Contract analysis

I. Executive Summary The purpose of this memorandum is to set forth the damages framework applicable to the claims of our client, Crestline Packaging Solutions LLC ("CPS"), against defendants Harlow Chemical Supply Inc. ("Harlow"), Gerald W. Norris ("Norris"), and Kenneth Fielding ("Fielding") arising from the misappropriation of CPS's proprietary barrier coating formulation designated CPS-BC-1147 and related breache

II. Background — Revenue Significance of CPS-BC-1147 An understanding of the commercial significance of the CPS-BC-1147 formulation to CPS's business is essential context for the damages analysis. The magnitude of CPS's investment in and revenue dependence on this product line directly informs the harm caused by Harlow's misappropriation. Product Description. CPS-BC-1147 is a water-based, high-performance barrier coa

III. Factual Predicate for Damages A. The Tolling Relationship and Misappropriation CPS and Harlow entered into a Toll Manufacturing Agreement on March 15, 2017 (the "TMA"), pursuant to which Harlow agreed to blend, package, and ship CPS-BC-1147 at Harlow's manufacturing facility in Terre Haute, Indiana, on behalf of CPS and in accordance with CPS's specifications. The tolling arrangement was a standard outsourced ma

1. Pinnacle Flexible Films LLC

4. TerraFold Industries LLC These five accounts represent a significant portion of CPS's CPS-BC-1147 customer base and include several of CPS's largest-volume purchasers. The pattern of solicitation is not random; it reflects a deliberate, systematic effort to target CPS's existing customer relationships using a product that is, as demonstrated by the forensic analysis, a near-identical copy of CPS's trade secret for

1. Count 1 — Misappropriation of Trade Secrets (DTSA): Misappropriation of the CPS-BC-1147 trade secret formulation in violation of the Defend Trade Secrets Act, 18 U.S.C. §§ 1836–1839.

2. Count 2 — Misappropriation of Trade Secrets (Ohio UTSA): Misappropriation of the CPS-BC-1147 trade secret formulation in violation of the Ohio Uniform Trade Secrets Act, Ohio Rev. Code §§ 1333.61–1333.69.

3. Count 3 — Breach of Contract: Breach of the TMA, specifically Sections 7 (Confidentiality), 8.2 (Reverse Engineering Prohibition), 9.1 (Post-Termination Non-Compete), and 9.3 (Customer Non-Solicitation).

4. Count 4 — Tortious Interference with Business Relationships: Intentional interference with CPS's existing and prospective business relationships with its CPS-BC-1147 customers through the solicitation of those customers using a misappropriated product.

5. Count 5 — Unjust Enrichment: Equitable claim for disgorgement of profits Harlow derived from its wrongful use of CPS's trade secret formulation. Discovery is currently underway. Harlow is estimated to produce approximately 42,000 documents, and CPS is anticipated to produce approximately 18,000 documents. Depositions of key witnesses are scheduled for the May through July 2024 time frame, including depositions of

IV. Damages Framework This section sets forth the three primary categories of compensatory damages, the legal basis and quantification methodology for each, and the preliminary estimates that will inform the scope of the Meridian Forensic expert report. A. Category 1 — CPS's Lost Profits from Diverted Sales Legal Basis. CPS's lost profits claim is supported by multiple legal theories. Under the DTSA, 18 U.S.C. § 1836

2. Pinnacle Flexible Films LLC

5. TerraFold Industries LLC Additional affected customers may be identified as discovery progresses, particularly through production of Harlow's ShieldCoat Pro 900 customer lists and Amanda Trent's sales records and communications. Quantification Methodology. The lost profits analysis will employ a "but for" methodology, comparing CPS's actual revenues and contribution margins from the affected customer accounts for

V. Exemplary / Punitive Damages A. DTSA Exemplary Damages Under 18 U.S.C. § 1836(b)(3)(C), if the court finds that the trade secret was "willfully and maliciously misappropriated," the court may award exemplary damages in an amount not more than two times the amount of compensatory damages awarded under subsection (b)(3)(B). This provision is designed to punish and deter particularly egregious conduct that goes beyon

VI. Attorneys' Fees A. DTSA Attorneys' Fees Under 18 U.S.C. § 1836(b)(3)(D), in a case of willful and malicious misappropriation, the court may award reasonable attorney's fees to the prevailing party. This is a discretionary, not mandatory, fee-shifting provision; its availability depends on the same finding of willfulness and malice required for exemplary damages. The same evidence supporting the exemplary damages

VII. Coordination with Meridian Forensic Consulting Group LLC A. Expert Engagement Jeffrey Callahan, CPA/ABV, CFF, a Principal at Meridian Forensic Consulting Group LLC, has been retained as CPS's economic damages expert. Mr. Callahan is a certified public accountant with accreditation in business valuation (ABV) and certification in financial forensics (CFF) from the American Institute of Certified Public Accountant

1. CPS Financial Records. • CPS-BC-1147 revenue detail by customer for fiscal years 2020 through 2024, including unit volumes (in pounds), pricing per pound, and total revenue per customer per period. • CPS-BC-1147 cost-of-goods-sold and contribution margin data, including detailed breakdowns of raw material costs, direct manufacturing labor, variable manufacturing overhead, packaging, freight, and sales commissions.

2. CPS Customer Records. • CPS's complete customer list for CPS-BC-1147, including all active and former customers. • Customer-specific volume and revenue data for the five identified affected customers (Mapleridge Paper Corp., Pinnacle Flexible Films LLC, Orion Paperboard Inc., Great River Packaging Co., and TerraFold Industries LLC), as well as for any additional customers identified as affected during discovery. •

3. Harlow discovery Production. • ShieldCoat Pro 900 sales records, invoices, customer lists, pricing data, and volume data, as produced by Harlow in discovery. • Harlow financial records for the ShieldCoat Pro 900 product line, including revenue, cost of goods sold, gross margin, and net profit data. • Amanda Trent's sales and solicitation records, including emails, text messages, sales call notes, proposals, and cu

4. TMA and Tolling Data. • The executed Toll Manufacturing Agreement dated March 15, 2017, including all amendments and schedules. • Tolling fee schedules, including the $0.38 per pound rate and any adjustments during the term of the TMA. • Calendar year 2022 production records reflecting the approximately 9.4 million pounds tolled by Harlow for CPS. • Termination correspondence, including the termination notice and

5. Thornburg Analytics Report. • The preliminary forensic chemical analysis report dated December 22, 2023, prepared by Dr. Elena Vasquez of Thornburg Analytics LLC, to establish the factual predicate that ShieldCoat Pro 900 is derived from CPS-BC-1147. This report is foundational to the damages analysis because it establishes the causal link between the misappropriation and Harlow's competing product.

6. R&D Investment Records. • Documentation of CPS's approximately $3.8 million investment in developing CPS-BC-1147, including R&D budgets, equipment purchase records, personnel costs allocable to the development program, raw material trial costs, pilot-line testing expenses, and FDA compliance testing costs. These records are relevant to the reasonable royalty alternative analysis (discussed in Section VIII below) a

1. Lost Profits Analysis (Category 1). A detailed, customer-by-customer analysis of CPS's lost profits from diverted sales of CPS-BC-1147, employing a "but for" methodology and supported by customer-specific volume data, pricing data, and contribution margin calculations.

2. Unjust Enrichment / Disgorgement Analysis (Category 2). An analysis of Harlow's net profits from ShieldCoat Pro 900 sales, with proper allocation to avoid overlap with the lost profits analysis (i.e., disgorgement should capture only profits not already accounted for as CPS lost profits).

3. Price Erosion Analysis (Category 3). A before-and-after pricing comparison quantifying the reduction in CPS's realized pricing for CPS-BC-1147 attributable to the competitive pressure from ShieldCoat Pro 900, applied to actual volumes sold to the affected customer base.

4. Total Compensatory Damages Range. A summary of total compensatory damages across all three categories, with clearly stated supporting assumptions, a detailed description of the methodologies employed, and a sensitivity analysis showing the impact of key variable assumptions on the total damages figure.

5. Willfulness Factors. A discussion of the factual indicators of willful and malicious misappropriation, to support CPS's briefing on exemplary damages. This section should address the deliberateness of the reverse engineering, the violation of contractual prohibitions, the systematic nature of customer solicitation, and the concealment of the misappropriation. This section is intended for use in legal briefing, not

6. Alternative Reasonable Royalty Calculation. As a floor and fallback damages theory, a calculation of the reasonable royalty that a willing licensor (CPS) and a willing licensee (Harlow) would have agreed upon for the right to use the CPS-BC-1147 formulation, taking into account the factors discussed in Section VIII below. This analysis should be included even though the primary theories (lost profits, unjust enric

VIII. Alternative Damages Theory — Reasonable Royalty Under both the DTSA, 18 U.S.C. § 1836(b)(3)(B)(ii), and the Ohio UTSA, Ohio Rev. Code § 1333.63(A), if actual loss and unjust enrichment are not adequately provable, the court may impose liability measured by "a reasonable royalty for the misappropriator's unauthorized disclosure or use of the trade secret." A reasonable royalty analysis provides a floor on damage

IX. Damages Relating to Breach of Contract Claims In addition to the trade secret damages discussed above, CPS's breach of contract claims (Count 3) provide an independent basis for compensatory damages. While there is significant overlap between the trade secret damages and the contract damages — because much of the same conduct underlies both theories — the contract claims warrant separate analysis because they are