What if McCain Defaults?

Yesterday, I wrote about John McCain's presidential campaign pledging its fundraising list as collateral for a loan - the same fundraising list that it said it would never sell to third parties. In that post I asserted that it was unlikely that McCain's campaign could be sued by consumers for violating the privacy policy, and pointed out that it's too early to sue in any case, since McCain's campaign hasn't defaulted on anything, and so the bank hasn't seized the list. However, that rather begs the question: is there anything that would happen if the list was seized? Well, potentially, there is. First, there's the potential breach of contract suit. As I mentioned yesterday, it would be unlikely to succeed, but that doesn't mean that the threat isn't there. There's also potential action by the government (probably more likely if McCain loses the presidential race). Section 5 of the FTC Act (discussed here) prohibits unfair or deceptive trade practices. That prohibition has been interpreted broadly, and has been used to punish companies which sell lists in violation of privacy policies in the past (e.g., this settlement with Gateway Learning, makers of "Hooked on Phonics"). Thus, theoretically, there's a chance that the FTC might take action if the campaign defaulted and the bank seized the list.

Realistically though, the FTC isn't going to go after a political campaign for pledging its fundraising list as collateral, since that would prevent other political campaigns from doing the same thing in the future, and the FTC is controlled by the government (i.e., politicians). Similarly, as I said yesterday, there are real obstacles to a breach of contract action being successfully brought. The bottom line is that the only hit John McCain's campaign is likely to take from pledging its list is political (if that).

Consequences of McCain Pledging his Donor List

According to this story from Politico, John McCain's presidential campaign has pledged its fundraising list as collateral for a loan. The problem is that the campaign's Privacy Policy states that: "John McCain 2008, will not sell your information to third parties or any commercial entities." While the policy does state that "We may share information -- that you voluntarily provide us -- with like-minded organizations committed to the principles or candidates of the Republican party, Republican State Party organizations, local Republican groups and like-minded organizations" it seems unlikely that the commercial banks which made the loan are "like-minded organizations," so there seems to be a conflict between the pledge and the policy.

Unsurprisingly, the comments to the article were mostly focused on the politics of the situation (e.g., "It's just one more example of John McCain's total arrogance.", which was followed by "I think I'll donate more money right now to spite this attack"). However, I'm more interested in the legal implications of the pledge. For example, the Politico article says that McCain's campaign could be sued by its donors for breach of contract. Is that true? Well, I have two words for any donors seeking to sue the campaign: Good Luck. While I'm all for protecting consumer privacy, the courts have previously ruled in In re Northwest Airlines Litigation that Northwest's privacy policy did not create a contract with consumers, and that the data collected by Northwest belonged to Northwest (who could therefore divulge it in violation of the privacy policy) not to consumers (who wanted it maintained in confidence). Whether or not you like the ruling, there's no reason to believe that someone suing McCain's campaign for pledging the list would have better luck. In any case, even if a court were to look more favorably on someone suing the McCain campaign, it's too early to sue the campaign anyway. The list was pledged, but the campaign hasn't defaulted, so the pledge hasn't been redeemed. In other words, there hasn't been a sale, and so, at least for now, there is no breach of the policy for which the McCain campaign could be sued.