The Court, being duly advised in the premises, upon all of the files, records, the proceedings herein, now makes and enters the following Order.

IT IS HEREBY ORDERED:

Plaintiff AGinformationData, LLC's Motion for Sanctions [Docket No. 69] is GRANTED in part and DENIED in part as forth in the Memorandum below.

This case arises out of claims by plaintiff AGinformationData, LLC (“AGinfoData”) that defendants Integrated Solutions Group, Inc. and AgTrax Technologies, Inc. (collectively “AgTrax”) violated a Non–Disclosure Agreement (“NDA”) between AGinfoData and AgTrax (“AGinfoData/AgTrax NDA”) by taking AGinfoData's proprietary information relating to its software products, and forming a partnership with defendants AgWorks, Inc. and AgWorks, LLC (collectively “AgWorks”), which sells AgTankTracker, a software product that competes directly with AGinfoData's Trax360. See Amended Complaint [Docket No. 51]. In sum, AGinfoData claims that in violation of the NDA, AgTrax is marketing and selling AgTankTracker to customers.

The matter is presently before the Court on AGinfoData's motion against AgWorks for sanctions related to AgWorks' destruction; refusal to produce or untimely production of sales records and financial documents; AgWorks' failure to comply with its discovery obligations and this Court's Order dated August 1, 2013; and AgTrax and AgWorks' destruction of electronic metadata associated with another NDA entered into between AgTrax and AgWorks.

AGinfoData commenced this suit against AgTrax and AgWorks, Inc. on December 21, 2011. [Docket No. 1]. Following an unsuccessful motion to dismiss or transfer filed by AgTrax, in July 2012, AGinfoData served interrogatories and requests for the production documents on AgTrax and AgWorks, Inc. seeking information regarding customers doing business with the AgTrax and AgWorks, including customers' identities, contracts with customers, and information reflecting the revenue and profits derived from the AgTrax/AgWorks relationship. Declaration of Pamela Abbate–Dattilo [Docket No. 72] (“Abbate Decl.”), Exs. A–D (Interrogatory Nos. 7–9 and Request Nos. 12–14).

AgTrax produced spreadsheets created by AgWorks, Inc. listing the names of numerous customers, the date of transactions, the purchase price and the software that was purchased. Id., ¶ 2 (citing by example Ex. F (INT000452–54, INT000983)). AgTrax also informed AGinfoData that it does not create this information:

*2 Id., Ex. E (January 22, 2013 letter from AgTrax to AGinfoData).

As for AgWorks, Inc. on September 5, 2012, it produced four invoices from September through October 2011, reflecting less than $20, 000 in sales involving only four customers arising out of the AgTrax/AgWorks relationship. Id., Exs. C (AgWorks, Inc.'s Responses to Request for Production of Documents), H (Invoices). But these invoices did not reflect all of the customers listed on the spreadsheets produced by AgTrax, nor did they match AgWorks Inc.'s answer to Interrogatory No. 8 in which it had itemized the various products sold to customers it had identified in response to Interrogatory No. 7 (seeking the identification of all persons and entities AgWorks had made a sale in connection with the AgTrax/AgWorks relationship). Id., Ex. D. Thereafter, from November 2012 through the instant motion, AGinfoData made numerous requests to AgWorks to produce documents and information reflecting sales and revenues arising out of the AgTrax/AgWorks relationship, AgTankTracker revenues, customer invoices and contracts. See, e.g., Second Declaration of Pamela Abbate–Datillio [Docket No. 80] (“Second Abbate Decl.”), Exs. 7–16.

On January 15, 2013, via its supplemental responses to AGinfoData's requests for production of documents, AgWorks, Inc. notified AGinfoData that it had no documents relating to the customers and the revenue arising out of the AgTrax/AgWorks relationship because AgWorks, Inc. had sold its business in or around January 2012. Id., Ex. I (January 15, 2013 letter from AgWorks, Inc. to AGinfoData attaching supplemental responses). During a conference call with this Court on January 22, 2013, AgWorks, Inc.'s counsel represented that he did not know who had purchased AgWorks, Inc. Id., ¶ 5. Through its own investigation, AGinfoData discovered that AgWorks, Inc. had sold its business to AgWorks, LLC, a wholly owned subsidiary of The McGregor Company. Id.; Affidavit Of Pamela Abbate–Dattilo in Support of Plaintiff Aginformationdata, LLCs Motion to Amend the Complaint (“Abbate Aff.”) [Docket No. 43], Ex. 6 (letter dated January 28, 2013 from counsel of The McGregor Company to Abbate). Within days of that phone conference, AGinfoData served subpoenas on The McGregor Company and AgWorks, LLC to obtain the documents that AgWorks, Inc. said it no longer possessed, but neither company would comply with the subpoenas. Abbate Aff., ¶¶ 2, 3, Ex. 6. In its letter setting forth its objections to the subpoenas, counsel for The McGregor Company stated: “It is unknown what documents have been misplaced or destructed. Certainly, in the negotiation of the Transaction, many unknown drafts and documents have been discarded.” Id., Ex. 6.

On February 25, 2013, AgWorks, LLC was brought into the suit by AGinfoData. See Amended Complaint [Docket No. 51]. The next day, AGinfoData served written discovery on AgWorks, LLC seeking the same information it had been requesting from AgWorks, Inc. Abbate Decl., ¶ 8.

In its April 9, 2013 responses to AGinfoData's written discovery relating to the customers and revenue resulting from the AgTrax/AgWorks relationship, AgWorks, LLC produced a summary listing 15 customers and another summary stating that the total sales of competitive products as of April 9, 2013 was $157, 916.88. Id., Ex. K (AgWorks, LLC's Answers to AGinfoData's Interrogatories, Exs. 1, 2). AgWorks, LLC also informed AGinfoData that some of the “many draft documents were destroyed in the course of negotiations with AgWorks, Inc.” Id., Ex. J (AgWorks, LLC's Responses to AGinfoData's Request for Documents), Request No. 30). AgWorks, LLC did not produce any additional documents until May 17, 2013, however, that production did not include any invoices or records of sales made. Id., ¶ 9.

*3 On June 19, 2013, AGinfoData took the deposition of Clyde Martin, the founder, President, and sole owner of AgWorks, Inc. Martin testified that based on the discovery produced, there was no way to ascertain all of the sales made with regard to the AgTrax/AgWorks relationship while he was the president AgWorks, Inc. Id., Ex. N (Martin Dep.), pp. 176–77. Martin also testified that he no longer had in his possession documents that reflected the sales AgWorks, Inc. made to AgTrax's customers. Id., pp. 19–20, 27–29. Martin referred AGinfoData to Matt Hull, a salesperson formerly employed by AgWorks, Inc. and currently employed by AgWorks, LLC, as a person who may have relevant information. Id., p. 177.

On July 5, 2013, AgWorks, LLC produced redacted customer invoices to AGinfoData, which it produced again to AGinfoData in an unredacted form on July 25, 2013, after AGinfoData had complained of the redactions to AgWorks, LLC on July 16, 2013, and to the Court on July 22, 2013. See Affidavit of Peter M. Waldeck [Docket No. 78] (“Waldeck Aff.”) Exs. 2, 3 (July 5 and 25 letters From AgWorks, LLC to AGinfoData); Abbate Decl., ¶¶ 10, 11, Exs. L (July 22, 2013 letter from AGinfoData to the Court), M (July 16, 2013 letter from AGinfoData to AgWorks).

On August 1, 2013 and shortly before an informal motion conference with the Court to address AgWorks' failure to produce documents evidencing its revenues, expenses and net income, and revenues associated with the sales of AgTankTranker by AgTrax, AgWorks, LLC produced to AGinfoData its 2010 corporate tax return along with the Schedule L Balance Sheet (23.6), a 2011 P&L for AgWorks, Inc. (11.68–11.70) that included the total income from the AgTankTracker, the 2012 P&L for AgWorks, LLC (AGW 6544), and AgTankTracker 2012 Sales Revenue (AgWorks, Inc. document 14.1 and Exs. 1 and 2 to AgWorks, LLC' previously produced with its answers to interrogatories). See Waldeck Aff., Ex. 1 (August 1, 2013 letter from AgWorks to AGinfoData); Abbate Decl., Exs. L (letter by AginfoData dated July 22, 2013 to Court), Q (2011 P&L for AgWorks, Inc.); Second Abbate Decl., Ex. 4 (AGW–6544). AgWorks, LLC's 2012 P&L provides general information regarding profits and costs but did not specifically reference the AgTankTracker. See Second Abbate Decl., Ex. 4 (AGW–6544).

Following the informal motion conference with the parties, this Court ordered AgWorks, LLC to produce to AGinfoData by August 5, 2013, the “income statements, profit and loss statements, or other comparable documents that show revenues, expenses and net income for the years 2010, 2011 and 2012, and documents reflecting AgWorks total revenue for the AgTankTracker for the years 2010,[1] 2011 and 2012.” August 1, 2013 Order [Docket No. 68].

On August 27, 2013, Hull's deposition was taken, but he could not testify as to the sales on behalf of AgWorks, Inc. Abbate Decl., Ex. O (Hull Dep.), p. 14. However, he did testify that it had been the practice since before and after the purchase of AgWorks, Inc. to record sales by a proposal that was signed by a customer; AgWorks had created a “timeline” of the events in this litigation without counsel; and he believed he had previously kept a spreadsheet of all sales that were made in connection with the AgTrax/AgWorks, Inc. relationship. Id., pp. 15–18, 20–22.

With regard to recording a sale to a customer, Hull testified as follows:

Id., pp. 15–17.

Greg Duhachek, AgWorks, LLC's president, testified on August 27, 2013, that he did not know whether AgWorks, LLC had the financial information concerning AgWorks, Inc., because AgWorks, Inc. had maintained it on QuickBooks software and he did not know if AgWorks, LLC still had access to QuickBooks for AgWorks, Inc. Abbate Decl., Ex. R (Duhachek Dep.), pp. 155–56. In addition, Duhachek testified that AgWorks, LLC does not create separate profit and loss statements for AgTankTracker, but that it does create an annual P&L through the Great Plains accounting software package, and that sales to AgTrax's customers are entered into this software. Id., pp. 26–28, 152.

Duhachek also testified that AgWorks, LLC had retrieved customer invoices for the litigation by using a filter on the Great Plains software, based on the parameters of the Complaint, and had produced all invoices within the timeframe of the Complaint. Id., p. 32. But invoices after this date, which he believed was April 9, 2013, were not included in the retrieval process. Id., p. 33.

On August 30, 2013, AGinfoData requested that AgWorks, LLC produce customer invoices from Golden Valley, Danville, Norder Supply, and Farmers Elevator Co–op–Rock Valley; customer invoices from April 9, 2013 through August 2013; the Great Plains reports; the P&Ls for 2010, 2011 and 2012; and the timeline, signed proposals from customers, and spreadsheet of sales referenced during Hull's deposition. Abbate Decl., Ex. P (August 30, 2013 letter from AGinfoData to AgWorks).

On September 18, 2013, and after the present motion for sanctions was filed, AgWorks, LLC produced to AGinfoData copies of signed proposals/contracts associated with the AgWorks/AgTrax partnership, and represented that many of the proposals for the AgTankTracker occurred verbally with no signed proposals. SeeWaldeck Aff., Ex. 4 (September 18, 2013 letter from AgWorks to AGinfoData). AgWorks, LLC also produced the timeline referenced in Hull's deposition. Id. As for the spreadsheet referenced by Hull during his deposition, AgWorks, LLC asserted that Hull testified that he could not specifically recall such a document, but that if he had created such a document it might be in the form of a spreadsheet. Id. AgWorks, LLC stated that the spreadsheet was not found by Hull during the search of his computer. Id. AgWorks, LLC represented that it used Great Plains as its accounting system, all billing documents, customer returns, receipts and statements provided to customers were generated from this program, and that AgWorks, LLC had produced all “customer-facing” documents generated from Great Plains. Id.

*5 As for the requested invoices, AgWorks, LLC informed AGinfoData that it had previously produced all copies of invoices for sales connected to the AgTrax/AgWorks relationship through June 2013. Id. AgWorks, LLC produced the customer invoices and returns generated from July to August 2013. Id.; see also Second Abbate Decl., Ex. 1 (same attaching documents, including invoices produced). In response to AGinfoData's complaint that it had not produced customer invoices for Norder Supply, Danville, Golden Valley Co-op, and Farmers Elevator Co-op—Rock Valley, AgWorks, LLC informed AGinfoData that Danville, Golden Valley Co-op, and Farmers Elevator Co-op—Rock Valley were not AgTankTracker customers. Id. AgWorks, LLC acknowledged that it had previously listed these companies as customers in its discovery responses. Id.; see also Abbate Decl., K (Ex. 1 (April 9, 2013 Answer to Interrogatory No. 7 referencing an exhibit listing customers)). However, through additional investigation, AgWorks, LLC determined that these companies were not AgTankTracker customers. See Waldeck Decl., Exs. 4, 5 (September 19, 2013 letter from AgWorks to AGinfoData). On September 19, 2013, AgWorks produced the invoices for AgTankTracker purchases by Norder Supply, Inc. Id., Ex. 6; Second Abbate Decl., Ex. 2 (same).

After the hearing, Hull submitted an affidavit addressing his testimony regarding the existence of the spreadsheet referenced during his deposition. See Affidavit of Matt Hull [Docket No. 85]. Hull represented that his testimony of tracking sales via a spreadsheet was an assumption on his part, which he determined to be inaccurate after his research. Id., ¶¶ 4, 6. Hull also asserted that when he changed his laptop in the January–March 2012 time frame and again in August 2013, he transferred all of his files from the old computer to the new computer each time without deleting any data. Id., ¶¶ 6–10.

In addition, upon the Court's instruction, after the hearing AgWorks, LLC submitted after the hearing on the motion, an affidavit by Ian McGregor, Vice President of The McGregor Company, in which he represented that he created the 2012 P&L document on August 1, 2013, and that the P&L represented the global profit and loss statement for AgWorks, LLC in its entirety. See Affidavit of Ian McGregor [Docket No. 84], ¶¶ 9, 10. McGregor also represented that in the normal course of business, AgWorks, LLC does not generate a separate P&L statement for AgTankTracker or for any other product line. Id., ¶ 11. McGregor stated that on October 3, 2013, in response to the request to clarify further the profit and loss information for the AgTankTracker, he created AGW–6665, which was attached to his affidavit. Id., ¶ 12, Ex. A. This document listed the gross operating income, gross margins and sales for AgWorks, LLC and also listed the month to date, year to date income and sales for the AgTankTracker, but the document does not list the date of the data. Id.

Also after the hearing and pursuant to this Court's directive, AgWorks issued supplemental answers to AGinfoData's Interrogatories regarding Golden Valley, Danville, and Farmers Elevator Co-op—Rock Valley, which referred to the submitted declarations of McGregor, Hull and Duhachek regarding sales to these customers. SeeDefendant AgWorks, LLC's First Supplemental Answers to Plaintiff AgInformation Data, LLC's First Set of Interrogatories, No. 7. While McGreger and Hull made no mention of these customers, Duhachek represented that Golden Valley became AgWorks' customer before the AgTrax/AgWorks Marketing Agreement was executed, and that while Golden Valley had purchased agronomy products from AgWorks, LLC, it had not purchased the AgTankTracker. See Affidavit of Greg Duhachek (“Duhachek Aff.”) [Docket No. 86], ¶¶ 5–8. Danville Co–Op and Farmers Elevator Co–Op—Rock Valley were customers obtained based on the leads through the AgTrax/AgWorks Marketing Agreement, however, these customers purchased products unrelated to the AgTankTracker. Id., ¶¶ 9–12; October 9, 2013 letter to Court from AgWorks attaching Danville Co–Op and Farmers Elevator Co–Op—Rock Valley invoices.

On July 29, 2011, Kent Fiebelkorn, the owner of AGinfoData, sent the NDA to AgTrax, which was signed by AgTrax's president on August 3, 2011, with only one modification made to it regarding the duration of the NDA. See Amended Complaint, ¶¶ 20, 23, Ex. A; Affidavit of Kent Fiebelkorn (“Fiebelkorn Aff.”) [Docket No. 16], ¶¶ 7–10, Ex. B. On August 8, 2011, Fiebelkorn gave a presentation to AgTrax's directors regarding AGinfoData's products, business model, sales strategies, marketing, research and development, including alleged confidential, proprietary and trade secret information. Fiebelkorn Aff., ¶¶ 11–13. The next day, AgTrax and AgWorks, Inc. entered into their own NDA. Abbate Decl., Ex. S (August 9, 2011 AgTrax/AgWorks NDA). The only difference between the AGinfoData/AgTrax NDA and the AgTrax/AgWorks NDA was the choice of state law to resolve disputes—Minnesota versus Kansas. Compare, Abbate Decl., Ex. S, with Amended Complaint, Ex. A. According to AgWorks, no other NDA used by AgWorks looks anything like the AgTrax/AgWorks NDA. Defendant AgWorks, Inc. and AgWorks, LLC's Memorandum in Opposition to Plaintiff's Motion for Sanctions [Docket No. 77] (“AgWorks Mem.”), p. 11.

*6 Gary Hobbs, AgTrax's President, testified at his deposition that AgWorks drafted the AgTrax/AgWorks NDA and presented it to him when he travelled to Iowa to meet with Martin. See Abbate Decl., Ex. T (Hobbs Dep.), p. 37; Declaration of Gary O. Hobbs [Docket No. 75] (“Hobbs Decl.”), ¶ 8. Hobbs represented in his declaration that he only retained a copy of the signed agreement, which has been produced to AGinfoData. Hobbs Decl., ¶¶ 8, 9. On August 1, 2013, this Court ordered AgWorks “to produce to plaintiff the metadata associated with AgWorks/AgTrax Non–Disclosure Agreement (“NDA”) signed in 2011.” August 1, 2013 Order. On August 7, 2013, AgWorks' counsel informed AGinfoData that “it has been determined that AgWorks, Inc. was not the creator nor they draft the [AgTrax/AgWorks NDA] signed and dated on August 9, 2011. As a direct result, no metadata exists within the records and files of AgWorks Inc. or AgWorks, LLC for this document.” Waldeck Decl., Ex. 6 (letter dated August 7, 2013 from AgWorks to AGinfoData). AgTrax also represented to AGinfoData that it had searched for the metadata and found none. See Abbate Decl., Exs. V, W. According to Hobbs, AgTrax's IT personnel searched its computer systems and hard copies for the documents pertaining to the present lawsuit, including documents shared between AgTrax and AgWorks. Hobbs Decl., ¶ 5. There was no record, including a record of deletion, that the AgWorks/AgTrax NDA ever existed on AgTrax's computer system. Id., ¶¶ 6, 7.

AGinfoData seeks sanctions against defendants for their abuse of the discovery process under Rule 37(b) of the Federal Rules of Civil Procedure and this Court's inherent authority. See Plaintiff AGinformationData, LLC's Memorandum in Support of Sanctions [Docket No. 71] (“Pl.'s Mem.”), pp. 15–16. The conduct at issue includes: AgWorks' failure to timely respond to discovery; failure to provide accurate testimony and documents on the sales AgTrax made in connection with the AgTrax/AgWorks relationship; AgWorks, Inc.'s failure to provide complete deposition testimony through its founder and owner of AgWorks, Inc.—Clyde Martin; AgWorks, Inc.'s concealment of the purchase of AgWorks, Inc. by AgWorks, LLC from AGinfoData for more than a year; AgWorks, Inc.'s failure to preserve documents bearing on this litigation when AgWorks, Inc. sold its business to AgWorks, LLC, including the spreadsheet referenced by Hull in his deposition; and AgWorks' misrepresentations regarding the existence of certain documents, including contracts with customers. Id., pp. 2, 17–18.

As a result of this alleged misconduct, AGinfoData seeks: at least $30, 000 in legal fees and costs incurred during discovery and bringing the present motion; a factual inference that AgWorks, Inc. had knowledge of the NDA between Defendant AgTrax and AGinfoData at the time AgWorks, Inc. entered into the Marketing Agreement with AgTrax; and an order precluding AgWorks from disputing AGinfoData's lost profit and unjust enrichment damage calculations, given it has been unwilling or unable to produce full and complete financial records. Id., pp. 18–19. In addition, AGinfoData seeks a monetary sanction of $5, 000 against defendants for the destruction of the metadata associated with the AgWorks/AgTrax NDA. Id., p. 19.

AgWorks countered that sanctions under Rule 37(b) require a violation of a court order on discovery, which AGinfoData has failed to show. See Defendant AgWorks, Inc. and AgWorks, LLC's Memorandum in Opposition to Plaintiff's Motion for Sanctions [Docket No. 77] (“AgWorks Mem.”), p. 13. AgWorks argued that AGinfoData has failed to establish that AgWorks has willfully withheld or destroyed evidence in an attempt to suppress the truth and consequently, was not entitled an adverse inference sanction. Id., p. 16. In particular, while AGinfoData claimed that AgWorks failed to produce documents showing AgWorks' revenues, expenses and net income for the years 2010, 2011 and 2012, AgWorks had produced all of the profit and loss statements for the years 2010, 2011 and 2012, including attachments to its Federal Tax Returns, and had produced all of the relevant customer invoices. Id., pp. 13–14. As to Martin's deposition testimony, AgWorks asserted that AGinfoData's reliance on Rule 37(d) for sanctions is misplaced as Martin appeared for his deposition. Id., p. 15. AgWorks also contended that AgWorks, Inc. had apprised AGinfoData of its potential sale before the start of litigation, and that the loss of any documents during the transition of the businesses is a fact of doing business and not evidence that specific documents were destroyed on purpose. Id., p. 16.

*7 As for the metadata of the AgWorks/AgTrax NDA, AgWorks argued that it complied with the Court's Order requiring the production of the metadata, as evidenced by the fact that it searched for this data and discovered none, and that the Court would have to guess as to whether to sanction it or AgTrax for the loss of this evidence. Id., pp. 14, 17. Similarly, AgTrax argued that sanctions against it for the loss of the metadata regarding the NDA was not appropriate, as there was no evidence that it prepared the AgWorks/AgTrax NDA and a search of its computer systems showed no evidence of the NDA or its deletion. See AgTrax Memorandum in Opposition to Plaintiff's Motion for Sanctions [Docket No. 74], pp. 2–3 (citing Hobbs Decl., ¶¶ 4–6).

In reply, AGinfoData pointed to the fact that at the time of the sale of AgWorks, Inc. to AgWorks, LLC, AgWorks, Inc. had been sued and therefore had a duty to preserve evidence bearing on the claims and defenses and to not relinquish control over the documents; yet, AgWorks has admitted that documents were destroyed when AgWorks, Inc. was sold to AgWorks, LLC. Plaintiff Aginformationdata, LLC's Reply Memorandum in Support of Sanctions [Docket No. 79] (“Pl.'s Reply”), pp. 4–5. According to AGinfoData, this failure to preserve was also evidenced by the fact that the spreadsheet Hull described during his deposition no longer exists. Id., p. 5. AGinfoData reiterated that AgWorks, Inc.'s failure to disclose the sale of its business for a year led to the loss of discovery. Id., p. 5. The fact that AgWorks reported to AGinfoData that it was discussing a sale was irrelevant because AgWorks refused to identify the buyer and subsequently withheld documents that would have revealed the sale. Id.

AGinfoData also argued that AgWorks failed to comply with this Court's August 1, 2013 Order by producing tax returns for 2010 and 2012, instead of P&Ls that break out revenue for the AgTankTracker, as the 2011 P&L did. In addition, AGinfoData complained that AgWorks failed to identify total AgTankTracker revenue by year. Id., p. 6. AGinfoData also noted that although AgWorks had previously represented that it did not have customer contracts or customer invoices, it subsequently produced such contracts, and only produced complete invoices after the present motion was brought. Id., p. 7. Finally, AGinfoData asserted that even though all documents have now been produced, this fact alone does not remedy AgWorks' discovery abuses. Id., pp. 7–8.

Federal Rule of Civil Procedure 37(b)(2) authorizes a court to award sanctions against a party who fails to obey an order to produce discovery. Possible sanctions include “directing that the matters embraced in the order or other designated facts be taken as established for purposes of the action, ” “prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence, ” and monetary sanctions in the form of an award of reasonable attorney's fees and expenses. Fed. R. Civ. P. 37(b)(2)(a)(i)–(ii), (c). These sanctions may also be imposed upon a party who fails to timely supplement its discovery responses as required by Rule 26(e). See Fed. R. Civ. P. 37(c)(1). Rule 37(c) is a self-executing provision for failure to make a disclosure required by Rule 26(e) that does not require that a motion to compel be brought first. See Fed. R. Civ. P. 37, advisory cmt. notes (1993).

The purpose of sanctions under Rule 37 is “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.” National Hockey League v. Metropolitan Hockey Club, Inc., 427 U.S. 639, 643 (1976) (per curiam). The district court has “a large measure of discretion in deciding what sanctions are appropriate for misconduct.” Hutchins v. A.G. Edwards & Sons, Inc., 116 F.3d 1256, 1260 (8th Cir. 1997).

*8 Further, by the virtue of its inherent authority, this Court has the discretion “to fashion an appropriate sanction for conduct which abuses the judicial process.” Sherman v. Rinchem Co., Inc., 687 F.3d 996, 1006 (8th Cir. 2012). “This inherent power reaches conduct both before and during the litigation as long as that conduct abuses the judicial process in some manner.” Stevenson v. Union Pacific R.R. Co., 354 F.3d 739, 751 (8th Cir. 2004). “Because of the potency of inherent powers, a court must exercise its inherent powers with restraint and discretion, and a primary aspect of that discretion is the ability to fashion an appropriate sanction.” Plaintiffs' Baycol Steering Comm. v. Bayer Corp., 419 F.3d 794, 802 (8th Cir. 2005).

Under federal law,[2] in order to levy the sanction of an adverse inference instruction as part of its inherent authority, there must be finding that the spoliation or destruction of evidence is intentional and indicates a desire to suppress the truth. See Stevenson, 354 F.3d at 746 (citing Lewy v. Remington Arms Co., 836 F.2d 1104, 1111–12 (8th Cir. 1988)); see also Greyhound Lines, Inc. v. Wade, 485 F.3d 1032, 1035 (8th Cir. 2007) (citation omitted) (finding that a spoliation sanction requires a finding of “intentional destruction of evidence indicating a desire to suppress the truth....”). “Intent is rarely proved by direct evidence, and a district court has substantial leeway to determine intent through consideration of circumstantial evidence, witness credibility, motives of the witnesses in a particular case, and other factors.” Morris v. Union Pac. R.R., 373 F.3d 896, 901 (8th Cir. 2004). “The intentionality requirement means that the destruction must have been purposeful. The purpose the destruction must serve is that of obscuring the truth.” Insignia Systems, Inc. v. News America Marketing In–Store, Inc., Civil No. 04–4213 (JRT/AJB), 2009 WL 483850, at *4 (D. Minn. Feb. 25, 2009). A finding of negligence (i.e. the defendant knew or should have known not to destroy relevant documents) will not support an adverse inference instruction. See Stevenson, 354 F.3d at 748.

Additionally, “[a]n adverse inference is appropriate only when, among other things, the party seeking the inference can show that once-extant records were destroyed ‘to suppress the truth,’ and that the records would have favored its case.” Johnson v. Ready Mixed Concrete Co., 424 F.3d 806, 811 (8th Cir. 2005) (quoting Groves v. Cost Planning & Mgmt. Int'l, Inc., 372 F.3d 1008, 1010 (8th Cir.2004); also Koons v. Aventis Pharms., Inc., 367 F.3d 768, 780 (8th Cir. 2004)). Consequently, the court must conclude that the destruction of evidence prejudiced the moving party in order to issue sanctions against the offending party. Stevenson, 354 F.3d at 748 (citing Dillon v. Nissan Motor Co., Ltd., 986 F.2d 263, 267 (8th Cir. 1993)).

The moving party has the burden to prove spoliation. Stevenson, 354 F.3d at 748.

The Court concludes that AgWorks' conduct in meeting its discovery obligations was dreadful with respect to both its duty to preserve evidence and to respond to discovery. AgWork's, Inc. failed to take steps to preserve information that may have bore on the claims, defenses and damages upon its sale to AgWorks, LLC, and AgWorks, LLC has dragged its feet and forced AGinfoData to expend unnecessary time and resources to finally get information regarding its revenues and sales of AgTankTracker to customers. Sanctions are warranted against AgWorks—the question is what sanctions.

*9 This Court concludes that AGinfoData is not entitled to a factual inference and instruction to the jury that AgWorks, Inc. had knowledge of the NDA between AgTrax and AGinfoData at the time AgWorks, Inc. entered into the Marketing Agreement with AgTrax.[3] Nor will the Court preclude AgWorks from disputing AGinfoData's damage calculations due to AgWorks failure to preserve documents. It is true that some documents from AgWorks, Inc. were destroyed or not retained by AgWorks, Inc. or AgWorks, LLC during and after the sale of AgWorks, Inc., and that AgWorks, LLC also destroyed draft documents in the course of negotiations with AgWorks, Inc. See AgWorks' Mem., p. 16; Abbate Decl., Ex. I (January 15, 2013 letter from AgWorks, Inc. to AGinfoData's counsel attaching supplemental responses), J (AgWorks, LLC response Document Request No. 30); Y (January 15, 2013 letter from AGinfoData to the Court stating that “AgWorks informs us that AgWorks has been sold and that it no longer possess documents pertaining to this litigation.”). It is also true that AgWorks, Inc. did nothing to apprise AGinfoData that it had been sold to AgWorks, LLC in January, 2012. However, no direct or circumstantial evidence was presented showing that AgWorks, Inc. or AgWorks, LLC intentionally destroyed documents for the purpose of suppressing the truth regarding AgWorks, Inc.'s knowledge of the NDA between AgTrax and AGinfoData at the time AgWorks, Inc. entered into the Marketing Agreement with AgTrax, or with respect to sales of AgTankTracker to AgTrax customers. At the point in time that the sale of AgWorks, Inc. to AgWorks, LLC took place, the suit had just been started, AgWorks, Inc. had just filed its answer [Docket No. 10], and no discovery had been served (and was not served until July 2012) alerting AgWorks as to the type of information that should be retained. Further, no evidence was presented that AgWorks was a sophisticated litigant in cases involving NDAs, or that AgWorks had general knowledge that such evidence would be important to any litigation involving a violation of an NDA, or that AgWorks had a history of exercising care to preserve evidence that was helpful to it. See Stevenson, 354 F.3d at 748.

Additionally, even if AGinfoData had been timely informed of the sale of AgWorks, Inc. to AgWorks, LLC, at most AGinfoData could have reminded AgWorks, Inc's counsel that his client needed to preserve documents bearing on this litigation, a duty that presumably competent counsel already knew must be met. The Court has no evidence before it from which it could conclude that AgWorks, Inc. concealed its sale to AgWorks, LLC in order to effectuate the loss of relevant documents.

This Court also cannot find prejudice to AGinfoData flowing from AgWorks' failure to preserve documents bearing on AGinfoData's lost profit and unjust enrichment damage calculations. Contrary to AGinfoData's complaint that AgWorks violated this Court's Order by failing to provide 2010 and 2012 profit and loss statements, the Order only required to AgWorks to produced “income statements, profit and loss statements, or other comparable documentsthat show revenues, expenses and income for 2010, 2011 and 2012.” August 1, 2013 Order (emphasis added). AgWorks produced to AGinfoData its 2010 corporate tax return along with the Schedule L Balance Sheet, a 2011 P&L and the 2012 P&L. See Waldeck Aff., Ex. 1 (August 1, 2013 letter from AgWorks to AGinfoData); see alsoSecond Abbate Decl., Ex. 4 (AGW–6544); McGregor Aff., ¶¶ 9, 10. AGinfoData has not provided any information to the Court as to why the 2010 corporate tax return along with the Schedule L Balance Sheet and the 2012 P&L are insufficient—other than the fact that they do not break out the financial information on the AgTankTracker sales as was done in the 2011 P&L.

But more significantly, the Court finds that AgWorks has provided sufficient documents reflecting AgWorks' total revenue for the sales of AgTankTracker for the years 2010, 2011 and 2012. Based on Martin's deposition testimony, AGinfoData acknowledged that there were no AgTankTracker sales in 2010. Second Abbate Decl., Ex. 6. AgWorks has produced a 2011 P&L that included the total income from the AgTankTracker. Abbate Decl., Ex. Q (2011 P&L). The 2012 P&L does not specifically set forth AgTankTracker sale information, however, AGinfoData has admitted that AgWorks has produced, albeit belatedly, “full and complete invoices” for the AgTankTracker, which according to AGinfoData had doubled the potential damages. See Pl.'s Reply Mem., pp. 1, 7.

As for AGinfoData's assertion that AgWorks failed to provide invoices for Golden Valley, Danville, and Farmers Elevator Co–Op–Rock Valley based on AgWorks' discovery responses, AgWorks has since informed AGinfoData and the Court that these entities did not purchase AgTankTracker.[4] See Duhachek Aff., ¶¶ 5–12. The Court cannot sanction AgWorks for documents it does not possess.

*10 Finally, while this Court is incredulous that neither AgTrax nor AgWorks have any evidence on their respective computers of the AgWorks/AgTrax NDA that was signed by them within days of AgTrax signing the AGinfoData/AgTrax NDA, this Court cannot award any sanctions against either of them for allegedly lost metadata. Other than the testimony of Hobbs, AgTrax's President, that AgWorks drafted the AgTrax/AgWorks NDA and presented it to him when he travelled to Iowa to meet with Martin, this Court has no evidence from which it can determine who destroyed metadata. Lacking evidence (e.g., a forensic examination of the defendants' respective computer systems) to determine which party drafted (or edited) the NDA, the Court will not speculate as to who is lying and who is telling truth about the creation of the AgWorks/AgTrax NDA or the deleting of metadata.

That said, AgWorks, Inc.'s and AgWorks, LLC's abject failure to preserve documents that may have been relevant to this litigation and to timely and accurately produce those documents it did possess, cannot be ignored. Given that litigation had started prior to the date of its sale, AgWorks, Inc. had an unequivocal duty to preserve all documents, including electronically stored information that was relevant to these issues, regardless of the transition of the business from it to AgWorks, LLC. Likewise, AgWorks, LLC had a duty to preserve documents and information generated during the negotiations of the purchase of AgWorks, Inc. relevant to the claims made in the suit and transferred to it with the sale. AgWorks, Inc. and AgWorks, LLC utterly disregarded these obligations. Additionally, rather than providing complete and accurate information bearing on damages from the get-go or via timely supplementation as required by Rule 26(e) with the information and documents it did possess, AgWorks forced AGinfoData to travel down a long and twisted road to obtain complete and accurate information regarding revenues, profits and losses, and sales of AgTankTracker to AgTrax customers.

Examples of the wild goose chase AGinfoData was made to endure include:

In sum, since initial service discovery in July 2012, AGinfoData has been spent more than a year trying to obtain from AgWorks accurate information and documents regarding its revenues, profits and losses, and its sales of AgTankTracker to AgTrax customers. Accordingly, AgWorks must pay the attorneys' fees and costs AGinfoData has incurred chasing the proverbial tail to garner AgWorks' knowledge of facts relevant to damages. In addition, while the Court will not preclude AgWorks from disputing AGinfoData's lost profit and unjust enrichment damage calculations, AgWorks will not be allowed to rely on any evidence that was not provided to AGinfoData on or prior to October 9, 2013, the date this motion was taken under advisement.[5]

*12 AgWorks shall pay to AGinfoData the reasonable attorneys' fees and costs it expended to obtain from AgWorks complete and accurate information regarding its revenues, profits and losses, and revenues associated with the sales of AgTankTracker to AgTrax customers. In addition, AgWorks shall pay to AGinfoData its reasonable attorney's fees and costs associated with bringing the present motion for sanctions and attending the hearing. To this end, AGinfoData shall serve and file an affidavit on or before March 31, 2014, setting forth the reasonable attorney's fees and costs incurred in connection with its efforts to obtain complete and accurate information from AgWorks regarding its revenues, profits and losses, and the revenues associated with the sales of AgTankTracker to AgTrax customers, and to prepare the present motion for sanctions and attend the hearing. This affidavit shall include the following information: the identity of each service provider; the amount of time each service provider expended and a description of each service provided; the hourly rate, level of experience and year of graduation for each service provider; and a description and amount for all expenses incurred. On or before April 7, 2014, AgWorks shall serve and file any objections to the amounts requested by AGinfoData. The Court will subsequently issue an order setting the amount of fees and costs awarded to AGinfoData.

Based Clyde Martin's deposition testimony, AGinfoData, acknowledged that there were no AgTankTracker sales in 2010. Second Abbate Decl., Ex. 6.

For cases brought in federal court based on diversity jurisdiction, such as here, “federal law applies to the imposition of sanctions for the spoliation of evidence.” Sherman, 687 F.3d at 1006.

AGinfoData seeks this inference in order to make out one of the elements of its tortious interference with contract claim against AgWorks–knowledge of the AGinfoData/AgTrax NDA. Pl. Mem., p. 18, n 17. According to AGinfoData, “[d]ocuments destroyed in the process of the sale of the AgWorks, Inc. to AgWorks, LLC would have likely been relevant to this issue.” Id.

The Court notes that per its direction, to confirm its representation AgWorks produced the invoices for Danville Co–Op and Farmers Elevator Co–Op—Rock Valley Danville to AgInfoData on October 9, 2013. These invoices made no mention of the AgTankTracker.

The Court will not award sanctions under Rule 37(d) as it relates to the deposition of Martin. Rule 37permits courts, on a motion by the aggrieved party, to order sanctions if a party “fails, after being served with proper notice, to appear for that person's deposition [.]” Fed. R. Civ. P. 37(d)(1)(A)(i). The Eighth Circuit has strictly construed Rule 37(d) to only to apply to a failure to appear at a deposition, as opposed to not answering questions. See Aziz v. Wright, 34 F.3d 587, 589 (8th Cir.1994). There is no dispute that Martin appeared at his deposition. If AGinfoData was unhappy with Martin's deposition testimony, then it should have brought a motion to compel.