Hemlock Semiconductor Case Ranked in the Top Ten Business Cases of the Decade in Michigan


The Michigan Bar Journal highlighted Orrick's work on behalf of Hemlock Semiconductor in an article on the "Top 10 Business Cases, 2010-2019." The article briefly discusses what the authors believe are the 10 most notable decisions of Michigan law affecting the business community during the past decade. They evaluate several factors: the number of times a case was cited, perception of the relative importance of the legal issue decided, and, most importantly, whether it was likely to affect the day-to-day practice of business lawyers in Michigan.

Orrick's team working on the case Hemlock Semiconductor Operations, LLC v SolarWorld Industries Sachsen GmbH was led by John Ansbro, Thomas Kidera, Alvin Lee and Peter Coll. Seller Hemlock entered into long-term "take or pay" agreements that required buyer Sachsen to either order from Hemlock polysilicon at fixed prices or pay Hemlock. After the Chinese government began subsidizing national polysilicon production, which caused market prices to plummet below the contract prices, Sachsen refused to pay Hemlock, claiming frustration of purpose and performance under the contracts was impracticable.

The Sixth Circuit affirmed the district court's decision that Sachsen's breach for failing to pay was not excused, confirming an award of $800 million in damages and interest. The court explained that these commercial impracticability defenses apply only if the unanticipated circumstance made performance of the promise vitally different from what should have reasonably been contemplated by the parties when they entered into the contract. Although the parties may not have foreseen the Chinese government's illegal actions, the possibility that market prices would plummet was well within contemplation. Holding otherwise would go against the general rule that a contract's unprofitability doesn't warrant application of the impracticability defenses.