Treibacher Industrie v. Allegheny Technologies

In November 2000, Treibacher Industrie A.G. (Treibacher) (plaintiff) entered into two contracts to sell tantalum carbide (TaC), a hard metal powder, to TDY Industries, Inc. (TDY) (defendant) for delivery “on consignment.” TDY was a subsidiary of Allegheny Technologies, Inc. (defendant). TDY accepted some TaC under the contracts but, in August 2001, stated that it did not believe that it had a binding obligation to accept any more TaC from Treibacher or to pay for any unaccepted TaC. Treibacher sold the TaC that TDY refused to accept at a lower price than TDY’s price and sued TDY for damages. At trial, TDY presented evidence that in the metal industry, the term “on consignment” meant that no sale occurred unless and until TDY actually used the TaC. Treibacher responded with evidence that, based on the parties’ seven-year course of dealing, “on consignment” meant that TDY had to pay for all the TaC specified in the contracts but that Treibacher would not bill TDY until TDY used the TaC. The district court ruled that under the Convention on Contracts for the International Sale of Goods (CISG), the parties’ course of dealing was more important than the industry’s understanding of the term “on consignment.” The district court further concluded that the parties’ course of dealing evidenced their agreement that TDY purchased the TaC when it agreed to the November 2000 contracts. The district court awarded Treibacher more than $5.3 million in damages. TDY appealed, arguing, among other things, that (1) under the CISG, a contract term must be interpreted consistently with industry usage absent an express agreement to a different interpretation and (2) the district court erroneously concluded that the parties’ course of dealing showed that TDY was obliged to pay for all the TaC specified in the contracts regardless of TDY’s actual usage.