Duncan v. Woodlawn Mfg., Ltd.

• Decision Date: 17 June 2015
• Docket Number: No. 08–14–00025–CV,08–14–00025–CV
• Parties: Sandy R. Duncan, Appellant, v. Woodlawn Manufacturing, Ltd., Appellee.
• Court: Texas Court of Appeals

479 S.W.3d 886

Sandy R. Duncan, Appellant,

v.Woodlawn Manufacturing, Ltd., Appellee.

No. 08–14–00025–CV

Court of Appeals of Texas, El Paso.

June 17, 2015

Gregory P. Standerfer, Standerfer Law Firm, PC, Chris Miltenberger, Law Office of Chris R. Miltenberger, PLLC, Southlake, TX, for Appellant.

John Bridges Brown, Ogletree, Deakins, Nash, Smoak & Stewart, PC, Dallas, TX, for Appellee.

Before McClure, C.J., Rodriguez, and Hughes, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Justice

Sandy Duncan sued Woodlawn Manufacturing, Ltd. for breach of an employment contract. The jury found that both Duncan and Woodlawn breached the parties' agreement, but Duncan did so first. It also failed to find any damages resulted from Woodlawn's breach. Following entry of a take nothing judgment, Duncan appeals. For the reasons stated below, we affirm.

FACTUAL SUMMARY

Woodlawn makes custom machine parts for the defense industry at an East Texas facility.¹ The plant employed upwards of 150 persons at its peak and has been in operation for some forty years. In 2008, the plant was purchased by Lone Star CRA Fund, LP, which owns a portfolio of different companies.

After the purchase, several Woodlawn senior managers entered into employment contracts with the company. Sandy Duncan was one of them. Duncan had initially been hired as an engineer in 2006, but in December 2009 he was promoted to President and CEO of Woodlawn. He is a degreed engineer with a master's degree in business administration.

Under his employment agreement, Duncan agreed to faithfully perform his duties and responsibilities to the best of his ability. He was to devote his full professional working time, attention, and energies to Woodlawn's business and act in its best interests. He also agreed to comply with all policies, standards, and regulations of Woodlawn. At trial, the parties disputed whether those standards and regulations included the provisions found in a company employee handbook. The handbook included a section entitled "Serious Types of Poor Personal Conduct, Some Actions That May Result in Immediate Discharge" that listed a series of offenses which could result in anything from warnings to immediate termination, depending on the nature, frequency, or severity of the infraction. One of the prohibited offenses was "[i]mmoral or indecent conduct (including suggestive or sexual remarks, propositions, or harassment), and repeated unwelcome comments of a personal nature." Another section prohibited "cursing, obscene remarks, or intimidating language, racial or ethnic slurs, comments or jokes." One section addressing drug and alcohol issues prohibited "Off-duty use, sale, or illegal involvement with drugs or alcohol in any manner which could cause adverse impact on community good-will toward the company...." The employee handbook generally counseled that no "drastic action" would be taken until the employee had been given an opportunity to correct the problem, "except in those cases where immediate discharge is called for by the very nature of the offense."

The employment agreement addressed how Duncan might leave Woodlawn's employment and what compensation would be due him if he did. The termination provisions contemplated four ways in which Duncan might leave: death or disability; termination for cause; termination without cause; and resignation. Only the termination for cause and termination without cause provisions are relevant and we set those out in full:

3. Termination. The Employment Period shall terminate on the earliest to occur of the following:

...

(b) Cause. Employer may terminate the Employment Period for Cause at any time. For the purposes of this Agreement, ‘Cause ’ shall be defined as the following:

(i) Employee's breach of this Agreement, if such breach has not been cured by the Employee within 30 days of his receipt of written notice from the Employer specifying such breach;

(ii) Employee's gross negligence, fraud, or material dishonesty in the performance of the duties assigned to him by Employer pursuant to Section 1(b) hereof, in each such case as determined by the Board of Managers of the Employer's general partner in good faith;

(iii) Employee's violation of the covenant not to compete set forth in Section 6 hereof or unauthorized use of Employer's trade secrets or confidential information, if such violation has not been cured by the Employee within 30 days of his receipt of written notice from the Employer specifying such violation;

(iv) Employee's failure to diligently and effectively perform the duties assigned to him by Employer pursuant to Section 1(b) hereof, if such failure has not been cured by the Employee within 30 days of his receipt of written notice from the Employer specifying such failure;

(v) the indictment of Employee for a felony;

(vi) Employee's declaration of personal bankruptcy; and

(vii) any action taken by Employee which in the reasonable opinion of Employer materially adversely affects the business, goodwill, or reputation of Employer, its employees, or its customers, if such action has not been cured by the Employee within 30 days of his receipt of written notice from the Employer specifying such action.

(c) Without Cause. Employer may terminate the Employment Period for any reason not specifically provided for in this Section 3, or for no reason, upon thirty (30) days' prior written notice to Employee.

Another section dictated what compensation would be due Duncan following termination. Termination for cause limited any severance compensation to his salary through the date of termination, while a "without cause" termination entitled him to other benefits:

4. Effect of Termination.

...

(b) Termination pursuant to Section 3(b). If the Employment Period is terminated pursuant to Section 3(b) hereof, no further compensation shall be paid to Employee after the date of termination (other than base salary and benefits earned through Employee's last day of employment).

(c) Termination Pursuant to Section 3(c). ... If the Employment Period is terminated pursuant to Section 3(c) hereof after May 27, 2009, Employer shall, as liquidated damages or severance pay, or both, continue to pay the base salary and benefits provided in Attachment 1 for six months. Employee shall also be entitled to a bonus, payable following the end of the fiscal year in which such termination occurred, equal to the amount Employee would have been entitled to receive pursuant to the calculation set forth in Attachment 1.

Woodlawn terminated Duncan for cause on October 8, 2010. The reasons developed at trial are sordid at best, but require recounting. First, Woodlawn contended that Duncan had several sexual liaisons with subordinate employees which reflected adversely on the workplace, and exposed the company to potential sexual harassment liability.

E.P.² started as an employee on the production floor. Duncan's mother, who was an administrative assistant, made the decision to bring her into the office to work as a receptionist. Duncan began seeing E.P. in the early summer of 2009 and had sexual relations with her. She was nineteen at the time. He admitted to having sex with her on four occasions, including while he was President and CEO. After their third liaison, E.P. was promoted from receptionist to become Duncan's administrative assistant. At trial, Duncan testified he was comfortable with sexual relations with his administrative assistant and contended it affected neither his, nor her, job performance. He even suggested to his wife that the three of them engage in a "threesome." Word of his relationship with E.P. spread to several individuals at the plant. The relationship was stormy at times, and Duncan admitted to having at least one long conversation with her in his office, with E.P. in tears. Some of his efforts to console her were also documented on company emails, sent during working hours.³

Duncan also had a relationship with another employee, B.M., who started as an hourly employee, left the company, and was later rehired by Duncan. After re-hiring her, Duncan shared with B.M. that he had a sexual relationship with E.P. B.M. came up to him on the factory floor and slipped her phone number into his pocket. That started a flirting episode lasting over a year which finally lead to one sexual encounter in March 2010. B.M. was 28 at the time, and Duncan admitted that he was old enough to have been her father.

B.M. later left the company and filed for unemployment. The affair came to light at Woodlawn when B.M. called Duncan to complain that the State was seeking reimbursement for some of the unemployment benefits paid her. She threatened to "make trouble" for Duncan, which he interpreted as filing a sexual harassment charge, unless he paid the chargeback. Duncan did in fact pay her from funds he borrowed from his family. He documented in an email that: "Rather than having to defend myself to Lone Star Investments, I decided it would be easier on me to pay this amount to her." Duncan denied giving B.M. any preferential treatment at work, but he did personally gift her with items worth $12,000 during their relationship. Several people at Woodlawn were aware of this relationship.

A third sexual encounter occurred with an African American employee named A.W. As Duncan described it, he was driving home from the plant, when A.W. drove by him, flagged him down, and invited him to her apartment. She was a laborer working on the shop floor. The next day, Duncan sent an email on the Woodlawn server to two friends, one of whom was a former Woodlawn employee:

I am definitely going to Hades. Just made out with [A.]. 24 yr old. Gorgeous new employee. Smoking hot BLACK girl. Over the last month, I've had 6 guys in the shop thanking me for hiring the new eye candy. I've taken a shine to her.... Ha! Get it? I said, ‘shine’.

When one of the friends responded saying: "Black? Have you no dignity?" Duncan replied, "Yes, but this one's a very attractive Hi-yellow."⁴ Duncan conceded this email was...