Argued: June 14, 2017
from the United States District Court for the Eastern
District of Michigan at Bay City. No. 1:13-cv-11037-Thomas L.
Ludington, District Judge.
K. Elliott, COHEN & GRIGSBY, P.C., Pittsburgh,
Pennsylvania, for Appellant.
Ansbro, ORRICK, HERRINGTON & SUTCLIFFE LLP, New York, New
York, for Appellee.
K. Elliott, Richard A. Ejzak, David F. Russey, Christina
Manfredi McKinley, COHEN & GRIGSBY, P.C., Pittsburgh,
Pennsylvania, Daniel P. Malone, Joseph E. Richotte, BUTZEL
LONG, P.C., Bloomfield Hills, Michigan, for Appellant.
Ansbro, J. Peter Coll, Jr., Daniel W. Robertson, Alvin Lee,
ORRICK, HERRINGTON & SUTCLIFFE LLP, New York, New York,
Craig W. Horn, Jamie Hecht Nisidis, BRAUN KENDRICK FINKBEINER
PLC, Saginaw, Michigan, for Appellee.
Before: MOORE, GILMAN, and COOK, Circuit Judges.
LEE GILMAN, Circuit Judge.
Semiconductor Operations, LLC (Hemlock) and SolarWorld
Industries Sachsen GmbH (Sachsen) are both involved in
manufacturing components of solar-power products. They
entered into a series of long-term supply agreements (LTAs),
by which Hemlock in Michigan would supply Sachsen in Germany
with set quantities of polycrystalline silicon (polysilicon)
at fixed prices between the years 2006 and 2019. The market
price of polysilicon was initially well above the LTA price,
but the market price plummeted several years later after the
Chinese government began subsidizing its national production
of polysilicon. The parties reached a temporary agreement to
lower the LTA price in 2011. When that agreement expired in
2012, however, the price reverted to the original amount.
Hemlock then demanded that Sachsen pay the original LTA price
for the specified quantity of polysilicon for the year 2012.
caused Hemlock to sue Sachsen for breach of contract in the
United States District Court for the Eastern District of
Michigan. Based on Hemlock's motion for summary judgment,
which the district court granted, Hemlock was awarded nearly
$800 million in damages and prejudgment interest. For the
reasons set forth below, we AFFIRM the
judgment of the district court.
and Sachsen negotiated a series of four LTAs. The first LTA
(LTA I) was executed in 2005 and was to remain in force
through 2015. Subsequent LTAs (LTAs II-IV) extended the
parties' relationship to the end of 2019. The first three
LTAs are nearly identical. LTA IV is structured differently
than the others, but the text of the provisions at issue is
essentially the same as in LTAs I-III.
provisions of the LTAs are particularly relevant to the
present case. First, a "take-or-pay" provision
required that Sachsen purchase a specified quantity of
polysilicon each year at a fixed price. The take-or-pay
provision obligated Sachsen to pay this yearly amount even if
it declined to take delivery of the polysilicon. Second, in
the event that Sachsen failed to pay the specified amount for
a given year, Hemlock had the right to terminate the LTAs.
Sachsen would then owe Hemlock the full remaining balance of
the LTA price, including amounts due for future years. We
will refer to this second provision as "the
entering into the LTAs, Hemlock began a massive expansion of
its manufacturing facilities in the United States at a cost
of over $4 billion. The LTAs acknowledged the planned
expansion several times. Sachsen was required to make
significant advance payments to Hemlock under the LTAs, which
were then credited against the purchase price of the
polysilicon. Although the LTAs do not explicitly describe the
reason for the advance payments, Sachsen acknowledges that
the purpose of the payments was to help fund Hemlock's
first few years of the LTAs' existence, Sachsen obtained
polysilicon from Hemlock at a price far below the
then-current market value. This began to change in 2009,
however, when the Chinese government started subsidizing its
national production of polysilicon. The result was that the
market price of polysilicon eventually dropped below the LTA
response, Hemlock and Sachsen negotiated a temporary
adjustment to the LTA price in 2011. After that agreement
expired the following year, the parties attempted to
negotiate further amendments but were unable to reach an
agreement. The district court's order granting summary
judgment describes the negotiations in detail, which we find
no need to repeat.
March 2013, Hemlock sent Sachsen a "Shortfall
Notice" that set forth the quantities of polysilicon
that Sachsen had failed to purchase under the LTAs in 2012
and that demanded payment pursuant to the take-or-pay
provision. Sachsen responded by insisting that it "did
not fall short of any purchase obligations, " that the
parties had permanently amended the LTAs, and that Hemlock
had waived the ability to enforce the LTAs. Two days later,
Hemlock sued, seeking the full amount due under the
filed its complaint in the district court against Sachsen in
March 2013. In its answer, Sachsen asserted 17 affirmative
defenses, including illegality, commercial impracticability,
and frustration of purpose. Hemlock moved to strike several
of the affirmative defenses under Rule 12(f) of the Federal
Rules of Civil Procedure. The court granted the motion in
part, striking Sachsen's argument that the LTAs were
illegal under European Union (E.U.) and German antitrust
laws. Sachsen filed a motion for reconsideration of that
decision, arguing that the court erroneously ignored one of
Sachsen's arguments and misinterpreted the burden of
proof under the E.U. antitrust laws at issue. The court
denied the motion, concluding that despite these alleged
errors, Sachsen's illegality defenses still lacked merit.
subsequently filed a motion for summary judgment in its favor
on its breach-of-contract claim. The district court granted
the motion, concluding that all of Sachsen's remaining
affirmative defenses were unavailing and that Hemlock was
entitled to recover under the liquidated-damages provision.
Judgment for the full amount of damages requested by Hemlock,
as well as for prejudgment and post-judgment interest, was
entered against Sachsen. In a separate order, the district
court granted in part Hemlock's motion for attorney fees
us on this appeal are the district court's decisions to
strike the illegality defense, to deny reconsideration of the
decision to strike that defense, and to grant summary
judgment to Hemlock. Sachsen has filed a separate appeal
challenging the attorney-fee award.