Law Times

Law Times • December 7, 2009 FOCUS PAGE 9 Does arbitration trump a class action? BY DARYL-LYNN CARLSON For Law Times clause in a contract can trump a class action lawsuit. In several cases over the past T five years, many courts across the country, including the Supreme Court of Canada, have affirmed that arbitration proceedings mandated in a contract take pre- cedence over a class action. But the two key cases that the top court dealt with originated in Quebec, so the question remains whether arbitration clauses will still take priority over class ac- tions in the rest of the country. In a decision in British Co- lumbia, the courts have asserted that a class action renders the ar- bitration clause inoperative. In Quebec, meanwhile, the courts have left it up to the ar- bitrator to determine the juris- diction of the case and whether the dispute involves obvious areas of law that need to be heard by a court. The high court is expected to provide clarity when it hears an appeal of a case from Brit- ish Columbia called Seidel v. Telus Communications Inc. The matter, scheduled to begin next May, is essentially a procedural test that will address the validity of the arbitration clause within the consumer contract. The decision could be signifi- cant, says Barry Leon, a partner in the international arbitration group at Perley-Robertson Hill & McDougall LLP. Key to the case is a section of the B.C. Commercial Arbitra- tion Act that requires parties to have the dispute determined by arbitration unless a court finds reason to render the agreement null and void, inoperative or in- capable of being performed. But in hearing the Seidel case, Leon says the top court could either narrow the win- dow for lower courts to refuse to refer a matter to arbitration "or enlarge it to the point that lower courts will be able to drive a truck through it." Yet he acknowledges that in past decisions, the Supreme Court and other appeal courts across the country have articu- lated a pro-arbitration theme. Thus, he says, "We might ex- pect the [top court to] keep the escape clause narrow and to provide a well-reasoned expla- nation for doing so." The issue is an important one, especially since arbitration clauses have a perception of be- ing a way of protecting against class action litigation. Compa- nies have been including them in consumer contracts in the hope of saving money by man- dating that complaints go to ar- bitration. As a result, many cor- porations are waiting for the top court's ruling on the issue. But besides arbitration claus- es, the whole premise of alter- native dispute resolution has opened the door to introducing Untitled-5 1 Billions of dollars invested, not a penny lost. The McKellar Structured Settlement™ McKellar introduced the concept of structured settlements in Canada in 1979. With almost 40 people at your disposal, we continue to set the standard today, providing safe, reliable, tax-free investment options for injured parties, while lowering claims costs. McKellar. Now you're sure. he courts have not yet had the final word on whether an arbitration creative means to settle routine litigation, something lawyers at one firm did with a class action lawsuit last year. Norm Emblem, a partner at Fraser Milner Casgrain LLP, found a unique way along with his colleagues to facilitate a settlement in a class action suit launched against KPMG LLP by former employee Alison Corless. The suit, whose class rep- resented former employees of KPMG across Canada, alleged the company didn't pay over- time in accordance with labour code provisions. The parties settled the case in eight months as a result of the court's approval for intro- ducing an ADR-type resolu- tion to the litigation process. The process, exclusive to the KPMG case, was called an over- time redress plan that provided the class members with options for determining the overtime pay owed and for taking re- course through ADR. The plan articulated in formal terms that it would be rolled into the action as the means for resolving the claims of each class member. "One of the selling features of that [plan] was there were three levels of review," says Emblem. For example, professionals at Crawford Class Action Services would review the work situation of each former employee who was a member of the class. If the employee accepted the offer based on the Crawford assess- ment, the matter would be re- solved for that individual. For employees who rejected the determination by Craw- ford, their case would go to mediation with the ability to choose between 10 mediators provided through the ADR Institute of Canada, Inc. and paid for by KPMG. If that didn't achieve a resolu- tion, then the employee would attend a binding arbitration. "We designed this process recognizing it had to have selling features in order for the court to Norm Emblem says the creative use of alternative dispute reso- lution helped reach a quick set- tlement in a class action against KPMG LLP. be persuaded that this would be a better alternative than the tra- ditional route of fighting out a certification motion and going to trial on the common issues if it was certified," Emblem says. "In effect, we kind of designed a front-end loaded, all-included Rolls-Royce plan which was heartily embraced by employees." The Ontario Superior Court pre-approved the settlement in June 2008 and then certified the action for settlement pur- poses in August. "There wasn't anyone who objected to the proposal to roll the [plan] into the class action," Emblem says. Ultimately, only three em- ployees opted out of the settle- ment. Emblem says the process demonstrated the creative ap- plications and adaptability of ADR techniques even within the court process. It also enabled KPMG to re- solve the case in an extraordinari- ly narrow time frame compared with the typically protracted na- ture of many class action cases. "It was resolved very quick- ly," Emblem notes. "In the end, it worked out extremely well for everyone." LT www.mckellar.com GUELPH 1-800-265-8381 McKELLAR STRUCTURED SETTLEMENTS INC. HALIFAX EDMONTON 1-800-565-0695 www.lawtimesnews.com 780-420-0897 USA 1-800-265-2789 12/1/09 11:20:54 AM

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