Judge Bohm is the bankruptcy Judge in Houston, Texas that handled the case of Tactical Firearms and its former owner Jeremy Alcede. As the Wall Street Journal first reported, Mr. Alcede put the gun store into bankruptcy to avoid foreclosure. During the bankruptcy, the business was sold to one of its investors, ending Mr. Aleced’s 70% ownership. What makes the Guns, Bankruptcy, Facebook, Twitter case unique is who owned the Facebook and Twitter accounts.
Although many social freedom advocates have criticized the Judge’s opinion, it was very detailed and well thought out. After reading the opinion, I could tell that most of the people criticizing it have not even bothered reading it. It is also clear that Mr. Alcede believes that part of the Facebook pages (his friends page) are distinct from the other parts (his likes page). Judge Bohm, did not buy this distinction and termed them the Facebook Profile and the Tactical Firearms Facebook Page to keep it clearer. It helps make the opinion more clear and helps understand that there really WAS a distinction between the two.
Guns, Bankruptcy, Facebook, Twitter do have a distinction, especially when a business that sells guns enters into bankruptcy and has Facebook and Twitter accounts. Judge Bohm gives us all a quick education of what is property of the bankruptcy estate and what is business property. I won’t go into all the details of the arguments from both sides, but the Judge ultimately decided that both of the accounts were property of the business and not owned by Alcede. The problem for the former owner is that he was ordered to surrender control of those accounts (namely logins and passwords) and he refused to do so. Not complying with Judge Bohm’s Orders can cause a Debtor in bankruptcy a lot of problems. Believe me, I have seen it personally. When Alcede refused to comply with the Order, he was held in contempt and carted off by the US Marshall’s to jail. A review of the case shows that Alcede finally purged himself of contempt and was released from custody. Good for him.
Ultimately, when you are a corporation in bankruptcy, you (the corporation) own the guns in the store. Alcede was a majority owner of the business, but he didn’t own the guns. A business is a legal entity that can be talked about in the same terms as a person. It is a living, breathing entity that can be birthed (incorporated) and die (dissolved). When a corporation files for bankruptcy protection, the shareholders are at the mercy of the court to keep it running. The bankruptcy estate in the case is now separate. In this case, the corporation is now owned by someone else. And that new owner wanted to get the business’ Facebook and Twitter accounts.
You can imagine why. Alcede was a pretty well-known, outspoken gun advocate. Through his social media efforts, he built up a following. But this is a good question for anyone that owns a small corporation. Who really owns those social media accounts? Are the posts under the business name or the owner’s personal name?
A business can have a Facebook page, but it ultimately HAS to be set up by a person, and ultimately controlled by one. Judge Bohm did a good job walking through personal and business accounts; accounts by celebrities and an interest of “persona.” Ultimately he decided the Facebook account was a business page of the Debtor, not a personal page of the former owner. He walked through his reasoning; among others: the page linked to the business website, many posts were business related (ads of sales, goings on of the business) and used for promoting the business, and others had access to it to provide updates of the business (that’s a big key to some social media observers), and it could be accessed from Constant Contact, a business generation email marketing service.
It reminded me of discussions about whether a debt in bankruptcy is a consumer or business debt. The question is why the debt was incurred. If it was incurred with a profit motive, then it could be characterized as a business debt. The opinion seemed to indicate that because the account was used with an eye towards promoting the business, that swayed the account from personal to commercial use. In fact Bohm uses the same type of analysis when determining a consumer case vs. a business case. In this situation, you add up the types of debt and the amounts and if it’s 51% business debt, then it could be characterized as a business case.
The Judge noted that many posts were personal, but concluded that a majority of them were business. This swayed it towards the commercial use side. In fact Alcede (while still in control of the corporation) testified himself that he spent a great deal of time on these accounts for business purposes. He testified that he answered thousands of Facebook messages and said it was a significant business activity. It was how he stayed in tune with social media because that was how people supported his business and how they heard about it. That is why you have to be careful when giving testimony. He was obviously trying to describe how much time he spent with the business in hopes to trying to be able to keep it. That without him, it would not make it. But he also helped to clear the way for the Judge to turn over control of these accounts to the new owners who would use them to help continue building up the business. Always remember, once you incorporate, the business is not “you” anymore. It is a new “you” owned by shareholders. This would include, as the Judge pointed out, all of the professional goodwill built up by the former owner.
As noted, the Court ultimately held that most of the Facebook and Twitter pages were business related. Even the political posts. He noted that political posts can often be attributed to people who advocate for gun laws, and ostensibly sell guns.
We noted many above and list a few others here. When you own a company in bankruptcy, abide by the Court orders. Understand when you incorporate a business that it is not “you” anymore. Have a strong social media policy. If you have personal accounts, keep them personal and unrelated to the business. Obviously it is hard to keep all business and personal activities separate. A small business many times is the persona of the owner, but you still need to try to keep them separate. Always have a eye towards selling the business. Besides your inventory and other assets, what else would you have to sell? In law, you write a contract with an eye towards a breach by either party in case you have to settle a disagreement.
This case is a fascinating case on many levels. It brings an opinion about ownership of social media accounts when there aren’t many out there. This case caught fire in the social media world and many experts gave their opinions about it. Heck, it may even force Facebook and Twitter to rethink their terms and services policies.
This case shows how a business can blur the lines between personal and business. There are a lot of lessons here. We see this a lot when a small business is owned by one person and a lot of personal “business” is run through the business like paying for a personal car through the business, buying items, paying for medical needs, etc. This commingling can cause many problems down the road; not to mention the IRS implications. Mr. Alcede gave a good fight. The case isn’t over. Maybe there will be more lessons later.
Busby & Associates is a Houston-based bankruptcy firm that helps consumers and small business owners who need debt relief and want to get a fresh start in life. Please visit our website for more information about us and bankruptcy. Call us today at (713) 974-1151 to schedule a no-obligation consultation or feel free to email us at Consumerlaw@busby-lee.com