Contract analysis

From: Samuel Eklund <seklund@calderwoodharkness.com> To: Tobias Wren <twren@stonefieldlogistics.com> Cc: Patrick Gallagher <pgallagher@calderwoodharkness.com> Date: Wed, 04 Oct 2023 06:47:00 -0000 Subject: Vantor v. Stonefield (22-cv-07841) — Plaintiff's Counsel Motion to Withdraw; Implications and Next Steps

ATTORNEY-CLIENT PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT

I am writing to alert you to a significant development in Vantor Holdings Corp. v. Stonefield Logistics, Inc., Case No. 22-cv-07841 (S.D.N.Y.). Yesterday afternoon, October 3, 2023, Caldwell Royce & Shapiro LLP ("CRS") filed a Motion to Withdraw as counsel for Vantor Holdings Corp. on the docket before the Honorable Margaret T. Calloway, U.S.D.J. The motion cites "irreconcilable differences" between CRS and Vantor as

It is important to situate this development within the current procedural posture of the case:

- Fact discovery closed on September 29, 2023. - Expert discovery deadline under the Case Management Order is January 12, 2024. - Dispositive motion deadline is March 1, 2024. - The deposition of Nikolai Vantorovich was ordered completed by October 20, 2023, per Judge Calloway's September 22 order granting Vantor's own motion to compel. That deposition has not yet been taken. - CRS's lead partner, Harrison Caldwell,

In retrospect, that settlement overture may well have been motivated by CRS's own desire to resolve the case before its attorney-client relationship with Vantor deteriorated further. Notably, the withdrawal motion papers reference approximately $870,000 in unpaid invoices against estimated total CRS fees of approximately $2.1 million — a substantial unpaid balance that in all likelihood precipitated the break.

*Corporate representation requirement.* Under well-established federal law, a corporation cannot appear pro se in federal court. Vantor Holdings Corp. is a New York corporation and must be represented by licensed counsel to participate in any proceedings, file motions, appear at conferences, or conduct discovery. If Vantor fails to retain new counsel, it cannot prosecute its claims or defend against Stonefield's coun

*Court process.* We expect Judge Calloway to grant the motion. Withdrawal motions based on fee disputes and irreconcilable differences are routinely granted, typically with a transition period. The court will likely order Vantor to retain substitute counsel within a specified period — commonly 30 to 60 days — and may stay certain deadlines in the interim.

*Impact on pending deadlines.* The Vantorovich deposition completion deadline of October 20 will almost certainly be affected. Expert discovery and dispositive motion deadlines may also be pushed. If Vantor retains new counsel promptly, the case resumes but with some delay. If not, more significant consequences follow, as discussed below.

**3. Strategic Assessment — What This Means for Stonefield**

We view this as a meaningfully positive development for Stonefield, for several reasons:

*Loss of experienced counsel.* CRS, led by Harrison Caldwell and Meredith Shapiro, was competent and aggressive counsel. Losing experienced representation mid-case is highly disruptive. Any replacement firm will need considerable time to get up to speed on a complex record — more than 75,000 documents produced, multiple depositions taken, and expert reports already served.

*Vantor's financial condition.* The fact that Vantor has approximately $870,000 in unpaid legal bills raises serious questions about Vantor's financial capacity to (a) retain quality replacement counsel, (b) fund continued prosecution through summary judgment and trial, and (c) sustain operations given the broader freight market decline. Vantor's FY 2022 revenue was approximately $310 million, down from approximately

*Potential for dismissal.* If Vantor fails to retain counsel within whatever period the court sets, Stonefield will be in a position to seek dismissal for failure to prosecute under Federal Rule of Civil Procedure 41(b). This would be the optimal outcome: dismissal on the merits, with prejudice, extinguishing the $95.4 million claim entirely and mooting the need for summary judgment briefing.

*Counterclaim posture.* Stonefield's pending counterclaim for declaratory judgment — that the termination was valid for Cause and no liquidated damages are owed — remains live. Even if Vantor's claims are dismissed, we may want to pursue the declaratory judgment to obtain a binding judicial determination, which is particularly relevant for Lakeshore National Bank reporting purposes and any future disputes.

We want to be candid about the risks and caution against premature optimism:

*New aggressive counsel.* There is a real scenario in which Vantor retains new counsel — potentially on a contingency or hybrid fee arrangement — and the case continues, possibly with a different strategic approach. We should not assume the case is over.

*Vantorovich individual involvement.* Nikolai Vantorovich, as CEO and approximately 58% owner of Vantor, has a substantial personal financial incentive to pursue this claim. He may attempt to appear pro se, though as noted above, this is impermissible for the corporate entity. If he were to assert claims individually — which the current complaint does not contemplate — that would present a different question, but the

*Settlement leverage.* This development significantly shifts leverage in Stonefield's favor. If and when settlement discussions resume, the dynamics will be fundamentally different. However, consistent with our prior discussions and Ridgeline's preference for aggressive defense, the current settlement authority range of $0–$4.5 million remains appropriate. We do not recommend making any affirmative settlement overtur

1. **Monitor the docket** for Judge Calloway's ruling on the withdrawal motion and any associated orders regarding substitute counsel deadlines and schedule modifications. We will keep you apprised of all developments in real time.

2. **Do not contact Vantor directly.** Until the motion is decided and any transition period runs, CRS remains counsel of record, and all communications must go through them. This is both a professional responsibility requirement and a strategic imperative.

3. **Preserve all work product.** Our summary judgment roadmap, expert reports, and deposition summaries are ready to deploy if the case resumes with new opposing counsel. Patrick Gallagher's team will keep these current.

4. **Prepare contingency filings.** Patrick and Simone will begin drafting a motion to dismiss for failure to prosecute under FRCP 41(b), to have ready for filing if Vantor fails to retain substitute counsel within whatever deadline the court imposes.

5. **Quarterly Lakeshore update.** We should include this development in the next quarterly litigation update to Catherine Devereaux at Lakeshore National Bank, noting the potential for case resolution via dismissal. Tobias — we are happy to draft that update for your review.

6. **Hold on active spending.** We suggest reducing active work on the matter to monitoring only until the situation clarifies, which will help manage costs. Total spend to date is approximately $4.42 million ($3.8 million in fees, $620,000 in costs and disbursements). If the case moves toward dismissal, total spend could remain close to current levels — a meaningful benefit.

I would welcome the opportunity to schedule a call among the three of us to discuss this further and answer any questions. Patrick Gallagher is copied here and is available for any detailed questions on the procedural posture or the substance of the motion papers. If you would like us to forward a copy of CRS's motion and supporting papers for your review, please let us know and we will send them along promptly.

We will circulate a further update once the court rules on the withdrawal motion.

Samuel Eklund Partner Calderwood & Harkness LLP 200 Park Avenue, 38th Floor New York, NY 10166 Direct: (212) 554-7130 Email: seklund@calderwoodharkness.com

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