GM dismisses ‘ambush’ allegations as ‘hyperbole’

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A lawyer for General Motors of Canada Ltd. has shot back at a group of former GM dealers, saying their class-action lawsuit against the company for shutting down their businesses amounts to nothing more than "hyperbole" and "rhetoric."

Kent Thomson, a lawyer acting for the car maker, made the comments Tuesday afternoon in his opening statement as a trial in the $750-million class-action suit got under way. The case, which involves about 180 dealers, dates back to GM Canada's move in 2009 to slash its dealership network in order to secure billions of dollars in government bailouts.

Earlier, a lawyer for the plaintiffs, David Sterns, told the Toronto court the car dealers faced an "ambush," a "wall of misinformation" and "divide-and-conquer" tactics from GM Canada when it gave them just six days to agree to wind-down their dealerships in May, 2009, and threatened that refusing to sign away their businesses could force the car company into bankruptcy protection.

"There is no substance to any of it," Mr. Thomson said of the plaintiffs' case against GM Canada. "The evidence will show that there was no ambush whatsoever, there was no deception, and at no time at all did [GM Canada] set out to divide and conquer anyone."

Mr. Thomson said GM Canada was under pressure to show the governments of Canada and Ontario that it was worth bailing out. After one restructuring plan was rejected in early 2009, GM Canada said needed to reduce its "bloated dealership network" by 42 per cent.

But the more than 200 dealers across Canada that GM Canada had targeted for closings, whom he repeatedly called "sophisticated businessmen," all consulted their own lawyers before signing the deals, Mr. Thomson said.

And they knew full well, he said, the money GM Canada offered in these wind-up agreements – on average $600,000 a dealership – was much more than the "goose egg" they stood to receive if GM Canada went into bankruptcy protection (GM's U.S. parent went into insolvency proceedings south of the border as part of the car giant's restructuring, but GM Canada did not).

Mr. Thomson also said dealers who agreed to give up their dealerships had all signed away the right to sue GM afterward for any violation of franchise laws, a move rendering this lawsuit dead on arrival: "They made fully informed decisions, with their eyes wide open."

The plaintiffs alleged GM Canada intentionally gave the dealers just six days – including the May long weekend – to sign away their businesses, some of which they had operated for decades, simply in order to avoid having to negotiate with them. The tight deadline, the ex-dealers alleged, violated franchise laws that allow 14 days for franchisees to consider new franchise agreements.

Mr. Sterns, a lawyer with Sotos LLP, also alleged that GM Canada misled the dealers: For example, he argued that the company's threat of bankruptcy-protection was hollow, as GM Canada had plans to allow dealers to sign their wind-down agreements even after filing for protection from its creditors.

The courtroom, and a foyer outside its doors, was packed with about two dozen of the former dealers and their families. Some guffawed quietly as GM Canada's lawyer spoke.

The case is being watched closely by many in the legal profession because the former GM Canada dealers are also suing Bay Street law firm Cassels Brock & Blackwell LLP, alleging the firm was in an undisclosed "direct conflict-of-interest" in acting both for the dealers and for the Canadian government on the auto-industry bailout. Cassels has denied this allegation.