Will court row over Pizza Pizza be kept secret?

A difficulty the government faces in studying the Pizza Pizza case is that it has been argued in secrecy. Many financial disputes are resolved in private these days, away from regular court, because it is seen as a possibly cheaper and faster way.

The Toronto Star
December 11, 1994

Will court row over Pizza Pizza be kept secret?
Kevin Donovan

PizzaPizzaAlWilde.jpg

OUT IN THE COLD: Al Wilde, owner of a Pizza Pizza franchise on Taunton Rd. in Oshawas, has been cut off by the giant food chain, meaning no phone numbers and no supplies.

“If the court grants money to them I want to assure you that Pizza Pizza will extend those benefits to any franchisee in our system that is entitled.”
- 1993 LETTER FROM PIZZA PIZZA OWNER MICHAEL OVERS

Pizza Pizza store owners who did not sue the fast food giant are hungrily waiting to hear what has happened in the case of 49 store owners who did.

But if the arbitration remains secret, how will they know what, if anything, they are due?

That’s the gist of a motion filed in court last week by Peter Waldmann, a lawyer for two Metro and four Oshawa franchisees.

Some background first.

A group of 49 franchisees sued Pizza Pizza in 1993, claiming they were owed millions of dollars because, they alleged, their company had mismanaged rent and advertising monies they had contributed for shared expenses over the years.

Instead of proceeding to lengthy trial, lawyers for both sides agreed to have the matter heard by a retired judge sitting as arbitrator. Pizza Pizza wanted the matter heard in secret, and lawyers for the franchisees consented. The retired judge and the original judge on the case have ordered the matter remain confidential.

A final award was handed down in September and Pizza Pizza has filed an appeal. Pizza Pizza would like the award and many weeks of testimony leading up to it to remain secret forever. The franchisees disagree.

Pizza Pizza is a 250-store chain in Ontario. Of that number, 49 are involved in the main lawsuit and a handful of others are involved in separate suits.

When the main lawsuit was launched in February 1993, 34 franchisees signed up as plaintiffs. Over the next few months, more and more stores joined, until the number hit 49, a distressing public fact for Pizza Pizza which is in the business of trying to sell more franchises. Other franchisees were poised to join.

On June 3, 1993, Pizza Pizza owner Michael Overs wrote a letter to all franchisees, which many believed was his way of persuading those who had not joined the lawsuit to stay away from court. The letter has been filed in court as part of Waldmann’s motion.

Here’s what Overs wrote:

“Some franchise owners involved in the lawsuit are stating that you have to join in order to share in any award that may be granted by the court. I don’t believe we have done anything wrong and I do not expect that there is going to be any compensation paid to the litigants. However, if the court grants money to them I want to assure you that Pizza Pizza will extend those benefits to any franchisee in our system that is entitled. You do not have to be a member of this lawsuit in order to collect if there is an award.”

“On the other hand,” Overs continues, “if there are any costs awarded to us by the courts as a result of this lawsuit those costs will be borne only by the people who have sued us.”

An award has now been made. This award is subject to a confidentiality order by Mr. Justice James Farley, the original judge on the case, and one by Richard Holland, the retired judge who sat as arbitrator.

Waldmann has recently filed his motion to remove the secrecy orders.

Two of his clients are Gary Dragicevic and Esmail Barzkar. Dragicevic owns an Etobicoke store; Barzkar owns one in North York.

Neither man is part of the group of 49. Both state in affidavits filed in court that they did not join because they believed Overs’ promise that they would receive whatever money, if any, was awarded to the others.

They now believe, according to their affidavits, that they are due money.

The hitch, they say, is that secrecy prevents them from collecting on Overs’ letter.

Out in Oshawa, four of Waldmann’s other Pizza Pizza clients are in a slightly different situation. They are all part of the group of 49, but they also have their own individual lawsuits going with Pizza Pizza.

Al Wilde and William Quait run what amounts to a renegade Pizza Pizza store on Taunton Rd. Since June, they have been “off-line,” meaning Pizza Pizza no longer sends them orders or supplies, a punishment Pizza Pizza often metes out to franchisees it claims owe money.

In an affidavit, Quait states that monies have been awarded him by the arbitration and so Pizza Pizza was wrong to terminate him. He and his partner want to use the results of the arbitration to defend them in the lawsuit Pizza Pizza has brought against them in an attempt to take over their store.

Another Oshawa case involves Aileen Collins and Darlene Thiele, who own two stores.

They are suing Pizza Pizza in a separate case that will go to trial in the spring. Like Wilde and Quait, they want to be able to use the arbitration results in their court case.

“It will be necessary to refer to monies awarded us in the arbitration in the course of the action,” Collins writes.

These matters and others related to Pizza Pizza’s bid for continued secrecy will be argued in front of Farley this week.

The Star has notified the court that it wishes to make arguments to have the secrecy order lifted, now that Pizza Pizza has filed an appeal.

At a hearing before Farley last week, Waldmann said his clients are in desperate financial straits and require access to the award results.

“I have a number of clients in a very difficult position,” he told Farley. “They are in a position they cannot survive. They will go under.”

The Pizza Pizza case has wide-ranging implications for the franchise industry. Consumer Minister Marilyn Churley said in a recent interview that the dispute has prompted her ministry to take a very serious look at some form of regulation for the trouble franchise industry in Ontario.

A difficulty the government faces in studying the Pizza Pizza case is that it has been argued in secrecy. Many financial disputes are resolved in private these days, away from regular court, because it is seen as a possibly cheaper and faster way.

Farley, the judge hearing the Pizza Pizza case, is in charge of Ontario’s Commercial Court. He is a big proponent of what the province now calls “The ADR Centre,” a floor of pastel-colored hearing rooms on Grenville St. devoted to alternate dispute resolution.

At the hearing, Farley urged lawyers for both sides of the Pizza Pizza dispute to talk to each other and work to resolve the many issues as soon as possible.

“You fellows earn a lot of money? Don’t you? Validly so,” Farley said. “So, let’s get on with it.”


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