A common contract shared by dozens of individual
franchisees may be viewed as a perfect vehicle for class action
certification. In the last five years, there have been many
successful class action certification motions alleging breaches of
the Arthur Wishart Act (Franchise Disclosure), 2000, S.O.
2000, c. 3 (Wishart Act) against franchisors. In the
summer of 2010, the Ontario Court of Appeal held that "a
dispute between a franchisor and several hundred franchisees is
exactly the kind of case for a class proceeding"
(Quizno's Canada Restaurant Corporation v. 2038724 Ontario
Ltd. v. 2038724 Ontario Ltd., 2010 ONCA 466 at para.
While the common features of a franchise agreement may work to a
franchisor's detriment in resisting class action certification,
amendments made to Ontario's summary judgment rule, which came
into effect in January 2010, provide more options to
Justice Perell rejected arguments that Suncor was required to
pay claimed damages of $200 million due to an alleged failure to
deliver a disclosure document to franchisees, holding that a
"one year, no non-refundable franchise fee" exemption
prescribed by the Wishart Act applied.
It took less than one year from the launch of the claim to
obtain summary judgment. What is the moral of the story?
Franchisors should consider seeking summary judgment in franchise
class actions. By doing so, a class action can be stopped in its
tracks at an early stage, giving franchisors increased business
certainty in a cost-effective manner.
The plaintiff has appealed Justice Perell's decision to the
Ontario Court of Appeal.
Jean-Marc Leclerc is a partner in the
Litigation Department. Andraya Firth is a partner
who practises business law with an emphasis on franchising,
distribution, privacy, and e-commerce law.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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