MEMORANDUM OPINION

MATTHEW W. BRANN, District Judge.

I. BACKGROUND

Plaintiff, Kirchhoff-Consigli Construction Management, LLC, (hereinafter "KCCM") filed this action against Defendant, Deluxe Building Systems, Inc., a subcontractor, (hereinafter "Deluxe"); KCCM is the general contractor for Pace University's (hereinafter "Pace") expansion of its Pleasantville, New York campus. KCCM subcontracted with Deluxe to build modular dormitories at its Berwick, Pennsylvania facility and deliver those units to the Pace University campus.

KCCM filed a five count complaint against Deluxe.1 Count I alleges breach of contract, Count II is for replevin, Counts III and IV are for injunctive relief,2 and Count V is for conversion. Deluxe, in turn, filed two counterclaims against KCCM, alleging breach of contract in Count I and unjust enrichment in Count II.3

On December 29, 2017, Deluxe filed a "motion for partial summary judgment striking claim for liquidated damages."4 The motion has been fully briefed and is ripe for disposition. For the reasons that follow, the motion is denied.5

II. DISCUSSION

A. Standard of Review

"One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and we think it should be interpreted in a way that allows it to accomplish this purpose."6 Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."7 "Facts that could alter the outcome are `material facts,' and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct."8 "A defendant meets this standard when there is an absence of evidence that rationally supports the plaintiff's case."9 "A plaintiff, on the other hand, must point to admissible evidence that would be sufficient to show all elements of a prima facie case under applicable substantive law."10

"[T]he inquiry involved in a ruling on a motion for summary judgment or for a directed verdict necessarily implicates the substantive evidentiary standard of proof that would apply at the trial on the merits."11 Thus, "[i]f the defendant in a run-of-the-mill civil case moves for summary judgment or for a directed verdict based on the lack of proof of a material fact, the judge must ask himself not whether he thinks the evidence unmistakably favors one side or the other but whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented."12 "The mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff."13 "The judge's inquiry, therefore, unavoidably asks . . . `whether there is [evidence] upon which a jury can properly proceed to find a verdict for the party producing it, upon whom the onus of proof is imposed.'"14 The evidentiary record at trial, by rule, will typically never surpass that which was compiled during the course of discovery.

"[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact."15 "[R]egardless of whether the moving party accompanies its summary judgment motion with affidavits, the motion may, and should, be granted so long as whatever is before the district court demonstrates that the standard for the entry of summary judgment, as set forth in Rule 56(c), is satisfied."16

Where the movant properly supports his motion, the nonmoving party, to avoid summary judgment, must answer by setting forth "genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party."17 For movants and nonmovants alike, the assertion "that a fact cannot be or is genuinely disputed" must be supported by: (i) "citing to particular parts of materials in the record" that go beyond "mere allegations"; (ii) "showing that the materials cited do not establish the absence or presence of a genuine dispute"; or (iii) "showing . . . that an adverse party cannot produce admissible evidence to support the fact."18

"When opposing summary judgment, the non-movant may not rest upon mere allegations, but rather must `identify those facts of record which would contradict the facts identified by the movant.'"19 Moreover, "[i]f a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may . . . consider the fact undisputed for purposes of the motion."20 On motion for summary judgment, "[t]he court need consider only the cited materials, but it may consider other materials in the record."21

"[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial."22 "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party."23 "If the evidence is merely colorable . . . or is not significantly probative, summary judgment may be granted."24

B. Undisputed Facts

This is a matter that has been replete with motions, so the parties may be assured that the Court is fully aware of the intricacies of this case. However, for the purposes of the instant motion, I set forth only the facts relevant to the determination of the enforceability of the liquidated damages clause at issue here.

KCCM and Deluxe, both represented by counsel, signed a subcontract on June 10, 2014 for Deluxe to manufacture modular housing units to be used for the construction of two resident housing buildings at Pace University's Pleasantville, New York campus. KCCM is Pace's general contractor hired to build several new buildings, including the construction of two new residence halls (Residence Halls A and B).

Within the subcontract, there is a liquidated damages clause, at issue in the instant motion. The clause is copied herein in its entirety:

In total, KCCM is demanding a sum of $8,315,000.00 from Deluxe for delay damages pursuant to this clause.

The liquidated damages clause between KCCM and Deluxe is, based on, but not identical to, the liquidated damages clause between Pace and KCCM.27 However, KCCM has been able to ameliorate some of the delays occasioned by Deluxe by having KCCM employees perform some of the necessary subcontracted work and also by hiring other subcontractors to do the work originally subcontracted to Deluxe. As a result of KCCM's mitigation of the delays attributable to Deluxe, Pace has not assessed liquidated damages against KCCM.

C. Analysis

1. Choice of Law: Both Commonwealth of Pennsylvania and State of New York law applies to this dispute.

As an initial matter, both parties agree that there is no choice of law provision in the contract, that Pennsylvania's choice of law rules govern, and that there is no "real conflict" between Pennsylvania's and New York's liquidated damages law. The Court may rely on both states' laws interchangeably.28

2. The liquidated damages claim will not be struck as the clause is reasonable and the actual damages amount was difficult to calculate in advance.

Liquidated damages are "the sum a party to a contract agrees to pay if he breaks some promise, and which, having been arrived at by a good faith effort to estimate in advance the actual damage that will probably ensue from the breach, is legally recoverable . . . if the breach occurs."29 The intent is for the parties to "provide for pre-determined liquidated damages in the event one party fails to perform."30 Liquidated damages must be reasonable, and to be assessed the harm caused by the breach must be uncertain or difficult to calculate.31

Furthermore, it is hornbook law that liquidated damages are not intended to penalize or punish the breaching party.32 "Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss[;][a] term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty."33

Here, KCCM's demand for liquidated damages is stated as follows in the amended complaint: "In addition, Deluxe failed to meet certain enumerated milestone dates set forth in the Subcontract, and, as a result, KCCM has assessed liquidated damages in the amount of $8,315,000.00 in accordance with the terms of Attachment E to the Subcontract."34 Deluxe argues in its motion for partial summary judgment that the agreement of the parties to liquidated damages in the amount of $5,000 per day for the first thirty days, and $10,000 per day thereafter, is an unreasonable punishment and should in some fashion be struck. KCCM argues that Deluxe is improperly viewing the liquidated damages provision with the benefit of hindsight; KCCM contends that the Court should look to the time of contracting in order to determine that the liquidated damages provision was reasonable.

To resolve this question, I must "demonstrably consider[] whether the per diem stipulation was: (1) chosen due to the difficulties in proving with certainty the precise extent of actual damages for breach, and (2) whether the stipulated sum was agreed to and intended as a good faith pre-estimate of actual damages anticipated from delayed repairs."35 This is a "mixed factual and legal question"36 that may be resolved on the papers.

As an initial matter, I note that "parole evidence of prior negotiations offered to describe the manner through which a liquidated damages provision was arrived at, i.e., to explain the terms of a writing, is often probative of the parties' intent."37 Deluxe argues that the liquidated damages provision is unreasonable and punitive; that the delay damages could have been reasonably estimated in advance; and that Pace University did not assess or attempt to assess liquidated damages against KCCM for its alleged failure to meet schedules.38

In response, KCCM argues that the "motion for partial summary judgment is meritless as it seeks to evaluate the subject liquidated damage provision, which was originally prepared and agreed-upon by both parties, in terms of its current effect and not in terms of the situation the parties faced at the time the provision was drafted and jointly agreed-upon by the parties."39 KCCM further argues, "moreover, Deluxe is a sophisticated contractor capable of undertaking multi-million dollar projects, represented by counsel throughout the negotiation of the Subcontract, which weighs in favor of the provisions enforceability."40

There is no singular set of factors or test for the Court to utilize in order to determine if a liquidated damages provision should be found to be valid or an invalid penalty. However, there is sufficient case law upon which I may rely as guidance to direct my inquiry. These are "the anticipated profits absent breach,"41 and "actual damages [], hence whether the stipulation was so grossly disproportionate to actual damages as to afford [] a windfall."42 "When, independently of the stipulation, the damages would be wholly uncertain and incapable or very difficult of being ascertained, except by mere conjecture, then the damages will usually be considered liquidated."43 "A sum fixed as security for the performance of a contract containing a number of stipulations of widely different importance, breaches of some of which are capable of accurate valuation, for any of which the stipulated sum is an excessive compensation, is a penalty;"44 "the relation which the sum stipulated bears to the extent of the injury which may be caused by the several breaches provided against;"45 "the case or difficulty of measuring a breach of damages, and such other matters as are legally or necessarily inherent in the transaction."46

Deluxe argues first that the liquidated damages provision was intended to be a penalty. The deposition of Mark Zych,47 a project executive with KCCM, cited by both parties, indicates that he had mixed intentions as to the liquidated damages provision — both to deter delay and to estimate delay damages. Zych stated:

Additionally, in his affidavit, Zych attested, regarding delays by Deluxe, as follows:

Delxue's argument that Zych had mixed motivations with regard to the liquidated damages provision is of little moment. "Subjective intent is of little probative value in assessing the reasonableness of the provision, for the prospect of damages in the event of a breach may always be said to encourage parties to comply with their contractual obligations."55 "The name by which [a penalty or liquidated damages clause] is called is but of slight weight, the controlling elements being the intent of the parties and the special circumstances of the case."56 It is clear that the intent of the parties was, as is common in construction contracts, to negotiate and fix a sum in advance, through counsel, to reasonably estimate the resultant damage from a breach.

Deluxe also argues that KCCM would be the recipient of a windfall if the Court were to uphold the liquidated damages clause. I disagree. Deluxe uses a misleading comparator in making its argument. Deluxe argues that the $8,315,000.00 demand for liquidated damages is excessive in comparison to the $1,238,927.55 actual damages suffered by KCCM. This comparison is inaccurate, because the $1,238,927.55 figure is, as Deluxe concedes, the net actual damages to KCCM.57 Actual damages to KCCM are, in fact, $22,792,859.55.58 The liquidated damages demand is, therefore, slightly more than one-third of actual damages. That is a reasonable figure. It is not "so grossly disproportionate to actual damages as to afford [] a windfall."59 Moreover, although actual damages are a useful guide in determining, post hoc, if the liquidated damages clause was reasonable at the time of the contract's drafting "as a general rule of law it is not necessary to show any actual damages in order to recover liquidated damages pursuant to a contract providing for liquidated damages."60 I conclude in this matter that "the damages named were for the breach of a single stipulation, and were not disproportionate to the loss which would probably result to the defendant from the failure of the plaintiffs to complete their work in time."61

I also cite to the matter of X.L.O. Concrete Corp. v. John T. Brady & Co,62 as a comparable, albiet not identical, case where a court upheld a per diem liquidated damages clause in a university construction project. In X.L.O Concrete, a court found that a $2,000 liquidated damage clause in a $14,993,000 construction project contract to furnish new residence halls for New York University was valid.63 That court found that the liquidated damages clause was not "manifestly disproportionate to the actual damage" and "the amount liquidated bares a reasonable proportion to the probable loss."64 The court explained, "The rule is well-established that a valid contractual provision for liquidated damages controls the rights of the parties in the event of a breach, notwithstanding that the stipulated sum may be less than the actual damages allegedly sustained by the injured party."65 "As early as 1902 the Court of Appeals [of the State of New York] recognized that "when the parties by their contract provide for the consequences of a breach, lay down a rule to admeasure the damages and agree when they are to be paid, the remedy thus provided must be exclusively followed.""66

"In Pennsylvania, liquidated damage clauses have been universally accepted as a necessary part of the law governing construction contracts."67 In the matter at hand, "plaintiff was an experienced contractor which dealt with defendant at arm's length."68 Deluxe is not a "a naive entity dealing with the ruthless general contractor,"69 but rather a "knowledgeable subcontractor"70 in business since 1965. Moreover, as noted repeatedly, Deluxe was represented by counsel during negotiation of the subcontract. "When these factors are considered together with the fact that the sum arrived at was the product of an arms-length transaction between sophisticated businessmen, ably represented by counsel, the sum stated for liquidated damages does not seem to be a sum plainly disproportionate to the possible loss"71

III. CONCLUSION

In sum, "clauses setting forth liquidated damages are enforced where they are reasonable, and fair attempts to fix just compensation for anticipated loss caused by breach of contracts."72 I find here that "the damages were not a penalty but rather a consequence of [] default.73

An appropriate Order follows.