PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
INTERNAL MEMORANDUM
April 15, 2024
TO: Samuel Eklund, Responsible Partner, Litigation (General) Linda Osei, Billing Partner, Litigation (General)
FROM: Patrick Gallagher, Lead Associate, Litigation (General)
RE: Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.) — Case Dormancy Protocol and Monitoring Recommendations
MATTER NO.: 1012-00005
CLIENT: Stonefield Logistics Group Inc.
CC: Simone Laroche, Working Associate; Helen Tsao, Senior Paralegal; David Moretti, Litigation Support / eDiscovery Manager
I. Purpose and Summary of Recommendation
The purpose of this memorandum is to recommend that the firm formally place the Vantor Holdings Corp. v. Stonefield Logistics Group Inc. matter (the "Matter" or the "Case") on dormant/monitoring status within the firm's matter management system, to establish a detailed monitoring protocol for the duration of dormancy, to define specific triggers that would warrant full reactivation of the litigation team, and to ensure the comprehensive preservation of all work product and case materials for potential future use. This last objective is particularly important given that a motion for summary judgment had been substantially developed prior to the effective stalling of the case, and the underlying work product retains significant strategic value should the matter return to active litigation.
In summary, my recommendation is as follows. The Case has been effectively inactive since February 12, 2024, when Nikolai Vantorovich — the Chief Executive Officer and Founder of plaintiff Vantor Holdings Corp. ("Vantor") — appeared pro se before the Honorable Margaret T. Calloway, United States District Judge, and obtained a sixty-day extension (to April 12, 2024) within which to retain substitute counsel following the October 2023 withdrawal of Vantor's prior counsel, Caldwell Royce & Shapiro LLP. That deadline expired on April 12, 2024 — three days ago — with no new attorney having entered an appearance on behalf of Vantor and no filings of any kind having been made on the docket by or on behalf of Vantor.
Given Vantor's sustained failure to prosecute over a period now approaching six months (dating to the withdrawal of Caldwell Royce & Shapiro LLP in October 2023) and its failure to comply with two successive court-imposed deadlines for retention of substitute counsel, the Matter should be transitioned from active litigation to dormant/monitoring status. The monitoring protocol should include quarterly docket checks and maintain a reduced staffing footprint, while preserving all options for affirmative relief on behalf of our client, Stonefield Logistics Group Inc. ("Stonefield" or the "Client"). Those options include, most importantly, renewal of the motion to dismiss for failure to prosecute under Federal Rule of Civil Procedure 41(b) — a draft of which was substantially completed in January 2024 — as well as filing the substantially completed motion for summary judgment should the case be revived by opposing counsel at some future date.
This memorandum sets forth the procedural history, the current status of the Case, the recommended dormancy protocol, the triggers for reactivation, the work product preservation plan, the financial summary and cost projections, and the options available for affirmative resolution of the Case. I request that Sam and Linda review the recommendations and provide the approvals identified in Section IX below at their earliest convenience, and ideally within the next two weeks.
II. Procedural Background and Current Status
A. Litigation Overview
This action was commenced on August 12, 2022, when Vantor Holdings Corp. filed a complaint in the United States District Court for the Southern District of New York, captioned Vantor Holdings Corp. v. Stonefield Logistics Group Inc., and assigned Case No. 22-cv-07841. The matter was assigned to Judge Calloway upon filing and has remained on her docket throughout.
Vantor Holdings Corp. is a New York corporation headquartered at 580 Eighth Avenue, 14th Floor, New York, New York 10018. The plaintiff operates principally through its wholly owned operating subsidiary, Vantor Transport Services LLC ("VTS"), a New York limited liability company that provides over-the-road trucking, intermodal, and last-mile logistics services primarily in the northeastern and mid-Atlantic United States.
The defendant, Stonefield Logistics Group Inc., is a Delaware corporation headquartered at 4200 Commerce Parkway, Suite 800, Fort Worth, Texas 76102. Stonefield operates as a third-party logistics provider and freight brokerage, matching shippers with carrier capacity across a national transportation network. Stonefield is a portfolio company of Ridgeline Capital Partners, LP, which acquired a controlling interest in Stonefield in 2017.
The dispute arises from the termination of a five-year Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Ref. No. SLG-VTS-2019-0315). The TSA was entered into between Stonefield, in its capacity as "Shipper-Broker," and Vantor Transport Services LLC, as the contracted carrier. The TSA had a term running from April 1, 2019 through March 31, 2024, with an Annual Committed Volume ("ACV") of $43.2 million and a total five-year minimum commitment of $216 million. The TSA governed the terms under which VTS would provide dedicated and contract carrier services on specified primary and secondary freight lanes in the northeastern United States on behalf of Stonefield's shipper customers.
Stonefield terminated the TSA effective March 4, 2022, invoking termination for Cause under Section 13.1(a) of the TSA. The termination followed a formal Cure Notice issued on January 18, 2022, which identified material breaches across all five of the Service Level Obligations ("SLOs") set forth in the TSA during the fourth quarter of 2021. Specifically, the Cure Notice documented the following performance deficiencies: on-time pickup performance of 78.2% against a contractual SLO of 95%; on-time delivery performance of 81.6% against a contractual SLO of 93%; tender acceptance rate of 71.4% against a contractual SLO of 90%; equipment availability of 62% against a contractual SLO of 85%; and a cargo claims ratio of 1.07% against a contractual maximum SLO of 0.5%. The TSA provided for a thirty-day cure period following delivery of a Cure Notice; VTS submitted a written response on February 14, 2022, but did not cure the identified deficiencies within the cure period.
Vantor claims approximately $95.4 million in total damages, broken down as follows:
• Liquidated damages under TSA Section 14.2: $67.23 million, calculated as 75% of the ACV of $43.2 million multiplied by the approximately 2.07 remaining contract years at the time of termination.
• Lost profits: $18.7 million, representing projected margin on non-Stonefield business that Vantor claims it was unable to obtain because of its reliance on the TSA.
• Stranded assets: $5.2 million, representing the depreciated value of tractors, trailers, and related equipment that Vantor claims were dedicated to the Stonefield account and could not be redeployed.
• Workforce reduction costs: $2.87 million, representing severance, benefits continuation, and related costs associated with the reduction of approximately 185 drivers and support staff following termination.
• Mitigation costs: $1.4 million, representing costs allegedly incurred in attempting to secure replacement volume.
Calderwood & Harkness LLP was engaged as lead defense counsel for Stonefield on September 1, 2022, following an initial conflict check and engagement letter executed with Tobias Wren, General Counsel of Stonefield. A Notice of Appearance on behalf of Stonefield was filed with the court on September 8, 2022.
B. Pleadings and Dispositive Motion History
On October 14, 2022, Stonefield filed a Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), targeting two aspects of Vantor's complaint. First, the motion argued that the liquidated damages clause in TSA Section 14.2 constituted an unenforceable penalty under New York law because the formula — 75% of remaining ACV — bore no reasonable relationship to anticipated or actual harm and was grossly disproportionate to any conceivable loss, particularly in light of the mutual consequential damages waiver in TSA Section 15.1. Second, the motion argued that Vantor's lost profits claim was inadequately pled because Vantor failed to allege with the requisite specificity the basis for projecting $18.7 million in lost profits from non-Stonefield business that it was allegedly unable to pursue.
On November 18, 2022, Vantor filed its opposition to the Motion to Dismiss, arguing that the enforceability of the liquidated damages clause was a fact-intensive inquiry inappropriate for resolution on a Rule 12(b)(6) motion and that the lost profits allegations were sufficient under the liberal notice pleading standard of Rule 8(a).
Before the court ruled on the Motion to Dismiss, Vantor exercised its right to amend under Federal Rule of Civil Procedure 15(a)(1) and filed an Amended Complaint on December 2, 2022. The Amended Complaint added several significant allegations: that Stonefield itself had breached the TSA by diverting committed freight volumes to alternative carriers, including Cascade Freight Systems Inc. and Briarwood Trucking Co., in violation of lane exclusivity provisions; that Stonefield engaged in pretextual termination designed to avoid a 14.3% rate adjustment that was scheduled to take effect on April 1, 2022, under the annual rate escalation mechanism in TSA Section 7.3; and that Stonefield had systematically reduced its tender volume to VTS in the months preceding the Cure Notice in order to manufacture the performance failures cited therein.
On December 16, 2022, the court denied the pending Motion to Dismiss as moot in light of the filing of the Amended Complaint.
On January 13, 2023, Stonefield filed its Answer to the Amended Complaint, asserting fourteen affirmative defenses — including valid termination for Cause, failure to mitigate, waiver, estoppel, and the contractual bar on consequential damages — together with a Counterclaim seeking a declaratory judgment that the termination of the TSA was valid and for Cause under Section 13.1(a) and that no liquidated damages or other amounts are owed to Vantor or VTS under the TSA. The declaratory judgment counterclaim was included to provide Stonefield with an affirmative mechanism to obtain a binding judicial determination on the validity of the termination, which has collateral significance for Stonefield's financial reporting and ongoing compliance obligations under its credit facility.
On January 27, 2023, Vantor filed its Answer to Stonefield's Counterclaim, denying the material allegations and asserting several affirmative defenses.
C. Discovery Phase
The Initial Pretrial Conference before Judge Calloway was held on February 10, 2023. At the conference, the parties presented a joint proposed case management plan, which the court adopted with minor modifications. On February 17, 2023, Judge Calloway entered the Case Management Order (the "CMO") establishing the following deadlines: fact discovery to be completed by September 29, 2023; expert discovery to be completed by January 12, 2024; and all dispositive motions to be filed by March 1, 2024.
Written discovery. Stonefield propounded its First Set of Interrogatories (25 interrogatories) and First Request for Production of Documents (38 requests) on March 6, 2023, targeting the core factual underpinnings of Vantor's claims, including the calculation of damages, the circumstances of the alleged fleet redeployment to the Northwind Distribution Co. account, and the basis for the pretextual termination theory. Stonefield simultaneously served its First Set of Requests for Admission (30 requests), which sought admissions on the Q4 2021 SLO failures and VTS's acknowledgment of those failures in its February 14, 2022 Cure Response. On May 5, 2023, Stonefield served its Second Request for Production (12 targeted requests) specifically addressing fleet redeployment decisions, communications with Northwind Distribution Co., and internal VTS fleet management records.
Document Productions. Stonefield produced a total of 42,387 documents comprising approximately 186,000 pages on April 14, 2023, Bates-stamped SLG-000001 through SLG-042387. The production was managed through Pinnacle Forensics LLC, the firm's eDiscovery vendor (Project ID PF-SLG-2022-0914). A privilege log accompanying the initial production identified 1,247 documents withheld on the basis of attorney-client privilege, work product protection, or both; a supplemental privilege log added 218 additional documents following a second collection from Stonefield's legal department network drives. All privilege determinations were reviewed by Simone Laroche and Helen Tsao under my supervision.
Vantor produced 28,914 documents comprising approximately 112,000 pages on April 28, 2023. The production was incomplete in several respects, and Stonefield filed a motion to compel on May 19, 2023, seeking, among other things, fleet management records, internal fleet redeployment communications, and financial records relating to the Northwind Distribution Co. account. Judge Calloway granted the motion to compel in relevant part by order dated June 9, 2023, and Vantor produced a supplemental set of 4,218 documents on June 22, 2023. These supplemental documents proved highly probative, as they included internal VTS fleet management memoranda confirming the diversion of eighty-five tractors from Stonefield-dedicated lanes to the Northwind account in October 2021 without prior notice to or authorization from Stonefield.
Third-Party discovery. On June 28, 2023, Stonefield served subpoenas duces tecum on Cascade Freight Systems Inc. and Briarwood Trucking Co. — the two alternative carriers identified in Vantor's Amended Complaint as recipients of improperly diverted Stonefield freight volumes. Both carriers responded in a timely fashion. Analysis of the third-party productions confirmed that Stonefield's use of Cascade and Briarwood was limited to Secondary Lanes (Lanes 8 through 14 in the TSA's Lane Matrix, Exhibit C to the TSA), which were not subject to the exclusivity provisions applicable to Primary Lanes (Lanes 1 through 7). This evidence supports Stonefield's defense that it did not breach any lane exclusivity obligation and undermines a core element of Vantor's pretextual termination theory.
Expert discovery. Vantor served the expert report of Dr. Philip Trask of Trask Greystone & Associates on May 15, 2023. Dr. Trask's report opined that Vantor sustained damages of approximately $95.4 million, consistent with the damages claimed in the Amended Complaint. Dr. Trask's methodology relied on a discounted cash flow analysis and incorporated projections of volume growth, rate escalations, and margin expansion that we believe are unsupported by the historical data and contain significant methodological flaws, as discussed in our Daubert analysis (see Section VI.C below).
Stonefield served the rebuttal expert report of Dr. Evelyn Rosser of Kensington Analytics Group LLC on August 25, 2023. Dr. Rosser's 48-page report concluded that if the termination was valid and for Cause — as Stonefield contends — Vantor's damages are $0. Under an alternative scenario in which the court were to find termination invalid, Dr. Rosser opined that Vantor's maximum recoverable damages would be approximately $8.2 million under a properly calculated lost-profits methodology, reflecting Vantor's actual margins, its documented failure to mitigate, and the exclusion of contractually barred consequential damages.
D. Depositions. Five fact depositions were taken during the discovery period, all of which yielded testimony favorable to Stonefield's defense:
Derek Pruitt, Vice President of Business Development, Vantor — deposed on July 10, 2023 (7 hours). Pruitt was Vantor's primary witness on the commercial relationship with Stonefield and the damages claim. Pruitt made several admissions that are damaging to Vantor's case: he acknowledged that VTS "struggled" with fleet capacity during Q4 2021 due to the competing demands of the Northwind Distribution Co. account and a nationwide driver shortage; he conceded that VTS did not dispute the underlying performance metrics cited in the January 18, 2022 Cure Notice; and he was unable to identify any specific mitigation steps taken by Vantor or VTS following termination to replace the Stonefield volume, instead testifying vaguely that VTS "put the word out" to potential customers.
Janet Kirkwood, Vice President of Carrier Relations, Stonefield — deposed on July 14, 2023 (6.5 hours). Kirkwood was the Stonefield executive responsible for managing the VTS carrier relationship and for overseeing the Cure Notice process. She testified that Stonefield's decision to use Cascade Freight Systems and Briarwood Trucking was limited to Secondary Lanes where VTS had no exclusivity rights and was driven by operational necessity when VTS repeatedly declined tenders on those lanes. Kirkwood denied that the April 2022 rate adjustment played any role in the termination decision, testifying that the decision to issue the Cure Notice was made in January 2022 — well before the rate adjustment mechanism was invoked — based solely on Q4 2021 performance data.
Raymond Hess, Director of Contract Compliance, Stonefield — deposed on July 27, 2023 (5 hours). Hess was responsible for monitoring carrier performance against contractual SLOs. He confirmed that the metrics cited in the Cure Notice were derived directly from VTS's own Carrier Performance Portal data submissions — the same portal that VTS used to self-report its performance to Stonefield on a monthly basis. Critically, Hess confirmed that VTS did not contest the accuracy of the performance metrics in its February 14, 2022 Cure Response; rather, VTS attributed the performance shortfalls to "market conditions" and "temporary fleet constraints" and requested an extension of the cure period, which Stonefield declined.
Sandra Milescu, Chief Operating Officer, Vantor/VTS — deposed on August 4, 2023 (7 hours). Milescu's testimony was perhaps the most damaging to Vantor's case. She confirmed that 85 tractors that had been dedicated to Stonefield Primary Lanes were reassigned to the Northwind Distribution Co. account in October 2021 — a decision she personally approved — without notifying Stonefield. When pressed on why Stonefield was not informed of the redeployment, Milescu was unable to provide a coherent explanation, testifying only that she "didn't think it would affect service levels" and that the redeployment was intended to be "temporary." This testimony directly undermines Vantor's argument that the Q4 2021 SLO failures were attributable to market conditions rather than Vantor's own management decisions, and it fatally compromises the pretextual termination theory.
Nikolai Vantorovich, Chief Executive Officer and Founder, Vantor — deposed on August 18, 2023 (4.5 hours, partial). Vantorovich was a difficult and evasive witness. He claimed he was "not involved in day-to-day fleet decisions" and repeatedly deferred to Milescu on operational questions. He was unable to explain why VTS diverted fleet resources from the Stonefield account to Northwind, why VTS failed to take meaningful mitigation steps after termination, or why Vantor's damages claim included categories of loss that appear to be contractually barred consequential damages. After approximately 4.5 hours of testimony, Vantorovich's personal attorney (separate from CRS) requested a suspension of the deposition on the ground that the witness was experiencing illness. The deposition was suspended, and Judge Calloway subsequently ordered that it be completed by October 20, 2023 (per the court's September 22, 2023 order). However, the deposition was never completed — CRS withdrew as counsel approximately two weeks later, and no further deposition was scheduled.
E. Plaintiff's Counsel Withdrawal and Subsequent Events
On October 3, 2023, Caldwell Royce & Shapiro LLP ("CRS," located at 1 Liberty Plaza, 22nd Floor, New York, New York 10006) filed a Motion to Withdraw as counsel for Vantor Holdings Corp. The motion cited "irreconcilable differences" between the firm and its client as the basis for withdrawal. While the motion did not elaborate on the nature of the differences in the public filing, the docket materials and the accompanying declaration strongly suggest that the dispute was financial in nature. The withdrawal motion disclosed that CRS was owed approximately $870,000 in unpaid legal fees and costs at the time of the motion, and that Vantor had failed to respond to multiple invoices and collection communications.
On October 18, 2023, Judge Calloway granted the Motion to Withdraw. In the accompanying order, the court directed Vantor to retain new counsel within sixty days — that is, by December 17, 2023. The court simultaneously stayed all remaining deadlines in the CMO pending the appearance of new counsel, noting that a corporate party cannot proceed pro se in federal court and that no further filings by Vantor would be accepted absent an appearance by licensed counsel.
The December 17, 2023 deadline came and went without any new attorney entering an appearance on behalf of Vantor. No communication of any kind was received from Vantor or from any prospective counsel during this period.
On January 8, 2024, Calderwood & Harkness filed a letter to Judge Calloway on behalf of Stonefield, noting Vantor's failure to retain substitute counsel within the court-imposed deadline and requesting that the court either schedule a status conference or consider dismissal of Vantor's claims for failure to prosecute pursuant to Federal Rule of Civil Procedure 41(b). The letter detailed the history of inactivity, the incomplete deposition of Vantorovich, and the prejudice to Stonefield from the ongoing uncertainty.
On January 22, 2024, Judge Calloway issued an Order to Show Cause why Vantor's claims should not be dismissed for failure to prosecute under FRCP 41(b) and Local Civil Rule 41.2. The order was served on Vantor at its principal office and on Vantorovich personally. The return date was set for February 12, 2024.
On February 12, 2024, Nikolai Vantorovich appeared personally and pro se before Judge Calloway in response to the Order to Show Cause. Vantorovich represented to the court that he had been in discussions with "several firms" about potential representation but had not yet finalized an engagement. He requested a ninety-day extension to retain counsel. Judge Calloway granted only sixty days, setting a new deadline of April 12, 2024. The court admonished Vantorovich that as a corporate entity, Vantor Holdings Corp. must be represented by licensed counsel to take any further action in the case, and that Vantorovich's personal pro se appearance did not and could not cure this deficiency. The court stated on the record that no further extensions would be granted absent extraordinary circumstances.
As of April 12, 2024 — the expiration of the second court-imposed deadline — no new counsel has entered an appearance for Vantor. No filings of any kind have been made on the docket by or on behalf of Vantor. No court orders have been issued since the February 12 hearing. There are no pending motions, no scheduled conferences, and no scheduled hearings. The case is, for all practical purposes, dormant.
III. Recommendation: Transition to Dormant/Monitoring Status
A. Basis for Dormancy Designation
Based on the procedural history set forth above, I recommend that the firm formally designate this Matter as dormant within our matter management system. The basis for this recommendation is as follows:
First, Vantor has taken no affirmative steps to prosecute this case since approximately October 2023 — a period of roughly six months. There have been no filings, no communications with the court or with defense counsel, and no indication of any intent to resume prosecution. The only docket activity since CRS's withdrawal was Vantorovich's pro se appearance at the February 12 show cause hearing, at which he requested (and received) an extension that he subsequently failed to utilize.
Second, Vantor's former counsel withdrew over a substantial fee dispute. CRS was owed approximately $870,000 at the time of withdrawal, suggesting that Vantor is experiencing significant financial difficulties or, at a minimum, a persistent unwillingness to fund this litigation. The magnitude of the unpaid fees — representing approximately one year of aggressive litigation — also suggests that prospective replacement counsel would likely require a substantial retainer or contingency arrangement, which may be difficult for Vantor to secure given the weakened posture of its case.
Third, Vantor has now failed to retain substitute counsel despite two successive court-imposed deadlines: the initial December 17, 2023 deadline and the extended April 12, 2024 deadline. The court explicitly warned Vantorovich at the February 12 hearing that no further extensions would be granted absent extraordinary circumstances, creating a significant procedural barrier to any future attempt to restart the case.
Fourth, as a New York corporation, Vantor cannot appear pro se in federal court. It cannot file motions, briefs, discovery requests, or any other papers, and it cannot participate in hearings, conferences, or trial, without representation by licensed counsel admitted to practice in the Southern District of New York. Vantorovich's personal pro se appearance at the February 12 hearing does not cure this fundamental deficiency for the corporate plaintiff. Until and unless new counsel enters an appearance, Vantor is functionally incapable of taking any action in this litigation.
Fifth, all CMO deadlines — the fact discovery deadline (September 29, 2023), the expert discovery deadline (January 12, 2024), and the dispositive motion deadline (March 1, 2024) — are stayed pursuant to Judge Calloway's October 18, 2023 order. These deadlines cannot be lifted and the case cannot proceed without new counsel appearing and the court entering a revised scheduling order. Even if Vantor were to retain counsel today, the case would require a new case management conference, a revised scheduling order, and potentially a reopening of certain discovery issues (including completion of Vantorovich's deposition), all of which would add months to the timeline.
Sixth, and finally, there are no indications from any source — the docket, communications with the court, informal contacts, or any outreach from Vantor or prospective counsel — that new representation is imminent or even actively being pursued. The combination of Vantor's apparent financial difficulties, the substantial unpaid fees owed to CRS, the weakened posture of Vantor's case following the discovery revelations (particularly the Milescu testimony regarding the Northwind fleet diversion), and the approaching six-month mark of complete inactivity collectively suggest that the probability of case reactivation is low, though not zero.
B. Staffing Reduction
Upon approval of the dormancy designation, I recommend reducing the active litigation team to a monitoring configuration as follows:
• Patrick Gallagher (Lead Associate): Periodic oversight of the monitoring protocol, review of quarterly docket reports, liaison with the responsible partner, and coordination with the client on quarterly updates. Estimated time commitment: 1–2 hours per quarter.
• Helen Tsao (Senior Paralegal): Primary responsibility for quarterly docket checks via PACER, preparation of the Quarterly Docket Check Report, and ongoing file maintenance to ensure the integrity and accessibility of the case file. Estimated time commitment: 2–3 hours per quarter.
• David Moretti (Litigation Support / eDiscovery Manager): Coordination with Pinnacle Forensics LLC to maintain the eDiscovery platform on archival tier, periodic verification of data integrity, and preservation of all review workflows, TAR models, and coding decisions. Estimated time commitment: 1 hour per quarter.
• Simone Laroche (Working Associate) and Kara Nystrom: No further active assignments on this matter during the dormancy period. Both Laroche and Nystrom should remain available and can be reactivated on short notice if circumstances warrant. Laroche in particular has deep familiarity with the summary judgment work product and would be essential to any reactivation effort.
Samuel Eklund should remain as responsible partner on the matter and will receive quarterly briefings from me summarizing the status of the case and any changes in the recommended course of action. Linda Osei should continue as billing partner; monthly billing during the dormancy period will be minimal, consisting primarily of docket check costs, eDiscovery platform hosting fees, and any client reporting requirements that arise during the applicable billing period.
C. Client Communication
I have already sent a preliminary communication to the client regarding the expiration of the April 12 deadline and the absence of any new counsel appearance. Specifically, by email dated April 16, 2024, I advised Tobias Wren, General Counsel of Stonefield, and Alison Trang, Partner at Ridgeline Capital Partners, LP, and Stonefield Board member, that the case is effectively dormant and recommended that Stonefield transition to a quarterly monitoring arrangement at significantly reduced cost. I have not yet received a substantive response and will follow up within the next week.
Going forward, I propose providing quarterly written updates to Wren and Trang summarizing docket activity (or the absence thereof) and any changes in our recommended course of action. These updates should be timed to align with the quarterly docket checks described in Section IV below, so that each client communication reflects the most current docket information.
In addition, we must continue to provide quarterly litigation updates to Catherine Devereaux, Senior Vice President of Loan Administration at Lakeshore National Bank, as required under Section 6.03(b) of the Credit Agreement between Stonefield and Lakeshore (Ref. No. LNB-SLG-2017-CA-4402). That provision requires notification and periodic reporting of any pending litigation involving potential liability exceeding $25 million. The next quarterly update to Lakeshore is due approximately July 2024. These updates should note the dormant status of the case and the absence of any active prosecution by Vantor, while continuing to disclose the case as pending until a final resolution is achieved.
Finally, we should continue to support Stonefield's annual financial reporting and audit disclosure needs. I anticipate preparing an annual litigation status letter addressed to Tobias Wren, Priya Ramachandran (Chief Financial Officer of Stonefield), and Robert Farraday (Engagement Partner at Clarendon Partners LLP, Stonefield's independent auditor), characterizing the likelihood of a material adverse outcome in this matter as "remote" given the current case posture. The "remote" characterization is appropriate in light of Vantor's sustained failure to prosecute, its inability to proceed without counsel, the strength of Stonefield's defenses on the merits, and the substantial weaknesses in Vantor's case that were exposed during discovery.
IV. Quarterly Docket Monitoring Protocol
A. Frequency and Responsibility
Helen Tsao will be responsible for performing a comprehensive docket check via PACER on every calendar quarter. The target dates for these checks will be the first Monday of January, April, July, and October of each year, beginning with the first scheduled check in July 2024.
Upon completion of each docket check, Tsao will prepare a brief written report (the "Quarterly Docket Check Report") addressed to me, summarizing the following categories of information:
(a) any new filings by any party, including Vantor, Stonefield, or any third party;
(b) any new counsel appearances, whether on behalf of Vantor or any successor or assignee;
(c) any court orders, whether entered on motion or sua sponte;
(d) any changes to the scheduling order, case management deadlines, or hearing calendar;
(e) the total number of months of docket inactivity since the last filing or court order; and
(f) any other developments or anomalies noted on the docket.
Upon receipt of each Quarterly Docket Check Report, I will review the report and assess whether any development warrants escalation or a change in the recommended course of action. In the event of a significant development — particularly any of the triggering events identified in Section IV.B below — I will immediately notify Samuel Eklund and coordinate with the team to assess the appropriate response. Routine "no activity" reports will be circulated to Eklund, Osei, Laroche, and Moretti within five business days of receipt.
B. Docket Items Triggering Immediate Escalation
Certain docket events would require immediate attention and escalation to the responsible partner, regardless of whether they occur at the time of a scheduled quarterly check or at any other time. If Tsao becomes aware of any such event through any means — including PACER alerts, informal notification from the court, or communication from any party — she should notify me immediately, and I will in turn notify Eklund. The triggering events are as follows:
1. Appearance of new counsel for Vantor. The entry of appearance by any attorney on behalf of Vantor Holdings Corp. would signal the potential reactivation of the case and would require immediate reassessment of our litigation strategy, staffing, and budget. This is the single most significant potential triggering event.
2. Any filing by Vantor, whether or not through counsel. While a filing by Vantor without counsel would be procedurally improper (as a corporate party cannot appear pro se), any such filing would indicate renewed activity and would need to be addressed — either by a motion to strike or by recognition that counsel has been retained but the formal appearance has not yet been filed.
3. Any sua sponte court order. This includes, without limitation, a dismissal for failure to prosecute under FRCP 41(b) or Local Civil Rule 41.2; an order to show cause; a scheduling order; an order administratively closing the case; or any other directive from the court. A sua sponte dismissal would require prompt analysis to determine whether it is with or without prejudice and what effect it has on Stonefield's declaratory judgment counterclaim.
4. Any contact from Vantorovich or from any attorney claiming to represent Vantor. Any communication — whether formal or informal, written or oral — from Nikolai Vantorovich or from any attorney purporting to act on behalf of Vantor or VTS should be immediately reported and routed to me and to Eklund.
5. Any assignment of Vantor's claims. We should monitor for any indication that Vantor's claims have been assigned to a third-party litigation funder, a claims aggregator, or any other assignee. Such an assignment could inject new financial resources and litigation sophistication into the case and would materially alter the risk profile.
V. Triggers for Full Reactivation
A. Vantor Retains New Counsel
If new counsel enters an appearance on behalf of Vantor, the litigation team should be immediately reactivated to full staffing, including recall of Simone Laroche and any additional associate or paralegal resources needed to address the anticipated surge of activity. The following steps should be taken upon reactivation:
First, I will work with Laroche to review and update the Summary Judgment Roadmap Memorandum dated September 15, 2023 (discussed in detail in Section VI.C below), along with all supporting work product, to determine whether any developments during the dormancy period — including any changes in applicable law, new Second Circuit or Supreme Court authority, or any additional information obtained from the client — affect our analysis or strategy. We will also need to determine whether any additional discovery is required or whether the existing record is sufficient to support the motion.
Second, we should assess whether the court will set a new case management schedule and, if so, prepare proposed revised deadlines for submission to the court. It is likely that Judge Calloway will convene a case management conference promptly after new counsel appears, and we should be prepared with a proposed scheduling order that accounts for the substantial work already completed during the prior discovery phase. In particular, we should advocate for a relatively compressed schedule given the advanced state of the case, including an early dispositive motion deadline that would allow us to file the summary judgment motion without unnecessary delay.
Third, we should reassess Stonefield's settlement posture. The current settlement authority is $0 to $4.5 million, as established in the Settlement Authority Memorandum dated November 8, 2022, and updated following the completion of fact discovery on August 30, 2023. Given the developments since the authority was last reviewed — including Vantor's sustained failure to prosecute, the withdrawal of CRS, and the further weakening of Vantor's case posture — it may be appropriate to revisit whether the current authority range remains suitable. I recommend discussing this with Tobias Wren (General Counsel, Stonefield), Marcus Denton (Chief Executive Officer, Stonefield), and Alison Trang and Douglas Whitmore (Managing Partner) at Ridgeline Capital Partners to determine whether the authority should be revised upward, downward, or maintained at the current level.
B. Court Orders Dismissal Sua Sponte
If the court dismisses Vantor's claims sua sponte for failure to prosecute — which remains a possibility under the court's inherent docket management authority and under Local Civil Rule 41.2 — the following actions should be taken:
If the dismissal is with prejudice, we should confirm that Stonefield's declaratory judgment counterclaim is also resolved by the dismissal order. If the counterclaim is not expressly addressed, we should file a motion to obtain declaratory relief on the counterclaim, confirming that the termination of the TSA was valid and for Cause and that no damages are owed. A with-prejudice dismissal on the claims combined with a declaratory judgment on the counterclaim would provide the most complete resolution and would allow Stonefield to definitively close the contingent liability from its books.
If the dismissal is without prejudice, we should promptly assess statute of limitations exposure and the risk of re-filing. The applicable statute of limitations for breach of contract claims under New York law is six years (N.Y. CPLR § 213(2)). The TSA was terminated effective March 4, 2022, and the complaint was filed on August 12, 2022. A without-prejudice dismissal would theoretically permit Vantor to re-file until approximately March 2028 (depending on the accrual analysis). We should advise the client of this exposure and assess whether any affirmative steps — such as filing a motion to convert the dismissal to one with prejudice, or pursuing the declaratory judgment counterclaim — are warranted to mitigate the re-filing risk.
C. Stonefield Elects to Seek Affirmative Relief
If, following consultation with the client, Stonefield determines that it wants to pursue affirmative relief to bring this matter to a close, two principal options are available:
Motion to Dismiss for Failure to Prosecute (FRCP 41(b)). The draft motion to dismiss for failure to prosecute was prepared on January 15, 2024 and is substantially complete. Upon client authorization, it can be finalized, reviewed, and filed within five to seven business days. This option is discussed in greater detail in Section VIII.A below and is my primary recommendation for affirmative resolution.
Direct Contact with Vantorovich. If the client prefers to explore a negotiated resolution, Stonefield (through counsel) could contact Nikolai Vantorovich directly to discuss a voluntary dismissal of the case with prejudice, either with or without a nominal payment by Stonefield. Because CRS has withdrawn and no new counsel has appeared, Vantorovich is currently unrepresented, and direct contact is permissible under the applicable rules of professional conduct. If at any point Vantor retains new counsel, all communications would need to be routed through that counsel. Any negotiation or settlement discussion should be coordinated with Samuel Eklund to ensure full compliance with ethical obligations and procedural requirements. This option is discussed further in Section VIII.C below.
VI. Work Product Preservation
A. Physical and Electronic File Integrity
All work product associated with Matter No. 1012-00005 is to be maintained on the firm's document management system (Vireo Data Systems) without purge, archival, or deletion for the full duration of the dormancy period. No documents should be removed from the active workspace, and all access permissions currently in effect should be maintained. This is essential both for potential reactivation of the case and for ongoing client reporting and audit support obligations.
The key categories of preserved materials include, without limitation, the following:
• All 150 documents catalogued in the Master Document Index maintained by Helen Tsao, last updated January 10, 2024. The Master Document Index provides a comprehensive inventory of all significant case documents, organized by category and cross-referenced to the relevant docket entries, Bates ranges, and internal work product.
• All pleadings, court filings, and docket entries, including the original Complaint, the Amended Complaint, Stonefield's Answer and Counterclaim, Vantor's Answer to Counterclaim, the Motion to Dismiss, all discovery motions and orders, the Motion to Withdraw, and all orders entered by Judge Calloway.
• All correspondence with the client (Tobias Wren, Priya Ramachandran, Marcus Denton, and other Stonefield personnel), with opposing counsel (CRS), with the court, with third parties (including Cascade Freight Systems, Briarwood Trucking, and Lakeshore National Bank), and with Stonefield's auditors (Clarendon Partners LLP).
• All internal memoranda, research memoranda, and strategy documents, including the Summary Judgment Roadmap Memorandum, the Settlement Authority Memoranda, the Daubert research memorandum, and all case assessment and strategy memoranda prepared during the active phase.
• All deposition transcripts, deposition summaries, preparation materials, witness outlines, and exhibit binders for the five depositions taken during fact discovery (Pruitt, Kirkwood, Hess, Milescu, and Vantorovich).
• All expert retention files, expert reports (including Dr. Rosser's 48-page final rebuttal report dated August 25, 2023, and Dr. Trask's damages report dated May 15, 2023), expert communications, engagement letters, invoices, and work papers.
• All discovery materials, including Stonefield's document production (Bates range SLG-000001 through SLG-042387), Vantor's document productions, third-party productions, privilege logs, interrogatory responses, requests for admission responses, and subpoena materials.
• All settlement analysis materials and authority memoranda, including the initial Settlement Authority Memorandum dated November 8, 2022 and the post-discovery update dated August 30, 2023.
B. eDiscovery Platform Preservation
Pinnacle Forensics LLC (Project ID PF-SLG-2022-0914) currently hosts Stonefield's produced documents and the full review database on its Relativity platform. The database includes all documents produced by all parties and third parties, together with all coding, tagging, and categorization applied during the document review, as well as the technology-assisted review (TAR 2.0) models developed during the review process.
David Moretti should coordinate with Nathan Billings, Client Engagement Director at Pinnacle Forensics (located at 12000 Findley Road, Suite 200, Johns Creek, Georgia 30097), to transition the hosted database from the current active hosting tier to an archival/reduced-cost tier. This transition will reduce monthly hosting costs from approximately $8,000–$10,000 per month on the active tier to approximately $2,500–$3,500 per month on the archival tier, while maintaining the full integrity and accessibility of the data. The archival tier provides all data preservation functionality; the primary difference is that search and review response times may be somewhat slower than on the active tier, which is acceptable for a dormant matter.
As part of this transition, Moretti should ensure that the following items are specifically preserved in exportable format, so that the platform can be fully reactivated or, if necessary, migrated to an alternative platform in the future:
• All TAR 2.0 predictive coding models, including training sets, seed documents, and model validation statistics;
• All coding decisions, reviewer notes, and issue tags applied during the review process;
• All review workflows, batch assignments, and quality control records;
• All search term hit reports and search analytics; and
• A complete data map documenting the architecture of the review database, custodian lists, and source collections.
In addition, Vantor's productions (28,914 documents in the initial production and 4,218 documents in the supplemental production compelled by Judge Calloway's June 9, 2023 order) and the third-party productions from Cascade Freight Systems Inc. and Briarwood Trucking Co. must remain accessible within the database. These productions contain critical evidence supporting Stonefield's defenses and would be essential in the event of reactivation.
C. Summary Judgment Readiness
A substantial amount of work product was developed in anticipation of filing a motion for summary judgment before the case stalled. Preservation of this work product is a priority, as it represents the foundation for what I believe would be a strong dispositive motion if the case is reactivated.
The Summary Judgment Roadmap Memorandum, dated September 15, 2023 (25 pages), outlines four principal pillars for the anticipated motion for summary judgment:
Pillar 1: Valid Termination for Cause. The undisputed record establishes that VTS failed all five Service Level Obligations in Q4 2021, that Stonefield issued a proper Cure Notice on January 18, 2022 identifying those failures, that VTS did not cure the failures within the thirty-day cure period, and that Stonefield terminated the TSA on March 4, 2022 in accordance with Section 13.1(a). VTS's own data — submitted through its Carrier Performance Portal and not contested in the February 14, 2022 Cure Response — confirms the SLO failures. The Milescu deposition testimony that 85 tractors were diverted to the Northwind account without notice to Stonefield further supports the conclusion that the performance failures were the result of Vantor's own management decisions rather than market conditions beyond its control.
Pillar 2: Unenforceability of the Liquidated Damages Clause. The liquidated damages clause in TSA Section 14.2, which purports to entitle the non-terminating party to 75% of the remaining ACV upon termination, produces a damages figure of $67.23 million that bears no reasonable relationship to any anticipated harm at the time of contracting. Under New York law, a liquidated damages clause is enforceable only if the amount is a reasonable estimate of probable damages and actual damages are difficult to ascertain. Here, the $67.23 million figure is grossly disproportionate to any conceivable loss — Dr. Rosser's maximum alternative damages estimate is $8.2 million — and actual damages were readily ascertainable at the time of contracting through standard lost-profits methodologies. The clause functions as an impermissible penalty and should be struck.
Pillar 3: Contractual Bar on Consequential Damages. TSA Section 15.1 contains a mutual waiver of consequential, incidental, special, and punitive damages. Three of Vantor's five damages categories — stranded assets ($5.2 million), workforce reduction costs ($2.87 million), and mitigation costs ($1.4 million) — are consequential damages by their nature. They represent downstream losses flowing from the termination rather than direct damages arising from the alleged breach of the TSA itself. Under the plain language of Section 15.1, these claims are contractually barred.
Pillar 4: Failure to Mitigate. The record establishes that Vantor made no meaningful effort to replace Stonefield's freight volume following the March 2022 termination, despite a historically robust freight market in Q1 and Q2 2022, with spot rates elevated approximately 35% above historical averages. Derek Pruitt's deposition testimony that VTS merely "put the word out" to potential customers falls far short of the reasonable mitigation efforts required under New York law. Vantor's failure to mitigate should preclude or substantially reduce any damages award, even if liability were established.
The Roadmap identifies two disputed factual issues that may preclude full summary judgment and could require resolution at trial:
(i) The Kirkwood Email. The September 22, 2021 internal email from Janet Kirkwood, in which she references "pull[ing] the plug" on the VTS contract and discusses the possibility of diverting volume to Cascade and Briarwood, may be argued by Vantor to evidence premeditated or pretextual termination. While we believe this email, read in full context, refers to contingency planning in response to VTS's declining performance rather than a predetermined decision to terminate, the email creates a genuine dispute of material fact on the pretextual termination theory that a court may be reluctant to resolve on summary judgment.
(ii) Enforceability of the Liquidated Damages Clause. Although we believe the clause is unenforceable as a matter of law, the enforceability of liquidated damages clauses under New York law is a fact-intensive inquiry that courts have been inconsistent in resolving at the summary judgment stage. There is a risk that the court will find that genuine disputes of material fact exist regarding the parties' intent at the time of contracting and the reasonableness of the damages estimate relative to anticipated harm.
Given these potential obstacles, my recommendation — as set forth in the Roadmap — is that partial summary judgment on the consequential damages bar (Pillar 3) and failure to mitigate (Pillar 4) represents the strongest and most likely pathway to a favorable dispositive ruling. These two issues present predominantly legal questions that are well-suited to summary judgment resolution, and a ruling in Stonefield's favor on both would eliminate approximately $9.47 million of Vantor's claimed damages ($5.2M + $2.87M + $1.4M) and significantly undermine the remaining claims. The Cause and liquidated damages issues (Pillars 1 and 2), while strong on the merits, may need to proceed to trial if contested, given the factual disputes identified above.
All supporting exhibits, deposition testimony citations, and expert report excerpts identified in the Roadmap remain accessible in the case file and on the eDiscovery platform. Deposition transcript designations have been preliminarily identified and can be finalized upon reactivation.
Finally, the Roadmap notes that the potential Daubert challenge to Dr. Trask's damages methodology — analyzed in detail in the research memorandum dated September 5, 2023, and the strategic memorandum dated September 18, 2023 — should be incorporated into the summary judgment briefing as a component of the argument on damages rather than filed as a standalone Daubert motion. The strategic memorandum concludes that a standalone Daubert motion carries risk of denial at the pre-trial stage (Judge Calloway has historically preferred to address Daubert issues in the context of summary judgment or in limine motions) and that the arguments are more effectively presented as part of the comprehensive summary judgment brief.
VII. Financial Summary and Cost Projections
A. Costs Incurred to Date
Total legal fees incurred through approximately October 2023 — the point at which CRS withdrew and the case became effectively dormant — are approximately $3,800,000. This figure reflects the substantial work performed during the thirteen-month active phase of the litigation, including initial case assessment and strategy development, motion practice, comprehensive fact and expert discovery, five depositions, extensive document review, development of the summary judgment work product, and ongoing client counseling and reporting.
Total costs and disbursements incurred through the same period are approximately $620,000. The principal components of this figure include expert fees payable to Kensington Analytics Group LLC (Dr. Rosser's firm) totaling approximately $214,300; Pinnacle Forensics LLC eDiscovery hosting, processing, and production costs; court reporter and videographer fees for the five depositions; travel expenses associated with depositions and court appearances; filing fees and service costs; and miscellaneous disbursements.
The total all-in spend on this matter to date is therefore approximately $4,420,000.
For reference, the applicable billing rates (at 2022 rates, which have been in effect for this engagement) are as follows:
Note: A 10% courtesy discount on associate rates is applied for all Ridgeline Capital Partners portfolio companies, including Stonefield, pursuant to the firm's standing arrangement with Ridgeline. Partner rates and paralegal rates are not subject to the discount.
B. Projected Monitoring Costs
During the dormancy period, the estimated costs are as follows:
Quarterly docket checks and file maintenance: Estimated at $2,000–$3,000 per quarter, based on Tsao's time at $375/hr (2–3 hours per quarter) and my time at $742.50/hr after discount (1–2 hours per quarter) for review and circulation of the Quarterly Docket Check Report.
Pinnacle Forensics archival hosting: Estimated at $2,500–$3,500 per month upon transition to the archival tier, or approximately $30,000–$42,000 annually. This compares to the current active-tier hosting cost of approximately $8,000–$10,000 per month ($96,000–$120,000 annually), representing a savings of approximately $54,000–$78,000 per year.
Quarterly lender update support: Estimated at $1,500–$2,500 per quarter, covering my review and revision of Tobias Wren's draft quarterly litigation update to Catherine Devereaux at Lakeshore National Bank and any related communications.
Annual audit/financial reporting status letter: Estimated at $2,000–$3,000 per year, covering preparation of the annual litigation status letter to Wren, Ramachandran, and Farraday at Clarendon Partners LLP.
Total estimated annual monitoring cost: Approximately $50,000–$65,000. This represents a significant reduction from the approximately $4.42 million incurred during the active phase over approximately thirteen months (an annualized rate of roughly $4.1 million per year in combined fees and costs).
C. Reactivation Cost Estimate
If the case is reactivated by the appearance of new counsel for Vantor, the following cost projections apply:
Summary judgment phase: Estimated additional fees of $800,000–$1,200,000, based on the substantial work product already completed. This estimate covers finalization of the summary judgment motion brief, preparation of the statement of undisputed material facts, assembly and authentication of supporting exhibits, review and response to Vantor's opposition brief, preparation and filing of a reply brief, and preparation for and attendance at oral argument. The range reflects uncertainty regarding the scope of any additional discovery that may be required if the court enters a revised scheduling order permitting supplemental discovery.
Trial phase (if necessary): Estimated additional fees of $1,500,000–$2,800,000, assuming that partial summary judgment narrows the issues for trial. This estimate covers pretrial preparation, motions in limine, jury selection (if applicable), presentation of the defense case, cross-examination of Vantor's witnesses, trial briefing, proposed jury instructions, and post-trial motions. The range is broad because the scope and duration of trial will depend significantly on the outcome of summary judgment and on whether the case settles prior to trial.
Additional expert costs: Estimated at $40,000–$80,000 for Dr. Rosser's deposition preparation, deposition testimony, and trial testimony (if the case proceeds to trial), in addition to the $214,300 already incurred. This brings the total projected cost for Kensington Analytics Group LLC to approximately $254,000–$294,000, which is within a reasonable range of the original pre-trial phase budget of $240,000–$260,000 established at the time of expert retention.
Original budget comparison: The preliminary budget communicated to the client on September 12, 2022, at the outset of the engagement, estimated total fees of $3.5 million–$5.2 million and total costs of $400,000–$750,000 through summary judgment. The semi-annual risk assessment prepared on September 20, 2023 — reflecting the completion of fact discovery and the development of expert work — updated the total projected spend through final disposition of the case to $5.5 million–$7.2 million in combined fees and costs. The actual spend of $4.42 million through October 2023 is within the original budget range for the pre-summary-judgment phase, and the projected reactivation costs, if incurred, would bring total spend within the updated through-disposition range.
VIII. Options for Affirmative Resolution
The memorandum identifies three principal options for affirmative resolution of this matter. They are presented in order of my recommendation.
A. Option 1: File Renewed Motion to Dismiss for Failure to Prosecute (FRCP 41(b)) — Recommended
The draft motion to dismiss Vantor's claims for failure to prosecute under Federal Rule of Civil Procedure 41(b) was prepared on January 15, 2024, in response to Vantor's failure to retain substitute counsel by the initial December 17, 2023 deadline. The motion is substantially complete and, upon authorization from the client, can be finalized, reviewed by the responsible partner, and filed with the court within five to seven business days.
The motion has only strengthened since it was drafted. At the time of preparation, the case had been dormant for approximately three months following CRS's withdrawal. As of the date of this memorandum, the case has been dormant for approximately six months, and by the time the motion could be briefed and heard — likely four to six weeks after filing — the case will have been dormant for approximately seven to eight months. By the one-year mark (October 2024), the failure-to-prosecute record will be exceptionally strong.
Under well-established Second Circuit precedent, including LeSane v. Hall's Security, Inc., 239 F.3d 206 (2d Cir. 2001), and Drake v. City of New York, 2019 WL 1429546 (S.D.N.Y. Mar. 29, 2019), involuntary dismissal for failure to prosecute requires consideration of five factors:
(i) Duration of inactivity. As noted, the case has been effectively dormant since October 2023, with no substantive filings since CRS's withdrawal. The only docket event w