Kaspar Szymanski, a Search Quality Strategist at Google, tweeted yesterday that Google reserves the right to take action on all the sites on a server or at a hosting company if they feel the host is massively spammy.
His tweet read:
if freehosts appear 2b massively spammed #Google reserves the right 2take action on the entire site
This comes in response to a Polish Google Webmaster Help thread where one site owner was complaining his site wasn't ranking well. My polish is not existant at all, so I'll use Google Translate to translate Kaspar's response:
if freehost is very zaspamowany , sometimes exclude him from the entire Google index. Such cases occur not often .
Of course, this is not new. Google has said in the past that they can ban all the sites on a host if the an unusual percentage of sites on that server or host are incredibly spammy. So it has happened and has been discussed, I believe in conferences. But I have never seen a Googler say it in response to a complaint about why his site is not ranking in a public Google help forum.
Forum discussion at Polish Google Webmaster Help.