**PRIVILEGED AND CONFIDENTIAL** **ATTORNEY-CLIENT PRIVILEGED COMMUNICATION / ATTORNEY WORK PRODUCT**
Calderwood & Harkness Matter No. 1012-00005
Tobias, Alison —
I wanted to provide a comprehensive status update on the Vantor matter following the expiration of the most recent court-imposed deadline. As outlined below, the case is now effectively dormant, and we have several options for how to proceed. I would welcome your input on the recommended approach.
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**1. April 12 Deadline Expiration**
As you will recall, on February 12, 2024, the Honorable Margaret T. Calloway granted Vantor a 60-day extension to retain substitute counsel following Mr. Vantorovich's pro se appearance at the Order to Show Cause hearing. That extension expired on Friday, April 12, 2024.
As of this morning, no new counsel has entered an appearance on behalf of either Vantor Holdings Corp. or Vantor Transport Services LLC. No filings of any kind have been made by Vantor or Mr. Vantorovich since the February 12 hearing.
For context, the procedural history on this issue is as follows:
- **October 18, 2023:** Caldwell Royce & Shapiro LLP withdrew as Vantor's counsel, citing irreconcilable differences with the client (with approximately $870,000 in unpaid legal fees as the apparent basis). The Court granted the withdrawal and set an initial 60-day deadline of December 17, 2023 for Vantor to retain new counsel. - **December 17, 2023:** Deadline passed without action or any communication from Vantor. - **January 22, 2024:** Court issued an Order to Show Cause why the case should not be dismissed for failure to prosecute. - **February 12, 2024:** Vantorovich appeared pro se and requested 90 days; the Court granted 60 days (i.e., through April 12, 2024). - **April 12, 2024:** Second deadline expired. No action taken.
Critically, because Vantor Holdings Corp. is a corporation, it cannot appear pro se in federal court — it must be represented by licensed counsel. In its current posture, Vantor is effectively unable to prosecute its claims.
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**2. Case Effectively Dormant**
The docket reflects no pending motions of any kind. All discovery and dispositive motion deadlines under the February 17, 2023 Case Management Order have been stayed since October 18, 2023, when the Court granted Caldwell Royce's withdrawal. For reference, the key deadlines that are now moot in the current posture were:
- Fact discovery: September 29, 2023 - Expert discovery: January 12, 2024 - Dispositive motions: March 1, 2024
Additionally, the Court-ordered deposition of Vantorovich was never completed. The Court had directed completion by October 20, 2023, but the counsel withdrawal intervened and the deposition was never rescheduled.
Vantor's total claimed damages remain at **$95.4 million**, broken down as follows:
- Liquidated damages: $67.23 million - Lost profits: $18.7 million - Stranded assets: $5.2 million - Workforce reduction costs: $2.87 million - Mitigation costs: $1.4 million
Stonefield's position remains strong. Dr. Evelyn Rosser's rebuttal report (Kensington Analytics Group) opines that Stonefield's maximum exposure is **$8.2 million** under an alternative lost-profits theory, and **$0** if the termination is upheld as valid for Cause — which we believe is the most likely outcome on summary judgment.
I would also note that the original TSA term expired on March 31, 2024, which further diminishes any prospective damages argument Vantor might advance.
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**3. Recommended Approach: Quarterly Docket Monitoring**
Given the current posture, I recommend placing the matter on dormant/monitoring status at Calderwood & Harkness. In practice, this means the following:
- **Quarterly docket checks** via PACER review, conducted by Helen Tsao (senior paralegal on the matter), to monitor for any new filings, new counsel appearances, or sua sponte court orders. - **Estimated quarterly cost:** approximately **$500–$750** per check (paralegal time only). - **Full preservation** of all work product for potential reactivation, including the summary judgment roadmap memorandum prepared in September 2023, all deposition summaries, expert reports (including the Rosser report), and discovery analyses.
Triggers for reactivation of the matter would include: (a) a new counsel appearance by Vantor; (b) any court order or scheduling directive; (c) any filing by Vantor or Vantorovich; or (d) client instruction.
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**4. Options for Affirmative Case Resolution**
Beyond monitoring, there are three options for moving toward a definitive resolution. These are not mutually exclusive, and I discuss my recommendation below.
**Option 1 (Recommended): File Renewed Motion to Dismiss for Failure to Prosecute Under FRCP 41(b)**
This is the strongest option available given the procedural posture. Vantor has now failed to comply with two successive court-imposed deadlines, has no counsel of record, and has taken no prosecutorial action of any kind in over six months.
As you may recall, we prepared a draft motion in January 2024 and held it in reserve pending the outcome of the February 12 hearing. That draft can be finalized and filed promptly.
Under FRCP 41(b), involuntary dismissal for failure to prosecute operates as an adjudication on the merits — that is, a dismissal with prejudice — unless the Court specifies otherwise. Courts evaluate such motions under a multi-factor test that considers:
- Duration of plaintiff's inactivity - Prejudice to the defendant - Whether plaintiff received adequate notice - Effectiveness of lesser sanctions - Meritoriousness of the underlying claims
All of these factors favor Stonefield. The inactivity has been extended and repeated; Stonefield has incurred approximately **$4.42 million** in defense costs; Vantor has received ample notice and multiple opportunities to cure; lesser sanctions (the initial extension, the Order to Show Cause, and the second extension) have proven ineffective; and the underlying claims are subject to substantial challenge on the merits.
My recommendation is to file this motion after a brief additional waiting period — I would suggest **late May or early June 2024** — to further strengthen the record of inactivity. By that point, we will be approaching a full year since any substantive case activity.
**Estimated cost to prepare and file: approximately $15,000–$25,000.**
**Option 2: Continue Monitoring Only**
This is the lowest-cost approach in the near term but leaves the case indefinitely open on the docket. I want to flag several ongoing obligations that attach so long as the case remains pending:
- **Lender reporting:** Continued quarterly litigation updates to Lakeshore National Bank (Catherine Devereaux, SVP, Loan Administration) are required under Section 6.03(b) of the Credit Agreement (Ref. LNB-SLG-2017-CA-4402), which mandates reporting on litigation with potential liability exceeding $25 million. - **Financial reporting:** Continued disclosure as a contingent liability in Stonefield's audited financial statements (Clarendon Partners LLP, Robert Farraday, engagement partner). We continue to characterize the likelihood of a material adverse outcome as "remote," and I see no reason to change that assessment, but the disclosure obligation persists as long as the case is open.
The principal risk under this approach is that Vantor could eventually retain new counsel and seek to revive the case, though this becomes increasingly unlikely given the fee dispute history with prior counsel and the continued passage of time.
**Option 3: Contact Vantorovich Directly to Explore Voluntary Dismissal or Nominal Settlement**
We could approach Vantorovich directly — as a corporate representative of Vantor — to explore whether Vantor would agree to a voluntary dismissal with prejudice, potentially in exchange for a mutual release and a nominal payment. On the professional responsibility question: direct contact with a represented party is of course prohibited, but since Vantor currently has no counsel of record, communication with Vantorovich as a corporate representative is permissible, provided we exercise appropriate care.
Any such payment would fall within the previously authorized settlement range of $0–$4.5 million, though given the current posture, I would recommend offering at the very low end or $0 (mutual walk-away with releases). This approach could achieve finality more quickly than a contested motion, but it does signal a willingness to pay that may not be warranted by the circumstances.
This option could be pursued as an alternative if Option 1 is unsuccessful, or it could be pursued in parallel — i.e., we file the dismissal motion while simultaneously making a practical overture to Vantorovich. In my experience, the filing of a 41(b) motion often concentrates the mind and creates an opening for a practical resolution.
**My recommendation is to wait approximately 4–6 additional weeks and then file the FRCP 41(b) motion (Option 1), while keeping Option 3 available as a fallback or parallel track depending on how events develop.**
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**5. Lender and Audit Reporting**
Tobias — as a reminder, the next quarterly litigation update to Lakeshore National Bank is due shortly under the Q1 2024 reporting cycle. The update should reflect:
- Plaintiff's prior counsel (Caldwell Royce & Shapiro) withdrew in October 2023 - No substitute counsel has been retained - The case is effectively dormant with no pending motions or active deadlines - The Company continues to assess Vantor's claims as without merit - No change in exposure assessment
Patrick Gallagher will prepare a draft of this update for your review, consistent with our practice on prior quarterly submissions.
Separately, with respect to the annual audit letter and litigation status summary for Clarendon Partners, our most recent submission characterized the likelihood of a material adverse outcome as "remote." That assessment remains appropriate and will carry forward into the upcoming year-end reporting cycle.
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**6. Billing and Cost Summary**
For reference, the current billing posture is as follows:
- **Total fees and costs incurred through October 2023** (the last active period): approximately **$4.42 million** - Fees: ~$3.8 million - Costs/disbursements: ~$620,000 (including expert fees for Kensington Analytics Group, eDiscovery hosting at Pinnacle Forensics, deposition costs, and travel) - **Billing since October 2023:** Minimal — limited to docket monitoring, the January 8, 2024 letter to the Court (previously circulated), analysis of the February 12, 2024 hearing, and internal assessment memoranda. - **Going forward on dormant status:** Monthly billing will be negligible, limited to the quarterly docket checks described above. - **If Option 1 is pursued:** One-time estimated cost of $15,000–$25,000 to finalize and file the FRCP 41(b) motion.
As a reminder, the 10% courtesy discount on associate rates continues to apply per the Ridgeline portfolio company arrangement set forth in our September 1, 2022 engagement letter.
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**7. Next Steps**
I would ask that you and Alison review the options outlined above and confirm your preferred approach — whether Option 1, Option 2, Option 3, or some combination. As noted, my recommendation is Option 1 (motion to dismiss for failure to prosecute, filed in late May or early June), with Option 3 held in reserve.
I am happy to schedule a brief call to discuss if that would be helpful. Patrick and Linda are copied here and available to assist with any follow-up, including the Lakeshore quarterly update.
Thank you both for your attention to this. I look forward to hearing from you.
Best regards,
Samuel Eklund Partner Calderwood & Harkness LLP Direct: (212) 554-7180 seklund@calderwoodharkness.com
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