Kentucky Statutes 190.045 – Cancellation, termination, refusal to renew franchise — Notice — Duty of manufacturer
Current as of: 2024 | Check for updates
|
Other versions
(1) Notwithstanding the terms, provisions, or conditions of any franchise or notwithstanding the terms or provisions of any waiver, a manufacturer shall not cancel, terminate, or fail to renew any franchise with a licensed new motor vehicle dealer unless the manufacturer has:
(a) Satisfied the notice requirement of subsection (4) of this section; (b) Has good cause for cancellation, termination, or nonrenewal;
(c) Has acted in good faith as defined in KRS § 190.010(22); and
(d) Has established the requirements of this subsection in proceedings before the licensor if the action is protested by the new motor vehicle dealer within:
1. Thirty (30) days after receiving notice of the cancellation, termination, or nonrenewal; or
2. Fifteen (15) days for a termination for a cause listed in subsection (4)(c)
of this section.
When a protest is filed, the licensor shall inform the manufacturer, distributor, factory branch, or factory representative that a timely protest has been filed and that the manufacturer, distributor, factory branch, or factory representative shall not cancel, terminate, or fail to renew any franchise with the licensed new motor vehicle dealer until the licensor has held a hearing and the licensor has determined that the manufacturer has met its burden under this section.
(2) Notwithstanding the terms, provisions, or conditions of any franchise or the terms or provisions of any waiver, good cause shall exist for the purposes of a termination, cancellation, or nonrenewal when:
(a) There is a failure by the new motor vehicle dealer to comply with a provision of the franchise which provision is both reasonable and of material significance to the franchise relationship, provided that the dealer has been notified in writing of the failure within one hundred eighty (180) days after the manufacturer first acquired knowledge of the failure.
(b) If the failure by the new motor vehicle dealer, defined in paragraph (a) of this subsection, relates to the performance of the new motor vehicle dealer in sales or service, then good cause shall be defined as the failure of the new motor vehicle dealer to comply with reasonable performance criteria established by the manufacturer, if the new motor vehicle dealer was apprised by the manufacturer in writing of a failure, and
1. The notification stated that notice was provided of failure of performance pursuant to this section;
2. The new motor vehicle dealer was afforded a reasonable opportunity, for a period of not less than six (6) months, to comply with the criteria; and
3. The new motor vehicle dealer did not demonstrate substantial progress toward compliance with the manufacturer’s performance criteria during the designated period.
(3) The manufacturer shall have the burden of proof under this section.
(4) Notwithstanding the terms, provisions, or conditions of any franchise prior to the termination, cancellation, or nonrenewal of any franchise, the manufacturer shall furnish notification of a termination, cancellation, or nonrenewal to the new motor vehicle dealer as follows:
(a) In the manner described in subsection (2)(b) of this section; and
(b) In not less than ninety (90) days prior to the effective date of the termination, cancellation or nonrenewal; or
(c) In not less than fifteen (15) days prior to the effective date of a termination, cancellation, or nonrenewal with respect to any of the following:
1. Insolvency of the new motor vehicle dealer, or filing of any petition by or against the new motor vehicle dealer under any bankruptcy or receivership law;
2. Failure of the new motor vehicle dealer to conduct its customary sales and service operations during its customary business hours for seven (7) consecutive business days, except for acts of God or circumstances beyond the direct control of the new motor vehicle dealer;
3. Fraudulent misrepresentation by the new motor vehicle dealer to the manufacturer or distributor which is material to the franchise;
4. Conviction of the new motor vehicle dealer, or any owner or operator thereof, of any felony which is punishable by imprisonment; or
5. Revocation of any license which the new motor vehicle dealer is required to have to operate a dealership;
(d) In not less than one hundred eighty (180) days prior to the effective date of a termination or cancellation where the manufacturer or distributor is discontinuing the sale of the product line.
(5) Notification under this section shall be in writing by certified mail or personally delivered to the new motor vehicle dealer; and shall contain:
(a) A statement of intent to terminate, cancel, or not to renew the franchise; and
(b) A statement of the reasons for the termination, cancellation, or nonrenewal;
and
(c) The date on which the termination, cancellation, or nonrenewal takes effect.
(6) Upon the termination, nonrenewal, or cancellation of any franchise, pursuant to this section, the new motor vehicle dealer shall be allowed fair and reasonable compensation by the manufacturer for the:
(a) New current model year motor vehicle inventory which has been acquired from the manufacturer, and which has not been damaged or altered while in the dealer’s possession;
(b) Supplies and parts which have been acquired from the manufacturer;
(c) Equipment and furnishings provided the new motor vehicle dealer purchased from the manufacturer or its approved sources; and
(d) Special tools.
Fair and reasonable compensation shall be paid by the manufacturer within ninety (90) days of the effective date of termination, cancellation, or nonrenewal, provided the new motor vehicle dealer has clear title to the inventory and other items and is in a position to convey that title to the manufacturer.
(7) In the event of a termination, cancellation, or nonrenewal under this section, and the new motor vehicle dealer is leasing the dealership facilities from a lessor other than the manufacturer, or owns the dealership facilities, the manufacturer shall pay a reasonable rent to the dealer in accordance with and subject to subsection (8) of this section.
(8) (a) Reasonable rental value shall be paid only to the extent the dealership premises are recognized in the franchise and only if they are:
1. Used solely for performance in accordance with the franchise; and
2. Not substantially in excess of those facilities recommended by the manufacturer.
(b) If the facilities are owned by the dealer, the manufacturer will either:
1. Locate a purchaser who will offer to purchase the dealership facilities at a reasonable price; or
2. Locate a lessee who will offer to lease the premises for a reasonable term at a reasonable rent; or
3. Failing the foregoing, lease the dealership facilities at a reasonable rental value for one (1) year.
(c) If the facilities are leased by the dealer, the manufacturer will either:
1. Locate a tenant or tenants satisfactory to the lessor, who will sublet or assume the balance of the lease; or
2. Arrange with the lessor for the cancellation of the lease without penalty to the dealer; or
3. Failing the foregoing, lease the dealership facilities at a reasonable rent for one (1) year.
(d) The manufacturer shall not be obligated to provide assistance under this section if the dealer:
1. Fails to accept a bona fide offer from a prospective purchaser, sublessee, or assignee; or
2. Refuses to execute a settlement agreement with the lessor if the agreement would be without cost to the dealer; or
3. Fails to make a written request for assistance under this section within one (1) month of the termination, cancellation, or nonrenewal.
(e) If, in an action for damages under this section, the manufacturer or distributor fails to prove either that the manufacturer or distributor has acted in good faith or that there was good cause for the franchise termination, cancellation, or nonrenewal, then the manufacturer or distributor may terminate, cancel, or fail to renew the franchise upon payment to the new motor vehicle dealer of an amount equal to the value of the dealership as an ongoing business location.
(9) Notice of termination to a dealer shall entitle the dealer to continue the franchise
and the dealer may attempt to sell the franchise until all of the dealer’s appeal rights have been exhausted.
Effective: June 29, 2023
History: Amended 2023 Ky. Acts ch. 7, sec. 3, effective June 29, 2023. — Amended
2000 Ky. Acts ch. 23, sec. 3, effective February 22, 2000. — Amended 1996 Ky. Acts ch. 111, sec. 5, effective July 15, 1996. — Amended 1984 Ky. Acts ch. 357, sec.
5, effective July 13, 1984. — Amended 1982 Ky. Acts ch. 373, sec. 6, effective July
15, 1982. — Amended 1974 Ky. Acts ch. 74, Art. IV, sec. 20(2). — Created 1972 Ky. Acts ch. 75, sec. 1.
(a) Satisfied the notice requirement of subsection (4) of this section; (b) Has good cause for cancellation, termination, or nonrenewal;
Terms Used In Kentucky Statutes 190.045
- Action: includes all proceedings in any court of this state. See Kentucky Statutes 446.010
- Appeal: A request made after a trial, asking another court (usually the court of appeals) to decide whether the trial was conducted properly. To make such a request is "to appeal" or "to take an appeal." One who appeals is called the appellant.
- Bankruptcy: Refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may discharge their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings.
- Certified mail: means any method of governmental, commercial, or electronic delivery that allows a document or package to have proof of:
(a) Sending the document or package. See Kentucky Statutes 446.010 - Conviction: A judgement of guilt against a criminal defendant.
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Distributor: which means any person, firm, association, corporation, or trust, resident or nonresident, who in whole or in part offers for sale, sells, or distributes any new motor vehicle to new motor vehicle dealers, or who maintains factory representatives, or who controls any person, firm, association, corporation, or trust, resident or nonresident, who in whole or in part offers for sale, sells, or distributes any new motor vehicle to new motor vehicle dealers. See Kentucky Statutes 190.010
- Factory branch: which means a branch office maintained by a manufacturer for the purpose of selling, or offering for sale, new motor vehicles to a distributor, wholesaler, or new motor vehicle dealer, or for directing or supervising, in whole or in part, factory or distributor representatives, and shall further include any sales promotion organization, whether the same be a person, firm, or corporation, which is engaged in promoting the sale of new motor vehicles in this state of a particular brand or make to new motor vehicle dealers. See Kentucky Statutes 190.010
- Factory representative: which means a representative employed by a manufacturer, distributor, or factory branch for the purpose of making or promoting for the sale of his or her, its, or their new motor vehicles, or for supervising or contracting with his or her, its, or their dealers, or prospective dealers. See Kentucky Statutes 190.010
- Franchise: means the agreement or contract between any new motor vehicle manufacturer, written or otherwise, and any new motor vehicle dealer that purports to fix the legal rights and liabilities of the parties to an agreement or contract, and pursuant to which the dealer purchases and resells the franchise product, along with any addendums to the franchise agreement. See Kentucky Statutes 190.010
- Good faith: means honesty in fact, and the observance of reasonable commercial standards of fair dealing in the trade, as is defined and interpreted in KRS §. See Kentucky Statutes 190.010
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Licensor: means the commission. See Kentucky Statutes 190.010
- Manufacturer: means any person, partnership, firm, association, corporation, or trust, resident or nonresident, who manufactures or assembles new motor vehicles, or imports for distribution through distributors of new motor vehicles, or any partnership, firm, association, joint venture, corporation, or trust, resident or nonresident, which is controlled by the manufacturer. See Kentucky Statutes 190.010
- Month: means calendar month. See Kentucky Statutes 446.010
- Motor vehicle: means every vehicle intended primarily for use and operation on the public highways that is self-propelled, including low-speed motor vehicles as defined in KRS §. See Kentucky Statutes 190.010
- Motor vehicle dealer: means any person not excluded by subsection (3) of this section, engaged in the business of selling, offering to sell, soliciting, or advertising the same, of new or used motor vehicles, or possessing motor vehicles for the purpose of resale, either on his or her own account, or on behalf of another, either as his or her primary business or incidental thereto. See Kentucky Statutes 190.010
- New motor vehicle: means a vehicle that is in the possession of the manufacturer, distributor, or wholesaler, or has been sold to the holders of a valid sales and service agreement, franchise, or contract, granted by the manufacturer, distributor, or wholesaler for the sale of the make of new vehicle, which is new, and on which the original title has not been issued from the franchised dealer. See Kentucky Statutes 190.010
- New motor vehicle dealer: means a vehicle dealer who holds a valid sales and service agreement, franchise, or contract, granted by the manufacturer, distributor, or wholesaler for the sale of the manufacturer's new motor vehicles. See Kentucky Statutes 190.010
- Owner: when applied to any animal, means any person having a property interest in such animal. See Kentucky Statutes 446.010
- Sale: means the issuance, transfer, agreement for transfer, exchange, lease, pledge, hypothecation, mortgage in any form, whether by transfer in trust or otherwise, of any motor vehicle or interest in it, or of any franchise related to it, as well as any option, subscription, other contract, or solicitation looking to a sale, offer to attempt to sell in any form, whether spoken or written. See Kentucky Statutes 190.010
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
- Year: means calendar year. See Kentucky Statutes 446.010
(c) Has acted in good faith as defined in KRS § 190.010(22); and
(d) Has established the requirements of this subsection in proceedings before the licensor if the action is protested by the new motor vehicle dealer within:
1. Thirty (30) days after receiving notice of the cancellation, termination, or nonrenewal; or
2. Fifteen (15) days for a termination for a cause listed in subsection (4)(c)
of this section.
When a protest is filed, the licensor shall inform the manufacturer, distributor, factory branch, or factory representative that a timely protest has been filed and that the manufacturer, distributor, factory branch, or factory representative shall not cancel, terminate, or fail to renew any franchise with the licensed new motor vehicle dealer until the licensor has held a hearing and the licensor has determined that the manufacturer has met its burden under this section.
(2) Notwithstanding the terms, provisions, or conditions of any franchise or the terms or provisions of any waiver, good cause shall exist for the purposes of a termination, cancellation, or nonrenewal when:
(a) There is a failure by the new motor vehicle dealer to comply with a provision of the franchise which provision is both reasonable and of material significance to the franchise relationship, provided that the dealer has been notified in writing of the failure within one hundred eighty (180) days after the manufacturer first acquired knowledge of the failure.
(b) If the failure by the new motor vehicle dealer, defined in paragraph (a) of this subsection, relates to the performance of the new motor vehicle dealer in sales or service, then good cause shall be defined as the failure of the new motor vehicle dealer to comply with reasonable performance criteria established by the manufacturer, if the new motor vehicle dealer was apprised by the manufacturer in writing of a failure, and
1. The notification stated that notice was provided of failure of performance pursuant to this section;
2. The new motor vehicle dealer was afforded a reasonable opportunity, for a period of not less than six (6) months, to comply with the criteria; and
3. The new motor vehicle dealer did not demonstrate substantial progress toward compliance with the manufacturer’s performance criteria during the designated period.
(3) The manufacturer shall have the burden of proof under this section.
(4) Notwithstanding the terms, provisions, or conditions of any franchise prior to the termination, cancellation, or nonrenewal of any franchise, the manufacturer shall furnish notification of a termination, cancellation, or nonrenewal to the new motor vehicle dealer as follows:
(a) In the manner described in subsection (2)(b) of this section; and
(b) In not less than ninety (90) days prior to the effective date of the termination, cancellation or nonrenewal; or
(c) In not less than fifteen (15) days prior to the effective date of a termination, cancellation, or nonrenewal with respect to any of the following:
1. Insolvency of the new motor vehicle dealer, or filing of any petition by or against the new motor vehicle dealer under any bankruptcy or receivership law;
2. Failure of the new motor vehicle dealer to conduct its customary sales and service operations during its customary business hours for seven (7) consecutive business days, except for acts of God or circumstances beyond the direct control of the new motor vehicle dealer;
3. Fraudulent misrepresentation by the new motor vehicle dealer to the manufacturer or distributor which is material to the franchise;
4. Conviction of the new motor vehicle dealer, or any owner or operator thereof, of any felony which is punishable by imprisonment; or
5. Revocation of any license which the new motor vehicle dealer is required to have to operate a dealership;
(d) In not less than one hundred eighty (180) days prior to the effective date of a termination or cancellation where the manufacturer or distributor is discontinuing the sale of the product line.
(5) Notification under this section shall be in writing by certified mail or personally delivered to the new motor vehicle dealer; and shall contain:
(a) A statement of intent to terminate, cancel, or not to renew the franchise; and
(b) A statement of the reasons for the termination, cancellation, or nonrenewal;
and
(c) The date on which the termination, cancellation, or nonrenewal takes effect.
(6) Upon the termination, nonrenewal, or cancellation of any franchise, pursuant to this section, the new motor vehicle dealer shall be allowed fair and reasonable compensation by the manufacturer for the:
(a) New current model year motor vehicle inventory which has been acquired from the manufacturer, and which has not been damaged or altered while in the dealer’s possession;
(b) Supplies and parts which have been acquired from the manufacturer;
(c) Equipment and furnishings provided the new motor vehicle dealer purchased from the manufacturer or its approved sources; and
(d) Special tools.
Fair and reasonable compensation shall be paid by the manufacturer within ninety (90) days of the effective date of termination, cancellation, or nonrenewal, provided the new motor vehicle dealer has clear title to the inventory and other items and is in a position to convey that title to the manufacturer.
(7) In the event of a termination, cancellation, or nonrenewal under this section, and the new motor vehicle dealer is leasing the dealership facilities from a lessor other than the manufacturer, or owns the dealership facilities, the manufacturer shall pay a reasonable rent to the dealer in accordance with and subject to subsection (8) of this section.
(8) (a) Reasonable rental value shall be paid only to the extent the dealership premises are recognized in the franchise and only if they are:
1. Used solely for performance in accordance with the franchise; and
2. Not substantially in excess of those facilities recommended by the manufacturer.
(b) If the facilities are owned by the dealer, the manufacturer will either:
1. Locate a purchaser who will offer to purchase the dealership facilities at a reasonable price; or
2. Locate a lessee who will offer to lease the premises for a reasonable term at a reasonable rent; or
3. Failing the foregoing, lease the dealership facilities at a reasonable rental value for one (1) year.
(c) If the facilities are leased by the dealer, the manufacturer will either:
1. Locate a tenant or tenants satisfactory to the lessor, who will sublet or assume the balance of the lease; or
2. Arrange with the lessor for the cancellation of the lease without penalty to the dealer; or
3. Failing the foregoing, lease the dealership facilities at a reasonable rent for one (1) year.
(d) The manufacturer shall not be obligated to provide assistance under this section if the dealer:
1. Fails to accept a bona fide offer from a prospective purchaser, sublessee, or assignee; or
2. Refuses to execute a settlement agreement with the lessor if the agreement would be without cost to the dealer; or
3. Fails to make a written request for assistance under this section within one (1) month of the termination, cancellation, or nonrenewal.
(e) If, in an action for damages under this section, the manufacturer or distributor fails to prove either that the manufacturer or distributor has acted in good faith or that there was good cause for the franchise termination, cancellation, or nonrenewal, then the manufacturer or distributor may terminate, cancel, or fail to renew the franchise upon payment to the new motor vehicle dealer of an amount equal to the value of the dealership as an ongoing business location.
(9) Notice of termination to a dealer shall entitle the dealer to continue the franchise
and the dealer may attempt to sell the franchise until all of the dealer’s appeal rights have been exhausted.
Effective: June 29, 2023
History: Amended 2023 Ky. Acts ch. 7, sec. 3, effective June 29, 2023. — Amended
2000 Ky. Acts ch. 23, sec. 3, effective February 22, 2000. — Amended 1996 Ky. Acts ch. 111, sec. 5, effective July 15, 1996. — Amended 1984 Ky. Acts ch. 357, sec.
5, effective July 13, 1984. — Amended 1982 Ky. Acts ch. 373, sec. 6, effective July
15, 1982. — Amended 1974 Ky. Acts ch. 74, Art. IV, sec. 20(2). — Created 1972 Ky. Acts ch. 75, sec. 1.