31-16-109. Termination, cancellation or nonrenewal of franchise.

(a) Notwithstanding the terms, provisions or conditions of any franchise or waiver, no manufacturer shall cancel, terminate or fail to renew any franchise with a licensee unless the manufacturer has satisfied the notice requirement of subsection (b) of this section and has good cause for cancellation, termination or nonrenewal.

(b) Prior to the termination, cancellation or nonrenewal of any franchise, the manufacturer shall furnish notification of termination, cancellation or nonrenewal to the department and the licensee:

(i) Not less than ninety (90) days prior to the effective date of the termination, cancellation or nonrenewal;

(ii) Not less than fifteen (15) days prior to the effective date of the termination, cancellation or nonrenewal with respect to any of the following which shall constitute good cause for cancellation, termination or nonrenewal:

(A) Insolvency of the licensee, or filing of any petition by or against the licensee under any bankruptcy or receivership law;

(B) Failure of the licensee to conduct sales and service operations during customary business hours for seven (7) consecutive business days, except for acts of God or circumstances beyond the direct control of the licensee;

(C) Conviction of the dealer, or any owner or principal manager of the dealer in a court of original jurisdiction of a felony or any crime involving theft, dishonesty or false statement;

(D) Revocation of any license which the licensee is required to have to operate a dealership;

(E) A fraudulent misrepresentation by the new motor vehicle dealer to the manufacturer, which is material to the franchise; or

(iii) Not less than one hundred eighty (180) days prior to the effective date of the termination or cancellation, where the manufacturer is discontinuing the sale of the product line.

(c) Notification under this section shall be in writing, by certified mail or personally delivered to the licensee and shall state the intention to terminate, cancel or not to renew the franchise, reasons for the termination, cancellation or nonrenewal and the date on which the termination, cancellation or nonrenewal takes effect.

(d) Good cause for termination, cancellation or nonrenewal of a franchise shall include but not be limited to:

(i) Failure by the licensee to comply with a provision of the franchise, which is both reasonable and of material significance to the franchise relationship, provided that the dealer has been notified in writing of the failure within one hundred eighty (180) days prior to termination, cancellation or nonrenewal;

(ii) Failure of the licensee to comply with reasonable performance criteria established by the manufacturer if the licensee was apprised by the manufacturer in writing of the failure and:

(A) The notification stated that notice was provided of failure of performance pursuant to this section;

(B) The licensee was afforded a reasonable opportunity, for a period of not less than six (6) months, to comply with the criteria; and

(C) The licensee did not demonstrate substantial compliance with the performance criteria of the manufacturer during such period.

(e) Within twenty (20) days of receiving the notice or within twenty (20) days after the end of any appeal procedure provided by the manufacturer, the dealer may file with the department to protest the termination, cancellation or nonrenewal. When a protest is filed, the department shall inform the manufacturer that a timely protest has been filed. The manufacturer shall have twenty (20) days to respond to the protest. The manufacturer shall not terminate, cancel or nonrenew the franchise until the department has held a hearing and determined that there is good cause for permitting the termination, cancellation or nonrenewal.

(f) The department will select a hearing examiner to conduct a hearing and to render proposed findings of fact. The proposed findings of fact shall be conclusive unless clearly erroneous and unsupported by the record. The hearing shall be conducted and the department shall render its final determination within one hundred twenty (120) days after the manufacturer responds to the licensee's protest. The department may forbid the termination, cancellation or nonrenewal of the franchise if it is determined good cause does not exist.

(g) All costs of the department, including but not limited to, the cost of the investigation, the cost of the hearing examiner and the cost of preparing the record, shall be borne equally by the parties. The department may, in its discretion, award costs to the prevailing party in any hearing held pursuant to this chapter provided, however, if the department should determine by a preponderance of the evidence, that the protest is without merit, it shall award costs and reasonable attorney fees to the prevailing party.

(h) The manufacturer shall have the burden of proof under this section.

(j) Upon the termination, nonrenewal or cancellation of any franchise by the manufacturer pursuant to this section, the licensee shall be allowed fair and reasonable compensation by the manufacturer for the:

(i) New vehicle inventory which is unused, undamaged, unsold and acquired from the manufacturer within the prior twelve (12) months and prior to the dealer receiving notice of termination;

(ii) Supplies and parts which are unused, undamaged, unsold and in original packaging and have been acquired from the manufacturer prior to the dealer receiving notice of termination and are listed in the manufacturer's current parts catalog or price list;

(iii) Equipment and furnishings purchased from the manufacturer or its approved sources in order to comply with the dealer's obligations under the franchise; and

(iv) Special tools acquired from the manufacturer or a source approved by the manufacturer which were recommended by the manufacturer in writing and are in good and usable condition, except for reasonable wear and tear.

(k) Fair and reasonable compensation under subsection (j) of this section shall be paid or credited by the manufacturer within ninety (90) days of the tender of the property, provided the licensee has clear title to the inventory and other items and is in a position to convey that title to the manufacturer.

(m) In the event of a termination, cancellation or nonrenewal by the manufacturer under this section, except as provided in subparagraph (b)(ii)(C) of this section, the manufacturer shall pay:

(i) A sum equivalent to rent of the unexpired term of the lease or one (1) year rent based upon reasonable rental value, whichever is less, if the motor vehicle dealer is leasing its motor vehicle dealership facility from a lessor other than manufacturers or distributors; or

(ii) A sum equivalent to reasonable rental value of the dealership facility for one (1) year or the reasonable rental value of the facility until facilities are leased or sold, whichever is less, if the motor vehicle dealer owns the motor vehicle dealer facility.

(n) The rental payment required under subsection (m) of this section is only required to the extent that the facilities were used for the sale and service of the manufacturer's or distributor's product, and only to the extent they are not leased for other purposes. Payment under subsection (k) of this section entitles the manufacturer or distributor to possession and use of the facility.

(o) This section shall not relieve a new motor vehicle dealer, lessor or other owner of an established place of business from the obligation to mitigate damages.