In re CTLI, LLC

528 B.R. 359, 73 Collier Bankr. Cas. 2d 703, 2015 Bankr. LEXIS 1117, 60 Bankr. Ct. Dec. (CRR) 243, 2015 WL 1588085
CourtUnited States Bankruptcy Court, S.D. Texas
DecidedApril 3, 2015
DocketCase No. 14-33564; Doc. No. 259
StatusPublished
Cited by12 cases

This text of 528 B.R. 359 (In re CTLI, LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re CTLI, LLC, 528 B.R. 359, 73 Collier Bankr. Cas. 2d 703, 2015 Bankr. LEXIS 1117, 60 Bankr. Ct. Dec. (CRR) 243, 2015 WL 1588085 (Tex. 2015).

Opinion

MEMORANDUM OPINION ON JEREMY ALCEDE’S EMERGENCY MOTION OBJECTING TO PROPOSED ORDER REGARDING SOCIAL MEDIA ACCOUNTS

Jeff Bohm, Chief United States Bankruptcy Judge

I. Introduction

This Memorandum Opinion addresses issues arising from the refusal of the former majority owner of this Chapter 11 corporate debtor to relinquish control of the ' debtor’s social media accounts to the bankruptcy estate. This dispute raises issues of first impression regarding whether social media can ever be property of a bankruptcy estate. This Court concludes that business social media accounts are property of a company’s bankruptcy estate. Finding that the accounts at issue are business and not personal accounts, the Court now orders the former owner to transfer administrative privileges to these accounts immediately to the reorganized debtor. Finally, this Court analyzes all possible property or privacy interests that the former owner might have in the debtor [362]*362corporation’s social media accounts. The Court concludes that requiring the former owner to transfer administrative privileges to the reorganized debtor does not violate any privacy rights that he claims to have.

II. Factual Background

This case arises out of the Chapter 11 reorganization of CTLI, LLC (the Debtor), which prior to bankruptcy was doing business as Tactical Firearms, a gun store and shooting range in Katy, Texas. The Debt- or was formed in 2011 and was originally wholly owned by Jeremy Alcede and his then-wife Sarah Alcede. [Doc No. 26, p. 3, ¶ 8]; [Mot. to Use Cash Collateral & Mot. to Pay Prepetition Wages Hr’g Tr. 16:21-25, July 3, 2014] (hereinafter July- 3 Hr’g Tr.). Originally, the Debtor sold guns and ammunition but did not operate a firing range. [July 3 Hr’g Tr. 16:21-17:4]. Later in 2011, Mr. Alcede recruited his wealthy friend, Steven Coe Wilson, to purchase a bigger building for the Debtor for $2.2 million in exchange for a 30% membership interest in the Debtor corporation. [Id. at 17:14-25]; [Cont. Hr’g on Mot. For Use of Cash Collateral & Hr’g on Exp. Mot. To App’t T’ee & Terminate Exclusivity 25:5-15, July 11, 2014] (hereinafter July 11 Hr’g Tr.). Mr. Wilson’s entry enabled the Debtor to expand and open the “finest indoor firing range in the country.” [Plan Agent’s Ex. 3].

While the Debtor appeared to prosper, internal disputes between the owners began to fester. Mr. and Mrs. Alcede began divorce proceedings in November of 2012, [July 11 Hr’g Tr. 25:5-15], and relations between Mr. Alcede and Mr. Wilson deteriorated after Mr. Wilson began to suspect Mr. Alcede of diverting cash obtained through the sale of the used shells from the gun range. [Doc. No., 26, pp. 3-4, ¶¶ 911]. Consequently, Mr. Wilson instituted a derivative action against Mr. Al-cede in state court in November 2013, requesting that the Debtor be put in receivership. [Doc. No. 26, p. 4, ¶ 11], The state court enjoined the Alcedes from diverting corporate assets or interfering with Mr. Wilson’s management rights, but initially refused the request for receivership. [Id. at p. 4, ¶ 12].

The Debtor subsequently defaulted on several loans. [July 11 Hr’g Tr. 23:24-29:1]. On June 10, 2014, Icon Bank of Texas, N.A., the major creditor of the Debtor, posted the Debtor’s real property for foreclosure. [Doc. No. 26, p. 5, ¶ 14]. On June 26, 2014, the state court approved Mr. Wilson’s request and ordered the appointment of a receiver for the Debtor. [Doc. No. 26, p. 6, ¶ 17]. The very next day, before a receiver could take control, Mr. Alcede caused the Debtor to file a Chapter 11 petition, [Doc. No. 1], which in turn resulted in the automatic stay barring the receiver from taking control of the Debtor and allowed Mr. Alcede to remain in control.

In bankruptcy court, Mr. Wilson quickly sought to have a trustee appointed to take control of the Debtor. [Doc. No. 26]. This Court did not appoint a trustee— thereby allowing Mr. Alcede to remain in control of the Debtor — but it did grant Mr. Wilson’s request to terminate exclusivity so that he could propose a Chapter 11 plan of -reorganization. [Doc. No. 75]. Mr. Wilson thereafter proposed a plan (the Plan), [Doc. No. 177], which was confirmed on December 8, 2014, [Doc. No. 237] (the Confirmation Order). Under the Plan, Wilson became the 100% owner of the reorganized Debtor. [Doc. No. 177, p. 12, ¶ 7.1]. This Court’s order confirming the Plan required Mr. Alcede to “deliver possession and control” of “passwords for the Debtor’s social media accounts, including but not limited to Facebook and Twitter” to Mr. Wilson on behalf of the reorganized [363]*363Debtor.1 [Doc. No. 237, p. 7, ¶ 57(2) ]. In a status conference held on December 11, 2014, this Court discovered that Mr. Al-cede had failed to honor that instruction. Mr. Wilson’s counsel filed a Certificate of Noncompliance on December 12, 2014. [Doc. No. 248]. In consequence, this Court found Mr. Alcede in contempt. [Doc. No. 242],

At a hearing on December 16, 2014, this Court heard testimony and admitted evidence presented by Mr. Wilson and Mr. Alcede regarding the social media accounts. At this hearing, Mr. Alcede claimed that all social media accounts at issue belonged to him personally and not to the Debtor.2 [Hr’g on Social Media Tr. 14:5-13; 49:21-22, Dec. 16, 2014] (Hereinafter Dec. 16 Hr’g Tr.). Further, Mr. Alcede argued that it would be impossible to share control of these accounts with the reorganized Debtor without violating his privacy. [Id. at 49:21-50:7]. This Court issued an initial ruling that a neutral third party court aide should be retained to sort the personal from the business content within the social media accounts. [Id. at 54:5-23]. Mr. Alcede stated on the record that he agreed with this approach. [Id. at 56:1-7]. However, when Mr. Wilson’s counsel filed a proposed order with this Court reflecting this initial ruling, Mr. Al-cede objected to the proposed order. [Doc. No. 259]. On February 12, 2015, this Court held a hearing on Mr. Alcede’s objection. After considering relevant legal authorities and the exhibits admitted and testimony adduced at tbe December 16, 2014 hearing and the February 12, 2015 hearing, against the background of all other testimony and filings in this Chapter 11 case, the Court now finds that the reorganized Debtor is entitled to direct control of 100% of one Facebook Page and one Twitter account, and that the assistance of an independent third party is not necessary.

III. Conclusions of Law

A. Jurisdiction

The Court has jurisdiction over this dispute pursuant to 28 U.S.C. §§ 1334(b) and 157(a). Section 1334(b) provides that “the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.” The district courts may, in turn, refer “any or all proceedings arising under title 11 or arising in or related to a case under title 11 ... to the bankruptcy judges for the district.” § 157(a). In the Southern District of Texas, General Order 2012-6 automatically refers all “[bankruptcy cases and proceedings arising under Title 11 or arising in or related to a case under Title 11” to the bankruptcy courts.

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Cite This Page — Counsel Stack

Bluebook (online)
528 B.R. 359, 73 Collier Bankr. Cas. 2d 703, 2015 Bankr. LEXIS 1117, 60 Bankr. Ct. Dec. (CRR) 243, 2015 WL 1588085, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-ctli-llc-txsb-2015.