BANKRUPTCY CORNER
Social Media Accounts as Part of the Bankruptcy Estate ?
JONATHAN CRANE
Over the past two decades social media has taken the market by storm . As of July 2020 , there are a reported 3.6 billion active social network users globally . Many of these accounts are used for businesses or profit generating ventures . These accounts are valuable to the business as they drive online marketing . So , when a business files for bankruptcy , do the accounts associated with the business become part of the bankruptcy estate ? Well that depends .
What is Property of the Estate ?
Section 541 ( a ) defines what property is included in a bankruptcy estate and includes , “ all legal or equitable interests of the debtor in property as of the commencement of the case .” 11 U . S . C . § 541 ( a )( 1 ). The United States Supreme Court has demonstrated how broad § 541 is to be read , holding that property “ is intended to include any property made available to the estate by other provisions of the [ Code ],” which included property seized prepetition by a secured creditor .” United States v . Whiting Pools , Inc ., 462 U . S . 198 , 201 ( 1983 ).
While federal bankruptcy law defines what is included as property of the estate , the nature and existence of a debtor ' s interest in property is determined under state law . In re Thomas , 883 F . 2d 991 , 995 ( 11th Cir . 1989 ) ( citations omitted ); Butner v . U . S ., 440 U . S . 48 , 55 , 99 S . Ct . 914 , 59 L . Ed . 2d 136 ( 1979 ) (" Property interests in bankruptcy are created and defined by state law ").
Which court gets to determine whether something is “ property of the estate ”?
Bankruptcy courts have the exclusive jurisdiction to determine what is property of the bankruptcy estate . In re Hafen , 616 B . R . 570 , 578 ( B . A . P . 10th Cir . 2020 ). “ The United States Court of Appeals for the Tenth Circuit has held that ‘ Congress intended to grant comprehensive jurisdiction to bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate .’” Id .
Modern Issues Regarding Property
In 2015 , a Texas Bankruptcy Court was faced with the question of whether a business ’ s social media accounts were property of the bankruptcy estate . In re CTLI , LLC , 528 B . R . 359 , 367-68 ( Bankr . S . D . Tex . 2015 ).
This particular dispute was in the context of a corporate chapter 11 reorganization arising from a member dispute . Id . at 362- 63 . The ousted member , who previously operated the Debtor on a day-to-day basis , had created Facebook and Twitter accounts for the debtor LLC and disputed that the accounts were property of the estate arguing that they were his personal property . Id . at 368 .
The CTLI court analogized social media accounts to a persona , which is “ the interest of the individual in the exclusive use of his own identity , in so far as it is represented by his name or likeness , and in so far as the use may be of benefit to him or to others ." Id . at 367 ( internal citations and quotations omitted ). The persona is recognized as a property interest under most state laws , and therefore is property of the estate . Id . However , there is a limitation on the “ property interest ” of the persona , the 13th Amendment ’ s prohibition on involuntary servitude , prohibiting a debtor from using estate property “ that would require any individual to perform personal services . Id .
While there are substantial evidentiary issues for each court to consider , one issue CTLI addressed was with respect to Facebook , the account was a “ Page ,” which are for “ businesses , brands , and organizations ,” id . at 365 , 367 , creating the presumption that “ it was the [ d ] ebtor ’ s Facebook Page .” Id . 367 . As for the Twitter account , the Twitter Handle was initially debtor ’ s business name and account summary described the debtor ’ s business , along with other facts evidenced that the account was established to promote the debtor ’ s brand . Id . at 372 . One side note , the ousted member changed the Facebook Page name and Twitter handle incorporating his own name in an attempt to convert the accounts to his individual property . Id . at 366 .
The ousted member also argued that in addition to posting personal messages on both social media accounts , he also sent private and personal messages through the accounts in which he claimed a right to privacy . Id . at 377 . The Court analogized the situation to a business email account and when an employee sends communications through the business e-mail courts must consider whether the employee had a reasonable expectation of privacy . Id . at 378 . In the case of CTLI , the Court determined that no policy existed regarding the social media accounts , however , the ousted member should have known the accounts belonged to the business and therefore no privacy rights were being violated . Id .
Conclusion
While the landscape of social media and internet networking is growing at a rapid pace , the laws surrounding bankruptcy are not . The , seemingly , only way for there to be any sort of uniformity on the issue regarding social media accounts as property of the bankruptcy estate would be for Congress to make it so . Smita Gautam , # bankruptcy : Reconsidering “ Property ” to Determine the Role of Social Media in the Bankruptcy Estate , 31 Emory Bankr . Dev . J . 127 , 145 ( 2014 ).
1 https :// www . statista . com / statistics / 278414 / number-of-worldwide-social-network-users /
This article was submitted by Jonathan Crane , Juris Doctor Candidate at Saint Thomas University Law School Class of 2022 , and summer intern at Furr and Cohen , P . A ., 2255 Glades Road , Suite 301E , Boca Raton , Florida 33431 , and any inquires or questions can be submitted to jrigoli @ furrcohen . com .
SAVE THE DATE
Personal Injury Seminar : How to Handle a Third Party Case Arising Out of a Work Related Injury
Thursday , October 29th 12:00 PM - 1:00 PM LIVE VIA ZOOM
Register at PalmBeachBar . org