Hemlock Semiconductor Operations, LLC v. SolarWorld Industries Sachsen GmbH

Facts

Hemlock agreed to sell Sachsen polysilicon for a fixed price between 2006 and 2019. The parties memorialized their agreement in a series of long-term supply agreements (LTAs). The LTAs contained a “take-or-pay” provision that required Sachsen to purchase a certain quantity of polysilicon each year and to pay Hemlock a fixed amount (even if it declined to take any product). The LTAs also included a liquidated damages provision that allowed Hemlock to terminate the contract if Sachsen failed to pay and demand the full remaining balance of the LTA price (including for future years). In 2009, China began “illegally” subsidizing national production of polysilicon and flooded the market. Eventually the market price of polysilicon dropped below the fixed LTA price. In 2011, Hemlock and Sachsen negotiated a one-year temporary adjustment to the LTA price. However, the parties were unable to reach an agreement for 2012. In March 2013, Hemlock sent a Sachsen a “Shortfall Notice” for its 2012 polysilicon purchases and demanded payment pursuant to the LTAs’ “take-or-pay” provision. Sachsen refused and asserted that it had no such obligation because the parties had permanently amended the LTAs.