Texas Attorney General Sues to Stop Living.com Data Sale

In a pre-emptive move aimed at ensuring that defunct online home furnishings retailer Living.com Inc. doesn't try to sell all its customer data as part of bankruptcy proceedings, the Texas Attorney General's Office last week filed both a lawsuit against the company and a proposed settlement that sets restrictions on such a sale.

Under the settlement agreement announced last week by Texas Attorney General John Cornyn, all of the personal financial data that Living.com collected - such as credit-card, bank account and Social Security numbers - would be destroyed under the supervision of the Austin, Texas-based company's court-appointed bankruptcy trustee.

The trustee could then sell or transfer the customer list, but only after notifying all of Living.com's customers of the proposed sale and giving them the chance to have their remaining information deleted from the list. The settlement still has to be approved by the judge overseeing the case in U.S. Bankruptcy Court in Austin.

Texas officials said the lawsuit and the settlement deal weren't filed in response to any proposal by the retailer, which shut down and filed for bankruptcy protection in August.

But Hal Morris, an assistant attorney general in Texas, said Cornyn's office has followed the bankruptcy case closely since Living.com went out of business. Cornyn's office wanted to head off any possible sale that wouldn't conform to the company's privacy policy, which promised that customer data wouldn't be shared or sold without their consent, he said.

The attorney general contacted Living.com's lawyers right after the bankruptcy filing. "This is an important issue," Morris said, noting that Cornyn has also been involved in efforts to block the sale of customer data by defunct online toy store Toysmart.com Inc. in Waltham, Mass.

Living.com retained the right to share data "with trustworthy third parties," but its policy said customers could opt out of having their information shared. Company officials couldn't be reached for comment at press time.

Stephen Keating, executive director of the Privacy Foundation, a privacy organization in Denver, said such enforcement actions are good for online shoppers. In the Living.com case, Keating said, consumers "were put first [so] that their data won't be used without their permission."

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