What is a litigation hold (legal hold) and do I really need one?

A litigation hold is a formal instruction to preserve all documents, emails, texts, files, and other records relevant to the lawsuit. It must be issued the moment you have reason to anticipate litigation — which means not when the lawsuit is filed, but when you know or reasonably should know that a claim is coming. This includes when you receive a demand letter, when a dispute escalates, or when you are served with a complaint. The consequences of failing to preserve evidence — called spoliation — are severe. A Texas court can instruct the jury that the destroyed evidence would have been unfavorable to you. In egregious cases, courts have entered default judgments against parties who destroyed relevant evidence. You need a litigation hold. It costs almost nothing to issue one and can cost hundreds of thousands of dollars not to.

How long does commercial litigation take in Texas?

In Texas state court, a typical commercial case from filing to trial takes 18 to 36 months — and that assumes no appeals. The timeline breaks down roughly as follows: pleadings and early motions (2–4 months), discovery (4–12 months), dispositive motions such as summary judgment (2–4 months), trial preparation and trial setting (4–8 months), and then the trial itself, which for a commercial case typically runs 3–10 days. Federal court in Texas (the Northern, Western, and Southern Districts) tends to move faster, with many commercial cases reaching trial in 12–24 months. Arbitration — if your contract requires it — can be faster, though that depends on the arbitration rules and the availability of the arbitrators. Appeals, if any, add another 12–24 months on top of the trial court timeline.

What is the difference between Texas state court and federal court for business litigation?

Most commercial disputes in Texas are litigated in state court under the Texas Rules of Civil Procedure. Federal court is available when there is complete diversity of citizenship between the parties (plaintiff and defendant are from different states) and the amount in controversy exceeds $75,000, or when the claim arises under federal law. Federal court in Texas — particularly the Northern District (Dallas/Fort Worth area) — tends to move faster than state court and has stricter procedural requirements. Judges in federal court typically have more experience with complex commercial matters and tighter control over discovery. Some businesses prefer federal court for these reasons. Others prefer state court because Texas state courts have local juries who may be more sympathetic to Texas businesses in disputes with out-of-state plaintiffs. The strategic choice of forum — and whether to remove to federal court if the case is filed in state court — is one of the first decisions your litigation attorney will address.

Litigation May 19, 2026 9 min read

The CEO's guide to getting sued: what happens in the first 30 days.

Q: What does 'discovery' actually involve in Texas commercial litigation?

Discovery is the phase of litigation where both sides exchange information. It has four primary components. Interrogatories are written questions that must be answered under oath — in Texas state court, each side can serve up to 15 interrogatories as of right, with more requiring court permission. Requests for production require you to produce documents, emails, text messages, financial records, contracts, and any other materials relevant to the dispute. Depositions are sworn oral testimony where the opposing attorney questions your witnesses — including you personally — with a court reporter transcribing every word. Requests for admission ask you to admit or deny specific factual propositions, which shapes what remains disputed at trial. Discovery typically takes 4–12 months in Texas state court. It is the most expensive phase of litigation — document collection, review, and production alone can cost tens of thousands of dollars even in relatively modest commercial disputes.

Q: What does commercial litigation realistically cost in Texas?

The honest answer is that the range is enormous and depends primarily on how hard both sides fight. A case that settles before significant discovery begins might cost $15,000–$50,000 in legal fees. A case that goes through full discovery and motion practice before settling typically costs $75,000–$250,000 per side. A case that goes to trial can exceed $500,000 per side. These numbers are not worst-case — they are what I have seen in typical Texas commercial disputes. The single biggest driver of cost is behavior: parties and attorneys who use litigation as a weapon rather than a resolution mechanism dramatically increase costs for everyone. The second biggest driver is document volume — cases involving large amounts of email correspondence, electronic records, or complex financial transactions cost more to litigate because document review is expensive. Expert witnesses add $20,000–$100,000+ on top of legal fees.

Q: When should I settle a lawsuit versus fight it?

This is the most important strategic decision in any litigation, and it should be made with a clear-eyed analysis of four factors. First, the merits: what is the realistic probability of winning at trial, based on the evidence that exists, not the evidence you wish existed? Second, the cost of fighting: what will it cost in legal fees, management time, and business disruption to litigate to a conclusion, even if you win? Third, the settlement value: what is the plaintiff willing to accept, and how does that compare to the litigation cost plus the risk-weighted value of a loss? Fourth, the non-monetary factors: does the case involve a precedent-setting issue, a business relationship worth preserving, or a public outcome (trial verdict) that would affect your reputation either way? Most commercial cases settle — approximately 95% in Texas state court — and the question is not whether to settle but when and on what terms. Settling too early sacrifices leverage; settling too late sacrifices money.

Q: Can I countersue the person who sued me?

Yes — in Texas, a counterclaim is filed as part of your answer and can assert any claim you have against the plaintiff arising from the same transaction or occurrence, or in some cases any related claim. A compulsory counterclaim — one that arises from the same transaction as the plaintiff's claim — must be asserted in the current case or it is waived. A permissive counterclaim may be asserted but doesn't have to be. Whether to counterclaim is a strategic decision that your litigation attorney should evaluate carefully. Counterclaims can increase your leverage in settlement negotiations, but they also increase the scope and cost of the litigation. A counterclaim that isn't well-supported is worse than no counterclaim — it signals that you're using litigation tactically, which affects your credibility with the court.

Q: Does my business insurance cover this lawsuit?

It depends entirely on the type of lawsuit and the type of coverage you have. General commercial liability (CGL) insurance covers bodily injury and property damage claims — not most commercial contract disputes or business torts. Directors and officers (D&O) insurance covers claims against directors and officers for their management decisions. Errors and omissions (E&O) or professional liability insurance covers claims arising from professional services. Employment practices liability (EPLI) covers employment-related claims including discrimination and wrongful termination. Cyber liability insurance covers data breach and privacy claims. The critical steps: notify your insurer immediately upon receiving a claim or lawsuit — most policies have prompt notice requirements, and late notice can void coverage. Review your policy carefully for exclusions, coverage limits, and defense cost provisions. Some policies pay for your legal defense in addition to any judgment; others only cover judgments up to the policy limit. Your insurer may also have the right to select your defense counsel, which is a term worth understanding before a dispute arises.

You just received a lawsuit. Most business owners have never been here before. Buyers — and litigators — have. Here's what the first 30 days actually look like: what's urgent, what's normal, what it costs, and when fighting is worth it.

Practice areas this article routes to

Litigation

If you read nothing else

Three things matter in the first 72 hours. First: find your response deadline — in Texas state court, you typically have 20 days from service to file an answer. Miss it and you lose by default, automatically, before the case is heard. Second: issue a litigation hold immediately — preserve every email, document, and record related to the dispute. Destroying evidence after you know litigation is coming is spoliation, and courts treat it seriously. Third: call a litigation attorney today. The most expensive decisions in commercial litigation are made in the first week, before counsel is engaged.

Most business litigation is less catastrophic than it feels when the papers arrive. It's also less cheap than you hope.

Call Chuck Kraus: (682) 529-7177

I've been the GC on the receiving end of this call three times. The first time was at a dual-listed company — a demand letter from a former supplier claiming breach of a supply agreement we believed was properly terminated. The second was a securities-related claim filed in federal court while I was managing a SPAC transaction. The third was an employment matter that came in the same week as a major acquisition close.

None of them were simple. None of them resolved the way they looked on the day the papers arrived. And in each case, the decisions made in the first week — who we retained, whether we preserved the right documents, how we communicated internally — had more impact on the outcome than anything that happened in the courtroom.

This article is written for the business owner who has never been through commercial litigation before. Not a legal brief. Not a scare tactic. A clear-eyed account of what the next 30 days look like, what each step costs, and what decisions actually matter.

What just landed on your desk

The documents you received are either a petition (Texas state court) or a complaint (federal court). They contain three things that matter immediately: the plaintiff's identity, the claims they're asserting, and the deadline for your response.

In Texas state court, you have until the Monday following 20 days after service to file an answer. In federal court, you have 21 days. Missing either deadline results in a default judgment — you lose automatically, without the case being heard on its merits. The court then holds a hearing on damages and enters a judgment against you. Default judgments are very difficult to undo.

The claims in the petition are allegations, not findings. The plaintiff's attorney drafted them to be as broad and inflammatory as possible. That's normal. Most commercial petitions include claims that will eventually be narrowed or dismissed. Read them for the deadline, not for an accurate account of what happened.

What the first 30 days actually look like

Day 1

You've been served. Three things happen today.

The papers are real, the deadline is real, and the clock is running. The temptation is to call the plaintiff directly, forward the complaint to your team, or start gathering your own version of events. All three are mistakes.

Find the response deadline — it's on the citation or summons. Write it down. Do not trust your memory on this.

Issue a litigation hold — a written instruction to preserve all documents, emails, texts, and files related to the dispute. Send it to every employee who might have relevant records. Do this before you sleep.

Call a litigation attorney — not tomorrow. Today. The attorney needs to evaluate the claims, advise on the response deadline, and confirm what preservation is required.

Notify your insurer — most commercial liability and D&O policies have prompt notice requirements. Late notice can void coverage. Pull the relevant policies tonight.

Week 1

First meetings, initial assessment, and the hold.

Your litigation attorney reviews the complaint in detail and advises on the strength of the claims, the available defenses, and the likely case trajectory. You provide a factual download — what actually happened, from your perspective — and begin gathering the key documents.

The litigation hold expands — your attorney identifies specifically what needs to be preserved. Email servers, text messages, cloud storage, accounting records, contracts, and personnel files may all be implicated depending on the claims.

Initial case assessment — the attorney provides a realistic evaluation: what the plaintiff needs to prove, what evidence likely exists on each side, what defenses are available, and what the case is likely worth to resolve.

Internal communication protocol — establish who inside your company is allowed to communicate about the case, through what channels, and to whom. Attorney-client privilege protects communications between you and your attorney. It does not protect internal emails between employees discussing the case.

Weeks 2 – 4

Answer filed. First strategic decisions.

Your attorney files the answer, which responds to each allegation and asserts your defenses. The answer is a legal document, not a comprehensive statement of your position — most responses are simple denials with affirmative defenses listed. This is also when the first real strategic decision is made: fight, settle, or pursue early resolution.

Motions to dismiss — if the complaint has legal deficiencies (fails to state a valid claim, lacks jurisdiction, or was filed past the statute of limitations), your attorney may file a motion to dismiss before discovery begins. A successful motion ends the case without the expense of full discovery.

Early settlement assessment — what is the plaintiff actually willing to accept? An informal inquiry through counsel costs almost nothing and tells you whether the gap between the parties is bridgeable before discovery begins. Most cases that will settle, settle before full discovery — the question is whether you've evaluated the merits clearly enough to negotiate from a position of knowledge.

Managing the business — commercial litigation is a background drain on management attention for its entire duration. Establish early who inside the company is the litigation point of contact, and keep the circle as small as possible. Key employees who will be witnesses need to be identified and briefed on document preservation but not coached on their testimony.

Days 30 – 90

Discovery begins. The real costs start.

Once the case moves into discovery — written questions, document requests, and depositions — costs accelerate significantly. Document collection and review is the most expensive part of most commercial cases, because it requires attorneys or e-discovery vendors to review large volumes of email and records for responsiveness and privilege.

Interrogatories and document requests — written discovery typically goes out in both directions in the 30–60 day window after the answer is filed. You'll need to gather, review, and produce documents. What you produce — and what you withhold on privilege grounds — shapes the case.

Deposition scheduling — depositions of key witnesses, including your own executives, are typically scheduled for the 3–6 month window. Deposition preparation takes 4–8 hours per witness and is not optional.

The settlement window stays open — cases that don't resolve in the first 30 days typically have a second serious settlement conversation after discovery, when both sides know what the evidence actually shows. The pre-discovery number and the post-discovery number are usually different.

What it actually costs — honestly

The number most business owners quote when asked about litigation costs is whatever they've heard from someone else. It's usually wrong in one direction or the other. Here's what I've actually seen in Texas commercial cases, across the categories that matter.

Litigation cost reality — Texas commercial cases

Case settles before significant discovery

Complaint filed, answer filed, initial negotiations, settlement agreement

$15K – $50K

Full discovery, then settlement

Document production, depositions, motion practice, mediation

$75K – $250K

Case goes to trial

Full discovery, summary judgment motions, trial preparation, trial

$250K – $600K+

Expert witnesses (per expert)

Retained opinion, report preparation, deposition, trial testimony

$20K – $100K+

E-discovery (large document volume)

Collection, processing, review, and production of electronic records

$10K – $75K

Settle or fight — the actual analysis

Most business owners arrive at this decision with their instincts, not their spreadsheets. "I'm not paying them a dime — they're wrong" is a position, not a strategy. So is "I just want this over." The real analysis has four parts.

The merits. What does the evidence actually show — not what you believe happened, but what a jury in Hood County or Tarrant County is likely to conclude based on the documents that exist? Your litigation attorney's job is to give you an honest assessment of this, including the parts you don't want to hear.

The cost of fighting. What will it cost in legal fees, management time, key employee distraction, and business disruption to litigate to a conclusion? Even if you win at trial, you've spent the money to get there. A $200,000 litigation victory after $180,000 in legal fees is a $20,000 net recovery — and that assumes you actually collect the judgment.

The settlement value. What will the plaintiff accept? That number changes as discovery proceeds. Before discovery, the plaintiff's leverage depends on what they think the evidence shows. After your document production, it depends on what they can actually prove. The best settlement conversations happen when both sides have enough information to negotiate from a place of knowledge rather than speculation.

The question is never whether to settle. It's when — and on whose terms.

The non-monetary factors. Some cases are worth fighting regardless of the math: precedent-setting issues, claims that threaten the business's core operations, or defendants who will keep coming back if the first claim settles easily. Some cases should settle regardless of the merits: when the relationship matters, when the business can't absorb the distraction, or when the reputational cost of a public trial exceeds the financial cost of resolution. These factors belong in the analysis.

What you can control

You can't control whether someone sues you. You can control almost everything that determines how it resolves.

The litigation hold is the single most important action in the first 24 hours — not because it will win the case, but because failing to preserve evidence creates problems that overshadow the underlying merits. I have seen courts instruct juries that destroyed evidence would have been unfavorable to the party that destroyed it. That instruction is very hard to survive, regardless of how strong the underlying defense is.

The selection of litigation counsel is the second most important decision. Litigation is specialized. A business attorney who handles contracts and formations is not the right choice to defend a commercial lawsuit in Texas state or federal court. The attorney who tried your real estate closing is not the right choice. The choice matters — litigation is a craft, and the quality of representation at every stage is measurable.

Everything after that — the answer, the discovery responses, the deposition preparation, the settlement negotiations — is executable if the first two decisions are made correctly.

How I help

I'm not a litigator. I'm the GC who stays involved.

I've been the executive on the receiving end of this call three times. I know what the CEO needs to hear in that moment: not a legal brief, but a clear picture of what this actually is, how bad it actually is, and what the path forward looks like.

When my clients face commercial litigation, I bring in Scale LLP's litigation team — including attorneys who have handled commercial disputes, breach of contract claims, partnership dissolutions, and fiduciary duty cases in Texas state and federal courts, including a former federal prosecutor. I stay involved as the business strategist. You get a litigator who knows the courtroom and a GC who knows your business and can translate between the two.

One call tells you which one you need — or whether you need both.

Schedule a Call

Going deeper

Questions I hear from business owners who have just been served.

What should I do immediately after my business is served with a lawsuit?

Three things, in order. First, read the documents carefully enough to find your response deadline — in Texas state court, you typically have until the Monday following 20 days from service to file an answer. Missing it results in a default judgment against you. Second, do not discuss the lawsuit with anyone except your attorney — not employees, not the plaintiff, not in email or Slack. Third, call a litigation attorney today. The most expensive mistakes in commercial litigation happen in the first 72 hours, before counsel is engaged.

What is a litigation hold and do I really need one?

A litigation hold is a formal instruction to preserve all documents, emails, texts, files, and other records relevant to the lawsuit. It must be issued the moment you anticipate litigation — which includes when you receive a demand letter, when a dispute escalates, or when you are served. Failing to preserve relevant evidence is called spoliation, and courts treat it severely. A Texas court can instruct the jury that the destroyed evidence would have been unfavorable to you. In egregious cases, courts have entered default judgments against parties who destroyed relevant evidence. Issue the hold before you do anything else.

What does "discovery" actually involve in a Texas business lawsuit?

Discovery has four primary components. Interrogatories are written questions answered under oath — Texas state court allows 15 as of right per side. Requests for production require you to produce documents, emails, texts, financial records, and contracts. Depositions are sworn oral testimony where the opposing attorney questions your witnesses — including you personally — with every word transcribed. Requests for admission ask you to admit or deny specific facts, shaping what remains disputed at trial. Discovery typically takes 4–12 months in Texas state court and is the most expensive phase — document collection and review alone can cost tens of thousands of dollars in modest commercial disputes.

How long does commercial litigation typically take in Texas?

In Texas state court, a typical commercial case from filing to trial takes 18 to 36 months. The rough breakdown: pleadings and early motions (2–4 months), discovery (4–12 months), dispositive motions (2–4 months), trial preparation and setting (4–8 months), then trial. Federal court in Texas tends to move faster — 12–24 months for many commercial cases. Arbitration can be faster depending on the rules and arbitrator availability. Appeals, if any, add 12–24 months on top of the trial court timeline.

What does commercial litigation realistically cost in Texas?

A case that settles before significant discovery might cost $15,000–$50,000 in legal fees. A case through full discovery and motion practice before settlement typically costs $75,000–$250,000 per side. A case that goes to trial can exceed $500,000 per side. Expert witnesses add $20,000–$100,000+ on top of legal fees. These are typical figures, not worst-case. The single biggest driver of cost is behavior — parties who use litigation as a weapon rather than a resolution mechanism dramatically increase costs for everyone. Texas follows the American Rule: each side pays their own fees unless a statute or contract provides otherwise.

When should I settle versus fight a business lawsuit?

The analysis has four parts. The merits: what does the evidence actually show, and what will a jury likely conclude? The cost of fighting: what will it cost in legal fees, management time, and business disruption to litigate to a conclusion, even if you win? The settlement value: what is the plaintiff actually willing to accept, and how does that compare to the litigation cost plus the risk-weighted value of losing? The non-monetary factors: does the case involve a precedent-setting issue, a relationship worth preserving, or a public outcome that affects your reputation? Approximately 95% of Texas commercial cases settle. The question is not whether to settle but when and on what terms.

Can I countersue the person who sued me?

Yes — a counterclaim is filed as part of your answer and can assert claims you have against the plaintiff from the same transaction or occurrence. A compulsory counterclaim — one arising from the same transaction — must be asserted now or it is waived. Whether to counterclaim is a strategic decision: counterclaims can increase your leverage in settlement negotiations, but they also increase the scope and cost of the litigation. A counterclaim that isn't well-supported is worse than no counterclaim — it signals that you're using litigation tactically, which affects your credibility with the court.

Does my business insurance cover this lawsuit?

It depends entirely on the type of lawsuit and your coverage. CGL covers bodily injury and property damage — not most contract disputes. D&O covers claims against directors and officers for management decisions. E&O or professional liability covers claims from professional services. EPLI covers employment claims. The critical step: notify your insurer immediately upon receiving a claim. Most policies have prompt notice requirements and late notice can void coverage. Review your policy for exclusions, coverage limits, and defense cost provisions. Some policies pay for your legal defense in addition to any judgment; others cover only judgments up to the policy limit. Your insurer may also have the right to select defense counsel.

The first call is the one
that changes the outcome.

If you've just been served — or if you know litigation is coming — call Chuck today. Not this week.

Schedule a Call (682) 529-7177

This article provides general information about commercial litigation procedure in Texas and is not legal advice for your specific situation. Every lawsuit involves unique facts, claims, and circumstances. If your business has received a lawsuit, demand letter, or subpoena, consult an attorney licensed in your jurisdiction immediately. Response deadlines are strict and missing them results in adverse consequences that are difficult or impossible to reverse. Chuck Kraus is licensed in Texas, Minnesota, Washington State, and Canada.