Fraternity jilted us, axed GM dealers say

"Unlike its American counterparts, which vigorously sought to protect the rights of terminated dealers, CADA refused all requests by the affected dealers to intervene," said the claim, which has not been proved in court.

The Toronto Star
January 26, 2010

Fraternity jilted us, axed GM dealers say
Canadian association ditched 215, sided with survivors, suit argues
Tony Van Alphen

The Canadian Automobile Dealers Association did not fight for more than 200 members told to close by General Motors last year because its interests lay with surviving retailers in the firm's restructuring, a class-action lawsuit says.

Although the lawsuit on behalf of affected dealers does not name the association as a defendant, the statement of claim says the umbrella group rejected all pleas for help about their futures.

"Unlike its American counterparts, which vigorously sought to protect the rights of terminated dealers, CADA refused all requests by the affected dealers to intervene," said the claim, which has not been proved in court.

Trillium Motor World of Toronto sued General Motors of Canada Ltd. on behalf of 215 Ontario dealers last week for breaching franchise law in ending agreements.

Trillium also sued Cassels, Brock and Blackwell LLP, a Bay Street law firm, and two of its lawyers for conflict of interest alleging they represented the federal government and the dealers association.

The federal government insisted GM shrink its dealer network as a condition for receiving billions of dollars in loans under a rescue plan.

Dealer association officials declined to comment Monday on the claim's criticism of its conduct in representing member interests.

GM and the law firm also have declined to comment on the claim's allegations now before the courts.

The claim does not indicate whether Cassels told the association about also representing the federal government. If Cassels did so, the umbrella group never informed GM dealers, the claim says.

Last May 20, the automaker told more than 240 dealers, including Trillium, that it would terminate their franchise agreements when they expire in the fall of this year. It did say that, if dealers closed by the end of 2009, they would receive some compensation under "wind-down" agreements.

GM gave affected dealers six days to make a decision. The claim says the association and Cassels Brock offered no advice on their franchise rights or on the offer, including the possibility of acting as a group to negotiate a better wind-down deal or of pushing for an extension.

The claim states the legal firm took and gave advice to an association steering committee of GM dealers where the majority did not receive termination notices.

"The continuing dealers stood to benefit from the elimination of the affected dealers because they would be able to purchase parts and accessories, tools and equipment from the affected dealers at massive discounts and have fewer competitors," the claim adds.

"It was in the interests of the continuing dealers that the affected dealers sign the wind-down agreement, and do so promptly in order to prevent GM from acting on its veiled threat to make a formal insolvency application."

Such an application under the federal Companies' Creditors Arrangement Act could have jeopardized any compensation to affected dealers. Under "intense pressure," about 90 per cent of dealers accepted the offer which did not even cover payment of employee severance costs in many cases, according to the claim.

The claim notes the association also was in a conflict because its interests lay with remaining store owners and the group viewed negatively affected retailers "as a necessary sacrifice for the greater good of GM and the continuing dealers."

After the May 26 deadline, the claim says the association sent a memo to dealers confirming a conflict between the two groups of retailers and a decision to hire separate counsel to represent their interests. It also returned money to GM dealers it had raised for a legal fund to represent their interests.

"Shortly thereafter, CADA made it known that the affected dealers … should not look to CADA for assistance," the claim says.

Separately, in November, a dozen dealers who rejected the offer, sued GM for ending their franchise deals in a "high-handed, oppressive and patently unfair" manner. They seek an order allowing them to stay open for at least five years and collect $1.5 million in damages each.

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