Mixing Business With Pleasure: Evaluating the Blurred Line Between the Ownership of Business and Personal Social Media Accounts Under § 541(a)(1)

• Publication year: 2017

Mixing Business With Pleasure: Evaluating the Blurred Line Between the Ownership of Business and Personal Social Media Accounts Under § 541(a)(1)

Alexandra L. Jamel

MIXING BUSINESS WITH PLEASURE: EVALUATING THE BLURRED LINE BETWEEN THE OWNERSHIP OF BUSINESS AND PERSONAL SOCIAL MEDIA ACCOUNTS UNDER § 541(A)(1)

Abstract

The 2005 BAPCPA amendments to the Bankruptcy Code did not address whether social media accounts constitute property of the estate. While social media use was not widespread in 2005, several widely used platforms are household names today. Despite the current popularity of social media, however, few courts have addressed the ownership rights in social media accounts. Fewer still have addressed whether a social media account is considered property of the estate.

In a case of first impression in 2015, the Bankruptcy Court for the Southern District of Texas in In re CTLI, LLC held that a chapter 11 debtor's social media accounts were property of the estate. Specifically, the court concluded that the debtor's Twitter and Facebook accounts fell under property of the estate because the social media accounts had a mixed personal and business use.

This Comment argues that social media accounts should not automatically fit within the broad scope of § 541(a)(1). Rather, courts should apply a factor-driven, case-by-case analysis to determine whether social media accounts constitute property of the estate. This Comment then proposes a three-prong analytical framework to guide courts' classification of a debtor's social media accounts.

This proposed solution seeks to accomplish two primary goals. First, it will help courts clarify the ownership rights in social media accounts and provide guidance to the over one billion users of social media who may face this issue. Second, because many social media accounts do not have an ascertainable value, this Comment will shed light on an appropriate valuation method of social media accounts in the bankruptcy context.

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Introduction

As of 2017, grandparents, children, and everyone in between seem to have some sort of digital footprint—be it on Facebook, Twitter, or Instagram. Businesses are also becoming increasingly active on social media, using various platforms to respond to customer complaints, advertise their goods and services, and connect with customers.¹ Social media has become an essential, intangible asset of a business.² With over one billion active users of social media (businesses and individuals), and its integration into everyday life, it is only more likely that the Internet will become an integral part of day-to-day life and business as the Millennial generation ages.

Despite individuals' and businesses' familiarity with social media throughout the United States,³ Congress has not yet categorized social media accounts within § 541 of the Bankruptcy Code (the "Code").⁴ While understanding how social media accounts fit within the scope of the Code is crucial, clarifying the extent of users' ownership rights of social media accounts is even more crucial because unlike ownership in the traditional sense of property law, a person cannot "own" a social media account.⁵ If a clear distinction exists between how a social media account is used—for business or personal use—ownership issues do not arise. Significant ownership issues arise, however, when an account has a mixed business and personal use. These underlying ownership issues turn on whether the account belonged to the business or to the person who created the account.

Additionally, the ownership rights of content posted to social media platforms are muddled.⁶ Facebook's "Statement of Rights and Responsibilities" states that the owner of the account is the owner of the

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content posted to Facebook through the account.⁷ But Facebook's "Statement of Rights and Responsibilities" also states that Facebook has "a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook."⁸ The conflicting policies may make the ownership rights of the account and content unclear in the context of bankruptcy.⁹

When businesses operate social media accounts, the discrepancy between social media websites' ownership polices generates the question: who owns the various social media accounts a business operates?¹⁰ This issue becomes particularly important when a business enters bankruptcy, where a business's assets are integral to a successful reorganization.

The Bankruptcy Court for the Southern District of Texas recently confronted this issue in In re CTLI, LLC.¹¹ There, the court held that a business's social media accounts were property of the estate because the debtor's social media account had a mixed personal and business use.¹² In reaching this conclusion, the court recognized that the issue of social media is "mostly uncharted in bankruptcy."¹³ However, the court left questions about social media account ownership unanswered.¹⁴

The court's decision in In re CTLI, LLC can potentially have a large impact on future bankruptcies and the legal implications of social media because, on average, 120 businesses filed for bankruptcy each day in 2015.¹⁵ While social media accounts have been classified as intangible property,¹⁶ the holding of In re CTLI, LLC cannot be broadly applied in a "one-size-fits-all" manner.

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Although modern technology has made it easy to stay in touch with people, communicate, and foster technological relationships in both a personal and professional manner,¹⁷ the rapid development of technology and social media has created a widening gap with other areas of law. As a result, only a few courts have shed light on issues related to social media.¹⁸ Moreover, these cases involved other areas of the law, such as employment and privacy law. Prior to In re CTLI, LLC in 2015, social media accounts were not considered in the context of bankruptcy. Thus, bankruptcy courts are relying on employment law cases on social media use in the workplace and district court cases for guidance.¹⁹ The determination of social media as a property right is applied at the state level. Courts will therefore continue to have difficulty applying the law consistently in the bankruptcy context. These issues are multi-faceted and rely on heavily on factual determinations; bankruptcy courts relying on, for example, employment law decisions about social media, face a task not unlike attempting to force a round peg through a square hole,²⁰ resulting in a further state of confusion in the bankruptcy.

This Comment will address the court's holding in In re CTLI, LLC in two principal ways. First, it will argue that the court in In re CTLI, LLC over-generalized the role of social media accounts in bankruptcy proceedings.²¹ Courts should not consider social media business accounts to be property of the estate when the social media account: (1) has a mixed business and personal use; and (2) is not primarily used to promote the debtor's business.

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Second, this Comment will directly address the holding in In re CTLI, LLC and show why the bankruptcy court's holding is contradictory to the underlying policy of a debtor's fresh start. Bankruptcy courts will need to evaluate future cases on a case-by-case basis. Unlike the Internet, which is evolving at an exponential rate, Internet-related case law is developing much more slowly.²² Courts must therefore be proactive in implementing a process to eliminate ambiguity, which will help deter unnecessary litigation in the future.

This Comment proceeds as follows. First, it will analyze Facebook and Twitter as examples of applicable social media accounts. The background of this Comment will provide an overview of five topics: (1) the history of social media; (2) relevant common law and modern property principles; (3) § 541(a)(1) of the Code, which defines property of the estate; (4) users' ownership rights of social media accounts created through Facebook and Twitter; and (5) recent case law involving social media account ownership.

Then, the analysis of this Comment will propose a three-factor test that will help courts determine whether a social media account should constitute property of the estate. This analysis also highlights other subsidiary consideration that courts should take into account, such as quasi-property rights and social media account valuation techniques. Finally, this Comment applies its proposed factor test to the facts on In re CTLI, LLC and demonstrates why the court should not have concluded the social media accounts at issue constituted property of the estate.

I. Background

A. The Rise of Social Media

The rise of social media accounts began in 1997 with the launch of Six Degrees, the first social media network.²³ Websites like Myspace and Friendster gained momentum in the early 2000s, Facebook launched in 2004 as

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a Harvard only website, and, on July 15 and September 26, 2006, respectively, Facebook and Twitter became available to users around the globe.²⁴

Despite social media's rapid growth, Congress remained silent on a social media account's status in bankruptcy in 2005 after the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA").²⁵ Congress's silence on the term is understandable because social media use was in its infancy.²⁶ However, after the court's decision in In re CTLI, LLC lawmakers may now be grappling with new questions arising from the ambiguity of this issue and its inevitable application in bankruptcy.²⁷

B. Historical Overview of Property

Under common law, property was viewed as a "tangible thing over which one person had the absolute, indivisible right to use, sell, give away, leave idle, or destroy."²⁸ Today, however, modern property is viewed as a "bundle" of rights, which includes the right to use something, the right to prevent others from using the thing, and the right to transfer an interest to someone...