THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY TALLMAN, HANNA, M.K. KELLER, CALTAGIRONE, CONKLIN, FLECK, GEIST, GIBBONS, HARKINS, HELM, HORNAMAN, KAUFFMAN, LONGIETTI, MARSHALL, METZGAR, MILLARD, O'NEILL, PICKETT, REICHLEY, STERN AND YOUNGBLOOD, FEBRUARY 28, 2011

REFERRED TO COMMITTEE ON AGRICULTURE AND RURAL AFFAIRS, FEBRUARY 28, 2011  

AN ACT

Amending the act of December 18, 1987 (P.L.412, No.86), entitled

"An act providing for the repurchase by the wholesaler,

manufacturer or distributor, from dealers or heirs of

dealers, of certain equipment, certain attachments and parts

held for sale upon termination of agreement whereby the

dealer agrees to maintain a stock of such implements,

attachments and parts, and for the repurchase of certain

tools," further providing for definitions, for termination of

dealer agreement, for death or incapacitation of dealer and

for repurchase of unused specialized repair tools; repealing

provisions relating to coercion; and providing for violations

of act, for warranty, for remedies and enforcement and for

waiver.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 2 of the act of December 18, 1987

(P.L.412, No.86), known as the Pennsylvania Fair Dealership Law, 

is amended to read:

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Construction equipment manufacturer."  A manufacturer of

construction, industrial, forestry, paving and mining equipment,

repair parts or specialized repair tools that does not

manufacture consumer or farming equipment either by itself or

through an affiliate.

"Consumer equipment."  Machinery designed and manufactured

primarily for household use.

"Current net price."  The price, applicable to an individual

dealer, listed in the printed price list or catalog or invoice

in use by the supplier on the date the dealer agreement is

terminated or canceled or has failed to be renewed.

"Dealer."  Any person, firm or corporation engaged

primarily in the business of retail sale or repair of

equipment. The term includes the heir or authorized

representative of a person or majority stockholder of a

corporation operating as a dealer in the event such person or

stockholder dies or becomes incapacitated. The term does not

include a person, firm or corporation that complies with all of

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the following:

(1)  Has purchased new equipment from a single

construction equipment manufacturer, constituting no less

than 75% of the person's, firm's or corporation's new

equipment, calculated on the basis of net cost.

(2)  Has an annual average sales volume in excess of

$100,000,000 over the seven-calendar-year period immediately

preceding the applicable determination date; provided,

however, the $100,000,000 threshold shall be increased each

year by an amount equal to the then-current threshold

multiplied by the percentage increase in the index from

January of the immediately preceding calendar year to January

of the current year.

(3)  Directly employs over 250 persons.

(4)  Has a written agreement with a construction

equipment manufacturer that requires the construction

equipment manufacturer to compensate the person, firm or

corporation for warranty labor costs either as:

(i)  a discount in the pricing of the equipment to

the person, firm or corporation; or

(ii)  a lump sum payment to the person, firm or

corporation that is made within 90 days of the sale of

the construction equipment manufacturer's new equipment.

"Dealer agreement."  An oral or written contract, franchise

agreement or security agreement between a dealer and supplier

whereby the dealer agrees to acquire from the supplier and to

maintain an inventory of equipment, repair parts or specialized

repair tools.

"Equipment."  Machines, implements of husbandry, golf, turf

and grounds maintenance machines, outdoor power equipment,

utility vehicles and machine attachments, accessories,

completing packages and bundles designed for or adapted and used

for agriculture, horticulture, floriculture, construction, 

livestock raising, silviculture, landscaping and grounds

maintenance, even though incidentally operated or used upon the

highways, including, but not limited to, tractors, farm

implements, loaders, backhoes, lawn mowers, rototillers, etc.,

and any business signs purchased by requirement of the supplier

which are less than five years old. The term shall not include:

(1)  equipment manufactured solely for the purpose of

industrial construction; or

(2)  all-terrain vehicles as defined in 75 Pa.C.S. § 7702 

(relating to definitions).

"Farming equipment."  Machinery designed and used for

agricultural operations, including farm tractors, choppers,

balers, reapers, mowers, pickers, threshers, combines, plows,

harrows, planters and any other vehicles or machines primarily

designed for use as implements of husbandry or multipurpose

agricultural vehicles.

"Index."  The producer price index prepared by the United

States Department of Labor, Bureau of Labor Statistics, as it

relates to construction, mining and forestry equipment.

"Mining equipment."  Machinery designed and used in the

production process at a mine site, including off-highway mining

trucks, large-wheel loaders, large track-type tractors, large-

wheel dozers, mining motor graders, open bowl scrapers and

underground mining trucks.

"Net cost."  The amount paid by the dealer to the supplier,

plus the cost of freight, if any, incurred by the dealer[.], as

long as the manufacturer initiates the termination or

nonrenewal. The term does not include the cost of freight if the

dealer initiates the termination or nonrenewal.

"Nonservicing dealer."  A dealer that sells equipment

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but does not provide parts and service.

"Paving equipment."  Machinery designed and used for asphalt

paving, including asphalt pavers, cold planers, asphalt

compactors, pneumatic compactors and rotary mixers.

"Repair parts."  All parts, component parts and superseded

parts related to a sale and related to repair of equipment. The

term includes bundled parts, which means several related parts,

components or accessories, bound together as one inclusive item

or priced as an inclusive item.

"Specialized repair tools."  Tools and equipment, including

diagnostic equipment, designed to be used or useful only in the

maintenance and repair of equipment.

"Supplier."  [A manufacturer of equipment or repair parts or

a wholesaler or distributor of equipment or repair parts who has

a valid existing contract with a manufacturer of equipment or

repair parts, including the successors or assigns of such

manufacturer, wholesaler or distributor.] A distributor,

manufacturer or wholesaler of equipment, repair parts or

specialized repair tools who enters into a dealer agreement with

a dealer.

Section 2.  Section 3(a) and (f) of the act are amended and

the section is amended by adding a subsection to read:

Section 3.  Termination of dealer agreement.

(a)  General provisions.--

(1)  A dealer may terminate a dealer agreement

with good cause. A dealer shall give the supplier at

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least 30  days' prior notice via registered letter mailed to

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the last known address of the supplier.

(2)  It shall be unlawful for a supplier to

terminate, cancel or fail to renew a dealer agreement or 

substantially  change the competitive circumstances of a

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dealer agreement without good cause except as provided in

subsection (b) or (c).

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(f)  Deficiencies may be cured.--Except for termination,

cancellation or discontinuance for reasons set forth in

subsection (b)(3) through (7), the supplier shall allow the

dealer no less than [60] 90 days to cure the deficiencies set

forth in the notice required under subsection (e). Any such time

provided to the dealer to cure deficiencies shall be calculated

from the date of receipt of notice.

(g)  Definition.--As used in this section, the term "good

cause" means the failure by a dealer to substantially comply

with the requirements imposed upon the dealer by the dealer

agreement, as long as the requirements are not different from

requirements imposed on other dealers of the same size,

geographic region and market demographics, either by their terms

or in the manner of their enforcement.

Section 3.  Sections 5 and 6 of the act are amended to read:

Section 5.  Death or incapacitation of dealer.

In the event of the death or incapacity of a dealer, the

supplier shall repurchase, at the option of the heir or

authorized representative of such person or stockholder, the

equipment, repair parts and specialized repair tools of the

dealer as if the supplier had terminated, canceled or failed to

renew the contract. The heir or authorized representative shall

have [120 days] one year from the date of the death of such

dealer or from the date such dealer is determined to be

incapacitated or becomes totally disabled, as applicable, to

exercise the option under this section. Nothing in this act

requires the repurchase of any equipment, repair parts and

specialized repair tools if the heir and supplier enter into a

new contract to operate the retail dealership.

Section 6.  Repurchase of [unused specialized repair tools]

specialized support products required by

manufacturer.

(a)  General rule.--A supplier shall repurchase, upon the

written request of a dealer, any specialized repair tool

purchased by the dealer pursuant to the requirements of the

supplier which remains unused for more than a 12-month period

after the dealer receives the same. The repurchase price payable

to the dealer under this section shall be the original cost to

the dealer plus a handling charge equal to 10% of such original

cost. A supplier shall repurchase at fair market value any

specific signage, data processing hardware, computer equipment,

communications equipment or software the supplier required the

dealer to acquire or purchase to satisfy the requirements of the

supplier. Fair market value of property subject to repurchase

pursuant to this section shall include the acquisition cost,

including any installation, shipping, handling, and set-up fees,

less straight line depreciation of such acquisition cost over

five years.

(b)  Amount.--Specialized repair tools shall be

repurchased at a sum equal to 75% of the last published net

cost, including shipping, handling and set-up fees, of all

specialized repair tools previously purchased pursuant to

requirements of the supplier. The specialized repair tools must

be complete and in working condition and must have been

purchased within ten years prior to the date of notification of

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termination of the dealer agreement.

Section 4.  Section 9 of the act is repealed:

[Section 9.  No coercion.

It shall be a violation for any supplier to require, attempt

to require, coerce or attempt to coerce any dealer in this

Commonwealth to order or accept delivery of any equipment or

repair parts not required by law which shall not have been

voluntarily ordered by the dealer.]

Section 5.  The act is amended by adding sections to read:

Section 9.1.  Violations of act.

It shall be a violation for any supplier:

(1)  To mandate or coerce a dealer concerning

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the opportunity to represent, purchase or sell

competitive equipment.

(2)  To mandate or coerce a dealer to order or

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accept delivery of equipment or repair parts not required

by law which have not been voluntarily ordered by the dealer

unless the equipment or repair parts are safety features

required by the supplier.

(3)  To refuse a dealer the opportunity to participate in

the management or investment to acquire any other business.

(4)  To refuse to deliver in reasonable quantities and

within a reasonable time, after receipt of the dealer's

order, to a dealer having a dealer agreement for the retail

sale of new equipment sold or distributed by the supplier,

equipment covered by the dealer agreement specifically

advertised or represented by the supplier to be available for

immediate delivery. The failure to deliver the equipment

shall not be considered a violation of this act if the

failure is due to prudent and reasonable restrictions on

extension of credit by the supplier to the dealer, an act of

God, work stoppage or delay due to strike or labor

difficulty, a bona fide shortage of materials, freight

embargo or other cause over which the supplier has no

control.

(5)  To discriminate, directly or indirectly, in filling

an order placed by a dealer for retail sale or lease of new

equipment under a dealer agreement as between dealers of the

same product line.

(6)  To discriminate, directly or indirectly, in price

between different dealers with respect to purchases of

equipment or repair parts of like quality, if the effect of

the discrimination may be to substantially lessen

competition; to tend to create a monopoly in a line of

commerce; or to injure, destroy or prevent competition with a

dealer that either grants or knowingly receives the benefit

of the discrimination. However, different prices may be

charged if:

(i)  the differences are due to the cost of

manufacture, sale or delivery of the equipment or repair

parts;

(ii)  the supplier can show that its lower price was

made in good faith to meet an equally low price of a

competitor; or

(iii)  the supplier can show that the difference in

price is due to a volume-based incentive program or

volume-based discounts.

(7)  To require a dealer to assent to a release,

assignment, novation, waiver or estoppel which would relieve

any person from liability imposed by this act.

Section 9.2.  Warranty.

(a)  General rule.--Warranty obligations include

product improvement programs, product upgrade programs and 

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recalls and warranty work. Warranty compensation shall include

compensation for diagnostic time, repair service time, parts and

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a dealer's transportation costs of equipment to the dealership

for needed warranty repairs and the return of the equipment to

the customer. Transportation costs paid by the supplier must be

based upon the distance to the nearest in-line dealer from the

customer's location. Compensation and labor rate shall be at the

publicly posted shop labor rate.

(b)  Payment of warranty claim.--Whenever a supplier

and a dealer enter into an agreement providing the

dealer's customer warranties, the supplier shall pay any

warranty claim made by the dealer for warranty parts or service

within 30 days after its receipt and approval. The supplier

shall approve or disapprove a warranty claim within 30 days

after its receipt. If a claim is not specifically disapproved in

writing within 30 days after its receipt, it is deemed to be

approved and payment  shall be made by the supplier within 30

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days. The following apply:

(1)  A dealer that performs warranty work as

provided for in this section shall be compensated for the

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dealer's labor in an amount that is not less than the

reasonable and customary amount of time required to complete

the work, expressed in hours and fraction of hours,

multiplied by the dealer's posted hourly labor rate.

(2)  A dealer that performs warranty work as

provided for in this section shall be compensated for

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parts used in fulfilling the warranty work in accordance with

the manufacturer's stated warranty policy but in no case in

an amount that is less than the dealer's costs for the parts

plus 20%, plus all freight and handling charges applicable to

such parts, to reimburse the dealer's reasonable costs of

doing business and providing the warranty service on behalf

of the supplier. If the warranty work is provided on behalf

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of the supplier on a product sold by a nonservicing dealer,

the compensation for parts used in fulfilling the warranty

work must be at an amount that is not less than the

supplier's suggested list price or dealer's cost plus a

minimum of 30%, whichever is greater, plus freight and

handling charges applicable to the parts.

(c)  Indemnity.--If a supplier and a dealer enter into a

dealer agreement, the supplier shall indemnify and hold harmless

the dealer against any judgment for damages arising from breach

of warranty or rescission of the sale by the supplier as long as

the dealer has no independent liability for misstatement or

misrepresentation to the customer regarding the supplier's

product or product warranty.

Section 9.3.  Remedies and enforcement.

The provisions of this act shall be supplemental to any

dealer agreement between the dealer and the supplier which

provides the dealer with greater protection. The dealer may 

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elect to pursue its contract remedy or the remedy provided by

State law, or both; and an election by the dealer to pursue such

remedies shall not bar its right to exercise any other remedies

that may be granted at law or in equity. If a supplier violates

this act, a dealer may bring an action against the supplier in a

court of competent jurisdiction for damages sustained by the

dealer as a consequence of the supplier's violation, including

consequential damages and incidental damages, court costs,

attorney fees and costs of arbitrators. The dealer also may be

granted injunctive relief against unlawful termination,

cancellation, nonrenewal or substantial change of competitive

circumstances. The remedies set forth in this section shall not

be deemed exclusive and shall be in addition to any other

remedies permitted by law.

Section 9.4.  Waiver.

(a)  Waiver of act void.--An attempted waiver of a provision

of this act shall be void. Any provision in a dealer agreement

that purports to elect the application of the law of a state

other than Pennsylvania shall be void. Any provision in a dealer

agreement that requires a dealer to pay attorney fees incurred

by a supplier shall be void.

(b)  Waiver of right to trial by jury.--No supplier may

require a dealer to waive the right to a trial by jury as a

remedy to a supplier and dealer contract or agreement dispute.

Section 6.  This act shall take effect immediately.