2013 Theme 1: Class Action Waivers Different From Arbitration Agreements?

The story of class actions in 2013 has some interesting themes, some of which were furthered by the long-awaited commentary from the Supreme Court of Canada. In the next five posts, we will highlight five themes we saw and how we expect them to develop in 2014.

The first theme is whether the enforcement of class action waivers should be analysed differently from the enforcement of arbitration agreements. Class action waivers and arbitration agreements are both contractual in nature, but many factors can affect their enforceability, including whether legislation in some or all jurisdictions prohibits either or both for some or all issues and in some or all contexts, what the exact clauses say, whether they are together or separate, what the dispute is about, who the parties are, and which court is hearing any challenge to the clauses.

The Supreme Court's Guidance

The leading Supreme Court of Canada case was decided in 2011: in Siedel, put (over) simply, the arbitration agreement was held to be void with respect to certain causes of action based on express language in consumer protection legislation. The Supreme Court held that the parties’ class action waiver was not severable from the arbitration agreement based on the wording of that particular agreement. Since the arbitration agreement was void with respect to certain claims, so was the embedded class action waiver. The Supreme Court thus deftly side-stepped the question of whether class action waivers are unconscionable. Thus started the trend of analysing arbitration clauses and class action waivers together.

2013's Inconsistent Decisions

In 2013, that trend led to an inconsistency in approach between jurisdictions:

• The Federal Court of Appeal enforced an arbitration agreement and class action waiver in Murphy v. Amway Canada et al (under different legislation). The lower court did the same, after suggesting that Siedel stands for the proposition that class actions waivers – and not just arbitration agreements – should be enforced unless expressly prohibited by the legislature. The Federal Court of Appeal approved the result but did not provide additional guidance on the issue of class action waivers.
• The B.C., Alberta and Manitoba Courts seem to have taken a different approach. In Young v. Dollar Financial Group Inc., Briones v. National Money Mart, and Robinson v. National Money Mart, the Courts held that the arbitration agreements were void because the applicable legislation prohibited them, and then, sometimes without comment, did not enforce the class action waiver even though the governing legislation arguably is silent on class action waivers.

What's Next?

The public policy rationales for enforcing arbitration agreements – including commercial certainty and freedom of contract – are arguably in tension with the public policy rationales behind class actions – namely, access to justice, judicial efficiency and behavior modification. Even though arbitration agreements and class action waivers are fundamentally compatible, the policy goals for enforcing the former do not coincide seamlessly with the policy goals (and sometimes legislation) that weigh against enforcing the latter in certain contexts. Since arbitration agreements and class action waivers often appear hand in hand, we expect to see some interesting judicial efforts to balance and reconcile these policy goals in 2014.