Sekisui America Corp. (Sekisui) (plaintiff) signed a contract to buy American Diagnostica, Inc. (ADI), which was owned by Richard Hart (defendant). Before closing, Sekisui claimed that ADI was not complying with certain representations in the contract involving FDA compliance. Sekisui sent a Notice of Claim to Hart, indicating that Sekisui planned to file suit for breach of contract. The suit was filed several months later. During discovery, Sekisui informed Hart that Sekisui had not implemented a litigation hold until more than 15 months after sending the Notice of Claim. In addition, Sekisui had not notified its information technology (IT) vendor of the litigation hold until about six months after it was put in place. In the interim, Sekisui had deleted the electronically stored information (ESI), including emails, of Hart and Leigh Ayres, an ADI employee. Ayres was involved in ADI’s Food and Drug Administration (FDA) compliance, a subject matter that was in dispute in Sekisui’s breach of contract claim. As a result of the destruction of evidence, Hart requested that a magistrate judge impose sanctions on Sekisui in the form of an adverse-inference jury instruction. The magistrate denied Hart’s request for sanctions, because it found that Hart had not proven prejudice. Hart appealed.