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Rick S. Rein and Karl E. Analo Secure $4.6 Million Victory in Breach of Commercial Guaranty Dispute

07/08/2020
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HMB litigators Rick S. Rein and Karl E. Analo secured a complete victory in a recent breach of guaranty dispute.  The team obtained summary judgment in their client’s favor on all counts resulting in a total judgment of over $4,600,000 as well as attorneys’ fees.

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HMB’s client leased certain equipment to a hospital pursuant to a commercial equipment lease.  The lease provided that HMB’s client was entitled to damages in the form of unpaid lease payments and liquidated damages for the loss of the value of the equipment upon breach.  In connection with the lease, the guarantor executed a commercial guaranty in which it guaranteed full and prompt payment of the hospital’s lease obligations.  After the hospital breached the lease, however, the guarantor refused to make any payments under the guaranty.  The guarantor claimed, among other things, that the liquidated damages for the loss of the value of the equipment was an illegal penalty.

After conducting discovery, HMB’s litigation team was able to establish that the liquidated damages were not an illegal penalty because: (1) the parties intended to agree in advance to the settlement of damages that might arise from breach of the lease; (2) the amount of liquidated damages was reasonable at the time the lease was executed, bearing relation to the damages which might be sustained; and (3) actual damages were uncertain in amount and difficult to prove.  The court, therefore, ruled that the guarantor was required to pay the full amount owed to HMB’s client, including attorneys’ fees.

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