Legal Cases and Outcomes: How Downtime and Uptime Disputes Impact Web Hosting Providers and Clients

Based on my 20+ years of experience in the IT sector, I can say that server outages and data loss are among the most frustrating problems in the internet world. In this article, we examine the situation of webmasters who suffer when service providers fail to meet the uptime guarantees in their contracts and cause data loss. By presenting case analyses from Europe and the USA regarding customer lawsuits and their outcomes, we aim to guide those experiencing similar problems and exploring legal avenues.

At first glance, the cost of a website outage can be seen through a simple calculation. For example, for a site with $1,000 in monthly advertising revenue, a 6-hour outage means a direct revenue loss of approximately $17, while for an e-commerce site with a monthly turnover of $10,000, it means a direct loss of $250. However, the real devastating impact of outages goes far beyond this immediate financial damage. Users quickly abandon sites they cannot access and turn to competing platforms; this deeply shakes hard-won customer loyalty and brand credibility. Furthermore, recurring outages cause permanent damage to the brand image, resonate negatively on social media, and increase user complaints. Ultimately, these negatives can lower your rankings in search engines like Google, leading to permanent losses in organic visitor traffic. Therefore, investing in technical infrastructure and uptime monitoring to ensure sites run uninterrupted not only prevents immediate revenue loss but is also vital for protecting the brand's long-term reputation and customer trust.

Even the best hosting companies can experience problems from time to time. What's important is knowing what can happen when these problems occur and being prepared. This article aims to create awareness by sharing some real incidents from the hosting world that have ended up in court. I want to reiterate that this article is definitely not legal advice. Our aim is to help you become more conscious of potential problems you might face with your hosting company by learning from others' experiences. Let's take a closer look at some striking case examples of disputes between hosting companies and customers that led to legal proceedings:

1.GoDaddy (USA) - Unkept Uptime Promise (2012)

• Company & Location: GoDaddy Inc., USA.
• What Happened?: A major outage lasting over 6 hours affected millions of customers. According to GoDaddy, the cause was internal network and router issues.
• Legal Process: A customer filed a class-action lawsuit alleging that the company's advertised "99.9% Uptime Guarantee" was breached. The lawsuit argued that the standard compensation (a credit of 5% of the monthly fee) was insufficient.
• Outcome/Lesson Learned: Although the outcome of the lawsuit remains unclear, this incident showed that marketing promises can lead to legal liability and that standard SLA remedies can be challenged.

2.Web Hosting Canada (Canada) - Both Data and Backups Lost (2021)

• Company & Location: Web Hosting Canada (WHC), Canada.
• What Happened?: A major server failure occurred, severely damaging 5 servers. Both primary data and backup data were lost, making many sites completely inaccessible. The cause was stated to be an unauthorized third party accidentally deleting the servers.
• Legal Process: A class-action lawsuit was filed on behalf of customers. It was alleged that WHC failed to provide the promised daily backup and secure hosting services, and did not fulfill its obligation to protect and back up data.
• Outcome/Lesson Learned: The parties reached a settlement, and WHC agreed to pay compensation. This case painfully highlighted how critical the quality of backup services and the location where backups are stored truly are.

3.OVHcloud (France) - Data Center Turned to Ash (2021)

• Company & Location: OVHcloud, France.
• What Happened?: The SBG2 data center in Strasbourg was completely destroyed in a fire. Servers and data of hundreds of customers became unusable. Worst of all, it emerged that the backups of customers who paid for backup services were also stored in the same facility that burned down and were destroyed.
• Legal Process: Many companies filed individual lawsuits, and more than 130 customers initiated a class-action lawsuit. It was claimed that OVH violated its commitment to store backups in a separate facility and failed to ensure data security.
• Outcome/Lesson Learned: In initial rulings, the court found OVH guilty of breach of contract and ordered compensation (decisions are under appeal). The class-action lawsuit is ongoing. This event underscored the vital importance of disaster recovery plans and keeping backups physically separate in different locations.

4.Rackspace (USA) - Ransomware and Blocked Access (2022)

• Company & Location: Rackspace Technology, USA.
• What Happened?: Hosted Exchange email servers were hit by a ransomware attack. Thousands of customers' email services were disrupted for days, and data became inaccessible.
• Legal Process: Customers filed class-action lawsuits alleging negligence, breach of contract, and inadequate cybersecurity measures.
• Outcome/Lesson Learned: The court directed the cases towards individual arbitration instead of a class action, based on clauses in the contracts. This situation shows how the "fine print" in hosting agreements (like arbitration clauses) can affect legal recourse options.

5.123-Reg (United Kingdom) - Old Backups and Data Loss (2018)

• Company & Location: 123-Reg Ltd., United Kingdom.
• What Happened?: Due to a hardware failure on a server, many websites went offline. When attempting to restore data from backups, it was discovered that some sites were rolled back to backups months old or suffered complete data loss. Prior to the incident, the company promised "backups every 24 hours" for its VPS services.
• Legal Process: Affected parties initiated a class-action lawsuit attempt alleging misrepresentation and breach of contract. The main complaint was that backups hadn't been updated for months despite the promise of daily backups.
• Outcome/Lesson Learned: There is no clear information on the outcome of this lawsuit attempt. However, the case shows that promises regarding backup frequency and quality may not reflect reality and can have serious consequences.

6.Peak Hosting (USA) - Major Client Loss and Bankruptcy (2015-2016)

• Company & Location: Peak Hosting, LLC, USA.
• What Happened?: Machine Zone, the developer of the popular mobile game "Game of War," terminated its contract with Peak Hosting due to persistent outages and service failures (faulty cable management, inadequate security, human errors, incorrect software versions, etc.).
• Legal Process: Both parties sued each other. Peak Hosting stated that Machine Zone constituted 80% of its business and that it had invested $35 million in infrastructure for this client.
• Outcome/Lesson Learned: Peak Hosting filed for bankruptcy due to the impact of losing its largest customer and laid off most of its staff. This situation dramatically illustrates how operational failures and the loss of a major client can threaten the very existence of a hosting provider.

7.Sears (USA) - Lawsuit Against Data Center Vendors (2013)

• Company & Location: Sears Holdings Corporation (as the customer), USA.
• What Happened?: Two major outages occurred at Sears' data center, allegedly due to failures in UPS modules under the responsibility of vendors providing maintenance and monitoring services.
• Legal Process: Sears did not settle for standard SLA credits and instead sued its vendors directly. It demanded approximately $5 million in damages, including lost profits (totaling over $2 million), repair costs ($2.2 million+), and temporary solution costs ($500k+).
• Outcome/Lesson Learned: While the detailed outcome of the lawsuit isn't specified, this case shows that large customers, following serious outages, may pursue direct lawsuits to recover tangible business losses rather than accepting limited SLA remedies.

8.Equinix (United Kingdom) - Power Out, Communication Lost (2020)

• Company & Location: Equinix, Inc., United Kingdom (LD8 facility).
• What Happened?: A major power outage lasting about 18 hours occurred in a significant data center due to a faulty UPS system. Customers reported losing both A+B power feeds simultaneously. During the outage, the company's communication was described as "terrible," and even physical access systems failed.
• Legal Process: Despite widespread customer dissatisfaction, no specific lawsuits related to this incident were confirmed in sources. However, it was noted that customers would raise issues regarding redundancy and communication.
• Outcome/Lesson Learned: The incident was resolved operationally. The case demonstrates that unexpected failures can happen even in seemingly highly reliable data centers, redundancy claims should be questioned, and transparent communication during a crisis is critically important.

What do these case examples tell us?

• Focusing solely on price can be risky: Carefully evaluate factors like the provider's infrastructure, security policies, backup procedures, and customer support.
• Read the Contracts (Yes, Those Long Texts!): What does the SLA (Service Level Agreement) promise? How realistic is the uptime guarantee? Who is responsible for data backups? Is there an arbitration clause? These details will determine your rights if a problem occurs.
• Backups Are Also Your Responsibility: Even if your provider offers backup services, the safest approach is to take your own regular backups and store them in a different location. The OVH and WHC cases are painful proof of this.
• Anything Can Break: Even the largest and most expensive providers can experience outages. What matters is how prepared your provider is for such situations and whether you have your own contingency plan.
• Communication is Key: Observe how quickly and transparently your provider communicates when there is a problem. Good communication can be a lifesaver in crisis moments.
  

We hope this compilation helps you make more informed decisions when choosing and managing your hosting provider. Remember, your website is your digital fortress, and building it on solid foundations is in your hands!