1012-00005 · Stonefield Logistics Group · Depositions

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP 200 Park Avenue, 38th Floor New York, New York 10166

DEPOSITION SUMMARY — RAYMOND HESS

Transcript Status: Rough transcript received from the court reporter on July 31, 2023. Final certified transcript is pending. All page and line references in this memorandum are to the rough transcript and are subject to revision upon receipt of the final transcript. The final transcript should be reviewed against this summary and any corrections noted.

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I. Executive Summary

Raymond Hess testified on July 27, 2023 as a fact witness on behalf of defendant Stonefield Logistics Group Inc. ("Stonefield" or "SLG"). Hess's testimony addressed four principal areas: (1) his role as Director of Contract Compliance in monitoring Vantor Transportation Services LLC's ("VTS") performance under the Transportation Services Agreement (the "TSA," Contract Ref. No. SLG-VTS-2019-0315, dated March 15, 2019); (2) the process by which he drafted and issued the Cure Notice dated January 18, 2022; (3) his evaluation of VTS's February 14, 2022 response to the Cure Notice and his assessment of whether cure had been achieved; and (4) his involvement in the factual analysis underlying the March 4, 2022 decision to terminate the TSA for Cause.

Overall Assessment. Hess was a well-prepared, credible witness who testified in a manner that was materially consistent with the key documents in evidence and with his prior witness preparation. His witness preparation session notes, dated July 24, 2023, reflect the themes and positions that Hess maintained throughout the deposition. He was composed under cross-examination, answered questions with appropriate specificity, and did not volunteer information beyond what was asked. He did not make any material concessions adverse to Stonefield's position on the core issues in the case.

Key Favorable Testimony. The following aspects of Hess's testimony are most significant for Stonefield's defense:

1. Metrics Derived from VTS's Own Data. Hess confirmed that all Q4 2021 performance metrics cited in the January 18, 2022 Cure Notice were derived from VTS's own Carrier Performance Portal data — that is, the data was inputted and reported by VTS personnel, not generated by Stonefield's internal tracking systems alone. This is a critical point because it effectively forecloses any argument by Vantor that Stonefield fabricated or manipulated the performance data underlying the Cure Notice.

2. VTS Did Not Dispute the Metrics. Hess testified that VTS's February 14, 2022 response letter did not challenge the accuracy of any of the five Q4 2021 performance figures cited in the Cure Notice. VTS disputed causation — arguing that Stonefield's own volume shortfalls and industry-wide conditions were responsible for the performance deterioration — but it did not contest the numbers themselves.

3. Independent Verification by Hess. Prior to issuing the Cure Notice, Hess independently verified the Q4 2021 performance metrics by cross-referencing the Portal data against Stonefield's internal tracking records. This dual verification undercuts any suggestion that the Cure Notice was based on unreliable or unexamined data.

4. Legal Input on Cure Notice. Hess testified that the Cure Notice was drafted with input from outside counsel at Ashford Meridian LLP — specifically, Lorraine Beckwith (Partner, Commercial Contracts) — to ensure compliance with Section 13.2 of the TSA, which requires that the notice specify the alleged breach "with reasonable particularity." This testimony supports the argument that Stonefield followed proper contractual procedures.

5. Post-Cure-Period Data Confirmed Continued Non-Compliance. Hess testified that he continued monitoring VTS performance after the cure period expired on February 17, 2022, and that the data through early March 2022 showed VTS continued to fall below the Service Level Obligation ("SLO") thresholds across all five categories. This undermines any argument that VTS was on a trajectory toward compliance or that termination was premature.

Key Risk Areas. CRS pursued two lines of cross-examination that warrant careful monitoring for purposes of the anticipated summary judgment motion:

First, CRS attempted to establish that Hess was aware of the upcoming April 2022 annual rate adjustment under Section 5.3 of the TSA when he drafted and issued the Cure Notice on January 18, 2022, thereby implying that the Cure Notice was motivated by Stonefield's desire to terminate the contract before a projected 14.3% rate increase took effect. Hess acknowledged general awareness that rates adjust annually under Section 5.3 but credibly denied that the rate adjustment played any role in his compliance analysis, and the chronology supports his testimony (the Ashford Meridian rate analysis memo was not prepared until February 2022, after the Cure Notice had already been sent).

Second, CRS attempted to establish that Hess received instructions from senior management — specifically from Janet Kirkwood (VP, Carrier Relations) and Carlos Medina (SVP, Operations) — to build a termination record against VTS. CRS introduced the September 22, 2021 internal Kirkwood-to-Medina email in which Kirkwood stated, "If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract." Hess testified credibly that he was not a recipient or copy on the email, had not seen it prior to this litigation, and that his compliance recommendation was independent of any such sentiment. While Hess handled both areas well, these remain areas CRS will likely revisit at summary judgment in support of Vantor's "pretext" theory.

II. Background and Role of Witness

Hess testified that he has served as Director of Contract Compliance at Stonefield Logistics Group Inc. since June 2018. In that capacity, he reports directly to Carlos Medina, Senior Vice President of Operations. Prior to joining Stonefield, Hess worked in freight brokerage operations at a regional logistics company (the name of which was not explored in detail during the deposition), where he gained experience in carrier management, transportation operations, and performance tracking systems. He holds a bachelor's degree in supply chain management.

Hess described his responsibilities at Stonefield as follows:

• Monitoring carrier performance across Stonefield's network against the SLOs set forth in Stonefield's individual carrier contracts. At the time of the events at issue, Stonefield maintained contractual relationships with approximately 12,000 approved carriers, of which VTS was among the largest by contract value and lane coverage.

• Managing the contract compliance process, including the identification of performance deficiencies, the issuance of cure notices and default notices in accordance with the applicable contract terms, and the management of carrier remediation processes.

• Coordinating with Stonefield's in-house legal department — headed by Tobias Wren, General Counsel — and with outside counsel on contract enforcement matters, including the preparation of cure notices that comply with applicable contractual notice provisions.

• Maintaining and overseeing the Contract Compliance team, which consists of approximately eight full-time analysts and compliance managers who handle day-to-day performance tracking across the carrier network.

Hess testified that he personally oversaw the VTS relationship from a compliance perspective beginning in approximately late 2020, when VTS performance first began to show signs of decline. Prior to that time, VTS's contract compliance was handled at a more routine level by members of his team, without Hess's direct personal involvement. The escalation of the VTS matter to Hess's personal oversight was consistent with Stonefield's standard operating procedures, which call for director-level involvement when a carrier's performance metrics fall below contractual thresholds for two or more consecutive reporting periods.

III. Testimony Regarding VTS Performance Monitoring

A. The Carrier Performance Portal

Hess provided extensive testimony regarding the Carrier Performance Portal (the "Portal"), which served as the primary vehicle through which VTS reported its operational performance data to Stonefield. Hess described the Portal as a shared, web-based platform accessible to both Stonefield compliance personnel and VTS operations personnel. The platform allowed VTS to input its own operational data on a weekly and monthly basis, which Stonefield's Contract Compliance team would then review, audit, and flag for exceptions or anomalies.

Hess testified that the Portal tracked all five SLO categories specified in the TSA:

1. On-time pickup rate — the percentage of tendered loads picked up within the contractually specified pickup window;

2. On-time delivery rate — the percentage of loads delivered within the contractually specified delivery window;

3. Tender acceptance rate — the percentage of load tenders offered by Stonefield that VTS accepted;

4. Cargo claims ratio — the total dollar value of cargo claims as a percentage of gross revenue attributable to VTS's operations under the TSA; and

5. Equipment availability compliance — the percentage of committed fleet capacity (measured in tractors) that VTS made available for Stonefield-dedicated lanes.

Each of these five metrics corresponded to a specific SLO threshold set forth in Schedule C of the TSA, which established minimum performance levels that VTS was obligated to maintain on a rolling quarterly basis.

Hess identified Sandra Milescu's operations team at VTS as the personnel responsible for inputting the data into the Portal. He explained that VTS operations staff would upload weekly data summaries, including load-level detail on pickup and delivery times, tender responses, and fleet deployment figures. Stonefield's compliance analysts would then review the uploaded data, perform spot audits against Stonefield's own dispatch records, and flag discrepancies for resolution.

Critically, Hess testified that the Portal data was the "primary and most reliable" source of performance metrics for purposes of contract compliance because the data was generated and entered by VTS itself. Hess stated, in substance, that because the data was self-reported by VTS, Vantor could not credibly dispute the accuracy of the performance figures that formed the basis for the Cure Notice. This testimony is of significant strategic importance for our Cause defense and should be cited prominently in summary judgment briefing.

B. Q4 2021 Performance Deterioration

Hess testified that he began observing significant deterioration in VTS's SLO performance starting in approximately September and October 2021. While VTS had shown intermittent signs of underperformance earlier in 2021, the Q4 2021 period represented a marked and sustained decline across all five SLO categories.

By the end of Q4 2021, the Portal data reflected the following performance metrics, all of which Hess stated he personally verified by cross-referencing the Portal reports against Stonefield's internal dispatch and claims records:

Hess emphasized that the deficiencies were not marginal — VTS was substantially below the contractual thresholds in every category. He characterized the Q4 2021 results as the worst quarterly performance by any major carrier in Stonefield's network during his tenure as Director of Contract Compliance.

Hess testified that in early January 2022, he formally flagged these deficiencies to Carlos Medina (SVP, Operations) and Janet Kirkwood (VP, Carrier Relations). He recommended initiating the formal cure process under Section 13.1(a) of the TSA, which provides that a party may terminate the agreement for Cause if the other party fails to cure a material breach within 30 calendar days after receipt of written notice specifying the breach with reasonable particularity. Medina and Kirkwood concurred with Hess's recommendation, and Hess proceeded to prepare the Cure Notice.

C. Prior Performance Discussions with VTS

Hess testified that the January 2022 Cure Notice was not the first occasion on which Stonefield raised VTS's performance deficiencies. To the contrary, Hess described multiple informal communications with VTS representatives throughout Q3 and Q4 2021 in which he and other Stonefield personnel communicated concerns about declining performance.

Hess identified at least three specific instances of such communications:

1. Late September 2021 — Phone call with Derek Pruitt (VP, Business Development, Vantor). Hess testified that he spoke with Pruitt by telephone in approximately late September 2021 regarding declining tender acceptance rates. Hess informed Pruitt that VTS's tender acceptance rate had dropped below 80% in recent weeks and that this was significantly below the 90% contractual threshold. Pruitt acknowledged the issue and attributed it to industry-wide driver shortages and difficulty retaining qualified drivers for long-haul lanes.

2. October 2021 — Email exchange with Sandra Milescu (COO, Vantor/VTS). Hess testified that he exchanged emails with Milescu in approximately mid-October 2021 regarding equipment availability shortfalls. Hess raised concerns that VTS was not deploying the committed number of tractors on Stonefield-dedicated lanes and asked Milescu to provide an updated fleet deployment plan. Milescu responded that VTS was working to address equipment shortfalls but cited difficulties in securing replacement drivers and the high cost of leasing additional tractors.

3. November 2021 — Formal performance review call. Hess described a scheduled performance review call in approximately mid-November 2021 that included, among others, Janet Kirkwood and Hess on the Stonefield side, and Derek Pruitt and Sandra Milescu on the VTS side. During this call, VTS acknowledged operational challenges across multiple SLO categories. VTS representatives attributed the performance declines to a nationwide driver shortage, supply chain disruptions arising from pandemic-related conditions, and the general tightening of the truckload carrier market during that period.

Importantly, Hess testified that during none of these discussions did VTS disclose that it had reassigned tractors away from Stonefield-dedicated lanes. The November 12, 2021 Milescu-to-Vantorovich email — in which Milescu wrote, "We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January" — was not brought to Hess's attention at any time prior to the discovery phase of this litigation. Hess stated that had he been aware of this deliberate redeployment, he would have escalated the matter immediately.

IV. Testimony Regarding the Cure Notice (January 18, 2022)

A. Drafting Process

Hess provided detailed testimony regarding the process by which the January 18, 2022 Cure Notice was drafted and finalized. He testified that he prepared the initial draft of the Cure Notice in early January 2022, working from the Q4 2021 Portal data and from internal performance tracking spreadsheets maintained by his Contract Compliance team. The draft identified each of the five SLO categories, stated the applicable contractual threshold for each, provided the actual Q4 2021 performance figure, cited the relevant sections of the TSA, and described the nature and extent of VTS's failure to meet its obligations.

Hess testified that he consulted with Tobias Wren, Stonefield's General Counsel, regarding the contractual requirements for issuance of a cure notice under the TSA. Wren directed Hess to coordinate with Ashford Meridian LLP, Stonefield's outside commercial counsel, to ensure that the notice satisfied the specificity requirements of Section 13.2.

Ashford Meridian LLP — specifically, Lorraine Beckwith (Partner, Commercial Contracts) — reviewed and provided input on the draft Cure Notice. Section 13.2 of the TSA requires that any notice of alleged breach be made "with reasonable particularity," and Beckwith's review was directed at ensuring that the Cure Notice met this standard. Beckwith's input included recommendations regarding the level of detail to be provided with respect to each SLO category and the inclusion of specific data references and TSA section citations. Hess testified that the final Cure Notice incorporated Beckwith's suggested revisions.

The final Cure Notice as issued identified each of the five SLO categories in which VTS was deficient, stated the contractual threshold for each, provided the actual Q4 2021 performance figure drawn from the Portal data, cited the relevant TSA provisions (including Sections 12.1 and 13.1(a) and Schedule C), and set forth the 30-day cure period as required by Section 13.1(a).

In addition to the five SLO deficiencies, the Cure Notice also identified VTS's chronic failure to provide substitute equipment or surge capacity as required under Section 7.4 of the TSA. Section 7.4 obligated VTS to make commercially reasonable efforts to provide substitute tractors or engage backup carriers when its equipment availability fell below committed levels. Hess testified that VTS had not complied with Section 7.4 during the Q4 2021 period, and this failure was included in the Cure Notice as an additional basis for the alleged breach.

B. Delivery of Cure Notice

Hess testified that the Cure Notice was transmitted on January 18, 2022. He sent the notice by email directly to Sandra Milescu (COO, VTS), which was the standard mode of operational communication between Hess and VTS personnel. A hard copy of the Cure Notice was also sent by overnight courier to VTS's principal office, in compliance with the notice provisions of the TSA (Section 14.2, which specifies that notices may be delivered by nationally recognized overnight courier service).

Hess confirmed that the cure period was 30 calendar days from receipt, as specified in Section 13.1(a) of the TSA. Based on VTS's receipt of the Cure Notice on or about January 18, 2022, the cure deadline was established as February 17, 2022. Hess stated that the 30-day period was calculated in accordance with the TSA's notice provisions and that he did not seek to shorten, extend, or otherwise modify the contractually prescribed cure period.

C. Independence of Decision

CRS devoted a significant portion of its examination to questioning whether Hess received instructions or pressure from senior management at Stonefield to initiate the cure process. This line of questioning was directed at supporting Vantor's theory that the Cure Notice was pretextual — that is, that it was issued not because of genuine compliance concerns but rather as a mechanism to engineer a termination that Stonefield's management had already decided upon for commercial reasons.

Hess denied this characterization clearly and consistently. He testified that the decision to recommend issuance of a Cure Notice was a routine compliance function driven by the severity of VTS's SLO failures, which, as noted above, were the worst of any major carrier in Stonefield's network during the relevant period. Hess stated that under Stonefield's standard compliance procedures, a carrier exhibiting failures of this magnitude across all five SLO categories would ordinarily be subject to a formal cure process, regardless of the carrier's identity or the commercial value of the contract.

Hess acknowledged that he was generally aware that Janet Kirkwood and Carlos Medina had been discussing VTS's performance challenges and potential alternative carrier options in the September–October 2021 time frame. Hess stated, however, that his awareness of these discussions did not influence his compliance determination. He testified that the compliance process was initiated through his department's standard procedures and that his recommendation was based solely on the performance data.

When pressed by CRS as to whether anyone had instructed him to "build a case" for termination, Hess responded: "No. My job is to enforce compliance with the contractual SLOs. The data showed that VTS was in material breach across all five categories. I would have issued a Cure Notice regardless of any other considerations."

V. Testimony Regarding VTS's Response (February 14, 2022)

A. Content of the Response

Hess confirmed that he received VTS's response to the Cure Notice on or about February 14, 2022 — three days before the expiration of the 30-day cure period. The response letter was dated February 14, 2022, and was sent by Derek Pruitt (VP, Business Development, Vantor Holdings Corp.) to Janet Kirkwood (VP, Carrier Relations, Stonefield), with a copy to Hess.

Hess testified regarding the substance of VTS's response as follows:

1. Acknowledgment of "operational challenges." The response acknowledged that VTS had experienced "operational challenges" during the Q4 2021 period that affected its performance under the TSA. Hess noted that the letter used the term "operational challenges" rather than expressly conceding a breach of the SLOs.

2. Attribution of performance deficiencies to external factors and Stonefield's conduct. The response attributed VTS's performance deficiencies to three principal factors: (a) a nationwide driver shortage affecting the truckload carrier industry generally; (b) Stonefield's alleged failure to tender the minimum Annual Contract Volume ("ACV") of $43.2 million, which VTS contended disrupted its fleet planning and economic viability on Stonefield-dedicated lanes; and (c) Stonefield's alleged diversion of volume to spot market carriers in lieu of tendering loads to VTS.

3. Assertion of "substantial cure." The response asserted that VTS had "substantially cured" the identified deficiencies during the 30-day cure period by implementing remedial measures, including the hiring of additional drivers, adjustments to dispatch priorities on Stonefield-dedicated lanes, and the engagement of backup carriers to supplement capacity.

4. Dispute of certain cargo claims data. The response challenged certain aspects of the cargo claims data cited in the Cure Notice, though Hess testified the challenge was not directed at the overall claims ratio figure but rather at the inclusion of specific claims that VTS contended were still under investigation at the time of the notice.

Critically, Hess testified that the VTS response letter did not dispute the accuracy of the underlying Q4 2021 performance metrics cited in the Cure Notice. VTS did not challenge the on-time pickup rate of 78.2%, the on-time delivery rate of 81.6%, the tender acceptance rate of 71.4%, the equipment availability figure of approximately 62%, or the aggregate number and dollar amount of cargo claims. The dispute advanced in VTS's response was over causation — i.e., why the metrics were as low as they were — not over the accuracy of the metrics themselves. This distinction is of fundamental importance to Stonefield's Cause defense and should be a central theme of summary judgment briefing.

B. Evaluation of Alleged Cure

Hess testified at length regarding his evaluation of whether VTS had demonstrated actual remediation of the identified breaches during the 30-day cure period running from January 18 through February 17, 2022.

Hess explained that he reviewed the Portal data for the cure period on a weekly basis to assess whether VTS's performance was improving toward compliance with the SLO thresholds. He testified that while there were marginal improvements in some metrics during the cure period, VTS remained materially below the SLO thresholds across all five categories as of the February 17, 2022 deadline. Specifically:

• On-time pickup rate improved from 78.2% (Q4 2021) to approximately 82–83% during the cure period, but this remained well below the 95% contractual threshold — a shortfall of approximately 12–13 percentage points.

• On-time delivery rate showed a modest improvement to approximately 83–84%, still substantially below the 93% contractual threshold.

• Tender acceptance rate remained in the range of 73–75%, far below the 90% contractual threshold.

• Equipment availability did not meaningfully improve during the cure period. Hess testified that the fleet available for Stonefield-dedicated lanes remained in the range of 250–260 tractors, compared to the 400-tractor commitment under the TSA. This represented only approximately 62–65% of committed capacity — essentially unchanged from the Q4 2021 figures — and was substantially below the 85% threshold (340 tractors).

• Cargo claims ratio data for the cure period was not fully available as of February 17, but the trend had not shown material improvement.

Based on this analysis, Hess concluded that VTS had failed to cure the identified breaches within the 30-day cure period. He testified that VTS's response letter, while listing certain remedial actions being taken or planned, was not supported by the actual performance data in the Portal. He stated: "Words on paper are not the same as actual performance. The data showed that VTS was still materially below every SLO threshold as of February 17, 2022."

C. Post-Cure-Period Data

Hess testified that he continued to monitor VTS's performance after the cure period expired on February 17, 2022, through the date of the termination letter on March 4, 2022 — a period of approximately two and a half weeks.

The post-cure-period data showed that VTS's performance did not materially improve and, in some categories, continued to deteriorate:

• On-time pickup rate in late February 2022 was approximately 80%, representing a slight decline from the cure period figure of 82–83%.

• Tender acceptance rate remained below 75%.

• Equipment availability did not improve and remained in the range of 250–260 tractors.

Hess communicated this assessment to Tobias Wren (General Counsel) and Carlos Medina (SVP, Operations) in late February 2022. Based on his review of the data, Hess recommended that Stonefield proceed with termination of the TSA for Cause under Section 13.1(a). Hess testified that in his professional judgment, VTS's performance trend did not indicate any likelihood of achieving compliance with the SLO thresholds in the near term, and that continued operation under the TSA would expose Stonefield to ongoing service failures and potential liability to its own customers.

VI. Testimony Regarding the Termination Letter (March 4, 2022)

Hess confirmed that the formal termination letter was drafted by Tobias Wren, Stonefield's General Counsel, and was transmitted on March 4, 2022 to both Vantor Holdings Corp. and Vantor Transportation Services LLC. Hess testified that he provided input on the factual basis for the termination — specifically, the performance data and cure period analysis — but did not draft the termination letter himself. The drafting of the letter was handled by the legal department with input from outside counsel.

The termination letter, as Hess described it and as reflected in the documentary record (Exhibit 8, SLG-000428), stated that VTS had "failed to cure the material breaches" identified in the January 18, 2022 Cure Notice within the 30-day cure period prescribed by Section 13.1(a) of the TSA. The letter terminated the TSA effective immediately pursuant to Section 13.1(a) and reserved all rights and remedies available to Stonefield under the agreement and at law or in equity.

Hess testified that he believed the termination was appropriate and warranted based on the severity and persistence of VTS's SLO failures, the lack of meaningful improvement during the cure period, and the continued deterioration of performance in the post-cure-period window. He characterized VTS's failures as among the most sustained and severe compliance deficiencies he had encountered in his career at Stonefield.

Hess confirmed on examination that, at the time of termination, the TSA had a remaining term of approximately 2 years and 27 days (from the March 4, 2022 termination date through the original TSA expiration date of March 31, 2024). This remaining term is relevant to Vantor's damages theory, which asserts lost profits for the unexpired contract period.

VII. Cross-Examination — Rate Adjustment Awareness

Jason Whitford of CRS devoted approximately 45 minutes to examining Hess regarding his awareness of the anticipated April 2022 annual rate adjustment under Section 5.3 of the TSA. This line of questioning was directed at Vantor's theory that Stonefield's true motivation for terminating the TSA was to avoid a substantial rate increase that would have taken effect on April 1, 2022 — approximately four weeks after the termination date — rather than legitimate concerns about VTS's performance.

Hess acknowledged on cross-examination that he was generally aware that rates under the TSA were subject to annual adjustment each April 1, as specified in Section 5.3. He testified, however, that the rate adjustment mechanism and the specific rate calculations were not within his area of responsibility. Rate negotiations and commercial pricing decisions were handled by Stonefield's commercial and finance teams, not by the Contract Compliance department.

When asked whether he had seen or been aware of the Ashford Meridian rate adjustment analysis memo from February 2022, Hess stated that he did not recall seeing the memo prior to issuing the Cure Notice on January 18, 2022. CRS then showed Hess the memo (Exhibit 6, SLG-021806). Hess acknowledged that the memo projected a rate increase of approximately 14.3% — from a weighted average per-mile rate of $2.87 to $3.28 — based on the contractual formula in Section 5.3 and prevailing market indices. Hess acknowledged that this was a significant increase but stated: "This was not a factor in my compliance analysis. I was focused on VTS's performance data, not on rate adjustments."

Hess denied categorically that the timing of the Cure Notice was motivated by a desire to terminate the TSA before the April 2022 rate adjustment took effect. He reiterated that the Cure Notice was issued because VTS's Q4 2021 performance was materially deficient across all five SLO categories and that the decision to issue the notice was made on the basis of the performance data alone.

Assessment. Hess's testimony on this point was consistent, detailed, and credible. Importantly, the chronology supports his position. The Cure Notice was issued on January 18, 2022. The Ashford Meridian rate adjustment analysis memo was prepared in February 2022 — that is, after the Cure Notice had already been sent. CRS did not effectively challenge this timeline. While CRS may argue that Stonefield's management was generally aware that rates would increase in April (as they did every year under Section 5.3), Hess's testimony that the rate adjustment was not within his compliance purview and did not influence his analysis is consistent and well-supported. CRS did not produce any document or communication suggesting that Hess was directed to consider the rate adjustment in connection with the Cure Notice.

VIII. Cross-Examination — Instructions from Management

CRS pursued a second major line of cross-examination directed at establishing that Hess's compliance recommendation was not truly independent but was instead the product of direction from Stonefield's senior management to build a contractual basis for terminating the VTS relationship.

Whitford questioned Hess regarding whether he received any direction from Marcus Denton (CEO), Tobias Wren (General Counsel), Carlos Medina (SVP, Operations), or Janet Kirkwood (VP, Carrier Relations) to initiate the cure process or to accelerate the timeline toward termination.

Hess testified firmly: "My recommendation to issue the Cure Notice was based on my independent review of VTS's Q4 2021 performance data. No one told me to find a reason to terminate. The data spoke for itself."

CRS then introduced the September 22, 2021 internal email from Janet Kirkwood to Carlos Medina (Exhibit 5, SLG-015442). The email reads, in relevant part: "VTS is a mess. We're already moving volume to Cascade and Briarwood on Lanes 8–14. If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract."

Hess was asked whether he had seen this email prior to the litigation. He testified that he was not a recipient or a copy on the email and had not seen it before it was produced in discovery. He stated that the email did not reflect any instruction to him and that he was not privy to the communications between Kirkwood and Medina regarding volume reallocation decisions.

CRS pressed Hess on whether he had discussed the "pull the plug" sentiment expressed in the Kirkwood email with either Kirkwood or Medina. Hess acknowledged that he had general conversations with both Kirkwood and Medina about VTS's poor performance during the Q3 and Q4 2021 time frame, as would be expected given his compliance role. However, he stated that those conversations were focused on the performance data and the appropriate compliance response, not on the broader commercial or strategic question of whether to terminate the relationship. He reiterated that the compliance process was initiated through his department's standard procedures, which applied uniformly to all carriers in Stonefield's network.

Assessment. Hess's testimony on this point was effective in insulating the compliance process from the more aggressive language in the Kirkwood email. His denial of having seen the email prior to litigation is corroborated by the fact that he was not a recipient or copy on the communication. His characterization of his conversations with Kirkwood and Medina as routine compliance discussions — rather than strategic planning sessions for termination — is consistent with his role and with the documentary record.

However, this remains a potential risk area at summary judgment. CRS may argue that Hess's "independent" analysis was, in reality, part of a coordinated termination strategy orchestrated at higher levels within Stonefield, and that Hess — whether or not he received explicit instructions — was aware of management's desire to end the VTS relationship and shaped his compliance actions accordingly. The fact that Hess was not copied on the Kirkwood email is helpful in responding to this argument, but we should be prepared for CRS to argue that the absence of a document trail to Hess does not preclude informal oral communications conveying the same sentiment. Hess's testimony that "the data spoke for itself" is a strong response, particularly given the magnitude of VTS's SLO failures.

IX. Cross-Examination — Volume Shortfall and Causation

CRS questioned Hess at some length regarding Stonefield's own performance under the ACV provisions of the TSA, attempting to establish that Stonefield's failure to tender the minimum Annual Contract Volume of $43.2 million to VTS was a contributing or proximate cause of VTS's performance deficiencies. This line of questioning relates to Vantor's affirmative defense and counterclaim theory that Stonefield's own breach — in the form of volume shortfalls and diversion of freight to spot market carriers — excused VTS's SLO failures or rendered the termination wrongful.

Hess testified that the ACV and volume commitments were "commercial matters outside my compliance responsibilities" and that his role was limited to measuring VTS's performance against the contractual SLO thresholds, irrespective of the volume levels being tendered by Stonefield. He stated that the compliance analysis he conducted did not take into account whether Stonefield was meeting its own volume obligations, because the SLOs were structured as independent performance obligations of VTS that were not conditioned on Stonefield tendering any particular volume level.

CRS pressed this point. Whitford asked: "Isn't it true that if Stonefield didn't send enough freight to VTS, VTS would have to redeploy its fleet to remain economically viable?" Hess responded: "I can only speak to the contractual metrics. VTS was required to maintain certain performance levels and fleet availability under the TSA. Whether they chose to redeploy fleet assets is a business decision they made without notifying us."

CRS then turned to the November 12, 2021 Milescu-to-Vantorovich email (Exhibit 9, VHC-008417), in which Sandra Milescu wrote: "We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January." Hess was asked whether he was aware, during the Q4 2021 period or at the time of the Cure Notice, that VTS had deliberately pulled 85 tractors off Stonefield-dedicated lanes. Hess testified that he was not aware of this fact during the relevant period and learned of it only during the discovery phase of this litigation, when the Milescu email was produced.

Hess's testimony that he was unaware of the deliberate tractor redeployment is corroborated by the Milescu email itself, in which Milescu expressly anticipated that Stonefield would not notice the redeployment until January 2022. This corroboration strengthens Hess's credibility on this point and undercuts VTS's position that its performance declines were attributable to Stonefield's conduct rather than VTS's own operational decisions.

Assessment. Hess handled the volume/causation line of questioning effectively by staying within the boundaries of his role and competency. He did not speculate about commercial matters outside his responsibility, did not attempt to opine on whether Stonefield met its ACV obligations, and consistently redirected the discussion to the factual performance data. His testimony that VTS's redeployment of 85 tractors was a unilateral, undisclosed decision by VTS — not a forced response to Stonefield's volume tenders — is a powerful point that should be coordinated with the Milescu deposition summary (Document 80).

X. Cross-Examination — Cargo Claims Data

CRS challenged the cargo claims ratio cited in the Cure Notice — approximately 1.07% of gross revenue, based on 16 documented claims totaling $387,400 in the November–December 2021 period — on the ground that some of the underlying claims were still being investigated by VTS's claims department at the time the Cure Notice was issued on January 18, 2022.

Hess acknowledged that, as of January 18, 2022, three of the 16 claims referenced in the Cure Notice were still under investigation by VTS's claims department and had not been finally resolved. However, he maintained that all 16 claims had been formally submitted through the claims reporting process and were therefore properly included in the cargo claims ratio calculation. He testified that the TSA's definition of the cargo claims ratio — as set forth in Schedule C — was based on claims submitted, not claims resolved or adjudicated, and that Stonefield's calculation methodology was consistent with this definition.

Hess further testified that the methodology for calculating the claims ratio — total dollar value of submitted claims divided by annualized gross revenue attributable to VTS operations under the TSA for the relevant period — was applied consistently across all carriers in Stonefield's network. He stated that the same methodology had been used by the Contract Compliance team for all cargo claims calculations since before he became Director in 2018, and that the methodology had not been altered or adjusted for purposes of the VTS Cure Notice.

CRS did not produce any documentary evidence contradicting the claims data or challenging the calculation methodology. Whitford's questioning on this point was relatively brief and did not elicit any concessions from Hess.

Assessment. This was a relatively minor line of attack. The cargo claims data, while one of the five SLO deficiencies cited in the Cure Notice, is the least significant of the five categories in terms of the magnitude of the shortfall. More importantly, even if the three unresolved claims were excluded entirely from the calculation, the remaining four SLO deficiencies — on-time pickup, on-time delivery, tender acceptance, and equipment availability — independently constituted material breaches of the TSA, each by a wide margin. CRS's challenge to the cargo claims data thus has limited practical impact on the overall Cause defense.

XI. Examination on Vantor's February 14, 2022 Response — "Substantial Cure" Assertions

CRS attempted to use Hess's testimony to validate Vantor's claim that VTS had "substantially cured" the breaches identified in the Cure Notice by the February 17, 2022 deadline. This line of questioning was directed at supporting Vantor's argument that, even if VTS's Q4 2021 performance was deficient, VTS took adequate corrective action during the 30-day cure period to satisfy its obligations under Section 13.1(a).

Hess was shown VTS's February 14 response letter (Exhibit 3, VHC-003287) and asked whether he agreed that VTS had taken steps to address the identified deficiencies. Hess acknowledged that the response letter described certain remedial actions that VTS stated it had undertaken or planned to undertake, including the hiring of additional drivers, adjustments to dispatch priorities on Stonefield-dedicated lanes, and the engagement of backup carriers to provide supplemental capacity. Hess stated, however, that the Portal data during the cure period did not reflect meaningful improvement corresponding to these claimed actions.

Hess was asked whether the marginal improvement in on-time pickup (from 78.2% to approximately 82–83%) demonstrated a trend toward compliance. Hess responded that while any improvement was noted, the absolute level remained far below the 95% contractual threshold and that a movement of four to five percentage points did not, in his assessment, constitute "cure" of a 16.8 percentage-point shortfall — particularly when the improvement would need to continue at an accelerating pace to reach the threshold within any reasonable timeframe.

Hess stated: "Words on paper are not the same as actual performance. The data showed that VTS was still materially below every SLO threshold as of February 17, 2022." He added that the purpose of the cure period under Section 13.1(a) was to provide the breaching party an opportunity to cure the breach — not merely to take preliminary steps toward eventual improvement.

Assessment. This testimony is strong for Stonefield's position that cure was not achieved. The distinction Hess drew between VTS's assertions of remedial action in its response letter and the actual performance data during the cure period is a key pillar of the Cause defense. The "words on paper versus actual performance" formulation is clear, memorable, and well-suited for use in summary judgment briefing and, potentially, at trial.

XII. Redirect Examination

On redirect examination, Patrick Gallagher elicited testimony from Hess that reinforced several critical points for Stonefield's defense. The redirect was focused and efficient, and Hess's responses were consistent with his prior testimony.

The principal points established on redirect were as follows:

1. VTS's own data as the basis for the Cure Notice. Gallagher confirmed through Hess's testimony that the Cure Notice was drafted based on performance data inputted into the Carrier Performance Portal by VTS's own operations team. The metrics cited in the Cure Notice were, in essence, self-reported by Vantor/VTS, and Stonefield relied on this data precisely because it was generated by the carrier itself.

2. VTS's failure to dispute the accuracy of the metrics. Hess confirmed that VTS's February 14, 2022 response letter did not dispute the accuracy of any of the Q4 2021 performance figures cited in the Cure Notice. The response contested causation — attributing the performance shortfalls to Stonefield's volume tenders and external market conditions — but accepted the metrics themselves as stated. Hess reiterated that this was a significant distinction: the numbers were not in dispute; only the reasons for the numbers.

3. Independence of the compliance recommendation from commercial or financial considerations. Gallagher elicited testimony reinforcing that Hess's compliance recommendation was made independently of any commercial or financial considerations, including the April 2022 rate adjustment. Hess confirmed that the rate adjustment mechanism was handled by Stonefield's commercial and finance teams and was not a factor in his compliance analysis.

4. Post-cure-period data confirmed continued non-compliance. Hess confirmed on redirect that the performance data for the period from February 17 through early March 2022 — after the cure period had expired — showed VTS continued to perform below SLO thresholds, further supporting the conclusion that VTS had not cured the identified breaches.

5. Standard compliance procedures. Gallagher elicited testimony that Hess followed Stonefield's standard compliance procedures applicable to all carriers in its network. The procedures applied to VTS were not unique to or specifically designed for VTS; they were the same procedures that would have been applied to any carrier exhibiting comparable SLO failures. This point undercuts any suggestion that the compliance process was tailored to target VTS for pretextual termination.

XIII. Exhibits Used During Deposition

The following exhibits were marked, identified, and used during the Hess deposition. Copies of each exhibit are maintained in the deposition file under Matter No. 1012-00005, Category VI (Depositions).

XIV. Key Takeaways and Strategic Implications

A. Strengths

1. VTS's own data as the basis for the Cure Notice. Hess's testimony that all five SLO metrics cited in the Cure Notice were derived from VTS's own Carrier Performance Portal data is extremely valuable for Stonefield's defense. This testimony preempts any argument by Vantor at summary judgment that Stonefield fabricated, manipulated, or selectively reported performance data to manufacture a basis for termination. The data was inputted by VTS personnel, maintained on a shared platform accessible to both parties, and verified by Hess through cross-referencing with Stonefield's internal tracking records. This is one of the strongest facts in Stonefield's Cause defense, and it should be cited prominently in summary judgment briefing.

2. VTS's failure to dispute the accuracy of the metrics. The fact that VTS's February 14, 2022 response letter did not challenge the accuracy of any of the five Q4 2021 performance figures — only the causation of those figures — is a powerful point for Stonefield. It establishes that the parties are not in dispute about the factual predicate for the Cure Notice. Vantor's defense is limited to arguing that the reasons for the metrics excuse the non-compliance, which is a much more difficult position to sustain given the language of the SLOs and the independent nature of VTS's performance obligations. This point should be emphasized in the Statement of Undisputed Material Facts for the summary judgment motion.

3. Effective separation of compliance from commercial strategy. Hess effectively separated his compliance role from the broader commercial and strategic discussions reflected in the Kirkwood email and the rate adjustment concerns. His testimony insulated the cure and termination process from the "pretext" narrative that Vantor is advancing. His statement that "the data spoke for itself" is both credible and resonant, and his claim of not having seen the Kirkwood email prior to litigation is corroborated by the email's distribution list.

4. Post-cure-period data showing continued non-compliance. Hess's testimony regarding VTS's continued failure to meet SLO thresholds after the cure period expired on February 17, 2022 bolsters the argument that VTS's alleged cure was insufficient. This evidence demonstrates that termination was not premature or the product of an artificially truncated cure period. VTS had 30 days to cure — the full period prescribed by the TSA — and its performance did not materially improve during that period or afterward.

B. Risks and Areas for Monitoring

1. The "pretext" narrative and the Kirkwood email. CRS will likely argue at summary judgment that Hess's "independence" is a facade and that the compliance process was orchestrated at a higher level within Stonefield to provide contractual cover for a commercially motivated termination. The September 22, 2021 Kirkwood email — "If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract" — remains the principal documentary vulnerability. While Hess was not copied on the email and credibly denied having seen it, CRS may argue that the sentiment expressed in the email permeated Stonefield's management culture and that Hess was aware of or influenced by it, even without having seen the specific document. We should prepare a detailed response to this argument for summary judgment briefing, emphasizing both the absence of a document trail connecting the Kirkwood sentiment to Hess and the overwhelming objective justification for the Cure Notice based on the performance data.

2. Unresolved cargo claims. The three unresolved cargo claims at the time of the Cure Notice represent a minor but identifiable point of vulnerability. CRS could argue that Stonefield included claims that had not been verified, thereby inflating the cargo claims ratio cited in the Cure Notice. However, this argument is significantly weakened by Hess's testimony that the calculation methodology (based on submitted claims, not resolved claims) was applied consistently across all carriers and was consistent with the TSA's definition. Moreover, the cargo claims were only one of five SLO categories in which VTS was deficient, and the remaining four categories independently constituted material breaches.

3. General awareness of the rate adjustment. Although Hess did not see the specific Ashford Meridian rate analysis memo before issuing the Cure Notice, he acknowledged general awareness that rates adjust annually under Section 5.3 of the TSA. CRS could attempt to use this general awareness to argue that Hess understood the cost implications of the upcoming rate cycle and factored this knowledge — consciously or unconsciously — into the timing of the Cure Notice. The strongest rebuttal is the chronology: the Cure Notice was issued on January 18, 2022, before the Ashford Meridian memo was prepared, and the performance data on which the Cure Notice was based was objectively severe and warranted a compliance action irrespective of any rate considerations.

C. Recommendations

1. Summary Judgment Roadmap (Document 124). The Hess deposition transcript should be cited prominently in the Summary Judgment Roadmap, which is currently being prepared by the litigation team. In particular, the following portions of Hess's testimony should be highlighted: (a) the testimony confirming that the Cure Notice metrics were derived from VTS's own Carrier Performance Portal data; (b) the testimony that VTS's February 14, 2022 response did not dispute the accuracy of those metrics; (c) the testimony establishing the independence of the compliance process from commercial considerations; and (d) the testimony regarding post-cure-period data confirming continued non-compliance.

2. Trial Witness Potential. Hess should be considered as a potential trial witness if the case proceeds past summary judgment. His demeanor during the deposition was calm, detailed, and consistent under both direct and cross-examination. He explained complex compliance and contractual concepts in accessible terms without appearing rehearsed or evasive. These qualities would be effective before a jury, particularly in presenting the narrative that Stonefield followed a legitimate, data-driven compliance process.

3. Coordination with Expert Report. Hess's testimony should be cross-referenced with the rebuttal expert report of Dr. Evelyn Rosser of Kensington Analytics Group LLC, which was served on August 25, 2023. Dr. Rosser's report relies on the same VTS performance data from the Carrier Performance Portal to conclude that Stonefield's termination of the TSA was valid for Cause and that Vantor's claimed damages should be $0 on that basis. The alignment between Hess's fact testimony and Dr. Rosser's expert analysis strengthens both the factual and expert components of Stonefield's defense.

4. Coordination with Milescu Deposition Summary. Hess's testimony should be coordinated with the Milescu deposition summary (Document 80, dated August 11, 2023). Sandra Milescu's admission during her deposition that VTS pulled 85 tractors off Stonefield-dedicated lanes without notification directly corroborates Hess's testimony that the performance declines were caused by VTS's own operational decisions, not by Stonefield's volume tenders. The Milescu email's express anticipation that "SLG won't notice until January" further confirms that the tractor redeployment was a deliberate, concealed decision by VTS — not a forced response to any alleged Stonefield breach.

XV. Distribution and Confidentiality Notice

This memorandum constitutes privileged attorney work product prepared in anticipation of litigation in the matter of Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.). It reflects the mental impressions, conclusions, and legal theories of counsel and is protected from disclosure under Federal Rule of Civil Procedure 26(b)(3) and the attorney work product doctrine. This memorandum should not be disclosed, distributed, forwarded, or otherwise made available to any person outside Calderwood & Harkness LLP or to any authorized client representative without the prior written approval of Samuel Eklund, Responsible Partner.

Distributed to:

• Samuel Eklund, Responsible Partner

• Patrick Gallagher, Lead Associate

Cc:

• Helen Tsao (file copy)

• Linda Osei (billing partner, for reference)

Filed in: Matter No. 1012-00005, Category VI (Depositions)

Prepared by:

Simone Laroche Associate, Litigation (General) Calderwood & Harkness LLP 200 Park Avenue, 38th Floor New York, NY 10166

Date: August 1, 2023

Matter:	Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.)
Calderwood & Harkness LLP Matter No.:	1012-00005
Date of Memorandum:	August 1, 2023
Prepared By:	Simone Laroche, Associate, Litigation (General)
To:	Samuel Eklund, Responsible Partner; Patrick Gallagher, Lead Associate
Re:	Summary and Analysis of Deposition of Raymond Hess, Director of Contract Compliance, Stonefield Logistics Group Inc.
Date of Deposition:	July 27, 2023
Duration:	Approximately 5 hours (9:30 a.m.–3:15 p.m., including lunch break and two short recesses)
Location:	Offices of Calderwood & Harkness LLP, 200 Park Avenue, 38th Floor, New York, NY 10166
Court Reporter:	To be identified from final certified transcript
Videographer:	None
Examining Counsel (Plaintiff):	Jason Whitford, Senior Associate, Caldwell Royce & Shapiro LLP ("CRS"); Alina Petrov, Associate, Caldwell Royce & Shapiro LLP (second chair — attended but did not examine)
Defending Counsel (Defendant):	Patrick Gallagher, Associate, Calderwood & Harkness LLP
Witness:	Raymond Hess, Director, Contract Compliance, Stonefield Logistics Group Inc.
SLO Category	TSA Threshold	Q4 2021 Actual	Shortfall
On-time pickup rate	≥ 95%	78.2%	-16.8 percentage points
On-time delivery rate	≥ 93%	81.6%	-11.4 percentage points
Tender acceptance rate	≥ 90%	71.4%	-18.6 percentage points
Equipment availability	≥ 85% of committed fleet (340 of 400 tractors)	~62% (~248 of 400 tractors)	-23 percentage points
Cargo claims ratio	≤ 0.5% of gross revenue	~1.07% ($387,400 across 16 claims, Nov.–Dec. 2021)	+0.57 percentage points
Exhibit	Description	Bates No.
Exhibit 1	Transportation Services Agreement dated March 15, 2019 (SLG-VTS-2019-0315), specifically Sections 5.3, 7.4, 12.1, 13.1, 13.2, 14.2, and Schedule C	N/A (contract document)
Exhibit 2	Cure Notice dated January 18, 2022	SLG-000412
Exhibit 3	VTS Response Letter dated February 14, 2022	VHC-003287
Exhibit 4	VTS Q4 2021 Carrier Performance Portal Reports	SLG-007891 through SLG-007903

Exhibit 5	Stonefield Internal Email — Janet Kirkwood to Carlos Medina, September 22, 2021	SLG-015442
Exhibit 6	Ashford Meridian Rate Adjustment Analysis Memo, February 2022	SLG-021806
Exhibit 7	VTS Cargo Claims Register, November–December 2021	SLG-009104
Exhibit 8	Stonefield Termination Letter dated March 4, 2022	SLG-000428
Exhibit 9	Email from Sandra Milescu to Anatoly Vantorovich, November 12, 2021	VHC-008417

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 38th Floor New York, New York 10166
DEPOSITION SUMMARY — RAYMOND HESS
Transcript Status: Rough transcript received from the court reporter on July 31, 2023. Final certified transcript is pending. All page and line references in this memorandum are to the rough transcript and are subject to revision upon receipt of the final transcript. The final transcript should be reviewed against this summary and any corrections noted.
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I. Executive Summary
Raymond Hess testified on July 27, 2023 as a fact witness on behalf of defendant Stonefield Logistics Group Inc. ("Stonefield" or "SLG"). Hess's testimony addressed four principal areas: (1) his role as Director of Contract Compliance in monitoring Vantor Transportation Services LLC's ("VTS") performance under the Transportation Services Agreement (the "TSA," Contract Ref. No. SLG-VTS-2019-0315, dated March 15, 2019); (2) the process by which he drafted and issued the Cure Notice dated January 18, 2022; (3) his evaluation of VTS's February 14, 2022 response to the Cure Notice and his assessment of whether cure had been achieved; and (4) his involvement in the factual analysis underlying the March 4, 2022 decision to terminate the TSA for Cause.
Overall Assessment. Hess was a well-prepared, credible witness who testified in a manner that was materially consistent with the key documents in evidence and with his prior witness preparation. His witness preparation session notes, dated July 24, 2023, reflect the themes and positions that Hess maintained throughout the deposition. He was composed under cross-examination, answered questions with appropriate specificity, and did not volunteer information beyond what was asked. He did not make any material concessions adverse to Stonefield's position on the core issues in the case.
Key Favorable Testimony. The following aspects of Hess's testimony are most significant for Stonefield's defense:
1.  Metrics Derived from VTS's Own Data. Hess confirmed that all Q4 2021 performance metrics cited in the January 18, 2022 Cure Notice were derived from VTS's own Carrier Performance Portal data — that is, the data was inputted and reported by VTS personnel, not generated by Stonefield's internal tracking systems alone. This is a critical point because it effectively forecloses any argument by Vantor that Stonefield fabricated or manipulated the performance data underlying the Cure Notice.
2.  VTS Did Not Dispute the Metrics. Hess testified that VTS's February 14, 2022 response letter did not challenge the accuracy of any of the five Q4 2021 performance figures cited in the Cure Notice. VTS disputed causation — arguing that Stonefield's own volume shortfalls and industry-wide conditions were responsible for the performance deterioration — but it did not contest the numbers themselves.
3.  Independent Verification by Hess. Prior to issuing the Cure Notice, Hess independently verified the Q4 2021 performance metrics by cross-referencing the Portal data against Stonefield's internal tracking records. This dual verification undercuts any suggestion that the Cure Notice was based on unreliable or unexamined data.
4.  Legal Input on Cure Notice. Hess testified that the Cure Notice was drafted with input from outside counsel at Ashford Meridian LLP — specifically, Lorraine Beckwith (Partner, Commercial Contracts) — to ensure compliance with Section 13.2 of the TSA, which requires that the notice specify the alleged breach "with reasonable particularity." This testimony supports the argument that Stonefield followed proper contractual procedures.
5.  Post-Cure-Period Data Confirmed Continued Non-Compliance. Hess testified that he continued monitoring VTS performance after the cure period expired on February 17, 2022, and that the data through early March 2022 showed VTS continued to fall below the Service Level Obligation ("SLO") thresholds across all five categories. This undermines any argument that VTS was on a trajectory toward compliance or that termination was premature.
Key Risk Areas. CRS pursued two lines of cross-examination that warrant careful monitoring for purposes of the anticipated summary judgment motion:
First, CRS attempted to establish that Hess was aware of the upcoming April 2022 annual rate adjustment under Section 5.3 of the TSA when he drafted and issued the Cure Notice on January 18, 2022, thereby implying that the Cure Notice was motivated by Stonefield's desire to terminate the contract before a projected 14.3% rate increase took effect. Hess acknowledged general awareness that rates adjust annually under Section 5.3 but credibly denied that the rate adjustment played any role in his compliance analysis, and the chronology supports his testimony (the Ashford Meridian rate analysis memo was not prepared until February 2022, after the Cure Notice had already been sent).
Second, CRS attempted to establish that Hess received instructions from senior management — specifically from Janet Kirkwood (VP, Carrier Relations) and Carlos Medina (SVP, Operations) — to build a termination record against VTS. CRS introduced the September 22, 2021 internal Kirkwood-to-Medina email in which Kirkwood stated, "If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract." Hess testified credibly that he was not a recipient or copy on the email, had not seen it prior to this litigation, and that his compliance recommendation was independent of any such sentiment. While Hess handled both areas well, these remain areas CRS will likely revisit at summary judgment in support of Vantor's "pretext" theory.
II. Background and Role of Witness
Hess testified that he has served as Director of Contract Compliance at Stonefield Logistics Group Inc. since June 2018. In that capacity, he reports directly to Carlos Medina, Senior Vice President of Operations. Prior to joining Stonefield, Hess worked in freight brokerage operations at a regional logistics company (the name of which was not explored in detail during the deposition), where he gained experience in carrier management, transportation operations, and performance tracking systems. He holds a bachelor's degree in supply chain management.
Hess described his responsibilities at Stonefield as follows:
•  Monitoring carrier performance across Stonefield's network against the SLOs set forth in Stonefield's individual carrier contracts. At the time of the events at issue, Stonefield maintained contractual relationships with approximately 12,000 approved carriers, of which VTS was among the largest by contract value and lane coverage.
•  Managing the contract compliance process, including the identification of performance deficiencies, the issuance of cure notices and default notices in accordance with the applicable contract terms, and the management of carrier remediation processes.
•  Coordinating with Stonefield's in-house legal department — headed by Tobias Wren, General Counsel — and with outside counsel on contract enforcement matters, including the preparation of cure notices that comply with applicable contractual notice provisions.
•  Maintaining and overseeing the Contract Compliance team, which consists of approximately eight full-time analysts and compliance managers who handle day-to-day performance tracking across the carrier network.
Hess testified that he personally oversaw the VTS relationship from a compliance perspective beginning in approximately late 2020, when VTS performance first began to show signs of decline. Prior to that time, VTS's contract compliance was handled at a more routine level by members of his team, without Hess's direct personal involvement. The escalation of the VTS matter to Hess's personal oversight was consistent with Stonefield's standard operating procedures, which call for director-level involvement when a carrier's performance metrics fall below contractual thresholds for two or more consecutive reporting periods.
III. Testimony Regarding VTS Performance Monitoring
A. The Carrier Performance Portal
Hess provided extensive testimony regarding the Carrier Performance Portal (the "Portal"), which served as the primary vehicle through which VTS reported its operational performance data to Stonefield. Hess described the Portal as a shared, web-based platform accessible to both Stonefield compliance personnel and VTS operations personnel. The platform allowed VTS to input its own operational data on a weekly and monthly basis, which Stonefield's Contract Compliance team would then review, audit, and flag for exceptions or anomalies.
Hess testified that the Portal tracked all five SLO categories specified in the TSA:
1.  On-time pickup rate — the percentage of tendered loads picked up within the contractually specified pickup window;
2.  On-time delivery rate — the percentage of loads delivered within the contractually specified delivery window;
3.  Tender acceptance rate — the percentage of load tenders offered by Stonefield that VTS accepted;
4.  Cargo claims ratio — the total dollar value of cargo claims as a percentage of gross revenue attributable to VTS's operations under the TSA; and
5.  Equipment availability compliance — the percentage of committed fleet capacity (measured in tractors) that VTS made available for Stonefield-dedicated lanes.
Each of these five metrics corresponded to a specific SLO threshold set forth in Schedule C of the TSA, which established minimum performance levels that VTS was obligated to maintain on a rolling quarterly basis.
Hess identified Sandra Milescu's operations team at VTS as the personnel responsible for inputting the data into the Portal. He explained that VTS operations staff would upload weekly data summaries, including load-level detail on pickup and delivery times, tender responses, and fleet deployment figures. Stonefield's compliance analysts would then review the uploaded data, perform spot audits against Stonefield's own dispatch records, and flag discrepancies for resolution.
Critically, Hess testified that the Portal data was the "primary and most reliable" source of performance metrics for purposes of contract compliance because the data was generated and entered by VTS itself. Hess stated, in substance, that because the data was self-reported by VTS, Vantor could not credibly dispute the accuracy of the performance figures that formed the basis for the Cure Notice. This testimony is of significant strategic importance for our Cause defense and should be cited prominently in summary judgment briefing.
B. Q4 2021 Performance Deterioration
Hess testified that he began observing significant deterioration in VTS's SLO performance starting in approximately September and October 2021. While VTS had shown intermittent signs of underperformance earlier in 2021, the Q4 2021 period represented a marked and sustained decline across all five SLO categories.
By the end of Q4 2021, the Portal data reflected the following performance metrics, all of which Hess stated he personally verified by cross-referencing the Portal reports against Stonefield's internal dispatch and claims records:
Hess emphasized that the deficiencies were not marginal — VTS was substantially below the contractual thresholds in every category. He characterized the Q4 2021 results as the worst quarterly performance by any major carrier in Stonefield's network during his tenure as Director of Contract Compliance.
Hess testified that in early January 2022, he formally flagged these deficiencies to Carlos Medina (SVP, Operations) and Janet Kirkwood (VP, Carrier Relations). He recommended initiating the formal cure process under Section 13.1(a) of the TSA, which provides that a party may terminate the agreement for Cause if the other party fails to cure a material breach within 30 calendar days after receipt of written notice specifying the breach with reasonable particularity. Medina and Kirkwood concurred with Hess's recommendation, and Hess proceeded to prepare the Cure Notice.
C. Prior Performance Discussions with VTS
Hess testified that the January 2022 Cure Notice was not the first occasion on which Stonefield raised VTS's performance deficiencies. To the contrary, Hess described multiple informal communications with VTS representatives throughout Q3 and Q4 2021 in which he and other Stonefield personnel communicated concerns about declining performance.
Hess identified at least three specific instances of such communications:
1.  Late September 2021 — Phone call with Derek Pruitt (VP, Business Development, Vantor). Hess testified that he spoke with Pruitt by telephone in approximately late September 2021 regarding declining tender acceptance rates. Hess informed Pruitt that VTS's tender acceptance rate had dropped below 80% in recent weeks and that this was significantly below the 90% contractual threshold. Pruitt acknowledged the issue and attributed it to industry-wide driver shortages and difficulty retaining qualified drivers for long-haul lanes.
2.  October 2021 — Email exchange with Sandra Milescu (COO, Vantor/VTS). Hess testified that he exchanged emails with Milescu in approximately mid-October 2021 regarding equipment availability shortfalls. Hess raised concerns that VTS was not deploying the committed number of tractors on Stonefield-dedicated lanes and asked Milescu to provide an updated fleet deployment plan. Milescu responded that VTS was working to address equipment shortfalls but cited difficulties in securing replacement drivers and the high cost of leasing additional tractors.
3.  November 2021 — Formal performance review call. Hess described a scheduled performance review call in approximately mid-November 2021 that included, among others, Janet Kirkwood and Hess on the Stonefield side, and Derek Pruitt and Sandra Milescu on the VTS side. During this call, VTS acknowledged operational challenges across multiple SLO categories. VTS representatives attributed the performance declines to a nationwide driver shortage, supply chain disruptions arising from pandemic-related conditions, and the general tightening of the truckload carrier market during that period.
Importantly, Hess testified that during none of these discussions did VTS disclose that it had reassigned tractors away from Stonefield-dedicated lanes. The November 12, 2021 Milescu-to-Vantorovich email — in which Milescu wrote, "We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January" — was not brought to Hess's attention at any time prior to the discovery phase of this litigation. Hess stated that had he been aware of this deliberate redeployment, he would have escalated the matter immediately.
IV. Testimony Regarding the Cure Notice (January 18, 2022)
A. Drafting Process
Hess provided detailed testimony regarding the process by which the January 18, 2022 Cure Notice was drafted and finalized. He testified that he prepared the initial draft of the Cure Notice in early January 2022, working from the Q4 2021 Portal data and from internal performance tracking spreadsheets maintained by his Contract Compliance team. The draft identified each of the five SLO categories, stated the applicable contractual threshold for each, provided the actual Q4 2021 performance figure, cited the relevant sections of the TSA, and described the nature and extent of VTS's failure to meet its obligations.
Hess testified that he consulted with Tobias Wren, Stonefield's General Counsel, regarding the contractual requirements for issuance of a cure notice under the TSA. Wren directed Hess to coordinate with Ashford Meridian LLP, Stonefield's outside commercial counsel, to ensure that the notice satisfied the specificity requirements of Section 13.2.
Ashford Meridian LLP — specifically, Lorraine Beckwith (Partner, Commercial Contracts) — reviewed and provided input on the draft Cure Notice. Section 13.2 of the TSA requires that any notice of alleged breach be made "with reasonable particularity," and Beckwith's review was directed at ensuring that the Cure Notice met this standard. Beckwith's input included recommendations regarding the level of detail to be provided with respect to each SLO category and the inclusion of specific data references and TSA section citations. Hess testified that the final Cure Notice incorporated Beckwith's suggested revisions.
The final Cure Notice as issued identified each of the five SLO categories in which VTS was deficient, stated the contractual threshold for each, provided the actual Q4 2021 performance figure drawn from the Portal data, cited the relevant TSA provisions (including Sections 12.1 and 13.1(a) and Schedule C), and set forth the 30-day cure period as required by Section 13.1(a).
In addition to the five SLO deficiencies, the Cure Notice also identified VTS's chronic failure to provide substitute equipment or surge capacity as required under Section 7.4 of the TSA. Section 7.4 obligated VTS to make commercially reasonable efforts to provide substitute tractors or engage backup carriers when its equipment availability fell below committed levels. Hess testified that VTS had not complied with Section 7.4 during the Q4 2021 period, and this failure was included in the Cure Notice as an additional basis for the alleged breach.
B. Delivery of Cure Notice
Hess testified that the Cure Notice was transmitted on January 18, 2022. He sent the notice by email directly to Sandra Milescu (COO, VTS), which was the standard mode of operational communication between Hess and VTS personnel. A hard copy of the Cure Notice was also sent by overnight courier to VTS's principal office, in compliance with the notice provisions of the TSA (Section 14.2, which specifies that notices may be delivered by nationally recognized overnight courier service).
Hess confirmed that the cure period was 30 calendar days from receipt, as specified in Section 13.1(a) of the TSA. Based on VTS's receipt of the Cure Notice on or about January 18, 2022, the cure deadline was established as February 17, 2022. Hess stated that the 30-day period was calculated in accordance with the TSA's notice provisions and that he did not seek to shorten, extend, or otherwise modify the contractually prescribed cure period.
C. Independence of Decision
CRS devoted a significant portion of its examination to questioning whether Hess received instructions or pressure from senior management at Stonefield to initiate the cure process. This line of questioning was directed at supporting Vantor's theory that the Cure Notice was pretextual — that is, that it was issued not because of genuine compliance concerns but rather as a mechanism to engineer a termination that Stonefield's management had already decided upon for commercial reasons.
Hess denied this characterization clearly and consistently. He testified that the decision to recommend issuance of a Cure Notice was a routine compliance function driven by the severity of VTS's SLO failures, which, as noted above, were the worst of any major carrier in Stonefield's network during the relevant period. Hess stated that under Stonefield's standard compliance procedures, a carrier exhibiting failures of this magnitude across all five SLO categories would ordinarily be subject to a formal cure process, regardless of the carrier's identity or the commercial value of the contract.
Hess acknowledged that he was generally aware that Janet Kirkwood and Carlos Medina had been discussing VTS's performance challenges and potential alternative carrier options in the September–October 2021 time frame. Hess stated, however, that his awareness of these discussions did not influence his compliance determination. He testified that the compliance process was initiated through his department's standard procedures and that his recommendation was based solely on the performance data.
When pressed by CRS as to whether anyone had instructed him to "build a case" for termination, Hess responded: "No. My job is to enforce compliance with the contractual SLOs. The data showed that VTS was in material breach across all five categories. I would have issued a Cure Notice regardless of any other considerations."
V. Testimony Regarding VTS's Response (February 14, 2022)
A. Content of the Response
Hess confirmed that he received VTS's response to the Cure Notice on or about February 14, 2022 — three days before the expiration of the 30-day cure period. The response letter was dated February 14, 2022, and was sent by Derek Pruitt (VP, Business Development, Vantor Holdings Corp.) to Janet Kirkwood (VP, Carrier Relations, Stonefield), with a copy to Hess.
Hess testified regarding the substance of VTS's response as follows:
1.  Acknowledgment of "operational challenges." The response acknowledged that VTS had experienced "operational challenges" during the Q4 2021 period that affected its performance under the TSA. Hess noted that the letter used the term "operational challenges" rather than expressly conceding a breach of the SLOs.
2.  Attribution of performance deficiencies to external factors and Stonefield's conduct. The response attributed VTS's performance deficiencies to three principal factors: (a) a nationwide driver shortage affecting the truckload carrier industry generally; (b) Stonefield's alleged failure to tender the minimum Annual Contract Volume ("ACV") of $43.2 million, which VTS contended disrupted its fleet planning and economic viability on Stonefield-dedicated lanes; and (c) Stonefield's alleged diversion of volume to spot market carriers in lieu of tendering loads to VTS.
3.  Assertion of "substantial cure." The response asserted that VTS had "substantially cured" the identified deficiencies during the 30-day cure period by implementing remedial measures, including the hiring of additional drivers, adjustments to dispatch priorities on Stonefield-dedicated lanes, and the engagement of backup carriers to supplement capacity.
4.  Dispute of certain cargo claims data. The response challenged certain aspects of the cargo claims data cited in the Cure Notice, though Hess testified the challenge was not directed at the overall claims ratio figure but rather at the inclusion of specific claims that VTS contended were still under investigation at the time of the notice.
Critically, Hess testified that the VTS response letter did not dispute the accuracy of the underlying Q4 2021 performance metrics cited in the Cure Notice. VTS did not challenge the on-time pickup rate of 78.2%, the on-time delivery rate of 81.6%, the tender acceptance rate of 71.4%, the equipment availability figure of approximately 62%, or the aggregate number and dollar amount of cargo claims. The dispute advanced in VTS's response was over causation — i.e., why the metrics were as low as they were — not over the accuracy of the metrics themselves. This distinction is of fundamental importance to Stonefield's Cause defense and should be a central theme of summary judgment briefing.
B. Evaluation of Alleged Cure
Hess testified at length regarding his evaluation of whether VTS had demonstrated actual remediation of the identified breaches during the 30-day cure period running from January 18 through February 17, 2022.
Hess explained that he reviewed the Portal data for the cure period on a weekly basis to assess whether VTS's performance was improving toward compliance with the SLO thresholds. He testified that while there were marginal improvements in some metrics during the cure period, VTS remained materially below the SLO thresholds across all five categories as of the February 17, 2022 deadline. Specifically:
•  On-time pickup rate improved from 78.2% (Q4 2021) to approximately 82–83% during the cure period, but this remained well below the 95% contractual threshold — a shortfall of approximately 12–13 percentage points.
•  On-time delivery rate showed a modest improvement to approximately 83–84%, still substantially below the 93% contractual threshold.
•  Tender acceptance rate remained in the range of 73–75%, far below the 90% contractual threshold.
•  Equipment availability did not meaningfully improve during the cure period. Hess testified that the fleet available for Stonefield-dedicated lanes remained in the range of 250–260 tractors, compared to the 400-tractor commitment under the TSA. This represented only approximately 62–65% of committed capacity — essentially unchanged from the Q4 2021 figures — and was substantially below the 85% threshold (340 tractors).
•  Cargo claims ratio data for the cure period was not fully available as of February 17, but the trend had not shown material improvement.
Based on this analysis, Hess concluded that VTS had failed to cure the identified breaches within the 30-day cure period. He testified that VTS's response letter, while listing certain remedial actions being taken or planned, was not supported by the actual performance data in the Portal. He stated: "Words on paper are not the same as actual performance. The data showed that VTS was still materially below every SLO threshold as of February 17, 2022."
C. Post-Cure-Period Data
Hess testified that he continued to monitor VTS's performance after the cure period expired on February 17, 2022, through the date of the termination letter on March 4, 2022 — a period of approximately two and a half weeks.
The post-cure-period data showed that VTS's performance did not materially improve and, in some categories, continued to deteriorate:
•  On-time pickup rate in late February 2022 was approximately 80%, representing a slight decline from the cure period figure of 82–83%.
•  Tender acceptance rate remained below 75%.
•  Equipment availability did not improve and remained in the range of 250–260 tractors.
Hess communicated this assessment to Tobias Wren (General Counsel) and Carlos Medina (SVP, Operations) in late February 2022. Based on his review of the data, Hess recommended that Stonefield proceed with termination of the TSA for Cause under Section 13.1(a). Hess testified that in his professional judgment, VTS's performance trend did not indicate any likelihood of achieving compliance with the SLO thresholds in the near term, and that continued operation under the TSA would expose Stonefield to ongoing service failures and potential liability to its own customers.
VI. Testimony Regarding the Termination Letter (March 4, 2022)
Hess confirmed that the formal termination letter was drafted by Tobias Wren, Stonefield's General Counsel, and was transmitted on March 4, 2022 to both Vantor Holdings Corp. and Vantor Transportation Services LLC. Hess testified that he provided input on the factual basis for the termination — specifically, the performance data and cure period analysis — but did not draft the termination letter himself. The drafting of the letter was handled by the legal department with input from outside counsel.
The termination letter, as Hess described it and as reflected in the documentary record (Exhibit 8, SLG-000428), stated that VTS had "failed to cure the material breaches" identified in the January 18, 2022 Cure Notice within the 30-day cure period prescribed by Section 13.1(a) of the TSA. The letter terminated the TSA effective immediately pursuant to Section 13.1(a) and reserved all rights and remedies available to Stonefield under the agreement and at law or in equity.
Hess testified that he believed the termination was appropriate and warranted based on the severity and persistence of VTS's SLO failures, the lack of meaningful improvement during the cure period, and the continued deterioration of performance in the post-cure-period window. He characterized VTS's failures as among the most sustained and severe compliance deficiencies he had encountered in his career at Stonefield.
Hess confirmed on examination that, at the time of termination, the TSA had a remaining term of approximately 2 years and 27 days (from the March 4, 2022 termination date through the original TSA expiration date of March 31, 2024). This remaining term is relevant to Vantor's damages theory, which asserts lost profits for the unexpired contract period.
VII. Cross-Examination — Rate Adjustment Awareness
Jason Whitford of CRS devoted approximately 45 minutes to examining Hess regarding his awareness of the anticipated April 2022 annual rate adjustment under Section 5.3 of the TSA. This line of questioning was directed at Vantor's theory that Stonefield's true motivation for terminating the TSA was to avoid a substantial rate increase that would have taken effect on April 1, 2022 — approximately four weeks after the termination date — rather than legitimate concerns about VTS's performance.
Hess acknowledged on cross-examination that he was generally aware that rates under the TSA were subject to annual adjustment each April 1, as specified in Section 5.3. He testified, however, that the rate adjustment mechanism and the specific rate calculations were not within his area of responsibility. Rate negotiations and commercial pricing decisions were handled by Stonefield's commercial and finance teams, not by the Contract Compliance department.
When asked whether he had seen or been aware of the Ashford Meridian rate adjustment analysis memo from February 2022, Hess stated that he did not recall seeing the memo prior to issuing the Cure Notice on January 18, 2022. CRS then showed Hess the memo (Exhibit 6, SLG-021806). Hess acknowledged that the memo projected a rate increase of approximately 14.3% — from a weighted average per-mile rate of $2.87 to $3.28 — based on the contractual formula in Section 5.3 and prevailing market indices. Hess acknowledged that this was a significant increase but stated: "This was not a factor in my compliance analysis. I was focused on VTS's performance data, not on rate adjustments."
Hess denied categorically that the timing of the Cure Notice was motivated by a desire to terminate the TSA before the April 2022 rate adjustment took effect. He reiterated that the Cure Notice was issued because VTS's Q4 2021 performance was materially deficient across all five SLO categories and that the decision to issue the notice was made on the basis of the performance data alone.
Assessment. Hess's testimony on this point was consistent, detailed, and credible. Importantly, the chronology supports his position. The Cure Notice was issued on January 18, 2022. The Ashford Meridian rate adjustment analysis memo was prepared in February 2022 — that is, after the Cure Notice had already been sent. CRS did not effectively challenge this timeline. While CRS may argue that Stonefield's management was generally aware that rates would increase in April (as they did every year under Section 5.3), Hess's testimony that the rate adjustment was not within his compliance purview and did not influence his analysis is consistent and well-supported. CRS did not produce any document or communication suggesting that Hess was directed to consider the rate adjustment in connection with the Cure Notice.
VIII. Cross-Examination — Instructions from Management
CRS pursued a second major line of cross-examination directed at establishing that Hess's compliance recommendation was not truly independent but was instead the product of direction from Stonefield's senior management to build a contractual basis for terminating the VTS relationship.
Whitford questioned Hess regarding whether he received any direction from Marcus Denton (CEO), Tobias Wren (General Counsel), Carlos Medina (SVP, Operations), or Janet Kirkwood (VP, Carrier Relations) to initiate the cure process or to accelerate the timeline toward termination.
Hess testified firmly: "My recommendation to issue the Cure Notice was based on my independent review of VTS's Q4 2021 performance data. No one told me to find a reason to terminate. The data spoke for itself."
CRS then introduced the September 22, 2021 internal email from Janet Kirkwood to Carlos Medina (Exhibit 5, SLG-015442). The email reads, in relevant part: "VTS is a mess. We're already moving volume to Cascade and Briarwood on Lanes 8–14. If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract."
Hess was asked whether he had seen this email prior to the litigation. He testified that he was not a recipient or a copy on the email and had not seen it before it was produced in discovery. He stated that the email did not reflect any instruction to him and that he was not privy to the communications between Kirkwood and Medina regarding volume reallocation decisions.
CRS pressed Hess on whether he had discussed the "pull the plug" sentiment expressed in the Kirkwood email with either Kirkwood or Medina. Hess acknowledged that he had general conversations with both Kirkwood and Medina about VTS's poor performance during the Q3 and Q4 2021 time frame, as would be expected given his compliance role. However, he stated that those conversations were focused on the performance data and the appropriate compliance response, not on the broader commercial or strategic question of whether to terminate the relationship. He reiterated that the compliance process was initiated through his department's standard procedures, which applied uniformly to all carriers in Stonefield's network.
Assessment. Hess's testimony on this point was effective in insulating the compliance process from the more aggressive language in the Kirkwood email. His denial of having seen the email prior to litigation is corroborated by the fact that he was not a recipient or copy on the communication. His characterization of his conversations with Kirkwood and Medina as routine compliance discussions — rather than strategic planning sessions for termination — is consistent with his role and with the documentary record.
However, this remains a potential risk area at summary judgment. CRS may argue that Hess's "independent" analysis was, in reality, part of a coordinated termination strategy orchestrated at higher levels within Stonefield, and that Hess — whether or not he received explicit instructions — was aware of management's desire to end the VTS relationship and shaped his compliance actions accordingly. The fact that Hess was not copied on the Kirkwood email is helpful in responding to this argument, but we should be prepared for CRS to argue that the absence of a document trail to Hess does not preclude informal oral communications conveying the same sentiment. Hess's testimony that "the data spoke for itself" is a strong response, particularly given the magnitude of VTS's SLO failures.
IX. Cross-Examination — Volume Shortfall and Causation
CRS questioned Hess at some length regarding Stonefield's own performance under the ACV provisions of the TSA, attempting to establish that Stonefield's failure to tender the minimum Annual Contract Volume of $43.2 million to VTS was a contributing or proximate cause of VTS's performance deficiencies. This line of questioning relates to Vantor's affirmative defense and counterclaim theory that Stonefield's own breach — in the form of volume shortfalls and diversion of freight to spot market carriers — excused VTS's SLO failures or rendered the termination wrongful.
Hess testified that the ACV and volume commitments were "commercial matters outside my compliance responsibilities" and that his role was limited to measuring VTS's performance against the contractual SLO thresholds, irrespective of the volume levels being tendered by Stonefield. He stated that the compliance analysis he conducted did not take into account whether Stonefield was meeting its own volume obligations, because the SLOs were structured as independent performance obligations of VTS that were not conditioned on Stonefield tendering any particular volume level.
CRS pressed this point. Whitford asked: "Isn't it true that if Stonefield didn't send enough freight to VTS, VTS would have to redeploy its fleet to remain economically viable?" Hess responded: "I can only speak to the contractual metrics. VTS was required to maintain certain performance levels and fleet availability under the TSA. Whether they chose to redeploy fleet assets is a business decision they made without notifying us."
CRS then turned to the November 12, 2021 Milescu-to-Vantorovich email (Exhibit 9, VHC-008417), in which Sandra Milescu wrote: "We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January." Hess was asked whether he was aware, during the Q4 2021 period or at the time of the Cure Notice, that VTS had deliberately pulled 85 tractors off Stonefield-dedicated lanes. Hess testified that he was not aware of this fact during the relevant period and learned of it only during the discovery phase of this litigation, when the Milescu email was produced.
Hess's testimony that he was unaware of the deliberate tractor redeployment is corroborated by the Milescu email itself, in which Milescu expressly anticipated that Stonefield would not notice the redeployment until January 2022. This corroboration strengthens Hess's credibility on this point and undercuts VTS's position that its performance declines were attributable to Stonefield's conduct rather than VTS's own operational decisions.
Assessment. Hess handled the volume/causation line of questioning effectively by staying within the boundaries of his role and competency. He did not speculate about commercial matters outside his responsibility, did not attempt to opine on whether Stonefield met its ACV obligations, and consistently redirected the discussion to the factual performance data. His testimony that VTS's redeployment of 85 tractors was a unilateral, undisclosed decision by VTS — not a forced response to Stonefield's volume tenders — is a powerful point that should be coordinated with the Milescu deposition summary (Document 80).
X. Cross-Examination — Cargo Claims Data
CRS challenged the cargo claims ratio cited in the Cure Notice — approximately 1.07% of gross revenue, based on 16 documented claims totaling $387,400 in the November–December 2021 period — on the ground that some of the underlying claims were still being investigated by VTS's claims department at the time the Cure Notice was issued on January 18, 2022.
Hess acknowledged that, as of January 18, 2022, three of the 16 claims referenced in the Cure Notice were still under investigation by VTS's claims department and had not been finally resolved. However, he maintained that all 16 claims had been formally submitted through the claims reporting process and were therefore properly included in the cargo claims ratio calculation. He testified that the TSA's definition of the cargo claims ratio — as set forth in Schedule C — was based on claims submitted, not claims resolved or adjudicated, and that Stonefield's calculation methodology was consistent with this definition.
Hess further testified that the methodology for calculating the claims ratio — total dollar value of submitted claims divided by annualized gross revenue attributable to VTS operations under the TSA for the relevant period — was applied consistently across all carriers in Stonefield's network. He stated that the same methodology had been used by the Contract Compliance team for all cargo claims calculations since before he became Director in 2018, and that the methodology had not been altered or adjusted for purposes of the VTS Cure Notice.
CRS did not produce any documentary evidence contradicting the claims data or challenging the calculation methodology. Whitford's questioning on this point was relatively brief and did not elicit any concessions from Hess.
Assessment. This was a relatively minor line of attack. The cargo claims data, while one of the five SLO deficiencies cited in the Cure Notice, is the least significant of the five categories in terms of the magnitude of the shortfall. More importantly, even if the three unresolved claims were excluded entirely from the calculation, the remaining four SLO deficiencies — on-time pickup, on-time delivery, tender acceptance, and equipment availability — independently constituted material breaches of the TSA, each by a wide margin. CRS's challenge to the cargo claims data thus has limited practical impact on the overall Cause defense.
XI. Examination on Vantor's February 14, 2022 Response — "Substantial Cure" Assertions
CRS attempted to use Hess's testimony to validate Vantor's claim that VTS had "substantially cured" the breaches identified in the Cure Notice by the February 17, 2022 deadline. This line of questioning was directed at supporting Vantor's argument that, even if VTS's Q4 2021 performance was deficient, VTS took adequate corrective action during the 30-day cure period to satisfy its obligations under Section 13.1(a).
Hess was shown VTS's February 14 response letter (Exhibit 3, VHC-003287) and asked whether he agreed that VTS had taken steps to address the identified deficiencies. Hess acknowledged that the response letter described certain remedial actions that VTS stated it had undertaken or planned to undertake, including the hiring of additional drivers, adjustments to dispatch priorities on Stonefield-dedicated lanes, and the engagement of backup carriers to provide supplemental capacity. Hess stated, however, that the Portal data during the cure period did not reflect meaningful improvement corresponding to these claimed actions.
Hess was asked whether the marginal improvement in on-time pickup (from 78.2% to approximately 82–83%) demonstrated a trend toward compliance. Hess responded that while any improvement was noted, the absolute level remained far below the 95% contractual threshold and that a movement of four to five percentage points did not, in his assessment, constitute "cure" of a 16.8 percentage-point shortfall — particularly when the improvement would need to continue at an accelerating pace to reach the threshold within any reasonable timeframe.
Hess stated: "Words on paper are not the same as actual performance. The data showed that VTS was still materially below every SLO threshold as of February 17, 2022." He added that the purpose of the cure period under Section 13.1(a) was to provide the breaching party an opportunity to cure the breach — not merely to take preliminary steps toward eventual improvement.
Assessment. This testimony is strong for Stonefield's position that cure was not achieved. The distinction Hess drew between VTS's assertions of remedial action in its response letter and the actual performance data during the cure period is a key pillar of the Cause defense. The "words on paper versus actual performance" formulation is clear, memorable, and well-suited for use in summary judgment briefing and, potentially, at trial.
XII. Redirect Examination
On redirect examination, Patrick Gallagher elicited testimony from Hess that reinforced several critical points for Stonefield's defense. The redirect was focused and efficient, and Hess's responses were consistent with his prior testimony.
The principal points established on redirect were as follows:
1.  VTS's own data as the basis for the Cure Notice. Gallagher confirmed through Hess's testimony that the Cure Notice was drafted based on performance data inputted into the Carrier Performance Portal by VTS's own operations team. The metrics cited in the Cure Notice were, in essence, self-reported by Vantor/VTS, and Stonefield relied on this data precisely because it was generated by the carrier itself.
2.  VTS's failure to dispute the accuracy of the metrics. Hess confirmed that VTS's February 14, 2022 response letter did not dispute the accuracy of any of the Q4 2021 performance figures cited in the Cure Notice. The response contested causation — attributing the performance shortfalls to Stonefield's volume tenders and external market conditions — but accepted the metrics themselves as stated. Hess reiterated that this was a significant distinction: the numbers were not in dispute; only the reasons for the numbers.
3.  Independence of the compliance recommendation from commercial or financial considerations. Gallagher elicited testimony reinforcing that Hess's compliance recommendation was made independently of any commercial or financial considerations, including the April 2022 rate adjustment. Hess confirmed that the rate adjustment mechanism was handled by Stonefield's commercial and finance teams and was not a factor in his compliance analysis.
4.  Post-cure-period data confirmed continued non-compliance. Hess confirmed on redirect that the performance data for the period from February 17 through early March 2022 — after the cure period had expired — showed VTS continued to perform below SLO thresholds, further supporting the conclusion that VTS had not cured the identified breaches.
5.  Standard compliance procedures. Gallagher elicited testimony that Hess followed Stonefield's standard compliance procedures applicable to all carriers in its network. The procedures applied to VTS were not unique to or specifically designed for VTS; they were the same procedures that would have been applied to any carrier exhibiting comparable SLO failures. This point undercuts any suggestion that the compliance process was tailored to target VTS for pretextual termination.
XIII. Exhibits Used During Deposition
The following exhibits were marked, identified, and used during the Hess deposition. Copies of each exhibit are maintained in the deposition file under Matter No. 1012-00005, Category VI (Depositions).
XIV. Key Takeaways and Strategic Implications
A. Strengths
1.  VTS's own data as the basis for the Cure Notice. Hess's testimony that all five SLO metrics cited in the Cure Notice were derived from VTS's own Carrier Performance Portal data is extremely valuable for Stonefield's defense. This testimony preempts any argument by Vantor at summary judgment that Stonefield fabricated, manipulated, or selectively reported performance data to manufacture a basis for termination. The data was inputted by VTS personnel, maintained on a shared platform accessible to both parties, and verified by Hess through cross-referencing with Stonefield's internal tracking records. This is one of the strongest facts in Stonefield's Cause defense, and it should be cited prominently in summary judgment briefing.
2.  VTS's failure to dispute the accuracy of the metrics. The fact that VTS's February 14, 2022 response letter did not challenge the accuracy of any of the five Q4 2021 performance figures — only the causation of those figures — is a powerful point for Stonefield. It establishes that the parties are not in dispute about the factual predicate for the Cure Notice. Vantor's defense is limited to arguing that the reasons for the metrics excuse the non-compliance, which is a much more difficult position to sustain given the language of the SLOs and the independent nature of VTS's performance obligations. This point should be emphasized in the Statement of Undisputed Material Facts for the summary judgment motion.
3.  Effective separation of compliance from commercial strategy. Hess effectively separated his compliance role from the broader commercial and strategic discussions reflected in the Kirkwood email and the rate adjustment concerns. His testimony insulated the cure and termination process from the "pretext" narrative that Vantor is advancing. His statement that "the data spoke for itself" is both credible and resonant, and his claim of not having seen the Kirkwood email prior to litigation is corroborated by the email's distribution list.
4.  Post-cure-period data showing continued non-compliance. Hess's testimony regarding VTS's continued failure to meet SLO thresholds after the cure period expired on February 17, 2022 bolsters the argument that VTS's alleged cure was insufficient. This evidence demonstrates that termination was not premature or the product of an artificially truncated cure period. VTS had 30 days to cure — the full period prescribed by the TSA — and its performance did not materially improve during that period or afterward.
B. Risks and Areas for Monitoring
1.  The "pretext" narrative and the Kirkwood email. CRS will likely argue at summary judgment that Hess's "independence" is a facade and that the compliance process was orchestrated at a higher level within Stonefield to provide contractual cover for a commercially motivated termination. The September 22, 2021 Kirkwood email — "If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract" — remains the principal documentary vulnerability. While Hess was not copied on the email and credibly denied having seen it, CRS may argue that the sentiment expressed in the email permeated Stonefield's management culture and that Hess was aware of or influenced by it, even without having seen the specific document. We should prepare a detailed response to this argument for summary judgment briefing, emphasizing both the absence of a document trail connecting the Kirkwood sentiment to Hess and the overwhelming objective justification for the Cure Notice based on the performance data.
2.  Unresolved cargo claims. The three unresolved cargo claims at the time of the Cure Notice represent a minor but identifiable point of vulnerability. CRS could argue that Stonefield included claims that had not been verified, thereby inflating the cargo claims ratio cited in the Cure Notice. However, this argument is significantly weakened by Hess's testimony that the calculation methodology (based on submitted claims, not resolved claims) was applied consistently across all carriers and was consistent with the TSA's definition. Moreover, the cargo claims were only one of five SLO categories in which VTS was deficient, and the remaining four categories independently constituted material breaches.
3.  General awareness of the rate adjustment. Although Hess did not see the specific Ashford Meridian rate analysis memo before issuing the Cure Notice, he acknowledged general awareness that rates adjust annually under Section 5.3 of the TSA. CRS could attempt to use this general awareness to argue that Hess understood the cost implications of the upcoming rate cycle and factored this knowledge — consciously or unconsciously — into the timing of the Cure Notice. The strongest rebuttal is the chronology: the Cure Notice was issued on January 18, 2022, before the Ashford Meridian memo was prepared, and the performance data on which the Cure Notice was based was objectively severe and warranted a compliance action irrespective of any rate considerations.
C. Recommendations
1.  Summary Judgment Roadmap (Document 124). The Hess deposition transcript should be cited prominently in the Summary Judgment Roadmap, which is currently being prepared by the litigation team. In particular, the following portions of Hess's testimony should be highlighted: (a) the testimony confirming that the Cure Notice metrics were derived from VTS's own Carrier Performance Portal data; (b) the testimony that VTS's February 14, 2022 response did not dispute the accuracy of those metrics; (c) the testimony establishing the independence of the compliance process from commercial considerations; and (d) the testimony regarding post-cure-period data confirming continued non-compliance.
2.  Trial Witness Potential. Hess should be considered as a potential trial witness if the case proceeds past summary judgment. His demeanor during the deposition was calm, detailed, and consistent under both direct and cross-examination. He explained complex compliance and contractual concepts in accessible terms without appearing rehearsed or evasive. These qualities would be effective before a jury, particularly in presenting the narrative that Stonefield followed a legitimate, data-driven compliance process.
3.  Coordination with Expert Report. Hess's testimony should be cross-referenced with the rebuttal expert report of Dr. Evelyn Rosser of Kensington Analytics Group LLC, which was served on August 25, 2023. Dr. Rosser's report relies on the same VTS performance data from the Carrier Performance Portal to conclude that Stonefield's termination of the TSA was valid for Cause and that Vantor's claimed damages should be $0 on that basis. The alignment between Hess's fact testimony and Dr. Rosser's expert analysis strengthens both the factual and expert components of Stonefield's defense.
4.  Coordination with Milescu Deposition Summary. Hess's testimony should be coordinated with the Milescu deposition summary (Document 80, dated August 11, 2023). Sandra Milescu's admission during her deposition that VTS pulled 85 tractors off Stonefield-dedicated lanes without notification directly corroborates Hess's testimony that the performance declines were caused by VTS's own operational decisions, not by Stonefield's volume tenders. The Milescu email's express anticipation that "SLG won't notice until January" further confirms that the tractor redeployment was a deliberate, concealed decision by VTS — not a forced response to any alleged Stonefield breach.
XV. Distribution and Confidentiality Notice
This memorandum constitutes privileged attorney work product prepared in anticipation of litigation in the matter of Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.). It reflects the mental impressions, conclusions, and legal theories of counsel and is protected from disclosure under Federal Rule of Civil Procedure 26(b)(3) and the attorney work product doctrine. This memorandum should not be disclosed, distributed, forwarded, or otherwise made available to any person outside Calderwood & Harkness LLP or to any authorized client representative without the prior written approval of Samuel Eklund, Responsible Partner.
Distributed to:
•  Samuel Eklund, Responsible Partner
•  Patrick Gallagher, Lead Associate
Cc:
•  Helen Tsao (file copy)
•  Linda Osei (billing partner, for reference)
Filed in: Matter No. 1012-00005, Category VI (Depositions)
Prepared by:
Simone Laroche Associate, Litigation (General) Calderwood & Harkness LLP 200 Park Avenue, 38th Floor New York, NY 10166
Date: August 1, 2023
Matter: | Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.)
Calderwood & Harkness LLP Matter No.: | 1012-00005
Date of Memorandum: | August 1, 2023
Prepared By: | Simone Laroche, Associate, Litigation (General)
To: | Samuel Eklund, Responsible Partner; Patrick Gallagher, Lead Associate
Re: | Summary and Analysis of Deposition of Raymond Hess, Director of Contract Compliance, Stonefield Logistics Group Inc.
Date of Deposition: | July 27, 2023
Duration: | Approximately 5 hours (9:30 a.m.–3:15 p.m., including lunch break and two short recesses)
Location: | Offices of Calderwood & Harkness LLP, 200 Park Avenue, 38th Floor, New York, NY 10166
Court Reporter: | To be identified from final certified transcript
Videographer: | None
Examining Counsel (Plaintiff): | Jason Whitford, Senior Associate, Caldwell Royce & Shapiro LLP ("CRS"); Alina Petrov, Associate, Caldwell Royce & Shapiro LLP (second chair — attended but did not examine)
Defending Counsel (Defendant): | Patrick Gallagher, Associate, Calderwood & Harkness LLP
Witness: | Raymond Hess, Director, Contract Compliance, Stonefield Logistics Group Inc.
SLO Category | TSA Threshold | Q4 2021 Actual | Shortfall
On-time pickup rate | ≥ 95% | 78.2% | -16.8 percentage points
On-time delivery rate | ≥ 93% | 81.6% | -11.4 percentage points
Tender acceptance rate | ≥ 90% | 71.4% | -18.6 percentage points
Equipment availability | ≥ 85% of committed fleet (340 of 400 tractors) | ~62% (~248 of 400 tractors) | -23 percentage points
Cargo claims ratio | ≤ 0.5% of gross revenue | ~1.07% ($387,400 across 16 claims, Nov.–Dec. 2021) | +0.57 percentage points
Exhibit | Description | Bates No.
Exhibit 1 | Transportation Services Agreement dated March 15, 2019 (SLG-VTS-2019-0315), specifically Sections 5.3, 7.4, 12.1, 13.1, 13.2, 14.2, and Schedule C | N/A (contract document)
Exhibit 2 | Cure Notice dated January 18, 2022 | SLG-000412
Exhibit 3 | VTS Response Letter dated February 14, 2022 | VHC-003287
Exhibit 4 | VTS Q4 2021 Carrier Performance Portal Reports | SLG-007891 through SLG-007903
Exhibit 5 | Stonefield Internal Email — Janet Kirkwood to Carlos Medina, September 22, 2021 | SLG-015442
Exhibit 6 | Ashford Meridian Rate Adjustment Analysis Memo, February 2022 | SLG-021806
Exhibit 7 | VTS Cargo Claims Register, November–December 2021 | SLG-009104
Exhibit 8 | Stonefield Termination Letter dated March 4, 2022 | SLG-000428
Exhibit 9 | Email from Sandra Milescu to Anatoly Vantorovich, November 12, 2021 | VHC-008417

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

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