Can a company be sanctioned for not preserving electronic records when it should have anticipated litigation?

Short Answer

Yes. When an organization knows, or reasonably should know, that litigation is likely, it has a duty to preserve relevant records—including electronic ones such as email, files, chat messages, and database entries. Failing to do so is called spoliation, and courts can impose sanctions for it.

The Duty to Preserve

The obligation to preserve evidence typically arises before a lawsuit is formally filed. It is triggered once litigation is reasonably anticipated—for example, after a demand letter, a serious dispute, an internal complaint, or any event that makes a claim foreseeable.

At that point, an organization is generally expected to issue a litigation hold (also called a legal hold): a directive that suspends routine deletion and instructs employees to retain potentially relevant material. Electronic records deserve special attention because automated systems may delete them on a schedule, and data can be overwritten or lost without anyone acting deliberately.

Why Electronic Records Are High Risk

Electronic information is uniquely fragile and easy to lose:

• Auto-delete and retention rules can erase email and messages.
• Routine system maintenance may overwrite backups.
• Metadata can change simply by opening or moving a file.
• Devices are reassigned, wiped, or replaced.

Because of this, “we didn’t mean to delete it” is often not a sufficient defense once a preservation duty exists.

Possible Sanctions

If a court finds that relevant electronic records were lost after the duty attached, the consequences scale with the conduct and the harm. They can include:

• Orders to pay the other side’s costs.
• Instructions allowing the jury to assume the lost evidence was unfavorable (an adverse-inference).
• Exclusion of evidence or arguments.
• In serious cases involving intent to deprive, default judgment or dismissal.

Generally, more severe penalties apply where a party acted intentionally or recklessly, while inadvertent loss despite reasonable efforts is treated more leniently.

The Practical Takeaway

Sound records management is the best protection. Knowing what you have, applying consistent retention rules, and being able to quickly pause deletion when a dispute looms all reduce legal exposure. The guidance commonly cited by practitioners on these issues comes from groups like The Sedona Conference.

Learn more on the electronic records hub.