July 19, 2007
Last Friday, the Supreme Court of Canada ("SCC") released Dell Computer Corp. v Union des consommateurs, [2007] 2 SCR 801 [Dell], a major case which has implications on topics ranging from private international law to the ability of arbitrators to rule on the extent of their own jurisdictions. More notably, released alongside its companion case, Rogers Wireless Inc. v Muroff, [2007] 2 SCR 921, the SCC also affirmed the ability of corporations to preclude class actions in their sales contracts through the use of arbitration clauses which require referring all disputes with customers to arbitration. While Professor Drummond has already commented on the ramifications of these cases, it might still be useful to point out the factual circumstances giving rise to Dell, and some of the more poignant passages therein - some with regards to class actions in general, and some with regards particularly to e-commerce.
In Dell, an error on the Dell website allowed a number of Quebec consumers to purchase hand-held computers for a much lower price than the normal price. When Dell refused to honor these sales, one consumer put Dell in default, and then along with the Union des consommateurs, sought to commence a class action against Dell. Dell in response applied to dismiss the class action and to refer the case to arbitration as per the arbitration clause in their contract of sale,
Starting at para 105, the majority decision written by Deschamps J. addresses the Union’s argument that their dispute shouldn't be submitted to arbitration because a class action is a matter of public order for the purposes of art. 2639 of the Civil Code of Quebec, CQLR c C-1991 [CCQ]. She rejects this argument by stating that the class action procedure is merely a mechanism with which to collectively enforce rights, and that no rights arise from the procedure itself. She writes at para 108,
Obviously, if Mr. Dumoulin had brought the same action solely as an individual, the Union’s argument based on the class action being of public order could not have been advanced to prevent the court hearing the action from referring the parties to arbitration.
Though the 3-member dissent disagreed with the majority on the applicability of article 3149 CCQ (they thought that it alone was sufficient to dismiss Dell’s motion to refer the dispute to arbitration), it agreed with the majority’s analysis of whether class actions constituted matters of public order. Moreover, the dissent went on to make some poignant statements about the validity of the arbitration clause.
At para 227, in addressing the claim of invalidity of the arbitration clause due to the fact that it was imposed via a contract of adhesion, the justices, by quoting a text by J.-L. Baudouin and P.-G. Jobin, considered a contract of adhesion “to be a true contract even though the role of the will of the adhering party is reduced to a minimum.”
At para 229, in deciding that the inclusion of an arbitration clause in an adhesion contract is not abusive, they write
The agreement to arbitrate a consumer dispute is not inherently unfair and abusive for the consumer. On the contrary, it may well facilitate the consumer’s access to justice.
Additionally, in concluding that the arbitration clause is not void for reason that it is an external clause that was not expressly brought to the attention of the consumer, the panel presumes “a certain level of computer competence [to] be attributed to those who choose to engage in e-commerce.” Citing reasons of ensuring commercial certainty, the judgment notes that even though “the hyperlink to the Terms and Conditions of Sale was in smaller print, [and] located at the bottom of the Configurator Page,” that
This is consistent with industry standards. In fact, this …was at the time recommended by Industry Canada…It is proper to assume, then, that consumers that were engaging in e-commerce at the time would have expected to find a company’s terms and conditions at the bottom of the web page. In light of this, we conclude that the hyperlink to the Terms and Conditions was evident…
Subsequent to the events giving rise to Dell, the province of Quebec enacted legislation that precludes mandatory arbitration clauses. Though the SCC decided these provisions were not applicable to the facts in Dell because the provisions were enacted after the events in question, had they been applicable, the legislation would have allowed the Union to refuse the mandatory arbitration and proceed with the class action litigation. Such legislation has been enacted in Ontario as well.
With these strong words from the SCC supporting the principle of the autonomy of contracting parties, it seems that disgruntled consumers in other provinces who wish to commence class actions against large corporations will have no choice but to rely on provincial legislatures in precluding mandatory arbitration clauses from canned contracts. Until then, as Professor Drummond pointed out, we may very well see the use of these clauses expand, and the instigation of class action lawsuits decline.
5 Comments
Any particular reason why you chose not to mention this little tidbit, fortunately set out in the headnote?
I'll repeat what Dumoulin did: "D, circumventing the measures taken by Dell by using a deep link that enabled him to access the order pages without following the usual route, ordered a computer at the lower price indicated there.
Let's compare that to its bricks and mortar equivalent: Dumoulin walking into, say, an Apple store, switching the price tags from a higher price unit to a lower price unit, then attempting to purchase the unit at the lower price. Does that sound like attempted fraud to you?
It's probably correct to say that what Dumoulin did was and should be irrelevant to the decision made by the SCC. However, are you certain it was?
More to the point, when considering the "common sense" of class counsel, isn't worth asking why the Union des consommateurs and its counsel decided to use Dumoulin as its name plaintiff. Could they not find one other aggrieved person amongst the entire Quebec polis?
I haven't read Dell yet, but I have to agree with the SCC that mandatory arbitration clauses aren't inherently abusive. Consumers ultimately pay for the inefficiency and expense of class actions. The consumer (and the manufacturer) may both be better off limiting the use of class actions, which is what contractual freedom is all about. Recent academic work confirms that there is market pressure in relation to standard clauses in contracts of adhesion, so judicial scrutiny should be limited to unusual clauses. If leigslatures (foolishly, IMHO) want to ban them, then that's up to them. Nothing in purely procedural class action legislation should be read as forbidding mutually beneficial contracts.
That's an interesting point you raise Mr. Cheifetz - one that I had thought about but quickly glossed over in writing my post.
My omission of that fact is reflective of my view that Mr. Dumoulin's actions were not as reprehensible as you would make them seem: since when is deep-linking to a page an act of fraud? All the links in my post above were deep-links to their respective websites. Does that make me guilty of reprehensibly bypassing the main page's navigational system? I hope not.
This is especially true of Dell's website where there are a myriad of prices that shift almost daily (It's like purchasing plane tickets). Though you could enter Dell's website via the main page and pay their sticker price, you'd be wise to ask around to see if any of your friends have a special link to a 'deals' page that was sent via a promotional email. As well, there are links to corporate pages that will give possibly yet a better price. All of these pages, so far as my experience goes, are valid prices that Dell would honor, so long as one can get a hold of a link and execute that transaction. (You can even negotiate a price with them if you call them.) Thus, considering this is the way that Dell runs their business, I'd contend that Mr. Dumoulin did nothing that was morally wrong by deep-linking to a page on their site that has a better price
While noting that real-world analogies to internet transactions are almost always inadequate to some degree, I'd contend that his "cirumvention" is only circumvention in the sense that avoiding a traffic jam is a 'circumvention'. That is, that the act of copying and pasting a link doesn't carry with it any of the fraudulent intent that you suggest. In your analogy, I'd contend it's more like he walked into the store, saw an obscure display rack with an item that is normally very expensive on sale for really cheap, thought it was a very good deal, and decided to purchase it. I think your analogy is more apt if he hacked into the site, changed the price, and then executed the transaction.
In short, my view of the facts in Dell is that Dell had the technological ability to prevent pages from being accessible - their failure to take down that page, though exploited, was their own error, which shouldn't be blamed on Mr. Dumoulin.
I think the issue is what did Mr. Dumoulin know and when did he know it?
It is clear that Dell didn't mean to offer Dumoulin the price he tried to get the handheld for.
In both common law and civil law systems, you can't "accept" an offer you know the other party didn't intend to make.
On the other hand, at least in the common law, you can accept an offer a party didn't intend to make, so long as it was reasonable in the circumstances to think it was a real offer. I don't know enough about the civilian view of this to be sure whether it would be the same in Quebec.
The "circumvention" language sounds like Dumoulin knew that the lower prices were mistakes. If that's the case, then it does sound morally suspect to try to take advantage of it.
My comment above was with respect to the nature of deep-linking to a site, but if we're talking about the intent of Mr. Dumoulin, then I'd agree that the 'circumvent' language makes it sound like that Dumoulin knew that the prices were mistakes. If indeed he did know, I'd also add my voice to those who denounce his actions as morally suspect.
However, all we know from the factual description is that he used a deep link to access Dell's website. Though the SCC used the word 'circumvent,' I nevertheless think it was reasonable in the circumstances for him to think that it was a real offer given the nature of Dell's site and the nature of the quick product turnover and price reductions in the computer industry. As such, without more evidence, my presumption would be that Dumoulin had an honest intent.
In the end, given the result upholding the mandatory arbitration clause in the contract of the case, I suppose this is an issue that will be left for the arbitrator to decide.