Canada’s Federal Court of Appeal has upheld a lower court decision to stay a proposed competition class action against Uber Eats in favour of mandatory arbitration.
Factual Background
In Lin v Uber Canada Inc et al, 2025 FCA 183, the plaintiff proposed a class action against Uber Canada Inc, Uber Technologies Inc, Uber Portier Canada Inc and Uber Castor Canada Inc (collectively “Uber”). The core allegation was that the defendants displayed a price for food delivery through Uber Eats that was not attainable due to additional fees. The plaintiff alleged that this practice violated the prohibition on “drip pricing” under section 52 of Canada’s Competition Act.
In the first-instance decision, the Federal Court stayed the proposed class action and upheld the arbitration agreement in the contract that the plaintiff had entered when creating his Uber Eats account.
Legal Principles and the Peace River Test
As a starting point, the Federal Court of Appeal underscored the “legislative and judicial preference for holding parties to arbitration agreements”, citing the Supreme Court of Canada’s decision in Peace River Hydro Partners v Petrowest Corp, 2022 SCC 41 at para 10 (where Baker McKenzie LLP represented an intervenor). Canadian courts will only consider challenges to the jurisdiction of an arbitrator or the enforceability of an arbitration agreement in exceptional circumstances.
The Federal Court of Appeal also highlighted the long-standing “competence-competence” principle that any challenge to an arbitrator’s jurisdiction should be decided by the arbitrator and not by the courts, subject to limited exceptions.
The legal test to stay a matter in favour of arbitration was articulated in Peace River. The test first puts the onus on the party seeking to enforce the arbitration agreement to establish four technical prerequisites: (1) an arbitration agreement exists; (2) a court proceeding has been commenced by a party to the arbitration agreement; (3) the court proceeding relates to a matter that the parties agreed to submit to arbitration; and (4) the opposing party applied for a stay prior to taking any step in the court proceeding. These technical prerequisites must be established on a low “arguable case” standard.
If the prerequisites are met, the onus switches to the party resisting arbitration to establish a statutory exception that would prevent the court from staying the court proceeding in favour of arbitration. This must be established on a higher “balance of probabilities” standard. The typical statutory exceptions are when the arbitration agreement is “null, void, inoperative, or incapable of performance”, other legislative interventions, or situations where the subject of the dispute is incapable of being the subject of arbitration.
The Action is Stayed in Favour of Arbitration
At the appeal stage, the plaintiff belatedly agreed that the four technical prerequisites were established. Accordingly, the legal question was whether the plaintiff established a statutory exception that prevented the Court from referring the action to arbitration.
The plaintiff argued that the arbitration agreement should not be enforced because it violates consumer protection legislation of certain Canadian provinces. For example, subsection 7(2) Ontario’s Consumer Protection Actprovides that an arbitration agreement in a consumer agreement “is invalid insofar as it prevents a consumer from exercising a right to commence an action in the Superior Court of Justice given under this Act.” This argument was rejected for numerous overlapping reasons, including that the plaintiff had not commenced an action before the Ontario Superior Court of Justice nor advanced claims under Ontario’s Consumer Protection Act, rendering subsection 7(2) doubly inapplicable. More fundamentally, provincial legislation is constitutionally incapable of limiting the jurisdiction of the Federal Court. Similar arguments were rejected with respect to Alberta and Saskatchewan’s consumer protection legislation.
The plaintiff also argued that section 25 of the Federal Courts Act operates as another legislative override preventing a stay in favour of arbitration. The Federal Court of Appeal found that this argument had been abandoned because the plaintiff did not raise it in his memorandum of fact and law filed on appeal. The Court of Appeal noted its agreement with the first-instance decision finding this argument to be meritless, but declined to elaborate. The lower court had found that section 25 prevents a jurisdictional lacuna in the rare circumstances where a provincial superior court cannot hear a claim arising under federal legislation. However, section 25 does not invalidate other forms of mandatory dispute resolution, including arbitration, in favour of the Federal Court’s jurisdiction (para 91).
The Federal Court of Appeal concluded that the plaintiff failed to establish any legislation that would override the arbitration clause.
The plaintiff also argued that the arbitration agreement was incapable of performance because the arbitral institute identified in the agreement does not accept class proceedings. The Supreme Court of Canada in Peace River held that an arbitration agreement is incapable of performance only when “it is impossible for the parties to obtain the specific arbitral procedures for which they bargained”, which was not seriously contested in this case. The Federal Court of Appeal upheld the long-standing principle that class action procedures cannot override a party’s substantive right to arbitrate nor serve as a means of circumventing an agreement to arbitrate. The plaintiff failed to establish that the arbitration agreement was clearly incapable of being performed, leaving this matter to be determined by the arbitrator in accordance with the competence-competence principle.
Finally, the plaintiff argued that the arbitration agreement is unconscionable given inequality of bargaining power and a “gulf in sophistication” between the putative class members and Uber. The Supreme Court of Canada has held that, in order for an arbitration agreement to be declared unconscionable, there must be an inequality in the positions of the parties such that “the law’s normal assumptions about free bargaining either no longer hold substantially true or are incapable of being fairly applied”, and that inequality resulted in the weaker party entering into an improvident bargain. The inequality must entail that the weaker party “cannot adequately protect their interests in the contracting process”. The Federal Court of Appeal made reference to a “rescue at sea” scenario where the weaker party is so dependent on the stronger party that they would suffer serious consequences if they did not to agree to the contract.
This unconscionability argument failed because the Court found no such vulnerability or unfairness in this case. There was no evidence that the plaintiff or putative class members were somehow dependent on the Uber Eats platform for food delivery services. Nor was there evidence to support the plaintiff’s claim that there was a “gulf in sophistication” between Uber and members of the putative class that was sufficient to render the arbitration clause unconscionable. While Uber is a sophisticated multi-national, the arbitration agreement was available and understandable at the time of contracting. The plaintiff certainly could have read the arbitration agreement before agreeing to it. The Court also found no evidence of an improvident bargain.
Key Take-Aways
- Arbitration agreements may be enforceable even against consumers provided the action is advanced in the Federal Court and the claims are not brought under consumer protection legislation that invalidates arbitration agreements.
- Contracts of adhesion between individuals and large companies may be enforceable, despite an imbalance in sophistication, provided the weaker party remains free to protect his/her interests when contracting and the agreement remains available and understandable.
- All else being equal, the likelihood of enforcing an arbitration clause to stay proposed class proceedings increases when the mandatory arbitration procedure is fair, accessible and not prohibitively expensive.
