Let Me Go First: Application Sequencing in the Context of an Arbitration Clause and a Class Proceeding

Overview

The British Columbia (“BC”) Supreme Court recently released a decision addressing whether an application for a stay of proceedings under section 15 of the British Columbia Arbitration Act (RSBC 1996, c. 55) may be heard prior to an application for certification of a class action.

The issue in Williams v Amazon.com, Inc,[1] put succinctly, was: who gets to have their application heard first?

Relying on the Supreme Court of Canada’s decision in Seidel v. TELUS Communications Inc., 2011 SCC 15, the BC Supreme Court held that the defendant’s substantive right to proceed to arbitration triumphs over the plaintiff’s procedural rights afforded by Class Proceedings Act

It is expected that the Supreme Court of Canada’s decision in Heller v. Uber Technologies, 2019 ONCA 1, which is currently under reserve, will delve into this issue further.

Context of the Decision

In Williams, the proposed representative plaintiff alleged that the defendants (collectively referred to in the decision as “Amazon”) agreed with third party sellers not to compete for sales of new books, music, movies, and DVDs. The plaintiff alleged on behalf of the proposed class that Amazon’s conduct was anti-competitive and sought to certify a class action for: claims of breach of the Competition Act, RSC 1985, c.C34, unjust enrichment, civil conspiracy, and breach of British Columbia’s Business Practices and Consumer Protection Act, SBC 2004, c.2 (the “Consumer Act”).

In contrast, Amazon relied on the Conditions of Use in effect for Canadian consumers, which contain an arbitration clause, and argued that its application for a stay of proceedings based on the arbitration clause should be heard in advance of the application for certification. The case management judge directed Amazon to bring an application for case management direction on the issue of whether the stay application could proceed first.

The Court agreed with Amazon’s submissions that the usual discretion held by a court on a sequencing application did not apply where the interlocutory application at issue was brought under s. 15 of the Arbitration Act.

While the Court did not go as far as to say that it had no discretion over the timing of a stay application under the Arbitration Act, it held that such discretion must be exercised in a manner that does not undermine the policy of the Arbitration Act—i.e., it must give effect to contractual arrangements freely entered into by the parties.

With the exception of the claims under the Consumer Act, which legislation the Supreme Court of Canada held in Seidel v. TELUS Communications Inc. deliberately curtailed private arbitration clauses, the B.C. Court agreed with Amazon that it had a substantive right to apply for a stay of proceedings before the certification application was heard. The Court held that Amazon’s right to apply for a stay of proceedings pursuant to the arbitration clause could not be defeated by the plaintiff’s based on “a unilateral procedural choice to pursue the claim as a class action.”

Requiring Amazon to wait until a certification hearing to argue its stay application—which would require responding to the certification motion and any interlocutory applications—would undermine the Arbitration Act and the right it confers on parties to an arbitration clause to apply for a stay of non-arbitral proceedings. Essentially, the plaintiffs were attempting to usurp Amazon’s substantive right to bring a stay application with their procedural right to have a certification application heard as the first step in a class proceeding.

The Court deliberately did not address the plaintiff’s argument that a stay of the non-Consumer Act claims should not be granted because the arbitration clause was unconscionable. This argument was based on the Ontario Court of Appeal’s decision in Heller v. Uber (now under appeal at the Supreme Court), which held that the arbitration clause in the services agreement for use of the Uber App was unconscionable because, inter alia, the arbitration clause was a substantially improvident or unfair bargain and there was significant inequality of bargaining power between the class representative and Uber. That argument went to the merits of Uber’s stay application.

A Harbinger of Things to Come?

The Supreme Court of Canada’s decision in Heller v. Uber will likely further address the sequencing of certification motions and motions to stay pursuant to an arbitration agreement

However, the law applied by the BC Supreme Court further establishes Canadian courts’ reluctance to interfere with arbitration agreements freely entered into between parties. A party’s substantive right to choose arbitration continues to trump procedural rights.

[1]Williams v Amazon.com, Inc, 2019 BCSC 1807 (CanLII) [Williams]

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