Class Action Update May 10, 2010

Class Action Update May 10, 2010

Certification results

The class action was certified as a class action by the Court on 26 March 2009.  Midas did not appeal the decision.

The lawsuit will proceed on behalf of all Canadian Midas franchisees which carried on both 11 July 2003 and 31 May 2007 under franchise agreements with Midas Canada Inc.

We sent all class members a notice enabling them to opt out of the law suit if they desired.  Only 6 dealers, representing 8 franchise locations in total, elected to opt out of the class action law suit.  This means that 95% of all Midas dealers who qualify a class member chose to remain as class members in the lawsuit.

Discovery phase

We recently met with Midas’ lawyers and agreed on a timetable in bringing this matter forward to trial.  The parties are currently in the “discovery” process which means that both sides will gather all relevant documents and make them available to the other side.  We have retained an expert to assist us with this process and both sides have targeted May 2010 as the likely target for their exchange of documents.

Upon receipt of each other’s documents, each party will review the documents over several months and then proceed to oral discoveries.  Oral discoveries will occur during the weeks of 13 September 2010 and 20 September 2010.  During this stage of the litigation, we have requested that Midas make available William M. Guzik to be examined on behalf of Midas.  Midas, in turn, will examine the class representative, Daniel McGolrick.  Oral examinations are expected to be completed by the end of September 2010.  Once finished, the class action lawsuit will be scheduled for trial.

Releases to be provided on Renewal and Transfer

After the certification of the lawsuit, the franchise agreement signed by Mr. McGolrick’s operating company expired on 31 July 2009.  Midas’ standard form of franchise agreement provides that as a condition of renewal of the franchise, all franchisees must execute a general release of any claims against Midas.  If Mr. McGolrick’s operating company were to sign this release in connection on renewal, then it would release all claims it has against Midas under the lawsuit.  As a result, we asked the Court to make an order prohibiting Midas from requiring any of its franchisees to execute a release of their claims in the class action proceeding as a condition of their renewal or transfer of their rights under the Franchise Agreement.

On 16 October 2009, Mr. Justice Cullity issued a decision granting our motion.  This was a significant decision both for this case and for the law generally.

The decision states that any provision contained in the Midas Franchise Agreement requiring franchisees to release Midas from liability as a condition for the renewal or transfer of their rights under their franchise agreement is unenforceable and void for the purposes of the class action proceeding.

Midas has appealed this decision.  The appeal was heard by the Ontario Court of Appeal on April 12, 2010.  The decision is under reserve and is expected to be released in the next few months.  The appeal will not impact the timing or the schedule of the class action lawsuit.