Two recent Supreme Court of Canada cases have tackled important issues involving class action suits against companies that do business with consumers electronically, and the decisions have brought clarity to the subject that could have far ranging impact for both the companies and consumers.

Supreme Court
September 24, 2007, THE LONDON FREE PRESS , BUSINESS,

JOHN MUSGREAVE & GRAHAM PORTER, LONDON FREELANCE WRITERS

The two cases, Dell Computer Corp. v Union des Consommateurs and Rogers Wireless Inc. v Muroff, originated in Quebec but have potential application across the country.

Both involved plaintiffs who were attempting to start class action in Quebec courts. In both cases, the defendants, Dell and Rogers, attempted to stop the class actions and argued that the disputing parties had to arbitrate rather than go to court.

An arbitration is a private method of dispute resolution that takes place outside of court proceedings. The plaintiffs with the action countered that even if there was an agreement to arbitrate, the courts could still hear class actions.

On this point, the Quebec Court of Appeal agreed; however, the Supreme Court sided with both Dell and Rogers. As a result, the disputes were referred to arbitration and the plaintiffs were denied the right to bring a class action against the companies.

Why did the Supreme Court deny the class action suits?

The Dell case involved a computer error on the Dell website that listed a price for computers that was incorrect and much lower than intended. When Dell realized the error, the company attempted to prevent consumers from accessing the order pages, but more than 500 orders did get through with the incorrect price.

Dell refused to complete these sales but offered a substantial reduction in price for the error. Dell posts very specific terms and conditions of sale on its website that include a dispute resolution clause. This clause states that any dispute between a consumer and Dell must be arbitrated under the American arbitration institution rules and that consumers are not permitted to bring court actions against sale disputes.

In hearing the Dell case, the Supreme Court focused on the importance of terms and conditions of sale and set down a general rule that if there is an arbitration provision in an agreement between two parties, the parties must first go to an arbitrator unless there is a challenge of the arbitrator's jurisdiction strictly on a question of law.

Therefore, when a consumer is dealing in an e-commerce environment and there is an arbitration provision in the contract, arbitration would be the correct means to resolve the dispute.

The Supreme Court also decided that if an arbitration agreement is included in a contract, it can prevent consumers from bringing class action suits.

The Court reasoned that class action is not necessarily a right but a procedural vehicle to pursue remedies. If an arbitration clause exists, courts must first determine if an issue should be heard by an arbitrator before deciding whether the plaintiff can launch a class action suit.

In some previous cases, courts were treating arbitration agreements as just one factor in the decision to certify a class action.

The Rogers Wireless case was concluded with generally the same reasoning as the Dell case. The company's terms of sale were very specific. They were designed to ensure that all disputes would go through arbitration with a clause preventing consumers from participating in class action proceeding against Rogers.

These two cases underline that importance for e-businesses to be familiar with consumer protection legislation. The Supreme Court rulings suggest that all companies that use the Internet for sales transactions should ensure their terms of sales are readily available -- through a hyper link or on an accessible web page - and easy to understand. It is one more way to manage the risk while pursuing the new opportunities of an e-commerce environment.