On June 16, 2022, the First Department issued a decision in VII MP Miami Hotel Owner, LLC v. Hycroft, LLC, 2022 NY Slip Op. 03983, holding that a liquidated damages clause was not an unenforceable penalty, explaining:
Defendant failed to establish that the liquidated damages provision in its agreement with plaintiff was an unenforceable penalty. The burden is on the party seeking to avoid liquidated damages to show either that damages flowing from a prospective breach were readily ascertainable at the time the parties entered into their [purchase] agreement, or that the liquidated damages clause is conspicuously disproportionate to these foreseeable losses.
Defendants failed to submit any evidence to establish either that actual damages were readily ascertainable at the time the purchase agreement was entered into, or that the liquidated damages were conspicuously disproportionate to foreseeable or probable losses. On the contrary, the parties acknowledged in the agreement that it was difficult to quantify damages and that plaintiff could assess a cancellation fee against defendant as liquidated damages and not as a penalty. Nor is there any evidence that the agreement was unconscionable due to unequal bargaining power; it was entered into by sophisticated, counseled businesspeople.
(Internal quotations and citations omitted).