MONTH-IN-BRIEF (Feb 2018)
The Southern District of New York on the Enforceability of a Clause Limiting Consequential Damages in a Revolving Credit Facility Agreement
By Stephen Sepinuck, Gonzaga University
In re Lyondell Chemical Co., No. 17-4375-DLC, 2018 WL 565272 (S.D.N.Y. Jan. 24, 2018). Although a lender breached a $750 million revolving credit facility by failing to lend, the lender was insulated from liability by a term in the credit facility disclaiming consequential damages. Such clauses are enforceable under New York law except to the extent that they cover claims for gross negligence or intentional wrongdoing or are unconscionable, and there was no claim that any of those exceptions applies. However, the clause did not bar restitutionary damages, and thus the lender had to return the $12 million commitment fee paid by the borrower. While the lender would be entitled to deduct from that amount the value of its partial performance arising from an earlier loan it made under the credit facility, the lender failed to prove the value of that performance.