MINUTES OF THE
	SENATE COMMITTEE ON TRANSPORTATION

	Sixty-eighth Session
	April 6, 1995


The Senate Committee on Transportation was called to order by Chairman William 
R. O'Donnell, at 1:40 p.m., on Thursday, April 6, 1995, in Room 226 of the 
Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the 
Attendance Roster.


COMMITTEE MEMBERS PRESENT:

Senator William R. O'Donnell, Chairman
Senator Maurice Washington, Vice Chairman
Senator Lawrence E. Jacobsen
Senator Jon C. Porter
Senator Joseph M. Neal, Jr.
Senator Raymond C. Shaffer
Senator O. C. Lee

STAFF MEMBERS PRESENT:

Don O. Williams, Chief Principal Research Analyst
Diane Rea, Committee Secretary

OTHERS PRESENT:

Frank Adams, Deputy Chief, Nevada Division of Investigation (NDI), Department of 
	Motor Vehicles & Public Safety (DMV&PS)
Daryl Capurro, Nevada Franchised Auto Dealers Association (NFADA)
M. K. (Ike) Yochum, Independent American Party (IAP)
Jack Stanko, Champion Chevrolet

Senator O'Donnell opened the hearing on Senate Bill (S.B.) 323.


SENATE BILL 323:	Authorizes chief of investigation division of department of motor 
vehicles and public safety to appoint certain persons as 
investigators and to enter into certain agreements with 
state and local law enforcement agencies.  (BDR 43-
1918)

Senator O'Donnell stated, "This was a bill that came to us from the Nevada 
Division of Investigation (NDI)."

Frank Adams, Deputy Chief, Nevada Division of Investigation (NDI) Department of 
Motor Vehicles and Public Safety (DMV&PS) testified NDI's primary duty, as a 
division, is to provide enforcement of the narcotic laws in the State of Nevada; and 
also provide criminal investigative services to other law enforcement agencies upon 
request.  He said he has been a law enforcement officer in Nevada for almost 25 
years.  Two lessons that he learned very quickly: one, criminals have no 
boundaries; unlike law enforcement.  They have no city, county or state lines.  And 
two, there are more criminals than there are law enforcement officers.

Mr. Adams said S.B. 323 helps address some of these problems.  In the last 10 
years, law enforcement has been very successful in joining task forces; both local 
and federal task forces.  They have signed mutual aid agreements between Utah, 
Arizona, and just recently California; to work cases back and forth across the state 
and county lines.  

Mr. Adams also said, this bill will allow NDI to enter into agreements with other 
state and local  agencies and cross designate those officers as investigators with 
the division of investigation.  It will also allow NDI to cross designate officers from 
other states, to work joint cases with; allowing them to become peace officers in 
Nevada under NDI authority and guidance, and allow them peace officer 
responsibilities here in Nevada.  (Arrest powers, the authority to be affiants in 
warrants, service of search warrants, service of arrest warrants).  He said NDI is 
trying to expand their interaction with other law enforcement agencies and provide 
that authority to them for NDI to work in California, Arizona and Utah.  That is 
basically what S.B. 323 will do for the division.

Senator O'Donnell asked if they would have to take a cut in pay?


Mr. Adams replied, that sometimes coming from California to Nevada, it is almost 
a raise in pay, because of less taxes.  There will be no monitory value involved.  
There will be some impact if NDI appoints someone in Nevada as cross designation, 
with State Industrial Insurance System (SIIS), as a reserve officer with another law 
enforcement agency that is covered under SIIS.  He said if they are a state agency, 
like from Utah or California, NDI has an agreement with them; that they are 
covered under their own SIIS, and under their own liability issues. This is written 
out in the agreement NDI has with these different states.

Senator O'Donnell asked for an example of why this bill is needed?

Mr. Adams replied, NDI arrests an individual in Winnemucca who has a load of 
cocaine in the car.  The destination for that vehicle is Idaho.  NDI has the Idaho 
people help in delivering the vehicle to the destination.  He said NDI has search 
warrants, but because the delivery is in Idaho, the law enforcement is not able to 
come from Nevada.  He said there is a lack of manpower, so the states try to 
support each other.  If NDI has the ability to cross designate, it is just one more 
officer to assist them in an investigation.

Senator O'Donnell asked if the Federal Bureau of Investigation (FBI) was called into 
assist in the case?

Mr. Adams replied there are certain limits that the FBI has, with regard to interstate 
cases.  Both (Drug Enforcement Agency) DEA and the FBI oftentimes say, "That 
is not a large enough case for us to work" and that is why NDI tries to work state-
to-state many times.  It is not a large enough case for the feds to become involved. 
 He said there is a lot of crossing, back and forth, at Stateline at Lake Tahoe and, 
Nevada has a lot of activity in Laughlin and Wendover.

He continued, NDI has a task force in Ely that consists of NDI and the local sheriffs 
there.  They chose not to designate their people as peace officers from a specific 
agency.  If NDI had the authority to do that, we could designate them as peace 
officers with the division and still participate in the task force.

Senator O'Donnell asked what kind of liability would Nevada be opened to?

Mr. Adams asked, "With regard to outside state agencies; outside of the State of 
Nevada?"

Senator O'Donnell replied, "An individual who you designate as a peace officer."


Mr. Adams replied, if they are a peace officer from another state, and NDI has an 
interstate agreement with them; in that interstate agreement there is an outline that 
the individual agency is responsible for their own liability issues.  That has been 
talked over with the Office of the Attorney General and they have agreed that is 
the proper way to approach the issues.

Senator Porter stated, "On page 2, line 6, the bill gives a $900 per month specific 
wage.  That could have been in there for 20 years or only 1 year.  Do you really 
want to have an amount certain in that?"

Mr. Adams replied that in Nevada, most law enforcement agencies have what is 
called a reserve force.  They are auxiliary officers who serve as volunteers.  What 
SIIS did, under section 4, for purposes of SIIS payments, their salary will be set at 
$900.

Senator Porter said, "I am just trying to save you from having to come back in a 
year or two and change that $950.  Is there some other wording that may help you 
from having to change it at sometime?"

Mr. Adams replied, "I really could not speak to that.  That is really an SIIS issue. 
 They are the ones that set the rates."

Senator Porter said, "I thought if you put in there [per SIIS rates as set] so that you 
would not have to change it someday."

Mr. Adams stated that it sounded good to him, but it is an SIIS issue.

Senator O'Donnell stated that it could be changed to one-third of the starting salary 
of a patrolman, or something that would make a lot more sense.  He explained that 
the committee is trying to have the bill structured so that they do not need to be 
reheard every 4 years to be changed.

Mr. Adams agreed to get with SIIS and try to have a more structured wording.

Senator Lee stated, this $900 figure is based upon reference to volunteer police or 
fire fighter in the State of Nevada, for workers compensation benefits.  Even 
though they are volunteering their time, they really are not getting paid; but it is set 
so they could qualify for workers compensation.  He asked, when NDI has these 
interlocal agreements with other states; while the officers are on the case they are 
working with NDI, and they are not receiving pay from Nevada, are they?  The 
officers are receiving pay from their own state or entity?"

Mr. Adams stated that is correct.

Senator Lee asked, "The workers' comp [compensation], as I understand you to 
say, has been agreed upon that it would be taken care of, also by them; or 
whatever?"

Mr. Adams agreed.

Senator O'Donnell asked, "You are saying that the individuals that are under the 
first part of this bill would not be paid out of SIIS?"

Mr. Adams replied, "That is correct.  The liability and SIIS coverage will be the 
responsibility of their parent agency, under our interlocal agreements or our written 
agreements."

Senator O'Donnell stated that he thinks that is incorrect.  "The way the bill is 
drafted, it says section 3 of this act.  Section 3 says [the chief of the investigation 
division may appoint persons as investigators who have completed the 
requirements for the training of a category 1 peace officer]."

Mr, Adams replied, "I think that would only apply to someone that we do not have 
an interagency agreement with and is actually a stand-alone volunteer with the 
division.  They would be required to have category 1 peace officer training."

Don O. Williams, Chief Principal Research Analyst, stated, "From just based on my 
previous assignments on committees dealing with workers' comp [compensation], 
the $900 figure is considered a deemed wage.  In other words, there has to be 
some basic standard pay to be used to calculate workers' compensation benefits. 
 This was last amended in 1983.  However, I know this issue comes up every 
session.  It is not something that has just been overlooked over the years.  
However, this is really something that would be more appropriately; as far as 
changing the $900 figure, would be something under Senate [Committee on] 
Commerce and Labor."

Senator Jacobsen said, all the volunteers, have a deemed wage and the Legislature 
has increased that a number of times.  The volunteers name is submitted to the 
county clerk and they pay the tab for SIIS.  He said he thinks fireman are paid 
$650.  If somebody is drafted, that can be covered in the same manner; but they 
have so many hours to report that name to the courthouse to make sure that 
person has coverage.


Senator O'Donnell said that his question is whether or not the deemed wage 
applies to the first part of the bill, which deals with the division chief appointing 
other law enforcement personnel.

Mr. Adams replied, the Office of the Attorney General indicates to NDI, that will 
only apply if NDI does not have an interagency agreement.  Spelled out in that 
agreement are the issues of liability and workmen's compensation.  If NDI appoints 
somebody as a special investigator, to do such things as assist us in computer 
crime, or interpretation, that person will have to be qualified as a category 1 peace 
officer, and then will be considered a volunteer officer.  That is where the SIIS part 
would come in.

Senator Shaffer stated that commerce and labor recently established that the 
deemed wage for a real-estate agent is $1500; just for the committee's 
information.

Senator O'Donnell stated the way the bill is drafted; sections 1, 2 and 3 fall under 
one Nevada Revised Statutes (NRS).  It says the chief of the investigation division 
may enter into an agreements with any state, to carry out the duties of the 
division.  Then it says "a peace officer, while carrying out the duties, has the same 
powers of responsibilities as an investigator of the investigation division."  He said, 
in section 3; "the chief of the investigation division may appoint persons as 
investigators who have completed the requirements of the training of a category 
1 peace officer."  He asked if section 2 meant; do they have to have category 1 
police office training, before being appointed as an investigator, in the investigation 
division?

Mr. Adams replied, "Yes, sir."

Senator O'Donnell continued:


Then it says, "A person appointed as an investigator has the powers 
 of a peace officer while carrying out his duties assigned to him by the 
chief, or the person designated by the chief."   On line 15; "[NRS] 
616.073 is hereby amended; Volunteer officers attached to the 
Nevada highway patrol, investigators appointed pursuant to section 
3;" are now deemed a wage of $900.  That means that our state is 
going to be paying a deemed wage, or a fee based upon a deemed 
wage of $900 for the investigator that is being appointed by the 
chief.  He said, if Nevada is paying the premiums on a deemed wage 
of $900 for this police officer that is appointed by the chief, then 
Nevada has the liability and responsibility of taking care of them if 
they get hurt.

Mr. Adams replied, "Yes, sir.  That is correct.  As I understand it, that would only 
apply to those volunteer officers that the chief would appoint; that were not related 
back to an interstate agreement.  That was my conversation with ..."

Senator O'Donnell interrupted; not the way it is written.  It says, "Volunteer 
officers attached to the Nevada highway patrol, the investigators appointed 
pursuant to section 3 of this act."  Section 3 of this act is the act that was just 
talked about; "The chief of the investigation division may appoint persons as 
investigators."

Senator Porter asked, "Can I make a recommendation?  In looking, via Don 
Williams, under NRS; as Don had said, they haven't looked at the volunteer peace 
officers since 1983.  It is $900.  Firemen were reviewed in [19]91 and they are up 
to $2,000.  I would suggest that we do send a message to [Senate Committee on] 
Commerce and Labor; they ought to take a look at some of these."

Senator O'Donnell responded, "I asked you the question about the liability.  Do we 
have, as a state; do we have liability for the officers that the chief investigator 
appoints?  You said, [No, we don't.  That is done ... each individual state takes 
care of the responsibility]."

Mr. Adams responded, "As long as there is an agreement.  There may be cases 
where the chief appoints an officer that is not under those agreements, for special 
purposes.  Then we would hold the liability and workmen's comp [compensation] 
responsibility."

Senator O'Donnell replied, "That is what you are saying.  The way I am reading the 
bill, and the way the bill is written, is very unclear who's what.  I think what we 
need to do is have some clarification language, because it does not make sense. 
 It says [The chief of the investigation division may appoint persons as 
investigators].  If he does, then they have the deemed wage of $900."


Mr. Adams responded, "Should there be a caveat in there, eliminating the interstate 
agreements?  Is that what you are looking for?  I would be happy to work with 
anybody on this."

Senator O'Donnell replied, "One issue is one issue.  The other one is whether or not 
we have liability, and should we take care of that liability.  I do not think we 
should.  If we are appointing officers to help us out in an investigation, I do not 
think we should be involved in their SIIS, or anything."

Mr. Adams replied, "That is correct.  Other officers from other organizations."

Senator O'Donnell stated, "But this bill could be construed two different ways.  
Setting that aside, the other issue is whether or not you should have the ability to 
enter into those negotiations.  That is something else that needs to be addressed. 
 Sometimes we get off on these little things over here, and we are not looking at 
the big picture.  I understand that this bill has been before a similar committee ..."

Mr. Adams replied, "It was drafted last session [Sixty-seventh Session], but there 
was not any action taken on it, as I understand it."

Senator Jacobsen asked, "Do we lose any jurisdiction?  You have an incident and 
you appoint somebody.  That officer is from California and in line of pursuit, he 
makes an arrest in California.  This guy has committed a crime in Nevada.  Do we 
give up any jurisdiction due to the fact that he was arrested in another state?"

Mr. Adams replied, "No, sir.  As I understand, all the laws and the interstate 
agreements still apply.  If he is acting in his state, then he would be acting as a 
California peace officer.  If he is in Nevada, working with our agency, he would be 
acting as a Nevada officer under our authority."

Senator Jacobsen said, "Then the second question I have, and I am going to use 
the Ken Gager [example], where he received a bomb through the mail; so that 
involves the federal government.  Who determines then, who is the supreme 
authority?  How many agencies were involved in that case?  Who is the supreme 
authority, or who makes the determination of what you are going to do?"


Mr. Adams replied, the determination on a case like that is the individual that has 
the primary jurisdiction.  In the Ken Gager case, it was the postal authority who 
had the primary jurisdiction.  In the agreements that Nevada has with the other 
states; once that case moves into Nevada, we have the authority to take the 
primary focus of that case, with the assistance of the California, Arizona or Utah 
officers.

Senator Jacobsen stated, "The point I am trying to get clear in my mind, whether 
federal authority has more authority than state authority?"

Mr. Adams replied, "Actually, in the Kenny Gager case, we could have gone both 
ways with that.  Both federally, there were crimes committed; and state crimes 
committed.  It was the prosecutors decision to stay with the federal side, because 
of the mandatory sentencing that they have on the federal side."

Senator Jacobsen asked, "In that case, you indicated maybe 15 different agencies. 
 Are all 15 then obligated to pursue that case to the conclusion?"

Mr. Adams replied, "No, sir.  That was just an ad hoc task force with commitments 
from each of the agencies.  As we progressed in that agency, those people did 
withdraw.  It really did narrow down to just one or two primary agencies."

Daryl Capurro, Nevada Franchised Auto Dealers Association (NFADA), testified, 
NFADA does not have any problem with the description of the activities that they 
would be involved in; how this law will work in drug cases and such.  The 
investigators that are attached to the dealer licensing section, that license and 
regulate auto dealers, will also end up in this division of investigation.  He said, 
NFADA's concern is, the ceding of authority to local sheriff or police departments, 
in the investigation of matters related to licensing and regulation of auto dealers. 
 NFADA has already had one case rather well documented in the state, in which 
local officials came into assist a state DMV&PS investigation case.  The 
investigator of the department is the expert in the application of this law regulating 
auto dealers, and had already given this dealer a clean bill of health.  The local 
police department came into this case; and the case was lost by the local 
authorities.  There are multiple lawsuits involved in that situation.  He said that is 
a case in which local authorities certainly should not have been involved.  They are 
not expert in the application of regulatory and licensing laws for automobile dealers. 
 The provisions of this law will allow the state to appoint local officials to carry out 
the department's duties.  NFADA has a real problem with that happening.  

Mr. Capurro said, if there is some way to amend the law to eliminate that 
possibility, NFADA has no problem with what was described regarding drug deals 
and the like.  NFADA does not believe the local officials should be involved in what 
is purely a state licensing regulatory function on vehicle dealers. 

Mr. Capurro also said he would be happy to answer any questions the committee 
might have.

M. L. (Ike) Yochum, Independent American Party (IAP), testified that he signed in 
in opposition of this bill primarily because he just has a natural suspicion of this sort 
of thing.  He said he has not had a chance to really analyze all the ramifications of 
the bill.  He said he thinks adding all this language does not do a whole lot to 
benefit the operations as they exist.  It seems like it tends to confuse the system 
as it is now.   As it stands right now, he said, he does not see any compelling 
reason for this at all.

Senator O'Donnell asked, "Do you feel as though the coordination effort, or the 
combination of two different police departments from two different states is sort 
of a violation of sovereignty?"

Mr. Yochum replied, "That may be so.  I had not really given that a whole lot of 
thought.  I do see an entanglement here that could eventually cause some serious 
problems."

Senator O'Donnell asked, "Frank [Mr. Adams], what is the federal limit on a case 
that the FBI will go ahead and take?  Or the NDI, the DEA, or whatever?"

Mr. Adams replied, it just depends on what type of case we are talking about.  He 
gave an example of some fraud cases that had been identified in California that NDI 
knows about in southern Nevada.  Those fraud cases had been brought to the 
attention of the FBI.  The FBI says, "That is too small a case.  We won't bother 
with it."  The locals say, "We do not have enough time to work it."  He said that 
case does not get done.  DEA looks for major case with a kilo of cocaine, or 100 
or 200 pounds of marijuana.  This is the type of case that the federal agencies will 
take.  NDI wants to work cases that may only have a couple of ounces, or maybe 
a pound of methamphetamine that we know is coming from Sacramento to 
Winnemucca, because a pound of methamphetamine is a pretty big case to the city 
of Winnemucca.  It is not large enough for the feds to become involved in.


Senator O'Donnell said for a pound of methamphetamine, if the FBI does not want 
to take it because the case is too small; first NDI develops a case.  You have 
suspicions.  You have probable cause.  He said, in a federal case, NDI takes that 
to the U.S. Attorney and says, "If we can develop this case, will you prosecute?" 
If he says "no", you do not have a case.  At the federal level it is not going 
anywhere.  NDI might as well not even pursue the case, because you can throw 
the offender in jail and he will be released right away.

Mr. Adams replied, "That is correct."

Senator O'Donnell continued, "On the local level, when you have a case, you go 
to the Office of the District Attorney.  The district attorney says [I'm not going to 
prosecute; this is too small].  Then you do not have a case."

Mr. Adams replied,  "That is correct.  Unless we make a probable-cause arrest."

Senator O'Donnell asked, "Where do you go when you have an interstate 
prosecutorial problem?  Who do you go to, to find out whether or not they are 
going to go ahead and take the case?"

Mr. Adams replied NDI will go to one of the two jurisdictions where the crime 
either originated or is completed.  He went to the example he had talked about in 
Winnemucca.  NDI gets a call from the California Bureau of Narcotics (CBN); saying 
that, "We know there is a mule coming to Winnemucca with a pound of 
methamphetamine; someone is transporting that."  California will set up 
surveillance and follow him to the state line.  At that point in time, California's 
authority stops.  He said NDI knows it is going to Winnemucca, so Nevada follows 
that case to Winnemucca.  The guy delivers the methamphetamine to a local dealer 
in Winnemucca.  NDI serves the search warrant, and makes the arrest.  NDI will 
prosecute the case at Winnemucca, through the Office of the Humboldt County 
District Attorney.  There could be a conspiracy case, to distribute a controlled 
substance on the California side.  Depending on who has the best case.  

He said what NDI is asking for in this particular bill, because of the lack of 
manpower, is to allow those California agents to come across the California line. 
 They could continue on and act as Nevada peace officers to assist us in the 
completion of that investigation.

Senator Lee asked, "The other states, our neighboring states; do you know if they 
have concurrent authority in their states to reciprocate to our guys?"

Mr. Adams replied, "We have entered into an agreement, that allows our people to 
be commissioned in California in every county that borders the state of Nevada."


Senator Lee asked if that was done by contract?

Mr. Adams replied, "That is done by an agreement between Nevada and California. 
 It is also done between California and Oregon, at this point in time.  All we are 
trying to do is be in a position to reciprocate to California."

Senator O'Donnell stated, "I think your next question is [under what authority]?"

Senator Lee said, "Well, yes.  If California can do it by contract, for you to go 
there; why cannot we do it by contract to go there?"

Mr. Adams responded, "Because I have no authority in our statutes to commission 
somebody."

Senator Lee asked, "So, they do have authority in statutes?"

Mr. Adams replied, "In California."

Senator O'Donnell asked, "What authority do you have, from the State of Nevada, 
to allow our officers to go into California and set up an agreement?"

Mr. Adams replied, "The opinion from the [Office of the] Attorney General's office 
that we can enter into ... to enter local or interstate agreements."

Senator O'Donnell asked, "Nothing in statute."

Mr. Adams responded, "No, sir."

Senator O'Donnell asked, "That is why the bill?"

Mr. Adams replied, "Yes, sir."

Senator O'Donnell asked, "So you are doing it basically under the [Office of the] 
Attorney General's ... ?"

Mr. Adams replied, "This bill has nothing to do with us going to California.  This bill 
allows them to come to Nevada and work under our authority.  Now, if they do 
that, they would have to go to each county sheriff and the sheriffs raise their hand, 
and swear them in to be a peace officer in that county."

Senator Shaffer asked, "If we are finished with this subject, can we have the 
gentleman address Mr. Capurro's concerns about the bills?"

Mr. Adams replied, as he understands Mr. Capurro's concern, there is a plan or 
some type of reorganization to bring the criminal investigative responsibilities of the 
Bureau of Enforcement into the Division of Investigation.  They still have to act 
under NDI's authority and responsibility.  NDI would still  have the responsibility for 
that criminal investigation.

Senator O'Donnell asked, "Has it happened in the past?"

Mr. Adams responded, "Where we have given authority?  We do not have the 
ability to give that authority."

Senator O'Donnell asked, "Then why is Mr. Capurro ... Daryl, do you want to come 
up and give the other side?  I do not understand."

Mr. Capurro responded what NFADA wants is to prevent that from happening, 
where the investigators are assigned to the Bureau of Enforcement, which is the 
car dealer licensing area.  They have the authority to investigate and enforce those 
provisions of NRS (chapter) 482 that apply to auto dealers.  Under this 
reorganization, they will simply disappear from the Bureau of Enforcement into the 
NDI.  He said he is concerned about what the local authority thinks his authority 
might be; and the uneven application.  The police chief in Pahrump is going to act 
differently than the police chief in Reno, Nevada.

Senator Shaffer asked, "Could you give us an example of what type of violation 
you would be concerned about?  What they might be involved in?"

Mr. Capurro replied, "Anything that would have to do with the odometer violations, 
consumer protection problems, complaints about violations of certain sections of 
the dealer act; anything that is covered under the applicable provisions of [NRS] 
482 for licensure of auto dealers."


Mr. Adams responded that it is his understanding that there is nothing in the law 
today that precludes any peace officer within the State of Nevada, particularly a 
police department or sheriffs department, from enforcing the  criminal laws of the 
State of Nevada.  That includes the laws that apply to the dealers that are criminal 
in nature.  It does not preclude a local District Attorney (DA) from prosecuting 
those cases brought to them by the local police department or the sheriff's 
department.  He said he does not know how NDI can prevent a local police 
department or sheriff's department from investigating and prosecuting a criminal 
case, according to their jurisdiction.  

Mr. Adams said he could see where Mr. Capurro is coming from.  He does not 
want NDI to take this authority and give it to the locals.  They do not need that 
authority in this particular area.  They can investigate and prosecute any criminal 
activity occurring in their jurisdiction.  He said the main thing that NDI is asking for 
in the bill is the reciprocal authority back and forth between the states.  Also, the 
authority to identify special persons with special talents that NDI can make 
volunteer individuals to help us in our criminal investigations.  

Mr. Adams said an area that he would address is computer crime.  NDI does not 
have anyone on-board that is trained in computer crime.  That is becoming  one of 
today's issues.  California has several people that are trained in computer crime. 
 He said NDI  could appoint those people as special investigators at the state or the 
local level, to assist them on those criminal investigations.  That is the purpose for 
the bill.  As far as giving authority, he said he does not see that happening.  NDI 
does not have a problem with restrictions, but that does not stop a local police 
department or sheriff's office from investigating and prosecuting the case with 
regard to the dealer's authority.

Mr. Capurro said he would refer back to the case that he had described.   The 
people who had the expertise, who were the investigators, had given this operation 
a clean bill of health.  

He said that the experts are the people that NFADA wants to be looking at cases, 
because they know what the regulations and the laws are, and how they are 
applied.  Mr. Capurro said he does not disagree with Mr. Adams; the local authority 
would have the authority to investigate.  That authority is not specifically written 
into this law now.  They have generally deferred to the Bureau of Investigation and 
have not become involved.  NFADA could see them directly involved without even 
informing the Bureau of Investigation, the way the bill is worded.  He said NFADA 
would prefer that the investigation be retained with the agency that has the 
expertise to do so. 


Mr. Adams responded, "We would have no problem as far as that goes.  We are 
looking for assistance in criminal investigations and narcotics enforcement areas. 
 The area of vehicle enforcement and dealer enforcement; if you want to say that 
the investigation division is not authorized to do that, we would not have a problem 
with that."

Mr. Capurro responded, "We are saying [not authorized to cede that power] which 
is the basis of this thing.  As I indicated in our testimony before, I have no problem 
with the sort of thing that he is describing.  There are other things that [the] 
division of investigation becomes involved with."

Senator O'Donnell said, "A simple explanation would be, such as a traffic accident 
on a highway.  The jurisdiction of a traffic accident on a major highway is the 
highway patrol; if it is a state highway.  If you aggregated the responsibility to the 
Nye County Sheriff; making him a quasi highway patrol specialist, in the interlocal 
agreement, then you would have the Nye County Sheriff doing traffic investigations 
in Nye County under the state."

Mr. Adams replied that, "They already have that authority."

Mr. Capurro said, "In that case, they have certain expertise in that area.  We are 
talking something completely different.  A regulatory and licensure function as 
opposed to a true law enforcement type activity; whether it is traffic accidents, 
robbery or murder, drug cases, or the like.  There is a certain expertise that those 
investigators have gained by working specifically with those statutes governing 
licensure and regulatory functions of auto dealers."

Senator O'Donnell asked, "You already have that authority to do that ... this 
scenario that I just developed.  But, in reality, don't you defer?  Does not the local 
SO [sheriff's office] or METRO [Las Vegas Metropolitan Police Department] in [Las] 
Vegas defer all the traffic accidents that are on certain major arterials that are 
designated as state highways; they defer those to the highway patrol."

Mr. Adams replied, "They do in certain circumstances.  The majority of them, they 
defer, because they do not have the power to handle them."

Senator O'Donnell stated, he thinks that they are talking about the ability for any 
SO, police officer, or METRO to investigate any state crime; that is normally 
deferred to the highway patrol, NDI; depending on whose jurisdiction it is.


He said when you marry these agencies, with interlocal agreements and interstate 
agreements, then you have outside people entering into investigations that normally 
would be handled by a specific agency. 

Senator Jacobsen stated, "I want to refer to the Sonner case.  Has that been 
decided?  Can we talk about that?"

Mr. Adams replied, "Yes, sir.  He has been convicted and sentenced to death."

Senator Jacobsen replied, "I guess in this case, where the incident started in 
Lovelock; so local authority was involved.  When they called for help, who was the 
first to respond?"

Mr. Adams replied, "It occurred in the county jurisdiction, as I understand it.  The 
first to respond was the Lovelock police department, and then the highway patrol 
officers."

Senator Jacobsen replied, "All I know is, more or less, what I read in the paper. 
 Then the national guard got involved."

Mr. Adams replied, "The division was requested, then by the sheriff's department, 
to respond and assist with the criminal investigation.  When the manhunt became 
so intensive; then a request for the National Guard, at the bride service."

Senator Jacobsen asked, "When they came into service, did you do anything to 
deputize the pilot or copilot, or whoever was aboard?"

Mr. Adams replied, "No, sir.  They had no specific authority to participate at a 
certain level.  There was no deputization."

Senator Jacobsen replied, "I guess then, in trying to develop a sequence with the 
manhunt, and when he was discovered; who was the-power-that-be that gave the 
power to tell one of the officers to shoot."

Mr. Adams replied, "As I understand it, the suspect was found in the Churchill 
County area.  At the authority of the sheriff; he requested the SWAT team come 
in from Reno.  The SWAT team was given the responsibility of locating and 
subduing the suspect."


Senator Jacobsen asked, "The SWAT team; they have that individual authority. 
 If they are being fired upon they can return the fire."

Mr. Adams replied, "That is the rule of engagement.  They are a Nevada peace 
officer so they have peace officer authority in that area."

Senator Jacobsen asked, "Was the press involved in any manner?"

Mr. Adams replied, "They were there on the scene, but not at the time of the 
capture." 

Senator Jacobsen asked, "When you invite other people to assist you, what kind 
of authority do you transfer to them?  Whether it is complete authority, or whether 
you are still the guiding master?"

Mr. Adams replied, "The lead agency on that was basically the sheriff's 
department.  It was their jurisdiction.  We provided assistance at their request.  
That is how most of it came down the road.  At the request of the sheriff's 
department, we provided assistance to them; in the manhunt and in the 
investigation."

Senator Neal asked, "If a sheriff or a deputy asks anyone to assist him, that person 
immediately acquires all the authority that is needed in that assistance.  That has 
almost been like common law practice, going on for about 400 years.  It is not a 
question as to what type of authority you got [have].  He can grab anybody and 
say [I need your assistance.  Come with me.]  You, at that time acquire all the 
authority that is needed for that assistance."

Senator O'Donnell responded, "I think there is a parallel here.  When you have a 
case that is developed locally; you have a murder or a kidnap case, where an 
individual is kidnaped in Reno.  The next stop is Lovelock.  Then the next stop is 
Idaho.  At that point, when they cross that line, it is no longer your jurisdiction, no 
longer Reno's jurisdiction, no longer Lovelock's jurisdiction.  It is now the FBI's 
jurisdiction.  They come in and take over the whole thing.  The question is, when 
you have an event that happens in Lovelock, in one county; and now goes into the 
jurisdiction of another county, shouldn't we now have the same kind of structure 
in terms of intercounty.  Now you've got Reno PD and Reno SO involved in 
Churchill County's jurisdiction.  They are saying [wait a minute.  What is going on 
here?] Who's responsibility, who's jurisdiction?"


Mr. Adams replied, "As I understand the way the Nevada law is stacked/set-up at 
this time; if you are a peace officer in Nevada, in the city of Reno, then you are a 
peace officer anywhere within the State of Nevada."

Senator O'Donnell asked who is in command?

Mr. Adams replied, "The ultimate commander is the chief of the jurisdiction for 
which that event is taking place in."

Senator O'Donnell asked what happens if it is multiple jurisdiction?

Mr. Adams replied, "We had that with the Borland/Sonner case.  When it was in 
Pershing County, [the] Pershing County Sheriff was the one ... the ultimate 
command.  When it was in Churchill County, Sheriff Lowery was the one that was 
in command of that situation.  We provided assistance to them at his direction."

Senator O'Donnell stated, "What I am saying is that I firmly believe that it should 
be aggregated through a higher level of decision.  Mr. Adams, once you cross the 
county lines, I think that is the responsibility of the state; whether it be NDI or 
whatever.  You should be the commander at that point, because it is multiple 
jurisdiction."

Senator O'Donnell closed the hearing on S.B. 323.

Senator O'Donnell opened the hearing on S.B. 332.

SENATE BILL 332:	Revises provisions relating to unfair practices of motor vehicle 
manufacturers, distributors, factory branches and their 
representatives.  (BDR 43-1043)

Mr. Capurro testified that he is appearing in support of S.B. 332.  However, he has 
a proposed amendment to the bill (Exhibit C) that his organization feels was left out 
in the drafting of the bill.


Mr. Capurro said he wants to give a quick history of what the bill is dealing with. 
 This section of law is known as the Dealer/Manufacture Relations Act (DMRA). 
 The reason NFADA has a DMRA is because the franchise contract between a 
manufacturer and a dealer is known as a contract of adhesion.  It is drafted and 
implemented by the manufacturer, based upon their own legal department people; 
and therefore is entirely on the side of the manufacturer.  He said the franchise 
agreement is a "one-size-fits-all" agreement that is signed by every dealer with that 
manufacturer, throughout the country.  There is no negotiatory process, or input 
on the part of the dealers.  The only time that the dealer has the option of whether 
or not to comply with the franchise agreement, is the very first franchise agreement 
he signs.  He said the dealer has the ability to say "no, I don't want to do that, or 
yes, I do."  Franchise agreements are living documents that are changed; each 
manufacturer has a different time element.   The entire agreement may be changed 
within a 3-or 5-year period.  When amendments are added, they are simply sent to 
the dealer and indicate "sign here."

He said the phrase CSI (Customer Satisfaction Index) is a program that the 
manufacturer has developed over the years to measure the effectiveness in the 
sales and service area of their franchise dealers.   The ultimate of the customer 
satisfaction index is the J. D. Power Survey.  It is an independent survey that 
covers the country and indicates the effectiveness of both the product that the 
manufacturer has and the service which his dealer network provides.   He said 
Toyota recently announced that they are scrapping their CSI program to develop 
a different manner of measuring the success of a dealership in meeting the 
demands of the public.  

Mr. Capurro said product quality also enters into this.  That is an area that is 
beyond the control of the dealer who is selling.  When a manufacturer sends out 
a CSI questionnaire, they are all different depending on the manufacturer.  This is 
a system that is developed and implemented by the manufacturer, with no other 
input.  The manufacturer can manipulate the information they receive, to get the 
answers that they want. 

He said the industry has no problem with a consistent standardized type of 
measuring device of the effectiveness in the area of sales and service.  That is not 
what this bill, or the proposed amendments are all about.  NFADA has a problem 
when the manufacturers will not let the dealers know exactly how they have 
achieved the results on the surveys that they send out.  


Mr Capurro said NFADA is working through the National Auto Dealers Association 
(NADA), which has committees that work with the major manufacturers, in trying 
to develop standardized approaches in the franchise agreements.  This is one area 
that is of great interest to all dealers throughout the country.  There are at least 10 
states that have CSI legislation such as Nevada has before you today.  He said their 
bill proposed in S.B. 332 is patterned after the Texas law which has been in effect 
for a while.  The amendment is what NFADA is looking for in the drafting of S. B. 
332; to eliminate the current subsection 6, starting at line 22, and substitute  (and 
he read Exhibit C).

He said the key element, is the manufacture-controlled formula; not one that has 
been developed through input from all sides that are a party to this action.  That 
is what NFADA is asking to have approved.

Mr. Capurro referred to the CSI quick reference guide (Exhibit D) on questions and 
answers that General Motors (GM) has published.  One question says, "How will 
the survey results be used?" The answer is, "The primary purpose for the standards 
is to improve customer satisfaction, build total customer enthusiasm, meet 
expectations, and increase loyalty; not to criticize dealers or take punitive action. 
 Survey results should be used as a relative comparison on dealer/retailer 
performance with that of other dealer groups."   Mr. Capurro said, if that is the 
case, the manufacturers, will not be opposed to this bill.  NFADA has simply said 
that you cannot use it to take punitive action.  The problem is that it is used in the 
dealings with the dealers to indicate to them that, "You need to substantially 
improve your CSI performance or we will not be providing you with the hot models, 
or we will not be providing you with the preferred sales chances that we might 
[provide to] someone else."

He said NFADA wants to make sure that surveys are not used against the dealer 
who does not have the bargaining power of dealing directly with the manufacturer. 
 NFADA is interested in customer satisfaction on sales and service.  A big part of 
 business is built on repeat business.  He said the dealer is not going to encourage 
people to come back and deal with them if he does not take care of them on the 
very first sale.

Mr. Capurro said he will be happy to answer any questions the committee might 
have.

Senator O'Donnell asked if there is any opposition from the dealers?

Mr. Capurro replied, "Not from the dealers.  The manufacturers standpoint; the bill 
was sent to the manufacturer's association.  I do not know whether anyone is here 
to represent them today.  I am sure they were aware of the hearing."


Senator Neal asked, "As I look at your amendment, it does a couple of things.  It 
would outlaw this particular control formula, forbid the termination of a franchise 
on that, and it also would forbid the information to be used to develop new 
franchises.  That last part kind of gives me a little bit of problem.  We seem to be 
getting into the restraint of trade area by doing that.  The formula, as you indicated 
here is supposed to measure customer satisfaction.  What are we to do with a 
dealer that is a bad guy.  You keep taking your car to the dealer and you are not 
getting it fixed?  They keep just messing you around.  What is the poor customer 
supposed to do in that type of situation?  Usually, you would go to the 
manufacturer, as I have done in the past on some of my automobiles.  Right 
directly to whoever; Ford, GM, Chrysler, anybody that feels that you are going to 
get some results."

Mr. Capurro replied, "This would not change that, senator.  You would still be able 
to do that.  In new cars that are sold, they are required to have the name and 
address and telephone number for the district or zone management for you to be 
able to do that."

Senator Neal asked, "Is it not the manufacturer who bears the responsibility?"

Mr. Capurro replied, "In some of those cases that become very complicated, that 
some of the provisions of get ready ... dealer get ready or dealer prep [preparation], 
weren't all approved and therefore, it was more than just a product line ..."

Senator Neal interrupted, "If we are going to pass legislation; dealing with 
franchises, why not do it with everybody.  Let's start with Burger King, 
McDonalds; and everybody who has a franchise will say [hey, you cannot use 
customer surveys to determine how effective your franchise is.]"

Mr. Capurro replied, there are others who have franchise protection acts.  The 
reason the new franchise language is in the bill is so that is not used to manipulate 
dealerships.  The reason NFADA put in "relative market area" is, there is a 
definition within the statute of relative market area; that being a 10-mile radius 
from the existing dealership.  If the manufacturer wanted to put anything in outside 
that 10-miles, he is free to do so.  There is nothing that says he cannot.

Senator Neal interrupted, "Are we talking about one of those vertical integration 
type situations?"


Mr. Capurro replied, "I do not see where that is applicable here, senator.  Perhaps 
..."

Senator Neal interrupted, "You know, in the oil companies we had a vertical 
integration type situation, where they controlled everything from the gas pump 
right up."

Mr. Capurro asked, "Are you saying where the manufacturer actually owns the 
dealer outlet?"

Senator Neal replied, "Yes, is it considered to be that?"

Mr. Capurro answered, "No, the dealerships ... there are some that are known as 
dealer development situations.  Some of the manufacturers; where they have 
actually put a dealer in and they are doing the financing.  For the most part ..."

Senator Neal interrupted, "Since it is not a vertical integration situation, it would 
be something new that this Legislature would be doing in terms of this type of 
franchise, would it not?"

Mr. Capurro replied, "No, sir.  The Dealer/Manufacturer Relations Act, I was ..."

Senator Neal interrupted, "I am talking about passing this particular piece of 
legislation."

Mr. Capurro replied, "This simply adds to what is already under (NRS) section 
482.36395, which are the basic [thou shall nots] as far as ..."

Senator Neal interrupted, "The point is, we do not have any reference in that 
statute at the present time, or similar to this.  So, this is new.  This would be 
new."

Mr. Capurro replied, "No question about it."

Senator Neal stated, "The dealers and manufacturers of cars have been around for 
quite some time.  Why is it now that we need such legislation?"


Mr. Capurro replied, "Because of the problem of the manufacturer's application of 
the CSI information; which again, we are not given privy as to how that is 
supposed to be applied.  In many cases, in dealers that I have talked to; where they 
have taken ..."

Senator Neal interrupted, "Do we have copies of that information?"

Mr. Capurro replied, "I have, which I will leave for the record; an example of the 
 CSI process that GM employs with respect to that."

Senator Neal asked if this is a survey that GM uses?

Mr. Capurro replied, following the sale of a vehicle, there is a survey sent out.  
They might survey 100 percent of the people who bought a car from this 
dealership.  Six months down the road, there may be another follow-up survey, in 
which they will survey only 50 percent.  They manipulate the numbers which are 
given to them for their own purpose.

Senator O'Donnell stated, the franchise dealer, who is  not going to provide a good 
service, is not going to be in business.  He said he does not understand the need 
for even doing surveys.  The survey is going to be negligible in terms of deciding 
whether a franchise dealer is successful or not.

Mr. Capurro replied, a national one that is supplied uniformly, so everyone knows 
how the figures are utilized, can provide a bench mark to measure performance 
against.  That is the problem.

Senator O'Donnell said he can see some legalities in this language.  It says; "The 
results of such manufacturer-controlled formula or calculation shall not be used in 
any action to terminate a dealer's franchise."  That he can understand.  It goes on 
to say, "or to support the addition of a new franchise within the existing dealer's 
relative market area."  

Senator O'Donnell gave an example of a dealer doing poorly in car sales.  He said 
this language will say that the manufacturer could open up another dealership 
based upon a survey he took.  Then the lawsuits start.  He said that is what he is 
worried about.


Mr. Capurro replied that could happen right now.  The reason he provided the 
amendment is because it narrows it somewhat.  There are plenty of other criteria; 
the manufacturer can either; (a) terminate the existing franchise or, (b) add a new 
dealer either within the relative market area, or outside the relative market area of 
the dealership.

Senator O'Donnell responded, "What I am saying, though, is with this language you 
are opening it up for legal action to be administered by the dealer.  The 
manufacturer is really not going to be sitting in the driver's seat, or have the ability 
to get another franchise.  He is not going to have any say-so on whether or not he 
can open up another franchise.  What will happen is, the existing dealer will file suit 
saying you cannot do that.  It does not matter what criteria you use, or the 
manufacturer uses for determining that there should be another dealership there. 
 What is going to happen is that first dealership that got the original contract is 
going to file with this language."

Mr. Capurro responded, all this does, if the manufacturer says based upon our CSI 
numbers, we believe that dealer is not doing the job and we want to terminate him, 
or we want to bring in a new dealership, this provision will come into play very 
clearly, to prohibit the manufacturer from doing that.  There are many other criteria 
that he can use which have nothing to do with CSI or this formula.  If there is some 
criteria established that has nothing to do with CSI, that will give the manufacturer 
all the ammunition he needs to terminate a nonproductive franchise, or to add a 
new dealership to pick up the slack; without having to even impose the provisions 
under subsection 6.

Senator Neal asked, "Would this not prevent dealers from coming together and 
establishing a car purchasing park; where you have the dealerships all located in 
one general area?"

Mr. Capurro replied that you have that very situation in Las Vegas right now, with 
a car mall being built out south of town near Green Valley.  There are 11 or 12 
franchises that are going to be collocated there.  He said the current law defines 
the relative market area and the ability to add.  Most franchises are outside the 
relative market area, and could be added without having to comply with any 
provision of the DMRA.

Senator Neal asked, "Within the 10-mile radius that could not be done, right?"

Mr. Capurro replied, "It could be done.  If the manufacturer says that I want 
another Ford franchise in here and it is within the relative market area, under the 
current law, the dealer has the right ..."

Senator Neal interrupted, "I am talking about the proposed law."

Mr. Capurro continued, under the current law, the dealer has the right to protest 
the addition of the new dealership within the relative market area.  That protest is 
filed with the Department of Motor Vehicles & Public Safety (DMV& PS).  The 
dealer who protests the addition of the new franchise has the burden of proof of 
showing that there is no need to add another dealership.

Senator Neal asked what the answer is to his question.  Will this proposal prevent 
the building of a car mall?

Mr. Capurro replied, "No, this particular provision will do nothing to prevent 
anymore than what the current law provides for, and that is the ability to protest 
that new dealership."

Senator Neal stated, "You said you could not ... the surveys could not be used to 
support any existing franchise.  You are saying that the old law is talking about the 
10-mile radius?"

Mr. Capurro responded, "Yes, this controlled formula we are talking about is sales 
and satisfaction; a specific area of CSI.  Not with respect as to whether this guy's 
performance as a dealer, his ability to maintain his share of the market, or he has 
not met the kind of criteria necessary within his market area; that will not change 
under this."

Senator Neal asked, "What is the association's position on the car malls?"

Mr. Capurro replied, "We do not become involved in the individual business 
decisions of dealers; whether they are existing dealers adding new points, or new 
dealers coming in.  That is not one of the tenants, or objectives of the 
organization."

Senator Neal asked, "But, the old dealers in the area can come together and form 
a car mall?"


Mr. Capurro replied, "Existing dealers, if they go to the manufacturer and indicate 
[we believe that the town has grown big enough that we can support another 
dealership out here] and the manufacturer says that your financials look okay, and 
we agree with you; yes, that can be done.  An outsider could come in and say [we 
believe that another dealership is necessary, and we have the necessary capital and 
where-with-all to accomplish that]."

Senator Neal asked, "If you cannot use this controlled formula, as indicated here, 
to manage your customer satisfaction and performance of dealers; what do you 
propose to be used in this case?"

Mr. Capurro responded, "With respect of protection of the consumer, we have a 
number of laws that are on the books, to protect his interest.  The Consumer 
Protection Act, Uniform Consumer Act, Uniform Commercial Code and so on.  In 
so far as protection of the consumer, this would not impact that area at all.  What 
we are saying is; if the development of a mutually agreed upon type of program of 
measuring customer satisfaction is developed, we have no problem with that at all. 
 Much like the J.D. Power survey that is a separate and neutral type survey.  CSI 
is a manufacturer-controlled unilateral type ..."

Senator Neal interrupted, "What do you want?  Do you want the manufacturer to 
come down and sit down with the dealers and talk about the survey?"

Mr. Capurro replied, "We believe there are circumstances in which our input to the 
process would be helpful in developing the questions and the ability to apply the 
answers to get the kind of responses necessary to do a approximation.  It makes 
sense to involve all parties.  Much like a labor negotiation process ..."

Senator Neal interrupted, "Your amendment is saying that you don't need this; you 
want to just get rid of it." 

Mr. Capurro replied, "No, what we are saying in this amendment is, that to 
eliminate the manufacturer-controlled unilaterally imposed type system in which 
they manipulate the figures; and there is no consistent standardized application of 
the formula."

Senator Neal asked, "But we are not replacing it with anything?"

Mr. Capurro replied, "That would be an open question."


Senator O'Donnell stated, "What you want to do is you want to prevent the little, 
poor dealership from the rich overbearing manufacturer coming in and taking away 
his poor, little franchise that he has received, that he worked so hard ... put all his 
hard earned money into.  You want to protect him from being surveyed out.  Isn't 
that right?"

Senator Shaffer asked, "Would you object if we added the language to this 
paragraph that the manufacturer could terminate a dealers franchise, or support an 
additional new franchise within the existing dealers relative market area if the 
dealer or the dealers rep [representative] attempted to sell a car under any false, 
deceptive or misleading sales or financing practices?"

Mr. Capurro replied, "I am sorry, I am not sure I understood ..."

Senator Shaffer stated, "If the dealer or the dealer's rep [representative] made an 
effort to try to sell a vehicle under the deception or false statements, or in any way 
misleading the customer; that would be grounds for either termination or support 
of an additional dealership in the area."

Mr. Capurro replied, "Any violation of other state law; it can certainly be used in 
the ..."

Senator Shaffer asked, "Would you object to that being put under this paragraph?"

Mr. Capurro replied, "I have no problem; that is currently in state law and would 
not be abdicated by this amendment.  If that would satisfy any concerns, fine.  The 
franchise agreement itself says, [we must comply with all other state laws that are 
applicable to our operations].  If we fail to do that, and are convicted of a deceptive 
trade practice, we have violated our franchise.  They already have the ability to ... 
and that is in every franchise.  They already have the ability to terminate us based 
upon the violation of any state law."

Senator Lee asked, "If I understand what we are talking about here; it appears to 
be that of all the evidence that the automobile manufacturer has, that can enable 
them to either cancel, yank, put me out of business as a dealership, or to move one 
in next door that essentially is going to hurt me.  Is what we are attempting to do 
here, is to eliminate a piece of evidence that is very possibly, very probably, is 
tainted evidence that could be used to harm me?  In other words, I am trying to 
relate this evidence to do these things, as we do in law enforcement.  We try to 
get evidence to either prosecute you, or to exhort you as being innocent.  If there 
is evidence that is tainted, we should not be able to use that.  Is that what we are 
trying to do here?  Is to eliminate that?"

Mr. Capurro replied, "That is exactly what the intent of this bill is."

Senator Washington asked, "I understand these reports and how they can be 
manipulated to enhance or close down one dealership versus another dealership; 
and I understand what you are trying to do with this language in this amendment. 
 Would it be fair if the manufacturer made it; or disclosed the information to the 
dealership so that he can use it as a means to close down the dealership?  A 
disclosure form, or make it available, or ...?"

Mr. Capurro replied, "The problem is;  the way they manipulate the figures this time 
might not be the same manner in which they manipulate them the next time.  They 
do that by changing the composition of the dealer group within which they are 
measuring.  This time, they might have 100 dealers which include 10 rural dealers 
and 70 or 90 urban dealers.  Next time it might be 50 rural dealers and 50 urban 
dealers.  There is no consistent application.  

Senator Washington stated, "The other thing that I understand about customer 
satisfaction is that; this is truly market driven.  If your customer satisfaction is not 
there, you won't have to worry about the manufacturer closing you down.  Your 
customer base will dictate that based on the number of units you move.  I do not 
understand why the manufacturer would use that anyway.  His primary goal is to 
move as many units as possible.  Not to hamper a franchise dealer from trying to 
sell those cars."

Mr. Capurro replied, "One of the purposes for using this is to hold their feet in the 
fire to sell more units.  Equated to the fact, the more units you sell, the better your 
CSI is going to be.  That is not necessarily true, but that is how they use it."

Senator Porter asked, "In your amendment, when you state that a manufacturer 
control corner, or  ... would that also refer to sales quotas from the manufacturer?"

Mr. Capurro replied, "No, because NFADA wants to make sure that they covered 
the CSI part of it; is how they apply the information that they receive on that 
survey.  Dealers do not know whether or not it is a specific formula or some other 
calculation that manufacturers use.  They will send us numbers that indicate "here 
is your rank in the market, here is what your CSI number is ..."

Senator Porter interrupted, "But it says, [other calculations which is reported to 
measure the sales].  Is not that a quota?"

Mr. Capurro replied, "If that is how you construe it, I am not ... I think that is 
handled under subsection 5, which was in the bill, about reasonable standards 
relating to sales or service of motor vehicles."

Senator Porter stated he is hearing this argument from insurance agents all the 
time.  The complaints are that managers cannot be trusted with the numbers that 
they use, they cannot be trusted with the quotas that they put in.  The problem is 
that, one of the few things that managers can use, to work with an agent that has 
problems, are customer service problems.  Managers cannot give quotas and 
cannot base it on much of anything but the way the dealer treats their customers. 
 He said if numerous customers complain, we know there is a problem; then we 
can decide how much business the dealer/agent has to do to stay in business.  Two 
or three sessions ago, agents petitioned the Legislature for loss not to be used to 
show a means to terminate a contract with an agent.  The Legislature did put that 
in place.  He said he would like to hear from the manufacturer and hear their side 
of the argument to defend their positions.

Mr. Capurro replied, "Planning potential is the figure that the manufacturer feels, 
based upon your facility and your placement in the market, that you should be 
selling.  That is a benchmark upon which you are expected to either meet or 
exceed.  If you do not, then you have provided the manufacturer with a hammer 
to be able to use against you.  He can also simply increase that planning potential, 
and he does so without any input from you or any evidence from the market."

Senator Porter replied, "Let's assume that you have legitimate complaints against 
a dealer.  Is there any control that the manufacturer has to use that in his basis of 
continuing a franchise?"

Mr. Capurro replied, "This provision would not stop him from using planning 
potential as a tool in adding sales or quotas."

Senator Porter asked if the manufacturers could use any type of customer 
complaints under this amendment?


Mr. Capurro replied, this prevents manufacturers from using his controlled formula 
for CSI as the purpose to eliminate a franchise.  He still has every other tool that 
he currently has to be able to bring action against the dealer.   We are simply taking 
 one area where we believe there is some abuse in the applications.  We have had 
a lot of dealers beat up by manufacturers representatives on the basis of CSI; 
without being able to question how they developed the CSI figures.

Senator O'Donnell replied, "I think that the frustration of the committee is that this 
language is all over the place.  We feel as though it may be a little too broad and 
that it is not specific enough to deal with the relevant market area.  In terms of 
surveys done on customer satisfaction, the way it is written it is all encompassing. 
 The committee is having a hard time with it.  If we can work on that and make it 
feel a little bit better."

Senator Washington said, "When the manufacturer accepts the franchise dealer, 
he bases it on the marketplace.  The manufacturer takes into account how many 
units the dealer can actually move by sales.  That dealer has to go into an 
agreement with the manufacturers; he is going to meet this quota by selling a 
certain amount of units within a period of time.  If he does not sell those units, the 
manufacturer can revoke that franchise based upon the fact that those units were 
not sold.  What you are asking is that this formula will not be the sole basis of 
closing down a franchise dealer?"

Mr. Capurro replied, "Everything that was said is exactly true.  Manufacturers are 
not going to be quick to terminate a franchise unless there is a severe consumer 
issue involved where the guy is going bankrupt quickly.  The manufacturer is going 
to try to work with the dealership in improving his sales area; if he is not meeting 
the planning potential that has been established.  He said if a manufacturer really 
wants to eliminate a troublesome franchise, it can be done by manipulating the 
numbers involved, and then showing that the dealer should be selling 1500 units 
and is only selling 500."

Senator Neal asked, "You keep using the term, "franchise."  Is it not a fact that a 
franchise is a contract that governs a relationship between the dealer and the 
manufacturer?"

Mr. Capurro replied that is correct.

Senator Neal asked, "When a dealer signs on to sell the manufacturer's product in 
a given area, he signs for certain conditions under which he is to make those sales. 
 Is the formula a part of the contract?"

Mr. Capurro replied, "It is not a particular part of the franchise agreement."


Jack Stanko, Champion Chevrolet, testified, "In the franchise agreement they will 
put in that you have sale and service satisfaction that has to be met.  They do not 
put an exact formula in there.  A problem that most dealers have with these 
formulas; every dealer that runs a business wants to have good customer 
satisfaction and repeat business.  They will do some manipulation in these 
numbers.  They will take in a branch of 140 dealers, they will set up three or four 
Models of Sales and Service Areas (MSSA's).  They will take a dealer from a little 
town where there is only one dealer with no other make franchise there.  They will 
consider them to be 100 percent sales."


Senator Neal asked, "I assume that you are a franchise dealer.  When you sign your 
franchise with your manufacturer, you understood about these formulas, did you 
not?"

Mr. Stanko replied, "I did not.  In 1990, when the new agreement came from 
General Motors, it said that your sales and service satisfaction is part of your 
contract.  It did not give a formula.  It said that even though your CSI numbers 
might be an averaging of your local branch; that they are going to put you in these 
multiple sales and service areas and you have to be in the upper 60 percent.  If you 
are in the bottom 40 percent, you are considered ineffective."

Senator Neal asked about subsection 5.  "Were those standards written in your 
franchise?"

Mr. Stanko replied, "No.  They state that they want you to perform adequately in 
sales and in service satisfaction.  They do not lay out their formulas or their 
methods for calculation."

Senator Neal stated that constitutionally the committee is barred from passing laws 
that will impair contracts.  

Mr. Capurro responded that the committee can pass a law if it affects the public 
health, safety and welfare.


Mr. Stanko said that the CSI is the manufacturer's and dealer's primary concerns. 
 The dealers criticize the figures because they can be manipulated to suit the 
manufacturers.  The CSI has only been around for about 8 years, but does provide 
the dealers with feedback from the customers.  It can be used against you by the 
manufacturers.

Senator Lee stated, "This bill, if it was to become law, does it or does it not 
enhance or hinder the general public as a customer of airing complaints about a 
vehicle to the franchise dealer?"

Mr. Stanko replied that it has no bearing on that at all.

Senator Lee asked, "If this language provides a piece of evidence that a 
manufacturer may use against dealers, the customer may write to the manufacturer 
and complain about the dealer because they did not fix this, or did not do that, or 
did whatever.

Mr. Stanko replied that is correct.

Mr. Capurro said, "We are not trying to prevent them from taking a legitimate 
action against a dealer who has either broken the law, not met reasonable 
expectations ..."

Senator Porter stated, "If I were a dealership and I had a contract with a detailing 
business; I would certainly like to be able to control who I contracted with to detail 
my car.  If I had a bunch of customer complaints, I would like to be able to say [I 
need another detailing service].  The manufacturer is where the cars comes from 
and they should set the standards."

Mr. Capurro replied, "Once I am franchised with General Motors, I do not have the 
choice to say [I do not like this contract this time, so I am going to start selling 
Fords].  We do not have the ability to say that I want to sell Fords now instead of 
Chevrolets."

Senator Porter replied, "I agree that there could be abuses.  You have Chevrolet 
dealers that really should not be selling Chevrolets."

Mr. Stanko stated, "To answer your question, Senator Porter; why would a 
manufacturer do that to a dealer?  It is not always that a person is not doing a job. 
 The numbers can be made to look any kind of way; especially when they control 
them to make it come out so that they can push someone out of business."


Senator Porter stated that the manufacturer has rights too.  "I think it should be a 
factor as to whether you stay as a franchise dealer.  It probably should not be the 
only reason.  If we could word it so that it is not the only reason ..."


Mr. Capurro replied that he thought that could be worked out.  "You could say 
there is [are] 10 things, but they have weigh the CSI as the most important thing."

Senator O'Donnell stated that the bill is workable, but needs clarification of the 
amendments.

Senator O'Donnell closed the hearing on S.B. 332.

Senator O'Donnell adjourned the meeting at 3:40 p.m.



RESPECTFULLY SUBMITTED:



	
Diane C. Rea,
Committee Secretary

APPROVED BY:





Senator William R. O'Donnell, Chairman


DATE: 	

Senate Committee on Transportation
April 6, 1995
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