The Supreme Court of Canada denied an application for
leave to appeal brought by the plaintiff, bringing an end to this
seven-year, $100 million class action.
On October 6, 2016, the Supreme Court of Canada denied an
application for leave to appeal by the representative plaintiff, a
former Pet Valu franchisee. In March 2016, the plaintiff sought
leave to appeal the January 2016 decision of the Court of Appeal,
which dismissed the class action in its entirety. The claim
originated in 2009 and sought damages of approximately $100 million
against Pet Valu. A copy of the judgment of the
Supreme Court of Canada can be found here.
The class action was certified in 2011 with a focus on the issue
of whether Pet Valu was contractually obligated to share volume
rebates with its franchisees and, if so, whether it breached that
duty. In October 2014, Pet Valu obtained summary judgment
dismissing five of the seven certified common issues, dealing
primarily with those contractual issues. The motion judge found
"overwhelming evidence" that Pet Valu shared all volume
rebates with its franchisees after adding a reasonable mark-up.
A summary of the decision can be found here.
In January 2016, the Court of Appeal dismissed the two remaining
certified common issues, which related to the statutory duty of
good faith and fair dealing under section 3 of the Wishart
Act. Among other things, the Court of Appeal held that a
failure to disclose allegedly material facts in a disclosure
document does not constitute a breach of the duty of good faith in
the performance and enforcement of a franchise agreement. The Court
also held that the duty of good faith does not obligate a
franchisor to disclose information necessary for franchisees to
verify whether it is meeting its obligations under a franchise
agreement. The unanimous decision of the Court of Appeal resulted
in an across-the-board victory by Pet Valu in the defence of all
claims raised by the plaintiff ex-franchisee.
A summary of the Court of Appeal decision can be found
The Court also awarded costs of the summary judgment motion to
Pet Valu in the amount of approximately $1.7 million. In awarding
costs, the motion judge referred to the "length and
multi-layered complexity of this litigation, and the fact that the
damages claim was always in the tens of millions of dollars."
decision can be found here.
As a result, the unanimous decision of the Court of Appeal
remains a leading appellate statement on the scope, content and
limitations of the duty of good faith and fair dealing under
section 3 of the Wishart Act. Franchisors and franchisees
should carefully review the decision for substantive guidance
regarding the obligations imposed under that duty.
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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