Litigation Holds Explained: How Businesses Must Preserve Evidence Before a Lawsuit

When a business senses that litigation is on the horizon — whether a lawsuit has been filed, threatened, or simply becomes reasonably foreseeable — a legal obligation immediately kicks in. The company must preserve all potentially relevant documents, communications, and data. This obligation is known as a litigation hold, and ignoring it can have consequences far more damaging than the underlying lawsuit itself.

Courts take evidence destruction seriously. When a party fails to preserve evidence it was obligated to keep, judges have the authority to sanction that party in ways that can effectively determine the outcome of the case. Understanding what a litigation hold is, when it triggers, and how to execute one properly is not just a litigation task — it is a core business risk management function.

What Is a Litigation Hold?

Definition and Scope

A litigation hold, sometimes called a legal hold or preservation order, is a directive to suspend normal document retention and destruction policies and preserve all materials that may be relevant to anticipated or actual litigation. The hold applies to documents in every format — emails, text messages, contracts, financial records, spreadsheets, voicemails, chat logs, and any other information that might be relevant to the dispute.

Electronically Stored Information

The hold is not just about paper documents sitting in a filing cabinet. Modern businesses generate enormous amounts of electronically stored information, commonly called ESI. Emails on company servers, files stored in cloud platforms, messages sent through workplace tools, and data on mobile devices all fall within the scope of a litigation hold. Many companies discover during litigation that their document management practices were far less organized than they believed.

When Does the Obligation Trigger?

The Reasonably Foreseeable Standard

The obligation to preserve evidence does not begin when a lawsuit is filed. It begins when litigation becomes reasonably foreseeable. Courts have interpreted this standard broadly. A threatening letter from an attorney, a demand for payment with a reference to legal action, a regulatory investigation, or even a heated dispute that a reasonable person would expect to end in court can all trigger the preservation duty.

Why You Cannot Wait for a Complaint to Be Filed

By the time a complaint is filed and served, the window for preserving certain categories of evidence may have already passed. Emails get deleted. Employees leave. Servers are wiped. Acting quickly when litigation becomes foreseeable is essential. The obligation also applies even when you believe you will win the case — a party that destroys evidence because it thinks the evidence is irrelevant has still violated its preservation duty.

What Happens When Evidence Is Destroyed?

Spoliation and Its Consequences

Spoliation is the legal term for failing to preserve evidence when there was a duty to do so. At the less severe end, courts may issue an adverse inference instruction, telling the jury that it may presume the destroyed evidence was unfavorable to the party that destroyed it. In practical terms, this can be devastating — if a court tells jurors they can assume missing emails supported the plaintiff’s case, that presumption may be impossible to overcome.

More Severe Sanctions

More severe sanctions include striking claims or defenses, entering default judgment against the offending party, or ordering that certain facts be deemed established. Courts have also imposed substantial monetary sanctions and ordered payment of the opposing party’s attorneys’ fees. In extreme cases involving intentional bad-faith destruction, criminal contempt referrals are possible.

How to Implement a Litigation Hold

Identifying Custodians

A litigation hold begins with identifying the people most likely to have relevant documents and communications. In a contract dispute, custodians typically include the employees who negotiated the deal, those who performed under it, and managers who oversaw the relationship. In an employment dispute, HR personnel, direct supervisors, and the relevant employees are obvious starting points.

Issuing Written Notice

Once custodians are identified, they should receive written notice immediately. The notice should explain in plain language that litigation is anticipated, that they are required to preserve all documents and communications related to the matter, and that normal deletion schedules are suspended. The notice should be specific enough that employees understand what types of documents are covered.

Coordinating with IT

IT departments play a critical role in litigation holds. Automatic email deletion policies, routine data backup overwriting, and scheduled server cleanups can all destroy evidence inadvertently unless IT is informed and takes specific steps to suspend those processes. A litigation hold that covers employees but fails to coordinate with IT is dangerously incomplete.

Monitoring and Updating the Hold

Document everything about the hold. Keep records of who was notified, when, and what they were told. Periodically remind custodians of their preservation obligations, especially in long-running disputes. As the litigation develops and the scope of relevant issues becomes clearer, reassess whether additional custodians need to be added.

Building a Litigation Hold Policy Before You Need It

Proactive Policy Development

The best time to develop a litigation hold procedure is before any dispute arises. Companies that have written policies, clear chains of notification, and trained employees are far better positioned to execute a hold quickly and effectively. The policy should define who is responsible for issuing holds, how custodians are identified, how IT is notified, and how compliance is monitored.

The Role of Outside Counsel

Outside counsel should be involved in developing this policy and in executing holds when actual litigation arises. Attorney-client privilege can protect communications about litigation holds, providing an additional layer of protection in the event your hold procedures are later scrutinized.

Frequently Asked Questions

Does a litigation hold apply to personal devices used for business? Yes, if employees use personal phones or computers for work-related communications, those devices can be within the scope of a litigation hold. This is a significant challenge for businesses that allow bring-your-own-device policies without clear data governance guidelines.

How long does a litigation hold last? A litigation hold remains in effect until the litigation is fully resolved, including any appeals, and all statutes of limitations for related claims have run. Releasing a hold prematurely is itself a form of spoliation.

Can we still delete documents that are clearly unrelated to the litigation? Technically yes, but courts expect a conservative approach. Any document that might conceivably be relevant should be preserved. Selective preservation based on internal judgments about relevance can backfire badly if a court later disagrees with those judgments.

What if an employee deletes relevant documents after receiving a hold notice? This is a serious problem that can result in sanctions against the company even if the deletion was the employee’s individual act. The company has an obligation to enforce the hold, and failure to do so can lead to spoliation findings.

Is there software that can help manage litigation holds? Yes. Legal hold management software can automate notifications, track acknowledgments from custodians, and maintain an audit trail of hold activities. These tools are particularly valuable for larger organizations dealing with multiple simultaneous disputes.