About the lawsuit

Nearly two years ago, franchised independents across Canada (and yours truly) watched with great interest as Sobeys and seven of its Price Chopper dealers became entangled in a legal dispute. I wrote about it here, in Canadian Grocer, after spending an afternoon digging through Ontario court records. The case is still ongoing, but it will likely end soon. 

The lawsuit started in 2010 when a number of Price Chopper franchisees sued Sobeys. They claimed the grocery chain exercised so much control over their costs and selling prices, they could never make a profit, let alone earn money for themselves or build equity in their businesses. The franchisees alleged Sobeys was actually making the profits from their stores’ operations, and that Sobeys withheld supplier monies they were owed. They claimed breach of contract, breach of duty of fair dealing and that Sobeys’ accounting methods adversely affected their franchises.

Sobeys countersued, claiming that the Price Chopper franchisees knew the terms of their agreements, which were clearly spelled out when they signed up. Sobeys vehemently denied any breach of contract and pointed to the large sums of money it had advanced the franchisees in stock and fixtures. Sobeys also charged that the franchisees violated the terms of their agreement by using money from their businesses to launch the lawsuit–something their agreement forbid.

Sobeys also asked the court to terminate the seven Price Chopper franchises. When the court said no, it became clear that this case would require further litigation.

In the two years since, both parties have been in and out of court. Witnesses have been heard and motions made. Meanwhile, the franchise agreements of six of the seven Price Chopper operators have expired–leaving just one still operating a store. But, for now, the suit continues. 

The most recent notice of motion came from Sobeys. It asked the court for a summary judgement on two of the franchisees’ claims. This would have had the effect of breaking the lawsuit into several, separate parts. However, Superior Court Justice Michael Brown ruled against Sobeys’ motion, saying all the issues brought by the franchisees were intertwined. To deal with some issues separately, he said, would prolong the case, thereby wasting the court’s time. “ This matter must proceed to trial as requested by the plaintiffs,” he ruled.

So that’s it, then. The matter must go to trial. Justice Brown gave the parties until Oct. 30 to prepare, and on that day a trial date was to be set. To my mind, this ruling is a blow to Sobeys, which likely hoped to avoid a trial altogether. Frankly, some of its court motions over the past two years left the impression that the company was trying to delay litigation by attempting to win summary judgements piece by piece in hopes that the franchisees would abandon their suit. Justice Brown’s ruling, however, means a trial must take place–unless, of course, there is an out-of-court settlement.

I’m no expert on legal matters, but it is my opinion that this case will be settled out of court, with Sobeys buying out the franchisees. My opinion is based on what Sobeys did five years ago in its legal dispute with Ontario IGA franchisees. That case dragged on, but in the end, some unhappy IGA franchisees were bought out and their stores were either re-franchised under another banner or turned into corporate stores. The remaining Ontario IGA franchisees eventually agreed to sign new franchise agreements with Sobeys’ Foodland banner.

Since Sobeys has been converting its Price Chopper stores to the FreshCo banner, such a buyout would seem logical. Sobeys could easily re-franchise the stores as FreshCo supermarkets or run them corporately for a time. Best of all, such a solution would mean no blame would be affixed to either Sobeys or the Price Chopper franchisees. The lawsuit would simply end.

At least that is how I see it, for now.