After a protracted legal battle between dealers, General Motors of Canada and law firm Cassels Brock & Blackwell (CBB), roughly 180 GM dealers who signed the automaker’s wind down agreement in May 2009 will start making their case for financial damages in a Toronto courtroom on the morning of Sept. 9, 2014.
“Though it may not have been widely covered [in the media], we have fought intensively since 2010 and have had a number of skirmishes proceeding up through the courts,” explained David Sterns of Toronto law firm Sotos LLP, which is representing the dealers.
“The biggest battle was certification.”
The Ontario Superior Court released a decision certifying the action as a class proceeding in early March of this year. The class consists of a group of dealers who signed the wind-down agreements that effectively terminated their franchises during GM’s bankruptcy restructuring in 2009. The class is seeking $750 million in damages.
CBB and General Motors appealed the certification decision to the divisional court where it unanimously upheld the decision of the motions judge in certifying the class proceeding.
In August, the Ontario Court of Appeal denied leave to appeal and, following what Sterns termed as “several subsequent skirmishes over discovery and privilege,” the September 2014 trial date was set this past October.
There are roughly 180 class members. GM had originally wound down 240 dealers. Sterns said 33 refused to sign the agreement at the time.
“Some dealers sued separately and have settled cases with GM. This class represents the dealers who did sign the agreement. There were 207 who signed, roughly 20 have opted out – mostly because they had ongoing relationships with General Motors.”
Representative plaintiff, Trillium Motor World Ltd., brought the action under Ontario’s Class Proceedings Act. The members of the class include dealerships in every province.
The crux of the case rests on Canadian franchise law. The plaintiff class asserts GM breached franchise laws in connection with the agreements GM obtained from the dealers it selected for elimination as part of the government bailout agreement.
The bailout was the largest government subsidy given to a corporation in Canadian history.
The claim further alleges that CBB failed to disclose to the dealers chosen for deletion that it was simultaneously acting for the Canadian Government in the GM auto bailout and, as a result, breached its duties to the dealers.
The lawsuit claims that many of the dealers have a right under provincial franchise laws to rescind or cancel the agreements and that all dealers have a right to sue for breach of the duty of fair dealing under Ontario’s franchise statute.
“When we were preparing to make our arguments as to why this case should be expedited, I really got the full impact of what some of these people had been going through because we asked for stories and testimonials,” Sterns said.
“I was blown away by just how devastated dealers still are from what happened. These were evergreen agreements often handed from one generation to the next. That’s why many of them [dealers] took on these massive and expensive image programs. To be given six days to decided the fate of your business took a huge toll financially and emotionally.”
Prior to May 20, 2009, Jerry Gazarek was the dealer principal of Sheraton Chevrolet Cadillac and its sister Saturn Saab store in Pickering, Ontario. As a member of the terminated group of dealers and a class member in the lawsuit, he said he is happy the case will finally get to trial.
“We have waited a long time,” he said. “It has been disappointing and frustrated for terminated dealers as we have had a long wait to see any potential justice.”
Gazarek, 72, whose brother Dennis wrote a book about the GM bailout called Whacked, said he is most concerned with seeing the group compensated, if that happens out of court, it doesn’t matter to him.
“The saddest thing is that time is sneaking by. A lot of these guys are older and sadly some of the dealers have passed away before they could see it end. It would be nice to see closure.”
GM communications director Faye Roberts was asked about the case but said the automaker would not provide any comments on the matter as it is before the courts.
When asked about the likelihood of a settlement before heading to trial, Sterns conceded it is a possibility.
“There’s always a chance and statistically speaking there is a good chance, that the vast majority of cases will settle before trial… I think we owe it to the class to see if there is a possibility, but right now, our effort is focused on going to trial and winning.”
He anticipates a trial would last four weeks.