First Ontario Franchise Class Action Certification Heading To Appeal Court

Justice Jenkins' order was the first time in Ontario that a franchisee's class action had been certified against a franchisor.

The INFO Franchise Newsletter
November 1, 1999

First Ontario Franchise Class Action Certification Heading To Appeal Court

On October 15, 1999, Justice Tamarin Dunnet of the Ontario Superior Court granted permission to Bulk Barn Foods Limited to appeal an earlier decision of Justice Jack Jenkins who had certified a class action (i.e. given it class action status) brought by franchisee Sam Doshi's company against Bulk Barn Food Limited. Justice Jenkins' order was the first time in Ontario that a franchisee's class action had been certified against a franchisor. The lawsuit alleges over-charging by the franchisor for products which it supplies to its franchisees under the terms of its standard franchise agreement. While Doshi has accused Bulk Barn of over-charging, Bulk Barn's complaint is that Doshi has not made out a real case against it. Under its standard franchise agreement, Bulk Barn must attempt to supply its franchisees with quality products at "everyday" prices equal to or lower than the prices available from other wholesalers. Doshi, according to Bulk Barn, has not shown that better "everyday" prices (for example not limited-time "specials") are in fact available from other wholesalers. Nor, according to Bulk Barn, has Doshi, as he is required, brought examples of supposed over-charging to Bulk Barn for investigation and, if necessary, corrective action.

Bulk Barn makes other complaints too. Doshi and his family have a combined $1 million invested in three Bulk Barn stores. Bulk Barn has argued that Doshi and his supporters are well able to afford their day in court if they think they have been overcharged. Bulk Barn objects to becoming involved in a class action where it is potentially exposed to the considerable costs of litigation and the burden and risks of disclosing thousands of documents with confidential prices, mark-ups and sales to its 57 franchisees, stretching back 6 years Under Ontario's "loser pays" litigation system, successful defendants rarely recover anywhere close to the real costs of litigation from the losing party. To make matters worse, in class actions, because of the number of people in the class, the costs are multiplied. Accordingly, defendants are frequently forced to settle class action cases so as to avoid the scale of costs, documentary disclosure and invasion of confidentiality which may be far greater than in ordinary litigation.

In finding that Bulk Barn's case for an appeal is desirable, Justice Dunnet found conflicting legal decisions as to whether Doshi had satisfied the statutory requirements for class certification. In addition, she found reason to doubt the correctness of the earlier decision to permit a class action and that the matters are of public importance to the development of the law. Justice Dunnet stated that the Class Proceedings Act is intended to screen claims that are not appropriate for class action treatment, at least in part to protect the defendant from being unjustifiably embroiled in complex and costly litigation. Justice Dunnet agreed with the Honourable Justice Sharpe in Robertson v. Thomson Corp. that the certification motion is intended to screen claims that are not appropriate for class action treatment, at least in part to protect the defendant from being unjustifiably embroiled in complex and costly litigation.

Osler, Hoskin & Harcourt (Box 50, 1 First Canadian Place, Toronto, ON, M5X 1B8, Tel: (416) 362-2111, Fax: (416) 862-6666, Web Site: www.osler.com) represents Bulk Barn with litigator Larry Lowenstein (E-Mail: moc.relso|nietsewoll#moc.relso|nietsewoll) leading the defence. Franchise lawyer Frank Zaid (E-Mail: fzaid@osle r.com) is providing commercial advice. Osler associate Tara James has been on the defence team from the start, with Joseph Starkman assisting at the motion for leave and Monica Creery at a motion for interim stay of the certification order. The plaintiff and its principal, Sam Doshi, are represented by litigation counsel Kirk Baert of McGowan & Associates (133 Richmond Street, West, Ste. 405, Toronto, ON, M5H 2L3, Tel: (416) 363-2253, Fax: (416) 363-1875) and David Sterns (E-Mail: ten.mbi|snrets#ten.mbi|snrets) of Sotos & Associates (180 Dundas St., West, Ste. 1250, Toronto, ON, M5G 1Z8, Tel: (416) 977-5333, Web Site: sotoslaw.com), Franchise lawyer John Sotos (E-Mail: jsotos@sotoslaw. com) is providing commercial advice


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Risks: Alpha Male attorney, Lawsuits, class-action, Gouging on rent and equipment, Gouging on supplies, Bad faith and unfair dealings, Termination, threats, Unsophisticated tyranny, Fear of poverty, Dissident leaders, Must buy only through franchisor (tied buying), Secret kickbacks and rebates, Encroachment (too many outlets in area), War of attrition, Arthur Wishart Act (Franchise Disclosure), 2000, Canada, Personality disorders, Class-action dead end, Can’t talk to media, Trial decision always appealed, Canada, 19991101 First Ontario

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