Legal Insight: DocuSign Breach a Strong Reminder to Manage Third-Party Service Provider Risks

DocuSign has confirmed that a data breach resulted in widespread malware phishing attacks targeting email addresses of more than 100 million of its customers. Companies that utilize DocuSign as a third-party service provider should move swiftly to protect themselves from the impact of the breach, as well as consider what next steps may be appropriate as part of any ongoing relationship with DocuSign.

DocuSign provides electronic signature technology and management services for facilitating electronic exchanges of contracts and signed documents for a wide range of industries—financial services, construction, health care, retail, and education—that may all be victims of the phishing campaigns launched during the past week.

As one of the most dominant players in providing technology solutions for electronic transactions, the DocuSign name and brand has frequently been exploited in phishing emails. DocuSign has more than 200 million users in 188 countries and is used by more than 300,000 companies. This particular attack was able to target more than 100 million customer email addresses that had been hacked from what DocuSign characterizes as “a separate, non-core system.” These phishing emails appeared to be sent from DocuSign with the goal of tricking recipients into opening an attached Word document that, when clicked, installs malicious software. DocuSign recommends that its customers delete any emails with the following subject lines:

• "Completed: [domain name] – Wire transfer for recipient-name Document Ready for Signature"; or
• "Completed [domain name/email address] – Accounting Invoice [Number] Document Ready for Signature".

DocuSign has stated that its "core" systems, which contain all other customer files, remain secure, and that only email addresses were accessed. No names, physical addresses, passwords, Social Security numbers, or credit card information was reportedly accessed by the hackers. DocuSign has also purportedly put additional security controls in place to protect against any future hacks.

All companies that use DocuSign as a third-party service provider should evaluate what additional steps should be taken in the wake of the breach, especially regulated companies. For example, the Consumer Financial Protection Bureau (CFPB) has articulated clear expectations for financial institutions relating to their third-party service providers. While the CFPB recognizes that the use of service providers like DocuSign is often an appropriate business decision for companies that may not have the in-house expertise with ESIGN and other relevant laws and regulations, the CFPB will hold companies accountable for any consumer harms that may arise from the use of such service providers.

Companies should consider:

• Refreshing any employee training to recognize phishing emails that may be received following the DocuSign breach;
• Monitoring for any suspicious activity that may be related to the DocuSign breach;
• Contacting the company’s cyber insurance carrier—although the breach originated at a third-party service provider, companies should review their policies to confirm whether they are covered for any breach-related costs;
• Preparing a uniform message that the company can use with consumers who may have questions about the potential impact of the DocuSign breach;
• Evaluating the company’s own information security programs and data breach response policies and procedures; and
• Reviewing any existing agreement with DocuSign to determine:
  • whether DocuSign is satisfying all of its breach-related obligations;
  • whether the company can audit DocuSign to confirm that the breach was isolated to just email addresses and what further security measures DocuSign has implemented since the breach;
  • whether additional monitoring of DocuSign operations may be appropriate going forward; and
  • whether the company can exercise any appropriate and enforceable consequences arising from the DocuSign breach, up to and including terminating the DocuSign agreement.

Ballard Spahr’s Privacy and Data Security Group provides a full range of counseling, transactional, regulatory, investigative, and litigation services across industry sectors. Our cross-disciplinary team of attorneys helps clients around the world mitigate cyber risk, investigate and respond to cyber incidents, and navigate post-incident enforcement, compliance, and litigation risk.

ABOUT BALLARD SPAHR

Ballard Spahr LLP, an Am Law 100 law firm with more than 500 lawyers in 15 offices in the United States, provides a range of services in litigation, business and finance, real estate, intellectual property, and public finance. Our clients include Fortune 500 companies, financial institutions, life sciences and technology companies, health systems, investors and developers, government agencies and sponsored enterprises, educational institutions, and nonprofit organizations. The firm combines a national scope of practice with strong regional market knowledge. For more information, please visit www.ballardspahr.com

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