July 17, 2007
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.
26 Comments
Professor Drummond:
Perhaps if Rogers selects a person or organization of suitable stature? Such people exist, of course. I don't need to name them. Some are members of the adr organization mentioned in the Dell style of cause. Others are in other organizations. Still others are on their own. Some (but not all) used to be judges, even of the SCC.
Were I such person I'd take exception to the imputation I'm incapable of being impartial because Rogers is paying the freight.
As you know, there are a number of class actions or quasi-class actions where the plaintiffs' claims have been resolved, in practice, by what amounted to court ordered forms of mandatory arbitration or mediation, where the process was paid for by the defendant.
Are you asserting (that is your implication) that the judges who ordered this procedure - let's concede that the opting out procedure wasn't practicable for many claimants so in practice the mediation or arbitration was binding - were so blinkered that they failed to realize they were compelling plaintiffs to submit their claims to an inherently biased-against-them arbitrator?
Or are you suggesting that the average member of the public is so cynical that he or she will not accept that the people were discussing will not be biased, even if the are not, so there's no point in the process? So that, regardless of what is actually the case, there will never be an appearance of justice?
The state pays for judges in criminal proceedings. Doesn't it follow from your premise that the defendant should never trust the judge?
Let me throw a small conundrum on the table. On an anecdotal level, it's an accepted premise (rightly or wrongly) amongst institutional litigants more often on the paying side of things that the successful adr organizations are slightly tilted towards the claimant. After all, why would a claimant voluntarily select an adr organization which a reputation of being neutral or anti-claimant if there's one that has a reputation of bringing about claimant-advantage settlements. So, ultimately, the adr-offering organizations or individuals who aren't perceived to be at least somewhat claimant tilted will go out of business.
If the premise underlying that conundrum is true, then your assumption is wrong and Roger's scheme will eventually work in the claimant's favour.
David Cheifetz
Thank you for presenting me with your conundrum, David.
I find the image of ordinary consumers across Canada, chatting with each other daily about the latest gossip on who is or isn’t a claimant-side arbitrator as charming as the image of Rogers subscribers scouring Rogers’ web site regularly to see whether Rogers has unilaterally changed the contract yet again (in any event, a fruitlessly abstract activity, given that subscribers cannot opt out of changes to the contract without paying a hefty early cancellation fee.)
In the real world, in consumer disputes, the only parties who have the time, inclination, and interest in acquiring anecdotal evidence about which side a particular arbitrator typically falls on are going to be…institutional litigants.
It is precisely this type of anecdotal information about the trends of particular arbitrators within the arbitration community that is inaccessible to ordinary consumer, who, unlike institutional litigants, will typically never see the inside of court or arbitrator’s room again. Short of paying a lawyer to do some digging, this kind of insight is, for the ordinary consumer, as obscure as Rogers’ standard form contract. And, of course, if your claim itself is for $688 (as was Muroff’s), or if your claim is on the order of magnitude of the very small claims court actions that mandatory arbitration clauses also aspire to preclude, no reasonable consumer would pay a lawyer for their insights.
While the reasonable consumer in this situation might try to group their claim with other similarly placed consumers and hire a class action lawyer on a contingency fee, if they happen to live in a province that still permits what are, in effect, class action bars on their consumer contracts, they would be out of luck – and, at the end of procedural hurdles such as the one reviewed by the SCC in the Dell and Rogers’ cases, almost certainly also out of time and money.
Professor Susan G. Drummond
Mr. Cheifetz,
Professor Drummond specifically refers to "ordinary consumers and the Canadian public" having faith in a system where one party pays an arbitrator's costs.
Her point concerns the appearance of neutrality to the general public, not whether an arbitrator is in fact biased or whether legal professionals trust that an arbitrator is of a "suitable stature".
Regarding the hypothesis that successful adr organizations slightly tilt towards claimants because claimants would not voluntarily choose an anti-claimant arbitrator, this relies upon the assumption that claimants are actually well-informed about the leanings of various arbitrators.
In labour arbitrations, for example, both parties are often represented by experienced lawyers who have had many dealings with the same set of arbitrators and have some idea of how arbitrators have ruled in the past.
In a commercial arbitration where the parties are fighting over a small sum, such as $688, it cannot be assumed that the complainant will be able to afford counsel or that their counsel will have enough experience in commercial arbitration to select a favourable arbitrator. For the claimants, the arbitration would likely be a one-off process. On the other side, the institutional party would likely have much more experience dealing with the exact same type of issues over a number of cases with a number of different arbitrators. It is difficult to see how the individual claimant can come out ahead in the selection process in such circumstances.
Prof. Drummond and Mr. Soh
Both of you have chosen to ignore my point which is that Prof Drummond's post impugned the integrity of a raft of very able people. They will not be biased because one side or the other is paying the freight. If that were the case, we'd never have an impartial mediation or arbitration any time a defendant admits liability and is prepared to pay. We'd always make it a condition that the claimant pay his, her or its own share. (We'll ignore the reality that the claimant will ask for that share as part of the settlement).
That the public, or a particular person, might not believe in the integrity of the tribunal is a different issue.
Prof Drummond. It seems to follow from your response that it wouldn't make a diference to you if Rogers had offered to fund the process before a mutually agreed upon arbitrator, without limiting ahead of time who that might be. I ask, rhetorically, why should that make a difference to the claimant's paranoia if it's the mere fact that Rogers is paying that creates the paranoia.
Mr. Soh: I suggest you spend a few weeks as an unpaid intern at the ADR Chambers. (I've no idea if they have such a position.) You might come away with a different view on the dynamics. Or maybe you wouldn't. In any event, the issue that I raised with Ms. Drummond had nothing to do with the ability of claimants seeking minor amounts - at any form of adr - to afford competent counsel.
Prof. Drummond: Thank you for thanking me for the conundrum. The point of it, as I trust you appreciated, is that where mediation or arbitration is voluntary, the adr organizations won't survive if they have a reputation of being pro-defendant. A minor tilt pro-claimant isn't really a problem for institutional (read repeat) defendants because closing the file is part of the process for them. As such, an effective adr organization is an advantage for instutional defendants, even if its slightly pro-plaintiff (whatever slightly means in context). My assumption is that somebody well equipped with the tools of law and economics could show that the efficiencies requre the adr organization be perceived to be slightly pro-plaintiff.
David Cheifetz
Dear David,
Kudos for taking up the cudgel of the wrongfully impugned.
Happily, in the case of Rogers’ mandatory arbitration clause, not a single arbitrator will ever be tainted with the least hint of bias. As noted, Rogers has not had a single arbitration since it put a mandatory arbitration clause on its wireless contract in 2001.
That the very existence of an ominous and occult mandatory arbitration clause on a consumer contract all but eliminated not only class actions but also arbitrations for Rogers is confirmed by Lang Michener, LLP in the following court-ordered document at Production #13: http://www.rogersandme.ca/documents/L-Drummond-Jan-25-2007.pdf . This document can be placed in context at http://www.rogersandme.ca/Rogersleadsthepack.htm . For further context, hit the “home” button at the top right of the latter page. Or you can avoid dragging yourself up through the belly of the site after entering through its backend and head straight to http://www.rogersandme.ca.
Regarding Rogers happy paucity of arbitrations: Is the marriage of law and ADR just so blissfully well-lubricated that alternative dispute resolution now means that a consumer politely heads over to a Rogers outlet, raises a wee issue they’re having with their bill or service, and Rogers gets right on it?
Or is it not more likely that the ordinary Canadian consumer in, say, a billing dispute with a well-endowed juggernaut of a corporation (to wit, see: http://www.rogersandme.ca/Rogerse_Legal_Team.htm), may be a slight bit less familiar than a lawyer with both the law AND the tools of law and economics.
Professor Susan G. Drummond
Dear Susan
Someone has to do it, right? That's the job of the the qualified barrister: the cab-rank rule.
Anyway, rest assured that I wasn't arguing the normative merits of anything Rogers did in the SCC action or anywhere else. In any event, as you've said the clauses are moot in Ontario and Quebec for consumer contracts.
My point was narrow, and remains what I said it was.
The merits of your position did not require the implicit impugning of a class of others. Although I appreciate that wasn't your intent, it was sufficiently implicit that it stood out. That the public might wrongly believe they're not impartial, and why the public isn't prepated to assume otherwise even if it's clear, is entirely different issue, for a different discussion. I'll say this much: we can point to the legal profession for much of the problem (or cynicism, if you will.)
As to the tools of law and economics - I'm prepared to guess that outside of the academy you'll find more members of the public than lawyers familiar with the concepts of economics that law adopted than lawyers are; at least in Canada.
Regards
Dear David,
I’m so pleased you brought up the fact that both Ontario and Quebec find mandatory arbitration clauses so repugnant that they passed legislation banning them on consumer contracts.
That means that Ontario and Quebec consumers won’t find the clause on Rogers’ contracts any more, right? After all, the Ontario Consumer Protection Act got rid of them in 2002 and the Quebec CPA on December 14, 2006 (the very day Rogers was in front of the SCC claiming the clauses were kindred to mom and apple pie).
Oops. I just looked. So as to flag for Ontario and Quebec consumers that their litigation rights have been (phew!) legislatively restored, Rogers has inserted on its nation-wide contract the phrase “To the extent permitted by applicable law” in front of its mandatory arbitration clause. The latter phrase was inserted in 2007 as a remedy for the fact that announcing on the contract and monthly invoice, without qualification, to Quebec and Ontario subscribers that they had signed up to never, ever sue Rogers in court or on a class action might constitute misrepresentation on Rogers’ part.
As the ordinary consumer in Toronto or Montreal, Thunderbay or Jonquierre, is standing at a Rogers outlet with the line growing behind them, one is to imagine him or her coming across this phrase and making a mental note to themselves to the effect that: “Ah, yes, by applicable law, that must mean legislation, and let me just run down the legislative data banks in my head and see which apply. Oh yes, I note in the respective consumer protection acts stored holus bolus in my memory that Ontario and Quebec won’t enforce that clause. Hmm, and I see that there’s a BC Court of Appeal decision on point. Let me just carry out a quickie analysis of the effect of Rogers v. Muroff on the applicable law before I turn to the other 52 clauses on Rogers’ Unified Terms of Service.”
One of the most hilariously ironic clauses on the current iteration of Rogers’ consumer contract (at http://www.rogers.com) is Term 37 which reads:
“These Terms been drawn up in the English language at the express request of the parties.”(sic).
If some Rogers-hating gremlin had hacked into Rogers’ web site and screwed with the contract, I don’t think they could have done a better job.
As Rogers’ contracts can be changed on-line in a nano-second, you may not find that astonishingly apt bit of contractual gibberish the next time you look. When it disappears or is modified, I’ll know that someone at Rogers is reading “The Court”.
You’d think that a company that is the repeated butt of international jokes about the grammatical incompetence of its drafting department (see http://www.rogersandme.ca/WaiverofLiability.htm) would be a tad more circumspect about hiring a copy editor. Lawyers may know less than the average Canadian about economics; regrettably, they appear to know less about the English language as well.
Warmly, Professor Susan G. Drummond
Susan,
Do Ontario and Quebec find mandatory arbitration clauses repugnant? I doubt the majority of Ont & Quebec voters have an opinion on this issue.
Of course, since you and I know that Ontario and Quebec legislatures have enacted privative clauses in statutes governing some administrative tribunal that oust the court's jurisdiction, and they haven't been all been repealed by any subsequent governing party, and they can be constitutional if drafted properly, then we know that mandatory arbitration clauses aren't in principle repugnant. Rather, it depends on whose ox is being gored at the particular time.
As to what the a majority of the Ontario and Quebec polis might find repugnant (other than ongoing failures of the Laffs and Blue Blanc Rouge to bring Lord Stanley home) I think it's more accurate to say that sufficient members of the governing party at the time thought there was sufficient value in listening to the few special interest groups who complained loudly enough. That doesn't mean the groups are wrong. It just means that, like most other issues of this sort, it's stretching the point to suggest the result was what the citizens of the state wanted. It might be what they'd have wanted if they'd thought about it adequately; however, who knows. They're have been some strange election results in Canada.
I might be overly cynical about the situation; however, a quick check of Hansard produced only one mention of the provision, at 2nd reading, without the usual grandstanding references - at http://hansardindex.ontla.on.ca/hansardeissue/37-3/l049b.htm - to the hordes of citizenry storming the gates etc because of the abuses of... etc.
Also, I don't particularly remember the issue being a hot button topic prior to 2002, but that's 5 years and more ago.
Finally, (since I've been known to rant on this issue before - let's put it under the rubric of "competence") ... if it is true that any significant number of Canadian lawyers (practitioners, at least) know less about the English language than the average Canadian, maybe we need to consider where most of these Canadian lawyers came from and either change that or change something about those places. I don't think we have to go as far back as their parents, or even Adam's Rib; we can probably stop at various institutions whose names usually have "Law" somewhere in the description.
David Cheifetz
Dear Professor Drummond,
Thank you for posting this very interesting commentary on the state of class actions law in Canada, and for providing the link to Prof. Gilles thought-provoking article.
My initial reaction was to think that Canadian class actions are (compared to their American cousins) still in their infancy. This is illustrated by the enactment, only earlier this decade, of class proceedings legislation in various provinces. It is further borne out by the fact that Canadian courts still appear to be struggling with some of the preliminary procedural issues surrounding class actions (let alone the multi-jurisdictional enforcement issues that follow). It seemed that the Supreme Court would approve of this trend towards increased class action proceedings, given its ruling in Western Canadian Shopping Centres Inc. v. Dutton, [2001] 2 S.C.R. 534 (http://scc.lexum.umontreal.ca/en/2001/2001scc46/2001scc46.html). However, this latest set of rulings clearly ranks the freedom of contract above the public interest in the pursuit of class actions.
In particular, the American system has had years to process mass tort claims, many of which are only just getting underway in Canada. It was my perception that the old American trend of tort actions as the dominant type of class actions was still in place in Canada. However, a brief review of the National Class Action Database (http://www.cba.org/ClassActions/main/gate/index/default.aspx) reveals that many ongoing actions might have been prevented by the type of contractual waiver discussed in your post. Would you agree that allowing the operation of these clauses (barring the type of legislative response you suggest) may tend to stunt the growth of class actions in Canada, and bring about an arguably premature demise of the system in this country?
Also, are you aware of any American legislative initiatives similar to those implemented in Ontario and Quebec? Have they received any judicial consideration, and if so, how does it bode for these Canadian provisions?
David,
Ah. We happen to agree: mandatory arbitration clauses on consumer contracts are so spectacularly arcane and occult that the vast majority of Canadians couldn’t form a reasonable opinion on their import.
But of course that just underlines the question: What the hell are they doing on take-it-or-leave-it, standard form contracts?
While the law remains (sometimes intentionally, shall we admit?) obscure and inaccessible to the majority of ordinary Canadians, it often appears that the most effective way to bring about public legal education and legal reform is through the media.
The following illustrates my point about PLE:
http://www.rogersandme.ca/story.html
And for a case on point regarding law reform, may I direct you to:
http://www.rogersandme.ca/Rogersleadsthepack.htm
While I’m afraid I really must disagree with you that it is the job of law professors to teach basic grammar to law students, I don’t actually believe the foundation of this problem lies with the three R’s. We all know how easy it is to take candy from a baby. Although law schools do their level best to promote basic social morality in the legal profession, there are some fundamental character traits that seem to be refractory to pedagogy;
...which, beyond representing the voice of the majority, is one of the reasons we have government.
Susan,
It might be that it ought not to be the law schools' - therefore the law professors' - job to teach basic grammar and literacy skills to "wannabe" practitioners; however, the law schools are admitting, cozening, and graduating these people with degrees.
In as much as literacy is a requirement for law, then don't admit somebody who lacks the necessary composition skills. That'll solve the problem. However, since that's not going to happen, ... the law schools are part of the process that foists these people on the public. If they can't write in a grammatically correct, coherent, sentence, they shouldn't graduate. If that means we need ESL courses for 'wannabes' then that's what the law schools will have to provide.
As for a discussion about morality and the practice of law (in all of it's areas - the academy, practitioners, judges, the legislatures), that's too big a topic for this thread.
Of course the law is sometimes intentionally obscure. That helps to perpetuate the mystique that one has to be and is smarter than the average moron in a hurry to be a competent lawyer. If you ever needed proof of that, it's in the post, here [ http://www.robhyndman.com/2007/07/17/on-lawyer-dissatisfaction/ ] describing a poll taken of US / UK lawyers in which the subjects stated that one of the reasons why lawyers are unhappy with their work is the "the yawning gap between their intelligence and the mind-numbing nature of their work". Right.
As to why variations of privative / exculpatory clauses are in adhesion contracts, try because it's legal to have them - or is legal, absent statutory prohibition, unless there's some sort of overriding unconscionability principle. Did the SCC mean that in Hunter Engineering Co. v. Syncrude Canada Ltd.? But that's Stephen Waddam's bailiwick, not mine. Normative morality is one thing; business morality is another. At least that's what some would say.
Regards,
David
Dear Melanie -
Thank you for your thoughtful response.
Class action law suits are in fact not so new to Canada, though they are less deeply entrenched in the common law provinces. Quebec has had class action legislation (see the Code of Civil Procedure: http://www.canlii.org/qc/laws/sta/c-25/20050809/whole.html at class action) in place since 1978. This is one of the many reasons that Quebec is referred to (by plaintiffs, of course) as class action heaven.
While I teach civil law at Osgoode, the provisions in Quebec’s CCP are actually based on New York class action procedure. I can attempt to convey the basics of what I know, but I will defer to corrections from experts on procedure, particularly from that jurisdiction.
There are several features of Quebec’s regime that underline the legislature’s intention to regard class action as a public order institution. While class action lawyers in Ontario (as Quebec) are paid on a contingency fee basis, the representative plaintiff in Ontario remains exposed to potentially astronomical adverse cost awards on certification. Judge Nordheimer (of Kanitz v. Rogers infamy) once ordered an RP to pay over $180,000 in adverse costs on an environmental case. Ontario class action lawyers routinely insist that the RP cover this bill. Quebec has set the small claims tariff on adverse cost awards for class certification. The culture of Quebec law has class action firms absorbing this bill. Further, Quebec has also instituted a public fund which covers these kinds of expenses. The fund is capitalized out of a percentage of successful class action awards.
Quebec has also recently simplified the procedure on certification in response to a predictable pattern of well-endowed defendants transforming what was meant to be a procedural step into a full blown trial on the substance, with attendant delays and motions for discovery.
Given that class actions cost Quebec consumers nothing but a percentage of a prospective award, consumers, if given the choice, would obviously rather go this route than choose the occult and uncertain arbitration procedure which corporations like Rogers are cynically promoting. Only someone who was in no position to agree to such an alternative dispute resolution would agree to it – to wit, ordinary consumers confronted with a baffling standard form contract.
If arbitration is such a salutary alternative to our public court system, and if consumer consent retains the least semblance of meaning, why not permit consumers to choose arbitration or class action once a dispute has arisen?
In the January, 2007 letter from Rogers’ legal department, quoted in my original comment, corporate counsel Talsky goes on to tell me that “In the event that you are involved in a potential arbitration with Rogers in the future, we would be pleased to provide you with an estimate [of the costs of arbitration] at that time.”
Shouldn’t consumers, at that juncture – when they first learn from Rogers how much it will cost to arbitrate the dispute – be given the choice to pursue a class action instead? Wouldn’t that, in fact, be meaningful consent to arbitrate?
It’s sufficiently obvious that the mandatory arbitration/class action waiver is little other than a class action bar that the above questions are surely rhetorical. Who else but members of the legal profession would be sufficiently bamboozled by their own ejaculations that any question remains.
David,
Thank you for your interjections. Yesterday, I found myself procrastinating by reading the posts to http://ninegrambrain.blogspot.com/. Given that the book that I’m writing (see http://www.rogersandme.ca/tea_index.html) is actually about Rogers and Canadian consumers, you’ve given me a forum to procrastinate in a more constructive manner.
You also clearly don’t have Rogers for a client (or at least won’t anymore). I think Corporate Communications sent out a far-ranging communiqué after it lost against me in Small Claims Court that says “Give her NO MORE OXYGEN!!!”
(A propos: http://www.rogersandme.ca/SticksandStones....htm
While we’re on the topic of Hunter Syncrude, fundamental breach, and exculpatory clauses, I have to disagree with your assessment that a plaintiff needs a statutory provision or overriding unconscionability principle in play to render a waiver of liability invalid. All one needs is someone skilled in circumvention of the law. Although this is how Ambrose Bierce defined “lawyer” in the Devil’s Dictionary, and although I have neither written the bar exams nor articled, let alone ever practiced law, I think I can wear the mantle, having successfully provoked a small claims court judge to throw out Rogers’ supposedly impregnable waiver of liability on the grounds that it was not…grammatical.
This minor marvel can be referenced at:
http://www.rogersandme.ca/WaiverofLiability.htm
Actual reasons for judgement:
http://www.rogersandme.ca/documents/SusanG.Drummondv.RogersWirelessInc.pdf
As to why Rogers didn’t appeal this decision all the way to the Supreme Court, see my comment regarding “Give her NO MORE OXYGEN!!!”
In any event, thank you for the opportunity to promote my web site, upcoming book, and eventual movie (starring Reese Witherspoon – I think you’ll agree from the photo at http://www.rogersandme.ca that there is a passing resemblance). I have a couple dozen other web pages that I’d be pleased to reference.
Mademoiselle-sauve-qui-peut
Susan,
Based on your description of what the judge did in your case, Judge Thomson held the clause was ambiguous and therefore didn't meant what Rogers wanted it to mean. It was an exculpatory clause, drafted by Rogers; therefore it's read narrowly against Rogers for at least these two reasons. I could describe others, but I won't - no Rogers isn't a client. The decision was either grammatically correct or incorrent . In any event, if the judge found the clause was ambiguous, wasn't clearly applicable to you, the necessary conclusion was that the clause didn't apply to you. Therefore, the judge didn't have to deal with the situation where the clause was applicable on its face.
Is there a fundamental breach doctrine at all? That's one of the issues that Hunter Syncrude leaves dangling. If Judge Thomson had held it was clear on its face, literally applicable, then she'd have had to deal with unconscionability issues. And whether there is a fundamental breach doctrine that prevents a clearly written, applicable exculpatory clause applying. So, decide what Hunter Syncrude means. Or what the gloss (maybe) on Hunter Syncrude in Gordon Capital v GCNA means.
As I said, that's Stephen Waddams territory. Or, John Swan (whose text I highly recommend) territory.
I know the Ambrose Bierce definition. It presumes one knows the law. Otherwise, how can one circumvent it? One might not apply it, one might argue for something that is contrary to it (without knowing it) but that's not circumventing.
Regards,
David
Whoah, David. I don't know if I'd be messing with Judge Thomson if I were you.
See: http://www.rogersandme.ca/ThisAintaTeaParty.htm
That's why senior litigators have articling students and young associates.
You were lucky to get Judge Thomson, if she is who I think she is.
You'd have been in far more difficulty if you'd had any of the "empathic and gentlemanly retired lawyers who typically constitute the deputy judges at Small Claims Court", not the least because the cast of Deputy Judges is far broader than that. My comments about the Ambrose Bierce definition of lawyer weren't directed at Judge Thomson. My point was that she didn't circumvent the law if she decided the clause is ambiguous. She correctly applied the law if she found the clause was ambiguous in general, or ambiguous in its application to you. I make no comment on the validity of the decision that the clause is ambiguous in general or in applicationYou might have had one of the neither empathic, gentlemanly, or retired lawyers who serve as deputy judges and who aren't as able as Judge Thomson. More to the point, you might have had a deputy judge who isn't quite as knowledgeable as she is. A Small Claims Court judge is like a medical GP. He or she hasn't time to be a specialist, but needs to know enough about a whole range of things to make rapid, informed, sensible decisions; all the while knowing that litigators like me are lurking in the wings to recommend our clients appeal the decision if the judge over-reaches.
If Judge Thomson is who I think she is, I first appeared before her sometime in the last millenium (ok, in 1975 or 1976), when I was articling. Our instructions, then, were that she would generally not be sympathetic towards the institutional clients we generally represented. Therefore, we were told to be well-prepared, or else.
David
Myriam Gilles from Cardozo Law School has the following response to your thoughtful queries:
David, you seem to be falling into the same trap as did some of the judges in this case. The issue is not "which is better: arbitration or courts?". The answer to that question will depend on the particular circumstances of each case, as well as the rules applicable to the particular arbitration being offered. In some cases (e.g., where many consumers have been harmed by the same corporate breach), class actions will be the more appropriate avenue by which to resolve the issue. In others, arbitration is more appropriate. That is why the decision of which route to take should be made only once the parties have all relevant facts before them: i.e., after the dispute has arisen.
The real issue here is: "under what circumstances should consumers be denied access to the publicly-funded justice system?". The answer is (or should be): only after the dispute has arisen, when they are in a position to make an informed decision.
As you point out, arbitration can work to the benefit of consumers - if it is inexpensive, unbiased, timely, etc. If this is so, then consumers will choose it voluntarily. There is no need to force it upon them.
Courts are free to encourage or even require efforts at ADR/settlement by the parties; that is a completely different matter from denying access to the court in the first place.
This is an unfortunate decision from the consumer perspective, but will hopefully have the positive effect of encouraging all those provinces who haven't already invalidated mandatory arbitration clauses in consumer contracts, to do so.
The critical point here is that consumers pay for the cost of the class action process. It (including plaintiff contingency fees) becomes part of the price of whatever they are buying. If you make that process mandatory, then they have to pay. If it can be contracted out of, then they don't.
Standard clauses in contracts of adhesion generally benefit both sides of the transaction. If they didn't, there would be market pressure for them to change. Banning mandatory arbitration clauses transfers wealth from both "big corporations" and consumers to plaintiff lawyers.
Philippa:
I hope not, and didn't intend to make that mistake, and I'm not certain what I said that leads you to that concern [g].
I don't believe I said anything which indicated that I was addressing the merits of the court vs private adr stream. I became involved to challenge the suggestion that the adr process (mandatory or otherwise, whenever it became applicable) was inherently (or even seemingly) biased because Rogers was paying for it.
Whether there's merit to the belief that the "publicy-funded justice system" is better for consumers, other than that it's on somebody else's penny and lawyers get to make money at the public's expense, is a question for another time.
Regards,
David
In some cases (e.g., where many consumers have been harmed by the same corporate breach), class actions will be the more appropriate avenue by which to resolve the issue. In others, arbitration is more appropriate. That is why the decision of which route to take should be made only once the parties have all relevant facts before them: i.e., after the dispute has arisen.
If this argument makes sense, then there is no reason to restrict it to class actions. We should just return to the common law position of prohibiting irrevocable arbitration clauses in contracts.
The trouble is that it doesn't make sense. A system where the claimant can choose the forum may also have inefficiencies that both parties would benefit from avoiding ex ante. This is particularly likely in the class action context, where entrepenurial lawyers with little real connection to the client class determine what the settlement is going to look like. Since these lawyers have to be paid, all settlements are going to cost the defendant firm more than they benefit the plaintiff class. These costs must, in turn, be internalized by consumers. Sometimes the benefit to the plaintiff class will be tiny, and it would have been better off bargaining away the class action forum in the first place. All the American experience shows is that there are enormous market pressures for this to happen.
The real issue is whether this market pressure is because consumer class actions are lawyer-driven inefficient monstrosities with no real benefit to consumers or because contracts of adhesion allow corporations to take advantage of consumer ignorance.
Thank you for your input Garth.
I will not have a moment (until this evening) to respond to your thesis that corporations are doing us all a favour when they ensure they can't ever be sued, nor your thesis that market forces will save us all from the tyranny of lawyers. However, as it is a brief intervention, I would like to direct you to a report by the Public interest Advocacy Centre that addresses many of the concerns you raise about the perils of trading on consumer ignorance. The full report can be accessed here:
http://www.piac.ca/consumers/mandatory_arbitration_and_consumer_contracts
I have also reproduced excerpts here:
http://www.rogersandme.ca/9reasonswhyarbitrationisbadforconsumers.htm
Having just tracked down the piece in The Times referenced above (http://business.timesonline.co.uk/tol/business/law/article2045254.ece), it is with basic human empathy that I read the rest of the paragraph that refers to the yawning gap between [lawyer's] intelligence and the mind-numbing nature of the work:
The lawyer who drafted Rogers' Trojan horse clause, which allows the corporation to unilaterally change the contract, post the changes to the internet, and from there presume consumer consent, almost guaranteed that nobody but an academic would ever read the tediously belaboured words. I'm not sure, then, whether the lonely soul stuck in a back room shoveling up unilateral modifications to Rogers web site on a revolving basis was grateful for the wholly unexpected attention when I pointed out the lack of basic intelligibility in yet another clause on the March, 2007 consumer contract, one that had not only been posted on-line but printed and distributed to Rogers outlets and third party dealerships across the nation:
In a further exchange between me and Rogers’ corporate counsel, Natalie Talsky acknowledged that, yes indeed, this provision was not a proper English sentence and therefore fundamentally incomprehensible. She thanked me for pointing it out and the error has now been corrected on-line.
Apart from the profound sense of futility that this gives rise to in the intelligent young minds that we graduate from law school, is there something so shameful in admitting that which is so obvious that only a child would have the naiveté to point out?: There is no semblance of consent on consumer contracts. Nobody expects there to be consent. Nobody reads the contract – not even those who draft it, nor those who commission it. The contract’s purpose is fundamentally little other than raw and cunning coercion.
For a lovely example of the radical contractual shift away consumer centrism that occurs when the market falls prey to increasing monopolization within an industry, compare Fido’s contract before and after Rogers swallowed up its competition:
1. http://web.archive.org/web/19970712075322/www.fido.ca/engl/ado/enga.htm
2. http://www.rogersandme.ca/Rogers_Wolfs_Down_Fido_by_Harry_Gefen_000.htm
With appreciation, I’ve added The Times article to my web site at: http://www.rogersandme.ca/TruthinAdvertising.htm which is located in the following context: http://www.rogersandme.ca/Rogerse_Legal_Team.htm
If the cellphone industry is monopolistic, a ban on arbitration clauses is a bad remedy. It would apply to competitive industries where arbitration clauses might well be best for everyone, and it wouldn't prevent the putative monopolists from extracting rents elsewhere. The best solution is to make the cellphone market more competitive.
There is a considerable academic literature on contracts of adhesion (standard forms presented on a take-it-or-leave-it basis). As with most things in life, the issues aren't all resolved. However, it is too simple to assume that because hardly anyone reads such contracts their terms are to the unilateral advantage of the seller. That's not because sellers are "doing us a favour." It's because if the value of a contract term to the buyer exceeds the cost to the seller, there is an incentive to include the buyer's value in the overall price.
I am not going to dispute that terms in contracts of adhesion should be regarded with a colder eye than those in contracts negotiated between sophisticated parties with independent legal advice. But arbitration clauses probably improve consumer welfare because the cost of civil class actions have to be reflected in prices and the benefits are small.
I'm not sure how many of you subscribe to Prof. Geist's BNA Highlights e-mail, but he included the following item in it this morning:
CT RULES AOL CONTRACT BLOCKNG CLASS ACTION UNENFORCEABLE
...[T]he Washington State Supreme Court has ruled that a forum selection clause in AOL's terms of service that has the effect of depriving Washington residents of their state-law right to aggregate small-dollar claims into a class action suit is unenforceable in that state. The plaintiffs alleged that America Online engaged in unfair and deceptive trade practices--in violation of the state consumer protection act--by creating unauthorized secondary accounts, charging subscribers for those accounts, and failing to fully credit subscribers who complained that the additional account was not unauthorized. Case name is Dix v. ICT Group Inc.
FYI.
I don't know if I want to be the one to open this pandora's box (heck I don't even own a cell phone), but recently (July 18, 2007) the U.S. Court of Appeals for the Ninth Circuit held in Douglas v. U.S. District Court that AOL' s failure to provide notice means that its altered phone service contract does not bind the consumer. It seems that in the new service contracts AOL added four new terms: additional service changes; a waiver of the right to bring class actions, an arbitration clause and a clause choosing New York law to govern any disputes arising under the contracts.
See http://caselaw.lp.findlaw.com/data2/circs/9th/0675424p.pdf
And discussion in http://writ.lp.findlaw.com/ramasastry/20070809.html.