Contract analysis

I. INTRODUCTION AND SUMMARY OF NEXFORD'S POSITION Nexford Industrial Holdings Inc. ("Nexford" or "NIH"), a Delaware corporation headquartered in Waukegan, Illinois, respectfully submits this Confidential Mediation Brief in advance of the August 2, 2023 mediation session before the Honorable Catherine Lindström (Ret.). This submission is intended to provide the Mediator with a comprehensive overview of the factual bac

II. BACKGROUND AND PARTIES A. Nexford Industrial Holdings Inc. Nexford Industrial Holdings Inc. is a Delaware corporation with its principal place of business at 4200 West Lakeshore Industrial Parkway, Suite 300, Waukegan, Illinois 60085. Its registered agent in Illinois is CT Statutory Services Inc., located in Springfield, Illinois. Nexford's senior leadership team includes Martin Schaeffer, Chief Executive Officer

III. THE MASTER SUPPLY AGREEMENT A. Key Terms of the MSA The parties' commercial relationship is governed by the Master Supply Agreement bearing reference number MSA-NIH-CPI-2020-001, executed on January 15, 2020, between Nexford (as Buyer) and Cardinal Peak (as Seller). A complete copy of the MSA, including all exhibits, is attached hereto as Exhibit A. The MSA established a three-year supply relationship running fr

Section 7.4 of the MSA is the central provision at issue in this dispute. It reads in its relevant entirety as follows: "Seller may pass through documented raw-material surcharges, including scrap, energy, and alloy surcharges, incurred during the applicable invoice period, provided that (a) Seller delivers to Buyer a Surcharge Notice with supporting documentation no later than fifteen (15) business days after the en

Section 7.4(a) — The 15-Business-Day Notice Requirement. Cardinal Peak's right to collect surcharges is expressly conditioned on the timely delivery of a Surcharge Notice with supporting documentation "no later than fifteen (15) business days after the end of the applicable month." This is not a mere formality or a directory guideline; it is a condition precedent to Cardinal Peak's entitlement to payment. The use of

Section 7.4(b) — Compliance with the Exhibit C Surcharge Methodology. The surcharge amounts must be "calculated in accordance with the methodology set forth in Exhibit C." This is not a suggestion or a general guideline — it is a mandatory computational requirement that channels the surcharge calculation through a specific, objectively verifiable framework. Cardinal Peak's unilateral departure from this methodology i

Section 7.4(c) imposes an absolute ceiling on monthly surcharges absent Nexford's prior written consent: "In no event shall the aggregate monthly surcharge exceed 12% of the applicable Base Price for the relevant product category without prior written consent of Buyer." Applied to the base prices established under Section 7.2, this cap operates as follows: The provision requires "prior written consent of Buyer" to ex

Section 7.4(d) establishes a procedural framework for disputing surcharges: Buyer must notify Seller of any disputed surcharge within thirty (30) calendar days of receipt of the Surcharge Notice. Unresolved disputes are to be escalated to senior officers of the respective parties for negotiation. If the senior officers are unable to resolve the dispute within a further thirty (30) calendar day period, the dispute is

Section 14.3 of the MSA establishes mandatory mediation in Chicago, Illinois as a prerequisite to litigation. No party may initiate litigation until the mediation process has been completed or the parties have reached an impasse. This mediation fulfills the contractual prerequisite of Section 14.3. The Mediator should note, however, that Cardinal Peak filed its Complaint in the Circuit Court of Cook County on August

IV. FACTUAL NARRATIVE — THE SURCHARGE DISPUTE A. The Disputed Period: March 2021 through May 2022 The dispute encompasses a fifteen-month period from March 2021 through May 2022 — a period of significant volatility in steel markets driven by pandemic-related supply chain disruptions, surging demand from infrastructure spending, and energy price fluctuations. During this period, Cardinal Peak issued monthly surcharge

V. PROCEDURAL HISTORY The procedural history of this case confirms that both the factual record and the litigation posture strongly favor Nexford's position. The key milestones are as follows: September 19, 2022: Nexford, through Calderwood & Harkness LLP, filed its Answer and Affirmative Defenses to Cardinal Peak's Complaint. Nexford's affirmative defenses include waiver (Cardinal Peak's failure to comply with condi

VI. NEXFORD'S CONTRACT DEFENSES Nexford's defense rests on three independent but overlapping grounds, each of which eliminates a significant portion of Cardinal Peak's claimed damages. Taken together, these defenses reduce Cardinal Peak's legitimate claim to zero (or, accounting for overlap, to at most $0.21 million above amounts already paid). Each defense is grounded in the plain language of the MSA and supported b

Section 7.4(c) imposes a hard ceiling on monthly surcharges: the aggregate monthly surcharge may not exceed 12% of the applicable Base Price for the relevant product category unless Nexford has provided its "prior written consent." As calculated in Section III.D above, this cap is $74.40 per ton for HRC and $88.80 per ton for CRC. For four months during the disputed period, the surcharges invoiced by Cardinal Peak ex

VII. CRITIQUE OF CARDINAL PEAK'S EXPERT REPORT (DR. THEODORE VOSS, PINNACLE ECONOMICS GROUP LLC) A. Summary of the Voss Report Cardinal Peak's retained damages expert, Dr. Theodore Voss of Pinnacle Economics Group LLC, submitted his expert report on April 12, 2023. Dr. Voss calculates total damages of $5.11 million, consisting of $4.73 million in principal (the full amount of Cardinal Peak's claimed unpaid surcharges

VIII. CARDINAL PEAK'S UNJUST ENRICHMENT AND ACCOUNT STATED CLAIMS ARE MERITLESS In addition to its breach of contract claim, Cardinal Peak has asserted claims for unjust enrichment and account stated. Both claims are legally deficient and should be given no weight in the mediation. A. Unjust Enrichment Under well-settled Illinois law, an unjust enrichment claim cannot be maintained where an express contract governs t

IX. NEXFORD'S WILLINGNESS TO RESOLVE THE DISPUTE A. Litigation Risk Assessment — Nexford's Strengths Nexford's litigation position is strong. The key factors supporting Nexford's confidence in its defenses include: • Plain contractual language. Each of Nexford's three defenses is grounded in the express terms of the MSA. The fifteen-business-day notice requirement, the Exhibit C methodology, and the 12% cap with prio

X. CONCLUSION Cardinal Peak's claimed damages of $4.73 million — and its total demand of $5.11 million including prejudgment interest — are vastly overstated. The claim rests on invoices that were untimely, calculations that departed from the contractual methodology, and surcharges that exceeded the contractual cap without written consent. When the Master Supply Agreement is properly applied, Nexford's maximum additi