Wait, are they saying that the clients don't store a local copy? Or that the local copy is inaccessible without the servers working?? That seems incredibly irresponsible and I can't imagine a single reason for doing that.

Or is there something else going on that corrupted the users' local copies? If the system is properly secure (i.e. data is encrypted and verifiable with the user's password-derived key) this shouldn't be possible, right?