Joseph Chandy v. Racetrac Petroleum, Inc. , 147 F. App'x 811 ( 2005 )


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  •                                                         [DO NOT PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT                  FILED
    U.S. COURT OF APPEALS
    ________________________         ELEVENTH CIRCUIT
    July 14, 2005
    No. 05-10941                THOMAS K. KAHN
    Non-Argument Calendar                 CLERK
    ________________________
    D. C. Docket No. 03-02890-CV-RWS-1
    JOSEPH CHANDY,
    Plaintiff-
    Counter-Defendant-Appellant,
    versus
    RACETRAC PETROLEUM, INC.,
    Defendant-
    Counter-Claimant-Appellee.
    ________________________
    Appeal from the United States District Court
    for the Northern District of Georgia
    _________________________
    (July 14, 2005)
    Before HULL, MARCUS and WILSON, Circuit Judges.
    PER CURIAM:
    Joseph Chandy appeals the district court’s entry of summary judgment in favor
    of RaceTrac Petroleum, Inc. (“RaceTrac”), in this breach-of-contract action arising
    out of a contract for the sale of one of RaceTrac’s gasoline service stations (the “Sale
    Agreement”) in Zephyrhills, Florida for $2.2 million. After Chandy defaulted on his
    obligations under the Sale Agreement -- in part, because of his inability to obtain
    financing -- RaceTrac retained his “earnest money” in the amount of $220,000,
    pursuant to a liquidated damages clause in the Sale Agreement.1 Chandy then filed
    this action in the district court, based on diversity jurisdiction. The district court
    entered summary judgment, after concluding that the liquidated damages clause was
    enforceable, under Georgia law. After thorough review of the record and careful
    consideration of the parties’ briefs, we affirm.
    We review the district court’s order granting summary judgment de novo. See
    Madray v. Publix Supermarkets, Inc., 
    208 F.3d 1290
    , 1296 (11th Cir. 2000). A
    motion for summary judgment should be granted when “the pleadings, depositions,
    answers to interrogatories, and admissions on file, together with the affidavits, if any,
    show that there is no genuine issue as to any material fact and that the moving party
    1
    RaceTrac filed a counterclaim, seeking recovery of an additional $50,000, pursuant to a
    “Letter Agreement,” executed after Chandy’s default. The parties subsequently filed a joint
    stipulation to dismiss RaceTrac’s counterclaim, indicating that Chandy was the prevailing party in
    the claim and allowing him to seek attorneys’ fees and costs relating to the counterclaim. The
    dismissal of the counterclaim is not at issue in this appeal.
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    is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56 (c). “Where the
    record taken as a whole could not lead a rational trier of fact to find for the non-
    moving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v.
    Zenith Radio Corp., 
    475 U.S. 574
    , 587, 
    106 S. Ct. 1348
    , 1356, 
    89 L. Ed. 2d 538
    (1986) (quoting First Nat’l Bank of Arizona v. Cities Serv. Co., 
    391 U.S. 253
    , 289,
    
    88 S. Ct. 1575
    , 1592, 
    20 L. Ed. 2d 569
     (1968)).
    Georgia substantive law controls the interpretation of the Sales Agreement in
    this action based on diversity jurisdiction. See Schwartz v. Fla. Bd. of Regents, 
    807 F.2d 901
    , 905 (11th Cir.1987) (holding that forum state’s contract law is applied in
    a diversity action in determining the construction and interpretation of the
    agreement). Under Georgia law, “if the parties agree in their contract what damages
    for a breach shall be, they are said to be liquidated and, unless the agreement violates
    some principle of law, the parties are bound by it.” O.C.G.A. § 13-6-7. The
    defaulting party to the contract bears the burden to establish the unenforceability of
    a liquidated damages clause. See Caincare, Inc. v. Ellison, 
    612 S.E.2d 47
    , 49 (Ga. Ct.
    App. 2005); Swan Kang, Inc. v. Tae Sang Kang (YI), 
    534 S.E.2d 145
    , 146 (Ga. Ct.
    App. 2000). The Georgia Supreme Court has held that a liquidated damages clause
    is enforceable if (1) the injury caused by the breach of the contract is difficult or
    impossible to accurately estimate; (2) the parties intended to provide for damages
    3
    rather than a penalty; and (3) the sum stipulated upon by the parties is a reasonable
    pre-estimate of the probable loss. Southeastern Land Fund v. Real Estate World, 
    227 S.E.2d 340
    , 343 (Ga. 1976); Caincare, 
    612 S.E.2d at 49
    ; Swan Kang, 
    534 S.E.2d at 146
    .
    On appeal, Chandy argues the district court erred by enforcing the liquidated
    damages clause in this case because none of the foregoing three conditions for
    enforceability were met. We disagree. In pertinent part, on factors (1) and (3) of the
    Southeastern Land test, the district court observed the following:
    [T]he uncontradicted evidence before the Court shows that the $220,000
    figure selected by RaceTrac was the product of a pre-execution analysis
    on the part of a RaceTrac representative to ascertain the extent of the
    company’s injuries should Mr. Chandy default. In particular, the sworn
    testimony provided to the Court illustrates that Christine Mudd,
    RaceTrac’s Director of Property Sales, performed an independent
    analysis on the damages that might be incurred if the Service Station
    transaction “fell tough,” This analysis is reported to have included
    consideration of a host of factors, including, inter alia, “lost opportunity
    costs” . . ., the current profitability of the Service Station, as well as the
    costs associated with “winding down” the Service Station’s operation as
    a RaceTrac facility.
    (citations omitted).     The district court rejected Chandy’s challenges to the
    reasonableness of the $220,000 figure, finding that “the amount selected appears to
    be reasonably proportionate to the financial injury one might expect from a breach on
    the part of the purchaser.” The district court also highlighted that the Georgia
    4
    Supreme Court has found, “with little hesitation,” reasonable a forfeiture provision
    providing that a seller of real estate may retain 10% of the purchase price upon the
    buyer’s default. See Liberty Life Ins. Co. v. Thomas Hartley Constr. Co., 
    375 S.E.2d 222
    , 223 (Ga. 1989). As for factor (2) of the Southeastern Land test, the Sale
    Agreement shows that the parties clearly contemplated, and intended, for the earnest
    money to be treated as liquidated damages in the event of a breach: “In the event the
    transaction contemplated hereby is not closed because of purchaser’s default, the
    earnest money may be retained by seller as liquidated damages for such a default.”
    Sale Agreement ¶7.
    Based upon our review of the record and the district court’s thorough and well-
    reasoned order applying Georgia law to the largely undisputed facts and addressing
    virtually every argument raised in this appeal, we can find no reversible error in the
    district court ’s disposition of this case and affirm its judgment in all respects.
    AFFIRMED.
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