AlyssaS - 10:00 pm on Feb 13, 2011 (gmt 0)
trinorthlighting - G is probably OK, as they appear to have made the manual penalty only after receiving conclusive proof that there were paid links (I think NYT provided a tape of a blogger saying that he had the link to JCPenny on his site because he was part of TNX, a paid link service).
Paid links are against G's TOS, everyone knows this, and everyone knows that they have the right to penalise you if you get caught.
However, if the penalty had merely been applied because there was an embarassing article in the NYT that said, "these links look a bit spammy", then yes, a lawsuit would fly if a penalty had been applied on such flimsy grounds.
Incidentally, this is why G tries to deal with things via algo. The algo is neutral and applies to all sites. People can't accuse them of penalising sites "because they want to force them to use Adwords" or whatever the conspiracy du jour is, as adwords spend is not a variable in the algo, as any patent will tell (and they should be able to prove that to an investigator too).