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This section contains the nature of the case and procedural background.

Kyocera (D) entered into four contracts with Hemlock (P), in which D promised to purchase specified amounts of polysilicon from P at specified prices over the course of the next ten years or so. The contracts contain 'take-or-pay' provisions. D was required to 'take' a specified quantity of polysilicon from D each year. It did not matter whether D took the product or not. It still had to pay. If D defaulted under the contracts, these provisions accelerate the amount D owes P, such that P can demand all remaining sums owed. For these acceleration provisions to take effect, D must default, P must serve notice of default, and P must give D 180 days to cure its default. If D does not cure, P can elect to terminate, at which point D becomes liable for all remaining payments due, the sum of the take-or-pay provisions. For these acceleration provisions to take effect, D must default, P must serve notice of default, and P must give D 180 days to cure its default. If D does not cure, P can elect to terminate, at which point D becomes liable for all remaining payments due, the sum of the take-or-pay provisions. The Chinese Communist government disrupted the solar-panel market by subsidizing Chinese solar-panel companies. This reduced the market price of polysilicon. The price D agreed to pay P was far greater than the going rate. D sought to renegotiate. A compromise, temporarily lowering the price was reached but P reneged that it would begin insisting that Kyocera take or pay for polysilicon at the original (and now inflated) price. P sought a declaratory judgment that D repudiated the parties' contracts by indicating that it would not take or pay at the original price. D counterclaimed that the 'pay' portion of the take-or-pay provisions is an unlawful penalty, and thus that the acceleration provisions are too. P moved to dismiss D's counterclaims, and the district court agreed. D appealed.

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