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
The New York Times recently reported that in 2014
alone, roughly 83% of cases in the U.S. upheld class-action
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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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