On Friday the Supreme Court of Canada issued its decision in Douez v Facebook. A majority of the Court held that a forum selection clause in Facebook’s terms of use should not be enforced.
Douez is the plaintiff in a proposed class action that alleges Facebook breached the British Columbia Privacy Act by administering its “sponsored stories” advertising program – a program by which Facebook used the name and picture of Facebook members (allegedly without their knowledge) to advertise companies and products to other members on the site and externally. Facebook sought to stay the action based on a clause in its terms of use that stipulated disputes would be resolved in California.
A four judge majority of the Court held that the clause should not be enforced. Three judges in this majority (Karakatsanis, Wagner and Gascon JJ) held that the clause was valid according to contract law principles but, as a matter of policy, should not be enforced. They explained that the two dispostive factors were (1) the “gross inequality in bargaining power” between Douez (a consumer of online services) and Facebook and (2) the interest in local adjudication of privacy disputes – disputes that rest on “quasi-constitutional” rights. Justice Abella joined this group against enforcement of the clause, but held that the clause should not be enforced because it was unconscionable – issuing a broader critique of the means of contracting used by Facebook and most other online service providers.
While the Court did not enforce the contract, the plurality’s view is balanced – making a narrow point about where these types of privacy claims should be heard rather than a more disruptive and general point about the enforceability of online service terms of use.
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