Dobson Bay Club Ii Dd, LLC, a Delaware Limited Liability Company; Dobson Bay Club Iii Kd, LLC, a Delaware Limited…

Summary

The Arizona Supreme Court held that a nearly $1.4 million late fee applied to a delayed final balloon payment was an unenforceable penalty rather than valid liquidated damages. It adopted a test requiring the stipulated amount to be reasonable in light of anticipated or actual loss and the difficulty of proving that loss, and concluded that the fee duplicated other contractual compensation and greatly exceeded any likely loss. Justice Bolick, dissenting, would have upheld the fee because sophisticated commercial parties negotiated it and the lender's potential opportunity costs were difficult to forecast.