHOUT THE STATE.
(K) A FRANCHISOR MAY NOT OTHERWISE RECOVER FROM A FRANCHISED MOTOR
VEHICLE DEALER THE FRANCHISOR'S COSTS FOR REIMBURSING A FRANCHISED MOTOR
VEHICLE DEALER FOR WARRANTY PARTS AND LABOR CLAIMS.
2. All warranty or sales incentive claims shall be either approved AND
PAID or disapproved [within], WITHIN A REASONABLE AMOUNT OF TIME. A
REASONABLE AMOUNT OF TIME SHALL BE:
(A) NO LESS THAN thirty days after [their] receipt[. When any such
claim is disapproved the franchised motor vehicle dealer shall be noti-
fied in writing of its disapproval within said period. Each such notice
shall state the specific grounds upon which the disapproval is based.
Failure to disapprove a claim within thirty days shall be deemed
approval] BY THE FRANCHISOR OF A WARRANTY CLAIM; AND
(B) NO LESS THAN FIVE BUSINESS DAYS FROM THE DATE UPON WHICH THE FRAN-
CHISED MOTOR VEHICLE DEALER PROVIDES NOTICE TO THE FRANCHISOR CERTIFYING
THE COMPLETION OF A SALE WHICH QUALIFIES UNDER A SALES INCENTIVE
PROGRAM. A SALE SHALL BE CONSIDERED COMPLETED UPON DELIVERY OF THE VEHI-
CLE TO THE CUSTOMER.
3. No franchisor shall conduct an audit or charge back any warranty or
sales incentive payment or otherwise hold a franchised motor vehicle
dealer liable for charges more than one year, or five years in the case
of fraud, after the date the franchisor made such payment to the dealer.
4. A franchisor shall not charge a dealer back subsequent to the
payment of a warranty or sales incentive claim unless a representative
of the franchisor has met in person at the dealership, or by telephone,
with an officer or employee of the dealer designated by the dealer and
explained in detail the basis for each of the proposed charge backs and
thereafter given the dealer's representative a reasonable opportunity at
the meeting, or during the telephone call, to explain the dealer's posi-
tion relating to each of the proposed charge backs. In the event the
dealer was selected for audit or review on the basis that some or all of
the dealer's claims were viewed as excessive in comparison to average,
mean or aggregate data accumulated by the franchisor, or in relation to
claims submitted by a group of other franchisees, the franchisor shall,
at or prior to the meeting or telephone call with the dealer's represen-
tative, provide the dealer with a written statement containing the basis
or methodology upon which the dealer was selected for audit or review.
S. 8034 5
5. A franchisor shall not deny or charge back a payment for warranty
work claimed by the dealer unless the franchisor satisfies its burden of
proof that the dealer did not make a good faith effort to comply with
the reasonable written procedures of the franchisor or that the dealer
did not actually perform the work.
6. A franchisor shall not deny or charge back a sales incentive
payment made to a dealer unless the claim was materially false or frau-
dulent or that the dealer failed to reasonably substantiate the claim
either in accordance with the manufacturer's reasonable procedures.
7. After all internal dispute resolution processes provided through
the franchisor have been resolved, the franchisor shall give notice to
the dealer of the final amount of a proposed warranty or sales incentive
charge back. If the dealer institutes an action pursuant to this article
within thirty days of receipt of such notice, the proposed charge back
shall be stayed, without bond, during the pendency of such action and
until the final judgment has been rendered in an adjudicatory proceeding
or action as provided in section four hundred sixty-nine of this arti-
cle.
S 2. This act shall take effect immediately.