Arbitration


Rogers has a clause on its contract that supposedly binds Rogers’ consumers to arbitration in the event of a legal dispute. That clause stipulates the following:

 

Arbitration

 

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. Please give notices of any Claims to: Legal Department, 333 Bloor Street East, Toronto, Ontario M4W 1G9. 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.

 

The arbitration clause in Rogers’ contract precludes consumers from going to court period, thereby eliminating the two standard venues in which the ordinary consumer most typically seeks justice: small claims court, and class action.

The arbitration clause commits the consumer to hire an arbitrator to resolve any legal disputes that arise with Rogers. The going rate for commercial arbitrators is approximately $4,000 per day – a cost that needs to be paid upfront and is split in two between plaintiffs and defendants. That figure doesn’t include what a plaintiff would spend on legal counsel.

For the vast majority of consumers (almost certainly all of those whose damages are less that $2,000) this clause - if it were enforceable – would operate as an insurmountable deterrent to seeking a legal remedy; or indeed even to defending oneself against a legal claim made by Rogers.
 

Arbitration clauses in consumer contracts began to be introduced across Canada in the last several years as class action law suits have taken off as a way for consumers to get redress from large corporations with deep pockets and resources for a prolonged legal battle. The procedure and legal fee arrangements of class action law suits account for the fact that the costs of litigation in Canada can be astronomical, particularly for ordinary consumers.

One goal behind the introduction of class action law suits into Canadian law was to provide consumers with "individually non-viable claims" - that is, claims that might not otherwise be pursued because the amounts at stake are small compared to the cost of litigation - to group their claims together with other plaintiffs. Most class action law suits work on the basis of a contingency fee for the class members' lawyer; that is, lawyers for the class take on all of the risks and costs of the case and if the case does not succeed, then the class members pay nothing. If the case succeeds, the lawyers for the class are paid a percentage (the contingency fee) of the damages.

A second goal of class action law suits is judicial economy. These suits allow for plaintiffs, and the courts, to avoid duplication in fact finding and legal analysis that would be required if each plaintiff had to individually litigate their cases.

The third goal of class action law suits is behaviour modification. In a climate where governments have de-regulated industries, class action law suits operate as a deterrent against powerful wrongdoers behaving cavalierly towards consumer and citizen interests in the certainty that most ordinary consumers do not have the resources to pursue them in law. The ominous potential for corporations of a costly class action law suit, with a substantial damage award to a large group of class members and the attendant negative publicity, reduces the incentive of large corporations to do a crass cost benefit analysis putting profit ahead of consumer and citizen interests. Class action lawyers on the plaintiff's side operate simultaneously as entrepreneurs (some corporation-side lawyers might say "predators" preying upon the fragile and vulnerable corporation) and also as private attorneys general - keeping the corporation in line with the laws of state. Contingency fees provide them with an economic incentive to pursue powerful corporations and force them to comply with the law.

As class action law suits in Canada have only really been taking off in the last 10 years, major corporations have been seeking ways to reduce their risks. One of the mechanisms that the legal departments of major corporations have been proposing is the introduction of arbitration clauses into consumer contracts. These clauses contractually preclude the consumer from suing for damages in a class action law suit, theoretically eliminating the corporation's vulnerability to the costs of a class action.

Increasingly, courts are finding that these clauses are unconscionable and should not be enforced. And legislatures, such as Ontario's, have passed legislation that renders the clauses unenforceable.

Canadian jurists are increasingly recognizing that arbitration clauses on consumer contracts are prejudicial to the interests of ordinary consumers and unevenly stacked to insulate large corporations from precisely the kinds of law suits that governments sanctioned to stimulate corporations to comply with both law and fundamental equity. Consumer advocacy groups have started to agitate for legislation that would preclude such a cynical corporate use of the alternative dispute mechanism of arbitration. For example, the Public Interest Advocacy Centre (PIAC) - a non-profit organization that provides legal and research services on behalf of consumer interests (in particular, vulnerable consumer interests) - has written a report that investigates the history and corporate use of arbitration clauses and strongly recommends that provinces

introduce legislative changes that will prohibit the use of mandatory arbitration clauses and protect consumers’ right to voluntarily choose a range of dispute settlement mechanisms in their dealings with businesses, whether arbitration, small claims court or class actions.

The report indicates that provincial governments like Ontario, and individual courts across the country, have started to compel corporations to behave like decent corporate citizens by rendering those clauses unenforceable through Consumer Protection legislation, or by refusing to uphold arbitration clauses in court on the grounds of unconsionability. PIAC also acts as an intervener representing consumers in cases where consumer interests at stake.

Apart from inoculating the corporation from the damage that a class action law suit can do to a major corporation (at the expense of the consumer's better interests and litigation rights), there are other corporate interests that are served by inserting arbitration clauses into consumer contracts. These interests very often go against the public interest in having matters proceed to a trial.