A recent Ontario Court of Appeal decision will lower the original $45 million in damages Cassels Brock & Blackwell LLP was ordered to pay in a 2015 General Motors of Canada Ltd. dealer class action, but the final amount has yet to be determined.
The appeal court’s decision in Trillium Motor World Ltd. v. Cassels Brock & Blackwell LLP was released July 4. Cassels Brock had appealed the original decision, with the appellate judge stating in her decision that the firm “raises legal issues relating to liability, the availability of an aggregate damages award, and the trial judge’s damages assessment.”
As Canadian Lawyer reported in 2015, an Ontario Superior Court judge awarded damages against Cassels Brock for breach of fiduciary duty, breach of contract and professional negligence. Justice Thomas McEwen found Cassels Brock owed contractual and fiduciary duties to some or all of GM Canada dealers in the class.
Cassels Brock submitted on appeal that the trial judge erred in his findings concerning the scope of the dealer retainer; by finding that Cassels Brock breached its duties to the class members; in his treatment of the Saturn dealers’ claims; by inferring causation; by awarding aggregate damages; and in his quantification of damages.
In a statement, Cassels Brock said that although the Court of Appeal did not accept a number of the arguments made by the firm on appeal, “we believe that we have acted appropriately and professionally in our handling of this matter, respecting our duties to our clients and acting in a manner consistent with our retainers and our clients’ instructions. With this stage of appeal now concluded, we look forward to building on our reputation as a dedicated, trusted advisor to our many clients.”
The facts of the case stem from May 2009, when Cassels Brock was retained by the class members — including Trillium, which became the representative plaintiff — to protect their interests in restructuring of the dealer network and represent them in related proceedings. About 200 GM Canada dealers were eliminated during the federal auto bailout, and the class action was seeking $750 million in damages on behalf of those dealers. Cassels Brock had been retained to represent Canadian dealers in a GM Canada restructuring bankruptcy.
In his 2015 decision, McEwen wrote: “Cassels takes the position that there was only ever the potential for a conflict to arise on account of the two retainers. In other words, Cassels accepts that there was indeed a risk that immediate legal interests of Industry Canada and the GMCL dealers would be directly adverse.”
Along with Cassels Brock’s appeal of the trial decision, Trillium filed a cross-appeal, arguing the class should have received more damages. It contended the value of the dealers’ lost chance was $77.3 million, not $45 million as found by the trial judge. Trillium also argued that the trial judge’s supplementary ruling should not be considered.
In January 2016, after the release of the trial decision, the parties met before the trial judge to settle the terms of the judgment, and it emerged that the trial judge may have misunderstood the composition of the class, the appeal decision reads.
“He had assumed that all 181 class members were also Participation Form Dealers, and thus Cassels’ clients; in fact, some of the class members may have been Call Dealers who listened in on the May 24 conference call but did not sign a participation form or send in money to the DSC,” Cronk wrote.
“In the result, by supplementary reasons dated March 22, 2016, the trial judge directed that the formal judgment provide that the damages awarded ($45 million) may be reduced on further motion to the Superior Court, if necessary, following the final disposition of any appeal from the trial judgment, to settle the process for determining the number and identity of the dealers entitled to share in that award and the calculation of those damages.”
Cronk dismissed Trillium’s cross-appeal.
“My overall reaction is the appeal decision speaks at length to the importance or the significance of a really large and strong set of factual findings from the trial judge, and that those are carefully reviewed and affirmed on this appeal decision,” says Michael Statham, managing partner at WeirFoulds LLP and counsel for Trillium.
Sotos LLP also served as counsel for Trillium on the appeal.
Cronk upheld Cassels Brock’s submission that the trial judge erred in his quantification of the damages. She agreed the amount contained calculation errors.
Cronk wrote that “the trial judge calculated the lost chance as the difference between the amount approved and the amount paid: $218 million - $126 million = $92 million.”
General Motors Corp. had approved up to $218 million for its subsidiary, GM Canada, to pay out the estimated 290 terminated dealers, and $126 million was the amount actually paid out to the 202 dealers who accepted the wind-down agreement offers.
Cassels argued, and Cronk agreed, that the second number should have been $143.5 million — the amount GM Canada offered to the terminated dealers under the WDAs, based on the actual final count of 240 terminated dealers.
“Neither side in hypothetical negotiations could have known that 38 terminated dealers would reject the WDAs,” reads the decision. “The offers on the table totalled $143.5 million. Unbeknownst to the dealers, GMCL had $218 million to spend. The trial judge should have calculated the value of the lost chance to negotiate successfully as the difference between the money approved for the WDAs and the money offered: $218 - $143.5 = $74.5 million.”
This reduces the overall starting point for the quantification of the aggregate damages award to $74.5 million, as opposed to the trial judge’s finding of $92 million.
“We are pleased that the Court of Appeal agreed with the firm’s submissions that the trial judge’s damages assessment was flawed and thus substantially reduced the amount of damages payable,” Cassels Brock said in a statement.
Marie-Andrée Vermette, partner at WeirFoulds and also counsel for Trillium, says even though they would have obviously preferred a higher number, “generally speaking, even on the damages part except for that one correction of one number, the court also affirmed the trial judge’s findings.”
She adds that the Court of Appeal endorsed the trial judge’s decision on liability and “we were happy about that.”
The appeal decision reads that the trial judge “properly exercised his jurisdiction to consider the issue, and sensibly left it open to revisit the calculation of damages following the release of this court’s decision.”
“As a result of the reasons of the trial judge that were issues after his main reasons, we have to go back before him — that was the case even before the appeal — to determine what the final number would be, which will be influenced by the number of dealers that actually retained Cassels Brock back in May of 2009,” says Vermette.
The appeal court’s decision in Trillium Motor World Ltd. v. Cassels Brock & Blackwell LLP was released July 4. Cassels Brock had appealed the original decision, with the appellate judge stating in her decision that the firm “raises legal issues relating to liability, the availability of an aggregate damages award, and the trial judge’s damages assessment.”
As Canadian Lawyer reported in 2015, an Ontario Superior Court judge awarded damages against Cassels Brock for breach of fiduciary duty, breach of contract and professional negligence. Justice Thomas McEwen found Cassels Brock owed contractual and fiduciary duties to some or all of GM Canada dealers in the class.
Cassels Brock submitted on appeal that the trial judge erred in his findings concerning the scope of the dealer retainer; by finding that Cassels Brock breached its duties to the class members; in his treatment of the Saturn dealers’ claims; by inferring causation; by awarding aggregate damages; and in his quantification of damages.
In a statement, Cassels Brock said that although the Court of Appeal did not accept a number of the arguments made by the firm on appeal, “we believe that we have acted appropriately and professionally in our handling of this matter, respecting our duties to our clients and acting in a manner consistent with our retainers and our clients’ instructions. With this stage of appeal now concluded, we look forward to building on our reputation as a dedicated, trusted advisor to our many clients.”
The facts of the case stem from May 2009, when Cassels Brock was retained by the class members — including Trillium, which became the representative plaintiff — to protect their interests in restructuring of the dealer network and represent them in related proceedings. About 200 GM Canada dealers were eliminated during the federal auto bailout, and the class action was seeking $750 million in damages on behalf of those dealers. Cassels Brock had been retained to represent Canadian dealers in a GM Canada restructuring bankruptcy.
In his 2015 decision, McEwen wrote: “Cassels takes the position that there was only ever the potential for a conflict to arise on account of the two retainers. In other words, Cassels accepts that there was indeed a risk that immediate legal interests of Industry Canada and the GMCL dealers would be directly adverse.”
Along with Cassels Brock’s appeal of the trial decision, Trillium filed a cross-appeal, arguing the class should have received more damages. It contended the value of the dealers’ lost chance was $77.3 million, not $45 million as found by the trial judge. Trillium also argued that the trial judge’s supplementary ruling should not be considered.
In January 2016, after the release of the trial decision, the parties met before the trial judge to settle the terms of the judgment, and it emerged that the trial judge may have misunderstood the composition of the class, the appeal decision reads.
“He had assumed that all 181 class members were also Participation Form Dealers, and thus Cassels’ clients; in fact, some of the class members may have been Call Dealers who listened in on the May 24 conference call but did not sign a participation form or send in money to the DSC,” Cronk wrote.
“In the result, by supplementary reasons dated March 22, 2016, the trial judge directed that the formal judgment provide that the damages awarded ($45 million) may be reduced on further motion to the Superior Court, if necessary, following the final disposition of any appeal from the trial judgment, to settle the process for determining the number and identity of the dealers entitled to share in that award and the calculation of those damages.”
Cronk dismissed Trillium’s cross-appeal.
“My overall reaction is the appeal decision speaks at length to the importance or the significance of a really large and strong set of factual findings from the trial judge, and that those are carefully reviewed and affirmed on this appeal decision,” says Michael Statham, managing partner at WeirFoulds LLP and counsel for Trillium.
Sotos LLP also served as counsel for Trillium on the appeal.
Cronk upheld Cassels Brock’s submission that the trial judge erred in his quantification of the damages. She agreed the amount contained calculation errors.
Cronk wrote that “the trial judge calculated the lost chance as the difference between the amount approved and the amount paid: $218 million - $126 million = $92 million.”
General Motors Corp. had approved up to $218 million for its subsidiary, GM Canada, to pay out the estimated 290 terminated dealers, and $126 million was the amount actually paid out to the 202 dealers who accepted the wind-down agreement offers.
Cassels argued, and Cronk agreed, that the second number should have been $143.5 million — the amount GM Canada offered to the terminated dealers under the WDAs, based on the actual final count of 240 terminated dealers.
“Neither side in hypothetical negotiations could have known that 38 terminated dealers would reject the WDAs,” reads the decision. “The offers on the table totalled $143.5 million. Unbeknownst to the dealers, GMCL had $218 million to spend. The trial judge should have calculated the value of the lost chance to negotiate successfully as the difference between the money approved for the WDAs and the money offered: $218 - $143.5 = $74.5 million.”
This reduces the overall starting point for the quantification of the aggregate damages award to $74.5 million, as opposed to the trial judge’s finding of $92 million.
“We are pleased that the Court of Appeal agreed with the firm’s submissions that the trial judge’s damages assessment was flawed and thus substantially reduced the amount of damages payable,” Cassels Brock said in a statement.
Marie-Andrée Vermette, partner at WeirFoulds and also counsel for Trillium, says even though they would have obviously preferred a higher number, “generally speaking, even on the damages part except for that one correction of one number, the court also affirmed the trial judge’s findings.”
She adds that the Court of Appeal endorsed the trial judge’s decision on liability and “we were happy about that.”
The appeal decision reads that the trial judge “properly exercised his jurisdiction to consider the issue, and sensibly left it open to revisit the calculation of damages following the release of this court’s decision.”
“As a result of the reasons of the trial judge that were issues after his main reasons, we have to go back before him — that was the case even before the appeal — to determine what the final number would be, which will be influenced by the number of dealers that actually retained Cassels Brock back in May of 2009,” says Vermette.
