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Switch involved in numerous lawsuits

Part of the difficulties of running a data center can be policing tenants. In September 2008, Switch sued tenant Brilliant Telecom after Brilliant’s parent company removed equipment without permission from a Switch data center.

A court sided with Switch two years later, saying Switch was owed more than $90,000. In April 2011, the SEC busted the parent company of Brilliant Telecom of running an $8.6 million Ponzi scheme.

Switch has successfully sued at least two tenants over unpaid rent and two companies for using a Switch-related name in a Web address.

Company representatives said the company has an annual churn rate of 1.4 percent, which it called lower than the industry average of about 6 percent.

Switch has fought over its patented technology with at least two data center service providers: Cobalt and Aligned. The Cobalt fight began in 2011, when Switch sued former CFO Mike Ballard.

Ballard had left the company in June 2006. About five years later, Ballard told the Sunrise Manor Town Advisory Board about his plans for a data center close to a Switch one.

Switch accused Ballard of using trade secrets learned during his time with Switch to help data center startup Cobalt. Cobalt opened on Cheyenne Avenue in February 2013 after $15 million of market research, investment and development, according to court records.

The case settled out of court in March 2013 with Ballard paying Switch $40,000 and Switch donating the money to three charities: Children’s Advocacy Alliance, CSN Foundation and Shade Tree. Two years later, Cobalt discontinued local operations.

By September 2017, Cobalt was back. It sued Switch, calling Roy’s company an illegal monopoly.

Switch has denied the allegations against it and blamed Cobalt’s failure to launch in Southern Nevada on Cobalt’s own shortcomings.

Switch representatives have denied the company is a monopoly because the market it competes in includes other cities with high volumes of data centers.

Only 5 percent of Switch’s revenue comes from companies in the Las Vegas area and Southern Nevada has data centers from companies other than Switch, according to Switch.

According to Cobalt, Switch prevents new data centers from coming to Southern Nevada.

Among Cobalt’s accusations: that Switch contracts punish tenants for locating some data in competing data centers. That Roy himself threatens companies and trade groups not to do business with competitors.

Cobalt accused Roy of using his position as a board member in the governor’s Office of Economic Development to stop tax credits for competitors.

Earlier this year, Switch sued data center consultant Steve Fairfax of Saxonville, Massachusetts, and service provider Aligned of Danbury, Connecticut.

Switch accused Aligned of using trade secrets Fairfax learned during a 2011 tour of Switch to build data centers in Plano, Texas, and Phoenix.

Fairfax had toured the Switch site at the request of Switch’s largest customer, eBay. The e-commerce company contributed about 10 percent of Switch’s revenue for 2017, according to SEC documents. Aligned and Fairfax have denied the accusations.

Aligned has countersued Switch, saying the Las Vegas company’s accusations cost Aligned business.

Switch successfully used the courts as part of its war to leave NV Energy as a customer.

Contact Wade Tyler Millward at (702) 383-4602 or wmillward@reviewjournal.com. Follow @wademillward on Twitter.

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