I don't think that's the issue, the issue was that they suspended accounts and sites that had already been payed for, and the only payment method the company offers is PayPal so there was no reasonable way for the customer to pay the outstanding ballance immediately (About $5 from the looks of it). He also offered proof that the small outstanding ballance would be payed within a couple of days.
Yes if it was +$100 maybe more serious action should have been taken, but it was just one domain on an account that, up to that point, had never had any issues with payments before (I'm assuming that but the support guy is so defensive I'm sure it would have been brought up before now). Even so there is no reason to just straight out cancel someones entire account without even contacting them, for all they knew the payment could have gone through without a problem.
If this is how things went down I see just about equal fault on both sides (contracts aside, I'd guess suspension of all accounts is in the "if you don't pay" part of the contract if not then there's something there for sure).
When the accounts were suspended for non payment instead of telling the host to "fuck off" they could have attempted to arrange an alternate payment method. If they were going to antagonise their former host (I say former as the obligation to host the data presumably ended on non-payment) then they could have used their CP, it seems, to download backups - then they could profane their host for wanting payment in return for service happy in the knowledge they were untouchable.
As I understand it, there are two people here. Guy[a] didn't pay, and had his account shut down. Fine. Guy[b], who is Guy[a]'s friend, simply bitched them out on twitter, and lost his account - along with ALL of his backups - in the process.
Correct me if I'm wrong, but if I were Guy[b], I'd consider googling lawyers.
Yes if it was +$100 maybe more serious action should have been taken, but it was just one domain on an account that, up to that point, had never had any issues with payments before (I'm assuming that but the support guy is so defensive I'm sure it would have been brought up before now). Even so there is no reason to just straight out cancel someones entire account without even contacting them, for all they knew the payment could have gone through without a problem.