News & Insights

Contracts – Liquidated Damages

By Paul Evelius

In CAS Severn, Inc. v. Awalt, the Court of Special Appeals has upheld a liquidated damages clause that was part of the non-competition section of a professional services agreement between CAS, a computer services firm, and Awalt, an independent contractor of CAS. The clause obligated Awalt to pay CAS 150% of the salary of any person who left CAS’ employ as a result of any solicitation made by Awalt during the one year following termination of the CAS-Awalt relationship. CAS sought court enforcement of the clause after Awalt induced two systems engineers to leave CAS’s employ during that one-year period. The Court found the liquidated damages clause reasonable based in part on evidence concerning the expenses which CAS incurred in recruiting and training systems engineers and the “incalculable and unquantifiable injuries to business relationships with past and present customers” that CAS suffered as a result of losing them.