Boswell et al v. Panera Bread Company et al

Filing 251

MEMORANDUM OPINION... IT IS HEREBY ORDERED that judgment is entered on behalf of Defendants and against Plaintiffs on Count Four of Plaintiffs Amended Complaint. Signed by District Judge Audrey G. Fleissig on 5/17/2016. (NEB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
MARK BOSWELL, et al.,
Plaintiffs,
v.
PANERA BREAD COMPANY, et al.,
Defendants.

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Case No. 4:14-CV-01833-AGF

MEMORANDUM OPINION
This matter is before the Court following a bench trial to address the only
remaining count in Plaintiffs’ amended complaint: Plaintiffs Mark Boswell and David
Lutton’s (together, “Plaintiffs’”) individual unjust enrichment claims (Count Four).
These claims arise out of the alleged promise of Defendants’ CEO, Ron Shaich, to apply
profit credits to Plaintiffs’ profit-based bonuses, known as “buyouts,” in order to offset
the significant costs incurred in implementing and testing a new operating system in the
cafes for which Plaintiffs served as Joint Venture General Managers (“JV GMs”).
Plaintiffs assert that they implemented the new system in reliance on such promise, but
were not provided profit credits to their buyouts, and that as a result, Defendants were
unjustly enriched. As damages, Plaintiffs seek what they assert is the additional amount
of buyout they would have received had the promised profit credits been applied.
The following findings of fact and conclusions of law are entered based on the
entire record, including the trial testimony and exhibits. As set forth below, the Court
finds that Defendants are entitled to judgment on the unjust enrichment claims.

FINDINGS OF FACT
At all relevant times, Plaintiffs were employed as JV GMs of Panera cafes in the
Charlotte, North Carolina market. In general, Defendants operated their cafes with
general managers (“GMs”) and JV GMs. Both GMs and JV GMs were at-will employees
responsible for managing all aspects of their respective cafes and were ultimately
accountable for the profits and sales in their cafes, though costs and expenses were borne
by Defendants. The JV GM program included three compensation components set out in
a Compensation Plan between the parties: a base salary, monthly bonuses known as
“payouts,” and a long-term, profit-based incentive bonus known as a “buyout,” payable
after five years. The GMs received only a base salary and monthly payouts. The buyout
required the JV GM to remain in his or her position for five years, and the amount of the
buyout turned on the profitability of the JV GM’s cafe in the last two years of the fiveyear period. The last two years of Plaintiffs’ five-year periods were March 2012 to
February 2013 (“Year Four”), and March 2013 to February 2014 (“Year Five”).
In January or February 2013, when Plaintiffs were nearing Year Five, they learned
that Defendants were considering changes to the ordering system in the Panera cafes,
such as installing kiosks. In May 2013, Plaintiffs learned that Charlotte had been chosen
as the test market for a new operating system known as “Panera 2.0” that would include
(1) table service, (2) the kiosk ordering system mentioned above for customers to use
throughout the store, and (3) educating customers on how to use the computers. Plaintiffs
were told at this time that Panera 2.0 would require a significant increase in staffing
levels and operating costs for a period of several months, primarily for labor but also for
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technology and marketing. Plaintiffs acknowledged at trial that they were required to
implement Panera 2.0 if they wished to remain employed, but as at-will employees, they
could have quit rather than implement Panera 2.0.
Plaintiffs began implementing Panera 2.0 in May 2013 by hiring and training staff
to meet the staffing levels required for Panera 2.0. Thus, Plaintiffs’ cafes began incurring
increased labor costs for Panera 2.0 in May 2013. These costs were paid by Defendants,
but any changes to the cafes’ profitability could have affected Plaintiffs’ profit-based
compensation.
On July 21, 2013, Defendants held a meeting for JV GMs and GMs regarding
Panera 2.0. The meeting was held in Charlotte, North Carolina, and Defendants’ CEO,
Shaich, and other executives attended the meeting. During a question-and-answer
session at the end of the meeting, Lutton asked a question about the increased costs of
Panera 2.0 and the effect of these costs on the managers’ profitability. Shaich responded
that the managers should not worry because Shaich was giving them his “personal
guaranty” that they would be “made whole.”
The GMs who attended the July 21st meeting were not eligible for a buyout. And
although Shaich knew that some JV GMs attending the meeting were due to receive
buyouts soon, both Plaintiffs admitted at trial that Shaich did not specifically say that
these JV GMs would receive any sort of profit credit applied to their buyouts. Boswell
further admitted that no representative of Defendant ever told him that he would receive a
profit credit applied to his buyout.
In fact, shortly after the meeting, Defendants began providing profit credits to the
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monthly payouts of Plaintiffs and the other JV GMs1 who implemented Panera 2.0.
Defendants calculated these monthly payout profit credits with the goal of ensuring that
the JV GMs’ monthly payouts equaled their average payouts from the prior year, before
they implemented Panera 2.0.
At some point, Boswell received documentation regarding the profit credits for JV
GMs who implemented Panera 2.0, but the only documentation he ever received in this
regard stated that profit credits would be applied to monthly payouts. This
documentation said nothing about profit credits being applied to buyouts, and Boswell
never objected on this basis. On September 27, 2013, Lutton had a call with Panera
regarding application of Panera 2.0 profit credits to monthly payouts, but buyout credits
were not discussed and Lutton never asked about buyout credits.
Both Plaintiffs received Panera 2.0 profit credits to their monthly payouts, but
neither attempted to track or calculate the amount of these credits.
Boswell’s cafe went live with Panera 2.0 on September 23, 2013, and Lutton’s did
so on December 17, 2013. Boswell’s cafe’s net sales increased from Year Four (March
2012 to February 2013) to Year Five (March 2013 to February 2014), but his operating
costs also increased during this time, driving down his profits. Lutton’s net sales
remained fairly steady from Year Four to Year Five, but his operating costs increased
during this time, thereby decreasing his profits. Both Plaintiffs believed that
implementing Panera 2.0 in their cafes contributed to their increased costs in Year Five,

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The record is unclear whether GMs also received these profit credits to their
monthly payouts.
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but they did not establish with certainty that the increase was solely due to Panera 2.0.
Moreover, both Plaintiffs acknowledged that their cafes did not begin incurring the
Panera 2.0 costs until two months into Year Five (May 2013), and neither Plaintiff
compared the change in his cafe’s sales, costs, and profits by looking solely at the periods
before and after implementing Panera 2.0.
Plaintiffs received their capped buyout payments in May 2014,2 and these buyouts
did not include a Panera 2.0 profit credit. Both Plaintiffs resigned from their employment
in July 2014. Both Plaintiffs admitted that the reason they did not quit earlier was
because they wanted to maintain their eligibility for a buyout, which required continued
employment as a JV GM on the buyout date.
In the summer of 2014, sometime after June 15, 2014, Defendants made the
decision to apply Panera 2.0 profit credits to the buyouts of other JV GMs who
implemented Panera 2.0 in the last two years of their Compensation Plans. Thus, Vickie
Snyder,3 another JV GM who implemented Panera 2.0 in her cafe, received a Panera 2.0
profit credit to her buyout in September 2014. The parties did not submit evidence as to
how these buyout credits were calculated. Neither Plaintiff raised the issue of Panera 2.0
buyout credits with Defendants before learning that Snyder had received such a credit to
her buyout.

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In the first quarter of 2011, Defendants announced their decision to cap the buyout
payments to JV GMs at $100,000, starting in January 2012, a modification this Court has
since held to be unenforceable.
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Snyder is also a class representative for the classwide claims in this lawsuit, which
were previously resolved by summary judgment.
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As damages for their unjust enrichment claims, Boswell seeks $33,015 and Lutton
seeks $42,455. Plaintiffs assert that these figures represent the amount by which their
buyouts would have increased if their cafes had not incurred the costs of implementing
Panera 2.0. Plaintiffs calculated these figures by applying the formula for buyouts listed
in their Compensation Plan based on their cafes’ Year-Four profits alone, instead of also
taking into account their lower Year-Five profits. In interrogatory answers submitted
earlier in the litigation, Plaintiffs offered two other damages calculations (in lower
amounts), but though the calculations themselves are reflected, Plaintiffs offered no
justification or explanation of these earlier calculations.
CONCLUSIONS OF LAW
“To establish the elements of an unjust enrichment claim, the plaintiff must prove
that (1) he conferred a benefit on the defendant; (2) the defendant appreciated the benefit;
and (3) the defendant accepted and retained the benefit under inequitable and/or unjust
circumstances.” Howard v. Turnbull, 316 S.W.3d 431, 436 (Mo. Ct. App. 2010).
“Demonstrating unjust retention of the benefit is the most significant element of unjust
enrichment and also the most difficult to establish.” Jennings v. SSM Health Care St.
Louis, 355 S.W.3d 526, 536 (Mo. Ct. App. 2011). “One thing the courts consider is
whether any wrongful conduct by the defendant contributed to plaintiff's disadvantage.”
Hunt v. Estate of Hunt, 348 S.W.3d 103, 111 (Mo. Ct. App. 2011). “The unjust retention
of benefits occurs only when benefits are conferred (a) in misreliance on a right or duty,
or (b) through a dutiful intervention in another’s affairs, or (c) under constraint.” Id.
Plaintiffs have consistently asserted that Defendants were unjustly enriched in this
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case because they received the benefit of Plaintiffs’ services in implementing the costly
and experimental Panera 2.0; that this benefit was conferred in reliance upon an oral
promise by Shaich to provide Plaintiffs with profit credits to protect their buyouts; and
that it would be inequitable for Defendants to retain the benefit without providing
Plaintiffs their promised profit credits. See Jennings, 355 S.W.3d at 536 (allowing an
unjust enrichment claim to go forward on a similar theory). However, the evidence at
trial established that neither Plaintiff implemented Panera 2.0 in reliance—or
misreliance—on any purported right to a profit credit to his buyout. Both Plaintiffs
admitted at trial that they began implementing Panera 2.0 months before receiving any
purported promise by Shaich and that, in fact, neither Shaich nor any other representative
of Defendants ever promised that a Panera 2.0 profit credit would be applied to their
buyouts. Instead, Defendants’ decision to apply Panera 2.0 profit credits to JV GM
buyouts came after Plaintiffs received their buyouts. At most, Defendants may have
promised Plaintiffs that Panera 2.0 profit credits would be applied to their monthly
payouts, and Defendants fulfilled that promise. And apparently, Plaintiffs did not find
these monthly credits important enough to track, further belying their assertions that
profit credits played a key role in their decisions to implement Panera 2.0 instead of
quitting their employment. Indeed, both Plaintiffs admitted that the reason they did not
quit was not because of any promised profit credits but because they wanted to maintain
eligibility for their buyouts. And of course, there is nothing “unjust” about Defendants
electing to try a new operating system in some of their stores, especially where, as here,
all increased expenses were paid by Defendants. Upon review of the evidence, the Court
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concludes that if Defendants received a benefit from Plaintiffs’ implementation of Panera
2.0, their retention of this benefit under the circumstances of this case is not unjust.
Moreover, Plaintiffs’ have not established damages with sufficient certainty. The
measure of damages for an unjust enrichment claim is “the amount of the enrichment
which, as between the two parties, would be unjust for one party to retain.” White v.
Pruiett, 39 S.W.3d 857, 863 (Mo. Ct. App. 2001). Plaintiffs assert that, in this case, their
damages are the amount by which their buyouts would have increased if they discounted
the costs of implementing Panera 2.0. Assuming, arguendo, that Plaintiffs’ measure is
correct, Plaintiffs admittedly have not calculated their damages under it. Plaintiffs did
not introduce into evidence the costs of implementing Panera 2.0 in their cafes. Rather,
the damages figure they offered at trial reflected the costs their cafes incurred in Year
Five as a whole, which included two months’ worth of costs incurred before Plaintiffs
began implementing Panera 2.0.
In short, the Court finds that Plaintiffs have failed to prove their unjust enrichment
claims, and Defendants are entitled to judgment in their favor on Count Four.

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CONCLUSION
For the reasons set forth above,
IT IS HEREBY ORDERED that judgment is entered on behalf of Defendants
and against Plaintiffs on Count Four of Plaintiffs’ Amended Complaint.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 17th day of May, 2016.

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