Uber v Heller: The Reasoning by the Honorable Madam Justice Côté

Truth be told, I started using UberEats App to order food delivery after the Court of Appeal for Ontario’s decision on the Uber case (Heller v. Uber, 2019 ONCA 1). Although I like cooking very much, I have to admit that UberEats provides efficient food delivery service that allows me to save some time that I should have spent in the kitchen in order to immerse myself in my work and writing when necessary. The day when I downloaded the App to my cellphone as a consumer, I saw the Terms and Conditions that oblige me to refer a dispute to binding individual arbitration. I am conscious of the existence of the Terms and Conditions. And I disagree with it. But I still downloaded it and used this App because a) I was starving; b) I think the arbitration clause won’t apply to me, a Quebec consumer living at Montreal, who is well protected by the Consumer Protection Act, CQLR c P-40.1 (See Art. 11.1).

I always feel thankful for the Uber drivers. My observation told me that most of them, not Mr. Heller, are originally from different parts of the world. They came to Canada because they believe Canada is the best country in the world which could give their family, especially their children a democratic, open and healthy environment to grow up. For them, Canada also means a stable, predictable and ordered society to conduct their businesses. Some of them, not Mr. Heller, have difficulty in reading and speaking English or French. But they work so hard to deliver food so that they could pay the bills and put bread on the table for their loving family. It is also them who save our time and to help the small and medium restaurants survive during the COVID-19 pandemic.

In the meantime, I love arbitration. I have been doing research and writing on domestic and international arbitration since 2012 on regular basis. I enjoy reading the reasoning by the Honorable Justice Côté. Her reasoning provides me with exceptional forensic analysis of the issues in Uber case. I feel somehow relieved to see and read her dissenting judgement. Justice Côté, the lone dissenter, hold that she would grant a stay of court proceedings in favor of arbitration on the condition that Uber advances the funds needed to initiate the International Commercial Arbitration proceedings. (para. 199 of Uber Technologies Inc. v. Heller2020 SCC 16). I would like to write about her reasoning on the issue of arbitral jurisdiction.

Some Facts Mentioned by Justice Côté 

1. To become an Uber driver, Mr. Heller was required to enter into a service agreement on the Uber Driver App. To accept the service agreement, Mr. Heller was required to scroll through the entire contract and to click two buttons to accept this agreement. The Uber App does not limit the time an Uber driver may take to review the service agreement.

2. The Service Agreement expressly states that it does not create an employment relationship. Instead, it is a software licensing agreement.

3. The Service Agreement contained the following arbitration clause:

“Governing Law; Arbitration. Except as otherwise set forth in this Agreement, this Agreement shall be exclusively governed by and construed in accordance with the laws of The Netherlands, excluding its rules on conflicts of laws. … Any dispute, conflict or controversy howsoever arising out of or broadly in connection with or relating to this Agreement, including those relating to its validity, its construction or its enforceability, shall be first mandatorily submitted to mediation proceedings under the International Chamber of Commerce Mediation Rules (“ICC Mediation Rules”). If such dispute has not been settled within sixty (60) days after a request for mediation has been submitted under such ICC Mediation Rules, such dispute can be referred to and shall be exclusively and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce (“ICC Arbitration Rules”). … The dispute shall be resolved by one (1) arbitrator appointed in accordance with the ICC Rules. The place of arbitration shall be Amsterdam, The Netherlands….” (emphasis added)

4. Uber offers a free internal dispute resolution mechanism which connects Uber drivers to customer support representatives. Mr. Heller can visit the Greenlight Hub located in Ontario to resolve disputes. In fact, Mr. Heller has raised over 300 complaints through this internal procedure since 2016, most of which were resolved within 58 hours. Mr. Heller was even able to quickly grasp the implications of a change in Uber’s fee payment structure and voice his concerns through the media.

5. The ICC Rules require upfront administrative fees for mediation and arbitration proceedings, which is around US$ 14 500 for a claim under US$ 200 000 (“ICC Fees”).

6. In 2017, Mr. Heller commenced a proposed class proceeding in Ontario for CAD$400 000 000, alleging that Uber drivers should be considered as Uber’s employees who are entitled to the benefits and protections of Ontario’s Employment Standards Act, 2000, S.O. 2000, c.41 (“ESA”). But Uber brought a motion to have Mr. Heller’s proceeding stayed in favour of arbitration according to the Arbitration Clause of the Service Agreement.

7. In 2018, the Superior Court of Justice for Ontario held that the court did not have the jurisdiction to decide whether the Arbitration Clause was valid and stayed Mr. Heller’s proceeding (Heller v. Uber Technologies Inc., 2018 ONSC 718)

8. In 2019, the Court of Appeal for Ontario reversed this order and determined that the Arbitration Clause was unconscionable based on the inequality of bargaining power between the parties and the improvident cost of arbitration (Heller v. Uber Technologies Inc.2019 ONCA 1)

Applicable Laws and Doctrines (non-exhaustive list)

1. Section 9 of the International Commercial Arbitration Act, 2017 (“ICAA”) stipulates that where a court refers the parties to arbitration, the proceedings of the court are stayed with respect to the matters to which the arbitration relates.

2. Section 7 (1) of the Ontario Arbitration Act, 1991 (“AA”) requires that in principle, the court shall stay the proceeding if there is an arbitration agreement between the parties.

3. Competence-Competence Principle:

The Supreme Court of Canada’s decisions on Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34 and Seidel v. TELUS Communications Inc.2011 SCC 15 provide the framework for the jurisdictional challenge on arbitration: Where pure questions of law are in dispute, the court is free to resolve the issue of jurisdiction. Where questions of fact alone are in dispute, the court must “normally” refer the case to arbitration. Where questions of mixed fact and law are in dispute, the court must refer the case to arbitration unless the relevant factual questions require “only superficial consideration of the documentary evidence in the record” (See paras. 84 to 85 of Dell and Bachand, F. & Bienvenu, P. (2007)L’arrêt Dell et le contrôle de la compétence arbitrale au stade du renvoi à l’arbitrage, Revue générale de droit, 37 (2), 477–490.)

4. Born, Gary B. International Commercial Arbitration, 2nd ed. Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2014.

In pages 308 to 309, Mr. Born wrote that “the Model Law includes within its coverage both consumer and employment matters, subject to any specific nonarbitrability rules adopted in particular states”. Mr. Born also considers that the term “commercial” applies “without regard to the nature or form of the parties’ claims and looks only to the character of their underlying transaction or conduct”.

In pages 350-351, Mr. Born noted that “The doctrine of separability is “one of the conceptual and practical cornerstones” of arbitration law which plays an important role in ensuring the efficacy and efficiency of the arbitration process” and that “an arbitration clause should be considered “autonomous and juridically independent from the main contract in which it is contained”.

Issues:

1. Which arbitration legislation governs Uber’s motion for a stay?

2. Is the Arbitration Clause null and void under the International Act, or invalid under the Arbitration Act?

3. Should a court or an arbitral tribunal rule first on the validity of the Arbitration Clause?

4. What conditions, if any, should the Court impose on the stay of proceedings?

Analysis by Justice Côté:

1. The International Commercial Arbitration Act applies. The Court should approach this issue by analyzing the nature of the parties’ relationship on the basis of a superficial review of the Service Agreement, as opposed to characterizing the nature of the dispute solely on the basis of the pleadings. A superficial review of the documentary evidence, especially the Service Agreement, reveals that the underlying transaction between Uber and Mr. Heller is commercial in nature. The Court hearing a motion for a stay should not decide complex questions of mixed law and fact, especially the nature of dispute, which require the production and thorough review of testimonial evidence (See paras. 84 to 85 of Dell).

Therefore, the ICCA applies to this motion.

2. The Rule of Systematic Referral to Arbitration applies. The validity of the Arbitration Clause in this case should be decided by the arbitral tribunal.

On one hand, the separability doctrine tells us that an arbitration clause should be considered “autonomous and juridically independent from the main contract in which it is contained”( A. J. van den Berg, ed., Yearbook Commercial Arbitration 1999 (1999), vol. XXIVa, at p. 176, as quoted in Born, vol. I, at p. 350).

The separability doctrine also holds that an arbitration clause could be invalidated only by a defect relating specifically to the arbitration agreement itself and not by one relating merely to the underlying contract in which that agreement is found (para. 224 of Uber Technologies Inc. v. Heller2020 SCC 16). Owing to the separability doctrine, the validity of an arbitration clause may be governed by a different substantive law than the one that governs the validity of the Service Agreement i.e. Dutch law.

On the other hand, the superficial review of the documentary evidence is not sufficient for the Court to resolve the issue of arbitral jurisdiction in this case. A review is not superficial if the court is required to review testimonial evidence (See paras. 84 to 85 and 88 of Dell and para. 15 and 25 of Rogers Wireless Inc. v. Muroff2007 SCC 35).

To make decision on the validity of the arbitration clause, the Court should know what fraction of the CAD$400 000 000 being sought in Mr. Heller’s proceeding represents his individual claim against Uber. To make decision on the validity of the arbitration clause, the Court should also know the comparative cost of pursuing a class action in the judicial system. To make decision on the validity of the arbitration clause, the Court should also know Mr. Heller’s financial situation, his personal characteristics and other circumstances of the formation of the contract. The Court cannot make a well-informed decision simply based on the superficial review of the documentary evidence.

Therefore, the rule of systematic referral to arbitration applies.

3. An arbitral tribunal should rule first on the validity of the Arbitration Clause in this case.

4. The possible remedies on this motion for a stay are: (a) a conditional stay of proceedings; and (b) severance of an unenforceable term of an arbitration agreement. 

While the severance of an unenforceable term of an arbitration agreement has been briefly introduced in #2, I would like to concentrate on the conditional stay of proceedings in this section.

Justice Côté noted that the Court could order a conditional stay and specify how the parties are to proceed to arbitration. Justice Côté emphasized that it is wrong to “conceptualize a successful motion for a stay as the end of the line for the plaintiff’s pursuit of their claim”.

It’s worth to remind that the constitutional right to access to the courts is not absolute (para. 17, British Columbia (Attorney General) v. Christie2007 SCC 21). The impediment to such access under the arbitration agreement and the arbitration acts exists simply because the parties to an arbitration agreement abide by their agreement. 

In furtherance of her reasoning, Justice Côté mentioned a court decision in Alberta. In Jonsson v. Lymer2020 ABCA 167, the Alberta Court of Appeal noted that “[i]nsurmountable preconditions . . . effectively amount to a total barrier to court access” concerned court orders which bar vexatious litigants from commencing proceedings in the courts unless the litigants fulfill certain preconditions. 

Inspired by this judgement, Justice Côté would grant a stay of court proceedings in favor of the Arbitration Clause on the condition that Uber advances the funds needed to initiate the International Commercial Arbitration proceedings. (para. 199 of Uber Technologies Inc. v. Heller2020 SCC 16).

Other Resources:

Tina Cicchetti, Alyssa King and Joshua Karton, “The Supreme Court of Canada Charts a Safe Route between the Scylla and Charybdis of Hostility to Arbitration and Competence-Competence Absolutism” (Kluwer Arbitration Blog, July 9, 2020).

William G. Horton and David Campbell, “Arbitration as an Alternative to Dispute Resolution: Class Proceedings and the Mirage of Mandatory Arbitration” [2019] Ann. Rev. Civ. Litig. 93.

Aslam & Ors v Uber BV & Ors[2016] UKET 2202551/2015 (28 October 2016).

The Supreme People’s Court of the People’s Republic of China Civil Ruling on Newpower Enterprises case, [(2019) Zui Gao Fa Min Te 2]

(Reminder: The purpose of this article is to provide general legal information. It does not contain a full analysis of the law nor does it constitute a legal advice on the points of law discussed. To minimize the legal risk for your business, you must take specific legal advice from a lawyer on any particular matter which concerns you. Thanks for your attention. 😊)