Kaiser Aluminum Warrick, LLC v. US Magnesium LLC

Background

Kaiser Aluminum Warrick, LLC and US Magnesium LLC entered a Magnesium Supply Agreement effective October 9, 2020. The agreement required US Magnesium to supply specified quantities of pure magnesium ingot to Kaiser at specified prices for 2021 and 2022. It also required US Magnesium to maintain a 60-day supply of safety stock.

The agreement included a force majeure provision excusing performance when events reasonably beyond a party’s direct control delayed or prevented performance, subject to notice and other requirements. On September 29, 2021, US Magnesium notified Kaiser that it was declaring a force majeure condition based on an unanticipated failure of critical manufacturing infrastructure and limited availability of magnesium chloride feed. Kaiser alleged that US Magnesium improperly relied on that declaration and refused to make its safety stock available.

Kaiser’s amended complaint asserted two breach-of-contract counts: one based on US Magnesium’s failure to supply magnesium after the force majeure declaration, and another based on the failure to supply the safety stock. Kaiser sought at least $85 million on the first count and at least $13 million on the second count, along with attorney’s fees and costs.

Motion to Dismiss

US Magnesium moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. It sought dismissal of Kaiser’s requests for incidental and consequential damages, cover damages exceeding the contract’s limitation, and attorney’s fees.

US Magnesium relied on Paragraph 8 of the agreement. That paragraph states that the seller’s liability concerning the agreement and material purchased under it may not exceed the purchase price of the relevant shipment, and that the seller is not liable for incidental or consequential damages. US Magnesium argued that this language barred Kaiser’s claimed lost profits, alleged reputational harm, labor and other costs, and damages beyond the product’s purchase price. Kaiser argued that Paragraph 8 applied only to material actually purchased and shipped, not to magnesium that US Magnesium never delivered.

Court’s Analysis

The court concluded that Paragraph 8 was ambiguous. It found reasonable support for US Magnesium’s reading that the paragraph generally limited liability under the agreement. But it also found Kaiser’s reading plausible: Paragraph 8 could apply only to claims involving material purchased or shipped, including defective or damaging material, rather than material that was never delivered.

Because the agreement could reasonably be interpreted in more than one way, the court held that the issue could not be resolved on a motion to dismiss. The interpretation question would have to await further development of the record, including discovery and possibly a later motion for summary judgment.

The court separately addressed attorney’s fees. It explained that a party who wins a breach-of-contract case generally may not recover attorney’s fees, and the agreement contained no provision authorizing such recovery. However, courts may award fees in unusual cases involving bad-faith, vexatious, wanton, or oppressive conduct. The court therefore declined to dismiss Kaiser’s attorney-fee request at this stage because the question whether this was such an unusual case remained open.

Disposition

The court denied without prejudice US Magnesium’s motion to dismiss portions of Kaiser’s amended complaint. The clerk was directed to close the motion at ECF No. 48. The order did not decide the ultimate amount of damages, the final interpretation of Paragraph 8, or whether Kaiser would ultimately receive attorney’s fees.