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Labour & Employment Law Blog

GM US May Hold Duties to Franchisees of GMCL

Zeilikman Law

Zeilikman Law

Case Summary

In a recent decision, the Ontario Court of Appeal overruled a lower court’s finding that GM US could not owe a duty of good faith and fair dealing under the Arthur Wishart Act. While the decision itself is limited in its application, it leaves the issue to be developed in future cases.

THE ARTHUR WISHART ACT

The Arthur Wishart Act (the “Act”) governs the relationship between franchisors and franchisees. It imposes certain duties on franchisors, for instance, to disclose to prospective franchisees all “material facts” relevant to the franchise, and to exercise a duty of good faith and fair dealing in the management of the franchise. The duty of good faith and fair dealing, as a general concept, requires that franchisors enforce franchise agreements in a manner that does not unfairly prejudice franchisees. Given the unequal bargaining power between franchisee and franchisor, the Act is thought to be a good way to limit franchisors’ ability to exploit franchisees via the franchise agreement.

THE FACTS

Sometime around 2009 GM commenced bankruptcy proceedings, resulting in a reorganization wherein GM assets were transferred to a new company, General Motors Company and General Motors LLC (collectively GM US). The plaintiff/appellants are long-standing dealers of GM vehicles in the Greater Toronto Area who hold dealer agreements with General Motors Canada Limited (GMCL). GMCL was subsumed within GM US. After the reorganization, GM US took several actions aimed at increasing the companies overall profitability. The plan included a restructuring of the GMCL dealer network, the introduction of a fresh-line-up of vehicles and the discontinuance of Pontiac brand vehicles and medium-duty trucks. The restructuring was effected by the Dealer Sales and Service Agreements (DSSA), and executed between GMCL and various dealers across the GTA. The appellants sued, alleging that GMCL and GM US breached their duty to act fairly and in good faith under the Act. The appellants argued that the GM US and GMCL structured its dealer network and products in order to maximize their profit per vehicle at the direct expense of the appellants’ profits. GM US brought a motion seeking to have the claim dismissed before trial on the grounds that there was no reasonable cause of action as against GM US because, as a parent company, GM US was not party to the DSSA. The trial judge granted the motion and dismissed the action as against GM US without leave to amend. The dealers appealed.

OUR THOUGHTS

The question to be answered on an appeal of this kind was whether “it is plain and obvious that the claim cannot succeed.” Benotto J.A. of the Court of Appeal held that the motion judge erred in its application of the law and the interpretation of the facts. The evidence suggested the facts, if true, could support the argument that GM US owed a duty to its franchisees due to the fact that they exercised significant operational control over the franchisees and because the franchisees had an ongoing financial obligation to GM US. It was irrelevant at this stage to consider the novelty of the issue or whether the link between GM US and the franchisees is tenuous. The issue should be explored at trial with full appreciation of the facts as they apply to the law.

As such, the decision does not do much by way of changing the law in Canada. It does, however, leave the door open for courts to extend the duty of good faith and fair dealing to the parent companies of franchisors. The concern in extending this duty is that it may become very difficult for corporate entities to predict if and when they have duties to franchisees by virtue of the fact that they hold an interest in franchisor corporations. Courts are generally reluctant to extend duties in the context of franchise agreements between parties with little relation to each other, as this fosters unpredictability and it becomes much more difficult to draw the line. Nevertheless, it remains important to keep in mind the power imbalance between franchisees and franchisors. As such, it may be in the public interest to further extend the duties owed by franchisors to large corporate entities that in turn control these franchisors. It will be interesting to see how the court decides this case and whether this decision will hold any implications for franchise law.

The above article is for general information purposes only, does not constitute legal advice or create a solicitor-client relationship. Because each case is unique and factually driven, if you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere. We represent clients in the Greater Toronto Area including Toronto, North York, Markham, Vaughan, Thornhill, Newmarket, Aurora, Brampton, Mississauga, Barrie, Ajax, Whitby, Pickering and Oshawa.

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Legal Receptionist

Zeilikman Law is an employment law firm located in Vaughan, Ontario. We are looking to hire a legal receptionist to join our firm. Preference will be given to candidates who have experience working as a receptionist at another law firm.

Location: Vaughan, Ontario.

Start Date: Immediately.

Hours: Monday to Friday, 9 am to 5 pm. Full time. In-person only. This is not a remote work position.

Wages: 35,000 to 40,000 per year.

Duties and Responsibilities:

  • Manage our firm’s multi-line telephone system to receive incoming calls.  Screen incoming telephone call inquiries to determine the nature of the telephone call and provide standard information related to our legal services.  Take and deliver messages and route incoming telephone calls to the appropriate staff person.
  • Answer general inquiries coming from the firm’s social media and website email.
  • Welcome in-person visitors upon arrival.  Direct visitors to the appropriate staff person and / or office or boardroom.
  • Organize in-person visitor schedule to prevent overlap and multiple bookings.
  • Receive, sort, and distribute daily mail and deliveries.
  • Arrange for couriers.
  • Keep front reception, kitchenette area and boardroom tidy.
  • Perform various clerical duties such as filing, photocopying, and faxing on an as-needed basis.
  • Process client or other payments.
  • May be asked to run minor errands outside of office such as attending post office to arrange a courier or pick up mail.
  • May be asked to assist other law clerks or lawyers of the firm as required and as appropriate.
  • Any other basic administrative duties or tasks as deemed appropriate.

Required Skills:

  • Basic knowledge of general office procedures including filing, faxing, and printing and copying.
  • Basic word processing computer skills.
  • Proficient in receptionist and telephone practices, etiquette, and decorum.
  • Professional attitude and appearance.
  • Excellent organizational skills.
  • Positive customer service attitude is a must.
  • Must be able to maintain confidential and sensitive information.

Education and Experience:

  • Highschool diploma or equivalent.
  • 1 – 2 years’ experience in an office setting with an emphasis in accounting, reception or clerical work is required.   We would prefer experience in a law firm environment.

Applications for this position should be sent via email to jennifer@zeilikmanlaw.com. All applications should include a cover letter, resume and at least two references. Only successful candidates will be contacted.