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NORTH CAROLINA STATUTES AND CODES

§ 20-305. Coercing dealer to accept commodities not ordered; threatening to cancel franchise; preventing transfer of ownership; granting additional franchises; terminating franchises without good caus

§ 20‑305.  Coercingdealer to accept commodities not ordered; threatening to cancel franchise;preventing transfer of ownership; granting additional franchises; terminatingfranchises without good cause; preventing family succession.

It shall be unlawful for anymanufacturer, factory branch, distributor, or distributor branch, or any fieldrepresentative, officer, agent, or any representative whatsoever of any ofthem:

(1)        To require, coerce,or attempt to coerce any dealer to accept delivery of any motor vehicle orvehicles, parts or accessories therefor, or any other commodities, which shallnot have been ordered by that dealer, or to accept delivery of any motorvehicle or vehicles which have been equipped in a manner other than asspecified by the dealer.

(2)        To require, coerce,or attempt to coerce any dealer to enter into any agreement with suchmanufacturer, factory branch, distributor, or distributor branch, orrepresentative thereof, or do any other act unfair to such dealer, bythreatening to cancel any franchise existing between such manufacturer, factorybranch, distributor, distributor branch, or representative thereof, and suchdealer;

(3)        (See Editor'snote for applicability) Unfairly without due regard to the equities of thedealer, and without just provocation, to cancel the franchise of such dealer;

(4)        Notwithstanding theterms of any franchise agreement, to prevent or refuse to approve the sale ortransfer of the ownership of a dealership by the sale of the business, stocktransfer, or otherwise, or the transfer, sale or assignment of a dealerfranchise, or a change in the executive management or principal operator of thedealership, or relocation of the dealership to another site within thedealership's relevant market area, if the Commissioner has determined, ifrequested in writing by the dealer within 30 days after receipt of an objectionto the proposed transfer, sale, assignment, relocation, or change, and after ahearing on the matter, that the failure to permit or honor the transfer, sale,assignment, relocation, or change is unreasonable under the circumstances. Nofranchise may be transferred, sold, assigned, relocated, or the executivemanagement or principal operators changed, unless the franchisor has been givenat least 30 days' prior written notice as to the proposed transferee's name andaddress, financial ability, and qualifications of the proposed transferee, acopy of the purchase agreement between the dealership and the proposedtransferee, the identity and qualifications of the persons proposed to beinvolved in executive management or as principal operators, and the locationand site plans of any proposed relocation. The franchisor shall send thedealership and the proposed transferee notice of objection, by registered or certifiedmail, return receipt requested, to the proposed transfer, sale, assignment,relocation, or change within 30 days after receipt of notice from the dealer,as provided in this section. The notice of objection shall state in detail allfactual and legal bases for the objection on the part of the franchisor to theproposed transfer, sale, assignment, relocation, or change that is specificallyreferenced in this subdivision. An objection to a proposed transfer, sale,assignment, relocation, or change in the executive management or principaloperator of the dealership may only be premised upon the factual and legalbases specifically referenced in this subdivision. A manufacturer's notice ofobjection which is based upon factual or legal issues that are not specificallyreferenced in this subdivision as being issues upon which the Commissionershall base his determination shall not be effective to preserve thefranchisor's right to object to the proposed transfer sale, assignment,relocation, or change, provided the dealership or proposed transferee hassubmitted written notice, as required above, as to the proposed transferee'sname and address, financial ability, and qualifications of the proposedtransferee, a copy of the purchase agreement between the dealership and theproposed transferee, the identity and qualifications of the persons proposed tobe involved in the executive management or as principal operators, and thelocation and site plans of any proposed relocation. Failure by the franchisorto send notice of objection within 30 days shall constitute waiver by thefranchisor of any right to object to the proposed transfer, sale, assignment,relocation, or change. If the franchisor requires additional information tocomplete its review, the franchisor shall notify the dealership within 15 daysafter receipt of the proposed transferee's name and address, financial ability,and qualifications, a copy of the purchase agreement between the dealership andthe proposed transferee, the identity and qualifications of the personsproposed to be involved in executive management or as principal operators, andthe location and site plans of any proposed relocation. If the franchisor failsto request additional information from the dealer or proposed transferee within15 days of receipt of this initial information, the 30‑day time periodwithin which the franchisor may provide notice of objection shall be deemed torun from the initial receipt date. Otherwise, the 30‑day time periodwithin which the franchisor may provide notice of objection shall run from thedate the franchisor has received the supplemental information requested fromthe dealer or proposed transferee; provided, however, that failure by thefranchisor to send notice of objection within 60 days of the franchisor'sreceipt of the initial information from the dealer shall constitute waiver bythe franchisor of any right to object to the proposed transfer, sale,assignment, relocation, or change. With respect to a proposed transfer ofownership, sale, or assignment, the sole issue for determination by theCommissioner and the sole issue upon which the Commissioner shall hear orconsider evidence is whether, by reason of lack of good moral character, lackof general business experience, or lack of financial ability, the proposedtransferee is unfit to own the dealership. For purposes of this subdivision,the refusal by the manufacturer to accept a proposed transferee who is of goodmoral character and who otherwise meets the written, reasonable, and uniformlyapplied business experience and financial requirements, if any, required by themanufacturer of owners of its franchised automobile dealerships is presumed todemonstrate the manufacturer's failure to prove that the proposed transferee isunfit to own the dealership. With respect to a proposed change in the executivemanagement or principal operator of the dealership, the sole issue fordetermination by the Commissioner and the sole issue on which the Commissionershall hear or consider evidence shall be whether, by reason of lack oftraining, lack of prior experience, poor past performance, or poor character,the proposed candidate for a position within the executive management or asprincipal operator of the dealership is unfit for the position. For purposes ofthis subdivision, the refusal by the manufacturer to accept a proposedcandidate for executive management or as principal operator who is of goodmoral character and who otherwise meets the written, reasonable, and uniformlyapplied standards or qualifications, if any, of the manufacturer relating tothe business experience and prior performance of executive management requiredby the manufacturers of its dealers is presumed to demonstrate themanufacturer's failure to prove the proposed candidate for executive managementor as principal operator is unfit to serve the capacity. With respect to aproposed relocation or other proposed change, the issue for determination bythe Commissioner is whether the proposed relocation or other change is unreasonableunder the circumstances. For purposes of this subdivision, the refusal by themanufacturer to agree to a proposed relocation which meets the written,reasonable, and uniformly applied standards or criteria, if any, of themanufacturer relating to dealer relocations is presumed to demonstrate that themanufacturer's failure to prove the proposed relocation is unreasonable underthe circumstances. The manufacturer shall have the burden of proof before theCommissioner under this subdivision. It is unlawful for a manufacturer to, inany way, condition its approval of a proposed transfer, sale, assignment,change in the dealer's executive management, principal operator, or appointmentof a designated successor, on the existing or proposed dealer's willingness toconstruct a new facility, renovate the existing facility, acquire or refrainfrom acquiring one or more line‑makes of vehicles, separate or divest oneor more line‑makes of vehicle, or establish or maintain exclusivefacilities, personnel, or display space. It is unlawful for a manufacturer to,in any way, condition its approval of a proposed relocation on the existing orproposed dealer's willingness to acquire or refrain from acquiring one or moreline‑makes of vehicles, separate or divest one or more line‑makesof vehicle, or establish or maintain exclusive facilities, personnel, ordisplay space. The opinion or determination of a franchisor that the continuedexistence of one of its franchised dealers situated in this State is notviable, or that the dealer holds or fails to hold licensing rights for the saleof other line‑makes of vehicles in a manner consistent with thefranchisor's existing or future distribution or marketing plans, shall notconstitute a lawful basis for the franchisor to fail or refuse to approve adealer's proposed relocation: provided, however, that nothing contained in thissubdivision shall be deemed to prevent or prohibit a franchisor from failing toapprove a dealer's proposed relocation on grounds that the specific site orfacility proposed by the dealer is otherwise unreasonable under thecircumstances. Approval of a relocation pursuant to this subdivision shall notin itself constitute the franchisor's representation or assurance of thedealer's viability at that location.

(5)        To enter into afranchise establishing an additional new motor vehicle dealer or relocating anexisting new motor vehicle dealer into a relevant market area where the sameline make is then represented without first notifying in writing the Commissionerand each new motor vehicle dealer in that line make in the relevant market areaof the intention to establish an additional dealer or to relocate an existingdealer within or into that market area. Within 30 days of receiving such noticeor within 30 days after the end of any appeal procedure provided by themanufacturer, any new motor vehicle dealer may file with the Commissioner aprotest to the establishing or relocating of the new motor vehicle dealer. Whena protest is filed, the Commissioner shall promptly inform the manufacturerthat a timely protest has been filed, and that the manufacturer shall notestablish or relocate the proposed new motor vehicle dealer until theCommissioner has held a hearing and has determined that there is good cause forpermitting the addition or relocation of such new motor vehicle dealer.

a.         This section doesnot apply:

1.         To the relocation ofan existing new motor vehicle dealer within that dealer's relevant market area,provided that the relocation not be at a site within 10 miles of a licensed newmotor vehicle dealer for the same line make of motor vehicle. If this sub‑subdivisionis applicable, only dealers trading in the same line‑make of vehicle thatare located within the 10‑mile radius shall be entitled to notice fromthe manufacturer and have the protest rights afforded under this section.

2.         If the proposedadditional new motor vehicle dealer is to be established at or within two milesof a location at which a former licensed new motor vehicle dealer for the sameline make of new motor vehicle had ceased operating within the previous twoyears.

3.         To the relocation ofan existing new motor vehicle dealer within two miles of the existing site ofthe new motor vehicle dealership if the franchise has been operating on aregular basis from the existing site for a minimum of three years immediatelypreceding the relocation.

4.         To the relocation ofan existing new motor vehicle dealer if the proposed site of the relocated newmotor vehicle dealership is further away from all other new motor vehicledealers of the same line make in that relevant market area.

5.         Repealed by SessionLaws 2008‑156, s. 3, effective August 3, 2008.

b.         In determiningwhether good cause has been established for not entering into or relocating anadditional new motor vehicle dealer for the same line make, the Commissionershall take into consideration the existing circumstances, including, but notlimited to:

1.         The permanency ofthe investment of both the existing and proposed additional new motor vehicledealers;

2.         Growth or decline inpopulation, density of population, and new car registrations in the relevantmarket area;

3.         Effect on theconsuming public in the relevant market area;

4.         Whether it isinjurious or beneficial to the public welfare for an additional new motorvehicle dealer to be established;

5.         Whether the newmotor vehicle dealers of the same line make in that relevant market area areproviding adequate competition and convenient customer care for the motorvehicles of the same line make in the market area which shall include theadequacy of motor vehicle sales and service facilities, equipment, supply ofmotor vehicle parts, and qualified service personnel;

6.         Whether theestablishment of an additional new motor vehicle dealer or relocation of anexisting new motor vehicle dealer in the relevant market area would increasecompetition in a manner such as to be in the long‑term public interest;and

7.         The effect on therelocating dealer of a denial of its relocation into the relevant market area.

c.         The Commissionershall try to conduct the hearing and render his final determination ifpossible, within 180 days after a protest is filed.

d.         Any parties to ahearing by the Commissioner concerning the establishment or relocating of a newmotor vehicle dealer shall have a right of review of the decision in a court ofcompetent jurisdiction pursuant to Chapter 150B of the General Statutes.

e.         In a hearinginvolving a proposed additional dealership, the manufacturer or distributor hasthe burden of proof under this section. In a proceeding involving therelocation of an existing dealership, the dealer seeking to relocate has theburden of proof under this section.

f.          If the Commissionerdetermines, following a hearing, that good cause exists for permitting theproposed additional or relocated motor vehicle dealership, the dealer seekingthe proposed additional or relocated motor vehicle dealership must, within twoyears, obtain a license from the Commissioner for the sale of vehicles at therelevant site, and actually commence operations at the site selling new motorvehicles of all line makes, as permitted by the Commissioner. Failure to obtaina permit and commence sales within two years shall constitute waiver by thedealer of the dealer's right to the additional or relocated dealership,requiring renotification, a new hearing, and a new determination as provided inthis section. If the Commissioner fails to determine that good cause exists forpermitting the proposed additional or relocated motor vehicle dealership, themanufacturer seeking the proposed additional dealership or dealer seeking torelocate may not again provide notice of its intention or otherwise attempt toestablish an additional dealership or relocate to any location within 10 milesof the site of the original proposed additional dealership or relocation sitefor a minimum of three years from the date of the Commissioner's determination.

g.         (See Editor'snote for applicability) For purposes of this subdivision, the addition,creation, or operation of a "satellite" or other facility, notphysically part of or contiguous to an existing licensed new motor vehicledealer, whether or not owned or operated by a person or other entity holding afranchise as defined by G.S. 20‑286(8a), at which warranty service workauthorized or reimbursed by a manufacturer is performed or at which new motorvehicles are offered for sale to the public, shall be considered an additionalnew motor vehicle dealer requiring a showing of good cause, prior notificationto existing new motor vehicle dealers of the same line make of vehicle withinthe relevant market area by the manufacturer and the opportunity for a hearingbefore the Commissioner as provided in this subdivision.

(6)        Notwithstanding theterms, provisions or conditions of any franchise or notwithstanding the termsor provisions of any waiver, to terminate, cancel or fail to renew anyfranchise with a licensed new motor vehicle dealer unless the manufacturer hassatisfied the notice requirements of subparagraph c. and the Commissioner hasdetermined, if requested in writing by the dealer within (i) the time periodspecified in G.S. 20‑305(6)c.1.II., III., or IV., as applicable, or (ii)the effective date of the franchise termination specified or proposed by themanufacturer in the notice of termination, whichever period of time is longer,and after a hearing on the matter, that there is good cause for thetermination, cancellation, or nonrenewal of the franchise and that themanufacturer has acted in good faith as defined in this act regarding thetermination, cancellation or nonrenewal. When such a petition is made to theCommissioner by a dealer for determination as to the existence of good causeand good faith for the termination, cancellation or nonrenewal of a franchise,the Commissioner shall promptly inform the manufacturer that a timely petitionhas been filed, and the franchise in question shall continue in effect pendingthe Commissioner's decision. The Commissioner shall try to conduct the hearingand render a final determination within 180 days after a petition has beenfiled. If the termination, cancellation or nonrenewal is pursuant to G.S. 20‑305(6)c.1.III.then the Commissioner shall give the proceeding priority consideration andshall try to render his final determination no later than 90 days after thepetition has been filed. Any parties to a hearing by the Commissioner underthis section shall have a right of review of the decision in a court ofcompetent jurisdiction pursuant to Chapter 150B of the General Statutes. Anydetermination of the Commissioner under this section finding that good causeexists for the nonrenewal, cancellation, or termination of any franchise shallautomatically be stayed during any period that the affected dealer shall havethe right to judicial review or appeal of the determination before the superiorcourt or any other appellate court and during the pendency of any appeal;provided, however, that within 30 days of entry of the Commissioner's order, theaffected dealer provide such security as the reviewing court, in itsdiscretion, may deem appropriate for payment of such costs and damages as maybe incurred or sustained by the manufacturer by reason of and during thependency of the stay. Although the right of the affected dealer to such stay isautomatic, the procedure for providing such security and for the award ofdamages, if any, to the manufacturer upon dissolution of the stay shall be inaccordance with G.S. 1A‑1, Rule 65(d) and (e). No such security providedby or on behalf of any affected dealer shall be forfeited or damages awardedagainst a dealer who obtains a stay under this subdivision in the event theownership of the affected dealership is subsequently transferred, sold, orassigned to a third party in accordance with this subdivision or subdivision(4) of this section and the closing on such transfer, sale, or assignmentoccurs no later than 180 days after the date of entry of the Commissioner'sorder. Furthermore, unless and until the termination, cancellation, ornonrenewal of a dealer's franchise shall finally become effective, in light ofany stay or any order of the Commissioner determining that good cause existsfor the termination, cancellation, or nonrenewal of a dealer's franchise asprovided in this paragraph, a dealer who receives a notice of termination,cancellation, or nonrenewal from a manufacturer as provided in this subdivisionshall continue to have the same rights to assign, sell, or transfer thefranchise to a third party under the franchise and as permitted under G.S. 20‑305(4)as if notice of the termination had not been given by the manufacturer. Anyfranchise under notice or threat of termination, cancellation, or nonrenewal bythe manufacturer which is duly transferred in accordance with G.S. 20‑305(4)shall not be subject to termination by reason of failure of performance orbreaches of the franchise on the part of the transferor.

a.         Notwithstanding theterms, provisions or conditions of any franchise or the terms or provisions ofany waiver, good cause shall exist for the purposes of a termination,cancellation or nonrenewal when:

1.         There is a failureby the new motor vehicle dealer to comply with a provision of the franchisewhich provision is both reasonable and of material significance to thefranchise relationship provided that the dealer has been notified in writing ofthe failure within 180 days after the manufacturer first acquired knowledge ofsuch failure;

2.         If the failure bythe new motor vehicle dealer relates to the performance of the new motorvehicle dealer in sales or service, then good cause shall be defined as thefailure of the new motor vehicle dealer to comply with reasonable performancecriteria established by the manufacturer if the new motor vehicle dealer wasapprised by the manufacturer in writing of the failure; and

I.          The notificationstated that notice was provided of failure of performance pursuant to thissection;

II.         The new motorvehicle dealer was afforded a reasonable opportunity, for a period of not lessthan 180 days, to comply with the criteria; and

III.       The new motorvehicle dealer failed to demonstrate substantial progress towards compliancewith the manufacturer's performance criteria during such period and the newmotor vehicle dealer's failure was not primarily due to economic or marketfactors within the dealer's relevant market area which were beyond the dealer'scontrol.

b.         The manufacturershall have the burden of proof under this section.

c.         Notification ofTermination, Cancellation and Nonrenewal. –

1.         Notwithstanding theterms, provisions or conditions of any franchise prior to the termination,cancellation or nonrenewal of any franchise, the manufacturer shall furnishnotification of termination, cancellation or nonrenewal to the new motorvehicle dealer as follows:

I.          In the mannerdescribed in G.S. 20‑305(6)c2 below; and

II.         Not less than 90days prior to the effective date of such termination, cancellation ornonrenewal; or

III.       Not less than 15days prior to the effective date of such termination, cancellation ornonrenewal with respect to any of the following:

A.        Insolvency of the newmotor vehicle dealer, or filing of any petition by or against the new motorvehicle dealer under any bankruptcy or receivership law;

B.         Failure of the newmotor vehicle dealer to conduct its customary sales and service operationsduring its customary business hours for seven consecutive business days, exceptfor acts of God or circumstances beyond the direct control of the new motor vehicledealer;

C.        Revocation of anylicense which the new motor vehicle dealer is required to have to operate adealership;

D.        Conviction of afelony involving moral turpitude, under the laws of this State or any otherstate, or territory, or the District of Columbia.

IV.       Not less than 180days prior to the effective date of such termination, cancellation, ornonrenewal which occurs as a result of any change in ownership, operation, orcontrol of all or any part of the business of the manufacturer, factory branch,distributor, or distributor branch whether by sale or transfer of assets,corporate stock or other equity interest, assignment, merger, consolidation,combination, joint venture, redemption, operation of law or otherwise; or thetermination, suspension, or cessation of a part or all of the businessoperations of the manufacturers, factory branch, distributor, or distributorbranch; or discontinuance of the sale of the product line or a change indistribution system by the manufacturer whether through a change indistributors or the manufacturer's decision to cease conducting businessthrough a distributor altogether.

V.        Unless the failure bythe new motor vehicle dealer relates to the performance of the new motorvehicle dealer in sales or service, not more than one year after themanufacturer first acquired knowledge of the basic facts comprising thefailure.

2.         Notification underthis section shall be in writing; shall be by certified mail or personallydelivered to the new motor vehicle dealer; and shall contain:

I.          A statement ofintention to terminate, cancel or not to renew the franchise;

II.         A detailedstatement of all of the material reasons for the termination, cancellation ornonrenewal; and

III.       The date on whichthe termination, cancellation or nonrenewal takes effect.

3.         Notificationprovided in G.S. 20‑305(6)c1II of 90 days prior to the effective date ofsuch termination, cancellation or renewal may run concurrent with the 180 daysdesignated in G.S. 20‑305(6)a2II provided the notification is clearlydesignated by a separate written document mailed by certified mail orpersonally delivered to the new motor vehicle dealer.

d.         Payments.

1.         Notwithstanding theterms of any franchise, agreement, or waiver, upon the termination, nonrenewalor cancellation of any franchise by the manufacturer or distributor, thecessation of business or the termination, nonrenewal, or cancellation of anyfranchise by any new motor vehicle dealer located in this State, or upon any ofthe occurrences set forth in G.S. 20‑305(6)c.1.IV., the manufacturer ordistributor shall purchase from and compensate the new motor vehicle dealer forall of the following:

I.          Each new and unsoldmotor vehicle within the new motor vehicle dealer's inventory that has beenacquired within 24 months of the effective date of the termination  from themanufacturer or distributor or another same line‑make dealer in theordinary course of business, and which has not been substantially altered ordamaged to the prejudice of the manufacturer or distributor while in the newmotor vehicle dealer's possession, and which has been driven less than 1,000miles or, for purposes of a recreational vehicle motor home as defined in G.S.20‑4.01(32a)a., less than 1,500 miles following the original date of deliveryto the dealer, and for which no certificate of title has been issued. Forpurposes of this sub‑subdivision, the term "ordinary course ofbusiness" shall include inventory transfers of all new, same line‑makevehicles between affiliated dealerships, or otherwise between dealershipshaving common or interrelated ownership, provided that the transfer is notintended solely for the purpose of benefiting from the termination assistancedescribed in this sub‑subdivision.

II.         Unused, undamagedand unsold supplies and parts purchased from the manufacturer or distributor orsources approved by the manufacturer or distributor, at a price not to exceedthe original manufacturer's price to the dealer, provided such supplies andparts are currently offered for sale by the manufacturer or distributor in itscurrent parts catalogs and are in salable condition.

III.       Equipment, signs,and furnishings that have not been substantially altered or damaged and thathave been required by the manufacturer or distributor to be purchased by thenew motor vehicle dealer from the manufacturer or distributor, or theirapproved sources.

IV.       Special tools thathave not been altered or damaged, normal wear and tear excepted, and that havebeen required by the manufacturer or distributor to be purchased by the newmotor vehicle dealer from the manufacturer or distributor, or their approvedsources within five years immediately preceding the termination, nonrenewal orcancellation of the franchise. The amount of compensation which shall be paidto the new motor vehicle dealer by the manufacturer or distributor shall be thenet acquisition price if the item was acquired in the 12 months preceding thedate of receipt of the dealer's request for compensation; seventy‑fivepercent (75%) of the net acquisition price if the item was acquired between 13and 24 months preceding the dealer's request for compensation; fifty percent(50%) of the net acquisition price if the item was acquired between 25 and 36months preceding the dealer's request for compensation; twenty‑fivepercent (25%) of the net acquisition price if the item was acquired between 37and 60 months preceding the dealer's request for compensation.

2.         The compensationprovided above shall be paid by the manufacturer or distributor not later than90 days after the manufacturer or distributor has received notice in writingfrom or on behalf of the new motor vehicle dealer specifying the elements ofcompensation requested by the dealer; provided the new motor vehicle dealerhas, or can obtain, clear title to the inventory and has conveyed, or canconvey, title and possession of the same to the manufacturer or distributor.Within 15 days after receipt of the dealer's written request for compensation,the manufacturer or distributor shall send the dealer detailed writteninstructions and forms required by the manufacturer or distributor toeffectuate the receipt of the compensation requested by the dealer. Themanufacturer or distributor shall be obligated to pay or reimburse the dealerfor any transportation charges associated with the repurchase obligations ofthe manufacturer or distributor under this sub‑subparagraph. Themanufacturer or distributor shall also compensate the dealer for any handling,packing, or similar payments contemplated in the franchise. In no event may themanufacturer or distributor charge the dealer any handling, restocking, orother similar costs or fees associated with items repurchased by themanufacturer under this sub‑subparagraph.

3.         In addition to theother payments set forth in this section, if a termination, cancellation, ornonrenewal is premised upon any of the occurrences set forth in G.S. 20‑305(6)c.1.IV.,then the manufacturer or distributor shall be liable to the dealer for anamount at least equivalent to the fair market value of the franchise on (i) thedate the franchisor announces the action which results in termination,cancellation, or nonrenewal; or (ii) the date the action which results intermination, cancellation, or nonrenewal first became general knowledge; or(iii) the day 12 months prior to the date on which the notice of termination,cancellation, or nonrenewal is issued, whichever amount is higher. Payment isdue not later than 90 days after the manufacturer or distributor has receivednotice in writing from, or on behalf of, the new motor vehicle dealerspecifying the elements of compensation requested by the dealer. If thetermination, cancellation, or nonrenewal is due to a manufacturer's change indistributors, the manufacturer may avoid paying fair market value to the dealerif the new distributor or the manufacturer offers the dealer a franchiseagreement with terms acceptable to the dealer.

e.         DealershipFacilities Assistance upon Termination, Cancellation or Nonrenewal.

Inthe event of the occurrence of any of the events specified in G.S. 20‑305(6)d.1.above, except termination, cancellation or nonrenewal for license revocation,conviction of a crime involving moral turpitude, or fraud by a dealer‑owner:

1.         Subject to paragraph3, if the new motor vehicle dealer is leasing the dealership facilities from alessor other than the manufacturer or distributor, the manufacturer ordistributor shall pay the new motor vehicle dealer a sum equivalent to the rentfor the unexpired term of the lease or three year's rent, whichever is less, orsuch longer term as is provided in the franchise agreement between the dealerand manufacturer; except that, in the case of motorcycle dealerships, themanufacturer shall pay the new motor vehicle dealer the sum equivalent to therent for the unexpired term of the lease or one year's rent, whichever is less,or such longer term as provided in the franchise agreement between the dealerand manufacturer; or

2.         Subject to paragraph3, if the new motor vehicle dealer owns the dealership facilities, themanufacturer or distributor shall pay the new motor vehicle dealer a sumequivalent to the reasonable rental value of the dealership facilities forthree years, or for one year in the case of motorcycle dealerships.

3.         In order to beentitled to facilities assistance from the manufacturer or distributor, asprovided in this paragraph e., the dealer, owner, or lessee, as the case maybe, shall have the obligation to mitigate damages by listing the demisedpremises for lease or sublease with a licensed real estate agent within 30 daysafter the effective date of the termination of the franchise and thereafter byreasonably cooperating with said real estate agent in the performance of theagent's duties and responsibilities. In the event that the dealer, owner, orlessee is able to lease or sublease the demised premises, the dealer shall beobligated to pay the manufacturer the net revenue received from such mitigationup to the total amount of facilities assistance which the dealer has receivedfrom the manufacturer pursuant to sub‑subdivisions 1. and 2. To theextent and for such uses and purposes as may be consistent with the terms ofthe lease, a manufacturer who pays facilities assistance to a dealer under thisparagraph e. shall be entitled to occupy and use the dealership facilitiesduring the years for which the manufacturer shall have paid rent under sub‑subdivisions1. and 2.

4.         In the event thetermination relates to fewer than all of the franchises operated by the dealerat a single location, the amount of facilities assistance which themanufacturer or distributor is required to pay the dealer under this sub‑subdivisionshall be based on the proportion of gross revenue received from the sale andlease of new vehicles by the dealer and from the dealer's parts and serviceoperations during the three years immediately preceding the effective date ofthe termination (or any shorter period that the dealer may have held thesefranchises) of the line‑makes being terminated, in relation to the grossrevenue received from the sale and lease of all line‑makes of newvehicles by the dealer and from the total of the dealer's and parts and serviceoperations from this location during the same three‑year period.

5.         The compensationrequired for facilities assistance under this paragraph e. shall be paid by themanufacturer or distributor within 90 days after the manufacturer ordistributor has received notice in writing from, or on behalf of, a new motorvehicle dealer specifying the elements of compensation requested by the dealer.

f.          The provisions ofsub‑subdivision e. above shall not be applicable when the termination,nonrenewal, or cancellation of the franchise agreement by a new motor vehicledealer is the result of the sale of assets or stock of the motor vehicledealership. The provisions of sub‑subdivisions d. and e. above shall notbe applicable when the termination, nonrenewal, or cancellation of thefranchise agreement is at the initiation of a new motor vehicle dealer ofrecreational vehicle motor homes, as defined in G.S. 20‑4.01(32a)a.,provided that at the time of the termination, nonrenewal, or cancellation, therecreational vehicle manufacturer or distributor has paid to the dealer allclaims for warranty or recall work, including payments for labor, parts, andother expenses, which were submitted by the dealer 30 days or more prior to thedate of termination, nonrenewal, or cancellation.

g.         A franchise shallcontinue in full force and operation notwithstanding a change, in whole or inpart, of an established plan or system of distribution of the motor vehiclesoffered for sale under the franchise. The appointment of a new manufacturer,factory branch, distributor, or distributor branch for motor vehicles offeredfor sale under the franchise agreement shall be deemed to be a change of anestablished plan or system of distribution.

Uponthe occurrence of the change, the Division shall deny an application of amanufacturer, factory branch, distributor, or distributor branch for a licenseor license renewal unless the applicant for a license as a manufacturer,factory branch, distributor, or distributor branch offers to each motor vehicledealer who is a party to a franchise for that line‑make a new franchiseagreement containing substantially the same provisions which were contained inthe previous franchise agreement or files an affidavit with the Divisionacknowledging its undertaking to assume and fulfill the rights, duties, andobligations of its predecessor under the previous franchise agreement.

(7)        Notwithstanding theterms of any contract or agreement, to prevent or refuse to honor thesuccession to a dealership, including the franchise, by a motor vehicledealer's designated successor as provided for under this subsection.

a.         Any owner of a newmotor vehicle dealership may appoint by will, or any other written instrument,a designated successor to succeed in the respective ownership interest orinterest as principal operator of the owner in the new motor vehicle dealership,including the franchise, upon the death or incapacity of the owner or principaloperator. In order for succession to the position of principal operator tooccur by operation of law in accordance with sub‑subdivision c. below,the owner's choice of a successor must be approved by the dealer, in accordancewith the dealer's bylaws, if applicable, either prior or subsequent to thedeath or incapacity of the existing principal operator.

b.         Any objections by amanufacturer or distributor to an owner's appointment of a designated successorshall be asserted in accordance with the following procedure:

1.         Within 30 days afterreceiving written notice of the identity of the owner's designated successorand general information as to the financial ability and qualifications of thedesignated successor, the franchisor shall send the owner and designatedsuccessor notice of objection, by registered or certified mail, return receiptrequested, to the appointment of the designated successor. The notice ofobjection shall state in detail all facts which constitute the basis for thecontention on the part of the manufacturer or distributor that good cause, asdefined in this sub‑subdivision below, exists for rejection of thedesignated successor. Failure by the franchisor to send notice of objectionwithin 30 days and otherwise as provided in this sub‑subdivision shallconstitute waiver by the franchisor of any right to object to the appointmentof the designated successor.

2.         Any time within 30days of receipt of the manufacturer's notice of objection the owner or thedesignated successor may file a request in writing with the Commissioner thatthe Commissioner hold an evidentiary hearing and determine whether good causeexists for rejection of the designated successor. When such a request is filed,the Commissioner shall promptly inform the affected manufacturer or distributorthat a timely request has been filed.

3.         The Commissionershall endeavor to hold the evidentiary hearing required under this sub‑subdivisionand render a determination within 180 days after receipt of the written requestfrom the owner or designated successor. In determining whether good causeexists for rejection of the owner's appointed designated successor, themanufacturer or distributor has the burden of proving that the designatedsuccessor is a person who is not of good moral character or does not meet thefranchisor's existing written and reasonable standards and, considering thevolume of sales and service of the new motor vehicle dealer, uniformly appliedminimum business experience standards in the market area.

4.         Any parties to ahearing by the Commissioner concerning whether good cause exists for therejection of the dealer's designated successor shall have a right of review ofthe decision in a court of competent jurisdiction pursuant to Chapter 150B ofthe General Statutes.

5.         Nothing in this sub‑subdivisionshall preclude a manufacturer or distributor from, upon its receipt of writtennotice from an owner of the identity of the owner's designated successor,requiring that the designated successor promptly provide personal and financialdata that is reasonably necessary to determine the financial ability andqualifications of the designated successor; provided, however, that such a requestfor additional information shall not delay any of the time periods orconstraints contained herein.

6.         In the event deathor incapacity of the owner or principal operator occurs prior to the time amanufacturer or distributor receives notice of the owner's appointment of adesignated successor or before the Commissioner has rendered a determination asprovided above, the existing franchise shall remain in effect and thedesignated successor shall be deemed to have succeeded to all of the owner's orprincipal operator's rights and obligations in the dealership and under thefranchise until a determination is made by the Commissioner or the rights ofthe parties have otherwise become fixed in accordance with this sub‑subdivision.

c.         Except as otherwiseprovided in sub‑subdivision d. of this subdivision, any designatedsuccessor of a deceased or incapacitated owner or principal operator of a newmotor vehicle dealership appointed by such owner in substantial compliance withthis section shall, by operation of law, succeed at the time of such death orincapacity to all of the rights and obligations of the owner or principaloperator in the new motor vehicle dealership and under either the existingfranchise or any other successor, renewal, or replacement franchise.

d.         Within 60 days afterthe death or incapacity of the owner or principal operator, a designatedsuccessor appointed in substantial compliance with this section shall give theaffected manufacturer or distributor written notice of his or her succession tothe position of owner or principal operator of the new motor vehicledealership; provided, however, that the failure of the designated successor togive the manufacturer or distributor written notice as provided above within 60days of the death or incapacity of the owner or principal operator shall notresult in the waiver or termination of the designated successor's right tosucceed to the ownership of the new motor vehicle dealership unless themanufacturer or distributor gives written notice of this provision to eitherthe designated successor or the deceased or incapacitated owner's executor,administrator, guardian or other fiduciary by certified or registered mail,return receipt requested, and said written notice grants not less than 30 days timewithin which the designated successor may give the notice required hereunder,provided the designated successor or the deceased or incapacitated owner'sexecutor, administrator, guardian or other fiduciary has given the manufacturerreasonable notice of death or incapacity. Within 30 days of receipt of thenotice by the manufacturer or distributor from the designated successorprovided in this paragraph, the manufacturer or distributor may request thatthe designated successor complete the application forms generally utilized bythe manufacturer or distributor to review the designated successor'squalifications to establish a successor dealership. Within 30 days of receiptof the completed forms, the manufacturer or distributor shall send a letter bycertified or registered mail, return receipt requested, advising the designatedsuccessor of facts and circumstances which have changed since themanufacturer's or distributor's original approval of the designated successor,and which have caused the manufacturer or distributor to object to thedesignated successor. Upon receipt of such notice, the designated successor mayeither designate an alternative successor or may file a request for evidentiaryhearing in accordance with the procedures provided in sub‑subdivisions b.2. –5. of this subdivision. In any such hearing, the manufacturer ordistributor shall be limited to facts and circumstances which did not exist atthe time the designated successor was originally approved or evidence which wasoriginally requested to be produced by the designated successor at the time ofthe original request and was fraudulent.

e.         The designatedsuccessor shall agree to be bound by all terms and conditions of the franchisein effect between the manufacturer or distributor and the owner at the time ofthe owner's or principal operator's death or incapacity, if so requested inwriting by the manufacturer or distributor subsequent to the owner's orprincipal operator's death or incapacity.

f.          This section doesnot preclude an owner of a new motor vehicle dealership from designating anyperson as his or her successor by written instrument filed with themanufacturer or distributor, and, in the event there is an inconsistencybetween the successor named in such written instrument and the designatedsuccessor otherwise appointed by the owner consistent with the provisions ofthis section, and that written instrument has not been revoked by the owner ofthe new motor vehicle dealership in writing to the manufacturer or distributor,then the written instrument filed with the manufacturer or distributor shallgovern as to the appointment of the successor.

(8)        To require, coerce,or attempt to coerce any new motor vehicle dealer in this State to order oraccept delivery of any new motor vehicle with special features, accessories orequipment not included in the list price of those motor vehicles as publiclyadvertised by the manufacturer or distributor.

(9)        To require, coerce,or attempt to coerce any new motor vehicle dealer in this State to purchasenondiagnostic computer equipment or programs, to participate monetarily in anadvertising campaign or contest, or to purchase unnecessary or unreasonablequantities of any promotional materials, training materials, training programs,showroom or other display decorations, materials, computer equipment orprograms, or special tools at the expense of the new motor vehicle dealer,provided that nothing in this subsection shall preclude a manufacturer ordistributor from including an unitemized uniform charge in the base price ofthe new motor vehicle charged to the dealer where such charge is attributableto advertising costs incurred or to be incurred by the manufacturer ordistributor in the ordinary courses of its business.

(10)      To require, coerce,or attempt to coerce any new motor vehicle dealer in this State to change thecapital structure of the new motor vehicle dealer or the means by or throughwhich the new motor vehicle dealer finances the operation of the dealershipprovided that the new motor vehicle dealer at all times meets any reasonablecapital standards determined by the manufacturer in accordance with uniformlyapplied criteria; and also provided that no change in the capital structureshall cause a change in the principal management or have the effect of a saleof the franchise without the consent of the manufacturer or distributor,provided that said consent shall not be unreasonably withheld.

(11)      To require, coerce,or attempt to coerce any new motor vehicle dealer in this State to refrain fromparticipation in the management of, investment in, or the acquisition of anyother line of new motor vehicle or related products; Provided, however, thatthis subsection does not apply unless the new motor vehicle dealer maintains areasonable line of credit for each make or line of new motor vehicle, and thenew motor vehicle dealer remains in compliance with any reasonable capitalstandards and facilities requirements of the manufacturer. The reasonablefacilities requirements shall not include any requirement that a new motorvehicle dealer establish or maintain exclusive facilities, personnel, ordisplay space.

(12)      To require, coerce,or attempt to coerce any new motor vehicle dealer in this State to changelocation of the dealership, or to make any substantial alterations to thedealership premises or facilities, when to do so would be unreasonable, orwithout written assurance of a sufficient supply of new motor vehicles so as tojustify such an expansion, in light of the current market and economicconditions.

(13)      To require, coerce,or attempt to coerce any new motor vehicle dealer in this State toprospectively assent to a release, assignment, novation, waiver or estoppelwhich would relieve any person from liability to be imposed by this law or torequire any controversy between a new motor vehicle dealer and a manufacturer,distributor, or representative, to be referred to any person other than theduly constituted courts of the State or the United States of America, or to theCommissioner, if such referral would be binding upon the new motor vehicledealer.

(14)      To delay, refuse, orfail to deliver motor vehicles or motor vehicle parts or accessories inreasonable quantities relative to the new motor vehicle dealer's facilities andsales potential in the new motor vehicle dealer's market area as determined inaccordance with reasonably applied economic principles, or within a reasonabletime, after receipt of an order from a dealer having a franchise for the retailsale of any new motor vehicle sold or distributed by the manufacturer ordistributor, any new vehicle, parts or accessories to new vehicles as arecovered by such franchise, and such vehicles, parts or accessories as arepublicly advertised as being available or actually being delivered. Thedelivery to another dealer of a motor vehicle of the same model and similarlyequipped as the vehicle ordered by a motor vehicle dealer who has not receiveddelivery thereof, but who has placed his written order for the vehicle prior tothe order of the dealer receiving the vehicle, shall be evidence of a delayeddelivery of, or refusal to deliver, a new motor vehicle to a motor vehicledealer within a reasonable time, without cause. Except as may be required byany consent decree of the Commissioner or other order of the Commissioner orcourt of competent jurisdiction, each manufacturer shall allocate its productsin a manner that provides each of its franchised dealers in this State anadequate supply of vehicles by series, product line, and model to achieve themanufacturer's minimum sales requirements, planning volume, or sales objectivesand that is fair and equitable to all of its franchised dealers in this State.Additionally, each manufacturer shall make available to each of its franchiseddealers in this State a minimum of one of each vehicle series, model, orproduct line that the manufacturer advertises nationally as being available forpurchase. A manufacturer shall not unfairly discriminate among its franchiseddealers in this allocation process. This subsection is not violated, however,if such failure is caused by acts or causes beyond the control of themanufacturer, distributor, factory branch, or factory representative.

(15)      To refuse to discloseto any new motor vehicle dealer, handling the same line make, the manner andmode of distribution of that line make within the State.

(16)      To award money,goods, services, or any other benefit to any new motor vehicle dealershipemployee, either directly or indirectly, unless such benefit is promptlyaccounted for, and transmitted to, or approved by, the new motor vehicledealer.

(17)      To increase prices ofnew motor vehicles which the new motor vehicle dealer had ordered and which themanufacturer or distributor has accepted for immediate delivery for privateretail consumers prior to the new motor vehicle dealer's receipt of the writtenofficial price increase notification. A sales contract signed by a privateretail consumer shall constitute evidence of each such order provided that thevehicle is in fact delivered to that customer. Price differences applicable tonew model or series shall not be considered a price increase or price decrease.Price changes caused by either: (i) the addition to a new motor vehicle ofrequired or optional equipment; or (ii) revaluation of the United Statesdollar, in the case of foreign‑make vehicles or components; or (iii) anincrease in transportation charges due to increased rates imposed by carriers;or (iv) new tariffs or duties imposed by the United States of America or anyother governmental authority, shall not be subject to the provisions of thissubsection.

(18)      To prevent or attemptto prevent a dealer from receiving fair and reasonable compensation for thevalue of the franchised business transferred in accordance with G.S. 20‑305(4)above, or to prevent or attempt to prevent, through the exercise of anycontractual right of first refusal or otherwise, a dealer located in this Statefrom transferring the franchised business to such persons or other entities asthe dealer shall designate in accordance with G.S. 20‑305(4). The opinionor determination of a manufacturer that the existence or location of one of itsfranchised dealers situated in this State is not viable or is not consistentwith the manufacturer's distribution or marketing forecast or plans shall notconstitute a lawful basis for the manufacturer to fail or refuse to approve adealer's proposed transfer of ownership submitted in accordance with G.S. 20‑305(4),or "good cause" for the termination, cancellation, or nonrenewal ofthe franchise under G.S. 20‑305(6) or grounds for the objection to anowner's designated successor appointed pursuant to G.S. 20‑305(7).

(19)      To offer any refundsor other types of inducements to any person for the purchase of new motorvehicles of a certain line make to be sold to the State or any politicalsubdivision thereof without making the same offer available upon request to allother new motor vehicle dealers in the same line make within the State.

(20)      To release to anyoutside party, except under subpoena or as otherwise required by law or in anadministrative, judicial or arbitration proceeding involving the manufactureror new motor vehicle dealer, any confidential business, financial, or personalinformation which may be from time to time provided by the new motor vehicledealer to the manufacturer, without the express written consent of the newmotor vehicle dealer.

(21)      To deny any new motorvehicle dealer the right of free association with any other new motor vehicledealer for any lawful purpose.

(22)      To unfairlydiscriminate among its new motor vehicle dealers with respect to warrantyreimbursements or authority granted its new motor vehicle dealers to makewarranty adjustments with retail customers.

(23)      To engage in anypredatory practice against or unfairly compete with a new motor vehicle dealerlocated in this State.

(24)      To terminate anyfranchise solely because of the death or incapacity of an owner who is notlisted in the franchise as one on whose expertise and abilities themanufacturer relied in the granting of the franchise.

(25)      To require, coerce,or attempt to coerce a new motor vehicle dealer in this State to eitherestablish or maintain exclusive facilities, personnel, or display space.

(26)      To resort to or touse any false or misleading advertisement in the conducting of its business asa manufacturer or distributor in this State.

(27)      To knowingly make,either directly or through any agent or employee, any material statement which isfalse or misleading or conceal any material facts which induce any new motorvehicle dealer to enter into any agreement or franchise or to take any actionwhich is materially prejudicial to that new motor vehicle dealer or hisbusiness.

(28)      To require, coerce,or attempt to coerce any new motor vehicle dealer to purchase or order any newmotor vehicle as a precondition to purchasing, ordering, or receiving any othernew motor vehicle or vehicles. Nothing herein shall prevent a manufacturer fromrequiring that a new motor vehicle dealer fairly represent and inventory thefull line of current model year new motor vehicles which are covered by thefranchise agreement, provided that such inventory representation requirementsare not unreasonable under the circumstances.

(29)      To require, coerce,or attempt to coerce any new motor vehicle dealer to sell, transfer, orotherwise issue stock or other ownership interest in the dealership corporationto a general manager or any other person involved in the management of thedealership other than the dealer principal or dealer operator named in thefranchise, unless the dealer principal or dealer operator is an absentee ownerwho is not involved in the operation of the dealership on a regular basis.

(30)      To vary the pricecharged to any of its franchised new motor vehicle dealers located in thisState for new motor vehicles based on the dealer's purchase of new facilities,supplies, tools, equipment, or other merchandise from the manufacturer, thedealer's relocation, remodeling, repair, or renovation of existing dealershipsor construction of a new facility, the dealer's participation in trainingprograms sponsored, endorsed, or recommended by the manufacturer, whether ornot the dealer is dualed with one or more other line makes of new motorvehicles, or the dealer's sales penetration. Except as provided in thissubdivision, it shall be unlawful for any manufacturer, factory branch,distributor, or distributor branch, or any field representative, officer,agent, or any representative whatsoever of any of them to vary the pricecharged to any of its franchised new motor vehicle dealers located in thisState for new motor vehicles based on the dealer's sales volume, the dealer'slevel of sales or customer service satisfaction, the dealer's purchase ofadvertising materials, signage, nondiagnostic computer hardware or software,communications devices, or furnishings, or the dealer's participation in usedmotor vehicle inspection or certification programs sponsored or endorsed by themanufacturer.

Theprice of the vehicle, for purposes of this subdivision shall include themanufacturer's use of rebates, credits, or other consideration that has theeffect of causing a variance in the price of new motor vehicles offered to its franchiseddealers located in the State.

Notwithstandingthe foregoing, nothing in this subdivision shall be deemed to preclude amanufacturer from establishing sales contests or promotions that provide oraward dealers or consumers rebates or incentives; provided, however, that themanufacturer complies with all of the following conditions:

a.         With respect tomanufacturer to consumer rebates and incentives, the manufacturer's criteriafor determining eligibility shall:

1.         Permit all of themanufacturer's franchised new motor vehicle dealers in this State to offer therebate or incentive; and

2.         Be uniformly appliedand administered to all eligible consumers.

b.         With respect tomanufacturer to dealer rebates and incentives, the rebate or incentive programshall:

1.         Be based solely onthe dealer's actual or reasonably anticipated sales volume or on a uniform pervehicle sold or leased basis;

2.         Be uniformlyavailable, applied, and administered to all of the manufacturer's franchisednew motor vehicle dealers in this State; and

3.         Provide that any ofthe manufacturer's franchised new motor vehicle dealers in this State may, uponwritten request, obtain the method or formula used by the manufacturer inestablishing the sales volumes for receiving the rebates or incentives and thespecific calculations for determining the required sales volumes of theinquiring dealer and any of the manufacturer's other franchised new motorvehicle dealers located within 75 miles of the inquiring dealer.

Nothingcontained in this subdivision shall prohibit a manufacturer from providingassistance or encouragement to a franchised dealer to remodel, renovate,recondition, or relocate the dealer's existing facilities, provided that thisassistance, encouragement, or rewards are not determined on a per vehiclebasis.

It isunlawful for any manufacturer to charge or include the cost of any program orpolicy prohibited under this subdivision in the price of new motor vehiclesthat the manufacturer sells to its franchised dealers or purchasers located inthis State.

Inthe event that as of October 1, 1999, a manufacturer was operating a programthat varied the price charged to its franchised dealers in this State in amanner that would violate this subdivision, or had in effect a documented policythat had been conveyed to its franchised dealers in this State and that variedthe price charged to its franchised dealers in this State in a manner thatwould violate this subdivision, it shall be lawful for that program or policy,including amendments to that program or policy that are consistent with thepurpose and provisions of the existing program or policy, or a program orpolicy similar thereto implemented after October 1, 1999, to continue in effectas to the manufacturer's franchised dealers located in this State until June30, 2014.

Inthe event that as of June 30, 2001, a manufacturer was operating a program thatvaried the price charged to its franchised dealers in this State in a mannerthat would violate this subdivision, or had in effect a documented policy thathad been conveyed to its franchised dealers in this State and that varied theprice charged to its franchised dealers in this State in a manner that wouldviolate this subdivision, and the program or policy was implemented in thisState subsequent to October 1, 1999, and prior to June 30, 2001, and providedthat the program or policy is in compliance with this subdivision as it existedas of June 30, 2001, it shall be lawful for that program or policy, includingamendments to that program or policy that comply with this subdivision as itexisted as of June 30, 2001, to continue in effect as to the manufacturer'sfranchised dealers located in this State until June 30, 2014.

Anymanufacturer shall be required to pay or otherwise compensate any franchisedealer who has earned the right to receive payment or other compensation undera program

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