Dell: Consumer Class Actions Stifled

Last Friday, the Supreme Court of Canada (“SCC”) released Dell Computer Corp. v Union des consommateurs, [2007] 2 SCR 801 [Dell], a major case which has implications on topics ranging from private international law to the ability of arbitrators to rule on the extent of their own jurisdictions. More notably, released alongside its companion case, Rogers Wireless Inc. v Muroff, [2007] 2 SCR 921, the SCC also affirmed the ability of corporations to preclude class actions in their sales contracts through the use of arbitration clauses which require referring all disputes with customers to arbitration. While Professor Drummond has already commented on the ramifications of these cases, it might still be useful to point out the factual circumstances giving rise to Dell, and some of the more poignant passages therein – some with regards to class actions in general, and some with regards particularly to e-commerce.

In Dell, an error on the Dell website allowed a number of Quebec consumers to purchase hand-held computers for a much lower price than the normal price. When Dell refused to honor these sales, one consumer put Dell in default, and then along with the Union des consommateurs, sought to commence a class action against Dell. Dell in response applied to dismiss the class action and to refer the case to arbitration as per the arbitration clause in their contract of sale,

Starting at para 105, the majority decision written by Deschamps J. addresses the Union’s argument that their dispute shouldn’t be submitted to arbitration because a class action is a matter of public order for the purposes of art. 2639 of the Civil Code of Quebec, CQLR c C-1991 [CCQ]. She rejects this argument by stating that the class action procedure is merely a mechanism with which to collectively enforce rights, and that no rights arise from the procedure itself. She writes at para 108,

Obviously, if Mr. Dumoulin had brought the same action solely as an individual, the Union’s argument based on the class action being of public order could not have been advanced to prevent the court hearing the action from referring the parties to arbitration.

Though the 3-member dissent disagreed with the majority on the applicability of article 3149 CCQ (they thought that it alone was sufficient to dismiss Dell’s motion to refer the dispute to arbitration), it agreed with the majority’s analysis of whether class actions constituted matters of public order. Moreover, the dissent went on to make some poignant statements about the validity of the arbitration clause.

At para 227, in addressing the claim of invalidity of the arbitration clause due to the fact that it was imposed via a contract of adhesion, the justices, by quoting a text by J.-L. Baudouin and P.-G. Jobin, considered a contract of adhesion “to be a true contract even though the role of the will of the adhering party is reduced to a minimum.”

At para 229, in deciding that the inclusion of an arbitration clause in an adhesion contract is not abusive, they write

The agreement to arbitrate a consumer dispute is not inherently unfair and abusive for the consumer. On the contrary, it may well facilitate the consumer’s access to justice.

Additionally, in concluding that the arbitration clause is not void for reason that it is an external clause that was not expressly brought to the attention of the consumer, the panel presumes “a certain level of computer competence [to] be attributed to those who choose to engage in e-commerce.” Citing reasons of ensuring commercial certainty, the judgment notes that even though “the hyperlink to the Terms and Conditions of Sale was in smaller print, [and] located at the bottom of the Configurator Page,” that

This is consistent with industry standards. In fact, this …was at the time recommended by Industry Canada…It is proper to assume, then, that consumers that were engaging in e-commerce at the time would have expected to find a company’s terms and conditions at the bottom of the web page. In light of this, we conclude that the hyperlink to the Terms and Conditions was evident…

Subsequent to the events giving rise to Dell, the province of Quebec enacted legislation that precludes mandatory arbitration clauses. Though the SCC decided these provisions were not applicable to the facts in Dell because the provisions were enacted after the events in question, had they been applicable, the legislation would have allowed the Union to refuse the mandatory arbitration and proceed with the class action litigation. Such legislation has been enacted in Ontario as well.

With these strong words from the SCC supporting the principle of the autonomy of contracting parties, it seems that disgruntled consumers in other provinces who wish to commence class actions against large corporations will have no choice but to rely on provincial legislatures in precluding mandatory arbitration clauses from canned contracts. Until then, as Professor Drummond pointed out, we may very well see the use of these clauses expand, and the instigation of class action lawsuits decline.