Emerson Electric Co. v. Yeo

Filing 75

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that Defendant's Motion for Certification of Interlocutory Appeal Pursuant to 28 U.S.C. § 1292(B) 64 is GRANTED. This Court's December 28, 2012 Order is amended to certify the following que stions as modified for immediate interlocutory appeal: 1. Does the 2011 Stock Option Agreement between Emerson Electric Company and Peter Ramos Yeo fail due to lack of adequate consideration under Missouri law barring Emerson from enforcing the restr ictive covenants and forum selection clause contained in that Agreement? 2. Does the District Court lack personal jurisdiction over Ramos Yeo where the only basis for the Court's jurisdiction is the forum selection clause contained in the 2011 S tock Option Agreement between Emerson Electric Co. and Ramos Yeo? IT IS FURTHER ORDERED that Defendant's Motion To Stay Proceedings Pending Interlocutory Appeal 65 is GRANTED in part. The current action is stayed, pending the outcome of Defend ant's application to the Court of Appeals for interlocutory review. IT IS FURTHER ORDERED that Defendant shall file, within seven (7) days of the date of this Order, his answer to Emerson's Verified Petition for Injunctive and Other Relief and Defendant's consent to extension of the existing Temporary Restraining Order. Signed by District Judge John A. Ross on 2/5/13. (LAH)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
EMERSON ELECTRIC CO.,

)
)
)
)
)
)
)
)
)

Plaintiff,
vs.
PETER RAMOS YEO,
Defendant.

Case No. 4:12CV1578 JAR

MEMORANDUM AND ORDER
This matter is before the Court on Defendant’s Motions for Certification of Interlocutory
Appeal Pursuant to 28 U.S.C. § 1292(B) [ECF No. 64] and To Stay Proceedings Pending
Interlocutory Appeal. [ECF No. 65] The motions are fully briefed and ready for disposition.
I. Procedural Background
On August 30, 2012, Plaintiff Emerson Electric Company (“Emerson”) filed its Petition
and Motion for Temporary Restraining Order against Defendant Ramos Yeo (“Defendant”) in
the Circuit Court of Saint Louis County, Missouri. Emerson alleges Defendant, a former
employee of its indirect subsidiary Astec International Ltd., ROHQ (“Astec”), is competing
against Emerson in violation of a non-compete clause included in a stock option agreement he
signed with Emerson (“2011 Stock Option Agreement” or “Agreement”). Emerson filed suit in
the Circuit Court of Saint Louis County, Missouri, based on a forum selection clause in the
agreement. This matter was removed to this Court on September 4, 2012. On September 5, 2012,
Defendant moved to dismiss Emerson’s Verified Petition for Injunctive and Other Relief because
the stock option agreement is not supported by adequate consideration for a non-compete clause
under Missouri law and because the Court lacks personal jurisdiction over him. (Doc. No. 18)
On September 7, 2012, this Court entered its Temporary Restraining Order. (Doc. No. 26) On
September 14, 2012, with the agreement of counsel, this Court denied Defendant’s motion to

dismiss without prejudice and ordered the matter stayed for fourteen days to allow the parties to
submit a joint proposed discovery and briefing schedule for the preliminary injunction hearing.
(Doc. No. 29) When the parties failed to submit a joint proposed schedule, the Court entered a
discovery and briefing schedule on October 5, 2012. (Doc. No. 36) Defendant renewed his
Motion to Dismiss on October 8, 2012. (Doc. No. 37) A hearing was held on December 19, 2012
and on December 28, 2012, the Court denied Defendant’s motion. (Doc. No. 63)
Defendant now seeks to amend that order to certify the following questions of law for
interlocutory appeal: (1) Does the 2011 Stock Option Agreement between Emerson Electric
Company and Peter Ramos Yeo fail due to lack of adequate consideration under Missouri law
barring Emerson from enforcing the restrictive covenants and forum selection clause contained
in that Agreement; and (2) Does the District Court lack personal jurisdiction over Ramos Yeo
where Ramos Yeo does not have minimum contacts with the state of Missouri and the only basis
for the Court’s jurisdiction is the forum selection clause contained in the 2011 Stock Option
Agreement between Emerson Electric Co. and Ramos Yeo. Defendant also seeks a stay of these
proceedings pending interlocutory appeal.
II. Legal Standard
The general purpose of 28 U.S.C. § 1292(b) is “to provide interlocutory appeal in
exceptional cases in order to avoid protracted and expensive litigation.” Paschall v. Kansas City
Star Co., 605 F.2d 403, 406 (8th Cir. 1979); White v. Nix, 43 F.3d 374, 376 (8th Cir.1994). The
burden is on the movant “to demonstrate that the case is an exceptional one in which immediate
appeal is warranted.” E.E.O.C. v. Allstate Ins. Co., 2007 WL 38675, at *2 (E.D.Mo. Jan. 4,
2007) (quoting White, 43 F.3d at 376). To satisfy § 1292(b) requirements, a case must involve
an issue that concerns “(1) a controlling question of law as to which there is (2) a substantial
ground for difference of opinion and upon which (3) a decision will materially advance the
-2-

ultimate termination of the litigation.” Paschall, 605 F.2d at 406. The Eighth Circuit has
emphasized that “it is the policy of the courts to discourage piecemeal appeals because most
often such appeals result in additional burdens on both the court and the litigants.” E.E.O.C.,
2007 WL 38675, at *2 (quoting White, 43 F.3d at 376). See also Control Data Corp. v.
International Business Machines Corp., 421 F .2d 323, 325 (8th Cir.1970). It is within the trial
court's discretion to grant or deny a motion for interlocutory appeal, and also within the
discretion of the court of appeals to certify the appeal. Id. A district court's grant of interlocutory
appeal must be in writing, and must state the basis for the interlocutory appeal. Federal Deposit
Ins. Corp. v. First Nat. Bank of Waukesha, Wis., 604 F.Supp. 616, 620 (D.Wis.1985).
Furthermore, the application for appeal “shall not stay proceedings in the district court unless the
district judge or the Court of Appeals or a judge thereof shall so order.” 28 U.S.C. § 1292(b).
III. Motion for Certification of Interlocutory Appeal
Defendant argues the Court’s December 28, 2012 Order denying his renewed motion to
dismiss involves two controlling questions of law as to which there are substantial grounds for
difference of opinion, and on which a decision will materially advance the ultimate termination
of the litigation. The first question of law is whether the stock option agreement is supported by
valid and adequate consideration. The second question of law is whether the Court has personal
jurisdiction over him where he lacks minimum contacts with the state of Missouri and the only
basis for jurisdiction is the forum selection clause of the agreement. (Memorandum in Support of
Motion for Certification, Doc. No. 66, pp. 5-6) Emerson contends that neither question satisfies
the statutory requirements of section 1292(b). (Opposition to Motion for Certification, Doc. No.
71, p. 3)
A. Controlling Question of Law

-3-

“All that must be shown in order for a question to be ‘controlling’ is that resolution of the
issue on appeal could materially affect the outcome of the litigation in the district court.”
Newsome v. Young Supply Co., 873 F.Supp.2d 872, 876 (E.D.Mich. 2012) (quoting Eagan v.
CSX Transportation, Inc., 294 F.Supp.2d 911, 915 (E.D.Mich.2003)). See also Klinghoffer v.
S.N.C. Achille Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione
Straordinaria, 921 F.2d 21, 24 (2d Cir. 1990) (A question of law is controlling “if reversal of the
district court’s order would terminate the action.”). The question for appeal must be a question of
law as opposed to a question of fact or matter for the court’s discretion. See White, 43 F.3d at
377; Control Data Corp., 421 F.2d at 326.
In this case the order being appealed is a denial of Defendant’s renewed motion to
dismiss the complaint against him. “It is settled in this circuit that “[w]hether a complaint states a
cause of action is a question of law which we review on appeal de novo.” Westcott v. City of
Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990) (quoting Morton v. Becker, 793 F.2d 185, 187 (8th
Cir.1986)). If the Court’s December 28, 2012 Order is reversed on appeal, then the petition filed
against Defendant would be dismissed and the action terminated. Thus, the questions presented
for appeal are “controlling” in that sense. Westcott, 901 F.2d at 1488..
B. Substantial Grounds for Difference of Opinion
Substantial grounds for a difference of opinion exists when: “(1) the question is difficult,
novel and either a question on which there is little precedent or one whose correct resolution is
not substantially guided by previous decisions”; (2) the question is one of first impression; (3) a
difference of opinion exists within the controlling circuit; or (4) the circuits are split on the
question. Newsome, 873 F.Supp.2d at 876-77 (quoting City of Dearborn v. Comcast of Michigan
III, Inc., 2008 WL 5084203, at *3 (E.D.Mich. 2008)). The difference of opinion must arise out of
genuine doubt as to the correct legal standard. Morgan v. Ford Motor Co., 2007 WL 269806, at
-4-

*3 (D.N.J. Jan. 25, 2007). Thus, a moving party's citation to a number of conflicting decisions on
the same issue might constitute a sufficient basis for the finding that substantial differences of
opinion exist See, White, 43 F.3d at 378 (finding that conflicting and contradictory opinions
provide substantial ground for a difference of opinion). “A court faced with a motion for
certification must analyze the strength of the arguments in opposition to the challenged ruling to
decide whether the issue is truly one on which there is a substantial ground for dispute.” APCC
Services, Inc. v. Sprint Communications Co., L.P., 297 F.Supp.2d 90, 98 (D.D.C. 2003) (citing
In re Vitamins Antitrust Litigation, 2000 WL 33142129, at *2 (D.D.C. Nov. 22, 2000)).
In support of his opposition to the Court’s Order, Defendant argues the Order conflicts
with Missouri law regarding illusory promises, see Frye v. Speedway Chevrolet Cadillac, 321
S.W.3d 429, 442 (Mo.Ct.App. 2010) and Fenberg v. Goggin, 800 S.W.2d 132 (Mo.Ct.App.
1990), and overlooks the Fifth Circuit’s decision in Olander v. Compass Bank, 363 F.3d 560 (5th
Cir. 2004). In Olander, the court held that a non-compete agreement contained in a stock option
agreement was unenforceable because the employer’s promises were illusory. “As an at-will
employer, Compass could terminate Olander for good cause, bad cause, or no cause at all. At the
time of termination, the rights under the stock option agreement would disappear.” Id. at 565.
Given the fact that at any time before Defendant’s options vested on October 3, 2012, Emerson
could have terminated his employment, Defendant argues the stock option grant was an illusory
promise. (Memorandum in Support of Motion for Certification, Doc. No. 66, p. 8)
Defendant also argues the Court’s Order conflicts with Missouri law regarding the
adequacy of consideration necessary to support a non-compete agreement, and cites Sturgis
Equip. Co. v. Falcon Indus. Sales Co., 930 S.W.2d 14 (Mo.Ct.App. 1996) (finding a restrictive
covenant contained in a stock purchase agreement between employer and an at-will employee
lacked consideration) and Mayer Hoffman McCann v. Barton, 614 F.3d 893 (8th Cir. 2010)
-5-

(finding a restrictive covenant in a stockholder agreement was supported by adequate
consideration where it provided that the purpose of the non-compete was to protect company’s
special interest ). (Doc. No. 66, pp. 8-10) Defendant states that like the agreement in Sturgis, the
stock option agreement at issue here does not provide that the restrictive covenants are necessary
to protect Emerson’s legitimate interests or that in consideration of the covenants, Defendant
would be given access to confidential information. (Memorandum in Support of Motion for
Certification, Doc. No. 66, p. 10)
Finally, Defendant argues the Court’s ruling that the forum selection clause is valid and
enforceable is contrary to federal law because the clause is unfair and unreasonable and because
Defendant lacks sufficient minimum contacts with the state of Missouri. (Id., pp. 10-12)
Emerson counters that Defendant fails to show a substantial ground for difference of
opinion on the consideration issue in light of Missouri case law holding that continued
employment is sufficient and valid consideration to support a non-compete agreement. See, e.g.,
Safety-Kleen Sys., Inc. v. Hennkens, 301 F.3d 931 (8th Cir. 2002); Easy Returns Midwest, Inc v.
Schultz, 964 S.W.2d 450 (Mo.Ct.App. 1998); Computer Sales Int’l, Inc. v. Collins, 723 S.W.2d
450 (Mo.Ct.App. 1986). (Doc. No. 71, pp. 3-6) “Simply put, if a noncompetition agreement that
hinges upon continued employment is supported by consideration (as is true under Missouri
law), then a stock option noncompete agreement cannot be invalidated for being illusory (i.e.,
lacking consideration) just because the employee is at-will. A contrary ruling adopting
[Defendant’s] argument would mean that all noncompetition agreements which rest upon the
continued employment of an at-will employee could never be enforceable, which is exactly the
opposite of well-established Missouri law.” (Opposition to Motion for Certification, Doc. No.
71, p. 5)

-6-

With regard to the personal jurisdiction issue, Emerson responds that the Court applied
the correct legal standard on the enforceability of forum selection clauses and that a dispute
about the application of law to facts is not a controlling question of law for interlocutory appeal.
Woods v. Christensen Shipyards, Ltd., 2006 WL 4680499, at *4 (S.D. Fla. 2006) (holding the
application of settled law on the enforceability of forum selection clauses to the facts at hand is
not a question of law over which there is a “substantial ground for difference of opinion.”)
(Opposition to Motion for Certification, Doc. No. 71, p. 7) However, Missouri law recognizes
that a forum selection clause may be unenforceable if its application is shown to be unfair or
unreasonable. The sufficiency of the evidence to make a showing that enforcement of the clause
would be unfair or unreasonable is a question of law reviewed independently on appeal. Whelan
Security Co., Inc. v. Allen, 26 S.W.3d 592, 595 (Mo. Ct. App. 2000).
The Court has extensively reviewed the parties’ briefing on Defendant’s motion and the
supporting authorities. As evidenced by the extent of the parties’ dispute on these issues, it is
clear this matter was not definitively guided by previous decisions. Moreover, the Court's own
view is that its ruling was a “close call.” Thus, the Court finds there is substantial ground for a
difference of opinion. See, Newsome, 873 F.Supp.2d at 878.
C. Materially Advance the Ultimate Termination of the Litigation
The third requirement necessitates a showing that the case is an extraordinary case where
“the decision of an interlocutory appeal might avoid protracted and expensive litigation.”
E.E.O.C., 2007 WL 38675, at *5 (quoting U.S. ex rel. Hollander v. Clay, 420 F.Supp. 853, 859
(D.D.C.1976)). In reaching this determination “the district court is well-advised to review the
procedural and substantive status of the case with respect to the progress or completion of
discovery, the disposition of pretrial motions, the extent of the parties' preparation for trial, and

-7-

the nature and scope of the requested relief.” Federal Deposit Ins. Corp. v. First Nat. Bank of
Waukesha, Wis., 604 F.Supp. 616, 620 (D.C. Wis. 1985).
The most persuasive argument to this Court is that both parties are set to engage in
expensive, time-consuming discovery in numerous countries, including the Philippines. No
depositions have been taken, and no scheduling order has been entered. Under the circumstances,
the Court finds an interlocutory appeal would promote judicial economy by settling these
contested questions before—potentially needlessly—occupying the Court's and parties' time and
attention.
In sum, the three requirements for an interlocutory appeal under 28 U.S.C. § 1292(b)
have been met in this case. The Court finds it necessary, however, to modify the question of law
Defendant seeks to certify on the personal jurisdiction issue. The issue of personal jurisdiction,
as it was originally framed for the Court, was tied to the adequacy of consideration issue. In
other words, the enforceability of the forum selection clause was dependent on a finding that the
stock option agreement containing the clause was supported by adequate consideration.
(Renewed Motion to Dismiss, Doc. No. 37, ¶ 7) Here, Defendant reiterates that the personal
jurisdiction issue is “intertwined with the adequacy of consideration argument because it is
undisputed that the only basis for the Court’s jurisdiction over [Defendant] is the Agreement. If
the Agreement lacks consideration such that it is invalid, then the forum selection clause is
invalid, and the Court does not have jurisdiction over [Defendant].” (Reply in Support of Motion
For Certification, Doc. No. 73, p. 3) As the party invoking the forum selection clause, Emerson
did not have to show minimum contacts. CIC Group, Inc. v. Mitchell, 2010 WL 5184990, at *2
(E.D. Mo. Dec. 15, 2010) (citing Whelan Security Co., Inc. v. Allen, 26 S.W.3d 592, 595 (Mo.
Ct. App. 2000). The Court addressed Defendant’s argument that he lacked minimum contacts
with Missouri only to the extent it was based on expense and inconvenience and found it was
-8-

neither unfair, unjust or unreasonable to hold him to his bargain and require him to defend this
action in this Court. Accordingly, the Court will modify Defendant’s second question of law by
deleting the language concerning minimum contacts.
IV. Motion to Stay Proceedings Pending Interlocutory Appeal
Defendant requests the Court stay proceedings, including discovery, pending resolution
of any interlocutory appeal. Defendant stipulates that the TRO issued by the Court on September
7, 2012 will remain in effect, as issued by the Court, up to and through August 31, 2013,1 unless
dissolved or modified earlier by this Court or the United States Court of Appeals for the Eighth
Circuit. (Memorandum in Support of Motion to Stay, Doc. No. 68)
Emerson opposes the broad stay requested by Defendant, and suggests that any stay
include a carve-out requiring Defendant to (1) answer the verified petition, (2) provide his
computer for forensic examination, and (3) give a deposition. (Opposition to Motion to Stay,
Doc. No. 72) Defendant replies that Emerson already has possession of his work computer, but
has produced nothing demonstrating that he copied files or confidential information. (Reply in
Support of Motion to Stay, Doc. No. 74). Defendant argues Emerson’s request for access to his
personal computer is not reasonably calculated to lead to discovery of admissible evidence
because its request is not limited to information related to Defendant’s employment with
Emerson. Given the invasive nature of Emerson’s request, the Court will deny Emerson’s request
for Defendant’s personal computer. The Court will also deny Emerson’s request that Defendant
give his deposition since the very purpose of an interlocutory appeal is to avoid expensive and
potentially unnecessary discovery and litigation. Upon consideration, the Court will grant
Defendant’s motion for stay but require Defendant to answer Emerson’s petition.

1

August 31, 2013 marks the end of the twelve (12) month non-compete period.
-9-

Accordingly,
IT IS HEREBY ORDERED that Defendant’s Motion for Certification of Interlocutory
Appeal Pursuant to 28 U.S.C. § 1292(B) [64] is GRANTED. This Court’s December 28, 2012
Order is amended to certify the following questions as modified for immediate interlocutory
appeal:
1. Does the 2011 Stock Option Agreement between Emerson Electric Company and Peter
Ramos Yeo fail due to lack of adequate consideration under Missouri law barring Emerson from
enforcing the restrictive covenants and forum selection clause contained in that Agreement?
2. Does the District Court lack personal jurisdiction over Ramos Yeo where the only
basis for the Court’s jurisdiction is the forum selection clause contained in the 2011 Stock
Option Agreement between Emerson Electric Co. and Ramos Yeo?
IT IS FURTHER ORDERED that Defendant’s Motion To Stay Proceedings Pending
Interlocutory Appeal [65] is GRANTED in part. The current action is stayed, pending the
outcome of Defendant’s application to the Court of Appeals for interlocutory review.
IT IS FURTHER ORDERED that Defendant shall file, within seven (7) days of the
date of this Order, his answer to Emerson’s Verified Petition for Injunctive and Other Relief and
Defendant’s consent to extension of the existing Temporary Restraining Order.

Dated this 5th day of February, 2013.

JOHN A. ROSS
UNITED STATES DISTRICT JUDGE

- 10 -