Plaintiff Frank Brunckhorst Co., LLC (“Brunkhorst”), is the national distributor for Boar's Head Provisions, Co., Inc. (“Boar's Head”), which produces delicatessen products such as meats, cheeses, soups, and condiments. Brunckhorst markets and sells Boar's Head products to about 400 independent distributors in the United States, and these distributors then resell the products to retail establishments and delicatessens. [Doc. No. 43, at p. 3, 1st Am. Compl.] The independent distributors deliver the products in “uniquely branded trucks” bearing the Boar's Head name and marks. [Doc. No. 43, at p. 4, 1st Am. Compl.]

Defendant Ihm worked as an independent distributor for Boar's Head products in the San Diego area from 2001 through July 2011, and conducted business by and through a corporation known as Sunset Deli Provisions, Inc. (“Sunset”). Sunset is also a defendant in this action. [Doc. No. 43, at p. 2, 1st Am. Compl.] While a distributor for Boar's Head products, Ihm and Sunset “developed a roster of customers ... in the San Diego area....” [Doc. No. 43, at p. 4-5, 1st Am. Compl.]

Although no written document is cited, Brunkhorst claims that as part of his agreement to distribute Boar's Head products, Ihm “expressly agreed” not to engage in competing or conflicting activities that could harm Boar's Head. [Doc. No. 43, at p. 4, 1st Am. Compl.] In addition, Brunkhorst alleges that Ihm's distributorship arrangement to sell Boar's Head products included an implied term which only allowed termination upon reasonable notice. [Doc. No. 43, at p. 15, 1st Am. Compl.] However, Brunkhorst alleges that sometime in 2011, Ihm entered into a “secret deal” with Dietz & Watson, Inc. (“D&W”) to abruptly terminate his relationship with Brunkhorst without notice and begin distributing products for D&W. [Doc. No. 43, at p. 5, 1st Am. Compl.] D&W prepares and distributes delicatessen products that compete with Boar's Head products. [Doc. No. 43, at p. 5., 1st Am. Compl.] D&W is not a party to this action. Ihm is currently a distributor for D&W through a new entity called South Shore Deli Provisions, Inc. (“South Shore”). Based on a theory of successor liability, South Shore was added as a defendant in Brunkhorst's First Amended Complaint. [Doc. No. 43, at p. 18-19.]

*2 On August 1, 2011, Ihm notified Brunckhorst in a letter that he was terminating his association with Boar's Head products “effective immediately.” [Doc. No. 43, at p. 5, 1st Am. Compl.] Brunkhorst claims that Ihm did not give prior notice of the termination so he could “exploit” the circumstances to his advantage. Brunkhorst asserts that in the weeks leading up to the termination and thereafter, Ihm and others engaged in conduct which was harmful to Boars Head. [Doc. No. 43, at p. 5-6 et seq., 1st Am. Compl.]

The original Complaint in this action was filed on August 19, 2011, only 18 days after Ihm terminated his relationship with Boar's Head. [Doc. No. 1, at 1.] The operative First Amended Complaint (“Complaint”) was filed on September 10, 2012 [Doc. No. 43] and includes the following causes of action against defendants: (1) Unfair Competition and False Designation of Origin Under Section 43(a) of the Lanham Act (15 U.S.C. § 1125, et seq.); (2) Unfair Competition Under California Business and Professions Code Section 17200; (3) Breach of Contract; (4) Breach of Duty of Good Faith and Fair Dealing; and (5) Intentional Interference with Prospective Economic Advantage. Brunkhorst seeks damages and injunctive relief. [Doc. No. 43, at p. 11-21, 1st Am. Compl.]

On December 14, 2011, plaintiff served defendant Ihm with its First Set of Interrogatories and its First Set of Requests for Production of Documents seeking access to information about defendants' communications and negotiations with D&W prior to August 1, 2011, when defendants terminated their distributorship with plaintiff and immediately began distributing products for D&W. [Doc. No. 65, Kirby Decl., at p. 3-4; Exs. 3 and 4.] On January 18, 2012, defendant Ihm served objections and responses to plaintiff's interrogatories and document requests. On April 25, 2012, defendant Ihm provided plaintiff with amended responses to these written discovery requests. [Kirby Decl., at pp. 3-4, 9; Exs. 2-8.] Defendants' objections, responses, and supplemental responses to these document requests and interrogatories were essentially the subject of three discovery motions in this Court:

*3 Despite rulings on all of these motions, defendant Ihm's responses and supplemental responses to plaintiff's First Set of Requests for Production of Documents and First Set of Interrogatories are still in dispute to this day and are the subject of the current Motion to Strike. In addition, because of its belief that defendant Ihm was evading discovery of relevant documents and information, plaintiff served D&W with third party subpoenas in Pennsylvania on August 14, 2012. By way of these subpoenas, plaintiff sought discovery similar to that requested from defendant Ihm in its First Set of Requests for Production of Documents and First Set of Interrogatories. [Kirby Decl., at p. 13.]

After D&W refused to comply with the subpoenas or to produce any documents or witnesses, plaintiff commenced a miscellaneous action in the United States District Court for the Eastern District of Pennsylvania. [Doc. No. 65, Kirby Decl., at p. 13-14.] On October 23, 2012, the Eastern District of Pennsylvania ordered D&W to respond to the subpoenas and to produce a corporate representative to testify about the topics listed in the subpoenas. [Doc. No. 65, Kirby Decl., at p. 16-17.] Thereafter, D&W produced a number of responsive documents revealing the details of its negotiations with defendants and the terms of their final agreement. These documents included a number of e-mail exchanges and between defendant Ihm and D&W that were responsive to plaintiff's written discovery requests and that should have been in his possession and should have been identified and produced by plaintiff in his discovery responses. [Doc. No. 65, Kirby Decl., at pp. 16-17.]

Discovery produced by D&W, as well as deposition testimony from other witnesses, all serve as the basis for plaintiff's allegations in its current Motion to Strike that defendants have: (1) made false and misleading statements in their responses to plaintiff's First Set of Requests for Production of Documents and First Set of Interrogatories; (2) failed to comply with their obligation to preserve relevant documents; (3) provided false deposition testimony; (4) delayed resolution of the case on the merits; (5) concealed, suppressed, deleted, or discarded responsive documents; and (6) failed to comply with this Court's Order of September 26, 2012. [P.'s Ps&As, at p. 1, 5, 7-17, 19-22.]

On December 17, 2012, plaintiff filed the instant Motion to Strike Defendants' Answer and Enter Their Default and for Costs and Attorneys' Fees (“Motion to Strike”). [Doc. No. 52 et seq.] Plaintiff also filed an Amended Motion to Strike on December 28, 2012. [Doc. No. 56.] On February 11, 2013, the District Court referred defendants' Motion to Strike to the undersigned Magistrate Judge for a report and recommendation. On March 14, 2013, this Court issued an Order to Show Cause Why Terminating Sanctions Should Not be Imposed Against Defendants and Why Defendant Michael R. Ihm Should Not Be Found in Contempt of Court. [Doc. No. 69.] An Evidentiary/Order to Show Cause Hearing was held on April 16, 2013. [Doc. No. 69, 72.] Defendant Ihm testified at this hearing.

After the initial Scheduling Order was filed on December 16, 2011 [Doc. No. 17], pre-trial deadlines set in the case have been extended three times. On April 17, 2012, Judge Stormes granted a brief extension of all pre-trial deadlines because of delays in finalizing a Protective Order and in completing discovery. [Doc. No. 32.] On September 26, 2012, this Court granted an extension of the fact discovery deadline but only for the purpose of completing depositions. This extension was necessitated by discovery disputes and delays in completing depositions. [Doc. No. 47, at p. 2.] On November 7, 2012, another extension of the deadline for completing depositions was requested in order to accommodate the travel and court schedule of D&W's designated witness. The deadline for completing depositions was briefly extended to November 20, 2012. [Doc. Nos. 49, 49-1, at pp. 2-5; Doc. No. 50.] Thus, the deadline for completing discovery in the case expired on November 20, 2012. On April 18, 2012, all remaining dates in the Second Amended Scheduling Order [Doc. No. 57] were vacated pending the filing of this Court's Report and Recommendation and the outcome of the District Court's Ruling on plaintiff's Motion to Strike. [Doc. No. 71.]

*4 Citing Rule 37(b)(2) and the District Court's inherent power, plaintiff's Motion to Strike seeks an order from the District Court striking defendants' Answer, entering a default judgment, holding defendants in contempt,[1] awarding reasonable costs and attorney's fees, and such other relief as the Court deems necessary and appropriate. Plaintiff contends that terminating sanctions are warranted in this case because defendants deliberately delayed a resolution of the case on the merits, increased the costs of litigation, created a substantial risk of influencing the adjudication of the case, caused prejudice to plaintiff, and violated a Court Order. Plaintiff also believes that defendants' conduct was willful and in bad faith and that lesser sanctions would not be effective in this case as defendants have already been warned[2] by the Court about the prospect of sanctions but to no avail.[3] [Pl.'s Ps&As, at pp. 19-25.]

On December 14, 2011, plaintiff served defendant Ihm with a First Set of Requests for the Production of Documents and a First Set of Interrogatories. [Kirby Decl., at p. 3; Exs. 2 and 3.] Through these written discovery requests, plaintiff sought access to documents and information about defendant Ihm's contacts and negotiations with D&W prior to August 1, 2011, when he terminated his distributorship with plaintiff in favor of a new distributorship with D&W. For example, for the relevant time period,[4] plaintiff requested production of all documents concerning defendants' contractual or business arrangement with D&W; any monetary payment, compensation, or gifts made or promised to defendants; and, any communications or meetings with D&W. [Kirby Decl., at p. 3; Ex. 2.] In the First Set of Interrogatories, defendant Ihm was asked to identify all written contracts, agreements, or other similar documents setting forth the terms of his business relationship with D&W and all communications with D&W prior to August 1, 2011, including the reason for the communication and the method of communication “(e.g. in person meeting, telephone; e-mail, etc).” [Doc. No. 65, Kirby Decl., at p. 3-4; Ex. 3, at p. 5.] In addition, defendant Ihm was specifically asked about the details of any communications he had with D&W's employee, Eugene Orsi, “since April 1, 2011.” [Doc. No. 65, Kirby Decl., at p. 3-4; Ex. 3, at p. 5.]

*5 Defendant Ihm initially responded to defendants' interrogatories and document requests on January 18, 2012. [Doc. No. 65, Kirby Decl., at pp. 4-5; Exhs. 4, 5.] In his initial responses to plaintiff's Document Requests, defendant Ihm objected to the production of any contracts, agreements, or communications with D&W and any documents concerning any monetary payments or compensation provided or promised by D&W on grounds of confidentiality and third party trade secret. [Doc. No. 65, Kirby Decl.; Ex. No. 4, at p. 3.] Defendant Ihm claimed he was “prohibited by contract from disclosing such information.” [Doc. No. 65, Kirby Decl.; Ex. No. 4, at p. 3.] He further stated that he was not aware of any documents concerning communications with D&W about plaintiff or its products or with plaintiff's current or former distributors on or after April 1, 2011. [Doc. No. 65, Kirby Decl.; Ex. 4, at p. 4.] According to plaintiff's counsel, defendants produced less than 80 pages of responsive documents, including only seven e-mails.[5] [Doc. No. 65, Kirby Decl., at p. 5.]

In his initial interrogatory responses, defendant Ihm identified the D&W Confidential Policy but did not identify any separate employment or other agreement. He said he could not recall the dates of his communications with D&W representatives during the relevant time period but said the method of communication was “verbal” and the reasons for the communications were “[s]ocialization, general conversation/pleasantries.” [Doc. No. 65, Kirby Decl.; Ex. 5, at pp. 3-4.] Defendant Ihm said he had a “verbal” communication with Eugene Orsi in July 2011, and the reason for the contact was “[s]ocialization, general conversation/pleasantries.” [Doc. No. 65, Kirby Decl.; Ex. 5, at p. 4.]

On April 25, 2012, defendant Ihm provided amended responses to defendants' interrogatories and document requests. [Doc. No. 65, Kirby Decl., at p. 9; Exs. 7, 8.] In his amended responses to document requests and interrogatories, defendant Ihm objected to the production of any contracts or agreements with D&W based on grounds of trade secret and confidentiality. [Doc. No. 65, Kirby Decl.; Ex. 7, at p. 3; Ex. 8, at p. 3.] He also stated that he was “prohibited by contract from disclosing such information.” [Doc. No. 65, Kirby Decl., Ex. 7, at p. 3; Ex. 8, at p. 3.] Although he identified for the first time a second document – a “[C]ompensation [A]greement” – he made the following representation in his amended responses to plaintiff's document requests: “Defendant is not in possession or control of this agreement which is held by D&W.” [Doc. No. 65, Kirby Decl.; Ex. 7, at p. 3.]

With respect to documents about meetings or other communications with D&W representatives, D&W's current or former distributors, and D&W's current or former retailers, defendant Ihm said in his amended responses that he conducted “a reasonable and diligent search” and would produce all responsive documents except D&W's Confidential Policy. [Doc. No. 65, Kirby Decl.; Ex. 7, at p. 3-4.] At this time plaintiff has represented that defendants produced only two e-mails and no documents about their business relationship with D&W. [Doc. No. 65, Kirby Decl., at p. 9-10.] On May 14, 2012, defendants did supplement their production of documents, but only produced three more e-mails and no documents concerning their business or compensation arrangements with D&W. [Doc. No. 65, Kirby Decl., at p. 10.]

In his amended responses to interrogatories served on April 25, 2013, defendant Ihm essentially admitted he had extensive business discussions and negotiations with D&W representatives between January 2011 through August 1, 2011. For example, defendant Ihm revealed that his first contact with D&W executives was an in-person dinner meeting in January of 2011. At this time D&W executives were gathering information about the San Diego market. Next, he met in person with a D&W representative in March 2011 for information gathering purposes. He then discussed a possible relationship with D&W representatives in person during April 2011. In May 2011, defendant Ihm said he discussed a “draft proposal” with a D&W representative. Further “in person” discussions took place in June 2011 when defendant Ihm and D&W representatives discussed his transition to D&W and the terms of their agreement. In late July 2011, he exchanged e-mails with a D&W representative, copies of which were attached to his responses. On August 1, 2011, he again met “in person” with D&W representatives to execute legal contracts, discuss the transition, and obtain assistance with training. In addition, defendant Ihm stated that he had “4-6 telephone conferences” with D&W representatives but did not recall the dates. Defendant Ihm did not reveal any contacts with Eugene Orsi. [Kirby Decl.; Ex. 8, at pp. 3-6.]

*6 As noted above, the parties filed a Joint Discovery Motion on May 21, 2012. [Doc. No. 38.] In the Joint Discovery Motion, plaintiff sought an order compelling defendant Ihm to produce additional documents in response to the First Set of Requests for the Production of Documents and the First Set of Interrogatories. [Doc. No. 38-8, 2-21.] Plaintiff was particularly interested in access to two documents that defendants had identified but refused to produce: (1) the Compensation Agreement between D&W and defendants; and (2) D&W's Confidential Policy. Defendants resisted discovery of these documents based on relevance, confidentiality, and trade secret concerns. [Doc. No. 38-8, at pp. 5-7, 10-11, 12-13, et seq.; Doc. No. 46, at 9-16.]

In the Joint Discovery Motion, defendant Ihm represented that he did not have a copy of the Compensation Agreement as “D&W maintains such agreements only in its possession” to keep the terms confidential. [Doc. No. 38-8, at p. 10.] In a Declaration under penalty of perjury submitted in support of his argument in the Joint Motion, defendant stated as follows: “D&W always presented any documents for my signature in person. D&W left a copy of its [Confidential Policy] but did not leave a copy of the Compensation Agreement.” [Doc. No. 38-6, Ihm Decl., at p. 5.] In support of this statement, the Joint Discovery Motion references the Declaration of Louis J. Eni, D&W's president and chief executive officer, which was filed in connection with a prior Motion on April 9, 2012. Mr. Eni's April 9, 2012 Declaration states that: “D&W has unique business arrangements with each of its distributors.... D&W keeps strictly confidential all such arrangements from both its competitors and its own distributors. Distributors are required to agree to keep confidential the terms of their individual arrangements with D&W.” [Doc. No. 30-6, at 3, Eni Decl.]

In addition, defense counsel submitted a Declaration with the Joint Discovery Motion filed May 21, 2012 stating that he had attempted to obtain a copy of the Compensation Agreement from D&W, but D&W refused to provide it to him because it contained confidential trade secret information. Attached as Exhibit A to defense counsel's Declaration is an e-mail from D&W's counsel dated May 9, 2012 refusing to produce documentation relating to its distributorship arrangement with defendants for confidentiality and trade secret reasons. Exhibit A states in part as follows:

[Doc. No. 38-4, Becker Decl., Ex. A.] Because of D&W's position on this matter, defense counsel suggested early in the litigation that plaintiff serve D&W with a subpoena. [Doc. No. 38-4, Becker Decl., at p. 2; Doc. No. 45, at pp. 9-16.]

Defendants' arguments in the Joint Discovery Motion were further supported by a second Declaration by D&W's president and chief executive officer. [Doc. No. 38-3, at pp. 3-7, 11; Doc. No. 38-5, at pp. 1-10.] This Declaration states that the Confidential Policy contains confidential business information and trade secrets. In addition, the Declaration states that D&W issued a Confidential Policy to Ihm subject to a confidentiality provision and agreement. In other words, Ihm was prohibited by contract from disclosing the contents of the Confidential Policy. [Doc. No. 38-5, Eni Decl., at p. 2.]

*7 In an Order filed September 26, 2012, this Court denied defendants' request for an order compelling defendants to produce the Confidential Policy but ordered defendant Ihm to produce a copy of his Compensation Agreement with D&W subject to the terms of the Protective Order. [Doc. No. 46, at p. 21.] Although defendant Ihm claimed that he did not have a copy of the Compensation Agreement, this Court concluded he was obligated to produce it pursuant to Federal Rule of Civil Procedure 26(b)(1), because it was within his “possession, custody, or control.” Fed.R.Civ.P. 26(b)(1). Defendant was not only a signatory to the Compensation Agreement, he continued to have a close working relationship with D&W. [Doc. No. 46, at pp. 14-15.]

In the Joint Discovery Motion filed May 21, 2012, plaintiff also complained that in response to various requests for production of documents about the relationship between defendants and D&W, defendants produced an unusually small number of documents. Plaintiff argued the number of documents was unusually small given Ihm's admissions in amended responses to interrogatories that his discussions with D&W representatives began in January 2011 and continued through the months leading up to Ihm's termination of his relationship with plaintiff on August 1, 2011. [Doc. No. 38-2, at pp. 10-11; Doc. No. 38-1, at p. 96-98.] Under the circumstances, plaintiff argued it was simply unbelievable that there were no other responsive documents, such as draft agreements and e-mail communications discussing the proposed terms of the final agreement. [Doc. No. 38-2, at pp. 10-11.]

In response, defendant Ihm stated in his Declaration submitted with the Joint Discovery Motion that: “Almost all of my interactions and communications with D&W leading up to my change in product distribution were in person or via telephone.” [Doc. No. 38-6, at p. 5, Ihm Decl.] He also represented that he used e-mail “as little as possible” and was not comfortable with computers. [Doc. No. 38-6, at p. 5, Ihm Decl.] As to some requests, defendant Ihm stated in the Joint Discovery Motion that he conducted a diligent search, including a search of his computer and employee computers and had produced all responsive documents during the relevant time period. [Doc. No. 38-8, at p. 12-13; Doc. No. 46, at pp. 16-21.] As to other requests, defendant Ihm's representations in the Joint Discovery Motion were ambiguous, and it was therefore unclear whether all responsive documents had been produced. [Doc. No. 46, at pp. 19-21.] Defendant Ihm was therefore ordered on September 26, 2012 to provide plaintiff with a declaration under penalty of perjury pursuant to Federal Rule of Civil Procedure 26(g)(1)(A) stating he conducted a diligent search and that his responses were complete and correct to the best of his knowledge, information, and belief. [Doc. No. 46, at pp. 21.]

According to plaintiff, defendants never produced a copy of the Compensation Agreement in response to the Court's Order of September 26, 2012. However, they did produce a few responsive documents, including a copy of a wire confirmation in the amount of $500,000 from D&W to defendant Sunset on August 1, 2011 and five emails. [Doc. No. 65, Kirby Decl., at p. 15; Exh. 18.] Defendant Ihm also provided a Declaration, as ordered by the Court on September 26, 2012, stating that he had diligently searched for relevant documents and that his production was correct and complete to the best of his knowledge. [Doc. No. 65, Kirby Decl., at p. 15; Exh. 19.]

Defendant Ihm was deposed on October 23, 2012 before D&W began producing documents on November 5, 2012 in response to an Order by the Eastern District of Pennsylvania. [Doc. No. 65, Kirby Decl., at p. 16; Ex. 21, at p. 1.] In his deposition, defendant Ihm testified that after he received defendants' preservation letter dated September 16, 2011, he did not delete any e-mails pertaining to his case. They would have been saved on his computer as there was no automatic deletion system in effect. However, defendant Ihm also stated that he is not computer literate and did not consult with anyone to ensure that e-mails in his system would not automatically delete over time. [Doc. No. 65, Kirby Decl; Ex. 21, at pp. 19-21.]

*8 From June 2011 until August 1, 2011, defendant Ihm testified that he only used e-mail “once or twice” to communicate with D&W. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 26, 47.] Prior to August 1, 2011, defendant Ihm said he received “[j]ust five emails, maybe [from D&W]. That's it.” [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 31.] Prior to August 1, 2011, defendant Ihm also said he did not receive any mail from D&W via the post office, FedEx, or UPS other than product information. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 21-22.] Nor did he receive any hard copies of punch lists, draft contracts, or contracts. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 31-32.]

According to defendant Ihm, all documents, such as draft contracts, contracts, and pricing information, were handed to him personally by D&W representatives, and he handed the documents back to them after he read them. He did not make copies of these documents. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 32-34, 37.] On August 1, 2011, D&W representatives presented him with the final version of the contract at his office. He reviewed it and signed it but did not retain a copy. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 61-62.] When asked why he did not retain a copy, defendant Ihm said that August 1, 2011 was a “crazy day” and having a copy of the contract was not a priority at that time. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 82.] Later, when he asked D&W for a copy, he was told by D&W's attorney that he could not have a copy because of the lawsuit. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 83.] Prior to signing this final contract, defendant Ihm said he did not consult an attorney about it. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 62.] Nor did he consult an attorney about terminating his relationship with plaintiff. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 276.]

After receiving plaintiff's document request, defendant Ihm represented that he looked on his computer and in a file for responsive documents, but he did not ask his employees to search for responsive documents because he did not believe they would have any. He did not communicate with his employees via e-mail about the matters plaintiff was attempting to discover. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 44.] Since August 1, 2011, defendant Ihm said he has not deleted any communications he had with D&W from his computer, so any such communications should still exist today. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 46, 48.]

Defendant Ihm also testified in his deposition on October 23, 2012 that he first began to think about switching from Boar's Head to D&W in May of 2011 after a meeting with a representative of Stater Brothers. In this meeting, defendant Ihm says he learned from the representative of Stater Brothers that plaintiff intended to make changes that would be detrimental to his business. Specifically, the Stater Brothers representative said he had been told by plaintiff's representative that defendant Ihm would “not be here to distribute the product to their stores.” After this meeting, defendant Ihm said he contacted D&W to set up a meeting to discuss making a change. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 127-151.]

As noted above, third party D&W began producing documents on November 5, 2012 in response to an Order by the Eastern District of Pennsylvania requiring it to produce documents in response to plaintiff's subpoenas. [Doc. No. 65, Kirby Decl., at p. 16.] As outlined more fully below, the discovery produced by D&W shows that defendant Ihm's written discovery responses, production of documents, representations to the Court, and deposition testimony include a number of misleading, inaccurate, and/or false information. In addition, other evidence submitted by plaintiff with the instant Motion to Strike shows that defendant Ihm failed to comply with the Court's September 26, 2012 Order to produce documents.

*9 According to plaintiff, the discovery produced by D&W includes more than 60 e-mail communications during the period March 2011 through August 1, 2011 between defendant Ihm and D&W representatives, including Eugene Orsi, that are responsive to plaintiff's document requests but were not previously produced by defendants. [Doc. No. 65, Kirby Decl., at p. 28.] A review of these e-mails shows that they should have been in defendant Ihm's possession and should have been identified and/or produced during the discovery process. [Doc. No. 65, Kirby Decl., at p. 17 et seq.; Ex. 23, at pp. DIETZ 041-139, 225-228, 382, 415-489.]

As noted above, defendant Ihm represented on April 25, 2012 in his amended responses to plaintiff's document requests that he conducted a “reasonable and diligent search” for his communications with D&W during the relevant time period and would produce all responsive documents. [Doc. No. 65, Kirby Decl.; Ex. 7, at p. 4.] In the parties' Joint Discovery Motion filed on May 21, 2012, defendants further represented that they conducted a “diligent search” and “provided all written communication during the relevant time period. Defendant has searched his computer and employee computers....”[6] [Doc. No. 38-8, at pp. 12-13.] As ordered by the Court on September 26, 2012, defendant Ihm also stated in a sworn declaration dated October 11, 2012 that he conducted a “further diligent search” and that his production of documents was correct and complete. [Doc. No. 65, Kirby Decl.; Ex. 19, at p. 2.] His failure to locate and produce these documents also contradicts his deposition testimony of October 23, 2012 stating that he did not delete communications from his computer so they should all exist today. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 46, 48.] By concealing the existence of these documents and/or by failing to identify or produce them, defendant Ihm violated this Court's Order of September 26, 2012. [Doc. No. 46, at pp. 16-21.]

Interrogatory No. 4 of plaintiff's First Set of Interrogatories specifically asked defendant Ihm about any communications he had with Eugene Orsi “since April 1, 2011.” [Doc. No. 65, Kirby Decl.; Exh. 5, at p. 4.] On January 18, 2012, in his initial responses to plaintiff's interrogatories defendant Ihm stated that he had a “verbal” communication with Eugene Orsi in July 2011 and that the reason for the communication was “[s]ocialization, general conversation/pleasantries.” [Doc. No. 65, Kirby Decl., Exh. 5, at p. 4.] Defendant did not change his answer to this Interrogatory in his Amended Response to Plaintiff's First Set of Interrogatories served on April 25, 2012. [Doc. No. 65, Kirby Decl., Exh. 8.] As the discovery from D&W revealed, defendant Ihm exchanged a series of e-mails with Eugene Orsi between May 16, 2011 and July 2011. All of these e-mail communications are business-related and generally discuss the marketing of D&W products by defendant Ihm. [Doc. No. 65, Kirby Decl., at p. 19-20, Exh. 23, at pp. DIETZ138-175, 225-232, 445, 489.] In other words, defendant Ihm's response to Interrogatory No. 4 is clearly misleading and inaccurate.

In sum, contrary to all of the representations made by defendant Ihm during the discovery process, the documents produced by D&W show that defendant Ihm's e-mail contacts with D&W representatives, including Eugene Orsi, during the relevant time period were plentiful, rather than sparse, as defendants consistently maintained during the discovery process. Based on the evidence in the record, the only logical conclusion is that defendant Ihm either discarded or deleted most of his e-mail exchanges with D&W despite a duty to preserve them, or simply elected not to produce them in response to discovery requests and in violation of this Court's Order of September 26, 2012.

*10 On September 26, 2012, this Court granted plaintiff's request for an order compelling defendant Ihm to produce a copy of the Compensation Agreement, because it was within his “possession, custody, or control” under Federal Rules of Civil Procedure 26(b)(1) and 34(a)(1). Although defendant Ihm has maintained during the entire discovery process that he did not have a copy of the Compensation Agreement in his possession, the Court concluded he had “a legal right to obtain a copy” because he was not only a signatory to the Compensation Agreement, he had a close working relationship with D&W. [Doc. No. 46, at pp. 14-15.] Defendant Ihm was ordered to produce a copy of the Compensation Agreement subject to the terms of the Protective Order no later than October 12, 2012. [Doc. No. 46, at p. 46.] According to plaintiff, defendant Ihm did not produce the Compensation Agreement by October 12, 2012 and still had not produced it as of the time the instant Motion to Strike was filed. [Doc. No. 65, Kirby Decl., at p. 27.] Instead, plaintiff received a copy of the Compensation Agreement in the documents produced by D&W. [Doc. No. 65, Kirby Decl.; Ex. 23, at pp. 1-7.] Thus, defendant Ihm failed to comply with this Court's Order of September 26, 2012 even though, as outlined more fully below, the circumstances strongly indicate he had access to a copy of the Compensation Agreement all along and could have produced it as ordered.

As set forth above, defendant Ihm represented to the Court in connection with the parties' Joint Motion and in his written discovery responses that he did not have a copy of the Compensation Agreement. However, the documents produced by D&W indicate that defendant Ihm did receive a copy of the Compensation Agreement from D&W. An e-mail from D&W dated June 30, 2011 indicates that two copies of an agreement were sent to defendant Ihm via FedEx on June 30, 2011. In this e-mail, defendant Ihm was instructed to sign both copies and keep one for himself. [Doc. No. 65, Kirby Decl., at p. 20; Ex. 23, at p. DIETZ068.] It is apparent that the referenced agreement is what defendant Ihm identified in his discovery responses as the Compensation Agreement.

The copy of the Compensation Agreement produced by D&W states on page 1 that the effective date is June 30, 2011. [Doc. No. 65, Kirby Decl., at p. 20; Ex. 23, at p. DIETZ001-007.] Plaintiff contends that the date the Compensation Agreement was signed is relevant to its claim that defendant Ihm breached his contractual duties to plaintiff. [Doc. No. 66, P.'s Reply, at p. 5.] The dates on the e-mail dated June 30, 2011 and the effective date shown on the first page of the Compensation Agreement conflict with defendant Ihm's deposition testimony that D&W representatives presented him with the final version of the contract at his office on August 1, 2011. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 61-62.] In addition, defendant Ihm testified in his deposition that prior to August 1, 2011 he did not receive from D&W any mail via the post office, FedEx, or UPS other than product information and did not receive hard copies of contracts from D&W. [Doc. No. 65, Kirby Decl.; Ex. 21 at pp. 21-22, 31-32.] Contrary to defendant Ihm's representations, D&W's representative, Thomas Nardi, testified in his deposition on November 16, 2012 that the Compensation Agreement was fully executed by Ihm on or before June 30, 2011. [Doc. No. 65, Kirby Decl.; Ex. 25, at pp. 67-68.] Given the significance of the Compensation Agreement, it is difficult to believe that defendant Ihm did not recall receiving it via FedEx, did not keep a copy of it, and did not remember when he executed it.

It is also telling that D&W representatives made conflicting representations about the Compensation Agreement during the course of discovery in this case. As noted above, defense counsel submitted a copy of an e-mail from D&W's counsel dated May 9, 2012 in connection with the parties' Joint Discovery Motion. In this May 9, 2012 e-mail, D&W's counsel refused to provide defense counsel with copies of documentation relating to D&W's distributorship arrangement with defendants because it contained confidential trade secret information. D&W's counsel also represented in the e-mail that the parties had agreed that this documentation “would remain at D&W's offices to avoid disclosure.” [Doc. No. 38-4, Becker Decl.; Ex. A.] D&W's president and chief executive officer later represented in a deposition taken on November 14, 2012 that defendant Ihm had asked D&W for a copy of the Compensation Agreement “probably this year, and we sent it. We sent him a copy of it.” [Doc. No. 65, Kirby Decl., at pp. 21-22; Ex. 24, at p. 99-100.] Another D&W representative, Thomas Nardi, testified in his deposition on November 16, 2012 that D&W never told defendant Ihm not to produce a copy of the Compensation Agreement. [Doc. No. 65, Kirby Decl.; Ex. 25, at p. 65.]

*11 The discovery produced by D&W also revealed the existence of other responsive agreements or contracts in draft or final form that were not produced by defendant Ihm during the course of discovery. For example, these documents include: (1) a Non-Disclosure and Confidentiality Agreement executed by defendant Ihm in March 2011 [Doc. No. 65, Kirby Decl., at p. 19; Exh. 23, at pp. DIETZ008-010, 013, 384-386]; (2) a Proposal for Strategic Distributor Relationship signed by defendant Ihm and D&W on May 12, 2011 [Doc. No 65, Kirby Decl., at p. 19; Exh. 23, at pp. DIETZ028-029]; and, (3) a Certificate executed by D&W and defendant Ihm on July 29, 2011 agreeing that defendant Ihm would begin an exclusive distributorship with D&W as of August 1, 2011 [Doc. No. 65, Kirby Decl., at p. 19; Exh. 23, at pp. DIETZ097, 240-241.]

Defendant Ihm did not produce or identify any of these agreements in his discovery responses or in connection with the parties' Joint Discovery Motion filed May 21, 2012. Instead, in the parties' joint submission, defendants made statements such as the following: (1) “Defendants identified the only document they have in their possession, namely, [the Confidential Policy].” [Doc. No. 38-8, at p. 5.] (2) “Defendants have produced all responsive documents.” [Doc. No. 38-8, at p. 18.] It is difficult to believe that defendant Ihm would not have retained copies of these important documents. Even if defendant Ihm chose not to keep a copy of these documents as part of his self-professed plan not to create a “paper trail,”[7] he certainly knew of their existence and should have revealed this in his responses to plaintiff's interrogatories and/or document requests.

As plaintiff contends, the timing of defendant Ihm's negotiations with D&W is, at the very least, relevant to its claim that defendants terminated the distributorship arrangement without giving plaintiff reasonable notice. [Doc. No. 43, 1st Am. Compl., at p. 15.] The Non-Disclosure and Confidentiality Agreement produced by D&W and executed by defendant Ihm in March 2011 clearly contradicts defendant Ihm's deposition testimony. In his deposition, defendant Ihm testified that he first began to think about switching from Boar's Head to D&W in May of 2011 after he learned in a meeting with Stater Brothers that plaintiff intended to make a business decision that would be detrimental to him. [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 127-151.] Thus, it is apparent that defendant Ihm's testimony was untruthful, and the truth about his negotiations with D&W would not have been discovered without the documents produced by D&W.

The documents produced by D&W also show that D&W sent draft agreements to defendant Ihm by e-mail for his review. Defendant Ihm also sent a draft agreement to an attorney for review.[8] [Doc. No. 65, Kirby Decl., at p. 21; Ex. 23, at pp. DIETZ041-042, 047-048, 058-063.] As noted above, defendant Ihm did not identify or produce any draft agreements or any communications about draft agreements in his discovery responses or in his representations to the Court in connection with the parties' Joint Discovery Motion even though they should have been in his possession and were responsive to plaintiff's discovery requests.

*12 On April 16, 2013, this Court held an Evidentiary Hearing in connection with plaintiff's Motion to Strike. [Doc. Nos. 69, 72.] During this Evidentiary Hearing, defendant Ihm was asked by plaintiff's counsel about the 60 e-mails he obviously did not produce during the discovery process and his representations that most of his contacts with D&W were in person. Defendant Ihm said that he did not remember the 60 e-mails. [CD-Rom, Apr. 16, 2013, at 1:54-56:10.] He also stated that: “[The emails] were not in my system, so obviously they got deleted.” [CD-ROM, Apr. 16, 2013, at 1:31:36; 1:53:04-54:28.] However, he did not recall discarding any documents. [CD-Rom, Apr. 16, 2013, at 1:59:35-50.] Defendant Ihm also claimed that he made an “honest mistake” and “mispoke” when he represented that he only exchanged a few e-mails with D&W representatives during the relevant time period. [CD-ROM, Apr. 16, 2013, at 1:55:40-57:10; 1:58:19-40.] When asked when he signed the Compensation Agreement, defendant Ihm said he believed he signed it on August 1, even though the e-mail communications indicate he received it an signed it earlier. [CD-ROM, Apr. 16, 2013, at 2:11:00-12:30.]

Spoliation is “the destruction or significant alteration of evidence, or the failure to preserve property for another's use as evidence, in pending or reasonably foreseeable litigation.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003). “[A] party can only be sanctioned for destroying evidence if it had a duty to preserve it.” Id. For a duty of preservation to arise, the Ninth Circuit has stated that a party must have “ ‘some notice that the documents were potentially relevant’ to the litigation before they were destroyed.” United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir. 2002). Other circuits have stated that a duty to preserve evidence arises when litigation is “pending or reasonably foreseeable.” Silvestri v. General Motors Corp., 271 F.3d 583, 590 (4th Cir. 2001). See alsoMicron Technology, Inc. v. Rambus Inc., 645 F.3d 1311, 1320 (Fed. Cir. 2011). “This is an objective standard, asking not whether the party in fact reasonably foresaw litigation, but whether a reasonable party in the same factual circumstances would have reasonably foreseen litigation.” Id.

“When litigation is ‘reasonably foreseeable’ is a flexible fact-specific standard that allows a district court to exercise the discretion necessary to confront the myriad factual situations inherent in the spoliation inquiry.” Id. “This standard does not trigger the duty to preserve documents from the mere existence of a potential claim or the distant possibility of litigation. [Citation omitted.] However, it is not so inflexible as to require that litigation be ‘imminent, or probable without significant contingencies....' ” Id.

“ ‘Document retention policies,’ which are created in part to keep certain information from getting into the hands of others ... are common in business. [Citation omitted.] It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy under ordinary circumstances.” Arthur Andersen LLP v. U.S., 544 U.S. 696, 704 (2005). However, “[o]nce a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Zubulake, 220 F.R.D. at 218. “The obligation to retain discoverable materials is an affirmative one; it requires that the ... corporate officers having notice of discovery obligations communicate those obligations to employees in possession of discoverable materials.” National Ass'n of Radiation Survivors v. Turnage, 115 F.R.D. 543, 558 (N.D. Cal.,1987). While there is no duty to retain every document, “anyone 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.” Id. at 217.

Here, there is evidence indicating that defendant Ihm's duty to preserve relevant documents was triggered early in his negotiations with D&W, because he knew he would be sued by plaintiff if he terminated his distributorship with plaintiff in favor of a new distributorship with plaintiff's direct competitor, D&W. First, plaintiff deposed D&W's president and chief executive officer, Louis J. Eni, Jr., who recalled a conversation with defendant Ihm in approximately April 2011 about the potential for litigation with plaintiff. At this time, defendant Ihm indicated he knew “probably from the beginning” that there was no way to avoid litigation with plaintiff. He told Mr. Eni that he knew he would be sued because “that's the way [plaintiff] operates.” [Doc. No. 65, Kirby Decl.; Ex. 24, Eni Depo., at p. 45-46.]

*13 Second, on June 27, 2011, an attorney that was helping defendant Ihm negotiate the terms of his contract with D&W sent an e-mail to a D&W representative about “issues and items [she] would like to see changed” in the draft agreement. She indicated that one of the items that had been discussed with D&W was “if BH litigates what support financially and otherwise D&W is prepared to provide.” [Doc. No. 65, Kirby Decl., Exh. 23, at p. DIETZ061.]

Third, defendant Ihm testified in his deposition that during the negotiations leading up to the change to D&W on August 1, 2011, the parties discussed having “little or no paperwork.” [Doc. No. 65, Kirby Decl.; Exh. 21, at p. 35.] “[I]f any paper was going to be given, it would be in person,” because they did not want to “have a paper trail” concerning their negotiations. [Doc. No. 65, Kirby Decl.; Exh. 21, at p. 36-37, 178-179.]

Fourth, in an e-mail from D&W on July 28, 2011, a D&W representative asked defendant Ihm “about the e-mail you are thinking about releasing to your soon to be former fellow distributors.” [Doc. No. 65, Kirby Decl., at p. 18; Ex. 23, at p. DIETZ 098.] Defendant Ihm responded as follows: “I am not putting anything in writing. There will be no paper trail....” [Doc. No. 65, Kirby Decl., at p. 18; Ex. 23, at p. DIETZ 098.]

In sum, it is clear from the evidence that defendant Ihm knew from the time he began his negotiations with D&W in early 2011 that plaintiff would sue him if he completed the deal. Given the information that was available to him during his negotiations with D&W, which began as early as January 2011, there is no question that litigation with plaintiff was anticipated and reasonably foreseeable. He therefore had a duty to preserve relevant evidence as early as January 2011 but in no event later than his discussion about expected litigation with D&W in April 2011.

In addition, on September 16, 2011, shortly after the lawsuit was filed on August 19, 2011, plaintiff's counsel sent defense counsel a letter which states in part as follows: “In light of the pending litigation..., please ensure that Mr. Ihm and [Sunset] preserve all documents in their possession or under their control, whether in hard copy or electronic form, including but not limited to computers and external hard drives, which relate in any way to Brunkhorst, Boar's Head products, Dietz & Watson, Dietz & Watson products, and all accounts served and solicited by Sunset/Ihm. In this regard, Mr. Ihm and Sunset should: 1. Suspend immediately all routine and other document purge or destruction activities regarding hard copy and electronically stored documents that are potentially relevant to this dispute. 2. Preserve all documents (hard copy and electronic) that are potentially relevant to this dispute.” [Doc. No. 53-2, Kirby Decl., at p. 2; Doc. No. 53-4, Ex. 1, at p. 1.]

Despite a duty to preserve relevant documents, defendant Ihm's employees later testified that: (1) they communicated by e-mail with D&W; (2) they were not instructed by anyone to preserve any e-mails concerning Brunkhorst, Boar's Head, or D&W at any time before or after this lawsuit was filed; (3) no one asked to review their e-mails for documents to be produced in connection with this lawsuit; and (4) they have deleted e-mails since August 1, 2011. [Doc. No. 65, Kirby Decl., at p. 12; Exh. 11-14.] For example, one employee testified that he “just delete[s] e-mails as they get old, as [he doesn't] need them any longer.” [Doc. No. 65, Kirby Decl., at p. 12; Exh. 12.] Employee testimony also indicated there was at least one responsive document that was not produced, namely, a letter received by the employee with his paycheck from defendant Ihm in late July 2011 seeking his attendance at a meeting. Although he indicated he did not believe he could locate a copy of the letter, he testified about his recollection of the contents. He also testified that at the meeting, he and some other employees were told about the switch to D&W and were asked to sign a confidentiality agreement. [Doc. No. 65, Kirby Decl., at pp. 12-13, Exh. 12, at pp. 32-38.]

*14 “The authority to sanction litigants for spoliation arises jointly under the Federal Rules of Civil Procedure and the court's own inherent powers.” Zubulake, 220 F.R.D. at 216. Under Federal Rule of Civil Procedure 37(b)(2), terminating and other types of sanctions may be imposed against a party “who fails to obey an order to provide or permit discovery.” Fed.R.Civ.P. 37(b)(2)(A),(C). If a party “fails to obey an order to provide or permit discovery,” Rule 37(b)(2) authorizes the District Court to issue a “just order,” including any of the following:

(v) dismissing the action or proceeding in whole or in part;

Fed.R.Civ.P. (b)(2)(A). These sanctions may also be imposed if a party who has responded to an interrogatory or request for production fails to supplement the response “in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.” Fed.R.Civ.P. 37 (c)(1)(C); 26(e)(1)(A).

“[S]anctions may be imposed [under Rule 37] even for negligent failures to provide discovery.” Fjelstad v. American Honda Motor Co., 762 F.2d 1334, 1343 (9th Cir. 1985). “Once the duty to preserve attaches, any destruction of documents is, at a minimum, negligent” unless the destruction was caused by events outside the party's control. Zubulake, 220 F.R.D. at 220. The fact that there is no evidence of bad faith does not immunize a party from sanctions under Rule 37. Hyde & Drath v. Baker, 24 F.3d 1162, 1171 (9th Cir. 1994). “While a finding of bad faith is not a requirement for imposing sanctions, good or bad faith may be a consideration in determining whether imposition of sanctions would be unjust.” Id.

*15 On the other hand, when more drastic, terminating sanctions, such as dismissal, are imposed under Rule 37, the party's failure to comply with a discovery order must be due to willfulness, fault, or bad faith. Fjelstad, 762 F.2d at 1337, 1343. “Disobedient conduct not shown to be outside the litigant's control meets this standard.” Fair Housing of Marin v. Combs, 285 F.3d 899, 905 (9th Cir. 2002). The party's transgression or misconduct must be directly related to the merits of the particular claim in controversy and threaten to interfere with a fair decision of the case. Id. For example, deception about a “peripheral” matter is not enough to justify the severe sanction of dismissal. Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F.3d 337, 348 (9th Cir. 1995).

“Before imposing the harsh sanction of dismissal, the district court must weigh several factors: (1) the public's interest in expeditious resolution of litigation; (2) the court's need to manage its dockets; (3) the risk of prejudice to the party seeking sanctions; (4) the public policy favoring disposition of cases on their merits; and (5) the availability of less drastic sanctions.” Id. If a court order has been violated, the first two factors would support terminating sanctions, but these factors must be balanced against the fourth factor, which “cuts against case-dispositive sanctions” by favoring a decision on the merits. Valley Engineers v. Electric Engineering Co., 158 F.3d 1051, 1057 (9th Cir. 1998).

In Leon v. IDX Systems Corp., 464 F.3d 951 (9th Cir. 2006), the Ninth Circuit indicated that the factors set forth in Anheuser-Busch would support dismissal if the conduct at issue “ ‘greatly impeded resolution of the case’ by obscuring the factual predicate of the case and consuming months of sanction-related litigation.” Id. at 958. “What is most critical for case-dispositive sanctions, regarding risk of prejudice and of less drastic sanctions, is whether the discovery violations ‘threaten to interfere with the rightful decision of the case.’ ” Valley Engineers v. Electric Engineering Co., 464 F.3d at 1057. “Dismissal is appropriate where a ‘pattern of deception and discovery abuse made it impossible’ for the district court to conduct a trial ‘with any reasonable assurance that the truth would be available.’ [Citation omitted.]” Id. Terminating sanctions are inappropriate when all or substantially all of the missing evidence is obtained from another source. In re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060, 1075 (N.D. Cal. 2006).

To determine whether less drastic sanctions are appropriate before dismissing a party's case, the District Court should consider: (1) the feasibility of less drastic sanctions and why such alternate sanctions would be inappropriate; (2) whether alternative sanctions should be implemented before the case is dismissed; and (3) whether the party was previously warned of the possibility of dismissal. Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F.3d at 352. However, “it is not always necessary for the court to impose lesser serious sanctions first, or to give any explicit warning.” Valley Engineers v. Electric Engineering Co., 464 F.3d at 1057. “The significance of warning is that a sanction may be unfair if the party could not have realized that it was in jeopardy of so severe a consequence if it was in error regarding its discovery posture.” Id. at 1057.

District Courts also have inherent power to dismiss a case or enter a default judgment as a sanction if a party willfully or deliberately deceives the Court or engages in abusive litigation practices that undermine the orderly administration of justice. Anheuser-Busch, 69 F.3d at 348. In other words, “[d]ismissal under a court's inherent powers is justified in extreme circumstances.” Halaco Engineering Co. v. Costle, 843 F.2d 376, 380 (9th Cir. 1988). A District Court can properly rely on its inherent power to impose the “harsh sanction” of dismissal if a party has engaged “deliberately in deceptive practices” that undermine the integrity of the judicial system but the conduct was not in violation of any particular discovery order governed by Rule 37. Leon v. IDX Systems Corp., 464 F.3d at 958. The Anheuser-Busch factors outlined above are also applied to determine whether terminating sanctions are appropriate under the Court's inherent power. Id. at 958-961.

*16 In Leon v. IDX,, 464 F.3d at 951, for example, the Ninth Circuit applied the Anheiser-Bush factors and upheld a dismissal of the plaintiff's case under the court's inherent power because the plaintiff acted in bad faith by deleting files on a computer that were relevant to the matters at issue in his case. The plaintiff in Leon v. IDX filed suit against his employer alleging that his employment was being terminated in retaliation for whistle blowing activities. The employer filed a separate declaratory relief action seeking to establish that it could terminate the employee without violating federal or state law. Id. at 955. Shortly after filing suit, the employer sent letters to the employee's counsel seeking return of an employer-issued laptop computer. In the letters, the employer's counsel specifically cautioned that the employee should preserve all data. The employee was “specifically warned” to ensure that no data on the computer was lost or corrupted. Id. at 956. However, when the computer was returned, a forensics analysis revealed that more than 2,200 files had been deleted. The forensics expert “reported that all data in the hard drive's unallocated space had been intentionally wiped, and also reported that the computer had been used to view and download pornography.” Id. In his deposition, the employee admitted deleting files after being placed on administrative leave. He then wrote a special computer program “to ‘wipe’ any deleted files from the unallocated space in the hard drive.” Id. He also admitted that some of the deleted files contained pornographic content. Id. At the employer's request, the District Court relied on its inherent powers to dismiss the employee's case for spoilation of evidence. Id. at 956-957.

Applying the five factors set out in Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F.3d at 337, the Ninth Circuit in Leon v. IDX, 464 F.3d at 951, upheld the District Court's dismissal of the employee's case. Id. at 959-961. According to the Ninth Circuit, a finding of bad faith was not erroneous because the employee knew he was under a duty to preserve all the data on the laptop and admitted he intended to destroy information, including pornographic files that were relevant to whether he was terminated for legitimate reasons. Id. at 959. In addition, the Ninth Circuit concluded the employer was prejudiced because there was no way to recreate the contents of the laptop and the deleted personal files were not only relevant but likely to be at the heart of the employer's defense. Id. at 959-960. The Ninth Circuit also agreed that less drastic sanctions were not feasible because the employer was essentially rendered helpless to rebut any evidence presented by the employee and a warning was not required before dismissal because the destruction of evidence occurred before the Court had any opportunity to warn. Id. at 960.

Rule 37(b)(2)(C) provides for an award of monetary sanctions for a party's failure to obey an order to provide or permit discovery. In this regard, Rule 37(b)(2)(C) states as follows: “Instead of or in addition to the [other sanctions allowed under this rule], the court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.” (Emphasis added.)

“Under its ‘inherent powers,’ a district court may also award sanctions in the form of attorneys' fees against a party or counsel who acts ‘in bad faith, vexatiously, wantonly, or for oppressive reasons.’ [Citation omitted.] Before awarding such sanctions, the court must make an express finding that the sanctioned party's behavior ‘constituted or was tantamount to bad faith.’ [Citation omitted.] A party ‘demonstrates bad faith by delaying or disrupting the litigation or hampering enforcement of a court order.’ [Citation omitted.]” Leon v. IDX, 464 F.3d at 961. An award of monetary sanctions must also be “reasonable” under the circumstances. Id.

Defendant Ihm argues that harsh, terminating sanctions should not be imposed because he did intentionally or willfully withhold information about his communications with D&W. [Doc. No. 63, Opp'n, at p. 11.] He believes that he has acted diligently and honestly in complying with the discovery process and the Court's Orders and that defendants' Motion to Strike misstates the facts and omits and twists information to push the Court to rule on the case without a trial on the merits. [Doc. No. 63, Opp'n, at pp. 8, 15.]

*17 Defendant Ihm blames his failure to locate relevant, discoverable documents on several factors. First, in a Declaration submitted in support of his Opposition to plaintiff's Motion to Strike, defendant Ihm states that: “Due to the small size and nontraditional type of office maintained by my business, I have never had a policy to save any documents other than documents pertaining to insurance, delivery truck information and invoices. My business does not maintain a paper flow.... [N]either myself nor my employees have ever saved or maintained email files on the computer....” [Doc. No. 63-2, Ihm Decl., at p. 2.] In other words, e-mails are deleted as a matter or course and no real effort is made to retain them for any reason.

Second, defendant Ihm concedes that his “record keeping may not have been up to par,” but this is because he was working long hours and is mostly on the road servicing customers. As a result, he “does not have a precise memory as to much of the office paperwork that was exchanged [with D&W], including e-mails.” [Doc. No. 63-2, Ihm Decl., at p. 2.]

Third, defendant Ihm argues that the facts are not extreme enough to warrant terminating sanctions, and in any event, plaintiff has not been prejudiced in its ability to try the case, as it was able to obtain the documents it was seeking from D&W. [Doc. No. 63, at p. 20.] According to defendant Ihm, plaintiff's contention that it has been prejudiced is “too speculative to warrant such dire sanctions.” [Doc. No. 63, Opp'n, at p. 20.]

The problem with defendant Ihm's admissions and explanations for his failure to produce e-mails and other relevant documents, including the Compensation Agreement, are that they have come too late in the litigation and after too many misleading and/or untruthful discovery responses and representations were made to both plaintiff and to the Court. The evidence, as summarized above, establishes a pattern of deliberate attempts to prevent the truth about the extent and duration of his negotiations with D&W from ever being discovered. As plaintiff contends, defendant Ihm's conduct in this regard threatened a fair and accurate resolution of the case. The evidence also shows that defendant Ihm succeeded in unnecessarily increasing the costs of this litigation and in delaying a resolution of the case on the merits. As plaintiff contends, it had to “spend much of the past year chasing after discovery to which it [was] plainly entitled” and was forced to take depositions without information that should have been produced months earlier. [Pl.'s Ps&As, at p. 1, 20; Doc. No. 65, Kirby Decl., at pp. 13-16.] In addition, plaintiff had to a spend a good deal of time and money litigating the subpoenas that were served on D&W in Pennsylvania, and this litigation might not have been necessary had defendant Ihm preserved and produced documents as he was required to do by law. However, it is also apparent that defendant Ihm acted against his own best interests in order to harm his adversary. While sending his former employer and current competitor off on an expensive “wild goose chase” to discover the truth through discovery from D&W, he not only damaged his credibility with the Court, he handed his opponents the ability to easily attack his credibility for truthfulness at trial and opened the door to significant sanctions.

“A party's destruction of evidence qualifies as willful spoilation if the party has ‘some notice that the documents were potentially relevant to the litigation before they were destroyed.” ’ Leon v. IDX, 464 F.3d at 959, quoting United States v. Kitsap Physicians Serv., 314 F.3d 995, 1001 (9th Cir. 2002). Here, the level of fault on the part of defendant Ihm is greater than mere negligence. As outlined more fully above, the evidence strongly points to willfulness. First, the evidence shows that defendant Ihm was certain he would be sued by plaintiff if he terminated his distributorship with plaintiff to begin distributing products for a direct competitor. Second, the evidence indicates that defendant Ihm admittedly had a strategy not to leave a paper trail during his negotiations with D&W in order to make it difficult for plaintiff to make a case against him when the inevitable lawsuit was filed. Third, defendant Ihm continued down the same path after the lawsuit was filed by frustrating plaintiff's discovery efforts at every turn with his false and/or misleading discovery responses and representations. Based on the evidence presented by plaintiff, this Court can only conclude that defendant Ihm willfully destroyed or failed to preserve documents knowing they were potentially relevant to anticipated and reasonably foreseeable litigation.

*18 In evaluating the evidence presented by plaintiff, the first two Anheiser-Busch factors weigh in favor of terminating sanctions. These factors are the public's interest in the expeditious resolution of litigation and the Court's need to manage its docket. Discovery in this case was originally scheduled to be completed by April 16, 2012, and the final Pre-Trial Conference was scheduled for November 12, 2012. [Doc. No. 17, at 3-4.] It is true that the Court's heavy caseload has resulted in significant delays in this case. However, it is also true that defendant Ihm's conduct has, as outlined more fully above, increased plaintiff's cost of litigation, delayed resolution of the case on the merits, and required significant Court time and resources to resolve the parties' Joint Discovery Motions premised on defendants' failure to provide full and complete discovery responses, as well as the instant Motion to Strike. Defendant Ihm also presented the Court with information that was, at the very least, misleading, and then violated the Court's Order to produce the Compensation Agreement even though the circumstances strongly indicate he could have produced it as ordered.

The remaining factors set forth in Anheiser-Busch, however, indicate that the facts at issue here are not extraordinary enough to justify severe terminating sanctions under Rule 37 or the Court's inherent powers. Most significantly, plaintiff has not shown the type of prejudice that would justify terminating sanctions, such as striking defendants' Answer and entering a default judgment. Because of the pre-trial deadlines set in the case, plaintiff argues that it was prejudiced because it was forced to spend valuable deposition time obtaining and clarifying facts that should have been disclosed in documents and written discovery responses. It was also forced to “engage in protracted litigation in Pennsylvania” to obtain documents that should have been produced by defendant Ihm. Because of the deadline for completing discovery, plaintiff also asserts that it had to forego certain depositions or take them without the documents it needed to prepare for depositions. However, these are all litigation costs that can been addressed with lesser sanctions. Monetary sanctions can be imposed to ease the increased costs of litigation that plaintiff obviously had to incur because defendant Ihm disregarded his discovery obligations. If necessary, the Court could order that depositions be re-taken at defendants' expense.

Plaintiff also argues it has been prejudiced because there is a substantial risk that relevant documents other than the ones produced by D&W have been deleted or discarded by defendant Ihm and his employees and will never be disclosed. For example, plaintiff alleges that defendants' employees were making misrepresentations to retailers after August 1, 2011 about the reasons for the switch from Boar's Head to D&W. Defendant therefore believes that evidence of the employees' alleged misconduct might have been included in documents that were discarded or deleted. However, this is mere speculation on plaintiff's part, and in any event, third party retailers would be the best source of this type of evidence, and plaintiff did have an opportunity to depose defendants' employees.

As plaintiff acknowledges, “[w]hat is most critical for case-dispositive sanctions, regarding risk of prejudice and of less drastic sanctions, is whether the discovery violations ‘threaten to interfere with the rightful decision of the case.’ ” Valley Engineers v. Electric Engineering Co., 464 F.3d at 1057. In addition, terminating sanctions are generally inappropriate when all or substantially all of the missing evidence is obtained from another source. In re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060, 1075 (N.D. Cal. 2006).

Although defendant Ihm's conduct is egregious in many respects, the facts here are distinguishable from cases where terminating sanctions were justified because there was no other way to discover or recreate missing evidence that was central to the key issues in the case. In Leon v. IDX, 464 F.3d at 951, for example, the Ninth Circuit concluded the defendant employer was prejudiced because there was no way to recreate the contents of material files that the plaintiff employee deleted from a company-owned computer. Terminating sanctions were the only feasible consequence, because the employee's knowing and deliberate destruction of material computer files left the defendant employer helpless to rebut any evidence presented by the plaintiff employee. Id. at 959-961.

*19 Here, plaintiff was able to obtain from D&W a significant volume of documents and information about the relationship and negotiations between defendant Ihm and D&W during the relevant time period to show that defendant Ihm's negotiations with D&W occurred over a period of many months, which strongly supports plaintiff's contention that defendant Ihm failed to give reasonable notice to plaintiff. In the evidence presented with plaintiff's Motion to Strike, there is nothing to indicate there are any significant gaps or holes in this discovery or in any other discovery before the Court that would prevent or make it difficult for plaintiff to prove its case against defendants. Therefore, this Court RECOMMENDS that plaintiff's Motion to Strike be DENIED to the extent it seeks terminating sanctions against defendants.

On the other hand, monetary sanctions under Rule 37(b)(2)(C) are most definitely warranted and appropriate given the evidence establishing that defendant Ihm's discovery abuses increased the costs of litigation to plaintiff without substantial justification. In addition, defendant Ihm has not presented anything which would convince this Court that there are circumstances which would make an award of expenses unjust. Therefore, this Court finds that plaintiff's Motion to Strike must be GRANTED to the extent it seeks monetary sanctions against defendant Ihm pursuant to Rule 37(b)(2)(C).

As the record before the Court does not include a declaration or other evidence outlining the reasonable expenses, including attorney's fees, that were caused by defendant Ihm's misconduct, plaintiff will be given additional time to file this information for consideration. Thereafter, an appropriate amount of monetary sanctions deemed by the Court to represent reasonable expenses incurred as a result of defendant Ihm's discovery abuses will be awarded in a separate order by this Court. In addition, as part of the Court's award reasonable expenses, the Court will consider any request by plaintiff for additional or continued depositions at defendants' expense if plaintiff is able to show necessity based on the late production of documents by defendants or D&W.

Based on the foregoing, this Court RECOMMENDS that plaintiff's Motion to Strike be DENIED to the extent it seeks terminating sanctions against defendants. “Within fourteen days after being served with a copy, any party may serve and file written objections to such proposed findings and recommendations as provided by rules of court.” 28 U.S.C. § 636(b)(1), The parties are advised that failure to file objections within the specified time may waive the right to raise those objections on appeal of the Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

For the reasons outlined above, this Court finds that plaintiff's Motion to Strike must be GRANTED to the extent it seeks an award of monetary sanctions under Federal Rule 37(b)(2)(C). No later than October 28, 2013, plaintiff shall submit any declarations and other evidence of expenses reasonably incurred as a result of defendant Ihm's failure to comply with this Court's Order of September 26, 2012, along with supporting legal bills which may be submitted for review in camera. [Doc. No. 46.] No later than October 28, 2013, plaintiff may also submit a request for additional discovery to the extent it can show it is necessary because of defendant Ihm's failure to comply with this Court's Order of September 26, 2012. No later than November 11, 2013, defendants may file any objections they might have to the reasonableness of the expenses presented or to any additional discovery requested.

IT IS SO ORDERED.

Dated: September 30, 2013.

In a civil action, a party can be found in contempt of court under Rule 37 for violating a court order to preserve relevant evidence. Phillips Elec. N. Am. v. BC Tech., 773 F.Supp.2d 1149, 1165, 1193-1194 (D. Utah 2011). Civil contempt sanctions are “designed to compel future compliance with a court order, are considered to be coercive and avoidable through obedience, and thus may be imposed in an ordinary civil proceeding upon notice and an opportunity to be heard.” International Union v. Bagwell, 512 U.S. 821, 827 (1994). “Judicial sanctions in civil contempt proceedings may, in a proper case, be employed for either or both of two purposes: to coerce [a party] into compliance with the court's order, and to compensate the complainant for losses sustained. [Citation omitted.] Where compensation is intended, a fine is imposed, payable to the complainant. Such fine must of course be based upon evidence of complainant's actual loss, and his right, as a civil litigant, to the compensatory fine is dependent upon the outcome of the basic controversy.” U.S. v. United Mine Workers of Am., 330 U.S. 258, 303-304 (1947). This Report and Recommendation does not include consideration of contempt sanctions under Rule 37, because the facts presented relate to past discovery abuses and the Court is not seeking to compel compliance in the future.

In denying the parties' initial Joint Motion for failure to satisfy meet and confer requirements, Magistrate Judge Stormes briefly addressed the problems the parties were having with defendants' responses to plaintiff's First Set of Interrogatories and First Set of Request for Production of Documents. Because Judge Stormes denied the Joint Motion for failure to satisfy meet and confer requirements, she concluded that sanctions were not appropriate at that time. However, she stated that: “Both sides are cautioned, however, that if a further motion is necessary, the Court will award sanctions, as consistent with Rule 37. Moreover, both sides are also specifically cautioned that the Court will award sanctions under its inherent authority if any further motions are filed without a proper and complete meet and confer effort.” Terminating sanctions were not mentioned. [Doc. No. 33, at pp. 5-6.]

Plaintiff also seeks sanctions under Federal Rule of Civil Procedure 11. However, this request for sanctions is not discussed in this Report and Recommendation because Rule 11(d) states as follows: “This rule does not apply to disclosures and discovery requests, responses, objections, and motions under Rules 26 through 37.”

The relevant time period has essentially been narrowed in the discovery process to January 2011 through August 1, 2011.

Other documents produced at this time included copies of plaintiff's own distributor policies. [Doc. No. 65, Kirby Decl., at p. 5.]

Despite this representation, at least two of defendants' employees testified that no one asked to look at their e-mails to see whether there were any communications with D&W. [Ex. 11, 43-50; Ex. 13, at p. 95.]

In his deposition on October 23, 2012, defendant Ihm testified that during his negotiations with D&W, he and a D&W representative discussed having “little or no paperwork,” because they did not want to “nave a paper trail.” [Doc. No. 65, Kirby Decl.; Ex. 21, at pp. 35-37, 178-179.] In an e-mail to a D&W representative on July 28, 2011, defendant Ihm also stated: “I am not putting anything in writing. There will be no paper trail....” [Doc. No. 65, Kirby Decl., at p. 18; Ex. 23, at p. DIETZ 098.]

Although it appears to be a peripheral matter, defendant Ihm also testified falsely in his deposition that he did not consult an attorney prior to signing the final agreement with D&W. [Doc. No. 65, Kirby Decl.; Ex. 21, at 62.]

Appropriate evidentiary sanctions for spoilation of relevant documents include: (1) the exclusion of evidence (Glover, 6 F.3d at 1329; Unward Sec. Ins. Co. v. Lakewood Eng'g & Mfg. Corp., 982 F.2d 363, 368-369 (9th Cir. 1992)); and (2) an adverse inference instruction allowing the jury to infer that the evidence destroyed would have been unfavorable to the responsible party. Medical Lab. Mgmt. Consultants v. Am. Broad. Co., Inc., 306 F.3d 806, 824 (9th Cir. 2002). Evidence may be excluded as a spoilation sanction if its use “would unfairly prejudice an opposing party.” Unigard, 982 F.2d at 368. “[A] party seeking an adverse inference instruction based on the destruction of evidence must establish (1) that the party having control over the evidence had an obligation to preserve it at the time it was destroyed; (2) that the records were destroyed ‘with a culpable state of mind’; and (3) that 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.” Residential Funding Corp. v. DeGeorge Financial Corp., 306 F.3d 99, 107 (2d Cir. 2002). The “culpable state of mind” includes negligence. Id. See also Glover, 6 F.3d at 1329 (stating that notice of “potential relevance to the litigation” is sufficient to impose an adverse inference for the spoilation of evidence and “bad faith” is not a prerequisite). Here, plaintiff has not requested evidentiary sanctions, and, as outlined more fully below, it does not appear that evidentiary sanctions would be appropriate in this case, because missing documents were produced by a third party, and the Court has no reason to believe the production is incomplete so that plaintiff would be unable to prove any of its case.