Facebook Privacy Class Claims Cleared for Canadian Hearing

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By Jeremy Hainsworth

Facebook Inc. will have to answer claims concerning its use of personal information for its now-defunct sponsored stories promotion in British Columbia—not California as its user terms of service dictated, the Supreme Court of Canada ruled ( Supreme Court of Canada Douez v. Facebook, Inc., S.C.C., No. 26616, 6/23/17 ).

The bottom line is that U.S. online companies with otherwise binding legal forum clauses in customer terms of service agreements may still be held to account in Canadian courts over alleged privacy violations, privacy attorneys told Bloomberg BNA.

Companies entering into contracts that involve “constitutional or quasi-constitutional rights of a Canadian“ may well be subject to Canadian legal jurisdiction, Christopher Rhone, a litigation partner with Branch MacMaster LLP in Vancouver who represented the plaintiffs, said.

The ruling calls into question the use of general clickwrap agreements that rely on users to click an online acceptance button as consent to often complicated privacy and data use terms, including agreeing to resolve claims in a particular location, attorneys said.

Deborah Douez brought class claims on behalf of 1.8 million British Columbians, alleging that Facebook violated the Privacy Act of British Columbia through its sponsored stories program, which combined names and photos of users with a message saying they had liked a company or product.

A $20 million settlement with a class of U.S.-based sponsored stories plaintiffs was recently finalized. The plaintiffs there argued that merely clicking Facebook’s “Like” button didn’t constitute consent for their profile photos to be used for marketing purposes.

Despite the forum setback, Facebook says it is ready to defend the litigation. “We continue to believe that the underlying claims are without merit, and will continue to defend ourselves vigorously,” a Facebook spokesman said.

Forum Selection Clauses

Shaun Brown, privacy partner at the nNovation LLP law firm in Ottowa and Toronto, told Bloomberg BNA June 26 that the Supreme Court ruling “significantly changes the law on consumer contracts.”

Previously, “forum selection clauses in consumer click wrap agreements have been enforceable in most Canadian jurisdictions,” he said. Companies shouldn’t expect such clauses to continue to be enforceable in privacy-related matters, especially if a product is very popular, Brown said.

“This decision does not mean that click wrap agreements are no longer enforceable contracts—just certain terms, in certain cases,” Brown said.

Rhone said companies should examine boilerplate contracts while Brown said that forum selection clauses tend to be scrutinized more closely than other contract terms.

“The enforceability of a forum selection clauses may turn on the particular right sought to be enforced in a particular case,” Brown said. The ruling could open the door to other clauses being unenforceable in the future, he said.

Better Suited Location

Rejecting the alleged consent to a California forum, the Canadian Supreme Court said the “grossly uneven bargaining power between the parties and the importance of adjudicating quasi-constitutional privacy rights in the province are reasons of public policy that are compelling, and when considered together, are decisive in this case.”

Consumers had little choice but to accept Facebook’s conditions, the court said, noting that the digital marketplace’s non-negotiable standard form contracts are presented to consumers on a “take-it-or-leave-it” basis.

A British Columbia court was better suited to assess the purpose and intent of the province’s Privacy Act, it said. “It would be contrary to public policy to enforce a forum selection clause in a consumer contract that has the effect of depriving a party of access to a statutorily mandated court,” the court said. Moreover, with the internet’s pervasive reach, potential harms to an individual’s privacy have been exacerbated and require local interpretation of privacy rights, it said.

Contracts and Consent

Canada’s Supreme Court also said that the case highlights the issue of consent and tests traditional contract principles.

“What does ‘consent’ mean when the agreement is said to be made by pressing a computer key? Can it realistically be said that the consumer turned his or her mind to all the terms and gave meaningful consent?” the court asked. Such automatic commitments should be scrutinized, not for the purpose of invalidating a contract, “but at the very least to intensify the scrutiny for clauses that have the effect of impairing a consumer’s access to possible remedies,” it said.

Brown said consumers couldn’t be expected to read every term of every clickable agreement. However, Brown noted that businesses have to be able to form enforceable agreements with consumers. “Otherwise businesses face unlimited risk with no predictability,” he said.

To contact the reporter on this story: Donald Aplin in Washington at daplin@bna.com

To contact the editor responsible for this story: Donald Aplin at daplin@bna.com

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