One week after the B.C. Court of Appeal ruled that it could order Google to remove websites from its global index, the same court (but different judges) ruled that a privacy class action lawsuit against Facebook could not proceed in the province because the Facebook terms and conditions provide that all disputes must be resolved in a court in Santa Clara, California. The decision should provide a wake-up call to users and policy makers because an absolute approach to terms and conditions not only means that Canadian courts may be unable resolve consumer disputes involving companies like Facebook, but that Canadian law will not apply either.

The current Facebook terms and conditions state:

You will resolve any claim, cause of action or dispute (claim) you have with us arising out of or relating to this Statement or Facebook exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County, and you agree to submit to the personal jurisdiction of such courts for the purpose of litigating all such claims. The laws of the State of California will govern this Statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions.

While this appears to be slightly different from the terms that governed the dispute before the B.C. courts (it referenced courts in Santa Clara county), the key takeaway from the decision goes well beyond a proposed class action lawsuit over a Facebook “sponsored stories” program that no longer exists. The trial judge rightly noted that the heart of the case is whether online terms and conditions override domestic legal protections (in this case, the B.C. Privacy Act).

The trial court judge ruled that the terms did not, citing provisions in the B.C. Privacy Act that confer exclusive jurisdiction on the B.C. Supreme Court. The B.C. Court of Appeal rejected both the analysis of the BC Privacy Act and the broader public policy considerations of whether online terms should trump local law. The court ruled that the Facebook terms were “valid, clear, and enforceable”. It then fell to the plaintiff to demonstrate why the court should decline to enforce the forum selection clause. The court cites as a possible example evidence that the case could not be heard in the California court (which would have the effect of creating a limitation of liability for Facebook). Without such evidence, the court ruled that the Facebook terms were binding. Moreover, it rejected the argument that the B.C. Privacy Act is intended to trump valid contracts.

Interestingly, a class action lawsuit over Facebook’s sponsored stories launched in the State of Illinois raised similar questions about the enforceability of the Facebook terms and conditions. The court also sided with Facebook, ruling that its forum selection clause was enforceable. The court identified three situations where the clause might not be enforced:

• if their incorporation into the contract was the result of fraud, undue influence or overweening bargaining power;
• if the selected forum is so gravely difficult and inconvenient that the complaining party will for all practical purposes be deprived of its day in court; or
• if enforcement of the clause would contravene a strong public policy of the forum in which the suit is brought, declared by statute or judicial decision.

The public policy discussion was interesting as the court ruled that California was fully capable of addressing the issue. That case was one of several that have upheld Facebook’s terms and conditions.

From a Canadian perspective, the public policy issue might well be whether California law offers the same level of privacy protection as that found in Canada. The Privacy Commissioner of Canada’s well-known 2009 investigation against Facebook did not focus on jurisdictional issues (the OPC maintains that the collection, use or disclosure of Canadian personal information triggers the law), but this case provides a reminder that Facebook believes that its terms and conditions ensure that California law and California courts govern any dispute or cause of action.

There is obvious value in contractual certainty and the benefits for online businesses, who can look to this case to more confidently rely on their terms and conditions. However, there is also a significant public policy risk, since it opens the door to contractual terms that trump local laws and protections. This is particularly true for online consumer contracts that involve no negotiation and are presented on a “take it or leave it” basis. In fact, few expect consumers to actually read the detailed fine print of every online contract, meaning that the clicking “I agree” may result in being bound by terms that trump Canadian law and the Canadian courts.