Bankruptcy Court Deems Social Media Accounts Property of the Estate

Social media accounts have become powerful marketing and public relations tools for businesses promoting their products or services.  In this tech era, companies can rely on Twitter and Facebook to connect with their target market, promote their products, build a brand name, and shape the public’s opinion.  But social media as an asset in a bankruptcy proceeding… yes, apparently that’s happening too.

In Texas, the United States Bankruptcy Court held that the former majority member had to relinquish control of the business’ social media accounts.  In In re CTLI, LLC (Bankr. S.D. Tex. Apr. 3, 2015), the court concluded that business social media accounts, even when there is some intermingling of personal content, can become property of an estate.  Jeremy Alcede, the majority shareholder of Tactical Firearms, a gun store and shooting range, had been posting personal and business content to Facebook and Twitter.   However, when the company entered into Chapter 11 reorganization, Alcede lost control and ownership of the company.  He then refused to relinquish the Facebook and Twitter accounts and even changed the accounts’ names to reflect his own name, arguing that that turning over these accounts would violate his individual privacy rights.  

The court began by asking whether a debtor’s social media accounts constituted property under Section 541 of the Bankruptcy Code. Section 541 defines “property of estate” to include “all legal or equitable interests of the debtor in property as of commencement of the case.” Although no Texas court had ruled on such issue, the court found that social media accounts are property interests under Texas law, as they provide "valuable access to customers and potential customers" similar to a subscriber or customer list. 

The court then looked to determine whether the Facebook and Twitter accounts were Alcede’s personal or business property.  The court explained that only business accounts are deemed property of an estate, ultimately deciding that they were business accounts. 

The court’s reasoning was that the Facebook account was not a “profile” but in fact a “page,” specifically designed for business use.  The fact that Alcede posted on behalf of the company was immaterial because his posts were targeted at promoting the business.  Additionally, other factors pointed to a business account: the Facebook page had a link to Tactical Firearms website, other employees of the company were granted access to post status updates promoting the business, and it was created in the name of the business, regardless if he later changed the name.

Similarly, the court found that the Twitter account was named after the business, included a link to the official webpage, included a description of the Tactical Firearms business in the account’s description, and was used almost exclusively to promote the business. 

The court also rejected Alcede’s privacy contentions by analogizing to cases where an employee waives privacy rights when emailing on an employer’s computer system.  The court ruled because the social media accounts were for the benefit of the business, Alcede lost any personal privacy right in his content. 

Lesson learned.

ALG is staying well-informed of these and other Internet law and Intellectual Property law related matters to make sure we can properly counsel our clients. If you have any questions regarding this or any other Internet law or business law related matters, please contact Antoine Law Group, APC.

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