Following, not Bucking, the Trend - Amazon’s Abandonment of Arbitration?

Following, not Bucking, the Trend - Amazon’s Abandonment of Arbitration?

Carol Trudell

In a post from last summer, I considered the implications of Amazon’s joint suit with Valentino against Kaitlyn Pan Group LLC for selling a Valentino Rockstud Pump “dupe” via Amazon’s marketplace. This joint suit represented a new approach to IP protection in the fashion industry, where historically, the profit interests of a mass-market retailer would be irreconcilable with a luxury brand’s desire for exclusivity. Ever distracted by shoes, I mentioned only in passing that Amazon’s usage of the courts “could signal a changed approach” to their management of claims. Now, facing almost 100,000 separate arbitrations against consumers in the US alone, Amazon has apparently given up on forced arbitration. Recently, Amazon amended its consumer terms to mandate that disputes be resolved by litigation within state or federal courts in the state of Washington. Many, such as the Wall Street Journal, have described Amazon as bucking the trend toward consumer arbitration.[1] In fact, Amazon is following a new trend marked by its joint suit with Valentino.

Although the changes to Amazon’s consumer terms were motivated by the onslaught of consumer arbitrations being filed in the US, Amazon’s recent changes have implications for the Canadian arbitration community. First, the abandonment of arbitration for disputes with its contracting parties seems to contradict the position Amazon took in recent litigation in the BC Supreme Court.[2] Second, given the Supreme Court of Canada’s decision in Uber v Heller,[3] Canadian courts will have to assess the new American dispute resolution terms proposed by Amazon under the rubric of unconscionability and, potentially, public policy as well. Interpretation of these questions by the courts will present Canadian advocates the opportunity to re-address crucial access to justice arguments. While Amazon's Canadian terms still make arbitration mandatory, the existing case law in Canada suggests it is not the forum which renders a dispute resolution method unjust. Instead, the effects of a dispute resolution clause whereby a weaker party will be disadvantaged because of associated costs, is the harm Canadian courts oppose. Thus, even if Canada's terms remain the same, our arbitral community should pay close attention to how the US deals with Amazon's mandatory litigation term.

In Williams v Amazon, Amazon’s forced arbitration clause was partly upheld, compelling a third-party seller who sued Amazon to arbitrate claims under the Competition Act, although not claims under the BC Business Practices and Consumer Protection Act.[4] In her reasons, Justice Horsman held that only the Competition Act claim was eligible for the stay of proceedings Amazon requested under s 15 of BC’s Arbitration Act.[5] Conversely, Justice Horsman found that the BPCPA was not subject to s 15.[6] Thus, for sellers and consumers, the Williams decision left open the possibility that Amazon could be forced into court to defend BPCPA claims.[7] Hence, the conflict between Amazon’s new US contract terms calling for litigation and the BC court’s position as set out in Williams lies in the enforcement and validity of a mandatory arbitration clause with respect to the Competition Act.[8] Where Amazon previously argued for this verdict in Williams, its new consumer terms oppose their previous stance, raising questions about whether Amazon will continue to force US parties to litigate while simultaneously preventing Canadians from doing so.

Relying on Uber v Heller, Williams argued Amazon’s forced arbitration clause contained within its standard form contract was unconscionable.[9] Although Justice Horsman found that the clause was not unconscionable, she commented on the unique policy considerations associated with forced arbitration clauses in contracts of adhesion: “the Supreme Court of Canada has … found that arbitration clauses promote access to justice by allowing parties to voluntarily choose private, less expensive, and potentially less time consuming methods of final dispute resolution outside of the traditional court system.”[10] Considering Justice Horsman’s statement, it seems Amazon forcing contracting parties to court conflicts with access to justice in cases where litigation would be more expensive than arbitration or severely detrimental to the claimant's reputation.  This argument is further supported by another BPCPA case, Pearce v 4 Pillars Consulting Group Inc.[11] At trial, Justice Mayer held that, where a class action waiver clause effectively "denied access to justice and the behavior modification provided by a class proceeding”, the clause is unenforceable.[12] Upholding the trial decision, the BCCA held that the class action waiver “so functionally interfere[d] with access to the courts that it [was] contrary to public policy and unenforceable”.[13] Similar to Justice Horsman in Williams, the BCCA reiterated the importance of allowing individuals to benefit from dispute resolution methods which are less costly, particularly where it is unlikely individuals have the resources to  pursue their claims alone.[14] While one case dealt with an arbitration agreement and the other with a class action waiver, the connecting thread is this: clauses mandating methods of dispute resolution that are so expensive or impractical for individuals to pursue that they hinder access to justice are unenforceable. Based on this reasoning, Amazon compelling individuals to file a lawsuit against them in situations where individuals clearly have lesser resources, rendering them highly unlikely to pursue a claim, pose a serious access to justice issue Canadian advocates need to be prepared to address.

It remains unclear how Amazon’s changes to its standard terms will be treated in either the US or Canada. The Valentino joint-suit remains undecided, and the creative American lawyers who filed the huge numbers of individual arbitrations against Amazon have not yet started to file lawsuits against it. For now, I will watch intently to see if Amazon abandons arbitration more broadly.