Kyocera Corp. v. Hemlock Semiconductor, LLC
313 Mich. App. 437
| Mich. Ct. App. | 2015Background
- Kyocera (buyer) and Hemlock (seller) entered four long-term take-or-pay contracts (2005–2008), the largest being Agreement IV (2008) obligating Kyocera to advance-pay and purchase polysilicon through 2020.
- Agreement IV included a take-or-pay/acceleration clause (buyer pays for contracted quantities regardless of purchases) and a force majeure clause excusing delays or failures caused by "acts of the Government" and other enumerated events.
- After global market changes (allegedly due to Chinese subsidies/dumping and ensuing U.S. trade measures), polysilicon prices collapsed and Hemlock reduced production and closed a plant; Kyocera claimed it could not profitably perform.
- Kyocera invoked the force majeure clause (asserting governmental acts caused its inability to perform) and sought a declaratory judgment excusing performance.
- Hemlock moved for dismissal under MCR 2.116(C)(8); the trial court assumed a government "act" might have occurred but held market unprofitability does not trigger force majeure in a take-or-pay contract and granted dismissal.
- The Court of Appeals affirmed: the force majeure clause does not cover mere economic hardship or loss of profitability, and Kyocera assumed market-risk under the take-or-pay agreement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether acts of foreign or domestic governments that depressed market prices can excuse buyer’s nonperformance under the contract’s force majeure clause | Kyocera: governmental actions (China/US) caused inability to perform, so force majeure applies | Hemlock: clause does not cover market-driven financial hardship; no government act directly barred performance | Held for Hemlock — market depression/unprofitability does not trigger force majeure; buyer assumed that risk |
| Whether plaintiff pleaded a cognizable force majeure claim at the (C)(8) pleading stage | Kyocera: complaint alleges government acts and resulting inability to pay, sufficient on pleadings | Hemlock: allegations merely show unprofitability; legal conclusions insufficient | Held for Hemlock — pleadings fail as matter of law; no factual development could state a claim |
| Whether the force majeure clause is ambiguous such that extrinsic evidence/ discovery is needed | Kyocera: clause should be interpreted to encompass unforeseeable, illegal government manipulation | Hemlock: clause is clear; no ambiguity warranting discovery | Held for Hemlock — clause not argued ambiguous below and court reads it plainly; no discovery required |
| Whether foreseeability of government action matters to force majeure applicability | Kyocera: unforeseeability supports relief (distinguishing some precedents) | Hemlock: foreseeability is irrelevant; contract allocation of market risk controls | Held for Hemlock — decision rests on contract interpretation/allocation of risk, not foreseeability |
Key Cases Cited
- Erickson v. Dart Oil & Gas Corp., 189 Mich. App. 679 (Mich. Ct. App. 1991) (discusses purpose and interpretation of force majeure clauses)
- Spiek v. Michigan Dep’t of Transp., 456 Mich. 331 (Mich. 1998) (standard of review for motions under MCR 2.116(C)(8))
- Maiden v. Rozwood, 461 Mich. 109 (Mich. 1999) (pleading standard for summary disposition under MCR 2.116(C)(8))
- Langham-Hill Petroleum Inc. v. Southern Fuels Co., 813 F.2d 1327 (4th Cir. 1987) (economic hardship/price collapse does not qualify as force majeure)
- In re Cablevision Consumer Litigation, 864 F. Supp. 2d 258 (E.D.N.Y. 2012) (force majeure clauses construed narrowly; specific identification of excusing events required)