Providing an important reminder about the intersection of privacy law and bankruptcy, a bankruptcy judge has ordered the appointment of a consumer privacy ombudsman in the Chapter 11 case filed by Crumbs Bake Shop.
Crumbs – a publicly held company selling cupcakes and other baked goods – filed for Chapter 11 protection in July in the face of severe liquidity problems. The company then filed a motion seeking permission from the U.S. Bankruptcy Court in New Jersey for an auction sale that would include Crumbs’ intellectual property, consisting of such data as names, phone numbers, and addresses.
The U.S. Trustee quickly responded by filing a motion requesting that the court appoint a privacy ombudsman.
The policy contained just three exceptions, which stated that customer information would be shared “only if we are compelled to do so by order of a duly-empowered governmental authority, we have the express permission of the consumer, or it is necessary to process transactions or provide our services.”
Once the ombudsman has been appointed, that provision would allow the sale to go forward only with the court’s permission after a hearing “giving due consideration to the facts, circumstances, and conditions of such sale” and “finding that no showing was made that such sale…would violate applicable nonbankruptcy law.”
To help guide the court’s consideration, the ombudsman would provide information at the hearing regarding the potential losses or gains of privacy and possible costs or benefits to consumers in the event of the sale as well as alternatives that could mitigate privacy losses or costs to consumers.
Bankruptcy Court Judge Michael B. Kaplan agreed, granting the trustee’s order.
To read the U.S. Trustee’s motion for the appointment of a consumer privacy ombudsman, click here.
To read the court’s order granting the motion, click here.