B.C. – application for stay required for court to consider role of arbitration at certification stage – #333

Tasked with deciding whether or not to certify an action as a class proceeding, Madam Justice Veronica Jackson in Matthews v. La Capitale Civil Service Mutual, 2020 BCSC 787 declined to consider whether to stay the proceedings on the basis of mandatory arbitration agreements contained in several of the agreements.  Despite contesting certification, Jackson J. noted that Defendants had not filed an application for a stay under section 15 of the Arbitration Act, RSBC 1996, c 55 and therefore the issues “were not squarely before me and were not argued on this application”.  “At this time”, she could not conclude arbitration of disputes involving potential class members was required.  See the earlier Arbitration Matters note “Stay granted despite anticipation that arbitrator applying U.S. law might not be able to grant claims”.

As independent contractors, the two (2) representative plaintiffs held different positions directly with Penncorp Life Insurance Company (“Penncorp”) in exchange for compensation which included commissions and percentages of profits, payable after retirement or termination of their contractual relationship with Penncorp.  Defendant La Capitale, defined at paras 14-17, in November 2006 acquired one of the other corporate Defendants which owned Penncorp.

In their action, Plaintiffs claimed that, after retirement, they did not receive full compensation due to acts they alleged Defendants took, as set out at para. 19.

Jackson J. prefaced her reasons with a caveat as to the scope of her fact findings.  She remarked that her findings were based on materials presented at the hearing limited to the preliminary procedural step of certification. She cautioned that those findings did not constitute final findings of fact based on admissible evidence ultimately tendered by the parties at future hearings on substantive issues.

Over the time period covered by the action, the contracts governing sales agents and sales managers underwent different versions.  Despite the changes, no modifications material to the certification application were brought to Jackson J.’s attention by the parties for the hearing. 

She observed that each category of contract was had a similar format. “The Sales Agent Agreements are standard form contracts with blank spaces in which the name of the agent, the company, and the date are filled into the template document” and “Sales Manager Agreements are standard form contracts with blank spaces in which the name of the agent, the company, the date, and the region are filled into the template document”.

Jackson J. was tasked with deciding whether or not to certify the Plaintiffs’ action as a class proceeding under section 2(2) of the Class Proceedings Act, RSBC 1996, c 50 (“CPA”).

Jackson J. undertook the analysis common to certification application and, at paras 150 and following, addressed whether a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues.  Plaintiffs’ submissions are outlined at paras 155-156 and Defendants are outlined at paras 157-158. 

Among other arguments, Defendants disputed that Plaintiffs had established that common questions of fact or law predominated over individual questions, arguing that individual issues dominated with respect to liability and damages.  Defendants also urged that common issues would fragment into individualized assessments and not serve judicial economy. As their final argument, Defendants mentioned that several of the agreements contained mandatory arbitration clauses which would require individuals bound by them to resolve their disputes through arbitration.

Jackson J. addressed Defendants’ final argument first, dismissing it.

[159] The defendants have not filed an application to stay the proceedings under s. 15 of the Arbitration Act, R.S.B.C. 1996, c. 55. Accordingly, the questions of whether the arbitration clauses contained in template agreements filed by the defendants are applicable to any of the class members and, if applicable, whether they are void, inoperative, or incapable of being performed, were not squarely before me and were not argued on this application. At this stage, I cannot conclude arbitration of disputes involving the potential class members is required”.

urbitral note – First, at paras 160 and following Jackson J. did anticipate that, later in the file, further modifications of the class could occur by inclusion, exclusion and subclasses.  Despite that anticipation, she appeared to limit those changes to the claims made and not the procedure applicable to presenting them in one or another forum.

Second, Jackson J. mentioned that she could not do so “[a]t this time” implying that, at a later time, an application under section 15 may be viable.  Plaintiffs might argue that such an application had to be presented at the certification hearing.

Third, in Williams v. Amazon.com, Inc., 2020 BCSC 300, Madam Justice Karen Horsman stayed a proposed class proceeding for non-consumer claims seeking damages under Canada’s Competition Act, RSC 1985, c C-34 based on a standard form contract which submitted those claims to arbitration administered in the U.S. and subject to U.S. laws.  Respecting competence-competence, Horsman J. recognized several issues affecting jurisdiction but deferred them to the arbitrator.  She acknowledged the “real prospect” that a U.S. arbitrator (i) could decide that such claims were not available under U.S. substantive law and (ii) might lack jurisdiction to award the claimed damages but those were not sufficient to hold that the arbitration agreement was void, inoperative or incapable of performance.  In addition, Horsman J. held that the agreement to arbitrate overcame any unconscionability concerns raised in Heller v. Uber Technologies Inc., 2019 ONCA 1.