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Click here for the full text of this decision FACTS:S.P.M. Flow Control Inc. (SPM), makes heavy-duty oilfield pumps. The pumps have two components: a “power end” and a “fluid end.” The fluid end requires internal contouring to give it the correct shape. As the process SPM used to make fluid ends dated back to the 1960s and took 115 hours, SPM decided to order new machinery for manufacturing this component. SPM contacted Maruka USA Inc. in 1996 to find suitable replacement machinery. One of the companies Maruka contacted was Toshiba Machine Co. of America, which provided literature and quotes for several machine tools, including the BMC 1000 Horizontal Machining Center. SPM initially rejected the BMC-1000 because it could not perform internal contouring, but Toshiba said they had new software that made such contouring possible through a process called “orbit boring.” Toshiba represented that the software was already being used on BMC-1000 machines in Japan; it also said the process could drastically reduce the number of hours it took to make the fluid ends � anywhere from 15 to 50 hours. There was some dispute over whether the orbit boring was really a new process, whether it was a combination of existing processes, whether it was another name for an existing process and whether a new Toshiba product, the NX-76, was the first product to use orbital boring. Though those issues were not resolved at the time, SPM decided to buy a BMC-1000 in December 1997 for immediate delivery. The purchase order listed “orbit machining” as an option and included a five-year warranty on orbit machining software. Several terms were included in what was called “Addendum A,” including a provision that SPM’s acceptance of the BMC-1000 was conditioned on the successful production of a flue end on the machine at SPM’s factory. Toshiba accepted the purchase order without comment and delivered the machine in March 1998. SPM made a down payment. The next month, a Toshiba programmer from Japan arrived to install the orbit boring software but he was unable to do so. After this failed attempt, a Toshiba representative, Steve Oliphant, sent an memo to another Toshiba representative saying that SPM was being used as a beta site for the orbit boring software. SPM complained in May that the BMC-1000 did not perform as expected. Toshiba sent the programmer back to SPM, but he was again unsuccessful in installing the software. SPM offered to return the equipment in return for a refund of the down payment, but Toshiba promised that a software solution was imminent. Two months later, in late July, SPM ordered another machine from Toshiba: the BMC-800. This machine was similar to the BMC-1000 in that it included orbit boring capabilities, but it was smaller. Toshiba at first said it would not ship the new machine until SPM paid the $742,500 balance on the BMC-1000, which SPM did. Five days later, Toshiba sent an “acceptance” letter for the BMC-800 purchase order. The letter stated, however, that the BMC-800 did not have the orbit boring technology and that an update would never be provided. Toshiba later assured SPM that the statement was a miscommunication and that Toshiba would be demonstrating the orbit boring software on the NX-76 at a trade show in September and would provide SPM with the software after that. SPM representatives attended the trade show and were told that the software would not be ready until January. It wasn’t ready in January, and for more than a year, the parties continued to haggle over the existence and/or arrival of the software. In May 1999, Oliphant promised the software would be ready in two months, but three months later, Toshiba finally stated that it would not provide SPM with the software at all. SPM began shopping for replacement machines, finally purchasing one of two machine tools from Goss Trevisan in May 2000. The first Goss machine went into operation in May 2001. The Goss machine could produce a fluid end in 34 hours. SPM had been using the BMC-1000 and the BMC-800 machines since June 1998, logging more than 15,000 hours in the production of fluid ends. Though the machines could not perform the internal contouring, they nevertheless cut down the manufacturing time by 15 hours, for an average of 100 hours per fluid end. SPM sued Toshiba for fraud, negligent misrepresentation, breach of contract and breach of warranty. Toshiba filed a counterclaim for the unpaid balance on the BMC-800. A jury ruled for SPM on all its claims. It found that SPM accepted the BMC-1000 but later revoked its acceptance; it also found that SPM did not accept the BMC-800. The jury awarded SPM $3 million each for the BMC-1000 and the BMC-800. The trial court separately awarded SPM $1.5 million in attorneys’ fees through the date of judgment and including fees in the event of an unsuccessful appeal by Toshiba. The trial court also awarded prejudgment interest starting from the day SPM filed suit. Toshiba appeals the jury verdict and the award of attorneys’ fees. SPM appeals the date from which prejudgment interest is being measured. HOLDING:Affirmed. The court first considers whether or not SPM accepted the BMC-1000 or the BMC-800. The court rejects Toshiba’s reliance on cases that equate use of a product with its acceptance. Admittedly, the SPM used the two machines for 17,000 hours, but to determine whether continued use of a non-conforming good serves as rejection or revocation of acceptance depends on whether the use was reasonable. Reasonableness is measured by factors such as the degree of economic hardship the buyer would suffer it discontinued using the defective good and the reasonableness of the buyer’s use after revocation as a method of mitigating damages. The court finds that both Toshiba’s assurances that the necessary software would be available, as well as SPM’s use of the BMC-1000 to mitigate its damages until it could get a replacement tend to support the conclusion that SPM’s extensive use of the BMC-1000 was reasonable, before and after SPM revoked its acceptance. Moreover, there was testimony that suitable replacements to meet SPM’s needs were hard to get, and the replacement machines SPM ultimately bought had a long lead time. There was more than a scintilla of evidence to support the jury’s finding that SPM revoked its acceptance of the BMC-1000. The court next considers whether Toshiba breached the contracts it had with SPM. After first finding that the evidence supported the jury’s finding that Addendum A was a part of the contract, the court then addresses Toshiba’s argument that because it delivered the BMC machines to SPM, it cannot be found to have breached the contract. The court finds the orbit boring software, the tools lists and part programs, the process cycle time studies and a test run-off of a fluid end were supposed to be delivered but never were. Therefore, there was enough evidence to support the jury’s findings. Then court then reviews Toshiba’s challenge to three aspects of the jury’s damages finding: 1. lost profits; 2. double recovery; and 3. an improper broad-form jury question. On the first point, the court takes note of the three components of the lost profits SPM’s expert says the company lost: 1. the increased cost of producing some of the fluid ends on the Toshiba machines; 2. lost sales caused by over-quoting or having being able to produce some fluid ends fast enough for some customers; and 3. other flow-control products it would have sold in connection with the new fluid ends. The court rejects Toshiba’s contention that the expert was not qualified because Toshiba did not object to the expert’s qualifications at trial. The court further rejects Toshiba’s contention that the trial court erred in admitting the expert’s testimony that Toshiba says was based on inadmissible hearsay. The court states that experts may rely on inadmissible facts or data to form an opinion or inference if the facts or data are of the type reasonably relied on by other experts in the field. “We cannot think of a more appropriate method to determine why sales were lost than to ask the customer,” the court adds. Next, the court considers whether SPM mitigated its damages. Toshiba claims SPM had a duty to cover but didn’t. On the contrary, the court finds, as SPM bought to Goss machines as cover when it became clear that Toshiba’s machines would not perform as represented. Once Goss machines were fully operational, SPM stopped using the Toshiba machines. The court also finds evidence of mitigation. Though the Toshiba machines did not perform as they were represented, they still reduced production time slightly. The 15-hour difference over time yielded a reduction in SPM’s damages by $2,250 per fluid end, a computation embraced by SPM’s expert. The court upholds the award of attorneys’ fees since a breach of contract was established. The court also allows the award of more than the lodestar amount in calculating those fees, as Texas courts consistently allow the use of a multiplier based upon the contingent nature of a fee under Texas statutes. The court further upholds the trial court’s refusal to submit Toshiba’s counterclaim for the unpaid balance of the BMC-800, as well as the trial court’s decision to submit SPM’s breach of warranty, fraud and negligent misrepresentation claims to the jury. The court then addresses SPM’s argument that prejudgment interest should have been measured earlier than February 29, 2000, when SPM filed suit. SPM says the date should be May 3, 1999, which is 180 days after SPM sent Toshiba a letter expressing dissatisfaction over the machines and stating that SPM was prepared to litigate but would prefer to work things out. The court rules that the letter did not constitute notice of SPM’s claim as a matter of law, so the trial court’s use of the date-of-filing date was proper. OPINION:Anne Gardner, J.; Cayce, C.J.; Gardner and McCoy, JJ.

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