An Important Victory for Metro Inc. in an Oppression-Remedy Lawsuit

Metro Inc., represented by law firm Langlois Kronström Desjardins, has won an important victory in a legal dispute with some of its shareholder merchants. On May 17, 2011, the Honourable Robert Mongeon of the Superior Court of Québec, in a detailed judgment, dismissed the oppression-remedy proceedings claiming abuse of shareholder rights brought by the Regroupement des marchands actionnaires.

The case dates back to January 2003, when the Regroupement instituted what the judge described as “[TRANSLATION] an all-out attack against Metro, raising grounds of oppression, illegality and nullity in respect of the company’s conduct towards them, an attack which, the defendants maintain, would if successful undermine the company and adversely affect its share price.”

This “attack” was further to “[TRANSLATION] thinly veiled complaints and accusations made by the shareholder merchants against Metro’s senior officers (specifically new arrivals Pierre Lessard and Paul Gobeil) who allegedly literally expropriated their businesses …”.

The first issue raised by the Court was whether the Regroupement had the necessary standing to complain of oppression on behalf of the shareholder merchants in their capacity as holders of multiple voting Class B Shares. For a variety of reasons, the Court concluded that: “[TRANSLATION] The shareholder merchants elected not to sue the defendants themselves, but through the intermediary of the Regroupement. However, as the evidence shows, the Regroupement is merely an agent of the merchants with a power of attorney to act as their spokesperson in their negotiations and dealings with the defendants. The Regroupement does not have the rights that the shareholder merchants have and can invoke against Metro.”

As for the issue of whether or not there was oppression, the Court accepted the argument made by Metro that the measures taken by Metro’s management, which the Regroupement was contesting on behalf of a minority of shareholder merchants, had been taken in the interest of the company as a whole and, moreover, had significantly benefited the shareholder merchants that the Regroupement claimed to represent.

In addition, the Court found that the fact that the shareholder merchants had lost their control of Metro was due to their own decision to transform Metro in 1986 from a cooperative of sorts into a widely-held company that had several times offered its shares to the public in order to obtain the necessary capital to compete with its rivals and finance its growth.

As Langlois Kronström Desjardins team, Raynold Langlois, Q.C., CIRC, FACTL, Ad. E., Guy Turner, Marc-André Sansregret, Marie-Geneviève Masson and Rébecca St-Pierre, maintained on behalf of Metro, the judge found that the contested measures had led Metro to become a force to be reckoned with in the grocery business, to the considerable benefit of all of its shareholders, including the shareholder merchants themselves. The judge noted several times in his decision that the shareholder merchants did not allege that they suffered any financial harm as a result of the contested measures and that the Regroupement’s complaints over the years were in fact aimed at prodding Metro to improve the terms of its commercial agreements with the merchants represented by the Regroupement. In this regard the Court concluded that a minority shareholder cannot use the oppression remedy as leverage to negotiate a better commercial relationship with the company it is a shareholder of.

Finally, the Court dismissed the Regroupement’s demand that certain of Metro’s bylaws be nullified, noting that they were not oppressive and were in accordance with the company’s articles and, moreover, that the Regroupement had waited too long before contesting them.