William K. Black, May 4, 2016     Bloomington, MN

To the shock of no one, with the possible exception of men who would use such a site, it is alleged that the website devoted to helping their customers cheat their loved ones cheated their customers.  (Yes, another example of the myriad forms and layers of “spontaneous order” that von Hayek does not want you, or any economist, to think about.)  This was reported in Corporate Counsel.  Plaintiffs are trying to bring a class action fraud lawsuit against the firm Ashley Madison (“Life is short.  Have an affair”).  The firm’s client list was made public by a hacker who expressed distress at the firm’s business plan of encouraging affairs.

Plaintiffs’ attorney alleges that the disclosures revealed that the firm was defrauding its (straight married male) customers who wanted to have an affair with straight married women.  Virtually every business that is in the business of getting straight men and women together for purposes of romance and sex has to deal with the gender imbalance problem.  Too many, too eager, men chase too few, too unimpressed, women.  The normal, not terribly successful, response is a subsidy to women to entice them to come to the event.

The plaintiffs’ counsel suing Ashley Madison allege the firm had a far more innovative response – it made up women, or more precisely, “bots” designed to emulate women in email “conversations.”  Geeky types may be thinking of the competition to develop a software that can fool a human being that is trying to discern whether he or she is communication with a human or a “machine.”  It appears (again, to everyone’s shock) that the guys that used Ashley Madison were not particularly adept at this ability to discern.  It’s almost as if they did not understand women and were focused entirely on sex.

The users claim a breach of contract because the company allegedly lied about the number of women participants on the site.

Here’s the plaintiffs’ problem: The company’s false misrepresentations were revealed in the stolen documents and hacked emails posted online. And the initial complaint relied heavily on quotes from the hacked material.

The leaked information “demonstrates that Ashley Madison went to extreme measures to fraudulently lure in and profit from customers,” the complaint states. The initial suit was filed in Maryland by plaintiff Christopher Russell against Avid Life Media Inc. and Avid Dating Life Inc., both based in Toronto and doing business as Ashley Madison.

It alleges such fraudulent actions as:

• * Marketing that the site had 5.5 million female profiles, when only a small percentage of the profiles belonged to actual women who used the site.

• *Hiring employees to create thousands of fake female profiles.

• *Creating more than 70,000 female “bots” to send male users millions of fake messages and lure them into spending “credits” to talk online.

In 2012 the California attorney general’s office inquired about the use of bots to deceive users. Company general counsel Mike Dacks replied with a letter that claimed bots on the website were placed there by “criminal elements” in its membership. But, according to press reports, about 80 percent of the company’s income actually came from members’ engagement with the company’s bots.

But here’s the kicker, which is consistent with the concept of karma, at least from the plaintiffs’ perspective.  The trial judge has ruled that the plaintiffs cannot use the leaked information to establish that they were defrauded.  It would be against public policy to allow someone to sue a legitimate firm on the basis of the firm’s purloined documents that purportedly prove that the firm was actually a criminal enterprise engaged in trying to make the world a worse place.