Automobile Dealer Representation2020-05-14T10:05:48-07:00


Dealer Litigation

The laws facing automotive dealers are niche specific and known by few. MLG’s team of experienced automotive lawyers has vast experience representing dealers in a variety of contexts. We have represented dealers in cases involving terminations, add-points, facilities upgrades, warranty chargebacks, allocation, curtailments, breach of fiduciary duty and fraud, both before the California New Motor Vehicle Board and in state and federal court.


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TOP 20 california DEALER laws

Transfer of Owner’s Interest Upon Death2018-07-24T20:13:12-07:00

A manufacturer may not prevent a dealership owner from transferring his ownership interest in the dealership to his heirs upon death. See Cal. Vehicle Code § 11713.3(j).

Dealer’s Right to Represent Other Brands2018-07-24T21:01:24-07:00

It is unlawful for a manufacturer to prevent a dealer from adding another line-make to an existing facility, so long as the franchisor’s facilities and capital requirements are met. See Cal. Vehicle Code § 11713.13(a).

Freedom to Select Dealer Executive Management2018-07-24T20:55:15-07:00

A franchisor has the right to approve a dealer operator, but has no authority to determine a dealer’s executive management. See Cal. Vehicle Code § 11713.3(c).

No Interference with Capital Structure and Financing2018-07-24T21:26:44-07:00

Manufacturers may not interfere with the choices made by a dealer relating to the dealership’s capital structure and financing. See Cal. Vehicle Code § 11713.3(b).

No Interference with Transfer of Non-Controlling Interests2018-07-24T21:09:08-07:00

A manufacturer may not require a dealership shareholder to sell his interest in the entity. Likewise, a manufacturer may not prevent a shareholder from selling his non-controlling interest in the dealership. See Cal. Vehicle Code § 11713.3(d)(1).

Non-Interference with Buy-Sells2018-07-24T21:15:41-07:00

Franchisors are prohibited from interfering with a dealer’s right to receive the fair value of the franchised business upon sale. See Cal. Vehicle Code § 11713.3(e).

Factory Approval of Buy-Sells2018-07-24T21:19:32-07:00

After submitting an application for buy-sell approval, a franchisor must notify the dealer of approval or disapproval within 60 days. See Cal. Vehicle Code § 11713.3(d)(2)(B).

Challenging Disapproval of Buy-Sells2018-07-24T21:22:29-07:00

If a franchisor disapproves a dealer’s buy-sell application, the burden in on the franchisor to demonstrate the disapproval was reasonable. See Cal. Vehicle Code § 11713.3(d)(3).

Right of First Refusal2018-07-24T21:38:20-07:00

A franchisor may exercise a right of first refusal when a dealer submits a buy-sell application. See Cal. Vehicle Code § 11713.3(t).

Factory Owned Dealership Restriction2018-07-24T21:41:21-07:00

Dealers of the same line-make are prohibited from competing within the relevant market area, spanning a 10 mile radius. See Cal. Vehicle Code § 11713.3(o).

Exclusivity Requirement2018-07-24T21:45:14-07:00

It is unlawful for a manufacturer to require exclusive facilities, personnel, or display space. See Cal. Vehicle Code § 11713.13(b).

Upgrade Limitation2018-07-24T21:46:59-07:00

When a manufacturer requires dealership expansions or alternations, the expansion and alteration requirements must be reasonable. See Cal. Vehicle Code § 11713.3(c).

Local or Alternative Sourced Suppliers2018-07-24T21:48:49-07:00

A manufacturer may not require a dealer to purchase goods or services from a specific vendor if goods or services of substantially similar kind, quality and general design concept are available through the dealer’s preferred vendor. See Cal. Vehicle Code § 11713.13(c)(1) – (2).

Limitation on Performance Standards2018-07-24T21:54:03-07:00

Manufacturer imposed performance standards must be reasonable. Upon request of the dealer, the manufacturer must provide a written summary of the methodology used to establish the performance standards. See Cal. Vehicle Code § 11713.13(g).

Fulfillment of Dealer Orders2018-07-24T21:58:30-07:00

A dealer’s order for vehicles or parts from the manufacturer must be honored within a reasonable time. See Cal. Vehicle Code § 11713.3(a).

Protection from Allegations of Exporting2018-07-24T22:01:12-07:00

The law prohibits a manufacturer from imposing charge backs or other adverse actions upon a dealer based on the dealer’s sale of a vehicle for export unless the dealer knew or should have known of the customer’s intent to export the vehicle. See Cal. Vehicle Code § 11713.3(y).

Arbitration Clauses in Franchise Agreements2018-07-24T22:03:47-07:00

Dealer franchise agreements must allow the dealer the option to elect arbitration or utilize the New Motor Vehicle Board to resolve disputes. See Motor Vehicle Franchise Contract Arbitrations Fairness Act.

Mandatory Termination Assistance2018-07-24T22:05:44-07:00

If a dealer’s franchise is terminated for any reason, California law requires the franchisor to provide termination assistance to the dealer. See Cal. Vehicle Code § 11713.13(d).

Protests Against Franchise Termination or Modification2018-07-24T22:15:42-07:00

A manufacturer must give written notice (containing specific language) to the dealer and the New Motor Vehicle board in order to properly terminate a franchise. The written notice must be received 60 days before the effective date of the termination and set forth the specific grounds for termination. In some instances, however, the written notice must only be received 15 days before the effective date of the termination.

If a manufacturer seeks to modify or replace an existing franchisee agreement with a succeeding agreement it must give the dealer written notice (containing specific language) of the request at least 60 days prior to the modification or replacement. Upon receiving written notice of termination or modification, a dealer may file a protest to the New Motor Vehicle Board. The protest must have specific content and must be filed within 10 days of a 15-day notice or within 30 days of a 60-day notice. The New Motor Vehicle Board will then conduct a hearing and issue a decision as to whether the termination or modification by the manufacturer was proper. The Board’s decision may be appealed to the Superior Court. See Cal. Vehicle Code § 3060.

Protests Against Establishment or Relocation of a Dealership2018-07-24T22:18:33-07:00

A franchisor intending to establish an additional franchise of the same line-make or relocate an existing franchise within 10 miles of where the same line-make is then represented must give written notice (containing specific language) to each dealer and the New Motor Vehicle Board. Dealers objecting to the additional franchise or relocation of an existing franchise may, within 20 day of receipt of the notice, file a protest with the New Motor Vehicle Board. The Board will then conduct a hearing and render a decision. The Board’s decision may be appealed to the Superior Court. See Cal. Vehicle Code §§ 3060, 3062.

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