Canadian Supreme Court Doesn't Like Facebook Clickwrap in Big Privacy Suit

The justices rule that local citizens shouldn't be forced to litigate in another country just because they've agreed to the social network's terms of use.

"I agree."

Most people don't spend much time before clicking on such words when presented with a website's terms of use. But in a big decision on Friday that allows a class action lawsuit to proceed against Facebook, the Supreme Court of Canada has determined that the social network's local users can't be forced via clicked assent to adjudicate their privacy rights in a foreign country.

Deborah Douez, a Vancouver woman, is leading the charge against Facebook over an advertising product called "Sponsored Stories," which Facebook launched in 2011 and has since abandoned. When it was in operation, Facebook used the name and picture of Facebook members to advertise companies and products to a member's friends.

In response to the lawsuit, which aims to score damages for about 1.8 million British Columbia residents, Facebook pointed to its terms of use, and specifically, a forum selection and choice of law clause requiring that disputes be resolved in California according to California law.

Facebook won the argument at a lower court, but in a vote of 7 to 2, the Canadian Supreme Court hands consumers the victory today.

"It is clear from the evidence that there was gross inequality of bargaining power between the parties," states the main opinion from three justices explaining why this contract of adhesion isn't enforceable. "Additionally, Canadian courts have a greater interest in adjudicating cases impinging on constitutional and quasi-constitutional rights because these rights play an essential role in a free and democratic society and embody key Canadian values. This matter requires an interpretation of a statutory privacy tort and only a local court’s interpretation of privacy rights under the Privacy Act will provide clarity and certainty about the scope of the rights to others in the province."

Another justice concurs. 

"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, public policy concerns outweigh those favouring enforceability of a forum selection clause," writes Justice Rosalie Abella.

The dissenting judges thought that Facebook should prevail because it had "established that an enforceable contract may be formed by clicking an appropriately designated online icon" and that "the contract on its face is clear and there is no inconsistency between a commitment to strive to apply local laws and an agreement that disputes will be tried in California."

Most American courts have come to a similar conclusion that so-called clickwrap is enforceable and that forum and choice-of-law clauses are to be honored, but the neighbors to the north are departing from this conclusion. It certainly adds discord to the words, "I agree," and may influence how multinational digital enterprises interact with consumers.

Here's the entire opinion.