SCC Finds Privacy Rights Protection Trumps Forum Selection Clause

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In a divided ruling, the Supreme Court of Canada has held that a potential class action lawsuit alleging Facebook’s violation of the Privacy Act will be held in British Columbia, and not California.

Deborah Douez, like a significant proportion of the Canadian population, has a Facebook account. In order to sign up, she had to agree to a contract—an End User License Agreement—that stated all legal disputes between the signer and Facebook were to be held in California courts. When Ms. Douez discovered that her likeness—along with millions of others—were used without her consent in a now-defunct advertising program, she initiated legal proceedings under s. 3(2) of the BC Privacy Act:

It is a tort, actionable without proof of damage, for a person to use 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.

Facebook immediately applied for a stay of proceedings on the basis that she had agreed to the forum selection clause when first signing up for Facebook.

Ms. Douez won at trial level, but on appeal the British Columbia Court of Appeal held that there was no good reason to find the clause invalid. The Supreme Court of Canada, by four-to-three ruling, allowed the appeal on the basis that the common law test for determining whether to enforce a forum selection clause weighed in favour of the case being heard in Canada.

The test for forum selection clauses is outlined in an older SCC case, Z.I. Pompey Industrie v. ECU-Line N.V. There, courts apply a two-step investigation: step one requires that the party seeking a stay—Facebook in this instance—must establish that the clause is “valid, clear and enforceable and that it applies to the cause of action before the court” (para 28); step two requires the plaintiff to show that there are strong reasons why the court should not enforce the forum selection clause. This second step, according to the case law, was meant to be flexible: courts were to consider “‘all the circumstances’ of a particular case” (at para 30).

For three judges on the majority ruling, this second step was the crucial factor in their decision: though the previous case law’s list of considerations did not consider public policy, Justices Karakatsanis, Wagner, and Gascon wrote:

we would modify the Pompey strong cause factors in the consumer context. When considering whether it is reasonable and just to enforce an otherwise binding forum selection clause in a consumer contract, courts should take account of all the circumstances of the particular case, including public policy considerations relating to the gross inequality of bargaining power between the parties and the nature of the rights at stake. (at para 38)

On that modified basis, three of the ruling judges found that Ms. Douez met the burden, as there was strong public interest in seeing the question of whether her—and, given the potential class action lawsuit that might follow, approximately 1.8 million residents of British Columbia—privacy rights were violated. Further, the sheer imbalance in bargaining power between individual citizens and a multi-billion dollar corporation was found to be another strong factor in favour of waiving the forum selection clause.

Indeed, Justice Abella (who wrote a concurring judgment) found that Facebook’s application failed on the first step on the basis of the imbalance in bargaining power, and on the basis that because of that imbalance and the public interest, the enforcement of the clause would be unconscionable.

While Chief Justice McLachlin, and Justices Moldaver and Côté dissented, the clear takeaway from the ruling is that the SCC has expressed its discomfort with the massive difference in power between online titans like Facebook and individual citizens—especially when the civil rights of those citizens were allegedly violated.

This blog post was written by a CCLA summer law student. Views expressed do not necessarily reflect the view of the CCLA.