Tobias, Marcus, Alison —
I am writing to update you on a procedural development in the above-captioned matter and to outline our recommended next steps. Calderwood & Harkness Matter No. 1012-00005.
**1. Motion to Dismiss Denied as Moot**
Judge Calloway entered an order yesterday, December 16, 2022, denying Stonefield's Motion to Dismiss as moot. I want to emphasize at the outset that this was not a ruling on the merits. The Court did not reach any of Stonefield's substantive arguments — including our arguments regarding the unenforceability of the liquidated damages clause as a penalty or the inadequacy of Vantor's lost profits pleading.
Rather, the denial was a straightforward procedural consequence of Vantor's filing of its Amended Complaint on December 2, 2022. Because Vantor amended as of right under Federal Rule of Civil Procedure 15(a)(1), the Amended Complaint superseded the original Complaint as a matter of law, rendering our pending motion — which was directed at the original pleading — moot. This is a standard procedural result, and it does not reflect any adverse view by the Court on the substance of our arguments.
**2. Summary of the Amended Complaint**
As you are aware, Vantor, through its counsel at Caldwell Royce & Shapiro, filed the Amended Complaint on December 2, 2022 (previously forwarded to you and available on PACER under Case No. 22-cv-07841). The Amended Complaint retains all of the original claims, including breach of contract and claimed damages as follows:
- Liquidated damages: approximately $67.23 million - Lost profits: $18.7 million - Stranded assets: $5.2 million - Workforce reduction costs: $2.87 million - Mitigation costs: $1.4 million - **Total claimed damages: approximately $95.4 million**
In addition, the Amended Complaint introduces three categories of new allegations:
(i) **Volume Shortfall.** Vantor alleges that Stonefield failed to tender the Annual Committed Volume ("ACV") in contract years 2 and 3, with alleged shortfalls totaling $18.1 million.
(ii) **Exclusivity Violations.** Vantor alleges that Stonefield diverted freight to competing carriers — specifically Cascade Freight Systems Inc. and Briarwood Trucking Co. — in violation of the exclusivity provisions set forth in Schedule C of the Transportation Services Agreement ("TSA").
(iii) **Pretextual Termination.** Vantor alleges that Stonefield's termination of the TSA was pretextual, motivated by a desire to avoid the approximately 14.3% rate increase that would have taken effect under the Rate Adjustment Mechanism on April 1, 2022.
Patrick Gallagher and Simone Laroche have completed a detailed internal analysis of each of these new allegations. We are happy to share that analysis and discuss it in further detail at your convenience.
**3. Strategic Assessment — Whether to Refile the Motion to Dismiss**
The team has carefully considered whether to refile a motion to dismiss directed at the Amended Complaint. Our recommendation is that we **do not refile the MTD at this time**.
Our rationale is as follows. The new allegations in the Amended Complaint are largely fact-dependent. The volume shortfall, exclusivity, and pretext claims are not susceptible to dismissal on the pleadings under Rule 12(b)(6), which requires the Court to accept Vantor's factual allegations as true and draw all reasonable inferences in Vantor's favor. A renewed motion directed at these allegations would, in our judgment, face a high likelihood of denial and would consume time and resources better directed elsewhere.
Importantly, our strongest arguments — that the liquidated damages clause constitutes an unenforceable penalty, that Vantor's damages are duplicative and overlapping, and that consequential damages are barred under TSA Section 15.1 — will be significantly more effective at the summary judgment stage, after we have built the factual record through discovery. We believe discovery will produce evidence favorable to Stonefield on each of the key disputed issues:
- **Volume Shortfall.** Our force majeure invocation for April through September 2020 adjusts the CY2 ACV down to $21.6 million, well below the $31.8 million actually tendered by Stonefield during that period. The factual record should demonstrate compliance.
- **Exclusivity.** Our preliminary analysis indicates that Stonefield's use of Cascade and Briarwood was limited to Lanes 8 through 14, which are classified as Secondary Lanes under Schedule C and are not subject to the exclusivity restriction. Documentary evidence and lane-level shipment data will bear this out.
- **Pretext.** Objective Cause for termination existed based on Vantor Transportation Solutions' severe and sustained performance failures across all five Service Level Obligations in Q4 2021. The contemporaneous performance data and correspondence will demonstrate that the termination decision was well-grounded, independent of any rate adjustment considerations.
We are confident this approach positions Stonefield most effectively for dispositive relief. That said, we welcome your input and are happy to discuss this assessment further.
**4. Proposed Next Steps — Answer, Affirmative Defenses, and Counterclaim**
Stonefield's responsive pleading to the Amended Complaint is due **January 13, 2023** (21 days from service, per FRCP 12(a)(4)(A), accounting for holiday extensions under Federal Rule of Civil Procedure 6(a)).
We plan to file a comprehensive Answer denying Vantor's material allegations, together with fourteen affirmative defenses, including:
1. Valid termination for Cause under TSA Section 13.1(a) 2. Unenforceability of the liquidated damages clause as a penalty 3. Failure to mitigate damages 4. Force majeure 5. Unclean hands 6. Contributory breach / first-to-breach doctrine 7. Waiver 8. Estoppel 9. Setoff 10. Consequential damages waiver under TSA Section 15.1 11. Through 14 — four additional defenses we will detail in the draft circulated for your review
Additionally, we recommend asserting a **counterclaim for declaratory judgment** seeking a declaration that: (a) Stonefield's termination of the TSA was valid and for Cause; (b) no liquidated damages are owed under the TSA; and (c) any material breach of the TSA was committed by Vantor Transportation Solutions, not Stonefield. The counterclaim serves several important purposes — it frames the narrative affirmatively rather than defensively, preserves Stonefield's right to seek affirmative relief, and positions us for summary judgment on the core question of whether Cause for termination existed.
Patrick and Simone are already preparing the initial draft of the Answer, affirmative defenses, and counterclaim. We will circulate the draft to Tobias for review and client comments well in advance of the January 13 filing deadline.
**5. Upcoming Procedural Milestones**
Looking ahead, we anticipate the following timeline:
- **Initial Pretrial Conference:** Expected in early-to-mid February 2023 before Judge Calloway. We will need to submit a joint proposed case management plan in advance of that conference, which will require coordination with Vantor's counsel.
- **discovery Schedule:** We expect the Court to set fact discovery through approximately late September 2023, with expert discovery extending into early 2024 and dispositive motions due in early-to-mid 2024. We will, of course, update you once the schedule is set.
- **discovery Preparation:** We will begin preparing our discovery plan and coordinating document preservation and collection efforts in parallel with the preparation of the responsive pleading. We will be in touch separately regarding Stonefield's document hold and collection protocols.
**6. Next Call**
I would like to schedule a call early next week to walk through the Amended Complaint analysis in greater detail and discuss the counterclaim strategy. Tobias, could you coordinate availability with Marcus and Alison? If Douglas Whitmore and Brendan Carey at Ridgeline would like to join as well, they are of course welcome.
Please do not hesitate to reach out in the meantime with any questions.
Best regards,
**Samuel Eklund** Partner Calderwood & Harkness LLP 200 Park Avenue, 38th Floor New York, NY 10166 T: (212) 554-7200 E: seklund@calderwoodharkness.com
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