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Supreme Court of Canada Delivers the Final Word on Pet Valu Class Action

Published: 10/06/2016

By Geoffrey B. Shaw, Derek Ronde, Eric Mayzel

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 here.

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.” The costs 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.

Pet Valu was represented by Cassels Brock lawyers Geoffrey B. Shaw, Derek Ronde and Eric Mayzel with the assistance of Rob Kligman and Kate Byers.