Canadian Court Gives Green Light on Class Certification for Quiznos Franchisees

Ontario gives Quiznos franchisees ok for class action

TORONTO – On April 27, the Ontario Divisional Court approved for certification a Canada-wide class action lawsuit brought by Quiznos franchisees against their franchisor and its designated supplier, Gordon Food Services. The lawsuit alleges that Quiznos violated its franchise agreements and the federal Competition Act by acting together with Gordon Food to artificially inflate prices paid by Quiznos operators, for their supplies and that such practices violate laws requiring franchisors to deal fairly with their franchisees.

In considering the suitability of Quiznos franchisees asserting their claims as a class action, the court endorsed the franchisees’ right to seek justice as a group. The court gave numerous reasons for believing a class action “would be preferable to any alternative to resolving this claim.” Best advancing access to justice was among these reasons.

According to the decision, Quiznos has approximately 427 franchises in Canada. It states that in 2004 the Canadian franchisees began to believe that they were being overcharged by Quiznos for supplies and formed an association known as Denver Subs to seek information and action by Quiznos and Gordon Food to redress their concerns about the cost of supplies. When the main legal action was filed, more than half the franchisees joined the independent franchisee association. The group maintains that Quiznos and its supplier thwarted the franchisees’ attempts to redress overcharging and tried to intimidate them with aggressive and retaliatory conduct. The franchisees allege that over 40 percent of Quiznos franchises in Canada are operating at a loss and that overcharging on supplies is the single greatest problem affecting the franchisees.

Douglas Johnson, the lead plaintiff and president of Quiznos’ Canadian franchisee association, “It is vital that franchisees have access to competitively priced supplies in order to have a chance to succeed.  Without the ability to bring this case forward as a group, franchisees face insurmountable obstacles in enforcing their legal rights.  We now have a real chance to fix the problems of the past and help franchisees in the future.”

According to David Sterns of Sotos LLP, lead counsel for the franchisees, “This decision is huge step forward for the franchisees and a complete vindication of our arguments on certification.  We believe that this action goes to the very heart of the franchisees’ complaints and we can now pursue them as a strong and united class. Hopefully, now, there are brighter days ahead for these franchisees.”

Quiznos did not make comment but issued this statement to Blue MauMau regarding the court’s recent decision:

“The first decision handed down by the Ontario Superior Court of Justice in March 2008 dismissed certification of this suit. This most recent ruling by the Ontario Court of Appeals represents a split decision, with one judge agreeing with the initial ruling and two judges ruling in favor of certification.

Given this division of opinion, Quiznos will seek an appeal to this decision. Quiznos hopes to resolve this litigation and further focus our time and resources on what it most important – providing a quality product at an outstanding value to consumers and increasing franchise owner profitability.”

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