Mark Boswell v. Panera Bread Company
879 F.3d 296
| 8th Cir. | 2018Background
- Panera created a multi-year compensation program promising a one-time, formula-driven bonus (a “JV GM Buyout”) payable ~5 years after an agreement, conditioned on the manager being employed on the payout date.
- Managers were at-will employees; the written Employment & Confidentiality Agreement and Compensation Plan were signed and referenced at-will status.
- In 2010–2011 Panera decided to cap bonuses at $100,000 and announced the cap effective January 2012. No manager complained until 2014, when Boswell and two others sued as a class for breach of contract.
- District court certified a class (~67 managers) and granted summary judgment for the managers, treating Panera’s promise as a unilateral offer that became irrevocable after managers began performance.
- Panera defended on multiple grounds: novation (oral replacement), waiver/estoppel (managers’ silence/continued work), reservation-of-rights (could revoke due to at-will status), and commercial frustration (economic downturn made payments impracticable).
- The Eighth Circuit affirmed: it treated the offer as unilateral, held managers’ beginning performance made the offer irrevocable, rejected novation/waiver/estoppel defenses, and rejected commercial frustration as foreseeable risk.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Nature of the agreement | Managers: written documents enforce a promise to pay the bonus (beyond at-will incidents). | Panera: agreements are bilateral or illusory because managers remained at-will; subsidiary promises are consideration. | Court: agreements were offers of unilateral contracts; continued at-will employment and attendant clauses are incidents and not consideration for a bilateral contract. |
| When unilateral offer becomes irrevocable | Managers: beginning performance (working under plan) made offers irrevocable. | Panera: revocation permissible until substantial performance; argues class members hadn’t substantially performed and Panera reserved power to modify. | Court: under Missouri law, beginning of performance (not necessarily substantial performance) makes the offer irrevocable; Panera’s asserted reservation was not sufficiently clear. |
| Novation / Waiver / Estoppel defenses | Managers: Panera’s cap was a repudiation; managers could continue performing and later sue. | Panera: managers’ silence/continued work constituted novation, waiver, or estoppel to the cap. | Court: novation fails for lack of consideration; continuing to work after repudiation is not waiver or acceptance of a unilateral modification; estoppel not allowed because managers reasonably continued performance to preserve rights. |
| Commercial frustration defense | Managers: downturn was foreseeable; Panera assumed the risk. | Panera: economic downturn made bonus payments too costly, frustrating purpose. | Court: commercial frustration fails because the downturn was foreseeable and Panera should have allocated the risk in the plan. |
Key Cases Cited
- Baker v. Bristol Care, Inc., 450 S.W.3d 770 (Mo. 2014) (continued at-will employment and incidents cannot supply consideration for a bilateral contract)
- Morrow v. Hallmark Cards, Inc., 273 S.W.3d 15 (Mo. Ct. App. 2008) (characterizing at-will employment as unilateral in this context)
- Cook v. Coldwell Banker, 967 S.W.2d 654 (Mo. Ct. App. 1998) (promise to pay bonus to at-will employee is an offer for a unilateral contract)
- Franconia Associates v. United States, 536 U.S. 129 (2002) (repudiation principles: promisee may await performance or treat repudiation as breach)
- DeCoursey v. American General Life Ins. Co., 822 F.3d 469 (8th Cir. 2016) (federal court’s obligation to apply state substantive law in diversity cases)
- Parker v. Pulitzer Publishing Co., 882 S.W.2d 245 (Mo. Ct. App. 1994) (contract should be construed to avoid making terms meaningless or illusory)