Customer information has become an increasingly valuable business asset.  And, the volume and detail of other available information about consumers has increased along with it, well beyond mere customer names and addresses to preferences, purchasing history, and online activity.  This means that when a business is sold, customer information is often sold along with it.  But careful diligence is required in handling this intangible asset, and the recent settlement in the RadioShack bankruptcy case is instructive.

As part of its Chapter 11 sale of assets, RadioShack proposed a sale of portions of its customer records database, containing personally identifying information (“PII”) such as customers’ name, mailing address, email address, phone number, and 21 other types of transaction data (such as store number and tender amount), of approximately 67 million customers.  The proposal quickly drew objections, most notably from the FTC and a coalition of 38 state Attorneys General led by Texas.

The problem was RadioShack’s privacy policy, which had told customers, “we will not sell or rent your personally identifiable information to anyone at any time.”  Despite the promise, the Bankruptcy Code allows customer information to be sold, but only under the supervision and approval of the court and a “consumer privacy ombudsman,” which was appointed in the RadioShack proceeding.

Ultimately, a settlement was reached and the sale of customer information was approved, but in truncated form. RadioShack agreed to limit contact information to email addresses only, and only those that were active in the two years prior to the bankruptcy filing.  Additionally, transaction data was reduced from 21 fields to 7.  The purchaser agreed to abide by RadioShack’s privacy policies and to require affirmative assent to any material change to them.  The settlement also provided that customers would receive a notice of the transfer of their information and an opportunity to opt out.

The RadioShack case demonstrates the importance of customer information, and the attention it should be given at the outset, even when crafting a customer-facing privacy policy, as well as in the M&A arena, bankruptcy, or elsewhere.  Privacy policies should be crafted with possible corporate mergers, acquisitions and liquidations in mind, and M&A and bankruptcy lawyers should be attentive to possible restrictions of data sale early on in their diligence process.

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Photo of David Munkittrick David Munkittrick

David Munkittrick is a litigator and trial attorney. His practice focuses on complex and large-scale antitrust, copyright and entertainment matters in all forms of dispute resolution and litigation, from complaint through appeal.

David has been involved in some of the most significant antitrust…

David Munkittrick is a litigator and trial attorney. His practice focuses on complex and large-scale antitrust, copyright and entertainment matters in all forms of dispute resolution and litigation, from complaint through appeal.

David has been involved in some of the most significant antitrust matters over the past few years, obtaining favorable results for Fortune 500 companies and other clients in bench and jury trials involving price discrimination and group boycott claims. His practice includes the full range of antitrust matters and disputes: from class actions to competitor suits and merger review. David advises antitrust clients in a range of industries, including entertainment, automotive, pharmaceutical, healthcare, agriculture, hospitality, financial services, and sports.

David also advises music, publishing, medical device, sports, and technology clients in navigating complex copyright issues and compliance. He has represented some of the most recognized names in entertainment, including Sony Music Entertainment, Lady Gaga, U2, Madonna, Daft Punk, RCA Records, BMG Music Publishing, Live Nation, the National Academy of Recording Arts and Sciences, Universal Music Group and Warner/Chappell.

David maintains an active pro bono practice, supporting clients in the arts and in immigration proceedings. He has been repeatedly recognized as Empire State Counsel by the New York State Bar Association for his pro bono service, and is a recipient of Proskauer’s Golden Gavel Award for excellence in pro bono work.

When not practicing law, David spends time practicing piano. He recently made his Carnegie Hall debut at Weill Recital Hall with a piano trio and accompanying a Schubert lieder.

David frequently speaks on antitrust and copyright issues, and has authored or co-authored numerous articles and treatise chapters, including:

  • Causation and Remoteness, the U.S. Perspective, in GCR Private Litigation Guide.
  • Data Breach Litigation Involving Consumer Class Actions, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • Location Privacy: Technology and the Law, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • FTC Enforcement of Privacy, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • The Role of Experts in Music Copyright Cases, Intellectual Property Magazine.
  • Nonprofit Education: A Historical Basis for Tax Exemption in the Arts, 21 NYSBA Ent., Arts, & Sports L.J. 67
  • A Founding Father of Modern Music Education: The Thought and Philosophy of Karl W. Gehrkens, Journal of Historical Research in Music Education
  • Jackson Family Wines, Inc. v. Diageo North America, Inc. Represented Diageo in trademark infringement litigation