The (Un?!-)Enforceability of Forum Selection Clauses in Adhesion Consumer Contracts

Written by on June 26, 2017.

Case Commentary: Douez v Facebook, Inc., 2017 SCC 33

Ms. Douez, an ordinary citizen of the Province of British Columbia, brought a proposed class action against the internet giant, Facebook, Inc. (“Facebook”), alleging that it improperly used her personal information to advertise companies and products to other members of Facebook and externally without her consent.  She alleged that Facebook’s activities violated British Columbia’s Privacy Act, RSBC 1996, c 373 (“Privacy Act”), which provides a statutory remedy for the benefit of persons whose information is used without their consent to advertise or promote the sales of goods or services.  Ms. Douez sought to institute a class action on behalf of all residents of British Columbia similarly situated.

Opposing certification of the class action, Facebook brought a motion that the Court decline to exercise its jurisdiction and, instead, stay the action in favour of the courts of California on the basis of a forum selection clause in Facebook’s standard-form terms of use.  The chambers judge declined to do so and certified the class action.  In so doing, the Court held that although the forum selection clause was valid and enforceable, section 4 of the Privacy Act—prescribing that an action for violation of the Privacy Act must be heard by the Supreme Court of British Columbia—overrode it.  Thus, the Court held, Facebook must respond to the lawsuit in British Columbia.

On appeal, Facebook was successful in convincing the Court of Appeal for British Columbia that the forum selection clause must be enforced and the action must be deferred to the courts of California.  In so holding, the Court of Appeal applied the two-prong test prescribed in the Supreme Court’s decision in Z.I. Pompey Industrie v ECU-Line N.V., 2003 SCC 27.  Under this test, the Court of Appeal found that Facebook had established that the forum selection clause was enforceable and that Ms. Douez, on the other hand, had failed to show strong cause why the clause should not be enforced.  As such, the Court of Appeal stayed the action.[1]

Supreme Court Restores the Class Action:

In a thorough decision handed down on June 23, 2017, the Honourable Supreme Court justices mounted a debate about the competing interests engaged in online consumer activities.  And, ultimately, a divided Supreme Court ruled that Ms. Douez’s appeal must be allowed and the class action must be restored.

In allowing the appeal, three of the Supreme Court’s justices held that, although the forum selection clause was enforceable, the plaintiff had shown strong cause that it should not be enforced.  It is so, they held, because the plaintiff’s claim involved a consumer contract of adhesion between an individual and a large corporation which implicated the “quasi-constitutional privacy rights of British Columbians.”   While forum selection clauses are commonly used in commercial relationships and regularly enforced by the courts, the consumer context of this case was significant to the analysis.  The public policy considerations that arose in this case “weigh[ed] heavily in favour of strong cause” that the forum selection clause should not be enforced.  Those considerations included: the inequality of the parties’ bargaining power, the plaintiff’s little to no choice but to accept Facebook’s non-negotiable standard-form terms of contract, the Canadian courts’ greater interest in adjudicating claims impinging on constitutional and quasi-constitutional rights, and the Canadian courts’ being best suited to interpret Canadian legislation.

Joining her three colleagues, and determining the result of the appeal in favour of the plaintiff, Madam Justice Abella went farther to hold that Facebook’s forum selection clause was not at all enforceable for public policy reasons or for its being outright unconscionable.  In so ruling, Her Honour noted that the plaintiff did not have any choice or bargaining power but to accept a term that took away her ability to access the domestic court system—“when online consumer contracts of adhesion contain terms that unduly impede the ability of consumers to vindicate their rights in domestic courts, particularly their quasi-constitutional or constitutional rights, in my view, public policy concerns outweigh those favouring enforceability of a forum selection clause.”

Implications for the Practice and Consumers:

As the minority of the Supreme Court panel noted in their dissenting judgment, disagreeing with their colleagues and holding that the forum selection clause should be enforced, the Supreme Court may have introduced “new and different principles” in regard to adhesion consumer contracts.

What remains from this evolving debate is that Canadian Courts are likely to intensify the scrutiny of forum selection clauses in adhesion consumer contracts where the consumer has little choice but to accept the terms the effect of which is to deprive her from a remedy provided by Canada’s laws or to the opportunity to be heard by a Canadian court.  Depending on the importance of the rights implicated and the severity of the alleged violations, in light of the Supreme Court’s decision, we anticipate enhanced protection by Canadian Courts of consumers’ rights vis-à-vis multinational corporations, and more meaningful recourse for consumers whose rights are improperly disregarded.

Contact us

To learn more about your legal rights, contact Siskinds LLP’s consumer law group.  With offices in Toronto and London, Ontario, and affiliate offices in Québec City and Montreal, Québec, Siskinds LLP is a prominent Canadian class action law firm striving to promote consumer rights and with a track record of success in recovering compensation for persons affected by unlawful business and commercial activities.

Sajjad Nematollahi
sajjad.nematollahi@siskinds.com
416.594.4390

[1] We previously wrote about this case and another decision of the Court of Appeal for British Columbia concerning the activities of an online service provider, Google Inc., in the matter of Equustek Solutions Inc v Jack, 2015 BCCA 265.  The latter has also been the subject of an appeal to the Supreme Court of Canada, while the Supreme Court’s decision in that matter has not been rendered as of the date of this article.

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