Thinking about blocking a client's access to a third party service? Think some more.
You entered a contract with somebody to provide them access to a third party’s cloud service. But that business relationship went bad. And now the company is refusing to pay.
What do you do?
Shut down the company’s access to the cloud service, you say? Congratulations. You may have just committed a crime.
At least that’s what the recent Northern District of California decision in Pierry, Inc. v. Thirty-One Gifts, LLC says on the facts before it.
The Parties
Pierry is a digital marketing agency providing software solutions. It resells Salesforce Marketing Cloud software applications and licenses and helps other companies integrate Salesforce into their businesses.
Thirty-One Gifts sells consumer products. It contracted with Pierry to digital marketing services, including Salesforce implementation.
The Contract
The contract between Pierry and Thirty-One Gifts contained two key provisions.
One. Even though Thirty-One Gifts relies on Pierry to operate the Salesforce application, Thirty-One Gifts owns that application.
And two. Thirty-One Gifts’ failure to timely pay fees alone does not allow Pierry to cutoff access to Salesforce. Instead, cutting off that access requires both (i) a failure to pay and (ii) that the failure is not due to a good faith dispute.
What Happened
Pierry allegedly blew its service obligations and cost Thirty-One Gifts $2.2 million in revenue. Thirty-One Gifts then refused to pay Pierry. And Pierry blocked Thirty-One Gifts’ access to Salesforce.
Pierry sued Thirty-One Gifts, and Thirty-One Gifts counterclaimed for violation of (among other things) the California Comprehensive Computer Data Access and Fraud Act. Pierry moved to dismiss this counterclaim.
This Act makes it a crime to disrupt access to computer services without permission. It also gives a civil claim to anybody harmed by the crime.
The Ruling
The Pierry court denied the motion to dismiss, allowing the counterclaim to survive. Pierry didn’t have permission to block access. The contract provides that Thirty-One Gifts owns the Salesforce application. And Pierry can block its access only if there is a failure to pay not subject to a good faith dispute.
The court hinged its ruling on mainly one case, People v. Childs. In that case, the California Court of Appeal held that an employee violates this law when he prevents his employer from accessing the employer’s own network.