This class action is brought on behalf of all Canadian Midas dealers. The claim alleges that Midas Canada breached its duties of good faith and fair dealing to the dealers by eliminating a preferential purchasing system which was an integral part of the Midas franchise system.

In 1980, Midas Canada came to its dealers proposing a new royalty arrangement: the dealers would pay a higher royalty fee (10% of gross sales instead of the previous rate of 5%). In return, dealers would receive a discount on products purchased through Midas’ wholly-owned distribution network. The discount was equal to 14.5% off the wholesale price that Midas gave to its other customers. This gave the Midas dealers a significant competitive advantage. The discount directly offset the increased royalty rates under the new franchise agreement and was to the net benefit of the dealers.

Midas dealers enjoyed this advantageous discount for 20 years. In 2001, Midas announced that it would stop noting the discount on invoices but would continue to apply it behind the scenes. In 2003, Midas ceased its parts manufacturing and distribution network altogether. Dealers were then required to purchase products from other sources. With the elimination of the Midas network came the elimination of the 14.5% discount on products that the dealers had bargained for back in 1981. The 10% royalty rate, however, remained unchanged.

The plaintiff alleges that Midas Canada breached its duty to treat the dealers in good faith by keeping the royalty rate the same without providing an adequate replacement for the 14.5% discount when it exited manufacturing and distribution in 2003.

The Ontario Superior Court of Justice certified the action as a class proceeding in 2009. The class is defined as all “corporations, partnerships and individuals carrying on business in Canada as franchisees on both July 11, 2003 and May 31, 2007 under franchise agreements with the defendant, Midas Canada Inc”. The case is proceeding towards a trial of the common issues certified by the Court.

Notice to class

• Notice to class (Jul 28, 2009)

Pleadings

• Statement of claim (Jun 29, 2007)
• Statement of defence (Oct 17, 2009)

Court Decisions and Orders

• Reasons of the Ontario Court of Appeal upholding the decision of Justice Cullity (Jul 6, 2010)
• Order preventing Midas from enforcing release from liability provisions (Oct 16, 2009)
• Reasons of Justice Cullity regarding release from liability provisions (Oct 16, 2009)
• Certification order (Mar 26, 2009)
• Reasons of Justice Cullity granting certification (Mar 26, 2009)
• Reply to statement of defence (Dec 19, 2009)

More information

• Class Action Update December 20, 2010
• Class Action Update May 10, 2010
• Midas Class Action Certified – Developments in the Law on System Change by Allan D.J. Dick
• Class Action FAQ

• July 6, 2010: The Ontario Court of Appeal held that releases contained within some franchisees’ franchise renewals were unenforceable.
• March 26, 2009: The Ontario Superior Court of Justice certified the action as a class proceeding. The class is defined as all “corporations, partnerships and individuals carrying on business in Canada as franchisees on both July 11, 2003 and May 31, 2007 under franchise agreements with the defendant, Midas Canada Inc”

Andy Seretis
t: 416.977.5333 x 306
f: 416.977.0717
e: aseretis@sotosllp.com

Allan Dick
t: 416.977.5333 x 309
f: 416.977.0717
e: adjdick@sotosllp.com

David Sterns
t: 416.977.5333 x 313
f: 416.977.0717
e: dsterns@sotosllp.com

John Yiokaris
t: 416.977.5333 x 323
f: 416.977.0717
e: jyiokaris@sotosllp.com