2004 Legislation
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HOUSE BILL NO. 703 – Agric equip dealers/suppliers

HOUSE BILL NO. 703

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H0703...........................................................by BUSINESS
AGRICULTURAL EQUIPMENT DEALERS/SUPPLIERS - Amends and adds to existing law
to revise certain contractual requirements between suppliers and dealers of
agricultural equipment; to provide certain prohibited practices; to provide
for arbitration in Idaho; to revise procedures regarding warranty claims;
and to provide application to certain data processing software.
                                                                        
02/16    House intro - 1st rdg - to printing
02/17    Rpt prt - to Bus

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-seventh Legislature                 Second Regular Session - 2004
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 703
                                                                        
                                   BY BUSINESS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO AGRICULTURAL AND FARM EQUIPMENT AND  CONTRACTS;  AMENDING  SECTION
  3        28-23-101, IDAHO CODE, TO PROVIDE FOR THE PAYMENT OR CREDIT FOR DEMONSTRA-
  4        TION  OR RENTAL EQUIPMENT THAT HAS NOT BEEN RETAILED TO AN END USER AND TO
  5        MAKE A TECHNICAL CORRECTION; AMENDING SECTION 28-23-102,  IDAHO  CODE,  TO
  6        REVISE  THE  PROCEDURES AND CREDITS FOR REPURCHASE OF REPAIR PARTS, REPAIR
  7        MANUALS, SPECIALIZED REPAIR TOOLS AND SIGNAGE AND TO MAKE  TECHNICAL  COR-
  8        RECTIONS;  AMENDING SECTION 28-23-105, IDAHO CODE, TO PROVIDE FOR ONE HUN-
  9        DRED PERCENT CURRENT NET PRICE FOR MANUALS AND REPAIR MANUALS AND  REASON-
 10        ABLE  REIMBURSEMENT FOR SERVICES PERFORMED IN CONNECTION WITH ASSEMBLY AND
 11        PREDELIVERY INSPECTIONS OF THE EQUIPMENT, TO PROVIDE VENUE FOR  CAUSES  OF
 12        ACTION  AND  TO  MAKE  TECHNICAL  CORRECTIONS; AMENDING SECTION 28-23-106,
 13        IDAHO CODE, TO PROVIDE APPLICATION TO TRANSPORTATION  CHARGES  WHICH  HAVE
 14        BEEN  PAID  BY  THE  RETAILER OR INVOICED TO THE RETAILER'S ACCOUNT AND TO
 15        MAKE A TECHNICAL CORRECTION; AMENDING SECTION 28-23-108,  IDAHO  CODE,  TO
 16        INCREASE  NOTICE  PROVISIONS  TO  NINETY DAYS; AMENDING SECTION 28-24-102,
 17        IDAHO CODE, TO FURTHER DEFINE TERMS;  AMENDING  SECTION  28-24-103,  IDAHO
 18        CODE,  TO  REVISE UNLAWFUL ACTS AND PRACTICES REGARDING EQUIPMENT DEALERS;
 19        AMENDING SECTION 28-24-104, IDAHO CODE,  TO  REVISE  TIME  PERIODS  FOR  A
 20        DEALER  TO  CURE A PROBLEM AND TO PROVIDE PROCEDURES PRIOR TO THE TERMINA-
 21        TION OR NONRENEWAL OF A DEALER AGREEMENT; AMENDING  PART  1,  CHAPTER  24,
 22        TITLE  28,  IDAHO  CODE,  BY  THE  ADDITION  OF  NEW  SECTIONS 28-24-104A,
 23        28-24-104B, 28-24-104C, 28-24-104D AND 28-24-104E, IDAHO CODE, TO  PROVIDE
 24        THE  ESTABLISHMENT  OF A NEW DEALERSHIP AND THE SUPPLIER'S DUTIES, TO PRO-
 25        VIDE FOR WARRANTY CLAIMS, TO PROVIDE FOR AUDIT OF WARRANTY CLAIMS, TO PRO-
 26        VIDE FOR ARBITRATION AND TO PROVIDE FOR SUCCESSORS IN INTEREST; AND AMEND-
 27        ING SECTION 28-24-105, IDAHO CODE, TO INCLUDE DATA PROCESSING SOFTWARE  IN
 28        REMEDIES AND ENFORCEMENT PROVISIONS, TO PROVIDE VENUE FOR CAUSES OF ACTION
 29        AND TO MAKE A TECHNICAL CORRECTION.
                                                                        
 30    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 31        SECTION 1.  That Section 28-23-101, Idaho Code, be, and the same is hereby
 32    amended to read as follows:
                                                                        
 33        28-23-101.  REPURCHASE  OF FARM MACHINERY, IMPLEMENTS, ATTACHMENTS, ACCES-
 34    SORIES AND PARTS UPON TERMINATION OF CONTRACT AND  OBLIGATION  TO  REPURCHASE.
 35    Whenever  any  person, firm, or corporation engaged in the business of selling
 36    and retailing farm implements and repair parts for farm implements enters into
 37    a written or parol contract, sales agreement or security agreement whereby the
 38    retailer agrees with any wholesaler,  manufacturer,  or  distributor  of  farm
 39    implements,  machinery, attachments, accessories or repair parts to maintain a
 40    stock of parts which may include, but is not limited  to,  complete  or  whole
 41    machines, or attachments, or demonstration and rental equipment and thereafter
 42    the written or parol contract, sales agreement or security agreement is termi-
 43    nated,  cancelled  or discontinued, then the wholesaler, manufacturer, or dis-
                                                                        
                                           2
                                                                        
  1    tributor shall pay to the retailer or credit to the retailer's account, if the
  2    retailer has outstanding any sums owing the wholesaler, manufacturer, or  dis-
  3    tributor,  unless  the  retailer  should desire and has a contractual right to
  4    keep such merchandise, a sum equal to one hundred per cent percent  (100%)  of
  5    the  net  cost  of  all  unused complete farm implements, machinery and repair
  6    parts and stock of parts, attachments in new condition which  have  been  pur-
  7    chased by the retailer from the wholesaler, manufacturer or distributor within
  8    the  thirty-six (36) months immediately preceding notification by either party
  9    of intent to cancel or discontinue the contract, including the  transportation
 10    charges to the retailer and from the retailer to the destination designated by
 11    the  wholesaler,  manufacturer,  or  distributor,  which have been paid by the
 12    retailer, or invoiced to retailer's account by the wholesaler, manufacturer or
 13    distributor. The payment or credit for demonstration or rental equipment  that
 14    has  not  been retailed to an end user is a sum equal to the depreciated value
 15    of the equipment to which the supplier  and  the  retailer  have  agreed.  The
 16    wholesaler,  manufacturer,  or distributor shall pay to the retailer a reason-
 17    able reimbursement for services performed in connection with the assembly  and
 18    predelivery  inspections  of  the farm equipment and attachments. The supplier
 19    assumes ownership of farm implements, machinery and repair parts and stock FOB
 20    the dealer location.
                                                                        
 21        SECTION 2.  That Section 28-23-102, Idaho Code, be, and the same is hereby
 22    amended to read as follows:
                                                                        
 23        28-23-102.  REPURCHASE OF REPAIR PARTS. Whenever any person, firm, or cor-
 24    poration engaged in the business of selling and retailing farm implements  and
 25    repair  parts  for  farm  implements  enters into a written or parol contract,
 26    sales agreement or security agreement whereby the  retailer  agrees  with  any
 27    wholesaler,  manufacturer,  or  distributor  of  farm  implements,  machinery,
 28    attachments,  accessories or repair parts to maintain a stock of parts or com-
 29    plete or whole machines, or attachments, manuals and repair manuals and there-
 30    after the written or parol contract, sales agreement or security agreement  is
 31    terminated,  cancelled  or discontinued, then the wholesaler, manufacturer, or
 32    distributor shall pay to the retailer or credit to the retailer's account,  if
 33    the  retailer  has outstanding any sums owing the wholesaler, manufacturer, or
 34    distributor, unless the retailer should desire and has a contractual right  to
 35    keep  such  merchandise, a sum equal to one hundred per cent percent (100%) of
 36    the current net prices, including the transportation charges from the retailer
 37    to the destination, which shall include a mailing address, designated  by  the
 38    wholesaler,  manufacturer or distributor within fifteen (15) days of said ter-
 39    mination, cancellation or discontinuance, wholesaler, manufacturer or distrib-
 40    utor which have been paid by the retailer, or invoiced to a retailer's account
 41    by the wholesaler, manufacturer or distributor, on manuals and repair manuals,
 42    repair parts, including superseded or previously included parts listed in cur-
 43    rent price lists or catalogs or electronic catalogs in use, or previously used
 44    within thirty-six (36) months prior to the latest parts price list issue  date
 45    by  the wholesaler, manufacturer or distributor on the date of cancellation or
 46    discontinuance of the contract, which parts had previously been  purchased  by
 47    the retailer from the wholesaler, manufacturer, or distributor and are held by
 48    the retailer on the date of the cancellation or discontinuance of the contract
 49    or  thereafter  received  by the retailer from the wholesaler, manufacturer or
 50    distributor.
 51        The wholesaler, manufacturer, or distributor shall also pay  the  retailer
 52    or credit to his account a sum equal to five per cent percent (5%) of the cur-
 53    rent net price of all parts returned for the handling, packing, and loading of
                                                                        
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  1    the  parts  back  to  the  wholesaler, manufacturer, or distributor unless the
  2    wholesaler, manufacturer or distributor elects to perform inventorying,  pack-
  3    ing and loading of the parts itself themselves.
  4        Upon  the  payment or allowance of credit to the retailer's account of the
  5    sum required by this section and section 28-23-101, Idaho Code, the  title  to
  6    the  farm implements, farm machinery, attachments, accessories or repair parts
  7    shall pass to the manufacturer, wholesaler or distributor making  the  payment
  8    or  allowing  the credit and the manufacturer, wholesaler or distributor shall
  9    be entitled to the possession of the farm implements, machinery,  attachments,
 10    accessories or repair parts. Title to farm implements, attachments, and acces-
 11    sories  and  repair  parts is transferred to the supplier FOB the dealer loca-
 12    tion. The provisions of this section shall apply to any part return adjustment
 13    agreement made between a dealer and a supplier. All payments or allowances  of
 14    credit due retailers under this section shall be paid or credited by the manu-
 15    facturer,  wholesaler, or distributor within ninety (90) days after the return
 16    of the farm implements, farm machinery,  attachments,  accessories  or  repair
 17    parts. After the ninety (90) days all sums of credits due shall include inter-
 18    est  at  the rate specified in section 28-22-104(1), Idaho Code. However, this
 19    section and section 28-23-101, Idaho Code, shall not in  any  way  affect  any
 20    security  interest  which the wholesaler, manufacturer or distributor may have
 21    in the inventory of the retailer.
 22        A supplier shall repurchase at net dealer cost manuals and repair  manuals
 23    purchased  in  the previous six (6) years as required by the supplier and held
 24    by the dealer on the date of termination. Manuals and repair manuals  must  be
 25    unique  to the supplier's product line and must be in complete and in readable
 26    condition.
 27        A supplier must repurchase, and the dealer must sell to the supplier, spe-
 28    cialized repair tools. As applied in this section, "specialized repair  tools"
 29    is defined as those tools required by the supplier and unique to the diagnosis
 30    or repair of the supplier's products. For specialized repair tools that are in
 31    new,  unused  condition and are applicable to the supplier's current products,
 32    the purchase price is one hundred percent (100%) of the original net  cost  to
 33    the  dealer. For all other specialized repair tools, the purchase price is the
 34    original net cost to the dealer less twenty percent (20%) per  year  deprecia-
 35    tion, but not less than fifty percent (50%) of the original purchase price.
 36        A supplier must repurchase, and the dealer must sell to the supplier, cur-
 37    rent  signage.  As used in this section, "current signage" means the principal
 38    outdoor signage required by the supplier that displays the supplier's  current
 39    logo or similar exclusive identifier, and that identifies the dealer as repre-
 40    senting  either the supplier or the supplier's products, or both. The purchase
 41    price shall be the original net cost to the dealer less twenty  percent  (20%)
 42    per  year, but may in no case be less than fifty percent (50%) of the original
 43    cost to the dealer.
                                                                        
 44        SECTION 3.  That Section 28-23-105, Idaho Code, be, and the same is hereby
 45    amended to read as follows:
                                                                        
 46        28-23-105.  FAILURE TO PAY SUMS SPECIFIED ON CANCELLATION OF CONTRACTS  --
 47    LIABILITY.  In  the event that any manufacturer, wholesaler, or distributor of
 48    farm implements, machinery, attachments, accessories and  repair  parts,  upon
 49    the  cancellation  of  a  contract  by either a retailer or such manufacturer,
 50    wholesaler or distributor, fails or refuses to make payment to the  dealer  or
 51    his heir or heirs as required by this section, the manufacturer, wholesaler or
 52    distributor shall be liable in a civil action to be brought by the retailer or
 53    his  heir or heirs for (a) one hundred per cent percent (100%) of the net cost
                                                                        
                                           4
                                                                        
  1    of the farm implements, machinery, and attachments and accessories, (b) trans-
  2    portation charges required in sections 28-23-101 and  28-23-102,  Idaho  Code,
  3    which  have  been paid by the retailer, or invoiced to the retailer's account,
  4    (c) one hundred per cent percent (100%) of the current  net  price  of  repair
  5    parts,  and  (d) five per cent percent (5%) for handling, packing and loading,
  6    if applicable, (e) one hundred percent (100%) of the  current  net  price  for
  7    manuals and repair manuals, and (f) reasonable reimbursement for services per-
  8    formed  in  connection with assembly and predelivery inspections of the equip-
  9    ment. A person, firm or corporation which brings an action under this  section
 10    must  commence  the action in the county in which the principal place of busi-
 11    ness of the retailer is located.
                                                                        
 12        SECTION 4.  That Section 28-23-106, Idaho Code, be, and the same is hereby
 13    amended to read as follows:
                                                                        
 14        28-23-106.  EXCEPTIONS. This act shall not require the repurchase  from  a
 15    retailer  of  a repair part where the retailer previously has failed to return
 16    the repair part to the wholesaler, manufacturer  or  distributor  after  being
 17    offered a reasonable opportunity to return the repair part at a price not less
 18    than  one  hundred per cent percent (100%) of the net price of the repair part
 19    as listed in the then  current  price  list  or  catalog,  and  transportation
 20    charges required in section 28-23-102, Idaho Code, which have been paid by the
 21    retailer,  or  invoiced  to the retailer's account. This act shall not require
 22    the repurchase from a retailer of repair parts which have  a  limited  storage
 23    life  or are otherwise subject to deterioration, such as rubber items, gaskets
 24    and batteries; repair parts in broken or damaged packages; single repair parts
 25    priced as a set of two (2) or more items; and repair parts  which  because  of
 26    their condition are not resalable as new parts without new packaging or recon-
 27    ditioning.
                                                                        
 28        SECTION 5.  That Section 28-23-108, Idaho Code, be, and the same is hereby
 29    amended to read as follows:
                                                                        
 30        28-23-108.  GUARANTY  AND  SECURITY  AGREEMENT  NOTICE  REQUIREMENTS.  All
 31    wholesalers,  manufacturers,  or  distributors  of farm implements, machinery,
 32    attachments, accessories or repair parts shall give the retailer a minimum  of
 33    sixty  (60)  ninety  (90)  days  notice in writing and obtain consent from the
 34    dealer before changing the time and manner of payment of any indebtedness owed
 35    by retailer to manufacturer, distributor or wholesaler, and before taking  and
 36    making  any  changes  in  notes  or  security for any indebtedness, and before
 37    releasing or adding additional guarantors, and  before  granting  renewals  or
 38    extensions of such indebtedness.
                                                                        
 39        SECTION 6.  That Section 28-24-102, Idaho Code, be, and the same is hereby
 40    amended to read as follows:
                                                                        
 41        28-24-102.  DEFINITIONS. As used in this chapter:
 42        (1)  "Assigned  area  of  responsibility"  means the geographic region for
 43    which a particular dealer is responsible for the marketing, selling,  leasing,
 44    or  servicing  of  equipment pursuant to a dealer agreement as assigned by the
 45    supplier.
 46        (2)  "Continuing commercial relationship" means any relationship in  which
 47    the  equipment  dealer has been granted the right to sell or service equipment
 48    manufactured by supplier.
 49        (23)  "Dealer agreement" means a contract or agreement,  either  expressed
                                                                        
                                           5
                                                                        
  1    or  implied,  whether  oral  or  written,  between a supplier and an equipment
  2    dealer, by which the equipment dealer is granted the right to sell, distribute
  3    or service the supplier's equipment, where there is  a  continuing  commercial
  4    relationship between the supplier and the equipment dealer.
  5        (34)  "Equipment"  means  machines  designed  for  or adapted and used for
  6    agriculture, horticulture, livestock and grazing and  related  industries  but
  7    not exclusive to agricultural use. Equipment also includes:
  8        (a)  All-terrain  vehicles  or  "ATVs,"  including three-wheeled and four-
  9        wheeled motorized vehicles, generally characterized by large, low-pressure
 10        tires, a seat designed to be straddled by the operator, and handlebars for
 11        steering. All-terrain vehicles are intended for off-road use.
 12        (b)  "Outdoor power equipment" means equipment, powered  by  two-cycle  or
 13        four-cycle  gas  or  diesel  engines, or electric motors, which is used to
 14        maintain commercial, public, or residential lawns and gardens or  used  in
 15        landscape, turf, golf course, plant nursery, forestry or tree maintenance.
 16        (5)  Demonstration and/or rental equipment is equipment that has been used
 17    but has not been sold to an end user.
 18        (46)  "Equipment dealer" or "equipment dealership" means any person, part-
 19    nership,  corporation,  association or other form of business enterprise, pri-
 20    marily engaged in the retail sale and/or service of equipment in  this  state,
 21    pursuant  to any oral or written agreement for a definite or indefinite period
 22    of time in which there is a continuing commercial relationship in the  market-
 23    ing of the equipment or related services.
 24        (57)  "Good  cause"  means failure by an equipment dealer to substantially
 25    comply with essential and reasonable requirements imposed upon  the  equipment
 26    dealer  by the dealer agreement, provided, such requirements are not different
 27    from those requirements imposed on other similarly situated equipment  dealers
 28    in the state either by their terms or in the manner of their enforcement.
 29        (68)  "Supplier"  means the manufacturer, wholesaler or distributor of the
 30    equipment to be sold by the equipment dealer, or any successor in interest  to
 31    or assignee of the supplier. A successor in interest includes any purchaser of
 32    assets  or  stock, any surviving corporation resulting from merger or liquida-
 33    tion, any receiver or any trustee of the original supplier.
 34        (9)  "Warranty claim" means a claim for payment submitted by an  equipment
 35    dealer  to  a  supplier  for service or parts, or both, provided to a customer
 36    under a:
 37        (a)  Warranty issued by the supplier; or
 38        (b)  Recall or modification order issued by the supplier.
                                                                        
 39        SECTION 7.  That Section 28-24-103, Idaho Code, be, and the same is hereby
 40    amended to read as follows:
                                                                        
 41        28-24-103.  DEALER AGREEMENTS -- UNLAWFUL ACTS AND PRACTICES. It shall  be
 42    a violation of the provisions of this chapter for a supplier to:
 43        (1)  Require or attempt to require any equipment dealer to order or accept
 44    delivery  of  any equipment or parts or any equipment with special features or
 45    accessories not included in the base list price of such equipment as  publicly
 46    advertised  by  the  supplier  which  the equipment dealer has not voluntarily
 47    ordered;
 48        (2)  Require or attempt to require any equipment dealer to enter into  any
 49    agreement,  whether  written  or  oral,  supplementing or amending an existing
 50    dealer agreement with such supplier unless  such  amendment  or  supplementary
 51    agreement is imposed on other similarly situated dealers in the state;
 52        (3)  Refuse  to  deliver  in reasonable quantities and within a reasonable
 53    time after receipt of the equipment dealer's order, to  any  equipment  dealer
                                                                        
                                           6
                                                                        
  1    having  a  dealer  agreement for the retail sale of new equipment sold or dis-
  2    tributed by such supplier, equipment covered by such dealer agreement specifi-
  3    cally advertised or represented by such supplier to be available for immediate
  4    delivery. The failure to deliver any such equipment shall not be considered  a
  5    violation of the provisions of this chapter when deliveries are based on prior
  6    retail  sales  ordering histories, the priority given to the sequence in which
  7    the orders are received or manufacturing  schedules or if such failure is  due
  8    to  prudent  and reasonable restriction on extension of credit by the supplier
  9    to the equipment dealer, an act of God, work stoppage or delay due to a strike
 10    or labor difficulty, a bona fide shortage of  materials,  freight  embargo  or
 11    other cause over which the supplier has no control;
 12        (4)  Terminate, cancel or fail to renew the dealer agreement of any equip-
 13    ment  dealer  or  substantially  change  the  competitive circumstances of the
 14    dealer agreement, attempt to terminate or cancel, or threaten not to renew the
 15    dealer agreement or attempt or threaten to substantially change  the  competi-
 16    tive circumstances of the dealer agreement without good cause. Nothing in this
 17    paragraph  shall  be interpreted to apply to a discontinuation of or change in
 18    the product line of an equipment dealer;
 19        (5)  Condition the renewal, continuation or extension of a  dealer  agree-
 20    ment  on  the  equipment  dealer's  substantial  renovation  of  the equipment
 21    dealer's place of business or on the construction,  purchase,  acquisition  or
 22    rental of a new place of business by the equipment dealer, unless:
 23        (a)  The  supplier  has  advised  the  equipment  dealer in writing of its
 24        demand for such renovation, construction, purchase, acquisition or  rental
 25        within  a reasonable time prior to the effective date of the proposed date
 26        of renewal or extension, but in no case less than one (1) year; and
 27        (b)  The supplier demonstrates the need for such change in  the  place  of
 28        business  and  the  reasonableness of the demand with respect to marketing
 29        and servicing the supplier's products and any significant economic  condi-
 30        tions  existing  at the time in the equipment dealer's trade area, and the
 31        equipment dealer does not make a good faith effort to complete  such  con-
 32        struction or renovation  plans within one (1) year.
 33        (6)  Discriminate  in  the  prices charged for equipment of like grade and
 34    quality sold by the supplier to similarly situated dealers in this state where
 35    the effect of such discrimination may be to substantially  lessen  competition
 36    or  tend  to  create  a monopoly in a line of commerce. The provisions of this
 37    subsection do not prevent the use of differentials which make only due  allow-
 38    ance for differences in the cost of manufacture, sale or delivery of equipment
 39    resulting  from the differing methods or quantities in which such equipment is
 40    sold or delivered; provided that nothing shall prevent a supplier from  offer-
 41    ing  a  lower  price in order to meet an equally low price of a competitor, or
 42    the services or facilities furnished by a competitor;
 43        (7)  Unreasonably withhold consent for an equipment dealer to  change  the
 44    capital  structure  of  the  equipment  dealership or the means by which it is
 45    financed, provided that the equipment  dealer  meets  the  reasonable  capital
 46    requirements of the supplier;
 47        (8)  Prevent,  by contract or otherwise, any equipment dealer or any offi-
 48    cer, member, partner or stockholder of an equipment dealership  from  selling,
 49    assigning, or transferring any interest or portion thereof held by any of them
 50    in  the  equipment dealership to any other person or party; provided, however,
 51    that no equipment dealer, officer, partner, member or stockholder  shall  have
 52    the  right  to sell, transfer, or assign the equipment dealership or the power
 53    of management or control thereof without the written consent of the  supplier,
 54    except  that  such  consent  shall  not be unreasonably withheld if the buyer,
 55    transferee, or assignee meets the reasonable  financial,  business  experience
                                                                        
                                           7
                                                                        
  1    and  character standards of the supplier. Should a supplier determine that the
  2    designated transferee is not acceptable, the supplier shall provide the equip-
  3    ment dealer with written notice of the supplier's objections and specific rea-
  4    sons for withholding its consent within thirty (30) calendar days  of  receipt
  5    of notice from the equipment dealer;
  6        (9)  Require an equipment dealer to assent to a release, assignment, nova-
  7    tion, waiver or estoppel which would relieve any person from liability imposed
  8    by this chapter;
  9        (10) (a)  Unreasonably  withhold consent, in the event of the death of the
 10        equipment dealer or the principal owner of the  equipment  dealership,  to
 11        the  transfer  of the equipment dealer's or the principal owner's interest
 12        in the equipment dealership to a member or members of the  family  of  the
 13        equipment  dealer  or of the principal owner or to another qualified indi-
 14        vidual, if the family member or other qualified individual meets the  rea-
 15        sonable financial, business experience and character standards of the sup-
 16        plier. A supplier shall have sixty (60) days to consider a request to make
 17        a transfer to a family member or other qualified an individual. If, within
 18        that  period, the supplier determines that the designated family member or
 19        other qualified individual does not meet the reasonable  financial,  busi-
 20        ness  experience and character standards of the supplier, it shall provide
 21        the designated family member or  other  qualified  individual  dealership,
 22        heirs  to  the dealership, or the estate of the dealer with written notice
 23        of its objection and the specific reasons for withholding its consent.  If
 24        the  family  member or other qualified individual reasonably satisfies the
 25        supplier's objections within sixty (60) days  after  notice  thereof,  the
 26        supplier  shall  approve the transfer. As used in this paragraph, "family"
 27        means and includes a spouse, parents, siblings,  children,  step-children,
 28        sons-in-law,  daughters-in-law, and lineal descendants, including those by
 29        adoption of the equipment dealer or principal owner of the equipment deal-
 30        ership. Nothing in this paragraph shall entitle a family member  or  other
 31        qualified  individual  to  continue  to operate the dealership without the
 32        consent of the supplier.
 33        (b)  Notwithstanding the provisions of paragraph (a) of  this  subsection,
 34        in  the  event  that a supplier and equipment dealer have duly executed an
 35        agreement concerning succession rights prior  to  the  equipment  dealer's
 36        death, and if such agreement has not been revoked, such agreement shall be
 37        observed.
 38        (11) Cause  the equipment dealer to refrain from participation in the man-
 39    agement, investment, acquisition, or sale of  any  other  related  product  or
 40    product  line  of  equipment,  parts or accessories, from the same or separate
 41    locations;
 42        (12) Enter into an agreement by which the supplier, factory  branch,  fac-
 43    tory representative, distributor, distributor branch, or distributor represen-
 44    tative can directly solicit the dealer's customers;
 45        (13) Fail to compensate a dealer for preparation and delivery of equipment
 46    that  the  supplier  sells  or  leases  for use within this state and that the
 47    dealer prepares for delivery and delivers.
                                                                        
 48        SECTION 8.  That Section 28-24-104, Idaho Code, be, and the same is hereby
 49    amended to read as follows:
                                                                        
 50        28-24-104.  TERMINATION  OF  DEALER  AGREEMENT  OR  CHANGE  OF   EQUIPMENT
 51    DEALER'S  COMPETITIVE  CIRCUMSTANCES  --  NOTICE -- GOOD CAUSE. (1) A supplier
 52    shall provide written notice to the equipment dealer of any proposed  termina-
 53    tion or nonrenewal of a dealer agreement or substantial change in the competi-
                                                                        
                                           8
                                                                        
  1    tive circumstances of a dealer agreement. The notice shall state the reason(s)
  2    constituting good cause for the action proposed to be taken. Except where good
  3    cause is alleged under the provisions of paragraphs (a) through (e) of subsec-
  4    tion    (2)  of  this  section, such notice shall be provided to the equipment
  5    dealer not less than ninety  (90) days before the proposed action is to become
  6    effective. Except where good cause is alleged under paragraphs (a) through (d)
  7    of subsection (2) of this section, the equipment dealer shall be  given  sixty
  8    ninety  (690) days within which to cure any claimed deficiency, and the notice
  9    shall advise the dealer of his right to cure. If  the  claimed  deficiency  is
 10    rectified  within  sixty   ninety (690) days, the notice shall be void and the
 11    proposed action shall not  become  effective.  Notwithstanding  the  equipment
 12    dealer's  failure  to  cure  the  deficiency  or deficiencies claimed, where a
 13    ninety (90) day notice is required to be given by the supplier,  the  contrac-
 14    tual  term  of  the  dealer  agreement  shall not expire, nor shall the dealer
 15    agreement be otherwise  terminated  or  cancelled,  nor  shall  the  equipment
 16    dealer's competitive circumstances be substantially changed prior to the expi-
 17    ration  of at least ninety (90) days following such notice without the written
 18    consent of the equipment dealer.
 19        (2)  As used in this chapter, "good cause" shall exist, but not be limited
 20    to the following circumstances when the equipment dealer has:
 21        (a)  Transferred a controlling ownership interest in the equipment dealer-
 22        ship without the supplier's consent;
 23        (b)  Made a material misrepresentation to the supplier;
 24        (c)  Filed a voluntary petition in bankruptcy or has  had  an  involuntary
 25        petition  in  bankruptcy  filed against the equipment dealer which has not
 26        been discharged within sixty ninety (690) days after  the  filing;  is  in
 27        default  under  the  provisions of a security agreement in effect with the
 28        supplier; or is insolvent or in receivership;
 29        (d)  Been convicted of a crime, punishable for a term of imprisonment  for
 30        one (1) year or more;
 31        (e)  Failed  to operate in the normal course of business for ten (10) con-
 32        secutive business days or has terminated said business;
 33        (f)  Relocated the  equipment  dealer's  place  of  business  without  the
 34        supplier's consent;
 35        (g)  Consistently  engaged  in business practices which are detrimental to
 36        the consumer or supplier by way of excessive pricing, misleading advertis-
 37        ing, failure to provide service and replacement parts or perform  warranty
 38        obligations;
 39        (h)  Inadequately  represented  the  supplier  over a one (1) year of such
 40        period of time or length of time period specified in the dealer  agreement
 41        causing lack of performance in sales, service or warranty areas and failed
 42        to achieve market penetration at levels consistent with similarly situated
 43        equipment  dealerships  in the state based on available record information
 44        or a time mutually agreed upon between the supplier and dealer to  reflect
 45        the ongoing market conditions;
 46        (ih)  Consistently  failed to meet building and housekeeping requirements,
 47        or has failed to provide adequate sales, service or parts  personnel  com-
 48        mensurate with the dealer agreement;
 49        (ji)  Failed  to  comply  with the applicable licensing laws pertaining to
 50        the products and services being represented for and on supplier's behalf;
 51        (kj)  Materially failed to comply with the terms of the dealer agreement.
 52        (3)  Notwithstanding the provisions of subsection  (2)  of  this  section,
 53    before  the  termination  or  nonrenewal  of  a  dealer agreement based upon a
 54    supplier's claim that the dealer has failed to achieve market  penetration  at
 55    levels  consistent  with similarly situated dealerships in the state, the sup-
                                                                        
                                           9
                                                                        
  1    plier shall provide written notice of its intention at least one (1)  year  in
  2    advance.
  3        (a)  After  issuance of such a notice, the supplier shall provide fair and
  4        reasonable efforts to work with the dealer to assist the dealer in gaining
  5        the required market penetration including,  but  not  limited  to,  making
  6        available  to  the dealer an adequate inventory of new equipment and parts
  7        and competitive marketing programs.
  8        (b)  Upon the end of the one (1) year period established in  this  subsec-
  9        tion  (3),  the  supplier  may  terminate or elect not to renew the dealer
 10        agreement only upon written notice specifying the reasons for  determining
 11        that  the  dealer failed to meet reasonable market penetration. The notice
 12        must specify that termination  or  nonrenewal  is  effective  one  hundred
 13        eighty  (180)  days from the date of the notice and either party may peti-
 14        tion the court.
 15        (c)  A supplier bears the burden of proving  that  a  retailer's  area  of
 16        responsibility or trade area does not afford sufficient sales potential to
 17        reasonably support the retailer. The supplier's proof must be in writing.
                                                                        
 18        SECTION  9.  That  Part  1,  Chapter 24, Title 28, Idaho Code, be, and the
 19    same is hereby amended by the addition thereto of NEW SECTIONS,  to  be  known
 20    and  designated as Sections 28-24-104A, 28-24-104B, 28-24-104C, 28-24-104D and
 21    28-24-104E, Idaho Code, and to read as follows:
                                                                        
 22        28-24-104A.  ESTABLISHMENT OF NEW DEALERSHIP -- SUPPLIER'S DUTIES. When  a
 23    supplier  enters  into an agreement to establish a new dealer or dealership or
 24    to relocate a current dealer or dealership for a particular  product  line  or
 25    make  of equipment, the supplier must give written notice of such an agreement
 26    by certified mail to all existing dealers or dealerships whose  assigned  area
 27    of  responsibility  is contiguous to the new dealer or dealership location. If
 28    no area of responsibility has been assigned then the supplier must give  writ-
 29    ten  notice  of  such an agreement by certified mail to the dealers or dealer-
 30    ships within a seventy-five (75) mile radius of the new dealer  location.  The
 31    supplier  must  provide  in its written notice the following information about
 32    the proposed new or relocated dealer or dealership:
 33        (1)  The proposed location;
 34        (2)  The proposed date for commencement of operation at the new  location;
 35    and
 36        (3)  The  identities of all existing dealers or dealerships whose assigned
 37    area of responsibility is contiguous to the new dealer or dealership location.
 38    If no area of responsibility has been assigned then  the  supplier  must  give
 39    written  notice of such an agreement by certified mail to the dealers or deal-
 40    erships located within a seventy-five (75) mile radius of the new dealer loca-
 41    tion.
                                                                        
 42        28-24-104B.  WARRANTY CLAIMS. (1) An equipment dealer may  submit  a  war-
 43    ranty  claim  to  a supplier if a warranty defect is identified and documented
 44    prior to the expiration of a supplier's warranty:
 45        (a)  While a dealer agreement is in effect; or
 46        (b)  After the termination of a dealer agreement if the claim is for  work
 47        performed while the dealer agreement was in effect.
 48        (2)  A  supplier  shall  accept or reject a warranty claim submitted under
 49    subsection (1) of this section, within fifteen (15) days of the date the  sup-
 50    plier  received  the  claim. A warranty claim not rejected within fifteen (15)
 51    days of the date the supplier received the claim is considered to be  accepted
 52    by the supplier.
                                                                        
                                           10
                                                                        
  1        (3)  No  later  than  fifteen (15) days after the date a warranty claim is
  2    accepted or rejected under subsection (2) of this section, the supplier shall:
  3        (a)  Pay an accepted warranty claim; or
  4        (b)  Send the dealer written notice of the reason the warranty  claim  was
  5        rejected.
  6        (4)  A supplier shall compensate the dealer for the warranty claim as fol-
  7    lows:
  8        (a)  The dealer's established customer hourly retail labor rate multiplied
  9        by  the  reasonable and customary amount of time required to complete such
 10        work by similarly situated dealers, including diagnostic time, and cleanup
 11        time, expressed in hours and fractions of an hour;
 12        (b)  The dealer's current net price on repair parts reimbursed at not less
 13        than net plus twenty percent (20%) of the cost for warranty  service  per-
 14        formed  on  behalf  of  the supplier to compensate for reasonable costs of
 15        doing business; and
 16        (c)  Extraordinary freight and handling costs. For purposes of  this  sub-
 17        section  (4)(c),  "extraordinary  freight  and handling costs" means costs
 18        that are above and beyond the normal reimbursement policy of the  supplier
 19        for warranty repair work;
 20        (d)  Transportation or travel within the dealer's assigned area of respon-
 21        sibility as defined by the supplier;
 22        (e)  When the repair work is for safety or mandatory modifications ordered
 23        by  the  supplier, the supplier shall reimburse the dealer for transporta-
 24        tion costs incurred by the dealer.
 25        (5)  After payment of a warranty claim, a supplier may  not  charge  back,
 26    off-set  or  otherwise  attempt  to recover from the dealer all or part of the
 27    amount of the claim unless:
 28        (a)  The warranty claim was submitted in error;
 29        (b)  The services for which the warranty claim was made were not  properly
 30        performed or were unnecessary to comply with the warranty; or
 31        (c)  The  dealer  did not substantiate the warranty claim according to the
 32        written requirements of the supplier that were in effect when  the  equip-
 33        ment was delivered to the dealer by the customer for warranty repairs.
 34        (6)  If  a  supplier  denies  a warranty claim due to a particular item or
 35    part of the claim, the denial shall only affect the items or parts in question
 36    and not the complete warranty claim.
 37        (7)  A supplier may not pass the cost of covering  warranty  claims  under
 38    this chapter on to a dealer through any means including:
 39        (a)  Surcharges;
 40        (b)  Reduction of discounts; or
 41        (c)  Certification standards.
 42        (8)  Notwithstanding  the  provisions of subsection (4) of this section, a
 43    dealer may accept the supplier's reimbursement terms and conditions in lieu of
 44    the terms and conditions set forth in subsection (4) of this section.
                                                                        
 45        28-24-104C.  AUDIT OF WARRANTY CLAIMS. A supplier may not audit a dealer's
 46    records with respect to any warranty claim submitted more than  one  (1)  year
 47    before the date of the audit.
                                                                        
 48        28-24-104D.  ARBITRATION.  Any  party to a retailer agreement aggrieved by
 49    the conduct of the other party  to  the  agreement  under  sections  28-23-101
 50    through   28-23-111,  Idaho Code, or under part 1, chapter 24, title 28, Idaho
 51    Code,  may seek arbitration of the issues under sections 7-901 through  7-922,
 52    Idaho Code. Unless the parties agree to different arbitration rules, the arbi-
 53    tration  shall  be  conducted  in Idaho pursuant to the commercial arbitration
                                                                        
                                           11
                                                                        
  1    rules of the American arbitration association. When  the  parties  agree,  the
  2    arbitration shall be the parties' only remedy and the findings and conclusions
  3    of the arbitrator or panel of arbitrators shall be binding upon both parties.
  4        (1)  The arbitrator or arbitrators may award the prevailing party:
  5        (a)  The costs of witness fees and other fees in the case;
  6        (b)  Reasonable attorney's fees; and
  7        (c)  Injunctive  relief  against  unlawful termination, cancellation, non-
  8        renewal or change in competitive circumstances.
  9        (2)  Any retailer has a civil cause of action in district  court  in  this
 10    state  against  a  supplier  for damages sustained by the retailer as a conse-
 11    quence of the supplier's violation of part 1,  chapter  24,  title  28,  Idaho
 12    Code, or sections 28-23-101 through 28-23-111, Idaho Code, together with:
 13        (a)  The actual costs of the action;
 14        (b)  Reasonable attorney's fees; and
 15        (c)  Injunctive  relief  against  unlawful termination, cancellation, non-
 16        renewal or change in competitive circumstances.
 17        (3)  No dealer shall be required to waive his rights to judicial  recourse
 18    by  contractual  agreements  through  penalty  of  loss  of trade discounts or
 19    changes in the competitive circumstance of the dealer by the  supplier  deemed
 20    to be punitive in nature or effect. The remedies set forth in this section are
 21    not  exclusive  and  are  in  addition to any other remedies permitted by law,
 22    unless the parties have mutually agreed to binding arbitration under this sec-
 23    tion.
                                                                        
 24        28-24-104E.  SUCCESSORS IN INTEREST. The obligations of any supplier under
 25    this chapter are applied to any successor in interest or assignee of the  sup-
 26    plier.  A successor in interest includes any purchaser of assets or stock, any
 27    surviving corporation resulting from merger or liquidation, and  any  receiver
 28    or any trustee of the original supplier.
                                                                        
 29        SECTION  10.  That  Section  28-24-105,  Idaho  Code,  be, and the same is
 30    hereby amended to read as follows:
                                                                        
 31        28-24-105.  REMEDIES AND ENFORCEMENT. Monetary damages  may  be  recovered
 32    for  losses  sustained  as a consequence of any violation of the provisions of
 33    this chapter. Such recovery may also include a requirement that  the  supplier
 34    repurchase  at  fair  market  value any data processing hardware, software and
 35    specialized repair tools and equipment previously purchased from the  supplier
 36    or  approved  vendor of the supplier pursuant to requirements of the supplier.
 37    Injunctive relief may also be granted against any actual or threatened  viola-
 38    tion of the provisions of this chapter. In any action brought under this chap-
 39    ter  the  prevailing  party shall be entitled to recover reasonable attorney's
 40    fees and costs. The remedies set forth in this section  shall  not  be  deemed
 41    exclusive  and  shall be in addition to any other remedies permitted by law. A
 42    person, firm or corporation which brings an action  under  this  section  must
 43    commence  the action in the county in which the principal place of business of
 44    the retailer is located.

Statement of Purpose / Fiscal Impact


                      STATEMENT OF PURPOSE
                           RS 13725C1
                                
This legislation updates the statutory requirements defining the
business relations between the independent equipment dealer and the
manufacturers, wholesalers, and suppliers.  It updates the "buy-
back" statutes to require the manufacturer/suppliers to repurchase
their required data processing, telecommunications, and computer
equipment, signage, special tools, repair manuals, and rental and
demonstration equipment.  It also updates the protection statutes
to include provisions concerning transfer of ownership; selling of
"other" product lines; dealer compensation; soliciting of
customers; notice requirements; and warranty compensation.

The purpose of this legislation is to update the current Idaho
dealer statutes to a level at least equal to their counterparts in
the surrounding states.
                                   
                          FISCAL NOTE

There is no fiscal impact to the State General Fund.  
     
     

Contact:  Rep. Sharon Block
          332-1000
          

STATEMENT OF PURPOSE/FISCAL NOTE                    H 703