Introduction

In Terra Management Group, LLC and Littleton Main Street LLC d/b/a Main Street Apartments v. Keaten, the Colorado Supreme Court settled a recurring and consequential question in spoliation law: when does a party’s duty to preserve evidence arise before a lawsuit is filed? The Court held that a prelitigation duty to preserve evidence arises when a party knows or should know that litigation is pending or reasonably foreseeable and the evidence is relevant to that litigation. The Court emphasized that “reasonably foreseeable” is an objective, flexible, and fact-specific standard requiring more than a mere possibility of suit—litigation must be imminent, likely, or reasonably anticipated.

The case arose from claims by Kathleen and Delaney Keaten, Section 8 tenants who reported persistent chemical odors and a constellation of symptoms they attributed to fumes from the apartment below, Unit 203E. After the downstairs tenant was evicted for nonpayment, the property owner and manager (collectively, Defendants) renovated the unit without documenting or preserving materials, contrary to company practice. A year later, the Keatens sued under the Colorado Premises Liability Act (PLA), alleging permanent injuries from exposure to toxic fumes. Following a bench trial, the district court entered judgment for the Keatens, awarded substantial damages (including exemplary damages), and drew an adverse inference sanction for spoliation based on Defendants’ failure to preserve evidence. The court of appeals affirmed.

On certiorari, the Supreme Court clarified Colorado’s precomplaint preservation standard and ultimately affirmed the judgment on harmless error grounds because the trial court’s causation finding did not depend on the adverse inference. This opinion harmonizes Colorado law with persuasive federal authority on prelitigation preservation and provides concrete guidance for courts and litigants facing spoliation disputes.

Summary of the Opinion

• New rule: A duty to preserve evidence arises when a party knows or should know that (1) litigation is pending or reasonably foreseeable and (2) the evidence is relevant to that litigation. “Reasonably foreseeable” refers to litigation that is imminent, likely, or reasonably anticipated, not merely possible.
• Standard is objective and flexible: Trial courts must assess foreseeability under a fact-specific, totality-of-the-circumstances approach.
• Sanctions framework: If evidence subject to this duty is destroyed, courts may impose sanctions (including adverse inference), considering culpability, prejudice, burden of preservation, deviations from ordinary practices, and punitive/remedial aims.
• Application to this case: Even assuming the trial court abused its discretion in drawing an adverse inference, any error was harmless because the trial court’s causation finding rested on independent evidence (expert testimony and comparative meth contamination testing).
• Outcome: The Supreme Court affirmed the court of appeals’ judgment in favor of the Keatens, though on different reasoning regarding spoliation.

Background and Procedural Posture

• Tenancy and complaints: The Keatens lived in Unit 303E (2005–2019). Starting in late 2017, they reported chemical odors and serious symptoms (respiratory irritation, nosebleeds, dizziness, cognitive issues) they suspected came from Unit 203E below. An incident report was prepared; an initial walkthrough found no odor; recommended follow-up (including law enforcement contact) was not pursued. A housing authority inspection later noted a “slight chemical smell,” then a reinspection passed.
• Eviction and renovation: On Aug. 28, 2018, the tenant in 203E was evicted for nonpayment. Defendants did not photograph or preserve items during removal (contrary to policy), then replaced carpet, sealed flooring, painted, and cleaned. The Keatens photographed items outside (including apparent gas canisters and a propane tank).
• Testing: After suit was filed (Oct. 30, 2019), sampling in Unit 303E and common areas detected meth within limits, except one bathroom sample exceeding limits. Court-ordered testing in 2020 (over a year post-renovation) found multiple exceedances in 203E (including an air duct at 44x the regulatory limit) and small amounts in 303E.
• Trial: Following an eight-day bench trial (Aug. 2021), the district court found that fumes from 203E caused the Keatens’ permanent brain injuries, relied on expert testimony and comparative contamination levels, and drew an adverse inference sanction based on Defendants’ failure to preserve evidence. It awarded over $10.5 million, including exemplary damages.
• Appeal: The court of appeals affirmed, holding that sanctions may be imposed for destruction of evidence when litigation is pending, imminent, or reasonably foreseeable, even precomplaint, and that the trial court did not rely solely on the adverse inference to find causation.
• Certiorari: The Supreme Court granted review to clarify the prelitigation duty to preserve standard.

Detailed Analysis

Precedents and Authorities Cited

• Aloi v. Union Pac. R.R. Corp., 129 P.3d 999 (Colo. 2006): Recognized courts’ inherent power to sanction spoliation and stated sanctions are appropriate if a party destroys evidence it “knows or should know” will be relevant to litigation. Aloi involved both a statutory preservation duty and actual notice, but did not define prelitigation triggers beyond those circumstances. Terra Keaten builds on Aloi by articulating a general prelitigation trigger.
• Warembourg v. Excel Elec., Inc., 2020 COA 103, 471 P.3d 1213: A division held sanctions may issue when a party knew or should have known evidence was relevant to pending, imminent, or reasonably foreseeable litigation pre-filing. The Supreme Court adopts a closely aligned but more precise articulation, emphasizing an objective, “imminent/likely/reasonably anticipated” threshold.
• Castillo v. Chief Alt., LLC, 140 P.3d 234 (Colo. App. 2006): Emphasized that the moving party’s behavior matters (e.g., telling a defendant “we’re not going to sue” may cut against foreseeability). Terra Keaten incorporates this party-conduct consideration in the totality analysis.
• Cache La Poudre Feeds, LLC v. Land O’Lakes, Inc., 244 F.R.D. 614 (D. Colo. 2007): Persuasive federal authority stating the duty is usually triggered by filing but may arise earlier; a “mere possibility” is insufficient; requires notice that litigation is likely. Terra Keaten embraces this “more than mere possibility” principle.
• Silvestri v. Gen. Motors Corp., 271 F.3d 583 (4th Cir. 2001): Federal precedent grounding spoliation sanctions in courts’ inherent power to protect the truth-seeking function. Terra Keaten cites this integrity-of-the-process rationale.
• Micron Tech., Inc. v. Rambus Inc., 645 F.3d 1311 (Fed. Cir. 2011): Adopted an objective standard for when litigation is reasonably foreseeable, which Terra Keaten follows.
• Apple Inc. v. Samsung Elecs. Co., 881 F. Supp. 2d 1132 (N.D. Cal. 2012): Recognizes a common-law preservation obligation from the moment litigation is reasonably anticipated; cited as persuasive authority.
• Bistrian v. Levi, 448 F. Supp. 3d 454 (E.D. Pa. 2020): “Reasonably foreseeable” is fact-specific and flexible—language reflected in Terra Keaten’s standard.
• Shaffer v. RWP Grp., Inc., 169 F.R.D. 19 (E.D.N.Y. 1996) & Vodusek v. Bayliner Marine Corp., 71 F.3d 148 (4th Cir. 1995): Identify the punitive and remedial purposes of adverse inferences and relevant sanction factors (culpability and prejudice). The Court relies on this framework.
• Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68 (S.D.N.Y. 1991) & In re Wechsler, 121 F. Supp. 2d 404 (D. Del. 2000): Support the precomplaint duty when litigation is likely or reasonably anticipated.
• Fujitsu Ltd. v. Fed. Express Corp., 247 F.3d 423 (2d Cir. 2001): Sanction selection is a totality-of-circumstances inquiry—adopted by the Court.
• Standards of review: Aloi (abuse of discretion in sanctions), Rains v. Barber, 2018 CO 61 (abuse of discretion definition), Ronquillo v. Eco-Clean Home Servs., Inc., 2021 CO 82, and Wal-Mart Stores, Inc. v. Crossgrove, 2012 CO 31 (incorrect legal standard as abuse of discretion; legal questions reviewed de novo).

Legal Reasoning and the New Rule

The Court begins from first principles: spoliation (the intentional destruction or failure to preserve evidence) undermines the truth-seeking function of courts, and trial courts possess inherent authority to impose sanctions to remedy prejudice and deter misconduct. To calibrate when a preservation obligation attaches before suit is filed, the Court articulates a two-part trigger:

• (1) Litigation status: Litigation is pending or “reasonably foreseeable.”
• (2) Relevance: The evidence destroyed would be relevant to that litigation.

The “reasonably foreseeable” component is objective: would a reasonable party in the same circumstances have foreseen litigation? The Court underscores this is not a bright-line test but a flexible, fact-dependent inquiry. Crucially, it rejects “mere possibility” of suit as insufficient and instead requires that litigation be “imminent, likely, or reasonably anticipated.” This aligns Colorado with mainstream federal common law guidance and resolves ambiguity suggested by earlier appellate formulations.

The Court supplies guidance for how trial courts should apply this standard, focusing on the totality of circumstances and the conduct of both sides:

• Behavior of the would-be plaintiff: Delays in reporting, delays in filing, or statements suggesting resolution/no litigation can cut against foreseeability; persistent complaints, preservation requests, or regulatory involvement can support foreseeability.
• Behavior of the would-be defendant: Consulting counsel, notifying insurers, or preparing incident reports may suggest the party perceived litigation as likely.
• Nature and extent of harm: Serious injuries or large-scale incidents typically make litigation reasonably foreseeable.
• Burden and practices: The burden of preservation and deviation from established preservation policies inform culpability and sanction choice.
• Prejudice: Courts should assess how the loss of evidence impairs the non-spoliating party’s ability to prove claims or defenses.

Once a duty is found and a breach established, courts may impose sanctions ranging from monetary penalties to adverse inference instructions or, in extreme cases, default judgment. The Court reiterates the dual purposes of sanctions—punitive (deterrence) and remedial (restoring the evidentiary balance)—and directs trial courts to tailor sanctions to culpability and prejudice.

Harmless Error: Why No Remand

Ordinarily, the articulation of a new standard would warrant remand. But the Court concludes that any error in imposing an adverse inference was harmless, because the district court’s causation finding did not depend on that inference. The trial court rested causation on:

• Expert testimony explaining that higher concentrations point to the source of contamination and that contamination likely migrated upward from 203E, and
• Testing showing markedly higher meth levels in 203E than in 303E, including a bathroom duct at 44x the regulatory limit, plus contemporaneous injuries to both plaintiffs.

The adverse inference, if it implied that a meth lab likely existed or that more evidence would have been found had the unit been preserved, did not supply the causal link. Therefore, even assuming the sanction was an abuse of discretion under the clarified standard, the error did not affect the judgment and is harmless.

Relationship to Federal ESI Sanctions

The Court notes that Fed. R. Civ. P. 37(e) imposes a heightened “intent to deprive” requirement for adverse inference sanctions when electronically stored information (ESI) is lost. Colorado has no equivalent rule, and Terra Keaten does not import an intent requirement for adverse inferences outside the Rule 37(e) ESI context. Colorado courts remain guided by common law principles—culpability and prejudice in a totality analysis—for non-ESI spoliation.

Impact and Practical Significance

Doctrinal Clarification

• Clear trigger: Colorado now has a uniform, objective standard for when the preservation duty attaches before suit: when litigation is pending or reasonably foreseeable and the evidence is relevant.
• “More than possibility” threshold: Parties need not preserve at the first hint of a dispute, but must act when litigation is likely, imminent, or reasonably anticipated.
• Totality and flexibility: Trial courts retain discretion to weigh facts holistically, including party communications, internal actions (e.g., insurer notice), and seriousness of alleged harm.
• Sanction tailoring: Emphasis on culpability, prejudice, burden, and deviations from policy supports proportionate remedies.

Operational Implications for Businesses, Landlords, and Insurers

• Incident-to-litigation pipelines: Incident reports, regulator inspections, persistent complaints, or severe injuries typically warrant early legal holds. Companies should refine triggers to initiate holds when litigation is “likely” or “reasonably anticipated.”
• Preservation planning: Update policies to preserve both physical evidence (e.g., fixtures, carpets, canisters) and ESI (emails, work orders, maintenance logs, photos, texts) once foreseeability arises.
• Training and audits: Train property managers and frontline staff to pause routine remediation (e.g., renovations) until evidence is documented and, where appropriate, retained. Audit compliance with “do not destroy” procedures.
• Insurer coordination: Notify carriers promptly upon foreseeable litigation; integrate insurer guidance on evidence preservation.
• Document deviations: Because deviations from standard practices can signal culpability, contemporaneously document any necessary departures and reasons (e.g., safety exigencies).

Guidance for Plaintiffs and Their Counsel

• Early preservation requests: Send prompt, specific preservation letters to lock in foreseeability and reduce spoliation risk.
• Avoid mixed signals: Communications suggesting resolution or no litigation may undercut foreseeability; be clear and consistent if litigation is contemplated.
• Independent documentation: As the Keatens did by photographing moved items, document conditions proactively when safe and lawful.

For Trial Courts

• Make findings explicit: Identify when foreseeability arose, the scope of the duty, what was lost, how culpable the spoliator was, and the specific prejudice.
• Calibrate the remedy: Tie the sanction’s content (including any adverse inference wording) to the proven prejudice and purpose (remedial vs. punitive).
• Articulate the inference: Specify what missing evidence would likely have shown and avoid letting the inference substitute for proof on essential elements unless justified by the record.

Sector-Specific Insight: Multi-Family Housing and Environmental Exposures

• Common triggers: Reports of noxious odors, regulator attention, and potential tenant injuries often make litigation reasonably foreseeable—especially where exposures are ongoing and remediation is contemplated.
• Remediation sequencing: Before renovating, photograph, inventory, and, where feasible, retain items and materials likely to bear on exposure causation. Consider neutral third-party testing and sealed storage with chain-of-custody.
• Regulatory overlays: Where agencies set contamination thresholds (e.g., CDPHE meth standards), test results implicating exceedances may strengthen foreseeability.

Complex Concepts Simplified

• Spoliation: Destroying, altering, or failing to preserve evidence that should be kept for a legal dispute. It can be intentional or negligent; both can lead to sanctions.
• Adverse inference: A sanction where the court allows the fact-finder to assume that missing evidence would have been unfavorable to the party that destroyed it.
• “Reasonably foreseeable” litigation: Objectively, a reasonable person in the same position would expect litigation to occur soon—not just a remote possibility, but likely, imminent, or reasonably anticipated.
• Relevance (for preservation): Evidence that bears on issues likely to be disputed in the anticipated case (e.g., causation, notice, damages).
• Premises Liability Act (PLA): Colorado statute governing landowner liability for injuries occurring on their property, focusing on status of the injured party and landowner’s duties.
• Harmless error: A legal mistake that did not affect the outcome; the judgment stands despite the error.
• Exemplary damages: Also called punitive damages; awarded to punish egregious conduct and deter similar future conduct, beyond compensatory damages.

Practical Checklists

When to Issue a Litigation Hold

Consider issuing a hold when one or more of the following are present:

• Persistent complaints or formal notice alleging injury or harm.
• Regulatory inspections or findings suggesting violation or hazard.
• Internal recognition of potential liability (e.g., incident reports, insurer notice, counsel consultation).
• Serious injuries, environmental contamination, or events likely to produce claims.
• Demand letters, preservation requests, or threats of litigation.

What to Preserve

• Physical items: Fixtures, materials removed during remediation, tools, containers, PPE, filters, HVAC components, debris.
• Documents/ESI: Emails, maintenance/work orders, inspection reports, test results, photos/videos, texts and messaging, incident reports, policies and training records.
• Metadata and chain-of-custody: Keep provenance records for integrity and admissibility.

Sanction-Proofing Steps

• Pause non-essential remediation until evidence is documented/preserved or jointly inspected.
• Engage third-party experts for neutral testing when appropriate.
• Document the burden and safety constraints that limit preservation; consider alternatives (photography, sampling, split samples).
• Communicate with the other side about inspections and preservation where feasible.

Open Questions and Future Litigation Frontiers

• Culpability threshold for adverse inferences: Outside the ESI context, Colorado has not adopted an “intent to deprive” requirement for adverse inferences; future cases may refine when negligence versus willfulness suffices.
• Scope and duration of preservation: How far must parties go in preserving large volumes of physical items pending litigation? Courts will likely continue balancing burden and relevance.
• Precision in adverse inferences: This case encourages trial courts to specify exactly what lost evidence would have shown and to ensure sanctions track prejudice, setting a template for future orders.

Conclusion

Terra Management Group v. Keaten establishes a clear, workable rule for precomplaint preservation in Colorado: a duty to preserve relevant evidence arises when litigation is pending or reasonably foreseeable—meaning imminent, likely, or reasonably anticipated—not merely possible. The standard is objective, flexible, and grounded in the totality of the circumstances, including both parties’ conduct and the seriousness of alleged harms. Sanction selection remains tied to culpability, prejudice, burden, and the need to deter and remediate.

Although the Supreme Court affirmed on harmless error grounds because the trial court’s causation finding did not rely on the adverse inference, the decision’s true significance lies in its guidance for litigants and trial courts. Businesses, landlords, insurers, and counsel should recalibrate legal-hold triggers and preservation practices to this clarified foreseeability threshold. Plaintiffs should promptly signal preservation needs and avoid mixed messages about litigation. Trial courts should make explicit findings on foreseeability, the scope of the preservation duty, prejudice, and the precise content of any inference.

In sum, Terra Keaten aligns Colorado spoliation law with mainstream common-law principles, provides concrete factors for assessing prelitigation preservation obligations, and reinforces the judiciary’s commitment to fair and accurate adjudication through properly preserved evidence.