CALDERWOOD & HARKNESS LLP Attorneys at Law 200 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Telephone: (312) 555-9200 Facsimile: (312) 555-9201
Matter No.: 1007-00005
March 25, 2022
VIA ELECTRONIC MAIL AND FIRST-CLASS MAIL
Rachel Drummond, Partner Victor Saldana, Associate Pratt, Givens & Lowell LLP 155 North Michigan Avenue, Suite 2700 Chicago, Illinois 60601
Re: Vantage Mobility Systems Corp. Response to Warranty Chargeback Notices WCN-2022-0103 and WCN-2022-0289 Issued by Meridian Powertrain Holdings, Inc. Under Long-Term Supply Agreement Ref. No. LTSA-MPT-2020-0315
Dear Ms. Drummond and Mr. Saldana:
I. Introduction and Purpose
This firm represents Vantage Mobility Systems Corp. ("Vantage"), a corporation organized and existing under the laws of the State of Delaware, with its principal place of business located at 4280 Mound Road, Sterling Heights, Michigan 48310, in connection with the ongoing warranty-chargeback dispute initiated by your client, Meridian Powertrain Holdings, Inc. ("Meridian"). We write in response to two additional warranty chargeback notices recently issued by Meridian, and we do so with the full authorization of Vantage's senior management and Board of Directors.
This letter constitutes Vantage's formal written objection to, and contestation of, Warranty Chargeback Notice WCN-2022-0103, dated January 18, 2022, and Warranty Chargeback Notice WCN-2022-0289, dated February 7, 2022, both of which were issued by Meridian pursuant to the warranty-chargeback provisions contained in the Long-Term Supply Agreement entered into between Vantage and Meridian on March 15, 2020 (Ref. No. LTSA-MPT-2020-0315) (the "LTSA"). Vantage disputes the factual predicates, legal theories, contractual interpretations, and monetary amounts asserted in each of these notices, and contests the entirety of the chargebacks claimed therein.
This response is timely made within the sixty (60)-day contest period prescribed by Section 9.4 of the LTSA with respect to each notice. WCN-2022-0103 was issued on January 18, 2022, making the deadline for a written contest March 19, 2022; however, as March 19, 2022 fell on a Saturday, the deadline was extended to the next business day, Monday, March 21, 2022. WCN-2022-0289 was issued on February 7, 2022, making the deadline for a written contest April 8, 2022. Accordingly, this consolidated response, dispatched on March 25, 2022, is timely as to both notices. Vantage expressly preserves and does not waive any objection to the timeliness or procedural sufficiency of either notice issued by Meridian.
In the interest of efficiency and to avoid unnecessary duplication, Vantage hereby incorporates by reference in their entirety the defenses, objections, factual allegations, legal arguments, and documentary evidence set forth in its prior response letter dated March 11, 2022, which was submitted by this firm on Vantage's behalf and which contested the first Warranty Chargeback Notice issued in this dispute, WCN-2021-1247, dated December 6, 2021. A copy of that letter is enclosed herewith for your convenience. All arguments, defenses, and positions stated in that prior correspondence are fully applicable to the two additional notices addressed herein and should be read together with this letter as a unified expression of Vantage's position.
II. Identification of the Disputed Chargeback Notices
For the sake of clarity and completeness, Vantage identifies below the specific chargeback notices being contested in this letter, the monetary amounts claimed in each, the parts at issue, and the aggregate exposure across all three notices that Meridian has now issued in connection with the same underlying product line.
A. Warranty Chargeback Notice WCN-2022-0103
Warranty Chargeback Notice WCN-2022-0103 was issued by Meridian on January 18, 2022, and was received by Vantage on or about January 21, 2022. This notice covers four thousand two hundred sixty (4,260) units of precision-machined aluminum valve body housings, encompassing Part Numbers VMS-4400A through VMS-4400F inclusive. These valve body housings are manufactured by Vantage at its Sterling Heights, Michigan facility and supplied to Meridian for integration into Meridian's Model MPT-8AT 8-speed automatic transmission modules.
The notice specifies a per-unit chargeback amount of four hundred twelve dollars and thirty cents ($412.30), resulting in a total claimed chargeback of one million seven hundred fifty-six thousand three hundred ninety-eight dollars and no cents ($1,756,398.00), calculated as 4,260 units multiplied by $412.30 per unit.
Meridian's stated basis for the chargeback is an alleged defect described as "micro-porosity in valve body housings causing hydraulic fluid bypass and field failures" in the MPT-8AT 8-speed automatic transmission modules. Meridian asserts that the alleged micro-porosity in the die-cast aluminum housings permits hydraulic fluid to bypass intended flow channels within the valve body, leading to solenoid-circuit malfunctions and, ultimately, transmission failure events reported by Meridian's original equipment manufacturer ("OEM") customers in the field. Vantage disputes this characterization in its entirety, as detailed below.
B. Warranty Chargeback Notice WCN-2022-0289
Warranty Chargeback Notice WCN-2022-0289 was issued by Meridian on February 7, 2022, and was received by Vantage on or about February 10, 2022. This notice covers three thousand seven hundred twelve (3,712) units of the same precision-machined aluminum valve body housings identified above, again encompassing Part Numbers VMS-4400A through VMS-4400F inclusive.
The per-unit chargeback amount claimed is identical to that in WCN-2022-0103 — four hundred twelve dollars and thirty cents ($412.30) per unit. The total claimed chargeback under this notice is accordingly one million five hundred thirty thousand four hundred ninety-seven dollars and sixty cents ($1,530,497.60), calculated as 3,712 units multiplied by $412.30 per unit.
The alleged defect underlying WCN-2022-0289 is identical to that asserted in WCN-2022-0103: micro-porosity in the valve body housings purportedly causing hydraulic fluid bypass and field failures in the MPT-8AT transmission modules. Meridian has not identified any distinct or additional defect mode, nor has it provided any supplemental technical analysis distinguishing the units covered by this second notice from those covered by the first. Vantage contests this notice on the same grounds applicable to WCN-2022-0103.
C. Aggregate Exposure Across All Three Notices
When combined with the previously contested Warranty Chargeback Notice WCN-2021-1247, which was issued by Meridian on December 6, 2021 and covered three thousand eight hundred forty-two (3,842) units at the same per-unit chargeback amount of $412.30, resulting in a total claim of one million five hundred eighty-three thousand six hundred fifty-four dollars and sixty cents ($1,583,654.60), the three chargeback notices collectively encompass eleven thousand eight hundred fourteen (11,814) units (3,842 + 4,260 + 3,712) and assert aggregate chargebacks totaling four million eight hundred seventy thousand five hundred fifty dollars and twenty cents ($4,870,550.20), calculated as the sum of $1,583,654.60, $1,756,398.00, and $1,530,497.60.
Vantage disputes the entirety of the claimed amounts across all three notices. Not a single dollar of the $4,870,550.20 in aggregate chargebacks is supported by the contractual provisions of the LTSA, the applicable engineering specifications, or the available technical evidence. As set forth in detail below and in Vantage's prior March 11, 2022 response letter, the chargebacks lack both factual foundation and contractual authorization, and Vantage objects to them in full.
III. Vantage's Substantive Defenses
Vantage raises the following substantive defenses to the chargebacks asserted in WCN-2022-0103 and WCN-2022-0289. Each of these defenses is independently sufficient to defeat Meridian's claims. Taken together, they demonstrate that Meridian's chargebacks are not only contractually unfounded but are contradicted by the available technical evidence and undermined by Meridian's own procedural failures.
A. Specification Compliance — ASTM E505 Level 2 Porosity Threshold
The central premise of Meridian's chargebacks is that Vantage-supplied valve body housings contain micro-porosity in the die-cast aluminum substrate at levels that exceed the applicable engineering specifications. This premise is false. Vantage's parts meet and, in the vast majority of instances, exceed the porosity requirements established by Meridian's own engineering drawings.
Under Section 9 of the LTSA, Vantage warrants that parts supplied to Meridian conform to Meridian's engineering specifications as set forth in the applicable engineering drawing packages. For the valve body housings at issue (Part Numbers VMS-4400A through VMS-4400F), the controlling specification is Meridian Drawing Set MER-DWG-4400, Revision C, which was issued by Meridian's engineering department in February 2020 and has not been superseded or amended since that date. This drawing set governs all dimensional, material, surface finish, and internal-quality requirements for the valve body housings.
With respect to casting porosity, MER-DWG-4400, Revision C expressly invokes ASTM E505 as the applicable standard for radiographic inspection of aluminum castings. The drawing set specifies a maximum porosity threshold of Level 2 on the ASTM E505 reference radiograph scale. This means that any valve body housing exhibiting porosity at or below ASTM E505 Level 2 is in full conformity with Meridian's stated engineering requirements. Meridian established this threshold, and Vantage is entitled to rely upon it as the definitive measure of specification compliance.
Vantage's quality records — including its Production Part Approval Process ("PPAP") documentation, which was formally approved by Meridian's supplier quality engineering team in June 2020, and its ongoing Statistical Process Control ("SPC") data collected across all production runs from June 2020 through the present — demonstrate conclusively that Vantage has met and exceeded the ASTM E505 Level 2 porosity threshold throughout the entire period in question. Specifically, Vantage's SPC data, derived from sampling plans conducted in accordance with the PPAP-approved control plan, shows that ninety-seven point three percent (97.3%) of sampled parts met ASTM E505 Level 1 — a standard that exceeds the specification requirement by a full grade — and that one hundred percent (100%) of sampled parts met Level 2. There is no evidence in Vantage's quality records, and Meridian has presented none, that any valve body housing supplied by Vantage failed to meet the Level 2 porosity threshold specified in MER-DWG-4400, Revision C.
It is axiomatic in automotive supply chain practice, and consistent with the LTSA's warranty framework, that a supplier's warranty obligation extends to conformity with the buyer's stated engineering specifications. Vantage's parts were manufactured in full conformity with Meridian's own specifications, including the porosity threshold that Meridian itself selected and approved. Meridian cannot, after the fact and without amending the applicable drawing set through the Engineering Change Notice ("ECN") process prescribed by Section 7 of the LTSA, retroactively impose a more stringent porosity requirement and charge Vantage for parts that meet the specifications as written. Accordingly, Meridian's warranty claim for alleged casting porosity lacks a contractual basis under Section 9 of the LTSA, and the chargebacks based on this theory must be rejected.
B. Root Cause Dispute — Meridian's Assembly Process
Even setting aside the specification-compliance defense detailed above, Vantage has substantial evidence indicating that the field failures reported by Meridian's OEM customers are attributable not to any defect in Vantage-supplied valve body housings, but rather to Meridian's own assembly process at its Schaumburg, Illinois facility. The available evidence strongly suggests that Meridian has misidentified the root cause of the reported failures and is seeking to shift liability for its own manufacturing deficiencies onto its supplier.
Vantage's Vice President of Quality, Thomas Reinhardt, a professional engineer with over twenty-five years of experience in powertrain component manufacturing and quality assurance, has conducted a thorough review of the available field-failure data, Meridian's 8D reports (to the extent they have been shared), and Vantage's own internal production and quality records. Based on this review, Mr. Reinhardt has identified a significant process change implemented by Meridian at its Schaumburg, Illinois assembly facility in August 2021 — specifically, a change to Meridian's torque-wrench calibration protocol for the MPT-8AT transmission module assembly line. This process change was implemented approximately two months before the first OEM field-failure reports emerged in October 2021, a temporal correlation that Mr. Reinhardt considers highly significant from a root-cause-analysis perspective.
The solenoid-pack retaining bolt torque specification for the MPT-8AT transmission module, as defined by Meridian's own assembly work instructions, is twelve Newton-meters (12 Nm). Evidence gathered by Vantage — including production records, calibration certificates, and information provided by personnel with knowledge of Meridian's assembly operations — suggests that following the August 2021 calibration change, Meridian's assembly line may have been applying inadequate torque to the solenoid-pack retaining bolts. Insufficient bolt torque would allow the solenoid pack to shift relative to the valve body housing during operation, disrupting the hydraulic circuit integrity and causing solenoid-circuit malfunctions. Critically, solenoid-circuit malfunctions arising from inadequate bolt torque would produce precisely the same symptoms — erratic shift quality, pressure-code diagnostic trouble codes, and intermittent loss of gears — that Meridian attributes to casting porosity in the valve body housings.
The temporal correlation between Meridian's assembly process change in August 2021 and the onset of OEM field complaints beginning in October 2021 is striking and cannot be dismissed as coincidental. Prior to August 2021, the VMS-4400 series valve body housings had been supplied by Vantage and assembled by Meridian for over fifteen months without any reported field failures attributable to micro-porosity or any other defect in the castings. The sudden emergence of field failures following Meridian's process change, using parts manufactured by Vantage under the same production processes, equipment, raw material specifications, and quality controls that had been in place since initial PPAP approval, strongly suggests that Meridian's own manufacturing operations — rather than Vantage's castings — are the proximate cause of the reported failures.
Vantage recognizes that definitive root-cause determination would benefit from a joint engineering investigation, including disassembly and inspection of returned transmission modules under controlled conditions. Vantage has repeatedly expressed its willingness to participate in such an investigation, and Vantage renews that offer here. To date, however, Meridian has not agreed to a joint investigation and has instead relied upon its own internal failure analyses — analyses that Vantage has not had an adequate opportunity to review or challenge.
C. Procedural Non-Compliance Under LTSA Section 9.4(b)
In addition to the substantive defenses set forth above, Vantage raises significant procedural objections to Meridian's chargeback process. Meridian's chronic failure to comply with the procedural requirements of the LTSA's warranty provisions undermines the evidentiary foundation for its chargebacks and deprives Vantage of its contractual right to independent verification of the alleged defects.
As detailed at length in Vantage's March 11, 2022 response letter regarding WCN-2021-1247, Section 9.4(b) of the LTSA imposes a clear and unambiguous obligation on Meridian: within thirty (30) days of the issuance of a warranty chargeback notice, Meridian must tender returned parts to the supplier for the supplier's independent inspection. This provision is not a mere formality; it is a fundamental procedural safeguard that ensures the supplier has a fair opportunity to examine the allegedly defective parts, conduct its own failure analysis, and either confirm or dispute the buyer's root-cause determination. Without access to returned parts, the supplier is effectively asked to accept the buyer's conclusions on faith — a result that Section 9.4(b) was plainly designed to prevent.
With respect to the first chargeback notice, WCN-2021-1247, Meridian's compliance with Section 9.4(b) was grossly deficient. The thirty-day window for tendering returned parts expired on January 5, 2022. Parts were not made available to Vantage until January 27, 2022 — fifty-two (52) days after issuance of the notice and twenty-two (22) days beyond the contractual deadline. Moreover, of the three thousand eight hundred forty-two (3,842) units referenced in WCN-2021-1247, only one thousand seven hundred thirty-four (1,734) units were ultimately tendered to Vantage for inspection. The remaining two thousand one hundred eight (2,108) units — representing fifty-four point eight percent (54.8%) of the units covered by the notice — were never tendered for Vantage's inspection at all. Meridian has offered no explanation for this failure, and no valid justification exists under the LTSA.
With respect to the two notices currently at issue, Vantage is monitoring Meridian's compliance with Section 9.4(b) on an ongoing basis. For WCN-2022-0103, issued January 18, 2022, the thirty-day tender deadline was February 17, 2022. For WCN-2022-0289, issued February 7, 2022, the thirty-day tender deadline is March 9, 2022. As of the date of this letter, Vantage has received only partial shipments of returned units under WCN-2022-0103 and has not yet received any returned units under WCN-2022-0289. Vantage reserves all rights to raise procedural objections should Meridian again fail to tender returned parts within the contractually required thirty-day window for either or both of these notices.
Meridian's chronic non-compliance with the inspection provisions of the LTSA is not a minor technicality. It strikes at the heart of the warranty-chargeback process by precluding Vantage from exercising its contractual right to independent verification of the alleged defects. A chargeback regime in which the buyer alone examines the allegedly defective parts, the buyer alone determines root cause, and the buyer alone calculates the chargeback amount — without affording the supplier a meaningful opportunity to inspect and challenge — is fundamentally unfair and inconsistent with the balanced framework established by the LTSA. Vantage submits that Meridian's procedural failures, standing alone, are sufficient grounds to invalidate the chargebacks at issue.
D. Administrative Fee Challenge — $48.00 Per Unit
Even if this dispute were to be resolved on terms other than a full rejection of the chargebacks (a result that Vantage does not concede and actively contests), the per-unit chargeback amount of $412.30 claimed by Meridian is inflated by the inclusion of an improper cost component. Specifically, the $412.30 per-unit figure includes a forty-eight dollar ($48.00) "administrative fee" that Meridian has appended to the otherwise itemized cost components.
Meridian's per-unit chargeback calculation, as set forth in the notices, is as follows:
Section 9.3 of the LTSA defines the categories of costs that are recoverable through the warranty-chargeback mechanism. Those recoverable categories include the direct cost of replacement parts, reasonable and documented labor costs incurred by the OEM dealer network in diagnosing and replacing the defective component, and the buyer's reasonable and documented costs for failure analysis and reverse logistics. Section 9.3 does not authorize the recovery of generalized administrative overhead, internal corporate allocations, or any similar indirect cost category.
The $48.00 administrative fee claimed by Meridian is, on its face, an internal overhead allocation that does not correspond to any specific, documented cost incurred in connection with the processing of a warranty claim for any individual unit. Meridian has not provided any documentation, invoices, or other substantiation demonstrating that this fee represents a direct, incremental cost attributable to any particular warranty event. Rather, the fee appears to be a blanket surcharge applied uniformly to every unit included in a chargeback notice, regardless of the actual administrative effort involved. Such a generalized allocation has no basis in the categories of recoverable costs enumerated in Section 9.3 of the LTSA.
The financial impact of this improper fee component is substantial. Across the aggregate eleven thousand eight hundred fourteen (11,814) units subject to the three warranty chargeback notices, the administrative fee totals five hundred sixty-seven thousand seventy-two dollars ($567,072.00), calculated as 11,814 units multiplied by $48.00 per unit. Even if Meridian were entitled to some recovery under the chargebacks — which Vantage denies in its entirety — the $567,072.00 administrative fee component must be excluded from any chargeback calculation as a matter of contract interpretation. Vantage objects to the inclusion of this fee and demands its removal from all chargeback calculations.
IV. Meridian's Unilateral Deductions Constitute a Material Breach of the LTSA
Vantage must raise an additional and independently significant issue that compounds the harm caused by Meridian's unsubstantiated chargebacks. Beginning with the January 2022 payment cycle, Meridian has unilaterally withheld chargeback amounts from Vantage's open accounts receivable without Vantage's consent, without prior written notice of its intent to do so, and — most critically — prior to the expiration of the sixty (60)-day contest period under Section 9.4 of the LTSA. This conduct constitutes a material breach of the LTSA's payment provisions.
As of the date of this letter, Meridian has withheld approximately two million four hundred thousand dollars ($2,400,000.00) from payments otherwise due and owing to Vantage under the LTSA. These payments relate to undisputed invoices for valve body housings and other components that Vantage has manufactured and delivered in accordance with Meridian's purchase orders and release schedules. Meridian has not disputed the conformity, timeliness, or quantity of these shipments. Rather, Meridian has simply reduced its remittances by amounts corresponding to the chargeback claims, treating the chargebacks as liquidated, settled obligations despite Vantage's timely contestation of each notice.
The LTSA's payment terms, set forth in Section 12, require Meridian to remit payment for conforming goods within forty-five (45) days of invoice. The LTSA does not authorize Meridian to offset disputed warranty chargebacks against Vantage's accounts receivable. This is a critical distinction. Had the parties intended to authorize unilateral setoff of contested chargebacks, Section 9 or Section 12 of the LTSA would have included an express provision to that effect. No such provision exists. The absence of a setoff authorization is particularly significant here, where Vantage has timely exercised its right to contest the chargebacks and where the contest period for at least one of the notices (WCN-2022-0289) remains open as of the date of this letter. Meridian's self-help remedy of unilateral deduction effectively nullifies Vantage's contractual right to contest chargebacks, because Meridian has already extracted the funds it claims to be owed before the dispute can be resolved.
Meridian's conduct constitutes a material breach of the LTSA's payment provisions and causes significant and ongoing financial harm to Vantage. The withholding of approximately $2.4 million in payments disrupts Vantage's cash flow, impairs its ability to fund ongoing operations (including the very production lines that manufacture parts for Meridian), and undermines the commercial trust upon which the parties' supply relationship depends.
Vantage demands the immediate cessation of all unilateral deductions from its accounts receivable and the full restoration of all amounts withheld to date, including any applicable late-payment interest at the rate specified in Section 12.3 of the LTSA, pending proper resolution of the disputed chargebacks through the contractual mechanisms established by the LTSA, including the contest process under Section 9.4 and, if necessary, the dispute-resolution provisions of Section 21. Until the chargebacks have been resolved through these contractual mechanisms, Meridian has no right to withhold any portion of Vantage's accounts receivable.
V. Reservation of Rights
Vantage expressly reserves all rights, claims, defenses, and remedies available to it under the LTSA, at law, and in equity, without limitation, including but not limited to the following:
(a) The right to seek damages for Meridian's material breach of the LTSA payment terms, including but not limited to direct damages, consequential damages to the extent not limited by the LTSA, and late-payment interest on all improperly withheld amounts;
(b) The right to challenge any additional warranty chargeback notices that may hereafter be issued by Meridian on the same or similar grounds, whether relating to the VMS-4400 series valve body housings or any other component supplied by Vantage under the LTSA;
(c) The right to recover all costs, expenses, and attorneys' fees incurred by Vantage in connection with this dispute, to the extent permitted by the LTSA, applicable law, or any other agreement between the parties;
(d) All rights under the LTSA warranty provisions, including Section 9 and all subsections thereof, including but not limited to the right to inspect returned parts, the right to conduct independent failure analysis, and the right to dispute Meridian's root-cause determinations;
(e) All rights to seek equitable relief, including injunctive relief to prevent further unauthorized deductions from Vantage's accounts receivable, should such relief become necessary; and
(f) All rights arising from or related to Meridian's procedural non-compliance with Section 9.4(b) of the LTSA, including the right to seek dismissal or invalidation of the chargebacks on procedural grounds.
The LTSA is governed by the laws of the State of Illinois, as specified in Section 22.4 thereof. Vantage preserves all rights, claims, and defenses available to it under the Illinois Uniform Commercial Code (810 ILCS 5/1-101 et seq.), including but not limited to the provisions of Article 2 governing the sale of goods, as well as all other applicable Illinois statutes, regulations, and common-law doctrines.
Nothing in this letter, in the prior response letter dated March 11, 2022, or in any other prior or future correspondence between the parties or their counsel shall be construed as an admission of liability, a waiver of any defense or objection, a concession regarding the validity or merits of any chargeback notice, or a limitation of Vantage's right to assert any claim, defense, or remedy at any time. This letter is written solely for the purpose of contesting the identified chargeback notices and preserving Vantage's rights, and it shall not be used or cited for any other purpose.
VI. Proposal for Meet-and-Confer Session
Notwithstanding Vantage's strong substantive and procedural objections to the chargebacks detailed above, Vantage recognizes the importance and mutual value of the longstanding commercial relationship between Vantage and Meridian. The parties' supply relationship dates to approximately 2016 — predating the current LTSA — and has historically been characterized by productive collaboration and mutual benefit.
Meridian is Vantage's largest customer by revenue, and Vantage currently supplies approximately four hundred eighty thousand (480,000) valve body housing units annually to Meridian under the LTSA at a weighted average unit price of seventy-eight dollars and fifty cents ($78.50), representing annual revenue to Vantage of approximately thirty-seven million six hundred eighty thousand dollars ($37,680,000.00). The disruption of this relationship would be detrimental to both parties, and Vantage has no desire to escalate this dispute beyond the measures necessary to protect its contractual and legal rights.
In the interest of preserving this important commercial relationship and achieving an efficient and equitable resolution, Vantage proposes that the parties convene a meet-and-confer session at a mutually agreeable date, time, and location to discuss all three outstanding chargeback notices — WCN-2021-1247, WCN-2022-0103, and WCN-2022-0289 — and to explore whether a commercial resolution can be reached without resort to formal dispute-resolution proceedings under Section 21 of the LTSA. Vantage suggests Chicago, Illinois as a neutral and convenient meeting location, given the proximity of both parties' counsel and Meridian's Schaumburg facility. Vantage is flexible as to the specific date and time and is available at your client's convenience within the next thirty (30) days.
To facilitate productive discussions at such a session, Vantage is prepared to share relevant technical data and quality documentation in advance, including but not limited to SPC data for the VMS-4400 series production runs at issue, PPAP records, radiographic inspection results, and the technical findings of Mr. Reinhardt's root-cause analysis. Vantage would expect Meridian to reciprocate by sharing its complete 8D reports, the raw data from its internal failure analyses, and the torque-wrench calibration records from its Schaumburg assembly facility for the relevant period.
Please advise as to Meridian's availability and willingness to participate in such a session at your earliest convenience. Vantage's proposal for a meet-and-confer session is made without prejudice to any of its rights, defenses, or remedies, all of which are expressly reserved.
VII. Closing
In summary, and for the reasons set forth in this letter and in Vantage's prior response letter dated March 11, 2022 (incorporated herein by reference), Vantage demands that Meridian take the following actions:
(a) Immediately reverse all unilateral deductions that Meridian has taken from Vantage's accounts receivable in connection with the disputed warranty chargebacks, and restore all withheld amounts — totaling approximately $2,400,000.00 — to Vantage's accounts receivable, together with any applicable late-payment interest;
(b) Withdraw or substantively revise Warranty Chargeback Notices WCN-2022-0103 and WCN-2022-0289, as well as the previously contested WCN-2021-1247, in light of the substantive and procedural deficiencies identified herein and in Vantage's prior correspondence; and
(c) Engage in good-faith discussions toward a commercial resolution of this dispute, including participation in the meet-and-confer session proposed above, before either party incurs the significant costs and disruptions associated with formal dispute-resolution proceedings.
Vantage has acted in good faith at every stage of this dispute. Vantage has timely contested each chargeback notice, has identified specific and well-supported defenses, and has expressed a genuine willingness to work toward a constructive resolution. Meridian's response to date — issuing additional chargebacks on the same unsubstantiated grounds, failing to comply with the inspection provisions of the LTSA, and unilaterally withholding millions of dollars from Vantage's accounts receivable — has not been consistent with the cooperative approach that the LTSA's warranty framework contemplates.
Should Meridian fail to respond appropriately to this letter and to the demands set forth herein, Vantage will have no alternative but to pursue all available contractual and legal remedies, including but not limited to initiating formal dispute-resolution proceedings under Section 21 of the LTSA and seeking affirmative relief for Meridian's material breach of the LTSA's payment provisions.
We look forward to your prompt response.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Carlos Espinoza, Partner 200 South Wacker Drive, Suite 3100 Chicago, Illinois 60606 Telephone: (312) 555-9200
Email: cespinoza@calderwoodharkness.com
cc: Samuel Eklund, Partner, Calderwood & Harkness LLP cc: Priya Nandakumar, General Counsel, Vantage Mobility Systems Corp. cc: Derek Calloway, Chief Executive Officer, Vantage Mobility Systems Corp.
Encl.: Copy of Vantage's Response Letter dated March 11, 2022 (contesting WCN-2021-1247) (incorporated by reference herein)
Notice | Date Issued | Units | Per-Unit Amount | Total Claimed
WCN-2021-1247 | December 6, 2021 | 3,842 | $412.30 | $1,583,654.60
WCN-2022-0103 | January 18, 2022 | 4,260 | $412.30 | $1,756,398.00
WCN-2022-0289 | February 7, 2022 | 3,712 | $412.30 | $1,530,497.60
Total | 11,814 | $4,870,550.20
Cost Component | Per-Unit Amount
Replacement part cost | $78.50
OEM dealer labor (diagnosis & replacement) | $218.00
Meridian internal failure-analysis and logistics costs | $67.80
Administrative fee | $48.00
Total per-unit chargeback | $412.30