Schrems v. Facebook: CJEU Accepts Facebook User as Consumer but Disallows Class Action Under Special Jurisdiction Rule

Reports Privacy

Maximilian Schrems v. Facebook Ireland Limited, judgment of 25 January 2018, C-498/16, EU:C:2018:37

On January 25, 2018, the Court of Justice of the European Union (“CJEU”) rendered an important jurisdictional decision against Facebook. The gist of the dispute was whether users could use the “consumer forum” special jurisdiction rule in (1) their own claims against Facebook or (2) for claims assigned to them.  CJEU ruled that Facebook users were consumers within the meaning of the Article 2 of the Brussels I Regulation and could therefore sue Facebook Ireland from their own domicile. However, the Court disallowed class actions to be litigated under special jurisdiction. While reaching its conclusion, it noted that special jurisdiction was an exception to the general rule and should be interpreted restrictively.

According to Article 2 of the Brussels I Regulation, plaintiffs can only initiate legal proceedings in the Member State where the defendant is domiciled. However, to protect weaker parties like consumers or employees, the Regulation includes “special jurisdiction” rules that supplement the general jurisdiction rule. Articles 15 and 16 set out a consumer forum rule where consumers can sue other parties to a contract from the consumers’ place of domicile.

The plaintiff in this proceeding was Max Schrems, an Austrian privacy advocate who notably challenged Facebook Ireland’s data transfer to Facebook USA before Irish courts in 2015. In that case, the CJEU ruled for Schrems and invalidated the US-EU Safe Harbor Framework that allowed the data transfer.

Fresh from his 2015 victory, Schrems brought another action against Facebook Ireland – this time in Austria, his place of domicile. In this suit, Schrems alleged that Facebook Ireland violated his own privacy and data protection rights and those of seven other Facebook users. These users, who were domiciled in Austria, Germany, and India, assigned their claims so that Schrems could litigate the dispute on their behalf. Among other remedies, Schrems sought an injunction (1) prohibiting the use of their data for Facebook’s own purposes or for those of third parties and (2) disclosing the use of such data.

Schrems claimed that the Austrian court had special jurisdiction over the proceeding by invoking the consumer forum rule in Article 16(1) of the Brussels I Regulation. Facebook Ireland argued that Schrems lost his “consumer” status after publishing books, giving lectures, and fundraising. According to Facebook, Schrems had become a “professional litigant” and, consequently, could no longer rely on special jurisdiction rule designed to protect consumers.  

When the dispute reached the Austrian Supreme Court, it referred the case to the CJEU for a preliminary ruling on the interpretation of Articles 15 and 16. The first issue was whether the activities of “publishing books, lecturing, operating websites, fundraising and being assigned the claims of numerous consumers for the purpose of their enforcement” could lead to the loss of a private Facebook account user’s status as a “consumer.” The CJEU ruled that a user will be deemed a “consumer” only if the use of services, “for which the applicant initially concluded a contract, has not subsequently become predominately professional.” It then went on to explain that the expertise Schrems acquired by writing a book, fundraising, and using Facebook to allegedly represent other users did not deprive him from his consumer status.

The second issue was whether Schrems could also rely on special jurisdiction for claims assigned to him. CJEU ruled that the consumer forum rule does not apply to the claims assigned by other consumers domiciled in the same Member State, in other Member States, or in non-member countries. In other words, the CJEU ruled that special jurisdiction only applied to the person who concluded the original contract with the business. This holding disallowed class actions through special jurisdiction.

Although Schrems hailed the judgment as a victory through his Twitter account, it was not a complete loss for Facebook. Over 25,000 people had assigned their claims against the Facebook Ireland to Schrems, with many more on the waiting list. Commentators stated that this judgment can only be a win for consumers who “take their disputes [so] seriously” that they sue Facebook themselves.

Moreover, CJEU ruled that consumer status can be lost over time. In other words, if pages, fundraising activities, or advertising on Facebook “subsequently become predominately professional,” then users will lose their right to sue Facebook through the consumer forum rule. The question remains whether the Court puts more emphasize on the characteristics or frequency of the activity.

 

Secil Bilgic is an LLM student at Harvard Law School and a Fulbright Scholar.