Does bankruptcy trump privacy?

If a firm goes bankrupt, do the creditors get to auction off their email list? How about names and addresses of those in a loyalty program?

Welcome to the modern privacy economic dilemma. Creditors want as much money as they can get out of assets that will pay only a fraction on the dollar owed. Does society have a right to stop them from more?

This would seem to be a simple matter of law. A legal promise is a fixed promise. Assets may change hands, but old promises cannot be removed during the transfer. When a firm has such a promise posted on their window next to their front door, doesn’t it bind the actions of the next owner? What if a customer list had over one hundred million names and constituted the second most valuable asset in the bankruptcy?

Simple is no longer simple in the modern world. How would your answer change if the firm had a standard promise in their online terms and conditions? Does anybody read those and believe them? And what if some users saw strict terms, while some saw different terms, and others saw none at all?

This is not merely a theoretical exercise. Look what a mess Radio Shack has gotten into – according to this article in ArsTechica.

Don’t get me wrong. Radio Shack is a mess. They are in bankruptcy, after all. That happened in February. It is sad for those of us who used to buy gadgets and plugs and assorted electronic knick-knacks, but the tech economy does not pause to let retailers fix their models. Radio Shack did not keep up with the times, and they imploded.

What is the deeper problem? In brief, Radio Shack’s creditors are selling their remaining assets. Most of the old stores were bought by Sprint, with the intent to turn them into cell phone retail outlets.

The marketing list is another asset in this sale. The creditors would like to get top dollar for it. It is a pretty valuable list too. After all, it identifies the names and contact information for some pretty nerdy buyers.

This made the news after a few aware states sued to stop the sale before it could be auctioned off. A few online journalists said “Hey, wait a minute!”

How will this turn out? We shall watch and see. The precedent matters, because this surely will not be the last time something like this happens.