1006-00005 · Crestline Packaging Solutions LLC · Memoranda

texas-claims-analysis-memo.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION

MEMORANDUM

I. PURPOSE

This memorandum provides a detailed analysis of the legal claims available to our client, Crestline Packaging Solutions LLC ("CPS"), against Ridgeway Freight Services Inc. ("Ridgeway") arising from Ridgeway's systematic overbilling of transportation services over a period of approximately twenty-six months. The memorandum evaluates the viability, evidentiary requirements, and anticipated challenges associated with each potential cause of action under Texas law, and provides strategic recommendations regarding pleading, discovery, and litigation posture.

This analysis has been prepared following a comprehensive review of the following materials: (a) the Master Transportation Services Agreement dated April 15, 2019, between CPS and Ridgeway (the "MTSA"), including Exhibit B (Rate Schedule) and Exhibit C (Fuel Surcharge Methodology); (b) CPS's internal audit findings, as compiled by CPS's accounts payable and internal audit teams between November 2020 and January 2021; (c) the pre-suit demand letter sent by this Firm on June 18, 2021, and Ridgeway's rejection thereof dated July 2, 2021, communicated through its outside counsel, Bartlett, Hogue & Sinclair LLP (Marcus T. Hogue); and (d) interviews with CPS personnel, including Patricia Sung (Vice President, Supply Chain & Logistics), Harold Inman (General Counsel), and Dennis Yurkovich (Chief Financial Officer).

The memorandum addresses the following claims and issues:

1. Breach of Contract. CPS's claim that Ridgeway breached the MTSA by systematically overbilling CPS across four distinct categories — inflated per-mile rates, improper fuel surcharge calculations, unauthorized accessorial charges, and duplicate invoices — resulting in aggregate overpayments of $1,847,632.19.

2. Common-Law Fraud. CPS's claim that Ridgeway's submission of inflated invoices constituted actionable fraud under Texas common law, including the critical question of scienter and the evidence needed to establish it.

3. Statutory Fraud under Texas Business & Commerce Code §27.01. The potential applicability of the Texas statutory fraud cause of action to the transactions at issue, and the limitations on its scope.

4. Unjust Enrichment / Money Had and Received. Alternative equitable claims for recovery of the overpayments, pleaded in the alternative to the contract claim.

5. Ridgeway's Anticipated Affirmative Defenses. An evaluation of the defenses Ridgeway is likely to assert, including the "oral modification" defense already asserted in Ridgeway's July 2, 2021 response letter, as well as waiver, estoppel, and statute of limitations.

6. Attorneys' Fees and Exemplary Damages. The availability of attorneys' fees under Texas Civil Practice & Remedies Code §38.001 and exemplary (punitive) damages under §41.003, including the statutory cap under §41.008.

7. Statute of Limitations. An assessment confirming that all claims are timely.

8. Strategic Recommendations. Recommendations for pleading, discovery priorities, and litigation strategy.

II. BREACH OF CONTRACT

A. Elements Under Texas Law

Under Texas law, a plaintiff asserting a claim for breach of contract must prove each of the following elements: (1) the existence of a valid, enforceable contract between the parties; (2) the plaintiff's performance or tender of performance under the contract; (3) the defendant's breach of the contract; and (4) damages sustained by the plaintiff as a result of the defendant's breach. Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 890 (Tex. 2019). These elements are well-established and have been consistently reaffirmed by Texas courts at all levels. See also Valero Mktg. & Supply Co. v. Kalama Int'l, 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, pet. denied) (applying the same four-element framework in a commercial supply agreement dispute). The plaintiff bears the burden of proving each element by a preponderance of the evidence.

As set forth below, CPS can establish each element with strong, objectively verifiable evidence.

B. Application to CPS's Claims

1. Valid Contract. The MTSA was duly executed by authorized representatives of CPS and Ridgeway on April 15, 2019. The agreement establishes a three-year term commencing on April 15, 2019, and expiring on April 14, 2022, with automatic renewal for successive one-year periods unless either party provides written notice of non-renewal at least ninety (90) days prior to the expiration of the then-current term.

The MTSA is supported by adequate mutual consideration. Under the agreement, CPS committed to use Ridgeway as its carrier for transportation of CPS products across its multi-state manufacturing and distribution network. Specifically, Ridgeway served as the exclusive carrier for both full truckload ("FTL") and less-than-truckload ("LTL") shipments originating from CPS's Texas manufacturing facility, and as the primary carrier for shipments from CPS's Ohio and Indiana facilities. In exchange, Ridgeway committed to provide transportation and logistics services at the rates specified in the Exhibit B rate schedule, subject to the fuel surcharge methodology set forth in Exhibit C and the annual rate escalation provisions described below.

The MTSA contains a governing law clause (§14.3) specifying that the agreement is governed by and construed in accordance with the laws of the State of Texas, and a forum selection clause (§14.4) specifying Tarrant County, Texas, as the exclusive venue for any litigation arising under or in connection with the agreement.

There is no dispute as to the existence, execution, or enforceability of the MTSA. Ridgeway has not, at any point in its pre-suit correspondence, contested the validity of the contract. The MTSA constitutes a binding, enforceable agreement between the parties. This element is clearly satisfied.

2. CPS's Performance. CPS performed all of its material obligations under the MTSA throughout the relevant period. Specifically, CPS paid every invoice submitted by Ridgeway within the contractual net-thirty-day payment terms throughout the entire twenty-six-month overbilling period from February 2019 through March 2021. CPS's accounts payable department processed Ridgeway's invoices in the ordinary course of business and remitted payment on or before the due date reflected on each invoice.

In addition to its payment obligations, CPS complied with all other material obligations under the MTSA, including its volume commitments and shipment scheduling requirements. CPS's five manufacturing facilities — located in Ohio, Indiana, and Texas — collectively generated approximately 14,000 truckloads per year of freight volume that was directed to Ridgeway in accordance with the MTSA's exclusivity and primary-carrier provisions. CPS consistently met its forecasted shipping volumes and cooperated with Ridgeway's scheduling and operational requirements.

CPS's total payments to Ridgeway during the overbilling period amounted to $12,318,209.46. As discussed in detail below, the correct amount due under the contractual rates and formulas was $10,470,577.27 — meaning that CPS overpaid by $1,847,632.19. Critically, CPS's overpayment does not constitute a failure of performance; rather, it demonstrates that CPS exceeded its contractual payment obligations to CPS's detriment. CPS's performance is not in question.

3. Ridgeway's Breach. CPS's internal audit, commenced in November 2020 and completed in January 2021, revealed that Ridgeway breached the MTSA in at least four distinct respects over the twenty-six-month period from February 2019 through March 2021. Each category of breach is discussed below.

(a) Inflated Per-Mile Rates — $1,104,891.53

The most significant category of overcharges involves Ridgeway's systematic application of per-mile FTL rates that exceeded the rates specified in the Exhibit B rate schedule. On 4,217 of 9,843 total invoices during the overbilling period — a rate of 42.8% — Ridgeway charged per-mile FTL rates that were 8% to 12% above the applicable contractual rate.

The Exhibit B rate schedule establishes specific per-mile rates for each shipping lane. The key contractual rates are as follows:

The MTSA provides for a 2.5% annual rate escalator, effective each April 15 (the anniversary of the agreement's execution date), applied to the base rates only. CPS's internal audit team properly accounted for this escalator in computing the correct amount due — that is, the overcharge calculation reflects the difference between the amounts Ridgeway actually invoiced and the amounts that would have been due under the Exhibit B rates as adjusted by the annual escalator. The inflated rates charged by Ridgeway exceeded even the escalated contractual rates by 8% to 12%.

The total overcharge attributable to inflated per-mile rates is $1,104,891.53, representing the largest single component of the aggregate overpayment. This amount has been computed on an invoice-by-invoice basis by CPS's internal audit team and will be independently verified by our retained forensic accounting expert.

(b) Improper Fuel Surcharge Calculations — $387,412.66

Exhibit C to the MTSA specifies the formula for calculating fuel surcharges on each shipment. The contractual formula provides that the fuel surcharge shall be calculated using the U.S. Department of Energy ("DOE") Weekly Retail On-Highway Diesel Price as published for the same week as the shipment. This is a standard industry methodology that ties the surcharge to contemporaneous fuel costs.

Ridgeway deviated from this methodology by using a seven-day lagging DOE index — that is, Ridgeway applied the DOE price from the week preceding the shipment week rather than the DOE price for the week in which the shipment actually occurred. During periods of declining diesel prices (which characterized much of the overbilling period), this lagging methodology systematically inflated the fuel surcharge because the prior week's higher price was applied instead of the current week's lower price. During periods of rising diesel prices, the lagging method would have the opposite effect, but the net result over the twenty-six-month period overwhelmingly favored Ridgeway.

The deviation from the contractual formula is objective, verifiable, and mechanical. By comparing the DOE index values used by Ridgeway on each invoice against the DOE index values published for the actual shipment week, the overcharge can be computed on a line-item basis. The total overcharge attributable to improper fuel surcharge calculations is $387,412.66.

Ridgeway billed CPS for various accessorial charges — including liftgate service fees, detention charges, and re-delivery fees — that were neither supported by the required delivery documentation nor authorized under the MTSA. The MTSA's rate schedule specifies the types of accessorial charges that may be assessed and establishes the documentation requirements for each. Under the agreement, accessorial charges may be invoiced only when (i) the charge type is enumerated in the rate schedule and (ii) the charge is supported by contemporaneous delivery or service documentation, such as signed delivery receipts, detention logs, or re-delivery authorization forms.

CPS's internal audit identified $241,008.00 in accessorial charges that failed to meet one or both of these requirements. In many instances, Ridgeway billed for liftgate or detention services on deliveries for which no supporting documentation existed in Ridgeway's delivery records, as verified against CPS's own receiving records. In other instances, the accessorial charge type was not among those enumerated in the rate schedule at all.

(d) Duplicate Invoices — $114,320.00

CPS's internal audit identified eighty-three (83) invoices that were submitted by Ridgeway and paid by CPS twice. In each instance, Ridgeway submitted two invoices bearing different invoice numbers but reflecting the same shipment, load number, date, and amount. CPS's accounts payable system, which processes invoices based on invoice number rather than shipment-level detail, did not flag these duplicates during routine processing. The duplicates were discovered during the November 2020 through January 2021 internal audit.

The total amount of duplicate payments is $114,320.00. This category of overcharge is the most straightforward to establish, as it requires only a comparison of invoice numbers against shipment records to confirm that two payments were made for a single shipment.

4. Damages. CPS's direct damages — the aggregate of overpayments across all four categories described above — total $1,847,632.19, computed as follows:

The correct amount due under the contractual rates and formulas was $10,470,577.27. This figure is derived by subtracting the aggregate overcharges of $1,847,632.19 from the total amount invoiced and paid of $12,318,209.46. The overcharges thus represent an approximately 15.0% overbilling rate across the twenty-six-month period.

In addition to the principal overcharge amount, CPS is entitled to contractual interest under MTSA §10.3, which provides for interest at the rate of 1.5% per month on disputed amounts found to be due from one party to the other. Contractual interest has been accruing since the date of each overpayment and will continue to accrue through the date of judgment or settlement. As of the June 18, 2021 demand letter, the accrued contractual interest was estimated at $221,715.86 and continues to grow.

C. Attorneys' Fees

Texas Civil Practice & Remedies Code §38.001 provides that a person may recover reasonable attorneys' fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for, among other things, a suit "founded on . . . an oral or written contract." Because CPS's breach-of-contract claim is founded on the MTSA, a written contract, CPS is entitled to recover reasonable attorneys' fees if it prevails on this claim.

Section 38.002 imposes a prerequisite: the claimant must present the claim to the opposing party or to a duly authorized agent of the opposing party and must allow the opposing party at least thirty (30) days to tender payment before filing suit. CPS has satisfied this requirement through two separate communications:

First, on February 8, 2021, Harold Inman, CPS's General Counsel, sent a written dispute notice to Ridgeway under MTSA §11.2, identifying the overcharges discovered by CPS's internal audit and demanding repayment. This notice was the first formal presentment of CPS's claim to Ridgeway.

Second, on June 18, 2021, this Firm sent a pre-suit demand letter on CPS's behalf, reiterating the claim in detail and demanding payment of $1,847,632.19 plus accrued interest within fourteen (14) days. The letter was sent by certified mail, return receipt requested, and by electronic mail to Ridgeway's registered agent and to Marcus T. Hogue of Bartlett, Hogue & Sinclair LLP, who had been identified as Ridgeway's outside counsel.

Ridgeway rejected the demand in a letter dated July 2, 2021, from Marcus T. Hogue. The Original Petition in this matter was filed on July 19, 2021 — more than thirty days after the February 8, 2021 notice and more than fourteen days after the June 18, 2021 demand letter. CPS has therefore satisfied the presentment requirement of §38.002, and attorneys' fees are recoverable if CPS prevails on its breach-of-contract claim.

D. Assessment. CPS's breach-of-contract claim is exceptionally strong. The core of the claim rests on a mechanical comparison of the amounts Ridgeway invoiced against the amounts due under the express terms of the MTSA — an analysis that involves no subjective judgments, disputed interpretations, or credibility determinations. The rate discrepancies are objectively verifiable by comparing Ridgeway's invoiced per-mile rates to the Exhibit B rate schedule (as adjusted by the annual escalator). The fuel surcharge methodology deviation is similarly verifiable by comparing the DOE index values used by Ridgeway to the DOE index values published for the actual shipment weeks, as specified in the Exhibit C formula. Duplicate invoices are self-evident upon comparison of invoice numbers to shipment records.

This claim is well-suited for resolution on summary judgment once two conditions are met: (1) the forensic accounting analysis by Meridian Forensic Accounting Group LLC (retained on August 20, 2021; engagement partner Nathan Crowley, CPA, CFF) is completed and presented in expert report form; and (2) Ridgeway's discovery responses — including its billing system records and internal communications — have been obtained and confirm that no legitimate basis exists for the overcharges. Given the objective, verifiable nature of the discrepancies, we anticipate that the breach-of-contract claim will present a compelling case for partial or full summary judgment, particularly if Ridgeway cannot produce credible evidence supporting its oral modification defense (addressed in Section V below).

III. FRAUD CLAIMS

A. Common-Law Fraud

1. Elements. Under Texas law, common-law fraud requires proof of the following elements: (1) a material misrepresentation was made; (2) the misrepresentation was false; (3) the speaker made the misrepresentation with knowledge of its falsity or recklessly, as a positive assertion, without any knowledge of its truth (the "scienter" requirement); (4) the speaker made the misrepresentation with the intent that it should be acted upon by the other party; and (5) the other party actually and justifiably relied on the misrepresentation and thereby suffered injury. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011).

The standard of proof for establishing fraud liability is preponderance of the evidence. A higher standard — clear and convincing evidence — is required only for the recovery of exemplary (punitive) damages under Texas Civil Practice & Remedies Code §41.003, as discussed in Section III.C below.

2. Application. Misrepresentation. Each invoice submitted by Ridgeway to CPS constitutes a representation by Ridgeway that the amount stated on the invoice was due and payable under the terms of the MTSA. An invoice is, by its nature, a demand for payment based on an implicit assertion that the goods or services were provided at the agreed-upon price. When Ridgeway invoiced rates exceeding the Exhibit B schedule, applied a non-contractual fuel surcharge methodology, billed for unsupported accessorial charges, or submitted duplicate invoices, it represented — falsely — that the invoiced amounts were contractually authorized and owing. The submission of 4,217 invoices bearing inflated per-mile rates, together with hundreds of additional invoices bearing improper fuel surcharges, unauthorized accessorial charges, and duplicate billings, constitutes a pattern of material misrepresentations over a twenty-six-month period.

Falsity. The invoiced amounts exceeded the amounts due under the contractual rate schedule, fuel surcharge formula, and accessorial charge provisions. This is demonstrable through an invoice-by-invoice comparison of the amounts charged to the amounts that should have been charged under the express terms of the MTSA. The falsity of each overcharged invoice is an objective fact, not a matter of interpretation or opinion.

Scienter. This is the critical factual question for the fraud claim. To satisfy the scienter requirement, CPS must establish that Ridgeway knew the rates it charged were inflated, or that Ridgeway acted recklessly — that is, made positive assertions about amounts due without any knowledge of their truth or accuracy.

At this pre-discovery stage — before we have obtained Ridgeway's internal records — CPS's internal audit has not uncovered direct evidence of intentional fraud by a specific individual at Ridgeway. No "smoking gun" document (such as an internal email directing the billing department to inflate rates) has been produced or identified. We do not have access to Ridgeway's billing system records, internal communications, or personnel files.

However, strong circumstantial indicia of deliberate conduct exist, and the pattern of overcharges is difficult to explain as innocent error:

• Prevalence. The overcharges affected 42.8% of all invoices submitted during the overbilling period (4,217 of 9,843 total invoices). A rate of nearly 43% is inconsistent with isolated, random, or inadvertent billing errors. If the overcharges were the product of genuine mistakes, one would expect a far lower incidence rate and a random distribution of errors — both overcharges and undercharges — rather than a systematic pattern of overcharges only.

• Multi-Category Pattern. The overcharges were not limited to a single billing component. They spanned four distinct categories: per-mile rates, fuel surcharges, accessorial charges, and duplicate invoices. The breadth of the overbilling pattern across multiple independent billing parameters suggests a deliberate, multi-faceted scheme rather than a single system configuration error.

• Duration. The overbilling persisted for twenty-six consecutive months (February 2019 through March 2021). If the overcharges were attributable to a one-time billing system error, one would expect the error to have been detected and corrected by Ridgeway's own internal quality-assurance processes within a much shorter timeframe.

• Consistent Margin. The inflated per-mile rates were systematically 8% to 12% above the Exhibit B schedule — a consistent margin that suggests a programmatic override of the contractual rates in Ridgeway's billing system rather than random data entry errors. If rates were being entered manually and incorrectly, one would expect greater variability in the deviation.

• Billing System Configuration. Ridgeway's pricing department, headed by James Whitford (Vice President of Pricing & Rate Management), would have been responsible for configuring Ridgeway's billing and rate management system to apply the correct contract rates for the CPS account. The systematic deviation from contractual rates suggests that someone within the pricing department — whether Whitford himself or a subordinate acting under his direction — deliberately configured or allowed the system to apply rates other than those specified in Exhibit B.

These circumstantial factors, taken together, create a strong inference that the overbilling was not accidental. Whether this inference can be elevated to proof of actual knowledge or recklessness will depend critically on the evidence obtained in discovery.

discovery Priority. Internal communications and billing system records from Ridgeway's pricing department are the single most important category of discovery for the fraud claim. Specifically, we should target the following:

(i) All communications between James Whitford and his subordinates in the pricing and rate management department regarding the CPS account, including rate configurations, rate adjustments, and billing system settings;

(ii) All communications between the pricing department and Ridgeway's senior management regarding the CPS account;

(iii) Billing system audit logs and configuration records for the CPS account, showing when and by whom rate changes were made;

(iv) Any internal audit, quality assurance, or compliance reviews conducted by Ridgeway that addressed billing accuracy or rate integrity for the CPS account or for other customers.

If internal emails, memoranda, or system records show that Ridgeway personnel knowingly applied inflated rates — or knowingly failed to correct known billing discrepancies — the fraud claim becomes very strong. Even absent a direct admission, evidence that the pricing department was aware of the rate discrepancies and took no corrective action would support a finding of recklessness sufficient to satisfy the scienter element.

Intent to Induce Reliance. Ridgeway submitted its invoices with the clear expectation and intent that CPS would pay them. Each invoice was a demand for payment, and Ridgeway's purpose in submitting invoices was to induce CPS to remit the amounts stated. This element is straightforward and not expected to be contested.

Reliance and Injury. CPS relied on the accuracy of Ridgeway's invoices and paid $12,318,209.46 — an amount $1,847,632.19 greater than what was actually due under the MTSA. CPS's reliance was reasonable: CPS was entitled to expect that its contracted logistics provider — a company with which it had negotiated specific rates memorialized in a detailed written agreement — would invoice at the contractual rates. CPS's accounts payable systems processed Ridgeway's invoices in the ordinary course of business, applying the same procedures used for all of CPS's vendor invoices. CPS did not independently verify each invoice against the rate schedule as a matter of routine practice, nor was it obligated to do so. The volume of invoices (approximately 9,843 over the twenty-six-month period, or roughly 378 per month) made manual verification of each invoice impracticable, and reliance on the accuracy of a contractual counterparty's invoices is both reasonable and expected in commercial practice.

3. Assessment. The common-law fraud claim is viable and should be pleaded, but its ultimate strength at trial depends heavily on the evidence obtained in discovery regarding Ridgeway's internal knowledge and intent. As noted, the circumstantial case is compelling even in the absence of direct evidence: the prevalence, multi-category nature, duration, and consistent margin of the overcharges create a strong inference of deliberate conduct. Discovery of Ridgeway's internal communications — particularly from the pricing department — will determine whether the inference can be converted to direct proof.

We recommend pleading common-law fraud in the Original Petition and pursuing aggressive discovery targeted at Ridgeway's pricing department, James Whitford, and any personnel involved in configuring or overseeing the billing system for the CPS account. The fraud claim serves a dual purpose: it provides a basis for exemplary damages (discussed below), significantly increasing Ridgeway's exposure; and it maximizes CPS's settlement leverage, as a fraud finding would carry reputational consequences for Ridgeway in addition to the financial impact.

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

1. Scope of §27.01. Section 27.01 of the Texas Business & Commerce Code creates a statutory cause of action for fraud committed in certain categories of transactions. As originally enacted, §27.01 applied only to "a transaction involving real estate or stock." Subsequent amendments expanded the statute to cover "a transaction involving the sale of goods" under certain circumstances. The statute provides for recovery of actual damages, court costs, and reasonable and necessary attorneys' fees. Where the defendant acted knowingly, treble damages may be awarded.

The applicability of §27.01 to the claims at issue presents an uncertain question of law. The MTSA involves the provision of freight transportation services — that is, Ridgeway transported CPS's products (packaging materials and chemical products) between CPS's manufacturing facilities and distribution points. Texas courts have construed the scope of §27.01 in various ways, and the case law does not clearly establish whether a contract for transportation services qualifies as a "transaction involving the sale of goods" within the meaning of the statute. While the MTSA undeniably involves the carriage of goods (CPS's products), the transaction at issue is the provision of transportation services, not the sale of the goods being transported. A court could reasonably conclude that §27.01 does not reach this type of transaction.

2. Assessment. Given the uncertainty regarding §27.01's applicability, we recommend pleading the statutory fraud claim in the alternative to preserve the cause of action. If the court determines that the MTSA constitutes a "transaction involving the sale of goods" — or if the facts developed in discovery support an alternative characterization of the transaction — the §27.01 claim would provide an additional basis for recovery. However, our primary reliance for the fraud-based claims should be on common-law fraud, which has no similar transactional limitation and is well-established as a basis for relief in cases involving commercial invoice fraud.

It should also be noted that the remedies available under §27.01 — actual damages, court costs, and reasonable attorneys' fees — substantially overlap with the remedies available through the breach-of-contract claim (which independently supports attorneys' fees under §38.001) and the common-law fraud claim (which supports exemplary damages under §41.003). The §27.01 claim therefore adds incremental value primarily as a belt-and-suspenders measure rather than as a source of unique relief.

C. Exemplary (Punitive) Damages

1. Legal Standard. Under Texas Civil Practice & Remedies Code §41.003(a), exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from fraud, malice, or gross negligence. Section 41.003(a)(1) defines "fraud" for purposes of the exemplary damages statute to require a showing of actual awareness of the falsity of a representation combined with an intent to induce the other party to act in reliance thereon.

The clear-and-convincing-evidence standard is higher than the preponderance standard applicable to the underlying fraud claim. This means that CPS could potentially prevail on its common-law fraud claim (establishing liability by a preponderance) without necessarily proving entitlement to exemplary damages (which requires clear and convincing evidence). In practice, however, if the discovery evidence is sufficient to establish fraud by a preponderance, it will often be sufficient to establish entitlement to exemplary damages as well — particularly if direct evidence of intentional misconduct is obtained.

2. Statutory Cap — §41.008. Texas Civil Practice & Remedies Code §41.008(b) imposes a cap on exemplary damages. Under §41.008(b), the amount of exemplary damages awarded may not exceed the greater of:

(i) two times the amount of economic damages, plus an amount equal to any noneconomic damages found by the trier of fact, not to exceed $750,000; or

(ii) $200,000.

In this case, CPS's claim is for economic damages only — the $1,847,632.19 in overpayments — with no claimed noneconomic damages. Accordingly, the applicable cap under §41.008(b)(1) would be:

2 × $1,847,632.19 = $3,695,264.38

Because this amount exceeds $200,000, the cap under subsection (b)(1) governs. The maximum exemplary damages award, if CPS proves fraud by clear and convincing evidence, would therefore be $3,695,264.38.

The combined potential recovery, including both actual damages and maximum exemplary damages, would be:

This figure does not include contractual interest under MTSA §10.3 or attorneys' fees, which would further increase the total recovery.

3. Strategic Value. The exemplary damages exposure is significant from a strategic standpoint, even if the ultimate likelihood of a jury awarding the maximum exemplary damages amount at trial is moderate rather than certain. The clear-and-convincing standard, while achievable with strong evidence, introduces inherent uncertainty that a jury may or may not resolve in CPS's favor.

However, the mere availability of exemplary damages creates a powerful settlement lever. Ridgeway is a mid-size freight company with annual revenues of approximately $94 million. A combined adverse verdict of $5.5 million or more — exclusive of interest and attorneys' fees — would represent a material financial impact on Ridgeway's balance sheet and operations. Moreover, a judicial finding of fraud would carry substantial reputational harm for Ridgeway in the transportation industry, potentially affecting its ability to retain existing customers and attract new ones.

We recommend emphasizing the exemplary damages exposure in any mediation or settlement discussions with Ridgeway. The threat of exemplary damages is most potent when combined with a strong evidentiary record of systematic, deliberate overcharging — and the evidence we have developed to date supports that narrative. If discovery produces direct evidence of intentional misconduct (e.g., internal emails from James Whitford's department), the settlement value of the exemplary damages component will increase substantially.

IV. MONEY HAD AND RECEIVED / UNJUST ENRICHMENT

A. Money Had and Received

An action for money had and received is an equitable claim under Texas law that permits recovery when one party holds money that in equity and good conscience belongs to another. The cause of action is not based on a wrongful act by the defendant, but rather on the equitable principle that one should not retain money that rightfully belongs to another. Edwards v. Mid-Continent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex. App.—Dallas 2008, pet. denied). The claim requires proof that the defendant holds money that belongs to the plaintiff and that the defendant has refused to return it despite demand.

This claim provides an alternative and independent basis for recovery of the $1,847,632.19 in overpayments. It is particularly useful as a safety net in the event that any individual overcharge category is found by the court not to fall within the scope of the breach-of-contract claim. For example, if a court were to construe certain accessorial charges as falling outside the MTSA's scope — perhaps because Ridgeway argues that those charges were governed by a separate arrangement or industry custom — the money-had-and-received claim would provide an equitable basis for recovering those overpayments regardless of whether they constitute a breach of the MTSA.

The elements of a money-had-and-received claim are straightforward in this case. Ridgeway received and retained $1,847,632.19 in overpayments from CPS. The overpayments were made by CPS in reliance on the accuracy of Ridgeway's invoices, and the amounts paid exceeded what CPS owed under the contractual terms. Ridgeway has refused to return the overpayments despite demand (first by CPS's February 8, 2021 dispute notice, and then by the Firm's June 18, 2021 pre-suit demand letter). In equity and good conscience, these funds belong to CPS.

B. Unjust Enrichment

In Texas, unjust enrichment is generally not recognized as an independent cause of action when an express contract governs the subject matter of the parties' dispute. The Texas Supreme Court has held that "[w]hen a valid, express contract covers the subject matter of the parties' dispute, there can be no recovery under a quasi-contract theory." Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000). Because the MTSA expressly governs the rates, fees, and charges that Ridgeway may bill to CPS, a standalone unjust enrichment claim may be precluded by the existence of the contract.

Nevertheless, we recommend pleading unjust enrichment in the alternative as a defensive pleading strategy. There are two reasons for this approach. First, Ridgeway may attempt to argue that the MTSA does not govern certain categories of overcharges — for instance, by claiming that certain accessorial charges fell outside the MTSA's scope or were governed by separate oral agreements or industry custom. If Ridgeway succeeds in removing any portion of the overcharges from the contractual framework, unjust enrichment would provide an alternative equitable theory for recovering those amounts. Second, pleading in the alternative is expressly permitted under Texas Rule of Civil Procedure 48, and there is no prejudice to CPS from including this claim. It serves to ensure that all avenues of recovery are preserved regardless of how the court construes the scope of the MTSA.

The unjust enrichment claim would be subject to the same four-year limitations period as the contract and fraud claims, and all overpayments at issue fall within that window.

V. RIDGEWAY'S ANTICIPATED DEFENSES

A. Oral Modification

1. The Defense as Stated. In its July 2, 2021 response letter, Ridgeway — through its outside counsel, Marcus T. Hogue of Bartlett, Hogue & Sinclair LLP — asserted that "rate adjustments were discussed and agreed to verbally between Ridgeway's operations team and CPS's logistics personnel." This assertion, which constitutes the centerpiece of Ridgeway's defense to date, appears to be predicated on a theory that the Exhibit B rate schedule was orally modified by mutual agreement during the course of the parties' performance under the MTSA, and that the rates Ridgeway charged were consistent with the alleged oral modifications.

Ridgeway's letter did not identify any specific CPS personnel who allegedly participated in or agreed to the purported rate adjustments, nor did it specify the dates on which the alleged oral modifications occurred, the specific rate changes that were allegedly discussed, or the specific shipment lanes affected. The assertion was made in general terms without supporting documentation or particularity.

2. MTSA §15.1 — No Oral Modification Clause. Section 15.1 of the MTSA expressly provides:

"This Agreement may not be amended, modified, or supplemented except by a written instrument signed by authorized representatives of both Parties."

This is a standard no-oral-modification ("NOM") clause. Under Texas law, NOM clauses are generally enforceable, and a party seeking to enforce an alleged oral modification of a contract containing a NOM clause bears a heavy burden. Patel v. Ambassador Drycleaning, 86 S.W.3d 304, 307–08 (Tex. App.—Eastland 2002, no pet.) (enforcing NOM clause and rejecting oral modification defense). While some older Texas decisions recognized the theoretical possibility that a NOM clause could itself be orally waived by the parties' subsequent conduct, the modern trend in Texas strongly favors the enforcement of written-modification requirements, particularly in commercial transactions between sophisticated parties. This trend has been reinforced by the Texas Legislature's adoption of UCC §2-209(2), which provides that a signed agreement excluding modification except by a signed writing "cannot be otherwise modified" — a provision that, while directly applicable only to transactions in goods, reflects the broader policy of Texas law favoring written agreements over oral understandings.

The MTSA's NOM clause is clear, unambiguous, and prominently placed in the agreement's general provisions. No written amendment to the Exhibit B rate schedule has been executed by the parties. No written amendment of any kind to the MTSA has been produced or even alleged by Ridgeway. On its face, the NOM clause bars Ridgeway's oral modification defense.

3. Factual Rebuttal — No CPS Authorization. Beyond the legal bar imposed by the NOM clause, the factual record flatly contradicts Ridgeway's claim that rate adjustments were "discussed and agreed to verbally" with CPS personnel. We have conducted interviews with the following CPS employees, each of whom would have been involved in or aware of any discussions regarding rate modifications:

Patricia Sung, Vice President of Supply Chain & Logistics. Ms. Sung's team handled day-to-day logistics coordination with Ridgeway, including shipment scheduling, freight management, and operational communications. She was the most senior CPS employee with regular contact with Ridgeway's operations team. Ms. Sung has confirmed unequivocally that no one in her department discussed, agreed to, or authorized any rate increases or modifications to the Exhibit B rate schedule at any time during the MTSA's term. It was Ms. Sung who first flagged the rate discrepancies during the Q3 2020 budget review in October 2020, after noticing that CPS's actual freight costs were consistently exceeding the budgeted amounts based on the contractual rates. Her discovery of the discrepancy was what prompted CPS's internal audit.

Harold Inman, General Counsel. Mr. Inman confirmed that no request for rate modification was ever presented to CPS's legal department by Ridgeway or by any CPS business unit. No amendment, modification, or supplement to the MTSA was ever executed, drafted, or authorized. Mr. Inman further confirmed that any modification to the MTSA would have required legal review and executive approval under CPS's internal contract management policies, and no such review or approval was ever sought or given.

Dennis Yurkovich, Chief Financial Officer. Mr. Yurkovich confirmed that no rate modifications were approved at the financial or executive level. He was not aware of any discussions with Ridgeway regarding rate changes, and no rate adjustments were reflected in CPS's budgets, financial models, or internal cost projections. Mr. Yurkovich authorized the initiation of the formal dispute process on January 29, 2021, following the completion of the internal audit.

In sum, no CPS personnel — at any level — authorized oral changes to the Exhibit B rate schedule. Ridgeway has not identified a single individual at CPS who allegedly participated in or agreed to rate modifications. Ridgeway bears the burden of proving the alleged oral modification, and to do so it would need to identify specific CPS personnel who agreed to rate changes, specify the dates and substance of the alleged agreements, and overcome the express NOM clause. On the current record, Ridgeway cannot meet this burden.

We will seek sworn declarations or affidavits from Ms. Sung, Mr. Inman, and Mr. Yurkovich to support a motion for summary judgment on this issue. Their testimony, combined with the NOM clause, should be dispositive.

4. Assessment. The oral modification defense is weak. It is contradicted by the MTSA's express no-oral-modification clause, which is enforceable under Texas law. It is further contradicted by the testimony of every CPS employee who would have been involved in or aware of rate-modification discussions. And it is undermined by the absence of any particularity in Ridgeway's assertion — Ridgeway has not identified who at CPS allegedly agreed to rate changes, when, or on what terms.

We expect this defense to collapse upon discovery and in settlement negotiations, particularly once Ridgeway is compelled to identify the specific CPS and Ridgeway personnel who purportedly participated in the alleged oral agreements and to produce any communications, notes, or records relating to the alleged discussions. If no such evidence exists — as we anticipate — the defense will be untenable.

B. Waiver / Estoppel

1. The Defense. Ridgeway may argue — either in its Answer or in a subsequent motion — that CPS waived its right to dispute the overcharges by paying Ridgeway's invoices without objection for an extended period. A related argument would be that CPS is estopped from recovering overpayments because Ridgeway relied on CPS's silence and continued payments in conducting its operations and managing its financial affairs.

2. Rebuttal. Waiver. Under Texas law, waiver is an intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003). The critical requirement is that the waiver must be intentional — a party cannot waive a right unless it is aware of the right and deliberately chooses to forego it. CPS at no time manifested an intent to accept inflated rates or to forego its right to be billed at the contractual rate schedule. CPS was not aware of the overcharges until Patricia Sung flagged rate discrepancies in October 2020, and the full scope of the overbilling was not confirmed until the internal audit was completed in January 2021. CPS's payment of Ridgeway's invoices was not an act of intentional relinquishment; it was the performance of CPS's contractual obligation to pay within net-thirty-day terms, undertaken in reliance on the (incorrect) assumption that Ridgeway's invoices were accurate.

MTSA §11.2 Dispute Window. The MTSA contains a dispute resolution mechanism in §11.2 that provides a sixty-day window from the invoice date within which a party may dispute charges. CPS identified the overcharges during the October 2020 through January 2021 internal audit and promptly sent a written dispute notice on February 8, 2021. For invoices issued from approximately December 2020 forward, CPS's February 2021 dispute fell within the sixty-day window. For older invoices, CPS could not have disputed charges it had not yet identified.

discovery Rule. For the older invoices, the discovery rule applies. CPS's obligation to dispute overcharges did not arise until CPS knew or, in the exercise of reasonable diligence, should have known of the overcharges. The overcharges were concealed within a high-volume invoice stream (approximately 378 invoices per month), embedded within line-item charges on invoices that appeared facially legitimate, and applied at margins (8–12% on rates) that were not so egregious as to be self-evident on casual inspection. CPS's internal audit team commenced its review on November 12, 2020, after Ms. Sung flagged the discrepancies, and completed the review on January 29, 2021. CPS sent its formal dispute notice ten days later, on February 8, 2021. CPS acted promptly and diligently upon discovery.

Estoppel. Estoppel requires, among other elements, that the party asserting it actually and reasonably relied on the other party's conduct to its detriment. Ridgeway cannot credibly claim that it relied on CPS's continued payment of invoices — and specifically on CPS's failure to dispute overcharges — to Ridgeway's detriment. CPS's payments did not cause Ridgeway to change its position or suffer any harm; to the contrary, CPS's payments enriched Ridgeway by $1,847,632.19 beyond what was contractually due. Ridgeway cannot claim detrimental reliance when it was the party that created the overcharges and benefited from CPS's payment of them.

3. Assessment. The waiver and estoppel defenses are weak. CPS did not intentionally waive any rights; it was unaware of the overcharges until October 2020 and acted promptly upon discovery. The MTSA's dispute mechanism was followed for current invoices, and the discovery rule protects CPS's claims for older invoices. Ridgeway cannot establish the detrimental reliance required for estoppel.

C. Statute of Limitations

1. Applicable Limitations Periods. The following limitations periods apply to CPS's claims:

• Breach of contract: Four (4) years under Texas Civil Practice & Remedies Code §16.004(a)(3).

• Common-law fraud: Four (4) years under §16.004(a)(4), subject to the discovery rule, which tolls the limitations period until the plaintiff knew or, in the exercise of reasonable diligence, should have known of the fraud.

• Money had and received / unjust enrichment: Generally four (4) years under the residual limitations provision.

2. Analysis. The earliest overcharge in the overbilling period dates to approximately February 2019, when Ridgeway first began applying inflated rates to its invoices. The Original Petition was filed on July 19, 2021. The interval from the earliest overcharge (February 2019) to the filing date (July 2021) is approximately twenty-nine months — well within the four-year limitations period applicable to all of CPS's claims.

Even under the most conservative accrual analysis — if Ridgeway were to argue that the breach-of-contract claim accrued on the date CPS paid each overcharged invoice rather than on the invoice date — the earliest payment (approximately thirty days after the February 2019 invoice, i.e., approximately March 2019) would still fall well within the four-year window.

For the fraud claim, the discovery rule provides additional protection. Under the discovery rule, the limitations period does not begin to run until the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the fraud. As discussed in Section V.B above, CPS did discover the overcharges until Patricia Sung flagged rate discrepancies in October 2020, and the full scope of the overbilling was not confirmed until the internal audit was completed in January 2021. If the fraud claim is measured from the October 2020 discovery date, the limitations period would not expire until October 2024 — more than three years after the July 2021 filing date.

Ridgeway's Answer, filed on August 5, 2021, asserts statute of limitations as an affirmative defense, but only "as to pre-February 2019 claims." This defense is inapplicable because no claims in this matter predate February 2019. The overbilling period began in February 2019, and all claims arise from conduct that occurred between February 2019 and March 2021. The limitations defense as framed in Ridgeway's Answer has no factual predicate.

3. Assessment. No statute of limitations bar exists for any of CPS's claims. All claims are comfortably within the four-year limitations period, and the discovery rule provides an additional margin of protection for the fraud claim. Ridgeway's limitations defense, as currently framed, is meritless.

D. Counterclaim for Early Termination

1. The Counterclaim. On August 5, 2021 — the same date it filed its Answer — Ridgeway filed a counterclaim against CPS alleging that CPS breached the MTSA by terminating the agreement before the expiration of the three-year term. Ridgeway claims approximately $340,000 in lost profits for the remaining term of the MTSA from April 22, 2021 (the effective termination date) through April 14, 2022 (the scheduled expiration date).

2. Rebuttal. CPS terminated the MTSA for cause under MTSA §9.2, which permits either party to terminate the agreement upon thirty (30) days' written notice if the other party commits a material breach that remains uncured after notice and a reasonable opportunity to cure.

The chronology of CPS's termination process was as follows:

• February 8, 2021: Harold Inman (CPS General Counsel) sent a written dispute and breach notice to Ridgeway under MTSA §11.2, identifying the overcharges discovered by the internal audit and demanding repayment.

• February – March 2021: During the thirty-day good-faith resolution period, Ridgeway offered $218,500 in credits — a figure that represented approximately 15% of the documented overcharges at the initial estimate level (which exceeded $1.4 million at that time) and approximately 12% of the refined final figure of $1,847,632.19. This response was manifestly inadequate and did not constitute a cure of the breach.

• March 22, 2021: CPS sent a written termination notice under §9.2, effective thirty days from receipt.

• April 22, 2021: The MTSA terminated, and CPS began transitioning its freight operations to Redfield Logistics Corp., a carrier based in Indianapolis, Indiana.

Ridgeway's systematic overbilling of $1,847,632.19 — representing a 15% overbilling rate across 42.8% of all invoices over twenty-six months — constitutes a material breach of the MTSA. The breach was not cured within the notice-and-cure period; Ridgeway's offer of $218,500 against documented overcharges in excess of $1.4 million (at the initial estimate level) was not a good-faith attempt at cure. CPS therefore had full contractual authority to terminate for cause under §9.2, and the termination was neither wrongful nor premature.

Even if a court were to determine that the termination was not justified — which we believe to be extremely unlikely on these facts — Ridgeway's $340,000 lost-profits figure appears to be a rough estimate unsupported by credible financial analysis. The figure does not account for Ridgeway's variable costs, mitigation efforts, or the possibility that Ridgeway could have replaced the lost CPS revenue with other customers. We will challenge this figure aggressively in discovery and, if necessary, through expert testimony.

3. Assessment. The counterclaim is weak and is likely intended primarily as a negotiating chip. CPS had clear and well-documented contractual grounds for termination for cause under §9.2. The counterclaim will be useful to Ridgeway only insofar as it creates a nominal offset claim in settlement discussions. It has little independent merit and should not materially affect CPS's litigation strategy.

VI. STATUTE OF LIMITATIONS — DETAILED ANALYSIS

As addressed in Section V.C above, all of CPS's claims are timely filed. For completeness, we summarize the limitations analysis here:

The four-year statute of limitations under Texas Civil Practice & Remedies Code §16.004 applies to CPS's breach of contract, common-law fraud, money had and received, and unjust enrichment claims. The earliest overcharge in the overbilling period occurred in February 2019. The Original Petition was filed on July 19, 2021 — approximately twenty-nine months after the earliest overcharge. This is well within the four-year limitations period for all claims.

The discovery rule, applicable to the fraud claim, provides additional protection. CPS did not discover and could not reasonably have discovered the overcharges until October 2020, when Patricia Sung first flagged rate discrepancies. Even measuring from October 2020, the filing date of July 19, 2021 falls within the four-year discovery-rule period (which would not expire until October 2024).

No claims in this matter predate February 2019, and Ridgeway's affirmative defense asserting limitations "as to pre-February 2019 claims" is therefore inapplicable and meritless. There is no limitations bar to any of CPS's claims.

VII. SUMMARY OF DAMAGES EXPOSURE FOR RIDGEWAY

The following table summarizes Ridgeway's total potential exposure in this litigation:

By contrast, Ridgeway's counterclaim for lost profits from early termination alleges damages of only $340,000, and that claim is, as discussed above, meritless given CPS's right to terminate for cause under §9.2.

The net exposure overwhelmingly favors CPS. Even in a scenario in which CPS prevails only on the breach-of-contract claim (without fraud or exemplary damages), CPS would be entitled to the $1,847,632.19 in overcharges, contractual interest, and attorneys' fees — a combined recovery likely in the range of $2.3 to $2.6 million. If CPS prevails on the fraud claim and obtains exemplary damages, the total recovery could exceed $6 million. In either scenario, Ridgeway faces substantial and material financial exposure.

VIII. RECOMMENDATIONS

Based on the foregoing analysis, we make the following recommendations:

A. Proceed with All Four Causes of Action

We recommend that CPS's Original Petition, to be filed on July 19, 2021, assert the following four causes of action:

1. Breach of Contract — for recovery of $1,847,632.19 in overcharges, contractual interest under MTSA §10.3, and attorneys' fees under Texas Civil Practice & Remedies Code §38.001.

2. Money Had and Received — as an independent equitable cause of action for recovery of the overpayments, providing a safety net in the event any overcharge category is deemed to fall outside the MTSA's scope.

3. Common-Law Fraud — for recovery of actual damages and, upon proof by clear and convincing evidence, exemplary damages of up to $3,695,264.38 under §41.003 and §41.008.

4. Unjust Enrichment — pleaded in the alternative, to preserve this avenue of recovery in the event Ridgeway succeeds in arguing that any portion of the overcharges falls outside the contractual framework.

The fraud claim, even if ultimately more difficult to prove at trial than the breach-of-contract claim, maximizes CPS's settlement leverage by exposing Ridgeway to exemplary damages of up to $3.7 million. The breach-of-contract claim alone would likely yield full compensatory recovery, but the additional pressure created by the fraud claim and exemplary damages exposure significantly increases the likelihood of a favorable settlement at or near the full value of CPS's claims.

We also recommend that the Original Petition include a prayer for statutory fraud under Texas Business & Commerce Code §27.01, pleaded in the alternative, to preserve that cause of action pending judicial determination of whether the MTSA falls within the statute's scope.

B. Prioritize discovery of Ridgeway's Internal Communications

The strength of CPS's fraud claim depends on establishing scienter — that Ridgeway knew its invoices were inflated or acted recklessly without regard to their accuracy. The most promising source of evidence on this issue is the pricing and rate management department at Ridgeway, headed by James Whitford (Vice President of Pricing & Rate Management). It is this department that would have been responsible for configuring the billing system to apply the correct contract rates to the CPS account, and it is within this department that any intentional manipulation of rates or deliberate override of contractual pricing would most likely have been discussed, directed, or implemented.

We recommend serving targeted interrogatories and requests for production of documents seeking the following categories of information and materials:

• Identification of all Ridgeway personnel involved in setting, adjusting, or configuring rates for the CPS account at any time during the MTSA's term, including but not limited to James Whitford and all rate analysts, billing specialists, and operations personnel who interacted with the CPS account.

• All internal communications — including emails, instant messages, memoranda, notes, and text messages — between and among Ridgeway personnel regarding CPS's rates, pricing, and billing, from January 1, 2019 through the present.

• All billing system configuration records, audit logs, and change histories for the CPS account, showing when and by whom rate parameters, fuel surcharge formulas, and accessorial charge settings were created, modified, or overridden.

• All communications between James Whitford and any Ridgeway rate analysts, billing personnel, or management-level employees regarding CPS pricing, rate adjustments, or billing issues.

• All internal audit, quality assurance, or compliance reports or reviews addressing billing accuracy, rate integrity, or customer disputes, whether specific to the CPS account or company-wide.

We anticipate that Ridgeway may resist production of these materials, particularly internal communications from the pricing department. We should be prepared to file a motion to compel production if Ridgeway's responses are incomplete, evasive, or unduly delayed. Early engagement with the court on discovery disputes, if necessary, will be important to maintaining the litigation timeline and ensuring that we obtain the evidence needed to evaluate and prosecute the fraud claim.

C. Prepare for Summary Judgment on Breach of Contract

Once the forensic accounting analysis by Meridian Forensic Accounting Group LLC (engagement partner Nathan Crowley, CPA, CFF, retained August 20, 2021) is completed and Ridgeway's discovery responses are obtained, the breach-of-contract claim should be ripe for summary judgment on liability.

The core facts underlying the breach-of-contract claim are objective and verifiable:

• The rate discrepancies are provable by a mechanical comparison of Ridgeway's invoiced per-mile rates to the Exhibit B rate schedule (as adjusted by the annual 2.5% escalator).

• The fuel surcharge methodology deviation is provable by comparing the DOE i

CALDERWOOD & HARKNESS LLP Attorneys at Law
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION
MEMORANDUM
I. PURPOSE
This memorandum provides a detailed analysis of the legal claims available to our client, Crestline Packaging Solutions LLC ("CPS"), against Ridgeway Freight Services Inc. ("Ridgeway") arising from Ridgeway's systematic overbilling of transportation services over a period of approximately twenty-six months. The memorandum evaluates the viability, evidentiary requirements, and anticipated challenges associated with each potential cause of action under Texas law, and provides strategic recommendations regarding pleading, discovery, and litigation posture.
This analysis has been prepared following a comprehensive review of the following materials: (a) the Master Transportation Services Agreement dated April 15, 2019, between CPS and Ridgeway (the "MTSA"), including Exhibit B (Rate Schedule) and Exhibit C (Fuel Surcharge Methodology); (b) CPS's internal audit findings, as compiled by CPS's accounts payable and internal audit teams between November 2020 and January 2021; (c) the pre-suit demand letter sent by this Firm on June 18, 2021, and Ridgeway's rejection thereof dated July 2, 2021, communicated through its outside counsel, Bartlett, Hogue & Sinclair LLP (Marcus T. Hogue); and (d) interviews with CPS personnel, including Patricia Sung (Vice President, Supply Chain & Logistics), Harold Inman (General Counsel), and Dennis Yurkovich (Chief Financial Officer).
The memorandum addresses the following claims and issues:
1. Breach of Contract. CPS's claim that Ridgeway breached the MTSA by systematically overbilling CPS across four distinct categories — inflated per-mile rates, improper fuel surcharge calculations, unauthorized accessorial charges, and duplicate invoices — resulting in aggregate overpayments of $1,847,632.19.
2. Common-Law Fraud. CPS's claim that Ridgeway's submission of inflated invoices constituted actionable fraud under Texas common law, including the critical question of scienter and the evidence needed to establish it.
3. Statutory Fraud under Texas Business & Commerce Code §27.01. The potential applicability of the Texas statutory fraud cause of action to the transactions at issue, and the limitations on its scope.
4. Unjust Enrichment / Money Had and Received. Alternative equitable claims for recovery of the overpayments, pleaded in the alternative to the contract claim.
5. Ridgeway's Anticipated Affirmative Defenses. An evaluation of the defenses Ridgeway is likely to assert, including the "oral modification" defense already asserted in Ridgeway's July 2, 2021 response letter, as well as waiver, estoppel, and statute of limitations.
6. Attorneys' Fees and Exemplary Damages. The availability of attorneys' fees under Texas Civil Practice & Remedies Code §38.001 and exemplary (punitive) damages under §41.003, including the statutory cap under §41.008.
7. Statute of Limitations. An assessment confirming that all claims are timely.
8. Strategic Recommendations. Recommendations for pleading, discovery priorities, and litigation strategy.
II. BREACH OF CONTRACT
A. Elements Under Texas Law
Under Texas law, a plaintiff asserting a claim for breach of contract must prove each of the following elements: (1) the existence of a valid, enforceable contract between the parties; (2) the plaintiff's performance or tender of performance under the contract; (3) the defendant's breach of the contract; and (4) damages sustained by the plaintiff as a result of the defendant's breach. Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 890 (Tex. 2019). These elements are well-established and have been consistently reaffirmed by Texas courts at all levels. See also Valero Mktg. & Supply Co. v. Kalama Int'l, 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, pet. denied) (applying the same four-element framework in a commercial supply agreement dispute). The plaintiff bears the burden of proving each element by a preponderance of the evidence.
As set forth below, CPS can establish each element with strong, objectively verifiable evidence.
B. Application to CPS's Claims
1. Valid Contract. The MTSA was duly executed by authorized representatives of CPS and Ridgeway on April 15, 2019. The agreement establishes a three-year term commencing on April 15, 2019, and expiring on April 14, 2022, with automatic renewal for successive one-year periods unless either party provides written notice of non-renewal at least ninety (90) days prior to the expiration of the then-current term.
The MTSA is supported by adequate mutual consideration. Under the agreement, CPS committed to use Ridgeway as its carrier for transportation of CPS products across its multi-state manufacturing and distribution network. Specifically, Ridgeway served as the exclusive carrier for both full truckload ("FTL") and less-than-truckload ("LTL") shipments originating from CPS's Texas manufacturing facility, and as the primary carrier for shipments from CPS's Ohio and Indiana facilities. In exchange, Ridgeway committed to provide transportation and logistics services at the rates specified in the Exhibit B rate schedule, subject to the fuel surcharge methodology set forth in Exhibit C and the annual rate escalation provisions described below.
The MTSA contains a governing law clause (§14.3) specifying that the agreement is governed by and construed in accordance with the laws of the State of Texas, and a forum selection clause (§14.4) specifying Tarrant County, Texas, as the exclusive venue for any litigation arising under or in connection with the agreement.
There is no dispute as to the existence, execution, or enforceability of the MTSA. Ridgeway has not, at any point in its pre-suit correspondence, contested the validity of the contract. The MTSA constitutes a binding, enforceable agreement between the parties. This element is clearly satisfied.
2. CPS's Performance. CPS performed all of its material obligations under the MTSA throughout the relevant period. Specifically, CPS paid every invoice submitted by Ridgeway within the contractual net-thirty-day payment terms throughout the entire twenty-six-month overbilling period from February 2019 through March 2021. CPS's accounts payable department processed Ridgeway's invoices in the ordinary course of business and remitted payment on or before the due date reflected on each invoice.
In addition to its payment obligations, CPS complied with all other material obligations under the MTSA, including its volume commitments and shipment scheduling requirements. CPS's five manufacturing facilities — located in Ohio, Indiana, and Texas — collectively generated approximately 14,000 truckloads per year of freight volume that was directed to Ridgeway in accordance with the MTSA's exclusivity and primary-carrier provisions. CPS consistently met its forecasted shipping volumes and cooperated with Ridgeway's scheduling and operational requirements.
CPS's total payments to Ridgeway during the overbilling period amounted to $12,318,209.46. As discussed in detail below, the correct amount due under the contractual rates and formulas was $10,470,577.27 — meaning that CPS overpaid by $1,847,632.19. Critically, CPS's overpayment does not constitute a failure of performance; rather, it demonstrates that CPS exceeded its contractual payment obligations to CPS's detriment. CPS's performance is not in question.
3. Ridgeway's Breach. CPS's internal audit, commenced in November 2020 and completed in January 2021, revealed that Ridgeway breached the MTSA in at least four distinct respects over the twenty-six-month period from February 2019 through March 2021. Each category of breach is discussed below.
(a) Inflated Per-Mile Rates — $1,104,891.53
The most significant category of overcharges involves Ridgeway's systematic application of per-mile FTL rates that exceeded the rates specified in the Exhibit B rate schedule. On 4,217 of 9,843 total invoices during the overbilling period — a rate of 42.8% — Ridgeway charged per-mile FTL rates that were 8% to 12% above the applicable contractual rate.
The Exhibit B rate schedule establishes specific per-mile rates for each shipping lane. The key contractual rates are as follows:
The MTSA provides for a 2.5% annual rate escalator, effective each April 15 (the anniversary of the agreement's execution date), applied to the base rates only. CPS's internal audit team properly accounted for this escalator in computing the correct amount due — that is, the overcharge calculation reflects the difference between the amounts Ridgeway actually invoiced and the amounts that would have been due under the Exhibit B rates as adjusted by the annual escalator. The inflated rates charged by Ridgeway exceeded even the escalated contractual rates by 8% to 12%.
The total overcharge attributable to inflated per-mile rates is $1,104,891.53, representing the largest single component of the aggregate overpayment. This amount has been computed on an invoice-by-invoice basis by CPS's internal audit team and will be independently verified by our retained forensic accounting expert.
(b) Improper Fuel Surcharge Calculations — $387,412.66
Exhibit C to the MTSA specifies the formula for calculating fuel surcharges on each shipment. The contractual formula provides that the fuel surcharge shall be calculated using the U.S. Department of Energy ("DOE") Weekly Retail On-Highway Diesel Price as published for the same week as the shipment. This is a standard industry methodology that ties the surcharge to contemporaneous fuel costs.
Ridgeway deviated from this methodology by using a seven-day lagging DOE index — that is, Ridgeway applied the DOE price from the week preceding the shipment week rather than the DOE price for the week in which the shipment actually occurred. During periods of declining diesel prices (which characterized much of the overbilling period), this lagging methodology systematically inflated the fuel surcharge because the prior week's higher price was applied instead of the current week's lower price. During periods of rising diesel prices, the lagging method would have the opposite effect, but the net result over the twenty-six-month period overwhelmingly favored Ridgeway.
The deviation from the contractual formula is objective, verifiable, and mechanical. By comparing the DOE index values used by Ridgeway on each invoice against the DOE index values published for the actual shipment week, the overcharge can be computed on a line-item basis. The total overcharge attributable to improper fuel surcharge calculations is $387,412.66.
(c) Unauthorized Accessorial Charges — $241,008.00
Ridgeway billed CPS for various accessorial charges — including liftgate service fees, detention charges, and re-delivery fees — that were neither supported by the required delivery documentation nor authorized under the MTSA. The MTSA's rate schedule specifies the types of accessorial charges that may be assessed and establishes the documentation requirements for each. Under the agreement, accessorial charges may be invoiced only when (i) the charge type is enumerated in the rate schedule and (ii) the charge is supported by contemporaneous delivery or service documentation, such as signed delivery receipts, detention logs, or re-delivery authorization forms.
CPS's internal audit identified $241,008.00 in accessorial charges that failed to meet one or both of these requirements. In many instances, Ridgeway billed for liftgate or detention services on deliveries for which no supporting documentation existed in Ridgeway's delivery records, as verified against CPS's own receiving records. In other instances, the accessorial charge type was not among those enumerated in the rate schedule at all.
(d) Duplicate Invoices — $114,320.00
CPS's internal audit identified eighty-three (83) invoices that were submitted by Ridgeway and paid by CPS twice. In each instance, Ridgeway submitted two invoices bearing different invoice numbers but reflecting the same shipment, load number, date, and amount. CPS's accounts payable system, which processes invoices based on invoice number rather than shipment-level detail, did not flag these duplicates during routine processing. The duplicates were discovered during the November 2020 through January 2021 internal audit.
The total amount of duplicate payments is $114,320.00. This category of overcharge is the most straightforward to establish, as it requires only a comparison of invoice numbers against shipment records to confirm that two payments were made for a single shipment.
4. Damages. CPS's direct damages — the aggregate of overpayments across all four categories described above — total $1,847,632.19, computed as follows:
The correct amount due under the contractual rates and formulas was $10,470,577.27. This figure is derived by subtracting the aggregate overcharges of $1,847,632.19 from the total amount invoiced and paid of $12,318,209.46. The overcharges thus represent an approximately 15.0% overbilling rate across the twenty-six-month period.
In addition to the principal overcharge amount, CPS is entitled to contractual interest under MTSA §10.3, which provides for interest at the rate of 1.5% per month on disputed amounts found to be due from one party to the other. Contractual interest has been accruing since the date of each overpayment and will continue to accrue through the date of judgment or settlement. As of the June 18, 2021 demand letter, the accrued contractual interest was estimated at $221,715.86 and continues to grow.
C. Attorneys' Fees
Texas Civil Practice & Remedies Code §38.001 provides that a person may recover reasonable attorneys' fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for, among other things, a suit "founded on . . . an oral or written contract." Because CPS's breach-of-contract claim is founded on the MTSA, a written contract, CPS is entitled to recover reasonable attorneys' fees if it prevails on this claim.
Section 38.002 imposes a prerequisite: the claimant must present the claim to the opposing party or to a duly authorized agent of the opposing party and must allow the opposing party at least thirty (30) days to tender payment before filing suit. CPS has satisfied this requirement through two separate communications:
First, on February 8, 2021, Harold Inman, CPS's General Counsel, sent a written dispute notice to Ridgeway under MTSA §11.2, identifying the overcharges discovered by CPS's internal audit and demanding repayment. This notice was the first formal presentment of CPS's claim to Ridgeway.
Second, on June 18, 2021, this Firm sent a pre-suit demand letter on CPS's behalf, reiterating the claim in detail and demanding payment of $1,847,632.19 plus accrued interest within fourteen (14) days. The letter was sent by certified mail, return receipt requested, and by electronic mail to Ridgeway's registered agent and to Marcus T. Hogue of Bartlett, Hogue & Sinclair LLP, who had been identified as Ridgeway's outside counsel.
Ridgeway rejected the demand in a letter dated July 2, 2021, from Marcus T. Hogue. The Original Petition in this matter was filed on July 19, 2021 — more than thirty days after the February 8, 2021 notice and more than fourteen days after the June 18, 2021 demand letter. CPS has therefore satisfied the presentment requirement of §38.002, and attorneys' fees are recoverable if CPS prevails on its breach-of-contract claim.
D. Assessment. CPS's breach-of-contract claim is exceptionally strong. The core of the claim rests on a mechanical comparison of the amounts Ridgeway invoiced against the amounts due under the express terms of the MTSA — an analysis that involves no subjective judgments, disputed interpretations, or credibility determinations. The rate discrepancies are objectively verifiable by comparing Ridgeway's invoiced per-mile rates to the Exhibit B rate schedule (as adjusted by the annual escalator). The fuel surcharge methodology deviation is similarly verifiable by comparing the DOE index values used by Ridgeway to the DOE index values published for the actual shipment weeks, as specified in the Exhibit C formula. Duplicate invoices are self-evident upon comparison of invoice numbers to shipment records.
This claim is well-suited for resolution on summary judgment once two conditions are met: (1) the forensic accounting analysis by Meridian Forensic Accounting Group LLC (retained on August 20, 2021; engagement partner Nathan Crowley, CPA, CFF) is completed and presented in expert report form; and (2) Ridgeway's discovery responses — including its billing system records and internal communications — have been obtained and confirm that no legitimate basis exists for the overcharges. Given the objective, verifiable nature of the discrepancies, we anticipate that the breach-of-contract claim will present a compelling case for partial or full summary judgment, particularly if Ridgeway cannot produce credible evidence supporting its oral modification defense (addressed in Section V below).
III. FRAUD CLAIMS
A. Common-Law Fraud
1. Elements. Under Texas law, common-law fraud requires proof of the following elements: (1) a material misrepresentation was made; (2) the misrepresentation was false; (3) the speaker made the misrepresentation with knowledge of its falsity or recklessly, as a positive assertion, without any knowledge of its truth (the "scienter" requirement); (4) the speaker made the misrepresentation with the intent that it should be acted upon by the other party; and (5) the other party actually and justifiably relied on the misrepresentation and thereby suffered injury. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011).
The standard of proof for establishing fraud liability is preponderance of the evidence. A higher standard — clear and convincing evidence — is required only for the recovery of exemplary (punitive) damages under Texas Civil Practice & Remedies Code §41.003, as discussed in Section III.C below.
2. Application. Misrepresentation. Each invoice submitted by Ridgeway to CPS constitutes a representation by Ridgeway that the amount stated on the invoice was due and payable under the terms of the MTSA. An invoice is, by its nature, a demand for payment based on an implicit assertion that the goods or services were provided at the agreed-upon price. When Ridgeway invoiced rates exceeding the Exhibit B schedule, applied a non-contractual fuel surcharge methodology, billed for unsupported accessorial charges, or submitted duplicate invoices, it represented — falsely — that the invoiced amounts were contractually authorized and owing. The submission of 4,217 invoices bearing inflated per-mile rates, together with hundreds of additional invoices bearing improper fuel surcharges, unauthorized accessorial charges, and duplicate billings, constitutes a pattern of material misrepresentations over a twenty-six-month period.
Falsity. The invoiced amounts exceeded the amounts due under the contractual rate schedule, fuel surcharge formula, and accessorial charge provisions. This is demonstrable through an invoice-by-invoice comparison of the amounts charged to the amounts that should have been charged under the express terms of the MTSA. The falsity of each overcharged invoice is an objective fact, not a matter of interpretation or opinion.
Scienter. This is the critical factual question for the fraud claim. To satisfy the scienter requirement, CPS must establish that Ridgeway knew the rates it charged were inflated, or that Ridgeway acted recklessly — that is, made positive assertions about amounts due without any knowledge of their truth or accuracy.
At this pre-discovery stage — before we have obtained Ridgeway's internal records — CPS's internal audit has not uncovered direct evidence of intentional fraud by a specific individual at Ridgeway. No "smoking gun" document (such as an internal email directing the billing department to inflate rates) has been produced or identified. We do not have access to Ridgeway's billing system records, internal communications, or personnel files.
However, strong circumstantial indicia of deliberate conduct exist, and the pattern of overcharges is difficult to explain as innocent error:
• Prevalence. The overcharges affected 42.8% of all invoices submitted during the overbilling period (4,217 of 9,843 total invoices). A rate of nearly 43% is inconsistent with isolated, random, or inadvertent billing errors. If the overcharges were the product of genuine mistakes, one would expect a far lower incidence rate and a random distribution of errors — both overcharges and undercharges — rather than a systematic pattern of overcharges only.
• Multi-Category Pattern. The overcharges were not limited to a single billing component. They spanned four distinct categories: per-mile rates, fuel surcharges, accessorial charges, and duplicate invoices. The breadth of the overbilling pattern across multiple independent billing parameters suggests a deliberate, multi-faceted scheme rather than a single system configuration error.
• Duration. The overbilling persisted for twenty-six consecutive months (February 2019 through March 2021). If the overcharges were attributable to a one-time billing system error, one would expect the error to have been detected and corrected by Ridgeway's own internal quality-assurance processes within a much shorter timeframe.
• Consistent Margin. The inflated per-mile rates were systematically 8% to 12% above the Exhibit B schedule — a consistent margin that suggests a programmatic override of the contractual rates in Ridgeway's billing system rather than random data entry errors. If rates were being entered manually and incorrectly, one would expect greater variability in the deviation.
• Billing System Configuration. Ridgeway's pricing department, headed by James Whitford (Vice President of Pricing & Rate Management), would have been responsible for configuring Ridgeway's billing and rate management system to apply the correct contract rates for the CPS account. The systematic deviation from contractual rates suggests that someone within the pricing department — whether Whitford himself or a subordinate acting under his direction — deliberately configured or allowed the system to apply rates other than those specified in Exhibit B.
These circumstantial factors, taken together, create a strong inference that the overbilling was not accidental. Whether this inference can be elevated to proof of actual knowledge or recklessness will depend critically on the evidence obtained in discovery.
discovery Priority. Internal communications and billing system records from Ridgeway's pricing department are the single most important category of discovery for the fraud claim. Specifically, we should target the following:
(i) All communications between James Whitford and his subordinates in the pricing and rate management department regarding the CPS account, including rate configurations, rate adjustments, and billing system settings;
(ii) All communications between the pricing department and Ridgeway's senior management regarding the CPS account;
(iii) Billing system audit logs and configuration records for the CPS account, showing when and by whom rate changes were made;
(iv) Any internal audit, quality assurance, or compliance reviews conducted by Ridgeway that addressed billing accuracy or rate integrity for the CPS account or for other customers.
If internal emails, memoranda, or system records show that Ridgeway personnel knowingly applied inflated rates — or knowingly failed to correct known billing discrepancies — the fraud claim becomes very strong. Even absent a direct admission, evidence that the pricing department was aware of the rate discrepancies and took no corrective action would support a finding of recklessness sufficient to satisfy the scienter element.
Intent to Induce Reliance. Ridgeway submitted its invoices with the clear expectation and intent that CPS would pay them. Each invoice was a demand for payment, and Ridgeway's purpose in submitting invoices was to induce CPS to remit the amounts stated. This element is straightforward and not expected to be contested.
Reliance and Injury. CPS relied on the accuracy of Ridgeway's invoices and paid $12,318,209.46 — an amount $1,847,632.19 greater than what was actually due under the MTSA. CPS's reliance was reasonable: CPS was entitled to expect that its contracted logistics provider — a company with which it had negotiated specific rates memorialized in a detailed written agreement — would invoice at the contractual rates. CPS's accounts payable systems processed Ridgeway's invoices in the ordinary course of business, applying the same procedures used for all of CPS's vendor invoices. CPS did not independently verify each invoice against the rate schedule as a matter of routine practice, nor was it obligated to do so. The volume of invoices (approximately 9,843 over the twenty-six-month period, or roughly 378 per month) made manual verification of each invoice impracticable, and reliance on the accuracy of a contractual counterparty's invoices is both reasonable and expected in commercial practice.
3. Assessment. The common-law fraud claim is viable and should be pleaded, but its ultimate strength at trial depends heavily on the evidence obtained in discovery regarding Ridgeway's internal knowledge and intent. As noted, the circumstantial case is compelling even in the absence of direct evidence: the prevalence, multi-category nature, duration, and consistent margin of the overcharges create a strong inference of deliberate conduct. Discovery of Ridgeway's internal communications — particularly from the pricing department — will determine whether the inference can be converted to direct proof.
We recommend pleading common-law fraud in the Original Petition and pursuing aggressive discovery targeted at Ridgeway's pricing department, James Whitford, and any personnel involved in configuring or overseeing the billing system for the CPS account. The fraud claim serves a dual purpose: it provides a basis for exemplary damages (discussed below), significantly increasing Ridgeway's exposure; and it maximizes CPS's settlement leverage, as a fraud finding would carry reputational consequences for Ridgeway in addition to the financial impact.
B. Statutory Fraud — Texas Business & Commerce Code §27.01
1. Scope of §27.01. Section 27.01 of the Texas Business & Commerce Code creates a statutory cause of action for fraud committed in certain categories of transactions. As originally enacted, §27.01 applied only to "a transaction involving real estate or stock." Subsequent amendments expanded the statute to cover "a transaction involving the sale of goods" under certain circumstances. The statute provides for recovery of actual damages, court costs, and reasonable and necessary attorneys' fees. Where the defendant acted knowingly, treble damages may be awarded.
The applicability of §27.01 to the claims at issue presents an uncertain question of law. The MTSA involves the provision of freight transportation services — that is, Ridgeway transported CPS's products (packaging materials and chemical products) between CPS's manufacturing facilities and distribution points. Texas courts have construed the scope of §27.01 in various ways, and the case law does not clearly establish whether a contract for transportation services qualifies as a "transaction involving the sale of goods" within the meaning of the statute. While the MTSA undeniably involves the carriage of goods (CPS's products), the transaction at issue is the provision of transportation services, not the sale of the goods being transported. A court could reasonably conclude that §27.01 does not reach this type of transaction.
2. Assessment. Given the uncertainty regarding §27.01's applicability, we recommend pleading the statutory fraud claim in the alternative to preserve the cause of action. If the court determines that the MTSA constitutes a "transaction involving the sale of goods" — or if the facts developed in discovery support an alternative characterization of the transaction — the §27.01 claim would provide an additional basis for recovery. However, our primary reliance for the fraud-based claims should be on common-law fraud, which has no similar transactional limitation and is well-established as a basis for relief in cases involving commercial invoice fraud.
It should also be noted that the remedies available under §27.01 — actual damages, court costs, and reasonable attorneys' fees — substantially overlap with the remedies available through the breach-of-contract claim (which independently supports attorneys' fees under §38.001) and the common-law fraud claim (which supports exemplary damages under §41.003). The §27.01 claim therefore adds incremental value primarily as a belt-and-suspenders measure rather than as a source of unique relief.
C. Exemplary (Punitive) Damages
1. Legal Standard. Under Texas Civil Practice & Remedies Code §41.003(a), exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from fraud, malice, or gross negligence. Section 41.003(a)(1) defines "fraud" for purposes of the exemplary damages statute to require a showing of actual awareness of the falsity of a representation combined with an intent to induce the other party to act in reliance thereon.
The clear-and-convincing-evidence standard is higher than the preponderance standard applicable to the underlying fraud claim. This means that CPS could potentially prevail on its common-law fraud claim (establishing liability by a preponderance) without necessarily proving entitlement to exemplary damages (which requires clear and convincing evidence). In practice, however, if the discovery evidence is sufficient to establish fraud by a preponderance, it will often be sufficient to establish entitlement to exemplary damages as well — particularly if direct evidence of intentional misconduct is obtained.
2. Statutory Cap — §41.008. Texas Civil Practice & Remedies Code §41.008(b) imposes a cap on exemplary damages. Under §41.008(b), the amount of exemplary damages awarded may not exceed the greater of:
(i) two times the amount of economic damages, plus an amount equal to any noneconomic damages found by the trier of fact, not to exceed $750,000; or
(ii) $200,000.
In this case, CPS's claim is for economic damages only — the $1,847,632.19 in overpayments — with no claimed noneconomic damages. Accordingly, the applicable cap under §41.008(b)(1) would be:
2 × $1,847,632.19 = $3,695,264.38
Because this amount exceeds $200,000, the cap under subsection (b)(1) governs. The maximum exemplary damages award, if CPS proves fraud by clear and convincing evidence, would therefore be $3,695,264.38.
The combined potential recovery, including both actual damages and maximum exemplary damages, would be:
This figure does not include contractual interest under MTSA §10.3 or attorneys' fees, which would further increase the total recovery.
3. Strategic Value. The exemplary damages exposure is significant from a strategic standpoint, even if the ultimate likelihood of a jury awarding the maximum exemplary damages amount at trial is moderate rather than certain. The clear-and-convincing standard, while achievable with strong evidence, introduces inherent uncertainty that a jury may or may not resolve in CPS's favor.
However, the mere availability of exemplary damages creates a powerful settlement lever. Ridgeway is a mid-size freight company with annual revenues of approximately $94 million. A combined adverse verdict of $5.5 million or more — exclusive of interest and attorneys' fees — would represent a material financial impact on Ridgeway's balance sheet and operations. Moreover, a judicial finding of fraud would carry substantial reputational harm for Ridgeway in the transportation industry, potentially affecting its ability to retain existing customers and attract new ones.
We recommend emphasizing the exemplary damages exposure in any mediation or settlement discussions with Ridgeway. The threat of exemplary damages is most potent when combined with a strong evidentiary record of systematic, deliberate overcharging — and the evidence we have developed to date supports that narrative. If discovery produces direct evidence of intentional misconduct (e.g., internal emails from James Whitford's department), the settlement value of the exemplary damages component will increase substantially.
IV. MONEY HAD AND RECEIVED / UNJUST ENRICHMENT
A. Money Had and Received
An action for money had and received is an equitable claim under Texas law that permits recovery when one party holds money that in equity and good conscience belongs to another. The cause of action is not based on a wrongful act by the defendant, but rather on the equitable principle that one should not retain money that rightfully belongs to another. Edwards v. Mid-Continent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex. App.—Dallas 2008, pet. denied). The claim requires proof that the defendant holds money that belongs to the plaintiff and that the defendant has refused to return it despite demand.
This claim provides an alternative and independent basis for recovery of the $1,847,632.19 in overpayments. It is particularly useful as a safety net in the event that any individual overcharge category is found by the court not to fall within the scope of the breach-of-contract claim. For example, if a court were to construe certain accessorial charges as falling outside the MTSA's scope — perhaps because Ridgeway argues that those charges were governed by a separate arrangement or industry custom — the money-had-and-received claim would provide an equitable basis for recovering those overpayments regardless of whether they constitute a breach of the MTSA.
The elements of a money-had-and-received claim are straightforward in this case. Ridgeway received and retained $1,847,632.19 in overpayments from CPS. The overpayments were made by CPS in reliance on the accuracy of Ridgeway's invoices, and the amounts paid exceeded what CPS owed under the contractual terms. Ridgeway has refused to return the overpayments despite demand (first by CPS's February 8, 2021 dispute notice, and then by the Firm's June 18, 2021 pre-suit demand letter). In equity and good conscience, these funds belong to CPS.
B. Unjust Enrichment
In Texas, unjust enrichment is generally not recognized as an independent cause of action when an express contract governs the subject matter of the parties' dispute. The Texas Supreme Court has held that "[w]hen a valid, express contract covers the subject matter of the parties' dispute, there can be no recovery under a quasi-contract theory." Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000). Because the MTSA expressly governs the rates, fees, and charges that Ridgeway may bill to CPS, a standalone unjust enrichment claim may be precluded by the existence of the contract.
Nevertheless, we recommend pleading unjust enrichment in the alternative as a defensive pleading strategy. There are two reasons for this approach. First, Ridgeway may attempt to argue that the MTSA does not govern certain categories of overcharges — for instance, by claiming that certain accessorial charges fell outside the MTSA's scope or were governed by separate oral agreements or industry custom. If Ridgeway succeeds in removing any portion of the overcharges from the contractual framework, unjust enrichment would provide an alternative equitable theory for recovering those amounts. Second, pleading in the alternative is expressly permitted under Texas Rule of Civil Procedure 48, and there is no prejudice to CPS from including this claim. It serves to ensure that all avenues of recovery are preserved regardless of how the court construes the scope of the MTSA.
The unjust enrichment claim would be subject to the same four-year limitations period as the contract and fraud claims, and all overpayments at issue fall within that window.
V. RIDGEWAY'S ANTICIPATED DEFENSES
A. Oral Modification
1. The Defense as Stated. In its July 2, 2021 response letter, Ridgeway — through its outside counsel, Marcus T. Hogue of Bartlett, Hogue & Sinclair LLP — asserted that "rate adjustments were discussed and agreed to verbally between Ridgeway's operations team and CPS's logistics personnel." This assertion, which constitutes the centerpiece of Ridgeway's defense to date, appears to be predicated on a theory that the Exhibit B rate schedule was orally modified by mutual agreement during the course of the parties' performance under the MTSA, and that the rates Ridgeway charged were consistent with the alleged oral modifications.
Ridgeway's letter did not identify any specific CPS personnel who allegedly participated in or agreed to the purported rate adjustments, nor did it specify the dates on which the alleged oral modifications occurred, the specific rate changes that were allegedly discussed, or the specific shipment lanes affected. The assertion was made in general terms without supporting documentation or particularity.
2. MTSA §15.1 — No Oral Modification Clause. Section 15.1 of the MTSA expressly provides:
"This Agreement may not be amended, modified, or supplemented except by a written instrument signed by authorized representatives of both Parties."
This is a standard no-oral-modification ("NOM") clause. Under Texas law, NOM clauses are generally enforceable, and a party seeking to enforce an alleged oral modification of a contract containing a NOM clause bears a heavy burden. Patel v. Ambassador Drycleaning, 86 S.W.3d 304, 307–08 (Tex. App.—Eastland 2002, no pet.) (enforcing NOM clause and rejecting oral modification defense). While some older Texas decisions recognized the theoretical possibility that a NOM clause could itself be orally waived by the parties' subsequent conduct, the modern trend in Texas strongly favors the enforcement of written-modification requirements, particularly in commercial transactions between sophisticated parties. This trend has been reinforced by the Texas Legislature's adoption of UCC §2-209(2), which provides that a signed agreement excluding modification except by a signed writing "cannot be otherwise modified" — a provision that, while directly applicable only to transactions in goods, reflects the broader policy of Texas law favoring written agreements over oral understandings.
The MTSA's NOM clause is clear, unambiguous, and prominently placed in the agreement's general provisions. No written amendment to the Exhibit B rate schedule has been executed by the parties. No written amendment of any kind to the MTSA has been produced or even alleged by Ridgeway. On its face, the NOM clause bars Ridgeway's oral modification defense.
3. Factual Rebuttal — No CPS Authorization. Beyond the legal bar imposed by the NOM clause, the factual record flatly contradicts Ridgeway's claim that rate adjustments were "discussed and agreed to verbally" with CPS personnel. We have conducted interviews with the following CPS employees, each of whom would have been involved in or aware of any discussions regarding rate modifications:
Patricia Sung, Vice President of Supply Chain & Logistics. Ms. Sung's team handled day-to-day logistics coordination with Ridgeway, including shipment scheduling, freight management, and operational communications. She was the most senior CPS employee with regular contact with Ridgeway's operations team. Ms. Sung has confirmed unequivocally that no one in her department discussed, agreed to, or authorized any rate increases or modifications to the Exhibit B rate schedule at any time during the MTSA's term. It was Ms. Sung who first flagged the rate discrepancies during the Q3 2020 budget review in October 2020, after noticing that CPS's actual freight costs were consistently exceeding the budgeted amounts based on the contractual rates. Her discovery of the discrepancy was what prompted CPS's internal audit.
Harold Inman, General Counsel. Mr. Inman confirmed that no request for rate modification was ever presented to CPS's legal department by Ridgeway or by any CPS business unit. No amendment, modification, or supplement to the MTSA was ever executed, drafted, or authorized. Mr. Inman further confirmed that any modification to the MTSA would have required legal review and executive approval under CPS's internal contract management policies, and no such review or approval was ever sought or given.
Dennis Yurkovich, Chief Financial Officer. Mr. Yurkovich confirmed that no rate modifications were approved at the financial or executive level. He was not aware of any discussions with Ridgeway regarding rate changes, and no rate adjustments were reflected in CPS's budgets, financial models, or internal cost projections. Mr. Yurkovich authorized the initiation of the formal dispute process on January 29, 2021, following the completion of the internal audit.
In sum, no CPS personnel — at any level — authorized oral changes to the Exhibit B rate schedule. Ridgeway has not identified a single individual at CPS who allegedly participated in or agreed to rate modifications. Ridgeway bears the burden of proving the alleged oral modification, and to do so it would need to identify specific CPS personnel who agreed to rate changes, specify the dates and substance of the alleged agreements, and overcome the express NOM clause. On the current record, Ridgeway cannot meet this burden.
We will seek sworn declarations or affidavits from Ms. Sung, Mr. Inman, and Mr. Yurkovich to support a motion for summary judgment on this issue. Their testimony, combined with the NOM clause, should be dispositive.
4. Assessment. The oral modification defense is weak. It is contradicted by the MTSA's express no-oral-modification clause, which is enforceable under Texas law. It is further contradicted by the testimony of every CPS employee who would have been involved in or aware of rate-modification discussions. And it is undermined by the absence of any particularity in Ridgeway's assertion — Ridgeway has not identified who at CPS allegedly agreed to rate changes, when, or on what terms.
We expect this defense to collapse upon discovery and in settlement negotiations, particularly once Ridgeway is compelled to identify the specific CPS and Ridgeway personnel who purportedly participated in the alleged oral agreements and to produce any communications, notes, or records relating to the alleged discussions. If no such evidence exists — as we anticipate — the defense will be untenable.
B. Waiver / Estoppel
1. The Defense. Ridgeway may argue — either in its Answer or in a subsequent motion — that CPS waived its right to dispute the overcharges by paying Ridgeway's invoices without objection for an extended period. A related argument would be that CPS is estopped from recovering overpayments because Ridgeway relied on CPS's silence and continued payments in conducting its operations and managing its financial affairs.
2. Rebuttal. Waiver. Under Texas law, waiver is an intentional relinquishment of a known right or intentional conduct inconsistent with claiming that right. Jernigan v. Langley, 111 S.W.3d 153, 156 (Tex. 2003). The critical requirement is that the waiver must be intentional — a party cannot waive a right unless it is aware of the right and deliberately chooses to forego it. CPS at no time manifested an intent to accept inflated rates or to forego its right to be billed at the contractual rate schedule. CPS was not aware of the overcharges until Patricia Sung flagged rate discrepancies in October 2020, and the full scope of the overbilling was not confirmed until the internal audit was completed in January 2021. CPS's payment of Ridgeway's invoices was not an act of intentional relinquishment; it was the performance of CPS's contractual obligation to pay within net-thirty-day terms, undertaken in reliance on the (incorrect) assumption that Ridgeway's invoices were accurate.
MTSA §11.2 Dispute Window. The MTSA contains a dispute resolution mechanism in §11.2 that provides a sixty-day window from the invoice date within which a party may dispute charges. CPS identified the overcharges during the October 2020 through January 2021 internal audit and promptly sent a written dispute notice on February 8, 2021. For invoices issued from approximately December 2020 forward, CPS's February 2021 dispute fell within the sixty-day window. For older invoices, CPS could not have disputed charges it had not yet identified.
discovery Rule. For the older invoices, the discovery rule applies. CPS's obligation to dispute overcharges did not arise until CPS knew or, in the exercise of reasonable diligence, should have known of the overcharges. The overcharges were concealed within a high-volume invoice stream (approximately 378 invoices per month), embedded within line-item charges on invoices that appeared facially legitimate, and applied at margins (8–12% on rates) that were not so egregious as to be self-evident on casual inspection. CPS's internal audit team commenced its review on November 12, 2020, after Ms. Sung flagged the discrepancies, and completed the review on January 29, 2021. CPS sent its formal dispute notice ten days later, on February 8, 2021. CPS acted promptly and diligently upon discovery.
Estoppel. Estoppel requires, among other elements, that the party asserting it actually and reasonably relied on the other party's conduct to its detriment. Ridgeway cannot credibly claim that it relied on CPS's continued payment of invoices — and specifically on CPS's failure to dispute overcharges — to Ridgeway's detriment. CPS's payments did not cause Ridgeway to change its position or suffer any harm; to the contrary, CPS's payments enriched Ridgeway by $1,847,632.19 beyond what was contractually due. Ridgeway cannot claim detrimental reliance when it was the party that created the overcharges and benefited from CPS's payment of them.
3. Assessment. The waiver and estoppel defenses are weak. CPS did not intentionally waive any rights; it was unaware of the overcharges until October 2020 and acted promptly upon discovery. The MTSA's dispute mechanism was followed for current invoices, and the discovery rule protects CPS's claims for older invoices. Ridgeway cannot establish the detrimental reliance required for estoppel.
C. Statute of Limitations
1. Applicable Limitations Periods. The following limitations periods apply to CPS's claims:
• Breach of contract: Four (4) years under Texas Civil Practice & Remedies Code §16.004(a)(3).
• Common-law fraud: Four (4) years under §16.004(a)(4), subject to the discovery rule, which tolls the limitations period until the plaintiff knew or, in the exercise of reasonable diligence, should have known of the fraud.
• Money had and received / unjust enrichment: Generally four (4) years under the residual limitations provision.
2. Analysis. The earliest overcharge in the overbilling period dates to approximately February 2019, when Ridgeway first began applying inflated rates to its invoices. The Original Petition was filed on July 19, 2021. The interval from the earliest overcharge (February 2019) to the filing date (July 2021) is approximately twenty-nine months — well within the four-year limitations period applicable to all of CPS's claims.
Even under the most conservative accrual analysis — if Ridgeway were to argue that the breach-of-contract claim accrued on the date CPS paid each overcharged invoice rather than on the invoice date — the earliest payment (approximately thirty days after the February 2019 invoice, i.e., approximately March 2019) would still fall well within the four-year window.
For the fraud claim, the discovery rule provides additional protection. Under the discovery rule, the limitations period does not begin to run until the plaintiff discovers, or in the exercise of reasonable diligence should have discovered, the fraud. As discussed in Section V.B above, CPS did discover the overcharges until Patricia Sung flagged rate discrepancies in October 2020, and the full scope of the overbilling was not confirmed until the internal audit was completed in January 2021. If the fraud claim is measured from the October 2020 discovery date, the limitations period would not expire until October 2024 — more than three years after the July 2021 filing date.
Ridgeway's Answer, filed on August 5, 2021, asserts statute of limitations as an affirmative defense, but only "as to pre-February 2019 claims." This defense is inapplicable because no claims in this matter predate February 2019. The overbilling period began in February 2019, and all claims arise from conduct that occurred between February 2019 and March 2021. The limitations defense as framed in Ridgeway's Answer has no factual predicate.
3. Assessment. No statute of limitations bar exists for any of CPS's claims. All claims are comfortably within the four-year limitations period, and the discovery rule provides an additional margin of protection for the fraud claim. Ridgeway's limitations defense, as currently framed, is meritless.
D. Counterclaim for Early Termination
1. The Counterclaim. On August 5, 2021 — the same date it filed its Answer — Ridgeway filed a counterclaim against CPS alleging that CPS breached the MTSA by terminating the agreement before the expiration of the three-year term. Ridgeway claims approximately $340,000 in lost profits for the remaining term of the MTSA from April 22, 2021 (the effective termination date) through April 14, 2022 (the scheduled expiration date).
2. Rebuttal. CPS terminated the MTSA for cause under MTSA §9.2, which permits either party to terminate the agreement upon thirty (30) days' written notice if the other party commits a material breach that remains uncured after notice and a reasonable opportunity to cure.
The chronology of CPS's termination process was as follows:
• February 8, 2021: Harold Inman (CPS General Counsel) sent a written dispute and breach notice to Ridgeway under MTSA §11.2, identifying the overcharges discovered by the internal audit and demanding repayment.
• February – March 2021: During the thirty-day good-faith resolution period, Ridgeway offered $218,500 in credits — a figure that represented approximately 15% of the documented overcharges at the initial estimate level (which exceeded $1.4 million at that time) and approximately 12% of the refined final figure of $1,847,632.19. This response was manifestly inadequate and did not constitute a cure of the breach.
• March 22, 2021: CPS sent a written termination notice under §9.2, effective thirty days from receipt.
• April 22, 2021: The MTSA terminated, and CPS began transitioning its freight operations to Redfield Logistics Corp., a carrier based in Indianapolis, Indiana.
Ridgeway's systematic overbilling of $1,847,632.19 — representing a 15% overbilling rate across 42.8% of all invoices over twenty-six months — constitutes a material breach of the MTSA. The breach was not cured within the notice-and-cure period; Ridgeway's offer of $218,500 against documented overcharges in excess of $1.4 million (at the initial estimate level) was not a good-faith attempt at cure. CPS therefore had full contractual authority to terminate for cause under §9.2, and the termination was neither wrongful nor premature.
Even if a court were to determine that the termination was not justified — which we believe to be extremely unlikely on these facts — Ridgeway's $340,000 lost-profits figure appears to be a rough estimate unsupported by credible financial analysis. The figure does not account for Ridgeway's variable costs, mitigation efforts, or the possibility that Ridgeway could have replaced the lost CPS revenue with other customers. We will challenge this figure aggressively in discovery and, if necessary, through expert testimony.
3. Assessment. The counterclaim is weak and is likely intended primarily as a negotiating chip. CPS had clear and well-documented contractual grounds for termination for cause under §9.2. The counterclaim will be useful to Ridgeway only insofar as it creates a nominal offset claim in settlement discussions. It has little independent merit and should not materially affect CPS's litigation strategy.
VI. STATUTE OF LIMITATIONS — DETAILED ANALYSIS
As addressed in Section V.C above, all of CPS's claims are timely filed. For completeness, we summarize the limitations analysis here:
The four-year statute of limitations under Texas Civil Practice & Remedies Code §16.004 applies to CPS's breach of contract, common-law fraud, money had and received, and unjust enrichment claims. The earliest overcharge in the overbilling period occurred in February 2019. The Original Petition was filed on July 19, 2021 — approximately twenty-nine months after the earliest overcharge. This is well within the four-year limitations period for all claims.
The discovery rule, applicable to the fraud claim, provides additional protection. CPS did not discover and could not reasonably have discovered the overcharges until October 2020, when Patricia Sung first flagged rate discrepancies. Even measuring from October 2020, the filing date of July 19, 2021 falls within the four-year discovery-rule period (which would not expire until October 2024).
No claims in this matter predate February 2019, and Ridgeway's affirmative defense asserting limitations "as to pre-February 2019 claims" is therefore inapplicable and meritless. There is no limitations bar to any of CPS's claims.
VII. SUMMARY OF DAMAGES EXPOSURE FOR RIDGEWAY
The following table summarizes Ridgeway's total potential exposure in this litigation:
By contrast, Ridgeway's counterclaim for lost profits from early termination alleges damages of only $340,000, and that claim is, as discussed above, meritless given CPS's right to terminate for cause under §9.2.
The net exposure overwhelmingly favors CPS. Even in a scenario in which CPS prevails only on the breach-of-contract claim (without fraud or exemplary damages), CPS would be entitled to the $1,847,632.19 in overcharges, contractual interest, and attorneys' fees — a combined recovery likely in the range of $2.3 to $2.6 million. If CPS prevails on the fraud claim and obtains exemplary damages, the total recovery could exceed $6 million. In either scenario, Ridgeway faces substantial and material financial exposure.
VIII. RECOMMENDATIONS
Based on the foregoing analysis, we make the following recommendations:
A. Proceed with All Four Causes of Action
We recommend that CPS's Original Petition, to be filed on July 19, 2021, assert the following four causes of action:
1. Breach of Contract — for recovery of $1,847,632.19 in overcharges, contractual interest under MTSA §10.3, and attorneys' fees under Texas Civil Practice & Remedies Code §38.001.
2. Money Had and Received — as an independent equitable cause of action for recovery of the overpayments, providing a safety net in the event any overcharge category is deemed to fall outside the MTSA's scope.
3. Common-Law Fraud — for recovery of actual damages and, upon proof by clear and convincing evidence, exemplary damages of up to $3,695,264.38 under §41.003 and §41.008.
4. Unjust Enrichment — pleaded in the alternative, to preserve this avenue of recovery in the event Ridgeway succeeds in arguing that any portion of the overcharges falls outside the contractual framework.
The fraud claim, even if ultimately more difficult to prove at trial than the breach-of-contract claim, maximizes CPS's settlement leverage by exposing Ridgeway to exemplary damages of up to $3.7 million. The breach-of-contract claim alone would likely yield full compensatory recovery, but the additional pressure created by the fraud claim and exemplary damages exposure significantly increases the likelihood of a favorable settlement at or near the full value of CPS's claims.
We also recommend that the Original Petition include a prayer for statutory fraud under Texas Business & Commerce Code §27.01, pleaded in the alternative, to preserve that cause of action pending judicial determination of whether the MTSA falls within the statute's scope.
B. Prioritize discovery of Ridgeway's Internal Communications
The strength of CPS's fraud claim depends on establishing scienter — that Ridgeway knew its invoices were inflated or acted recklessly without regard to their accuracy. The most promising source of evidence on this issue is the pricing and rate management department at Ridgeway, headed by James Whitford (Vice President of Pricing & Rate Management). It is this department that would have been responsible for configuring the billing system to apply the correct contract rates to the CPS account, and it is within this department that any intentional manipulation of rates or deliberate override of contractual pricing would most likely have been discussed, directed, or implemented.
We recommend serving targeted interrogatories and requests for production of documents seeking the following categories of information and materials:
• Identification of all Ridgeway personnel involved in setting, adjusting, or configuring rates for the CPS account at any time during the MTSA's term, including but not limited to James Whitford and all rate analysts, billing specialists, and operations personnel who interacted with the CPS account.
• All internal communications — including emails, instant messages, memoranda, notes, and text messages — between and among Ridgeway personnel regarding CPS's rates, pricing, and billing, from January 1, 2019 through the present.
• All billing system configuration records, audit logs, and change histories for the CPS account, showing when and by whom rate parameters, fuel surcharge formulas, and accessorial charge settings were created, modified, or overridden.
• All communications between James Whitford and any Ridgeway rate analysts, billing personnel, or management-level employees regarding CPS pricing, rate adjustments, or billing issues.
• All internal audit, quality assurance, or compliance reports or reviews addressing billing accuracy, rate integrity, or customer disputes, whether specific to the CPS account or company-wide.
We anticipate that Ridgeway may resist production of these materials, particularly internal communications from the pricing department. We should be prepared to file a motion to compel production if Ridgeway's responses are incomplete, evasive, or unduly delayed. Early engagement with the court on discovery disputes, if necessary, will be important to maintaining the litigation timeline and ensuring that we obtain the evidence needed to evaluate and prosecute the fraud claim.
C. Prepare for Summary Judgment on Breach of Contract
Once the forensic accounting analysis by Meridian Forensic Accounting Group LLC (engagement partner Nathan Crowley, CPA, CFF, retained August 20, 2021) is completed and Ridgeway's discovery responses are obtained, the breach-of-contract claim should be ripe for summary judgment on liability.
The core facts underlying the breach-of-contract claim are objective and verifiable:
• The rate discrepancies are provable by a mechanical comparison of Ridgeway's invoiced per-mile rates to the Exhibit B rate schedule (as adjusted by the annual 2.5% escalator).
• The fuel surcharge methodology deviation is provable by comparing the DOE i

CALDERWOOD & HARKNESS LLP Attorneys at Law

MEMORANDUM

I. PURPOSE

II. BREACH OF CONTRACT

III. FRAUD CLAIMS

IV. MONEY HAD AND RECEIVED / UNJUST ENRICHMENT

V. RIDGEWAY'S ANTICIPATED DEFENSES

VII. SUMMARY OF DAMAGES EXPOSURE FOR RIDGEWAY

VIII. RECOMMENDATIONS

Record

Parties

Dates

Amounts