The problem is that they didn't pay for the building. If they had paid for it, he wouldn't have demolished his own building.
Just because you ask someone to do something for you doesn't mean that you have to do it. In this case, someone asked the web developer to build a website. Instead of doing that, he just made a "this person sucks" website instead. A great business move, perhaps not, but legally questionable? Also not.
I think the analogy is somewhat apt. The legal system is the mechanism for enforcing contracts and bypassing it out of convenience should be frowned upon. Habeous corpus was inconvenient so it was bypassed. I'm opposed to the suspension of habeous corpus and in the interest of consistency I ought to be opposed to what this developer did.
Such stipulations are a good idea because companies are much more likely to pay you and pay you promptly when you take their site offline than when you pursue conventional collection methods (including lawsuits/small claims).
When people don't pay their phone bill, the phone company politely tells callers that "the phone number is no longer in service." They don't have a recording saying "Bill is a loser who can't pay his bills, so we TP-ed his house and called his kids ugly ... oh and you should probably be friends with Jack instead, he's better looking!"
You know you have a problem with how you treat your customers when the phone companies do a better job than you.
I'm not sure what they could get sued for. Libel? The only statement about UtilityBuilder is that they refused to pay their developer. Breach of contract? This seems more likely, though I haven't ever seen a web development contract, so I don't know what kind of clauses it would have about failure to pay.
Actually, there is also a statement that the user would be better off using a competitor because "we suck".
so you're not paying attention at all? they did not pay him, that is why he did this.