## Facts

- Parents enrolled their daughter at a private school for the 1996–97 year by signing a membership agreement and paying a deposit.
- The agreement required written notice of withdrawal by June 1, 1996, and stated that late notice would obligate the parents to pay the full year’s tuition as liquidated damages, plus collection costs and attorney’s fees.
- The parents gave written notice of withdrawal on June 13, 1996.
- The school demanded full tuition under the agreement; the parents refused to pay.
- The school sued for tuition, late fees, and attorney’s fees.
- In discovery, the parents served an interrogatory seeking information about whether the school attempted to fill the vacated student spot; the school objected as irrelevant and burdensome, asserting no duty to mitigate.
- The trial court denied the parents’ motion to compel discovery and granted the school summary judgment for tuition, late fees, and attorney’s fees.

## Issues

1. Whether the trial court abused its discretion by granting summary judgment before permitting discovery relevant to the parents’ defense that the liquidated damages clause was an unenforceable penalty.
2. Whether the agreement’s full-tuition provision for late withdrawal constituted enforceable liquidated damages or an unenforceable penalty under Virginia law.

## Decision

- The Supreme Court of Virginia reversed the summary judgment and remanded.
- The Court held that the trial court abused its discretion by entering summary judgment before allowing discovery bearing on the parents’ penalty defense.
- The Court did not finally decide whether the clause was enforceable liquidated damages or an unenforceable penalty, leaving that issue for further proceedings on a developed record.

## Legal Principles

- A stipulated-damages clause is enforceable as liquidated damages if the amount is a reasonable estimate of damages from breach and actual damages are difficult to ascertain at the time of contracting.
- A stipulated sum is an unenforceable penalty if it is out of proportion to the probable loss or not a reasonable pre-estimate of anticipated harm.
- Although enforceability of a liquidated damages clause is a question of law, it may depend on underlying facts about anticipated or actual injury and related circumstances.
- A court abuses its discretion when it denies reasonable, relevant discovery needed to develop a factual basis to oppose summary judgment on a dispositive issue.

## Conclusion

The court reversed and remanded because summary judgment enforcing the tuition clause was entered before the parents could obtain discovery relevant to their claim that the clause functioned as an unenforceable penalty, requiring further proceedings with an adequate factual record.


O’Brian v. Langley Sch., 256 Va. 547, 507 S.E.2d 363 (1998)