Supreme Court Rules Facebook Forum Selection Clause Unenforceable

- 2017-06-23 -

In a 4-3 decision, the Supreme Court of Canada ruled in Douez v Facebook, Inc. 2017 SCC 33, that Facebook’s efforts in its terms of service to require Canadians to pursue grievances with Facebook in California courts instead of Canadian courts is unenforceable.

The case involved a class action against Facebook alleging violations of BC's Privacy Act. The class action could not proceed, however, as Facebook argued that its terms of service require disputes to be resolved in California courts and under California law. Historically, the Supreme Court of Canada's jurisprudence favoured enforcement of these “forum selection clauses” on the rationale that holding sophisticated commercial parties to their jurisdictional choices advances the underlying principles that private international law seeks to achieve.

However, online platforms now routinely impose non-negotiable choice of forum and law clauses in their terms of service, which consumers must accept on a take it or leave it basis. This means that online platform users will need to undertake the cost and difficulty of advancing their claims in foreign courts if they are to resolve disputes with their service provider, undermining access to justice as customers are not well suited to bear such costs. Moreover, as foreign courts will typically apply their own laws in lieu of Canadian laws, this approach would allow online service providers to opt out of Canadian laws and standards entirely. This is especially problematic where the laws in question implicate constitutionally protected rights are invoked, as different jurisdictions must have leeway to apply different standards of freedom of expression and privacy to their denizens. CIPPIC's intervention therefore argued that enforcing forum selection clauses imposed onto online customers on a non-negotiable basis will undermine the principles of order, fairness and comity which private international law seeks to achieve.

Justice Karakatsanis’ decision identified three factors that cumulatively amounted to strong cause not to enforce Facebook’s forum selection clause:

  • the claim involved a consumer contract of adhesion between an individual consumer and a large corporation - a gross inequality of bargaining power - and a statutory cause of action implicating quasi-constitutional privacy rights;
  • the interests of justice support having the action adjudicated by a Canadian court since Canadian courts are better placed to assess the purpose and intent of the legislation and to decide whether public policy or legislative intent prevents parties from opting out of rights created by Canadian legislators; and
  • the expense and inconvenience of requiring British Columbian individuals to litigate in California, compared to the comparative expense and inconvenience to Facebook.

Justice Abella would have gone further and found Facebook’s forum selection clause unconscionable and so unenforceable under contract law.

A three-judge dissent would have found Facebook’s terms of service enforceable.

CIPPIC thanks Paul Bates of Siskinds LLP and our colleagues Marina Pavlovic and Jeremy de Beer of the Centre for Law, Technology and Society at the University of Ottawa for their able support.