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- Getting Noticed in the Digital Age: Delaware Bankruptcy Court Finds Email Notice Satisfies Due Process but Not Rule 2002
- Third Circuit Reversal Paves the Way For NextEra to Potentially Recover Administrative Expenses Incurred in Connection With Failed Merger
- Delaware District Court Disagrees with Bankruptcy Court’s Ruling and Holds That Committee’s Challenge Rights Survived Entry of the Sale Order and Consummation of Sale
Delaware Bankruptcy Court Tackles Challenges to Email Privacy
In re Irish Bank Resolution Corp. (In Special Liquidation), 559 B.R. 627 (Bankr. D. Del. 2016)
Late last year, the foreign representatives (the “Foreign Representatives”) of chapter 15 debtor Irish Bank Resolution Corporation Limited (“IBRC”) were forced to get creative after their more traditional efforts to obtain discovery from a Yahoo! email account failed. In connection with IBRC’s liquidation, significant international litigation is on-going related to the repayment evasion of billions in loans advanced by IBRC to companies owned or controlled by the Quinn Family. In the course of that litigation, the Foreign Representatives discovered various email accounts believed to be connected to the Quinn Family and their attempts to conceal assets, including a Yahoo! email account maintained by a mysterious “Abdulla Rasimov” (the “Rasimov Account”). The whereabouts of Mr. Rasimov are unknown, service of process has gone unacknowledged, and the Rasimov Account was closed during the proceedings described herein. Accordingly, when their attempts to obtain the contents of the Rasimov Account through a Bankruptcy Rule 2004 order and an order to compel failed, the Foreign Representatives obtained from the Delaware Bankruptcy Court an order making them the “subscriber” of the account (the “Subscriber Order”). With the Subscriber Order in hand, the Foreign Representatives then sought turnover of the account’s contents under sections 542(a) and 542(e) of the Bankruptcy Code from Yahoo! Inc. (“Yahoo”). A maneuver Yahoo opposed.
To support their turnover request, the Foreign Representatives argued that the contents of the Rasimov Account became property of IBRC’s estate when the Bankruptcy Court entered the Subscriber Order and that they relate to IBRC’s property or financial affairs. The Bankruptcy Court did not agree, however. First, there was no evidence presented that the contents of the Yahoo account were property of IBRC’s estate as of the commencement date of its bankruptcy proceedings or that the contents relate to IBRC’s property or affairs. While the Foreign Representatives believe that the contents of the Rasimov Account fulfill the requirements of section 542, speculation alone is insufficient. Second, the Subscriber Order did not appear to create property rights in the Rasimov account in IBRC’s favor. Third, and most importantly, the Stored Communication Act (the “SCA”), 18 U.S.C. §§ 2701, et. seq., bars disclosure of the Rasimov Account contents even if the Subscriber Order conveyed property rights to IBRC.
The SCA regulates the disclosure of email and other electronic communications to third-parties by email service providers, such as Yahoo. As a general matter, knowing disclosure is prohibited absent an applicable statutory exception, as the SCA seeks to create a “zone of privacy” for internet subscribers’ personal information. In the IBRC case, the Foreign Representatives argued that the SCA permits disclosure when a subscriber gives “lawful consent” and because the Subscriber Order designated them the subscriber of the Rasimov Account, such exception was satisfied. The Court, however, disagreed. Although the factual situation presented to the Court was unique, the Court found support for its ruling in existing case law, which holds that the SCA does not provide a mechanism to compel a service provider to disclose a user’s private email contents when none of the parties to the communications have provided consent in fact. Implied, constructive, or imputed consent will not suffice. Litigants either must obtain voluntary consent from the actual subscriber or utilize the discovery tools available to obtain such consent.