An Ontario court granted class action status yesterday to a lawsuit by over 200 former Canadian GM auto dealers terminated in connection with GM’s 2009 auto bailout by the Governments of Canada and Ontario.

The lawsuit, seeking $750 million in damages, claims that General Motors of Canada Limited (GM), a subsidiary of General Motors Company, breached provincial franchise laws in eliminating the dealerships. Also named in the suit is Cassels Brock & Blackwell LLP (Cassels), a major Canadian law firm retained to act for the Canadian GM dealers in anticipation of a GM restructuring.

Concluding that justice would best be served by allowing the dealers to proceed as a class action, Justice Strathy remarked:  “[i]t is not realistic to think that an individual franchisee, who has experienced the loss of their business, is financially or psychologically equipped to engage in protracted, complicated and very expensive litigation with one of the largest corporations in North America and a major Canadian law firm.” (Para. 161)

Regarding the claims against Cassels, the judge commented, “[t]his is not a typical solicitor’s negligence case” and that the case raises “important issues concerning lawyers’ duties to their clients, particularly in the context of group retainers.” (Para. 164)

David Sterns, one of the lawyers for the lead plaintiff, stated:

The elimination of the dealers was a man-made disaster for hundreds of family-owned businesses forced to pay the price for GM’s financial problems.  As a result of this decision, the dealers now have a chance to put the pieces back together and mount a recovery of their own.

Trillium Motor World Ltd., a former GM dealer in Toronto, has been designated to represent the terminated dealers in every province.

For more information contact David Sterns at dsterns@sotosllp.com or John Sotos at jsotos@sotosllp.com. The dealers are jointly represented by the Toronto law firms WeirFoulds LLP and Sotos LLP.

A copy of the decision is available at: http://www.sotosllp.com/wp-content/uploads/2011/03/reasons-for-decision-certification.pdf

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