The Federal Court of Appeal's recent decision in Murphy v Amway Canada Corp. has clarified the findings in Seidel v TELUS Communications confirming that in the absence of express statutory language overriding mandatory arbitration agreements and class action waivers, courts will continue to give effect to the parties' agreements to arbitrate individually and not by class action.
As we reported previously, the Supreme Court of Canada's 2011 decision in Seidel left some uncertainty as to the enforceability of mandatory arbitration agreements and class action waivers for statutory claims. A link to our previous legal update can be found here.
On October 23, 2009, the appellant, Kerry Murphy, began a proposed class action proceeding against Amway Canada Corporation and Amway Global claiming their business practices were in violation of sections 52, 55 and 55(1) of the Competition Act. Murphy complained Amway failed to provide its distributors with an accurate compensation metric and Amway's business operated as an illegal scheme of pyramid-selling. Consequently, Murphy filed a claim seeking $15,000 in damages, and sought to have her action certified as a class action. No other potential class members had been identified.
In response, Amway brought a motion to stay the proceedings and to compel arbitration as per the agreement to mediate and arbitrate disputes (the Arbitration Agreement) entered into between the parties. Amway's motion was granted November 23, 2011, by a Federal Court judge (the Judge). The Judge determined that a class action waiver contained in the Arbitration Agreement barred Murphy from bringing a motion for certification as a class. The clause prohibited any party from bringing a class action for an amount exceeding $1,000 and stated that any class action would have to be resolved individually in private arbitration.
Murphy sought to have the stay granted by the Judge set aside. The main issue raised in this appeal was whether a private claim under section 36 of the Competition Act was arbitrable.
Relying on Seidel, Murphy asserted that the statutory protections under the Competition Act in this matter were closely analogous to those in the Business Practices and Consumer Protection Act (BPCPA), which were at issue in that case. It was further argued that there was a compelling public policy concern that could not be adequately addressed in private and confidential arbitration proceedings.
Seidel involved a dispute between Telus and one of its customers over a cell phone contract, which provided that all disputes would be resolved by way of private arbitration. Seidel argued that the contract was in violation of the BPCPA and sought to certify her action on behalf of a class. A majority of the Supreme Court determined that the effect of the language and intent of the BPCPA was to invalidate the arbitration clause, but only to the extent that it took away a protection conferred by the BPCPA.
The SCC held that statutory language expressing a clear legislative intent to exclude recourse to arbitration would be required before the courts will refuse to give effect to the terms of an arbitration agreement. On that basis, Seidel was allowed to proceed with part of her claim as a class action insofar as it was covered by statutory protections interpreted by the SCC as excluding recourse to arbitration. However, it was determined that her private action for damages under another section of the BPCPA could go to arbitration as that claim was not covered by similar protections under the BPCPA.
The FCA agreed with the Judge in finding that the provisions of the Competition Act raised in this matter were not comparable to those in the BPCPA. Unlike the BPCPA, the Competition Act did not contain language indicating Parliament's intent that arbitration clauses or class action waivers be restricted or prohibited. The FCA concluded that Murphy's claim was much more analogous to Seidel's private action in damages, which the SCC had determined was arbitrable.
With respect to the public interest concerns raised by Murphy, the FCA held that two recent SCC cases – Dell Computer Corp. v Union des consommateurs et al and Rogers Wireless Inc. v Muroff – had clearly determined that public order concerns do not affect whether or not arbitration should be permitted. Very clearly, any statutory claim will be subjected to arbitration where the parties have agreed to arbitrate, unless there is language in the statute expressing clear legislative intent to the contrary.
The Murphy decision confirms that Canada remains an "arbitration-friendly jurisdiction." It suggests the Seidel decision must be applied narrowly: absent factors that were present in that case (i.e., statutory language expressing clear legislative intent), courts will not interfere with parties' class action waivers or agreements to arbitrate their disputes, including statutory claims. This position is consistent with a long line of cases and affirms that such waivers and agreements remain effective tools by which businesses can limit their risk of distracting class actions and costly litigation proceedings.
The author wishes to thank articling student Todd Melchior for his help in preparing this legal update.
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