Court of Appeal of Québec and Federal Court of Canada examine the effect of arbitration clauses on class action proceedings

24 juillet 2012

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In TELUS Mobilité c. Comtois, the Québec Court of Appeal unanimously decided that TELUS’ commercial clients (i.e. companies or natural persons carrying on an enterprise) were ineligible to be part of a proposed plaintiff class as they were bound by an arbitration clause in their agreements with TELUS, which was combined with a class action waiver. The Quebec Consumer Protection Act, which prohibits pre-dispute arbitration clauses, was of no avail to the plaintiffs because it does not apply to commercial transactions (i.e. transactions between companies, between companies and natural persons carrying on an enterprise, or between natural persons carrying on an enterprise).

Similarly, in Murphy v. Amway, the Federal Court of Canada also denied in its entirety a motion for certification of a class action as the contract between the parties (a natural person and a company) contained an arbitration clause and a partial class action waiver. In this case, the plaintiffs were alleging a violation of the Competition Act.

In sum, these two decisions demonstrate that an arbitration clause and class action waiver, even when part of a standard form contract (or “contract of adhesion” as such agreements are called in Québec), is an effective way of precluding class action proceedings (except, in certain jurisdictions, for consumer claims, see for example Seidel v. TELUS Communications Inc.), which should be considered by businesses wishing to minimize their class action risk.

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