Cassels Brock to dole out $45M in damages to GM class-action dealers


Cassels Brock to dole out $45M in damages to GM class-action dealers

A final ruling has been made in the class-action lawsuit filed against General Motors of Canada in regards to actions taken to close dealerships amid the economic downturn. With that, the claims against GMCL have been dismissed.

That said, Justice Thomas McEwen has come down hard on the law firm Cassels Brock, which has close ties to all parties involved, for breach of contractual and fiduciary duties, calling for a payout of $45 million for damages to the dealers involved in the closings.

Back in 2009, when General Motors Co. was in the throes of the recession and a federal auto bailout from the U.S., the company's Canadian arm was forced to close over 200 GMCL dealerships to satisfy the demands of the Canadian government.

A class-action lawsuit was then filed in 2011. It aimed to secure $750 million in damages for the dealers who lost their businesses, with the potential to alter the industry concept of franchise protection and dealer rights.

The case finally came to a head after a 41-day trial that took place in December, as Justice McEwen said in the 160-page report covering the case released last week that GMCL did not breach any common law or statutory obligations toward the dealers.

And the claim from plaintiff Trillium Motor World Ltd. - representing 181 dealers who accepted the non-renewal and wind-down agreements (WDA) from the automaker - was dismissed as McEwen ruled that GMCL did not breach the Arthur Wishart Act (franchise disclosure) back in 2009.  

At the time, the dealers were given six days to accept or decline the offers. Out of the 240 dealers, 202 of them accepted the offers, executing and returning the WDAs to the automaker.

The ruling announced GMCL's counterclaim against Trillium and each of the class members was also dismissed by McEwen.

Interestingly, it was a different story for one party: the law firm Cassels Brock, which was retained by the Class Members, including Trillium, to protect their interests in any complex restructuring of the dealer network and to represent them in any GMCL CCAA (Companies' Creditors Arrangement Act) proceedings.

Justice McEwen found that Cassels breaches its contractual and fiduciary duties by accepting the retainer by Class Members and Trillium, even though the firm had already agreed to act for the Federal Government in regards to any GMCL CCAA proceedings.

McEwen said, "Cassels knew about this conflict from the outset; yet, rather than declining to act for GMCL dealers and referring the dealers to an unconflicted law firm, or even telling the dealers about the retained with the Federal Government, Cassels continues to act for both the Federal Government and the dealers."

Furthermore, McEwen said the firm also breached its contractual duties by working for both the GMCL dealers that has signed WDAs, as well as those who were continuing with GMCL, citing, "it knew or ought to have known that the two groups of dealers had divergent and adverse interests."

McEwen also asserted Cassels maintained a "'Wait-and-See Approach,' long past its appropriateness," which resulted in lost negotiation opportunities for Class Members for increased wind-down payments from GMCL.

The justice allowed Tillium's claim against Cassel and ruled the firm award the Class Members aggregate damages of $45 million for the lost opportunity.

The trial, held in December, took 41 days to complete, and the parties involved called 25 witnesses to the stand, including eight experts.