The court-appointed trustee handling Living.com's bankruptcy reversed herself this week, removing court documents that were posted on the company's Web site that revealed employees' salaries and stock options and listed thousands of customers' names and home addresses.
The information was removed after several former employees of the home furnishings site complained, said Patrick Huffstickler, the trustee's lawyer. But the information could still be
accessed from the site's directory Friday afternoon. Privacy advocates said it appeared to be the first bankruptcy filing posted on a retail Web site and a cautionary tale about the posting of private information that is contained in a public document.
The documents identified all the people--including employees, customers and business associates--owed money by Amazon.com-backed Living.com, which filed for Chapter 11 bankruptcy protection in August. Among the information posted were the salaries, signing bonuses and stock options for employees and the amount customers had put down as deposits. Home addresses for all the creditors were listed. Living.com executives prepared the filing.
"The documents are public record," Huffstickler said Wednesday. "The same information that is available on the Net is available in the court clerk's office."
But posting these kinds of public records on the Internet raises issues about "how public should a public record be," said policy analyst Andrew Shen of the Electronic Privacy Information Center (EPIC), a privacy research group.
For decades, Shen said, these records were found only in a court clerk's office, seldom seen by anyone other than the interested parties. The courts would inform creditors of bankruptcy proceedings via regular mail. Now the Internet can make this kind of sensitive information available to anyone, anywhere.
"It's fairly clear that a Web site should be careful what information should be disclosed," Shen said. "And information on how much money people are making at their jobs is right at the top of the list."
Bankruptcy lawyers are required by law to file creditor information with the courts, but it is at the discretion of the lawyers to disseminate the information beyond that, according to Nancy Peterman, a lawyer with Greenberg, Traurig in Boston. Even in the courthouse filing, the lawyers can ask the court to protect employees' privacy by removing personal information from the record.
The trustee administering the company's bankruptcy, Lisa Poulin, removed the employee information from the Web site late Wednesday and the customer information on Thursday.
Privacy issues have emerged as a critical issue for Internet retailers. For example, last June, failed online toy retailer Toysmart.com touched off a whirlwind of controversy after attempting to auction off its customer information as part of its liquidation. Privacy protection groups, the Federal Trade Commission, and state and federal lawmakers filed suit to stop the sale.
The FTC, more than 40 states, and numerous others have called for new safeguards to protect consumer privacy. A Massachusetts bankruptcy judge is deciding the fate of Toysmart's customer lists.
In Living.com's case, Poulin thought posting the documents on Living.com's site would make it easier for the company's creditors to learn of its bankruptcy proceedings, Huffstickler said. In a bankruptcy case, the court-appointed trustee is responsible for liquidating a company's assets. In a Chapter 11 bankruptcy, the trustee has the choice of continuing to operate the company in order to save it.
One former Living.com employee, who spoke on condition of anonymity, said he was outraged and was one of the people who called Living.com's trustee when he saw the amount of his paycheck in public view.
"An employer trying to hire a Living.com employee can find out what they were making before and doesn't have to offer them much more," the anonymous employee speculated.
There is precedent for posting bankruptcy information on the Internet. U.S. federal bankruptcy courts post creditor lists and docket information online. But the filings do not include addresses or other personal information, according to Pacer, the company that operates the courts' Web sites.