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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

May 22, 2023

FROM: Patrick Gallagher, Lead Associate, Litigation (General) Simone Laroche, Working Associate, Litigation (General)

TO: Samuel Eklund, Responsible Partner, Litigation (General) Linda Osei, Billing Partner, Litigation (General)

RE: Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.) — Analysis of Expert Report of Dr. Philip Trask (Trask Greystone & Associates)

CLIENT: Stonefield Logistics Group Inc.

MATTER NO.: 1012-00005

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I. EXECUTIVE SUMMARY

This memorandum provides a detailed analysis and critique of the expert report of Dr. Philip Trask, founder and principal of Trask Greystone & Associates (400 Madison Avenue, Suite 900, New York, NY 10017), which was served by plaintiff Vantor Holdings Corp. ("Vantor" or "Plaintiff") through its counsel Caldwell Royce & Shapiro LLP on May 15, 2023. We have reviewed the report in its entirety, including its appendices and the materials Dr. Trask identifies as having been relied upon in forming his opinions.

Dr. Trask's report opines that Vantor suffered total damages of $95,400,000 as a result of Stonefield Logistics Group Inc.'s ("Stonefield" or "SLG") alleged wrongful termination of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Ref. No. SLG-VTS-2019-0315). The claimed damages encompass liquidated damages, lost profits, stranded asset costs, workforce reduction costs, and mitigation costs. In our assessment, the report suffers from four fundamental methodological weaknesses that substantially undermine both its reliability and its admissibility under Federal Rule of Evidence 702 and the Daubert standard:

(i) Dr. Trask assumes without legal or economic analysis that the liquidated damages clause in TSA Section 14.2 is fully enforceable, treating the contractual formula as a mathematical given rather than subjecting the resulting figure to any reasonableness inquiry;

(ii) Dr. Trask relies on inflated operating margin assumptions for the lost profits calculation, applying a 12% operating margin derived from COVID-era consolidated financial data that does not reflect account-specific profitability or post-2021 freight market conditions;

(iii) Dr. Trask fails entirely to account for the material breaches committed by Vantor Transport Services LLC ("VTS"), the carrier-provider under the TSA, including the undisclosed reassignment of 85 tractors from SLG-dedicated lanes to the Northwind Distribution Co. account in October 2021 — a redeployment that was the proximate cause of VTS's Q4 2021 service level failures; and

(iv) Dr. Trask's report contains no meaningful analysis of Vantor's duty to mitigate damages, despite the exceptionally robust freight market conditions prevailing at the time of termination that would have permitted VTS to redeploy its freed-up fleet capacity to alternative shippers.

Each of these weaknesses is analyzed in detail in Section IV below, along with specific quantitative implications for the claimed damages figure.

This memorandum concludes with recommendations for rebuttal strategy, including specific issues and analyses to direct to our retained expert, Dr. Evelyn Rosser of Kensington Analytics Group LLC, potential grounds for a Daubert challenge, and the integration of the expert analysis into our anticipated summary judgment briefing. As set forth below, when the identified weaknesses are accounted for, Stonefield's maximum realistic exposure is estimated at approximately $8.2 million — a figure that will be further refined through Dr. Rosser's rebuttal report and ongoing discovery analysis.

II. BACKGROUND AND PROCEDURAL CONTEXT

A. The TSA and Its Termination

The Transportation Services Agreement was executed on March 15, 2019 between Stonefield Logistics Group Inc., acting as "Shipper-Broker," and Vantor Transport Services LLC, acting as "Carrier-Provider." VTS is a New York limited liability company and a wholly owned subsidiary of Vantor Holdings Corp. The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield during negotiations that spanned approximately four months from November 2018 through February 2019. VTS was represented in those negotiations by its in-house legal team under the direction of its then-General Counsel, Marcus Raines.

The TSA established a five-year term commencing April 1, 2019 and extending through March 31, 2024. The agreement is governed by New York law pursuant to its choice-of-law provision in Section 16.3, and includes a forum selection clause in Section 16.4 designating the United States District Court for the Southern District of New York as the exclusive forum for any disputes arising under or in connection with the agreement.

The TSA set forth an Annual Committed Volume ("ACV") of $43,200,000 per contract year, representing the minimum aggregate value of transportation services that Stonefield committed to tender to VTS under the contract's dedicated-lane and overflow freight provisions. Over the full five-year term, the total minimum commitment amounted to $216,000,000. The ACV was subject to the Rate Adjustment Mechanism set forth in Section 5.3, which indexed per-mile rates to a blended formula of 70% diesel fuel index and 30% Consumer Price Index for All Urban Consumers ("CPI-U"), with annual adjustments effective on each contract-year anniversary date.

In exchange for the volume commitment, VTS was required to maintain dedicated fleet capacity of not fewer than 400 tractors and a proportionate number of trailers for SLG-designated lanes, and to meet five Service Level Obligations ("SLOs") set forth in Schedule C to the TSA. These SLOs established minimum performance thresholds for on-time pickup rate, on-time delivery rate, tender acceptance rate, equipment availability, and cargo claims ratio.

The contractual relationship began to deteriorate in the second half of 2021. Stonefield's contract compliance team, led by Raymond Hess, Director of Contract Compliance, observed a marked decline in VTS's performance across all five SLOs beginning in approximately September 2021 and worsening through the fourth quarter. On January 18, 2022, Stonefield issued a formal Cure Notice pursuant to TSA Section 13.1(a), sent from Raymond Hess to Sandra Milescu, Chief Operating Officer of Vantor and VTS. The Cure Notice identified material breaches across all five SLOs during Q4 2021, documented the specific performance shortfalls with supporting data, and provided VTS with the 30-day cure period prescribed by the agreement.

Vantor responded to the Cure Notice on February 14, 2022, through a letter from Derek Pruitt, Vice President of Business Development, addressed to Janet Kirkwood, Vice President of Carrier Relations at Stonefield. Vantor's response acknowledged "operational challenges" during Q4 2021 but disputed Stonefield's characterization of the performance shortfalls as material breaches, claiming that Stonefield's own alleged failure to tender the full ACV had contributed to VTS's capacity allocation decisions. The response asserted that VTS had "substantially cured" the identified deficiencies and that further improvements were underway.

Stonefield assessed VTS's cure efforts and determined them to be insufficient. On March 4, 2022, Stonefield terminated the TSA by letter from Tobias Wren, General Counsel, to Marcus Raines, General Counsel of Vantor and VTS. The termination letter asserted VTS's failure to cure material breaches under Section 13.1(a), detailed the ongoing performance deficiencies that persisted through the cure period, and stated that the termination was effective immediately.

At the time of termination, the remaining term of the TSA was approximately 2 years and 27 days — from March 4, 2022 through the original expiration date of March 31, 2024. This is the period over which Dr. Trask calculates damages, and the accuracy of this calculation of the remaining term is not disputed for purposes of this analysis.

B. Procedural Posture of the Expert Report

Vantor Holdings Corp. filed its original Complaint in this action on August 12, 2022, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and wrongful termination of the TSA. On December 2, 2022, Vantor filed an Amended Complaint adding allegations of volume shortfall breach (claiming that Stonefield failed to meet the ACV minimums in Contract Years 2 and 3), lane exclusivity violations (claiming Stonefield diverted freight from VTS-dedicated lanes to competing carriers), and pretextual termination motive (claiming Stonefield terminated the TSA to avoid the impending rate adjustment under Section 5.3 that would have increased Stonefield's annual transportation costs by approximately $6.2 million).

Stonefield filed its Answer, Affirmative Defenses, and Counterclaim for declaratory judgment on January 13, 2023. The Counterclaim seeks a judicial declaration that the termination was valid for Cause under TSA Section 13.1(a), that the liquidated damages provision in Section 14.2 constitutes an unenforceable penalty, and that VTS's own material breaches preclude any recovery by Vantor.

The Honorable Margaret T. Calloway entered a Case Management Order on February 17, 2023, establishing the following key deadlines relevant to the expert phase:

• Fact discovery deadline: September 29, 2023

• Plaintiff's expert reports: May 15, 2023

• Defendant's expert and rebuttal reports: August 25, 2023

• Expert depositions: September 15 through November 15, 2023

• Expert discovery deadline: January 12, 2024

• Dispositive motions deadline: February 16, 2024

Dr. Trask's expert report was served on May 15, 2023, in compliance with the Case Management Order's deadline for Plaintiff's expert reports. The report was served during the active fact discovery phase, with approximately four months remaining before the fact discovery cutoff. This timing is relevant because certain discovery — including Sandra Milescu's deposition and the supplemental document production (VHC-029001 through VHC-033218) — had not yet occurred at the time of Dr. Trask's report, although the underlying documents and interrogatory responses that form the foundation of many of the issues identified in this memorandum were available to Dr. Trask before his report date.

Our firm retained Kensington Analytics Group LLC on behalf of Stonefield on October 28, 2022, shortly after this firm's initial retention by Stonefield. Kensington Analytics is led by Dr. Evelyn Rosser, Managing Director, with support from Michael Chung, Senior Analyst. Dr. Rosser holds a Ph.D. in economics from the University of Chicago, has testified as a damages expert in over forty commercial litigation matters in federal and state courts, and has particular expertise in transportation industry economics. She and Mr. Chung have been reviewing discovery materials as they have become available and have developed a preliminary damages framework for the rebuttal report. The target deadline for a draft rebuttal report from Dr. Rosser is early August 2023, to permit review, revision, and finalization before the August 25, 2023 service date.

III. OVERVIEW OF DR. TRASK'S REPORT

A. Qualifications and Methodology

Dr. Trask is identified in his report as the founder and principal of Trask Greystone & Associates, a New York-based economic consulting firm. His curriculum vitae, appended to the report as Exhibit A, states that he holds a Ph.D. in economics from Columbia University and an MBA from the Wharton School of the University of Pennsylvania. He describes his areas of expertise as including "economic damages quantification, valuation, and financial analysis in commercial disputes," and lists prior testimony in approximately twenty-five matters over the past fifteen years, primarily in breach-of-contract and business tort litigation. His prior engagements span several industries, including financial services, real estate, and manufacturing, but notably include only two prior matters involving the transportation or logistics sector.

Dr. Trask's report states that he was retained by Caldwell Royce & Shapiro LLP on behalf of Vantor Holdings Corp. in approximately January 2023. His report identifies the following categories of materials reviewed in forming his opinions:

• The Transportation Services Agreement dated March 15, 2019, including all schedules and amendments;

• The Cure Notice dated January 18, 2022;

• Vantor's response to the Cure Notice dated February 14, 2022;

• The termination letter dated March 4, 2022;

• Vantor Holdings Corp. and VTS audited financial statements for fiscal years 2019 through 2022;

• Selected discovery materials produced in this litigation, as provided to Dr. Trask by counsel; and

• Publicly available industry data and market reports (not individually identified in the report).

Dr. Trask's report does not identify the specific discovery materials reviewed, does not include a privilege log or document list, and does not indicate whether he reviewed Stonefield's document production, deposition transcripts, or interrogatory responses. This lack of specificity is itself a methodological concern, as it precludes meaningful assessment of the completeness of the factual foundation for his opinions.

With respect to methodology, Dr. Trask states that he employs an "expectation interest" framework consistent with standard principles of contract damages under New York law. He purports to calculate the economic position Vantor would have occupied "but for" Stonefield's termination of the TSA. His analysis proceeds in five steps: (1) calculating liquidated damages under the TSA formula; (2) calculating lost profits on the remaining committed volume above the contractual minimum; (3) quantifying stranded assets and associated costs; (4) quantifying workforce reduction costs; and (5) quantifying mitigation costs. These steps and the resulting figures are summarized in Section III.B below.

B. Summary of Damages Opinions

Dr. Trask's report presents total claimed damages of $95,400,000, broken down as follows:

Several observations about the structure of these damages claims are warranted at the outset. First, the liquidated damages component ($67,230,000) constitutes approximately 70.5% of the total claimed damages. The viability of the overall claim is therefore heavily dependent on the enforceability of the Section 14.2 liquidated damages provision — a legal question that Dr. Trask treats as settled. Second, the lost profits claim ($18,700,000) is additive to the liquidated damages claim, raising a significant double-recovery problem discussed at length in Section IV.B below. Third, the remaining categories — stranded assets, workforce reduction costs, and mitigation costs — total $9,470,000 and are consequential in nature, potentially barred by the mutual consequential damages waiver in TSA Section 15.1. Each of these issues is analyzed in the sections that follow.

IV. CRITIQUE OF DR. TRASK'S REPORT — FOUR FUNDAMENTAL WEAKNESSES

A. Weakness #1: Assumption That Liquidated Damages Clause Is Fully Enforceable

1. Dr. Trask's Approach. The largest single component of Dr. Trask's damages opinion — $67,230,000, representing approximately 70.5% of the total claimed damages — derives from the liquidated damages provision set forth in Section 14.2 of the TSA. That provision establishes a formula under which, in the event of a termination by the Carrier-Provider for the Shipper-Broker's breach, the Shipper-Broker shall pay liquidated damages equal to 75% of the Annual Committed Volume multiplied by the number of full and partial contract years remaining in the term.

Dr. Trask's report treats this provision as a straightforward mathematical input. His analysis consists of applying the contractual formula to the undisputed remaining term (2 years and 27 days), multiplying 75% by the $43.2 million ACV, and producing a total liquidated damages figure of $67,230,000. The report contains no legal or economic analysis of the enforceability of the provision. Nor does it contain any independent assessment of whether the $67,230,000 figure bears a reasonable relationship to Vantor's actual anticipated damages at the time the TSA was executed.

Dr. Trask's sole justification for treating the liquidated damages clause as enforceable is a brief reference to the clause's recital language, in which the parties "acknowledged and agreed" that the liquidated damages formula represents "a reasonable estimate of the damages that the non-breaching party would sustain" and that the amount "shall not constitute a penalty." Dr. Trask accepts this contractual recital at face value, stating in his report that "[t]he parties' mutual acknowledgment establishes the reasonableness of the formula as a damages measure."

2. Why This Is Problematic. Dr. Trask's uncritical acceptance of the liquidated damages clause is problematic for several interrelated reasons.

First, the enforceability of a liquidated damages provision under New York law is not determined by the parties' self-serving recital that the amount is "reasonable" and "not a penalty." Rather, it is a question of law subject to a well-established two-part test. As the New York Court of Appeals has held, a liquidated damages clause is enforceable only where: (a) the amount fixed represents a reasonable estimate of the probable loss anticipated at the time of contracting, and (b) actual damages flowing from the breach would be difficult to ascertain at the time of contracting. See Northpoint Holdings v. Purdy Corp., 41 N.Y.2d 354, 365 (1977); Kestrel Corporation, 4 N.Y.3d 373, 380 (2005). Where either condition is not met, the clause is deemed an unenforceable penalty regardless of the parties' subjective characterization.

Second, as we analyzed in detail in our September 19, 2022 memorandum (Doc. 15), there is a "moderate" probability that a court would find the Section 14.2 liquidated damages formula constitutes an unenforceable penalty. This assessment rests on the second prong of the New York test: actual damages in the transportation services context — encompassing lost volume, replacement costs, fleet redeployment costs, and workforce adjustments — were arguably readily ascertainable at the time of contracting. The truckload transportation industry is characterized by well-established cost structures, publicly available rate benchmarks, and standardized margin analyses. Both Vantor and Stonefield had access to detailed cost and revenue data at the time of the TSA negotiation, and there is no indication in the negotiation record that the parties treated damages as inherently difficult to calculate. The TSA negotiation file, as produced by Ashford Meridian LLP (Bates range SLG-002015 through SLG-002287), does not contain any supporting analysis or economic justification for the 75% multiplier used in the formula.

Third, the liquidated damages formula produces a figure that is grossly disproportionate to any plausible measure of Vantor's actual loss from the termination. This disproportionality is apparent from several data points:

(i) Vantor's own FY 2022 consolidated revenue declined from approximately $385 million (FY 2021) to approximately $310 million, a decline of approximately $75 million (19.5%). However, the SLG contract represented only approximately $43.2 million in annual revenue — roughly 11.2% of Vantor's FY 2021 revenue. The $67.23 million liquidated damages figure exceeds the total annual value of the contract by more than 55%, and is roughly equivalent to 90% of Vantor's entire year-over-year revenue decline, despite the fact that a significant portion of that revenue decline was attributable to broader freight market softening entirely independent of the TSA termination.

(ii) The 75% multiplier in the liquidated damages formula was not derived from any cost analysis, margin study, or economic modeling documented in the TSA negotiation record. It appears to have been a negotiated commercial term rather than a calculated estimate of probable loss. By contrast, industry-standard contract termination formulas in the transportation sector typically apply a multiplier of 15% to 30% of remaining committed volume, reflecting typical carrier operating margins — not 75%.

(iii) The formula does not account for costs that would have been avoided had the contract continued (i.e., the variable costs of actually performing the transportation services), nor does it incorporate any offset for mitigation or replacement revenue. A 75% multiplier implies that VTS's operating margin on the SLG contract was 75% — a figure that is economically implausible for a truckload carrier and that is contradicted by Vantor's own reported consolidated operating margins of 8% to 14% during the relevant period.

Fourth, Dr. Trask is retained as a damages expert, not a legal expert. He is not qualified to render opinions on the enforceability of contract provisions under New York law, and his report does not purport to do so. Yet his entire damages framework is built on the foundational legal conclusion that the Section 14.2 clause is enforceable. By treating enforceability as a given rather than a contingency, Dr. Trask's analysis fails to provide the court or jury with the kind of economically grounded damages assessment that would survive independent scrutiny. An expert who uncritically assumes the most favorable legal interpretation for his client, without performing any independent economic analysis to validate that assumption, provides an opinion that lacks the methodological rigor required under Daubert.

3. Impact on Total Damages. The practical significance of this weakness cannot be overstated. If the liquidated damages clause is found to be an unenforceable penalty — a result we assess as having moderate probability — then $67,230,000, representing approximately 70.5% of Dr. Trask's total claimed damages, would be eliminated from the case. The remaining damages categories would total $28,170,000 at most, before accounting for the additional defenses analyzed elsewhere in this memorandum (mitigation, Vantor's own breaches, the consequential damages waiver, and the double-recovery problem with lost profits).

Moreover, the structure of the TSA creates an additional complication for Vantor. Section 14.2 arguably provides that liquidated damages constitute the "sole and exclusive remedy" for damages arising from early termination. If a court construes this language as an exclusive-remedy provision — even while finding the liquidated damages formula itself unenforceable — Vantor may be precluded from separately claiming lost profits under Section 14.2's exclusivity framework. This interpretation would eliminate not only the $67.23 million in liquidated damages but also the $18.7 million in lost profits, reducing the remaining claim to $9.47 million in consequential damages categories (which are themselves likely barred by Section 15.1, as discussed in Section V.A below).

4. Recommendations for Rebuttal. We recommend directing Dr. Rosser and Mr. Chung at Kensington Analytics to perform the following analyses in their rebuttal report:

(a) An independent analysis demonstrating that actual damages from early termination of a transportation services agreement of this nature were readily ascertainable at the time of contracting (March 15, 2019), using publicly available freight market data (including Brightmoor Software, the Dunmore Systems, and standard industry costing models), standard carrier cost-of-operations data published by the American Trucking Associations, and Vantor's own financial statements and SEC filings.

(b) A disproportionality analysis comparing the $67.23 million liquidated damages figure to multiple reasonable measures of actual harm, including: (i) a lost-profits measure based on actual account-level margins; (ii) a replacement-cost measure reflecting the cost to VTS of redeploying its freed-up fleet capacity; and (iii) industry benchmarks for contract termination damages in comparable transportation services agreements.

(c) An analysis of the 75% multiplier, demonstrating that it bears no reasonable relationship to Vantor's actual or anticipated profit margins on the SLG contract and is inconsistent with industry norms for liquidated damages provisions in transportation contracts.

B. Weakness #2: Inflated Operating Margin Assumptions for Lost Profits Calculation

1. Dr. Trask's Methodology. Dr. Trask's lost profits opinion claims $18,700,000 in damages, calculated by applying a 12% average operating margin to the remaining committed volume under the TSA of approximately $86.4 million (calculated as $43.2 million ACV × 2 remaining full contract years). Dr. Trask describes this as the profit that Vantor would have earned on the SLG freight over the remaining contract term, above and beyond the return of invested costs.

The 12% margin figure appears to be derived from Vantor's consolidated operating margins as reported in its audited financial statements for fiscal years 2019 and 2020. The report references these consolidated figures without identifying the specific financial line items used in the calculation. Dr. Trask's report states that the 12% margin represents a "reasonable projection of Vantor's expected profitability on the SLG account," but does not provide any account-level data to support this assertion. No backup workpapers demonstrating the derivation of the 12% figure are appended to the report, although Dr. Trask states that his "detailed calculations are available upon request."

Dr. Trask applies the 12% margin uniformly across the entire remaining committed volume, without adjustment for changing market conditions, cost escalation, or the TSA's Rate Adjustment Mechanism. He does not present a range of margin assumptions, does not perform sensitivity analysis, and does not provide probability-weighted scenarios. The single-point estimate of $18.7 million is presented as a definitive figure rather than the midpoint or boundary of a range.

2. Why This Is Inflated. There are multiple independent reasons to conclude that the 12% operating margin assumption is materially inflated and does not reflect a reliable estimate of VTS's expected profitability on the SLG account over the remaining contract term.

Consolidated vs. Account-Level Data. Dr. Trask's reliance on Vantor's consolidated operating margins is fundamentally misguided because consolidated margins reflect the blended profitability of Vantor's entire portfolio of shipper relationships — not the profitability of the SLG account in particular. It is well established in the transportation industry that different accounts carry materially different margin profiles depending on lane density, freight characteristics, rate structure, deadhead miles, and capacity commitments. The SLG contract was a dedicated-fleet arrangement with a negotiated rate structure and volume-based pricing that was specifically designed to provide Stonefield with below-market rates in exchange for the volume commitment. Vantor's own internal financial data — which we expect to confirm through detailed analysis of the VTS financial records produced in discovery (Bates range VHC-000001 through VHC-028914, supplemented by VHC-029001 through VHC-033218) — likely shows that the SLG account specifically had lower margins than the company-wide average.

COVID-Era Distortion. The fiscal years from which Dr. Trask derives his 12% margin assumption — FY 2019 and FY 2020 — were characterized by extraordinary market conditions that are not representative of normalized operating profitability. FY 2020 in particular saw significant COVID-era pricing surges in the truckload sector, driven by supply chain disruptions, capacity constraints, and emergency freight demand. These conditions produced elevated margins across the industry that were widely recognized as temporary and unsustainable. By FY 2022, the freight market had softened considerably: Vantor's own consolidated revenue declined from approximately $385 million to approximately $310 million, and industry-wide operating margins for truckload carriers compressed substantially. Any reasonable forward-looking projection of VTS's margins on the SLG account for the period March 2022 through March 2024 should have accounted for this market normalization.

Rate Adjustment Mechanism. The TSA's Rate Adjustment Mechanism in Section 5.3, which indexed per-mile rates to a blend of 70% diesel fuel index and 30% CPI-U, would have adjusted rates annually. While this mechanism would have increased the per-mile rates paid by Stonefield, it would not have insulated VTS from margin compression caused by cost increases that were not fully captured by the rate formula. Specifically, rising fuel costs in 2022 — diesel prices reached historic highs in the first half of 2022 — would have increased VTS's actual fuel expenditures by more than the 70% diesel-indexed rate adjustment would have compensated, because the rate adjustment applied to the prior year's fuel index and did not provide real-time fuel cost passthrough. Similarly, driver wage inflation in 2021 and 2022 (averaging 10% to 15% year-over-year in the truckload sector, according to American Trucking Associations data) was not captured by the CPI-U component of the formula and would have directly eroded operating margins.

Confusion of Gross and Operating Margins. Dr. Trask's report does not clearly distinguish between gross margins (revenue minus direct costs of transportation services) and operating margins (gross profit minus allocated overhead, administrative costs, and depreciation). The 12% figure, if derived from Vantor's consolidated income statements, may reflect gross margin rather than true operating margin after allocation of overhead costs to the SLG account. This distinction is material: in the truckload carrier industry, the spread between gross margin and operating margin is typically 5 to 8 percentage points, reflecting the substantial overhead burden that must be allocated across individual accounts.

No Cost Decomposition. A reliable lost-profits analysis requires the expert to decompose costs into fixed and variable components and to isolate the incremental profit margin on the specific revenue stream at issue. Dr. Trask's report does not perform this decomposition. It does not separately identify or account for the variable costs that VTS would have incurred in performing the SLG contract — including driver wages and benefits, fuel, maintenance and repair, tires, insurance, tolls, and equipment depreciation — nor does it identify which fixed costs, if any, were truly incremental to the SLG account. Without this cost decomposition, the 12% margin figure is an unsupported assumption rather than a calculated result.

Absence of Sensitivity Analysis. A single-point estimate of operating margin, applied uniformly across a two-year future period in a volatile industry, does not meet the standards of generally accepted economic methodology. A reliable damages estimate would present a range of margin assumptions — at minimum, a base case, an optimistic case, and a pessimistic case — reflecting the uncertainty inherent in projecting future profitability. Dr. Trask's failure to perform any sensitivity analysis exaggerates the precision of his lost profits figure and overstates the resulting damages claim.

3. Relationship to Liquidated Damages — Double Recovery Problem. Apart from the margin inflation issue, Dr. Trask's lost profits claim presents a fundamental double-recovery problem when considered alongside the liquidated damages claim. This issue, which we analyzed in detail in our February 15, 2023 memorandum (Doc. 118), arises because the liquidated damages and lost profits categories both purport to compensate Vantor for the same underlying harm — the loss of the remaining value of the TSA.

The liquidated damages formula in Section 14.2 was designed to serve as a comprehensive measure of the non-breaching party's damages from early termination. By applying 75% of the ACV to the remaining term, the formula implicitly incorporates the terminating party's lost profits, since the 75% multiplier was intended to approximate the net economic value of the contract to the non-breaching party after accounting for avoided costs. If the liquidated damages clause is enforceable, it represents the agreed-upon measure of total termination damages — not a floor to which additional lost-profits damages may be added.

New York law prohibits duplicative recovery for the same injury. See Bi-Economy Market, Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 194 (2008); Kenford Co. v. County of Erie, 73 N.Y.2d 312, 319 (1989). Dr. Trask's report does not address the overlap between the liquidated damages and lost profits categories, does not explain why separate recovery for both categories is legally or economically warranted, and does not perform any analysis to ensure that the two categories do not compensate for the same lost economic value. This represents a fundamental analytical flaw that pervades the report's damages framework.

The magnitude of the potential double recovery is substantial. If the liquidated damages claim of $67.23 million is intended to compensate for the loss of 75% of the remaining contract value, and the lost profits claim of $18.7 million is intended to compensate for the operating margin on the remaining contract volume, then the combined claim of $85.93 million exceeds the total remaining contract value of $86.4 million (2 years × $43.2 million ACV) by a factor that suggests the sum of the two categories compensates for more than 99% of the total remaining revenue — an absurd result for a carrier with operating margins of 8% to 14%.

4. Recommendations for Rebuttal. We recommend directing Dr. Rosser to perform the following analyses:

(a) A detailed analysis of VTS's actual account-level margins on SLG freight, using VTS's internal financial records as produced in discovery (Bates range VHC-000001 through VHC-028914 and supplemental production VHC-029001 through VHC-033218). This analysis should isolate SLG-specific revenues, direct costs, and allocated overhead to determine the true operating margin on the SLG account for each contract year.

(b) Development of a proper variable-cost model isolating the incremental profit margin on SLG-specific freight, with line-item accounting for fuel cost escalation (using EIA diesel price data), driver pay inflation (using ATA and Bureau of Labor Statistics data), equipment depreciation (using VTS's depreciation schedules for TSA-dedicated assets), and insurance costs (using VTS's insurance renewal data).

(c) A sensitivity analysis presenting a range of margin assumptions — base case, high case, and low case — reflecting freight market uncertainty over the remaining contract term.

(d) An economic analysis of the duplicative nature of the liquidated damages and lost profits claims, demonstrating that the two categories compensate for overlapping economic harm and that permitting recovery of both would result in a windfall to Vantor.

C. Weakness #3: Failure to Account for Vantor's Own Breaches

1. The Breaches Dr. Trask Ignores. Dr. Trask's report makes no reference to, and does not account for, VTS's material breaches of the TSA. This omission is remarkable given that VTS's breaches are at the core of Stonefield's defense and are extensively documented in the record. A damages expert purporting to calculate the economic position Vantor would have occupied "but for" the termination cannot simply ignore the question of whether Vantor was itself in breach — particularly where those breaches provided the legal basis for the termination. The specific breaches that Dr. Trask ignores are as follows.

##### a. VTS's Q4 2021 Service Level Failures

VTS's performance during Q4 2021 fell materially below the contractually required SLOs across all five service categories. The specific performance data, as documented in Stonefield's January 18, 2022 Cure Notice and corroborated by VTS's own internal performance tracking data (produced at VHC-011204 through VHC-011287), is as follows:

The equipment availability shortfall is particularly significant. VTS was contractually required to maintain a minimum of 400 dedicated tractors for SLG lanes, with an SLO requiring at least 85% availability (340 tractors) at any given time. In Q4 2021, only approximately 248 tractors were available — 152 tractors below the commitment and 92 tractors below the SLO minimum. The causes of this shortfall are directly relevant to Weakness #3 and are discussed immediately below.

Additionally, the cargo claims data shows 16 documented claims in November and December 2021 alone, totaling $387,400 in claimed losses. The 1.07% cargo claims ratio was more than double the 0.5% maximum permitted under the TSA, reflecting a pattern of freight handling deficiencies that went beyond isolated incidents.

##### b. Undisclosed Fleet Redeployment

The most significant breach identified in the record — and the one most conspicuously absent from Dr. Trask's analysis — is VTS's undisclosed redeployment of 85 tractors from SLG-dedicated lanes to the Northwind Distribution Co. account in October 2021.

This redeployment was first documented in an internal email from Sandra Milescu, Chief Operating Officer of Vantor and VTS, to Nikolai Vantorovich, Chairman and controlling shareholder of Vantor Holdings Corp., dated November 12, 2021 (VHC-008417). In that email, Ms. Milescu wrote:

"We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January."

The redacted portion of this email is the subject of a pending motion to compel, but the unredacted text is sufficient to establish the key facts: VTS unilaterally reduced its SLG-dedicated fleet by 85 tractors (a 21.25% reduction from the 400-tractor commitment) to service a different customer, and did so with full awareness that this redeployment would not be disclosed to Stonefield.

Vantor's supplemental document production, served on June 22, 2023 (comprising 4,218 documents, Bates range VHC-029001 through VHC-033218), further confirmed the fleet redeployment. Internal VTS operations reports produced in that supplement show that the 85 tractors were redirected to the Northwind Distribution Co. account beginning in approximately the second week of October 2021, and that the redeployment was authorized by Ms. Milescu with the knowledge of Derek Pruitt, VP of Business Development.

Sandra Milescu confirmed the reassignment during her deposition on August 4, 2023. Although this deposition occurred after Dr. Trask's report was served on May 15, 2023, the underlying documents establishing the fleet redeployment — including the November 12, 2021 Milescu email (VHC-008417) and the VTS internal operations reports — were produced before Dr. Trask's report date and were available to him through Vantor's counsel. Dr. Trask's failure to address these documents in his report is therefore not attributable to timing but to a deliberate analytical choice — or, at minimum, a failure to review the discovery record with adequate diligence.

2. Why This Omission Is Critical. The omission of VTS's breaches from Dr. Trask's analysis is critical for three independent reasons.

First, the first-to-breach doctrine. Under New York law, a party that commits the first material breach of a contract cannot recover damages for the other party's subsequent non-performance. See Ashgrove & Co. v. Camberwell Industries, 500 F.3d 171, 186 (2d Cir. 2007) (applying New York law). As we analyzed in our March 15, 2023 memorandum (Doc. 119), if VTS committed the first material breach by unilaterally reducing its dedicated fleet capacity in October 2021 — before any alleged volume shortfalls by Stonefield and before the March 4, 2022 termination — then Stonefield's subsequent termination was justified as a matter of law, and Vantor cannot claim any damages whatsoever. The Milescu email (VHC-008417) provides strong evidence that VTS's fleet redeployment preceded and caused the Q4 2021 SLO failures that Stonefield cited in the Cure Notice, and that VTS was therefore the first party to materially breach the agreement.

If the first-to-breach doctrine applies, Vantor's damages are $0 — not $95.4 million. Dr. Trask's complete disregard of this defense renders his entire damages analysis contingent on a factual and legal premise (that Stonefield breached first) that he does not examine, let alone establish.

Second, setoff and comparative fault. Even if a court were to conclude that VTS was not the first to breach — for example, because it credits Vantor's argument that Stonefield's alleged volume shortfalls predated and caused VTS's fleet redeployment decision — VTS's breaches would at minimum constitute a setoff against any damages Vantor might otherwise recover. Dr. Trask's report contains no offset, reduction, or comparative fault analysis. It presents the full $95.4 million damages figure as if VTS performed the TSA flawlessly and Stonefield alone was at fault. This approach is inconsistent with basic damages principles and produces a distorted picture of the economic harm attributable to Stonefield's conduct.

Third, causal apportionment. Even under Vantor's own theory of the case — which asserts that Stonefield's volume shortfalls caused VTS's performance deficiencies — a responsible damages expert would attempt to model the causal relationship between the alleged volume shortfalls and VTS's SLO failures, and to apportion damages accordingly. Dr. Trask makes no such attempt. He does not analyze whether or to what extent Stonefield's alleged volume shortfalls caused VTS's fleet redeployment, whether VTS's decision to redirect tractors to Northwind was a reasonable response to reduced SLG volume or an independent commercial decision, or how the causal chain affects the quantum of damages. The absence of any causal apportionment analysis is a fundamental methodological deficiency.

3. Stonefield's Volume Tender Defense. Vantor alleges in its Amended Complaint that Stonefield failed to tender the ACV minimum in Contract Years 2 and 3, and that these volume shortfalls constituted a prior material breach by Stonefield. Dr. Trask's report accepts Vantor's shortfall calculations at face value. A more rigorous analysis reveals significant problems with Vantor's volume calculations.

Contract Year 2 (April 1, 2020 through March 31, 2021). Actual tenders totaled $31.8 million against the ACV of $43.2 million. Vantor characterizes the $11.4 million difference as a material breach. However, Stonefield properly invoked the force majeure provision in TSA Section 12.1 for the period of April through September 2020, citing the operational and economic impacts of the COVID-19 pandemic on freight volumes. Stonefield's force majeure notice was served on April 14, 2020, and VTS did not challenge or dispute the notice at the time. Adjusting for the six-month force majeure period, the applicable ACV for Contract Year 2 is $43.2 million × (6/12) = $21.6 million. VTS's actual tenders of $31.8 million exceeded this adjusted minimum by $10.2 million — meaning that, far from a shortfall, Stonefield tendered nearly 50% more volume than it was contractually required to tender during CY2 on an adjusted basis.

Dr. Trask's report does not analyze or even reference the force majeure adjustment. His acceptance of Vantor's unadjusted shortfall calculation is a significant analytical error that distorts the factual predicate for Vantor's volume-shortfall theory.

Contract Year 3 (April 1, 2021 through March 31, 2022, partial). Actual tenders through the termination date (approximately 10 months, April 2021 through January 2022) totaled $36.5 million. Vantor calculates a shortfall of $6.7 million ($43.2 million − $36.5 million), but this comparison improperly uses the full-year ACV of $43.2 million against only 10 months of actual tenders. The TSA was terminated on March 4, 2022, meaning that approximately two months of the contract year (February and March 2022) cannot fairly be included in the comparison. The prorated ACV for the 10-month period is approximately $36.0 million ($43.2 million × 10/12), making the actual tenders of $36.5 million slightly above the prorated minimum. The parties dispute the proper methodology for prorating the CY3 ACV, but Dr. Trask does not engage with the prorating issue at all — he simply adopts Vantor's calculation.

4. Recommendations for Rebuttal. We recommend directing Dr. Rosser to perform the following analyses:

(a) Quantify the impact of VTS's breaches as an offset to any damages claim. Specifically, Dr. Rosser should calculate the harm Stonefield suffered from VTS's service level failures, including: excess freight costs incurred by Stonefield for alternative carrier coverage on Lanes 8 through 14 via Cascade Freight Systems Inc. and Briarwood Trucking Co.; customer complaints and lost business attributable to VTS's on-time delivery failures; and premium charges incurred for emergency substitute capacity during Q4 2021 and Q1 2022.

(b) Incorporate the force majeure-adjusted ACV analysis for Contract Year 2, demonstrating that Stonefield met its volume obligations on a properly adjusted basis and that the alleged $11.4 million shortfall is factually unfounded.

(c) Perform a proper causal analysis determining whether VTS's undisclosed fleet redeployment of 85 tractors to Northwind in October 2021 was the proximate cause of VTS's Q4 2021 SLO failures, as distinct from and independent of any alleged volume shortfalls by Stonefield. Dr. Rosser should model the relationship between the fleet reduction and each of the five SLO metrics to demonstrate that the timing and magnitude of VTS's performance decline are consistent with the fleet redeployment and inconsistent with Vantor's alleged-shortfall causation theory.

(d) Analyze the prorated CY3 ACV and demonstrate that Stonefield's actual tenders met or exceeded the properly calculated minimum commitment through the date of termination.

D. Weakness #4: Absence of Meaningful Mitigation Analysis

1. Dr. Trask's Treatment of Mitigation. Dr. Trask's report includes a single line item of $1,400,000 for "Mitigation Costs," described as costs Vantor purportedly incurred in seeking replacement freight following the TSA termination. This line item is presented on the damages side of the ledger — as an additional cost Vantor suffered, rather than as an offset to claimed losses. The report provides no supporting detail for the $1.4 million figure beyond a general reference to "business development expenses, broker commissions, and related administrative costs."

More importantly, the report contains no analysis whatsoever of whether Vantor actually mitigated its damages or had a duty to do so. Dr. Trask does not discuss:

(a) The availability of replacement freight in the marketplace following the TSA termination;

(b) The freight market conditions prevailing in Q1 and Q2 2022, including spot rates, contract rates, and carrier capacity;

(d) The extent to which replacement freight revenue could have offset the claimed losses;

(e) VTS's post-termination revenue trajectory relative to the loss of the SLG contract; or

(f) Whether VTS in fact replaced the SLG volume, in whole or in part, with alternative freight.

The $1.4 million mitigation costs line item, presented without a corresponding mitigation offset analysis, creates the misleading impression that Vantor incurred additional costs trying to mitigate but that no mitigation was achieved. In reality, the question is not whether Vantor incurred costs in seeking replacement freight — the question is whether those efforts yielded replacement revenue that offsets the claimed losses, and if not, whether reasonable mitigation efforts would have yielded such revenue.

2. Why This Omission Is Fatal. Under New York law, a plaintiff has an affirmative duty to mitigate damages by making reasonable efforts to avoid or minimize loss following a breach of contract. See LNR Partners, LLC v. Manna Equities LLC, 658 F. App'x 18, 21 (2d Cir. 2016); Wilmot v. State, 32 N.Y.2d 164, 169 (1973). Failure to mitigate reduces the plaintiff's recoverable damages by the amount that could reasonably have been avoided through the exercise of reasonable diligence. The duty to mitigate does not require the plaintiff to take extraordinary measures, but it does require reasonable efforts proportionate to the loss at issue.

The absence of mitigation analysis in Dr. Trask's report is particularly egregious given the freight market conditions that prevailed at the time of the TSA termination. As we analyzed in our January 30, 2023 memorandum (Doc. 117), the freight market in Q1 and Q2 2022 was among the most favorable carrier environments in the past decade:

• Spot rates for dry-van truckload freight were elevated approximately 35% above historical five-year averages, according to Brightmoor Software and the Dunmore Systems.

• Carrier capacity was tight, with the American Trucking Associations' Trucking Tonnage Index showing sustained high demand through the first half of 2022.

• Major shippers across multiple industries were actively seeking additional carrier capacity, paying premium rates, and offering multi-year contract commitments to secure dedicated fleet resources.

In this environment, VTS's fleet of approximately 650 owned tractors and 2,100 trailers represented a highly marketable asset base. The approximately 400 tractors and proportionate trailers that had been dedicated to SLG lanes under the TSA — and which were freed up by the termination — could have been readily deployed to alternative shippers at rates at or above the rates Stonefield was paying under the TSA. Indeed, the 85 tractors that VTS had already redeployed to the Northwind account in October 2021 demonstrate that VTS was capable of and experienced in redirecting fleet capacity to alternative customers on relatively short notice.

The evidentiary record on Vantor's post-termination mitigation efforts is thin, and the information that is available suggests limited mitigation activity. Derek Pruitt, VP of Business Development for Vantor, testified at his July 10, 2023 deposition that VTS "struggled" to maintain fleet capacity in Q4 2021 but was unable to identify specific mitigation steps taken after the March 4, 2022 termination. Although this deposition occurred after Dr. Trask's report was served, the information underlying any mitigation analysis was available to Dr. Trask from Vantor's interrogatory responses and financial records, which were produced before his report date.

Vantor's interrogatory responses, which we analyzed in our May 8, 2023 memorandum (Doc. 56), were notably evasive on the subject of mitigation. In particular, Vantor's response to Interrogatory No. 14 — which asked Vantor to "identify all efforts undertaken by Vantor or VTS to replace the revenue lost due to the termination of the TSA, including but not limited to identification of prospective shippers contacted, contract proposals submitted, and replacement freight secured" — was non-responsive and conclusory. Vantor stated only that it "undertook commercially reasonable efforts to mitigate its damages, including exploring alternative freight opportunities," without identifying any specific shippers, contracts, or revenue.

The robust freight market conditions strongly suggest that Vantor could have substantially replaced the SLG freight volume — and may have in fact done so. VTS's post-termination financial performance may show that total revenue did not decline by the full amount of the lost SLG contract, which would indicate that mitigation occurred even if Vantor is reluctant to characterize it as such. Dr. Trask's failure to investigate or account for replacement revenue is a critical omission that inflates the claimed damages by the full amount of any actual or reasonably achievable mitigation.

3. Recommendations for Rebuttal. We recommend directing Dr. Rosser to perform the following analyses:

(a) An analysis of publicly available freight market data — including Brightmoor Software, the Dunmore Systems, the ATA Trucking Tonnage Index, and relevant industry publications — for Q1 2022 through Q1 2024, demonstrating the readily available replacement freight opportunities that existed during the remaining contract term and the rates at which alternative freight was available.

(b) A comparison of VTS's post-termination revenue trajectory to its pre-termination revenue, accounting for the loss of the SLG contract and other independent factors (such as general freight market softening), to determine whether VTS in fact mitigated its damages and, if so, by how much. This analysis should use Vantor's FY 2022 and FY 2023 financial data as produced in discovery.

(c) A calculation of a reasonable mitigation offset — the amount of replacement revenue Vantor should have earned had it exercised reasonable diligence in redeploying its freed-up fleet capacity — expressed as a reduction to any damages calculation. This offset should be based on (i) the number of tractors and trailers freed up by the TSA termination (approximately 400 tractors), (ii) the prevailing market rates for dedicated and spot truckload freight in the relevant period, (iii) a reasonable timeline for redeployment (we anticipate Dr. Rosser will conclude that 60 to 90 days was sufficient to redeploy the majority of freed-up capacity, based on industry norms), and (iv) an assumed utilization rate consistent with VTS's historical fleet utilization on non-SLG freight.

V. ADDITIONAL ISSUES AND OBSERVATIONS

A. Consequential Damages Waiver (TSA Section 15.1)

Section 15.1 of the TSA contains a mutual waiver of consequential, incidental, special, and punitive damages. The provision states, in relevant part:

"IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES."

Three of Dr. Trask's five damages categories are consequential in nature and are likely barred by this waiver:

• Stranded Assets & Costs ($5,200,000): This category encompasses depreciation on tractors and trailers acquired specifically for the SLG contract, as well as lease termination costs for equipment leased in connection with SLG-dedicated operations. These are downstream economic consequences of the termination — costs that flow indirectly from the loss of the contract rather than directly from the breach itself. They represent the economic impact of VTS's inability to productively deploy assets that were acquired in reliance on the contract's continuation. Under New York law, such reliance-based losses are typically classified as consequential damages. See Biotronik A.G. v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799, 806 (2014).

• Workforce Reduction Costs ($2,870,000): This category encompasses severance payments, unemployment insurance costs, and related expenses for approximately 180 drivers and support staff who were terminated following the loss of the SLG contract. These costs are a downstream consequence of the termination — they would not have been incurred "but for" the loss of the contract, but they are not a direct measure of the contract's value. Rather, they represent the cost of VTS's operational downsizing in response to the revenue loss, and are properly characterized as consequential damages.

• Mitigation Costs ($1,400,000): Although mitigation costs are sometimes recoverable as incidental damages, the category as presented by Dr. Trask — "costs incurred by Vantor seeking replacement freight" — encompasses business development expenses, broker commissions, and administrative costs that are consequential in character.

The total of these three categories is $9,470,000. As we analyzed in our April 5, 2023 memorandum (Doc. 122), these categories represent downstream economic consequences of the termination, not direct contract damages, and are barred by the Section 15.1 waiver. Dr. Trask's report does not reference or address the Section 15.1 waiver at all, which is a significant oversight given that the waiver appears in the very contract that forms the basis of his damages analysis.

Recommendation: Dr. Rosser should separately address the legal and economic characterization of these damages categories in her rebuttal report, identifying each as consequential in nature and subject to the Section 15.1 waiver. Calderwood & Harkness should advance the waiver argument as a separate ground for partial summary judgment, seeking dismissal of the $9.47 million in consequential damages claims.

B. Standing Issue — Vantor Holdings Corp. vs. VTS

The Complaint and Amended Complaint in this action were filed by Vantor Holdings Corp., a New York corporation. However, the signatory counterparty to the TSA is Vantor Transport Services LLC ("VTS"), a New York limited liability company that is a wholly owned subsidiary of Vantor Holdings Corp. Vantor Holdings is the sole member of VTS.

Dr. Trask's report calculates damages suffered by "Vantor" without distinguishing between the parent entity (Vantor Holdings Corp.) and the subsidiary that is the actual party to the TSA (VTS). Financial data from both entities is used interchangeably, and the report does not address whether Vantor Holdings Corp. has standing to assert claims for breach of a contract to which it was not a party.

As we analyzed in our December 8, 2022 memorandum (Doc. 120), there is a potential defense that Vantor Holdings Corp. lacks standing as a non-signatory to the TSA. Under New York law, only parties to a contract — or intended third-party beneficiaries — may sue for breach. Vantor Holdings, as the sole member of VTS, is not automatically a party to VTS's contracts and does not have standing to assert VTS's breach-of-contract claims in its own name absent a basis for piercing the corporate veil in reverse or an assignment of claims from VTS to Vantor Holdings.

However, this argument is secondary in our overall defense strategy. The likelihood is that, if the standing issue were raised, the court would permit Vantor Holdings to amend the Complaint to substitute or add VTS as a party plaintiff under Federal Rule of Civil Procedure 17(a)(3), which provides that an action "shall not be dismissed on the ground that it is not prosecuted in the name of the real party in interest until ... a reasonable time has been allowed for ... ratification of commencement of the action." While a Rule 17 amendment would likely be granted, it would impose some procedural costs on Vantor and could be used as leverage in settlement negotiations.

Recommendation: Preserve this argument in responsive briefing but do not lead with it as a primary defense theory.

C. Rate Adjustment Motive

Dr. Trask's report devotes approximately three pages to the Ashford Meridian LLP rate adjustment analysis dated February 2022, which projected that the scheduled April 2022 rate adjustment under the TSA's Rate Adjustment Mechanism (Section 5.3) would have increased per-mile rates from a weighted average of $2.87 to $3.28. This represented a 14.3% increase, calculated as ($3.28 − $2.87) / $2.87 = 14.29%, and would have added approximately $6.2 million in annual transportation costs to Stonefield's SLG-related expend

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
May 22, 2023
FROM: Patrick Gallagher, Lead Associate, Litigation (General) Simone Laroche, Working Associate, Litigation (General)
TO: Samuel Eklund, Responsible Partner, Litigation (General) Linda Osei, Billing Partner, Litigation (General)
RE: Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.) — Analysis of Expert Report of Dr. Philip Trask (Trask Greystone & Associates)
CLIENT: Stonefield Logistics Group Inc.
MATTER NO.: 1012-00005
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I. EXECUTIVE SUMMARY
This memorandum provides a detailed analysis and critique of the expert report of Dr. Philip Trask, founder and principal of Trask Greystone & Associates (400 Madison Avenue, Suite 900, New York, NY 10017), which was served by plaintiff Vantor Holdings Corp. ("Vantor" or "Plaintiff") through its counsel Caldwell Royce & Shapiro LLP on May 15, 2023. We have reviewed the report in its entirety, including its appendices and the materials Dr. Trask identifies as having been relied upon in forming his opinions.
Dr. Trask's report opines that Vantor suffered total damages of $95,400,000 as a result of Stonefield Logistics Group Inc.'s ("Stonefield" or "SLG") alleged wrongful termination of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Ref. No. SLG-VTS-2019-0315). The claimed damages encompass liquidated damages, lost profits, stranded asset costs, workforce reduction costs, and mitigation costs. In our assessment, the report suffers from four fundamental methodological weaknesses that substantially undermine both its reliability and its admissibility under Federal Rule of Evidence 702 and the Daubert standard:
(i) Dr. Trask assumes without legal or economic analysis that the liquidated damages clause in TSA Section 14.2 is fully enforceable, treating the contractual formula as a mathematical given rather than subjecting the resulting figure to any reasonableness inquiry;
(ii) Dr. Trask relies on inflated operating margin assumptions for the lost profits calculation, applying a 12% operating margin derived from COVID-era consolidated financial data that does not reflect account-specific profitability or post-2021 freight market conditions;
(iii) Dr. Trask fails entirely to account for the material breaches committed by Vantor Transport Services LLC ("VTS"), the carrier-provider under the TSA, including the undisclosed reassignment of 85 tractors from SLG-dedicated lanes to the Northwind Distribution Co. account in October 2021 — a redeployment that was the proximate cause of VTS's Q4 2021 service level failures; and
(iv) Dr. Trask's report contains no meaningful analysis of Vantor's duty to mitigate damages, despite the exceptionally robust freight market conditions prevailing at the time of termination that would have permitted VTS to redeploy its freed-up fleet capacity to alternative shippers.
Each of these weaknesses is analyzed in detail in Section IV below, along with specific quantitative implications for the claimed damages figure.
This memorandum concludes with recommendations for rebuttal strategy, including specific issues and analyses to direct to our retained expert, Dr. Evelyn Rosser of Kensington Analytics Group LLC, potential grounds for a Daubert challenge, and the integration of the expert analysis into our anticipated summary judgment briefing. As set forth below, when the identified weaknesses are accounted for, Stonefield's maximum realistic exposure is estimated at approximately $8.2 million — a figure that will be further refined through Dr. Rosser's rebuttal report and ongoing discovery analysis.
II. BACKGROUND AND PROCEDURAL CONTEXT
A. The TSA and Its Termination
The Transportation Services Agreement was executed on March 15, 2019 between Stonefield Logistics Group Inc., acting as "Shipper-Broker," and Vantor Transport Services LLC, acting as "Carrier-Provider." VTS is a New York limited liability company and a wholly owned subsidiary of Vantor Holdings Corp. The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield during negotiations that spanned approximately four months from November 2018 through February 2019. VTS was represented in those negotiations by its in-house legal team under the direction of its then-General Counsel, Marcus Raines.
The TSA established a five-year term commencing April 1, 2019 and extending through March 31, 2024. The agreement is governed by New York law pursuant to its choice-of-law provision in Section 16.3, and includes a forum selection clause in Section 16.4 designating the United States District Court for the Southern District of New York as the exclusive forum for any disputes arising under or in connection with the agreement.
The TSA set forth an Annual Committed Volume ("ACV") of $43,200,000 per contract year, representing the minimum aggregate value of transportation services that Stonefield committed to tender to VTS under the contract's dedicated-lane and overflow freight provisions. Over the full five-year term, the total minimum commitment amounted to $216,000,000. The ACV was subject to the Rate Adjustment Mechanism set forth in Section 5.3, which indexed per-mile rates to a blended formula of 70% diesel fuel index and 30% Consumer Price Index for All Urban Consumers ("CPI-U"), with annual adjustments effective on each contract-year anniversary date.
In exchange for the volume commitment, VTS was required to maintain dedicated fleet capacity of not fewer than 400 tractors and a proportionate number of trailers for SLG-designated lanes, and to meet five Service Level Obligations ("SLOs") set forth in Schedule C to the TSA. These SLOs established minimum performance thresholds for on-time pickup rate, on-time delivery rate, tender acceptance rate, equipment availability, and cargo claims ratio.
The contractual relationship began to deteriorate in the second half of 2021. Stonefield's contract compliance team, led by Raymond Hess, Director of Contract Compliance, observed a marked decline in VTS's performance across all five SLOs beginning in approximately September 2021 and worsening through the fourth quarter. On January 18, 2022, Stonefield issued a formal Cure Notice pursuant to TSA Section 13.1(a), sent from Raymond Hess to Sandra Milescu, Chief Operating Officer of Vantor and VTS. The Cure Notice identified material breaches across all five SLOs during Q4 2021, documented the specific performance shortfalls with supporting data, and provided VTS with the 30-day cure period prescribed by the agreement.
Vantor responded to the Cure Notice on February 14, 2022, through a letter from Derek Pruitt, Vice President of Business Development, addressed to Janet Kirkwood, Vice President of Carrier Relations at Stonefield. Vantor's response acknowledged "operational challenges" during Q4 2021 but disputed Stonefield's characterization of the performance shortfalls as material breaches, claiming that Stonefield's own alleged failure to tender the full ACV had contributed to VTS's capacity allocation decisions. The response asserted that VTS had "substantially cured" the identified deficiencies and that further improvements were underway.
Stonefield assessed VTS's cure efforts and determined them to be insufficient. On March 4, 2022, Stonefield terminated the TSA by letter from Tobias Wren, General Counsel, to Marcus Raines, General Counsel of Vantor and VTS. The termination letter asserted VTS's failure to cure material breaches under Section 13.1(a), detailed the ongoing performance deficiencies that persisted through the cure period, and stated that the termination was effective immediately.
At the time of termination, the remaining term of the TSA was approximately 2 years and 27 days — from March 4, 2022 through the original expiration date of March 31, 2024. This is the period over which Dr. Trask calculates damages, and the accuracy of this calculation of the remaining term is not disputed for purposes of this analysis.
B. Procedural Posture of the Expert Report
Vantor Holdings Corp. filed its original Complaint in this action on August 12, 2022, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and wrongful termination of the TSA. On December 2, 2022, Vantor filed an Amended Complaint adding allegations of volume shortfall breach (claiming that Stonefield failed to meet the ACV minimums in Contract Years 2 and 3), lane exclusivity violations (claiming Stonefield diverted freight from VTS-dedicated lanes to competing carriers), and pretextual termination motive (claiming Stonefield terminated the TSA to avoid the impending rate adjustment under Section 5.3 that would have increased Stonefield's annual transportation costs by approximately $6.2 million).
Stonefield filed its Answer, Affirmative Defenses, and Counterclaim for declaratory judgment on January 13, 2023. The Counterclaim seeks a judicial declaration that the termination was valid for Cause under TSA Section 13.1(a), that the liquidated damages provision in Section 14.2 constitutes an unenforceable penalty, and that VTS's own material breaches preclude any recovery by Vantor.
The Honorable Margaret T. Calloway entered a Case Management Order on February 17, 2023, establishing the following key deadlines relevant to the expert phase:
• Fact discovery deadline: September 29, 2023
• Plaintiff's expert reports: May 15, 2023
• Defendant's expert and rebuttal reports: August 25, 2023
• Expert depositions: September 15 through November 15, 2023
• Expert discovery deadline: January 12, 2024
• Dispositive motions deadline: February 16, 2024
Dr. Trask's expert report was served on May 15, 2023, in compliance with the Case Management Order's deadline for Plaintiff's expert reports. The report was served during the active fact discovery phase, with approximately four months remaining before the fact discovery cutoff. This timing is relevant because certain discovery — including Sandra Milescu's deposition and the supplemental document production (VHC-029001 through VHC-033218) — had not yet occurred at the time of Dr. Trask's report, although the underlying documents and interrogatory responses that form the foundation of many of the issues identified in this memorandum were available to Dr. Trask before his report date.
Our firm retained Kensington Analytics Group LLC on behalf of Stonefield on October 28, 2022, shortly after this firm's initial retention by Stonefield. Kensington Analytics is led by Dr. Evelyn Rosser, Managing Director, with support from Michael Chung, Senior Analyst. Dr. Rosser holds a Ph.D. in economics from the University of Chicago, has testified as a damages expert in over forty commercial litigation matters in federal and state courts, and has particular expertise in transportation industry economics. She and Mr. Chung have been reviewing discovery materials as they have become available and have developed a preliminary damages framework for the rebuttal report. The target deadline for a draft rebuttal report from Dr. Rosser is early August 2023, to permit review, revision, and finalization before the August 25, 2023 service date.
III. OVERVIEW OF DR. TRASK'S REPORT
A. Qualifications and Methodology
Dr. Trask is identified in his report as the founder and principal of Trask Greystone & Associates, a New York-based economic consulting firm. His curriculum vitae, appended to the report as Exhibit A, states that he holds a Ph.D. in economics from Columbia University and an MBA from the Wharton School of the University of Pennsylvania. He describes his areas of expertise as including "economic damages quantification, valuation, and financial analysis in commercial disputes," and lists prior testimony in approximately twenty-five matters over the past fifteen years, primarily in breach-of-contract and business tort litigation. His prior engagements span several industries, including financial services, real estate, and manufacturing, but notably include only two prior matters involving the transportation or logistics sector.
Dr. Trask's report states that he was retained by Caldwell Royce & Shapiro LLP on behalf of Vantor Holdings Corp. in approximately January 2023. His report identifies the following categories of materials reviewed in forming his opinions:
• The Transportation Services Agreement dated March 15, 2019, including all schedules and amendments;
• The Cure Notice dated January 18, 2022;
• Vantor's response to the Cure Notice dated February 14, 2022;
• The termination letter dated March 4, 2022;
• Vantor Holdings Corp. and VTS audited financial statements for fiscal years 2019 through 2022;
• Selected discovery materials produced in this litigation, as provided to Dr. Trask by counsel; and
• Publicly available industry data and market reports (not individually identified in the report).
Dr. Trask's report does not identify the specific discovery materials reviewed, does not include a privilege log or document list, and does not indicate whether he reviewed Stonefield's document production, deposition transcripts, or interrogatory responses. This lack of specificity is itself a methodological concern, as it precludes meaningful assessment of the completeness of the factual foundation for his opinions.
With respect to methodology, Dr. Trask states that he employs an "expectation interest" framework consistent with standard principles of contract damages under New York law. He purports to calculate the economic position Vantor would have occupied "but for" Stonefield's termination of the TSA. His analysis proceeds in five steps: (1) calculating liquidated damages under the TSA formula; (2) calculating lost profits on the remaining committed volume above the contractual minimum; (3) quantifying stranded assets and associated costs; (4) quantifying workforce reduction costs; and (5) quantifying mitigation costs. These steps and the resulting figures are summarized in Section III.B below.
B. Summary of Damages Opinions
Dr. Trask's report presents total claimed damages of $95,400,000, broken down as follows:
Several observations about the structure of these damages claims are warranted at the outset. First, the liquidated damages component ($67,230,000) constitutes approximately 70.5% of the total claimed damages. The viability of the overall claim is therefore heavily dependent on the enforceability of the Section 14.2 liquidated damages provision — a legal question that Dr. Trask treats as settled. Second, the lost profits claim ($18,700,000) is additive to the liquidated damages claim, raising a significant double-recovery problem discussed at length in Section IV.B below. Third, the remaining categories — stranded assets, workforce reduction costs, and mitigation costs — total $9,470,000 and are consequential in nature, potentially barred by the mutual consequential damages waiver in TSA Section 15.1. Each of these issues is analyzed in the sections that follow.
IV. CRITIQUE OF DR. TRASK'S REPORT — FOUR FUNDAMENTAL WEAKNESSES
A. Weakness #1: Assumption That Liquidated Damages Clause Is Fully Enforceable
1. Dr. Trask's Approach. The largest single component of Dr. Trask's damages opinion — $67,230,000, representing approximately 70.5% of the total claimed damages — derives from the liquidated damages provision set forth in Section 14.2 of the TSA. That provision establishes a formula under which, in the event of a termination by the Carrier-Provider for the Shipper-Broker's breach, the Shipper-Broker shall pay liquidated damages equal to 75% of the Annual Committed Volume multiplied by the number of full and partial contract years remaining in the term.
Dr. Trask's report treats this provision as a straightforward mathematical input. His analysis consists of applying the contractual formula to the undisputed remaining term (2 years and 27 days), multiplying 75% by the $43.2 million ACV, and producing a total liquidated damages figure of $67,230,000. The report contains no legal or economic analysis of the enforceability of the provision. Nor does it contain any independent assessment of whether the $67,230,000 figure bears a reasonable relationship to Vantor's actual anticipated damages at the time the TSA was executed.
Dr. Trask's sole justification for treating the liquidated damages clause as enforceable is a brief reference to the clause's recital language, in which the parties "acknowledged and agreed" that the liquidated damages formula represents "a reasonable estimate of the damages that the non-breaching party would sustain" and that the amount "shall not constitute a penalty." Dr. Trask accepts this contractual recital at face value, stating in his report that "[t]he parties' mutual acknowledgment establishes the reasonableness of the formula as a damages measure."
2. Why This Is Problematic. Dr. Trask's uncritical acceptance of the liquidated damages clause is problematic for several interrelated reasons.
First, the enforceability of a liquidated damages provision under New York law is not determined by the parties' self-serving recital that the amount is "reasonable" and "not a penalty." Rather, it is a question of law subject to a well-established two-part test. As the New York Court of Appeals has held, a liquidated damages clause is enforceable only where: (a) the amount fixed represents a reasonable estimate of the probable loss anticipated at the time of contracting, and (b) actual damages flowing from the breach would be difficult to ascertain at the time of contracting. See Northpoint Holdings v. Purdy Corp., 41 N.Y.2d 354, 365 (1977); Kestrel Corporation, 4 N.Y.3d 373, 380 (2005). Where either condition is not met, the clause is deemed an unenforceable penalty regardless of the parties' subjective characterization.
Second, as we analyzed in detail in our September 19, 2022 memorandum (Doc. 15), there is a "moderate" probability that a court would find the Section 14.2 liquidated damages formula constitutes an unenforceable penalty. This assessment rests on the second prong of the New York test: actual damages in the transportation services context — encompassing lost volume, replacement costs, fleet redeployment costs, and workforce adjustments — were arguably readily ascertainable at the time of contracting. The truckload transportation industry is characterized by well-established cost structures, publicly available rate benchmarks, and standardized margin analyses. Both Vantor and Stonefield had access to detailed cost and revenue data at the time of the TSA negotiation, and there is no indication in the negotiation record that the parties treated damages as inherently difficult to calculate. The TSA negotiation file, as produced by Ashford Meridian LLP (Bates range SLG-002015 through SLG-002287), does not contain any supporting analysis or economic justification for the 75% multiplier used in the formula.
Third, the liquidated damages formula produces a figure that is grossly disproportionate to any plausible measure of Vantor's actual loss from the termination. This disproportionality is apparent from several data points:
(i) Vantor's own FY 2022 consolidated revenue declined from approximately $385 million (FY 2021) to approximately $310 million, a decline of approximately $75 million (19.5%). However, the SLG contract represented only approximately $43.2 million in annual revenue — roughly 11.2% of Vantor's FY 2021 revenue. The $67.23 million liquidated damages figure exceeds the total annual value of the contract by more than 55%, and is roughly equivalent to 90% of Vantor's entire year-over-year revenue decline, despite the fact that a significant portion of that revenue decline was attributable to broader freight market softening entirely independent of the TSA termination.
(ii) The 75% multiplier in the liquidated damages formula was not derived from any cost analysis, margin study, or economic modeling documented in the TSA negotiation record. It appears to have been a negotiated commercial term rather than a calculated estimate of probable loss. By contrast, industry-standard contract termination formulas in the transportation sector typically apply a multiplier of 15% to 30% of remaining committed volume, reflecting typical carrier operating margins — not 75%.
(iii) The formula does not account for costs that would have been avoided had the contract continued (i.e., the variable costs of actually performing the transportation services), nor does it incorporate any offset for mitigation or replacement revenue. A 75% multiplier implies that VTS's operating margin on the SLG contract was 75% — a figure that is economically implausible for a truckload carrier and that is contradicted by Vantor's own reported consolidated operating margins of 8% to 14% during the relevant period.
Fourth, Dr. Trask is retained as a damages expert, not a legal expert. He is not qualified to render opinions on the enforceability of contract provisions under New York law, and his report does not purport to do so. Yet his entire damages framework is built on the foundational legal conclusion that the Section 14.2 clause is enforceable. By treating enforceability as a given rather than a contingency, Dr. Trask's analysis fails to provide the court or jury with the kind of economically grounded damages assessment that would survive independent scrutiny. An expert who uncritically assumes the most favorable legal interpretation for his client, without performing any independent economic analysis to validate that assumption, provides an opinion that lacks the methodological rigor required under Daubert.
3. Impact on Total Damages. The practical significance of this weakness cannot be overstated. If the liquidated damages clause is found to be an unenforceable penalty — a result we assess as having moderate probability — then $67,230,000, representing approximately 70.5% of Dr. Trask's total claimed damages, would be eliminated from the case. The remaining damages categories would total $28,170,000 at most, before accounting for the additional defenses analyzed elsewhere in this memorandum (mitigation, Vantor's own breaches, the consequential damages waiver, and the double-recovery problem with lost profits).
Moreover, the structure of the TSA creates an additional complication for Vantor. Section 14.2 arguably provides that liquidated damages constitute the "sole and exclusive remedy" for damages arising from early termination. If a court construes this language as an exclusive-remedy provision — even while finding the liquidated damages formula itself unenforceable — Vantor may be precluded from separately claiming lost profits under Section 14.2's exclusivity framework. This interpretation would eliminate not only the $67.23 million in liquidated damages but also the $18.7 million in lost profits, reducing the remaining claim to $9.47 million in consequential damages categories (which are themselves likely barred by Section 15.1, as discussed in Section V.A below).
4. Recommendations for Rebuttal. We recommend directing Dr. Rosser and Mr. Chung at Kensington Analytics to perform the following analyses in their rebuttal report:
(a) An independent analysis demonstrating that actual damages from early termination of a transportation services agreement of this nature were readily ascertainable at the time of contracting (March 15, 2019), using publicly available freight market data (including Brightmoor Software, the Dunmore Systems, and standard industry costing models), standard carrier cost-of-operations data published by the American Trucking Associations, and Vantor's own financial statements and SEC filings.
(b) A disproportionality analysis comparing the $67.23 million liquidated damages figure to multiple reasonable measures of actual harm, including: (i) a lost-profits measure based on actual account-level margins; (ii) a replacement-cost measure reflecting the cost to VTS of redeploying its freed-up fleet capacity; and (iii) industry benchmarks for contract termination damages in comparable transportation services agreements.
(c) An analysis of the 75% multiplier, demonstrating that it bears no reasonable relationship to Vantor's actual or anticipated profit margins on the SLG contract and is inconsistent with industry norms for liquidated damages provisions in transportation contracts.
B. Weakness #2: Inflated Operating Margin Assumptions for Lost Profits Calculation
1. Dr. Trask's Methodology. Dr. Trask's lost profits opinion claims $18,700,000 in damages, calculated by applying a 12% average operating margin to the remaining committed volume under the TSA of approximately $86.4 million (calculated as $43.2 million ACV × 2 remaining full contract years). Dr. Trask describes this as the profit that Vantor would have earned on the SLG freight over the remaining contract term, above and beyond the return of invested costs.
The 12% margin figure appears to be derived from Vantor's consolidated operating margins as reported in its audited financial statements for fiscal years 2019 and 2020. The report references these consolidated figures without identifying the specific financial line items used in the calculation. Dr. Trask's report states that the 12% margin represents a "reasonable projection of Vantor's expected profitability on the SLG account," but does not provide any account-level data to support this assertion. No backup workpapers demonstrating the derivation of the 12% figure are appended to the report, although Dr. Trask states that his "detailed calculations are available upon request."
Dr. Trask applies the 12% margin uniformly across the entire remaining committed volume, without adjustment for changing market conditions, cost escalation, or the TSA's Rate Adjustment Mechanism. He does not present a range of margin assumptions, does not perform sensitivity analysis, and does not provide probability-weighted scenarios. The single-point estimate of $18.7 million is presented as a definitive figure rather than the midpoint or boundary of a range.
2. Why This Is Inflated. There are multiple independent reasons to conclude that the 12% operating margin assumption is materially inflated and does not reflect a reliable estimate of VTS's expected profitability on the SLG account over the remaining contract term.
Consolidated vs. Account-Level Data. Dr. Trask's reliance on Vantor's consolidated operating margins is fundamentally misguided because consolidated margins reflect the blended profitability of Vantor's entire portfolio of shipper relationships — not the profitability of the SLG account in particular. It is well established in the transportation industry that different accounts carry materially different margin profiles depending on lane density, freight characteristics, rate structure, deadhead miles, and capacity commitments. The SLG contract was a dedicated-fleet arrangement with a negotiated rate structure and volume-based pricing that was specifically designed to provide Stonefield with below-market rates in exchange for the volume commitment. Vantor's own internal financial data — which we expect to confirm through detailed analysis of the VTS financial records produced in discovery (Bates range VHC-000001 through VHC-028914, supplemented by VHC-029001 through VHC-033218) — likely shows that the SLG account specifically had lower margins than the company-wide average.
COVID-Era Distortion. The fiscal years from which Dr. Trask derives his 12% margin assumption — FY 2019 and FY 2020 — were characterized by extraordinary market conditions that are not representative of normalized operating profitability. FY 2020 in particular saw significant COVID-era pricing surges in the truckload sector, driven by supply chain disruptions, capacity constraints, and emergency freight demand. These conditions produced elevated margins across the industry that were widely recognized as temporary and unsustainable. By FY 2022, the freight market had softened considerably: Vantor's own consolidated revenue declined from approximately $385 million to approximately $310 million, and industry-wide operating margins for truckload carriers compressed substantially. Any reasonable forward-looking projection of VTS's margins on the SLG account for the period March 2022 through March 2024 should have accounted for this market normalization.
Rate Adjustment Mechanism. The TSA's Rate Adjustment Mechanism in Section 5.3, which indexed per-mile rates to a blend of 70% diesel fuel index and 30% CPI-U, would have adjusted rates annually. While this mechanism would have increased the per-mile rates paid by Stonefield, it would not have insulated VTS from margin compression caused by cost increases that were not fully captured by the rate formula. Specifically, rising fuel costs in 2022 — diesel prices reached historic highs in the first half of 2022 — would have increased VTS's actual fuel expenditures by more than the 70% diesel-indexed rate adjustment would have compensated, because the rate adjustment applied to the prior year's fuel index and did not provide real-time fuel cost passthrough. Similarly, driver wage inflation in 2021 and 2022 (averaging 10% to 15% year-over-year in the truckload sector, according to American Trucking Associations data) was not captured by the CPI-U component of the formula and would have directly eroded operating margins.
Confusion of Gross and Operating Margins. Dr. Trask's report does not clearly distinguish between gross margins (revenue minus direct costs of transportation services) and operating margins (gross profit minus allocated overhead, administrative costs, and depreciation). The 12% figure, if derived from Vantor's consolidated income statements, may reflect gross margin rather than true operating margin after allocation of overhead costs to the SLG account. This distinction is material: in the truckload carrier industry, the spread between gross margin and operating margin is typically 5 to 8 percentage points, reflecting the substantial overhead burden that must be allocated across individual accounts.
No Cost Decomposition. A reliable lost-profits analysis requires the expert to decompose costs into fixed and variable components and to isolate the incremental profit margin on the specific revenue stream at issue. Dr. Trask's report does not perform this decomposition. It does not separately identify or account for the variable costs that VTS would have incurred in performing the SLG contract — including driver wages and benefits, fuel, maintenance and repair, tires, insurance, tolls, and equipment depreciation — nor does it identify which fixed costs, if any, were truly incremental to the SLG account. Without this cost decomposition, the 12% margin figure is an unsupported assumption rather than a calculated result.
Absence of Sensitivity Analysis. A single-point estimate of operating margin, applied uniformly across a two-year future period in a volatile industry, does not meet the standards of generally accepted economic methodology. A reliable damages estimate would present a range of margin assumptions — at minimum, a base case, an optimistic case, and a pessimistic case — reflecting the uncertainty inherent in projecting future profitability. Dr. Trask's failure to perform any sensitivity analysis exaggerates the precision of his lost profits figure and overstates the resulting damages claim.
3. Relationship to Liquidated Damages — Double Recovery Problem. Apart from the margin inflation issue, Dr. Trask's lost profits claim presents a fundamental double-recovery problem when considered alongside the liquidated damages claim. This issue, which we analyzed in detail in our February 15, 2023 memorandum (Doc. 118), arises because the liquidated damages and lost profits categories both purport to compensate Vantor for the same underlying harm — the loss of the remaining value of the TSA.
The liquidated damages formula in Section 14.2 was designed to serve as a comprehensive measure of the non-breaching party's damages from early termination. By applying 75% of the ACV to the remaining term, the formula implicitly incorporates the terminating party's lost profits, since the 75% multiplier was intended to approximate the net economic value of the contract to the non-breaching party after accounting for avoided costs. If the liquidated damages clause is enforceable, it represents the agreed-upon measure of total termination damages — not a floor to which additional lost-profits damages may be added.
New York law prohibits duplicative recovery for the same injury. See Bi-Economy Market, Inc. v. Harleysville Ins. Co. of N.Y., 10 N.Y.3d 187, 194 (2008); Kenford Co. v. County of Erie, 73 N.Y.2d 312, 319 (1989). Dr. Trask's report does not address the overlap between the liquidated damages and lost profits categories, does not explain why separate recovery for both categories is legally or economically warranted, and does not perform any analysis to ensure that the two categories do not compensate for the same lost economic value. This represents a fundamental analytical flaw that pervades the report's damages framework.
The magnitude of the potential double recovery is substantial. If the liquidated damages claim of $67.23 million is intended to compensate for the loss of 75% of the remaining contract value, and the lost profits claim of $18.7 million is intended to compensate for the operating margin on the remaining contract volume, then the combined claim of $85.93 million exceeds the total remaining contract value of $86.4 million (2 years × $43.2 million ACV) by a factor that suggests the sum of the two categories compensates for more than 99% of the total remaining revenue — an absurd result for a carrier with operating margins of 8% to 14%.
4. Recommendations for Rebuttal. We recommend directing Dr. Rosser to perform the following analyses:
(a) A detailed analysis of VTS's actual account-level margins on SLG freight, using VTS's internal financial records as produced in discovery (Bates range VHC-000001 through VHC-028914 and supplemental production VHC-029001 through VHC-033218). This analysis should isolate SLG-specific revenues, direct costs, and allocated overhead to determine the true operating margin on the SLG account for each contract year.
(b) Development of a proper variable-cost model isolating the incremental profit margin on SLG-specific freight, with line-item accounting for fuel cost escalation (using EIA diesel price data), driver pay inflation (using ATA and Bureau of Labor Statistics data), equipment depreciation (using VTS's depreciation schedules for TSA-dedicated assets), and insurance costs (using VTS's insurance renewal data).
(c) A sensitivity analysis presenting a range of margin assumptions — base case, high case, and low case — reflecting freight market uncertainty over the remaining contract term.
(d) An economic analysis of the duplicative nature of the liquidated damages and lost profits claims, demonstrating that the two categories compensate for overlapping economic harm and that permitting recovery of both would result in a windfall to Vantor.
C. Weakness #3: Failure to Account for Vantor's Own Breaches
1. The Breaches Dr. Trask Ignores. Dr. Trask's report makes no reference to, and does not account for, VTS's material breaches of the TSA. This omission is remarkable given that VTS's breaches are at the core of Stonefield's defense and are extensively documented in the record. A damages expert purporting to calculate the economic position Vantor would have occupied "but for" the termination cannot simply ignore the question of whether Vantor was itself in breach — particularly where those breaches provided the legal basis for the termination. The specific breaches that Dr. Trask ignores are as follows.
##### a. VTS's Q4 2021 Service Level Failures
VTS's performance during Q4 2021 fell materially below the contractually required SLOs across all five service categories. The specific performance data, as documented in Stonefield's January 18, 2022 Cure Notice and corroborated by VTS's own internal performance tracking data (produced at VHC-011204 through VHC-011287), is as follows:
The equipment availability shortfall is particularly significant. VTS was contractually required to maintain a minimum of 400 dedicated tractors for SLG lanes, with an SLO requiring at least 85% availability (340 tractors) at any given time. In Q4 2021, only approximately 248 tractors were available — 152 tractors below the commitment and 92 tractors below the SLO minimum. The causes of this shortfall are directly relevant to Weakness #3 and are discussed immediately below.
Additionally, the cargo claims data shows 16 documented claims in November and December 2021 alone, totaling $387,400 in claimed losses. The 1.07% cargo claims ratio was more than double the 0.5% maximum permitted under the TSA, reflecting a pattern of freight handling deficiencies that went beyond isolated incidents.
##### b. Undisclosed Fleet Redeployment
The most significant breach identified in the record — and the one most conspicuously absent from Dr. Trask's analysis — is VTS's undisclosed redeployment of 85 tractors from SLG-dedicated lanes to the Northwind Distribution Co. account in October 2021.
This redeployment was first documented in an internal email from Sandra Milescu, Chief Operating Officer of Vantor and VTS, to Nikolai Vantorovich, Chairman and controlling shareholder of Vantor Holdings Corp., dated November 12, 2021 (VHC-008417). In that email, Ms. Milescu wrote:
"We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January."
The redacted portion of this email is the subject of a pending motion to compel, but the unredacted text is sufficient to establish the key facts: VTS unilaterally reduced its SLG-dedicated fleet by 85 tractors (a 21.25% reduction from the 400-tractor commitment) to service a different customer, and did so with full awareness that this redeployment would not be disclosed to Stonefield.
Vantor's supplemental document production, served on June 22, 2023 (comprising 4,218 documents, Bates range VHC-029001 through VHC-033218), further confirmed the fleet redeployment. Internal VTS operations reports produced in that supplement show that the 85 tractors were redirected to the Northwind Distribution Co. account beginning in approximately the second week of October 2021, and that the redeployment was authorized by Ms. Milescu with the knowledge of Derek Pruitt, VP of Business Development.
Sandra Milescu confirmed the reassignment during her deposition on August 4, 2023. Although this deposition occurred after Dr. Trask's report was served on May 15, 2023, the underlying documents establishing the fleet redeployment — including the November 12, 2021 Milescu email (VHC-008417) and the VTS internal operations reports — were produced before Dr. Trask's report date and were available to him through Vantor's counsel. Dr. Trask's failure to address these documents in his report is therefore not attributable to timing but to a deliberate analytical choice — or, at minimum, a failure to review the discovery record with adequate diligence.
2. Why This Omission Is Critical. The omission of VTS's breaches from Dr. Trask's analysis is critical for three independent reasons.
First, the first-to-breach doctrine. Under New York law, a party that commits the first material breach of a contract cannot recover damages for the other party's subsequent non-performance. See Ashgrove & Co. v. Camberwell Industries, 500 F.3d 171, 186 (2d Cir. 2007) (applying New York law). As we analyzed in our March 15, 2023 memorandum (Doc. 119), if VTS committed the first material breach by unilaterally reducing its dedicated fleet capacity in October 2021 — before any alleged volume shortfalls by Stonefield and before the March 4, 2022 termination — then Stonefield's subsequent termination was justified as a matter of law, and Vantor cannot claim any damages whatsoever. The Milescu email (VHC-008417) provides strong evidence that VTS's fleet redeployment preceded and caused the Q4 2021 SLO failures that Stonefield cited in the Cure Notice, and that VTS was therefore the first party to materially breach the agreement.
If the first-to-breach doctrine applies, Vantor's damages are $0 — not $95.4 million. Dr. Trask's complete disregard of this defense renders his entire damages analysis contingent on a factual and legal premise (that Stonefield breached first) that he does not examine, let alone establish.
Second, setoff and comparative fault. Even if a court were to conclude that VTS was not the first to breach — for example, because it credits Vantor's argument that Stonefield's alleged volume shortfalls predated and caused VTS's fleet redeployment decision — VTS's breaches would at minimum constitute a setoff against any damages Vantor might otherwise recover. Dr. Trask's report contains no offset, reduction, or comparative fault analysis. It presents the full $95.4 million damages figure as if VTS performed the TSA flawlessly and Stonefield alone was at fault. This approach is inconsistent with basic damages principles and produces a distorted picture of the economic harm attributable to Stonefield's conduct.
Third, causal apportionment. Even under Vantor's own theory of the case — which asserts that Stonefield's volume shortfalls caused VTS's performance deficiencies — a responsible damages expert would attempt to model the causal relationship between the alleged volume shortfalls and VTS's SLO failures, and to apportion damages accordingly. Dr. Trask makes no such attempt. He does not analyze whether or to what extent Stonefield's alleged volume shortfalls caused VTS's fleet redeployment, whether VTS's decision to redirect tractors to Northwind was a reasonable response to reduced SLG volume or an independent commercial decision, or how the causal chain affects the quantum of damages. The absence of any causal apportionment analysis is a fundamental methodological deficiency.
3. Stonefield's Volume Tender Defense. Vantor alleges in its Amended Complaint that Stonefield failed to tender the ACV minimum in Contract Years 2 and 3, and that these volume shortfalls constituted a prior material breach by Stonefield. Dr. Trask's report accepts Vantor's shortfall calculations at face value. A more rigorous analysis reveals significant problems with Vantor's volume calculations.
Contract Year 2 (April 1, 2020 through March 31, 2021). Actual tenders totaled $31.8 million against the ACV of $43.2 million. Vantor characterizes the $11.4 million difference as a material breach. However, Stonefield properly invoked the force majeure provision in TSA Section 12.1 for the period of April through September 2020, citing the operational and economic impacts of the COVID-19 pandemic on freight volumes. Stonefield's force majeure notice was served on April 14, 2020, and VTS did not challenge or dispute the notice at the time. Adjusting for the six-month force majeure period, the applicable ACV for Contract Year 2 is $43.2 million × (6/12) = $21.6 million. VTS's actual tenders of $31.8 million exceeded this adjusted minimum by $10.2 million — meaning that, far from a shortfall, Stonefield tendered nearly 50% more volume than it was contractually required to tender during CY2 on an adjusted basis.
Dr. Trask's report does not analyze or even reference the force majeure adjustment. His acceptance of Vantor's unadjusted shortfall calculation is a significant analytical error that distorts the factual predicate for Vantor's volume-shortfall theory.
Contract Year 3 (April 1, 2021 through March 31, 2022, partial). Actual tenders through the termination date (approximately 10 months, April 2021 through January 2022) totaled $36.5 million. Vantor calculates a shortfall of $6.7 million ($43.2 million − $36.5 million), but this comparison improperly uses the full-year ACV of $43.2 million against only 10 months of actual tenders. The TSA was terminated on March 4, 2022, meaning that approximately two months of the contract year (February and March 2022) cannot fairly be included in the comparison. The prorated ACV for the 10-month period is approximately $36.0 million ($43.2 million × 10/12), making the actual tenders of $36.5 million slightly above the prorated minimum. The parties dispute the proper methodology for prorating the CY3 ACV, but Dr. Trask does not engage with the prorating issue at all — he simply adopts Vantor's calculation.
4. Recommendations for Rebuttal. We recommend directing Dr. Rosser to perform the following analyses:
(a) Quantify the impact of VTS's breaches as an offset to any damages claim. Specifically, Dr. Rosser should calculate the harm Stonefield suffered from VTS's service level failures, including: excess freight costs incurred by Stonefield for alternative carrier coverage on Lanes 8 through 14 via Cascade Freight Systems Inc. and Briarwood Trucking Co.; customer complaints and lost business attributable to VTS's on-time delivery failures; and premium charges incurred for emergency substitute capacity during Q4 2021 and Q1 2022.
(b) Incorporate the force majeure-adjusted ACV analysis for Contract Year 2, demonstrating that Stonefield met its volume obligations on a properly adjusted basis and that the alleged $11.4 million shortfall is factually unfounded.
(c) Perform a proper causal analysis determining whether VTS's undisclosed fleet redeployment of 85 tractors to Northwind in October 2021 was the proximate cause of VTS's Q4 2021 SLO failures, as distinct from and independent of any alleged volume shortfalls by Stonefield. Dr. Rosser should model the relationship between the fleet reduction and each of the five SLO metrics to demonstrate that the timing and magnitude of VTS's performance decline are consistent with the fleet redeployment and inconsistent with Vantor's alleged-shortfall causation theory.
(d) Analyze the prorated CY3 ACV and demonstrate that Stonefield's actual tenders met or exceeded the properly calculated minimum commitment through the date of termination.
D. Weakness #4: Absence of Meaningful Mitigation Analysis
1. Dr. Trask's Treatment of Mitigation. Dr. Trask's report includes a single line item of $1,400,000 for "Mitigation Costs," described as costs Vantor purportedly incurred in seeking replacement freight following the TSA termination. This line item is presented on the damages side of the ledger — as an additional cost Vantor suffered, rather than as an offset to claimed losses. The report provides no supporting detail for the $1.4 million figure beyond a general reference to "business development expenses, broker commissions, and related administrative costs."
More importantly, the report contains no analysis whatsoever of whether Vantor actually mitigated its damages or had a duty to do so. Dr. Trask does not discuss:
(a) The availability of replacement freight in the marketplace following the TSA termination;
(b) The freight market conditions prevailing in Q1 and Q2 2022, including spot rates, contract rates, and carrier capacity;
(c) Vantor's efforts (or lack thereof) to find alternative shippers and deploy its freed-up fleet capacity;
(d) The extent to which replacement freight revenue could have offset the claimed losses;
(e) VTS's post-termination revenue trajectory relative to the loss of the SLG contract; or
(f) Whether VTS in fact replaced the SLG volume, in whole or in part, with alternative freight.
The $1.4 million mitigation costs line item, presented without a corresponding mitigation offset analysis, creates the misleading impression that Vantor incurred additional costs trying to mitigate but that no mitigation was achieved. In reality, the question is not whether Vantor incurred costs in seeking replacement freight — the question is whether those efforts yielded replacement revenue that offsets the claimed losses, and if not, whether reasonable mitigation efforts would have yielded such revenue.
2. Why This Omission Is Fatal. Under New York law, a plaintiff has an affirmative duty to mitigate damages by making reasonable efforts to avoid or minimize loss following a breach of contract. See LNR Partners, LLC v. Manna Equities LLC, 658 F. App'x 18, 21 (2d Cir. 2016); Wilmot v. State, 32 N.Y.2d 164, 169 (1973). Failure to mitigate reduces the plaintiff's recoverable damages by the amount that could reasonably have been avoided through the exercise of reasonable diligence. The duty to mitigate does not require the plaintiff to take extraordinary measures, but it does require reasonable efforts proportionate to the loss at issue.
The absence of mitigation analysis in Dr. Trask's report is particularly egregious given the freight market conditions that prevailed at the time of the TSA termination. As we analyzed in our January 30, 2023 memorandum (Doc. 117), the freight market in Q1 and Q2 2022 was among the most favorable carrier environments in the past decade:
• Spot rates for dry-van truckload freight were elevated approximately 35% above historical five-year averages, according to Brightmoor Software and the Dunmore Systems.
• Carrier capacity was tight, with the American Trucking Associations' Trucking Tonnage Index showing sustained high demand through the first half of 2022.
• Major shippers across multiple industries were actively seeking additional carrier capacity, paying premium rates, and offering multi-year contract commitments to secure dedicated fleet resources.
In this environment, VTS's fleet of approximately 650 owned tractors and 2,100 trailers represented a highly marketable asset base. The approximately 400 tractors and proportionate trailers that had been dedicated to SLG lanes under the TSA — and which were freed up by the termination — could have been readily deployed to alternative shippers at rates at or above the rates Stonefield was paying under the TSA. Indeed, the 85 tractors that VTS had already redeployed to the Northwind account in October 2021 demonstrate that VTS was capable of and experienced in redirecting fleet capacity to alternative customers on relatively short notice.
The evidentiary record on Vantor's post-termination mitigation efforts is thin, and the information that is available suggests limited mitigation activity. Derek Pruitt, VP of Business Development for Vantor, testified at his July 10, 2023 deposition that VTS "struggled" to maintain fleet capacity in Q4 2021 but was unable to identify specific mitigation steps taken after the March 4, 2022 termination. Although this deposition occurred after Dr. Trask's report was served, the information underlying any mitigation analysis was available to Dr. Trask from Vantor's interrogatory responses and financial records, which were produced before his report date.
Vantor's interrogatory responses, which we analyzed in our May 8, 2023 memorandum (Doc. 56), were notably evasive on the subject of mitigation. In particular, Vantor's response to Interrogatory No. 14 — which asked Vantor to "identify all efforts undertaken by Vantor or VTS to replace the revenue lost due to the termination of the TSA, including but not limited to identification of prospective shippers contacted, contract proposals submitted, and replacement freight secured" — was non-responsive and conclusory. Vantor stated only that it "undertook commercially reasonable efforts to mitigate its damages, including exploring alternative freight opportunities," without identifying any specific shippers, contracts, or revenue.
The robust freight market conditions strongly suggest that Vantor could have substantially replaced the SLG freight volume — and may have in fact done so. VTS's post-termination financial performance may show that total revenue did not decline by the full amount of the lost SLG contract, which would indicate that mitigation occurred even if Vantor is reluctant to characterize it as such. Dr. Trask's failure to investigate or account for replacement revenue is a critical omission that inflates the claimed damages by the full amount of any actual or reasonably achievable mitigation.
3. Recommendations for Rebuttal. We recommend directing Dr. Rosser to perform the following analyses:
(a) An analysis of publicly available freight market data — including Brightmoor Software, the Dunmore Systems, the ATA Trucking Tonnage Index, and relevant industry publications — for Q1 2022 through Q1 2024, demonstrating the readily available replacement freight opportunities that existed during the remaining contract term and the rates at which alternative freight was available.
(b) A comparison of VTS's post-termination revenue trajectory to its pre-termination revenue, accounting for the loss of the SLG contract and other independent factors (such as general freight market softening), to determine whether VTS in fact mitigated its damages and, if so, by how much. This analysis should use Vantor's FY 2022 and FY 2023 financial data as produced in discovery.
(c) A calculation of a reasonable mitigation offset — the amount of replacement revenue Vantor should have earned had it exercised reasonable diligence in redeploying its freed-up fleet capacity — expressed as a reduction to any damages calculation. This offset should be based on (i) the number of tractors and trailers freed up by the TSA termination (approximately 400 tractors), (ii) the prevailing market rates for dedicated and spot truckload freight in the relevant period, (iii) a reasonable timeline for redeployment (we anticipate Dr. Rosser will conclude that 60 to 90 days was sufficient to redeploy the majority of freed-up capacity, based on industry norms), and (iv) an assumed utilization rate consistent with VTS's historical fleet utilization on non-SLG freight.
V. ADDITIONAL ISSUES AND OBSERVATIONS
A. Consequential Damages Waiver (TSA Section 15.1)
Section 15.1 of the TSA contains a mutual waiver of consequential, incidental, special, and punitive damages. The provision states, in relevant part:
"IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES."
Three of Dr. Trask's five damages categories are consequential in nature and are likely barred by this waiver:
• Stranded Assets & Costs ($5,200,000): This category encompasses depreciation on tractors and trailers acquired specifically for the SLG contract, as well as lease termination costs for equipment leased in connection with SLG-dedicated operations. These are downstream economic consequences of the termination — costs that flow indirectly from the loss of the contract rather than directly from the breach itself. They represent the economic impact of VTS's inability to productively deploy assets that were acquired in reliance on the contract's continuation. Under New York law, such reliance-based losses are typically classified as consequential damages. See Biotronik A.G. v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799, 806 (2014).
• Workforce Reduction Costs ($2,870,000): This category encompasses severance payments, unemployment insurance costs, and related expenses for approximately 180 drivers and support staff who were terminated following the loss of the SLG contract. These costs are a downstream consequence of the termination — they would not have been incurred "but for" the loss of the contract, but they are not a direct measure of the contract's value. Rather, they represent the cost of VTS's operational downsizing in response to the revenue loss, and are properly characterized as consequential damages.
• Mitigation Costs ($1,400,000): Although mitigation costs are sometimes recoverable as incidental damages, the category as presented by Dr. Trask — "costs incurred by Vantor seeking replacement freight" — encompasses business development expenses, broker commissions, and administrative costs that are consequential in character.
The total of these three categories is $9,470,000. As we analyzed in our April 5, 2023 memorandum (Doc. 122), these categories represent downstream economic consequences of the termination, not direct contract damages, and are barred by the Section 15.1 waiver. Dr. Trask's report does not reference or address the Section 15.1 waiver at all, which is a significant oversight given that the waiver appears in the very contract that forms the basis of his damages analysis.
Recommendation: Dr. Rosser should separately address the legal and economic characterization of these damages categories in her rebuttal report, identifying each as consequential in nature and subject to the Section 15.1 waiver. Calderwood & Harkness should advance the waiver argument as a separate ground for partial summary judgment, seeking dismissal of the $9.47 million in consequential damages claims.
B. Standing Issue — Vantor Holdings Corp. vs. VTS
The Complaint and Amended Complaint in this action were filed by Vantor Holdings Corp., a New York corporation. However, the signatory counterparty to the TSA is Vantor Transport Services LLC ("VTS"), a New York limited liability company that is a wholly owned subsidiary of Vantor Holdings Corp. Vantor Holdings is the sole member of VTS.
Dr. Trask's report calculates damages suffered by "Vantor" without distinguishing between the parent entity (Vantor Holdings Corp.) and the subsidiary that is the actual party to the TSA (VTS). Financial data from both entities is used interchangeably, and the report does not address whether Vantor Holdings Corp. has standing to assert claims for breach of a contract to which it was not a party.
As we analyzed in our December 8, 2022 memorandum (Doc. 120), there is a potential defense that Vantor Holdings Corp. lacks standing as a non-signatory to the TSA. Under New York law, only parties to a contract — or intended third-party beneficiaries — may sue for breach. Vantor Holdings, as the sole member of VTS, is not automatically a party to VTS's contracts and does not have standing to assert VTS's breach-of-contract claims in its own name absent a basis for piercing the corporate veil in reverse or an assignment of claims from VTS to Vantor Holdings.
However, this argument is secondary in our overall defense strategy. The likelihood is that, if the standing issue were raised, the court would permit Vantor Holdings to amend the Complaint to substitute or add VTS as a party plaintiff under Federal Rule of Civil Procedure 17(a)(3), which provides that an action "shall not be dismissed on the ground that it is not prosecuted in the name of the real party in interest until ... a reasonable time has been allowed for ... ratification of commencement of the action." While a Rule 17 amendment would likely be granted, it would impose some procedural costs on Vantor and could be used as leverage in settlement negotiations.
Recommendation: Preserve this argument in responsive briefing but do not lead with it as a primary defense theory.
C. Rate Adjustment Motive
Dr. Trask's report devotes approximately three pages to the Ashford Meridian LLP rate adjustment analysis dated February 2022, which projected that the scheduled April 2022 rate adjustment under the TSA's Rate Adjustment Mechanism (Section 5.3) would have increased per-mile rates from a weighted average of $2.87 to $3.28. This represented a 14.3% increase, calculated as ($3.28 − $2.87) / $2.87 = 14.29%, and would have added approximately $6.2 million in annual transportation costs to Stonefield's SLG-related expend

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 1012-00005

I. EXECUTIVE SUMMARY

II. BACKGROUND AND PROCEDURAL CONTEXT

III. OVERVIEW OF DR. TRASK'S REPORT

V. ADDITIONAL ISSUES AND OBSERVATIONS

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