## Facts

- Hemlock Semiconductor Operations, LLC, a Michigan polysilicon manufacturer, entered four long-term supply agreements (2006–2019) to supply SolarWorld Industries Sachsen GmbH, a German solar-components manufacturer.
- The agreements set fixed prices and annual quantities and included a take-or-pay obligation requiring payment even if Sachsen declined delivery.
- The agreements also included a liquidated-damages provision allowing Hemlock, upon nonpayment and termination, to recover the remaining contract price for the balance of the term.
- After the market price of polysilicon later fell sharply (attributed by Sachsen to Chinese subsidization), the parties temporarily reduced prices in 2011; the modification ended in 2012 and prices reverted.
- Sachsen refused to pay amounts due under the agreements; Hemlock sued for breach in the Eastern District of Michigan seeking liquidated damages and prejudgment interest.
- The district court granted summary judgment to Hemlock, awarded nearly $800 million in liquidated damages and prejudgment interest, struck Sachsen’s antitrust-based defenses, and rejected commercial impracticability and frustration of purpose defenses.

## Issues

1. Whether Sachsen could avoid enforcement of the contracts based on antitrust illegality theories, including under E.U. competition law.
2. Whether market collapse and related asserted events excused performance under Michigan doctrines of commercial impracticability or frustration of purpose.
3. Whether the liquidated-damages provision awarding the remaining contract price was an unenforceable penalty under Michigan law.

## Decision

- The Sixth Circuit affirmed the district court’s summary judgment for Hemlock on liability and damages.
- The court held Sachsen’s antitrust-based defenses were properly struck because enforcing payment obligations did not require illegal conduct.
- The court held commercial impracticability did not apply because performance remained possible and the contracts allocated market-price risk to Sachsen.
- The court held frustration of purpose did not apply because the agreements’ primary purpose—stable supply at a predictable price—was still achievable.
- The court upheld the liquidated-damages provision as enforceable and not a penalty, affirming the award of the remaining contract price (with prejudgment interest).

## Legal Principles

- Antitrust illegality defenses generally do not bar contract enforcement where the judgment does not compel the alleged unlawful conduct.
- Under Michigan law, commercial impracticability requires more than increased cost or reduced profitability; a party is not excused when the contract assigns the relevant risk and performance is still possible.
- Frustration of purpose requires an unforeseen event that substantially destroys the contract’s principal purpose; a price collapse affecting profitability does not suffice when the agreed exchange remains available.
- A liquidated-damages clause is enforceable if, at contract formation, it reasonably forecasts anticipated harm and is not grossly disproportionate to likely losses, including in capital-intensive long-term supply arrangements.

## Conclusion

The Sixth Circuit enforced fixed-price, take-or-pay polysilicon supply contracts and their liquidated-damages remedy, holding that claimed antitrust concerns and severe market changes did not excuse payment obligations where the agreements allocated price risk and the contracts’ essential purpose remained intact.


Hemlock Semiconductor Operations, LLC v. SolarWorld Indus. Sachsen GmbH, 867 F.3d 692 (6th Cir. 2017)