Courts have long recognized that sanctions may be imposed when a party destroys evidence relevant to pending claims. The Colorado Supreme Court's decision in Keaten v. Terra Management Group, LLC clarifies a critical question for litigants, property managers, and counsel alike: At what point does the duty to preserve evidence arise before a lawsuit is filed? The ruling delineates an objective, fact-specific standard for determining when litigation is "reasonably foreseeable." The Court's opinion provides both clarity and caution, reinforcing that the preservation obligation extends beyond pending lawsuits to situations where litigation is likely or imminent.
Factual Background
Kathleen and Delaney Keaten resided in an apartment complex owned and managed by the defendants, Littleton Main Street LLC and Terra Management Group, LLC. The Keatens repeatedly complained of severe physical symptoms allegedly caused by toxic fumes emanating from the unit below, which they suspected was being used as a methamphetamine lab. After evicting the downstairs tenant for nonpayment of rent, the property managers discarded the tenant's belongings without photographing them, contrary to company policy, and later renovated and re-leased the unit.
More than a year later, the Keatens sued under the Colorado Premises Liability Act, alleging permanent brain injuries resulting from chemical exposure. Following a bench trial, the court found in their favor, relying on expert testimony, meth residue samples, and medical evidence linking the exposure to their injuries. The court also drew an adverse inference against the defendants for failing to preserve evidence from the downstairs apartment that "would have established a link in the chain of evidence."
On appeal, the Colorado Court of Appeals affirmed. The Colorado Supreme Court granted certiorari to examine the scope of a party's pre-litigation duty to preserve evidence.
Spoilation of Evidence
Spoliation of evidence has long been defined as the "intentional destruction, mutilation, alteration, or concealment of evidence." Black's Law Dictionary (12th ed. 2024). Colorado courts, like those in other jurisdictions, recognize that trial courts possess broad inherent authority to impose sanctions for spoliation. This authority is rooted in the court's responsibility to protect the integrity of the judicial process to ensure confidence in the fairness of the proceedings. Aloi v. Union Pacific R.R. Co., 129 P.3d 999, 1002 (Colo. 2006).
Range and Purpose of Sanctions
Sanctions for spoliation serve both punitive and remedial purposes: they deter parties from destroying evidence and attempt to restore the prejudiced party to the position it would have occupied had the evidence been properly preserved. The available remedies are wide-ranging, from monetary penalties to the most severe consequences- dismissal or entry of default judgment. Aloi v. Union Pacific., 129 P.3d at 1002.
Among these, one of the most common sanctions is an adverse inference instruction, allowing the factfinder to presume that missing evidence would have been unfavorable to the party responsible for its loss. Courts emphasize that this remedy not only discourages misconduct but also mitigates the unfair evidentiary advantage gained through spoilation. Warembourg v. Excel Elec., Inc., 2020 COA 103, ¶¶ 61-62, 471 P.3d 1213, 1225.
Evaluation Culpability and Prejudice
When determining whether to impose sanctions, courts typically assess both the culpability of the party responsible for the spoilation and the degree of prejudice suffered by the opposing party. The analysis is context-specific and guided by principles of fairness and proportionality. A willful or bad faith destruction of evidence justifies stronger sanctions, while negligent or inadvertent spoilation may warrant lesser remedies depending on the extent of prejudice to the non-offending party.
The Duty to Preserve Evidence
Before imposing sanctions for spoliation, courts undertake a three-step inquiry:
- The court must determine whether the missing evidence is relevant to an issue in the case. If the evidence is not relevant, the inquiry ends there.
- If it is, the court must examine whether the party responsible for the loss had an obligation to preserve that evidence.
- Finally, if such a duty existed, the court must decide what sanction, if any, is warranted in light of the destruction and its consequences. Cache La Poudre Feeds, LLC v. Land O' Lakes, Inc. 244 F.R.D. 614, 620-21 (D. Colo. 2007).
When the Duty Arises
The central question in Keaten was when a party's duty to preserve evidence arises before litigation formally begins. In Aloi v. Union Pacific Railroad Corp., 129 P.3d 999 (Colo. 2006), the Colorado Supreme Court held that sanctions are appropriate where a party destroys evidence it "knows or should know will be relevant to litigation." There, the defendant had both a statutory preservation obligation and actual notice of an impending personal injury suit. However, Aloi left open the broader question of when, absent statutory guidance or explicit notice, the duty arises in anticipation of litigation.
In the years since Aloi, Colorado appellate decisions- such as Castillo v. Chief Alternative, LLC, 140 P.3d234 (Colo. App. 2006), and Warembourg v. Excel Electric, Inc., 471 P.3d 1213 (Colo. App. 2020), have clarified that sanctions may be imposed when a party knew or should have known that the evidence was relevant to pending, imminent, or reasonably foreseeable litigation, even if no complaint had yet been filed.
The Colorado Supreme Court's Decision
Building on these precedents and the common law of other jurisdictions, the Colorado Supreme Court in Keaten articulated a clear standard: "A 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. Aloi v. Union Pacific Railroad Corp., 129 P.3d 999, 1002 (Colo. 2006).
The Court explained that while the duty unquestionably attaches upon the filing of a lawsuit, it may arise earlier if litigation is reasonably foreseeable. This standard is "objective, flexible, and fact-dependent, asking whether a reasonable party under the circumstances would have anticipated litigation." Apple Inc. v. Samsung Elecs. Co., 881 F. Supp.2d 1132, 1136-37 (N.D. Cal. 2012).
Importantly, the Court emphasized that the "mere possibility" of a claim does not trigger the duty. A vague threat or distant potential for a dispute is insufficient. Cache La Poudre Feeds, LLC v. Land O'Lakes, Inc., 244 F.R.D. 614, 620 (D. Colo. 2007). Rather, litigation must be imminent, likely, or reasonably anticipated based on concrete facts or communications.
Factors Indicating Foreseeability
The determination of whether litigation is reasonably foreseeable depends on the totality of the circumstances. Courts may consider both parties' conduct and communications. For example, if a plaintiff delays reporting an issue or expressly indicates that no lawsuit is forthcoming, the defendant's preservation duty may not yet be triggered. Conversely, a defendant's actions- such as consulting counsel, notifying an insurer, or undertaking remedial measures- may signal that litigation was anticipated. The severity of the alleged harm also impacts the analysis. Large-scale or serious injuries naturally make litigation more foreseeable than minor or isolated events. Castillo, 140 P.3d at 237.
Determining Appropriate Sanctions
Once a court finds that a duty to preserve evidence existed and was breached, it must then determine an appropriate sanction. This analysis requires balancing multiple factors:
- The culpability if the party responsible for the loss,
- The degree of prejudice to the opposing party, and
- The proportionality of the remedy. Fujitsu Ltd. V. Fed. Express Corp., 247 F.3d 423, 436 (2d. Cir. 2001).
A court may also evaluate whether the burden of preservation was reasonable under the circumstances, whether the destruction deviated from normal business or document-retention practices, and whether the sanction serves the dual purpose of punishment and remediation. Severe sanctions, such as default judgment or adverse inference, are reserved for cases involving willful or bad faith destruction of evidence that materially impairs the fact-finding process.
Any Error in the Case was Harmless
Although the trial court drew a negative inference that the destroyed evidence "would have established a link in the chain of evidence" against the Defendants, it did not specify the precise content of that missing evidence or explain how the inference affected its causation analysis. Even if the missing materials might have supported the Keatens' claim that a methamphetamine lab operated in the downstairs apartment, the trial court did not rely on that inference to establish causation.
Instead, the trial court's ruling rested on extensive expert testimony and objective testing results showing significantly higher concentrations of meth residue in Unit 203E compared to the Keatens' apartment above. The court also found it highly improbable that both plaintiffs, of different ages and medical backgrounds, would simultaneously develop identical neurological symptoms absent exposure to toxic fumes.
Since the causation finding was based in independent evidence, the Supreme Court concluded that any error in the trial court's use of the sanction was harmless. The evidence overwhelmingly supported the conclusion that the fumes from Unit 203E caused the Keatens' injuries. Accordingly, the Court affirmed the judgment of the court of appeals, though on modified reasoning.
Conclusion and Practical Implications
The Keaten decision marks an important clarification in Colorado law regarding when the duty to preserve evidence arises before litigation begins. The Colorado Supreme Court confirmed a party's obligation to preserve relevant evidence extends beyond the moment a complaint is filed; it arises when litigation is "reasonably foreseeable." This standard is objective and fact-specific, balancing the realities of pre-suit investigations with the need to protect the integrity of the judicial process.
Property managers, insurers, and other entities engaged in risk-sensitive operations should document complaints, inspections, and remedial actions with the understanding that such materials may become evidence in future proceedings. Likewise, counsel should advise clients to err on the side of preservation when confronted with serious allegations of injury or property damage.
Ultimately, Keaten strengthens Colorado's jurisprudence on spoilation by aligning it with the prevailing common law approach. Preservation duties arise not from speculation, but from reasonable anticipation of litigation. The decision offers both clarity and caution- clarity in the standard itself, and caution to those who might underestimate the evidentiary and financial consequences of failing to preserve potential proof.
