Legal Question in Technology Law in California

Re: Can a ASP/Online accounting software company freeze its customers corporate

You would probably have a breach of contract claim against the service due to the failure of the warehouse management program. In addition to damages, you could request the return of the data. Ideally, you should have a back-up of all your accounting data.

If you would like to discuss any issues further, please feel free to contact my office. My contact information is below. Thank you.

The foregoing is general information only, not specific legal advice. No attorney/client relation has been created or should be implied.

Glenn M. Lyon, Esq

MacGregor Lyon, LLC

Promenade II

1230 Peachtree Street NE

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Atlanta Georgia 30309

Phone 404.942.3545

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Re: Can a ASP/Online accounting software company freeze its customers corporate

Generally, a creditor cannot seize the debtor's property without a court's direct or implied authorization. So, if the business records were in your possession, you would have the right to maintain possession.

If, however, your business records are in the possession and control of your creditor, one would have to scrutinize the contract between you to see whether the creditor has any right to keep possession. The matter is somewhat complicated if it is your intangible data, stuck in software owned by the creditor and licensed to you.

The legal action to recover possession of personal property is called replevin. I know of no reason why intangible property such as data cannot be the subject of a replevin action. It would be an interesting case, applying a 19th-Century legal doctrine to 21st-Century issues.

Again, whether you have the right to possession may be governed by language in your contract or license for use of the software, but I'd guess you have a better than 50% chance of winning an action to recover the data. Maybe all that would be necessary is a starchy letter from a lawyer, threatening a replevin action with a claim for consequential damages.

Re: Can a ASP/Online accounting software company freeze its customers corporate

I generally agree with Mr. Whipple's answer, though I think your claim to the data is stronger than he thinks it is. The problem with what he and Mr. Lyon suggest is that, aside from having a lawyer write a demand letter, these suggestions take time, and you seem to need your data right now.

Another option available to you is to pay the $4,800, reclaim your data and then sue the company in small claims court to get the $4,800 back on the ground that you paid it under duress. I once won a similar case for a client whose print shop had not performed as promised but refused to return her original documents until she paid up.

There are some risks in doing this. The court might rule against you, for example. The chances of this happening depend upon the terms of your contract, and please bear in mind that I don't know what the contract says. Another risk is that the company will go bankrupt or otherwise make it difficult for you to get your money back. If the data matters more than the money, though, you may have to accept these risks.

You should have an attorney write a demand letter beforehand but, if that fails and you need your data, your best bet might be to pay now and sue later.