GM, Cassels targeted in $750M class action

The claim alleges that in April 2009, the Canadian Automotive Dealers' Association, a dealer lobby group, retained Cassels to advise GM dealers on the potential restructuring of the GM dealer network… The CADA dealers then contributed $5,000 or $2,500 to a legal fund. The claim alleges that Cassels never advised the dealers it was also acting for the federal government.

National Post
January 22, 2010

GM, Cassels targeted in $750M class action
Terminated dealers
Jim Middlemiss

Blue chip Bay Street law firm Cassels Brock & Blackwell has been hit with a $750-million class action alleging it was in a conflict of interest and breached franchise laws when it acted on behalf of a group of GM Canada dealers during the recent auto bailout. General Motors of Canada has also been named as a defendant.

The lawsuit, which must still be proved in a court of law, was filed on behalf of Trillium Motor World Ltd., which seeks to represent the terminated dealers and the case has yet to be certified.

It is hoped the 215 Canadian GM dealers that were cut off by the parent as it restructured last year will become part of the suit.

Calls to Cassel's managing partner Mark Young were not returned at press time. Tax lawyer Peter Harris, one of two Cassels lawyers named in the suit, declined to comment when reached at his office. Mike Weinczok, a restructuring lawyer at the firm named in the suit, did not return calls at press time. GM Canada also declined to comment.

Trillium, a Toronto dealer, alleges that at the time Cassels was advising all the dealers on their legal rights involving GM Canada's move to reduce its dealer ranks, the law firm was also representing the federal government on auto bailout negotiations. The claim alleges the firm didn't disclose this relationship.

The claim alleges that Ottawa was "instrumental in GM's decision to reduce the number of its dealers. Cassels was in an untenable and indefensible conflict of interest purporting to act for Canada and the GM dealers."

The claim alleges that in April 2009, the Canadian Automotive Dealers' Association, a dealer lobby group, retained Cassels to advise GM dealers on the potential restructuring of the GM dealer network. The claim alleges one of the reasons that Cassels was selected was because it represented GM's Saturn-SAAB dealers in their dealings with GM. The CADA dealers then contributed $5,000 or $2,500 to a legal fund.

The claim alleges that Cassels never advised the dealers it was also acting for the federal government.

On May 20, GM sent 240 dealers a winding down agreement offering them compensation to close their dealerships and they had to respond by May 26. The claim alleges the dealers were unable to negotiate with the parent company as a group and only had two to four days to accept termination agreements. It also alleges that Cassels advised the dealers they should get independent legal advice, but there was only 48 hours remaining under the wind down agreement.

After 90% of the affected dealers signed the agreement, the suit alleges that CADA then sent all GM dealers who contributed to the legal fund a memo indicating that a conflict of interest existed between those dealers who were terminated and those who continued and it hired a new law firm to represent the continuing dealers.

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