rates. If successful, the Board determines the correct rates, and the dealer may be entitled to retroactive payment. The franchisor has the burden of proof. Reduction in Warranty Reimbursement This protest allows the dealer to challenge a reduction in time or compensation applicable to specific parts or labor operations. The protest needs to be filed within six months following the franchisee’s receipt of notice of the reduction. The franchisor has the burden of proof to establish the reasonableness, adequacy and fairness of the reduction. Improper Disapproval of Warranty Claim The Board determines if the franchisor followed proper timelines and limited disapproval reasons (e.g., false claim, improper repair or material noncompliance), offering the dealer a path to overturn wrongful denials. The franchisor has the burden of proof. The dealer must file the protest within six months after receiving the written disapproval, and the franchisor bears the burden of proof. Improper Chargeback of Warranty Claim After Audit This is one of the most common protests. The franchisor may conduct audits of dealer warranty records on a reasonable basis and for a period of nine months following the payment of a claim. If the franchisor disapproves of a previously approved claim following an audit, within 30 days after the audit, the franchisor shall provide the dealer with a written notice of disapproval stating the specific grounds upon which the claim is disapproved. The dealer shall have at least 30 days thereafter to appeal and respond to any disapproval with additional supporting documentation or information that rebuts the disapproval. If, after the appeal process, the franchisor issues a final denial of a warranty claim, it must provide the dealer with a written notification of the final denial, and cannot charge the dealer back for 45 days after. If the dealer files a protest before the 45-day period expires, the franchisor is prohibited from charging the dealer until the Board issues a final order on the protest. The Board determines whether the franchisor followed timelines and limited claim disapproval reasons (false claim, ineligible under communicated terms or material noncompliance). The franchisor has the burden of proof. Improper Chargeback of Sales Incentive Claims After Audit Dealers can challenge chargebacks following sales incentive audits to confirm the franchisor acted lawfully and did not violate audit limitations (e.g., adherence to the nine-month period or proper extrapolation methods). A dealer must initiate the protest within six months of receiving the chargeback notice from the franchisor. The franchisor has the burden of proof. Unreasonable Performance Standards A dealer can challenge any performance standard, sales objective or measuring program that materially affects them (e.g., affecting incentive payment eligibility or working capital) if it is inconsistent with standards outlined in Vehicle Code § 11713.13(g). The Board determines whether the standard is reasonable based on local demographics, market characteristics, vehicle allocation, economic circumstances, and historical sales and service records. No specific time limit is set for the dealer to file the protest, but it must be filed within a “reasonable time.” The franchisor has the burden of proof. Improper Vehicle or Parts Allocation A dealer can challenge the franchisor’s failure to deliver vehicles or parts in reasonable quantities and within a reasonable time after an order, or the failure to disclose the basis of the allocation system upon written request (VC § 11713.3(a)). No specific time limit is prescribed for filing, but it should be done within a reasonable time. The franchisor has the burden of proof. Franchisor Competing With Dealer Dealers can challenge a manufacturer or its affiliate that is unfairly competing in the sale, lease, or warranty service of new motor vehicles, except in cases where specifically permitted exceptions apply (e.g., temporary ownership or dealer development programs). Again, no specific time is prescribed, but the protest should be filed within a reasonable time. The franchisor has the burden of proof to show it is not competing with dealers. Requirement to Maintain Exclusive Facilities/ Refusal to Allow Another Line Make So long as a dealer complies with the reasonable facilities and capital requirements of the franchisor, a dealer can protest its franchisor’s insistence to maintain exclusive facilities, and/or the refusal to authorize adding a sales or service operation of another line-make. The franchisor bears the burden of proof in such protests to demonstrate that its position is reasonable, considering all existing circumstances. Requirement to Make Facility Upgrades Dealers can protest manufacturer requirements for a facility upgrade. The franchisor has the burden of proof to show that the requirement is reasonable considering all existing circumstances. 16 California New Car Dealer Quarterly
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