FIRST REGULAR SESSION

HOUSE BILL NO. 788

91ST GENERAL ASSEMBLY

INTRODUCED BY REPRESENTATIVE O'CONNOR.

Read 1^st time February 14, 2001, and 1000 copies ordered printed.

TED WEDEL, Chief Clerk

1880L.01I

AN ACT

To repeal sections 407.1000, 407.1005, 407.1010, 407.1015 and 407.1020, RSMo 2000, relating to motorcycle franchise practices.

Section A. Sections 407.1000, 407.1005, 407.1010, 407.1015 and 407.1020, RSMo 2000, are repealed.

[407.1000. As used in sections 407.1000 to 407.1020, unless the context otherwise requires, the following terms mean:

(1) "Coerce", to force a person to act in a given manner or to compel by pressure or threat but shall not be construed to include the following:

(a) Good faith recommendations, exposition, argument, persuasion or attempts at persuasion;

(b) Notice given in good faith to any franchisee of such franchisee's violation of terms or provisions of such franchise or contractual agreement;

(c) Any other conduct set forth in section 407.1020 as a defense to an action brought pursuant to sections 407.1000 to 407.1020; or

(d) Any other conduct set forth in sections 407.1000 to 407.1020 that is permitted of the franchisor or is expressly excluded from coercion or a violation of sections 407.1000 to 407.1020;

(2) "Franchise", a written arrangement or contract for a definite or indefinite period, in which a person grants to another person a license to use, or the right to grant to others a license to use, a trade name, trademark, service mark, or related characteristics, in which there is a community of interest in the marketing of goods or services, or both, at wholesale or retail, by agreement, lease or otherwise, and in which the operation of the franchisee's business with respect to such franchise is substantially reliant on the franchisor for the continued supply of franchised new motorcycles, parts and accessories for sale at wholesale or retail;

(3) "Franchisee", a person to whom a franchise is granted;

(4) "Franchisor", a person who grants a franchise to another person;

(5) "Motorcycle", a motor vehicle operated on two wheels;

(6) "New", when referring to motorcycles or parts, means those motorcycles or parts which have not been held except as inventory, as that term is defined in subdivision (4) of section 400.9-109, RSMo;

(7) "Person", a sole proprietor, partnership, corporation, or any other form of business organization.]

[407.1005. The performance, whether by act or omission, by a motorcycle franchisor of any or all of the following activities enumerated in this section are hereby defined as unlawful practices, the remedies for which are set forth in section 407.1010:

(1) To engage in any conduct which is capricious, in bad faith, or unconscionable and which causes damage to a motorcycle franchisee or to the public; provided, that good faith conduct engaged in by motorcycle franchisors as sellers of new motorcycles or parts or as holders of security interest therein, in pursuit of rights or remedies accorded to sellers of goods or to holders of security interests pursuant to the provisions of chapter 400, RSMo, uniform commercial code, shall not constitute unfair practices pursuant to sections 407.1000 to 407.1020;

(2) To coerce any motorcycle franchisee to accept delivery of any new motorcycle or motorcycles, equipment, parts or accessories therefor, or any other commodity or commodities which such motorcycle franchisee has not ordered after such motorcycle franchisee has rejected such commodity or commodities. It shall not be deemed a violation of this section for a motorcycle franchisor to require a motorcycle franchisee to have an inventory of parts, tools, and equipment reasonably necessary to service the motorcycles sold by a motorcycle franchisor; or new motorcycles reasonably necessary to meet the demands of dealers or the public or to display to the public the full line of a motorcycle franchisor's product line;

(3) To unreasonably refuse to deliver in reasonable quantities and within a reasonable time after receipt of orders for new motorcycles, such motorcycles as are so ordered and as are covered by such franchise and as are specifically publicly advertised by such motorcycle franchisor to be available for immediate delivery; provided, however, the failure to deliver any motorcycle shall not be considered a violation of sections 407.1000 to 407.1020 if such failure be due to an act of God, work stoppage, or delay due to a strike or labor difficulty, shortage of products or materials, freight delays, embargo or other cause of which such motorcycle franchisor shall have no control;

(4) To coerce any motorcycle franchisee to enter into any agreement with such motorcycle franchisor or to do any other act prejudicial to such motorcycle franchisee, by threatening to cancel any franchise or any contractual agreement existing between such motorcycle franchisor and motorcycle franchisee; provided, however, that notice in good faith to any motorcycle franchisee of such motorcycle franchisee's violation of any provisions of such franchise or contractual agreement shall not constitute a violation of sections 407.1000 to 407.1020;

(5) To terminate or cancel the franchise or selling agreement of any motorcycle franchisee except a termination or cancellation made by reason of a substantial default by such franchisee in the performance of such motorcycle franchisee's reasonable and lawful obligations to such motorcycle franchisor under the franchise. The nonrenewal of a motorcycle franchise or selling agreement shall constitute an unfair termination or cancellation, regardless of the terms or provisions of such franchise or selling agreement unless it is not renewed by reason of:

(a) A substantial default by such motorcycle franchisee in the performance of such motorcycle franchisee's reasonable and lawful obligations to such motorcycle franchisor under the nonrenewed franchise or selling agreement; or

(b) The discontinuance of the sale in the state of Missouri of such motorcycle franchisor's products which are the subject of the franchise;

(6) To prevent by contract or otherwise, any motorcycle franchisee from changing the capital structure of the franchisee's franchise of such motorcycle franchisee or the means by or through which the franchisee finances the operation of the franchisee's franchise, provided the motorcycle franchisee at all times meets any reasonable capital standards agreed to between the motorcycle franchisee and the motorcycle franchisor and grants to the motorcycle franchisor a purchase money security interest in the new motorcycles, new parts and accessories purchased from the motorcycle franchisor;

(7) To prevent by contract or otherwise any motorcycle franchisee or any officer, partner or stockholder of any motorcycle franchisee from selling or transferring any part of the interest of any of them to any other person or persons or party or parties; provided, if the franchise specifically permits the franchisor to approve or disapprove of any such proposed sale or transfer, a franchisor shall only be allowed to disapprove of a proposed sale or transfer if the interest being sold or transferred when added to any other interest owned by the transferee constitutes fifty percent or more of the ownership interest in the franchise and if the proposed transferee fails to satisfy any standards of the franchisor which are in fact normally relied upon by the franchisor prior to its entering into a franchise, and which relate to the proposed management or ownership of the franchise operations or to the qualification, capitalization, integrity, or character of the proposed transferee and which are reasonable. In order to exercise a franchisor's right of disapproval as set forth herein the franchisor shall:

(a) Notify, in writing, the franchisee of the franchisor's disapproval within thirty working days of the franchisor's receipt of a written proposal to consummate such sale or transfer; provided, however, that the franchisee and the prospective franchisee shall cooperate fully with the franchisor in providing information relating to the prospective transferee's capitalization, integrity and character;

(b) Specify in such written notice the reasonable standards which the franchisor contends are not satisfied and the reasons the franchisor contends such standards are not satisfied. Failure on the part of the franchisor to fully comply with either paragraph (a) of this subdivision or this paragraph shall be conclusively deemed an approval by the franchisor of the proposed sale or transfer to the proposed transferee;

(8) To prevent by contract or otherwise any motorcycle franchisee from changing the executive management of the motorcycle franchisee's business, except that any attempt by a motorcycle franchisor to demonstrate by giving reasons that such change in executive management will be detrimental to the distribution of the motorcycle franchisor's motorcycles shall not constitute a violation of this subdivision;

(9) To impose unreasonable standards of performance upon a motorcycle franchisee;

(10) To require a motorcycle franchisee at the time of entering into a franchise arrangement to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by sections 407.1000 to 407.1020;

(11) To prohibit directly or indirectly the right of free association among motorcycle franchisees for any lawful purpose;

(12) To provide any term or condition in any lease or other agreement ancillary or collateral to a franchise, which term or condition directly or indirectly violates the provisions of sections 407.1000 to 407.1020.]

[407.1010. Any motorcycle franchisee may bring an action against a motorcycle franchisor with whom the franchisee has a franchise, for an act or omission which constitutes an unlawful practice as defined in section 407.1005 to recover damages sustained by reason thereof, and, where appropriate, such motorcycle franchisee shall be entitled to injunctive relief, but the remedies set forth in this section shall not be deemed exclusive and shall be in addition to any other remedies permitted by law.]

[407.1015. Any person who is engaged or engages directly or indirectly in purposeful contacts within the state of Missouri in connection with the offering, advertising, purchasing, selling, or contracting to purchase or to sell new motorcycles, or who, being a motorcycle franchisor, is transacting or transacts any business with a motorcycle franchisee who maintains a place of business within the state and with whom the franchisee has a franchise, shall be subject to the jurisdiction of the courts of the state of Missouri, upon service of process in accordance with the provisions of section 506.510, RSMo, irrespective of whether such person is a manufacturer, importer, distributor or dealer in new motorcycles.]

[407.1020. It shall be a defense for a motorcycle franchisor, to any action brought pursuant to sections 407.1000 to 407.1020 by a motorcycle franchisee, if it is shown that such motorcycle franchisee has failed to substantially comply with reasonable and lawful requirements imposed by the franchise and other agreements ancillary or collateral thereto, or if the motorcycle franchisee, or any of its officers, have been convicted of a felony relevant to business honesty or business practices, or if the motorcycle franchisee has ceased conducting its business or has abandoned the franchise, or is insolvent as that term is defined in subdivision (23) of section 400.1-201, RSMo, or has filed a voluntary petition in bankruptcy, or has made an assignment for benefit of creditors, or has been the subject of an involuntary proceeding under the federal bankruptcy act or under any state insolvency law which is not vacated within twenty days from the institution thereof, or there has been an appointment of a receiver or other officer having similar powers for the motorcycle franchisee or the motorcycle franchisee's business who is not removed within twenty days from the person's appointment, or there has been a levy under attachment, execution or similar process which is not within ten days vacated or removed by payment or bonding, and it shall be a defense to any action brought pursuant to sections 407.1000 to 407.1020 that the complained of conduct by a motorcycle franchisor was undertaken in good faith in pursuit of rights or remedies accorded to a motorcycle franchisor as a seller of goods or a holder of a security interest pursuant to the provisions of chapter 400, RSMo.]

Missouri House of Representatives