Court finds for Kaiser in suit against US Magnesium

A court found in favor of Kaiser Aluminum in a lawsuit in which the aluminum producer sued U.S. Magnesium over a breach of contract.

A jury returned a verdict for a Kaiser subsidiary, Kaiser Aluminum Warrick, rejecting U.S. Magnesium’s argument that the Salt Lake City-based company couldn’t fulfil its contract when it declared a force majeure after its equipment failed. U.S. Magnesium said it couldn’t make repairs due to Covid-related supply chain issues.

According to a judgment entered by the court on Aug. 8, U.S. Magnesium is required to reimburse Kaiser for about $55 million in higher magnesium costs Kaiser had to pay other suppliers when it turned to the spot market, plus about $12.9 million in prejudgment interest.

Background

The dispute originated in 2020, when U.S. Magnesium and Kaiser Aluminum Warrick entered into an agreement under which the magnesium company would sell its product at specified prices between December 2020 and December 2022. Specifically, the deal required a minimum purchase of 6,674 metric tons (t) and a maximum purchase of 7,526t of pure magnesium ingot between Dec. 1, 2020 and Dec. 31, 2021, and from Jan. 1, 2022 to Dec. 31, 2022, according to the complaint filed by Kaiser.

The arrangement went on for about nine months until, on Sept. 29, 2021, U.S. Magnesium sent Kaiser a declaration of force majeure, saying critical pieces of its equipment failed, according to the complaint.

Kaiser claimed the letter was vague, failing to say “what steps U.S. Mag was taking to rectify the failed ‘manufacturing infrastructure’ and no information as to when the failure might be rectified.” U.S. Magnesium denied this.

Kaiser also said U.S. Magnesium failed to maintain a 60-day supply of magnesium, as per their agreement, according to the complaint. U.S. Magnesium argued the force majeure excused them from providing the backup supply.

Kaiser said it had to buy magnesium from other suppliers on the spot market, which was three to six times higher than the fixed prices in the contract.

Kaiser argued that ultimately the force majeure declaration was improper because the equipment at issue was poorly maintained, and a breakdown could have been avoided, which U.S. Magnesium denied.

U.S. Magnesium denied that it breached the contract.