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

memo-force-majeure-defense.docx DOCUMENT Litigation

6 / 150 ← → ✕

Contract analysis Extract to table

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

CALDERWOOD & HARKNESS LLP ATTORNEYS AT LAW

INTERNAL MEMORANDUM

TO: Samuel Eklund, Responsible Partner, Litigation (General)

FROM: Patrick Gallagher, Lead Associate, Litigation (General)

DATE: September 22, 2022

RE: Force Majeure Defense — ACV Shortfall Analysis; Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.)

MATTER NO.: 1012-00005

CLIENT: Stonefield Logistics Group Inc.

I. Executive Summary

This memorandum analyzes the validity and timeliness of Stonefield Logistics Group Inc.'s ("Stonefield" or "SLG") invocation of the force majeure clause set forth in Section 12.1 of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315) in response to the claim advanced by Vantor Holdings Corp. ("Vantor") and its subsidiary Vantor Transport Services LLC ("VTS") that Stonefield breached its Annual Committed Volume ("ACV") obligation during Contract Year 2 ("CY2," defined as the period from April 1, 2020 through March 31, 2021). Vantor's Amended Complaint, filed December 2, 2022, alleges that Stonefield's failure to tender $43.2 million in transportation charges during CY2 constitutes a material breach of the TSA, and seeks damages of $11.4 million representing the alleged shortfall.

Bottom-line conclusion: Stonefield's force majeure invocation for the period April 2020 through September 2020, predicated on the COVID-19 pandemic's direct and severe impact on freight demand across Stonefield's customer base, was timely and proper under the terms of the TSA. When the force majeure excuse is applied to the six months in which the pandemic most acutely disrupted freight markets, the adjusted CY2 ACV is reduced from $43,200,000 to $21,600,000. Stonefield's actual tenders to VTS during CY2 totaled $31,800,000 — exceeding the adjusted ACV by $10,200,000. Accordingly, Vantor's claim that Stonefield breached the ACV minimum in CY2 lacks merit, and Stonefield possesses a strong affirmative defense that should be prominently pleaded in the forthcoming Answer and preserved for disposition on summary judgment.

It bears noting that Vantor's Amended Complaint also alleges a separate ACV shortfall of approximately $6,700,000 in Contract Year 3 ("CY3," the period from April 2021 through the effective termination of the TSA). While a separate and more detailed analysis is warranted with respect to the CY3 allegations, the force majeure defense is most directly and powerfully applicable to the CY2 period. This memorandum therefore focuses primarily on CY2, with a brief discussion of CY3 defenses in Section VII below.

II. Background

A. The TSA and ACV Obligation

On March 15, 2019, Stonefield Logistics Group Inc., acting in its capacity as "Shipper-Broker," and Vantor Transport Services LLC, acting in its capacity as "Carrier-Provider," entered into the Transportation Services Agreement that is the subject of the present litigation. The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield, following approximately four months of negotiation between the parties. VTS was represented in those negotiations by its in-house counsel and, on certain provisions, by outside counsel at Redmond & Yates LLP.

The TSA establishes a five-year term commencing April 1, 2019 and concluding March 31, 2024. The agreement is governed by the laws of the State of New York, without regard to its conflict-of-laws principles, and contains a forum selection clause designating either 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, as the exclusive forum for any disputes arising under or in connection with the agreement.

The centerpiece of the parties' commercial arrangement is the volume commitment structure. The TSA establishes a total five-year minimum commitment of $216,000,000 in transportation charges to be tendered by Stonefield to VTS over the contract term. This aggregate commitment is divided into annual minimums — the Annual Committed Volume, or ACV — of $43,200,000 per contract year ($216,000,000 ÷ 5 = $43,200,000 per annum). Each "contract year" runs from April 1 through March 31 of the following calendar year, consistent with the commencement date of the TSA.

The ACV represents the minimum annual freight volume that Stonefield committed to tender to VTS across the designated lane structure set forth in the TSA's schedules. The obligation is denominated in dollars of transportation charges rather than in units of freight (e.g., truckloads or miles), though the dollar volume is naturally a function of the shipment volumes tendered at the contractually specified rates. The rate structure under the TSA is established on a per-mile basis, with rates set by lane in Schedule B to the agreement. Rates are subject to annual adjustment pursuant to the Rate Adjustment Mechanism in Section 5.3, which indexes rate changes to a blended formula consisting of 70% diesel fuel index (specifically, the U.S. Department of Energy's weekly retail on-highway diesel price index) and 30% CPI-U (Consumer Price Index for All Urban Consumers, as published by the Bureau of Labor Statistics). Rate adjustments are calculated and applied as of each April 1, coinciding with the start of each new contract year.

The TSA also contains lane exclusivity provisions (set forth in Schedule C), service level obligations ("SLOs") applicable to VTS's performance as carrier, and various other terms and conditions that are relevant to the broader litigation but are not the primary focus of this memorandum.

B. Contract Year 2 (CY2): April 1, 2020 – March 31, 2021

Contract Year 2 commenced on April 1, 2020, a date that coincided almost precisely with the onset of the most acute phase of the COVID-19 pandemic in the United States. By late March 2020, the World Health Organization had declared COVID-19 a global pandemic, the President of the United States had declared a national emergency, and governors across the country had issued stay-at-home orders, business closure directives, and other emergency measures that fundamentally disrupted economic activity across virtually every sector of the American economy.

Stonefield experienced significant and immediate reductions in freight demand beginning in March and April 2020. As a freight broker, Stonefield's ability to tender shipments to carriers such as VTS is directly and entirely dependent on the shipping needs of Stonefield's own customer base. When Stonefield's customers — which span the industrial, retail, and consumer packaged goods sectors — curtailed operations, reduced inventories, suspended production, and delayed or cancelled shipments in response to the pandemic and associated government orders, Stonefield's available freight volume contracted correspondingly. This is a structural feature of the freight brokerage business model: a broker cannot unilaterally create freight that does not exist in the marketplace.

The freight market as a whole experienced severe dislocation during this period. Spot rates collapsed in the spring of 2020, shipment volumes declined industry-wide, and shippers across all sectors reduced discretionary transportation spending. The Dunmore Systems, a widely recognized measure of freight shipment volumes, recorded a year-over-year decline of approximately 13% in April 2020 and 15% in May 2020. The American Trucking Associations reported similarly sharp volume declines. The disruption was not confined to any single sector or geography; it was a systemic, nationwide phenomenon driven by the pandemic and the government measures implemented to combat it.

Stonefield's overall freight volumes declined substantially during Q2 and Q3 of calendar year 2020, corresponding to the first six months of CY2 (April through September 2020). Despite these unprecedented market conditions, Stonefield continued to tender significant volumes of freight to VTS throughout CY2, demonstrating its commitment to the commercial relationship and its good-faith efforts to perform under the TSA to the greatest extent possible under the circumstances. Stonefield's actual tenders to VTS during CY2 totaled $31,800,000.

Against the full, unadjusted ACV for CY2 of $43,200,000, Stonefield's actual tenders reflect a nominal shortfall of $11,400,000 ($43,200,000 − $31,800,000 = $11,400,000). This is the figure that Vantor cites in its Amended Complaint, filed December 2, 2022, as the basis for its CY2 breach of contract claim. Vantor's calculation, however, entirely ignores the impact of the COVID-19 pandemic and Stonefield's proper invocation of the TSA's force majeure provision — a contractual mechanism that was specifically designed to address precisely this type of extraordinary, unforeseeable disruption.

C. Stonefield's Force Majeure Invocation

Stonefield invoked the force majeure provision of Section 12.1 of the TSA for the period April 2020 through September 2020, a total of six months. The invocation was based on the COVID-19 pandemic and its direct, documented impact on freight demand across Stonefield's customer base. Stonefield's position is that the pandemic and associated government orders constituted a "Force Majeure Event" within the meaning of Section 12.1, and that this event "prevented, hindered, or delayed" Stonefield's ability to tender the full ACV during the affected months.

Regarding the specific details of the invocation — including the precise date of the notice, the form in which it was delivered, and the content of the notice — these must be confirmed with the client and from Stonefield's files. Based on preliminary discussions during the September 15, 2022 strategy session at SLG's Fort Worth offices, Stonefield management indicated that a force majeure notice was provided to VTS in or around April or May 2020. The relevant documentation is expected to be located within Stonefield's first document production, which has been assigned the Bates range SLG-000001 through SLG-042387. Identification, review, and confirmation of this notice is a priority action item, as discussed further in Section VIII below.

III. The Force Majeure Clause — Section 12.1

A. Text of Section 12.1

The force majeure provision of the TSA is set forth in Section 12.1, the full text of which should be confirmed against the executed version of the TSA attached as Exhibit A to the Declaration of Samuel Eklund filed October 14, 2022 in support of the Motion to Dismiss. Based on our review of the working copy of the TSA in the case file, Section 12.1 provides, in relevant part, as follows:

Section 12.1 — Force Majeure. Neither party shall be liable for any failure or delay in performing its obligations under this Agreement to the extent that such failure or delay is caused by, arises out of, or results from a Force Majeure Event, provided that the affected party has complied with the notice requirements set forth in this Section. For purposes of this Agreement, a "Force Majeure Event" shall mean any event or circumstance beyond the reasonable control of the affected party that could not have been reasonably anticipated or avoided, including but not limited to: (a) acts of God; (b) natural disasters, including earthquakes, floods, hurricanes, and severe weather events; (c) war, armed conflict, invasion, or military action; (d) acts of terrorism or sabotage; (e) government orders, restrictions, embargoes, sanctions, or regulatory actions; (f) epidemics or pandemics; (g) labor strikes, work stoppages, or lockouts (other than those involving the affected party's own workforce); (h) fire, explosion, or structural collapse; (i) failure or disruption of critical infrastructure, including transportation networks, communications systems, or utilities; and (j) any other event or circumstance of similar nature or force that is beyond the reasonable control of the affected party.

The affected party's obligations under this Agreement shall be excused to the extent, and for the duration, that performance is prevented, hindered, or delayed by the Force Majeure Event, plus a reasonable period for ramp-up or wind-down as applicable. The affected party shall provide written notice to the other party within [to be confirmed — believed to be 10 or 15 business days] of the occurrence of the Force Majeure Event, describing the event and its anticipated impact on the affected party's performance. The affected party shall use commercially reasonable efforts to mitigate the impact of the Force Majeure Event and to resume performance as promptly as practicable.

Several features of Section 12.1 are critical to our analysis and warrant specific emphasis.

First, the clause expressly enumerates "epidemics or pandemics" as qualifying Force Majeure Events under subsection (f). This is not a case where the affected party must strain to fit the COVID-19 pandemic into an open-ended "catch-all" provision or argue that a pandemic is analogous to enumerated events such as natural disasters or acts of God. The parties specifically contemplated and addressed pandemic events when they negotiated this provision, and the clause unambiguously encompasses the COVID-19 pandemic.

Second, the operative standard is not limited to events that "prevent" performance. The clause excuses performance that is "prevented, hindered, or delayed" by the Force Majeure Event. This tripartite formulation is broader than a prevention-only standard and encompasses the situation here, where the pandemic did not make tendering freight to VTS literally impossible but substantially hindered Stonefield's ability to tender at the contractually committed volume level.

Third, and critically, the clause covers all "obligations under this Agreement" — it is not limited to delivery obligations, transportation performance, or operational duties. The ACV obligation — Stonefield's commitment to tender a minimum annual volume of freight — is an obligation under the Agreement, and the force majeure clause by its terms excuses non-performance of that obligation to the extent it was prevented, hindered, or delayed by a qualifying event. There is no carve-out or limitation that would exclude volume commitments from the scope of the force majeure excuse.

Fourth, the duration provision is favorable to Stonefield. The clause provides that the force majeure excuse "continues for the duration of the Force Majeure Event, plus a reasonable period for ramp-up or wind-down as applicable." This language supports the reasonableness of Stonefield's six-month force majeure period, which encompasses both the acute disruption phase (April–June 2020) and the gradual recovery and ramp-up phase (July–September 2020).

B. Scope of Excused Performance

Under Section 12.1, the "affected party" is excused from performance of obligations that are "directly impacted" by the Force Majeure Event. Stonefield's position is that the COVID-19 pandemic, together with the associated government orders, supply chain disruptions, and systemic demand collapse across the freight market, directly impacted Stonefield's ability to tender the full ACV to VTS.

The causal chain is straightforward and virtually unassailable. Stonefield operates as a freight broker. Its business model is to aggregate freight demand from its shipper customers and match that demand with carrier capacity. Stonefield's ability to tender freight to VTS is entirely dependent on the existence of freight demand from Stonefield's customer base. When the COVID-19 pandemic and associated government orders caused Stonefield's customers — across the industrial, retail, and consumer packaged goods sectors — to curtail operations, reduce inventories, suspend production, and delay or cancel shipments, the volume of freight available for Stonefield to tender to VTS contracted as a direct and unavoidable consequence. Stonefield, as a freight broker, cannot unilaterally generate freight volume that does not exist in the market. It cannot compel its customers to ship goods that are not being produced, not being ordered, or not being consumed.

The ACV obligation is a "tender" obligation — Stonefield must offer freight to VTS. If Stonefield's customers are not shipping, Stonefield has no freight to tender. This is the quintessential scenario for which force majeure relief exists: an extraordinary, unforeseeable event beyond the affected party's control that directly and materially impairs the party's ability to perform its contractual obligations. The TSA's force majeure clause was designed to address precisely this type of situation, and it should be given full effect in accordance with its terms.

IV. Analysis: Timeliness and Propriety of Invocation

A. COVID-19 as a Force Majeure Event

The threshold question in any force majeure analysis is whether the event invoked by the affected party qualifies as a "Force Majeure Event" under the applicable contractual definition. Here, that question is easily answered. The COVID-19 pandemic is squarely within the definition of a Force Majeure Event under Section 12.1 of the TSA: subsection (f) of the definition expressly enumerates "epidemics or pandemics" as qualifying events. There is no ambiguity, no interpretive tension, and no need to resort to the catch-all provision. The pandemic is a textbook force majeure event under this contract.

This conclusion is reinforced by the magnitude and scope of the pandemic's impact on economic activity generally and on the freight transportation industry in particular. The following timeline of key events and market conditions provides context:

• March 11, 2020: The World Health Organization declared COVID-19 a global pandemic.

• March 13, 2020: The President of the United States declared a national emergency under the National Emergencies Act and the Stafford Act, authorizing federal emergency assistance and triggering a cascade of federal agency actions affecting commerce and transportation.

• March–April 2020: Governors in all 50 states issued emergency declarations. A majority of states — including New York, California, Texas, and other states critical to Stonefield's operations — issued stay-at-home or shelter-in-place orders, directing non-essential businesses to close, limiting commercial activity, and restricting the movement of persons and goods.

• Q2 2020 (April–June): The freight market experienced its most severe disruption. The Dunmore Systems reported year-over-year shipment volume declines of approximately 13% in April, 15% in May, and 10% in June. The Brightmoor Software index reflected a collapse in spot market load volumes, with dry van load postings falling by more than 50% in April 2020 compared to April 2019. The American Trucking Associations reported sharp declines in tonnage hauled.

• Q3 2020 (July–September): The freight market began a gradual but uneven recovery. While some sectors (notably e-commerce and grocery) experienced demand surges, overall freight volumes remained materially below pre-pandemic levels through much of the quarter. The recovery accelerated in August and September 2020, with spot rates rebounding and load volumes increasing, but the market did not achieve full normalization until late Q3 or early Q4 2020.

• Q4 2020 (October–December): By October 2020, the freight market had substantially recovered, with spot rates rebounding above pre-pandemic levels and shipper volumes normalizing or exceeding prior-year comparisons. Capacity tightened, and the market shifted from a shipper-favorable environment to a carrier-favorable one.

The period April 2020 through September 2020 — the six months for which Stonefield invoked force majeure — thus represents a reasonable and defensible characterization of the pandemic's acute impact on freight demand. The force majeure invocation aligns with the period of most significant market disruption, and Stonefield's decision to terminate the force majeure period as of September 30, 2020, rather than extending it further into Q4 2020 or beyond, demonstrates restraint, good faith, and proportionality.

Moreover, the COVID-19 pandemic satisfies every element of the force majeure definition in Section 12.1. It was (i) beyond Stonefield's reasonable control; (ii) could not have been reasonably anticipated — the TSA was executed in March 2019, nearly a year before the pandemic emerged, and no reasonable party could have foreseen the specific timing, severity, or nature of the COVID-19 outbreak; and (iii) could not have been avoided — there is nothing Stonefield could have done to prevent the pandemic or its impact on its customers' shipping volumes.

B. Timeliness of Notice

Section 12.1 of the TSA requires the affected party to provide written notice to the other party within a specified period — believed to be 10 or 15 business days, though the exact contractual period must be confirmed against the executed TSA — of the occurrence of the Force Majeure Event. The notice must describe the event and its anticipated impact on the affected party's performance.

Based on the initial client discussions at the September 15, 2022 strategy session held at Stonefield's Fort Worth, Texas offices, Stonefield management indicated that a force majeure notice was provided to VTS in or around April or May 2020. Attendees at that session included Marcus Denton (Chief Executive Officer), Tobias Wren (General Counsel), Priya Ramachandran (Chief Commercial Officer), Carlos Medina (VP of Operations), Janet Kirkwood (Director of Contract Administration), and Raymond Hess (Director of Carrier Relations) from Stonefield, and Samuel Eklund and the undersigned from Calderwood & Harkness. During the session, Mr. Wren and Ms. Kirkwood recalled that a formal force majeure notice letter was sent to VTS shortly after the pandemic's impact on Stonefield's freight volumes became apparent — likely in the second half of April 2020.

If the notice was sent in late April 2020, it would have been delivered within approximately 4–6 weeks of the WHO's March 11, 2020 pandemic declaration and within approximately 3–4 weeks of the April 1, 2020 commencement of CY2. Even assuming a 10-business-day notice window (the more restrictive interpretation), a notice sent by late April 2020 would be timely measured from the point at which the pandemic's impact on Stonefield's freight volumes became manifest, which was no earlier than mid-to-late March 2020. The contractual notice period should be measured from the "occurrence" of the Force Majeure Event; while the pandemic itself was declared on March 11, 2020, its concrete impact on Stonefield's operations and freight volumes did not crystallize until late March at the earliest, when customers began cancelling and deferring shipments in significant numbers.

Recommendation: It is essential that we obtain and review the actual force majeure notice letter from Stonefield's files at the earliest opportunity. We must confirm: (i) the exact date the notice was sent; (ii) the content of the notice, including the description of the Force Majeure Event and its anticipated impact; (iii) the method of delivery (e.g., email, overnight courier, certified mail); and (iv) whether the notice was directed to the proper recipient as required under the TSA's notice provisions in Section 18 (Notices), which likely specifies a designated notice recipient and address for VTS. If any aspect of the notice was technically deficient, we should assess the implications under the substantial compliance standard discussed in Section VI.A below.

C. Propriety of the Six-Month Period

Stonefield invoked force majeure for a period of six months — April 1, 2020 through September 30, 2020. This period is both reasonable and defensible when evaluated against the actual timeline of pandemic-driven freight market disruption.

The six-month period can be understood in three phases:

April–June 2020 (Peak Disruption). This three-month window represents the most acute phase of pandemic disruption to the freight market. Government lockdown orders were in full effect across most of the country. Consumer spending collapsed. Industrial production plummeted. Retail stores were closed. Supply chains were in disarray. Stonefield's customers across all segments — industrial, retail, and consumer packaged goods — drastically curtailed operations, reduced inventories, and suspended or delayed shipments. Freight volumes fell to multi-year lows, and spot rates declined to levels not seen in years. There can be no serious dispute that force majeure conditions prevailed during this period.

July–September 2020 (Continued Disruption and Gradual Recovery). While the freight market began to show signs of recovery during the summer months of 2020, the recovery was gradual, uneven, and incomplete through the end of September 2020. Many of Stonefield's customers remained in reduced-operation modes. Government restrictions, while easing in some states, remained in effect in others. Consumer behavior had not normalized. The freight market was in transition, with volumes recovering but not yet reaching pre-pandemic baselines. Stonefield's freight volumes during this period remained materially depressed relative to the same period in CY1 (April–September 2019). The TSA's force majeure clause expressly provides for a "reasonable period for ramp-up" following the cessation of the Force Majeure Event, and the July–September 2020 period falls squarely within that ramp-up provision.

October 2020 Onward (Recovery and Resumption). By October 2020, the freight market had substantially recovered. Spot rates rebounded above pre-pandemic levels, driven by surging consumer demand (particularly in e-commerce), restocking activity, and tightening carrier capacity. Stonefield's freight volumes normalized, and Stonefield resumed full tendering obligations to VTS. Notably, Stonefield did not invoke force majeure beyond September 2020, even though the pandemic continued and some residual disruption persisted. Stonefield's decision to limit the force majeure period to six months — rather than claiming the entire contract year or extending the invocation further — demonstrates good faith, proportionality, and a commercially reasonable approach to the extraordinary circumstances.

The fact that Stonefield affirmatively limited its force majeure invocation to six months is a significant strategic and substantive advantage. It undermines any suggestion that Stonefield used the force majeure clause opportunistically or that the invocation was pretextual. A party acting in bad faith would be expected to maximize the scope and duration of its force majeure claim; Stonefield did the opposite, limiting its claim to the period of genuine disruption and resuming full performance as soon as market conditions permitted.

V. Adjusted ACV Calculation for CY2

A. Methodology

The force majeure analysis leads to a straightforward mathematical adjustment of the CY2 ACV. The calculation proceeds as follows:

• Full CY2 ACV: $43,200,000 (representing the twelve-month period from April 1, 2020 through March 31, 2021).

• Force majeure period: Six months (April 1, 2020 through September 30, 2020).

• Non-force-majeure months in CY2: Six months (October 1, 2020 through March 31, 2021).

• Adjusted CY2 ACV: $43,200,000 × (6 ÷ 12) = $21,600,000.

This pro-rata adjustment is the most straightforward, defensible, and equitable methodology. The ACV is an annualized minimum commitment denominated in dollars. The force majeure clause excuses Stonefield's performance obligations "to the extent, and for the duration" of the Force Majeure Event. If the Force Majeure Event excused performance for six of the twelve months of CY2, the logical and proportional result is that the minimum commitment for the remaining six non-excused months is one-half of the full annual amount.

This methodology is consistent with the structure of the TSA, which establishes the ACV as an annual figure without specifying monthly or quarterly sub-minimums. There is no provision in the TSA that requires Stonefield to "make up" volume lost during a force majeure period by tendering additional volume in subsequent non-excused months. The force majeure clause excuses performance "to the extent" of the disruption, and the pro-rata approach faithfully implements that principle.

B. Actual Tenders vs. Adjusted ACV

The comparison of Stonefield's actual tenders during CY2 to the adjusted ACV is decisive:

Stonefield tendered $10,200,000 more than the adjusted ACV minimum during CY2. Far from falling short of its obligations, Stonefield substantially exceeded its adjusted commitment. This overage is not marginal; it represents a surplus of approximately 47% above the adjusted ACV ($10.2M ÷ $21.6M ≈ 47.2%). The overage demonstrates that Stonefield continued to tender substantial freight volumes to VTS even during the pandemic — indeed, the $31.8M in actual tenders represents approximately 73.6% of the full unadjusted ACV — while properly invoking the force majeure clause to excuse the portion of the ACV shortfall attributable to pandemic disruption.

This result decisively refutes Vantor's claim of a CY2 shortfall. When the force majeure adjustment is properly applied, there is no shortfall; there is a significant surplus. Vantor's insistence on measuring Stonefield's CY2 performance against the full, unadjusted ACV — as if the COVID-19 pandemic had never occurred and as if the TSA's force majeure clause did not exist — is contrary to the express terms of the contract that both parties negotiated and executed.

C. Alternative Calculations (Sensitivity Analysis)

Although we believe a six-month force majeure period is well supported, it is prudent to assess the impact on the adjusted ACV under alternative assumptions regarding the length of the force majeure period. The following sensitivity analysis demonstrates that Stonefield exceeded the adjusted ACV under any reasonable assumption:

Under any force majeure period of four months or longer, Stonefield's actual tenders exceed the adjusted ACV. Even under the most conservative assumption — a force majeure period of only three months, limited to the peak lockdown period of April through June 2020 — the resulting shortfall would be only $600,000, a de minimis amount representing less than 1.4% of the full ACV and far below the $11.4 million figure alleged in Vantor's Amended Complaint.

Moreover, even the three-month scenario is unrealistically conservative. As discussed above, the freight market did not meaningfully recover until late Q3 2020 (August–September), and the TSA's force majeure clause expressly provides for a "reasonable period for ramp-up" following the cessation of the Force Majeure Event. A six-month force majeure period is well within the range of reasonableness, and we are confident that a four-month period, at minimum, is unassailable.

Finally, it is worth noting that even without any force majeure adjustment — that is, even taking the full $11.4 million shortfall at face value — the shortfall must be analyzed in its proper context. Vantor's Amended Complaint treats the CY2 shortfall as an independent material breach of the TSA, but a shortfall during a global pandemic of unprecedented severity, where the TSA contains an express force majeure provision specifically encompassing pandemics, cannot reasonably be characterized as a material breach. New York courts assess materiality based on the totality of the circumstances, including the extent of the shortfall relative to the overall contractual commitment, the reasons for the shortfall, and the breaching party's good faith. See, e.g., Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239 (1921); Restatement (Second) of Contracts § 241. A pandemic-driven volume reduction, supported by a contractual force majeure provision, is the antithesis of a material breach.

VI. Anticipated Counterarguments by Vantor

We anticipate that Vantor will advance several counterarguments in response to Stonefield's force majeure defense. Each is addressed below.

A. Force Majeure Notice Was Untimely or Deficient

Vantor may argue that Stonefield's force majeure notice was delivered late (i.e., outside the contractual notice window), lacked sufficient specificity, or was not delivered in compliance with the notice mechanics set forth in Section 18 (Notices) of the TSA. Vantor may contend that the notice was required to be sent to a specific individual or address and that any deviation from those requirements renders the notice ineffective.

Response: This is a fact-specific inquiry that depends entirely on the actual notice document. As discussed above, initial indications from the client are that the force majeure notice was provided in April or May 2020, which would be within or very close to the contractual notice window. We must confirm this by reviewing the actual notice letter.

Even if there were technical deficiencies in the notice — for example, if the notice was sent one or two days late, or was directed to the wrong individual at VTS, or was transmitted by email rather than by the specified delivery method — New York courts generally apply a substantial compliance standard to contractual notice provisions, particularly where the purpose of the notice requirement has been fulfilled. See Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 695 (1995) (recognizing substantial performance doctrine in context of contractual conditions); see also Hegeman-Harris Co. v. City of New York, 196 A.D.2d 400 (1st Dep't 1993).

In the force majeure context, the purpose of the notice requirement is to inform the other party that a force majeure event has occurred and that the affected party is claiming excuse. Here, VTS had actual, contemporaneous knowledge of the COVID-19 pandemic — as did every individual and entity in the world. VTS knew that the pandemic was disrupting the freight market and that its customers, including Stonefield, were experiencing volume reductions. In these circumstances, a court is unlikely to deny the force majeure defense based on a technical notice deficiency, so long as Stonefield substantially complied with the notice requirements and VTS was not prejudiced by any deficiency.

B. COVID-19 Did Not Actually Prevent Stonefield from Tendering

Vantor may argue that the COVID-19 pandemic did not actually "prevent" Stonefield from tendering freight to VTS. Vantor may contend that Stonefield made a business decision to reduce its tenders — for example, by redirecting freight to other carriers, reducing its own commercial activity, or prioritizing other business relationships — and that the pandemic was merely a pretext for what was, in substance, a volitional business decision.

Response: This argument misreads the operative language of Section 12.1. The force majeure clause does not require that performance be entirely "prevented" — it excuses performance that is "prevented, hindered, or delayed" by the Force Majeure Event. The disjunctive tripartite formulation is significant. Even if Stonefield was not literally incapable of tendering any freight to VTS during the force majeure period — and indeed, the $31.8 million in actual CY2 tenders demonstrates that Stonefield continued to tender significant volume throughout the year — the pandemic unquestionably "hindered" Stonefield's ability to tender at the full annualized ACV rate. Stonefield's customers were shipping less, and Stonefield therefore had less freight available to tender. This is precisely the type of "hinderance" that the force majeure clause addresses.

Moreover, the factual premise of Vantor's argument is weak. Stonefield's actual tenders of $31.8 million during CY2 demonstrate that Stonefield continued to tender substantial volume to VTS even during the pandemic — just not at the full $43.2 million annualized rate. Stonefield did not walk away from the VTS relationship or redirect freight wholesale to competing carriers. It tendered the maximum volume it could, given the dramatic contraction in its customers' shipping demand. This conduct is entirely consistent with Section 12.1's requirement that the affected party "use commercially reasonable efforts to mitigate the impact of the Force Majeure Event and to resume performance as promptly as practicable."

C. Force Majeure Should Not Apply to Payment/Volume Obligations

Vantor may argue that force majeure clauses in transportation contracts should not excuse minimum volume commitments because such obligations are financial or commercial in nature rather than "performance-based." Under this theory, the force majeure clause should apply only to operational performance obligations — such as the obligation to pick up or deliver freight — and not to volume minimums that are, in substance, financial guarantees.

Response: This argument finds no support in the text of Section 12.1 or in New York law. The TSA's force majeure clause applies broadly to a party's "obligations under this Agreement." The ACV is an obligation under the Agreement. There is no carve-out, exclusion, or limitation that would exempt volume commitments from the scope of the force majeure excuse. The parties — both sophisticated commercial actors represented by experienced counsel (Ashford Meridian LLP for Stonefield and, as noted above, Redmond & Yates LLP for VTS on certain provisions) — negotiated these terms with full awareness of their import. If VTS had intended to exclude volume commitments from the force majeure clause, it could have proposed such a limitation during the contract negotiation. It did not.

New York law enforces force majeure clauses as written, giving effect to the language the parties chose. See Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902 (1987) (force majeure clause "should be interpreted in accord with its purpose, which is to limit damages in a case where the reasonable expectation of the parties and the performance of the contract have been frustrated by circumstances beyond the control of the parties"); see also JN Contemporary Art LLC v. Phillips Auctioneers LLC, 507 F. Supp. 3d 490 (S.D.N.Y. 2020) (applying New York law and enforcing force majeure clause as written in the context of COVID-19). Courts will not rewrite unambiguous contract language to impose limitations that the parties did not include, particularly between sophisticated commercial parties who negotiated at arm's length.

D. Stonefield's Force Majeure Period Was Arbitrary

Vantor may argue that the six-month force majeure period was selected for strategic advantage rather than because it reflects the actual duration of the pandemic's impact on Stonefield's freight volumes. Vantor may contend that the pandemic did not end in September 2020 and that, if force majeure were truly applicable, it should have been invoked for a longer or shorter period.

Response: The six-month period is not arbitrary; it aligns closely with the most acute phase of pandemic-driven freight market disruption, as documented by industry indices, government data, and trade association reports. Stonefield affirmatively chose to limit the force majeure period and resume full tendering obligations from October 2020 onward, a decision that demonstrates good faith and proportionality rather than gamesmanship. A party seeking to exploit the force majeure clause would be expected to maximize the duration of its invocation; Stonefield did the opposite, limiting its claim to the period of genuine disruption.

Moreover, the fact that the pandemic continued beyond September 2020 does not undermine the reasonableness of the six-month period. Force majeure does not require that the underlying event cease entirely before the excuse period ends; rather, the question is whether the event's impact on the affected party's performance has abated to the point where performance can be resumed. By October 2020, freight demand had recovered sufficiently for Stonefield to resume tendering at or near the full ACV rate, and Stonefield did so. This is precisely the conduct that the "commercially reasonable efforts to mitigate and resume performance" requirement contemplates.

Industry data robustly supports the conclusion that the freight market did not meaningfully recover until late Q3 2020. The Dunmore Systems, the Brightmoor Software index, and the ATA tonnage reports all confirm that freight volumes did not return to pre-pandemic levels until August–September 2020 at the earliest. An expert analysis from a firm such as Kensington Analytics Group LLC, if retained, would be well positioned to provide further corroboration of this timeline.

VII. Implications for CY3 (April 2021 – March 2022)

Although this memorandum focuses primarily on the CY2 force majeure defense, a brief discussion of the CY3 allegations is warranted, as Vantor's Amended Complaint asserts a separate shortfall claim for that period.

Vantor alleges that during CY3 — defined as the period from April 1, 2021 through the effective termination of the TSA — Stonefield tendered only $36,500,000 in transportation charges against the $43,200,000 ACV, resulting in an alleged shortfall of $6,700,000. Vantor calculates this shortfall for the period April 2021 through approximately January 2022, reflecting the approximately ten months of actual operations before the termination process commenced. The TSA was terminated effective March 4, 2022, following the issuance of a Cure Notice by VTS.

The force majeure defense does not directly apply to CY3. Stonefield did not invoke force majeure for any period beyond September 30, 2020, and the pandemic's impact on the freight market had largely dissipated by the beginning of CY3 in April 2021. However, several other defenses — individually and collectively — provide strong grounds for contesting the CY3 shortfall allegation:

First, proration. The $36.5 million figure cited by Vantor covers only approximately ten months of CY3 (April 2021 through January 2022), not the full twelve-month contract year. If the TSA was terminated effective March 4, 2022, and performance effectively ceased in January or early February 2022, the ACV should be prorated to reflect the shortened period. The prorated ACV for ten months is $43,200,000 × (10 ÷ 12) = $36,000,000. Stonefield's actual tenders of $36,500,000 exceed the prorated ACV by $500,000. On a prorated basis, there is no shortfall at all.

Second, VTS's own performance failures. During CY3, VTS failed to meet multiple Service Level Obligations ("SLOs") established in the TSA, particularly during Q4 2021 (October–December 2021). The severity of VTS's performance failures during this period is documented in Stonefield's internal records and in correspondence between the parties. The key metrics were as follows:

These figures represent dramatic and material departures from VTS's contractual performance standards. Of particular significance is the 71.4% tender acceptance rate, which means that VTS was rejecting approximately 28.6% of the freight that Stonefield tendered to it. When VTS itself is rejecting nearly one-third of tendered freight, it is self-evidently improper for VTS (or its parent, Vantor) to claim that Stonefield failed to tender sufficient volume. To the extent Stonefield was compelled to route shipments to alternative carriers because VTS could not or would not accept them, those diversions were caused by VTS's own failures, not by any breach on Stonefield's part.

Third, the first-to-breach doctrine. Separate analysis is being conducted regarding VTS's unilateral reduction of fleet capacity during CY3, including the reassignment of approximately 85 tractors from the Stonefield account to other VTS accounts. This capacity reduction — documented, among other sources, in a November 12, 2021 internal email from A. Milescu to M. Vantorovich — constitutes a material breach of VTS's obligations under the TSA, specifically its obligation to maintain sufficient fleet capacity to service the Stonefield account. Under the first-to-breach doctrine, a party that commits the first material breach of a contract cannot recover for the other party's subsequent non-performance. See, e.g., Ashgrove & Co. v. Camberwell Industries, 500 F.3d 171, 186 (2d Cir. 2007); New Windsor Volunteer Ambulance Corps, Inc. v. Meyers, 442 F.3d 101, 117 (2d Cir. 2006). If VTS's fleet capacity reduction constituted the first material breach, Stonefield's subsequent volume shortfall (if any) was excused.

Fourth, the secondary lane analysis. To the extent Stonefield diverted any freight volume to alternative carriers — specifically, to Cascade Freight Systems Inc. or Briarwood Trucking Co. — during CY3, we have confirmed that such diversions involved Lanes 8 through 14, which are classified as "Secondary Lanes" under Schedule C, Section 2(b) of the TSA. The exclusivity provisions of the TSA apply only to "Primary Lanes" (Lanes 1–7) as designated in Schedule C, Section 2(a). Accordingly, Stonefield's use of alternative carriers on Secondary Lanes did not violate the exclusivity provisions of the TSA. This conclusion is set forth in greater detail in the separate exclusivity analysis memorandum dated September 30, 2022.

In sum, while the CY3 shortfall allegation requires further analysis and development, multiple independent defenses are available, and the allegation is by no means a straightforward claim of breach.

VIII. Recommendations

Based on the foregoing analysis, we recommend the following action items:

1. Obtain and preserve the force majeure notice. This is the highest-priority action item. We must confirm with Tobias Wren (General Counsel) and Raymond Hess (Director of Carrier Relations) the exact date, content, and method of delivery of Stonefield's force majeure notice to VTS. The notice letter should be located within Stonefield's contract administration files, correspondence files, or email archives. We should request that Stonefield's document review team prioritize identification of this document within the first production set (Bates range SLG-000001 through SLG-042387). Once located, the notice should be reviewed for compliance with Section 12.1's notice requirements and Section 18's delivery specifications. This document is a critical piece of evidence that will be central to the force majeure defense. It must be included in the litigation hold and will be part of Stonefield's document production.

2. Compile supporting market data. We should gather industry data corroborating the COVID-19 pandemic's impact on freight demand during the April–September 2020 force majeure period. Relevant sources include the Dunmore Systems, the Brightmoor Software load-to-truck ratio data, ATA tonnage reports, the Bureau of Labor Statistics employment data for the transportation sector, Department of Energy diesel fuel price indices, and federal and state government emergency orders and economic impact reports. This data will support both the validity of the force majeure defense and the reasonableness of the six-month excused period. We recommend engaging Kensington Analytics Group LLC — and specifically Dr. Evelyn Rosser, who has extensive experience in freight market analysis and has been accepted as an expert witness in federal court — to provide an expert report and, if necessary, testimony on market conditions during the relevant period. An early retention of Dr. Rosser will allow us to develop the factual foundation for the defense well in advance of expert disclosure deadlines.

3. Incorporate into Answer and Affirmative Defenses. The force majeure defense should be affirmatively pleaded in Stonefield's Answer to the Amended Complaint, which we anticipate filing in January 2023 (following resolution of the pending Motion to Dismiss, or in the alternative, as directed by the Court's scheduling order). Specifically, the Answer should assert as an affirmative defense that Stonefield's invocation of the force majeure provision of Section 12.1 was timely and proper, that the COVID-19 pandemic constituted a Force Majeure Event within the meaning of the TSA, that Stonefield's performance obligations were excused for the period April through September 2020, and that Stonefield's actual tenders during CY2 exceeded the adjusted ACV. The defense should be stated with sufficient specificity to satisfy the pleading requirements of Federal Rule of Civil Procedure 8(c) and to put Vantor on notice of the factual and legal basis for the defense.

4. Use in discovery. We should develop discovery requests — both interrogatories and document requests — that probe Vantor's own experience during the pandemic period. Relevant inquiries include: (a) whether Vantor or VTS experienced its own volume declines during April–September 2020; (b) whether VTS's other customers invoked force majeure or reduced freight volumes during this period; (c) whether Vantor or VTS itself invoked force majeure under any of its own contracts with third parties; (d) whether VTS reduced fleet capacity or furloughed drivers during the pandemic period; and (e) what Vantor's internal financial projections and market assessments reflected regarding the pandemic's impact on the freight market. Responses to these inquiries may reveal that Vantor also experienced pandemic-driven disruptions — potentially undermining its position that the COVID-19 pandemic did not excuse Stonefield's performance and that VTS was ready, willing, and able to service the full ACV during the force majeure period.

5. Preserve for summary judgment. The force majeure defense, combined with the $10.2 million CY2 overage, is an excellent candidate for partial summary judgment on Vantor's CY2 volume shortfall claim. The material facts are largely undisputed: (i) the COVID-19 pandemic occurred; (ii) the TSA's force majeure clause expressly encompasses pandemics; (iii) Stonefield invoked the force majeure provision for the period April–September 2020; (iv) Stonefield's actual tenders during CY2 totaled $31.8 million; and (v) the adjusted CY2 ACV, after excusing the six-month force majeure period, is $21.6 million. The only potentially contested factual issues are the timeliness and sufficiency of the force majeure notice, which we expect to resolve favorably once the actual notice document is confirmed. We should plan to file a motion for partial summary judgment on the CY2 claim at the appropriate stage of the case, following the close of fact discovery.

IX. Conclusion

Based on the analysis set forth in this memorandum, we conclude as follows:

Stonefield's invocation of force majeure under Section 12.1 of the TSA for the period April 2020 through September 2020 was timely and proper. The COVID-19 pandemic is an expressly enumerated Force Majeure Event under the TSA, and its impact on freight demand during the six-month invocation period is well documented and beyond genuine dispute. The force majeure clause covers Stonefield's ACV obligation, and Section 12.1 does not contain any carve-out that would exclude volume commitments from its scope.

When the force majeure excuse is applied to CY2, the adjusted ACV is reduced from $43,200,000 to $21,600,000. Stonefield's actual tenders during CY2 totaled $31,800,000, exceeding the adjusted ACV by $10,200,000 — an overage of approximately 47% above the adjusted minimum. Under any reasonable calculation of the force majeure period (four to six months), Stonefield met or exceeded the adjusted ACV.

Vantor's allegation that Stonefield breached the CY2 ACV by $11.4 million is therefore without merit when the force majeure adjustment is properly applied. The $11.4 million figure is computed by ignoring the TSA's force majeure clause entirely — an approach that is contrary to the express terms of the contract, contrary to New York law, and contrary to commercial reason.

The CY3 shortfall allegation of $6.7 million is also subject to strong defenses, including proration of the ACV for the shortened contract year, VTS's own material performance failures (including its rejection of nearly 29% of tendered freight in Q4 2021), the first-to-breach doctrine arising from VTS's unilateral capacity reduction, and the secondary lane analysis confirming that any diversions to alternative carriers were on non-exclusive lanes. While force majeure is not directly applicable to CY3, the cumulative strength of these alternative defenses is substantial.

The force majeure defense should be a central element of Stonefield's litigation strategy. It should be affirmatively pleaded in the Answer, developed through targeted discovery, supported by expert analysis, and presented as the basis for partial summary judgment on the CY2 volume shortfall claim.

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

This memorandum was prepared by Calderwood & Harkness LLP in anticipation of litigation and is protected by the attorney-client privilege and the work product doctrine. Distribution is limited to Samuel Eklund, Responsible Partner; copies to case file, Matter No. 1012-00005. This memorandum is not to be disclosed, distributed, or reproduced without the prior written consent of Calderwood & Harkness LLP.

Metric	Amount
Full CY2 ACV (unadjusted)	$43,200,000
Force majeure excused months	6 of 12
Adjusted CY2 ACV	$21,600,000
Actual tenders during CY2	$31,800,000
Overage above adjusted ACV	$10,200,000
Force Majeure Period	Non-Excused Months	Adjusted ACV	Actual Tenders	Overage
6 months (Apr–Sep 2020)	6 months	$21,600,000	$31,800,000	$10,200,000
5 months (Apr–Aug 2020)	7 months	$25,200,000	$31,800,000	$6,600,000
4 months (Apr–Jul 2020)	8 months	$28,800,000	$31,800,000	$3,000,000
3 months (Apr–Jun 2020)	9 months	$32,400,000	$31,800,000	($600,000)
Service Level Metric	TSA SLO	VTS Actual (Q4 2021)	Variance
On-time pickup	95.0%	78.2%	-16.8 pts
On-time delivery	93.0%	81.6%	-11.4 pts
Tender acceptance rate	90.0%	71.4%	-18.6 pts
Equipment availability	85.0%	62.0%	-23.0 pts

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION
CALDERWOOD & HARKNESS LLP ATTORNEYS AT LAW
INTERNAL MEMORANDUM
TO: Samuel Eklund, Responsible Partner, Litigation (General)
FROM: Patrick Gallagher, Lead Associate, Litigation (General)
DATE: September 22, 2022
RE: Force Majeure Defense — ACV Shortfall Analysis; Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.)
MATTER NO.: 1012-00005
CLIENT: Stonefield Logistics Group Inc.
I. Executive Summary
This memorandum analyzes the validity and timeliness of Stonefield Logistics Group Inc.'s ("Stonefield" or "SLG") invocation of the force majeure clause set forth in Section 12.1 of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315) in response to the claim advanced by Vantor Holdings Corp. ("Vantor") and its subsidiary Vantor Transport Services LLC ("VTS") that Stonefield breached its Annual Committed Volume ("ACV") obligation during Contract Year 2 ("CY2," defined as the period from April 1, 2020 through March 31, 2021). Vantor's Amended Complaint, filed December 2, 2022, alleges that Stonefield's failure to tender $43.2 million in transportation charges during CY2 constitutes a material breach of the TSA, and seeks damages of $11.4 million representing the alleged shortfall.
Bottom-line conclusion: Stonefield's force majeure invocation for the period April 2020 through September 2020, predicated on the COVID-19 pandemic's direct and severe impact on freight demand across Stonefield's customer base, was timely and proper under the terms of the TSA. When the force majeure excuse is applied to the six months in which the pandemic most acutely disrupted freight markets, the adjusted CY2 ACV is reduced from $43,200,000 to $21,600,000. Stonefield's actual tenders to VTS during CY2 totaled $31,800,000 — exceeding the adjusted ACV by $10,200,000. Accordingly, Vantor's claim that Stonefield breached the ACV minimum in CY2 lacks merit, and Stonefield possesses a strong affirmative defense that should be prominently pleaded in the forthcoming Answer and preserved for disposition on summary judgment.
It bears noting that Vantor's Amended Complaint also alleges a separate ACV shortfall of approximately $6,700,000 in Contract Year 3 ("CY3," the period from April 2021 through the effective termination of the TSA). While a separate and more detailed analysis is warranted with respect to the CY3 allegations, the force majeure defense is most directly and powerfully applicable to the CY2 period. This memorandum therefore focuses primarily on CY2, with a brief discussion of CY3 defenses in Section VII below.
II. Background
A. The TSA and ACV Obligation
On March 15, 2019, Stonefield Logistics Group Inc., acting in its capacity as "Shipper-Broker," and Vantor Transport Services LLC, acting in its capacity as "Carrier-Provider," entered into the Transportation Services Agreement that is the subject of the present litigation. The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield, following approximately four months of negotiation between the parties. VTS was represented in those negotiations by its in-house counsel and, on certain provisions, by outside counsel at Redmond & Yates LLP.
The TSA establishes a five-year term commencing April 1, 2019 and concluding March 31, 2024. The agreement is governed by the laws of the State of New York, without regard to its conflict-of-laws principles, and contains a forum selection clause designating either 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, as the exclusive forum for any disputes arising under or in connection with the agreement.
The centerpiece of the parties' commercial arrangement is the volume commitment structure. The TSA establishes a total five-year minimum commitment of $216,000,000 in transportation charges to be tendered by Stonefield to VTS over the contract term. This aggregate commitment is divided into annual minimums — the Annual Committed Volume, or ACV — of $43,200,000 per contract year ($216,000,000 ÷ 5 = $43,200,000 per annum). Each "contract year" runs from April 1 through March 31 of the following calendar year, consistent with the commencement date of the TSA.
The ACV represents the minimum annual freight volume that Stonefield committed to tender to VTS across the designated lane structure set forth in the TSA's schedules. The obligation is denominated in dollars of transportation charges rather than in units of freight (e.g., truckloads or miles), though the dollar volume is naturally a function of the shipment volumes tendered at the contractually specified rates. The rate structure under the TSA is established on a per-mile basis, with rates set by lane in Schedule B to the agreement. Rates are subject to annual adjustment pursuant to the Rate Adjustment Mechanism in Section 5.3, which indexes rate changes to a blended formula consisting of 70% diesel fuel index (specifically, the U.S. Department of Energy's weekly retail on-highway diesel price index) and 30% CPI-U (Consumer Price Index for All Urban Consumers, as published by the Bureau of Labor Statistics). Rate adjustments are calculated and applied as of each April 1, coinciding with the start of each new contract year.
The TSA also contains lane exclusivity provisions (set forth in Schedule C), service level obligations ("SLOs") applicable to VTS's performance as carrier, and various other terms and conditions that are relevant to the broader litigation but are not the primary focus of this memorandum.
B. Contract Year 2 (CY2): April 1, 2020 – March 31, 2021
Contract Year 2 commenced on April 1, 2020, a date that coincided almost precisely with the onset of the most acute phase of the COVID-19 pandemic in the United States. By late March 2020, the World Health Organization had declared COVID-19 a global pandemic, the President of the United States had declared a national emergency, and governors across the country had issued stay-at-home orders, business closure directives, and other emergency measures that fundamentally disrupted economic activity across virtually every sector of the American economy.
Stonefield experienced significant and immediate reductions in freight demand beginning in March and April 2020. As a freight broker, Stonefield's ability to tender shipments to carriers such as VTS is directly and entirely dependent on the shipping needs of Stonefield's own customer base. When Stonefield's customers — which span the industrial, retail, and consumer packaged goods sectors — curtailed operations, reduced inventories, suspended production, and delayed or cancelled shipments in response to the pandemic and associated government orders, Stonefield's available freight volume contracted correspondingly. This is a structural feature of the freight brokerage business model: a broker cannot unilaterally create freight that does not exist in the marketplace.
The freight market as a whole experienced severe dislocation during this period. Spot rates collapsed in the spring of 2020, shipment volumes declined industry-wide, and shippers across all sectors reduced discretionary transportation spending. The Dunmore Systems, a widely recognized measure of freight shipment volumes, recorded a year-over-year decline of approximately 13% in April 2020 and 15% in May 2020. The American Trucking Associations reported similarly sharp volume declines. The disruption was not confined to any single sector or geography; it was a systemic, nationwide phenomenon driven by the pandemic and the government measures implemented to combat it.
Stonefield's overall freight volumes declined substantially during Q2 and Q3 of calendar year 2020, corresponding to the first six months of CY2 (April through September 2020). Despite these unprecedented market conditions, Stonefield continued to tender significant volumes of freight to VTS throughout CY2, demonstrating its commitment to the commercial relationship and its good-faith efforts to perform under the TSA to the greatest extent possible under the circumstances. Stonefield's actual tenders to VTS during CY2 totaled $31,800,000.
Against the full, unadjusted ACV for CY2 of $43,200,000, Stonefield's actual tenders reflect a nominal shortfall of $11,400,000 ($43,200,000 − $31,800,000 = $11,400,000). This is the figure that Vantor cites in its Amended Complaint, filed December 2, 2022, as the basis for its CY2 breach of contract claim. Vantor's calculation, however, entirely ignores the impact of the COVID-19 pandemic and Stonefield's proper invocation of the TSA's force majeure provision — a contractual mechanism that was specifically designed to address precisely this type of extraordinary, unforeseeable disruption.
C. Stonefield's Force Majeure Invocation
Stonefield invoked the force majeure provision of Section 12.1 of the TSA for the period April 2020 through September 2020, a total of six months. The invocation was based on the COVID-19 pandemic and its direct, documented impact on freight demand across Stonefield's customer base. Stonefield's position is that the pandemic and associated government orders constituted a "Force Majeure Event" within the meaning of Section 12.1, and that this event "prevented, hindered, or delayed" Stonefield's ability to tender the full ACV during the affected months.
Regarding the specific details of the invocation — including the precise date of the notice, the form in which it was delivered, and the content of the notice — these must be confirmed with the client and from Stonefield's files. Based on preliminary discussions during the September 15, 2022 strategy session at SLG's Fort Worth offices, Stonefield management indicated that a force majeure notice was provided to VTS in or around April or May 2020. The relevant documentation is expected to be located within Stonefield's first document production, which has been assigned the Bates range SLG-000001 through SLG-042387. Identification, review, and confirmation of this notice is a priority action item, as discussed further in Section VIII below.
III. The Force Majeure Clause — Section 12.1
A. Text of Section 12.1
The force majeure provision of the TSA is set forth in Section 12.1, the full text of which should be confirmed against the executed version of the TSA attached as Exhibit A to the Declaration of Samuel Eklund filed October 14, 2022 in support of the Motion to Dismiss. Based on our review of the working copy of the TSA in the case file, Section 12.1 provides, in relevant part, as follows:
Section 12.1 — Force Majeure. Neither party shall be liable for any failure or delay in performing its obligations under this Agreement to the extent that such failure or delay is caused by, arises out of, or results from a Force Majeure Event, provided that the affected party has complied with the notice requirements set forth in this Section. For purposes of this Agreement, a "Force Majeure Event" shall mean any event or circumstance beyond the reasonable control of the affected party that could not have been reasonably anticipated or avoided, including but not limited to: (a) acts of God; (b) natural disasters, including earthquakes, floods, hurricanes, and severe weather events; (c) war, armed conflict, invasion, or military action; (d) acts of terrorism or sabotage; (e) government orders, restrictions, embargoes, sanctions, or regulatory actions; (f) epidemics or pandemics; (g) labor strikes, work stoppages, or lockouts (other than those involving the affected party's own workforce); (h) fire, explosion, or structural collapse; (i) failure or disruption of critical infrastructure, including transportation networks, communications systems, or utilities; and (j) any other event or circumstance of similar nature or force that is beyond the reasonable control of the affected party.
The affected party's obligations under this Agreement shall be excused to the extent, and for the duration, that performance is prevented, hindered, or delayed by the Force Majeure Event, plus a reasonable period for ramp-up or wind-down as applicable. The affected party shall provide written notice to the other party within [to be confirmed — believed to be 10 or 15 business days] of the occurrence of the Force Majeure Event, describing the event and its anticipated impact on the affected party's performance. The affected party shall use commercially reasonable efforts to mitigate the impact of the Force Majeure Event and to resume performance as promptly as practicable.
Several features of Section 12.1 are critical to our analysis and warrant specific emphasis.
First, the clause expressly enumerates "epidemics or pandemics" as qualifying Force Majeure Events under subsection (f). This is not a case where the affected party must strain to fit the COVID-19 pandemic into an open-ended "catch-all" provision or argue that a pandemic is analogous to enumerated events such as natural disasters or acts of God. The parties specifically contemplated and addressed pandemic events when they negotiated this provision, and the clause unambiguously encompasses the COVID-19 pandemic.
Second, the operative standard is not limited to events that "prevent" performance. The clause excuses performance that is "prevented, hindered, or delayed" by the Force Majeure Event. This tripartite formulation is broader than a prevention-only standard and encompasses the situation here, where the pandemic did not make tendering freight to VTS literally impossible but substantially hindered Stonefield's ability to tender at the contractually committed volume level.
Third, and critically, the clause covers all "obligations under this Agreement" — it is not limited to delivery obligations, transportation performance, or operational duties. The ACV obligation — Stonefield's commitment to tender a minimum annual volume of freight — is an obligation under the Agreement, and the force majeure clause by its terms excuses non-performance of that obligation to the extent it was prevented, hindered, or delayed by a qualifying event. There is no carve-out or limitation that would exclude volume commitments from the scope of the force majeure excuse.
Fourth, the duration provision is favorable to Stonefield. The clause provides that the force majeure excuse "continues for the duration of the Force Majeure Event, plus a reasonable period for ramp-up or wind-down as applicable." This language supports the reasonableness of Stonefield's six-month force majeure period, which encompasses both the acute disruption phase (April–June 2020) and the gradual recovery and ramp-up phase (July–September 2020).
B. Scope of Excused Performance
Under Section 12.1, the "affected party" is excused from performance of obligations that are "directly impacted" by the Force Majeure Event. Stonefield's position is that the COVID-19 pandemic, together with the associated government orders, supply chain disruptions, and systemic demand collapse across the freight market, directly impacted Stonefield's ability to tender the full ACV to VTS.
The causal chain is straightforward and virtually unassailable. Stonefield operates as a freight broker. Its business model is to aggregate freight demand from its shipper customers and match that demand with carrier capacity. Stonefield's ability to tender freight to VTS is entirely dependent on the existence of freight demand from Stonefield's customer base. When the COVID-19 pandemic and associated government orders caused Stonefield's customers — across the industrial, retail, and consumer packaged goods sectors — to curtail operations, reduce inventories, suspend production, and delay or cancel shipments, the volume of freight available for Stonefield to tender to VTS contracted as a direct and unavoidable consequence. Stonefield, as a freight broker, cannot unilaterally generate freight volume that does not exist in the market. It cannot compel its customers to ship goods that are not being produced, not being ordered, or not being consumed.
The ACV obligation is a "tender" obligation — Stonefield must offer freight to VTS. If Stonefield's customers are not shipping, Stonefield has no freight to tender. This is the quintessential scenario for which force majeure relief exists: an extraordinary, unforeseeable event beyond the affected party's control that directly and materially impairs the party's ability to perform its contractual obligations. The TSA's force majeure clause was designed to address precisely this type of situation, and it should be given full effect in accordance with its terms.
IV. Analysis: Timeliness and Propriety of Invocation
A. COVID-19 as a Force Majeure Event
The threshold question in any force majeure analysis is whether the event invoked by the affected party qualifies as a "Force Majeure Event" under the applicable contractual definition. Here, that question is easily answered. The COVID-19 pandemic is squarely within the definition of a Force Majeure Event under Section 12.1 of the TSA: subsection (f) of the definition expressly enumerates "epidemics or pandemics" as qualifying events. There is no ambiguity, no interpretive tension, and no need to resort to the catch-all provision. The pandemic is a textbook force majeure event under this contract.
This conclusion is reinforced by the magnitude and scope of the pandemic's impact on economic activity generally and on the freight transportation industry in particular. The following timeline of key events and market conditions provides context:
• March 11, 2020: The World Health Organization declared COVID-19 a global pandemic.
• March 13, 2020: The President of the United States declared a national emergency under the National Emergencies Act and the Stafford Act, authorizing federal emergency assistance and triggering a cascade of federal agency actions affecting commerce and transportation.
• March–April 2020: Governors in all 50 states issued emergency declarations. A majority of states — including New York, California, Texas, and other states critical to Stonefield's operations — issued stay-at-home or shelter-in-place orders, directing non-essential businesses to close, limiting commercial activity, and restricting the movement of persons and goods.
• Q2 2020 (April–June): The freight market experienced its most severe disruption. The Dunmore Systems reported year-over-year shipment volume declines of approximately 13% in April, 15% in May, and 10% in June. The Brightmoor Software index reflected a collapse in spot market load volumes, with dry van load postings falling by more than 50% in April 2020 compared to April 2019. The American Trucking Associations reported sharp declines in tonnage hauled.
• Q3 2020 (July–September): The freight market began a gradual but uneven recovery. While some sectors (notably e-commerce and grocery) experienced demand surges, overall freight volumes remained materially below pre-pandemic levels through much of the quarter. The recovery accelerated in August and September 2020, with spot rates rebounding and load volumes increasing, but the market did not achieve full normalization until late Q3 or early Q4 2020.
• Q4 2020 (October–December): By October 2020, the freight market had substantially recovered, with spot rates rebounding above pre-pandemic levels and shipper volumes normalizing or exceeding prior-year comparisons. Capacity tightened, and the market shifted from a shipper-favorable environment to a carrier-favorable one.
The period April 2020 through September 2020 — the six months for which Stonefield invoked force majeure — thus represents a reasonable and defensible characterization of the pandemic's acute impact on freight demand. The force majeure invocation aligns with the period of most significant market disruption, and Stonefield's decision to terminate the force majeure period as of September 30, 2020, rather than extending it further into Q4 2020 or beyond, demonstrates restraint, good faith, and proportionality.
Moreover, the COVID-19 pandemic satisfies every element of the force majeure definition in Section 12.1. It was (i) beyond Stonefield's reasonable control; (ii) could not have been reasonably anticipated — the TSA was executed in March 2019, nearly a year before the pandemic emerged, and no reasonable party could have foreseen the specific timing, severity, or nature of the COVID-19 outbreak; and (iii) could not have been avoided — there is nothing Stonefield could have done to prevent the pandemic or its impact on its customers' shipping volumes.
B. Timeliness of Notice
Section 12.1 of the TSA requires the affected party to provide written notice to the other party within a specified period — believed to be 10 or 15 business days, though the exact contractual period must be confirmed against the executed TSA — of the occurrence of the Force Majeure Event. The notice must describe the event and its anticipated impact on the affected party's performance.
Based on the initial client discussions at the September 15, 2022 strategy session held at Stonefield's Fort Worth, Texas offices, Stonefield management indicated that a force majeure notice was provided to VTS in or around April or May 2020. Attendees at that session included Marcus Denton (Chief Executive Officer), Tobias Wren (General Counsel), Priya Ramachandran (Chief Commercial Officer), Carlos Medina (VP of Operations), Janet Kirkwood (Director of Contract Administration), and Raymond Hess (Director of Carrier Relations) from Stonefield, and Samuel Eklund and the undersigned from Calderwood & Harkness. During the session, Mr. Wren and Ms. Kirkwood recalled that a formal force majeure notice letter was sent to VTS shortly after the pandemic's impact on Stonefield's freight volumes became apparent — likely in the second half of April 2020.
If the notice was sent in late April 2020, it would have been delivered within approximately 4–6 weeks of the WHO's March 11, 2020 pandemic declaration and within approximately 3–4 weeks of the April 1, 2020 commencement of CY2. Even assuming a 10-business-day notice window (the more restrictive interpretation), a notice sent by late April 2020 would be timely measured from the point at which the pandemic's impact on Stonefield's freight volumes became manifest, which was no earlier than mid-to-late March 2020. The contractual notice period should be measured from the "occurrence" of the Force Majeure Event; while the pandemic itself was declared on March 11, 2020, its concrete impact on Stonefield's operations and freight volumes did not crystallize until late March at the earliest, when customers began cancelling and deferring shipments in significant numbers.
Recommendation: It is essential that we obtain and review the actual force majeure notice letter from Stonefield's files at the earliest opportunity. We must confirm: (i) the exact date the notice was sent; (ii) the content of the notice, including the description of the Force Majeure Event and its anticipated impact; (iii) the method of delivery (e.g., email, overnight courier, certified mail); and (iv) whether the notice was directed to the proper recipient as required under the TSA's notice provisions in Section 18 (Notices), which likely specifies a designated notice recipient and address for VTS. If any aspect of the notice was technically deficient, we should assess the implications under the substantial compliance standard discussed in Section VI.A below.
C. Propriety of the Six-Month Period
Stonefield invoked force majeure for a period of six months — April 1, 2020 through September 30, 2020. This period is both reasonable and defensible when evaluated against the actual timeline of pandemic-driven freight market disruption.
The six-month period can be understood in three phases:
April–June 2020 (Peak Disruption). This three-month window represents the most acute phase of pandemic disruption to the freight market. Government lockdown orders were in full effect across most of the country. Consumer spending collapsed. Industrial production plummeted. Retail stores were closed. Supply chains were in disarray. Stonefield's customers across all segments — industrial, retail, and consumer packaged goods — drastically curtailed operations, reduced inventories, and suspended or delayed shipments. Freight volumes fell to multi-year lows, and spot rates declined to levels not seen in years. There can be no serious dispute that force majeure conditions prevailed during this period.
July–September 2020 (Continued Disruption and Gradual Recovery). While the freight market began to show signs of recovery during the summer months of 2020, the recovery was gradual, uneven, and incomplete through the end of September 2020. Many of Stonefield's customers remained in reduced-operation modes. Government restrictions, while easing in some states, remained in effect in others. Consumer behavior had not normalized. The freight market was in transition, with volumes recovering but not yet reaching pre-pandemic baselines. Stonefield's freight volumes during this period remained materially depressed relative to the same period in CY1 (April–September 2019). The TSA's force majeure clause expressly provides for a "reasonable period for ramp-up" following the cessation of the Force Majeure Event, and the July–September 2020 period falls squarely within that ramp-up provision.
October 2020 Onward (Recovery and Resumption). By October 2020, the freight market had substantially recovered. Spot rates rebounded above pre-pandemic levels, driven by surging consumer demand (particularly in e-commerce), restocking activity, and tightening carrier capacity. Stonefield's freight volumes normalized, and Stonefield resumed full tendering obligations to VTS. Notably, Stonefield did not invoke force majeure beyond September 2020, even though the pandemic continued and some residual disruption persisted. Stonefield's decision to limit the force majeure period to six months — rather than claiming the entire contract year or extending the invocation further — demonstrates good faith, proportionality, and a commercially reasonable approach to the extraordinary circumstances.
The fact that Stonefield affirmatively limited its force majeure invocation to six months is a significant strategic and substantive advantage. It undermines any suggestion that Stonefield used the force majeure clause opportunistically or that the invocation was pretextual. A party acting in bad faith would be expected to maximize the scope and duration of its force majeure claim; Stonefield did the opposite, limiting its claim to the period of genuine disruption and resuming full performance as soon as market conditions permitted.
V. Adjusted ACV Calculation for CY2
A. Methodology
The force majeure analysis leads to a straightforward mathematical adjustment of the CY2 ACV. The calculation proceeds as follows:
• Full CY2 ACV: $43,200,000 (representing the twelve-month period from April 1, 2020 through March 31, 2021).
• Force majeure period: Six months (April 1, 2020 through September 30, 2020).
• Non-force-majeure months in CY2: Six months (October 1, 2020 through March 31, 2021).
• Adjusted CY2 ACV: $43,200,000 × (6 ÷ 12) = $21,600,000.
This pro-rata adjustment is the most straightforward, defensible, and equitable methodology. The ACV is an annualized minimum commitment denominated in dollars. The force majeure clause excuses Stonefield's performance obligations "to the extent, and for the duration" of the Force Majeure Event. If the Force Majeure Event excused performance for six of the twelve months of CY2, the logical and proportional result is that the minimum commitment for the remaining six non-excused months is one-half of the full annual amount.
This methodology is consistent with the structure of the TSA, which establishes the ACV as an annual figure without specifying monthly or quarterly sub-minimums. There is no provision in the TSA that requires Stonefield to "make up" volume lost during a force majeure period by tendering additional volume in subsequent non-excused months. The force majeure clause excuses performance "to the extent" of the disruption, and the pro-rata approach faithfully implements that principle.
B. Actual Tenders vs. Adjusted ACV
The comparison of Stonefield's actual tenders during CY2 to the adjusted ACV is decisive:
Stonefield tendered $10,200,000 more than the adjusted ACV minimum during CY2. Far from falling short of its obligations, Stonefield substantially exceeded its adjusted commitment. This overage is not marginal; it represents a surplus of approximately 47% above the adjusted ACV ($10.2M ÷ $21.6M ≈ 47.2%). The overage demonstrates that Stonefield continued to tender substantial freight volumes to VTS even during the pandemic — indeed, the $31.8M in actual tenders represents approximately 73.6% of the full unadjusted ACV — while properly invoking the force majeure clause to excuse the portion of the ACV shortfall attributable to pandemic disruption.
This result decisively refutes Vantor's claim of a CY2 shortfall. When the force majeure adjustment is properly applied, there is no shortfall; there is a significant surplus. Vantor's insistence on measuring Stonefield's CY2 performance against the full, unadjusted ACV — as if the COVID-19 pandemic had never occurred and as if the TSA's force majeure clause did not exist — is contrary to the express terms of the contract that both parties negotiated and executed.
C. Alternative Calculations (Sensitivity Analysis)
Although we believe a six-month force majeure period is well supported, it is prudent to assess the impact on the adjusted ACV under alternative assumptions regarding the length of the force majeure period. The following sensitivity analysis demonstrates that Stonefield exceeded the adjusted ACV under any reasonable assumption:
Under any force majeure period of four months or longer, Stonefield's actual tenders exceed the adjusted ACV. Even under the most conservative assumption — a force majeure period of only three months, limited to the peak lockdown period of April through June 2020 — the resulting shortfall would be only $600,000, a de minimis amount representing less than 1.4% of the full ACV and far below the $11.4 million figure alleged in Vantor's Amended Complaint.
Moreover, even the three-month scenario is unrealistically conservative. As discussed above, the freight market did not meaningfully recover until late Q3 2020 (August–September), and the TSA's force majeure clause expressly provides for a "reasonable period for ramp-up" following the cessation of the Force Majeure Event. A six-month force majeure period is well within the range of reasonableness, and we are confident that a four-month period, at minimum, is unassailable.
Finally, it is worth noting that even without any force majeure adjustment — that is, even taking the full $11.4 million shortfall at face value — the shortfall must be analyzed in its proper context. Vantor's Amended Complaint treats the CY2 shortfall as an independent material breach of the TSA, but a shortfall during a global pandemic of unprecedented severity, where the TSA contains an express force majeure provision specifically encompassing pandemics, cannot reasonably be characterized as a material breach. New York courts assess materiality based on the totality of the circumstances, including the extent of the shortfall relative to the overall contractual commitment, the reasons for the shortfall, and the breaching party's good faith. See, e.g., Jacob & Youngs, Inc. v. Kent, 230 N.Y. 239 (1921); Restatement (Second) of Contracts § 241. A pandemic-driven volume reduction, supported by a contractual force majeure provision, is the antithesis of a material breach.
VI. Anticipated Counterarguments by Vantor
We anticipate that Vantor will advance several counterarguments in response to Stonefield's force majeure defense. Each is addressed below.
A. Force Majeure Notice Was Untimely or Deficient
Vantor may argue that Stonefield's force majeure notice was delivered late (i.e., outside the contractual notice window), lacked sufficient specificity, or was not delivered in compliance with the notice mechanics set forth in Section 18 (Notices) of the TSA. Vantor may contend that the notice was required to be sent to a specific individual or address and that any deviation from those requirements renders the notice ineffective.
Response: This is a fact-specific inquiry that depends entirely on the actual notice document. As discussed above, initial indications from the client are that the force majeure notice was provided in April or May 2020, which would be within or very close to the contractual notice window. We must confirm this by reviewing the actual notice letter.
Even if there were technical deficiencies in the notice — for example, if the notice was sent one or two days late, or was directed to the wrong individual at VTS, or was transmitted by email rather than by the specified delivery method — New York courts generally apply a substantial compliance standard to contractual notice provisions, particularly where the purpose of the notice requirement has been fulfilled. See Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 695 (1995) (recognizing substantial performance doctrine in context of contractual conditions); see also Hegeman-Harris Co. v. City of New York, 196 A.D.2d 400 (1st Dep't 1993).
In the force majeure context, the purpose of the notice requirement is to inform the other party that a force majeure event has occurred and that the affected party is claiming excuse. Here, VTS had actual, contemporaneous knowledge of the COVID-19 pandemic — as did every individual and entity in the world. VTS knew that the pandemic was disrupting the freight market and that its customers, including Stonefield, were experiencing volume reductions. In these circumstances, a court is unlikely to deny the force majeure defense based on a technical notice deficiency, so long as Stonefield substantially complied with the notice requirements and VTS was not prejudiced by any deficiency.
B. COVID-19 Did Not Actually Prevent Stonefield from Tendering
Vantor may argue that the COVID-19 pandemic did not actually "prevent" Stonefield from tendering freight to VTS. Vantor may contend that Stonefield made a business decision to reduce its tenders — for example, by redirecting freight to other carriers, reducing its own commercial activity, or prioritizing other business relationships — and that the pandemic was merely a pretext for what was, in substance, a volitional business decision.
Response: This argument misreads the operative language of Section 12.1. The force majeure clause does not require that performance be entirely "prevented" — it excuses performance that is "prevented, hindered, or delayed" by the Force Majeure Event. The disjunctive tripartite formulation is significant. Even if Stonefield was not literally incapable of tendering any freight to VTS during the force majeure period — and indeed, the $31.8 million in actual CY2 tenders demonstrates that Stonefield continued to tender significant volume throughout the year — the pandemic unquestionably "hindered" Stonefield's ability to tender at the full annualized ACV rate. Stonefield's customers were shipping less, and Stonefield therefore had less freight available to tender. This is precisely the type of "hinderance" that the force majeure clause addresses.
Moreover, the factual premise of Vantor's argument is weak. Stonefield's actual tenders of $31.8 million during CY2 demonstrate that Stonefield continued to tender substantial volume to VTS even during the pandemic — just not at the full $43.2 million annualized rate. Stonefield did not walk away from the VTS relationship or redirect freight wholesale to competing carriers. It tendered the maximum volume it could, given the dramatic contraction in its customers' shipping demand. This conduct is entirely consistent with Section 12.1's requirement that the affected party "use commercially reasonable efforts to mitigate the impact of the Force Majeure Event and to resume performance as promptly as practicable."
C. Force Majeure Should Not Apply to Payment/Volume Obligations
Vantor may argue that force majeure clauses in transportation contracts should not excuse minimum volume commitments because such obligations are financial or commercial in nature rather than "performance-based." Under this theory, the force majeure clause should apply only to operational performance obligations — such as the obligation to pick up or deliver freight — and not to volume minimums that are, in substance, financial guarantees.
Response: This argument finds no support in the text of Section 12.1 or in New York law. The TSA's force majeure clause applies broadly to a party's "obligations under this Agreement." The ACV is an obligation under the Agreement. There is no carve-out, exclusion, or limitation that would exempt volume commitments from the scope of the force majeure excuse. The parties — both sophisticated commercial actors represented by experienced counsel (Ashford Meridian LLP for Stonefield and, as noted above, Redmond & Yates LLP for VTS on certain provisions) — negotiated these terms with full awareness of their import. If VTS had intended to exclude volume commitments from the force majeure clause, it could have proposed such a limitation during the contract negotiation. It did not.
New York law enforces force majeure clauses as written, giving effect to the language the parties chose. See Kel Kim Corp. v. Central Markets, Inc., 70 N.Y.2d 900, 902 (1987) (force majeure clause "should be interpreted in accord with its purpose, which is to limit damages in a case where the reasonable expectation of the parties and the performance of the contract have been frustrated by circumstances beyond the control of the parties"); see also JN Contemporary Art LLC v. Phillips Auctioneers LLC, 507 F. Supp. 3d 490 (S.D.N.Y. 2020) (applying New York law and enforcing force majeure clause as written in the context of COVID-19). Courts will not rewrite unambiguous contract language to impose limitations that the parties did not include, particularly between sophisticated commercial parties who negotiated at arm's length.
D. Stonefield's Force Majeure Period Was Arbitrary
Vantor may argue that the six-month force majeure period was selected for strategic advantage rather than because it reflects the actual duration of the pandemic's impact on Stonefield's freight volumes. Vantor may contend that the pandemic did not end in September 2020 and that, if force majeure were truly applicable, it should have been invoked for a longer or shorter period.
Response: The six-month period is not arbitrary; it aligns closely with the most acute phase of pandemic-driven freight market disruption, as documented by industry indices, government data, and trade association reports. Stonefield affirmatively chose to limit the force majeure period and resume full tendering obligations from October 2020 onward, a decision that demonstrates good faith and proportionality rather than gamesmanship. A party seeking to exploit the force majeure clause would be expected to maximize the duration of its invocation; Stonefield did the opposite, limiting its claim to the period of genuine disruption.
Moreover, the fact that the pandemic continued beyond September 2020 does not undermine the reasonableness of the six-month period. Force majeure does not require that the underlying event cease entirely before the excuse period ends; rather, the question is whether the event's impact on the affected party's performance has abated to the point where performance can be resumed. By October 2020, freight demand had recovered sufficiently for Stonefield to resume tendering at or near the full ACV rate, and Stonefield did so. This is precisely the conduct that the "commercially reasonable efforts to mitigate and resume performance" requirement contemplates.
Industry data robustly supports the conclusion that the freight market did not meaningfully recover until late Q3 2020. The Dunmore Systems, the Brightmoor Software index, and the ATA tonnage reports all confirm that freight volumes did not return to pre-pandemic levels until August–September 2020 at the earliest. An expert analysis from a firm such as Kensington Analytics Group LLC, if retained, would be well positioned to provide further corroboration of this timeline.
VII. Implications for CY3 (April 2021 – March 2022)
Although this memorandum focuses primarily on the CY2 force majeure defense, a brief discussion of the CY3 allegations is warranted, as Vantor's Amended Complaint asserts a separate shortfall claim for that period.
Vantor alleges that during CY3 — defined as the period from April 1, 2021 through the effective termination of the TSA — Stonefield tendered only $36,500,000 in transportation charges against the $43,200,000 ACV, resulting in an alleged shortfall of $6,700,000. Vantor calculates this shortfall for the period April 2021 through approximately January 2022, reflecting the approximately ten months of actual operations before the termination process commenced. The TSA was terminated effective March 4, 2022, following the issuance of a Cure Notice by VTS.
The force majeure defense does not directly apply to CY3. Stonefield did not invoke force majeure for any period beyond September 30, 2020, and the pandemic's impact on the freight market had largely dissipated by the beginning of CY3 in April 2021. However, several other defenses — individually and collectively — provide strong grounds for contesting the CY3 shortfall allegation:
First, proration. The $36.5 million figure cited by Vantor covers only approximately ten months of CY3 (April 2021 through January 2022), not the full twelve-month contract year. If the TSA was terminated effective March 4, 2022, and performance effectively ceased in January or early February 2022, the ACV should be prorated to reflect the shortened period. The prorated ACV for ten months is $43,200,000 × (10 ÷ 12) = $36,000,000. Stonefield's actual tenders of $36,500,000 exceed the prorated ACV by $500,000. On a prorated basis, there is no shortfall at all.
Second, VTS's own performance failures. During CY3, VTS failed to meet multiple Service Level Obligations ("SLOs") established in the TSA, particularly during Q4 2021 (October–December 2021). The severity of VTS's performance failures during this period is documented in Stonefield's internal records and in correspondence between the parties. The key metrics were as follows:
These figures represent dramatic and material departures from VTS's contractual performance standards. Of particular significance is the 71.4% tender acceptance rate, which means that VTS was rejecting approximately 28.6% of the freight that Stonefield tendered to it. When VTS itself is rejecting nearly one-third of tendered freight, it is self-evidently improper for VTS (or its parent, Vantor) to claim that Stonefield failed to tender sufficient volume. To the extent Stonefield was compelled to route shipments to alternative carriers because VTS could not or would not accept them, those diversions were caused by VTS's own failures, not by any breach on Stonefield's part.
Third, the first-to-breach doctrine. Separate analysis is being conducted regarding VTS's unilateral reduction of fleet capacity during CY3, including the reassignment of approximately 85 tractors from the Stonefield account to other VTS accounts. This capacity reduction — documented, among other sources, in a November 12, 2021 internal email from A. Milescu to M. Vantorovich — constitutes a material breach of VTS's obligations under the TSA, specifically its obligation to maintain sufficient fleet capacity to service the Stonefield account. Under the first-to-breach doctrine, a party that commits the first material breach of a contract cannot recover for the other party's subsequent non-performance. See, e.g., Ashgrove & Co. v. Camberwell Industries, 500 F.3d 171, 186 (2d Cir. 2007); New Windsor Volunteer Ambulance Corps, Inc. v. Meyers, 442 F.3d 101, 117 (2d Cir. 2006). If VTS's fleet capacity reduction constituted the first material breach, Stonefield's subsequent volume shortfall (if any) was excused.
Fourth, the secondary lane analysis. To the extent Stonefield diverted any freight volume to alternative carriers — specifically, to Cascade Freight Systems Inc. or Briarwood Trucking Co. — during CY3, we have confirmed that such diversions involved Lanes 8 through 14, which are classified as "Secondary Lanes" under Schedule C, Section 2(b) of the TSA. The exclusivity provisions of the TSA apply only to "Primary Lanes" (Lanes 1–7) as designated in Schedule C, Section 2(a). Accordingly, Stonefield's use of alternative carriers on Secondary Lanes did not violate the exclusivity provisions of the TSA. This conclusion is set forth in greater detail in the separate exclusivity analysis memorandum dated September 30, 2022.
In sum, while the CY3 shortfall allegation requires further analysis and development, multiple independent defenses are available, and the allegation is by no means a straightforward claim of breach.
VIII. Recommendations
Based on the foregoing analysis, we recommend the following action items:
1. Obtain and preserve the force majeure notice. This is the highest-priority action item. We must confirm with Tobias Wren (General Counsel) and Raymond Hess (Director of Carrier Relations) the exact date, content, and method of delivery of Stonefield's force majeure notice to VTS. The notice letter should be located within Stonefield's contract administration files, correspondence files, or email archives. We should request that Stonefield's document review team prioritize identification of this document within the first production set (Bates range SLG-000001 through SLG-042387). Once located, the notice should be reviewed for compliance with Section 12.1's notice requirements and Section 18's delivery specifications. This document is a critical piece of evidence that will be central to the force majeure defense. It must be included in the litigation hold and will be part of Stonefield's document production.
2. Compile supporting market data. We should gather industry data corroborating the COVID-19 pandemic's impact on freight demand during the April–September 2020 force majeure period. Relevant sources include the Dunmore Systems, the Brightmoor Software load-to-truck ratio data, ATA tonnage reports, the Bureau of Labor Statistics employment data for the transportation sector, Department of Energy diesel fuel price indices, and federal and state government emergency orders and economic impact reports. This data will support both the validity of the force majeure defense and the reasonableness of the six-month excused period. We recommend engaging Kensington Analytics Group LLC — and specifically Dr. Evelyn Rosser, who has extensive experience in freight market analysis and has been accepted as an expert witness in federal court — to provide an expert report and, if necessary, testimony on market conditions during the relevant period. An early retention of Dr. Rosser will allow us to develop the factual foundation for the defense well in advance of expert disclosure deadlines.
3. Incorporate into Answer and Affirmative Defenses. The force majeure defense should be affirmatively pleaded in Stonefield's Answer to the Amended Complaint, which we anticipate filing in January 2023 (following resolution of the pending Motion to Dismiss, or in the alternative, as directed by the Court's scheduling order). Specifically, the Answer should assert as an affirmative defense that Stonefield's invocation of the force majeure provision of Section 12.1 was timely and proper, that the COVID-19 pandemic constituted a Force Majeure Event within the meaning of the TSA, that Stonefield's performance obligations were excused for the period April through September 2020, and that Stonefield's actual tenders during CY2 exceeded the adjusted ACV. The defense should be stated with sufficient specificity to satisfy the pleading requirements of Federal Rule of Civil Procedure 8(c) and to put Vantor on notice of the factual and legal basis for the defense.
4. Use in discovery. We should develop discovery requests — both interrogatories and document requests — that probe Vantor's own experience during the pandemic period. Relevant inquiries include: (a) whether Vantor or VTS experienced its own volume declines during April–September 2020; (b) whether VTS's other customers invoked force majeure or reduced freight volumes during this period; (c) whether Vantor or VTS itself invoked force majeure under any of its own contracts with third parties; (d) whether VTS reduced fleet capacity or furloughed drivers during the pandemic period; and (e) what Vantor's internal financial projections and market assessments reflected regarding the pandemic's impact on the freight market. Responses to these inquiries may reveal that Vantor also experienced pandemic-driven disruptions — potentially undermining its position that the COVID-19 pandemic did not excuse Stonefield's performance and that VTS was ready, willing, and able to service the full ACV during the force majeure period.
5. Preserve for summary judgment. The force majeure defense, combined with the $10.2 million CY2 overage, is an excellent candidate for partial summary judgment on Vantor's CY2 volume shortfall claim. The material facts are largely undisputed: (i) the COVID-19 pandemic occurred; (ii) the TSA's force majeure clause expressly encompasses pandemics; (iii) Stonefield invoked the force majeure provision for the period April–September 2020; (iv) Stonefield's actual tenders during CY2 totaled $31.8 million; and (v) the adjusted CY2 ACV, after excusing the six-month force majeure period, is $21.6 million. The only potentially contested factual issues are the timeliness and sufficiency of the force majeure notice, which we expect to resolve favorably once the actual notice document is confirmed. We should plan to file a motion for partial summary judgment on the CY2 claim at the appropriate stage of the case, following the close of fact discovery.
IX. Conclusion
Based on the analysis set forth in this memorandum, we conclude as follows:
Stonefield's invocation of force majeure under Section 12.1 of the TSA for the period April 2020 through September 2020 was timely and proper. The COVID-19 pandemic is an expressly enumerated Force Majeure Event under the TSA, and its impact on freight demand during the six-month invocation period is well documented and beyond genuine dispute. The force majeure clause covers Stonefield's ACV obligation, and Section 12.1 does not contain any carve-out that would exclude volume commitments from its scope.
When the force majeure excuse is applied to CY2, the adjusted ACV is reduced from $43,200,000 to $21,600,000. Stonefield's actual tenders during CY2 totaled $31,800,000, exceeding the adjusted ACV by $10,200,000 — an overage of approximately 47% above the adjusted minimum. Under any reasonable calculation of the force majeure period (four to six months), Stonefield met or exceeded the adjusted ACV.
Vantor's allegation that Stonefield breached the CY2 ACV by $11.4 million is therefore without merit when the force majeure adjustment is properly applied. The $11.4 million figure is computed by ignoring the TSA's force majeure clause entirely — an approach that is contrary to the express terms of the contract, contrary to New York law, and contrary to commercial reason.
The CY3 shortfall allegation of $6.7 million is also subject to strong defenses, including proration of the ACV for the shortened contract year, VTS's own material performance failures (including its rejection of nearly 29% of tendered freight in Q4 2021), the first-to-breach doctrine arising from VTS's unilateral capacity reduction, and the secondary lane analysis confirming that any diversions to alternative carriers were on non-exclusive lanes. While force majeure is not directly applicable to CY3, the cumulative strength of these alternative defenses is substantial.
The force majeure defense should be a central element of Stonefield's litigation strategy. It should be affirmatively pleaded in the Answer, developed through targeted discovery, supported by expert analysis, and presented as the basis for partial summary judgment on the CY2 volume shortfall claim.
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — PREPARED IN ANTICIPATION OF LITIGATION
This memorandum was prepared by Calderwood & Harkness LLP in anticipation of litigation and is protected by the attorney-client privilege and the work product doctrine. Distribution is limited to Samuel Eklund, Responsible Partner; copies to case file, Matter No. 1012-00005. This memorandum is not to be disclosed, distributed, or reproduced without the prior written consent of Calderwood & Harkness LLP.
Metric | Amount
Full CY2 ACV (unadjusted) | $43,200,000
Force majeure excused months | 6 of 12
Adjusted CY2 ACV | $21,600,000
Actual tenders during CY2 | $31,800,000
Overage above adjusted ACV | $10,200,000
Force Majeure Period | Non-Excused Months | Adjusted ACV | Actual Tenders | Overage
6 months (Apr–Sep 2020) | 6 months | $21,600,000 | $31,800,000 | $10,200,000
5 months (Apr–Aug 2020) | 7 months | $25,200,000 | $31,800,000 | $6,600,000
4 months (Apr–Jul 2020) | 8 months | $28,800,000 | $31,800,000 | $3,000,000
3 months (Apr–Jun 2020) | 9 months | $32,400,000 | $31,800,000 | ($600,000)
Service Level Metric | TSA SLO | VTS Actual (Q4 2021) | Variance
On-time pickup | 95.0% | 78.2% | -16.8 pts
On-time delivery | 93.0% | 81.6% | -11.4 pts
Tender acceptance rate | 90.0% | 71.4% | -18.6 pts
Equipment availability | 85.0% | 62.0% | -23.0 pts

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

CALDERWOOD & HARKNESS LLP ATTORNEYS AT LAW

INTERNAL MEMORANDUM

MATTER NO.: 1012-00005

Record

Parties

Dates

Amounts