Contract analysis

I. Executive Summary Raymond Hess testified on July 27, 2023 as a fact witness on behalf of defendant Stonefield Logistics Group Inc. ("Stonefield" or "SLG"). Hess's testimony addressed four principal areas: (1) his role as Director of Contract Compliance in monitoring Vantor Transportation Services LLC's ("VTS") performance under the Transportation Services Agreement (the "TSA," Contract Ref. No. SLG-VTS-2019-0315,

1. Metrics Derived from VTS's Own Data. Hess confirmed that all Q4 2021 performance metrics cited in the January 18, 2022 Cure Notice were derived from VTS's own Carrier Performance Portal data — that is, the data was inputted and reported by VTS personnel, not generated by Stonefield's internal tracking systems alone. This is a critical point because it effectively forecloses any argument by Vantor that Stonefield f

2. VTS Did Not Dispute the Metrics. Hess testified that VTS's February 14, 2022 response letter did not challenge the accuracy of any of the five Q4 2021 performance figures cited in the Cure Notice. VTS disputed causation — arguing that Stonefield's own volume shortfalls and industry-wide conditions were responsible for the performance deterioration — but it did not contest the numbers themselves.

3. Independent Verification by Hess. Prior to issuing the Cure Notice, Hess independently verified the Q4 2021 performance metrics by cross-referencing the Portal data against Stonefield's internal tracking records. This dual verification undercuts any suggestion that the Cure Notice was based on unreliable or unexamined data.

4. Legal Input on Cure Notice. Hess testified that the Cure Notice was drafted with input from outside counsel at Ashford Meridian LLP — specifically, Lorraine Beckwith (Partner, Commercial Contracts) — to ensure compliance with Section 13.2 of the TSA, which requires that the notice specify the alleged breach "with reasonable particularity." This testimony supports the argument that Stonefield followed proper contra

5. Post-Cure-Period Data Confirmed Continued Non-Compliance. Hess testified that he continued monitoring VTS performance after the cure period expired on February 17, 2022, and that the data through early March 2022 showed VTS continued to fall below the Service Level Obligation ("SLO") thresholds across all five categories. This undermines any argument that VTS was on a trajectory toward compliance or that terminati

II. Background and Role of Witness Hess testified that he has served as Director of Contract Compliance at Stonefield Logistics Group Inc. since June 2018. In that capacity, he reports directly to Carlos Medina, Senior Vice President of Operations. Prior to joining Stonefield, Hess worked in freight brokerage operations at a regional logistics company (the name of which was not explored in detail during the depositio

III. Testimony Regarding VTS Performance Monitoring A. The Carrier Performance Portal Hess provided extensive testimony regarding the Carrier Performance Portal (the "Portal"), which served as the primary vehicle through which VTS reported its operational performance data to Stonefield. Hess described the Portal as a shared, web-based platform accessible to both Stonefield compliance personnel and VTS operations pers

1. On-time pickup rate — the percentage of tendered loads picked up within the contractually specified pickup window;

2. On-time delivery rate — the percentage of loads delivered within the contractually specified delivery window;

3. Tender acceptance rate — the percentage of load tenders offered by Stonefield that VTS accepted;

4. Cargo claims ratio — the total dollar value of cargo claims as a percentage of gross revenue attributable to VTS's operations under the TSA; and

5. Equipment availability compliance — the percentage of committed fleet capacity (measured in tractors) that VTS made available for Stonefield-dedicated lanes. Each of these five metrics corresponded to a specific SLO threshold set forth in Schedule C of the TSA, which established minimum performance levels that VTS was obligated to maintain on a rolling quarterly basis. Hess identified Sandra Milescu's operations t

1. Late September 2021 — Phone call with Derek Pruitt (VP, Business Development, Vantor). Hess testified that he spoke with Pruitt by telephone in approximately late September 2021 regarding declining tender acceptance rates. Hess informed Pruitt that VTS's tender acceptance rate had dropped below 80% in recent weeks and that this was significantly below the 90% contractual threshold. Pruitt acknowledged the issue an

2. October 2021 — Email exchange with Sandra Milescu (COO, Vantor/VTS). Hess testified that he exchanged emails with Milescu in approximately mid-October 2021 regarding equipment availability shortfalls. Hess raised concerns that VTS was not deploying the committed number of tractors on Stonefield-dedicated lanes and asked Milescu to provide an updated fleet deployment plan. Milescu responded that VTS was working to

3. November 2021 — Formal performance review call. Hess described a scheduled performance review call in approximately mid-November 2021 that included, among others, Janet Kirkwood and Hess on the Stonefield side, and Derek Pruitt and Sandra Milescu on the VTS side. During this call, VTS acknowledged operational challenges across multiple SLO categories. VTS representatives attributed the performance declines to a na

IV. Testimony Regarding the Cure Notice (January 18, 2022) A. Drafting Process Hess provided detailed testimony regarding the process by which the January 18, 2022 Cure Notice was drafted and finalized. He testified that he prepared the initial draft of the Cure Notice in early January 2022, working from the Q4 2021 Portal data and from internal performance tracking spreadsheets maintained by his Contract Compliance

V. Testimony Regarding VTS's Response (February 14, 2022) A. Content of the Response Hess confirmed that he received VTS's response to the Cure Notice on or about February 14, 2022 — three days before the expiration of the 30-day cure period. The response letter was dated February 14, 2022, and was sent by Derek Pruitt (VP, Business Development, Vantor Holdings Corp.) to Janet Kirkwood (VP, Carrier Relations, Stonefi

1. Acknowledgment of "operational challenges." The response acknowledged that VTS had experienced "operational challenges" during the Q4 2021 period that affected its performance under the TSA. Hess noted that the letter used the term "operational challenges" rather than expressly conceding a breach of the SLOs.

2. Attribution of performance deficiencies to external factors and Stonefield's conduct. The response attributed VTS's performance deficiencies to three principal factors: (a) a nationwide driver shortage affecting the truckload carrier industry generally; (b) Stonefield's alleged failure to tender the minimum Annual Contract Volume ("ACV") of $43.2 million, which VTS contended disrupted its fleet planning and econom

3. Assertion of "substantial cure." The response asserted that VTS had "substantially cured" the identified deficiencies during the 30-day cure period by implementing remedial measures, including the hiring of additional drivers, adjustments to dispatch priorities on Stonefield-dedicated lanes, and the engagement of backup carriers to supplement capacity.

4. Dispute of certain cargo claims data. The response challenged certain aspects of the cargo claims data cited in the Cure Notice, though Hess testified the challenge was not directed at the overall claims ratio figure but rather at the inclusion of specific claims that VTS contended were still under investigation at the time of the notice. Critically, Hess testified that the VTS response letter did not dispute the

VI. Testimony Regarding the Termination Letter (March 4, 2022) Hess confirmed that the formal termination letter was drafted by Tobias Wren, Stonefield's General Counsel, and was transmitted on March 4, 2022 to both Vantor Holdings Corp. and Vantor Transportation Services LLC. Hess testified that he provided input on the factual basis for the termination — specifically, the performance data and cure period analysis —

VII. Cross-Examination — Rate Adjustment Awareness Jason Whitford of CRS devoted approximately 45 minutes to examining Hess regarding his awareness of the anticipated April 2022 annual rate adjustment under Section 5.3 of the TSA. This line of questioning was directed at Vantor's theory that Stonefield's true motivation for terminating the TSA was to avoid a substantial rate increase that would have taken effect on A

VIII. Cross-Examination — Instructions from Management CRS pursued a second major line of cross-examination directed at establishing that Hess's compliance recommendation was not truly independent but was instead the product of direction from Stonefield's senior management to build a contractual basis for terminating the VTS relationship. Whitford questioned Hess regarding whether he received any direction from Marcu

IX. Cross-Examination — Volume Shortfall and Causation CRS questioned Hess at some length regarding Stonefield's own performance under the ACV provisions of the TSA, attempting to establish that Stonefield's failure to tender the minimum Annual Contract Volume of $43.2 million to VTS was a contributing or proximate cause of VTS's performance deficiencies. This line of questioning relates to Vantor's affirmative defen

X. Cross-Examination — Cargo Claims Data CRS challenged the cargo claims ratio cited in the Cure Notice — approximately 1.07% of gross revenue, based on 16 documented claims totaling $387,400 in the November–December 2021 period — on the ground that some of the underlying claims were still being investigated by VTS's claims department at the time the Cure Notice was issued on January 18, 2022. Hess acknowledged that,

XI. Examination on Vantor's February 14, 2022 Response — "Substantial Cure" Assertions CRS attempted to use Hess's testimony to validate Vantor's claim that VTS had "substantially cured" the breaches identified in the Cure Notice by the February 17, 2022 deadline. This line of questioning was directed at supporting Vantor's argument that, even if VTS's Q4 2021 performance was deficient, VTS took adequate corrective a

XII. Redirect Examination On redirect examination, Patrick Gallagher elicited testimony from Hess that reinforced several critical points for Stonefield's defense. The redirect was focused and efficient, and Hess's responses were consistent with his prior testimony. The principal points established on redirect were as follows:

1. VTS's own data as the basis for the Cure Notice. Gallagher confirmed through Hess's testimony that the Cure Notice was drafted based on performance data inputted into the Carrier Performance Portal by VTS's own operations team. The metrics cited in the Cure Notice were, in essence, self-reported by Vantor/VTS, and Stonefield relied on this data precisely because it was generated by the carrier itself.

2. VTS's failure to dispute the accuracy of the metrics. Hess confirmed that VTS's February 14, 2022 response letter did not dispute the accuracy of any of the Q4 2021 performance figures cited in the Cure Notice. The response contested causation — attributing the performance shortfalls to Stonefield's volume tenders and external market conditions — but accepted the metrics themselves as stated. Hess reiterated that

3. Independence of the compliance recommendation from commercial or financial considerations. Gallagher elicited testimony reinforcing that Hess's compliance recommendation was made independently of any commercial or financial considerations, including the April 2022 rate adjustment. Hess confirmed that the rate adjustment mechanism was handled by Stonefield's commercial and finance teams and was not a factor in his

4. Post-cure-period data confirmed continued non-compliance. Hess confirmed on redirect that the performance data for the period from February 17 through early March 2022 — after the cure period had expired — showed VTS continued to perform below SLO thresholds, further supporting the conclusion that VTS had not cured the identified breaches.

5. Standard compliance procedures. Gallagher elicited testimony that Hess followed Stonefield's standard compliance procedures applicable to all carriers in its network. The procedures applied to VTS were not unique to or specifically designed for VTS; they were the same procedures that would have been applied to any carrier exhibiting comparable SLO failures. This point undercuts any suggestion that the compliance p

XIII. Exhibits Used During Deposition The following exhibits were marked, identified, and used during the Hess deposition. Copies of each exhibit are maintained in the deposition file under Matter No. 1012-00005, Category VI (Depositions).

XIV. Key Takeaways and Strategic Implications A. Strengths

1. VTS's own data as the basis for the Cure Notice. Hess's testimony that all five SLO metrics cited in the Cure Notice were derived from VTS's own Carrier Performance Portal data is extremely valuable for Stonefield's defense. This testimony preempts any argument by Vantor at summary judgment that Stonefield fabricated, manipulated, or selectively reported performance data to manufacture a basis for termination. The

2. VTS's failure to dispute the accuracy of the metrics. The fact that VTS's February 14, 2022 response letter did not challenge the accuracy of any of the five Q4 2021 performance figures — only the causation of those figures — is a powerful point for Stonefield. It establishes that the parties are not in dispute about the factual predicate for the Cure Notice. Vantor's defense is limited to arguing that the reasons

3. Effective separation of compliance from commercial strategy. Hess effectively separated his compliance role from the broader commercial and strategic discussions reflected in the Kirkwood email and the rate adjustment concerns. His testimony insulated the cure and termination process from the "pretext" narrative that Vantor is advancing. His statement that "the data spoke for itself" is both credible and resonant,

4. Post-cure-period data showing continued non-compliance. Hess's testimony regarding VTS's continued failure to meet SLO thresholds after the cure period expired on February 17, 2022 bolsters the argument that VTS's alleged cure was insufficient. This evidence demonstrates that termination was not premature or the product of an artificially truncated cure period. VTS had 30 days to cure — the full period prescribed

1. The "pretext" narrative and the Kirkwood email. CRS will likely argue at summary judgment that Hess's "independence" is a facade and that the compliance process was orchestrated at a higher level within Stonefield to provide contractual cover for a commercially motivated termination. The September 22, 2021 Kirkwood email — "If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract" —

2. Unresolved cargo claims. The three unresolved cargo claims at the time of the Cure Notice represent a minor but identifiable point of vulnerability. CRS could argue that Stonefield included claims that had not been verified, thereby inflating the cargo claims ratio cited in the Cure Notice. However, this argument is significantly weakened by Hess's testimony that the calculation methodology (based on submitted cla

3. General awareness of the rate adjustment. Although Hess did not see the specific Ashford Meridian rate analysis memo before issuing the Cure Notice, he acknowledged general awareness that rates adjust annually under Section 5.3 of the TSA. CRS could attempt to use this general awareness to argue that Hess understood the cost implications of the upcoming rate cycle and factored this knowledge — consciously or uncon

1. Summary Judgment Roadmap (Document 124). The Hess deposition transcript should be cited prominently in the Summary Judgment Roadmap, which is currently being prepared by the litigation team. In particular, the following portions of Hess's testimony should be highlighted: (a) the testimony confirming that the Cure Notice metrics were derived from VTS's own Carrier Performance Portal data; (b) the testimony that VTS

2. Trial Witness Potential. Hess should be considered as a potential trial witness if the case proceeds past summary judgment. His demeanor during the deposition was calm, detailed, and consistent under both direct and cross-examination. He explained complex compliance and contractual concepts in accessible terms without appearing rehearsed or evasive. These qualities would be effective before a jury, particularly in

3. Coordination with Expert Report. Hess's testimony should be cross-referenced with the rebuttal expert report of Dr. Evelyn Rosser of Kensington Analytics Group LLC, which was served on August 25, 2023. Dr. Rosser's report relies on the same VTS performance data from the Carrier Performance Portal to conclude that Stonefield's termination of the TSA was valid for Cause and that Vantor's claimed damages should be $0

4. Coordination with Milescu Deposition Summary. Hess's testimony should be coordinated with the Milescu deposition summary (Document 80, dated August 11, 2023). Sandra Milescu's admission during her deposition that VTS pulled 85 tractors off Stonefield-dedicated lanes without notification directly corroborates Hess's testimony that the performance declines were caused by VTS's own operational decisions, not by Stone

XV. Distribution and Confidentiality Notice This memorandum constitutes privileged attorney work product prepared in anticipation of litigation in the matter of Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.). It reflects the mental impressions, conclusions, and legal theories of counsel and is protected from disclosure under Federal Rule of Civil Procedure 26(b)(3) and the a