Shift Law Blog
Facebook's forum selection clause ruled unenforceable
The case began when Ms. Douez, who resides in British Columbia (“BC”), noticed that Facebook had used her profile picture and name for the purposes of advertising without her permission. She sought certification for a class action in BC against Facebook alleging the company used her name and likeness (along with about 1.8 million others’) without consent for the purposes of advertising, contrary to BC's Privacy Act.
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Facebook brought a preliminary motion to stay Ms. Douez’s action based on its forum selection clause requiring that the class action under the BC Privacy Act be tried in California rather than in BC where Ms. Douez resided and where the relevant statute was enacted.
The Chambers Judge who first heard the case refused to enforce the forum selection clause. On appeal, the BC Court of Appeal reversed the Chambers Judge’s decision and held that Ms. Douez’s action should be stayed finding that the clause was enforceable. On appeal to the Supreme Court of Canada, the Court was asked to determine whether the Court of Appeal had correctly held that the forum selection clause was enforceable.
In a split decision, the majority of the Supreme Court held that the forum selection clause was NOT enforceable and that the action need not be tried in California.
In coming to this decision, the Court applied a common law two-step test used to determine the enforceability of forum selection clauses. The test requires: (i) that the contract is otherwise enforceable; and (ii) an assessment of whether there is “strong cause” to retain jurisdiction over a matter within the province. This requires analysis of all relevant circumstances including “convenience of the parties, fairness between the parties, and the interest of justice”.
The Supreme Court ultimately held that: (i) there were strong public policy cause not to enforce the forum selection clause; (ii) the interest of justice was best served if questions arising under the BC Privacy Act were adjudicated in BC; and (iii) it would be far more convenient and affordable to have Facebook come to BC than for Ms. Douez to go to California.
In rendering its decision, the Court made several key findings and considered factors not only relevant to large platforms like Facebook but to all website owners and operators:
- Forum selection clauses serve a valuable purpose: they are intended to create certainty and security in commercial dealings. However, because forum selection clauses encroach on the public sphere of adjudication and may impact on causes of action available to a claimant, Canadian courts should not treat them like any other contractual clause;
- Where the interests of justice are at stake, such as in this case where a forum selection clause would unfairly cause the loss of a procedural advantage, a Court may find that the clause is unenforceable (in this case, the courts of California were certainly not best positioned to hear a case relating to the BC Privacy Act on its merits);
- Freedom to contract is not unfettered –a court has the discretion to deny enforcement of a contract for reasons of public policy in appropriate circumstances like gross inequality of bargaining power between the parties and in consideration of the nature of the rights at stake (like in this case, the right to privacy which is seen in Canada as a quasi-constitutional right); and
- Different concerns and factors animate and guide the enforceability of forum selection clauses in the consumer context than they do in the commercial context:
o In the commercial context, the parties are typically sophisticated, take the opportunity to analyze the various risks and benefits of agreeing to a foreign jurisdiction and to negotiate those terms.
o Conversely, consumer contracts are almost always one-sided. They bear unequal bargaining power and consumers are typically faced with the choice to “agree” to the terms or abandon all use of what are often very popular sites.