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seems like if there's a limit to the number of files the client can handle, the client should warn you as you're approaching that limit, and ideally block you from adding too many.

If the client allows you do do something, and you do it, and it causes the client to break, that is 100% a "failure"

(IANAL) The thing is the ACLU only has leverage against the Federal gov't if they pursue a settlement - the federal gov't doesn't want to see the agents deposed. Even if they have immunity, it'd make them look bad. If this went to trial, that leverage would be gone. So, the settlement deal gets them point 2 on that list, instead of just (potentially more) money.