Supreme Sellout
Canada's Top Court Has Sold Out Consumers By Handing Businesses An Easy Way To Avoid Class Action Suits
by Jacob Ziegel
This commentary was first published in the Financial Post on August 9, 2007.
Last month, the Supreme Court of Canada released two important judgments, both reversing decisions of the Quebec Court of Appeal and involving consumer class actions. In the first case, a class action against Dell Computer Corp., the action sought to oblige Dell to honour the bargain prices for handheld computers it had mistakenly advertised for sale on its Web site. In the second, involving Rogers Wireless Inc, the named plaintiff Frederick Muroff was challenging, on behalf of himself and all other subscribers, the validity of roaming charges of $4 a minute for use in designated areas of the United States.
The key issue in Dell and Rogers was a contract provision restricting the consumer's recourse, in the case of a dispute, to the arbitration procedure provided for in the contract and precluding recourse to the courts individually and, even more so, in class action form.
The Supreme Court, disagreeing with the Quebec Court of Appeal, upheld both contracts' arbitration provisions. Consumer activists have roundly criticized the Supreme Court decisions as jeopardizing the future of class actions in Canada, at least in contractual cases.
The critics are basically right. Though the relevant arbitration and class actions provisions differ across Canada, the Supreme Court judgments will generally have a debilitating effect. Ontario and Quebec are exceptions because these provinces have now outlawed mandatory-arbitration provisions in consumer contracts.
The majority and minority judgments in Dell are long (a daunting 114 pages altogether) and complex, but both suffer from similar defects. They fail largely to recognize the fundamental difference between the redress of consumer and business grievances. They fail too to appreciate the overarching purpose of consumer class actions to permit the aggregation of large numbers of individual claims where it would be prohibitively expensive and unrealistic to expect aggrieved consumers to pursue individual claims.
It is particularly anomalous that the Supreme Court should have overlooked these distinctions in the present cases. As recently as 2001, Chief Justice Beverley McLachlin wrote in glowing terms in a Supreme Court judgment on appeal from Alberta about the virtues of class actions in promoting consumer justice and effecting important economies in the use of judicial resources. She also told lower-court judges to exercise their inherent powers to fill any gaps in provincial rules of procedure to allow class actions to go forward. In other judgments, she has encouraged provincial courts to interpret the class action rules liberally to promote their beneficial purposes. Regrettably, in the Dell Computer and Rogers Wireless cases, the members of the Supreme Court became so entangled in the technical provisions of the Quebec Civil Code and Code of Civil Procedure that they failed to see the proverbial wood for the trees.
The recent amendments to the Ontario and Quebec class action rules affirm the primacy of class action rules and the importance of leaving the choice of remedies with the consumer, not with the suppliers of goods or services. The B.C. courts have reached the same conclusion in rejecting mandatory-arbitration provisions in pay-day-loan contracts, though without the benefit of explicit legislation.
The Supreme Court decisions likely will engender much new and expensive litigation involving the validity of arbitration provisions outside Ontario and Quebec, until such time as those provinces make clear their own positions. One may also expect large companies to oppose legislative amendments in those provinces on the ground that the Supreme Court found nothing intrinsically unfair or unconscionable in arbitration clauses. The business community might even attempt to reverse the Ontario and Quebec amendments.
The Supreme Court judgments draw an invidious distinction between class actions involving contractual claims and class actions based on non-contractual wrongs committed by defendants. Those defendants may feel discriminated against and may feel that they too should be permitted to oblige plaintiffs to settle their grievances by arbitration or, if such a tour de force is felt to be too offensive to settled legal principles, to change the legislation to require arbitration in all class action claims at the plaintiffs' or defendant's option. Such a consummation would truly turn the rationales of class actions on their head and undo all the beneficial effects class actions were designed to accomplish.
Certainly class actions have their weaknesses, but the solution is to amend the legislation and not to privatize the dispute-settlement procedure at the defendant's option. On the whole, Canadian courts have handled class actions fairly and responsibly. The great majority of claims never proceed to trial and are either dismissed by the courts, as not disclosing a cause of action, or are settled at the certification state. The threat of punitive damages if the case goes to trial and is heard by a jury is a much smaller factor in Canada than in the United States.
Of course, the object of an arbitration clause may be to avoid class claims altogether and to be able to pick off those plaintiffs, one at a time, that have the deep pockets and the perseverance to pursue individual claims. It is precisely this mischief that class action legislation was designed to reverse and that regrettably the members of the Supreme Court failed firmly to keep in mind in addressing the technical issues before them.
