GM dealt with dealers ‘fairly, reasonably and lawfully at all times’

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A day after closing arguments started in the General Motors non-retained dealer case, the automaker’s legal team gave its final submission in the precedent setting case.

Following months of evidence and a full day of submissions from the plaintiff class presented in the Toronto courtroom on Wednesday, GM disputed those claims saying, among other things, GMCL breached no duty owed to the class members at any time, including its duty of fair dealing.

“Rather, GMCL dealt with the non-retained dealers fairly, reasonably and lawfully at all times,” read the submission, obtained by Canadian AutoWorld.

The company argued it had no obligation to deliver a “disclosure document” to non-retained dealers when it provided them with wind-down offers in May 2009.

Vital to the case is GMCL’s submission the Ontario choice of law clauses in the dealer sales and service agreements (DSSA) did not give the class members in non-franchise statue jurisdictions – all provinces outside of Ontario, Alberta and P.E.I – the benefit of the statutory rights conferred under the Wishart Act. There are dealerships from every province in the plaintiff class.

Key to the plaintiff’s case has been the idea of good faith and fair dealing related to the Arthur Wishart Act – an Ontario statute designed to protect franchise business owners that, in part, requires parent companies to provide a disclosure document that contains accurate, clear and concise information including financial statements and the proposed franchise agreement prior to signing any contracts.

Legal experts have said this case will decide if the Wishart Act applies when a franchisor is going through financial challenges or if the duty of fair dealing only applies in fair weather.

GMCL noted the generic use of the word franchise when referring to a dealership does not mean the DSSA is a “franchise agreement” in the same sense that the term is used in franchise law statues such as the Wishart Act.

The automaker argued that is does not sell dealerships, nor does it charge stores ongoing royalties as a percentage of each dealership’s sales.

In the comprehensive submission, GMCL submitted it was fully aware of its overdealering issue as market share diminished over the last decade and had worked to solve the issue with programs like Project 2000 and Ring Analysis, specifically in the GTA.

GMCL’s submission specifically discussed the named plaintiff, Trillium Motor World and its owner/operator Lynton Hurdman. The store had operated out of the Scarborough Auto Mall in northeastern Toronto.

GMCL characterized Trillium as the “poster child” for overdealering.

“As well as having serious and unfixable problems with its location, Trillium performed very poorly on a number of different metrics for years leading up to 2009,” GMCL revealed, adding Trillium was one of the worst performing stores in Canada in a number of important respects.

Trillium’s net capital was consistently below the contractual standard required under the capital standards addendum of its DSSA. GMCL said the store’s working capital was 70 per cent of what was required in 2003; by 2008, it had fallen to 15 per cent of what was required – “in part because Mr. Hurdman had taken $200,000 from Trillium to place a down payment on a vacation property in Florida.”

The submission delves into intense detail about claims made by the plaintiff class, but essentially argues the steps it took in 2009 to restructure its network were entirely appropriate.

“GMCL conducted itself at all times fairly, properly and lawfully.”

Closing arguments are scheduled to finish Dec. 19. Justice Thomas McEwen is not expected to make a final ruling for several months.