Really? AFAIK in my country (Netherlands), a 'verbal agreement' is also legally binding. Is that different in US? Of course it may be harder to proof, but at the end of a website building job there's often enough paper and email trails to make your case.
I'm not an american, but yes, I believe verbal contracts do apply in the US. I called it unrealistic because it's much harder to prove. As you pointed out, it's possible.
Having a proper contract is the responsibility of the contractor. If he didn't bother to present one, he doesn't get to make up for it by holding the website hostage.
Actually, he does. With IP contracts the onus falls on the buyer, not the seller, who is granted full ownership of their work from the moment of creation. Making sure you have clear title to the the work of another isn't the contractor's responsibility, it's yours.
That said, there are a ton of things having to do with the scope of work, reviews of work in progress, acceptance or rejection of completed work, and payment terms that are absolutly the contractor's responsibility. But again, securing clear title to the work is the buyer's concern, not the seller's.
No, the inference you're drawing does not follow from what I said. I simply pointed out that, contrary to your assertion, the onus for securing clear title to the work rests with the buyer, not the seller. Assuming that the designer is also hosting the site, they are presumably free to limit access until they've been paid.
Everything you said is correct. But it has nothing to do with the issue here.
The seller is not "limiting access". They are not taking away the work they produced. They are instead publishing defamatory messages on the client's domain against the client's will. They are essentially claiming the domain as their own, which is the real issue here. This wouldn't be an interesting or controversial story if nycfreshmarket.com was a white screen, or a coming soon type thing.