GM Canada accused of ambushing dealers during downsizing
Lawyer claims GM Canada told dealers they could only get compensation if all of them agreed to deal within six days
TORONTO—A lawyer for former General Motors of Canada Ltd. (GM Canada) dealers says the automaker deliberately ambushed and misled them in 2009 when it downsized its retail network in the wake of the financial crisis and recession.
In his opening remarks, lawyer David Stern told a packed courtroom that GM Canada broke provincial laws when it told the dealers they could only get compensation if all of them agreed to a deal within six days.
Stern said the law in Ontario, Prince Edward Island and Alberta says franchisees must get 14 days notice and complete disclosure.
He said that GM Canada was able to give the required time, but chose to wait until the last possible minute for its own reasons, including that it wanted to reduce its dealership size without needing court protection from creditors.
“The evidence will show that (GM Canada) achieved this result by ambush, deception and divide and conquer tactics” Stern said.
The former dealers are seeking as much as $750 million in compensation, but the amount would be reduced by money they previously received from GM Canada.
The automaker says former dealers covered by the class action received a total of $123 million for agreeing to shut down by the end of 2009 and that there was no room for negotiation.
The dealers also allege that GM Canada knew that law firm Cassels Brock & Blackwell LLP was in a conflict of interest because it represented both of them through their national association and the Canadian federal government, which had told the automaker that it must reduce the size of its dealership in order to receive billions of dollars in bailout funds.
GM Canada and Cassels Brock have disputed the allegations.
The case was originally filed by a former Toronto GM dealership, now called Trillium Motor World, on behalf of dealerships in Ontario, Alberta and P.E.I. that were told in May 2009 that their dealer agreements would be terminated before their normal expiration date.
The automaker slashed its operations to qualify for billions of dollars of government bailout money following the financial crisis.
Both Ottawa and the Ontario government acquired GM shares in 2009 after providing some $10.6 billion in aid to the automaker.