This guide discusses dealership operational compliance with the CARS Act (adopted through Senate Bill 766 in 2025), which becomes operative on October 1, 2026. It replaces CNCDA’s prior SB 766 white paper (published October 2025) and expands it with more detailed information throughout, form-by-form completion guidance for the new and revised Reynolds and Reynolds forms developed in coordination with CNCDA, additional FAQs, department-level implementation checklists, worked examples, and examples of compliant and noncompliant advertisements.
CNCDA members should also note that the elements of prior CNCDA compliance resources are outdated due to the CARS Act and will be updated in the future. These resources include the 2025 F&I Compliance Manual, 2022 Advertising Law Manual, and 2021 Dealership Operations Guide.
Special thanks to Reynolds and Reynolds and Comply Auto for their feedback in the development of this Guide.
The Guide will be continuously updated through October 2026. You can download a current version of the guide by clicking on the link above.
2026 Prop 65 Reference Guide
I. Introduction
This Proposition 65 Reference Guide provides California New Car Dealers Association (CNCDA) members with guidance and best practices to comply with California’s Proposition 65 requirements as administered by the California Office of Environmental Health Hazard Assessment (OEHHA). The guide covers the regulatory background of Proposition 65, includes regulatory updates to the rule including effective dates and what enforcement and penalization looks like, includes a dealership compliance checklist, and lays out department by department requirements and sample language to ensure compliance. This guide is neither legal advice nor a comprehensive guide meant to cover every iteration of a dealership site thus dealers should consult legal counsel or environmental health and safety experts for site‑specific or nuanced questions.
II. Proposition 65 Background
Enacted in 1986 as the Safe Drinking Water & Toxic Enforcement Act
, Proposition 65 mandates warning disclosures for exposures to listed chemicals which are known to cause cancer, birth defects, and/or other reproductive harm.
OEHHA maintains the chemical list and safe harbor warning standards.
Businesses must issue a “clear and reasonable” warning before any known, intentional exposure to a listed chemical—through product labels, signage, or postings.
If exposures are below de minimus levels (“safe harbor numbers”), no warning is required—but environmental testing is necessary to confirm such low exposure.
Many businesses choose to warn proactively, given the prevalence of over 900 chemicals in everyday products and environments.
III. Regulatory Updates
August 30, 2016: Office of Administrative Law (OAL) approved the regulations promulgated by OEHHA amending Title 27, Article 6, Clear and Reasonable Warnings, of the California Code of Regulations.
August 30, 2018: OEHHA’s Clear and Reasonable Warnings rule became fully effective, including “tailored” signage.
November 26, 2024: OAL approved amendments to Prop 65 aimed to make the “short-form” clear and reasonable warnings more informative for consumers.
Effective January 1, 2025: Short‑form warnings now must:
Name at least one specific chemical per endpoint;
Include “WARNING” in all caps and bold;
Reference OEHHA’s website; and
Include yellow triangle (or black‑and‑white if no yellow on sign).
Dealerships have until January 1, 2028, to fully adopt the new warnings.
Products labeled with older short-form warnings before January 1, 2028, can still be sold.
A point-of-sale sign may be utilized in lieu of individual product warnings, provided certain parameters are met. See Section-VII for more details.
Required language must be exact to qualify for safe harbor.
Multilingual versions required where material in other languages is present (Spanish, Chinese, Tagalog, etc.). “One‑size‑fits‑all” signs are not acceptable.
Compliance with Prop 65 is continuous, and businesses should stay updated on new listings and changes by monitoring OEHHA notices.
IV. Enforcement & Penalties
Enforced by California Attorney General, district attorneys (for cities with a population over 750k), city attorneys, or private enforcers.
No proof of harm required; a 60‑day notice is mandatory before private actions; public agencies can act immediately.
Penalties up to $2,500 per violation per day
, plus injunctive relief.
Settlements often totaling tens of millions
In 2022 over 800 Prop 65 related settlements totaled over $26M
By 2024 that number grew to over 1,300 settlements totaling over $101M.
No cure period (except a few limited exceptions). Dealers receiving 60‑day notice should consult counsel immediately.
As noted above, businesses must issue a “clear and reasonable” warning before any known, intentional exposure to a listed chemical—through product labels, signage, or postings. Clear and reasonable warnings must name at least one listed chemical (“phthalates,” “benzene,” etc.) and must be prominent: readable, conspicuous, likely to be understood under normal usage. A dual chemical warning is required when there are multiple chemicals present that are known to cause cancer and birth defects. Where one chemical present in the area is known to cause cancer and birth defects and exposure is possible, a single chemical warning is sufficient for safe harbor.
Long-Form Example (dual chemical):
Short-Form Example (single chemical):
VII. Parts & Online Sales – Consumer Product Exposure
Dealers must ensure all sold parts/products carry compliant warnings prior to exposure to the product.
Options include:
On‑Product Labels: Short-form warnings are permitted provided the warning text is at least 6-point font and no smaller than the largest product information text.
Point-of-Sale Warnings for passenger or off-highway motor vehicle parts: Dealers may post product specific warnings on a posted sign, shelf tag, or shelf sign at each point of display of the product as a substitute for individual product warnings.
“Passenger or off-highway motor vehicle part” means any part offered for sale or transferred to a consumer for installation in or service on a passenger or off-highway motor vehicle but shall not include packaged service chemicals, tires, parts containing asbestos, carpeting, upholstery including fillings and coverings, textiles, or fabrics.
Requirements:
Must be prominent and conspicuous so it is likely to be seen, read, and understood by a shopper under normal conditions;
Must contain the required language and symbol (yellow triangle with an exclamation point (black and white allowed if no yellow is used elsewhere));
Must be 5×5 inches in size and contain 20-point font.
Must be in multilingual formats when other languages are used.
When products are sold online, safe harbor requires electronic warnings meeting the statutory requirements at point of purchase.
Warnings must be in multilingual formats when other languages are used on other signage.
Website warnings must be clearly visible or hyperlinked with “WARNING”.
Warn Prior to Exposure
Remember the consumer must be warned prior to exposure. To ensure that warning takes place for a product ordered online, best practice is to include a Prop 65 warning on the website prior to purchase. The text requirements are the same as they would be if the consumer purchased the product in person.
Sample On-Product Label:
Sample Point-of-Sale Sign:
NOTE
Prop 65 signage may lead with “WARNING”, “CALIFORNIA WARNING”, or “CA WARNING”
VIII. Showroom, Lot, Parts Entrance – Environmental Exposure
Post signage at each public entrance. Signage must clearly identify one or more sources of exposure, be provided in a conspicuous manner, and provided in such a way as to make it likely to be seen, read, and understood by any ordinary individual in the course of normal daily activity. The warning must be in 72-point font. If other signs are multilingual, each corresponding language version of the Prop 65 sign is required.
Dual chemical version: same structure but “including benzene and toluene…”
IX. Employee Areas – Occupational Exposure Signage
Dealerships with hazardous chemicals must also have a written Hazard Communication Program under OSHA, SDS availability, training, and clearly posted warnings accessible to employees (e.g., breakrooms). Signage must clearly identify one or more sources of exposure, be provided in a conspicuous manner, and provided in such a way as to make it likely to be seen, read, and understood by any ordinary individual in the course of normal daily activity. The warning must be in 72-point font. If signs are multilingual, each corresponding language version of the Prop 65 is required.
Sample Occupational Exposure Sign:
Dual chemical version: same structure but “including benzene and toluene…”
X. Waiting Areas and Vending Machine Food & Beverage Exposure Signage
If food/beverages are available (even free), post 8½×11″ signs with 28-point or larger font at customer area entrances and on or near vending machines. Signage must be conspicuous, and likely to be seen, read, and understood by a customer consuming the food or beverage offered. Sign must be in all languages used on other signs in the dealership.
Sample Food & Beverage Exposure Sign:
Dealers may also post smaller notices (5″X5″, 20-point font) at point-of-service of the food or beverage.
XI. Vehicle Exposure Signage
Manufacturers must supply, and dealers must affix OEHHA‑approved Prop 65 stickers to all new, used, or loaner vehicles —unless the manufacturer has assumed responsibility by contract. The warning must be affixed to the driver-side window or mirror/hang-tag, if the vehicle does not have a driver-side window. It is recommended the text of the warning be at least 12-point font.
NOTE
In the rare occurrence a vehicle does not have a driver-side window or a rear-view mirror, the warning must be placed in another prominent location.
Sample Vehicle Exposure Label:
Rental Vehicles:
Safe harbor options specifically for rental vehicles include employing one of the following:
Printing the warning in the rental contract
Warning text must be no less than 6-point font and no smaller than the largest font size used for other consumer information.
Providing warning text on a hang-tag
Recommended no less than 12-point font)
Posting the warning on a sign in no smaller than 22-point font, posted at the counter or similar area of the rental facility where rental transactions occur, where it will be likely to be seen, read, and understood by the renter during the process of renting the vehicle.
Providing the warning in an electronic rental contract.
Providing the warning in a confirmation email that is sent to the renter’s email address.
Providing the warning through a clearly marked hyperlink using the word “WARNING” on the online reservation page, or by otherwise prominently displaying the warning to the renter prior to completing the online reservation.
The warning should contain specific rental language and be provided in all languages used in the transaction.
Sample Rental Vehicle Exposure Warning:
XII. Enclosed Parking Facility Exposure Signage
Enclosed parking facilities storing vehicles must have 20″×20″ signs with 72-point font at any entrance posted conspicuously and readable.
Sample Enclosed Parking Facility Exposure Sign:
XIII. Service Drive Exposure Signage
To fall under the safe harbor for the dealership service drive, signage must be posted at each public entrance. The sign must be in at least 32-point font, boxed, conspicuous, and provided in all languages used on other signs in the dealership.
Sample Service Drive Exposure Sign:
Dealers can also include similar warnings on the back of repair orders for additional protection and are encouraged to post vehicle parts-specific Prop 65 warning signs at the points-of-sale in the service department, as best practice. See Section VII for specific requirements of this sign.
XIV. Designated Smoking Area Exposure Signage
If dealerships offer a designated smoking area(s) for use by employees and/or customers, a Prop 65 warning sign must be posted at the entrance to and within the designated smoking area. The sign must be 8½” x11” inches in size with no smaller than 22-point font. The warning must also be enclosed in a box and must mirror the language in the example below.
Sample Designated Smoking Area Exposure Sign:
XV. Final Notes & Best Practices
Use exact safe‑harbor language, fonts, symbols, and size requirements.
Conduct periodic review to ensure all signage and warnings remain current, intact, and posted where required.
Maintain documentation (photos, logs, HAZCOM program, training records).
Obtain written agreements with part manufacturers confirming that compliant warnings are provided.
Engage counsel or compliance specialists when receiving enforcement notices or if environmental testing indicates risk.
2025 F&I Compliance Manual, 8th Edition
Service Department Compliance Manual
CNCDA’s Service Department Compliance Manual outlines key compliance requirements for dealership service departments. Topics include initial and revised estimates, customer authorization, invoices, and special requirements for unique service operations.
New Motor Vehicle Board Resources
The California New Motor Vehicle Board (NMVB) has a very extensive website which is very helpful in explaining how the Board works. The website is at www.nmvb.ca.gov. Below are some of the features of the website.
Guide to the New Motor Vehicle Board. The Board publishes a very detailed Guide to the New Motor Vehicle Board which includes the Board’s organization, jurisdiction, operations, and procedures. This Guide covers all aspects of the Board’s operations and also has sample forms. The Guide is a must for any dealer or dealer attorney desiring information about the Board or who is involved in any proceeding before the Board. The Guide is available at https://nmvb.ca.gov/publications/2023/Guide_to_the_New_Motor_Vehicle_Board.pdf and is periodically updated.
Informational Guide for Manufacturers and Distributors. The Board publishes an Informational Guide for Manufacturers and Distributions to help them comply with California’s vehicle franchise and manufacturer laws. The publication is for use by manufacturers and distributors in their market representation, dealer development, and legal departments. This publication is available by using the Publications tab on the homepage of the Board’s website.
Guide for Protests over Export Policies. The Board publishes an Export or Sale-For-Resale Prohibition Policy Protest Guide for help in filing protests under Vehicle Code §§ 3085, et seq.) This publication is available by using the Publications tab on the homepage of the Board’s website.
Administrative Law Judges Benchbook. The Board publishes an Administrative Law Judges Benchbook which is primarily for use by the administrative law judges or Board members acting as presiding officers in hearings before the Board. This Benchbook can be helpful for those practicing before the Board. It is not available on the Board’s website but can be obtained by a public records request to the Board. The Board provides Guidelines for Access to Public Records which can be seen by using the Publications tab on the homepage of the Board’s website.
Court Cases Dealing with the Board. The Board’s website has a list of various court cases dealing with the Board in the areas of the Board’s composition, constitutionality, and due process issues; exhaustion of administrative remedies; judicial review, jurisdiction; termination or modification of a franchise; establishment of an additional franchise or franchise relocation; hearing on protests; recovery of damages and injunctive relief; writ of mandamus; ex parte communications; and unlawful acts. This list is available by using the Publications tab on the homepage of the Board’s website.
Legal Program. The Board’s website has a Legal Program section which includes a detailed discussion about filing petitions and protests with the Board. It also contains the text of laws that apply to the Board in the California Vehicle Code and the California Code of Regulations, and a discussion of the Board’s rulemaking authority and process. This information can be found by using the Legal Program tab on the homepage of the Board’s website.
Final Decisions of the Board. The Board’s website allows access to copies of final decisions of the Board regarding petitions, protests, and dispositive motions. These decisions are available by using the Final Decisions tab on the homepage of the Board’s website.
New Motor Vehicle Board Forms. The Board publishes many forms for use in Board proceedings which are available by using the Forms tab on the homepage of the Board’s website.
Agenda and Minutes of Board Proceedings. Agenda and minutes of the Board’s meetings are available by using the Meetings tab on the homepage of the Board’s website.
Board Consumer Mediation Services. The Board offers an informal, no-cost, dispute resolution program for consumers with a complaint against new motor vehicle dealers, or vehicle manufacturers or distributors licensed to do business in California. See the Consumer Program tab on the homepage of the Board’s website for more details.
Arbitration Clauses in Franchise Agreements
A federal law enacted in 2002 prohibits manufacturers from forcing dealers in franchise agreements that are entered into, amended, altered, modified or extended after November 2, 2002, to use mandatory binding arbitration as the exclusive means to resolve disputes. The new law allows dealers the option, after the controversy has arisen, to elect either arbitration, or utilize the New Motor Vehicle Board.
It is important for dealers to remember that manufacturers cannot insist on binding arbitration for any franchise agreement. The two exceptions to keep in mind are franchise agreements that have not been amended, altered, modified, renewed, or extended since November 2, 2002, and agreements with manufacturers or their affiliates that are not franchise agreements. For example, captive finance company loan documents are not franchise agreements and are therefore not covered.
Some agreements between the manufacturer itself and a dealer can fall into a true grey area, such as facilities assistance agreements. Such agreements exist only to further operation of a franchise, but the argument can be made that such agreements do not, in and of themselves, qualify as franchise agreements and, therefore, are exempt. Dealers therefore should not assume that the federal law limiting arbitration clauses in franchise agreements will automatically nullify all factory-drafted arbitration clauses.
Text of the Law
Section 1226 of Title 15 of the United States Code: (a) Election of arbitration (1) Definitions. For purposes of this subsection-(A) the term “motor vehicle” has the meaning given such term in section 30102(6) of title 49; and (B) the term “motor vehicle franchise contract” means a contract under which a motor vehicle manufacturer, importer, or distributor sells motor vehicles to any other person for resale to an ultimate purchaser and authorizes such other person to repair and service the manufacturer’s motor vehicles. (2) Consent required. Notwithstanding any other provision of law, whenever a motor vehicle franchise contract provides for the use of arbitration to resolve a controversy arising out of or relating to such contract, arbitration may be used to settle such controversy only if after such controversy arises all parties to such controversy consent in writing to use arbitration to settle such controversy. (3) Explanation required. Notwithstanding any other provision of law, whenever arbitration is elected to settle a dispute under a motor vehicle franchise contract, the arbitrator shall provide the parties to such contract with a written explanation of the factual and legal basis for the award. (b) Application. Subsection (a) shall apply to contracts entered into, amended, altered, modified, renewed, or extended after November 2, 2002.
California Vehicle Code § 11713.3(g)(1)(D): It is unlawful and a violation of this code for a manufacturer, manufacturer branch, distributor, or distributor branch licensed pursuant to this code to do, directly or indirectly through an affiliate, any of the following: Except as provided in paragraph (3), to obtain from a dealer or enforce against a dealer an agreement, provision, release, assignment, novation, waiver, or estoppel that does any of the following: (D) Requires a controversy between a manufacturer, manufacturer branch, distributor, distributor branch, or representative and a dealer to be referred to a person for a binding determination. However, this subparagraph does not prohibit arbitration before an independent arbitrator, provided that whenever a motor vehicle franchise contract provides for the use of arbitration to resolve a controversy arising out of, or relating to, that contract, arbitration may be used to settle the controversy only if, after the controversy arises, all parties to the controversy consent in writing to use arbitration to settle the controversy. For the purpose of this subparagraph, the terms “motor vehicle” and “motor vehicle franchise contract” shall have the same meanings as defined in Section 1226 of Title 15 of the United States Code. If arbitration is elected to settle a dispute under a motor vehicle franchise contract, the arbitrator shall provide the parties to the arbitration with a written explanation of the factual and legal basis for the award.
Discussion
It is important to recognize that binding arbitration between a dealer and its franchisor can only occur if all parties (the dealer and the manufacturer) agree, after a controversy has arisen, consent in writing to use arbitration to settle the controversy.
Protecting and Asserting Franchise Rights
Dealers enjoy a wealth of protections under the franchise laws. But it is important that dealers protect, preserve, and assert, where appropriate, their rights under these laws.
Recordkeeping
A critical element in protecting franchise rights is to have a good record retention and recordkeeping system in place with respect to all franchise matters, including agreements, documents, correspondence, email, memoranda, and reports (paper and web-based) issued by or exchanged with the franchisor. With the advent of web-based documents in lieu of paper documents, dealers should conduct a periodic (such as monthly) “data dump” of documents posted on the factory’s dealer reports and dealer documents website. Relying on the documents remaining on the website for years until needed is dangerous; not only can the factory change the documents at any time without notice, the dealer’s ability to access the documents can also change instantly, especially if a dispute between the dealer and factory were to arise.
If a dealer must assert franchise rights in court or before the New Motor Vehicle Board, the fight is almost always based on documents, and on what was done with or after receipt of documents. The better the recordkeeping system, the more credible will be the dealer’s story of their own franchise investment and operational history, and of the dealer’s efforts to “do the right thing” when the franchisor voiced any complaints.
Protests concerning an additional dealership, relocation, termination, or franchise modification all involve determination of good cause, including permanency of the investment. Dealers should have not only accounting records demonstrating their investment, but all other documents reflecting the investment, including agreements, promissory notes, leases, real estate purchase agreements, deeds, construction contracts, minutes discussing and/or approving any investment, etc. These documents help to give life to the dealer’s contention that a large, permanent investment has been made in the franchise. Another important area to have documented is all community benefit/charitable work in which the dealership is involved.
Respond to Factory Communications
Dealers must not ignore any communication from the franchisor alleging any sort of dealer failure or deficiency. The dealer must respond in a documented way to ensure the paper record is clear that the dealer cared about the issue and advised the franchisor of the dealer’s plan to address it, or of the dealer’s careful determination that the alleged failure or deficiency is incorrect or inapplicable to the dealer’s circumstances.
Dealers should also be aware most franchisor representatives complete a “contact report” after each visit. This document goes into the dealer file and purports to memorialize the discussion with the dealer. Dealers finding themselves in litigation will see extensive documentation of every performance, staff, advertising, or facility concern ever raised by manufacturer reps, as well as a few not previously discussed. Dealers can create their own record of events by sending a quick email to their rep thanking them for their visit and recounting the discussion.
Conduct Due Diligence before Signing any Document Requested by the Franchisor
When manufacturers want dealers to sign documents, they can apply relentless pressure, employing not only letters, email, and phone calls, but also personal visits by factory representatives. But dealers must conduct due diligence before signing anything from the factory. It is entirely possible that the document will modify or affect the dealer’s rights.
For example, a dealer who had asserted that the factory’s reassignment of the dealer’s PMA (primary market area) zip codes was ineffectual because it was done without giving the dealer notice and the right to protest the change was later asked to sign a dealer contract that was identical to the previous contract, with only the dates updated. The dealer was told that the factory was simply renewing the existing dealer agreement. But by signing that contract, the dealer became bound to a clause in the terms and conditions incorporated into it that provided that the dealer accepts the PMA as last announced by the manufacturer. Dealers should consider having all agreements that require a signature received from the factory reviewed by legal counsel prior to signing.
Keep Track of Deadlines
As summarized in this manual, several deadlines exist with respect to the assertion of dealer rights, including, for example, the time to rebut an incentive audit chargeback, the time to protest a reduction in warranty compensation, a time to file an add-point protest. Any communication from a manufacturer that states certain action by the factory is coming up should be carefully checked against any possible upcoming deadline by which the dealer’s rights must be asserted.
Additional Pathways to Enforce Franchise Laws
Basic Rule
Protests at the New Motor Vehicle Board are not the exclusive pathway to enforce California’s franchise law. Additional legal theories to enforce franchise laws include licensee actions under the Vehicle Code as well as various other legal theories.
Text of the Law
Vehicle Code § 11726: Any licensee suffering pecuniary loss because of any willful failure by any other licensee to comply with any provision of Article 1 (commencing with Section 11700) or 3 (commencing with Section 11900) of Chapter 4 of Division 5 or with any regulation adopted by the department or any rule adopted or decision rendered by the board under authority vested in them may recover damages and reasonable attorney fees therefor in any court of competent jurisdiction. Any such licensee may also have appropriate injunctive relief in any such court.
Discussion
Although New Motor Vehicle Board protests can be an effective way to resolve disputes between dealers and manufacturers, the Board does not have the authority to hear protests involving violations of all franchise laws, nor can it adjudicate claims involving illegal actions outside of California’s franchise laws (such as contract disputes). The Board’s authority is also limited in other important ways, and it cannot provide a prevailing dealer with attorney’s fees.
For these reasons, a dealer may wish to consider alternative legal pathways to prosecute his or her claim against a manufacturer. One such pathway involves an action in Superior Court through Vehicle Code section 11726. An action based on this code section can be brought to enforce various franchise laws that cannot be prosecuted as protests at the New Motor Vehicle Board. For example, a dealer does not have the authority to file a protest to seek statutory indemnification (see Chapter 23), but the dealer would have the authority to prosecute an action to enforce this right via section 11726. Section 11726 also can provide a prevailing dealer with attorney’s fees.
Finally, dealers should consult their counsel to explore additional options for relief, which could take various forms depending on the nature of the manufacturer’s illegal action. For example, claims under California’s Unfair Competition Law (Business and Professions Code sections 17200 et. seq.) may provide an additional pathway to secure relief.
Petitions
Basic Rule
Under Vehicle Code section 3050(b), which prior to 2020 was section 3050(c), any person may petition the New Motor Vehicle Board to consider any matter concerning the activities of any person applying for or holding a license as a new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative.
(b) Consider any matter concerning the activities or practices of any person applying for or holding a license as a new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative pursuant to Chapter 4 (commencing with Section 11700) of Division 5 submitted by any person. A member of the board who is a new motor vehicle dealer may not participate in, hear, comment, advise other members upon, or decide any matter considered by the board pursuant to this subdivision that involves a dispute between a franchisee and franchisor. After that consideration, the board may do any one or any combination of the following:
(1) Direct the department to conduct investigation of matters that the board deems reasonable, and make a written report on the results of the investigation to the board within the time specified by the board.
(2) (A) Undertake to mediate, arbitrate, or otherwise resolve any honest difference of opinion or viewpoint existing between any member of the public and any new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative.
(B) The board does not have jurisdiction over a dispute pursuant to this paragraph involving any member of the public, including a consumer or other person who is not applying for or holding a license as a new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative pursuant to Chapter 4 (commencing with Section 11700) of Division 5, unless that person has filed the dispute with the board or consents to jurisdiction by the board.
(3) Order the department to exercise any and all authority or power that the department may have with respect to the issuance, renewal, refusal to renew, suspension, or revocation of the license of any new motor vehicle dealer, manufacturer, manufacturer branch, distributor, distributor branch, or representative as that license is required under Chapter 4 (commencing with Section 11700) of Division 5.
California Vehicle Code § 512: A “representative” is any person regularly employed by a manufacturer or distributor for the purpose of negotiating or promoting the sale of the manufacturer’s or distributer’s vehicles to their franchisees or for regularly supervising or contacting franchisees or prospective franchisees in this state for any purpose.
Discussion
Jurisdiction for Common Law and Statutory Claims Originally Cognizable in the Courts
Vehicle Code § 3050(e) states: Notwithstanding subdivisions (b)[Petitions], (c) [Franchisee Protests], and (d) [Association Protests over Factory Export Policies], the courts have jurisdiction over all common law and statutory claims originally cognizable in the courts. For those claims, a party may initiate an action directly in any court of competent jurisdiction.
Vehicle Code § 3050(e) was effective on January 1, 1998. Before that date there were a series of appellate court cases in the 1990s wrestling with whether parties to lawsuits should have first exhausted their administrative remedies by going to the New Motor Vehicle Board first before filing an action in court. Many of the 1990 cases had ruled that for common law and non-protest cases, the parties did not have to go to the Board first. Vehicle Code section 3050(e) codified those decisions. Citations to court cases dealing with these issues can be found by using the Publications tab on the homepage of the Board’s website and finding the Exhaustion of Administrative Remedies and Jurisdiction sections under Court Cases, Chapter 49, New Motor Vehicle Board Resources.
Jurisdiction of the Board for Petitions under Vehicle Code § 3050(b)
There was a time when the Board accepted petitions to resolve controversies between dealers and factories. That all changed in 2003 with the court opinion of the California Court of Appeal in the case of Mazda of America, Inc. v. New Motor Vehicle Board and David J. Phillips Buick-Pontiac, Inc. (2003) 110 Cal.App.4th 1451. In that case a dealer, by a petition to the Board under Vehicle Code § 3050(c) (now § 3050(b)), asked the Board to resolve the legality of the factory’s turndown of a purchaser with whom the dealer had entered into an agreement to sell it business. The court decided that Vehicle Code § 3050(c) did not give the Board the authority to resolve and adjudicate a dispute between a dealer and a factory. The court in effect said that for purposes of the statute the dealer would not be considered to be a “member of the public” entitled to file a petition to resolve dealer-factory disputes. As a result the only persons who can petition the Board for an adjudication by the Board under Vehicle Code §3050(b)(2) are members of the public and not Vehicle Code licensees.
In the Mazda case, however, the court stated that a dealer could file a petition with the Board and have the Board consider the activities of the factory or any other licensee. After the Board’s consideration the Board may (1) direct the DMV to conduct an investigation of the matter the Board deems reasonable and make a written report to the Board, and/or (2) order the DMV to exercise all power it has with respect the license held by the factory, another dealer, or any other person or entity licensed under Chapter 4 (commencing with Section 11700) of Division 5 of the Vehicle Code. For example, if a dealer believed another dealer was competing unfairly with illegal advertising, such a dealer could file a petition with the Board and ask the Board to take the action noted above, especially if the filing dealer was not receiving any response to a complaint that had been made to the DMV. Vehicle Code § 3050(b) might also be interpreted as allowing a petition for the Board to consider other activities or practices not covered by Vehicle Code §§ 11700-11762.
Process for Filing Petition with the Board; Contents of Petition; Answer to Petitions
The petition process begins with the filing by any person of a petition with the Board and requesting that the Board consider the matter and take action on it.
There is a $200 filing fee.
Section 555 of Title 13 of the California Code of Regulations provides for the content of the petition as follows:
The petition shall set forth in clear and concise language the nature of the matter which the petitioner wishes the Board to consider. The petition shall comply substantially with the following requirements:
(a) Include the name, mailing address and telephone number of the petitioner; the name, mailing address and telephone number of his or her attorney or authorized agent if any, and the name and address of the licensee or applicant for license (hereinafter referred to as “respondent”) whose activities or practices are in question. All correspondence with petitioner and notices to petitioner shall be addressed to petitioner’s said address, if he or she appears in person, or to the address of his or her attorney or agent, if he or she is represented by an attorney or agent. Petitioner shall promptly give the executive director and respondent written notice by mail of all subsequent changes of address or telephone number.
(b) Insofar as is known to petitioner, include the names, residence addresses and business addresses of persons and the dates, places and specific actions or practices involved in the matter.
(c) If the actions or practices described in the petition are believed to be in violation of law, a concise recitation of applicable law and citation to the applicable statutes or other authorities.
(d) If the petitioner desires that the board mediate, arbitrate or resolve a difference between the petitioner and respondent, recite that fact and describe the relief or disposition of the matter which petitioner would consider acceptable.
(e) The petitioner may submit, as exhibits to the petition, photographic, documentary or similar physical evidence relevant to the matter referred to in the petition, in which event an appropriate description of the exhibits shall be set forth in the petition sufficient to identify them and to explain their relevancy.
(f) The petitioner shall set forth in the petition an estimate of the number of days required to complete the hearing.
(g) The petitioner shall set forth in the petition a request for a prehearing conference if one is desired. Section 558 of the California Code of Regulation provides that the responding party must file an answer to the petition within 30 days of the date of service of the petition and provides the form and content of the answer.
Notice to Respondent; Board’s First Consideration
Section 557 of the California Code of Regulations provides: (a) Upon the filing of a petition with the board, a copy of the petition shall be transmitted by the executive director of the board to each member of the board for consideration. Unless, within 10 days of receipt of a copy of the petition, any member of the board notifies the executive director of an objection, the executive director shall set the matter for a hearing before an administrative law judge designated by the board.
(b) If any member of the board gives notice of objection within 10 days of receipt of a copy of a petition, the petition shall be first considered by the board at its next meeting to determine what action shall be taken in regard to the petition. Upon receipt by the executive director of a notice of objection, the executive director shall notify the parties named in the petition that there has been an objection and that the matter will be considered by the board at its next meeting. The parties shall also be given a minimum of 10 days prior notice of the time, date, and location of the board meeting at which the petition will be considered.
Board resolution of Petitions under Vehicle Code §§ 3050(b)(1) and (3) without a Hearing
The New Motor Vehicle Board’s Guide to the New Motor Vehicle Board states the following with regard petitions under Vehicle Code §§ 3050(b)(1) and (3) which are discussed above.
“If the petitioner is a licensee or member of the public seeking relief under Vehicle Code section 3050(c)(1) and/or (3), these petitions would not be submitted to the Board for first consideration (13 CCR 557), as the authority for first consideration,
limits first consideration to matters in which a hearing is sought, i.e., Vehicle Code section 3050(c)(2) petitions. These petitions would be agendized for consideration of the relief requested by the Petitioner at the next regularly scheduled meeting. Such petitions are not assigned to an ALJ and are not subject to the normal evidentiary hearing process. The Board members, at a noticed meeting, would hear from the parties by way of written and oral arguments, and consider granting the relief requested. After consideration, the public members of the Board shall take final action and issue a written decision that either grants the appropriate relief pursuant to Vehicle Code section 3050(c)(1) or (c)(3), or orders the petition dismissed.
The public members of the Board may also request further briefing and/or the submission of further evidence and continue the matter to a later open meeting for consideration and final action.”
For petitions seeking adjudication by the Board between a member of the public and a licensee under Vehicle Code § 3050(b)(2) the Board retains the authority to mediate the matter or appoint an administrative law judge to hear the matter.
Processes for Board Adjudication under Vehicle Code § 3050(b)(2)
The processes for Board Adjudication under Vehicle Code § 3050(b)(2) between a member of the public and a licensee are very similar to the processes for protests set forth in Chapters 41 and 42. Here is a list of some of the important ones. Some of the items on this list may also apply to petitions under Vehicle Code § 3050(b)(1) and (3).
The Board may allow discovery by processes similar to those in civil litigation in California See Vehicle Code § 3050.1.
A party may disqualify a Board member or administrative law judge. See 13 California Code of Regulations §§ 551.7 and 551.2(b).
A party may file a motion to intervene in the petition proceeding. See 13 California Code of Regulations § 551.13.
Three members of the Board constitute a quorum. See Vehicle Code § 3050.1 for disputes between licensees.
See 13 California Code of Regulations § 556 for the form and filing of the petition.
Additional evidence and argument may be submitted in support of the petition. See 13 California Code of Regulations § 556.
See 13 California Code of Regulations § 556 for actions that may be taken by the Board over petitions.
The Board decision must be in writing and served on the parties. See 13 California Code of Regulations § 556.
The Board may dismiss the petitions. See 13 California Code of Regulations § 551.8.
See 13 California Code of Regulations § 580 for the procedure at hearings.
The Board may allow amicus curiae briefs. See 13 California Code of Regulations §551.13.
Informal Mediation for Vehicle Code § 3050(b)(2) Petitions
Prior to initiating a petition to the Board for adjudication of a controversy between a member of the public and a licensee, either party may request that the Board mediate the controversy. See 13 California Code of Regulations §§ 551.14-551.17 for the mediation process and the right to convert the mediation to a petition.
Vehicle Code sections 11713.3 and 11713.13 prohibit dozens of specific actions by manufacturers. The Vehicle Code contemplates that such actions may be prosecuted by dealers in Superior Court pursuant Vehicle Code section 11726 (see Chapter 46 on such legal actions in Superior Court).
Various specific subdivisions within Vehicle Code section 11713.3 and 11713.13 are also prosecutable as protests at the New Motor Vehicle Board, and in such protests the manufacturer has the burden of proof to establish that their conduct was lawful. These include protests involving performance standards, vehicle and parts allocation, facility and equipment policies, DC fast charging requirements, and unlawful manufacturer competition.
Text of the Law
California Vehicle Code § 3065.3: (a) No franchisor shall establish or maintain a performance standard, sales objective, or program for measuring a dealer’s sales, service, or customer service performance that is inconsistent with the standards set forth in subdivision (g) of Section 11713.13.
(b) No franchisor shall allocate vehicles or parts in a manner inconsistent with the standards set forth in subdivision (a) of Section 11713.3.
(c) No franchisor shall impose a facility or equipment policy inconsistent with the standards set forth in subdivision (a), (b), (c), or (k) of Section 11713.13.
(d) No franchisor shall compete with a dealer in violation of subdivision (o) of Section 11713.3.
(e) A franchisee may file a protest with the board for determination of whether a franchisor has complied with this section and in that proceeding the franchisor shall have the burden of proof.
Discussion
Vehicle Code section 3065.3 was created by AB 179 (2019) and subsequently amended by AB 473 (2023). Originally, the statute only established a protest right for unlawful manufacturer performance standards. However, the 2023 amendments expanded the statute to authorize dealer protests involving vehicle and parts allocation, facility and equipment policies, DC fast charging requirements, and unlawful competition.
In any protest filed under section 3065.3 the manufacturer has the burden of proof to establish that its conduct was lawful. This “burden shifting” requirement is valuable for dealers. To put it simply, in the event of a “tie” the party with the burden of proof should lose. Ordinarily, the party filing a legal action has the burden of proof, but in some cases where the legislature has determined there is an asymmetric power relationship between the parties (e.g., employee/employer, franchisee/franchisor) the defendant may have the burden of proof to establish their contact is lawful.
