October 10, 2008

8th U.S. Circuit Court of Appeals Upholds $21 Million Verdict

By Donna Walter

The 8th U.S. Circuit Court of Appeals affirmed a $21 million verdict against a St. Louis-based carbon-fiber manufacturer in a breach-of-contract lawsuit.

A federal jury in St. Louis awarded Structural Polymer Group and Structural Polymer Systems, which are British corporations, $36 million in lost profits from Zoltek Corp. Chief Judge Carol E. Jackson later reduced the award to a little more than $21 million because the difference consisted of a duplicative award.

"The firm's clients are completely and totally satisfied with the outcome," said Louis F. Bonacorsi, a partner at Bryan Cave in St. Louis. Bonacorsi credited another Bryan Cave partner, Thomas Walsh, for briefing the appeal.

"The appellate court absolutely vindicated the district court's hard work," Bonacorsi said, noting the case was under submission at the 8th Circuit for almost nine months.

A message left for one of Zoltek's lawyers was not immediately returned. Zoltek's spokesman is out of the country and unavailable for comment.

Zoltek and Structural Polymer in November 2000 entered into a supply agreement through which Zoltek would sell carbon fiber to Structural Polymer for 10 years. Structural Polymer manufactures a light-weight building material that can be used to make wind energy turbine blades.

Zoltek didn't fill the 2005 and 2006 orders for carbon fiber. The jury awarded lost profits through Dec. 31, 2006, but rejected Structual Polymer's claims for future profits through 2010.

On appeal, Zoltek argued that the contract lacked mutuality of obligation, that Structural Polymer abandoned the supply agreement when it didn't order any carbon fiber in 2003, that the trial judge allowed unfairly prejudicial testimony at trial and that there wasn't adequate evidence to support the damages calculations.

Zoltek argued that Structural Polymer acted in bad faith when it didn't make any purchases in 2003. But the court, in an opinion written by Circuit Judge Stephen M. Colloton, found that the claim of bad faith "is an argument that SP breached the agreement, not that the agreement lacked mutuality or consideration in the first place."

The court said Structural Polymer's failure to buy carbon fiber between February 2002 and early 2004 doesn't mean the agreement was mutually abandoned. In requirement contracts, the type of contract at issue here, buyers have the right to reduce their requirements as long as they're acting in good faith, the court said. In addition, the jury rejected the idea that the company's failure to order constituted a breach of contract, the court said.

The 8th Circuit similarly rejected the rest of Zoltek's arguments. The court also rejected Structural Polymer's argument that Jackson shouldn't have reduced the verdict.

Originally published by Donna Walter.

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