In Episode 117, our CEO, Kelly Twigger discusses whether a company that allows its employees to use personal phones for business has control of those devices for discovery and whether a failure to preserve text messages on personal devices will result in sanctions in Miramontes v. Peraton, Inc.
Introduction
Welcome to this week’s episode of our Case of the Week series brought to you by eDiscovery Assistant in partnership with ACEDS. eDiscovery Assistant is a platform that helps lawyers and legal professionals leverage the power of ESI as evidence by reimagining how to conduct research for ediscovery, as well as training in ediscovery.
My name is Kelly Twigger. I am the CEO and founder at eDiscovery Assistant, as well as the principal at ESI Attorneys. Each week on our Case of the Week series, I choose a recent decision in ediscovery and talk to you about the practical implications of that judge’s ruling, what it means for you, your practice, and for your clients, and how to do the discovery of ESI better.
Unlike any other substantive area in the law, the constantly evolving landscape of technology means that trial courts, on both the federal and state level, are regularly issuing new opinions on parties’ obligations around ESI. Because the bulk of our learning in ediscovery comes through case law, diving into the details of those decisions and what our practical takeaways are is one of the best ways to understand the issues and details we need to focus on in planning and executing any discovery.
Background
Our decision today comes from the case titled Miramontes v. Peraton Inc. It’s from the Northern district of Texas, and this decision is authored by United States district Judge Jane Boyle on June 6th, so just a few months ago. Judge Boyle has 12 decisions in our eDiscovery Assistant database, and as always, we add the issue tags from our proprietary issue tagging structure to each decision. This week’s issue tags include text messages, bad faith, sanctions, failure to preserve, spoliation, possession, custody, and control, mobile device, and legal hold.
Facts
We are before the Court on a motion for sanctions brought by plaintiff for the failure to preserve text messages and a skills assessment related to the plaintiff’s performance. The plaintiff, Miramontes, was a 27-year veteran employee of Prospecta, and his title was Senior Supply Chain Business Partner Manager. Prospecta was then acquired by Peraton, the defendant here.
In the business year prior to the acquisition, Miramontes received a positive performance review from his manager, whose name was Joseph Capalbo. Following that merger, Peraton decided to absorb Miramonte’s duties into existing positions and eliminate his position, and he was moved from a supply chain manager to a category manager. Shortly thereafter, Peraton began a series of layoffs, internally referred to as Project Falcon, and Miramontes was terminated on July 1, 2021, as part of the first round of layoffs.
Miramontes’ supervisor notified him that he was being terminated via a Zoom call, during which his supervisor, then Victor Stemberger, unilaterally brought up Miramontes’ age, telling him twice without prompting that he was not being terminated because of his age. Peraton asserts that Project Falcon was a company-wide reduction in force made necessary by budgetary constraints after the merger. Miramontes contends that it was a sham created to disguise Peraton’s real reasons for terminating the affected employees’ discrimination based on age and race.
Miramontes sent Paragon a litigation hold letter in July 2021, shortly after he was terminated. The letter placed Peraton on notice to preserve all documents regarding his claims, including, “information, data, emails, texts, attachments, and other method or means of communications internally or externally, and not to allow the deletion of these documents.” Just to be clear — this is a letter that Miramontes, the plaintiff, sent to Peraton, the defendant, telling them specifically to preserve data in anticipation of litigation. Peraton directed Miramontes’ supervisor, Victor Stemberger, his supervisor when he was terminated, to preserve emails relating to Miramontes claims, but did not mention any text messages.
Miramontes then sued Peraton in state court on November 3, 2021, several months after the letter, bringing claims for breach of contract, negligent misrepresentation, and age and race discrimination, and a few others. The case was then removed to federal court. At his deposition, Stemberger testified that he used his personal cell phone to text his supervisor, Joseph Capalbo, who used to be Miramontes supervisor, about Miramontes once or twice.
Stemberger also testified that he had received a litigation hold letter from Miramontes, and that he then texted Capalbo, “have you seen this?” He added that he only read the first paragraph of the hold letter from Miramontes, was unaware of his any duty to preserve his text messages, and could not remember what the supposed second text message was about. According to Stemberger, there were two objectives to the text messages: to let Capalbo know that he had received it — the litigation hold letter — and to make sure that legal was aware of the letter. He testified that he could not produce the text messages because he had deleted them, as was his normal practice to delete all text messages within 48 hours of receiving them. That’s the first issue on the motion for sanctions, is the duty to preserve these text messages between Stemberger and Capalbo.
The second issue on the motion for sanctions related to a skills matrix template that was the alleged basis for Miramonte’s termination. Miramontes stated that Peraton produced the template document — which indicated that he was not performing well in his job — but did not produce any evidence of who filled out the form or what factors were used or any communications related to filling out the form.
While we’re on this motion for sanctions, Peraton also moved for summary judgment, claiming that the plaintiff has not shown that he was terminated based on his age or his race.
That’s a majority of the facts. We’re going to see a few more as we go through the Court’s analysis.
Analysis
The Court begins with a three-part analysis as to whether spoliation exists here as a basis for sanctions. Again, we’ve got two issues: the lack of information about the skills template and the text messages. We know that the text messages are gone, so that’s really the focus of the Court’s discussion here.
The three-part analysis for spoliation is one that we’ve covered many times on Case of the Week. One, the spoliating party must have controlled the evidence and been under an obligation to preserve it at the time of destruction, so control and duty to preserve. Two, the evidence must have been intentionally destroyed. Three, the moving party must show that the spoliating party acted in bad faith. In addition to these three requirements, courts also require a showing of prejudice to the moving party in order for sanctions to be imposed. The judge here notes that courts have very broad discretion in determining the appropriate sanction that is proportional to the conduct of the spoliating party and the resulting prejudice to the moving party, and that’s going to be important in this particular decision.
The Court starts by addressing the duty to preserve the text messages between Stemberger and Capalbo and the information about the skills matrix. Peraton argued that because the text messages were on Stemberger’s personal phone, it did not have a duty to preserve the messages because it did not have possession, custody, or control of the phone. The plaintiff, on the other hand, alleged that the text messages would have shown that Miramontes was terminated based on his age and/or his race, and that it also put forward evidence that employees were required to use their personal phones and did for business regularly.
The Court noted that in order for Peraton to have a duty to preserve, it must have controlled the evidence and been under an obligation to preserve it at the time of the destruction. This is when the Court goes into the issue of control, and this is where I want you to focus because this is the most important part of the decision.
The Court notes that there’s a dearth of case law on this topic, and it looks to evaluate the concept of control as that term is applied under Federal Rule of Civil Procedure 34, using a four-factor test: one, whether the employer issued the devices; two, how frequently the devices were used for business purposes; three, whether the employer had a legal right to obtain communications from the devices; and four, whether company policies address access to communications on personal devices.
As we go through this decision, I want you to think back to episode 72, In re Pork Antitrust Litig. That was a situation where employees had text messages on their phones, but the company had a BYOD policy. In that case, the Court held that the company, I believe it was Hormel, did not have possession, custody, or control of those mobile devices to be able to produce those text messages. We’re going to juxtapose In Re Pork to the case that we have before us.
The Court in its analysis here points to two cases that suggest that a company has control over business information on an employee’s personal cell phone, “when the phones are routinely used for business purposes.”
This next point is interesting. Peraton argues that it only has control if it has a legal right to obtain them, what’s been called the legal right test. There’s also a practical ability test that courts have applied. But the Court rejects both of those bright line tests, saying that, “while it has intuitive appeal, the realities of modern business require a fact-specific approach.” According to the Court:
Today, many, if not most employees, use cell phones for work. While some companies issue work devices, others, including Peraton, do not. Under Peraton’s view, a company could effectively shield a significant amount of its employees’ business communications from discovery simply by allowing its employees to conduct business on their personal phones. For these reasons, the Court agrees with other courts that have found electronically stored information on employees’ personal devices may be under the control of their employer in certain circumstances.
This Court does not cite to or distinguish the In Re Pork decision. In episode 72, I specifically raised the issue of whether or not the approach the court took there would be one that would be followed by other courts because it was pretty suspect. The Court here did not follow it’s reasoning, and does not even mention it.
Here, the Court found that Stemberger’s phone and the messages on it, which were text messages to Capalbo about Miramontes, were under Peraton’s control, relying on the evidence presented by Miramontes that Peraton did not issue company cell phones and that employees regularly conducted business on their cell phones. The Court also found that Peraton had a duty to preserve, and that Stemberger knew about the lawsuit when the messages were destroyed. In fact, Stemberger actually created and sent the text messages in response to receiving a litigation hold letter from plaintiff, and he testified that he wanted to make sure legal knew about it. It’s pretty clear he knew he had a duty to preserve the information when he deleted it.
The Court then addresses the relevance of the text messages and specifically addressed the difficult burden faced by the moving party in proving whether or not destroyed evidence is relevant. The Court says,
“Courts recognize that the burden placed on the moving party to show that the lost evidence would have been favorable to it ought not to be too onerous lest the spoliator be permitted to profit from destruction,” and that they should consider, “whether the evidence in the case as a whole would allow a reasonable fact finder to conclude that the missing evidence would have helped the requesting party support its claims or defenses.”
I love that language. I think you should focus on it. That is a reasonable approach to the way that mobile devices, text messaging, instant messaging are being used in practice today, and a much more appropriate way to address these issues than the standard legal right or practical ability tests that we fashioned under the law.
With that language in mind, the Court found here that a reasonable fact finder would conclude that the missing text messages would have helped Miramontes support his claim based on the fact that the text messages were created and sent contemporaneously with the legal hold letter that Miramontes sent. The messages were between the two people who could have filled out the skills matrix that addressed why the plaintiff was terminated. In fact, Stemberger was the one who suggested that Peraton terminate Miramontes, even after Capalbo had given Miramontes a positive performance review immediately prior to the merger. The Court also found that because relevance could be concluded, Miramontes was prejudiced by the deletion, meeting another requirement of the spoliation analysis. So that solves our first prong. We’ve got duty to preserve and the text messages were under the control of Peraton, now we’ve got to turn to whether or not that destruction was intentional.
The Court concluded that the messages were intentionally destroyed because Stemberger testified that he actively deleted them and that he acted within the scope of his employment, making Peraton vicariously liable for his actions. That means that Peraton can be held liable for the intentional destruction of the text messages. The Court also found that Peraton acted in bad faith, that they knew of the impending litigation, and instructed employees not to delete email about the matter, but did not mention preserving text messages, even though Peraton was aware that employees did use their personal cell phones for business.
The language of the Court here is key. Peraton’s failure to preserve its employees’ text messages, despite receiving a litigation hold letter specifically asking that they be preserved, demonstrates bad faith. With that, the plaintiff had met his burden to show spoliation, and the Court then moves to what sanctions are appropriate.
The Court notes that the selected sanctions cannot be harsher than necessary to respond to the need to punish or deter and to address the impact on discovery. We’re all aware of the sanctions that are put forth in Rule 37, but the Court doesn’t choose any of those here. Instead, Miramontes does ask the Court to find liability for it, but the Court finds that the conduct did not rise to that level and instead sanctions Peraton by denying Peraton’s motion for summary judgment.
If you’re thinking like I did, that such a sanction isn’t contemplated by Rule 37, then you’re right. But as the Court noted at the outset, it’s got the broad discretion to determine an appropriate sanction, and the Court did that here. So very thoughtful, very factually specific, very business-oriented decision made by the Judge here. In this instance, the Court found that the text messages may have raised a factual dispute about whether Peraton dismissed Miramontes based on his age and or race, and that Peraton should not be allowed to benefit from that spoliation by getting summary judgment. The Court also allowed Miramontes to have additional interrogatories and RFPs to work to overcome the prejudice of the lost data. Essentially, sanctions granted, motion for summary judgment denied as a sanction, and Miramontes allowed to engage in some additional discovery.
Takeaways
The key takeaway here is the Court’s language that these issues are deeply factual. That puts the onus on the individual parties to put forth all the facts that either demonstrate relevance and intent or to defend against them. You saw the level of detail that was required here from Miramontes about how employees use their personal cell phones and what the company’s approach to them was, and that was compelling for the Court here. This Court decided not to address the legal right and the practical ability test, calling them intellectually valuable, but not really comporting with the way that employees use their phones for business communications today. That’s a really insightful approach that this Judge took, and I want us to be thinking about that and focusing on that particular decision.
The Court’s decision tells any employer that when you issue a legal hold notice, it needs to expressly include text messages and any other source of ESI that may be relevant so all the employees are on notice of their duty to preserve. Failure to do that here constituted bad faith.
This decision also suggests that companies need to educate their employees as to the scope of duty to preserve in any matter, because it may take time to get a legal hold notice out to people. For folks who do things like Stemberger did here, which is delete their text messages every 48 hours, they will have engaged in spoliation before they even get a legal hold notice. What the Court is saying here is that because Peraton was liable and had control over the text messages on Stemberger’s phone, that when Peraton was on notice, Stemberger was on notice. In a situation in which Stemberger didn’t get a copy of that letter, but Peraton did, I think that the Court would still impute that same liability.
Factually here, this Judge’s decision is very interesting because it’s pretty thin on facts that suggest that the missing text messages really had anything to do with Miramontes’ race or age. Other discovery decisions that we’ve seen here on Case of the Week would have required a much higher level of evidence in order to make the finding that those text messages would have been relevant. I liked the Court’s approach here because we’ve seen that putting too much burden on the moving party when they don’t have the evidence to be able to argue is very onerous, and it often results in poor decisions. Here the judge really turns that up on its head and says, we can’t be putting that burden on the moving party. It’s pretty clear here that you’ve got current supervisor texting the former supervisor, and those are the people who are most likely to be talking about that skills matrix, and so therefore, we’re going to determine relevance.
I’ve said this already, but I really do think that Judge Boyle’s analysis here is brilliant and is spot on with how business information is created on employees’ personal devices. Breaking from the practical ability test, the Court really says that facts matter, not some pre-constructed test. Here, Peraton knew their employees use their phones for business, then tried to escape having control over the data. That’s an important lesson for companies and one that should have an immediate effect on how organizations approach employees’ use of personal mobile devices. Use of mobile devices is only going to increase, not decrease, and companies need to get a handle on this issue right away or face potential sanctions on spoliation.
Conclusion
That’s our Case of the Week for this week. Thank you so much for joining me. We’re back again next week with another decision from our eDiscovery Assistant database. As always, if you have a suggestion for a case to be covered on Case of the Week, drop me a line. If you’d like to receive the Case of the Week delivered directly to your inbox via our weekly newsletter, you can sign up on our blog. If you’re interested in doing a free trial of our case law and resource database, you can sign up to get started.
Thanks so much, and have a great week.
