(July 24, 2017) On June 23, 2017, the Supreme Court of Canada (SCC), in the decision Douez v. Facebook, Inc., ruled against the enforcement of Facebook’s forum selection and choice of law clause and cleared the way for a privacy lawsuit to go forward in British Columbia, despite a clause in Facebook’s terms of use that stipulates that claims be litigated in courts in California, where the company is headquartered. (Douez v. Facebook, Inc., 2017 SCC 33, Judgments of the Supreme Court of Canada website.) The Court ruled against a motion by the company to stay the proceedings. (Id.)

Case History

A person who wishes to join Facebook has to go through the registration process, during which, in order to be successfully registered, one must agree to the terms of use. These terms include both a forum selection clause and a choice of law clause stating the following:

You will resolve any claim, cause of action or dispute (claim) you have with us arising out of or relating to this Statement or Facebook exclusively in a state or federal court located in Santa Clara County. The laws of the State of California will govern this Statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions. You agree to submit to the personal jurisdiction of the courts located in Santa Clara County, California for purpose of litigating all such claims. [A.R., vol. II, p. 138.] (Douez v. Facebook, Inc., ¶ 8.)

In 2011, Facebook created Sponsored Stories as a new advertising product that uses the name and the profile picture of the users. When a user “likes” the Facebook page of a company that purchases the Sponsored Stories, his name and photo will be associated with the company or their product and will be used to advertise on Facebook and externally. (Douez v. Facebook, Inc., ¶ 6.) According to the British Columbia Privacy Act, this practice is illegal and can be actionable without proof of any damage. (Privacy Act, RSBC 1996, c 373.) When Deborah Louise Douez realized her profile had been used by Facebook through Sponsored Stories, she brought a claim against the company in British Columbia’s court system.

The Supreme Court of British Columbia Ruling

In 2014, the court of first instance, the Supreme Court of British Columbia (BCSC), declined the enforcement of the Facebook terms of use forum selection and choice of law clauses on three bases. (Douez v. Facebook, Inc., 2014 BCSC 953, Canadian Legal Information Institute (CANLII) website.)

(1) The rights in the Privacy Act override the forum selection clause, and given the quasi-constitutional nature of these rights there is a strong public policy consideration in favor of British Columbia’s local courts to take jurisdiction in this matter. Under the Privacy Act, the Supreme Court of British Columbia has exclusive jurisdiction to hear this claim, the BCSC held. Moreover, there was no evidence that a Californian court would hear this dispute, which takes its roots in Canadian law. (Id.)

(2) The plaintiff showed “strong causes” not to enforce the forum selection clause. (Id.) The “strong cause” concept, first developed in the English case The Eleftheria (Owners of Cargo Lately Laden on Board Ship or Vessel Eleftheria v. Owners of Ship or Vessel Eleftheria) ([1969] 2 All E.R. 641 (Eng. P.D.A.) at 645), which refers to the plaintiff having to show causes which “go beyond mere balance of convenience.” (Sarabia v. Oceanic Mindoro (The) (1996), 1996 CANLII 1537 (BC CA).)

(3) Under the doctrine of forum non conveniens, a Californian court would not be more appropriate than the BCSC to hear this claim. (Id.) The doctrine of forum non conveniens consists in the analysis of different factors in order to determine the existence of an effective link between the forum chosen by the parties and the lawsuit. This test also determines if there is a forum more appropriate than the selected court to rule over the case. (Mills v. The Queen, [1986] 1 SCR 863, 1986 CanLII 17 (SCC) ¶ 74.)

The Court of Appeal of British Columbia Ruling

In 2015, the Court of Appeal of British Columbia (BCCA) reversed the BCSC, saying that the lower court judge had erred in his interpretation of the Privacy Act, which led him to wrongfully conclude that the plaintiff had successfully showed strong causes not to enforce the forum selection clause. (Douez v. Facebook, Inc., 2015 BCCA, CANLII 279.) The Court also pointed out the differences between the doctrine of forum non conveniens and the test elaborated in Pompey Industries, which states the criteria a forum selection clause has to meet in order to be enforceable, and determined that the lower court should not have considered the doctrine of forum non conveniens. (Id.; Z.I. Pompey Industrie v. ECU-Line N.V. [2003] 1 SCR 450, 2003 SCC 27, CANLII.)

The Supreme Court of Canada Ruling

The SCC, in a 4-3 decision, allowed the appeal, refused to enforce the forum selection clause, and restored the BCSC’s jurisdiction. (Douez v. Facebook, Inc., ¶ 77.) In order to determine whether or not the forum selection clause was valid and enforceable, the justices applied the validity test developed in Pompey Industries. This test has two steps: (1) the clause has to be valid under contractual doctrines, namely, it has to be clear and enforceable. If the clause meets this criterion, it is enforceable and (2) the plaintiff has the burden to show “strong causes” factors not to enforce the clause. In this second step, the court must consider all the circumstances, the convenience of the parties, fairness between the parties, and the interests of justice. (Z.I. Pompey Industrie v. ECU-Line N.V. , ¶ 39.) The SCC found that the forum selection clause successfully passed the first step, therefore the clause is enforceable. However, the Court held that in the second step of the test, Douez has shown “strong cause” not to enforce the forum selection clause. The strong cause was established by the accumulation of different factors: a consumer contract of adhesion, constitutional and quasi-constitutional rights, and public policy concerns. (Douez v. Facebook, Inc., ¶ 4.)

The Facebook registration process creates, by one click, a commercial and consumer relationship between a multibillionaire company and a private person, the SCC stated. In this process, the consumer has no opportunity to negotiate the terms of its contractual relationship. (Id. ¶ 53.) Moreover, Facebook is the biggest social networking platform with extensive reach, which has grown in importance in the full exercise of its social, political, and economic rights. Therefore, a consumer might not have a real choice in remaining off the Internet social life that Facebook dominates. (Id. ¶ 56.) These circumstances create a “gross inequality of bargaining power” between the company and its users, in the SCC’s view. When a forum selection clause is important in international contractual law in order to ensure the certainty and security of the contractual relationship, the Court pointed out, enforcing a forum selection clause in a consumer contract of adhesion ‘’may do the opposite for the millions of ordinary people who would not foresee or expect its implications and cannot be deemed to have undertaken sophisticated analysis of foreign legal systems prior to opening an online account.” ( Id. ¶ 33.)

The SCC also took into consideration that the right to privacy is a constitutional and quasi-constitutional right and this category of rights plays a key role in the wellbeing of the citizens and the Canadian society. (Id. ¶ 58.) The Court stated that the Canadian courts have “greater interest” in adjudicating these categories of rights. (Id.) By doing so, the courts interpret these rights and established the norms guiding their application, which is an inherent public good. Finally, the Privacy Act is intended to create protection for British Columbia residents, so local courts might be better placed to adjudicate these claims, because they are more familiar with the local cultural and social context in which privacy interests arise and are in a better position to determine the degree of the rights’ violation and any damages that flow from it. (Id. ¶ 60.)

In its judgment, the Court also pointed out certain secondary factors related to fairness and access to justice that favor the non-enforcement of the forum selection clause. The justices mentioned that the interests of justice favor the ruling of the case being held in British Columbia’s local courts. (Id. ¶ 65.) In determining if there was a “strong cause” not to enforce the forum selection clause, the SCC also took into consideration a comparative analysis of expense and convenience to both parties if the claim were to be heard in California. (Id. ¶ 73.)

Prepared by Marie-Philippe Lavoie, Law Library Intern, under the supervision of Tariq Ahmad, Foreign Law Specialist.