$394M Verdict: Consumers Energy, DTE Win Against Toshiba

Case Background

Consumers Energy Company and DTE Electric Company jointly own the Ludington Plant, located on the shore of Lake Michigan in Ludington, Michigan. The facility operates as a massive energy battery, pumping water uphill into a 27-billion-gallon reservoir during periods of low demand and releasing it through turbines to generate electricity during peak demand. The plant can produce more than 2,000 megawatts of power, enough to serve over 1.4 million people.

Cause

In 2010, the utilities contracted with Toshiba International Corporation (later assigned to Toshiba America Energy Systems Corporation) to perform a major overhaul and upgrade of the Ludington Plant's six pump-turbine units. The contract, valued at over $500 million, required Toshiba to return the plant to "as nearly an as-new condition as possible" and enable it to operate for at least 30 years with only minimal routine maintenance. Work began in 2015, with units being brought back online between 2015 and 2022.

Problems surfaced in 2019 when the utilities discovered degraded metal and cracking in critical components during periodic inspections. The utilities alleged that Toshiba performed defective work on key turbine components, including discharge ring extensions, main shaft seals, and motor-operated disconnect switches. Specifically, they claimed Toshiba improperly removed stainless-steel overlays from discharge rings and failed to replace them, instead using materials and methods that caused excessive stress and cracking.

Injury

The alleged defects severely limited plant operations. Two of the six generating units Units 2 and 4 were restricted to approximately 50 hours of operation per year due to the defective work. During the trial, jurors viewed video evidence showing water pouring through internal rooms of the facility, described by utility lawyers as a "waterfall" leak inside the plant. The utilities maintained that Toshiba's failures made the promised 30-year service life impossible and would require more frequent maintenance rather than the reduced maintenance that was promised.

Damages Sought

The utilities initially sought more than $800 million in damages and prejudgment interest. After hiring independent contractor Voith Hydro to assess Toshiba's work and develop a repair plan, they filed suit in April 2022 after repeated attempts to resolve the issues directly with Toshiba proved unsuccessful.

Key Arguments and Proceedings

Legal Representation

Plaintiffs: Consumers Energy Company | DTE Electric Company

Defendants: Toshiba America Energy Systems Corporation | Toshiba Corporation

· Counsel for Defendants: Nicholas Ellis

Key Arguments or Remarks by Counsel

In a joint statement following the verdict, the utilities said: "We hold ourselves and our contractors to the highest standards to do safe, dependable, on-time work that serves our customers, and feel validated the jury agreed Toshiba did not meet those standards. We will continue to operate the Ludington Pumped Storage plant reliably and will always go to bat for our customers."

Claims

The utilities brought four counts against the Defendants.

Breach of Warranty Provisions: The utilities alleged Toshiba breached its warranties by delivering defective work affecting key turbine components that failed to meet contract specifications for a defect-free, 30-year service life.

Breach of Duty to Repair Defects: Despite repeated requests, Toshiba allegedly refused to rectify defective work and instead told the utilities to use defective components "as is" or wait to see if components failed.

Failure to Timely Complete Work: Toshiba allegedly missed numerous contractual deadlines, entitling the utilities to liquidated damages based on the length of delays.

Breach of Parent Guaranty: Toshiba Corporation guaranteed its subsidiary's performance under a 2011 Parent Guaranty, agreeing to indemnify the utilities against losses if Toshiba America failed to perform.

Defense

Toshiba denied wrongdoing throughout the litigation. The defense blamed design decisions and operating practices by the utilities, characterizing the damage as self-inflicted. Toshiba argued the utilities used the contract as an insurance policy to cover normal wear and tear at the more than 50-year-old plant. The defense also raised affirmative defenses including waiver, failure to mitigate damages, and that acceptance certificates signed by the utilities extinguished prior claims. Toshiba further argued its liability should be capped at the contract price under a limitation of liability clause, and that the contractual consequential damages waiver barred prejudgment interest claims. Toshiba also filed counterclaims seeking more than $15 million for allegedly withheld payments and failure to grant final acceptance on certain units.

Jury Verdict

On December 18, 2025, a federal jury in U.S. District Court for the Eastern District of Michigan returned a verdict in favor of Consumers Energy and DTE Electric. The jury found that Toshiba America Energy Systems breached the contract and awarded $383,136,736 in damages. The parties stipulated to an additional $11,287,402 in liquidated damages for late achievement of Unit Interim Acceptance on Units 1, 6, and 3, bringing the total verdict to $394,424,138.

The jury rejected all of Toshiba's affirmative defenses, including arguments that the utilities waived claims, released Toshiba from liability, or failed to mitigate damages. The jury also rejected Toshiba's counterclaim, finding that the utilities did not breach the contract with respect to Toshiba's claims for withheld payments.

With prejudgment interest, legal fees, and other Court-awarded costs still to be determined, the utilities expect total recovery to exceed $500 million. The verdict represents a key win for Consumers Energy and DTE Electric customers across Michigan.

Following the verdict, Toshiba indicated it was disappointed with the outcome and plans to continue addressing the matter through the judicial process, leaving open the possibility of appeals. Final judgment remains pending, and post-trial motions are expected.

Court documents are available upon request at jurimatic@exlitem.com