CFA Franchise Law Day 2016: Recent Franchise Case Law Developments

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1 CFA Franchise Law Day 2016: Recent Franchise Case Law Developments Chris Horkins, Cassels Brock and Blackwell LLP Jean-Marc Leclerc, Sotos LLP January 28, 2016

2 Trillium Motors World Ltd. v. General Motors of Canada Ltd.

3 Trillium Motors World Ltd. v. General Motors of Canada Ltd. Facts: GM, on the brink of bankruptcy, commenced restructuring plan to reduce dealership network by 240 locations in order to avoid seeking creditor protection under CCAA GM attempted to terminate these dealerships with Notices of Non-Renewal and Wind-Down Agreements Franchisees commenced class-action against GM for breaching its common law and statutory duties

4 Trillium Motors World Ltd. v. General Motors of Canada Ltd. Key Takeaways: The duty of good faith and fair dealing must be viewed through the lens of the commercial reality of the circumstances No positive obligation for franchisors to facilitate or encourage association. Just stay out of the way No ongoing positive obligation of disclosure, either under section 3 or 5 of the Wishart Act Beware choice of law clauses if you select Ontario law, the Wishart Act applies

5 Ontario Ltd. v. Cora Franchise Group Inc.

6 Ontario Ltd. v. Cora Franchise Group Inc. Facts: Franchise agreements ( FA ) required general release of franchisor from all claims as condition precedent to assignment of FA Franchisees wanted that section of FA declared void and unenforceable The release was found to be void, as it interfered with the statutory rights of franchisees

7 Ontario Ltd. v. Cora Franchise Group Inc. Key Takeaways: Be careful of requiring franchisees to give broad, general releases; release must carefully carve out claims that cannot be released pursuant to s. 11 of the Wishart Act If the contract contains a requirement to give a general release, the court will strike it down and say that no release needs to be given by the franchisee

8 Ontario Inc. v. Pet Valu Canada

9 Ontario Inc. v. Pet Valu Canada Facts: Class action alleged that PV was contractually obligated to share volume rebates with franchisees obtained as a result of PV s purchasing power. Summary judgment decision found PV had duty to disclose change in circumstances re purchasing power and volume rebates. On appeal, court ruled that PV did not breach any contractual or statutory duties.

10 Ontario Inc. v. Pet Valu Canada Key Takeaways: The duty of good faith and fair dealing may impose a duty of ongoing disclosure, the duty is limited: No requirement to disclose for franchisees to determine whether the franchisor is meeting its obligations. Failure to include material facts in a disclosure document is not a breach of section 3. Non-disclosure must have an adverse affect to be a breach of section 3. The information must relate to the performance and enforcement of the franchise agreement.

11 Dunkin Brands Canada Ltd. v. Bertico Inc.

12 Dunkin Brands Canada Ltd. v. Bertico Inc. Facts: Group action by 21 Dunkin Donuts Quebec franchisees alleging DD failed to protect them from heightened competition from Tim Hortons. Trial judge found DD had breached obligation to protect and enhance the brand, awarded $16.4 million. Quebec CA upheld but reduced damages to $10.9 million.

13 Dunkin Brands Canada Ltd. v. Bertico Inc. Key Takeaways: Decision is based on civil law principles and not binding outside of Quebec but could be applied elsewhere Good faith comes in many different forms can you draft around the problem? Follow good, basic business practices and don t abandon the system! (Sarcasm) Good faith facts are critical. Be the good guy.

14 CFA Franchise Law Day 2016: Recent Franchise Case Law Developments Cassels Brock & Blackwell LLP Suite 2100, Scotia Plaza Suite 2200, HSBC Building 40 King Street West 885 West Georgia Street Toronto, ON Canada M5H 3C2 Vancouver, BC Canada V6C 3E8 Tel: Tel: Fax: Fax: CASSELS BROCK & BLACKWELL LLP. ALL RIGHTS RESERVED. This document and the information in it is for illustration only and does not constitute legal advice. The information is subject to changes in the law and the interpretation thereof. This document is not a substitute for legal or other professional advice. Users should consult legal counsel for advice regarding the matters discussed herein.