UNITED AIRLINES INC.
AUSTIN TRAVEL CORP.
867 F.2d 737 (2nd Cir. 1989)
MINER, CIRCUIT JUDGE:
Defendant-appellant Austin Travel Corp. ("Austin") appeals from a summary judgment entered in the United States District Court for the Southern District of New York (Pollack, J.) awarding plaintiff-appellee United Air Lines, Inc. ("United") $408,375 in liquidated damages and unpaid debt plus interest and costs. United sued Austin to recover (i) damages for breach of leases obligating Austin to use a United computerized reservation system ("CRS") called Apollo and a United business and accounting system known as Apollo Business System ("ABS"), and (ii) unpaid accrued rentals. Austin claimed that the liquidated damages clauses of its Apollo contracts with United were unreasonable and unenforceable and that United's CRS practices violated federal and New York State antitrust laws.
The district court held that the liquidated damages clauses were reasonable and enforceable and that Austin could not prevail on claims of monopolization, attempted monopolization, restraint of trade and price discrimination. On appeal, Austin reasserts its liquidated damages and antitrust claims. Because we hold that the liquidated damages provisions of the United-Austin contracts were at the time of execution a reasonable forecast of damages in case of breach and because there was no showing at the district court of any antitrust violation by United, we affirm the entry of summary judgment in United's favor.
It is commonplace for contracting parties to determine in advance the amount of compensation due in case of a breach of contract. A liquidated damages clause generally will be upheld by a court, unless the liquidated amount is a penalty because it is plainly or grossly disproportionate to the probable loss anticipated when the contract was executed. Liquidated damages are not penalties if they bear a "reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation." Leasing Service Corp. v. Justice, 673 F.2d 70, 73 (2d Cir. 1982).
The liquidated damages fixed in the Apollo contracts were, as the district court found, reasonable at the time the contracts were executed. Most of United's costs when providing Apollo service are either fixed or determined in the early stages of the contractual relationship. The few costs that United would
avoid by an early termination of an Apollo contract are estimated to be "less than 20 percent of the amount of revenue from the monthly fixed usage fees and variable charges." 681 F.Supp. at 187 (emphasis omitted). The Apollo contracts' liquidated damages clauses provide for recovery by United of only 80% of the fixed and variable charges. Austin is thus provided with better than adequate credit for the costs United is able to avoid by the early removal of the Apollo CRSs from Austin premises.