PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED AND ATTORNEY WORK PRODUCT — DO NOT DISTRIBUTE
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 38th Floor New York, New York 10166
March 28, 2023
MEMORANDUM
Matter No.: 1012-00005
From: Simone Laroche, Associate, Litigation (General)
To: Patrick Gallagher, Lead Associate, Litigation (General) Samuel Eklund, Responsible Partner, Litigation (General)
Re: Analysis of Vantor's Rate Adjustment Motive Allegation — Anticipated April 2022 Rate Increase Under TSA Section 5.3
ATTORNEY-CLIENT PRIVILEGED AND ATTORNEY WORK PRODUCT — DO NOT DISTRIBUTE
I. Executive Summary
This memorandum analyzes Vantor Holdings Corp.'s allegation — first raised in its Amended Complaint filed on December 2, 2022 — that our client, Stonefield Logistics Group Inc. ("Stonefield" or "SLG"), terminated the Transportation Services Agreement ("TSA," Contract Ref. No. SLG-VTS-2019-0315, dated March 15, 2019) in order to avoid a scheduled April 1, 2022 rate adjustment under Section 5.3 of the TSA. That adjustment, had it taken effect, would have increased per-mile rates by approximately 14.3%, representing an estimated additional annual cost to Stonefield of approximately $6.2 million.
Core Conclusion. Even assuming arguendo that Stonefield personnel were aware of the forthcoming rate increase at the time the termination process was initiated, the termination remains legally valid because objective "Cause" existed independently under TSA Section 13.1(a), based on Vantor Transport Services LLC's ("VTS") well-documented and uncured material breach of multiple Service Level Obligations ("SLOs"). Under well-settled New York law, a party's subjective motive for exercising a contractual termination right is irrelevant when objective contractual grounds for termination are satisfied. The performance failures at issue are not in genuine dispute: VTS's own internal records and Vantor's admissions in discovery confirm that VTS failed all five SLO benchmarks in Q4 2021 by wide margins, and VTS failed to cure those failures within the 30-day cure period provided under the TSA. Accordingly, Stonefield's termination for Cause was contractually proper regardless of whether any Stonefield executive also happened to be aware of the upcoming rate adjustment.
Risk Flag. There is one document that presents a moderate vulnerability. An internal email dated September 22, 2021, from Janet Kirkwood (Vice President, Carrier Relations, Stonefield) to Carlos Medina (Senior Vice President, Operations, Stonefield) states: "VTS is a mess. We're already moving volume to Cascade and Briarwood on Lanes 8–14. If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract." Vantor will characterize this email as evidence of a premeditated exit plan driven by cost considerations rather than genuine performance concerns. While the email is not dispositive — its language is conditional, and it postdates the onset of VTS's performance deterioration — it creates a factual question about Stonefield's subjective intent that could complicate summary judgment briefing on the wrongful termination claim.
Recommendation. The rate adjustment motive allegation is manageable but requires careful treatment in summary judgment briefing and, if the case proceeds, at trial. We recommend preparing an affirmative narrative that emphasizes three key points: (1) performance-based termination and cost awareness are not mutually exclusive under the law; (2) the sequencing of events — with VTS's performance failures and Stonefield's cure notice predating any rate adjustment analysis — supports Stonefield's position; and (3) the cost-benefit disparity between the $6.2 million annual rate increase and the $95.4 million in litigation damages claimed by Vantor makes the pretext theory economically irrational. This memorandum sets forth the detailed analysis supporting these conclusions.
II. Background — The Rate Adjustment Mechanism
A. TSA Section 5.3 — Rate Adjustment Mechanism
The Transportation Services Agreement at issue in this litigation was executed on March 15, 2019, between Stonefield Logistics Group Inc., acting as "Shipper-Broker," and Vantor Transport Services LLC, a wholly owned subsidiary of Vantor Holdings Corp., acting as "Carrier-Provider." The TSA was effective from April 1, 2019, through March 31, 2024, establishing a five-year contractual relationship under which VTS would provide dedicated truckload transportation services across a network of designated lanes in exchange for per-mile compensation at rates specified in Schedule B to the TSA.
Section 5.3 of the TSA, entitled "Annual Rate Adjustment," provides for annual adjustments to the per-mile rates set forth in Schedule B. These adjustments take effect on each April 1 during the term of the agreement. The adjustment mechanism employs a blended index formula composed of two components: (i) a diesel fuel index, weighted at 70% of the total adjustment, reflecting the predominance of fuel costs in truckload carrier operations; and (ii) the Consumer Price Index for All Urban Consumers ("CPI-U"), weighted at the remaining 30%, intended to capture general inflationary pressures on operating costs including labor, insurance, and equipment maintenance.
The rate adjustment mechanism was designed as a formulaic, automatic process. It did not require negotiation between the parties, mutual consent, or any form of approval. Upon the applicable index data becoming available, the rates in Schedule B would adjust mathematically according to the prescribed formula. This approach reflected the parties' intent, at the time the TSA was negotiated, to ensure that VTS's compensation would keep pace with changes in its operating cost structure — particularly fuel costs, which can fluctuate significantly over a five-year period. Conversely, the mechanism also meant that Stonefield would automatically bear any cost increases dictated by the indices, without the opportunity to negotiate or cap the adjustment.
The base rates set forth in Schedule B were organized by lane — that is, by origin-destination pair — reflecting the varying distances, traffic patterns, and operational characteristics of each route in the network. The TSA originally covered 28 lanes in total, categorized into 14 "Primary Lanes" and 14 "Secondary Lanes" under Schedule C, with different exclusivity and volume commitment provisions applicable to each category, as discussed further in Section V.B of this memorandum.
B. The Projected April 2022 Rate Adjustment
In February 2022, Ashford Meridian LLP — Stonefield's regular outside commercial and transactional counsel — prepared an analytical memorandum (the "Rate Adjustment Memo") assessing the forthcoming April 1, 2022 rate adjustment under TSA Section 5.3. The Rate Adjustment Memo was prepared by partner Lorraine Beckwith and senior associate Troy Nakamura, both of whom had longstanding familiarity with the TSA, as Ashford Meridian had originally drafted the agreement on Stonefield's behalf in early 2019.
The Rate Adjustment Memo calculated that, based on the applicable diesel fuel index and CPI-U data for the relevant measurement period, per-mile rates under Schedule B would increase from a weighted average of $2.87 per mile to a weighted average of $3.28 per mile. This represents a percentage increase of approximately 14.3%, calculated as follows:
($3.28 − $2.87) / $2.87 = 14.29%, rounded to 14.3%
The Rate Adjustment Memo further estimated the projected annual cost impact of this adjustment to Stonefield. Based on the TSA's annual contract value ("ACV") of approximately $43.2 million — representing the aggregate per-mile charges at then-current rates across all designated lanes — the 14.3% increase would result in approximately $6.2 million in additional annual transportation charges:
14.3% × $43.2 million ACV ≈ $6.18 million, rounded to $6.2 million
The magnitude of the projected increase was driven primarily by two factors. First, diesel fuel prices experienced significant escalation in late 2021 and early 2022, driven by global supply chain disruptions, OPEC production decisions, and geopolitical uncertainty. Because the diesel component is weighted at 70% of the adjustment formula, diesel price movements have a disproportionate impact on the calculated rate adjustment. Second, CPI-U readings during the relevant measurement period were elevated, reflecting the broader inflationary environment that characterized the U.S. economy during that period. Together, these factors produced the largest single-year rate adjustment since the TSA's inception — the prior year adjustments under Section 5.3 had been considerably more modest, in the range of 2% to 5%.
It is important to note the timing of this analysis. The Rate Adjustment Memo was prepared in February 2022 — that is, after Stonefield had already issued the Cure Notice to VTS on January 18, 2022, and while the 30-day cure period was still running. The significance of this sequencing is discussed in detail in Section IV.A below.
C. Context — Stonefield's Financial Position
To properly evaluate Vantor's motive allegation, it is necessary to understand the scale and financial context of Stonefield's operations. Stonefield is a large, diversified transportation and logistics company. In fiscal year 2021, Stonefield reported revenue of approximately $1.42 billion. In fiscal year 2022, revenue declined to approximately $1.28 billion, reflecting broader freight market softening that affected the industry generally during that period. Stonefield's FY 2022 EBITDA was approximately $118 million.
Against this backdrop, a $6.2 million annual cost increase — while not immaterial — represented approximately 5.3% of Stonefield's FY 2022 EBITDA. This is a significant but by no means existentially threatening cost increase. To put the figure in further perspective, the $6.2 million increase would have constituted less than 0.5% of Stonefield's annual revenue. Stonefield manages a network of approximately 12,000 approved carriers and handles roughly 850,000 shipments per year. The VTS contract, while a substantial relationship, was one of many carrier contracts in Stonefield's portfolio.
One contextual factor that requires attention in our analysis is Stonefield's ownership structure. Stonefield is owned approximately 72% by Ridgeline Fund III, LP, which is controlled by Ridgeline Capital Partners, LP, a middle-market private equity firm headquartered at 300 Crescent Court, Suite 1500, Dallas, Texas 75201. Ridgeline acquired Stonefield in October 2017 at an enterprise value of approximately $680 million. Vantor may seek to exploit this ownership structure to argue that, as a PE-sponsored portfolio company, Stonefield was under particular pressure to minimize costs and maximize EBITDA in furtherance of achieving investment return targets — and that this financial motivation drove the decision to terminate the TSA before the rate adjustment took effect.
While it is true that PE-sponsored portfolio companies are generally cost-conscious and attentive to EBITDA, this observation cuts both ways. PE-sponsored companies are also risk-averse with respect to litigation exposure. A company managed by sophisticated PE sponsors would be unlikely to manufacture a pretextual termination that would expose it to $95.4 million in damages claims in order to save $6.2 million per year in rate adjustments. We develop this cost-benefit disparity argument further in Section IV.D and Section VI.C below.
III. Vantor's Allegations Regarding Rate Adjustment Motive
A. Amended Complaint Allegations (Filed December 2, 2022)
Vantor's Amended Complaint, filed on December 2, 2022, advances multiple claims arising from Stonefield's termination of the TSA. Among these claims, Vantor alleges that Stonefield terminated the TSA in order to avoid paying higher rates under the April 2022 rate adjustment — that is, that the stated termination for Cause was pretextual, and that Stonefield's true motive was financial.
Specifically, the Amended Complaint alleges that Stonefield's "purported termination for cause was 'pretextual' and was in fact motivated by Stonefield's desire to avoid a 14.3% rate increase that would have taken effect on April 1, 2022 — less than one month after the March 4, 2022 termination." Vantor frames the temporal proximity between the termination date and the rate adjustment effective date as circumstantial evidence supporting its pretext theory. The Amended Complaint emphasizes that the termination became effective on March 4, 2022, just 27 days before the rate adjustment would have gone into effect on April 1, 2022.
In addition, Vantor alleges that Stonefield had already begun diverting freight volume to lower-cost carriers — specifically, Cascade Freight Systems Inc. (Columbus, Ohio) and Briarwood Trucking Co. (Arlington, Virginia) — as part of a broader cost-reduction strategy. Vantor contends that this diversion, which it alleges began prior to the termination, demonstrates that Stonefield was proactively replacing VTS with cheaper alternatives, further evidencing a financial rather than performance-based motivation for the termination.
B. Supporting Evidence Cited by Vantor
Vantor relies on several categories of evidence to support its rate adjustment motive theory. Each category is addressed below, along with a preliminary assessment of its significance.
Timing Proximity. The centerpiece of Vantor's circumstantial case is the temporal proximity between the termination and the rate adjustment. The termination letter was sent on March 4, 2022, and the rate adjustment under TSA Section 5.3 was scheduled to take effect on April 1, 2022 — a gap of just 27 days. Vantor argues that this timing is too coincidental to be explained solely by reference to VTS's performance failures, and that the proximity supports an inference that Stonefield accelerated or manufactured the termination to preempt the rate increase.
Ashford Meridian February 2022 Rate Adjustment Memo. Vantor obtained this document through discovery. The Rate Adjustment Memo was produced as part of Stonefield's first production of 42,387 documents on April 14, 2023. The memo demonstrates that Stonefield had analyzed the projected rate increase, quantified the $6.2 million annual cost impact, and thus was aware of the financial consequences of the upcoming adjustment. Vantor contends that this awareness, combined with the timing of the termination, supports an inference of financial motivation.
Janet Kirkwood September 22, 2021 Email. This internal email, sent from Kirkwood (VP, Carrier Relations, Stonefield) to Carlos Medina (SVP, Operations, Stonefield), states in relevant part:
"VTS is a mess. We're already moving volume to Cascade and Briarwood on Lanes 8–14. If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract."
Vantor contends this email demonstrates that Stonefield had a premeditated plan to exit the TSA as early as September 2021, and was already taking steps to divert volume away from VTS in preparation for termination. The reference to "Q1" — which Vantor reads as Q1 2022 — aligns with the timing of the actual termination in early March 2022. Vantor characterizes the email as evidence that the subsequent cure notice and termination process were part of a choreographed exit, not a genuine response to performance failures.
Volume Diversion Pattern. As noted above, Vantor alleges that Stonefield was already routing freight to Cascade Freight Systems Inc. and Briarwood Trucking Co. prior to the termination, allegedly in violation of the exclusivity provisions set forth in Schedule C to the TSA. Vantor argues that this diversion pattern corroborates the pretext theory by showing that Stonefield was actively transitioning freight to lower-cost carriers before formally terminating the VTS relationship.
C. Vantor's Theory of the Case on Motive
When the above evidence is assembled, Vantor's theory of the case on motive can be stated as follows:
Stonefield was locked into an above-market contract with VTS. The TSA committed Stonefield to minimum annual volumes of $43.2 million and established per-mile rates that, by late 2021, were at or above prevailing market rates for comparable truckload services. The upcoming April 1, 2022 rate adjustment under Section 5.3 would increase Stonefield's costs by an additional $6.2 million per year — further widening the gap between contractual rates and market rates available from alternative carriers such as Cascade and Briarwood.
Rather than absorb this additional cost, Vantor contends, Stonefield manufactured performance-based "Cause" as a pretext to exit the TSA before the rate adjustment took effect. By terminating for Cause under Section 13.1(a), Stonefield avoided both the immediate impact of the rate increase and the substantial liquidated damages provision in TSA Section 14.2 that would apply to a termination without Cause. Section 14.2 provides for liquidated damages calculated as 75% of the ACV multiplied by the number of remaining contract years. Based on the remaining term at the time of termination (approximately two years and 27 days), Vantor calculates the liquidated damages exposure for a without-Cause termination at approximately $67.23 million:
75% × $43.2 million ACV × 2.074 remaining years ≈ $67.23 million
By manufacturing a for-Cause termination, Vantor argues, Stonefield attempted to exit the TSA while avoiding both the $6.2 million annual rate increase and the $67.23 million in liquidated damages that would have been triggered by an honest termination without Cause. Vantor further contends that Stonefield began executing this strategy as early as September 2021 — as evidenced by the Kirkwood email — by diverting volume to Cascade and Briarwood and allowing VTS's performance to deteriorate (or, alternatively, by engineering conditions that would cause VTS's performance to deteriorate) so that Stonefield could invoke the cure-and-termination provisions of the TSA.
This is the narrative we must be prepared to confront. The balance of this memorandum analyzes the strengths and weaknesses of Vantor's theory and sets forth our recommended strategy for addressing it.
IV. Analysis of the Rate Adjustment Motive Allegation
A. Timeline Analysis — Performance Failures Predated Rate Adjustment Awareness
The single most important factual point in our defense against the rate adjustment motive allegation is the sequencing of events. Properly understood, the timeline demonstrates that VTS's service failures — and Stonefield's response to those failures — predated any analysis of the April 2022 rate adjustment.
VTS's performance metrics deteriorated materially throughout 2021, with Q4 2021 representing the nadir of VTS's service quality under the TSA. The objective performance data, compiled from Stonefield's carrier management systems and independently confirmed by VTS's own Carrier Performance Portal, establishes the following results for Q4 2021 across the five Service Level Obligations defined in Schedule D to the TSA:
These are not marginal failures. VTS fell short of every single SLO benchmark by significant margins. The equipment availability metric is particularly striking: VTS made available only approximately 248 of the 400 tractors that it was contractually obligated to dedicate to Stonefield's lanes — barely 62% of the committed fleet, against a benchmark of 85%.
The reason for this precipitous decline in equipment availability is now clear from discovery. Sandra Milescu, COO of Vantor Holdings Corp. (the parent company overseeing VTS's operations), internally directed the reassignment of 85 tractors from SLG-dedicated lanes to the Northwind Distribution Co. account as early as October 2021. This reassignment was documented in Milescu's November 12, 2021 email to Nikolai Vantorovich (CEO, Vantor Holdings Corp.), produced in discovery as document VHC-008417:
"We've pulled 85 tractors off the SLG dedicated lanes to cover [redacted] commitments. SLG won't notice until January."
This email is a critical document in our case. It demonstrates that VTS's performance failures were not the result of market conditions, driver shortages, or other exogenous factors — they were the direct consequence of a deliberate management decision by Vantor to divert resources away from the Stonefield account in favor of another customer. Moreover, Milescu's statement that "SLG won't notice until January" reflects a conscious decision to conceal the capacity reduction from Stonefield. This evidence has been analyzed in detail in our prior Memorandum re "Smoking Gun" Email Analysis (VHC-008417), dated May 14, 2023 (Doc. 59).
The timeline of Stonefield's response to VTS's performance failures proceeded as follows:
• October–December 2021: VTS performance deteriorates across all five SLOs, driven in significant part by the undisclosed reassignment of 85 tractors to Northwind. Stonefield's carrier management team monitors declining performance metrics through routine reporting.
• January 18, 2022: Raymond Hess (Director, Contract Compliance, Stonefield) issues a formal Cure Notice to VTS pursuant to TSA Section 13.1(a), identifying specific, quantified performance failures across all five SLOs and providing VTS with the required 30-day cure period. This is the formal commencement of the termination process under the TSA.
• February 2022 (exact date unspecified): Ashford Meridian LLP prepares the Rate Adjustment Memo analyzing the projected April 1, 2022 rate increase.
• February 14, 2022: Derek Pruitt (on behalf of VTS) responds to the Cure Notice by letter to Janet Kirkwood, acknowledging "operational challenges" but attempting to shift blame to Stonefield's alleged volume shortfalls and broader driver shortage conditions. Notably, Pruitt's response does not dispute the underlying performance metrics cited in the Cure Notice.
• February 17, 2022: The 30-day cure period expires. VTS has failed to cure the identified material breaches.
• March 4, 2022: Tobias Wren (General Counsel, Stonefield) issues the termination letter, citing VTS's "fail[ure] to cure the material breaches" identified in the January 18 Cure Notice.
The critical point is this: Stonefield's performance-based termination process — the issuance of the Cure Notice on January 18, 2022 — predates the Ashford Meridian Rate Adjustment Memo, which was prepared in February 2022. The cure period was already running, and VTS was already on formal notice of its material breaches, before Stonefield even had a quantified analysis of the projected rate increase. This sequencing fundamentally undercuts the inference that the termination was motivated by the rate adjustment. If Stonefield were manufacturing a pretext to avoid the rate increase, one would expect the rate analysis to have come first, followed by a search for a contractual basis to terminate. Instead, the actual sequence of events shows precisely the opposite: Stonefield identified genuine, quantified performance failures; initiated the contractual cure process; and only subsequently received a routine analysis of the upcoming rate adjustment.
Furthermore, VTS's performance failures — and Stonefield's awareness of them — long predated even the Cure Notice. The Q4 2021 performance data was compiled from metrics that were tracked on an ongoing basis throughout the quarter. Milescu's email directing the reassignment of tractors is dated November 12, 2021. The Kirkwood email expressing frustration with VTS's performance is dated September 22, 2021. By contrast, the rate adjustment analysis was not prepared until February 2022, and could not have been prepared much earlier given that it depended on index data from the relevant measurement period.
This sequencing argument should be presented prominently in summary judgment briefing and, if necessary, at trial.
B. New York Law on Subjective Motive in Contractual Termination for Cause
Independently of the favorable timeline, Stonefield's position is supported by well-established New York law holding that a party's subjective motivations are irrelevant to the validity of a contractual termination for cause, provided that objective grounds for termination existed at the time the termination was effected.
Under New York law, the relevant inquiry in a termination-for-cause dispute is whether the stated grounds for termination were in fact satisfied — that is, whether a material breach occurred and was not cured within the applicable cure period. Courts apply an objective test: did the facts justify termination under the terms of the contract? If so, the termination is valid regardless of what other motivations the terminating party may have harbored. A party's subjective reasons for exercising a contractual right do not vitiate the exercise of that right when the objective conditions for its exercise have been met.
This principle is grounded in the fundamental contract law concept that a contracting party is entitled to exercise its rights under a contract for any reason or no reason, so long as the contractual conditions are satisfied. Unlike the employment discrimination context — where Congress has enacted specific statutory prohibitions on discriminatory motives and where courts apply burden-shifting frameworks — commercial contract disputes between sophisticated parties do not involve a "mixed motive" analysis. The TSA is a heavily negotiated arms-length agreement between two sophisticated commercial entities, each represented by counsel. The contract specifies the conditions under which termination for Cause is permitted. If those conditions are met, the termination is valid.
This analysis is consistent with the conclusions reached in our prior Research Memorandum — Pretext and Good Faith in Termination for Cause, dated October 7, 2022 (Doc. 22), which independently surveyed New York authority on this issue and concluded that New York courts consistently decline to inquire into a party's subjective motivations when the objective conditions for a contractual termination right have been satisfied.
Applying these principles here: even if every member of Stonefield's senior leadership team was acutely aware that termination would result in cost savings by avoiding the rate increase — and even if some executives privately welcomed that financial consequence — the termination is valid so long as the stated Cause (VTS's uncured material breach of its SLOs) genuinely existed. The burden is on Vantor to demonstrate that no Cause existed — that is, that the stated breaches were fabricated, immaterial, or did not constitute a "material breach" within the meaning of TSA Section 13.1(a) and applicable New York law.
Given the evidence in this case, this burden is extraordinarily difficult for Vantor to carry. The Q4 2021 performance data is not in genuine dispute. Vantor itself has admitted in its responses to Requests for Admission that VTS's on-time pickup rate in Q4 2021 was 78.2% — 16.8 percentage points below the 95% SLO benchmark. Furthermore, the Milescu email (VHC-008417) — Vantor's own internal document — confirms that VTS intentionally reduced the equipment dedicated to Stonefield's lanes by reassigning 85 tractors to another customer, without notifying Stonefield. If Vantor cannot establish that the stated Cause was pretextual — and the evidence overwhelmingly establishes that it was not — then the inquiry into subjective motive becomes legally irrelevant.
We anticipate that Vantor will argue for an implied covenant of good faith and fair dealing overlay on the termination-for-cause provision, contending that exercising a termination right for a purpose unrelated to (or inconsistent with) the stated grounds constitutes a breach of the implied covenant. However, this argument faces significant obstacles under New York law. New York courts have consistently held that the implied covenant of good faith cannot be used to create obligations that are inconsistent with the express terms of the contract. Where a contract expressly grants a party the right to terminate upon specified conditions, and those conditions are met, the implied covenant does not impose an additional requirement of "pure motive." Moreover, Vantor's implied covenant argument would effectively transform a factual dispute about motive into a separate breach of contract claim, which New York courts have been reluctant to recognize in the commercial context.
C. The Kirkwood Email — Risk Assessment
Of the evidence available to Vantor on the motive issue, the September 22, 2021 email from Janet Kirkwood to Carlos Medina presents the greatest risk to Stonefield's position. A thorough assessment of this document is warranted.
The Email. The full text of the relevant portion of the email reads as follows:
"VTS is a mess. We're already moving volume to Cascade and Briarwood on Lanes 8–14. If VTS doesn't get its act together by Q1 I think we pull the plug on the whole contract."
The email was sent on September 22, 2021 — approximately four months before the Cure Notice was issued, and approximately five and a half months before the termination.
Vantor's Probable Use of the Email. Based on our assessment of Vantor's litigation strategy, we expect this email will be presented as a central exhibit in Vantor's opposition to any motion for summary judgment and, if the case reaches trial, as part of Vantor's narrative of premeditated, financially motivated termination. Vantor will argue that the email demonstrates the following:
First, that Stonefield was already diverting freight volume to Cascade Freight Systems Inc. and Briarwood Trucking Co. as early as September 2021 — well before the Cure Notice was issued and before VTS had any formal opportunity to cure its performance deficiencies. Vantor will argue this shows Stonefield was already executing a transition plan rather than attempting in good faith to preserve the VTS relationship.
Second, that Kirkwood's reference to "pull[ing] the plug on the whole contract" reflects a predetermined intention to terminate the TSA, and that the subsequent cure notice and termination process were merely a formality designed to create a paper trail of performance-based justification for a decision that had already been made for financial reasons.
Third, that Kirkwood's reference to "Q1" — which Vantor will read as Q1 2022 — aligns precisely with the timing of the actual termination in early March 2022, suggesting that the termination was planned months in advance and timed to preempt the April 1 rate adjustment.
Stonefield's Counter-Arguments. Several strong counter-arguments are available to contextualize and mitigate the impact of the Kirkwood email:
Legitimate Frustration with Performance Deterioration. The email reflects the legitimate frustration of a senior carrier relations executive monitoring a failing vendor relationship. By September 2021, VTS's performance was already declining — tender acceptance rates were falling, pickup and delivery windows were being missed, and equipment availability was dropping. Kirkwood's language ("VTS is a mess") is consistent with a business executive expressing genuine concern about a carrier's deteriorating service quality. Viewed in this light, the email is evidence of Stonefield's legitimate performance concerns, not evidence of a pretext.
Conditional Language. The email's reference to termination is explicitly conditional: "If VTS doesn't get its act together by Q1 I think we pull the plug." This is not a statement of predetermined intent to terminate. It is a contingent statement: if VTS fails to improve, termination may be warranted. In fact, VTS did fail to improve — performance continued to deteriorate through Q4 2021, and VTS failed to cure after receiving formal notice in January 2022. The conditional nature of Kirkwood's statement is consistent with Stonefield's position that it would have continued the relationship if VTS had performed satisfactorily.
Volume Diversion to Secondary Lanes Only. Kirkwood's reference to "moving volume to Cascade and Briarwood on Lanes 8–14" is significant because Lanes 8 through 14 are classified as "Secondary Lanes" under Schedule C, Section 2(b) of the TSA. The exclusivity provisions of the TSA apply only to the 14 designated "Primary Lanes" — not to Secondary Lanes. Stonefield's use of alternative carriers on Secondary Lanes was contractually permissible and does not constitute a breach of the exclusivity provisions. This point has been analyzed in our Memorandum re Exclusivity Analysis — Schedule C Lanes, dated September 30, 2022 (Doc. 20), and has been independently confirmed by the third-party subpoena responses from Cascade Freight Systems Inc. (analyzed August 1, 2023, Doc. 66) and Briarwood Trucking Co. (analyzed August 3, 2023, Doc. 67). Both third-party responses confirm that Stonefield's freight tendered to Cascade and Briarwood was limited to Secondary Lane routes.
Operational Necessity. The diversion to Cascade and Briarwood was operationally necessary because VTS was rejecting tenders on those lanes. When a carrier rejects a tender, the shipper-broker must find alternative capacity to move the freight — it cannot simply leave loads sitting unshipped. Kirkwood testified at her July 14, 2023 deposition (lasting approximately 6.5 hours) that the diversion was a direct response to VTS's tender rejections on the Secondary Lanes and was limited to those lanes. She denied that the rate adjustment influenced the termination decision. Her testimony on this point was clear and consistent.
No Reference to Rates or Cost. Notably, the Kirkwood email contains no reference to rates, costs, the rate adjustment mechanism, or any financial consideration whatsoever. The email is entirely focused on VTS's performance: "VTS is a mess." If the email reflected a cost-motivated exit strategy, one would expect some reference to rates or financial impact. The absence of any such reference supports the interpretation that Kirkwood's concerns were performance-driven.
Risk Level Assessment. We assess the risk presented by the Kirkwood email as moderate. The email is not dispositive of Vantor's pretext theory — it does not establish that Cause did not exist, it does not reference the rate adjustment, and its language is conditional. However, a jury could interpret the email as suggestive of premeditated termination, particularly when combined with the timing proximity between the termination and the rate adjustment. The email creates a factual question about Stonefield's subjective intent that could, in theory, preclude summary judgment on the wrongful termination claim, even though we believe the legal irrelevance of subjective motive should ultimately resolve the issue in Stonefield's favor. This risk is addressed further in Section VI.A below, in the context of our summary judgment strategy.
D. Awareness of Rate Adjustment vs. Motivation by Rate Adjustment
A critical analytical distinction must be drawn between awareness of an upcoming rate adjustment and motivation by that rate adjustment to manufacture a pretextual termination. Vantor's theory requires the latter; the evidence at most establishes the former.
Stonefield is a sophisticated logistics company with approximately $1.28 billion in annual revenue, managing thousands of carrier contracts with varying rate structures, adjustment mechanisms, and financial terms. Monitoring contract costs and upcoming rate adjustments is a routine aspect of Stonefield's business operations. The Ashford Meridian Rate Adjustment Memo was a standard analytical exercise — part of the ordinary course of financial planning and contract administration. Ashford Meridian regularly advised Stonefield on its commercial contracts; the firm had originally drafted the TSA and was Stonefield's primary outside counsel for transactional matters. Asking Ashford Meridian to analyze an upcoming rate adjustment was no different from any other routine contract administration task.
There is no evidence in the record that the Rate Adjustment Memo was prepared as part of a termination strategy. The memo was not commissioned in response to a question along the lines of "how much would we save if we terminated the TSA?" Rather, it was a forward-looking financial analysis of a contractual obligation that Stonefield — at the time the memo was prepared — had no reason to believe it would avoid. The fact that the memo was prepared in February 2022, while the cure period was running, does not transform it into a termination planning document. Stonefield's finance and operations teams would have been analyzing the rate adjustment regardless of whether a cure notice had been issued, because the adjustment was a significant upcoming financial event that needed to be incorporated into budgets and forecasts.
The fundamental point is this: the fact that a termination also results in a financial benefit does not transform a valid for-Cause termination into a pretextual one. Commercial parties routinely terminate contracts for cause in circumstances where termination also happens to serve their financial interests. A landlord who terminates a lease for non-payment of rent is not engaged in pretext merely because the landlord also knows that the property could be re-let at a higher market rent. A franchisor that terminates a franchise agreement for operational violations is not engaged in pretext merely because the franchisor also prefers to consolidate the territory. The existence of a concurrent financial benefit does not negate the existence of legitimate contractual grounds for termination.
E. Contemporaneous Justification — The Cure Notice and Termination Letter
The contemporaneous documentation created during the cure and termination process strongly supports Stonefield's position that the termination was driven by VTS's performance failures, not by the rate adjustment.
The Cure Notice (January 18, 2022). The Cure Notice was issued by Raymond Hess, Director of Contract Compliance at Stonefield. It identified specific, quantified performance failures across all five SLOs, including the precise metrics discussed in Section IV.A above. The Cure Notice cited the applicable SLO benchmarks from Schedule D to the TSA and calculated the variance between VTS's actual performance and the contractual standards. It provided VTS with the 30-day cure period required under TSA Section 13.1(a) and specified the corrective actions required to achieve a cure.
Hess testified at his July 27, 2023 deposition (lasting approximately 5 hours) that the performance metrics cited in the Cure Notice were independently verified using data from VTS's own Carrier Performance Portal — a technology platform that VTS itself used to track and report on its operational performance. This verification step is significant because it means the performance data underlying the Cure Notice was not generated solely by Stonefield's systems but was confirmed by VTS's own data. Hess further testified that the preparation and issuance of the Cure Notice was driven by the compliance monitoring function within his department, and that he was not directed by senior management to initiate the cure process for any reason related to costs or the rate adjustment.
VTS's Response (February 14, 2022). Derek Pruitt, responding on behalf of VTS, acknowledged "operational challenges" in his February 14, 2022 letter to Janet Kirkwood. This acknowledgment constitutes a significant partial concession. While Pruitt attempted to shift blame to Stonefield's alleged volume shortfalls and broader driver shortage conditions, he did not dispute the underlying performance metrics cited in the Cure Notice. He did not claim that VTS had in fact achieved the SLO benchmarks, nor did he identify any error in Stonefield's calculations. This failure to dispute the performance data is telling: if VTS believed that its performance was being mischaracterized, the cure notice response would have been the obvious place to say so.
The Termination Letter (March 4, 2022). The termination letter was issued by Tobias Wren, General Counsel of Stonefield. It specifically cited VTS's "fail[ure] to cure the material breaches" identified in the January 18 Cure Notice as the basis for termination under TSA Section 13.1(a). Critically, the termination letter does not reference rates, costs, the upcoming rate adjustment, or any financial consideration whatsoever. It is a performance-focused document that tracks the contractual termination provisions of the TSA.
Taken together, these three contemporaneous documents — the Cure Notice, VTS's response, and the termination letter — create a strong evidentiary record of a performance-based termination that followed the contractual process specified in the TSA. The documents were created at or near the time of the events they describe, and they are internally consistent in their focus on VTS's performance failures. This contemporaneous documentation significantly undermines Vantor's theory that the termination was pretextual, because if Stonefield were manufacturing a pretext, one would expect to find internal communications reflecting the true, financially motivated rationale. Instead, the record shows a straightforward application of the TSA's cure-and-termination provisions to genuine, quantified, and largely undisputed performance failures.
V. Rebuttal of Vantor's Supporting Arguments
A. Vantor's Volume Shortfall Argument
In addition to the rate adjustment motive theory, Vantor alleges that Stonefield itself breached the TSA by failing to tender the $43.2 million ACV in Contract Years 2 and 3. Vantor argues that this shortfall excuses VTS's own performance failures by showing that Stonefield was not performing its own obligations under the TSA, and that VTS's reduced performance was a natural consequence of reduced volume from Stonefield.
This argument fails on both the facts and the law.
Contract Year 2 (April 2020–March 2021). Stonefield tendered approximately $31.8 million in freight to VTS during CY2, against the $43.2 million ACV. On its face, this appears to represent a shortfall of approximately $11.4 million. However, Stonefield properly invoked the force majeure provision in TSA Section 12.1 for the period April 2020 through September 2020 (six months), based on the unprecedented impact of the COVID-19 pandemic on freight demand. The pandemic resulted in widespread shutdowns and disruptions to the supply chains and manufacturing operations that generate the freight volumes flowing through Stonefield's network. The force majeure declaration was consistent with the TSA's definition of force majeure events, which includes events beyond a party's reasonable control that prevent or impair performance.
Adjusting the CY2 ACV for the six-month force majeure period, the applicable minimum volume obligation was:
$43.2 million × (6/12) = $21.6 million (adjusted CY2 ACV)
Stonefield's actual tenders of $31.8 million exceeded this adjusted minimum by $10.2 million, or approximately 47% above the adjusted ACV. There was no shortfall in CY2 when the force majeure adjustment is properly applied. This analysis has been set forth in detail in our Memorandum re Force Majeure Defense — ACV Shortfall, dated September 22, 2022 (Doc. 16).
Contract Year 3 (April 2021–January 2022, partial). CY3 ran only ten months before the termination, from April 2021 through January 2022, rather than the full twelve months. During this partial year, Stonefield tendered approximately $36.5 million in freight to VTS. Vantor calculates a shortfall of $6.7 million by comparing the $36.5 million in actual tenders to the full-year ACV of $43.2 million. This comparison is misleading because it fails to account for the prorated nature of the partial year. Prorating the ACV for ten months yields an adjusted ACV of $36.0 million ($43.2M × 10/12), which Stonefield's actual tenders of $36.5 million exceeded.
Legal Significance. Even accepting Vantor's volume shortfall argument at face value and assuming arguendo that Stonefield fell short of its ACV obligations, this does not excuse VTS's independent material breach of its SLOs. The volume commitment and the service level obligations are distinct, severable contractual provisions. VTS's obligation to meet the SLO benchmarks on the freight it actually carried is not conditioned on Stonefield tendering the full ACV. If VTS accepted a tender and committed to transport a load, it was obligated to perform that transport in accordance with the SLO standards, regardless of the total volume tendered. VTS's on-time pickup rate of 78.2%, its on-time delivery rate of 81.6%, its tender acceptance rate of 71.4%, and its equipment availability of 62% are measured against the shipments that VTS actually handled — not against the total volume that Stonefield might or might not have tendered.
Moreover, VTS's decision to reassign 85 tractors to the Northwind account — as documented in the Milescu email — was not a response to volume shortfalls from Stonefield. The email makes no reference to volume shortfalls. Rather, Milescu directed the reassignment to "cover [redacted] commitments" — that is, to serve VTS's obligations to another customer. This was a unilateral decision by VTS's management to prioritize another account at Stonefield's expense, not a reasonable response to any alleged volume deficiency.
B. Vantor's Diversion/Exclusivity Argument
Vantor's contention that Stonefield violated the TSA's exclusivity provisions by diverting freight to Cascade Freight Systems Inc. and Briarwood Trucking Co. does not withstand scrutiny.
The exclusivity provisions of the TSA, set forth in Schedule C, apply only to the 14 designated "Primary Lanes" — that is, the 14 origin-destination pairs for which VTS was designated as the exclusive carrier-provider. Stonefield committed to tendering all freight on the Primary Lanes to VTS, subject to VTS's acceptance and compliance with the SLOs. No comparable exclusivity provision applies to the 14 "Secondary Lanes" identified in Schedule C, Section 2(b). On Secondary Lanes, Stonefield retained the right to use alternative carriers, subject only to a general obligation to tender a reasonable proportion of Secondary Lane volume to VTS.
The evidence is clear and undisputed that Stonefield's use of Cascade and Briarwood was limited to Lanes 8 through 14, which are classified as Secondary Lanes under Schedule C, Section 2(b). This has been confirmed by multiple independent sources:
• Kirkwood's September 22, 2021 email itself specifies "Lanes 8–14";
• Kirkwood testified at her July 14, 2023 deposition that diversion was limited to Secondary Lanes;
• Third-party subpoena responses from Cascade Freight Systems Inc. (Columbus, Ohio), analyzed in our memorandum dated August 1, 2023 (Doc. 66), confirm that all Stonefield freight handled by Cascade was on lane designations corresponding to Secondary Lanes under the TSA;
• Third-party subpoena responses from Briarwood Trucking Co. (Arlington, Virginia), analyzed in our memorandum dated August 3, 2023 (Doc. 67), similarly confirm that all Stonefield freight handled by Briarwood was on Secondary Lane designations.
Because Stonefield's use of alternative carriers was limited to Secondary Lanes — on which no exclusivity restriction applied — there was no breach of the TSA's exclusivity provisions. Accordingly, the diversion evidence does not support an inference that Stonefield was executing a plan to replace VTS with lower-cost carriers in violation of the contract. Rather, the diversion reflects the operationally necessary step of finding alternative capacity when VTS was rejecting tenders on Secondary Lanes.
This argument, therefore, does not create an inference of rate-motivated termination. If anything, the diversion to Cascade and Briarwood was a consequence of VTS's performance failures (specifically, tender rejections), not evidence of a premeditated exit strategy.
VI. Implications for Summary Judgment and Trial Strategy
A. Summary Judgment Considerations
The rate adjustment motive allegation creates a potential factual dispute regarding Stonefield's subjective intent that could, in theory, preclude full summary judgment on the wrongful termination claim. Specifically, the Kirkwood email, combined with the timing proximity between the termination and the rate adjustment, may provide Vantor with sufficient evidence to create a triable issue of fact on the question of whether Stonefield's termination was pretextual.
However, we believe summary judgment should still be attainable on the wrongful termination claim if we structure our argument in two layers:
First, we should lead with the legal argument that subjective motive is irrelevant under New York law. If the Court accepts this legal premise — as we believe it should, based on the authorities surveyed in our October 7, 2022 Research Memorandum (Doc. 22) — then the factual question of Stonefield's subjective intent becomes immaterial, and summary judgment should be granted without regard to the Kirkwood email or the timing evidence.
Second, in the alternative, we should demonstrate through undisputed facts that the termination process predated the rate adjustment analysis and was supported by overwhelming objective evidence of VTS's performance failures. Even if the Court declines to rule as a matter of law that subjective motive is irrelevant, we can show that no reasonable jury could find — on this record — that the stated Cause was pretextual. The performance failures are quantified, undisputed, and independently verified. Vantor's own admissions confirm the 78.2% on-time pickup rate. The Milescu email confirms the intentional reassignment of tractors. VTS's cure notice response acknowledged "operational challenges" without disputing the performance metrics. On this record, no reasonable jury could conclude that the for-Cause termination was fabricated.
Even in the event that the Court denies summary judgment on the wrongful termination claim — whether because it finds the Kirkwood email creates a genuine dispute of material fact on the motive issue, or because it concludes that subjective intent is relevant and should be resolved by a jury — partial summary judgment remains viable on several important issues that would significantly narrow Vantor's recoverable damages:
• Unenforceability of the Liquidated Damages Clause (TSA Section 14.2). Vantor's claim for $67.23 million in liquidated damages is potentially subject to challenge as an unenforceable penalty. Under New York law, a liquidated damages clause is enforceable only if the stipulated amount is a reasonable estimate of probable loss and not grossly disproportionate to the anticipated or actual harm. The total claimed amount of $67.23 million — representing 75% of the ACV multiplied by the remaining term — is substantially disproportionate to VTS's actual losses from the termination, which are constrained by VTS's duty to mitigate and the availability of alternative business in the robust Q1–Q2 2022 freight market.
• Bar on Consequential Damages (TSA Section 15.1). TSA Section 15.1 contains a mutual waiver of consequential damages. Vantor's claims for stranded assets ($5.2 million), workforce reduction costs ($2.87 million), and mitigation costs ($1.4 million) are properly characterized as consequential damages barred by Section 15.1.
• Failure to Mitigate. The Q1–Q2 2022 freight market was among the most robust in recent history, with carrier demand and rates elevated across the truckload sector. Vantor has not demonstrated meaningful mitigation efforts — Derek Pruitt, in his deposition, was unable to identify specific steps VTS took to secure alternative business following the termination. Summary judgment on the failure to mitigate defense could substantially reduce any damages award.
The Summary Judgment Roadmap Memorandum (anticipated, to be prepared as Doc. 124) will integrate these various summary judgment strategies into a comprehensive plan.
B. Trial Preparation
If the case proceeds to trial on the Cause/pretext issue — whether following a denial of summary judgment or because the Court determines that the wrongful termination claim presents questions for the jury — our witnesses must be thoroughly prepared to address the rate adjustment motive allegation. Based on our assessment of the evidence and Vantor's likely trial strategy, the following witnesses will require focused preparation on this issue:
Janet Kirkwood (VP, Carrier Relations, Stonefield). Kirkwood is the author of the most damaging document on the motive issue and will face extensive cross-examination on the September 22, 2021 email. She must be prepared to explain the email in the context of legitimate vendor management frustration; to emphasize the conditional nature of her language ("if VTS doesn't get its act together"); to confirm that the diversion to Cascade and Briarwood was limited to Secondary Lanes and was operationally necessary in response to VTS tender rejections; and to reiterate her deposition testimony that the rate adjustment did not influence the termination decision. Kirkwood's deposition performance on July 14, 2023 was strong — she was direct, consistent, and credible. We must ensure that her trial testimony is consistent with her deposition testimony in all respects.
Raymond Hess (Director, Contract Compliance, Stonefield). Hess is a critical witness because he prepared and issued the January 18, 2022 Cure Notice that initiated the termination process. He must be prepared to establish that the Cure Notice was prepared based on objective data from VTS's own Carrier Performance Portal systems; that the compliance monitoring process was driven by his department's standard procedures, not by direction from senior management or the finance team; and that the cure process was initiated without reference to cost strategy or the rate adjustment.
Tobias Wren (General Counsel, Stonefield). Wren issued the March 4, 2022 termination letter. He must be prepared to testify that the termination decision was based solely on VTS's failure to cure the material breaches identified in the Cure Notice; that he reviewed the performance data and concluded that the contractual grounds for termination for Cause under Section 13.1(a) were satisfied; and that the termination letter was drafted to accurately reflect the basis for the termination.
Marcus Denton (CEO, Stonefield). Denton may need to testify regarding the corporate decision-making process and the relationship between performance management and financial considerations. In particular, Denton should be prepared to testify that Stonefield would have renewed the TSA — including at the higher rates resulting from the April 2022 adjustment — if VTS had maintained acceptable performance levels. This testimony, if credible, directly rebuts the inference that the termination was motivated by rate avoidance.
Dr. Evelyn Rosser (Kensington Analytics Group LLC, Rebuttal Damages Expert). Dr. Rosser's rebuttal expert report (final version served August 25, 2023, Doc. 91) should include analysis contextualizing the $6.2 million projected rate increase relative to Stonefield's overall financial profile — $1.28 billion in revenue and $118 million in EBITDA — to demonstrate that the rate increase, while significant, was not sufficiently material to motivate a pretextual termination that would expose Stonefield to $95.4 million in damages claims. Dr. Rosser should be prepared to testify at trial regarding the economic irrationality of the pretext theory.
C. Rebuttal Narrative
Based on our analysis of the evidence and the law, we propose the following affirmative narrative for use in summary judgment briefing and, if necessary, at trial. This narrative should be adapted as appropriate for each forum, but its core themes should remain consistent:
Stonefield Logistics Group is a $1.3 billion transportation and logistics company that manages a network of approximately 12,000 approved carriers and handles roughly 850,000 shipments annually. In March 2019, Stonefield entered into the TSA with VTS in good faith, committing to approximately $216 million in minimum freight volumes over the five-year term of the agreement. For nearly three years, Stonefield honored its commitments under the TSA and worked with VTS as a valued carrier partner.
When VTS's performance collapsed across all five Service Level Obligations in Q4 2021 — driven by VTS's undisclosed and unilateral decision to reassign 85 dedicated tractors to another shipper's account — Stonefield followed the contractual process. It issued a detailed Cure Notice identifying the specific performance failures. It gave VTS 30 days to remedy the situation. And it terminated only after VTS failed to cure. At no point did Stonefield deviate from the TSA's prescribed termination process.
Vantor now contends that this termination was pretextual — that Stonefield manufactured Cause to avoid a 14.3% rate increase. But this theory defies both the evidence and common sense. The termination process began in January 2022, before Stonefield had even analyzed the upcoming rate adjustment. VTS's performance failures are documented, quantified, and largely undisputed. And the notion that Stonefield would deliberately invite a $95.4 million lawsuit to save $6.2 million in annual rate adjustments defies business logic. No rational actor would manufacture a pretext under those circumstances.
The cost-benefit disparity argument is particularly powerful and should be emphasized in both briefing and trial presentation. The risk of litigation damages ($95.4 million in total claimed damages, including $67.23 million in liquidated damages, $5.2 million in stranded assets, $2.87 million in workforce reduction costs, and various other categories) dwarfs the savings from avoiding the rate increase ($6.2 million per year, or approximately $12.4 million for the two remaining contract years). Stonefield is a sophisticated, PE-backed company with experienced management and legal counsel. The suggestion that such a company would knowingly expose itself to nearly $100 million in litigation liability to save $12.4 million — a ratio of approximately 7.7:1 in downside risk to upside benefit — is implausible on its face.
VII. Risk Assessment Summary
The following table summarizes our assessment of the key evidence and legal factors bearing on Vantor's rate adjustment motive allegation:
VIII. Recommendations
Based on the analysis set forth in this memorandum, we make the following recommendations for the handling of Vantor's rate adjustment motive allegation:
1. Summary Judgment Briefing. The rate adjustment motive allegation should be addressed directly and affirmatively in Stonefield's summary judgment motion, whenever filed. We should not attempt to sidestep or minimize this issue. Our briefing should lead with the legal argument that subjective motive is irrelevant under New York law when objective contractual grounds for termination are satisfied, citing the authorities analyzed in the October 7, 2022 Research Memorandum (Doc. 22) and supplemented with any additional authority identified through updated research. In the alternative, the briefing should demonstrate through undisputed facts that (i) the termination process predated the rate adjustment analysis, (ii) the stated performance failures are quantified, independently verified, and largely undisputed, and (iii) VTS failed to cure within the contractual cure period. The cost-benefit disparity argument should be presented as a common-sense check on the plausibility of Vantor's pretext theory.
2. Kirkwood Email Han