I. Introduction

*1 Plaintiff Badger Daylighting Corp. alleges its former employee, Shannon Rutherford, stole Badger's confidential information with the intent to use it working for a direct competitor. Before the Court is Badger's motion to compel and for sanctions, which accuses Rutherford of intentionally destroying evidence (including nearly 15,000 emails), delaying the forensic investigation in this matter, and failing to produce an iPhone 12 and USB device as required by the Joint ESI Protocol. [Filing No. 72.] Badger seeks immediate production of those devices and sanctions. In opposing the motion, Rutherford acknowledges she deleted nearly 15,000 emails, but claims they were merely spam/junk emails. Rutherford also represents that she is not in possession of the iPhone 12 or USB device. The evidence shows Rutherford acted with a calculated effort to conceal or destroy evidence when she knew or should have known litigation was pending, and her changing story regarding the location of the missing devices is not persuasive. Accordingly, Badger's motion is well taken and supports an adverse inference as a sanction for Rutherford's conduct and allow Badgers to recover reasonable fees and costs.

II. Background

Rutherford resigned from Badger on April 29, 2024. On April 30, 2024, Rutherford's Badger-owned iPhone was factory reset, without Badger's approval, before she returned this and other Badger-owned devices to Badger. [Filing No. 73-1, at ECF p. 46.] On May 1, 2024, Rutherford began working for Precision Hydrovac, a direct competitor of Badger.

Badger hired forensic examination expert Rebecca Green to review Rutherford's devices and accounts. Following Green's preliminary forensic examination of Rutherford's activity on Badger-owned devices and accounts, Badger allegedly discovered evidence that Rutherford had misappropriated Badger's trade secret information and was in violation of her non-compete and non-solicitation agreements with Badger. Thus, on May 30, 2024, Badger filed a complaint against Rutherford for breach of contract, breach of non-solicitation agreement, breach of noncompetition agreement, breach of fiduciary duties, and misappropriation of Badger's confidential trade secret information. [Filing No. 1.]

The Court required the parties to file an agreed electronically stored information protocol and signed the proposed protective order. [Filing No. 33; Filing No. 34.] On July 3, 2024, the Court acknowledged Badger had ample reason for concern about Rutherford's actions, that Green's investigation suggested a USB device exists, but that if Rutherford truly did not have the device in her custody and control she need not produce something she does not have. [Filing No. 38.] On July 15, 2024, the Court approved the parties’ Joint ESI Protocol and ordered Rutherford to make her personal accounts and devices available for inspection and examination.

On August 22, 2024, Rutherford's prior counsel communicated to Green that they became aware for the first time of a discovery issue. In reviewing ESI batches, former counsel discovered a screenshot of text messages between Rutherford and Precision managing partner Brent Mays dated April 25, 2024, that counsel had never seen. Counsel stated that based on what they knew so far, some April 25, 2024, text messages between Rutherford and Mays were missing from Rutherford's current phones. On August 26, 2024, Badger's counsel and Rutherford's former counsel met and conferred to discuss this issue as well as devices and accounts that had not been made available for inspection and collection, as required by the Joint ESI Protocol. Less than two weeks later, on September 6, 2024, Rutherford's counsel moved to withdraw, and the Court granted that request on September 10, 2024. [Filing Nos. 52-57.]

*2 On September 16, 2024, the Court scheduled a status conference and ordered the parties to submit Local Rule 37-1 statements outlining the discovery dispute. [Filing No. 58.] On September 22, 2024, Badger submitted its statement, which outlined Rutherford's misconduct and failure to comply with her obligations under the Joint ESI Protocol. On September 23, 2024, Rutherford's current counsel filed his appearance. [Filing No. 59.] Between October 1 and 10, 2024, Badger's counsel and Rutherford's new counsel met and conferred to address outstanding discovery issues, deficiencies, and failures to produce, as identified in Green's report.

On October 10, 2024, the Court held a telephonic status conference to address this discovery dispute. During that conference, Rutherford's new counsel reported that he was working to resolve the deficiencies identified in Green's report. Following the hearing, the Court issued an order expressly providing that it “will not tolerate any discovery misconduct by Defendant” and that “[i]f Plaintiff has to file a motion to compel, and Defendant is found to have engaged in discovery misconduct, Defendant would face the imposition of sanctions, including payment of Plaintiff's attorney's fees necessitated by any misconduct.” [Filing No. 64.] The Court ordered Rutherford to resolve all outstanding discovery disputes and granted Badger leave to file a motion to compel if the issues outlined in its statement of dispute were not resolved.

Rutherford failed to heed the Court's warning. Since the Court's October 10, 2024, order, several significant issues remain unresolved, unremedied, and ignored. Thus, on November 27, 2024, Badger filed the underlying motion to compel and for sanctions. [Filing No. 72.] During a telephonic status conference on January 6, 2025, the Court asked the parties whether they desired to have an evidentiary hearing on Plaintiff's pending motion to compel and for sanctions, but neither side believed such a hearing was necessary. [Filing No. 83.]

III. Discussion

Badger claims Rutherford has refused to comply with the Court's directives and the Joint ESI Protocol in this case by: (1) destroying evidence to conceal her actions; (2) engaging in a pattern of delays; and (3) refusing to hand over an iPhone 12 and USB device. While Rutherford claims she has complied with the Court's order and fully supplemented her discovery responses on or before October 24, 2024, Rutherford's evolving explanations attempting to justify her spoliation and delays are neither credible nor persuasive.

A. Destruction of evidence

First, Badger claims that Rutherford has destroyed significant amounts of information stored on her personal devices and accounts. Badger argues Rutherford's actions amount to an intentional, orchestrated attempt to conceal her misconduct. To find sanctions for spoliation are appropriate, the Court must find a party has a duty to preserve evidence because the party knew, or should have known, that litigation was imminent, and the movant demonstrates that the evidence was destroyed in bad faith, with the intent to deprive another party of the information's use in the litigation. Fed. R. Civ. P. 37(e). See, e.g., Bracey v. Grondin, 712 F.3d 1012, 1018-19 (7th Cir. 2013) (“In this circuit, when a party intentionally destroys evidence in bad faith, the judge may instruct the jury to infer the evidence contained incriminatory context. When considering the propriety of such an adverse inference instruction, the crucial element is not that the evidence was destroyed but rather the reason for the destruction. A party destroys a document in bad faith when it does so for the purpose of hiding adverse information.” (Internal citations, quotation marks, and brackets omitted)).

*3 Badger relies on Green's detailed, 60-page forensic examination, which revealed that Rutherford destroyed—that is, personally deleted and rendered unavailable for inspection—nearly 15,000 Yahoo emails, as well as some text messages. Before Rutherford resigned from Badger, she used her Badger-owned laptop to access to a personal Yahoo email account. As a result, Yahoo artifacts were written into the Badger laptop hard drive. The Yahoo artifacts reveal a consistent pattern of more than 20,000 unread messages in her Yahoo email account on March 19, April 3, April 5, and April 12, 2024. [Filing No. 73-1, at ECF p. 47.]

On June 5, 2024 (after Rutherford had resigned from Badger and started working for its competitor Precision, and six days after Badger initiated this federal lawsuit), for reasons unknown, Rutherford used her iPhone 15 to take a picture of her Yahoo email account. Specifically, Rutherford took a photo of the trash folder—as it appeared on a Dell laptop supplied by Precision. At that time, the Yahoo account showed 3,600 emails.[1] On July 1, 2024, Rutherford's former counsel authorized Green's request to download data from the same Yahoo account, but someone cancelled the request on July 2, 2024. Green did not cancel it, and such cancellation can only be made by someone with access to the Yahoo email account. The most reasonable conclusion is that the person who did so must have been Rutherford. On July 21, 2024, after Green finally received access to the Yahoo email account, Green discovered only 5,972 emails in the account.

Rutherford acknowledges she intentionally destroyed about 15,000 Yahoo emails, but she claims that she merely deleted spam/junk emails from her personal email account. [Filing No. 78, at ECF p. 13.] However, Green found that in that time period, Rutherford forwarded what is likely confidential Badger trade secret information to her Yahoo account from her Badger account. Green found evidence in Rutherford's Badger email account that Rutherford forwarded an email from her Badger email to her Yahoo account titled “Fwd: Worley NDA & Pre-Qual (Badger Daylighting)NDA – Venture Global CP2.” When Green tried to find this email in the Yahoo account, it had already been deleted. [Filing No. 79-1, at ECF p. 4.] Due to Rutherford's actions, Green likely cannot recover the deleted emails. [Filing No. 79-1, at ECF p. 4 (“Rutherford's destruction of 15,000 Yahoo emails prohibits Badger from knowing what Badger ESI Rutherford may have accessed while connected to her personal Yahoo email account from Badger's laptop.”).] Why would Rutherford forward a Badger account email to her Yahoo email and then delete it? While Rutherford represents to the Court that this email was just another junk email, the title alone shows otherwise. Worley is a significant, prospective customer of Badger. The only reasonable conclusion is that Rutherford deliberately destroyed the email, along with 15,000 other emails. Now, Badger cannot uncover whether Rutherford sent or forwarded any other confidential information.

Rutherford disputes that she was under any obligation to preserve these emails. However, between April 2024 and June 2024, Rutherford was aware of her duty to preserve any and all evidence that may be relevant to this litigation, evidenced by (1) Rutherford's knowledge and awareness of the confidentiality, non-solicitation, and non-competition agreement she signed through the course of her employment with Badger; (2) the several demand letters she received in May 2024, prior to litigation; and (3) commencement of litigation in late May 2024.

*4 Rutherford also blatantly misrepresents a claim that Badger had “obtained all relevant Yahoo emails prior to litigation.” [Filing No. 78, at ECF p. 15.] Rather, as Green explains, prior to initiating this lawsuit, Badger had access to Rutherford's Badger-owned device and Badger email account. Thus, Badger only had access to some emails Rutherford forwarded to her personal Yahoo account that remained in the Badger email system. However, while employed by Badger, Rutherford could use her Badger devices and account to send emails to her Yahoo account, move emails to her Yahoo account into different folders, and purge emails sent to her Yahoo account. At no point prior to this litigation has Badger ever had access to Rutherford's personal accounts or devices, including the Yahoo email account. This is why Badger requested and received approval to perform forensic examination of those devices. Badger could not determine discrepancies between the accounts until Green obtained access to the Yahoo account. The Yahoo account was a key source for evidentiary records of Rutherford's email activity. Rutherford's mass Yahoo deletions destroyed those records and left a hole in the investigation that cannot be undone, as Badger now cannot confirm or deny the extent of Rutherford's misappropriation of Badger's ESI.

Only after Green's forensic investigation Badger learned: Rutherford used her Badger laptop to access her personal Yahoo account; Rutherford sent Badger information from her Badger account and device to her Yahoo account; Rutherford accessed Badger confidential information while accessing her Yahoo account on her Badger laptop; Rutherford deleted 15,000 emails from her Yahoo account, which cannot be recovered; and Rutherford has been accessing her Yahoo account since this litigation commenced. Rutherford did not disclose these facts voluntarily. Rutherford's intentional deletion of 15,000 emails renders it impossible to discern the full context of the destroyed evidence, but the evidence available easily undermines Rutherford's credibility in claiming she merely deleted junk/spam emails. Rather, the appropriate inference is Badger used her Yahoo account to facilitate misappropriation of confidential Badger information.

This is not the first time Rutherford has destroyed evidence. As noted, on August 22, 2024, Rutherford's prior counsel discovered never-before-seen text messages between Rutherford and Precision manager partner Brent Mays while reviewing batches of information produced from Green's investigation. At that time, Rutherford's former counsel conceded this was evidence that some April 25, 2024, text messages between Rutherford and Mays were missing from Rutherford's current phone. Roughly two weeks later, Rutherford's counsel moved to withdraw, stating there had been “a change in circumstances which has altered counsel's ability to continue [his/her] representation of Shannon Rutherford in this matter.” [Filing No. 54; Filing No. 55; Filing No. 56.] While Rutherford's prior counsel appropriately left their reason for withdrawing vague, the timing and circumstances of their withdrawal motions suggest counsel did so because Rutherford had not been forthcoming and there were ESI-related concerns. Rutherford now claims that when she was notified of this litigation, she provided screenshots of the texts with Mays to her counsel and then deleted the screenshots from her camera roll. Rutherford's explanation is inconsistent with her former counsel's representations to Badger. If there was such a simple explanation for the deletion and subsequent discovery, counsel would have advised Badger.

In fact, Rutherford's explanation is implausible. Rutherford claims she took a screenshot of the message, deleted it believing it had been shared, and that this action “would appear obvious given that the text was produced through the ESI collection, specifically Batch 23, of Rutherford's phone.” [Filing No. 78, at ECF p. 15.] Mysteriously, the only message Rutherford happened to screenshot and delete, and which later appeared in Green's forensic examination for the first time, was the very message between her and a competitor, in which she asks Mays how much they pay their operators, advising them that she had someone in mind that “would definitely be an asset.” And Mays responded, “I'd love to meet them!!” [Filing No. 73, at ECF p. 9.] The text messages continue, with Rutherford stating that she has been calling “Customers telling them that [she's] making the move,” and some asked whether she will bring operators from Badger to Precision. [Filing No. 73, at ECF p. 9.] The only reasonable inference to draw is that Rutherford intentionally deleted these messages.

*5 Rutherford's efforts to destroy and conceal evidence of her misconduct can be traced back even further, to the day she resigned. On that day, Rutherford reset her Badger iPhone, preventing Badger from recovering evidence of her wrongdoing. Green's investigation revealed on July 2023, Rutherford sent a text message to her former co-worker, Libby Kircher, advising her to “get as many contacts out of your phone before turning in your notice share the contact with your personal phone and ... reset your work phone back to factory settings so they can't go into your messages[.]” [Filing No. 73-1, at ECF p. 6.] On April 26, 2024, Rutherford told Kircher she was going to work for Precision, stating “I'm about to take all the Entergy work from [Badger]. I mean every bit of it.” [Filing No. 73-1, at ECF p. 11.] She also sought advice on resetting her devices to factory settings before returning to Badger. [Filing No. 73-1, at ECF p. 11.]

Rutherford now attempts to argue that Badger's own policies permit her and other employees to reset their devices upon resignation, [Filing No. 78, at ECF p. 16], but her attempt to stretch and extrapolate Badger's policies finds no support in any plain term or provision. The policy in question permits Rutherford to dispose of her personal information from a Badger-owned phone; it does not authorize the destruction of Badger's electronically stored information. Rutherford intentionally chose to do a factor reset, rather than systematically just deleting her personal information. Thus, she made a choice to destroy Badger's ESI (and advised others to do the same). As a result, Rutherford destroyed call logs, text messages, travel and location data, cloud storage artifacts, photographs, and additional ESI from her Badger iPhone. [Filing No. 79-1, at ECF p. 12-13.] The consequences of such actions, and prejudice to Badger, are obvious.

B. Pattern of delay

Second, Badger accuses Rutherford of a pattern of delay, as it has been over four months since the forensic examination began, and it is still not complete because of Rutherford's attempts to delay the process. Badger acknowledges that no lawsuit is free of delay, and some delay is understandable. However, Badger argues that Rutherford's actions fall outside the norm. Rutherford has manufactured delay at every turn in relation to Green's forensic investigation and with respect to identifying devices and providing access.

For instance, Green discovered that on June 14, 2024, Rutherford recovered her Google account, but she did not disclose any Google accounts to Green on July 17, 2024, as required by the Joint ESI Protocol. Green asked Rutherford's former counsel about Google artifacts found on July 26, 2024, and her former counsel stated on July 29, 2024, that Rutherford was not aware of and did not use any Google accounts. [Filing No. 73-1, at ECF p. 19.] Green's prior counsel stated on August 26, 2024, that the Google account was not one that Rutherford recognized. However, the following day, Rutherford used the Google account to order Texas Roadhouse. [Filing No. 73-1, at ECF p. 20-21.] Access to this account was withheld from Green until October 30, 2024. At that time, Green's forensic examination revealed that Rutherford recovered the Google account in question on June 14, 2024, and had been actively using it. Green also found the account in use, likely from Rutherford's iPhone 15, on both dates Rutherford's former counsel reported that Rutherford had no knowledge of the account.

Green further details two Samsung phones, the first of which Rutherford's former counsel stated was temporarily first used as a personal phone, and then to do work for Precision while her iPhone was out of possession for the forensic review. Former counsel stated that Rutherford purchased the second Samsung shortly after she realized she had failed to keep contacts from transferring to the first, but she did not complete the activation process on the second phone. Counsel treated both devices as potentially responsive. [Filing No. 73-1, at ECF p. 22.] After Rutherford's former counsel withdrew, Green reached out to Rutherford directly on September 15, 2024, asking her to ship the Samsung devices for forensic imaging. Rutherford at first indicated she could only locate one phone, but after much back and forth, Green received the devices on October 11 and 22, 2024.

*6 On October 4 and 8, 2024, Rutherford's new counsel sent Green emails providing usernames and passwords for some of the outstanding demands in Badger's September 22, 2024, statement of dispute. Green tested the provided information on October 18, 2024, and found all the account or password information provided in those communications to be incorrect, which included two Google accounts, as well as TikTok, Instagram, and SnapChat accounts. [Filing No. 37-1, at ECF p. 23.] On October 22, 2024, Green received another email from Rutherford's counsel with more incorrect account login and passwords; counsel attributed the issue to typos. Green ultimately gained access to these accounts between October 27 and November 1, 2024.

Rutherford failed to disclose she had an iCloud account. Green discovered that account on July 24, 2024. Green immediately requested access, but it took nearly a month for Rutherford to provide correct login credentials. Green finally connected to the account on August 22, 2024, during which time she discovered the presence of a backup for an Apple iPhone 12. Green immediately requested access to that. Rutherford provided incorrect login credentials multiple times, until Green finally got access on October 30, 2024. Previous login attempts between August 27 and October 30 required a device PIN; however, at the time Green eventually gained access on October 30, she was not prompted for a device PIN, indicating Rutherford (or her husband) changed the account in that time period.

Rutherford's attempts to minimize the nature, scope, and significance of her delay are not persuasive. And while these delays, standing alone, might not justify granting Badger's motion, Rutherford's pattern of delay, combined with her intentional destruction of evidence and her ever-evolving story about the location of a device, described below, warrant sanctions and an adverse inference.

C. Failure to produce devices

Finally, Rutherford has failed to produce to Green for inspection an iPhone 12 she used while at Badger and a SanDisk USB device she inserted into her Badger laptop. The Court ordered Rutherford to provide, by July 17, 2024, counsel and Green a list of all the accounts and devices she had used since January 1, 2023. [Filing No 39-1, at ECF p. 3.] Green discovered Rutherford failed to produce, among others, the iPhone 12 and USB device. Badger argues that the iPhone 12 in particular is highly relevant because Green discovered evidence indicating Rutherford has used this device to harvest and store Badger's confidential information. Green only discovered this after she found an iCloud backup for an iPhone 12 on August 22, 2024, following her receipt of access to Rutherford's previously undisclosed iCloud account. On October 10, 2024, this Court ordered Rutherford to fully comply with her obligations under the Joint ESI Protocol without further delay. Rutherford still has not produced these devices and remains out of compliance with the Court's order. Rutherford's refusal to produce this device for inspection has prejudiced Badger's ability to fully present its claims and damages.

Rutherford claims that she cannot produce the iPhone 12 because she cannot locate it. Rutherford has provided multiple alleged whereabouts: it was supposedly traded in for the iPhone 15; it was thrown away; it was possibly at a lake house; it was possibly on the third floor of her primary home; it was possibly picked up by someone's child; and, most recently, her twins used and lost it. Green's investigation revealed that Rutherford has been using the iPhone 12 since this litigation commenced. On June 18, 2024, metadata showed a live photo was created of a web search related to “Indiana Non-Competition Law,” and a result narrative providing “Not enforceable to any extent.” [Filing No. 73-1, at ECF p. 55-59.] Rutherford's current story that she failed to locate the iPhone 12 because her nine-year-old twins got ahold of it is only mere conjecture. Rutherford's refusal to produce the iPhone 12 for inspection—and her ever-changing stories about its whereabouts—are a blatant violation of this Court's orders. The only reasonable inference is that Rutherford used the iPhone 12 to store and share Badger-owned information in a manner harmful to Badger's interests and to solicit Badger's customers for work at a competitor.

*7 The same is true for the USB device. Green's examination to date reveals that Rutherford was the only individual who could have inserted this device into her Badger-owned computer. There is no evidence any other Badger employee ever had possession or access to her Badger-owned computer at the time the device was inserted. Rutherford stated that she would take business from Badger, and the evidence indicates Rutherford accessed and used Badger's information while working for a competitor as promised. The only person that had access to and who occupied the laptop during the time the USB was inserted into the laptop was Rutherford.

Rutherford argues that because Badger accessed and downloaded the iCloud backup for both Rutherford's iPhone 15 and the iPhone12 in question, there can be no prejudice to Badger even if the iPhone is never able to be produced. [Filing No. 78, at ECF p. 23.] The iCloud backup for the device was only discovered due to Green's diligent examination. Badger has demonstrated the prejudice from Rutherford's failure to fulfill her obligation to produce the physical iPhone 12 device. Rutherford mischaracterizes an iCloud backup as something that can sufficiently stand in for the physical device. Badger and Green disagree, with Green explaining that “[c]omparing a Device's iCloud backup to the Device is like comparing applies to oranges because the iCloud does not negate or resolve the significant problems caused by the missing iPhone.” [Filing No. 79-1.] Relatedly, Badger's counsel stated during the January 6, 2025, telephonic status conference with the undersigned that Badger has no way of knowing if the iCloud backup contains all the information that was stored on the iPhone 12 without Green receiving the physical device and examining it. Badger has gone through incredible amounts of expense in hiring and relying on Green to conduct all her examinations and to gain the access that has been achieved.

It is not for Badger to speculate about what other evidence may be on Rutherford's iPhone 12 device or where the USB may be located. Rather, it is Rutherford's obligation to produce these devices for Badger to search and collect all responsive information. Rutherford's latest claim that her twins got ahold of the iPhone is neither helpful nor believable, and her failure to locate the iPhone and USB device is just another example of her disregard for Court-ordered obligations. Thus, these actions support granting Badger's request for sanctions.

IV. Conclusion

For these reasons, Badger's motion to compel and for sanctions [Filing No. 72] should be granted in part such that the Court should draw a negative inference from Rutherford's spoliation of evidence, intentional destruction and delay, and failure to produce all devices. Because the parties (and the Court) will never know what they do not know, it is impossible to say with certainty what information Rutherford deleted. Thus, the extreme sanction of entry of default judgment is not appropriate. However, an adverse inference in Badger's favor is proper. Should this case proceed to trial, the jury should be instructed to infer that the emails Rutherford deleted and the devices she failed to produce contained information that would have been adverse to Rutherford's position. In addition, Rutherford should pay for Badger's reasonable costs and fees because of her misconduct.

Any objection to the Magistrate Judge's Report and Recommendation shall be filed with the Clerk in accordance with 28 U.S.C. § 636(b)(1). Failure to file timely objections within fourteen days after service shall constitute waiver of subsequent review absent a showing of good cause for such failure. After the time to file any objection has passed, the Court should advise Badger that it can file a motion for fees and costs.