Court allows $100 million class action suit to proceed against Sears Canada Inc. and Sears Roebuck and Co. over alleged breaches of Ontario franchise legislation and dealer contracts

TORONTO, Sept. 11, 2014 /CNW/ - An Ontario court granted class action status on Monday to a lawsuit brought by over 250 current and former operators of "Sears Hometown Stores".

The lawsuit, seeking $100 million in damages, claims that Sears Canada Inc. and Sears Roebuck and Co. ("Sears") breached provincial franchise laws and the plaintiffs' rights under the common law by making it virtually impossible for them to operate their Hometown Stores profitably.

The suit alleges that Sears earns high profit margins on sales of goods to the dealers while simultaneously downloading a disproportionate share of the costs associated with retail and product handling onto the same dealers.

It is alleged that this business model, which enriches Sears at the expense of the dealers, is perpetuated by Sears using a number of means including: concealing the economic reality of the Hometown store program from prospective dealers and competing against dealers in their territory through online sales.

Sears denies the allegations and has blamed the dealers' woes on the competitive retail environment in which the stores operate.

In a twenty-two page decision, the Honourable Justice Gray certified a number of common issues, two of which relate to whether Sears breached its obligation to exercise contractual discretion in good faith and whether Sears was unjustly enriched by the way they operated the Hometown store business model.

James Kay, the principal of 1291079 Ontario Limited, who was appointed as the representative plaintiff, was enthusiastic in the wake of Monday's decision. "A wave of relief has washed over the class members after hearing that the court has certified this class action. Everyone is looking forward to proving these allegations at trial."

A copy of the decision is available at:  http://www.sotosllp.com/wp-content/uploads/2014/09/Reasons-for-Judgment-of-Gray-J.-Sep-9-14.pdf

A copy of the court filed statement of claim is available at:  http://www.sotosllp.com/wp-content/uploads/2013/07/Statement-of-claim-Final.pdf

SOURCE: Sotos LLP

Contact David Sterns at [email protected] or Andy Seretis at [email protected]. Sotos LLP 416-977-0007