(Reprinted with amendments adopted on April 21, 2003)

 

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.

 

~

 

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 single-

1-10  line dealer who engages primarily in the retail sale and servicing

1-11  of off-road 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 $10,000,000 of

2-4  inventory purchased from the supplier for the immediately

2-5  preceding 3 years.

2-6  Sec. 4.  “Dealer agreement” means an oral or written

2-7  agreement 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 share of

3-9  the market the dealer was required to obtain 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 obtain the required share of the market.

3-12      5.  A supplier is not required to comply with the provisions of

3-13  subsections 2 and 3 if the supplier terminates or refuses to renew a

3-14  dealer agreement for any reason set forth in paragraphs (b) to (i),

3-15  inclusive, of subsection 6.

3-16      6.  As used in this section, “good cause” means:

3-17      (a) A dealer fails to comply with the terms of a dealer

3-18  agreement, if the terms are not substantially different from the

3-19  terms required for other dealers in this state or any other state;

3-20      (b) A closeout or sale of a substantial part of the business

3-21  assets of a dealer or a commencement of the dissolution or

3-22  liquidation of the business assets of the dealer;

3-23      (c) A dealer changes its principal place of business or adds

3-24  other places of business without the prior approval of the supplier,

3-25  which may not be unreasonably withheld;

3-26      (d) A dealer substantially defaults under a chattel mortgage or

3-27  other security agreement between the dealer and the supplier;

3-28      (e) A guarantee of a present or future obligation of a dealer to

3-29  the supplier is revoked or discontinued;

3-30      (f) A dealer fails to operate in the normal course of business

3-31  for at least 7 consecutive days;

3-32      (g) A dealer abandons the dealership;

3-33      (h) A dealer pleads guilty to or is convicted of a felony

3-34  affecting the business relationship between the dealer and

3-35  supplier; or

3-36      (i) A dealer transfers a financial interest in the dealership, a

3-37  person who has a substantial financial interest in the ownership or

3-38  control of the dealership dies or withdraws from the dealership, or

3-39  the financial interest of a partner or major shareholder in the

3-40  dealership is substantially reduced.

3-41  For the purposes of this section, good cause does not exist if the

3-42  supplier consents to any action described in this section.

3-43      Sec. 10.  1.  Each year a supplier shall allow each dealer

3-44  with whom it has entered into a dealer agreement to return to the

4-1  supplier for credit a portion of the surplus parts in the dealer’s

4-2  inventory.

4-3  2.  A supplier shall notify each dealer of the period it has

4-4  designated for that dealer to submit a list of the surplus parts the

4-5  dealer wishes to return and for that dealer to return the surplus

4-6  parts to the supplier. The period designated for each dealer for the

4-7  return of surplus parts must not be less than 90 days.

4-8  3.  If a supplier fails to notify a dealer of the period during

4-9  which the dealer may return surplus parts within the preceding 12

4-10  months, the supplier shall authorize the return of a dealer’s

4-11  surplus parts within 60 days after the supplier receives a request

4-12  from the dealer to return the surplus parts.

4-13      4.  A dealer may return surplus parts equal to not more than

4-14  10 percent of the value of the parts purchased by the dealer from

4-15  the supplier during:

4-16      (a) The 12-month period immediately preceding the notice

4-17  provided to the dealer by the supplier pursuant to subsection 2; or

4-18      (b) The month the supplier receives a request from a dealer

4-19  pursuant to subsection 3 to return surplus parts to the

4-20  supplier,

4-21  whichever is applicable.

4-22      5.  Any part included in the supplier’s list of returnable parts

4-23  or any superseded part that is not eligible for return to the supplier

4-24  on the date the supplier provides notice to the dealer pursuant to

4-25  subsection 2 or the date the supplier receives the dealer’s request

4-26  pursuant to subsection 3, whichever is applicable, is eligible for

4-27  credit as a returned surplus part. A part which is returned must be

4-28  in new and undamaged condition and must have been purchased

4-29  by the dealer from the supplier to whom it is returned.

4-30      6.  The minimum credit allowed for a returned part is 95

4-31  percent of the net price, as set forth in the supplier’s list of

4-32  returnable parts on the date the supplier provides notice to the

4-33  dealer pursuant to subsection 2 or the date the supplier receives

4-34  the dealer’s request pursuant to subsection 3, whichever is

4-35  applicable.

4-36      7.  All applicable credit for the returned parts must be issued

4-37  or provided to the dealer within 90 days after the supplier receives

4-38  the dealer’s returned surplus parts.

4-39      8.  The provisions of this section:

4-40      (a) Do not apply to a supplier that has established a program

4-41  for its dealers for the return of surplus repair parts if the program

4-42  provides credit of not less than 85 percent of the net price for the

4-43  returned repair parts;

4-44      (b) Do not prohibit a supplier from charging a dealer’s

4-45  account for the amounts previously paid or credited by the

5-1  supplier as a discount incident to the dealer’s purchase of goods;

5-2  and

5-3  (c) Do not require a dealer to return for credit surplus parts to

5-4  a supplier.

5-5  Sec. 11.  A supplier shall not:

5-6  1.  Require a dealer to accept delivery of equipment, parts or

5-7  accessories which the dealer has not ordered unless the

5-8  equipment, parts or accessories are required by the supplier for

5-9  the safe use of any inventory provided to the dealer by the

5-10  supplier;

5-11      2.  Condition the sale of any equipment to a dealer upon the

5-12  purchase of additional goods or services, except that a supplier

5-13  may require a dealer to purchase those parts which are necessary

5-14  to maintain the equipment used in the area where the dealership is

5-15  located;

5-16      3.  Prohibit a dealer from purchasing equipment

5-17  manufactured by another supplier; or

5-18      4.  Terminate, fail to renew or substantially change the terms

5-19  of a dealer agreement because of a natural disaster, including a

5-20  drought in the market area of the dealership, a labor dispute or

5-21  any other similar circumstances which are beyond the control of

5-22  the dealer.

5-23      Sec. 12.  1.  Except as otherwise provided in this section,

5-24  upon the termination of a dealer agreement by a supplier or

5-25  dealer, the supplier shall repurchase the inventory held by the

5-26  dealer on the date of the termination of the dealer agreement.

5-27      2.  A supplier who repurchases the inventory of a dealer

5-28  pursuant to subsection 1 shall:

5-29      (a) Pay the dealer:

5-30          (1) One hundred percent of the net price of all new and

5-31  undamaged inventory; and

5-32          (2) Ninety-five percent of the net price of new and

5-33  undamaged superseded repair parts.

5-34      (b) Except as otherwise provided in this paragraph, pay the

5-35  dealer an amount equal to 5 percent of the net price of all new and

5-36  undamaged repair parts returned to the supplier to cover the cost

5-37  incurred by the dealer for handling, packing and shipping the

5-38  superseded repair parts to the supplier. If the supplier handles,

5-39  packs and ships the superseded repair parts, the dealer is not

5-40  entitled to receive any money for those services which the supplier

5-41  performed.

5-42      (c) Purchase, at its depreciated value, any computers, software

5-43  or telecommunications equipment that the supplier required the

5-44  dealer to purchase within the previous 5 years.

6-1  (d) Repurchase, at 75 percent of the net cost, any specialized

6-2  repair tools purchased if those tools are:

6-3       (1) Included in the tool catalog of the supplier;

6-4       (2) Purchased in accordance with the requirements of the

6-5  supplier;

6-6       (3) Held by the dealer on the date of the termination of the

6-7  dealer agreement; and

6-8       (4) Complete and in resalable condition.

6-9  (e) Repurchase any inventory which is owned by the supplier

6-10  and leased, rented or used in demonstrations by the dealer if the

6-11  supplier receives an allowance based on the use of such inventory.

6-12  Inventory which is used in demonstrations for not more than a

6-13  total of 50 hours shall be deemed new inventory. Inventory which

6-14  is used in demonstrations for more than 50 hours and purchased

6-15  from the supplier less than 36 months before the termination of

6-16  the dealer’s agreement must be repurchased at its depreciated

6-17  value, as determined by the supplier and dealer.

6-18      3.  If the dealer agreement authorizes the dealer to retain the

6-19  inventory upon the termination of the dealer agreement, the dealer

6-20  may retain any portion of the inventory, except any specialized

6-21  tools described in paragraph (d) of subsection 2 which the supplier

6-22  wishes to repurchase from the dealer.

6-23      4.  If the dealer owes any outstanding debts to the supplier,

6-24  the amount of the repurchase of the inventory may be set off or

6-25  credited to the account of the dealer.

6-26      5.  Upon payment to the dealer of the amount for the

6-27  repurchase of the inventory pursuant to this section, the title and

6-28  right of possession to the inventory transfers to the supplier.

6-29      Sec. 13.  1.  At the end of each year after the termination of

6-30  a dealer agreement, a dealer’s reserve account for recourse, retail

6-31  sale or lease contracts may not be debited by a supplier or lender

6-32  for any deficiency unless the dealer is given written notice of at

6-33  least 7 business days by certified or registered mail, return receipt

6-34  requested, of any proposed sale of the inventory which was

6-35  financed and an opportunity to purchase the inventory.

6-36      2.  The dealer must be given quarterly reports concerning any

6-37  remaining outstanding recourse contracts. As the recourse

6-38  contracts are reduced, any money in the reserve account must be

6-39  returned to the dealer in direct proportion to the liabilities

6-40  outstanding.

6-41      Sec. 14.  The provisions of sections 2 to 20, inclusive, of this

6-42  act do not require a supplier to repurchase from a dealer:

6-43      1.  Any repair part which is not in new and undamaged

6-44  condition or, because of its condition, is not resalable as a new

6-45  part;

7-1  2.  Any inventory which the dealer retains pursuant to

7-2  subsection 3 of section 12 of this act;

7-3  3.  Any inventory which is not in new, undamaged and

7-4  complete condition;

7-5  4.  Any inventory which was ordered by the dealer on or after

7-6  the date of the termination of the dealer agreement; or

7-7  5.  Any inventory which was purchased more than 36 months

7-8  before the notice of the termination of the dealer agreement is

7-9  provided.

7-10      Sec. 15.  If a supplier fails or refuses to repurchase and pay a

7-11  dealer for any inventory the supplier is required to repurchase in

7-12  accordance with the provisions of sections 2 to 20, inclusive, of

7-13  this act within 60 days after shipment of the inventory to the

7-14  supplier, the supplier is liable for:

7-15      1.  An amount equal to 100 percent of the net price of the

7-16  inventory;

7-17      2.  Any shipping charges paid by the dealer;

7-18      3.  Attorney’s fees and court costs; and

7-19      4.  An amount equal to the interest on the amount of the net

7-20  price calculated at the legal rate of interest from the 61st day after

7-21  the date of the shipment of the inventory to the supplier.

7-22      Sec. 16. 1.  Upon the death of a dealer or the majority

7-23  shareholder of a corporation which operates as a dealer, the

7-24  supplier shall, upon the approval or request of the devisee or heir

7-25  of the dealer or majority shareholder, repurchase the inventory of

7-26  the dealer in the manner prescribed in section 12 of this act.

7-27      2.  The devisee or heir shall, within 1 year after the death of

7-28  the dealer or majority stockholder, notify the supplier whether the

7-29  supplier will be required to repurchase the inventory of the dealer.

7-30      3.  A supplier is not required to repurchase the inventory of

7-31  the dealer if the devisee or heir and the supplier enter into a new

7-32  dealer agreement to operate the dealership.

7-33      4.  This section does not authorize any person, including a

7-34  devisee or heir, to operate a dealership without the written

7-35  approval of the supplier.

7-36      5.  An agreement executed by the supplier and dealer that sets

7-37  forth the rights relating to succession to the operation of the

7-38  dealership is enforceable without regard to the person who is

7-39  designated as the successor to the dealership.

7-40      6.  As used in this section:

7-41      (a) “Devisee” has the meaning ascribed to it in NRS 132.100.

7-42      (b) “Heir” has the meaning ascribed to it in NRS 132.165.

7-43      Sec. 17.  The provisions of sections 2 to 20, inclusive, of this

7-44  act do not affect any security interest which a supplier has in the

7-45  inventory of a dealer. The dealer and supplier shall each provide a

8-1  representative to inspect the inventory and certify its acceptability

8-2  when packaged for shipment. The failure of the supplier to

8-3  provide a representative for the inspection within 60 days shall be

8-4  deemed acceptance by the supplier of the inventory returned to the

8-5  supplier.

8-6  Sec. 18.  1.  A dealer may bring a civil action for damages in

8-7  a court of competent jurisdiction against a supplier who violates

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

8-9  may recover damages incurred as a result of any violation

8-10  committed by the supplier, including costs and attorney’s fees.

8-11      2.  A dealer may apply for injunctive relief for the unlawful

8-12  termination, nonrenewal or substantial change of the terms of a

8-13  dealer agreement.

8-14      3.  The remedies provided in this section are in addition to any

8-15  other remedies provided by law.

8-16      Sec. 19.  1.  Except as otherwise provided in this section, any

8-17  agreement entered into by a supplier and a dealer concerning

8-18  reimbursement for work performed under a warranty, including,

8-19  without limitation, a dealer agreement, must comply with the

8-20  provisions set forth in this section.

8-21      2.  A supplier who authorizes a dealer to perform work under a

8-22  warranty shall reimburse a dealer who submits a warranty claim

8-23  for such work. A dealer may submit a warranty claim to a

8-24  supplier:

8-25      (a) During the period the dealer agreement is in effect; or

8-26      (b) After the termination of a dealer agreement if the warranty

8-27  claim concerns work performed under a warranty during the

8-28  period the dealer agreement was in effect.

8-29      3.  A warranty claim which is submitted to a supplier must be

8-30  paid within 30 days after the claim is approved by the supplier.

8-31  The supplier shall approve or disapprove a warranty claim or any

8-32  part thereof within 30 days after it receives the warranty claim. If

8-33  the warranty claim is disapproved, the supplier shall, not later

8-34  than 30 days after it receives the warranty claim, send written

8-35  notice to the dealer setting forth the reasons for disapproval of the

8-36  warranty claim. A warranty claim which is not disapproved by the

8-37  supplier within the prescribed period shall be deemed approved.

8-38      4.  The amount of a warranty claim must not be less than the

8-39  amount equal to the sum of:

8-40      (a) The reasonable and customary time required by the dealer

8-41  to complete the work, including diagnostic time, expressed in

8-42  hours and fractions of hours, multiplied by the dealer’s hourly

8-43  retail rate for labor;

8-44      (b) The dealer’s net price for any repair parts replaced, plus 20

8-45  percent of the net price for those parts; and

9-1  (c) If a warranty claim concerns repair work for any

9-2  machinery or equipment which is performed by the dealer in

9-3  accordance with a safety or modification order issued by a

9-4  supplier, the costs incurred by the dealer to transport to the

9-5  dealer’s place of business for repair any machinery or equipment

9-6  which is within the dealer’s service area and subject to a safety or

9-7  modification order.

9-8  5.  After a supplier has paid a warranty claim, the supplier

9-9  shall not charge back, set off or otherwise attempt to recover from

9-10  a dealer any amount of the warranty claim unless:

9-11      (a) The warranty claim is fraudulent;

9-12      (b) The work was not performed properly or was not necessary

9-13  to comply with the requirements of the warranty; or

9-14      (c) The dealer did not provide the records for the warranty

9-15  claim as required by the agreement for work performed under the

9-16  warranty.

9-17      6.  A supplier shall not require a dealer to pay the costs

9-18  incurred by the supplier in paying warranty claims by:

9-19      (a) Imposing a surcharge;

9-20      (b) Reducing any discounts provided to a dealer; or

9-21      (c) Imposing additional requirements for the certification of a

9-22  dealer authorized to perform work under a warranty.

9-23      7.  Except for a warranty claim where fraud is alleged, a

9-24  supplier may not audit the records of a dealer relating to a

9-25  warranty claim more than 1 year after the warranty claim is

9-26  submitted to the supplier. A supplier may not audit a warranty

9-27  claim more than once. The provisions of this subsection do not

9-28  prohibit a supplier from requesting additional information from a

9-29  dealer if the initial audit of the warranty claim indicates any

9-30  errors, inconsistencies or fraud.

9-31      8.  The provisions of this section do not apply to a written

9-32  dealer agreement which provides compensation to a dealer for any

9-33  labor required to be performed under a warranty before the labor

9-34  is performed if the compensation is based on:

9-35      (a) A reduction of the price of the equipment sold to the

9-36  dealer; or

9-37      (b) A lump-sum payment of not less than 5 percent of the

9-38  suggested retail price of the equipment.

9-39      9.  As used in this section:

9-40      (a) “Audit” means an examination by a supplier of the records

9-41  of a warranty claim submitted by a dealer.

9-42      (b) “Net price” means the price a supplier charges a dealer for

9-43  a repair part.

10-1      (c) “Warranty claim” means a request submitted by a dealer to

10-2  a supplier for payment for work performed under a warranty or a

10-3  safety or modification order issued by the supplier.

10-4      Sec. 20.  1.  A person may not waive or modify a right,

10-5  obligation or liability set forth in the provisions of sections 2 to 20,

10-6  inclusive, of this act.

10-7      2.  A condition, stipulation or provision of a dealer agreement

10-8  or any other agreement that:

10-9      (a) Limits the procedural or substantive rights of a dealer

10-10  pursuant to the provisions of sections 2 to 20, inclusive, of this act;

10-11     (b) Requires a person to waive a right set forth in the

10-12  provisions of sections 2 to 20, inclusive, of this act; or

10-13     (c) Relieves a person of an obligation or liability imposed by

10-14  the provisions of sections 2 to 20, inclusive, of this act,

10-15  is void.

10-16     Sec. 21.  1.  This act applies to a dealer agreement or any

10-17  agreement for the payment of claims for reimbursement for work

10-18  performed by a dealer under a warranty provided by a supplier

10-19  which is entered into between a supplier and dealer before, on or

10-20  after October 1, 2003.

10-21     2.  As used in this section:

10-22     (a) “Dealer” has the meaning ascribed to it in section 3 of this

10-23  act.

10-24     (b) “Dealer agreement” has the meaning ascribed to it in section

10-25  4 of this act.

10-26     (c) “Supplier” has the meaning ascribed to it in section 8 of this

10-27  act.

 

10-28  H