1012-00005 · Stonefield Logistics Group · Case Assessment & Strategy

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PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION

MEETING NOTES — STRATEGY SESSION

Vantor Holdings Corp. v. Stonefield Logistics Group Inc. Case No. 22-cv-07841 (S.D.N.Y.) Hon. Margaret T. Calloway, U.S.D.J.

Date: September 15, 2022

Privilege Designation: These notes are protected by the attorney-client privilege and the work product doctrine. They reflect the mental impressions, conclusions, opinions, and legal theories of counsel. They were prepared in anticipation of litigation and at the direction of counsel. Do not distribute outside the engagement team without the prior written approval of Samuel Eklund, Responsible Partner, Calderwood & Harkness LLP.

ATTENDEES

Calderwood & Harkness LLP

Stonefield Logistics Group Inc.

I. OPENING REMARKS AND PURPOSE OF MEETING

Samuel Eklund opened the meeting at approximately 10:00 a.m. CT by stating the purpose of the session: to conduct a comprehensive factual download from the Stonefield team regarding the full history of the Vantor/VTS relationship, the events and circumstances leading to the termination of the Transportation Services Agreement (the "TSA"), and to discuss the key documents, principal risk areas, and the overarching defense strategy for the litigation. Eklund emphasized that a thorough understanding of the underlying facts from each member of the Stonefield team was essential at this stage to enable Calderwood & Harkness to refine its preliminary case assessment and to begin developing the factual record that would support the defense.

Eklund noted that the Complaint in this matter was filed by Vantor Holdings Corp. on August 12, 2022 in the United States District Court for the Southern District of New York, Case No. 22-cv-07841, and that the case has been assigned to the Honorable Margaret T. Calloway, United States District Judge. He briefly summarized the principal claims as breach of contract, breach of the implied covenant of good faith and fair dealing, and a demand for liquidated damages, lost profits, and related relief totaling approximately $95.4 million.

Eklund confirmed that Calderwood & Harkness's engagement letter was fully executed on September 1, 2022, and that the firm's Notice of Appearance was filed with the Court on September 8, 2022.

Eklund reminded all attendees that the entirety of the discussion during the session constituted privileged attorney-client communication. He noted that all communications with Calderwood & Harkness in connection with the litigation are protected by the attorney-client privilege and that the attorneys' mental impressions, analysis, and strategy reflected in these notes are additionally protected as attorney work product. Eklund further confirmed that the litigation hold memorandum issued on September 2, 2022 remains in full force and effect. He confirmed that all Stonefield attendees had signed individual litigation hold acknowledgment forms, and he noted the following dates of receipt:

• Janet Kirkwood — September 6, 2022

• Raymond Hess — September 5, 2022

• Carlos Medina — September 7, 2022

• Priya Ramachandran — September 6, 2022

Eklund stated that Marcus Denton and Tobias Wren had signed their acknowledgments at the time of the engagement, on September 1, 2022.

Patrick Gallagher noted that Calderwood & Harkness's Preliminary Case Assessment Memorandum, dated September 9, 2022, had been circulated to Tobias Wren on the date of issuance and that Wren had confirmed receipt. Gallagher stated that the purpose of today's session was, in significant part, to gather the additional factual detail necessary to refine and supplement the analysis set forth in that memorandum. Gallagher also noted that a number of additional analytical workstreams were in progress, including memoranda on force majeure, the Schedule C exclusivity issue, and the enforceability of the liquidated damages clause, and that the discussion at this meeting would inform each of those analyses.

II. OVERVIEW OF THE VANTOR RELATIONSHIP AND THE TSA

A. Background of the Relationship

Tobias Wren provided an overview of Stonefield Logistics Group Inc. ("Stonefield" or "SLG") for purposes of the record. Stonefield is a mid-market freight brokerage and managed transportation company headquartered in Fort Worth, Texas. The company is incorporated in the State of Delaware. Stonefield generated approximately $1.42 billion in revenue in fiscal year 2021 and approximately $1.28 billion in fiscal year 2022, with the decline reflecting the broader softening of the freight market that began in the latter part of 2021 and continued into 2022. The company employs approximately 2,800 individuals and manages a carrier network of approximately 12,000 approved carriers. Stonefield handles roughly 850,000 shipments annually. Its service offerings include full truckload ("TL"), less-than-truckload ("LTL"), intermodal, and last-mile delivery services.

Wren noted that Ridgeline Capital Partners, LP acquired a controlling equity stake in Stonefield in October 2017 through a leveraged buyout. Ridgeline holds approximately 72% of the equity in Stonefield through Ridgeline Fund III, LP. The acquisition was completed at an enterprise value of approximately $680 million. Ridgeline's involvement is relevant to the litigation insofar as the private equity sponsor has a direct economic interest in the outcome and will need to be consulted on certain strategic decisions, including any settlement discussions.

Janet Kirkwood then explained the origins of the relationship between Stonefield and the Vantor entities. In late 2018, Stonefield was actively seeking dedicated carrier capacity in the Northeast, Mid-Atlantic, and Southeast corridors. These were high-volume lanes where Stonefield's shipper-customers required reliable, consistent capacity, and Stonefield's carrier procurement team identified an opportunity to secure a dedicated fleet arrangement to supplement its spot and contract carrier base. Vantor Transport Services LLC ("VTS"), the operating subsidiary of Vantor Holdings Corp. ("Vantor"), was identified as a strong candidate. VTS was a regional asset-based carrier with a fleet of approximately 650 owned tractors and approximately 2,100 trailers, primarily operating in the geographic corridors Stonefield was targeting.

Kirkwood stated that Derek Pruitt, who held the title of Vice President, Business Development at Vantor, served as the primary relationship manager on the Vantor side throughout the life of the relationship. Kirkwood was his counterpart at Stonefield. Kirkwood noted that she and Pruitt developed a productive working relationship during the initial negotiations and the early years of the contract, which made the subsequent deterioration of VTS's performance all the more frustrating and unexpected.

B. Key Terms of the TSA

Wren and Kirkwood jointly outlined the principal terms of the Transportation Services Agreement. The TSA was executed on March 15, 2019 between Stonefield Logistics Group Inc. (designated as the "Shipper-Broker" under the agreement) and Vantor Transport Services LLC (designated as the "Carrier-Provider"). The contract reference number is SLG-VTS-2019-0315.

Wren noted that the TSA was drafted by Ashford Meridian LLP, Stonefield's regular outside commercial and transactional counsel, based in Dallas, Texas. The lead drafter was Lorraine Beckwith, a Partner in Ashford Meridian's Commercial Contracts practice, with assistance from Troy Nakamura, a Senior Associate in the same group. Wren confirmed that Ashford Meridian's familiarity with the contract terms and drafting history would be relevant to certain interpretive questions that may arise in the litigation, and that Calderwood & Harkness had already been in contact with Beckwith to coordinate.

The principal terms of the TSA, as discussed during the meeting, are summarized below:

Term. The TSA had an initial term of five years, running from April 1, 2019 through March 31, 2024. The agreement provided for one automatic two-year renewal (extending the term through March 31, 2026) unless either party provided 180 calendar days' advance written notice of non-renewal.

Governing Law and Forum Selection. The TSA is governed by the laws of the State of New York (without regard to conflicts-of-law principles). The forum selection clause provides for exclusive jurisdiction and venue in the United States District Court for the Southern District of New York or the Supreme Court of the State of New York, New York County. Wren confirmed that this provision was the basis for Vantor filing in the S.D.N.Y. and that Stonefield does not intend to challenge personal jurisdiction or venue.

Annual Committed Volume (ACV). Stonefield committed to tender a minimum annual freight volume of $43.2 million in transportation charges to VTS per contract year (each contract year running April 1 through March 31). The total five-year minimum commitment was therefore $216 million. Eklund noted that this commitment is at the center of Vantor's volume-shortfall allegations and would be a focal point of the litigation.

Fleet Capacity Commitment. VTS committed to maintaining a minimum fleet capacity of 400 tractors and 1,200 trailers available for Stonefield freight at all times during the term. This commitment was intended to ensure that VTS had sufficient dedicated equipment to service the volume Stonefield was committing to tender.

Rate Structure. Rates were established on a per-mile basis by lane, as set forth in Schedule B to the TSA. The rates were subject to annual adjustment pursuant the Rate Adjustment Mechanism in Section 5.3 of the agreement. The adjustment was indexed to a blended formula consisting of 70% based on the diesel fuel index and 30% based on the Consumer Price Index for All Urban Consumers (CPI-U). Adjustments were effective each April 1.

Service Level Obligations (SLOs). The TSA imposed the following minimum Service Level Obligations on VTS:

• On-time pickup rate: greater than or equal to 95%

• On-time delivery rate: greater than or equal to 93%

• Cargo claims ratio: less than or equal to 0.5% of gross revenue

• Tender acceptance rate: greater than or equal to 90%

• Equipment availability compliance: greater than or equal to 85% of committed fleet capacity

These SLOs were measurable, objective performance standards, and Hess confirmed that they were tracked on a quarterly basis using data from both VTS's own Carrier Performance Portal and Stonefield's internal transportation management system ("TMS").

Termination for Cause. Section 13.1 of the TSA provided for termination for Cause upon the occurrence of any of the following events:

(a) Material breach remaining uncured for 30 calendar days after written notice specifying the breach (Section 13.1(a));

(b) Insolvency or bankruptcy of the other party (Section 13.1(b));

(d) Material violation of applicable law, including regulations of the United States Department of Transportation ("DOT") and the Federal Motor Carrier Safety Administration ("FMCSA") (Section 13.1(d)).

Cure Notice Requirement. Section 13.2 required that any notice of breach intended to trigger the 30-day cure period under Section 13.1(a) must be in writing and must specify the breach "with reasonable particularity." The applicable cure period was required to run in full before termination could become effective.

Liquidated Damages. Section 14.2 of the TSA provided that if Stonefield terminated the agreement "other than for Cause," Stonefield would be obligated to pay VTS liquidated damages equal to 75% of the ACV multiplied by the number of full and partial contract years remaining in the term. The parties acknowledged in the agreement that this amount constituted a "reasonable estimate of [VTS's] anticipated damages" and was "not a penalty." Eklund noted that the enforceability of this provision under New York law was a key issue and was the subject of a separate memorandum being prepared by the Calderwood & Harkness team.

Consequential Damages Waiver. Section 15.1 of the TSA contained a mutual waiver of consequential damages, including but not limited to lost profits, loss of business, and loss of goodwill. Eklund flagged that this provision would be critical to challenging several categories of Vantor's claimed damages.

Dispute Resolution. Section 16 of the TSA required a mandatory 30-day executive negotiation period before either party could initiate litigation. During this period, the chief executive officers (or their designees) of the respective parties were required to meet and attempt to resolve the dispute in good faith. The executive negotiation process was completed prior to filing of the Complaint, as discussed further in Section X below.

Schedule C Exclusivity. Schedule C to the TSA designated 14 "Primary Lanes" (specific origin-destination pairs) on which Stonefield committed to use VTS as its exclusive carrier. Section 2(b) of Schedule C separately identified "Secondary Lanes," which were non-exclusive and on which Stonefield was free to use other carriers alongside VTS. The distinction between Primary and Secondary Lanes is a central issue in the exclusivity violation allegations, as discussed further in Section VIII below.

III. TIMELINE OF VTS PERFORMANCE FAILURES

A. Contract Years 1 and 2 — Generally Satisfactory Performance (April 2019 – March 2021)

Janet Kirkwood stated that VTS's performance was generally within the SLO thresholds during Contract Year 1 (April 2019 through March 2020) and the early portion of Contract Year 2. The relationship during this period was described as productive, with regular operational calls occurring between Kirkwood and Pruitt on a biweekly basis and quarterly business reviews conducted in person, alternating between Stonefield's Fort Worth headquarters and VTS's facilities.

Carlos Medina noted that there were some spot issues with on-time delivery during Q3 2019, coinciding with a seasonal peak period in August and September of that year. Medina stated that these issues were resolved informally through direct communication between the operations teams, without any need to invoke the formal cure process. VTS deployed additional equipment to address the seasonal surge, and performance returned to compliant levels by October 2019.

B. COVID-19 Force Majeure Period (April 2020 – September 2020)

Tobias Wren confirmed that Stonefield formally invoked the force majeure provision under Section 12.1 of the TSA for the period of April 2020 through September 2020 due to the impacts of the COVID-19 pandemic on freight demand. Section 12.1 defines force majeure events to include, among other things, epidemics, pandemics, government orders, and other circumstances beyond a party's reasonable control. The invocation was communicated in writing to VTS in accordance with the notice provisions of the agreement.

Patrick Gallagher asked about the implications of the force majeure invocation for the ACV during Contract Year 2. Wren confirmed that the force majeure reduced the CY2 ACV obligation proportionally. Because the force majeure period covered six of the twelve months in CY2, the adjusted CY2 ACV was calculated as $43.2 million multiplied by 6/12, yielding an adjusted minimum of $21.6 million. Wren stated that Stonefield's actual tenders during the full CY2 period (April 2020 through March 2021) totaled $31.8 million, which exceeded the adjusted minimum by $10.2 million.

Gallagher confirmed that this calculation is a key defense point against Vantor's allegation in the Amended Complaint that Stonefield failed to tender the required ACV in CY2. Gallagher noted that the force majeure defense had been analyzed in Calderwood & Harkness's Force Majeure Defense Memorandum, which was in preparation with a target completion date of September 22, 2022.

C. Deterioration in Contract Year 3 (April 2021 – January 2022)

Kirkwood described a progressive deterioration in VTS's performance beginning around mid-2021, approximately the start of Q2 of Contract Year 3. She stated that the decline was not sudden but rather a gradual erosion across multiple SLO categories that became increasingly pronounced as the year progressed. Kirkwood stated that she personally raised concerns with Derek Pruitt on multiple occasions between June and November 2021. These communications included telephone calls, emails, and at least one in-person meeting during a quarterly business review held in August 2021 at VTS's offices. Pruitt's responses during this period were characterized by Kirkwood as vague and non-committal. He acknowledged operational challenges in general terms but did not provide specific remediation plans or timelines for improvement.

Carlos Medina described the operational impact of VTS's performance failures from Stonefield's perspective. He stated that Stonefield began receiving increasing complaints from its own shipper-customers about service disruptions attributable to VTS. These complaints included late pickups at origin facilities, missed delivery windows at destination facilities, and tender rejections that forced Stonefield to scramble for alternative capacity on short notice, often at significantly higher spot market rates. Medina stated that the shipper-customer complaints were documented in Stonefield's customer relationship management system and that several key accounts — which Medina declined to identify by name in this session but would provide to Calderwood & Harkness separately — had specifically threatened to reduce their business with Stonefield if the service issues were not resolved.

Raymond Hess then provided the detailed Q4 2021 performance data that formed the basis of the Cure Notice. Hess stated that as Director of Contract Compliance, he was responsible for tracking and compiling the SLO metrics on a quarterly basis. The Q4 2021 data (covering October 1, 2021 through December 31, 2021) showed the following:

Hess noted with respect to the cargo claims metric that there were 16 documented cargo claims during November and December 2021 alone, totaling $387,400 in claimed damages. The claims involved damage to goods in transit, including temperature-sensitive products and manufactured goods, and the claims ratio of approximately 1.07% was more than double the contractual maximum of 0.5%.

Hess further stated that VTS had also chronically failed to provide substitute equipment or arrange surge capacity as required under Section 7.4 of the TSA. Section 7.4 obligated VTS, when its own fleet capacity was insufficient to service Stonefield's tendered loads, to arrange for substitute equipment from qualified sub-haulers at no additional cost to Stonefield. Hess stated that VTS's failure to comply with this obligation compounded the impact of the equipment availability shortfall and contributed directly to the tender rejection rate.

Eklund asked Hess to confirm the data sources underlying the Q4 2021 metrics. Hess stated that all of the metrics were derived from VTS's own Carrier Performance Portal — an electronic system maintained by VTS that tracked pickup and delivery times, tender acceptance and rejection, and equipment deployment — supplemented by and cross-referenced against Stonefield's internal TMS records. Hess emphasized that the data was independently verifiable and that VTS did not dispute the accuracy of the metrics at any time when they were cited in the Cure Notice or in any subsequent communication.

D. The Milescu Email (November 12, 2021)

Eklund raised an internal VTS email that he identified as potentially the most significant document in the case. The email was authored by Sandra Milescu, Chief Operating Officer of Vantor/VTS, and sent to Nikolai Vantorovich, Chief Executive Officer and majority owner of Vantor Holdings Corp. The email is dated November 12, 2021, and was obtained by Stonefield during the pre-litigation document exchange between the parties that occurred in connection with the executive negotiation process under Section 16 of the TSA. The email states, in relevant part:

"We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January."

Kirkwood confirmed that Stonefield was not notified of this fleet reassignment at the time it occurred. She stated that she first learned of it from a subordinate's informal report in early January 2022, when the Q4 2021 performance data was being compiled and the precipitous drop in equipment availability became apparent. Kirkwood stated that at the time she received the informal report, she did not yet have access to the Milescu email itself and was not aware of the deliberate nature of the fleet redeployment.

Medina expressed significant frustration regarding the substance of the email. He noted that the removal of 85 tractors from the Stonefield-dedicated fleet — out of the 400 tractors VTS was contractually required to maintain — was the direct and principal cause of the drop in equipment availability from previously compliant levels to 62%. Medina stated that this single decision by VTS management effectively made it impossible for VTS to comply with the SLOs during Q4 2021 and that VTS chose to make this decision unilaterally, without notice to Stonefield and in direct contravention of its contractual obligations.

Eklund provided his assessment of the significance of the Milescu email. He stated that this document could serve as a critical "smoking gun" in the litigation for several reasons. First, it establishes that VTS intentionally and deliberately breached the TSA by unilaterally reassigning dedicated fleet capacity to another customer without providing notice to Stonefield, as required by the agreement. Second, and perhaps more importantly, it directly undermines Vantor's central narrative — asserted in the Complaint and in the February 14, 2022 cure response letter — that the performance failures were caused by Stonefield's own volume shortfalls or by the nationwide driver shortage. The Milescu email demonstrates that VTS's performance failures were the result of a conscious corporate decision to prioritize another customer over Stonefield, not external market conditions beyond VTS's control.

Gallagher asked whether Stonefield was aware of the identity of the customer to which VTS had redirected the 85 tractors. The "[redacted]" portion of the email, as received by Stonefield during the pre-litigation exchange, did not identify the customer by name. Kirkwood stated that she believed, based on information she had received informally from industry contacts, that the redirected capacity was being used to service a company called Northwind Distribution Co., but she could not confirm this from her own direct knowledge. Kirkwood stated that the discovery process should be used to establish this fact definitively, including through production of VTS's fleet deployment records, dispatch logs, and any agreement between VTS and Northwind Distribution Co.

Eklund concurred and stated that identifying the Northwind relationship and the terms under which VTS diverted the tractors would be a priority in discovery.

IV. THE CURE NOTICE AND TERMINATION PROCESS

A. The Cure Notice (January 18, 2022)

Raymond Hess explained the process by which the Cure Notice was prepared and issued. After the Q4 2021 performance metrics were compiled in early January 2022, Hess discussed the results with Kirkwood and Wren. Given the severity and breadth of the performance failures across all five SLO categories, the team determined that a formal Cure Notice under Section 13.2 of the TSA was warranted. Hess consulted with Ashford Meridian LLP, specifically Lorraine Beckwith, regarding the drafting and substantive requirements of the Cure Notice.

The Cure Notice was dated January 18, 2022. It was sent by Raymond Hess, in his capacity as Director of Contract Compliance at Stonefield, to Sandra Milescu, COO of Vantor Transport Services LLC. The Cure Notice specified with particularity each of the six categories of material breach:

1. On-time pickup rate: actual 78.2% versus SLO threshold of 95%;

2. On-time delivery rate: actual 81.6% versus SLO threshold of 93%;

3. Tender acceptance rate: actual 71.4% versus SLO threshold of 90%;

4. Equipment availability: actual 62% of committed fleet capacity (approximately 248 tractors) versus SLO threshold of 85% (minimum 340 tractors);

5. Cargo claims ratio: actual 1.07% versus SLO maximum of 0.5%; and

6. Failure to provide substitute equipment or surge capacity as required under Section 7.4 of the TSA.

The Cure Notice cited the specific metric figures for each category, the corresponding contractual thresholds, and the sections of the TSA in which each obligation was established. The notice invoked Section 13.1(a) and stated that VTS had 30 calendar days from receipt to cure the identified material breaches. The cure deadline, measured from receipt of the notice, was February 17, 2022.

Gallagher confirmed that the Cure Notice was reviewed by Ashford Meridian before it was sent. Hess confirmed that Lorraine Beckwith reviewed the final version of the Cure Notice and approved it for issuance. Hess stated that Beckwith made several revisions to his initial draft to ensure that each breach category was articulated with sufficient specificity to satisfy the "reasonable particularity" standard of Section 13.2.

Eklund observed that the specificity and detail of the Cure Notice should satisfy the "reasonable particularity" requirement of Section 13.2 of the TSA. Each metric, the corresponding contractual threshold, and the actual performance figure for the applicable period were separately enumerated, and the notice identified the specific TSA provisions that had been breached. Eklund stated that he anticipated Vantor would argue that the Cure Notice was deficient in some respect, and he asked the team to preserve all drafts and communications relating to the preparation of the Cure Notice for production in discovery.

B. Vantor's Response (February 14, 2022)

Hess described Vantor's response to the Cure Notice. VTS submitted a written response in the form of a letter from Derek Pruitt, Vice President of Business Development at Vantor, addressed to Janet Kirkwood at Stonefield, dated February 14, 2022 — three days before the expiration of the 30-day cure period.

In the February 14 letter, Pruitt acknowledged that VTS had experienced "operational challenges" during the Q4 2021 period. However, rather than demonstrating that the identified breaches had been cured, Pruitt asserted that the performance failures were attributable to three external factors:

(i) A nationwide driver shortage affecting the entire trucking industry;

(ii) Stonefield's own failure to tender the minimum committed volumes under the ACV provision, which Pruitt asserted had caused VTS to reduce its dedicated fleet capacity for Stonefield; and

(iii) Stonefield's alleged instructions to divert freight volume to lower-cost spot market carriers in violation of the exclusivity provisions, which Pruitt claimed further reduced VTS's revenue from the Stonefield account and justified VTS's fleet reductions.

Pruitt's letter asserted that VTS had "substantially cured" the identified deficiencies and disputed the accuracy of the cargo claims data cited in the Cure Notice. However, Kirkwood stated that the Pruitt letter was not accompanied by any supporting data, documentary evidence of actual remediation steps taken, or specific information demonstrating that VTS had restored its fleet capacity or improved its performance metrics to compliant levels.

Hess confirmed that the post-cure-period performance data, specifically the SLO metrics for the period through late February and early March 2022 as captured in Stonefield's internal TMS systems, showed continued failures across all SLO categories. There was no material improvement in any of the six breach categories identified in the Cure Notice. Hess stated that on-time pickup remained below 80%, tender acceptance remained below 75%, and equipment availability showed no meaningful recovery.

Eklund noted that the absence of supporting data in Pruitt's response and the continued failure to cure after the cure period expired significantly strengthened Stonefield's position that the termination was proper.

C. The Termination Letter (March 4, 2022)

Tobias Wren described the termination process. Following the expiration of the cure period on February 17, 2022, and after confirming that VTS's performance had not materially improved, Wren prepared a formal termination letter. The letter was dated March 4, 2022 and was sent from Tobias Wren, in his capacity as General Counsel of Stonefield Logistics Group Inc., to both Vantor Holdings Corp. and Vantor Transport Services LLC.

The termination letter stated that VTS had "failed to cure the material breaches" identified in the Cure Notice dated January 18, 2022 within the 30-calendar-day cure period prescribed by Section 13.2 of the TSA. The letter terminated the TSA effective immediately pursuant to Section 13.1(a). The letter reserved all of Stonefield's rights and remedies under the agreement, at law, and in equity.

Wren noted that the remaining term of the TSA at the time of termination was approximately two years and 27 days, running from March 4, 2022 through the expiration date of March 31, 2024. This is the period on which Vantor's liquidated damages calculation is based.

Wren confirmed that Ashford Meridian LLP, specifically Lorraine Beckwith, reviewed and approved the termination letter before it was sent. Wren stated that the letter went through two rounds of revision with Beckwith's input to ensure that it properly invoked the contractual termination mechanism and that the grounds for termination were clearly and accurately stated.

V. DISCUSSION OF THE KIRKWOOD EMAIL (SEPTEMBER 22, 2021) — KEY RISK AREA

A. Context and Content

Eklund raised what he identified as a significant risk document for the defense. The document in question is an internal Stonefield email from Janet Kirkwood to Carlos Medina, dated September 22, 2021. The email states:

"VTS is a mess. We're already moving volume to Cascade and Briarwood on Lanes 8–14. If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract."

Eklund stated that this email presents a litigation risk on two fronts. First, Vantor will likely use this email to argue that Stonefield had already decided to terminate the TSA well before the Cure Notice was issued on January 18, 2022, which would support an argument that the formal cure process was pretextual — i.e., that Stonefield had already made up its mind and went through the motions of the cure process merely to create a documentary record justifying a decision it had already reached. Second, Vantor will argue that the reference to "moving volume to Cascade and Briarwood on Lanes 8–14" constitutes evidence that Stonefield was diverting freight to competing carriers — specifically, Cascade Freight Systems Inc. and Briarwood Trucking Co. — in violation of the Schedule C exclusivity provisions.

Eklund noted that this email was among the documents identified by Calderwood & Harkness during its initial review of the document collection provided by Stonefield and that it had been flagged as a priority risk item in the Preliminary Case Assessment Memorandum.

B. Kirkwood's Explanation

Kirkwood provided a detailed explanation of the context and circumstances surrounding the email. She stated that by September 2021, VTS was already rejecting a significant percentage of Stonefield's tenders on certain lanes. The tender rejections were forcing Stonefield to find alternative carrier capacity on short notice in order to serve its own shipper-customers. The volume that was moved to Cascade Freight Systems Inc. and Briarwood Trucking Co. was specifically on Lanes 8 through 14, as stated in the email.

Kirkwood stated — and emphasized — that Lanes 8 through 14 are classified as "Secondary Lanes" under Section 2(b) of Schedule C to the TSA. The exclusivity commitment applies only to the 14 designated "Primary Lanes," which are separately identified in Section 2(a) of Schedule C. There is no exclusivity obligation on Secondary Lanes. Kirkwood stated that she was aware of this distinction at the time she authorized the volume movement and that the decision was made in compliance with the contractual framework.

Regarding the phrase "pull the plug on the whole contract," Kirkwood stated that this was an expression of frustration with VTS's deteriorating performance, not a predetermined decision to terminate the agreement. She noted that the email was written on September 22, 2021, and that the actual termination did not occur until March 4, 2022 — approximately five and a half months later — and only after the formal cure process mandated by the TSA had been initiated and completed. During the intervening period, Stonefield continued to communicate with VTS, issued the Cure Notice, provided VTS with the full 30-day cure opportunity, evaluated VTS's cure response, and monitored post-cure-period performance before making the decision to terminate. Kirkwood stated that if she had truly "decided" to terminate as of September 2021, there would have been no reason to engage in this extensive process.

Kirkwood further denied that the upcoming April 2022 rate adjustment under Section 5.3 of the TSA played any role in her thinking at the time of the September 22, 2021 email. She stated that she was focused entirely on VTS's operational failures and the impact those failures were having on Stonefield's shipper-customers. Kirkwood stated that as VP of Carrier Relations, her primary concern was maintaining service quality, and that she was not involved in and was not aware of the specific financial analysis of the rate adjustment impact until much later.

Carlos Medina corroborated Kirkwood's account in all material respects. Medina stated that the volume diversion to Cascade and Briarwood was an operationally necessary measure to avoid service failures to Stonefield's own shipper-customers. When VTS rejected tenders or failed to pick up loads on time, Stonefield had an obligation to its own customers to find alternative capacity. Cascade Freight Systems Inc., based in Columbus, Ohio, and Briarwood Trucking Co., based in Arlington, Virginia, were both existing approved carriers in Stonefield's carrier network and were qualified to service the lanes in question. Medina stated that the decision was purely operational and was consistent with Stonefield's standard operating procedures for managing capacity disruptions.

Eklund advised the team that this email will require very careful handling throughout the litigation. He stated that Kirkwood will almost certainly be deposed by Vantor's counsel, Harrison Caldwell of Caldwell Royce & Shapiro LLP, and that the September 22, 2021 email will be a primary focus of that deposition. Eklund recommended comprehensive witness preparation sessions before any deposition takes place, with particular attention to the context and explanation for the email, the distinction between Primary and Secondary Lanes, and the timeline from the email to the eventual termination. Eklund stated that Kirkwood's ability to provide a clear, consistent, and credible explanation of this email will be important to the defense.

VI. DISCUSSION OF THE RATE ADJUSTMENT MOTIVE

A. The April 2022 Rate Adjustment

Patrick Gallagher asked the Stonefield team about the company's awareness of the upcoming April 2022 rate adjustment under Section 5.3 of the TSA and the extent to which the financial impact of that adjustment was a factor in the termination decision.

Priya Ramachandran provided the financial details. Under the Rate Adjustment Mechanism in Section 5.3 of the TSA, which indexed rate changes to a blend of 70% based on the diesel fuel index and 30% based on the Consumer Price Index for All Urban Consumers (CPI-U), the April 1, 2022 adjustment would have increased the weighted average per-mile rate from $2.87 to $3.28. This represented a 14.3% increase (calculated as ($3.28 − $2.87) / $2.87 = 14.29%). Ramachandran stated that this increase was driven primarily by the sharp rise in diesel fuel prices during late 2021 and early 2022, which was the dominant input in the 70/30 blended formula.

Ramachandran stated that this rate increase would have added approximately $6.2 million in annual transportation costs to Stonefield, based on the ACV and the projected volume mix by lane. She confirmed that Ashford Meridian LLP prepared a rate adjustment analysis memorandum in February 2022 that quantified this impact and analyzed the financial implications for Stonefield. The memorandum was prepared by Lorraine Beckwith and was shared with Tobias Wren and Priya Ramachandran. Ramachandran confirmed that she received the memorandum in mid-February 2022.

Gallagher noted that Vantor's Amended Complaint specifically alleges that Stonefield terminated the TSA in order to avoid paying the higher rates that would have taken effect on April 1, 2022. This allegation goes to Vantor's claim that the termination was not genuinely motivated by performance concerns but was instead an economically motivated decision to escape an increasingly unfavorable contract.

B. Client's Position on Rate Adjustment Motive

Tobias Wren stated emphatically that the rate adjustment was not the reason for the termination. He noted that the chronology refutes this allegation: the Cure Notice was issued on January 18, 2022, which was before the Ashford Meridian rate adjustment memorandum was even prepared in February 2022. The Cure Notice was based solely on VTS's Q4 2021 performance failures, as documented in the SLO metrics compiled by Hess. Wren stated that the termination decision flowed directly from VTS's failure to cure those breaches, not from any desire to avoid the rate adjustment.

Marcus Denton stated his position clearly: "We had real performance problems. Our customers were suffering. The rate adjustment was a factor we were aware of, sure, but it was not the driver of the termination decision. The driver was VTS's failure to perform its obligations under the contract."

Janet Kirkwood stated that she was aware in general terms that the rates under the TSA were subject to annual adjustment and that the upcoming adjustment would result in an increase. However, she denied that this awareness influenced her assessment of VTS's performance or her recommendation regarding termination. Kirkwood reiterated that her focus throughout the relevant period was on VTS's operational failures and their impact on Stonefield's shipper-customer relationships.

Eklund provided his legal assessment. He stated that awareness of the rate adjustment is not per se evidence of bad faith under New York law. The key legal question is whether objective "Cause" for termination existed at the time the termination was exercised. Based on the Q4 2021 metrics, which showed failures across all five SLO categories and the Section 7.4 substitute equipment obligation, objective Cause clearly existed. The law does not require that a party's motives be "pure" or that the termination decision be free from any collateral business considerations; what matters is that the contractual grounds for termination were validly invoked.

However, Eklund cautioned that the proximity in timing creates an optics risk that Vantor will attempt to exploit. The Cure Notice was issued on January 18, 2022; the rate adjustment would have taken effect on April 1, 2022; and the termination was effective March 4, 2022 — less than four weeks before the rate adjustment. This chronology, while not legally dispositive, creates a narrative opportunity for Vantor to argue to a factfinder that the termination was financially motivated. Eklund stated that the defense team needed to be prepared to address this narrative head-on.

Eklund further noted that New York law does not generally inquire into the subjective motivation underlying a termination for cause when objective contractual grounds for termination are satisfied. Even if Stonefield had mixed motives — including both legitimate performance concerns and a desire to avoid the cost increase — the termination remains valid under New York law so long as Cause objectively existed at the time it was exercised. Eklund cited this principle as well-established in New York commercial contract jurisprudence and stated that Calderwood & Harkness would prepare a research memorandum on the pretext and good faith issues (assigned to Simone Laroche, with a target completion date of early October 2022).

VII. DISCUSSION OF VANTOR'S VOLUME SHORTFALL ALLEGATIONS

A. CY2 Volume (April 2020 – March 2021)

Vantor's Amended Complaint alleges that Stonefield tendered only $31.8 million in freight volume to VTS during Contract Year 2 (April 2020 through March 2021), compared to the $43.2 million ACV, resulting in an alleged shortfall of $11.4 million.

Tobias Wren reiterated the force majeure defense that is central to Stonefield's response to this allegation. Stonefield properly invoked the force majeure provision under Section 12.1 of the TSA for the period of April 2020 through September 2020 due to the COVID-19 pandemic. This invocation reduced the CY2 ACV obligation proportionally. Because the force majeure period covered six of the twelve months in CY2, the adjusted ACV was $43.2 million multiplied by 6/12, yielding an adjusted minimum of $21.6 million. Stonefield's actual tenders of $31.8 million during CY2 exceeded the adjusted minimum by $10.2 million, representing a surplus of more than 47% above the adjusted commitment.

Eklund confirmed that Calderwood & Harkness had already analyzed this point in detail. The Force Majeure Defense Memorandum, being prepared by Gallagher with a target completion date of September 22, 2022, addresses the timeliness and propriety of the force majeure invocation, the contractual basis for proportional ACV reduction, and the factual record supporting the defense. Eklund stated that the CY2 volume allegation should be the weakest of Vantor's claims and that the defense on this point was strong.

B. CY3 Volume (April 2021 – January 2022)

Vantor's Amended Complaint also alleges that Stonefield tendered only $36.5 million during the CY3 period (April 2021 through January 2022, a period of approximately 10 months), creating an alleged $6.7 million shortfall against the annual ACV of $43.2 million.

Priya Ramachandran stated that Vantor's calculation was fundamentally misleading. The CY3 period was cut short by the termination of the TSA on March 4, 2022. The CY3 contract year would have run through March 31, 2022, but Stonefield's tenders to VTS necessarily ceased upon termination. Comparing 10 months of actual tenders against a 12-month ACV produces a facially misleading shortfall figure. Ramachandran stated that when the ACV is prorated for the 10 months during which the TSA was operative in CY3, the prorated ACV is $36.0 million ($43.2 million multiplied by 10/12). Stonefield's actual tenders of $36.5 million exceeded the prorated amount by $500,000.

Janet Kirkwood added a further defense point. She stated that the volume shortfall in absolute terms — to the extent any shortfall existed — was driven in significant part by VTS's own tender rejections. When VTS rejected tenders submitted by Stonefield, Stonefield was forced to find alternative carrier capacity to serve its shipper-customers. The volume that flowed through those alternative carriers necessarily reduced the total volume flowing through VTS. Kirkwood stated that VTS cannot cause Stonefield to divert volume by rejecting tenders and then complain that Stonefield's volume was insufficient.

Eklund noted that this was a strong factual counter-argument and that the legal framework supported it as well. He stated that the "first-to-breach" doctrine may apply to this situation. Under New York law, when one party commits the first material breach of a contract, the other party's subsequent performance obligations may be excused. If VTS committed the first material breach by unilaterally reducing fleet capacity — removing 85 tractors from the Stonefield-dedicated fleet in or about October 2021, as established by the Milescu email — then VTS's prior breach would excuse any subsequent shortfall in Stonefield's volume tenders. In other words, VTS cannot breach first by withdrawing dedicated capacity, then claim that Stonefield breached by failing to tender sufficient volume through the now-depleted VTS fleet. Eklund stated that this doctrine would be an important element of the defense and would be developed further in Calderwood & Harkness's contract analysis and motion practice.

VIII. DISCUSSION OF VANTOR'S EXCLUSIVITY VIOLATION ALLEGATIONS

Vantor's Amended Complaint alleges that Stonefield diverted freight to Cascade Freight Systems Inc. and Briarwood Trucking Co. in violation of the exclusivity provisions contained in Schedule C to the TSA. Vantor alleges that this diversion constitutes a material breach of Stonefield's obligations and, in the alternative, contributed to VTS's alleged inability to meet the SLOs by reducing the volume available to VTS.

Janet Kirkwood confirmed that Stonefield did use Cascade Freight Systems Inc. and Briarwood Trucking Co. during the relevant period. However, she stated that these carriers were used exclusively on Lanes 8 through 14, which are classified as "Secondary Lanes" under Section 2(b) of Schedule C to the TSA. The exclusivity commitment in Schedule C applies only to the 14 designated "Primary Lanes" identified in Section 2(a). Secondary Lanes are explicitly non-exclusive, and Stonefield retained full discretion to use other carriers on those lanes. Kirkwood stated that Stonefield did not use Cascade, Briarwood, or any other carrier in place of VTS on any Primary Lane.

Eklund stated that Calderwood & Harkness's Exclusivity Analysis Memorandum, being prepared by Simone Laroche with a target completion date of September 30, 2022, maps each Cascade and Briarwood shipment to the specific lane on which it was transported. Eklund stated that the preliminary results of that analysis confirm that all Cascade and Briarwood shipments were on Secondary Lanes and that there was no violation of the Schedule C exclusivity provisions.

Patrick Gallagher suggested that Calderwood & Harkness should serve third-party subpoenas on Cascade Freight Systems Inc. (located at 4700 Lakehurst Court, Columbus, OH 43016) and Briarwood Trucking Co. (located at 1280 Jefferson Davis Highway, Suite 310, Arlington, VA 22202) during discovery. The subpoenas would seek records confirming the lane-specific usage of these carriers for Stonefield freight, including bills of lading, rate confirmations, and shipment records identifying origin and destination for each load transported. This documentary evidence from third-party sources would independently corroborate Stonefield's position that the usage was limited to Secondary Lanes.

Eklund agreed that this approach was prudent and would help build a robust documentary record supporting the non-exclusivity defense. He stated that the subpoenas should be timed to coincide with the opening of discovery so that the records would be available for use during depositions of Vantor witnesses.

IX. DISCUSSION OF VANTOR'S DAMAGES CLAIMS ($95.4 MILLION)

A. Breakdown of Claimed Damages

Patrick Gallagher summarized the total damages claimed by Vantor, as set forth in the demand letter dated April 8, 2022, which was sent by Harrison Caldwell of Caldwell Royce & Shapiro LLP. The total claimed damages are $95.4 million, broken down as follows:

B. Defense Team's Assessment

Eklund stated that the claimed damages of $95.4 million are substantially overstated and are subject to multiple significant challenges:

Liquidated Damages ($67.23 million). If the termination was validly exercised "for Cause" under Section 13.1(a) of the TSA, no liquidated damages are owed. Section 14.2 applies only to terminations "other than for Cause." The entire defense strategy is predicated on establishing that Cause existed, and the Q4 2021 performance data, the Milescu email, and the unremedied cure period strongly support that position.

Even if the Court were to determine that the liquidated damages clause is triggered — for example, if the Court found that the termination was not valid for Cause — the clause may be unenforceable as a penalty under New York law. New York applies a two-part test for the enforceability of liquidated damages provisions: (1) the amount must have been a reasonable estimate of anticipated damages at the time of contracting, and (2) actual damages must have been difficult to ascertain at the time of contracting. Eklund stated that $67.23 million is grossly disproportionate to any actual loss VTS could demonstrate, particularly given the robust freight market conditions that would have enabled VTS to mitigate its losses by replacing Stonefield volume with other customers. He noted that Calderwood & Harkness's Liquidated Damages Enforceability Memorandum, prepared by Simone Laroche and dated September 19, 2022, assigns a "moderate" probability of a finding of unenforceability, but notes that New York courts are generally reluctant to override freely negotiated terms between sophisticated commercial parties. This is a risk area that requires careful briefing and expert support.

Duplicative Recovery. Eklund noted that Vantor's simultaneous claims for liquidated damages ($67.23 million) and lost profits ($18.7 million) appear duplicative. Both categories seek to compensate Vantor for the same harm — the lost value of the remaining contract term. New York law prohibits double recovery, and a plaintiff cannot recover both liquidated damages and actual damages for the same breach. Vantor will be required to elect between these remedies or demonstrate that they compensate for distinct harms, which will be difficult given the overlap.

Consequential Damages Waiver. The stranded assets claim ($5.2 million), workforce reduction costs ($2.87 million), and mitigation costs ($1.4 million) — totaling $9.47 million — are arguably consequential damages barred by the mutual consequential damages waiver in Section 15.1 of the TSA. These categories of harm are indirect, downstream consequences of the contract termination, not direct damages flowing from the breach itself. Calderwood & Harkness will argue that Section 15.1 bars recovery for each of these categories.

Failure to Mitigate. Eklund stated that Vantor's damages are further reduced by its duty to mitigate. The freight market in Q1 and Q2 of 2022 was robust, with spot rates elevated approximately 35% above historical averages. In this market environment, Vantor should have been able to readily replace the Stonefield volume by contracting with other shippers. Vantor's failure to do so — or to demonstrate that it made reasonable efforts to do so — would reduce its recoverable damages significantly. This is a factual issue that will be explored in discovery and supported by expert testimony.

Priya Ramachandran provided context regarding the financial impact of a potential adverse judgment on Stonefield. She noted that Stonefield's fiscal year 2022 EBITDA is approximately $118 million. An adverse judgment of $95.4 million would be material and would have significant implications for the company's financial position and capital structure. Ramachandran confirmed that Stonefield had already fulfilled its notification obligation under the Lakeshore National Bank credit facility: a notification was sent to Lakeshore on August 24, 2022, pursuant to Section 6.03(b) of the Credit Agreement, which requires notice of any potential liability exceeding $25 million. The notification process is discussed further in Section XII below.

C. Expert Retention

Eklund recommended that Stonefield retain a damages rebuttal expert to analyze and challenge the damages report that Vantor is expected to submit. Eklund stated that Vantor's counsel has engaged Trask Greystone Associates as its damages expert and that a report should be expected during the expert disclosure phase. To rebut this report effectively, Stonefield needs its own qualified expert in transportation economics and contract damages.

Eklund proposed retaining Kensington Analytics Group LLC, led by Dr. Evelyn Rosser, Managing Director, located at 1700 Market Street, Suite 2800, Philadelphia, PA 19103. Eklund stated that Dr. Rosser has extensive experience in transportation industry economics, contract damages analysis, and has previously served as a damages expert in freight and logistics disputes in federal courts, including in the S.D.N.Y. Her credentials and experience were well-suited to the issues in this case.

Denton and Wren authorized Eklund to proceed with the expert retention process. Eklund noted that the engagement letter would be forthcoming. The engagement letter was subsequently executed on October 28, 2022. The agreed-upon rates are $625 per hour for Dr. Rosser and $375 per hour for Michael Chung, Senior Analyst, who will support the engagement. The estimated budget for the expert engagement is $180,000 to $250,000, depending on the scope and complexity of the rebuttal analysis required.

Eklund noted that Alison Trang, a Partner at Ridgeline Capital Partners and a member of the Stonefield Board of Directors, had previously confirmed authorization for the expert retention in an email communication dated October 3, 2022.

X. PRE-LITIGATION PROCEDURAL HISTORY

Eklund confirmed the pre-litigation timeline for the record, summarizing the key events in chronological order:

March 4, 2022: Stonefield terminates the TSA by formal letter from Tobias Wren to Vantor Holdings Corp. and VTS, effective immediately, citing VTS's failure to cure the material breaches identified in the January 18, 2022 Cure Notice.

April 8, 2022: Vantor sends a formal demand letter through its counsel, Harrison Caldwell of Caldwell Royce & Shapiro LLP, demanding payment of $95.4 million in total claimed damages.

April 29, 2022: Stonefield, through Tobias Wren, responds to the demand letter, rejecting the claimed damages in their entirety and invoking the mandatory executive negotiation period under Section 16 of the TSA.

May 16, 2022: First executive negotiation meeting, held in person between Marcus Denton (CEO, Stonefield) and Nikolai Vantorovich (CEO, Vantor). No resolution reached.

June 3, 2022: Second executive negotiation session, conducted by telephone between Denton and Vantorovich. No resolution reached.

August 12, 2022: Vantor files the original Complaint in the United States District Court for the Southern District of New York, commencing the litigation.

Marcus Denton confirmed that both executive negotiation sessions were unproductive. He stated that Nikolai Vantorovich's position during both sessions was that Vantor was entitled to full payment of the $95.4 million in claimed damages and that he was unwilling to discuss any lesser amount. Denton stated that he offered to discuss the factual basis for the claims and to explore whether the parties could reach a mutual understanding of the underlying facts, but that no counter-proposal or specific settlement offer was made by Stonefield at that time. Denton described the tone of the conversations as professional but pointed, and stated that it was clear from the outset that Vantorovich was not prepared to negotiate in any meaningful sense.

Tobias Wren noted that Ashford Meridian LLP (Lorraine Beckwith and Troy Nakamura) provided initial pre-litigation guidance to Stonefield during the period following the demand letter and through the executive negotiation process, before Calderwood & Harkness was engaged for the litigation defense. Ashford Meridian assisted with the April 29, 2022 response letter and provided general strategic advice during the executive negotiation sessions. Upon engagement of Calderwood & Harkness in September 2022, Ashford Meridian transitioned the litigation-specific advisory role to Calderwood & Harkness while remaining available for questions regarding the TSA drafting history and commercial context.

XI. INSURANCE COVERAGE STATUS

Tobias Wren reported on the status of Stonefield's efforts to obtain insurance coverage for the defense costs and potential liability in connection with the litigation.

Directors and Officers Liability Policy. Stonefield maintains a Directors and Officers liability insurance policy with Graymark Insurance Company, Policy No. GLG-DO-1025-00008, with a $15 million aggregate limit. A tender of the Vantor claims was submitted to Graymark on September 6, 2022. Graymark declined coverage by letter dated October 3, 2022, determining that the claims alleged in the Complaint arise from a commercial contract dispute — specifically, the breach of the TSA — rather than from wrongful acts of the directors and officers of Stonefield. Graymark cited the "contractual liability" exclusion in the policy as the basis for the declination.

Commercial General Liability Policy. Stonefield maintains a commercial general liability policy with Brindoval Mutual Insurance Co., Policy No. CGL-SLG-2022-11902. Wren confirmed that this policy does not cover breach of contract claims, and accordingly no tender was pursued under this policy.

Eklund stated that Calderwood & Harkness would analyze the Graymark declination to confirm that it was defensible and to assess whether it would be cost-effective to challenge the declination through coverage litigation or arbitration. He noted that this analysis was subsequently completed in a memorandum dated October 10, 2022, which concluded that the Graymark declination was defensible on its terms, that the contractual liability exclusion appeared to apply squarely to the claims in the Complaint, and that challenging the declination would not be cost-effective given the low probability of success and the legal fees that would be required to litigate a coverage dispute.

Wren confirmed that, in light of the coverage outcomes, all defense costs would be borne by Stonefield out of operating cash flow. Wren stated that Ramachandran had confirmed the availability of sufficient operating cash flow and that no additional borrowing under the credit facility was anticipated at this time to fund defense costs.

XII. LENDER NOTIFICATION

Priya Ramachandran confirmed that Stonefield notified Lakeshore National Bank, as Administrative Agent under Stonefield's senior secured credit facility, of the commencement of the litigation on August 24, 2022. The notification was sent eight business days after the Complaint was served on Stonefield, within the ten-business-day notification requirement under Section 6.03(b) of the Credit Agreement.

The Credit Agreement is referenced as LNB-SLG-2017-CA-4402. It was originally dated October 12, 2017, in connection with the Ridgeline Capital Partners leveraged buyout, and was subsequently amended and restated on June 30, 2021. Section 6.03(b) of the Credit Agreement requires Stonefield to notify the Administrative Agent promptly, and in any event within ten business days, of any litigation, investigation, or proceeding that could reasonably be expected to result in a liability exceeding $25 million.

Stonefield's senior secured credit facility is $425 million in total, consisting of a $175 million revolving credit facility and a $250 million term loan B.

The notification letter was prepared by Tobias Wren with review by Patrick Gallagher at Calderwood & Harkness before submission. Lakeshore National Bank's acknowledgment of receipt was sent by Catherin

PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT / ATTORNEY-CLIENT COMMUNICATION
MEETING NOTES — STRATEGY SESSION
Vantor Holdings Corp. v. Stonefield Logistics Group Inc. Case No. 22-cv-07841 (S.D.N.Y.) Hon. Margaret T. Calloway, U.S.D.J.
Date: September 15, 2022
Privilege Designation: These notes are protected by the attorney-client privilege and the work product doctrine. They reflect the mental impressions, conclusions, opinions, and legal theories of counsel. They were prepared in anticipation of litigation and at the direction of counsel. Do not distribute outside the engagement team without the prior written approval of Samuel Eklund, Responsible Partner, Calderwood & Harkness LLP.
ATTENDEES
Calderwood & Harkness LLP
Stonefield Logistics Group Inc.
I. OPENING REMARKS AND PURPOSE OF MEETING
Samuel Eklund opened the meeting at approximately 10:00 a.m. CT by stating the purpose of the session: to conduct a comprehensive factual download from the Stonefield team regarding the full history of the Vantor/VTS relationship, the events and circumstances leading to the termination of the Transportation Services Agreement (the "TSA"), and to discuss the key documents, principal risk areas, and the overarching defense strategy for the litigation. Eklund emphasized that a thorough understanding of the underlying facts from each member of the Stonefield team was essential at this stage to enable Calderwood & Harkness to refine its preliminary case assessment and to begin developing the factual record that would support the defense.
Eklund noted that the Complaint in this matter was filed by Vantor Holdings Corp. on August 12, 2022 in the United States District Court for the Southern District of New York, Case No. 22-cv-07841, and that the case has been assigned to the Honorable Margaret T. Calloway, United States District Judge. He briefly summarized the principal claims as breach of contract, breach of the implied covenant of good faith and fair dealing, and a demand for liquidated damages, lost profits, and related relief totaling approximately $95.4 million.
Eklund confirmed that Calderwood & Harkness's engagement letter was fully executed on September 1, 2022, and that the firm's Notice of Appearance was filed with the Court on September 8, 2022.
Eklund reminded all attendees that the entirety of the discussion during the session constituted privileged attorney-client communication. He noted that all communications with Calderwood & Harkness in connection with the litigation are protected by the attorney-client privilege and that the attorneys' mental impressions, analysis, and strategy reflected in these notes are additionally protected as attorney work product. Eklund further confirmed that the litigation hold memorandum issued on September 2, 2022 remains in full force and effect. He confirmed that all Stonefield attendees had signed individual litigation hold acknowledgment forms, and he noted the following dates of receipt:
•  Janet Kirkwood — September 6, 2022
•  Raymond Hess — September 5, 2022
•  Carlos Medina — September 7, 2022
•  Priya Ramachandran — September 6, 2022
Eklund stated that Marcus Denton and Tobias Wren had signed their acknowledgments at the time of the engagement, on September 1, 2022.
Patrick Gallagher noted that Calderwood & Harkness's Preliminary Case Assessment Memorandum, dated September 9, 2022, had been circulated to Tobias Wren on the date of issuance and that Wren had confirmed receipt. Gallagher stated that the purpose of today's session was, in significant part, to gather the additional factual detail necessary to refine and supplement the analysis set forth in that memorandum. Gallagher also noted that a number of additional analytical workstreams were in progress, including memoranda on force majeure, the Schedule C exclusivity issue, and the enforceability of the liquidated damages clause, and that the discussion at this meeting would inform each of those analyses.
II. OVERVIEW OF THE VANTOR RELATIONSHIP AND THE TSA
A. Background of the Relationship
Tobias Wren provided an overview of Stonefield Logistics Group Inc. ("Stonefield" or "SLG") for purposes of the record. Stonefield is a mid-market freight brokerage and managed transportation company headquartered in Fort Worth, Texas. The company is incorporated in the State of Delaware. Stonefield generated approximately $1.42 billion in revenue in fiscal year 2021 and approximately $1.28 billion in fiscal year 2022, with the decline reflecting the broader softening of the freight market that began in the latter part of 2021 and continued into 2022. The company employs approximately 2,800 individuals and manages a carrier network of approximately 12,000 approved carriers. Stonefield handles roughly 850,000 shipments annually. Its service offerings include full truckload ("TL"), less-than-truckload ("LTL"), intermodal, and last-mile delivery services.
Wren noted that Ridgeline Capital Partners, LP acquired a controlling equity stake in Stonefield in October 2017 through a leveraged buyout. Ridgeline holds approximately 72% of the equity in Stonefield through Ridgeline Fund III, LP. The acquisition was completed at an enterprise value of approximately $680 million. Ridgeline's involvement is relevant to the litigation insofar as the private equity sponsor has a direct economic interest in the outcome and will need to be consulted on certain strategic decisions, including any settlement discussions.
Janet Kirkwood then explained the origins of the relationship between Stonefield and the Vantor entities. In late 2018, Stonefield was actively seeking dedicated carrier capacity in the Northeast, Mid-Atlantic, and Southeast corridors. These were high-volume lanes where Stonefield's shipper-customers required reliable, consistent capacity, and Stonefield's carrier procurement team identified an opportunity to secure a dedicated fleet arrangement to supplement its spot and contract carrier base. Vantor Transport Services LLC ("VTS"), the operating subsidiary of Vantor Holdings Corp. ("Vantor"), was identified as a strong candidate. VTS was a regional asset-based carrier with a fleet of approximately 650 owned tractors and approximately 2,100 trailers, primarily operating in the geographic corridors Stonefield was targeting.
Kirkwood stated that Derek Pruitt, who held the title of Vice President, Business Development at Vantor, served as the primary relationship manager on the Vantor side throughout the life of the relationship. Kirkwood was his counterpart at Stonefield. Kirkwood noted that she and Pruitt developed a productive working relationship during the initial negotiations and the early years of the contract, which made the subsequent deterioration of VTS's performance all the more frustrating and unexpected.
B. Key Terms of the TSA
Wren and Kirkwood jointly outlined the principal terms of the Transportation Services Agreement. The TSA was executed on March 15, 2019 between Stonefield Logistics Group Inc. (designated as the "Shipper-Broker" under the agreement) and Vantor Transport Services LLC (designated as the "Carrier-Provider"). The contract reference number is SLG-VTS-2019-0315.
Wren noted that the TSA was drafted by Ashford Meridian LLP, Stonefield's regular outside commercial and transactional counsel, based in Dallas, Texas. The lead drafter was Lorraine Beckwith, a Partner in Ashford Meridian's Commercial Contracts practice, with assistance from Troy Nakamura, a Senior Associate in the same group. Wren confirmed that Ashford Meridian's familiarity with the contract terms and drafting history would be relevant to certain interpretive questions that may arise in the litigation, and that Calderwood & Harkness had already been in contact with Beckwith to coordinate.
The principal terms of the TSA, as discussed during the meeting, are summarized below:
Term. The TSA had an initial term of five years, running from April 1, 2019 through March 31, 2024. The agreement provided for one automatic two-year renewal (extending the term through March 31, 2026) unless either party provided 180 calendar days' advance written notice of non-renewal.
Governing Law and Forum Selection. The TSA is governed by the laws of the State of New York (without regard to conflicts-of-law principles). The forum selection clause provides for exclusive jurisdiction and venue in the United States District Court for the Southern District of New York or the Supreme Court of the State of New York, New York County. Wren confirmed that this provision was the basis for Vantor filing in the S.D.N.Y. and that Stonefield does not intend to challenge personal jurisdiction or venue.
Annual Committed Volume (ACV). Stonefield committed to tender a minimum annual freight volume of $43.2 million in transportation charges to VTS per contract year (each contract year running April 1 through March 31). The total five-year minimum commitment was therefore $216 million. Eklund noted that this commitment is at the center of Vantor's volume-shortfall allegations and would be a focal point of the litigation.
Fleet Capacity Commitment. VTS committed to maintaining a minimum fleet capacity of 400 tractors and 1,200 trailers available for Stonefield freight at all times during the term. This commitment was intended to ensure that VTS had sufficient dedicated equipment to service the volume Stonefield was committing to tender.
Rate Structure. Rates were established on a per-mile basis by lane, as set forth in Schedule B to the TSA. The rates were subject to annual adjustment pursuant the Rate Adjustment Mechanism in Section 5.3 of the agreement. The adjustment was indexed to a blended formula consisting of 70% based on the diesel fuel index and 30% based on the Consumer Price Index for All Urban Consumers (CPI-U). Adjustments were effective each April 1.
Service Level Obligations (SLOs). The TSA imposed the following minimum Service Level Obligations on VTS:
•  On-time pickup rate: greater than or equal to 95%
•  On-time delivery rate: greater than or equal to 93%
•  Cargo claims ratio: less than or equal to 0.5% of gross revenue
•  Tender acceptance rate: greater than or equal to 90%
•  Equipment availability compliance: greater than or equal to 85% of committed fleet capacity
These SLOs were measurable, objective performance standards, and Hess confirmed that they were tracked on a quarterly basis using data from both VTS's own Carrier Performance Portal and Stonefield's internal transportation management system ("TMS").
Termination for Cause. Section 13.1 of the TSA provided for termination for Cause upon the occurrence of any of the following events:
(a) Material breach remaining uncured for 30 calendar days after written notice specifying the breach (Section 13.1(a));
(b) Insolvency or bankruptcy of the other party (Section 13.1(b));
(c) Failure to maintain required insurance coverages (Section 13.1(c)); and
(d) Material violation of applicable law, including regulations of the United States Department of Transportation ("DOT") and the Federal Motor Carrier Safety Administration ("FMCSA") (Section 13.1(d)).
Cure Notice Requirement. Section 13.2 required that any notice of breach intended to trigger the 30-day cure period under Section 13.1(a) must be in writing and must specify the breach "with reasonable particularity." The applicable cure period was required to run in full before termination could become effective.
Liquidated Damages. Section 14.2 of the TSA provided that if Stonefield terminated the agreement "other than for Cause," Stonefield would be obligated to pay VTS liquidated damages equal to 75% of the ACV multiplied by the number of full and partial contract years remaining in the term. The parties acknowledged in the agreement that this amount constituted a "reasonable estimate of [VTS's] anticipated damages" and was "not a penalty." Eklund noted that the enforceability of this provision under New York law was a key issue and was the subject of a separate memorandum being prepared by the Calderwood & Harkness team.
Consequential Damages Waiver. Section 15.1 of the TSA contained a mutual waiver of consequential damages, including but not limited to lost profits, loss of business, and loss of goodwill. Eklund flagged that this provision would be critical to challenging several categories of Vantor's claimed damages.
Dispute Resolution. Section 16 of the TSA required a mandatory 30-day executive negotiation period before either party could initiate litigation. During this period, the chief executive officers (or their designees) of the respective parties were required to meet and attempt to resolve the dispute in good faith. The executive negotiation process was completed prior to filing of the Complaint, as discussed further in Section X below.
Schedule C Exclusivity. Schedule C to the TSA designated 14 "Primary Lanes" (specific origin-destination pairs) on which Stonefield committed to use VTS as its exclusive carrier. Section 2(b) of Schedule C separately identified "Secondary Lanes," which were non-exclusive and on which Stonefield was free to use other carriers alongside VTS. The distinction between Primary and Secondary Lanes is a central issue in the exclusivity violation allegations, as discussed further in Section VIII below.
III. TIMELINE OF VTS PERFORMANCE FAILURES
A. Contract Years 1 and 2 — Generally Satisfactory Performance (April 2019 – March 2021)
Janet Kirkwood stated that VTS's performance was generally within the SLO thresholds during Contract Year 1 (April 2019 through March 2020) and the early portion of Contract Year 2. The relationship during this period was described as productive, with regular operational calls occurring between Kirkwood and Pruitt on a biweekly basis and quarterly business reviews conducted in person, alternating between Stonefield's Fort Worth headquarters and VTS's facilities.
Carlos Medina noted that there were some spot issues with on-time delivery during Q3 2019, coinciding with a seasonal peak period in August and September of that year. Medina stated that these issues were resolved informally through direct communication between the operations teams, without any need to invoke the formal cure process. VTS deployed additional equipment to address the seasonal surge, and performance returned to compliant levels by October 2019.
B. COVID-19 Force Majeure Period (April 2020 – September 2020)
Tobias Wren confirmed that Stonefield formally invoked the force majeure provision under Section 12.1 of the TSA for the period of April 2020 through September 2020 due to the impacts of the COVID-19 pandemic on freight demand. Section 12.1 defines force majeure events to include, among other things, epidemics, pandemics, government orders, and other circumstances beyond a party's reasonable control. The invocation was communicated in writing to VTS in accordance with the notice provisions of the agreement.
Patrick Gallagher asked about the implications of the force majeure invocation for the ACV during Contract Year 2. Wren confirmed that the force majeure reduced the CY2 ACV obligation proportionally. Because the force majeure period covered six of the twelve months in CY2, the adjusted CY2 ACV was calculated as $43.2 million multiplied by 6/12, yielding an adjusted minimum of $21.6 million. Wren stated that Stonefield's actual tenders during the full CY2 period (April 2020 through March 2021) totaled $31.8 million, which exceeded the adjusted minimum by $10.2 million.
Gallagher confirmed that this calculation is a key defense point against Vantor's allegation in the Amended Complaint that Stonefield failed to tender the required ACV in CY2. Gallagher noted that the force majeure defense had been analyzed in Calderwood & Harkness's Force Majeure Defense Memorandum, which was in preparation with a target completion date of September 22, 2022.
C. Deterioration in Contract Year 3 (April 2021 – January 2022)
Kirkwood described a progressive deterioration in VTS's performance beginning around mid-2021, approximately the start of Q2 of Contract Year 3. She stated that the decline was not sudden but rather a gradual erosion across multiple SLO categories that became increasingly pronounced as the year progressed. Kirkwood stated that she personally raised concerns with Derek Pruitt on multiple occasions between June and November 2021. These communications included telephone calls, emails, and at least one in-person meeting during a quarterly business review held in August 2021 at VTS's offices. Pruitt's responses during this period were characterized by Kirkwood as vague and non-committal. He acknowledged operational challenges in general terms but did not provide specific remediation plans or timelines for improvement.
Carlos Medina described the operational impact of VTS's performance failures from Stonefield's perspective. He stated that Stonefield began receiving increasing complaints from its own shipper-customers about service disruptions attributable to VTS. These complaints included late pickups at origin facilities, missed delivery windows at destination facilities, and tender rejections that forced Stonefield to scramble for alternative capacity on short notice, often at significantly higher spot market rates. Medina stated that the shipper-customer complaints were documented in Stonefield's customer relationship management system and that several key accounts — which Medina declined to identify by name in this session but would provide to Calderwood & Harkness separately — had specifically threatened to reduce their business with Stonefield if the service issues were not resolved.
Raymond Hess then provided the detailed Q4 2021 performance data that formed the basis of the Cure Notice. Hess stated that as Director of Contract Compliance, he was responsible for tracking and compiling the SLO metrics on a quarterly basis. The Q4 2021 data (covering October 1, 2021 through December 31, 2021) showed the following:
Hess noted with respect to the cargo claims metric that there were 16 documented cargo claims during November and December 2021 alone, totaling $387,400 in claimed damages. The claims involved damage to goods in transit, including temperature-sensitive products and manufactured goods, and the claims ratio of approximately 1.07% was more than double the contractual maximum of 0.5%.
Hess further stated that VTS had also chronically failed to provide substitute equipment or arrange surge capacity as required under Section 7.4 of the TSA. Section 7.4 obligated VTS, when its own fleet capacity was insufficient to service Stonefield's tendered loads, to arrange for substitute equipment from qualified sub-haulers at no additional cost to Stonefield. Hess stated that VTS's failure to comply with this obligation compounded the impact of the equipment availability shortfall and contributed directly to the tender rejection rate.
Eklund asked Hess to confirm the data sources underlying the Q4 2021 metrics. Hess stated that all of the metrics were derived from VTS's own Carrier Performance Portal — an electronic system maintained by VTS that tracked pickup and delivery times, tender acceptance and rejection, and equipment deployment — supplemented by and cross-referenced against Stonefield's internal TMS records. Hess emphasized that the data was independently verifiable and that VTS did not dispute the accuracy of the metrics at any time when they were cited in the Cure Notice or in any subsequent communication.
D. The Milescu Email (November 12, 2021)
Eklund raised an internal VTS email that he identified as potentially the most significant document in the case. The email was authored by Sandra Milescu, Chief Operating Officer of Vantor/VTS, and sent to Nikolai Vantorovich, Chief Executive Officer and majority owner of Vantor Holdings Corp. The email is dated November 12, 2021, and was obtained by Stonefield during the pre-litigation document exchange between the parties that occurred in connection with the executive negotiation process under Section 16 of the TSA. The email states, in relevant part:
"We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January."
Kirkwood confirmed that Stonefield was not notified of this fleet reassignment at the time it occurred. She stated that she first learned of it from a subordinate's informal report in early January 2022, when the Q4 2021 performance data was being compiled and the precipitous drop in equipment availability became apparent. Kirkwood stated that at the time she received the informal report, she did not yet have access to the Milescu email itself and was not aware of the deliberate nature of the fleet redeployment.
Medina expressed significant frustration regarding the substance of the email. He noted that the removal of 85 tractors from the Stonefield-dedicated fleet — out of the 400 tractors VTS was contractually required to maintain — was the direct and principal cause of the drop in equipment availability from previously compliant levels to 62%. Medina stated that this single decision by VTS management effectively made it impossible for VTS to comply with the SLOs during Q4 2021 and that VTS chose to make this decision unilaterally, without notice to Stonefield and in direct contravention of its contractual obligations.
Eklund provided his assessment of the significance of the Milescu email. He stated that this document could serve as a critical "smoking gun" in the litigation for several reasons. First, it establishes that VTS intentionally and deliberately breached the TSA by unilaterally reassigning dedicated fleet capacity to another customer without providing notice to Stonefield, as required by the agreement. Second, and perhaps more importantly, it directly undermines Vantor's central narrative — asserted in the Complaint and in the February 14, 2022 cure response letter — that the performance failures were caused by Stonefield's own volume shortfalls or by the nationwide driver shortage. The Milescu email demonstrates that VTS's performance failures were the result of a conscious corporate decision to prioritize another customer over Stonefield, not external market conditions beyond VTS's control.
Gallagher asked whether Stonefield was aware of the identity of the customer to which VTS had redirected the 85 tractors. The "[redacted]" portion of the email, as received by Stonefield during the pre-litigation exchange, did not identify the customer by name. Kirkwood stated that she believed, based on information she had received informally from industry contacts, that the redirected capacity was being used to service a company called Northwind Distribution Co., but she could not confirm this from her own direct knowledge. Kirkwood stated that the discovery process should be used to establish this fact definitively, including through production of VTS's fleet deployment records, dispatch logs, and any agreement between VTS and Northwind Distribution Co.
Eklund concurred and stated that identifying the Northwind relationship and the terms under which VTS diverted the tractors would be a priority in discovery.
IV. THE CURE NOTICE AND TERMINATION PROCESS
A. The Cure Notice (January 18, 2022)
Raymond Hess explained the process by which the Cure Notice was prepared and issued. After the Q4 2021 performance metrics were compiled in early January 2022, Hess discussed the results with Kirkwood and Wren. Given the severity and breadth of the performance failures across all five SLO categories, the team determined that a formal Cure Notice under Section 13.2 of the TSA was warranted. Hess consulted with Ashford Meridian LLP, specifically Lorraine Beckwith, regarding the drafting and substantive requirements of the Cure Notice.
The Cure Notice was dated January 18, 2022. It was sent by Raymond Hess, in his capacity as Director of Contract Compliance at Stonefield, to Sandra Milescu, COO of Vantor Transport Services LLC. The Cure Notice specified with particularity each of the six categories of material breach:
1.  On-time pickup rate: actual 78.2% versus SLO threshold of 95%;
2.  On-time delivery rate: actual 81.6% versus SLO threshold of 93%;
3.  Tender acceptance rate: actual 71.4% versus SLO threshold of 90%;
4.  Equipment availability: actual 62% of committed fleet capacity (approximately 248 tractors) versus SLO threshold of 85% (minimum 340 tractors);
5.  Cargo claims ratio: actual 1.07% versus SLO maximum of 0.5%; and
6.  Failure to provide substitute equipment or surge capacity as required under Section 7.4 of the TSA.
The Cure Notice cited the specific metric figures for each category, the corresponding contractual thresholds, and the sections of the TSA in which each obligation was established. The notice invoked Section 13.1(a) and stated that VTS had 30 calendar days from receipt to cure the identified material breaches. The cure deadline, measured from receipt of the notice, was February 17, 2022.
Gallagher confirmed that the Cure Notice was reviewed by Ashford Meridian before it was sent. Hess confirmed that Lorraine Beckwith reviewed the final version of the Cure Notice and approved it for issuance. Hess stated that Beckwith made several revisions to his initial draft to ensure that each breach category was articulated with sufficient specificity to satisfy the "reasonable particularity" standard of Section 13.2.
Eklund observed that the specificity and detail of the Cure Notice should satisfy the "reasonable particularity" requirement of Section 13.2 of the TSA. Each metric, the corresponding contractual threshold, and the actual performance figure for the applicable period were separately enumerated, and the notice identified the specific TSA provisions that had been breached. Eklund stated that he anticipated Vantor would argue that the Cure Notice was deficient in some respect, and he asked the team to preserve all drafts and communications relating to the preparation of the Cure Notice for production in discovery.
B. Vantor's Response (February 14, 2022)
Hess described Vantor's response to the Cure Notice. VTS submitted a written response in the form of a letter from Derek Pruitt, Vice President of Business Development at Vantor, addressed to Janet Kirkwood at Stonefield, dated February 14, 2022 — three days before the expiration of the 30-day cure period.
In the February 14 letter, Pruitt acknowledged that VTS had experienced "operational challenges" during the Q4 2021 period. However, rather than demonstrating that the identified breaches had been cured, Pruitt asserted that the performance failures were attributable to three external factors:
(i) A nationwide driver shortage affecting the entire trucking industry;
(ii) Stonefield's own failure to tender the minimum committed volumes under the ACV provision, which Pruitt asserted had caused VTS to reduce its dedicated fleet capacity for Stonefield; and
(iii) Stonefield's alleged instructions to divert freight volume to lower-cost spot market carriers in violation of the exclusivity provisions, which Pruitt claimed further reduced VTS's revenue from the Stonefield account and justified VTS's fleet reductions.
Pruitt's letter asserted that VTS had "substantially cured" the identified deficiencies and disputed the accuracy of the cargo claims data cited in the Cure Notice. However, Kirkwood stated that the Pruitt letter was not accompanied by any supporting data, documentary evidence of actual remediation steps taken, or specific information demonstrating that VTS had restored its fleet capacity or improved its performance metrics to compliant levels.
Hess confirmed that the post-cure-period performance data, specifically the SLO metrics for the period through late February and early March 2022 as captured in Stonefield's internal TMS systems, showed continued failures across all SLO categories. There was no material improvement in any of the six breach categories identified in the Cure Notice. Hess stated that on-time pickup remained below 80%, tender acceptance remained below 75%, and equipment availability showed no meaningful recovery.
Eklund noted that the absence of supporting data in Pruitt's response and the continued failure to cure after the cure period expired significantly strengthened Stonefield's position that the termination was proper.
C. The Termination Letter (March 4, 2022)
Tobias Wren described the termination process. Following the expiration of the cure period on February 17, 2022, and after confirming that VTS's performance had not materially improved, Wren prepared a formal termination letter. The letter was dated March 4, 2022 and was sent from Tobias Wren, in his capacity as General Counsel of Stonefield Logistics Group Inc., to both Vantor Holdings Corp. and Vantor Transport Services LLC.
The termination letter stated that VTS had "failed to cure the material breaches" identified in the Cure Notice dated January 18, 2022 within the 30-calendar-day cure period prescribed by Section 13.2 of the TSA. The letter terminated the TSA effective immediately pursuant to Section 13.1(a). The letter reserved all of Stonefield's rights and remedies under the agreement, at law, and in equity.
Wren noted that the remaining term of the TSA at the time of termination was approximately two years and 27 days, running from March 4, 2022 through the expiration date of March 31, 2024. This is the period on which Vantor's liquidated damages calculation is based.
Wren confirmed that Ashford Meridian LLP, specifically Lorraine Beckwith, reviewed and approved the termination letter before it was sent. Wren stated that the letter went through two rounds of revision with Beckwith's input to ensure that it properly invoked the contractual termination mechanism and that the grounds for termination were clearly and accurately stated.
V. DISCUSSION OF THE KIRKWOOD EMAIL (SEPTEMBER 22, 2021) — KEY RISK AREA
A. Context and Content
Eklund raised what he identified as a significant risk document for the defense. The document in question is an internal Stonefield email from Janet Kirkwood to Carlos Medina, dated September 22, 2021. The email states:
"VTS is a mess. We're already moving volume to Cascade and Briarwood on Lanes 8–14. If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract."
Eklund stated that this email presents a litigation risk on two fronts. First, Vantor will likely use this email to argue that Stonefield had already decided to terminate the TSA well before the Cure Notice was issued on January 18, 2022, which would support an argument that the formal cure process was pretextual — i.e., that Stonefield had already made up its mind and went through the motions of the cure process merely to create a documentary record justifying a decision it had already reached. Second, Vantor will argue that the reference to "moving volume to Cascade and Briarwood on Lanes 8–14" constitutes evidence that Stonefield was diverting freight to competing carriers — specifically, Cascade Freight Systems Inc. and Briarwood Trucking Co. — in violation of the Schedule C exclusivity provisions.
Eklund noted that this email was among the documents identified by Calderwood & Harkness during its initial review of the document collection provided by Stonefield and that it had been flagged as a priority risk item in the Preliminary Case Assessment Memorandum.
B. Kirkwood's Explanation
Kirkwood provided a detailed explanation of the context and circumstances surrounding the email. She stated that by September 2021, VTS was already rejecting a significant percentage of Stonefield's tenders on certain lanes. The tender rejections were forcing Stonefield to find alternative carrier capacity on short notice in order to serve its own shipper-customers. The volume that was moved to Cascade Freight Systems Inc. and Briarwood Trucking Co. was specifically on Lanes 8 through 14, as stated in the email.
Kirkwood stated — and emphasized — that Lanes 8 through 14 are classified as "Secondary Lanes" under Section 2(b) of Schedule C to the TSA. The exclusivity commitment applies only to the 14 designated "Primary Lanes," which are separately identified in Section 2(a) of Schedule C. There is no exclusivity obligation on Secondary Lanes. Kirkwood stated that she was aware of this distinction at the time she authorized the volume movement and that the decision was made in compliance with the contractual framework.
Regarding the phrase "pull the plug on the whole contract," Kirkwood stated that this was an expression of frustration with VTS's deteriorating performance, not a predetermined decision to terminate the agreement. She noted that the email was written on September 22, 2021, and that the actual termination did not occur until March 4, 2022 — approximately five and a half months later — and only after the formal cure process mandated by the TSA had been initiated and completed. During the intervening period, Stonefield continued to communicate with VTS, issued the Cure Notice, provided VTS with the full 30-day cure opportunity, evaluated VTS's cure response, and monitored post-cure-period performance before making the decision to terminate. Kirkwood stated that if she had truly "decided" to terminate as of September 2021, there would have been no reason to engage in this extensive process.
Kirkwood further denied that the upcoming April 2022 rate adjustment under Section 5.3 of the TSA played any role in her thinking at the time of the September 22, 2021 email. She stated that she was focused entirely on VTS's operational failures and the impact those failures were having on Stonefield's shipper-customers. Kirkwood stated that as VP of Carrier Relations, her primary concern was maintaining service quality, and that she was not involved in and was not aware of the specific financial analysis of the rate adjustment impact until much later.
Carlos Medina corroborated Kirkwood's account in all material respects. Medina stated that the volume diversion to Cascade and Briarwood was an operationally necessary measure to avoid service failures to Stonefield's own shipper-customers. When VTS rejected tenders or failed to pick up loads on time, Stonefield had an obligation to its own customers to find alternative capacity. Cascade Freight Systems Inc., based in Columbus, Ohio, and Briarwood Trucking Co., based in Arlington, Virginia, were both existing approved carriers in Stonefield's carrier network and were qualified to service the lanes in question. Medina stated that the decision was purely operational and was consistent with Stonefield's standard operating procedures for managing capacity disruptions.
Eklund advised the team that this email will require very careful handling throughout the litigation. He stated that Kirkwood will almost certainly be deposed by Vantor's counsel, Harrison Caldwell of Caldwell Royce & Shapiro LLP, and that the September 22, 2021 email will be a primary focus of that deposition. Eklund recommended comprehensive witness preparation sessions before any deposition takes place, with particular attention to the context and explanation for the email, the distinction between Primary and Secondary Lanes, and the timeline from the email to the eventual termination. Eklund stated that Kirkwood's ability to provide a clear, consistent, and credible explanation of this email will be important to the defense.
VI. DISCUSSION OF THE RATE ADJUSTMENT MOTIVE
A. The April 2022 Rate Adjustment
Patrick Gallagher asked the Stonefield team about the company's awareness of the upcoming April 2022 rate adjustment under Section 5.3 of the TSA and the extent to which the financial impact of that adjustment was a factor in the termination decision.
Priya Ramachandran provided the financial details. Under the Rate Adjustment Mechanism in Section 5.3 of the TSA, which indexed rate changes to a blend of 70% based on the diesel fuel index and 30% based on the Consumer Price Index for All Urban Consumers (CPI-U), the April 1, 2022 adjustment would have increased the weighted average per-mile rate from $2.87 to $3.28. This represented a 14.3% increase (calculated as ($3.28 − $2.87) / $2.87 = 14.29%). Ramachandran stated that this increase was driven primarily by the sharp rise in diesel fuel prices during late 2021 and early 2022, which was the dominant input in the 70/30 blended formula.
Ramachandran stated that this rate increase would have added approximately $6.2 million in annual transportation costs to Stonefield, based on the ACV and the projected volume mix by lane. She confirmed that Ashford Meridian LLP prepared a rate adjustment analysis memorandum in February 2022 that quantified this impact and analyzed the financial implications for Stonefield. The memorandum was prepared by Lorraine Beckwith and was shared with Tobias Wren and Priya Ramachandran. Ramachandran confirmed that she received the memorandum in mid-February 2022.
Gallagher noted that Vantor's Amended Complaint specifically alleges that Stonefield terminated the TSA in order to avoid paying the higher rates that would have taken effect on April 1, 2022. This allegation goes to Vantor's claim that the termination was not genuinely motivated by performance concerns but was instead an economically motivated decision to escape an increasingly unfavorable contract.
B. Client's Position on Rate Adjustment Motive
Tobias Wren stated emphatically that the rate adjustment was not the reason for the termination. He noted that the chronology refutes this allegation: the Cure Notice was issued on January 18, 2022, which was before the Ashford Meridian rate adjustment memorandum was even prepared in February 2022. The Cure Notice was based solely on VTS's Q4 2021 performance failures, as documented in the SLO metrics compiled by Hess. Wren stated that the termination decision flowed directly from VTS's failure to cure those breaches, not from any desire to avoid the rate adjustment.
Marcus Denton stated his position clearly: "We had real performance problems. Our customers were suffering. The rate adjustment was a factor we were aware of, sure, but it was not the driver of the termination decision. The driver was VTS's failure to perform its obligations under the contract."
Janet Kirkwood stated that she was aware in general terms that the rates under the TSA were subject to annual adjustment and that the upcoming adjustment would result in an increase. However, she denied that this awareness influenced her assessment of VTS's performance or her recommendation regarding termination. Kirkwood reiterated that her focus throughout the relevant period was on VTS's operational failures and their impact on Stonefield's shipper-customer relationships.
Eklund provided his legal assessment. He stated that awareness of the rate adjustment is not per se evidence of bad faith under New York law. The key legal question is whether objective "Cause" for termination existed at the time the termination was exercised. Based on the Q4 2021 metrics, which showed failures across all five SLO categories and the Section 7.4 substitute equipment obligation, objective Cause clearly existed. The law does not require that a party's motives be "pure" or that the termination decision be free from any collateral business considerations; what matters is that the contractual grounds for termination were validly invoked.
However, Eklund cautioned that the proximity in timing creates an optics risk that Vantor will attempt to exploit. The Cure Notice was issued on January 18, 2022; the rate adjustment would have taken effect on April 1, 2022; and the termination was effective March 4, 2022 — less than four weeks before the rate adjustment. This chronology, while not legally dispositive, creates a narrative opportunity for Vantor to argue to a factfinder that the termination was financially motivated. Eklund stated that the defense team needed to be prepared to address this narrative head-on.
Eklund further noted that New York law does not generally inquire into the subjective motivation underlying a termination for cause when objective contractual grounds for termination are satisfied. Even if Stonefield had mixed motives — including both legitimate performance concerns and a desire to avoid the cost increase — the termination remains valid under New York law so long as Cause objectively existed at the time it was exercised. Eklund cited this principle as well-established in New York commercial contract jurisprudence and stated that Calderwood & Harkness would prepare a research memorandum on the pretext and good faith issues (assigned to Simone Laroche, with a target completion date of early October 2022).
VII. DISCUSSION OF VANTOR'S VOLUME SHORTFALL ALLEGATIONS
A. CY2 Volume (April 2020 – March 2021)
Vantor's Amended Complaint alleges that Stonefield tendered only $31.8 million in freight volume to VTS during Contract Year 2 (April 2020 through March 2021), compared to the $43.2 million ACV, resulting in an alleged shortfall of $11.4 million.
Tobias Wren reiterated the force majeure defense that is central to Stonefield's response to this allegation. Stonefield properly invoked the force majeure provision under Section 12.1 of the TSA for the period of April 2020 through September 2020 due to the COVID-19 pandemic. This invocation reduced the CY2 ACV obligation proportionally. Because the force majeure period covered six of the twelve months in CY2, the adjusted ACV was $43.2 million multiplied by 6/12, yielding an adjusted minimum of $21.6 million. Stonefield's actual tenders of $31.8 million during CY2 exceeded the adjusted minimum by $10.2 million, representing a surplus of more than 47% above the adjusted commitment.
Eklund confirmed that Calderwood & Harkness had already analyzed this point in detail. The Force Majeure Defense Memorandum, being prepared by Gallagher with a target completion date of September 22, 2022, addresses the timeliness and propriety of the force majeure invocation, the contractual basis for proportional ACV reduction, and the factual record supporting the defense. Eklund stated that the CY2 volume allegation should be the weakest of Vantor's claims and that the defense on this point was strong.
B. CY3 Volume (April 2021 – January 2022)
Vantor's Amended Complaint also alleges that Stonefield tendered only $36.5 million during the CY3 period (April 2021 through January 2022, a period of approximately 10 months), creating an alleged $6.7 million shortfall against the annual ACV of $43.2 million.
Priya Ramachandran stated that Vantor's calculation was fundamentally misleading. The CY3 period was cut short by the termination of the TSA on March 4, 2022. The CY3 contract year would have run through March 31, 2022, but Stonefield's tenders to VTS necessarily ceased upon termination. Comparing 10 months of actual tenders against a 12-month ACV produces a facially misleading shortfall figure. Ramachandran stated that when the ACV is prorated for the 10 months during which the TSA was operative in CY3, the prorated ACV is $36.0 million ($43.2 million multiplied by 10/12). Stonefield's actual tenders of $36.5 million exceeded the prorated amount by $500,000.
Janet Kirkwood added a further defense point. She stated that the volume shortfall in absolute terms — to the extent any shortfall existed — was driven in significant part by VTS's own tender rejections. When VTS rejected tenders submitted by Stonefield, Stonefield was forced to find alternative carrier capacity to serve its shipper-customers. The volume that flowed through those alternative carriers necessarily reduced the total volume flowing through VTS. Kirkwood stated that VTS cannot cause Stonefield to divert volume by rejecting tenders and then complain that Stonefield's volume was insufficient.
Eklund noted that this was a strong factual counter-argument and that the legal framework supported it as well. He stated that the "first-to-breach" doctrine may apply to this situation. Under New York law, when one party commits the first material breach of a contract, the other party's subsequent performance obligations may be excused. If VTS committed the first material breach by unilaterally reducing fleet capacity — removing 85 tractors from the Stonefield-dedicated fleet in or about October 2021, as established by the Milescu email — then VTS's prior breach would excuse any subsequent shortfall in Stonefield's volume tenders. In other words, VTS cannot breach first by withdrawing dedicated capacity, then claim that Stonefield breached by failing to tender sufficient volume through the now-depleted VTS fleet. Eklund stated that this doctrine would be an important element of the defense and would be developed further in Calderwood & Harkness's contract analysis and motion practice.
VIII. DISCUSSION OF VANTOR'S EXCLUSIVITY VIOLATION ALLEGATIONS
Vantor's Amended Complaint alleges that Stonefield diverted freight to Cascade Freight Systems Inc. and Briarwood Trucking Co. in violation of the exclusivity provisions contained in Schedule C to the TSA. Vantor alleges that this diversion constitutes a material breach of Stonefield's obligations and, in the alternative, contributed to VTS's alleged inability to meet the SLOs by reducing the volume available to VTS.
Janet Kirkwood confirmed that Stonefield did use Cascade Freight Systems Inc. and Briarwood Trucking Co. during the relevant period. However, she stated that these carriers were used exclusively on Lanes 8 through 14, which are classified as "Secondary Lanes" under Section 2(b) of Schedule C to the TSA. The exclusivity commitment in Schedule C applies only to the 14 designated "Primary Lanes" identified in Section 2(a). Secondary Lanes are explicitly non-exclusive, and Stonefield retained full discretion to use other carriers on those lanes. Kirkwood stated that Stonefield did not use Cascade, Briarwood, or any other carrier in place of VTS on any Primary Lane.
Eklund stated that Calderwood & Harkness's Exclusivity Analysis Memorandum, being prepared by Simone Laroche with a target completion date of September 30, 2022, maps each Cascade and Briarwood shipment to the specific lane on which it was transported. Eklund stated that the preliminary results of that analysis confirm that all Cascade and Briarwood shipments were on Secondary Lanes and that there was no violation of the Schedule C exclusivity provisions.
Patrick Gallagher suggested that Calderwood & Harkness should serve third-party subpoenas on Cascade Freight Systems Inc. (located at 4700 Lakehurst Court, Columbus, OH 43016) and Briarwood Trucking Co. (located at 1280 Jefferson Davis Highway, Suite 310, Arlington, VA 22202) during discovery. The subpoenas would seek records confirming the lane-specific usage of these carriers for Stonefield freight, including bills of lading, rate confirmations, and shipment records identifying origin and destination for each load transported. This documentary evidence from third-party sources would independently corroborate Stonefield's position that the usage was limited to Secondary Lanes.
Eklund agreed that this approach was prudent and would help build a robust documentary record supporting the non-exclusivity defense. He stated that the subpoenas should be timed to coincide with the opening of discovery so that the records would be available for use during depositions of Vantor witnesses.
IX. DISCUSSION OF VANTOR'S DAMAGES CLAIMS ($95.4 MILLION)
A. Breakdown of Claimed Damages
Patrick Gallagher summarized the total damages claimed by Vantor, as set forth in the demand letter dated April 8, 2022, which was sent by Harrison Caldwell of Caldwell Royce & Shapiro LLP. The total claimed damages are $95.4 million, broken down as follows:
B. Defense Team's Assessment
Eklund stated that the claimed damages of $95.4 million are substantially overstated and are subject to multiple significant challenges:
Liquidated Damages ($67.23 million). If the termination was validly exercised "for Cause" under Section 13.1(a) of the TSA, no liquidated damages are owed. Section 14.2 applies only to terminations "other than for Cause." The entire defense strategy is predicated on establishing that Cause existed, and the Q4 2021 performance data, the Milescu email, and the unremedied cure period strongly support that position.
Even if the Court were to determine that the liquidated damages clause is triggered — for example, if the Court found that the termination was not valid for Cause — the clause may be unenforceable as a penalty under New York law. New York applies a two-part test for the enforceability of liquidated damages provisions: (1) the amount must have been a reasonable estimate of anticipated damages at the time of contracting, and (2) actual damages must have been difficult to ascertain at the time of contracting. Eklund stated that $67.23 million is grossly disproportionate to any actual loss VTS could demonstrate, particularly given the robust freight market conditions that would have enabled VTS to mitigate its losses by replacing Stonefield volume with other customers. He noted that Calderwood & Harkness's Liquidated Damages Enforceability Memorandum, prepared by Simone Laroche and dated September 19, 2022, assigns a "moderate" probability of a finding of unenforceability, but notes that New York courts are generally reluctant to override freely negotiated terms between sophisticated commercial parties. This is a risk area that requires careful briefing and expert support.
Duplicative Recovery. Eklund noted that Vantor's simultaneous claims for liquidated damages ($67.23 million) and lost profits ($18.7 million) appear duplicative. Both categories seek to compensate Vantor for the same harm — the lost value of the remaining contract term. New York law prohibits double recovery, and a plaintiff cannot recover both liquidated damages and actual damages for the same breach. Vantor will be required to elect between these remedies or demonstrate that they compensate for distinct harms, which will be difficult given the overlap.
Consequential Damages Waiver. The stranded assets claim ($5.2 million), workforce reduction costs ($2.87 million), and mitigation costs ($1.4 million) — totaling $9.47 million — are arguably consequential damages barred by the mutual consequential damages waiver in Section 15.1 of the TSA. These categories of harm are indirect, downstream consequences of the contract termination, not direct damages flowing from the breach itself. Calderwood & Harkness will argue that Section 15.1 bars recovery for each of these categories.
Failure to Mitigate. Eklund stated that Vantor's damages are further reduced by its duty to mitigate. The freight market in Q1 and Q2 of 2022 was robust, with spot rates elevated approximately 35% above historical averages. In this market environment, Vantor should have been able to readily replace the Stonefield volume by contracting with other shippers. Vantor's failure to do so — or to demonstrate that it made reasonable efforts to do so — would reduce its recoverable damages significantly. This is a factual issue that will be explored in discovery and supported by expert testimony.
Priya Ramachandran provided context regarding the financial impact of a potential adverse judgment on Stonefield. She noted that Stonefield's fiscal year 2022 EBITDA is approximately $118 million. An adverse judgment of $95.4 million would be material and would have significant implications for the company's financial position and capital structure. Ramachandran confirmed that Stonefield had already fulfilled its notification obligation under the Lakeshore National Bank credit facility: a notification was sent to Lakeshore on August 24, 2022, pursuant to Section 6.03(b) of the Credit Agreement, which requires notice of any potential liability exceeding $25 million. The notification process is discussed further in Section XII below.
C. Expert Retention
Eklund recommended that Stonefield retain a damages rebuttal expert to analyze and challenge the damages report that Vantor is expected to submit. Eklund stated that Vantor's counsel has engaged Trask Greystone Associates as its damages expert and that a report should be expected during the expert disclosure phase. To rebut this report effectively, Stonefield needs its own qualified expert in transportation economics and contract damages.
Eklund proposed retaining Kensington Analytics Group LLC, led by Dr. Evelyn Rosser, Managing Director, located at 1700 Market Street, Suite 2800, Philadelphia, PA 19103. Eklund stated that Dr. Rosser has extensive experience in transportation industry economics, contract damages analysis, and has previously served as a damages expert in freight and logistics disputes in federal courts, including in the S.D.N.Y. Her credentials and experience were well-suited to the issues in this case.
Denton and Wren authorized Eklund to proceed with the expert retention process. Eklund noted that the engagement letter would be forthcoming. The engagement letter was subsequently executed on October 28, 2022. The agreed-upon rates are $625 per hour for Dr. Rosser and $375 per hour for Michael Chung, Senior Analyst, who will support the engagement. The estimated budget for the expert engagement is $180,000 to $250,000, depending on the scope and complexity of the rebuttal analysis required.
Eklund noted that Alison Trang, a Partner at Ridgeline Capital Partners and a member of the Stonefield Board of Directors, had previously confirmed authorization for the expert retention in an email communication dated October 3, 2022.
X. PRE-LITIGATION PROCEDURAL HISTORY
Eklund confirmed the pre-litigation timeline for the record, summarizing the key events in chronological order:
March 4, 2022: Stonefield terminates the TSA by formal letter from Tobias Wren to Vantor Holdings Corp. and VTS, effective immediately, citing VTS's failure to cure the material breaches identified in the January 18, 2022 Cure Notice.
April 8, 2022: Vantor sends a formal demand letter through its counsel, Harrison Caldwell of Caldwell Royce & Shapiro LLP, demanding payment of $95.4 million in total claimed damages.
April 29, 2022: Stonefield, through Tobias Wren, responds to the demand letter, rejecting the claimed damages in their entirety and invoking the mandatory executive negotiation period under Section 16 of the TSA.
May 16, 2022: First executive negotiation meeting, held in person between Marcus Denton (CEO, Stonefield) and Nikolai Vantorovich (CEO, Vantor). No resolution reached.
June 3, 2022: Second executive negotiation session, conducted by telephone between Denton and Vantorovich. No resolution reached.
August 12, 2022: Vantor files the original Complaint in the United States District Court for the Southern District of New York, commencing the litigation.
Marcus Denton confirmed that both executive negotiation sessions were unproductive. He stated that Nikolai Vantorovich's position during both sessions was that Vantor was entitled to full payment of the $95.4 million in claimed damages and that he was unwilling to discuss any lesser amount. Denton stated that he offered to discuss the factual basis for the claims and to explore whether the parties could reach a mutual understanding of the underlying facts, but that no counter-proposal or specific settlement offer was made by Stonefield at that time. Denton described the tone of the conversations as professional but pointed, and stated that it was clear from the outset that Vantorovich was not prepared to negotiate in any meaningful sense.
Tobias Wren noted that Ashford Meridian LLP (Lorraine Beckwith and Troy Nakamura) provided initial pre-litigation guidance to Stonefield during the period following the demand letter and through the executive negotiation process, before Calderwood & Harkness was engaged for the litigation defense. Ashford Meridian assisted with the April 29, 2022 response letter and provided general strategic advice during the executive negotiation sessions. Upon engagement of Calderwood & Harkness in September 2022, Ashford Meridian transitioned the litigation-specific advisory role to Calderwood & Harkness while remaining available for questions regarding the TSA drafting history and commercial context.
XI. INSURANCE COVERAGE STATUS
Tobias Wren reported on the status of Stonefield's efforts to obtain insurance coverage for the defense costs and potential liability in connection with the litigation.
Directors and Officers Liability Policy. Stonefield maintains a Directors and Officers liability insurance policy with Graymark Insurance Company, Policy No. GLG-DO-1025-00008, with a $15 million aggregate limit. A tender of the Vantor claims was submitted to Graymark on September 6, 2022. Graymark declined coverage by letter dated October 3, 2022, determining that the claims alleged in the Complaint arise from a commercial contract dispute — specifically, the breach of the TSA — rather than from wrongful acts of the directors and officers of Stonefield. Graymark cited the "contractual liability" exclusion in the policy as the basis for the declination.
Commercial General Liability Policy. Stonefield maintains a commercial general liability policy with Brindoval Mutual Insurance Co., Policy No. CGL-SLG-2022-11902. Wren confirmed that this policy does not cover breach of contract claims, and accordingly no tender was pursued under this policy.
Eklund stated that Calderwood & Harkness would analyze the Graymark declination to confirm that it was defensible and to assess whether it would be cost-effective to challenge the declination through coverage litigation or arbitration. He noted that this analysis was subsequently completed in a memorandum dated October 10, 2022, which concluded that the Graymark declination was defensible on its terms, that the contractual liability exclusion appeared to apply squarely to the claims in the Complaint, and that challenging the declination would not be cost-effective given the low probability of success and the legal fees that would be required to litigate a coverage dispute.
Wren confirmed that, in light of the coverage outcomes, all defense costs would be borne by Stonefield out of operating cash flow. Wren stated that Ramachandran had confirmed the availability of sufficient operating cash flow and that no additional borrowing under the credit facility was anticipated at this time to fund defense costs.
XII. LENDER NOTIFICATION
Priya Ramachandran confirmed that Stonefield notified Lakeshore National Bank, as Administrative Agent under Stonefield's senior secured credit facility, of the commencement of the litigation on August 24, 2022. The notification was sent eight business days after the Complaint was served on Stonefield, within the ten-business-day notification requirement under Section 6.03(b) of the Credit Agreement.
The Credit Agreement is referenced as LNB-SLG-2017-CA-4402. It was originally dated October 12, 2017, in connection with the Ridgeline Capital Partners leveraged buyout, and was subsequently amended and restated on June 30, 2021. Section 6.03(b) of the Credit Agreement requires Stonefield to notify the Administrative Agent promptly, and in any event within ten business days, of any litigation, investigation, or proceeding that could reasonably be expected to result in a liability exceeding $25 million.
Stonefield's senior secured credit facility is $425 million in total, consisting of a $175 million revolving credit facility and a $250 million term loan B.
The notification letter was prepared by Tobias Wren with review by Patrick Gallagher at Calderwood & Harkness before submission. Lakeshore National Bank's acknowledgment of receipt was sent by Catherin