Electromedics (defendant) began accepting bids to purchase the company. Among the bidders were St. Jude Medical (plaintiff) and Medtronic (defendant). St. Jude and Electromedics negotiated a merger agreement that included a $3 million termination fee to be paid to St. Jude if the merger did not close. Subsequent to this agreement, Medtronic increased its bid for Electromedics. St. Jude matched the increased bid, and Medtronic increased its bid again. Electromedics ultimately accepted Medtronic’s bid, selling for $97 million, $11 million more than it would have absent Medtronic’s two increased bids. Neither Electromedics nor Medtronic paid the termination fee to St. Jude. St. Jude sued Medtronic for payment of the fee. The trial court applied a liquidated-damages standard and found the fee to be an unenforceable penalty. The court granted Medtronic summary judgment. St. Jude appealed.