The British Columbia Court of Appeal recently overturned the certification of a class action against Facebook Inc. in relation to alleged breaches of B.C.’s Privacy Act, involving unauthorized commercial use of users’ names and likenesses. The lower court had exercised its jurisdiction over the claim despite the fact that Facebook’s standard terms of use contain a forum selection clause requiring Facebook users to adjudicate disputes in California. In Douez v. Facebook Inc., (Douez) the Court of Appeal stayed the action on the basis that California was the more appropriate jurisdiction, finding that the provincial Privacy Act cannot apply outside B.C. to preclude adjudication of this dispute by the courts of California, by overriding the forum selection clause in users’ contracts. As a result, the certification of the class proceeding in B.C. is effectively moot. This case sets a strong precedent for the enforceability of forum selection clauses included in terms of use and other similar contracts that many companies rely on when conducting business over the Internet.

CERTIFICATION DECISION

In Douez, the plaintiff sought to certify a class proceeding on behalf of all Facebook users in B.C. whose name or portrait was used by Facebook for advertising through a product called “Sponsored Stories.” Sponsored Stories were advertisements bearing the name and likeness of a Facebook user along with the logo or other information of the entity that purchased the advertisement. The Sponsored Stories were sent to users’ contacts without the knowledge of the user whose likeness was used. The plaintiff alleged that Facebook did not seek or obtain consent from Facebook users to use their names or pictures in the Sponsored Stories, contrary to section 3(2) of the B.C. Privacy Act, which makes it a tort for a person to use the name or portrait of another for advertising of other such commercial purposes without consent.

Facebook’s central argument in response was that its standard terms of use contained a forum selection clause whereby the user agreed to resolve any claim in relation to the terms of use or to Facebook generally exclusively in the state or federal courts located in Santa Clara County, California. The plaintiff argued the forum selection clause was unenforceable given that section 4 of the Privacy Act mandates that actions under that Act must be heard and determined by the B.C. Supreme Court. The lower court found that, by conferring exclusive jurisdiction of such claims to the B.C. Supreme Court, the legislature intended to override any forum selection clauses to the contrary and that this is a strong policy reason against enforcing such clauses. The lower court ultimately refused Facebook’s application to have it decline jurisdiction and certified the action as a class proceeding. For more information, see our June 2014 Blakes Bulletin: B.C.’s Privacy Act Trumps Jurisdiction Selection Clause

APPEAL

The Court of Appeal reversed the lower court judge’s decision on appeal. The Court of Appeal held that where a defendant can establish that a forum selection clause is valid, clear and enforceable, the plaintiff must show “strong cause” as to why the court should not enforce the contractual term.

On the facts before it, the Court of Appeal found the exclusive forum selection clause was enforceable. It concluded that the principles of territoriality and subject matter competence limited the application of the Privacy Act to the B.C. Supreme Court only in relation to other tribunals (such as the Provincial Court or arbitration tribunals) also located in the province and not in relation to courts worldwide.

In particular, the Court of Appeal held that the chambers judge had erred in failing to give effect to the long-standing principle of territoriality. This principle refers to the lack of force carried by a territory’s laws outside of that territory, except insofar as allowed by comity or as determined by the courts of the foreign territory. Therefore, by implication, California (or other foreign) courts alone can decide whether California courts have territorial competence over proceedings.

Specifically, the Court of Appeal went on to hold that the provision of the Privacy Act on which the plaintiff relied to say the action had to be tried by the B.C. Supreme Court actually speaks to subject matter competence, not territorial competence. This means that “s. 4 must be interpreted to mean that the B.C. Supreme Court has jurisdiction to the exclusion only of other courts in B.C., not other courts worldwide.”

The Court of Appeal also overturned the lower court’s finding that there was “strong cause” not to enforce the forum selection clause. The lower court’s conclusion, and all of the plaintiff’s arguments on appeal, depended on the lower court’s inaccurate interpretation of section 4 of the Privacy Act. If the plaintiff had establish that the California courts would not have territorial competence (under California law) to hear the plaintiff’s claim, that could constitute “strong cause,” but she had not provided any evidence to satisfy her burden to establish that there was “strong cause” for the B.C. courts not to enforce the forum selection clause.

The Court of Appeal opted not to address the issue of class action certification as the forum selection clause issue was dispositive of the appeal. The stay of proceedings, however, effectively renders the certification moot, as the action cannot proceed.

The Court of Appeal’s decision in Douez affirms that forum selection clauses that are clear and valid will be given effect by B.C. courts unless a plaintiff can establish a “strong cause” why the B.C. court should decline jurisdiction. However, such clauses may not offer any protection in circumstances where legislators have granted exclusive subject matter competence to courts in their jurisdiction in conjunction with a prohibition on contracting out of statutory protections.