HB0956 94TH GENERAL ASSEMBLY

LRB094 06117 DRH 37654 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB0956

Introduced 2/3/2005, by Rep. Kenneth Dunkin

SYNOPSIS AS INTRODUCED:

625 ILCS 5/5-501	from Ch. 95 1/2, par. 5-501
815 ILCS 710/4	from Ch. 121 1/2, par. 754

Amends the Illinois Vehicle Code. Provides that the Secretary of State, on complaint of the Motor Vehicle Review Board, shall refuse to issue or renew a vehicle dealer's license, or shall suspend or revoke that dealer's license, if costs or fees assessed under the Motor Vehicle Franchise Act have remained unpaid for longer than 90 days after the dealer received from the Motor Vehicle Review Board actual notice and demand for the costs or fees. Amends the Motor Vehicle Franchise Act provision regarding unfair competition and practices. Provides that, when a vehicle manufacturer decides to establish or relocate a new sales franchise within the territory of an existing franchisee of that manufacturer, the manufacturer's written notice must state that the franchisee has only 30 days in which to file a written protest.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning transportation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Vehicle Code is amended by changing Section 5-501 as follows:

(625 ILCS 5/5-501) (from Ch. 95 1/2, par. 5-501)

Sec. 5-501. Denial, suspension or revocation or cancellation of a license. (a) The license of a person issued under this Chapter may be denied, revoked or suspended if the Secretary of State finds that the applicant, or the officer, director, shareholder having a ten percent or greater ownership interest in the corporation, owner, partner, trustee, manager, employee or the licensee has:

1. Violated this Act;

2. Made any material misrepresentation to the Secretary of State in connection with an application for a license, junking certificate, salvage certificate, title or registration;

3. Committed a fraudulent act in connection with selling, bartering, exchanging, offering for sale or otherwise dealing in vehicles, chassis, essential parts, or vehicle shells;

4. As a new vehicle dealer has no contract with a manufacturer or enfranchised distributor to sell that new vehicle in this State;

5. Not maintained an established place of business as defined in this Code;

6. Failed to file or produce for the Secretary of State any application, report, document or other pertinent books, records, documents, letters, contracts, required to be filed or produced under this Code or any rule or regulation made by the Secretary of State pursuant to this Code;

7. Previously had, within 3 years, such a license denied, suspended, revoked, or cancelled under the provisions of subsection (c) (2) of this Section;

8. Has committed in any calendar year 3 or more violations, as determined in any civil or criminal proceeding, of any one or more of the following Acts:

a. the "Consumer Finance Act";

b. the "Consumer Installment Loan Act";

c. the "Retail Installment Sales Act";

d. the "Motor Vehicle Retail Installment Sales Act";

e. "An Act in relation to the rate of interest and other charges in connection with sales on credit and the lending of money", approved May 24, 1879, as amended;

f. "An Act to promote the welfare of wage-earners by regulating the assignment of wages, and prescribing a penalty for the violation thereof", approved July 1, 1935, as amended;

g. Part 8 of Article XII of the Code of Civil Procedure; or

h. the "Consumer Fraud Act";

9. Failed to pay any fees or taxes due under this Act, or has failed to transmit any fees or taxes received by him for transmittal by him to the Secretary of State or the State of Illinois;

10. Converted an abandoned vehicle;

11. Used a vehicle identification plate or number assigned to a vehicle other than the one to which originally assigned;

12. Violated the provisions of Chapter 5 of this Act, as amended;

13. Violated the provisions of Chapter 4 of this Act, as amended;

14. Violated the provisions of Chapter 3 of this Act, as amended;

15. Violated Section 21-2 of the Criminal Code of 1961, Criminal Trespass to Vehicles;

16. Made or concealed a material fact in connection with his application for a license;

17. Acted in the capacity of a person licensed or acted as a licensee under this Chapter without having a license therefor;

18. Failed to pay, within 90 days after a final judgment, any fines assessed against the licensee pursuant to an action brought under Section 5-404.

(b) In addition to other grounds specified in this Chapter, the Secretary of State, on complaint of the Department of Revenue, shall refuse the issuance or of renewal of a license, or suspend or revoke such license, for any of the following violations of the "Retailers' Occupation Tax Act":

1. Failure to make a tax return;

2. The filing of a fraudulent return;

3. Failure to pay all or part of any tax or penalty finally determined to be due;

4. Failure to comply with the bonding requirements of the "Retailers' Occupation Tax Act".

(b-1) In addition to other grounds specified in this Chapter, the Secretary of State, on complaint of the Motor Vehicle Review Board, shall refuse the issuance or renewal of a license, or suspend or revoke that license, if costs or fees assessed under Section 29 of the Motor Vehicle Franchise Act have remained unpaid for a period in excess of 90 days after the licensee received from the Motor Vehicle Board actual notice and demand for the costs or fees.

(c) Cancellation of a license.

1. The license of a person issued under this Chapter may be cancelled by the Secretary of State prior to its expiration in any of the following situations:

A. When a license is voluntarily surrendered, by the licensed person; or

B. If the business enterprise is a sole proprietorship, which is not a franchised dealership, when the sole proprietor dies or is imprisoned for any period of time exceeding 30 days; or

C. If the license was issued to the wrong person or corporation, or contains an error on its face. If any person above whose license has been cancelled wishes to apply for another license, whether during the same license year or any other year, that person shall be treated as any other new applicant and the cancellation of the person's prior license shall not, in and of itself, be a bar to the issuance of a new license.

2. The license of a person issued under this Chapter may be cancelled without a hearing when the Secretary of State is notified that the applicant, or any officer, director, shareholder having a 10 per cent or greater ownership interest in the corporation, owner, partner, trustee, manager, employee or member of the applicant or the licensee has been convicted of any felony involving the selling, bartering, exchanging, offering for sale, or otherwise dealing in vehicles, chassis, essential parts, vehicle shells, or ownership documents relating to any of the above items.

(Source: P.A. 86-820.)

Section 10. The Motor Vehicle Franchise Act is amended by changing Section 4 as follows:

(815 ILCS 710/4) (from Ch. 121 1/2, par. 754)

Sec. 4. Unfair competition and practices.

(a) The unfair methods of competition and unfair and deceptive acts or practices listed in this Section are hereby declared to be unlawful. In construing the provisions of this Section, the courts may be guided by the interpretations of the Federal Trade Commission Act (15 U.S.C. 45 et seq.), as from time to time amended.

(b) It shall be deemed a violation for any manufacturer, factory branch, factory representative, distributor or wholesaler, distributor branch, distributor representative or motor vehicle dealer to engage in any action with respect to a franchise which is arbitrary, in bad faith or unconscionable and which causes damage to any of the parties or to the public.

(c) It shall be deemed a violation for a manufacturer, a distributor, a wholesaler, a distributor branch or division, a factory branch or division, or a wholesale branch or division, or officer, agent or other representative thereof, to coerce, or attempt to coerce, any motor vehicle dealer:

(1) to accept, buy or order any motor vehicle or vehicles, appliances, equipment, parts or accessories therefor, or any other commodity or commodities or service or services which such motor vehicle dealer has not voluntarily ordered or requested except items required by applicable local, state or federal law; or to require a motor vehicle dealer to accept, buy, order or purchase such items in order to obtain any motor vehicle or vehicles or any other commodity or commodities which have been ordered or requested by such motor vehicle dealer;

(2) to order or accept delivery of any motor vehicle with special features, appliances, accessories or equipment not included in the list price of the motor vehicles as publicly advertised by the manufacturer thereof, except items required by applicable law; or

(3) to order for anyone any parts, accessories, equipment, machinery, tools, appliances or any commodity whatsoever, except items required by applicable law.

(d) It shall be deemed a violation for a manufacturer, a distributor, a wholesaler, a distributor branch or division, or officer, agent or other representative thereof:

(1) to adopt, change, establish or implement a plan or system for the allocation and distribution of new motor vehicles to motor vehicle dealers which is arbitrary or capricious or to modify an existing plan so as to cause the same to be arbitrary or capricious;

(2) to fail or refuse to advise or disclose to any motor vehicle dealer having a franchise or selling agreement, upon written request therefor, the basis upon which new motor vehicles of the same line make are allocated or distributed to motor vehicle dealers in the State and the basis upon which the current allocation or distribution is being made or will be made to such motor vehicle dealer;

(3) to refuse to deliver in reasonable quantities and within a reasonable time after receipt of dealer's order, to any motor vehicle dealer having a franchise or selling agreement for the retail sale of new motor vehicles sold or distributed by such manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division or wholesale branch or division, any such motor vehicles as are covered by such franchise or selling agreement specifically publicly advertised in the State by such manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division, or wholesale branch or division to be available for immediate delivery. However, the failure to deliver any motor vehicle shall not be considered a violation of this Act if such failure is due to an act of God, a work stoppage or delay due to a strike or labor difficulty, a shortage of materials, a lack of manufacturing capacity, a freight embargo or other cause over which the manufacturer, distributor, or wholesaler, or any agent thereof has no control;

(4) to coerce, or attempt to coerce, any motor vehicle dealer to enter into any agreement with such manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division, or wholesale branch or division, or officer, agent or other representative thereof, or to do any other act prejudicial to the dealer by threatening to reduce his allocation of motor vehicles or cancel any franchise or any selling agreement existing between such manufacturer, distributor, wholesaler, distributor branch or division, or factory branch or division, or wholesale branch or division, and the dealer. However, notice in good faith to any motor vehicle dealer of the dealer's violation of any terms or provisions of such franchise or selling agreement or of any law or regulation applicable to the conduct of a motor vehicle dealer shall not constitute a violation of this Act;

(5) to require a franchisee to participate in an advertising campaign or contest or any promotional campaign, or to purchase or lease any promotional materials, training materials, show room or other display decorations or materials at the expense of the franchisee;

(6) to cancel or terminate the franchise or selling agreement of a motor vehicle dealer without good cause and without giving notice as hereinafter provided; to fail or refuse to extend the franchise or selling agreement of a motor vehicle dealer upon its expiration without good cause and without giving notice as hereinafter provided; or, to offer a renewal, replacement or succeeding franchise or selling agreement containing terms and provisions the effect of which is to substantially change or modify the sales and service obligations or capital requirements of the motor vehicle dealer arbitrarily and without good cause and without giving notice as hereinafter provided notwithstanding any term or provision of a franchise or selling agreement.

(A) If a manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division or wholesale branch or division intends to cancel or terminate a franchise or selling agreement or intends not to extend or renew a franchise or selling agreement on its expiration, it shall send a letter by certified mail, return receipt requested, to the affected franchisee at least 60 days before the effective date of the proposed action, or not later than 10 days before the proposed action when the reason for the action is based upon either of the following:

(i) the business operations of the franchisee have been abandoned or the franchisee has failed to conduct customary sales and service operations during customary business hours for at least 7 consecutive business days unless such closing is due to an act of God, strike or labor difficulty or other cause over which the franchisee has no control; or

(ii) the conviction of or plea of nolo contendere by the motor vehicle dealer or any operator thereof in a court of competent jurisdiction to an offense punishable by imprisonment for more than two years.

Each notice of proposed action shall include a detailed statement setting forth the specific grounds for the proposed cancellation, termination, or refusal to extend or renew and shall state that the dealer has only 30 days from receipt of the notice to file with the Motor Vehicle Review Board a written protest against the proposed action.

(B) If a manufacturer, distributor, wholesaler, distributor branch or division, factory branch or division or wholesale branch or division intends to change substantially or modify the sales and service obligations or capital requirements of a motor vehicle dealer as a condition to extending or renewing the existing franchise or selling agreement of such motor vehicle dealer, it shall send a letter by certified mail, return receipt requested, to the affected franchisee at least 60 days before the date of expiration of the franchise or selling agreement. Each notice of proposed action shall include a detailed statement setting forth the specific grounds for the proposed action and shall state that the dealer has only 30 days from receipt of the notice to file with the Motor Vehicle Review Board a written protest against the proposed action.

(C) Within 30 days from receipt of the notice under subparagraphs (A) and (B), the franchisee may file with the Board a written protest against the proposed action.

When the protest has been timely filed, the Board shall enter an order, fixing a date (within 60 days of the date of the order), time, and place of a hearing on the protest required under Sections 12 and 29 of this Act, and send by certified mail, return receipt requested, a copy of the order to the manufacturer that filed the notice of intention of the proposed action and to the protesting dealer or franchisee.

The manufacturer shall have the burden of proof to establish that good cause exists to cancel or terminate, or fail to extend or renew the franchise or selling agreement of a motor vehicle dealer or franchisee, and to change substantially or modify the sales and service obligations or capital requirements of a motor vehicle dealer as a condition to extending or renewing the existing franchise or selling agreement. The determination whether good cause exists to cancel, terminate, or refuse to renew or extend the franchise or selling agreement, or to change or modify the obligations of the dealer as a condition to offer renewal, replacement, or succession shall be made by the Board under subsection (d) of Section 12 of this Act.

(D) Notwithstanding the terms, conditions, or provisions of a franchise or selling agreement, the following shall not constitute good cause for cancelling or terminating or failing to extend or renew the franchise or selling agreement: (i) the change of ownership or executive management of the franchisee's dealership; or (ii) the fact that the franchisee or owner of an interest in the franchise owns, has an investment in, participates in the management of, or holds a license for the sale of the same or any other line make of new motor vehicles.

Good cause shall exist to cancel, terminate or fail to offer a renewal or replacement franchise or selling agreement to all franchisees of a line make if the manufacturer permanently discontinues the manufacture or assembly of motor vehicles of such line make.

(E) The manufacturer may not cancel or terminate, or fail to extend or renew a franchise or selling agreement or change or modify the obligations of the franchisee as a condition to offering a renewal, replacement, or succeeding franchise or selling agreement before the hearing process is concluded as prescribed by this Act, and thereafter, if the Board determines that the manufacturer has failed to meet its burden of proof and that good cause does not exist to allow the proposed action; or

(7) notwithstanding the terms of any franchise agreement, to fail to indemnify and hold harmless its franchised dealers against any judgment or settlement for damages, including, but not limited to, court costs, expert witness fees, reasonable attorneys' fees of the new motor vehicle dealer, and other expenses incurred in the litigation, so long as such fees and costs are reasonable, arising out of complaints, claims or lawsuits including, but not limited to, strict liability, negligence, misrepresentation, warranty (express or implied), or recision of the sale as defined in Section 2-608 of the Uniform Commercial Code, to the extent that the judgment or settlement relates to the alleged defective or negligent manufacture, assembly or design of new motor vehicles, parts or accessories or other functions by the manufacturer, beyond the control of the dealer; provided that, in order to provide an adequate defense, the manufacturer receives notice of the filing of a complaint, claim, or lawsuit within 60 days after the filing.

(e) It shall be deemed a violation for a manufacturer, a distributor, a wholesaler, a distributor branch or division or officer, agent or other representative thereof:

(1) to resort to or use any false or misleading advertisement in connection with his business as such manufacturer, distributor, wholesaler, distributor branch or division or officer, agent or other representative thereof;

(2) to offer to sell or lease, or to sell or lease, any new motor vehicle to any motor vehicle dealer at a lower actual price therefor than the actual price offered to any other motor vehicle dealer for the same model vehicle similarly equipped or to utilize any device including, but not limited to, sales promotion plans or programs which result in such lesser actual price or fail to make available to any motor vehicle dealer any preferential pricing, incentive, rebate, finance rate, or low interest loan program offered to competing motor vehicle dealers in other contiguous states. However, the provisions of this paragraph shall not apply to sales to a motor vehicle dealer for resale to any unit of the United States Government, the State or any of its political subdivisions;

(3) to offer to sell or lease, or to sell or lease, any new motor vehicle to any person, except a wholesaler, distributor or manufacturer's employees at a lower actual price therefor than the actual price offered and charged to a motor vehicle dealer for the same model vehicle similarly equipped or to utilize any device which results in such lesser actual price. However, the provisions of this paragraph shall not apply to sales to a motor vehicle dealer for resale to any unit of the United States Government, the State or any of its political subdivisions;

(4) to prevent or attempt to prevent by contract or otherwise any motor vehicle dealer or franchisee from changing the executive management control of the motor vehicle dealer or franchisee unless the franchiser, having the burden of proof, proves that such change of executive management will result in executive management control by a person or persons who are not of good moral character or who do not meet the franchiser's existing and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area. However where the manufacturer rejects a proposed change in executive management control, the manufacturer shall give written notice of his reasons to the dealer within 60 days of notice to the manufacturer by the dealer of the proposed change. If the manufacturer does not send a letter to the franchisee by certified mail, return receipt requested, within 60 days from receipt by the manufacturer of the proposed change, then the change of the executive management control of the franchisee shall be deemed accepted as proposed by the franchisee, and the manufacturer shall give immediate effect to such change;

(5) to prevent or attempt to prevent by contract or otherwise any motor vehicle dealer from establishing or changing the capital structure of his dealership or the means by or through which he finances the operation thereof; provided the dealer meets any reasonable capital standards agreed to between the dealer and the manufacturer, distributor or wholesaler, who may require that the sources, method and manner by which the dealer finances or intends to finance its operation, equipment or facilities be fully disclosed;

(6) to refuse to give effect to or prevent or attempt to prevent by contract or otherwise any motor vehicle dealer or any officer, partner or stockholder of any motor vehicle dealer from selling or transferring any part of the interest of any of them to any other person or persons or party or parties unless such sale or transfer is to a transferee who would not otherwise qualify for a new motor vehicle dealers license under "The Illinois Vehicle Code" or unless the franchiser, having the burden of proof, proves that such sale or transfer is to a person or party who is not of good moral character or does not meet the franchiser's existing and reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area. However, nothing herein shall be construed to prevent a franchiser from implementing affirmative action programs providing business opportunities for minorities or from complying with applicable federal, State or local law:

(A) If the manufacturer intends to refuse to approve the sale or transfer of all or a part of the interest, then it shall, within 60 days from receipt of the completed application forms generally utilized by a manufacturer to conduct its review and a copy of all agreements regarding the proposed transfer, send a letter by certified mail, return receipt requested, advising the franchisee of any refusal to approve the sale or transfer of all or part of the interest and shall state that the dealer only has 30 days from the receipt of the notice to file with the Motor Vehicle Review Board a written protest against the proposed action. The notice shall set forth specific criteria used to evaluate the prospective transferee and the grounds for refusing to approve the sale or transfer to that transferee. Within 30 days from the franchisee's receipt of the manufacturer's notice, the franchisee may file with the Board a written protest against the proposed action.

When a protest has been timely filed, the Board shall enter an order, fixing the date (within 60 days of the date of such order), time, and place of a hearing on the protest, required under Sections 12 and 29 of this Act, and send by certified mail, return receipt requested, a copy of the order to the manufacturer that filed notice of intention of the proposed action and to the protesting franchisee.

The manufacturer shall have the burden of proof to establish that good cause exists to refuse to approve the sale or transfer to the transferee. The determination whether good cause exists to refuse to approve the sale or transfer shall be made by the Board under subdivisions (6)(B). The manufacturer shall not refuse to approve the sale or transfer by a dealer or an officer, partner, or stockholder of a franchise or any part of the interest to any person or persons before the hearing process is concluded as prescribed by this Act, and thereafter if the Board determines that the manufacturer has failed to meet its burden of proof and that good cause does not exist to refuse to approve the sale or transfer to the transferee.

(B) Good cause to refuse to approve such sale or transfer under this Section is established when such sale or transfer is to a transferee who would not otherwise qualify for a new motor vehicle dealers license under "The Illinois Vehicle Code" or such sale or transfer is to a person or party who is not of good moral character or does not meet the franchiser's existing and reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area.

(7) to obtain money, goods, services, anything of value, or any other benefit from any other person with whom the motor vehicle dealer does business, on account of or in relation to the transactions between the dealer and the other person as compensation, except for services actually rendered, unless such benefit is promptly accounted for and transmitted to the motor vehicle dealer;

(8) to grant an additional franchise in the relevant market area of an existing franchise of the same line make or to relocate an existing motor vehicle dealership within or into a relevant market area of an existing franchise of the same line make. However, if the manufacturer wishes to grant such an additional franchise to an independent person in a bona fide relationship in which such person is prepared to make a significant investment subject to loss in such a dealership, or if the manufacturer wishes to relocate an existing motor vehicle dealership, then the manufacturer shall send a letter by certified mail, return receipt requested, to each existing dealer or dealers of the same line make whose relevant market area includes the proposed location of the additional or relocated franchise at least 60 days before the manufacturer grants an additional franchise or relocates an existing franchise of the same line make within or into the relevant market area of an existing franchisee of the same line make. Each notice shall set forth the specific grounds for the proposed grant of an additional or relocation of an existing franchise and shall state that the dealer has only 30 days from the date of receipt of the notice to file with the Motor Vehicle Review Board a written protest against the proposed action. Unless the parties agree upon the grant or establishment of the additional or relocated franchise within 30 days from the date the notice was received by the existing franchisee of the same line make or any person entitled to receive such notice, the franchisee or other person may file with the Board a written protest against the grant or establishment of the proposed additional or relocated franchise and shall state that the dealer only has 30 days from the receipt of the notice to file with the Motor Vehicle Review Board a written protest against the proposed action.

When a protest has been timely filed, the Board shall enter an order fixing a date (within 60 days of the date of the order), time, and place of a hearing on the protest, required under Sections 12 and 29 of this Act, and send by certified or registered mail, return receipt requested, a copy of the order to the manufacturer that filed the notice of intention to grant or establish the proposed additional or relocated franchise and to the protesting dealer or dealers of the same line make whose relevant market area includes the proposed location of the additional or relocated franchise.

When more than one protest is filed against the grant or establishment of the additional or relocated franchise of the same line make, the Board may consolidate the hearings to expedite disposition of the matter. The manufacturer shall have the burden of proof to establish that good cause exists to allow the grant or establishment of the additional or relocated franchise. The manufacturer may not grant or establish the additional franchise or relocate the existing franchise before the hearing process is concluded as prescribed by this Act, and thereafter if the Board determines that the manufacturer has failed to meet its burden of proof and that good cause does not exist to allow the grant or establishment of the additional franchise or relocation of the existing franchise.

The determination whether good cause exists for allowing the grant or establishment of an additional franchise or relocated existing franchise, shall be made by the Board under subsection (c) of Section 12 of this Act. If the manufacturer seeks to enter into a contract, agreement or other arrangement with any person, establishing any additional motor vehicle dealership or other facility, limited to the sale of factory repurchase vehicles or late model vehicles, then the manufacturer shall follow the notice procedures set forth in this Section and the determination whether good cause exists for allowing the proposed agreement shall be made by the Board under subsection (c) of Section 12, with the manufacturer having the burden of proof.

A. (Blank).

B. For the purposes of this Section, appointment of a successor motor vehicle dealer at the same location as its predecessor, or within 2 miles of such location, or the relocation of an existing dealer or franchise within 2 miles of the relocating dealer's or franchisee's existing location, shall not be construed as a grant, establishment or the entering into of an additional franchise or selling agreement, or a relocation of an existing franchise. The reopening of a motor vehicle dealership that has not been in operation for 18 months or more shall be deemed the grant of an additional franchise or selling agreement.

C. This Section does not apply to the relocation of an existing dealership or franchise in a county having a population of more than 300,000 persons when the new location is within the dealer's current relevant market area, provided the new location is more than 7 miles from the nearest dealer of the same line make. This Section does not apply to the relocation of an existing dealership or franchise in a county having a population of less than 300,000 persons when the new location is within the dealer's current relevant market area, provided the new location is more than 12 miles from the nearest dealer of the same line make. A dealer that would be farther away from the new location of an existing dealership or franchise of the same line make after a relocation may not file a written protest against the relocation with the Motor Vehicle Review Board.

D. Nothing in this Section shall be construed to prevent a franchiser from implementing affirmative action programs providing business opportunities for minorities or from complying with applicable federal, State or local law;

(9) to require a motor vehicle dealer to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by this Act;

(10) to prevent or refuse to give effect to the succession to the ownership or management control of a dealership by any legatee under the will of a dealer or to an heir under the laws of descent and distribution of this State unless the franchisee has designated a successor to the ownership or management control under the succession provisions of the franchise. Unless the franchiser, having the burden of proof, proves that the successor is a person who is not of good moral character or does not meet the franchiser's existing and reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area, any designated successor of a dealer or franchisee may succeed to the ownership or management control of a dealership under the existing franchise if:

(i) The designated successor gives the franchiser written notice by certified mail, return receipt requested, of his or her intention to succeed to the ownership of the dealer within 60 days of the dealer's death or incapacity; and

(ii) The designated successor agrees to be bound by all the terms and conditions of the existing franchise.

Notwithstanding the foregoing, in the event the motor vehicle dealer or franchisee and manufacturer have duly executed an agreement concerning succession rights prior to the dealer's death or incapacitation, the agreement shall be observed.

(A) If the franchiser intends to refuse to honor the successor to the ownership of a deceased or incapacitated dealer or franchisee under an existing franchise agreement, the franchiser shall send a letter by certified mail, return receipt requested, to the designated successor within 60 days from receipt of a proposal advising of its intent to refuse to honor the succession and to discontinue the existing franchise agreement and shall state that the designated successor only has 30 days from the receipt of the notice to file with the Motor Vehicle Review Board a written protest against the proposed action. The notice shall set forth the specific grounds for the refusal to honor the succession and discontinue the existing franchise agreement.

If notice of refusal is not timely served upon the designated successor, the franchise agreement shall continue in effect subject to termination only as otherwise permitted by paragraph (6) of subsection (d) of Section 4 of this Act.

Within 30 days from the date the notice was received by the designated successor or any other person entitled to notice, the designee or other person may file with the Board a written protest against the proposed action.

When a protest has been timely filed, the Board shall enter an order, fixing a date (within 60 days of the date of the order), time, and place of a hearing on the protest, required under Sections 12 and 29 of this Act, and send by certified mail, return receipt requested, a copy of the order to the franchiser that filed the notice of intention of the proposed action and to the protesting designee or such other person.

The manufacturer shall have the burden of proof to establish that good cause exists to refuse to honor the succession and discontinue the existing franchise agreement. The determination whether good cause exists to refuse to honor the succession shall be made by the Board under subdivision (B) of this paragraph (10). The manufacturer shall not refuse to honor the succession or discontinue the existing franchise agreement before the hearing process is concluded as prescribed by this Act, and thereafter if the Board determines that it has failed to meet its burden of proof and that good cause does not exist to refuse to honor the succession and discontinue the existing franchise agreement.

(B) No manufacturer shall impose any conditions upon honoring the succession and continuing the existing franchise agreement with the designated successor other than that the franchisee has designated a successor to the ownership or management control under the succession provisions of the franchise, or that the designated successor is of good moral character or meets the reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area;

(11) to prevent or refuse to approve a proposal to establish a successor franchise at a location previously approved by the franchiser when submitted with the voluntary termination by the existing franchisee unless the successor franchisee would not otherwise qualify for a new motor vehicle dealer's license under the Illinois Vehicle Code or unless the franchiser, having the burden of proof, proves that such proposed successor is not of good moral character or does not meet the franchiser's existing and reasonable capital standards and, with consideration given to the volume of sales and service of the dealership, uniformly applied minimum business experience standards in the market area. However, when such a rejection of a proposal is made, the manufacturer shall give written notice of its reasons to the franchisee within 60 days of receipt by the manufacturer of the proposal. However, nothing herein shall be construed to prevent a franchiser from implementing affirmative action programs providing business opportunities for minorities, or from complying with applicable federal, State or local law;

(12) to prevent or refuse to grant a franchise to a person because such person owns, has investment in or participates in the management of or holds a franchise for the sale of another make or line of motor vehicles within 7 miles of the proposed franchise location in a county having a population of more than 300,000 persons, or within 12 miles of the proposed franchise location in a county having a population of less than 300,000 persons; or

(13) to prevent or attempt to prevent any new motor vehicle dealer from establishing any additional motor vehicle dealership or other facility limited to the sale of factory repurchase vehicles or late model vehicles or otherwise offering for sale factory repurchase vehicles of the same line make at an existing franchise by failing to make available any contract, agreement or other arrangement which is made available or otherwise offered to any person.

(f) It is deemed a violation for a manufacturer, a distributor, a wholesale, a distributor branch or division, a factory branch or division, or a wholesale branch or division, or officer, agent, broker, shareholder, except a shareholder of 1% or less of the outstanding shares of any class of securities of a manufacturer, distributor, or wholesaler which is a publicly traded corporation, or other representative, directly or indirectly, to own or operate a place of business as a motor vehicle franchisee or motor vehicle financing affiliate, except that, this subsection shall not prohibit the ownership or operation of a place of business by a manufacturer, distributor, or wholesaler for a period, not to exceed 18 months, during the transition from one motor vehicle franchisee to another; or the investment in a motor vehicle franchisee by a manufacturer, distributor, or wholesaler if the investment is for the sole purpose of enabling a partner or shareholder in that motor vehicle franchisee to acquire an interest in that motor vehicle franchisee and that partner or shareholder is not otherwise employed by or associated with the manufacturer, distributor, or wholesaler and would not otherwise have the requisite capital investment funds to invest in the motor vehicle franchisee, and has the right to purchase the entire equity interest of the manufacturer, distributor, or wholesaler in the motor vehicle franchisee within a reasonable period of time not to exceed 5 years.

(Source: P.A. 90-655, eff. 7-30-98; 91-415, eff. 1-1-00; 91-485, eff. 1-1-00; 91-701, eff. 5-12-00.)