## Facts

- A commercial lease for a Kauai dairy-farm property began in 1988 between the then-owner and Meadow Gold Dairies, Inc. as tenant.
- In 1996, the fee owner’s interest was sold to Jeffrey S. Lindner, who became the lessor under the lease.
- In 1997, Meadow Gold exercised renewal options extending the lease term through September 30, 2013.
- After renewing, Meadow Gold assigned its leasehold interests and obligations to Southern Food Group, L.P. (SFG), while Meadow Gold remained liable under the lease.
- The lease contained a liquidated-damages clause requiring, upon early termination, a lump-sum payment equal to up to five years of the present value of future rent.
- A neighboring landowner complained about the dairy’s environmental impacts and threatened litigation under the Clean Water Act; the tenant cited increased environmental-compliance costs and neighborhood objections.
- The dairy operations were closed and the lease was terminated effective December 31, 2000, well before the scheduled 2013 expiration.
- No liquidated damages were paid, and Lindner sued for, among other things, liquidated damages under the lease.
- On cross-motions for partial summary judgment, Lindner sought enforcement of the liquidated-damages clause; SFG argued frustration of purpose and inadequate notice as defenses.

## Issues

1. Whether the lease’s liquidated-damages provision was enforceable and required a lump-sum payment upon early termination.
2. Whether frustration of purpose excused performance of the liquidated-damages obligation based on environmental compliance costs, regulatory conditions, and neighbor complaints or threatened litigation.
3. Whether Lindner’s alleged failure to provide contractually required notice barred recovery of liquidated damages.

## Decision

- The court granted Lindner’s motion for partial summary judgment on the liquidated-damages claim and denied SFG’s countermotion.
- The court held the liquidated-damages clause was clear and enforceable and entitled Lindner to a lump-sum cash payment upon early termination.
- The court rejected frustration of purpose as a defense because the asserted events were foreseeable and did not substantially or severely frustrate the lease’s principal purpose.
- The court rejected SFG’s notice defense, concluding the cited notice provisions did not defeat the post-termination liquidated-damages claim.

## Legal Principles

- A liquidated-damages clause in a commercial lease is enforceable where it provides a clear, contractually agreed measure of damages for early termination and functions as a reasonable estimate of anticipated loss rather than a penalty.
- Frustration of purpose requires (1) frustration of a principal purpose, (2) substantial or severe frustration, and (3) an event that was not foreseeable; increased costs or reduced profitability generally do not satisfy the doctrine.
- Foreseeable regulatory compliance burdens and foreseeable third-party disputes are risks typically borne by the party operating the regulated business when the contract allocates operational compliance obligations to that party.
- Contractual notice provisions do not bar recovery where the relied-upon notice requirement is inapplicable to the claimed obligation or where the circumstances show sufficient awareness and communication concerning the asserted default or termination.

## Conclusion

The court enforced the lease’s liquidated-damages remedy for early termination and held that foreseeable environmental compliance burdens and neighbor-related disputes did not excuse payment under frustration of purpose, nor did the asserted notice defects defeat the lessor’s liquidated-damages claim.


Lindner v. Meadow Gold Dairies, Inc., 515 F. Supp. 2d 1154 (D. Haw. 2007)