Guidance on Handling Emerging Legal Issues Related to COVID-19
The state of emergency has resulted in several emerging legal trends. The State Bar of Michigan has been tracking these trends and gathering important practice tips and guidance from attorneys in each area. Please click on your area of interest for detailed information, including checklists, case summaries, and other key tips.
Kyocera Corporation v. Hemlock Semiconductor, LLC
The court held that construing the force majeure clause narrowly, the plaintiff “contractually assumed the very market risks that gave rise to” its liability under the take-or-pay contract, and that the plain language of the clause did not permit relief on the grounds the market for polysilicon had shifted, regardless of the cause of the shift. Thus, it affirmed the trial court’s dismissal of plaintiff’s complaint for declaratory relief pursuant to MCR 2.116(C)(8). At stake was plaintiff’s (a Japanese company) liability under its take-or-pay contract for the purchase of polysilicon for use in solar panels from defendant (a Michigan manufacturer). Plaintiff sought a declaration that the acts of the Chinese or U.S. governments constituted a force majeure event under the contract, and that it was “not liable for delays or failures to perform for so long as the force majeure event continues.” If plaintiff was “liable under the contract for the full purchase price of all unordered polysilicon for the duration of the contract,” it faced liability of up to $1.74 billion. The trial court assumed that plaintiff adequately pleaded that the actions of China or the U.S. in the solar industry market generally constituted “acts of the Government.” Plaintiff argued that the trial court erred by determining that it did not adequately plead that “its delays or failure in performance under the contract had arisen out of or resulted from the ‘acts of the Government.’” The court disagreed. It noted that the bulk of plaintiff’s complaint consisted of “allegations of bad behavior on the part of defendant. Such conduct, even if true, cannot form the basis for relief under the force majeure clause, as none of the alleged acts are ‘acts of God; acts of the Government or the public enemy; natural disasters; fire; flood; epidemics; quarantine restrictions; strikes; freight embargoes; war; acts of terrorism; [or] equipment breakage.’” Further, it held that the conduct alleged here “did not constitute a force majeure event under the parties’ contract, and that the trial court should have, had it considered the issue, granted summary disposition to defendant on that additional ground.” However, regardless of whether it analyzed “whether a force majeure event occurred, or whether plaintiff’s alleged inability to perform its contractual obligations arose out of or resulted from an assumed force majeure event,” the court’s holding was the same – “plaintiff failed to state a claim on which relief could be granted, and the trial court properly granted summary disposition to defendant.” Read the Full Text Opinion
State Bar of Michigan
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Lansing, MI 48933-2012