Plaintiff, Compass Chemical International, LLC (“Compass”), manufactures and sells specialty chemicals. (Tr. 6-7.) Compass supplies products to customers for industrial water treatment applications called “phosphonates,” and a product called “phosphorus acid” used in both the agricultural industry and in oil fields. (Id. at 7-8, 313-14.) Its main facility is located in Smyrna, Georgia. (Id. at 6.) Compass has about fifty employees. (Id.) Its founder and Chief Executive Officer is Bill Bellah. (Id. at 30, 315.) Its President since approximately 2006 has been Danny McCaul. (Id. at 5-6, 61, 313.)

Defendant Brian K. Failon joined Compass in October 1999, and worked there through July 14, 2009. (Tr. 8, 61-62, 123, 128, 311-12.) Mr. Failon testified that, given his fifteen years' of experience in the business, his numerous contacts, and his expertise, he brought the water treatment chemicals business to Compass and then grew it. (Id. at 63, 312-13.) Mr. Failon considers himself to be the “leading expert on phosphonates in the United States.” (Id. at 338.)

Mr. Failon began at Compass as an account manager, moved to sales and new customer accounts, and in 2001 became Vice President and Technical Director. (Tr. 123-24.) Mr. Failon owned fifteen percent of Compass for a time, but sold that stake in 2005 when Compass reincorporated. (Id. at 124.)[3] In August of 2006, Mr. Failon became Vice President and Sales Manager, and in July 2007, he became Vice President of Business Development and Technology. (Id. at 8, 124.) In that last position, Mr. Failon's primary duty was to develop new products and to develop new markets and applications for Compass's products. (Id. at 9-10, 125.) According to Mr. McCaul, Mr. Failon was an “extremely important” part of Compass and its “number three guy.” (Id. at 9.) Mr. McCaul conceded that, given Mr. Failon's years of employment at Compass, he was familiar with Compass's products, pricing, margins, and customers, and might have known more than Mr. McCaul about some of Compass's products. (Id. at 62.)

*2 Throughout his tenure at Compass, Mr. Failon did not work in the Smyrna office, but maintained an office at his home in Richmond, Virginia. (Tr. 30, 123, 306.) Compass provided him with both desktop and laptop computers. (Id. at 30-31, 135-36.)[4] He used the laptop extensively to communicate via e-mail and to access Compass's databases (i.e., Chempax and eChempax, discussed infra), and he always used it when he traveled. (Id. at 31-32, 136.) That laptop also contained contact information for Compass's customers. (Id. at 32.)

Mr. Failon worked for Compass under a series of employment agreements. (Tr. 8.)[5] The most recent one was executed on July 13, 2007, and was in effect until Mr. Failon left Compass. (Id. at 8-9; see also Pl.'s Ex. 1 (the “2007 employment agreement”).) That 2007 employment agreement contains a confidentiality clause in section 8(a). (Tr. 18-19.) Mr. Failon knew that he was not free to share any of the confidential information that he had obtained while employed by Compass after his termination (and asserts that he has not). (Id. at 130.) Moreover, Mr. Failon knew that he was not free to retain any of the confidential information that he had obtained while employed by Compass after his termination (and asserts that he has not). (Id. at 130-31, 145, 336.) Finally, Mr. Failon knew that he was not free to supply any confidential information that he obtained while employed by Compass to any of its competitors after his termination (and asserts that he has not). (Id. at 131.)

Both Mr. McCaul and Mr. Failon agree that Compass considers certain items to be confidential and in the nature of trade secrets. (Tr. 11-12, 128.) Mr. McCaul testified that Compass considers the following items confidential:

(Id. at 12-13.)[6]

*3 Compass deems the above-listed items confidential because it operates in a competitive environment. (Tr. 15.)[7] Compass seeks to maintain the secrecy of its customer list because the fewer competitors who know its customers and call on them, the better position Compass is to make a sale. (Id.) Similarly, because competitors often do not know which products a customer buys, Compass seeks to maintain the confidentiality of that information. (Id. at 15-16.) The volume of product a customer buys is important information because Compass prioritizes its largest customers and offers pricing discounts based on volume. (Id. at 16.) As for price and profit margins, Compass seeks to keep that information confidential to keep competitors from underbidding it. (Id.) Finally, Compass develops for some customers a specific formulation of a product that allows the customer to receive a better price or for Compass to obtain a higher profit margin. (Id. at 17-18.) To protect and keep confidential the various categories of confidential information and trade secrets discussed above, Compass restricts information to those people who have a “need to know” certain information to do their jobs; moreover, Compass requires its employees to sign confidentiality agreements or (as in Mr. Failon's case) employment contracts containing confidentially clauses. (Id. at 18.)

Compass has two computerized databases that are relevant here–Chempax and eChempax. (Tr. 19, 24.) Mr. Failon was authorized and expected to access both databases to perform his job duties. (Id. at 90.)

Chempax is a database and software system that Compass uses to manage its business, including order taking, raw material purchasing, manufacturing, batch processing, inventory control, and generation of confidential financial information. (Tr. 19, 22-23.) Chempax contains customer lists, the products that its customers use (including any specific formulations of a product), volume of sales transactions, and historical data on each customer (back to 2006). (Id. at 19-20.) Chempax also contains pricing information by customer, profit margins achieved, and the overall sales and profitability of each customer by individual product. (Id. at 20-21.) Chempax can rank customers by sales, profit margin, and product used. (Id.at 21.) Compass restricts access to the Chempax system with user names and passwords, and further restricts access to certain Chempax modules to certain employees. (Id. at 22, 24.)

The other system, eChempax, is a mobile version of Chempax that can only be accessed by six to eight Compass employees through user names and passwords. (Tr. 24.) This system does not contain all the information available on Chempax, but is designed mainly for traveling salespeople, who use it to obtain information about customers and to place orders for customers. (Id.) Mr. McCaul considered the information in eChempax to be confidential. (Id. at 25.)

Information contained in both Chempax and eChempax can be viewed, printed, saved to the computer's hard drive, saved to an external drive, or transmitted via e-mail. (Tr. 26.) As one of Compass's highest ranking executives, Mr. Failon had access to most of the information stored on both Chempax and eChempax from both his laptop and desktop computers. (Id.at 26-27, 326.) Although most sales managers have no access to Chempax and can access only their accounts in eChempax, Mr. Failon had access to all accounts, even those with whom he did not deal, through Chempax. (Id.at 27-28.)

It is undisputed that Mr. Failon accessed confidential information through Chempax and eChempax. However, he asserts that there was not necessarily any confidential information on his Compass-owned desktop or laptop at any point in time. (Id. at 139-40, 326.)[8] He could not recall downloading any materials from Chempax to his laptop, asserting that he only used the laptop to examine reports it generated. (Id. at 326.)

*4 Compass maintains activity logs showing when an employee signs in and out of both Chempax and eChempax. (Tr. 33, 49.) However, Compass's computer system cannot determine whether an employee printed any screens or downloaded information during the time he was logged on to Chempax. (Id. at 33.) Compass had, for whatever reason, elected not to implement these tracking features. (Id. at 90-91.)[9]

Compass submitted testimony and exhibits regarding Mr. Failon's useage of both Chempax and eChempax during his employment. Plaintiff's Exhibit 8, prepared from information found on Compass's servers, is an activity log showing the times at which Mr. Failon signed in and out of Chempax from November 30, 2007, through July 9, 2009. (Tr. 49-50, 68-69, 70.)

Plaintiff's Exhibit 9 is a graph prepared by Mr. McCaul from the data reflected on Plaintiff's Exhibit 8 showing the hours each month from July 2008 through June 2009 that Mr. Failon spent logged into the SA5 Sales Report on the Chempax system.[10] (Tr. 55.) This graph reflects that Mr. Failon spent almost six hours logged into the SA5 Sales Report in April 2009, less than two hours logged into that report in May 2009, but over twelve hours logged in to that report in June 2009. (Pl.'s Ex. 9.)

Mr. McCaul testified that, during that time frame (April-June 2009) Mr. Failon's job, which was focused on business development, new products, and technology support, would not have required him to access this information. (Tr. 56.) As discussed infra, Mr. Failon received a draft employment agreement from Compass on June 24, 2009, setting out the terms of their relationship on a go-forward basis, which he eventually rejected. Mr. McCaul conceded that, after Mr. Failon's receipt of that agreement, he accessed the sales module in Chempax only three times (July 1 and July 9) for a total of about 78 minutes. (Id. at 72-73.) Mr. McCaul agreed that this amount of time did not seem excessive. (Id. at 73.)

Finally, Plaintiff's Exhibit 10 is an activity log showing the dates and times during which Mr. Failon logged in and out of Compass's eChempax system during 2008-09. (Tr. 57; Pl.'s Ex. 10.) Page 1 of that exhibit reflects his activity from February 27, 2009, through June 11, 2009. (Tr. 57.) Plaintiff's Exhibit 11 reflects the various confidential areas within eChempax that Mr. Failon accessed while logged into the system between June 1, 2009, and June 11, 2009. (Id. at 58, 60.) As noted earlier, Compass's system cannot determine whether the user downloaded, saved, or printed this information. (Id. at 58-59.)

*5 On May 22, 2009, Mr. McCaul sent a letter to Mr. Failon, which reads in relevant part as follows:

(Pl.'s Ex. 2; see also Tr. 33-35.)[11]

Mr. McCaul testified that the purpose of this letter was to insure Compass's compliance with the 2007 employment agreement by giving adequate notice of termination and to confirm that it wanted a new agreement with Mr. Failon starting July 13, 2009. (Tr. 35.) Without timely notice of termination, the 2007 employment agreement would have renewed automatically. (Id. at 36.)

Mr. McCaul added that one or two weeks before he sent the May 22 letter, he informed Mr. Failon that he would be receiving a termination letter, that Compass wanted to enter into a new employment agreement with him, and that he would receive a draft of a revised employment agreement before July 13. (Tr. 34-37, 75, 100-01.) Mr. McCaul also informed Mr. Failon that the draft agreement would pay him a substantially lower base salary than his current agreement. (Id. at 75.) However, Mr. McCaul indicated to Mr. Failon that Compass's goal was to restructure his compensation package so that he could earn as much or more than he had earned before. (Id. at 75-76.)

Mr. McCaul conceded that nothing in this May 22 letter directed Mr. Failon to preserve documents or other evidence concerning his activities and not to delete anything. (Tr. 74.) Moreover, he conceded that the letter made no threats of litigation. (Id.) Finally, Mr. McCaul agreed that, if Mr. Failon and Compass were unable to agree on terms of a new employment agreement, he would be out of a job effective July 13, 2009; thus, there was nothing wrong with Mr. Failon looking for another job or exploring whether to start his own business. (Id. at 74-75, 101.)

*6 On June 1, 2009, Mr. Failon took the Compass-owned desktop computer to Elijah Lorenz of Personal Computer Service Company and directed him to reformat its hard drive, which had the effect of removing any data that had been stored on it. (Tr. 109-110, 138-39, 322.) Mr. Failon denies that he reformatted the desktop's hard drive to delete evidence that might be relevant to future litigation. (Id. at 324, 335-36.)[12] However, he never told anyone at Compass that the desktop's hard drive had been reformatted. (Id.at 44.)

Mr. Failon explained his reasons for reformatting the desktop's hard drive as follows. He was separated from his wife for over two years (from about February 2007 through late-April 2009) and lived elsewhere. During that two-year period, he worked mostly on the laptop, because the desktop remained at his family's residence. Mr. Failon asserted that there was very little work-related data on the desktop at this time; however, his wife and children used the desktop, causing it to become “bogged down” with personal files and programs. (Tr. 138-39, 170, 306-07, 322.) When he returned to the family home in April 2009, he began using the desktop again and realized that it had problems; thus, he elected to reformat its hard drive to eliminate that personal information and improve its speed. (Id. at 170, 308, 322.)[13] Mr. Failon claims that reformatting the desktop's hard drive returned that computer to like-new condition, which satisfied his desire to return Compass's property in working order. (Id. at 170, 322, 324.)

After reformatting its hard drive, Mr. Failon forbid his family from using the desktop, but he used it from June 1, 2009, through the date he returned it, and did not subsequently reformat its hard drive, delete any Compass files, or wipe its hard drive. (Tr. 170-71, 322-23, 327.) In other words, anything placed on the desktop during Mr. Failon's last six weeks of employment was still there when he turned it over to Mr. McCaul on July 14, 2009 (discussed infra). (Id. at 327.) Mr. Failon also testified that, after June 1, 2009, because of problems with the laptop (discussed infra), and because he was away from home less due to a travel moratorium, he primarily used the desktop, not the laptop, to perform Compass's business. (Id. at 170, 308-09, 324.)

The parties' computer experts[14] agree that the desktop's hard drive was reformatted on June 1, 2009. (Tr. 187, 196, 284-85.) Reformatting occurs when one deletes the computer's operating system (i.e., Microsoft Windows), deletes files stored on the hard drive, and reinstalls the operating system. (Id. at 197.) Although the experts agree that some data may be recovered by a forensic specialist following reformatting, that process generally deletes information that had been stored on the computer's hard drive. (Id. at 197-99, 285, 287-88.)[15] Indeed, Mr. Persinger's search of the unallocated space of the desktop's hard drive for documents or files dated before June 1, 2009, yielded no results. (Id. at 199-200.)

*7 Mr. McCaul submitted a draft of a new employment agreement to Mr. Failon on approximately June 24, 2009. (Tr. 37, 73, 75.) Although other employees received a ten percent pay cut, this draft lowered Mr. Failon's salary by thirty percent. (Id. at 320-21.) Prior to that date, Mr. McCaul testified that Mr. Failon had given no indication that he was seeking work elsewhere. In fact, Mr. McCaul asserted that Mr. Failon had always indicated that he had no other plans but to stay with Compass. (Id. at 37-39.)[16] Mr. McCaul testified that when he followed up with Mr. Failon to obtain his comments on the draft employment agreement, Mr. Failon indicated that he had no problem with extending the current agreement to give them more time to negotiate, and that he was going to discuss the draft with his attorney and get back in touch. (Id. at 39.) Thus, Mr. McCaul was expecting to hear back from Mr. Failon with proposed modifications to the draft. (Id. at 39-40.)

Mr. Failon met with his attorney in mid-June 2009. (Tr. 143, 173, 321.) Although the exact date of this meeting is unknown, it occurred before Mr. Failon traveled to Houston on the weekend of June 26-27, 2009 to meet with Compass's competitor, and before he wiped the laptop's hard drive on June 29, 2009 (both events discussed infra). (Id. at 142, 174.) Because it would have been logical for Mr. Failon to speak with his attorney after receiving the draft employment agreement (as he had informed Mr. McCaul he intended to do), the Court discusses their meeting at this point in the time line.

Mr. Failon gave conflicting explanations for why he sought legal advice. The Court begins with the following excerpt from his deposition testimony:

(Tr. 141-42, 143-44, 172-73, quoting Failon Dep. 177 line 12 through 178 line 21.)

At the hearing, Mr. Failon testified that, despite responding “Well, sure” to the question of whether he sought legal advice before visiting Mr. Lorenz on June 29 because he was concerned that he might get sued by Compass if he opened a competing business, he “wasn't listening to the question.” (Tr. 173.) He asserted that he only heard the second part of the question (i.e., whether he was concerned about being sued) and did not focus on the time frame element in the first part of the question. (Id.)[18] Mr. Failon testified at the hearing that it became clear to him on July 10, 2009, and after that Compass might sue (given the threat from Mr. McCaul, discussed infra), but he denied any concern over being sued when he went to see Mr. Lorenz on June 29. (Id.) Specifically, Mr. Failon said that his primary worry over potential litigation with Compass arose out of the 2007 employment agreement's non-solicitation covenant, but after he met with his lawyer in mid-June, he was no longer concerned about that provision. (Id. at 143-45, 347-48.)[19] Thus, when he went to see Mr. Lorenz on June 29, Mr. Failon claims that he was no longer worried about litigation with Compass. (Id. at 142, 173-74.) Therefore, wiping the laptop's hard drive had nothing to do with any concern over being sued. (Id. at 141.)

*8 Access Chemicals and Services (“Access”) is located in Houston, Texas. (Tr. 28-29.) Mr. Failon initially secured Access as a Compass customer through his personal relationship with Ron Treece, with whom he had worked at Albright & Wilson during the 1990s. (Id. at 29, 63, 132-33.) According to Mr. McCaul, Access had distributed phosphorus acid for Compass, but that business relationship ended in 2005 or 2006, when Access began competing with Compass. (Id. at 30, 111-12.) Compass never tried to re-establish its relationship with Access; in fact, Mr. Bellah directed Mr. Failon (who had responsibility for the account) that he should have nothing further to do with Access and make no contact with Mr. Treece. (Id.at 30.)

Two of the principals at Access, Mr. Treece and Dennis Dickson, were deposed about their contacts with Mr. Failon. Portions of their testimony were read at the hearing. (Tr. 111-20 (Dickson); id. at 178-82 (Treece).) Mr. Treece is a Vice President and Partner at Access. (Id. at 178-79.) He testified that Mr. Failon called him in May or June of 2009 to see if Access was interested in having a business relationship with him. (Id. at 180.)[20]Before meeting in person with Mr. Failon, Mr. Treece stated that he spoke with him perhaps twice more, exchanged some e-mails, and executed a non-disclosure agreement that Mr. Failon sent to him. (Id. at 180-81.) At some point, either before or after he left Compass, Mr. Treece related that Mr. Failon sent him a copy of the 2007 employment agreement and they discussed it.[21] Mr. Failon told Mr. Treece that, knowing Mr. Bellah, there was a possibility that he (Failon) would be sued. (Id. at 181-82.) In fact, Mr. Treece was concerned that if he did business with Mr. Failon or employed him, Access might be sued. (Id. at 180.)

Mr. Dickson (Access's President) testified that he heard from Mr. Treece that Mr. Failon was considering leaving Compass. (Tr. 112.) Mr. Failon came to Houston to meet with Mr. Dickson and Mr. Treece in late-June 2009 to discuss the possibility of doing business together. (Id. at 112-13.) Before that meeting, Mr. Dickson saw a copy of Mr. Failon's 2007 employment agreement with Compass and Mr. Failon's resume. (Id. at 119-20.)[22]

*9 Mr. Dickson, Mr. Treece, and Mr. Failon met for dinner on Saturday, June 27, 2009, at the Grotto Restaurant in Woodlands, Texas. (Tr. 113.) They conducted a wide-ranging discussion about the possibility of doing business together going forward. (Id.) Those discussions included Mr. Failon coming to work for Access, his formation of a partnership or joint venture with Access,[23] or having Mr. Failon's new company buy chemicals from Access. (Id. at 113-14.) They also discussed Mr. Failon's salary expectations, the possible term of any employment agreement, and execution of a formal operating service agreement. (Id. at 116.) After dinner, the three men went to Mr. Treece's home to continue the discussion. (Id. at 116-17.) The meeting concluded with an agreement from Mr. Failon that he would submit a specific, detailed business proposal to Access. (Id. at 117.)[24]

On Monday, June 29, 2009, Mr. Failon took his Compass-owned laptop to Mr. Lorenz of Personal Computer Service Company and directed him to “wipe” its hard drive. (Tr. 106, 136, 269, 328.) Mr. Lorenz testified that he conducted a Department of Defense (“DOD”) wipe of the laptop's hard drive, an action which prevented the information on the hard drive from ever being accessed again, even by an expert. (Id. at 107, 109.)[25]

According to Mr. Lorenz, Mr. Failon stated that he was returning the laptop to his employer and wanted a record of what was wrong with it; thus, he asked Mr. Lorenz to prepare a written statement (in the record as Pl.'s Ex. 4) documenting the laptop's problems. (Tr. 108, 270-72.)[26] However, Mr. Failon directed Mr. Lorenz to omit any mention of the wipe of the hard drive from that statement. (Id. at 108, 341.) Mr. Failon testified that he gave this instruction to Mr. Lorenz because wiping a hard drive has a negative connotation, although he claims he was not doing anything wrong. (Id. at 136, 138.)

*10 Mr. Failon was adamant that wiping the laptop had nothing to do with any concern he had about getting sued. (Tr. 141.) He claims that he did not wipe the laptop's hard drive to destroy evidence that might be pertinent to future litigation. (Id. at 336.) In fact, as of June 29, 2009, no one from Compass had threatened litigation against Mr. Failon. (Id. at 76, 329.) However, Mr. Failon agreed that nothing placed on the laptop on or before June 29, 2009 could be recovered given the wipe of its hard drive. (Id. at 139.) Mr. Failon did not create a list of the items stored on the laptop before its hard drive was wiped. (Id. at 145.) Mr. Failon mentioned to Mr. Lorenz that he was starting his own business, but he did not indicate that his request to wipe the hard drive had anything to do with that decision. (Id. at 109, 143, 270-71.)[27]

Mr. Failon testified that he took the laptop to Mr. Lorenz for two reasons. Fist, he wanted to delete all of his personal information from the laptop; he did not trust Mr. Bellah or Mr. McCaul and did want to place any personal information in their hands. (Tr. 140, 161, 319, 329.) Second, he wanted to return Compass's property in its best possible working condition. (Id.) Mr. Failon described as a “coincidence” the fact that he wiped the laptop's hard drive only one day after returning from meeting with officers of Access in Houston. (Id. at 136-37.) Mr. Failon asserted that he made the wipe on June 29 so that he could include that cost with his June expense report. (Id. at 137; see infra note 33.)

Mr. Failon asserts that no Compass-owned information was wiped off his laptop because he had transferred it all to the desktop. (Tr. 145.) Specifically, Mr. Failon testified that between June 1, 2009 (when the desktop's hard drive was reformatted) and June 29, 2009 (when the laptop's hard drive was wiped), he “migrated” all relevant Compass work product from the laptop to the desktop. (Id. at 140-41, 170.)[28]

The parties' experts agree that the laptop's hard drive was wiped, making it impossible to recover any data from it. (Tr. 187, 189-91, 279.) Wiping a hard drive also makes it impossible to determine whether files or documents were copied (to a CD ROM or thumb drive), transferred, or printed from the laptop before the wipe occurred. (Id. at 191, 293-94.) For example, plaintiff's computer expert (Mr. Persinger) testified that, if data had been downloaded from Chempax or eChempax to the laptop, printed from the laptop, or transferred from the laptop, the laptop would retain a record of such activity. However, wiping the laptop's hard drive removed all traces of such activity. (Id. at 264.)

Mr. Failon testified that when he took the desktop to Mr. Lorenz on June 1, 2009, and the laptop to him on June 29, 2009, he did not understand the difference between reformatting and wiping a hard drive. He thought they were the same. (Tr. 323, 328.) He was not aware that wiping would permanently delete all information whereas reformatting might not. (Id. at 323-24; see also id. at 284-85 (explanation by defendants' expert of the difference between the two).) Nevertheless, Mr. Failon did not inform anyone at Compass that he had deleted the contents of both computers' hard drives. (Id. at 143.) He asserts that he is not aware of anything that he deleted that is relevant to this lawsuit. (Id. at 336.)

*11 On Friday, July 10, 2009, Mr. Failon sent an e-mail to Mr. McCaul in which he announced that he was rejecting the draft employment agreement and leaving Compass. (Tr. 38, 40, 321.) In response, Mr. McCaul testified that he contacted Mr. Failon and told him that, should he fail to comply with the terms of the 2007 employment agreement, Compass would file suit against him. (Id. at 77-78.) Compass also cut off Mr. Failon's access to its computer systems. (Id. at 57.) Mr. McCaul agreed that July 10, 2009, was the first date on which Compass threatened to sue Mr. Failon if he breached the 2007 employment agreement. (Id. at 78.)

Given the announcement of July 10, Mr. McCaul wanted to meet with Mr. Failon for a closeout session, so he flew to Richmond on Tuesday, July 14, 2009. (Tr. 40-41.)[29] According to Mr. Failon, during the initial portion of their meeting, he and Mr. McCaul discussed various products, projects, customers, and files, and reviewed an anti-dumping petition that Mr. Failon had been handling for Compass. (Id. at 330.) Near the end of their meeting, Mr. McCaul provided Mr. Failon with a letter dated July 13, 2009 (Pl.'s Ex. 3), which reminded him to return all of Compass's property and to comply with the confidentiality and non-solicitation provisions of the 2007 employment agreement; according to that letter, failure to comply with those provisions could result in litigation. (Tr. 41, 77, 78-79, 330-31.) Mr. Failon testified that he told Mr. McCaul that he would read the letter later. (Id. at 331.) However, he claims that Mr. McCaul insisted on discussing the letter and said: “ ‘If you compete with Compass in any way or harm Compass in any way, Bill [Bellah] has said we'll come after you and he's a street fighter.’ ” (Id.)[30]

During their meeting, Mr. McCaul took possession of the Dell desktop and laptop computers that belonged to Compass. (Tr. 40, 41-42.)[31] When he delivered the laptop, Mr. Failon gave Mr. McCaul a statement (Pl.'s Ex. 4) from Personal Computer Service Company signed by its owner (Mr. Lorenz) describing problems with the laptop, the approximate cost of repairs, and providing his opinion that it was not cost effective to repair. (Tr. 42, 138, 328.) There was no mention on the statement that the laptop's hard drive had been wiped, because Mr. Failon had instructed Mr. Lorenz to exclude that information. (Id. at 136, 138.)

Mr. Failon told Mr. McCaul that the laptop had stopped working, that he had been unable to use it for a few weeks, that he had taken it to a computer service company, and that this statement was that company's findings. (Tr. 42.) The comment that the laptop had been out of service surprised Mr. McCaul, because Mr. Failon had not mentioned that problem to him. (Id. at 80.) Thus, Mr. McCaul testified that he was immediately suspicious about the laptop (but not about the desktop).[32] (Id. at 80-82, 84.) Mr. Failon even asked Mr. McCaul if he wanted to take the laptop because it was not worth fixing, but he replied that he did. (Id. at 80.) Mr. Failon did not tell Mr. McCaul that the laptop's hard drive had been wiped. (Id. at 42-43.)[33]Before leaving Richmond on July 14, Mr. McCaul, accompanied by Mr. Failon, took both the desktop and the laptop computers to a Fed Ex or UPS store and shipped them to Compass's headquarters in Smyrna, Georgia. (Id. at 44.)

*12 The desktop was operational upon its return to Smyrna. (Tr. 83-84.) Personnel in Compass's quality control laboratory subsequently began using the desktop. (Id. at 84, 247, 249.)[34] Mr. McCaul did not send the desktop to Compass's Information Technology (“IT”) employee to download whatever files may have been on in when Mr. Failon returned it. (Id. at 84-85.) In other words, no steps were taken to preserve the desktop in the same condition as Mr. Failon returned it. (Id. at 85.) Mr. McCaul testified that he did nothing with the desktop at that time because Compass was not contemplating litigation against Mr. Failon. (Id.)[35]

Upon its return to Smyrna, Mr. McCaul promptly gave the laptop to Compass's IT employee to examine. (Tr. 80.) That IT employee informed Mr. McCaul that Mr. Failon had not reported any problems with his laptop. (Id.) Within two weeks' of Mr. Failon's departure, that IT employee reported back to Mr. McCaul that he could get nothing off of the laptop. (Id. at 80-81.) Thus, Mr. McCaul knew in July 2009 that, for whatever reason, the laptop's hard drive had been wiped or its data removed. (Id. at 81.)

As noted above, Mr. Failon's last day on the payroll at Compass was July 14, 2009. (Tr. 131.) The next day, July 15, 2009, Mr. Failon registered defendant True North Products as a limited liability company in Virginia. (Id.at 131, 309.) On approximately July 19, 2009, Mr. Failon met with Mr. Bill Burton of Zschimmer and Schwarz (a Compass customer) in an effort to do business with him. (Id. at 132.)

Mr. Failon testified that defendant Source 1 Specialty Chemicals, Inc. (“Source 1”) is a Texas corporation that sells phosphorus acid and its derivatives and phosphoric acid and its derivatives directly to some of Compass's customers and in competition with Compass. (Tr. 132.) Mr. Failon incorporated Source 1 as a wholly-owned subsidiary of True North. (Id.) Access (discussed supra Part I.H), is the exclusive supplier of chemicals to Source 1, which resells them and shares the gross profits with Access. (Id. at 133.)

Mr. Failon testified that he did not need any of Compass's confidential information to start a competing business nor did he take any of its confidential information. (Tr. 313.) Mr. Failon admits that he has solicited Compass's customers since he left plaintiff's employment. (Id. at 92, 335.) However, his position in this litigation is that the non-solicitation provision in the 2007 employment agreement expired when his job ended. (Id. at 94-95, 321, 329-30, 335.)[36] He agrees, however, that the agreement's confidentiality and non-disparagement clauses remain in effect after its termination. (Id. at 321.)

*13 In October 2009, plaintiff's expert (Mr. Persinger) examined images of the hard drives of the desktop and the laptop that had been used by Mr. Failon. (Tr. 185-86, 192, 196.)[37] Compass then filed this action [1-1] in the Superior Court of Cobb County, Georgia on November 11, 2009.[38]Defendants removed [1] it to this Court on December 11, 2009. On the previous day, December 10, Mr. Failon filed suit against Compass in the United States District Court for the Eastern District of Virginia alleging, inter alia, breach of contract. (Tr. 103, 163-64.) Mr. Failon subsequently filed [4] but withdrew [20] a motion to transfer venue of this action from Georgia to Virginia after he voluntarily dismissed the Virginia case.

Mr. Failon served his “Answers and Objections to Plaintiff's First Set of Interrogatories” on April 26, 2010. Interrogatory No. 15 and Mr. Failon's answer thereto are as follows:

(Pl.'s Ex. 12, at 11; see also Tr. 151-53.)[40]

Compass took Mr. Failon's deposition on July 8-9, 2010 [115-16]. (Tr. 153.) The following questions and answers from that deposition relate to Mr. Failon's knowledge about, and use of, a thumb drive:

(Failon Dep. 179-80, quoted in Tr. 147, 149.)

At the deposition, counsel for Compass asked Mr. Failon questions about his Verizon e-mail account. (Tr. 154.) Those e-mails apparently revealed that Mr. Failon had been in contact with Access via that account. (Id. at 155.) When Compass protested that those e-mails had not been produced, Mr. Failon's counsel agreed to produce them. (Id.) Thus, about four or five days after the conclusion of his deposition (or about July 13 or 14, 2010), Mr. Failon downloaded certain e-mails to a thumb drive and provided them to his counsel to be produced. (Id. at 155-56, 165.)[41]

*14 However, Mr. Failon did not take steps to correct the statements in his deposition or in the answer to his Interrogatory No. 15, asserting that he did not own a thumb drive. (Tr. 156-57.) Mr. Failon reserved the right to read and sign his deposition transcript. (Id. at 166.) After Mr. Failon used a thumb drive to collect the aforementioned e-mails, his attorney sent him a copy of the transcript that he reviewed and signed; however, Mr. Failon made no corrections. (Id.)[42]

Compass's expert (Mr. Persinger) reviewed images of the hard drives of both the laptop and desktop computers returned by Mr. Failon and prepared an initial report dated September 23, 2010. (Tr. 183-84; see also Pl.'s Ex. 20 (initial report).) One of Mr. Persinger's findings in that initial report was that a thumb drive had been used to copy data from Mr. Failon's desktop computer. (Tr. 184, 201.)

After learning that Compass's expert had discovered his use of a thumb drive, Mr. Failon amended his interrogatory response, agreed to disclose the thumb drive, and produced it for inspection. (Tr. 157, 169.) On November 1, 2010, Mr. Failon served his Third Supplemental Answers to Plaintiff's First Set of Interrogatories (Pl.'s Ex. 16.)[43] Although not verified, this document provides the following supplemental answer to Interrogatory No. 15:

(Pl.'s Ex. 16, at 2.) This was Mr. Failon's first disclosure of a thumb drive. (Tr. 157.) He asserted at the hearing that he thought that a personal thumb drive was not responsive to the interrogatory, but concedes that the initial answer was false. (Id. at 153.) He had purchased this thumb drive with his own funds. (Id. at 326.)

Given the findings by plaintiff's expert and the supplemental interrogatory answer, Mr. Failon's testimony at the hearing about this thumb drive was different than that offered at his earlier deposition. At the hearing, Mr. Failon stated that he owned a personal thumb drive on July 8, 2010 (the first day of his deposition) and during 2009. (Tr. 147.) Mr. Failon claimed that his incorrect deposition testimony about the thumb drive was the result of fatigue (i.e., it was late in the day when he answered those questions) and confusion. (Id. at 147-48.) He claimed confusion because plaintiff's counsel had just asked a series of questions about Compass-owned computers, and he mistakenly thought that he was being asked if he had ever had a Compass-owned thumb drive. (Id. at 148, 150-51.) However, as quoted above, the questions about the thumb drive clearly do not ask about Compass-owned property. (Failon Dep. 179-80.)

In any event, Mr. Failon's claim of confusion is undermined by the following exchange:

(Tr. 151.)

Mr. Failon's attorneys turned the above-referenced thumb drive over for analysis to their expert, Mr. Vaughn. (Tr. 157.) Mr. Failon reported to Mr. Vaughn that he had used that thumb drive to transfer data to or from his Compass-issued desktop and laptop. (Id.) On cross-examination during the first day of the hearing, Mr. Failon stated, “That's the only thumb drive I've ever used.” (Id.)

On further cross-examination during the first day of the hearing, Mr. Failon admitted that he had recently become aware that the parties' computer experts had determined that a second thumb drive had been inserted into the desktop computer. (Tr. 166.) The following questions and answers ensued:

(Id. at 166-67.)

On the second day of hearing, Mr. Failon answered the following carefully-crafted question:

(Tr. 333.) Mr. Failon also asserted that, as of the time he left Compass in July 2009, he did not have a second thumb drive. (Id.) Mr. Failon repeated both answers on cross-examination. (Id. at 345.)

Mr. Failon then admitted to plaintiff's counsel that he “may” have owned another thumb drive. (Tr. 345.) He conceded the possibility that this other thumb drive had been inserted into the desktop computer and that he may have thrown it away. (Id. at 345-46.) Although he cannot recall throwing it away, Mr. Failon does not know where it is now. (Id. at 346.) Despite his previous unequivocal statements, for the period of July 13, 2009, and before, Mr. Failon testified that he owned another thumb drive. (Id. at 346-47.) However, Mr. Failon cannot recall whether he used that other thumb drive in connection with his work at Compass; the only thumb drive he recalls using is the one produced in discovery. (Id. at 347.) Since July 13, 2009, Mr. Failon asserted that he has either thrown that other thumb drive away or lost it (since it cannot be found). (Id.) He is certain that, after July 14, 2009, he has not owned any thumb drive other than the one produced for inspection. (Id. at 346.) Mr. Failon testified that, regardless of whether he owned one or two thumb drives, he did not use one to steal Compass's confidential information. (Id. at 333.)

Mr. Failon testified that he deleted files from his thumb drive after he transferred them from the laptop to the desktop. (Tr. 158, 326.) Mr. Failon asserted that he did so because he did not want to take any of Compass's documents with him when he left. (Id. at 169.) As part of his expert report, Mr. Vaughn prepared a list of files that were placed on, modified on, or deleted from, that thumb drive from May 1, 2009, through July 14, 2009. (Pl.'s Ex. 17; see also Tr. 158-59, 206-07, 384, 392.) Mr. Failon conceded that most of the files listed in the excerpt from Mr. Vaughn's report (Pl.'s Ex. 17) were placed on the thumb drive on May 18, 2009. (Tr. 159.)[44] Mr. Failon testified that he moved these files during the last two months of his employment as he was contemplating leaving Compass. (Id. at 159-60.)[45]

*16 Plaintiff's expert (Mr. Persinger) examined an image of the thumb drive that Mr. Failon produced and prepared an addendum and supplemental report dated December 13, 2010 (Pl.'s Ex. 22), analyzing its content. (Tr. 184, 237, 252.) Mr. Persinger found that Mr. Failon had deleted most of the contents of that thumb drive, which moved those files to the thumb drive's unallocated space. (Id. at 67-68, 251.)[46] Mr. Persinger recovered some deleted documents from the unallocated space on that known thumb drive and provided a report to Compass. (Id. at 44-45, 65-66, 68, 169, 241-42, 251; see also Pl.'s Exs. 6 & 22 (pages of text fragments from deleted files found on Mr. Failon's thumb drive).)

According to Mr. McCaul, ninety percent of the deleted files recovered from the unallocated space on Mr. Failon's thumb drive were confidential Compass documents, such as sales call reports, weekly reports, e-mails between Mr. Failon and customers, pricing letters, and correspondence between Mr. Failon and/or Compass's counsel and the International Trade Commission concerning an anti-dumping petition. (Tr. 45-47.)[47] However, as noted above, Mr. Failon had deleted these confidential Compass files (reflected in Pl.'s Exs. 6-7) from the thumb drive. (Id. at 68.) Indeed, Mr. McCaul agreed that, after Mr. Failon left Compass's employment, to the extent that he had any documents related to Compass on a personal thumb drive or on a personal computer, he would have expected him to delete them. (Id.)

This dispute concerning the thumb drive also relates to the manner in which Mr. Failon claims that he moved files from the laptop to the desktop. As noted above, Mr. Failon testified that between June 1, 2009 (when the desktop's hard drive was reformatted) and June 29, 2009 (when the laptop's hard drive was wiped), he transferred all Compass-owned files or documents from the laptop to the desktop.[48] (Tr. 140-41, 325.) Mr. Failon admitted at the hearing that his deposition testimony–asserting that he had moved those files from the laptop to the desktop solely via e-mail–was wrong. Instead, Mr. Failon testified that he moved those files from the laptop to the desktop using a personal thumb drive. (Id. at 149-51, 158, 325.)[49]

Plaintiff's counsel also asked Mr. Failon at the deposition whether he had “retained” any information that had been on the laptop before it was wiped. He answered, “No.” (Failon Dep. 180, lines 18-21; see also Tr. 149 (quoting deposition testimony).) At the hearing, Mr. Failon explained that he had misunderstood the word “retained” in that question and assumed plaintiff's counsel was asking if he had retained any of Compass's confidential material when he left its employment. (Tr. 150-51.) Mr. Failon revised his testimony and agreed that he retained certain files by transferring them from the laptop to the desktop using a personal thumb drive. (Id.)

*17 As noted above, the parties' computer experts determined during forensic analysis of the computers' hard drives that a thumb drive had been inserted into the desktop. Although he initially denied owning a thumb drive, Mr. Failon eventually produced one and its image was examined by both experts in November 2010. (Tr. 184, 186, 282.)[50] Both experts agree that this thumb drive contained what is called “U3 technology.” (Id. at 202, 282-83, 289-90.)[51]

In the course of investigating the forensic image of the desktop's hard drive, plaintiff's expert (Mr. Persinger) detected a second thumb drive that had been used in conjunction with the desktop. (Tr. 201-211.) Defendants' expert concurs that a second thumb drive was used in conjunction with the desktop. (Id. at 283, 355.) As discussed in detail below, however, the experts disagree on (1) when that second thumb drive was inserted into the desktop, and (2) whether the two thumb drives were purchased in a twin pack.

Plaintiff's expert (Mr. Persinger) opined that the unknown thumb drive was used with Mr. Failon's desktop computer before July 14, 2009 (while Mr. Failon was still employed by Compass). (Tr. 233.) Defendants' expert (Mr. Vaughn) disagreed and opined that the unknown thumb drive was inserted into that desktop for the first time on August 14, 2009 (after Mr. Failon left Compass's employ). (Id. at 216, 356-57, 374.) Mr. Vaughn believes that the only thumb drive inserted into the desktop before July 14, 2009, was the known thumb drive that has been produced and examined. (Id. at 374.) Both experts base their opinions on information found in the system hive of the desktop's registry, but they have different interpretations of that information, as summarized below.

On the second day of hearing, Mr. Persinger criticized Mr. Vaughn's opinion that the unknown thumb drive was not inserted until August 14, 2009, because he claims that the date reflected in Mr. Vaughn's report is the date contained in the system hive, not the insertion or ejection of the device from the desktop. (Tr. 216-18.) Although Mr. Persinger thoughtfully presented his opinion that the unknown thumb drive had been used with Mr. Failon's desktop computer before July 14, 2009, he testified that it was “possible, but not plausible” that someone inserted the unknown thumb drive into the desktop after Mr. Failon returned it. (Id. at 250.)

*18 After having the opportunity to review Mr. Persinger's testimony and the exhibits he created and discussed (Pl.'s Exs. 24-27, 29), Mr. Vaughn defended his opinion on the third day of hearing. (Tr. 356-57.) In a step-by-step explanation, Mr. Vaughn testified that the individual pages of plaintiff's Exhibit 29 (printouts from the system hive of the desktop computer's registry),[52] were taken from various “restore points” of the desktop computer. (Id. at 358.) A restore point, in its simplest form, is a snapshot of a computer's operating state at a point in time. (Id.)[53]

Although plaintiff's Exhibit 29 does not reflect all of the desktop's restore points–only two or three are shown–it describes them. (Tr. 359.)[54] In trying to determine when a second (unknown) thumb drive was used in connection with the desktop, Mr. Vaughn opined that it is important to review all of its restore points instead of just a few. (Id. at 361-62.) Therefore, he made that review and compiled that information into Defendants' Exhibit 16. (See id. at 362-91.) With regard to the known thumb drive, Mr. Vaughn's exhibit (Defs.' Ex. 16) shows that the desktop's operating system first recognized it at restore point 25 (RP25), which was created on June 26, 2009; this means that the known thumb drive was inserted into the desktop on either June 25 or June 26, 2009. (Tr. 363-64, 375-76.)[55] The exhibit further shows that the operating system recognized the known thumb drive from that restore point (RP25) onward until the exhibit's last restore point (RP96) on September 15, 2009. (Id. at 364-65.)[56]

*19 With regard to the unknown thumb drive, Mr. Vaughn's exhibit (Defs.' Ex. 16) shows that the desktop's operating system first recognized it at restore point 48 (RP48), meaning that the unknown thumb drive was not inserted into the desktop until August 14, 2009. (Tr. 364.)[57] The exhibit further shows that the operating system recognized that unknown thumb drive from that restore point (RP48) onward until the exhibit's last restore point (RP96) on September 15, 2009. (Id. at 364-65.) The fact that there are no “Xs” for the unknown thumb drive at RP36 and before (dates which correspond to Mr. Failon employment with Compass) means that he did not insert the unknown thumb drive into the desktop. (Id. at 365.) Mr. Persinger was present in the Courtroom when Mr. Vaughn testified. (Id. at 352-53.) However, plaintiff did not put its expert on the stand to rebut Mr. Vaughn's testimony.

Plaintiff's expert (Mr. Persinger) testified that, based on similarities between the parent IDs of the known and unknown thumb drives (which includes their vendor IDs (090c) and product IDs (1000)), he believed that they were purchased together in a twin pack. (Tr. 201-02, 213-15; compare Pl.'s Ex. 24-26, with Pl.'s Ex. 27.)[58] However defendants' expert (Mr. Vaughn) disagreed, asserting that any such claim would be speculative. He opined that manufacturers produce thumb drives in mass; thus, even if the two thumb drives were manufactured at the same time, it does not mean they were packaged and sold together. (Tr. 283-84, 369.) On the third day of hearing, after reviewing plaintiff's exhibits, Mr. Vaughn supplemented his opinion. He added that, regardless of whether the vendor and product IDs of the known and unknown thumb drives match, the firmware revisions do not. (Id. at 369-70.)[59] Specifically, the firmware revision (11.00) listed on the second page of Plaintiff's Exhibit 24 (which reflects the F drive of the known thumb drive) is different from the firmware revision (4.03) listed for the unknown thumb drive. (See Pl.'s Ex. 27.) As noted above, Mr. Persinger was present but did not rebut Mr. Vaughn's testimony.

Spoliation is “intentional destruction, mutilation, alteration, or concealment of evidence.” Black's Law Dictionary 1437 (8th ed. 2004). Federal law governs the imposition of spoliation sanctions in a diversity case. Flury v. Daimler Chrysler Corp., 427 F.3d 939, 944 (11th Cir. 2005). However, “a party can only be sanctioned for destroying evidence if it had a duty to preserve it.” Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y. 2003); see also Kronisch v. United States, 150 F.3d 112, 126 (2d Cir. 1998)(“In order for an adverse inference to arise from the destruction of evidence, the party having control over the evidence must have had an obligation to preserve it at the time it was destroyed.”), overruled on other grounds, Rotella v. Wood, 528 U.S. 549 (2000).

*20 Defendants “emphasize [the] critical point [that] this Court should look to Georgia law when deciding spoliation issues.” (Defs.' Post-Hr'g Br. Opp'n Pl.'s Mot. for Spoliation Sanctions 5 (citing Flury, 427 F.3d at 944).)[60]However, the court in Flury merely noted that its decision on the imposition of sanctions was “informed by Georgia law,” and that such law was “wholly consistent with federal spoliation principles.” 427 F.3d at 944. With respect to Mr. Failon's duty to preserve evidence in June 2009, defendants' position that the Court should follow Georgia precedent is problematic for two reasons. First, Flury, like most federal courts considering spoliation sanctions in diversity actions, did not have before it the issue of a party's pre-suit duty to preserve evidence. Thus, Flury cannot fairly be read to impose either a state or federal law standard for determining a party's pre-suit duty to preserve evidence (an issue on which federal courts have split, see infra Part II.A.3). Second, recent Georgia precedent on the issue of the pre-suit duty to preserve evidence is not “wholly consistent” with federal law. Accordingly, this Court must determine as a threshold matter whether state or federal law applies to Mr. Failon's pre-suit duty to preserve evidence, before applying federal law to imposition of any sanctions.

A federal court sitting in diversity is required to apply state substantive law and federal procedural law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).[61] “As recognized by the Supreme Court, however, ‘classification of a law as substantive or procedural for Erie purposes is sometimes a challenging endeavor.’ ” Burke v. Smith, 252 F.3d 1260, 1265 (11th Cir. 2001) (quoting Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 416 (1996)) (internal punctuation omitted).

“Because of the difficulties associated with the application of the Eriedoctrine, [the Eleventh Circuit has] adopted a multi-step analysis for determining whether state or federal law should apply to a particular issue raised in a diversity case.” Esfeld v. Costa Crociere, S.P.A., 289 F.3d 1300, 1306 (11th Cir. 2002) (citing Alexander Proudfoot Co. v. Thayer, 877 F.2d 912, 917-19 (11th Cir. 1989)). That analysis is as follows:

Esfeld, 289 F.3d at 1306-07 (footnote and internal citations omitted). The Court conducts each step of that analysis below.

In Georgia, “[s]poliation refers to the destruction or failure to preserve evidence that is necessary to contemplated or pending litigation.” Baxley v. Hakiel Indus., Inc., 647 S.E.2d 29, 30 (Ga. 2007) (citation omitted). The court in Baxley found a duty to preserve evidence where the alleged spoliator “was aware of the potential for litigation.” Id. However, the Georgia Supreme Court later limited its holding in Baxley, noting that “the phrase ‘potential for litigation’ from Baxley refers to litigation that is actually ‘contemplated or pending,’ and nothing more.” Silman v. Assoc. Bellemeade, 685 S.E.2d 277, 279 (Ga. 2009). Further, the Georgia Court of Appeals recently held that “[t]o meet the standard for proving spoliation, the injured party must show that the alleged tortfeasor was put on notice that the party was contemplating litigation.” Craig v. Bailey Bros. Realty, Inc., 697 S.E.2d 888, 891 (Ga. Ct. App. 2010). In other words, under Georgia law, a party has no pre-suit duty to preserve evidence in the absence of actual or constructive notice that another party is contemplating litigation. Id.[62]

*21 In federal courts, “[t]he obligation to preserve evidence arises when the party has notice that the evidence is relevant to litigation or when a party should have known that the evidence may be relevant to future litigation.” Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423, 436 (2d Cir. 2001) (citing Kronisch, 150 F.3d at 126); see also Silvestri v. Gen. Motors Corp., 271 F.3d 583, 591 (4th Cir. 2001) (“The duty to preserve material evidence arises not only during litigation but also extends to that period before the litigation when a party reasonably should know that the evidence may be relevant to anticipated litigation.”). This standard has been applied by this Court and by other district courts in this Circuit. See Walker v. U.S., I.R.S., No. 4:07-CV-0102-HLM, 2009 WL 1241929, at *1 (N.D. Ga. Feb. 26, 2009); Brown v. Chertoff, 563 F. Supp. 2d 1372, 1377 (S.D. Ga. 2008); Sapeu v. Bland, No. 6:04-CV-129, 2007 WL 2694781, at *1 n.3 (S.D. Ga. Sept. 10, 2007).

In this case, it is undisputed that Compass was not contemplating litigation against Mr. Failon during June 2009 and that he received notice of potential litigation no earlier than July 10, 2010. Thus, Georgia law would impose no duty to preserve evidence on Mr. Failon, while federal law would require a determination of whether litigation was reasonably foreseeable to Mr. Failon during June 2009. Given these differing standards, the Court finds that Georgia and federal law are in conflict, and that the choice of law is crucial in determining whether Mr. Failon had a duty to preserve evidence at the time he reformatted the desktop computer and wiped the laptop's hard drive. Accordingly, the Court continues its analysis.

No congressional statute or Federal Rule of Civil Procedure covers the issue of pre-suit obligation to preserve evidence. In federal courts, “the power to sanction for spoliation derives from the inherent power of the court, not substantive law.” Silvestri, 271 F.3d at 590; see also Hodge v. Wal-Mart Stores, Inc., 360 F.3d 446, 450 (4th Cir. 2004) (“spoliation is not a substantive claim or defense but a rule of evidence, and thus is administered at the discretion of the trial court.”) (citation and internal quotations omitted); Carrier Corp. v. G.W. Martin, Inc., No. 1:08-CV-1003-CC, 2009 WL 1649587, at *4 (N.D. Ga. May 27, 2009) (“One specific application of the court's inherent power is ‘the imposition of sanctions for spoliation of evidence in a diversity suit.’ ” (quoting Flury, 427 F.3d at 943-44)). This is especially true where the alleged spoliation occurs before litigation, and thus outside the ambit of Federal Rule of Civil Procedure 37, which governs discovery sanctions. See ABC Home Health Servs., Inc. v. Int'l Bus. Machs., 158 F.R.D. 180, 182 (S.D. Ga. 1994) (finding pre-suit document destruction sanctionable because “conduct ordinarily sanctionable under Rule 37, but which falls outside the express terms of the rule, ‘can be sanctioned by proper exercise of this Court's inherent powers.’ ” (quoting EEOC v. Jacksonville Shipyards, Inc., 690 F. Supp. 995, 997 (S.D. Fla. 1988))). Because no federal statute or rule is on point, the Court continues its analysis. Esfeld, 289 F.3d at 1306-07.

The Eleventh Circuit has not ruled on whether federal courts sitting in diversity should apply state or federal law to determine a party's pre-suit obligation to preserve evidence, and other circuits have reached conflicting results. See King v. Ill. Cent. R.R., 337 F.3d 550, 555-56 (5th Cir. 2003) (applying federal law); Allstate Ins. Co. v. Sunbeam Corp., 53 F.3d 804, 806-07 (7th Cir. 1995) (applying state law).[63] In the absence of controlling precedent, the Court examines the factors identified by the Eleventh Circuit in Esfeld.

Esfeld, 289 F.3d at 1307 (footnote and internal citations omitted); see alsoHanna, 380 U.S. at 468 (“The ‘outcome-determination’ test therefore cannot be read without reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws.”).

As a practical matter, resolution of the instant motion may be outcome-determinative in, or at least have a marked effect on, this lawsuit. However, it does not change the law or burdens of proof associated with plaintiff's claims or defendants' defenses. See Hanna, 380 U.S. at 469 (“Though choice of the federal or state rule will at this point have a marked effect upon the outcome of the litigation.... Petitioner, in choosing her forum, was not presented with a situation where application of the state rule would wholly bar recovery.”). Consequently, although failure to apply state law to the disputed issue could lead to different outcomes in state and federal court with respect to the instant spoliation motion, it would not generally be outcome-determinative of the claims asserted in this lawsuit and would not encourage forum shopping.[64]

Further, any concern about inequitable administration of the law is lessened by Georgia's failure to indicate that it considers spoliation of evidence a substantive matter. Like the majority of states, Georgia does not recognize spoliation of evidence as a separate tort. See Owens v. Am. Refuse Sys., Inc., 536 S.E.2d 782, 784 (Ga. Ct. App. 2000); Sharpnack v. Hoffinger, 499 S.E.2d 363, 364 (Ga. Ct. App. 1998). Rather, Georgia courts recognize spoliation of evidence “as an appropriate basis for appropriate sanctions in the decision of the underlying case.” Sharpnack, 499 S.E.2d at 364.

The Court concludes that any concerns about forum shopping or inequitable administration of the law are outweighed by the countervailing federal interests in consistent application of federal law and in discouraging spoliation of evidence. If, as numerous courts have suggested, spoliation is an evidentiary doctrine and not substantive law, then the Eleventh Circuit's holding that “federal law governs the imposition of spoliation sanctions,” Flury, 427 F.3d at 944, must also encompass the duty to preserve evidence. Further, although the Eleventh Circuit has not expressly ruled on the choice of law issue presented in this case, it has cited with approval a Fifth Circuit decision applying federal law to pre-suit spoliation. See Martinez v. Brink's, Inc., 171 Fed.Appx. 263, 269 n.7 (11th Cir. 2006) (per curiam) (citing King, 337 F.3d at 556); Flury, 427 F.3d at 943 (same).[65] Moreover, applying the same duty to preserve evidence that is applied throughout federal courts would not unfairly discriminate against citizens of Georgia. Esfeld, 289 F.3d at 1307. Accordingly, the Court applies federal law to determine whether Mr. Failon engaged in spoliation of evidence.

*23 It is undisputed that Mr. Failon reformatted the desktop computer's hard drive and wiped the laptop computer's hard drive, and that the contents of both hard drives are relevant to plaintiff's claims.[66] However, Mr. Failon's actions only constitute spoliation of evidence if he had an obligation to preserve evidence in June 2009. As discussed above, Mr. Failon only had a duty to preserve the contents of the hard drives if litigation was reasonably foreseeable when he reformatted the desktop's hard drive and wiped the laptop's hard drive. Silvestri, 271 F.3d at 591.

The Court finds that Mr. Failon had no duty to preserve evidence at the time he reformatted the desktop's hard drive, given that tensions with Compass had not yet escalated, he had not yet sought legal counsel, and the desktop's performance issues were attributable to other users during a time period when Mr. Failon was not using it.[67]

However, several facts convince the Court that Mr. Failon had a duty to preserve evidence by the time he wiped the laptop's hard drive on June 29, 2009. Mr. Failon knew as of May 22, 2009, that Compass intended to allow the 2007 employment agreement to terminate on July 13, 2009, and that Compass desired to enter into a new employment agreement. When he received the draft employment agreement on June 24, 2009, Mr. Failon learned that Compass sought to reduce his base salary by thirty percent. Mr. Failon's reasonable beliefs concerning the potential for litigation must be informed by his history with Compass. Namely, when Mr. Bellah attempted in 2006 to get Mr. Failon to agree to changes in the 2005 employment agreement, Mr. Failon and his attorney “interpreted it as a serious threat” and filed a lawsuit for anticipatory breach of contract. (Tr. 162; see supranote 5.) Moreover, Mr. Failon felt oppressed by negotiations leading to the 2007 employment agreement. (See supra note 11.) Thus, it would not have been idle speculation for Mr. Failon to foresee in 2009 the potential for litigation with Compass. See KCH Servs., Inc. v. Vanaire, Inc., No. 05-777-C, 2009 WL 2216601, at *1 (W.D. Ky. July 22, 2009) (finding familiarity with competitor's “willingness and ability to file suit” relevant to foreseeability of litigation).

Further, seeking legal counsel is indicative of anticipating litigation. Mr. Failon met with his attorney after reformatting the desktop's hard drive, but before wiping the laptop's hard drive. Although he denied any concern over being sued when he went to see Mr. Lorenz on June 29, 2009, Mr. Failon testified at his deposition and at the hearing that he was concerned that he might be sued by Compass. (See Failon Dep. 177-78; Tr. 338.) Mr. Failon insisted during the hearing that he was no longer worried about litigation with Compass after meeting with his attorney. However, at most, the attorney could have reassured Mr. Failon that he would prevail in any dispute (as opposed to telling Mr. Failon what Compass would or would not do).[68]

*24 Moreover, Mr. Failon shared his concerns over potential litigation with Ron Treece, the Access Vice-President, whom he was prohibited from contacting during his Compass employment. Specifically, Mr. Treece testified that when he first received a copy of Mr. Failon's employment agreement with Compass (before the June 27, 2009 meeting), Mr. Failon mentioned the possibility of being sued because “knowing Bellah ... there's a possibility of it.” (Tr. 181-82.) On the likelihood of litigation, Mr. Treece recalled that Mr. Failon “didn't say he was worried. He just said that there is a possibility that he would be [sued] regardless.” (Id. at 182.)

Finally, despite testifying to the “paramount” importance that he placed on returning the computers to Compass “in as close to full functionality as possible” (Tr. 140), Mr. Failon returned the laptop in a non-working condition (inasmuch as there was no software on it), not only neglecting to inform Mr. McCaul that he had wiped its hard drive but also affirmatively concealing that fact.[69]

A reasonable person in Mr. Failon's position should have known on June 29, 2009, that the laptop's hard drive could be relevant to future litigation. See Silvestri, 271 F.3d at 591. Further, the evidence strongly suggests that Mr. Failon actually knew that there was a reasonable possibility of litigation at that time.[70] Given his distrust of Mr. Bellah and Mr. McCaul and his concern that he might be sued “regardless,” a reasonably prudent person in Mr. Failon's position would have removed his own personal data from the laptop's hard drive and nothing more. That Mr. Failon affirmatively hid that he wiped the laptop's hard drive and gave false testimony about the thumb drive (and numerous other matters) only leads the Court to reject any claim by Mr. Failon that he did not reasonably foresee litigation with Compass.

According to the Eleventh Circuit, “[S]anctions for discovery abuses are intended to prevent unfair prejudice to litigants and to insure the integrity of the discovery process.” Flury, 427 F.3d at 944 (citations omitted). “To determine whether spoliation sanctions are warranted, a court must consider the factors identified in Flury.” Graff v. Baja Marine Corp., 310 Fed.Appx. 298, 301 (11th Cir. 2009). Those factors are as follows.

Flury, 427 F.3d at 945 (citing Bridgestone/Firestone N. Am. Tire, LLC v. Campbell, 574 S.E.2d 923, 926 (Ga. Ct. App. 2002)).

As for factor one, “If relevant evidence is not produced, for whatever reason, and then is destroyed before either party learns of the existence of that evidence, then the absence of the relevant evidence prejudices the party that would have relied on it to prove its case.” Connor v. Sun Trust Bank, 546 F. Supp.2d 1360, 1376 (N.D. Ga. 2008) (Vining, J.). It makes no difference that the Court and the parties may only speculate as to whether the hard drives contained any damaging evidence. See Brown, 563 F. Supp. 2d at 1379 (“To require a party to show, before obtaining sanctions, that unproduced evidence contains damaging information would simply turn ‘spoliation law’ on its head.”); see also Residential Funding Corp. v. Degeorge Fin. Corp., 306 F.3d 99, 109 (2d Cir. 2002) (“Courts must take care not to hold the prejudiced party to too strict a standard of proof regarding the likely contents of the destroyed or unavailable evidence, because doing so would subvert the purposes of the adverse inference, and would allow parties who have destroyed evidence to profit from that destruction.”) (citation and internal punctuation omitted). “Therefore, courts properly focus on the relevance of the destroyed evidence in determining prejudice.” Brown, 563 F. Supp. 2d at 1379. Here, the laptop's hard drive is relevant to plaintiff's claims. See Nucor Corp. v. Bell, 251 F.R.D. 191 (D.S.C. 2008) (“The presence of confidential [ ] information on the laptop would tend to make it more probable that defendants misappropriated [plaintiff's] trade secrets; the absence of confidential [ ] information would make it less probable.”). Moreover, an expert's examination of an unwiped hard drive would have revealed what, if anything, Mr. Failon may have done with plaintiff's data (i.e., downloaded, emailed, printed, or transferred). Plaintiff therefore has established the first factor.

With respect to the second factor, the Court concludes that the prejudice cannot be cured. See Flury, 427 F.3d at 945-46 (jury instruction insufficient to cure prejudice where non-spoliating party had no opportunity to examine physical evidence); Bridgestone/Firestone, 574 S.E.2d at 926-27(photographs of destroyed evidence insufficient to cure prejudice). Similarly, the third factor, the practical importance of the laptop's hard drive, is satisfied because that hard drive is critical to the underlying claims. SeeBridgestone/Firestone, 574 S.E.2d at 927.

With regard to factor four, a showing of malice is not required in order to find bad faith. Flury, 427 F.3d at 946. “The court should weigh the degree of the spoliator's culpability against the prejudice to the opposing party.” Id. “In evaluating culpability, district courts routinely look to a party's failure to take proper measures to preserve evidence.” Brown, 563 F. Supp. 2d at 1381.

*26 Here, Mr. Failon's actions in destroying evidence, viewed objectively, were at least negligent and may have been deliberate.[71] After all, the wipe of the laptop's hard drive occurred immediately after Mr. Failon's meeting with Access–a competitor Mr. Bellah had ordered Mr. Failon to avoid. Even if that timing were mere coincidence, Mr. Failon's conduct following the spoliation leads the Court to conclude that his testimony is not credible and that he acted in bad faith. See Rimkus Consulting Group, Inc. v. Cammarata, 688 F. Supp. 2d 598, 643 (S.D. Tex. 2010) (finding increased degree of culpability where “defendants' proffered reasons and explanations for deleting or destroying the emails and attachments are inconsistent and lack record support”).

Specifically, Mr. Failon directed Mr. Lorenz to omit the wiping of the laptop's hard drive from his invoice. Indeed, he knew that disclosure of such action would raise suspicions. (Tr. 136.) Further, Mr. Failon denied ownership or knowledge of any thumb drive in multiple interrogatory responses and in his deposition, admitting to the existence of the known thumb drive only after plaintiff's expert discovered its use. As summarized supra, Part I.O.1, Mr. Failon's claimed confusion simply is not credible. Moreover, although the second thumb drive is not the smoking gun that plaintiff hoped it would be, it was inexcusable for Mr. Failon to deny its existence until the second day of the evidentiary hearing. Furthermore, as summarized above, Mr. Failon's testimony during the evidentiary hearing was replete with inconsistencies that further undermine his credibility.

Finally, as to the fifth factor, “[a]lthough the leading cases on spoliation sanctions ... involve the potential for abuse by experts, the analysis under this fifth spoliation factor is focused on whether the non-spoliating party, despite its ability to present evidence in support of its claims, has had a full opportunity to discover the most relevant and most reliable evidence.” Connor, 546 F. Supp. 2d at 1377 (citations omitted). Here, plaintiff has not had such an opportunity because Mr. Failon deleted all information, relevant and otherwise, from the laptop. Although Mr. Failon claimed repeatedly that he did not intentionally delete confidential material in order to deprive Compass of potential evidence, the Court has difficulty crediting those claims given Mr. Failon's propensity to prevaricate.

In sum, consideration of the five factors establishes that spoliation of evidence occurred in this case and that sanctions are warranted. In its final step, therefore, the Court considers the appropriate sanctions.

District courts have discretion to impose spoliation sanctions against parties. Brown, 563 F. Supp. 2d at 1377. “Appropriate sanctions should (1) deter the parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced party to the same position it would have been in absent the wrongful destruction of evidence by the opposing party.” Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 685 F. Supp. 2d 456, 469 (S.D.N.Y. 2010) (citation and internal quotation omitted). In weighing the factors addressed above and considering the available sanctions, the Court is mindful that it “should always impose the least harsh sanction that can provide an adequate remedy. The choices include–from least harsh to most harsh–further discovery, cost-shifting, fines, special jury instructions, preclusion, and the entry of default judgment or dismissal (terminating sanctions).” Id. ; see also Flury, 427 F.3d at 945 (“[a]s sanctions for spoliation, courts may impose the following: (1) dismissal of the case; (2) exclusion of expert testimony; or (3) a jury instruction on spoliation of evidence which raises a presumption against the spoliator.”).

*27 “Dismissal represents the most severe sanction available to a federal court, and therefore should only be exercised where there is a showing of bad faith and where lesser sanctions will not suffice.” Flury, 427 F.3d at 944. Plaintiff argues that default judgment (the equivalent of dismissal given the posture of this case) is appropriate because the deleted evidence would have been critical to many of its claims, including breach of contract for unauthorized disclosure of confidential information, conversion or theft of personal property, breach of fiduciary duty, misappropriation of trade secrets, and wrongful disclosure and use of the confidential information. (Br. Supp. Pl.'s Mot. for Spoliation Sanctions at 15.) Plaintiff contends that Mr. Failon's conduct “has precluded this action from being decided on the merits.” (Id. at 17.) However, the undersigned will not recommend a terminating sanction in this case because lesser sanctions will suffice.

Practical considerations undermine plaintiff's argument for default judgment. It is impossible to know what evidence has been lost. Plaintiff has not identified any probative evidence corroborating what it alleges might have been found on the laptop. In other words, despite knowledge of the competitors Mr. Failon solicited, plaintiff has not identified any specific confidential information that has been disclosed to a third party, or any third party who is alleged to have received any confidential information.[72] Thus, even if the Court entered default judgment against defendants, plaintiff has given no indication that it could establish any damages caused by any unauthorized use or disclosure of confidential information. Moreover, the evidence recovered from the desktop and known thumb drive is just as consistent with Mr. Failon's assertion that he did not take or disclose any confidential information as it is consistent with plaintiff's claims.

To justify a severe sanction, the innocent party must present extrinsic evidence tending to show that the destroyed evidence would have been favorable to its case. Pension Comm., 685 F. Supp. 2d at 468. Plaintiff has not done so. Consequently, because further discovery is not practical and the undersigned will not recommend terminating sanctions, the Court is left to consider cost-shifting and special jury instructions. See id. at 469.

“Monetary sanctions are appropriate to punish the offending party for its actions and to deter the litigant's conduct, sending the message that egregious conduct will not be tolerated. Awarding monetary sanctions serves the remedial purpose of compensating the movant for the reasonable costs it incurred in bringing a motion for sanctions.” Pension Comm., 685 F. Supp. 2d at 471 (citation and internal punctuation omitted).

Wiping the laptop's hard drive destroyed relevant evidence. However, it is Mr. Failon's subsequent conduct that is more culpable. By hiding that the hard drive was wiped, Mr. Failon created a cloud of suspicion around himself from the outset of this case. Mr. Failon further impeded discovery by refusing to sit for his deposition.[73] As discussed supra, when he was deposed, Mr. Failon gave false testimony, and he continued that practice at the evidentiary hearing. He also answered an interrogatory falsely and corrected it only because he had no choice. Whether he breached his employment contract or not, Mr. Failon's conduct in this case has been egregious and deserving of sanction. See Rimkus Consulting, 688 F. Supp. 2d at 647 (assessing reasonable costs and attorney's fees where plaintiff “spent considerable time and money attempting to determine the existence and extent of the spoliation, hampered by the defendants' inconsistent and untruthful answers to questions”).

*28 Because Mr. Failon's behavior necessitated the filing of Compass's spoliation motion, Compass is entitled to the reasonable expenses and attorney's fees that it incurred in connection with that motion. Accordingly, the undersigned RECOMMENDS that plaintiff be permitted to submit a fee application, documenting its reasonable costs (including costs for its expert) and attorney's fees directly associated with the Motion for Spoliation Sanctions. However, those costs and fees should be limited. The third day of the evidentiary hearing was necessary primarily for defendants to rebut Mr. Persinger's testimony regarding the second thumb drive, which they did successfully. In other words, the third day of the evidentiary hearing cannot be attributed to Mr. Failon. Therefore, reasonable costs and attorney's fees should include direct preparations for, and attendance at, the first two days of the evidentiary hearing, as well as briefing the motion (both pre-and post-hearing).

Should this case go to trial,[74] the Court should allow introduction of evidence of the circumstances surrounding the reformatting of the desktop's hard drive, the wiping of the laptop's hard drive, and Mr. Failon's concealment of the thumb drive. The Court has found that the destruction of evidence was at least negligent, and that those acts were compounded by Mr. Failon's willful bad faith thereafter. Further, the spoliation was not so egregious as to justify the harshest inference instructions.[75] The remaining question, therefore, is what form of adverse inference instruction is appropriate. That question cannot be answered before trial.

As noted above, if a jury finds Mr. Failon only negligent, it would not be permitted to draw an adverse inference against him. Mann, 588 F.3d at 1310; see also Bashir v. Amtrak, 119 F.3d 929, 931 (11th Cir. 1997) (per curiam) (“Mere negligence in losing or destroying the records is not enough for an adverse inference, as it does not sustain an inference of consciousness of a weak case.”). If, however, a jury finds Mr. Failon more than negligent, “an adverse inference instruction can take many forms, again ranging in degrees of harshness. The harshness of the instruction should be determined based on the nature of the spoliating party's conduct–the more egregious the conduct, the more harsh the instruction.” Pension Comm., 685 F. Supp. 2d at 470. The court in Pension Committee explained as follows:

*29 Id. at 470-71 (citations omitted).

Accordingly, if Mr. Failon is found to have spoliated evidence in bad faith, it would be appropriate for the jury to be permitted, but not required, to presume that the lost evidence is relevant and favorable to Compass. SeeRimkus Consulting, 688 F. Supp. 2d at 646 (allowing introduction of evidence without mandatory presumption); Zubulake, 220 F.R.D. at 222(declining to give adverse inference instruction where plaintiff “cannot demonstrate that the lost evidence would have supported her claims”). At trial, the undersigned recommends that the District Court give the jury an adverse inference charge as it sees fit regarding each defendant. SeeBashir, 119 F.3d at 931 (“In this circuit, an adverse inference is drawn from a party's failure to preserve evidence only when the absence of that evidence is predicated on bad faith.”); Connor, 546 F. Supp. 2d at 1377(“the court will instruct the jury as to the appropriate inference to draw from the absence of evidence”); Nucor, 251 F.R.D. at 203-04 (example spoliation charge).

Following three days of hearing, numerous briefs, exhaustive study of the record, and the drafting of this lengthy Report and Recommendation, the Court is left with the clear conviction that Mr. Failon has not been honest about his activities. Given that finding, the undersigned is unable to credit Mr. Failon's claims that he never expected to be sued by Compass, that his motive for wiping the laptop's hard drive was innocent, and that he never intended to delete information that might be relevant to future litigation. Accordingly, for the reasons explained above, the undersigned RECOMMENDS that Plaintiff's Motion for Spoliation Sanctions [159] be GRANTED IN PART. Mr. Failon should be required to pay plaintiff its reasonable costs and attorney's fees incurred in bringing this motion (but excluding the third day of the evidentiary hearing). Should this case go to trial, plaintiff should be permitted to present evidence of the spoliation that occurred before this action was initiated. However, severe sanctions including default judgment or a mandatory adverse inference are not warranted.

The Clerk is DIRECTED to terminate the reference to the Magistrate Judge.

SO RECOMMENDED, this 15th day of February, 2011.

Let this Final Report and Recommendation of the United States Magistrate Judge, made in accordance with 28 U.S.C. § 636(b)(1)(B), Federal Rule of Civil Procedure 72(b), and the Court's Local Rule 72.1B, be filed and a copy, together with a copy of this Order, be served upon counsel for the parties.

Pursuant to 28 U.S.C. § 636(b)(1), each party may file written objections, if any, to the Final Report and Recommendation within fourteen days of the receipt of this Order. Should objections be filed, they shall specify with particularity the alleged error(s) made (including reference by page number to any transcripts if applicable) and shall be served upon the opposing party. The party filing objections will be responsible for obtaining and filing the transcript of any evidentiary hearing for review by the District Court. If no objections are filed, the Final Report and Recommendation may be adopted as the opinion and order of the District Court, and any appellate review of factual findings will be limited to a plain error review. United States v. Slay, 714 F.2d 1093, 1095 (11th Cir. 1983) (per curiam).

*30 The Clerk is directed to submit the Final Report and Recommendation with objections, if any, to the District Court after expiration of the above time period.

SO ORDERED, this 15th day of February, 2011.

The pages of the three-volume hearing transcript (“Tr.”) are consecutively numbered. (Dec. 29, 2010, Vol. I, pp. 1-175 [201]; Dec. 30, 2010, Vol. II, pp. 176-349 [202]; and Jan. 18, 2011, Vol. III, pp. 350-395 [209] ).

Defendants submitted a second post-hearing brief. (See Defs.' Suppl. Post-Hr'g Br. Opp'n Pl.'s Mot. for Spoliation Sanctions [215].) Plaintiff likewise submitted a second post-hearing brief. (Suppl. Post-Hr'g Br. Supp. Pl.'s Mot. for Spoliation Sanctions [217].)

Although Mr. Failon asserts that Mr. Bellah induced him to sell his shares in a heavy-handed fashion, that dispute is not relevant to the issue referred to the undersigned. In any event, Mr. Bellah offered Mr. Failon a continued interest in Compass, but he elected to sell and received compensation. (Tr. 338-41.)

Mr. Failon received the desktop in about 2004 and the laptop in about 2006. (Tr. 135, 321-22, 327-28.) Mr. Failon never “synched” the files contained on the laptop and the desktop and their hard drives were not identical. (Id. at 139.) Mr. Failon also owns a personal laptop. (Id. at 334.) To date, plaintiff has not sought to inspect it, although Mr. Failon offered at the hearing to make it available. (Id. at 334-35.)

Mr. Failon and Compass had a rocky relationship. Mr. Failon claims that Mr. Bellah “bullied, intimidated, threatened, demeaned, belittled” and blackmailed him. (Tr. 164-65; see alsoid. at 317-19 (describing two job-related situations that Mr. Failon called blackmail).) He called Mr. Bellah the “absolute worst boss I've ever had.” (Id. at 315.) Mr. Failon also claimed that Mr. Bellah had threatened him and other salesmen via e-mail with termination or fines for violating his edicts. (Id. at 96, 315-16.) Mr. McCaul conceded that Mr. Bellah was a “strong-willed person.” (Id. at 95.) The instant litigation is not the first. In 2006, Mr. Failon filed, but did not serve, a lawsuit against Compass for anticipatory breach of his 2005 employment agreement. (Id. at 124-25, 161-62.)

Mr. Failon agreed that items (a), (d), (e) are confidential, although he later testified that prices may or may not be confidential. (Tr. 128-30, 314-15.) Mr. Failon asserted that Compass's product list is not confidential because the products it sells are listed on its website. (Id. at 128-29.) Moreover, he claimed that item (c), product volume, is not confidential. (Id. at 314.)

Mr. McCaul emphasized that, in the chemical business, a seller does not simply publish a price list and wait for customers to examine that list and place an order. (Tr. 13.) Instead, a salesman calls on a customer, offers a product for certain applications, and attempts to discern from that customer the price it is willing to pay. (Id.) There is no commodity exchange that lists current prices. (Id. at 14.) Although industry publications might disclose some information about markets or contract pricing, that information is not usually current or reliable. (Id. at 14-15.)

Mr. Failon subsequently testified that there was confidential information on the desktop when he returned it. (Tr. 140.)

Sean O'Donnell, President of DataCor, Inc., the vendor that created, sells, and supports both Chempax and eChempax, testified via deposition that a customer has the capability to keep track of information that is printed from Chempax; however, Compass's administrator did not turn on that feature of the software. (Tr. 272-74.) Mr. O'Donnell initially testified that Compass had the capability to track data downloaded from eChempax, but that feature was not turned on. (Id. at 274.) However, he then stated that he was not sure whether eChempax kept a record of printing, downloading, or exporting data from that system. However, unlike Chempax, that was not a feature a customer would turn on or turn off; that feature either exists in the eChempax software or it does not. (Id. at 274-75.)

The sales analysis (SA) module contains confidential lists of all customers, the products they purchase, the prices they pay, and the profit Compass makes on them. (Tr. 52-53.) The invoicing (IN) module contains confidential information about Compass's sales transactions, including the name of the customer, the product purchased, the price, the costs incurred in making that product, shipping costs, and profit. (Id. at 51.)

At the expiration of Mr. Failon's 2005 employment agreement in 2007, Compass also sent him written notice of termination. (Tr. 96-97.) That notice purported to terminate Mr. Failon's employment for gross negligence or wilful misconduct, which would have deprived him of a severance. (Id. at 97; Defs.' Ex. 15 (Notice of Termination of Employment).) Compass's description of this event is found in its Initial Disclosures (marked as Defs.' Ex. 14, pp. 2-4). (Tr. 98-99.) Although defendants' counsel described plaintiff's approach to employee relations as “heavy-handed” because Mr. Failon faced the option of signing a new agreement or being fired for cause with no severance (id. at 99), Mr. McCaul believed that Compass acted fairly toward Mr. Failon because it had cause to fire him, but accepted his explanation that alcohol abuse had caused his performance problems, and gave him a second chance when he stopped drinking; moreover, Mr. Failon negotiated a $12,000 increase in annual compensation over what Compass initially offered. (Id. at 99-100, 103-04.)

As of June 1, 2009, no one from Compass had threatened litigation against Mr. Failon. (Tr. 76.)

Unlike the situation with the laptop (discussed infra), Mr. Failon did not charge the reformatting expense to Compass. He felt that this expense should fall on him since programs loaded by his family had caused the problem. (Tr. 324.)

Plaintiff's expert (James B. Persinger of PM Investigations, Inc.) and defendants' expert (James D. Vaughn of Intelligent Discovery Solutions), conducted forensic analysis of images of the hard drives of the desktop and laptop used by Mr. Failon, as well as a thumb drive subsequently produced in discovery. (Tr. 183-86, 277-80, 354-55.) Counsel stipulated to the experts' qualifications. (Id. at 182-83, 278-79.) A detailed discussion of how one creates and examines a forensic image of a hard drive using EnCase software is in the record (id. at 186-189, 279-80), but not summarized here.

The “unallocated space” on a hard drive contains the files or documents that have been deleted, while the “allocated space” contains files or documents the computer operator has saved. (Tr. 188.) When the desktop's hard drive was reformatted, files deleted by that action went to unallocated space. EnCase may be able to recover file names or fragments of files from unallocated space, but not file contents. (Id. at 198-200.)

Mr. Failon testified that, up through mid-June 2009, he had made no decisions about his future. He was still waiting for the draft employment agreement to review; when it arrived, he would review the pros and cons of staying with Compass or pursuing one of the other options he was exploring. (Tr. 320.)

At the hearing, Mr. Failon changed the answer to this question to “Yes” and testified that he saved some items from the laptop using a thumb drive. (Tr. 142.) His evolving thumb drive(s) story is discussed infra Part I.O.

To add to the confusion, on the second day of hearing, Mr. Failon agreed with plaintiff's counsel's assertion that, “during June of 2009 [he was] concerned about and contemplated the possibility of litigation with Compass.” (Tr. 338.)

Mr. Failon asserted that he was never concerned about being sued over stealing confidential information because he was not taking any. (Tr. 142, 348.)

Mr. Failon's cell phone records show that he called Mr. Treece on May 11, 2009 and again on May 13, 2009. (Pl.'s Ex. 18; Tr. 179.) Mr. Failon testified that the purpose of these and all subsequent calls was to rekindle his relationship with Mr. Treece and to determine if he was interested in doing business together in some capacity. (Tr. 343-45.)

Mr. Failon testified that he sent a copy of his 2007 employment agreement to Mr. Treece before he went to Houston on the weekend of June 27, 2009. (Tr. 134-35, 337, 345.)

Mr. Dickson initially was unsure about when he first saw Mr. Failon's 2007 employment agreement. (Tr. 118-19.). However, as shown in the text preceding this note, he later testified that he saw the contract before their first meeting. (Mr. Failon confirmed that testimony. (See supra note 21.)) When he saw the 2007 employment agreement, Mr. Dickson expressed concern about being sued if Access did business with Mr. Failon. (Id. at 119.) Mr. Failon responded that he had hired a lawyer to dispute the agreement's validity. (Id. at 118-19.) Although Mr. Failon initially agreed that he may have informed Mr. Dickson on June 27 that he intended to challenge the 2007 employment agreement (id.at 163), on subsequent examination he asserted that Mr. Dickson got the dates wrong. Specifically, Mr. Failon testified that he may have discussed his intention to challenge the 2007 employment agreement at the meeting with Mr. Dickson on July 21, 2009, but not on June 27, 2009. (Id. at 174-75.)

Mr. Failon wanted to form a joint venture with Access. (Tr. 114-15.) Mr. Failon believed that he could expand Access's market for phosphorus acid and its derivatives beyond the greater-Houston area (where Access was concentrated) to end users across the country (id. at 115) and get Access into the fertilizer business. (Id. at 115-16.) Mr. Dickson was concerned that, if Access entered into a partnership or joint venture with Mr. Failon, Compass would sue given the 2007 employment agreement. (Id. at 117.) However, he desired to do business with Mr. Failon along other lines. (Id.)

Mr. Failon disputes Mr. Dickson's testimony because he believes that their discussions about possible business ventures on June 27, 2009, were tentative, and that more concrete conversations did not occur until they met again on July 21, 2009. (Tr. 133-34.)

Mr. Lorenz testified that Mr. Failon did not specifically ask for a DOD wipe. (Tr. 107.) In fact, Mr. Lorenz speculated that Mr. Failon did not know what a DOD wipe was. (Id.) Mr. Failon agreed that he had not heard of a DOD wipe until Mr. Lorenz mentioned it. (Id. at 328-29.) Mr. Failon simply indicated that he wanted the hard drive wiped so that others could not access it. (Id. at 107-08.) Mr. Lorenz further testified that Mr. Failon “asked if he could have the same thing done to the laptop” that had been done to the desktop, and that he would have reinstalled Windows if the hard drive had not had bad sectors. (Lorenz Dep. [44] 30-31, 35-36.) Mr. Failon claimed that he did not have a high level of sophistication when it came to working with computers, and always used others to correct problems with them. (Id. at 323.)

Mr. Failon testified that the laptop was running slowly, that the monitor was broken with lines going across it, and that he had to “reboot” it frequently. (Tr. 170, 308.) Plaintiff's expert (Mr. Persinger) testified that the laptop was not in need of repair and disagreed with each element of Mr. Lorenz's diagnostic. (Id. at 192-96, 253.) He conceded on cross-examination, however, that he imaged and studied the laptop's hard drive without installing software on it and turning it on. (Id. at 253.) Morever, Mr. Persinger conceded that Mr. Lorenz was in a better position, having examined the laptop before its hard drive was wiped, to make a diagnosis on its functionality. (Id. at 253-56.) Defendants' expert (Mr. Vaughn) opined that one could not draw conclusions about the correctness of Mr. Lorenz's opinion by examining only the laptop's hard drive. (Id. at 280-82, 292-93, 296-98.) The experts also disagreed over whether wiping the laptop's hard drive could improve its functionality. (Compare id.at 256-58 (Persinger asserting it would not), with id. at 282, 293 (Vaughn asserting that it might).)

Mr. Lorenz volunteered that, in his experience, it is common when a computer changes hands (i.e., either returned to an employer or sold to another) for the user to wipe its hard drive. (Tr. 271.) Plaintiff's expert (Mr. Persinger) testified that, in his experience, it is unusual for an employee to have his computer wiped before returning it to the employer. (Id. at 191.) Instead, an employee who places personal items on a company-owned computer usually deletes the personal items using special software without wiping the entire hard drive. (Id. at 191-92.)

The dispute over how Mr. Failon migrated those files and/or documents from the laptop to the desktop is discussed infra Part I.O. There is also a discrepancy over when Mr. Failon transferred files. (See infra note 44.)

Mr. Failon's last day of employment under the 2007 employment agreement was July 13, 2009. Mr. Failon negotiated one day's extension (and an extra day's pay) as a condition for meeting with Mr. McCaul on July 14, 2009. (Tr. 40-41, 101, 128, 330, 341-42.) As they negotiated over holding this meeting, Mr. McCaul told Mr. Failon that he was bringing a letter from Compass's attorney. (Id. at 330.)

Mr. Failon claims that this threat of litigation on July 14, 2009, was the first he received from Compass. (Tr. 330, 332.) However, he also asserted that July 10, 2009, was the first time that Mr. McCaul had threatened litigation. (Id. at 173.) As noted above, Mr. McCaul testified that he threatened litigation on July 10, 2009.

Mr. Failon also returned a Compass-owned Blackberry and two file boxes containing confidential documents that belonged to Compass. (Tr. 145, 334.) Mr. Failon testified that he printed out and placed in those boxes documents (organized by customer, product, or project) that he did not transfer from the laptop to the desktop. (Id. at 325-26.)

Mr. McCaul could recall no discussion with Mr. Failon about the desktop. (Tr. 43-44.) However, there must have been some discussion about the desktop because Mr. McCaul allowed Mr. Failon to keep the monitor that had been connected to it. (Id. at 371-72.)

Mr. Failon submitted an expense report (Pl.'s Ex. 5) to Compass for reimbursement of the $55 he paid to Personal Computer Service. (Tr. 43, 137.) That expense report also fails to mention the wipe of the laptop's hard drive.

The desktop apparently was unused between July 14, 2009, and August 14, 2009. (Tr. 372-73; see also Defs.' Ex 16.) Mr. McCaul had no personal knowledge of whether lab personnel deleted files created by Mr. Failon from the desktop. (Tr. 85-86.)

At a later date, counsel for Compass hired Mr. Persinger to examine the desktop. Mr. Persinger extracted a list of files stored on the desktop's hard drive and gave that list to Mr. McCaul. Although Mr. McCaul asserted that those files had been created by lab personnel and not Mr. Failon, he conceded that nothing he saw on that list reflected any misconduct by Mr. Failon. (Tr. 87-89.)

Compass examined Mr. Failon's e-mails (i.e., those sent to or from his Compass e-mail address and found in its server). (Tr. 89.) Mr. McCaul conceded that all of those e-mails were the normal “back and forth” variety exchanged between an employee and a customer; he saw no e-mails that violated the 2007 employment agreement. (Id. at 89-90.)

Defendants' expert (Mr. Vaughn) examined images of the hard drives after the suit began. His report is dated November 1, 2010.

Mr. McCaul testified that Compass suspected Mr. Failon had engaged in spoliation of evidence before it filed the lawsuit in November 2009. (Tr. 79-80.) However, neither the Complaint, the Joint Preliminary Report and Discovery Plan [12] (filed Jan. 11, 2010), nor Compass's Initial Disclosures [13] (filed Jan. 11, 2010) allege that critical evidence had been eliminated. Indeed, Compass did not file the instant Motion until October 20, 2010, almost one year after suit was filed.

Interrogatory No. 14 sought the identification of all computer systems Mr. Failon had used since July 13, 2007. (Pl.'s Ex. 12 at 11; see Tr. 152.)

A thumb drive is a portable, removable storage device that can be inserted into a computer and used to transfer data to or from that computer. It is similar to a hard drive, but with smaller capacity. (Tr. 202.) Mr. Failon knows what a thumb drive is, how to use one, and that it is called removable media. (Id. at 146, 151.)

Mr. Failon forwarded the e-mails from his Verizon account to his counsel because there were so few of them. However, e-mails reflecting his communications with Zschimmer and Schwartz and with Access (i.e., Messrs. Dickson and Treece), which were stored on True North Products's server, were so voluminous that he could not forward them via email. Therefore, Mr. Failon saved blocks of these e-mails as pdf or zip files to a thumb drive and then e-mailed those files to his attorney. (Tr. 165.)

Mr. Failon claimed that, although he testified on July 8, 2010 that he had no thumb drive but then used a thumb drive on July 13 or 14, 2010, he did not attempt to correct his deposition testimony because he thought that plaintiff's counsel was asking about a Compass-owned thumb drive. (Tr. 156.)

Neither Mr. Failon's First Supplemental Answers to Plaintiff's First Set of Interrogatories (served May 6, 2010, and filed as Pl.'s Ex. 13) nor his Second Supplemental Answers to Plaintiff's First Set of Interrogatories (served July 1, 2010, and filed as Pl.'s Ex. 14) corrected his response to Interrogatory No. 15 about the thumb drive. (Tr. 153-54.)

This date of May 18, 2009, contrasts with Mr. Failon's claims that he moved files from the laptop to the desktop via the thumb drive between March-May 2009 (infra Part I.O.4) or between June 1-29, 2009 (supra Part I.I).

Testimony focused on the last few documents listed on the third page of Mr. Vaughn's report excerpt. (Pl.'s Ex. 17, bates no. TNP 2177.) This exhibit shows that on June 22, 2009, Mr. Failon placed CV.docx (his curriculum vita) on the thumb drive. (Tr. 160.) On June 23, 2009, he placed his compensation history and a Non-Disclosure Agreement (“NDA”) he obtained from Legal Zoom, an on-line legal service, on the thumb drive. (Id.) Mr. Failon testified that he executed the NDA with Access to protect confidential information before his first visit to Houston on June 27, 2009. (Id. at 160-61.) The type of confidential information Mr. Failon says he shared with Access included his salary history and the 2007 employment agreement. (Id. at 161.)

However, Mr. Persinger could not tell when those files were deleted from the thumb drive. (Tr. 252.) He conceded that the deletions could have occurred before Mr. Failon left Compass's employ. (Id. at 252-53.)

Plaintiff's Exhibit 7, prepared by Mr. McCaul from the documents contained in Plaintiff's Exhibit 6, summarizes their contents and notes what Compass deems confidential. (Tr. 47-48.)

At his deposition, Mr. Failon provided a different time line. He claimed that he transferred files via e-mail from the laptop to the desktop in March and April 2009, and possibly into May 2009. (Failon Dep. 179.) Given that Mr. Failon did not move back into the home where he kept the desktop until late-April 2009 (id. at 139), one must ask why he would send files to a desktop that was not accessible.

Although Mr. Failon usually asserted that he moved files from the laptop to the desktop with a thumb drive, on occasion he testified that he moved files using both e-mail and a thumb drive. (See Tr. 151, 325.)

The thumb drive produced by Mr. Failon and examined by the experts is sometimes called the “known” thumb drive. The second thumb drive that has not been produced is sometimes called the “unknown” thumb drive. (Tr. 355.)

A thumb drive with U3 technology offers password protection to the user, and if ejected properly from the computer into which has been inserted, erases all evidence of its use. (Tr. 202-03, 282-83.) In contrast, a thumb drive without U3 technology leaves a record on the computer of its insertion and of the data transferred to the thumb drive. (Id. at 202-03.) If a thumb drive containing U3 technology is ejected improperly from the computer into which it was inserted, the clean-up program cannot work and it, like a normal thumb drive, would leave a trail behind of its use. (Id. at 204.) Manufacturers place U3 technology on their thumb drives, highlight its features on the packaging (i.e., password protection and the clean-up feature), and sell them for a few dollars more than thumb drives without that technology. (Id. at 169, 250-51, 283.) Mr. Failon testified that U3 appeared on the computer screen as he used the thumb drive, but was unaware of what U3 technology was until he heard it described at the hearing. (Id. at 167, 332-33.) By purchasing a thumb drive with U3 technology, Mr. Failon asserted that he had no intent to delete evidence that might be relevant to a lawsuit. (Id. at 332.)

Mr. Vaughn explained that the registry is a database that tracks activity as it occurs. If one inserts a thumb drive into a laptop running Windows, the registry will capture that insertion. (Tr. 379.) The next time the laptop's operating system creates a restore point, regardless of whether that thumb drive is still present, that restore point will capture the fact that it had been inserted. (Id.)

The Windows XP operating system records information about the computer on at least a daily basis as restore points. It creates restore points more often than daily if software programs or drivers are installed or if a device such as a monitor, keyboard, mouse or thumb drive is connected or inserted. (Tr. 358-59, 376, 383.)

For example, on the first page of plaintiff's Exhibit 29, about half-way down on the left side are the words, “Full Path.” (Tr. 359-60.) The first page of plaintiff's Exhibit 29 shows that the “File Created” date for restore point 65 was “8/16/09” at “5:28:05 AM.” (Tr. 360.)

A restore point does not track the various dates that a device such as a thumb drive was used with a computer; instead, it captures the point at which the operating system first recognizes the thumb drive's insertion into the computer. (Tr. 365.) Therefore, the first thumb drive was inserted after creation of restore point 24 (RP24) but before creation of restore point 25 (RP25). (Id. at 378.)

Mr. Vaughn made this same point with Plaintiff's Exhibit 29. Specifically, page PMI06 of that exhibit appears to show that the known thumb drive was being used on August 16, 2009, even though it is undisputed that Mr. Failon had already returned the desktop by that date (and, of course, retained the known thumb drive). (Tr. 367-68.) However, that date (August 16, 2009) refers to the creation date of the restore point (RP65). (Id. at 368.) Once a device is recognized, it appears in all subsequent restore points. Thus, the known thumb drive shows up on RP65 because it had been recorded in RP64, RP63, RP62, etc. all the way back until it had first been inserted into the desktop at RP25. (Id.)

There are numerous restore points for August 14, 2009. (SeeDefs.' Ex. 16 at 1-2, RP37-RP60.) According to Mr. Vaughn, this shows that there was a substantial amount of activity on the desktop on this date, including creation of profiles for new users, plugging in a new monitor, installing software programs, updating drivers, and insertion of the unknown thumb drive. (Tr. 373.)

Mr. Persinger speculated that the second (unknown) thumb drive contained U3 technology. (Tr. 213-15, 220-21.) However, there is no evidence controverting Mr. Failon's assertion that he was unaware of U3 technology and did not use it. In light of Mr. Vaughn's testimony about the unknown thumb drive and Mr. Failon's testimony about his own second thumb drive, the Court finds no benefit to be gained by speculating whether Mr. Failon may have inadvertently used U3 by properly ejecting his thumb drives.

The firmware is what a manufacturer builds into a device to allow it to be read. (Tr. 370.)

Plaintiff agrees to the applicability of Georgia law, but offers a different interpretation of that law, supplemented by citations to federal cases. (See Post-Hr'g Br. Supp. Pl.'s Mot. for Spoliation Sanctions 2-3.)

Further, a federal court sitting in diversity applies the substantive law of the forum state, unless federal constitutional or statutory law requires a contrary result. Pendergrast v. Sprint Nextel Corp., 592 F.3d 1119, 1132-33 (11th Cir. 2010); Galindo v. ARI Mut. Ins. Co., 203 F.3d 771, 774 (11th Cir. 2000). The Court thus analyzes Georgia law, although the alleged spoliation occurred in Virginia.

Plaintiff cites Kitchens v. Brusman, 694 S.E.2d 667, 671-72 (Ga. Ct. App. 2010), for the proposition that a pre-suit duty to preserve evidence arose when the alleged spoliator knew that the plaintiff “had litigation in mind as a possibility or plan.” (Post-Hr'g Br. Supp. Pl.'s Mot. for Spoliation Sanctions 2.) However, the court in Kitchens based its conclusion on a finding that “there is evidence of more than a potential for litigation” where “a lawyer was already investigating and asking for ... medical records.” 694 S.E.2d at 671. Accordingly, Kitchens is consistent with the proposition that the alleged spoliator has no duty to preserve evidence absent notice of contemplated or pending litigation.

As noted above, once spoliation has been established, federal law controls the imposition of sanctions. See Adkins v. Wolever, 554 F.3d 650, 651 (6th Cir. 2009) (“We now recognize–as does every other federal court of appeals to have addressed the question–that a federal court's inherent powers include broad discretion to craft proper sanctions for spoliated evidence.”).

The Court very much doubts that a plaintiff would be led to choose federal court out of fear that a defendant, knowing that evidence may be relevant to future litigation, but not having notice of contemplated or pending litigation, would engage in spoliation. The Court further observes that Compass did not make such a choice in the instant case. Compass sued in the Superior Court of Cobb County; defendants filed a Notice of Removal.

In King, the plaintiff notified the defendant nearly three years after a train-automobile collision that he was seeking recovery based on an alleged train signal malfunction. 337 F.3d at 552, 556. By that time, relevant maintenance records had been destroyed. Id. at 555-56. The plaintiff filed suit in state court in Mississippi; the defendant removed to federal court on diversity jurisdiction. Id. at 552. In considering the plaintiff's spoliation argument, the Fifth Circuit stated that “federal courts apply their own evidentiary rules in diversity matters.” Id. at 556.

“Relevant evidence” means evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence. Fed. R. Evid. 401.

Moreover, spoliation sanctions for the desktop would be problematic, given that Compass also failed to preserve this evidence. (See supra Part I.L.)

This is particularly true in light of the pre-existing animosity and Mr. Failon's stated belief that “[t]here's no limit to what Mr. Bellah will do” to prevent him from competing with Compass. (Tr. 319.)

If returning the laptop in full functionality was of paramount importance, Mr. Failon could have had Mr. Lorenz perform the recommended repairs, notwithstanding the latter's opinion that doing so would not have been cost effective, or reinstall the original software after wiping the hard drive. But, like in so many instances at the hearing, Mr. Failon contradicted himself about the software. With respect to the desktop, he testified that because he “had the original disks of the operating system and all the Office suite software,” he instructed Mr. Lorenz to “load everything back onto the desktop in the hopes that it would be returned to like-new condition.” (Tr. 322.) However, with regard to the laptop, Mr. Failon asserted he would have had Mr. Lorenz reload the Windows operating system and related software, but he “couldn't find it or maybe never had it because it might have been installed by Dell at the factory.” (Id. at 329.) A consistent lack of veracity destroyed Mr. Failon's credibility.

If in fact Mr. Failon did not misappropriate confidential information, then he had no reason to think the hard drive would be relevant to such claims. However, he admittedly was concerned about the non-solicitation clause and should have known that the laptop's hard drive would provide evidence to prove or disprove any violation of the 2007 employment agreement.

That uncertainty likely precludes default judgment as an available sanction. See Mann v. Taser Int'l, Inc., 588 F.3d 1291, 1310 (11th Cir. 2009) (“mere negligence in losing or destroying records is not sufficient to draw an adverse inference.”); Silvestri, 271 F.3d at 594.

At the hearing, Mr. McCaul offered his opinion that plaintiff's exhibits 6-9 establish that Mr. Failon violated his confidentiality agreement. (Tr. 64-65.) However, plaintiff deposed Mr. Treece and Mr. Dickson, apparently without discovering supporting evidence, and failed to identify to this Court any other Compass customer that it alleges received or benefitted from Compass's trade secrets.

The District Court found “that Failon's conduct in refusing to sit for his depositions was improper and in clear violation of this court's clear directive,” and imposed sanctions against him, including an award of attorney's fees. (Order of June 21, 2010 [96] at 17.) Given this delay, the Court does not fault plaintiff for not filing its spoliation motion until it had conducted sufficient discovery. (See supra note 38.)

The Court does not presume that this case will go to trial. SeeKronisch, 150 F.3d at 128 (“We do not suggest that the destruction of evidence, standing alone, is enough to allow a party who has produced no evidence–or utterly inadequate evidence–in support of a given claim to survive summary judgment on that claim.”). Therefore, only a brief discussion of adverse inference sanctions is included here.

The Court is not persuaded otherwise by the cases that plaintiff cites. (See Br. Supp. Pl.'s Mot. for Spoliation Sanctions 17-18; Post-Hr'g Br. Supp. Pl.'s Mot. for Spoliation Sanctions 12-13.) In each of those cases the spoliating party already was engaged in litigation, sometimes destroying evidence after a motion to compel or discovery order.