B.C. Court rules in favour of Amazon arbitration clause

While Heller v. Uber Technologies Inc. awaits conclusion at the Supreme Court of Canada, a B.C. court has stayed a proposed class proceeding brought against Amazon, which was based on an arbitration clause mandating arbitration in the U.S.

In Heller, The Ontario Court of Appeal overturned a stay of a proposed class action, finding the arbitration clause unconscionable. In Williams v. Amazon.com, Inc., plaintiff John Williams argued his facts were similar to Heller but failed to persuade Justice Karen Horsman of the B.C. Supreme Court.

“The courts of first instance are starting to take a harder look at what actually is unconscionable conduct and whether unconscionable Terms and Conditions arise simply because the individual has to arbitrate,” says Daniel Urbas, a litigator, arbitrator and mediator at Urbas Arbitral, in Montréal. 

In Williams v. Amazon.com Inc., Williams alleged the company had agreed not to compete for the sale of books, music, DVDs and other products on its website in Canada, to the company’s own benefit and at the detriment of its customers. Williams sought an injunction and restoration order under the Business Practices and Consumer Protection Act and damages under the Competition Act, for the tort of conspiracy and equitable remedies for unjust enrichment.

Amazon applied for a stay under s. 15 of the province’s Arbitration Act for the conspiracy and unjust enrichment claims made under the Competition Act.  Amazon conceded that as per the SCC’s decision in Seidel v. TELUS Communications Inc., claims under s. 172 of the BPCPA can be sought in court, regardless of a mandatory arbitration clause.

Williams’ proposed class included any person in Canada – not from Ontario and Quebec – who bought books, music, videos or DVDs through “the Buy Box” on Amazon.ca. Urbas notes Ontario and Quebec have laws preventing consumers form agreeing to arbitration in advance of the dispute.

All Amazon customers – and Williams became one in 2015 – agree to conditions of use, which state: “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,” according to the decision.

Williams relied on Heller, to argue the arbitration clause was unconscionable for being a non-negotiable agreement between parties with a power imbalance, forcing him to pursue his claim in a foreign country under foreign law.

In Heller, the plaintiff proposed a class action on behalf of Ontario Uber drivers, whose service agreements included required mediation-arbitration, for which “up-front administrative and filing fees” cost $14,500 and the location of the arbitration was Amsterdam, Netherlands. The Court of Appeal had overturned the lower court’s stay in favour of arbitration, because it “constituted a contracting out” of Employment Standards Act provisions and placed “significant financial and geographic barriers” in the process, said the B.C. decision.

Horsman found Amazon’s and Uber’s arbitration clauses were not comparable. Amazon’s had a $200 up-front fee, refundable for claims less than $10,000 unless the arbitrator deemed the claim frivolous. Arbitration is also permitted by phone, written submission and allows for small claims court.

The action consisted of two categories of claims – cons umer and non-consumer – and Horsman confined herself to the question of whether the non-consumer claims could be stayed in favour of arbitration.

Section 15 of the Arbitration Act says a party to an arbitration agreement being sued in civil court can apply for a stay, which the court must make unless the arbitration agreement is “void, inoperative or incapable of being performed,” said the decision.

Williams argued that the Conditions of Use did bind him to arbitration but presented two options: arbitration or “small claims court if your claims qualify.” He argued that, as “small claims court” is undefined, the B.C. Supreme Court counts as an option. He also argued under the Conditions of Use, the parties’ identities are unclear and that an U.S. arbitrator applying U.S. law to the Competition Act is not a court of competent jurisdiction. Horsman returned that B.C. had a small claims court and if Williams wanted to take the dispute there, he could. Horsman said the vagueness of the parties’ identities could be handled by the arbitrator and that the prospect the U.S. arbitrator would lack jurisdiction to award damages under the Competition Act was arbitrable, was not a ground for voiding the arbitration clause.

“There is nothing in the record before me to suggest that damages under U.S. antitrust law would be an inferior remedy to damages under the Competition Act,” Horsman wrote in the decision.

Williams also raised public policy issues about enforcing arbitration clauses in consumer contracts, and said they are inherently unfair and intended to avoid consumer actions and class proceedings. Williams cited studies that showed the low rate at which consumers pursue successful arbitrations.

In an article on his website, Urbas writes that Horsman responded to Williams’ claim the clause was inherently unfair by noting the issue “had been discussed an dismissed in prior cases and that it was not her role to invalidate such clauses on ‘policy’ where the legislatures have not done so.”