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Argued February 5, 2001

A Washington, D.C. restaurant sought a declaration that its landlord breached an exclusive use covenant by renting space in the same building to a specialty cake shop. The restaurant claimed that under its lease, the breach entitled it to a 50 percent rent abatement. The district court granted summary judgment for the landlord, finding that under the circumstances of this case, a 50 percent rent abatement would constitute an unenforceable penalty. Because we conclude that the rent abatement, negotiated by sophisticated parties, was not an unreasonable estimate of the damages likely to result from a breach of the exclusive covenant, and because the landlord’s additional arguments for summary judgment fail, we reverse and remand for further proceedings.

I.

 
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