Judge Upholds Pioneer EDA Dealer Protection Law
October 22, 2020
A North Dakota Judge ruled in favor of farm equipment dealers on SB 2289, passed by the state legislature three years ago. The bill, which was originally blocked by a Federal lawsuit filed by manufacturers, addresses manufacturer contract issues where manufacturers unreasonable demands have place dealers at a disadvantage when it comes to dealership terminations, warranty limitations and fair process of dealership transfer or sale
During the 2017 North Dakota legislative session, the Pioneer Equipment Dealers Association (formerly the North Dakota Implement Dealers Association) supported the introduction of S.B. 2289, a comprehensive and impactful farm equipment dealer protection bill. The legislation was passed with overwhelming support from lawmakers and was signed by Governor Doug Burgum in March, 2017. Four months later, the manufacturers filed a Federal lawsuit seeking to block the bill in its entirety. The lawsuit consisted of a sixty-three page complaint and a motion for a preliminary injunction. The Judge granted the manufacturers’ motion for an injunction, which effectively put a stay on the law until the Judge could make a decision regarding the merits of the manufacturers’ complaint.
On October 19, 2020, the Judge ruled in favor of the dealers on the remaining claims (relating to trademark law, federal pricing statutes, and constitutional issues) and the new law will apply to all dealer agreements signed after August 1, 2017.
S.B. 2289 was supported by dealer members in response to a fundamental shift in the requirements that are placed upon dealers by several farm equipment manufacturers. The bill addresses manufacturer contract issues that would create numerous challenges for dealers. The legislation also enhances existing law in other areas including 1. the prohibition of mandatory equipment and parts purchases, minimum order requirements, and “purity” requirements stipulating the separation of facilities/personnel/display space/etc. and 2. the requirement that manufacturers reimburse dealers for warranty parts, labor, and transportation at the respective dealer’s non-warranty customer pay rate. The new law also limits the warranty or incentive audit and chargeback period to one year. This warranty reimbursement language also applies to manufacturer issued product improvement programs, factory maintenance plans, extended warranties, service contracts, etc.
Senate Bill 2289:
1. Protects dealers from being required to purchase farm equipment.
2. Protects dealers from being required to purchase additional, unwanted inventory.
3. Protects dealers from being required to separate product brands, service areas, facilities, personnel, or display space in order to renew a dealer agreement or participate in a program discount or sales incentive.
4. Protects dealers from the arbitrary termination of their dealership contract and unreasonable removal of authorization for a branch location or product line.
Other issues addressed by SB 2289 include prohibitions regarding dealership terminations, transparent and reasonable performance requirements, limitations regarding warranty and incentive payment chargebacks, and the establishment of a fair process through which dealers may transfer or sell their dealership.
SB 2289’s passage was vigorously promoted by Pioneer EDA members during the session, and supported by several state ag organizations including the ND Farm Bureau, ND Farmer’s Union, ND Ag Association, ND Grain Growers Association, and the ND Stockmen’s Association. In the end, dealer and producer concerns resonated with legislators, who passed SB 2289 with a vote of 46-0 in the Senate, and 86-5 in the House, before sending it to the Governor for his signature.
Pioneer EDA recommends that each dealer located in North Dakota seek to understand their rights under the new state law. One of those rights pertains to fair reimbursement for warranty repairs. Please see the “Warranty Reimbursement Guide” linked here, which also contains a “Letter of Notice” that dealers may use to notify manufacturers of their respective repair rates. The “Letter of Notice” is also attached as a Word document which may be edited.
Ideally, Pioneer EDA believes that equitable contract terms should be negotiated outside of the legislative arena whenever possible. It is our continual goal to work with manufacturers at that level with legislation only as a last resort. At the end of the day, dealers and manufacturers are partners in serving our farm customers – we need to work together.
Please direct questions to Pioneer EDA President/CEO Matthew Larsgaard at (701) 293-6822.