The factual background leading to the filing of this lawsuit is described in this Court's Order on First Financial's Motion for Prejudgment Attachment, as well as the Honorable Michael J. Davis's order granting First Financial's motion for a preliminary injunction.[2]

Generally speaking, First Financial seeks “sanctions against Defendants and their counsel for their repeated failures to comply with orders of the Court [,]” based at least in part on spoliation of evidence.[3] The facts are discussed in detail below. Nonetheless, the Court provides a broad overview to orient the reader to the relevant discovery issues.

First Financial's Omnibus Motion for Sanctions is based on the conduct of Defendants and their counsel, Jon E. Drucker (“Drucker”), who was admitted pro hac vice to this Court.[4] First Financial served its first set of Requests for Production of Documents in September 2014.[5] When Defendants responded by objecting and producing no documents, First Financial moved to compel the production of these documents, which the Court granted.[6] After the Court-ordered deadline to respond passed, and after Defendants provided only partial responses, First Financial moved for sanctions.[7] To date—and over a year after the request was first served—First Financial has still not received the majority of the discovery it sought in its First Set of RFPs.[8]

*2 First Financial also moved the Court to compel the production of documents pursuant to three third-party subpoenas.[9] The Court granted the motion, but Drucker, who also represented the third-party witnesses, did not comply with the Court order.[10] First Financial filed a second motion for sanctions.[11] At this point, the Court denied both pending sanctions motions without prejudice, and ordered First Financial to file a single omnibus motion for sanctions addressing Defendants' and Drucker's conduct to date.[12] First Financial filed the Omnibus Motion for Sanctions on July 13, 2015, and the Court heard oral argument on August 20, 2015.[13]

First Financial seeks the following sanctions: striking Defendants' answer, including affirmative defenses; adverse and non-rebuttable inferences against Defendants; revoking Drucker's pro hac vice status; and cost and fees associated with the motions to compel and motions for sanctions.[14] The Court finds that, although Defendants did not destroy evidence in bad faith, sanctions pursuant to Rule 37 are warranted, as discussed in detail below.

Some of First Financial's motions were filed while others were awaiting their hearing date. For the sake of clarity, the Court provides the background for the motions to compel—and their corresponding motions for sanctions—separately. The Court then provides the background regarding the Omnibus Motion for Sanctions and additional factual allegations made during the hearing.

The day after this suit was filed, First Financial sent preservation notices to Defendants.[15] The letters instructed Defendants not to destroy any information, whether in paper, electronic, or any other format, and warned that sanctions may be issued “for spoliation of evidence or potential evidence.”[16] The letters also instructed Defendants, if represented by counsel, to send the letters to their counsel.[17] Presumably, all electronic or other evidence the Defendants possessed or controlled as of the date of their receipt of the preservation letters in mid-June, at the latest, should have been preserved.

*3 First Financial served its First Set of RFPs on September 30, 2014.[18] Almost three months later, First Financial filed its first motion to compel, seeking relief because Defendants objected to all of First Financial's First Set of RFPs on November 10, 2014, and produced no documents.[19] Defendants did not respond to First Financial's attempts to meet and confer before First Financial filed the First Motion to Compel.[20] Defendants did not respond to the motion or appear at the hearing.[21] The Court granted the motion from the bench and stated that “all of Defendants' objections to Plaintiff[']s First Request for Production [of Documents] are waived.”[22] On First Financial's request, the Court entered an order to show cause regarding fees and costs associated with the First Motion to Compel.[23]

On March 10 and 11, 2015, Defendants produced emails that that were, at least in part, responsive to four RFPs that were the subject of the First Motion to Compel.[24] Finding this production insufficient, First Financial moved the Court for sanctions on March 20, 2015, for Defendants' failure to comply with the Court's February 2015 Order.[25]Specifically, First Financial argued the documents were not complete responses to the RFPs because First Financial sought “all documents”—not just emails.[26] Regardless, Defendants produced no other documents in response to the first set of RFPs.[27] Defendants' lack of fulsome responses also prompted First Financial to move to modify and extend the original scheduling order.[28]

On March 26, 2015, the Court held a status conference and heard oral argument on the Order to Show Cause.[29] The Court ordered Defendants' counsel, Drucker, to pay $1,379.86 in travel costs to First Financial's counsel, David D. VanSpeybroeck (“VanSpeybroeck”).[30] The sanction represented only VanSpeybroeck's travel expenses from Portland, Oregon, to the Twin Cities.[31] The Court noted that

On April 9, 2015, First Financial filed a status report.[33] The Status Report noted that Drucker forwarded approximately ninety emails to First Financial's counsel without Bates numbers.[34] First Financial's RFPs requested documents in native format, and therefore, the forwarding of emails did not comply with that request or the Federal Rules of Civil Procedure.[35] Defendants declined First Financial's offer “to pay for a third-party vendor to extract text messages from Defendants' mobile devices.”[36] Defendants provided supplemental written responses to First Financial's RFPs, and stated that “there were no responsive text messages, or that the messages had been erased.”[37]

*4 The Status Report also stated that Drucker represented to First Financial that “Defendants communicated with their team primarily through text messages.”[38] Moreover, during the hearing on the preliminary injunction, witnesses testified about receiving text messages.[39]

Additionally, the Status Report noted one email, from Michael Jones (“Jones”) to Lee, that supports the inference that, as early as May 15, 2014, Defendants expected First Financial to sue them.[40] As stated earlier, First Financial notified Defendants on or about May 16, 2014, that it contemplated legal action.[41]

In light of these facts and circumstances, First Financial supplemented its First Motion for Sanctions.[42] First Financial averred that the documents Defendants produced were “woefully inadequate” and reviewed the facts as presented in the Status Report.[43] In addition, First Financial argued that as of that date—April 29, 2015—Defendants had “produced zero texts and zero metadata.”[44] Deposition testimony demonstrated that responsive communications exist, or existed, but were not produced.[45] Finally, First Financial informed the Court that Drucker instructed “Defendants to not fully comply with Plaintiff's [First Set of RFPs]” by artificially limiting their requests to emails and texts, and not all documents.[46] First Financial sought an adverse inference instruction with respect to the First Set of RFPs, Request Numbers 4, 8, 9, 10, 18, 20, 21, 22, 32, 35, 36, 37, 38, and 39, and attorneys' fees.[47] Defendants only response to the First Motion for Sanctions was that First Financial failed to comply with this District's meet-and-confer requirement.[48]

*5 On May 8, 2015, Drucker emailed First Financial's counsel purporting to attach “all the text messages” that Defendants have.[49]

The Court held oral argument on the First Motion for Sanctions on May 11, 2015.[50] The Court observed that it was not appropriate for Defendants to “litigat[e] by doing nothing,” and noted that despite Defendants' recalcitrance, it was Drucker's responsibility to get his clients to cooperate.[51] The Court ordered supplemental briefing with respect to First Financial's oral request for costs and fees in connection with its First Motion for Sanctions, and took the matter under advisement.[52] Declarations regarding costs and fees were filed on May 19, 2015, and Defendants did not respond.[53]

Drucker subsequently offered to seek Defendants' text messages from their phone companies.[54] Drucker did not, however, respond to First Financial's counsel's later attempt to ascertain the status of that effort.[55] Sometime before June 25, 2015, First Financial's counsel received a link to yet another set of Defendants' text messages.[56] These text messages are dated between November 2014 and some time in 2015, but do not include text messages from May 2014 through October 2014.[57] First Financial's counsel's attempts to determine how they were exported from Defendants' devices were unsuccessful.[58]

On the same day First Financial filed its First Motion for Sanctions, it also filed its second and third motions to compel.[59] In the Second Motion to Compel, First Financial sought to compel the production of documents from three witnesses who were required to produce documents pursuant to deposition subpoenas.[60]

*6 On May 11, 2015, the Court granted the Second Motion to Compel from the bench.[61] Drucker stated his clients would produce telephones to a third-party vendor.[62]

On June 10, 2015, First Financial filed a motion for sanctions for failure to comply with the Court's order regarding the Second Motion for Compel.[63] First Financial argued that despite the Court's orders, Defendants' counsel, Drucker—who also represented the witnesses that were the subject of the subpoenas—did not respond to First Financial's attempts to discuss and facilitate compliance with the Court's order.[64] First Financial sought an order awarding First Financial costs, compelling responses within seven days, as well as an order of contempt and a daily monetary fine.[65]Defendants did not file a response to the Second Motion for Sanctions within the time permitted by the Local Rules.

Based on Defendants' and Drucker's conduct, the Court denied both the First and Second Motions for Sanctions without prejudice.[66] The Court believed that in this case, serial motions for sanctions were inefficient and were ineffective in inducing compliance.[67] Instead, the Court instructed First Financial “to file one omnibus motion for sanctions in accordance with the nondispositive motions deadline that addresses all of Defendants' sanctionable conduct up to that point, as well as the appropriate sanction.”[68] Pursuant to that order, the Omnibus Motion for Sanctions was filed on July 13, 2015.[69]

In addition to the above facts, First Financial provides additional facts that it contends warrant sanctions. First Financial argues Drucker submitted a declaration that he knew contained materially false statements regarding Moua's move from Minnesota to California.[70] First Financial also argues Drucker gave erroneous advice to Defendants about the scope of the preliminary injunction.[71]

To date, Defendants have not produced any text messages or emails from the time period immediately before and after May 10, 2014, the date First Financial alleges Defendants recruited their down-line contractors to resign from First Financial and join FEG.[72] First Financial alleges Defendants purposefully destroyed evidence based on an email from Lee to Drucker that says “Whenever we get new phone, all text all gone with the old phone. They do not transfer over. The only reason, Gilles [Moua] had these was because they're from Phil and he saved them.”[73] First Financial argues it is prejudiced because “Defendants communicated with their team primarily through text messages, so not only did their spoliation destroy critically important evidence in this case, it may have destroyed the only direct evidence of their pre-May 10, 2014 agreement to defect en mass from FFS.”[74]

*7 First Financial summarizes its missing discovery as follows:

In response, Defendants argue, in essence, they have produced everything they have, and, to the extent they destroyed evidence, it was inadvertent.[76] Additionally, Defendants argue First Financial failed to meet and confer with them in advance of filing the Omnibus Motion for Sanctions, and that First Financial is not prejudiced.[77]

Moua argues that his son routinely cleaned out files, including text messages, “that were cluttering [his] phone's memory,” and he did this even before receiving the preservation letter.[78] Defendants aver they have produced all text messages between Moua and his down-line team members on Moua's phone since late May 2014 and on Lee's phone since August 2014.[79] Further, Defendants argue Moua “only texted a little bit” and Lee's “communications are irrelevant and she should not even be a defendant here” because she only used text messages to arrange logistics for Moua's business and to talk to her family.[80]

Drucker expresses contrition with respect to his behavior and notes that he was dealing with a serious health issue with his mother, which is now resolved.[81]

During the hearing, the parties addressed some additional documents that Defendants produced to First Financial at some point after First Financial filed the Omnibus Motion for Sanctions, but before the hearing on the Omnibus Motion for Sanctions. The parties dispute who was responsible for obtaining phone records from Defendants' cell phone provider.[82] Nonetheless, at the hearing, the parties agreed that Defendants produced their phone records to First Financial on August 11, 2015.[83] Additionally, First Financial subpoenaed Drucker for documents related to third parties.[84] First Financial argues a response was due on June 29, 2015.[85] The parties initially disputed whether Drucker was served properly with the subpoena.[86] Regardless, Drucker argued at the hearing that he responded to the subpoena sometime in August 2015.[87] Additionally, on August 11, 2015, Defendants provided their tax returns.[88]

*8 Finally, the Court notes that, following a contested motion for pro hac vice admission of a new attorney for Defendants, Drucker withdrew from representing Defendants.[89]

First Financial seeks the following sanctions:

The specific non-rebuttable adverse inferences First Financial seeks are:

First Financial seeks several types of sanctions. The Court first addresses Defendants' argument that sanctions are not warranted based on First Financial's failure to meet and confer, followed by the propriety of revoking Drucker's pro hac vice admission as a sanction. The Court then considers First Financial's proposed sanctions of striking Defendants' Answer and drawing adverse inferences against Defendants based on the Court's inherent authority to impose sanctions for the spoliation of evidence. (Mem. in Supp. of Omnibus Mot. for Sanctions at 19). Finally, the Court considers sanctions pursuant to Rule 37 for failure to comply with a Court order.

As an initial matter, the Court notes Defendants argued that the Omnibus Motion for Sanctions, as well as others, should be denied based on First Financial's failure to engage in the meet-and-confer process. (Defs.' Mem. in Opp'n to Omnibus Mot. for Sanctions at 1–2); see also (Defs.' Opp'n to First Mot. for Sanctions, Decl. of Jon E. Drucker). At the August 20, 2015 hearing, the Court admonished First Financial that, regardless of Defendants' unwillingness to participate in this case, it was incumbent upon First Financial to continue to satisfy the meet-and-confer obligations of this District. See (Aug. 2015 Tr. at 3–4). The Court finds its admonition during the August 20, 2015 hearing sufficient to impress upon First Financial the importance of meeting and conferring, regardless of Defendants' counsel's recalcitrance. Therefore, the Court declines to deny the Omnibus Motion for Sanctions on this ground and considers it on its merits.

If a party's conduct falls outside of conduct sanctionable under the Rules, the court may impose sanctions based on its inherent authority to control its own judicial proceedings. E*Trade Sec. LLC v. Deutsche Bank AG, 230 F.R.D. 582, 586 (D. Minn. 2005) (Boylan, Mag. J., as adopted by Kyle, J.) (citing Stevenson v. Union Pac. R.R. Co., 354 F.3d 739, 745 (8th Cir. 2004)).

*9 First Financial describes Drucker's involvement in this case in detail and seeks revocation of Drucker's pro hac vice admission as a sanction against Drucker individually. (Mem. in Supp. of Omnibus Mot. for Sanctions at 7–18, 24–27). Some of this conduct can be attributable to Drucker only, and not to his clients. These include the assertions that Drucker knowingly filed misleading statements with the Court regarding Moua's move from Minnesota to California and assertions that Drucker provided erroneous advice to his clients about the scope of the preliminary injunction. (Id. at 15–18).

The Court declines to impose the sanction of revoking Drucker's pro hac vice admission, as requested by First Financial. See (id. at 24–27). Drucker withdrew from representing Defendants. (Notice of Attorney Appearance/Substitution). Thus, the Court finds that revoking his pro hac vice admission is not likely to have a punitive or deterrent effect because Drucker is no longer involved in this case.[92]

First Financial asks this Court either to strike Defendants' answer or to draw non-rebuttable adverse inferences regarding five issues based on Defendants' destruction of emails and texts. (Mem. in Supp. of Omnibus Mot. for Sanctions at 19–24). The Court finds that First Financial has provided no evidence that Defendants intentionally destroyed emails, and therefore does not recommend a sanction on this basis. The Court finds, however, that First Financial has provided evidence sufficient for the Court to conclude that Defendants destroyed text messages. Nonetheless, the Court does not find Defendants destroyed text messages in bad faith and therefore declines to recommend sanctions based on spoliation of evidence.

“ ‘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.’ ” Nicollet Cattle Co., Inc. v. United Food Grp., LLC, No. 08-5899 (JRT/FLN), 2010 WL 3546784, at *4 (D. Minn. Sept. 7, 2010) (Tunheim, J.) (quoting Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003)). When a court finds spoliation of evidence, it may order sanctions if “a party (1) destroys (2) discoverable material (3) which the party knew or should have known (4) was relevant to pending, imminent, or reasonably foreseeable litigation.” Lexis–Nexis v. Beer, 41 F. Supp. 2d 950, 954 (D. Minn. 1999) (Doty, J.). In addition, a court must find that the moving party was prejudiced before a sanction can be imposed for spoliation. Stevenson, 354 F.3d at 748. In order to impose the grave sanction of an adverse inference instruction, “a district court must issue explicit findings of bad faith and prejudice.” Hallmark Cards, Inc. v. Murley, 703 F.3d 456, 461 (8th Cir. 2013).

Text messages are relevant to First Financial's allegations that Defendants recruited members of their down-line team to join them in working for FEG. See (Compl. ¶ 33). The only text message produced dated May 10, 2014, the date of the meeting at Defendants' home, is from one of Moua's “lieutenants,” Nonei Vorasane (“Vorasane”), to another former First Financial employee, Saveng Vongkhamsene (“Vongkhamsene”), telling Vongkhamsene to go to Moua's house “quietly.”[93] (VanSpeybroeck Decl.–201 ¶ 12); (Text Messages between Vorasane and Vongkhamsene, Ex. 11, Attached to VanSpeybroeck Decl.–201) [Doc. No. 201-11]. Thus, the text messages requested are “reasonably calculated to lead to the discovery of admissible evidence” with respect to First Financial's claims. See Fed. R. Civ. P. 26(b).[94]

*10 Evidence submitted shows that some text messages are no longer available for production in discovery in this case, regardless of whether the text messages were destroyed as the result of Defendants replacing their phones or because Defendants intentionally deleted messages to improve the performance of their phones.[95] Compare (Email from Drucker to VanSpeybroeck (May 8, 2015), Ex. 1, Attached to VanSpeybroeck Decl.–201) with (Moua Decl. ¶¶ 4–5). At the hearing, First Financial's counsel represented that of the text messages produced, there are no text messages from the period of May 2014 to October 2014. (Aug. 2015 Tr. at 6). Defendants' phone records were eventually produced on August 11, 2015. See (id. at 18). According to First Financial, Defendants' phone records show that from the period May 26, 2014, to June 15, 2014, Moua sent or received 611 texts and Lee sent or received 2,044 texts.[96] (Id. at 21). Subsequent months similarly demonstrate high numbers of texts ascribed to both Defendants.[97]See (id. at 21–22). Thus, the Court finds that text messages existed at some point, were destroyed, and are no longer available for production.

The Court also finds First Financial is prejudiced by Defendants' destruction of the text messages. The only surviving text message from the time period at issue is from Moua's “lieutenant” to another member of Moua's team and instructs him to go to Moua's house. (Text Messages between Vorasane and Vongkhamsene, Ex. 11, Attached VanSpeybroeck Decl.–201). This suggests that other text messages from Defendants would have produced communications between Moua, Lee, and their down-line team members. In fact, that same lieutenant told several others to go to Moua's house. (Decl. of Nonei Vorasane in Supp. of Defs.' Mem. in Opp'n to Omnibus Mot. for Sanctions, “Vorasane Decl.”) [Doc. No. 214 ¶ 6].

Finally, the record is not clear with respect to whether Defendants “knew or should have known” that they were destroying discoverable information. See Lexis-Nexis, 41 F. Supp. 2d at 954. First Financial's counsel sent Moua a letter stating it intended to sue him. (Letter from David D. VanSpeybroeck to Moua (May 16, 2014) at 1, 3, Ex. B, Attached to Status Report). Further, First Financial sent preservation letters to both Defendants on June 11, 2014. (Preservation Letters, Ex. 10, Attached to VanSpeybroeck Decl.–201). Moua, however, avers that his son deleted text messages in late May 2014, before Moua received the preservation letter. (Moua Decl. ¶¶ 4–5). The Court cannot conclude Moua “knew or should have known” that he should have preserved his text messages in late May 2014.

Lee, however, purchased a new phone in August 2014, which was after First Financial sent the preservation letters. (Lee Decl. ¶¶ 3–4). Therefore, Lee “knew or should have known” that she had to preserve her text messages. Both Defendants attempt to excuse their conduct because they are “unsophisticated individuals when it comes to technology and litigation.” (Moua Decl. ¶ 3); (Lee Decl. ¶ 2). But in August 2014, Defendants were represented by Drucker, who had an obligation as an officer of the Court to instruct his clients to preserve potentially relevant evidence.

*11 Even if both Moua and Lee knew or should have known they were supposed to preserve text messages, the sanctions First Financial seek—striking the answer or providing an adverse inference instruction—require a finding of bad faith and prejudice. Hallmark Cards, 703 F.3d at 461; see also Sentis Group, Inc. v. Shell Oil Co., 763 F.3d 919, 924 (8th Cir. 2014) (affirming district court's dismissal of case as spoliation sanctions based on the district court's analysis of bad faith and the intentional suppression of evidence). Examples of bad faith include fraud on the court, the delay or disruption of litigation, or hampering the “enforcement of a court order.” Chambers v. NASCO, Inc., 501 U.S. 33, 46 (1991). In the context of issuing an adverse inference instruction for spoliation of evidence, the Eighth Circuit requires that the district court make a finding that the nonmoving party intentionally destroyed evidence with a desire to suppress the truth. Hallmark Cards, 703 F.3d at 460 (citing Stevenson, 354 F.3d at 746, 748).[98]

Even if First Financial is prejudiced, the Court finds that Lee's and Moua's destruction of evidence was not done in bad faith. The Court is persuaded that even though Defendants received preservation letters, they either did not understand them or were not able to implement the requirements. This is also true with respect to First Financial's letter to Moua in May 2014: the Court cannot conclude that letter was sufficient to put Moua on notice that text messages in particular should not be destroyed because they may be relevant to upcoming litigation. To the extent Moua asserts that his son deleted text messages, he avers that his son did so before Moua received the preservation letter. (Moua Decl. ¶¶ 4–5). First Financial questions the effectiveness of deleting text messages to improve phone performance, and argues that this argument was “concocted” after First Financial pointed out that any phone replacements took place after the preservation letters were sent. (Reply at 6, 6 n.7). Even if Lee and Moua replaced their phones after receiving the preservation letters, the Court cannot conclude they did so in bad faith. Replacing outdated technology is a modern reality and does not always have the effect of removing all the data relevant to litigation.

The Court did not hold an evidentiary hearing, and nothing in the record suggests that doing so would be helpful.[99] The record supports, at best, an inference that Moua and Lee intentionally destroyed text messages. But the Court cannot conclude that they did so in bad faith. Because the Court finds First Financial has presented no evidence that allows the Court to infer that Lee and Moua had a desire to suppress the truth with respect to text messages, the Court concludes sanctions for spoliation are not warranted. See Hallmark Cards, 703 F.3d at 460.

*12 Nonetheless, Defendants' conduct cannot go unsanctioned. The mere absence of bad faith does not mean that neither Defendants nor Drucker are blameless. Their conduct is an unacceptable manipulation of the judicial process, is grossly unfair to First Financial, and cannot be condoned, much less excused. First Financial's request for “non-rebuttable adverse inferences” may more appropriately be considered as a request to designate facts to be taken as established under Rule 37. See Fed. R. Civ. P. 37(b)(2)(A)(i); (Mem. in Supp. of Omnibus Mot. for Sanctions at 23). Thus, the Court next analyzes the appropriateness of sanctions under Rule 37.

Sanctions for failing to comply with a discovery order are available under Rule 37 of the Federal Rules of Civil Procedure. Rule 37 sanctions require “an order compelling discovery, a willful violation of that order, and prejudice to the other party.” Chrysler Corp., 186 F.3d at 1019.[100] When a party fails to obey a discovery order, the court “may issue further just orders,” which may include:

Fed. R. Civ. P. 37(b)(2)(A)(i)–(vii). Striking a pleading—in whole or in part—is one of the most severe sanctions under Rule 37(b)(2) and therefore, requires “a finding of willfulness to avoid being deemed an abuse of discretion.” Card Tech. Corp., 249 F.R.D. at 571.

“The sanction imposed must be fair and tailored to the issue raised by the discovery order.” Id. (citing Ins. Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 707 (1982); Keefer v. Provident Life & Accident Ins. Co., 238 F.3d 937, 941 (8th Cir. 2000)). “There is a strong policy favoring a trial on the merits and against depriving a party of his day in court.” Fox v. Studebaker-Worthington, Inc., 516 F.2d 989, 996 (8th Cir. 1975). “[T]he most severe in the spectrum of sanctions provided by statue or rule must be available to the district court in appropriate cases, not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterrent.” Nat'l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 643 (1976).

Two orders compelling discovery have been issued here. First, the Court granted First Financial's First Motion to Compel relating to Defendants' failure to provide any meaningful response to First Financial's First Set of RFPs. See (Feb. 2015 Order); (Mem. in Supp. of First Mot. to Compel).

Second, the Court granted First Financial's Second Motion to Compel relating to third party discovery. (May 2015 Tr. at 38); (May 2015 Order). Specifically, Drucker, who represented the third-party deponents who did not produce documents at the time of their depositions, agreed to produce the deponents' phones to a third-party vendor. (May 2015 Tr. at 7–8, 38). The Court memorialized this agreement in its Order. (May 2015 Order).

*13 The Court finds that Defendants' violations of each of these orders were willful. Pursuant to the Court's February 2015 Order, Defendants were required to produce responsive documents on or before March 13, 2015.[101] (Mem. in Supp. of First Mot. for Sanctions at 1). On March 10 and 11, 2015, Defendants produced some emails in response to some of First Financial's requests for production of documents. (Id. at 3–4). Specifically, Defendants produced emails First Financial believed were responsive to Request Numbers 1, 2, 16, and 17, which request all documents relating Moua and Lee's communications with First Financial and FEG from January 1, 2009, to the present. (Id. at 4). Nonetheless, because Defendants produced only emails, and no other types of documents as requested, First Financial argued that Defendants' emails “may not be fully responsive to [Request Numbers] 1, 2, 16, and 17.” (Id.).

Later, on April 8, 2015, Defendants produced additional emails in non-native format. (Status Report at 2). The same day, Defendants supplemented their written response to First Financial's First Set of RFPs. (Defs.' Suppl. Resp., Ex. D, Attached to Status Report). This document averred that all documents “in their custody, possession or control” had been produced. See (id.). But First Financial learned through other discovery the extent of the documents Defendants had not produced. See (Suppl. Mem. in Supp. of First Mot. for Sanctions at 2). For example, First Financial received emails from Jones, an actuarial consultant who works closely with FEG. (Id.). In one email from Moua to Lee, Moua discusses his litigation with First Financial.[102] See (Emails produced by Michael Jones, Ex. 1, at 13–14, Attached to VanSpeybroeck Decl.–162). Although addressed to Lee, it seems likely that other former First Financial contractors were blind carbon copied on that email, not only from the context, but also because the text begins “To All Leaders.” (Id. at 13). Another email, dated November 8, 2014, from either Lee or Moua is addressed to “everyone.”[103] (Id. at 10). There are several other emails to or from “Mai Noukhay,” who, as stated previously, the Court presumes is Mai Lee, a Defendant in this case. See generally (id. at 1–14).

On May 8, 2015, Defendants' counsel emailed First Financial's counsel “all the text messages” that Defendants had. (Email from Drucker to VanSpeybroeck (May 8, 2015), Ex. 1, Attached to VanSpeybroeck Decl.–201). Thus, Defendants' production on May 8, 2015, demonstrates that earlier representations to First Financial about the completeness of Defendants' responses to First Financial's First Set of RFPs were not true. And in June 2015, Defendants yet again produced additional text messages. See (VanSpeybroeck Decl.–201 ¶ 10); (Davidson/Drucker Emails (June 25, 2015), Ex. 9, Attached to VanSpeybroeck Decl.–201); see also (Aug. 2015 Tr. at 18–21). Thus, the representations Defendants made both in May and April 2015 were not true because Defendants produced additional text messages. To date, Defendants have not produced text messages or emails from the time period around May 10, 2014, when First Financial alleges Defendants recruited former First Financial contractors to work for FEG, although phone records show texting occurred during this time period. (Mem. in Supp. of Omnibus Mot. for Sanctions at 6); (Aug. 2015 Tr. at 21–22). The low volume of production is especially troubling in light of the number of down-line contractors Defendants may have been communicating with and in light of the volume of texting demonstrated by Defendants' phone records.

*14 Additionally, First Financial requested documents related to Moua's and Lee's income from both First Financial and FEG. (First Set of RFPs, Request Nos. 8, 9, 20, 21). Despite Defendants' RFP response in April 2015 that they produced all responsive documents, Defendants produced tax returns on August 11, 2015. (Aug. 2015 Tr. at 17). These documents, which fall within the scope of documents related to income from First Financial and/or FEG, were produced nearly six months after the Court's February 2015 Order and three months after Defendants represented to First Financial and the Court that their response to the First Set of RFPs was complete.

First Financial summarized the discovery that remains missing. Of the items missing, several relate to RFPs propounded by First Financial and therefore fall within the scope of the Court's February 2015 Order. Defendants should have produced text messages and emails because both forms of communication are encompassed in the definitions provided by First Financial in its First Set of RFPs, and because they were specifically requested. (First Set of RFPs at 1–2); see also (id., Request Nos. 37, 38, 39, 40). Further, metadata was requested to be produced. See (id. at 1). First Financial requested, and has not received, financial information relating to the value of the policies Defendants sold and compensation related thereto, copies of laptop computer hard drives, First Financial customer and contractor lists, documents related to the May 10, 2014 meeting, and documents signed by the Defendants' down-line teams. Compare (Mem. in Supp. of Omnibus Mot. for Sanctions at 21–22) with (First Set of RFPs, Request Nos. 8, 9, 14, 20, 21, 24, 26, 30, 31, 32, 41, 42).

First Financial also has not received documents supporting Defendants' affirmative defenses, which are documents “required to be produced automatically on an ongoing basis as part of Defendants' Rule 26 disclosures.” (Mem. in Supp. of Omnibus Mot. for Sanctions at 22); see also Fed. R. Civ. P. 26(a)(1)(A). In addition, several of First Financial's RFPs request information related to Defendants' affirmative defenses. (First Set of RFPs, Request Nos. 34, 43, 44, 45). Defendants' failure to produce documents related to their affirmative defenses when ordered to respond to First Financial's First Set of RFPs constitutes yet another violation of the Court's February 2015 Order.

The record before the Court compels a conclusion that the violations of the February 2015 Order were willful. Defendants averred that everything had been produced but on several occasions managed to find more documents to produce. In other words, even if some text messages were inadvertently destroyed, Defendants have violated Court orders by representing that “everything” had been produced when, clearly, it had not. Furthermore, there is no explanation for the piecemeal nature of the production or reasons—technical or logistical—that excused the partial and clearly incomplete production. Defendants have not demonstrated any meaningful efforts taken to comply with Court orders.[104] Cf. St. Jude Med. S.C., Inc. v. Tormey, No. 11-cv-00327 (MJD/TNL), 2013 WL 3270374, at *8–9 (D. Minn. Mar. 25, 2013) (Leung, Mag. J.) (describing plaintiff's efforts to comply with a court order and determining sanctions were not appropriate where defendant disagreed that plaintiff's efforts and explanation were not “technically possible”). To the extent Drucker argues that a failure to comply with the Court's February 2015 Order is related to any communication issues with his clients, this argument is unavailing. See (Aug. 2015 Tr. at 43, 48–51). Drucker raised this issue in the May 2015 hearing and at the August 2015 hearing, but never moved the Court for any formal relief from its orders. See (id.); (May 2015 Tr. at 33–34); but see (id. at 36) (First Financial's counsel stating that Defendants testified during the hearing on the preliminary injunction in English without the assistance of an interpreter). In other words, Drucker had three opportunities to provide a written response regarding issues with his clients. And it was not until he defended himself and his clients against sanctions that he brought the issues with his clients to the Court's attention. This is exactly the kind of information a court needs to help it assess why litigants are not complying with discovery orders, and this belated and insufficient explanation is not persuasive at this late stage of such a troubled discovery process. Further, a strain on the attorney-client relationship does not relieve Drucker of his duty, as an officer of the Court, to comply with Court orders, or, at a minimum, communicate with the Court about his inability to do so.

*15 First Financial's Second Motion to Compel related to the failure of third-party deponents, represented by Drucker, to produce all relevant documents responsive to their respective subpoenas. (Mem. in Supp. of Second Mot. to Compel at 1). The Court granted the Motion to Compel after the parties agreed that Drucker would produce the third-party deponents' telephones to a third-party vendor.[105] (May 2015 Tr. at 7–8, 38); (May 2015 Order). First Financial's counsel reached out to Drucker via email three times, requesting the status of Drucker's production to the third-party vendor. (Mem. in Supp. of Second Mot. to Compel at 3–4). Drucker did not respond to any of First Financial's counsel's emails. (Id.); see also (Decl. of David D. VanSpeybroeck, “VanSpeybroeck Decl.–180”) [Doc. No. 180]. To date, the phones have not been produced to the third-party vendor. (Mem. in Supp. of Omnibus Mot. for Sanctions at 5, 7). Drucker and the third-party deponents have violated this Court's May 12, 2015 Order.[106]

Although not boundless, discovery is designed to “make a trial less a game of blind man's bluff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent.” United States v. Procter & Gamble Co., 356 U.S. 677, 682 (1958). Defendants' conduct has prevented First Financial from obtaining the information it needs to adequately litigate its case. Even though, as described above, some documents have now been produced, many documents are still missing. In particular, Defendants' failure to produce communications related to the events of May 10, 2014, have prevented First Financial from investigating what happened on that day. The only text message produced from that day is from one of Moua's down-line team members, Vorasane, to another, requesting that the recipient go to Moua's house “quietly.” (VanSpeybroeck Decl.–201 ¶ 12); (Text Messages between Vorasane and Vongkhamsene, Ex. 11, Attached to VanSpeybroeck Decl.–201). Vorasane stated that she “heard” that Moua's son was going to Moua's house and that she wanted to go, too. (Vorasane Decl. ¶ 5). She “sent a text message to a few people on [her] team, telling them to ‘come quietly’ ” to Moua's house. (Id. ¶ 6). As stated above, this text message demonstrates that the production of text messages, and possibly emails, to and from Defendants and their down-line team members, including the three deponents at issue in the Second Motion to Compel, would show what happened during the day of, days before, and days after May 10, 2014.

*16 Although First Financial's argument about prejudice relates only to text messages, the Court finds First Financial is prejudiced in additional ways. See (Mem. in Supp. of Omnibus Mot. for Sanctions at 21) (“The prejudice suffered by FFS is equally clear. Defendants communicated with their team primarily through text messages, so not only did their spoliation destroy critically important evidence in this case, it may have destroyed the only direct evidence of their pre-May 20, 2014 agreement to defect en mass from FFS.”). Emails produced from a third party, Jones, demonstrate that Moua and Lee used emails to communicate about First Financial. See (Emails produced by Michael Jones, Ex. 1, Attached to VanSpeybroeck Decl.–162). Defendants' refusal to produce their emails, laptops, and hard drives has prevented First Financial from learning what actions, if any, Defendants took to breach their contracts with First Financial and to recruit down-line First Financial contractors. Defendants' refusal to produce documents related to their income from First Financial and FEG prevents First Financial from analyzing the scope of its loss from Defendants' alleged actions. Finally, Defendants' failure to produce documents supporting their affirmative defenses impedes First Financial's ability to adequately prepare for dispositive motion practice and trial.

For the foregoing reasons, the Court finds that Defendants' and Drucker's failure to comply with court orders prejudiced First Financial. Because the Court finds Defendants and Drucker willfully violated this Court's orders and First Financial is prejudiced, the Court recommends that sanctions be granted pursuant to Rule 37(b)(2). The sanctions described below reflect this Court's intention to ameliorate the primary harms caused to First Financial—a lack of information typically produced in discovery and a lack of respect for the discovery process and Court orders. The Court recommends non-monetary sanctions as well as monetary sanctions against Defendants.

As stated above, Defendants' willful disobedience of Court orders has left First Financial without much of the information to which it is entitled to prosecute its case. In other words, Defendants' and Drucker's conduct has affected a merits-based resolution of this dispute. As the Supreme Court noted, the Federal Rules of Civil Procedure “invest the deposition-discovery process with a vital role in preparation for trial.” Hickman v. Taylor, 329 U.S. 495, 501 (1947). Discovery helps to narrow and clarify the issues between the parties, and serves to help ascertain the facts, or the location of facts, related to those issues. Id. Defendants' and Drucker's conduct of purposefully withholding information regarding relevant issues has hampered First Financial's ability to prepare for trial.

The Court finds that striking Defendants' answer, including affirmative defenses, in its entirety is too harsh a remedy and would be contrary to the policy of favoring a trial on the merits. See Fox, 516 F.2d at 995–96. The Court recommends, however, that some of the affirmative defenses that were addressed in First Financial's First Set of RFPs be stricken. See Fed. R. Civ. P. 37(b)(2)(A)(iii). First Financial sought documents related to Defendants' affirmative defenses of defamation, constructive termination, offset, and unclean hands.[107] (First Set of RFPs, Request Nos. 34, 43, 44, 45); see also (Answer at 4, 9, 11). Defendants stated that they produced all the documents “within their custody, possession or control” with respect to defamation and constructive termination. (Defs.' Suppl. Resp. at 8, 10, Ex. D, Attached to Status Report). Defendants aver that they have no documents regarding their affirmative defense of unclean hands. (Id. at 10–11). With respect to both constructive termination and unclean hands, Defendants state they believe First Financial has either more documents than Defendants, or First Financial has all of the relevant documents.[108] (Id. at 10–11).

*17 Defendants' refusal to provide First Financial with documents supporting their affirmative defenses of defamation and constructive termination, after multiple opportunities and orders, prevented First Financial from investigating Defendants' defenses. Therefore, the Court recommends that the affirmative defenses related to defamation and constructive termination be stricken.

With respect to the unclean hands affirmative defense, Defendants stated that First Financial “possesses all such documents.” (Id. at 10–11). Thus, the Court cannot conclude that Defendants violated a Court order with respect to this affirmative defense if, as they state, they have no documents to produce. Nonetheless, the Court notes the general principle that, subject to the discretion of Judge Schiltz as the trial judge, a party typically may not introduce evidence at trial that it has not produced in discovery.

With respect to offset, Defendants responded “Defendants cite subparagraph X of the FFS Sales Contractor Agreement, which is in FFS's possession.” (Id. at 10). The Court finds that this gives First Financial sufficient notice of how Defendants intend to support their offset claim; this affirmative defense need not be stricken nor should Defendants be prevented from introducing evidence supporting this affirmative defense.[109]

The Court recommends that the jury be instructed that Defendants did not fully respond to discovery as ordered by the Court, and that the jury may make the following inferences based on the absence of that evidence:

See (Mem. in Supp. of Omnibus Mot. for Sanctions at 23). These inferences are nevertheless rebuttable. SeeStevenson, 354 F.3d at 750 (stating that “unfair prejudice should be avoided by permitting the defendant to put on some evidence of its document retention policy and how it affected the destruction of the requested records as an innocent explanation for its conduct”). Defendants may introduce evidence that explains why the documents were not produced during discovery.

These inferences are the same as the non-rebuttable adverse inferences First Financial proposes with one exception. First Financial proposes an additional adverse inference: “That Defendants recruited FFS customers to FEG.” (Mem. in Supp. of Omnibus Mot. for Sanctions at 23). Nothing in the record supports any suggestion that the missing communications are related to customers. Instead, the record supports, as further discussed below, that the missing communications relate to Defendants' conduct with respect to their down-line contractors. Therefore, the Court declines to impose an adverse inference instruction related to Defendants' recruitment of First Financial customers to join FEG.

Recent Eighth Circuit case law requires that “a district court must issue explicit findings of bad faith and prejudice prior to delivering an adverse inference instruction.” Hallmark Cards, 703 F.3d at 461. In Hallmark Cards, the sanctioned party engaged in spoliation of evidence, which came to light at trial. Id. at 459. Because the Eighth Circuit does not refer to a court order compelling discovery or Rule 37, it appears it relied on the district court's inherent authority to sanction the spoliation of evidence in its Hallmark Cards sanctions analysis. See id. at 460–62. Here, the Court does not rely on its inherent authority nor principles relating to spoliation for this sanction. Instead, the Court relies on its above finding that Defendants willfully violated court orders compelling discovery and that these violations prejudiced First Financial. See Chrysler Corp., 186 F.3d at 1019. Therefore, sanctions under Rule 37 are appropriate. See id. The Court exercises its broad discretion to issue a “further just order[ ]” under Rule 37(b)(2) that is not one of the enumerated but inexhaustive options—the adverse inference instruction described above. The Court notes that this is not as severe as First Financial's request, which sought a non-rebuttable presumption. Cf. (Mem. in Supp. of Omnibus Mot. for Sanctions at 23). Further, it is not as severe as some of enumerated options provided by Rule 37(b)(2), such as directing that a designated fact be established for the purposes of the action, dismissing the action, or entering default judgment. These actions would essentially deprive Defendants of their day in court. See Fox, 516 F.2d at 996. A lesser sanction, such as staying the case until the discovery is produced, would be ineffective based on Defendants' past conduct. See Fed. R. Civ. P. 37(b)(2)(A)(iv).

*18 The adverse inference instruction described above is tailored to Defendants' conduct. First Financial does not have emails, text messages, and other documents responsive to its First RFPs, a year after requesting this information. SeeCard Tech., 249 F.R.D. at 571; (Mem. in Supp. of Omnibus Mot. for Sanctions at 21–22). Because this missing evidence is in the nature of communications, the adverse inferences above are tailored to inferences related to what the missing communications may have contained. See (Mem. in Supp. of Omnibus Mot. for Sanctions at 23). The adverse inferences above are also specific to Defendants' willful violation of the Court's February 2015 Order. The record reflects that Defendants contributed to the violation of the February 2015 Order and, therefore, the sanction is appropriately directed at Defendants.

In addition to the above sanctions, the Court awards fees and costs as described below.

When a motion to compel is granted, “the court must, after giving an opportunity to be heard, require the party or deponent whose conduct necessitated the motion, the party or attorney advising that conduct, or both to pay the movant's reasonable expenses incurred in making the motion, including attorney's fees.” Fed. R. Civ. P. 37(a)(5)(A). Payment must not be ordered, however, if the moving party did not attempt to obtain the information in good faith without court intervention, the non-moving party's “nondisclosure, response, or objection was substantially justified; or ... other circumstances make an award of expenses unjust.” Id. Fees under Rule 37(a)(5) may be awarded for prosecuting a motion for sanctions because “[s]uch an award is consistent with the purposes of sanctions under Rules 37 and 26(g)—to deter abuse and compensate the opposing party for all expenses, whenever incurred, that would not have been sustained had the opponent conducted itself properly[.]” Johnson Int'l Co. v. Jackson Nat'l Life Ins. Co., 19 F.3d 431, 439 n.10 (8th Cir. 1994) (internal quotation marks omitted).[110]

The Court recommends fees and costs associated with the First Motion for Sanctions and the Omnibus Motion for Sanctions be assessed against Defendants.[111] The record reflects that both Defendants and Drucker contributed to the violation of the Court's February 2015 Order, to which both the First Motion for Sanctions and the majority of the Omnibus Motion for Sanctions relate. Therefore, the Court will leave the details of how to apportion the sanctions to Defendants and their counsel. See, e.g., Denton v. Mr. Swiss of Mo., Inc., 564 F.2d 236, 241 (8th Cir. 1977) (affirming district court's dismissal of complaints as sanction for failure to comply with district court's discovery orders, noting that both counsel and clients were responsible for failing to respond to the court's discovery orders and stating that “[t]he judicial system cannot tolerate litigants who flagrantly refuse to comply with the orders of the court and who refuse to make discovery, for ‘(d)elay and evasion are added burdens on litigation, causing waste of judicial and legal time, are unfair to the litigants and offend the administration of justice’ ”).

Drucker represented the third-party deponents whose subpoenas were at issue in the Second Motion to Compel. (Mem. in Supp. of Second Mot. to Compel at 3). Neither Drucker nor the third-party deponents responded to the Second Motion to Compel, which was granted. (May 2015 Order). Thus, the Court cannot conclude that any refusal to produce documents was substantially justified or that there are any “other circumstances that make an award of expenses unjust.” See Fed. R. Civ. P. 37(a)(5)(A)(iii). Additionally, the Second Motion for Sanctions was related to Drucker's failure to comply with the Court's May 2015 Order, granting the Second Motion to Compel. Therefore, the Court recommends awarding reasonable fees and costs associated with the Second Motion to Compel and the Second Motion for Sanctions. Because there is no support in the record that Defendants Moua and Lee took any action that caused or related to First Financial filing the Second Motion to Compel or Second Motion for Sanctions, the Court recommends these fees and costs be awarded against Drucker. Although Drucker has since withdrawn from the case, he was still a participant in the case at the time the Second Motion to Compel was filed and granted, and defended himself against the Omnibus Motion for Sanctions. The Court finds it serves the interest of justice for Drucker to be sanctioned pursuant to Rule 37 and Local Rule 1.3. See D. Minn. LR 1.3 (“If an attorney, law firm, or party violates these rules or is responsible for a rule violation, the court may impose appropriate sanctions as needed to protect the parties and the interests of justice. Potential sanctions include, among other things, excluding evidence, preventing a witness from testifying, striking pleadings or papers, refusing oral argument, or imposing attorney's fees.”).

*19 Because Drucker is no longer representing Defendants, Defendants' current counsel must serve Drucker with this Report and Recommendation, as well as any other documents filed in relation to this Report and Recommendation. Service must be complete, and Defendants' counsel must file proof of service, within three business days of this Report and Recommendation and the filing of any related documents.

First Financial must file affidavits of its fees and costs incurred in bringing the Second Motion to Compel, the Second Motions for Sanctions, and the Omnibus Motion for Sanctions within fourteen days of an order adopting the recommendation of fees and costs as a sanction.[112] Defendants and Drucker may file responses to the affidavits seven days later.

Based upon all the files, records, and proceedings herein, IT IS HEREBY RECOMMENDED that:

This Report and Recommendation is amended to correct the clerical error raised in First Financial Security, Inc.'s letter dated January 18, 2016. This amendment does not affect the deadlines to object to the Report and Recommendation; those dates are provided on the final page of this Report and Recommendation.

(Order Dated Jan. 14, 2016) [Doc. No. 262]; see also (Mem. Op. & Order Dated Sept. 4, 2014) [Doc. No. 80 at 2–7]. In light of the complicated history of this case and the volume of exhibits and declarations filed with this motion, the Court uses footnotes in the Introduction and Factual Background sections of this Report and Recommendation to improve readability.

(Mem. of Law in Supp. of Omnibus Mot. for Sanctions, “Mem. in Supp. of Omnibus Mot. for Sanctions”) [Doc. No. 200 at 1]; see also (id. at 19–24).

See generally (id.); see also (Text Only Entry: Order Dated July 30, 2014) [Doc. No. 47].

(Mem. in Supp. of Omnibus Mot. for Sanctions at 3). The Court refers to this as “First Financial's First Set of RFPs.”

(Text Only Entry Order Dated Feb. 27, 2015, “Feb. 2015 Order”) [Doc. No. 113]

(Mot. to Sanction Defs. for Failure to Comply with a Court Order, “First Mot. for Sanctions”) [Doc. No. 133]; (Mem. of Law in Supp. of First Mot. for Sanctions, “Mem. in Supp. of First Mot. for Sanctions”) [Doc. No. 151].

See (Mem. in Supp. of Omnibus Mot. for Sanctions at 21–22).

(Mot. to Compel Produc. of Docs., “Second Mot. to Compel”) [Doc. No. 137]; (Mem. of Law in Supp. of Second Mot. to Compel, “Mem. in Supp. of Second Mot. to Compel”) [Doc. No. 139 at 1].

See (Order Dated May 12, 2015, “May 2015 Order”) [Doc. No. 168].

(Mot. to Sanction Defs. for Failure to Comply with a Court Order, “Second Motion for Sanctions”) [Doc. No. 178].

(Order Dated June 24, 2015, “June 2015 Order”) [Doc. No. 182].

(Minute Entry Dated August 20, 2015) [Doc. No. 239]. The Court also heard First Financial's Motion for Prejudgment Attachment at this hearing. See (id.).

(Mem. in Supp. of Omnibus Mot. for Sanctions at 2). Although the Court instructed First Financial to file this motion in accordance with the nondispositive deadline in this case, First Financial seeks sanctions that affect potentially dispositive, evidentiary, and trial issues that fall within the discretion of the Honorable Patrick J. Schiltz as the trial judge. See (June 2015 Order); see generally (Mem. in Supp. of Omnibus Mot. for Sanctions). Therefore, the sanctions analysis will take the form of a Report and Recommendation for Judge Schiltz's consideration. See 3M Innovative Props. Co. v. Tomar Elecs., No. 05-756 (MJD/AJB), 2006 WL 2670038, at *1, n.1 (Boylan, Mag. J. as adopted by Davis, J.) (taking the same approach).

See (Compl.); (Letters from Clifford S. Davidson to Defendants Gilles Moua (“Moua”) and Mai Lee (“Lee”) (June 10, 2014), the “Preservation Letters,” Ex. 10, Attached to Decl. of David D. VanSpeybroeck, “VanSpeybroeck Decl.–201”) [Doc. No. 201-10]. This exhibit contains two letters, which are identical. Because Exhibit 10 does not have internal page numbers, the Court refers to the page numbers assigned by CM/ECF

(Preservation Letters at 2, 5, Ex. 10, Attached to VanSpeybroeck Decl.–201).

(Id. at 4, 7).

(Mem. in Supp. of Omnibus Mot. for Sanctions at 3).

(Mot. to Compel Produc. of Docs. in Resp. to Pl.'s First Request for Produc. of Docs., “First Mot. to Compel”) [Doc. No. 100]; (Mem. of Law in Supp. of First Mot. to Compel, “Mem. in Supp. of First Mot. to Compel”) [Doc. No. 103 at 1, 2].

(Meet-&-Confer Statement Regarding First Mot. to Compel) [Doc. No. 102].

See (Minute Entry Dated Feb. 27, 2015) [Doc. No. 112].

(Feb. 2015 Order).

(Order to Show Cause Why Defs. & Their Counsel Should Not Be Required to Pay Pl.'s Reasonable Expenses in Bringing Mot. to Compel, “Order to Show Cause”) [Doc. No. 121].

(Mem. in Supp. of First Mot. for Sanctions at 1–2).

(First Mot. for Sanctions); (Mem. in Supp. of First Mot. for Sanctions).

(Mem. in Supp. of First Mot. for Sanctions at 4).

(Id. at 5).

(Id. at 6 n.2); (Partially Assented-to Mot. to Modify Scheduling Order) [Doc. No. 128].

(Am. Minute Entry Dated Mar. 26, 2015) [Doc. No. 156].

(Order Dated Apr. 30, 2015) [Doc. No. 164].

(Id. at 5–6).

(Id. at 5).

(Status Report Pursuant to Order of Hon. Mag. J. Steven E. Rau, “Status Report”) [Doc. No. 157].

(Id. at 1); see also (Suppl. Mem. of Law in Supp. of First Mot. for Sanctions, “Suppl. Mem. in Supp. of First Mot. for Sanctions”) [Doc. No. 161 at 2–3].

(Pl.'s First Request for Produc. to Defs., “First Set of RFPs,” Ex. A) [Doc. No. 152]; (Status Report at 2); see also Fed. R. Civ. P. 34(b)(2)(E) (“Unless otherwise stipulated or ordered by the court, these procedures apply to producing documents or electronically stored information: (i) A party must produce documents as they are kept in the usual course of business or must organize and label them to correspond to the categories in the request; (ii) If a request does not specify a form for producing electronically stored information, a party must produce it in a form or forms in which it is ordinarily maintained or in a reasonably usable form or forms; and (iii) A party need not produce the same electronically stored information in more than one form.”). First Financial noted that Defendants previously produced emails in native format. See (Status Report at 2) (“In any event, Plaintiff expects Defendants to produce native files, as they did with the emails they produced before the March 26 hearing.”).

(Id. at 2).

(Id.) see also (Defs.' Resps. to Pl.'s Requests for Produc. of Docs., “Defs.' Suppl. Resp.,” Ex. D, Attached to Status Report).

(Status Report at 1).

(Id. at 1–2).

(Id. at 1); (Email from Michael Jones to Lee (May 15, 2014), Ex. C, Attached to Status Report) (stating “Here is retainer and when First Financial file [sic] any frivolous suit or claim, ....”). This email is addressed to “Mai Noukhay,” who appears to be the same person as Mai Lee, one of the Defendants in this case. See (id.) see also (Status Report at 1). At no point have Defendants disputed that emails produced by First Financial for the purposes of their motions to compel or motions for sanctions are not to or from Defendants. Thus, the Court presumes that all references to “Mai Noukhay” refer to Lee. See also (Suppl. Mem. in Supp. of First Mot. for Sanctions at 7) (stating that “Defendant Lee sent or received all of the Jones Emails”).

(Status Report at 1); (Letter from VanSpeybroeck to Moua (May 16, 2014), at 1, 3, Ex. B, Attached to Status Report) (stating that “FFS has discovered that you have breached several terms of your Sales Contractor Agreement ... with FFS” and that “FFS plans to bring suit against you and will pursue all legal remedies it has against you.”).

(Suppl. Mem. in Supp. of First Mot. for Sanctions).

Compare (id. at 2–3) with (Status Report).

(Suppl. Mem. in Supp. of First Mot. for Sanctions at 3).

(Id. at 2, 4–5, 7).

(Id. at 5); see also (Email from Drucker to Moua and Lee (Jan. 22, 2015), Ex. 2, Attached to Decl. of VanSpeybroeck in Supp. of Suppl. Mem. in Supp. of First Mot. for Sanctions, “VanSpeybroeck Decl.–162”) [Doc. No. 162] (instructing Defendants to “gather and print-out all emails and texts that have anything to do with FFS, along with anything to and from FEG—from May 10, 2013 to the present.”). The parties “agreed to limit the time frame for producing responsive documents to January 1, 2013, to the present.” (Suppl. Mem. in Supp. of First Mot. for Sanctions at 5 n.3).

(Id. at 14).

(Defs.' Opp'n to First Mot. for Sanctions, Decl. of Jon E. Drucker) [Doc. No. 163].

(Email from Drucker to VanSpeybroeck (May 8, 2015), Ex. 1, Attached to VanSpeybroeck Decl.–201) [Doc. No. 201-1].

(Minute Entry Dated May 11, 2015) [Doc. No. 167]. At this hearing, the Court also heard oral argument on the Second Motion to Compel. (Id.).

See (Tr. of Mots. Hr'g Dated May 11, 2015, “May 2015 Tr”) [Doc. No. 172 at 29–30].

(May 2015 Order at 2).

See (Decl. of David D. VanSpeybroeck, “VanSpeybroeck Decl.–173”) [Doc. No. 173]; (Decl. of Timothy A. Solomon) [Doc. No. 174].

(Mem. in Supp. of Omnibus Mot. for Sanctions at 5).

(Id.); see also (Emails from VanSpeybroeck to Drucker (May 27, 2015; June 2, 2015; June 8, 2015), Ex. 8, Attached to VanSpeybroeck Decl.–201) [Doc. No. 201-8].

See (VanSpeybroeck Decl.–201 ¶ 10); (Emails between Clifford S. Davidson and Drucker (June 25, 2015), “Davidson/Drucker Emails (June 25, 2015),” Ex. 9, Attached to VanSpeybroeck Decl.–201) [Doc. No. 201-9]; see also (Tr. of Mots. Hr'g Dated Aug. 20, 2015, “Aug. 2015 Tr.”) [Doc. No. 241 at 20–21].

(Aug. 2015 Tr. at 6).

See (VanSpeybroeck Decl.–201 ¶ 10); (Davidson/Drucker Emails (June 25, 2015),” Ex. 9, Attached to VanSpeybroeck Decl.–201).

(Second Mot. to Compel); (Mot. to Compel Disclosures Required by FRCP 26(a), “Third Mot. to Compel”) [Doc. No. 144]. First Financial withdrew its Third Motion to Compel, and therefore, it is not further discussed in this Report and Recommendation. (Letter to Mag. J. Dated Apr. 28, 2015) [Doc. No. 158].

(Mem. in Supp. of Second Mot. to Compel at 1).

(Minute Entry Dated May 11, 2015); (May 2015 Order). The Court also granted First Financial's Partially Assented-To Motion to Modify Scheduling Order and held oral argument on the First Motion for Sanctions at the same hearing. (Minute Entry Dated May 11, 2015).

(May 2015 Tr. at 7–8).

(Second Mot. for Sanctions).

(Mem. of Law in Supp. of Second Mot. for Sanctions, “Mem. in Supp. of Second Mot. for Sanctions”) [Doc. No. 179 at 3–4].

(Id. at 6).

(June 2015 Order).

(Id. at 2).

(Id. at 2–3).

(Omnibus Mot. for Sanctions).

(Mem. in Supp. of Omnibus Mot. for Sanctions at 15–17).

(Id. at 17–18).

(Id. at 6).

(Emails from Lee to Drucker (May 8, 2015), Ex. 1, Attached to VanSpeybroeck Decl–201).

(Mem. in Supp. of Omnibus Mot. for Sanctions at 21).

(Id. at 21–22).

(Defs.' Opp'n to Omnibus Mot. for Sanctions Mem. of Points & Authorities, “Mem. in Opp'n to Omnibus Mot. for Sanctions”) [Doc. No. 211 at 2–4].

(Id. at 2–3, 5–6).

(Id. at 4); see also (Decl. of Gilles Moua in Supp. of Mem. in Opp'n to Omnibus Mot. for Sanctions, “Moua Decl.”) [Doc. No. 212 ¶¶ 4–5].

(Mem. in Opp'n to Omnibus Mot. for Sanctions at 4). Lee received a new phone in August 2014. (Id. at 6); (Decl. of Mai Lee in Supp. of Mem. in Opp'n to Omnibus Mot. for Sanctions, “Lee Decl.”) [Doc. No. 213 ¶ 4].

(Mem. in Opp'n to Omnibus Mot. for Sanctions at 5–6).

(Id. at 9–11).

(Id. at 5, 6); (Reply to Defs.' Opp'n to Omnibus Mot. for Sanctions, “Reply”) [Doc. No. 231 at 7].

(Aug. 2015 Tr. at 18–19, 34–35).

(Mem. in Supp. of Omnibus Mot. for Sanctions at 5).

(Id.).

(Mem. in Opp'n to Omnibus Mot. for Sanctions at 7–8); (Reply at 11).

(Aug. 2015 Tr. at 39).

(Id. at 17–18).

(Order Dated Nov. 3, 2015) [Doc. No. 254]; (Notice of Attorney Appearance/ Substitution) [Doc. No. 256].

(Omnibus Mot. for Sanctions).

(Mem. in Supp. of Omnibus Mot. for Sanctions at 23).

Further, any advice Drucker provided to Defendants about the scope of the preliminary injunction does not appear to be related to the other discovery issues in this case, and is more appropriately addressed either between Drucker and his clients themselves, or in any related disputes regarding the preliminary injunction.

Vongkhamsene is a down-line member of Moua's team. See (Mem. Op. & Order Dated Sept. 14, 2014 at 3) (stating that Souksakhone Khammanivong (“Khammanivong”) is “one of Moua's downline agents”); (id. at 5) (stating that Vongkhamsene was a down-line agent from Khammanivong).

The Federal Rules of Civil Procedure were amended effective December 1, 2015, including Rule 26. The Court refers to the version of Rule 26 prior to the amendment because that was the Rule in effect at the time of the parties' dispute.

In fact, Drucker conceded at the hearing that, at least with respect Moua's text messages, “there was an inadvertent loss of data.” (Aug. 2015 Tr. at 42).

First Financial reviewed and discussed the cell phone bills during the hearing but did not move to have them introduced into evidence nor has First Financial since provided the bills to the Court. See (Aug. 2015 Tr. at 21–22). Nonetheless, Drucker stated at the hearing that he provided the cell phone bills to First Financial recently and did not address, much less object to, First Financial's statements about their contents. (Id. at 39). Thus, the Court relies on these records for the purpose of demonstrating that more text messages were, at some point, sent or received and not produced, which Defendants do not dispute.

Defendants argue that the texts are “mostly incoming.” (Aug 2015 Tr. at 40). The distinction is irrelevant for the Court's purposes here, which is merely to show that text messages were sent or received and were not produced in this litigation.

In Hallmark Cards, the Eighth Circuit clarified that “a district court must issue explicit findings of bad faith and prejudice prior to delivering an adverse inference instruction.” 703 F.3d at 461.

Cf. Chrysler Corp. v. Carey, 186 F.3d 1016, 1022 (8th Cir. 1999) (stating that if “the record demonstrates a willful and bad faith abuse of discovery and the non-cooperating party could not be unfairly surprised by the sanction,” no evidentiary hearing is necessary.). First Financial did not request an evidentiary hearing. At the August 2015 hearing, Drucker stated that an evidentiary hearing would be helpful to demonstrate the difficulties he has had with his clients. (Aug. 2015 Tr. at 35–36). He did not request an evidentiary hearing related to any other matter, nor did he raise the issue in his written submission. See (Mem. in Opp'n to Omnibus Mot. for Sanctions). Further, as discussed later in this Report and Recommendation, any difficulty Drucker may have had with his clients was not timely reported to the Court.

But see Card Tech. Corp. v. DataCard Inc., 249 F.R.D. 567, 570 (D. Minn. 2008) (Davis, J.) (“It is not a requirement that the party ‘willfully’ refuse to obey the Court's discovery order.”) (citing Societe Internationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197, 207–08 (1958)).

The Court granted First Financial's First Motion to Compel without specifying a production date. See (Feb. 2015 Order). The Court agrees with First Financial that, because First Financial's First Motion to Compel sought production within fourteen days, Defendants were required to comply by March 13, 2015, fourteen days after the date of the hearing. See (Mem. in Supp. of First Mot. for Sanctions).

This email was forwarded from Moua to Jones. (Emails produced by Michael Jones, Ex. 1 at 13, Attached to VanSpeybroeck Decl.–162).

This email is from an email address associated with Moua's name, but is signed “Mai,” which is Lee's first name. (Emails produced by Michael Jones, Ex. 1 at 10, Attached to VanSpeybroeck Decl.–162).

Defendants statements that “people” at an Apple store helped them produce text messages provides very little detail and no explanation of why text messages are missing, whether there is any way to recover the text messages, and if so, whether any such attempt has been made. See (Moua Decl. ¶ 7); (Lee Decl. ¶ 5).

There appears to be some confusion over whose phones were to be produced. The order granting the Second Motion to Compel only related to the three third-party deponents at issue because the language of the order stated that the motion is granted “pursuant to the parties' agreement to use a third-party vendor to facilitate the production of documents as described on the record.” (May 2015 Order at 2). This is also consistent with VanSpeybroeck's attempts to follow up on the order. See (Emails from VanSpeybroeck to Drucker (May 27, 2015; June 2, 2015; June 8, 2015), Ex. 8, Attached to VanSpeybroeck Decl.–201).

As stated previously, Drucker represented the third-party witnesses for the purposes of their depositions. (Mem. in Supp. of Second Mot. to Compel at 3).

Defendants' claim of constructive termination is not titled as an affirmative defense. (Defs.' Answer to Compl., “Answer”) [Doc. No. 90 at 4] (“Defendants deny that they have ever solicited or induced any agent associated with FFS to join FEG. FFS constructively terminated all such agents by disabling their login to the FFS website and they sought-out Defendants after FFS terminated them.”). Nonetheless, for ease of reference and for the purposes of this Report and Recommendation, the Court addresses constructive termination as an affirmative defense.

With respect to constructive termination, Defendants state that they “believe that Plaintiff possesses more such documents, i.e., re blocking FFS account access to all Champion Club members.” (Defs.' Suppl. Resp. at 10, Ex. D, Attached to Status Report). With respect to unclean hands, Defendants state that they “believe that FFS possesses all such documents in its custody, possession and control, i.e., documents re Thai Thao.” (Id. at 11).

As stated above, however, and subject to Judge Schiltz's discretion, Defendants may not introduce evidence they have not disclosed in discovery.

In Johnson International, the Court relied on Federal Rule of Civil Procedure 37(a)(4), which is substantially similar to the modern Rule 37(a)(5). 19 F.3d at 439 n.10; compare Fed. R. Civ. P. 37(a)(4) (1994) with Fed. R. Civ. P. 37(a)(5) (2015).

Because the Court already considered sanctions in connection with First Financial's First Motion to Compel, the Court will not reconsider that order nor award additional fees and costs related to the First Motion to Compel. See (Order Dated Apr. 30, 2015).

First Financial already filed affidavits related to its First Motion for Sanctions on May 19, 2015. (VanSpeybroeck Decl.–173); (Decl. of Timothy A. Solomon).