Can RadioShack Sell Your Data in Bankruptcy Court?

Saul Loeb/AFP/Getty Images

Saul Loeb/AFP/Getty Images

We’re in an age where privacy is being redefined by the technology we use, and personal information about us that’s available to companies and the public at large. Some things, like privacy policies, are still held incredibly sacred because they build a level of trust with consumers who are wary of these changes. But one company in particular, now in the midst of bankruptcy proceedings, is trashing its customer pact for the sake of the almighty dollar.

“We will not sell or rent your personally identifiable information to anyone at any time,” RadioShack’s policy states, even now, on its live website. “We will not use any personal information beyond what is necessary to assist us in delivering to you the services you have requested.”

The policy also states that the only time it will send personally identifying information about its customers to other organizations is when a) consent has been given by the customer, b) the store needs to charge a credit card or render other services through payment, or c) when required to do so by law, either in response to a court order or subpoena.

Stated several lines above these once-comforting words, however, is this: “We reserve the right to change the privacy policy at any time.” It seems as if the company might be doing just that as it wades through the mire that is bankruptcy court. All’s fair in love and war, and bankruptcy court may be as close to corporate warfare as it gets. AdAge reports the company is looking to sell 13 million email addresses and 65 million customer names and physical addresses in its bankruptcy proceedings, according to Hilco Streambank, the intellectual property broker handling the sale of RadioShack’s intangible assets.

While it might seem appropriate to be indignant about the apparent lack of respect for its former patrons, all bets for customer care are off in bankruptcy court. In fact, this isn’t the first time client lists and personal information have been auctioned to the highest bidder. “It’s funny that people think it’s new that RadioShack is trying to monetize that asset,” said Justin Yoshimura to AdAge. Yoshimura is the founder of Retail Growth Fund, a private equity fund that invests in e-commerce sites. Yoshimura has been involved in acquiring bankrupt retailers before, including clothing stores such as Delia’s, Deb Shops, and WetSeal. “All of those had the customer list as part of the sale,” he said.

That’s because once a company declares bankruptcy, the court’s job is to ensure that investors get every last possible dollar to offset their losses. Service to former customers falls well below that on the priority list.

Source: Thinkstock

Source: Thinkstock

Despite being typical, numerous state and corporate entities are trying to block the sale. Texas Attorney General Ken Paxton filed paperwork earlier in March to challenge the sale, in part because the state prohibits companies from selling customer data if it violates their privacy policies. AT&T filed another challenge, saying that its cooperation with the technology retailer means at least a portion of the customer data collected belongs to the wireless company, not RadioShack. (One of the bidders, according to Bloomberg Business, would rebrand RadioShack as Sprint stores, potentially giving away scores of competitor information).

And as of March 25, 22 states had joined Texas in its legal challenge, which predicts up to 117 million people could have some form of personal data sold over the auction block. New York has yet to join the challenge officially, but the state’s Attorney General Eric Schneiderman said his office is monitoring the situation and is prepared to take action to protect New York consumer information. “When a company collects private customer data on the condition that it will not be resold, it is the company’s responsibility to uphold their end of the bargain,” he wrote in a statement.

A hedge fund that has served as one of RadioShack’s creditors, Standard General, was reported by Bloomberg News to have won the auction Tuesday. But with the legal challenges and another complaint from a second bidder, the bankruptcy court in Wilmington, Del. will have the final say on the data sale and all other matters about which bidder has control over the company. Standard General’s largest competitor, Salus Capital Partners, has called the auction a “sham” and is calling for a new hearing. U.S. Bankruptcy Judge Brendan Shannon, who will decide the case, said he’s cleared his schedule until March 30 to reach a final decision.

Even though the controversy about the case is highly publicized, the data sale could still be approved as part of the deal. The sales are “very common,” said Robert Braun, partner and co-chair of the privacy information management and data protection group at the Jeffer Mangels Butler and Mitchell law firm. He backed up Yoshimura’s statements in the AdAge article, but added that the courts haven’t yet seen much of a challenge since corporate privacy policies have become more common:

This would seem to fly in the face of [RadioShack’s privacy policy]; however this is bankruptcy and the bankruptcy courts have a great deal of leeway in overriding policies. Information is like any other asset that is owned by a company, and a bankruptcy court has a duty to maximize the recovery of assets by the creditors of a company, so it is going to approve a transaction which in balance it believes is going to get the best deal for creditors of the company. Meanwhile people are out there ready to buy it because it’s valuable.

In the legal challenge, Texas AG Ken Paxton argues that the sale of that data, even in a bankruptcy auction, constitutes a “”false, misleading, and deceptive business practice.” But as the common saying goes, life’s not fair — a sentiment, which both RadioShack executives and its customers can probably agree on at the moment.

Follow Nikelle on Twitter @Nikelle_CS

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