CHAPTER 71
SENATE BILL No. 593
An Act concerning the vehicle dealers and
manufacturers licensing act; relating to denial,
suspension or revocation of license;
prohibited acts; amending K.S.A. 8-2416 and K.S.A.
1997 Supp. 8-2410 and repealing the existing
sections.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 1997 Supp. 8-2410 is hereby amended to
read as
follows: 8-2410. (a) A license may be denied, suspended or revoked
or a
renewal may be refused by the director on any of the following
grounds:
(1) Proof of financial unfitness of the applicant;
(2) material false statement in an application for a
license;
(3) filing a materially false or fraudulent tax return as
certified by the
director of taxation;
(4) negligently failing to comply with any applicable
provision of this
act or any applicable rule or regulation adopted pursuant
thereto;
(5) knowingly defrauding any retail buyer to the buyer's
damage;
(6) negligently failing to perform any written agreement with
any
buyer;
(7) failure or refusal to furnish and keep in force any
required bond;
(8) knowingly making a fraudulent sale or transaction;
(9) knowingly engaging in false or misleading advertising;
(10) willful misrepresentation, circumvention or
concealment,
through a subterfuge or device, of any material particulars, or the
nature
thereof, required by law to be stated or furnished to the retail
buyer;
(11) negligent use of fraudulent devices, methods or practices
in con-
travention of law with respect to the retaking of goods under
retail in-
stallment contracts and the redemption and resale of such
goods;
(12) knowingly violating any law relating to the sale,
distribution or
financing of vehicles;
(13) being a first or second stage manufacturer of vehicles,
factory
branch, distributor, distributor or factory representative,
officer, agent or
any representative thereof, who has:
(A) induced or has attempted to induce, by coercion,
intimidation or
discrimination, any dealer to involuntarily accept delivery
of any vehicle
or vehicles, parts or accessories therefor, or any form of
advertisements
or other commodities which shall not have been ordered by
the dealer;
(A) Required any new vehicle dealer to order or accept
delivery of
any new motor vehicle, part or accessory of such part, equipment
or any
other commodity not required by law, or not necessary for the
repair or
service, or both, of a new motor vehicle which was not ordered
by the
new vehicle dealer;
(B) unfairly, without due regard to the equities of the
vehicle dealer,
and without just provocation, canceled, terminated or failed to
renew a
franchise agreement with any new vehicle dealer; or
(C) induced, or has attempted to induce, by coercion,
intimidation
or discrimination, any vehicle dealer to involuntarily enter into
any fran-
chise agreement with such first or second stage manufacturer,
factory
branch, distributor, or any representative thereof, or to do any
other act
to a vehicle dealer which may be deemed a violation of this act, or
the
rules and regulations adopted or orders promulgated under authority
of
this act, by threatening to cancel or not renew a franchise
agreement
existing between such parties;
(14) being a first or second stage manufacturer, or
distributor who
for the protection of the buying public fails to specify in writing
the de-
livery and preparation obligations of its vehicle dealers prior to
delivery
of new vehicles to new vehicle dealers. A copy of such writing
shall be
filed with the division by every licensed first or second stage
manufacturer
of vehicles and the contents thereof shall constitute the vehicle
dealer's
only responsibility for product liability as between the vehicle
dealer and
the first or second stage manufacturer. Any mechanical, body or
parts
defects arising from any express or implied warranties of the first
or sec-
ond stage manufacturer shall constitute the product or warranty
liability
of the first or second stage manufacturer. The first or second
stage man-
ufacturer shall reasonably compensate any authorized vehicle dealer
for
the performance of delivery and preparation obligation;
(15) being a first or second stage manufacturer of new
vehicles, fac-
tory branch or distributor who fails to supply a new vehicle dealer
with a
reasonable quantity of new vehicles, parts and accessories, in
accordance
with the franchise agreement. It shall not be deemed a violation of
this
act if such failure is attributable to factors reasonably beyond
the control
of such first or second stage manufacturer, factory branch or
distributor;
(16) knowingly used or permitted the use of dealer plates
contrary to
law;
(17) has failed or refused to permit an agent of the division,
during
the licensee's regular business hours, to examine or inspect such
dealer's
records pertaining to titles and purchase and sale of vehicles;
(18) has failed to notify the division within 10 days of
dealer's plates
that have been lost, stolen, mutilated or destroyed;
(19) has failed or refused to surrender their dealer's license
or
dealer's plates to the division or its agent upon demand;
(20) has demonstrated that such person is not of good
character and
reputation in the community in which the dealer resides;
(21) has, within five years immediately preceding the date of
making
application, been convicted of a felony or any crime involving
moral tur-
pitude, or has been adjudged guilty of the violations of any law of
any
state or the United States in connection with such person's
operation as
a dealer or salesperson;
(22) has cross-titled a title to any purchaser of any vehicle.
Cross-
titling shall include, but not by way of limitation, a dealer or
broker or
the authorized agent of either selling or causing to be sold,
exchanged or
transferred any vehicle and not showing a complete chain of title
on the
papers necessary for the issuance of title for the purchaser. The
selling
dealer's name must appear on the assigned first or second stage
manu-
facturer's certificate of origin or reassigned certificate of
title;
(23) has changed the location of such person's established
place of
business or supplemental place of business prior to approval of
such
change by the division;
(24) having in such person's possession a certificate of title
which is
not properly completed, otherwise known as an ``open title'';
(25) doing business as a vehicle dealer other than at the
dealer's es-
tablished or supplemental place of business, with the exception
that deal-
ers selling new recreational vehicles may engage in business at
other than
their established or supplemental place of business for a period
not to
exceed 15 days;
(26) any violation of K.S.A. 8-126 et seq., and
amendments thereto,
in connection with such person's operation as a dealer;
(27) any violation of K.S.A. 8-116, and amendments
thereto;
(28) any violation of K.S.A. 21-3757, and amendments
thereto;
(29) any violation of K.S.A. 79-1019, 79-3294 et seq.,
or 79-3601 et
seq., and amendments thereto;
(30) failure to provide adequate proof of ownership for motor
vehi-
cles in the dealer's possession;
(31) being a first or second stage manufacturer who fails to
provide
the director of property valuation all information necessary for
vehicle
identification number identification and determination of vehicle
classi-
fication at least 90 days prior to release for sale of any new
make, model
or series of vehicles; or
(32) displaying motor vehicles at a location other than at the
dealer's
established place of business or supplemental place of business
without
obtaining the authorization required in K.S.A. 1997 Supp. 8-2435,
and
amendments thereto.
(b) In addition to the provisions of subsection (a), and
notwithstand-
ing the terms and conditions of any franchise agreement,
including any
policy, bulletin, practice or guideline with respect thereto or
performance
thereunder, no first or second stage manufacturer of vehicles,
factory
branch, distributor, distributor or factory representative,
officer or agent
or any representative thereof, or any other person may do or
cause to be
done any of the following acts or practices referenced in this
subsection,
all of which are also declared to be a violation of the vehicle
dealers and
manufacturers licensing act, and amendments thereto:
(1) Through the use of a written instrument or otherwise,
unreason-
ably fail or refuse to offer to its same line-make new vehicle
dealers all
models manufactured for that line-make, or unreasonably require
a dealer
to: (A) Pay any extra fee;
(B) purchase unreasonable advertising displays or other
materials; or
(C) remodel, renovate or recondition the dealer's existing
facilities as
a prerequisite to receiving a model or series of vehicles. The
provisions of
this subsection shall not apply to manufacturers of recreational
vehicles;
(2) require a change in the capital structure of the new
vehicle deal-
ership, or the means by or through which the dealer finances the
operation
of the dealership, if the dealership at all times meets any
reasonable capital
standards determined by the manufacturer and in accordance with
uni-
formly applied criteria;
(3) discriminate unreasonably among competing dealers of
the same
line-make in the sale of vehicles or availability of incentive
programs or
sales promotion plans or other similar programs, unless
justified by ob-
solescence;
(4) unless required by subpoena or as otherwise compelled
by law:
(A) Require a new vehicle dealer to release, convey or otherwise
provide
customer information if to do so is unlawful, or if the customer
objects in
writing to doing so, unless the information is necessary for the
first or
second stage manufacturer of vehicles, factory branch or
distributor to
meet its obligations to consumers or the new vehicle dealer,
including
vehicle recalls or other requirements imposed by state or
federal law; or
(B) release to any unaffiliated third party any customer
information
which has been provided by the dealer to the
manufacturer.
(c) The director may deny the application for the
license within 30
days after receipt thereof by written notice to the applicant,
stating the
grounds for such denial. Upon request by the applicant whose
license has
been so denied, the applicant shall be granted an opportunity to be
heard
in accordance with the provisions of the Kansas administrative
procedure
act.
(c) (d) If a licensee is a firm or
corporation, it shall be sufficient cause
for the denial, suspension or revocation of a license that any
officer, di-
rector or trustee of the firm or corporation, or any member in case
of a
partnership, has been guilty of any act or omission which would be
good
cause for refusing, suspending or revoking a license to such party
as an
individual. Each licensee shall be responsible for the acts of its
salesper-
sons or representatives while acting as its agent.
(d) (e) Any licensee or other person
aggrieved by a final order of the
director, may appeal to the district court as provided by the act
for judicial
review and civil enforcement of agency actions.
(e) (f) The revocation or suspension
of a first or second stage man-
ufacturer's or distributor's license may be limited to one or more
munic-
ipalities or counties or any other defined trade area.
Sec. 2. K.S.A. 8-2416 is hereby amended to read as
follows: 8-2416.
(a) A vehicle dealer desiring to sell, transfer or assign
all or any portion
of such dealer's business, and to assign any agreement to
the purchaser
thereof, shall submit a written proposal of such sale,
transfer or assign-
ment to the first or second stage manufacturer or
distributor, and ap-
proval of such proposal shall not be arbitrarily or
unreasonably withheld.
The proposed purchaser of such dealership also shall
furnish to the first
or second stage manufacturer or distributor all of the
information cus-
tomarily required of applicants for an
agreement.
(b) The refusal of the first or second stage
manufacturer or the dis-
tributor to approve a proposed sale, transfer or assignment
shall be sub-
ject to review by the director if a written application
therefor is filed with
the director by the vehicle dealer desiring to sell,
transfer or assign, with
notice thereof to the first or second stage manufacturer or
distributor,
within 30 days of the date of such refusal. For the
purposes of this section
the failure of the first or second stage manufacturer or
distributor to
approve the request, in writing, within 30 days of a
request to sell, transfer
or assign, shall be deemed to be a refusal. Such refusal
shall not be con-
sidered final until the director, after a hearing has been
held in accord-
ance with the provisions of K.S.A. 8-2411 and amendments
thereto has
determined that the approval was not arbitrarily or
unreasonably with-
held. The director shall make such determination within 90
days after the
application for review has been filed.
(c) The burden of proof shall be on the first or
second stage manu-
facturer or distributor to show that the approval of the
sale, transfer or
assignment of any interest in the franchise agreement was
not withheld
arbitrarily or without reasonable justification. Material
factors to be con-
sidered may include, but are not limited to: Whether the
basic financial
and facility requirements of the franchise agreement will
be met by the
proposed sale, transfer or assignment, and whether the
proposed pur-
chaser, transferee or assignee is capable of operating,
managing and su-
pervising such business.
(d) Failure of the first or second stage manufacturer
or distributor or
any officer or agent thereof to abide by the final order of
the director, or
to continue the agreement pending the final determination
of the issues,
shall be cause for the director to refuse to issue a
subsequent license in
the same trade area to an applicant who will be selling the
same vehicles
as the former vehicle dealer for the same first or second
stage manufac-
turer or distributor.
(e) The provisions of this section shall apply to the
personal repre-
sentative, executor or administrator or the heirs at law of
the estate of an
individual who had an interest in an agreement, or to the
guardian or
conservator of an individual who has such an interest for
one year follow-
ing appointment.
(a) A vehicle dealer shall not transfer, assign or sell a
franchise agree-
ment or interest in a dealership to another person unless the
dealer first
gives written notice to the first or second stage manufacturer
or distrib-
utor of the dealer's decision to make such transfer, assignment
or sale.
The dealer shall provide the first or second stage manufacturer
or dis-
tributor with any completed application forms and related
information
generally utilized by the first or second stage manufacturer or
distributor
to conduct its review of prospective new vehicle dealers, and a
copy of all
agreements regarding the proposed transfer, assignment or
sale.
(b) The first or second stage manufacturer or distributor
shall send a
letter by certified mail to the dealer within 60 days of receipt
of the in-
formation specified in subsection (a). The letter shall indicate
any disap-
proval of the transfer, assignment or sale and shall
specifically set forth
the reasons for the disapproval. If the first or second stage
manufacturer
or distributor does not respond by letter within the 60-day
period, its
consent to the proposed transfer, assignment or sale is deemed
to have
been granted. A first or second stage manufacturer or
distributor shall
not arbitrarily or unreasonably withhold approval of the
transfer, assign-
ment or sale of a franchise agreement or an interest in a
dealership.
(c) Within 90 days after receipt of a notice of disapproval
as provided
in subsection (b), the new vehicle dealer may file a complaint
with the
director with respect to the first or second stage manufacturer
or distrib-
utor's failure to approve the proposed transfer, assignment or
sale. When
such a complaint has been filed, the director shall inform the
first or
second stage manufacturer or distributor that a timely complaint
has been
filed and a hearing is required in accordance with the
provisions of K.S.A.
8-2411 and amendments thereto, to determine whether good cause
exists
to disapprove the transfer, assignment or sale. A disapproval
shall not be
final until the director or the director's designee makes a
final determi-
nation as to good cause.
(d) A first or second stage manufacturer or distributor
shall not fail
or refuse to approve the transfer, assignment or sale of the
business and
assets of a new vehicle dealer, or refuse to continue the
franchise agree-
ment with the prospective transferee after the holding of a
hearing on the
complaint if the director or the director's designee determines
that good
cause does not exist for the first or second stage manufacturer
or distrib-
utor to fail or refuse to approve such transfer, assignment or
sale. The
burden of proof shall be on the first or second stage
manufacturer or
distributor to show that the disapproval of the transfer,
assignment or
sale was with good cause. Material factors to be considered may
include,
but are not limited to: (1) Whether the basic financial and
facility require-
ments of the franchise agreement will be met by the proposed
transfer,
assignment or sale;
(2) whether the proposed purchaser, transferee or assignee
is capable
of operating, managing and supervising such business;
and
(3) the extent to which the refusal to approve will have a
substantial
and adverse effect upon the dealer's investment or return on
investment.
(e) The first or second stage manufacturer or distributor
shall have a
right of first refusal to acquire the new vehicle dealer's
assets or ownership
in the event of a proposed change of all or substantially all of
the dealer's
ownership, or the transfer of all or substantially all of the
new vehicle
dealer's assets, if all of the following are met: (1) The first
or second stage
manufacturer or distributor notifies the dealer in writing
within the 60-
day limit established under subsection (b) of its intent to
exercise its right
of first refusal;
(2) the exercise of the right of first refusal will result
in the dealer and
dealer's owners receiving consideration, terms and conditions
that either
are the same as or greater than that which they have contracted
to receive
in connection with the proposed change of all or substantially
all of the
dealer's ownership, or the transfer of all or substantially all
of the new
vehicle dealer's assets;
(3) the proposed change of all or substantially all of the
dealership's
ownership or the transfer of all or substantially all of the new
vehicle
dealer's assets does not involve the transfer of assets or the
transfer or
issuance of stock by the dealer or one or more dealer owners to
a desig-
nated family member or members, including the spouse, child or
grand-
child, spouse of a child or grandchild, brother, sister or
parent of the
dealer owner, or one or more dealer owners, or to a qualified
manager,
or to a partnership or corporation controlled by any such
person; or to a
trust arrangement established or to be established for the
purpose of al-
lowing the new vehicle dealer to continue to qualify as such a
dealer, so
long as the new vehicle dealer continues to qualify as such
pursuant to
the first or second stage manufacturer or distributor's
standards, or pro-
vides for the succession of the franchise agreement to
designated family
members or qualified management in the event of the death or
incapacity
of the dealer or its principal owner or owners; and
(4) except as otherwise provided in this subsection, the
first or second
stage manufacturer or distributor agrees to pay the reasonable
expenses,
including reasonable attorney fees, which do not exceed the
usual, cus-
tomary and reasonable fees charged for similar work done for
other cli-
ents, incurred by the proposed owner or transferee prior to the
first or
second stage manufacturer or distributor's exercise of its right
of first
refusal in negotiating and implementing the contract for the
proposed
change of all or substantially all of the dealer ownership, or
the transfer
of all or substantially all of the new vehicle dealer's assets.
No payment
of expenses and attorney fees shall be required if the dealer
has not sub-
mitted or caused to be submitted an accounting of those expenses
within
20 days of the dealer's receipt of the first or second stage
manufacturer
or distributor's written request for such an accounting. Such an
expense
accounting may be requested by a first or second stage
manufacturer or
distributor before exercising its right of first
refusal.
(f) A new vehicle dealer and its owners may appoint by
trust, will or
any other valid written instrument a successor to the owner's
interest in
the franchise agreement upon the owner's death or incapacity,
subject to
the following procedures: (1) Unless the first or second
stage manufac-
turer or distributor has good cause to refuse to approve the
succession,
the successor may succeed to the ownership of the new vehicle
dealer
under the existing franchise agreement if: (A) Within 90
days of the
owner's death or incapacity, the successor gives written notice
of the suc-
cessor's intent to succeed to ownership of the new vehicle
dealer and its
franchise agreement; and
(B) the successor agrees to be bound by all the terms and
conditions
of the franchise agreement with the prior new vehicle
dealer.
(2) Upon request, the successor shall promptly provide the
first or
second stage manufacturer or distributor evidence of the
successorship
appointment, as well as personal and financial information
reasonably
necessary to determine whether the succession should be approved
by the
first or second stage manufacturer or distributor.
(3) If a first or second stage manufacturer or distributor
believes that
good cause exists to refuse to approve the intended succession
under sub-
section (f)(1), then the first or second stage manufacturer or
distributor
shall serve the new vehicle dealer and named successor written
notice of
refusal to approve the intended succession within 60 days of its
receipt of
the notice of the intended succession, or within 60 days of
receiving the
information requested under paragraph (f)(2), whichever is
later. The
notice must contain specific grounds for the refusal to approve
the suc-
cession. In the event of such a refusal the new vehicle dealer
or successor
may file a complaint as provided under subsection (c), and the
matter
shall then proceed to hearing in the manner and on the same
basis as the
disapproval of a transfer, assignment or sale.
(4) If notice of refusal to approve the intended succession
is not served
within 60 days upon the intended successor, the successor may
continue
the franchise agreement and the successor shall thereby be
deemed ap-
proved by the first or second stage manufacturer or
distributor.
(g) It shall be a violation of this act for a first or
second stage man-
ufacturer or distributor, or anyone on their behalf, to exercise
a right of
first refusal or other right to acquire the business of the new
vehicle dealer
or a franchise agreement as a means to influence the
consideration or
other terms offered by a person in connection with the
acquisition of the
business or franchise agreement or to influence a person to
refrain from
entering into, or to withdraw from, negotiations for the
acquisition of the
business or franchise agreement.
New Sec. 3. (a) Any licensee receiving or renewing its
license after
the effective date of this act in all respects agrees to be bound
by its
provisions and shall comply with it, and no franchise agreement
made,
entered or renewed after the effective date of this act shall avoid
or cir-
cumvent the requirements of this act, or violate its provisions,
and no
franchise agreement shall be performed after the date the
licensee's li-
cense is issued or renewed in such a manner that the licensee
avoids,
circumvents or otherwise does not conform or comply with the
require-
ments of this act. Notwithstanding the effective date of any
franchise
agreement, all licenses and renewals thereof are issued subject to
all pro-
visions of the dealers and manufacturers licensing act and any
regulations
in effect upon the date of issuance, as well as all future
provisions of this
act and any regulations which may become effective during the term
of
the license.
(b) The provisions of this section shall be a part of and
supplemental
to the vehicle dealers and manufacturers licensing act.
Sec. 4. K.S.A. 8-2416 and K.S.A. 1997 Supp. 8-2410 are
hereby re-
pealed.
Sec. 5. This act shall take effect and be in force from
and after its
publication in the statute book.
Approved April 8, 1998
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