Class Action Arbitrations

In many cases, an arbitration clause or agreement purports to take away a potential claimant’s right to pursue or participate in a class proceeding. However, the Supreme Court of Canada “has repeatedly affirmed that the advantages conferred by class proceeding legislation are purely procedural, and they do not confer substantive rights.”[1] So, where a person is required to arbitrate under an agreement, they cannot pursue any legal proceedings, individual or as part of a class.

A class action lawsuit is a court action by one person on behalf of a class. The members of that class do not participate in the hearing but agree to be bound by the judge’s decision on their common issues. There are several reasons that claimants might wish to pursue a class action. Perhaps their individual damages are too small to justify a lawsuit, but collectively amount to a significant sum. Class actions are also more quickly resolved than many individual cases and prevent variations in damages and liability for identical factual scenarios. The procedural advantages of a class proceeding are conferred by provincial statute: in Ontario this is the Class Proceedings Act, 1992.[2] There are statutory requirements that the members must meet before the action can be certified, and the action is closely supervised by the courts to protect the interests of the non-participant class members.

Where is Class Arbitration Available?

Courts are required to enforce valid arbitration agreements,[3] unless another statute provides otherwise or a statutory exception applies. Whether class arbitration is available, therefore, depends upon the meaning of the agreement and any applicable legislation. Language that allows or requires class arbitration in the circumstances would, therefore, presumably be enforced by the courts.

Of course, most contemporary arbitration clauses are silent on the availability of class arbitration. In Canada, there is only one case that has addressed the interplay between class proceedings and class arbitration. In Godi v. Toronto Transit Commission,[4]arising from the disastrous collision of two Toronto Transit Commission subway trains in 1995, the claimants commenced a class action lawsuit. The justice presiding over the proceedings believed strongly in the advantages of alternative dispute resolution. The order in this decision, which addressed procedural matters including requirements for certification of claimants, opt-out provisions, and claims for damages, also set out requirements for arbitration of the outstanding issues. Although both parties were reluctant to pursue alternative means of dispute resolution, they both agreed, and the matter was ultimately resolved through these collaborative means.[5] 

One suggestion to facilitate class arbitration is to amend arbitration statutes to provide that unless the agreement stipulates otherwise, class arbitration is available under certain circumstances.[6]

Class Arbitration in the United States

In the United States, class arbitration may be available where an agreement is silent on the issue. After an arbitrator had certified a class and awarded its members damages and legal fees, the Supreme Court arbitrator had jurisdiction to determine the availability of class arbitration pursuant to a general arbitration clause which referred “all disputes, claims or controversies arising from or relating to this contract or the relationships which result from this contract” to a mutually agreed arbitrator. The parties had consented to the choice of the named plaintiffs, and the class members consented to class arbitration and therefore the choice of arbitrator. The issue to be decided was what type of arbitration proceedings had been agreed to in their contract. This was not a question of the validity or enforceability of the contract, nor its applicability to the circumstances of the dispute, which would fall within the jurisdiction of the courts. Rather, the question of class arbitration concerned interpretation of the agreement and arbitral procedures, the availability of class arbitration was referred to the arbitrator.[7]

Roadblocks to Class Arbitration

It seems then, in the United States at least, that under a broad arbitration clause that is otherwise enforceable, applies to the circumstances of the dispute, and which does not explicitly preclude class arbitration, an arbitrator has jurisdiction to determine the availability of class arbitration. Whether this is the most preferable outcome is an open question.

Although class arbitration may be preferable to litigation, there must be some statutory or contractual provision that authorizes its use as a means of dispute resolution in the circumstances. The question becomes either 1) may a court order a class action to proceed by way of arbitration; or 2) can an arbitrator “certify” a class such that the members of that class are bound by their decision.

Arbitration is, by definition, intended to be more expeditious and straightforward than courts. Its procedures are simple and there is little back and forth between the arbitrator(s) and parties. However, this expedited process precludes the type of oversight that is required in class proceedings, and arguably necessary in order to ensure the rights of class members are protected throughout the process.

International Arbitration Services Based in Canada

If you require an arbitrator to resolve a class action arbitration dispute, please click here to view our roster of arbitrators, or contact us for assistance in selecting an arbitrator.

[1] Pioneer Corp v Godfrey, 2019 SCC 42 at para 116 https://canlii.ca/t/j2hbf

[2] SO 1992, c 6 https://www.ontario.ca/laws/statute/92c06

[3] See, for example, Ontario’s Arbitration Act, 1991 at s 7(1) [SO 1991, c 17 https://www.ontario.ca/laws/statute/91a17 ]

[4] Godi v. Toronto Transit Commission (20 September 1996), Toronto 95-CU-89529, Winkler J. (Ont. Gen. Div.) discussed in Richard H. McLaren, Innovative Dispute Resolution: The Alternative (2021, Thomson Reuters Canada Ltd) at §§ 7:33 to 7:35

[5] See discussion in Naomi Furmston, “Godi v. Toronto Transit Commission: A Case for Court-Mandated Mediation?”, Canadian Forum on Civil Justice, 1999 https://cfcj-fcjc.org/sites/default/files/docs/hosted/17458-godi_v_toronto.pdf

[6] Richard H. McLaren, Innovative Dispute Resolution: The Alternative

[7] Green Tree Financial Corp v Bazzle, 539 US 444 at 451-53 <https://scholar.google.ca/scholar_case?case=9002727405287991290&hl=en&as_sdt=2006>