Liquidated Damages Provision Eliminates Need for Plaintiff to Mitigate Damages

On April 24, 2020, Justice Scarpulla of the New York County Commercial Division issued a decision in Gorelick v. Cushman & Wakefield, Inc., 2020 NY Slip Op. 31298(U), holding that a liquidated damages clause eliminates the need for the plaintiff to mitigate its damages, explaining:

Plaintiff moves to dismiss the Third Affirmative Defense, which alleges that plaintiff failed to mitigate his damages. The Severance Provision, under which defendant agreed to make a payment to plaintiff if plaintiffs role was eliminated during the first eighteen (18) months of employment, is akin to a liquidated damages provision, and thus, plaintiff has no duty to mitigate damages.

Defendant has failed to raise an issue of fact as to whether the Severance Provision is an unenforceable penalty. In the event that plaintiffs role was eliminated within eighteen months, defendant agreed to provide plaintiff with a year of total compensation; the fixed and agreed amount bears a reasonable relationship to the amount of probable or actual harm, and it is not a penalty because it was a reasonable estimate at the time the contract was negotiated and executed.

(Internal quotations and citations omitted).

A key element in commercial litigation is proving damages. This decision discusses liquidated damages; that is, damages agreed to in advance by the parties. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding a liquidated damages provision.