Bankruptcy Court Resolves Social Media Showdown
This is a story about guns and bankruptcy and social media in Texas. When the dust had cleared, the gun shop’s social media accounts had been pried out of the former owner’s hands, having been found to be property of the estate. In re CTLI, Inc., 528 B.R. 359 (Bankr. S.D. Tex. 2015).
Social Media 101
Facebook is the preeminent social networking website of the current moment, and as of the time of this opinion, it boasts approximately 1.39 billion monthly active users. http://newsroom.fb.com/company-info/ (accessed April 1, 2015). While anyone can visit individual Facebook Pages and Profiles and view information that has been made public, to have access to the full range of Facebook features one must be a registered Facebook User. A Facebook User provides Facebook with his or her name, birthdate, sex, and an email address or phone number and is then granted a Facebook Profile, which the User can personalize with biographical information. The User is then prompted to “friend” other Users, beginning with the User’s personal contacts and branching out to Users with mutual Friends. Facebook Users can post Status Updates, photos and videos, and Life Events to Facebook. These posts appear on the User’s Timeline (the User’s personal page) and on the Newsfeeds (Facebook home pages) of the User’s Facebook Friends. The Facebook User can also access other features, such as sending individual or group Messages to Facebook Friends, and creating Facebook Events and Facebook Groups.
In addition to interacting with other individual Users, Facebook provides Pages for “businesses, brands and organizations.” A Facebook Page is created by an individual User to represent an organization or brand, and that User becomes the first Page Admin, which enables him or her to customize the Page, post Status Updates and photos, and access other features. Facebook Users can “like” the Page to become Fans who will then see the Page’s posts in their Newsfeeds. The first Page Admin can then grant other Facebook Friends various degrees of administrative access to the Page. Full access grants the new Admin equal powers to the original Admin, including the ability to remove the original Admin.
In re CTLI, at 365.
Twitter is the next most popular social media platform after Facebook, with an estimated 288 million monthly active users, https://about.twitter.com/company (accessed April 1, 2015). Unlike Facebook, the default setting in Twitter is to allow Twitter Users to freely “follow” one another without the necessity of being approved by each other. When Users “follow” each other, they will see each other’s “Tweets” (like Facebook Status Updates) in their Twitter feeds. Tweets are limited to 140 characters, or less if the User includes a photo. Twitter Users often includes links to web sites in Tweets. Users can tag each other in Tweets using the “@” symbol followed by a user’s “Handle”—a unique identifier that can also be used to locate the User’s individual Twitter page (twitter.com/”Handle”). Users also “Retweet” each other’s Tweets. Additionally, Twitter users can tag topics with the “#” symbol, known as a hashtag. Other Users can filter their feeds to view all Tweets with any given hashtag. These features have made Twitter an important social media platform for tracking trends.
Id, at 366.
The Court’s Ruling
The Court is skeptical of Mr. Alcede’s purported rationale for creating the Tactical Firearms Facebook Page. Mr. Alcede contends that he had reached the limit of Facebook Friends and therefore Facebook was automatically denying his Friend Requests. [Hearing of February 12, 2015, at 1:08 p.m]. However, as of December 18, 2014, Mr. Alcede personally had only 4,423 Facebook Friends. [Alcede’s Ex. 9], While it is possible that Mr. Alcede had more Friends when he created the Tactical Firearms Facebook Page, such a precipitous decline in Mr. Alcede’s popularity is unlikely. Furthermore, if Mr. Alcede had really created the Page to promote himself personally, he would have originally entitled it “Jeremy Alcede.” Apparently, since the filing of the Plan, Mr. Alcede has created an individual Page specifically to promote his personal “brand,” and therefore two “Jeremy Alcede” Facebook Pages exist in addition to the personal “Jeremy Alcede” Facebook Profile: “Jeremy Alcede Entrepreneur” (the former Tactical Firearms Facebook Page) and “Jeremy Alcede Patriot.” Mr. Alcede, conveniently, has never mentioned this fact to the Court.
However, even if Mr. Alcede did indeed create the Tactical Firearms Facebook Page because he was approaching the Friend limit, it would not affect the character of the Tactical Firearms Facebook Page. It may be true that Mr. Alcede, like many small business owners, closely associated his own identity with that of his business, so closely that he entitled the Facebook Page “Tactical Firearms” “for people to know it was me.” [Dec. 16 H’rg Tr. 21:6-7]. Nonetheless, Mr. Alcede and the Debtor are—and always have been—two distinct legal entities, with separate and distinguishable property. The fact that the Tactical Firearms Facebook Page was created in the name of the business, was linked to the business’s web page, and was used for business purposes places it squarely in the category of property of the Debtor’s estate (and now property of the reorganized Debtor) and not personal property of Mr. Alcede.
Id. at 369.
Finally, the history of Mr. Alcede’s activities promoting the Debtor specifically supports the characterization of political posts as business-related, as opposed to personal expression of political beliefs. While Mr. Alcede was in charge of the Debtor, the Debtor was known for its marquee displaying messages promoting gun rights and criticizing President Barack Obama—no doubt with the objective of increasing gun and ammunition sales. Such messages include: “I like my guns like Obama likes his voters / undocumented”, “Threatening to sue POS Obama and pro open carry is why I love Greg Abbott”, “Honk if you support open carry / Don’t tread on me”, “We have hit Barack bottom / go vote red”, “Does one of Obama’s family members have to be beheaded for “change” to happen?”, and “Will trade Obama to Mexico for Sgt Tahmooressi / God help us all.” [Plan Agent’s Exs. 2 & 3]. The store frequently received news coverage for its signs. [Plan Agent’s Ex. 2], At one point, the Debtor held a contest encouraging “ALL FRIENDS, FANS, AND MOST OF ALL LOYAL CUSTOMERS” to submit messages for the marquee, with the winner receiving a one year family gold range membership worth $560!” [Id.].
Mr. Alcede himself has stated to this Court: “I don’t mean to toot my own horn, but I’m a PR genius . . . .” [July 11 H’rg Tr. 125:16-17]. This Court finds that Mr. Alcede’s political messages on the store’s marquee and via social media were a manifestation of this genius. Given this context, regarding overtly political posts and tweets, the Court agrees with the Plan Agent’s counsel, who stated: “[I]t’s very hard for me to stipulate that anything on this page is not business related due to the nature of the business and the fact that this type of business is frequently affiliated with a particular political affiliation.” [Dec. 16 Hr’g Tr. 31:4-8], Indeed, this Court finds that all of these political posts and Tweets are related to the Debtor’s business and were issued with the purpose of generating publicity for the business in order to increase sales of guns and ammunition.
The Court also found that the twitter account was business rather than personal.
The fact that the Twitter account was named after the business, included a description of the business, and was linked to the business’s web page raises a presumption that the Twitter account has always been a business account. Mr. Alcede’s dispute with this conclusion is premised solely on his contention that “95%” of the account’s Tweets were personal. [Dec. 16 Hr’g Tr. 35:14-20]. However, Mr. Alcede provided only one example of such a Tweet, and as addressed supra in Section III.H, this Court finds that it was not in fact a “personal” Tweet, but instead served to promote the Tactical Firearms brand. Therefore, this Court finds that the Twitter account formerly located at @tacticalfirearm and now located at @jeremyalcede is a business account of the reorganized Debtor. It is not a personal account of Jeremy Alcede.
Id. at 372-73.
The liberty concerns inherent to individual social media accounts do not apply to business social media accounts, even if the business is closely associated with an individual. However, this Court must address another concern specific to an individual who is closely associated with a business’s social media account—the professional goodwill of the individual which may be reflected in that account. This Court finds that while an individual is using the business’s account, some of the individual’s professional goodwill may be reflected in the account’s followers along with the business goodwill. The bankruptcy estate includes only the value of the social media reflected by the business goodwill, and not the professional goodwill. Yet, the Court finds this reality is no limitation on the reorganized Debtor’s right to control its social media accounts, because any goodwill legitimately belonging solely to the individual will follow the individual.
A business social media account is in a sense a manifestation of the business’s accrued goodwill. See Smita Gautam, #bankruptcy: Reconsidering “Property” to Determine the Role of Social Media in the Bankruptcy Estate, 31 Emory Bankr. Dev. J. 127, 134 (2014) (including goodwill as an element of value in a social media account). The goodwill of a company is developed by its employees over the years. Nonetheless, whatever goodwill the individual caused to be associated with the [**34] business remains property of the business. (citation omitted). If the individual leaves the business and some goodwill is thereby withdrawn, that goodwill is properly characterized as professional goodwill that is the sole property of the departed employee. (citation omitted).
This Court finds that the proper way to characterize Mr. Alcede’s interest in the reorganized Debtor’s social media accounts is as an interest in professional goodwill, and the Court allows that Mr. Alcede may have developed some such goodwill that is manifested by the Debtor’s Facebook Fans and Twitter followers. However, the Court finds that recognizing the business social media accounts as property of the reorganized Debtor does not deprive Mr. Alcede of any of this professional goodwill, if it indeed exists. The line of demarcation between professional and personal goodwill is precisely the line between goodwill that departs with the professional and goodwill that remains with the business. See id. Therefore, Mr. Alcede is unimpeded in his ability to control whatever property interest he legitimately holds in the reorganized Debtor’s social media accounts. Whichever followers embody the goodwill that legitimately inheres in Mr. Alcede, as opposed to the corporate reorganized Debtor, are free to follow him to his own personal Facebook Page, entitled “Jeremy Alcede Patriot,” and to a personal Twitter account which he is free to reestablish with the title “Jeremy Alcede” and Handle “@jeremyalcede.” The extent of the loss of followers to the business accounts and subsequent gain in followers by Mr. Alcede will reflect the true extent of his personal interest in the accounts.
Id., at 473.
The Story Continues
Bankruptcy Court Resolves Social Media Showdown