Oasis Foot Spa and Massage – Why Spoliation is Relevant in Missouri

By Sanjay Agrawal

Parties and prospective parties in civil litigation have a common law duty to take reasonable steps to preserve evidence relevant to pending or reasonably anticipated litigation. Before the advent of the digital age and its consequential widespread use of electronic media in the storage of documentary information, spoliation of documentary evidence usually took the form of destruction of the document itself — for example, by shredding, burning, or discarding. Today, with the press of a button, a library-size folder of electronic documents can be successfully deleted, destroyed or spoliated in seconds.

It is rare today for a court to address spoliation. However, it is important to show that, at the time the alleged spoliator destroyed the document(s), they did so in breach of an existing duty to preserve such property. The difference between paper and electronic documents is important in the context of trying to determine whether the destruction of a document was intentional, or whether it was done in the normal course of business operations. For example, were the documents destroyed per a company’s retention policy; and therefore, not spoliation per se. It might be easier to establish intentional destruction in the case of paper documents, as that requires some physical activity by the spoliator to effectively cause the destruction.

The doctrine of spoliation has been held to mean that the intentional destruction of evidence carries a rebuttable presumption that the evidence destroyed would have been unfavorable to the party who destroyed it. K.B.,et al., v. Oasis Foot Spa and Massage, LLC and Zenghaou Lu, 2024 WL 4438799], concerns a sexual assault caused by an Oasis’ employee Xing Wu Zang (“Zang”). In Oasis Foot Spa, the circuit court awarded compensatory and punitive damages to six plaintiffs because of spoliation.

Background

Zehnghau Lu owned Oasis Foot Spa and Massage, LLC (“Oasis”) and his wife Angela Zuo (“Zuo”) was responsible for hiring, training and supervising employees. Zang did not have a Missouri license to practice massage therapy but was hired by Zuo based on his experience working for a competitor. Zou failed to conduct a background check. Zhang started in February 2019 and by April 2019, Zou received a complaint that Zhang inappropriately touched J.G. Zou failed to investigate and failed to determine the veracity of J.G.’s complaint. During his employment, Zhang sexually assaulted eight women. In September 2019, after being assaulted, K.B. went to a hospital emergency room where a sexual-assault kit examination was performed and K.B. provided law enforcement with a statement.

Zhang was arrested and the Missouri Board of Therapeutic Massage closed Oasis because of the sexual assaults. In February 2020, Oasis was sold. In October 2020, Plaintiffs filed suit against Oasis alleging claims of negligent hiring and retention and negligent supervision. In 2021, Zuo threw away all of Oasis’s business records, including all client information. Zuo knew of the suit against Oasis, but she testified that she disposed of the documents while cleaning.

The circuit court awarded punitive damages against Oasis. Oasis asserted the punitive damage awards were grossly excessive given the size of the compensatory awards, exceeded what is necessary to punish a closed business, and violated due process.

To determine whether a punitive damages award violates due process, three factors must be considered: 1) the degree of the reprehensibility of the defendant’s conduct; (2) the ratio between the harm the defendant inflicted— measured in actual damages—and the punitive damages award; and (3) a comparison of the punitive damages award and the civil or criminal penalties that could be imposed for comparable misconduct. All Star Awards & Ad Specialties, Inc. v. HALO Branded Sols., Inc., 642 S.W.3d 281, 296 (Mo. banc 2022).

The first factor, the degree of reprehensibility of the defendant’s conduct, is the most important factor. Id. Violent crimes are more serious than nonviolent crimes, and crimes involving “‘trickery and deceit’ are more reprehensible than negligence.” BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 576, 116 S. Ct. 1589, 134 L.Ed.2d 809 (1996). The Court found Appellant’s conduct reprehensible. Appellant’s actions ultimately caused the Plaintiffs to suffer extreme economic, physical and mental harm. The Appellant (a) failed to comply with the State’s rules and regulations by hiring and retaining Zhang; (b) provided Zhang with the unfettered opportunity to repeatedly sexually assault women at Oasis; (c) paid Zhang to do it and turned a blind eye to criminal conduct, and (d) when made aware of an complaint indicating that Zhang had assaulted a client, failed to take the complaint seriously and investigate.

The second factor is the ratio between the harm inflicted and the punitive damage award. The purpose of punitive damage is to have a deterrent effect. The ratio between the compensatory and punitive damages for Plaintiffs ranged from 1.3:1 to 2.1:1. “It is impossible to place monetary value on the physical, mental, and emotional anguish Plaintiffs suffered ....” Ingham v. Johnson & Johnson, 608 S.W.3d 663, 723 (Mo. App. 2020). The Court found the ratio to be low and the imposition of punitive damages supported the State’s interest in deterring companies from failing to follow laws and regulations.

The third factor, which is the least persuasive factor, compares the award and potential civil or criminal penalties. The Court found that Appellant’s misconduct did not comport with a statutory penalty, as violations of common law tort duties rarely are directly in line with statutory penalties. Yet, the State investigated and closed the business. Thus, the Court held that the circuit court did not err in overruling Appellant’s motion for regarding the punitive damage award as a violation of its due process rights.

Appellant argues that (1) there was no evidence of any fraud, deceit, or bad faith in the destruction of Oasis’s records and (2) even if the adverse inference admission were warranted, it went too far because there was no evidence the business records would have put Oasis on notice of Zhang’s dangerous proclivities.

Spoliation is the destruction or significant alteration of evidence. As with any other evidence admitted at trial, the allegedly spoliated evidence must be relevant. In Missouri, the evidentiary spoliation doctrine applies when there is intentional destruction of evidence, indicating fraud and a desire to suppress the truth. The destruction of evidence without a satisfactory explanation gives rise to an inference unfavorable to the spoliator. Finally, although a party must be shown to have intentionally spoliated the evidence, indicating fraud and a desire to suppress the truth, it may be shown by the proponent that the alleged spoliator had a duty, or should have recognized a duty, to preserve the evidence. If the spoliation doctrine is found to apply, the court will allow the requesting party to make an adverse inference regarding the destruction of the evidence. This adverse inference does not prove the opposing party’s case and is limited to punishing the spoliators by holding them to admit that the destroyed evidence would have been unfavorable to their position.

“The evidentiary spoliation doctrine applies when there is intentional destruction of evidence, indicating fraud and a desire to suppress the truth.” Brown v. Hamid, 856 S.W.2d 51, 56-57 (Mo. banc 1993). “To constitute spoliation, the destructive act must be intentional, indicating fraud, deceit, or bad faith.” Marmaduke v. CBL & Assocs. Mgmt., Inc., 521 S.W.3d 257, 269 (Mo. App. 2017). “Spoliators are subject to an adverse evidentiary inference where they are held to admit that the destroyed evidence would have been unfavorable to their position.” Tribus, LLC v. Greater Metro, Inc., 589 S.W.3d 679, 693 (Mo. App. 2019). The spoliation doctrine is designed to punish spoliators and is not concerned with whether those spoliators suffer prejudice. Hill v. SSM Health Care St. Louis, 563 S.W.3d 757, 761 (Mo. App. 2018).

Appellant acknowledged receiving a preservation letter from Plaintiffs in 2019 and served with the petition in 2020. Appellant retained counsel in early January 2021 prior to the destruction of the records. Additionally, Appellant had a regulatory obligation to maintain and preserve all client records for at least three years. 20 CSR § 2197-5.010(1)(F). However, despite this knowledge, Zuo testified she destroyed all of Oasis’s business records in 2021.

Destruction of evidence without an adequate explanation may support an adverse inference. Gilmore v. Mo. Dep’t of Soc. Servs., Children’s Div., 658 S.W.3d 146, 154 (Mo. App. 2022). If the alleged spoliator knew or should have known there was a duty to preserve the evidence, the evidence’s destruction may give rise to an inference of fraud. Morris v. J.C. Penney Life Ins. Co., 895 S.W.2d 73, 77-78 (Mo. App. 1995).

The adverse inference admission stated, “[Appellant] destroyed all Oasis’s business records after this lawsuit was filed. [Appellant] admit[s] that Oasis business records would have contained evidence unfavorable to [Appellant’s] position that they did not have notice of Xing Wu Zhang’s dangerous proclivities while working at Oasis.” However, Appellant failed to make a specific, contemporaneous objection to Plaintiffs’ adverse inference at trial and only raised the adverse inference in motions in limine and in post-trial motion. Thus, Appellant failed to preserve the issue for appeal.

A business should be aware that when there is pending or anticipated litigation to review their retention policies for corporate documents and to place a litigation hold on the destruction of any potential documents. This will prevent the intentional destruction of any potential evidence that may have been unfavorable to their position and avoid the spoliation doctrine.

About Sanjay Agrawal

Sanjay is senior counsel in Tressler's Litigation Practice Group in our St. Louis Metro Area and Chicago, Illinois offices. He focuses his practice on various general defense litigation matters. Sanjay has effectively litigated cases in Missouri as well as in various federal and appellate courts. He is an experienced attorney with over 20 years of legal experience in litigation, appeals, licensing, commercial transactions, due diligence, client counseling, patentability, freedom to operate, cross-border transactions, M&A and technology commercialization. Click here to read Sanjay's full attorney biography.