A Canadian judge has ruled that more than 200 former General Motors dealers who businesses were eliminated in a 2009 restructuring can sue the company as a group.
Ontario Superior Court Justice G.R. Strathy on Tuesday granted class action status to the lawsuit filed by more than 200 GM dealers whose franchises were eliminated during GM's financial crisis in 2009, according to a statement from two Toronto law firms representing the dealers. The lawsuit seeks $750 million in damages and alleges that GM of Canada violated provincial franchise laws in getting rid of the dealers.
Tony LaRocca, a spokesman for GM of Canada, said Wednesday the company does not comment on pending court cases.
The law firms, WeirFoulds LLP and Sotos LLP, said that one of the conditions set for GM getting Canadian government bailout funding was the elimination of a large number of dealerships. They say that many dealers agreed to termination packages only because GM threatened to file for insolvency if the dealers rejected the offers.
GM avoided insolvency proceedings in Canada, but it filed for bankruptcy protection in the U.S., where it also eliminated a large number of dealers. The company contended that its dealership network was developed when it had a much larger share of the market, and the numbers had to be thinned for the remaining dealers to be profitable.
The law firms said that Trillium Motor World Ltd., a former Toronto GM dealer, was picked to represent the terminated dealers in each province.
"The elimination of the dealers was a man-made disaster for hundreds of family-owned businesses forced to pay the price for GM's financial problems," David Sterns, one of the dealers' lawyers, said in a statement. "As a result of this decision, the dealers now have a chance to put the pieces back together and mount a recovery of their own."
Last month GM reported a $4.7 billion annual profit for 2010 and predicted that it would build on the performance in 2011. The company exited U.S. bankruptcy protection in July of 2009.