Assembly Bill No. 369–Assemblymen Grady, Atkinson, Collins, Goicoechea, Knecht, McCleary, Pierce, Sherer and Williams

 

March 17, 2003

____________

 

Referred to Committee on Commerce and Labor

 

SUMMARY—Revises provisions governing trade practices between suppliers and dealers of certain equipment and machinery. (BDR 52‑1059)

 

FISCAL NOTE:  Effect on Local Government: No.

                           Effect on the State: No.

 

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EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.

 

AN ACT relating to trade practices; requiring a supplier of certain equipment and machinery to repurchase the equipment and machinery from a dealer to whom it was sold under certain circumstances; providing for the payment of claims for reimbursement for work performed by such a dealer under a warranty; and providing other matters properly relating thereto.

 

THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN

SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:

 

1-1  Section 1. Chapter 597 of NRS is hereby amended by adding

1-2  thereto the provisions set forth as sections 2 to 20, inclusive, of this

1-3  act.

1-4  Sec. 2. As used in sections 2 to 20, inclusive, of this act,

1-5  unless the context otherwise requires, the words and terms defined

1-6  in sections 3 to 8, inclusive, of this act have the meanings ascribed

1-7  to them in those sections.

1-8  Sec. 3.  “Dealer” means any person who engages in the

1-9  business of selling inventory. The term does not include a dealer

1-10  who engages primarily in the retail sale and servicing of off-road

1-11  construction and earth-moving equipment and:

2-1  1.  Who purchases at least 75 percent of the new inventory of

2-2  one supplier pursuant to a dealer agreement with the supplier; and

2-3  2.  Whose annual average sales are more than $20,000,000 of

2-4  inventory purchased from the supplier for the immediately

2-5  preceding 3 years.

2-6  Sec. 4.  “Dealer agreement” means a written agreement

2-7  between a supplier and a dealer by which:

2-8  1.  A commercial relationship of definite duration or

2-9  continuing indefinite duration is established;

2-10      2.  The dealer is granted the right to offer and sell inventory at

2-11  retail;

2-12      3.  The dealer constitutes a component of a system for the

2-13  distribution of inventory; and

2-14      4.  The operation of a portion of the dealer’s business is

2-15  substantially dependent upon the supplier for a continued supply

2-16  of inventory.

2-17      Sec. 5.  “Inventory” means machinery, farm equipment,

2-18  utility equipment, industrial equipment, construction equipment,

2-19  outdoor power equipment or any attachments or repair parts for

2-20  that machinery or equipment.

2-21      Sec. 6.  “Net price” means the price set forth in the price list

2-22  or catalog of a supplier which is in effect when a dealer agreement

2-23  is terminated, less any applicable trade or cash discounts.

2-24      Sec. 7.  “Superseded part” or “superseded repair part” means

2-25  a part which has an equivalent function of a part which is

2-26  available on the date of the termination of a dealer agreement.

2-27      Sec. 8.  “Supplier” means:

2-28      1.  A manufacturer, wholesaler or wholesale distributor of

2-29  new inventory;

2-30      2.  A purchaser of the assets or shares of a surviving

2-31  corporation resulting from a merger or liquidation of a supplier;

2-32  or

2-33      3.  A receiver, assignee or trustee of such a manufacturer,

2-34  wholesaler or wholesale distributor.

2-35      Sec. 9.  1.  A supplier shall not terminate, fail to renew or

2-36  substantially change the terms of a dealer agreement without good

2-37  cause.

2-38      2.  Except as otherwise provided in this section, a supplier

2-39  may terminate or refuse to renew a dealer agreement for good

2-40  cause if the supplier provides to the dealer a written notice setting

2-41  forth the reasons for the termination or nonrenewal of the dealer

2-42  agreement at least 180 days before the termination or nonrenewal

2-43  of the dealer agreement.

2-44      3.  A supplier shall include in the written notice required by

2-45  subsection 2 an explanation of the deficiencies of the dealer and

3-1  the manner in which those deficiencies must be corrected. If the

3-2  dealer corrects the deficiencies set forth in the notice within 60

3-3  days after he receives the notice, the supplier shall not terminate

3-4  or fail to renew the dealer agreement for the reasons set forth in

3-5  the notice.

3-6  4.  A supplier shall not terminate or refuse to renew a dealer

3-7  agreement based solely on the failure of the dealer to comply with

3-8  the requirements of the dealer agreement concerning the amount

3-9  of business the dealer was required to transact unless the supplier

3-10  has, for not less than 1 year, provided assistance to the dealer in

3-11  the dealer’s effort to transact the required amount of business.

3-12      5.  As used in this section, “good cause” means:

3-13      (a) A dealer fails to comply with the terms of a dealer

3-14  agreement, if the terms are not substantially different from the

3-15  terms required for other dealers in this state or any other state;

3-16      (b) A closeout or sale of a substantial part of the business

3-17  assets of a dealer or a commencement of the dissolution or

3-18  liquidation of the business assets of the dealer;

3-19      (c) A dealer changes its principal place of business or adds

3-20  other places of business without the prior approval of the supplier,

3-21  which may not be unreasonably withheld;

3-22      (d) A dealer substantially defaults under a chattel mortgage or

3-23  other security agreement between the dealer and the supplier;

3-24      (e) A guarantee of a present or future obligation of a dealer to

3-25  the supplier is revoked or discontinued;

3-26      (f) A dealer fails to operate in the normal course of business

3-27  for at least 7 consecutive days;

3-28      (g) A dealer abandons the dealership;

3-29      (h) A dealer pleads guilty to or is convicted of a felony

3-30  affecting the business relationship between the dealer and

3-31  supplier; or

3-32      (i) A dealer transfers a financial interest in the dealership, a

3-33  person who has a substantial financial interest in the ownership or

3-34  control of the dealership dies or withdraws from the dealership, or

3-35  the financial interest of a partner or major shareholder in the

3-36  dealership is substantially reduced.

3-37  For the purposes of this section, good cause does not exist if the

3-38  supplier consents to any action described in this section.

3-39      Sec. 10.  1.  Each year a supplier shall allow each dealer

3-40  with whom it has entered into a dealer agreement to return to the

3-41  supplier for credit a portion of the surplus parts in the dealer’s

3-42  inventory.

3-43      2.  A supplier shall notify each dealer of the period it has

3-44  designated for that dealer to submit a list of the surplus parts the

3-45  dealer wishes to return and for that dealer to return the surplus

4-1  parts to the supplier. The period designated for each dealer for the

4-2  return of surplus parts must not be less than 90 days.

4-3  3.  If a supplier fails to notify a dealer of the period during

4-4  which the dealer may return surplus parts within the preceding 12

4-5  months, the supplier shall authorize the return of a dealer’s

4-6  surplus parts within 60 days after the supplier receives a request

4-7  from the dealer to return the surplus parts.

4-8  4.  A dealer may return surplus parts equal to not more than

4-9  10 percent of the value of the parts purchased by the dealer from

4-10  the supplier during:

4-11      (a) The 12-month period immediately preceding the notice

4-12  provided to the dealer by the supplier pursuant to subsection 2; or

4-13      (b) The month the supplier receives a request from a dealer

4-14  pursuant to subsection 3 to return surplus parts to the

4-15  supplier,

4-16  whichever is applicable.

4-17      5.  Any part included in the supplier’s list of returnable parts

4-18  or any superseded part that is not eligible for return to the supplier

4-19  on the date the supplier provides notice to the dealer pursuant to

4-20  subsection 2 or the date the supplier receives the dealer’s request

4-21  pursuant to subsection 3, whichever is applicable, is eligible for

4-22  credit as a returned surplus part. A part which is returned must be

4-23  in new and undamaged condition and must have been purchased

4-24  by the dealer from the supplier to whom it is returned.

4-25      6.  The minimum credit allowed for a returned part is 95

4-26  percent of the net price, as set forth in the supplier’s list of

4-27  returnable parts on the date the supplier provides notice to the

4-28  dealer pursuant to subsection 2 or the date the supplier receives

4-29  the dealer’s request pursuant to subsection 3, whichever is

4-30  applicable.

4-31      7.  All applicable credit for the returned parts must be issued

4-32  or provided to the dealer within 90 days after the supplier receives

4-33  the dealer’s returned surplus parts.

4-34      8.  The provisions of this section:

4-35      (a) Are in addition to any other agreement between a dealer

4-36  and supplier concerning the return of surplus repair parts;

4-37      (b) Do not prohibit a supplier from charging a dealer’s

4-38  account for the amounts previously paid or credited by the

4-39  supplier as a discount incident to the dealer’s purchase of goods;

4-40  and

4-41      (c) Do not require a dealer to return for credit surplus parts to

4-42  a supplier.

4-43      Sec. 11.  A supplier shall not:

4-44      1.  Require a dealer to accept delivery of equipment, parts or

4-45  accessories which the dealer has not ordered unless the

5-1  equipment, parts or accessories are required by the supplier for

5-2  the safe use of any inventory provided to the dealer by the

5-3  supplier;

5-4  2.  Condition the sale of any equipment to a dealer upon the

5-5  purchase of additional goods or services, except that a supplier

5-6  may require a dealer to purchase those parts which are necessary

5-7  to maintain the equipment used in the area where the dealership is

5-8  located;

5-9  3.  Prohibit a dealer from purchasing equipment

5-10  manufactured by another supplier; or

5-11      4.  Terminate, fail to renew or substantially change the terms

5-12  of a dealer agreement because of a natural disaster, including a

5-13  drought in the market area of the dealership, a labor dispute or

5-14  any other similar circumstances which are beyond the control of

5-15  the dealer.

5-16      Sec. 12.  1.  Except as otherwise provided in this section,

5-17  upon the termination of a dealer agreement by a supplier or

5-18  dealer, the supplier shall repurchase the inventory held by the

5-19  dealer on the date of the termination of the dealer agreement.

5-20      2.  A supplier who repurchases the inventory of a dealer

5-21  pursuant to subsection 1 shall:

5-22      (a) Pay the dealer:

5-23          (1) One hundred percent of the net price of all new and

5-24  undamaged inventory; and

5-25          (2) Ninety-five percent of the net price of new and

5-26  undamaged superseded repair parts.

5-27      (b) Except as otherwise provided in this paragraph, pay the

5-28  dealer an amount equal to 5 percent of the net price of all new and

5-29  undamaged repair parts returned to the supplier to cover the cost

5-30  incurred by the dealer for handling, packing and shipping the

5-31  superseded repair parts to the supplier. If the supplier handles,

5-32  packs and ships the superseded repair parts, the dealer is not

5-33  entitled to receive any money for those services which the supplier

5-34  performed.

5-35      (c) Purchase, at its depreciated value, any computers, software

5-36  or telecommunications equipment that the supplier required the

5-37  dealer to purchase within the previous 5 years.

5-38      (d) Repurchase, at 75 percent of the net cost, any specialized

5-39  repair tools purchased if those tools are:

5-40          (1) Included in the tool catalog of the supplier;

5-41          (2) Purchased in accordance with the requirements of the

5-42  supplier;

5-43          (3) Held by the dealer on the date of the termination of the

5-44  dealer agreement; and

5-45          (4) Complete and in resalable condition.

6-1  (e) Repurchase, at its depreciated value, any inventory which

6-2  was used in demonstrations or for display, or leased or rented by

6-3  the dealer.

6-4  3.  If the dealer agreement authorizes the dealer to retain the

6-5  inventory upon the termination of the dealer agreement, the dealer

6-6  may retain any portion of the inventory, except any specialized

6-7  tools described in paragraph (d) of subsection 2 which the supplier

6-8  wishes to repurchase from the dealer.

6-9  4.  If the dealer owes any outstanding debts to the supplier,

6-10  the amount of the repurchase of the inventory may be setoff or

6-11  credited to the account of the dealer.

6-12      5.  Upon payment to the dealer of the amount for the

6-13  repurchase of the inventory pursuant to this section, the title and

6-14  right of possession to the inventory transfers to the supplier.

6-15      Sec. 13.  1.  At the end of each year after the termination of

6-16  a dealer agreement, a dealer’s reserve account for recourse, retail

6-17  sale or lease contracts may not be debited by a supplier or lender

6-18  for any deficiency unless the dealer is given written notice of at

6-19  least 7 business days by certified or registered mail, return receipt

6-20  requested, of any proposed sale of the inventory which was

6-21  financed and an opportunity to purchase the inventory.

6-22      2.  The dealer must be given quarterly reports concerning any

6-23  remaining outstanding recourse contracts. As the recourse

6-24  contracts are reduced, any money in the reserve account must be

6-25  returned to the dealer in direct proportion to the liabilities

6-26  outstanding.

6-27      Sec. 14.  The provisions of sections 2 to 20, inclusive, of this

6-28  act do not require a supplier to repurchase from a dealer:

6-29      1.  Any repair part which is not in new and undamaged

6-30  condition or, because of its condition, is not resalable as a new

6-31  part;

6-32      2.  Any inventory which the dealer retains pursuant to

6-33  subsection 3 of section 12 of this act;

6-34      3.  Any inventory which is not in new, undamaged and

6-35  complete condition;

6-36      4.  Any inventory which was ordered by the dealer on or after

6-37  the date of the termination of the dealer agreement; or

6-38      5.  Any inventory which was purchased more than 36 months

6-39  before the notice of the termination of the dealer agreement is

6-40  provided.

6-41      Sec. 15.  If a supplier fails or refuses to repurchase and pay a

6-42  dealer for any inventory the supplier is required to repurchase in

6-43  accordance with the provisions of sections 2 to 20, inclusive, of

6-44  this act within 60 days after shipment of the inventory to the

6-45  supplier, the supplier is liable for:

7-1  1.  An amount equal to 100 percent of the net price of the

7-2  inventory;

7-3  2.  Any shipping charges paid by the dealer;

7-4  3.  Attorney’s fees and court costs; and

7-5  4.  An amount equal to the interest on the amount of the net

7-6  price calculated at the legal rate of interest from the 61st day after

7-7  the date of the shipment of the inventory to the supplier.

7-8  Sec. 16. 1.  Upon the death of a dealer or the majority

7-9  shareholder of a corporation which operates as a dealer, the

7-10  supplier shall, upon the approval or request of the devisee or heir

7-11  of the dealer or majority shareholder, repurchase the inventory of

7-12  the dealer in the manner prescribed in section 12 of this act.

7-13      2.  The devisee or heir shall, within 1 year after the death of

7-14  the dealer or majority stockholder, notify the supplier whether the

7-15  supplier will be required to repurchase the inventory of the dealer.

7-16      3.  A supplier is not required to repurchase the inventory of

7-17  the dealer if the devisee or heir and the supplier enter into a new

7-18  dealer agreement to operate the dealership.

7-19      4.  This section does not authorize any person, including a

7-20  devisee or heir, to operate a dealership without the written

7-21  approval of the supplier.

7-22      5.  An agreement executed by the supplier and dealer that sets

7-23  forth the rights relating to succession to the operation of the

7-24  dealership is enforceable without regard to the person who is

7-25  designated as the successor to the dealership.

7-26      6.  As used in this section:

7-27      (a) “Devisee” has the meaning ascribed to it in NRS 132.100.

7-28      (b) “Heir” has the meaning ascribed to it in NRS 132.165.

7-29      Sec. 17.  The provisions of sections 2 to 20, inclusive, of this

7-30  act do not affect any security interest which a supplier has in the

7-31  inventory of a dealer. The dealer and supplier shall each provide a

7-32  representative to inspect the inventory and certify its acceptability

7-33  when packaged for shipment. The failure of the supplier to

7-34  provide a representative for the inspection within 60 days shall be

7-35  deemed acceptance by the supplier of the inventory returned to the

7-36  supplier.

7-37      Sec. 18.  1.  A dealer may bring a civil action for damages in

7-38  a court of competent jurisdiction against a supplier who violates

7-39  any of the provisions of sections 2 to 20, inclusive, of this act and

7-40  may recover damages incurred as a result of any violation

7-41  committed by the supplier, including costs and attorney’s fees.

7-42      2.  A dealer may apply for injunctive relief for the unlawful

7-43  termination, nonrenewal or substantial change of the terms of a

7-44  dealer agreement.

8-1  3.  The remedies provided in this section are in addition to any

8-2  other remedies provided by law.

8-3  Sec. 19.  Except as otherwise provided in an agreement,

8-4  including, without limitation, a dealer agreement, entered into by

8-5  a supplier and a dealer concerning work performed under a

8-6  warranty:

8-7  1.  A supplier who authorizes a dealer to perform work under a

8-8  warranty shall reimburse a dealer who submits a claim for

8-9  reimbursement for such work.

8-10      2.  A claim for reimbursement which is submitted to a supplier

8-11  must be paid within 30 days after the claim is approved by the

8-12  supplier. The supplier shall approve or disapprove a claim within

8-13  30 days after it receives the claim. If the claim is disapproved, the

8-14  supplier shall, not later than 30 days after it receives the claim,

8-15  send written notice to the dealer setting forth the reasons for

8-16  disapproval of the claim. A claim which is not disapproved by the

8-17  supplier within the prescribed period shall be deemed approved.

8-18      3.  The amount of reimbursement for a claim must not be less

8-19  than the amount equal to the sum of:

8-20      (a) The time required to complete the work, expressed in hours

8-21  and fractions of hours, multiplied by the dealer’s hourly retail rate

8-22  for labor; and

8-23      (b) The dealer’s cost for any parts replaced, including the cost

8-24  of the shipping and handling of the parts, plus 15 percent of the

8-25  total costs and charges.

8-26      4.  After a supplier has paid a claim for reimbursement, the

8-27  supplier shall not charge back, setoff or otherwise attempt to

8-28  recover from a dealer any amount of the claim for reimbursement

8-29  unless:

8-30      (a) The claim for reimbursement is fraudulent; or

8-31      (b) The work was not performed properly or was not necessary

8-32  to comply with the requirements of the warranty.

8-33      5.  A supplier shall not require a dealer to pay for the costs

8-34  incurred by the supplier in paying claims for reimbursement for

8-35  work performed under a warranty by imposing a surcharge,

8-36  reducing any discounts provided to a dealer or imposing

8-37  additional requirements for certification of a dealer authorized to

8-38  perform work under a warranty.

8-39      6.  A supplier may audit the records of a dealer relating to a

8-40  claim for reimbursement for work performed under a warranty

8-41  within 1 year after the claim is submitted to the supplier.

8-42      Sec. 20.  1.  A person may not waive or modify a right,

8-43  obligation or liability set forth in the provisions of sections 2 to 20,

8-44  inclusive, of this act.

9-1  2.  A condition, stipulation or provision of a dealer agreement

9-2  or any other agreement that:

9-3  (a) Limits the procedural or substantive rights of a dealer

9-4  pursuant to the provisions of sections 2 to 20, inclusive, of this act;

9-5  (b) Requires a person to waive a right set forth in the

9-6  provisions of sections 2 to 20, inclusive, of this act; or

9-7  (c) Relieves a person of an obligation or liability imposed by

9-8  the provisions of sections 2 to 20, inclusive, of this act,

9-9  is void.

9-10      Sec. 21.  1.  This act applies to a dealer agreement or any

9-11  agreement for the payment of claims for reimbursement for work

9-12  performed by a dealer under a warranty provided by a supplier

9-13  which is entered into between a supplier and dealer before, on or

9-14  after October 1, 2003.

9-15      2.  As used in this section:

9-16      (a) “Dealer” has the meaning ascribed to it in section 3 of this

9-17  act.

9-18      (b) “Dealer agreement” has the meaning ascribed to it in section

9-19  4 of this act.

9-20      (c) “Supplier” has the meaning ascribed to it in section 8 of this

9-21  act.

 

9-22  H