(a) This section shall only apply to a dealer contract between a dealer who is not a single-line dealer and a supplier who is not a single-line supplier.
(b) Except where there are grounds for termination of a dealer contract pursuant to paragraph (1), (2), (3), (4), (5), (6), (7), or (8) of subdivision (c), a supplier shall give a dealer 180 days written notice of the supplier’s intent to terminate a dealer contract. The notice shall include all reasons constituting good cause for the termination and shall provide the dealer with 60 days to cure any claimed deficiency. If the deficiency is cured within 60 days to the satisfaction of the supplier, which shall be determined in good faith, the notice of termination shall be void. Except as provided in subdivision (d), a supplier may not terminate a dealer contract based on paragraph (12) of subdivision (c) unless the supplier gives the dealer notice of that action at least one year before the effective date of that action. If the dealer achieves the supplier’s requirements for reasonable standards or performance objectives before the expiration of the one-year notice period, the notice shall be void and the dealer contract shall continue in full force and effect.
(c) No supplier, directly or through an officer, agent, or employee, may terminate, cancel, fail to renew, or materially change the competitive circumstances of a dealer contract without good cause. In addition to the definition in subdivision (l) of Section 22901, good cause exists whenever the dealer has taken any of the following actions:
(1) Transferred a controlling ownership interest in the dealership without the consent of the supplier, who shall not withhold consent unreasonably.
(2) Made a material misrepresentation or falsification of any record.
(3) Filed a voluntary petition in bankruptcy or has had an involuntary petition in bankruptcy filed against the dealer that has not been dismissed within 60 days after the filing or is insolvent or in receivership.
(4) Pleaded guilty to or has been convicted of a felony involving an act of moral turpitude.
(5) Failed to operate in the normal course of business for seven consecutive business days, without the consent of the supplier, or has terminated the business.
(6) Relocated or established a new or additional dealer’s place of business without the supplier’s consent.
(7) Materially defaulted under any chattel mortgage or other security agreement between the dealer and the supplier, or there has been a revocation of any guarantee of the dealer’s present or future obligations to the supplier. However, good cause does not exist if a person revokes any guarantee in connection with or following the transfer of that person’s entire ownership interest in the dealer unless the supplier requires that person to execute a new guarantee of the dealer’s present or future obligations in connection with that transfer of ownership interest.
(8) Failed to satisfy any payment obligation as it became due and payable to the supplier, failed to promptly account to the supplier for any proceeds from the sale of equipment, or failed to hold those proceeds in trust for the benefit of the supplier.
(9) Engaged in conduct that is injurious or detrimental to any of the following:
(A) The dealer’s customers. This includes, but is not limited to, the following conduct: excessive pricing, misleading advertising, failure to provide service and replacement parts, and failure to perform warranty obligations.
(B) The public welfare.
(C) The representation or reputation of the supplier’s product.
(10) Consistently failed to meet building and housekeeping requirements, or failed to provide adequate sales, service, or parts personnel commensurate with the dealer contract.
(11) Consistently failed to comply with the applicable licensing laws pertaining to the products and services being represented for and on the supplier’s behalf.
(12) Consistently failed to meet and maintain the supplier’s requirements for reasonable standards and performance objectives, if the supplier has given the dealer reasonable standards and performance objectives that are based on the manufacturer’s experience in other comparable market areas.
(d) Notwithstanding subdivision (c), if the sales, service, rental, and repair of a supplier’s product represents the lesser of 10 percent or three hundred fifty thousand dollars ($350,000) of the dealer’s total gross annual revenue that includes, but is not limited to, the sales, service, rental, or repair, for each dealer location, the supplier may terminate a dealer contract based on paragraph (12) of subdivision (c) upon providing the dealer with notice of that action at least 180 days before the effective date of that action. If the dealer achieves the supplier’s requirements for reasonable standards or performance objectives within 60 days of receipt of the termination notice, the notice shall be void and the dealer contract shall continue in full force and effect.
(e) Notwithstanding a dealer contract that provides for exclusivity during the term of the contract, a supplier may begin contract negotiations with a potential replacement dealer 60 days prior to the expiration of the notice period that has been provided pursuant to subdivisions (b) or (d) if the dealer failed to achieve the supplier’s requirements for reasonable standards or performance objectives within 60 days of receipt of the termination notice. Nothing in this subdivision shall authorize a replacement dealer to conduct operations with a supplier during the term of a dealer contract.
(Amended by Stats. 2009, Ch. 500, Sec. 8. (AB 1059) Effective January 1, 2010.)
Last modified: October 25, 2018