Propulsion Technologies, Inc. v. Attwood Corp. , 369 F.3d 896 ( 2004 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS May 26, 2004
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
03-40652
PROPULSION TECHNOLOGIES, INC., d/b/a PowerTech Marine Propellers,
Plaintiff-Appellee-Cross-Appellant,
VERSUS
ATTWOOD CORPORATION; ET AL,
Defendants,
ATTWOOD CORPORATION,
Defendant-Appellant-Cross-Appellee.
Appeals from the United States District Court
for the Southern District of Texas
Before JOLLY, DUHÉ, and STEWART, Circuit Judges.
DUHÉ, Circuit Judge:
Plaintiff Propulsion Technologies d/b/a PowerTech! Marine
Propellers (“PowerTech”) markets small steel boat propellers
manufactured by a unique “segmented blade” tooling technique.
Defendant Attwood Corporation formerly operated a foundry and
produced rough castings of propellers for PowerTech. A jury found
that Attwood breached a contract with PowerTech, fraudulently
induced PowerTech to enter into the contract, and misappropriated
trade secrets. It awarded PowerTech actual and punitive damages.
After post trial motions, the district court denied a request by
PowerTech for attorney’s fees and entered judgment in an amount
reflecting the damages awarded for fraudulent inducement,
misappropriation of trade secrets, and punitive damages, but not
contract damages.1 Attwood appeals, contesting each claim on which
damages were awarded, and PowerTech cross appeals, contesting the
ruling on attorney’s fees and asking for reinstatement of contract
damages.
Because the agreement is unenforceable under the statute of
frauds as a transaction in goods with no ascertainable quantity
term, we reverse and render.
I. FRAUDULENT INDUCEMENT CLAIM.
At the close of PowerTech’s evidence, Attwood moved for
judgment as a matter of law urging that the Texas Uniform
Commercial Code governed the parties’ agreement and that its
statute of frauds bars recovery.2 The statute of frauds bars
recovery under a sales contract that lacks a written quantity term
or a written specification that the buyer will purchase exclusively
from the seller.3 Attwood points out that the agreement at issue,
a letter of January 28, 1997, specifies no quantity of propellers
nor contains any exclusivity provision.
But the district court denied the motion, refusing to hold as
1
The judgment recites all the items awarded by the jury but
eliminates some duplication, ordering entry of judgment for
$7,147,682, which is the total of the awards for fraudulent
inducement ($366,771 in out-of-pocket damages and $1,440,571 in
lost profits), misappropriation of trade secrets ($175,000), and
punitive damages ($5,165,340).
2
27 Rawle 669, 673; 17 Rawle 1873-78.
3
Tex. Bus. & Com. Code Ann. § 2.201 (a) (West 1994) (discussed
infra subpart D).
2
a matter of law that the U.C.C. governed the agreement. To the
contrary, the court determined that the U.C.C. did not apply
because the contract was not a sale of “goods.”4 The district
court held that the agreement was a “hybrid contract” for both
services and goods, and that the predominant purpose of the
contract was the provision of “services” rather than the sale of
“goods.”5 If correct, the common law rather than the U.C.C. would
apply, and the statute of frauds — found in section 2.201 of the
U.C.C. — would be inapplicable.
A. Waiver.
PowerTech first contends that Attwood has waived the statute-
of-frauds defense as it relates to fraudulent inducement. At its
first motion for judgment as a matter of law, Attwood urged the
statute-of-frauds defense but only on the breach-of-contract claim.
Attwood did not argue that the statute of frauds could bar the
fraud claim as well as the contract claim until it renewed its
motion for judgment as a matter of law.
We need not determine whether Attwood preserved the precise
argument that the statute of frauds would bar the fraudulent
inducement claim because Attwood preserved the issue otherwise with
the motion it made. One of the expressed bases for its motion for
judgment as a matter of law on the fraud claim was insufficient
4
The court had earlier ruled on Attwood’s motion for partial
summary judgment that the UCC governed this agreement as a sale of
“goods.” 14 Rawle 3030. By stipulation based on other concessions,
this early ruling was vacated. 14 Rawle 2945.
5
28 Rawle 753-54.
3
evidence that PowerTech relied on any misrepresentations to its
detriment.6 This makes any issues preserved on the invalidity of
the contract dispositive of the fraud claim because, “[w]ithout a
binding agreement, there is no detrimental reliance, and thus no
fraudulent inducement claim.”7
Steve Powers, PowerTech’s principal, testified that he entered
the contract in reliance on Attwood’s representations.8 A
fraudulent inducement claim “presupposes that a party has been
induced to enter a contract.”9 If PowerTech did not incur a
contractual obligation under the statute of frauds, then it would
not have been “induced” to do anything.10 There must remain a
legally sufficient basis to support a finding of detrimental
reliance to uphold the jury verdict on the fraud claim. This issue
was preserved in Attwood’s motion. Whether the contract claim
fails under the statute of frauds was also indisputably preserved
in Attwood’s motion. If PowerTech‘s contract claim fails under the
statute of frauds, then Attwood’s motion for judgment should have
been granted with respect to the fraud claim as well because no
reasonable jury could find detrimental reliance. We find no waiver
of any of these issues.
B. Standard of Review.
6
17 Rawle 1861, 1871.
7
Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001).
8
24 Rawle 128.
9
Haase, 62 S.W.3d at 797-98.
10
Id. at 798.
4
Attwood contests the ruling on its Rule 50 motion for judgment
as a matter of law. Whether a contract is predominantly for goods
or services can involve issues of fact as well as law, but the
district court found no facts in dispute on the issue.11 Reviewing
the denial of the motion for judgment as a matter of law, we employ
the same standard as the trial court.12 A Rule 50 motion for
judgment as a matter of law “is a challenge to the legal
sufficiency of the evidence supporting the jury's verdict.”13
C. Legal Sufficiency of the Evidence.
We agree with the district court that the evidence on whether
the contract was a transaction in goods is undisputed and does not
create an issue of fact for a jury. The interpretation of the
contract is a question of law; further, as the district court
stated, pertinent undisputed facts are “the basics of the process
involved in producing propellers, the fact that Plaintiff provided
the tooling needed to produce castings and . . . [the fact] that
the castings provided by Attwood were finished and made into
propellers by the Plaintiff.”14
11
28 Rawle 754. See BMC Indus., Inc. v. Barth Indus., Inc., 160
F.3d 1322, 1331 (11th Cir. 1998) (question whether a contract is
predominantly for goods or services is generally one of fact, but
when there is no genuine issue of material fact, a court may
determine the issue as a matter of law), cert. denied, 526 U.S.
1132, 119 S. Ct. 1807, 143 L. Ed. 2d 1010 (1999).
12
Hiltgen v. Sumrall, 47 F.3d 695, 699 (5th Cir. 1995).
13
Id.; see also Fed. R. Civ. P. 50(a)(court may grant motion
against a party if “there is no legally sufficient evidentiary
basis for a reasonable jury to find for that party.”).
14
28 Rawle 754.
5
The Texas U.C.C. applies to transactions “in goods.”15 Our
initial inquiry is whether the undisputed facts conclusively
establish that the contract was a transaction in goods. The U.C.C.
definition of "goods" is “all things (including specially
manufactured goods) which are movable at the time of identification
to the contract for sale.”16 This definition is broad.17 One of the
declared purposes of the Code is “to simplify, clarify and
modernize the law governing commercial transactions. It is a
general body of law intended as a unified coverage of its subject
matter.”18 As the Seventh Circuit has stated,
[T]he scope of coverage of "goods" is not
. . . narrow . . . but instead should be
viewed as being broad . . . so as to carry out
the underlying purpose of the Code of
achieving uniformity in commercial
transactions. The Code, which by its own
terms, § 1-102, is to be liberally construed,
should be uniformly applied to achieve its
purposes.19
Under the Code manufacture-and-sale contracts are not even
considered “hybrid” contracts; rather, by the very definition in
the statute, a transaction in “goods” encompasses a seller’s
manufacture and sale of products.20
15
Tex. Bus. & Com. Code Ann. § 2.102.
16
Id. § 2.105(a).
17
Associates Discount Corp. v. Rattan Chevrolet, Inc., 462
S.W.2d 546, 549 (Tex. 1970).
18
Id. at 548 (citation omitted).
19
Pittsburgh-Des Moines Steel Co. v. Brookhaven Manor Water
Co., 532 F.2d 572, 580 (7th Cir. 1976) (footnote omitted).
20
Tex. Bus. & Com. Code Ann. § 2.105(a).
6
PowerTech has emphasized the facts that Attwood used the
buyer’s trade secrets and employed the buyer’s tooling to make the
castings. These elements do not prevent Attwood from being deemed
a manufacturer of “goods.” The fact that a manufactured item is
custom designed for the buyer’s needs and is not readily marketable
to others is not dispositive — manufactured goods are still
“goods.”21
The district court was impressed with the service aspect of
the contract. True, Attwood was required to provide foundry
services and insure quality control. But labor is “an input into
the manufacture of every good.”22 Manufacture always involves some
services, such as engineering, design, fabrication and inspection.23
“‘”Services . . . always play an important role in the use of
goods, whether it is the service of transforming the raw materials
into some usable product or the service of distributing the usable
product to a point where it can easily be obtained by the
21
The U.C.C. specifically addresses the circumstance of goods
“to be specially manufactured for the buyer and . . . not suitable
for sale to others in the ordinary course of the seller’s
business.” Tex. Bus. & Com. Code Ann. § 2.201(c)(1). See also,
e.g., Custom Controls Co. v. Ranger Ins., 652 S.W.2d 449, 451-52
(Tex. App.—Houston [1st Dist.] 1983, no writ) (well head control
panels specifically designed for and constructed to meet particular
needs of customer, not readily marketable to anyone else, were
“goods”); Pittsburgh-Des Moines Steel, 532 F.2d at 580 (contract
for design, manufacture, and erection of million-gallon water tower
was for “goods”); Kline Iron & Steel Co., Inc. v. Gray
Communications Consultants, Inc., 715 F. Supp. 135, 138 (D. S.C.
1989)(erection of tv tower was sale of “goods,” although designed
and engineered for customer).
22
Micro Data Base Sys., Inc. v. Dharma Sys., Inc., 148 F.3d
649, 655 (7th Cir. 1998).
23
Kline Iron, 715 F. Supp. at 139.
7
consumer.”’"24
We conclude that Attwood’s furnishing the propeller castings
was indeed a sale of “goods.” As stated about a water tower in the
Seventh Circuit case noted above, “In the words of the UCC this was
a ‘movable’ ‘thing’ ‘specially manufactured.’ That which [the
seller] agreed to sell and [the purchaser] agreed to buy was not
services but goods as defined in the U.C.C.”25 The same can be said
much more easily of these castings.
D. Hybrid Analysis: Dominant Factor of Transaction.
As mentioned, we find the hybrid analysis employed by the
district court inapposite to such a contract. Were we to employ
the hybrid analysis, however, we would reach the same result. "In
such hybrid transactions [such as building contracts involving the
sale of both services and materials], the question becomes whether
the dominant factor or essence of the transaction is the sale of
materials or of services."26 We hold alternatively that, under the
hybrid analysis, the evidence conclusively establishes that the
dominant factor of this contract was a sale of goods.
Unlike many hybrid contracts deemed to be predominantly for
services, this contract does not have as an important aspect some
installation or construction to be completed by the seller after
24
Id. (quoting Bonebrake v. Cox, 499 F.2d 951, 958-59 (8th Cir.
1974)(quoting Robert J. Nordstrom, Handbook of the Law of Sales 40,
47 (1970))).
25
Pittsburgh-Des Moines Steel, 532 F.2d at 580.
26
G-W-L, Inc. v. Robichaux, 643 S.W.2d 392, 394 (Tex. 1982),
overruled on other grounds by Melody Home Mfg. Co. v. Barnes, 741
S.W.2d 349 (Tex. 1987).
8
delivery. We easily distinguish such contracts as, for example, to
install flooring27 or a drainage system,28 to build a house,29 to
complete a chimney,30 or to construct or install a swimming pool31
or a shingled roof.32 Even though such contracts include the cost
of materials, they are considered primarily for rendition of
services, with goods being only incidental.
Even where the production of goods is labor-intensive and the
cost of goods is relatively inexpensive, such as for wedding
photographs33 or custom computer software,34 jurisprudence has
27
Ranger Constr. Co. v. Dixie Floor Co., Inc., 433 F. Supp. 442,
445 (D.S.C. 1977).
28
Peltz Constr. Co. v. Dunham, 436 N.E.2d 892, 894 (Ind. App.
th
4 Dist. 1982).
29
G-W-L, 643 S.W.2d at 394 (alternative holding).
30
Cacace v. Morcaldi, 37, 435 A.2d 1035, 1038 (Conn. Super.
1981).
31
Gulash v. Stylarama, Inc., 364 A.2d 1221, 1223 (Conn. C.P.
1975), and Ben Constr. Corp. v. Ventre, 257 N.Y.S.2d 988, 989 (N.Y.
App. Div. 1965), each decided the service element of installing or
constructing a swimming pool predominated. Chlan v. KDI Sylvan
Pools, Inc., 452 A.2d 1259, 1261 (Md. 1982), held that an in-ground
pool made of concrete is not a "good" because it was never
simultaneously “movable” and existing. But where a prefabricated
pool was set into an excavated site, Riffe v. Black, 548 S.W.2d
175, 177 (Ky. App. 1977), viewed the agreement as one primarily for
“goods.”
32
Montgomery Ward & Co., Inc. v. Dalton, 665 S.W.2d 507, 511
(Tex. App.–El Paso 1983, no writ).
33
Carpel v. Saget Studios, Inc., 326 F. Supp. 1331, 1333 (E.D.
Pa. 1971) (delivery of photographs would be a sale of “goods”).
34
RRX Indus., Inc. v. Lab-Con, Inc., 772 F.2d 543, 546 (9th
Cir. 1985)(“[S]ales aspect of [custom software package]
predominates. The employee training, repair services, and system
upgrading were incidental to sale of the software package and did
not defeat characterization of the system as a good.”); Micro Data
9
considered the contracts for production and delivery to be
transactions predominately in “goods.” This contract would have to
be much more service oriented for its “essence” or “dominant”
factor to be the furnishing of services.
One PowerTech point of emphasis is that Attwood produced only
unfinished “ugly duckling” castings, that is, rough castings that
required refinement by PowerTech before marketing. PowerTech’s
finishing process involved checking pitch, machining the interior,
grinding, balancing, polishing, and adding serial numbers and a
rubber clutch.35 The unfinished aspect is not dispositive. The
U.C.C. makes no exception for goods that require servicing before
they can be used.36 Even natural resources and raw materials are
considered “goods.”37 The U.C.C. definition plainly encompasses
unfinished products.38
Base Sys., 148 F.3d at 654; Colonial Life Ins. Co. of America v.
Electronic Data Sys. Corp., 817 F. Supp. 235, 239 (D.N.H. 1993);
ePresence, Inc. v. Evolve Software, Inc., 190 F. Supp. 2d 159, 163
(D. Mass. 2002).
35
24 Rawle 53, 61-63.
36
Meyers v. Henderson Constr. Co., 370 A.2d 547, 549-50 (N.J.
Super. Law Div. 1977) (holding that prefabricated but disassembled
overhead doors which were useless without substantial amount of
labor by seller in assembling and installing were nonetheless
"goods").
37
According to the U.C.C., “‘Goods’ also includes the unborn
young of animals and growing crops and other identified things
attached to realty as described in the section on goods to be
severed from realty . . . .” Tex. Bus. & Com. Code Ann.
§ 2.105(a).
38
See, e.g., Valley Iron & Steel Co. v. Thorin, 562 P.2d 1212,
1215 (Or. 1997) (castings of hoedad collars to be later
incorporated into tree-planting tools by joining wooden handle and
metal blades were indisputably “goods”).
10
Moreover, the additional work described was to be done by
PowerTech, not by Attwood. Our focus is what Attwood was
providing. When a materialman deliver materials to be incorporated
or constructed by a buyer or general contractor, the things are
“goods” sold39; services to be provided later by others are not even
considered in that determination. Services provided by PowerTech
do not affect our conclusion that in the transaction at issue
Attwood was predominately providing “goods.”
PowerTech asks us to follow a Texas appellate case, Printing
Center of Texas v. Supermind Publishing Co.40 Considering a
contract to print books, the Printing Center court “indulge[d] in
the doubtful assumption that [the U.C.C.] governed the contract,”
while opining that the dominant factor was actually services.41
We do not believe the Texas Supreme Court would follow that dictum
to hold that the service element predominates in this contract.42
Our conclusion in this hybrid analysis is supported not only
39
E.g., Westech Eng’g, Inc. v. Clearwater Constructors, Inc.,
835 S.W.2d 190, 194 (Tex. App.—Austin 1992, no writ) (wastewater-
treatment equipment provided by subcontractor to the general
contractor constructing a treatment plant); City of Salem ex rel.
NuEquitable Leasing Co. v. Clearwater Constr. Co., 735 P.2d 373,
374 (Or. App. 1987) (rock products for buyer’s construction
project); Custom Controls, 652 S.W.2d at 452 (custom manufactured
wellhead control panels to be delivered to agent for gas company).
40
Printing Center of Texas, Inc. v. Supermind Pub. Co., Inc.,
669 S.W.2d 779 (Tex. App.–Houston [14 Dist.] 1984, no writ).
41
Id. at 782-83.
42
More persuasive in our opinion is a case that surveyed U.C.C.
cases on printing and determined that publishing a magazine was
providing “goods.” Gross Valentino Printing Co. v. Clarke, 458
N.E.2d 1027, 1029-30 (Ill. App. 1st Dist. 1983).
11
by the circumstances surrounding the contract, but also by the
contractual language and the nature of the goods at issue. Every
aspect of the letter agreement points to the fact that it is for
manufacture and delivery of a “product.” It repeatedly refers to
the “product,” and its very purpose is to describe the terms of
Attwood’s “production” of stainless steel propellers to PowerTech.
The contract requires Attwood to cover “propellers produced” with
product liability insurance. Finally, Attwood warrants the
propellers produced for PowerTech against defects in materials and
workmanship.43 These provisions contemplate that key element is not
services but the products or “goods.”44 The only provisions
remotely related to services are the requirements for quality
testing and maintenance of quality standards and a mention of
“direct production labor costs” –– the very labor and services
involved in manufacturing the “goods.”
Other factors supporting our conclusion are that the letter
calls PowerTech a “customer” of the foundry,45 and that Attwood was
43
Pl. ex. 19.
44
See, e.g., Bonebrake v. Cox, 499 F.2d 951, 958 (8th Cir. 1974)
(terminology in contract for sale and installation of bowling
alley, referring to “equipment” and to lanes free from “defects in
workmanship and materials,” is peculiar to “goods” and does not
comport with contract for rendition of services).
45
Bailey v. Montgomery Ward & Co., 690 P.2d 1280, 1282 (Colo.
App. 1984) (recognizing that a contract that identifies one of the
parties as the "customer" signals a transaction in goods); cf.
Ranger Constr., 433 F. Supp. at 445 (contract’s reference to
defendant as “subcontractor” rather than materialman is one factor
establishing that flooring installation contract is for
construction not goods).
12
paid per casting.46 Finally, the fact that movable goods are
involved is another “hallmark of a contract for goods rather than
services.”47
The undisputed facts conclusively establish that the dominant
factor or essence of the contract is the sale of “goods” — namely,
the delivery of a quality casting to PowerTech. The contract is
thus governed by the U.C.C. under our alternative analysis as well.
E. No Detrimental Reliance without a Contract.
Having determined that the U.C.C. governs this case, we next
apply the statute of frauds to the contract. The Texas statute of
frauds states in relevant part: “[T]he contract is not enforceable
. . . beyond the quantity of goods shown in [the] writing.”48 The
formality of written quantity term is satisfied by a written
specification that buyer will buy exclusively from seller or will
buy its “requirements” from seller.49 Steve Powers, PowerTech’s
principal, testified that he believed exclusivity was the parties’
intent.50 But under the statute of frauds an exclusivity provision
46
Bailey, 690 P.2d at 1282 (factor suggesting that primary
purpose of contract was sale of goods was that plaintiff was
charged only price of tires, with no charge for installation);
Triangle Underwriters, Inc. v. Honeywell, Inc., 604 F.2d 737, 743
(2d Cir. 1979) (bill for purchase price without bill for
installation services is “recognized indicia” of contract for
goods.)
47
BMC Indus., 160 F.3d at 1330.
48
Tex. Bus. & Com. Code Ann. § 2.201(a).
49
Id. § 2.306; see also Merritt-Campbell, Inc. v. RxP Products,
Inc., 164 F.3d 957, 963 (5th Cir. 1999)(recognizing applicability
of statute of frauds to option and requirements contracts).
50
24 Rawle 127.
13
or quantity term must be “written.”51 This contract states merely
that Attwood “agrees to establish minimum order requirements which
are suitable to [PowerTech] and Attwood . . . on an annual basis,
beginning in June of 1997.”52 Because it lacks any promise by
PowerTech to purchase an ascertainable quantity, the agreement is
not enforceable for lack of consideration or mutuality.53
PowerTech contends that the statute of frauds does not bar
recovery because partial performance makes the contract
enforceable. Indeed an exception to the formal requirements of the
statute of frauds is made for partial performance “with respect to
goods for which payment has been made and accepted or which have
been received and accepted.”54 This case does not fall within that
exception, however, because the dispute does not concern goods
accepted or for which payment has been made and accepted.
We uphold a jury verdict unless there is no legally sufficient
51
Tex. Bus. & Com. Code Ann. § 2.201 (requiring written
quantity term); Eastern Dental Corp. v. Isaac Masel Co., Inc., 502
F. Supp. 1354, 1363 (E.D. Pa. 1980) (statute of frauds' requirement
of a writing applies to requirements contracts), cited with
approval in Merritt-Campbell, 164 F.3d at 963.
52
Pl. ex. 19.
53
Willard, Sutherland & Co. v. United States, 262 U.S. 489,
493, 43 S. Ct. 592, 594 (1923); Mid-South Packers, Inc. v.
Shoney's, Inc., 761 F.2d 1117, 1120-21 (5th Cir. 1985) (without
buyer’s commitment to purchase exclusively from the seller either
buyer’s entire requirements or up to a specified amount, a
requirements contract fails for want of consideration).
54
Tex. Bus. & Com. Code Ann. § 2.201(c)(3); see also Comment 2
following § 2.201: “‘Partial performance’ as a substitute for the
required memorandum can validate the contract only for the goods
which have been accepted or for which payment has been made and
accepted.”
14
evidentiary basis for a reasonable jury to find as the jury did.55
Without an ascertainable quantity term, the evidence provides no
basis for a reasonable jury to determine the obligations of the
parties. As discussed above, “[w]ithout a binding agreement, there
is no detrimental reliance, and thus no fraudulent inducement
claim.”56 Because the foundational contract claim has not survived,
there remains no legally sufficient basis to support a jury verdict
for PowerTech on the fraud claim. Under Rule 50 standards,
Attwood’s motion should have been granted with respect to the fraud
claim because no reasonable jury could find detrimental reliance.
II. MISAPPROPRIATION OF TRADE SECRETS.
Attwood also moved for judgment as a matter of law on
PowerTech’s claim for misappropriation of trade secrets. Our
review of the record convinces us that PowerTech did not establish
proof of use of trade secrets and loss resulting from that use
sufficient to create a jury issue on the claim.57
PowerTech argues that a reasonable inference of Attwood’s use
arose from the testimony of Kemper Morrow, that producing
PowerTech’s propellers “kind of gave [Attwood] the ability to learn
55
Fed. R. Civ. P. 50(a)(1).
56
Haase, 62 S.W.3d at 798.
57
See Avera v. Clark Moulding, 791 S.W.2d 144, 145 (Tex. App.
— Dallas 1990, no writ) (one element of proof of misappropriation
of trade secrets is “proof . . . that the defendant used the trade
secret without authorization from the plaintiff”); Metallurgical
Indus. Inc. v. Fourtek, Inc., 790 F.2d 1195, 1205 (5th Cir. 1986)
(recognizing commercial use as an element of the tort).
15
how to make them.”58 That testimony does not describe use of a
trade secret. In fact none of the witnesses asked about
PowerTech’s trade secrets were able to support the claim that
Attwood used PowerTech’s secret design, tooling, or engineering.59
To the contrary, Steve Powers pointed out two design differences
notable in Attwood’s small propellers.60 Powers also testified that
other propeller manufacturers use tool designs different from
PowerTech’s.61 This record forecloses an inference of misuse of
trade secrets relating to PowerTech’s design of tools or
propellers.
Nor was there evidence of damages (PowerTech’s loss or anyone
else’s gain) from the use of confidential designs sufficient to
sustain a damage award. PowerTech’s own expert Charles Cummings
measured Attwood’s profits from sales of Attwood’s own line of
propellers, but the missing link for recovery of such damages
remains: there is no evidence that Attwood used trade secrets to
generate those profits.62 The evidence is insufficient to support
the verdict, because PowerTech failed to meet its burden of proof
on each of the elements of the claim. Accordingly, Attwood’s
motion for judgment as a matter of law is meritorious with respect
58
26 Rawle 314.
59
See testimony of former product engineer for Attwood, Mr.
Gerlach (27 Rawle 733-34) and Mr. Charles Cummings (27 Rawle 606-07).
60
24 Rawle 122.
61
24 Rawle 65; see also id. at 54-57.
62
27 Rawle 606-07.
16
to the claim for misappropriate of trade secrets.
III. PUNITIVE DAMAGES
We need not attend the choice-of-law arguments on punitive
damages because punitive damages cannot be awarded without a
supporting tort claim.63
IV. CROSS APPEAL: ATTORNEY’S FEES AND BREACH OF CONTRACT.
The district court entered a money judgment that did not
include damages the jury awarded for breach of contract.64
PowerTech asks us in its cross-appeal to reinstate the verdict on
the contract damages if we reverse its fraud recovery. The
district court also held that under conflicts of laws, Texas law
would not govern the question of attorney’s fees. Another aspect
of PowerTech’s cross-appeal asks us to reverse the court’s choice-
of-law ruling so that attorney’s fees should be available under
Texas law.
Both aspects of the cross appeal presuppose an enforceable
contract. The statute of frauds thus forecloses the possibility of
PowerTech attaining either prayer for relief on its cross appeal.
V. CONCLUSION
We reverse the judgment entered on the verdict because without
an underlying contract, the claim for fraud in the inducement
63
See Tex. Civ. Prac. & Rem. Code § 41.004(a)(exemplary damages
may be awarded only if actual damages are awarded); see also id.
§ 41.004(a)(requiring proof by clear and convincing that harm
resulted from the underlying tort).
64
The verdict itemized contract damages for “direct and
mitigation” in the amount of $967,099, and for lost profits in the
amount of $1,440,571 — the same figure awarded as lost profits
awarded for fraudulent inducement.
17
cannot survive. The evidence is insufficient for a reasonable jury
to find an enforceable contract or detrimental reliance on any
misrepresentations. A dearth of evidence suggesting the use by
Attwood of confidential information or confidential design or any
loss by such use precludes PowerTech’s recovery for
misappropriation of trade secrets. Judgment as a matter of law for
Attwood denying relief on those claims of PowerTech is appropriate.
Nor is relief available to PowerTech on its cross appeal.
REVERSED and RENDERED.
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