§ 31-16-109 — Termination, cancellation or nonrenewal of franchise

(a) Notwithstanding the terms, provisions or conditions of
any franchise or waiver, no manufacturer shall cancel, terminate
or fail to renew any franchise with a licensee unless the
manufacturer has satisfied the notice requirement of subsection
(b) of this section and has good cause for cancellation,
termination or nonrenewal.
(b) Prior to the termination, cancellation or nonrenewal
of any franchise, the manufacturer shall furnish notification of
termination, cancellation or nonrenewal to the department and
the licensee:
(i) Not less than ninety (90) days prior to the
effective date of the termination, cancellation or nonrenewal;
(ii) Not less than fifteen (15) days prior to the
effective date of the termination, cancellation or nonrenewal
with respect to any of the following which shall constitute good
cause for cancellation, termination or nonrenewal:
(A) Insolvency of the licensee, or filing of any
petition by or against the licensee under any bankruptcy or
receivership law;
(B) Failure of the licensee to conduct sales and
service operations during customary business hours for seven (7)
consecutive business days, except for acts of God or
circumstances beyond the direct control of the licensee;
(C) Conviction of the dealer, or any owner or
principal manager of the dealer in a court of original
jurisdiction of a felony or any crime involving theft,
dishonesty or false statement;
(D) Revocation of any license which the licensee
is required to have to operate a dealership;
(E) A fraudulent misrepresentation by the new
motor vehicle dealer to the manufacturer, which is material to
the franchise; or
(iii) Not less than one hundred eighty (180) days
prior to the effective date of the termination or cancellation,
where the manufacturer is discontinuing the sale of the product
line.
(c) Notification under this section shall be in writing,
by certified mail or personally delivered to the licensee and
shall state the intention to terminate, cancel or not to renew
the franchise, reasons for the termination, cancellation or
nonrenewal and the date on which the termination, cancellation
or nonrenewal takes effect.
(d) Good cause for termination, cancellation or nonrenewal
of a franchise shall include but not be limited to:
(i) Failure by the licensee to comply with a
provision of the franchise, which is both reasonable and of
material significance to the franchise relationship, provided
that the dealer has been notified in writing of the failure
within one hundred eighty (180) days prior to termination,
cancellation or nonrenewal;
(ii) Failure of the licensee to comply with
reasonable performance criteria established by the manufacturer
if the licensee was apprised by the manufacturer in writing of
the failure and:
(A) The notification stated that notice was
provided of failure of performance pursuant to this section;
(B) The licensee was afforded a reasonable
opportunity, for a period of not less than six (6) months, to
comply with the criteria; and
(C) The licensee did not demonstrate substantial
compliance with the performance criteria of the manufacturer
during such period.
(e) Within twenty (20) days of receiving the notice or
within twenty (20) days after the end of any appeal procedure
provided by the manufacturer, the dealer may file with the
department to protest the termination, cancellation or
nonrenewal. When a protest is filed, the department shall
inform the manufacturer that a timely protest has been filed.
The manufacturer shall have twenty (20) days to respond to the
protest. The manufacturer shall not terminate, cancel or
nonrenew the franchise until the department has held a hearing
and determined that there is good cause for permitting the
termination, cancellation or nonrenewal.
(f) The department will select a hearing examiner to
conduct a hearing and to render proposed findings of fact. The
proposed findings of fact shall be conclusive unless clearly
erroneous and unsupported by the record. The hearing shall be
conducted and the department shall render its final
determination within one hundred twenty (120) days after the
manufacturer responds to the licensee's protest. The department
may forbid the termination, cancellation or nonrenewal of the
franchise if it is determined good cause does not exist.
(g) All costs of the department, including but not limited
to, the cost of the investigation, the cost of the hearing
examiner and the cost of preparing the record, shall be borne
equally by the parties. The department may, in its discretion,
award costs to the prevailing party in any hearing held pursuant
to this chapter provided, however, if the department should
determine by a preponderance of the evidence, that the protest
is without merit, it shall award costs and reasonable attorney
fees to the prevailing party.
(h) The manufacturer shall have the burden of proof under
this section.
(j) Upon the termination, nonrenewal or cancellation of
any franchise by the manufacturer pursuant to this section, the
licensee shall be allowed fair and reasonable compensation by
the manufacturer for the:
(i) New vehicle inventory which is unused, undamaged,
unsold and acquired from the manufacturer within the prior
twelve (12) months and prior to the dealer receiving notice of
termination;
(ii) Supplies and parts which are unused, undamaged,
unsold and in original packaging and have been acquired from the
manufacturer prior to the dealer receiving notice of termination
and are listed in the manufacturer's current parts catalog or
price list;
(iii) Equipment and furnishings purchased from the
manufacturer or its approved sources in order to comply with the
dealer's obligations under the franchise; and
(iv) Special tools acquired from the manufacturer or
a source approved by the manufacturer which were recommended by
the manufacturer in writing and are in good and usable
condition, except for reasonable wear and tear.
(k) Fair and reasonable compensation under subsection (j)
of this section shall be paid or credited by the manufacturer
within ninety (90) days of the tender of the property, provided
the licensee has clear title to the inventory and other items
and is in a position to convey that title to the manufacturer.
(m) In the event of a termination, cancellation or
nonrenewal by the manufacturer under this section, except as
provided in subparagraph (b)(ii)(C) of this section, the
manufacturer shall pay:
(i) A sum equivalent to rent of the unexpired term of
the lease or one (1) year rent based upon reasonable rental
value, whichever is less, if the motor vehicle dealer is leasing
its motor vehicle dealership facility from a lessor other than
manufacturers or distributors; or
(ii) A sum equivalent to reasonable rental value of
the dealership facility for one (1) year or the reasonable
rental value of the facility until facilities are leased or
sold, whichever is less, if the motor vehicle dealer owns the
motor vehicle dealer facility.
(n) The rental payment required under subsection (m) of
this section is only required to the extent that the facilities
were used for the sale and service of the manufacturer's or
distributor's product, and only to the extent they are not
leased for other purposes. Payment under subsection (k) of this
section entitles the manufacturer or distributor to possession
and use of the facility.
(o) This section shall not relieve a new motor vehicle
dealer, lessor or other owner of an established place of
business from the obligation to mitigate damages.