They may own their servers, but you also entered a deal with them (as miniscule as it may be), which means that this applies:
http://en.wikipedia.org/wiki/Good_faith_(law)
This (if it happened as described) would be a violation of this.
http://en.wikipedia.org/wiki/Good_faith_(law)
This (if it happened as described) would be a violation of this.
There's nothing new about this "class system." Instagram's servers are the property of Instagram (and therefore Facebook), so they can do essentially anything they like with them, including things that make them look really bad from the outside like this incident (assuming everything happened as was implied).