## Facts

- A commercial developer (CRE) agreed to buy land and construct a building to a cable company tenant’s (TCI’s) specifications for a long-term lease in Riverdale, Utah, in a largely undeveloped subdivision.
- The tenant’s agent drafted the lease; CRE largely accepted it as drafted, filling in rent and term.
- The lease included (1) a continuous-operation covenant requiring the tenant to continuously occupy and operate its cable business on the premises and (2) a liquidated-damages provision requiring payment of double rent for breach of the continuous-operation covenant.
- In 2001, the tenant ceased operations and vacated the building; the premises remained vacant until a new tenant leased it in 2006.
- During the vacancy, the tenant and its successor (Comcast) continued paying base rent but did not pay the additional amount required by the liquidated-damages clause.
- CRE sued Comcast for breach, seeking liquidated damages and interest.

## Issues

1. Whether liquidated-damages clauses are subject to heightened judicial scrutiny or are reviewed under ordinary contract principles.
2. Whether the lease’s double-rent liquidated-damages provision was unenforceable as an unconscionable penalty.
3. Whether CRE’s recovery was limited because CRE allegedly failed to mitigate damages after the tenant vacated.

## Decision

- The Utah Supreme Court affirmed judgment for CRE.
- The court held liquidated-damages clauses are not subject to heightened scrutiny and are evaluated like other contract provisions.
- The court rejected Comcast’s unconscionability challenge, finding insufficient evidence of procedural or substantive unconscionability.
- The court held Comcast failed to prove CRE unreasonably failed to mitigate damages.

## Legal Principles

- Liquidated-damages provisions are reviewed under ordinary contract doctrines, not a heightened or special standard.
- A liquidated-damages clause is generally enforceable absent a showing of invalidity under standard contract defenses, including unconscionability.
- Unconscionability requires proof of procedural and/or substantive unfairness; a party that drafted the challenged term faces difficulty showing procedural unconscionability based on surprise or oppression.
- The breaching party bears the burden to prove failure to mitigate and must show the nonbreaching party’s mitigation efforts were unreasonable and likely would have reduced the loss.

## Conclusion

The court enforced the lease’s double-rent liquidated-damages remedy for breach of a continuous-operation covenant, held such clauses are treated like other contract terms under Utah law, and confirmed that the breaching party bears the burden to prove inadequate mitigation.


Commercial Real Estate Inv., L.C. v. Comcast of Utah II, Inc., 2012 UT 49, 285 P.3d 1193 (Utah 2012)