Legal news and trends for Canadian in-house counsel and c-suite executives
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particularly intrigued with the decision in 405341 Ontario Ltd. v. Midas Canada Inc., wherein the Ontario Court of Appeal upheld a class action deci- sion that alleged the parent company breached its duty of good faith and fair dealing with its franchisees by eliminat- ing a preferential purchasing system. The franchisees had launched a class action against the company, alleging it had violated its franchise agreement by outsourcing to a third-party product supplier. The franchisees won their case in the Ontario Divisional Court but the parent company appealed — and lost. The case served as insight for many in-house counsel, particularly in terms of class actions. "I know there were many lawyers who followed this case as we were all trying to see where the bar is being set," says Vukovich. While the facts of the case were specific to Midas franchise owners, other lawyers fol- lowed the case because it was one of the first class actions that received a court ruling. "It's an important case and one that everyone was interested in seeing the outcome," Vukovich says. Ultimately, keeping an eye on the courts and knowing how to keep on top of the related legal issues is an ongoing learning experience for all in-house counsel, he says. Jonathan C. Lisus, a partner at Lax O'Sullivan Scott Lisus LLP, says besides Midas, 1518628 Ontario Inc. v. Tutor Time Learning Centres LLC is also important because the Ontario Superior Court noted the Arthur Wishart Act's main intent is to protect franchisees. Lisus also says in the Ontario Superior Court matter 1318214 Ontario Ltd. v. Sobeys, franchisees successfully prohibited Sobeys Capital Inc. from terminating franchise agreements with a group of franchise owners within the same company based on their right to associate under the act as franchisees. Lisus warns lawyers who serve fran- chises as either in-house or otherwise. "Litigation places the relationship between the parties under a micro- scope. The imposition of a judicial microscope on any relationship can yield unexpected and sometimes arti- ficial results," he wrote in an accompa- nying paper to his OBA presentation. "However, when the microscope is fitted with a lens ground to a pre- scription premised on vulnerability and an inequality of bargaining power the potential for adverse consequenc- es for the franchisor is substantially enhanced. In these circumstances, counsel would do well to pay close regard to the lessons recent develop- ments teach and to keep a close eye on the opportunities and threats pre- sented by the Court's concern for pro- portionality and access to justice." IH 26 • DECEMBER 2010/JANUARY 2011 ntitled-1 1 INHOUSE 11/30/10 8:46:25 AM