MANNING LEAVER LEGAL LANE Dealer Protests Before the California New Motor Vehicle Board By Gary H. Prudian, Esq., Partner, Manning, Leaver, Bruder & Berberich LLP This is Part 1 of a two-part series. The California New Motor Vehicle Board (the “Board”) was originally established in 1967 as the New Car Dealers Policy and Appeals Board to hear appeals of new car dealer licensing decisions made by the Department of Motor Vehicles. Initially, its duties were similar to other occupational licensing boards. In 1973, the Legislature renamed the Board the New Motor Vehicle Board and expanded its authority by adding Vehicle Code sections 3060 to 3069, which became operative on July 1, 1974. These sections empowered the Board to adjudicate disputes between new car dealers and manufacturers. In enacting the 1973 legislation, the Legislature found that the distribution and sale of new motor vehicles were vital to the California economy and public welfare, and that empowering the Board to adjudicate disputes was necessary to address the power imbalance between manufacturers and independent new motor vehicle dealers. It would also ensure that said dealers fulfill their obligations as franchisees and provide adequate and sufficient service to consumers. Protests before the Board are a crucial tool for dealers to protect their rights and prevent manufacturer overreach. This article is Part 1 of a two-part series. Part 1 provides the many protest rights dealers can file with the Board to resolve disputes with their manufacturer-franchisors. Part 2 will focus on when dealers can file lawsuits to resolve franchisor disputes without first seeking arbitration or mediation through the Board for such disputes. Part 2 will also discuss the petition process that can be filed with the Board and when petitions are applicable. The following is a description of the various protests that franchisees can file with the Board, showing in each instance which party has the burden of proof. The allocation of the burden of proof in Board proceedings is significant, because when a party has the burden of proof, it means that party must convince the administrative law judge that the evidence it has produced outweighs the evidence presented by the opposing party. The party with the burden of proof usually presents its case first in the Board proceeding. Termination When a dealer receives a written notice of termination (or a refusal to continue an existing franchise agreement), filing a termination protest automatically stays the termination, allowing the dealer to continue operating while the protest is pending. Most termination protests need to be filed within 30 days of the dealer’s receipt of the notice of termination, but some need to be filed within 10 days (e.g., insolvency, failure to operate during regular hours or transfer of ownership interest without consent). It is essential to promptly consult with competent counsel upon receipt of a notice of termination. The franchisor has the burden of proof to establish good cause for the termination. If the franchisor cannot do so, the Board will not permit the termination. 14 California New Car Dealer Quarterly
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