1. When Must a Business Preserve Evidence before Litigation?
A company's duty to preserve evidence may arise before a lawsuit begins. Under New York law, the duty is triggered when litigation is reasonably anticipated, not necessarily when a party receives formal court papers.
Reasonable Anticipation of a Business Lawsuit
In VOOM HD Holdings LLC v. EchoStar Satellite L.L.C., 93 A.D.3d 33 (1st Dep't 2012), the court applied the reasonable anticipation standard to electronic evidence.
The duty may arise when a business has notice of a credible probability of litigation. A serious contract breakdown, threatened claim, or preparations to sue may establish that notice.
Routine disagreements do not necessarily trigger preservation duties. The assessment depends on what the company knew or reasonably anticipated when the records were at risk.
Demand Letters and Contract Dispute Warnings
A demand letter threatening litigation may establish notice, particularly when it identifies alleged breaches and seeks legal remedies. Its language and surrounding circumstances matter.
A company preparing to sue may also have preservation obligations. Settlement negotiations do not eliminate those duties once litigation is reasonably anticipated.
A commercial litigation assessment can help determine when the dispute became foreseeable and which records require protection.
2. Which Electronic Business Records Must Be Preserved?
Companies generally must preserve information relevant to reasonably anticipated claims or defenses within their possession or control. The obligation does not automatically extend to unrelated business records.
Emails, Business Messages, and Attachments
Relevant communications may include emails, internal messages, contract attachments, and approval records. These can establish contractual terms, notice of a breach, or changes in business instructions.
Original files may contain timestamps, attachments, and metadata missing from screenshots. Preservation methods should retain information needed to establish authenticity and the sequence of events.
Accounting Records and Transaction Histories
Invoices, payment confirmations, ledger entries, and audit trails may establish performance, outstanding obligations, or disputed losses.
In breach of contract litigation, transaction histories can reveal whether payments were received, reversed, or applied to different accounts.
An exported report may omit earlier changes. Businesses should check whether their accounting systems retain historical versions and supporting records.
Relevant Time Frames and Data Sources
The relevant time frame should reflect the anticipated dispute. An unpaid invoice claim may require records covering contract formation, delivery, payment, and subsequent communications.
Information may also exist in cloud storage, archived accounts, employee devices, or vendor-managed platforms. Companies should identify relevant sources within their possession or control and assess third-party retention arrangements.
3. How Should a Company Implement a Litigation Hold?
A litigation hold instructs employees and relevant data custodians to preserve information that routine operations might delete or alter. Under VOOM, effective preservation requires practical protective measures, not merely issuing a notice.
Identify Record Custodians
Companies should identify employees and systems involved in disputed transactions. Finance personnel, managers, and IT administrators may hold different records.
A litigation hold should specify:
- Relevant employees, accounts, and records.
- Transactions and time periods covered.
- Deletion or overwriting processes requiring attention.
- Personnel responsible for preservation measures.
The scope should reflect reasonably anticipated claims and defenses.
Suspending Automatic Deletion and Overwriting
Email systems, messaging platforms, and cloud applications may automatically remove records or overwrite historical versions.
IT personnel should assess these settings and implement reliable preservation measures. Routine backups may not retain every necessary record or its metadata.
Preserving a reliable copy may suffice in some circumstances, while other systems require adjustments to retention settings.
Monitor and Update the Litigation Hold
Employees should understand their preservation responsibilities, and designated personnel should verify that protective measures work.
Changes in claims, employee departures, or newly identified systems may require updates. Records of instructions, acknowledgments, and technical actions can help document compliance.
When records span multiple systems or custodians, additional evidence preservation measures may be necessary to protect relevant information.
4. What Happens If Business Litigation Evidence Is Lost?
Losing relevant evidence may lead to sanctions when a preservation duty existed. The consequences depend on the applicable court rules, the circumstances of the loss, and the importance of the missing evidence.
Spoliation Consequences under New York Law
New York courts may impose spoliation sanctions under applicable case law and, where appropriate, CPLR § 3126.
In Pegasus Aviation I, Inc. V. Varig Logistica S.A., 26 N.Y.3d 543 (2015), the Court of Appeals identified three requirements: a duty to preserve evidence, a culpable state of mind, and the relevance of the missing evidence.
Ordinary negligence may establish culpability, but when destruction was merely negligent, the party seeking sanctions must prove relevance. Failure to issue a litigation hold does not automatically constitute gross negligence.
Depending on the circumstances, sanctions may include adverse-inference instructions, evidentiary restrictions, or more severe relief. Evidence loss does not automatically justify dismissal.
Federal Rule 37(E) for Lost Electronic Information
Federal Rule of Civil Procedure 37(e) applies when electronically stored information that should have been preserved in anticipation or conduct of litigation is lost because a party failed to take reasonable steps, and the information cannot be restored or replaced through additional discovery.
Under Rule 37(e)(1), a court finding prejudice may order measures no greater than necessary to cure that prejudice.
More severe measures under Rule 37(e)(2), including an adverse presumption, dismissal, or default judgment, require a finding that the party intended to deprive another party of the information's use in litigation.
Federal courts evaluate reasonable preservation efforts rather than requiring perfect retention of electronic records.
Preservation and Production Are Different Obligations
Preservation protects potentially relevant information from loss. Discovery determines which records must later be disclosed.
In New York's Commercial Division, Rule 11-c addresses electronic discovery, including attorney consultation, production formats, and proportionality.
A company may need to preserve information before determining what must be produced. Attorneys must separately assess discovery obligations, privilege, confidentiality, and applicable objections.
During business litigation, attorneys may coordinate electronic discovery and address disputes over missing records.
09 Feb, 2026
