Contract analysis

I. INTRODUCTION AND ASSIGNMENT A. Identity and Qualifications of Expert

1. My name is Dr. Evelyn Rosser. I am the Managing Director and Lead Expert at Kensington Analytics Group LLC ("Kensington Analytics" or "KAG"), an economic and financial consulting firm headquartered at 1700 Market Street, Suite 2800, Philadelphia, Pennsylvania 19103. I submit this expert rebuttal report in connection with the above-captioned matter.

2. I hold a Ph.D. in Economics from the University of Pennsylvania, with a specialization in transportation economics and industrial organization. I also hold a Master of Arts in Economics from the University of Virginia and a Bachelor of Arts in Economics, summa cum laude, from Georgetown University. My doctoral dissertation examined pricing dynamics in deregulated freight markets and was subsequently published, in

3. I have over twenty years of professional experience in economic analysis, damages quantification, and expert testimony in the context of commercial litigation. Throughout my career, I have developed particular expertise in the transportation and logistics industry, including freight brokerage operations, truckload and less-than-truckload markets, carrier economics, supply chain contract structures, and the financi

4. My industry-specific expertise encompasses the full range of economic issues commonly arising in transportation disputes, including the analysis of rate structures, volume commitments, service level agreements, capacity allocation, fleet utilization metrics, and the economic impact of market cycles on carrier and shipper profitability. I have been engaged as a consulting or testifying expert in matters involving n

5. I have been retained as a testifying expert in prior matters involving, among other topics, breach of contract damages, lost profits quantification, liquidated damages disputes, business valuation, and economic analysis of commercial agreements. I have provided testimony at trial and by deposition in federal and state courts across multiple jurisdictions, as well as in arbitration proceedings. A complete list of c

6. My full curriculum vitae, setting forth my educational background, professional experience, publications, presentations, and prior testimony, is attached as Appendix A to this report. B. Scope of Engagement

7. I have been retained by Calderwood & Harkness LLP on behalf of Stonefield Logistics Group Inc. ("Stonefield," "SLG," or "Defendant") to serve as a testifying expert in connection with the damages claims asserted by Vantor Holdings Corp. ("Vantor" or "VHC") and its subsidiary, Vantor Transport Services LLC ("VTS"), in this litigation. My engagement has been specifically focused on rebutting the expert report of Dr.

8. The scope of my engagement encompasses the following tasks: (i) Evaluating the methodology and conclusions of Dr. Trask's damages analysis, including his calculation of liquidated damages, lost profits, stranded asset costs, workforce reduction costs, and mitigation costs; (ii) Providing an independent economic assessment of any damages, if any, that Vantor may have suffered as a result of the termination of the T

9. In performing my analysis, I have been assisted by Michael Chung, Senior Analyst at Kensington Analytics Group LLC. Mr. Chung has performed data collection, financial modeling, and computational analysis under my direction and supervision. All opinions expressed in this report are my own. C. Summary of Opinions

10. Based on my review of the record evidence, my independent economic analysis, and my professional judgment, I have formed the following opinions, each of which I hold to a reasonable degree of economic certainty: Opinion 1: If Stonefield's termination of the TSA was valid "for Cause" under Section 13.1(a) of the TSA—an issue that is ultimately a legal determination for the Court—then Vantor Transport Services LLC

11. My hourly rate for this engagement is $625 per hour. Mr. Chung's hourly rate is $375 per hour. These rates are consistent with the standard rates charged by Kensington Analytics for comparable engagements and are not contingent on the opinions I render, the content of my testimony, or the outcome of this litigation. Total fees invoiced to date in connection with this engagement are approximately $214,300. E. Mate

12. In forming my opinions, I have reviewed and considered a substantial body of materials, including contractual documents, correspondence, financial data, deposition transcripts, discovery productions, public market data, and the Trask Report itself. A list of materials considered in forming my opinions is as Appendix B to this key materials I have relied upon include, but are not limited to, the following: • Trans

13. I reserve the right to supplement the materials list set forth in Appendix B as additional materials become available through the completion of outstanding discovery in this matter.

II. BACKGROUND AND FACTUAL FRAMEWORK

14. Before addressing the specific errors in Dr. Trask's damages analysis, it is necessary to set forth the relevant factual and contractual background. The following summary is drawn from the documentary record and deposition testimony I have reviewed in connection with this engagement. A. Overview of the TSA

15. The Transportation Services Agreement at issue in this litigation was executed on March 15, 2019, between Stonefield Logistics Group Inc., acting in its capacity as "Shipper-Broker," and Vantor Transport Services LLC, a wholly-owned subsidiary of Vantor Holdings Corp., acting in its capacity as "Carrier-Provider." The TSA established a five-year contractual relationship with an initial term running from April 1,

16. The TSA included an automatic two-year renewal provision, pursuant to which the agreement would renew for an additional two-year term (through March 31, 2026) unless either party provided written notice of non-renewal at least 180 days prior to the expiration of the initial term. No non-renewal notice was issued by either party prior to the events giving rise to this litigation.

17. The scope of the TSA required VTS to provide dedicated and on-demand truckload transportation services across specified freight lanes in the Northeast, Mid-Atlantic, and Southeast corridors of the United States. The geographic scope and lane designations were set forth in Schedule A to the TSA. VTS was to serve as a primary carrier for SLG's freight tendering operations in these corridors, subject to the volume c

18. Under the TSA, VTS committed to maintaining a minimum fleet capacity of 400 tractors and 1,200 trailers available for SLG freight operations at all times during the term of the agreement. This minimum fleet commitment was a material term of the contract, reflecting the dedicated capacity model upon which SLG's supply chain operations depended.

19. The TSA included an Annual Committed Volume ("ACV") provision pursuant to which SLG committed to tender a minimum of $43.2 million per contract year in transportation charges to VTS. Over the full five-year initial term, this represented a total minimum commitment of $216 million in freight volume. The ACV represented a mutual commitment: SLG committed to tender the minimum volume, and VTS committed to maintain t

20. The rate structure governing the TSA was set forth in Schedule B, which specified per-mile rates by lane category. These rates were subject to annual adjustment pursuant to the Rate Adjustment Mechanism in Section 5.3 of the TSA. Under Section 5.3, per-mile rates were adjusted each April 1, based on a blended index composed of 70% diesel fuel index (U.S. Energy Information Administration weekly retail on-highway

21. The TSA imposed specific Service Level Obligations ("SLOs") on VTS, which were set forth in Section 8 and quantified as measurable performance thresholds. These SLOs represented the minimum operational standards VTS was required to maintain throughout the contract term: (a) On-Time Pickup Rate: Greater than or equal to 95% of all tendered loads picked up within the contractually specified pickup window; (b) On-Ti

22. These SLOs were not aspirational targets; they were contractual obligations, the sustained failure of which could constitute a material breach giving rise to SLG's right to issue a Cure Notice and, ultimately, to terminate the TSA for Cause under Section 13.1(a). B. Overview of TSA Termination

23. On January 18, 2022, Stonefield issued a formal Cure Notice to VTS, delivered from Raymond Hess, Director of Contract Compliance at SLG, to Sandra Milescu, Chief Operating Officer of Vantor and VTS. The Cure Notice identified material breaches by VTS across all five SLO categories during the fourth quarter of 2021 (October 1 through December 31, 2021). The specific performance failures identified in the Cure Noti

24. The Cure Notice triggered a 30-day cure period pursuant to the TSA's cure provisions. That cure period expired on February 17, 2022. During the cure period, VTS submitted a written response dated February 14, 2022, from Derek Pruitt, Vice President of Business Development at Vantor, to Janet Kirkwood, Vice President of Carrier Relations at SLG.

25. The VTS response of February 14, 2022, acknowledged what it characterized as "operational challenges" but asserted that those challenges were caused by factors beyond VTS's control, including a nationwide driver shortage affecting the entire trucking industry, SLG's alleged volume shortfalls relative to the ACV commitment, and SLG's alleged diversion of freight to other carriers. VTS also disputed certain aspects

26. On March 4, 2022, following the expiration of the cure period without cure, SLG terminated the TSA effective immediately for Cause under Section 13.1(a). The termination letter was issued by Tobias Wren, General Counsel of SLG, and cited VTS's sustained failure to meet SLO thresholds across all five categories, VTS's failure to cure those breaches within the contractual cure period, and VTS's failure to maintain

27. One of the most significant facts in the record is VTS's undisclosed, unilateral redeployment of a substantial portion of its committed fleet capacity away from SLG freight operations and toward a different customer account. This fact is central both to the question of whether Stonefield had valid Cause for termination and to the assessment of damages.

28. An internal email dated November 12, 2021, from Sandra Milescu (COO of Vantor and VTS) to Nikolai Vantorovich (CEO of Vantor Holdings Corp.), Bates-stamped VHC-008417, states in relevant part: "We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January."

29. The import of this communication is substantial. First, it confirms that VTS made a deliberate decision to remove 85 tractors—representing more than 21% of its 400-tractor commitment under the TSA—from SLG-dedicated freight operations. Second, the redeployment was concealed from SLG, as reflected in the statement that "SLG won't notice until January." Third, the timing of the redeployment (by November 2021 at the

30. Documents produced in Vantor's supplemental production (VHC-029001 through VHC-033218) confirm that the 85 tractors removed from the SLG account were redirected to VTS's account with Northwind Distribution Co. beginning in October 2021. These fleet redeployment records show a systematic transfer of equipment and driver assignments from SLG-designated lanes to Northwind lanes over the course of approximately three

31. At her deposition on August 4, 2023, Ms. Milescu confirmed the 85-tractor reassignment. She characterized the decision as "temporary" and driven by what she described as "commercial necessity," testifying that Northwind Distribution had threatened to terminate its own contract with VTS if VTS could not provide additional capacity to address seasonal demand. However, Ms. Milescu could not explain why SLG was not n

32. The economic significance of this unilateral redeployment is straightforward. VTS's committed fleet capacity under the TSA was 400 tractors. The removal of 85 tractors reduced VTS's available fleet to approximately 315 tractors, which is 78.75% of the committed capacity—already below the 85% equipment availability threshold. By Q4 2021, when the Cure Notice performance data was measured, the effective fleet had d

33. In short, VTS's own deliberate, undisclosed decision to redirect equipment away from the SLG account was the primary driver of the very SLO failures that gave rise to the Cure Notice and subsequent termination. This fact is critical to any honest damages analysis and is entirely absent from Dr. Trask's report. D. Stonefield's Volume Tendering

34. Because Dr. Trask's report and Vantor's litigation position both rely heavily on the allegation that SLG failed to meet its ACV commitment—and that this failure was a root cause of VTS's performance problems—it is necessary to examine the actual volume tendering history under the TSA.

35. Contract Year 1 (April 2019 – March 2020): SLG tendered the full committed volume during the first contract year. There is no dispute regarding CY1 performance, and no shortfall claim has been asserted by either party for this period.

36. Contract Year 2 (April 2020 – March 2021): Actual freight tenders from SLG to VTS during CY2 totaled approximately $31.8 million. Standing alone, this figure would represent a shortfall of approximately $11.4 million against the unadjusted ACV of $43.2 million. However, Stonefield invoked the force majeure provision of the TSA (Section 12.1) for the period of April 2020 through September 2020, a six-month interva

38. In sum, the volume tendering record does not support Vantor's narrative that SLG systematically underperformed its volume commitment under the TSA. CY1 was fully performed. CY2 exceeded the adjusted ACV by a substantial margin. CY3, when properly annualized, was on pace to meet or exceed the ACV. These facts are relevant both to the validity of VTS's asserted defenses and to the proper calculation of damages.

III. CRITIQUE OF DR. TRASK'S DAMAGES ANALYSIS

39. Having established the relevant factual and contractual framework, I turn to a detailed critique of Dr. Trask's damages analysis. As set forth below, the Trask Report contains at least five fundamental errors, each of which independently inflates the damages figure and, collectively, result in an overstatement of damages by a factor of approximately eleven to one. A. Overview of Dr. Trask's Conclusions

40. Dr. Trask's report, served on May 15, 2023, concludes that Vantor has suffered total damages of $95.4 million as a result of the TSA termination. This figure is comprised of the following components: • Liquidated damages (2 full remaining contract years): $64,800,000, calculated as 75% × $43.2 million × 2 years; • Liquidated damages (partial year, 27 days): $2,430,000, calculated as 75% × $43.2 million × • Total

41. For the reasons set forth below, each of these components is affected by one or more fundamental analytical errors, and the aggregate figure of $95.4 million bears no reasonable relationship to any actual or reasonably anticipated harm suffered by Vantor as a result of the TSA termination. B. Fundamental Error 1: Assumption of Liquidated Damages Enforceability Without Economic Analysis

42. The single largest component of Dr. Trask's damages calculation is his claim for liquidated damages in the amount of $67.23 million, representing over 70% of his total damages figure. Dr. Trask arrives at this number by mechanically applying the liquidated damages formula set forth in Section 14.2 of the TSA. However, Dr. Trask's report simply assumes as a given that the liquidated damages clause is enforceable.

43. Under well-established New York law, which governs the TSA pursuant to its choice-of-law provision, a liquidated damages clause is enforceable only if two conditions are satisfied: (i) the amount liquidated bears a reasonable proportion to the probable loss at the time of contracting, and (ii) actual damages flowing from the breach would be difficult to ascertain. Where the amount fixed is "plainly or grossly dis

44. As an economist, I am not offering legal conclusions regarding the enforceability of the liquidated damages clause. However, I am qualified to, and do, offer an economic opinion on the question of whether the formula produces results that are reasonably proportionate to any actual or anticipated harm. As I demonstrate in Section III.G below, the answer is definitively no. The liquidated damages formula assumes th

45. An expert damages report that claims $67.23 million in liquidated damages without performing any analysis of whether the formula produces economically reasonable results is fundamentally deficient. Dr. Trask essentially invites the Court to enforce the clause without any economic evidence supporting its reasonableness—a position that cannot withstand scrutiny. C. Fundamental Error 2: Duplicative Damages

46. Dr. Trask's report claims both liquidated damages of $67.23 million and lost profits of $18.7 million, for a combined total of $85.93 million on these two categories alone. This approach results in impermissible double recovery and is economically indefensible.

47. Under New York law, a plaintiff cannot recover both liquidated damages and actual damages (including lost profits) arising from the same breach. The purpose of a liquidated damages clause is to serve as a substitute for actual damages—to provide a predetermined measure of recovery in lieu of proof of actual loss. Where a liquidated damages clause is enforceable, it fixes the measure of damages and precludes addit

48. The liquidated damages clause in Section 14.2 of the TSA was plainly intended to be VTS's exclusive remedy for a non-Cause termination by SLG. The clause provides a formula for calculating the "Termination Payment" due upon early termination without Cause, and the structure of the clause indicates that this payment was intended to make VTS whole for the loss of the remaining contract term. Dr. Trask's decision to

49. The logic is straightforward: if the liquidated damages clause is enforceable, the lost profits claim is subsumed within it, and Dr. Trask's separate lost profits calculation should be zeroed out. If the liquidated damages clause is unenforceable (as I believe the economic evidence supports), then only actual damages—properly calculated using a lost-profits methodology—are recoverable, and the $67.23 million figu

50. Dr. Trask's lost profits calculation of $18.7 million is predicated on the assumption that VTS would have earned a 12% operating margin on SLG freight over the remaining contract term. This margin assumption is central to his analysis and, in my opinion, is significantly overstated and unsupported by the evidence.

51. The 12% figure appears to be derived from VTS's self-reported margins on the SLG account, as presented in internal VTS documents. However, Dr. Trask does not independently verify this figure against VTS's audited financial statements, industry benchmark data, or any analysis of the costs VTS would have actually incurred in performing the remaining contract years.

52. My analysis of VTS's audited financials reveals company-wide operating margins that are far lower than 12%: • FY 2021: VTS reported total revenue of approximately $385 million and operating income implying an operating margin of approximately 4.8%. • FY 2022: VTS reported total revenue of approximately $310 million (reflecting the loss of the SLG account and broader freight market softening) and operating income

53. The company-wide operating margin is the most reliable indicator of VTS's expected profitability on a major contract. While Dr. Trask may argue that the SLG account carried above-average margins due to volume density or lane efficiency, a margin of 12%—nearly three times the company-wide average—is extraordinary and requires far more rigorous support than self-reported internal data.

54. Industry benchmarks further undermine Dr. Trask's 12% assumption. Published data from the American Trucking Associations, American Transportation Research Institute, publicly traded comparables in the regional asset-based trucking sector consistently show operating margins in the range of 3% to 7% for well-managed carriers operating in the size and segment profile comparable to A 12% operating margin would place

55. Moreover, Dr. Trask's margin figure fails to adequately account for the variable costs that VTS would have incurred in performing the remaining contract years. These costs include, but are not limited to: fuel costs (which were escalating sharply in 2022 due to energy price volatility); driver compensation (which was rising industry-wide due to the same driver shortage that VTS itself cited as a cause of its perf

56. The difference between 12% and 5.2% is not a rounding error—it is the difference between $18.7 million in lost profits and approximately $3.37 million. Dr. Trask's inflated margin assumption accounts for more than $15 million of his lost profits figure. E. Fundamental Error 4: Failure to Account for Vantor's Own Breaches

57. Perhaps the most striking deficiency in Dr. Trask's analysis is his assumption that VTS would have fully performed the remaining contract term at 100% of SLO standards, earning the full committed volume revenue of $43.2 million per year for the remaining approximately 2.07 years. This assumption is flatly contradicted by the undisputed evidence in the record.

58. As detailed in Section II.C above, by Q4 2021 VTS was failing all five SLOs, in many cases by substantial margins. Its on-time pickup rate was 78.2% (versus a 95% requirement); its on-time delivery rate was 81.6% (versus 93%); its tender acceptance rate was 71.4% (versus 90%); its equipment availability was 62% (versus 85%); and its cargo claims ratio was 1.07% (versus 0.5%). These were not minor or transient def