S 313 TERMINATION OF FRANCHISES

Sen Roberto "Bobby" Gonzales

Actions: [6] STBTC/SJC-STBTC

Scheduled: Not Scheduled

 Senate Bill 313 (SB 313) Adds a definition to the Franchise Termination Act. SB 313 requires notice of termination of franchises and clarifies the applicability of the Franchise Termination Act.
 

 Senate Bill 313 (SB 313) Adds a definition to the Franchise Termination Act. SB 313 requires notice of termination of franchises and clarifies the applicability of the Franchise Termination Act.

SECTION 1 amends Trade Practices and Regulations Section 57-23-1 NMSA 1978 (being Laws 1985, Chapter 229, Section 1) to provide that Chapter 57, Article 23 NMSA 1978 may be cited as the Franchise Termination Act (Act).

SECTION 2 amends Trade Practices and Regulations Section 57-23-2 NMSA 1978 (being Laws 1985, Chapter 229, Section 2) to insert a definition as used in the Act. Subsection E is inserted to define “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 the dealer has:
(1) transferred a controlling ownership interest in the dealer's business without the supplier's written consent; 
(2) filed a voluntary petition in bankruptcy or has had an involuntary petition in bankruptcy filed against the dealer that has not been discharged within 30 days after the filing; had a closeout or sale of a substantial part of the dealer's assets related to the business; or (c) has commenced dissolution or liquidation; 
(3) a deleted, added or changed dealer locations without the prior written approval of the supplier; 
(4) 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; with an exception.
(5) failed to operate in the normal course of business for seven consecutive days or has otherwise abandoned the dealer's business; 
(6) pleaded guilty to or has been convicted of a felony affecting the relationship between the dealer and supplier; 
(7) engaged in conduct that is injurious or detrimental to customers or the public welfare or the representation or reputation of the supplier's product; or 
(8) consistently failed to meet and maintain the supplier's requirements for reasonable standards and performance objectives.

SECTION 3 adds a new section of the Act to address termination of a franchise
A. A supplier shall provide a dealer at least 180 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 60 days in which to cure any claimed deficiency. If all claimed deficiencies are rectified within 60 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 the Act. 

B. 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 60 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. 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. 

C. 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 180 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 B of this section. Notwithstanding anything to the contrary contained in the 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 180-day period has expired, as applicable." 

SECTION 4 amends Trade Practices and Regulations Section 57-23-3 NMSA 1978 (being Laws 1985, Chapter 229, Section 3) to insert Subsection A to require that a dealer shall give the supplier at least 30 days' prior written notice of termination of a franchise. A supplier shall not terminate a franchise without good cause. 

SECTION 5 adds a new section of the Act titled Choice of Law— Attorney Fees—Validty. 
An attempted waiver of a provision of the Act or application of the 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 6 adds a new section of the Franchise Termination Act titled Supplemental Provisions.
The provisions of the 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 7 adds a new section of the Act titled Civil Actions— Attorney Fees.
A person who is injured in the person's business or property by a violation of the Act or because the person refuses to accede to a proposal for an arrangement that would be in violation of the Act may bring a civil action in a court in this state to enjoin further violations and to recover the damages sustained by the person together with the costs of the suit, including a reasonable attorney fee. 


SECTION 8 makes the provisions of this Act 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. 

 Senate Bill 313 (SB 313) duplicates House Bill 398 (HB 398) with the exception of Section 4 of SB 313, which is not contained in HB 398.