My guess would be no, but the facts (as yet unknown) may dictate otherwise in the future.

Liquidated damages clauses, even very large ones, are fairly common in large transactions.  For example, in Sun v. Microsoft, the litigation concerned, in part, a liquidated damages clause for $35 million relating to the disclosure of the Java source code.

However, the purpose and policy behind enforcing liquidated damages clauses may not support enforcing the clause in this case.  The purpose of enforcing such clauses is that proving damages in a breach of contract suit can itself be extremely expensive, and consume a great deal of court time.  Parties agree to these clauses for different reasons.  For example, by assigning a fixed price tag to a breach, a party both limits its damages and knows when they can afford to breach ("efficient breach") when they stand to make more money by breaching than they would lose by having to pay the liquidated damages.  Additionally, in contracts where proving damages would be very difficult and time-consuming, it assures the non-breaching party some acceptable sum.

Additionally, the use of liquidated damages serves as a big stick either to ensure compliance or to be compensated for a breach.  When parties do not trust each other, the use of liquidated damages clauses makes it possible to contract without fear of being left in the lurch.

However, what liquidated damages clauses cannot be is a mere penalty or punishment for breach.  It is not the purpose of contract law to leave the non-breaching party in a better position than he would be in had the terms of the contract been executed as agreed.  The damages must have some relation to the actual damages likely to be suffered.  While they obviously need not be identical, as this would run into the exact problem of wrangling over damages determinations that such clauses are intended to avoid, a court does have jurisdiction to consider the nature of the amount in the contract.

In this case, the contract specifies as a material breach the failure in two consecutive years to achieve the following goals:


So approximately $5 million in revenue would be sufficient to meet this goal.  Clearly, "Revenue" would not be equal to actual profits, which would be smaller and would go to Gox to some extent.  In short, by not executing the terms of this contract, it is unlikely CoinLab would have lost even $5 million after all the expenses necessary to set up shop and make it all legal.  Further, according to the contract, they aren't even entitled to such damages.


Also, the agreement specifically only invokes the liquidated damages clause to the breach of two sections, only one of which is (currently) relevant to this case.


So the liquidated damages relate only to those damages directly caused by Gox's alleged breach of exclusivity.

Let's be generous and assume that would include all the damages from the projected income, and that the projected income would have been twice what they agreed to deliver, and that they would have taken all that as pure profit.

That's $10 million.  In other words, the liquidated damages are $40 million more than even a generous estimate of what the breach of the exclusivity agreement would have cost Coinlab.  And projected profits are, themselves, excluded from liability without "willful misconduct or gross negligence."  Just that Gox and Coinlab were unable to do the deal as agreed doesn't come near to qualifying.  

On Coinlab's side, the complaint is well-drafted enough to take note of this, at least by implication:


Saying that and proving it are two different things, though.

My off-the-cuff guess, based on these facts, assuming they are true as stated in the complaint, is that the liquidated damages clause, in this context, is an impermissible penalty clause rather than a reasonable value agreed upon by the parties.

I wouldn't say that without reservation, though.  Subsequent information that comes out could show that, indeed, this is a reasonable value agreed upon by the parties based on the actual likely amount of damages from breach.  

Whether or not the clause can be enforced will come down to whether it is such a reasonable estimation, or whether it is an impermissible penalty clause.

Ironic considering the whole problem is people who "think of the kids" a wee bit too much.

It is an incredibly stupid article.  The flabbergasting hypocrisy of attacking this guy as some kind of menace is ridiculous.  All he is doing is distributing information.

Who is dangerous is the gun manufacturers of the United States selling deadly weapons to anyone and everyone, even enemies of the United States, to both sides of civil wars, to genocidal warlords, etc.  Or the National Rifle Association, which poses as a civil rights group but which is, in actuality, nothing more than an industry lobby. 

Distributed Defense presents no such threat.  They aren't seeking out and stoking wars in other countries to make a profit on them.  What they empower is the individual, by making information available.  The only thing this guy is dangerous to, other than a government regulatory scheme that was already broken before he came along, is corporate profits. 

You can fully expect the gun industry to hate this guy as much as the government.  After all, if the average Joe can provide for the means of his own defense, who needs them?

I wouldn't be surprised at all if they could do it, nor if they have a contingency plan for taking down the entire Internet at least briefly.  If not the NSA, then some other TLA.  

The question is why would they want to?  

I'm sure they are watching with fascination, but I think they'd be a lot more likely to use Bitcoin themselves than want to destroy it.  I'd guess the same about the CIA.

That's a hoot coming from a scamming fruitcake.

How the hell do you think poker professionals make the bulk of their money?  It's by beating up amateurs and taking their lunch money.  Only a fool wants to sit there playing other pros, unless they're so good they play the rare games, like the Big Game at Bobby's Room, that is infested with pros?


You think that's the only time Esfandiari has been staked?  I guess you think all the guys on High Stakes Poker are playing their own money, too.  You seriously betray a deep ignorance of how the poker world works.


Do you even lift?

Who's to tell him otherwise?  He has a stable of suckers willing to sit there while he pisses in their face, and they come back and ask for more.

Please Read This Personal Appeal From Bitcoin Founder Satoshi Nakamoto.

I suppose it could work.  So long as we don't have to look at some picture of some creepy looking guy.

I wonder how many people who voted No at the beginning of the thread have changed their minds.

My mind has changed to a definite yes, get rid of this guy.  This is just too much baggage and conflict of interest.

Otherwise, the so-called Bitcoin Foundation is a joke and deserves a scammer tag.

They wouldn't show up with a court order from Japan.  They'd show up in court here with the foreign judgment, and depending on the jurisdiction, have the foreign judgment domesticated and enforced, obtaining an enforcement order from the local court.  Then they would serve the bank with an order from the local court incorporating the judgment of the foreign court.

Japan is, of course, party to the treaties which allow this, and United States law has, itself, recognized the judgments of foreign courts both in common law and under statutory law passed pursuant to the mostly Twentieth Century treaties.

Liquidated damages clauses in large transactions are routine.  Sun v. Microsoft, as one example, concerned in part a $35 million liquidated damages clause.

In this case, the clause might be unenforceable because the contract concerns a much smaller value than that between Sun and Microsoft, making the $50 million number more of a penalty than a way of simplifying the calculation of damages.  The purpose of contract law is not to award jackpots to lucky winners, but to put the non-breaching party in the position he would have been in had the contract been followed.

The purpose for this kind of clause is often, you don't trust who you are contracting with actually to carry out the agreement.  If Coinlab was acting in good faith (hard to know that yet), then the purpose of having such a big number is to have a big club to enforce compliance.  Gox was obviously stupid to sign an agreement with a clause like this and then not carry it out.  Coinlab might have been stupid, too, if they were the first to breach.

I doubt the $50 million number would be upheld.  It might be a Sword of Damocles, but it's a toy plastic sword.

Yeah, seriously.  WTF are you people waiting for?  The thread isn't going to create itself.

My guess would be he put it there himself.  Maybe the feds should be investigating him and see what they can find on his computer.  I bet it wouldn't be pretty.

This statement of yours screams you don't know what you're talking about.  Scared money is not a phenomenon of only putting on the table what you can afford to lose.  That's called proper bankroll management.  Scared money is when you put too much of your bankroll on the table, such that fear of losing money actually causes you to play poorly.


That wouldn't hurt, but I've seen him play and played with him, and he's at least a reasonably good tournament player. 

In any event, though, buying pieces is usually not the best kind of staking deal.  I consider it usually to be more for fun.  With the payout structure of most tournaments, the horse has to finish fairly high before there's any real profit to it, with only the top few spots paying any kind of "jackpot." 

A staking agreement is usually more profitable, such as buying half their buyin in return for getting your stake back out of any win, plus a cut of any profit over and above that, often something like 60/40.  In this case, the staker usually gets the bulk of the prize when the horse barely makes the money, with the horse only seriously profiting on the top few spots.

"This user is currently ignored."

Of all the annoyances on this site, the one-click ignore option is not one of them.  Good choice.  It's always annoying to have to click on a nick, then have to click on some sub-menu and find ignore somewhere buried three links down.

But here, it's like a one-button flush and down the retard toilet they go.

You're doing it wrong.

No it hasn't.  It's just another bump in the road.  There are really only two possibilities here.

A)  Gox was completely fucked in breaching this contract and will be sued out of existence.  If they did that, they're incompetent and we need a temporary vacuum that can be filled by a competent entity.

B)  Gox was correct to breach the contract, and Coinlab was actually the party that fucked up.  In that case, the ill-begotten scheme to move over U.S. Gox users to Coinlab won't happen (I never thought this was a good idea) and Gox will go on.

In either case, we're fine long-term.  Glad I cashed in at $135, even though as usual I missed the "top."

It is very unlikely they can challenge it successfully.  The contract contains a choice-of-forum provision specifying King County Washington and agrees to personal jurisdiction.

It's at least somewhat likely Gox can win there or anywhere, though.  We'll need to know more details before that can be judged, though.

Specifically:


Such choice-of-forum and choice-of-law provisions are routinely enforced.

So they happened to be psychic and knew that Gox would sign a contract and then immediately just breach it?  They must be pretty smart.  Maybe they deserve that money.

This is just a demonstration of a simple fact.  You can fuck around with Bitcoiners and all they will do is cry about it like pussies.

Make a contract with venture capitalists and fuck them and they will sue you.  

I don't know who is right yet, but it's pretty obvious MtGox signed a contract and is not following through.  They may have an escape hatch because it's entirely possible Coinlab itself didn't come through, i.e. a "material breach," and therefore, Gox isn't obligated to do it.  But litigation was a predictable result of breaching the contract themselves.  And material breach is an affirmative defense.

Whether or not it's true, assuming they ever actually serve this suit on Gox (they have 120 days after filing), we'll likely be seeing a motion to dismiss of some kind soon.  If that doesn't work, we'll likely see an answer citing material breach or some other legitimate reason for pulling out of the agreement, discovery, dueling motions for summary judgment, and if it doesn't end there, a trial where Gox would have to prove out their defenses, which are mainly affirmative defenses, i.e., the defendant has to prove they apply by a preponderance of the evidence.

It could be Coinlab never even actually serves this or it settles well before trial.  The latter is the most likely alternative.  Neither side has much to gain by protracted, expensive litigation on this issue.  Contract litigation is rarely profitable and the remedy is generally to put the plaintiff in the same financial position he'd have been in had the contract been carried out.  In this case, that's highly speculative and would take a lot of time-consuming expert testimony to establish.

So my guess is we'll see some preliminary sabre-rattling and motion practice, then it'll settle for some sum we'll never know because of a non-disclosure agreement.