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:
During each year of the Term, CoinLab shall reach the following minimum Revenue:
Year 1: US $ 310,000
Year 2: US $ 341,000 or 110% of the actual Revenue of Year 1, whichever is greater
Year 3: US $ 375,100 or 110% of the actual Revenue of Year 2, whichever is greater
Year 4: US $ 412,610 or 110% of the actual Revenue of Year 3, whichever is greater
Year 5: US $ 453,871 or 110% of the actual Revenue of Year 4, whichever is greater
Year 6: US $ 499,258 or 110% of the actual Revenue of Year 5, whichever is greater
Year 7: US $ 549,184 or 110% of the actual Revenue of Year 6, whichever is greater
Year 8: US $ 604,102 or 110% of the actual Revenue of Year 7, whichever is greater
Year 9: US $ 664,513 or 110% of the actual Revenue of Year 8, whichever is greater
Year 10: US $ 730,964 or 110% of the actual Revenue of Year 9, whichever is greater
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.
EXCEPT FOR CLAIMS SUBJECT TO INDEMNIFICATION OR ARISING OUT OF A BREACH OF CONFIDENTIALITY OR WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF A PARTY, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, DAMAGES RELATING TO THE LOSS OF PROFITS, INCOME OR GOODWILL, EVEN IF AWARE OF THE POSSIBILITY OF 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.
F. Exclusivity.
F1. During the Term, MtGox and Tibanne shall not grant anyone the right to use the Licensed Materials to provide the Services, or any part thereof, in the Territory. The exclusivity granted herein shall apply strictly to Services targeting the Territory and the CoinLab Customers (as defined below) and advertised and sold as such. It shall not include the provision of Services to users of the Services who, depending on the interpretation or circumstances, may or may not be considered CoinLab Customers.
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:
Mt. Gox has willfully failed to perform its obligations under this contract.
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.
