## Facts

- Westhaven Associates, Ltd. owned a shopping center and leased approximately 17% of its rentable space to C.C. of Madison, Inc. (Cost Cutters) under a ten-year commercial lease beginning in 1997.
- The lease set rent at a daily rate (about $49.58 per day at the time of breach) and contained stipulated-damages provisions triggered by tenant default.
- The lease also included a mitigation requirement obligating Westhaven to attempt to reduce damages by reletting.
- In October 1999, Cost Cutters closed its store and vacated without the landlord’s approval; it did not pay rent from February 1, 2000 forward.
- Westhaven attempted to relet the premises; the space remained vacant until a new tenant lease began December 1, 2000.
- Westhaven sought unpaid rent, damages for the vacancy period, and attorney’s fees for reletting-related work and for litigation to enforce the lease.
- The parties stipulated to relevant facts and filed cross-motions for summary judgment.
- The circuit court held the stipulated-damages provisions were unenforceable penalties but nonetheless awarded Westhaven attorney’s fees for efforts to enforce the lease against Cost Cutters.

## Issues

1. Whether the lease’s stipulated-damages provisions were enforceable liquidated damages or unenforceable penalty clauses under Wisconsin law.
2. Whether the lease authorized Westhaven to recover attorney’s fees incurred in litigation against Cost Cutters.

## Decision

- The Court of Appeals reversed the circuit court’s invalidation of the stipulated-damages provisions and held they were enforceable liquidated damages.
- The Court of Appeals reversed the attorney’s-fee award, holding the lease did not clearly authorize recovery of litigation fees against the breaching tenant.
- The case was remanded for further proceedings consistent with these holdings.

## Legal Principles

- A stipulated-damages clause is enforceable as liquidated damages when, at the time of contracting, anticipated harm from breach is difficult to measure and the stipulated amount is a reasonable forecast of just compensation rather than an unreasonably large sum functioning as punishment.
- The reasonableness of stipulated damages is judged as of contract formation, not by comparing the clause to actual losses after breach.
- In a shopping-center lease, anticipated damages from a major tenant’s departure may reasonably include effects beyond lost rent, such as reduced customer traffic and increased risk to other tenancies.
- A contractual duty to mitigate can support enforceability by reducing the risk that stipulated damages will produce a recovery grossly exceeding the landlord’s actual loss.
- Attorney’s fees are not recoverable unless authorized by statute or contract, and contractual fee-shifting provisions are strictly construed; language allowing recovery of attorney’s fees as part of reletting expenses does not, without clear terms, authorize recovery of fees for litigation against the tenant.

## Conclusion

The court held that the commercial lease’s stipulated-damages provisions were reasonable forecasts of hard-to-measure shopping-center losses at the time of contracting and therefore enforceable, but it denied fee shifting for litigation because the lease did not clearly provide for recovery of attorney’s fees incurred in suing the breaching tenant.


Westhaven Assocs., Ltd. v. C.C. of Madison, Inc., 652 N.W.2d 819 (Wis. Ct. App. 2002)