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Heller v. Uber in the SCC, Part 3: The Unconscionability Doctrine Clarified or Confounded

4 minute read

The SCC’s recent decision in Heller v. Uber delves into a number of apparently disparate aspects of civil litigation, as we previously noted here and here.  The Court finds room to comment on (and seeks to evolve) principles of arbitration law, equitable doctrines of contract interpretation, and class actions in one case – which is as much heavy lifting as a “typical” constitutional challenge.  And, in Heller v. Uber, all that legal analysis (and the significant doctrinal disputes among the Justices themselves) plays out in a case that has not reached a merits determination – or even the putative class proceeding’s certification hearing.

One interesting, rather fundamental, aspect of the case is where it takes the doctrine of unconscionability.  Unconscionability is a legal doctrine (but, as noted in the case, it is also a form of ex post facto judicial moralism), borne of fairness and equity, that is a challenge to the so-called “freedom to contract.”  Unconscionability impacts whether a court decline to hold parties to their written bargain.

The problems for commercial litigators in conceptualizing and applying such a broad concept to a specific contract entered into by (at least) two specific parties is brought home in Heller v. Uber, in the forceful concurring reasons of Brown J. and dissenting reasons of Coté J.  They each criticise the decision and reasoning of the majority (reasons by Abella and Rowe JJ.) about unconscionability. Brown J. charges that the majority’s reasoning on unconscionabilty “drastically expands the scope of unconscionability, provides very little guidance for the doctrine’s application, and does all of this in the context of an appeal whose just disposition requires no such change.”  Coté J. fears that the majority’s expression of the law of unconscionability ”might be open to abuse by a party to a standard form contract who chooses to enjoy the benefits of the agreement as long as it suits them, but who then chooses to rely on [the majority’s] opaque standard when called upon to honour an obligation which is not in their interest.”  Those are cutting critiques, to be sure, but it will nevertheless be the majority’s reasoning and exposition of the law that will be relied on for years to come.

Mr. Heller and his fellow class members were parties to a standard form Uber contract that required them to arbitrate their disputes in the Netherlands, and pay a US$14,500 administrative fee, up front, in the event of such a dispute.  Was that arbitration term unconscionable, such that a court should not enforce it?

The majority of the Court held that, to find a bargain unenforceable pursuant to the unconscionability doctrine, there must be (a) an inequality of bargaining position, and (b) an improvident bargain.  A bargain is improvident if it unduly advantages the stronger party or unduly disadvantages the more vulnerable.  Notably, the majority found that inequality of bargaining power was evident in the fact that the drivers had to sign a standard form contract which they could not negotiate – the classic “contract of adhesion.”  The majority also found that Uber did not have to knowingly take advantage of its superior bargaining power.  The majority was careful to note that it did not presume to state that all standard form contracts are inherently unequal, but Brown J. and Coté J. worry that that is a very real implication of the majority’s reasoning.

The majority found that the administrative fee and a trip to the Netherlands were obvious insurmountable barriers for Uber drivers to access dispute resolution, and improvident on their face.  However, the arbitration clause was just one of the “puts and takes” in the overall Uber bargain.  Rather than strike the whole contract as unconscionable, the majority found just the arbitration clause invalid.  The majority treated the arbitration provision as a “stand alone contract” within the contract.  Coté J. notes that there is some authority for treating an arbitration provision so distinctly, but it remains to be seen whether courts will rely on Uber v. Heller to attempt to “redline” other discrete terms from an agreement that would otherwise be enforced.

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