ItalCable SpA v. Envoy Global, Inc.

MEMORANDUM ***

ItalCable SpA (“ItalCable”) appeals the Bankruptcy Appellate Panel’s (“BAP”) reversal of the judgment of the U.S. Bankruptcy Court for the Northern District of California. The facts and prior proceedings are known to the parties; they are not recited herein, except as necessary.

I

ItalCable asserts that a contingent payment clause in its contract with Envoy Global, Inc., constitutes an illegal forfeiture. Under Oregon law, forfeiture clauses are treated as liquidated damages clauses. See Bennett v. Les Schwab Tire Ctrs. of Or., 48 Or.App. 909 , 618 P.2d 455 (Or.Ct.App.1980) (treating a forfeiture clause as a liquidated damages clause). Section 72.7180(1) of the Oregon Revised Statutes governs the enforceability of liquidated damages clauses:

Or.Rev.Stat. § 72.7180(1) (1999). See also Illingworth v. Bushong, 297 Or. 675 , 688 P.2d 379, 390 (Or.1984) (extending § 72.7180(1) from the sale of goods to all contracts). ItalCable, as the party seeking to avoid enforcement of the clause, bears the burden to prove that the clause constitutes an illegal penalty.

ItalCable did not meet its burden in the bankruptcy court to show that the forfeited amount was unreasonable…