Although the court agreed with the plaintiff that determining the validity of the early termination fee was not properly resolved on a motion to dismiss, the court also stated its "impression" that the contract clearly stated the amount due and that the plaintiff's argument was "suspect." Id. at *7. However, the motion was denied because the court was "not in a position to find the termination fee unenforceable without additional discovery by the parties." Id.
Although the DecisivEdge court reserved ruling on the enforceability of the liquidated damages provision for another day, it is not unthinkable that a liquidated damages provision would be held unenforceable in a contract with a readily ascertainable value. Indeed, many courts have reached that exact conclusion. In Lake River Corp. v. Carborundum Co., 769 F.2d 1284, 1286 (7th Cir. 1985), for example, the Seventh Circuit held that the liquidated damages provision was an unenforceable penalty "because it is designed always to assure [the plaintiff] more than its actual damages" where the liquidated damages formula was the full contract price minus the amount already invoiced to the defendant. Id. at 1290. Similarly, in A.V. Consultants, Inc. v. Barnes, 978 F.2d 996, 1001 (7th Cir. 1992), the Seventh Circuit affirmed a district court's holding that a purported liquidated damages provision was unenforceable where the formula was the balance of certain administrative fees due for the remaining contract period. Other cases have reached similar results. See Easton Telecom Servs., L.L.C. v. CoreComm Internet Group., Inc., 216 F. Supp. 2d 695 (N.D. Ohio 2002) (holding that provision requiring immediate payment of the full amount due for the remainder of the term was an unenforceable penalty not based on any real estimation of damages for breach); Poinsettia Dairy Prods., Inc. v. Wessel Co., 166 So. 306 (Fla. 1936) (holding provision unenforceable that required immediate payment of the full amount due for the remainder of the term).
Based on these and other authorities, even sophisticated commercial parties must remember that not all liquidated damages provisions are enforceable. Where the value of a contract is readily ascertainable, liquidated damages provisions are particularly suspect and may be held invalid—particularly where they would provide a windfall to the non-breaching party by requiring immediate payment of the full contract value.