CALDERWOOD & HARKNESS LLP Attorneys at Law
2200 Ross Avenue, Suite 3600 Dallas, Texas 75201 Telephone: (214) 555-7800 Facsimile: (214) 555-7801 www.calderwoodharkness.com
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
July 3, 2025
MEMORANDUM
TO: Margaret Hollis, General Counsel, Stonefield Logistics Group Inc. Nathan Okonkwo, Managing Director, Ridgepoint Capital Management LLC
FROM: Bernard Crawford, Responsible Partner, Calderwood & Harkness LLP
CC: Renata Vasquez, Billing Partner, Calderwood & Harkness LLP Aaron Turcotte, Chief People Officer, Stonefield Logistics Group Inc.
RE: Monthly Litigation Status Report — June 2025 Delano v. Stonefield Logistics Group Inc., Case No. 3:25-cv-01847-RBC U.S. District Court for the Northern District of Texas, Dallas Division
PRIVILEGED AND CONFIDENTIAL
This memorandum constitutes a privileged and confidential attorney-client communication and attorney work product prepared by Calderwood & Harkness LLP. It is intended solely for the use of Stonefield Logistics Group Inc. and its authorized representatives, including Ridgepoint Capital Management LLC in its capacity as equity sponsor. Do not distribute, copy, or disclose this memorandum or any portion thereof to any third party without the prior written consent of Calderwood & Harkness LLP.
I. Executive Summary
This Monthly Litigation Status Report covers the reporting period of May 1, 2025 through June 30, 2025, and provides an update on all material activity in Delano v. Stonefield Logistics Group Inc., Case No. 3:25-cv-01847-RBC, pending before the Honorable Rebecca Chen, United States District Judge for the Northern District of Texas, Dallas Division, with the Honorable Timothy Farrell, United States Magistrate Judge, overseeing pretrial proceedings.
The case remains in its early stages. During the reporting period, Calderwood & Harkness achieved several key milestones on behalf of Stonefield Logistics Group Inc. ("SLG" or the "Company"):
• Answer and Affirmative Defenses. SLG's Answer to Plaintiff's Complaint was filed on June 2, 2025, asserting fourteen affirmative defenses, including the independent contractor defense under the FLSA economic reality test, the enforceability of the arbitration clause and collective action waiver contained in ICOA v3.0 (applicable to approximately 640 of the 1,187 putative collective members), the statute of limitations defense, and good-faith reliance on prior legal counsel.
• Rule 16 Scheduling Conference. The Rule 16 Scheduling Conference was held before Magistrate Judge Farrell on June 18, 2025. The parties appeared, and Magistrate Judge Farrell adopted the agreed briefing schedule for conditional certification and set the remaining pretrial deadlines.
• Scheduling Order. The Scheduling Order was entered on June 20, 2025, establishing key deadlines including Plaintiff's deadline to file a Motion for Conditional Certification (July 14, 2025), Defendant's Response deadline (August 13, 2025), a merits discovery cutoff of March 15, 2026, and a trial setting of September 14, 2026.
• Initial Disclosures. SLG served its Initial Disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1) on June 16, 2025, identifying key witnesses and document categories.
• First-Round Written discovery. Defendant served its First Set of Interrogatories (25) and First Set of Requests for Production (30) to Plaintiff Marcus Delano on June 23, 2025. Plaintiff served its first set of interrogatories (25) on SLG on June 20, 2025.
• Expert Consultant. Dr. Priya Ramanathan of Corbin Risk Advisors LLC has been formally retained and has commenced preliminary data analysis. Her preliminary analysis deliverable was received on schedule on June 20, 2025. Initial findings indicate statistically significant variance across SLG's driver population on multiple dimensions, which will be central to the opposition to conditional certification.
• Plaintiff's Motion for Conditional Certification. Plaintiff's Motion for Conditional Certification is anticipated to be filed on or about July 14, 2025. Calderwood & Harkness has commenced preparation of the opposition brief and supporting materials.
• Budget. Total fees and costs incurred through June 30, 2025 are approximately $119,400 (comprising $87,400 in legal fees and approximately $32,000 in expert costs), against the Phase 1 billing cap of $475,000. The current billing trajectory is within budget projections.
• Risk Assessment. The overall risk assessment remains consistent with the Initial Case Assessment Memorandum dated May 9, 2025. Total potential exposure is approximately $73,958,409 (including liquidated damages) if the full collective of 1,187 drivers prevails on all claims. Realistic exposure varies materially depending on the outcome of conditional certification, enforcement of the arbitration clause, opt-in rates, and the merits.
II. Case Background
Named plaintiff Marcus Delano, a former delivery driver at SLG's Fort Worth distribution hub (designated internally as HUB-01), filed the above-referenced action on April 30, 2025, in the United States District Court for the Northern District of Texas, Dallas Division. Delano alleges that SLG misclassified him and approximately 1,200 similarly situated delivery drivers as independent contractors in violation of the Fair Labor Standards Act ("FLSA") and the Texas Payday Law.
Delano performed delivery services for SLG from March 2021 through September 2024 pursuant to an Independent Contractor Operating Agreement, version 1.0 (the "ICOA v1.0"), which was the standard form of agreement used by SLG from 2018 until its first revision in August 2020. Delano's claims arise under his contention that SLG exercised sufficient control over his day-to-day activities — including route assignment through SLG's proprietary RouteSync dispatch platform, GPS tracking, mandatory delivery windows, uniform and branding requirements, and an 85% minimum delivery acceptance rate — to render him an employee rather than an independent contractor under applicable law.
Specifically, Delano asserts the following claims:
• Unpaid Overtime under FLSA § 207. Delano alleges that he regularly worked in excess of forty (40) hours per week without receiving overtime compensation at the rate of one-and-one-half times his regular rate of pay, as required by the FLSA.
• Collective Action under FLSA § 216(b). Delano seeks to prosecute this action as a collective action on behalf of himself and all similarly situated delivery drivers. The proposed collective consists of all individuals who performed delivery driving services for SLG pursuant to an ICOA at any of SLG's fourteen (14) distribution hubs located across Texas, Oklahoma, Arkansas, and Louisiana, from April 30, 2022 through the date of final judgment.
• Texas Payday Law Claims. Delano asserts parallel claims under the Texas Payday Law (Texas Labor Code Chapter 61), alleging that SLG failed to pay wages owed for overtime hours worked.
SLG's internal records identify 1,187 unique drivers who executed ICOAs during the relevant limitations period across the Company's fourteen distribution hubs. These drivers signed one of three versions of the ICOA: v1.0 (2018), v2.0 (August 2020), or v3.0 (January 2023). Critically, approximately 640 of the 1,187 drivers executed ICOA v3.0, which contains a mutual arbitration clause and collective action waiver. Named plaintiff Delano, however, signed ICOA v1.0, which does not contain an arbitration clause.
Plaintiff is represented by Claudia Hartwell and Jordan Brashear of Hartwell & Brashear PLLC, Dallas, Texas. Hartwell & Brashear is a plaintiffs' employment firm with significant experience in FLSA collective actions involving independent contractor misclassification, including several prior matters in the Northern District of Texas.
The case has been assigned to the Honorable Rebecca Chen, United States District Judge, for all purposes, and to the Honorable Timothy Farrell, United States Magistrate Judge, for pretrial proceedings by referral.
III. Activity Report — June 2025
This section provides a detailed summary of all material litigation activity during the reporting period.
A. Answer and Affirmative Defenses (Filed June 2, 2025)
Calderwood & Harkness filed Stonefield Logistics Group Inc.'s Answer to Plaintiff's Original Complaint on June 2, 2025, within the time permitted by Federal Rule of Civil Procedure 12(a)(1)(A)(i), as extended by stipulation of the parties. The Answer denies Plaintiff's core allegation that SLG's delivery drivers were misclassified as independent contractors and denies that Delano or any putative collective member is entitled to relief under the FLSA or the Texas Payday Law.
The Answer asserts fourteen (14) affirmative defenses, the most significant of which are summarized below:
1. Independent Contractor Status. Drivers are bona fide independent contractors under the FLSA economic reality test, considering the totality of the circumstances, including their ownership of delivery vehicles, ability to accept or decline delivery assignments, per-delivery compensation structure, execution of ICOAs expressly designating the relationship as one of independent contractor, and opportunity for profit or loss based on delivery volume, route efficiency, and vehicle expenses.
2. Arbitration Clause and Collective Action Waiver (ICOA v3.0). Approximately 640 of the 1,187 putative collective members signed ICOA v3.0 (January 2023 revision), which contains a binding mutual arbitration clause and a collective action waiver enforceable under the Federal Arbitration Act, 9 U.S.C. § 1 et seq., and controlling precedent. SLG reserves the right to move to compel individual arbitration as to these drivers at the appropriate time.
3. Statute of Limitations. Claims arising more than two years prior to the filing of the Complaint (i.e., before April 30, 2023) are time-barred under FLSA § 255(a), absent a showing of willful violation, which SLG denies. This defense may limit the recoverable period for a significant number of opt-in plaintiffs.
4. Good-Faith Defense. SLG acted in good faith and in conformity with, and in reliance on, the advice of its prior outside counsel, Pennfield & Daye LLP, which provided written legal opinions regarding the propriety of SLG's independent contractor classification of delivery drivers. This advice was rendered in connection with the drafting and revision of the ICOA in 2018, 2020, and 2023 and in connection with ongoing compliance inquiries.
5. Failure to State a Claim. Plaintiff fails to state a claim upon which relief can be granted with respect to certain of his claims.
Additional affirmative defenses include, inter alia, the defense of estoppel, waiver, laches, failure to mitigate, and offset for earnings from other delivery platforms during the relevant period. The full roster of affirmative defenses is set forth in the Answer filed with the Court.
It bears emphasis that because named plaintiff Marcus Delano signed ICOA v1.0 (2018 version), which does not contain an arbitration clause or collective action waiver, the arbitration defense does not apply to Delano individually. However, if enforced, the arbitration clause in ICOA v3.0 could reduce the putative collective by approximately 640 members — from 1,187 to approximately 547 drivers — with a corresponding reduction in potential exposure.
B. Joint Rule 26(f) Report (Filed June 16, 2025)
The parties conferred pursuant to Federal Rule of Civil Procedure 26(f) and filed the Joint Rule 26(f) Report and discovery Plan on June 16, 2025. The report reflects both agreement and disagreement on several key discovery and case management issues, as summarized below.
Plaintiff's Position. Plaintiff contends that broad discovery should proceed immediately across all fourteen of SLG's distribution hubs, encompassing RouteSync dispatch data, GPS telematics logs, and pay records for all 1,187 drivers identified in SLG's records. Plaintiff further contends that conditional certification discovery and merits discovery should proceed concurrently, without phasing, in the interest of efficiency and to avoid delay.
Defendant's Position. SLG contends that discovery should be phased, with an initial phase of limited discovery relating to the conditional certification motion preceding full-scale merits discovery. SLG further contends that the electronically stored information ("ESI") protocols for RouteSync dispatch data and GPS telematics logs require careful negotiation due to the volume of data involved (SLG estimates approximately 14.7 million dispatch records and 87 million GPS data points across the relevant period), the proprietary nature of the RouteSync software platform, and the need for standardized export formats to ensure data integrity and usability.
Areas of Agreement. Notwithstanding their differing positions on phasing and scope, the parties agreed to an ESI protocol framework that includes the following provisions:
• RouteSync dispatch data will be produced in CSV export format, with field-level definitions to be agreed upon or determined by the Court if the parties cannot agree.
• GPS telematics logs will be produced in standardized format with timestamp, latitude/longitude coordinates, speed, and stop-duration fields.
• Email and document productions will be made in TIFF format with associated metadata and text files, subject to de-duplication at the custodian level.
• The parties will use a common ESI vendor, to be agreed upon, for hosting and review platform purposes, with costs shared as determined by the Court or agreement.
The parties also set forth a proposed briefing schedule for the anticipated motion for conditional certification, which was subsequently adopted by Magistrate Judge Farrell in the Scheduling Order.
C. Rule 16 Scheduling Conference (June 18, 2025)
The Rule 16 Scheduling Conference was held before Magistrate Judge Timothy Farrell on June 18, 2025. Both parties appeared. Calderwood & Harkness was represented by Bernard Crawford, Responsible Partner, and James Underwood, Lead Associate. Hartwell & Brashear PLLC was represented by Claudia Hartwell.
During the conference, Magistrate Judge Farrell addressed the parties' respective positions on discovery phasing as set forth in the Joint Rule 26(f) Report. Magistrate Judge Farrell indicated a preference for some degree of phasing, consistent with the common practice in FLSA collective actions in the Northern District of Texas, but declined to formally restrict merits discovery at this stage. He noted that the parties should attempt to resolve ESI protocol disputes informally before seeking Court intervention.
Magistrate Judge Farrell adopted the parties' agreed briefing schedule for the anticipated motion for conditional certification and set the remaining pretrial deadlines as reflected in the Scheduling Order discussed below.
D. Scheduling Order (Entered June 20, 2025)
The Scheduling Order was entered by Magistrate Judge Farrell on June 20, 2025. The key deadlines established by the Order are as follows:
The Scheduling Order also provides that the parties may, upon good cause shown, seek modification of the above deadlines by joint motion or, in the absence of agreement, by noticed motion. The Order reserves all issues relating to the timing and scope of any motion to compel arbitration.
E. Initial Disclosures (Served June 16, 2025)
SLG served its Initial Disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1) on June 16, 2025, contemporaneously with the filing of the Joint Rule 26(f) Report. The disclosures identify the following categories of information:
Witnesses. SLG identified the following individuals as likely to have discoverable information relevant to the claims and defenses in this action:
• Trevor Sandoval, Vice President of Operations, Stonefield Logistics Group Inc. — Mr. Sandoval has knowledge of SLG's operational structure, the design and implementation of the RouteSync dispatch platform, hub-level operational policies, and the Company's independent contractor model.
• Karen Lund, Director of Driver Relations, Stonefield Logistics Group Inc. — Ms. Lund has knowledge of driver onboarding, ICOA execution and administration, driver communications, training programs, performance metrics, and deactivation procedures.
• Dennis Faulkner, Hub Manager, Fort Worth Distribution Hub (HUB-01), Stonefield Logistics Group Inc. — Mr. Faulkner has knowledge of the day-to-day operations at HUB-01, where the named plaintiff was based, including dispatch procedures, delivery assignment practices, driver supervision, and the specific operational conditions applicable to Delano's tenure.
• Aaron Turcotte, Chief People Officer, Stonefield Logistics Group Inc. — Mr. Turcotte has knowledge of SLG's workforce classification policies, human resources practices, the litigation hold process, and internal policy decisions relating to the independent contractor model.
• Margaret Hollis, General Counsel, Stonefield Logistics Group Inc. — Ms. Hollis has knowledge of the Company's legal affairs, the engagement of outside counsel for classification advice, and oversight of the litigation hold. Ms. Hollis's testimony may be limited by the attorney-client privilege and work product doctrine.
Document Categories. SLG identified the following categories of documents as relevant and potentially responsive:
• Independent Contractor Operating Agreements (ICOA v1.0, v2.0, and v3.0), including executed copies for drivers within the proposed collective.
• RouteSync dispatch records, including delivery assignment, acceptance, completion, and time-stamp data.
• GPS telematics logs for driver-operated vehicles.
• Pay records, including per-delivery payment records, bonus payments, and any adjustments.
• Driver training materials and onboarding documentation.
• Hub-level operational policies, including standard operating procedures for each of the fourteen distribution hubs.
• Performance review records, including delivery acceptance rate reports, on-time delivery metrics, and any corrective action or deactivation records.
Damages Computation. Consistent with SLG's position that its drivers are properly classified as independent contractors, SLG's initial damages computation states that no damages are owed. SLG reserves the right to supplement this computation as discovery progresses and if the Court's rulings require a damages analysis under an employment theory.
F. First-Round Written discovery (Served June 23, 2025)
On June 23, 2025, Calderwood & Harkness served Defendant SLG's First Set of Interrogatories to Plaintiff Marcus Delano (25 interrogatories) and Defendant SLG's First Set of Requests for Production of Documents to Plaintiff Marcus Delano (30 requests). The discovery is designed to develop facts relevant to both the conditional certification analysis and the merits, with particular focus on establishing Delano's individual circumstances, autonomy, and entrepreneurial engagement.
First Set of Interrogatories (25). The interrogatories cover the following subject areas:
• Delano's complete work history with SLG, including dates of engagement, hub assignments, and reasons for cessation of the relationship (March 2021 through September 2024).
• The number of hours Delano worked per week during each calendar quarter of his engagement with SLG, including start times, end times, and break periods.
• Delano's total earnings from SLG during each calendar year of his engagement, and whether such earnings were reported on IRS Schedule C (Profit or Loss from Business) on his federal income tax returns.
• Any earnings Delano received from other delivery platforms (e.g., Ashbury Corporation, Aldermere Enterprises, Fenmore Holdings, Cobalt Ridge Corporation) or other sources of income during his engagement with SLG.
• Whether Delano engaged in subcontracting of any of his delivery assignments during his tenure with SLG, and if so, the identity of any subcontractors, the terms of engagement, and the frequency of subcontracting.
• Vehicle expenses and maintenance costs incurred by Delano in connection with his delivery activities, including fuel, insurance, repairs, and depreciation.
• Tax filings for 2021 through 2024, including whether Delano reported his SLG earnings as self-employment income on Schedule C and whether he claimed vehicle and business-related deductions.
• Communications between Delano and other current or former SLG drivers concerning this litigation, the potential for collective action participation, or opt-in solicitation efforts.
First Set of Requests for Production (30). The requests for production seek the following categories of documents:
• Federal and state income tax returns (including all Schedules C) for tax years 2021 through 2024.
• Bank and financial account records reflecting deposits of payments from SLG and any other delivery platforms during the relevant period.
• All written or electronic communications between Delano and any other current or former SLG driver concerning this litigation, SLG's classification practices, or the possibility of joining a collective or class action.
• Records of Delano's engagement with any other delivery platform or gig economy company during his period of engagement with SLG, including contracts, earnings statements, and account records.
• Vehicle expense records, including receipts for fuel, maintenance, repairs, insurance premiums, and vehicle purchase or lease documentation.
• Any subcontracting agreements entered into by Delano with respect to SLG delivery assignments, including contracts, payment records, and communications.
Plaintiff's responses to both the interrogatories and requests for production are due on July 23, 2025, pursuant to Federal Rules of Civil Procedure 33(b)(2) and 34(b)(2)(A).
In addition, Plaintiff served its First Set of Interrogatories (25) to Defendant Stonefield Logistics Group Inc. on June 20, 2025. SLG's responses are being prepared by Calderwood & Harkness and are due on July 21, 2025. Plaintiff's interrogatories seek information regarding SLG's classification policies, the development and revision of the ICOA, RouteSync platform capabilities, hub-level operational practices, and the identity of all individuals involved in making classification decisions.
G. Expert Retention — Corbin Risk Advisors LLC
Corbin Risk Advisors LLC ("Corbin Risk") was formally retained pursuant to the Expert Retention Agreement dated May 8, 2025, a copy of which has been provided to SLG's General Counsel. Dr. Priya Ramanathan, a labor economist and the lead consultant at Corbin Risk, is heading the engagement. Dr. Ramanathan holds a Ph.D. in Labor Economics from the University of Chicago and has served as an expert witness or consultant in more than forty FLSA and state wage-and-hour matters, including several cases involving independent contractor classification in the logistics and transportation industries.
The fee structure for the Corbin Risk engagement is as follows:
• Dr. Priya Ramanathan: $550 per hour
• Associate analysts: $375 per hour
The budget parameters for the expert engagement are:
• Conditional certification phase: $175,000
• Total through trial (if necessary): $450,000
• Preliminary analysis phase: $90,000 (included within the $475,000 Phase 1 billing cap established under the Ridgepoint Capital portfolio company panel agreement)
Calderwood & Harkness transmitted the Expert Work Plan Memorandum dated May 14, 2025, to Dr. Ramanathan, outlining the data needs for the engagement (including RouteSync dispatch logs, GPS telematics data, pay records, and ICOA execution records across all fourteen hubs), the analytical framework for demonstrating lack of commonality among drivers (focusing on variance in hours worked, compensation, delivery acceptance behavior, route deviation patterns, and multi-platform engagement), and the deliverable timeline.
Dr. Ramanathan's preliminary analysis deliverable was due on June 20, 2025, and was received on schedule. The preliminary analysis encompasses a statistical examination of a representative sample of driver data across SLG's hub network and has yielded the following initial findings:
• Weekly Hours Worked. Statistically significant variance in weekly hours worked across hubs and among drivers within the same hub. The coefficient of variation exceeds 0.35 across the driver population, indicating substantial heterogeneity inconsistent with a uniform work-hour mandate.
• Gross Pay. Per-delivery payment rates and total gross pay vary meaningfully across drivers, reflecting differences in delivery volume, delivery type (standard vs. oversized), geographic zone, and individual efficiency.
• Delivery Acceptance Rates. While the ICOA v3.0 establishes a minimum acceptance rate of 85%, actual acceptance rates vary widely, with a significant number of drivers maintaining acceptance rates well above 90% and others falling below the threshold without immediate consequence.
• Route Deviation Frequency. GPS telematics data indicates substantial variation in the degree to which drivers deviate from RouteSync-suggested routes, suggesting that drivers exercise meaningful discretion in route selection notwithstanding the availability of suggested routing.
• Multi-Platform Engagement. Preliminary cross-referencing of pay records and publicly available information suggests that a material percentage of SLG drivers simultaneously engaged with competing delivery platforms during their tenure with SLG.
These findings will be central to the opposition to conditional certification and will be formalized in Dr. Ramanathan's expert declaration, which is targeted for completion by July 25, 2025.
H. Litigation Hold Compliance
The Litigation Hold Notice was issued by Calderwood & Harkness to Margaret Hollis, General Counsel of SLG, on May 2, 2025 — within forty-eight hours of the filing of Plaintiff's Complaint. The Litigation Hold Notice directs the preservation of all documents and electronically stored information potentially relevant to this litigation, including but not limited to:
• All versions of the Independent Contractor Operating Agreement (ICOA v1.0, v2.0, and v3.0) and executed copies for all drivers within the proposed collective.
• RouteSync dispatch data, including all delivery assignment, acceptance, completion, cancellation, and time-stamp records.
• GPS telematics logs for all driver-operated vehicles.
• Pay records, including per-delivery payment records, bonus payments, and adjustment records.
• Driver training materials and onboarding documentation.
• Communications between SLG personnel and drivers, including emails, text messages, in-app messages, and written correspondence.
• Performance review records, delivery acceptance rate reports, and any disciplinary, corrective action, or deactivation records.
• Hub-level operational policies and standard operating procedures.
SLG's Information Technology department, under the direction of the Company's Chief Information Officer, has confirmed full implementation of the litigation hold, including suspension of all automated data deletion and retention-policy-based purging for the identified data categories. Aaron Turcotte, Chief People Officer, has confirmed distribution of the hold notice to all fourteen hub managers and all relevant operational personnel, with written acknowledgments obtained from each recipient.
No issues, deficiencies, or compliance concerns have been identified during this reporting period. Calderwood & Harkness will continue to monitor litigation hold compliance on an ongoing basis and will promptly notify the client team of any issues that arise.
I. Insurance Coverage Update
Formal notice of the Delano claim was provided to Broadleaf Insurance Company ("Broadleaf") under Employment Practices Liability Insurance ("EPLI") Policy No. BIC-EPL-2024-07831 via letter dated May 5, 2025. The key terms of the policy are as follows:
• Policy Period: January 1, 2025 through January 1, 2026.
• Self-Insured Retention (SIR): $2,000,000.
• Policy Limit: $10,000,000 (aggregate), in excess of the SIR.
• Insurer: Broadleaf Insurance Company.
Broadleaf acknowledged receipt of the claim notice and issued a Reservation of Rights letter dated May 19, 2025. In the Reservation of Rights letter, Broadleaf identified two principal coverage issues that it is reserving the right to assert:
(a) Coverage for Misclassification Claims. Broadleaf has questioned whether independent contractor misclassification claims constitute covered "Employment Practices Wrongful Acts" as defined under the EPLI policy. Broadleaf's position is that the policy definition of "Employment Practices Wrongful Acts" may be limited to claims brought by individuals who are employees of the insured, and that claims brought by individuals contending they should have been classified as employees — but who were not, in fact, treated as employees — may fall outside the scope of coverage.
(b) Late-Notice Defense for Pre-Policy-Period Conduct. Broadleaf has noted that the claims in the Delano action date back to April 30, 2022, while the current EPLI policy incepted on January 1, 2025. Broadleaf has reserved the right to assert a late-notice defense with respect to claims and conduct arising prior to the current policy period, to the extent that SLG had knowledge of circumstances giving rise to a potential claim prior to the inception of the current policy and failed to provide timely notice under the prior policy.
Calderwood & Harkness has responded to Broadleaf's Reservation of Rights letter on behalf of SLG, providing additional information and legal authority in support of the position that the misclassification claims fall within the scope of covered Employment Practices Wrongful Acts and that notice was timely and proper. We continue to monitor Broadleaf's coverage posture and to coordinate with Broadleaf as appropriate regarding the defense and any future settlement discussions.
It is important for the client team to be aware that, given the total potential exposure of approximately $74 million (including liquidated damages), the $10 million aggregate policy limit (net of the $2 million SIR) would cover only a fraction of any adverse judgment or significant settlement. If Broadleaf ultimately denies coverage in whole or in part, SLG would bear the full financial exposure. We recommend that coverage issues remain a standing agenda item for client team discussions.
IV. Work Product and Internal Memoranda Completed During Period
During the reporting period, Calderwood & Harkness prepared the following internal memoranda and work product in connection with this matter. All such documents are protected by the attorney-client privilege and the attorney work product doctrine and have been distributed only to authorized recipients.
1. ICOA Version Comparison Chart (May 12, 2025). A comprehensive comparison of material terms across the three versions of the Independent Contractor Operating Agreement: ICOA v1.0 (2018), ICOA v2.0 (August 2020), and ICOA v3.0 (January 2023). The chart addresses the following terms across all three versions: arbitration clause (absent in v1.0 and v2.0; present in v3.0), collective action waiver (absent in v1.0 and v2.0; present in v3.0), subcontracting provisions (permissive in all versions, with procedural requirements added in v2.0 and v3.0), non-compete terms (twelve-month / fifty-mile radius in all versions), minimum delivery acceptance rate (85% in all versions, though enforcement mechanisms vary), payment rates ($14.50 to $38.00 per delivery depending on delivery type, geographic zone, and time of day, with rate adjustments in each successive version), uniform and branding requirements (standardized vehicle signage in v1.0; expanded to include branded apparel in v2.0 and v3.0), and GPS tracking obligations (voluntary in v1.0; recommended in v2.0; mandatory in v3.0).
2. Memorandum re: Enforceability of ICOA v3.0 Arbitration and Collective Action Waiver (May 15, 2025). An analysis of the enforceability of the arbitration clause and collective action waiver contained in ICOA v3.0 under the Federal Arbitration Act and controlling Supreme Court and Fifth Circuit precedent. The memorandum concludes that the clause is likely enforceable under Granite Harbor Systems. v. Lewis, 584 U.S. 497 (2018), and Fifth Circuit decisions applying Ridgeway Services Inc. to FLSA collective action waivers. The memorandum identifies the primary risk factor as the potential applicability of the FAA Section 1 transportation worker exemption, 9 U.S.C. § 1, which excludes from the FAA's coverage "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." The memorandum analyzes the question of whether SLG delivery drivers fall within this exemption, considering relevant Fifth Circuit and Supreme Court authority, and assesses the risk as moderate.
3. Driver Classification Analysis Memorandum — FLSA Economic Reality Test (May 20, 2025). A factor-by-factor analysis of the six-factor economic reality test applied in the Fifth Circuit to determine whether workers are employees or independent contractors under the FLSA. The memorandum evaluates each factor — (i) degree of control exercised by the alleged employer, (ii) the worker's opportunity for profit or loss, (iii) the worker's investment in equipment or materials, (iv) the degree of skill required, (v) the permanence of the working relationship, and (vi) whether the service rendered is an integral part of the alleged employer's business — and provides a risk assessment for each factor and for the totality of the circumstances. The memorandum identifies the control factor and the integral-part-of-the-business factor as presenting the greatest risk for SLG.
4. Texas Payday Law Supplemental Analysis (May 22, 2025). A supplemental memorandum assessing Plaintiff's state-law claims under the Texas Payday Law (Texas Labor Code Chapter 61), including the threshold question of whether the Texas Payday Law applies to individuals classified as independent contractors, the measure of damages under state law, and the interaction between the state-law claims and the FLSA collective action mechanism.
5. Damages Exposure Analysis Memorandum (June 5, 2025). A detailed damages exposure analysis modeling three scenarios:
• Scenario A — Full Collective (1,187 drivers): Total potential exposure of approximately $73,958,409, including liquidated damages for willful violation under FLSA § 216(b). This scenario assumes conditional certification of the full proposed collective, 100% opt-in, and a finding that all drivers were employees entitled to overtime compensation for all hours worked in excess of forty per week.
• Scenario B — Post-Arbitration Reduced Collective (547 drivers): Total potential exposure of approximately $34,100,000, including liquidated damages. This scenario assumes that the ICOA v3.0 arbitration clause is enforced as to approximately 640 drivers, reducing the collective to the 547 drivers who signed ICOA v1.0 or v2.0, with 100% opt-in among the remaining eligible drivers.
• Scenario C — Low Opt-In (20% of 547 = approximately 109 drivers): Total potential exposure of approximately $6,800,000, including liquidated damages. This scenario assumes enforcement of the arbitration clause and a 20% opt-in rate among eligible non-arbitration drivers, which is within the range of opt-in rates observed in comparable FLSA collective actions in the Fifth Circuit.
6. Memorandum re: Strategic Considerations — Motion to Compel Arbitration Timing (June 10, 2025). An analysis of the strategic considerations involved in determining the optimal timing for filing a motion to compel individual arbitration as to ICOA v3.0 signatories. The memorandum evaluates three options: (a) filing the motion before the conditional certification ruling, (b) filing the motion concurrently with the opposition to conditional certification, and (c) filing the motion after the conditional certification ruling. Each option is assessed in terms of its potential impact on the conditional certification analysis, the risk of waiver arguments, the practical effect on opt-in solicitation, and alignment with the overall defense strategy. The memorandum does not recommend a definitive course of action at this time but identifies the factors that should inform the decision, which remains under active evaluation with input from the client team.
7. RouteSync Data & GPS Log Analysis Memorandum (June 25, 2025). A memorandum analyzing dispatch records from the RouteSync platform and GPS telematics data for Marcus Delano and a sample of fifty (50) drivers across five (5) of SLG's fourteen distribution hubs. The analysis examines patterns of delivery assignment, acceptance, completion, and cancellation; route adherence versus deviation; daily start and end times; total active hours versus idle time; and geographic coverage. The memorandum identifies key data points that support SLG's position regarding driver autonomy and variability across the driver population.
8. Subcontracting and Multi-Platform Engagement Memorandum (June 30, 2025). A memorandum analyzing the extent to which SLG drivers engaged in subcontracting of delivery assignments (permitted under the ICOA, subject to procedural requirements) and worked simultaneously for competing delivery platforms during their engagement with SLG. The analysis draws on available internal records, including RouteSync login data and pay records, and identifies indicators of multi-platform engagement that may support SLG's independent contractor defense. Preliminary findings indicate that a meaningful percentage of drivers exhibited patterns consistent with multi-platform engagement, although the precise scope will require further development through discovery.
V. Upcoming Activities — July 2025
The following activities are anticipated during the month of July 2025:
1. Plaintiff's Motion for Conditional Certification. Plaintiff's Motion for Conditional Certification is expected to be filed on or about July 14, 2025, in accordance with the Scheduling Order. Calderwood & Harkness anticipates that Plaintiff will submit declarations from Delano and a small number of other drivers, along with a legal memorandum arguing that the proposed collective satisfies the "similarly situated" standard under FLSA § 216(b) and Fifth Circuit precedent.
2. Preparation of Defendant's Response in Opposition to Conditional Certification. SLG's Response in Opposition is due August 13, 2025. Calderwood & Harkness is preparing the opposition brief and supporting materials, including:
• Finalization of supporting declarations from Trevor Sandoval (VP of Operations), Karen Lund (Director of Driver Relations), and Dennis Faulkner (Hub Manager, HUB-01). These declarations will address hub-level operational variations, differences in driver supervision and autonomy across hubs, and the specific operational conditions applicable to different ICOA versions.
• Finalization of Dr. Priya Ramanathan's expert declaration, targeted for completion by July 25, 2025. The declaration will present the statistical analysis of variance across the driver population and will serve as the evidentiary foundation for SLG's argument that the proposed collective lacks the commonality required for conditional certification.
• The opposition brief will argue: (a) that material variations across SLG's fourteen distribution hubs, three ICOA versions, and differing levels of driver autonomy and operational control defeat the "similarly situated" standard; (b) that Plaintiff's declarations (to the extent they rely on Delano's individual experience at HUB-01) are conclusory, anecdotal, and insufficient to demonstrate that the experiences of 1,187 drivers across fourteen hubs are substantially similar; (c) that the proposed collective is overbroad given that approximately 640 drivers are subject to an enforceable arbitration clause and collective action waiver under ICOA v3.0; and (d) that Dr. Ramanathan's statistical evidence demonstrates a lack of commonality across the driver population on key metrics including hours worked, compensation, acceptance behavior, route discretion, and multi-platform engagement.
3. Stonefield's Responses to Plaintiff's First Set of Interrogatories. SLG's Objections and Responses to Plaintiff's First Set of Interrogatories are due July 21, 2025. Calderwood & Harkness is coordinating with SLG personnel to gather the necessary information and prepare substantive responses, subject to appropriate objections.
4. Receipt and Review of Plaintiff's discovery Responses. Plaintiff's responses to SLG's First Set of Interrogatories and First Set of Requests for Production are due July 23, 2025. Calderwood & Harkness will review the responses upon receipt and assess whether follow-up discovery or motion practice (e.g., motion to compel) is warranted.
5. Arbitration Motion Timing. Calderwood & Harkness will continue to evaluate the optimal timing for filing a motion to compel individual arbitration as to ICOA v3.0 signatories. This strategic decision will be finalized in consultation with Margaret Hollis and Nathan Okonkwo, with consideration given to the impact on conditional certification proceedings, the risk of waiver arguments, and the broader defense strategy.
6. Privilege Log Preparation (Phase 1). Calderwood & Harkness will prepare the Phase 1 Privilege Log covering pre-litigation classification advice and related communications from SLG's prior outside counsel, Pennfield & Daye LLP, spanning the period from 2018 through 2024. Target completion for the Phase 1 Privilege Log is July 31, 2025.
7. Broadleaf Insurance Coordination. Calderwood & Harkness will continue to monitor Broadleaf's coverage position and respond to any additional information requests from the insurer. Any material developments in coverage will be reported to the client team promptly.
8. Client Strategy Call. We recommend scheduling a call with the client team — including Margaret Hollis, Nathan Okonkwo, and Aaron Turcotte — during the week of July 7, 2025, to finalize the opposition strategy, discuss the arbitration motion timing, and address mediation timing considerations raised by Ridgepoint Capital Management LLC. A calendar invitation will follow under separate cover.
VI. Staffing
The current matter staffing for Delano v. Stonefield Logistics Group Inc. is as follows:
External Expert:
No changes to the matter staffing are anticipated during the next reporting period. If additional staffing is required — for example, in connection with large-scale document review or deposition preparation — Calderwood & Harkness will advise the client team in advance and will ensure that any additional timekeepers are staffed at rates consistent with the Ridgepoint Capital portfolio company panel agreement.
VII. Budget and Billing Summary
A. Fee Summary — Through June 30, 2025
The following table summarizes legal fees incurred by Calderwood & Harkness through June 30, 2025:
Note: Total legal fees are rounded to $87,400 for reporting purposes. Billing rates are established pursuant to the Ridgepoint Capital portfolio company panel agreement.
B. Expert Costs — Through June 30, 2025
Corbin Risk Advisors LLC has invoiced the following amounts through June 30, 2025:
• Total invoiced to date: approximately $32,000
• Phase 1 expert preliminary analysis budget: $90,000
• Total conditional certification phase expert budget: $175,000
Dr. Ramanathan's preliminary analysis deliverable was received on schedule on June 20, 2025. Additional work is in progress toward the expert declaration in support of SLG's opposition to conditional certification, which is targeted for completion by July 25, 2025. Expert costs are expected to increase materially during July as the declaration is finalized.
C. Phase 1 Billing Cap Status
The following table summarizes the status of the Phase 1 billing cap established under the Ridgepoint Capital portfolio company panel agreement:
The $87,400 in legal fees incurred through June 30, 2025 represents approximately 22.7% of the $385,000 legal fee component of the Phase 1 cap. The current billing trajectory is consistent with budget projections set forth in the Initial Case Assessment Memorandum. The most fee-intensive period of Phase 1 is expected to be July through August 2025, corresponding to the preparation of the opposition to conditional certification, the supporting factual and expert declarations, and the commencement of substantive discovery responses. Calderwood & Harkness will continue to manage fees within the Phase 1 cap and will promptly advise the client team if any budget pressures are identified.
D. Estimated Total Fees Through Trial (If No Settlement)
The estimated total legal fees and expert costs through trial, assuming the matter proceeds through conditional certification, full merits discovery, dispositive motions, and trial (currently set for September 14, 2026), remain in the range of $2.1 million to $2.8 million, unchanged from the estimate provided in the Initial Case Assessment Memorandum dated May 9, 2025.
This estimate is subject to revision based on the outcome of the conditional certification motion, the scope of the collective (if certified), the volume of merits discovery, and whether the matter proceeds to trial or is resolved through settlement or arbitration. Calderwood & Harkness will update the estimate as warranted by material developments.
VIII. Risk Assessment Update
The overall risk posture in Delano v. Stonefield Logistics Group Inc. remains consistent with the assessment set forth in the Initial Case Assessment Memorandum dated May 9, 2025. Calderwood & Harkness continues to evaluate the key risk factors as follows:
Classification Risk. The core merits question in this case is whether SLG's delivery drivers are employees or independent contractors under the FLSA economic reality test. As detailed in the Driver Classification Analysis Memorandum dated May 20, 2025, several of the six economic reality factors present risk for SLG's position. In particular, Plaintiff is expected to emphasize SLG's control over driver activities through the RouteSync dispatch platform (which assigns delivery routes and windows), mandatory GPS tracking (under ICOA v3.0), uniform and branding requirements, the 85% minimum delivery acceptance rate, and limits on drivers' practical ability to subcontract. Conversely, SLG's strongest arguments relate to driver ownership of delivery vehicles (representing a significant capital investment), the theoretical and contractual ability of drivers to decline delivery assignments, the per-delivery payment structure (which creates an opportunity for profit or loss based on volume and efficiency), and the express independent contractor designation in the ICOA. The merits risk is moderate. The outcome will depend heavily on the specific factual record developed through discovery and the Court's weighing of the factors under the totality of the circumstances.
Conditional Certification Risk. In the Fifth Circuit, the standard for conditional certification under FLSA § 216(b) is relatively lenient, requiring only that the plaintiff demonstrate that potential opt-in plaintiffs are "similarly situated" to the named plaintiff. Courts in this circuit apply a two-stage process: a notice stage (where the burden is light) and a decertification stage (where the burden is more rigorous). At the notice stage, Plaintiff's burden is to make a modest factual showing that he and the putative collective members are victims of a common policy or plan that violated the FLSA. This standard generally favors plaintiffs. However, SLG has meaningful arguments against conditional certification based on the material operational variations across its fourteen distribution hubs, the three different ICOA versions with differing contractual terms, and Dr. Ramanathan's preliminary statistical findings showing significant variance across the driver population on key metrics. The risk of conditional certification is elevated but not certain, and the strength of SLG's opposition will depend on the quality of the supporting declarations and expert evidence.
Arbitration Opportunity. The ICOA v3.0 arbitration clause and collective action waiver represent the most significant opportunity to reduce SLG's exposure in this case. If the Court enforces the arbitration clause, approximately 640 of the 1,187 putative collective members would be compelled to pursue their claims, if any, in individual arbitration rather than as part of the collective action. This would reduce the collective from 1,187 to approximately 547 drivers and would correspondingly reduce total potential exposure from approximately $74 million to approximately $34.1 million (Scenario B) — or lower, depending on opt-in rates (Scenario C estimates $6.8 million at a 20% opt-in rate). The enforceability of the arbitration clause is likely under Granite Harbor Systems. v. Lewis and Fifth Circuit precedent, subject to the risk that the Court could find that the FAA Section 1 transportation worker exemption applies to SLG's delivery drivers. The strategic timing of the motion to compel arbitration remains under evaluation, as discussed in Section V above.
Insurance Uncertainty. Broadleaf Insurance Company's Reservation of Rights letter dated May 19, 2025 creates meaningful uncertainty regarding the availability of EPLI coverage for this matter. If Broadleaf ultimately denies coverage — whether on the basis that misclassification claims are not covered "Employment Practices Wrongful Acts" or on late-notice grounds — SLG would bear the full financial exposure for defense costs, any judgment, and any settlement. Even if coverage is confirmed, the $10 million aggregate policy limit (net of the $2 million SIR) would cover only a fraction of the potential exposure in Scenarios A and B. Coverage risk remains an important factor in the overall risk assessment and in any settlement analysis.
Ridgepoint Exit Timeline. Calderwood & Harkness understands that Ridgepoint Capital Management LLC is exploring a potential exit or recapitalization of Stonefield Logistics Group Inc. in the late 2025 or early 2026 timeframe. The pendency and potential magnitude of the Delano litigation could have a material impact on SLG's valuation and the feasibility and timing of any exit transaction. This consideration adds strategic urgency to the evaluation of resolution options, including mediation, settlement, and the timing of the arbitration motion. Calderwood & Harkness recommends that resolution strategy be a standing agenda item for discussions between outside counsel, SLG's General Counsel, and Ridgepoint.
Maximum Potential Exposure. The maximum potential exposure remains approximately $73,958,409, calculated based on the full collective of 1,187 drivers, a three-year statute of limitations (applicable only upon a finding of willful violation), overtime compensation for all hours worked in excess of forty per week, and an equal amount of liquidated damages under FLSA § 216(b). This figure does not include Plaintiff's attorneys' fees, which would be recoverable by a prevailing plaintiff under FLSA § 216(b) and could be substantial in a case of this magnitude.
The realistic exposure range is significantly lower and depends on: (a) whether the collective is conditionally certified and the scope of certification; (b) whether the ICOA v3.0 arbitration clause is enforced; (c) the opt-in rate among eligible collective members; (d) whether the Court finds a willful violation (which would extend the statute of limitations from two to three years); and (e) the merits outcome. Calderwood & Harkness will continue to refine the exposure analysis as the case develops.
IX. Recommended Next Steps / Action Items
Based on the current status of the case and the anticipated activity in July 2025, Calderwood & Harkness recommends the following next steps and action items:
1. Opposition to Conditional Certification. Prepare and finalize SLG's Response in Opposition to Plaintiff's Motion for Conditional Certification, due August 13, 2025. This is the highest-priority deliverable for the next reporting period.
2. Supporting Declarations and Expert Declaration. Finalize supporting declarations from Trevor Sandoval, Karen Lund, and Dennis Faulkner, as well as the expert declaration of Dr. Priya Ramanathan, by July 25, 2025, to allow sufficient time for review and incorporation into the opposition brief.
3. Interrogatory Responses. Complete SLG's Objections and Responses to Plaintiff's First Set of Interrogatories by the July 21, 2025 deadline.
4. Privilege Log (Phase 1). Prepare the Phase 1 Privilege Log covering communications between SLG and its prior outside counsel, Pennfield & Daye LLP, relating to independent contractor classification advice during the period 2018 through 2024. Target completion: July 31, 2025.