Contract analysis

I. EXECUTIVE SUMMARY Calderwood & Harkness LLP has been retained to defend Stonefield Logistics Group Inc. ("SLG" or the "Company") in a collective action filed under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216(b), and the Texas Payday Law, Texas Labor Code §§ 61.001 et seq. The purpose of this memorandum is to provide the Company's leadership and Ridgepoint Capital Management LLC ("Ridgepoint") with a com

II. BACKGROUND ON STONEFIELD LOGISTICS GROUP INC. A. Company Overview Stonefield Logistics Group Inc. is a Delaware-incorporated, Texas-headquartered transportation and logistics company specializing in last-mile delivery, regional freight, and white-glove delivery services. The Company was founded in 2011 and has grown to become a significant regional player in the last-mile logistics space, serving major e-commerce

III. PARTIES AND COUNSEL A. Plaintiff — Marcus Delano Marcus Delano is the named plaintiff and sole opt-in plaintiff at this stage of the proceedings. Delano is a former delivery driver who performed last-mile residential delivery services for SLG from approximately March 2021 through September 2024. Throughout his engagement, Delano operated out of SLG's Fort Worth distribution hub, designated internally as HUB-01,

IV. PROCEDURAL HISTORY AND KEY DATES The matter is in its earliest procedural stages. As of the date of this memorandum (May 9, 2025), the procedural posture is pre-answer. The following is a summary of the procedural history to date and anticipated key dates: We note that additional procedural milestones will arise as the case progresses, including the timing of our anticipated motion to compel arbitration for ICOA

V. SUMMARY OF PLAINTIFF'S CLAIMS A. FLSA Collective Action — Overtime Violations (29 U.S.C. § 207, § 216(b)) The centerpiece of Plaintiff's Complaint is a claim for unpaid overtime compensation under the Fair Labor Standards Act, 29 U.S.C. § 207, brought as a collective action pursuant to 29 U.S.C. § 216(b). Plaintiff alleges that SLG misclassified its delivery drivers as independent contractors rather than employees

1. Employment Relationship Allegations The core of Plaintiff's misclassification claim rests on his allegation that SLG exercised sufficient control over its delivery drivers to establish an employment relationship under the FLSA's economic reality test, notwithstanding the independent contractor designation in the ICOAs. Specifically, the Complaint alleges the following indicia of control and employment: (a) Mandato

2. Hours and Compensation Allegations Plaintiff alleges that he worked an average of 58 hours per week during his engagement with SLG, based on GPS tracking data and RouteSync records. He further alleges that he received average weekly gross pay of $1,247 based on his 2023 pay records, yielding an effective hourly rate of approximately $21.50 per hour ($1,247 ÷ 58 hours = $21.50/hour). Under the FLSA, non-exempt empl

3. Collective Action Allegations Plaintiff seeks to certify a collective action under 29 U.S.C. § 216(b) on behalf of all individuals who performed delivery driving services for SLG pursuant to an ICOA at any of SLG's 14 distribution hubs from April 30, 2022 through the date of final judgment. The proposed collective definition is discussed in Section V.C below.

4. Willfulness Allegations Plaintiff's Complaint specifically alleges that SLG's violations of the FLSA were willful, as that term is used in 29 U.S.C. § 255(a). Plaintiff asserts that SLG knew or showed reckless disregard for whether its classification of drivers as independent contractors violated the FLSA. If the court finds willfulness, the applicable statute of limitations extends from two years to three years,

VI. DISTRIBUTION HUB OVERVIEW AND DRIVER POPULATION SLG operates 14 distribution hubs across Texas, Oklahoma, Louisiana, and Arkansas. The following table provides a summary of each hub, including its location and the approximate number of drivers who signed ICOAs during the relevant period (April 30, 2022 to present): An important element of our defense strategy — particularly as it relates to opposing conditional c

VII. INDEPENDENT CONTRACTOR OPERATING AGREEMENT — KEY TERMS A. Overview of ICOA Versions SLG has utilized three versions of the Independent Contractor Operating Agreement template during the relevant period: Version 1.0 (2018 — Original Template). The original ICOA template was drafted by Pennfield & Daye LLP (801 Cherry Street, Suite 1400, Fort Worth, TX 76102) and has been in use since the Company's early growth ph

1. Independent Contractor Classification. All versions of the ICOA expressly classify drivers as independent contractors, not employees of SLG. Each version contains a recital acknowledging that the driver is operating an independent business and is not entitled to employee benefits, including workers' compensation, unemployment insurance, health insurance, or overtime pay.

2. Per-Delivery Compensation. Drivers are compensated on a per-delivery basis. Rates range from $14.50 to $38.00 per delivery depending on package weight, distance from the hub, and delivery type (standard last-mile vs. white-glove). Drivers do not receive a salary, hourly wage, or guaranteed minimum payment.

3. Mandatory Branding. All versions require drivers to wear Stonefield-branded uniforms and display vehicle placards during deliveries. SLG supplies the uniforms and placards at no cost to the driver.

4. RouteSync Dispatch Platform. Deliveries are assigned through SLG's proprietary dispatch platform, RouteSync. Drivers access their daily delivery assignments through the RouteSync mobile application and are expected to complete deliveries within designated time windows.

5. Delivery Windows. Required daily delivery windows are 7:00 AM to 8:00 PM, Monday through Saturday. Drivers are not required to work all days or all hours within this window, but deliveries must be completed within these parameters.

6. GPS Tracking. All versions require drivers to install and maintain an SLG-provided telematics device on their vehicles, enabling real-time GPS tracking. SLG retains GPS data for performance monitoring, customer service, and safety purposes.

7. Minimum Acceptance Rate. Drivers are required to maintain a minimum delivery acceptance rate of 85% per rolling 30-day period. Falling below this threshold triggers a "performance review" process that may result in counseling, reduced delivery assignments, or termination of the ICOA.

8. Vehicle Requirements. Drivers are required to provide their own vehicles, which must meet SLG specifications: cargo van or box truck, model year 2015 or newer, having passed an SLG safety inspection. Drivers bear all costs of vehicle ownership, including purchase or lease payments, fuel, maintenance, repairs, and insurance.

9. Non-Compete Clause. All versions contain a non-compete clause prohibiting drivers from performing similar delivery services for a competing company for a period of 12 months following termination of the ICOA within a 50-mile radius of their assigned hub.

10. Subcontracting. All versions nominally permit drivers to subcontract deliveries to third parties, but only with prior written approval from SLG. As Plaintiff alleges, and as our preliminary review of Company records suggests, such approvals have been exceedingly rare. C. Key Differences in ICOA v3.0 ICOA v3.0, effective January 2023, introduced three provisions that are of central importance to our defense strate

1. Arbitration Clause (Section 14.1). Section 14.1 of ICOA v3.0 requires that all disputes, claims, or controversies arising out of or relating to the ICOA, the driver's relationship with SLG, or the termination of the ICOA, shall be resolved exclusively through binding individual arbitration administered by the American Arbitration Association ("AAA") under its Employment Arbitration Rules (or, if the AAA declines j

2. Class/Collective Action Waiver (Section 14.2). Section 14.2 provides that the driver waives any right to participate in a class action, collective action, or representative proceeding, including but not limited to actions brought under the FLSA, 29 U.S.C. § 216(b), and any state wage-and-hour laws. The driver agrees that all claims must be brought in the driver's individual capacity, and that the arbitrator may no

3. Delegation Clause (Section 14.3). Section 14.3 delegates to the arbitrator all threshold questions of arbitrability, including questions regarding the existence, scope, validity, or enforceability of the arbitration agreement, the class/collective action waiver, and any challenge to the formation of the ICOA as a whole. This delegation clause is significant because it limits the Court's role in deciding gateway ar

VIII. DAMAGES EXPOSURE ANALYSIS A. Plaintiff's Damages Theory Plaintiff's damages theory is based on a straightforward per-driver calculation applied across the proposed collective. The calculation assumes uniform application of Plaintiff's individual hourly rate and overtime hours across all drivers in the collective — an assumption that our defense will challenge vigorously. Plaintiff's damages theory proceeds as f

1. Uniform Hours. Plaintiff's theory assumes that all drivers worked an average of 58 hours per week. In reality, hours worked varied significantly across drivers, hubs, seasons, and delivery types. Many drivers worked substantially fewer hours, and some drivers worked on a part-time or sporadic basis. RouteSync and GPS data will be critical to establishing actual hours worked on an individualized basis.

2. Uniform Pay. Plaintiff's theory applies a single average weekly pay figure ($1,247) across all drivers. In reality, per-delivery rates vary by delivery type, weight, and distance, and individual drivers' weekly earnings varied considerably.

3. Opt-In Rates. Not all eligible drivers will opt into the collective. Opt-in rates in FLSA collective actions vary widely but are typically well below 100%. Based on our experience in comparable cases, we estimate opt-in rates in the range of 15%–35% for a collective of this size and geographic scope, absent aggressive plaintiff-side outreach.

4. Period of Engagement. Plaintiff's damages theory assumes that all drivers were engaged for the full 161-week relevant period. Many drivers were engaged for shorter periods, and turnover rates across the hubs suggest that a significant portion of the driver population had engagement periods substantially shorter than the full relevant period.

5. Defenses to Willfulness and Liquidated Damages. As discussed in Sections IX.D and IX.E below, SLG has viable arguments that the alleged violation was not willful (which would shorten the statute of limitations and reduce per-driver damages) and that good-faith reliance on counsel warrants reduction or elimination of liquidated damages (which would eliminate the doubling). Our retained expert, Dr. Priya Ramanathan

IX. KEY DEFENSES A. Independent Contractor Status — FLSA Economic Reality Test SLG's primary defense is that its delivery drivers are bona fide independent contractors, not employees, under the FLSA. The determination of whether a worker is an employee or an independent contractor under the FLSA is governed by the "economic reality" test, which examines the totality of the circumstances to determine whether the worke

1. Degree of Control Exercised by the Alleged Employer This factor examines the extent to which the putative employer controls the manner and means by which the work is performed, as opposed to merely controlling the results of the work. Arguments favoring SLG (independent contractor status): SLG will argue that while RouteSync assigns available deliveries, drivers retain meaningful discretion over their work. Driver

2. Opportunity for Profit or Loss This factor examines whether the worker has a meaningful opportunity to profit or suffer loss based on his or her own managerial skill, initiative, and judgment. Arguments favoring SLG: Drivers have significant entrepreneurial opportunity. They use their own vehicles and bear the full costs of vehicle ownership, fuel, maintenance, and insurance. A driver who manages vehicle costs eff

3. Investment in Equipment and Facilities This factor examines whether the worker has made significant capital investments in equipment and facilities necessary to perform the work. Arguments favoring SLG: Drivers make substantial investments in their own vehicles, which must be cargo vans or box trucks with a model year of 2015 or newer. The cost of purchasing or leasing such a vehicle is significant — typically $25

4. Permanence of the Working Relationship This factor examines whether the working relationship is indefinite or of an expected duration that suggests employment, or whether it is project-based, temporary, or sporadic in a manner more consistent with independent contractor status. Arguments favoring SLG: ICOAs are terminable at will by either party at any time, without cause. Many drivers have worked for SLG for rela

5. Skill Required to Perform the Work This factor examines whether the work requires specialized skills, training, or expertise, or whether it is relatively unskilled work that does not require business judgment or initiative. Arguments favoring SLG: While delivery driving itself may not require highly specialized skills, successful drivers in SLG's network demonstrate meaningful skills in route optimization, custome

6. Integral Nature of the Service to the Alleged Employer's Business This factor examines whether the worker's services are integral to the putative employer's core business operations. Arguments favoring SLG: SLG will acknowledge that delivery services are important to its operations but will argue that this factor should not be given dispositive weight, consistent with Fifth Circuit precedent. See Hopkins, 545 F.3d

1. Enforceability Under the FAA and *Ridgeway Services Inc.* Approximately 640 of the 1,187 drivers in the relevant population signed ICOA v3.0, which contains an arbitration clause requiring individual arbitration of all disputes, a class/collective action waiver, and a delegation clause. Under the Supreme Court's decision in Granite Harbor Systems. v. Lewis, 584 U.S. 497 (2018), class and collective action waivers

2. FAA § 1 Transportation Worker Exemption — Key Risk Factor The most significant risk to enforceability is the FAA § 1 transportation worker exemption. Section 1 of the FAA provides that "nothing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. In New Prime Inc. v. Oliveira, 586 U.S. 105 (201

3. Strategic Impact If the ICOA v3.0 arbitration clause and collective action waiver are enforceable, a motion to compel individual arbitration for the approximately 640 v3.0 signatories would reduce the collective from 1,187 to approximately 547 drivers. This reduction would substantially decrease the total exposure and would simplify the remaining litigation by removing the largest segment of the driver population