The Sixth Circuit Court of Appeals today affirmed a $793 million judgment on behalf of long-time client Hemlock Semiconductor Corporation. The court’s decision upheld a June 2016 summary judgment order in the Eastern District of Michigan’s Northern Division, leaving intact the large award against Hemlock’s German customer SolarWorld Industries Sachsen GmbH.
Secured by an Orrick team led by partners Peter Coll
and John Ansbro
, the significant award was based on SolarWorld’s breach of contract for failure to make hundreds of millions of dollars in required purchases from Hemlock under several long-term supply agreements. The trial court’s ruling was one of the first on the merits addressing the scope of relief available under Hemlock’s long-term supply agreements – and sets important precedent as Hemlock continues to litigate cases involving the same agreements with numerous other customers, with billions of dollars at stake.
There were three critical issues on appeal: 1) Were the customer’s defaults to be excused because the current polysilicon trade war between the U.S. and China had caused the price of polysilicon to drop dramatically and most importantly below contract prices? 2) Was the accelerated take or pay provision an enforceable liquidated damage remedy or was it a penalty? 3) Did the contracts violate German and EU antitrust laws?
The Sixth Circuit rejected Solar World’s arguments and affirmed the judgment, holding (i) that the accelerated “take or pay” provisions of Hemlock’s contracts are valid and enforceable under Michigan law as reasonable liquidated damage provisions; (ii) that large declines in market price, even if due to alleged “illegal activity” by the Chinese government in undermining ” the market, cannot excuse performance on grounds of commercial impracticability; and (iii) that Supreme Court precedent barred SolarWorld’s purported “antitrust” defense, because enforcing SolarWorld’s payment obligation did not amount to a violation of antitrust law. It also affirmed the $3.6 million attorney fee award, which included essentially all costs and hours billed (all at Orrick’s standard billing rates for the matter, which are far in excess of local rates in Bay City, Michigan)
. The Sixth Circuit’s affirmance is a culmination of the team’s work in litigating these contracts on Hemlock’s behalf since 2011.
In addition to Peter and John, the Orrick team included Kelsi Brown Corkran, Colby Allsbrook
, Daniel Robertson, Alvin Lee, Tom Kidera
and Kyle Howard