Arbitration Clauses: The Impact on Class Actions in Canada and the United States
As we have discussed before, the public policy rationales for enforcing arbitration agreements are arguably at odds with the policy rationales underpinning the class actions regime. Over the past few years, courts in Canada and the United States have been engaged in this dialogue through cases involving consumer contracts.
The Seidel decision continues to be applied by Canadian courts for the proposition that arbitration clauses should be enforced unless expressly prohibited by the legislature. The Supreme Court only certified the Consumer Protection Act (“CPA”) claim as a class action and held that the other non-consumer claims would proceed to arbitration. The Supreme Court’s decision in Seidel built on the principles previously articulated in Griffin v Dell Canada Inc., where the Ontario Court of Appeal certified a class action in which a consumer contract contained an arbitration clause on the basis that the “CPA provisions resolve the tension between the Arbitration Act and the Class Proceedings Act in favour of class proceedings”.
Late last year, in Wellman and Corless v TELUS and Bell, the Ontario Superior Court of Justice certified a class proceeding despite an arbitration clause in the underlying consumer contract. The plaintiffs asserted, among other claims, breach of Ontario’s CPA, which was deemed to relieve consumers from mandatory arbitration clauses in consumer contracts. Unlike the Supreme Court’s decision in Seidel, the Court in this case decided that the non-consumer claims and consumer claims would be heard together. Following the decision in Griffin v Dell Canada Inc., the Court held that separating the consumer claims and non-consumer claims could lead to inefficiency, risk inconsistent results and create a multiplicity of proceedings.
In contrast to the Canadian trends, arbitration clauses in consumer contracts have been upheld in the United States so as to preclude class actions. The U.S. Supreme Court in AT&T v Concepcion (2011) and Italian Colors v American Express (2013) upheld the public policy rationale of enforcing arbitration clauses over the availability of class actions. In fact, in Del Toro v Applebee’s in late 2013, a federal court judge ruled in Applebee’s favour and enforced an arbitration clause, saying he was bound by the Supreme Court decisions.
The New York Times recently reported that in 2014 alone, roughly 83% of cases in the U.S. upheld class-action waivers.
As evidenced by the above-mentioned jurisprudence, the approach of the Canadian and U.S. courts to the interplay between arbitration clauses in consumer contracts and the ability of consumers to seek redress by means of class actions has differed in recent years. In Canada, the courts have generally interpreted the provincial consumer legislation as evidencing a legislative intent to permit consumer class proceedings in the face of arbitration clauses. Indeed, some Canadian courts to date have expanded this analysis so as to include any parallel common law claims that are asserted in the same proposed proceedings. Conversely, the U.S. courts have tended to enforce the arbitration provisions in consumer contracts, such that collective consumer actions have often been precluded.