STATE OF NEW YORK ________________________________________________________________________ 2431 2019-2020 Regular Sessions IN ASSEMBLY January 22, 2019 ___________ Introduced by M. of A. GANTT -- read once and referred 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: 1 Section 1. Section 465 of the vehicle and traffic law, as amended by 2 chapter 490 of the laws of 2008, subdivisions 1, 3, 4, 6 and 7 as 3 amended by chapter 26 of the laws of 2014, is amended to read as 4 follows: 5 § 465. Procedures relating to warranties and sales incentives. 1. (a) 6 Every franchisor shall properly fulfill any warranty agreement and/or 7 franchisor's service contract and shall compensate each of its fran- 8 chised motor vehicle dealers for warranty parts and labor in amounts 9 which reflect reasonable compensation for such work. All warranty claims 10 and/or claims under a franchisor's service contract made by franchised 11 motor vehicle dealers shall be paid within thirty days following their 12 approval. For the purposes of this section, warranty claims shall 13 include voluntary recalls established by the franchisor, and any recalls 14 pursuant to 49 U.S.C. 301. For parts reimbursement[,] (other than compo- 15 nents, systems, fixtures, appliances, furnishings, accessories and 16 features of a house coach that are designed, used and maintained prima- 17 rily for nonvehicular residential purposes[,]) and for labor reimburse- 18 ment, reasonable compensation shall not be less than the price and rate 19 charged by the franchised motor vehicle dealer for like parts or 20 services to non-warranty and/or non-service contract customers. 21 (b) For purposes of this section, [~~the price and rate charged by the~~ 22 ~~franchised motor vehicle dealer for parts may be established~~] the fran- 23 chised motor vehicle dealer may establish its warranty reimbursement 24 price and rate by submitting to the franchisor one hundred sequential 25 nonwarranty customer-paid service repair orders or the number of sequen- EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD00139-01-9

A. 2431 2 1 tial nonwarranty customer-paid service repair orders written within a 2 ninety day period, whichever is less, covering repairs, regardless of 3 the reason for the repairs, made no more than one hundred eighty days 4 before the submission, and declaring the price and rate, including aver- 5 age markup [~~for~~] used by the franchised motor vehicle dealer as its 6 reimbursement rate. 7 (c) With regard to any submission by a franchised motor vehicle dealer 8 under this section, the following provisions shall apply: (i) the fran- 9 chised motor vehicle dealer shall determine the individual markup of 10 each qualifying part listed in the franchised motor vehicle dealer's 11 submission, which individual markups the franchised motor vehicle dealer 12 shall then average, which average of the individual markups shall deter- 13 mine the "average" markup to be used as the dealer's reimbursement rate; 14 (ii) the dealer may authorize any employee or representative of the 15 dealership to sign the dealer's declaration of a rate and to submit the 16 request for reimbursement by a manufacturer at that rate; (iii) it shall 17 be within the dealer's sole discretion as to the means by which the 18 necessary information is provided to the franchisor to support the aver- 19 age parts markup calculation; (iv) all manufacturers shall designate an 20 address to which their franchised dealers or representatives may submit 21 a request under this section, proof of mailing or delivery to such 22 address shall be sufficient evidence raising a presumption that such 23 request was delivered to the manufacturer; and (v) notwithstanding 24 anything contained in this section, the franchised motor vehicle dealer 25 shall include in its calculation those non-warranty customer paid-for 26 parts otherwise covered by the franchisor's warranty program, regardless 27 of the reason they were supplied to the non-warranty customer, including 28 parts routinely replaced as part of regular maintenance on a vehicle, 29 including, but not limited to belts, brakes, batteries, keys, transmit- 30 ters and transmitter batteries, windshield wipers, sealants, bulbs, 31 headlight and taillight lenses, fluids, pumps, filters and similar parts 32 provided, however, the franchised motor vehicle dealer shall not be 33 required in its submission to perform any of the following: 34 (1) list on any form, spreadsheet, or other compilation those repair 35 orders which do not contain parts that the dealer is relying on for the 36 calculation of the average markup; 37 (2) include in any calculation of its average markup tires, wheels, 38 any parts or items it actually used or provided in the repair of phys- 39 ical damage to the body or chassis of a vehicle, including, but not 40 limited to, body panels, windows (glass or other material), doors, bump- 41 ers, fenders, or similar items, or the paint or other finishing materi- 42 als for such items; 43 (3) include in any calculation of its average markup any parts or 44 items actually used or provided in the course of standard vehicle prepa- 45 ration for sale to a customer; 46 (4) include in any calculation of its average markup any parts actual- 47 ly provided internally to various departments within the franchised 48 motor vehicle dealership's business; and 49 (5) include in any calculation of its average markup any type of parts 50 provided by the franchisor only as a matter of "goodwill" rather than in 51 the course of regular warranty service. 52 (d) For purposes of this section, the price and rate charged by the 53 franchised motor vehicle dealer for labor may be established by submit- 54 ting one hundred sequential nonwarranty customer-paid service repair 55 orders, or the number of sequential nonwarranty customer-paid service 56 repair orders, written in the month preceding the submission, whichever

A. 2431 3 1 is less, covering repairs, regardless of the reason for the repairs, and 2 dividing the amount of the dealer's total labor sales for retail custom- 3 er repairs by the number of total labor hours that generated those 4 sales, and declaring the resulting average labor rate for the franchised 5 motor vehicle dealer as its reimbursement rate. The franchised motor 6 vehicle dealer shall not use in any calculation of its labor rate any 7 labor conducted in the course of standard vehicle preparation for sale 8 to a customer, or in the course of internal service performed for vari- 9 ous departments within the franchised motor vehicle dealership's busi- 10 ness. 11 (e) The reimbursement rate so declared shall go into effect thirty 12 days following the declaration [~~and~~]. The declaration shall be presumed 13 to be [~~reasonable, however a franchisor may rebut such presumption by~~ 14 ~~showing that such rate so established is unreasonable in light of the~~ 15 ~~practices of all other franchised motor vehicle dealers in the vicinity~~ 16 ~~offering the same line make.~~] accurate when submitted as set forth under 17 this section providing a detailed, complete, written explanation of any 18 part or item included or omitted from the declaration calculation that 19 is not consistent with the provisions of this section to the franchised 20 motor vehicle dealer, within fifteen days of receipt by the franchisor 21 of the submission or any material amendment thereto along with the 22 return of the repair orders upon which the manufacturer is relying for 23 its objection or objections. The franchisor waives any right to rebut 24 the submission if the franchisor fails to provide the written explana- 25 tion described in this paragraph within the fifteen day period following 26 the motor vehicle dealer's submission. The franchised motor vehicle 27 dealer may choose to correct its submission based upon the franchisor's 28 written rebuttal without being required to make a completely new 29 submission, if done so within thirty days of receiving the franchisor's 30 written rebuttal. Any such amendment to the initial submission will 31 relate back to the date of the initial submission and any resulting 32 price or rate shall be paid by the franchisor retroactively, without 33 penalty, on all claims submitted by the franchised motor vehicle dealer 34 thirty days from the date of the initial submission. If the franchised 35 motor vehicle dealer does not agree with the franchisor's rebuttal, the 36 price or rate so declared shall become effective according to this 37 section unless the franchisor institutes an action pursuant to this 38 article, claiming that the franchised motor vehicle dealer has violated 39 the provisions of this section, within thirty days from the date of the 40 franchisee's response to the franchisor's rebuttal. The burden of proof 41 in any such action shall be on the franchisor. 42 (f) The franchised motor vehicle dealer shall not request a change in 43 the reimbursement rate more often than once in each calendar year. 44 (g) A franchisor who fails to reimburse warranty and labor claims 45 established pursuant to this section shall be liable to the franchised 46 motor vehicle dealer for all such claims at the price and rate submitted 47 by the franchisee from the time such submission was made. In addition, 48 any franchisor who fails to so reimburse such claims shall be subject to 49 a penalty of five hundred dollars per claim payable to the franchised 50 motor vehicle dealer. An additional penalty of one thousand dollars per 51 claim shall be payable to the franchised motor vehicle dealer for each 52 successive ten day period thereafter in which the claim is not reim- 53 bursed as required by this section. In order to ensure timely payment of 54 claims submitted under this section, a franchised motor vehicle dealer 55 may, beginning upon the expiration of the thirty day period established 56 by this section, withhold any payments owed to a franchisor equal to the

A. 2431 4 1 claims made by the franchised motor vehicle dealer, plus the penalty, 2 until the franchisor makes warranty and labor reimbursement pursuant to 3 this section. Any dealer who exercises such right shall not be deemed in 4 default of any obligations under the franchise or any other agreement 5 with the manufacturer or any subsidiary or affiliate of the manufactur- 6 er. 7 (h) In establishing the parts reimbursement or the labor reimbursement 8 rate, the franchisor shall not require a franchised motor vehicle dealer 9 to establish said rate by a methodology, or by requiring information, 10 that is unduly burdensome or time consuming to provide[~~, including, but~~ 11 ~~not limited to, a transaction by transaction calculation~~]. 12 (i) In no event may a franchisor require a dealer to accept reimburse- 13 ment for parts based on the franchisor's suggested list price (whether 14 called MSRP or known by any other designation) in lieu of determining 15 and reimbursing a dealer at the dealer's average markup pursuant to this 16 section. 17 (j) In no event shall any franchisor retaliate or threaten to retali- 18 ate against a dealer for exercising its rights under this section or 19 under any other section of this article. Retaliation shall include, but 20 not be limited to, threatening to conduct, or conducting, an audit of 21 dealership records, threatening to withhold, or withholding, products, 22 allocations, or benefits from any dealer, or imposing additional costs 23 or penalties on any dealer that the manufacturer does not impose on 24 every dealer either within or without the state. 25 (k) A franchisor may not otherwise recover from a franchised motor 26 vehicle dealer the franchisor's costs for reimbursing a franchised motor 27 vehicle dealer for warranty parts and labor claims. 28 2. For the purposes of this section, the following parts or types of 29 repairs shall be excluded from the parts and/or labor calculations and 30 the franchisor's reimbursement requirements under this section: (a) 31 parts sold at wholesale; (b) tires; (c) routine maintenance not covered 32 under any retail customer warranty such as fluids, filters and belts not 33 provided in the course of repairs; (d) vehicle reconditioning; and (e) 34 batteries replaced as part of a routine maintenance operation. If the 35 franchisor rejects the declaration or attempts to rebut the declaration 36 because of an error in the dealer's submission, the franchisor shall 37 identify with specificity the reason for rejection and identify the 38 error or errors within the submission. In the event the franchisor 39 rejects or rebuts the dealer's initial declaration, the dealer shall 40 have the opportunity, within sixty days to resubmit the full and 41 corrected declaration addressing the alleged error or errors identified 42 by the franchisor. The franchisor shall respond within sixty days. The 43 one hundred eighty day requirement for the repair orders shall be stayed 44 from the date of initial submission. In any action or proceeding held 45 pursuant to this subdivision, the franchisor shall have the burden of 46 proving that the rate declared by the dealer was unreasonable as 47 described in this subdivision and that the proposed adjustment of the 48 average percentage markup or rejection of the submission is reasonable 49 pursuant to the provisions of this subdivision. 50 [2] 3. All warranty or sales incentive claims shall be either 51 approved or disapproved, within a reasonable amount of time. A reason- 52 able amount of time shall be: No less than thirty days after [~~their~~] 53 receipt. [~~When any such claim is disapproved the franchised motor vehi-~~ 54 ~~cle dealer shall be notified in writing of its disapproval within said~~ 55 ~~period. Each such notice shall state the specific grounds upon which the~~

A. 2431 5 1 ~~disapproval is based. Failure to disapprove a claim within thirty days~~ 2 ~~shall be deemed approval~~] by the franchisor of a warranty claim; and 3 (b) No less than five business days from the date upon which the fran- 4 chised motor vehicle dealer provides notice to the franchisor certifying 5 the completion of a sale which qualifies under a sales incentive 6 program. A sale shall be considered completed upon delivery of the vehi- 7 cle to the customer. 8 [3] 4. No franchisor shall conduct an audit or charge back any 9 warranty payment, or any sales, advertising or marketing incentive 10 payment ("incentive payments") or otherwise hold a franchised motor 11 vehicle dealer liable for charges more than one year, or five years in 12 the case of fraud, after the date the franchisor made such payment to 13 the dealer, without providing a notice to a franchised motor vehicle 14 dealer of, or a mechanism that makes available to a franchised motor 15 vehicle dealer, information regarding errors or issues regarding such 16 dealer's warranty, sales, advertising or marketing incentive claims that 17 are the subject of the audit or chargeback. Nothing in this section 18 shall be deemed to grant a dealer the right to access any file held by 19 the manufacturer evaluating such dealer. In connection with a claim for 20 warranty reimbursements, the dealer's failure to document properly one 21 part of a warranty repair that contains more than one part shall not be 22 the sole basis to charge back the entire repair. A manufacturer shall 23 not deny a claim submitted under this section based solely on a dealer's 24 incidental failure to comply with a specific claim processing require- 25 ment, a clerical error, or other administrative technicality, provided 26 that the failure does not call into question the legitimacy of the claim 27 and that the dealer corrects the claim according to franchisor guide- 28 lines. 29 [4] 5. A franchisor shall not charge a dealer back subsequent to the 30 payment of a warranty, sales, advertising or marketing incentive claim 31 unless a representative of the franchisor has met in person at the deal- 32 ership, or by telephone, with an officer or employee of the dealer 33 designated by the dealer and explained in detail the basis for each of 34 the proposed charge backs and thereafter given the dealer's represen- 35 tative a reasonable opportunity at the meeting, or during the telephone 36 call, to explain the dealer's position relating to each of the proposed 37 charge backs. In the event the dealer was selected for audit or review 38 on the basis that some or all of the dealer's claims were viewed as 39 excessive in comparison to average, mean or aggregate data accumulated 40 by the franchisor, or in relation to claims submitted by a group of 41 other franchisees, the franchisor shall, at or prior to the meeting or 42 telephone call with the dealer's representative, provide the dealer with 43 a written statement containing the basis or methodology upon which the 44 dealer was selected for audit or review. 45 [5] 6. A franchisor shall not deny or charge back a payment for 46 warranty work claimed by the dealer unless the franchisor satisfies its 47 burden of proof that the dealer did not make a good faith effort to 48 comply with the reasonable written procedures of the franchisor or that 49 the dealer did not actually perform the work. 50 [6] 7. A franchisor shall not deny or charge back a sales, advertis- 51 ing or marketing incentive payment made to a dealer unless the claim was 52 materially false or fraudulent or the dealer failed to reasonably 53 substantiate the claim in accordance with the manufacturer's reasonable 54 procedures. 55 [7] 8. After all internal dispute resolution processes provided 56 through the franchisor have been resolved, the franchisor shall give

A. 2431 6 1 notice to the dealer of the final amount of a proposed warranty, sales, 2 advertising or marketing incentive charge back. If the dealer institutes 3 an action pursuant to this article within thirty days of receipt of such 4 notice, the proposed charge back shall be stayed, without bond, during 5 the pendency of such action and until the final judgment has been 6 rendered in an adjudicatory proceeding or action as provided in section 7 four hundred sixty-nine of this article. The franchisor shall not impose 8 the chargeback, debit the dealer's account, or otherwise seek to obtain 9 all or any part of the chargeback funds from the dealer during the thir- 10 ty-day period in which the dealer has the opportunity to file an action 11 as set forth above. 12 § 2. This act shall take effect immediately.

Creates changes to warranties and sales incentives

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