Court Opinion

ID: 35403
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:27:49+00
Date Added: 2024-06-11T17:13:27.037767
License: Public Domain

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.

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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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