House Study Bill 659 HOUSE FILE BY (PROPOSED COMMITTEE ON AGRICULTURE BILL BY CHAIRPERSON DRAKE) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to suppliers and dealers of agricultural and 2 industrial, construction, or utility equipment, and providing 3 an effective date. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 6144HC 81 6 da/sh/8 PAG LIN 1 1 Section 1. Section 322F.7, unnumbered paragraph 1, Code 1 2 2005, is amended to read as follows: 1 3 A supplier violates this chapterif theby failing to 1 4 comply with a provision of this chapter, including by 1 5 performing an act prohibited by this chapter or not performing 1 6 an act required by this chapter. In addition, a supplier 1 7 violates this chapter if the supplier does any of the 1 8 following: 1 9 Sec. 2. Section 322F.7, Code 2005, is amended by adding 1 10 the following new subsection: 1 11 NEW SUBSECTION. 8. Terminates a dealership agreement for 1 12 equipment without good cause or adequate prior notice as 1 13 required in section 322F.2. 1 14 Sec. 3. EFFECTIVE DATE. This Act, being deemed of 1 15 immediate importance, takes effect upon enactment. 1 16 EXPLANATION 1 17 This bill relates to certain types of dealership agreements 1 18 governed under Code chapter 322F. Under that chapter, 1 19 dealership agreements generally involve agricultural equipment 1 20 franchises, but they may also involve construction equipment, 1 21 industrial equipment, utility equipment, or outdoor power 1 22 equipment franchises. Under the Code chapter, a franchisor is 1 23 referred to as the supplier and a franchisee is referred to as 1 24 a dealer or dealership. Generally, Code chapter 322F 1 25 regulates business relationships between suppliers and dealers 1 26 by providing for the terms and conditions of dealership 1 27 agreements. 1 28 The bill addresses an issue involving the scope of a 1 29 supplier's liability under Code section 322F.8, which states 1 30 that a dealer may bring a civil action against a supplier for 1 31 damages sustained by the dealer as a consequence of the 1 32 supplier's "violation" of the chapter. Code section 322F.7 1 33 enumerates a list of violations without specifically 1 34 referencing other sections of the Code chapter. A question 1 35 has arisen whether that list is exhaustive, and whether a 2 1 dealer may bring a civil action against a supplier for damages 2 2 for a violation of the Code chapter if the violation is not 2 3 enumerated in Code section 322F.7. For example, on March 22, 2 4 2005, the United States district court for the northern 2 5 district of Iowa, in an order granting summary judgment, found 2 6 that the list of violations in Code section 322F.7 was 2 7 exhaustive and thus a dealer could not sue a supplier for 2 8 damages under Code section 322F.8 for failing to terminate the 2 9 dealership in compliance with Code section 322F.2, which 2 10 requires good cause (as defined in Code section 322F.1) and 2 11 adequate notice to the dealer. (Highway Equipment Co. Inc. v. 2 12 FECO Ltd. (No. C03=0076)). 2 13 The bill provides that a supplier violates Code chapter 2 14 322F by failing to comply with a provision of the chapter 2 15 regardless of whether it is enumerated in Code section 322F.7. 2 16 It also adds a provision to the enumerated list contained in 2 17 Code section 322F.7 by providing that terminating a dealership 2 18 agreement for equipment without good cause or adequate notice 2 19 is a "violation" of the Code chapter. Thus, a dealer could 2 20 bring a civil action against a supplier under Code section 2 21 322F.8 for the failure of a supplier to comply with the good 2 22 cause and notice requirements in Code section 322F.2. 2 23 The bill takes effect upon enactment. 2 24 LSB 6144HC 81 2 25 da:nh/sh/8