A litigation hold, also known as a "preservation order" or "hold order" is a temporary suspension of the company’s document retention destruction policies for the documents that may be relevant to a law suit or that are reasonably anticipated to be relevant. It is a stipulation requiring the company to preserve all data that may relate to a legal action involving the company. A litigation hold ensures that the documents relating to the litigation are not destroyed and are available for the discovery process prior to litigation.
A party anticipating litigation must implement a litigation hold, suspending its routine document retention destruction policy. A company must preserve records when it hears of pending or imminent litigation, or when litigation is reasonably anticipated. During a Litigation hold, the employees are notified of the document preservation requirements. The employees should be alerted whenever there is any information that is likely to be sought in discovery. The company may publish preservation requirements upon receipt of a complaint, demand letter, or preservation letter expressly requesting that certain documents be preserved.
A litigation hold prevents destruction, alteration, or mutilation of evidence. A company can either issue a litigation hold internally, or their attorney may issue a litigation hold using a litigation hold letter. The order applies to both paper based documents and electronically stored information. A company may have to pay penalties if it does not comply with litigation hold orders. The penalties include large monetary fines, reimbursement of the opponent’s litigation costs, or inferences against the party failing to meet discovery obligations.