A BILL to amend and reenact §17A-6A-1, §17A-6A-3, §17A-6A-4, §17A-6A-5, §17A-6A-6, §17A-6A-7, §17A-6A-8, §17A-6A-8a, §17A-6A-10, §17A-6A-11, §17A-6A-12, §17A-6A-13, §17A-6A-18, §17A-6A-19, §17A-6A-20 and §17A-6A-21 of the Code of West Virginia, 1931, as amended; and to amend said code by adding thereto seven new sections, designated §17A-6A-12a, §17A-6A-12b, §17A-6A-12c, §17A-6A-14a, §17A-6A-15, §17A-6A-16 and §17A-6A-17, all relating to motor vehicle dealers, distributors, wholesalers and manufacturers.
The Legislature finds and declares that the distribution and sale of motor vehicles in this state vitally affects the general economy and the public interest and welfare and that in order to promote the public interest and welfare and in exercise of its police power, it is necessary to regulate motor vehicle dealers, manufacturers, distributors, and representatives of vehicle manufacturers and distributors doing business in this state in order to avoid inequitable conduct and undue control of the independent new motor vehicle dealer by the vehicle manufacturer or distributor and to insure that dealers fulfill their obligations under their franchises and provide adequate and sufficient service to consumers generally, and to protect and preserve the investments and properties of the citizens and motor vehicle dealers of this State.
For the purposes of this article, the words and phrases defined in this section have the meanings ascribed to them, except where the context clearly indicates a different meaning.
(1) “Dealer agreement” means the franchise, agreement or contract in writing between a manufacturer, distributor and a new motor vehicle dealer which purports to establish the legal rights and obligations of the parties to the agreement or contract with regard to the purchase, lease or sale of new motor vehicles, accessories, service and sale of parts for motor vehicles.
(2) “Designated family member” means the spouse, child, grandchild, parent, brother or sister of a deceased new motor vehicle dealer who is entitled to inherit the deceased dealer’s ownership interest in the new motor vehicle dealership under the terms of the dealer’s will, or who has otherwise been designated in writing by a deceased dealer to succeed the deceased dealer in the new motor vehicle dealership, or is entitled to inherit under the laws of intestate succession of this state. With respect to an incapacitated new motor vehicle dealer, the term means the person appointed by a court as the legal representative of the new motor vehicle dealer’s property. The term also includes the appointed and qualified personal representative and the testamentary trustee of a deceased new motor vehicle dealer. However, the term means only that designated successor nominated by the new motor vehicle dealer in a written document filed by the dealer with the manufacturer or distributor, if such a document is filed.
(3) “Distributor” means any person, resident or nonresident, who, in whole or in part, offers for sale, sells or distributes any new motor vehicle to a new motor vehicle dealer or who maintains a factor representative, resident or nonresident, or who controls any person, resident or nonresident, who, in whole or in part, offers for sale, sells or distributes any new motor vehicle to a new motor vehicle dealer.
(4) “Established place of business” means a permanent, enclosed commercial building located within this state easily accessible and open to the public at all reasonable times and at which the business of a new motor vehicle dealer, including the display and repair of motor vehicles, may be lawfully carried on in accordance with the terms of all applicable building codes, zoning and other land-use regulatory ordinances and as licensed by the Division of Motor Vehicles.
(5) “Factory branch” means an office maintained by a manufacturer or distributor for the purpose of selling or offering for sale vehicles to a distributor, wholesaler or new motor vehicle dealer, or for directing or supervising, in whole or in part, factory or distributor representatives. The term includes any sales promotion organization maintained by a manufacturer or distributor which is engaged in promoting the sale of a particular make of new motor vehicles in this state to new motor vehicle dealers.
(6) “Factory representative” means an agent or employee of a manufacturer, distributor or factory branch retained or employed for the purpose of making or promoting the sale of new motor vehicles or for supervising or contracting with new motor vehicle dealers or proposed motor vehicle dealers.
(7) “Good faith” means honesty in fact and the observation of reasonable commercial standards of fair dealing in the trade.
(8) “Manufacturer” means any person who manufactures or assembles new motor vehicles, or any distributor, factory branch or factory representative. and, in the case of a school bus, truck tractor, road tractor or truck as defined in Section 1, Article 1 of Chapter 17A, also means a person engaged in the business of manufacturing a school bus, truck tractor, road tractor or truck, their engines, power trains or rear axles, including when such engines, power trains, or rear axles are not warranted by the final manufacturer or assembler, and any distributor, factory branch or representative. The term manufacturer also includes a captive finance source as herein defined in section 10(1)(k)(i) of this article.
(9) “Motor vehicle” means that term as defined in section one, article one of this chapter, including motorcycle, school bus, truck tracter, road tractor, truck, and recreational vehicle, all-terrain vehicle, and utility terrain vehicle as defined in subsections (c), (d), (ff), (h), (i), and (nn) and (vv) respectively, of said section, but not including a farm tractor or farm equipment. The term “motor vehicle” shall also include, for a school bus, truck tractor, road tractor and truck, its component parts, including, but not limited to, its engine, transmission, or real axle manufactured for installation in a school bus, truck tractor, road tractor or truck.
(10) “New motor vehicle” means a motor vehicle which is in the possession of the manufacturer, distributor or wholesaler, or has been sold only to a new motor vehicle dealer and on which the original title has not been issued from the new motor vehicle dealer.
(11) “New motor vehicle dealer” means a person who holds a dealer agreement granted by a manufacturer or distributor for the sale of its motor vehicles, who is engaged in the business of purchasing, selling, leasing, exchanging or dealing in new motor vehicles, service of said vehicles, warranty work and sale of parts who has an established place of business in this state and is licensed by the Division of Motor Vehicles.
(12) “Person” means a natural person, partnership, corporation, association, trust, estate or other legal entity.
(13) “Proposed new motor vehicle dealer” means a person who has an application pending for a new dealer agreement with a manufacturer or distributor. “Proposed motor vehicle dealer” does not include a person whose dealer agreement is being renewed or continued.
(14) “Relevant market area” means the area located within a twenty air-mile radius around an existing same line-make new motor vehicle dealership.
§17A-6A-4. Cancellation of dealer contract; notification.
(d) Has good cause for the cancellation, termination, nonrenewal or discontinuance.
(g) The dealer’s overall performance under the reasonable terms of the franchise agreement. This shall include the overall fairness of the agreement terms, the enforceability of the agreement and the relative bargaining power of the parties.
(h) Whether the manufacturer provided the requested appropriate volumes and type of motor vehicles to the dealer, training, tools, parts and support to the dealer.
(d) The failure continued for more than three hundred sixty days after the date notification was given pursuant to subdivision (a) of this subsection.
§17A-6A-5. Circumstances not constituting good cause.
(a) A change in ownership of the new motor vehicle dealer's dealership. The subdivision does not authorize any change in ownership which would have the effect of a sale or an assignment of the dealer agreement or a change in the principal management of the dealership without the manufacturer's or distributor's prior written consent, which shall not be unreasonably or untimely withheld.
(b) The refusal of the new motor vehicle dealer to purchase or accept delivery of any new motor vehicle parts, accessories, or any other commodity or services not ordered by the new motor vehicle dealer.
(c) The fact that the new motor vehicle dealer owns, has an investment in, participates in the management of, or holds a dealer agreement for the sale of another make or line of new motor vehicles, or that the new motor vehicle dealer has established another make or line of new motor vehicles in the same dealership facilities as those of the manufacturer or distributor: Provided, That the new motor vehicle dealer maintains a reasonable line of credit for each make or line of new motor vehicles, and that the new motor vehicle dealer remains in substantial compliance with the terms and conditions of the dealer agreement and with any reasonable facilities' requirements of the manufacturer or distributor.
(d) The fact that the new motor vehicle dealer sells or transfers ownership of the dealership or sells or transfers capital stock in the dealership to the new motor vehicle dealer's spouse, son or daughter: Provided, That the sale or transfer shall not have the effect of a sale or an assignment of the dealer agreement or a change in the principal management of the dealership without the manufacturer's or distributor's prior written consent.
For each termination, cancellation, nonrenewal or discontinuance, the manufacturer or distributor shall have the burden of proof by a preponderance of the evidence for showing that he or she has acted in good faith, that the notice requirement has been complied with, and that there was good cause by a preponderance of the evidence for the termination, cancellation, nonrenewal or discontinuance.
(a) Except as otherwise provided in this section, notice shall be made not less than one hundred twenty days prior to the effective date of the termination, cancellation, nonrenewal or discontinuance.
(3) The date on which the termination, cancellation, nonrenewal or discontinuance takes effect.
(5) A fraudulent misrepresentation by the new motor vehicle dealer to the manufacturer or distributor, which is material to the dealer agreement.
(d) Notwithstanding subdivision (a) of this subsection, notice shall be made not less than twelve months prior to the effective date of a termination, cancellation, nonrenewal or discontinuance if a manufacturer or distributor discontinues production of the new motor vehicle dealer's product line or discontinues distribution of the product line in this state.
(3) Is based on an alleged breach of the franchise agreement which is not in fact a material and substantial breach.
(f) No replacement dealer shall be named for this point or location to engage in business and the dealer’s agreement shall remain in effect until a final judgement is entered after all appeals are exhausted: Provided, That when a motor vehicle dealer appeals a decision upholding a discontinuation, cancellation or nonrenewal under subdivisions (f) and (g) of this section, the dealer agreement shall remain in effect pending exhaustion of all appeals only if the motor vehicle dealer establishes a likelihood of success on appeal and that the public interest will not be harmed by keeping the dealer agreement in effect pending entry of final judgement after such appeal. Provided, that when a motor vehicle dealer appeals a decision upholding a discontinuation, cancellation or nonrenewal under sub-section (c) of this section, the dealer agreement shall remain in effect pending exhaustion of all appeals only if the motor vehicle dealer establishes a likelihood of success on appeal and the public interest will not be harmed by keeping the dealer agreement in effect pending entry of final judgment after appeal.
(g) If a transfer of ownership is proposed after a notice to discontinue, cancel or not renew a dealer agreement is received but, prior to the final determination, including exhaustion of all appellate remedies of a motor vehicle dealer’s complaint or petition contesting such action, the termination proceedings shall be stayed, without bond, during the period the transfer is being reviewed by the manufacturer or distributor. During the period that the transfer is being reviewed by the manufacturer or distributor, the dealer agreement shall remain in full force and effect, and the motor vehicle dealer shall retain all rights and remedies pursuant to the terms and conditions of the dealer agreement and applicable law. This shall include, but is not limited to, all rights of transfer under subdivision (2), section ten, article six-a, chapter seventeen of this code until such time as the manufacturer or distributor has accepted or rejected the proposed transfer. If the proposed transfer is rejected, the motor vehicle dealer shall retain all of its rights pursuant to section sixteen of said article to a judicial determination as to whether the manufacturer or distributor’s rejection is in compliance with the provisions of subdivision (2), section ten of said article and during the pendency of such judicial proceeding, and any related appellate proceedings, the termination proceedings shall remain stayed without bond, the dealer agreement shall remain in full force and effect and the motor vehicle dealer shall retain all rights and remedies pursuant to the terms and conditions of the dealer agreement and applicable law including all rights of transfer. If a transfer is approved by the manufacturer or distributor or mandated by law, the termination proceedings shall be dismissed with prejudice as moot.
§17A-6A-8. Reasonable compensation to dealer.
(a) Any new motor vehicle inventory, manufactured for sale in the United States, purchased from the manufacturer, distributor or other dealers, which has not been materially altered, substantially damaged or driven for more than seven hundred fifty miles one thousand miles, except that for any new motorcycle, all terrain vehicle and utility terrain vehicle inventory purchased from the manufacturer or distributor, that inventory must not have been materially altered, substantially damaged or driven for more than fifty miles. For purposes of a school bus, truck tractor, road tractor or truck, materially altered does not include dealer add-ons, such as, but not limited to, racks, mud flaps, fifth wheel assemblies, dump or tank bodies.
(d) Special computer software, hardware, license fees and other programs mandated by the manufacturer to provide training or communication with the manufacturer.
(2) Upon the termination, cancellation, nonrenewal or discontinuance of a dealer agreement by the manufacturer or distributor, the manufacturer or distributor shall also pay to the new motor vehicle dealer a sum equal to the current, fair rental value of his or her established place of business for a period of three years from the effective date of termination, cancellation, nonrenewal or discontinuance, or the remainder of the lease, whichever is less. If the dealer, directly or indirectly, owns the dealership facility, the manufacturer shall pay the dealer a sum equal to the reasonable rental value of the dealership premises for three years. However, the dealer shall have the obligation to mitigate his or her damages, including, but not limited to, listing the facility with a commercial real estate agent and other reasonable steps to sell or lease the property. During this three-year period the manufacturer shall have the right to occupy and use the facilities until such time as the dealer is able to otherwise sell or lease the property to another party. The payment required by this subsection does not apply to any termination, cancellation, nonrenewal or discontinuance made pursuant to subsection (c), section five of this article.
(d) Any costs the dealer incurred for facility upgrades or alternations required by the manufacturer, distributor, or factory branch within the previous twelve years. This subdivision shall not apply if the manufacturer has provided the motor vehicle dealer with lump sum payments to assist dealer in making facility improvements or to pay for signs or manufacturer image elements when such payments are not dependent on the dealer selling or purchasing specific numbers of new motor vehicles, and such payments are equal to the entire cost of the facility improvements, signs or image elements.
(e) Payment by the manufacturer to the dealer shall be made within ninety days. Thereafter, interest shall accumulate at the rate of twelve percent per annum.
§17A-6A-8a. Compensation to dealers for service rendered.
(c) Provide the dealer the schedule of compensation to be paid the dealer for parts, work and service in connection with warranty and recall services and the time allowance for the performance of the work and service.
(c) Any manufacturer, distributor or wholesaler, or representative thereof, compensate for warranty and recall work based on a flat-rate figure that is less than what the dealer charges for retail work.
(3) It is a violation of this section for any manufacturer, distributor, wholesaler or representative to require any dealer to pay in any manner, surcharges, limited allocation, audits, charge backs or other retaliation, if the dealer seeks to recover its nonwarranty retail rate for warranty and recall work.
(4) The retail rate charged by the dealer for parts is established by the dealer submitting to the manufacturer or distributor one hundred sequential nonwarranty customer-paid service repair orders that contain warranty-like parts or ninety consecutive days of nonwarranty customer-paid service repair orders that contain warranty-like parts, whichever is less, covering repairs made no more than one hundred eighty days before the submission and declaring the average percentage markup.
(5) The retail rate customarily charged by the dealer for labor must be established using the same process as provided under subsection (4) and declaring the average labor rate. The average labor rate must be determined by dividing the amount of the dealer’s total labor sales by the number of total hours that generated those sales. If a labor rate and parts markup rate simultaneously declared by the dealer, the dealer may use the same repair orders to complete each calculation as provided under subsection (4).
(7) The average of the parts markup rates and labor rate is presumed to be fair and reasonable and must go into effect thirty days following the manufacturer’s approval. A manufacturer or distributor may rebut the presumption by a preponderance of the evidence that a rate is unreasonable in light of the practices of all other franchised motor vehicle dealers in an economically similar area of the state offering the dealer’s declaration of the same line-make vehicles, not later than thirty days after submission. If the average parts markup rate or average labor rate is rebutted, or both, the manufacturer or distributor shall propose an adjustment of the average percentage markup based on that rebuttal not later than thirty days after submission.
(8) Each manufacturer, in establishing a schedule of compensation for warranty work, shall rely on the vehicle dealer’s written schedule of hourly labor rates and parts and may not obligate any vehicle dealer to engage in unduly burdensome or time-consuming documentation of rates or parts, including obligating vehicle dealers to engage in transaction-by-transaction or part-by-part calculations.
(9) A dealer or manufacturer may demand that the average parts markup or average labor rate be calculated using the process provided under subsections 4 and 5; however, the demand for the average parts markup may not be made within twelve months of the last parts markup declaration and the demand for the average labor rate may not be amide within twelve months of the last labor rate declaration. If a parts markup or labor rate is demanded by the dealer or manufacturer, the dealer shall determine the repair orders to be included in the calculation under subsection 4 and 5.
(10) As it applies to a school bus, truck tractor, road tractor and truck as defined in Section 1, Article 1 of Chapter 17A, the manufacturer, distributor and/or O.E.M. supplier shall paid the dealer its incurred actual time at the retail labor rate for retrieving a motor vehicle and returning a motor vehicle to dealer’s designated parking area. Dealer will be paid $50.00 minimum for each operation that requires the use of each electronic tool, i.e. laptop computer. The manufacturer or distributor cannot reduce what is paid to dealer for this retrieval or return time, or for the electronic tool charge. Dealer will be allowed to add to a completed warranty repair order three hours for every twenty-four hours the manufacturer, distributor and/or O.E.M. supplier makes the dealer stop working on a vehicle while the manufacturer, distributor and/or O.E.M. supplier decides how it wants the dealer to proceed with the repairs.
(4)(11) All claims made by motor vehicle dealers pursuant to this section for compensation for delivery, preparation, warranty and recall work, including labor, parts and other expenses, shall be paid by the manufacturer within thirty days after approval and shall be approved or disapproved by the manufacturer within thirty days after receipt. When any claim is disapproved, the dealer shall be notified in writing of the grounds for disapproval. No claim which has been approved and paid may be charged back to the dealer unless it can be shown that the claim was false or fraudulent, that the repairs were not properly made or were unnecessary to correct the defective condition or the dealer failed to reasonably substantiate the claim in accordance with the written requirements of the manufacturer or distributor in effect at the time the claim arose. No charge back may be made until the dealer has had notice and an opportunity to support the claim in question. No otherwise valid reimbursement claims may be denied once properly submitted within manufacturers’ submission guidelines due to a clerical error or omission or based on a different level of technician technical certification or the dealer’s failure to subscribe to any manufacturer’s computerized training programs.
(5)(12) Notwithstanding the terms of a franchise agreement or provision of law in conflict with this section, the dealer's delivery, preparation, warranty and recall obligations constitutes the dealer's sole responsibility for product liability as between the dealer and manufacturer, and, except for a loss caused by the dealer's failure to adhere to these obligations, a loss caused by the dealer's negligence or intentional misconduct or a loss caused by the dealer's modification of a product without manufacturer authorization, the manufacturer shall reimburse the dealer for all loss incurred by the dealer, including legal fees, court costs and damages, as a result of the dealer having been named a party in a product liability action.
(h) Prospectively assent to a waiver of a trial by jury, release, arbitration, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by this article or require any controversy between a new motor vehicle dealer and a manufacturer or distributor to be referred to a person other than the duly constituted courts of the this state or the United States, if the referral would be binding upon the new motor vehicle dealer the United States District Courts for the Southern and Northern Districts of West Virginia. Nothing contained herein shall prevent a motor vehicle dealer, after a civil action is filed, to enter into any agreement of settlement, arbitration, assignment or waiver of a trial by jury.
(i) To coerce or require any dealer, whether by agreement, program, incentive provision, or otherwise, to construct improvements to its facilities or to install new signs or other franchisor image elements that replace or substantially alter those improvements, signs, or franchisor image elements completed within the preceding ten years that were required or approved by the manufacturer, factory branch, distributor, or distributor branch or one of its affiliates. If a manufacturer, factory branch, distributor, or distributor branch offers incentives, or other payments under a program offered after the effective date of this subdivision and available to more than one dealer in the state that are premised wholly or in part on dealer facility improvements or installation of franchisor signs or other franchisor image elements, a dealer that constructed improvements or installed signs or other franchisor image elements required by or approved by the manufacturer, factory branch, distributor, or distributor branch and completed within the ten years preceding the program shall be deemed to be in compliance with the program requirements pertaining to construction of facilities or installation of signs or other franchisor image elements that would replace or substantially alter those previously constructed or installed within that ten-year period. This subdivision shall not apply to a program that provides lump sum payments to assist dealers in making facility improvements or to pay for signs or franchisor image elements when such payments are not dependent on the dealer selling or purchasing specific numbers of new vehicles, and such payments are equal to the entire cost of the facility improvements, signs or image elements.
(j) To condition the award, sale, transfer, relocation, or renewal of a franchise or dealer agreement or to condition sales, service, parts, or finance incentives upon site control or an agreement to renovate or make substantial improvements to a facility; provided, however, that voluntary and non-coerced acceptance of such conditions by the dealer in writing, including, but not limited to, a written agreement for which the dealer has accepted separate and valuable consideration, shall not constitute a violation.
(i) In this section, "captive finance source" means any financial source that provides automotive-related loans or purchases retail installment contracts or lease contracts for motor vehicles in this state, and is, directly or indirectly, owned, operated, or controlled by such manufacturer, factory branch, distributor, or distributor branch.
(a) Require a dealer to grant such captive finance source a power of attorney to do anything on behalf of the dealer other than sign the dealer's name on any check, draft, or other instrument received in payment or proceeds under any contract for the sale or lease of a motor vehicle that is made payable to the dealer but which is properly payable to the captive finance source, is for the purpose of correcting an error in a customer's finance application or title processing document, or is for the purpose of processing regular titling of the vehicle.
(b) Require a dealer to warrant or guarantee the accuracy and completeness of any personal, financial, or credit information provided by the customer on the credit application and/or in the course of applying for credit other than to require that the dealer make reasonable inquiry regarding the accuracy and completeness of such information and represent that such information is true and correct to the best of the dealer's knowledge.
(c) Require a dealer to repurchase, pay off, or guaranty any contract for the sale or lease of a motor vehicle or to require a dealer to indemnify, defend, or hold harmless the captive finance source for settlements, judgments, damages, litigation expenses, or other costs or expenses incurred by such captive finance source unless the obligation to repurchase, pay off, guaranty, indemnify, or hold harmless resulted directly from (i) the subject dealer's material breach of the terms of a written agreement with the captive finance source or the terms for the purchase of an individual contract for sale or lease that the captive finance source communicates to the dealer before each such purchase, except to the extent the breached terms are otherwise prohibited under subparagraphs (a)-(h), or (ii) the subject dealer's violation of applicable law. However, for purposes of this section, the dealer may contractually obligate itself to warrant the accuracy of the information provided in the finance contract, but such warranty may only be enforced if the captive finance source gives the dealer a reasonable opportunity to cure or correct any errors in the finance contract where cure or correction is possible. For purposes of this section, any allegation by a third party that would constitute a breach of the terms of a written agreement between the dealer and a captive finance source shall be considered a material breach.
(d) Notwithstanding the terms of any contract or agreement, treat a dealer's breach of an agreement between the dealer and a captive finance source with respect to the captive finance source's purchase of individual contracts for the sale or lease of a motor vehicle as a breach of such agreement with respect to purchase of other such contracts, nor shall such a breach in and of itself, constitute a breach of any other agreement between the dealer and the captive finance source, or between the dealer and any affiliate of such captive finance source.
(e) Require a dealer to waive any defenses that may be available to it under its agreements with the captive finance source or under any applicable laws.
(f) Require a dealer to settle or contribute any of its own funds or financial resources toward the settlement of any multiparty or class action litigation without obtaining the dealer's voluntary and written consent subsequent to the filing of such litigation.
(3) A chargeback to a dealer, or offset of any amounts otherwise payable to a dealer by the captive finance source, for any indebtedness properly owing from a dealer to the captive finance source as part of a specific program covered by this section, the terms of which have been agreed to by the dealer in advance, except to the extent such chargeback would otherwise be prohibited by this section.
(h) Require a dealer to repossess or otherwise gain possession of a motor vehicle at the request of or on behalf of the captive finance source. This section shall not apply to any requirements contained in any agreement between the dealer and the captive finance source wherein the dealer agrees to receive and process vehicles that are voluntarily returned by the customer or returned to the lessor at the end of the lease term.
(i) Any clause or provision in any franchise or agreement between a dealer and a manufacturer, factory branch, distributor, or distributor branch, or between a dealer and any captive finance source, that is in violation of or that is inconsistent with any of the provisions of this section shall be deemed null and void and without force and effect to the extent it violates this section.
(iv) Any captive finance source who engages directly or indirectly in purposeful contacts within this state in connection with the offering or advertising the availability of financing for the sale or lease of motor vehicles within this state, or who has business dealings within this state, shall be subject to the provisions of this section and shall be subject to the jurisdiction of the courts of this state.
(v) The applicability of this section shall not be affected by a choice of law clause in any agreement, waiver, novation, or any other written instrument.
(vi) It shall be unlawful for a captive finance source to use any subsidiary corporation, affiliated corporation, or any other controlled corporation, partnership, association, or person to accomplish what would otherwise be illegal conduct under this section on the part of the captive finance source.
(i) Operating a dealership temporarily for a reasonable period.
(ii) Operating a dealership which is for sale at a reasonable price.
(i) A manufacturer has a contractual right of first refusal to acquire the new motor vehicle dealer’s assets where the dealer owner receives consideration, terms and conditions that are either the same as or better than those they have already contracted to receive under the proposed change of more than fifty percent of the dealer’s ownership.
(ii) To provide for the succession of the franchise agreement to designated family members or qualified management in the event of death or incapacity of the dealer or its principle owner or owners.
(iii) Upon exercising the right of first refusal by a manufacturer, it eliminates any requirement under its dealer agreement or other applicable provision of this statute that the manufacturer evaluate, process or respond to the underlying proposed transfer by approving or rejecting the proposal, is not subject to challenge as a rejection or denial of the proposed transfer by any party.
(i) By an act or statement that the manufacturer or distributor will in any manner impact the dealer, whether it is express or implied or made directly or indirectly.
(ii) By a contract, or an express or implied offer of contract, made to the dealer on the condition that the dealer shall sell, offer to sell or sell exclusively an extended service contract, extended maintenance plan or similar product offered, endorsed or sponsored by the manufacturer or distributor.
(iii) By measuring the dealer's performance under the franchise based on the sale of extended service contracts, extended maintenance plans or similar products offered, endorsed or sponsored by the manufacturer or distributor.
(iv) By requiring the dealer to actively promote the sale of extended service contracts, extended maintenance plans or similar products offered, endorsed or sponsored by the manufacturer or distributor.
(v) Nothing in this paragraph shall prohibit a manufacturer or distributor from providing incentive programs to a new vehicle dealer who makes the voluntary decision to offer to sell, sell or sell exclusively an extended service contract, extended maintenance plan or similar product offered, endorsed or sponsored by the manufacturer or distributor.
(y) (i) Require a dealer to purchase goods or services from a vendor selected, identified, or designated by a manufacturer, factory branch, distributor, distributor branch, or one of its affiliates by agreement, program, incentive provision, or otherwise without making available to the dealer the option to obtain the goods or services of substantially similar quality and overall design from a vendor chosen by the dealer and approved by the manufacturer, factory branch, distributor, or distributor branch; provided that such approval shall not be unreasonably withheld, and further provided that the dealer's option to select a vendor shall not be available if the manufacturer or distributor provides substantial reimbursement for the goods or services offered. Substantial reimbursement is equal to or greater than sixty-five percent of the cost, which shall not be greater than the cost of reasonably available similar goods and services in close proximity to the dealer's market.
(ii) To fail to provide to a dealer, when the manufacturer, factory branch, distributor, or distributor branch claims that a vendor chosen by the dealer cannot supply goods and services of substantially similar quality, a disclosure concerning the vendor selected, identified, or designated by the franchisor stating: (I) Whether the manufacturer, factory branch, distributor, distributor branch, or one of its affiliates, or any officer, director, or supervisory employee of the same, has an ownership interest, actual or beneficial, in the vendor and, if so, the percentage of the ownership interest; and (ii) whether the manufacturer, factory branch, distributor, distributor branch, or one of its affiliates has an agreement or arrangement by which the vendor pays to the manufacturer, factory branch, distributor, distributor branch, or one of its affiliates, or any officer, director, or supervisory employee of the same, any compensation and, if so, the basis and amount of the compensation to be paid as a result of any purchases by the dealer, whether it is to be paid by direct payment by the vendor or by credit from the vendor for the benefit of the recipient.
(3) A manufacturer or distributor, either directly or through any subsidiary, may not terminate, cancel, fail to renew or discontinue any lease of the new motor vehicle dealer's established place of business except for a material breach of the lease.
(4) Except as may otherwise be provided in this article, no manufacturer or franchisor shall sell, directly or indirectly, any new motor vehicle to a consumer in this state, except through a new motor vehicle dealer holding a franchise for the line-make covering such new motor vehicle. This subsection shall not apply to manufacturer or franchisor sales of new motor vehicles to charitable organizations, qualified vendors or employees of the manufacturer or franchisor.
(5) Except when prevented by an act of God, labor strike, transportation disruption outside the control of the manufacturer or time of war, a manufacturer or distributor may not refuse or fail to deliver, in reasonable quantities and within a reasonable time, to a dealer having a franchise agreement for the retail sale of any motor vehicle sold or distributed by the manufacturer, any new motor vehicle or parts or accessories to new motor vehicles as are covered by the franchise if the vehicles, parts and accessories are publicly advertised as being available for delivery or are actually being delivered. All models offered for sale by the manufacturer, without any enrollment, surcharge, unreasonable facility or building or any other unreasonable type of upgrade requirement or acquisition fee, shall be available to the franchised dealer at no additional cost for that particular model of vehicle.
§17A-6A-11. Where motor vehicle dealer deceased or incapacitated.
(1) Any designated family member of a deceased or incapacitated new motor vehicle dealer may succeed the dealer in the ownership or operation of the dealership under the existing dealer agreement if the designated family member gives the manufacturer or distributor written notice of his or her intention to succeed to the dealership within one hundred twenty days after the dealer's death or incapacity, agrees to be bound by all of the terms and conditions of the dealer agreement, and the designated family member meets the current criteria generally applied by the manufacturer or distributor in qualifying new motor vehicle dealers. A manufacturer or distributor may refuse to honor the existing dealer agreement with the designated family member only for good cause. In determining whether good cause exists for refusing to honor the agreement, the manufacturer or distributor has the burden of proving that the designated successor is a person who is not of good moral character or does not meet the manufacturer’s existing written, reasonable and uniformly applied standards for business experience and financial qualifications. The designated family member will have a minimum of one year to satisfy the manufacturer’s written and reasonable standards and financial qualifications for appointment as the dealer principal.
(2) The manufacturer or distributor may request from a designated family member such personal and financial data as is reasonably necessary to determine whether the existing dealer agreement should be honored. The designated family member shall supply the personal and financial data promptly upon the request.
(3) If a manufacturer or distributor believes that good cause exists for refusing to honor the succession, the manufacturer or distributor may, within forty-five days after receipt of the notice of the designated family member's intent to succeed the dealer in the ownership and operation of the dealership, or within forty-five days after the receipt of the requested personal and financial data, serve upon the designated family member notice of its refusal to approve the succession.
(4) The notice of the manufacturer or distributor provided in subsection (3) above shall state the specific grounds for the refusal to approve the succession and that discontinuance of the agreement shall take effect not less than ninety days one hundred and eighty days after the date the notice is served.
(5) If notice of refusal is not served within the sixty days provided for in subsection (3) of this section, the dealer agreement continues in effect and is subject to termination only as otherwise permitted by this article.
(6) This section does not preclude a new motor vehicle dealer from designating any person as his or her successor by will or any other written instrument filed with the manufacturer or distributor, and if such an instrument is filed, it alone determines the succession rights to the management and operation of the dealership.
(7) If the manufacturer challenges the succession, it maintains the burden of proof to show good cause by a preponderance of the evidence. If the person seeking succession files a civil action within the one hundred eighty days set forth in subsection (4), no action may be taken by the manufacturer contrary to the dealer agreement until such time as the civil action and any appeal has been exhausted. Provided, that when a motor vehicle dealer appeals a decision upholding a manufacturer’s decision to not allow succession based upon the designated person’s insolvency, conviction of a crime punishable by imprisonment in excess of one year under the law which the designated person was convicted or the crime involved theft, dishonesty, or false statement, regardless of the punishment, the dealer agreement shall remain in effect pending exhaustion of all appeals only if the motor vehicle dealer establishes a likelihood of success on appeal and the public interest will not be harmed by keeping the dealer agreement in effect pending entry of final judgment after such appeal.
§17A-6A-12. Establishment and relocation or establishment of additional dealers.
(1) As used in this section, “relocate” and “relocation” do not include the relocation of a new motor vehicle dealer within four air miles of its established place of business or an existing new motor vehicle dealer sells or transfers the dealership to a new owner and the successor new motor vehicle dealership owner relocates to a location within four miles of the seller’s last open new motor vehicle dealership location. The relocation of a new motor vehicle dealer to a site within the area of sales responsibility assigned to that dealer by the manufacturing branch or distributor may not be within six air miles of another dealer of the same line-make.
(2) Before a manufacturer or distributor enters into a dealer agreement establishing or relocating a new motor vehicle dealer within a relevant market area where the same line-make is represented, the manufacturer or distributor shall give written notice to each new motor vehicle dealer of the same line-make in the relevant market area of its intention to establish an additional dealer or to relocate an existing dealer within that relevant market area.
(3) Within sixty days after receiving the notice provided in subsection (2) of this section, or within sixty days after the end of any appeal procedure provided by the manufacturer or distributor, a new motor vehicle dealer of the same line-make within the affected relevant market area may bring a declaratory judgment action in the circuit court for the county in which the new motor vehicle dealer is located to determine whether good cause exists for the establishing or relocating of the proposed new motor vehicle dealer: Provided, That a new motor vehicle dealer of the same line-make within the affected relevant market area shall not be permitted to bring such an action if the proposed relocation site would be further from the location of the new motor vehicle dealer of the same line-make than the location from which the dealership is being moved. Once an action has been filed, the manufacturer or distributor may not establish or relocate the proposed new motor vehicle dealer until the circuit court has rendered a decision on the matter. An action brought pursuant to this section shall be given precedence over all other civil matters on the court’s docket. The manufacturer has the burden of proving that good cause exists for establishing or relocating a proposed new motor vehicle dealer.
(4) This section does not apply to the reopening in a relevant market area of a new motor vehicle dealer that has been closed or sold within the preceding two years if the established place of business of the new motor vehicle dealer is within four air miles of the established place of business of the closed or sold new motor vehicle dealer.
(g) The effect on the relocating dealer of a denial of its relocation into the relevant market area.
§17A-6A-12a. Restriction on Motor Vehicle Dealer’s Use of Dealership Property.
§17A-6A-12c. Certain Property Use Agreements.
(a) Notwithstanding subsection (b)(1) of section twelve-b of this article, and subject to this section, a dealer may enter into a property use agreement for cash consideration that grants the manufacturer or distributor the exclusive rights to direct the use of the dealership.
(1) Each new motor vehicle manufacturer or distributor shall specify in writing to each of its new motor vehicle dealers licensed in this state the dealer's obligations for preparation, delivery and warranty service on its products. The manufacturer or distributor shall compensate the new motor vehicle dealer for warranty service required of the dealer by the manufacturer or distributor. The manufacturer or distributor shall provide the new motor vehicle dealer with the schedule of compensation to be paid to the dealer for parts, work and service, and the time allowance for the performance of the work and service in a manner in compliance with section eight-a of this article.
(2) The schedule of compensation shall include reasonable compensation for diagnostic work, as well as repair service and labor. Time allowances for the diagnosis and performance of warranty work and service shall be reasonable and adequate for the work to be performed. In the determination of what constitutes reasonable compensation under this section, the principal factor to be given consideration shall be the prevailing wage rates being paid by dealers in the community in which the dealer is doing business, and in no event may the compensation of a dealer for warranty labor and parts be less than the rates charged by the dealer for like service to retail customers for nonwarranty service and repairs, provided that the rates are reasonable. section eight-a of this article shall govern. However, in the case of a new motor vehicle dealer of motorcycles or recreational vehicles, in no event may the compensation of a dealer for warranty parts be less than the dealer’s cost of acquiring the part plus twenty percent.
(c) Fail to compensate any of the new motor vehicle dealers licensed in this state for repairs effected by the recall.
(4) All claims made by a new motor vehicle dealer pursuant to this section for labor and parts shall be paid within thirty days after their approval. All claims shall be either approved or disapproved by the manufacturer or distributor within thirty days after their receipt on a proper form generally used by the manufacturer or distributor and containing the usually required information therein. Any claim not specifically disapproved in writing within thirty days after the receipt of the form is considered to be approved and payment shall be made within thirty days. The manufacturer has the right to initiate an audit of a claim within twelve months after payment and to charge back to the new motor vehicle dealer the amount of any false, fraudulent or unsubstantiated claim, subject to the requirements of section eight-a of this article.
(5) The manufacturer shall accept the return of any new and unused part, component or accessory that was ordered by the dealer, and shall reimburse the dealer for the full cost charged to the dealer for the part, component or accessory if the dealer returns the part and makes a claim for the return of the part within one year of the dealer’s receipt of the part, component or accessory and provides reasonable documentation, to include any changed part numbers to match new part numbers, provided that the part was ordered for a warranty repair.
If there is a dispute between the manufacturer, factory branch, distributor, or distributor branch and the dealer with respect to any matter referred to this article, either party may notify, in writing, the other party of its request to challenge, through the manufacturer’s appeal process or the circuit courts of the State of West Virginia. A manufacturer, factory branch, distributor, or distributor branch may not collect chargebacks, fully or in part, either through direct payment or by charge to the dealer's account, for warranty parts or service compensation, including service incentives, sales incentives, other sales compensation, surcharges, fees, penalties, or any financial imposition of any type arising from an alleged failure of the dealer to comply with a policy of, directive from, or agreement with the manufacturer, factory branch, distributor, or distributor branch until thirty days following final notice of the amount charged to the dealer following all internal processes of the manufacturer, factory, factory branch, distributor, or distributor branch. Within thirty days following receipt of final notice, the dealer may, in writing, request a hearing or seek civil relief from the manufacturer’s appeal process or the circuit courts of the State of West Virginia . If a dealer requests a hearing or files a civil action, the manufacturer, factory branch, distributor, or distributor branch may not collect the chargeback, fully or in part, either through direct payment or by charge to the dealer's account, until the completion of the hearing or civil action, and all appeal, civil or otherwise, have been exhausted concerning the validity of the chargeback.
§17A-6A-15 Dealer Data, Obligation of Manufacturer, Vendors, Suppliers, and Others; Indemnification of Dealer.
Notwithstanding any of the terms or provisions contained in this section or in any consent, authorization, release, novation, franchise, or other contract or agreement, whenever any manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party acting on behalf of or through or approved, referred, endorsed, authorized, certified, granted preferred status, or recommended by, any manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor requires that a new motor vehicle dealer provide any dealer, consumer, or customer data or information through direct access to a dealer’s computer system, the dealer is not required to provide, and may not be required to consent to provide in any written agreement, such direct access to its computer system. The dealer may instead provide the same dealer, consumer, or customer data or information specified by the requesting party by timely obtaining and pushing or otherwise furnishing the requested data to the requesting party in a widely accepted file format; provided that, when a dealer would otherwise be required to provide direct access to its computer system under the terms of a consent, authorization, release, novation, franchise, or other contract or agreement, a dealer that elects to provide data or information through other means may be charged a reasonable initial set-up fee and a reasonable processing fee based on the actual incremental costs incurred by the party requesting the data for establishing and implementing the process for the dealer. Any term or provision contained in any consent, authorization, release, novation, franchise, or other contract or agreement which is inconsistent with any term or provision contained in this subsection shall be voidable at the option of the dealer.
Notwithstanding the terms or conditions of any consent, authorization, release, novation, franchise or other contract or agreement, every manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party acting on behalf of or through any manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, having electronic access to consumer or customer data or other information in a computer system utilized by a new motor vehicle dealer, or who has otherwise been provided consumer or customer data or information by the dealer, shall fully indemnify an hold harmless any dealer from all damages, costs, and expenses incurred by the dealer. Such indemnification by the manufacturer, factory branch, distributor, distributor branch, dealer management computer system vendor, or any third party, whether working for these entities or not, includes, but is not limited to, judgments, settlements, fines penalties, litigation costs, defense costs, court costs, costs related to the disclosure of security breaches, and attorney fees arising out of complaints, claims, civil and administrative actions, and, to the fullest extent allowable under the law, governmental investigations and prosecutions to the extent caused by a security breach or the access, storage, maintenance, use, sharing, disclosure, or retention of the dealer’s consumer or customer data or other information or maintenance or services provided to any computer system utilized by a new motor vehicle dealer.
§17A-6A-16. Exports; Rebuttable Presumption on Behalf of Dealer.
It shall be unlawful for a manufacturer or distributor to take or threaten to take any adverse action against a dealer pursuant to an export or sale-for-resale prohibition because the dealer sold or leased a vehicle to a customer who either exported the vehicle to a foreign country or resold the vehicle in violation of the prohibition, unless the export or sale-for-resale prohibition policy was provided to the dealer in writing prior to the sale or lease, and the dealer knew or reasonably should have known of the customer’s intent to export or resell the vehicle in violation of the prohibition at the time of sale or lease. If the dealer causes the vehicle to be registered in this state or any other state, a rebuttable presumption is established that the dealer did not have reason to know of the customer’s intent to export or resell the vehicle.
§17A-6A-17. Manufacturer performance standards; uniform application, prohibited practices.
A performance standard, sales objective, or program for measuring dealer performance that may have a material effect on a dealer, including the dealer’s right to payment under any incentive or reimbursement program, and the application of the standard, sales objective or program by a manufacturer, distributor or factory branch, shall be fair, reasonable, equitable and based on accurate information.
Prior to beginning any incentive or reimbursement program, the manufacturer shall provide in writing to each dealer of the same line-make that chooses to participate in the programe the dealer’s performance requirement or sales goal or objective, which shall include a reasonable and general explanation of the methodology, criteria, and calculations used.
A manufacturer shall allocate an adequate supply of vehicles, appropriate to the market and season, to its dealers by series, product line, and model to assist the dealer in achieving any performance standards established by the manufacturer and distributor.
A dealer that claims that the application of a performance standard, sales objective, or program for measuring dealership performance does not meet the standards listed in subsection (a) of this section, may seek relief and damages in the circuit courts of the State of West Virginia.
The manufacturer or distributor has the burden of proving by a preponderance of the evidence that the performance standard, sales objective or program for measuring dealership performance complies with this Article.
Notwithstanding the terms of any dealer agreement, a manufacturer or distributor shall indemnify and hold harmless its dealers for any reasonable expenses incurred, including damages, court costs and attorney's fees, arising solely out of complaints, claims or actions which relate to the manufacture, assembly, design of a new motor vehicle or other functions by the manufacturer or distributor beyond the control of the dealer, including, without limitation, the selection by the manufacturer or distributor of parts or components for the vehicle, and any damages to merchandise occurring prior to acceptance of the vehicle by the dealer to the dealer if the carrier is designated by the manufacturer or distributor, if the new motor vehicle dealer gives timely notice to the manufacturer or distributor of the complaint, claim or action.
§17A-6A-19. Actions at law; damages.
(1) If a manufacturer or distributor terminates, cancels, fails to renew or discontinues a dealer agreement for other than good cause as defined in this article, or commits any other violation of this article, the new motor vehicle dealer adversely affected by the actions may bring an action for damages and equitable relief against the manufacturer or distributor. If the new motor vehicle dealer prevails, the dealer may recover, in addition to actual damages, treble damages up to three times the amount of the actual damages awarded, plus reasonable attorney’s fees, regardless of the amount in controversy. For the purposes of the award of attorney’s fees and costs, whenever the new motor vehicle dealer is seeking injunctive or other relief, the dealer may be considered to have prevailed when a judgment or other final order providing equitable relief is entered in its favor.
(2) A manufacturer or distributor who violates this article is liable for all damages sustained by a new motor vehicle dealer as a result of the violation.
(3) A manufacturer or distributor or new motor vehicle dealer may bring an action for declaratory judgment for determination of any controversy arising pursuant to this article.
(4) Any corporation or association which is primarily owned by or composed of dealers and which primarily represents the interests of dealers has standing to file a petition or cause of action with the court of competent jurisdiction for itself or by, for or on behalf of any, or a group of, new motor vehicle dealers for any violation of this article or for the determination of any rights created by this article.
(5) In addition to any county in which venue is proper in accordance with the Constitution and laws of this state, in any cause of action brought by a new motor vehicle dealer against a manufacturer or distributor for any violation of this article or for the determination of any rights created by the dealer’s franchise agreement, venue is proper in the county in which the dealer is engaged in the business of selling the products or services of the manufacturer or distributor.
Upon proper application to the circuit court, a manufacturer or distributor or new motor vehicle dealer may obtain appropriate injunctive relief against termination, cancellation, nonrenewal or discontinuance of a dealer agreement or any other violation of this article. The court may grant injunctive relief or a temporary restraining order without bond.
§17A-6A-21. West Virginia law to apply.
Notwithstanding the terms, provisions or requirements of any franchise agreement, contract or other agreement of any kind between a new motor vehicle dealer and a manufacturer or distributor, captive finance source, or any subsidiary, affiliate or partner of a manufacturer or distributor, the provisions of the Code of West Virginia apply to all such agreements and contracts. Any provisions in the agreements and contracts which violate the terms of this section are null and void.
NOTE: The purpose of this bill is to update and clarify the article of the code relating to motor vehicle dealers, distributors, wholesalers and manufacturers.
Sections §17A-6A-12a; 12b; 12c; 14a; 15; 16 and 17 are new, therefore underscoring has been omitted.
Sections §17A-6A-18; 19 and 20 and 21 have been renumbered.


In February of this year, I blogged on the topic of what happens when it is unclear whose program is involved with respect to activities of a place of education. It’s a question that comes up from time to time and is very complicated. For those representing educational institutions, it is an important one. On November 5, 2018, the Seventh Circuit affirmed that decision, and I thought it makes sense to go over the Seventh Circuit decision. Since we have already covered the facts in the prior blog entry, there is no reason to go into detail here as to what the facts are. So, the categories for this blog entry are court’s reasoning and takeaways. Due to that configuration, the reader is probably going to want to read the whole thing.
The Department of Justice filed an amicus brief in the case at the invitation of the court.
The limited case law interpreting the statutory term simply emphasizes the breadth of the ADA and of the phrase itself.
Under 28 C.F.R. §35.130(b)(4), a governmental entity cannot avoid its obligations under the ADA by ceding its governmental function to private entities.
The mandate of title II is clear so that whenever a public entity or federal funding recipient does anything, it has to extend the benefits of and cannot discriminate in that thing on the basis of disability.
The question whether a particular event is a service, program, or activity of a public entity turns on what the public entity itself is doing, providing, or making available.
Both the parties and the Department of Justice acknowledged that the regulations specifically contemplate that liability may attach to some complicated relationships between public and private actors. For example, 28 C.F.R. §35.130(b) prohibits a public entity from discriminating on the basis of disability, directly or indirectly, such as through contractual, licensing, or other arrangements.
The Department of Justice in its amicus brief said that if there is a true joint endeavor, then both the public and private entity are responsible for complying with the ADA and/or §504 of the Rehabilitation Act with respect to the entire event.
The Department of Justice in its amicus brief said that where the public entity does not engage in a joint endeavor with the private entity, but instead participates in the event of the private entity, then the liability of the public entity is limited to its own program within the event, but does not extend to the entire event. Whether it is a true joint endeavor or a situation where a public entity is simply participating in the event of a private entity is a continuum. Lots of situations will fall between the two extremes.
Considering the record, this case falls closer to the public entity simply participating than it does to a true joint endeavor because: 1) the event was part of the museum’s own programming for the people of the community with the hope that those in attendance would be more supportive of the museum’s endeavors; 2) the students who sang at the event and the teachers who accompany them were simply the invitees of the museum; 3) the responsibility of the school upon acceptance of the invitation was limited to arranging for the attendance of the students and for the presentation of the musical program for the audience; and 4) the planning, community notification, and refreshments for the audience were handled by the museum as the sponsor and host of the event.
Even looking at the record in a way most charitably for the plaintiff, it simply cannot be said that the school’s participation was in any way a substitution for an event that otherwise would have been held at the school as part of its own observance of the holiday season.
Any benefits to the students of the school or to the school’s students parents were purely collateral to the objectives of the museum and must be considered in that context.
The inquiry into whether a particular program involving private entities not subject to the statute and public entities subject to title II of the ADA is a service, program or activity of the public entity is a fact intensive issue.
Over the years, I have noticed that the Seventh Circuit has evolved when it comes to persons with disabilities. At present, the Seventh Circuit seems to be less pro-disability than it has in the past. Certainly, other Circuits, such as the 11th and the 9th for example, are much more pro-disability in their decisions.
The Seventh Circuit decision is quite broad in its analysis. That is, it doesn’t give the attorney a lot of specific guidelines as to how go about figuring out whose program is it. I don’t find thinking of whose program is it on a continuum very helpful for specific factual situations. For that, what the District Court had to say is useful, and since that decision was affirmed on appeal, remains good law. Of course, before you can figure out whose program it is, you have to figure out first what programs are involved. For that, the reader will want to take a look at this blog entry.
With respect to appealing the case to the United States Supreme Court, I am not aware of any split in the Circuits. However, this particular area is so complicated and so fact intensive, that down the road I could see a split developing in the Circuits. So, the Supreme Court may wait for the split to occur before taking this kind of case.
The case makes pretty clear that a public entity pawning off its obligations onto a private entity that discriminates on the basis of disability is not going to fly. On that score, the reader may want to look at this blog entry and this blog entry discussing the nondelegable/delegable duty of ADA compliance.
For specific guidance outside of the general statement contained in this opinion, I would refer to this blog entry for trying to figure out just whose program is it.
The statement from the opinion that reads: “the record, even charitably read for Ms. Ashby[plaintiff], did not support the conclusion that the school’s participation was in any way a substitution for an event that otherwise would have been held at the school as part of its own observance of the holiday season,” will be a boon for any defendant arguing that it wasn’t their program as this statement, if it becomes the standard, basically says anything short of a joint venture is not going to impose ADA liability. Such a reading doesn’t make sense in light of the way the rest the decision reads, but nevertheless look for defense lawyers to exploit this. Such a standard is also likely not to be followed by all Circuits, and thereby lead to the Circuit split.
That the court recognizes the fact intensive nature of figuring out just whose program it is, presents plaintiffs with an opportunity to argue against motions for summary judgment filed by defendants.
Finally, my blog was nominated in the expert category for a best blog by the expert institute. Thanks to all who nominated me. You now have a chance to vote here for it to be a best blog. Regarding the ABA 100 for this year, I should be finding out soon, since the notification always happens around thanksgiving.
Have a great thanksgiving everyone!!!!!
I have been blogging since December 2011. In all that time, with the exception of a winter break, I have never taken two weeks off. I do have a reason for doing so here. First, we had Labor Day weekend and then working with co-counsel, David Llewellyn, we had to move things to file a complaint in the case of Stian v. Atlanta Medical Center Inc. and Anthony E. Barnes M.D. in Fulton County Superior Court involving culturally deaf plaintiffs where we allege both the failure to obtain consent (medical malpractice), and the failure to provide effective communications per this case due to the failure to provide an ASL interpreter. Second, we had hurricane Irma hit Atlanta at the beginning of this week. We are all okay here. Several big trees fell down around us, and we lost power for 34 hours, but nothing beyond that. Cars are okay. Then, at the end of the week, Robin Shea and I presented to the Federal Bar Association at their national convention here in Atlanta on ADA hot issues: the labor and employment law version. At that presentation, we covered: pregnancy and the ADA; mandatory reassignment; can you get compensatory and punitive damages in ADA retaliation cases; marijuana in the workplace; and the decision throwing out the EEOC wellness plans. So, the week was insane. It was fabulous to finally meet Robin, whom I had never met before except in cyberspace.
So now I am back to blogging. In deciding what to blog on week to week, one of the factors that I consider is whether a fellow blogger has blogged on it. If they have, can I put a different spin on it? If not, I let it go and blog on something else. For example, Robin Shea on her blog, blogged on the case throwing out the EEOC wellness plans. Her blog was so comprehensive and so well done, that I didn’t think I could add anything to it. That blog entry can be found here. There are other times where a blog entry appears, and I believe I can add a different perspective to it. The blog entry of this week is one of those situations. My colleague, Richard Hunt, recently blogged here on the case of Civil Rights Education and Enforcement Center v. Hospitality Properties Trust. After reading his very provocative blog entry, I thought I could add a different perspective to it. As usual, the blog entry is divided into categories and they are: facts; issues presented; holdings; court’s reasoning standing; court’s reasoning REIT class action; concurring and dissenting opinion’s reasoning; and takeaways. Of course, the reader is free to focus on any or all of the categories.
Hospitality Properties Trust (HPT) is a real estate investment trust (REIT in the vernacular), owning hotels across the United States. Real estate investment trusts are where investors own a fraction of a group of real estate holdings. They are exempt from taxation on corporate profits. That is, shareholders are taxed only when they receive dividends. To avoid taxation at the corporate level, real estate investment trusts, among other things, must remain passive investors and delegate the management of particular facilities. The plaintiffs are all persons with disabilities using wheelchairs. Each phoned an HPT owned hotel located in her state of residence that provided free local shuttle services and each one was informed that the hotel at issue did not provide equivalent shuttle service for people with mobility impairments. Each person alleged that they would have stayed at the hotel they called but for its failure to provide equivalent shuttle service. Each person also alleged that they intended to stay at the hotel, but the hotel’s failure to provide equivalent shuttle service deterred them from doing so at present. The plaintiff filed a class action against HPT alleging that HPT failed to offer equivalent accessible transportation services at its hotel in violation of title III of the ADA. Plaintiffs alleged that while most HPT hotels provide some form of free local transportation service, very few of those hotels provide equivalent service accessible to people using wheelchairs or scooters for mobility.
Can a plaintiff rely on the deterrent effect doctrine in order to establish constitutional standing under the ADA where the plaintiff lacks first-hand knowledge that an establishment is not in ADA compliance?
Does a plaintiff have constitutional standing where her only motivation for visiting the facility is to test for ADA compliance?
Do real estate investment trusts by their very nature get a pass on ADA compliance, particularly with respect to class action litigation?
A plaintiff experiences continuing adverse effects where a defendant’s failure to comply with the ADA deters her from making use of the defendant’s facility.
The harm a plaintiff faces is concrete and particularized with respect to their intent to visit the hotels once they are notified that there is not equivalent shuttle service for persons with disabilities.
Actually visiting a hotel, as opposed to phoning, does not make a plaintiff’s injury anymore concrete. In either event, a plaintiff is deterred from using the accommodation. It is the plaintiff’s actual knowledge of a barrier, rather than the source of that knowledge, that is determinative.
While past actions may constitute evidence bearing on whether there is a real and immediate threat of repeated injury, that is not necessarily dispositive evidence. For instance, evidence of concrete travel plans would be sufficient to show that a plaintiff with a disability intends to visit the facility even if she has not traveled there in the past.
Requiring a plaintiff to personally encounter barriers also causes line drawing problems. Would it be enough to travel to the hotel and ask the concierge whether the hotel’s shuttle service accommodates a person with a disability or must a plaintiff actually attempt to use the purportedly deficient accommodation? If the concierge says there is no accommodation, must the plaintiff perform a visual inspection or review schedules to verify this?
Making case-by-case determinations about whether a particular plaintiff’s injury is imminent is well within the competency of the District Courts.
Under the ADA, once a plaintiff has actually become aware of discriminatory conditions existing at a public accommodation thereby deterring him or her from visiting or patronizing that accommodation, the plaintiff has suffered an injury. That injury continues so long as equivalent access is denied.
Interpreting the ADA to exclude testers from enforcing the right to be free from discrimination would undermine the specific intent of the ADA.
Relying on a case from the 11th Circuit, Houston v. Murad Supermarkets, Inc., 733 F.3d 1323 (11th 2013), the court said: 1) nothing in the text of title II of the ADA constrains the statutorily created right to be free from disability discrimination in the enjoyment of a facility based upon a plaintiff’s motive for assessing the facility; 2) 42 U.S.C. §12182(a) specifically states that no individual shall be discriminated against on the basis of disability, which is similar to the Fair Housing Act language; 3) 42 U.S.C. §12188 provide that any person subject to discrimination on the basis of disability may bring suit; and 4) Congress knows how to limit standing to sue under discrimination statutes to certain groups of people and has done so in various other statutes, but chose not to do so in 42 U.S.C. §12182(a). Accordingly, a tester does have the right to sue for injunctive relief under 42 U.S.C. §12182(a).
The 10th Circuit has also held tester standing is viable under title III of the ADA in this case. The 10th Circuit said that title III provides remedies for any person subject to illegal disability discrimination. Therefore, it concluded that anyone suffering an invasion of legal interest protected by title III may have standing regardless of his or her motivation in encountering that invasion.
The proper focus in determining jurisdiction are the facts existing at the time the complaint under consideration is filed.
To get class certification, a party has to show the requirements of federal Rules of Civil Procedure 23(a) are satisfied, which are: 1) joinder of all members is impracticable; 2) questions of law or fact are common to the class; 3) the named plaintiffs claims or defenses are typical of those of the class; and 4) representative parties will fairly and adequately protect the interests of the class. Once that is done, then a party has to satisfy one of three requirements of rule 23(b). With respect to rule 23(b), plaintiff relied on claiming that the party opposing the class had acted or refused to act on grounds that apply generally to the class so that final injunctive relief would be appropriate respecting the class as a whole.
HPT does not itself operate the hotels. Rather, HPT utilizes various professional management companies as eligible independent contractors to operate the hotel it owns. Eligible independent contractors are a person or corporation actively engaged in the trade or business of operating qualified lodging facilities and that does not control more than 35% of the real estate investment trust’s shares or voting powers.
While HPT’s agreement with management companies required eligible independent contractors to comply with all laws in their fulfillment of their management agreement obligations, those agreements also stipulated that the management companies have sole, exclusive, and uninterrupted control over the operation of the hotels.
HPT does not set or provide the management companies with any uniform policy or plan regarding the operation of shuttle or transportation services at its hotels. Accordingly, it is the management companies and not HPT that decide whether to offer local transportation services and the terms for which those services operate.
According to HPT’s website, it’s 500 hotels are operated by six eligible independent contracting firms, such as but not limited to Wyndham and Hyatt.
Presumably, the managers maintaining control over the properties they have contracted to manage, could themselves be named as defendants in separate class actions, and could ultimately be held responsible for any discriminatory practices.
The District Court correctly found that HPT did not have a policy regarding how its eligible independent contractors had to comply with the ADA. In fact, individual hotel practices were all over the place.
HPT has done nothing to discourage its contractors from complying with the ADA since HPT’s contracts require hotel to operate in compliance with applicable federal and state laws. Such a contractual term is a policy of delegation and not of noncompliance.
There is no evidence of a single general policy of discrimination that could serve as a common issue.
The concept of a nondelegable duty does not mean that an actor cannot delegate an activity to an independent contractor.
Even if HPT would be vicariously liable for ADA violations by contractors, that by itself but not bear on commonality for purposes of class action certification since that only creates a common issue as to where the financial burden of liability falls and not a common issue regarding liability. There is also no common policy or practice.
While intentional noncompliance would amount to an unofficial policy of discrimination weighing in favor of class certification, a policy against having uniform practices is not a common issue for class certification purposes.
It simply doesn’t make sense to say that firms will violate the ADA rather than comply with it so long as they can avoid class-action suits.
Whatever incentive to sue under the ADA, the class action rules do not require HPT to manage its properties in a manner facilitating class actions if and when ADA violations occur.
Title III of the ADA prohibits discrimination on the basis of disability in the full and equal enjoyment of accommodations by any person owning, leasing (or leases to), or operating a place of public accommodation.
Congress made no distinction whether the owner was a natural person, a partnership, a corporation, a real estate investment trust, or any other type of structure allowed under the law. Rather, Congress just outlawed discrimination on the basis of disability.
The majority’s conclusion permits HPT to avoid for all practical purposes the consequences of the ADA. By this decision, plaintiffs and other advocates of people with disabilities will now be required to seek equal treatment one hotel at a time. HPT’s decision to establish a real estate investment trust as its preferred ownership structure should not shield HPT from its alleged systematic effort to abate the equivalent transportation requirements of the ADA.
In civil rights litigation, plaintiff’s satisfy the commonality requirement where the lawsuit challenges a systemwide practice or policy affecting all of the putative class members.
Plaintiffs all suffer from similar harm based upon HPT’s failure to accommodate their disability as required by the ADA. Whether one hotel provides no van service for people with mobility impairments while another hotel charges extra for van service, is irrelevant to the issue of class certification. Instead, what should drive the analysis is whether all of the putative class members suffer from the failure of HPT’s hotels to accommodate their disability as required by the ADA.
Precedent does support class certification where you have shared legal issues with diverse factual predicates.
The shared legal issue of the denial of equivalent transportation in violation of the ADA satisfies the commonality requirement.
Phoning and being told that a place of public accommodation is not accessible for a person with a disability is very real. In fact, this almost happened to me yesterday. I am going to a bar convention in a different part of the country. As everyone knows, I am deaf but function entirely in the hearing world thanks to lip reading and very advanced powerful hearing aids. However, when I travel alone (my wife is hearing), at night I am a deaf person. That means I need a room that is accessible to the deaf. Being accessible means a kit they can then install into a room. I am perfectly mobile. Also, I am a bit clumsy and not all that great in space. That means a hotel room with grab bars and all these other things that are needed for a mobility impaired person actually gets in my way. There is also the taking away of the room from someone with a mobility impairment when it is simply not necessary. Finally, it also smacks of unnecessary segregation. So, whenever I go on one of these trips, I always reserve a room with the hotel directly. Yesterday, I spent quite a time back and forth trying to explain to the hotel reservation person that I needed a deaf accessible room and had no interest in a room for people with mobility impairments. The person on the other end said that I had no choice but to use a mobility impaired accessible room, which would also be accessible to a deaf person. I tried to explain that all they needed was a kit and there was no need for me to be in a room reserved for people with mobility impairments. The person resisted, and I finally asked to speak to a manager. She then got on the phone with their engineering staff and found out, as I already knew, that all they needed was a kit and that they could put me in any room. I have to tell you I came very very close to saying forget about it and not staying there. It amazes me how these high-end hotels simply do not get deaf accessibility 25 years after the ADA went into effect. If I had to choose another hotel if the person did not back down, I most certainly would have been injured even though I never actually visited the hotel. So, I certainly get the court’s point that an injury can be had when a person on the other end of the line assures that individual that they would not be accessible to a person with a disability.
The majority opinion works as such where I agree with the dissent that real estate investment trusts by their very definition no longer have to worry about complying with the ADA under this decision. I also do not entirely buy that this is a delegation. Seems to me, the facts of this situation are that they are transferring the obligation to comply with the ADA onto someone else. Finally, this decision gives real estate investment trusts absolutely no incentive to train their independent contractors on their ADA compliance obligations.
I also agree that requiring a plaintiff to personally encounter a barrier does indeed cause line drawing problems.
As the court mentioned, this is not the first case to say that testers have standing under the ADA. For instance, we discussed tester standing in this blog entry.
While real estate investment trusts are off the hook for ADA liability, the independent contractors themselves are certainly not.
I don’t think the Nevada Supreme Court, for example, would agree with the majority decision regarding the obligations of the real estate investment trust with respect to the ADA (See this blog entry). So, be sure to check your jurisdiction.
One could argue that this decision goes beyond the case discussed in this blog entry. In that case, also from the Ninth Circuit, ADA compliance was allowed to be delegated. However, here an argument exists that ADA compliance is not just being delegated but transferred.
I understand how Richard could say that telephoning means trolling for dollars. However, as I mentioned above, the harm from being rejected over the phone on the basis of disability is quite real. Perhaps, a compromise could be reached in the intent to return part of the analysis. For example, is there anything else besides the telephone call indicating an intent to return or show up at that place? For example, in my case, I had already registered for the conference and booked airfare. In other words, assessing whether the allegations of intent to return go beyond boilerplate claims.
This case does not rule out class actions against individual properties or against the eligible independent contractors.


On or about October 5, 2005, pro se petitioner, Michael Wrencher, an inmate at the Indiana State Prison (ISP) in Michigan City, Indiana, filed a petition seeking relief under 28 U.S.C. § 2254. The Response filed on behalf of the respondent by the Attorney General of Indiana on January 6, 2006, demonstrates the necessary compliance with Lewis v. Faulkner, 689 F.2d 100 (7th Cir. 1982). The petitioner filed a Traverse on January 26, 2006, which this Court has carefully examined.
The petitioner is a convicted felon serving a sentence imposed by a court in the State of Indiana. At the time of the filing of this petition he was incarcerated in the ISP in this district. A good starting place for this judicial journey is with the Court of Appeals of Indiana in its unpublished memorandum decision authored by Judge Riley and entered May 13, 2005. Such was concurred in by Judges Sullivan and Najam. For the immediate reference of all concerned, the memorandum decision is marked as Appendix "A", attached hereto and incorporated herein. The Supreme Court of Indiana denied transfer on August 25, 2005. Certainly this action by the second highest court in the State of Indiana is entitled to a presumption of correctness under 28 U.S.C. § 2254(e)(1), unless this petitioner sustains his burden to rebut this presumption by clear and convincing evidence, and he has not.
Of earlier and important concern is the decision of the Supreme Court of Indiana in Winter v. State, 635 N.E. 2d 1095 (Ind. 1994). That decision as indicated upheld the sentences imposed in the state courts in Lake County, Indiana in 1992, which sentences were 100 years for attempted murder and murder. He was found guilty by a jury in Lake County, Indiana and was found to be a habitual offender. The conviction and sentence was upheld by the Supreme Court of Indiana on June 22, 1994. Thereafter, this petitioner returned to the state trial court seeking post-conviction relief which was denied in October 2004, setting the stage for the aforesaid decision of the Court of Appeals of Indiana. It would appear that this petitioner gets any benefit from Houston v. Lack, 487 U.S. 266 (1988).
Not surprisingly, the Attorney General of Indiana bottoms an argument here on the statute of limitations found in 28 U.S.C. § 2244(d)(1), as a part of the Anti-Terrorism and Effective Death Penalty Act of 1996, 28 U.S.C. § 2244(d)(1), which became effective on April 24, 1997 after a judicially created year of grace. See especially Artuz v. Bennett, 531 U.S. 4 (2000). According to the argument advanced by the Attorney General of Indiana, the petitioner's conviction was final on September 20, 1994 with the expiration of the time within which to seek a writ of certiorari to the Supreme Court of the United States. See Griffith v. Kentucky, 479 U.S. 314 (1987). This petitioner had until April 24, 1997 to file an action under 28 U.S.C. § 2254. See Newell v. Hanks, 283 F.3d 827 (7th Cir. 2002). As indicated, this petition was prepared and filed on or about October 5, 2005, and this court is giving this petitioner the full benefit of Houston as aforesaid. The Attorney General of Indiana contends that the tolling provision of § 2244(d)(2) does not salvage the timeliness of this petition. This court is inclined to agree. See Fernandez v. Sternes, 227 F.3d 977 (7th Cir. 2000).
It is beyond any doubt that the provisions regarding the statute of limitations in AEDPA has some hard edges, but it is the burden of this court to follow the law on the subject as enunciated by the Congress, the Supreme Court of the United States, and the Court of Appeals for the circuit here. All of those authorities compel the DENIAL of this petition because it is filed out of time. IT IS SO ORDERED.


Plaintiff, James Smith, an inmate currently confined at the State Correctional Institution at Benner Township, Bellefonte, Pennsylvania (“SCI-Benner”), filed this civil action pursuant to 42 U.S.C. § 1983 on December 22, 2017 in the United States District Court for the Western District of Pennsylvania. (Doc. No. 1, 6.) This case was transferred to this district on March 7, 2018. (Doc. No. 8.) Pursuant to the Prison Litigation Reform Act of 1995 (“PLRA”), the Court will perform the following screening of the complaint prior to service of process.
Under 28 U.S.C. § 1915A, the Court is obligated, prior to service of process, to screen a civil complaint in which a prisoner is seeking redress from a governmental entity or officer or employee of a governmental entity. 28 U.S.C. § 1915A(a); James v. Pa. Dep't of Corr., 230 F. App'x 195, 197 (3d Cir. 2007). The Court must dismiss the complaint if it fails to state a claim upon which relief can be granted. 28 U.S.C. § 1915A(b)(1); Mitchell v. Dodrill, 696 F.Supp.2d 454, 471 (M.D. Pa. 2010). The Court has a similar obligation with respect to actions brought in forma pauperis. See 28 U.S.C. § 1915(e)(2). In performing this mandatory screening function, a district court applies the same standard applied to motions to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Mitchell, 696 F.Supp.2d at 471.