In this certified franchise class action arising from the 2009 automotive restructuring, the representative plaintiff alleged that the franchisor breached statutory duties of fair dealing, disclosure, and association when it issued wind-down agreements to affected dealers on short notice, and also alleged that class counsel acted in conflict and failed to protect the dealers' interests.
The court held that the franchisor did not breach its obligations under the Arthur Wishart Act or analogous provincial legislation, found the wind-down release enforceable as a settlement of existing and fully known claims, and dismissed the claim against the franchisor as well as the franchisor's counterclaim.
The court further held that the law firm retained for the dealer group had in fact entered into a solicitor-client relationship with the contributing dealers, that its retainer extended to pre-filing restructuring issues, and that it breached fiduciary, contractual, and tort duties by acting despite an undisclosed conflict with Industry Canada, failing to address the steering committee's internal conflict, and maintaining an unreasonable wait-and-see approach.
Applying a loss-of-chance analysis, the court found that the class lost a real and significant opportunity to negotiate collectively for higher wind-down payments and awarded aggregate damages of $45 million against the law firm.
