Court Allows Franchise Class Action against Midas Canada

    TORONTO, April 1 /CNW/ - On 26 March 2009, the Ontario Superior Court of
Justice certified a Canada-wide class action lawsuit by Midas franchisees
against Midas Canada Inc. Midas Canada is a subsidiary of Midas Inc. -
    The lawsuit concerns Midas' decision in 2003 to cease distributing parts
to its Canadian franchisees at discounted prices through its wholly-owned
distribution system. The franchisees allege that this decision deprived them
of the right to purchase parts at a 14.5% discount below net wholesale prices
and other advantages which they previously enjoyed.
    Midas' actions in 2003 were part of its international business
restructuring which resulted in a dramatic business turnaround of the
international auto parts franchisor. However, the franchisees assert in the
lawsuit that Midas' restructuring caused them significant financial losses and
was carried out at their expense. The court stated that the claim by the
franchisees if proven at trial "could justify a finding of liability in
damages, and ... an abatement of the royalty (paid by the franchisees) in the
    According to plaintiff's lawyer, David Sterns, "this case will be of
considerable importance to franchisees whenever a franchisor makes one-sided
changes to the business terms of its franchise system." The court stated that
a franchisor may not fundamentally change the business terms of the system to
the franchisees' detriment. As such, even if Midas' actions did not run afoul
of the precise terms of the franchise agreement, the franchisees may be
entitled to compensation and an improved royalty structure for the future.
    Franchising represents a significant part of the Canadian economy. This
decision highlights the need for fair dealing between franchisors and

For further information:

For further information: David Sterns at or Allan
D.J. Dick at; Sotos LLP, (416) 977-0007

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