TORONTO - 215 General Motors auto dealers in Canada filed a $750 million class action lawsuit yesterday in Ontario's Superior Court of Justice. The dealers were terminated as a result of last year’s auto bailout program. They claim that GM Canada, a subsidiary of its U.S.-based General Motors Company, breached franchise laws in connection with the agreements with which GM obtained from the dealers it selected for elimination as part of the federal bailout.

Also named in the suit is Cassels Brock & Blackwell LLP (CBB), a Canadian law firm which had been retained in advance to represent Canadian dealers in a GM restructuring or bankruptcy. The claim alleges that the firm failed to disclose to the dealers that it was simultaneously acting for the Canadian Government in the GM auto bailout. The Canadian Government insisted that GM scale back its dealership network as a condition of its multi-billion dollar bailout funding. The bailout was the largest government subsidy given to a corporation in Canadian history.

The lawsuit asserts that after GM presented a termination package to the affected dealers, attorneys at Cassels Brock & Blackwell told them to consult their individual lawyers in the limited time which they had to respond to the package. Unable to negotiate as a group, and without group legal counsel, the vast majority of dealers signed back the termination package as presented by GM rather than risking GM filing for a formal insolvency proceeding as GM threatened to do if the dealers rejected the offer. The dealers had between two and four business days to accept the package which was offered.

David Sterns, Sotos LLP, one of the lawyers for the lead plaintiff, stated, “These dealers include some of the best in the country. The offer they were handed gave them a fraction of what their businesses were worth, but they had no collective representation and precious little time”.

The claim states that the dealers “were the only significant stakeholders in the GM auto bailout which were denied a voice in the restructuring.” Regardless, it is claimed that many of the dealers have a right under provincial franchise laws to cancel the agreements.

GM avoided a formal insolvency proceeding in Canada, unlike in the United States where its parent company reduced its dealership network through a formal Chapter 11 filing.

The representative plaintiff, Trillium Motor World Ltd., brought the action under Ontario’s Class Proceedings Act, 1992. The claim seeks court certification to represent all 215 similarly affected dealers in Canada.