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Microsoft, Law Firm Cloud Files Access Row Goes to Arbitration

Oct. 27, 2022, 10:20 PM

A Houston criminal defense firm won an appeal sending to arbitration its dispute with Microsoft Corp. over being locked out of a cloud storage account that allegedly included child pornography related to a case being handled by the firm.

Though the parties’ dispute had started in court, where Turnbull Legal Group PLLC initially sought injunctive relieve to regain access to its OneDrive account, a Texas appeals court said Thursday that proceedings hadn’t gone so far as to allow Microsoft to prove the firm “substantially invoked” the judicial process and couldn’t opt out.

Turnbull’s request for injunctive relief doesn’t mean they explicitly or implicitly wanted this dispute to be litigated at court, the Texas Court of Appeals, First District said.

Initially it was Microsoft that asked the trial court to compel arbitration, but Turnbull resisted saying that its claims related to intellectual property, which the computing company’s terms of service agreement specifically carves out from its arbitration provision.

But, four months later after Microsoft rescinded its motion to compel, Turnbull asked the court to move the dispute to arbitration. The company was ultimately granted an anti-arbitration injunction by the trial court. Turnbull appealed.

Flagged and Terminated

The law firm uses Microsoft’s Office 365 suite, including OneDrive for its attorneys to save and access files. Two images that allegedly included child pornography were flagged by Microsoft and caused the company to suspend and ultimately terminate Turnbull’s OneDrive account.

The firm obtained a temporary restraining order in a Harris County trial court, pending arbitration, to require Microsoft to restore access to the account and immediately return all files.

Turnbull acknowledged that Microsoft’s service agreement, to which it had agreed when it signed up for an account, required a 60-day informal resolution period. But it said then that injunctive relief was needed to prevent further harm to its clients and ensure that Microsoft didn’t permanently destroy its files.

The firm later moved to resolve the dispute in arbitration, prompting the company to pursue—and win—an order keeping them in court.

Opposing the firm’s appeal, Microsoft contended that the trial court correctly granted its motion because Turnbull stated in writing that it didn’t want to resolve the issue in arbitration.

No Affirmative Indication

However, that wasn’t an affirmative indication that the firm wanted to resolve the issue in court. The firm’s statements weren’t assertions of fact, but a response to Microsoft initial motion to compel arbitration, the appellate court said.

The statements concern a legal question, whether the firm’s claims fall within the scope of the service agreement or fall within the carve out for intellectual property claims, Justice April L. Farris wrote in the opinion.

The Federal Arbitration Act permits parties to seek preliminary injunctive relief prior to a court ruling on arbitrability, the three-judge panel added.

Microsoft didn’t establish Turnbull waived its right to arbitrate by invoking the litigation process to the prejudice of the company, the court said.

Justices Sarah Beth Landau and Amparo Guerra joined in the ruling.

Reynolds Frizzell LLP represented Turnbull. Greenberg Traurig LLP represented Microsoft.

The case is Turnbull Legal Group PLLC v. Microsoft Corp., Tex. App., 1st Dist., No. 01-20-00851-CV, 10/27/22.

To contact the reporter on this story: Janet Miranda in Houston at jmiranda@bloombergindustry.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com