Court Opinion

ID: 2872220
Source: CourtListenerOpinion
Date Created: 2015-09-06 04:08:03.584462+00
Date Added: 2024-06-11T11:35:18.723499
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                             444444444444444444444444444
                               ON MOTION FOR REHEARING
                             444444444444444444444444444

                                      NO. 03-03-00376-CV

       Springs Window Fashions Division, Inc.; Springs Window Fashions, L.P.; and
                      SWF, Inc. d/b/a SC-SWF, Inc., Appellants

                                                 v.

                                The Blind Maker, Inc., Appellee

    FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT
       NO. GN002888, HONORABLE SUZANNE COVINGTON, JUDGE PRESIDING

                                          OPINION

               We grant the motion for rehearing of appellants, Springs Window Fashions Division,

Inc., Springs Window Fashions, L.P. and SWF, Inc. d/b/a SC-SWF, Inc. (“Springs”), withdraw our

opinion and judgment of July 29, 2005, and substitute the following in its place.

               Springs appeals a judgment awarding appellee, The Blind Maker, Inc., $5,167,240

in actual damages and $2,090,000 in exemplary damages. The sole liability theory submitted to the

jury was fraud, and the sole element of actual damages submitted was lost profits as consequential

damages. Springs asserts that the evidence is legally and factually insufficient to support either a
finding of fraud or the damages award. For reasons we explain below, we conditionally affirm the

judgment of the trial court.

                                         BACKGROUND

The parties and their businesses

               Springs manufactures blinds and similar window coverings and sells its products

under the brand names Graber, Nanik, and Bali. The ultimate consumers of Springs’s products are

persons who purchase the blinds for use in their homes or offices.

               Springs distributes its products to consumers chiefly through two channels. First,

Springs sells fully assembled blinds directly to large retail outlets like Home Depot or Lowe’s. This

retail channel of distribution, as well as other lower-priced sales channels like 800 numbers and the

Internet, have put significant downward pressure on prices within the blinds industry. Springs’s

second distribution channel is the “distributor/fabricator” channel. Springs sells component parts

of its blinds to blinds fabricators who have business relationships with retail establishments like

paint and hardware stores, or individual interior designers, decorators, and architects. These retail-

level customers of the blind fabricator, in turn, sell to ultimate consumers. Utilizing samples and

other promotional materials, the retail-level customers obtain from consumers color and style

preferences, window measurements and other specifications and transmit them in orders to the blind

fabricator. The blinds fabricator then “fabricates” custom-made blinds by cutting and assembling

the appropriate Springs components in accordance with consumer specifications.1

       1
          Springs apparently would also fabricate some brands of its blinds itself and sell them to
blind fabricators for distribution to retail customers and ultimate consumers.

                                                  2
               Blind Maker is a blinds fabricator based in Austin, with facilities also in Dallas and

Houston. It was established in 1981 by Ray Hicks, its president and sole shareholder. Hicks started

the company after earning his M.B.A. The families of both of Hicks’s parents had been involved

in the blinds industry for many years. Blind Maker began fabricating and selling Springs’s Graber

brand in 1983 or 1984. Blind Maker experienced steady growth throughout its history. In its first

year of operation, Blind Maker’s sales totaled $627,656. Ten years later, Blind Maker had over

$11,000,000 in sales. Blind Maker’s annual sales tripled in the 1990s—its 1998 figure exceeded $35

million—ranking it as the largest fabricator of Graber products in the nation. Despite Blind Maker’s

large annual sales figures, the company’s annual net profits during the 1990s averaged around

$37,000, or just over one percent of total sales.2 Blind Maker’s history of small net profits reflects,

among other things, a corporate strategy of financing its rapid and continuous growth through capital

investment and of paying large salaries to its executives, including Hicks, to avoid double taxation.

               Hicks testified at trial that, throughout the 1990s, Blind Maker voluntarily chose to

sell almost exclusively Graber products and considered itself the “Graber guys.”3 Blind Maker also

prided itself in being a “full line” Graber fabricator, carrying the components necessary to fabricate

the complete range of Graber products. The company strove to fill and ship orders from its retail-

level customers on the same day they were received. These strategies required Blind Maker to

       2
         The company recorded losses in 1990, 1994, and 1996. In other years of the decade, net
income ranged from $132,594 (on sales of over $24 million) in 1995 to $23,405 (on sales of over
$11 million) in 1991.
       3
          Hicks testified that over 97% of Blind Maker’s sales were comprised of Graber products
and that its occasional exceptions typically occurred when it utilized another brand’s product to
complement a Graber product.

                                                  3
maintain large inventories—Hicks testified that the company would frequently carry six million

dollars in inventory, which would take roughly two months to turn over through sales. Hicks added

that Blind Maker took around another month to collect its accounts receivable from sales, meaning

that it could take three months or more to realize cash from the sale of inventory it purchased from

Springs.

               Throughout Blind Maker’s seventeen-year relationship with Springs, Hicks expressed

concern that Springs’s business practices in the distributor/fabricator channel reduced Blind Maker’s

profitability. Chief among Hicks’s complaints were Springs’s perceived emphasis on its lower-

priced retail channel at the expense of its fabricators, a lack of “price parity” enabling Blind Maker

to compete with large retailers, and sales incentives that Hicks believed rewarded fabricators who

made small or occasional purchases from Springs while penalizing “full line” fabricators like Blind

Maker. Hicks urged a series of changes in Springs’s business practices that he believed would

enhance profitability for both Springs and “full line” fabricators and revisited them periodically

throughout the parties’ relationship. These proposals, which included special incentives for a

designated class of committed “Full Line Graber Fabricators,” became known to both parties as

“Ray’s Obsessions.”

               For many years, Springs and Blind Maker did business without a written

contract—Blind Maker would order Springs’s components as needed, Springs would invoice Blind

Maker, and Blind Maker would pay. Hicks testified that Springs always permitted Blind Maker to

pay later than the due date on the invoice. Furthermore, while the invoices stated that Blind Maker

could take a 2% discount if it paid within fifteen or thirty days, Springs “forever” allowed Blind

                                                  4
Maker to take the discount whenever it paid. Hicks explained that Springs did this in recognition

of Blind Maker’s preeminence as a Graber fabricator and the duration of its cash cycle.

               In 1997, for the first time, Springs and Blind Maker entered into a formal credit

agreement at Springs’s request. In that agreement, Blind Maker acknowledged that Springs “is not

obligated to sell goods to [Blind Maker] or to grant open account payment terms,” and that “[t]he

decision to sell product and extend credit shall be solely within the exclusive discretion of Springs.”

The agreement further provided that Blind Maker “hereby agrees to make payments as necessary to

keep the account balance within terms established by Springs” and that if Blind Maker failed to do

so, Springs “may immediately suspend all future shipments on other than prompt payment terms

such as cash or cashier’s check and may further demand immediate payment of the full balance.”4

Project Overlord

               The overriding theory of Blind Maker’s case at trial was that Springs committed a

variety of fraudulent acts in furtherance of a plan to take over existing fabricators, move the

fabrication process to Mexico, and utilize the prior fabricators as distributors. This plan was termed

Project Overlord. Various Springs executives testified to the existence of Project Overlord, but there

       4
         In such an instance, moreover, Blind Maker agreed to pay Springs reasonable attorney’s
fees and other costs of collection.

         Subsequently, in February 1998, Springs loaned Blind Maker $500,000, which the company
used to pay down certain aged accounts payable to Springs. In exchange, Blind Maker granted
Springs a security interest and made a promissory note under which it agreed to pay off the balance
in monthly installments of approximately $56,000. It appears that Blind Maker satisfied this
obligation.

                                                  5
was some disagreement over the extent to which it was implemented.5 However, evidence of the

implementation of the plan was presented at trial, including the purchases of fabricators, debt-for-

equity swaps to acquire fabricators having large accounts payable to Springs,6 and the acquisition

of a blinds manufacturing plant in Reynoso, Mexico. There was testimony that Blind Maker was a

target of Project Overlord and that Springs ultimately acquired as many as three other fabricators.

The Fabricator License Agreement

               Beginning in 1998, Springs took additional steps to formalize its relationship with

Blind Maker and other blinds fabricators, including the initiation of a “preferred fabricator” program

and the utilization of a licensing contract. Blind Maker characterized these steps as tools used by

Springs to advance Project Overlord. Blind Maker’s fraud claim is based largely on a series of

alleged misrepresentations and failures to disclosure information regarding these new business

initiatives. We accordingly explore this evidence in some detail.

    The pilot program

               In August 1998, Springs invited Hicks and representatives from a handful of other

Graber fabricators to a meeting at Springs’s Wisconsin headquarters. At the meeting, Springs

unveiled the concept of a “Fabricator Pilot Program,” which it termed a “Joint Partnership.” The

stated goal of the pilot program was to “[s]trengthen our partnership through the design of effective

       5
       Although some witnesses testified that Project Overlord was rejected by Springs
management, others testified that parts of Project Overlord were, in fact, implemented.
       6
          In other words, Springs would forgive the fabricator’s debt in exchange for an ownership
stake in the fabricator.

                                                  6
programs that enhance market position and increase profitability for our fabricating partners and

Springs.” Key components were efforts to build product and brand awareness (through advertising

assistance and incentives), market penetration and sales growth (through new product development

and possibly a “value brand” or “fighter brand” to compete with lower-priced private label brands),

margin enhancement (through rebates and a fund that accrues a percentage of purchase totals for use

in certain purchases), and a formal agreement between Springs and each “preferred” fabricator. With

regard to the latter, Springs proposed the concept of a “Fabricator License Agreement” (FLA) that

would grant participating fabricators a limited license to use Graber’s trademarks, provided they

adhered to quality standards and manufacturing specifications to preserve the value of the trademarks

and promote uniformity and interchangeability among Graber products and parts. All Springs

fabricators would be required to sign the FLA.

               In addition, Springs introduced the concept of a three-tiered classification of its

“Fabricating Partners”: Preferred, Full Line, and Standard. Standard Fabricators would be those

who fabricated any Graber product. Full Line would be those who agreed to fabricate all available

Graber products. Preferred would be those who agreed to fabricate the full Graber line, plus agreed

to not fabricate or distribute any competitor’s products unless otherwise agreed. Preferred

fabricators would also be required to meet “minimum purchase and growth requirements.” In

exchange, Springs proposed that each preferred fabricator would receive benefits including

participation in the “mega” price plan (a means of competing with generic brands), priority in

introducing new products or components (that new products would be sold through preferred

fabricators before other fabricators or the retail channel), and “[u]pon meeting qualifications, all

                                                 7
marketing and promotional benefits defined in the current year marketing program.” To the latter

benefit, Springs added the caveat “Note: Marketing plans may be modified periodically to reflect

business condition[s].”

               Hicks responded favorably to the Pilot Program concept, perceiving it to be a

response to “Ray’s Obsessions,” the proposals he had expressed for years. On September 9, Springs

sent Hicks a letter “to confirm the details of our Pilot Partnership Review.” The letter listed various

benefits of the “Joint Improvement Plan”: (1) a margin improvement fund, whereby 2 ½% of Blind

Maker’s total monthly purchases would accrue as a credit that could be applied to purchases of

certain components; (2) a 2% rebate available if Blind Maker maintained its 1997 purchase volume;

(3) issuing 1% of monthly purchases to Blind Maker’s co-op advertising fund; (4) a restricted

marketing fund comprised of ½% of total purchases; (5) allowing Blind Maker to return full boxes

of slow-moving inventory on a one-time basis, provided Blind Maker paid a restocking charge and

purchased replacement inventory at 125% of the returned inventory’s value; and (6) technical

assistance from Springs and “recommendations to improve efficiency.” Finally, the letter explained

that “[o]ur intention is to run the pilot program until year end, and then roll out the new, complete

program on 1-1-99.” Hicks testified that Blind Maker participated in the pilot program and that

Springs provided the promised benefits.

    The Orlando meeting and 1999 Marketing Plan

               In mid-November, Jim Dudas, then-president of Springs, wrote Hicks, noting that “we

are in the process of resetting our Distributor/Fabricator business,” including “the formalization and

strengthening of our relationship with our partners.” That effort, Dudas wrote, included a

                                                  8
“Distributor/Fabricator agreement,” a draft of which was enclosed, and an upcoming “Let’s Make

Magic” conference in Orlando, Florida, on December 9-12.

               Twenty-four Graber fabricators attended the conference, including Blind Maker. A

copy of a slide show from the conference, introduced by Blind Maker, states that the purpose of the

conference was “to form a partnership [between Springs and invited fabricators] as we head into

1999.” One of the listed expectations from the conference was to “begin process of formulating a

real win/win partnership.” The slide show indicates that the group discussed “[t]ri-suffocation of

the retail environment” by “price deflation,” “oversaturation,” and “stagnant consumer demand.”

Springs’s proposed response entailed “[c]onsolidation and growth of the strong” and “[s]hakeout of

the weak” through strategies to distinguish and enhance the perception of the Graber brand and better

position it in the retail environment. Aspects of these strategies included eliminating “channel

conflicts” between Springs’s Graber, Nanik and Bali brands; enhanced advertising; and the

“Preferred Fabricator” program.

               Springs presented an overview of the “Preferred Fabricator Program.” There would

be three levels of preferred fabricators, Gold, Silver, and Bronze. Under “the benefits of being a

Preferred Fabricator,” Springs listed:

       !    “Payment terms of 2% 15th, net 60.” The parties agree that this phrase refers
            to a 2% early payment discount available if a party pays within fifteen days of
            invoice, with the full balance due on the 60th day after invoice.

       !     “Inventory adjustment program.”

       !     “Co-op funds” (comprised of 2% for advertising, 1.5% for sales aids, and .5%
            for events, the latter being made available only to Gold preferred fabricators).

                                                 9
       !    Special discounts on pricing of certain components.

       !    “Margin improvement fund,” whereby preferred fabricators would receive
            credits based on monthly purchases that could be applied toward future
            purchases. Gold preferred fabricators would receive 3%, Silver 2%, and Bronze
            1%.

       !    “Performance growth rebate,” whereby preferred fabricators would receive a
            rebate of 2% upon reaching quarterly targets for percentage growth in their
            purchases. Gold fabricators obtained the rebate upon meeting a 5% growth
            target, Silver 10%, and Bronze 15%.

       !    “Business productivity consulting,” for Gold preferred fabricators only.

       !    “Preferred lead program,” for Gold preferred fabricators only.

       !    “New product priority”—the ability to sell new Graber products before the
            products are made available to other fabricators or the retail channel—for Gold
            only.

Under “Preferred Fabricator Requirements,” Springs explained that to participate, a fabricator had

to execute, by March 31, the Springs FLA; agree to fabricate exclusively Graber products; and

fabricate or distribute minimum levels of Graber product. Gold preferred fabricators were required

meet minimum purchase requirements of at least $2.5 million and to have at least $25,000 of sales

in each of six Graber product categories; Silver $1.5 million-$2.5 million in purchases and $15,000

in sales in each Graber product category; and Bronze $.5 million-$1.5 million in purchases and

$5,000 in sales in each Graber product category.

               Springs also reviewed the FLA, which Springs explained was aimed at maintaining

and enhancing the reputation of its Graber trademarks. Springs emphasized that the FLA required

fabricators to use only Graber components with the Graber products they sold and to conform to

                                                10
Graber technical specifications. The “1999 Distributor/Fabricator Pricing Plan” was also presented,

as was a description of Springs’s planned 1999 training programs.

               Blind Maker also introduced into evidence a booklet titled Springs’s “1999 Marketing

Program,” which Hicks thought he received after the Orlando conference but before he signed the

FLA. Under “Preferred Requirements” were listed the minimum purchase requirements discussed

in Orlando, the exclusivity requirement (with the caveat that competitive products could be sold

upon prior written approval from Springs), plus a requirement to:

       Execute and deliver to Springs . . . the [FLA] and strictly comply with all terms and
       conditions of this agreement. Our goal is to have the signed Agreement by January
       1, 1999. If you are unable to sign the agreement by March 1, 1999, your company
       will be assigned into the Standard Category. In the event that the agreement is not
       signed by June 1, 1999, we will be forced to discontinue sales to your company.

Among the “preferred benefits,” the 1999 Marketing Plan included:

       !    Fabrication and technical support;

       !    Business productivity consulting;

       !    Preferred lead program;

       !    New product priority;

       !    Payment terms of “2%, 15th, net 60 for all Preferred Fabricators;”

       !    An “Inventory Adjustment Program,” whereby preferred fabricators could return
            certain unused inventory one time per year, contingent upon paying a restocking
            fee (lower for Gold preferred fabricators, higher for Silver and Bronze) and
            ordering new inventory at 125% of the value of the returned components;

       !    Co-op advertising, sales and event funds. All preferred fabricators would
            receive advertising funds equal to 2% of qualified purchases and sales funds

                                                 11
            equal to 1.5% of qualified purchases. Gold preferred fabricators only would
            receive event funds equal to .5% of qualified purchases.

       !    A margin improvement fund, or monthly credit based on a percentage of a
            fabricator’s volume of qualified purchases. The 1999 Marketing Plan explained
            that “[t]he primary objective of the Margin Improvement Fund is to improve
            overall profitability.” Gold preferred fabricators would receive a 3% credit,
            Silver 2%, and Bronze 1%;

       !    Special discounts on components; and

       !    A performance growth rebate, which would reward preferred fabricators with
            a 2% rebate upon achieving specified percentage growth relative to prior year
            purchases. Gold preferred fabricators obtained the rebate upon achieving 5%
            growth, Silver 10%, and Bronze 15%.

Dudas later testified that Springs had “most definitely” intended for the blinds fabricators to rely on

the statements made in the Orlando slide show and 1999 Marketing Plan as true. But, he clarified

that those statements represented only Springs’s “intentions” in its new preferred fabricator program.

               Hicks later testified that Springs depicted its new initiatives as a means of reducing

the number of fabricators with whom it dealt from the 60 to 80 it had been utilizing to approximately

twenty. These “fortunate few” would receive “lots of benefits,” including those mentioned above

as well as other benefits that had been discussed during the pilot-program discussions, including new

product development, a “good/better/best” brand positioning effort, a low-priced “fighter brand,”

“mega pricing,” and use of Springs’s equipment.7 Blind Maker also introduced into evidence a

document, prepared by Springs, representing Blind Maker’s projected financial benefits if it

participated in the preferred fabricator program at its 1999 projected volume of purchases. Adding

       7
          Hicks characterized the benefits discussed in Orlando as essentially the same as those
offered under the pilot program.

                                                  12
the projected financial benefits from the new co-op advertising programs, margin enhancement fund,

and the performance growth rebate yielded an estimated financial benefit of over $1.5 million. The

document also compared these benefits to those Blind Maker had received under Springs’s 1998

incentive programs, and represented that Springs stood to gain more than $1.1 million in additional

benefits.

    Evidence of a link to Project Overlord

               Following the Orlando conference, an internal Springs operations review analyzed

fabricator feedback from the event. The review listed a number of the fabricators’ concerns

including, (1) questions regarding Springs’s ability to deliver the promises made, (2) quality and

service issues, (3) belief that the FLA was lopsided in Springs’s favor, and (4) concerns about

Springs’s strategy to acquire [distributor/fabricators] and establish wholly owned fabrication

capability. At the end of this list, the review states “*** We will be driven to execute OVERLORD

on an accelerated basis.”

Hicks signs the FLA

               Hicks did not sign the FLA at the Orlando conference. Springs mailed a revised

version of the agreement to Blind Maker on January 7, 1999. Springs had made several revisions

based on “the significant comments that were obtained in Orlando” in order to “make the Agreement

completely serviceable to [Springs] and it’s [sic] fabricating partners.” The letter stated “a timetable

for completion of the Agreement”:

                                                  13
       January 1999 - March 1999 Signed Agreements are obtained and applicable
                                 benefits (Gold, Silver and Bronze Preferred
                                 Fabricators) begin to accrue the month following the
                                 signature.

       March 2, 1999                   Fabricators not signing the Agreement will be
                                       classified as Standard Fabricators.

       June 1, 1999                    Fabricators who have not signed the Agreement will
                                       be discontinued by their election of not signing the
                                       Agreement.

After consulting with Blind Maker’s corporate counsel, Hicks signed the revised FLA on January

15, 1999.

               The FLA itself made no mention of the Preferred Benefits discussed in Orlando or

in the 1999 Marketing Plan. It did grant Blind Maker a “non-exclusive right and license” to use

certain of Springs’s Graber trademarks listed in an exhibit to the agreement. The license permitted

Blind Maker to use the trademarks within identified territory and distribution channels. Blind Maker

agreed “to devote its best efforts to promote and sell the Licensed Product in the Primary Territory”

and that all Licensed Products would utilize only Springs components and be installed and

constructed in conformity with technical information and specifications provided by Springs.

Springs was also given power to approve any advertising for the Licensed Products.

               Springs agreed, during the term of the agreement, to sell to Blind Maker all

components for fabrication of the Licensed Products, subject to its right to decline any order. The

agreement further provides that, “The prices and other terms and conditions of sale for the

components are set forth in Springs’s price lists and standard terms and conditions of sale,” and that

                                                 14
“Springs reserves the right to change prices and standard terms and conditions of sale and the

features of its components at any time during the terms of this Agreement.” Additionally, the FLA

provided that “[a]ll orders shall be subject to the approval of Springs’s credit department.” The FLA

also obligated Springs to sell “sufficient quantities of samples and displays of the Licensed Products,

catalogs, and other advertising and promotional aids,” and to make available, from time to time,

fabricator technical information, including finished product specifications, fabrication and assembly

instructions, and repair instructions.

               The FLA also permitted either party to terminate the agreement, with or without

cause, upon six months’ advance written notice. Upon termination, Blind Maker’s license to use

Springs’s trademarks and technical information would cease.

               The sole reference in the FLA to the Preferred Fabricator program was in section

13.01, which provided:

       Springs Fabricators are classified as Preferred (Gold, Silver, or Bronze) or Standard
       Distributor/Fabricator. Fabricator agrees to strictly comply with all requirements for
       its assigned category . . . . The requirements are subject to quarterly review and
       revision. Fabricator shall provide quarterly reports of its compliance status with
       respect to all performance targets assigned to Fabricator.

The FLA contained an addendum identifying Blind Maker as a Gold Preferred Fabricator and setting

forth the requirements that Blind Maker purchase a total of at least $2.5 million of qualifying

products and at least $25,000 from each Graber product group; fabricate and distribute only Springs

products unless Blind Maker obtained written approval to do otherwise; and meet a $12.3 million

sales objective. Payment terms were again specified as “2% 15th, Net 60.”

                                                  15
               The FLA further provided that Springs would have a right of first refusal should

Hicks sell the Blind Maker. However, Hicks handwrote a modification: “Springs shall not have a

right of first refusal if ownership is transferred in accordance with a will to family members.”

               Finally, section 15.05 of the FLA provided:

       This Agreement contains the entire agreement between the parties hereto in respect
       of the subject matter hereof, and supercedes and cancels all previous agreements,
       negotiations, commitments and understandings, with respect to the subject matter
       hereof, whether made orally or in writing.

After Hicks executed the FLA and forwarded it to Springs, Dudas wrote on January 22 to

acknowledge receipt and “welcome you to our joint partnership.” Dudas added that “[s]ince your

signing date was January, 1999, the Preferred benefits will begin on February 1, 1999. These

benefits will be distributed as per our 1999 Fabricator publication and our discussions in Orlando.”

               Hicks later testified that, although the FLA and other Springs documentation had

referenced “Standard Fabricators,” Springs executives had “repeatedly” told him that Blind Maker

had to sign the FLA as a preferred fabricator—i.e., to agree to the exclusivity requirement and

preferred fabricator performance targets—or Springs would discontinue all business with Blind

Maker on June 1, 1999. Hicks later learned that, in fact, Springs had continued to do business with

other fabricators as standard fabricators. He testified that if he had understood that Blind Maker

could have continued to do business with Springs as a standard fabricator, he would not have signed

the FLA as a preferred fabricator. Hicks also testified as to his understanding at the time that the

FLA and the preferred fabricator benefits “went together” and that if he had believed that Springs

                                                16
would not consider itself bound to provide the preferred fabricator benefits, he would not have

signed the FLA as a preferred fabricator.

Springs enforces the terms of the FLA

                The dispute that ensued stemmed from Springs’s attempts to enforce FLA terms that

departed from the parties’ past business practices, Springs’s modification of certain preferred

fabricator benefits, and Springs’s failure to deliver certain benefits as originally promised. Initially,

Blind Maker received at least some of the preferred fabricator benefits represented in the 1999

Marketing Plan and prior discussions. Particularly important to Blind Maker was the 3% margin

improvement fund. Also, even though the preferred fabricator requirements explicitly stated

payment terms of “2% 15, net 60,” Blind Maker continued its practice of taking 2% early payment

discounts even when it paid significantly later than fifteen days after invoice. However, Springs was

slower to deliver on other preferred fabricator benefits, raised some component prices, and

eliminated a truckload discount that Blind Maker had received prior to 1999.

                In April 1999, Hicks learned that Springs was selling a new type of Graber product

through Home Depot. Hicks faxed a letter to Dudas complaining that the action “speaks volumes”

about Springs’s retail strategy and “it raises serious issues of integrity.”8 Hicks also urged that he

“signed this contract expecting a ‘fighter brand.’ Where is it? Instead we are taking a significant

price increase on our basic components.” He added, “We should not be penalized for signing a

contract or being loyal to Graber. We must have access to competitively priced components on those

        8
         Hicks added, “Jim, I am not questioning your personal integrity, but your company’s
marketing integrity is certainly in question.”

                                                   17
generic, commodity products.” Hicks also expressed concern that, “I also signed the contract

expecting significant savings from your preferred programs. Between the price increase, losing the

truckload discount, and the other perks, The Blind Maker is not doing well.” Hicks later testified

that this was the first time he began to question Springs’s commitment to the promises he believed

it had made in Orlando.

               On May 29, 1999, Hicks executed a second revised version of the FLA. This version

included a narrower right of first refusal provision applying only where an owner attempted to sell

a fabricator to one of Springs’s direct or indirect competitors. The agreement was otherwise

identical to the version Hicks had signed in January except for some changes to the exhibits. The

exhibit addressing Blind Maker’s obligations as a Gold preferred fabricator was unchanged.

               Beginning in June, Springs’s credit department began to inquire with Blind Maker

regarding its practice of taking the 2% early payment discount even while paying significantly later

that the fifteen days after invoice specified in the FLA. These discussions culminated in a September

29 conference call in which Springs informed Blind Maker that it would strictly enforce the “2%

15th, net 60" payment terms specified in the FLA.9 In Hicks’s view, due to Blind Maker’s cash cycle

on inventory, this step eliminated any possibility it could obtain the 2% discount, effectively adding

what Hicks estimated to be $25,000 or $30,000 per month to the company’s inventory costs.

               Relations between the two companies continued to sour thereafter. After a meeting

with a Springs marketing executive that Hicks later recounted “created some animosity,” Dudas

       9
         Springs also sought reimbursement from Blind Maker for discounts it improperly took
between June 1 and September 29. This aspect of the parties’ dispute, which escalated in the
succeeding months, was ultimately resolved before trial.

                                                 18
informed Hicks that, as Hicks recounted, “I basically wasn’t liked at Springs . . . was considered to

be leading a charge against them,” and that his “issues were mine and mine alone.” Dudas,

according to Hicks, concluded by suggesting that Hicks “should consider my options, one of which

was for Springs to buy The Blind Maker.” This was the first time that Hicks had heard such an idea

from a Springs executive, and Hicks recounted that he felt “shocked and threatened that they even

would consider a strategy like that.”

               Dudas subsequently left Springs some time thereafter, and, on October 22, 1999,

Dudas wrote Hicks thanking him for “your support,” and professing, “I know I have failed to deliver

all that was promised at the outset of my tenure, but I do believe that we have made progress and that

the current business direction is correct.”

The white sale

               There is evidence that, during 1999, there was awareness within Springs that Blind

Maker was encountering financial difficulties. An October email from Springs’s credit manager

related an industry rumor that Blind Maker’s bank had begun carefully scrutinizing Blind Maker’s

account balances and sending auditors twice monthly to do inventory verification. The email

concluded that the rumors were only speculation, “but given the concerns we have, I feel it is worth

documenting. We should also be wary of any large orders that may potentially be placed by [Blind

Maker] to make their ‘quotas.’” Other internal documents reflected concern that Blind Maker’s

accounts payable had swelled and had become late since Springs began strictly enforcing the fifteen-

day requirement for the 2% early payment discount. Testimony from Springs employees further

revealed that Springs had an internal “credit limit” for Blind Maker of $3.8 million and that Blind

                                                 19
Maker had approached or exceeded this limit for much of the latter half of 1999. Blind Maker was

not informed of any such limit, however, until several months later.

               In November, Blind Maker received a Graber “General Sales Bulletin,” addressed to

“Graber Preferred Distributor/Fabricators,” announcing a “First Quarter 2000 White Sale” through

which preferred fabricators could obtain steep discounts on large purchases of certain Graber

components. Hicks testified that, having “lost” its customary 2% early payment discount, Blind

Maker “bought as much as we could”—over $1 million more in inventory than in a typical

month—both to avail itself of the white sale discounts and to meet the 5% growth target for

receiving the preferred fabricator benefits’ 2% performance growth rebate. Blind Maker’s accounts

payable rose to over $4.8 million by January 8, 2000.

               Hicks testified that Springs thereafter began putting unprecedented pressure on Blind

Maker to pay down its debt. Later in January, Springs reduced Blind Maker’s internal “credit limit”

from $3.85 million to $3.4 million. It did not inform Blind Maker of this reduction or the existence

of a credit limit. Blind Maker ultimately agreed to a repayment schedule.

Changes to the preferred fabricator benefits

               In March 2000, Springs held a meeting of its Preferred Fabricators in Chicago, at

which it announced changes in its preferred benefits for 2000. Springs replaced the margin

enhancement fund, which had been based solely on the volume of a fabricator’s purchases, with a

“Business Development Fund,” which provided rebates tied to growth in purchase volume.10 Springs

       10
           In all classifications, a fabricator had to achieve a minimum of 5% growth. For meeting
this threshold, a Gold fabricator would receive a 3% rebate, a Silver 2%, and a Bronze 1%. For the

                                                20
also modified the performance growth rebate to provide graduated percentages of rebates based not

on fabricator classification, but percentage growth.11 These shifts to growth-based incentives from

volume-based incentives created new difficulties for Blind Maker; because it was already a large

fabricator, it regarded the required growth thresholds as virtually impossible to achieve. However,

Blind Maker apparently did qualify for a new “Platinum” classification of preferred fabricators

applicable to those with at least $5 million in annual purchases. These changes took effect on

April 1.

The “customer list”

               At the March meeting, Springs also introduced a new promotional program, “Clear

to the TOP,” through which fabricators’ retail-level customers could obtain certain benefits, such as

free merchandise, based on growth in their purchases of Graber products. Blind Maker and other

fabricators were asked to mail “Clear to the TOP” program registration cards to their retail-level

customers. The cards requested confidential past-sales data, including customer identities, addresses,

telephone numbers, social security numbers or employer identification numbers, as well as sales

histories. Blind Maker considered this “very confidential information,” and voiced concern to

Springs. Springs represented that this information would be kept confidential—it would not be used

by Springs but would be forwarded to a third-party administrator; only names, social security

numbers and addresses for IRS purposes would be given to Springs. Springs would not have the

new Platinum classification, discussed above, Springs would pay a 4% rebate.
       11
        For 5-10% growth, all classifications of preferred fabricators would receive a 1% rebate;
11-14% growth, 2% rebate; and 15% or more growth would yield a 3% rebate.

                                                 21
sales history information.     Springs also purportedly represented that only the third-party

administrator would have access to the sensitive information and that Springs was using this

arrangement so fabricators would not have to disclose their confidential information to Springs.

Blind Maker gives notice to terminate

               On May 19, 2000, Blind Maker sent Springs a letter terminating the FLA effective

six months later, November 19, 2000, as required by that agreement. Hicks later explained that

Springs had eliminated any benefit for Blind Maker to continue as a preferred fabricator.

               An internal Springs briefing paper prepared for Springs president Ron Zabel lists

several potential “choices” that “should be presented to Ray Hicks no later than 5/26/00.” Among

these were Springs acquiring an equity position in Blind Maker. However, Hicks later testified that

Springs did not offer that option. Subsequently, on July 6, Springs placed a “credit hold” on Blind

Maker’s purchases for the first time. Springs witnesses later testified that Blind Maker’s termination

notice was a factor in this decision. On July 13, Springs informed Blind Maker for the first time

about its internal credit limit. Hicks testified that credit holds were “constant” thereafter and that

Springs frequently informed Blind Maker that requested components were on back order when,

Hicks maintains, other fabricators were able to purchase the same components. There was also

evidence that Springs refused to complete warranty work submitted by Blind Maker at this time.

               Blind Maker and Springs attempted to negotiate the extent to which Blind Maker

could sell products from rival manufacturers during the remaining term of the FLA and whether

Springs could compete for Blind Maker’s retail-level customers. The evidence is disputed as to

whether the parties ever reached any agreement.

                                                 22
Project Texas

                Also in July, Springs executives began actively developing alternative channels

through which Springs could reach the Texas market. Springs formulated a plan, “Project Texas,”

for pursuing Blind Maker’s customers. An internal Springs memo circulated around this time by

Springs’s new president, Ron Zabel, questioned whether Blind Maker should have a “hard” or “soft”

landing following its notice of termination. Another internal Springs document lists two scenarios

to be presented to Blind Maker. Scenario 1 listed a variety of options for the continued relationship

between the two companies. This included (a) Spring’s buyback of existing inventory and increasing

Blind Maker’s margin, (b) voiding the FLA and allowing Blind Maker to fabricate under its own

brand, or (c) an exchange of debt for equity in which Springs would actively participate in the

operation of Blind Maker. Scenario 2 contemplated Blind Maker’s demise: “SWF will implement

actions to insure payment of the outstanding amount ($4.1M) SWF will take action(s) to maintain

sales of its products in the markets formerly served by TBM.” A document entitled “Ray, we want

you back!!” also reflects the hard or soft landing strategy. This document lays out a number of

inducements for the Blind Maker to return as a Springs fabricator and states that, if Blind Maker does

not agree within 24 hours, Springs will demand repayment of all accounts receivable within 60 days,

cancel all pending and future orders, and “[Springs] will immediately deploy appropriate resources

to enable it to penetrate all markets now being served by Blind Maker.”

                There is evidence that, by September, Springs was using the confidential customer

information from the “Clear to the TOP” promotion to compete directly for Blind Maker’s retail-

level customers. There is also evidence that Springs provided this information to rival fabricators

                                                 23
to enable them to compete for Blind Maker’s customers. At trial, Springs’s CFO conceded that he

had believed it was wrong for Springs to use the confidential customer information in that manner.

               At this point in their relationship, Springs began refusing to accept unopened

inventory that Blind Maker was attempting to return.

The lawsuit

               On September 29, 2000, Blind Maker filed suit against Springs in Travis County

district court, claiming fraud, breach of contract, negligence, negligent misrepresentation,

misappropriation of trade secrets, tortious interference with business relations, promissory estoppel,

and claims under the Texas Deceptive Trade Practice Act and the Wisconsin Fair Dealership Act.

Springs counterclaimed under the FLA for $2.3 million, Blind Maker’s remaining credit balance.

Against this counterclaim, Blind Maker asserted various defenses, including that it was fraudulently

induced into the FLA.

               The case was tried to a jury. Although the jury heard evidence relevant to all of Blind

Maker’s liability claims, before submission Blind Maker dismissed with prejudice all of its claims

except fraud. As for damages, Blind Maker submitted only past and future “Lost Profits that were

natural, probable, and foreseeable consequence of Springs’s fraud.” The jury found that Springs had

committed fraud, and awarded Blind Maker $5,157,240 in past lost profits; it awarded no future lost

profits. The jury further found by clear and convincing evidence that the harm to Blind Maker

resulted from fraud, and awarded $2,090,000 in exemplary damages. However, the jury also found

that Blind Maker failed to comply with its payment obligations under the FLA and that such failure

was not excused by either of two counterclaim defenses Blind Maker submitted to the

                                                 24
jury—fraudulent inducement or anticipatory breach. The jury awarded Springs $2,043,660 in

damages. Only Springs now appeals.

                                            DISCUSSION

                Springs raises four primary issues on appeal: (1) the jury’s finding of fraud is not

supported by legally or factually sufficient evidence; (2) the jury’s actual-damage award is not

supported by legally or factually sufficient evidence; (3) because its liability finding and actual-

damage award are not supported by the evidence, the jury’s exemplary-damage predicate finding and

award should likewise be overturned; and (4) in the alternative, the judgment must be reformed to

award post-judgment interest accruing after September 1, 2003 at the rate of 5% rather that 10%.

The jury’s fraud finding

                In its first issue, Springs challenges the legal and factual sufficiency of the evidence

to support the jury’s finding of fraud.

     Standard of review

                In reviewing the legal sufficiency of the evidence, we view the evidence in the light

favorable to the verdict, crediting favorable evidence if reasonable jurors could, and disregarding

contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 807

(Tex. 2005). There is legally insufficient evidence or “no evidence” of a vital fact when (a) there

is a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence

from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to

prove a vital fact is no more than a mere scintilla; or (d) the evidence conclusively establishes the

                                                   25
opposite of the vital fact. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997);

Patlyek v. Brittain, 149 S.W.3d 781, 785 (Tex. App.—Austin 2004, pet. denied). More than a

scintilla of evidence exists when the evidence supporting the finding, as a whole, “rises to a level

that would enable reasonable and fair-minded people to differ in their conclusions.” Havner, 953
S.W.2d at 711 (quoting Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995)). If the

evidence is so weak as to do no more than create a mere surmise or suspicion of its existence, its

legal effect is that it is no evidence. Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 183

(Tex. 1995).

                In reviewing a factual insufficiency point, we consider, weigh, and examine all the

evidence presented at trial. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989).

We set aside a finding for factual insufficiency only if it is so contrary to the overwhelming weight

of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986)

(per curiam).

     Overview of the jury charge and evidence

                The starting point for our analysis of Springs’s evidentiary sufficiency challenge is

the charge as submitted to the jury. Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000) (legal

sufficiency); Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 762 (Tex. 2003) (“Before a

court can properly conduct a factual sufficiency review, it must first have a clear understanding of

the evidence that is pertinent to its inquiry. The starting point generally is the charge and instructions

to the jury.”); Ancira Enters., Inc. v. Fischer, No. 03-03-00498-CV, 2005 Tex. App. LEXIS 4708,

at *23-24 (Tex. App.—Austin June 16, 2005, no pet. h.). The focus of our inquiry, then, is Question

                                                   26
1, in which the jury was asked, “Did Springs commit fraud against The Blind Maker?” The jury was

instructed that “fraud can occur through either: (1) misrepresentation; or (2) failure to disclose,” and

then proceeded to list the elements of both forms of fraud:

       1.   Fraud by misrepresentation occurs when—

            a.    a party makes a material misrepresentation;

            b.    the misrepresentation is made with the knowledge of its falsity or made recklessly
                  without any knowledge of the truth and as a positive assertion;

            c.    the misrepresentation is made with the intention that it should be acted on by the
                  other party; and

            d.    the other party acts in reliance on the misrepresentation and thereby suffers injury.

                 “Misrepresentation” means:

            a.    A false statement of fact;

                  OR

            b     A promise of future performance made with an intent, at the time the promise was
                  made, not to perform as promised.12

       2.   Fraud by failure to disclose occurs when–

            a.    a party fails to disclose a material fact within the knowledge of that party,

            b.    the party knows that the other party is ignorant of the fact and does not have an
                  equal opportunity to discover the truth,

       12
           Springs does not dispute that this is a proper instruction regarding fraud by
misrepresentation. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001).

                                                      27
            c.    the party intends to induce the other party to take some action by failing to disclose
                  the fact, and

            d.    the other party suffers injury as a result of acting without knowledge of the
                  undisclosed fact.13

The jury answered Question 1 in the affirmative.

                 The gist of Blind Maker’s fraud claim was that Springs committed a series of

independently actionable fraudulent acts to effectuate the “Overlord” plan. Blind Maker alleged the

following specific fraudulent acts:

       !    Fraudulently inducing Blind Maker to enter into the FLA, which Blind Maker
            contends effectively trapped the company in an agreement that required Blind
            Maker to sell exclusively Graber products and allowed termination only by six-
            months’ advance notice (the “fraudulent-inducement” theory);

       !    Fraudulently failing to disclose to Blind Maker that it was in danger of
            exceeding Springs’s “secret” credit limits before allowing it to make large credit
            purchases in connection with the December 1999 white sale promotion (the
            “white sale” theory);

       !    Fraudulently misrepresenting that Blind Maker’s customer list information
            collected through the “Clear to the TOP” promotion would be kept confidential,
            then using it to compete against Blind Maker a few months later (the “customer
            list” theory);

       !    Fraudulently failing to disclose that, after Blind Maker gave notice to terminate
            the FLA, Springs would (1) place a credit hold on its purchases; (2) treat it
            “differently” than other preferred fabricators; (3) refuse to do business with it as
            a standard fabricator; (4) use the customer information obtained through the
            Clear to the TOP promotion to compete against it; and (5) make false statements

       13
            As discussed below, Springs objected to the submission of an instruction on fraud by
failure to disclose, contending that, as a matter of law, such a claim was foreclosed because it owed
no duty to disclose and because Blind Maker did not obtain a predicate finding on the existence of
such a duty. We address this contention below.

                                                  28
           to Blind Maker’s customers concerning why Blind Maker was no longer selling
           Springs’s products (the “termination” theory).

    Fraudulent inducement theory

              In support of its fraudulent inducement theory, Blind Maker elicited the following

evidence of representations or nondisclosures by Springs before Hicks signed the FLA:

       !   Hicks testified that Springs “repeatedly” told him that Blind Maker would have
           to sign the FLA as a preferred fabricator by June 1, 1999, or Springs would
           cease to do business with Blind Maker. Hicks also testified that Springs never
           told him that he could opt to continue doing business as a standard fabricator,
           as he later learned that Skandia, one of Blind Maker’s competitors, did;

       !   Hicks testified that he was never told that the 3% margin development discount
           could change or would be changed in March 2000;

       !   Hicks testified that he was never told that Springs would strictly enforce the 2%
           early payment discount for payment within fifteen days of invoice;

       !   Hicks testified that Springs’s expressed intentions with the FLA and preferred
           fabricator program was to eliminate “bottom feeders;”

       !   Hicks testified that he was never told about “Overlord” or that Blind Maker was
           a target;

       !   Evidence regarding the preferred fabricator benefits represented to Hicks during
           the Orlando conference and in the 1999 Marketing Plan. These included (i) new
           product development; (ii) new product priority (distributor/fabricators would be
           able to sell new products for a year before it went into the retail channel); (iii)
           Nanik blinds would not be sold in the retail channel (so as to avoid channel
           conflicts); (iv) a lower-priced “fighter brand” would be developed and deployed,
           as well as “good-better-best” product positioning; (v) price parity between the
           distributor/fabricator channel and the retail channel; (vi) a “mega pricing”
           program to combat low-priced generics; (vii) smaller, cheaper samples; and

                                                29
              (viii) pull national consumer advertising.14 Blind Maker also claims that Springs
              misrepresented that these benefits and FLA “went together as a whole.” Hicks
              testified that he wouldn’t have signed the FLA as a preferred fabricator if these
              benefits had not been promised and that Springs failed to fulfill each represented
              benefit;15 and

       !      Hicks testified that Springs never told him that it viewed its representations
              regarding the preferred fabricator benefits as mere business “intentions” and not
              as firm commitments.

                 Springs contends that none of this evidence can have probative value because of the

operation of various legal rules. See Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334

(Tex. 1998) (legal sufficiency or “no evidence” point will be sustained when court is barred by rules

of law or of evidence from giving weight to only evidence offered to prove a vital fact); Havner, 953
S.W.2d at 711.

            The jury’s failure to find fraudulent inducement in Question 6

                 Springs’s first argument is predicated on the jury’s failure to find in Blind Maker’s

favor on its fraudulent-inducement defense to Springs’s counterclaim under the FLA. Question 6

of the charge, presenting Blind Maker’s affirmative defenses, asked, “Was The Blind Maker’s failure

to comply [with the FLA] excused,” and included an instruction regarding two defenses:

       14
          Blind Maker also asserts that its “termination claims” are, in part, fraudulent inducement
claims, because Springs should have disclosed, before Blind Maker entered into the FLA, the actions
Springs would ultimately take after Blind Maker gave notice to terminate sixteen months later. We
address this aspect of Blind Maker’s fraudulent inducement claim in our discussion of the
termination theory.
       15
         We also note that Dudas’s farewell letter to Hicks conceded his failure “to deliver all that
was promised at the outset of my tenure.”

                                                   30
       [F]ailure to comply by The Blind Maker is excused if any one of the following is
       true:

       Failure to comply by The Blind Maker is excused by Springs’s previous failure to
       comply with a material obligation of the [FLA]; or

       Failure to comply by The Blind Maker is excused if The Blind Maker entered into
       the [FLA] as a result of fraud, if any, by Springs.

The question then explicitly linked the term “fraud” in Question 6 to the definitions and instructions

accompanying Question 1: “Please refer to Question 1 for instructions on fraud.” The jury answered

“no” to Question 6. Because the two defenses were submitted in the disjunctive, the jury necessarily

failed to find either fraudulent inducement or anticipatory breach.

               Springs reasons that because the jury failed to find in Question 6 that Blind Maker

was fraudulently induced into the FLA, the jury necessarily could not have relied on evidence of

fraudulent inducement in finding some fraud in Question 1. It extrapolates that, in our sufficiency

review, we must consider only potential evidence of fraud that is not “inducement-related.” Blind

Maker assails this argument on two chief grounds. It first cites the proposition that a jury’s failure

to find in favor of a party on an issue is not an affirmative finding to the contrary but merely

indicates that the party failed to carry its burden of proving that fact. See C. & R. Transp., Inc. v.

Campbell, 406 S.W.2d 191, 194 (Tex. 1966); Gensco v. Canco Equip. Inc., 737 S.W.2d 345, 347-48

(Tex. App.—Amarillo 1987, no writ).16 Second, Blind Maker suggests that Springs is attempting

       16
          See VandeStreek v. Hammer, No. 03-99-00355-CV, 2000 Tex. App. LEXIS 4588, at *2-3
(Tex. App.—Austin 2000, no pet.) (memorandum opinion); but see Doyle Wilson Homebuilder, Inc.
v. Pickens, 996 S.W.2d 387, 399 (Tex. App.—Austin 1999, pet. dism’d by agr.) (characterizing
jury’s negative answer to breach of contract submission as “an implicit finding that the electrical
wiring used . . . was of good quality and free of defects, since any materials not in conformity were

                                                 31
to revive an argument, waived at trial, that the jury’s findings in Questions 1 and 6 fatally conflict.17

We agree that Springs has waived the argument it attempts to assert here.

                In the district court, Springs argued that the jury’s responses in Questions 1 and 6

fatally conflicted and rejected the possibility that the responses could be reconciled.18 Blind Maker

maintained that (1) Springs waived its conflict complaint by failing to object before the jury was

discharged; and (2) while conceding “there is some overlap in the facts inquired about,” the two

responses could be reconciled because Question 1 inquired about additional acts of fraud beyond

Blind Maker’s fraudulent inducement into the FLA. On appeal, Springs does not attempt to argue

conflict and does not appear to dispute that it waived that argument; instead, it purports to adopt

Blind Maker’s position at trial that the responses could be reconciled and additionally attempts to

derive implications for our sufficiency review of the Question 1 finding.

considered defective under the contract”; although finding was “not conclusive,” it “indicates that
the jury did not believe that either a manufacturing defect or improper installation . . . caused the
fire.”).
        17
             Both affirmative jury findings and failures to find may give rise to fatal conflicts under
Texas law. See Bender v. Southern Pac. Transp. Co., 600 S.W.2d 257, 260 (Tex. 1980); Ford Motor
Co. v. Miles, 141 S.W.3d 309, 316-19 (Tex. App.—Dallas 2004, pet. filed) (negative finding on
strict liability issue fatally conflicted with affirmative finding on negligence issue, requiring reversal
and remand for new trial); see generally 4 Roy W. McDonald & Elaine A. Grafton Carlson, Texas
Civil Practice §§ 25:11-:13 (2d ed. 2001) (citing cases involving jury failures to find in discussion
of conflicting findings).
        18
            In both its motion for new trial and its motion to disregard jury findings and for judgment,
for example, Springs posited that if Blind Maker “had alleged and/or proved a misrepresentation that
it relied upon in some way other than entering into the F&L Agreement, the two answers might not
contradict each other,” but it rejected this possibility because the jury had awarded an amount for
fraud damages in Question 2 that exceeded any amount it believed was attributable to any non-
inducement fraud.

                                                   32
               The unstated premise underlying Springs’s argument on appeal is that the jury’s

responses in Questions 1 and 6 would conflict unless we reconcile the two by construing the jury’s

Question 1 finding to be based solely upon evidence of fraud other than fraudulent inducement. This

is the type of analysis that Texas courts perform when a conflict complaint is raised. See, e.g,

Bender v. Southern Pac. Transp. Co., 600 S.W.2d 257, 260 (Tex. 1980) (reconciling jury’s liability

findings on certain issues with failures to find on other issues). Absent a conflict complaint, there

is no basis for reconciling the jury’s responses, and the court must give effect to each finding in the

ordinary fashion. See id. A conflict objection can be waived. St. Paul Fire & Marine Ins. Co. v.

Murphree, 357 S.W.2d 744, 748-49 (Tex. 1962) (rendering of judgment on fatally conflicting

findings is not fundamental error and can be waived).19 Especially in the face of general principles

of sufficiency review, which require us to consider all of the evidence in light of the charge actually

submitted, we decline to reconcile the jury’s responses in Questions 1 and 6, much less rely on such

reconciliation to limit our sufficiency review, because Springs did not first preserve a conflict

objection at trial. See Associated Indem. Corp., 964 S.W.2d at 285-86; Plas-Tex, 772 S.W.2d at 445.

To hold otherwise would create an end-run around the modern error preservation requirement that

parties object to conflicting jury findings before the jury is discharged20and the sound policies that

       19
          Cf. Golden Eagle Archery Co. v. Jackson, 116 S.W.3d 757, 763-70 (Tex. 2003) (absent
contrary instructions in charge or other limitations, jury might award overlapping or duplicative
elements of damages based on same evidence).
       20
        See Columbia Med. Ctr. of Las Colinas v. Bush, 122 S.W.3d 835, 861 (Tex. App.—Fort
Worth 2003, pet. denied); Norwest Mortgage, Inc. v. Salinas, 999 S.W.2d 846, 865 (Tex.
App.—Corpus Christi 1999, pet. denied); City of Port Isabel v. Shiba, 976 S.W.2d 856, 860 (Tex.
App.—Corpus Christi 1998, pet. denied); Isern v. Watson, 942 S.W.2d 186, 191 (Tex.
App.—Beaumont 1997, writ denied); Ciba-Geigy Corp. v. Stephens, 871 S.W.2d 317, 324 (Tex.
App.—Eastland 1994, writ denied); see also Tex. R. Civ. P. 295 (contemplating that trial court can

                                                  33
underlie that requirement. What the jury intended by findings that potentially conflict is best

determined by the jury itself, a procedure made available by timely objection before the jury is

discharged, see Tex. R. Civ. P. 295, rather than by appellate courts drawing “speculative”

conclusions regarding “the jury’s thought processes or of its intentions in giving its answers to the

two issues,” as Springs asks us to do here. C. & R. Transp., 406 S.W.2d at 195.

                 We accordingly hold that Springs waived its argument that the jury’s failure to find

in Blind Maker’s favor regarding its fraudulent inducement defense limits the scope of our

sufficiency review of the jury’s Question 1 fraud finding.21

            “Con-tort” cases

                 Next, Springs contends that Blind Maker’s fraudulent-inducement claim is, in

substance, a claim for damages from Springs’s failure to perform under the FLA, and thus can be

brought only as a contract claim. See Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494-

95 (Tex. 1991).

                 In DeLanney, the supreme court held that a cause of action for “negligence” could

not be based on an allegation that a party failed to perform duties subsumed in a contract because

return conflicting verdict to jury with instructions).

           We note that, in some of its older decisions, the supreme court addressed issues of conflict
raised for the first time on appeal. C. & R. Transp., Inc. v. Campbell, 406 S.W.2d 191, 195 (Tex.
1966) (addressing conflict “although neither party so contends or has sought a mistrial on that
ground.”). Because Springs does not dispute that it waived its conflict objection at trial, we need not
consider the implications, if any, of these decisions.
       21
          Because we rely on waiver, we have no occasion to consider whether, assuming we could
properly reconcile the responses in Questions 1 and 6 in the manner Springs suggest, it would have
any implications for our sufficiency review.

                                                  34
such an action sounded in contract and not tort. Id. at 494-95; see also Crawford v. Ace Signs, Inc.,

917 S.W.2d 12, 13-14 (Tex. 1996) (extending DeLanney to hold that nonperformance of contract

not actionable under DTPA). Subsequently, in Formosa Plastics Corp., USA v. Presidio Eng. &

Contr., Inc., 960 S.W.2d 41, 46-47 (Tex. 1998), the supreme court rejected the application of

DeLanney to preclude a fraudulent-inducement claim. The court noted that Texas law has long

imposed a tort duty, independent of any contract, to abstain from inducing another to enter into a

contract through the use of fraud. Id. at 46 (citing Prudential Ins. Co. v. Jefferson Assocs., Ltd., 896
S.W.2d 156, 162 (Tex. 1995), and Dallas Farm Mach. Co. v. Reaves, 307 S.W.2d 233, 239 (Tex.

1957)). It likewise noted that it had “repeatedly recognized that a fraud claim could be based on a

promise made with no intention of performing, irrespective of whether the promise is later subsumed

in a contract.” Id. (citing Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d
591, 597 (Tex. 1992)). It also established that tort damages are not precluded simply because a

fraudulent representation causes only an economic loss. Id. at 47. “Accordingly,” the supreme court

held, “tort damages are recoverable for a fraudulent inducement claim irrespective of whether the

fraudulent representations are later subsumed in a contract or whether the plaintiff only suffers an

economic loss related to the subject matter of the contract.” Id.

                To distinguish Formosa, Springs relies on the jury’s failure to find fraudulent

inducement in Question 6, which it equates to a finding of no fraudulent inducement. “This is a

misinterpretation of the issue and the answer.” C. & R. Transp., 406 S.W.2d at 194. The jury’s

failure to find fraudulent inducement in Question 6 is not an affirmative finding of no fraudulent

inducement. Id. In light of this principle, and Springs’s waiver of any conflict-related complaint

                                                  35
relating to the jury’s consideration of fraudulent inducement evidence in finding fraud in Question

1, we must reject Springs’s attempt to use the Question 6 finding to avoid Formosa. Assuming there

is otherwise competent evidence of fraudulent inducement, DeLanney does not stand as a barrier to

our considering that evidence as support for the jury’s Question 1 fraud finding. Formosa, 960
S.W.2d at 47.

         Merger clause

                In section 15.05 of the FLA, Blind Maker contractually agreed that (1) the FLA

“contains the entire agreement” between it and Springs “with respect to the subject matter hereof”;

and that the FLA (2) “supersedes and cancels all previous agreements, negotiations, commitments

and understandings, with respect to the subject matter hereof, whether made orally or in writing.”

Springs contends that section 15.05 negates, as a matter of law, the reliance element of Blind

Maker’s fraud claim to the extent it arose before Hicks’s entry into the FLA; i.e., its fraudulent

inducement theory. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179-80 (Tex. 1997)

(disclaimer provision in settlement agreement defeated fraudulent inducement claim by negating

reliance on pre-contractual representations); Prudential, 896 S.W.2d at 162 (“as is” clause and

disclaimer of reliance negated reliance element of fraud claim predicated on pre-contractual

representations).

                Blind Maker attempts to distinguish section 15.05 from the type of contractual

provisions addressed in Schlumberger and Prudential. It points out that Schlumberger involved a

disclaimer of reliance in a settlement release, see Schlumberger, 995 S.W.2d at 177-80, while

Prudential involved a contractual “as is” clause and disclaimer of reliance in a real estate purchase

                                                 36
agreement. See Prudential, 896 S.W.2d at 160. Blind Maker observes that section 15.05 is a merger

or integration clause, and maintains that it can only prevent the use of parol evidence to vary the

written terms of the FLA and does not bar tort claims. We reject Blind Maker’s argument.

               In general, a “merger clause” is a contractual provision to the effect that the written

terms of the contract may not be varied by prior agreements because all such agreements have been

merged into the written document. IKON Office Solutions, Inc. v. Eifert, 125 S.W.3d 113, 125 n.6

(Tex. App.—Houston [14th Dist.] 2003, pet. denied) (citing Black’s Law Dictionary 989 (6th ed.

1990)). Such clauses emphasize the parties’ intent to invoke the “merger doctrine.” Fish v. Tandy

Corp., 948 S.W.2d 886, 899 (Tex. App.—Fort Worth 1997, pet. denied) (“A written merger clause

. . . is essentially a memorialization of the merger doctrine.”). Under the merger doctrine, prior or

contemporaneous agreements between the same parties, concerning the same subject matter, are

absorbed into a subsequent agreement. See Texas A & M Univ.-Kingsville v. Lawson, 127 S.W.3d
866, 872 (Tex. App.—Austin 2004, pet. filed); Fish, 948 S.W.2d at 898; see generally Hubacek v.

Ennis State Bank, 317 S.W.2d 30, 31 (Tex. 1958) (explaining merger rule). Whether merger occurs

depends on the intent of the parties. Lawson, 127 S.W.3d at 872; Fish, 948 S.W.2d at 898. The

merger doctrine is an adjunct of the parol-evidence rule. Lawson, 127 S.W.3d at 872. For these

reasons, at least one of our sister courts has suggested that merger clauses operate solely to bar

contract claims based on extra-contractual agreements or representations, and not torts. See

Carousel’s Creamery, L.L.C. v. Marble Slab Creamery, Inc., 134 S.W.3d 385, 395 (Tex.

App.—Houston [1st Dist.] 2004, pet. filed).

                                                 37
               However, the supreme court in Schlumberger implied that merger clauses could,

under circumstances like those present in that case, operate to negate the reliance element even of

fraudulent-inducement claims arising from the same contract containing the merger clause.

Schlumberger, 959 S.W.2d at 181 (“We emphasize that a disclaimer of reliance or merger clause

will not always bar a fraudulent inducement claim.”) (emphasis added). Moreover, several of our

sister courts and the Fifth Circuit have equated merger clauses similar to section 15.05 with the type

of disclaimers of reliance applied in Schlumberger and Prudential. See, e.g., IKON, 125 S.W.3d at

126-28 (provisions that contract was “entire agreement” and requiring any modifications to be in

writing barred fraudulent-inducement claim under Schlumberger); Yzaguirre v. KCS Res., Inc., 47
S.W.3d 532, 542-43 (Tex. App.—Dallas 2000), aff’d, 53 S.W.3d 368 (Tex. 2001) (merger clause

in settlement agreement containing “entire agreement” provision and statement that “[n]o oral

understandings, statements, promises or inducements contrary to this Settlement Agreement exist”

characterized as “disclaimer” and applying Schlumberger to preclude fraudulent-inducement claim);

see also U.S. Quest Ltd. v. Kimmons, 228 F.3d 399, 403-04 (5th Cir. 2000) (applying Texas law and

concluding that merger clause showed parties “intended to abandon any alleged agreement to enter

a second written contract”); Armstrong v. American Home Shield Corp., 333 F.3d 566, 571 (5th Cir.

2003) (applying Schlumberger to negate fraud claims based on merger clause).

               By contractually “cancelling” all pre-FLA “agreements, negotiations, commitments

and understandings” and “supersed[ing]” them with the FLA, a merger clause like section 15.05

amounted to a disclaimer of the existence of pre-contract agreements, promises or representations

and any right of the parties to rely upon them. We conclude that section 15.05 is susceptible to being

                                                 38
enforced as a disclaimer of representations or reliance under the Schlumberger or Prudential

analyses.

               We next consider the extent to which section 15.05 and the FLA, as a matter of

contract law, encompass the alleged agreements or understandings that were the basis of Blind

Maker’s fraudulent inducement theory of fraud.22 Blind Maker points out that section 15.05 states

that the FLA is the “entire agreement” only “with respect to the subject matter hereof.” It urges that

the FLA’s “subject matter” is “exceedingly narrow,” addressing only licensing issues and not the

credit or benefits issues at the root of its fraud claims. In response, Springs asserts that the FLA’s

subject matter extends to all aspects of the parties’ manufacturer-fabricator relationship. While we

disagree with Blind Maker’s characterization of the FLA as merely a licensing agreement, we agree

that section 15.05 and the FLA do not absorb all of the representation or understandings made the

basis of Blind Maker’s fraudulent-inducement theory of fraud.

               A merger clause like section 15.05 memorializes the parties’ intent to integrate or

absorb their prior negotiations, agreements, or understandings concerning the same subject matter

into a subsequent written contract. See, e.g., Fish, 948 S.W.2d at 898-99; Leon Ltd. v. Albuquerque

Commons P’ship., 862 S.W.2d 693, 700 (Tex. App.—El Paso 1993, no writ). Where the parties

       22
           See Schlumberger, 959 S.W.2d 171, 179-80 (Tex. 1997) (looking to “well-established
rules of contract interpretation” as first step in determining whether release was enforceable to bar
fraudulent inducement claims); Prudential, 896 S.W.2d at 161-62 (“terms of the agreement” among
factors to be considered in determining whether “as is” clause is enforceable).

          Section 15.06 of the FLA provides that the agreement is to be construed for all purposes
in accordance with Wisconsin law. Because neither party asserts that Wisconsin law differs from
Texas law in any respect that bears upon our analysis here, we will employ Texas law.

                                                 39
have concluded a valid integrated agreement dealing with the subject matter between them, the parol

evidence rule will prevent enforcement of prior or contemporaneous agreements that are inconsistent

with the integrated agreement. Fish, 948 S.W.2d at 898; Leon, 862 S.W.2d at 700; see also Lawson,
127 S.W.3d at 872. However, this bar does not preclude enforcement of prior or contemporaneous

agreements which are collateral to, are not inconsistent with, and do not vary or contradict the

express or implied terms or obligations of the integrated agreement. Hubacek, 317 S.W.2d at 32.

To be collateral, the prior agreement must be such that as the parties might naturally make separately

and would not ordinarily be expected to embody in the integrated agreement; further, the allegedly

collateral agreement must not be so clearly connected with the principal transaction as to be part and

parcel thereof. Fish, 948 S.W.2d at 899; Leon, 862 S.W.2d at 700-01.

                 The FLA not only addresses but also squarely contradicts Blind Maker’s claim that

Springs fraudulently failed to disclose that it might “take away” the 2% early payment discount by

strictly enforcing it. The FLA explicitly provided, among Blind Maker’s Gold preferred fabricator

requirements, “2% 15, net 60”—that Blind Maker could take the discount only if it paid within

fifteen days of invoice.23

                 We accordingly conclude that section 15.05 operates to negate the existence of Blind

Maker’s prior understanding regarding the 2% discount. See Fish, 948 S.W.2d at 899; Leon, 862
S.W.2d at 700-01.24 Other pre-FLA representations or understandings, while not flatly contradicting

        23
             This term was repeated in both the 1999 Marketing Plan brochure and the Orlando slide
show.
        24
          Some of our sister courts have held that, even without merger clauses or contractual
disclaimers of reliance, fraud claims predicated upon alleged representations squarely contradicted
by the express, unambiguous terms of a written agreement are foreclosed as a matter of law because

                                                  40
the agreement, fall within the subject matter of the agreement and are thereby absorbed into it. See

Leon, 862 S.W.2d at 700-01. The FLA addresses fabricator classifications in the following

provision:

        Springs Fabricators are classified as Preferred (Gold, Silver, or Bronze) or Standard
        Distributor/Fabricator. Fabricator agrees to strictly comply with all requirements for
        its assigned category, which are attached . . . . The requirements are subject to
        quarterly review and revision.

Any representation or understanding concerning whether Blind Maker could have become a standard

fabricator would fall within the subject matter of this provision.

                On the other hand, in light of our earlier review of the negotiations preceding the

FLA, we cannot conclude as a matter of law that the FLA was intended to address the preferred

fabricator benefits that Blind Maker was to receive, the relationship between any promises regarding

these benefits and the FLA, or whether the 3% margin improvement fund benefit could change. See

Hubacek, 317 S.W.2d at 31-32. Although these benefits were discussed before Blind Maker’s entry

reliance is not justifiable. See In re GTE Mobilnet of S. Tex. Ltd. P’ship, 123 S.W.3d 795, 799-800
(Tex. App.—Beaumont 2003, orig. proceeding); DRC Parts & Accessories, L.L.C. v. VM Motori,
S.P.A., 112 S.W.3d 854, 858-59 (Tex. App.—Houston [14th Dist.] 2003, pet. denied); cf. TCA Bldg.
Co. v. Entech, Inc., 86 S.W.3d 667, 674-75 (Tex. App.—Austin 2002, no pet.) (reliance element of
fraud claim negated as matter of law where plaintiff rejected contract containing alleged
misrepresentation). These courts have reasoned that, because a contrary approach “would defeat the
ability of written contracts to provide certainty and avoid dispute, the prevailing rule . . . is instead
that a party who enters into a written contract while relying on a contrary oral agreement does so at
its peril and is not rewarded with a claim for fraudulent inducement when the other party seeks to
invoke its rights under the contract.” DRC, 112 S.W.3d at 859. “Otherwise, contracts would be
‘nothing more than a scrap of paper.’” Fisher Controls Intern., Inc. v. Gibbons, 911 S.W.2d 135,
141-42 (Tex. App.—Houston [1st Dist.] 1995, pet. denied) (quoting Howeth v. Davenport, 311
S.W.2d 480, 482 (Tex. Civ. App.—San Antonio 1958, writ ref’d n.r.e.)).

                                                   41
into the FLA, the agreement is entirely silent regarding them.25 Springs’s own correspondence,

moreover, suggests that it viewed the preferred fabricator benefits as distinct from the FLA. In his

letter acknowledging Hicks’s first execution of the FLA in January 1999, Dudas wrote that “the

Preferred benefits will begin on February 1, 1999 [and] will be distributed as per our 1999

Fabricator publication and our discussions in Orlando.” (Emphasis added). Because we hold that

the FLA was not intended to encompass every aspect of the parties’ manufacturer-fabricator

relationship, evidence that Springs misled Blind Maker regarding their “partnership” while

concealing Project Overlord is also not excluded by the merger clause.

               We now consider whether section 15.05 is enforceable to negate the reliance element

of Blind Maker’s fraudulent-inducement theory to the extent that theory is predicated on

representations or understandings we have held to be within the FLA’s “subject matter.” As our first

step, we must consider whether Schlumberger or Prudential controls our analysis. Schlumberger

addressed the enforceability of a release to bar a claim that the plaintiff had been fraudulently

induced into the same settlement agreement in which the release was contained. Schlumberger, 959
S.W.2d at 177-81. Prudential, by contrast, addressed the enforceability of an “as is” clause and

       25
           The FLA does contain a general provision obligating Springs to sell to the fabricator
“sufficient quantities of samples and displays . . . catalogs, and other advertising and promotional
aids to sufficiently service” the fabricator’s territory, as well as a requirement that Springs make
available technical information concerning the licensed products, including finished product
specifications, fabrication and assembly instruction, installation and repair instructions, and similar
information. These provisions do not appear to address the same advertising and consulting benefits
Springs depicted as preferred fabricator benefits. Similarly, while the FLA reserves Springs’s “right
to change prices and standard terms and conditions of sale,” our review of the evidence indicates that
these terms and prices were distinct from the discounts and incentives offered under the preferred
fabricator benefit program.

                                                  42
disclaimer of reliance to bar tort claims where the plaintiff did not allege or prove that he had been

fraudulently induced into the contract. Prudential, 896 S.W.2d at 161-62 (“A buyer is not bound

by an agreement to purchase something ‘as is’ that he is induced to make because of a fraudulent

representation or concealment of information by the seller.”).          Blind Maker suggests that

Schlumberger would control our analysis but is unavailable because section 15.05 is not a release

incident to a settlement terminating the parties’ relationship. See Schlumberger, 959 S.W.2d at 179-

80 (sole purpose of release was to end dispute); see also John v. Marshall Health Servs., Inc., 91
S.W.3d 446, 449-50 (Tex. App.—Texarkana 2002, pet. denied); Woodlands Land Dev. Co. v.

Jenkins, 48 S.W.3d 415, 422 (Tex. App.—Beaumont 2001, no pet.); Fletcher v. Edwards, 26 S.W.3d
66, 77 (Tex. App.—Waco 2000, pet. denied).26 Springs contends that Prudential governs because

the jury failed to find that it had fraudulently induced Blind Maker into the FLA. While we

emphasize that the jury’s failure to find fraudulent inducement in Question 6 is not an affirmative

finding of no fraudulent inducement, we agree with Springs that the jury’s rejection of Blind Maker’s

fraudulent inducement defense to the FLA in Question 6 brings this case closer to Prudential than

       26
             But see IKON Office Solutions, Inc. v. Eifert, 125 S.W.3d 113,126-28 (Tex.
App.—Houston [14th Dist.] 2003, pet. denied) (applying Schlumberger to bar fraudulent inducement
claim relating to employment contract because agreement was intended to put end to pre-contract
dispute over plaintiff’s job responsibilities following acquisition of his company by defendant);
Armstrong v. American Home Shield Corp., 333 F.3d 566, 571 (5th Cir. 2003) (not considering
whether agreement was settlement agreement or release); see also U.S. Quest Ltd. v. Kimmons, 228
F.3d 399, 403-04 (5th Cir. 2000). Also, in an unreported opinion, we applied Schlumberger to
enforce a merger clause to bar fraudulent-inducement claims relating to an earnest money contract
without considering that the contract was not a settlement agreement. Starlight v. Xarin Austin I,
Ltd., 1999 Tex. App. LEXIS 159, at *22-25 (Tex. App.—Austin Jan. 14, 1999, no pet.) (not
designated for publication).

                                                 43
Schlumberger.27 We thus apply Prudential to determine whether, under the unique circumstances

of this case, section 15.05 negates the reliance element of Blind Maker’s fraudulent inducement

theory as a matter of law to the extent that theory is predicated upon representations and

nondisclosures we have held to be within the FLA’s scope. See Prudential, 896 S.W.2d at 161.

                In Prudential, the supreme court held that an “as is” clause and disclaimer of reliance

negated the causation element of various tort claims as a matter of law. Id. “By agreeing to purchase

something ‘as is,’” the court explained, “a buyer agrees to make his own appraisal of the bargain and

to accept the risk that he may be wrong. . . . The seller gives no assurances, express or implied,

concerning the value or condition of the thing sold.” Id. As for the disclaimer of reliance, the

supreme court stated simply that it “was an important element of their arm’s length transaction and

is binding . . . unless set aside.” Id. But the court qualified its holding by emphasizing that this type

of agreement would not have “this determinative effect in every circumstance” because “other

aspects of a transaction may make an ‘as is’ agreement unenforceable”:

        27
             Even if the jury’s fraud finding in Question 1 was based on evidence of fraudulent
inducement—a possibility left open by Springs’ failure to preserve a conflict objection—it would
have no bearing on the effect we give the jury’s failure to find fraudulent inducement in Question
6. Question 1 does not submit Blind Maker’s fraudulent inducement defense; only Question 6 does.
A finding of fraud in Question 1 is not a finding establishing Blind Maker’s fraudulent inducement
defense at least where, as here, Blind Maker purports to rely in Question 1 on evidence of fraud other
than fraudulent inducement. Compare Anderson, Greenwood & Co. v. Martin, 44 S.W.3d 200, 211-
12 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (jury finding of liability on affirmative
fraudulent inducement claim established fraudulent inducement defense even though plaintiff only
pled and did not specifically submit that defense). Fraudulent inducement is only “a particular
species of fraud that arises only in the context of a contract and requires the existence of a contract
as part of its proof.” Haase v. Glazner, 62 S.W.3d 795, 799 (Tex. 2001) (Emphasis added.). Only
Question 6 submits Blind Maker’s fraudulent-inducement defense issue to the jury, and the jury’s
adverse finding alone controls that issue.

                                                   44
       The nature of the transaction and the totality of the circumstances must be
       considered. Where the “as is” clause is an important part of the basis of the bargain,
       not an incidental or ‘boiler-plate’ provision, and is entered into by parties of
       relatively equal bargaining position, a buyer’s affirmation and agreement that he is
       not relying on representations by the seller should be given effect.”

Id.

               Recently, we applied Prudential to hold that an “as is” clause and disclaimer of

warranties in a commercial lease barred negligence, fraud, and breach-of-warranty claims arising

from a fire in the leased premises. Gym-N-I Playgrounds, Inc. v. Snider, 158 S.W.3d 78, 84-85 (Tex.

App.—Austin 2005, pet. filed). We considered five “Prudential factors”: (1) the sophistication of

the parties; (2) the terms of the “as is” agreement; (3) whether the “as is” agreement was freely

negotiated; (4) whether the agreement was an arm’s length transaction; and (5) whether there was

a knowing misrepresentation or concealment of a known fact. Id. at 85 (citing Procter III v. RMC

Capital Corp., 47 S.W.3d 828, 833 (Tex. App.—Beaumont 2001, no pet.)). We also noted that

whether a party was represented by counsel is also important in our assessment of both the party’s

relative sophistication and whether the agreement was freely negotiated. Id. Our overall inquiry was

to determine, based on the factors, whether the “as is” clause met the “letter and spirit of Prudential”

and should be held valid. Id. We held that the “as is” agreement should be enforced, noting in

particular the sophistication of the parties, the terms of the “as is” clause, and admissions of lack of

fraudulent inducement. Id. at 85-86. We also emphasized that, before signing the lease, the owners

of Gym-N-I also had actual knowledge of the very building conditions later made the basis of the

suit, yet signed the “as is” clause with awareness of that provision and its meaning. Id.; cf.

                                                  45
Schlumberger, 959 S.W.2d at 180 (release executed in context of dispute concerning very issues later

made basis of suit).

               We apply these factors here. First, we note that in Prudential, the supreme court held

that Goldman’s “contractual disavowal of reliance was an important part of their arm’s-length

transaction and is binding on Goldman unless set aside.” Prudential, 896 S.W.2d at 161. Although

Blind Maker asserted fraudulent-inducement and anticipatory-breach defenses to bar enforcement

of the FLA and effectively set it aside, the jury rejected these defenses.

               Moreover, there is no dispute that the parties dealt at arms’ length and that Blind

Maker’s principal, Hicks, was a sophisticated businessman. Hicks had earned an M.B.A., as well

as a masters in engineering. He had been in the blinds business since 1981, overseeing a company

with annual sales in the tens of millions of dollars. Hicks, furthermore, had assistance of counsel

to review the FLA and was able to negotiate changes to other provisions. Blind Maker signed not

one but two iterations of the FLA,28 each of which reflected negotiated terms.

               We also find it significant that, by May, Hicks had already begun to question

Springs’s “integrity” with regard to the preferred fabricator program, as manifested in his April 19,

       28
            Springs asserts that Blind Maker executed the FLA a third time, in October 1999, and
characterizes this act as ratifying any earlier fraudulent acts, including Springs’s “change” regarding
the 2% early payment discount. See Meyer v. Cathey, 167 S.W.3d 327, 331-32 (Tex. 2005); Fortune
Prod. Co. v. Conoco, Inc., 52 S.W.2d 671, 676-80 (Tex. 2000). Springs’s sole evidence to support
this assertion pertains to a one-page addendum to the FLA that Hicks executed on October 5, 1999,
amending the exhibit listing the products Blind Maker was permitted to sell. We reject Springs’s
characterization of this one-page amendment as a third execution of the entire agreement or as a
ratification of any prior fraud.

                                                  46
1999, letter to Dudas. Despite these concerns, Blind Maker executed the FLA, including section

15.05, a second time in May 2000.

               In sum, Blind Maker was a sophisticated party who, with advise of counsel, twice

signed a contract disclaiming the existence of extra-contractual “agreements,” “commitments,” or

“understandings” within the subject matter of the FLA in the face of brewing disputes regarding

some of these “understandings.” Blind Maker now attempts to claim fraud based on alleged

misrepresentations and nondisclosures the subject of which are addressed or even squarely

contradicted by the contract’s clear terms. Under these circumstances, it is within the “letter and

spirit” of Prudential to hold that section 15.05 negates, as a matter of law, the reliance element of

Blind Maker’s fraudulent inducement theory to the extent it is predicated upon evidence of

representations or understandings within the scope of the FLA. Specifically, Blind Maker’s

fraudulent inducement theory is foreclosed to the extent it is based on the following evidence:

       !    Evidence that Springs misrepresented that Blind Maker had to sign the FLA as
            a preferred fabricator or, as of June 1, 1999, it would not be permitted to
            purchase Springs products.

       !    Evidence that Springs failed to disclose that Blind Maker could continue doing
            business with Springs as a standard fabricator.

       !    Evidence that Springs failed to disclose that it would “take away” Blind Maker’s
            ability to take 2 percent discounts on payment terms beyond 15 days.

              We emphasize that our holding should not be construed as a categorical “roadmap to

future tortfeasors giving them the means to avoid liability merely by including a boilerplate merger

clause in a contract,” as Blind Maker cautions us against. Reaves remains the law of Texas. See 307
47
S.W.2d at 234-39. However, in these circumstances, Prudential compels us to give effect to the

merger clause in the FLA. Compare Prudential, 896 S.W.2d at 161-62, with Plunkett, 27 S.W.2d

at 616 (where jury found fraudulent inducement, merger clause did not bar tort claims). Moreover,

we emphasize again our holding that section 15.05 does not bar Blind Maker’s fraudulent

inducement theory to the extent it is predicated upon representations or understandings we have

determined to be beyond the FLA’s scope.

         Duty to disclose

               Finally, Springs argues that Blind Maker’s fraudulent-inducement theory fails as a

matter of law to the extent it is predicated upon Springs’s failure to disclose material facts, as

opposed to affirmative misrepresentations. Springs first contends that no evidence supports the

submission of a fraud-by-nondisclosure theory. Springs argues in the alternative that Blind Maker

waived the right to recover on any fraud-by-nondisclosure theory by failing to obtain a predicate

finding that Springs had a duty to disclose the facts in question to Blind Maker.

               A failure to disclose information does not constitute fraud unless there is first a duty

to disclose the information. Bradford v. Vento, 48 S.W.3d 749, 755 (Tex. 2001); Insurance Co. of

N. Am. v. Morris, 981 S.W.2d 667, 674 (Tex. 1998). Such a duty can arise where there is a fiduciary

or confidential relationship between the parties. Morris, 981 S.W.2d at 674. However, silence may

also be equivalent to a false representation in certain circumstances, but “only when the particular

circumstances impose a duty on the party to speak and he deliberately remains silent.” Bradford,
48 S.W.3d at 755; SmithKline Beecham Corp. v. Doe, 903 S.W.2d 347, 353 (Tex. 1995); Smith v.

                                                 48
National Resort Communities, Inc., 585 S.W.2d 655, 658 (Tex.1979). Whether a duty to disclose

exists is a question of law. Bradford, 48 S.W.3d at 755.

               Because the existence of a duty to disclose is a question of law, we reject Springs’s

alternative argument that Blind Maker was required to obtain a predicate finding that Springs owed

it a duty to disclose.29 We thus consider whether there is legally and factually sufficient evidence

of “particular circumstances” that would give rise to a duty to disclose on the part of Springs. See

Bradford, 48 S.W.3d at 755.

               The jury charge required Blind Maker to show that (1) Springs failed to disclose a

material fact within its knowledge; (2) Springs knew that Blind Maker was ignorant of that fact and

did not have an equal opportunity to discover the truth; and (3) Springs’s failure to disclose the fact

was intended to induce Blind Maker to take some action. Blind Maker contends that Springs had

a duty to disclose the following facts before it entered into the FLA: (1) that Springs viewed its

representations concerning the preferred fabricator benefits it would make available to Blind Maker

as mere “intentions,” not binding commitments; (2) that Springs would eventually change the 3%

       29
           Springs relies on Choi v. McKenzie, 975 S.W.2d 740, 743 (Tex. App.—Corpus Christi
1998, pet. denied), for the proposition that Blind Maker was required to obtain a predicate finding
of duty to disclose. However, Choi involved the question of whether the “confidential relationship”
exception to the statute of frauds applied, not whether a duty to disclose exists in a fraud cause. Id.
at 743. Moreover, the parties had agreed that the duty-to-disclose issue was one of fact. Id.

          Based on its argument that Blind Maker was required to obtain a predicate finding
regarding duty to disclose, Springs contends that we must reverse and remand for new trial under
Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000), because Blind Maker’s “invalid”
fraud-by-nondisclosure theories were commingled in a single broad-form question with Blind
Maker’s fraudulent misrepresentation theories. We need not address this question because we
conclude above that legally and factually sufficient evidence supports the submission of Blind
Maker’s fraud-by-nondisclosure theory.

                                                  49
margin improvement fund benefit, which was based on purchase volume, to a strictly growth-based

incentive; (3) the existence of Project Overlord and that Blind Maker was a target of it; (4) that

Springs would “take away” the 2% early payment discount by strictly enforcing it; (5) that Blind

Maker could continue doing business as a standard fabricator and was not required to sign the FLA

as a preferred fabricator. Blind Maker’s reliance on the latter two facts as a basis for its fraudulent-

inducement theory is foreclosed by section 15.05 of the FLA, as previously explained. Cf.

Schlumberger, 959 S.W.2d at 181-82 (release negated reliance element of both misrepresentation

and nondisclosure-based fraud claims). We also believe that there is no evidence that Springs had

a duty to disclose that it would someday change the 3% margin improvement fund benefit into a

growth-based incentive.

               In Bradford v. Vento, the supreme court emphasized that the second element required

by the charge—that Springs knew that Blind Maker was ignorant of the fact and did not have an

equal opportunity to discover the truth—incorporates two requirements: (1) the defendant must be

shown to have known that the plaintiff was ignorant of a material fact, and (2) the fact must be one

that the plaintiff did not have an equal opportunity to discover. See 48 S.W.3d 749.

               Bradford involved a fraud claim asserted by Vento, who became embroiled in a

dispute over whether he had purchased a sports memorabilia shop from Taylor. Id. at 752-54. The

shop was located at a mall. Id. at 752. After believing he had purchased the shop from Taylor,

Vento went to Bradford’s office, paid the shop’s rent for the month of October 1994, informed

Bradford that he had purchased the store, and inquired about a long-term lease. Id. Bradford

congratulated Vento on purchasing the store, indicated that he had heard about his purchase,

                                                  50
informed him that the monthly rent he had paid was a “decent deal,” suggested that a long-term was

a bad idea, and said he would “take care of” Vento in January. Id. Bradford did not mention that

the store’s lease was non-assignable, that additional rent would be due for December, and that Vento

would be required to apply for a new lease. Id. Sometime after this meeting concluded, Taylor

informed Bradford that he still owned the store and that there could be trouble with Vento. Id. at

752-53. Bradford alerted mall security, an altercation ensued involving Vento, Taylor, Bradford, and

mall security, and Vento was asked by police to leave the mall because he could not prove his

ownership. Id. at 753. Vento sued Bradford, among others. Id.

               The trial court submitted theories of both fraudulent misrepresentation and fraudulent

nondisclosure to the jury, which awarded damages to Vento against Bradford. Id. at 753-54. The

supreme court reversed, holding that there was no evidence that Bradford knew Vento was ignorant

of a fact and did not have an equal opportunity to discover the truth. It relied on the fact that even

though Vento claimed to have purchased the store, he never asked Bradford or any other mall

personnel for a copy of the store’s lease, the terms of the lease, or whether any rent was due for the

two months between his meeting and January. Id. at 756. It added that Vento had never asked for

the lease to be assigned to him and that he had only inquired about a long-term lease for himself.

Id. Moreover, the supreme court held, there was “no evidence that Bradford knew that Vento had

not obtained or could not obtain the information from other sources, such as Taylor, from whom

Vento was buying the store.” Id. at 755-56.

               In this case, there is no evidence that Springs knew either that Hicks or Blind Maker

had understood that the 3% margin improvement discount (or any other preferred benefit) was a

                                                 51
permanent entitlement that could not be changed.30 If anything, the evidence demonstrates that

Springs either disclosed this possibility to Blind Maker before Blind Maker entered into the FLA or

that Blind Maker would have had an equal opportunity to discern it from Springs’s disclosures.

Blind Maker purports to rely on a set of representations encompassed within Springs “1999

Marketing Plan,” a designation that implies limited duration. Moreover, during the discussions

concerning the pilot program, the model for the preferred fabricator benefits program, Blind Maker

was cautioned that “Note: Marketing plans may be modified periodically to reflect business

condition[s].” Hicks or Blind Maker did even less than Vento to inquire whether the preferred

fabricator benefits represented in the 1999 Marketing Plan and Pilot Program were permanent.

Under Bradford, Blind Maker cannot rely purely on such unexpressed, subjective understandings

as a basis for fraud.31

                However, we conclude that there is legally and factually sufficient evidence giving

rise to a duty on the part of Springs to disclose that it regarded its representations concerning the

        30
           Nor is there evidence of any affirmative representations by Springs to the effect that the
preferred benefits could not be changed. Blind Maker appears to suggest that the document
presented to Hicks during the Orlando conference illustrating Blind Maker’s potential 1999 earnings
if it became a preferred fabricator impliedly represented that the benefits would not be changed.
Even if this were an otherwise valid inference, the document refers only to Blind Maker’s
prospective earnings in 1999 and is not evidence of representations concerning benefits or earnings
in any future year.
        31
           For similar reasons, we also hold that Springs had no duty to disclose that it would enforce
the fifteen-day condition for obtaining the 2% early payment discount. Springs repeatedly disclosed
to Blind Maker that its payment terms for preferred fabricators were “2% 15, net 60” not only in the
express terms of the FLA, but also in the 1999 Marketing Plan brochure, the Orlando slide show, and
even in the discussions concerning the pilot program. The absence of such a duty is an independent
bar to Blind Maker’s assertions that Springs’s enforcement of the early payment discount terms
constituted fraud-by-nondisclosure.

                                                  52
preferred fabricator benefits at the Orlando conference and in the 1999 Marketing Plan to be non-

binding “intentions.” As previously discussed, there is evidence that Springs affirmatively

represented that it would provide certain special benefits to fabricators who executed the FLA and

opted for preferred fabricator status, and it made further representations that additional benefits

would be provided to “Gold” preferred fabricators. Blind Maker relied on these representations in

executing the FLA as a Gold preferred fabricator—Hicks testified that he would not have signed the

agreement except to obtain the promised benefits but that Springs ultimately failed to deliver the

benefits. Dudas appeared to confirm that fact. Springs’s actions raise the inference that it knew

Blind Maker was ignorant that Springs’s promised benefits were merely intentions, yet remained

silent with the intent to induce Blind Maker to sign the FLA in reliance on a belief that Springs’s

representations were firm commitments. Similarly, the combination of the representations regarding

Springs’s desire to be partners with its fabricators with the proof regarding the nature of Project

Overlord constitutes evidence Springs knew Blind Maker was ignorant of the plan. Under these

circumstances, we find there is legally and factually sufficient evidence that Springs owed a duty to

disclose Project Overlord and that it regarded its representations concerning preferred fabricator

benefits to be mere expressions of intention, that Blind Maker’s fraud-by-nondisclosure theory was

properly submitted to the jury, and that this evidence is sufficient to support the jury’s finding of

fraud under Blind Maker’s fraudulent inducement theory. See, e.g., Spoljaric v. Percival Tours, Inc.,

708 S.W.2d 432, 435 (Tex. 1986) (silence can be equivalent to false misrepresentation where

particular circumstances impose duty to speak).

                                                  53
         Conclusion regarding Blind Maker’s fraudulent-inducement theory

               We hold that there is legally and factually sufficient evidence of fraudulent

inducement in that: (1) Springs misrepresented that Blind Maker would receive certain preferred

fabricator benefits and Gold preferred fabricator benefits if it signed the FLA as that classification

of fabricator; (2) Springs failed to disclose its view that these representations were mere “intentions”

and not firm commitments, and (3) Springs failed to disclose that Blind Maker was a target of

Project Overlord. However, in light of section 15.05 of the FLA and Texas legal standards regarding

fraud-by-nondisclosure, Blind Maker’s other evidence supporting its fraudulent-inducement theory

cannot have probative value and, thus, is no evidence of fraudulent inducement.

    The white sale theory

               We turn to Springs’s second legal and factual sufficiency argument—that the

evidence is insufficient to support Blind Maker’s white sale theory. Blind Maker’s “white sale”

theory is also predicated upon a duty on the part of Springs to disclose a fact. As Blind Maker

described it in its initial brief, “Springs not only did not prevent TBM from making its customary

large year-end purchases or even caution or warn TBM not to make it, Springs actually encouraged

TBM to make these purchases” while it was in danger of exceeding the internal limits that Springs

had imposed on Blind Maker’s credit. We hold there is no evidence giving rise to a duty to disclose

on the part of Springs under these circumstances.

               As previously noted, there is no general duty to disclose information. Bradford, 48
S.W.3d at 755. Blind Maker does not allege that it has the sort of fiduciary or confidential

relationship that could give rise to such a duty. See Morris, 981 S.W.2d at 674. Nor is there

                                                  54
evidence that Springs knowingly failed to disclose a fact that Blind Maker did not have the equal

opportunity to discover. Bradford, 48 S.W.3d at 755-56. Even assuming that Springs had an

internal credit benchmark for Blind Maker of which Blind Maker was unaware, Blind Maker knew

of, and had ready access to, the two contracts that set forth the parties’ respective rights regarding

Blind Maker’s credit purchases—the 1997 credit agreement and the FLA. Under the credit

agreement, Blind Maker acknowledged that Springs “is not obligated to sell goods to [Blind Maker]

or to grant open account payment terms,” and that “[t]he decision to sell product and extend credit

shall be solely within the exclusive discretion of Springs.” The agreement further provided that

Blind Maker “hereby agrees to make payments as necessary to keep the account balance within terms

established by Springs,” and that if Blind Maker failed to do so, Springs “may immediately suspend

all future shipments on other than prompt payment terms such as cash or cashier’s check and may

further demand immediate payment of the full balance.” In the FLA, Blind Maker agreed that all

of its orders “shall be subject to the approval of Springs’s credit department,” and gave Springs

broad power to obtain information regarding Blind Maker’s financial condition. In the face of these

explicit contractual limitations,32 Blind Maker took the risk of assuming significant additional debt

in what Hicks testified was an attempt to meet the 5% threshold necessary to attain the 2%

performance growth fund benefit.33 At most, Blind Maker’s evidence indicates only that Springs

exercised its rights under contracts governing these sophisticated parties’ credit transactions. Texas

       32
         There was also evidence that Springs had previously expressed concern regarding Blind
Maker’s debt and late payments of accounts payable, as suggested by Springs’s $500,000 loan to
Blind Maker in early 1998 to help it pay down lagging accounts payable.
       33
          We also observe that Blind Maker also voluntarily had assumed the obligations under the
1997 credit agreement, and does not assert it was fraudulently induced into that agreement.

                                                 55
companies do not owe other Texas companies a general duty to provide each other business advice

in their arms’ length credit transactions. Failure to do so is not actionable fraud by failure to disclose

under Texas law. There is thus no evidence to support Blind Maker’s white sale theory of fraud.

     The “customer list” theory

                Next, we consider Springs’s third sufficiency challenge—that the evidence is legally

and factually insufficient to support Blind Maker’s “customer list” fraud theory. Blind Maker had

alleged that Springs fraudulently obtained confidential information regarding its customers through

the “Clear to the TOP” promotion and used it a few months later to compete for those customers.

On appeal, Springs contends there is insufficient evidence to support the element of intent. The jury

was instructed that it could find fraud by misrepresentation based on “[a] promise of future

performance made with an intent, at the time the promise was made, not to perform as promised.”

                A promise to do an act (or refrain from an act) in the future constitutes fraud only

when made with no intention of performing the promise at the time the promise was made.

Formosa, 960 S.W.2d at 48; Spoljaric, 708 S.W.2d at 434; Power Res. Group, Inc. v. Public Util.

Comm’n, 73 S.W.3d 354, 362 (Tex. App.—Austin 2002, pet. denied). Thus, the mere failure to

subsequently perform a promise, standing alone, is not evidence of fraud. Formosa, 960 S.W.2d at

48; Power Res. Group, 73 S.W.3d at 362. Rather, Blind Maker must have presented evidence that

Springs made representations with intent to deceive and with no intention of performing as

represented. See Formosa, 960 S.W.2d at 48. The evidence presented must have been relevant to

Springs’s intent at the time the representation was made. See id.

                                                   56
               Such fraudulent intent may be established by either direct or circumstantial evidence,

and the subsequent failure to perform the promise, while not alone dispositive, can be considered

with other factors to establish intent. Spoljaric, 708 S.W.2d at 434-45. The supreme court has stated

that “‘[s]light circumstantial evidence’ of fraud, when considered with a breach of promise to

perform, is sufficient to support a finding of fraudulent intent.” Id. at 435 (quoting Maulding v.

Niemeyer, 241 S.W.2d 733, 738 (Tex. Civ. App.—El Paso 1951, orig. proceeding)). Intent tends

to be a fact question uniquely within the realm of the trier of fact because it so depends on the

credibility of witnesses and the weight given to their testimony. Id. at 434. Although circumstantial

evidence may be used to establish any material fact, it must transcend mere suspicion; there must

be a logical bridge between the proffered evidence and the fact. IKON, 125 S.W.3d at 124 (quoting

Lozano v. Lozano, 52 S.W.3d 141, 149, 151 (Tex. 2001) (Phillips, C.J., concurring and dissenting));

see also City of Keller, 168 S.W.3d at 810-11.

               A desire to compete against or acquire another business is not alone evidence of

fraudulent intent. However, we must consider, in combination, evidence of: (1) Project Overlord,

(2) Springs’s acts in connection with the FLA and the preferred fabricator benefits, and (3) Springs’s

ultimate violation of its promises that the customer information would be kept confidential. We

conclude that, together, this evidence supports an inference that Springs had implemented a scheme

to induce Blind Maker into the FLA with false promises and to progressively weaken it economically

by fraudulent acts or withholding or eliminating promised benefits, with a goal of ultimately

acquiring it or otherwise taking its customers. Even if we have determined that some of the

component acts are not in themselves actionable fraud, we nonetheless conclude that they may be

                                                 57
probative of Springs’s intent at the time it induced Springs to divulge its customer information.34

In so concluding, we are especially mindful that intent tends to be a fact question uniquely within

the realm of the trier of fact because it so depends upon the credibility of the witnesses and the

weight to be given their testimony, Spoljaric, 708 S.W.2d at 435-36, and that the supreme court has

cautioned us that even “slight” circumstantial evidence of fraud, when considered with the breach

of a promise to perform, is sufficient to support a finding of fraudulent intent. Id. at 435. We hold

that there is legally and factually sufficient evidence supporting the intent element of Blind Maker’s

“customer list” fraud theory and, thus, the jury’s finding of fraud in Question 1.35

    Termination theory

               Finally, we consider Springs’s fourth sufficiency argument—that there is legally

insufficient evidence of Blind Maker’s termination theory. Blind Maker alleged that, at the time it

entered into the FLA, made purchases under it, or decided to terminate the FLA, Springs was

intentionally remaining silent to mislead Blind Maker regarding its intentions to (1) cease treating

       34
           However, we express no opinion regarding whether the existence of Project Texas, Zabel’s
memorandum, or the mere act of competing for Blind Maker’s customers after it learned that Blind
Maker would terminate and cause Springs to lose its main conduit to the Texas market are, standing
alone, evidence that Springs had fraudulent intent at the time it induced Blind Maker to divulge its
customer information. Compare IKON, 125 S.W.3d at 131-32 (acts by acquiring company after
president of acquired company had proposed consolidating their operations into single marketplace
were no evidence that, when signing acquisition agreement, acquiring company had no intent to
honor its promise to maintain plaintiff’s company as stand-alone company for two years), with
Formosa, 960 S.W.2d at 47-48 (proof that defendant had breached promises subsumed in contract
even before plaintiff signed contract was legally sufficient evidence that defendant had no intent of
performing).
       35
           The parties dispute whether Blind Maker was required to show intent or merely
recklessness with regard to whether Springs would perform its promise in the future. Because we
find sufficient evidence of intent, we need not address this issue.

                                                 58
Blind Maker with the rights of a preferred fabricator during the remaining term of the FLA; (2)

refuse to sell Springs products to Blind Maker after the term expired; (3) consider Blind Maker’s

termination notice a factor in placing a credit hold, thereby withholding product; and (4) make false

representations to Blind Maker’s customers concerning the reasons why Blind Maker was no longer

selling Springs’s products. The evidence was undisputed that Blind Maker was the first preferred

fabricator ever to terminate the FLA. It is pure speculation to posit that, at the time Blind Maker

executed the FLA, Springs would have known that Blind Maker would terminate the FLA sixteen

months later, much less have formulated plans to harm Blind Maker thereafter or have intentionally

remained silent regarding those plans in order to induce Blind Maker into entering the FLA. See

Bradford, 48 S.W.3d at 755. Nor is there evidence to support any inferences of such knowledge and

intent at the time Blind Maker made purchases under the FLA or decided to give notice of

termination.36

                 As Springs suggests, Blind Maker’s termination theory appears to be a repackaging

of allegations it asserted at trial to support its now-dismissed causes of action for breach of contract,

business defamation, or tortious interference. They are not proof of fraud. Moreover, any fraud-by-

        36
            Blind Maker also asserts a “termination claim” with respect to Springs’s misuse of its
customer information. It is pure speculation that, at the time Blind Maker signed the FLA, Springs
had already planned to obtain and misuse Blind Maker’s customer information and intentionally
remained silent to induce Blind Maker into the FLA. However, because we have concluded that
there is legally and factually sufficient evidence that Springs fraudulently obtained Blind Maker’s
customer information in March 2000, there likewise may be sufficient evidence that Springs
remained silent concerning its plans to use the information in order to induce Blind Maker’s
subsequent purchases, and may have had a duty to disclose the information before Blind Maker gave
notice to terminate the FLA. We need not address these issue because any damages arising from
such claims would be subsumed within the damages recoverable under Blind Maker’s customer list
claim.

                                                   59
nondisclosure theory based on at least two of the allegations would be independently barred because

Springs’s right to take the actions that Blind Maker complains of are explicitly set forth in the 1997

credit agreement and the FLA, to which both parties had equal access. See Bradford, 48 S.W.3d at

755. Blind Maker claims that Springs committed fraud in connection with its placing of credit holds,

yet Blind Maker acknowledged in the 1997 credit agreement that Springs “is not obligated to sell

goods to [Blind Maker] or to grant open account payment terms,” and that “[t]he decision to sell

product and extend credit shall be solely within the exclusive discretion of Springs.” Blind Maker

further agreed to “to make payments as necessary to keep the account balance within terms

established by Springs,” and that if Blind Maker failed to do so, Springs “may immediately suspend

all future shipments on other than prompt payment terms such as cash or cashier’s check and may

further demand immediate payment of the full balance.” In the FLA, moreover, Blind Maker agreed

that all of its orders “shall be subject to the approval of Springs’s credit department.” Similarly,

Blind Maker complains that Springs ceased to do business with it after the FLA terminated, yet the

FLA required Springs to sell goods to Blind Maker only during the term of that agreement. We hold

there is no evidence to support Blind Maker’s termination theory.

    Disposition of evidentiary sufficiency challenge to fraud finding

               In conclusion, we hold there is legally and factually sufficient evidence to support the

jury’s finding of fraud. Specifically, there is sufficient evidence to support both Blind Maker’s

customer list fraud theory and its fraudulent inducement theory, to the extent the latter is predicated

upon evidence that (1) Springs misrepresented that Blind Maker would receive certain preferred

fabricator benefits and Gold preferred fabricator benefits if it signed the FLA as that classification

                                                  60
of fabricator; (2) Springs failed to disclose its view that these representations were mere “intentions”

and not firm commitments; and (3) Springs misrepresented and failed to disclose its intentions

regarding its new “partnership” with Blind Maker, while pursuing Project Overlord.

Actual damages

               In its second issue, Springs challenges the legal and factual sufficiency of the jury’s

$5,167,240 award as actual damages. Because Springs is not contesting the form of the actual

damage submission, the starting point for our analysis is again the jury charge as submitted. See

Osterberg, 12 S.W.3d at 55; Jackson, 116 S.W.3d at 762.

    The charge

               Question 2 inquired of the jury, “What sum of money, if any, if paid now in cash,

would fairly and reasonably compensate The Blind Maker for its damages, if any, that were

proximately caused by Springs’s fraud?” It then provided standard Pattern Jury Charge instructions

regarding damages and proximate cause.37 Following these instructions, the jury was asked to

consider only a single element of damages: “Lost profits that were a natural, probable, and

foreseeable consequence of Springs’s fraud.” The jury was then asked to determine, and state in

separate blanks, the amount of such lost profits that (1) “were sustained in the past by The Blind

Maker”; or (2) “in reasonably probability will be sustained by The Blind Maker in the future.” The

jury awarded $0 for future lost profits but $5,167,240 as past lost profits.

       37
        See Comm. on Pattern Jury Charges, State Bar of Tex., Pattern Jury Charges: Business,
Consumer, Insurance, Employment (PJC) 100.9, 110.20 (2002).

                                                  61
    Legal standards

                Lost profits may be recovered as fraud damages either as direct damages or

consequential damages. Direct damages are the necessary and usual result of the defendant’s

wrongful act; they flow naturally and necessarily from the wrong. Arthur Andersen & Co v. Perry

Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997). Direct damages compensate the plaintiff for the

loss that is conclusively presumed to have been foreseen by the defendant from his wrongful act.38

Id. Texas law recognizes two measures of direct damages for fraud: out-of-pocket damages, which

are measured by the difference between the value actually paid and the value actually received; and

benefit-of-bargain damages, which is measured by the difference between the value as represented

and the value actually received. Formosa, 960 S.W.2d at 49. Lost profits can be a component of

benefit-of-the-bargain direct damages; they, like other benefit-of-bargain damage components, are

measured by comparing the anticipated profits under the fraudulently promised bargain with profits

actually received. Id. at 50. They are not available as out-of-pocket damages because that measure

“only compensates for actual injuries a party sustains through parting with something, not loss of

profits fraudulently promised, in a bid not made, and a profit never realized, in a hypothetical bargain

never struck.” Id. at 50-51.

                Consequential damages result naturally but not necessarily from a defendant’s

wrongful acts; they must be the foreseeable result of the wrong and must be directly traceable to it.

Arthur Andersen, 945 S.W.2d at 816. “In the proper case, consequential damages could include

        38
         Thus, the PJC exemplar for lost profits as direct damages from fraud omits the
requirement that the damages be foreseeable and proximately caused by the injury. Id. PJC 110.3,
110.19.

                                                  62
foreseeable profits from other business opportunities lost as a result of the fraudulent

misrepresentation” or nondisclosure. Formosa, 960 S.W.2d at 49 n.1.

                Blind Maker concedes that it did not seek lost profits as direct, benefit-of-bargain

damages. It is thus not seeking, for example, any profits it might have anticipated under the FLA

and preferred fabricator benefits program had Springs provided the benefits as promised. Instead,

Blind Maker sought lost profits solely as consequential damages; i.e., those arising from business

opportunities it lost because of Springs’s fraud. This choice of damage remedies is reflected in

Question 2, which tracked the Pattern Jury Charge exemplars for consequential damages caused by

fraud39 and lost profits as consequential damages.40 Our inquiry is thus whether there is legally or

factually sufficient evidence of past consequential lost profits damages to support the jury’s

$5,167,240 award.41

                When determining whether legally and factually sufficient evidence of past

consequential lost profits damages supports the jury’s award, we are mindful of several important

       39
            See id. PJC 110.20.
       40
         Compare id. PJC 110.20, with id. PJC 110.3 (direct damages), and id. PJC 110.4
(consequential damages).
       41
           As a threshold matter, we reject Blind Maker’s argument that we should consider evidence
(if any) of other elements of damages that were not submitted (such as out-of-pocket damages) as
additional support for the jury’s damage award. Invoking rule of civil procedure 279, Blind Maker
characterizes the submission of consequential lost profits damages as the submission of a single
element of a “ground of recovery”—“actual damages”—such that any omitted elements of actual
damages supported by factually sufficient evidence must be deemed found in a manner supporting
the judgment. See Tex. R. Civ. P. 279. But rule 279 operates only as to liability theories—
“independent grounds of recovery or of defense”—not damages. Moreover, Blind Maker’s
interpretation of rule 279 would contradict and undermine the supreme court’s directive that, when
reviewing the sufficiency of evidence supporting a jury’s damage award, our starting point is the
charge as submitted. See Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 762 (Tex. 2003).

                                                 63
standards governing the manner in which lost profits must be proven under Texas law. First, lost

profits, by definition, must be profits, and should not be confused with economic gains or losses that

are a mere component of a lost profits calculation or with other types of economic harm that may be

compensable through different damage elements. See, e.g., Holt Atherton Indus., Inc. v. Heine, 835
S.W.2d 80, 84 (Tex. 1992) (proof of “lost income” is not proof of lost profits). Lost profits are

damages for the loss of net income to a business, Miga v. Jensen, 96 S.W.3d 207, 213 (Tex. 2002),

and, broadly speaking, reflects income from lost business activity less expenses that would have been

attributable to that activity. See generally Capitol Metrop. Transp. Authority v. Central of Tenn. Ry.

& Navigation Co., 114 S.W.3d 573, 581-82 & n.7 (Tex. App.—Austin 2003, pet. denied)

(considering both income projections and specific expenses when evaluating proof of lost profits).

               Second, while there is no one correct method for calculating lost profits, once a party

has chosen a particular method, “[r]ecovery of lost profits must be predicated on one complete

calculation.” Holt Atherton, 835 S.W.2d at 85. It is not enough to supply “pieces of several different

methods of calculating lost profits.” Id. In Holt Atherton, the supreme court cited our discussion

in Fleming Mfg. Co. v. Capitol Brick, Inc., 734 S.W.2d 405, 407-08 (Tex. App.—Austin 1987, writ

ref’d n.r.e.), as “demonstrat[ing] a complete calculation of lost profits.” Holt Atherton, 835 S.W.2d

at 85. Fleming illustrates a calculation of lost profits taking into account (1) the number of bricks

that would have been produced while a brick mold was not operational; (2) whether the bricks would

have been sold (as evidenced by existing contracts and sales projections derived from past sales and

market conditions); (3) prevailing market price; and (4) average net profit on bricks sold. Fleming,
734 S.W.2d at 407-08.

                                                 64
               Finally, to recover lost profits, by whatever method calculated, “the amount of the

loss must be shown by competent evidence with reasonable certainty.” Southwest Battery Corp. v.

Owen, 115 S.W.2d 1097, 1098 (Tex. 1938); see Texas Instruments, Inc. v. Teletron Energy Mgt.,

Inc., 877 S.W.2d 276, 279 (Tex. 1994) (“We have consistently reaffirmed the Southwest Battery

decision.”). As this court has previously explained:

       The supreme court has consistently held that in order to recover lost profits, the loss
       amount must be shown by competent evidence with reasonable certainty. The test
       is a flexible one in order to accommodate the myriad circumstances in which claims
       for lost profits arise. What constitutes reasonably certain evidence of lost profits is
       a fact-intensive determination. However, the injured party must do more than show
       it suffered some lost profits. At a minimum, opinions or estimates of lost profits
       must be based on objective facts, figures, or data from which the amount of lost
       profits may be ascertained.

Capitol Metro. Transp. Auth., 114 S.W.2d at 579 (internal citations omitted). Thus, we have held

that “lost profit” calculations are no evidence of lost profits when our examination reveals them to

be predicated on unfounded, speculative assumptions. Id. at 579-82; Fleming, 734 S.W.2d at 407-08

(“We cannot . . .conclude that lost profits were proven . . .with that degree of reasonable certainty

required when the only evidence offered concerned anticipated or potential production”) (Emphasis

in original.); see also Texas Instruments, 877 S.W.2d at 279.

    Blind Maker’s evidence

               As proof of consequential past lost profits damages, Blind Maker relied on two sets

of calculations. First, Blind Maker offered the testimony and analysis of its damages expert, Dr.

James R. Vinson, who stated that Blind Maker incurred over $11 million in what he characterized

                                                 65
as “lost profits.” Second, Blind Maker entered into evidence a series of calculations prepared by

Blind Maker personnel, titled “Plaintiff’s Compilation of Damages,” that reflected a total damage

amount of over $10 million.42

            Vinson’s testimony

                 Vinson testified that he calculated his “lost profits” figure through what he termed

the “before and after” method—he compared Blind Maker’s financial performance before the

company’s January 1999 execution of the FLA to its performance thereafter. As Vinson put it, the

before and after method “is a very straightforward, simple methodology. . . . What it means is, you

look at the operation of the business as it occurred especially over a long period of time. And then

you look at an event. And then you look at the business after the event before and after.” For his

“before” figures, Vinson relied primarily on Blind Maker balance sheets and income statements

between 1991 to 1998; his “after” figures were derived from those documents for the period between

1999 and August 2002, the time of trial.

                 Vinson’s concept of measuring lost profits by calculating a business’s overall profit

before and after an event finds support in Texas law, especially where the business has a “track

record” of profitability. Southwest Battery, 115 S.W.2d at 1098-99 (“Where the business is shown

       42
           Additionally, following submission on appeal, Blind Maker has offered various additional
explanations and characterizations of the evidence in the record in an attempt to demonstrate
evidence of lost profits. In addition to summarizing Vinson’s calculation and various cases, this
exhibit proposes two new calculations of lost profits: (1) “lost profits [as] evidenced by reduction
in net income” of $7,391,612; and (2) “lost profits evidenced by subtracting costs and expenses that
[it] would have incurred from the lost gross revenues” of $5,336,235. Because Blind Maker did not
present these alternative calculations in the trial court, they cannot do so here.

                                                  66
to have been already established and making a profit at the time when the contract was breached or

the tort committed, such pre-existing profit, together with other facts and circumstances, may

indicate with reasonable certainty the amount of profits lost. It is permissible to show the amount

of business done by the plaintiff in a corresponding period of time not too remote, and the business

during the time for which recovery is sought.”); see also Fleming, 734 S.W.2d at 407 (same).

               Vinson provided a calculation of Blind Maker’s lost profits based on historic

profitability, but this measure falls short of the amount the jury awarded. Vinson acknowledged that

Blind Maker averaged only $37,000 in annual net profits between 1991 and 1998—what Vinson

himself termed “a small amount of net profit”—and actually operated at a loss during two of those

years. Based on this average, Vinson projected “lost average profits” or “normal profits” of

$100,064 between January 1999, when Blind Maker executed the FLA, and August 2002.

               However, Vinson then added to this lost profits figure $7,552,490 in total net

operating losses for the same time period (which he termed “lost net operating income”) to yield a

“combined total of lost profits” of $7,654.554. Vinson then added to his “combined total of lost

profits” (1) $650,194 in various charge-offs to equity of unusable assets (e.g., Graber inventory); (2)

$3,523,610 in various other losses not yet charged-off; and (3) $652,583 in various non-operating

losses to achieve “total losses” of $11,173,775.

               At the time Vinson presented his damages calculation at trial, Blind Maker had been

asserting several causes of action other than fraud and seeking recovery for a broad range of business

losses other than lost profits. Vinson’s testimony may have been intended to support these other

damage theories; however, Blind Maker ultimately elected to seek only lost-profits damages for

                                                   67
fraud, so we must consider whether Vinson’s testimony is legally and factually sufficient evidence

of that single element of damages.

               Blind Maker relies on the principle that a business operating at a loss can recover lost

profits from specific lost business opportunities regardless of whether the company is making an

overall profit. Frank B. Hall & Co. v. Beach, 733 S.W.2d 251, 257 (Tex. App.—Corpus Christi

1987, writ ref’d n.r.e.). It also notes that net profits are “what remains in the conduct of a business

after deducting from its total receipts all of the expenses incurred in carrying on the business.”

Turner v. PV Int’l Corp., 765 S.W.2d 455, 465 (Tex. App.—Dallas 1989, writ denied) (quoting R.A.

Corbett Transp., Inc. v. Oden, 678 S.W.2d 172, 176 (Tex. App.—Tyler 1984, no writ)). In Blind

Maker’s view, its losses are thus merely “net profits that have not been achieved,” which “are lost

profits, as a matter of logic and law.”

               Blind Maker conceivably could have recovered lost profits from specific lost business

opportunities in an amount that exceeded its overall average net profits. See Frank B. Hall, 733
S.W.2d at 258. However, that is not the “one complete calculation” that Vinson made. Holt

Atherton, 835 S.W.2d at 85.        Vinson calculated Blind Maker’s overall “before and after”

performance, not profits from specific lost business opportunities. Having made Blind Maker’s

overall performance the focus of his inquiry, the maximum lost profits that Vinson could have found

were his projected overall net profits of $37,000 per year, or $100,064 past lost profits. Furthermore,

we cannot speculate that any of Vinson’s loss figures are comprised of lost profits from specific lost

sales and business opportunities, as Vinson and Blind Maker made no attempt in the trial court to

distinguish the portion of its losses attributable to lost profit on sales from other damages. See id.

                                                  68
(“the bare assertion that contracts were lost does not demonstrate a reasonably certain objective

determination of lost profits.”).43 The failure to demonstrate that these losses were lost profits as that

concept is known to Texas law renders Vinson’s calculation legally and factually insufficient to

support the jury’s award of $5,167,240.

                However, Vinson also testified that reduced salaries and benefits to Ray Hicks

represented lost profits. He explained in his report:

        The Blind Maker’s profits are, to the larger part, paid out as officer’s salaries and
        benefits, this item is actually a part of additional lost profits. The deficiency of this
        payment to officers (Ray Hicks) was $137,571.00 in 1999, $113,371.00 in 2000, and
        $150,371.00 in 2001. Through July 2002, the current year deficit is $115,133.00.
        This represents a total loss of $516,446.00.

In his testimony, Vinson again mentioned $516,000 in salary and benefits had been forgone by Ray

Hicks as part of Blind Maker’s lost profits.

                In a closely held corporation such as Blind Maker, evidence of salaries to its

owner/executive is relevant to a determination of lost profits. See Bettius & Sanderson, P.C. v.

National Union Fire Ins. Co., 839 F.2d 1009, 1014 (4th Cir. 1988). In Bettius, the Fourth Circuit

Court of Appeals explained this concept in the context of a professional corporation:

        [T]he professional corporation desires to disburse its earnings in order to avoid
        having income taxes imposed twice on what is in reality the same group of people.

        43
           Blind Maker also suggests that the testimony of Springs’s damages expert, Dr. Avera,
independently supports the jury’s award. Responding to Vinson’s calculation of over $11 million
in total business losses, Avera offered an alternative calculation of Blind Maker’s total business
losses as only around $6 million. Avera’s testimony established total business losses, but does not
support $6 million in lost profits.

                                                   69
        . . . This is accomplished by distributing all or most of its earnings to the principals
        as compensation before calculating the professional corporation’s net income. The
        result, of course, is that the corporation’s net income for tax purposes is almost
        always at or near zero, but it is unrealistic to suggest that the corporation is not
        earning a profit. If we were to treat a net income as its net profit for the purpose of
        proving loss of profits it would rarely, if ever show a profit even when its
        shareholders were earning large incomes. It would never be able to prove damages
        for lost profits if the wrongful act of another caused it harm.

Id. at 1013. As in Bettius, a significant portion of Blind Maker’s net income was distributed to its

owner through compensation. Accordingly, a reduction in compensation due to Springs’s fraud is

a valid measure of lost profits. See id. at 1014. Thus, we find that there is evidence in Vinson’s

testimony to support $516,446 in lost profits attributable to lost executive salaries in addition to the

$100,064 lost overall profits, or a total of $616,510 in past lost profits.

          Plaintiff’s Compilation of Damages

                The “Plaintiff’s Compilation of Damages” is comprised of sixteen line item

categories of business losses calculated by Blind Maker’s employees; supporting documentation is

also supplied regarding each separate calculation. The line item figures are added to equal a total

of $10,625,441. The calculation of this total suffers from the same basic defect as Vinson’s

calculation: it is a compilation of total business losses, not lost profits. Several of the line items

clearly reflect out-of-pocket expenses, such as expenses from unusable inventory, equipment and

samples, and out-of-pocket expenses incurred when Blind Maker claimed it had to purchase Springs

materials from other fabricators. The $10,625,441 calculation is thus legally and factually

insufficient to support the jury’s award of lost profits damages.

                                                  70
               Four of the line item calculations potentially appear to reflect lost profits. Treating

each calculation as a distinct “one complete calculation,” Holt Atherton, 835 S.W.2d at 85, we hold

that one of these items constitute evidence of lost profits.

               Line item G purports to reflect $5,703,283 in lost sales revenues attributable to

Springs’s pursuit of Blind Maker’s customers by using information it had fraudulently obtained

through the “Clear to the TOP” promotion, the basis for Blind Maker’s “customer list” fraud theory.

The supporting documentation explains that Blind Maker derived this figure by comparing its 1999

sales to “Clear to the TOP” registrants to its 2000 and 2001 sales to those same customers. Blind

Maker then multiplied this figure by a 21.4% gross margin to yield $1,220,503.44 The supporting

documentation explains that 21.4% was Blind Maker’s 2000 year-to-date gross margin as of May

2000, the month before Springs began using its confidential customer information from the “Clear

to the TOP” promotion to compete against Blind Maker. Ordinarily, the calculation of lost profit

damages must be based on net income, not gross revenue or gross profits. See Edmunds v. Sanders,

2 S.W.3d 697, 705 (Tex. App.—El Paso 1999, pet. denied) (“The correct measure of damages for

lost profits is net profits.”); Turner v. PV Int’l Corp., 765 S.W.2d 455, 465 (Tex. App.—Dallas 1988,

writ denied); Mangham v. Hall, 564 S.W.2d 465 (Tex. App.—Corpus Christi 1978, writ ref’d n.r.e.)

       44
           The calculation of this figure in the “Plaintiff’s Compilation of Damages” is inconsistent
with that in the supporting materials. This may reflect rounding. In the Compilation, Blind Maker’s
$5,703,283 lost sales figure is multiplied by a 22% gross margin to yield $1,254,722, while the
supporting documentation utilizes the 21.4% gross margin figure to yield $1,220, 503. An additional
$50, 449 was added to reflect purchases made by Blind Maker to replace incentives that were to have
been supplied by Springs as part of the program. The total damages stated in the supporting
documentation is $1,270.952. Because the Compilation appears to reflect a summary or estimate,
we will consider the more precise figure contained in the supporting materials.

                                                 71
               However, Hicks testified that Blind Maker’s net profits could be determined by

subtracting overhead from gross margins. When a defendant’s actions cause a reduction in the extent

of business done by the injured party, but does not create any reasonable opportunity for the injured

party to reduce its expenses, the defendant is entitled to no reduction in the damages awarded against

him with respect to overhead costs. Houston Chronicle Pub. Co. v. McNair Trucklease, Inc., 519
S.W.2d 924, 932 (Tex. App.—Houston [1st Dist.] 1975, writ ref’d n.r.e) (citing 5 Corbin on

Contracts 1038 (1964)); see DP Solutions, Inc. v. Rollins, Inc., 353 F.3d 421, 429 (5th Cir. 2003);

F.S. New Prod., Inc. v. Strong Indus., Inc., 129 S.W.3d 606, 624 (Tex. App.—Houston [1st Dist.]

2004, pet. filed). Here, the jury found that Springs committed fraud, and that fraud left Blind Maker

with no way to reduce its expenses—Blind Maker’s operating costs remained basically the same but

Springs refused to sell Blind Maker more material, to buy back Blind Maker’s unsold inventory, or

to provide Blind Maker with service.45 Under these circumstances, gross profits are an appropriate

measure of lost-profit damages. We find this calculation to be sufficient evidence of $1,220,503 in

lost profit damages.

               Line item N reflects $850,000 in “lost profits” from lost sales of Nanik brand

products. The supporting materials explain that Blind Maker was permitted under the FLA to sell

Nanik products (which, like Graber products, were manufactured by Springs) as a distributor rather

than as a fabricator. According to Blind Maker’s calculations, it earned an average of $170,000

“gross profit” annually on its sales of Nanik products in 1999 and 2000. The $850,000 figure

       45
          Ray Hicks explained, “If I don’t have the sales, I don’t have the gross margin, but I still
have the overhead.”

                                                 72
represents Blind Maker’s projection of gross profits assuming that it earned this same $170,000

annual average gross profits from Nanik sales for five years following its termination of the FLA.

In other words, this figure assumes that (1) Blind Maker would have continued distributing Nanik

products during this five-year period (and, implicitly, that Springs had a legal obligation to allow it

to do so even after Blind Maker had terminated the FLA); and (2) Blind Maker’s sales of Nanik

products during this five-year period would have remained at the average levels Blind Maker realized

during the two-year span between 1999 and 2000. Blind Maker does not explain the bases for these

assumptions, and its calculations are thus pure speculation and no evidence of lost profits.46 See

Capital Metro. Transp. Auth., 114 S.W.3d at 580-82. In any event, the jury denied Blind Maker

recovery of any future lost profits accruing after August 2002.

                Line item O reflects “lost contract sales,” attributes $694,947 in lost gross margins

on lost sales “in the contract market as a direct result of an abrupt transition.” Blind Maker

distributed finished product from Springs for the commercial market. Blind Maker claimed losses

from these contract sales that were discontinued as a result of the termination of the relationship

between Blind Maker and Springs. However, this calculation projects Blind Maker’s damages,

including growth in sales, through December 2002. Because the jury did not award future lost

profits, this calculation does not support the jury’s award of damages. Furthermore, the damage

from lost contract sales, as well as the lost Nanik sales, resulted from Springs’s refusal to sell to

Blind Maker. We have held that there is legally insufficient evidence to support Blind Maker’s

       46
            It is also unclear whether Blind Maker’s “average gross profits” reflect net profits.

                                                  73
termination theory. Accordingly, there is also legally insufficient evidence to support damages based

on Springs’s refusal to sell certain products to Blind Maker.

               Item R “lost GM $ in wood sales,” purports to reflect $2,489,489 in lost gross

margins from sales of wood products “which resulted from poor quality wood products delivered

by the Graber required and specified supplier, and those losses in gross margin created due to poor

product delivery during the transition.” These figures are based on testimony that Blind Maker was

forced by Springs to purchase its wood from a single supplier in Mexico. Ray Hicks explained that

Springs’s Mexican supplier provided low grade material that did not meet specifications. However,

there is no evidence in the record that the quality problems were the result of any actionable conduct

by Springs. Nothing in the record reflects Blind Maker’s control over the quality of the wood

produced by the supplier, or that the quality problems were intended as a part of Springs’s fraud.

               Except for the damages for lost sales to “Clear to the TOP” registrants, the

calculations contained in Blind Maker’s “Plaintiff’s Compilation of Damages” are not sufficient

evidence of lost profits.

    Disposition of actual damages issue

               We hold that there is legally and factually insufficient evidence to support the jury’s

award of $5,167,240 in consequential lost-profits damages. However, there is sufficient evidence

that Blind Maker incurred lost profits damages based on two measures—$616,510 under Vinson’s

calculations and $1,270,952 for lost sales attributable the customer list claim within the “Plaintiff’s

Compilation of Damages.” The record now before us indicates that these two measures of damages

overlap, as lost profits attributable to the customer list claim would necessarily have been factored

                                                  74
into Vinson’s calculation of overall lost profits. Thus, at most, Blind Maker is entitled to recover

$1,270,952 in actual damages, the larger of the two measures.

               An appellate court may suggest a remittitur on its own motion when an appellant

complains that there is insufficient evidence to support an award and the appellate court agrees, but

there is sufficient evidence to support a lesser award. See Tex. R. App. P. 46.3; see also Comstock

Silversmiths, Inc. v. Carey, 894 S.W.2d 56, 57 (Tex. App.—San Antonio 1995, no writ); David

McDavid Pontiac, Inc. v. Nix, 681 S.W.2d 831, 838-39 (Tex. App.—Dallas 1984, writ ref’d n.r.e.).

The party prevailing in the trial court must be given the option of accepting the remittitur or having

the case remanded for a new trial. See Larson v. Cactus Util. Co., 730 S.W.2d 640, 641 (Tex. 1987).

Accordingly, we suggest a remittitur of $3,896,288, the difference between the jury’s award of

$5,167,240 and $1,270,952, the highest amount of actual damages that Blind Maker’s evidence

supports.

Exemplary damages

               When suggesting a remittitur regarding actual damages, we must also reevaluate the

jury’s award of exemplary damages. See Bunton v. Bentley, 153 S.W.3d 50, 54 (Tex. 2004). We

review the award de novo to ensure that exemplary damages are not “grossly disproportional” to the

gravity of the defendant’s conduct. Id. (citing Cooper Indus. v. Leatherman Tool Group, Inc., 532
U.S. 424, 434-36 (2001)). We consider (1) the degree of reprehensibility of the defendant’s

misconduct, (2) the disparity between the actual or potential harm suffered by the plaintiff and the

punitive damages award, and (3) the difference between the punitive damages awarded by the jury

and the civil penalties awarded or imposed in other comparable cases. Id. (citing State Farm Mutual

                                                 75
Auto Ins. v. Campbell, 538 U.S. 408, 418 (2003)). The most important of these considerations is the

degree of reprehensibility of the defendant’s misconduct. Campbell, 538 U.S. at 419. We are guided

in examining a defendant’s conduct and look to whether: the harm caused was physical as opposed

to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or

safety of others; the target of the conduct had financial vulnerability; the conduct involved repeated

actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or

deceit, or mere accident. Id. Finally, because we have sustained some of Blind Maker’s actual

damages, we construe Springs’s arguments about exemplary damages as an attack on the legal

sufficiency of the evidence of exemplary damages. In reviewing a claim that evidence is legally

insufficient under the clear and convincing standard applicable to the punitive damages award in this

case, we look at all the evidence in the light most favorable to the finding to determine whether a

reasonable trier of fact could have formed a firm belief or conviction that its finding was true.

Diamond Shamrock Ref. Co. v. Hall, 168 S.W.3d 164, 170 (Tex. 2005) (quoting Southwestern Bell

Tel. Co. v. Garza, 164 S.W.3d 607, 636 (Tex. 2004)); see In re J.F.C., 96 S.W.3d 256, 264-68 (Tex.

2002); see also City of Keller, 168 S.W.3d at 817. We assume that the fact-finder resolved disputed

facts in favor of its finding if a reasonable fact-finder could do so, and disregard all evidence that a

reasonable fact-finder could have disbelieved or found to have been incredible. See Hall, 168
S.W.3d at 170 (quoting In re J.F.C., 96 S.W.3d at 266).

               The jury awarded Blind Maker $2,090,000 as exemplary damages based on its finding

of $5,167,240 lost profits. We have suggested a remittitur that would reduce the actual damages to

$1,270,952. Applying the constitutional considerations discussed above, we first note that the Blind

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Maker sufficiently proved that Springs implemented Project Overlord and sustained its

implementation over the course of several years. Further, the jury found existence of fraud

concerning the FLA, and the evidence connects that fraud to Project Overlord and Springs’s

subsequent activities. We have also reviewed the evidence concerning Springs’s misrepresentations

about the preferred fabricator benefits. Hicks testified that he would not have signed the FLA had

he known that he could continue as a standard fabricator without it and if he had known that Springs

did not consider itself bound to provide preferred fabricator benefits. Finally, there is evidence of

Springs’s misuse of Blind Makers’s customer list after Springs gave assurances that the information

would be kept confidential and would only be used by a third-party administrator. Together, as we

have already noted, the evidence supports an inference that Springs had implemented a scheme to

induce the Blind Maker into the FLA with false promises and to weaken it financially by fraudulent

acts or by withholding and eliminating promised benefits, with the ultimate goal of either acquiring

ownership of the Blind Maker or taking its customers. We conclude that the jury’s award satisfies

the Bunton-Campbell test and that a reasonable trier of fact could have formed a firm belief or

conviction that its finding was true. We emphasize that it is not Springs’s desire to find alternate

means of competing for Texas customers that forms the basis for our conclusions regarding

“reprehensible conduct.” Rather, it is the means by which that desire was effectuated, the pattern

of behavior over time, and Springs’s undermining of Blind Maker’s financial viability through fraud.

               In considering the disparity between the actual or potential harm suffered by the

plaintiff and the exemplary damages award, we note that the ratio between our suggested actual

                                                 77
damages and the jury’s award of exemplary damages is little more than 1:1.6.47 The United States

Supreme Court has indicated that awards of exemplary damages that are less than four times the

actual damages are well below the line of constitutional impropriety. State Farm, 538 U.S. at 425.

Furthermore, we find the award of $2,090,000 to be reasonable in light of the fact that the civil

practices and remedies code would permit an award of exemplary damages of over $2.5 million. See

Tex. Civ. Prac. & Rem. Code Ann. § 41.008(b) (West Supp. 2004-05); Citizen’s Nat’l Bank v. Allen

Rae Invs., Inc., 142 S.W.3d 459, 486 (Tex. App.—Fort Worth 2004, no pet.).

Post-judgment interest

               The trial court signed the final judgment in this case on May 29, 2003 and set post-

judgment interest at 10%. In its final issue, Springs argues that, because the legislature amended the

finance code effective September 1, 2003, the post-judgment interest accruing after September 1,

2003 should be capped at 5%. See Tex. Fin. Code Ann. § 304.003(c)(2) (West Supp. 2004-05).48

We disagree.

       47
          The disparity is even smaller when we consider the extensive damages presented by Blind
Maker that were not submitted to the jury through the narrow lost profits issue. Although these
damages did not support the jury’s award of lost profits, they are relevant to exemplary damages
because they represent actual harm suffered by Blind Maker. See Bunton v. Bentley, 153 S.W.3d 50,
54 (Tex. 2004) (citing State Farm Mutual Auto Ins. v. Campbell, 538 U.S. 408, 418 (2003)).
       48
           See Act of June 2, 2003, 78th Leg., R.S., ch. 676, § 1, 2003 Tex. Gen. Laws 2096, 2097
(effective June 20, 2003) (codified at Tex. Fin. Code Ann. § 304.003(c) (West Supp. 2004)); Act of
June 2, 2003, 78th Leg., R.S., ch. 204, § 6.01, 2003 Tex. Gen. Laws 847, 862 (effective Sept. 1,
2003) (codified at Tex. Fin. Code Ann. § 304.003(c) (West Supp. 2004)). These two bills were
identical except for their effective dates. Because the judgment in this case was signed before June
20, 2003, we have no need to decide which effective date controls.

                                                 78
                The amendments to the finance code at issue in this case provide that they apply “in

any case in which a final judgment is signed or subject to appeal on or after the effective date of this

Act.” Many of our sister courts have confronted the issue of the applicability of the 2003

amendments and have uniformly concluded, based on the statutory language and the legislative

history, that the amendments do not apply to judgments made final before the amendments’ effective

date. See City of Houston v. Fletcher, 166 S.W.3d 479, 493-94 (Tex. App.—Eastland 2005, pet.

filed); City of Dallas v. Redbird Dev. Corp., 143 S.W.3d 375, 388-89 (Tex. App.—Dallas 2004, no

pet.) (quoting Columbia Med. Ctr. of Las Colinas v. Bush, 122 S.W.3d 835, 865-66 (Tex.

App.—Fort Worth 2003, pet. denied)) (amendment applied to cases where judgment is signed on

or after effective date of act and “to cases where a judgment becomes subject to appeal, i.e., capable

of being appealed, on or after the effective date of the Act”); In re Kajima Int’l, Inc., 139 S.W.3d
107, 117 (Tex. App.—Corpus Christi 2004, pet. denied) (amendments apply only to judgment “that

fully and finally disposes of all parties and all issues before the trial court and therefore is capable

of being appealed”). In other words, the amendments apply to cases that become “capable of being

appealed” after the amendments’ effective date; they do not apply to those “pending appeal” as of

the effective date. Bennett v. Cochran, No. 14-00-01160-CV, 2004 Tex. App. LEXIS 3545, at *26-

27 (Tex. App.—Houston [14th Dist.] April 22, 2004, no pet.); Cigna Healthcare of Tex., Inc. v.

Pybas, 127 S.W.3d 400, 421 (Tex. App.—Dallas 2004, no pet.).49 In this case, the judgment was

        49
         See also Utts v. Short, No. 03-03-00512-CV, 2004 Tex. App. LEXIS 2874, at *18-22
(Tex. App.—Austin April 1, 2004, pet. denied) (mem. op.).

                                                  79
capable of being appealed on May 29, 2003. Thus, the trial court did not err in applying a 10% post-

judgment interest rate. We overrule Springs’s final issue.

                                          CONCLUSION

                 We hold that while there is legally and factually sufficient evidence that Springs’s

committed fraud against Blind Maker, the evidence is legally and factually insufficient to support

the full amount of actual damages the jury awarded. Although we have concluded that there is no

evidence to support the jury’s actual damages award, there is sufficient evidence that Blind Maker

incurred $1,270,952 in lost-profits damages. Subtracting $1,270,952 from the jury’s award of

$5,167,240 in actual damages reveals a difference of $3,896,288. Accordingly, we suggest a

remittitur in the amount of $3,896,288. See Tex. R. App. P. 46.3. If the sum is not remitted, the

judgment will be reversed, and the cause will be remanded to the trial court for a new trial. Having

reevaluated the jury’s award of exemplary damages in light of the remittitur, we affirm the jury’s

award. We have also overruled Springs’s argument that concerning the appropriate post-judgment

interest rate.

                 In sum, we affirm the judgment of the trial court conditioned on the remittitur of

$3,896,288. See Tex. R. App. P. 46.3. If Blind Maker files a remittitur of $3,896,288 with the clerk

of the district court within thirty days of this opinion and judgment and notifies this Court as such,

we will reform the trial court’s judgment and, as reformed, affirm.50 See id. If the Travis County

        50
            In our July 29, 2005 opinion, we suggested a remittitur of $3,279,778. We have been
informed by the Blind Maker that it filed a remittitur in that amount while the motion for rehearing
was pending. To comply with this opinion, the Blind Maker must file an additional remittitur of
$616,510 with the clerk of the district court within thirty days of this opinion and judgment and
notify this Court as such.

                                                  80
District Clerk does not receive Blind Maker’s remittitur within thirty days of this opinion and

judgment, we will reverse the trial court’s judgment and remand the cause to the trial court for a new

trial.

                                               Bob Pemberton, Justice

Before Chief Justice Law, Justices B. A. Smith and Pemberton

Affirmed Conditioned on Remittitur

Filed: January 20, 2006

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