Antitrust Law Daily Wrap Up, PRIVACY NEWS: Texas Attorney General seeks opt-in requirement in sale of dating service customers’ personal information, (Oct 16, 2013)

By Tobias J. Gillett, J.D., LL.M.

The Texas Attorney General has objected to online dating service True.com’s sale in bankruptcy of its 43 million-member database to Canada-based online dating service PlentyofFish.com, the Attorney General has announced. The objection, filed in the federal bankruptcy court in Plano, Texas, contends that Plano, Texas-based True Beginnings, LLC, owner of the database and the True.com website, must give its former customers the opportunity to approve of the transfer of their information before it can be sold.

On August 1, 2012, True Beginnings filed a petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code. According to the objection, True.com’s privacy policy claimed that it would not “share this email address with other TRUE members or unaffiliated third parties for marketing purposes,” and made other statements indicating that it would not disclose customers’ personal information to non-affiliated third parties. However, two other sentences “introduce[d] a certain ambiguity” by stating that, should TRUE be acquired or have substantially all of its assets transferred, the personal information would be considered a transferrable asset, with registered members to be given notice and an opportunity to opt-out of the transfer. According to the Attorney General, these sentences introduced “ambiguities as to whether Customers will have a right to opt-out or opt-in to consent to the transfer of their” personal information.

The objection contends that, pursuant to 11 U.S.C. § 363(b)(1), the bankruptcy trustee could not sell or lease the personally identifiable information to any other person unless the sale was consistent with True.com’s privacy policy, the customers consented, or the court found no applicable non-bankruptcy law had been violated. Moreover, the sale as currently proposed would violate the privacy policy because (1) the policy’s inconsistencies should be construed against the debtor, and (2) no actual notice was provided to customers of a potential transfer of their “highly sensitive” personal information. In addition, the objection contends that the transfer would violate “various consumer protection laws,” and therefore the court could not approve the sale because “applicable non-bankruptcy law” had been violated.

Therefore, the Attorney General advocates that True.com’s members should be given notice and the option to opt-in to the information transfer. The present transfer process would merely provide for e-mail notice and would require members to take direct steps to opt-out, according to the Attorney General. The objection states that the Attorney General would not object to a sale that was “consistent” with True.com’s privacy policies by including notice and implementation of an opt-in procedure.

“At a time when privacy is an issue of grave concern to so many, we are taking legal action to prevent an online dating service from selling more than 2 million Texans’ personal information without their consent,” said Attorney General Greg Abbott. “The proper course is for True.com and its bankruptcy trustee to seek the customers’ permission before selling their private information to a third party - and that’s exactly what our legal action asks the bankruptcy court to require before the case proceeds.”

The Attorney General’s objection will be heard in the bankruptcy court on October 25. The Attorney General’s announcement contains examples of the kinds of information that were collected from True Beginnings’ members.

Attorneys: Hal F. Morris for the State of Texas.

Companies: True Beginnings, LLC; PlentyofFish.com

News: Privacy TexasNews