GM dealers ‘weighing options’ after losing appeal

The saga continues.

The long and winding legal battle concerning 180 GM dealers who lost their franchise during the automaker’s bankruptcy restructuring back in 2009 might be marching on to the Supreme Court.

The latest setback for the plaintiff class of dealers came in a series of decisions handed down on July 4 from the Court of Appeal for Ontario.
The court rejected the appeal launched by the dealers and dismissed GM of Canada’s (GMCL) cross appeal. Also dismissed was an appeal from law firm Cassels Brock and Blackwell LLP (CBB) related to the trial judge’s liability findings, though the appeal court did note a calculation error by the trial judge meant the payment CBB has already been ordered to make to the dealers should be lowered from $45 million to $36.9 million.

The decisions, signed and released by the three-judge panel, has likely set the stage for a Supreme Court showdown in what has grown into a legal battle for franchise car dealer rights in Canada.

“We’re still digesting the decisions and considering options,” explained Andy Seretis, lawyer with Sotos LLP, which along with WeirFoulds has been co-counsel for Trillium.

“Obviously the dealers were disappointed with the ruling.”

These most recent decision were related to appeals launched after the original trial decision was handed down back in 2016.

The appeal court heard arguments over a four-day period back in January as GMCL, the dealer class and CBB were all appealing the rulings from Superior Court Judge Thomas McEwen.

In the original trial, the plaintiffs had argued GMCL had breached the rights provided to franchisees under the Arthur Wishart Act. The dealers claimed the six days they were given to sign the wind-down agreements (WDA) and everything communicated to them up to that point by the automaker was not in accordance with fair dealing set out by the Act.

The original class action was certified back in March 2011 with the appellant Trillium Motor World named as the representative plaintiff.

GMCL had argued it complied with the Act and that any legal proceedings were barred by the releases in the WDAs as they contained a promise by the signing dealer not to sue GMCL.

Of the 240 dealers who were offered the WDAs in May 2009, 202 signed and accepted the payment offered.

GMCL had launched a counterclaim for damages arguing dealers participating in the class claim breached the covenants laid out in the WDA.

The dealer class was also suing CBB. After learning the brand would be axed, Canadian Saturn dealers, with the help of the Canadian Automobile Dealers’ Association, had retained Peter Harris, then a partner at CBB, to advise them through the transition.

Later that same month, however, the federal government retained CBB to counsel Industry Canada regarding the financial bailout of both GMCL and Chrysler Canada. The dealers argued there was inherent conflict in having the same firm advise the deleted dealers while simultaneously helping the government save the automaker.

Though CBB argued at trial it was only offering legal information at the request of the CADA, McEwen ruled the firm had breached its contractual and fiduciary duty to the dealers because it represented both the affected dealers and the federal government in its handling of the GM bailout.

CBB was ordered to pay $45 million in damages to the dealers, a decision it was appealing this past January.

The appeal panel – made up of Justices Eleanore Cronk, Katherine van Rensburg and Gladys Pardu – ruled to dismiss the appeal from the trial judge’s liability findings related to CBB but said the trial judge had erred in coming up with that total.

Barring another appeal by CBB (no decision had been released as of press time) of the appeal court decision, Seretis said the case of exactly which dealers are entitled to compensation from that $36.9-million payout will be sent back to Justice McEwen to sort out.

Even though all 180 class members signed the WDA, only a subset of those dealers would have retained CBB by either sending in the form or providing money to the CADA. Both courts have ruled damages can only be awarded to the dealers who retained CBB, a distinction that does not extend to every dealer in the class.

There is no set timeline for that action and it will mostly depend on further appeals launched by the parties.
Sotos LLP lawyer Allan Dick said central to the issue is that the court of appeal found the release the dealers signed as part of the WDA would preclude them from making claims against General Motors.

“If we considered taking the case to the Supreme Court of Canada, the issue would simply be, was the court of appeal right in upholding Justice McEwen’s finding that those releases were binding on the dealers in the circumstances in which they signed them?” Dick explained.

What remains significant and in the dealers’ favour is that appeal panel upheld the trial judge’s decision related to whether CBB’s involvement with the dealers and the government negatively affected the dealers’ chance of negotiating with GMCL to increase wind-down payments, he added.

“That continues to be the message of the court of appeal, that it was impermissible of Cassels Brock to represent the dealers when they had the conflict of interest by representing the Government of Canada,” he said.

“It’s a significant damage award against a law firm that took on the representation of these dealers at a time of crisis.”

Should GMCL, the Trillium class or CBB chose to appeal these recent decisions, the first step is to be granted leave to appeal to the Supreme Court. Submissions must be made in writing within a predetermined time period. Seretis said being granted leave could take between six months and a year.

Former dealer and plaintiff class member Jerry Gazarek told Canadian AutoWorld outside the courtroom back in January that the dealer class was prepared for this case to be ultimately decided by the Supreme Court.

“We knew right from the beginning that it would be about seven to 10 years from when we launched this until we would see resolution,” he said back in January.

He also stressed the importance a final decision has for current dealers.

“If we’re not successful, then every dealer in Canada is at risk. It would mean every manufacturer would have free reign and license to do what they want to do. They’ll be no rights left

for the dealer,” he said.

Attempts to reach GMCL and CBB were not successful.