Commercial Real Estate Investment, L.C. v. Comcast of Utah II, Inc., 2012 UT 49

In 1995 CRE and TCI/Comeast entered a lease for building space where CRE would purchase and construct the building to TCI’s specifications and lease to TCI; the lease included a liquidated damages clause (1/30th of minimum monthly rent per day of noncompliance) and a duty on CRE to mitigate damages.
TCI occupied the building from 1995 until July 17, 2001, when it ceased operations and vacated; Comeast acquired TCI’s interest in 2002 and later listed the building for lease.
CRE referred inquiries to Comcast’s real estate agent but took no other steps to find a replacement tenant; a substitute tenant took possession on February 22, 2006.
Liquidated damages accrued from July 17, 2001, to February 22, 2006, totaling $1,711,990.66 (pre-interest).
CRE sued Comcast for breach of contract and fees in July 2004; the district court granted partial summary judgment enforcing the liquidated damages clause and denying mitigation reduction, and CRE was awarded liquidated damages and interest.
The Utah Supreme Court affirmed, holding liquidated damages clauses are reviewed like other contract terms, that CRE did not breach its duty to mitigate, and that Comcast bore the burden of proving unreasonableness at contract formation.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Enforceability of the liquidated damages clause	Comcast argues the clause is a penalty and should be unenforceable; seeks heightened scrutiny or unconscionability analysis.	CRE argues Restatement/section 389 approach applies and that the clause is enforceable unless unconscionable or a penalty.	Liquidated damages are not subject to heightened scrutiny and are enforceable unless unconscionable; the clause here is enforceable.
CRE's duty to mitigate damages	CRE failed to mitigate by not actively seeking a replacement tenant beyond referring inquiries to Comcast’s agent.	CRE’s mitigation efforts were reasonable under market conditions and Comcast provided no viable evidence of further mitigation.	CRE did not breach its duty to mitigate; no reduction of damages for mitigation is warranted.

Reliance Ins. Co. v. Utah Dep't of Transp., 858 P.2d 1363 (Utah 1993) (adopted Restatement approach for liquidated damages in Utah)
Dopp v. Richards, 135 P.97? 98? (1913) (Utah) (early test distinguishing penalties vs. liquidated damages)
Croft v. Jensen, 40 P.2d 202 (Utah 1935) (penalty vs. liquidated damages inquiry; unconscionability flavored)
Warner v. Rasmussen, 704 P.2d 559 (Utah 1985) (shock the conscience as a test for unconscionability in liquidated damages)
Robbins v. Finlay, 645 P.2d 623 (Utah 1982) (Restatement (First) influence on Utah liquidated damages)
Perkins v. Spencer, 243 P.2d 446 (Utah 1952) (early Restatement-based testing framework in Utah)
Johnson v. Carman, 572 P.2d 371 (Utah 1977) (disproportional damages analysis in liquidated damages)
Woodhaven Apartments v. Washington, 942 P.2d 918 (Utah 1997) (Restatement approach applied; emphasis on predictability)
Bair v. Axiom Design, L.L.C., 20 P.3d 388 (Utah 2001) (adoption of Restatement-based test; burden on challenger)
Park Valley Corp. v. Bagley, 635 P.2d 65 (Utah 1981) (freedom to contract with safeguards against unconscionability)
Themy v. Seagull Enters., Inc., 595 P.2d 526 (Utah 1979) (unconscionability as a check on liquidated damages)
Corison v. Hamilton, 332 P.2d 991 (Utah 1958) (equitable relief denied where not unconscionable)