Cloud Hosting

Rackspace Technology Inc. wont have to face proposed class-action litigation in San Antonio over a Decemberransomware attack that hobbled the cloud computing company.

Rodriguez grantedRackspaces motion to compel the plaintiffs to pursue their claims individually in arbitration.

We are pleased with the Courts decision, Casey Shilling, Rackspaces chief marketing officer, said in an email Friday.

Whether the plaintiffs will proceed with their claims individually in arbitration couldnt be determined. An attorney for the group didnt respond to a request for comment.

Four proposed class-action lawsuits had been filed in San Antonio in the wake of the breach, which shut down Rackspaces hosted Exchange email service and led it to exit the business. The cases were subsequently consolidated.

A BRUISING: Rackspaces reputation taking a hit as response to ransomware attack falls short of customers' hopes

The judge agreed with Rackspace that the claims should be heard in private via arbitration because of a long-standing provision in the contracts the companys customers agreed to when they renewed their email-hosting services.

The plaintiffs demanded a jury trial and made a few arguments why their claims should not be arbitrated including that the issues fell outside the scope of the arbitration clause.

Rodriguez didnt buy the arguments.

All hosted Exchange customers must agree to Rackspaces governing terms, including a Master Services Agreement, to complete the transaction and begin using its services, the judge said in his 18-page ruling.

Rodriguez concluded that, under Texas law, the plaintiffs' continued use of the services before and through the security incident served as sufficient evidence of their intent to be bound by terms of the agreement from June 2022. The precise language of the arbitration provision has remained unchanged since 2019, he added.

The judge also shot down the plaintiffs argument that they agreed to arbitration under economic duress because shifting email platforms would have caused them significant hardship.

Plaintiffs have failed to identify any threat made by Rackspace or any reason to believe that they had 'no means of protection' against the arbitration provision, Rodriguez said.

The plaintiffs also said the arbitration agreement was procedurally unconscionable because Rackspace had imposed the provision unilaterally, without notice or an opportunity to negotiate.

On that argument, Rodriguez ruled that plaintiffs cannot plausibly claim to be unfairly surprised by an agreement to arbitrate that has been effective for over a decade.

As to the plaintiffs' claim that arbitration would be prohibitively expensive, Rodriguez said that argument was unavailing. The American Arbitration Association filing fee of$200 for each individual would be more cost-effective than litigating each plaintiffs claim individually in federal court, where the cost to file a lawsuit is $402, he said.

The plaintiffs were seeking damages and injunctive relief relating to the disruption of their email services, which they alleged resulted in the permanent loss of some communications and potential disclosure of sensitive information.

In a similar case brought against Rackspace by a Beverly Hills, Calif., law firm in Los Angeles federal court, both sides announced to the court last month that they had reached a confidential settlement. That case was dismissed Wednesday.

That apparently leaves just one remaining proposed class-action lawsuit. That was filed earlier this year againstRackspace in New York federal court. The company has until Wednesday to file its answer in the case.

The court actions didnt seem to generateany positivemomentum for Rackspaces stock price. Shares dropped nearly a dime to close Friday at $1.13.

pdanner@express-news.net

Go here to read the rest:
S.A. judge tosses proposed class-action suit against Rackspace - San Antonio Express-News