Jim Meadows & Lisa Rovinsky in InformationWeek: When (and if) to Sue Your Cloud Provider

Culhane Meadows’ co-founder and managing partner, Jim Meadows, and Boston partner Lisa Rovinsky were recently quoted in an article by InformationWeek about your relationship with your Cloud provider and when (and if) you should take legal action.

Here are a few excerpts from the article:

Given the expensive consequences of even relatively short cloud outages, legal action is inevitable in some instances. Companies have to determine whether they actually have a case and if it even makes sense from a business perspective to engage in a legal battle.

“There are always going to be caps on limitation of liability and indemnity,” says Lisa Rovinsky, partner at full-service law firm Culhane Meadows. A data breach can affect large groups of customers, and if they were all to sue the cloud provider, it could not remain in business.

But negligence on the part of the cloud provider could mean breach of contract. “If a cloud provider fails to follow its stated security procedures, there’s justification to seek a large or even unlimited liability,” says Rovinsky.

To date, there have been a number of significant moves, including class action lawsuits, against cloud providers for outages related to ransomware. For example, a ransomware attack against Ultimate Kronos Group triggered a class action lawsuit against the workforce management solutions company. Because of the breach, Kronos Private Cloud customers were unable to process payrolls for weeks.

A ransomware attack took down 365 Data Centers’ entire cloud. Customers experienced an outage, and the hybrid data center solutions company had to rebuild its platform. Customers filed a class action lawsuit, alleging the company’s failure to segment and weak security left it vulnerable to the ransomware that led to the outage and loss of customer data.

When it comes to the major cloud providers, referred to as hyperscalers due to their data processing methods and capabilities, legal action will be difficult because of the position these companies have carved out for themselves.

While pursuing damages via lawsuit could be a possible avenue, cloud customers may decide against it because of the importance of their relationship with a cloud provider.

“The reason for not relying on a lawsuit for damages often involves the level of reliance that the customer places on the provider — suing a key business partner is often not the best way to manage such a relationship,” James Meadows, co-founder of Culhane Meadows, points out.

If a customer has the majority of its data with a cloud provider, suing could mean shouldering not only legal costs but also the hefty cost of switching cloud providers.

The outcome of lawsuits, like the ones against Ultimate Kronos Group and 365 Data Centers, could shape the landscape for future legal action against cloud providers. As cloud adoption continues to increase, the relationship between providers and customers will evolve. Cloud customers are maturing and developing more sophisticated hybrid cloud strategies, which Rovinsky predicts will trigger a shift in the cloud space. “You are going to see more negotiations on everything,” she forecasts.

Read the entire article HERE to learn more.


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