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Legal Insights on the Ashley Madison Hack: Part I

Internet commenters and legal analysts alike are buzzing about the Ashley Madison hack. The website -- which billed itself as a networking site for anyone who wanted to discretely arrange an extramarital affair -- has already been named in several class action lawsuits, with claims ranging from breach of contract to negligence. As more names are unearthed (and more personal data divulged), additional lawsuits are sure to follow. For those lucky enough to be watching this spectacle from the sidelines, there are some important questions to ask. In the next few posts, I'll consider some of these issues.

It seems clear that the Impact Team (the group responsible for breaking into Ashley Madison’s servers) were singularly focused on exposing embarrassing personal information as well as sensitive financial data. What is less clear is why they chose Ashley Madison’s parent company Avid Life Media (“ALM”) as the target. Certainly, the general public's reaction to the data breach was muted if not downright amused, likely because the “victims” here were about as unsympathetic as they come. Still, the choice of Ashley Madison, and the way the hack was announced, demonstrates an important point about data security: self-described “hacktivists” may target secure information for reasons other than financial gain.

The Impact Team appears to be more motivated by shaming than any identifiable monetary benefit, although it is entirely possible that money was a factor. Interestingly, the intended damage from the leak was designed to flow in two directions. The first, and most obvious, was to Ashley Madison users, who clearly faced embarrassment and worse if their behavior were made public. The second direction was to ALM itself, for “fraud, deceit, and stupidity.” In particular, the Impact Team referred to ALM's promises to customers that it would delete their data permanently, and keep their private information safe. Obviously, that didn't happen. ALM made matters far worse for itself when it scrambled to provide a response to Impact Team's threat, and made promises of security it could not keep. Now, in addition to a class action lawsuit alleging half a billion dollars in damages, ALM faces the wrath of a recently emboldened FTC.

One takeaway from this situation from a legal perspective is how ALM was targeted. Black hat groups often solicit suggestions for whom to attack, but typically in a secure fashion that would prevent early warning. LulzSec, responsible for the data breach at Sony Pictures in 2011, made a habit of seeking input as to what government entity or business to target, but kept those suggestions, and the contributors, secret. The Impact Team broke from that pattern, and announced before the breach, that they would release private information unless ALM shut down Ashley Madison and sister site “Established Men.” Other than a similar demand made to Sony Pictures Studios regarding the film The Interview, I can think of no other instances where hackers/hacktivists telegraphed that a cyber attack was coming.

Realizing this, a few questions immediately sprang to mind:

  • What do you do if your company gets a warning from a web group?
  • How many businesses have received such warnings and silently complied, just to avoid loss of sensitive information or damage to their reputation?
  • What happens to officers and directors who receive these warnings and do nothing? Is that a breach of fiduciary duties? Negligence? A civil conspiracy?

Ultimately, all of these questions merge into the two ongoing themes of data security: How do you protect critical information, and what do you do if you can't?

In my upcoming articles I will get into the particulars of how some companies respond to cyberattacks, but for now, it makes sense to highlight the importance of planning ahead for your business. Even a basic cyber security protocol is better than a haphazard, post hoc response, and there are many resources that provide guidance about best practices. Longer-term planning requires expertise and commitment, but education can begin any time.

I'll paraphrase Ashley Madison -- Life is short: make a plan.

© 2020 Bilzin Sumberg Baena Price & Axelrod LLPNational Law Review, Volume V, Number 238


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