U.S. Federal Court rules against SolarWorld in polysilicon dispute

The future of German-U.S. solar producer SolarWorld is in doubt, with the U.S. Federal Court handing down a ruling against it in its dispute with Hemlock Semiconductor. Hemlock is pursuing well in excess of $500 million in damages after SolarWorld subsidiary Deutsche Solar did not honor multi-year, take-or-pay polysilicon supply deals.

In handing down its initial judgment today, presiding judge Thomas L. Ludington found that SolarWorld’s arguments outlining the reasons that it is not beholden under the supply contracts were “without merit”. The court, rejecting SolarWorld’s submission to have the case heard by a jury, granted the motion for summary judgment yesterday.

The U.S. Federal District Court, Eastern District of Michigan, Northern Division, found that a jury hearing is not required in the case as a material dispute, or a determination over the facts of the case requiring jury input, is not necessary.

Intriguingly, in the Public Memorandum, Opinion and Order handed down yesterday, the court outlines how negotiations between SolarWorld and Hemlock to adjust the mutli-year polysilicon contracts went sour in 2013. The court found that the dispute escalated once Hemlock added to its negotiating position a provision that SolarWorld must petition the U.S. Department of Commerce to find a resolution to the solar trade dispute materializing between the U.S. and China. SolarWorld is widely acknowledged as being the initiator of the U.S.-China trade dispute.

The Public Memorandum, Opinion and Order from the court, was obtained by pv magazine today.

In his ruling, Judge Ludington dismissed a series of arguments put forward by SolarWorld and its subsidiary Deutsche Solar that the full value of the take-or-pay polysilicon contracts should not be awarded as damages. The amount totals $588, 272,512 (or $770,759,004 including interest). The court found that the burden is on Deutsche Solar to demonstrate the unreasonableness of the damages payment due under the supply contracts. It found that Deutsche Solar did not meet this burden in its submission to the court.

In its determination, the court has granted Hemlock Semiconductor’s motion for summary judgment. It has directed Hemlock to submit accrued damages to the court by July 22, 2016. Hemlock has additionally been directed to submit its legal fees incurred during the case.

The 40-page determination includes a detailed discussion of the case and relevant case law. It also sets out the process of attempted renegotiation of the supply contracts initiated by Deutsche Solar and SolarWorld, as well as Hemlock’s internal communications regarding adjusting existing supply contracts to market prices.

The determination also considers SolarWorld’s submission that the supply agreements were “commercially impracticable” given the alleged “illegal” market intervention of Chinese suppliers in the U.S. solar market. This argument was also put forward by Kyocera in its similar case with Hemlock. The court dismissed this submission.