(a) This section shall only apply to dealer contracts between a single-line dealer and its single-line supplier.
(b) No supplier may terminate a dealer contract without good cause. In addition to the definition in subdivision (l) of Section 22901, good cause exists whenever any one of the following is applicable:
(1) There has been a closeout or sale of 65 percent or more of the dealer’s assets related to the equipment business or there has been a commencement of a dissolution or liquidation of the dealer.
(2) The dealer has changed its principal place of business or added additional locations without prior approval of the supplier, which shall not be unreasonably withheld.
(3) The dealer has materially defaulted under a chattel mortgage or other security agreement between the dealer and the supplier, or there has been a revocation or discontinuance of a guarantee of a present or future obligation of the dealer to the supplier.
(4) The dealer has failed to operate in the normal course of business for seven consecutive days, without the consent of the supplier, or has otherwise abandoned the business.
(5) The dealer has pleaded guilty to or has been convicted of a felony involving an act of moral turpitude.
(6) The dealer has transferred an interest in the dealership, or a person with a substantial interest in the ownership or control of the dealership, including an individual, proprietor, partner or major shareholder, has withdrawn from the dealership or died, or a substantial reduction has occurred in the interest of a partner or major shareholder in the dealership. However, good cause does not exist if the supplier has consented to an action described in this paragraph.
(c) Except as otherwise provided in this subdivision, a supplier shall provide a dealer with at least 90 days written notice of termination. The notice shall state all reasons constituting good cause for termination and shall state that the dealer has 60 days in which to cure any claimed deficiency. If the deficiency is cured within 60 days, the notice shall be void. Notwithstanding the foregoing, if the good cause for termination is due to the dealer’s failure to meet or maintain the supplier’s requirements for market penetration, a reasonable period of time shall have existed where the supplier has worked with the dealer to gain the desired market share. The notice and right to cure provisions under this subdivision shall not apply if the reason for termination is for any reason set forth in subdivision (b).
(d) If a dealer dies, a supplier shall have 90 days in which to consider and make a determination on a request by a family member to enter into a new dealer contract to operate the dealership. If the supplier determines that the requesting family member is not acceptable, the supplier shall provide the family member with a written notice of its determination with the stated reasons for rejection. This section does not entitle an heir, personal representative, or family member to operate a dealership without specific written consent of the supplier.
(e) Notwithstanding subdivision (d), if a supplier and dealer have previously executed an agreement concerning succession rights prior to the dealer’s death, and if that agreement is still in effect, the agreement shall be observed even if it designated someone other than the surviving spouse or heirs of the decedent as the successor.
(f) For purposes of this section, dealer assets shall not include land or buildings.
(Added by Stats. 2005, Ch. 712, Sec. 8. Effective October 7, 2005.)
Last modified: October 25, 2018