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,
Claude Marseille and
Adam Spiro
Copyright 2011, Blake, Cassels & Graydon LLP
Originally published in Blakes Bulletin on Class Actions, November 2011
OVERVIEW
On November 23, 2011, the Federal Court of Canada confirmed that it does not have jurisdiction to hear a Motion to Certify an Action as a Class Action, in the presence of a binding arbitration agreement and related class action waiver. The decision was issued by the Honorable Justice Richard Boivin in Murphy v. Compagnie Amway Canada.
PROCEDURAL CONTEXT
On October 23, 2009, the plaintiff, an Independent Business Owner (IBO) who distributed Amway's products, instituted a proposed class action before the Federal Court, on behalf of all Canadian residents who distributed Amway's products starting October 23, 2007. He claimed that Amway had breached various dispositions of the Competition Act of Canada (the Act), and sought damages of C$15,000 under section 36 of the Act.
Amway, represented by Blakes, filed a Motion to Stay and to Compel Arbitration on the basis that the contractual documents agreed to by the parties contained an arbitration agreement and a class action waiver, governed by the Ontario Arbitration Act. The class action waiver provides, notably, that neither party is to "assert any claim as a class, collective, or representative action if [...] the amount of the party's individual claim exceeds $1,000."
The Motion to Stay and to Compel Arbitration was heard in the context of a three-day hearing which included the hearing of the plaintiff's Motion to Certify an Action as a Class Action, as well as other accessory motions. The Court found it unnecessary to rule on these other motions, in light of its decision to grant Amway's Motion to Stay and to Compel Arbitration, and to permanently stay the plaintiff's action.
JUDGMENT
The Court found that the wording of the arbitration agreement and class action waiver was clear, and thus prohibited the plaintiff from bringing his C$15,000 claim both (a) before a State-appointed Court and (b) as a class action.
The Court relied on a series of decisions from the Supreme Court of Canada (the SCC) that confirm the validity and enforceability of arbitration agreements:
- 2003 – Desputeaux v. Éditions Chouette (1987) inc.
- 2006 – Bisaillon v. Concordia University
- 2007 – Dell Computer Corp. v. Union des consommateurs
- 2007 – Rogers Wireless v. Muroff
- 2011 – Seidel v. TELUS Communications Inc.
On the basis of these decisions, Mr. Justice Boivin concluded that "arbitration agreements must be enforced by courts absent specific legislative language to the contrary", that class actions are "a procedural vehicle whose use neither modifies nor creates substantive rights", and that "absent clear legislative language prohibiting class action waivers, it must give effect to the parties' agreement to arbitrate." The Court went on to find that such legislative language was nowhere to be found in the Act.
Moreover, the Court concluded that the presence of an arbitration agreement creates a "private jurisdiction" between the parties, thus ousting the jurisdiction of the Court over the subject matter of the dispute.
CONCLUSION
In March 2011, the SCC, in Seidel, confirmed that its earlier jurisprudence on this issue, arising out of Quebec, was equally applicable in common law jurisdictions. The Amway decision applies Seidel to confirm that arbitration agreements and class action waivers are valid and enforceable in Canada, in the absence of specific legislative language to the contrary. The fact that the claim is brought under a public order statute, or that the plaintiff seeks to have his action certified as a class action, cannot affect the validity and enforceability of an arbitration agreement and class action waiver. This represents a clear and forceful endorsement by the Federal Court of consensual arbitration as a fair, efficient, and cost-effective way to solve disputes in Canada, even in the face of a proposed class action.
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