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.

I hereby certifiy that the above Bill originated in the
Senate, and passed that body

__________________________________

Senate concurred in
House amendments__________________________

__________________________________

President of the Senate.

__________________________________

Secretary of the Senate.

Passed the House
as amended __________________________

__________________________________

Speaker of the House.

__________________________________

Chief Clerk of the House.

Approved __________________________

__________________________________

Governor.