Texas Lawyer, May 2, 1994
SECTION: Weekly Case Summaries; Texas Supreme Court; Appellate Procedure; Pg. 12

Statement Of Facts/ Extensions/ Court's Own Motion/ Expiration Date/ 
Past Lost Profits/ New Businesses/ Established Products/Reasonable Certainty

* An appellate court can, on its own motion, postpone the deadline for
filing a statement of facts if the court's motion is made before a
properly granted extension for filing has expired.

* A party is not entitled to an award for past lost profits without
proving them with "reasonable certainty."

* Past lost profits are not precluded simply because a business is new.

* Past lost profits do not depend on the newness of the business entity,
but on the business activity; therefore recovery for past lost profits
will be more likely when they are based on an established product, not a
new or unique product.

Texas Instruments Inc. v. Teletron Energy Management Inc., No. D-3088,
4/20/94, 11 pp. FACTS: An engineer started up a corporation to develop
and market a new voice-activated thermostat. The engineer contacted
Texas Instruments (TI) to design and produce this novel product.

The corporation paid TI $ 15,000 to begin work, with the balance of $
17,200 to be paid over the next 11 weeks pending completion of 10
working prototypes of the product.

Two years passed with the engineer's corporation advertising and
marketing the product, however TI never came up with a working model and
eventually quit trying.

The engineer's corporation sued TI on several causes of action. The jury
awarded the corporation $ 100,000 for expenses, $ 500,000 for past lost
profits and nothing for future lost profits. The trial court entered a
judgment for the $ 100,000 in expenses for damages under the DTPA and
for attorneys' fees, however, the trial court refused to enter a
judgment on the $ 500,000 in past lost profits. The trial court granted
TI's motion for j.n.o.v. on the issue of past lost profits.

The corporation appealed to the 14th Court of Appeals. The corporation
filed for and was granted nine extensions for time to file a statement
of facts because the court reporter would not complete the record. The
last due date was set for Dec. 2.

The trial court eventually found the court reporter in contempt of court
and committed her to jail. The court reporter was to appear for a
hearing on Dec. 18, so prior to the Dec. 2 deadline date, the court of
appeals, on its own motion, extended the corporation's filing deadline
date to Dec. 18 to coincide with the court reporter's hearing. The
statement of facts was finally filed on Dec. 6.

The court of appeals modified the trial court's judgment to reflect the
$ 500,000 in lost past profits originally awarded by the jury.

TI now argues that the corporation's appeal was not timely perfected,
and that the corporation was not entitled to damages on lost past
profits. HOLDING: Affirmed as to the timely filing of the appeal and
reversed as to the reformation of the trial court's judgment. The Court
holds that the evidence did not support an award for past lost profits.

The Court first addresses the question of whether or not the corporation
timely perfected its appeal. Noting that "it would make little sense to
allow the court discretion in setting the deadline, but none in
adjusting it once it was set and before it expired[,]" the Court holds
that an appellate court can, on its own motion, further postpone a
deadline for filing the record if done so prior to the expiration of the
last set date.

Turning to the past lost profits issue, the Court refers to the rules
set out for recovery in Southwest Battery Corp. v. Owen, 115 S.W.2d 1097
(Tex. 1938), and reaffirmed by subsequent cases.

The Southwest Battery rule requires a party seeking recovery on past
lost profits to prove them with "reasonable certainty." Though the
Southwest Battery rules replaced strict reliance on whether or not a
business was based on uncertain or changing conditions, the rules till
contemplates these characteristics as factors, when combined with
others, that "preclude recovery of lost profits in retrospect."

The Court points out that Southwest Battery'sinclusion of a business'
newness applying the "reasonable certainty" test "does not deny recovery
by a new business simply because it is new," but because the profits
hoped to be made often are not capable of being established by proof
with a degree of certainty.

The Court adds that "when there are firmer reasons to expect a business
to yield a profit, the enterprise is not prohibited from recovering
merely because it is new." The Court further explains that the
"enterprise" referred to is "not the business entity, but the activity
alleged to have been damaged."

The Court again cites to Southwest Battery and to Pace Corp. v. Jackson,
284 S.W.2d 340 (Tex. 1955). Damages for lost profits were awarded in
both cases, despite the fact that the businesses in each case were new.
The difference lies in the history of the product, the Court determines;
Southwest Battery and Pace were businesses selling established products
(car batteries and cigarettes), whereas the product involved in this
case is new, unique and has never been sold. "The very viability of the
product is in doubt in this case," the Court observes.

The Court concludes, noting that the corporation's expectations "were at
best hopeful; in reality, they were little more than wishful," that
there was no evidence to prove past lost profits with reasonable
certainty and that the court of appeals should not have reformed the
judgment.

OPINION: Hecht, J.

ATTORNEYS: Franci N. Beck with Susman Godfrey, Houston, Jesse R. Pierce
and Warren W. Harris with Porter & Clements, Houston, for TI; James E.
Doyle and Andrew R. Harvin with Doyle, Reed, Restrepo, Harvin & Robbins,
Houston, for the engineer's corporation.

TRIAL COURT: Alice Oliver Trevathan; 151st District, Harris County.