Hepler Broom, LLC

Waiting For More Dough: The Eastern District of Missouri Rules that an Offer of Judgment Does Not Moot a Class Action

November 19, 2015

Panera Bread Company is, quite obviously, in the bread business. But when Mark Boswell and others filed a class action against the company for breach of contract and fraud, the case was about a different kind of dough.

Boswell and the other named plaintiffs had served as Joint Venture General Managers for Panera, managing the daily operations of company-owned cafés. Boswell v. Panera Bread Company, No. 4:14-CV-01833 AGF, 2015 WL 6445396, at *1 (E.D. Mo. Oct. 23, 2015).  Panera entered into a standard Employment Agreement with Boswell and other Joint Venture GMs. Id. Under the Employment Agreement, the Joint Venture GMs received a small annual salary. Id. The Agreement also contained a buy-out clause, which entitled the Joint Venture GM to a one-time buyout payment at the end of five years, based on the profitability of the manager’s café (along with other factors). Id. The plaintiffs alleged that Panera modified the Agreements to include a cap on the buyout, short-changing them. Id.

Three months after the plaintiffs moved for class certification, Panera made an offer of judgment to the three named plaintiffs under Rule 68. Id. at *5.  In particular, Panera offered to pay each named plaintiff $1,000 more than the difference between their respective capped and uncapped buyouts, plus prejudgment interest and costs. Id. Predictably, the plaintiffs rejected the offer and also moved to strike them. Id. Panera, in turn, moved to dismiss the putative class action, arguing that the Court no longer had subject matter jurisdiction because the offers of judgment had mooted the case and deprived the named plaintiffs of a personal stake in the litigation. Id. Alternatively, Panera moved to stay the action until the Supreme Court had issued its ruling in Campbell-Ewald, which would decide “whether a case becomes moot when a plaintiff receives an offer of complete relief on his claim, and whether the answer to that question differs in a putative class action.” Id. (citing Campbell-Ewald Co. v. Gomez, — U.S. —, 135 S. Ct. 2311, 2311 (2015)).

The Court rejected Panera’s arguments.  As an initial matter, Panera’s offer of judgment was not complete because the plaintiffs’ allegations, at least at the class certification stage, were sufficient to make a punitive damages award possible. Id. at *7.  With punitive damages still on the table, Panera’s offer was not an offer of complete relief. Id.

But even if it was, the Court found that Panera’s rejected offer could not be used to moot the case. Id. at *8.  Since the Supreme Court’s decision in Genesis Healthcare, “every circuit court to have considered the issue has held that an unaccepted offer of relief does not moot a named plaintiff’s individual or putative class claims.” Id. (referring to Genesis Healthcare Corp. v. Smczyk, — U.S. —, 133 S. Ct. 1523, 1528-34 (2013)).

The Court also denied Panera’s motion for a stay, finding that Campbell-Ewald was “unlikely to affect this Court’s jurisdiction over this case.” Id. at *9.  Curiously, less than two weeks later, the same Court granted a defendant’s motion to stay pending a decision in Campbell-Ewald. See St. Louis Heart Ctr., Inc. v. Athenahealth, Inc., No. 4:15-CV-01215 AGF, 2015 WL 6777873, at *4-5 (E.D. Mo. Nov. 4, 2015) (“Like this case, Campbell–Ewald is a putative class action alleging violations of the TCPA [Telephone Consumer Protection Act], in which the defendant offered the named plaintiff complete relief on his individual claim before a class had been certified.  Plaintiff here does not dispute that Defendant offered it complete relief.”).  Notably, St. Louis Heart Center and Campbell-Ewald both involve putative class actions brought under the TCPA, while Boswell does not. Compare Gomez v. Campbell-Ewald Co., 768 F.3d 871, 873 (9th Cir. 2014) and St. Louis Heart Ctr., Inc., 2015 WL 6777873, at *1, with Boswell, 2015 WL 6445396, at *2.

After denying Panera’s motion to dismiss and stay, the Court turned to the named plaintiffs’ motion for class certification.  Finding that the plaintiffs had met their burden of proving Rule 23’s prerequisites, the Court granted plaintiffs’ motion for class certification. Id. at *15.  On November 6, 2015, Panera appealed the Court’s class certification ruling under Rule 23(f). See Petition for Permission to Appeal Under Rule 23(f), Boswell v. Panera Bread Company, No. 15-8022 (8th Cir. Nov. 6, 2015).  Ten days later, Boswell filed an opposition to Panera’s appeal.  Response in Opposition to Petition for 23(f) Appeal, Boswell v. Panera Bread Company, No. 15-8022 (8th Cir. Nov. 16, 2015).

As of this writing, it remains to be seen whether the Eighth Circuit will bite on Panera’s appeal.  But if the appeal is granted, between the pending decision in Campbell-Ewald and the district court’s class certification ruling, the Eighth Circuit will certainly have plenty to chew on.