Section 407.825

Title XXVI TRADE AND COMMERCE

Chapter 407

Effective - 28 Aug 2001, 4 histories, see footnote   (history) 

  407.825.  Unlawful practices. — Notwithstanding the terms of any franchise agreement, the performance, whether by act or omission, by a motor vehicle franchisor of any or all of the following acts enumerated in this section* are hereby defined as unlawful practices, the remedies for which are set forth in section 407.835:

  (1) To engage in any conduct which is capricious, in bad faith, or unconscionable and which causes damage to a motor vehicle franchisee or to the public; provided, that good faith conduct engaged in by motor vehicle franchisors as sellers of new motor vehicles or parts or as holders of security interest therein, in pursuit of rights or remedies accorded to sellers of goods or to holders of security interests pursuant to the provisions of chapter 400, RSMo, uniform commercial code, shall not constitute unfair practices pursuant to sections 407.810 to 407.835;

  (2) To coerce any motor vehicle franchisee to accept delivery of any new motor vehicle or vehicles, equipment, parts or accessories therefor, or any other commodity or commodities which such motor vehicle franchisee has not ordered after such motor vehicle franchisee has rejected such commodity or commodities. It shall not be deemed a violation of this section for a motor vehicle franchisor to require a motor vehicle franchisee to have an inventory of parts, tools, and equipment reasonably necessary to service the motor vehicles sold by a motor vehicle franchisor; or new motor vehicles reasonably necessary to meet the demands of dealers or the public or to display to the public the full line of a motor vehicle franchisor's product line;

  (3) To unreasonably refuse to deliver in reasonable quantities and within a reasonable time after receipt of orders for new motor vehicles, such motor vehicles as are so ordered and as are covered by such franchise and as are specifically publicly advertised by such motor vehicle franchisor to be available for immediate delivery; provided, however, the failure to deliver any motor vehicle shall not be considered a violation of sections 407.810 to 407.835 if such failure is due to an act of God, work stoppage, or delay due to a strike or labor difficulty, shortage of products or materials, freight delays, embargo or other cause of which such motor vehicle franchisor shall have no control;

  (4) To coerce any motor vehicle franchisee to enter into any agreement with such motor vehicle franchisor or to do any other act prejudicial to such motor vehicle franchisee, by threatening to cancel any franchise or any contractual agreement existing between such motor vehicle franchisor and motor vehicle franchisee; provided, however, that notice in good faith to any motor vehicle franchisee of such motor vehicle franchisee's violation of any provisions of such franchise or contractual agreement shall not constitute a violation of sections 407.810 to 407.835;

  (5) To terminate, cancel or refuse to continue any franchise without good cause, directly or indirectly through the actions of the franchisor, unless such new motor vehicle franchisee substantially defaults in the performance of such franchisee's reasonable and lawful obligations under such franchisee's franchise, or such new motor vehicle franchisor discontinues the sale in the state of Missouri of such franchisor's products which are the subject of the franchise. In determining whether good cause exists, the administrative hearing commission shall take into consideration the existing circumstances, including, but not limited to, the following factors:

  (a) The franchisee's sales in relation to sales in the market;

  (b) The franchisee's investment and obligations;

  (c) Injury to the public welfare;

  (d) The adequacy of the franchisee's service facilities, equipment, parts and personnel in relation to those of other franchisees of the same line-make;

  (e) Whether warranties are being honored by the franchisee;

  (f) The parties' compliance with their franchise agreement;

  (g) The desire of a franchisor for market penetration or a market study, if any, prepared by the franchisor or franchisee are two factors which may be considered;

  (h) The harm to the franchisor;

  (6) To prevent by contract or otherwise, any motor vehicle franchisee from changing the capital structure of the franchisee's franchise of such motor vehicle franchisee or the means by or through which the franchisee finances the operation of the franchisee's franchise, provided the motor vehicle franchisee at all times meets any reasonable capital standards agreed to between the motor vehicle franchisee and the motor vehicle franchisor and grants to the motor vehicle franchisor a purchase money security interest in the new motor vehicles, new parts and accessories purchased from the motor vehicle franchisor;

  (7) (a) To** prevent, by contract or otherwise, any sale or transfer of a franchisee's franchise or franchises or interest or management thereof; provided, if the franchise specifically permits the franchisor to approve or disapprove any such proposed sale or transfer, a franchisor shall only be allowed to disapprove a proposed sale or transfer if the interest being sold or transferred when added to any other interest owned by the transferee constitutes fifty percent or more of the ownership interest in the franchise and if the proposed transferee fails to satisfy any standards of the franchisor which are in fact normally relied upon by the franchisor prior to its entering into a franchise, and which relate to the proposed management or ownership of the franchise operations or to the qualification, capitalization, integrity or character of the proposed transferee and which are reasonable. A franchisee may request, at any time, that the franchisor provide a copy of the standards which are normally relied upon by the franchisor to evaluate a proposed sale or transfer and a proposed transferee;

  (b) The franchisee and the prospective franchisee shall cooperate fully with the franchisor in providing information relating to the prospective transferee's qualifications, capitalization, integrity and character;

  (c) In the event of a proposed sale or transfer of a franchise, the franchisor shall be permitted to exercise a right of first refusal to acquire the franchisee's assets or ownership if:

  a. The franchise agreement permits the franchisor to exercise a right of first refusal to acquire the franchisee's assets or ownership in the event of a proposed sale or transfer;

  b. Such sale or transfer is conditioned upon the franchisor or franchisee entering a franchise agreement with the proposed transferee;

  c. The exercise of the right of first refusal shall result in the franchisee and the franchisee's owners receiving the same or greater consideration and the same terms and conditions as contracted to receive in connection with the proposed sale or transfer;

  d. The sale or transfer does not involve the sale or transfer to an immediate member or members of the family of one or more franchisee owners, defined as a spouse, child, grandchild, spouse of a child or grandchild, brother, sister or parent of the franchisee owner, or to the qualified manager, defined as an individual who has been employed by the franchisee for at least two years and who otherwise qualifies as a franchisee operator, or a partnership or corporation controlled by such persons; and

  e. The franchisor agrees to pay the reasonable expenses, including attorney's fees which do not exceed the usual, customary and reasonable fees charged for similar work done for other clients, incurred by the proposed transferee prior to the franchisor's exercise of its right of first refusal in negotiating and implementing the contract for the proposed sale or transfer of the franchise or the franchisee's assets. Notwithstanding the foregoing, no payment of such expenses and attorney's fees shall be required if the franchisee has not submitted or caused to be submitted an accounting of those expenses within fourteen days of the franchisee's receipt of the franchisor's written request for such an accounting. Such accounting may be requested by a franchisor before exercising its right of first refusal;

  (d) For determining whether good cause exists for the purposes of this subdivision, the administrative hearing commission shall take into consideration the existing circumstances, including, but not limited to, the following factors:

  a. Whether the franchise agreement specifically permits the franchisor to approve or disapprove any proposed sale or transfer;

  b. Whether the interest to be sold or transferred when added to any other interest owned by the proposed transferee constitutes fifty percent or more of the ownership interest in the franchise;

  c. Whether the proposed transferee fails to satisfy any standards of the franchisor which are in fact normally relied upon by the franchisor prior to its entering into a franchise, and which related to the proposed management or ownership of the franchise operations or to the qualification, capitalization, integrity or character of the proposed transferee which are reasonable;

  d. Injury to the public welfare;

  e. The harm to the franchisor;

  (8) To prevent by contract or otherwise any motor vehicle franchisee from changing the executive management of the motor vehicle franchisee's business, except that any attempt by a motor vehicle franchisor to demonstrate by giving reasons that such change in executive management will be detrimental to the distribution of the motor vehicle franchisor's motor vehicles shall not constitute a violation of this subdivision;

  (9) To impose unreasonable standards of performance upon a motor vehicle franchisee;

  (10) To require a motor vehicle franchisee at the time of entering into a franchise arrangement to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by sections 407.810 to 407.835;

  (11) To prohibit directly or indirectly the right of free association among motor vehicle franchisees for any lawful purpose;

  (12) To provide any term or condition in any lease or other agreement ancillary or collateral to a franchise, which term or condition directly or indirectly violates the provisions of sections 407.810 to 407.835;

  (13) Upon any termination, cancellation or refusal to continue any franchise or any discontinuation of any line-make or parts or products related to such line-make by a franchisor, fail to pay reasonable compensation to a franchisee as follows:

  (a) Any new, undamaged and unsold vehicle in the franchisee's inventory of either the current model year or purchased from the franchisor within one hundred twenty days prior to receipt of a notice of termination or nonrenewal, provided the vehicle has less than five hundred miles registered on the odometer, including mileage incurred in delivery from the franchisor or in transporting the vehicle between dealers for sale, at the dealer's net acquisition cost, plus any cost to the dealer for returning the vehicle inventory to the franchisor;

  (b) The franchisee's cost of each new, unused, undamaged and unsold part or accessory if the part or accessory is in the current parts catalog, less applicable allowances, plus five percent of the catalog price of the part for the cost of packing and returning the part to the franchisor. In the case of sheet metal, a comparable substitute for the original package may be used. Reconditioned or core parts shall be valued at their core value, the price listed in the current parts catalog or the amount paid for expedited return of core parts, whichever is higher. If the part or accessory was purchased by the franchisee from an outgoing authorized franchisee, the franchisor shall purchase the part for either the price in the current parts catalog or the franchisee's actual purchase price of the part, whichever is less. In the case of parts which no longer appear in the current parts catalog, the franchisor may purchase the part for either the price in the last version of the parts catalog in which the part appeared or the franchisee's actual purchase price of the part, whichever is less. The franchisee shall maintain accurate records regarding the actual purchase price of parts bought from an outgoing authorized franchisee. In the absence of such records, the franchisor is not required to purchase parts which are not in the current parts catalog;

  (c) The depreciated value determined pursuant to generally accepted accounting principles of each undamaged sign owned by the franchisee which bears a trademark or trade name used or claimed by the franchisor if the sign was purchased from, or purchased at the request of, the franchisor;

  (d) The fair market value of all special tools, data processing equipment and automotive service equipment owned by the franchisee which were recommended in writing and designated as special tools and equipment and purchased from, or purchased at the request of, the franchisor within three years of the termination of the franchise, if the tools and equipment are in usable and good condition, except for reasonable wear and tear;

  (e) Except as provided in paragraph (a) of this subdivision, the cost of transporting, handling, packing, storing and loading of any property subject to repurchase pursuant to this section shall not exceed reasonable and customary charges; and

  (f) The franchisor shall pay the franchisee the amounts specified in this subdivision within ninety days after the tender of the property subject to the franchisee providing evidence of good and clear title upon return of the property to the franchisor. The franchisor shall remove the property within one hundred eighty days after the tender of the property from the franchisee's property. Unless previous arrangements have been made and agreed upon, the franchisee is under no obligation to provide insurance for the property left after one hundred eighty days;

  (14) To prevent or refuse to honor the succession to a franchise or franchises by any legal heir or devisee under the will of a franchisee, under any written instrument filed with the franchisor designating any person as the person's successor franchisee, or pursuant to the laws of descent and distribution of this state; provided:

  (a) Any designated family member of a deceased or incapacitated franchisee shall become the succeeding franchisee of such deceased or incapacitated franchisee if such designated family member gives the franchisor written notice of such family member's intention to succeed to the franchise or franchises within one hundred twenty days after the death or incapacity of the franchisee, and agrees to be bound by all of the terms and conditions of the current franchise agreement, and the designated family member meets the current reasonable criteria generally applied by the franchisor in qualifying franchisees. A franchisee may request, at any time, that the franchisor provide a copy of such criteria generally applied by the franchisor in qualifying franchisees;

  (b) The franchisor may request from a designated family member such personal and financial data as is reasonably necessary to determine whether the existing franchise agreement should be honored. The designated family member shall supply the personal and financial data promptly upon the request;

  (c) If the designated family member does not meet the reasonable criteria generally applied by the franchisor in qualifying franchisees, the discontinuance of the current franchise agreement shall take effect not less than ninety days after the date the franchisor serves the required notice on the designated family member pursuant to subsection 4 of section 407.822;

  (d) The provisions of this subdivision shall not preclude a franchisee from designating any person as the person's successor by written instrument filed with the franchisor, and if such an instrument is filed, it alone shall determine the succession rights to the management and operation of the franchise; and

  (e) For determining whether good cause exists, the administrative hearing commission shall take into consideration the existing circumstances, including, but not limited to, the following factors:

  a. Whether the franchise agreement specifically permits the franchisor to approve or disapprove any successor;

  b. Whether the proposed successor fails to satisfy any standards of the franchisor which are in fact normally relied upon by the franchisor prior to the successor entering into a franchise, and which relate to the proposed management or ownership of the franchise operation or to the qualification, capitalization, integrity or character of the proposed successor and which are reasonable;

  c. Injury to the public welfare;

  d. The harm to the franchisor;

  (15) To coerce, threaten, intimidate or require a franchisee under any condition affecting or related to a franchise agreement, or to waive, limit or disclaim a right that the franchisee may have pursuant to the provisions of sections 407.810 to 407.835. Any contracts or agreements which contain such provisions shall be deemed against the public policy of the state of Missouri and are void and unenforceable. Nothing in this section shall prohibit voluntary settlement agreements;

  (16) To initiate any act enumerated in this subsection on grounds that it has advised a franchisee of its intention to discontinue representation at the time of a franchisee change or require any franchisee to enter into a site control agreement as a condition to initiating any act enumerated in this subsection. Such condition shall not be construed to nullify an existing site control agreement for a franchisee's property;

  (17) To require, coerce, or attempt to coerce any franchisee in this state to refrain from, or to terminate, cancel, or refuse to continue any franchise based upon participation by the franchisee in the management of, investment in or the acquisition of a franchise for the sale of any other line of new vehicle or related products in the same or separate facilities as those of the franchisor. This subdivision does not apply unless the franchisee maintains a reasonable line of credit for each make or line of new vehicle, the franchisee remains in compliance with the franchise and any reasonable facilities requirements of the franchisor, and no change is made in the principal management of the franchisee. The reasonable facilities requirement shall not include any requirement that a franchisee establish or maintain exclusive facilities, personnel, or display space, when such requirements or any of them would not otherwise be justified by reasonable business considerations. Before the addition of a line-make to the dealership facilities the franchisee must first request consent of the franchisor, if required by the franchise agreement. Any decision of the franchisor with regard to dualing of two or more franchises shall be granted or denied within sixty days of a written request from the new vehicle dealer. The franchiser's failure to respond timely to a dualing request shall be deemed to be approval of the franchisee's request;

  (18) To fail or refuse to offer to sell to all franchisees for a line-make every motor vehicle sold or offered for sale to any franchisee of that line-make. However, the failure to deliver any such motor vehicle shall not be considered a violation of this section if the failure is not arbitrary, or is due to a lack of manufacturing capacity or to a strike or labor difficulty, a shortage of materials, a freight embargo or other cause over which the franchisor has no control. A franchisor may impose reasonable requirements on the franchisee including, but not limited to, the purchase of reasonable quantities of advertising materials, the purchase of special tools required to properly service a motor vehicle, the undertaking of sales person or service person training related to the motor vehicle, the meeting of reasonable display and facility requirements as a condition of receiving a motor vehicle, or other reasonable requirements; provided, that if a franchisor requires a franchisee to purchase essential service tools with a purchase price in the aggregate of more than seventy-five hundred dollars in order to receive a particular model of new motor vehicle, the franchisor shall upon written request provide such franchisee with a good faith estimate in writing of the number of vehicles of that particular model that the franchisee will be allocated during that model year in which the tools are required to be purchased.

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(L. 1980 H.B. 1600 § 4, A.L. 1997 H.B. 516, A.L. 2001 H.B. 575)

*Word "subsection" appears in original rolls.

**Word "to" does not appear in original rolls