Dating Site Merger Nixed in the Name of Privacy

SHERMAN, Texas (CN) - The dating site Plenty of Fish withdrew its offer to purchase bankrupt competitor True.com's information on more than 43 million subscribers after Texas officials expressed privacy concerns.

True.com's Plano-based operator, True Beginnings, filed for Chapter 11 protection in Texas last year. Canada-based Plentyoffish.com later agreed to a $700,000 asset-purchase agreement for the information.

Texas Attorney General Greg Abbott objected to the sale on Oct. 16, blasting True.com for not seeking the permission of subscribers before selling their information to a third-party.

Abbott said he does not object to the asset sale but instead has taken aim at True.com's "ambiguous online published privacy policy" and its failure to provide members with prior notice regarding the sale of their personal information.

The website purports to screen out married applicants, as well as convicted sex offenders.

"True does not sell, trade, or otherwise disclose customer lists names, addresses, birth dates, email address or other individually identifiable information to unaffiliated third parties without your permission," the website claims.

That assurance aside, True.com's policy goes on to say that member personal information would be considered a transferable asset in the event the website was acquired or its assets sold, Abbott said.

"The deceptive ambiguity of these contradictory statements mislead customers who have no way to discern whether they must affirmatively consent or object to the transfer of their [personally identifiable information]," his 18-page objection stated. "Moreover, the misleading statements do not state whether or how customers will receive notice of a potential transfer of their [personally identifiable information]. Indeed, in this case, customers have received no notice of the bankruptcy, the sale, or of any resulting possibility of a transfer of their [personally identifiable information]."

On Wednesday, bankruptcy trustee Christopher Moser filed a notice of termination of the asset-purchase agreement with the bankruptcy court. The notice included a letter from PlentyofFish.com attorney Joseph Larsen with Sedgwick LLP in Houston, explaining that True.com "does not appear to have the unrestricted right to sell the trade secrets that make up its customer information."

"The grounds for termination include ... [t]he sale of the customer information as set out in the APA appears to violate seller's privacy policy with affects and binds sellers' assets," Larsen wrote.

He added that "the transfer of seller's customer information and other intellectual property do not appear to be legal, valid and effective and will not vest in purchase all right[,] title and interest of seller in the assets."

Abbott then filed a notice with the court Thursday of his intent to seek civil fines and penalties against True.com for violations of state consumer-protection laws.

"Specifically, the True.com published privacy policies create ambiguous and deceptive disclosures regarding the protection of customers' private information and deceptive statements regarding criminal background checks," the notice of intent states. "These violations carry fines and penalties per incident, and since the petition date, each of the Debtor's 30,333 new members would constitute a violation of at least one, if not several, of these laws."

Abbott's office is currently negotiating with True.com's attorneys, the bankruptcy trustee and the consumer-privacy ombudsman for an injunction that would mandate compliance with the law. If a suitable settlement is reached, Abbott would be willing to subordinate all or a substantial part of any fines or penalties to claims by unsecured creditors.

Follow @davejourno

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