Court Allows Franchise Class Action against Midas Canada

As such, even if Midas' actions did not run afoul of the precise terms of the franchise agreement, the franchisees may be entitled to compensation and an improved royalty structure for the future.

Yahoo Finance
April 1, 2009

Court Allows Franchise Class Action against Midas Canada
Press Release

TORONTO, April 1 /CNW/ - On 26 March 2009, the Ontario Superior Court of Justice certified a Canada-wide class action lawsuit by Midas franchisees against Midas Canada Inc. Midas Canada is a subsidiary of Midas Inc. - MDS:NYSE.

The lawsuit concerns Midas' decision in 2003 to cease distributing parts to its Canadian franchisees at discounted prices through its wholly-owned distribution system. The franchisees allege that this decision deprived them of the right to purchase parts at a 14.5% discount below net wholesale prices and other advantages which they previously enjoyed.

Midas' actions in 2003 were part of its international business restructuring which resulted in a dramatic business turnaround of the international auto parts franchisor. However, the franchisees assert in the lawsuit that Midas' restructuring caused them significant financial losses and was carried out at their expense. The court stated that the claim by the franchisees if proven at trial "could justify a finding of liability in damages, and … an abatement of the royalty (paid by the franchisees) in the future."

According to plaintiff's lawyer, David Sterns, "this case will be of considerable importance to franchisees whenever a franchisor makes one-sided changes to the business terms of its franchise system." The court stated that a franchisor may not fundamentally change the business terms of the system to the franchisees' detriment. As such, even if Midas' actions did not run afoul of the precise terms of the franchise agreement, the franchisees may be entitled to compensation and an improved royalty structure for the future.

Franchising represents a significant part of the Canadian economy. This decision highlights the need for fair dealing between franchisors and franchisees.

For further information

David Sterns at moc.pllsotos|snretsd#moc.pllsotos|snretsd or Allan D.J. Dick at moc.pllsotos|kcidjda#moc.pllsotos|kcidjda
Sotos LLP, (416) 977-0007

http://finance.yahoo.com/news/Court-Allows-Franchise-Class-cnw-14822907.html


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