Court Allows $750 Million Class Action Suit to Proceed Against General Motors of Canada and Cassels Brock & Blackwell Over Mass Termination of Canadian GM Dealerships in 2009By Sotos Llp, PRNE
Tuesday, March 1, 2011
TORONTO, March 2, 2011 - An Ontario court granted class action status yesterday to a lawsuit by
over 200 former Canadian GM auto dealers terminated in connection with GM's
2009 auto bailout by the Governments of Canada and Ontario.
The lawsuit, seeking $750 million in damages, claims that General Motors
of Canada Limited (GM), a subsidiary of General Motors Company, breached
provincial franchise laws in eliminating the dealerships.
Also named in the suit is Cassels Brock & Blackwell LLP (Cassels), a
major Canadian law firm retained to act for the Canadian GM dealers in
anticipation of a GM restructuring. The claim alleges that Cassels was in a
conflict of interest by simultaneously acting for the Government of Canada in
connection with the GM auto bailout. One of the conditions for GM to access
billions of dollars of government funding was the elimination of a large
number of GM dealers.
The suit alleges that after GM presented a termination package to the
affected dealers, Cassels told them to consult their individual lawyers in
the limited time which they had to respond to the package. Unable to
negotiate as a group, and without group legal counsel, the vast majority of
dealers signed back the termination package as presented by GM rather than
risking GM filing for a formal insolvency proceeding as GM threatened to do
if the dealers rejected the offer. The dealers had between two and four
business days to accept the package which was offered.
GM avoided a formal insolvency proceeding in Canada, unlike in the United
States where its parent company reduced its dealership network through a
formal Chapter 11 filing.
In the 68-page decision, the Honourable Justice G.R. Strathy described
the tumultuous events that took place over six days in May 2009 while GM
sought to eliminate the dealers. These events had been largely shielded from
public disclosure through confidentiality agreements signed by the dealers at
the time of their terminations. (As further background, lawyers for the
terminated dealers have initiated freedom of information requests to both the
federal and provincial governments in relation to the GM auto bailout. Both
governments have denied access to thousands of documents, citing the need to
protect commercial interests of unnamed third parties, presumably GM. These
refusals are currently under appeal.)
Concluding that justice would best be served by allowing the dealers to
proceed as a class action, Justice Strathy remarked: "[i]t is not realistic
to think that an individual franchisee, who has experienced the loss of their
business, is financially or psychologically equipped to engage in protracted,
complicated and very expensive litigation with one of the largest
corporations in North America and a major Canadian law firm." (Para. 161)
Regarding the claims against Cassels, the judge commented, "[t]his is not
a typical solicitor's negligence case" and that the case raises "important
issues concerning lawyers' duties to their clients, particularly in the
context of group retainers." (Para. 164)
David Sterns, one of the lawyers for the lead plaintiff, stated "the
elimination of the dealers was a man-made disaster for hundreds of
family-owned businesses forced to pay the price for GM's financial problems.
As a result of this decision, the dealers now have a chance to put the pieces
back together and mount a recovery of their own."
Trillium Motor World Ltd., a former GM dealer in Toronto, has been
designated to represent the terminated dealers in every province.
A copy of the decision is available at:
A copy of the court filed statement of claim is available at:
Pour une copie de la declaration en francais cliquez:
The dealers are jointly represented by the Toronto law firms WeirFoulds
LLP (www.weirfoulds.com) and Sotos LLP (www.sotosllp.com).
(Due to the length of the above URLs, it may be necessary to copy and
paste the hyperlink into your Internet browser's URL address field. Remove
the space if one exists.)
For further information:
David Sterns at firstname.lastname@example.org or John Sotos at
email@example.com. Sotos LLP +1416-977-0007
For further information: David Sterns at dsterns at sotosllp.com or John Sotos at
jsotos at sotosllp.com. Sotos LLP +1416-977-0007
Tags: canada, March 2, Sotos Llp, Toronto