How do operators of global services deal with the panoply of legal systems around the world?  One common strategy relies on choice of law and forum selection clauses in Terms of Use agreements.  These clauses purport to determine in advance what law will apply to disputes and where they will be heard.  Canadian courts tend to enforce such agreements, on the basis that the parties are generally best-placed to decide for themselves how to govern their affairs.  Such agreements promote certainty, which courts (and parties) usually finds comforting.

However, local laws sometimes modify or invalidate these kinds of agreements.  For example, in 2011, the Supreme Court of Canada ruled that the B.C. Business Practices and Consumer Protection Act overrode an arbitration clause in a consumer contract.

A similar issue recently arose when a B.C. resident tried to initiate a class action lawsuit in B.C. against Facebook.

Background

In Douez v. Facebook, Inc., 2014 BCSC 953, a B.C. resident tried to initiate a class action lawsuit in B.C. against Facebook.relating to “Sponsored Stories”: an advertising product which could display the name and image of a Facebook user in the news feeds of that user’s “Friends”, in association with promotional content paid for by an advertiser.[1]  The plaintiff cited a statutory tort relating to use without consent of a person’s name or likeness for advertising purposes under sub-section 3(2) of the B.C. Privacy Act.  Facebook sought dismissal, primarily on the grounds that its Terms of Use included an exclusive forum selection clause, nominating the federal courts of Santa Clara County, California.

On May 30, 2015, Justice Griffin issued an order denying Facebook’s application for dismissal and certifying the class action.  Among other reasons, Justice Griffin concluded that section 4 of the B.C. Privacy Act conferred exclusive jurisdiction to hear claims in respect of the statutory torts under that Act on the B.C. Supreme Court and therefore, if the forum selection clause in the Terms of Use was upheld, the plaintiff would have been unable to bring the claim anywhere.

Facebook appealed.  On June 19, 2015, the B.C. Court of Appeal ruled in Facebook’s favour, upholding the forum selection clause and staying the action in BC.

Critically, the BC Court of Appeal concluded that Justice Griffin had “failed to give effect to the principle of territoriality. […] B.C. law applies only in B.C. Our Legislature is powerless to affect the law of other jurisdictions.”[2]  In the BC Court of Appeal’s view, section 4 of the BC Privacy Act only granted exclusive jurisdiction within the province of B.C.; it had no effect on the jurisdiction of courts in California.

According to well-established principles of private international law (also known as “conflict of laws”), Facebook, as the party seeking to enforce the forum selection clause, had the burden to show that the clause was valid, clear and enforceable, and applied to the dispute.  The plaintiff had effectively conceded these points at trial.  The burden of proof then shifted to the plaintiff to show “strong cause” why the clause should not be enforced.

The plaintiff’s argument on this point relied on the inference that California courts would not have jurisdiction to hear the case.[3]  But the plaintiff had offered no basis for such a conclusion other than s. 4 of the Privacy Act.  Having concluded that this provision had no effect on the California courts, the Court of Appeal was forced to conclude that the plaintiff had failed to meet the burden of proof.  Accordingly, there was no reason not to apply the forum selection clause.

Lessons for Businesses

For online service providers and users alike, this decision should serve as a reminder that web Terms of Use have to be taken seriously.

For users, the main lesson should be that courts will not lightly set aside forum selection clauses.  One cannot simply ignore the “boiler plate” terms of these agreements.  They generally have real meaning and effect.

For service providers, the key take-away from the decision should be that Terms of Use should include forum selection and choice of law provisions to address the risk of liability under unfamiliar legal regimes.  But these clauses will only be effective if the Terms of Use themselves are enforceable.

Decisions like this will motivate plaintiffs to directly attack the validity and enforceability of Terms of Use and this remains an unsettled area of law, both in Canada and around the world.  Cases have turned on fine points of user interface design in how terms are presented to users and how (or if) agreement is demonstrated.  It may not be good enough to simply copy design patterns from other services.  Service providers who want to be able to enforce their Terms of Use should obtain legal advice in the jurisdictions in which they intend to offer services, preferably early in their design cycles.