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California Dreamin’: British Columbia Court of Appeal Enforces Facebook Forum Selection Clause, Requires Provincial Privacy Class Action to be Brought in California Court

July 7, 2015

By Catherine Lovrics and Tamara Céline Winegust

Facebook’s Terms of Use, like the Terms of Use of many other popular social media sites, require claims and disputes be brought in California; for example, Google and YouTube Terms of Use require disputes be heard by courts in Santa Clara County, California; Twitter selects San Francisco, California; Instagram also selects Santa Clara County for certain disputes, and otherwise has a binding arbitration clause subject to American Arbitration Association's rules (with an opt-out), or alternately permits claims to be brought in local “small claims” courts. Facebook’s forum selection clause was recently enforced by the British Columbia Court of Appeal (BCCA), preventing a Canadian privacy class action case from moving forward in BC courts. Douez v Facebook, Inc, 2015 BCCA 279.

This decision is significant. It gives comfort to website operators that rely on forum selection clauses in their Terms of Use to limit the jurisdictions where they’ll defend legal proceedings. However, it presents challenges to Canadian (or at least BC) website users who may be forced to bring claims in foreign courts, like California, due to non-negotiable forum selection clauses in Terms of Use.  All is not lost for the user, however, as Canadian privacy commissioners are likely to continue hearing privacy complaints of social media and other websites users, and the decision doesn’t deprive Canadians of privacy rights altogether. Further, there are a number of other rights granted by Canadian laws that cannot be contracted out of in Terms of Use, including certain consumer rights.

In Douez v Facebook, Inc., the plaintiff, Douez, sought to certify a class action seeking damages under section 3(2) of the BC Privacy Act for the unauthorized use of Facebook users’ names and images as part of Facebook’s “Sponsored Stories” feature.  The feature resulted in advertisements featuring a user’s name and image appearing on the user’s friends’ newsfeed when the user pressed the “like” button for a business.

Section 3(2) of the BC Privacy Act prohibits “use [of] the name or portrait of another for the purpose of advertising or promoting the sale of, or other trading in, property or services, unless that other, or a person entitled to consent on his or her behalf, consents to the use for that purpose”. Violation of this provision gives rise to a private cause of action in tort, and is actionable without proof of damage.

Facebook argued that the unilateral forum selection clause included in its Terms of Use, which must be agreed to by all Facebook users before partaking in the service, was valid and enforceable. The Plaintiff, Ms. Douez, claimed the forum selection clause could not apply because application of the clause would effectively bar her claim, since section 4 of the Privacy Act provides that “any action under this Act must be heard and determined by the Supreme Court [of BC]”.

The lower court agreed that the forum selection clause was valid, clear and enforceable, but sided with the Plaintiff, concluding that section 4 of the Privacy Act “overrode” the clause and gave the BC courts exclusive jurisdiction over Privacy Act claims to the exclusion of other courts worldwide. In the alternative, the court also held that Ms. Douez made a strong case not to enforce the clause, since—due to BC courts having exclusive jurisdiction over the claim under section 4—enforcing the clause would essentially derive the Plaintiff of her claim and this would be contrary to the legislative intent behind the Privacy Act.

The BCCA disagreed, finding section 4 did not “override” the forum selection clause and grant the BC courts exclusive territorial jurisdiction over such claims, and that the Plaintiff failed to show a strong reason not to enforce the clause.

First, respecting whether the forum selection clause could be enforced, the BCCA applied the test from ZI Pompey Industrie v ECU-Line NV, 2003 SCC 27, and answered yes. Under the Pompey test, the defendant must first show the forum selection clause is valid, clear, and enforceable, at which point, the burden switches to the plaintiff who must show a strong cause for the court to decline to enforce the clause. If such strong cause is shown, a defendant may nevertheless ask the court to decline the case on the basis of forum non conveniens in accordance with the factors set out at section 11 of the BC Court Jurisdiction and Proceedings Transfer Act. In this case, the parties agreed, and the lower court accepted, that the clause was prima facie valid, clear, and enforceable.

The BCCA overturned the lower court’s finding that section 4 gave the BC courts exclusive territorial jurisdiction over Privacy Act claims, overriding an otherwise enforceable forum selection clause. The Court based its decision on the principle of “territoriality”—i.e. that laws only apply within the territory where the legislators making such laws have competence (in this case, BC). On one hand, the Court recognized that technology has required a more nuanced approach to territoriality that focuses more on the relationship between the parties than their physical location. Nevertheless, the BCCA held that, as a general rule, provisions in BC statutes do not apply extraterritorially, and thus section 4 could not operate to deprive non-BC courts of territorial jurisdiction to hear claims against Facebook. In any event, section 4 was a rule regarding subject matter, rather than territorial, competence. The Court also suggested that section 4 could not operate to render void a contractual forum selection clause since it only applied to “anything contained in another Act”, rather than anything contained in a contract.

Second, respecting whether the forum selection clause should be enforced, the BCCA held that the Plaintiff failed to meet its burden and show any reason why the proceeding could not be heard in the California courts, since, in light of section 4 not applying outside BC, a California court would not be precluded from hearing the Plaintiff’s claims. Further, the Plaintiff did not submit any evidence or argument that it would be otherwise precluded from making such claims before a California court.

Consequently, the BCCA allowed Facebook’s appeal and granted the stay.

The BCCA’s enforcement of the Facebook forum selection clause is consistent with other decisions from Canadian courts that have held such clauses to be enforceable in the absence of “strong cause” to the contrary, including that of the Ontario Superior Court of Justice in Rudder v Microsoft, more than 15 years ago. It injects a degree of certainty for businesses operating on a national or international level that rely on such clauses in their Terms of Use and other contracts. It also underscores the importance that businesses ensure that their forum selection clauses are clear, valid, and enforceable.

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Tamara Céline Winegust Tamara Céline Winegust
B.F.A., J.D.
416.957.1651  email Tamara Céline Winegust