For the reasons set forth below, the Court respectfully recommends that Sonrai's motion for sanctions against Romano be granted in part and denied in part. Specifically, the Court recommends that the District Court issue sanctions against Romano pursuant to Federal Rule of Civil Procedure 37(e) based upon his deliberate destruction of electronically stored information (“ESI”) that should have been preserved in anticipation of litigation. However, even though the Court finds that Sonrai was prejudiced by Romano's spoliation of evidence, the Court does not recommend that the District Court enter a default judgment against Romano. Instead, the Court recommends that the District Court instruct the jury that it may or must presume the ESI that Romano failed to preserve was unfavorable to him. See Fed.R.Civ.P. 37(e)(2)(B). Furthermore, the Court recommends that the District Court deny Sonrai's motion for sanctions against Heil because Sonrai has failed to show that sanctions are warranted under Rule 37(e).

I. BACKGROUND

A. The Parties

As alleged in the Second Amended Complaint, plaintiff Sonrai “is an information technology company with extensive experience in the equipment manufacturing, waste collection, and management industries.” (Dckt. #119 at 1.)[2] One of Sonrai's products is the “Vector” system, which is a “comprehensive telematics and vehicle information system for the waste hauling industry.” (Id. at 12.) According to Sonrai, Vector enables a waste hauling truck fleet operator to monitor all relevant data from the truck chassis and the waste collection body in real time, which optimizes the waste hauling and management process. (Id.) Sonrai used a website hosted by defendant Geotab – which provides “open fleet management platforms” – and Geotab hardware in its Vector product. (Id. at 2, 4.) Defendant Heil is a leading manufacturer of waste hauling vehicles in the United States that, at one point, expressed great interest in acquiring Sonrai's Vector product. (Id. at 10.)

B. Romano's work with Sonrai

*2 In 2006, defendant Anthony Romano, who was working for a firm known as Advanced Custom Engineering Systems (A.C.E.S.), also began to work with Sonrai to perform product development, sales, and marketing services.[3] (Dckt. #335-1 at 9; Dckt. #129 at 40.) Romano was the principal salesperson for both A.C.E.S. and Sonrai, and the companies issued him equipment including a laptop computer, an iPhone, and an iPad for use in the course of his work on their behalf. (Dckt. #335-1 at 20-23; Dckt. #385-2 at 4-5.) While working with Sonrai, Romano had contact with Heil and other Sonrai customers including non-party Progressive Waste Solutions (“Progressive”) and he worked to convince them to use Sonrai's Vector system. (Dckt. #335-1 at 15; Dckt. #119 at 9.)

C. Romano's resignation and his post-employment contact with Sonrai

Romano resigned from Sonrai on January 11, 2016 after he did not receive the equity interest in Sonrai that he believed that he was entitled to. (Dckt. #335-1 at 18-19; Dckt. #119 at 9.) Nonetheless, Romano worked on Sonrai's behalf for several days after his resignation to prepare maps for Polk County. (Dckt. #335-1 at 36-37.) Romano made these maps from publicly available databases. (Id.) Sonrai allowed Romano to use his computer to complete the Polk County project although Romano does not recall if the project required him to download anything from his computer and there was very little activity on the laptop concerning this project. (Dckt. #385-3 at 14-15; Dckt. #335-1 at 36-37, 178.)

On January 17, 2016, Sonrai's Chief Operating Officer Dennis Keizer conducted an exit interview with Romano. (Dckt. #335-1 at 176-77.) Keizer asked Romano to return: (a) his Sonrai-issued laptop and hard drive; (b) all software, discs or back-ups of any electronic information obtained through his employment at Sonrai; (c) customer lists and vendor lists; (d) project or development work with any of Sonrai's contacts or customers; and (e) his Sonrai issued phone and iPad. (Id.) Keizer also provided Romano with a written list of the property that he was required to return. (Id.)

On February 6, 2016, after Romano failed to return his Sonrai-issued devices, Sonrai's former counsel David Stieper sent a letter to Romano demanding that he return all Sonrai-issued devices and property in his possession by February 11.[4] The stated purpose of the letter was to enforce Sonrai's “post-employment covenants including Sonrai's legal right to obtain immediate return of Sonrai property” in Romano's possession or control. (Dckt. #402 at 12-13.) Stieper made it clear that Sonrai's property included “a computer laptop, software, patent information and patent pending information, confidential sales, customer and pricing information, proprietary mapping information, processes and other information and intellectual property of Sonrai.” (Id.) Stieper expressed Sonrai's suspicion that Romano had already contacted one of Sonrai's competitors and he made it clear that Sonrai expected a representation from Romano that he had not “duplicated or otherwise shared” Sonrai's confidential and proprietary information with any third parties, including Sonrai's customers or competitors. (Id.)

Finally, Stieper informed Romano that his possession of Sonrai's confidential information was “in violation of Illinois Trade Secrets Act and Illinois Common law” and he expressed Sonrai's intent to protect its confidential data by “pursu[ing] all legal and equitable remedies against [Romano] and any third-party [with] which [he] shared this confidential [information]” including filing a lawsuit against him “as a result of [his] misappropriation and misuse of Sonrai property.” (Id.) The letter served as Sonrai's “final demand” and Stieper closed by warning Romano that Sonrai would “have no alternative but to seek refuge in Court” if he did not return Sonrai's property by Sonrai's deadline (February 11, 2016). (Id.)

*3 The next day (February 7, 2016), Romano's attorney Kate Kanabay sent an e-mail response to Sonrai's letter, stating that Romano would “promptly” turn over the laptop to her to “facilitate the exchange of the parties' property.” (Dckt. #335-1 at 669.) Kanabay stated further:

(Id.) Kanabay made it clear that Romano “is aware of his legal obligations with regard to any confidential information of Sonrai he may possess.” (Id.)

Kanabay then pivoted and asserted a laundry list of rights that Romano planned to assert against Sonrai. (Id.) Among other things, Kanabay claimed that Romano was due reimbursement for expenses, payment for three weeks of accrued vacation, a share of equity in Sonrai, and damages for Sonrai's tortious interference with Romano's business relationships and creation of a hostile working environment. Kanabay closed her e-mail with the following:

(Id.)

On February 10, 2016 (the day before Sonrai's deadline for return of the property), Romano and Kanabay exchanged the following text messages over the course of a few hours:

The following morning, the conversation continued:

A few hours later, Romano said:

(Dckt. #335-1 at 672-75.)

D. Sonrai's forensic examination of Romano's laptop

*4 On February 17, 2016, Sonrai's Chief Operating Officer Keizer went to Kanabay's office, picked up Romano's Sonrai-issued MAC laptop and cell phone, and documented the items he retrieved with photographs. (Dckt. #335-1 at 177, 184-87.) Keizer, who did not receive any external hard drives or flash drives from Kanabay on February 17,[5] immediately delivered Romano's laptop to a computer forensic firm known as Forensicon. (Dckt. #335-1 at 177.) Forensicon made an image of Romano's laptop on February 19, 2016. Sonrai's counsel subsequently provided the image to Digital Forensic Corporation (“DFC”) so that DFC could conduct a forensic examination. (Dckt. #335-1 at 172-73.)

Sean Quellos, a DFC senior forensic engineer, conducted the forensic examination of the image of Romano's laptop. (Dckt. #335-1 at 172-73.) Quellos processed the image of Romano's laptop through a program called Magnet Axiom that produced a full report of what was on the laptop's drive. (Dckt. #385-4 at 10, 33, 37; Dckt. #335-1 at 172-74.) Each piece of information that was recognized by the Magnet Axiom program – whether a system file, Word document, video, Excel file, or an e-mail – is known as an “artifact.” (Dckt. #385-4 at 11-12; Dckt. #335-1 at 172-74.)

Quellos made a number of findings regarding the activity that occurred on Romano's laptop between December 2015 and February 11, 2016:

a. On December 14, 2015, an anti-forensic tool called BackBlaze was installed and run on the laptop. (Dckt. #335-1 at 173; Dckt. #385-4 at 14-15, 34.) BackBlaze is a program that is designed “for eliminating data on the [hard] drive” of a computer. (Dckt. #385-4 at 15.);

b. On December 31, 2015, two external hard drives (a Kingston USB Flash Drive and a Western Digital My Passport Ultra) were connected to the laptop. (Dckt. #335-1 at 173; Dckt. #385-4 at 14.) Quellos had no opinion as to whether any data was transferred from the laptop to either of these devices or whether any data was transferred to the laptop to these devices. (Id.);

c. From January 8, 2016 at 11:47 a.m. through January 9, 2016 at 9:50 a.m., the laptop downloaded reports relating to Sonrai's customer Progressive from a Sonrai-related web address that could only be accessed by authorized Sonrai personnel with valid login credentials. (Dckt. #335-1 at 174, 177-78.) On January 8, the laptop was connected to Progressive's wireless networks meaning that Romano's laptop was at Progressive's offices while at least part of the download of Sonrai's Progressive reports was occurring. (Id.);

d. A Seagate Backup Plus drive with the serial number NA7RZD8E (“NA7 Seagate) was connected to the laptop on December 13 and December 14, 2015, and February 9, 10, and 11, 2016. (Dckt. #335-1 at 173.);

e. Each time the NA7 Seagate was connected to the laptop, the available space on the drive decreased and the used space increased. (Dckt. #335-1 at 173.) A decrease in the available space on the NA7 Seagate and an increase in the used space indicates that data was added to the device. (Dckt. #385-4 at 11-12, 13-14.);

f. The NA7 Seagate's used space increased by 30GB (gigabytes) between February 10 and February 11, 2016. (Dckt. #335-1 at 173; Dckt. #385-4 at 13-14.);

g. On February 11, 2016, an anti-forensic tool called CleanMyMac was first initiated and last run on the laptop. (Dckt. #335-1 at 173; Dckt. #385-4 at 16, 34.) CleanMyMac's purpose is to remove data, free up space, and improve the performance of the machine. (Dckt. #385-4 at 15.);

*5 h. Between February 10 and February 11, 2016, the amount of used space on the laptop significantly decreased by 236GB and the amount of unused space correspondingly increased. (Dckt. #335-1 at 173.) CleanMyMac could have contributed to the 236GB increase in unused space on the laptop though Quellos could not quantify how much space on the laptop was freed up on account of CleanMyMac. (Dckt. #385-4 at 16.);

i. Through the process of “file carving,”[6] Quellos was able to recover 19GB of data that was previously deleted from the laptop. (Dckt. #335-1 at 174; Dckt. #385-4 at 17.) The recovered data included 23.7MB of Excel file artifacts, 13.2GB of Image file artifacts, 4.61GB of PDF file artifacts, 30.1MB of RTF file artifacts, and 1.2GB of Video file artifacts.[7] (Id.);

j. The investigative reports prepared by DFC show that on February 10 and 11, 2016, Romano used the laptop to access certain Sonrai-related files and documents that were then deleted from the laptop. Those files and documents were then partially recovered through the file carving process. (Dckt. #335-1 at 178); and

k. It is possible that more data was removed from the laptop that was not recoverable. (Dckt. #385-4 at 19.)

E. Romano returned one external hard drive to Sonrai in September 2016

On September 19, 2016, Romano's litigation counsel returned a Seagate Backup Plus drive with the serial number NA5A69XL (“NA5 Seagate”) to Sonrai's counsel. (Dckt. #136-2; Dckt. #164-3.)[8] Romano had previously delivered the NA5 Seagate to Kanabay on or about March 8, 2016. (Dckt. #136-2.) One of Sonrai's attorneys personally reviewed the files on the NA5 Seagate and found many Sonrai documents from 2013 as well as numerous personal items, including Romano's 2012 personal tax return, hundreds of family photographs, numerous school-related items for Romano's children, and music. (Dckt. #137-5.) Sonrai's attorney saw no e-mail correspondence in general, and no e-mail correspondence from 2015 and 2016 in particular, on the NA5 Seagate. (Id.) Sonrai also provided the NA5 Seagate to Forensicon, which created and analyzed a forensic image of the device's hard drive. (Dckt. #137-6 at 2.) Forensicon determined that the NA5 Seagate was first connected to Romano's MAC laptop on August 10, 2013 and that there was no activity on the device between November 1, 2015 and March 5, 2016. (Dckt. #137-6 at 3.)

F. ESI produced by Heil concerning Romano's pre-resignation communications and activities in December 2015

*6 Sonrai, which initially filed this lawsuit against Romano, Geotab, and another defendant in March 2016, did not name Heil as a defendant until it filed its second amended complaint in September 2017. (Dckt. #119.) On November 8, 2017, Sonrai served Heil with a set of document requests and Heil served its written responses on December 15, 2017. Thereafter, Heil applied the ESI discovery protocol that had previously been adopted by the other parties and it asserts – without contradiction – that it produced to Sonrai over 60,000 pages of documents by June 2018. (Dckt. #318 at 3.) Among other things, the e-mails produced by Heil show that in December 2015 Romano was in regular contact with individuals in the waste industry and at Heil regarding his frustration with Sonrai, his anticipated departure from Sonrai, and the potential plans for Romano and Heil to work together in the future.

In particular, the e-mails reveal the following communications:

On December 8, 2015, Heil employee Geoff Apthorp e-mailed another Heil employee Frank Kennedy explaining, “I've been speaking to [Romano] a couple times over the last 2 weeks so I at least got some context but looking forward to your updates.” (Dckt. #335-1 at 141.) Kennedy responded: “Great. Tony is in Chicago for budget meetings. Had a blow up with [Sonrai CEO Chris Flood]. Wings clipped and no communication with [Heil]. I'll fill you in.” (Id. at 140.) Apthorp then asked Kennedy to call Heil CEO Pat Carroll to brief him because “this is urgent based on where we are in the process.” (Id.) Later that day, Kennedy e-mailed Apthorp back stating: “Spoke with [Heil CEO Pat Carroll]. Pat said we'll make sure [Romano] lands on his feet. I'll get a personal email for [Romano] and forward to you both.” (Id. at 138-39.) Carroll later e-mailed Kennedy, stating: “Talked to [Romano]. He is in a good place now.” (Id. at 137.)

On December 9, 2015, Romano created a new personal e-mail address, MSWGIS1@gmail.com and he e-mailed Kennedy and another individual in the waste industry stating:

(Dckt. #335-1 at 146.) Kennedy responded, “Today is the first day of the rest of your twisted life! Great e-mail address, now get a f**king phone.” (Id. at 145.) Later that same day, Kennedy forwarded the new e-mail address to Carroll. (Id. at 137.) Carroll then asked Kennedy if he spoke to Romano that day, to which Kennedy responded:

(Id. at 136.) Carroll responded, “Tony is a good dude. We all want to see him do okay.” (Id.)

On December 10, 2015, Romano e-mailed Carroll regarding his frustration with the ongoing employment and ownership negotiations with Sonrai. He states, in pertinent part:

(Dckt. #335-1 at 150.) Carroll responded the next day (December 11, 2015), and told Romano that:

(Id. at 152.)

Also, on December 11, 2015, Romano responded to Apthorp's December 10 e-mail – in which Apthorp had asserted that “we've got a solid game plan coming together – working it as top priority” – and stated:

(Dckt. #353 at 32.)

On December 17, 2015, Sonrai COO Keizer sent Romano an e-mail in which Keizer explained that he wanted to “set the appropriate expectations” for the parties' upcoming meeting and made clear Sonrai's vision of how the company wanted to move forward with Romano. (Dckt. #353 at 22-23.) That same day, Romano, who was apparently displeased with Sonrai's plan, forwarded to Kennedy the above e-mail from Keizer with a note that Sonrai's executives were “F***ing clowns” and that it was time to “s**t or get off the pot.” (Dckt. #353 at 22.)

Sonrai asserts – without dispute – that none of the above e-mails were produced by Romano or recovered by Quellos during his forensic examination of Romano's laptop. (Dckt. #335 at 8.)

G. DFC's forensic audit of Romano's laptop recovered additional ESI images of Romano's pre-and post-resignation activities

During his forensic examination of Romano's laptop, Quellos used the “file carving” process to recover “artifacts” of additional e-mails that had been sent from or to Romano's laptop from mid-December 2015 through early January 2016 but had been deleted. (Dckt. #335-1 at 174; Dckt. #385-4 at 17.) These recovered e-mails, which notably were not produced by Heil or Romano during discovery, provide the following additional information about Romano's communications and activities during this time period.

*8 On December 17, 2015, Romano forwarded Sonrai COO Keizer's e-mail in which Keizer explained that he wanted to “set the appropriate expectations” for Sonrai's upcoming meeting with Romano to Carroll and Apthorp at Heil and to Don Ross (Sonrai's business contact) and made clear Sonrai's vision of how the company would proceed with Romano going forward. (Dckt. #335-1 at 156, 158-59, 161-62, 163.) Each of these forwarded e-mails included a message of disdain from Romano regarding Sonrai and how the company was dealing with him. (Id.) On December 23, 2015, Romano e-mailed Heil employee Ken Beaver[11] stating, “In case you don't want to contact me via my work e-mail, use this one...” (Dckt. #335-1 at 164.) On January 6, 2016, Romano e-mailed Frank Pellitta, another important Sonrai contact in the waste industry, and told Pellitta to use his g-mail address (mswgis1@gmail.com) “for the time being.” (Dckt. #335-1 at 170.)

The forensic examination also uncovered evidence that on February 9, 2016, Romano – almost one month after he resigned from Sonrai – used the laptop to access Sonrai's database to connect to a Las Vegas vehicle that was run on the Vector system. (Dckt. #385-3 at 12-13; Dckt. #335-1 at 190.) At the time, Romano was in Chattanooga with Heil officials working to develop Heil's “Enhance” product. (Dckt. #385-3 at 12-13.)[12]

II. LEGAL STANDARD

“Spoliation of evidence occurs when one party destroys evidence relevant to an issue in the case,” Smith v. United States, 293 F.3d 984, 988 (7th Cir. 2002), or “fail[s] to preserve property for another's use as evidence in pending or reasonably foreseeable litigation.” TLS Mgmt. & Mktg. Servs. LLC v. Rodriguez-Toledo, Civ. No. 15-2121, 2017 WL 1155743, at *1 (D.P.R. Mar. 27, 2017) (internal quotation marks omitted). Federal Rules of Civil Procedure 37(e) provide the Court authority to sanction a party for the failure to preserve electronically stored evidence (“ESI”).[13] Rule 37(e) “sets out five prerequisites that must be met before any sanctions may be imposed.” Worldpay, US, Inc. v. Haydon, No. 17 CV4179, 2018 WL 5977926, at *3–4 (N.D.Ill. Nov. 14, 2018). In particular:

Id.; Snider, 2017 WL 2973464 at *4. No sanctions may be imposed under Rule 37(e) unless the party seeking relief establishes each one of these prerequisites by a preponderance of the evidence. Worldpay, 2018 WL 5977926, at *4; Snider, 2017 WL 2973464 at *4; Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 776-77 (7th Cir. 2016) (proof by preponderance of the evidence is sufficient to impose sanctions under Rule 37).

*9 When the five prerequisites under Rule 37(e) are met, “the court looks to the prejudice suffered by the party seeking the ESI.” Snider, 2017 WL 2973464 at *5. “To evaluate prejudice, the court must have some evidence regarding the particular nature of the missing ESI.” Id.

Id.; Williams v. Am. Coll. of Educ., Inc., No. 16 CV 11746, 2019 WL 4412801, at *10 (N.D.Ill. Sept. 16, 2019). The choice of an appropriate remedy for spoliation of evidence in violation of Rule 37(e) is committed to the discretion of the trial court and is decided on a case-by-case basis. Franklin v. Howard Brown Health Center, No. 17 CV 8376, 2018 WL 4784668, at *5 (N.D.Ill. Oct. 4, 2018), report and recommendation adopted, 17 CV 8376, 2018 WL 5831995 (N.D.Ill. Nov. 7, 2018).

III. ANALYSIS

A. Sonrai's motion for sanctions against Romano

Sonrai moves for sanctions against Romano pursuant to Rule 37(e) based on its argument that: (1) Romano had a duty to preserve all ESI on his Sonrai-issued laptop, phone, iPad, and electronic drives at the time he deleted the ESI from his laptop and phone and failed to retain the other electronic devices because litigation related to his employment with Sonrai was anticipated; (2) Romano acted in bad faith when he deleted the ESI from his laptop and phone; (3) Sonrai suffered prejudice because the deleted ESI would have supported its breach of fiduciary duty claim against Romano; and (4) the appropriate sanction is the entry of a default judgment, or alternatively, an instruction presuming that the destroyed ESI was unfavorable to Romano.

In response, Romano admits that it is possible that he deleted Sonrai-related ESI prior to his return of his laptop and phone to the company. (Dckt. #385 at 6.)[14] The Court finds it was not only “possible” but “certain” that Romano deleted Sonrai-related ESI from his devices. As explained in Sections I(D) and I(E) above, Quellos recovered Sonrai-related ESI dated from mid-December 2015 through early January 2016 that Romano had deleted from his laptop. Moreover, as explained in Section I(F), Heil produced additional Sonrai-related ESI that was sent to or from Romano on his laptop during December 2015 that was not recovered from his laptop or otherwise produced by Romano in this action.

Despite this, Romano opposes Sonrai's motion for four reasons. In particular, Romano asserts that: (1) he had no duty to preserve ESI on his electronic devices because he neither knew nor should have known that litigation with Sonrai was imminent at the time he deleted the ESI; (2) Sonrai was not prejudiced because it failed to show that he destroyed any relevant ESI; (3) Sonrai failed to show that his deletion of the ESI was done in bad faith because he “inadvertently deleted” the Sonrai-related ESI on his laptop and phone while attempting to “safeguard his personal information” (Dckt. #385 at 6); and (4) the proposed sanction of default is not warranted by the evidence.

*10 As explained below, the Court agrees that Sonrai has shown by a preponderance of the evidence that Romano has violated Rule 37(e) though it agrees with Romano that the proposed sanction of a default judgment is too harsh under the circumstances of this case.

1. Stieper's February 6, 2016 letter to Romano and Kanabay's February 7, 2016 e-mail response on Romano's behalf created a duty for Romano to preserve evidence

It is well-settled that a duty to preserve evidence can arise before litigation actually ensues and Rule 37(e), which applies to ESI “that should have been preserved in the anticipation or conduct of litigation,” expressly contemplates this scenario. See Does 1-5 v. City of Chicago, No. 18 CV 03054, 2019 WL 2994532, at *2 (N.D.Ill. July 9, 2019) (the duty to preserve can be triggered prior to “the filing of a Complaint in a district court”). The inquiry as to whether a duty to preserve exists is “based on the specific circumstances and facts and whether those facts give rise to a reasonable foreseeability that litigation will ensue.” Id. at *2, 4 (citing to Trask-Morton v. Motel 6 Operating L.P., 534 F.3d 672, 681 (7th Cir. 2008)). The Seventh Circuit and other courts have held that “[a] demand letter threatening litigation may trigger the duty to preserve documents within its scope.” Does 1-5, 2019 WL 2994532, at *4 (citing to Trask-Morton, 534 F.3d at 681); In re Ethicon, Inc. Pelvic Repair Sys. Prod. Liab. Litig., 299 F.R.D. 502, 512 (S.D.W.Va. 2014); Stevenson v. City & Cty. of San Francisco, No. C-11-4950 MMC, 2015 WL 6177363, at *4 (N.D.Cal. Oct. 21, 2015).

As explained above in Section I(C), Stieper sent Romano a letter on February 6, 2016 demanding that Romano return all of Sonrai's property in his possession by Sonrai's deadline (February 11) and threatening that Sonrai would bring a lawsuit against Romano as a result of his misappropriation and misuse of Sonrai's property if he did not timely comply. As such, Stieper's letter created a duty for Romano to preserve evidence. See, e.g., Stevenson, 2015 WL 6177363, at *4, quoting In re Napster, Inc. Copyright Litig., 462 F.Supp.2d 1060, 1069 (N.D.Cal. 2006) (“duty to preserve evidence arose when plaintiff's CEO advised defendant that if it did not take certain action, defendant ‘would be sued’ ”).[15]

If this were not enough, Kanabay's e-mail response to Stieper on February 7 confirmed that Romano was “aware of his legal obligations with regard to any confidential information of Sonrai he may possess” and she assured Stieper that the information on the laptop would not be accessed by anyone while in her possession. (Dckt. #335-1 at 669.) The latter statement implied that Sonrai's confidential information would still be on the laptop when it was delivered to Kanabay. Kanabay also threatened Sonrai with litigation by asserting a list of claims that Romano planned to assert against Sonrai. (Id.) In addition, Romano's text exchange with Kanabay on February 10, 2016 indicates that he was taking Sonrai's threats seriously because he was “killing” himself to get the laptop back to Kanabay in time to meet Sonrai's deadline. (Dckt. #335-1 at 672-73.) Thus, it is evident that Romano anticipated that litigation was on the horizon and he had a duty to preserve evidence when he received Stieper's demand letter on February 6, 2016. Does 1-5, 2019 WL 2994532, at *4.

2. Romano should have preserved all relevant ESI on the electronic devices that he had in his possession as of February 6, 2016 yet he failed to take reasonable steps to do so and all of the lost ESI cannot be restored

*11 Once Romano received Stieper's February 6, 2016 letter, he had a duty to preserve all ESI on the electronic devices and drives in his possession that was relevant to reasonably foreseeable litigation between himself and Sonrai. See, e.g., Snider, 2017 WL 2973464, at *4. It is undisputed that Romano had in his possession his laptop, his phone, and the NA7 Seagate drive. It is also undisputed that Romano deliberately destroyed relevant ESI including e-mails and text messages by deleting the ESI from his laptop and phone. Sonrai retained DFC to recover the data that had been deleted, but the forensic examination Quellos conducted was able to recover only a fraction of the data (19GB out of 236GB) that was deleted from the laptop. Quellos also testified that additional data deleted from the laptop may not be recoverable. The Court finds that Sonrai has pursued its options for recovering the deleted ESI by commissioning the forensic examination and seeking to obtain the ESI from other parties through discovery. See Schmalz, 2018 WL 1704109, at *3.

The forensic examination also shows that Romano connected the NA7 Seagate to his laptop between February 10 and February 11, 2016 and that the amount of data on the laptop decreased by 30GB and correspondingly increased by 30GB on the NA7 Seagate (supra, at Section I(D).) This indicates that 30GB of data was transferred from the laptop to the NA7 Seagate. The parties dispute what has become of the NA7 Seagate.

Romano testified that he sent the NA7 Seagate to Kanabay along with the laptop and his phone. (Dckt. #335-1 at 28.) However, the Court finds by a preponderance of the evidence that Romano's testimony on this point is not credible. Romano consulted with Kanabay only regarding the return of the laptop and the phone, he never discussed the NA7 Seagate in the February 10-11, 2016 text exchange he had with Kanabay, and he has no receipt or other documentation indicating that he sent the NA7 Seagate to her. (Dckt. #335-1 at 26, 28, 672-73.) Moreover, Sonrai's COO Keizer testified that he received only the laptop and phone from Kanabay on February 17, 2016. (Dckt. #335-1 at 177.) Keizer took pictures of what he did receive, and there is no apparent reason why he would deny receiving the NA7 Seagate if he had in fact received it given Sonrai's belief that the drive contains ESI that is helpful to its case. Accordingly, the Court further finds that Romano failed to take reasonable steps to preserve the NA7 Seagate and the ESI it contained.

Sonrai also asserts that Romano had a duty to preserve his Sonrai-issued iPad and two other electronic drives (a Kingston USB Flash Drive and a Western Digital My Passport Ultra). However, the Court finds that there is insufficient evidence to show that those devices were in Romano's possession at the time his preservation duty arose on February 6, 2016. In particular, Romano told Keizer that he lost the iPad in November 2015 and the device was not used again until February 25, 2016 – six weeks after Romano resigned – according to the records submitted by Sonrai. (Dckt. #335-1 at 177, 689-717.) Given Sonrai's acknowledgement that the iPad may have been used by whoever found or stole it, (Dckt. #385-2 at 9), there is no definitive proof that Romano had possession of the device after November 2015 and the Court does not find that Romano had a duty to preserve the ESI stored on it. See, e.g., TLS Mgmt., 2017 WL 1155743, at *3 (finding that movant failed to establish that there was a duty to preserve an iPhone where movant failed to offer evidence “clarifying” the time period that the phone was lost). Similarly, the record contains no evidence as to when Romano lost track of the other two drives and Sonrai did not meet its burden of showing that Romano had possession of them on February 6, 2016 when he received Sonrai's demand letter. Accordingly, the Court finds that Sonrai has failed to show that Romano had a duty to preserve the ESI stored on these devices. Id.

3. Romano's destruction of the ESI on his devices prejudiced Sonrai

*12 “Rule 37(e) eliminates the requirement of a culpable state of mind” as a prerequisite for obtaining sanctions and “the [R]ule now focuses on the prejudice to the moving party.” Yoe v. Crescent Sock Co., No. 1:15-CV-3-SKL, 2017 WL 5479932, at *11 (E.D.Tenn. Nov. 14, 2017). Prejudice for purpose of the Rule is determined by the impact that the lost ESI has on a “party's ability to obtain the proofs necessary for its case.” Id. Thus, “ ‘[t]o suffer substantive prejudice due to spoliation of evidence, the lost evidence must prevent the aggrieved party from using evidence essential to its underlying claim.’ ” Does 1-5, 2019 WL 2994532, at *7, quoting Schmalz, 2018 WL 1704109, at *3. Since it is often impossible to know the exact nature of the lost and unrecoverable ESI, the moving party “must only come forward with plausible, concrete suggestions as to what [the destroyed] evidence might have been.” Rodriguez-Toledo, 2017 WL 1155743, at *1 (internal quotation marks omitted; emphasis in original); GN Netcom, Inc. v. Plantronics, Inc., 930 F.3d 76, 83 (3d Cir. 2019) (finding that party established prejudice by plausibly suggesting that deleted e-mails might contain important information to support its claims); Worldpay, 2018 WL 5977926, at *5; Snider, 2017 WL 2973464, at *5.

Sonrai asserts that it suffered prejudice because it would have offered the deleted ESI to show that Romano used Sonrai's secrets and confidential information to breach his fiduciary duty by interfering with Sonrai's business and clients, including Progressive and Heil. (Dckt. #335 at 18.) The Court agrees. For example, Sonrai has evidence that Romano – who resigned from Sonrai on January 11, 2016 – spent almost 24 hours from January 8 through January 9 downloading reports related to Progressive from Sonrai's restricted access website to his laptop (Section I(D).) Keizer testified that Romano had no legitimate business reason to conduct the Progressive download[16] and that Sonrai subsequently lost Progressive as a customer. (Dckt. #335-1 at 177-78.) Indeed, on February 11, 2016, Romano texted Kanabay that “I've landed a whale ... Progressive waste is interested in retaining my services” and Progressive in fact signed up as a client with Romano's new company (Optimum Analytics) twelve days later. (Dckt. #335-1 at 655-58, 672-73.) Sonrai has suffered prejudice because it was unable to recover from the laptop the Progressive reports that Romano downloaded and the communications he had with Progressive officials during the January and February 2016 timeframe before he wiped the laptop and sent it back to Kanabay. See, e.g., Schmalz, 2018 WL 1704109, at *4 (finding prejudice where “[w]ithout the lost text messages, Plaintiff is deprived of the opportunity to know ‘the precise nature and frequency’ of those private communications, which occurred during a critical time period”).

In addition, Sonrai alleges that after Sonrai rejected Heil's efforts to obtain a license over Sonrai's technology, including its Vector system, Heil and Romano moved forward with an alternative plan in which Romano, in breach of his fiduciary duties, would assist Heil in developing a Vector-mimicking product of its own. (Dckt. #402 at 7; Dckt. #119 at 13-16.) Heil entered a consulting agreement with Romano's new company on January 22, 2016. (Dckt. #335-1 at 662-67.)[17] Approximately two weeks later and almost a month after he resigned from Sonrai, Quellos recovered deleted evidence from the laptop showing that Romano accessed Sonrai's database to connect to a vehicle that was run on the Vector system (Section I(G).) At that time, Romano was in the company of Heil officials, who were working to develop a product that – according to Sonrai – was designed to mimic Sonrai's Vector system. (Id.)

*13 Heil has produced some ESI reflecting its communications with Romano in December 2015 and Quellos recovered additional communications during that time frame (Sections I(F) and I(G).)[18] However, ESI reflecting communications between Romano and Heil during the January through mid-February 2016 time frame when Romano wiped his laptop is missing. Any deleted ESI from this critical time frame certainly might have been important to support this aspect of Sonrai's claim.

Finally, the “high degree of animosity” between Romano and Sonrai at the time Romano deleted the information from devices on February 10 – as clearly evident from Romano's e-mail communications in the months prior – provides further support for a finding that the deleted ESI may have been helpful to Sonrai. See Karsch v. Blink Health Ltd., No. 17CV3880VMBCM, 2019 WL 2708125, at *25 (S.D.N.Y. June 20, 2019).

For these reasons, the Court finds that Sonrai has shown by a preponderance of the evidence that it was prejudiced by Romano's deletion of ESI from his electronic devices.

4. Romano deleted the ESI from his laptop and phone with the intent to deprive Sonrai of its use in litigation

Sonrai requests that the Court enter a default judgment against Romano as a sanction for his deletion of the ESI from his laptop and phone and his failure to preserve the NA7 Seagate drive and the ESI that was transferred from the laptop to it. Such a severe sanction cannot be imposed under Rule 37(e) unless the Court finds that Romano acted with the intent to deprive Sonrai of the ESI's use in the litigation. Fed.R.Civ.P. 37(e)(2). To satisfy this standard, the Court must find that Romano destroyed the ESI in “bad faith,” i.e., “ ‘for the purpose of hiding adverse information.’ ” Worldpay, 2018 WL 5977926, at *5, quoting Faas v. Sears, Roebuck & Co., 532 F.3d 633, 644 (7th Cir. 2008); Schmalz, 2018 WL 1704109, at *5 (same). “[I]ntentional destruction and bad faith may be proved inferentially and with circumstantial evidence,” In re Text Messaging Antitrust Litig., 46 F.Supp.3d 788, 798 (N.D.Ill. 2014), aff'd, 782 F.3d 867 (7th Cir. 2015), and this Court “need not leave experience and commonsense at the courthouse door” when making its determination. Franklin, 2018 WL 4784668, at *3 n.3.

Although Romano claims that he did not act in bad faith because he “inadvertently deleted” the Sonrai-related ESI, for the following reasons, the Court finds that Romano acted in bad faith with the intent to deprive Sonrai of the use of the ESI in litigation when he deleted the ESI from his laptop and phone.

First, the evidence shows that Romano deliberately removed and deleted Sonrai-related ESI from his laptop and phone after his duty to preserve evidence arose on February 6, 2016. Romano testified that he deleted personal information from his personal devices and that he did not transfer that information to any external hard drive during his February 10 efforts to clean and scrub devices. (Dckt. #335-1 at 34.) The forensic examination established that Romano transferred 30GB of data to the NA7 Seagate between February 10 and February 11 (Section I(D).) Since Romano admittedly did not transfer his personal data to any electronic drives, the only logical inference is that Romano transferred Sonrai-related ESI to the NA7 Seagate. Furthermore, the Sonrai-related ESI recovered by Quellos, (see Section I(G)), and the separate and distinct batch of Sonrai-related e-mails produced by Heil in discovery, (see Section I(F)), were at one point on Romano's electronic devices but were deleted from the devices by Romano prior to their return to Sonrai.

*14 Second, the Court finds that Romano's claim that he “inadvertently” removed the Sonrai-related ESI from his devices is not credible. Again, since Romano was deleting his personal information, he had to be aware that the ESI he transferred to the NA7 Seagate was not personal information. In addition, Romano certainly knew that he spent 22 hours between January 8 and January 9 downloading Progressive-related reports from a Sonrai web address. Romano was also pursuing Progressive as a client for his fledgling business Optimum Analytics – which he incorporated on January 19, 2016 (Dckt. #335-1 at 660) – and he reported to Kanabay on February 11 that he had “[l]anded a whale. Progressive waste is interested in securing my services.” (Dckt. #335-1 at 675.) In light of these facts, it is highly implausible that Romano would have removed the Progressive reports from his devices on February 10 by accident. Finally, the sheer volume of the data removed from the laptop (236GB) undercuts Romano's professed belief that he was only removing personal data from the devices.

Third, Romano's creation of a new e-mail address and his acquisition of a new phone to facilitate his efforts to communicate with Heil officials without the knowledge of Sonrai while he was still employed by Sonrai in December 2015 is consistent with Sonrai's argument that Romano deliberately deleted the ESI regarding those communications from his devices. (Supra Section I(F).) After all, if Romano did not want Sonrai to know about those communications while they were occurring, he certainly would not have wanted Sonrai to learn of the communications after he received Sonrai's threat to sue him for such activities on February 6, 2016.

Finally, the Court finds that much of Romano's testimony regarding his actions surrounding his deletion of the ESI lacks candor. See Schmalz, 2018 WL 1704109, at *5 (noting that a lack of candor concerning actions is a factor in finding bad faith). In particular:

a. Romano – who admits that no one helped him erase data from his laptop or phone – testified that he does not recall knowing of the existence of software that would enable him to erase data from his laptop or phone in 2015 or purchasing such software (Dckt. #335-1 at 24-2), nor does he recall that two anti-forensic data removal tools (BackBlaze and CleanMyMac) were installed on his laptop in December 2015 and February 2016 (Dckt. #335-1 at 31; supra, Section I(D));

b. Romano testified that no one recommended to him what software to use to erase data but that he did not look on the internet to find software to erase data and he does not remember how he determined what software to use to erase data (Dckt. #335-1 at 26);

c. Although Romano testified that he downloaded data from his laptop to external drives “in the normal course of business,” he does not recall and could not identify any part of his work for Sonrai or A.C.E.S. that required such transfers in December 2015 and February 2016 when he transferred at least 30GB of data to the NA7 Seagate (Dckt. #335-1 at 36, 38);

d. Although he attached one electronic drive to his laptop on December 15, 2015 (a SanDisk Cruzer Glide) and two additional electronic drives to his laptop (namely, a Kingston USB Flash Drive and a Western Digital My Passport Ultra) on New Year's Eve in 2015, he does not know where these drives are, when he last saw them, or what he did with them (Dckt. #335-1 at 31);

e. He was in a “panic” while he was scrubbing and deleting data from his laptop and phone on February 10, 2016 but he testified that he did not know why (Dckt. #335-1 at 34). However, the only apparent reason why he would have been in a panic is because he feared that he might not finish deleting data from his devices in time to get them to the Philadelphia airport so that they could be shipped to Chicago to meet the deadline set by Stieper's February 6 letter (Dckt. #335-1 at 672-74). Romano, quite naturally, did not want to be sued by Sonrai; and

f. Romano scrubbed and wiped personal data from his laptop and phone based on his professed concern of what Sonrai's executives might do with his personal information yet he (through his counsel) voluntarily provided to Sonrai the NA5 Seagate drive, which was filled with his personal items including his 2015 tax return, hundreds of family photographs, and materials concerning his children (Dckt. #335-1 at 34-35; supra, Section I(E).)

*15 All of the above supports a finding that Romano deleted the ESI in an effort to deprive Sonrai of the information in this litigation.

5. Although Romano is subject to sanctions under Rule 37(e)(2), the remedy of a default judgment is not warranted by the record

Romano is subject to sanctions under Rule 37(e)(2) based upon this Court's finding that he acted with the intent to deprive Sonrai of the use of the ESI that he removed from his electronic devices. Under Rule 37(e)(2), the court may presume that the lost information was unfavorable to Romano, may instruct the jury that it may or must presume the information was unfavorable to Romano, or enter a default judgment against him. Sonrai argues that the Court should enter a default judgment against Romano. Romano, not surprisingly, disagrees and argues that the jury should determine the consequences of his pre-suit conduct.

“ ‘The choice of an appropriate remedy for spoliation is confined to the sound discretion of the trial judge and is assessed on a case-by-case basis.’ ” Franklin, 2018 WL 4784668, at 5, quoting Watkins v. New York City Transit Authority, 16 Civ. 4161 (LGS), 2018 WL 895624, at *10 (S.D.N.Y. Feb. 13, 2018); see also Boneck v. City of New Berlin, 22 Fed.Appx. 629, 630 (7th Cir. 2001) (“penalties in litigation should be proportional to the wrongs”). The entry of a default judgment is warranted where “the most critical evidence” is destroyed and the non-responsible party has suffered “irreparable prejudice.” GN Netcom, 930 F.3d at 83 (citing cases).[19] On the other hand, a lesser sanction is appropriate where the destroyed ESI may have helped the non-responsible party prove a piece of its case, but the ESI was “certainly not the ‘sole piece of evidence.’ ” Id., at 84; Nucor, 251 F.R.D. at 201 (spoliation did not support the “extreme sanction of default judgment” where plaintiff still had “considerable evidence” to prove its claim); Top Tobacco, L.P. v. Midwestern Cash & Carry, LLC, No. 11 CV 4460, 2012 WL 4490473, at *3 (N.D.Ill. Aug. 3, 2012), report and recommendation adopted, 2012 WL 4490412 (N.D.Ill. Sept. 27, 2012) (sanction less than dismissal was warranted where spoliation, “while extremely serious” did not render plaintiffs unable to prove their claims); Am. Family Mut. Ins., Co. v. Roth, No. 05 C 3839, 2009 WL 982788, at *14 (N.D.Ill. Feb. 20, 2009) (“Roth's conduct has not made it impossible for American Family to prove its case, and the Roth's perfidy can be dealt with through means other than a default judgment”).

*16 In this case, although Sonrai was prejudiced by Romano's spoliation, the prejudice is not irreparable because Sonrai still has considerable evidence to prove its claims. A passage from Sonrai's memorandum in support of its renewed motion for sanctions illustrates this point. Sonrai, after referencing the ESI produced by Heil and the additional ESI recovered by Quellos, states that:

(Dckt. #335 at 10.) In other words, Sonrai has evidence to prove its claims, though it is certainly possible that there is additional probative evidence that was deleted by Romano and is non-recoverable.

Given this, the Court finds that an adverse inference instruction to the jury under Rule 37(e)(2)(B) would be an appropriate sanction. The circumstances in Nucor Corp. v. Bell, supra, are analogous to this case. In Nucor, the court found that an adverse inference instruction was appropriate given that “the vast amount of information plaintiff knows was transferred from [defendant's] Nucor computer to various other storage media ... [provided] plaintiff [with] sufficient circumstantial evidence to support its argument that defendants misappropriated confidential Nucor information – even if it may not have a reliable list of documents on the destroyed USB device or have all of the information that was on the laptop.” Nucor, 251 F.R.D. at 202. “Adverse-inference instructions were developed on the premise that a party's intentional loss or destruction of evidence to prevent its use in litigation gives rise to a reasonable inference that the evidence was unfavorable to the party responsible for the loss or destruction of the evidence.” Schamlz, 2018 WL 1704109, at *4. Such an instruction is particularly appropriate where, as here, the ESI that Romano deleted from his devices but was recovered (either from Heil in discovery or through forensic examination) is supportive of Sonrai's claims and damaging to Romano.

Sonrai has also sought an award of the attorney's fees and costs that it has incurred in filing this motion. (Dckt. #323 at 3; Dckt. #335 at 24.) Romano did not address Sonrai's fee request in its response. “In addition to any other sanctions expressly contemplated by Rule 37(e), as amended, a court has the discretion to award attorneys' fees and costs to the moving party, to the extent reasonable to address any prejudice caused by the spoliation.” Karsch, 2019 WL 2708125, at *14. The Court in its discretion respectfully recommends that Sonrai receive an award of its reasonable attorney's fees and costs that it has incurred in filing this motion because the Court recommends granting Sonrai's motion for sanctions, Romano has made no response to Sonrai's fee response, and because such an award will help address the prejudice caused by Romano's spoliation and serve to deter future spoliation. See, e.g., Schmalz, 2018 WL 1704109, at *7 (awarding fees and costs based on a violation of Rule 37(e)); Distefano v. Law Offices of Barbara H. Katsos, PC, No. CV112893PKCAKT, 2017 WL 1968278, at *27 (E.D.N.Y. May 11, 2017) (same); Top Tobacco, 2012 WL 4490473, at *3 (awarding fees and costs in connection with the filing of a successful motion for sanctions based on spoliation).[20]

*17 In sum: for the above reasons, the Court recommends that the District Court find that Romano destroyed or lost ESI in violation of Rule 37(e) and that it impose a sanction of instructing the jury that it may or must presume that the information was unfavorable to Romano under Rule 37(e)(2)(B), and award Sonrai the reasonable attorney's fees and costs that it incurred in connection with its renewed motion for sanctions.

B. Sonrai's motion for sanctions against Heil

During his forensic examination of Romano's laptop, Quellos recovered the artifact of a deleted e-mail (hereinafter, the “Romano artifact”) that was dated December 30, 2015 and was “from” Romano's gmail account (Dckt. #335-1 at 166.) The body of the Romano artifact appears as follows:

(Id.) Ken Beaver is a Heil employee. Sonrai asserts that Heil is subject to sanctions because it had a duty to preserve relevant ESI but acted in bad faith by failing to preserve both the Romano artifact and the e-mail string that was referenced therein. Sonrai further asserts that Heil is subject to sanctions even if it never had possession of the Romano artifact and e-mail string because Beaver (Heil's agent) instructed Romano to delete the e-mail string. In its response, Heil asserts that it acted in good faith to produce ESI to Sonrai and it denies that it ever had control of the Romano artifact or the e-mail string. Heil further denies that it had any duty to preserve evidence at the time the Romano artifact and e-mail string were supposedly deleted in December 2015.

As explained below, the Court agrees with Heil and finds that Sonrai has failed to show by the preponderance of the evidence that Heil has violated Rule 37(e).

1. Sonrai has failed to show that Heil ever had control of the Romano artifact and the e-mail chain referenced therein

A party can be held accountable for preserving evidence only to the extent that it has control over the evidence in question. See, e.g., Joseph v. Carnes, 566 Fed.Appx. 530, 535 (7th Cir. 2014), quoting MacNeil Auto. Prods., Ltd. v. Cannon Auto. Ltd., 715 F.Supp.2d 786, 800 (N.D.Ill. 2010) (“ ‘A party has a duty to preserve evidence over which it had control’ ”). Heil asserts that it lacked control over the Romano artifact based on the testimony of Quellos. In particular, Quellos testified that the Romano artifact appeared to be a draft that was maintained in the draft part of the e-mail client and that what was reported in the body of the artifact remained open for editing. (Dckt. #381 at 48, 54.) Quellos further testified that he did not know: (i) who created the text within this artifact; (ii) to whom the artifact was intended to be sent; (iii) whether the artifact was, in fact, sent; and (iv) to whom the artifact was sent (including whether it was ever sent to anyone at Heil). (Dckt. #381 at 48, 54-55.)

Sonrai does not dispute Quellos' testimony. Nonetheless, Sonrai asserts that it is nonetheless possible that Romano “could have” sent a final version of his artifact to Beaver since the “file carving” process Quellos used “does not have 100% success rate.” (Dckt. #396 at 1.) Such speculation, however, is insufficient to meet Sonrai's burden of showing that Heil actually received and had control of the Romano artifact. See, e.g., Bracey v. Grondin, 712 F.3d 1012, 1019 (7th Cir. 2013) (a party's “own speculation” is insufficient to establish spoliation of evidence); Rummery v. Illinois Bell Tel. Co., 250 F.3d 553, 558 (7th Cir. 2001) (same); Flair Airlines, Ltd. v. Gregor, LLC, No. 18 CV 2023, 2018 WL 8445779, at *4 (N.D.Ill. Dec. 14, 2018), report and recommendation adopted, 2019 WL 1465736 (N.D.Ill. Apr. 3, 2019) (finding that “[m]ere speculation” is insufficient to warrant sanctions under Rule 37(e)).

*18 Heil likewise argues that it cannot be held accountable for the deletion of the e-mail string referenced in the Romano artifact because Sonrai has offered no evidence that the e-mail string ever existed on Heil's computer system. Once more the Court agrees. Without evidence of the specific nature of the e-mail string, it is not possible to determine whether the e-mail string originated from (or was ever present on) Heil's computer system. The fact that Romano and Beaver did not avail themselves of the opportunity to explain what the deleted e-mail string said does not establish that Heil ever had control of the string as Sonrai unpersuasively asserts.[21]

2. Sonrai has failed to show that Heil had a duty to preserve evidence in December 2015

Sonrai – citing largely to e-mails produced by Heil during discovery – asserts that by December 30, 2015 (when Beaver allegedly instructed Romano to “delete the string”), “Heil knew or reasonably foresaw that: (a) Romano's actions could lead to litigation with Sonrai and his subsequent employment plans would be material in any such litigation.” (Dckt. #353 at 7.) There is some evidence that Heil was aware in December 2015 of the possibility that litigation might ensue between Romano and Sonrai. In particular, a December 11, 2015 e-mail from Heil's CEO Pat Carroll to Romano expressed Carroll's belief that Sonrai was worried about Romano “competing” against it and possibly doing something with Heil and he asked Romano if he had a non-compete or non-disclosure agreement with Sonrai. (Dckt. #335-1 at 152.)

However, knowledge of the possibility of litigation does not create a duty to preserve evidence. “There is a difference between anticipating or contemplating litigation” – which triggers a duty to preserve – and “the potential for litigation” – which does not. See Bamcor LLC v. Jupiter Aluminum Corp., No. 2:08 CV 194, 2010 WL 11575084, at *3 (N.D.Ind. Feb. 8, 2010); Iowa Ham Canning, Inc. v. Handtmann, Inc., 870 F.Supp. 238, 245 (N.D.Ill. 1994). “Before litigation begins, courts agree that the receipt of a demand letter, a request for evidence preservation, a threat of litigation, or a decision to pursue a claim will trigger the duty to preserve evidence.” In re Ethicon, 299 F.R.D. at 512; Stevenson, 2015 WL 6177353, at *4 (same). Heil had not received a demand letter, request for evidence preservation, or threat of litigation in December 2015 nor had Sonrai communicated a decision to pursue a claim against Romano or Heil. Consequently, the Court finds that Sonrai has failed to show that Heil anticipated litigation within the meaning of Rule 37(e) and Heil had no duty to preserve evidence as of December 2015.

3. Sonrai has failed to show that it suffered any prejudice from the alleged deletion of the e-mail string

Even if Sonrai had presented sufficient evidence to support a finding that Heil had control of the e-mail string and failed to retain the string in violation of its duty to do so, Sonrai has failed to show that it has suffered any prejudice. As stated above in Section III(A)(3), the aggrieved party must offer plausible suggestions as to what the deleted ESI would have established because substantive prejudice is established under Rule 37(e) only when the lost evidence prevents the aggrieved party from using evidence essential to its claim. Here, Sonrai offers no evidence as to what the deleted e-mail string concerned, let alone any proof showing that the string contained evidence essential to its claim.

*19 To the contrary, the evidence in the record concerning the communications between Romano and Beaver on December 30, 2015 address a topic (namely, Romano's prospective application for a visa for travel to India) that Sonrai has not argued has any connection to its claims. In particular, the evidence shows that Romano sent an e-mail with the subject “Fwd: Visa Docs” to a Heil employee named Frank Kennedy at 11:37 a.m. on December 30, 2015. (Dckt. #381 at 66.) The Romano artifact appears to have been created 13 minutes later at 11:50 a.m. (Dckt. #335-1 at 166.) The Romano artifact's reference to Beaver appears to have been created less than an hour later at 12:44 p.m. (Id.) Later that afternoon at 2:37 p.m., Beaver sent to Romano an e-mail with the subject “Visa Docs” that concerned the documents that Romano would need for his Visa application. (Dckt. #381 at 60.) Finally, at 5:37 p.m., Romano sent to Kennedy an e-mail with the subject “Fwd: Visa Docs” that attached documents concerning his visa application. (Id.) This chain of e-mails regarding visa documents weighs against any argument that the deleted thread might include evidence relevant to Sonrai's claims.

Lastly, there is no evidence that Heil has acted in bad faith with respect to its production of ESI in response to Sonrai's requests. Indeed, Heil has fully responded to Sonrai's discovery requests by running ESI searches using the search terms and custodians supplied by Sonrai and producing over 60,000 pages of ESI – including a number of e-mails that Sonrai admits strengthens its claims against both Heil and Romano. (Dckt. #396 at 3.)

In sum: for the above reasons, the Court recommends that the District Court deny Sonrai's motion pursuant to Rule 37(e) for sanctions against Heil.

For the foregoing reasons, this Court recommends that the District Court grant Sonrai's motion for sanctions against Romano and deny Sonrai's motion for sanctions against Heil. Counsel has fourteen (14) days from the date of service of this Court's Report and Recommendation to file objections with the District Court. See Fed.R.Civ.P. 72(b)(2); 28 U.S.C. § 636(b)(1). Failure to timely object constitutes a waiver of the right to appeal. Tumminaro v. Astrue, 671 F.3d 629, 633 (7th Cir. 2011).

ENTERED:

Notably, although Sonrai filed its renewed motion for sanctions against Romano in late 2019, briefing was stayed while the parties completed expert discovery and Sonrai did not file its reply in support of its motion until June 26, 2020. On July 17, 2020, Romano filed a motion seeking leave to file a sur-reply. (Dckt. #414.) The Court hereby grants Romano's motion and it has reviewed and considered Romano's sur-reply in ruling on the motion for sanctions.

The manner in which the parties filed some of the briefs and exhibits related to the motions for sanctions made it somewhat difficult to navigate the record on CM/ECF. For example, Sonrai filed one large 700-page attachment to its memorandum in support of motion for sanctions against Romano, instead of separately designating each exhibit in CM/ECF. For the ease of the District Court and any subsequent reviewer, this Court will cite to the record by designating the CM/ECF docket number and the electronically stamped CM/ECF page number.

As time went on, Romano spent more of his time working for Sonrai. (Dckt. #335-1 at 9.)

Though Sonrai mentioned this letter in its motion for sanctions, it did not submit the letter as an exhibit to that motion, but instead attached it to its reply brief. (Dckt. #402 at 12-13.) This prompted Romano to file a motion for leave to file a sur-reply to address the letter. (Dckt. #414.) Again, to ensure the record is complete, the Court has granted Romano's motion for leave to file a sur-reply and considered Romano's additional arguments.

Although Romano testified at his deposition that he included a Seagate hard drive in the same box he used to send the laptop and cell phone to Kanabay, (Dckt. #335-1 at 29), the Court does not credit his testimony on this point for the reasons stated below. (Infra, at Section III(A)(2).)

When a file is “deleted,” it is not actually deleted from the computer. (Dckt. #385-4 at 17). Instead, although the data is disconnected from the file operating system, the data still exists in unallocated space or unallocated sectors and can potentially be recovered through file carving. (Id.); see Nucor Corp. v. Bell, 251 F.R.D. 191, 198 (D.S.C. 2008). However, data in unallocated space can be overwritten with new data and once “a file is overwritten with new data, it is permanently lost and unrecoverable.” Nucor, 251 F.R.D. at 198; Dckt. #385-4 at 17. Because the computer has permission to overwrite data in unallocated space, a portion of the “data in unallocated space is lost every time a computer is turned on or shut down, when a program is installed or de-installed, when a user runs a program, or virtually any time anything happens on a computer.” Nucor, 251 F.R.D. at 198.

For perspective, “one gigabyte of e-mails is over 100,000 pages of documents, assuming there are not attachments, which is a faulty assumption.” Snider v. Danfoss, No. 15 CV 4748, 2017 WL 2973464, at *2 n.5 (N.D.Ill. July 12, 2017), report and recommendation adopted, No. 15 CV 04748, 2017 WL 3268891 (N.D.Ill. Aug. 1, 2017); Riley v. California, 573 U.S. 373, 394 (2014) (“Sixteen gigabytes translates to millions of pages of text, thousands of pictures, or hundreds of videos.”).

The Court has considered sworn affidavits and other evidence presented by the parties in connection with Sonrai's prior motion for sanctions in resolving the sanctions motions presently before it. See Prudential Insurance Co. of America v. Newman, No. 17 CV 8732, 2019 WL 4750014 at *9 n. 13 (N.D.Ill. Sept. 30, 2019) (noting that a court has a right to take notice of its own records and files).

Don Ross is the Director of Operations for the Tampa-based Kessler Consulting, Inc., which provided consulting services for the waste services contract for Hillsborough County, Florida. (Dckt. #335 at n.1.) Sonrai's largest deployment of technology was in Hillsborough County. (Id.)

“Dennis” refers to Dennis Keizer, Sonrai's Chief Operating Officer.

When Romano later became a consultant to Heil, he reported to Beaver. (Dckt. #335-1 at 47.)

“Enhance” was a Heil internal initiative to measure the total cost of ownership of Heil products. (Dckt. 335-1 at 17-18.) Sonrai asserts that Heil's “Enhance” was designed to mimic its Vector system. (Dckt. #402 at 8.)

Sonrai also argues that the Court can sanction Romano and Heil under its inherent authority. However, Rule 37(e) was amended in 2015 to “foreclose[ ] reliance on inherent authority or state law to determine when certain measures would be used.” Fed. R. Civ. P. 37(e), 2015 Amendment Advisory Committee Notes. Consequently, Rule 37(e) provides the sole authority for potential sanctions concerning the failure to preserve ESI and Sonrai's motions are denied to the extent that they seek sanctions based on this Court's inherent authority. See Snider v. Danfoss, LLC, No. 15 CV 4748, 2017 WL 2973464, at *3 n.8 (N.D.Ill. July 12, 2017), report and recommendation adopted, No.15 CV 4748, 2017 WL 3268891 (N.D.Ill. Aug. 1, 2017); Schmalz v. Vill. of N. Riverside, No. 13 CV 8012, 2018 WL 1704109, at *2 (N.D. Ill. Mar. 23, 2018).

Romano does claim that he “inadvertently deleted” the Sonrai-related ESI (Dckt. #385 at 6) and he also points out that Quellos was unable to determine how much of the 236GB of data that was deleted from the laptop between February 9 and 10, 2016 was personal data as opposed to Sonrai-related data (Dckt. #385-4 at 16.)

Romano asserts that Stieper's letter did not create a duty to preserve because the letter did not mention “preserve,” “preservation,” or “evidence.” (Dckt. #414 at 2.) However, a demand letter which threatens litigation need not contain any particular buzz words to create a duty to preserve evidence. Moreover, Stieper demanded the return of all of Sonrai's property including “patent information and patent pending information, confidential sales, customer and pricing information, proprietary mapping information, process, and other information and property of Sonrai.” (Dckt. #402 at 12.) In order to comply with Stieper's demand, Romano would have had to preserve – and not delete – the ESI on his laptop prior to sending the laptop and electronic devices back to Sonrai.

The fact that Sonrai expected Romano to be present at Progressive for a debriefing meeting prior to the marathon download session does not, as Romano suggests, indicate that the download had a legitimate business purpose pertaining to Sonrai. (Dckt. #385-3 at 9-10.)

Sonrai asserts that Heil was barred from doing business with Romano at this time pursuant to a June 24, 2014 agreement between Sonrai and Heil. (Dckt. #396 at 1, 10.)

Significantly, the fact that Heil has produced ESI sent from Romano's laptop that Quellos did not recover with his forensic examination indicates that Quellos was unable to recover the totality of the relevant ESI that Romano deleted from his laptop.

As Sonrai points out, courts have also entered a dispositive sanction where (1) a party altered, modified, and destroyed thousands of potentially relevant files on his computer immediately after receiving notice that the contents of the files were the subject of litigation and then lied to the court about the date he received notice (Krumwiede v. Brighton Assocs., L.L.C., No. 05 C 3003, 2006 WL 1308629, at *9-10 (N.D.Ill. May 8, 2006): and (2) where a party reinstalled the operating system on his employer-issued laptop with the intent of depriving the employer of the use of the ESI on the laptop after he had been advised to preserve evidence and he repeatedly lied about his actions at his deposition, in his declaration, and at an evidentiary hearing. Williams v. Am. Coll. of Educ., Inc., No. 16 C 11746, 2019 WL 4412801, at *10-14 (N.D.Ill. Sept. 16, 2019). However, these cases are factually distinguishable. Furthermore, the Court notes that the sanction in Krumwiede was decided prior to the 2015 amendment to Rule 37(e), which, “relative to its predecessor, significantly limits a court's discretion to impose sanctions for the loss or destruction of ESI.” Schmalz, 2018 WL 1704109, at *6 (internal quotation marks omitted). The Court further notes that the severe sanction in Williams was based in large part on the court's exercise of its inherent authority to sanction litigation misconduct. Williams, 2019 WL 4412801, at *10-11, 15-16. As pointed out above, supra, at n.12, this Court is relying solely on Rule 37(e) to impose sanctions upon Romano.

Counsel shall confer with consideration to procedures outlined by Local Rule 54.3(d) to determine if they can come to an agreement as to the amount of attorney's fees and costs to be paid. If they are unable to come to an agreement, Sonrai shall submit a fee application with supporting affidavit(s) and contemporaneous billing records on or before February 17, 2021. Romano shall submit its response in opposition by March 3, 2021. No reply is permitted without leave of Court.

The Court also rejects Sonrai's unsupported argument that Heil can be subject to sanctions under Rule 37(e) even if Heil never had control of the Romano artifact and e-mail string simply based upon Beaver's alleged instruction to Romano to “delete the string.” (Dckt. #396 at 2.) While urging others to delete ESI can show bad faith, such action must be coupled with a party's destruction of ESI that a party had a duty to preserve to support an award of sanctions against that party under Rule 37(e). See, e.g., Jenkins v. Woody, No. 3:15CV355, 2017 WL 362475, at *18 n.34 (E.D.Va. Jan. 21, 2017) (sanctions under Rule 37(e) “are most appropriately directed at the party having control over the evidence who had an obligation to preserve it at the time it was destroyed”) (internal quotation marks omitted).