I'm no fan of liquidated damages provisions. They're often (indeed, typically) employed in an oppressive fashion, and included by the economically superior party in a contract with a much more vulnerable counterparty.
But when a sophisticated shopping mall negotiates with a sophisticated business and they mutually agree on a cotenancy provision -- basically, that rent gets reduced if and when an "anchor" tenant leaves and the foot traffic to the mall thereby diminishes -- I have zero problem with them. And very much appreciate Justice Evan's unanimous opinion holding that the cotenancy provision here was just fine.
To me, the case for intervening in the contractual relations is at its nadir when the matter involves very sophisticated business parties, little to no public policy concerns, and provisions that are beneficial to both sides at different points in time. The cotenancy provision here is a perfect example. The shopping mall was able to receive higher rent when it had anchor tenants with a lot of foot traffic, and the store was able to pay lower rent when the anchor tenants were gone and the foot traffic diminished.
The fact that the departure of the anchor tenants was not under the "control" of the shopping mall is of no moment. For one thing, the shopping mall could have gotten someone in there by offering incentives; I bet a lot of stores would take the space if the mall owner charged, say, a penny a foot in monthly rent.
And even if the anchor tenant's departure was entirely beyond the control of the shopping mall owner, so what? Lots of contracts provide for higher (or lower) rent when things beyond the control of the parties occur. I'm not in charge of the U.S. money supply, for example, but if my contractual rent increases (or decreases) based on the nationwide inflation rate, tough. Ditto for a contract that establishes a set price when the cost of the underlying commodities rises or falls. Those provisions harm the party adversely affected by the things the occur beyond their control. But we're fine with that.
So I'm a thousand percent on board for today's opinion. Indeed, I affirmatively like these provisions. They make sense for everyone.
So yay, California Supreme Court.
