§ 465 — Procedures relating to warranties and sales incentives

§ 465. Procedures relating to warranties and sales incentives. 1.\nEvery franchisor shall properly fulfill any warranty agreement and/or\nfranchisor's service contract, including but not limited to all warranty\nrepairs, extended warranty repairs, factory compensated repairs,\nrecalls, diagnostics, parts and other voluntary stop-sell repairs, and\nshall compensate each of its franchised motor vehicle dealers for all\nwarranty, recall, diagnostic labor operations and parts where applicable\nin amounts which reflect reasonable compensation for such work. For\npurposes of this section, reasonable compensation shall be the\nreasonable labor time allowances defined by the retail labor time guide\nreasonably utilized by a franchised motor vehicle dealer for\nnon-warranty customer paid labor operations. All warranty claims and/or\nclaims under a franchisor's service contract made by franchised motor\nvehicle dealers shall be paid within thirty days following their\napproval. For diagnosis work, parts reimbursement, other than\ncomponents, systems, fixtures, appliances, furnishings, accessories and\nfeatures of a house coach that are designed, used and maintained\nprimarily for nonvehicular residential purposes, and for labor\nreimbursement, reasonable compensation shall not be less than the price\nand rate charged by the franchised motor vehicle dealer for like\nservices to non-warranty and/or non-service contract customers. For\npurposes of this section, the price and rate charged by the franchised\nmotor vehicle dealer for parts may be established by submitting to the\nfranchisor one hundred sequential nonwarranty customer-paid service\nrepair orders or the number of sequential nonwarranty customer-paid\nservice repair orders written within a ninety day period, whichever is\nless, covering repairs made no more than one hundred eighty days before\nthe submission, and declaring the price and rate, including average\nmarkup for the franchised motor vehicle dealer as its reimbursement\nrate. The reimbursement rate so declared shall go into effect thirty\ndays following the declaration and shall be presumed to be reasonable,\nhowever a franchisor may rebut such presumption by showing that such\nrate so established is unreasonable in light of the practices of all\nother franchised motor vehicle dealers in the vicinity offering the same\nline make. The franchised motor vehicle dealer shall not request a\nchange in the reimbursement rate more often than once in each calendar\nyear. In establishing the labor reimbursement rate, the franchisor shall\nnot require a franchised motor vehicle dealer to establish said rate by\na methodology, or by requiring information, that is unduly burdensome or\ntime consuming to provide, including, but not limited to, a transaction\nby transaction calculation. For the purposes of this section, the\nfollowing parts or types of repairs shall be excluded from the parts\nand/or labor calculations and the franchisor's reimbursement\nrequirements under this section: (a) parts sold at wholesale; (b) tires;\n(c) routine maintenance not covered under any retail customer warranty\nsuch as fluids, filters and belts not provided in the course of repairs;\n(d) vehicle reconditioning; and (e) batteries replaced as part of a\nroutine maintenance operation. If the franchisor rejects the declaration\nor attempts to rebut the declaration because of an error in the dealer's\nsubmission, the franchisor shall identify with specificity the reason\nfor rejection and identify the error or errors within the submission. In\nthe event the franchisor rejects or rebuts the dealer's initial\ndeclaration, the dealer shall have the opportunity, within sixty days to\nresubmit the full and corrected declaration addressing the alleged error\nor errors identified by the franchisor. The franchisor shall respond\nwithin sixty days. The one hundred eighty day requirement for the repair\norders shall be stayed from the date of initial submission. In any\naction or proceeding held pursuant to this subdivision, the franchisor\nshall have the burden of proving that the rate declared by the dealer\nwas unreasonable as described in this subdivision and that the proposed\nadjustment of the average percentage markup or rejection of the\nsubmission is reasonable pursuant to the provisions of this subdivision.\nA warranty claim timely made shall not be deemed invalid solely because\nunavailable parts cause additional use and mileage on the vehicle.\n 2. All warranty or sales incentive claims shall be either approved or\ndisapproved within thirty days after their receipt. When any such claim\nis disapproved the franchised motor vehicle dealer shall be notified in\nwriting of its disapproval within said period. Each such notice shall\nstate the specific grounds upon which the disapproval is based. Failure\nto disapprove a claim within thirty days shall be deemed approval.\n 3. No franchisor shall conduct an audit or charge back any warranty\npayment, or any sales, advertising or marketing incentive payment\n("incentive payments") or otherwise hold a franchised motor vehicle\ndealer liable for charges more than one year, or five years in the case\nof fraud, after the date the franchisor made such payment to the dealer,\nwithout providing a notice to a franchised motor vehicle dealer of, or a\nmechanism that makes available to a franchised motor vehicle dealer,\ninformation regarding errors or issues regarding such dealer's warranty,\nsales, advertising or marketing incentive claims that are the subject of\nthe audit or chargeback. Nothing in this section shall be deemed to\ngrant a dealer the right to access any file held by the manufacturer\nevaluating such dealer. In connection with a claim for warranty\nreimbursements, the dealer's failure to document properly one part of a\nwarranty repair that contains more than one part shall not be the sole\nbasis to charge back the entire repair. A manufacturer shall not deny a\nclaim submitted under this section based solely on a dealer's incidental\nfailure to comply with a specific claim processing requirement, a\nclerical error, or other administrative technicality, provided that the\nfailure does not call into question the legitimacy of the claim and that\nthe dealer corrects the claim according to franchisor guidelines.\n 4. A franchisor shall not charge a dealer back subsequent to the\npayment of a warranty, sales, advertising or marketing incentive claim\nunless a representative of the franchisor has met in person at the\ndealership, or by telephone, with an officer or employee of the dealer\ndesignated by the dealer and explained in detail the basis for each of\nthe proposed charge backs and thereafter given the dealer's\nrepresentative a reasonable opportunity at the meeting, or during the\ntelephone call, to explain the dealer's position relating to each of the\nproposed charge backs. In the event the dealer was selected for audit or\nreview on the basis that some or all of the dealer's claims were viewed\nas excessive in comparison to average, mean or aggregate data\naccumulated by the franchisor, or in relation to claims submitted by a\ngroup of other franchisees, the franchisor shall, at or prior to the\nmeeting or telephone call with the dealer's representative, provide the\ndealer with a written statement containing the basis or methodology upon\nwhich the dealer was selected for audit or review.\n 5. A franchisor shall not deny or charge back a payment for warranty\nwork claimed by the dealer unless the franchisor satisfies its burden of\nproof that the dealer did not make a good faith effort to comply with\nthe reasonable written procedures of the franchisor or that the dealer\ndid not actually perform the work.\n 6. A franchisor shall not deny or charge back a sales, advertising or\nmarketing incentive payment made to a dealer unless the claim was\nmaterially false or fraudulent or the dealer failed to reasonably\nsubstantiate the claim in accordance with the manufacturer's reasonable\nprocedures.\n 7. After all internal dispute resolution processes provided through\nthe franchisor have been resolved, the franchisor shall give notice to\nthe dealer of the final amount of a proposed warranty, sales,\nadvertising or marketing incentive charge back. If the dealer institutes\nan action pursuant to this article within thirty days of receipt of such\nnotice, the proposed charge back shall be stayed, without bond, during\nthe pendency of such action and until the final judgment has been\nrendered in an adjudicatory proceeding or action as provided in section\nfour hundred sixty-nine of this article. The franchisor shall not impose\nthe chargeback, debit the dealer's account, or otherwise seek to obtain\nall or any part of the chargeback funds from the dealer during the\nthirty-day period in which the dealer has the opportunity to file an\naction as set forth above.\n