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Voluntary arbitration bill signed by Bush

November 23, 2010

Dealers who enter into, modify or extend a franchise agreement after Nov.2, 2002, are free to use arbitration in manufacturer-dealer disputes, following the enactment of legislation that day by President Bush. Officials of the National Automobile Dealers Association called the voluntary arbitration bill their top legislative priority. "This is the biggest legislative victory for the NADA in at least 50 years," said H. Carter Myers, III, NADA chairman.

"We were persistent and we prevailed. This will help new-car and newtruck dealers all over the country." Automobile and truck manufacturers no longer may use mandatory binding arbitration clauses in franchise contracts to circumvent dealers' state rights. Dealers who voluntarily opt to proceed to arbitration will benefit from a provision in the law that applies only to motor vehicle franchise arbitration and requires the arbitrator to provide the parties with a written explanation of the factual and legal bases for any award.

Recognizing the pending law change, one or more manufacturers in October attempted to engage dealers in new franchise agreements which included mandatory binding arbitration, the NADA reported. Lobbyists for dealers pressed Congress on the arbitration matter for years, seeking to erase the disparity in bargaining power between manufacturers and dealers.

The mandatory binding arbitration clause in dealer franchise agreements forced dealers to waive their rights under state and federal laws as a condition of obtaining or keeping a franchise. Testifying before a House judiciary subcommittee in 2000, Delaware truck dealer Jerry Turnauer said: "Where arbitration is appropriate, as sensible, financially savvy businesspeople we'll voluntarily opt for it without having it forced down our throats for every foreseeable and unforeseeable dispute. "Even though I have my life's assets at risk, I have more consideration under the law if I get a $25 parking ticket than I am afforded (under mandatory binding arbitration)."

NADA officials said the legislation became law by overcoming a pressing Congressional agenda of midterm elections, appropriations bills, saber-rattling with Iraq and homeland security. "We could not have won this battle without the continued involvement of dealers across the nation and the persistence of the NADA's legislative staff," Myers said. "This confirms that dealers' grassroots involvement is a critical component of our success in Washington." The new law passed as a rider to a Justice Department appropriations bill.