CELANESE, LTD. v. JAMES E. JOHNSTON--Appeal from County Court at Law No 4 of Nueces County

NUMBER 13-02-097-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI EDINBURG

CELANESE, LTD. Appellants,

v.

JAMES E. JOHNSTON, Appellee.

On appeal from the County Court at Law No 4

of Nueces County, Texas.

M E M O R A N D U M O P I N I O N

Before Chief Justice Valdez and Justices Rodriguez and Dorsey //

Opinion by Chief Justice Valdez

James E. Johnston brought suit against his former employer, Celanese Ltd., for breach of contract and defamation after Celanese terminated him, putatively on grounds that Johnston allegedly falsified an expense report. A jury found in favor of Johnston on the breach of contract and defamation claims, and further found that Celanese acted with malice regarding the defamation. The trial court entered judgment in accordance with the verdict. Celanese raises eleven issues on appeal. We reform the award of exemplary damages against Celanese, and, as reformed, affirm the trial court's judgment.

As this is a memorandum opinion and the parties are familiar with the facts, we will not recite them here except as necessary to advise the parties of the Court s decision and the basic reasons for it. See Tex. R. App. P. 47.4.

Defamation

Celanese s fourth, fifth, sixth, seventh, and eighth issues concern the jury s findings regarding defamation. The jury found that Celanese s statements concerning the termination of Johnston s employment for falsification of company documents constituted slander per se and libel per se, and further found from clear and convincing evidence that Celanese s defamatory conduct was performed with actual malice.

In Celanese s fourth issue, it argues that Johnston cannot recover for defamation per se given that the statements at issue were subject to a qualified privilege and there is no evidence of actual malice. In its fifth issue, Celanese asserts that the evidence is legally and factually insufficient to support the jury s finding of actual malice.

A defamatory statement may be subject to a conditional or qualified privilege, which arises out of the circumstances in which an allegedly false statement is published in a lawful manner for a lawful purpose. Hearst Corp. v. Skeen, 130 S.W.3d 910, 926 (Tex. App. Fort Worth 2004, pet. filed). An interest giving rise to a qualified privilege may be that of the publisher of the communication, the recipient of the communication, or a third person. TRT Dev. Co.-KC v. Meyers, 15 S.W.3d 281, 286 (Tex. App. Corpus Christi 2000, no pet.); Pioneer Concrete of Tex., Inc. v. Allen, 858 S.W.2d 47, 50 (Tex. App. Houston [14th Dist.] 1993, writ denied). Similarly, an employer has a conditional or qualified privilege that attaches to communications made in the course of an investigation following a report of employee wrongdoing. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 646 (Tex. 1995); Austin v. Inet Techs., Inc., 118 S.W.3d 491, 496 (Tex. App. Dallas 2003, no pet.). The privilege remains intact as long as communications pass only to persons having an interest or duty in the matter to which the communications relate. Austin, 118 S.W.3d at 496.

In the instant case, the parties stipulated that the communications at issue were subject to a conditional or qualified privilege. However, a conditional or qualified privilege is defeated when the privilege is abused, such as when the person making the defamatory statement acts with actual malice. TRT Dev. Co.-KC, 15 S.W.3d at 286; Grant v. Stop-N-Go Mkt. of Tex., Inc., 994 S.W.2d 867, 874 (Tex. App. Houston [1st Dist.] 1999, no writ); see Hearst Corp., 130 S.W.3d at 926.

In the context of a defamation claim, actual malice means knowledge of, or reckless disregard for, the falsity of a statement. Bentley v. Bunton, 94 S.W.3d 561, 591 (Tex. 2002). Reckless disregard is a subjective standard that focuses on the conduct and state of mind of the defendant. Id. It requires more than a departure from reasonably prudent conduct, and accordingly, mere negligence is not enough. Id. There must be evidence that the defendant in fact entertained serious doubts as to the truth of his publication or evidence that the defendant actually had a high degree of awareness of the probable falsity of his statements. Bentley, 94 S.W.3d at 591. Thus, for example, the failure to investigate the facts before speaking as a reasonably prudent person would do is not, standing alone, evidence of a reckless disregard for the truth, but evidence that a failure to investigate was contrary to a speaker's usual practice and motivated by a desire to avoid the truth may demonstrate the reckless disregard required for actual malice. Id.

A plaintiff is entitled to prove the defendant's state of mind through circumstantial evidence. Bentley, 94 S.W.3d at 591. The evidence necessary to prove malice must be clear and convincing. See Tex. Civ. Prac. & Rem. Code Ann. 41.003(a)(2) (Vernon Supp. 2004); Forbes, Inc. v. Granada Biosciences, Inc., 124 S.W.3d 167, 171 (Tex. 2003). Clear and convincing evidence is that measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. Tex. Civ. Prac. & Rem. Code Ann. 41.001(2) (Vernon Supp. 2004); Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 31 (Tex. 1994).

We conclude that the jury had before it sufficient clear and convincing evidence from which it may have inferred that Celanese in fact entertained serious doubts as to the truth of the publication about Johnston or evidence that Celanese actually had a high degree of awareness of the probable falsity of the allegations against Johnston. Bentley, 94 S.W.3d at 591. Therefore, the statements were not subject to a qualified privilege.

Johnston, an engineer who had worked for Celanese for over eighteen years when he was terminated, was in charge of a Y2K project to anticipate problems with computer systems. He and several other employees worked on the project, which began in earnest in mid 1999. Johnston s grandmother became ill in June and he went to see her in Tennessee. Because it was essential for Johnston to remain in communication with other project members while away, he took his cellular telephone and gave the telephone number to them. The cellular telephone he used was in the name of M & J Photography, a company he and his wife owned. Upon his return, Johnston requested reimbursement from his supervisor, Ted Bensen, for the cell phone expenses. Following a series of communications and revisions // to the original expense report, Celanese terminated Johnston on grounds that he falsified his expense report. The original expense report comprised $689.09 and was accompanied by the cell phone bill showing that amount as roamer charges. Upon questioning, Johnston told Bensen that he did not receive an itemization of the calls and he believed that the roamer charges were incurred because he kept the phone activated, while out of the calling area, in order to communicate with Celanese employees. Johnston believed this was an appropriate business expense because he would not have taken the cell phone with him on his trip but for the need to communicate with team members. Johnston told Bensen he believed all expenses were business-related, and that he would try to obtain a more detailed expense report.

Johnston testified he subsequently received the itemized portion of the cell phone bill which had been forwarded by separate mail from a previous address. He reviewed the itemized portion of the bill and realized that roamer charges were assigned to different calls. Accordingly, he omitted outgoing calls that were not Celanese-related, and submitted a second expense report for approximately $300 to $350. This second report was not kept by Celanese. Johnston included incoming calls because the itemization did not include phone numbers for those calls and Johnston believed all incoming calls were business-related.

When Johnston submitted the second report, he explained to Bensen that he had not received the itemized portion of the bill when he submitted the original expense report. Johnston testified that he told Bensen he had misunderstood what the roaming charges were and how they were calculated and that he did not realize that an itemization of calls should have come with the statement, but was delayed. Johnston explained his reasoning and calculations for submitting the second report. Bensen reviewed the bill and questioned the timing of some of the incoming calls as being outside of business hours. Johnston replied that Ted, I m sorry. I did not specifically go through and look at dates and times . . . but if you have a problem with it let me have it back and I ll just delete them. I mean, I m not going to argue with you over them. Johnston offered to remove even Celanese-related calls if Bensen questioned them. At trial, Bensen acknowledged Johnston s offer: He tried to say that and I told him that was not what he needed to do. He needed to just take a look and assess which ones were personal and which ones were business. It was his responsibility to do that. Bensen told him to take a shot at separating the personal and business calls.

Johnston checked with his wife, who did not recall anyone other than Celanese employees calling the cell phone. Nevertheless, Johnston again revised the expense report to what he considered to be the absolute minimum business expenses, and submitted a final report for $228.73. In reaching this figure, Johnston deleted all incoming calls from his calculation even though he had unquestionably received incoming calls for business purposes. Celanese paid this bill. At trial, Johnston testified that, after further reviewing the bill, he would have been entitled to $417 as an appropriate business expense.

After submission of the first expense report, Bensen contacted his supervisor, Jeff Kirk, with his concern over the amount. Bensen expressed concern that Johnston had deliberately submitted a false expense statement knowing it included calls that were not Celanese-related, and Bensen said that Johnston had stated that the report contained only business-related calls. The next day, August 18, Bensen and Kirk met with Ken Davis, the director of human resources at the plant, and legal counsel. They decided to put the question of Johnston s conduct and future to Darrell Nordeen, the director of the Celanese facility.

Nordeen, Bensen, Kirk, Davis, and Bee Schuck, a human resources supervisor over Bensen s area of responsibility, met the next day. At this meeting, Bensen relayed the circumstances surrounding submission of the expense reports, but failed to recount Johnston s explanations. Instead, Bensen affirmatively represented to the group that Johnston had no explanation. According to Nordeen, [Bensen] said that Jim Johnston could not and did not did not offer explanation. According to the summary of the meeting wherein Celanese determined to terminate Johnston:

The issue of the sizeable $$ variance between the first and fourth expense report was discussed. The consensus was that the $$ amount was of little importance but the fact that Jim had not offered any plausible explanation caused great concern. That is, when Ted and Jim discussed the various expense reports, Jim never said that he d made a math error, that he misunderstood what Celanese would cover as business related, that he d assumed too much. Instead, each time, Jim had stated verbally and via his signature, that the $$ were business related and reimbursable to him.

At this meeting, Bensen unequivocally recommended termination based on the original report, despite the fact that Bensen expressly viewed the later reports as works in progress. The group agreed, and Bensen and Schuck terminated Johnston on August 24, 1999.

After being informed that he was terminated for deliberately falsifying his expense report, Johnston testified that I turned to Ms. Schuck and I said, Bee, you ve known me for years. This is not deliberate. What is going on here? And she she turned away and she went, I know. Johnston further testified that Schuck told him It really doesn t matter whether it s deliberate or not. // Johnston attempted to explain the reports, but at some point, Schuck interceded to stop the explaining. At trial, Celanese employees generally concurred that if the error in the expense report had been a mistake or unintentional it would have prevented a finding of deliberate falsification. Bensen admitted that if Johnston truly believed that the roamer charges were assessed only on incoming calls, then that would have been a reasonable explanation for the error on the original report.

According to the evidence at trial, Celanese failed to follow its own written policy regarding the termination of an employee for cause. Celanese contended that it terminated Johnston under that part of its written policy allowing immediate discharge for [d]eliberately falsifying records. However, the written policies provide, in part, that:

B.If the offense occurs on a night shift, week-end, or holiday, the supervisor of the offending employee sends the employee home and instructs him/her to report to the Human Resources Department normally at 10:00 a.m. on the next work day, exclusive of Saturday, Sunday, or holiday.

C.The department section leader arranges a meeting with a representative of the Human Resources Department to review the case.

D.Normally at 10:00 a.m. on the next work day, the offending employee, the supervisor, 2nd level supervisor, department section leader, and Human Resources representative meet and proceed in accordance with Paragraphs E and F below[.]

E.The supervisor of the offending employee reports the circumstances and the employee is given an opportunity to present facts in the case.

F. After completion of the hearing, the employee s immediate supervisor, 2nd level supervisor, section leader and a representative of the Human Resources Department will recommend to the employee s department manager and to the respective Plant Manager what corrective action should be taken.

G. If the disciplinary action is discharge, the department section leader secures the approval of the department manager, Human Resources Manager, and the Plant Manager.

* * *

I.In all cases involving corrective action, timing is important. Once it has been decided that corrective action may be necessary, the fact finding group will meet within 24 hours. The results of their findings and recommended action to be taken will be presented to the employee s department manager and respective Plant Manager within 24 hours of the fact finding meeting.

In all corrective action cases, the Plant Manager has the final approval.

An employee shall not be discharged without being notified of the reason for his/her discharge, and he/she shall be given an opportunity to be heard in his defense in the presence of his department manager and the Human Resources Manager.

The jury may have concluded that Celanese failed to follow this policy with respect to timing. Despite the policy requirement of moving quickly in cases of serious infractions, fifteen days elapsed between the submission of the original expense report on August 9, 1999, and Johnston s termination on August 24, 1999.

More significantly, however, Celanese failed to follow the policy with regard to its requirement of an investigative fact-finding meeting wherein [t]he supervisor of the offending employee reports the circumstances and the employee is given an opportunity to present facts in the case. Instead, Johnston was terminated based solely on Bensen s version of events, which varied in material respects from Johnston s explanation. The jury may have inferred that the failure to allow Johnston a hearing was deliberate given that Celanese employees were well-aware of the seriousness of the allegation against Johnston. Nordeen, for instance, admitted he would not hire an applicant who had been terminated for falsification of documents, and that such an allegation would be absolutely fatal to any prospect for employment. The jury may have drawn similar inferences from the fact that the committee took time to consult with Celanese s lawyer, but not with Johnston as its policies required.

While Bensen testified that he felt no hostility for Johnston, the jury heard contrary testimony indicating that Bensen was hostile to Johnston. Nan Flaten, who had animosity towards Johnston, warned Bensen to watch out for Johnston when Bensen became his supervisor. At Bensen s first meeting with Johnston, Bensen accused Johnston of handling personal business on company time. Bensen questioned Johnston about the prudence of using a cell phone to conduct business. Bensen admitted his mind was made up that Johnston should be terminated when Johnston submitted the second report.

The jury also heard evidence indicating that, although Johnston s salary had been included in the budget for the coming year, Celanese was in a constant mode of continuing to try to find cost reduction ideas to make sure our businesses can stay profitable and stay in operation, so there s always cost reduction initiatives and ideas being considered. Bensen and Flaten were specifically working on a cost reduction project which included personnel reduction. The jury may have inferred that Bensen and Flaten saw an opportunity to terminate an employee they did not like and at the same time promote a cost cutting project under their management.

Ultimately, the jury may have concluded that some of Celanese s actions were inconsistent with its contention that the original report was deliberately falsified. The jury is the sole judge of the credibility of the witnesses, and could have believed Johnston s testimony regarding the expense report rather than the testimony of the witnesses for Celanese. Silcott v. Oglesby, 721 S.W.2d 290, 293 (Tex. 1986); Gorges Foodservice, Inc. v. Huerta, 964 S.W.2d 656, 666 (Tex. App. Corpus Christi 1997, no writ). The jury s verdict was supported by more than a scintilla of evidence, and was not so against the great weight and preponderance of the evidence as to be manifestly unjust. Maritime Overseas Corp., 971 S.W.2d at 406-07. We conclude that Johnston presented legally and factually sufficient evidence to support the jury s finding that Celanese defamed Johnston and that the defamation was motivated by malice. Celanese s fourth and fifth issues are overruled.

In its sixth issue, Celanese contends that Johnston s defamation claim must fail because truth is an absolute defense. We agree that truth is a defense to defamation. See Tex. Civ. Prac. & Rem. Code Ann. 73.005 (Vernon 1997). The statement need not be true in every detail; substantial truth is sufficient to establish the defense. McIlvain v. Jacobs, 794 S.W.2d 14, 15-16 (Tex. 1990). Given the conflicting testimony from Johnston and the Celanese witnesses, the jury could determine that Celanese s statements regarding Johnston s alleged falsification of company documents were not substantially true. We are not at liberty to substitute our judgment for that of the jury. See Pool v. Ford Motor Co., 715 S.W.2d 629, 634 (Tex. 1986). Accordingly, we overrule the sixth issue.

Celanese argues in its seventh issue that Johnston s claim for libel per se must fail on grounds that there is no evidence that a document stating that Johnston falsified company documents was ever published to a third party.

As an initial matter, we note that Celanese does not raise an issue regarding Johnston s claim for slander per se. In the instant case, the alleged publications occurred both orally and in written format. The oral statements that constitute Johnston s slander claim were made on several occasions. First, Johnston s supervisor, Bensen, told Kirk, who told Davis and Nordeen. Bensen then met with Kirk, Davis, Nordeen, Schuck, and an attorney. The following day, the same committee met and voted to terminate Johnston.

Moreover, following Johnston s termination, Davis, the human resources manager, spoke with his human resources representatives in an educational way and shared with them the facts of the case, specifically identifying Johnston by name. According to Davis, there were new employees at that meeting, and at least one employee who did not know Johnston. Davis conceded he did not need to name Johnston by name to get his point across.

Statements are considered published, even if they are made only to other employees or managers. See Stephens v. Delhi Gas Pipeline Corp., 924 S.W.2d 765, 769 (Tex. App. Texarkana 1996, writ denied). We conclude that there is sufficient evidence to support a claim for slander per se, and the judgment can rest on that alone.

However, even if we were required to examine the record for evidence supporting the jury s findings of libel per se, we would reach a similar result. In terms of written documentation, the allegations were made in Johnston s personnel file, Nordeen s letter of termination, minutes of meetings and notes, and in submissions to the Texas Workforce Commission. Celanese, the appellant with the burden of proof on this issue, has neither argued nor cited any authority indicating that such submissions do not qualify as libelous publications.

We conclude that the communications that Johnston deliberately falsified documents constitute publication of the defamation. The defamation was communicated within the company, even following the investigation and Johnston s termination, and without the company to the Texas Workforce Commission. We overrule Celanese s seventh issue.

Celanese argues in its eighth issue that Johnston cannot prevail on his claims because Johnston obtained a new job shortly after the termination and no prospective employer testified to knowledge of the defamatory statements. This argument is premised on Reeves v. Western Co. of N. Am., 867 S.W.2d 385, 395 (Tex. App. San Antonio 1993), overruled on other grounds, Cain v. Hearst Corp., 878 S.W.2d 577 (Tex. 1994). In Reeves, a job applicant sued his potential employer for defamation after he was denied employment for testing positive for alcohol use.

Reeves is distinguishable from the instant case. In Reeves, there was no evidence that the defamatory statements were published. See id. Instead, the applicant argued that he would be compelled to tell other prospective employers of the defamation. In affirming the trial court s ruling against the applicant, the court of appeals found no evidence of compelled self-publication, and stated that Speculation about possible consequences if a prospective employer knew Reeves did not pass the alcohol test will not support this claim. See id.

In the instant case, the record contains evidence that the defamatory statements were published, and, accordingly, this case does not rely on speculative issues regarding self-publication. The eighth issue is overruled.

Damages

Celanese s final three issues attack the jury s award of damages. In its ninth issue, Celanese asserts that the jury s award of $250,000 in general damages for the defamation was not supported by legally or factually sufficient evidence and was excessive.

In a case of slander or libel per se, no independent proof of damage to the plaintiff's reputation or of mental anguish is required because the defamation itself gives rise to a presumption of these damages. See Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 374 (Tex. 1984); Peshak v. Greer, 13 S.W.3d 421, 427 (Tex. App. Corpus Christi 2000, no pet.); Wal-Mart Stores, Inc. v. Odem, 929 S.W.2d 513, 527 (Tex. App. San Antonio 1996, writ denied). Damages resulting from slander are purely personal and cannot be measured by any fixed rule or standard, and the amount awarded rests largely in the discretion of the jury. See Fontenot Petro-Chem & Marine Servs. v. Labono, 993 S.W.2d 455, 459 (Tex. App. Corpus Christi 1999, pet. denied); Wal-Mart Stores, Inc., 929 S.W.2d at 527; Shearson Lehman Hutton, Inc. v. Tucker, 806 S.W.2d 914, 924 (Tex. App. Corpus Christi 1991, writ dism'd w.o.j.). In such a case, we will not disturb a jury's award of actual damages unless the record indicates the award was excessive or was the result of passion, prejudice, or other improper influence. Wal-Mart Stores, Inc., 929 S.W.2d at 527. In the instant case, the record is devoid of any such indication. Moreover, the damages awarded are well within the range of damages previously upheld by this Court for defamation. See, e.g., Shearson Lehman Hutton, Inc., 806 S.W.2d at 924; (upholding damages of $317,191.66); Vista Chevrolet, Inc. v. Barron, 698 S.W.2d 435, 443 (Tex. App. Corpus Christi 1985, no writ) (upholding damages of $500,000). Accordingly, we decline to disturb the jury s award. We overrule Celanese s ninth issue.

In its tenth issue, Celanese asserts the evidence is legally and factually insufficient to support the exemplary damages awarded. Celanese argues that the exemplary damages awarded do not relate to the nature of the wrong allegedly committed, the extent or type of harm resulting from such conduct, the character of the alleged conduct, or the degree of culpability.

In the instant case, the jury awarded $1,500,000 as exemplary damages. The trial court reduced this award pursuant to statute, and the judgment awarded Johnston exemplary damages in an amount equal to non-economic damages of $250,000, plus twice the economic damages of $32,250, for a total of $314,500. See Tex. Civ. Prac. & Rem. Code Ann. 41.008 (Vernon Supp. 2004).

We review the excessiveness of an exemplary damages award under state law as a factual sufficiency challenge. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406 (Tex. 1998); Baribeau v. Gustafson, 107 S.W.3d 52, 61 (Tex. App. San Antonio 2003, pet. denied). We may only reverse if the exemplary damages award is so against the great weight and preponderance of the evidence as to be manifestly unjust. Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 30 (Tex. 1994); Baribeau, 107 S.W.3d at 61. No set rule or ratio between actual and exemplary damages exists which would indicate that the exemplary damages awarded in this case were excessive. Alamo Nat'l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex. 1981). Factors we consider in determining the reasonableness of an award include: (1) the nature of the wrong; (2) the character of the conduct involved; (3) the degree of culpability of the wrongdoer; (4) the situation and sensibilities of the parties concerned; and (5) the extent to which conduct offends a public sense of justice and impropriety. Tex. Civ. Prac. & Rem. Code Ann. 41.011 (Vernon 1997); Kraus, 616 S.W.2d at 910

Johnston, an employee of eighteen year s duration, was terminated for cause on grounds he deliberately falsified company documents. Celanese witnesses conceded that this was a serious allegation that would potentially eliminate Johnston s future job possibilities. Celanese admitted it would not hire someone who had been charged with such conduct. Johnston testified that the charge jeopardized his professional designation as an engineer. One of Johnston s colleagues testified that this incident damaged Johnston s professional reputation.

In terms of the specific document that was allegedly falsified, the expense report, the jury may have considered that the expenses were incurred as a result of Johnston s performance of work for Celanese, without compensation, while on leave to see his dying grandparent. Further, Johnston was terminated based on his initial expense report even though subsequent reports were treated as works in progress. The evidence indicated that Johnston repeatedly revised the report while consistently offering to eliminate unacceptable charges. In fact, under the evidence adduced at trial, Johnston s final expense report underestimated his actual expenses by some $188.27.

The jury further heard evidence that Celanese failed to follow its own policies and procedures with regard to investigating Johnston s alleged misconduct. Celanese failed to give Johnston the required notice or hearing regarding the allegedly falsified expense report. Perhaps it was significant to the jury that Celanese instead took time to include the company lawyer in the meetings preceding Johnston s termination. Celanese made its determination to terminate Johnston based solely on Bensen s recommendation. Bensen did not convey Johnston s explanation regarding the error to the other Celanese employees, and told them, to the contrary, that Johnston offered no explanation. Celanese witnesses admitted that it would not be grounds for termination if Johnston had merely made a mistake on the expense report. The jury had sufficient evidence before it to conclude that a Celanese witness thought that Johnston had made a mistake on his expense report, but nonetheless proceeded with termination for intentional falsification of a company document.

The jury was properly instructed on the Kraus factors, and the record contains competent evidence to support the award. We hold that the evidence is factually sufficient to support the award. Evidence which is factually sufficient is necessarily legally sufficient. Baribeau, 107 S.W.3d at 63. We overrule Celanese s tenth issue.

In its eleventh and final issue, Celanese asserts the award of $314,500 in exemplary damages is excessive and is erroneous because it includes the breach of contract award. We have already addressed Celanese s argument that the exemplary damages awarded are excessive and need not further address that argument herein. However, we agree with Celanese s remaining argument that exemplary damages may not be awarded for breach of contract.

Exemplary damages are not recoverable in a breach of contract action. See Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex. 1995) (breach of contract alone will not support punitive damages; existence of independent tort must be established). Therefore, it follows that economic damages arising from a breach of contract may not be used to increase the statutory cap under section 41.008. Signal Peak Enters. of Tex., Inc. v. Bettina Invs., Inc., 138 S.W.3d 915, 928 (Tex. App. Dallas 2004, no pet. h.).

Accordingly, the exemplary damages awarded should not include economic damages awarded on Johnston s breach of contract claim. The trial court's judgment should be reformed to reflect an award of exemplary damages against Celanese of $250,000.00. See Tex. Civ. Prac. & Rem. Code Ann. 41.008(b)(1)(A) (Vernon Supp. 2004). We sustain Celanese s eleventh issue.

Breach of Contract

Celanese s first three issues on appeal concern the jury s award of separation pay to Johnston. The jury found that Celanese and Johnston agreed that, in the event of termination without cause, he would be provided separation pay, and Celanese failed to comply with this agreement. Johnston was awarded $32,250 for separation pay. //

Celanese contends that (1) its separation pay policy is not a contract, (2) the statute of frauds precludes Johnston s oral claim for breach of contract, and (3) Johnston was ineligible to receive separation pay under any alleged contract. Johnston does not dispute that Celanese had the right to terminate his employment at any time for any reason, but he asserts that he was entitled to separation pay if he was discharged without just cause.

In its first issue, Celanese asserts that its separation pay policy is not a contract, and accordingly, it may not be held liable for any alleged breach thereof. Celanese relies on authority holding that provisions of an employee handbook do not create property rights or an alteration of an employee s at-will status. See Guinn v. Bosque County, 58 S.W.3d 194, 201 (Tex. App. Waco 2001, pet. denied). Without doubt, [i]n an employment-at-will relationship, either party may modify the employment terms as a condition of continued employment. Werden v. Nueces County Hosp. Dist., 28 S.W.3d 649, 652 (Tex. App. Corpus Christi 2000, no pet.) (quoting Gamble v. Gregg County, 932 S.W.2d 253, 256 (Tex. App. Texarkana 1996, no writ)). Here, however, modification of the at-will employment status of Johnston is not at issue; rather, the sole issue is whether Celanese was required to pay Johnston separation pay if it discharged him without good cause.

Although an at-will employment relationship allows either party to end it without penalty, the employee is entitled to be paid for labor performed prior to termination. Harrison v. Gemdrill Intern., Inc., 981 S.W.2d 714, 718 (Tex. App. Houston [1st Dist.] 1998, pet. denied); see Tex. Lab. Code Ann. 61.019 (Vernon Supp. 2004). Similarly, he is entitled to other benefits he was promised and in existence during his employment and when it ended, even though the employer may have retained the right to modify those benefits. Hamby Co. v. Palmer, 631 S.W.2d 589, 591 (Tex. App. Amarillo 1982, no writ); see Tex. Lab. Code Ann. 61.001 (Vernon 1996).

Johnston testified that when he was initially offered employment with Celanese, he was told he would be entitled to separation pay if he were to be involuntarily terminated without cause. He testified that the separation pay policy was one of the reasons he accepted employment with Celanese.

Celanese s plant manager, Darrell Nordeen, and its human resources director, Ken Davis, agreed that Celanese s separation pay policy had not changed since Johnston was employed. All of the witnesses for Celanese admitted Johnston would have been entitled to separation pay if Celanese had fired him without good cause, and that the only reason Johnston was not paid separation pay was because he was terminated for falsification of company documents. Accordingly, we conclude that Johnston was entitled to separation pay. We overrule Celanese s first issue.

According to Celanese s second issue, any alleged contract for separation pay violates the statute of frauds because it is not to be performed within one year and therefore cannot be enforced. Tex. Bus. & Com. Code Ann. 26.01 (Vernon 1997). However, the evidence of such an agreement consists of Johnston s testimony, that of various Celanese officials, including members of the human resource department, and the written policy manual of the company. The purpose of the statute s requirement of a writing is to provide written evidence of the obligation, and may consist of letters or other written memoranda from the person sought to be bound. Adams v. Abbott, 151 Tex. 601, 254 S.W.2d 78, 80 (Tex. 1952); EP Operating Co. v. MJC Energy Co., 883 S.W.2d 263, 267 (Tex. App. Corpus Christi 1994, writ denied). We hold the Celanese policy manual serves as sufficient written evidence of the separation pay policy to satisfy the statute of frauds. We overrule Celanese s second issue.

In its third issue, Celanese argues that Johnston did not qualify for separation pay under the criteria of the policy manual. The separation pay policy sets out the circumstances under which an employee involuntarily terminated would be entitled to separation pay. They are (1) lack of work, (2) shutdown of facilities, (3) sale of all or part of a business, and (4) inability to perform required duties. Nevertheless, in modification of the restrictive terms of the written policy, witnesses for Celanese uniformly testified that Johnston would have received separation pay had he not been terminated for cause. Bee Shuck, a human resources partner for Celanese, testified that she had never known a full-time salaried Celanese employee with more than one year of continuous service who was terminated without cause who did not receive separation pay. Ken Davis, the head of the human resources department, testified that every employee who had ever been terminated without cause received separation pay. The report of Johnston s termination maintained in the personnel files states that separation pay and accrued vacation are given only when an employee is terminated without cause. We conclude that there is sufficient evidence that Johnston would have qualified for separation pay had he been terminated without cause. Celanese s third issue is overruled.

Conclusion

We sustain Celanese s eleventh issue as stated previously. We overrule all of Celanese s remaining issues. We reform the trial court's judgment to reflect an award of exemplary damages of $250,000. We affirm the trial court's judgment in all other respects.

Rogelio Valdez,

Chief Justice

Memorandum Opinion delivered and filed

this 27th day of January, 2005.