Navigating Federal Discovery Obligations: What Small Businesses Often Get Wrong
When small businesses become involved in federal litigation, discovery is often where things quietly go off the rails. Not because of bad faith—but because many companies underestimate how demanding federal discovery obligations truly are.
Federal courts expect litigants of all sizes to preserve, collect, and produce relevant information competently and in good faith. A company’s size, informality, or lack of in-house counsel is rarely an excuse. The result? Businesses that think they are “doing their best” may still face sanctions, adverse inferences, or severe strategic disadvantages.
Below are the most common—and costly—discovery mistakes small businesses make in federal cases.
1. Treating Discovery as a “Lawyer Problem”
One of the most frequent missteps is assuming discovery compliance is handled exclusively by outside counsel.
In reality, discovery is a joint effort between legal counsel and the business itself. Attorneys can advise, draft responses, and manage production—but only the business controls its data, employees, systems, and day-to-day information practices.
When key custodians are unavailable, disorganized, or uninformed about their obligations, discovery failures follow quickly.
What works instead:
Businesses should designate an internal point person early—often a senior manager or operations lead—who understands where data lives and can coordinate preservation and collection efforts across the organization.
2. Failing to Preserve Data Early Enough
Many businesses believe preservation duties begin only after formal discovery requests are served. That is incorrect.
Under federal law, the obligation to preserve evidence arises when litigation is reasonably anticipated—not when a lawsuit is filed, and not when discovery formally begins.
Deleting emails, overwriting files, recycling laptops, or letting messaging platforms auto-delete content after that point can expose a company to serious sanctions, even if the deletion was routine or unintentional.
What works instead:
Issuing a timely litigation hold and suspending routine deletion policies is critical. This includes email retention settings, messaging apps, shared drives, cloud platforms, and employee devices used for work.
3. Underestimating Electronically Stored Information (ESI)
Small businesses often think discovery only means producing emails and a handful of documents. Federal discovery obligations are far broader.
Electronically Stored Information (ESI) can include:
Emails and attachments
Text messages and chat platforms (Slack, Teams, WhatsApp, etc.)
Cloud storage (Google Drive, OneDrive, Dropbox)
Accounting and CRM systems
Metadata associated with files
Personal devices used for work purposes
Failure to identify and search all relevant data sources can lead to incomplete productions—and credibility problems with the court.
What works instead:
Early data mapping is essential. Businesses should work with counsel to identify all systems where relevant information may exist and assess accessibility, cost, and proportionality issues at the outset.
4. Ignoring the Duty of Candor in Discovery Responses
Discovery responses are not marketing documents. Courts expect accuracy, transparency, and good-faith efforts.
Overly aggressive objections, boilerplate responses, or vague statements like “documents will be produced as appropriate” often backfire. Judges regularly compel supplemental responses and may impose cost-shifting or sanctions when they sense gamesmanship.
What works instead:
Tailored objections, clear explanations, and reasonable cooperation tend to preserve credibility and reduce downstream disputes. Federal discovery rewards professionalism, not obstruction.
5. Producing Documents Without Strategic Review
In an effort to “get discovery over with,” some businesses rush to produce large volumes of documents without sufficient legal review. This can result in:
Disclosure of privileged communications
Inconsistent narratives across productions
Damaging documents produced without context
Waiver of important legal protections
Once produced, documents cannot be taken back.
What works instead:
Discovery should be deliberate, not rushed. Strategic review helps ensure productions are complete, consistent, and aligned with the broader litigation strategy.
6. Assuming Proportionality Will Protect Them Automatically
Federal discovery rules emphasize proportionality—but courts expect parties to invoke and support proportionality arguments with facts.
Merely asserting that discovery is “burdensome” or “expensive” is rarely enough. Without evidence, courts often require compliance.
What works instead:
Businesses should be prepared to explain data volume, retrieval costs, technical limitations, and operational burdens with specificity. Early discussions with counsel help frame these issues before disputes escalate.
Why This Matters
Discovery failures rarely end cases immediately—but they can quietly destroy leverage, credibility, and defenses long before trial.
For small businesses, the goal is not perfection. It is reasonable, documented, good-faith compliance with federal discovery obligations. Courts understand resource constraints—but they expect seriousness and transparency.
Conclusion
Federal discovery is not intuitive, informal, or forgiving. Small businesses that treat it casually often pay a steep price later in the case.
Early legal guidance, internal coordination, and disciplined data practices can make the difference between controlled litigation and avoidable exposure.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. Discovery obligations vary based on jurisdiction, court rules, and the specific facts of each case. Businesses facing actual or anticipated litigation should consult qualified legal counsel regarding their specific circumstances.
