AT&T MOBILITY V. CONCEPCION AND SEIDEL V. TELUS: CONTRASTING APPROACHES
Whether mandatory arbitration clauses that effectively or explicitly bar class proceedings are allowable in consumer contracts has been the subject of much judicial comment in both Canada and the United States. Following the release of two recent supreme court decisions, AT&T Mobility LLC v. Concepcion et ux. from the United States Supreme Court, and Seidel v. TELUS Communications Inc., from the Supreme Court of Canada, mandatory arbitration clauses barring class proceedings remain allowable in both countries. That said, the case law in Canada makes it clear that mandatory arbitration clauses barring class proceedings will be inoperative where there are provincial statutory provisions prohibiting them – such as in the consumer protection legislation in Alberta, Ontario, and Québec.
In AT&T Mobility, district and circuit courts in California ruled that an arbitration clause prohibiting class proceedings, including class arbitration, was unconscionable, under the State of California’s Discover Bank rule. The US Supreme Court reversed the decision, holding that the arbitration clause was not unconscionable and that the state law was preempted by the Federal Arbitration Act.
SEIDEL V. TELUS
In Seidel v. TELUS, the Supreme Court of Canada concluded that the arbitration agreement in the cell phone company’s standard form contract was partially unenforceable, because it required the customer to waive rights granted by that Act, and which would not, in the Court’s view, be provided by arbitration. The Supreme Court of Canada left open the possibility that absent a legislative provision stating otherwise, a mandatory arbitration clause in a consumer contract trumps class proceedings.
The customer sued the cell phone company for breaching its contract by charging her for air time before her calls were actually connected. She applied to certify her lawsuit as a class proceeding under the provincial Class Proceedings Act. The contract contained an arbitration agreement, in which the customer had waived her right to sue in a class proceeding. The cell phone company applied to stay the certification application. The B.C. court decisions were complex, but ultimately resulted in the Court of Appeal staying the application. The customer appealed to the Supreme Court of Canada.
All the Supreme Court of Canada judges agreed that (unless there is a legislated exception) any challenges to an arbitrator’s jurisdiction should be determined first by that arbitrator, unless they are based on a question of law, or mixed fact and law, that requires only a basic review of documentary evidence. The judges agreed that the issue in this case was a question of law and so they could decide it.
The majority of the Court partly overturned the decision of the Court of Appeal, concluding that the B.C. legislature had intended that claims under certain sections of the provincial Business Practices and Consumer Protection Act (BPCPA) be made in court, rather than resolved by arbitration, and that this right could not be waived. The customer was allowed to continue her certification application for those claims. The Court upheld the stay of her other claims, concluding that arbitration agreements should be enforced unless there is legislation to the contrary.
When an arbitration clause in a consumer contract is invoked in Canada, it may trump class proceedings, but careful attention should be paid to applicable provincial and federal statutes and whether such statutes will render the arbitration clause inoperative. In particular, various provinces (Québec, Ontario, and Alberta) have enacted consumer protection legislation expressly prohibiting mandatory arbitration agreements and “waiver of class proceedings” clauses in consumer contracts.