Atel Financial Corp., a California Corporation v. Quaker Coal Company, a Kentucky Corporation

Atel Financial Corp. (“Atel”) appeals from the district court’s judgment that the liquidated damages provision in its $12 million equipment lease contract (the “Lease”) with Quaker Coal Company (“Quaker”) is unenforceable as a penalty under California law.

The facts of this case are set forth in detail in the district court’s opinion, reported at 132 F.Supp.2d 1233 (N.D.Cal. 2001). In essence, the parties entered into a lease for heavy mining equipment and Quaker, the lessee, became delinquent on its lease payments for a period of several months. Atel declared default and demanded liquidated damages. Shortly thereafter, Quaker made the outstanding lease payments, and also paid late fees which were calculated at 1-1/2 % per month of the past due amount pursuant to the Lease. The following day, Atel brought suit alleging breach of contract and seeking enforcement of the liquidated damages provision of the Lease. The district court conducted a bench trial and found that by the time of trial, all amounts invoiced by Atel had been paid by Quaker, and Quaker continued to perform under the Lease. Moreover, the Lease was renewed by the parties and made effective for an extended…