Robert Carmichael v. Separators, Inc.

• Court: Indiana Court of Appeals
• Decided: May 8, 2020
• Docket: 19A-PL-1821
• Status: Published

Opinion

FILED May 08 2020, 8:32 am

CLERK Indiana Supreme Court Court of Appeals and Tax Court

ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE Margaret M. Christensen Christopher C. Murray Andrew M. Pendexter John A. Drake Dentons Bingham Greenebaum, LLP Ogletree Deakins Nash Smoak & Indianapolis, Indiana Stewart, PC Indianapolis, Indiana

IN THE COURT OF APPEALS OF INDIANA

Robert Carmichael, May 8, 2020 Appellant-Defendant, Court of Appeals Case No. 19A-PL-1821 v. Appeal from the Johnson Superior Court Separators, Inc., The Honorable Marla K. Clark, Appellee-Plaintiff. Judge Trial Court Cause No. 41D04-1509-PL-91

Riley, Judge.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 1 of 44 STATEMENT OF THE CASE [1] Appellant-Defendant, Robert Carmichael (Carmichael), appeals following the

trial court’s entry of default judgment and award of exemplary and

compensatory damages against him and his co-defendants, Olice Monday

(Monday) and Centrifuge Supplies, Inc. (CSI), (collectively, the Defendants),1

in favor of Appellee-Plaintiff, Separators, Inc. (Separators).

[2] We affirm.

ISSUES [3] Carmichael presents this court with four issues, which we consolidate and

restate as the following three:

(1) Whether the trial court’s entry of a default judgment against Carmichael and his co-defendants as a sanction for spoliation of evidence in contempt of its discovery orders was clearly erroneous;

(2) Whether the trial court properly denied Carmichael’s motion for summary judgment; and

(3) Whether the trial court’s award of exemplary and compensatory damages was clearly erroneous.

1 The judgments and damages were entered against all the Defendants. Monday and CSI do not participate in this appeal.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 2 of 44 FACTS AND PROCEDURAL HISTORY [4] Separators was founded in 1985 and provides its customers with centrifuge

services, equipment, and parts. Over the course of its corporate existence,

Separators amassed a collection of reference materials pertaining to the

provision and maintenance of centrifuges to its customers (the technical

library). The technical library contained hundreds of original equipment

manufacturer manuals (the manuals), some of which had been modified with

notes regarding specific alterations to Separators’ customers’ centrifuges.

Separators had converted the technical library to an electronic format, a

laborious process that entailed manually scanning thousands of pages of

documents. The technical library was password protected, and Separators did

not allow the general public or its competitors to access it. In addition to the

technical library, Separators stored other types of data on its computer network,

including customer parts lists, customer quotes, and other sales and financial

information. The Separators’ employee handbook provided that employees

were not to copy any of Separators’ data files without the company’s

permission.

[5] From 2005 to 2013, Carmichael was the parts manager for Separators, a job

which entailed interfacing with Separators’ customers on a regular basis.

Separators had hired Monday in 2002, and he became Carmichael’s assistant in

the parts department. Neither Carmichael nor Monday signed a non-compete,

non-solicitation, or confidentiality agreement with Separators. In December

2012, Carmichael formed CSI as a direct competitor to Separators. Carmichael

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 3 of 44 was the president and sole shareholder of CSI. Carmichael formally resigned

from Separators on March 8, 2013. Before he left the company, Carmichael

copied hundreds of manuals from the technical library and subsequently copied

those electronic files onto his CSI computer, all without Separators’ consent.

[6] After Carmichael left, Monday became the manager of Separators’ parts

department. On February 20, 2015, Monday left Separators to begin working

for CSI as its vice president. Before he left Separators, and without the

company’s consent, Monday copied thousands of data files relating to

Separators’ business, including the manuals, sales documents, service parts lists,

and customer quotes, onto a Seagate USB Device (Seagate USB) and a Pockey

USB Device (Pockey USB). On February 23, 2015, Monday’s first day of work

at CSI, Monday downloaded the data from the Seagate and Pockey USBs onto

his CSI computer. Monday had internet-based data backup for his CSI

computer on an ASUS WebStorage account (ASUS account), and he had

another internet-based data storage account with Microsoft OneDrive

(OneDrive account). Carmichael used a Western Digital Passport drive (WDP

drive) to back-up financial data from his CSI computer prior to moving to an

internet-based accounting system.

[7] On September 14, 2015, Separators filed its Verified Complaint for Injunctive

Relief and Damages (Complaint) alleging that the Defendants had copied and

taken “Separators’ files containing proprietary and trade secret information

including, but not limited to, parts lists, customer lists, supplier information,

custom parts drawings, manuals, and financial reports[,]” and thus had

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 4 of 44 “accessed, copied and used a significant portion of Separators’ technical,

commercial, and financial library.” (Appellant’s App. Vol. III, pp. 40, 42).

Separators raised claims of misappropriation of trade secrets pursuant to the

Indiana Uniform Trade Secrets Act (IUTSA) (all Defendants); breach of

fiduciary duty/duty of loyalty and computer trespass (Carmichael and

Monday); and tortious interference with business relationships, unfair

competition, unjust enrichment, conversion, theft, and civil conspiracy (all

Defendants). In conjunction with its Complaint, Separators sought a temporary

restraining order (TRO) on CSI’s unfairly competitive business activities.

Separators also sought orders directing the preservation of evidence within the

Defendants’ possession or control and for expedited discovery.

[8] On September 14, 2015, the trial court issued a TRO that enjoined the

Defendants from using Separators’ trade secrets and confidential information to

compete against Separators. The trial court also issued its Order Preserving

Electronic Evidence (OPEE) that directed the Defendants to

preserve all electronically stored date in their possession, custody, or control relating to Separators, including emails or data that exists or existed (before being deleted) on any computer, laptop, PDA, backup tape, CD, DVD, USB drive, cloud storage, or other media (including all metadata and tags).

(Appellant’s App. Vol. III, p. 157). The trial court ordered the Defendants to

comply with Separators’ expedited discovery requests by September 22, 2015,

and it set a hearing on Separators’ motion for a preliminary injunction for

September 23, 2015.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 5 of 44 [9] On September 14, 2015, Carmichael was personally served with the Complaint,

TRO, and OPEE at 6:00 p.m. Monday was with Carmichael when Carmichael

was served. At 6:03 p.m. on September 14, 2015, approximately 100 files

related to Separators were deleted from the Pockey USB. At 7:10 p.m. on

September 14, 2015, after Monday had been personally served with the same

documents, 1063 items related to Separators were deleted from the Seagate

USB. Sometime after September 14, 2015, Carmichael deleted approximately

twenty emails from his CSI computer that were potentially related to

Separators.

[10] On September 23, 2015, the trial court entered a stipulated preliminary

injunction order (PI) which enjoined the Defendants from

destroying, erasing, or otherwise making unavailable for further proceedings in this matter, any records or documents (data or information maintained in computer media, including Defendants’ personal computers, drives, email, and other media) in Defendants’ possession, custody, or control that were obtained from or derived from any Separators [] documents, data, records, or information.

(Appellant’s App. Vol. III, p. 160). The PI also ordered the Defendants to

produce their computers and electronic data storage devices, which, according

to an agreed inspection order (AIO) entered in conjunction with the PI,

included “any and all devices and media used to store electronic

information[.]” (Appellant’s App. Vol. III, p. 164). These items were to be

produced to computer forensics expert Rebecca Green (Green) for inspection.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 6 of 44 Between September 22, 2015, which was the day before the hearing on

Separators’ motion for a preliminary injunction, and September 24, 2015, the

day that the Defendants’ computers, electronic data storage devices, and media

were to be turned over to Green for inspection, at least 932 files relating to

Separators were deleted from Monday’s CSI computer.

[11] On September 24, 2015, in order to comply with the TRO, OPEE, PI, AIO,

and the trial court’s order granting Separators’ expedited discovery requests

(collectively, the discovery orders), Carmichael and Monday met with Green at

the CSI business premises. While there, Green specifically asked Carmichael

and Monday whether they had any internet-based data storage that was

implicated by the discovery orders. Carmichael and Monday disclosed their

internet-based accounting system and produced their CSI computers and the

Seagate USB, but they failed to produce the WDP drive and failed to disclose

the ASUS and OneDrive accounts. 2 On October 5, 2015, the day before the

Pockey USB was scheduled to be turned over to Green for inspection,

approximately 3000 images were uploaded onto the USB, rendering the

previously-deleted data irretrievable.

[12] As a result of her forensic investigation, Green discovered the deletions from

the Seagate and Pockey USBs and the CSI computers, the existence of the

2 The trial court found that Carmichael also failed to disclose an additional internet-based data storage account at Dropbox, but it does not appear that the trial court relied upon the non-disclosure of that account in its conclusions of law sanctioning the Defendants.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 7 of 44 undisclosed internet-based data storage sites and the WDP drive, and the

overwriting of deleted data by images on the Pockey USB. On February 11,

2016, Separators filed a motion for order to show cause seeking to have the

Defendants held in contempt and sanctioned for violating the discovery orders

by destroying and concealing evidence relevant to its claims. Among its

requests for relief, Separators sought a default judgment against the Defendants

on several of its claims the prosecution of which it alleged had been materially

impeded by the Defendants’ actions.

[13] On March 16, April 26, and May 17, 2016, the trial court held hearings on

Separators’ rule to show cause motion. The Defendants did not dispute that

they had copied Separators’ manuals before leaving the company and had

downloaded the copied data onto CSI computers for their use, but they did

dispute that any data they had taken constituted trade secrets or was proprietary

to Separators. Carmichael admitted that he had deleted emails from his CSI

computer after the discovery orders were entered, which he acknowledged

made it difficult to determine whether the emails were Separators-related.

Monday testified that, immediately upon learning of the lawsuit from

Carmichael and after being personally served with the Complaint himself, he

became anxious and deleted files from his CSI computer. However, Monday

denied having possession of the Seagate and Pockey USBs on September 14,

2015, the day that data had been deleted from those devices. Monday testified

that the Seagate USB had been in the possession of his girlfriend and that the

Pockey USB had been in the possession of his ex-wife, but he also related that

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 8 of 44 he did not inform his girlfriend or his ex-wife of the lawsuit until days after he

was served with the Complaint. Monday further testified that he had met with

his ex-wife on October 5, 2015, to download family photographs from the

Pockey USB before producing it to Separators. Monday could not explain how

the images were overwritten onto the Pockey USB. Neither Monday’s

girlfriend nor his ex-wife testified at the hearings. Green provided expert

testimony regarding her forensic examination and the loss of data from the

Seagate and Pockey USBs and the CSI computers.

[14] On November 8, 2016, the trial court issued its Order finding the Defendants in

contempt. The trial court ruled that the Defendants had “acted in conspiracy

with one another in violating the [c]ourt’s orders” by willfully deleting

information from the Seagate and Pockey USBs and the CSI computers,

attempting to hide the deletion of data on the Pockey USB by overwriting 3000

images onto the device, and failing to disclose the existence of the internet-

based locations of relevant electronic files. (Appellant’s App. Vol. II, p. 83). As

a sanction for these discovery violations, the trial court entered a default

judgment on Separators’ claims of misappropriation of trade secrets, breach of

fiduciary duty/duty of loyalty, computer trespass, theft, conversion, and civil

conspiracy. In addition to entering the default judgment against the

Defendants, the trial court awarded Separators attorneys’ fees and costs for

prosecuting its show-cause motion, and, in order to ensure that the Defendants

did not violate its orders in the future, the trial court ordered that they would be

subject to third-party oversight of their electronic data use for two years. The

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 9 of 44 Defendants did not seek to set aside the default judgment, and the parties

continued to engage in discovery.

[15] On October 31, 2017, Carmichael filed a motion for summary judgment

arguing that Separators’ breach of fiduciary duty/duty of loyalty, computer

trespass, conversion, theft, and civil conspiracy claims were barred by the

applicable two-year statute of limitations. As part of its response, Separators

argued that the entry of the default judgment precluded Carmichael’s motion

for summary judgment. On March 8, 2018, after a hearing, the trial court

denied Carmichael’s motion for summary judgment in an order addressing the

merits of his arguments.

[16] On March 19 through March 22, 2018, the trial court conducted a bench trial

on Separators’ claims for exemplary and compensatory damages. Separators

showed that, in addition to taking the manuals and other technical information

that had been the subject of the discovery sanctions hearing, about two months

before leaving Separators, Carmichael had created a contact list of 203 of

Separators’ clients on his CSI computer, which, immediately after leaving the

company, he had used to target and serve Separators’ customers. Carmichael

had also taken requests for quotes from Separators which he had used to

provide quotes for potential CSI customers. Carmichael and CSI had

immediately begun using the manuals they had taken from Separators and had

continued to use them in their ordinary course of business. CSI had been

immediately profitable, which was highly unusual for a start-up company. By

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 10 of 44 2016, its annual net income was $1.4 million, and, as of April 2017, CSI had

already generated total profits of $3.25 million for the year.

[17] To support its claims for damages, Separators presented the expert testimony of

certified public accountant (CPA) Rodney Crawford (Crawford). Crawford

testified regarding the methods he used to calculate Separators’ lost profits and

the amount lost, which he concluded was $8,680,447. Counsel for the

Defendants cross-examined Crawford on these issues. CPA Daniel Gross

(Gross) provided expert testimony for the Defendants. On the third day of trial,

the trial court excluded evidence of any independent damages calculation done

by Gross because the Defendants had not timely disclosed that opinion

evidence to Separators. Gross’s testimony was limited to a critique of the facts

and assumptions underpinning Crawford’s lost-profits calculations.

[18] The parties engaged in post-trial briefing. In its submission to the trial court,

Separators argued that it was entitled to compensatory damages for lost profits

on its misappropriation of trade secrets, breach of fiduciary duty/duty of

loyalty, computer trespass, conversion, theft, and conspiracy claims in the

amount of $8,680,447. Separators claimed exemplary treble damages pursuant

to the Indiana Crime Victim’s Relief Act (ICVRA), or, in the alternative, an

award of exemplary doubled damages under the IUTSA.

[19] On January 31, 2019, the trial court entered its Order on damages. The trial

court found that CSI could not have obtained its unusual level of success

without the data it had taken from Separators and that less than three percent of

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 11 of 44 its business had come from customers who had not previously been customers

of Separators. The trial court further found that CSI had received a competitive

advantage through its misappropriation of Separators’ data without having to

incur the substantial costs and burdens Separators had. The trial court awarded

Separators $8,680,447 in compensatory damages.

[20] The trial court considered Separators’ request for treble exemplary damages

under the ICVRA. While it found that the Defendants had wrongfully taken

Separators’ property and had attempted to hide that fact by destroying evidence

in violation of its discovery orders, it also found that many of the manuals were

publicly available, it was industry practice for employees to compile technical

information and take it with them as they moved to another employer, the parts

industry was heavily-reliant on relationships, and that Carmichael’s relationship

with some of Separators’ clients had likely enticed them to go to CSI. The trial

court declined to enter treble damages but found that $3,000,000 in exemplary

damages was warranted. The trial court found that, if it were not awarding

damages under the ICVRA, it would have awarded the double damages

Separators sought under the IUTSA, concluding that the Defendants had

engaged in the type of willful and malicious misappropriation required to

recover under the IUTSA. Based on its findings and conclusions, the trial court

entered the following Order:

[T]he [c]ourt hereby awards [Separators] damages as set forth above consisting of compensatory damages in the amount of $8,680,447.00 and exemplary damages pursuant to the [ICVRA] in the amount of $3,000,000.00.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 12 of 44 (Appellant’s App. Vol. II, p. 112).

[21] On March 5, 2019, Carmichael and CSI filed their Motion to Correct Error

pursuant to Trial Rule 59 in which they requested, among other things, that the

trial court vacate its November 8, 2016, default judgement, arguing that the trial

court’s finding that Carmichael and Monday had conspired to violate the trial

court’s discovery orders was a legal impossibility because, as agents of the same

principal, CSI, they could not have been two separate entities who could have

agreed to conspire. Carmichael and CSI later styled their motion as a Motion

to Reconsider. On July 11, 2019, the trial court denied the Motion to Correct

Error/Motion to Reconsider in an Order addressing the merits.

[22] Carmichael now appeals. Additional facts will be provided as necessary.

DISCUSSION AND DECISION I. Standard of Review

[23] Carmichael appeals following the trial court’s entry of special findings of fact

and conclusions of law pursuant to Indiana Trial Rule 52(A). Therefore, we

employ a two-tiered standard of review in which we will affirm if the evidence

supports the findings and the findings support the judgment. Wysocki v. Johnson,

18 N.E.3d 600, 603 (Ind. 2014). When conducting our review, we neither

reweigh the evidence, nor do we reassess the credibility of the witnesses.

Marion Cty. Auditor v. Sawmill Creek, LLC, 964 N.E.2d 213, 216 (Ind. 2012). We

consider the evidence most favorable to the judgment, with all reasonable

inferences drawn in favor of the judgment. Stout v. Underhill, 734 N.E.2d 717,

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 13 of 44 719 (Ind. Ct. App. 2000), trans. denied. We will not set aside the trial court’s

findings or judgment unless they are clearly erroneous. Wysocki, 18 N.E.3d at

603. Findings of fact are clearly erroneous only where they enjoy no factual

support in the record, and a judgment is clearly erroneous if it applies an

incorrect legal standard to properly-found facts. Id.

II. Default Judgment

[24] Carmichael challenges the trial court’s entry of the default judgment against

him and his co-defendants, raising the same intracorporate conspiracy

argument he raised in his Motion to Correct Error. Carmichael also argues that

there was insufficient evidence that he had an agreement with Monday to

violate the discovery orders, his individual conduct alone was inadequate to

support the default judgment, and entry of the default judgment as a sanction

for violating the discovery orders was an abuse of the trial court’s discretion.

We address each of these arguments in turn.

A. Intracorporate Conspiracy

[25] Carmichael argues that the trial court’s finding that he and Monday conspired

to violate the discovery orders was clearly erroneous because a conspiracy

requires two entities to form an agreement, and, as agents of CSI, they were but

one entity. Separators responds that Carmichael’s challenge to the default

judgment is not properly before this court because Carmichael first challenged

the default judgment via an Indiana Trial Rule 59 motion to correct error,

rather than through a TR 60(B) motion to set aside the judgment. Carmichael

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 14 of 44 counters that Separators did not raise its TR 60(B) argument below and,

therefore, it is waived.

[26] We agree with Carmichael. TR 55 governing default judgments provides that

“[a] judgment by default which has been entered may be set aside by the

court for the grounds and in accordance with the provisions of Rule 60(B).”

TR 60(B) motions are used to set aside default judgments entered as a

sanction for discovery violations. See, e.g., Ameristar Casino E. Chicago, LLC v.

Ferrantelli, 120 N.E.3d 1021, 1026 (Ind. Ct. App. 2019) (appeal from denial

of defendant Ameristar’s TR 60(B) motion to set aside default judgment

entered as sanction for discovery violations), trans. denied; Waterfield v.

Waterfield, 61 N.E.3d 314, 331 (Ind. Ct. App. 2016) (noting that the appeal of

a default judgment sanction for discovery violations was taken after the

appellant’s TR 60(B) motion was denied), trans. denied. Be that as it may,

Separators never raised this issue in the proceedings below. It is well-settled

that “[i]ssues not raised at the trial court are waived on appeal.” Cavens v.

Zaberdac, 849 N.E.2d 526, 533 (Ind. 2006) (citing Reemer v. State, 835 N.E.2d

1005, 1007 n.4 (Ind. 2005); Ealy v. State, 685 N.E.2d 1047, 1050 (Ind. 1997)).

We conclude that, by failing to raise its TR 60(B) argument to the trial court,

Separators waived it. See id.

[27] It is equally well-settled, however, that issues raised for the first time in a

motion to correct error are waived. See O’Bryant v. Adams, 123 N.E.3d 689, 694

(Ind. 2019) (finding waiver of an argument presented for the first time in a

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 15 of 44 motion to correct error where O’Bryant failed to establish the argument had not

been available during the original proceedings); Fillmore LLC v. Fillmore Mach. &

Tool Co., 783 N.E.2d 1169, 1179 (Ind. Ct. App. 2003) (issue raised for the first

time in a motion to correct error waived where opposing party had no prior

notice of the issue, it not having been raised in the answer, as a counter-claim or

third-party complaint, in the parties’ agreed entry, or in the proposed findings of

fact and conclusions of law), trans. denied; Babinchak v. Town of Chesterton, 598

N.E.2d 1099, 1103 (Ind. Ct. App. 1992) (argument not raised or considered

before being raised in a motion to correct error was waived). Carmichael’s

intracorporate conspiracy argument was available to him at the commencement

of the instant litigation, but he did not raise it in his Answer to the Complaint,

in his written objection to the rule-to-show-cause motion or its supporting

memorandum, during the three hearings on the show-cause motion, or in his

proposed findings of fact and conclusions of law for the show-cause

proceedings. Indeed, this issue was not raised until after the trial court had

conducted a four-day bench trial on damages, the parties had engaged in post-

trial briefing, and the trial court had entered its Order on damages. The

argument Carmichael presents was not raised by the Defendants until they filed

their March 5, 2019, Motion to Correct Error. We conclude that Carmichael

waived this issue, and inasmuch as the trial court considered it in denying

Carmichael’s Motion to Correct Error, it should not have.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 16 of 44 B. Agreement

[28] The trial court concluded that “Carmichael, Monday, and [CSI] have acted in

conspiracy with one another in violating the [c]ourt’s orders.” (Appellant’s

App. Vol. II, p. 83). Carmichael asserts that the evidence did not support the

trial court’s determination that he and Monday conspired to violate the

discovery orders because there was no evidence of an agreement between them

to do so. As a general principle, “[a] civil conspiracy is a combination of two or

more persons engaging in a concerted action to accomplish an unlawful

purpose, or to accomplish some lawful purpose by unlawful means.” Hardy v.

South Bend Sash & Door Co., Inc., 603 N.E.2d 895, 902 (Ind. Ct. App. 1992).

The elements of an action for civil conspiracy are an object to be accomplished,

a meeting of the minds on the object or course of action, one or more overt acts,

and damages proximately caused by those acts. 16 Am. Jur.2d Conspiracy § 51.

“While an agreement between the parties is a necessary element of civil

conspiracy, such agreement need not extend to all the details of the

conspiratorial scheme.” Id. In addition,

[i]t is not necessary in order to establish a conspiracy that there be direct evidence of an agreement. Rather, a civil conspiracy may be asserted through circumstantial evidence or by averment of isolated or independent facts susceptible of an inference of concurrence of sentiment.

Miller v. Central Ind. Com. Found., 11 N.E.3d 944, 963 (Ind. Ct. App. 2014)

(citations omitted), trans. denied. Because conspiracies are usually formed in

secret and are consequently seldom supported at trial by direct testimony, it is

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 17 of 44 particularly necessary and proper to permit them to be inferred from

circumstances. Smith v. Fiscus, 62 Ind. App. 156, 160, 111 N.E. 203, 204 (Ind.

1916). When multiple parties are found to have conspired to commit civil

contempt, each participant in the conspiracy may be held responsible as a joint

tortfeasor for damages caused by the wrongful or contemptuous acts, regardless

of the degree of active participation. Bottoms v. B&M Coal Corp., 405 N.E.2d 82,

90 (Ind. Ct. App. 1980).

[29] Here, the evidence supported the trials court’s determination that Carmichael

and Monday conspired to violate the trial court’s discovery orders in order to

frustrate Separators’ ability to successfully prosecute its Complaint. The

discovery orders contained clear directives: The Defendants were not to

destroy, or render unavailable, any data relevant to Separators, and they were

to produce all devices and internet-based accounts used to store data related to

Separators. Carmichael and Monday had a long history of working together at

Separators and admittedly removed data from Separators without Separators’

express consent before leaving that company. Carmichael is the president and

sole shareholder of CSI, and Monday is CSI’s vice president. Carmichael and

Monday subsequently uploaded the data they had taken from Separators onto

their CSI computers and into internet-based data storage accounts. Carmichael

was first served with the TRO, OPEE, and the Complaint that named the

Defendants in a suit based on their taking Separators’ data without Separators’

consent. According to Carmichael, Monday was with him at Carmichael’s

home when Carmichael was served. Within three minutes of Carmichael being

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 18 of 44 served, 100 files were deleted from the Pockey USB. The reasonable inference

to be made from these facts and circumstances was that Carmichael and

Monday agreed that part of their efforts to defend the allegations contained in

the Complaint would be to eliminate evidence in their possession that could

prove Separators’ claims. The subsequent deletions of data from the Seagate

USB and the CSI computers, the concealment of the internet-based data storage

accounts and the WDP device, and the overwriting of deleted data on the

Pockey USB were other acts in furtherance of that agreement. In light of this

evidence that Carmichael and Monday had both been named in Separators’

Complaint, they were physically together when the data deletion began, the

suspicious timing of the first deletion from the Pockey USB so quickly after

Carmichael was served with the Complaint, and the subsequent deletions and

overwriting that occurred just before discovery was to be produced, we cannot

conclude that the trial court’s determination that Carmichael and Monday

conspired to violate the discovery orders was clearly erroneous. See Wysocki, 18

N.E.3d at 603.

[30] Carmichael’s sole argument on this point is that a finding of a conspiracy based

on an agreement between him and Monday was “counterintuitive” because

Monday deleted data from the two USBs and his CSI computer and overwrote

images onto the Pockey USB, whereas Carmichael “merely deleted only 20

‘potentially responsive’ emails” from his CSI computer. (Appellant’s Br. p. 25).

Carmichael essentially argues that he could not have agreed to violate the

discovery orders because Monday performed more overt acts than he in

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 19 of 44 furtherance of the conspiracy. This argument is unpersuasive because it

overlooks evidence that Carmichael also failed to disclose the WDP drive and

because crediting his argument would entail us reweighing the evidence

presented to the trial court, which is contrary to our standard of review. See

Marion Cty. Auditor, 964 N.E.2d at 216.

C. Carmichael’s Individual Acts

[31] Carmichael next asserts that his individual acts of deleting his emails and failure

to disclose the WDP drive could not support a finding by the trial court that he

had intentionally violated the discovery orders. This argument is premised on

Carmichael’s contention that Monday’s acts could not be attributed to him as a

co-conspirator. Because we have already concluded that the trial court’s

determination that the Defendants conspired to violate the discovery orders was

not clearly erroneous, we do not address Carmichael’s contention that his

individual acts alone were insufficient to support the entry of the default

judgment.

D. Default Judgment as Sanction

[32] Carmichael next contends that the trial court abused its discretion when it

entered the default judgment against him and his co-defendants after

concluding that they were in contempt of the discovery orders and had

destroyed and hidden evidence. Trial courts have the inherent power to punish

litigants in order to maintain the dignity of the court, secure obedience to

process and rules, rebuke interference with the orderly conduct of business, and

to punish unseemly behavior. City of Gary v. Major, 822 N.E.2d 165, 169 (Ind.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 20 of 44 2005). As part of that inherent power, a trial court may impose sanctions to

protect the discovery process. Noble Cty. v. Rogers, 745 N.E.2d 194, 198 (Ind.

2001). In addition, Indiana Trial Rule 37(B)(2) provides that if a party fails to

obey a discovery order, a trial court “may make such orders in regard to the

failure as are just,” including entering a default judgment against the offending

party. It is within the trial court’s sound discretion to select the appropriate

sanction for discovery violations, and, thus, we review the trial court’s decision

only for an abuse of that discretion. Whitaker v. Becker, 960 N.E.2d 111, 115

(Ind. 2012). “Trial judges stand much closer than an appellate court to the

currents of litigation pending before them, and they have a correspondingly

better sense of which sanctions will adequately protect the litigants in any given

case, without going overboard, while still discouraging gamesmanship in future

litigation.” Id. In addition, “the purpose of sanctioning discovery violations is

not merely to penalize those whose conduct may be deemed to warrant such a

sanction, but to deter those who might be tempted to such conduct in the

absence of such a deterrent.” Id. (quotation and citation omitted).

[33] Here, the trial court determined that Carmichael and Monday had deleted

evidence from the Pockey and Seagate USBs, their CSI computers, including

emails, and had concealed the existence of the WDP device and the internet-

based data storage accounts, thereby engaging in spoliation. See WESCO Dist.,

Inc., v. ArcelorMittal Ind. Harbor LLC, 23 N.E.3d 682, 702 (Ind. Ct. App. 2014)

(“Spoliation of evidence is the intentional destruction, mutilation, alteration, or

concealment of evidence.”), trans. dismissed. Our supreme court has noted that

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 21 of 44 “[c]ourts uniformly condemn spoliation. [I]ntentional destruction of potential

evidence in order to disrupt or defeat another person’s right of recovery is highly

improper and cannot be justified.” Gribben v. Wal-Mart Stores, Inc., 824 N.E.2d

349, 354 (Ind. 2005) (quotation omitted, emphasis added). Our supreme court

has provided the following guidance on the appropriateness of sanctions for

spoliation:

Determining whether sanctions are warranted and, if so, what they should include, requires a court to consider both the spoliating party’s culpability and the level of prejudice to the party seeking discovery. Culpability can range along a continuum from destruction intended to make evidence unavailable in litigation to inadvertent loss of information for reasons unrelated to the litigation. Prejudice can range along a continuum from an inability to prove claims or defenses to little or no impact on the presentation of proof. A court’s response to the loss of evidence depends on both the degree of culpability and the extent of prejudice. Even if there is intentional destruction of potentially relevant evidence, if there is no prejudice to the opposing party, that influences the sanctions consequence. And even if there is an inadvertent loss of evidence but severe prejudice to the opposing party, that too will influence the appropriate response, recognizing that sanctions (as opposed to other remedial steps) require some degree of culpability.

Howard Reg’l Health Sys. v. Gordon, 952 N.E.2d 182, 189-90 (Ind. 2011) (quoting

Rimkus Consulting Grp., Inc. v. Cammarata, 688 F.Supp.2d 598, 613 (S.D. Tex.

2010)). In light of this guidance, we will examine the trial court’s findings and

conclusions regarding the Defendants’ culpability in the spoliation as well as

the prejudice resulting to Separators.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 22 of 44 1. Culpability

[34] The trial court entered the following relevant findings and conclusions

regarding the Defendants’ culpability in the spoliation:

55. The [c]ourt finds that the above-referenced deletions were an attempt by the Defendants to prevent data and other evidence from being discovered in this litigation.

****

87. Based on the facts found above, the [c]ourt concludes that the Defendants have engaged in contempt.

92. The Defendants have failed to meet their burden of showing that their violations of the [c]ourt’s clear orders were not willful. To the contrary, the evidence shows the opposite. The Defendants deleted Separator[s’] data despite having notice [of] the very subject of the lawsuit filed against them concerned what data they had taken and what they had done with it.

96. The Defendants’ actions were deliberate and willfully disregarded the explicit instructions of the [c]ourt’s [discovery orders]. As such, and to prevent further irreparable harm, the Defendants will be held in contempt, and appropriate remedies and sanction will now issue.

97. The [c]ourt finds that the Defendants have engaged in the willful, bad-faith, intentional destruction of evidence.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 23 of 44 98. Separate from the [c]ourt’s express orders, the Defendants were under an obligation to preserve potentially relevant evidence. They did the opposite and intentionally deleted data that they knew might be used to support [Separators’] claims against them.

99. The Defendants’ actions were egregious and were intended to interfere with [Separators’] claims against the Defendants and with the orderly administration of justice by this [c]ourt.

(Appellant’s App. Vol. II, pp. 73, 82-84). The trial court found that the

Defendants should not be permitted to benefit by their destruction of evidence

and that fairness required that default judgment be entered against them.

[35] The evidence showed that despite the clear directives of the trial court’s

discovery orders, the Defendants destroyed and concealed data relevant to

Separators’ claims. The destruction was swift and continuing. The first

deletion from the Pockey USB occurred just three minutes after Carmichael

was served with the Complaint, TRO, and OPEE, and over 1000 additional

files were deleted from the Seagate USB shortly after Monday was served. The

subsequent spoliation occurred just before the Defendants were to produce

evidence relevant to Separators’ discovery requests: Almost 1000 files were

deleted from Monday’s CSI computer between September 22 and September

24, 2015, the date the computer was to be turned over to Green for

examination, and approximately 3000 images were overwritten onto the

Pockey USB on October 5, 2015, the day before it was produced. Carmichael

deleted responsive emails from his CSI computer, and the Defendants also

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 24 of 44 failed to disclose relevant internet-based data storage accounts and the WDP

device. Despite Green’s expert testimony concerning the substance and timing

of the deletions, Monday offered implausible denials of responsibility. For his

part, Carmichael admitted that deleting emails from his CSI computer made it

difficult to discern if they were Separators-related.

[36] Carmichael only challenges his culpability for these actions with the same

arguments we have already found to be unpersuasive elsewhere, namely that

Monday’s spoliation was improperly attributed to Carmichael and that his own

individual conduct was inadequate to support the entry of a default judgment.

However, as a co-conspirator, Carmichael was equally liable for Monday’s acts

of spoliation. See Bottoms, 405 N.E.2d at 90. There is no other reasonable

inference to be made from the substance, timing, multiplicity of these actions

but that Carmichael and Monday sought to frustrate Separators’ ability to prove

its claims. This degree of spoliation represents the apex of the spoliation

culpability continuum and has been strongly condemned by our supreme court.

See Howard Reg’l Health Sys., 952 N.E.2d at 189-90; Gribben, 824 N.E.2d at 354.

While it is the regular practice of trial courts to fashion progressive sanctions

leading up to a dismissal or default judgment when it is possible to do so,

imposing intermediate sanctions is not obligatory when a party’s behavior is

particularly egregious. See Prime Mortgage USA, Inc. v. Nichols, 885 N.E.2d 628,

649-651 (Ind. Ct. App. 2008) (holding that the defendant’s production of a

forged shareholder agreement during discovery merited the sanction of a default

judgment, a sanction that is most often invoked where a party commits perjury

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 25 of 44 or destroys or doctors evidence); Whitaker, 960 N.E.2d at 116-17 (upholding the

entry of default judgment as sanction for car accident plaintiff’s late and

misleading discovery response that he had no planned treatment for his spine

when, in fact, surgery had been planned that would obscure the source of his

claimed injuries); Whitewater Valley Canoe Rental, Inc. v. Bd. of Franklin Cty.

Comm’rs, 507 N.E.2d 1001, 1007-08 (Ind. Ct. App. 1987) (holding that entry of

default judgment against Whitewater was proper where trial court found that it

had either destroyed or failed to produce documents which it had earlier

claimed were too burdensome to produce and had motioned to protect).

[37] We agree with the trial court that Carmichael’s and Monday’s conduct was

egregious and demonstrated a flagrant disregard for the trial court’s discovery

orders and the judicial process. This is precisely the type of discovery

misconduct that should be sanctioned by default so as to discourage other

litigants from attempting it. See Whitaker, 960 N.E.2d at 115. Accordingly, we

find no clear error in the trial court’s findings and conclusions, and we further

conclude that it was within the trial court’s discretion to enter a default

judgment given the high degree of Carmichael’s shared culpability.

2. Prejudice

[38] The trial court’s findings regarding prejudice to Separators concentrated on the

data deletions, as opposed to the concealment of the WDP drive and the

internet-based data storage accounts, and so we will focus our analysis there as

well. The trial court entered findings of fact generally consistent with Green’s

trial testimony. The trial court found that the overwriting of the 3000 image Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 26 of 44 files onto the Pockey USB likely made relevant data forever irretrievable. The

932 files that were deleted from Monday’s CSI computer were not recoverable

beyond the names of the files. Although Green was able to recover the names

of many files that had been deleted from the USBs and the CSI computers,

much relevant evidence had been destroyed, including additional filenames, the

contents of the files, and metadata showing how the files that been used,

transferred, or copied. There may have been additional files relevant to

Separators that had been totally deleted such that Green could not recover the

filenames or even determine how many had been deleted. The trial court

quoted one of Green’s reports and found that the spoliation had “‘certainly

destroyed relevant evidence.’” (Appellant’s App. Vol. II, p. 72).

[39] The trial court entered the additional following relevant findings and

conclusions regarding the prejudice resulting to Separators as a result of the

51. The acts of deleting data from the Pockey USB device, the Seagate USB device, and the [CSI] computers have destroyed evidence potentially relevant in this litigation and hindered the forensic investigation. These actions added layers of complexity that have increased the amount of time and reconstruction efforts required of Green in conducting her forensic investigation. . . .

53. The deletion of evidence described above obstructs Green’s ability to conduct a complete analysis of the electronic storage devices to identify all of the Separators [] data that the Defendants copied and to determine how the Defendants used Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 27 of 44 that data. That deletion therefore interferes with [Separators’] ability to discover those facts and use them to support its claims against the Defendants and interferes with the [c]ourt’s ability to decide these issues.

100. The Defendants’ deletions risk causing substantial prejudice to Separators [] in prosecuting its claims.

102. The Defendants’ deletions and anti-forensic activity have resulted in some data being irretrievably lost.

103. The Defendants’ deletion of data thus impairs Separators [] ability to go to trial on the following claims: [misappropriation of trade secrets, computer trespass, theft, conversion, and breach of fiduciary duty/duty of loyalty].

104. The existing evidence shows that the Defendants copied hundreds or thousands of Separators [] computer files onto [the Pockey and Seagate USBs] and transferred them to [CSI’s] computers. To determine the Defendants’ liability and damages for computer trespass, misappropriation, theft, conversion, and breach of their fiduciary duty and duty of loyalty, this [c]ourt must know what computer files that the Defendants improperly copied and what Defendants did with these computer files.

105. Indeed, the Defendants have already made clear that they intend to defend this lawsuit in part by disputing exactly which type of files they took. For example, the Defendants have argued in their briefing and at the hearings that they took only [the]

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 28 of 44 manuals from Separators [] and they dispute whether such manuals may be treated as Separators[’] property.

106. However, the Defendants’ deletion of many of the electronic files, including the deletion of metadata and the deletion of some files irretrievably and completely, deprives this [c]ourt of evidence showing all of the files that the Defendants copied and of evidence showing when and how the Defendants used those files in operating their new competing business.

(Appellant’s App. Vol. II, pp. 71-72, 84-87) (record citations and footnote

omitted, emphasis in the original).

[40] In assessing whether prejudice resulting from discovery violations merits the

entry of a default judgment, we consider how the violation impacted the non-

violating party’s ability to bring or defend claims. Howard Reg’l Health Sys., 952

N.E.2d at 189-90. In Whitaker, 960 N.E.2d at 114, 117, our supreme court

upheld the trial court’s determination that default was merited where

Whitaker’s obfuscation during discovery about having cervical spine fusion

surgery impacted the only real issue in the case, namely whether his surgery

was prompted by the collision at the base of the lawsuit or by a pre-existing

condition. Similarly, in Prime Mortgage, 885 N.E.2d at 651, we upheld a trial

court’s entry of default judgment against the defendant for submitting a forged

shareholder agreement during discovery because that forgery went to the heart

of the shareholders’ dispute and caused the plaintiff-shareholder to change her

theory of the case. Entry of a default judgment has also been found to be

warranted where discovery violations resulted in difficulty to the opposing party

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 29 of 44 in preparing for trial and additional expense. See Sahara Mart, Inc. v. Ind. Dep’t

Revenue, 114 N.E.3d 36, 50 (Ind. Tax Ct. 2018) (concluding that defendant-

taxpayer’s perjury and witness-tampering in a sales-tax proceeding impeded

trial preparation and caused the Department to expend time and money

gathering and presenting evidence to support its rule-to-show-cause motion).

[41] Here, Carmichael and Monday admitted that they had taken data from

Separators, but they claimed that they had only taken the manuals which they

contended were not trade secrets or proprietary to Separators. Separators

disputed that Carmichael and Monday took only the manuals. It alleged in its

Complaint that the Defendants had taken other materials such as “parts lists,

customer lists, supplier information, custom parts drawings, manuals, and

financial reports[,]” and thus had “accessed, copied and used a significant

portion of Separators’ technical, commercial, and financial library.”

(Appellant’s App. Vol. III, pp. 40, 42). In order to prosecute these claims, it

was essential for Separators to know the totality of the data taken and how it

had been used by the Defendants. Therefore, the trial court’s conclusion that

the partial and complete deletions of data from the USBs and CSI computers

interfered both with Separators’ ability to proceed on its claims and with the

trial court’s ability to decide the case was not clearly erroneous. In addition, as

in Sahara Mart, the spoliation necessitated a forensic investigation by Green,

added layers of complexity to her investigation, and resulted in show-cause

proceedings, causing Separators delay and additional litigation expenses.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 30 of 44 [42] Regarding the issue of prejudice, Carmichael merely argues that any prejudice

flowing to Separators was caused by Monday’s actions which could not be

imputed to him and that his individual conduct caused no prejudice, arguments

we find to be unpersuasive because of the trial court’s finding that he conspired

with Monday. Carmichael also quotes Nagel v. Northern Indiana Public Service

Company, 26 N.E.3d 30, 39 (Ind. Ct. App. 2015), trans. denied, for the

proposition that “[i]n determining the appropriateness of default judgment as a

[] sanction, there is a marked preference in Indiana for deciding disputes on

their merits, especially in cases involving material issues of fact, substantial

amounts of money, or weighty policy determinations.” (Appellant’s Br. p. 50-

51). In support of this argument, Carmichael identifies what he contends were

issues of material fact concerning his defense that the manuals were not trade

secrets or proprietary to Separators. What this argument overlooks is that the

Defendants’ own acts of spoliation rendered the material issues of fact

pertaining to Separators’ claims—what data the Defendants took and how they

used it—incapable of being fully known, and therefore, resolved. We

acknowledge that a substantial amount of money is involved in this case, in

excess of $11,000,000. However, Prime Mortgage illustrates that this court will

uphold the entry of default judgment as a sanction for discovery violations in

cases which involve substantial sums of money where the conduct at issue was

egregious and material prejudice has been shown. 885 N.E.2d at 672

(upholding default judgment entered as a sanction and damages award in

excess of $8,000,000). Carmichael does not identify any weighty policy

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 31 of 44 determinations for us that would render the default judgment entered in this

case inappropriate.

[43] We recognize that Carmichael and Monday were not completely successful in

their spoliation efforts and that Separators was still able to gather some

evidence that large numbers of its manuals as well as some other types of

documents had been taken. Thus, Separators was not entirely precluded from

pursuing its claims. The trial court assessed the degree of prejudice to

Separators, and, together with its findings and conclusions regarding the

Defendants’ culpability, determined that the default judgment was warranted.

This court has observed that “the culpability versus prejudice balancing act,

namely, the prejudice to the non-spoliating party versus the culpability of the

spoliating party, is best left to the trial court.” Northern Ind. Pub. Serv. Co. v.

Aqua Envtl. Container Corp., 102 N.E.3d 290, 304 (Ind. Ct. App. 2018). The trial

court entered findings and conclusions which were supported by the evidence

and which in turn supported its determination that a default judgment was

merited based on the Defendants’ culpability and the prejudice resulting from

their actions. Therefore, we conclude that its determination was not clearly

erroneous. See Wysocki, 18 N.E.3d at 603.

III. Summary Judgment

[44] Carmichael next contends that the trial court erred when it denied his October

31, 2017, motion for summary judgment on Separators’ fiduciary duty/duty of

loyalty, computer trespass, conversion, theft, and civil conspiracy claims in

which he argued that those claims were barred by the applicable two-year

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 32 of 44 statute of limitations. Carmichael did not move for summary judgment on any

claims that were not already subject to the default judgment. Separators

responds that Carmichael improperly moved for summary judgment after the

trial court had entered the default judgment. Therefore, as a threshold issue, we

must determine whether Carmichael’s argument is properly before us.

[45] On March 8, 2018, after a hearing, the trial court denied Carmichael’s summary

judgment motion in an order addressing the merits of his statute of limitations

arguments. In a footnote the trial court observed the following:

The parties disagree about whether Carmichael is entitled to move for summary judgment at this stage of the proceedings, in light of the default judgment entered against him on some of Separators[’] claims. For purposes of this Order, the [c]ourt assumes without deciding that Carmichael’s motion is timely, as his motion fails on the merits. However, language in Prime Mortgage, 885 N.E.2d at 639 seems to suggest otherwise.

(Appellant’s App. Vol. X, p. 144).

[46] On appeal, Carmichael joins the trial court’s suggestion that this court’s

decision in Prime Mortgage provides authority for a litigant to pursue summary

judgment proceedings on claims subject to a default judgment entered as a

sanction for discovery violations. We disagree, given the circumstances of this

case. In Prime Mortgage, plaintiff Nichols, who held a fifty per cent interest in

Prime, filed an action for the appointment of a receiver and the dissolution of

the closely-held corporation when she and the only other shareholder, Law,

were unable to agree on a buyout for Nichols. 885 N.E.2d at 637. Law

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 33 of 44 responded that Nichols did not have a fifty per cent interest in Prime, as he had

issued stock to two other persons pursuant to an agreement he claimed Nichols

had signed which authorized the stock issue. Id. Nichols amended her

Complaint to add a claim of breach of fiduciary duty against Law for allegedly

improperly inducing her to sign the agreement. Id. However, Nichols

subsequently determined through discovery that Law had forged her signature

on the agreement, causing her to file a third amended Complaint alleging the

forgery and seeking treble damages against Law and his co-defendant Prime

pursuant to the ICVRA. Id. at 637-38. The defendants moved for summary

judgment, arguing that the Crime Victims Statute count was barred by the

statute of limitations. Id. at 638. The trial court denied that motion. Id.

Nichols then sought sanctions against the defendants for Law’s submission of

the forged agreement during discovery. Id. The trial court granted Nichols’

sanctions motion, dismissed the defendants’ counterclaims and granted

summary judgment on some, but not all, of Nichols’s claims. Id. The trial

court later entered treble damages in favor of Nichols in excess of $8,000,000.

Id.

[47] On appeal, the Prime Mortgage court considered whether the defendants were

able to appeal the denial of their motion for summary judgment after the trial

court had entered a default judgment against them as a sanction for their

discovery conduct. Id. at 638-39. The Prime Mortgage court concluded that it

was possible because the trial court had not stricken the defendants’ answers

and affirmative defenses upon entering the default judgment. Id. at 639. The

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 34 of 44 court also found it significant that the entire summary judgment proceedings

were concluded before the trial court’s entry of the default judgment. Id. The

court, therefore, addressed the merits of the statute of limitations argument. Id.

[48] Prime Mortgage is distinguishable on its facts from the instant case. Here,

although the trial court did not strike his answer and affirmative defenses in

conjunction with the default judgment, Carmichael did not file his summary

judgment motion until after the trial court had entered its default judgment

sanction, and, thus, the significant procedural rationale set out in Prime

Mortgage is not present here. More importantly, we believe that the nature of a

default judgment entered as a sanction for discovery violations, as opposed to a

default judgment entered for other reasons such as a failure to appear and

answer a complaint, precludes subsequent procedural attacks such as the one

mounted by Carmichael in this case. The trial court was authorized by TR

37(B)(2) to enter default judgment as a sanction for violations of its discovery

orders. We find nothing in TR 37 or indeed in any other Indiana Trial Rule

which would permit a defendant to challenge a discovery violation sanction

through a motion alleging a procedural defense to the underlying claims of the

complaint. Thus, it is of no moment that Separators still had three active

claims, which it subsequently dismissed, and the trial court had not yet entered

final judgment when Carmichael filed his summary judgment motion.

[49] Trial courts are permitted to exercise their contempt powers to promote orderly

discovery and punish discovery violations so that others are not tempted to

engage in like conduct. See City of Gary, 882 N.E.2d at 169; Whitaker, 960

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 35 of 44 N.E.2d at 115. To allow such a procedural attack on a trial court’s sanction

would be to seriously undermine the ability of trial courts to exercise their

contempt powers to further those ends. In reaching our conclusion, we express

no opinion on the availability of summary judgment proceedings following the

entry of default judgment for other reasons. Because we conclude that

Carmichael’s summary judgment arguments are not properly before us, we do

not address them further.

IV. Damages

[50] Carmichael challenges the trial court’s award of exemplary and compensatory

damages. The computation of damages is a matter within the sound discretion

of the trial court. Fischer v. Heymann, 12 N.E.3d 867, 870 (Ind. 2014). Where

the trial court has entered special findings pursuant to TR 52(A) and the issue

on review relates to the award of damages, the award should not be reversed if

it is within the scope of the evidence before the trial court. Int’l Bus. Machs.

Corp. v. State on behalf of Ind. Family & Soc. Servs. Admin., 124 N.E.3d 1187, 1189-

90 (Ind. 2019).

A. Exemplary Damages

[51] Carmichael argues that the trial court improperly awarded exemplary damages

under the IUTSA because the trial court’s findings that he and his co-

defendants acted willfully and maliciously, as required for exemplary damages

under the IUTSA, were unsupported by evidence in the record. However, the

factual premise of Carmichael’s argument is inaccurate. The trial court

awarded exemplary damages under the ICVRA, not the IUTSA. The trial

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 36 of 44 court entered findings indicating that if it were not awarding damages under the

ICVRA, Separators would be entitled to damages under the IUTSA due to the

Defendants’ willful and malicious conduct, but its Order entering “exemplary

damages pursuant to the [ICVRA] in the amount of $3,000,000.00” is clear and

explicit regarding the grounds for the exemplary damages award. (Appellant’s

App. Vol. II, p. 112). Carmichael does not challenge any of the findings and

conclusions supporting the trial court’s award of damages under the ICVRA.

Therefore, we do not address Carmichael’s argument on this issue further.

B. Compensatory Damages

[52] The trial court entered compensatory damages for Separators’ lost profits on its

misappropriation of trade secrets, breach of fiduciary duty/duty of loyalty,

computer trespass, conversion, theft, and civil conspiracy claims. The trial

court entered the following relevant conclusions regarding compensatory

damages:

4. As a general rule, “[t]ort damages do not require absolute certainty” and lost profits need not “be ascertainable with absolute certainty.” Columbus Medical Services Organization, LLC v. Liberty Health Care Corp., 911 N.E.2d 85, 96 (Ind. Ct. App. 2009). The Indiana Court of Appeals “will affirm a damage award for lost profits as long as there [is] some evidence on which to base an award for [the] anticipated profits.” Id. at 97 (internal quotations omitted).

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 37 of 44 19. Separators supported its calculation of its lost profits with the opinion and testimony of an expert witness, [] Crawford, a [CPA].

20. To prepare his lost profit calculations, Crawford analyzed both Separators’ and CSI’s respective financial information and the trend in Separators’ parts sales before and after Carmichael began operating CSI in March 2013. He also identified overlapping customers between the two companies. Crawford determined how much of Separators’ lost sales overlapped with CSI’s gained sales by confirming they involved the same customers. Crawford determined that substantially all of the sales gained by CSI were with prior-Separators customers – in the years 2013-2017 over 90% of CSI’s parts sales were directly to customers that were prior or current Separators customers.

21. To calculate Separators’ lost profits, Crawford started by determining Separators’ lost sales.

22. Crawford calculated Separators’ average annual sales to each customer that it lost to CSI during the period before the customer switched to CSI. Crawford determined that Separators’ historical growth trend was 5.87% based on Separators’ parts sales between 2006 and 2012.

23. Crawford applied that rate to Separators’ average parts sales for each of the overlapping customers to calculate what Separators’ expected sales to those customers would have been from 2013 on. Crawford then subtracted the amount of Separators’ actual sales to the “overlapping” customers from the amount of its expected sales to those customers to determine the amount of Separators’ lost sales to those customers.

24. Following identification of Separators’ lost sales, Crawford applied a profit margin to them. Crawford then determined the

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 38 of 44 appropriate damages period, selecting a period that starts at the date of the wrongful act and continues until operations return to normal. In Crawford’s view, Separators’ operations had still not returned to “normal” as of the date of trial because its parts sales in 2016 were only $3.1 million, whereas in 2012, before Defendants’ misconduct, they were $5.1 million. Crawford therefore calculated damages through the most recent date for which he had financial data.

25. Crawford then calculated Separators’ lost profits by multiplying the lost sales to the overlapping customers by the relevant profit margin.

26. Based on these figures, Crawford determined that Separators suffered lost profits in the amount of $6,804,693.00 through April 2017, with the calculation through trial putting the figure at $8,680,447.00.

27. The Court finds this methodology sound and Crawford’s testimony to be credible.

(Appellant’s App. Vol. II, pp. 101, 104-05). Crawford testified to the facts and

calculations that were summarized in the trial court’s conclusions. In light of

this evidence which supported the trial court’s conclusions, none of which

Carmichael specifically challenges on appeal, we cannot say that the trial

court’s determination of Separators’ compensatory damages for lost profits is

clearly erroneous. See Int’l Bus. Machs. Corp., 124 N.E.3d at 1189-90.

[53] Despite the evidence supporting the trial court’s findings and conclusions,

Carmichael argues that the trial court awarded damages “without allowing

Carmichael a full opportunity to present evidence of Separators’ own causation

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 39 of 44 of its lost profits that it sought to recover as damages.” (Appellant’s Br. p. 62).

Carmichael does not further explain how he was impeded in his effort to

present evidence of Separators’ own culpability in its lost profits. We note that

Carmichael and his co-defendants did not elect to have Gross prepare an

independent damages calculation in time for presentation at trial, Gross offered

expert testimony on behalf of the Defendants, and the Defendants cross-

examined Crawford and Separators’ other witnesses pursuant to their theory of

the case and damages. Accordingly, we find no merit in this argument.

[54] Carmichael also argues that “the trial court’s finding essentially concludes that

CSI’s success was based solely on its use of the [m]anuals, despite ample

undisputed evidence to the contrary.” (Appellant’s Br. p. 62). In support of

this contention, he directs our attention to evidence in the record that he feels

demonstrated that not all of CSI’s success was attributed to its use of the

manuals taken from Separators, such as his pre-existing business relationships

with Separators clients, CSI’s lower overhead and prices, and the fact that he

had no agreement-not-to-compete with Separators. Carmichael contends these

factors should have resulted in some unspecified reduction in Separators’ claim

for damages. We find these arguments unpersuasive for at least two reasons.

Carmichael mischaracterizes the trial court’s findings and conclusions, in that it

did not find that CSI’s success was based solely on its use of the manuals.

Rather, it merely found that CSI “could not have obtained the success it did

without the data that was misappropriated from Separators” which included

not only the manuals but also a client contact list, requests for quotes, and other

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 40 of 44 information. (Appellant’s App. Vol. II, p. 99). In addition, Carmichael’s

arguments are unavailing because they entail our consideration of evidence that

does not support the trial court’s findings and conclusions, and are, therefore,

contrary to our standard of review. See Stout, 734 N.E.2d at 719.

[55] Lastly, Carmichael challenges Crawford’s methodology and the factual bases

for his damages calculations. Carmichael argues that Crawford’s method was

flawed because he erroneously assumed that all of Separators’ clients lost to CSI

would do business with Separators on a yearly basis, all of Separators’ lost

clients did business with CSI because CSI used Separators’ data, and

Separators’ financial losses were exclusively the result of CSI’s illegitimate

competition. Carmichael also contends that Crawford failed to consider a

variety of factors in his computations, including Separators’ high employee

turn-over, Separators’ decline in sales before CSI began competing, CSI’s better

pricing that lured Separators’ customers, the importance of Carmichael’s

established business relationships and expertise, and the fact that Carmichael

had no agreement-not-to-compete with Separators.

[56] In Bowden v. Agnew, 2 N.E.3d 743, 749-50 (Ind. Ct. App. 2014), this court

affirmed the award of compensatory damages where the defendants, the

Bowdens, challenged the basis for plaintiff Agnew’s expert’s calculation of

profits for purposes of a compensatory damages award. Agnew and the

Bowdens had entered into a business venture wherein they agreed to split their

net profits equally. Id. at 745. In order to cover expenses in another, unrelated

business venture, without Agnew’s consent, the Bowdens assigned all of the

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 41 of 44 profits from their venture with Agnew to a third party. Id. at 746. At trial on

Agnew’s claims for, among other things, breach of fiduciary duty and civil

conspiracy, Agnew presented the expert testimony of a CPA to support his

claim to his share of the improperly-assigned profits totaling $1,754,278. Id.

at 747. The Bowdens did not offer any expert testimony but had a

spreadsheet admitted into evidence that showed that the venture had actually

resulted in a net loss. Id. The trial court fully credited the testimony and

damages calculations of Agnew’s CPA and awarded Agnew $1,754,278 in

compensatory damages. Id. On appeal, the Bowdens challenged the trial

court’s damages award, arguing that the CPA had not requisitioned

information from the Bowdens and had excluded entire categories and time

periods of expenses from his profitability calculations. Id. at 749. After

rejecting the Bowden’s argument that the CPA’s opinion had an insufficient

factual basis, the Court found that the Bowdens were essentially challenging

the weight that the trial court should have afforded the CPA’s testimony. Id.

at 750. The Court observed that

[the CPA] was thoroughly cross-examined at trial and steadfastly stood by his calculations. Aware of the challenges asserted by the Bowdens, the trial court expressly found [the CPA’s] testimony credible, explained in detail its reliance on the expert’s calculations, and concluded in part:

66. No particular degree of certainty is required in awarding damages so long as the amount awarded is supported by the evidence and not based merely on

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 42 of 44 speculation or conjecture. JKL Components Corp. v. Insul- Reps, Inc., 596 N.E.2d 945, 954 (Ind. Ct. App. 1992).

67. Plaintiffs have readily met this burden of proof. [The CPA] provided the Court with a detailed report and testimony regarding Agnew's measure of damages. [The CPA’s] measure of damages was supported by the evidence and is neither speculative nor based upon conjecture.

The Bowdens, who have not directly challenged any of the trial court's specific findings or conclusions, have failed to establish that the trial court's reliance on [the CPA’s] expert testimony regarding damages was clearly erroneous.

[57] Like the defendants in Bowden, Carmichael’s challenges essentially assail the

weight that the trial court accorded to Crawford’s expert testimony. However,

Carmichael and his co-defendants thoroughly cross-examined Crawford at trial

regarding his calculations, and they presented all of these same challenges to the

trial court through Gross’s expert testimony. Here, as in Bowden, the trial court

noted that Indiana law did not require absolute certainty in damages

calculations, it specifically found Crawford’s testimony to be credible, and it

cited Crawford’s methods and conclusions in reaching its damages

determination. Accordingly, we find that Carmichael has failed to establish

that the trial court’s findings and conclusions supporting its award of

compensatory damages based on Crawford’s calculations were clearly

erroneous. See id.

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 43 of 44 CONCLUSION [58] Based on the foregoing, we conclude that the trial court’s findings and

conclusions supporting the entry of a default judgment against Carmichael as a

sanction were not clearly erroneous and that Carmichael’s summary judgment

arguments are not properly before us. We also conclude that the trial court’s

awards of exemplary and compensatory damages in favor of Separators were

supported by the evidence and were not clearly erroneous.

[59] Affirmed.

[60] Mathias, J. and Tavitas, J. concur

Court of Appeals of Indiana | Opinion 19A-PL-1821 | May 8, 2020 Page 44 of 44