NEWSLETTER

Cassels v. GM

A large downtown Toronto law firm, Cassels Brock & Blackwell LLP (“Cassels”), along with General Motors Canada Inc. (“GM”), is being sued in the Ontario Superior Court of Justice by Trillium Motor World Ltd. (“Trillium”). On January 21, 2010, Trillium commenced a class action law suit for $7,500,000 against Cassels for their involvement in the restructuring of GM in 2009. Trillium was one of approximately 240 dealers across Canada that was affected by GM’s restructuring in 2009.

Trillium alleges that Cassels was in a conflict of interest when it agreed to provide legal representation to dealers that were having their dealership agreements terminated in 2009 by GM as a result of the Government of Canada’s auto bailout proposal. It is Trillium’s position that Cassels was providing legal advice to the Canadian Government when it imposed the term whereby GM would be required to reduce the number of dealers in the franchise system in order for it to be eligible to receive government financial assistance. The Court has not yet ruled on this matter.

In or around April 2009, Cassels was retained by the Canadian Automotive Dealers Association (“CADA”) to represent GM dealers in the event of a restructuring of the dealership network. Cassels was selected for its expertise in the areas of law that were likely to be needed to address this issue. Trillium alleges that Cassels never disclosed to CADA of its retainer agreement with the Government of Canada relating to the GM auto bail out.

It is Trillium’s position that Cassels was in an indefensible conflict of interest by acting both for the Government of Canada and the GM dealers: the Canadian Government wanted a certain number of GM dealers closed; and the dealers wanted to remain as dealers or to be paid as much as possible in order to surrender their rights.

In failing to inform GM dealers that it acted for the Government of Canada in the GM auto bailout and by not obtaining the consent of the GM dealers, Cassels allegedly breached its duty of care and fiduciary duty to the GM dealers. In doing so, it is alleged that Casssels failed to provide GM dealers with proper legal advice and neglected to protect the interest of the affected GM dealers.

It is also Trillium’s position that GM breached its statutory obligation under provincial franchise legislation in Ontario, Alberta and Prince Edward Island. Trillium alleges that GM did not provide affected dealers with the required disclosure documents prior to them entering into the Winding Down Agreement (“WDA”) with the Canadian Government, that GM breached its statutory duties of good faith and fair dealing since it interfered with its franchisees’ right to association, and that the WDA contained an invalid release and waiver provision relating to provincial franchise statutes. These allegations have yet to be determined by the Court.

For a copy of the statement of claim in this case, visit: http://www.heydary.com/resources/class-action/SOC-cassels.pdf

For additional information on franchise related litigation matters, contact Javad Heydary at jheydary@heydary.com or visit www.heydary.com.


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