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Rejected dealers sue GM in Canada

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Rejected dealers sue GM in Canada



DECEMBER 14, 2009 - 12:01 AM ET

General Motors Co.'s legal problems with rejected dealers went international when a dozen Canadian GM wind-down dealers sued GM of Canada Ltd. last month.

The lawsuit, filed Nov. 26 in Ontario provincial court in Toronto, accuses GM Canada of breaching dealer agreements when it sent e-mails to the 12 dealers saying the company will not renew sales and service agreements that expire Oct. 31, 2010.

The suit also alleges the wind-down money offered to dealers covers dealership employee severance and other close-down costs but provides "no compensation at all to the plaintiffs."

A spokesman for GM Canada declined comment.

GM Canada sent the e-mails to about 240 dealers, including the 12 plaintiffs, on May 20, according to the complaint and the dealers' lawyer, Jonathan Lisus.

In the United States, GM rejected dealers under the protection of federal bankruptcy laws that superseded state franchise laws. But GM Canada did not file for bankruptcy and was not included in the U.S. Chapter 11 filing.

About 200 dealers accepted GM Canada's offer because they felt they had little choice, Lisus said. "The implication was that if you didn't take the agreement, the company would file bankruptcy," he said.

"I wouldn't be surprised if at some point in the future, dealers who took the wind-down agreement raised issues or concerns [in court] about the manner in which the agreement was presented to them," Lisus said of the rest of GM's 240 rejected dealers.

Rejected GM dealers in the United States have until Oct. 31, 2010, to wind down their stores, but Canadian dealers have to close their stores by Dec. 31, 2009, Lisus says.

In the suit, the dealers are seeking:

-- An injunction that stops GM Canada from terminating their dealer agreements.

-- Retention of their sales and service agreements with the automaker until at least Oct. 31, 2015.

-- $1.5 million Canadian (about $1.4 million) each in punitive damages.

-- Unspecified compensatory damages for loss of profit and goodwill.

The suit says the automaker's actions are "designed to coerce the plaintiffs into accepting the wind-down agreement."

The suit also asks for additional damages for plaintiffs who sell Pontiac, which GM is shutting down.

According to Lisus and the complaint, GM Canada paid cash to continuing dealers who had Pontiac franchises based on the number of Pontiac vehicles those dealers sold in 2008. But Robert Slessor, one of the plaintiffs and owner of Robert Slessor Pontiac-Buick Inc. in Grimsby, Ontario, said GM refused to pay anything to the rejected dealers with Pontiac franchises.

He said payments to the continuing dealers amounted to $950 or more per vehicle sold in 2008.

Slessor, a second-generation dealer, says GM did not explain why it chose to terminate his franchise agreement, while keeping a nearby Chevrolet dealer.

Slessor adds: "The level of frustration is high."

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