Republic Airways: Crash Landing for SLV Damages

Equipment Leasing & Finance Magazine

As Victoria Gelman and Eddie Gross have so ably discussed in the Spring 2019 issue of the Journal of Equipment Lease Financing, Valentine’s Day 2019 was a massacre for equipment lessors that have utilized the stipulated loss value (SLV) table to establish liquidated damages for an event of default under a true lease. The U.S. Bankruptcy Court for the Southern District of New York, in a published decision, In re Republic Airways Holdings Inc., 2019 WL 630336, ruled that use of the SLV to establish liquidated damages “violate public policy and constitute unenforceable penalties in violation of” UCC section 2A-504.

The judge dealt another body blow to the equipment finance industry by ruling that the parent guaranty—even though it contained a hell or high water clause—was not enforceable against the guarantor, because it would have required the guarantor to be responsible for the very damages the court had just ruled were an unenforceable penalty.

This article will not repeat the cogent arguments in the JELF article. And you probably are asking yourself, “Do I really need to read another article about Republic Airways?” The answer is yes. As the EMT technicians say to a bleeding victim, “Stay with me!” Because the decision, flawed as it was, inadvertently may have reached the correct result in that fact-intensive case.

To read the full article, please click here.

“Republic Airways: Crash Landing for SLV Damages,” by Stephen T. Whelan was published in Equipment Leasing & Finance Magazine on October 2019. Reprinted with permission.