memo-strategy-vantorovich-pro-se.docx

1012-00005 · Stonefield Logistics Group · Pleadings & Court Filings

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CALDERWOOD & HARKNESS LLP 200 Park Avenue, 38th Floor New York, New York 10166

MEMORANDUM

TO: Samuel Eklund, Responsible Partner; Linda Osei, Billing Partner

FROM: Patrick Gallagher, Lead Associate

DATE: February 14, 2024

RE: Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.) — Strategy Following Vantorovich Pro Se Appearance on February 12, 2024

MATTER NO.: 1012-00005

CLIENT: Stonefield Logistics Group Inc.

I. Executive Summary

On February 12, 2024, Nikolai Vantorovich, the Chief Executive Officer and Founder of Vantor Holdings Corp. ("Vantor" or "Plaintiff"), appeared pro se before the Honorable Margaret T. Calloway, United States District Judge, Southern District of New York, in response to the Court's January 22, 2024 Order to Show Cause why Vantor's claims should not be dismissed for failure to prosecute under Federal Rule of Civil Procedure 41(b). The Order to Show Cause followed Vantor's failure to retain substitute counsel by the Court-imposed December 17, 2023 deadline, which itself resulted from the October 2023 withdrawal of Vantor's prior counsel, Caldwell Royce & Shapiro LLP.

At the February 12 hearing, Vantorovich requested a ninety-day extension to retain new counsel. Judge Calloway, while acknowledging the difficulty of obtaining substitute counsel in a case of this complexity, granted a reduced extension of sixty days, setting a new deadline of April 12, 2024 for counsel to enter an appearance on behalf of Vantor. No other substantive orders were entered at the hearing, and all deadlines under the operative Case Management Order remain stayed.

This memorandum provides an analysis of the legal implications of Vantorovich's pro se appearance, with particular focus on the well-established prohibition against corporate pro se representation in federal court. The memorandum further assesses Vantor's realistic prospects for retaining substitute counsel within the sixty-day extension period and sets forth recommended strategic steps for our client, Stonefield Logistics Group Inc. ("Stonefield" or "Defendant"), going forward.

Our principal recommendation is as follows: Stonefield should monitor the April 12, 2024 deadline closely and, if no counsel enters an appearance on Vantor's behalf by that date, promptly file a renewed motion to dismiss for failure to prosecute under Rule 41(b). The draft motion previously prepared on January 15, 2024, should be updated to incorporate the February 12 hearing and the passage of the April 12 deadline, and held in reserve for immediate filing. In the interim, the matter should be placed on reduced-activity status with quarterly docket monitoring at reduced cost, and all summary judgment work product should be preserved in the event the case resumes.

II. Background and Procedural History Leading to Pro Se Appearance

This section summarizes the procedural developments that led to Vantorovich's pro se appearance on February 12, 2024. A fuller recitation of the complete procedural history of this litigation, including the underlying substantive claims and the course of discovery, is set forth in our September 15, 2023 Summary Judgment Roadmap Memorandum and our December 8, 2022 Memorandum on Standing and Real-Party-in-Interest Issues. The discussion below focuses on events from October 2023 through the present that are directly relevant to the current strategic posture.

A. Caldwell Royce & Shapiro LLP Withdrawal

On October 3, 2023, Caldwell Royce & Shapiro LLP ("CRS"), which had served as counsel of record for Vantor since the inception of this litigation, filed a Motion to Withdraw as counsel for Vantor Holdings Corp. (ECF No. 147). The motion was led by Harrison Caldwell and Meredith Shapiro, the two CRS partners principally responsible for the matter. The supporting declaration of Harrison Caldwell, filed under seal (ECF No. 147-1), cited "irreconcilable differences" between CRS and its client as the basis for withdrawal.

While the full details of the fee dispute were filed under seal, the docket entry and the publicly available portions of the supporting papers strongly suggested that the dispute was rooted in Vantor's failure to pay legal fees. Based on publicly available information and statements made during the October 18, 2023 hearing on the withdrawal motion, CRS's estimated total fees in this matter were approximately $2.1 million, with approximately $870,000 in invoices remaining unpaid at the time of withdrawal. The magnitude of the unpaid balance — representing over forty percent of total fees — is significant and, as discussed further in Section IV below, has direct bearing on the likelihood that Vantor will be able to retain substitute counsel.

On October 18, 2023, Judge Calloway held a hearing on CRS's withdrawal motion. After hearing from Mr. Caldwell, who confirmed the irreconcilable nature of the dispute and stated that CRS could no longer effectively represent Vantor under the circumstances, Judge Calloway granted the motion to withdraw (ECF No. 152). In the same order, the Court directed Vantor to retain new counsel within sixty days — establishing a deadline of December 17, 2023 — and warned that failure to do so could result in sanctions, including dismissal of the action. The Court further ordered that all deadlines in the Case Management Order (originally entered February 17, 2023, ECF No. 48, and subsequently amended) were stayed pending the appearance of new counsel for Vantor.

B. December 17, 2023 Deadline — No New Counsel

The December 17, 2023 deadline passed without any new counsel entering an appearance on Vantor's behalf. During the period between October 18, 2023 and December 17, 2023, no filings of any kind were made on Vantor's docket, nor did any attorney contact our office or the Court to indicate that retention discussions were ongoing. The docket was entirely silent for a period of two months.

On January 8, 2024, Samuel Eklund, as lead partner for Stonefield in this matter, filed a letter to Judge Calloway on behalf of Stonefield (ECF No. 155) advising the Court of Vantor's failure to retain substitute counsel within the sixty-day period ordered by the Court. The letter respectfully requested that the Court schedule a status conference and, in the alternative, consider dismissal of Vantor's claims for failure to prosecute under Federal Rule of Civil Procedure 41(b). The letter noted, among other things, that the case had been effectively dormant since October 2023, that Stonefield had incurred substantial defense costs totaling approximately $4.42 million through the date of CRS's withdrawal, and that the continued pendency of the action was causing ongoing prejudice to Stonefield in the form of uncertainty affecting its financial reporting obligations, lender covenants, and business operations.

C. Order to Show Cause

On January 22, 2024, Judge Calloway issued an Order to Show Cause (ECF No. 157) directing Vantor Holdings Corp. to appear and demonstrate why its claims should not be dismissed for failure to prosecute under Federal Rule of Civil Procedure 41(b). The Order noted that Vantor had failed to comply with the Court's October 18, 2023 directive to retain substitute counsel within sixty days and that no new counsel had entered an appearance. The return date on the Order to Show Cause was set for February 12, 2024 at 10:00 a.m.

The Order to Show Cause was served on Vantor at its principal place of business (4500 Tenth Avenue, Suite 2200, New York, New York 10034) and on Nikolai Vantorovich at his listed personal address by both regular and certified mail on January 23, 2024, in accordance with the Court's service instructions.

D. February 12, 2024 Hearing

On February 12, 2024, Nikolai Vantorovich appeared in person, pro se, at the return date hearing before Judge Calloway. The undersigned attended the hearing in person on behalf of Stonefield, accompanied by Simone Laroche. The hearing lasted approximately twenty-five minutes.

Vantorovich identified himself to the Court as the CEO, Founder, and majority shareholder of Vantor Holdings Corp. He stated that he had been in discussions with several potential replacement counsel since the fall of 2023 but had been unable to finalize a retention agreement due to what he described as "the size and complexity of this case and the costs involved." He did not identify any specific firms with which he had been in discussions, nor did he provide any documentation of retention negotiations. He requested a ninety-day extension — until approximately mid-May 2024 — to secure new representation.

Judge Calloway questioned Vantorovich about the nature of his discussions with potential counsel, the reasons for the delay, and Vantor's financial ability to fund continued litigation. Vantorovich's responses were general in nature and did not provide specific information regarding any particular firm's engagement terms or the status of any pending retention agreement. Notably, Vantorovich stated that he was "optimistic" about securing counsel but acknowledged that "the fee situation" had been "a challenge."

The Court acknowledged the difficulty of retaining counsel in a complex commercial case midstream but expressed concern about the extended period of inactivity and the prejudice to the defendant. Judge Calloway granted a reduced extension of sixty days — setting a new deadline of April 12, 2024 for counsel to enter an appearance on behalf of Vantor. The Court stated on the record that it would "not look favorably on further requests for extensions" and that "this case needs to move forward or it needs to end."

No other substantive orders were entered at the hearing. All Case Management Order deadlines remain stayed. Samuel Eklund was not present at the hearing but reviewed our contemporaneous notes and summary the same day.

III. Legal Analysis: Corporate Pro Se Representation in Federal Court

The central legal issue raised by Vantorovich's appearance on February 12, 2024, is the prohibition on corporate pro se representation in federal court. While the Court's decision to hear from Vantorovich at the Order to Show Cause hearing was procedurally unremarkable — courts routinely permit a corporate officer to address the Court in connection with a show-cause proceeding — it is critical that we frame the ongoing analysis around the bedrock principle that a corporation cannot appear pro se in federal court for purposes of litigating the merits of a case.

A. The Governing Rule

It is a well-established and uniformly applied principle that a corporation, partnership, or other artificial entity cannot appear pro se in federal court. A corporation must be represented by a licensed attorney admitted to practice before the court in question. This rule derives from 28 U.S.C. § 1654, which provides that "[i]n all courts of the United States the parties may plead and conduct their own cases personally or by counsel." While this provision facially grants a broad right to self-representation, federal courts have uniformly held that the phrase "conduct their own cases personally" applies only to natural persons and does not extend to artificial entities such as corporations, limited liability companies, partnerships, or associations.

The Supreme Court addressed this issue directly in Rowland v. California Men's Colony, 506 U.S. 194, 201–02 (1993), observing that "it has been the law for the better part of two centuries . . . that a corporation may appear in the federal courts only through licensed counsel." The Court explained that the rationale for this rule is rooted in the nature of the corporate form itself: a corporation is a legal fiction that can act only through its agents, and the conduct of litigation on behalf of a corporation requires the skill and accountability that only a licensed attorney can provide. Allowing a lay officer, director, or shareholder to represent a corporation in federal court would effectively permit the unauthorized practice of law and would deprive opposing parties and the court of the protections that bar membership and professional ethical obligations provide.

The Second Circuit has consistently enforced this prohibition. In Lattanzio v. COMTA, 481 F.3d 137, 139–40 (2d Cir. 2007), the Court of Appeals reaffirmed that a corporation cannot proceed pro se and that a complaint filed on behalf of a corporation by a non-attorney must be dismissed. See also Eagle Assocs. v. Bank of Montreal, 926 F.2d 1305, 1308 (2d Cir. 1991) (a corporation "must appear through an attorney"); Jones v. Niagara Frontier Transp. Auth., 722 F.2d 20, 22 (2d Cir. 1983) (same). Courts in the Southern District of New York have repeatedly applied this rule, even where the individual seeking to represent the corporation is the sole shareholder or a majority owner. See, e.g., Pridgen v. Andresen, 113 F.3d 391, 393 (2d Cir. 1997) (sole shareholder may not represent corporation); Dow Chem. Pac. Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 336 (2d Cir. 1986) (lay officer not permitted to serve as counsel for corporate entity).

The policy justifications for this rule are threefold. First, a corporation's interests may diverge from those of any individual officer or shareholder, and only a licensed attorney owes professional duties of competence, diligence, and candor to the tribunal that protect both the corporate entity and the integrity of the proceedings. Second, permitting lay representation by a corporate officer would create opportunities for the unauthorized practice of law and would undermine the regulatory framework governing attorney conduct. Third, permitting corporate self-representation would impose burdens on the court and on opposing parties, who would be unable to rely on the professional obligations of an officer of the court in connection with matters such as discovery compliance, scheduling, and settlement discussions.

B. Application to Vantor Holdings Corp.

Vantor Holdings Corp. is a corporation organized under the laws of the State of New York, with its principal place of business at 4500 Tenth Avenue, Suite 2200, New York, New York 10034. It is the named plaintiff in this action. Nikolai Vantorovich is the Chief Executive Officer, Founder, and holder of approximately 58% of the outstanding equity of Vantor. While Vantorovich is clearly the dominant individual behind the corporate entity, he is not the same legal person as Vantor Holdings Corp. The corporate form has been maintained throughout this litigation, and there is no basis in the record for piercing the corporate veil or treating the corporation and its principal as identical.

Accordingly, Vantorovich's pro se appearance on February 12, 2024, was, at best, an appearance on his own behalf as a natural person. It does not and cannot constitute an appearance on behalf of Vantor Holdings Corp. for purposes of prosecuting the claims asserted in the Amended Complaint. Unless and until a licensed attorney enters an appearance on behalf of Vantor, the corporate plaintiff is effectively without representation and is unable to take any litigation steps — including filing motions, conducting discovery, or proceeding to trial.

The Court's tolerance of Vantorovich's appearance at the February 12 hearing to argue against dismissal was procedurally appropriate and consistent with the approach courts typically take at the Order to Show Cause stage. Courts routinely permit a corporate officer to explain the circumstances surrounding the corporation's failure to secure counsel and to request additional time. See, e.g., Berrios v. N.Y.C. Hous. Auth., No. 17-cv-7174, 2018 WL 4762247, at *2 (S.D.N.Y. Oct. 2, 2018) (permitting corporate representative to address court at show-cause hearing while noting that pro se representation was not permitted for substantive purposes). However, this procedural accommodation does not cure Vantor's lack of counsel for purposes of ongoing litigation. If no attorney enters an appearance by the April 12, 2024 deadline, Vantor will remain without representation, and the basis for dismissal under Rule 41(b) will be fully ripe.

C. Vantor Transport Services LLC

A related but secondary issue concerns Vantor Transport Services LLC ("VTS"), a New York limited liability company and wholly owned subsidiary of Vantor Holdings Corp. The Transportation Services Agreement at the heart of this litigation (Contract Reference No. SLG-VTS-2019-0315, dated March 15, 2019, the "TSA") was entered into between Stonefield Logistics Group Inc. and VTS, not between Stonefield and Vantor Holdings Corp. VTS is not separately named as a plaintiff in this action, but is referenced extensively in the Amended Complaint as the entity that performed the services under the TSA and that allegedly suffered the damages giving rise to Vantor's claims.

As a limited liability company, VTS is likewise an artificial entity that cannot appear pro se in federal court. The corporate pro se prohibition applies with equal force to LLCs. See In re Holistic Supplements LLC, No. 20-cv-3514, 2021 WL 848704, at 1 (S.D.N.Y. Mar. 5, 2021); Lattanzio*, 481 F.3d at 139–40.

We note that our December 8, 2022 memorandum on Vantor's standing analyzed the potential Federal Rule of Civil Procedure 17 real-party-in-interest issue arising from the fact that VTS, not Vantor Holdings Corp., was the party to the TSA. That analysis identified a viable defense argument that Vantor lacks standing to assert contract claims arising under an agreement to which it was not a party, and that VTS is the real party in interest. This defense remains preserved and has been raised in Stonefield's Answer and Affirmative Defenses (ECF No. 31, Seventh Affirmative Defense). However, the real-party-in-interest issue is not the primary strategic focus at this stage, given that dismissal for failure to prosecute presents a more efficient and procedurally straightforward path to resolution. Should the case survive the current failure-to-prosecute posture, the Rule 17 defense should be reassessed in connection with any summary judgment motion.

IV. Assessment: Likelihood Vantor Will Retain New Counsel

A central question for Stonefield's strategic planning is whether Vantor will, in fact, succeed in retaining substitute counsel by the April 12, 2024 deadline. While we cannot predict with certainty what Vantor will do, the following analysis weighs the factors for and against successful retention based on the information available to us.

A. Factors Weighing Against Successful Retention

Several significant factors suggest that Vantor will have difficulty retaining substitute counsel within the sixty-day extension period.

Fee Dispute History. CRS withdrew from this matter citing approximately $870,000 in unpaid invoices out of total estimated fees of approximately $2.1 million. The existence and magnitude of this fee dispute will be known to any prospective replacement counsel, either through direct inquiry, through the sealed withdrawal papers (which a prospective counsel might seek access to), or through the legal community's general awareness of the dispute. Any experienced litigation firm considering taking on this matter will be aware of the risk that Vantor will fail to pay its legal bills. Prospective replacement counsel will, in all likelihood, demand significant upfront retainers, advance payment of estimated costs, or alternative fee arrangements (such as contingency or hybrid arrangements) before agreeing to enter an appearance. The fee dispute history substantially narrows the pool of firms willing to take on this representation.

Case Complexity and Remaining Work. This is a complex commercial litigation involving claims and counterclaims arising from a multi-year transportation services agreement with an original contract value in excess of $200 million. The case involves substantial remaining work that any new counsel would need to undertake. Specifically:

• The deposition of Nikolai Vantorovich was never completed. The deposition commenced on August 18, 2023, but was cut short after approximately four and a half hours when Vantorovich claimed illness and was unable to continue. The Court ordered completion of the deposition by October 20, 2023 (ECF No. 142), but this deadline was overtaken by CRS's withdrawal, and the deposition has never been completed.

• Expert discovery was stayed as of CRS's withdrawal. The expert discovery deadline under the Case Management Order was January 12, 2024. While both sides exchanged initial expert reports prior to the stay, rebuttal reports were pending, and expert depositions had not yet been scheduled.

• Dispositive motions were stayed. The deadline for summary judgment motions under the Case Management Order was March 1, 2024. No such motions have been filed.

• The document record is extensive. Stonefield produced 42,387 documents (approximately 186,000 pages) during fact discovery. Vantor produced 28,914 documents (approximately 112,000 pages), plus an additional 4,218 supplemental documents produced on a rolling basis through August 2023. Multiple fact depositions were completed, including depositions of Derek Pruitt (Vantor's former CFO), Sandra Milescu (Vantor's SVP of Operations), and several Stonefield witnesses. Expert reports have been exchanged.

New counsel would need to come up to speed on this extensive record before being able to effectively represent Vantor. The cost and time required to do so are substantial, and many firms will view this as an unattractive proposition, particularly given the fee dispute history and the weakened case posture described below.

Weakened Case Posture. The discovery completed in this case has produced significant evidence undermining Vantor's claims and supporting Stonefield's defense position. Among the most significant adverse evidence (from Vantor's perspective) are the following:

(i) Sandra Milescu's November 12, 2021 internal email (Bates No. VHC-008417), in which Milescu, then Vantor's Senior Vice President of Operations, acknowledged that VTS "pulled 85 tractors off the SLG dedicated lanes" to cover commitments to other customers. This email is a powerful piece of evidence supporting Stonefield's position that VTS, not Stonefield, committed the material breach of the TSA by failing to maintain the committed fleet capacity.

(ii) Milescu's deposition testimony on August 4, 2023 (Milescu Dep. Tr. 142:8–145:22), in which she confirmed the reassignment of eighty-five tractors from the Stonefield dedicated lanes to the Northwind Distribution Co. account during the third quarter of 2021, without advance notice to or consent from Stonefield, in direct contravention of Section 4.2(a) of the TSA.

(iii) Derek Pruitt's deposition testimony on July 10, 2023 (Pruitt Dep. Tr. 87:14–89:3; 112:5–114:19), in which Vantor's former CFO acknowledged that VTS "struggled" to maintain committed fleet capacity during the relevant period and was unable to identify any specific post-termination mitigation efforts undertaken by VTS or Vantor to reduce the alleged damages.

(iv) Dr. Evelyn Rosser's August 25, 2023 rebuttal expert report, which opined that the maximum supportable damages figure, even under Vantor's most favorable assumptions, is $8.2 million — a fraction of Vantor's claimed damages of $95.4 million as set forth in the Amended Complaint. Dr. Rosser's analysis identifies fundamental methodological flaws in the damages model prepared by Vantor's expert, Dr. Marcus Theil, including the failure to account for VTS's own breach, the failure to apply appropriate mitigation adjustments, and the use of an unsupported damages period extending well beyond the remaining term of the TSA.

Any prospective replacement counsel conducting even a preliminary review of the case will encounter these evidentiary problems. The gap between the $95.4 million damages claim and the $8.2 million maximum figure identified in our rebuttal expert report is dramatic, and the evidence of VTS's own breach substantially undermines the theory of liability. While the nominal size of the claim might initially attract interest, a thorough case review is likely to dampen enthusiasm, particularly for firms evaluating the case on a contingency or partial-contingency basis.

Vantor's Financial Condition. Vantor's financial performance has deteriorated since the commencement of this litigation. Based on publicly available financial information and information obtained through discovery, Vantor's revenues declined from approximately $385 million in fiscal year 2021 to approximately $310 million in fiscal year 2022 — a decline of approximately 19.5%. This decline reflects, in part, the loss of the Stonefield contract (which represented a significant revenue stream for VTS and, by extension, Vantor), as well as broader market softness in the freight and logistics sector. While we do not have access to Vantor's financial results for fiscal year 2023, the general trajectory suggests continued pressure on the company's financial resources. A company facing declining revenues and a history of failing to pay its prior litigation counsel may lack the financial resources to fund new litigation counsel through summary judgment and a potential trial, which could cost an additional $2 million to $4 million or more depending on the scope and duration of the remaining proceedings.

Time Elapsed. By the April 12, 2024 deadline, the case will have been effectively stalled for over six months — from October 2023 through April 2024. During this period, no substantive litigation activity will have occurred. New counsel would face significant catch-up requirements, including review of the full discovery record, familiarization with the case law and contractual provisions at issue, and preparation for the remaining phases of litigation. The passage of time also raises practical challenges, including the potential loss of institutional knowledge that CRS possessed and the need to re-establish relationships with witnesses and experts.

B. Factors Potentially Favoring Retention

Two factors weigh, at least in theory, in favor of Vantor's ability to retain substitute counsel.

Nominal Damages Claim Size. The $95.4 million damages claim, even if substantially reduced, represents a potentially significant recovery that could attract contingency-fee counsel or firms willing to accept a hybrid fee arrangement. A contingency-fee firm that believed it could recover even a fraction of the claimed damages — say, $10 million to $20 million — might view the case as potentially profitable, depending on the fee percentage and the estimated costs of bringing the case to trial. However, the combination of the weakened evidentiary posture, the corporate pro se prohibition (which requires the immediate entry of counsel before any further litigation steps can be taken), and the fee dispute history with CRS make this scenario considerably less likely than it might otherwise be. Contingency-fee firms are sophisticated evaluators of litigation risk, and the factors described in Section IV.A above would likely give any such firm significant pause.

Vantorovich's Personal Stake. Nikolai Vantorovich holds approximately 58% of the outstanding equity of Vantor Holdings Corp. As the dominant shareholder, he has a strong personal financial incentive to pursue the litigation to a successful conclusion, and this personal stake may motivate him to expend significant effort — and potentially personal funds — to retain counsel. It is possible, for example, that Vantorovich might personally guarantee a portion of the legal fees, contribute personal funds toward a retainer, or offer other inducements to prospective counsel. We cannot rule out this possibility, and it represents the most significant risk factor in our assessment.

C. Overall Assessment

On balance, it is our assessment that it is more likely than not that Vantor will fail to retain substitute counsel by the April 12, 2024 deadline. The fee dispute history with CRS, the weakened case posture as revealed by discovery, the financial constraints facing Vantor, and the complexity and catch-up costs of the remaining litigation create substantial and, in some cases, compounding barriers to successful retention. The passage of six months of dormancy further reduces the case's attractiveness to prospective counsel.

However, we cannot rule out the possibility that Vantor will secure new representation. Vantorovich is clearly motivated and may find a firm willing to take on the case under some form of contingency or hybrid arrangement, or he may invest personal funds to finance a retention. Accordingly, Stonefield should prepare for both scenarios: dismissal for failure to prosecute if no counsel appears, and a resumption of active litigation if counsel does appear.

It is also possible, though we consider it less likely, that Vantorovich will appear again on April 12 and request yet another extension. The Court's comments on the record at the February 12 hearing — particularly Judge Calloway's statement that she would "not look favorably on further requests for extensions" — suggest that the Court's patience is limited, but we cannot guarantee that the Court would deny an extension request, particularly if Vantorovich can demonstrate concrete progress toward retention (such as a letter of intent from a prospective firm or evidence of ongoing negotiations). Our strategy should account for this contingency as well.

V. Strategic Recommendations

Based on the foregoing analysis, we recommend the following strategic approach for Stonefield going forward.

A. Monitor the April 12, 2024 Deadline

The most immediate action item is to calendar the April 12, 2024 deadline and conduct a docket check on or immediately after that date. The docket should be monitored for any new counsel appearance filed by Vantor, as well as for any letter or motion seeking a further extension of the deadline. Helen Tsao, Senior Paralegal, should be assigned responsibility for the docket check and should set calendar reminders for April 12 and April 15, 2024.

If no counsel has appeared by April 12, 2024, and no extension request has been filed, we recommend filing a renewed letter or motion seeking dismissal within one to two business days. Speed is important: a prompt filing will signal to the Court that Stonefield is monitoring the deadline and is prepared to move forward, and will reduce the risk that Vantorovich files a last-minute extension request that preempts our motion.

If counsel does appear by April 12, the strategic posture changes significantly, and a separate assessment will be required to evaluate the new counsel's likely approach, the timing of any resumed Case Management Order deadlines, and the appropriate next steps toward summary judgment. We will address that contingency in a supplemental memorandum if and when it arises.

B. Prepare Renewed Motion to Dismiss for Failure to Prosecute (FRCP 41(b))

The draft FRCP 41(b) motion to dismiss for failure to prosecute, prepared on January 15, 2024, by the undersigned and Simone Laroche, should be updated to reflect the February 12, 2024 hearing and the passage of the April 12, 2024 deadline. The updated motion should be finalized and held in reserve for filing promptly after April 12 if no counsel appears.

The renewed motion should be built around the following arguments:

Duration of Failure to Proceed. Vantor has failed to prosecute its claims for an extended period. No substantive litigation activity has occurred since October 2023, when CRS withdrew. By April 12, 2024, the case will have been dormant for over six months, with no discovery, no motions, and no substantive filings by the plaintiff.

Failure to Comply with Court Orders. Vantor has failed to comply with two court-ordered deadlines to retain substitute counsel. The first deadline (December 17, 2023) passed without any action by Vantor. The second deadline (April 12, 2024), which the Court granted as an additional accommodation, will likewise have passed without compliance. Repeated failures to comply with court orders weigh heavily in favor of dismissal. See Link v. Wabash R.R. Co., 370 U.S. 626, 630–31 (1962).

Corporate Pro Se Prohibition. A corporation cannot appear pro se in federal court. Without counsel, Vantor cannot take any litigation steps — it cannot file motions, conduct discovery, or proceed to trial. The litigation is at a permanent standstill unless and until counsel appears, and the Court should not indefinitely tolerate a case that cannot proceed.

Prejudice to Defendant. The continued pendency of this action causes ongoing prejudice to Stonefield in multiple respects. Stonefield has incurred approximately $4.42 million in defense costs through October 2023, consisting of approximately $3.8 million in attorneys' fees and approximately $620,000 in costs and disbursements. The continued pendency of the case also imposes ongoing burdens related to financial reporting and lender relations. Stonefield is required to provide quarterly litigation updates to Lakeshore National Bank, in its capacity as Administrative Agent under the $425 million Senior Secured Credit Facility (Reference No. LNB-SLG-2017-CA-4402), and to disclose the pending litigation in its annual financial reporting and audit disclosures. The uncertainty created by the pending $95.4 million claim affects Stonefield's business operations, lender confidence, and potential counterparty negotiations.

Second Circuit Dismissal Factors. Under the Second Circuit's framework for evaluating involuntary dismissal under Rule 41(b), the court considers: (1) the duration of the plaintiff's failure to proceed; (2) whether the plaintiff was on notice that dismissal was being contemplated; (3) whether the defendant is likely to be prejudiced by further delay; (4) the need to balance the court's interest in managing its calendar against the plaintiff's interest in receiving a fair chance to be heard; and (5) the efficacy of lesser sanctions. See Drake v. City of Fort Collins, 927 F.2d 1156, 1159 (10th Cir. 1991); LeSane v. Hall's Sec. Analyst, Inc., 239 F.3d 206, 209 (2d Cir. 2001). All five factors favor dismissal here: the failure to proceed is of extended duration (over six months); Vantor has been on explicit notice since the January 22, 2024 Order to Show Cause that dismissal was being contemplated; Stonefield has demonstrated prejudice; the Court's calendar is being burdened by a dormant case; and lesser sanctions (including the initial sixty-day extension and the additional sixty-day extension granted on February 12) have proven ineffective.

We recommend seeking dismissal with prejudice. A dismissal with prejudice is warranted given the duration of the delay, the repeated failures to comply with Court orders, and the absence of any indication that Vantor will be able to cure the deficiency. A dismissal without prejudice would leave open the possibility of refiling, which would expose Stonefield to continued uncertainty and potential future litigation costs.

Alternatively, if the Court is inclined to dismiss without prejudice, we should request that the dismissal be conditioned on Vantor's payment of Stonefield's reasonable attorneys' fees and costs incurred after the October 2023 withdrawal as a condition of any future refiling. This approach would provide Stonefield with at least partial protection against the costs imposed by the extended period of dormancy and would create a meaningful disincentive against strategic refiling.

C. Preserve Summary Judgment Materials

Regardless of the outcome on the failure-to-prosecute motion, all work product prepared for summary judgment should be preserved and maintained in accessible form. This includes the following:

• The September 15, 2023 Summary Judgment Roadmap Memorandum (25 pages), which sets forth the four pillars of Stonefield's summary judgment defense: (1) valid termination for Cause under TSA Section 12.2(a); (2) unenforceability of the TSA's liquidated damages provision (TSA Section 14.3) as an impermissible penalty under New York law; (3) contractual bar on consequential damages under TSA Section 15.1; and (4) Vantor's failure to mitigate damages.

• Dr. Evelyn Rosser's final rebuttal expert report (August 25, 2023, 48 pages), together with all supporting exhibits, data files, and correspondence with Dr. Rosser.

• Deposition transcripts and summaries for Derek Pruitt (July 10, 2023), Terrence Kirkwood (July 17, 2023), Jessica Hess (July 24, 2023), Sandra Milescu (August 4, 2023), and the partial deposition of Nikolai Vantorovich (August 18, 2023, 4.5 hours completed).

• Key documents indexed from Vantor's production and supplemental production, including the critical Milescu email (VHC-008417), the internal fleet allocation reports, the Northwind Distribution Co. correspondence, and the financial records supporting the damages analysis.

If the case resumes — whether because new counsel appears before the April 12 deadline, or because the Court grants yet another extension — we should be prepared to move for summary judgment promptly upon lifting of the stay. The summary judgment materials are in an advanced state of preparation, and the work required to finalize a motion from the existing roadmap would be significantly less than starting from scratch. Our September 2023 estimate for summary judgment briefing, assuming the roadmap is current, was approximately $250,000 to $350,000 in additional fees, which remains a reasonable estimate.

D. Consider Proactive Outreach to Vantorovich

As an alternative or complementary strategy, we may wish to consider whether it is appropriate to contact Vantorovich directly (or any newly appearing counsel, if one materializes) to explore a voluntary dismissal or nominal settlement. There are potential advantages to a negotiated resolution: it would provide certainty, eliminate the ongoing disclosure and reporting obligations, and avoid the cost and risk of further proceedings in the event the case resumes.

Settlement authority for this matter remains at $0 to $4.5 million per the November 8, 2022 Settlement Authority Memorandum, as updated by the August 30, 2023 post-discovery analysis. The August 30 analysis recommended reducing the high end of the settlement range in light of the significantly strengthened defense posture revealed by discovery, but the formal settlement authority was not revised at that time. Given the current trajectory of the case — the withdrawal of opposing counsel, the failure to retain substitute counsel, the likelihood of dismissal for failure to prosecute, and the evidentiary weaknesses in Vantor's case — any settlement payment should be at the very low end of the authorized range or, ideally, $0 (a walk-away with mutual general releases and a stipulated dismissal with prejudice of all claims and counterclaims).

We note that any proactive outreach to Vantorovich carries some risk. If Vantorovich is currently unrepresented, Stonefield's counsel must be mindful of the ethical constraints on communications with unrepresented parties. While Vantorovich is not, strictly speaking, an unrepresented "party" in the traditional sense (he is a corporate officer, and the corporate party is Vantor), prudence suggests that any outreach should be carefully framed and should avoid substantive legal discussions beyond the proposal of settlement terms. If new counsel appears for Vantor, any settlement discussions should be conducted exclusively through counsel.

We recommend discussing the advisability and timing of any proactive outreach with the client and with Ridgeline Capital Partners, LP ("Ridgeline"), which holds a 34% equity stake in Stonefield and whose representatives — Alison Trang (Managing Director) and Douglas Whitmore (General Counsel) — have been actively involved in strategic decisions concerning this litigation. No outreach should be initiated without express client authorization and Ridgeline's concurrence.

E. Stonefield's Counterclaim

Stonefield's counterclaim for declaratory judgment, filed January 13, 2023 (ECF No. 30), remains pending. The counterclaim seeks three declarations: (1) that Stonefield's termination of the TSA was valid and for Cause under TSA Section 12.2(a); (2) that no liquidated damages are owed to Vantor or VTS under TSA Section 14.3; and (3) that VTS committed a material breach of the TSA by failing to maintain the committed fleet capacity, thereby excusing Stonefield's performance obligations. Vantor filed an Answer to the Counterclaim on February 10, 2023 (ECF No. 38), and the counterclaim has been subject to the same discovery and CMO schedule as Vantor's affirmative claims.

If Vantor's claims are dismissed for failure to prosecute, the counterclaim would also need to be resolved. Several options exist:

(i) The Court may dismiss the counterclaim as moot if the main claims are dismissed with prejudice. Because the declaratory relief sought by Stonefield is fundamentally defensive in nature — it seeks declarations that mirror the substantive defenses to Vantor's affirmative claims — a dismissal with prejudice of Vantor's claims would effectively resolve the underlying controversy and render the counterclaim moot. Some courts dismiss such counterclaims sua sponte; others require a motion or stipulation.

(ii) Stonefield could voluntarily dismiss the counterclaim without prejudice under Federal Rule of Civil Procedure 41(a). This approach provides the cleanest resolution and avoids any argument that the counterclaim remains pending and requires further proceedings. A voluntary dismissal without prejudice would preserve Stonefield's ability to refile the declaratory judgment claims in the unlikely event that Vantor later initiates a new action based on the same or similar theories.

(iii) Stonefield could seek a default judgment on the counterclaim if Vantor fails to respond or appear. However, this path is procedurally cumbersome (requiring proof of damages and compliance with the default judgment procedures under Rule 55) and is unlikely to yield practical benefit, as the declaratory relief has no independent monetary value and would merely confirm what would already be established by the dismissal of Vantor's claims.

We recommend voluntary dismissal of the counterclaim without prejudice as part of any dismissal resolution. The declaratory relief sought in the counterclaim is primarily a defensive tool that was designed to ensure a binding judicial determination of the parties' rights under the TSA, particularly in the event that Vantor obtained a favorable ruling on its claims. With Vantor's claims dismissed with prejudice, the counterclaim serves no continuing practical purpose, and its voluntary dismissal simplifies the resolution and avoids unnecessary further proceedings. If the resolution involves a negotiated settlement or stipulated dismissal, the counterclaim can be addressed as part of the overall dismissal stipulation.

F. Lender and Auditor Communications

Two ongoing external reporting obligations require attention in light of the February 12 hearing.

Lakeshore National Bank. Under the terms of the $425 million Senior Secured Credit Facility (Reference No. LNB-SLG-2017-CA-4402), Stonefield is required to provide quarterly litigation updates to Lakeshore National Bank, in its capacity as Administrative Agent. The updates are addressed to Catherine Devereaux, Senior Vice President, Loan Administration. The most recent quarterly update was dated January 5, 2024, and was prepared by the undersigned in coordination with Tobias Wren (General Counsel, Stonefield) and Priya Ramachandran (Chief Financial Officer, Stonefield). The January 5 update reflected the status of the case as of that date, including CRS's withdrawal and the pending Order to Show Cause.

The next quarterly update is due in early Q1 2024. We should work with Tobias Wren and Priya Ramachandran to prepare an updated report that includes information about the February 12 hearing, the sixty-day extension granted by the Court, and the new April 12 deadline. The update should maintain the assessment that the claims lack merit and should note the significant possibility that the case may be subject to dismissal for failure to prosecute. The tone of the update should be measured and factual, reflecting confidence in Stonefield's defense position without overstating the certainty of a favorable outcome.

Clarendon Partners LLP (Auditors). For purposes of Stonefield's annual financial reporting and audit disclosure, the current assessment — likelihood of material adverse outcome characterized as "remote" under ASC 450 (formerly FAS 5) — remains appropriate and is, if anything, further strengthened by the case's trajectory toward potential dismissal. The engagement partner at Clarendon Partners LLP is Robert Farraday. No immediate action is required with respect to the auditors, but we should be prepared to provide an updated litigation assessment letter when requested in connection with Stonefield's FY 2023 audit, which is expected to be completed in the second quarter of 2024. The assessment letter should reflect the current posture of the case and the reduced likelihood of an adverse outcome.

VI. Budget and Staffing Implications

During the monitoring period — now through April 12, 2024 — costs should be minimal. The work required during this period is limited to the following activities:

• Periodic docket checks by Helen Tsao, Senior Paralegal (current billing rate: $375/hour), to monitor for any new counsel appearance, extension request, or other filing by Vantor.

• Periodic updates to the client (Tobias Wren, General Counsel, Stonefield) and, as appropriate, to Ridgeline Capital Partners (Alison Trang, Douglas Whitmore).

• Refinement and updating of the January 15, 2024 draft FRCP 41(b) motion to dismiss for failure to prosecute, to incorporate the February 12, 2024 hearing and the April 12 deadline.

• Preparation of the quarterly lender update to Lakeshore National Bank.

Estimated cost for monitoring through April 12 and preparation of renewed dismissal motion: $15,000 to $25,000. This estimate assumes no new substantive developments requiring significant additional work during the monitoring period.

If the case resumes with new opposing counsel, the estimated additional fees through summary judgment are $800,000 to $1,200,000. This estimate includes the completion of the Vantorovich deposition, the completion of expert discovery (including rebuttal expert reports and expert depositions), preparation and briefing of Stonefield's summary judgment motion, and defense of any cross-motion for summary judgment filed by Vantor. If the case proceeds to trial, estimated additional fees would be $1,500,000 to $2,500,000, depending on the scope and duration of the trial and the extent of pre-trial motion practice. These estimates are consistent with the range set forth in the September 20, 2023 semi-annual risk assessment, which estimated total spend through final disposition at $5.5 million to $7.2 million, versus the approximately $4.42 million incurred to date.

We recommend placing the matter on reduced-activity/dormant status effective immediately, with quarterly docket checks and minimal staffing. Staffing during the dormant period should be limited to Patrick Gallagher (Lead Associate) and Helen Tsao (Senior Paralegal), with Samuel Eklund remaining available for strategic decisions and client communications. Simone Laroche should be released to other matters but remain on standby for reassignment if the case resumes. Staffing will be reassessed promptly upon the outcome of the April 12 deadline.

Linda Osei, as billing partner, should update the matter status in the firm's billing system to reflect the reduced-activity designation and adjust the annual fee estimate for the matter accordingly. If the case is dismissed, the matter should be closed following confirmation of the dismissal order and completion of final billing.

VII. Conclusion and Action Items

For the reasons set forth above, the February 12, 2024 hearing did not materially change the trajectory of this case. Vantor Holdings Corp. remains without counsel of record and is unable to prosecute its claims in the absence of licensed counsel. The Court has granted a final sixty-day extension — with an implicit warning that no further extensions should be expected — and the April 12, 2024 deadline now represents the critical inflection point for this litigation. Stonefield should monitor that deadline closely, prepare for both scenarios (dismissal and resumption), and maintain its defense readiness at minimal cost during the interim period.

The following action items should be implemented immediately:

Action Item 1: Calendar the April 12, 2024 deadline for new counsel appearance. Set calendar reminders for docket checks on April 12 and April 15, 2024. If no new appearance is filed by April 12, alert Patrick Gallagher and Samuel Eklund immediately.

Responsible: Helen Tsao, Senior Paralegal

Action Item 2: Update and finalize the January 15, 2024 draft FRCP 41(b) motion to dismiss for failure to prosecute, incorporating the February 12, 2024 hearing, Judge Calloway's statements on the record, and the pending April 12 deadline. Hold in reserve for filing promptly (within one to two business days) after April 12 if no counsel appears for Vantor.

Responsible: Patrick Gallagher, Lead Associate; Simone Laroche, Associate

Action Item 3: Circulate this memorandum to Tobias Wren, General Counsel of Stonefield Logistics Group Inc., and via Samuel Eklund to Alison Trang and Douglas Whitmore at Ridgeline Capital Partners, with a recommendation to approve the monitoring approach outlined herein and to discuss whether proactive outreach to Vantorovich or prospective new counsel is desired.

Responsible: Samuel Eklund, Responsible Partner

Action Item 4: Prepare the quarterly lender update to Lakeshore National Bank (Catherine Devereaux, SVP, Loan Administration) reflecting the February 12, 2024 hearing, the sixty-day extension, and the current case posture. Coordinate with Tobias Wren and Priya Ramachandran on content and timing.

Responsible: Patrick Gallagher, in coordination with Tobias Wren (SLG)

Action Item 5: Preserve all summary judgment work product and expert materials. Ensure that Pinnacle Forensics (Project ID: PF-SLG-2022-0914) continues hosting the document review platform on standby at a reduced monthly hosting rate. Confirm the current monthly hosting cost and verify that all data remains accessible.

Responsible: David Moretti, Litigation Support Specialist

Action Item 6: Place the matter on dormant/reduced-activity status effective immediately. Reduce staffing to Gallagher and Tsao for monitoring purposes. Update the matter status and annual fee estimate in the firm's billing system. Reassess staffing and budget upon the outcome of the April 12, 2024 deadline.

Responsible: Linda Osei, Billing Partner

Please do not hesitate to contact me with any questions or to discuss the recommendations set forth in this memorandum. I am available to meet at your convenience.

Respectfully submitted,

PATRICK GALLAGHER Lead Associate Calderwood & Harkness LLP 200 Park Avenue, 38th Floor New York, New York 10166 Direct: (212) 555-4837

Email: pgallagher@calderwoodharkness.com

cc: File (Matter No. 1012-00005)

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for use by the attorneys, partners, and authorized personnel of Calderwood & Harkness LLP and the client, Stonefield Logistics Group Inc. Any unauthorized review, use, disclosure, or distribution is strictly prohibited.
CALDERWOOD & HARKNESS LLP 200 Park Avenue, 38th Floor New York, New York 10166
MEMORANDUM
TO: Samuel Eklund, Responsible Partner; Linda Osei, Billing Partner
FROM: Patrick Gallagher, Lead Associate
DATE: February 14, 2024
RE: Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.) — Strategy Following Vantorovich Pro Se Appearance on February 12, 2024
MATTER NO.: 1012-00005
CLIENT: Stonefield Logistics Group Inc.
I. Executive Summary
On February 12, 2024, Nikolai Vantorovich, the Chief Executive Officer and Founder of Vantor Holdings Corp. ("Vantor" or "Plaintiff"), appeared pro se before the Honorable Margaret T. Calloway, United States District Judge, Southern District of New York, in response to the Court's January 22, 2024 Order to Show Cause why Vantor's claims should not be dismissed for failure to prosecute under Federal Rule of Civil Procedure 41(b). The Order to Show Cause followed Vantor's failure to retain substitute counsel by the Court-imposed December 17, 2023 deadline, which itself resulted from the October 2023 withdrawal of Vantor's prior counsel, Caldwell Royce & Shapiro LLP.
At the February 12 hearing, Vantorovich requested a ninety-day extension to retain new counsel. Judge Calloway, while acknowledging the difficulty of obtaining substitute counsel in a case of this complexity, granted a reduced extension of sixty days, setting a new deadline of April 12, 2024 for counsel to enter an appearance on behalf of Vantor. No other substantive orders were entered at the hearing, and all deadlines under the operative Case Management Order remain stayed.
This memorandum provides an analysis of the legal implications of Vantorovich's pro se appearance, with particular focus on the well-established prohibition against corporate pro se representation in federal court. The memorandum further assesses Vantor's realistic prospects for retaining substitute counsel within the sixty-day extension period and sets forth recommended strategic steps for our client, Stonefield Logistics Group Inc. ("Stonefield" or "Defendant"), going forward.
Our principal recommendation is as follows: Stonefield should monitor the April 12, 2024 deadline closely and, if no counsel enters an appearance on Vantor's behalf by that date, promptly file a renewed motion to dismiss for failure to prosecute under Rule 41(b). The draft motion previously prepared on January 15, 2024, should be updated to incorporate the February 12 hearing and the passage of the April 12 deadline, and held in reserve for immediate filing. In the interim, the matter should be placed on reduced-activity status with quarterly docket monitoring at reduced cost, and all summary judgment work product should be preserved in the event the case resumes.
II. Background and Procedural History Leading to Pro Se Appearance
This section summarizes the procedural developments that led to Vantorovich's pro se appearance on February 12, 2024. A fuller recitation of the complete procedural history of this litigation, including the underlying substantive claims and the course of discovery, is set forth in our September 15, 2023 Summary Judgment Roadmap Memorandum and our December 8, 2022 Memorandum on Standing and Real-Party-in-Interest Issues. The discussion below focuses on events from October 2023 through the present that are directly relevant to the current strategic posture.
A. Caldwell Royce & Shapiro LLP Withdrawal
On October 3, 2023, Caldwell Royce & Shapiro LLP ("CRS"), which had served as counsel of record for Vantor since the inception of this litigation, filed a Motion to Withdraw as counsel for Vantor Holdings Corp. (ECF No. 147). The motion was led by Harrison Caldwell and Meredith Shapiro, the two CRS partners principally responsible for the matter. The supporting declaration of Harrison Caldwell, filed under seal (ECF No. 147-1), cited "irreconcilable differences" between CRS and its client as the basis for withdrawal.
While the full details of the fee dispute were filed under seal, the docket entry and the publicly available portions of the supporting papers strongly suggested that the dispute was rooted in Vantor's failure to pay legal fees. Based on publicly available information and statements made during the October 18, 2023 hearing on the withdrawal motion, CRS's estimated total fees in this matter were approximately $2.1 million, with approximately $870,000 in invoices remaining unpaid at the time of withdrawal. The magnitude of the unpaid balance — representing over forty percent of total fees — is significant and, as discussed further in Section IV below, has direct bearing on the likelihood that Vantor will be able to retain substitute counsel.
On October 18, 2023, Judge Calloway held a hearing on CRS's withdrawal motion. After hearing from Mr. Caldwell, who confirmed the irreconcilable nature of the dispute and stated that CRS could no longer effectively represent Vantor under the circumstances, Judge Calloway granted the motion to withdraw (ECF No. 152). In the same order, the Court directed Vantor to retain new counsel within sixty days — establishing a deadline of December 17, 2023 — and warned that failure to do so could result in sanctions, including dismissal of the action. The Court further ordered that all deadlines in the Case Management Order (originally entered February 17, 2023, ECF No. 48, and subsequently amended) were stayed pending the appearance of new counsel for Vantor.
B. December 17, 2023 Deadline — No New Counsel
The December 17, 2023 deadline passed without any new counsel entering an appearance on Vantor's behalf. During the period between October 18, 2023 and December 17, 2023, no filings of any kind were made on Vantor's docket, nor did any attorney contact our office or the Court to indicate that retention discussions were ongoing. The docket was entirely silent for a period of two months.
On January 8, 2024, Samuel Eklund, as lead partner for Stonefield in this matter, filed a letter to Judge Calloway on behalf of Stonefield (ECF No. 155) advising the Court of Vantor's failure to retain substitute counsel within the sixty-day period ordered by the Court. The letter respectfully requested that the Court schedule a status conference and, in the alternative, consider dismissal of Vantor's claims for failure to prosecute under Federal Rule of Civil Procedure 41(b). The letter noted, among other things, that the case had been effectively dormant since October 2023, that Stonefield had incurred substantial defense costs totaling approximately $4.42 million through the date of CRS's withdrawal, and that the continued pendency of the action was causing ongoing prejudice to Stonefield in the form of uncertainty affecting its financial reporting obligations, lender covenants, and business operations.
C. Order to Show Cause
On January 22, 2024, Judge Calloway issued an Order to Show Cause (ECF No. 157) directing Vantor Holdings Corp. to appear and demonstrate why its claims should not be dismissed for failure to prosecute under Federal Rule of Civil Procedure 41(b). The Order noted that Vantor had failed to comply with the Court's October 18, 2023 directive to retain substitute counsel within sixty days and that no new counsel had entered an appearance. The return date on the Order to Show Cause was set for February 12, 2024 at 10:00 a.m.
The Order to Show Cause was served on Vantor at its principal place of business (4500 Tenth Avenue, Suite 2200, New York, New York 10034) and on Nikolai Vantorovich at his listed personal address by both regular and certified mail on January 23, 2024, in accordance with the Court's service instructions.
D. February 12, 2024 Hearing
On February 12, 2024, Nikolai Vantorovich appeared in person, pro se, at the return date hearing before Judge Calloway. The undersigned attended the hearing in person on behalf of Stonefield, accompanied by Simone Laroche. The hearing lasted approximately twenty-five minutes.
Vantorovich identified himself to the Court as the CEO, Founder, and majority shareholder of Vantor Holdings Corp. He stated that he had been in discussions with several potential replacement counsel since the fall of 2023 but had been unable to finalize a retention agreement due to what he described as "the size and complexity of this case and the costs involved." He did not identify any specific firms with which he had been in discussions, nor did he provide any documentation of retention negotiations. He requested a ninety-day extension — until approximately mid-May 2024 — to secure new representation.
Judge Calloway questioned Vantorovich about the nature of his discussions with potential counsel, the reasons for the delay, and Vantor's financial ability to fund continued litigation. Vantorovich's responses were general in nature and did not provide specific information regarding any particular firm's engagement terms or the status of any pending retention agreement. Notably, Vantorovich stated that he was "optimistic" about securing counsel but acknowledged that "the fee situation" had been "a challenge."
The Court acknowledged the difficulty of retaining counsel in a complex commercial case midstream but expressed concern about the extended period of inactivity and the prejudice to the defendant. Judge Calloway granted a reduced extension of sixty days — setting a new deadline of April 12, 2024 for counsel to enter an appearance on behalf of Vantor. The Court stated on the record that it would "not look favorably on further requests for extensions" and that "this case needs to move forward or it needs to end."
No other substantive orders were entered at the hearing. All Case Management Order deadlines remain stayed. Samuel Eklund was not present at the hearing but reviewed our contemporaneous notes and summary the same day.
III. Legal Analysis: Corporate Pro Se Representation in Federal Court
The central legal issue raised by Vantorovich's appearance on February 12, 2024, is the prohibition on corporate pro se representation in federal court. While the Court's decision to hear from Vantorovich at the Order to Show Cause hearing was procedurally unremarkable — courts routinely permit a corporate officer to address the Court in connection with a show-cause proceeding — it is critical that we frame the ongoing analysis around the bedrock principle that a corporation cannot appear pro se in federal court for purposes of litigating the merits of a case.
A. The Governing Rule
It is a well-established and uniformly applied principle that a corporation, partnership, or other artificial entity cannot appear pro se in federal court. A corporation must be represented by a licensed attorney admitted to practice before the court in question. This rule derives from 28 U.S.C. § 1654, which provides that "[i]n all courts of the United States the parties may plead and conduct their own cases personally or by counsel." While this provision facially grants a broad right to self-representation, federal courts have uniformly held that the phrase "conduct their own cases personally" applies only to natural persons and does not extend to artificial entities such as corporations, limited liability companies, partnerships, or associations.
The Supreme Court addressed this issue directly in Rowland v. California Men's Colony, 506 U.S. 194, 201–02 (1993), observing that "it has been the law for the better part of two centuries . . . that a corporation may appear in the federal courts only through licensed counsel." The Court explained that the rationale for this rule is rooted in the nature of the corporate form itself: a corporation is a legal fiction that can act only through its agents, and the conduct of litigation on behalf of a corporation requires the skill and accountability that only a licensed attorney can provide. Allowing a lay officer, director, or shareholder to represent a corporation in federal court would effectively permit the unauthorized practice of law and would deprive opposing parties and the court of the protections that bar membership and professional ethical obligations provide.
The Second Circuit has consistently enforced this prohibition. In Lattanzio v. COMTA, 481 F.3d 137, 139–40 (2d Cir. 2007), the Court of Appeals reaffirmed that a corporation cannot proceed pro se and that a complaint filed on behalf of a corporation by a non-attorney must be dismissed. See also Eagle Assocs. v. Bank of Montreal, 926 F.2d 1305, 1308 (2d Cir. 1991) (a corporation "must appear through an attorney"); Jones v. Niagara Frontier Transp. Auth., 722 F.2d 20, 22 (2d Cir. 1983) (same). Courts in the Southern District of New York have repeatedly applied this rule, even where the individual seeking to represent the corporation is the sole shareholder or a majority owner. See, e.g., Pridgen v. Andresen, 113 F.3d 391, 393 (2d Cir. 1997) (sole shareholder may not represent corporation); Dow Chem. Pac. Ltd. v. Rascator Maritime S.A., 782 F.2d 329, 336 (2d Cir. 1986) (lay officer not permitted to serve as counsel for corporate entity).
The policy justifications for this rule are threefold. First, a corporation's interests may diverge from those of any individual officer or shareholder, and only a licensed attorney owes professional duties of competence, diligence, and candor to the tribunal that protect both the corporate entity and the integrity of the proceedings. Second, permitting lay representation by a corporate officer would create opportunities for the unauthorized practice of law and would undermine the regulatory framework governing attorney conduct. Third, permitting corporate self-representation would impose burdens on the court and on opposing parties, who would be unable to rely on the professional obligations of an officer of the court in connection with matters such as discovery compliance, scheduling, and settlement discussions.
B. Application to Vantor Holdings Corp.
Vantor Holdings Corp. is a corporation organized under the laws of the State of New York, with its principal place of business at 4500 Tenth Avenue, Suite 2200, New York, New York 10034. It is the named plaintiff in this action. Nikolai Vantorovich is the Chief Executive Officer, Founder, and holder of approximately 58% of the outstanding equity of Vantor. While Vantorovich is clearly the dominant individual behind the corporate entity, he is not the same legal person as Vantor Holdings Corp. The corporate form has been maintained throughout this litigation, and there is no basis in the record for piercing the corporate veil or treating the corporation and its principal as identical.
Accordingly, Vantorovich's pro se appearance on February 12, 2024, was, at best, an appearance on his own behalf as a natural person. It does not and cannot constitute an appearance on behalf of Vantor Holdings Corp. for purposes of prosecuting the claims asserted in the Amended Complaint. Unless and until a licensed attorney enters an appearance on behalf of Vantor, the corporate plaintiff is effectively without representation and is unable to take any litigation steps — including filing motions, conducting discovery, or proceeding to trial.
The Court's tolerance of Vantorovich's appearance at the February 12 hearing to argue against dismissal was procedurally appropriate and consistent with the approach courts typically take at the Order to Show Cause stage. Courts routinely permit a corporate officer to explain the circumstances surrounding the corporation's failure to secure counsel and to request additional time. See, e.g., Berrios v. N.Y.C. Hous. Auth., No. 17-cv-7174, 2018 WL 4762247, at *2 (S.D.N.Y. Oct. 2, 2018) (permitting corporate representative to address court at show-cause hearing while noting that pro se representation was not permitted for substantive purposes). However, this procedural accommodation does not cure Vantor's lack of counsel for purposes of ongoing litigation. If no attorney enters an appearance by the April 12, 2024 deadline, Vantor will remain without representation, and the basis for dismissal under Rule 41(b) will be fully ripe.
C. Vantor Transport Services LLC
A related but secondary issue concerns Vantor Transport Services LLC ("VTS"), a New York limited liability company and wholly owned subsidiary of Vantor Holdings Corp. The Transportation Services Agreement at the heart of this litigation (Contract Reference No. SLG-VTS-2019-0315, dated March 15, 2019, the "TSA") was entered into between Stonefield Logistics Group Inc. and VTS, not between Stonefield and Vantor Holdings Corp. VTS is not separately named as a plaintiff in this action, but is referenced extensively in the Amended Complaint as the entity that performed the services under the TSA and that allegedly suffered the damages giving rise to Vantor's claims.
As a limited liability company, VTS is likewise an artificial entity that cannot appear pro se in federal court. The corporate pro se prohibition applies with equal force to LLCs. See In re Holistic Supplements LLC, No. 20-cv-3514, 2021 WL 848704, at 1 (S.D.N.Y. Mar. 5, 2021); Lattanzio*, 481 F.3d at 139–40.
We note that our December 8, 2022 memorandum on Vantor's standing analyzed the potential Federal Rule of Civil Procedure 17 real-party-in-interest issue arising from the fact that VTS, not Vantor Holdings Corp., was the party to the TSA. That analysis identified a viable defense argument that Vantor lacks standing to assert contract claims arising under an agreement to which it was not a party, and that VTS is the real party in interest. This defense remains preserved and has been raised in Stonefield's Answer and Affirmative Defenses (ECF No. 31, Seventh Affirmative Defense). However, the real-party-in-interest issue is not the primary strategic focus at this stage, given that dismissal for failure to prosecute presents a more efficient and procedurally straightforward path to resolution. Should the case survive the current failure-to-prosecute posture, the Rule 17 defense should be reassessed in connection with any summary judgment motion.
IV. Assessment: Likelihood Vantor Will Retain New Counsel
A central question for Stonefield's strategic planning is whether Vantor will, in fact, succeed in retaining substitute counsel by the April 12, 2024 deadline. While we cannot predict with certainty what Vantor will do, the following analysis weighs the factors for and against successful retention based on the information available to us.
A. Factors Weighing Against Successful Retention
Several significant factors suggest that Vantor will have difficulty retaining substitute counsel within the sixty-day extension period.
Fee Dispute History. CRS withdrew from this matter citing approximately $870,000 in unpaid invoices out of total estimated fees of approximately $2.1 million. The existence and magnitude of this fee dispute will be known to any prospective replacement counsel, either through direct inquiry, through the sealed withdrawal papers (which a prospective counsel might seek access to), or through the legal community's general awareness of the dispute. Any experienced litigation firm considering taking on this matter will be aware of the risk that Vantor will fail to pay its legal bills. Prospective replacement counsel will, in all likelihood, demand significant upfront retainers, advance payment of estimated costs, or alternative fee arrangements (such as contingency or hybrid arrangements) before agreeing to enter an appearance. The fee dispute history substantially narrows the pool of firms willing to take on this representation.
Case Complexity and Remaining Work. This is a complex commercial litigation involving claims and counterclaims arising from a multi-year transportation services agreement with an original contract value in excess of $200 million. The case involves substantial remaining work that any new counsel would need to undertake. Specifically:
• The deposition of Nikolai Vantorovich was never completed. The deposition commenced on August 18, 2023, but was cut short after approximately four and a half hours when Vantorovich claimed illness and was unable to continue. The Court ordered completion of the deposition by October 20, 2023 (ECF No. 142), but this deadline was overtaken by CRS's withdrawal, and the deposition has never been completed.
• Expert discovery was stayed as of CRS's withdrawal. The expert discovery deadline under the Case Management Order was January 12, 2024. While both sides exchanged initial expert reports prior to the stay, rebuttal reports were pending, and expert depositions had not yet been scheduled.
• Dispositive motions were stayed. The deadline for summary judgment motions under the Case Management Order was March 1, 2024. No such motions have been filed.
• The document record is extensive. Stonefield produced 42,387 documents (approximately 186,000 pages) during fact discovery. Vantor produced 28,914 documents (approximately 112,000 pages), plus an additional 4,218 supplemental documents produced on a rolling basis through August 2023. Multiple fact depositions were completed, including depositions of Derek Pruitt (Vantor's former CFO), Sandra Milescu (Vantor's SVP of Operations), and several Stonefield witnesses. Expert reports have been exchanged.
New counsel would need to come up to speed on this extensive record before being able to effectively represent Vantor. The cost and time required to do so are substantial, and many firms will view this as an unattractive proposition, particularly given the fee dispute history and the weakened case posture described below.
Weakened Case Posture. The discovery completed in this case has produced significant evidence undermining Vantor's claims and supporting Stonefield's defense position. Among the most significant adverse evidence (from Vantor's perspective) are the following:
(i) Sandra Milescu's November 12, 2021 internal email (Bates No. VHC-008417), in which Milescu, then Vantor's Senior Vice President of Operations, acknowledged that VTS "pulled 85 tractors off the SLG dedicated lanes" to cover commitments to other customers. This email is a powerful piece of evidence supporting Stonefield's position that VTS, not Stonefield, committed the material breach of the TSA by failing to maintain the committed fleet capacity.
(ii) Milescu's deposition testimony on August 4, 2023 (Milescu Dep. Tr. 142:8–145:22), in which she confirmed the reassignment of eighty-five tractors from the Stonefield dedicated lanes to the Northwind Distribution Co. account during the third quarter of 2021, without advance notice to or consent from Stonefield, in direct contravention of Section 4.2(a) of the TSA.
(iii) Derek Pruitt's deposition testimony on July 10, 2023 (Pruitt Dep. Tr. 87:14–89:3; 112:5–114:19), in which Vantor's former CFO acknowledged that VTS "struggled" to maintain committed fleet capacity during the relevant period and was unable to identify any specific post-termination mitigation efforts undertaken by VTS or Vantor to reduce the alleged damages.
(iv) Dr. Evelyn Rosser's August 25, 2023 rebuttal expert report, which opined that the maximum supportable damages figure, even under Vantor's most favorable assumptions, is $8.2 million — a fraction of Vantor's claimed damages of $95.4 million as set forth in the Amended Complaint. Dr. Rosser's analysis identifies fundamental methodological flaws in the damages model prepared by Vantor's expert, Dr. Marcus Theil, including the failure to account for VTS's own breach, the failure to apply appropriate mitigation adjustments, and the use of an unsupported damages period extending well beyond the remaining term of the TSA.
Any prospective replacement counsel conducting even a preliminary review of the case will encounter these evidentiary problems. The gap between the $95.4 million damages claim and the $8.2 million maximum figure identified in our rebuttal expert report is dramatic, and the evidence of VTS's own breach substantially undermines the theory of liability. While the nominal size of the claim might initially attract interest, a thorough case review is likely to dampen enthusiasm, particularly for firms evaluating the case on a contingency or partial-contingency basis.
Vantor's Financial Condition. Vantor's financial performance has deteriorated since the commencement of this litigation. Based on publicly available financial information and information obtained through discovery, Vantor's revenues declined from approximately $385 million in fiscal year 2021 to approximately $310 million in fiscal year 2022 — a decline of approximately 19.5%. This decline reflects, in part, the loss of the Stonefield contract (which represented a significant revenue stream for VTS and, by extension, Vantor), as well as broader market softness in the freight and logistics sector. While we do not have access to Vantor's financial results for fiscal year 2023, the general trajectory suggests continued pressure on the company's financial resources. A company facing declining revenues and a history of failing to pay its prior litigation counsel may lack the financial resources to fund new litigation counsel through summary judgment and a potential trial, which could cost an additional $2 million to $4 million or more depending on the scope and duration of the remaining proceedings.
Time Elapsed. By the April 12, 2024 deadline, the case will have been effectively stalled for over six months — from October 2023 through April 2024. During this period, no substantive litigation activity will have occurred. New counsel would face significant catch-up requirements, including review of the full discovery record, familiarization with the case law and contractual provisions at issue, and preparation for the remaining phases of litigation. The passage of time also raises practical challenges, including the potential loss of institutional knowledge that CRS possessed and the need to re-establish relationships with witnesses and experts.
B. Factors Potentially Favoring Retention
Two factors weigh, at least in theory, in favor of Vantor's ability to retain substitute counsel.
Nominal Damages Claim Size. The $95.4 million damages claim, even if substantially reduced, represents a potentially significant recovery that could attract contingency-fee counsel or firms willing to accept a hybrid fee arrangement. A contingency-fee firm that believed it could recover even a fraction of the claimed damages — say, $10 million to $20 million — might view the case as potentially profitable, depending on the fee percentage and the estimated costs of bringing the case to trial. However, the combination of the weakened evidentiary posture, the corporate pro se prohibition (which requires the immediate entry of counsel before any further litigation steps can be taken), and the fee dispute history with CRS make this scenario considerably less likely than it might otherwise be. Contingency-fee firms are sophisticated evaluators of litigation risk, and the factors described in Section IV.A above would likely give any such firm significant pause.
Vantorovich's Personal Stake. Nikolai Vantorovich holds approximately 58% of the outstanding equity of Vantor Holdings Corp. As the dominant shareholder, he has a strong personal financial incentive to pursue the litigation to a successful conclusion, and this personal stake may motivate him to expend significant effort — and potentially personal funds — to retain counsel. It is possible, for example, that Vantorovich might personally guarantee a portion of the legal fees, contribute personal funds toward a retainer, or offer other inducements to prospective counsel. We cannot rule out this possibility, and it represents the most significant risk factor in our assessment.
C. Overall Assessment
On balance, it is our assessment that it is more likely than not that Vantor will fail to retain substitute counsel by the April 12, 2024 deadline. The fee dispute history with CRS, the weakened case posture as revealed by discovery, the financial constraints facing Vantor, and the complexity and catch-up costs of the remaining litigation create substantial and, in some cases, compounding barriers to successful retention. The passage of six months of dormancy further reduces the case's attractiveness to prospective counsel.
However, we cannot rule out the possibility that Vantor will secure new representation. Vantorovich is clearly motivated and may find a firm willing to take on the case under some form of contingency or hybrid arrangement, or he may invest personal funds to finance a retention. Accordingly, Stonefield should prepare for both scenarios: dismissal for failure to prosecute if no counsel appears, and a resumption of active litigation if counsel does appear.
It is also possible, though we consider it less likely, that Vantorovich will appear again on April 12 and request yet another extension. The Court's comments on the record at the February 12 hearing — particularly Judge Calloway's statement that she would "not look favorably on further requests for extensions" — suggest that the Court's patience is limited, but we cannot guarantee that the Court would deny an extension request, particularly if Vantorovich can demonstrate concrete progress toward retention (such as a letter of intent from a prospective firm or evidence of ongoing negotiations). Our strategy should account for this contingency as well.
V. Strategic Recommendations
Based on the foregoing analysis, we recommend the following strategic approach for Stonefield going forward.
A. Monitor the April 12, 2024 Deadline
The most immediate action item is to calendar the April 12, 2024 deadline and conduct a docket check on or immediately after that date. The docket should be monitored for any new counsel appearance filed by Vantor, as well as for any letter or motion seeking a further extension of the deadline. Helen Tsao, Senior Paralegal, should be assigned responsibility for the docket check and should set calendar reminders for April 12 and April 15, 2024.
If no counsel has appeared by April 12, 2024, and no extension request has been filed, we recommend filing a renewed letter or motion seeking dismissal within one to two business days. Speed is important: a prompt filing will signal to the Court that Stonefield is monitoring the deadline and is prepared to move forward, and will reduce the risk that Vantorovich files a last-minute extension request that preempts our motion.
If counsel does appear by April 12, the strategic posture changes significantly, and a separate assessment will be required to evaluate the new counsel's likely approach, the timing of any resumed Case Management Order deadlines, and the appropriate next steps toward summary judgment. We will address that contingency in a supplemental memorandum if and when it arises.
B. Prepare Renewed Motion to Dismiss for Failure to Prosecute (FRCP 41(b))
The draft FRCP 41(b) motion to dismiss for failure to prosecute, prepared on January 15, 2024, by the undersigned and Simone Laroche, should be updated to reflect the February 12, 2024 hearing and the passage of the April 12, 2024 deadline. The updated motion should be finalized and held in reserve for filing promptly after April 12 if no counsel appears.
The renewed motion should be built around the following arguments:
Duration of Failure to Proceed. Vantor has failed to prosecute its claims for an extended period. No substantive litigation activity has occurred since October 2023, when CRS withdrew. By April 12, 2024, the case will have been dormant for over six months, with no discovery, no motions, and no substantive filings by the plaintiff.
Failure to Comply with Court Orders. Vantor has failed to comply with two court-ordered deadlines to retain substitute counsel. The first deadline (December 17, 2023) passed without any action by Vantor. The second deadline (April 12, 2024), which the Court granted as an additional accommodation, will likewise have passed without compliance. Repeated failures to comply with court orders weigh heavily in favor of dismissal. See Link v. Wabash R.R. Co., 370 U.S. 626, 630–31 (1962).
Corporate Pro Se Prohibition. A corporation cannot appear pro se in federal court. Without counsel, Vantor cannot take any litigation steps — it cannot file motions, conduct discovery, or proceed to trial. The litigation is at a permanent standstill unless and until counsel appears, and the Court should not indefinitely tolerate a case that cannot proceed.
Prejudice to Defendant. The continued pendency of this action causes ongoing prejudice to Stonefield in multiple respects. Stonefield has incurred approximately $4.42 million in defense costs through October 2023, consisting of approximately $3.8 million in attorneys' fees and approximately $620,000 in costs and disbursements. The continued pendency of the case also imposes ongoing burdens related to financial reporting and lender relations. Stonefield is required to provide quarterly litigation updates to Lakeshore National Bank, in its capacity as Administrative Agent under the $425 million Senior Secured Credit Facility (Reference No. LNB-SLG-2017-CA-4402), and to disclose the pending litigation in its annual financial reporting and audit disclosures. The uncertainty created by the pending $95.4 million claim affects Stonefield's business operations, lender confidence, and potential counterparty negotiations.
Second Circuit Dismissal Factors. Under the Second Circuit's framework for evaluating involuntary dismissal under Rule 41(b), the court considers: (1) the duration of the plaintiff's failure to proceed; (2) whether the plaintiff was on notice that dismissal was being contemplated; (3) whether the defendant is likely to be prejudiced by further delay; (4) the need to balance the court's interest in managing its calendar against the plaintiff's interest in receiving a fair chance to be heard; and (5) the efficacy of lesser sanctions. See Drake v. City of Fort Collins, 927 F.2d 1156, 1159 (10th Cir. 1991); LeSane v. Hall's Sec. Analyst, Inc., 239 F.3d 206, 209 (2d Cir. 2001). All five factors favor dismissal here: the failure to proceed is of extended duration (over six months); Vantor has been on explicit notice since the January 22, 2024 Order to Show Cause that dismissal was being contemplated; Stonefield has demonstrated prejudice; the Court's calendar is being burdened by a dormant case; and lesser sanctions (including the initial sixty-day extension and the additional sixty-day extension granted on February 12) have proven ineffective.
We recommend seeking dismissal with prejudice. A dismissal with prejudice is warranted given the duration of the delay, the repeated failures to comply with Court orders, and the absence of any indication that Vantor will be able to cure the deficiency. A dismissal without prejudice would leave open the possibility of refiling, which would expose Stonefield to continued uncertainty and potential future litigation costs.
Alternatively, if the Court is inclined to dismiss without prejudice, we should request that the dismissal be conditioned on Vantor's payment of Stonefield's reasonable attorneys' fees and costs incurred after the October 2023 withdrawal as a condition of any future refiling. This approach would provide Stonefield with at least partial protection against the costs imposed by the extended period of dormancy and would create a meaningful disincentive against strategic refiling.
C. Preserve Summary Judgment Materials
Regardless of the outcome on the failure-to-prosecute motion, all work product prepared for summary judgment should be preserved and maintained in accessible form. This includes the following:
• The September 15, 2023 Summary Judgment Roadmap Memorandum (25 pages), which sets forth the four pillars of Stonefield's summary judgment defense: (1) valid termination for Cause under TSA Section 12.2(a); (2) unenforceability of the TSA's liquidated damages provision (TSA Section 14.3) as an impermissible penalty under New York law; (3) contractual bar on consequential damages under TSA Section 15.1; and (4) Vantor's failure to mitigate damages.
• Dr. Evelyn Rosser's final rebuttal expert report (August 25, 2023, 48 pages), together with all supporting exhibits, data files, and correspondence with Dr. Rosser.
• Deposition transcripts and summaries for Derek Pruitt (July 10, 2023), Terrence Kirkwood (July 17, 2023), Jessica Hess (July 24, 2023), Sandra Milescu (August 4, 2023), and the partial deposition of Nikolai Vantorovich (August 18, 2023, 4.5 hours completed).
• Key documents indexed from Vantor's production and supplemental production, including the critical Milescu email (VHC-008417), the internal fleet allocation reports, the Northwind Distribution Co. correspondence, and the financial records supporting the damages analysis.
If the case resumes — whether because new counsel appears before the April 12 deadline, or because the Court grants yet another extension — we should be prepared to move for summary judgment promptly upon lifting of the stay. The summary judgment materials are in an advanced state of preparation, and the work required to finalize a motion from the existing roadmap would be significantly less than starting from scratch. Our September 2023 estimate for summary judgment briefing, assuming the roadmap is current, was approximately $250,000 to $350,000 in additional fees, which remains a reasonable estimate.
D. Consider Proactive Outreach to Vantorovich
As an alternative or complementary strategy, we may wish to consider whether it is appropriate to contact Vantorovich directly (or any newly appearing counsel, if one materializes) to explore a voluntary dismissal or nominal settlement. There are potential advantages to a negotiated resolution: it would provide certainty, eliminate the ongoing disclosure and reporting obligations, and avoid the cost and risk of further proceedings in the event the case resumes.
Settlement authority for this matter remains at $0 to $4.5 million per the November 8, 2022 Settlement Authority Memorandum, as updated by the August 30, 2023 post-discovery analysis. The August 30 analysis recommended reducing the high end of the settlement range in light of the significantly strengthened defense posture revealed by discovery, but the formal settlement authority was not revised at that time. Given the current trajectory of the case — the withdrawal of opposing counsel, the failure to retain substitute counsel, the likelihood of dismissal for failure to prosecute, and the evidentiary weaknesses in Vantor's case — any settlement payment should be at the very low end of the authorized range or, ideally, $0 (a walk-away with mutual general releases and a stipulated dismissal with prejudice of all claims and counterclaims).
We note that any proactive outreach to Vantorovich carries some risk. If Vantorovich is currently unrepresented, Stonefield's counsel must be mindful of the ethical constraints on communications with unrepresented parties. While Vantorovich is not, strictly speaking, an unrepresented "party" in the traditional sense (he is a corporate officer, and the corporate party is Vantor), prudence suggests that any outreach should be carefully framed and should avoid substantive legal discussions beyond the proposal of settlement terms. If new counsel appears for Vantor, any settlement discussions should be conducted exclusively through counsel.
We recommend discussing the advisability and timing of any proactive outreach with the client and with Ridgeline Capital Partners, LP ("Ridgeline"), which holds a 34% equity stake in Stonefield and whose representatives — Alison Trang (Managing Director) and Douglas Whitmore (General Counsel) — have been actively involved in strategic decisions concerning this litigation. No outreach should be initiated without express client authorization and Ridgeline's concurrence.
E. Stonefield's Counterclaim
Stonefield's counterclaim for declaratory judgment, filed January 13, 2023 (ECF No. 30), remains pending. The counterclaim seeks three declarations: (1) that Stonefield's termination of the TSA was valid and for Cause under TSA Section 12.2(a); (2) that no liquidated damages are owed to Vantor or VTS under TSA Section 14.3; and (3) that VTS committed a material breach of the TSA by failing to maintain the committed fleet capacity, thereby excusing Stonefield's performance obligations. Vantor filed an Answer to the Counterclaim on February 10, 2023 (ECF No. 38), and the counterclaim has been subject to the same discovery and CMO schedule as Vantor's affirmative claims.
If Vantor's claims are dismissed for failure to prosecute, the counterclaim would also need to be resolved. Several options exist:
(i) The Court may dismiss the counterclaim as moot if the main claims are dismissed with prejudice. Because the declaratory relief sought by Stonefield is fundamentally defensive in nature — it seeks declarations that mirror the substantive defenses to Vantor's affirmative claims — a dismissal with prejudice of Vantor's claims would effectively resolve the underlying controversy and render the counterclaim moot. Some courts dismiss such counterclaims sua sponte; others require a motion or stipulation.
(ii) Stonefield could voluntarily dismiss the counterclaim without prejudice under Federal Rule of Civil Procedure 41(a). This approach provides the cleanest resolution and avoids any argument that the counterclaim remains pending and requires further proceedings. A voluntary dismissal without prejudice would preserve Stonefield's ability to refile the declaratory judgment claims in the unlikely event that Vantor later initiates a new action based on the same or similar theories.
(iii) Stonefield could seek a default judgment on the counterclaim if Vantor fails to respond or appear. However, this path is procedurally cumbersome (requiring proof of damages and compliance with the default judgment procedures under Rule 55) and is unlikely to yield practical benefit, as the declaratory relief has no independent monetary value and would merely confirm what would already be established by the dismissal of Vantor's claims.
We recommend voluntary dismissal of the counterclaim without prejudice as part of any dismissal resolution. The declaratory relief sought in the counterclaim is primarily a defensive tool that was designed to ensure a binding judicial determination of the parties' rights under the TSA, particularly in the event that Vantor obtained a favorable ruling on its claims. With Vantor's claims dismissed with prejudice, the counterclaim serves no continuing practical purpose, and its voluntary dismissal simplifies the resolution and avoids unnecessary further proceedings. If the resolution involves a negotiated settlement or stipulated dismissal, the counterclaim can be addressed as part of the overall dismissal stipulation.
F. Lender and Auditor Communications
Two ongoing external reporting obligations require attention in light of the February 12 hearing.
Lakeshore National Bank. Under the terms of the $425 million Senior Secured Credit Facility (Reference No. LNB-SLG-2017-CA-4402), Stonefield is required to provide quarterly litigation updates to Lakeshore National Bank, in its capacity as Administrative Agent. The updates are addressed to Catherine Devereaux, Senior Vice President, Loan Administration. The most recent quarterly update was dated January 5, 2024, and was prepared by the undersigned in coordination with Tobias Wren (General Counsel, Stonefield) and Priya Ramachandran (Chief Financial Officer, Stonefield). The January 5 update reflected the status of the case as of that date, including CRS's withdrawal and the pending Order to Show Cause.
The next quarterly update is due in early Q1 2024. We should work with Tobias Wren and Priya Ramachandran to prepare an updated report that includes information about the February 12 hearing, the sixty-day extension granted by the Court, and the new April 12 deadline. The update should maintain the assessment that the claims lack merit and should note the significant possibility that the case may be subject to dismissal for failure to prosecute. The tone of the update should be measured and factual, reflecting confidence in Stonefield's defense position without overstating the certainty of a favorable outcome.
Clarendon Partners LLP (Auditors). For purposes of Stonefield's annual financial reporting and audit disclosure, the current assessment — likelihood of material adverse outcome characterized as "remote" under ASC 450 (formerly FAS 5) — remains appropriate and is, if anything, further strengthened by the case's trajectory toward potential dismissal. The engagement partner at Clarendon Partners LLP is Robert Farraday. No immediate action is required with respect to the auditors, but we should be prepared to provide an updated litigation assessment letter when requested in connection with Stonefield's FY 2023 audit, which is expected to be completed in the second quarter of 2024. The assessment letter should reflect the current posture of the case and the reduced likelihood of an adverse outcome.
VI. Budget and Staffing Implications
During the monitoring period — now through April 12, 2024 — costs should be minimal. The work required during this period is limited to the following activities:
• Periodic docket checks by Helen Tsao, Senior Paralegal (current billing rate: $375/hour), to monitor for any new counsel appearance, extension request, or other filing by Vantor.
• Periodic updates to the client (Tobias Wren, General Counsel, Stonefield) and, as appropriate, to Ridgeline Capital Partners (Alison Trang, Douglas Whitmore).
• Refinement and updating of the January 15, 2024 draft FRCP 41(b) motion to dismiss for failure to prosecute, to incorporate the February 12, 2024 hearing and the April 12 deadline.
• Preparation of the quarterly lender update to Lakeshore National Bank.
Estimated cost for monitoring through April 12 and preparation of renewed dismissal motion: $15,000 to $25,000. This estimate assumes no new substantive developments requiring significant additional work during the monitoring period.
If the case resumes with new opposing counsel, the estimated additional fees through summary judgment are $800,000 to $1,200,000. This estimate includes the completion of the Vantorovich deposition, the completion of expert discovery (including rebuttal expert reports and expert depositions), preparation and briefing of Stonefield's summary judgment motion, and defense of any cross-motion for summary judgment filed by Vantor. If the case proceeds to trial, estimated additional fees would be $1,500,000 to $2,500,000, depending on the scope and duration of the trial and the extent of pre-trial motion practice. These estimates are consistent with the range set forth in the September 20, 2023 semi-annual risk assessment, which estimated total spend through final disposition at $5.5 million to $7.2 million, versus the approximately $4.42 million incurred to date.
We recommend placing the matter on reduced-activity/dormant status effective immediately, with quarterly docket checks and minimal staffing. Staffing during the dormant period should be limited to Patrick Gallagher (Lead Associate) and Helen Tsao (Senior Paralegal), with Samuel Eklund remaining available for strategic decisions and client communications. Simone Laroche should be released to other matters but remain on standby for reassignment if the case resumes. Staffing will be reassessed promptly upon the outcome of the April 12 deadline.
Linda Osei, as billing partner, should update the matter status in the firm's billing system to reflect the reduced-activity designation and adjust the annual fee estimate for the matter accordingly. If the case is dismissed, the matter should be closed following confirmation of the dismissal order and completion of final billing.
VII. Conclusion and Action Items
For the reasons set forth above, the February 12, 2024 hearing did not materially change the trajectory of this case. Vantor Holdings Corp. remains without counsel of record and is unable to prosecute its claims in the absence of licensed counsel. The Court has granted a final sixty-day extension — with an implicit warning that no further extensions should be expected — and the April 12, 2024 deadline now represents the critical inflection point for this litigation. Stonefield should monitor that deadline closely, prepare for both scenarios (dismissal and resumption), and maintain its defense readiness at minimal cost during the interim period.
The following action items should be implemented immediately:
Action Item 1: Calendar the April 12, 2024 deadline for new counsel appearance. Set calendar reminders for docket checks on April 12 and April 15, 2024. If no new appearance is filed by April 12, alert Patrick Gallagher and Samuel Eklund immediately.
Responsible: Helen Tsao, Senior Paralegal
Action Item 2: Update and finalize the January 15, 2024 draft FRCP 41(b) motion to dismiss for failure to prosecute, incorporating the February 12, 2024 hearing, Judge Calloway's statements on the record, and the pending April 12 deadline. Hold in reserve for filing promptly (within one to two business days) after April 12 if no counsel appears for Vantor.
Responsible: Patrick Gallagher, Lead Associate; Simone Laroche, Associate
Action Item 3: Circulate this memorandum to Tobias Wren, General Counsel of Stonefield Logistics Group Inc., and via Samuel Eklund to Alison Trang and Douglas Whitmore at Ridgeline Capital Partners, with a recommendation to approve the monitoring approach outlined herein and to discuss whether proactive outreach to Vantorovich or prospective new counsel is desired.
Responsible: Samuel Eklund, Responsible Partner
Action Item 4: Prepare the quarterly lender update to Lakeshore National Bank (Catherine Devereaux, SVP, Loan Administration) reflecting the February 12, 2024 hearing, the sixty-day extension, and the current case posture. Coordinate with Tobias Wren and Priya Ramachandran on content and timing.
Responsible: Patrick Gallagher, in coordination with Tobias Wren (SLG)
Action Item 5: Preserve all summary judgment work product and expert materials. Ensure that Pinnacle Forensics (Project ID: PF-SLG-2022-0914) continues hosting the document review platform on standby at a reduced monthly hosting rate. Confirm the current monthly hosting cost and verify that all data remains accessible.
Responsible: David Moretti, Litigation Support Specialist
Action Item 6: Place the matter on dormant/reduced-activity status effective immediately. Reduce staffing to Gallagher and Tsao for monitoring purposes. Update the matter status and annual fee estimate in the firm's billing system. Reassess staffing and budget upon the outcome of the April 12, 2024 deadline.
Responsible: Linda Osei, Billing Partner
Please do not hesitate to contact me with any questions or to discuss the recommendations set forth in this memorandum. I am available to meet at your convenience.
Respectfully submitted,
PATRICK GALLAGHER Lead Associate Calderwood & Harkness LLP 200 Park Avenue, 38th Floor New York, New York 10166 Direct: (212) 555-4837
Email: pgallagher@calderwoodharkness.com
cc: File (Matter No. 1012-00005)

MEMORANDUM

MATTER NO.: 1012-00005

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