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Hemlock Semiconductor Operations, LLC v. SolarWorld Industries Sachsen GmbH

United States Court of Appeals, Sixth Circuit
867 F.3d 692 (2017)


Facts

Hemlock Semiconductor Operations, LLC (plaintiff) entered into a series of agreements to supply SolarWorld Industries Sachsen GmbH (defendant) with specific quantities of polysilicon at fixed prices over a 14-year period. In exchange, SolarWorld agreed to a take-or-pay provision stating that SolarWorld would pay for a minimum amount of polysilicon each year, even if it took delivery of less than that amount. Further, under the agreements’ liquidated-damages provision, if SolarWorld failed to pay this minimum amount in a given year, then it had to pay Hemlock the minimum amount for that year plus any future years still left in the agreements. Several years into the agreements, the Chinese government began subsidizing polysilicon production in China, which unexpectedly drove down market prices. Although Hemlock and SolarWorld negotiated a temporary downward price adjustment in one year’s agreement, they were unable to agree on any amendments to the future agreements. The next year, SolarWorld did not pay the contractual minimum amount. Hemlock sued for breach of contract, seeking damages under the liquidated-damages provision. SolarWorld claimed that the Chinese government had acted illegally in dumping massive amounts of polysilicon on the market and had illegally committed criminal espionage against an entity related to SolarWorld. SolarWorld argued that these illegal actions were unforeseeable events that supported the defenses of impossibility, impracticability, and frustration of purpose. The district court determined that these defenses did not apply. The district court based this conclusion on its findings that: (1) market shifts, for any reason, were a basic assumption of the parties’ agreements and (2) the parties’ primary contractual purpose was to provide SolarWorld “with a stable supply of polysilicon at a predictable price.” SolarWorld appealed.

Rule of Law

Issue

Holding and Reasoning (Gilman, J.)

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