Israel: Israeli Court: Privacy Class Action Against Facebook May Proceed

Last Updated: 12 April 2017
Article by Dan Or-Hof

The District Court for the Central District of Israel denied a Facebook motion to dismiss a 400 million dollars class action, on grounds of improper venue, lack of jurisdiction and erroneous application of the Israeli law (CA 46065-09-14 Ben Hamo V. Facebook Inc. et at. Decision delivered on June 10, 2016).

The decision extends the reach of Israeli courts and Israeli law to free online services.

Petitioner – Ohad Ben Hamo, claimed that Facebook monitored users' private messages, read their contents and misused them without receiving informed consent and without providing users with adequate notices, as required under the Protection of Privacy Act, 1981 (PPA). The petitioner further claimed that Facebook failed to register their data base with the Data Bases Registrar, as required under the PPA. Both causes of action constitute civil torts and criminal offences.

The class action is similar in part to a pending class action which was filed in December 2013 to a court in California (Campbell, et al. v. Facebook Inc., Case No. 4:13-cv-05996, in the U.S. District Court for the Northern District of California).

Facebook Cannot Deprive Consumers of their Rights

The court ruled that the true purpose of the Facebook foreign jurisdiction and law provisions was to deter Israeli consumers from exercising their legal rights. These provisions provided Facebook an unreasonable advantage over users and therefore were held invalid. We believe that pursuant to current law in Israel, Facebook should have anticipated the court's decision.

Following the denial of the motion to dismiss, the petitioner may proceed with his preliminary petition to certify the claim as a class action. Oral arguments are set to December 12, 2016.

Not the First

This is not the first class action that Facebook faces in Israel. On May 2016, Facebook settled another class action for NIS 9 million (approximately 2 million dollars). The case was filed in 2012 and claimed that Facebook violated the Israeli spam law, by causing users to send their non-Facebook contacts invitations to join Facebook. Under the settlement, Facebook will also need to modify the invitations feature (case name: CA 58064-12-12 Ronit Cohen et al, V. Facebook Inc. et al. Decision approving the settlement delivered in May 5, 2016).

Facebook's Motion to Dismiss in More Detail

The defendants (Facebook Inc. and Facebook Ireland) filed a motion to dismiss the claim, substantially on lack of jurisdiction, improper venue and application of California law

Under the Facebook terms of use, the user must resolve disputes with Facebook in California courts. Facebook argued that the petitioner cannot move to declare the jurisdiction clause invalid on grounds that it is a depriving provision pursuant to the Standard Contracts Act, 1982, because California law and not Israeli law govern the terms of use; that the petitioner did not show a cause of action under California laws and that the jurisdiction clause will not deter the petitioner from filing a 400 million dollars class action in California.

Facebook further argued that the majority of interests involved and the reasonable expectations of the parties, should lead to the conclusion that the proper forum is a competent court in California.

The Grounds for Denying the Motion

In denying Facebook's motion, the court ruled as follows:

It is probably high time to view the matter of foreign jurisdiction clauses from the consumer's point of view, especially when the consumer faces giant international corporations with consumer-facing engagements on a global scale.

Facebook serves 4 million Israeli users under a standard "as-is" terms of use. Evidently, Facebook adapted its social media platform for Israeli users, by creating a version in Hebrew, by translating the terms of use to Hebrew and by providing support in Hebrew. Users do not pay for Facebook's services, however Facebook exploits the use of its platform to generate income from advertisements.

The proper venue is Israeli courts, whether it is a small personal claim, which will not be heard if the user will need to file it in California, or if it is a consumer-related class action.

Without further evidence about different procedures under California laws, the court concluded that the applicable provisions under California law and Israeli law are similar. By citing CA 39292-04-13 Raz Klinghofer v. PayPal Pte Ltd. (Decision delivered on May 31, 2015), the court further concluded that a different approach will deny the possibility to review whether the jurisdiction clause is depriving under the Standard Contracts Act and therefore will thwart the possibility to commence a class action against defendants of this kind.

While the PayPal case relates to fee-based services, the Facebook decision extends the reach of Israeli courts to global corporations who provide Israeli users free-of-charge services as well. The court ruled that according to Israeli law, the mere fact that Facebook does not charge fees for its services cannot immune Facebook from litigation in Israel.

The court used further comparative law and cited scholars to support its finding. Among them, was an opinion who viewed a foreign governing law clause as a provision that limits or deprives altogether a consumer from commencing legal actions, and therefore should be held invalid, or presumed as depriving (and consequently be held invalid unless the defendant proves otherwise), pursuant to sections 5 and 4(9) of the Standard Contracts Act.

Facebook cannot deprive consumers of their rights. The true purpose of the Facebook foreign jurisdiction and law provisions in their terms of use, the court ruled, was to deter Israeli consumers from exercising their legal rights.

These provisions provided Facebook an unreasonable advantage over users, and therefore, at the very least they were presumed as depriving. The presumption of deprivation was not rebutted by Facebook, and therefore the provisions were held invalid.

Additionally, the decision made clear that the proper forum to hear this case is Israel, because the more substantive connections and interests lie with the Israeli jurisdiction – A Hebrew version of Facebook and Facebook's documents, provision of the Facebook services to millions of Israelis, the causes of action relate to Israeli users, the personal messages – the subject matter of the claim, were sent by Israeli users, and the applicable law is Israeli law.

Facebook should have had reasonable expectations, as a global corporation who offers its services in many countries, that it will need to litigate in various jurisdictions.

Finally, the court concluded that the claimed torts of privacy breach and failure to register a data base, occurred in Israel and therefore the applicable law is the Israeli law.

Based on the above grounds, the court denied Facebook's motion to dismiss the claim.

The Outcome of the Decision

Current Israeli laws and case law are highly supportive of consumers. In previous cases, including class actions such as the PayPal case, courts dismissed time and again motions to dismiss claims on grounds of governing foreign laws and foreign jurisdiction. Therefore, the current decision did not come as a surprise.

Service providers who provide their services over the web, including free-of-charge, to Israeli users should be prepared to litigate disputes in Israeli courts. Israeli courts will not allow foreign corporations to deprive consumer rights, including the right to litigate disputes.

This decision may impact similar proceedings in other jurisdictions as well, and therefore should be taken into consideration by Facebook, as part of their global litigation strategy.

Evidently, service providers can offer dispute resolution mechanisms which serve the interests of both parties much better than the provisions under the Facebook terms of use, and consequently will have better chances to survive the possibility of invalidation.

Next Steps

The case is set to a hearing on the petition to certify the claim as a class action on December 12, 2016.

If the claim is certified, the court will hear arguments and decide on the merits of the claim. In most cases, following a certification of a class action, the case in settled and the settlement must be approved by the court.

Case name: CA 46065-09-14 Ben Hamo V. Facebook Inc. et at. Decision delivered on June 10, 2016.

The decision (in Hebrew).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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