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Category Archives: Litigation

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Few “likes” for Facebook Forum Selection Clause: Supreme Court Finds “Strong Cause” to Not Enforce Forum Selection Clause

Posted in Case Comment, Legislation, Litigation

Electronic terms of service govern billions of relationships worldwide, whether a user is joining a social media service, shopping online or accessing a blog. In each case, a binding contract is formed, the terms of which are usually set out in the website’s “terms of service” . But when a contract is made over the internet and there is later a dispute, whose law governs? What is the “forum” for the resolution of the dispute? What if the contract expressly designates a specific jurisdiction as the appropriate “forum”? In Douez v Facebook, Inc. (“Douez”), the Supreme Court of … Continue Reading

BC Court Enforces Franchise Termination and Release Agreement

Posted in Franchising, Litigation

Overview

In the recent decision Dairy Queen Canada, Inc. v. M.Y. Sundae Inc., 2017 BCSC 358, the Supreme Court of British Columbia upheld a Mutual Cancellation and Release agreement in the context of a franchisor-franchisee relationship. The decision confirms that, absent evidence of duress or unconscionability, a franchisor is permitted to take advantage of a superior bargaining position, and obtain an enforceable release when a franchisee is in default.  The decision only considered common law principles as opposed to franchise legislation.  The Court also awarded damages for the tort of passing off against a franchisee who refused to … Continue Reading

BC Court of Appeal: “Immediate” Termination Rights in Dealer Agreements Must be Exercised Promptly

Posted in Case Comment, Distribution, Franchising, Litigation

In the recent decision of Cellular Baby Cell Phones Accessories Specialist Ltd. v. Fido Solutions Inc., 2017 BCCA 50 the BC Court of Appeal held that the long delay in the exercise of a supplier’s contractual right to terminate a dealership agreement rendered the termination improper.  The court also held that a dealer’s obligation to mitigate its damages upon termination was met, even though the dealer declined to sell the dealership to a third party.

In this case, the supplier terminated the dealership agreement on the basis that the dealer had failed to meet quarterly sales quotas on three … Continue Reading

Not So Fast! Ontario Court Finds Franchise Grant “Premature”

Posted in Franchising, Litigation

In the recent decision of Raibex Canada Ltd. v. ASWR Franchising Corp., the Ontario Superior Court of Justice allowed a franchisee to rescind its franchise agreement on the basis that it signed the agreement at a time when critical information regarding the costs to develop the franchise and leasing obligations had not yet come into existence.  As a result, the Court found that the franchise grant was “premature” and the disclosure document provided to the franchisee deficient.

At issue in this case, was the franchisor’s failure to provide details relating to a sublease and franchise development costs, … Continue Reading

Cook or Get Out of the Kitchen: Legitimate Interest Required to Enforce a Restrictive Covenant

Posted in Competition, Franchising, Litigation

On McCarthy Tétrault LLP’s Canadian Appeals Monitor blog, Shanique Lake recently published a helpful discussion of the Ontario Court of Appeal’s decision in MEDIchair LP v DME Medeqip Inc, which will be of interest to readers of the Consumer & Retail Advisor. This decision has important implications for all franchisors and franchisees in respect of enforcement of restrictive covenants or non-competition clauses in franchise agreements.… Continue Reading

Dunkin’ Donuts: The Supreme Court of Canada puts an end to the saga

Posted in Franchising, Litigation

On March 17, 2016, the Supreme Court of Canada (“SCC”) dismissed the Dunkin’ Brands Canada Ltd.’s application for leave to appeal from the judgment rendered by the Québec Court of Appeal on April 15, 2015.

By dismissing the application for leave, the SCC determined that it would not review the Québec Court of Appeal decision which, notably, ruled that the obligations to enhance and protect the brand are implicit to franchise agreements. A more detailed analysis of this decision is available in our previous publication.

As is customary, the SCC did not provide its grounds for dismissing the application … Continue Reading

Franchise Agreements: Beware of Misrepresentations

Posted in Franchising, Litigation

On January 18, 2016, the Quebec Court of Appeal rendered an interesting judgment as to the consequences of a contract which precluded future claims, by a franchisee against its franchisor on the basis of false representations.

In Presse Café Franchise Restaurants inc. c. 9192-6287 Québec Inc. et Pierre Demarais, Presse Café Franchise Restaurants Inc. (“Presse Café“), appealed the judgment requiring  it to indemnify Mr. Pierre Desmarais and 9192-6287 Québec Inc. (together the “Franchisee”), a corporation formed by Mr. Desmarais for purposes of operating a Presse Café premium franchise.

Presse Café operates a network of franchises … Continue Reading

Ontario Court of Appeal Dismisses Pet Valu Class Action, Clarifies the Scope of the Duty of Good Faith and Fair Dealing and Calls for Greater Judicial Restraint

Posted in Class Action, Consumer Protection, Franchising, Litigation

The recent decision of the Ontario Court of Appeal in 1250264 Ontario Inc. v. Pet Valu Canada Inc., 2016 ONCA 24 clarifies and narrows the scope of the duty of good faith and fair dealing imposed on franchisors under section 3 of the Arthur Wishart Act (Franchise Disclosure) (“AWA”) and expressly cautions against zealous judicial intervention in the framing and amendment of common issues in class action proceedings.

Read more in the original post by our colleagues at Canadian Appeals Monitor, McCarthy Tétrault’s blog focusing on information and commentary on upcoming and recent Appeal Court decisions.… Continue Reading

Ontario Court Grants Injunction to Protect Franchisor from Rogue Franchisees

Posted in Consumer Protection, Franchising, Litigation, Retailing

In Home Instead Inc. v. 244674 Ontario Inc. et al. (“Home Instead”), the Ontario Superior Court of Justice (the “Court”) considered the granting of an injunction against the franchisees, 244674 Ontario Inc. et al. (“244”) leading to the termination of their businesses where the goodwill and reputation of Home Instead (the “Franchisor”) was at stake. The two principles Mr. Weinert and Ms. Reid were allegedly operating their two separate franchises in common ownership in breach of the terms of their respective franchise agreements. Their franchise agreements did not permit the operation of … Continue Reading

The Lens of Commercial Reality: Lessons to be Learned from the First Common Issues Franchise Trial

Posted in Class Action, Franchising, Litigation

The recent common issues trial in Trillium Motor World Ltd. v. General Motors of Canada Ltd. contains some interesting lessons for future cases involving system changes, in particular the court’s recognition that challenges to franchisor decisions on system-wide issues must be examined through the lens of “commercial reality”.  Below is a link to a short article which provides a concise discussion of this case.

http://www.lawtimesnews.com/201509074901/focus-on/focus-gm-ruling-offers-a-lot-of-fodder-for-franchise-class-actionsContinue Reading

Not Everyone is a Party: Some Comfort for Foreign Franchisors

Posted in Franchising, Litigation

A recent case, Addison Chevrolet Buick GMC Limited et al. v. General Motors of Canada Limited et al. (“Addison GMC”), considered the role of a foreign franchisor that is not a party to the applicable franchise agreement. In Addison GMC, the Ontario Superior Court of Justice reflected on a claim by a group of Canadian automobile dealers (the “Plaintiffs”) that certain bailout monies invested in their US parent company, General Motors Company (“New GM”) in connection with the bankruptcy reorganization (the “Reorganization”) of General Motors Corporation (“Old GM”) should … Continue Reading

Ontario Superior Court of Justice Finds that Shareholders of a Franchisee are not “Franchisees” within the Meaning of the Arthur Wishart Act

Posted in Franchising, Litigation

In 2313103 Ontario Inc. et. al. (“231”) v JM Food Services Ltd. et. al. (“JM”), the Ontario Superior Court of Justice (the “Court”) considered whether the shareholders of a corporate franchisee (“Franchisee”) can invoke the same statutory rights afforded to franchisees under the Arthur Wishart Act (Ontario) (the “Act”). The ruling of the Court confirms that shareholders of a Franchisee must look to the remedies and rights afforded to them in applicable corporate legislation (in this case the Business Corporations Act (Ontario) (the “OBCA”)) rather than the … Continue Reading

The Ontario Court of Appeal Finds Franchise Disclosure Document Fatally Deficient

Posted in Franchising, Litigation

In 2240802 Ontario Inc. v. Springdale Pizza Depot Ltd., the Ontario Court of Appeal (the “Court”) held that a franchise disclosure document provided by a franchisor to a franchisee contained certain material deficiencies such that it effectively amounted to no disclosure under the Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the “Act”). This entitled the franchisee to rescind the franchise agreement and to receive financial compensation.

The Court outlined the following three deficiencies in the disclosure document: (i) financial statements which were compiled but not audited or reviewed; (ii) a … Continue Reading

Update: Dunkin’ Donuts on its way to the Supreme Court of Canada

Posted in Franchising, Litigation

We previously wrote about the decision rendered by the Québec Court of Appeal against Dunkin’ Brands Canada Ltd. in connection with its litigation with its franchisees. Dunkin’ Brands Canada Ltd. has filed an application for leave to appeal to the Supreme Court of Canada.

According to the Québec Court of Appeal, Dunkin’ Brands Canada Ltd. breached franchise agreements by not complying with the implied obligation to protect and enhance the brand. As a result of this judgment, Dunkin’ Brands Canada Ltd. would have to pay more than $10.9 million to a group of Québec franchisees.

The upcoming relevant development to … Continue Reading

Some Things Stay the Same: Quebec Court Precludes Retroactive Application of New Immigration Criteria for Skilled Workers

Posted in Litigation, Retailing

On March 31, 2015, the Quebec Superior Court rendered a declaratory judgment (Stasenco c. Quebec, 2015 QCCS 1769) to the effect that a candidate applying for a Quebec Selection Certificate (“QSC”) in the Skilled Worker category had to be assessed in accordance with the criteria applicable to that category at the time of the submission of the application, rather than on the basis of any modified criteria that had been established thereafter.  The decision is of significance to potential employees and over 50,000 applicants who applied for a QSC prior to August 1, 2013 when the new selection criteria … Continue Reading

Ontario Court Upholds Restrictive Covenants In Franchise Agreement

Posted in Franchising, Litigation

Franchise agreements often contain covenants restricting the activities of a franchisee both during the term of the franchise agreement and for a period afterwards. In 1598631 Ontario Inc. v. Imvescor Restaurant Group Inc. (“Imvescor”), the Ontario Superior Court of Justice (the “Court”) had the opportunity to comment on the following restrictive covenant upon application by a former franchisee (the “Franchisee”) for a declaration that the covenant be void as ambiguous and/or as an unreasonable restraint of trade:

“Franchisee agrees that for a period of five years after the termination of this Agreement or expiration … Continue Reading

Not COOLing Down, UPDATE: Canada Set to Impose 100 Percent Surtax on U.S. Imports

Posted in Litigation, Trade

We previously wrote that an upcoming decision of the Appellate Body of the World Trade Organization (WTO) regarding country-of-origin labelling (COOL) requirements in the United States could have a serious impact on U.S.-Canada trade.

In its decision, released on May 18th, 2015, the Appellate Body has rejected an appeal from the United States and upheld the October 2014 compliance panel finding that U.S. revised country-of-origin labeling (COOL) rules for importation of meat from Canada and Mexico are inconsistent with Article 2.1 of the Agreement on Technical Barriers to Trade (TBT). The Appellate Body’s decision must be adopted by the … Continue Reading

Spotlight on 2015: Trends and Issues in Retail

Posted in Legislation, Litigation, Retailing

As we are now in the second quarter of 2015, retailers are anticipating how changes over the remainder of the year could affect them. We anticipate that developments on the horizon will have a significant impact upon retailers in Canada over the remainder of 2015 (and beyond). Top trends and issues of which retailers should be aware include the following:

  1. Cybersecurity: Growing Threats to Retailers of Data Breaches

The consequences and the prevalence of data breaches have been growing, and there is no reason to suspect this trend will slow down. Cybersecurity firm Risk Based Security claims 2014 was the … Continue Reading

Franchise Update – Court of Appeal Considers Scope of Basket-Clause Disclosure of Material Facts under Ontario Franchise Legislation

Posted in Franchising, Litigation, Retailing

In its recent decision in Caffé Demetre Franchising Corp. v. 2249027 Ontario Inc., 2015 ONCA 258, the Ontario Court of Appeal upheld the Superior Court’s decision (which we previously wrote about here) granting partial summary judgment dismissing a franchisee’s claim seeking rescission of a franchise agreement approximately one year after purchase.

The lower court decision in Caffé Demetre was one of the first franchise rescission claims decided since the Supreme Court of Canada’s decision in Hryniak v. Mauldin, which mandated a “shift in culture” toward increased summary judgment in Canada. In upholding the summary judgment, the … Continue Reading

Retailers’ Patent Liability for the Distribution of Allegedly Infringing Products

Posted in Litigation, Product Liability, Retailing

In recent years, a number of retailers have been sued for patent infringement based on their distribution of allegedly infringing products. While there are no recent cases in which a retailer has been found liable for patent infringement on this basis, the upswing in this trend serves as a reminder to retailers of their potential exposure to claims of patent infringement with respect to the products they carry.

Potential Liability

A patentee has a claim against a retailer distributing goods that infringe its patent, notwithstanding that the retailer did not design or manufacture the allegedly infringing goods. In valuing its … Continue Reading

Roadblocks to Certification of Consumer Class Actions in B.C.?

Posted in Consumer Protection, Litigation

Alexandra CocksThe following post by Alexandra Cocks on the Canadian Class Actions Monitor blog may be of interest to readers of this blog: Roadblocks to Certification of Consumer Class Actions in B.C.?

On October 8, 2014, the B.C. Supreme Court refused to certify a proposed consumer class action relating to the sale of bottled beverages sold under the trade name “Vitaminwater” to B.C. consumers. [1]

The plaintiff alleged that the defendants, Energy Brands Inc. and Coca-Cola Ltd., marketed Vitaminwater products in a manner which had the “capability, tendency or effect of deceiving or misleading a consumer” into concluding that Vitaminwater is … Continue Reading

Ontario Court Certifies Franchise Encroachment Claim as Class Action

Posted in Franchising, Litigation

The Ontario Superior Court of Justice recently certified a class action by dealers of a home furnishings company in 1291079 Ontario Limited v. Sears Canada Inc.

The dealers are outlet stores for a national department store (the putative franchisor) and allege that they are “franchisees” within the meaning of Ontario’s Arthur Wishart Act (Franchise Disclosure), 2000, S.O. 2000, c. 3 (the Act).… Continue Reading

Too much of a “Good Thing”? Exclusivity and Enforcement in Licensing Agreements

Posted in Litigation, Retailing

Exclusive product or manufacturing licenses allow retailers to leverage a partnering business’s strengths, such as a strong brand name, loyal customer base, or state-of-the-art operations and supply chain management.  With these benefits, retailers might be tempted to find multiple strategic partners.  As long as each of the partners benefits from their respective exclusive licenses, couldn’t having multiple strategic partners be a good thing?

“Not so fast” according to one trial judge from the New York State Supreme Court.  In a recent case, the court sided with Macy’s Inc. (“Macy’s”) in its lawsuit against J.C. Penney Corporation Inc. (… Continue Reading

Drafting General Release Clauses in Franchise Agreements: A Cautionary Tale from the Ontario Superior Court of Justice

Posted in Franchising, Litigation

The following article may be of interest to readers of this blog:

Drafting General Release Clauses in Franchise Agreements: A Cautionary Tale from the Ontario Superior Court of Justice

The Ontario Superior Court of Justice recently struck down a general release clause in a franchise agreement, even though the franchisor only sought a release with respect to non-statutory claims. The case provides important guidance regarding how to draft a release that will withstand scrutiny under section 11 of the Arthur Wishart Act (Franchise Disclosure) (Act) and the parallel provisions in the franchise legislation in Alberta, Manitoba, New Brunswick and P.E.I. … Continue Reading