Panera, LLC v. James Dobson

United States Court of Appeals
For the Eighth Circuit
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No. 19-1683
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Panera, LLC
lllllllllllllllllllllPlaintiff - Appellant
v.
James Dobson; Krish Gopalakrishnan; James Phillips, also known as Kyle; Act III
Management, LLC
lllllllllllllllllllllDefendants - Appellees
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Appeal from United States District Court
for the Eastern District of Missouri - St. Louis
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Submitted: February 18, 2021
Filed: June 8, 2021
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Before SMITH, Chief Judge, WOLLMAN and STRAS, Circuit Judges.
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SMITH, Chief Judge.
Panera, LLC (“Panera”) appeals from the district court’s order dismissing its
civil action against Act III Management, LLC (“Act III”) and former employees
James Dobson, Krish Gopalakrishnan, and James Phillips (collectively, “individual
defendants”) under the doctrine of forum non conveniens. We dismiss the appeal as
moot and vacate the district court’s order.
I. Background
The individual defendants are former employees of Panera, a fast casual dining
company. The individual defendants executed non-compete agreements with Panera
containing a six-month prohibition on employment with Panera’s competitors. The
non-compete agreements also contained a forum selection clause providing that
litigation take place in Missouri.
Ron Shaich, the former President, CEO, and Chairman of the Board of
Directors of Panera, formed Act III. Act III owns and manages several fast causal
brands. In 2018, the president of one of Act III’s business holdings began working
for Panera. Act III threatened to enforce that president’s non-compete agreement.
Panera claimed the president’s non-compete agreement was invalid. To avoid
litigation, the parties entered into a settlement agreement. That agreement permitted
Act III to solicit and make an offer of employment to Panera employees, provided that
Act III first provide written notice of the offer within a designated time. During that
time, Panera had the option to “negotiate terms for the employee to remain employed
by Panera, or . . . decide that it will waive the terms of any applicable non-
competition agreement.” Panera, LLC v. Dobson, No. 4:19-cv-276-HEA, 2019 WL
1001536, at *1 (E.D. Mo. Feb. 28, 2019). Nothing in the settlement agreement
“waive[d], abridge[d,] or exstinguish[ed] any . . . remedies that the Act III Entities or
such employee may have at law or in equity regarding the applicability or
enforceability of such non-competition agreement.” Id. at *2. The agreement
obligated Panera to act in good faith. Importantly, the settlement agreement also
contained a forum selection clause stating that “the exclusive jurisdiction and venue
for any actions arising out of this Settlement Agreement shall be in any state or
federal court in Delaware.” Id.
On February 5, 2019, the individual defendants informed Panera that Act III
had offered them employment and submitted their resignations. On February 8, Act
III sent formal notice of the offers of employment to Panera and requested that it
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waive the non-compete agreements. The same day, Panera terminated the individual
defendants’ employment. On February 13, Panera informed Act III that it intended
to litigate the non-compete agreements.
On February 21, 2019, Act III filed suit against Panera in Delaware state court
(“Delaware court”), alleging that Panera breached the settlement by (a) “insisting on
enforcing the [individual defendants’] non-competes even though it is not reasonably
necessary for Panera to do so; and (b) failing to assess in good faith the request that
it waive the non-competes.” Id. Panera responded by moving to dismiss or stay Act
III’s complaint on two grounds: (1) Delaware was not the proper forum, and (2) Act
III lacked standing to challenge the enforceability of the individual defendants’ non-
compete agreements.
That same day, Panera also filed the instant action in federal district court in
Missouri. Additionally, it sought a temporary restraining order (TRO) to enjoin the
individual defendants from beginning work at Act III on March 1, 2019. The
following day, Act III moved in the district court to dismiss the case on forum non
conveniens grounds or stay the action.
On February 28, 2019, the district court granted Act III’s dismissal motion. It
concluded that the forum selection clause contained in the settlement agreement
between Panera and Act III required the parties to litigate in Delaware. Panera
immediately filed suit in the Delaware court on March 1, 2019.1 The complaint was
1
Both parties have moved for us to take judicial notice of the Delaware court
proceedings. We grant the parties’ motions. See, e.g., PPW Royalty Tr. by & through
Petrie v. Barton, 841 F.3d 746, 753 (8th Cir. 2016) (“We also take judicial notice of
the opinions and orders from the prior Willits cases, including the facts of what issues
and claims were litigated . . . .”), as amended (Oct. 28, 2016); Donner v. Alcoa, Inc.,
709 F.3d 694, 697 n.2 (8th Cir. 2013) (“We may take judicial notice of the matters
filed in this related case.”); Great Plains Tr. Co. v. Union Pac. R.R. Co., 492 F.3d
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virtually identical to the complaint that the Missouri district court had dismissed the
day prior. Panera simultaneously moved for a TRO—just as it had in the district
court—to prevent the individual defendants from working for Act III. On March 8,
the Delaware court granted Panera’s motion for a TRO. Panera then moved for a
preliminary injunction, which the Delaware court granted.
On March 29, 2019, Panera filed its notice of appeal of the district court’s
dismissal order.
On April 19, 2019, Panera expressly acknowledged to the Delaware court that
it was “accept[ing] and voluntarily submit[ting] to jurisdiction” in the Delaware court.
See Ex. 3 to Appellees’ Motion for Judicial Notice at 1. Panera explained that, “left
with no other option to prevent irreparable harm,” it “consented to venue and
jurisdiction in [the Delaware court] pertaining to its claims for preliminary injunctive
relief” on March 1, 2019. Id. at 2. It assured the Delaware court that it was “not in any
way challenging jurisdiction or venue [in the Delaware court] for this matter.” Id.
Panera represented that the debate over the impact of the district court’s dismissal
order was “rendered moot as to the issue of whether [the Delaware court] c[ould]
exercise jurisdiction because Panera consent[ed] to this venue.” Id. at 6. Nonetheless,
it asserted it was “appealing the Missouri dismissal to protect” its “contractual right
to insist on a Missouri forum in any future litigation regarding its non-compete
agreements.” Id.
II. Discussion
In light of Panera’s acceptance of and submission to the Delaware court’s
jurisdiction and venue, both parties now agree that no actual controversy remains
986, 996 (8th Cir. 2007) (“[W]e may take judicial notice of proceedings in other
courts that relate directly to matters at issue.”).
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concerning proper venue and the appeal is moot.2 The only remaining question is
whether this court should vacate the district court’s dismissal order.
“The statute that enables us to vacate a lower court judgment when a case
becomes moot is flexible, allowing a court to ‘direct the entry of such appropriate
judgment, decree, or order, or require such further proceedings to be had as may be
just under the circumstances.’” Alvarez v. Smith, 558 U.S. 87, 94 (2009) (quoting 28
U.S.C. § 2106). In similar cases of mootness, both our precedent and that of the
Supreme Court typically favor vacating the lower court’s judgment. Id. (citing United
States v. Munsingwear, Inc., 340 U.S. 36, 40 (1950)). Doing so enables the parties to
litigate their issues on a clean slate. Id. (citing Munsingwear, 340 U.S. at 40); see also
Camreta v. Greene, 563 U.S. 692, 712 (2011) (“Our ‘established’ (though not
exceptionless) practice in this situation is to vacate the judgment below.” (quoting
Munsingwear, 340 U.S. at 39)); Moore v. Thurston, 928 F.3d 753, 758 (8th Cir. 2019)
(recognizing that “our normal practice when a civil case becomes moot pending
appellate adjudication” is to “vacate the district court’s judgment”).
“But vacatur is an equitable remedy, not an automatic right.” Moore, 928 F.3d
at 758 (citing U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513 U.S. 18, 23 (1994)
(declining to vacate lower court decision after settlement mooted the case)). “[A]bsent
unusual circumstances, our decision [whether to vacate the lower court judgment] is
informed almost entirely, if not entirely, by the twin considerations of fault and public
interest.” Id. (quotation omitted). The consideration of fault concerns “whether the
party seeking relief from the judgment below caused the mootness by voluntary
action.” Bancorp, 513 U.S. at 24. Vacatur, as an equitable remedy, is generally
inappropriate in circumstances where a losing party essentially arranges an appeal’s
dismissal by settlement. See id. at 25 (“Where mootness results from settlement,
. . . the losing party has voluntarily forfeited his legal remedy by the ordinary
2
Panera conceded at oral argument that the appeal is moot.
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processes of appeal or certiorari, thereby surrendering his claim to the equitable
remedy of vacatur. The judgment is not unreviewable, but simply unreviewed by his
own choice.”). Such voluntary forfeiture of the legal remedy of appellate review also
surrenders the party’s claim to the equitable relief of vacatur of the trial court’s
judgment. Id. And vacatur is not an appropriate remedy when a case is mooted
because the losing party “declined to pursue its appeal.” Id. at 26 (quoting Karcher
v. May, 484 U.S. 72, 83 (1987)).
By contrast, “[a] party who seeks review of the merits of an adverse ruling, but
is frustrated by the vagaries of circumstance, ought not in fairness be forced to
acquiesce in the judgment.” Id. at 25 (emphasis added). “In Alvarez, . . . the Court
interpreted the definition of ‘voluntary action’ narrowly, ruling that the Bancorp
exception to vacatur only applied where mootness is the result of settlement or
something that closely resembles settlement.” Timmins v. Narricot Indus., L.P., 360
F. App’x 419, 422 (4th Cir. 2010) (unpublished per curiam) (emphasis added) (citing
Alvarez, 558 U.S. at 93–96).
The Supreme Court recognized in Alvarez “that, even where a party has
voluntarily mooted the appeal, it is possible for compelling equitable circumstances
to militate strongly in favor of vacatur.” Schell v. OXY USA Inc., 814 F.3d 1107, 1120
(10th Cir. 2016) (citing Alvarez, 558 U.S. at 96–97 (ordering vacatur despite the state
mooting the appeal by voluntarily returning cars and cash that it had seized from the
plaintiffs because the state had done so in the ordinary course of state court
proceedings having no procedural link to the federal case)). “[U]nder a holistic
vacatur analysis, the fact that [a party’s] purpose was unrelated to mooting”
constitutes a “significant” factor. Id. at 1122 (emphasis added).
Along with fault, public interest also plays an important role in determining
whether to vacate the lower court judgment. See Bancorp, 513 U.S. at 26. “Judicial
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precedents are presumptively correct and valuable to the legal community as a whole.
They are not merely the property of private litigants and should stand unless a court
concludes that the public interest would be served by a vacatur.” Id. at 26 (quotation
omitted). “Specifically, the public has an interest in protecting district court
precedents from ‘a refined form of collateral attack:’ the appellant who settles while
appeal is pending and, having rendered the case moot by his own actions, demands
the adverse lower-court opinion be vacated.” NASD Disp. Resol., Inc. v. Jud. Council
of State of Cal., 488 F.3d 1065, 1069 (9th Cir. 2007) (quoting Bancorp, 513 U.S. at
26). But the Supreme Court has “never suggested . . . that the precedential value of
a decision alone renders vacatur inappropriate. Such a rule would swallow
Munsingwear.” Am. Fam. Life Assurance Co. of Columbus v. F.C.C., 129 F.3d 625,
631 (D.C. Cir. 1997).
Here, Panera’s action of filing an identical suit in the Delaware court one day
after the district court’s dismissal in Missouri does not satisfy the Supreme Court’s
narrow definition of “voluntary action” to justify invocation of the Bancorp exception
to vacatur. See Timmins, 360 F. App’x at 422. Panera “did not settle the case, nor did
[it] fail to appeal.” NASD Disp. Resol, 488 F.3d at 1070. The parties continue to
litigate the underlying claims in the Delaware court. And, Panera did appeal the
district court’s dismissal order to this court and argue in its briefing that the appeal
was not moot by virtue of an exception. See Appellant’s Reply Br. at 9. Only at oral
argument did Panera finally concede that the appeal was moot. Panera’s decision to
file suit in the Delaware court was born out of exigency. The individual defendants
were scheduled to begin work with Act III on March 1, 2019. The district court
entered its dismissal order the day before. Time was of the essence for Panera to gain
a TRO to prevent the individual defendants from working for Act III. For that reason,
Panera filed suit against Act III in Delaware and sought a TRO on March 1, 2019. In
sum, mootness was not “the result of settlement or something that closely resembles
settlement.” Timmins, 360 F. App’x at 422. Instead, it was the result of the exigent
circumstances that Panera faced to protect its interests.
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The public certainly has an interest in judicial precedents. See Bancorp, 513
U.S. at 26. But the precedential value of the district court’s judgment is lessened
because the case concerns the interpretation of two specific agreements entered into
solely by these parties affecting only their rights under them. For that reason, the
value of the judgment to the public at large is minimal. Nor is this a case of a settling
party’s “refined form of collateral attack” on a district court’s judgment that the
public has an interest in protecting. NASD Disp. Resol., 488 F.3d at 1069 (quoting
Bancorp, 513 U.S. at 26).
Therefore, we will apply our normal practice of vacating the lower court’s
judgment in a moot appeal. See Alvarez, 558 U.S. at 94; Camreta, 563 U.S. at 712;
Moore, 928 F.3d at 758.
III. Conclusion
Accordingly, we hold that the appeal is moot. We vacate the district court’s
judgment and remand with directions to dismiss Panera’s complaint.
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