United States District Court, S.D. Texas, Corpus Christi Division
ORDER ON MOTION FOR SANCTIONS
GONZALES RAMOS UNITED STATES DISTRICT JUDGE
the Court is Plaintiffs' Motion for Sanctions (D.E. 225).
Plaintiffs complain that Defendants 4JLJ, LLC d/b/a J4
Oilfield Services and John Jalufka (jointly J4) stonewalled
discovery, denied the existence of available information, and
ultimately allowed that information to be lost or destroyed,
impairing Plaintiffs' ability to recover on the claims
made in this case. J4 argues that its rights to the
information sought were insufficient to support a duty to
preserve or disclose it and any loss of the information is
the fault of Plaintiffs for not seeking to compel discovery
in a timely manner.
reasons set out below, the Court GRANTS the motion (D.E. 225)
and imposes sanctions in the form of an adverse inference
jury instruction and placement of the Technical Corrections
Act burden of proof on J4. The Court further considers and
DENIES Plaintiffs' First Amended Motion for Partial
Summary Judgment (D.E. 252), which seeks summary judgment
based, in part, on spoliation presumptions or the
extrapolation of residual existing data to issues for which
data was lost or destroyed.
bring this case as a collective action under the Fair Labor
Standards Act (FLSA), seeking unpaid overtime wages and other
damages. D.E. 18, 146. J4 has pled the Motor Carrier Act
(MCA) exemption as eliminating Plaintiffs' rights and
remedies under the FLSA because Plaintiffs' work was
governed by the Secretary of Transportation. The MCA
exemption is limited by the provisions of the
SAFETEA-LUTechnical Corrections Act of 2008 (TCA).
More specifically, the TCA provides an exception from the MCA
exemption-when Plaintiffs' work involved meaningful
duties with respect to motor vehicles weighing 10, 000 pounds
or less (non-commercial vehicles). Consequently, any evidence
that demonstrates the number of hours Plaintiffs worked and
whether their work involved one or more non-commercial
vehicles is not only relevant, but critical to the claims and
defenses in this case.
undisputed that J4 had installed in many of its vehicles-both
commercial and non-commercial-a system licensed from
FleetMatics that included a Global Positioning System (GPS)
tracker. Together with key fobs issued to
individual employees and key fob readers installed in the
vehicles, the system recorded such things as the identity of
the driver, the date and time the vehicle was turned on, the
amount of time the vehicle ran, the distance it traveled, and
the path it followed. All of this allowed J4 to observe the
activities of its fleet in real time on computer monitors. It
also provided for the storage of data in FleetMatic's
computer servers from which J4 could obtain reports through a
software interface. Those reports included data for activity
filtered on a vehicle and/or driver basis.
FleetMatics data was relevant to the allegations in this case
in two important ways. First, Plaintiffs claim that J4
required them to submit their time sheets using block
increments of time that J4 prescribed on a task basis-not the
hours they actually worked. The FleetMatics data could
confirm whether Plaintiffs worked more hours than they were
permitted to report. Second, J4 has invoked the MCA
exemption, seeking to eliminate the Plaintiffs' FLSA
claims in a wholesale manner. The FleetMatics data could
corroborate or controvert Plaintiffs' assertions that
they performed substantial work on non-commercial vehicles,
bringing them within the TCA exception and eliminating
J4's claimed MCA exemption.
is a relatively recent change in the law, straddling the
requirements for making an FLSA claim and losing it to the
MCA exemption. Courts have been split on whether plaintiffs,
with the burden to establish their FLSA claims, must show
that they did work on
non-commercial vehicles or whether defendants, with the
burden to establish the MCA exemption, must show that
plaintiffs did not work on
non-commercial vehicles. Thus, despite its determinative
power, the FleetMatics data's practical utility to either
side of the pending dispute depended not only on the content
of the data but upon which party had the burden to prove
Plaintiffs' amount of work on non-commercial vehicles
(the TCA issue).
midst of this uncertainty and prior to this Court's April
10, 2017 ruling placing the burden of proof on Plaintiffs,
Plaintiffs sought the FleetMatics data from J4. J4 did not
preserve it and did not produce it in discovery.
Consequently, a large part of the data appears to have been
lost or destroyed. Plaintiffs seek sanctions against J4 for
Standard of Review
Federal Rules of Civil Procedure 26(g)(3) and 37, a court may
sanction a party to litigation who fails to comply with the
duty of disclosure and the duty to respond appropriately to
requests for production and requests for admissions. A
federal court also has the inherent power to sanction a party
who has abused the judicial process. Chambers v.
NASCO, 501 U.S. 32, 44 (1991). The spoliation of
evidence is one such abuse. Rimkus Consulting Group, Inc.
v. Cammarata, 688 F.Supp.2d 598, 611 (S.D. Tex. 2010).
“Spoliation of evidence ‘is the destruction or
the significant and meaningful alteration of
evidence.'” Guzman v. Jones, 804 F.3d 707,
713 (5th Cir. 2015) (quoting Rimkus, 688 F.Supp.2d
party seeking imposition of a sanction for spoliation bears
the burden of proof. Rimkus, 688 F.Supp.2d at
615-16. That proof involves three elements:
(1) the party with control over the evidence had an
obligation to preserve it at the time it was destroyed; (2)
the evidence was destroyed with a culpable state of mind; and
(3) the destroyed evidence was “relevant” to the
party's claim or defense such that a reasonable trier of
fact could find that it would support that claim or defense.
Culpability sufficient to impose sanctions requires a showing
of bad faith or bad conduct. Condrey v. SunTrust Bank of
Georgia, 431 F.3d 191, 203 (5th Cir. 2005);
Rimkus, 688 F.Supp.2d at 614. Bad faith in this
context generally means destruction for the purpose of hiding
adverse evidence. Guzman, 804 F.3d at 713.
J4 Had a Duty to Preserve the FleetMatics Data
duty to preserve evidence arises when a party has evidence
that it knows or should know is relevant to a claim that is
in litigation or is likely to be litigated. Rimkus,
688 F.Supp.2d at 612-13.
[A]nyone who anticipates being a party or is a party to a
lawsuit must not destroy unique, relevant evidence that might
be useful to an adversary. “While a litigant is under
no duty to keep or retain every document in its possession .
. . it is under a duty to preserve what it knows, or
reasonably should know, is relevant in the action, is
reasonably calculated to lead to the discovery of admissible
evidence, is reasonably likely to be requested during
discovery and/or is the subject of a pending discovery
Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 217
(S.D.N.Y. 2003) (ellipses in original; citing Turner v.
Hudson Transit Lines, Inc., 142 F.R.D. 68, 72 (S.D.N.Y.
1991) (quoting Wm. T. Thompson Co. v. General Nutrition
Corp., 593 F.Supp. 1443, 1455 (C.D. Cal. 1984))).
party requesting an adverse inference must first show that
the documents in question exist or existed and were within
the control of the opposing party.” Jobe v. ATR
Mktg., Inc., 189 F.3d 466 n.3 (5th Cir. 1999). J4
disclaims any duty to preserve the FleetMatics data, arguing
that it did not have the necessary possession, custody, or
control to support imposition of any duty. While the
Jobe recitation of the duty to preserve may not
state its full scope,  the Court finds that J4's disclaimer
of control is not well-founded on our facts.
parties rely on FleetMatics' agreement, including its
standard terms and conditions, to demonstrate whether J4 had
possession, custody, or control sufficient to trigger a duty
to preserve evidence. The following discussion sets out the
relevant terms and their significance to the question of the
duty to preserve.
ACCESS AND USE
to the terms and conditions of this Agreement, FleetMatics
hereby grants Customer a non-exclusive, non-transferable
limited right in the territory where the Customer is located
a. To access and use the Services until the last
day of the Service Term, consistent with any
FleetMatics policies and additional use limitations specified
or referenced in the order form and solely for
the Customer's use; and
b. To download, print, copy and use any
documentation as reasonably necessary for its internal,
in-house use related to the rights granted
under subsection (a) above.
FleetMatics reserves all rights not expressly granted herein.
Except as otherwise permitted herein, Customer may not copy,
modify, adapt, or create derivative works of the
Services. Except as otherwise permitted herein,
in no event shall Customer (i) use, or permit any third party
to use, the Services for time-sharing, rental, or
service bureau purposes, or (ii) decompile,
disassemble, reverse assemble, or otherwise
reverse engineer the Equipment or
Services, or permit any third party to decompile, reverse
assemble, or reverse engineer the Equipment or Services.
Customer will use the equipment and services only in
compliance with applicable law.
234-5 (emphasis added). This provision reflects that J4 had
the right to access and use the FleetMatics data in every way
necessary to preserve it. While it specifies “solely
for the Customer's use, ” and “internal,
in-house use, ” J4 has provided no authority for
construing preservation of evidence-fully anticipated and
empowered by the agreement and consistent with maintaining
the business records the system generated-as something other
than “J4's use.” Production of the data to a
third party is a separate issue not relevant at this
juncture. The remaining language of this section, which
addresses other copying and third-party access, prohibits use
for the purpose of misappropriating FleetMatics' hardware
or software design. It is not directed to the content of the
data, but the engineering by which it is processed and
argues that access to information should not be confused with
control, citing Dotson v. Edmonson, No. 16-15371,
2017 WL 4310676 (E.D. La. September 28, 2017). However, in
Dotson, the parties resisting discovery (not the
duty to preserve) were the employees of the non-party owner
of the information. They did not procure the compilation of
information and there is no evidence that they had a
contractual right to copy, print, or download the material
for future use. Rather, their access was permitted only for
viewing the information. Here, J4 is a subscriber who has
paid for the right not only to access and view the
information, but to copy, print, download, and preserve it.
There is nothing about the relationship between J4 and
FleetMatics that impairs J4's right to preserve the data
consistent with the purposes of its subscription.
there is some question regarding J4's right to produce
the information to third parties in this action, nothing
about the relationship of the parties impairs J4's
ability and right to preserve the information until
disclosure issues can be adjudicated. Moreover, nothing about
the duty to preserve this data, which involves unlimited
print or digital duplication, would amount to illegally
taking exclusive possession of something belonging to
another. Thus J4's reliance on In re Grand Jury
Subpoena, 646 F.2d 963, 969 (5th Cir.
1981) is inapposite.
notes in its response, even in the context of the duty to
disclose in discovery (as opposed to the duty to preserve),
the necessary control is construed expansively to include
scenarios in which the responding party has the legal right
or practical ability to obtain the information from another.
D.E. 234, p. 9 (citing Duarte v. St. Paul Fire &
Marine Ins. Co., No. EP-14-CV-305-KC, 2015 WL 7709433,
at *5 (W.D. Tex. September 25, 2015)). Control is shown if
the resisting party has a relationship with the non-party by
affiliation, employment, or statute, which supports the
party's authority or ability to obtain the document from
the non-party. Duarte, supra. J4's subscription
to FleetMatics' service was just such a relationship that
gave J4 all of the rights it needed to preserve the data that
FleetMatics' equipment generated from the J4 fleet.
“Access and Use” terms of the FleetMatics
agreement support a finding that J4 had the necessary control
to preserve the data.
INTELLECTUAL PROPERTY RIGHTS
and all other intellectual property rights subsisting in the
Service is owned by FleetMatics or the providers of such
information. The customer may use
information retrieved from the Services only for its own use
which means that the Customer may not sell,
resell, retransmit or otherwise make the information
retrieved from the Services available in any manner or on any
medium to any third party unless the Customer has obtained
FleetMatics' prior written consent.
(emphasis added). This section more specifically reflects
FleetMatics' concern with defending its intellectual
property rights. The data it gathers from its customers, by
itself, is not claimed as intellectual property. It is the
manner in which the data is processed and displayed that it
seeks to protect. This section reinforces J4's control
over the data sufficient to preserve it. FleetMatics only
seeks to limit disclosure without its consent. J4 neither
sought nor was denied this consent.
“Intellectual Property Rights” terms do not
affect J4's control for purposes of preservation.
USE OF THE FLEETMATICS SERVICE
The customer is responsible for all use of the Services made
using any usernames and passwords registered by or allocated
to it . . . .
FleetMatics may provide hypertext links to sites on the
internet . . . FleetMatics . . . takes no responsibility for
and gives no warranties, guarantees or representations in
respect of linked sites. . . .
. . . FleetMatics assumes no responsibility for the accuracy
of [maps, routing instructions and driving directions]. . . .
The Equipment and Services are designed to collect certain
data and information from Customer's vehicles, including,
without limitation, data regarding the location of the
vehicles, rate of travel, ignition on/off, idle time, number
of stops and other similar information (collectively
“Vehicle Information”). Customer acknowledges and
agrees that as between Customer and FleetMatics,
Fleetmatics owns all Vehicle Information,
including all rights in and to such Vehicle
Information. Without limiting the generality of
the foregoing, Customer acknowledges and agrees that,
as the owner of the Vehicle Information,
Fleetmatics may review, analyze, manipulate, copy and modify
the Vehicle Information. Fleetmatics may also distribute
reports, analyses and data based upon the
Vehicle Information, provided, however that Fleetmatics
agrees that it shall not disclose to any third parties any
Vehicle Information that identifies specifically Customer or
any of the drivers of Customer's vehicles. It being
understood, however, that the foregoing restriction shall not
apply to disclosures of Vehicle Information that are (i)
required by law or in response to a request from law
enforcement authorities, (ii) made in connection with a
subpoena or other similar demand, (iii) made
in connection with a contemplated merger, acquisition or
similar transaction, (iv) made to Fleetmatics' affiliates
or related companies, and/or (v) made to Fleetmatics'
Id. (emphasis added). This language limits
FleetMatics' responsibility regarding derivative
services. FleetMatics will serve the registered users and
Customer is obligated to safeguard usernames and passwords.
FleetMatics will provide links to third party services whose
websites Customer accesses without reliance on FleetMatics.
It will provide geographical information that Customer uses
at its own risk. And it will generate data that Customer
cannot prevent it from using to further develop its