1006-00005 · Crestline Packaging Solutions LLC · Memoranda

initial-case-assessment-memo.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

MEMORANDUM

I. EXECUTIVE SUMMARY

Calderwood & Harkness LLP ("C&H" or "the Firm") was retained by Crestline Packaging Solutions LLC ("CPS" or "Crestline") effective June 1, 2021 (Matter No. 1006-00005) to pursue recovery of $1,847,632.19 in freight invoice overcharges against Ridgeway Freight Services Inc. ("Ridgeway"). This memorandum sets forth our preliminary assessment of the relevant facts, applicable law, claims, anticipated defenses, potential damages, and recommended litigation strategy.

Our assessment is based on an initial review of the following materials and sources of information: (i) the Master Transportation Services Agreement dated April 15, 2019 (the "MTSA"), including all exhibits and appendices thereto; (ii) invoice records for all freight services rendered by Ridgeway during the period February 2019 through March 2021; (iii) CPS's internal audit findings and supporting workpapers; and (iv) detailed interviews with CPS's supply chain and finance personnel — specifically Patricia Sung (VP of Supply Chain & Logistics), Dennis Yurkovich (CFO), Harold Inman (General Counsel), and Margaret Ashford (CEO & President) — conducted during an in-person meeting held on May 21, 2021 at CPS headquarters in Dayton, Ohio.

Based on this preliminary review, it is our assessment that CPS possesses strong claims for breach of contract and money had and received against Ridgeway, with a viable statutory and common-law fraud claim under the Texas Business & Commerce Code §27.01 and general Texas common-law fraud principles. The overcharges at issue span a 26-month period — February 2019 through March 2021 — and are documented across four distinct categories: (1) inflated per-mile rates; (2) improper fuel surcharge calculations; (3) unauthorized accessorial charges; and (4) duplicate invoices. The systematic nature of these overcharges, affecting approximately 42.8% of all invoices rendered during the relevant period, strongly suggests a deliberate billing scheme rather than isolated or inadvertent errors.

We anticipate that Ridgeway's principal defense will be an assertion that the parties orally agreed to modify the contractual rate schedule. This defense is weak. The MTSA contains an express no-oral-modification clause at §15.1 requiring all amendments to be memorialized in a writing signed by both parties, and no CPS personnel authorized any changes to the rate schedule — a fact confirmed through our interviews with each of the key CPS principals identified above.

The purpose of this memorandum is to provide Francesca Morano and Samuel Eklund with a comprehensive preliminary assessment to support a decision on next steps, including the issuance of a pre-suit demand letter, the retention of a forensic accounting expert, and the preparation and filing of an Original Petition in Tarrant County, Texas.

II. FACTUAL BACKGROUND

A. The Parties

1. Crestline Packaging Solutions LLC (Plaintiff / Client). Crestline Packaging Solutions LLC is an Ohio limited liability company with its principal place of business at 4500 Needmore Road, Dayton, Ohio 45424. CPS operates in the specialty packaging manufacturing sector, with core competencies in corrugated packaging, specialty industrial chemical coatings, and chemical barrier films serving the food, pharmaceutical, and industrial end-markets. For fiscal year 2020, CPS reported annual revenue of approximately $218.4 million and employed approximately 1,150 individuals across its operations.

CPS maintains a substantial logistics footprint. The company ships approximately 14,000 truckloads per year from five manufacturing facilities located across Ohio, Indiana, and Texas. Given the volume and geographic breadth of these shipping operations, freight and transportation costs constitute a significant line item in CPS's operating budget, and the reliability and accuracy of carrier billing is a matter of material financial importance to the company.

CPS is a portfolio company of Pinnacle Ridge Capital Partners LP, a Cincinnati-based private equity firm. Pinnacle Ridge acquired CPS in March 2018 for approximately $412 million. The Managing Partner of Pinnacle Ridge is Gerald Fleischmann, who referred CPS to this Firm following the escalation of the freight dispute at issue in this memorandum.

The key CPS principals relevant to this matter are as follows:

• Margaret "Meg" Ashford — CEO & President

• Dennis Yurkovich — Chief Financial Officer

• Patricia Sung — Vice President of Supply Chain & Logistics

• Harold Inman — General Counsel (in-house)

CPS's primary commercial lender is First Buckeye National Bank, based in Columbus, Ohio. The relationship manager on the CPS account is Andrea Kimball. CPS's registered agent is CT Statutory Trust Company, 1300 East 9th Street, Cleveland, Ohio 44114. CPS's employer identification number is 31-1847290.

2. Ridgeway Freight Services Inc. (Defendant / Counterparty). Ridgeway Freight Services Inc. is a Texas corporation with its headquarters at 7200 East Lancaster Avenue, Fort Worth, Texas 76112. Ridgeway operates as a third-party logistics provider, offering full truckload ("FTL") and less-than-truckload ("LTL") freight brokerage and carriage services. Its primary service territory encompasses the southern United States and the Midwest corridor. For fiscal year 2020, Ridgeway reported annual revenue of approximately $94 million and employed approximately 380 individuals.

Ridgeway was awarded the CPS transportation contract following a competitive request for proposal ("RFP") process conducted in early 2019. Under the resulting MTSA, Ridgeway served as the exclusive LTL and FTL carrier for CPS's Texas manufacturing facility and as the primary carrier for CPS's Ohio and Indiana facilities.

The key Ridgeway principals relevant to this matter are as follows:

• Raymond "Ray" Calder — Founder & Chief Executive Officer

• Brenda Novotny — Chief Operating Officer

• James Whitford — Vice President of Pricing & Rate Management

• Susan Delacroix — Controller

Ridgeway's outside counsel is Bartlett, Hogue & Sinclair LLP, located at 801 Cherry Street, Suite 3400, Fort Worth, Texas 76102. The lead attorney on the CPS matter is Marcus T. Hogue, a partner at the firm, with associate Reyna Villarreal serving as second chair. Ridgeway's registered agent is National Registered Agents of Texas Inc., 1999 Bryan Street, Suite 900, Dallas, Texas 75201. Ridgeway's employer identification number is 75-3291084.

B. The Master Transportation Services Agreement (MTSA)

The governing contract between CPS and Ridgeway is the Master Transportation Services Agreement, which was executed with an effective date of April 15, 2019 (the "MTSA"). The MTSA has an initial term of three years, running from April 15, 2019 through April 14, 2022, with automatic one-year renewal periods absent written notice of non-renewal provided at least 90 days prior to the expiration of the then-current term. The key provisions relevant to this dispute are summarized below.

Rate Schedule (Exhibit B). The MTSA contains an attached rate schedule at Exhibit B, which sets forth the agreed-upon base rates for all FTL and LTL freight movements on a lane-by-lane basis. The principal base rates are as follows:

• FTL Base Rate (Ohio to Texas lane): $2.18 per mile

• FTL Base Rate (Indiana to Texas lane): $2.04 per mile

• FTL Base Rate (Texas to Ohio lane): $2.22 per mile

• LTL Rate (all lanes): $14.60 per hundredweight (cwt) for Class 70 shipments

The MTSA further provides for an annual rate escalator of 2.5%, effective each April 15, applied to base rates only. Critically, the escalator does not apply to the fuel surcharge component. The rate schedule is unambiguous in its terms and does not contemplate any discretionary pricing authority on the part of Ridgeway.

Fuel Surcharge (Exhibit C). The fuel surcharge applicable to each shipment is governed by Exhibit C to the MTSA. The fuel surcharge is pegged to the U.S. Department of Energy ("DOE") Weekly Retail On-Highway Diesel Price and is calculated pursuant to a formula set forth in the exhibit. Exhibit C expressly requires that the fuel surcharge be calculated using the same-week DOE index corresponding to the date of shipment. This provision is important because, as detailed below, Ridgeway systematically used a 7-day lagging index, which produced inflated surcharges during periods of declining diesel prices.

Invoice Terms (§6.1). Ridgeway is required to submit invoices on a weekly basis, with invoices due each Friday. Payment terms are net 30 days from the invoice date.

Audit Rights (§7.4). CPS retains the right to audit Ridgeway's billing records upon 15 business days' written notice. This provision is significant because it contemplates the possibility of billing discrepancies and establishes a contractual mechanism for their identification and resolution.

Dispute Resolution (§11.2). The MTSA sets forth a structured dispute resolution process. CPS must provide written notice of any invoice dispute within 60 days of the invoice date. Upon receipt of such notice, the parties are required to engage in a 30-day good-faith resolution period. If the dispute is not resolved within that period, the aggrieved party may pursue litigation.

Termination for Cause (§9.2). Either party may terminate the MTSA upon 30 days' written notice if the other party commits a material breach that remains uncured following notice.

Interest on Overdue Amounts (§10.3). Any amounts overdue under the MTSA bear interest at a rate of 1.5% per month. This provision is relevant to CPS's claim for contractual interest on the overcharged amounts, as Ridgeway has held these funds since the dates of the respective overpayments.

Modification (§15.1). All amendments to the MTSA must be in writing and signed by both parties. The MTSA contains no provision for oral modification. This clause is critical to CPS's position, as it forecloses Ridgeway's anticipated defense that the rate schedule was orally amended.

Governing Law (§14.3). The MTSA is governed by the laws of the State of Texas.

Forum Selection (§14.4). Any litigation arising out of or relating to the MTSA is to be brought in a court of competent jurisdiction in Tarrant County, Texas.

C. The Overcharges

The overcharges at issue span a 26-month period, from February 2019 through March 2021. During this period, Ridgeway submitted a total of 9,843 invoices to CPS, for a combined invoiced amount of $12,318,209.46. Based on CPS's internal audit — which reconciled each invoice against the applicable rates set forth in Exhibit B and the fuel surcharge formula in Exhibit C — the correct amount that should have been invoiced under the MTSA was $10,470,577.27. The resulting total overcharge is $1,847,632.19, representing an overbilling rate of approximately 15.0%.

The overcharges fall into four distinct categories, each of which reflects a different type of billing irregularity:

Category 1: Inflated Per-Mile Rates — $1,104,891.53. This is the largest category of overcharges and accounts for approximately 59.8% of the total disputed amount. CPS's internal audit identified 4,217 of the 9,843 total invoices (approximately 42.8%) on which Ridgeway applied per-mile rates that exceeded the Exhibit B schedule by 8% to 12%. These inflated rates were not consistent with any permissible escalator or adjustment under the MTSA. They were applied across all lanes — Ohio to Texas, Indiana to Texas, and Texas to Ohio — and persisted throughout the entire 26-month period. The scope and consistency of the inflation strongly suggest that the rate adjustments were programmed into Ridgeway's billing system rather than applied on an ad hoc basis.

Category 2: Improper Fuel Surcharge Calculation — $387,412.66. This category accounts for approximately 21.0% of the total overcharges. The MTSA (Exhibit C) requires that the fuel surcharge be calculated using the DOE Weekly Retail On-Highway Diesel Price index for the same week as the shipment date. Ridgeway's billing records indicate that it instead used a 7-day lagging index — that is, the DOE index from the week preceding the shipment date. This methodology systematically inflated the fuel surcharge during periods when diesel prices were falling, because the lagging index captured higher prices than those in effect during the actual week of shipment. This discrepancy was consistent across all invoices during periods of declining diesel prices and appears to have been a systemic feature of Ridgeway's fuel surcharge calculation methodology.

Category 3: Unauthorized Accessorial Charges — $241,008.00. This category accounts for approximately 13.0% of the total overcharges. Ridgeway billed CPS for various accessorial services — including liftgate use, detention time, and re-delivery fees — that are not supported by corresponding delivery documentation. Under the MTSA, accessorial charges are permissible only when supported by proper documentation evidencing that the accessorial service was actually performed. CPS's audit team cross-referenced Ridgeway's accessorial charges against delivery receipts, driver logs, and facility records and was unable to identify supporting documentation for $241,008.00 in accessorial fees. In many instances, liftgate charges were billed for shipments delivered to CPS facilities that do not have liftgate-equipped docks, and detention charges were billed for deliveries completed within the standard unloading window.

Category 4: Duplicate Invoices — $114,320.00. This category accounts for approximately 6.2% of the total overcharges. CPS identified 83 instances in which identical invoices were submitted by Ridgeway and paid by CPS's accounts payable department twice. The duplicate invoices bore different invoice numbers but identical shipment dates, shipment reference numbers, origin/destination pairs, and dollar amounts. The duplication appears to have resulted from a combination of billing system errors and a failure of internal controls at Ridgeway, though the high number of duplicates — 83 over a 26-month period — raises questions about whether the duplication was inadvertent.

Reconciliation of Overcharge Categories. The four categories total as follows:

$1,104,891.53 + $387,412.66 + $241,008.00 + $114,320.00 = $1,847,632.19

This figure reconciles with the difference between the total amount invoiced ($12,318,209.46) and the correct contractual amount ($10,470,577.27).

It is important to note that these figures are based on CPS's internal audit and are therefore preliminary in nature. While we have reviewed the audit methodology and believe it to be sound, we strongly recommend the retention of an independent forensic accounting firm to verify these findings and prepare a report suitable for use in litigation. The independent verification will be essential for purposes of expert testimony, dispositive motions, and trial.

D. Discovery of Overcharges and Pre-Suit Communications

The timeline of events leading from the discovery of the overcharges to the retention of Calderwood & Harkness LLP is summarized below.

October 2020. Patricia Sung, CPS's Vice President of Supply Chain & Logistics, first flagged rate discrepancies during the Q3 2020 budget review process. Ms. Sung observed that actual freight costs were trending significantly higher than budgeted amounts, even after accounting for volume increases and the annual 2.5% rate escalator. She reported her concerns to Dennis Yurkovich, CPS's CFO.

November 12, 2020. Based on Ms. Sung's initial findings, CPS's internal audit team commenced a systematic invoice-by-invoice review of all Ridgeway invoices dating back to the inception of the MTSA. The audit team, led by a senior internal auditor reporting to the CFO, compared each invoice line item against the applicable Exhibit B rate, verified the fuel surcharge calculation against the corresponding DOE index data, cross-referenced accessorial charges against delivery documentation, and checked for duplicate submissions.

January 29, 2021. CPS completed its internal review. The audit identified overcharges totaling $1,412,088.74 — an initial estimate that was subsequently refined to $1,847,632.19 as additional invoices and supporting documentation were reviewed. Dennis Yurkovich authorized the initiation of a formal dispute with Ridgeway.

February 8, 2021. Harold Inman, CPS's General Counsel, sent a written invoice dispute notice to Ridgeway pursuant to MTSA §11.2. The notice identified overcharges totaling $1,412,088.74 (the then-current estimate), described the four categories of billing irregularities, and demanded full reimbursement. The notice was sent via certified mail and email to Ridgeway's corporate headquarters and to the attention of Raymond Calder, CEO, and Brenda Novotny, COO.

February 10, 2021. Ridgeway acknowledged receipt of the dispute notice through a brief email from Brenda Novotny to Harold Inman, indicating that Ridgeway would review the allegations and respond within the contractual 30-day resolution period.

March 12, 2021. The 30-day good-faith resolution period expired. During this period, Ridgeway offered a credit of only $218,500.00, which it characterized as a "goodwill adjustment." Ridgeway denied that any systematic overbilling had occurred, attributing the identified discrepancies to "inadvertent system errors" and what it described as "authorized rate adjustments" that had been discussed between the parties during the course of the business relationship. Ridgeway did not produce any written documentation of any such authorized rate adjustments or any correspondence reflecting the purported discussions.

March 15, 2021. CPS, through Harold Inman, formally rejected the $218,500.00 offer as wholly inadequate. Mr. Inman's rejection letter reiterated that the overcharges were systematic, documented, and in clear contravention of the MTSA's rate schedule, and that CPS would pursue all available remedies if the dispute was not resolved in full.

March 22, 2021. CPS issued a 30-day written termination notice under MTSA §9.2, citing Ridgeway's material breach of the MTSA through the systematic overbilling described in the February 8, 2021 dispute notice. The notice stated that the termination would become effective on April 22, 2021 unless Ridgeway cured the breach by providing full reimbursement within the 30-day notice period. Ridgeway did not cure the breach.

April 22, 2021. The MTSA terminated. CPS transitioned its freight operations to Redfield Logistics Corp., a new carrier based in Indianapolis, Indiana, which had been engaged by Patricia Sung as a replacement carrier during the 30-day notice period.

E. Engagement of Calderwood & Harkness LLP

May 14, 2021. Harold Inman contacted Francesca Morano at Calderwood & Harkness LLP following a referral from Gerald Fleischmann, Managing Partner of Pinnacle Ridge Capital Partners LP, CPS's private equity sponsor. Mr. Inman described the freight dispute and expressed CPS's desire to retain outside counsel with experience in commercial litigation and transportation industry disputes.

May 21, 2021. Francesca Morano and Samuel Eklund traveled to CPS headquarters in Dayton, Ohio, for an in-person meeting with CPS's leadership team, including Margaret Ashford (CEO), Dennis Yurkovich (CFO), Patricia Sung (VP of Supply Chain & Logistics), and Harold Inman (General Counsel). During this meeting, the C&H team reviewed the internal audit findings in detail, examined representative sample invoices, discussed the pre-suit communications with Ridgeway, and assessed the documentary record available to support CPS's claims.

June 1, 2021. The engagement letter was executed by CPS and Calderwood & Harkness LLP. The matter was opened under Matter No. 1006-00005. The fee arrangement provides for standard hourly rates with a 10% courtesy discount for this inaugural engagement, reflecting the Firm's desire to establish a long-term relationship with CPS and Pinnacle Ridge Capital Partners LP. The applicable hourly rates, after the discount, are as follows:

• Francesca Morano (Partner): $825/hour

• Samuel Eklund (Partner): $795/hour

• Yuki Nakamura (Senior Associate): $475/hour

• Carlos Espinoza (Associate): $395/hour

CPS has provided an evergreen retainer of $75,000.00, which will be held in the Firm's trust account and applied against invoices as rendered. The retainer will be replenished by CPS upon notice from the Firm.

III. APPLICABLE LAW (TEXAS)

The MTSA designates Texas law as the governing law (§14.3). This section sets forth the legal framework applicable to CPS's claims and analyzes the strength of each cause of action.

A. Breach of Contract

Under Texas law, the elements of a breach of contract claim are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach by the defendant; and (4) damages resulting from the breach. See Valero Mktg. & Supply Co. v. Kalama Int'l, 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, no pet.); see also Bartlett v. Schmidt, 33 S.W.3d 35, 38 (Tex. App.—Corpus Christi 2000, pet. denied).

Application to the Facts. Each element of a breach of contract claim is readily established on the facts of this case.

Valid contract. The MTSA is a comprehensive written agreement executed by authorized representatives of both CPS and Ridgeway. It contains definite terms, including an unambiguous rate schedule (Exhibit B), a fuel surcharge formula (Exhibit C), and detailed provisions governing invoicing, payment, audit, and dispute resolution. There is no question as to the validity or enforceability of the MTSA.

Performance by CPS. CPS performed its obligations under the MTSA by, among other things, tendering freight for shipment in accordance with the agreement and paying all invoices in full and on time. CPS paid $12,318,209.46 to Ridgeway during the 26-month period at issue — a sum that exceeded its contractual obligation by $1,847,632.19.

Breach by Ridgeway. Ridgeway breached the MTSA in at least four distinct ways: (i) by billing per-mile rates that exceeded the Exhibit B schedule by 8% to 12% on 4,217 invoices; (ii) by using an incorrect DOE diesel index to calculate fuel surcharges in contravention of the Exhibit C formula; (iii) by billing for accessorial services not supported by delivery documentation; and (iv) by submitting 83 duplicate invoices.

Damages. CPS's damages are the $1,847,632.19 in overcharges it paid to Ridgeway above and beyond the amounts owed under the MTSA's rate schedule. These damages are objectively quantifiable by comparing each invoice to the applicable contractual rate.

This claim is straightforward and strong. The rate discrepancies are objectively verifiable through a mechanical comparison of invoices to the Exhibit B rate schedule and Exhibit C fuel surcharge formula. The breach of contract claim is, in our assessment, susceptible to summary judgment once supported by an independent forensic accounting analysis.

B. Statute of Frauds / No-Oral-Modification Clause

We anticipate that Ridgeway will attempt to defend against the breach of contract claim by asserting that the rate discrepancies identified by CPS resulted from an oral modification to the MTSA — specifically, that the parties informally agreed to adjust the rate schedule during the course of the business relationship. Ridgeway's pre-suit communications alluded to "authorized rate adjustments," although Ridgeway has not identified any specific CPS representative who purportedly authorized such adjustments or produced any documentation supporting the claim.

This defense is weak for several reasons.

First, MTSA §15.1 contains an express no-oral-modification clause, which provides in pertinent part that "[t]his Agreement may not be amended, modified, or supplemented except by a written instrument executed by authorized representatives of both parties." Under Texas law, contractual provisions requiring amendments to be in writing are generally enforceable and will be given effect according to their terms. See Patel v. Ambassador Drycleaning, 86 S.W.3d 304, 307–08 (Tex. App.—Eastland 2002, no pet.) (holding that a no-oral-modification clause precluded evidence of alleged oral amendment); see also Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986) (noting that parties to a written agreement may include provisions requiring that modifications be in writing).

Second, no CPS personnel authorized any oral changes to the rate schedule. This fact has been confirmed through our interviews with each of the relevant CPS principals — Patricia Sung, Harold Inman, and Dennis Yurkovich — each of whom stated unequivocally that no rate adjustments were discussed or agreed upon outside the written terms of the MTSA.

Third, even under the more permissive line of Texas authority holding that no-oral-modification clauses can in certain circumstances be waived by the parties' subsequent conduct, Ridgeway would bear the burden of proving the existence, terms, and consideration for the alleged oral modification. Given the absence of any written documentation, the denial by all CPS personnel, and the breadth of the claimed modifications (affecting over 4,200 invoices across multiple rate categories and lanes), this burden is unlikely to be met.

C. Statutory Fraud — Texas Business & Commerce Code §27.01

Texas Business & Commerce Code §27.01 creates a cause of action for fraud in a "transaction involving real estate or stock in a corporation or joint stock company." However, the statute has been extended by courts to encompass transactions involving "goods" as well. The MTSA involves both the provision of transportation services and the physical carriage of goods — i.e., CPS's packaged products. While freight transportation services may not fall squarely within the traditional definition of "goods," Texas courts have construed "transaction involving goods" broadly, and there is a reasonable basis to argue that the MTSA — which exists for the purpose of transporting CPS's manufactured goods — falls within the statute's scope.

We recommend pleading §27.01 in the alternative. However, the primary fraud theory should rest on common-law fraud, which does not present the same definitional threshold issues.

Common-Law Fraud. Under Texas law, the elements of common-law fraud are: (1) a material misrepresentation; (2) that was false; (3) that the defendant knew was false or made recklessly without knowledge of its truth; (4) that the defendant made with the intent to induce the plaintiff's reliance; (5) that the plaintiff actually and justifiably relied upon; and (6) that caused the plaintiff injury. See Rowan Whitfield CPAs LLP, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001).

Application to the Facts. Each invoice submitted by Ridgeway constitutes an implied representation that the charges therein are calculated in accordance with the MTSA's rate schedule and billing provisions. Where Ridgeway submitted invoices reflecting rates higher than the contractual rates, fuel surcharges calculated using an incorrect index, accessorial charges without documentation, or duplicate invoices, each such invoice contained a material misrepresentation as to the amounts due from CPS.

The systematic nature of the overcharges provides strong circumstantial evidence of scienter. The inflated per-mile rates affected 4,217 of 9,843 total invoices — approximately 42.8% of all billings — over a period of 26 months, across multiple billing categories and service lanes. This pattern is not consistent with isolated or inadvertent errors. Rather, it strongly suggests that the rate inflation was programmed into Ridgeway's billing system as a deliberate scheme to extract excess payments from CPS. Similarly, the consistent use of a 7-day lagging DOE index for fuel surcharge calculations — rather than the same-week index specified in the MTSA — appears to reflect a systemic billing configuration rather than a sporadic data-entry mistake.

It will be critical to obtain discovery of Ridgeway's internal communications, billing system configuration records, and rate change logs to establish scienter definitively. We anticipate that the pricing and rate management department — under the direction of James Whitford (VP of Pricing & Rate Management) — will be a key focus of discovery on this issue.

D. Money Had and Received

Under Texas law, a claim for money had and received is an equitable cause of action that permits recovery when one party holds money that in equity and good conscience belongs to another. See Edwards v. Mid-Continent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex. App.—Dallas 2008, pet. denied). The claim does not require proof of a written contract or fraud; rather, it is based on the principle that a defendant should not be permitted to retain funds to which it has no right.

This claim provides an alternative basis for recovery of the $1,847,632.19 in overpayments. It is particularly useful as a backstop in the event that any technical defense — such as a statute of limitations argument as to particular invoice categories or a challenge to the scope of the MTSA's rate schedule — limits the availability of the breach of contract claim. The money had and received claim allows the court to look beyond the four corners of the contract and assess the equitable circumstances of the parties' financial relationship.

E. Unjust Enrichment

Unjust enrichment provides an additional equitable basis for recovery. Under Texas law, unjust enrichment is available where one party has obtained a benefit from another by fraud, duress, or the taking of an undue advantage, and it would be unconscionable for the benefited party to retain the benefit without payment. See Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).

We will plead unjust enrichment in the alternative to the breach of contract claim. This cause of action is available to the extent that the MTSA does not govern the parties' rights as to any particular overcharge — for example, if Ridgeway were to argue that certain categories of charges fell outside the scope of the MTSA's rate schedule or were governed by separate understandings between the parties.

IV. ANTICIPATED DEFENSES

Based on Ridgeway's pre-suit communications and our analysis of the factual record, we anticipate the following principal defenses.

A. Oral Modification

As discussed in Section III.B above, Ridgeway is likely to assert that CPS orally agreed to adjusted rates during the course of the business relationship. In its March 12, 2021 settlement correspondence, Ridgeway referenced "authorized rate adjustments" without specifying who at CPS purportedly authorized such adjustments or when such authorization was given.

Response. This defense is weak for the reasons stated above. MTSA §15.1 expressly bars oral modifications. No CPS personnel authorized any changes to the rate schedule, as confirmed through detailed interviews with Patricia Sung, Harold Inman, and Dennis Yurkovich. Ridgeway bears the burden of proving the existence, terms, and consideration of the purported modification, and we do not believe it can meet that burden in the face of the contractual prohibition and the unanimous denial by CPS's personnel. Moreover, even if Ridgeway could identify a specific CPS individual who allegedly participated in a rate discussion, that individual would need to have had actual authority to modify the contract — authority that the MTSA reserves to "authorized representatives" acting in writing.

Assessment: Weak defense. Unlikely to survive summary judgment.

B. Waiver / Estoppel

Ridgeway may argue that CPS waived its right to dispute the overcharges by paying the invoices without objection over the 26-month period. The argument would be that CPS's continued payment constituted acquiescence in the rates as billed, thereby estopping CPS from challenging those rates retroactively.

Response. This defense fails for several reasons. First, waiver under Texas law requires an intentional relinquishment of a known right. See Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003). CPS did not intentionally relinquish any right; rather, it paid invoices in the ordinary course of business without knowledge that the invoices contained overcharges. The overcharges were concealed within complex billing that included thousands of invoices, multiple rate categories, and varying fuel surcharge calculations. CPS's routine payment of such invoices — which is the standard practice in commercial freight relationships — does not constitute a knowing waiver of its contractual right to accurate billing.

Second, MTSA §11.2 provides a structured dispute resolution process, including a 60-day window from the invoice date within which disputes may be raised. CPS exercised this right as soon as the pattern of overcharges was identified. The contractual framework contemplates that billing disputes may arise after payment and does not condition the right to dispute on non-payment.

Third, estoppel requires a showing that the party asserting it changed its position in reliance on the other party's conduct. Ridgeway cannot credibly argue that it relied on CPS's payment of overcharged invoices in a way that prejudiced Ridgeway's position; Ridgeway's "reliance" in this context consists of retaining money to which it was not entitled.

Assessment: Weak defense. Unlikely to succeed at trial.

C. Statute of Limitations

The Texas statute of limitations for breach of contract is four years. Tex. Civ. Prac. & Rem. Code §16.004. The statute of limitations for fraud is likewise four years. Id. §16.004(a)(4).

The earliest overcharges at issue date to February 2019. We anticipate filing suit in July 2021, which is approximately two years and five months after the earliest overcharges occurred — well within the four-year limitations period. Even if the matter were delayed, all claims would remain timely if suit is filed before early 2023.

Ridgeway may attempt to invoke the statute of limitations as to claims arising before a particular date. However, because no overcharges predate February 2019 (the MTSA itself was not effective until April 15, 2019, and the earliest overcharges occurred during the onboarding period in February 2019), this argument is meritless as to any claims CPS intends to assert.

Additionally, with respect to the fraud claim, the discovery rule may further extend the limitations period. Under the discovery rule, the limitations period does not commence until the plaintiff knew or, exercising reasonable diligence, should have known of the fraud. The overcharges were not discovered until October 2020, and CPS's failure to detect them earlier is explained by the concealed nature of the overbilling within a high-volume, complex billing relationship.

Assessment: Not a viable defense on these facts.

D. Counterclaim for Early Termination

We anticipate that Ridgeway may assert a counterclaim based on CPS's termination of the MTSA prior to its April 14, 2022 expiration date. Ridgeway would likely characterize the termination as wrongful and seek to recover lost profits on the remaining contract term — approximately 12 months of freight services. Based on Ridgeway's apparent margin on the CPS account, we estimate that such a counterclaim could seek damages in the range of approximately $340,000.

Response. CPS's termination was for cause under MTSA §9.2, which permits termination upon 30 days' written notice when the other party has committed a material breach. CPS provided the required notice on March 22, 2021, citing Ridgeway's systematic overbilling as the material breach. Ridgeway failed to cure the breach within the 30-day notice period, and the MTSA terminated on April 22, 2021. The termination was procedurally and substantively proper under the contract.

Even assuming, arguendo, that the termination were deemed wrongful — which we do not believe is a credible argument given the documented overcharges — Ridgeway would need to establish its lost profits with reasonable certainty. Texas law requires that lost profits be established by competent evidence and cannot be based on speculation or conjecture. See Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992). Given the disputed nature of the account, the fact that Ridgeway's revenue from CPS was inflated by the very overcharges at issue, and the inherent uncertainty surrounding future freight volumes, Ridgeway will face a significant evidentiary challenge in proving its counterclaim damages with the requisite certainty.

Assessment: Moderate risk at best. CPS has a strong defense on the merits, and the potential exposure ($340,000) is far outweighed by CPS's affirmative claims ($1,847,632.19 plus interest, fees, and potential exemplary damages).

V. DAMAGES ANALYSIS (PRELIMINARY)

The following table summarizes our preliminary assessment of CPS's potential damages recovery:

Contractual Interest. MTSA §10.3 provides for interest at 1.5% per month on overdue amounts. Because the overcharges constitute amounts improperly collected by Ridgeway, the corresponding overpayments represent amounts that are "overdue" to CPS from the date of each respective payment. We have calculated contractual interest on a rolling basis — applying the 1.5% monthly rate to each overcharge from the date it was paid by CPS — and estimate that approximately $221,715.86 in contractual interest has accrued through the approximate date of the anticipated pre-suit demand letter. Interest continues to accrue at the contractual rate of 1.5% per month, and we estimate total contractual interest through a projected trial date in mid-2022 in the range of $275,000 to $350,000.

Attorneys' Fees. Texas Civil Practice & Remedies Code §38.001 provides for the recovery of reasonable attorneys' fees in a suit founded on a written contract. The statute requires that the claimant present the claim to the opposing party at least 30 days before filing suit and that the opposing party fail to tender payment. See id. §38.002. CPS's February 8, 2021 dispute notice and the pre-suit demand letter to be issued this month will satisfy this presentment requirement. Accordingly, if CPS prevails on its breach of contract claim, it will be entitled to recover its reasonable and necessary attorneys' fees incurred in prosecuting the action.

Exemplary Damages. If CPS can establish its fraud claim by clear and convincing evidence, it may be entitled to recover exemplary (punitive) damages under Texas Civil Practice & Remedies Code §41.003. Exemplary damages under Texas law are subject to the cap set forth in §41.008(b), which limits recovery to the greater of: (i) two times the amount of economic damages, plus an amount equal to any non-economic damages found by the jury up to $750,000; or (ii) $200,000.

In this case, assuming economic damages of $1,847,632.19 and no non-economic damages, the exemplary damages cap would be 2 × $1,847,632.19 = $3,695,264.38. The availability of exemplary damages at this level is a powerful settlement lever. While the ultimate likelihood of a jury awarding the maximum exemplary damages is moderate — such an award would require clear and convincing evidence of fraud, which in turn depends on what discovery reveals about Ridgeway's internal knowledge and intent — the mere possibility of a near-$3.7 million exemplary damages award will meaningfully increase Ridgeway's incentive to negotiate a favorable settlement.

Pre-Judgment Interest. In addition to contractual interest under the MTSA, CPS may be entitled to pre-judgment interest at the statutory rate under Texas law. The availability of statutory pre-judgment interest in addition to contractual interest depends on whether the contractual interest provision is deemed to be the exclusive remedy for the time-value-of-money component of damages. We will research this issue further and advise.

VI. RECOMMENDED STRATEGY

Based on the foregoing analysis, we recommend the following six-part litigation strategy.

1. Pre-Suit Demand

We recommend issuing a detailed pre-suit demand letter addressed to Raymond Calder, CEO of Ridgeway, with a copy to Ridgeway's counsel (Marcus T. Hogue at Bartlett, Hogue & Sinclair LLP). The demand letter should:

(a) Set forth CPS's claims in detail, including a description of each of the four categories of overcharges and the supporting documentation;

(b) Demand full repayment of the overcharge principal ($1,847,632.19) plus contractual interest ($221,715.86 estimated through the demand date), for a total demand of approximately $2,069,348.05;

(d) Include a litigation preservation demand, directing Ridgeway to preserve all billing records, communications, rate files, financial records, and other documents relating to the CPS account;

(e) Satisfy the presentment requirement of Texas Civil Practice & Remedies Code §38.002 for purposes of attorneys' fee recovery; and

(f) Demonstrate good faith and a willingness to resolve the matter short of litigation, which will be relevant to the court's assessment of CPS's reasonableness.

We propose a target send date of the week of June 14, 2021. The demand letter will be prepared by the undersigned and circulated to Francesca Morano and Samuel Eklund for review and approval prior to issuance.

2. Retain Forensic Accountant

We recommend engaging a forensic accounting firm to independently verify CPS's internal audit findings and prepare an expert report suitable for use in litigation. An independent verification is essential for several reasons: it will insulate CPS against challenges to the reliability and objectivity of its internal audit; it will provide the foundation for expert testimony at trial; it will support dispositive motions; and it will lend credibility to CPS's damages claims in settlement negotiations.

We recommend Meridian Forensic Accounting Group LLC, based in Dallas, Texas. The engagement would be led by Nathan Crowley, CPA, CFF, who has substantial experience in freight and logistics billing disputes and has been qualified as an expert witness in numerous cases in Texas state and federal courts. Mr. Crowley's firm has the technical capacity to process and analyze the full universe of 9,843 invoices and to perform a rigorous reconciliation against the MTSA's rate schedule and fuel surcharge formula.

The proposed scope of the engagement would include:

(a) Invoice-by-invoice reconciliation of all 9,843 Ridgeway invoices against the Exhibit B rate schedule and Exhibit C fuel surcharge formula;

(b) Quantification of overcharges by category (inflated per-mile rates, improper fuel surcharge calculation, unauthorized accessorial charges, and duplicate invoices);

(d) Preparation of a comprehensive expert report in compliance with Texas Rule of Civil Procedure 194.2(f); and

(e) Availability for deposition and trial testimony.

We estimate forensic accounting fees in the range of $40,000 to $55,000, depending on the complexity of the data and the extent of any challenges to the analysis. We have obtained a preliminary fee estimate from Mr. Crowley's firm and will forward it to the litigation team for review.

3. File Suit

If the pre-suit demand is rejected or does not produce a satisfactory resolution — which we consider the likely outcome based on Ridgeway's posture in pre-suit negotiations — we recommend filing an Original Petition in the 342nd Judicial District Court, Tarrant County, Texas, consistent with the forum selection clause at MTSA §14.4.

The Original Petition will assert the following causes of action:

(a) Breach of contract — seeking actual damages of $1,847,632.19, contractual interest at 1.5% per month, and attorneys' fees under Texas Civil Practice & Remedies Code §38.001;

(b) Money had and received — seeking recovery of $1,847,632.19 in overpayments held by Ridgeway;

(c) Common-law fraud — seeking actual damages, exemplary damages under Texas Civil Practice & Remedies Code §41.003, and attorneys' fees;

(d) Unjust enrichment — pleaded in the alternative, seeking recovery of the $1,847,632.19 in overpayments to the extent the MTSA does not govern the parties' rights as to any particular overcharge.

The petition will include a jury demand. We recommend proceeding under discovery Control Plan Level 2 pursuant to Texas Rule of Civil Procedure 190.3, which provides an appropriate discovery framework for a case of this complexity and value.

Our target filing date is mid-July 2021, which allows sufficient time for the pre-suit demand process to run its course while ensuring that the case is positioned for prompt advancement once filed.

4. Aggressive discovery

Following the filing of the Original Petition, we will serve comprehensive written discovery targeting the documents, communications, and data necessary to prove CPS's claims and to foreclose Ridgeway's anticipated defenses. Specifically, we will serve interrogatories and requests for production seeking:

(a) Ridgeway's internal billing records and rate files for the CPS account, including all rate tables, rate change histories, and billing system configuration settings;

(b) All communications — internal and external — relating to rate adjustments, rate changes, or pricing for the CPS account, with particular focus on communications within the pricing and rate management department under James Whitford (VP of Pricing & Rate Management);

(c) Billing system configuration settings, rate change logs, and audit trails reflecting when and by whom rate changes were implemented in Ridgeway's systems;

(d) Fuel surcharge calculation workpapers and underlying DOE index data used to calculate fuel surcharges on CPS invoices, including any documentation reflecting the methodology or index selection employed;

(e) Accessorial charge documentation, including delivery receipts, driver logs, detention records, liftgate usage records, and re-delivery records supporting the $241,008.00 in accessorial charges at issue;

(f) Any documents supporting the purported oral modification of the MTSA's rate schedule, including meeting notes, emails, call logs, or memoranda reflecting discussions between CPS and Ridgeway personnel regarding rate changes;

(g) Ridgeway's financial records relating to the CPS account, including profit-and-loss statements, margin analyses, and internal reports;

(h) Documents supporting any counterclaim for early termination damages, including lost profit calculations and assumptions.

The primary objective of the discovery effort is twofold: first, to establish the intentional nature of the overcharges — which is essential to the fraud claim and to the recovery of exemplary damages — and second, to foreclose the oral modification defense by demonstrating the absence of any documented authorization from CPS for rate changes.

We also anticipate deposing the following individuals:

• Raymond Calder (CEO, Ridgeway)

• James Whitford (VP of Pricing & Rate Management, Ridgeway)

• Brenda Novotny (COO, Ridgeway)

• Susan Delacroix (Controller, Ridgeway)

• The individual(s) responsible for configuring and maintaining Ridgeway's billing system

5. Mediation / Settlement Posture

We should be prepared for either court-ordered or voluntary mediation, which is common in Tarrant County commercial litigation. CPS's strong factual and legal position — particularly if discovery yields evidence of intentional rate inflation — should produce a favorable settlement outcome.

We recommend discussing the settlement floor with CPS's leadership and the Pinnacle Ridge team prior to any mediation. As a preliminary recommendation, we suggest establishing a minimum settlement threshold of 80% of the overcharge principal ($1,478,106), plus a meaningful contribution toward attorneys' fees and interest. This threshold balances the strength of CPS's position against the inherent uncertainties and costs of trial and reflects the fact that a settlement within this range would be a highly favorable outcome for CPS.

If the case does not resolve early through mediation or direct negotiation, we recommend filing a motion for summary judgment on the breach of contract claim. Given the objective verifiability of the overcharges, we believe the breach of contract claim is well suited for summary disposition. A successful summary judgment motion — or even a strong motion that appears likely to succeed — will significantly increase CPS's settlement leverage and may prompt Ridgeway to reassess its litigation posture.

6. Target Resolution Timeline

Based on the current posture of the matter and the procedural framework applicable in Tarrant County, we estimate that this matter can be resolved within six to nine months, either through settlement or early dispositive motion. The key milestones are as follows:

We will keep CPS's leadership and in-house counsel informed of all material developments and will provide monthly status reports. If the case proceeds on the timeline outlined above, we anticipate the most likely resolution scenario is a negotiated settlement in the range of Q4 2021 to Q1 2022, following completion of the initial round of discovery and either a mediation or summary judgment motion.

VII. BUDGET ESTIMATE

Based on the foregoing analysis and our assessment of the likely course of this litigation, we estimate total fees and expenses in the range of $250,000 to $400,000, depending on the following variables:

• The extent and contentiousness of discovery, including the number of depositions required and the degree to which Ridgeway resists production of relevant documents;

• Whether dispositive motions (summary judgment) are necessary;

• Whether mediation produces a resolution or whether the case proceeds to trial; and

• The overall duration of the litigation.

The following breakdown provides a more granular estimate by cost category:

We note that the lower end of this range assumes a resolution through mediation or settlement following the initial round of discovery, without the need for dispositive motions or trial preparation. The upper end assumes contested discovery, a summary judgment motion, and some trial preparation, but does not assume a full trial. If the case were to proceed through a multi-day jury trial, fees could exceed the upper end of this range, and we would provide an updated estimate in advance of any trial preparation.

We will provide monthly budget updates to CPS and will advise promptly if the scope of the matter changes in a way that materially affects the budget estimate. The $75,000 evergreen retainer will be applied against invoices as rendered, and we will request replenishment as necessary. All billing will be at the discounted hourly rates set forth in the engagement letter.

VIII. CONCLUSION

Based on our initial review of the facts, the governing contract, the applicable law, and the anticipated defenses, it is our assessment that CPS has strong claims against Ridgeway, supported by documented, quantifiable overcharges totaling $1,847,632.19. The principal areas of strength and our key conclusions are summarized as follows:

CALDERWOOD & HARKNESS LLP
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
MEMORANDUM
I. EXECUTIVE SUMMARY
Calderwood & Harkness LLP ("C&H" or "the Firm") was retained by Crestline Packaging Solutions LLC ("CPS" or "Crestline") effective June 1, 2021 (Matter No. 1006-00005) to pursue recovery of $1,847,632.19 in freight invoice overcharges against Ridgeway Freight Services Inc. ("Ridgeway"). This memorandum sets forth our preliminary assessment of the relevant facts, applicable law, claims, anticipated defenses, potential damages, and recommended litigation strategy.
Our assessment is based on an initial review of the following materials and sources of information: (i) the Master Transportation Services Agreement dated April 15, 2019 (the "MTSA"), including all exhibits and appendices thereto; (ii) invoice records for all freight services rendered by Ridgeway during the period February 2019 through March 2021; (iii) CPS's internal audit findings and supporting workpapers; and (iv) detailed interviews with CPS's supply chain and finance personnel — specifically Patricia Sung (VP of Supply Chain & Logistics), Dennis Yurkovich (CFO), Harold Inman (General Counsel), and Margaret Ashford (CEO & President) — conducted during an in-person meeting held on May 21, 2021 at CPS headquarters in Dayton, Ohio.
Based on this preliminary review, it is our assessment that CPS possesses strong claims for breach of contract and money had and received against Ridgeway, with a viable statutory and common-law fraud claim under the Texas Business & Commerce Code §27.01 and general Texas common-law fraud principles. The overcharges at issue span a 26-month period — February 2019 through March 2021 — and are documented across four distinct categories: (1) inflated per-mile rates; (2) improper fuel surcharge calculations; (3) unauthorized accessorial charges; and (4) duplicate invoices. The systematic nature of these overcharges, affecting approximately 42.8% of all invoices rendered during the relevant period, strongly suggests a deliberate billing scheme rather than isolated or inadvertent errors.
We anticipate that Ridgeway's principal defense will be an assertion that the parties orally agreed to modify the contractual rate schedule. This defense is weak. The MTSA contains an express no-oral-modification clause at §15.1 requiring all amendments to be memorialized in a writing signed by both parties, and no CPS personnel authorized any changes to the rate schedule — a fact confirmed through our interviews with each of the key CPS principals identified above.
The purpose of this memorandum is to provide Francesca Morano and Samuel Eklund with a comprehensive preliminary assessment to support a decision on next steps, including the issuance of a pre-suit demand letter, the retention of a forensic accounting expert, and the preparation and filing of an Original Petition in Tarrant County, Texas.
II. FACTUAL BACKGROUND
A. The Parties
1. Crestline Packaging Solutions LLC (Plaintiff / Client). Crestline Packaging Solutions LLC is an Ohio limited liability company with its principal place of business at 4500 Needmore Road, Dayton, Ohio 45424. CPS operates in the specialty packaging manufacturing sector, with core competencies in corrugated packaging, specialty industrial chemical coatings, and chemical barrier films serving the food, pharmaceutical, and industrial end-markets. For fiscal year 2020, CPS reported annual revenue of approximately $218.4 million and employed approximately 1,150 individuals across its operations.
CPS maintains a substantial logistics footprint. The company ships approximately 14,000 truckloads per year from five manufacturing facilities located across Ohio, Indiana, and Texas. Given the volume and geographic breadth of these shipping operations, freight and transportation costs constitute a significant line item in CPS's operating budget, and the reliability and accuracy of carrier billing is a matter of material financial importance to the company.
CPS is a portfolio company of Pinnacle Ridge Capital Partners LP, a Cincinnati-based private equity firm. Pinnacle Ridge acquired CPS in March 2018 for approximately $412 million. The Managing Partner of Pinnacle Ridge is Gerald Fleischmann, who referred CPS to this Firm following the escalation of the freight dispute at issue in this memorandum.
The key CPS principals relevant to this matter are as follows:
• Margaret "Meg" Ashford — CEO & President
• Dennis Yurkovich — Chief Financial Officer
• Patricia Sung — Vice President of Supply Chain & Logistics
• Harold Inman — General Counsel (in-house)
CPS's primary commercial lender is First Buckeye National Bank, based in Columbus, Ohio. The relationship manager on the CPS account is Andrea Kimball. CPS's registered agent is CT Statutory Trust Company, 1300 East 9th Street, Cleveland, Ohio 44114. CPS's employer identification number is 31-1847290.
2. Ridgeway Freight Services Inc. (Defendant / Counterparty). Ridgeway Freight Services Inc. is a Texas corporation with its headquarters at 7200 East Lancaster Avenue, Fort Worth, Texas 76112. Ridgeway operates as a third-party logistics provider, offering full truckload ("FTL") and less-than-truckload ("LTL") freight brokerage and carriage services. Its primary service territory encompasses the southern United States and the Midwest corridor. For fiscal year 2020, Ridgeway reported annual revenue of approximately $94 million and employed approximately 380 individuals.
Ridgeway was awarded the CPS transportation contract following a competitive request for proposal ("RFP") process conducted in early 2019. Under the resulting MTSA, Ridgeway served as the exclusive LTL and FTL carrier for CPS's Texas manufacturing facility and as the primary carrier for CPS's Ohio and Indiana facilities.
The key Ridgeway principals relevant to this matter are as follows:
• Raymond "Ray" Calder — Founder & Chief Executive Officer
• Brenda Novotny — Chief Operating Officer
• James Whitford — Vice President of Pricing & Rate Management
• Susan Delacroix — Controller
Ridgeway's outside counsel is Bartlett, Hogue & Sinclair LLP, located at 801 Cherry Street, Suite 3400, Fort Worth, Texas 76102. The lead attorney on the CPS matter is Marcus T. Hogue, a partner at the firm, with associate Reyna Villarreal serving as second chair. Ridgeway's registered agent is National Registered Agents of Texas Inc., 1999 Bryan Street, Suite 900, Dallas, Texas 75201. Ridgeway's employer identification number is 75-3291084.
B. The Master Transportation Services Agreement (MTSA)
The governing contract between CPS and Ridgeway is the Master Transportation Services Agreement, which was executed with an effective date of April 15, 2019 (the "MTSA"). The MTSA has an initial term of three years, running from April 15, 2019 through April 14, 2022, with automatic one-year renewal periods absent written notice of non-renewal provided at least 90 days prior to the expiration of the then-current term. The key provisions relevant to this dispute are summarized below.
Rate Schedule (Exhibit B). The MTSA contains an attached rate schedule at Exhibit B, which sets forth the agreed-upon base rates for all FTL and LTL freight movements on a lane-by-lane basis. The principal base rates are as follows:
• FTL Base Rate (Ohio to Texas lane): $2.18 per mile
• FTL Base Rate (Indiana to Texas lane): $2.04 per mile
• FTL Base Rate (Texas to Ohio lane): $2.22 per mile
• LTL Rate (all lanes): $14.60 per hundredweight (cwt) for Class 70 shipments
The MTSA further provides for an annual rate escalator of 2.5%, effective each April 15, applied to base rates only. Critically, the escalator does not apply to the fuel surcharge component. The rate schedule is unambiguous in its terms and does not contemplate any discretionary pricing authority on the part of Ridgeway.
Fuel Surcharge (Exhibit C). The fuel surcharge applicable to each shipment is governed by Exhibit C to the MTSA. The fuel surcharge is pegged to the U.S. Department of Energy ("DOE") Weekly Retail On-Highway Diesel Price and is calculated pursuant to a formula set forth in the exhibit. Exhibit C expressly requires that the fuel surcharge be calculated using the same-week DOE index corresponding to the date of shipment. This provision is important because, as detailed below, Ridgeway systematically used a 7-day lagging index, which produced inflated surcharges during periods of declining diesel prices.
Invoice Terms (§6.1). Ridgeway is required to submit invoices on a weekly basis, with invoices due each Friday. Payment terms are net 30 days from the invoice date.
Audit Rights (§7.4). CPS retains the right to audit Ridgeway's billing records upon 15 business days' written notice. This provision is significant because it contemplates the possibility of billing discrepancies and establishes a contractual mechanism for their identification and resolution.
Dispute Resolution (§11.2). The MTSA sets forth a structured dispute resolution process. CPS must provide written notice of any invoice dispute within 60 days of the invoice date. Upon receipt of such notice, the parties are required to engage in a 30-day good-faith resolution period. If the dispute is not resolved within that period, the aggrieved party may pursue litigation.
Termination for Cause (§9.2). Either party may terminate the MTSA upon 30 days' written notice if the other party commits a material breach that remains uncured following notice.
Interest on Overdue Amounts (§10.3). Any amounts overdue under the MTSA bear interest at a rate of 1.5% per month. This provision is relevant to CPS's claim for contractual interest on the overcharged amounts, as Ridgeway has held these funds since the dates of the respective overpayments.
Modification (§15.1). All amendments to the MTSA must be in writing and signed by both parties. The MTSA contains no provision for oral modification. This clause is critical to CPS's position, as it forecloses Ridgeway's anticipated defense that the rate schedule was orally amended.
Governing Law (§14.3). The MTSA is governed by the laws of the State of Texas.
Forum Selection (§14.4). Any litigation arising out of or relating to the MTSA is to be brought in a court of competent jurisdiction in Tarrant County, Texas.
C. The Overcharges
The overcharges at issue span a 26-month period, from February 2019 through March 2021. During this period, Ridgeway submitted a total of 9,843 invoices to CPS, for a combined invoiced amount of $12,318,209.46. Based on CPS's internal audit — which reconciled each invoice against the applicable rates set forth in Exhibit B and the fuel surcharge formula in Exhibit C — the correct amount that should have been invoiced under the MTSA was $10,470,577.27. The resulting total overcharge is $1,847,632.19, representing an overbilling rate of approximately 15.0%.
The overcharges fall into four distinct categories, each of which reflects a different type of billing irregularity:
Category 1: Inflated Per-Mile Rates — $1,104,891.53. This is the largest category of overcharges and accounts for approximately 59.8% of the total disputed amount. CPS's internal audit identified 4,217 of the 9,843 total invoices (approximately 42.8%) on which Ridgeway applied per-mile rates that exceeded the Exhibit B schedule by 8% to 12%. These inflated rates were not consistent with any permissible escalator or adjustment under the MTSA. They were applied across all lanes — Ohio to Texas, Indiana to Texas, and Texas to Ohio — and persisted throughout the entire 26-month period. The scope and consistency of the inflation strongly suggest that the rate adjustments were programmed into Ridgeway's billing system rather than applied on an ad hoc basis.
Category 2: Improper Fuel Surcharge Calculation — $387,412.66. This category accounts for approximately 21.0% of the total overcharges. The MTSA (Exhibit C) requires that the fuel surcharge be calculated using the DOE Weekly Retail On-Highway Diesel Price index for the same week as the shipment date. Ridgeway's billing records indicate that it instead used a 7-day lagging index — that is, the DOE index from the week preceding the shipment date. This methodology systematically inflated the fuel surcharge during periods when diesel prices were falling, because the lagging index captured higher prices than those in effect during the actual week of shipment. This discrepancy was consistent across all invoices during periods of declining diesel prices and appears to have been a systemic feature of Ridgeway's fuel surcharge calculation methodology.
Category 3: Unauthorized Accessorial Charges — $241,008.00. This category accounts for approximately 13.0% of the total overcharges. Ridgeway billed CPS for various accessorial services — including liftgate use, detention time, and re-delivery fees — that are not supported by corresponding delivery documentation. Under the MTSA, accessorial charges are permissible only when supported by proper documentation evidencing that the accessorial service was actually performed. CPS's audit team cross-referenced Ridgeway's accessorial charges against delivery receipts, driver logs, and facility records and was unable to identify supporting documentation for $241,008.00 in accessorial fees. In many instances, liftgate charges were billed for shipments delivered to CPS facilities that do not have liftgate-equipped docks, and detention charges were billed for deliveries completed within the standard unloading window.
Category 4: Duplicate Invoices — $114,320.00. This category accounts for approximately 6.2% of the total overcharges. CPS identified 83 instances in which identical invoices were submitted by Ridgeway and paid by CPS's accounts payable department twice. The duplicate invoices bore different invoice numbers but identical shipment dates, shipment reference numbers, origin/destination pairs, and dollar amounts. The duplication appears to have resulted from a combination of billing system errors and a failure of internal controls at Ridgeway, though the high number of duplicates — 83 over a 26-month period — raises questions about whether the duplication was inadvertent.
Reconciliation of Overcharge Categories. The four categories total as follows:
$1,104,891.53 + $387,412.66 + $241,008.00 + $114,320.00 = $1,847,632.19
This figure reconciles with the difference between the total amount invoiced ($12,318,209.46) and the correct contractual amount ($10,470,577.27).
It is important to note that these figures are based on CPS's internal audit and are therefore preliminary in nature. While we have reviewed the audit methodology and believe it to be sound, we strongly recommend the retention of an independent forensic accounting firm to verify these findings and prepare a report suitable for use in litigation. The independent verification will be essential for purposes of expert testimony, dispositive motions, and trial.
D. Discovery of Overcharges and Pre-Suit Communications
The timeline of events leading from the discovery of the overcharges to the retention of Calderwood & Harkness LLP is summarized below.
October 2020. Patricia Sung, CPS's Vice President of Supply Chain & Logistics, first flagged rate discrepancies during the Q3 2020 budget review process. Ms. Sung observed that actual freight costs were trending significantly higher than budgeted amounts, even after accounting for volume increases and the annual 2.5% rate escalator. She reported her concerns to Dennis Yurkovich, CPS's CFO.
November 12, 2020. Based on Ms. Sung's initial findings, CPS's internal audit team commenced a systematic invoice-by-invoice review of all Ridgeway invoices dating back to the inception of the MTSA. The audit team, led by a senior internal auditor reporting to the CFO, compared each invoice line item against the applicable Exhibit B rate, verified the fuel surcharge calculation against the corresponding DOE index data, cross-referenced accessorial charges against delivery documentation, and checked for duplicate submissions.
January 29, 2021. CPS completed its internal review. The audit identified overcharges totaling $1,412,088.74 — an initial estimate that was subsequently refined to $1,847,632.19 as additional invoices and supporting documentation were reviewed. Dennis Yurkovich authorized the initiation of a formal dispute with Ridgeway.
February 8, 2021. Harold Inman, CPS's General Counsel, sent a written invoice dispute notice to Ridgeway pursuant to MTSA §11.2. The notice identified overcharges totaling $1,412,088.74 (the then-current estimate), described the four categories of billing irregularities, and demanded full reimbursement. The notice was sent via certified mail and email to Ridgeway's corporate headquarters and to the attention of Raymond Calder, CEO, and Brenda Novotny, COO.
February 10, 2021. Ridgeway acknowledged receipt of the dispute notice through a brief email from Brenda Novotny to Harold Inman, indicating that Ridgeway would review the allegations and respond within the contractual 30-day resolution period.
March 12, 2021. The 30-day good-faith resolution period expired. During this period, Ridgeway offered a credit of only $218,500.00, which it characterized as a "goodwill adjustment." Ridgeway denied that any systematic overbilling had occurred, attributing the identified discrepancies to "inadvertent system errors" and what it described as "authorized rate adjustments" that had been discussed between the parties during the course of the business relationship. Ridgeway did not produce any written documentation of any such authorized rate adjustments or any correspondence reflecting the purported discussions.
March 15, 2021. CPS, through Harold Inman, formally rejected the $218,500.00 offer as wholly inadequate. Mr. Inman's rejection letter reiterated that the overcharges were systematic, documented, and in clear contravention of the MTSA's rate schedule, and that CPS would pursue all available remedies if the dispute was not resolved in full.
March 22, 2021. CPS issued a 30-day written termination notice under MTSA §9.2, citing Ridgeway's material breach of the MTSA through the systematic overbilling described in the February 8, 2021 dispute notice. The notice stated that the termination would become effective on April 22, 2021 unless Ridgeway cured the breach by providing full reimbursement within the 30-day notice period. Ridgeway did not cure the breach.
April 22, 2021. The MTSA terminated. CPS transitioned its freight operations to Redfield Logistics Corp., a new carrier based in Indianapolis, Indiana, which had been engaged by Patricia Sung as a replacement carrier during the 30-day notice period.
E. Engagement of Calderwood & Harkness LLP
May 14, 2021. Harold Inman contacted Francesca Morano at Calderwood & Harkness LLP following a referral from Gerald Fleischmann, Managing Partner of Pinnacle Ridge Capital Partners LP, CPS's private equity sponsor. Mr. Inman described the freight dispute and expressed CPS's desire to retain outside counsel with experience in commercial litigation and transportation industry disputes.
May 21, 2021. Francesca Morano and Samuel Eklund traveled to CPS headquarters in Dayton, Ohio, for an in-person meeting with CPS's leadership team, including Margaret Ashford (CEO), Dennis Yurkovich (CFO), Patricia Sung (VP of Supply Chain & Logistics), and Harold Inman (General Counsel). During this meeting, the C&H team reviewed the internal audit findings in detail, examined representative sample invoices, discussed the pre-suit communications with Ridgeway, and assessed the documentary record available to support CPS's claims.
June 1, 2021. The engagement letter was executed by CPS and Calderwood & Harkness LLP. The matter was opened under Matter No. 1006-00005. The fee arrangement provides for standard hourly rates with a 10% courtesy discount for this inaugural engagement, reflecting the Firm's desire to establish a long-term relationship with CPS and Pinnacle Ridge Capital Partners LP. The applicable hourly rates, after the discount, are as follows:
• Francesca Morano (Partner): $825/hour
• Samuel Eklund (Partner): $795/hour
• Yuki Nakamura (Senior Associate): $475/hour
• Carlos Espinoza (Associate): $395/hour
CPS has provided an evergreen retainer of $75,000.00, which will be held in the Firm's trust account and applied against invoices as rendered. The retainer will be replenished by CPS upon notice from the Firm.
III. APPLICABLE LAW (TEXAS)
The MTSA designates Texas law as the governing law (§14.3). This section sets forth the legal framework applicable to CPS's claims and analyzes the strength of each cause of action.
A. Breach of Contract
Under Texas law, the elements of a breach of contract claim are: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach by the defendant; and (4) damages resulting from the breach. See Valero Mktg. & Supply Co. v. Kalama Int'l, 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, no pet.); see also Bartlett v. Schmidt, 33 S.W.3d 35, 38 (Tex. App.—Corpus Christi 2000, pet. denied).
Application to the Facts. Each element of a breach of contract claim is readily established on the facts of this case.
Valid contract. The MTSA is a comprehensive written agreement executed by authorized representatives of both CPS and Ridgeway. It contains definite terms, including an unambiguous rate schedule (Exhibit B), a fuel surcharge formula (Exhibit C), and detailed provisions governing invoicing, payment, audit, and dispute resolution. There is no question as to the validity or enforceability of the MTSA.
Performance by CPS. CPS performed its obligations under the MTSA by, among other things, tendering freight for shipment in accordance with the agreement and paying all invoices in full and on time. CPS paid $12,318,209.46 to Ridgeway during the 26-month period at issue — a sum that exceeded its contractual obligation by $1,847,632.19.
Breach by Ridgeway. Ridgeway breached the MTSA in at least four distinct ways: (i) by billing per-mile rates that exceeded the Exhibit B schedule by 8% to 12% on 4,217 invoices; (ii) by using an incorrect DOE diesel index to calculate fuel surcharges in contravention of the Exhibit C formula; (iii) by billing for accessorial services not supported by delivery documentation; and (iv) by submitting 83 duplicate invoices.
Damages. CPS's damages are the $1,847,632.19 in overcharges it paid to Ridgeway above and beyond the amounts owed under the MTSA's rate schedule. These damages are objectively quantifiable by comparing each invoice to the applicable contractual rate.
This claim is straightforward and strong. The rate discrepancies are objectively verifiable through a mechanical comparison of invoices to the Exhibit B rate schedule and Exhibit C fuel surcharge formula. The breach of contract claim is, in our assessment, susceptible to summary judgment once supported by an independent forensic accounting analysis.
B. Statute of Frauds / No-Oral-Modification Clause
We anticipate that Ridgeway will attempt to defend against the breach of contract claim by asserting that the rate discrepancies identified by CPS resulted from an oral modification to the MTSA — specifically, that the parties informally agreed to adjust the rate schedule during the course of the business relationship. Ridgeway's pre-suit communications alluded to "authorized rate adjustments," although Ridgeway has not identified any specific CPS representative who purportedly authorized such adjustments or produced any documentation supporting the claim.
This defense is weak for several reasons.
First, MTSA §15.1 contains an express no-oral-modification clause, which provides in pertinent part that "[t]his Agreement may not be amended, modified, or supplemented except by a written instrument executed by authorized representatives of both parties." Under Texas law, contractual provisions requiring amendments to be in writing are generally enforceable and will be given effect according to their terms. See Patel v. Ambassador Drycleaning, 86 S.W.3d 304, 307–08 (Tex. App.—Eastland 2002, no pet.) (holding that a no-oral-modification clause precluded evidence of alleged oral amendment); see also Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986) (noting that parties to a written agreement may include provisions requiring that modifications be in writing).
Second, no CPS personnel authorized any oral changes to the rate schedule. This fact has been confirmed through our interviews with each of the relevant CPS principals — Patricia Sung, Harold Inman, and Dennis Yurkovich — each of whom stated unequivocally that no rate adjustments were discussed or agreed upon outside the written terms of the MTSA.
Third, even under the more permissive line of Texas authority holding that no-oral-modification clauses can in certain circumstances be waived by the parties' subsequent conduct, Ridgeway would bear the burden of proving the existence, terms, and consideration for the alleged oral modification. Given the absence of any written documentation, the denial by all CPS personnel, and the breadth of the claimed modifications (affecting over 4,200 invoices across multiple rate categories and lanes), this burden is unlikely to be met.
C. Statutory Fraud — Texas Business & Commerce Code §27.01
Texas Business & Commerce Code §27.01 creates a cause of action for fraud in a "transaction involving real estate or stock in a corporation or joint stock company." However, the statute has been extended by courts to encompass transactions involving "goods" as well. The MTSA involves both the provision of transportation services and the physical carriage of goods — i.e., CPS's packaged products. While freight transportation services may not fall squarely within the traditional definition of "goods," Texas courts have construed "transaction involving goods" broadly, and there is a reasonable basis to argue that the MTSA — which exists for the purpose of transporting CPS's manufactured goods — falls within the statute's scope.
We recommend pleading §27.01 in the alternative. However, the primary fraud theory should rest on common-law fraud, which does not present the same definitional threshold issues.
Common-Law Fraud. Under Texas law, the elements of common-law fraud are: (1) a material misrepresentation; (2) that was false; (3) that the defendant knew was false or made recklessly without knowledge of its truth; (4) that the defendant made with the intent to induce the plaintiff's reliance; (5) that the plaintiff actually and justifiably relied upon; and (6) that caused the plaintiff injury. See Rowan Whitfield CPAs LLP, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001).
Application to the Facts. Each invoice submitted by Ridgeway constitutes an implied representation that the charges therein are calculated in accordance with the MTSA's rate schedule and billing provisions. Where Ridgeway submitted invoices reflecting rates higher than the contractual rates, fuel surcharges calculated using an incorrect index, accessorial charges without documentation, or duplicate invoices, each such invoice contained a material misrepresentation as to the amounts due from CPS.
The systematic nature of the overcharges provides strong circumstantial evidence of scienter. The inflated per-mile rates affected 4,217 of 9,843 total invoices — approximately 42.8% of all billings — over a period of 26 months, across multiple billing categories and service lanes. This pattern is not consistent with isolated or inadvertent errors. Rather, it strongly suggests that the rate inflation was programmed into Ridgeway's billing system as a deliberate scheme to extract excess payments from CPS. Similarly, the consistent use of a 7-day lagging DOE index for fuel surcharge calculations — rather than the same-week index specified in the MTSA — appears to reflect a systemic billing configuration rather than a sporadic data-entry mistake.
It will be critical to obtain discovery of Ridgeway's internal communications, billing system configuration records, and rate change logs to establish scienter definitively. We anticipate that the pricing and rate management department — under the direction of James Whitford (VP of Pricing & Rate Management) — will be a key focus of discovery on this issue.
D. Money Had and Received
Under Texas law, a claim for money had and received is an equitable cause of action that permits recovery when one party holds money that in equity and good conscience belongs to another. See Edwards v. Mid-Continent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex. App.—Dallas 2008, pet. denied). The claim does not require proof of a written contract or fraud; rather, it is based on the principle that a defendant should not be permitted to retain funds to which it has no right.
This claim provides an alternative basis for recovery of the $1,847,632.19 in overpayments. It is particularly useful as a backstop in the event that any technical defense — such as a statute of limitations argument as to particular invoice categories or a challenge to the scope of the MTSA's rate schedule — limits the availability of the breach of contract claim. The money had and received claim allows the court to look beyond the four corners of the contract and assess the equitable circumstances of the parties' financial relationship.
E. Unjust Enrichment
Unjust enrichment provides an additional equitable basis for recovery. Under Texas law, unjust enrichment is available where one party has obtained a benefit from another by fraud, duress, or the taking of an undue advantage, and it would be unconscionable for the benefited party to retain the benefit without payment. See Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).
We will plead unjust enrichment in the alternative to the breach of contract claim. This cause of action is available to the extent that the MTSA does not govern the parties' rights as to any particular overcharge — for example, if Ridgeway were to argue that certain categories of charges fell outside the scope of the MTSA's rate schedule or were governed by separate understandings between the parties.
IV. ANTICIPATED DEFENSES
Based on Ridgeway's pre-suit communications and our analysis of the factual record, we anticipate the following principal defenses.
A. Oral Modification
As discussed in Section III.B above, Ridgeway is likely to assert that CPS orally agreed to adjusted rates during the course of the business relationship. In its March 12, 2021 settlement correspondence, Ridgeway referenced "authorized rate adjustments" without specifying who at CPS purportedly authorized such adjustments or when such authorization was given.
Response. This defense is weak for the reasons stated above. MTSA §15.1 expressly bars oral modifications. No CPS personnel authorized any changes to the rate schedule, as confirmed through detailed interviews with Patricia Sung, Harold Inman, and Dennis Yurkovich. Ridgeway bears the burden of proving the existence, terms, and consideration of the purported modification, and we do not believe it can meet that burden in the face of the contractual prohibition and the unanimous denial by CPS's personnel. Moreover, even if Ridgeway could identify a specific CPS individual who allegedly participated in a rate discussion, that individual would need to have had actual authority to modify the contract — authority that the MTSA reserves to "authorized representatives" acting in writing.
Assessment: Weak defense. Unlikely to survive summary judgment.
B. Waiver / Estoppel
Ridgeway may argue that CPS waived its right to dispute the overcharges by paying the invoices without objection over the 26-month period. The argument would be that CPS's continued payment constituted acquiescence in the rates as billed, thereby estopping CPS from challenging those rates retroactively.
Response. This defense fails for several reasons. First, waiver under Texas law requires an intentional relinquishment of a known right. See Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003). CPS did not intentionally relinquish any right; rather, it paid invoices in the ordinary course of business without knowledge that the invoices contained overcharges. The overcharges were concealed within complex billing that included thousands of invoices, multiple rate categories, and varying fuel surcharge calculations. CPS's routine payment of such invoices — which is the standard practice in commercial freight relationships — does not constitute a knowing waiver of its contractual right to accurate billing.
Second, MTSA §11.2 provides a structured dispute resolution process, including a 60-day window from the invoice date within which disputes may be raised. CPS exercised this right as soon as the pattern of overcharges was identified. The contractual framework contemplates that billing disputes may arise after payment and does not condition the right to dispute on non-payment.
Third, estoppel requires a showing that the party asserting it changed its position in reliance on the other party's conduct. Ridgeway cannot credibly argue that it relied on CPS's payment of overcharged invoices in a way that prejudiced Ridgeway's position; Ridgeway's "reliance" in this context consists of retaining money to which it was not entitled.
Assessment: Weak defense. Unlikely to succeed at trial.
C. Statute of Limitations
The Texas statute of limitations for breach of contract is four years. Tex. Civ. Prac. & Rem. Code §16.004. The statute of limitations for fraud is likewise four years. Id. §16.004(a)(4).
The earliest overcharges at issue date to February 2019. We anticipate filing suit in July 2021, which is approximately two years and five months after the earliest overcharges occurred — well within the four-year limitations period. Even if the matter were delayed, all claims would remain timely if suit is filed before early 2023.
Ridgeway may attempt to invoke the statute of limitations as to claims arising before a particular date. However, because no overcharges predate February 2019 (the MTSA itself was not effective until April 15, 2019, and the earliest overcharges occurred during the onboarding period in February 2019), this argument is meritless as to any claims CPS intends to assert.
Additionally, with respect to the fraud claim, the discovery rule may further extend the limitations period. Under the discovery rule, the limitations period does not commence until the plaintiff knew or, exercising reasonable diligence, should have known of the fraud. The overcharges were not discovered until October 2020, and CPS's failure to detect them earlier is explained by the concealed nature of the overbilling within a high-volume, complex billing relationship.
Assessment: Not a viable defense on these facts.
D. Counterclaim for Early Termination
We anticipate that Ridgeway may assert a counterclaim based on CPS's termination of the MTSA prior to its April 14, 2022 expiration date. Ridgeway would likely characterize the termination as wrongful and seek to recover lost profits on the remaining contract term — approximately 12 months of freight services. Based on Ridgeway's apparent margin on the CPS account, we estimate that such a counterclaim could seek damages in the range of approximately $340,000.
Response. CPS's termination was for cause under MTSA §9.2, which permits termination upon 30 days' written notice when the other party has committed a material breach. CPS provided the required notice on March 22, 2021, citing Ridgeway's systematic overbilling as the material breach. Ridgeway failed to cure the breach within the 30-day notice period, and the MTSA terminated on April 22, 2021. The termination was procedurally and substantively proper under the contract.
Even assuming, arguendo, that the termination were deemed wrongful — which we do not believe is a credible argument given the documented overcharges — Ridgeway would need to establish its lost profits with reasonable certainty. Texas law requires that lost profits be established by competent evidence and cannot be based on speculation or conjecture. See Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992). Given the disputed nature of the account, the fact that Ridgeway's revenue from CPS was inflated by the very overcharges at issue, and the inherent uncertainty surrounding future freight volumes, Ridgeway will face a significant evidentiary challenge in proving its counterclaim damages with the requisite certainty.
Assessment: Moderate risk at best. CPS has a strong defense on the merits, and the potential exposure ($340,000) is far outweighed by CPS's affirmative claims ($1,847,632.19 plus interest, fees, and potential exemplary damages).
V. DAMAGES ANALYSIS (PRELIMINARY)
The following table summarizes our preliminary assessment of CPS's potential damages recovery:
Contractual Interest. MTSA §10.3 provides for interest at 1.5% per month on overdue amounts. Because the overcharges constitute amounts improperly collected by Ridgeway, the corresponding overpayments represent amounts that are "overdue" to CPS from the date of each respective payment. We have calculated contractual interest on a rolling basis — applying the 1.5% monthly rate to each overcharge from the date it was paid by CPS — and estimate that approximately $221,715.86 in contractual interest has accrued through the approximate date of the anticipated pre-suit demand letter. Interest continues to accrue at the contractual rate of 1.5% per month, and we estimate total contractual interest through a projected trial date in mid-2022 in the range of $275,000 to $350,000.
Attorneys' Fees. Texas Civil Practice & Remedies Code §38.001 provides for the recovery of reasonable attorneys' fees in a suit founded on a written contract. The statute requires that the claimant present the claim to the opposing party at least 30 days before filing suit and that the opposing party fail to tender payment. See id. §38.002. CPS's February 8, 2021 dispute notice and the pre-suit demand letter to be issued this month will satisfy this presentment requirement. Accordingly, if CPS prevails on its breach of contract claim, it will be entitled to recover its reasonable and necessary attorneys' fees incurred in prosecuting the action.
Exemplary Damages. If CPS can establish its fraud claim by clear and convincing evidence, it may be entitled to recover exemplary (punitive) damages under Texas Civil Practice & Remedies Code §41.003. Exemplary damages under Texas law are subject to the cap set forth in §41.008(b), which limits recovery to the greater of: (i) two times the amount of economic damages, plus an amount equal to any non-economic damages found by the jury up to $750,000; or (ii) $200,000.
In this case, assuming economic damages of $1,847,632.19 and no non-economic damages, the exemplary damages cap would be 2 × $1,847,632.19 = $3,695,264.38. The availability of exemplary damages at this level is a powerful settlement lever. While the ultimate likelihood of a jury awarding the maximum exemplary damages is moderate — such an award would require clear and convincing evidence of fraud, which in turn depends on what discovery reveals about Ridgeway's internal knowledge and intent — the mere possibility of a near-$3.7 million exemplary damages award will meaningfully increase Ridgeway's incentive to negotiate a favorable settlement.
Pre-Judgment Interest. In addition to contractual interest under the MTSA, CPS may be entitled to pre-judgment interest at the statutory rate under Texas law. The availability of statutory pre-judgment interest in addition to contractual interest depends on whether the contractual interest provision is deemed to be the exclusive remedy for the time-value-of-money component of damages. We will research this issue further and advise.
VI. RECOMMENDED STRATEGY
Based on the foregoing analysis, we recommend the following six-part litigation strategy.
1. Pre-Suit Demand
We recommend issuing a detailed pre-suit demand letter addressed to Raymond Calder, CEO of Ridgeway, with a copy to Ridgeway's counsel (Marcus T. Hogue at Bartlett, Hogue & Sinclair LLP). The demand letter should:
(a) Set forth CPS's claims in detail, including a description of each of the four categories of overcharges and the supporting documentation;
(b) Demand full repayment of the overcharge principal ($1,847,632.19) plus contractual interest ($221,715.86 estimated through the demand date), for a total demand of approximately $2,069,348.05;
(c) Establish a 14-day deadline for response and payment;
(d) Include a litigation preservation demand, directing Ridgeway to preserve all billing records, communications, rate files, financial records, and other documents relating to the CPS account;
(e) Satisfy the presentment requirement of Texas Civil Practice & Remedies Code §38.002 for purposes of attorneys' fee recovery; and
(f) Demonstrate good faith and a willingness to resolve the matter short of litigation, which will be relevant to the court's assessment of CPS's reasonableness.
We propose a target send date of the week of June 14, 2021. The demand letter will be prepared by the undersigned and circulated to Francesca Morano and Samuel Eklund for review and approval prior to issuance.
2. Retain Forensic Accountant
We recommend engaging a forensic accounting firm to independently verify CPS's internal audit findings and prepare an expert report suitable for use in litigation. An independent verification is essential for several reasons: it will insulate CPS against challenges to the reliability and objectivity of its internal audit; it will provide the foundation for expert testimony at trial; it will support dispositive motions; and it will lend credibility to CPS's damages claims in settlement negotiations.
We recommend Meridian Forensic Accounting Group LLC, based in Dallas, Texas. The engagement would be led by Nathan Crowley, CPA, CFF, who has substantial experience in freight and logistics billing disputes and has been qualified as an expert witness in numerous cases in Texas state and federal courts. Mr. Crowley's firm has the technical capacity to process and analyze the full universe of 9,843 invoices and to perform a rigorous reconciliation against the MTSA's rate schedule and fuel surcharge formula.
The proposed scope of the engagement would include:
(a) Invoice-by-invoice reconciliation of all 9,843 Ridgeway invoices against the Exhibit B rate schedule and Exhibit C fuel surcharge formula;
(b) Quantification of overcharges by category (inflated per-mile rates, improper fuel surcharge calculation, unauthorized accessorial charges, and duplicate invoices);
(c) Calculation of contractual interest on a rolling basis from the date of each overpayment;
(d) Preparation of a comprehensive expert report in compliance with Texas Rule of Civil Procedure 194.2(f); and
(e) Availability for deposition and trial testimony.
We estimate forensic accounting fees in the range of $40,000 to $55,000, depending on the complexity of the data and the extent of any challenges to the analysis. We have obtained a preliminary fee estimate from Mr. Crowley's firm and will forward it to the litigation team for review.
3. File Suit
If the pre-suit demand is rejected or does not produce a satisfactory resolution — which we consider the likely outcome based on Ridgeway's posture in pre-suit negotiations — we recommend filing an Original Petition in the 342nd Judicial District Court, Tarrant County, Texas, consistent with the forum selection clause at MTSA §14.4.
The Original Petition will assert the following causes of action:
(a) Breach of contract — seeking actual damages of $1,847,632.19, contractual interest at 1.5% per month, and attorneys' fees under Texas Civil Practice & Remedies Code §38.001;
(b) Money had and received — seeking recovery of $1,847,632.19 in overpayments held by Ridgeway;
(c) Common-law fraud — seeking actual damages, exemplary damages under Texas Civil Practice & Remedies Code §41.003, and attorneys' fees;
(d) Unjust enrichment — pleaded in the alternative, seeking recovery of the $1,847,632.19 in overpayments to the extent the MTSA does not govern the parties' rights as to any particular overcharge.
The petition will include a jury demand. We recommend proceeding under discovery Control Plan Level 2 pursuant to Texas Rule of Civil Procedure 190.3, which provides an appropriate discovery framework for a case of this complexity and value.
Our target filing date is mid-July 2021, which allows sufficient time for the pre-suit demand process to run its course while ensuring that the case is positioned for prompt advancement once filed.
4. Aggressive discovery
Following the filing of the Original Petition, we will serve comprehensive written discovery targeting the documents, communications, and data necessary to prove CPS's claims and to foreclose Ridgeway's anticipated defenses. Specifically, we will serve interrogatories and requests for production seeking:
(a) Ridgeway's internal billing records and rate files for the CPS account, including all rate tables, rate change histories, and billing system configuration settings;
(b) All communications — internal and external — relating to rate adjustments, rate changes, or pricing for the CPS account, with particular focus on communications within the pricing and rate management department under James Whitford (VP of Pricing & Rate Management);
(c) Billing system configuration settings, rate change logs, and audit trails reflecting when and by whom rate changes were implemented in Ridgeway's systems;
(d) Fuel surcharge calculation workpapers and underlying DOE index data used to calculate fuel surcharges on CPS invoices, including any documentation reflecting the methodology or index selection employed;
(e) Accessorial charge documentation, including delivery receipts, driver logs, detention records, liftgate usage records, and re-delivery records supporting the $241,008.00 in accessorial charges at issue;
(f) Any documents supporting the purported oral modification of the MTSA's rate schedule, including meeting notes, emails, call logs, or memoranda reflecting discussions between CPS and Ridgeway personnel regarding rate changes;
(g) Ridgeway's financial records relating to the CPS account, including profit-and-loss statements, margin analyses, and internal reports;
(h) Documents supporting any counterclaim for early termination damages, including lost profit calculations and assumptions.
The primary objective of the discovery effort is twofold: first, to establish the intentional nature of the overcharges — which is essential to the fraud claim and to the recovery of exemplary damages — and second, to foreclose the oral modification defense by demonstrating the absence of any documented authorization from CPS for rate changes.
We also anticipate deposing the following individuals:
• Raymond Calder (CEO, Ridgeway)
• James Whitford (VP of Pricing & Rate Management, Ridgeway)
• Brenda Novotny (COO, Ridgeway)
• Susan Delacroix (Controller, Ridgeway)
• The individual(s) responsible for configuring and maintaining Ridgeway's billing system
5. Mediation / Settlement Posture
We should be prepared for either court-ordered or voluntary mediation, which is common in Tarrant County commercial litigation. CPS's strong factual and legal position — particularly if discovery yields evidence of intentional rate inflation — should produce a favorable settlement outcome.
We recommend discussing the settlement floor with CPS's leadership and the Pinnacle Ridge team prior to any mediation. As a preliminary recommendation, we suggest establishing a minimum settlement threshold of 80% of the overcharge principal ($1,478,106), plus a meaningful contribution toward attorneys' fees and interest. This threshold balances the strength of CPS's position against the inherent uncertainties and costs of trial and reflects the fact that a settlement within this range would be a highly favorable outcome for CPS.
If the case does not resolve early through mediation or direct negotiation, we recommend filing a motion for summary judgment on the breach of contract claim. Given the objective verifiability of the overcharges, we believe the breach of contract claim is well suited for summary disposition. A successful summary judgment motion — or even a strong motion that appears likely to succeed — will significantly increase CPS's settlement leverage and may prompt Ridgeway to reassess its litigation posture.
6. Target Resolution Timeline
Based on the current posture of the matter and the procedural framework applicable in Tarrant County, we estimate that this matter can be resolved within six to nine months, either through settlement or early dispositive motion. The key milestones are as follows:
We will keep CPS's leadership and in-house counsel informed of all material developments and will provide monthly status reports. If the case proceeds on the timeline outlined above, we anticipate the most likely resolution scenario is a negotiated settlement in the range of Q4 2021 to Q1 2022, following completion of the initial round of discovery and either a mediation or summary judgment motion.
VII. BUDGET ESTIMATE
Based on the foregoing analysis and our assessment of the likely course of this litigation, we estimate total fees and expenses in the range of $250,000 to $400,000, depending on the following variables:
• The extent and contentiousness of discovery, including the number of depositions required and the degree to which Ridgeway resists production of relevant documents;
• Whether dispositive motions (summary judgment) are necessary;
• Whether mediation produces a resolution or whether the case proceeds to trial; and
• The overall duration of the litigation.
The following breakdown provides a more granular estimate by cost category:
We note that the lower end of this range assumes a resolution through mediation or settlement following the initial round of discovery, without the need for dispositive motions or trial preparation. The upper end assumes contested discovery, a summary judgment motion, and some trial preparation, but does not assume a full trial. If the case were to proceed through a multi-day jury trial, fees could exceed the upper end of this range, and we would provide an updated estimate in advance of any trial preparation.
We will provide monthly budget updates to CPS and will advise promptly if the scope of the matter changes in a way that materially affects the budget estimate. The $75,000 evergreen retainer will be applied against invoices as rendered, and we will request replenishment as necessary. All billing will be at the discounted hourly rates set forth in the engagement letter.
VIII. CONCLUSION
Based on our initial review of the facts, the governing contract, the applicable law, and the anticipated defenses, it is our assessment that CPS has strong claims against Ridgeway, supported by documented, quantifiable overcharges totaling $1,847,632.19. The principal areas of strength and our key conclusions are summarized as follows:
Breach of Contract. The primary claim for breach of contract is straightforward and compelling. The overcharges are objectively verifiable through a mechanical comparison of each invoice to the MTSA's unambiguous rate schedule. This claim is susceptible to summary judgment once supported by an independently verified forensic accounting analysis.
Fraud. The fraud claim provides substantial settlement leverage through the threat of exemplary damages of up to $3,695,264.38 under Texas Civil Practice & Remedies Code §41.008(b). The systematic nature of the overcharges — affecting nearly 43% of all invoices over a 26-month period — strongly supports an inference of deliberate conduct. Discovery of Ridgeway's internal communications and billing system records will be critical to establishing the scienter element.
Defenses. Ridgeway's anticipated defenses — principally oral modification and waiver — are weak. The MTSA's no-oral-modification clause (§15.1) bars Ridgeway's principal defense, and CPS's payment of invoices in the ordinary course does not constitute waiver of its contractual right to accurate billing. Any counterclaim for early termination damages is of limited value given the propriety of CPS's for-cause termination under §9.2.
Strategy. We recommend an aggressive but efficient litigation strategy: a pre-suit demand letter designed to preserve the record and demonstrate good faith; prompt filing of suit in Tarrant County; targeted discovery aimed at establishing the intentional nature of the overcharges; and early mediation to achieve resolution within six to nine months.
We request authorization from Francesca Morano and Samuel Eklund to proceed with the following immediate next steps:
1. Preparation and issuance of a pre-suit demand letter to Raymond Calder at Ridgeway, targeted for the week of June 14, 2021; and
2. Engagement of Meridian Forensic Accounting Group LLC (Nathan Crowley, CPA, CFF) to conduct an independent verification of CPS's internal audit findings, at an estimated cost of $40,000 to $55,000.
We are prepared to discuss this memorandum and the recommended strategy at your earliest convenience and will begin preparing the pre-suit demand letter and Original Petition upon receiving authorization to proceed.
This memorandum constitutes privileged and confidential attorney-client communication and attorney work product. It is intended solely for the use of the attorneys and staff of Calderwood & Harkness LLP identified herein and the client, Crestline Packaging Solutions LLC. This memorandum and its contents are not to be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP and Crestline Packaging Solutions LLC.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Yuki Nakamura Senior Associate
By: ________
Carlos Espinoza Associate
cc: Matter File (1006-00005)
TO: | Francesca Morano, Partner; Samuel Eklund, Partner
FROM: | Yuki Nakamura, Senior Associate; Carlos Espinoza, Associate
DATE: | June 10, 2021
RE: | Crestline Packaging Solutions LLC — Initial Case Assessment; Freight Invoice Dispute with Ridgeway Freight Services Inc. (Matter No. 1006-00005)
Category | Amount / Range
Overcharges (principal) | $1,847,632.19
Contractual interest (1.5%/month per MTSA §10.3, estimated through trial) | $275,000 – $350,000 (est.)
Attorneys' fees (recoverable under Tex. Civ. Prac. & Rem. Code §38.001) | To be determined
Exemplary damages (if fraud proven, up to 2× economic damages under Tex. Civ. Prac. & Rem. Code §41.008(b)) | Up to $3,695,264.38
Milestone | Target Date
Pre-suit demand letter | June 2021
Filing of Original Petition | July 2021
Discovery period | August – November 2021
Mediation (if voluntary or court-ordered) | Q4 2021
Summary judgment motion (if needed) | Q1 2022
Trial (if necessary) | Mid-2022
Cost Category | Estimated Range
C&H attorney fees (after 10% courtesy discount) | $200,000 – $300,000
Forensic accounting (Meridian Forensic Accounting Group) | $40,000 – $55,000
Court costs and filing fees | $1,500 – $3,000
Mediation costs (CPS's share) | $3,000 – $6,000
Other costs (travel, service of process, copies, etc.) | $5,000 – $10,000
Total | $249,500 – $374,000