ONTARIO – Dispute Resolution Clause – Where a class action plaintiff agreed by “click through” to an online merchant’s Conditions of Use that provided for all disputes to be resolved by arbitration according to U.S. Federal law and prohibited class actions, the Court stayed the action in favour of arbitration on the basis that the clause was not void, inoperative or incapable of performance. The online merchant’s subsequent changes to its dispute resolution clause to permit actions in courts in the Plaintiff’s provinces of residence was argued by the parties but did not change the Court’s decision to stay the action.
Difederico v. Amazon.Com Inc. et al, 2022 FC 1256
2022 FC 1256 (Sept.6, 2022)
Federal Court (J. Furlanetto)
The Defendants (“Amazon”) brought a motion for a stay in favour of arbitration pursuant to section 50(1)(b) of the Federal Courts Act, RSC 1985, c F-7. The Plaintiff was a representative plaintiff in a proposed class action relating to purchases she made from Amazon. The motion was heard before the certification motion. (para.12)
The Court stay because there was an arbitration agreement in place that covered the Plaintiff’s purchases and the Plaintiff did not make out any exceptional grounds to deny a stay, including on the basis of public policy or unconscionability, and any challenge to the jurisdiction of the arbitrator or the validity of the arbitration clauses should be referred to the arbitrator. (para.2)
The Plaintiff’s claim alleged Amazon engaged in criminal price fixing pursuant to s.45 of the Competition Act, RSC 1985, c C-34. (para.3)
The arbitration clause in Amazon’s 2014 Conditions of Use provided inter alia, that (para.8):
- Any dispute or claim relating in any way to your use of any Amazon.ca Service, or to any products or services sold or distributed by Amazon.ca or through Amazon.ca Services will be resolved by binding arbitration, rather than in court, except that you may assert claims in small claims court if your claims qualify. The U.S. Federal Arbitration Act and U.S. federal arbitration law apply to this agreement.
- We each agree that any dispute resolution proceedings will be conducted only on an individual basis and not in a class, consolidated or representative action.
- By using any Amazon.ca Service, you agree that the U.S. Federal Arbitration Act, applicable U.S. federal law, and the laws of the state of Washington, United States, without regard to principles of conflict of laws, will govern these Conditions of Use and any dispute of any sort that might arise between you and Amazon.ca.
In 2022, Amazon amended its Conditions of Use after the motion was argued. The parties were given leave to make additional submissions. The new dispute resolution clause permitted an action in small claims court or superior court of justice of the province of residence and that the “ law of the State of Washington applied except to the extent Canadian or provincial laws say otherwise. (para.20);
- Procedural Fairness-The parties were given an opportunity to provide further submissions orally and in writing. J, Furlanetto held that there was procedural fairness and that the Plaintiff had not established how any proposed new evidence would affect the issues to be decided on the motion or would change the result.
The court referred to Scott v Cook, 1970 CanLII 331 (ON SC),  2 OR 769; 671122 Ontario Ltd v Sagaz Industries Canada Inc, 2001 SCC 59. Therefore the Plaintiff’s motion to amend the notice of motion, allow for further evidence and submissions was denied.(paras.38-40).
- Enforceability of Arbitration Clauses- Referring to the SCC decision in Seidel v TELUS Communications Inc, 2011 SCC 15[Seidel] at para 2; TELUS Communications Inc v Wellman, 2019 SCC 19 [Wellman] at para 46, the Court held that it is well settled policy in Canada that compliance with commercial arbitration clauses is to be enforced by the courts to the extent that such agreements are not null, void, inoperative or incapable of performance.(42)
- Contract Interpretation-The court then considered whether the United Nations Foreign Arbitral (Awards Convention (“UNFAACA”) applied. UNFAACA incorporates into Canadian law, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (a.k.a. The New York Convention). Article11(3) of the NY Convention requires courts of contracting states to refer parties to arbitration, if so agreed between the parties unless the arbitration clause is null, void, inoperative or incapable of being performed. (para.44)
The New York Convention has also been adopted in Ontario’s International Commercial Arbitration Act, 2017, SO 2017, c 2 Sch 5 [ICAA].(para.45)
Whether the Federal Courts Act (FCA) or UNFAACA applied is important because the UNFAACA applies only to commercial relationships.(para.50). The term “commercial relationship” is not defined in the UNFAACA. The question for the Court was thus whether the relationship between the Plaintiff and Amazon was a commercial relationship?
The Court referred to TELUS Communications Inc v Wellman, 2019 SCC 19, which held that the modern approach to statutory interpretation provides that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”. (para.56)
The Court also referred to the SCC’s approach in Uber v Heller, 2020 SCC 16 where the SCC held that when determining if the Ontario ICCA applied to that case, the court should focus on the nature of the dispute, not the nature of the relationship between the parties.(para.60) . In the Uber case the SCC found an employment relationship was not a “ commercial relationship.”
J .Furlanetto held that the nature of the dispute between these parties was more like a commercial relationship in which the UNFAACA would apply even though the plaintiff is a consumer as the Plaintiff had made claims that are commercial.(para.63)
- Stay. The test for granting a stay was reviewed. The three prongs of this analysis are 1) is there an arbitration agreement in place?; 2) do the Plaintiff’s claims arguably fall within the scope of the arbitration agreement?; and 3) are there any grounds on which to deny the stay. (para.69)
The Court held that the Clause was not optional. (para.87)The 2022 Arbitration Clause gave effect to a legal principle already in place, namely, that if the applicable law of a province gives a right to resolve a dispute in a court, notwithstanding, the arbitration clause, there is a right to proceed in the courts.(para.88) Because the Competition Act does not restrict or prohibit arbitration clauses or restrict or prohibit class action waiver the 2022 Arbitration Clause was found to be valid and enforceable. (paras.88-90)
The Court also held that the test to determine if claims are within the scope of an arbitration clause is low, citing the statement in Kore Meals LLC v Freshii Development LLC, 2021 ONSC 2896 at para 15. (para.92) . The Amazon arbitration clause in question was broad and covered all matters relating to Amazon.ca purchases the Judge held that the Plaintiff’s claims fell within the scope of the arbitration clause.
- Exceptions- The Court reviewed the usual cases on whether to grant a stay in favour of arbitration. (para.96) including the articulation of the third exception is articulated in Uber Technologies Inc v Heller, 2020 SCC 16 .There the SCC held that a court should not refer a bona fide challenge to the validity of the clause or the jurisdiction of the arbitrator if doing so would make it impossible for one party to arbitrate or for the challenge to be resolved, then the court may decide same on first instance. (para.97)
In this case the Uber circumstances for third exception did not exist .(para.98)
In this case there were complex issues of fact and law that required more than a superficial review.(para.115)
The Court also did not find that it was clear on the record that a stay and deferral to arbitration would deny the Plaintiff a remedy under the Competition Act. (para.116) or that referring the matter to the arbitrator would be cost prohibitive as the Amazon Arbitration clauses only required a claimant to pay a small up-front fee of $200 and that Amazon would fund the arbitration for claims up to $10000.00. (para.118)
Because the Competition Act does not prohibit class action waivers or arbitration clauses, the Judge held that arbitration clauses were not contrary to public policy.(para.121)
Finally the judge did not find the Arbitration Clauses unconscionable. (para.126)