Pony.ai Sues Data Center for Contractual Breaches During Pandemic

In a breach of contract complaint filed late last week the American arm of China’s Pony.ai, an autonomous vehicle technology company, filed suit against a Maryland-based Digital Realty Trust and its subsidiaries (DRT) over data center services. According to the Northern District of California complaint, DRT deployed the “nuclear” option against Pony.ai, forcing it to pay for services or face a server shutdown despite assurances that Pony.ai’s pre-COVID expansion order would be canceled. 

Pony.ai explains that in late 2019, it signed a contract for additional space, power, and equipment with DRT, scheduled for phased deliveries beginning in April 2020. However, with the advent of the COVID-19 pandemic, Pony.ai claims “it was more than obvious to everyone involved by early 2020 that the space and leased power and equipment would not be needed.”

The dispute hinges on whether the parties agreed that the order would be canceled. Pony.ai says DRT gave multiple assurances that it would be, but notwithstanding these representations, began billing for it. Pony.ai claims it made repeated inquiries, including filing a formal dispute notice in October 2020, about the mounting invoices, but DRT “ducked and dodged” the issue.

Negotiations between the parties had failed by the end of 2020 when DRT allegedly “resorted to drastic measures by threatening to power-down Pony.ai’s servers unless all disputed amounts were paid on a very short timeline.” To avoid a shutdown of the company, Pony.ai claims it paid under duress and protest, while reserving all rights.

Citing irreparable damage to the parties’ relationship, the complaint explains that Pony.ai terminated their master agreement in early 2022. Yet, the plaintiff claims it still receives invoices under the canceled and superseded service order. The nine-count complaint seeks to recover previously paid amounts, a declaration that no further amounts are due, and exemplary damages.

Pony.ai is represented by the Moya Law Firm.