Cassels Brock & Blackwell LLP is suing close to 150 law firms and lawyers across Canada as it faces conflict-of-interest allegations in a closely watched lawsuit.
The Bay Street law firm is a defendant in a $750-million class-action suit launched by more than 200 former GM car dealers against General Motors of Canada Ltd. over the rapid-fire shutdown of their businesses in 2009, as the car maker sought a government bailout and teetered on the brink of bankruptcy.
That original lawsuit accuses GM of using “shock and awe” tactics to pressure the dealers into agreeing to close their businesses in just a few days, allegedly violating franchise laws. The suit also alleges that Cassels had an “undisclosed conflict-of-interest” in the case.
The suit alleges that Cassels advised both the auto dealers’ association and the Canadian government on the matter, as Ottawa was allegedly pressuring GM to cut its number of dealerships to receive a bailout and avoid bankruptcy. The allegations have not been proven in court.
In response, Cassels has filed a claim against almost 150 lawyers and law firms across Canada.
Cassels’ claim targets the lawyers from whom the individual GM dealers were required to seek independent advice when they were given just six days, over the Victoria Day weekend in May, 2009, to accept their “wind-down agreements” from General Motors.
Cassels’ claim, filed late last year, demands that any damages it is forced to pay to the auto dealers should be instead covered by this list of lawyers; the claim also seeks legal costs for Cassels.
The list ranges from Cassels’ Bay Street rivals to small-town solo lawyers, and other unknown lawyers it identifies as “John Doe.” If any harm were done, the claim alleges, it was because of those lawyers’ “negligence,” not Cassels.
The class-action suit’s allegation that Cassels was wrong in acting both for the federal government and for the Canadian Automobile Dealers Association has attracted wide attention in legal circles, because it raises fundamental questions about conflicts of interest.
The way the profession deals with conflicts has been a source of contention for years, especially as law firms merge into larger entities more likely to end up with clients with opposing interests.
David Sterns, a Toronto class-action lawyer with Sotos LLP acting for the GM dealers in their lawsuit, calls Cassels’ move to sue nearly 150 lawyers unprecedented.
“For one law firm to be suing that many other law firms is pretty unusual,” Mr. Sterns said.
Cassels declined Tuesday to comment on the case. Lawyers and law firms on the list contacted on Tuesday also declined to comment.
Claims such as this one are usually handled by the insurers that provide lawyers with their malpractice policies.
The original case against GM and Cassels was certified, or given a green light as a class action, by Mr. Justice George Strathy of the Ontario Superior Court last year.
Judge Strathy said in his decision that he recognized the $750-million action may be “an embarrassment” to the Bay Street law firm. But he refused a request that the case against Cassels be put on hold pending the result of the fight against GM.
Both GM and Cassels lost appeals of the certification decision in Divisional Court, in rulings released in March. Cassels is now seeking permission to appeal that ruling before the Ontario Court of Appeal.
Jerry Gazarek, 71, lost both of his family dealerships in Pickering, Ont., east of Toronto, where he had sold cars for 32 years. He said he only had a few days to find a local lawyer to look over the wind-down agreements from GM over the holiday weekend in May, 2009, which he said was not enough time.
He said he had spent more than $5-million on renovations to his main dealership at GM’s behest in 2006. And the $600,000 he received from GM under the wind-down agreement, he said, was barely enough to cover the costs of terminating his nearly 100 employees.
Mr. Gazarek said that while he decided to sell his real estate to cover his costs and retire, some of his fellow dealers ended up in much worse financial shape.
“They gave us three or four working days to surrender our lives,” he said. “ ‘Get independent legal advice by your local solicitor and get it in by Tuesday or we’ll go bankrupt and you won’t get anything.’ Talk about a gun to your head.”