§ 8-20-5 — Limitations on Cancellations, Modifications, Terminations, and Nonrenewals of Franchise Relationships

(a) Notwithstanding the terms, provisions, or conditions of any agreement or franchise or notwithstanding the terms or provisions of any waiver, no manufacturer shall cancel, terminate, modify, fail to renew, or refuse to continue any franchise relationship with a licensed new motor vehicle dealer unless the manufacturer has:
(1) Satisfied the notice requirement of this section.
(2) Acted in good faith as defined in this chapter.
(3) Has good cause for the cancellation, termination, modification, nonrenewal, or noncontinuance.
(b) Notwithstanding the terms, provisions, or conditions of any agreement or franchise or the terms or provisions of any waiver, good cause shall exist for the purposes of a termination, cancellation, modification, nonrenewal, or noncontinuance when:
(1) There is a failure by the new motor vehicle dealer to comply with a provision of the franchise which provision is both reasonable and of material significance to the franchise relationship, provided that the manufacturer first acquired actual or constructive knowledge of such failure not more than 180 days prior to the date on which notification is given by the manufacturer pursuant to the requirements of this section.
(2) If the failure by the new motor vehicle dealer to comply with a provision of the franchise relates to the performance of the dealer in sales or service, then good cause shall be defined as the failure of the dealer to substantially comply with the reasonable performance provisions of the franchise if:
a. The new motor vehicle dealer was apprised by the manufacturer in writing of such failure and each of the following occur:
1. The notification stated that notice was provided of failure of performance pursuant to this chapter.
2. The new motor vehicle dealer was afforded a reasonable opportunity, for a period of not less than six months, to exert good faith efforts to carry out such provisions.
3. The new motor vehicle dealer did not demonstrate substantial compliance with the manufacturer’s performance standards during such period and that the failure to demonstrate such compliance was not due to factors which were beyond the control of such dealer.
b. Such failure thereafter continued within the period which began not more than 180 days before the date notification of termination, cancellation, modification, or nonrenewal was given pursuant to this section.
(c) The manufacturer shall have the burden of proof for showing that it has acted in good faith, that the notice requirements have been complied with, and that there was good cause for the franchise termination, cancellation, modification, nonrenewal, or noncontinuance.
(d) If a dealer brings an action in a court of competent jurisdiction to challenge the cancellation, termination, or nonrenewal of a franchise or dealer agreement by a manufacturer under this section, such franchise or dealer agreement shall remain in full force and effect and such dealer shall retain all rights and remedies pursuant to the terms and conditions of such franchise or dealer agreement, including, but not limited to, the right to sell or transfer the dealer’s ownership interest, until a final determination by a court of competent jurisdiction, including appeal, unless extended by the court for good cause. This subsection shall not apply to a cancellation, termination, or nonrenewal of a franchise or dealer agreement based upon any of the reasons set forth in subsection (e)(2).
(e) Notwithstanding the terms, provisions, or conditions of any agreement or franchise or the terms or provisions of any waiver, prior to the termination, cancellation, modification, or nonrenewal of any franchise or dealer agreement, the manufacturer shall furnish notification of such termination, cancellation, modification, or nonrenewal to the new motor vehicle dealer as follows:
(1) In the manner described in subsection (f).
(2) Not less than 90 days prior to the effective date of such termination, cancellation, modification, or nonrenewal or not less than 30 days prior to the effective date of such termination, cancellation, or nonrenewal with respect to any of the following:
a. Filing of any petition by or against the new motor vehicle dealer under any bankruptcy or receivership law.
b. Willful or intentional misrepresentation made by the new motor vehicle dealer with the express intent to defraud the manufacturer or distributor.
c. Failure of the new motor vehicle dealer to conduct its customary sales and service operations during its customary business hours for seven consecutive business days.
d. Final conviction (including appeal) of the new motor vehicle dealer, principal owner, or principal executive manager of any felony.
(f) Notification under this section shall be in writing; shall be by certified mail or personally delivered to the new motor vehicle dealer; and shall contain:
(1) A statement of intention to terminate the franchise, cancel the franchise, modify the franchise, or not to renew the franchise.
(2) A statement of the reasons for the termination, cancellation, modification, or nonrenewal.
(3) The date on which such termination, cancellation, modification, or nonrenewal takes effect.
(g) Upon the termination, cancellation, or nonrenewal by the manufacturer of any franchise or dealer agreement for good cause, the new motor vehicle dealer shall be paid fair and reasonable compensation by the manufacturer for the:
(1) New motor vehicle inventory of the current and previous model year which has been acquired from the manufacturer. Any new and unused motor vehicle repurchased by the manufacturer shall be repurchased at the net cost to the dealer.
(2) Supplies and parts acquired by the new motor vehicle dealer from the manufacturer, its approved sources, or original manufacturer supplies and parts acquired from other dealers in the ordinary course of business, within seven years prior to the effective date of the termination, cancellation, or nonrenewal. Supplies and parts shall be repurchased by the manufacturer at the net cost to the dealer without any restocking fees or other fees.
(3) Equipment, signs, and furnishings acquired by the new motor vehicle dealer from the manufacturer or its approved sources. The dealer shall be paid either the fair market value of the equipment, signs, and furnishings as of the date of termination or the value of the equipment, signs, and furnishings based on a six-year straight line schedule of depreciation, whichever is greater.
(4) Special tools and automotive service equipment that were required and designated as special tools or equipment by the manufacturer. The dealer shall be paid either the fair market value of the special tools and automotive service equipment as of the date of termination or the value of the special tools and automotive service equipment based on a six-year straight line schedule of depreciation, whichever is greater.
(5) The net cost of any upgrades or alterations made by the dealer to the dealership facilities which were recommended in writing by the manufacturer and made within two years prior to the effective date of termination.
(6) Dealership facilities, if the facilities were required to be purchased or constructed as a precondition to obtaining the franchise or to its renewal by the manufacturer. The manufacturer shall use its best efforts to locate a purchaser who will offer to purchase the facilities at a reasonable price. If the manufacturer does not locate a purchaser within a reasonable time, the manufacturer will pay the dealer an amount equivalent to the reasonable rental value of such facilities for three years during which time the manufacturer shall be entitled to possession of the facilities. If the facilities were leased from a lessor other than the manufacturer and the facilities were required as a precondition to obtaining the franchise or to its renewal by the manufacturer, then the manufacturer shall use its best efforts to locate a lessee who will offer to lease the premises for a reasonable term at a reasonable rent. If the manufacturer does not locate a lessee within a reasonable time, the manufacturer shall pay such rent for three years or the remainder of the term of the lease, whichever is less and the manufacturer shall have the option to succeed to the rights of the dealer under the lease. If the dealership facility is used for more than one line make, the rental payment by the manufacturer shall be prorated for each line make based on the floor space allocated to each line make.
(h) Upon the termination, cancellation, or nonrenewal by the manufacturer of any franchise without good cause, the new motor vehicle dealer shall be paid fair and reasonable compensation by the manufacturer for the items described in subdivisions (g)(1) through (g)(6) and for the dealership facilities, if the facilities were required to be purchased or constructed as a precondition to obtain the franchise or to its renewal by the manufacturer. If the facilities were leased and the lease was required as a precondition to obtaining the franchise or to its renewal by the manufacturer, then the manufacturer shall be liable for payment of the rent for the remainder of the term of the lease during which time the manufacturer shall be entitled to possession of the facilities. If the dealership facility is used for more than one line make, the rental payment by the manufacturer shall be prorated based on the floor space allocated to each line make. The manufacturer shall also pay the dealer fair and reasonable compensation for the value of the dealership within six months after the date of termination, cancellation, or nonrenewal.
(i) Upon the termination, cancellation, or nonrenewal by the manufacturer of any franchise as a result of willful or intentional misrepresentations made by the new motor vehicle dealer with the express intent to defraud the manufacturer or distributor or upon the termination, cancellation, or nonrenewal by the motor vehicle dealer, the new motor vehicle dealer shall be paid fair and reasonable compensation by the manufacturer for the items described in subdivisions (g)(1) through (g)(6).
(j)(1) Upon the termination, cancellation, or nonrenewal by the manufacturer occurring as a result of the cessation of a line make or as a result of the manufacturer’s selling or otherwise transferring some or all of the assets essential to the manufacture or distribution of the line make, the new motor vehicle dealer shall be paid fair and reasonable compensation by the manufacturer for the items described in subdivisions (g)(1) through (g)(6). The manufacturer shall also compensate the dealer in an amount equal to the greater of:
a. The actual pecuniary loss that the dealer suffered as a result of the termination, cancellation, or nonrenewal.
b. The fair market value of the franchise determined as of:
1. The date the manufacturer announces the action that results in termination, cancellation, or nonrenewal.
2. The date the action that resulted in the termination, cancellation, or nonrenewal first became general knowledge.
3. The day 12 months prior to the date on which the notice of termination, cancellation, or nonrenewal is issued, whichever is greater.
(2) If, as a result of the circumstances described above, an entity other than the original manufacturer of a line make becomes the manufacturer of the line make and intends to distribute motor vehicles of that line make in Alabama, the entity shall honor the franchise agreements of the original manufacturer and its dealers or offer those dealers a new franchise agreement for the line make on substantially similar terms and conditions. A dealer which elects to remain a dealer with the new entity or which enters into a new franchise agreement with this entity shall not be entitled to the compensation set forth in subdivision (1).
(3) This subsection shall not apply in the event of a termination or cessation of a line make by a recreational vehicle manufacturer.
(k) The fair and reasonable compensation to the dealer shall be paid by the manufacturer within 90 days after tender by the dealer of the items in subdivisions (g)(1) through (g)(4) at the dealership premises, provided the new motor vehicle dealer has clear title to the inventory and other items and is in a position to convey that title to the manufacturer.
(l) Subsections (g) through (k) shall not apply upon the termination, cancellation, or nonrenewal of a franchise by a motor home or motorcycle dealer.

Legislative History

(Acts 1981, No. 81-390, p. 596, §5; Acts 1991, No. 91-212, p. 398, §1; Act 2010-198, p. 300, §1.)