Is the Class Action a Public Order Institution?

Both the majority and dissent in two cases on arbitration clauses that came out of the Supreme Court of Canada (“SCC”) on Friday, July 13 make statements in obiter to the effect that the class action is not a public order institution of Canadian law. Ironically, when the Dell Computer Corp. v Union des consommateurs, [2007] 2 SCR 801 [Dell] and Rogers Wireless Inc. v Muroff, [2007] 2 SCR 921 [Rogers] cases are placed in a larger social context, the public’s interest in securing the class action as a vital aspect of the public justice system could hardly have been rendered clearer. The Rogers case received much less of the court’s attention, having been carried through on Dell’s slipstream; however it is the features of Rogers’ mandatory arbitration/class action waivers on its consumer contracts that highlight the hollowness of off-the-bench judicial laments about access to justice for ordinary Canadians.

Both cases turned on the sublimely procedural question of whether an arbitrator or a Quebec superior court judge should have first kick at the can in deciding whether a mandatory arbitration clause on a consumer contract was enforceable or not. Such clauses preclude consumers from pursuing corporations in any kind of court action, including class action. In both Ontario and Quebec the question has been rendered moot by amendments to consumer protection legislation which prohibit such clauses, underlining the public order aspect of the class action.

After the issue wound its way for three years through the Canadian judicial hierarchy, the SCC held that arbitrators have the jurisdiction to determine whether they should have the jurisdiction to hear the dispute. Courts then have the power to review an arbitrator’s decision about their own jurisdiction, conceivably sending the case back once more to the arbitrator. As things go, if both the arbitrator and Superior Court happen to both find that mandatory arbitration clauses on consumer contracts are not valid, it is at this moment that the plaintiffs can go forward on the next procedural motion to have the class certified, the actual trial on the merits still being eons away. While Muroff’s lawyer, paid on a class action contingency, considers the hundreds of thousands spent responding to Rogers’ procedural concerns before the SCC, it hardly seems relevant anymore that Dr. Muroff was suing Rogers for $688, which is Rogers’ invoice tally after the dentist made a handful of calls from the United States over a 7 day visit, Rogers having charged $4.00/minute for roaming charges.

As pointed out by the Union des consommateurs, which filed the original motion for class action certification in the Dell case, the class action has a critical social dimension: “Its purpose is to facilitate access to justice for citizens who share common problems and would otherwise have little incentive to apply to the courts on an individual basis to assert their rights.” Ordinary consumers, in particular, might especially lack the financial means to go up against a deep-pocketed Dell or Rogers.

Aware of the power of the class action to remove the ability of corporations to reap marginal dividends from the countless ordinary consumers who forgo litigation after a minimal cost/benefit analysis, a handful of aggressive corporations in the United States began to introduce class action waivers into their consumer contracts several years ago. This maneuver has been sufficiently powerful in the USA that American law professor Myriam Gilles projects the near-total demise of the modern class action. She regards it as

inevitable that firms will ultimately act in their economic best interests, and those interests dictate that virtually all companies will opt out of exposure to class action liability. Why wouldn’t they? Once the waivers gain broader acceptance and recognition, it will become malpractice for corporate counsel not to include such clauses in consumer and other class-action-prone contracts (Gilles, 377).

Rogers, hoping to import this trend north of the border, slid the mandatory arbitration/class action waiver into its contracts in 2001 by way of a nefarious Trojan horse clause that allows the corporation to unilaterally change the contract whenever it sees fit, post the modified contract on its web site, and presume consent to the introduction of new clauses from the consumer’s next invoice payment. The decision in Kanitz v Rogers Cable Inc., [2002] OJ No 665 (ONSC) has already held that it is reasonable to expect consumers to monitor Rogers’ web site on a regular basis, scouring for such contractual changes.

Rogers, without Dell’s American connections, may have less familiarity with how to remove the very apparent stink that hovers around mandatory arbitration clauses. Riding through the Supreme Court on Dell’s coattails, the details of how Rogers’ manages its arbitration clause escaped scrutiny.

Dell’s contract refers consumer disputes to the National Arbitration Forum (“NAF”) in Minnesota. On the NAF’s web site, set prices for consumer arbitrations are listed, and they are not terribly out of whack with what an unrepresented consumer might spend in Small Claims Court. Conceivably, the SCC might be correct, in these circumstances, when it notes that arbitration may well facilitate the consumer’s access to justice.

Rogers, however, nowhere mentions what the cost of a consumer arbitration might be. Commercial arbitrators typically cost $4,000-$7,000 per day – one of the reasons arbitration is referred to as a “private justice system.” Half of this sum has to be paid up front by each of the parties. Offering Rogers a chance to correct my own assessment of the daunting cost of a Rogers’ arbitration, I sent a letter to Rogers’ legal department in January of 2007 asking for the average cost of arbitration based on previous Rogers arbitrations. I received a letter back from corporate counsel Natalie Talsky informing me that “[T]he cost of arbitration is driven by a number of factors, including the complexity of the claim and the length of the arbitration process.…Providing you with an estimate of the cost of arbitration for an unspecified dispute would not be particularly useful information for you.”

Perhaps more surprising than Rogers’ nonchalance towards the concept of informed consent is the fact that this allusion to the complexity and length of arbitrations is pure abstraction: Rogers has not once been in an arbitration since it introduced the mandatory arbitration/class action waiver onto its wireless contract – a wholly predictable result when one pictures ordinary consumers anxiously weighing the potential costs of arbitration against the benefits of proceeding.

Rogers’ introduction of an offer to pay the full costs of the arbitration on its 2007 contract as a way to avoid this glaring problem also takes the idea of a “private justice system” to a whole other dimension. How could ordinary consumers and the Canadian public have faith that an arbitrator has come to an unbiased decision when Rogers has paid for the resolution of the dispute, especially when Rogers – far more likely than an ordinary consumer to be a repeat player – will be footing the next bill if the arbitrator is “lucky” enough to be approved by both parties as suitable?

That Rogers has reaped marginal dividends from the insertion of a mandatory arbitration clause is evident from the paucity of arbitrations it has had to face. It reaped further dividends on Friday by being able to succeed with a three year procedural hurdle in the way of a class action proceeding that two provinces have ruled are clearly public order institutions meant to facilitate access to justice for ordinary Canadian consumers. As the SCC remains uncertain as to the public interest in class actions, the rest of Canada’s provincial legislatures need to weigh in and announce clearly that the class action is a matter of public order. Corporations may be constitutionally incapable of thinking beyond the horizon of their own economic interests. Our governments are not so morally hobbled.