- Establish an additional dealership; or
- Relocate an existing dealership to a location that is within a 10-mile radius of any dealership of the same line-make.
For vehicles other than recreational vehicles (RVs), definition of "same line-make" is not contained in the Vehicle Code. Whether vehicles are of the same line-make may be obvious in most situations, however, gray areas can exist. (For example, the Board was called upon to decide whether motor scooters were of the same line-make as motorcycles as the latter term was defined in the franchise agreement.) For RVs, line-make is defined in Vehicle Code section 3072.5 as a group or groups of recreational vehicles defined by the terms of a written agreement that complies with Vehicle Code section 331.3, i.e., a franchise agreement.
Any protest filed pursuant to this section is, by statute, filed against the manufacturer or distributor that is attempting to establish a dealership or to relocate one of its existing dealers.
Both Vehicle Code sections 3062(a)(1) and 3072(a)(1) require that the manufacturer or distributor must first give written notice of their intention to establish a new dealership or relocate an existing dealership to the Board and to dealerships of the same line-make within the relevant market area as defined in Vehicle Code section 507.
The written notice must contain on the first page, in at least 12-point bold type and circumscribed by a line, the following statement:1
1The last sentence in the "Notice to Dealer" language in Section 3072(a) contains commas as follows: "If, within this time, you file with the board..."
Exceptions to the Right to Protest
There are exceptions to the requirement of notice of a franchisor's intent to establish or relocate a dealership.
For vehicles other than RVs, no notice is required to be given, and there is no right to protest, if:
- The relocation of an existing dealership to a location that is both within the same city as, and within one mile from, the existing (or relocating) dealership location; or
- The reopening of a dealership that has been out of operation for less than one year; or
- The establishment at a location that is both within the same city as, and within one-quarter mile from, the location of a dealership of the same line-make that has been out of operation for less than 90 days; or
- A display of vehicles at a fair, exposition, or similar exhibit provided that no actual sales are made at the event and the display does not exceed 30 days. (See remaining text in Veh. Code §3062(c)).
"Relevant market area" is defined at Vehicle Code section 507 as "any area within a radius of 10 miles from the site of a potential new dealership." The distance is determined by a straight-line measurement between the nearest points of the new dealership's location and the protesting dealership's location. There are times when a survey may be necessary to determine whether a dealer desiring to protest is located within the relevant market area.
For Recreational Vehicles, no notice is required to be given, and there is no right to protest, if:
- The relocation of an existing dealership to any location that is both within the same city as, and within one mile of, the existing (or relocating) dealership location; or
- The reopening of a dealership that has been out of operation for less than one year; or
- The establishment at any location that is both within the same city as, and within one-quarter mile of, the location of a dealership of the same RV line-make that has been out of operation for less than 90 days; or
- A display of vehicles at a fair, exposition, or similar exhibit if no actual sales are made at the event and the display does not exceed 30 days. This paragraph may not be construed to prohibit a new vehicle dealer from establishing a branch office for the purpose of selling vehicles at the fair, exposition, or similar exhibit, even though that event is sponsored by a financial institution, as defined in Section 31041 of the Financial Code, or by a financial institution and a licensed dealer. The establishment of these branch offices, however, shall be in accordance with subdivision (a) where applicable; or
- An annual show sponsored by a national trade association of recreational vehicle manufacturers that complies with all of the requirements of Vehicle Code section 11713.15.
- A motor vehicle dealership protesting the location of another dealership with the same recreational vehicle line-make within its relevant marker area, if the dealership location subject to the protest was established on or before January 1, 2004.
The definition of "relevant market area" is the same for both RVs and for new motor vehicles other than RVs.
Both Vehicle Code sections 3062 and 3072 require that if an "off-site sale" is intended, the manufacturer or distributor must give notice to all dealers of the same line-make within 10 miles of the proposed site. The notified dealers then would have the right to protest the off-site sale before the Board.
How to File a Protest
The following are guidelines to consider when filing a protest, however, the applicable Vehicle Code sections (3000 et seq.) and regulations ( 13 CCR § 550 et seq.) should be consulted as well. The Board's legal staff is also available to provide information concerning the procedural aspects of filing a protest. The staff can be contacted at (916) 445-1888. PLEASE NOTE: THE BOARD'S STAFF IS NOT PERMITTED TO PROVIDE LEGAL ADVICE CONCERNING THE MERITS OF A PARTICULAR MATTER.
Most types of protests have specific statutorily imposed time limits for filing. A protest is deemed to be filed upon its receipt by the Board via regular mail, email, or facsimile, or upon mailing of the protest, if sent by certified or registered mail. In order to ensure your protest is timely filed by the Board, it should be personally delivered or sent by certified mail, return receipt requested.
There are three things that must accompany each protest submitted:
If any of the above are not enclosed, the protest may not be processed until any missing items have been received.
Time Frame for Filing a Protest
Timely filing of a protest will preclude the manufacturer or distributor from establishing or relocating the dealership until a hearing is held and the Board acts on the Administrative Law Judge's proposed decision. The protest filing periods and the effective dates of the relocation or establishment are as follows:
In response to a notice of intent to establish or relocate (as provided by the franchisor) a protest must be filed within 20 days of the dealer's receipt of the notice of the franchisor's intent to establish or relocate a franchisee or 20 days after the end of any appeal procedure provided by the distributor or manufacturer. If no protest is filed, the establishment or relocation becomes effective as of the date stated by the manufacturer or distributor.
The protest is deemed filed on the date of its receipt by the Board via regular mail, email, or facsimile, or upon mailing of the protest, if sent by certified or registered mail.
Extension of Time
If, within the above filing period, a franchisee files with the Board a request for additional time for the filing of a protest, the Board or its Executive Director, upon a showing of good cause, may grant an additional 10 days to file the protest.
If no protest is filed, or if the protest is not filed in time, the manufacturer or distributor may be able to establish the proposed dealership or relocate the existing dealership without proceeding before the Board.
Required Elements of a Protest
The time of filing and content of protests pursuant to Vehicle Code sections 3062 and 3072 are set forth in detail in Section 585 of Title 13 of the California Code of Regulations.
A protest of the relocation of an existing franchise or the establishment of an additional franchise must:
- Be in writing and be signed by the franchisee or its attorney;
- Be responsive to the specific grounds for the establishment or relocation contained in the franchisor's notice and set forth clearly and concisely the factual contentions of the franchisee with respect to the matter referred to in the notice;
- Set forth the franchisee's mailing address and telephone number and the name, address, and telephone number of its attorney or authorized agent, if any. [All correspondence and notices to the franchisee shall thereafter be addressed to that address, if the dealer principal is presenting its own case, or to the address of the dealer's attorney or agent, if so represented];
- Indicate either that the franchisee does or does not desire to appear before the Board;
- Set forth an estimate of the number of days required to complete the hearing;
- Indicate that the franchisee requests a pre-hearing conference if one is desired;
- Be accompanied by a $200 filing fee in the form of a check, money order or credit card payable to the New Motor Vehicle Board or a request for a fee waiver (DOC); and
- Be accompanied by a completed proof of service (DOC) signifying that a copy of the protest was served upon the franchisor.
In addition, the franchisee may submit as exhibits to the protest any physical evidence relevant to the matter with an adequate description in the protest.
When a protest is filed, the Board begins hearing proceedings that are similar to a formal civil trial. These proceedings may include the scheduling of various pre-hearing conferences, settlement conferences, authorization to engage in discovery, identification of witnesses, and so on. Sanctions may be imposed by the Board if a party fails to comply with discovery orders or fails to participate properly in a settlement conference.
All hearings on protests filed pursuant to Vehicle Code section 3062 or 3072, may be considered by the entire Board or may, at its discretion be conducted by one of the Board's Administrative Law Judges. (For limitations on Board Member participation, see Board Member Participation in the Protest Process, below.) At the hearing, oral argument is heard, evidence is admitted, testimony is received, and a written decision is rendered. Vehicle Code section 3066 or 3080 describes the hearing procedures in detail.
Notice of Appearance
Respondents in Board proceedings are required to file a written notice of appearance within 15 days of receipt of the protest ( 13 CCR § 585.1). Failure to timely file a notice of appearance will result in all proceedings in the matter being suspended until the notice is filed.
Vehicle Code section 3066 or 3080 permits any interested individual to submit an application (DOC) to the Board for permission to appear at the hearing on any protest for the purpose of submitting direct evidence concerning the issues raised in the protest.
Request for a Fee Waiver
Telephonic Pre-Hearing Conference
Once a protest is filed and processed, a notice of telephonic pre-hearing conference is sent to the parties or counsel thereof. During the initial pre-hearing conference, the parties may address any preliminary motions, and establish a discovery schedule, a settlement conference date, and/or a hearing date. Generally the parties do not proceed with discovery until all preliminary motions have been resolved.
All issues concerning timeliness and jurisdiction are resolved prior to addressing the merits of a protest. If the respondent contends the protest was not timely submitted or the Board lacks jurisdiction, it will file a Motion to Dismiss the Protest. After the motion has been filed, a briefing schedule is established and a telephonic hearing is scheduled. In the event of live testimony, the hearing will be conducted in-person (13 CCR §551.19). If the Motion is dispositive, i.e., granted, the matter is submitted to the Board and will be considered at the next Board meeting. If the matter is not dispositive, i.e., denied, a pre-hearing conference will be scheduled for the parties to establish a discovery schedule, a settlement conference date, and/or a hearing date.
The Board or its Executive Director may authorize the parties to engage in discovery procedures as set forth for civil actions in the Code of Civil Procedure Title 4 (commencing with Section 2016.010) of Part 4. The provisions of Chapter 13 (commencing with Section 2030.010) of that title, providing for written interrogatories, do not apply to Board proceedings. The Board can issue subpoenas for the attendance at deposition or hearing of non-parties, or a subpoena duces tecum for the production of papers, records, and books by a witness or deponent (13 CCR § 551.2).
During the initial pre-hearing conference, the parties generally establish a discovery schedule for the production of documents, exchange of witness lists, and deposition cut-off. Discovery must be completed no later than 15 days prior to the commencement of the hearing. Once a discovery schedule is established, it can be modified by stipulation of the parties.
Mandatory Settlement Conference
In any protest, the Board or its Executive Director may order a mandatory settlement conference. The failure of a party to appear, to be prepared, or to have authority to settle the matter may result in any or all of the following:
- The Board, its Executive Director, or an Administrative Law Judge designated by the Board or its Executive Director may suspend all proceedings before the Board in the matter until compliance;
- The Board, its Executive Director, or an Administrative Law Judge designated by the Board or its Executive Director may dismiss the proceedings or any part thereof before the Board with or without prejudice;
- The Board, its Executive Director, or an Administrative Law Judge designated by the Board or its Executive Director may require all the Board's costs be paid by the party at fault;
- The Board, its Executive Director, or an Administrative Law Judge designated by the Board or its Executive Director may deem that the party at fault has abandoned the matter (Veh. Code § 3050.4).
Hearings On The Merits
If a protest is timely filed, the manufacturer or distributor cannot establish or relocate the franchise until a hearing has been held and the Board has acted on the Administrative Law Judge's proposed decision.
At the hearing, the protesting dealer has the burden of establishing that there is good cause to not allow the franchisor to enter into a franchise establishing an additional motor vehicle dealership or relocating an existing motor vehicle dealership.
In making a determination of good cause pursuant to Vehicle Code section 3063, the Board shall take into consideration the existing circumstances including, but not limited to, all of the following:
- Permanency of the investment;
- Effect on the retail motor vehicle business and the consuming public in the relevant market area;
- Whether it is injurious to the public welfare for an additional franchise to be established;
- Whether the franchisees of the same line-make in that relevant market area are providing adequate competition and convenient consumer care for the motor vehicles of the line-make in the market area which shall include the adequacy of motor vehicle sales and service facilities, equipment, supply of vehicle parts, and qualified service personnel; and
- Whether the establishment of an additional franchise would increase competition and therefore be in the public interest.
In the case of RVs, when making a determination of good cause pursuant to Vehicle Code section 3073, the Board shall take into consideration the existing circumstances set forth above for new motor vehicles other than RVs, however, the Board shall consider the adequacy of service facilities, equipment, supply of vehicle parts, and qualified service personnel only if such requirements are contained in the franchise agreement.
Changes to a Hearing Date
Except in cases of a franchisee who deals exclusively in motorcycles, the Board or its Executive Director may accelerate or postpone the date initially established for the hearing.
For the purpose of accelerating or postponing a hearing date, good cause must be shown. The hearing may not be rescheduled for a date more than 90 days from the date of the Board's original order. Good cause includes, but is not limited to, the effects upon, and any irreparable harm to the parties or interested persons or groups, if the request for a change in the hearing date is not granted.
Application for a continuance of the hearing date must be in writing, and filed with the Executive Director at least 10 days prior to the start of the hearing. Otherwise, a continuance will not be granted except in cases of extreme emergency such as serious accident or death.
A party in a Board proceeding is entitled to one disqualification of the assigned merits Administrative Law Judge without cause (13 CCR § 551.12). Parties are not entitled to a peremptory challenge for law and motion hearings, settlement conferences, and rulings on discovery disputes. Except for the convenience of the Board, or for good cause shown, the filing of a peremptory challenge will not result in a continuance of the merits hearing.
Any person, including a Board Member, may file a motion to intervene in a pending protest ( 13 CCR § 551.13).
Amicus curiae Briefs
The Board, its Executive Director, or an Administrative Law Judge designated by the Board or its Executive Director may, in his or her discretion, allow the filing of amicus curiae briefs ( 13 CCR § 551.13).
A party to a Board proceeding, by means of a motion may request a change in venue (the location of the hearing, 13 CCR § 551.10 et seq.).
Decisions Of The Board
Administrative Procedure Act
Decisions of the Board, i.e., Proposed Decisions, Proposed Orders, or Proposed Rulings, are determined after the consideration of evidence introduced in a Board proceeding, conducted in accordance with the Administrative Procedure Act (Gov. Code § 11500 et seq.).
Stipulations of Fact
A hearing initiated by the filing of a protest may be held in whole or in part on a stipulation of fact, in which the parties define matters not in dispute, and other parts of the dispute which have been resolved. Such stipulations are of value as they tend to facilitate and expedite conflict resolution. (See 13 CCR § 587 for procedural details for stipulation of fact before the Board.)
Stipulated Decisions [only Article 4 not Article 5 RV protests]
Failure to Appear at a Hearing
Any party who fails to appear at a hearing may not be entitled to a further opportunity to be heard except in cases where good cause for such failure is shown to the Board or to the Administrative Law Judge within 5 days thereafter. The lack of such a showing may, in the discretion of the Board or the Administrative Law Judge, be interpreted as an abandonment of interest by the party in the subject matter of the proceeding ( 13 CCR § 589).
Board Member Participation in the Protest Process
In Article 4 protests, Dealer members of the Board are prohibited from hearing, commenting, advising public members upon, or deciding any matter that involves a dispute between a franchisee and a franchisor, unless all parties stipulate otherwise (Veh. Code § 3066(d)).
In Article 5 RV protests, Dealer members may participate. Dealer members may participate in matters which do not involve a dispute between a franchisee and a franchisor, such as a petition filed by a member of the public or an appeal from a Departmental decision.
Matters submitted to the Board for decision are presented at open, public meetings. The Board deliberates in closed Executive Session before reporting its decision publicly. The deliberations of the Board are in private and are not reported.
All decisions of the Board are issued in writing, and contain findings of fact and a determination for each issue presented. The Board has the option to sustain, conditionally sustain, overrule, or conditionally overrule the protest. Board decisions become final when delivered to the parties.
If the Board fails to act within 30 days after the close of a hearing, within 30 days after the Board receives a proposed decision from the Administrative Law Judge, or within a period which may be mutually agreed upon by the parties, then the proposed action of the franchisor is deemed to be approved. (Veh. Code § 3067 or 3081.)
Determination of Protest
If the protesting dealer is unable to prove good cause to not allow the establishment or relocation, the manufacturer or distributor will be permitted to proceed with its intended action.