From Small to Supreme

On December 14, 2006, Rogers Wireless Inc presented arguments at the Supreme Court of Canada in support of the arbitration clause on its standard form consumer contracts. Rogers has been sued in a class action law suit by a plaintiff from Quebec who claims that roaming charges billed by the corporation are abusive. Rogers has responded by claiming that class action law suits against the corporation are barred to all of its consumers the moment they enter a contract with Rogers.

The binding arbitration clause on Rogers consumer contract is broad. It is laid out in small print at term 34 of Rogers’ Wireless Service Agreement:


34. Any claim, dispute or controversy (whether in contract or tort, pursuant to statute or regulation, or otherwise, and whether pre-existing, present or future) arising out of or relating to: (a) this agreement; (b) the services or equipment provided to you by us; (c) oral or written statements, or advertisements or promotions relating to this agreement or to the services or equipment; or (d) the relationships that result from this agreement (collectively the “Claim”) will be

determined by arbitration to the exclusion of the courts. You agree to waive any right you may have to commence or participate in any class action against us related to any Claim and, where applicable, you also agree to opt out of any class proceeding against us…. Arbitration will be conducted by one arbitrator pursuant to the laws and rules relating to commercial arbitration in the province in which you reside that are in effect on the date of the notice.

While the clause purports to preclude consumers from suing Rogers in any type of court action, it is clear that the chief mischief that Rogers is seeking to circumvent with this clause is the class action law suit.

What is generally not salient to consumers when they sign a contract with Rogers Wireless is that the alternative dispute mechanism to which they have purportedly committed themselves – arbitration – is extraordinarily expensive and cost ineffective for the majority of claims against the corporation. Arbitration with a commercial arbitrator is private justice. Arbitration fees can be costly; a cost that is not atypically shared between the parties who “hire” the arbitration to resolve their dispute.

For a consumer who has a dispute with Rogers of less than the costs of arbitration, the stakes of having an arbitrator resolve the dispute in their disfavour are extreme, operating effectively as a deterrent against consumers pursuing claims.

Class action law suits, on the other hand, were devised to group parties with small damage claims together to pool the legal resources required to prosecute a claim. This permits relatively weaker consumers to go toe-to-toe against the deeper legal pockets of large corporations and defendants. To facilitate the process of distributing costs over a pool of similarly aggrieved consumers, provincial governments have passed legislation permitting contingency fees for lawyers representing classes so that the lawyer is paid a percentage of the potential award. Class action lawyers bear the risks of a negative judgement.

The insertion of arbitration clauses into consumer contracts have been increasingly popular amongst large corporations in the United States to inoculate large corporations against this kind of legally entrenched consumer advocacy. In the last several years, Canadian corporations have begun to follow suit. Corporations like Rogers Wireless claim that consumers are not obliged to enter wireless agreements with the corporation, but if they do, they must sign away their litigation rights for the privilege of being a Rogers’ consumer.

While class action law suits are no doubt the principle mischief that Rogers claims to contractually preclude, the binding arbitration on its contract also claims to prevent consumers from suing or being sued in court period. For example, the clause is broadly enough formulated that consumers cannot even use inexpensive and use-friendly small claims court actions to pursue Rogers for a relatively minor damage claim.

Consumer rights groups have long been arguing that binding arbitration clauses on consumer contracts are unconscionable. The contracts themselves are non-negotiable and the vast majority of consumers are unaware that they have signed away all of their litigation rights against the corporation when they enter the contract; and unaware of the overwhelming costs of the dispute resolution mechanism to which they have purportedly signed on.

Provincial legislatures have begun to agree that arbitration clauses on consumer contracts are inherently unfair in consumer settings. Ontario passed an amendment to its consumer protection legislation on July 30, 2005 which rendered arbitration clauses unenforceable in Ontario. Section 7(2) of the Ontario Consumer Protection Act now provides that

[A]ny term or acknowledgment in a consumer agreement or a related agreement that requires or has the effect of requiring that disputes arising out of the consumer agreement be submitted to arbitration is invalid insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice given under this Act.

And Quebec tabled legislation in November of 2007 that prohibits merchants from including, in consumer contracts, clauses obliging the consumer to submit any dispute that arises to arbitration.

All of these arguments on the substance are not centrally at issue in the case before the Supreme Court. The case revolves around the question of who should determine whether Rogers' arbitration clause is enforceable or not: a Superior Court judge, or an arbitrator. Rogers argues that the decision lies with the arbitrator.

What might be born in mind is that the plaintiff in this case initiated a class action law suit against Rogers in Quebec and, hundreds of hours and thousands of dollars later, the case is stymied on this very minute procedural point. The lawyer representing the plaintiff, who is paid a contingency fee out of potential and only eventual award, has not even been able to get the claim to the point of certification as Rogers has tied the matter up with procedural questions.

The attitude of Quebec's elected officials towards Rogers' mandatory arbitration clauses is unequivocal:

On the very day that Rogers' argued its case in front of the Supreme Court, Justice LeBel initiated the proceedings by noting that he had just been informed that, save a few very minor technical changes, Quebec's legislation (rushed with incredible rapidity into legislation) was about to be passed into law. He wanted to know how that affected the legal arguments of the parties in court.

Even after the oral pleadings were submitted, the Supreme Court asked the parties on December 21, 2006 to make written submissions to the court on the impact of Quebec's legislation by January 19, 2007.