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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

DEFENDANT STONEFIELD LOGISTICS GROUP INC.'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMISS PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6)

CALDERWOOD & HARKNESS LLP Samuel Eklund, Esq. Patrick Gallagher, Esq. 200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588

Attorneys for Defendant Stonefield Logistics Group Inc.

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I. PRELIMINARY STATEMENT

Defendant Stonefield Logistics Group Inc. ("Stonefield" or "SLG") respectfully submits this memorandum of law in support of its motion to dismiss the Complaint filed by Plaintiff Vantor Holdings Corp. ("Vantor") pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, the Complaint should be dismissed in its entirety because each of Vantor's damages theories is fatally deficient as a matter of law, and the Complaint therefore fails to state a claim upon which relief can be granted.

This case arises out of the termination of a five-year Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315) between Stonefield and Vantor's wholly owned operating subsidiary, Vantor Transport Services LLC ("VTS"). Vantor alleges that Stonefield wrongfully terminated the TSA and seeks approximately $95.4 million in damages, a staggering sum that includes $67.23 million in purported liquidated damages under Section 14.2 of the TSA, $18.7 million in alleged lost profits, and additional consequential damages categories — stranded assets and costs, workforce reduction costs, and mitigation costs — totaling approximately $9.47 million.

The Complaint should be dismissed on two independent grounds. First, the liquidated damages clause in Section 14.2 of the TSA is unenforceable as a matter of law because it constitutes an impermissible penalty under well-settled New York law. The clause purports to impose damages of $67.23 million — approximately 6.5 times VTS's expected profit on the remaining contract term — by mechanically applying a 75% multiplier to Vantor's gross annual committed volume for each remaining year, without any adjustment for avoided costs, operating margins, or the duty to mitigate. Under the two-part test that New York courts have consistently applied for more than a century, this clause fails both prongs: the stipulated amount bears no reasonable proportion to any probable loss, and the actual damages at issue were readily calculable at the time the contract was formed. Vantor's claim for $67.23 million in liquidated damages must therefore be dismissed.

Second, Vantor's lost profits claim fails to plead damages with the requisite certainty and particularity that New York law demands. The Complaint baldly asserts $18.7 million in lost profits without alleging the operating margin, cost structure, mitigation efforts, or any other factual predicate from which the Court could draw a reasonable inference that the figure represents a plausible measure of actual loss. Moreover, the lost profits claim is duplicative of the liquidated damages claim, as both purport to compensate Vantor for the same injury — the value VTS would have derived from the remaining contract term. Recovery of both is impermissible under New York law.

The TSA is attached as Exhibit A to the Declaration of Samuel Eklund, filed contemporaneously herewith, and is integral to and incorporated by reference in the Complaint. Vantor's Complaint quotes and relies upon numerous provisions of the TSA, and the TSA is referenced in no fewer than thirty-seven paragraphs of the Complaint. The TSA is therefore properly before the Court on a Rule 12(b)(6) motion. See Chambers v. Pinnacle Corporation, 282 F.3d 147, 153 (2d Cir. 2002).

A brief summary of the factual posture confirms that this case involves nothing more than a carrier that catastrophically failed to perform its contractual obligations and a shipper that exercised its express contractual right to terminate for cause. Stonefield terminated the TSA on March 4, 2022, for Cause under Section 13.1(a), following documented, severe, and sustained service failures by VTS across all five Service Level Obligations ("SLOs") during the fourth quarter of 2021. The failures were pervasive and deeply below contractual thresholds: on-time pickup rates fell to 78.2% against a required 95% threshold; on-time delivery rates dropped to 81.6% against a required 93% threshold; tender acceptance rates collapsed to 71.4% against a required 90% threshold; equipment availability plummeted to 62% of committed fleet capacity against a required 85% threshold; and VTS's cargo claims ratio spiked to 1.07% of gross revenue — more than double the contractual maximum of 0.5% — driven by sixteen documented cargo claims totaling $387,400 in November and December 2021 alone.

Stonefield scrupulously followed the contractual termination procedures. On January 18, 2022, Raymond Hess, Stonefield's Director of Contract Compliance, issued a detailed written Cure Notice to Sandra Milescu, Chief Operating Officer of Vantor and VTS, specifying each breach with the particularity required by Section 13.2 and providing VTS thirty calendar days to cure. VTS did not cure the identified deficiencies within the cure period, which expired on February 17, 2022. On March 4, 2022, Tobias Wren, Stonefield's General Counsel, issued a formal termination letter to Vantor Holdings Corp. and VTS, terminating the TSA effective immediately for Cause under Section 13.1(a).

Vantor's Complaint asserts a single cause of action for breach of contract, claiming that the termination was wrongful and seeking damages that are either barred as a matter of law — because the liquidated damages clause upon which Vantor principally relies is an unenforceable penalty — or insufficiently pled — because Vantor's lost profits and consequential damages claims are speculative, conclusory, and, in the case of the consequential damages, expressly waived by the parties' contract. The Court should dismiss the Complaint with prejudice.

II. STATEMENT OF FACTS

The following facts are drawn from the allegations of the Complaint, which Stonefield accepts as true solely for purposes of this motion, and from the TSA itself, which is integral to and incorporated by reference in the Complaint.

A. The Parties

Stonefield Logistics Group Inc. is a Delaware corporation headquartered at 4200 Commerce Parkway, Suite 800, Fort Worth, Texas 76102. (Compl. ¶ 2.) Stonefield is a mid-market freight brokerage, managed transportation, and supply chain solutions company operating across the continental United States and cross-border into Mexico and Canada. (Compl. ¶ 12.) Stonefield manages a carrier network of approximately 12,000 approved carriers and handles roughly 850,000 shipments annually, with total revenue of approximately $1.42 billion for its fiscal year ended December 31, 2021. (Compl. ¶¶ 12–13.) Stonefield employs approximately 2,800 individuals across its national operations. (Compl. ¶ 13.)

Vantor Holdings Corp. is a New York corporation headquartered at 580 Eighth Avenue, 14th Floor, New York, New York 10018. (Compl. ¶ 1.) Vantor is a holding company; the TSA was not executed by Vantor itself but rather was signed by and between Stonefield and Vantor's wholly owned operating subsidiary, Vantor Transport Services LLC ("VTS"), a New York limited liability company. (Compl. ¶¶ 3, 15; TSA at 1.) VTS operates a fleet of approximately 650 owned tractors and 2,100 trailers, with additional capacity sourced through a network of owner-operators. (Compl. ¶ 16.) Vantor reported approximate consolidated revenue of $385 million for fiscal year 2021 and employs approximately 1,900 individuals. (Compl. ¶ 17.)

It bears noting at the outset that the TSA was executed by VTS, not by Vantor Holdings Corp. The Complaint does not clearly allege the basis on which Vantor Holdings Corp. — the holding company parent — has standing to assert breach of contract claims under an agreement to which it was not a party. Stonefield reserves the right to raise this standing issue in further proceedings. For purposes of this motion, however, Stonefield addresses the substance of Vantor's damages claims.

B. The Transportation Services Agreement

The TSA was executed on March 15, 2019, between Stonefield (designated as "Shipper-Broker") and VTS (designated as "Carrier-Provider"). (TSA at 1.) The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield and was the product of arm's-length negotiations between two sophisticated commercial parties, each represented by experienced counsel. (Compl. ¶ 19.)

Governing Law and Forum. Section 17.3 of the TSA provides that the Agreement "shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of laws principles." (TSA § 17.3.) Section 17.4 provides for exclusive jurisdiction in the United States District Court for the Southern District of New York, or the Supreme Court of the State of New York, New York County. (TSA § 17.4.)

Term. The TSA had an initial term of five years, commencing on April 1, 2019 and expiring on March 31, 2024, with one automatic two-year renewal period (through March 31, 2026) absent 180 days' prior written notice of non-renewal by either party. (TSA § 2.1.)

Scope of Services. Under the TSA, VTS agreed to provide dedicated and on-demand truckload transportation services across specified lanes in the Northeast, Mid-Atlantic, and Southeast corridors, as set forth in the Lane Schedule attached as Schedule A to the TSA. (TSA §§ 3.1–3.3; Sched. A.) VTS committed to maintaining minimum fleet capacity of 400 tractors and 1,200 trailers for Stonefield freight at all times during the term of the Agreement. (TSA § 7.1.)

Annual Committed Volume. As consideration for VTS's commitment of dedicated fleet capacity, Stonefield committed to tender a minimum of $43.2 million per year in transportation charges to VTS (the "Annual Committed Volume" or "ACV"), for a total five-year commitment of $216 million. (TSA § 4.1.) The ACV was subject to adjustment only under the limited circumstances set forth in Section 4.3 of the TSA.

Rate Structure. Per-mile rates were set by lane in Schedule B to the TSA, subject to annual adjustment under Section 5.3's Rate Adjustment Mechanism. (TSA § 5.1; Sched. B.) The Rate Adjustment Mechanism indexed adjustments to a blended formula weighted 70% to the U.S. Department of Energy's diesel fuel price index and 30% to the Consumer Price Index for All Urban Consumers (CPI-U), with adjustments calculated and applied as of each April 1 during the term. (TSA § 5.3.)

Service Level Obligations. Article 6 of the TSA established five Service Level Obligations ("SLOs") that VTS was required to maintain at all times during the term. These performance benchmarks were the cornerstone of the parties' bargain, reflecting the minimum standards of service that Stonefield required and that VTS agreed to deliver as a condition of receiving Stonefield's substantial committed volume:

(i) On-Time Pickup Rate: VTS was required to maintain an on-time pickup rate of not less than 95% of all loads tendered by Stonefield. (TSA § 6.1(a).)

(ii) On-Time Delivery Rate: VTS was required to maintain an on-time delivery rate of not less than 93% of all loads tendered by Stonefield. (TSA § 6.1(b).)

(iii) Cargo Claims Ratio: VTS was required to maintain a cargo claims ratio of not more than 0.5% of gross revenue from Stonefield freight. (TSA § 6.1(c).)

(iv) Tender Acceptance Rate: VTS was required to accept not less than 90% of all loads tendered by Stonefield under the TSA. (TSA § 6.1(d).)

(v) Equipment Availability Compliance: VTS was required to maintain equipment availability at not less than 85% of its committed fleet capacity — i.e., at least 340 tractors and 1,020 trailers available for Stonefield freight at any given time. (TSA § 6.1(e).)

These SLOs were not aspirational targets; they were material obligations. Article 6 expressly provided that a failure to satisfy any SLO for any calendar quarter constituted a "material breach" of the Agreement. (TSA § 6.2.)

C. The Liquidated Damages Clause (Section 14.2)

Section 14.2 of the TSA provides the liquidated damages mechanism that is the centerpiece of Vantor's damages claim. The provision states, in relevant part:

"In the event that Shipper-Broker terminates this Agreement other than 'for Cause' (as defined in Section 13.1), Shipper-Broker shall pay to Carrier-Provider, as liquidated damages and not as a penalty, an amount equal to seventy-five percent (75%) of the Annual Committed Volume multiplied by the number of full and partial Contract Years remaining in the then-current Term (including any Renewal Term then in effect). The parties acknowledge and agree that the liquidated damages set forth herein represent a reasonable estimate of the damages that Carrier-Provider would suffer as a result of such early termination, and that such damages are not a penalty." (TSA § 14.2.)

Under this formula, and based on Vantor's own calculations as pled in the Complaint, the liquidated damages would be calculated as follows:

• 75% × $43.2 million (ACV) × 2 full remaining contract years = $64.8 million;

• Plus 75% × $43.2 million (ACV) × (27/365) for the partial year (March 4, 2022 through March 31, 2022) ≈ $2.43 million;

• Total claimed liquidated damages: $67.23 million.

(Compl. ¶¶ 58–61.)

As demonstrated in Section IV.A below, this formula produces a result that is grossly disproportionate to any reasonable estimate of VTS's actual loss and constitutes an unenforceable penalty under New York law.

D. The Termination for Cause Provision (Section 13.1)

Section 13.1 of the TSA defines "Cause" for purposes of the Agreement's termination provisions. The section provides that either party may terminate the TSA for "Cause," which is defined to include:

(a) A material breach of any provision of the Agreement that remains uncured for thirty (30) calendar days after written notice specifying the breach with reasonable particularity is delivered to the breaching party;

(b) The filing of a voluntary petition in bankruptcy by, or the entry of an order for relief against, the other party under Title 11 of the United States Code, or the institution of any insolvency or receivership proceeding, or the making of a general assignment for the benefit of creditors by the other party;

(c) The failure by Carrier-Provider to maintain required insurance coverages as set forth in Article 9 for more than fifteen (15) calendar days after written notice from Shipper-Broker; and

(d) A material violation of applicable law by Carrier-Provider, including but not limited to regulations promulgated by the United States Department of Transportation ("DOT") or the Federal Motor Carrier Safety Administration ("FMCSA").

(TSA § 13.1.)

Section 13.2 of the TSA further requires the terminating party to deliver a written Cure Notice specifying with "reasonable particularity" the alleged breach and providing the applicable cure period before any termination for Cause may become effective. (TSA § 13.2.) Stonefield fully complied with these requirements, as set forth below.

E. The Consequential Damages Waiver (Section 15.1)

Section 15.1 of the TSA contains a mutual waiver of consequential, incidental, and indirect damages. The provision states:

"Except as otherwise expressly provided herein, neither party shall be liable to the other for any consequential, incidental, indirect, special, or punitive damages arising out of or relating to this Agreement or the performance or breach thereof, including but not limited to lost revenue, loss of business or business opportunities, increased costs of operations, or diminution in value, regardless of whether such damages are based on contract, tort, strict liability, or any other theory, and regardless of whether such party has been advised of the possibility of such damages." (TSA § 15.1.)

As discussed in Section IV.C below, several categories of damages claimed in the Complaint fall squarely within the scope of this waiver.

F. VTS's Performance Failures and Stonefield's Termination

The events leading to Stonefield's termination of the TSA are largely set forth in the Complaint, and the relevant facts are not in material dispute for purposes of this motion.

Q4 2021 Performance Failures. During the fourth quarter of 2021 (October through December), VTS failed every one of the five SLOs established in Article 6 of the TSA. The magnitude of these failures was not marginal but catastrophic:

(Compl. ¶¶ 36–40; Eklund Decl., Ex. B.)

The cargo claims failures were particularly alarming. During November and December 2021 alone, VTS generated sixteen documented cargo claims totaling $387,400 — claims arising from damaged, lost, or stolen freight entrusted to VTS for transportation. (Compl. ¶ 40.) This claims volume represented a ratio of 1.07% of gross revenue, more than double the contractual maximum of 0.5%. (Id.)

The equipment availability shortfall was equally severe. VTS had committed to maintaining a minimum fleet capacity of 400 tractors for Stonefield freight, yet during Q4 2021, only approximately 248 tractors were available — a 38% deficit from the committed level. (Compl. ¶ 39.) VTS also failed to provide substitute equipment or surge capacity as required under Section 7.4 of the TSA. (Eklund Decl., Ex. B at 3.)

January 18, 2022 — Cure Notice. On January 18, 2022, Raymond Hess, Director of Contract Compliance at Stonefield, sent a detailed written Cure Notice to Sandra Milescu, Chief Operating Officer of Vantor and VTS, in strict compliance with Sections 13.1(a) and 13.2 of the TSA. (Compl. ¶ 42; Eklund Decl., Ex. B.) The Cure Notice specified each breach with the particularity required by the TSA, identifying each SLO metric, the contractual threshold, the actual performance figure achieved by VTS, and VTS's chronic failure to provide substitute equipment or surge capacity under Section 7.4. (Eklund Decl., Ex. B.) The Cure Notice provided VTS thirty calendar days to cure the identified breaches, as required by Section 13.1(a). (Id.)

February 14, 2022 — Vantor's Response. On February 14, 2022 — three days before expiration of the cure period — Derek Pruitt, Vice President of Business Development at Vantor, responded to the Cure Notice on behalf of VTS. (Compl. ¶ 43.) Mr. Pruitt's letter acknowledged what it characterized as "operational challenges" but attributed them to three external factors: (i) a nationwide driver shortage affecting the entire trucking industry; (ii) Stonefield's alleged failure to tender ACV minimums; and (iii) Stonefield's alleged diversion of volume to lower-cost spot market carriers. (Id.) VTS asserted that it had "substantially cured" the identified deficiencies, although it disputed Stonefield's cargo claims data. (Id.) Critically, VTS did not provide any data, evidence, or documentation demonstrating that it had in fact achieved compliance with any of the five SLOs. Nor did VTS propose a specific remediation plan with measurable milestones.

Expiration of Cure Period — February 17, 2022. The thirty-day cure period expired on February 17, 2022. VTS did not, in fact, cure the identified deficiencies. The Complaint itself does not allege that VTS achieved compliance with any of the five SLOs by the expiration of the cure period. (See Compl. ¶¶ 43–46.)

March 4, 2022 — Termination. On March 4, 2022, Tobias Wren, General Counsel of Stonefield, issued a formal termination letter to Vantor Holdings Corp. and VTS, terminating the TSA effective immediately for Cause under Section 13.1(a). (Compl. ¶ 46.) The termination letter stated that VTS had "failed to cure the material breaches" identified in the Cure Notice and that Stonefield was exercising its contractual right to terminate the TSA for Cause. (Id.) At the time of termination, the remaining term under the TSA was approximately two years and twenty-seven days (March 4, 2022 through March 31, 2024). (Compl. ¶ 47.)

G. Procedural History

The procedural history of this matter is straightforward. On April 8, 2022, Vantor, acting through its counsel Caldwell Royce & Shapiro LLP, sent a demand letter to Stonefield claiming wrongful termination of the TSA and demanding $95.4 million in damages. (Compl. ¶ 49.) On April 29, 2022, Tobias Wren, on behalf of Stonefield, rejected the demand and invoked the Section 16 mandatory thirty-day executive negotiation period that the TSA requires as a precondition to litigation. (Compl. ¶ 50.)

Pursuant to Section 16, the parties engaged in two executive negotiation sessions. The first session took place on May 16, 2022, in person, between Marcus Denton, Chief Executive Officer of Stonefield, and Nikolai Vantorovich, Chief Executive Officer of Vantor Holdings Corp. (Compl. ¶ 51.) The session did not result in a resolution. (Id.) A second session was conducted telephonically on June 3, 2022, between the same principals. (Compl. ¶ 52.) Again, no resolution was reached. (Id.)

On August 12, 2022, having exhausted the contractual negotiation process, Vantor filed the original Complaint in this Court, commencing this action under Case No. 22-cv-07841. (Dkt. No. 1.) Calderwood & Harkness LLP was engaged as lead defense counsel for Stonefield on September 1, 2022, and filed a Notice of Appearance on September 8, 2022. (Dkt. No. 8.)

III. LEGAL STANDARD

A. Rule 12(b)(6) Standard

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed if it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In evaluating a motion to dismiss, the Court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007).

However, the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). A complaint must contain "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).

"Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. The Court must engage in a "two-pronged approach": first, it should identify and disregard allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth"; and second, it should consider the remaining well-pleaded factual allegations to determine whether they "plausibly give rise to an entitlement to relief." Id. at 679.

On a motion to dismiss under Rule 12(b)(6), the Court may consider: (1) the factual allegations of the complaint, which are accepted as true; (2) documents attached to the complaint as exhibits; (3) documents incorporated by reference in the complaint; and (4) documents that are "integral" to the complaint — i.e., documents upon which the complaint "solely relies" and that are "integral to the complaint." Chambers v. Pinnacle Corporation, 282 F.3d 147, 153 (2d Cir. 2002); DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010). In contract actions, the operative agreement is routinely considered on a motion to dismiss where, as here, the complaint expressly references and relies upon the agreement. See Nicosia v. Hollowell & Co., 834 F.3d 220, 230–31 (2d Cir. 2016).

The TSA, attached as Exhibit A to the Declaration of Samuel Eklund filed contemporaneously herewith, is integral to and repeatedly referenced in the Complaint. The Complaint quotes or cites specific provisions of the TSA in at least thirty-seven paragraphs. Vantor's sole cause of action — breach of contract — is predicated entirely on the TSA. The TSA is therefore properly before the Court on this motion.

B. New York Contract Law Governs

The TSA contains a choice-of-law provision designating New York law as the governing law. (TSA § 17.3.) When a federal court sits in diversity or otherwise adjudicates state-law claims, it applies the substantive law of the forum state, including its choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Under New York choice-of-law principles, the parties' contractual choice of New York law is generally respected in commercial disputes between sophisticated parties, provided the chosen law bears a reasonable relationship to the transaction. See Ministers & Missionaries Benefit Bd. v. Snow, 26 N.Y.3d 466, 474 (2015); IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310, 315 (2012).

Here, no party disputes that New York law governs the TSA. Vantor is a New York corporation; VTS is a New York limited liability company; the parties selected New York as the governing law and this Court as the forum. Accordingly, New York law governs the enforceability of the liquidated damages clause and the sufficiency of the lost profits claim at issue on this motion.

IV. ARGUMENT

A. THE LIQUIDATED DAMAGES CLAUSE IN SECTION 14.2 IS UNENFORCEABLE AS A PENALTY UNDER NEW YORK LAW

The cornerstone of Vantor's Complaint is a claim for $67.23 million in liquidated damages under Section 14.2 of the TSA. This claim must be dismissed because Section 14.2 is an unenforceable penalty as a matter of New York law. The clause produces a damages figure that bears no reasonable relationship to any plausible estimate of VTS's actual loss, and the actual damages at issue were not difficult to determine at the time the contract was formed. Under the settled two-part test applied by New York courts, the clause fails on both prongs and is void as a matter of law.

1. The Governing Legal Standard for Liquidated Damages Under New York Law. Under New York law, a liquidated damages provision is enforceable if, and only if, two conditions are satisfied: (i) the amount stipulated bears a reasonable proportion to the probable loss at the time the contract was made, and (ii) actual damages would be difficult to determine at the time of contracting. See Truck Rent-A-Ctr., Inc. v. Purdy Corp., 41 N.Y.2d 354, 357 (1977); JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005). Both conditions must be met; failure to satisfy either renders the clause unenforceable. JMD Holding, 4 N.Y.3d at 380.

The party seeking to enforce a liquidated damages provision bears the initial burden of demonstrating that the provision satisfies both prongs of the test. Id. at 379–80. However, where the unenforceability of a liquidated damages clause is apparent from the face of the contract, the court may determine the issue as a matter of law. See Leasing Serv. Corp. v. Justice, 673 F.2d 70, 73 (2d Cir. 1982) (applying New York law); 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Ass'n, Inc., 24 N.Y.3d 528, 536 (2014).

The rationale underlying New York's longstanding hostility to penalty clauses is straightforward: "A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation." Truck Rent-A-Ctr., 41 N.Y.2d at 357. But "[i]f the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced." Id. The New York Court of Appeals has "consistently refused to enforce provisions which in effect penalize a party for failure to perform a contract where the damage amount bears no reasonable relation to the actual damages sustained." JMD Holding, 4 N.Y.3d at 380.

Critically, the parties' own characterization of a liquidated damages clause is not dispositive. A contractual recital that a sum is "not a penalty" does not foreclose judicial inquiry into the substance of the provision. See Truck Rent-A-Ctr., 41 N.Y.2d at 358 ("The label the parties place on a provision is not controlling."); JMD Holding, 4 N.Y.3d at 380 ("[T]he recital in the contract that the damages set forth therein are liquidated, and not a penalty, does not change the character of the clause . . . ."). Courts independently evaluate whether the clause functions as a legitimate pre-estimate of loss or as a punishment for breach.

New York courts have repeatedly struck down liquidated damages clauses that function as punitive rather than compensatory mechanisms, particularly where the stipulated amount substantially exceeds the actual or anticipated loss. See, e.g., 172 Van Duzer Realty, 24 N.Y.3d at 536–37 (invalidating liquidated damages clause as a penalty); Leasing Serv. Corp., 673 F.2d at 73–74 (same, applying New York law); Bates Advert. USA, Inc. v. 498 Seventh, LLC, 7 N.Y.3d 115, 120 (2006) (discussing the test for penalty clauses and emphasizing proportionality).

2. The Liquidated Damages Formula Bears No Reasonable Relationship to Vantor's Probable Loss. Application of the first prong of the enforceability test — whether the stipulated amount bears a reasonable proportion to the probable loss — demonstrates that Section 14.2 is grossly disproportionate and therefore constitutes a penalty.

The Formula. Section 14.2 calculates liquidated damages as 75% of the ACV ($43.2 million) multiplied by the number of full and partial contract years remaining. As pled in the Complaint, this yields:

75% × $43.2 million × 2.07 years ≈ $67.23 million.

(Compl. ¶¶ 58–61.)

The formula is mechanically tied to gross revenue, not to actual loss. The fundamental deficiency in Section 14.2 is that it calculates "damages" as a fixed percentage of gross contract revenue — i.e., the total transportation charges that Stonefield would have paid VTS — without any adjustment for the costs VTS would have incurred in performing the services. The formula ignores the elementary distinction between revenue and profit. A carrier's actual loss from the termination of a transportation contract is not the revenue it would have earned; it is the profit it would have earned — i.e., revenue minus the substantial costs of performance.

If VTS had continued to perform under the TSA for the remaining two years, it would have been required to maintain a fleet of at least 400 tractors and 1,200 trailers, employ hundreds of drivers, purchase fuel, maintain and repair equipment, carry insurance, and absorb the full panoply of operating costs associated with a large-scale truckload carrier. These costs are real, substantial, and well-documented in VTS's ordinary course of business. The liquidated damages formula in Section 14.2 takes no account of any of them.

The formula fails to account for VTS's operating margin. Vantor's own Complaint acknowledges that VTS operated at an approximately 12% operating margin on Stonefield freight. (Compl. ¶ 63.) Based on this margin — which Vantor itself has pled — VTS's actual expected profit from the remaining two years of the contract would have been approximately:

$86.4 million (2 years × $43.2 million ACV) × 12% = approximately $10.4 million.

Yet the liquidated damages clause would award VTS $67.23 million — approximately 6.5 times its anticipated profit. The disproportion is staggering. Under no recognized legal or economic principle does a party's actual loss from termination of a services contract equal 75% of its gross revenue without any deduction for the costs it would have incurred in performance. The formula effectively requires Stonefield to pay VTS nearly as much as VTS would have been paid for actually performing the services, while relieving VTS of all obligation to perform those services and all costs associated with performance.

The formula fails to account for avoided costs. Had the TSA remained in effect, VTS would have incurred substantial costs in performing its obligations. These include, at a minimum:

• Driver wages and benefits for the hundreds of drivers required to operate 400+ tractors;

• Fuel costs, which represent the single largest line item in any truckload carrier's cost structure;

• Equipment depreciation, lease payments, and maintenance for 400 tractors and 1,200 trailers;

• Insurance premiums, including commercial automobile liability, cargo, and general liability;

• Overhead costs, including dispatch, fleet management, safety and compliance, and administrative support;

• Owner-operator payments for any capacity sourced through VTS's network of independent contractors.

Following termination, VTS incurs none of these costs with respect to Stonefield freight. The liquidated damages formula does not account for these avoided costs, and as a result, it compensates VTS for "losses" it would never have sustained.

The formula fails to account for mitigation. Under well-established New York law, a non-breaching party has a duty to mitigate its damages. See Holy Properties Ltd., L.P. v. Kenneth Cole Prods., Inc., 87 N.Y.2d 130, 133 (1995). VTS owns and operates a fleet of approximately 650 tractors and 2,100 trailers, a substantial portion of which were dedicated to Stonefield freight. Upon termination of the TSA, VTS's fleet became available for deployment to other customers. There is no basis to conclude — and the Complaint does not allege — that VTS's fleet sat idle after termination. To the contrary, the truckload transportation market in 2022 was characterized by robust demand and elevated freight rates, creating ample opportunities for VTS to redeploy its assets.

The liquidated damages formula in Section 14.2 takes no account of mitigation. It awards VTS a fixed sum — 75% of gross revenue for the remaining term — regardless of whether VTS deploys its fleet to other customers and generates alternative revenue. This feature alone confirms that the clause operates as a penalty, not as a genuine pre-estimate of loss.

The 75% multiplier is arbitrary. Section 14.2 applies a 75% multiplier to the ACV. This multiplier is not tethered to any demonstrated cost structure, margin analysis, or anticipated harm. At the time the TSA was executed in March 2019, both parties had access to — and routinely tracked — VTS's operating costs, margins, and industry benchmarks. A genuine effort to estimate VTS's probable loss from early termination would have considered VTS's expected profit margin (approximately 12%) and the likelihood and extent of mitigation. Instead, the parties adopted an arbitrary multiplier of 75% — more than six times VTS's operating margin — that bears no rational relationship to any plausible estimate of actual harm.

In sum, the liquidated damages formula in Section 14.2 fails the first prong of the enforceability test because the stipulated amount ($67.23 million) is grossly disproportionate to VTS's probable loss (approximately $10.4 million in expected profits, likely reduced further by mitigation).

3. Vantor's Actual Damages Were Not Difficult to Determine at the Time of Contracting. The second prong of the enforceability test requires that actual damages be "incapable or difficult of precise estimation" at the time the contract was made. Truck Rent-A-Ctr., 41 N.Y.2d at 357. This condition is not met here.

Transportation and logistics is a mature, data-driven industry with well-established methods for calculating lost profits from a terminated transportation services contract. The fundamental measure of a carrier's loss from early termination is straightforward: the difference between the contract price (revenue) and the cost of performance, adjusted for mitigation — i.e., the carrier's expected margin on the contract, net of any revenue earned from alternative deployment of its assets.

At the time the TSA was executed in March 2019, VTS's costs of performance were known, quantifiable, and tracked by VTS in its ordinary course of business. VTS was an established carrier with a multi-year operating history. It operated a fleet of approximately 650 tractors and 2,100 trailers. Its per-mile and per-load operating costs — driver wages, fuel costs, equipment depreciation, insurance, maintenance, and overhead — were all readily ascertainable from VTS's internal financial records. Indeed, Vantor itself has alleged in its Complaint that VTS operated at an approximately 12% operating margin on Stonefield freight (Compl. ¶ 63), confirming that VTS's margins were known and quantifiable.

The parties to the TSA were not unsophisticated consumers or small businesses lacking access to financial data. Stonefield is a $1.42 billion revenue company; Vantor and VTS had combined revenue of approximately $385 million. Both parties were represented by experienced counsel during the negotiation and execution of the TSA. Both had access to detailed financial and operational data, including historical margin analyses, cost-per-mile calculations, and industry benchmarking data.

The ACV and rate structure set forth in the TSA provided a clear and definite basis for calculating anticipated revenue. Combined with VTS's known cost structure, these contractual terms permitted a straightforward and reliable calculation of anticipated profit. There was nothing inherently uncertain, speculative, or difficult about estimating the damages that VTS would suffer from early termination. The calculation could have been — and can now be — performed with no more difficulty than a simple subtraction of known costs from known revenues, adjusted for mitigation.

The parties' sophistication and access to data distinguish this case from the paradigmatic situations in which courts have found actual damages difficult to estimate — e.g., cases involving novel products with no established market, construction projects subject to unpredictable site conditions, or agreements where performance depends on inherently uncertain future events. Here, the parties were dealing in a commodity service — truckload transportation — with well-established pricing, cost structures, and market dynamics.

Because VTS's actual damages from early termination were not "incapable or difficult of precise estimation" at the time the TSA was executed, the second prong of the enforceability test is not satisfied. See JMD Holding, 4 N.Y.3d at 380 (liquidated damages clause fails where actual damages "were not difficult to determine"); Leasing Serv. Corp., 673 F.2d at 73 (same).

The failure to satisfy either prong is independently sufficient to invalidate the clause. Here, Section 14.2 fails both.

4. The Clause Operates as a Penalty. The combined effect of the foregoing analysis compels a single conclusion: Section 14.2 of the TSA operates as a penalty and is void under New York law.

A contractual provision that requires payment of a sum grossly disproportionate to anticipated harm "calls for a penalty and will not be enforced." Truck Rent-A-Ctr., 41 N.Y.2d at 357. The disproportionality here is extreme and evident from multiple vantage points:

First, the $67.23 million liquidated damages figure exceeds VTS's own expected profit from the remaining contract term by a factor of approximately 6.5. VTS's anticipated profit — based on Vantor's own allegation of a 12% operating margin — was approximately $10.4 million. A clause that awards a party more than six times its expected profit does not represent a "reasonable estimate" of loss; it represents a penalty designed to deter breach.

Second, the liquidated damages figure ($67.23 million) exceeds Vantor's own separately pled estimate of its actual lost profits ($18.7 million) by nearly $50 million. In other words, Vantor's own Complaint implicitly concedes that the liquidated damages clause produces a result that is approximately 3.6 times greater than what Vantor itself believes its actual damages to be. This internal inconsistency in the Complaint powerfully demonstrates that the liquidated damages clause does not bear a reasonable proportion to actual loss.

Third, the liquidated damages represent approximately 78% of VTS's total expected gross revenue from the remaining contract term ($86.4 million over two years at $43.2 million per year). Under the clause, VTS would receive 78% of its total contract revenue without performing any services, without incurring any costs of performance, and without any duty to account for revenue earned from alternative uses of its fleet. This is the hallmark of a penalty: it enriches the non-breaching party far beyond compensation for its actual loss.

Fourth, the parties' self-serving recital in Section 14.2 that the liquidated damages "represent a reasonable estimate of the damages that [VTS] would suffer" and "are not a penalty" does not alter this analysis. As the New York Court of Appeals has repeatedly held, "[t]he label the parties place on a provision is not controlling" and "the recital in the contract that the damages set forth therein are liquidated, and not a penalty, does not change the character of the clause." Truck Rent-A-Ctr., 41 N.Y.2d at 358; JMD Holding, 4 N.Y.3d at 380. Courts look beyond boilerplate contractual language to the economic substance of the provision. Here, the economic substance is plain: the clause imposes a penalty.

For all of these reasons, the liquidated damages clause in Section 14.2 of the TSA is an unenforceable penalty as a matter of New York law. Vantor's claim for $67.23 million in liquidated damages fails to state a claim upon which relief can be granted and should be dismissed.

5. Dismissal of the Liquidated Damages Claim Is Appropriate at the Pleading Stage. Stonefield anticipates that Vantor may argue that the enforceability of a liquidated damages clause is a fact-intensive inquiry that cannot be resolved at the pleading stage. That argument fails here.

Where, as here, the enforceability of a liquidated damages clause can be determined from the four corners of the contract — which is properly before the Court as an integral document — dismissal under Rule 12(b)(6) is appropriate without the need for discovery. See Bates Advert., 7 N.Y.3d at 120 (resolving enforceability of contractual provision on the contract's terms); Leasing Serv. Corp., 673 F.2d at 73–74 (affirming dismissal of claim based on unenforceable liquidated damages clause under New York law where unenforceability was apparent from contract terms). The Second Circuit has recognized that "where the terms of the contract are clear and unambiguous, the intent of the parties must be found therein," and no extrinsic evidence is needed. Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002).

The TSA is unambiguous. The formula set forth in Section 14.2 — 75% of ACV multiplied by remaining years — is explicitly defined. The ACV is a fixed, stated figure ($43.2 million). The remaining-term multiplier is a simple arithmetic function of the termination date and the contract expiration date. The Court need not look beyond the four corners of the contract to determine that the formula produces a result that is grossly disproportionate to any reasonable estimate of actual loss and that the actual damages at issue were readily calculable at the time of contracting.

Moreover, the very allegations of Vantor's own Complaint — particularly the allegation of a 12% operating margin (Compl. ¶ 63) and the separate lost profits claim of $18.7 million (Compl. ¶ 64) — supply the factual predicate for the Court's analysis. Taking Vantor's own allegations as true, as the Court must on a Rule 12(b)(6) motion, the liquidated damages clause awards VTS 6.5 times its expected profit. No discovery is needed to determine that such a ratio is grossly disproportionate.

Courts in this District and in the Second Circuit have dismissed liquidated damages claims on a motion to dismiss where, as here, the contract terms demonstrated unenforceability as a matter of law. See, e.g., Leasing Serv. Corp., 673 F.2d at 73–74; Wechsler v. Hunt Health Sys., Ltd., 186 F. Supp. 2d 402, 413 (S.D.N.Y. 2002) (dismissing claim predicated on penalty clause on Rule 12(b)(6) motion). Dismissal is appropriate here.

B. VANTOR'S LOST PROFITS CLAIM FAILS TO STATE A CLAIM BECAUSE DAMAGES ARE NOT PLED WITH REQUISITE CERTAINTY

Vantor's second damages theory — a claim for $18.7 million in lost profits — should also be dismissed. The Complaint fails to plead lost profits with the reasonable certainty required under New York law, and the lost profits claim is duplicative of the liquidated damages claim, rendering it impermissible under any scenario.

1. New York Law Requires Lost Profits to Be Pled and Proven with Reasonable Certainty. Under well-settled New York law, lost profits may be recovered for breach of contract only if they are: (i) established with a reasonable degree of certainty; (ii) shown to flow naturally from the breach; and (iii) not unduly speculative. See Kenford Co. v. Cnty. of Erie, 67 N.Y.2d 257, 261 (1986); Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 403 (1993). "Lost profits must be capable of measurement based upon known reliable factors without undue speculation." Kenford, 67 N.Y.2d at 261.

The requirement of reasonable certainty is not merely an evidentiary hurdle to be surmounted at trial; it operates as a constraint at the pleading stage as well. A plaintiff must plead facts sufficient to establish that its lost profits are not speculative. See Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996). Conclusory allegations of lost profits, unaccompanied by facts demonstrating a non-speculative basis for the claimed amount, are insufficient to survive a motion to dismiss under the Twombly/Iqbal standard. See Iqbal, 556 U.S. at 678.

The "reasonable certainty" standard has particular force in the context of breach of contract claims, where the purpose of damages is to place the injured party in the position it would have occupied had the contract been performed. See Brushton-Moira Cent. Sch. Dist. v. Fred H. Thomas Assocs., P.C., 91 N.Y.2d 256, 261 (1998). When the claimed profits are speculative or conjectural, the damages award would constitute a windfall rather than compensation, and recovery must be denied.

2. Vantor's Complaint Fails to Plead Lost Profits with Any Particularity. Vantor alleges $18.7 million in lost profits. (Compl. ¶ 64.) However, the Complaint provides no factual basis for this figure — it appears as a bare number, untethered to any supporting allegations. The Complaint does not allege:

(a) VTS's operating margin on Stonefield freight with any specificity or supporting factual basis beyond a conclusory reference to "approximately 12%" (Compl. ¶ 63), without identifying the source, methodology, or time period underlying that figure;

(b) VTS's cost structure — including driver wages, fuel costs, equipment depreciation, insurance premiums, maintenance expenses, overhead allocations, or any other cost component — that would support a margin calculation;

(c) What alternative revenue VTS could or did generate after termination by redeploying its fleet to other customers, which is directly relevant to mitigation and the calculation of net lost profits;

(d) The factual basis for, or derivation of, the alleged 12% operating margin, or whether that figure represents a historical average, a forward-looking projection, a gross margin, or a net margin;

(e) Any distinction between gross and net profits, or any explanation of why the $18.7 million figure represents net lost profits rather than gross lost revenue; or

(f) Any factual allegations regarding VTS's track record, financial performance, or market conditions that would support the plausibility of the claimed amount.

The $18.7 million figure is a bare assertion. It appears untethered to the factual allegations of the Complaint and is therefore precisely the type of "conclusory statement" that the Supreme Court held insufficient under Iqbal. See 556 U.S. at 678. Without factual content to support the plausibility of this figure, the Court cannot "draw the reasonable inference" that $18.7 million represents a plausible and non-speculative measure of VTS's actual lost profits. The claim should be dismissed.

3. The Lost Profits Claim Is Duplicative of the Liquidated Damages Claim. Even setting aside the pleading deficiencies, Vantor's lost profits claim fails on an independent ground: it is impermissibly duplicative of the liquidated damages claim.

The liquidated damages clause in Section 14.2 was intended by the parties to be the exclusive remedy for termination other than for Cause. See TSA § 14.2 (providing that upon termination other than for Cause, Stonefield "shall pay to Carrier-Provider, as liquidated damages," the stipulated amount). The very purpose of a liquidated damages clause is to substitute a pre-agreed amount for the uncertainty of proving actual damages. See JMD Holding, 4 N.Y.3d at 379. By definition, a valid liquidated damages clause precludes separate recovery of actual damages for the same breach.

Under New York law, a valid and enforceable liquidated damages clause precludes recovery of actual damages (including lost profits) for the breach to which the clause applies. See Truck Rent-A-Ctr., 41 N.Y.2d at 356; Fifty States Mgmt. Corp. v. Pioneer Auto Parks, Inc., 46 N.Y.2d 573, 577 (1979). The converse is also true: if the liquidated damages clause is unenforceable — as Stonefield contends — then Vantor may seek actual damages, but only actual damages. The two remedies are mutually exclusive, not cumulative.

Vantor's Complaint seeks both. It claims $67.23 million in liquidated damages and $18.7 million in lost profits, for a combined total of $85.93 million based on the same underlying harm: the value VTS would have derived from the remaining contract term. Both figures purport to compensate Vantor for the same injury — the economic benefit VTS lost when the TSA was terminated. Allowing recovery of both would constitute an impermissible double recovery. See Biotronik A.G. v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799, 806 (2014) (noting the prohibition against double recovery under New York law).

The duplicative nature of these claims requires dismissal of the lost profits claim regardless of the Court's disposition of the liquidated damages claim:

• If the liquidated damages clause is enforceable (a proposition Stonefield vigorously contests), then Vantor's exclusive remedy for early termination is the liquidated damages amount, and the separate lost profits claim must be dismissed as precluded.

• If the liquidated damages clause is unenforceable (as Stonefield contends), then Vantor may pursue actual damages, but cannot also pursue liquidated damages. In either event, the two claims cannot coexist.

The total claimed damages of $95.4 million includes both $67.23 million in liquidated damages and $18.7 million in lost profits, which compensate for the same injury: the value VTS would have derived from the remaining contract term. Under any legal framework, one or the other must be dismissed. On the pleading as currently framed, the lost profits claim is duplicative and should be stricken.

4. At a Minimum, the Lost Profits Claim Should Be Dismissed as Insufficiently Pled. Even if the Court were to conclude — contrary to Stonefield's arguments — that the liquidated damages claim could survive this motion (which it should not), the independent lost profits claim fails to meet the Twombly/Iqbal pleading standard. As demonstrated above, the lost profits claim rests entirely on conclusory assertions — a bare allegation of "$18.7 million" — without factual content sufficient to allow the Court to draw a reasonable inference that this figure represents a plausible, non-speculative measure of VTS's actual lost profits.

The Complaint does not allege a single fact from which the Court could evaluate whether $18.7 million is a reasonable estimate of lost profits, an aspirational number, or a figure pulled from thin air. There is no cost analysis, no margin calculation, no mitigation assessment, and no factual predicate. This is precisely the type of "threadbare recital" that Iqbal holds insufficient. 556 U.S. at 678.

The lost profits claim should be dismissed.

C. VANTOR'S CONSEQUENTIAL DAMAGES CLAIMS ARE BARRED BY THE TSA'S MUTUAL WAIVER PROVISION

Although Stonefield's primary arguments target the liquidated damages and lost profits claims that form the bulk of Vantor's damages demand, Stonefield also moves to dismiss several additional categories of damages asserted in the Complaint on the independent ground that they are consequential damages expressly barred by the mutual waiver provision in Section 15.1 of the TSA.

In addition to its $67.23 million liquidated damages claim and $18.7 million lost profits claim, Vantor's Complaint alleges three further categories of damages:

(i) Stranded assets and costs: $5.2 million, representing alleged depreciation on dedicated equipment, lease termination penalties, and costs associated with idle or underutilized fleet assets following termination (Compl. ¶ 66);

(ii) Workforce reduction costs: $2.87 million, representing alleged severance payments and associated costs for approximately 180 drivers and support staff terminated as a result of the TSA termination (Compl. ¶ 67); and

(iii) Mitigation costs: $1.4 million, representing alleged costs incurred in seeking replacement freight, including sales and marketing expenses, broker commissions, and administrative costs (Compl. ¶ 68).

These three categories total approximately $9.47 million. Each is a paradigmatic example of consequential damages — i.e., damages that do not flow directly from the breach itself but arise from VTS's particular circumstances and operational decisions.

Section 15.1 of the TSA contains a broad, mutual waiver of such damages. The clause provides that "neither party shall be liable to the other for any consequential, incidental, indirect, special, or punitive damages arising out of or relating to this Agreement or the performance or breach thereof, including but not limited to lost revenue, loss of business or business opportunities, increased costs of operations, or diminution in value." (TSA § 15.1.) This waiver was mutually agreed upon by sophisticated commercial parties, each represented by counsel, and reflects a considered allocation of risk.

The categories of damages at issue here fall squarely within the scope of this waiver:

• Stranded asset costs ($5.2 million) represent depreciation and lease termination costs on equipment that VTS chose to dedicate to Stonefield freight. These are consequential damages arising from VTS's particular investment decisions and fleet management practices, not direct damages flowing from any breach.

• Workforce reduction costs ($2.87 million) represent severance and related costs for employees VTS terminated following the end of the TSA. These costs arise from VTS's employment practices and staffing decisions, not from the breach itself. They are classic consequential or incidental damages.

• Mitigation costs ($1.4 million) represent expenses VTS incurred in seeking replacement freight. These costs are, by definition, consequential — they arise as a consequence of the termination, not as direct damages from the breach.

New York courts routinely enforce mutual waivers of consequential damages in commercial contracts between sophisticated parties. See Metropolitan Life Ins. Co. v. Noble Lowndes Int'l, Inc., 84 N.Y.2d 430, 436 (1994); Biotronik, 22 N.Y.3d at 805. The waiver in Section 15.1 is clear, unambiguous, and broadly drafted. Vantor's subsidiary, VTS, agreed to this waiver as part of the TSA. Vantor cannot now seek to recover the very categories of damages that VTS expressly agreed to waive.

These claims should be dismissed as barred by the express contractual waiver in TSA Section 15.1.

V. CONCLUSION

For the foregoing reasons, Defendant Stonefield Logistics Group Inc. respectfully requests that the Court grant its motion to dismiss and dismiss the Complaint in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6). In the alternative, Stonefield respectfully requests that the Court:

(i) Dismiss Vantor's claim for $67.23 million in liquidated damages under Section 14.2 of the TSA on the ground that the liquidated damages clause is an unenforceable penalty under New York law;

(ii) Dismiss Vantor's $18.7 million lost profits claim for failure to plead damages with the reasonable certainty required under New York law, and as duplicative of the liquidated damages claim; and

(iii) Dismiss Vantor's consequential damages claims — stranded assets and costs ($5.2 million), workforce reduction costs ($2.87 million), and mitigation costs ($1.4 million) — as barred by the mutual waiver provision in Section 15.1 of the TSA.

Stonefield further respectfully requests such other and further relief as this Court deems just and proper.

Dated: October 14, 2022 New York, New York

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Samuel Eklund, Esq. Responsible Partner

Patrick Gallagher, Esq. Lead Associate

CALDERWOOD & HARKNESS LLP 200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588

Attorneys for Defendant Stonefield Logistics Group Inc.

CERTIFICATE OF SERVICE

I, Samuel Eklund, hereby certify that on October 14, 2022, a true and correct copy of the foregoing Memorandum of Law in Support of Defendant Stonefield Logistics Group Inc.'s Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) was served via the Court's Electronic Case Filing ("ECF") system upon all counsel of record, including:

Harrison Caldwell, Esq. Meredith Shapiro, Esq. Jason Whitford, Esq. Caldwell Royce & Shapiro LLP 1 Liberty Plaza, 22nd Floor New York, New York 10006 Telephone: (212) 701-3000 Facsimile: (212) 701-3100 Counsel for Plaintiff Vantor Holdings Corp.

________________________________________

Samuel Eklund

EXHIBITS (Filed Separately with the Declaration of Samuel Eklund)

Exhibit A: Transportation Services Agreement dated March 15, 2019, by and between Stonefield Logistics Group Inc. and Vantor Transport Services LLC (Contract Reference No. SLG-VTS-2019-0315).

Exhibit B: Cure Notice dated January 18, 2022, from Raymond Hess, Director of Contract Compliance, Stonefield Logistics Group Inc., to Sandra Milescu, Chief Operating Officer, Vantor Holdings Corp. / Vantor Transport Services LLC.

VANTOR HOLDINGS CORP.,

Plaintiff,

Case No. 22-cv-07841 (MTC)

Hon. Margaret T. Calloway, U.S.D.J.

STONEFIELD LOGISTICS GROUP INC.,

Defendant.

Page

PRELIMINARY STATEMENT	1
STATEMENT OF FACTS	4
<!-- indent:1 -->A. The Parties<!-- /indent -->	4
<!-- indent:1 -->B. The Transportation Services Agreement<!-- /indent -->	5
<!-- indent:1 -->C. The Liquidated Damages Clause (Section 14.2)<!-- /indent -->	7
<!-- indent:1 -->D. The Termination for Cause Provision (Section 13.1)<!-- /indent -->	8
<!-- indent:1 -->E. The Consequential Damages Waiver (Section 15.1)<!-- /indent -->	9
<!-- indent:1 -->F. VTS's Performance Failures and Stonefield's Termination<!-- /indent -->	9
<!-- indent:1 -->G. Procedural History<!-- /indent -->	12
LEGAL STANDARD	13
<!-- indent:1 -->A. Rule 12(b)(6) Standard<!-- /indent -->	13
<!-- indent:1 -->B. New York Contract Law Governs<!-- /indent -->	14
ARGUMENT	15

A. The Liqui

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
DEFENDANT STONEFIELD LOGISTICS GROUP INC.'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO DISMISS PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6)
CALDERWOOD & HARKNESS LLP Samuel Eklund, Esq. Patrick Gallagher, Esq. 200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Attorneys for Defendant Stonefield Logistics Group Inc.
TABLE OF CONTENTS
Right-click to update Table of Contents
I. PRELIMINARY STATEMENT
Defendant Stonefield Logistics Group Inc. ("Stonefield" or "SLG") respectfully submits this memorandum of law in support of its motion to dismiss the Complaint filed by Plaintiff Vantor Holdings Corp. ("Vantor") pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, the Complaint should be dismissed in its entirety because each of Vantor's damages theories is fatally deficient as a matter of law, and the Complaint therefore fails to state a claim upon which relief can be granted.
This case arises out of the termination of a five-year Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315) between Stonefield and Vantor's wholly owned operating subsidiary, Vantor Transport Services LLC ("VTS"). Vantor alleges that Stonefield wrongfully terminated the TSA and seeks approximately $95.4 million in damages, a staggering sum that includes $67.23 million in purported liquidated damages under Section 14.2 of the TSA, $18.7 million in alleged lost profits, and additional consequential damages categories — stranded assets and costs, workforce reduction costs, and mitigation costs — totaling approximately $9.47 million.
The Complaint should be dismissed on two independent grounds. First, the liquidated damages clause in Section 14.2 of the TSA is unenforceable as a matter of law because it constitutes an impermissible penalty under well-settled New York law. The clause purports to impose damages of $67.23 million — approximately 6.5 times VTS's expected profit on the remaining contract term — by mechanically applying a 75% multiplier to Vantor's gross annual committed volume for each remaining year, without any adjustment for avoided costs, operating margins, or the duty to mitigate. Under the two-part test that New York courts have consistently applied for more than a century, this clause fails both prongs: the stipulated amount bears no reasonable proportion to any probable loss, and the actual damages at issue were readily calculable at the time the contract was formed. Vantor's claim for $67.23 million in liquidated damages must therefore be dismissed.
Second, Vantor's lost profits claim fails to plead damages with the requisite certainty and particularity that New York law demands. The Complaint baldly asserts $18.7 million in lost profits without alleging the operating margin, cost structure, mitigation efforts, or any other factual predicate from which the Court could draw a reasonable inference that the figure represents a plausible measure of actual loss. Moreover, the lost profits claim is duplicative of the liquidated damages claim, as both purport to compensate Vantor for the same injury — the value VTS would have derived from the remaining contract term. Recovery of both is impermissible under New York law.
The TSA is attached as Exhibit A to the Declaration of Samuel Eklund, filed contemporaneously herewith, and is integral to and incorporated by reference in the Complaint. Vantor's Complaint quotes and relies upon numerous provisions of the TSA, and the TSA is referenced in no fewer than thirty-seven paragraphs of the Complaint. The TSA is therefore properly before the Court on a Rule 12(b)(6) motion. See Chambers v. Pinnacle Corporation, 282 F.3d 147, 153 (2d Cir. 2002).
A brief summary of the factual posture confirms that this case involves nothing more than a carrier that catastrophically failed to perform its contractual obligations and a shipper that exercised its express contractual right to terminate for cause. Stonefield terminated the TSA on March 4, 2022, for Cause under Section 13.1(a), following documented, severe, and sustained service failures by VTS across all five Service Level Obligations ("SLOs") during the fourth quarter of 2021. The failures were pervasive and deeply below contractual thresholds: on-time pickup rates fell to 78.2% against a required 95% threshold; on-time delivery rates dropped to 81.6% against a required 93% threshold; tender acceptance rates collapsed to 71.4% against a required 90% threshold; equipment availability plummeted to 62% of committed fleet capacity against a required 85% threshold; and VTS's cargo claims ratio spiked to 1.07% of gross revenue — more than double the contractual maximum of 0.5% — driven by sixteen documented cargo claims totaling $387,400 in November and December 2021 alone.
Stonefield scrupulously followed the contractual termination procedures. On January 18, 2022, Raymond Hess, Stonefield's Director of Contract Compliance, issued a detailed written Cure Notice to Sandra Milescu, Chief Operating Officer of Vantor and VTS, specifying each breach with the particularity required by Section 13.2 and providing VTS thirty calendar days to cure. VTS did not cure the identified deficiencies within the cure period, which expired on February 17, 2022. On March 4, 2022, Tobias Wren, Stonefield's General Counsel, issued a formal termination letter to Vantor Holdings Corp. and VTS, terminating the TSA effective immediately for Cause under Section 13.1(a).
Vantor's Complaint asserts a single cause of action for breach of contract, claiming that the termination was wrongful and seeking damages that are either barred as a matter of law — because the liquidated damages clause upon which Vantor principally relies is an unenforceable penalty — or insufficiently pled — because Vantor's lost profits and consequential damages claims are speculative, conclusory, and, in the case of the consequential damages, expressly waived by the parties' contract. The Court should dismiss the Complaint with prejudice.
II. STATEMENT OF FACTS
The following facts are drawn from the allegations of the Complaint, which Stonefield accepts as true solely for purposes of this motion, and from the TSA itself, which is integral to and incorporated by reference in the Complaint.
A. The Parties
Stonefield Logistics Group Inc. is a Delaware corporation headquartered at 4200 Commerce Parkway, Suite 800, Fort Worth, Texas 76102. (Compl. ¶ 2.) Stonefield is a mid-market freight brokerage, managed transportation, and supply chain solutions company operating across the continental United States and cross-border into Mexico and Canada. (Compl. ¶ 12.) Stonefield manages a carrier network of approximately 12,000 approved carriers and handles roughly 850,000 shipments annually, with total revenue of approximately $1.42 billion for its fiscal year ended December 31, 2021. (Compl. ¶¶ 12–13.) Stonefield employs approximately 2,800 individuals across its national operations. (Compl. ¶ 13.)
Vantor Holdings Corp. is a New York corporation headquartered at 580 Eighth Avenue, 14th Floor, New York, New York 10018. (Compl. ¶ 1.) Vantor is a holding company; the TSA was not executed by Vantor itself but rather was signed by and between Stonefield and Vantor's wholly owned operating subsidiary, Vantor Transport Services LLC ("VTS"), a New York limited liability company. (Compl. ¶¶ 3, 15; TSA at 1.) VTS operates a fleet of approximately 650 owned tractors and 2,100 trailers, with additional capacity sourced through a network of owner-operators. (Compl. ¶ 16.) Vantor reported approximate consolidated revenue of $385 million for fiscal year 2021 and employs approximately 1,900 individuals. (Compl. ¶ 17.)
It bears noting at the outset that the TSA was executed by VTS, not by Vantor Holdings Corp. The Complaint does not clearly allege the basis on which Vantor Holdings Corp. — the holding company parent — has standing to assert breach of contract claims under an agreement to which it was not a party. Stonefield reserves the right to raise this standing issue in further proceedings. For purposes of this motion, however, Stonefield addresses the substance of Vantor's damages claims.
B. The Transportation Services Agreement
The TSA was executed on March 15, 2019, between Stonefield (designated as "Shipper-Broker") and VTS (designated as "Carrier-Provider"). (TSA at 1.) The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield and was the product of arm's-length negotiations between two sophisticated commercial parties, each represented by experienced counsel. (Compl. ¶ 19.)
Governing Law and Forum. Section 17.3 of the TSA provides that the Agreement "shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of laws principles." (TSA § 17.3.) Section 17.4 provides for exclusive jurisdiction in the United States District Court for the Southern District of New York, or the Supreme Court of the State of New York, New York County. (TSA § 17.4.)
Term. The TSA had an initial term of five years, commencing on April 1, 2019 and expiring on March 31, 2024, with one automatic two-year renewal period (through March 31, 2026) absent 180 days' prior written notice of non-renewal by either party. (TSA § 2.1.)
Scope of Services. Under the TSA, VTS agreed to provide dedicated and on-demand truckload transportation services across specified lanes in the Northeast, Mid-Atlantic, and Southeast corridors, as set forth in the Lane Schedule attached as Schedule A to the TSA. (TSA §§ 3.1–3.3; Sched. A.) VTS committed to maintaining minimum fleet capacity of 400 tractors and 1,200 trailers for Stonefield freight at all times during the term of the Agreement. (TSA § 7.1.)
Annual Committed Volume. As consideration for VTS's commitment of dedicated fleet capacity, Stonefield committed to tender a minimum of $43.2 million per year in transportation charges to VTS (the "Annual Committed Volume" or "ACV"), for a total five-year commitment of $216 million. (TSA § 4.1.) The ACV was subject to adjustment only under the limited circumstances set forth in Section 4.3 of the TSA.
Rate Structure. Per-mile rates were set by lane in Schedule B to the TSA, subject to annual adjustment under Section 5.3's Rate Adjustment Mechanism. (TSA § 5.1; Sched. B.) The Rate Adjustment Mechanism indexed adjustments to a blended formula weighted 70% to the U.S. Department of Energy's diesel fuel price index and 30% to the Consumer Price Index for All Urban Consumers (CPI-U), with adjustments calculated and applied as of each April 1 during the term. (TSA § 5.3.)
Service Level Obligations. Article 6 of the TSA established five Service Level Obligations ("SLOs") that VTS was required to maintain at all times during the term. These performance benchmarks were the cornerstone of the parties' bargain, reflecting the minimum standards of service that Stonefield required and that VTS agreed to deliver as a condition of receiving Stonefield's substantial committed volume:
(i) On-Time Pickup Rate: VTS was required to maintain an on-time pickup rate of not less than 95% of all loads tendered by Stonefield. (TSA § 6.1(a).)
(ii) On-Time Delivery Rate: VTS was required to maintain an on-time delivery rate of not less than 93% of all loads tendered by Stonefield. (TSA § 6.1(b).)
(iii) Cargo Claims Ratio: VTS was required to maintain a cargo claims ratio of not more than 0.5% of gross revenue from Stonefield freight. (TSA § 6.1(c).)
(iv) Tender Acceptance Rate: VTS was required to accept not less than 90% of all loads tendered by Stonefield under the TSA. (TSA § 6.1(d).)
(v) Equipment Availability Compliance: VTS was required to maintain equipment availability at not less than 85% of its committed fleet capacity — i.e., at least 340 tractors and 1,020 trailers available for Stonefield freight at any given time. (TSA § 6.1(e).)
These SLOs were not aspirational targets; they were material obligations. Article 6 expressly provided that a failure to satisfy any SLO for any calendar quarter constituted a "material breach" of the Agreement. (TSA § 6.2.)
C. The Liquidated Damages Clause (Section 14.2)
Section 14.2 of the TSA provides the liquidated damages mechanism that is the centerpiece of Vantor's damages claim. The provision states, in relevant part:
"In the event that Shipper-Broker terminates this Agreement other than 'for Cause' (as defined in Section 13.1), Shipper-Broker shall pay to Carrier-Provider, as liquidated damages and not as a penalty, an amount equal to seventy-five percent (75%) of the Annual Committed Volume multiplied by the number of full and partial Contract Years remaining in the then-current Term (including any Renewal Term then in effect). The parties acknowledge and agree that the liquidated damages set forth herein represent a reasonable estimate of the damages that Carrier-Provider would suffer as a result of such early termination, and that such damages are not a penalty." (TSA § 14.2.)
Under this formula, and based on Vantor's own calculations as pled in the Complaint, the liquidated damages would be calculated as follows:
• 75% × $43.2 million (ACV) × 2 full remaining contract years = $64.8 million;
• Plus 75% × $43.2 million (ACV) × (27/365) for the partial year (March 4, 2022 through March 31, 2022) ≈ $2.43 million;
• Total claimed liquidated damages: $67.23 million.
(Compl. ¶¶ 58–61.)
As demonstrated in Section IV.A below, this formula produces a result that is grossly disproportionate to any reasonable estimate of VTS's actual loss and constitutes an unenforceable penalty under New York law.
D. The Termination for Cause Provision (Section 13.1)
Section 13.1 of the TSA defines "Cause" for purposes of the Agreement's termination provisions. The section provides that either party may terminate the TSA for "Cause," which is defined to include:
(a) A material breach of any provision of the Agreement that remains uncured for thirty (30) calendar days after written notice specifying the breach with reasonable particularity is delivered to the breaching party;
(b) The filing of a voluntary petition in bankruptcy by, or the entry of an order for relief against, the other party under Title 11 of the United States Code, or the institution of any insolvency or receivership proceeding, or the making of a general assignment for the benefit of creditors by the other party;
(c) The failure by Carrier-Provider to maintain required insurance coverages as set forth in Article 9 for more than fifteen (15) calendar days after written notice from Shipper-Broker; and
(d) A material violation of applicable law by Carrier-Provider, including but not limited to regulations promulgated by the United States Department of Transportation ("DOT") or the Federal Motor Carrier Safety Administration ("FMCSA").
(TSA § 13.1.)
Section 13.2 of the TSA further requires the terminating party to deliver a written Cure Notice specifying with "reasonable particularity" the alleged breach and providing the applicable cure period before any termination for Cause may become effective. (TSA § 13.2.) Stonefield fully complied with these requirements, as set forth below.
E. The Consequential Damages Waiver (Section 15.1)
Section 15.1 of the TSA contains a mutual waiver of consequential, incidental, and indirect damages. The provision states:
"Except as otherwise expressly provided herein, neither party shall be liable to the other for any consequential, incidental, indirect, special, or punitive damages arising out of or relating to this Agreement or the performance or breach thereof, including but not limited to lost revenue, loss of business or business opportunities, increased costs of operations, or diminution in value, regardless of whether such damages are based on contract, tort, strict liability, or any other theory, and regardless of whether such party has been advised of the possibility of such damages." (TSA § 15.1.)
As discussed in Section IV.C below, several categories of damages claimed in the Complaint fall squarely within the scope of this waiver.
F. VTS's Performance Failures and Stonefield's Termination
The events leading to Stonefield's termination of the TSA are largely set forth in the Complaint, and the relevant facts are not in material dispute for purposes of this motion.
Q4 2021 Performance Failures. During the fourth quarter of 2021 (October through December), VTS failed every one of the five SLOs established in Article 6 of the TSA. The magnitude of these failures was not marginal but catastrophic:
(Compl. ¶¶ 36–40; Eklund Decl., Ex. B.)
The cargo claims failures were particularly alarming. During November and December 2021 alone, VTS generated sixteen documented cargo claims totaling $387,400 — claims arising from damaged, lost, or stolen freight entrusted to VTS for transportation. (Compl. ¶ 40.) This claims volume represented a ratio of 1.07% of gross revenue, more than double the contractual maximum of 0.5%. (Id.)
The equipment availability shortfall was equally severe. VTS had committed to maintaining a minimum fleet capacity of 400 tractors for Stonefield freight, yet during Q4 2021, only approximately 248 tractors were available — a 38% deficit from the committed level. (Compl. ¶ 39.) VTS also failed to provide substitute equipment or surge capacity as required under Section 7.4 of the TSA. (Eklund Decl., Ex. B at 3.)
January 18, 2022 — Cure Notice. On January 18, 2022, Raymond Hess, Director of Contract Compliance at Stonefield, sent a detailed written Cure Notice to Sandra Milescu, Chief Operating Officer of Vantor and VTS, in strict compliance with Sections 13.1(a) and 13.2 of the TSA. (Compl. ¶ 42; Eklund Decl., Ex. B.) The Cure Notice specified each breach with the particularity required by the TSA, identifying each SLO metric, the contractual threshold, the actual performance figure achieved by VTS, and VTS's chronic failure to provide substitute equipment or surge capacity under Section 7.4. (Eklund Decl., Ex. B.) The Cure Notice provided VTS thirty calendar days to cure the identified breaches, as required by Section 13.1(a). (Id.)
February 14, 2022 — Vantor's Response. On February 14, 2022 — three days before expiration of the cure period — Derek Pruitt, Vice President of Business Development at Vantor, responded to the Cure Notice on behalf of VTS. (Compl. ¶ 43.) Mr. Pruitt's letter acknowledged what it characterized as "operational challenges" but attributed them to three external factors: (i) a nationwide driver shortage affecting the entire trucking industry; (ii) Stonefield's alleged failure to tender ACV minimums; and (iii) Stonefield's alleged diversion of volume to lower-cost spot market carriers. (Id.) VTS asserted that it had "substantially cured" the identified deficiencies, although it disputed Stonefield's cargo claims data. (Id.) Critically, VTS did not provide any data, evidence, or documentation demonstrating that it had in fact achieved compliance with any of the five SLOs. Nor did VTS propose a specific remediation plan with measurable milestones.
Expiration of Cure Period — February 17, 2022. The thirty-day cure period expired on February 17, 2022. VTS did not, in fact, cure the identified deficiencies. The Complaint itself does not allege that VTS achieved compliance with any of the five SLOs by the expiration of the cure period. (See Compl. ¶¶ 43–46.)
March 4, 2022 — Termination. On March 4, 2022, Tobias Wren, General Counsel of Stonefield, issued a formal termination letter to Vantor Holdings Corp. and VTS, terminating the TSA effective immediately for Cause under Section 13.1(a). (Compl. ¶ 46.) The termination letter stated that VTS had "failed to cure the material breaches" identified in the Cure Notice and that Stonefield was exercising its contractual right to terminate the TSA for Cause. (Id.) At the time of termination, the remaining term under the TSA was approximately two years and twenty-seven days (March 4, 2022 through March 31, 2024). (Compl. ¶ 47.)
G. Procedural History
The procedural history of this matter is straightforward. On April 8, 2022, Vantor, acting through its counsel Caldwell Royce & Shapiro LLP, sent a demand letter to Stonefield claiming wrongful termination of the TSA and demanding $95.4 million in damages. (Compl. ¶ 49.) On April 29, 2022, Tobias Wren, on behalf of Stonefield, rejected the demand and invoked the Section 16 mandatory thirty-day executive negotiation period that the TSA requires as a precondition to litigation. (Compl. ¶ 50.)
Pursuant to Section 16, the parties engaged in two executive negotiation sessions. The first session took place on May 16, 2022, in person, between Marcus Denton, Chief Executive Officer of Stonefield, and Nikolai Vantorovich, Chief Executive Officer of Vantor Holdings Corp. (Compl. ¶ 51.) The session did not result in a resolution. (Id.) A second session was conducted telephonically on June 3, 2022, between the same principals. (Compl. ¶ 52.) Again, no resolution was reached. (Id.)
On August 12, 2022, having exhausted the contractual negotiation process, Vantor filed the original Complaint in this Court, commencing this action under Case No. 22-cv-07841. (Dkt. No. 1.) Calderwood & Harkness LLP was engaged as lead defense counsel for Stonefield on September 1, 2022, and filed a Notice of Appearance on September 8, 2022. (Dkt. No. 8.)
III. LEGAL STANDARD
A. Rule 12(b)(6) Standard
Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed if it "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). In evaluating a motion to dismiss, the Court must accept all well-pleaded factual allegations in the complaint as true and draw all reasonable inferences in the plaintiff's favor. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007).
However, the Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). A complaint must contain "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).
"Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. The Court must engage in a "two-pronged approach": first, it should identify and disregard allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth"; and second, it should consider the remaining well-pleaded factual allegations to determine whether they "plausibly give rise to an entitlement to relief." Id. at 679.
On a motion to dismiss under Rule 12(b)(6), the Court may consider: (1) the factual allegations of the complaint, which are accepted as true; (2) documents attached to the complaint as exhibits; (3) documents incorporated by reference in the complaint; and (4) documents that are "integral" to the complaint — i.e., documents upon which the complaint "solely relies" and that are "integral to the complaint." Chambers v. Pinnacle Corporation, 282 F.3d 147, 153 (2d Cir. 2002); DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010). In contract actions, the operative agreement is routinely considered on a motion to dismiss where, as here, the complaint expressly references and relies upon the agreement. See Nicosia v. Hollowell & Co., 834 F.3d 220, 230–31 (2d Cir. 2016).
The TSA, attached as Exhibit A to the Declaration of Samuel Eklund filed contemporaneously herewith, is integral to and repeatedly referenced in the Complaint. The Complaint quotes or cites specific provisions of the TSA in at least thirty-seven paragraphs. Vantor's sole cause of action — breach of contract — is predicated entirely on the TSA. The TSA is therefore properly before the Court on this motion.
B. New York Contract Law Governs
The TSA contains a choice-of-law provision designating New York law as the governing law. (TSA § 17.3.) When a federal court sits in diversity or otherwise adjudicates state-law claims, it applies the substantive law of the forum state, including its choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941); Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Under New York choice-of-law principles, the parties' contractual choice of New York law is generally respected in commercial disputes between sophisticated parties, provided the chosen law bears a reasonable relationship to the transaction. See Ministers & Missionaries Benefit Bd. v. Snow, 26 N.Y.3d 466, 474 (2015); IRB-Brasil Resseguros, S.A. v. Inepar Invs., S.A., 20 N.Y.3d 310, 315 (2012).
Here, no party disputes that New York law governs the TSA. Vantor is a New York corporation; VTS is a New York limited liability company; the parties selected New York as the governing law and this Court as the forum. Accordingly, New York law governs the enforceability of the liquidated damages clause and the sufficiency of the lost profits claim at issue on this motion.
IV. ARGUMENT
A. THE LIQUIDATED DAMAGES CLAUSE IN SECTION 14.2 IS UNENFORCEABLE AS A PENALTY UNDER NEW YORK LAW
The cornerstone of Vantor's Complaint is a claim for $67.23 million in liquidated damages under Section 14.2 of the TSA. This claim must be dismissed because Section 14.2 is an unenforceable penalty as a matter of New York law. The clause produces a damages figure that bears no reasonable relationship to any plausible estimate of VTS's actual loss, and the actual damages at issue were not difficult to determine at the time the contract was formed. Under the settled two-part test applied by New York courts, the clause fails on both prongs and is void as a matter of law.
1. The Governing Legal Standard for Liquidated Damages Under New York Law. Under New York law, a liquidated damages provision is enforceable if, and only if, two conditions are satisfied: (i) the amount stipulated bears a reasonable proportion to the probable loss at the time the contract was made, and (ii) actual damages would be difficult to determine at the time of contracting. See Truck Rent-A-Ctr., Inc. v. Purdy Corp., 41 N.Y.2d 354, 357 (1977); JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005). Both conditions must be met; failure to satisfy either renders the clause unenforceable. JMD Holding, 4 N.Y.3d at 380.
The party seeking to enforce a liquidated damages provision bears the initial burden of demonstrating that the provision satisfies both prongs of the test. Id. at 379–80. However, where the unenforceability of a liquidated damages clause is apparent from the face of the contract, the court may determine the issue as a matter of law. See Leasing Serv. Corp. v. Justice, 673 F.2d 70, 73 (2d Cir. 1982) (applying New York law); 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Ass'n, Inc., 24 N.Y.3d 528, 536 (2014).
The rationale underlying New York's longstanding hostility to penalty clauses is straightforward: "A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss and the amount of actual loss is incapable or difficult of precise estimation." Truck Rent-A-Ctr., 41 N.Y.2d at 357. But "[i]f the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced." Id. The New York Court of Appeals has "consistently refused to enforce provisions which in effect penalize a party for failure to perform a contract where the damage amount bears no reasonable relation to the actual damages sustained." JMD Holding, 4 N.Y.3d at 380.
Critically, the parties' own characterization of a liquidated damages clause is not dispositive. A contractual recital that a sum is "not a penalty" does not foreclose judicial inquiry into the substance of the provision. See Truck Rent-A-Ctr., 41 N.Y.2d at 358 ("The label the parties place on a provision is not controlling."); JMD Holding, 4 N.Y.3d at 380 ("[T]he recital in the contract that the damages set forth therein are liquidated, and not a penalty, does not change the character of the clause . . . ."). Courts independently evaluate whether the clause functions as a legitimate pre-estimate of loss or as a punishment for breach.
New York courts have repeatedly struck down liquidated damages clauses that function as punitive rather than compensatory mechanisms, particularly where the stipulated amount substantially exceeds the actual or anticipated loss. See, e.g., 172 Van Duzer Realty, 24 N.Y.3d at 536–37 (invalidating liquidated damages clause as a penalty); Leasing Serv. Corp., 673 F.2d at 73–74 (same, applying New York law); Bates Advert. USA, Inc. v. 498 Seventh, LLC, 7 N.Y.3d 115, 120 (2006) (discussing the test for penalty clauses and emphasizing proportionality).
2. The Liquidated Damages Formula Bears No Reasonable Relationship to Vantor's Probable Loss. Application of the first prong of the enforceability test — whether the stipulated amount bears a reasonable proportion to the probable loss — demonstrates that Section 14.2 is grossly disproportionate and therefore constitutes a penalty.
The Formula. Section 14.2 calculates liquidated damages as 75% of the ACV ($43.2 million) multiplied by the number of full and partial contract years remaining. As pled in the Complaint, this yields:
75% × $43.2 million × 2.07 years ≈ $67.23 million.
(Compl. ¶¶ 58–61.)
The formula is mechanically tied to gross revenue, not to actual loss. The fundamental deficiency in Section 14.2 is that it calculates "damages" as a fixed percentage of gross contract revenue — i.e., the total transportation charges that Stonefield would have paid VTS — without any adjustment for the costs VTS would have incurred in performing the services. The formula ignores the elementary distinction between revenue and profit. A carrier's actual loss from the termination of a transportation contract is not the revenue it would have earned; it is the profit it would have earned — i.e., revenue minus the substantial costs of performance.
If VTS had continued to perform under the TSA for the remaining two years, it would have been required to maintain a fleet of at least 400 tractors and 1,200 trailers, employ hundreds of drivers, purchase fuel, maintain and repair equipment, carry insurance, and absorb the full panoply of operating costs associated with a large-scale truckload carrier. These costs are real, substantial, and well-documented in VTS's ordinary course of business. The liquidated damages formula in Section 14.2 takes no account of any of them.
The formula fails to account for VTS's operating margin. Vantor's own Complaint acknowledges that VTS operated at an approximately 12% operating margin on Stonefield freight. (Compl. ¶ 63.) Based on this margin — which Vantor itself has pled — VTS's actual expected profit from the remaining two years of the contract would have been approximately:
$86.4 million (2 years × $43.2 million ACV) × 12% = approximately $10.4 million.
Yet the liquidated damages clause would award VTS $67.23 million — approximately 6.5 times its anticipated profit. The disproportion is staggering. Under no recognized legal or economic principle does a party's actual loss from termination of a services contract equal 75% of its gross revenue without any deduction for the costs it would have incurred in performance. The formula effectively requires Stonefield to pay VTS nearly as much as VTS would have been paid for actually performing the services, while relieving VTS of all obligation to perform those services and all costs associated with performance.
The formula fails to account for avoided costs. Had the TSA remained in effect, VTS would have incurred substantial costs in performing its obligations. These include, at a minimum:
• Driver wages and benefits for the hundreds of drivers required to operate 400+ tractors;
• Fuel costs, which represent the single largest line item in any truckload carrier's cost structure;
• Equipment depreciation, lease payments, and maintenance for 400 tractors and 1,200 trailers;
• Insurance premiums, including commercial automobile liability, cargo, and general liability;
• Overhead costs, including dispatch, fleet management, safety and compliance, and administrative support;
• Owner-operator payments for any capacity sourced through VTS's network of independent contractors.
Following termination, VTS incurs none of these costs with respect to Stonefield freight. The liquidated damages formula does not account for these avoided costs, and as a result, it compensates VTS for "losses" it would never have sustained.
The formula fails to account for mitigation. Under well-established New York law, a non-breaching party has a duty to mitigate its damages. See Holy Properties Ltd., L.P. v. Kenneth Cole Prods., Inc., 87 N.Y.2d 130, 133 (1995). VTS owns and operates a fleet of approximately 650 tractors and 2,100 trailers, a substantial portion of which were dedicated to Stonefield freight. Upon termination of the TSA, VTS's fleet became available for deployment to other customers. There is no basis to conclude — and the Complaint does not allege — that VTS's fleet sat idle after termination. To the contrary, the truckload transportation market in 2022 was characterized by robust demand and elevated freight rates, creating ample opportunities for VTS to redeploy its assets.
The liquidated damages formula in Section 14.2 takes no account of mitigation. It awards VTS a fixed sum — 75% of gross revenue for the remaining term — regardless of whether VTS deploys its fleet to other customers and generates alternative revenue. This feature alone confirms that the clause operates as a penalty, not as a genuine pre-estimate of loss.
The 75% multiplier is arbitrary. Section 14.2 applies a 75% multiplier to the ACV. This multiplier is not tethered to any demonstrated cost structure, margin analysis, or anticipated harm. At the time the TSA was executed in March 2019, both parties had access to — and routinely tracked — VTS's operating costs, margins, and industry benchmarks. A genuine effort to estimate VTS's probable loss from early termination would have considered VTS's expected profit margin (approximately 12%) and the likelihood and extent of mitigation. Instead, the parties adopted an arbitrary multiplier of 75% — more than six times VTS's operating margin — that bears no rational relationship to any plausible estimate of actual harm.
In sum, the liquidated damages formula in Section 14.2 fails the first prong of the enforceability test because the stipulated amount ($67.23 million) is grossly disproportionate to VTS's probable loss (approximately $10.4 million in expected profits, likely reduced further by mitigation).
3. Vantor's Actual Damages Were Not Difficult to Determine at the Time of Contracting. The second prong of the enforceability test requires that actual damages be "incapable or difficult of precise estimation" at the time the contract was made. Truck Rent-A-Ctr., 41 N.Y.2d at 357. This condition is not met here.
Transportation and logistics is a mature, data-driven industry with well-established methods for calculating lost profits from a terminated transportation services contract. The fundamental measure of a carrier's loss from early termination is straightforward: the difference between the contract price (revenue) and the cost of performance, adjusted for mitigation — i.e., the carrier's expected margin on the contract, net of any revenue earned from alternative deployment of its assets.
At the time the TSA was executed in March 2019, VTS's costs of performance were known, quantifiable, and tracked by VTS in its ordinary course of business. VTS was an established carrier with a multi-year operating history. It operated a fleet of approximately 650 tractors and 2,100 trailers. Its per-mile and per-load operating costs — driver wages, fuel costs, equipment depreciation, insurance, maintenance, and overhead — were all readily ascertainable from VTS's internal financial records. Indeed, Vantor itself has alleged in its Complaint that VTS operated at an approximately 12% operating margin on Stonefield freight (Compl. ¶ 63), confirming that VTS's margins were known and quantifiable.
The parties to the TSA were not unsophisticated consumers or small businesses lacking access to financial data. Stonefield is a $1.42 billion revenue company; Vantor and VTS had combined revenue of approximately $385 million. Both parties were represented by experienced counsel during the negotiation and execution of the TSA. Both had access to detailed financial and operational data, including historical margin analyses, cost-per-mile calculations, and industry benchmarking data.
The ACV and rate structure set forth in the TSA provided a clear and definite basis for calculating anticipated revenue. Combined with VTS's known cost structure, these contractual terms permitted a straightforward and reliable calculation of anticipated profit. There was nothing inherently uncertain, speculative, or difficult about estimating the damages that VTS would suffer from early termination. The calculation could have been — and can now be — performed with no more difficulty than a simple subtraction of known costs from known revenues, adjusted for mitigation.
The parties' sophistication and access to data distinguish this case from the paradigmatic situations in which courts have found actual damages difficult to estimate — e.g., cases involving novel products with no established market, construction projects subject to unpredictable site conditions, or agreements where performance depends on inherently uncertain future events. Here, the parties were dealing in a commodity service — truckload transportation — with well-established pricing, cost structures, and market dynamics.
Because VTS's actual damages from early termination were not "incapable or difficult of precise estimation" at the time the TSA was executed, the second prong of the enforceability test is not satisfied. See JMD Holding, 4 N.Y.3d at 380 (liquidated damages clause fails where actual damages "were not difficult to determine"); Leasing Serv. Corp., 673 F.2d at 73 (same).
The failure to satisfy either prong is independently sufficient to invalidate the clause. Here, Section 14.2 fails both.
4. The Clause Operates as a Penalty. The combined effect of the foregoing analysis compels a single conclusion: Section 14.2 of the TSA operates as a penalty and is void under New York law.
A contractual provision that requires payment of a sum grossly disproportionate to anticipated harm "calls for a penalty and will not be enforced." Truck Rent-A-Ctr., 41 N.Y.2d at 357. The disproportionality here is extreme and evident from multiple vantage points:
First, the $67.23 million liquidated damages figure exceeds VTS's own expected profit from the remaining contract term by a factor of approximately 6.5. VTS's anticipated profit — based on Vantor's own allegation of a 12% operating margin — was approximately $10.4 million. A clause that awards a party more than six times its expected profit does not represent a "reasonable estimate" of loss; it represents a penalty designed to deter breach.
Second, the liquidated damages figure ($67.23 million) exceeds Vantor's own separately pled estimate of its actual lost profits ($18.7 million) by nearly $50 million. In other words, Vantor's own Complaint implicitly concedes that the liquidated damages clause produces a result that is approximately 3.6 times greater than what Vantor itself believes its actual damages to be. This internal inconsistency in the Complaint powerfully demonstrates that the liquidated damages clause does not bear a reasonable proportion to actual loss.
Third, the liquidated damages represent approximately 78% of VTS's total expected gross revenue from the remaining contract term ($86.4 million over two years at $43.2 million per year). Under the clause, VTS would receive 78% of its total contract revenue without performing any services, without incurring any costs of performance, and without any duty to account for revenue earned from alternative uses of its fleet. This is the hallmark of a penalty: it enriches the non-breaching party far beyond compensation for its actual loss.
Fourth, the parties' self-serving recital in Section 14.2 that the liquidated damages "represent a reasonable estimate of the damages that [VTS] would suffer" and "are not a penalty" does not alter this analysis. As the New York Court of Appeals has repeatedly held, "[t]he label the parties place on a provision is not controlling" and "the recital in the contract that the damages set forth therein are liquidated, and not a penalty, does not change the character of the clause." Truck Rent-A-Ctr., 41 N.Y.2d at 358; JMD Holding, 4 N.Y.3d at 380. Courts look beyond boilerplate contractual language to the economic substance of the provision. Here, the economic substance is plain: the clause imposes a penalty.
For all of these reasons, the liquidated damages clause in Section 14.2 of the TSA is an unenforceable penalty as a matter of New York law. Vantor's claim for $67.23 million in liquidated damages fails to state a claim upon which relief can be granted and should be dismissed.
5. Dismissal of the Liquidated Damages Claim Is Appropriate at the Pleading Stage. Stonefield anticipates that Vantor may argue that the enforceability of a liquidated damages clause is a fact-intensive inquiry that cannot be resolved at the pleading stage. That argument fails here.
Where, as here, the enforceability of a liquidated damages clause can be determined from the four corners of the contract — which is properly before the Court as an integral document — dismissal under Rule 12(b)(6) is appropriate without the need for discovery. See Bates Advert., 7 N.Y.3d at 120 (resolving enforceability of contractual provision on the contract's terms); Leasing Serv. Corp., 673 F.2d at 73–74 (affirming dismissal of claim based on unenforceable liquidated damages clause under New York law where unenforceability was apparent from contract terms). The Second Circuit has recognized that "where the terms of the contract are clear and unambiguous, the intent of the parties must be found therein," and no extrinsic evidence is needed. Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002).
The TSA is unambiguous. The formula set forth in Section 14.2 — 75% of ACV multiplied by remaining years — is explicitly defined. The ACV is a fixed, stated figure ($43.2 million). The remaining-term multiplier is a simple arithmetic function of the termination date and the contract expiration date. The Court need not look beyond the four corners of the contract to determine that the formula produces a result that is grossly disproportionate to any reasonable estimate of actual loss and that the actual damages at issue were readily calculable at the time of contracting.
Moreover, the very allegations of Vantor's own Complaint — particularly the allegation of a 12% operating margin (Compl. ¶ 63) and the separate lost profits claim of $18.7 million (Compl. ¶ 64) — supply the factual predicate for the Court's analysis. Taking Vantor's own allegations as true, as the Court must on a Rule 12(b)(6) motion, the liquidated damages clause awards VTS 6.5 times its expected profit. No discovery is needed to determine that such a ratio is grossly disproportionate.
Courts in this District and in the Second Circuit have dismissed liquidated damages claims on a motion to dismiss where, as here, the contract terms demonstrated unenforceability as a matter of law. See, e.g., Leasing Serv. Corp., 673 F.2d at 73–74; Wechsler v. Hunt Health Sys., Ltd., 186 F. Supp. 2d 402, 413 (S.D.N.Y. 2002) (dismissing claim predicated on penalty clause on Rule 12(b)(6) motion). Dismissal is appropriate here.
B. VANTOR'S LOST PROFITS CLAIM FAILS TO STATE A CLAIM BECAUSE DAMAGES ARE NOT PLED WITH REQUISITE CERTAINTY
Vantor's second damages theory — a claim for $18.7 million in lost profits — should also be dismissed. The Complaint fails to plead lost profits with the reasonable certainty required under New York law, and the lost profits claim is duplicative of the liquidated damages claim, rendering it impermissible under any scenario.
1. New York Law Requires Lost Profits to Be Pled and Proven with Reasonable Certainty. Under well-settled New York law, lost profits may be recovered for breach of contract only if they are: (i) established with a reasonable degree of certainty; (ii) shown to flow naturally from the breach; and (iii) not unduly speculative. See Kenford Co. v. Cnty. of Erie, 67 N.Y.2d 257, 261 (1986); Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 403 (1993). "Lost profits must be capable of measurement based upon known reliable factors without undue speculation." Kenford, 67 N.Y.2d at 261.
The requirement of reasonable certainty is not merely an evidentiary hurdle to be surmounted at trial; it operates as a constraint at the pleading stage as well. A plaintiff must plead facts sufficient to establish that its lost profits are not speculative. See Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 421 (1996). Conclusory allegations of lost profits, unaccompanied by facts demonstrating a non-speculative basis for the claimed amount, are insufficient to survive a motion to dismiss under the Twombly/Iqbal standard. See Iqbal, 556 U.S. at 678.
The "reasonable certainty" standard has particular force in the context of breach of contract claims, where the purpose of damages is to place the injured party in the position it would have occupied had the contract been performed. See Brushton-Moira Cent. Sch. Dist. v. Fred H. Thomas Assocs., P.C., 91 N.Y.2d 256, 261 (1998). When the claimed profits are speculative or conjectural, the damages award would constitute a windfall rather than compensation, and recovery must be denied.
2. Vantor's Complaint Fails to Plead Lost Profits with Any Particularity. Vantor alleges $18.7 million in lost profits. (Compl. ¶ 64.) However, the Complaint provides no factual basis for this figure — it appears as a bare number, untethered to any supporting allegations. The Complaint does not allege:
(a) VTS's operating margin on Stonefield freight with any specificity or supporting factual basis beyond a conclusory reference to "approximately 12%" (Compl. ¶ 63), without identifying the source, methodology, or time period underlying that figure;
(b) VTS's cost structure — including driver wages, fuel costs, equipment depreciation, insurance premiums, maintenance expenses, overhead allocations, or any other cost component — that would support a margin calculation;
(c) What alternative revenue VTS could or did generate after termination by redeploying its fleet to other customers, which is directly relevant to mitigation and the calculation of net lost profits;
(d) The factual basis for, or derivation of, the alleged 12% operating margin, or whether that figure represents a historical average, a forward-looking projection, a gross margin, or a net margin;
(e) Any distinction between gross and net profits, or any explanation of why the $18.7 million figure represents net lost profits rather than gross lost revenue; or
(f) Any factual allegations regarding VTS's track record, financial performance, or market conditions that would support the plausibility of the claimed amount.
The $18.7 million figure is a bare assertion. It appears untethered to the factual allegations of the Complaint and is therefore precisely the type of "conclusory statement" that the Supreme Court held insufficient under Iqbal. See 556 U.S. at 678. Without factual content to support the plausibility of this figure, the Court cannot "draw the reasonable inference" that $18.7 million represents a plausible and non-speculative measure of VTS's actual lost profits. The claim should be dismissed.
3. The Lost Profits Claim Is Duplicative of the Liquidated Damages Claim. Even setting aside the pleading deficiencies, Vantor's lost profits claim fails on an independent ground: it is impermissibly duplicative of the liquidated damages claim.
The liquidated damages clause in Section 14.2 was intended by the parties to be the exclusive remedy for termination other than for Cause. See TSA § 14.2 (providing that upon termination other than for Cause, Stonefield "shall pay to Carrier-Provider, as liquidated damages," the stipulated amount). The very purpose of a liquidated damages clause is to substitute a pre-agreed amount for the uncertainty of proving actual damages. See JMD Holding, 4 N.Y.3d at 379. By definition, a valid liquidated damages clause precludes separate recovery of actual damages for the same breach.
Under New York law, a valid and enforceable liquidated damages clause precludes recovery of actual damages (including lost profits) for the breach to which the clause applies. See Truck Rent-A-Ctr., 41 N.Y.2d at 356; Fifty States Mgmt. Corp. v. Pioneer Auto Parks, Inc., 46 N.Y.2d 573, 577 (1979). The converse is also true: if the liquidated damages clause is unenforceable — as Stonefield contends — then Vantor may seek actual damages, but only actual damages. The two remedies are mutually exclusive, not cumulative.
Vantor's Complaint seeks both. It claims $67.23 million in liquidated damages and $18.7 million in lost profits, for a combined total of $85.93 million based on the same underlying harm: the value VTS would have derived from the remaining contract term. Both figures purport to compensate Vantor for the same injury — the economic benefit VTS lost when the TSA was terminated. Allowing recovery of both would constitute an impermissible double recovery. See Biotronik A.G. v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799, 806 (2014) (noting the prohibition against double recovery under New York law).
The duplicative nature of these claims requires dismissal of the lost profits claim regardless of the Court's disposition of the liquidated damages claim:
• If the liquidated damages clause is enforceable (a proposition Stonefield vigorously contests), then Vantor's exclusive remedy for early termination is the liquidated damages amount, and the separate lost profits claim must be dismissed as precluded.
• If the liquidated damages clause is unenforceable (as Stonefield contends), then Vantor may pursue actual damages, but cannot also pursue liquidated damages. In either event, the two claims cannot coexist.
The total claimed damages of $95.4 million includes both $67.23 million in liquidated damages and $18.7 million in lost profits, which compensate for the same injury: the value VTS would have derived from the remaining contract term. Under any legal framework, one or the other must be dismissed. On the pleading as currently framed, the lost profits claim is duplicative and should be stricken.
4. At a Minimum, the Lost Profits Claim Should Be Dismissed as Insufficiently Pled. Even if the Court were to conclude — contrary to Stonefield's arguments — that the liquidated damages claim could survive this motion (which it should not), the independent lost profits claim fails to meet the Twombly/Iqbal pleading standard. As demonstrated above, the lost profits claim rests entirely on conclusory assertions — a bare allegation of "$18.7 million" — without factual content sufficient to allow the Court to draw a reasonable inference that this figure represents a plausible, non-speculative measure of VTS's actual lost profits.
The Complaint does not allege a single fact from which the Court could evaluate whether $18.7 million is a reasonable estimate of lost profits, an aspirational number, or a figure pulled from thin air. There is no cost analysis, no margin calculation, no mitigation assessment, and no factual predicate. This is precisely the type of "threadbare recital" that Iqbal holds insufficient. 556 U.S. at 678.
The lost profits claim should be dismissed.
C. VANTOR'S CONSEQUENTIAL DAMAGES CLAIMS ARE BARRED BY THE TSA'S MUTUAL WAIVER PROVISION
Although Stonefield's primary arguments target the liquidated damages and lost profits claims that form the bulk of Vantor's damages demand, Stonefield also moves to dismiss several additional categories of damages asserted in the Complaint on the independent ground that they are consequential damages expressly barred by the mutual waiver provision in Section 15.1 of the TSA.
In addition to its $67.23 million liquidated damages claim and $18.7 million lost profits claim, Vantor's Complaint alleges three further categories of damages:
(i) Stranded assets and costs: $5.2 million, representing alleged depreciation on dedicated equipment, lease termination penalties, and costs associated with idle or underutilized fleet assets following termination (Compl. ¶ 66);
(ii) Workforce reduction costs: $2.87 million, representing alleged severance payments and associated costs for approximately 180 drivers and support staff terminated as a result of the TSA termination (Compl. ¶ 67); and
(iii) Mitigation costs: $1.4 million, representing alleged costs incurred in seeking replacement freight, including sales and marketing expenses, broker commissions, and administrative costs (Compl. ¶ 68).
These three categories total approximately $9.47 million. Each is a paradigmatic example of consequential damages — i.e., damages that do not flow directly from the breach itself but arise from VTS's particular circumstances and operational decisions.
Section 15.1 of the TSA contains a broad, mutual waiver of such damages. The clause provides that "neither party shall be liable to the other for any consequential, incidental, indirect, special, or punitive damages arising out of or relating to this Agreement or the performance or breach thereof, including but not limited to lost revenue, loss of business or business opportunities, increased costs of operations, or diminution in value." (TSA § 15.1.) This waiver was mutually agreed upon by sophisticated commercial parties, each represented by counsel, and reflects a considered allocation of risk.
The categories of damages at issue here fall squarely within the scope of this waiver:
• Stranded asset costs ($5.2 million) represent depreciation and lease termination costs on equipment that VTS chose to dedicate to Stonefield freight. These are consequential damages arising from VTS's particular investment decisions and fleet management practices, not direct damages flowing from any breach.
• Workforce reduction costs ($2.87 million) represent severance and related costs for employees VTS terminated following the end of the TSA. These costs arise from VTS's employment practices and staffing decisions, not from the breach itself. They are classic consequential or incidental damages.
• Mitigation costs ($1.4 million) represent expenses VTS incurred in seeking replacement freight. These costs are, by definition, consequential — they arise as a consequence of the termination, not as direct damages from the breach.
New York courts routinely enforce mutual waivers of consequential damages in commercial contracts between sophisticated parties. See Metropolitan Life Ins. Co. v. Noble Lowndes Int'l, Inc., 84 N.Y.2d 430, 436 (1994); Biotronik, 22 N.Y.3d at 805. The waiver in Section 15.1 is clear, unambiguous, and broadly drafted. Vantor's subsidiary, VTS, agreed to this waiver as part of the TSA. Vantor cannot now seek to recover the very categories of damages that VTS expressly agreed to waive.
These claims should be dismissed as barred by the express contractual waiver in TSA Section 15.1.
V. CONCLUSION
For the foregoing reasons, Defendant Stonefield Logistics Group Inc. respectfully requests that the Court grant its motion to dismiss and dismiss the Complaint in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6). In the alternative, Stonefield respectfully requests that the Court:
(i) Dismiss Vantor's claim for $67.23 million in liquidated damages under Section 14.2 of the TSA on the ground that the liquidated damages clause is an unenforceable penalty under New York law;
(ii) Dismiss Vantor's $18.7 million lost profits claim for failure to plead damages with the reasonable certainty required under New York law, and as duplicative of the liquidated damages claim; and
(iii) Dismiss Vantor's consequential damages claims — stranded assets and costs ($5.2 million), workforce reduction costs ($2.87 million), and mitigation costs ($1.4 million) — as barred by the mutual waiver provision in Section 15.1 of the TSA.
Stonefield further respectfully requests such other and further relief as this Court deems just and proper.
Dated: October 14, 2022 New York, New York
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Samuel Eklund, Esq. Responsible Partner
Patrick Gallagher, Esq. Lead Associate
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Attorneys for Defendant Stonefield Logistics Group Inc.
CERTIFICATE OF SERVICE
I, Samuel Eklund, hereby certify that on October 14, 2022, a true and correct copy of the foregoing Memorandum of Law in Support of Defendant Stonefield Logistics Group Inc.'s Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6) was served via the Court's Electronic Case Filing ("ECF") system upon all counsel of record, including:
Harrison Caldwell, Esq. Meredith Shapiro, Esq. Jason Whitford, Esq. Caldwell Royce & Shapiro LLP 1 Liberty Plaza, 22nd Floor New York, New York 10006 Telephone: (212) 701-3000 Facsimile: (212) 701-3100 Counsel for Plaintiff Vantor Holdings Corp.
________________________________________
Samuel Eklund
EXHIBITS (Filed Separately with the Declaration of Samuel Eklund)
Exhibit A: Transportation Services Agreement dated March 15, 2019, by and between Stonefield Logistics Group Inc. and Vantor Transport Services LLC (Contract Reference No. SLG-VTS-2019-0315).
Exhibit B: Cure Notice dated January 18, 2022, from Raymond Hess, Director of Contract Compliance, Stonefield Logistics Group Inc., to Sandra Milescu, Chief Operating Officer, Vantor Holdings Corp. / Vantor Transport Services LLC.
VANTOR HOLDINGS CORP.,
Plaintiff,
Case No. 22-cv-07841 (MTC)
v.
Hon. Margaret T. Calloway, U.S.D.J.
STONEFIELD LOGISTICS GROUP INC.,
Defendant.
Page
PRELIMINARY STATEMENT | 1
STATEMENT OF FACTS | 4
A. The Parties | 4
B. The Transportation Services Agreement | 5
C. The Liquidated Damages Clause (Section 14.2) | 7
D. The Termination for Cause Provision (Section 13.1) | 8
E. The Consequential Damages Waiver (Section 15.1) | 9
F. VTS's Performance Failures and Stonefield's Termination | 9
G. Procedural History | 12
LEGAL STANDARD | 13
A. Rule 12(b)(6) Standard | 13
B. New York Contract Law Governs | 14
ARGUMENT | 15
A. The Liqui

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

TABLE OF CONTENTS

I. PRELIMINARY STATEMENT

II. STATEMENT OF FACTS

III. LEGAL STANDARD

IV. ARGUMENT

V. CONCLUSION

CALDERWOOD & HARKNESS LLP

CERTIFICATE OF SERVICE

VANTOR HOLDINGS CORP.,

STONEFIELD LOGISTICS GROUP INC.,

Record

Parties

Dates

Amounts