Contract analysis

I. EXECUTIVE SUMMARY This memorandum documents the complete arc of Calderwood & Harkness LLP's ("C&H") engagement in the defense of Whitmore Aerospace LLC ("WAL") in ICC Arbitration Case No. 27914/MHM, from initial retention through the issuance of the Partial Award on March 22, 2024. Its purpose is to capture the key strategic decisions made throughout the engagement, summarize hearing outcomes and the Tribunal's fi

II. ENGAGEMENT OVERVIEW A. Retention and Staffing Calderwood & Harkness LLP was retained to represent WAL in connection with the anticipated ICC arbitration proceedings pursuant to an engagement letter dated November 2, 2022, addressed to Dana Prescott, Vice President and General Counsel of WAL. The engagement was assigned Engagement Number 1019-00001 in the firm's matter management system. The engagement team was st

III. FACTUAL BACKGROUND AND CONTRACTUAL FRAMEWORK A. The Master Supply Agreement The Master Supply Agreement for Titanium Alloy Turbine Housings (reference WAL-KDG-MSA-2018-0615) (the "MSA") was executed on June 15, 2018, between WAL, as Buyer, and Kestrel, as Seller. The MSA established the framework for Kestrel's manufacture and supply of Ti-6Al-4V ELI (Extra Low Interstitials) titanium alloy turbine housings in ac

Section 8.4 — Rejection and Cure. Section 8.4 of the MSA established the framework for lot rejections and the Seller's right to cure. Under this provision, if WAL rejected a lot for non-conformance with the applicable engineering specifications, Kestrel was afforded a period of thirty calendar days (subsequently extended to forty-five calendar days by Amendment No. 2) to cure the deficiency by either replacing the no

Section 8.7 — Exclusive Remedy and Consequential Damages Waiver. Section 8.7 established the exclusive remedies available to WAL in the event of non-conformance: replacement of defective units, credit against future orders, or termination of the MSA upon the occurrence of a Persistent Quality Failure. Importantly, Section 8.7 included a mutual waiver of consequential damages, including but not limited to lost profits

Section 14.2 — Termination for Cause. Section 14.2 set forth two independent bases for termination for cause: (a) material breach that remains uncured for sixty days following delivery of written notice specifying the breach; or (b) the occurrence of a Persistent Quality Failure as defined in Section 8.4. WAL's termination was predicated on Section 14.2(b), the Persistent Quality Failure ground. Porosity Specificatio

IV. PROCEDURAL HISTORY A. Pre-Arbitration Steps The procedural sequence of events leading up to the commencement of the arbitration is summarized as follows: • October 3, 2022: WAL issued its Notice of Termination for Cause to Kestrel, invoking Section 14.2(b) of the MSA on the basis of Persistent Quality Failure. The notice was prepared by WAL's in-house legal team and delivered to Kestrel at its registered address

V. KEY STRATEGIC DECISIONS AND ANALYSIS This section records the principal strategic decisions made during the course of the engagement, together with the rationale for each decision and, where relevant, an assessment of how each decision contributed to the outcome. A. Dual-Track Defense Strategy At the outset of the engagement, the team made the strategic decision to pursue a dual-track approach: a robust substantiv

VI. THE PARTIAL AWARD — MARCH 22, 2024 A. Tribunal's Key Findings The Tribunal issued its Partial Award on March 22, 2024. The Award was unanimous and addressed all claims and the counterclaim on the merits. The Tribunal's key findings are summarized as follows:

1. WAL Did Not Commit Material Breach of the MSA. The Tribunal found, by a preponderance of the evidence, that the lots rejected by WAL failed to meet the contractual porosity specification of ≤0.25% set forth in WAL-SPEC-TH-401, Appendix C, Table 3. In reaching this conclusion, the Tribunal credited the metallurgical analysis of Dr. Raymond Chow (WAL's expert) over that of Dr. Kessler (Kestrel's expert), finding tha

2. WAL's Termination for Persistent Quality Failure Was Proper. The Tribunal found that WAL's termination of the MSA for cause under Section 14.2(b) was both procedurally and substantively proper. Seven uncured lot rejections within a rolling twelve-month period exceeded the three-rejection Persistent Quality Failure threshold established by Section 8.4 of the MSA. The Tribunal rejected Kestrel's argument that WAL ha

3. WAL Did Not Apply Unpublished Specifications. The Tribunal rejected Kestrel's assertion that WAL had applied an unpublished, more stringent porosity standard of ≤0.15%. The Tribunal found that the ≤0.25% standard is expressly stated in WAL-SPEC-TH-401, Appendix C, Table 3, that this standard was incorporated by reference into the MSA, and that no credible evidence supported Kestrel's contention that WAL deviated f

4. All of Kestrel's Damages Claims Dismissed in Their Entirety. The Tribunal dismissed each of Kestrel's four categories of claimed damages: (a) Lost Profits — Remaining Contract Term (€12.83M): Dismissed. The Tribunal found that because WAL's termination was proper, Kestrel had no entitlement to lost profits for the remaining term of the MSA. Additionally, the Tribunal found that lost profits constituted consequenti

VII. FINANCIAL SUMMARY — ENGAGEMENT ECONOMICS A. Fees and Disbursements The following table summarizes the total fees and disbursements billed during the engagement: The costs and disbursements of $634,700 include the following principal categories: expert fees paid to Ridgeline Economic Consulting LLC (Dr. Ostrovsky), Arclight Materials Science Inc. (Dr. Chow), and Canfield & Thorpe LLP (Sandra Gillespie); hearing-r

VIII. LESSONS LEARNED This section records the key lessons learned from the engagement, both for the benefit of the C&H team and for future reference in similar international arbitration and commercial dispute matters. A. Importance of Robust Quality Documentation WAL's meticulous maintenance of incoming inspection records under its quality-control procedure WAL-QCP-100, with detailed lot-by-lot porosity testing docu