On January 31, 2024, the Second Department issued a decision in Misty Cleaning Servs., Inc. v. Independent Group Home Living Program, Inc., 2024 NY Slip Op. 00418, holding that a liquidated damages clause was not enforceable, explaining:
Misty Cleaning did not establish its prima facie entitlement to an award of liquidated damages. A liquidated damages clause will be held enforceable if, at the time the agreement is made, the amount of actual loss is incapable or difficult of precise estimation, and the stipulated amount of damages bears a reasonable proportion to the probable loss. However, if the clause provides for damages that are plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced.
. . .
Misty Cleaning did not establish, prima facie, that the liquidated damages clause was enforceable. Misty Cleaning failed to show that actual damages were not readily ascertainable or that the liquidated damages clause contained in the agreement was not disproportionate to its damages. Under these circumstances, Misty Cleaning failed to establish its prima facie entitlement to an award of liquidated damages.
(Internal quotations and citations omitted).