Charles & Colvard, Ltd announced that on December 5, 2024, it received an interim award in its confidential arbitration with Wolfspeed, Inc Importantly, the award rejected Wolfspeed’s claims to expectation damages of approximately $22.8 million, limiting the Company’s damages to just $3.3 million representing approximately $1.3 million for inventory previously purchased and approximately $2.0 million of consigned inventory in the Company’s possession, that will now be recorded on the Company’s balance sheet as of June 30, 2024 – along with interest, arbitration and limited attorney’s fees as described below.
“We consider this a significant victory for the Company and its shareholders, as Wolfspeed sought total damages in excess of $28 million. This resolution allows us to focus on our business and move forward to execute on our strategic plans while no longer being obligated under a long-term purchase commitment that we believe hindered the Company’s growth and profitability for quite some time,” said Company President and Chief Executive Officer Don O’Connell.
Under the terms of the interim award, the arbitrators rejected Wolfspeed’s claims for additional expectation damages. The Company is required to pay Wolfspeed the undisputed amount of approximately $1.3 million for product previously purchased and already reflected as a payable in the Company’s historical financial statements.
In addition, the Company is also required to purchase and pay Wolfspeed approximately $2.0 million for raw material delivered to the Company on consignment, which will have a positive impact on the Company’s balance sheet by increasing inventory by a similar amount as of June 30, 2024.
Wolfspeed is entitled to recover interest at the rate of 8% per annum on the foregoing compensatory damages between April 24, 2023 until paid. The arbitrators’ fees and expenses shall be borne by the Company and will be included in the final award.
Wolfspeed was awarded attorney’s fees and costs incurred in connection with this arbitration, but not for any time related to arguing for expectation damages, nor for expert witness fees and expenses.
No later than January 4, 2025, Wolfspeed shall submit a petition for its attorney’s fees and costs together with a supporting affidavit on the reasonableness and necessity of (i) the time spent, (ii) the number of attorneys who worked on the matter, (iii) the hourly rates charged, compared to the customary fees charged in the community for similar services by lawyers of similar experience, and (iv) the costs incurred.
All such costs shall be supported by documentation. The Company shall have 15 days from the service of Wolfspeed’s petition to respond. The arbitrators shall review the parties’ submissions on the issue of attorney’s fees and costs and then issue a final award.
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