Also before the Court is Thomas Nelson's Motion to Review (Doc. No. 386) the Magistrate Judge's March 29, 2018 Memorandum and Order compelling certain discovery (Doc. No. 381) (Magistrate Judge's Order III”), EPAC's Motion to Review (Doc. No. 393) the Magistrate Judge's March 29, 2018 Memorandum and Order denying another motion to compel (Doc. No. 380) (“Magistrate Judge's Order II”), and Thomas Nelson's Motion for a Hearing (Doc. No. 388). The Court finds that this matter has been sufficiently briefed, and oral argument is unnecessary.

In June 2012, EPAC brought this suit after Thomas Nelson breached a contract in which it hired EPAC to print its books. (Doc. No. 1.) After the case had been pending for over three years, now-retired Magistrate Judge John Bryant appointed a Special Master to determine whether Thomas Nelson destroyed evidence about the quality of the books EPAC printed, which is relevant to whether EPAC first breached its contract with Thomas Nelson and gave Thomas Nelson cause to terminate the contract. (Doc. No. 77.) On January 29, 2016, the Special Master issued a Report and Recommendation on the spoliation issues. After District Judges John Nixon and Todd Campbell retired, Judge Curtis Collier's designation expired, and Judge William Campbell recused, the case was reassigned to the undersigned. Upon Magistrate Judge Bryant's retirement, the case management referral was reassigned to Magistrate Judge Alistair Newbern.

A. ORDER ADOPTING IN PART AND REJECTING IN PART THE SPECIAL MASTER'S REPORT AND RECOMMENDATION (DOC. NO. 379)

Both parties object to portions of the Magistrate Judge's Order I. (Doc. No. 382, 391.) The Court will reverse a nondispositive ruling from the Magistrate Judge only if clearly erroneous, based on legal error, or in the interest of justice. Fed. R. Civ. P. 72(a); M.D. Tenn. L.R. 72.02(b); see Automated Sols. Corp. v. Paragon Data Sys., Inc., 756 F.3d 504, 513 (6th Cir. 2014)(reviewing Magistrate Judge's decision on adverse inference jury instructions for clear error). A finding is clearly erroneous “when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.” Sawyer v. Whitely, 505 U.S. 333, 346 n.14 (1992) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)). The Court will only review arguments made before the Magistrate Judge, and will defer all new arguments to allow the Magistrate Judge to rule on them in the first instance. Murr v. United States, 200 F.3d 895, 902 n.1 (6th Cir. 2000)(collecting cases).

The Magistrate Judge held that (1) Thomas Nelson negligently disposed of books after its preservation duty was in place; (2) the books are relevant to claims and defenses in this lawsuit and EPAC is prejudiced by their loss; and (3) to remedy the prejudice to EPAC, a permissive inference jury instruction is an appropriate remedy. Thomas Nelson objects to the finding of prejudice as premature because discovery is still open. (Doc. No. 385 at 6, 15.) It also objects to the permissive inference jury instruction recommended by the Magistrate Judge on the ground that it invades the province of the jury. (Doc. No. 385 at 8.) It last objects to the Magistrate Judge's finding that EPAC's failure to preserve its own books has “minimal relevance” because EPAC's samples of the books reflects the quality of the books just as well as the ones Thomas Nelson actually received. (Doc. No. 385 at 18.)

*2 EPAC objects to the Magistrate Judge's spoliation ruling regarding the books. It argues that the recommended jury instruction is clearly erroneous because it allows Thomas Nelson to prove that it sold the books. It also objects to the Magistrate Judge's factual findings that the books were destroyed “negligently” and that there were books remaining after April 18, 2011. It last objects to the Magistrate Judge's remedy because EPAC cannot discover the facts learned by the Special Master regarding the books. (Doc. No. 392 at 15-19.)

As to Thomas Nelson's first objection, the Magistrate Judge's factual findings are not premature. It is not clearly erroneous for the Magistrate Judge to rely on the record before her in making her ruling. See Berger v. Medina Cty. Oh. Bd. of Cty. Com'rs, 295 F. App'x 42, 44 (6th Cir. 2008) (the district court can only rule on the record the parties present). If further developments occur during discovery that mitigate the finding of prejudice, Thomas Nelson may bring it to the Court's attention. However, on the record before the Court, the Magistrate Judge's factual findings are affirmed.

Regarding the permissive inference jury instruction, when spoliation of evidence affects trial evidence, “an adverse inference instruction is necessary for remedial purposes.” E.E.O.C. v. JP Morgan Chase Bank, N.A., 295 F.R.D. 166, 175 (N.D. Oh. 2013) (citing Beaven v. U.S. Dep't of Justice, 622 F.3d 540, 555 (6th Cir. 2010)). Thomas Nelson had control over the books that were relevant to whether it could lawfully terminate its contract with EPAC. It had an obligation to preserve that evidence but destroyed it negligently, and the destroyed evidence was “relevant” to a party's claim or defense. Johnson v. Metro. Gov't of Nashville & Davidson Cty., Tenn., 502 F. App'x 523, 531-32 (6th Cir. 2012). The Magistrate Judge proposed the following jury instruction: “Thomas Nelson had a duty to preserve evidence relevant to this litigation; that it breached that duty by negligently allowing the books in its control to be sold, lost, or destroyed; and that the jury may infer that, if available, the books would support EPAC's claims and be adverse to Thomas Nelson's arguments.” (Doc. No. 379 at 46.) The jury instruction does not tell the jury how to find on any fact, so it does not “invade the province of the jury.” See Beaven, 622 F.3d at 555(holding that the district court did not err in allowing the factfinder to make an inference on a critical issue of the case so long as the factfinder has the ability to accept or reject the inference). To the contrary, the jury instruction allows the jury to decide whether to infer that the destroyed books would support EPAC's claims.

The Court disagrees with EPAC's objection that the jury instruction is not severe enough. The Court finds that the severity of the sanction is appropriate given that Thomas Nelson was negligent in its destruction of the books. See Adkins v. Wolever, 554 F.3d 650, 652-53 (6th Cir. 2009) (holding that district courts have discretion to impose a range of sanctions for spoiled evidence depending on the fault of the party who spoiled the evidence). Although EPAC objects to the Magistrate Judge's factual finding that the spoliation was negligent (Doc. No. 392 at 16), it does not include any citations to the record to proof of intentional spoliation. See M.D. Tenn. L.R. 72.02(b)(1) (requiring a motion to review be “accompanied by sufficient documentation ... to apprise the District Judge of the basis for the appeal). Further, the Magistrate Judge's analysis finding that the spoliation was negligent is sound. The Magistrate Judge accepted the Special Master's factual finding that there was “no evidence that the disposition of the books was coupled with an intent to deprive EPAC of this evidence and nothing to suggest an effort to dispose of the books tied in any way to frustrating EPAC's claims in this litigation.” (Doc. No. 379 at 41 (internal quotations omitted)). Rather, nobody except for counsel “considered preserving the books until after this lawsuit was filed,” and counsel sent an email to preserve evidence, although the email was not interpreted to include EPAC-printed books. (Doc. No. 379 at 42.) In short, ordering the permissive adverse inference instruction on the physical evidence is not clearly erroneous.

*3 Finally, Thomas Nelson argues that EPAC had its own independent duty to preserve books it printed and never shipped to EPAC. These books could be relevant, according to Thomas Nelson, as evidence of the quality of books it printed. However, this is a contract case and the important evidence is the quality of books that were delivered to Thomas Nelson pursuant to the Master Services Agreement (“MSA”). The Magistrate Judge is correct that the relevant books in this matter were the ones Thomas Nelson possessed and did not retain. (Doc. No. 379 at 44-45 n.13.)

The Magistrate Judge made factual findings that Thomas Nelson did not make reasonable efforts to preserve electronically stored information (“ESI”), including warehouse data, lost due to Thomas Nelson's negligence; that EPAC is prejudiced by the loss of warehouse data; and that to remedy the loss, the Court will give a corrective jury instruction and prevent Thomas Nelson from offering evidence regarding any customer complaints about EPAC books. (Doc. No. 379 at 2-3.) Thomas Nelson argues that the Magistrate Judge's factual determinations are clearly erroneous; that the loss did not cause EPAC prejudice; (Doc. No. 385 at 7, 13); that the proposed jury instruction invades the province of the jury; (Doc. No. 385 at 8); that the adverse jury instruction is too severe under Federal Rule of Civil Procedure 37(e)(1); and that Thomas Nelson could not have reasonably anticipated that EPAC would want information from the warehouse data. (Doc. No. 385 at 11.)

Regarding each of these objections, the Magistrate Judge made specific factual findings. On whether data was lost and whether EPAC was prejudiced, the Magistrate Judge found, “it appears that the full extent of the warehouse data relevant to EPAC's claims has not been restored.” (Doc. No. 379 at 52.) The Magistrate Judge adopted the Special Master's factual finding that Thomas Nelson's actions do not support a finding of intent because “the Special Master had the broadest access to information regarding the state of mind of those who allowed the loss of evidence in this matter, including interviewing Thomas Nelson's employees and its counsel and reviewing thousands of internal and third-party communications.” (Doc. No. 379 at 38.) The Magistrate Judge's review of the record also led her to the finding that “Thomas Nelson failed to take its preservation obligations seriously, .... but” there is no evidence, direct or indirect, that “Thomas Nelson intended to deprive EPAC of evidence for use in this litigation.” (Id.) These factual findings are not clearly erroneous based on the current record.

Regarding the jury instruction, the Court will make a slight alteration. Under the standard set by the 2015 Amendments, the Magistrate Judge correctly held that the sanctions “cannot include sanctions reserved for intentional conduct regarding lost ESI under Rule 37(e)(2),” which includes both mandatory and permissive inference jury instructions. (Doc. No. 379 at 39.) The Magistrate Judge ordered that the Court “instruct the jury that Thomas Nelson had a duty to preserve its warehouse data as of April 18, 2011, and that such data, now lost, would have shown whether EPAC-printed books were sold or returned, whether Thomas Nelson received customer complaints about EPAC-printed books, the quantity and timeliness of EPAC's order fulfillment, and from what EPAC facility the books were shipped.” (Doc. No. 379 at 54-55.)

The Committee Notes to the 2015 Amendments of Rule 37(e)(1) state that even without intent, the Court has a duty to order sanctions so long as they do not go as far as the sanctions in subsection (e)(2). The Court must craft a remedy “no greater than necessary to cure the prejudice.” Committee Notes to Rule 37(e)(1). The Committee Notes give examples of appropriate remedies: “forbidding the party that failed to preserve information from putting on certain evidence, permitting the parties to present evidence and argument to the jury regarding the loss of information, or giving jury instructions to assist in its evaluation of such evidence or argument, other than [permissive or mandatory inference jury instructions].” Thomas Nelson is already precluded from offering evidence regarding any customer complaints about EPAC books.[1] The Court will also permit the parties to present evidence and argument to the jury regarding the loss of the warehouse data. The Court will instruct the jury how to consider that evidence as follows: “Thomas Nelson had a duty to preserve its warehouse data as of April 18, 2011, and negligently failed to do so. Such data, now lost, may have shown whether EPAC-printed books were sold, returned, whether Thomas Nelson received customer complaints about EPAC-printed books, the quantity and timeliness of EPAC's order fulfillment, and from what EPAC facility the books were shipped. You may give this whatever weight you deem appropriate as you consider all of the evidence presented at trial.” Allowing this is “no greater than necessary to cure the prejudice,” and allows Thomas Nelson to present its argument that the data did not prejudice EPAC and EPAC to present its argument that its whole case could be proven by the warehouse data. Ultimately, it leaves the findings of fact to the jury.

*4 Both sides object to the Magistrate Judge's finding of culpability. Thomas Nelson objects that it was not negligent because it could not have anticipated that EPAC would want the books. EPAC objects to the finding that Thomas Nelson negligently, rather than intentionally, destroyed the warehouse data. The Magistrate Judge's reasoning (Doc. No. 379 at 30-39) is not clearly erroneous. The data was relevant to the “quality, quantity, and delivery of books printed at the EPAC2 facility, the books' disposition, the MSA and its termination, and the relationship between EPAC and Thomas Nelson.” (Doc. No. 379 at 30-36.) Once Thomas Nelson was on notice about a lawsuit regarding the MSA, it should have retained the warehouse data. At the same time, EPAC cites no evidence of intent in the record, but rather the proof shows that Thomas Nelson did not consider this data relevant to this case. (Doc. No. 379 at 15.)

EPAC requests that the Court appoint another third party, under the direction of EPAC but at the expense of Thomas Nelson, to restore and produce to EPAC all remaining warehouse data and make a report as to any and all data that cannot be produced. (Doc. No. 392 at 11-13.) This is an issue that rests in the discretion of the Magistrate Judge.

The Magistrate Judge held that Thomas Nelson negligently allowed relevant emails that it had a duty to preserve to be purged from its Postini email archive. Those emails, purged because of Thomas Nelson's negligence, have effectively been replaced or restored through additional discovery. However, she found that EPAC suffered prejudice by receiving the emails after certain depositions because of Thomas Nelson's delay in producing relevant emails. To remedy the prejudice, the Magistrate Judge ordered that EPAC may re-depose those witnesses at Thomas Nelson's expense, excluding attorney's fees, on issues reasonably related to the emails belatedly produced. Thomas Nelson argues that no rule permits a finding of prejudice based on delayed production of ESI; that EPAC caused the delay; and that the Magistrate Judge “ignored” that EPAC failed to produce “dozens of relevant emails that Thomas Nelson has produced.” (Doc. No. 385 at 20-22.)

On the factual question of whether Thomas Nelson caused the delay of email productions, the Court adopts the Magistrate Judge's reasoning that Thomas Nelson did not discover its omission until “far later than it should have with the implementation of a litigation hold.” (Doc. No. 379 at 55-57.) Specifically, the Magistrate Judge found that Thomas Nelson did not discover the purge of the emails until 2013, long after the duty to preserve evidence arose in April 2011. (Id. at 55-56.)

On the legal issue of whether Rules 16 and 26 permit the Magistrate Judge to shift costs of depositions due to Thomas Nelson's delayed production of emails, the Court agrees with the Magistrate Judge that Thomas Nelson failed to timely provide information that should be in its initial disclosures, Rule 26(a)(1)(A)(ii), and in violation of the Court's Scheduling Order (Doc. Nos. 10; 49). Cost-shifting sanctions are permitted under Rule 16(f)(2) for violation of the Court's Orders and under Rule 37(c)(1)(A) for violating Rule 26, so the Magistrate Judge's Order is not clearly erroneous.. FED. R. CIV. P. 16(f)(2).

EPAC argues that it was contrary to law for the Magistrate Judge to fail to address Thomas Nelson's cover-up of its destruction of the emails. (Doc. No. 392 at 20-21.) EPAC requests that the sanctions against Thomas Nelson be harsher to reflect the destruction of the emails. (Doc. No. 392 at 21.) However, EPAC does not cite to the record to any indication of a cover-up by Thomas Nelson. As already noted, Local Rule 72.02(b)(1) requires “sufficient documentation including, but not limited to, briefs, affidavits, pertinent exhibits, and if necessary, transcripts of the record to apprise the District Judge of the basis for the appeal” to accompany a motion to review. Because EPAC did not provide the Court with any evidence of a cover-up, the Court cannot find the Magistrate Judge clearly erroneous for failing to address such cover-up.

*5 Regarding any allegation that EPAC failed to produce emails, Thomas Nelson states that it intends to ask the Magistrate Judge to reconsider the previous Magistrate Judge's ruling (Doc. No. 385 at 22 n.6). EPAC also seeks a third-party to produce Thomas Nelson's delta set of emails at EPAC's discretion but at Thomas Nelson's expense. (Doc. No. 392 at 14.) EPAC seeks confirmation that it may seek future relief regarding the production of emails. The Court reserves decision on any of these issues unless the parties present them to the Magistrate Judge.

The Magistrate Judge ordered that Thomas Nelson bears 75% of the Special Master's fees and costs and 50% of EPAC's reasonable costs and attorney's fees incurred during the Special Master proceedings. Thomas Nelson objects that EPAC drove up its fees with its “petulant, scorched earth” behavior. (Doc. No. 385 at 22.) This objection is overruled. Although the Special Master found that “EPAC's counsel made [his] work more difficult and expensive ... embrac[ing] a style of advocacy whereby the advocate repeats assertions with escalating frequency, length, and hyperbole, hoping they might be mistaken as true notwithstanding a lack of supporting evidence,” any attorney's fees that are found to be part of the “petulant, scorched earth nature of EPAC's responses coupled with loose assertions of fact” that “undermined the process” will not be found reasonable. (Doc. No. 226 at 21 n.37.) Thomas Nelson will only be responsible for 50% of EPAC's reasonable attorney's fees.

EPAC, on the other hand, argues that Thomas Nelson should pay all of EPAC's attorney's fees and expenses and the Special Master's fees and expenses related to the Special Master proceedings, and all of EPAC's attorney's fees and expenses for additional email-related depositions. The Magistrate Judge found that EPAC requested the Special Master and should have to shoulder some of the burden of the “discovery marathon.” Additionally, the Magistrate Judge found that EPAC would have incurred some discovery expenses in the normal course of litigation, and should not be reimbursed for those expenses. The Magistrate Judge's reasoning is not clearly erroneous. (Doc. No. 379 at 58-60.)

B. EPAC'S MOTION TO REVIEW THE MAGISTRATE JUDGE'S ORDER DENYING ITS MOTION TO COMPEL (DOC. NO. 380)

EPAC seeks all non-privileged factual information found by the Special Master. (Doc. No. 393.) During the investigation, the Special Master took three audio recorded statements by Thomas Nelson. On August 4, 2016, Magistrate Judge Bryant ordered the Special Master to transcribe those audio recordings, designate which portions of those transcripts on which he relied for his Report and Recommendation, and submit those portions to Thomas Nelson to designate any privileged sections. (Doc. No. 320.) Thomas Nelson then filed the redacted statements and an accompanying privilege log. (Doc. Nos. 339, 339-1, 339-2, 339-3.) EPAC now seeks the remainder of the unprivileged portions of the transcripts, including the portions the Special Master did not rely upon for his Report and Recommendation. The Magistrate Judge denied this request because Judge Bryant's August 4, 2016 Order allowed discovery of all non-privileged facts relied upon by the Special Master (Doc. No. 320), to which EPAC did not object. If EPAC wanted more information, it should have requested it when the Special Master was transcribing the tapes and Thomas Nelson was creating its privilege log. Granting this request now would cause more work and expense for the parties on the speculation that something may be relevant. The Magistrate Judge's Order is not clearly erroneous.

*6 Thomas Nelson seeks attorney's fees for responding to this Motion. (Doc. No. 411 at 4.) Thomas Nelson does not cite any legal basis that would allow it to obtain attorney's fees for responding to a motion to compel in this context, and that request is denied.

C. THOMAS NELSON'S MOTION TO REVIEW THE MAGISTRATE JUDGE'S ORDER GRANTING EPAC'S MOTION TO COMPEL (DOC. NO. 381)

Thomas Nelson objects to the Magistrate Judge ordering it to amend its privilege log to a form that the Court and EPAC can decipher. (Doc. No. 386.) It argues that EPAC's Motion to Compel is untimely, the Magistrate Judge ignored the burden her Order imposes on it, and argues that burden is too great. (Doc No. 387.) The Objections are timely because it is not an objection to the Special Master's Report and Recommendation, but to a privilege log that has to do with evidence that could be used at trial. The Magistrate Judge did not hold that the burden on Thomas Nelson is only relevant when discussing it in the context of a protective order, but instead found that Thomas Nelson could have avoided a substantial amount of its burden by seeking a protective order. The burden of meeting and conferring about the privilege log is not too great, and is a task all parties to litigation must endure. The Magistrate Judge's Order is not clearly erroneous.

D. CONCLUSION

The Court Orders as follows:

IT IS SO ORDERED.