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Boswell v. Panera Bread Co.

United States Court of Appeals, Eighth Circuit

January 5, 2018

Mark Boswell; David Lutton, individually, and on behalf of all others similarly situated; Vickie Snyder Plaintiffs - Appellees
Panera Bread Company, a Delaware Corporation; Panera, LLC, a Delaware Limited Liability Company Defendants-Appellants

          Submitted: September 21, 2017

         Appeal from United States District Court for the Eastern District of Missouri - St. Louis

          Before LOKEN, ARNOLD, and SHEPHERD, Circuit Judges.


         The central issue in this contracts case is whether certain at-will employees can hold their employer, Panera, LLC, to its promise to pay them a bonus. The district court[1] thought so and granted summary judgment to the employees. We agree and affirm.

         In an effort to recruit and retain general managers for its restaurants, Panera created a program under which qualifying managers were eligible to receive a relatively large one-time bonus, among other emoluments. A few years after creating the program, Panera asked the managers to sign an employment agreement that incorporated a compensation plan providing that the one-time bonus would be paid about five years after the manager executed the agreement. The amount of the bonus depended heavily on the profitability of the manager's restaurant over the final two years of the five-year period. To receive the bonus, the manager had to be a manager under the program on the date when the bonus was payable.

         Panera decided in 2010 that it would set a $100, 000 cap on the amount of the bonus because the bonuses would otherwise be too costly. Panera informed its managers of the cap in 2011 and explained that it would become effective in January 2012. Panera received no complaints about the cap until 2014 when one of the managers under the program, Mark Boswell, raised concerns shortly before he received his bonus. Boswell and two other managers, David Lutton and Vickie Snyder, then sued Panera for breach of contract on behalf of themselves and a class of similarly situated managers, maintaining that Panera had violated the agreements by imposing the cap. Panera responded that the parties had orally terminated and replaced-or, in legal parlance, novated-the agreement because the managers, by their words and actions, assented to a new agreement containing the cap. Panera also asserted that the managers had waived any claims they had regarding the cap by continuing to work without complaint or were estopped from raising any claims about it because it was too late. It argued as well that an economic downturn allowed it to impose the cap because the purpose of the contract had been commercially frustrated.

         The district court certified a class of about sixty-seven managers and eventually granted them summary judgment. In doing so, the court rejected the managers' characterization of the agreement as a bilateral contract: The court decided instead that Panera had extended an offer to enter into a unilateral contract and that the offer had become irrevocable because all class members had rendered a substantial part of the requested performance by working at least a year after signing their agreements. The court noted that, even if the agreement amounted to a bilateral contract, Panera's novation defense failed: it held that any supposed novation was not supported by consideration since Panera did not promise to do anything that it was not already obligated to do. The court also rejected Panera's waiver and estoppel defenses because Panera's imposition of the cap was a repudiation of its bonus offer, and the managers were free to continue performing rather than treat the repudiation as an immediate breach. It also rejected Panera's commercial-frustration defense, holding that the economic downturn was a foreseeable event that Panera should have anticipated when making the bonus offer. Panera appeals the district court's grant of summary judgment-a decision we review de novo. Mackey v. Johnson, 868 F.3d 726, 729 (8th Cir. 2017). The parties agree that we apply Missouri substantive law in this diversity case. See DeCoursey v. Am. Gen. Life Ins. Co., 822 F.3d 469, 473 (8th Cir. 2016).

         We note as a preliminary matter that, like the district court (and contrary to the managers' continued insistence on appeal), we think that under Missouri law the agreements amounted to offers by Panera to enter into a unilateral contract. A bilateral contract is a contract containing mutual promises imposing some legal duty or liability on each promisor. Mayer Hoffman McCann, P.C. v. Barton, 614 F.3d 893, 903 (8th Cir. 2010). A bilateral contract, like all contracts, must be supported by consideration, which "consists either of a promise (to do or refrain from doing something) or the transfer or giving up of something of value to the other party." Baker v. Bristol Care, Inc., 450 S.W.3d 770, 774 (Mo. 2014) (en banc).

         The managers here were already at-will employees when they signed their respective agreements, and those documents expressly recognized that the managers would remain at-will employees during the five-year bonus period. Under Missouri law, a promise to continue an at-will employment relationship cannot serve as consideration to create an enforceable contract, see id. at 775, because, as one court explained, at-will employment is terminable at the will of either party on a moment-by-moment basis, so the employment relationship is not legally enforceable. Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15, 26 (Mo.Ct.App. 2008). An employee's promise to work for an employer until the employee decides to quit is therefore not much of a promise at all, at least not one sufficient to serve as consideration. As a result, employment at will can be characterized as a unilateral contract because there is an express or implied promise that the employer will pay if the employee works as directed. Id.

         The managers concede that, under Missouri law, continued at-will employment is not consideration to support a bilateral contract. But, they argue, they made a number of other promises when they signed their employment agreements that do amount to consideration, including a "restrictive confidentiality covenant" under which the managers promised not to disclose "any secret or confidential material or information relating to any aspect of the business or operations of Panera, " promises to abide by forum-selection and choice-of-law clauses, and waivers of the right to recover consequential and punitive damages and the right to a jury trial. We cannot, however, square the managers' argument with Baker, where the Supreme Court of Missouri held that "[n]either Baker's continued at-will employment nor the incidents of that employment provide consideration." Baker, 450 S.W.3d at 776. The Baker court does not go into much detail about what constitutes an "incident" to at-will employment, so we must predict how the Supreme Court of Missouri would flesh out the term, see DeCoursey, 822 F.3d at 476, and we think that that court would conclude that the managers' promises here fit within that category. The employee in Baker made a similar confidentiality covenant, see 450 S.W.3d at 785 (Wilson, J., dissenting), but the Baker court viewed that covenant as an incident to the at-will employment. Id. at 776. The managers' other promises stem from boilerplate contractual provisions that are tied directly to the at-will relationship and not more broadly to other situations. For example, the waiver of the right to recover consequential and punitive damages applies to "any claim directly or indirectly arising from or relating to" the employment agreement. In light of Baker, we think that the Supreme Court of Missouri would classify the subsidiary promises as mere incidents to the at-will relationship, so they likewise cannot serve as consideration for a bilateral contract.

         Our conclusion that the agreement does not constitute a bilateral contract does not, however, conclude the managers' claim. As the district court correctly pointed out, an employer's "promise to pay a bonus in return for an at-will employee's continued employment is an offer for a unilateral contract." See Cook v. Coldwell Banker, 967 S.W.2d 654, 657 (Mo.Ct.App. 1998). An offeror in a unilateral contract receives performance, rather than a promise, as consideration in return for the offeror's promise. Id.

         The question that arises at this point is whether Panera could modify or terminate the terms of its offer to pay the one-time bonus by imposing a cap on it. Generally, an offeror can withdraw an offer at any time before the offeree accepts it. Id. But the Missouri Court of Appeals has said several times that a party may not revoke an offer to make a unilateral contract after the offeree has substantially performed it because the offeree, at that point, has supplied consideration to make the contract enforceable against the offeror to the extent it has been performed, see id., and because "great injustice may arise" if the offeror can revoke an offer after the offeree has spent time and expense in performing. See 1 Williston on Contracts § 5:13 (4th ed. 2017). Panera takes issue with the district court's conclusion that all the managers in the class had substantially performed under the offer as a matter of law so as to render the offer irrevocable.

         We do not think, though, that the Supreme Court of Missouri, if confronted with the issue, would conclude that the offeree of a unilateral-contract offer must render a substantial part of the requested performance to make the offer irrevocable. We think it would conclude instead that an offeree must merely begin performance, and since each of the managers in the class here had at least ...

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