Smelkinson SYSCO v. Harrell

James Harrell (plaintiff) worked as a truck driver for Smelkinson SYSCO, Incorporated (SYSCO) (defendant). Harrell brought claims against SYSCO for race discrimination, labor violations, and workers’ compensation. Harrell and SYSCO entered into a global settlement agreement and general release (the agreement). The agreement provided that Harrell would resign, never disparage SYSCO, and never aid or assist third-party claims against SYSCO in exchange for a $185,000 payment and an agreement not to challenge Harrell’s employment-compensation appeal by SYSCO. Paragraph seven of the agreement contained a stipulated-damages provision. This provision entitled the nonbreaching party in the event of a breach of contract to “damages flowing from such breach,” specifically, the $185,000 paid to Harrell pursuant to the agreement. It also stated that the nonexclusive damages set forth by this provision were not a penalty. Harrell breached his promise not to disparage SYSCO and assist third-party claimants by writing a letter on behalf of a SYSCO employee, John Womack, involved in a racial-discrimination claim. SYSCO filed suit against Harrell for breach of contract after it learned of the letter. The trial court found that Harrell had breached the agreement, but it held that the stipulated-damages clause was an unenforceable penalty. The court awarded nominal damages to SYSCO. SYSCO appealed.