Court gives green light to suit by GM dealers

Ontario will be "the only jurisdiction in North America where there will be a full and open examination by a court of the fairness of General Motors' treatment of its dealers," said Jonathan Lisus, a lawyer for the dealers.

The Globe and Mail
April 21, 2010

Court gives green light to suit by GM dealers
Greg Keenan

A lawsuit against General Motors of Canada Ltd. filed by 19 car dealers who were terminated by the auto maker can go ahead in the Ontario Superior Court, and will examine the process the company used to slash its dealership network by more than one-third last year.

Madame Justice Sarah Pepall rejected arguments by GM Canada that the terminations should be examined by a national arbitration program instead of the court, or that the multi-party lawsuit should be divided into 19 individual suits.

"The uncontradicted evidence of the plaintiffs is that they do not have the financial resources, human capital or organizational structure to litigate solo," Judge Pepall wrote.

Unless GM Canada successfully appeals, the ruling sets up a court hearing into events surrounding the termination of 240 dealers last spring, when the parent General Motors Corp. was heading into Chapter 11 bankruptcy protection. At the time, both companies were negotiating a bailout from the U.S., Canadian and Ontario governments that amounted to more than $60-billion (U.S.) of taxpayer money.

Ontario will be "the only jurisdiction in North America where there will be a full and open examination by a court of the fairness of General Motors' treatment of its dealers," said Jonathan Lisus, a lawyer for the dealers.

GM Canada spokesman Tony LaRocca said the company will not comment on the case.

The 19 dealers involved in the suit - mainly from Ontario, but also British Columbia, Alberta and Prince Edward Island - did not sign wind-down agreements presented to them by the company last May.

Part of the redress they are seeking from GM Canada is a reversal of the terminations so that they can continue as dealers for the company after October, 2010, the date their relationship with GM Canada is scheduled to be severed.

The culling of dealerships was part of a second restructuring plan submitted to the federal and Ontario governments, which rejected the original plan because they believed the company needed to take more drastic actions.

The termination of the 240 Canadian dealers is the subject of a class-action suit by other GM dealers who did sign wind-down agreements waiving their right to sue, but are now suing both the company and law firm Cassels Brock & Blackwell LLP.

The suit alleges that Cassels Brock was in a conflict of interest because it was acting for the federal government in the bailout negotiations, while providing advice to the Canadian Automobile Dealers Association, a trade organization and lobby group for about 3,000 new-car dealers in Canada.

Among the issues to be examined in the suit by the 19 dealers are the analyses GM Canada used to decide which dealers should be terminated, and the timelines for responding to the wind-down agreements, which gave dealers six days to decide.

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