Judge Throws Out Ransomware Class-Action Suit Against Rackspace

A federal judge in San Antonio has tossed a proposed class-action lawsuit against Rackspace Technology over a ransomware attack.

Rackspace Technology finally has some good news - the embattled cloud computing company won’t face a proposed class-action lawsuit over the December ransomware attack that had a crippling effect on the San Antonio, Texas-based company.

A U.S. District Judge dismissed the case against Rackspace on Thursday. The case was brought by 37 plaintiffs from around the country who lost access to email and other data as a result of the attack. More than 30,000 customers were allegedly affected.

Judge Xavier Rodriguez granted Rackspace’s motion to compel the plaintiffs to pursue their claims individually in arbitration.

Whether the plaintiffs will proceed with their claims individually in arbitration is yet to be determined. Four proposed class-action lawsuits were filed following the breach that saw Rackspace’s hosted Exchange email service shut down and eventually led to Rackspace exiting the business entirely. Those cases were later consolidated.

Rackspace’s Decline

The attack came at a particularly difficult time for Rackspace. As ChannelE2E reported at the time, the company had undergone a number of business shifts. Following that, the MSP’s business valuation fell from about $8 billion in 2020 to approximately $865 million as of December 7, 2022. As of May 22 2023, the company’s net worth is about $307.56 million with an enterprise value of $4.01 billion.

The tumult led the company to take some drastic steps, including overhauling its executive team, reorganizing its business and apparently considering potential asset sales.