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Click here for the full text of this decision FACTS:This case arises from a memorandum of understanding between Fluorogas Limited and Fluorine on Call Ltd. Flourogas is an English company that develops and manufactures fluorine generators. It was owned by Graham Hodgson, who was also its president. FOC is a Texas company that began with two brothers, Frederick and Stephen Siegele. The Siegeles sought to enter what they viewed as the potential market for on-site fluorine generators for use in the semiconductor industry. This potential market arises from the need to clean manufacturing equipment. After examining the potential market for on-site fluorine generators as well as potential sources, the Siegeles contacted Fluorogas. Interested in obtaining a license to Fluorogas’s technology, the Siegeles began negotiating with Hodgson in the summer of 2000. Eventually, these negotiations led to a memorandum of understanding that Hodgson and Frederick Siegele signed on Aug. 11, 2000. The MOU was a handwritten document drafted by Frederick Siegele over the course of a weekend. Fluorogas contends that the parties planned to eventually replace the MOU with a more formal contract; in September 2000, Frederick Siegele wrote a letter agreeing with that contention. The MOU granted FOC “the exclusive worldwide right to manufacture and supply Fluorine generators based on FG Background Technology (as defined below) where such generators are to be used in the Chemical Vapor Deposition (“CVD”) process, excluding etch applications.” In return, FOC agreed to pay royalties based on its revenues; if FOC failed to make those royalty payments, its license would become nonexclusive once Fluorogas provided notice. Fluorogas also granted FOC some nonexclusive rights to Fluorogas’ technology: “the non-exclusive worldwide right to manufacture and supply Fluorine generators based on FG Background Technology where such generators are to be used in the Semiconductor Industry, including the etch applications.” The MOU contained no express duration term. After the parties signed the MOU, FOC purchased a Fluorogas test generator to sell to Applied. According to Applied, it could not use this test generator for its business; rather, it used the generator to assist in determining whether on-site fluorine generation might be commercially viable. Sometime thereafter, Applied employees had various conversations directly with Fluorogas that appear to have involved the possibility of Applied investing in Fluorogas. FOC contends that the discussions also suggested that Applied deal directly with Fluorogas. FOC contended that these conversations violated the MOU and so sued Fluorogas. In January 2001, FOC dismissed this first suit without prejudice. On Feb. 23, 2001, Fluorogas’s lawyers sent FOC a letter, which forms the basis of much of this case. After first stating that it was not sure that the MOU bound it, Fluorogas stated: “For the avoidance of any possible doubt we must make it clear that this letter is formal notice of termination of the relationship sought to be realised under the Memorandum of Understanding, and accordingly, and to the extent that the Memorandum of Agreement imposed any obligation on our client, any and all such obligations are now at an end.” After receiving this letter, FOC sued Fluorogas again in Texas state court on March 8, 2001; Fluorogas removed the case, based on diversity, to the Western District of Texas. FOC later added Applied as a defendant, bringing claims for tortious interference with contract and conspiracy against it. In September 2001, while this case was pending, The BOC Group PLC, a publicly-held British company, purchased all of Fluorogas’ stock for $4.5 million, plus contingent money depending on sales of fluorine generators. The BOC Group (through BOC Edwards, a division of BOC Group’s American subsidiary) first contacted Fluorogas on March 2, 2001, seven days after Fluorogas terminated the MOU. The purpose of this contact was to discuss working together to develop fluorine generators for on-site CVD cleaning. On Sept. 26, 2001, The BOC Group PLC purchased all of Fluorogas’ stock. Fluorogas continues to sell fluorine generators for work unrelated to semiconductor use and sells fluorine cells to BOC Edwards for BOC Edwards to develop for semiconductor use. BOC has yet to make a profit from semiconductor fluorine use, having only placed two test units with customers. After this acquisition, FOC amended its complaint to add claims for tortious interference, conspiracy, and derivative liability against The BOC Group plc and its American subsidiary, The BOC Group Inc. On Dec. 16, 2002, following referral to a magistrate judge, the district court granted summary judgment in Applied’s favor on all of FOC’s claims against it. The district court also granted summary judgment in BOC’s favor on the tortious interference and conspiracy claims. The remaining claims went to trial, where the jury found for FOC on its breach of contract and fraud claims against Fluorogas and also found BOC derivatively liable. The jury awarded $120 million for “loss of income producing asset” damages, $170,000 in reliance damages, and $12 million in punitive damages. The district court entered judgment for these awards, plus prejudgment interest, costs, and $24,199,037.45 in attorney’s fees. Thus, the total judgment exceeded $170 million. Fluorogas and BOC moved for judgment as a matter of law, for a new trial, and for remittitur. The district court denied these motions. Fluorogas, BOC and FOC filed notices of appeal. HOLDING:Reversed and rendered in part; reversed and remanded in part; affirmed in part. The MOU is an indefinite length contract, and therefore terminable at will. FOC contends that it would generally be unfair for a licensor to be able to terminate at any time for any reason. For that reason, courts often read a reasonable term into otherwise terminable indefinite contracts. the district court did not err in concluding that the MOU contemplated that FOC would expend a substantial sum of money in fulfilling its obligations and that, thus, a reasonable term should be implied into the MOU. FOC’s claim based on failure to disclose is deficient because FOC has not pleaded or argued any exception that would have given Fluorogas a duty to disclose. In addition, FOC has no injury that can be attributed to the alleged fraudulent representations. the only fraud claim that remains is the fraudulent inducement claim — that Fluorogas entered the MOU never intending to comply with it. And for this, FOC only presents evidence that Hodgson testified that he believed he could terminate at any time and that by December 2000, he intended to terminate. Even viewed in FOC’s favor, this is not evidence that Hodgson entered the contract without intending to perform. Therefore, the district court erred in denying Fluorogas’s and BOC’s motion for judgment as a matter of law on FOC’s fraud claim. Because the punitive damages were based on this fraud claim, the award of punitive damages cannot stand. BOC cannot be held derivatively liable for the claims under either an alter ego or single business enterprise theory because the claims all arose before BOC acquired Fluorogas. The court reverses the judgment against the two BOC entities. In determining that FOC failed to present evidence to show a fact question on its tortious interference claims against Applied, the magistrate judge analyzed FOC’s evidence, finding that “many documents cited by Plaintiff do not say what Plaintiff says they say.” Some of FOC’s assertions go beyond mere suspicion (for example, FOC presented the handwritten notes of an Applied executive, Jeet Harika, from an internal Applied meeting on Sept. 5, 2000 — these notes included the comment “? get off FOC agreement”). While Applied cites evidence that would strongly argue against tortious interference, the evidence cannot resolve the issue on summary judgment. Summary judgment was proper on the conspiracy claim against BOC, summary judgment was also proper on the conspiracy claim against Applied. Using the regular hourly rate of FOC’s lawyers, BOC and Fluorogas calculate the actual lodestar amount of fees at $3.3 million, although they also contend that this is an overstatement. Under this calculation, the $24 million represented an eight-fold enhancement of the lodestar amount. The district court abused its discretion in awarding such a vast amount of fees, particularly since it originally did so before providing BOC and Fluorogas with an opportunity to respond. Furthermore, in light of the court’s reversal of the lost-asset damages, the results obtained by FOC’s lawyers have changed. The court remands the attorney’s fee award to the district court for reconsideration. OPINION:Edward C. Prado, J.; Davis, Prado and Pickering, JJ.

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