Superior Court Approves Settlement Against Ford

On March 26, 2004, Justice Lynn Ratushny of the Ontario Superior Court of Justice approved a $50 million settlement of a class action brought against the Ford Motor Company of Canada, Ltd. arising out of the decision by Ford of Canada, in 1999, to eliminate the distinction between Mercury dealers and Ford dealers. Prior to the change, Ford cars were generally sold only by “Ford dealers”; and Mercury cars only by “Mercury dealers”. In the fall of 1999, all dealers began selling the same vehicles. Dealerships which had been selling Ford cars commenced a class action, seeking a declaration that this change was a breach of the Dealer Sales and Service Agreement, which required that a market study be done before any “additional dealers” were appointed within 15 kilometres.

The class action was certified on an appeal to the Divisional Court in May 2000. The trial of the action was adjourned just before commencement in May 2003, and the parties spent the next six months negotiating a resolution of the claim, including a claim for damages for all class members.

The agreement ultimately reached provided for all dealers in the class to receive a payment to compensate them for the reduction in the value of the goodwill of their businesses, calculated on the basis of their sales volume prior to the change. In addition, dealers who are in particularly egregious situations by virtue of their proximity to other dealers are given access to funds to be used for the purpose of reducing the total number of dealerships. Any member of the class that wishes to pursue its own claim is entitled to opt out. A total of $50 million was paid by Ford of Canada into funds available for these purposes.

Justice Ratushny approved the settlement despite the objections of two class members who felt that the settlement did not adequately address their particular issues. The judge wrote: “I conclude that in a very difficult situation with a multitude of varying factors affecting Class Members, the settlement provides a reasonable alternative to those Class Members who do not wish to proceed to trial and that it is fair, reasonable and in the best interests of the class.”
The Honourable Peter Cory, C.C., C.D., was appointed by the court as Referee to determine any disputes with respect to entitlement, and Paul Le Vay of Stockwoods LLP was appointed to act as fund counsel in any such proceedings.

Ford of Canada was represented by Hugh DesBrisay and Bonnie Tough of Hodgson Tough Shields DesBrisay O’Donnell LLP of Toronto. The representative plaintiffs were represented by Peter Doody and Larry Elliot of Borden Ladner Gervais LLP in Ottawa. The objecting class members were represented by Colin Stevenson of Stevenson & Associates of Toronto, and Rolf Renz of Templeman Menninga LLP of Belleville.