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. Requirement to Install Fast Charging Stations Dealers can protest a manufacturer’s fast charging station requirements. The franchisor has the burden of proof to show that all the statutory requirements of Vehicle Code § 11713.13(k) are met. Preparation and Delivery Compensation If a dealer believes the compensation specified by the franchisor for fulfilling delivery and preparation obligations is unreasonable, it can file a protest with the Board. The dealer has the burden of proof to demonstrate that the compensation is unreasonable, considering all relevant circumstances. Association Challenging Export Policy Legality A dealer association may file this protest on behalf of two or more dealers to obtain a Board declaration regarding whether a manufacturer’s export or sale-for-resale prohibition policy violates dealer protections. The association has the burden of proof. For detailed information about these protest rights, review the California New Car Dealers Association (CNCDA) Franchise Law Manual authored by our firm. It can be found in the Comply section at www.cncda.org. Manning, Leaver, Bruder & Berberich LLP is a Los Angeles law firm that practices throughout California and has been in existence for over 100 years. Its strong automobile dealer practice covers all areas related to the automobile dealer industry, including dealership buy-sells, real estate transactions, business and consumer litigation, regulatory compliance, dealer association law, new motor vehicle board matters and franchise law. Visit www.manningleaver.com for more information and areas of practice. Nothing in this article may be considered as legal advice. Contact legal counsel for legal advice. Protests before the Board are a crucial tool for dealers to protect their rights and prevent manufacturer overreach. 10
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