Former GM dealers claim automaker ambushed them

General Motors Canada made about 180 auto dealers sign wind-down agreements during the financial crisis using “ambush, deception, and divide-and-conquer tactics,” said counsel for the dealers in his opening statement in the Ontario Superior Court this morning.

GM gave the dealers just six days to obtain legal advice and sign the agreement when as a franchisor, the law required it to give them at least 14 days to mull over the deal, David Sterns told the court on the first day of the $750-million class action lawsuit against GM.

The dealers received no notice they’d be receiving the wind down agreements when other parties, such as the federal and provincial governments, were aware of what was to come, Sterns said.

The dealers were in “a state of shock” when they received the letter on May 20, 2009 advising them of the wind down plans, he said, adding the reason behind the delay to get the information to them wasn’t some “act of God” but GM’s own convenience.

On the first day of the much-anticipated hearing, observers filled up the courtroom quickly, and the doors had to remain open to allow the rest of the crowd to follow the proceedings from an extra space outside the courtroom.

In his opening statement, Sterns also alleged the letter GM sent to the dealers was misleading in many ways. Dealers were lead to believe GM’s government bailout package was subject to a 45-per-cent reduction of its dealer network by the end of 2010, said Sterns.

“General Motors’ message to the dealers was that the government was forcing their hands to make the cuts by the end of 2010,” he said, when in fact, “the government at no time required General Motors to reduce the dealership by the end of 2010 as a condition of the bailout.”

GM also said the wind-down offer was subject to a 100-per-cent acceptance by the dealers, but “the evidence will show a 100 per cent acceptance was never required,” added Sterns.

GM also refused to reveal to dealers which one of them had received the wind-down notice, which was a breach of their right to association according to Stern.

Cassels Brock & Blackwell LLP is part of the proceedings for allegedly acting in conflict of interest when it represented the Canadian Automobile Dealers Association while advising the government in the bailout talks as well.

The case against Cassels is “in the nature of loss of chance,” said Sterns. “If the class members had been represented by competent and unconflicted counsel, what could they have achieved?”

Cassels and GM have not yet made their opening statements.

The hearing continues in Toronto.

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