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

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INTERNAL WORKING DRAFT — NOT FOR FILING — Subject to attorney review by S. Eklund

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

DEFENDANT STONEFIELD LOGISTICS GROUP INC.'S REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF ITS MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(6)

PRELIMINARY STATEMENT

This Reply Memorandum is submitted on behalf of Defendant Stonefield Logistics Group Inc. ("Stonefield" or "Defendant") in further support of its Motion to Dismiss, filed October 14, 2022 (Dkt. No. 18), and responds to the Memorandum of Law in Opposition filed by Plaintiff Vantor Holdings Corp. ("Vantor" or "Plaintiff") on November 18, 2022 (Dkt. No. 24) (the "Opposition").

Vantor's Opposition fails to rescue its legally deficient claims. Rather than confronting the legal infirmities identified in Stonefield's opening memorandum, Vantor improperly attempts to convert this Rule 12(b)(6) motion into a premature merits adjudication by injecting disputed factual assertions that have no bearing on the facial adequacy of its pleading. The Opposition is replete with allegations about Stonefield's alleged motives for termination, its purported exclusivity violations, and the surrounding commercial circumstances — none of which speak to the dispositive legal question before the Court: whether the damages Vantor seeks are cognizable as a matter of law under the terms of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315).

The two central arguments in Stonefield's opening memorandum remain unrebutted.

First, the liquidated damages clause in Section 14.2 of the TSA constitutes an unenforceable penalty as a matter of law under well-established New York precedent. The formula in Section 14.2 — which mechanically computes damages equal to 75% of the Annual Committed Volume multiplied by the number of remaining contract years — produces a sum of approximately $67,230,000, an amount more than six times Vantor's own acknowledged lost profits on the contract. A liquidated damages provision so grossly disproportionate to any reasonable estimate of anticipated harm is, by definition, a penalty, and New York law does not permit its enforcement. Vantor's Opposition offers no persuasive authority to the contrary.

Second, Vantor's separate lost profits claim fails to plead damages with the requisite certainty under New York law. The Complaint's bare assertion of $18,700,000 in lost profits, derived from an unsubstantiated "average 12% operating margin," does not satisfy the pleading standard for lost profits claims. Moreover, as Stonefield demonstrated in its opening brief — and as Vantor conspicuously failed to address in its Opposition — the lost profits claim is duplicative of the liquidated damages claim, as both seek compensation for the identical contractual harm.

Vantor's Opposition fundamentally conflates the enforceability analysis — which the Court can and should resolve at the pleading stage — with the factual merits of the underlying breach dispute, which is a separate inquiry entirely. This distinction is critical. The pending motion does not ask the Court to determine whether Stonefield's termination of the TSA was wrongful. It asks the Court to determine whether, even assuming a wrongful termination, the specific categories of damages Vantor seeks are legally available. As demonstrated below, they are not.

ARGUMENT

I. THE LIQUIDATED DAMAGES CLAUSE IS AN UNENFORCEABLE PENALTY, AND VANTOR'S OPPOSITION FAILS TO DEMONSTRATE OTHERWISE

A. Vantor Misstates the Applicable Legal Standard

Vantor's Opposition devotes considerable effort to the proposition that the enforceability of a liquidated damages clause is "invariably a factual question that cannot be resolved on a motion to dismiss." Opp. at 7. This proposition is incorrect as a matter of law.

Under New York law, the enforceability of a liquidated damages provision is a question of law that courts routinely resolve at the pleading stage when the contract terms are unambiguous and the relevant circumstances are apparent from the face of the agreement. See Kestrel Corporation, 4 N.Y.3d 373, 380 (2005) ("[W]hether a contractual provision represents an enforceable liquidated damages clause or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances under which it was made."); Truck Rent-A-Ctr., Inc. v. Purdy Corp., 41 N.Y.2d 354, 358 (1977) (same). Where, as here, the contract is before the Court, its terms are unambiguous, and the relevant circumstances can be ascertained from the four corners of the agreement, there is no need for discovery or factual development to resolve the enforceability question.

The two-part test for enforceability of a liquidated damages provision under New York law is well settled. A liquidated damages clause is enforceable only if: (1) the liquidated amount is a reasonable estimate of the anticipated or probable damages at the time of contracting; and (2) actual damages must have been difficult to ascertain at the time of contracting. See Truck Rent-A-Ctr., 41 N.Y.2d at 357; JMD Holding, 4 N.Y.3d at 380; Bates Advert. USA, Inc. v. 498 Seventh, LLC, 7 N.Y.3d 115, 120 (2006). The party seeking to enforce the clause — here, Vantor — bears the burden of demonstrating that both prongs are satisfied. See JMD Holding, 4 N.Y.3d at 380. As demonstrated below, Vantor cannot satisfy either prong.

Both prongs of this analysis can be assessed based on the TSA itself, which is attached to the Declaration of Samuel Eklund (filed October 14, 2022, Dkt. No. 19) as Exhibit A and is therefore properly before the Court on this motion. See Chambers v. Pinnacle Corporation, 282 F.3d 147, 153 (2d Cir. 2002) (on a 12(b)(6) motion, the court may consider "any written instrument attached to [the complaint] as an exhibit or any statements or documents incorporated in it by reference" as well as documents "integral to" the complaint). The TSA is referenced extensively in the Complaint and forms the basis of each of Vantor's claims. The Court need look no further than the contract's own terms to determine whether Section 14.2 passes muster under New York law. It does not.

B. The Formula Produces a Grossly Disproportionate Amount That Confirms Its Punitive Character

The liquidated damages formula in Section 14.2 of the TSA operates in a purely mechanical fashion. The provision states, in relevant part:

"In the event of termination of this Agreement by Service Provider other than for Cause as defined in Section 13.1, Service Provider shall pay to Customer liquidated damages in an amount equal to seventy-five percent (75%) of the Annual Committed Volume multiplied by the number of remaining full and partial Contract Years in the then-current Term."

TSA § 14.2. The Annual Committed Volume ("ACV") is defined as $43,200,000. TSA § 2.1(c). This figure represents the minimum annual freight volume that Stonefield committed to tender to Vantor's subsidiary, VTS Freight Carriers LLC ("VTS"), over each of the five contract years (April 1, 2019 through March 31, 2024).

At the time of Stonefield's termination on March 4, 2022, approximately 2.07 contract years remained in the TSA's term (through the original March 31, 2024 expiration date). Applying the Section 14.2 formula, the liquidated damages computation yields the following:

• Two full remaining contract years: 75% × $43,200,000 × 2 = $64,800,000

• Partial contract year (approximately 27 days of Contract Year 3): 75% × $43,200,000 × (27/365) ≈ $2,430,000

• Total liquidated damages: approximately $67,230,000

This is the amount Vantor seeks in its Complaint. Compl. ¶ 58.

This sum — representing 75% of the total remaining contract value — bears no reasonable relationship to the anticipated actual harm from early termination. The gross disproportionality between the liquidated amount and any realistic measure of anticipated damages is apparent from Vantor's own pleading. Vantor's Complaint acknowledges that VTS's operating margin on Stonefield freight was approximately 12%. Compl. ¶ 43. At that margin, VTS's actual lost profit on the remaining committed volume of approximately $86.4 million (i.e., $43,200,000 × 2 remaining full years, assuming full volume tender) would be approximately $10.4 million — a small fraction of the $67,230,000 demanded under Section 14.2.

The 75% multiplier applied in Section 14.2 is thus not a reasonable estimate of anticipated damages; it is a punitive surcharge. A reasonable liquidated damages provision might approximate the claimant's anticipated lost margin (here, 12% of remaining volume, or roughly $10.4 million). Instead, Section 14.2 applies a multiplier of 75% to gross revenue — not to any measure of profit, net value, or anticipated harm — yielding an amount approximately 6.5 times greater than Vantor's own alleged lost profits.

This degree of disproportion is a hallmark of a penalty provision designed to deter termination rather than to approximate harm. See Truck Rent-A-Ctr., 41 N.Y.2d at 358 (invalidating liquidated damages provision where the stipulated amount was "unreasonably and grossly disproportionate to the probable loss"); 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Ass'n, 24 N.Y.3d 528, 536 (2014) (holding that a liquidated damages provision that "fixe[d] damages grossly disproportionate to the amount of actual damages" constituted an unenforceable penalty). As the Court of Appeals has explained, the "single most important factor" in determining whether a stipulated damages clause is enforceable is "whether the amount is reasonable in relation to the probable damages." JMD Holding, 4 N.Y.3d at 381. Here, by any measure, $67.23 million is not a reasonable estimate of damages that could fairly be anticipated to flow from early termination of a contract generating approximately $10.4 million in annual profit for VTS.

Vantor offers no explanation in its Opposition for why a 75% multiplier applied to gross revenue represents a reasonable estimate of its anticipated harm. It cannot, because no such explanation exists.

C. Actual Damages Were Readily Ascertainable at the Time of Contracting

Vantor's Opposition argues that "the unpredictable nature of the freight market" made actual damages difficult to calculate at the time the TSA was executed on March 15, 2019. Opp. at 12. This argument is without merit. In fact, the TSA itself provides a comprehensive framework for calculating actual damages with considerable precision.

The TSA contains the following provisions, each of which directly bears on the calculation of damages from early termination:

• Schedule B (Rate Schedules): Detailed per-mile and per-load rates for each of the defined service lanes, organized by equipment type and origin-destination pair, providing a granular basis for computing the revenue at stake.

• Section 2.1(c) (Volume Commitments): A defined Annual Committed Volume of $43,200,000, with a total five-year minimum volume commitment of $216,000,000, establishing the baseline revenue stream.

• Section 5.3 (Rate Adjustment Mechanism): An annual rate adjustment indexed to a specified blend of 70% diesel fuel index and 30% Consumer Price Index for All Urban Consumers (CPI-U), providing a contractually defined methodology for projecting future rates.

These provisions demonstrate that the parties had sophisticated tools — indeed, tools of their own devising — to estimate the economic value of the contract and, correspondingly, the damages flowing from its termination. The TSA was not a contract of uncertain scope or indefinite duration; it was a five-year agreement with defined volumes, defined rates, and a defined mechanism for rate adjustment. The calculation of lost profits on such a contract is straightforward: take the committed volume for the remaining term, apply the contractually defined rates (as adjusted), subtract VTS's variable and allocable costs, and the result is the profit VTS would have earned but for early termination.

VTS's operating margins, fleet costs, driver wages, fuel consumption, equipment depreciation, and overhead were known or knowable quantities at the time of contracting. Vantor — a holding company with approximately $385 million in FY 2021 revenue, operating through VTS a fleet of approximately 650 owned tractors and 2,100 trailers — was a sophisticated commercial entity fully capable of modeling its anticipated damages from early termination. Indeed, any enterprise operating at that scale would necessarily maintain detailed financial models, cost allocation methodologies, and margin analyses for each of its major customer relationships.

New York courts have consistently held that where contract terms supply defined parameters for calculating actual damages, the "difficulty of ascertainment" prong is not satisfied. See JMD Holding, 4 N.Y.3d at 381 ("There is nothing in the nature of these contracts to suggest that the amount of actual damages was not readily ascertainable . . . the contracts themselves provided adequate means by which the parties could calculate actual damages."); United Merchant & Mfrs., Inc. v. Equitable Life Assurance Soc'y, 674 F.2d 134, 142 (2d Cir. 1982) (holding that where "the contract itself contains a measure by which damages can be calculated," the difficulty-of-ascertainment prong is not met); Bates Advert. USA, 7 N.Y.3d at 120–21 (similar). The TSA falls squarely within this line of authority.

D. Vantor's Cases Are Distinguishable

Vantor's Opposition relies principally on a handful of cases involving long-term commercial leases and construction contracts where courts upheld liquidated damages provisions. See Opp. at 13–16 (citing Jay's Distributing Co. v. United Can Co., Leasing Serv. Corp. v. Justice, and others). These cases are distinguishable from the present matter in several material respects.

First, in each of the cases Vantor cites, the liquidated damages bore a reasonable proportional relationship to the expected harm. The stipulated amounts in those cases typically ranged from 10% to 25% of the remaining contract value — amounts that bore a plausible relationship to the claimant's anticipated loss. Here, by contrast, the 75% multiplier applied in Section 14.2 produces liquidated damages equal to approximately 75% of remaining gross revenue and more than 600% of anticipated lost profits. None of Vantor's authorities endorsed a liquidated damages provision approaching this degree of disproportion.

Second, in the cases Vantor cites, actual damages truly were difficult to ascertain because market substitution was uncertain and the claimant's ability to mitigate was genuinely in question. In a commercial lease context, for example, the landlord's ability to re-lease premises at comparable rates depends on local market conditions, the condition of the premises, the remaining lease term, and other variables that may resist precise quantification at the time of contracting. Here, by contrast, VTS could readily replace Stonefield freight volume. The national truckload freight market in early-to-mid 2022 — the period following Stonefield's termination — was characterized by robust demand, tight carrier capacity, and elevated spot rates, conditions that would have facilitated VTS's ability to find substitute freight. More fundamentally, however, the question is not what actually happened after termination but what was reasonably foreseeable at the time of contracting. At the time the TSA was executed in March 2019, VTS had the tools and the data to model its anticipated damages from early termination with reasonable precision, as discussed above.

Third, and most critically, none of the cases Vantor cites involved a liquidated damages formula that produced an amount more than six times the claimant's own acknowledged lost profits. That disparity alone distinguishes this case from Vantor's authorities and confirms the punitive character of Section 14.2. When a contractual damages provision yields a sum bearing so little relationship to any reasonable measure of anticipated harm, the provision is, by definition, a penalty — regardless of the label the parties have attached to it. See Truck Rent-A-Ctr., 41 N.Y.2d at 358 ("A liquidated damages provision will not be enforced when the amount is 'plainly or grossly disproportionate to the probable loss.'") (quoting Restatement (Second) of Contracts § 356, cmt. b).

II. VANTOR IMPROPERLY CONFLATES THE ENFORCEABILITY ANALYSIS WITH THE MERITS OF THE BREACH DISPUTE

A. The Enforceability of Section 14.2 Is Independent of Whether Stonefield's Termination Was "For Cause"

A substantial portion of Vantor's Opposition is devoted to the argument that Stonefield's termination of the TSA was pretextual and did not constitute a valid termination "for Cause" under TSA Section 13.1(a). See Opp. at 17–23. Vantor contends that Stonefield fabricated performance deficiencies as a pretext for terminating the TSA and that Stonefield's true motivation was to avoid the anticipated 14.3% rate increase under the April 2022 rate adjustment cycle and to redirect freight to lower-cost carriers Cascade Freight Systems Inc. and Briarwood Trucking Co. See Opp. at 18–20.

These arguments — whatever their ultimate merit at a later stage of this litigation — are irrelevant to the pending motion. The Motion to Dismiss does not ask the Court to determine whether Stonefield validly terminated the TSA for Cause. Rather, it asks the Court to determine whether, assuming arguendo that Stonefield's termination was wrongful (i.e., was not for Cause), the remedy Vantor seeks — $67.23 million in liquidated damages under Section 14.2 — is legally available under New York law. That is a pure question of contract enforceability, and it does not depend on the factual circumstances surrounding Stonefield's termination.

The distinction is not merely formal; it is analytically critical. The enforceability of a liquidated damages clause is assessed as of the time of contracting — here, March 15, 2019 — not at the time of breach. See Truck Rent-A-Ctr., 41 N.Y.2d at 357 ("The test to be applied in determining whether a provision in a contract constitutes a penalty or an enforceable liquidation of damages . . . is to be judged as of the time of making the contract."); JMD Holding, 4 N.Y.3d at 380 (same). Whether Stonefield breached the TSA, and what motivated its termination, are factual questions that have no bearing on whether the parties, in March 2019, agreed to a liquidated damages formula that satisfies the two-part enforceability test.

Vantor's arguments about Stonefield's alleged motives for termination — including the anticipated rate increase from a weighted average of $2.87 per mile to $3.28 per mile (an increase of approximately 14.3%, adding approximately $6.2 million in annual costs), and the alleged diversion of freight to Cascade Freight Systems Inc. and Briarwood Trucking Co. — are factual contentions relevant to the question of liability. They may be relevant at summary judgment or trial in assessing whether Stonefield's termination was in fact wrongful. But they are wholly irrelevant to the legal question presented by this motion: whether Section 14.2 is an enforceable liquidated damages provision or an unenforceable penalty. The Court should decline Vantor's invitation to conflate these two distinct inquiries.

B. Vantor's Factual Assertions Do Not Defeat the Motion

Throughout its Opposition, Vantor marshals a series of factual assertions that, it contends, demonstrate the need for discovery and preclude dismissal at the pleading stage. Specifically, Vantor asserts that:

• Stonefield failed to tender the Annual Committed Volume in Contract Years 2 and 3, tendering only $31.8 million in CY2 (April 2020–March 2021) and $36.5 million in CY3 (through January 2022, before termination), and that this volume shortfall caused VTS's alleged performance failures. See Opp. at 21–22.

• Stonefield violated the exclusivity provisions of TSA Section 4.2 by diverting freight on "Primary Lanes" (as defined in Schedule A) to competing carriers. See Opp. at 22–23.

• Stonefield's purported desire to avoid the upcoming rate adjustment — from a weighted average of $2.87 per mile to $3.28 per mile, a 14.3% increase adding approximately $6.2 million in annual costs — was the true motivation for termination. See Opp. at 18–19.

These factual allegations, even if accepted as true for purposes of this motion, do not establish that the liquidated damages formula in Section 14.2 is enforceable. As explained above, the enforceability of a liquidated damages provision turns on whether the stipulated amount was a reasonable estimate of anticipated damages at the time of contracting and whether actual damages were difficult to ascertain at that time. Neither inquiry depends on what Stonefield did or did not do during the performance of the TSA. Vantor's factual assertions about Stonefield's conduct may be relevant to the question of breach and to the computation of actual damages, but they do not — and cannot — transform a punitive liquidated damages provision into an enforceable one.

Similarly, Vantor's claims about Stonefield's alleged exclusivity violations on Primary Lanes and Stonefield's purported desire to avoid the upcoming rate adjustment go to the question of breach — not to the question of whether the contractual remedy is lawful. The two inquiries are distinct, and Vantor's Opposition systematically collapses them into one. This Court should not permit that analytical error to stand.

III. VANTOR'S LOST PROFITS CLAIM REMAINS INADEQUATELY PLED

A. The Complaint Fails to Plead Lost Profits with Requisite Certainty

Under New York law, lost profits must be pled — and ultimately proven — with reasonable certainty. See Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261 (1986) ("[I]t is incumbent upon the party seeking to recover lost profits to demonstrate . . . that the alleged loss was 'capable of proof with reasonable certainty.'"); Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 403 (1993) (same). Although the standard for pleading lost profits is not identical to the standard for proving them at trial, a complaint must nonetheless provide sufficient factual content to make the lost profits claim plausible — not merely possible. See Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 570.

Vantor's Complaint alleges $18,700,000 in lost profits based on an "average 12% operating margin" on Stonefield freight multiplied by the remaining committed volume. Compl. ¶ 62. This bare allegation is insufficient for several independent reasons.

First, the Complaint does not identify the specific costs, revenues, or financial projections underlying the 12% margin figure. The assertion that VTS earned an "average 12% operating margin" on Stonefield freight is a conclusory allegation unsupported by any factual detail. The Complaint does not specify VTS's revenue on Stonefield freight in any particular period, does not identify the cost categories that comprise the remaining 88% of revenue, and does not explain how the 12% figure was derived or whether it reflects historical performance, projected performance, or some other basis. Without such detail, the Court has no basis on which to assess the plausibility of the claimed margin.

Second, the Complaint does not account for variable costs that VTS would not have incurred had the contract continued in effect. An operating margin of 12% on freight revenue of $43.2 million implies total operating costs of approximately $38 million per year. But a significant portion of those costs — including fuel, driver wages, tolls, equipment maintenance, and other variable costs — would not have been incurred in the absence of the Stonefield freight. Upon termination, VTS was relieved of the obligation to perform the transportation services; its variable costs would have ceased accordingly. The Complaint's lost profits calculation ignores this fundamental principle and simply applies a gross margin percentage to the remaining committed volume without any adjustment for costs avoided. This approach overstates the lost profits figure and renders the claim implausible as pled.

Third, the Complaint does not address market conditions that would affect VTS's ability to maintain the claimed 12% margin over the remaining two-year contract term (through March 31, 2024). Operating margins in the freight transportation industry fluctuate with fuel prices, driver availability, equipment costs, and other market variables. The Complaint's assumption of a static 12% margin over a two-year forward period, without any factual basis for that assumption, does not satisfy the reasonable certainty standard.

Fourth, and perhaps most fundamentally, the Complaint assumes — without any factual foundation — that Stonefield would have tendered the full Annual Committed Volume of $43,200,000 for the remaining contract term. But this is the very obligation that Vantor itself alleges Stonefield was already breaching. The Complaint acknowledges that Stonefield tendered only $31.8 million in Contract Year 2 and $36.5 million in Contract Year 3 (through January 2022) — shortfalls of approximately $11.4 million and $6.7 million, respectively. Compl. ¶¶ 37–38. Having alleged that Stonefield was systematically under-tendering, Vantor cannot then calculate its lost profits on the assumption that Stonefield would have tendered the full committed volume for the remaining two years. This internal contradiction renders the lost profits claim facially implausible.

B. The Lost Profits Claim Is Duplicative of the Liquidated Damages Claim

As argued in Stonefield's opening memorandum, and as Vantor conspicuously failed to address in its Opposition, Vantor cannot recover both liquidated damages of $67,230,000 and separate lost profits of $18,700,000. Both claims compensate for the identical harm: the economic value of the TSA that Vantor allegedly lost due to Stonefield's early termination.

New York law prohibits double recovery. See Loughrin v. Litchfield & Madison Ry. Co., 48 Misc. 3d 12, 16 (App. Term 2015); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525–26 (2d Cir. 1994) (noting that under New York law, "a plaintiff may not recover more than one full satisfaction for a single injury"). The liquidated damages clause in Section 14.2, by its express terms, represents the parties' agreed-upon measure of damages for termination of the TSA other than for Cause. If enforceable — which Stonefield disputes — the clause displaces any separate lost profits claim, because the parties have already stipulated to the amount of damages flowing from early termination. See TSA § 14.2 (specifying liquidated damages as the exclusive remedy for termination without Cause). If unenforceable — as Stonefield argues, and as the Court should hold — Vantor may pursue a claim for actual damages, including lost profits (assuming such a claim is adequately pled). But Vantor cannot pursue both simultaneously.

Vantor's Opposition fails entirely to address this argument. Its silence is telling. Stonefield's opening memorandum squarely presented the duplicative recovery issue, and Vantor chose not to respond. The Court should deem the argument conceded. See Jackson v. Fed. Express, 766 F.3d 189, 198 (2d Cir. 2014) ("[A] party's failure to raise or adequately brief an issue in opposition to a motion to dismiss may result in a waiver of that argument.").

The Complaint pleads both claims as cumulative, seeking $67,230,000 in liquidated damages plus $18,700,000 in lost profits — a total of $85,930,000 for what is, at bottom, a single contractual harm: the loss of the benefit of the bargain under the TSA. This is precisely the type of impermissible stacking that New York courts reject. The lost profits claim should be dismissed as duplicative.

IV. VANTOR'S ADDITIONAL DAMAGES CATEGORIES ALSO FAIL AS A MATTER OF LAW

Although not the primary focus of Stonefield's opening brief, it bears noting that the additional categories of damages alleged in the Complaint are independently subject to dismissal as barred by the consequential damages waiver in TSA Section 15.1. Specifically, the Complaint alleges three additional categories of damages:

• Stranded assets and costs: $5,200,000, representing alleged depreciation and write-downs on tractors, trailers, and other equipment dedicated to the Stonefield account. Compl. ¶ 64.

• Workforce reduction costs: $2,870,000, representing alleged severance, unemployment insurance costs, and related expenses associated with the termination of approximately 180 drivers and support staff who were purportedly dedicated to the Stonefield freight operation. Compl. ¶ 65.

• Mitigation costs: $1,400,000, representing alleged costs incurred by VTS in seeking replacement freight, including sales and marketing expenses, broker commissions, and related costs. Compl. ¶ 66.

Each of these categories constitutes consequential or incidental damages barred by TSA Section 15.1. That provision states:

"IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOST REVENUE, LOSS OF USE, BUSINESS INTERRUPTION, OR COST OF PROCUREMENT OF SUBSTITUTE SERVICES, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY, OR ANY OTHER THEORY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES."

TSA § 15.1 (emphasis in original).

Depreciation on equipment dedicated to a particular customer account, severance costs for personnel displaced by the termination of that account, and costs incurred in seeking replacement business are classic categories of consequential and incidental damages. See Biotronik A.G. v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799, 806 (2014) (consequential damages are "damages that do not flow directly and immediately from the act of the party, but only from some of the consequences or results of such act"); see also U.C.C. § 2-715(2) (defining consequential damages as losses "resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise"). Each of the three additional damages categories alleged in the Complaint falls squarely within the scope of Section 15.1's mutual waiver.

Vantor's Opposition does not address Section 15.1 or argue that these categories of damages survive the mutual consequential damages waiver. Nor does the Opposition contend that any of the three categories constitutes "direct" damages falling outside the scope of the waiver. The failure to respond to this argument warrants its acceptance by the Court. See Jackson, 766 F.3d at 198.

These claims — totaling $9,470,000 — should be dismissed.

CONCLUSION

For the foregoing reasons, and for the reasons set forth in Stonefield's opening Memorandum of Law filed October 14, 2022 (Dkt. No. 18), Defendant Stonefield Logistics Group Inc. respectfully requests that the Court grant its Motion to Dismiss in its entirety:

1. Dismissing Vantor's liquidated damages claim ($67,230,000) as premised on an unenforceable penalty clause that fails both prongs of the New York enforceability test for liquidated damages provisions;

2. Dismissing Vantor's lost profits claim ($18,700,000) as inadequately pled under the reasonable certainty standard and, in the alternative, as duplicative of the liquidated damages claim, seeking recovery for the identical contractual harm;

3. Dismissing Vantor's consequential damages claims — stranded assets ($5,200,000), workforce reduction costs ($2,870,000), and mitigation costs ($1,400,000) — as barred by the mutual consequential damages waiver in TSA Section 15.1.

The total claims subject to dismissal amount to $95,400,000 — the entirety of Vantor's damages case. Dismissal of all claims is warranted as a matter of law, and no discovery or further factual development is necessary to resolve the issues presented.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Patrick Gallagher [Draft — to be signed by Samuel Eklund upon finalization]

200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) _- Facsimile: (212) -_

Attorneys for Defendant Stonefield Logistics Group Inc.

Dated: November 29, 2022 New York, New York

CERTIFICATE OF SERVICE

I hereby certify that on November __, 2022, I caused the foregoing Reply Memorandum of Law in Further Support of Defendant Stonefield Logistics Group Inc.'s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6), together with all exhibits and attachments thereto, to be served upon all counsel of record via the Court's CM/ECF electronic filing system, which will send notification of such filing to all parties registered to receive electronic notices in this case, including:

Harrison Caldwell, Esq. Jason Whitford, Esq. Caldwell Royce & Shapiro LLP 1 Liberty Plaza, 22nd Floor New York, New York 10006 Telephone: (212) _-__

Attorneys for Plaintiff Vantor Holdings Corp.

________________________________________

Patrick Gallagher [Draft — to be signed upon finalization]

INTERNAL MEMORANDUM — NOT FOR FILING — PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

DRAFT NOTES FOR S. EKLUND REVIEW

From: Patrick Gallagher, Senior Associate To: Samuel Eklund, Partner Date: November 29, 2022 Re: Reply Memo — Vantor Holdings Corp. v. Stonefield Logistics Group Inc., No. 22-cv-07841 (MTCa) Matter No.: 1012-00005

Sam —

This draft responds to Vantor's opposition filed November 18. A few notes for your review:

Main Thrust. Vantor's opposition largely conflates the enforceability question with the merits of whether Stonefield's termination was pretextual. I've kept the reply focused on the legal standard and tried to avoid getting drawn into the factual disputes about whether termination was for Cause. Let me know if you think we should engage more directly with their pretext arguments or if the current approach — treating them as irrelevant to the 12(b)(6) inquiry — is the right one.

Section 15.1 / Consequential Damages Waiver. I added the argument about TSA Section 15.1 barring the stranded assets, workforce reduction, and mitigation cost claims. This was not in our opening brief, but Vantor did not address it in opposition, and I thought it was worth flagging for the Court. The argument is strong — those are textbook consequential damages categories, and the waiver language is broad and mutual. Let me know if you want to sharpen this section or if you're concerned about raising it for the first time in reply. I think it's defensible since it's based on the face of the contract already before the Court, but I understand if you'd prefer to save it for summary judgment.

Duplicative Recovery / Lost Profits. Vantor's opposition completely ignores our argument that the lost profits claim is duplicative of the liquidated damages claim. I've flagged their silence and asked the Court to deem the point conceded. If you want to develop this argument further, let me know.

Amended Complaint. Vantor filed an Amended Complaint on December 2, which may moot this motion depending on timing. We should have the reply ready to file in case the Court rules before that filing is processed or in case the Amended Complaint does not materially alter the damages claims. I'll compare the original and amended complaints once I have a copy and advise on whether we need to file a new motion.

Please let me know your comments and any revisions. I can turn around a final version within 24 hours of receiving your edits.

— PG

NOTE: This internal annotation page is to be removed from the final filing version.

VANTOR HOLDINGS CORP.,

Plaintiff,

Case No. 22-cv-07841 (MTCa)

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

STONEFIELD LOGISTICS GROUP INC.,

Defendant.

INTERNAL WORKING DRAFT — NOT FOR FILING — Subject to attorney review by S. Eklund
UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
DEFENDANT STONEFIELD LOGISTICS GROUP INC.'S REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF ITS MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(6)
PRELIMINARY STATEMENT
This Reply Memorandum is submitted on behalf of Defendant Stonefield Logistics Group Inc. ("Stonefield" or "Defendant") in further support of its Motion to Dismiss, filed October 14, 2022 (Dkt. No. 18), and responds to the Memorandum of Law in Opposition filed by Plaintiff Vantor Holdings Corp. ("Vantor" or "Plaintiff") on November 18, 2022 (Dkt. No. 24) (the "Opposition").
Vantor's Opposition fails to rescue its legally deficient claims. Rather than confronting the legal infirmities identified in Stonefield's opening memorandum, Vantor improperly attempts to convert this Rule 12(b)(6) motion into a premature merits adjudication by injecting disputed factual assertions that have no bearing on the facial adequacy of its pleading. The Opposition is replete with allegations about Stonefield's alleged motives for termination, its purported exclusivity violations, and the surrounding commercial circumstances — none of which speak to the dispositive legal question before the Court: whether the damages Vantor seeks are cognizable as a matter of law under the terms of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315).
The two central arguments in Stonefield's opening memorandum remain unrebutted.
First, the liquidated damages clause in Section 14.2 of the TSA constitutes an unenforceable penalty as a matter of law under well-established New York precedent. The formula in Section 14.2 — which mechanically computes damages equal to 75% of the Annual Committed Volume multiplied by the number of remaining contract years — produces a sum of approximately $67,230,000, an amount more than six times Vantor's own acknowledged lost profits on the contract. A liquidated damages provision so grossly disproportionate to any reasonable estimate of anticipated harm is, by definition, a penalty, and New York law does not permit its enforcement. Vantor's Opposition offers no persuasive authority to the contrary.
Second, Vantor's separate lost profits claim fails to plead damages with the requisite certainty under New York law. The Complaint's bare assertion of $18,700,000 in lost profits, derived from an unsubstantiated "average 12% operating margin," does not satisfy the pleading standard for lost profits claims. Moreover, as Stonefield demonstrated in its opening brief — and as Vantor conspicuously failed to address in its Opposition — the lost profits claim is duplicative of the liquidated damages claim, as both seek compensation for the identical contractual harm.
Vantor's Opposition fundamentally conflates the enforceability analysis — which the Court can and should resolve at the pleading stage — with the factual merits of the underlying breach dispute, which is a separate inquiry entirely. This distinction is critical. The pending motion does not ask the Court to determine whether Stonefield's termination of the TSA was wrongful. It asks the Court to determine whether, even assuming a wrongful termination, the specific categories of damages Vantor seeks are legally available. As demonstrated below, they are not.
ARGUMENT
I. THE LIQUIDATED DAMAGES CLAUSE IS AN UNENFORCEABLE PENALTY, AND VANTOR'S OPPOSITION FAILS TO DEMONSTRATE OTHERWISE
A. Vantor Misstates the Applicable Legal Standard
Vantor's Opposition devotes considerable effort to the proposition that the enforceability of a liquidated damages clause is "invariably a factual question that cannot be resolved on a motion to dismiss." Opp. at 7. This proposition is incorrect as a matter of law.
Under New York law, the enforceability of a liquidated damages provision is a question of law that courts routinely resolve at the pleading stage when the contract terms are unambiguous and the relevant circumstances are apparent from the face of the agreement. See Kestrel Corporation, 4 N.Y.3d 373, 380 (2005) ("[W]hether a contractual provision represents an enforceable liquidated damages clause or an unenforceable penalty is a question of law, giving due consideration to the nature of the contract and the circumstances under which it was made."); Truck Rent-A-Ctr., Inc. v. Purdy Corp., 41 N.Y.2d 354, 358 (1977) (same). Where, as here, the contract is before the Court, its terms are unambiguous, and the relevant circumstances can be ascertained from the four corners of the agreement, there is no need for discovery or factual development to resolve the enforceability question.
The two-part test for enforceability of a liquidated damages provision under New York law is well settled. A liquidated damages clause is enforceable only if: (1) the liquidated amount is a reasonable estimate of the anticipated or probable damages at the time of contracting; and (2) actual damages must have been difficult to ascertain at the time of contracting. See Truck Rent-A-Ctr., 41 N.Y.2d at 357; JMD Holding, 4 N.Y.3d at 380; Bates Advert. USA, Inc. v. 498 Seventh, LLC, 7 N.Y.3d 115, 120 (2006). The party seeking to enforce the clause — here, Vantor — bears the burden of demonstrating that both prongs are satisfied. See JMD Holding, 4 N.Y.3d at 380. As demonstrated below, Vantor cannot satisfy either prong.
Both prongs of this analysis can be assessed based on the TSA itself, which is attached to the Declaration of Samuel Eklund (filed October 14, 2022, Dkt. No. 19) as Exhibit A and is therefore properly before the Court on this motion. See Chambers v. Pinnacle Corporation, 282 F.3d 147, 153 (2d Cir. 2002) (on a 12(b)(6) motion, the court may consider "any written instrument attached to [the complaint] as an exhibit or any statements or documents incorporated in it by reference" as well as documents "integral to" the complaint). The TSA is referenced extensively in the Complaint and forms the basis of each of Vantor's claims. The Court need look no further than the contract's own terms to determine whether Section 14.2 passes muster under New York law. It does not.
B. The Formula Produces a Grossly Disproportionate Amount That Confirms Its Punitive Character
The liquidated damages formula in Section 14.2 of the TSA operates in a purely mechanical fashion. The provision states, in relevant part:
"In the event of termination of this Agreement by Service Provider other than for Cause as defined in Section 13.1, Service Provider shall pay to Customer liquidated damages in an amount equal to seventy-five percent (75%) of the Annual Committed Volume multiplied by the number of remaining full and partial Contract Years in the then-current Term."
TSA § 14.2. The Annual Committed Volume ("ACV") is defined as $43,200,000. TSA § 2.1(c). This figure represents the minimum annual freight volume that Stonefield committed to tender to Vantor's subsidiary, VTS Freight Carriers LLC ("VTS"), over each of the five contract years (April 1, 2019 through March 31, 2024).
At the time of Stonefield's termination on March 4, 2022, approximately 2.07 contract years remained in the TSA's term (through the original March 31, 2024 expiration date). Applying the Section 14.2 formula, the liquidated damages computation yields the following:
•  Two full remaining contract years: 75% × $43,200,000 × 2 = $64,800,000
•  Partial contract year (approximately 27 days of Contract Year 3): 75% × $43,200,000 × (27/365) ≈ $2,430,000
•  Total liquidated damages: approximately $67,230,000
This is the amount Vantor seeks in its Complaint. Compl. ¶ 58.
This sum — representing 75% of the total remaining contract value — bears no reasonable relationship to the anticipated actual harm from early termination. The gross disproportionality between the liquidated amount and any realistic measure of anticipated damages is apparent from Vantor's own pleading. Vantor's Complaint acknowledges that VTS's operating margin on Stonefield freight was approximately 12%. Compl. ¶ 43. At that margin, VTS's actual lost profit on the remaining committed volume of approximately $86.4 million (i.e., $43,200,000 × 2 remaining full years, assuming full volume tender) would be approximately $10.4 million — a small fraction of the $67,230,000 demanded under Section 14.2.
The 75% multiplier applied in Section 14.2 is thus not a reasonable estimate of anticipated damages; it is a punitive surcharge. A reasonable liquidated damages provision might approximate the claimant's anticipated lost margin (here, 12% of remaining volume, or roughly $10.4 million). Instead, Section 14.2 applies a multiplier of 75% to gross revenue — not to any measure of profit, net value, or anticipated harm — yielding an amount approximately 6.5 times greater than Vantor's own alleged lost profits.
This degree of disproportion is a hallmark of a penalty provision designed to deter termination rather than to approximate harm. See Truck Rent-A-Ctr., 41 N.Y.2d at 358 (invalidating liquidated damages provision where the stipulated amount was "unreasonably and grossly disproportionate to the probable loss"); 172 Van Duzer Realty Corp. v. Globe Alumni Student Assistance Ass'n, 24 N.Y.3d 528, 536 (2014) (holding that a liquidated damages provision that "fixe[d] damages grossly disproportionate to the amount of actual damages" constituted an unenforceable penalty). As the Court of Appeals has explained, the "single most important factor" in determining whether a stipulated damages clause is enforceable is "whether the amount is reasonable in relation to the probable damages." JMD Holding, 4 N.Y.3d at 381. Here, by any measure, $67.23 million is not a reasonable estimate of damages that could fairly be anticipated to flow from early termination of a contract generating approximately $10.4 million in annual profit for VTS.
Vantor offers no explanation in its Opposition for why a 75% multiplier applied to gross revenue represents a reasonable estimate of its anticipated harm. It cannot, because no such explanation exists.
C. Actual Damages Were Readily Ascertainable at the Time of Contracting
Vantor's Opposition argues that "the unpredictable nature of the freight market" made actual damages difficult to calculate at the time the TSA was executed on March 15, 2019. Opp. at 12. This argument is without merit. In fact, the TSA itself provides a comprehensive framework for calculating actual damages with considerable precision.
The TSA contains the following provisions, each of which directly bears on the calculation of damages from early termination:
•  Schedule B (Rate Schedules): Detailed per-mile and per-load rates for each of the defined service lanes, organized by equipment type and origin-destination pair, providing a granular basis for computing the revenue at stake.
•  Section 2.1(c) (Volume Commitments): A defined Annual Committed Volume of $43,200,000, with a total five-year minimum volume commitment of $216,000,000, establishing the baseline revenue stream.
•  Section 5.3 (Rate Adjustment Mechanism): An annual rate adjustment indexed to a specified blend of 70% diesel fuel index and 30% Consumer Price Index for All Urban Consumers (CPI-U), providing a contractually defined methodology for projecting future rates.
These provisions demonstrate that the parties had sophisticated tools — indeed, tools of their own devising — to estimate the economic value of the contract and, correspondingly, the damages flowing from its termination. The TSA was not a contract of uncertain scope or indefinite duration; it was a five-year agreement with defined volumes, defined rates, and a defined mechanism for rate adjustment. The calculation of lost profits on such a contract is straightforward: take the committed volume for the remaining term, apply the contractually defined rates (as adjusted), subtract VTS's variable and allocable costs, and the result is the profit VTS would have earned but for early termination.
VTS's operating margins, fleet costs, driver wages, fuel consumption, equipment depreciation, and overhead were known or knowable quantities at the time of contracting. Vantor — a holding company with approximately $385 million in FY 2021 revenue, operating through VTS a fleet of approximately 650 owned tractors and 2,100 trailers — was a sophisticated commercial entity fully capable of modeling its anticipated damages from early termination. Indeed, any enterprise operating at that scale would necessarily maintain detailed financial models, cost allocation methodologies, and margin analyses for each of its major customer relationships.
New York courts have consistently held that where contract terms supply defined parameters for calculating actual damages, the "difficulty of ascertainment" prong is not satisfied. See JMD Holding, 4 N.Y.3d at 381 ("There is nothing in the nature of these contracts to suggest that the amount of actual damages was not readily ascertainable . . . the contracts themselves provided adequate means by which the parties could calculate actual damages."); United Merchant & Mfrs., Inc. v. Equitable Life Assurance Soc'y, 674 F.2d 134, 142 (2d Cir. 1982) (holding that where "the contract itself contains a measure by which damages can be calculated," the difficulty-of-ascertainment prong is not met); Bates Advert. USA, 7 N.Y.3d at 120–21 (similar). The TSA falls squarely within this line of authority.
D. Vantor's Cases Are Distinguishable
Vantor's Opposition relies principally on a handful of cases involving long-term commercial leases and construction contracts where courts upheld liquidated damages provisions. See Opp. at 13–16 (citing Jay's Distributing Co. v. United Can Co., Leasing Serv. Corp. v. Justice, and others). These cases are distinguishable from the present matter in several material respects.
First, in each of the cases Vantor cites, the liquidated damages bore a reasonable proportional relationship to the expected harm. The stipulated amounts in those cases typically ranged from 10% to 25% of the remaining contract value — amounts that bore a plausible relationship to the claimant's anticipated loss. Here, by contrast, the 75% multiplier applied in Section 14.2 produces liquidated damages equal to approximately 75% of remaining gross revenue and more than 600% of anticipated lost profits. None of Vantor's authorities endorsed a liquidated damages provision approaching this degree of disproportion.
Second, in the cases Vantor cites, actual damages truly were difficult to ascertain because market substitution was uncertain and the claimant's ability to mitigate was genuinely in question. In a commercial lease context, for example, the landlord's ability to re-lease premises at comparable rates depends on local market conditions, the condition of the premises, the remaining lease term, and other variables that may resist precise quantification at the time of contracting. Here, by contrast, VTS could readily replace Stonefield freight volume. The national truckload freight market in early-to-mid 2022 — the period following Stonefield's termination — was characterized by robust demand, tight carrier capacity, and elevated spot rates, conditions that would have facilitated VTS's ability to find substitute freight. More fundamentally, however, the question is not what actually happened after termination but what was reasonably foreseeable at the time of contracting. At the time the TSA was executed in March 2019, VTS had the tools and the data to model its anticipated damages from early termination with reasonable precision, as discussed above.
Third, and most critically, none of the cases Vantor cites involved a liquidated damages formula that produced an amount more than six times the claimant's own acknowledged lost profits. That disparity alone distinguishes this case from Vantor's authorities and confirms the punitive character of Section 14.2. When a contractual damages provision yields a sum bearing so little relationship to any reasonable measure of anticipated harm, the provision is, by definition, a penalty — regardless of the label the parties have attached to it. See Truck Rent-A-Ctr., 41 N.Y.2d at 358 ("A liquidated damages provision will not be enforced when the amount is 'plainly or grossly disproportionate to the probable loss.'") (quoting Restatement (Second) of Contracts § 356, cmt. b).
II. VANTOR IMPROPERLY CONFLATES THE ENFORCEABILITY ANALYSIS WITH THE MERITS OF THE BREACH DISPUTE
A. The Enforceability of Section 14.2 Is Independent of Whether Stonefield's Termination Was "For Cause"
A substantial portion of Vantor's Opposition is devoted to the argument that Stonefield's termination of the TSA was pretextual and did not constitute a valid termination "for Cause" under TSA Section 13.1(a). See Opp. at 17–23. Vantor contends that Stonefield fabricated performance deficiencies as a pretext for terminating the TSA and that Stonefield's true motivation was to avoid the anticipated 14.3% rate increase under the April 2022 rate adjustment cycle and to redirect freight to lower-cost carriers Cascade Freight Systems Inc. and Briarwood Trucking Co. See Opp. at 18–20.
These arguments — whatever their ultimate merit at a later stage of this litigation — are irrelevant to the pending motion. The Motion to Dismiss does not ask the Court to determine whether Stonefield validly terminated the TSA for Cause. Rather, it asks the Court to determine whether, assuming arguendo that Stonefield's termination was wrongful (i.e., was not for Cause), the remedy Vantor seeks — $67.23 million in liquidated damages under Section 14.2 — is legally available under New York law. That is a pure question of contract enforceability, and it does not depend on the factual circumstances surrounding Stonefield's termination.
The distinction is not merely formal; it is analytically critical. The enforceability of a liquidated damages clause is assessed as of the time of contracting — here, March 15, 2019 — not at the time of breach. See Truck Rent-A-Ctr., 41 N.Y.2d at 357 ("The test to be applied in determining whether a provision in a contract constitutes a penalty or an enforceable liquidation of damages . . . is to be judged as of the time of making the contract."); JMD Holding, 4 N.Y.3d at 380 (same). Whether Stonefield breached the TSA, and what motivated its termination, are factual questions that have no bearing on whether the parties, in March 2019, agreed to a liquidated damages formula that satisfies the two-part enforceability test.
Vantor's arguments about Stonefield's alleged motives for termination — including the anticipated rate increase from a weighted average of $2.87 per mile to $3.28 per mile (an increase of approximately 14.3%, adding approximately $6.2 million in annual costs), and the alleged diversion of freight to Cascade Freight Systems Inc. and Briarwood Trucking Co. — are factual contentions relevant to the question of liability. They may be relevant at summary judgment or trial in assessing whether Stonefield's termination was in fact wrongful. But they are wholly irrelevant to the legal question presented by this motion: whether Section 14.2 is an enforceable liquidated damages provision or an unenforceable penalty. The Court should decline Vantor's invitation to conflate these two distinct inquiries.
B. Vantor's Factual Assertions Do Not Defeat the Motion
Throughout its Opposition, Vantor marshals a series of factual assertions that, it contends, demonstrate the need for discovery and preclude dismissal at the pleading stage. Specifically, Vantor asserts that:
•  Stonefield failed to tender the Annual Committed Volume in Contract Years 2 and 3, tendering only $31.8 million in CY2 (April 2020–March 2021) and $36.5 million in CY3 (through January 2022, before termination), and that this volume shortfall caused VTS's alleged performance failures. See Opp. at 21–22.
•  Stonefield violated the exclusivity provisions of TSA Section 4.2 by diverting freight on "Primary Lanes" (as defined in Schedule A) to competing carriers. See Opp. at 22–23.
•  Stonefield's purported desire to avoid the upcoming rate adjustment — from a weighted average of $2.87 per mile to $3.28 per mile, a 14.3% increase adding approximately $6.2 million in annual costs — was the true motivation for termination. See Opp. at 18–19.
These factual allegations, even if accepted as true for purposes of this motion, do not establish that the liquidated damages formula in Section 14.2 is enforceable. As explained above, the enforceability of a liquidated damages provision turns on whether the stipulated amount was a reasonable estimate of anticipated damages at the time of contracting and whether actual damages were difficult to ascertain at that time. Neither inquiry depends on what Stonefield did or did not do during the performance of the TSA. Vantor's factual assertions about Stonefield's conduct may be relevant to the question of breach and to the computation of actual damages, but they do not — and cannot — transform a punitive liquidated damages provision into an enforceable one.
Similarly, Vantor's claims about Stonefield's alleged exclusivity violations on Primary Lanes and Stonefield's purported desire to avoid the upcoming rate adjustment go to the question of breach — not to the question of whether the contractual remedy is lawful. The two inquiries are distinct, and Vantor's Opposition systematically collapses them into one. This Court should not permit that analytical error to stand.
III. VANTOR'S LOST PROFITS CLAIM REMAINS INADEQUATELY PLED
A. The Complaint Fails to Plead Lost Profits with Requisite Certainty
Under New York law, lost profits must be pled — and ultimately proven — with reasonable certainty. See Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261 (1986) ("[I]t is incumbent upon the party seeking to recover lost profits to demonstrate . . . that the alleged loss was 'capable of proof with reasonable certainty.'"); Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 403 (1993) (same). Although the standard for pleading lost profits is not identical to the standard for proving them at trial, a complaint must nonetheless provide sufficient factual content to make the lost profits claim plausible — not merely possible. See Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 570.
Vantor's Complaint alleges $18,700,000 in lost profits based on an "average 12% operating margin" on Stonefield freight multiplied by the remaining committed volume. Compl. ¶ 62. This bare allegation is insufficient for several independent reasons.
First, the Complaint does not identify the specific costs, revenues, or financial projections underlying the 12% margin figure. The assertion that VTS earned an "average 12% operating margin" on Stonefield freight is a conclusory allegation unsupported by any factual detail. The Complaint does not specify VTS's revenue on Stonefield freight in any particular period, does not identify the cost categories that comprise the remaining 88% of revenue, and does not explain how the 12% figure was derived or whether it reflects historical performance, projected performance, or some other basis. Without such detail, the Court has no basis on which to assess the plausibility of the claimed margin.
Second, the Complaint does not account for variable costs that VTS would not have incurred had the contract continued in effect. An operating margin of 12% on freight revenue of $43.2 million implies total operating costs of approximately $38 million per year. But a significant portion of those costs — including fuel, driver wages, tolls, equipment maintenance, and other variable costs — would not have been incurred in the absence of the Stonefield freight. Upon termination, VTS was relieved of the obligation to perform the transportation services; its variable costs would have ceased accordingly. The Complaint's lost profits calculation ignores this fundamental principle and simply applies a gross margin percentage to the remaining committed volume without any adjustment for costs avoided. This approach overstates the lost profits figure and renders the claim implausible as pled.
Third, the Complaint does not address market conditions that would affect VTS's ability to maintain the claimed 12% margin over the remaining two-year contract term (through March 31, 2024). Operating margins in the freight transportation industry fluctuate with fuel prices, driver availability, equipment costs, and other market variables. The Complaint's assumption of a static 12% margin over a two-year forward period, without any factual basis for that assumption, does not satisfy the reasonable certainty standard.
Fourth, and perhaps most fundamentally, the Complaint assumes — without any factual foundation — that Stonefield would have tendered the full Annual Committed Volume of $43,200,000 for the remaining contract term. But this is the very obligation that Vantor itself alleges Stonefield was already breaching. The Complaint acknowledges that Stonefield tendered only $31.8 million in Contract Year 2 and $36.5 million in Contract Year 3 (through January 2022) — shortfalls of approximately $11.4 million and $6.7 million, respectively. Compl. ¶¶ 37–38. Having alleged that Stonefield was systematically under-tendering, Vantor cannot then calculate its lost profits on the assumption that Stonefield would have tendered the full committed volume for the remaining two years. This internal contradiction renders the lost profits claim facially implausible.
B. The Lost Profits Claim Is Duplicative of the Liquidated Damages Claim
As argued in Stonefield's opening memorandum, and as Vantor conspicuously failed to address in its Opposition, Vantor cannot recover both liquidated damages of $67,230,000 and separate lost profits of $18,700,000. Both claims compensate for the identical harm: the economic value of the TSA that Vantor allegedly lost due to Stonefield's early termination.
New York law prohibits double recovery. See Loughrin v. Litchfield & Madison Ry. Co., 48 Misc. 3d 12, 16 (App. Term 2015); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525–26 (2d Cir. 1994) (noting that under New York law, "a plaintiff may not recover more than one full satisfaction for a single injury"). The liquidated damages clause in Section 14.2, by its express terms, represents the parties' agreed-upon measure of damages for termination of the TSA other than for Cause. If enforceable — which Stonefield disputes — the clause displaces any separate lost profits claim, because the parties have already stipulated to the amount of damages flowing from early termination. See TSA § 14.2 (specifying liquidated damages as the exclusive remedy for termination without Cause). If unenforceable — as Stonefield argues, and as the Court should hold — Vantor may pursue a claim for actual damages, including lost profits (assuming such a claim is adequately pled). But Vantor cannot pursue both simultaneously.
Vantor's Opposition fails entirely to address this argument. Its silence is telling. Stonefield's opening memorandum squarely presented the duplicative recovery issue, and Vantor chose not to respond. The Court should deem the argument conceded. See Jackson v. Fed. Express, 766 F.3d 189, 198 (2d Cir. 2014) ("[A] party's failure to raise or adequately brief an issue in opposition to a motion to dismiss may result in a waiver of that argument.").
The Complaint pleads both claims as cumulative, seeking $67,230,000 in liquidated damages plus $18,700,000 in lost profits — a total of $85,930,000 for what is, at bottom, a single contractual harm: the loss of the benefit of the bargain under the TSA. This is precisely the type of impermissible stacking that New York courts reject. The lost profits claim should be dismissed as duplicative.
IV. VANTOR'S ADDITIONAL DAMAGES CATEGORIES ALSO FAIL AS A MATTER OF LAW
Although not the primary focus of Stonefield's opening brief, it bears noting that the additional categories of damages alleged in the Complaint are independently subject to dismissal as barred by the consequential damages waiver in TSA Section 15.1. Specifically, the Complaint alleges three additional categories of damages:
•  Stranded assets and costs: $5,200,000, representing alleged depreciation and write-downs on tractors, trailers, and other equipment dedicated to the Stonefield account. Compl. ¶ 64.
•  Workforce reduction costs: $2,870,000, representing alleged severance, unemployment insurance costs, and related expenses associated with the termination of approximately 180 drivers and support staff who were purportedly dedicated to the Stonefield freight operation. Compl. ¶ 65.
•  Mitigation costs: $1,400,000, representing alleged costs incurred by VTS in seeking replacement freight, including sales and marketing expenses, broker commissions, and related costs. Compl. ¶ 66.
Each of these categories constitutes consequential or incidental damages barred by TSA Section 15.1. That provision states:
"IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOST REVENUE, LOSS OF USE, BUSINESS INTERRUPTION, OR COST OF PROCUREMENT OF SUBSTITUTE SERVICES, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY, OR ANY OTHER THEORY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES."
TSA § 15.1 (emphasis in original).
Depreciation on equipment dedicated to a particular customer account, severance costs for personnel displaced by the termination of that account, and costs incurred in seeking replacement business are classic categories of consequential and incidental damages. See Biotronik A.G. v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799, 806 (2014) (consequential damages are "damages that do not flow directly and immediately from the act of the party, but only from some of the consequences or results of such act"); see also U.C.C. § 2-715(2) (defining consequential damages as losses "resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise"). Each of the three additional damages categories alleged in the Complaint falls squarely within the scope of Section 15.1's mutual waiver.
Vantor's Opposition does not address Section 15.1 or argue that these categories of damages survive the mutual consequential damages waiver. Nor does the Opposition contend that any of the three categories constitutes "direct" damages falling outside the scope of the waiver. The failure to respond to this argument warrants its acceptance by the Court. See Jackson, 766 F.3d at 198.
These claims — totaling $9,470,000 — should be dismissed.
CONCLUSION
For the foregoing reasons, and for the reasons set forth in Stonefield's opening Memorandum of Law filed October 14, 2022 (Dkt. No. 18), Defendant Stonefield Logistics Group Inc. respectfully requests that the Court grant its Motion to Dismiss in its entirety:
1.  Dismissing Vantor's liquidated damages claim ($67,230,000) as premised on an unenforceable penalty clause that fails both prongs of the New York enforceability test for liquidated damages provisions;
2.  Dismissing Vantor's lost profits claim ($18,700,000) as inadequately pled under the reasonable certainty standard and, in the alternative, as duplicative of the liquidated damages claim, seeking recovery for the identical contractual harm;
3.  Dismissing Vantor's consequential damages claims — stranded assets ($5,200,000), workforce reduction costs ($2,870,000), and mitigation costs ($1,400,000) — as barred by the mutual consequential damages waiver in TSA Section 15.1.
The total claims subject to dismissal amount to $95,400,000 — the entirety of Vantor's damages case. Dismissal of all claims is warranted as a matter of law, and no discovery or further factual development is necessary to resolve the issues presented.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Patrick Gallagher [Draft — to be signed by Samuel Eklund upon finalization]
200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) _- Facsimile: (212) -_
Attorneys for Defendant Stonefield Logistics Group Inc.
Dated: November 29, 2022 New York, New York
CERTIFICATE OF SERVICE
I hereby certify that on November __, 2022, I caused the foregoing Reply Memorandum of Law in Further Support of Defendant Stonefield Logistics Group Inc.'s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6), together with all exhibits and attachments thereto, to be served upon all counsel of record via the Court's CM/ECF electronic filing system, which will send notification of such filing to all parties registered to receive electronic notices in this case, including:
Harrison Caldwell, Esq. Jason Whitford, Esq. Caldwell Royce & Shapiro LLP 1 Liberty Plaza, 22nd Floor New York, New York 10006 Telephone: (212) _-__
Attorneys for Plaintiff Vantor Holdings Corp.
________________________________________
Patrick Gallagher [Draft — to be signed upon finalization]
INTERNAL MEMORANDUM — NOT FOR FILING — PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
DRAFT NOTES FOR S. EKLUND REVIEW
From: Patrick Gallagher, Senior Associate To: Samuel Eklund, Partner Date: November 29, 2022 Re: Reply Memo — Vantor Holdings Corp. v. Stonefield Logistics Group Inc., No. 22-cv-07841 (MTCa) Matter No.: 1012-00005
Sam —
This draft responds to Vantor's opposition filed November 18. A few notes for your review:
Main Thrust. Vantor's opposition largely conflates the enforceability question with the merits of whether Stonefield's termination was pretextual. I've kept the reply focused on the legal standard and tried to avoid getting drawn into the factual disputes about whether termination was for Cause. Let me know if you think we should engage more directly with their pretext arguments or if the current approach — treating them as irrelevant to the 12(b)(6) inquiry — is the right one.
Section 15.1 / Consequential Damages Waiver. I added the argument about TSA Section 15.1 barring the stranded assets, workforce reduction, and mitigation cost claims. This was not in our opening brief, but Vantor did not address it in opposition, and I thought it was worth flagging for the Court. The argument is strong — those are textbook consequential damages categories, and the waiver language is broad and mutual. Let me know if you want to sharpen this section or if you're concerned about raising it for the first time in reply. I think it's defensible since it's based on the face of the contract already before the Court, but I understand if you'd prefer to save it for summary judgment.
Duplicative Recovery / Lost Profits. Vantor's opposition completely ignores our argument that the lost profits claim is duplicative of the liquidated damages claim. I've flagged their silence and asked the Court to deem the point conceded. If you want to develop this argument further, let me know.
Amended Complaint. Vantor filed an Amended Complaint on December 2, which may moot this motion depending on timing. We should have the reply ready to file in case the Court rules before that filing is processed or in case the Amended Complaint does not materially alter the damages claims. I'll compare the original and amended complaints once I have a copy and advise on whether we need to file a new motion.
Please let me know your comments and any revisions. I can turn around a final version within 24 hours of receiving your edits.
— PG
NOTE: This internal annotation page is to be removed from the final filing version.
VANTOR HOLDINGS CORP.,
<!-- indent:2 -->Plaintiff,<!-- /indent -->
Case No. 22-cv-07841 (MTCa)
v.
Hon. Margaret T. Calloway, U.S.D.J.
STONEFIELD LOGISTICS GROUP INC.,
<!-- indent:2 -->Defendant.<!-- /indent -->