REVISED

                   UNITED STATES COURT OF APPEALS
                        For the Fifth Circuit



                            No.      96-40622




  DSC COMMUNICATIONS CORPORATION; DSC TECHNOLOGIES CORPORATION,

                          Plaintiff-Appellants and Cross Appellees,

                                  VERSUS

  NEXT LEVEL COMMUNICATIONS; THOMAS R. EAMES; PETER W. KEELER,

                         Defendants-Appellees and Cross Appellants.


            Appeal from the United States District Court
                  for the Eastern District of Texas

                        February 28, 1997
Before POLITZ, Chief Judge, SMITH and DUHÉ, Circuit Judges.

DUHÉ, Circuit Judge:

     DSC Communications appeals the district court’s refusal to

aggregate   damages   awarded   to   it    by   a   jury   for   diversion   of

corporate opportunity and misappropriation of trade secrets, as
well as the district court’s denial of attorneys’ fees.            Next Level

Communications cross appeals on numerous grounds, alleging that

DSC’s claims fail, that certain evidence was improperly admitted at

trial, and that damages were improperly awarded.

     For the reasons assigned, we affirm in part and vacate and

remand in part.



                                Background
       DSC Communications designs and manufactures telecommunications

equipment.      Thomas Eames and Peter Keeler began working at DSC in

1990    after    DSC   acquired     their    original      employer,    Optilink

Corporation. At both Optilink and DSC, Eames worked as an engineer

designing new technology, while Keeler worked in marketing.

       When   DSC   acquired    Optilink,    Eames   and    Keeler     were   both

involved with the “Litespan 2000" product, a digital loop carrier

that    represented     a      significant    advance      in   communications

technology. The Litespan combines many individual analog telephone

signals into one digital signal.           The Litespan quickly became very

profitable for DSC, and the company began to consider developing a

more advanced version of the Litespan, known as a broadband access

product, that delivers television and computer services in addition

to telephone service.

       Eames began working to develop a broadband access product in

1994, and identified two alternative designs for the product:

hybrid fiber coax (“HFC”) and switched digital video (“SDV”).                  HFC

design uses a system similar to that of existing cable television,

and broadcasts TV signals.           SDV design instead makes private,

“point to point” connections to each household on the system.

       In the early stages of broadband access development, it

appeared telephone companies preferred HFC design as a short term

option, but favored SDV as a long term design choice.                DSC claimed

at trial it instructed Eames to focus on HFC as a short term

solution, but to continue developing SDV technology.

       By 1994, Eames and Keeler were considering leaving DSC and


                                       2
forming their own company.     In May 1994, while still employed at

DSC, Eames drafted a document representing a business plan for a

new company.     This document proposed the development of an SDV

architecture,    and   was   marked    with   the   name   “Next   Level

Communications.”

       In early July, 1994, Eames and Keeler obtained $5 million in

financing to start Next Level.    On July 8, 1994, Eames and Keeler

resigned from DSC.     At least 6 other DSC employees followed Eames

and Keeler to Next Level.       Next Level focused its efforts on

developing an SDV system.

       By January 1995, Next Level was low on funds, and began to

seek investors so it could continue its product development.

Several companies discussed investing with Next Level, including

DSC.    Ultimately General Instrument (“GI”), a larger company who

principally manufactures television delivery equipment, committed

to invest $6.5 million in Next Level in return for a 10% interest

in the company, plus an option to buy the remaining stock.

       DSC filed this lawsuit in April, after GI first announced its

investment in Next Level, when it reviewed the files saved on

Eames’ computer at DSC and found three pages of Next Level’s May

business proposal.     In September 1995, GI exercised its option to

purchase the remaining stock in Next Level and agreed to indemnify

Eames and Keeler from any liability or expenses incurred by them in

connection with this lawsuit.

       After a three week trial, the jury found Eames, Keeler and

Next Level liable for breach of contract, diversion of corporate


                                   3
opportunity, and misappropriation of trade secrets.                         The jury also

awarded DSC punitive damages.             The total damages award against the

defendants was $369,200,000.

     DSC moved for entry of judgment for all actual and punitive

damages,    and   asked       the     district   court       to     grant   a    permanent

injunction prohibiting Defendants from disclosing the trade secrets

found to be misappropriated, plus requiring an assignment to DSC of

any SDV patents.             DSC also sought attorneys’ fees, costs, and

interest.

     The    district         court    declined     to       enter     judgment     as   DSC

requested.    It held the legal theories underlying the three torts

on which DSC recovered, breach of contract, diversion of corporate

opportunity,      and        misappropriation          of     trade     secrets,        were

duplicative, and refused to aggregate the damages.                       It ordered DSC

to elect between the damages awarded for those torts.                                 Under

objection,   DSC     chose      the    damages    for       diversion       of   corporate

opportunity, and the court entered judgment for $126,532,000.                           The

court also entered judgment for DSC on the total $10,200,000

awarded in punitives, and granted DSC temporary injunctive relief

until the judgment was satisfied that prevented Next Level from

disclosing the technology at issue unless it did so in “the

ordinary    course      of    business.”         The    court       declined     to   award

attorneys’ fees.

     Both    parties         appeal    the   judgment,        DSC     claiming     it   was

wrongfully forced to elect its damages and Next Level arguing the

evidence    did   not    support       verdicts    of       diversion       of   corporate


                                             4
opportunity and misappropriation of trade secrets.



                                         Discussion

                                             I.

     DSC         first    complains   that    the     district   court     incorrectly

ordered it to elect between relief for diversion of corporate

opportunity and misappropriation of trade secrets.1                         Since the

district court found the three legal theories advanced by DSC at

trial overlapped by alleging predicate facts that were nearly

identical, it only allowed recovery under one of the theories.

     DSC         argues    that    the    torts     of    diversion   of     corporate

opportunity and misappropriation of trade secrets are distinct and

do not overlap.            It contends, therefore, that it is entitled to

relief for both torts.            Next Level responds that there is no need

to consider the propriety of the election requirement because DSC’s

legal theories both fail: the corporate opportunity claim fails as

a matter of law and was supported by insufficient evidence, while

the verdict for misappropriation of trade secrets is insupportable

as a matter of law, as well as a result of several evidentiary

errors made by the district court.

     We agree with Next Level that the award for usurpation of

corporate opportunity cannot stand.                      On October 28, 1996, this

Court decided United Teachers Assoc. Ins. Co. v. MacKeen & Bailey,

Inc.,       

   (5th     Cir.     1996),    which   controls     the


        1
      DSC does not appeal the election order as to the breach of
contract award.

                                             5
determination. In that case, an insurance company sued its actuary

for breach of fiduciary duty.   We stated that while the actuary had

fiduciary status, and had breached his duties to the insurance

company, the district court erred in allowing recovery against him

under the usurpation of corporate opportunity doctrine:

     We believe that under Texas law the usurpation of
     corporate opportunity doctrine does not apply to all
     corporate fiduciaries, but is limited to officers,
     directors, and major shareholders who are fiduciaries.
     While it is true that several Texas cases use the broader
     term “corporate fiduciary” in discussing the doctrine, we
     have found no Texas cases, nor has UTAIC cited us to any,
     applying the corporate opportunity doctrine to any person
     other than an officer, director, or major shareholder.
     We certainly have found no Texas cases standing for the
     proposition that this doctrine applies to all corporate
     fiduciaries.

(footnote omitted).        United Teachers had not been

decided when briefs were filed or at the time of oral argument.

Next Level filed a supplemental brief with this court after oral

argument to call our attention to this clarification of existing

case law and its application to the facts of this case.2

     2
      Next Level did not originally argue to this Court that Eames
and Keeler could not be liable as they were not officers, directors
or major shareholders in their original brief. Next Level did,
however, raise the argument that Eames and Keeler were only high
level employees who did not occupy positions as officers, directors
or major shareholders in the district court. It did not originally
argue this theory on appeal as support for its allegation Next
Level did not divert a corporate opportunity because the issue has
not been definitively decided in Texas state court, and the only
federal case law specifically addressing this issue was the
district court holding in United Teachers overruled on appeal by
this Court’s holding.
   While it is clear that a party who fails to raise an issue in its
initial brief waives the right to review of that issue, Webb v.
Investacorp, Inc., 

, 257 n.2 (5th Cir. 1996), we have
yet to address our procedure when a party wishes to file a
supplemental brief on an issue because of an intervening change in
law.   Other circuits have held both that parties may raise new

                                  6
     In light of the holding in United Teachers, Eames, Keeler and

Next Level were incorrectly found to be liable for diversion of

corporate opportunity under Texas law.          United Teachers clearly

holds     that,   under   Texas   law,   the   usurpation   of   corporate

opportunity doctrine is inapplicable to any fiduciary who is not

also an officer, director, or major shareholder of a corporate

entity.     None of the appellees ever were, or ever alleged to be,

officers, directors, or major shareholders in DSC.          As a matter of

law in this circuit, Eames, Keeler and Next Level could not be held

responsible for diverting a corporate opportunity from DSC because

they did not hold any of these positions.          For this reason, the

judgment in favor of DSC for diversion of corporate opportunity

must be vacated.

     Next Level also appealed the award to DSC of $20 million for

conspiracy to usurp a corporate opportunity.        Since it was legally


issues because of an intervening change in law, and that parties
waived their right to have issues addressed by not discussing them
in their original brief. See United States v. Sterner, 

, 252 n.3 (9th Cir. 1994), overruled on other grounds by United
States v. Keys, 

(9th Cir. 1996)(allowing issue to be
raised for the first time in a 28(j) letter to prevent “substantial
injustice”); Louisiana-Pacific Corp. v. ASARCO, Inc., 

,
1582-83 (9th Cir. 1994), cert. denied, 

(1995)
(allowing plaintiffs to file a supplemental brief after a statutory
amendment); contra Bickel v. Korean Air Lines, 

(6th
Cir. 1996), cert. denied, No. 96-796, 

, (U.S. Jan.
21, 1997), (declining to consider an argument raised by the
defendant in a supplemental brief even though a recent Supreme
Court case dealt with some of the issues in the appeal).
   Refusing to allow the introduction of the holding in United
Teachers would result in this panel deciding an essential issue in
this appeal under incorrect law. United Teachers’ holding clearly
states the law, and we are bound to follow our own precedent. We
are unwilling to ignore this important clarification of the law,
and perpetuate incorrect law, merely because United Teachers was
decided after briefing and oral argument in this case.

                                     7
impossible for the Appellees to usurp a corporate opportunity, they

could   not     have    conspired      to    do    so.    The    damages      award   for

conspiracy to usurp a corporate opportunity also fails.

       Since    we     hold    the     verdict     for    diversion      of    corporate

opportunity is incorrect as a matter of law, and the judgment

awarding damages for that tort must be vacated, the verdict for

misappropriation of trade secrets is no longer duplicative and may

be reinstated if upheld.              Next Level attacks this verdict on two

grounds, first arguing that the misappropriation verdict was based

on   defective       special     interrogatories         that    did    not   adequately

present the contested issues.

       DSC alleged that Eames, Keeler, and Next Level misappropriated

six trade secrets.            Next Level mounted a double defense to this

charge,    arguing       these       trade   secrets      were    not    secret,      then

contending they had not misappropriated any of the alleged secrets.

The trial judge submitted a single interrogatory to the jury asking

if DSC proved Next Level had misappropriated DSC’s trade secrets.

Next    Level     claims       this     single       interrogatory        permitted     a

nonunanimous jury verdict, in that the jury did not specify which

of the alleged trade secrets Next Level used.

       We review the district court’s use of special interrogatories

only for abuse of discretion. E.E.O.C. v. Manville Sales Corp., 

, 1096 (5th Cir. 1994), cert. denied, 

(1995).   The district court has considerable leeway in deciding if

special interrogatories should be used, as well as in constructing

the form of the interrogatories.                  See Bryan v. Cargill, Inc., 723


                                             

, 1204-6 (5th Cir. 1984).

     Next   Level     argues   that   the   damages   model   DSC    presented

depended on a finding six trade secrets were misappropriated.                If

the jury believed less than six secrets were wrongly used by Next

Level,    the    damages   model    collapses.     However,    there    is   no

indication that the jury found less than all six secrets were

misappropriated, or that the evidence presented at trial was

insufficient to support a finding of misappropriation on all six

secrets.    We do not find any abuse of discretion by the district

court in its construction of the interrogatories.

     Next Level also argues the misappropriation judgment must be

overturned because the trial court erred in excluding important

evidence.       The trial court told the parties before trial it would

not allow into evidence any documents that were not produced to

opposing counsel in a timely manner.          During trial, it refused to

allow Next Level to cross examine the DSC expert with a short

article    written    by   George   Hawley,   a   vice   president    at   DSC,

published in a trade journal in 1991.             The article purportedly

disclosed the elements of one of the six alleged trade secrets,

contradicting the expert’s testimony that the trade secret was not

in the public domain.       Next Level had not disclosed the article to

DSC or listed the article on its pretrial exhibit list, claiming it

was unaware of the article’s existence because DSC withheld the

article from them.3


     3
      It is difficult to see how an article published in a trade
journal could have been “withheld”.

                                       9
      “The district court has broad discretion in deciding whether

to admit into evidence exhibits not listed in the pre-trial order.”

Gilber v. Tulane Univ., 

, 127 (5th Cir. 1990).               As

well, the district court has no obligation to consider evidence not

listed in the pre-trial order unless “necessary to prevent manifest

injustice.”   Goodman v. Lee, 

, 1011 (5th Cir. 1996),

cert. denied, 

(1996).         The district court made it

clear evidence not disclosed to the opposing party would not be

admitted at trial.        The article may have been helpful to Next

Level, but was not essential to its case. The trial court acted

within its discretion.

      For these reasons, we find there was no reversible error in

the verdict for misappropriation of trade secrets.            It therefore

stands, and upon remand should be substituted for the judgment

entered on usurpation of corporate opportunity.



                                      II.

      DSC contends it is entitled to permanent injunctive relief4

for misappropriation of trade secrets; either a limited injunction

in   combination   with    monetary    damages   or   a   total   injunction

prohibiting Next Level from using the trade secrets the jury found

it misappropriated.       DSC believes it should be allowed to choose

between these forms of relief, after it sees what sort of permanent

     4
     The district court issued a temporary injunction against Next
Level directing that the trade secret technology may not be
transferred or disclosed, but allows disclosure “in the ordinary
course of business.” The temporary injunction is only in place
until the judgment for DSC is satisfied.

                                      10
injunction the district court would fashion.

       Since “the basis for injunctive relief in the federal courts

has always been irreparable injury and the inadequacy of legal

remedies,” Weinburger v. Romero-Barcelo, 

, 1803

(1982), it is clear injunctions are an extraordinary remedy, to be

granted only when a party is threatened with injury for which he

cannot obtain a sufficient legal remedy.        Wright, Miller & Kane,

Federal Practice and Procedure: Civil 2d § 2942 at 43-44 (1995).

       We review the district court’s denial of permanent injunctive

relief for abuse of discretion.      North Alamo Water Supply Corp. v.

City of San Juan, Tex., 

, 916 (5th Cir. 1996), cert.

denied, 

(1996); Peaches Entertainment Corp. v.

Entertainment Repertoire Assoc., 

, 693 (5th Cir. 1995).

“The district court abuses its discretion if it (1) relies on

clearly erroneous factual findings when deciding to grant or deny

the permanent injunction (2) relies on erroneous conclusions of law

when deciding to grant or deny the permanent injunction, or (3)

misapplies the factual or legal conclusions when fashioning its

injunctive relief.”     Peaches Entertainment 

.

       The district court did not abuse its discretion in deciding

DSC was not entitled to permanent injunctive relief.             It did not

rely   on   clearly   erroneous   factual   findings   or   an    erroneous

conclusion of law.     The jury awarded DSC damages for lost sales on

SDV products.    DSC thus premised its damages claim on Next Level

developing an SDV system that competed with DSC’s system.            As the

district court noted, the money damages DSC recovered sufficiently


                                    11
compensated it for that injury, and the drastic solution of a

permanent injunction is unnecessary.      No irreparable harm was

suffered.



                                III.

     Next Level contends the district court erred in reversing an

earlier order and admitting, on the last day of testimony, evidence

that GI had agreed to indemnify Next Level, Eames, and Keeler

against any judgment for DSC.   The court originally ruled evidence

of the indemnification agreement was inadmissible, but changed its

ruling near the end of trial.    It rejected Next Level’s argument

that its agreement was equivalent to liability insurance, and was

inadmissible under Fed.R.Evid. 411.    It stated that even had the

agreement been insurance, it was admissible under the exceptions in

Rule 411 to show Eames and Keeler’s lack of ownership of the trade

secrets.     It then noted that Next Level opened the door to

admission of the agreement in voir dire, when its counsel told the

jurors the case was “a question of life or death to Mr. Eames and

Mr. Keeler.”    Finally, it found that even if admission of the

agreement was improper, the error was not sufficient to warrant a

new trial.

     We examine the admission of challenged evidence by asking two

questions: did the district court abuse its discretion in admitting

the evidence, and, if so, did its error affect the substantial

rights of the affected party?    Munn v. Algee, 

, 571

(5th Cir. 1991), cert. denied, 

(1991).   The district


                                 12
court did not abuse its discretion in admitting evidence of the

indemnity agreement.    The agreement was an integral part of the

relationship between the parties in this litigation.         Evidence

showed the price GI paid for Next Level was far below its actual

worth.    To explain this apparent incongruity, the jury needed to

understand the parties’ full relationship.      It also cast doubt on

counsel’s characterization of the effect of the case on Eames and

Keeler. While the timing of the district court’s decision to allow

this evidence was admittedly awkward, it was not an abuse of

discretion.



                                 IV.

     Next Level argues that the damage award for lost profits

cannot stand because DSC’s damage model was speculative: DSC has

yet to sell its SDV product, and no market has been established for

DSC’s SDV system.   It then attacks the methodology used by DSC’s

damage expert, Ray Sears, claiming the assumptions Sears relied on

were based on conjecture not fact.     Next Level’s main objections to

Sears’ analysis are that Sears had no basis to assume a large

number of households would gain access to SDV technology, and Sears

assigned market shares to DSC and Next Level without solid evidence

to support these numbers.   Sears testified DSC would have assumed

a forty percent market share in SDV sales had Next Level not been

formed.   With Next Level in the market, that company would acquire

twenty percent of the SDV market, and later “take away” eight

percent of DSC’s market share.   Finally, Next Level argues DSC did


                                 13
not allocate any portion of the damage figure Sears proposed to

specific acts by Next Level.     The jury, however, found that two of

the acts included in the damages analysis were not wrongful.

      Next Level also argues that as the damages award should be

reversed, the punitives award should not be allowed to stand.

A.    Were the damages speculative?

      We examine the challenge that damages for lost profits are

speculative to determine whether a reasonable person could find the

profits were established with reasonable certainty, considering all

evidence in the light most favorable to the plaintiffs.          Thompson

and Wallace v. Falconwood Corp., 

, 435 (5th Cir. 1996).

      Under Texas law, “evidence to establish profits must not be

uncertain or speculative.”      Texas Instruments, Inc. v. Teletron

Energy Management, Inc., 

, 279 (Tex. 1994), (quoting

Southwest Battery Corp. v. Owen, 

, 426; 

, 1098 (Tex. 1938)).     However, the requirement that damages be

based on more than speculation       “is intended to be flexible enough

to accommodate the myriad circumstances in which claims for lost

profits arise.”     Texas 

.        “[I]t is

not    necessary   that   recovery    for   future   profits   should   be

established by exact calculation, as it is enough to have data from

which these profits may be ascertained with a reasonable degree of

certainty and exactness.”     Fiberlok, Inc. v. LMS Enter., Inc., 

, 962 (5th Cir. 1992) (citing Copenhaver v. Berryman, 

, 544 (Tex.Civ.App. 1980)).

      While SDV technology represents a new product the intensive


                                     14
market research DSC presented at trial, coupled with the known

history of the telecommunications industry and the success of the

Lightspan product, established with sufficient certainty that SDV

technology is likely to generate significant profits.             Even if a

product is not yet fully developed, a plaintiff is not prevented

from   recovering   future   lost   profits    if   it    was   hindered   in

developing that product, and the evidence shows the eventual

completion and success of that product is probable.             As well, DSC

has traditionally been a leader in producing technology used in

telecommunications.      Its   history    of     strong    performance     is

indicative of the likely success of this revolutionary new product.



B. Was Sears’ methodology based on conjecture?

       While “damages may not be determined by mere speculation or

guess, it will be enough if the evidence show[s] the extent of the

damages as a matter of just and reasonable inference, although the

result be only approximate.”    Terrell v. Household Goods Carriers’

Bureau, 

, 24 (5th Cir. 1974), cert. dismissed, 

(1974) (quoting Story Parchment Co. v. Paterson Parchment Paper

Co., 

, 563 (1931).           We do not agree that Sears’

methodology was based on conjecture.          The assumptions Sears made

about the availability of SDV access and the respective market

percentages of DSC and Next Level are adequately supported.

       It is true these predictions are not guaranteed.           No one can

definitively say what the future holds for SDV technology, or DSC

and Next Level in particular.       However, uncertainty surrounding


                                    15
precisely how the industry will evolve does not reduce all analysis

about future developments to mere speculation.            Sears based his

predictions   on   data   obtained    from   respected    sources    in   the

telecommunications    market.        The   jury   chose   to   believe    his

estimation of damages.    There was sufficient evidence presented to

support the jury’s verdict.

C.   Was the unitary damages figure impermissible?

     The damage model Sears presented showed the total damages

allocated to Next Level’s alleged wrongful conduct.            The jury then

allocated damages to each different cause of action.            DSC was not

obligated to precisely apportion damages for each instance of

wrongful   conduct   it   alleged,    as   unitary   damages    models    are

permissible under Texas law.         Bildon Farms, Inc. v Ward County

Improvement Dist. No. 2, 

, 896 (Tex. 1967).

     The fact the jury found Eames and Keeler were not liable for

soliciting key employees of DSC is irrelevant to our inquiry.

First, the jury found Eames and Keeler were not liable for these

acts in the context of the breach of contract claim.            Damages for

breach of contract were not included in the judgment entered by the

district court, and are not appealed to this Court.            Second, even

if the jury’s finding was relevant to the misappropriation of trade

secrets damages, we may safely assume the jury did not award

damages to DSC for conduct for which Eames and Keeler were not

liable.

D.   Should the punitive damages award be reversed?

     Next Level argues that the punitive damage award must be


                                     16
vacated since DSC’s compensatory damage award cannot stand.           As we

uphold the compensatory damage award, this argument fails.



                                   V.

       DSC appeals the district court’s denial of attorneys’ fees.

It argues that attorneys’ fees are recoverable incident to punitive

damages, and that under our precedent, the district court erred in

refusing to enter this award.

       As DSC does not claim it is entitled to attorneys’ fees

because of a statute or contract, the court’s authority to award

fees is based on its inherent power to sanction behavior by a

litigant.     Tacon Mechanical Contractors, Inc. v. Aetna Casualty &

Sur. Co., 

, 489 (5th Cir. 1995).         We review for abuse of

discretion.     

agree that attorneys’ fees are allowed in connection

with an award of punitive damages, an award of punitive damages

does    not   automatically   compel   an   award   of   attorneys’   fees.

Attorneys’ fees not compelled by statute or contract are awarded at

the discretion of the district court.        The district court issued a

well-reasoned, thorough opinion detailing the reasons for its

refusal of DSC’s request for attorneys’ fees.         We find no basis for

reversing its holding.

       DSC claims that Bauman v.       Centex Corp., 

(5th

Cir. 1980), is authority for the proposition DSC is entitled to its

fees.     We agree with the district court that Bauman does not

control.      In Bauman, the district court awarded attorneys’ fees,


                                   17
where the parties had stipulated beforehand the court would decide

this matter instead of the jury.      The parties also agreed on the

amount of attorneys’ fees that would be proper.     

     Contrary to DSC’s apparent belief, Bauman does not direct that

a court must award attorneys’ fees in a particular case.     It only

upheld an award made by the district court.   As well, the challenge

in Bauman focused on the amount of the award, when the parties

submitted no evidence of fees but had previously stipulated to a

reasonable amount.   We merely found the stipulation was sufficient

to support the amount of the award.



                          CONCLUSION



     We reverse the award to DSC for usurpation of corporate

opportunity and conspiracy to usurp a corporate opportunity.       As

the award for misappropriation of trade secrets stands, judgment on

that claim should be entered.   No other errors merit reversal or a

new trial.   DSC is not entitled to an award of attorneys’ fees.   We

therefore AFFIRM IN PART, and VACATE IN PART and REMAND to the

district court for entry of judgment consistent with this opinion.




                                 18