I seem to remember Mr Moynihan mentioning somewhere (on blackmask, or elsewhere, long ago) that he was notified once by CN and did not immediately respond, though I don't know the nature of the initial contact... whether it was "please contact us regarding" or "remove our property at once," or what. This is what prompted CN to unilaterally act to shut his server down. This has been accepted procedure for dealing with questionable material on web servers (except in extreme cases, like child porn), so in this light, CN was justified in their initial actions.
However, dragging the case out as they did without letting Moynihan settle left them open to public scrutiny, which brings us to "Let he who is without sin cast the first stone." CN ended up with too much of their dirty laundry aired in public, and in the interest if not looking any worse to others, or compromising any other business deals, finally let the whole thing end as quietly as possible.
So, sure, CN was in the right. But they were still a$$holes about it, and backed down only after Moynihan exposed their less-than-stellar practices.
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