British Columbia –  Effect of consent orders staying proceedings in favour of arbitration – #636

Williams v. Audible Inc., 2022 BCSC 834 (“Audible”) is the second of two decisions by Justice Horsman extending stays of proceedings in favour of arbitration under s. 15 of the former Arbitration Act, R.S.B.C. 1996, c. 55 in the context of class proceedings. The first, Williams v. Inc., 2020 BCSC 300 (the “Amazon Stay Decision”), concerned a separate class proceeding, brought by the same representative plaintiffs as in Audible, alleging similar causes of action, but against Amazon. That decision is under appeal. In this case, Justice Horsman granted the stay sought by Audible. Following the principles in Seidel v TELUS Communications Inc., 2011 SCC 15, the parties agreed to a consent stay of proceedings in favour of arbitration in respect of the plaintiff’s non-consumer protection legislation claims because of the arbitration clause in the relevant contracts. On this application, Justice Horsman found that, because the representative plaintiffs’ non-consumer claims were stayed by virtue of a consent order, there was no proceeding in which to advance the claims of the other possible class members, whose claims related to a period of time when Audible’s contracts did not contain arbitration clause. Therefore, she granted an extension of the stay of those proceedings to cover those claims too.

In Audible, the plaintiff sought to certify a class proceeding against Audible Inc., Apple, Inc. and Apple Canada Inc. for claims arising from certain exclusivity provisions in an agreement between Audible and Apple in respect of the sale of digitized audiobooks, which the plaintiff alleged were anti-competitive. He sought restitution or disgorgement of the “overcharge” paid as a result. Within that proceeding, three applications were brought and are the subject of this decision – an application to certify by the plaintiff; an application for summary judgment by the defendants; and an application by Audible to extend a previous consent order for a stay of proceedings in favour of arbitration. This case note addresses only the latter.

In the proposed class proceeding, the plaintiff advanced claims under s. 172 of the Business Practices and Consumer Protection Act, S.B.C. 2004 c. 2 (“Consumers Act”) and claims that were not caught by that legislation, such as civil conspiracy and breaches of the Competition Act (the “Non-Consumers Act” claims). The contract between Audible and the plaintiff contained mandatory arbitration provisions, which Audible sought to enforce. In light of the Supreme Court of Canada’s decision in Seidel, wherein the Court held that claims under s.172 of the Consumer Act could be pursued in court notwithstanding mandatory arbitration provisions, Audible agreed that it could not seek to stay any claims brought under the Consumers Act. Its stay application, therefore, was limited to the Non-Consumers Act claims.

Before the hearing of the application, Audible and the plaintiff agreed to stay the Non-Consumers Act claims, subject to two exceptions. As a result, a stay of proceedings was effected by consent order.

The two exceptions to the agreement between the parties related to: (a) claims for relief on behalf of Alberta residents under the Alberta Consumer Protection Act, R.S.A. 2000, C-26.3 and (b) all claims of putative class members for the period from July 21, 2010 to September 5, 2012, when Audible’s contracts with its customers did not contain an arbitration clause. The application by Audible sought to extend the stay of proceedings to these two exceptions.

Whether a plaintiff may advance claims on behalf of other putative class members even if his own claims were stayed had previously been litigated in the Amazon Stay Decision. Though the plaintiff neither lived in Alberta nor had purchased digitized audiobooks in the relevant time period (i.e., he had no claims he could personally advance), he argued that, pursuant to a British Columbia Court of Appeal decision in MacKinnon v. Instaloans Financial Solution Centres (Kelowna) Ltd., 2004 BCCA 472, he could still advance the claims even if he did not have standing to maintain those claims as an individual. However, in the Amazon Stay Decision, Justice Horsman rejected this argument and distinguished MacKinnon. That case focused on whether the viability of the causes of action should be assessed solely in reference to the representative plaintiff or also from the perspective of the proposed class members. In other words, the question in MacKinnon was whether the claims made by a representative plaintiff in a proposed class action had to be ones he could make on his own, or they could be evaluated by reference to other members of the proposed class. That is a question grounded in the law of class actions. Here, the issue was the effect of the stay of proceedings of the plaintiff’s claims on the claims of other putative class members. That is a question of arbitration law and the meaning to be given to an order to “stay the legal proceedings”.

In the Amazon Stay Decision, Justice Horsman held that once the plaintiff’s non-Consumers Act claims were stayed, the plaintiff could not have standing to continue non-Consumer Act claims on behalf of other possible class members. Under s. 15 of the British Columbia 1996 Arbitration Act, there was an order “staying the legal proceedings”. There was, therefore, no proceeding that could be continued on behalf of other class members, as the plaintiff’s claims had been stayed.

The decision in Audible then turned on the application of the Amazon Stay Decision. Justice Horsman rejected the attempts to distinguish this case from the Amazon Stay Decision, concluding at para. 51: 

“Furthermore, and in any event, the plaintiff cannot continue Non-Consumer Act claims against Audible on behalf of (another possible representative plaintiff) for the same reason that he cannot advance such claims on behalf of any other putative class member:  if the plaintiff’s proceeding against Audible is stayed, there is no proceeding to continue. These circumstances fall directly within the scope of my reasoning in the Amazon Stay Decision.” 

The extension of the stay was granted, subject to the plaintiff seeking leave to lift the stay once the appeal of the Amazon Stay Decision was heard.

Contributor’s Notes:

Since Seidel, courts have distinguished claims made under consumer protection legislation from other claims subject to mandatory arbitration clauses. Consumer protection claims are one area where the courts grapple with the policy implications of mandatory arbitration clauses, particularly in standard form contracts. In this case, the Seidel principles resulted in a stay of proceedings under the Arbitration Act in respect of the Non-Consumers Act claims but not the claims advanced under the Consumers Act. While Justice Horsman was willing to agree to that bifurcation of the plaintiffs’ claims, she was unwilling to draw distinctions among the Non-Consumers Act claims, noting that once the plaintiff’s claims were stayed, there was no proceeding in which to advance the claims of the other possible class members. The British Columbia Court of Appeal’s review of the Amazon Stay Decision should assist in understanding the implication of a “stay of proceedings”, especially in the context of class proceedings.

This case and the Amazon Stay Decision also serve as a good reminder for class proceeding counsel to consider the impact of stays of proceedings on all putative class members.

For a summary of the Amazon Stay Decision, see earlier case note: B.C. – stay granted despite anticipation that arbitrator applying U.S. law might not be able to grant claims – #283.