Social Media Property Rights in Bankruptcy

Modern technology, particularly the internet and smartphones, has brought with it many new types of property, property that is largely intangible.  Intangible property does not have a physical existence and cannot be touched or moved like a car, painting, or other type of tangible property.  Much of the law has evolved to deal with tangible property so courts are still adapting to how to deal with intangible property in all areas of the law.social media property rights
Earlier this month, one bankruptcy court began to tackle the issue of social media property rights in the context of bankruptcy.  The case, In Re CTLI, involved a Chapter 11, business bankruptcy and a dispute between the company, CTLI, LLC declaring bankruptcy and a former owner of the company, Jeremy Alcedes.  In re CTLI was a Texas bankruptcy case, but it will likely be looked to for guidance by other bankruptcy cases, including ones in Florida.  As noted in earlier blogs, the Bankruptcy Code is federal law, and with a few exceptions, applied similarly across jurisdictions.

 Brief Background

After filing the bankruptcy petition on behalf of the company, Alcedes was ousted from having any ownership in the company.   The company proceeded with the bankruptcy and included the bankruptcy court ordered Alcedes to turn over access to all of the company’s social media accounts.  He didn’t and was found in contempt of court.  Alcedes brought a motion resisting the court’s order on the grounds that he personally owned the company’s social media property rights and that sharing them would violate his privacy interests.

 Social Media Property Rights as Bankruptcy Property

The Bankruptcy Code, 11 U.S.C. § 541, broadly defines the property included in the bankruptcy estate as “all legal or equitable interests of the debtor in property as of the commencement of the case.”  The court in In re CTLI found that this definition encompassed social media property rights, analogizing them to customer lists, which bankruptcy courts have considered property of the bankruptcy estate.  The fact that followers on Facebook and Twitter can opt-out at their option and stop following the account or liking the page did not change the court’s view.
There is a chance that bankruptcy courts in Florida could reach a different outcome. At least one Florida court, in Mattocks v. Black Entm’t Television LLC, 43 F.Supp.3d 1311, 1321 (S.D. Fla. 2014), a non-bankruptcy case, found that because of the ability to “unlike,” Facebook page likes were not property.

 Distinguishing Social Media Property Rights – Personal vs. Business Accounts

The In re CTLI court engaged in a lengthy analysis to determine whether the Facebook and Twitter accounts were business or personal accounts.  To oversimplify, it looked to how the Facebook Page and Twitter account were used.  Both were primarily used to promote the business and Alcedes even gave testimony that supported this characterization before he was removed from ownership.  The court thus deemed the accounts business accounts.

Privacy Rights Not Implicated

The court also rejected Alcedes contention that granting the company access to the Facebook and Twitter pages violated his privacy rights.  The court found it did not and that any potential argument to the contrary was waived when Alcedes granted access to the accounts to two other people for use in promoting the business.
Though it’s unclear how a similar Florida case would come out, as a precautionary measure and good business practice, business owners should carefully segregate their business and personal social media accounts.  For more information about social media property rights in bankruptcy bankruptcy, contact the Jacksonville bankruptcy attorneys at Adam Law Group today