Know When to Hold Em: Legal Holds in Investigations

In our last post, we discussed retention policies, defensible deletion, and the risks associated with a “save everything” approach.

Legal holds are a cornerstone of defensible preservation, but not all legal holds are created equal. The obligations that arise in civil litigation often differ in meaningful ways from those triggered by regulatory investigations. While both sets of obligations require organizations to preserve relevant electronically stored information (ESI), the timing, scope, urgency, and strategic considerations can vary significantly.

Understanding these differences is essential for legal, compliance, and information governance teams tasked with navigating high stakes matters. Missteps – whether through delay, overreach, or misalignment – can expose organizations to sanctions, adverse findings, or reputational damage. In this post, we will discuss differences in legal hold obligations between regulatory investigations and civil litigation.

The Common Ground: A Duty to Preserve

Let’s start with what they have in common. At a high level, both civil litigation and regulatory investigations impose a duty to preserve relevant information once a triggering event occurs. In civil litigation, that trigger is typically when litigation is reasonably anticipated. In regulatory investigations, the trigger could arise even earlier – sometimes before a formal inquiry is launched.

In both contexts, the core expectations are similar:

• Identify relevant custodians and data sources
• Issue timely and clear legal hold notices
• Suspend routine deletion practices
• Monitor compliance and document preservation efforts

Courts and regulators alike evaluate whether organizations took reasonable, good-faith steps to preserve evidence. However, how those steps are applied (and how quickly) can differ significantly depending on the type of matter.

Triggering Events: When the Clock Starts

Now, let’s discuss the differences. In civil litigation, the duty to preserve is generally tied to reasonable anticipation of litigation. This can occur even before the case is filed, (e.g., when a demand letter is received, a dispute escalates, or an incident suggests a lawsuit is likely). While the standard is fact-specific, it often allows for some degree of internal assessment before a legal hold is issued.

Regulatory investigations, by contrast, often involve even earlier and more explicit triggers. These can include:

• Subpoenas or civil investigative demands (CIDs)
• Government inquiries or informal requests for information
• Internal reports of misconduct that could attract regulatory scrutiny
• Whistleblower complaints
• Notices of audits or inspections

In many cases, the mere possibility of regulatory scrutiny may be sufficient to trigger preservation obligations, especially in highly regulated industries. Waiting too long to act can be especially risky, as regulators may view delays as a failure to cooperate.

Scope: Targeted vs. Expansive Preservation

Another difference is the scope of preservation. Civil litigation typically emphasizes proportionality. Under Rule 26(b)(1) of the Federal Rules of Civil Procedure, “[p]arties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case”. Legal teams often work to narrow the scope of holds to specific custodians, timeframes, and data sources to control cost and complexity.

Regulatory investigations, on the other hand, often demand a broader scope. Regulators may request wide-ranging categories of information, spanning multiple business units, jurisdictions, and time periods. In some cases, organizations must preserve data beyond what they initially believe is relevant, anticipating future requests or follow-on inquiries.

This broader scope can create tension with internal information governance and defensible deletion policies. Legal teams must balance the need for comprehensive preservation with the risks of over-collection and over-preservation. In practice, many organizations adopt a more conservative approach in regulatory matters, expanding the scope of holds to avoid gaps.

Speed and Urgency: The Pace of Preservation

Another difference is timeline. Civil litigation often unfolds over a longer timeline, allowing for measured decision-making and phased preservation efforts. While prompt action is still required, there may be opportunities to refine scope, interview custodians, and coordinate with IT before issuing holds.

Regulatory investigations tend to move much faster. Government agencies may impose tight deadlines for responses, and early missteps can have lasting consequences. As a result, organizations must be prepared to act quickly: sometimes issuing broad legal holds within days or even hours of receiving notice.

This urgency underscores the importance of pre-established processes. Organizations with mature legal hold programs can respond rapidly, while those relying on ad hoc workflows may struggle to keep pace.

Custodian Engagement: Different Audiences, Different Risks

The level of custodian engagement is another difference. In civil litigation, legal holds are typically directed at employees who are directly involved in the underlying dispute. Custodian populations may be relatively contained, and communication can be tailored to specific roles and responsibilities.

Regulatory investigations often involve a wider and more diverse group of custodians, including senior executives, compliance personnel, and employees across multiple functions. In some cases, external parties (e.g., such as third-party vendors or affiliates) may also be implicated.

Therefore, custodian communication in regulatory matters must be handled with particular care. Messaging must be clear, consistent, and sensitive to the potential seriousness of the investigation. Employees may be concerned about personal liability, making it even more important to provide guidance, support, and clear points of contact.

Documentation and Defensibility: Scrutiny from Different Angles

In civil litigation, preservation efforts may be examined by opposing counsel and the court. Challenges may arise through motions for sanctions or disputes over discovery scope, but often only when discovery deficiencies are identified. The focus is often on whether the organization acted reasonably and whether any loss of data caused prejudice.

In regulatory investigations, scrutiny may come directly from government agencies with significant enforcement authority. Regulators may request detailed information about preservation efforts, including legal hold notices, custodian lists, and system-level controls. In some cases, failure to preserve evidence can lead to independent enforcement actions, separate from the underlying investigation.

This heightened scrutiny places a premium on comprehensive documentation. Organizations must be able to demonstrate not only that holds were issued, but that they were effectively implemented, monitored, and enforced.

Technology and Coordination: Scaling for Complexity

Both civil litigation and regulatory investigations benefit from modern legal hold technology, but the demands of regulatory matters often require greater scalability and integration.

Automated legal hold platforms enable rapid issuance, real-time tracking, and centralized documentation – capabilities that are particularly valuable in fast-moving investigations. Integration with enterprise systems allows for preservation in place, reducing the risk of data loss while minimizing disruption.

Regulatory investigations also often require even more close collaboration between legal, compliance, IT, and senior leadership. Decisions about scope, timing, and communication must be aligned across these functions to ensure consistency and defensibility.

Conclusion

Legal holds are an important tool in both civil litigation and regulatory investigations, but the context in which they’re applied shapes how they should be executed. Civil litigation emphasizes proportionality and targeted preservation, while regulatory investigations often demand speed, breadth, and heightened scrutiny. By acting promptly, scoping thoughtfully, engaging custodians effectively, and leveraging technology to track and document efforts, organizations can tailor their preservation strategies to the demands of each situation, enabling them to meet their obligations with confidence.

In our next post, we’ll discuss the steps needed to design and operationalize a legal hold workflow in today’s diverse data environment. Stay tuned!

For more regarding Cimplifi eDiscovery, litigation, and investigations capabilities, click here.