SECTIONS 22900-22927 - California Statutes

BUSINESS AND PROFESSIONS CODE

SECTION 22900-22927

22900. The Legislature finds and declares that the retail
distribution, sales, and rental of agricultural, construction,
utility, industrial, mining, outdoor power, forestry, and lawn and
garden equipment, utilizing independent dealers operating under
contract with the supplier vitally affects the general economy of the
state, the public interest, and the public welfare. Therefore, the
Legislature has determined that it is necessary to regulate the
business relations between the dealers and suppliers as described in
this chapter.

22901. The following definitions apply for purposes of this
chapter:
(a) "Act" means the Fair Practices of Equipment Manufacturers,
Distributors, Wholesalers, and Dealers Act.
(b) "Bulk sales law" means the Uniform Commercial Code-Bulk Sales
as contained in Division 6 (commencing with Section 6101) of the
Commercial Code.
(c) "Claim" means a dealer's claim for reimbursement from a
supplier for labor and materials expended by the dealer to meet the
requirements of the supplier's warranty agreement with a consumer of
the supplier's products if the dealer has complied with the supplier'
s then-existing written policies and procedures for warranties and
warranty claims.
(d) "Current parts price" means, with respect to current parts,
the price for repair parts listed in the supplier's price list or
catalog in effect at the time the dealer contract is canceled or
discontinued or, for purposes of Section 22905, the price list or
catalog in effect at the time the repair parts were ordered. "Current
parts price" also means, with respect to superseded repair parts,
the price listed in the supplier's price list or catalog in effect at
the time the dealer contract is canceled or discontinued for the
part that performs the same function and purpose as the superseded
part, but is simply listed under a different part number.
(e) "Current net parts cost" means the current parts price less
any trade or cash discounts typically given to the dealer with
respect to that dealer's normal, ordinary course of orders of repair
parts. "Current net parts cost" also means, with respect to a
warranty, the current parts price of the supplier for the equipment
repaired less any trade or cash discounts typically given to the
dealer with respect to that dealer's normal, ordinary course of
orders of repair parts.
(f) "Dealer" means any person primarily engaged in the retail sale
of equipment as defined in subdivision (j). For the purposes of this
act, "dealer" does not include a "franchisee" as defined in Section
331.1 of the Vehicle Code or a "new motor vehicle dealer" as defined
in Section 426 of the Vehicle Code.
(g) "Dealer contract" means either an oral or written contract,
agreement, or arrangement for a definite or indefinite period between
a dealer and a supplier that provides for the rights and obligations
of the parties with respect to the purchase or sale of equipment or
repair parts.
(h) "Dealership" means the retail sale business engaged in by a
dealer under a dealer contract.
(i) "Demonstrator" means equipment in a dealer's inventory that
has not been sold, but has had its usage demonstrated to potential
customers, either without charge or pursuant to a short-term rental
agreement, with the intent of encouraging the potential customer to
purchase the equipment.
(j) (1) "Equipment" means all-terrain vehicles and other
machinery, equipment, implements, or attachments used for, or in
connection with, any of the following purposes:
(A) Lawn, garden, golf course, landscaping, or grounds
maintenance.
(B) Planting, cultivating, irrigating, harvesting, and producing
agricultural or forestry products.
(C) Raising, feeding, or tending to, or harvesting products from,
livestock and any other activity in connection with those activities.
(D) Industrial, construction, maintenance, mining, or utility
activities or applications, including, but not limited to, material
handling equipment.
(2) Self-propelled vehicles designed primarily for the
transportation of persons or property on a street or highway are
specifically excluded from the definition of equipment.
(k) "Family member" means a spouse, parent, sibling, child,
son-in-law, daughter-in-law, and lineal descendant, including those
by adoption.
(l) "Good cause" means failure by a dealer to comply with the
requirements imposed on the dealer by the dealer contract, if those
requirements are not different from those requirements imposed on
other similarly situated dealers in this state.
(m) "Index" means the United States Department of Labor, Bureau of
Labor Statistics purchase price index for construction machinery
series identification number pcu333120333120, or any successor index
measuring substantially similar information.
(n) "Inventory" means equipment, repair parts, data-processing
hardware or software, and specialized service or repair parts.
(o) "Major shareholder" means a shareholder with 51-percent or
greater interest in a dealership.
(p) "Manufacturer created incentive program" means a program in
which the dealer's inventory has not been sold but has been used for
specialized purposes, including, but not limited to, harvest rental
programs, dealer purchase rentals, and short-term rentals. The
warranty that is transferred to the consumer upon sale, which shall
be disclosed prior to sale, is the manufacturer-provided base
warranty, less hours and time used while in a manufacturer created
incentive program.
(q) "Net equipment cost" means the price the dealer actually paid
to the supplier for equipment, plus (1) freight, at truckload rates
in effect as of the effective date of the termination of a dealer
contract, if freight was paid by the dealer from the supplier's
location to the dealer's location and (2) reimbursement for labor
incurred in preparing the equipment for retail sale or rental, which
labor will be reimbursed at the dealer's standard labor rate charged
by the dealer to its customers for nonwarranty repair work; provided,
however, if a supplier has established a reasonable setup time, that
labor will be reimbursed at an amount equal to the reasonable setup
time in effect as of the date of delivery multiplied by the dealer's
standard labor rate.
(r) "Person" means an individual, corporation, partnership,
limited liability company, trust, or any and all other forms of
business entities, including any other entity in which a person has a
majority interest or of which a person has control, as well as the
individual officers, directors, and other persons in active control
of the activities of each entity.
(s) "Repair parts" means all parts and products related to the
service or repair of equipment, including superseded parts.
(t) "Single-line dealer" means a dealer that has (1) purchased
construction, industrial, forestry, and mining equipment from a
single supplier constituting 75 percent of the dealer's new
equipment, calculated on the basis of net cost; and (2) a total
annual average sales volume in excess of forty million dollars
($40,000,000) for the three calendar years immediately preceding the
applicable determination date; provided, however, the sales threshold
shall be increased each year by an amount equal to the current sales
threshold multiplied by the percentage increase in the index from
January 1 of the immediately preceding year to January 1 of the
current year.
(u) "Single-line supplier" means the supplier that is selling the
single-line dealer construction, industrial, forestry, and mining
equipment constituting 75 percent of the dealer's new equipment.
(v) "Supplier" means any person engaged in the business of
manufacturing, assembly, or wholesale distribution of equipment or
repair parts. "Supplier" also includes any successor in interest to a
supplier, including a purchaser of assets or stock, or a surviving
corporation resulting from a merger, liquidation, or reorganization
of a supplier.
(w) "Terminate" means to terminate, cancel, fail to renew, or
materially change the competitive circumstances of a dealer contract.

22902. It shall be a violation of this chapter for a supplier to
take any of the following actions:
(a) To coerce or compel any dealer to order or accept delivery of
any equipment or parts that the dealer has not voluntarily ordered,
except as required by any applicable law or unless the equipment or
repair parts are safety features required by the supplier.
(b) To coerce or compel any dealer to enter into any contract,
whether written or oral, or amend an existing dealer contract with
the supplier, unless the contract or amendment is imposed on all
other similarly situated dealers in the state.
(c) To refuse to deliver to any dealer in reasonable quantities
and within a reasonable time after receipt of the dealer's order,
equipment covered by the dealer contract specifically advertised or
represented by the supplier to be available for immediate delivery or
on an agreed-upon delivery date. The failure to deliver the
equipment shall not be considered a violation of this act if the
failure is due to reasonable restrictions on extension of credit by
the supplier to the dealer, any breach of or default under the
contract by the dealer, an act of God, work stoppage or delay due to
a strike or labor difficulty, a bona fide shortage of materials,
freight embargo, or a business decision by the supplier to limit the
production volume of the equipment and written notice is provided to
the dealer within 30 days of that decision or other cause over which
the supplier has no control.
(d) To terminate, cancel, or fail to renew a dealer contract or
materially change the competitive circumstances of the dealer
contract without good cause.
(e) To require as a condition of renewal or extension of a dealer
contract that the dealer complete substantial renovation of the
dealer's place of business or acquire new or additional space to
serve as the dealer's place of business, unless the supplier provides
at least one year's written notice of the condition that states all
grounds supporting the condition. The supplier shall provide not less
than two years for the dealer to complete the renovation or
acquisition after the one year's notice period has expired.
(f) To discriminate, directly or indirectly, in prices charged
between different dealers with respect to purchases of equipment or
repair parts of like grade and quality and identical brand, where the
effect of that discrimination may be to substantially lessen
competition, tend to create a monopoly in any line of commerce, or
injure, destroy, or prevent competition with any dealer who either
grants or knowingly receives the benefit of the discrimination.
However, different prices may be charged if (1) the differences are
due to differences in the cost of manufacture, sale or delivery of
the equipment or repair parts, or (2) the supplier can show that its
lower price was made in good faith to meet an equally low price of a
competitor and the lower price was made available to other dealers,
or (3) the differences are related to the volume of equipment
purchased by dealers if the supplier offers all other similarly
situated dealers the same volume program.
(g) To prevent, by contract or otherwise, any dealer from changing
its capital structure, ownership, or the means by which the
dealership is financed, provided the dealer at all times meets any
reasonable capital standards imposed by the supplier or as otherwise
agreed to between the dealer and the supplier and imposed on
similarly situated dealers, and provided this change by the dealer
does not result in a change of the controlling interest in the
executive management or board of directors, or any guarantors of the
dealership.
(h) To prevent, by contract or otherwise, any dealer or any
officer, member, partner, or stockholder of any dealer from selling
or transferring any part of the interest of any of them to any other
party or parties. However, no dealer, officer, partner, member, or
stockholder shall have the right to sell, transfer, or assign the
dealership or power of management or control of the dealership
without the written consent of the supplier.
(i) To require a dealer to assent to a release, assignment,
novation, waiver, or estoppel that would relieve any person from
liability imposed by this section.
(j) To require any dealer to purchase goods or services as a
condition of the sale by the supplier to the dealer of any equipment,
repair parts, or other goods or services; except that nothing in
this subdivision shall prohibit a supplier from requiring the dealer
to purchase repair parts, special tools, and training reasonably
necessary to maintain the safe operation or quality of operation in
the field of any equipment offered for sale by the dealer.
(k) To coerce any dealer into a refusal to purchase equipment
manufactured by another supplier.
(l) To penalize any dealer that purchases equipment or repair
parts for sale manufactured by another supplier.
(m) To discriminate, directly or indirectly, between dealers of
the same product line in filling an order placed by a dealer for
retail sale or lease of equipment under a dealer contract.

22902.5. Nothing in this chapter permits the offering or
enforcement of a provision in a dealer contract that requires a
dealer to comply with a minimum price-fixing provision or any other
provision to limit competition. For purposes of this chapter, a
provision in a dealer contract providing for exclusive territorial
rights and its corresponding provisions shall not be prohibited.

22903. (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.

22903.1. (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) If a supplier has contractual authority to approve or deny a
request for a sale or transfer of a dealer's business or an equity
ownership interest in the business, the supplier shall approve or
deny the request within 60 days after receiving a written request
from the dealer. If the supplier has neither approved nor denied the
request within the 60-day period, the request shall be deemed
approved. The dealer's request shall include reasonable financial
information, personal background, character references, and work
history information for the acquiring persons. If a supplier denies a
request made pursuant to this section, the supplier shall provide
the dealer with a written notice of that denial that states the
reasons for the denial. A supplier may only deny a request based on
the failure of the proposed transferees to meet the reasonable
requirements consistently imposed by the supplier in determining
approval of transfers or approvals of new dealers.
(c) If a dealer dies and the supplier has contractual authority to
approve or deny a request for the sale or transfer of the dealer's
business or an equity ownership interest in the business, the dealer'
s estate or other person with authority to transfer the dealer's
assets shall have 180 days to submit to the supplier a written
request for a sale or transfer of that business or equity ownership
interest. If the request is timely submitted, the supplier shall
approve or deny that request in accordance with subdivision (b).
Notwithstanding any contrary provision of this chapter, any attempt
by a supplier to terminate the dealer contract as a result of the
death of a dealer shall be delayed until there has been compliance
with the terms of this section or the 180-day period has expired, as
applicable.
(d) Notwithstanding subdivision (c), if a supplier and dealer
executed an agreement concerning succession rights prior to the
dealer's death, and if the 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.
(e) A supplier may withhold consent to a transfer of an interest
in a dealership if, with due regard to regional market conditions and
distribution economies, the dealer's area of responsibility or trade
area does not afford sufficient sales potential to reasonably
support a dealer. In any dispute between a supplier and dealer under
this subdivision, the supplier shall bear the burden of proving that
the dealer's area of responsibility or trade area does not afford
sufficient sales potential to reasonably support a dealer.

22903.2. (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.

22903.3. (a) If a dealer submits a warranty claim to a supplier
while the dealer contract is in effect or within 60 days after the
termination of the dealer contract, and if the claim is for work
performed before the termination or expiration of the dealer
contract, the supplier shall approve or reject that warranty claim by
written notice to the dealer within 45 days after the supplier's
receipt of the warranty claim. If the supplier approves the warranty
claim, the supplier shall pay the dealer or credit the dealer's
account the entire amount owed with respect to the claim within 30
days of approval. If the supplier rejects the warranty claim, the
supplier shall give the dealer written or electronic notice of the
grounds for rejection. These reasons must be consistent with the
supplier's reason for rejecting the warranty claims of other dealers,
both in terms and manner of enforcement. If the supplier does not
provide the dealer with grounds for rejection, the claim shall be
deemed to be approved.
(b) Any claim that is not approved by the supplier based upon the
dealer's failure to properly follow the procedural or technical
requirements for submission of the warranty claim may be resubmitted
in proper form by the dealer within 30 days of receipt of the
supplier's rejection notification.
(c) Warranty work performed by the dealer shall be compensated in
accordance with the reasonable and customary amount of time required
to complete the work, expressed in hours and fractions multiplied by
the dealer's established customer hourly retail labor rate, which
shall have previously been made known to the supplier. Parts used in
warranty repair work shall be reimbursed at the current net parts
cost plus 15 percent and the cost of freight. For purposes of this
subdivision, "established customer hourly retail labor rate" means
the lowest posted customer in-shop retail labor rate for the six
months preceding the claim.
(d) For the purpose of this act, any repair work or installation
of replacement parts with respect to the dealer's equipment in
inventory or equipment of the dealer's customers at the request of
the supplier, including work performed pursuant to a product
improvement program, shall be deemed to create a warranty claim for
which the dealer shall be paid pursuant to this section.
(e) A supplier may audit warranty claims submitted by its dealers
for a period of up to one year. If the audit reveals an amount was
misrepresented by the supplier, the supplier may charge its dealers
the amount shown by the audit to be misrepresented. If a warranty
claim is misrepresented, then subsequent warranty claims submitted
within the two-year period ending with the date of the audit may be
audited. However, a supplier shall not audit a warranty claim more
than once.
(f) The requirements of subdivisions (a), (b), and (c) apply to
all warranty claims submitted by a dealer to a supplier where the
dealer has complied with the supplier's reasonable written policies
and procedures for warranty reimbursement. A supplier's warranty
reimbursement policies and procedures shall be deemed unreasonable to
the extent they conflict with any of the provisions of this section.
(g) A dealer may choose to accept alternate reimbursement terms
and conditions instead of the requirements of subdivisions (a), (b),
and (c) if there is a written dealer contract between the supplier
and the dealer that requires the supplier to compensate the dealer
for warranty labor costs either as: (1) a discount in the pricing of
the equipment to the dealer; or (2) a lump-sum payment to the dealer
that is made to the dealer within 90 days of the sale of the supplier'
s new equipment. If the requirements of this subdivision are met and
alternate terms and conditions are in place, subdivisions (a), (b),
and (c) do not apply and the alternate terms and conditions are
enforceable. Nothing contained in this subdivision shall be deemed to
affect the supplier's obligation to reimburse the dealer for parts
in accordance with subdivision (c).
(h) If a supplier fails or refuses to pay for warranty work
covered under this section within 30 days of the supplier's approval
of the dealer's claim, the supplier shall be liable for 110 percent
of the total claim, plus interest at the statutory rate from the
payment due date until the date of payment, and actual costs for any
court or arbitration proceeding, including costs for attorney's fees
and arbitrators.

22904. Every supplier shall provide to its dealers, on an annual
basis, an opportunity to return a portion of their surplus parts
inventory for credit. The surplus procedure shall be administered as
follows:
(a) The supplier may notify its dealers of a time period, of at
least 90 days' duration, during which time dealers may submit their
surplus parts list and return their surplus parts to the supplier. A
supplier may choose to designate a different period of time for each
dealer to return surplus parts.
(b) If a supplier has not notified a dealer of a specific time
period for returning surplus parts within the preceding 12 months,
then it shall authorize and allow the dealer's surplus parts return
request within 60 days after receipt of that request from the dealer.
(c) Pursuant to the provisions of this section, a supplier shall
allow surplus parts return authority on a dollar value of parts equal
to 10 percent of the total dollar value of parts purchased by the
dealer from the supplier during the 12-month period immediately
preceding the notification to the dealer by the supplier of the
surplus parts return program, or the month the dealer's return
request is made, whichever is applicable.
(d) Returned parts shall be in new and unused condition and shall
have been purchased by the dealer from the supplier to whom they are
returned. Obsolete and superseded parts may be returned if listed in
the supplier's current returnable parts list or if those parts have
not been the subject of a supplier's return program at the date of
the notification to the dealer by the supplier of the surplus parts
return program, or the date of the dealer's parts return request,
whichever is applicable.
(e) The minimum lawful credit to be allowed for returned parts
shall be 95 percent of the current net parts cost, as listed in the
supplier's current returnable parts list at the date of the
notification to the dealer by the supplier of the surplus parts
return program, or the date of the dealer's parts return request,
whichever is applicable.
(f) The annual parts return provided for in this section may be
waived by a dealer.
(g) If an outstanding balance is owed to the supplier, the
supplier may credit the dealer's account within 30 days after the
supplier's receipt of the dealer's returned parts. If no balance
exists, the supplier shall pay the dealer within 30 days after the
supplier's receipt of the dealer's returned parts. If a supplier
refuses to credit the dealer's account or pay the dealer for returned
parts covered by this section within 30 days of the supplier's
receipt of returned parts, the supplier shall be liable for 110
percent of the total current net parts cost, plus interest at the
statutory rate from the payment due date until the date of payment,
and actual costs for any court or arbitration proceeding, including
costs for attorney's fees and arbitrators.

22905. Except as provided in subdivision (p), whenever a dealer
contract is terminated by cancellation or nonrenewal, the supplier
shall repurchase the inventory as provided in this section.
(a) The supplier shall repurchase at its fair market value or
assume the lease responsibilities of any specific data-processing
hardware that the supplier required the dealer to purchase to satisfy
the minimum requirements of the dealer contract, including computer
systems equipment required and approved by the supplier to
communicate with the supplier. The fair market value of property
subject to repurchase shall be deemed to be equal to the acquisition
cost, including any shipping, handling and set-up fees, less straight
line depreciation of that acquisition cost over three years. If the
dealer purchased data-processing hardware or software that exceeded
the supplier's minimum requirements, the acquisition cost of that
data-processing hardware or software shall be deemed to be the
acquisition cost of hardware or software of similar quality that did
not exceed the minimum requirements of the supplier.
(b) The supplier shall pay a sum equal to 100 percent of the net
equipment cost of all new, unsold, undamaged, and complete equipment.
(c) The supplier shall pay a sum equal to 100 percent of the net
equipment cost of all unsold, undamaged demonstrators, less
depreciation due to usage of those demonstrators. The depreciation
adjustment shall be based on published industry rental rates to the
extent those rates are available. For purposes of this subdivision,
demonstrators, with hour meters that have less than 50 hours of use
shall be considered new, unsold equipment subject to repurchase under
this section.
(d) The supplier shall pay a sum equal to 100 percent of the net
equipment cost of all unsold and undamaged equipment used in a
manufacturer created incentive program, as defined in subdivision (p)
of Section 22901, less depreciation due to usage and bonus or volume
incentive received by the dealer for the equipment. The depreciation
adjustment shall be based on published industry rental rates to the
extent these rates are available. For purposes of this subdivision,
equipment with hour meters used in a manufacturer created incentive
program with less than 50 hours of use will be considered new, unsold
equipment subject to repurchase under this section.
(e) The supplier shall pay a sum equal to 95 percent of the
current net parts costs on new, unsold, undamaged repair parts that
had previously been purchased from the supplier and held by the
dealer on the date that the dealer contract terminates or expires.
(f) The supplier shall also pay the dealer 5 percent of the
current net parts cost on all new, unused, and undamaged repair parts
returned, to cover the cost of handling, packing, and loading of
those parts for return to the supplier. The dealer may allow the
supplier to perform the handling, packing, and loading of parts
instead of receiving the 5 percent payment for these services. When
the supplier is chosen to perform these services, the dealer shall
make available to the supplier, at the dealer's address or at the
places at which it is located, all equipment previously purchased by
the dealer.
(g) The supplier shall pay a sum equal to 75 percent of the net
equipment cost, including shipping, handling and set-up fees, of all
specialized equipment or repair tools previously purchased pursuant
to requirements of the supplier prior to the date of the applicable
notification of termination or nonrenewal of the dealer contract. The
specialized equipment or repair tools must be unique to the supplier'
s product line and must be complete and in operating condition.
(h) Upon the payment or allowance of credit to the dealer's
account of the sums required by this section, the title to all
inventory purchased shall pass to the supplier making payment, and
the supplier shall be entitled to the possession of the inventory.
All payments or allowances of credit due to dealers shall be paid or
credited within 90 days after receipt by the supplier of property
required to be repurchased. Any payments or allowances of credit due
to dealers that are not paid within the 90-day period will accrue
interest at the statutory rate. The supplier may withhold payments
due under this section during the period of time in which the dealer
fails to comply with its contractual obligations to remove any
signage indicating that the dealer is an authorized dealer of the
supplier.
(i) The supplier and dealer shall each pay 50 percent of the costs
of freight to ship equipment to the nearest retail outlet or to ship
repair parts to the nearest supplier distribution center.
(j) The provisions of this section shall not require the
repurchase from the dealer of any of the following:
(1) Any repair part that is in a broken or damaged package.
However, the supplier shall be required to repurchase a repair part
in a broken or damaged package, for a repurchase price that is equal
to 85 percent of the current net parts cost for the repair part, if
the aggregate current price for the entire package of repair parts is
seventy-five dollars ($75) or higher.
(2) Any repair part that, because of its condition, is not
resalable as a new part without reconditioning.
(3) Any inventory for which the dealer is unable to furnish
evidence, satisfactory to the supplier, of clear title, free and
clear of all claims, liens and encumbrances.
(4) Any inventory that the dealer desires to keep if the dealer
has a contractual right to do so.
(5) Any equipment or repair parts that are not in new, unsold,
undamaged, complete condition; subject to the provisions of this act
relating to demonstrators.
(6) Any equipment or repair parts acquired by the dealer from any
source other than the supplier unless that equipment or those repair
parts were ordered from, or invoiced to, the dealer by the supplier.
(7) Any equipment or repair parts that are not returned to the
supplier within 90 days after the latter of (A) the effective date of
termination of a dealer contract or (B) the date the dealer receives
from the supplier all information, documents or supporting materials
required by the supplier to comply with the supplier's return
policy. However, this paragraph shall not be applicable to a dealer
if the supplier did not give the dealer notice of the 90-day deadline
at the time the applicable notice of termination was sent to the
dealer.
(k) If any supplier fails or refuses to repurchase any inventory
covered under this section within 90 days after termination of a
dealer contract, the supplier shall be liable for the total amount of
110 percent of the current net equipment cost of the inventory, plus
any freight charges paid by the dealer, interest accrued at the
statutory rate from the date of shipment to the supplier until the
date of payment, 5 percent for handling, packing, and loading, and
actual costs for any court or arbitration proceedings, including
costs for attorney's fees and arbitrators.
(l) Notwithstanding any provision to the contrary in the
Commercial Code, the dealer shall retain a first and prior lien
against all inventory returned by the dealer to the supplier under
this act until the dealer has paid all amounts owed by the supplier
for the repurchase of inventory required under this act.
(m) This section shall not be construed to affect any security
interest that the supplier may have in the inventory of the dealer,
and any repurchase shall not be subject to the provisions of the bulk
sales law or to the claims of any secured or unsecured creditors of
the supplier or any assignee of the supplier until such time as the
dealer has received full payment or credit.
(n) The dealer may not cancel a dealer contract to avoid a payment
obligation to the supplier for equipment or parts.
(o) If a dealer has more than one business location covered by the
same dealer contract, the repurchase requirements of this section
shall apply only to the repurchase of a dealer's inventory obtained
from the supplier or the supplier's distributor by the particular
business location or locations involved in the dealer contract
termination and shall not apply to any other business locations
covered by the same contract.
(p) If 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, then the
supplier shall repurchase the inventory only if a dealer contract is
canceled or not renewed by the dealer for any of the following
reasons:
(1) The supplier consistently failed to provide adequate product
support for the type and use of the product, which includes, but is
not limited to, technical assistance, operators and repair manuals,
and parts lists and diagrams.
(2) The supplier consistently failed to provide adequate training,
required by the supplier, for maintenance, repair, or usage of the
supplier's product.
(3) The supplier consistently failed to provide marketing and
marketing support for the supplier's product if marketing is a
requirement of the dealer contract.
(4) The supplier's product is defective and breaches the implied
warranty of merchantability as defined in Section 1791.1 of the Civil
Code.
(5) The supplier consistently failed to meet its warranty
obligations to the dealer.
(6) The supplier abandons the market thereby failing to provide
parts and services necessary for a dealer to perform warranty
obligations.
(7) The supplier engaged in conduct that is injurious or
detrimental to the dealer's customers, the public welfare, or the
reputation of the dealer.
(8) The supplier made a material misrepresentation or
falsification of any record.
(9) The supplier violated any provision of this chapter.
(q) Notwithstanding subdivision (p), nothing in this section shall
be construed to limit the supplier's responsibility to repurchase a
dealer's inventory as provided in this section when the supplier
cancels or fails to renew a dealer contract.

22906. (a) A dealer, as defined in subdivision (f) of Section
22901, is not entitled to establish a lien pursuant to this act,
unless that person has first sent to the lien debtor a written
notice, by certified mail, which states all of the following:
(1) The payment of the reasonable or agreed charges is more than
90 days overdue. This requirement does not apply to equipment subject
to repurchase that was returned to the supplier subsequent to return
of other equipment also subject to repurchase for which payment is
overdue.
(2) The amount of reasonable or agreed charges that are overdue.
(3) The lien debtor has the following three alternatives:
(A) Allow the lien to be filed.
(B) Enter into a consensual security interest in the proceeds,
pursuant to the Commercial Code.
(C) Pay the reasonable or agreed charges that are overdue.
(4) The lien debtor has 10 days from receipt of the notice to
select an alternative, notify the lien claimant of the alternative
selected, and satisfy all of the requirements of the selected
alternative. This part of the notice to the lien debtor shall be in
10-point type or bolder.
(5) The lien claimant may file the notice of claim of lien
pursuant to this chapter at any time thereafter if the lien debtor
does not comply with the requirements of this section.
(b) A dealer who has complied with subdivision (a), has a lien
for payment of the repurchase amount payable pursuant to subdivisions
(b), (c), (d), (e), and (f) of Section 22905 and for the costs of
enforcing the lien.
(c) The lien established pursuant to this chapter attaches to the
proceeds of any sale of the equipment returned for repurchase.
(d) The amount of charges secured by the lien shall not exceed an
amount equal to the reasonable or agreed charges for the equipment
specified in Section 22905.

22907. Except as otherwise provided in this act, the notice of lien
shall remain in effect, and no new notice of claim of lien shall be
required in order to maintain the lien, as long as the dealer remains
unpaid for the amounts secured by the lien.

22908. The lien created by this act shall be perfected and shall be
effective upon the filing of a notice claim of lien with the
Secretary of State.

22909. The notice of claim of lien shall contain all of the
following information:
(a) The name and address of the lien claimant.
(b) The name and address of the lien debtor.
(c) The location of the property to which the equipment was
returned.
(d) A statement that the payment of reasonable or agreed charges
is more than 90 days overdue.
(e) The amount of the reasonable or agreed charges that are
overdue.
(f) A statement, signed under penalty of perjury, that includes
all of the following:
(1) That the lien claimant sent to the lien debtor the notice
required pursuant to subdivision (a) of Section 22906.
(2) That more than 10 days have elapsed since the notice was
received by the lien debtor.
(3) That the lien debtor has not complied with the requirements of
subdivision (a) of Section 22906.
(g) A statement that the lien claimant has an equipment repurchase
lien pursuant to Section 22906.

22910. The notice of claim of lien shall be signed by the lien
claimant or by a person authorized by the claimant.

22911. The notice of a claim of lien shall be filed on a form
prescribed by the Secretary of State pursuant to Section 9502 of the
Commercial Code. The standard form shall be completed in its entirety
except as follows:
(a) The lien claimant may be identified either as a lien claimant
or as a secured party.
(b) The form shall be signed by the lien claimant and need not be
signed by the lien debtor.
(c) The description of the collateral shall be the information
specified in subdivisions (c), (d), (e), and (g) of Section 22909.
(d) Attached to the form shall be a separately signed statement
containing the information specified in subdivision (f) of Section
22909.

22912. The notice of claim of lien shall be filed, indexed, and
marked in the office of the Secretary of State in the same manner as
a financing statement is filed, indexed, and marked pursuant to
Sections 9516 and 9519 of the Commercial Code.

22913. The lien claimant shall provide written notice of the claim
of lien to the lien debtor within 10 days of the date of filing the
lien with the Secretary of State.

22914. For the purpose of the Secretary of State's index pursuant
to Sections 9516 and 9519 of the Commercial Code and for the purpose
of the issuance of a certificate pursuant to Section 9523 or 9528 of
the Commercial Code, the Secretary of State shall identify a notice
pursuant to this article as a financing statement.

22915. The lien created pursuant to this act shall be treated
according to the following:
(a) Have priority in accordance with the time the notice of claim
of lien is filed with the Secretary of State.
(b) Have the same priority as a security interest perfected by the
filing of a financing statement as of the date of notice of claim of
lien was filed with the Secretary of State.
(c) Not have priority over labor claims for wages and salaries for
personal services that are provided by any employee to any lien
debtor in connection with the equipment supplied, the proceeds of
which are subject to the lien.

22916. A member of the public may obtain a certificate from the
Secretary of State identifying whether there is a lien on file and
any notice of claim of lien naming a particular debtor, and if so,
giving the date and time of the filing of each notice, and the names
and addresses of each lienholder in the certificate. The fee for the
certificate is the same as the fee for the certificate issued
pursuant to Section 9523 of the Commercial Code.

22917. A member of the public may obtain a copy of any notice of an
equipment repurchase lien, including notices affecting the notices
from the Secretary of State. The fee for these copies shall be the
same as that prescribed in Section 9525 of the Commercial Code.

22918. The lien claimant shall provide written notice to secured
creditors at least 30 days prior to enforcing the claim of lien. For
purposes of this section, "secured creditors" means any entity named
as a secured party in the financing statement filed with regard to
the debtor and which covers returned equipment.

22919. The lien claimant shall foreclose on a lien created by this
chapter only in an action to recover the reasonable or agreed
charges. The final judgment shall be enforced pursuant to Title 9
(commencing with Section 680.010) of Part 2 of the Code of Civil
Procedure.

22920. (a) When a lien claimant receives payment for the total
amounts secured by the lien, the lien claimant shall send the lien
debtor a statement relinquishing the security interest under the
notice of claim of lien, which shall be identified by the date, names
of parties thereto, and file number. If the affected lienholder of
record fails to send the termination statement within 10 days, he or
she is liable to the debtor for all actual damages suffered by the
debtor by reason of this failure, and if that failure is in bad
faith, for a penalty of one hundred dollars ($100).
(b) The filing officer shall mark each termination statement with
the date and time of the filing and shall index the statement under
the name of the lien debtor and under the file number of the original
lien. If the filing officer has an electronic microfilm or other
photographic record of the lien and related filings, he or she may
remove and destroy the originals from the files after receipt of the
termination statement. If the filing officer does not have the
record, he or she may remove and destroy the originals from the files
after one year from the receipt of the termination statement.

22921. (a) A lien created pursuant to this chapter is assignable or
transferable by the holder of the lien, with full rights of
enforcement.
(b) The lienholder shall file a statement of assignment or
transfer with the office of the Secretary of State in the same manner
that a statement is filed pursuant to Section 9514 of the Commercial
Code.

22922. (a) Except to the extent specifically set forth in this act,
the lien created by this act is subject to Division 9 (commencing
with Section 9101) of the Commercial Code.
(b) For the purposes of this act, the following terms have the
following meanings:
(1) "Secured party" refers to the dealer, lien creditor, lien
claimant, or assignee thereof.
(2) "Debtor" refers to the supplier, lien debtor, or debtor.
(3) "Collateral" refers to the equipment subject to the lien
created under this chapter.
(c) A security agreement is not necessary to make an equipment
repurchase lien created under this chapter enforceable.
(d) An equipment repurchase lien created under this chapter shall
not continue in the repurchased equipment following the disposition
thereof.
(e) The right of a dealer to enforce the lien created under this
act shall be governed by this act and shall not be governed by
Chapter 6 (commencing with Section 9601) of Division 9 of the
Commercial Code.

22923. The Secretary of State may adopt any regulations necessary
to carry out his or her duties pursuant to this chapter, including
prescribing necessary forms.

22924. (a) In the event of the death or incapacity of the dealer,
which in this context shall mean an owner, equal or majority partner,
or the majority stockholder of a corporation, operating as a dealer,
the supplier shall, at the option of the heirs at law, if the dealer
died intestate, or the executor under the terms of the deceased
dealer's last will and testament, if the dealer died testate,
repurchase the inventory from the estate as if the supplier had
terminated the dealer contract and the inventory repurchase
provisions of Section 22905 are applicable. The heirs or executor
shall have 180 days from the date of the death of the dealer or
majority stockholder to exercise the option under this section.
However, nothing in this section shall require the repurchase of
inventory, if the heirs or executor and the supplier enter into a new
dealer agreement, or if a successor to the dealer is established
pursuant to subdivision (b) of Section 22903.1. This section shall be
subject to that portion of the dealer contract pertaining to death
of the dealer or succession, to the extent the contract is not
inconsistent. Nothing in this section shall entitle an heir or
personal representative of a deceased dealer or majority stockholder
to operate the dealership beyond the 180 days provided for in this
subdivision without the consent of the supplier.
(b) The provisions of this section shall be supplemental to any
agreement between the dealer and the supplier covering the return of
equipment, attachments, and repair parts. Notwithstanding anything
contained in this section, the rights of a supplier to charge back to
the dealer's account amounts previously paid or credited as a
discount incident to the dealer's purchase of inventory shall not be
affected. Further, any repurchase shall not be subject to the
provisions of the bulk sales law.

22925. Any dealer may bring an action against a supplier in any
court of competent jurisdiction for damages sustained by the dealer
as a consequence of the supplier's violation of any provisions of
this chapter, together with costs and reasonable attorney's fees. The
dealer may also be granted injunctive relief against unlawful
termination, cancellation, nonrenewal, and change in competitive
circumstances. The remedies set forth in this action shall not be
deemed exclusive and shall be in addition to any other remedies
permitted by law. This section is not intended to affect current law
pertaining to product liability actions.

22926. If any provision of this act or the application thereof to
any person or circumstances is held invalid, that invalidity shall
not affect other provisions or applications of this act which can be
given effect without the invalid provision or application, and to
this end the provisions of this act are severable.

22927. This act shall apply to dealer contracts in effect on the
effective date of this act that have no expiration date and that are
continuing contracts, and all other dealer contracts entered into or
renewed on or after the effective date of this act.
A provision in any contract or agreement with respect to a
supplier that requires jurisdiction or venue or forum outside of this
state or requires the application of the laws of another state is
void with respect to a claim otherwise enforceable under this act.