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

reply-memo-mtd-final.docx DOCUMENT Litigation

141 / 150 ← → ✕

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

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

CALDERWOOD & HARKNESS LLP Attorneys for Defendant Stonefield Logistics Group Inc.

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

Samuel Eklund Patrick Gallagher

TABLE OF AUTHORITIES

Cases

Statutes and Rules

Other Authorities

PRELIMINARY STATEMENT

Defendant Stonefield Logistics Group Inc. ("Stonefield" or "SLG") respectfully submits this Reply Memorandum of Law in further support of its Motion to Dismiss, filed October 14, 2022 (Dkt. 18), and in response to the Opposition Memorandum of Law filed by Plaintiff Vantor Holdings Corp. ("Vantor") on November 18, 2022 (Dkt. 24) (the "Opposition").

Stonefield's Motion to Dismiss advances two independent grounds for dismissal under Federal Rule of Civil Procedure 12(b)(6). First, the liquidated damages clause set forth in Section 14.2 of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315) constitutes an unenforceable penalty under New York law and, accordingly, Vantor's claim for $67.23 million in liquidated damages must be dismissed as a matter of law. Second, Vantor's claim for $18.7 million in lost profits fails to plead damages with the requisite certainty demanded by New York law and is, in any event, duplicative of the liquidated damages claim. Both arguments were set forth at length in Stonefield's opening memorandum and supporting materials.

Vantor's Opposition fails to rebut either argument. Instead, Vantor conflates the legal enforceability analysis applicable at the motion to dismiss stage with factual merits arguments that bear on the ultimate question of liability — a question that is not before this Court on the present motion. Vantor asks the Court to accept, without analysis, that the mere existence of a negotiated liquidated damages clause between sophisticated parties is sufficient to survive a motion to dismiss. That is not the law. New York courts have consistently held that the enforceability of a liquidated damages clause is a question of law that can be — and frequently is — resolved at the pleading stage or on summary judgment, without regard to the sophistication of the contracting parties.

By way of background, the parties to the TSA are Stonefield Logistics Group Inc. in its capacity as "Shipper-Broker" and Vantor Transport Services LLC ("VTS"), Vantor's wholly owned subsidiary, in its capacity as "Carrier-Provider." The TSA is a five-year transportation services agreement under which VTS agreed to provide dedicated freight transportation services across specified service lanes in the northeastern and mid-Atlantic United States. The TSA is governed by New York law pursuant to Section 19.3 (Governing Law), and Section 19.4 (Forum Selection) designates this Court as the exclusive forum for any disputes arising under the agreement.

Vantor's Complaint seeks approximately $95.4 million in total damages. The largest component — $67.23 million — consists of liquidated damages calculated under the formula set forth in Section 14.2 of the TSA. Vantor also seeks $18.7 million in lost profits, $5.2 million for allegedly stranded fleet assets, $2.87 million in workforce reduction costs, and additional categories of consequential and incidental damages. As detailed below, the liquidated damages claim is legally deficient because the formula in Section 14.2 operates as a penalty, and the lost profits claim is deficient both because it is inadequately pled and because it is duplicative of the liquidated damages claim.

This Reply demonstrates that Vantor's Opposition relies on mischaracterizations of both the contractual provisions at issue and the applicable legal standards. Vantor distorts the two-prong enforceability test for liquidated damages provisions, ignores the gross disproportion between the liquidated amount and any plausible measure of actual harm, and asks the Court to defer to the contractual text on a question that is, by its nature, subject to independent judicial scrutiny. Vantor's lost profits arguments fare no better: the Opposition offers no cure for the Complaint's failure to plead any factual basis for the conclusory 12% operating margin figure on which the entire lost profits calculation rests.

The Court should grant the Motion to Dismiss in its entirety.

ARGUMENT

I. THE LIQUIDATED DAMAGES CLAUSE IN SECTION 14.2 OF THE TSA IS AN UNENFORCEABLE PENALTY

A. Vantor Misstates the Governing Legal Standard

Vantor's Opposition opens its defense of the Section 14.2 liquidated damages clause with the assertion that New York courts "routinely enforce liquidated damages provisions in commercial contracts between sophisticated parties." Opp. at 8. While true as a general proposition, this statement — standing alone — does not resolve the question before the Court, and Vantor's suggestion that it does reflects a fundamental misunderstanding of the applicable legal framework.

Under well-settled New York law, the enforceability of a liquidated damages provision is governed by a two-part test. As the New York Court of Appeals explained in Northpoint Holdings v. Purdy Corp., 41 N.Y.2d 354, 365 (1977), a liquidated damages clause will be upheld only if: (1) the amount liquidated bears a reasonable proportion to the probable loss at the time the contract was executed, and (2) the actual loss is incapable or very difficult of precise estimation. See also JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005) (reaffirming the Truck Rent-A-Center two-part test and emphasizing that both prongs must be satisfied). This test derives from the longstanding common law principle, recognized in New York for over a century and a half, that contractual provisions designed to operate in terrorem — to compel performance through the threat of a disproportionate penalty — are unenforceable as contrary to public policy. See Cotheal v. Talmage, 9 N.Y. 551, 553 (1854); Buchanan v. Tilden, 158 N.Y. 109, 116 (1899).

The same basic framework is reflected in the Restatement (Second) of Contracts, which provides that a liquidated damages provision is unenforceable as a penalty if "the amount fixed is unreasonably large." Restatement (Second) of Contracts § 356(1) (Am. L. Inst. 1981). The New York Uniform Commercial Code, applicable to sales transactions, adopts a parallel standard. See N.Y. U.C.C. § 2-718(1). And the leading treatise on contracts law observes that "the single most important question" in the liquidated damages analysis is "whether the stipulated sum is a reasonable forecast of just compensation for the harm that is caused by the breach." 11 Williston on Contracts § 65:1 (4th ed. 2022).

Vantor's Opposition effectively collapses the two-prong test into a single inquiry: whether the parties agreed to the clause. But the very existence of the penalty doctrine as a limit on freedom of contract reflects the law's judgment that not every term to which sophisticated parties agree is enforceable. As the Court of Appeals recognized in JMD Holding, "[t]he burden is on the party seeking to avoid liquidated damages to show that the provision is an unenforceable penalty," but the court retains the independent authority — and indeed the obligation — to evaluate the clause's reasonableness. 4 N.Y.3d at 380. The inquiry is objective, not subjective: it does not turn on what the parties believed about the clause's reasonableness, but on whether the clause in fact bears a reasonable relationship to the anticipated harm. See E. Allan Farnsworth, Contracts § 12.18, at 818 (4th ed. 2004) (explaining that the "test is an objective one" and that "statements by the parties characterizing a provision as one for liquidated damages are not conclusive").

Vantor places considerable emphasis on the contractual recital in Section 14.2 that the parties "acknowledge and agree that the liquidated damages set forth herein represent a reasonable estimate of the damages that [VTS] would suffer" and are "not a penalty." Opp. at 9-10. This boilerplate language is certainly relevant to the analysis, and Stonefield does not suggest that it should be ignored entirely. But it is far from dispositive. New York courts have consistently held that the label the parties attach to a contractual provision — whether they call it "liquidated damages" or "a penalty" — does not control the legal characterization. See Truck Rent-A-Center, 41 N.Y.2d at 365 ("[T]he characterization of a clause as one for liquidated damages or for a penalty is a question of law for the court, and the parties' own characterization of the clause is not controlling."). The Court must look beyond the contractual language to the economic substance of the clause — specifically, to whether the amount stipulated bears a reasonable relationship to the harm that was anticipated at the time of contracting. That analysis, as set forth below, reveals that the Section 14.2 formula operates as a penalty.

Vantor further suggests that the sophistication of the contracting parties and the arms'-length nature of the negotiation render the clause immune from scrutiny. Opp. at 10-11. Again, while the sophistication of the parties is a relevant consideration, it is not a trump card. The penalty doctrine applies to contracts between the most sophisticated commercial actors no less than to consumer agreements. See JMD Holding, 4 N.Y.3d at 380 (applying the two-prong enforceability test to a contract between experienced commercial parties). This is necessarily so, because the doctrine serves a systemic function — preventing the use of contractual mechanisms to exact punishment for breach — that transcends the particular bargaining dynamics of any individual transaction. The Court should decline Vantor's invitation to abandon the established legal framework in favor of a blanket rule of enforceability for negotiated commercial clauses.

B. The Liquidated Damages Formula Bears No Reasonable Relationship to Anticipated Harm

The central deficiency of the Section 14.2 liquidated damages clause is that the formula it prescribes produces a damages figure that is grossly disproportionate to any plausible measure of the actual harm that VTS would suffer from early termination of the TSA. This disproportion — which is apparent on the face of the Complaint and the TSA itself — compels the conclusion that the clause is an unenforceable penalty.

Section 14.2 provides, in relevant part:

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

The Annual Committed Volume ("ACV") under the TSA is $43.2 million. Compl. ¶ 28. As applied to the facts alleged by Vantor — Stonefield's termination notice was delivered on March 4, 2022, with approximately two years and twenty-seven days remaining through the original March 31, 2024 expiration of the initial five-year term — the Section 14.2 formula yields the following calculation:

• Two full remaining Contract Years: 75% × $43.2 million × 2 = $64,800,000

• One partial remaining Contract Year (27 days): 75% × $43.2 million × (27/365) ≈ $2,396,712

• Total liquidated damages: approximately $67,196,712 (rounded by Vantor to $67.23 million)

This figure — $67.23 million — vastly exceeds any plausible measure of actual harm resulting from the early termination of the TSA. The critical flaw in the formula is that it calculates liquidated damages based on seventy-five percent of gross revenue commitment, rather than on net profits, contribution margin, or any other metric that accounts for the costs VTS would have incurred in performing the contract. The distinction is not merely technical; it is dispositive. The difference between gross revenue and net profit is, of course, the entirety of VTS's operating costs — fuel, driver compensation, equipment depreciation, insurance, maintenance, overhead, and all other variable and fixed costs of providing freight transportation services. A formula that compensates a carrier at seventy-five percent of gross committed revenue, without any deduction for the costs the carrier would have incurred in earning that revenue, does not measure loss at all. It measures something far in excess of loss.

The disproportion is readily demonstrable from the face of Vantor's own Complaint. The Complaint alleges that VTS achieved an average operating margin of approximately twelve percent on the Stonefield freight business. Compl. ¶ 47. Even crediting this figure — which Stonefield disputes, and which is in any event a conclusory allegation unsupported by any factual detail, as discussed further in Part II below — VTS's actual lost profit on the remaining committed volume would be a small fraction of the liquidated damages figure. The remaining committed volume over the approximately two years and twenty-seven days left in the TSA term would total approximately $86.4 million in gross revenue (2 full years × $43.2 million ACV, plus a pro rata portion for the partial year). At a twelve percent operating margin, VTS's lost profit would be approximately $10.4 million. The liquidated damages figure of $67.23 million is thus approximately six and a half times VTS's own alleged actual loss.

Put differently, the seventy-five percent multiplier embedded in the Section 14.2 formula effectively compensates VTS at approximately 625% of its own asserted operating margin on the Stonefield business. By any measure, this is a grossly disproportionate recovery that cannot be justified as a "reasonable estimate of the anticipated harm" at the time of contracting. Under Truck Rent-A-Center, JMD Holding, and the broader weight of New York authority, such a disproportion is the hallmark of a penalty. See Leasing Serv. Corp. v. Justice, 673 F.2d 70, 73 (2d Cir. 1982) (applying New York law and holding that a liquidated damages provision is "unreasonable if it is 'plainly disproportionate to actual damages as estimated prospectively'" (quoting Restatement (Second) of Contracts § 356 cmt. b)).

Vantor's Opposition attempts to defend the seventy-five percent multiplier by arguing that it reflects not merely lost profits but also "fixed costs, stranded assets, and workforce investments" that VTS would incur as a consequence of early termination. Opp. at 14-15. This argument is unavailing for two independent reasons.

First, the argument proves too much. If fixed costs, stranded assets, and workforce reduction costs are ascertainable categories of actual damages — and Vantor plainly believes they are, because Vantor's Complaint separately pleads $5.2 million in stranded fleet asset damages and $2.87 million in workforce reduction costs (Compl. ¶¶ 56-58) — then there was no need for a liquidated damages proxy to capture those losses. The entire premise of a liquidated damages clause is that actual damages are "incapable or very difficult of precise estimation" at the time of contracting. Truck Rent-A-Center, 41 N.Y.2d at 365. Vantor cannot simultaneously argue that (a) these categories of harm were so uncertain at the time of contracting that a liquidated damages formula was necessary to capture them, and (b) these same categories of harm are so certain and identifiable that they can be separately pled and quantified in a complaint filed three years after the TSA was executed. These positions are irreconcilable.

Second, even if one were to add VTS's separately pled damages for stranded assets ($5.2 million) and workforce reduction costs ($2.87 million) to the approximately $10.4 million in lost profits based on Vantor's own twelve percent margin figure, the total — approximately $18.47 million — still falls far short of the $67.23 million liquidated damages figure. The liquidated amount exceeds even this aggregated measure of all conceivable actual damages by a factor of more than 3.6 to 1. And this calculation generously assumes that all of these categories of damages are properly recoverable (a proposition Stonefield disputes) and that none of them overlaps with the lost profits calculation (another dubious assumption). No matter how the numbers are arranged, the Section 14.2 formula produces a result that bears no reasonable relationship to VTS's anticipated loss.

The seventy-five percent-of-gross-revenue formula is, in economic substance, a termination penalty. It is designed not to compensate VTS for the loss of the contract, but to make termination so economically punishing for Stonefield that Stonefield would never exercise its right to terminate — even if VTS's performance were deficient in ways that did not rise to the level of "Cause" as narrowly defined in Section 13.1. That is precisely the type of in terrorem provision that the penalty doctrine is designed to invalidate. The clause should be held unenforceable as a matter of law.

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

Vantor argues that actual damages from the early termination of a five-year transportation services contract were inherently uncertain and difficult to ascertain when the TSA was executed on March 15, 2019, thus satisfying the second prong of the Truck Rent-A-Center test. Opp. at 16-18. This argument is factually and legally untenable.

The TSA is not a contract characterized by fundamental uncertainty about the nature or magnitude of the parties' expected performance. To the contrary, the agreement itself contains remarkably detailed specifications that would permit — and indeed, facilitate — the calculation of actual damages with reasonable precision. Among other things, the TSA includes:

• Defined Annual Committed Volume. Section 5.1 establishes an ACV of $43.2 million, representing Stonefield's minimum annual commitment to tender freight to VTS across the specified service lanes. This figure provides a clear baseline for calculating lost revenue.

• Detailed Rate Schedules. Schedule B to the TSA sets forth per-mile rates for each designated service lane, broken down by corridor and load type. The weighted average rate at the time of execution was $2.87 per mile (subject to adjustment through the Rate Adjustment Mechanism in Section 7.3). These rates, combined with the volume commitment, permit the calculation of expected revenue with precision.

• Specified Fleet Capacity Requirements. Section 6.2 requires VTS to maintain a dedicated fleet of not fewer than 400 tractors and 1,200 trailers to service the Stonefield account. These fleet requirements define the fixed-cost base associated with the contract.

• Identified Service Lanes. Schedule A designates specific origin-destination pairs across the northeastern and mid-Atlantic United States, providing a geographic framework for cost estimation.

With these contractual inputs, the parties had ample data to calculate lost profits — covering revenue shortfall less avoided variable costs — with reasonable precision at the time of contracting. The lost-profits methodology applicable to such a calculation is well established in the transportation logistics industry: lost revenue equals the ACV for the remaining term, less variable costs avoided (principally fuel, tolls, driver compensation attributable to Stonefield-dedicated loads, and variable equipment maintenance), with fixed costs that would continue to be incurred regardless of the termination treated as a separate compensable category. This is a standard damages model that any competent economist or industry consultant could construct using the data embedded in the TSA itself.

Vantor's attempt to analogize this case to situations involving inherently speculative damages is unpersuasive. The Opposition cites cases involving exclusive distribution agreements in nascent markets, technology licensing arrangements with uncertain adoption rates, and other contexts where future revenue streams were genuinely unknowable at the time of contracting. Opp. at 17. Those cases are inapposite. The TSA is a freight transportation services agreement between two established industry participants — Stonefield, with approximately $1.42 billion in fiscal year 2021 revenue and a network of approximately 12,000 approved carriers nationwide; and VTS, operating a fleet of approximately 650 tractors and 2,100 trailers with approximately $385 million in fiscal year 2021 revenue. See Compl. ¶¶ 8-10, 19-21. Both parties had extensive historical data regarding operating costs, margins, and fleet utilization rates. The damages that would result from early termination of a contract with defined volumes, rates, and fleet requirements were calculable using standard industry methodologies — there was nothing inherently speculative or uncertain about them.

Indeed, Vantor's own litigation conduct underscores this point. The Complaint references the engagement of Dr. Philip Trask of Trask Greystone & Associates, a consulting firm, to calculate Vantor's damages in connection with this litigation. See Compl. ¶ 48 (alleging damages "based on analysis performed by [VTS's] financial and economic consultants"). The fact that Vantor was able to retain an expert who could calculate precise damages figures — down to the specific dollar amounts pled in the Complaint's ad damnum clause — confirms that actual damages from early termination of the TSA are ascertainable and subject to reasonable estimation. If actual damages can be calculated ex post by a retained expert, they could equally have been estimated ex ante by the contracting parties using the same data and the same methodologies. The entire rationale for a liquidated damages clause — that actual damages are too uncertain to be calculated — is thus absent here, and the second prong of the Truck Rent-A-Center test is not satisfied.

Vantor's Opposition does not squarely address this point. Instead, Vantor argues in general terms that "the precise impact of early termination on VTS's business, including the ability to redeploy assets, mitigate workforce reductions, and secure replacement freight volumes, was uncertain at the time the TSA was executed." Opp. at 17. But this proves nothing. The fact that some variables in a damages calculation are uncertain does not mean that actual damages are "incapable or very difficult of precise estimation" within the meaning of the enforceability test. If it did, every contract would satisfy the second prong, because every damages calculation involves some degree of estimation and uncertainty. The inquiry under Truck Rent-A-Center is whether the overall damages framework is so uncertain as to justify the substitution of a stipulated amount for actual proof. See DAR & Assocs., Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192, 201 (E.D.N.Y. 1999) (holding under New York law that "[w]here damages may be computed by a reasonably precise formula, it is more likely that the sum named as liquidated damages was meant to serve as a penalty to ensure faithful performance"). Here, the TSA's own terms provide the "reasonably precise formula" for calculating actual damages, making a liquidated damages proxy unnecessary — and a disproportionate one unenforceable.

D. Vantor's Cases Are Distinguishable

Vantor's Opposition cites several New York decisions upholding liquidated damages clauses in commercial contracts. Each of the cited cases is distinguishable from the facts presented here.

The cases on which Vantor principally relies involved liquidated damages clauses where the stipulated amount bore a reasonable proportional relationship to the anticipated loss. In each instance, the clause at issue was pegged to a percentage of net profits, a measure of demonstrable out-of-pocket loss, or a narrow and specifically identified category of harm for which estimation at the time of contracting was genuinely difficult. For example, Vantor cites Bos. Concessions Grp., Inc. v. Criterion Ctr. Corp., 200 A.D.2d 543 (1st Dep't 1994), in which the Appellate Division upheld a clause providing for the return of a deposit in the event of the landlord's default under a lease. The deposit bore a direct and proportional relationship to the tenant's reliance investment. Nothing comparable exists here: the Section 14.2 formula has no anchor in VTS's actual economic loss, reliance interest, or any other cognizable measure of harm.

Similarly, Vantor relies on Ridgeway Capital Markets v. Nyland (CF8) Ltd., 878 F.2d 620 (2d Cir. 1989), in which the Second Circuit upheld a liquidated damages clause in a loan agreement. In that case, the stipulated amount — an interest rate differential — was directly tied to the lender's cost of funds and the economic harm of the borrower's prepayment. The court emphasized that the clause bore a "reasonable relationship" to the anticipated harm because it was derived from objectively verifiable market rates. 878 F.2d at 625. Here, by contrast, the seventy-five percent multiplier applied to gross revenue has no derivation in any identifiable cost, loss, or economic metric. It is, in effect, an arbitrary figure — and an extraordinarily high one — untethered to the actual economics of the VTS-Stonefield relationship.

What Vantor conspicuously fails to cite is any New York authority enforcing a liquidated damages clause that yields a recovery exceeding 600% of the claimant's own estimated actual loss. Stonefield is aware of no such authority, and believes none exists. To the contrary, the consistent teaching of the New York cases is that a gross disproportion between the stipulated amount and the probable actual loss is the strongest indicator that a clause operates as a penalty rather than as a legitimate pre-estimate of harm. See Leasing Serv. Corp., 673 F.2d at 73 (noting that "gross disproportion" between the stipulated amount and the likely loss is "the surest sign of a penalty"); JMD Holding, 4 N.Y.3d at 380 (emphasizing that the stipulated amount must be "a reasonable measure of the anticipated probable harm"). The disproportion here — approximately 6.5 to 1, based on Vantor's own allegations — is precisely the type of red flag that New York courts have identified as warranting invalidation.

Vantor's cases thus do not support the enforceability of the Section 14.2 clause. They support, at most, the unremarkable proposition that liquidated damages clauses can be enforceable — a proposition that Stonefield does not dispute. The question is whether this clause, with this formula, producing this result, is enforceable. The answer, under the two-prong Truck Rent-A-Center test, is no.

II. VANTOR'S LOST PROFITS CLAIM IS INADEQUATELY PLED

A. Vantor Fails to Plead Lost Profits with Reasonable Certainty

Independent of the liquidated damages issue, Vantor's claim for $18.7 million in lost profits fails to satisfy the pleading requirements of Federal Rule of Civil Procedure 12(b)(6) as interpreted by Thackeray Corporation v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).

Under New York law, lost profits are recoverable as contract damages only where they can be established with "reasonable certainty." Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261 (1986). This standard requires more than speculation or conjecture; the claimant must demonstrate a "stable foundation for a reasonable estimate of the damage incurred as a result of the breach." Id. While the reasonable certainty requirement is principally a standard of proof applicable at trial, it also imposes constraints at the pleading stage: a plaintiff must plead sufficient facts to make its lost profits claim "plausible on its face." See Luitpold Pharms., Inc. v. Ed. Geistlich Söhne A.G. für Chemische Industrie, 784 F.3d 78, 95 (2d Cir. 2015) (holding that a lost profits claim must be supported by factual allegations sufficient to satisfy the Twombly/Iqbal plausibility standard). A bare assertion of a dollar figure, unsupported by any factual predicate, is insufficient. See Wechsler v. Hunt Health Sys., Ltd., 330 F. Supp. 2d 383, 414 (S.D.N.Y. 2004) (dismissing lost profits claim at the 12(b)(6) stage for failure to plead sufficient factual detail).

Vantor's Complaint alleges that VTS would have earned $18.7 million in lost profits over the remaining term of the TSA, based on an asserted average operating margin of approximately twelve percent applied to the remaining committed volume. Compl. ¶¶ 47-48. But the Complaint provides no factual basis whatsoever for the twelve percent margin figure. There is no reference to VTS's historical financial performance on the Stonefield account or more broadly. There is no identification of the specific cost components that were included or excluded in arriving at the twelve percent figure. There is no accounting for the variable costs that VTS would have avoided upon termination of the TSA — costs such as fuel, driver compensation, tolls, and equipment maintenance that VTS would not have incurred had it not been performing under the contract. And there is no explanation of whether the twelve percent figure represents an operating margin, a contribution margin, a net margin, or some other financial metric. The Complaint simply asserts "12%" as if it were a self-evident fact, and builds its entire $18.7 million lost profits calculation on that unadorned assertion.

This is precisely the type of conclusory allegation that Twombly and Iqbal require this Court to disregard. A bare assertion of a margin percentage, without any supporting factual detail, does not cross the line from "conceivable" to "plausible." Iqbal, 556 U.S. at 680. Vantor was required to plead facts from which the Court could reasonably infer that a twelve percent margin was realistic and achievable — for example, by referencing VTS's historical financial results on the Stonefield account, industry benchmarks for comparable transportation services contracts, or the specific cost structure underlying VTS's operations. The Complaint does none of these things.

Vantor's Opposition argues that the twelve percent margin figure is a "factual matter" best resolved in discovery, not on a motion to dismiss. Opp. at 22. This argument misapprehends the standard. The question on a Rule 12(b)(6) motion is not whether the twelve percent figure will ultimately be proved correct; it is whether the Complaint pleads sufficient facts to make the assertion plausible. As the Court of Appeals for the Second Circuit has explained, "[t]he plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). A conclusory assertion of a margin percentage, devoid of any factual support, does not satisfy this standard. See also Kenford II, 73 N.Y.2d at 319 (emphasizing that lost profits must be established through "evidence of actual experience" or other concrete data, not "mere speculation or conjecture").

The lost profits claim should be dismissed for failure to state a claim upon which relief can be granted.

B. The Lost Profits Claim Is Duplicative of Liquidated Damages

Even if the Complaint adequately pled the twelve percent margin figure — and it does not — the lost profits claim would still be subject to dismissal because it is duplicative of the liquidated damages claim. Both claims seek to compensate Vantor for the same underlying harm: the economic value of the remaining TSA term that was allegedly lost as a result of Stonefield's early termination.

Under New York law, a plaintiff cannot recover both liquidated damages and actual damages for the same breach where the liquidated damages clause was intended to be the exclusive contractual remedy for such breach. See United Air Lines, Inc. v. Austin Travel Corp., 867 F.2d 737, 740 (2d Cir. 1989) (applying New York law and holding that "a liquidated damages clause, by its very nature, is intended to serve as a substitute for actual damages and not as a supplement to them"). The purpose of a liquidated damages clause is to fix the parties' recovery in lieu of proving actual damages. If the clause is enforceable, it displaces the actual damages inquiry. If it is unenforceable, the claimant may pursue actual damages — but the two remedies cannot coexist for the same breach.

Section 14.2 of the TSA, by its terms, establishes liquidated damages as the measure of harm for termination without Cause. The clause does not contemplate a separate, additional lost profits recovery. To the contrary, the clause purports to fix the damages arising from such termination at a defined amount calculated under the seventy-five percent formula. The clause does not carve out lost profits as a category of harm that may be pursued independently. It does not state that it is a "floor" or a "minimum" recovery. It states that the stipulated amount represents the "damages that [VTS] would suffer" from early termination — i.e., all damages, not merely some subset of them.

Vantor's Complaint nevertheless seeks both $67.23 million in liquidated damages under Section 14.2 and $18.7 million in lost profits, for a combined recovery of $85.93 million attributable to the loss of the remaining contract term. This is impermissible double-counting. The liquidated damages figure of $67.23 million is itself calculated by reference to the remaining committed volume — the same volume from which the lost profits figure is derived. The two claims compensate for the same loss, measured differently. Permitting Vantor to recover both would result in a windfall that finds no support in the contract or in governing law.

This duplicative-recovery problem exists regardless of the Court's ultimate determination on the enforceability of the liquidated damages clause. If the clause is enforceable, Vantor's recovery is limited to the stipulated amount; there is no basis for a separate lost profits award on top of it. If the clause is unenforceable, Vantor may pursue actual damages — including, potentially, lost profits — but the liquidated damages claim itself falls away, and Vantor's total recovery cannot include both the stipulated amount and a separate actual damages figure. Under either scenario, the two claims cannot coexist. The lost profits claim is, at best, an alternative theory of recovery that should have been pled as such. Vantor's failure to characterize it as an alternative, and its apparent intent to stack both claims, renders the lost profits claim duplicative and subject to dismissal.

Vantor's Opposition does not address this duplicative-recovery argument. The Opposition is entirely silent on the relationship between the liquidated damages claim and the lost profits claim, and offers no explanation for how both can be sustained simultaneously. Vantor's silence on this point is telling, and the Court should draw the inference that Vantor has no response to it. The lost profits claim should be dismissed as duplicative of the liquidated damages claim, in addition to being inadequately pled.

III. VANTOR'S REMAINING ARGUMENTS LACK MERIT

A. Vantor's Policy Arguments Do Not Override the Legal Standards

Unable to meet its burden under the applicable legal standards, Vantor retreats to policy arguments. The Opposition devotes several pages to the contention that granting Stonefield's Motion to Dismiss at this stage would "undermine commercial certainty" and "chill the use of liquidated damages clauses in transportation contracts." Opp. at 24-26. Vantor warns that if courts scrutinize the proportionality of liquidated damages clauses on a motion to dismiss, sophisticated commercial parties will be unable to rely on the enforceability of their negotiated agreements, with resulting harm to the efficiency of the transportation logistics industry.

These policy arguments, whatever their abstract appeal, are irrelevant to the Rule 12(b)(6) analysis. The Court's task on this motion is to assess the legal sufficiency of the claims as pled — not to make policy judgments about the desirability of liquidated damages clauses in commercial contracts generally. See Global Reinsurance Corp. of Am. v. Equitas Ltd., 18 N.Y.3d 722, 733 (2012) (cautioning that courts should apply established legal principles rather than engage in "judicial legislation" based on policy preferences); U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 49 (2d Cir. 2004) (applying New York law and declining to extend existing precedent based on policy arguments unsupported by case authority).

Moreover, the enforceability of a specific liquidated damages clause depends on its particular terms and the circumstances of the particular contract — not on generalized policy preferences about the desirability of such clauses. Holding that this clause, with this formula, is an unenforceable penalty says nothing about the enforceability of reasonably proportioned liquidated damages clauses in other transportation contracts. If anything, applying the established legal standards to this clause reaffirms the commercial certainty that Vantor claims to value: it sends the clear signal that parties drafting liquidated damages provisions must ensure that the stipulated amount bears a reasonable relationship to anticipated harm, as the law has always required. A rule that automatically enforces any amount the parties agree to, regardless of proportionality, would not promote commercial certainty — it would create a mechanism for one party to extract a windfall from the other under the guise of contract enforcement.

The Court should not be swayed by Vantor's policy rhetoric. The legal standards are clear, the application to this clause is straightforward, and the result compelled by New York law is dismissal.

B. Vantor's Factual Allegations Regarding the Termination Are Irrelevant to This Motion

Finally, Vantor's Opposition devotes substantial space to the factual circumstances surrounding Stonefield's termination of the TSA. The Opposition argues at length that the termination was pretextual, motivated by Stonefield's desire to avoid a 14.3% rate increase under the Rate Adjustment Mechanism in Section 7.3 of the TSA — specifically, an increase in the weighted average per-mile rate from $2.87 to $3.28, effective April 1, 2022. Opp. at 26-31. Vantor further contends that the performance failures cited by Stonefield as the basis for its termination were caused by Stonefield's own volume shortfalls, which allegedly left VTS unable to achieve the operational efficiency required to meet the service-level metrics specified in Schedule C. Id.

These factual allegations may be relevant to the merits of the underlying breach-of-contract dispute — specifically, to the question of whether Stonefield's termination was "for Cause" within the meaning of Section 13.1 or was instead wrongful. But they are entirely irrelevant to the legal questions presented by the Motion to Dismiss.

Stonefield's Motion does not challenge the factual sufficiency of Vantor's allegations regarding the nature or circumstances of the termination. Stonefield does not argue on this motion that the termination was "for Cause" or that Vantor has failed to plead a breach of the TSA. Rather, Stonefield's Motion challenges the legal enforceability of the liquidated damages clause and the pleading sufficiency of the lost profits claim. These are legal questions that do not turn on the factual circumstances of the termination.

The enforceability of the liquidated damages clause under the Truck Rent-A-Center two-prong test is assessed as of the time the contract was executed — March 15, 2019 — not as of the time of termination. The question is whether the stipulated amount represented a reasonable estimate of anticipated harm at the time of contracting, and whether actual damages were difficult to ascertain at the time of contracting. The factual circumstances surrounding the termination three years later — including Stonefield's alleged motivations, the rate adjustment dispute, and the volume shortfall allegations — have no bearing on this analysis. Whether Stonefield terminated the TSA for good reasons or bad reasons, the threshold legal question remains the same: is the formula in Section 14.2 a reasonable pre-estimate of anticipated harm, or is it a penalty? That question is answered by examining the clause's terms and the economic context of the contract at the time of execution, not by examining the circumstances of the breach.

Vantor's extensive discussion of the termination circumstances appears designed to generate sympathy and suggest that Stonefield is a bad actor. Whatever the merits of that suggestion — and Stonefield disputes Vantor's characterization of the termination in every respect — it has no place in the Rule 12(b)(6) analysis. The Court should disregard Vantor's factual narratives as irrelevant to the legal questions presented by this Motion.

CONCLUSION

For the foregoing reasons, Defendant Stonefield Logistics Group Inc. respectfully requests that the Court grant its Motion to Dismiss in its entirety:

(a) dismissing Vantor's claim for liquidated damages under Section 14.2 of the Transportation Services Agreement on the ground that the clause constitutes an unenforceable penalty under New York law, as it fails both prongs of the two-part enforceability test established by Northpoint Holdings v. Purdy Corp. and its progeny; and

(b) dismissing Vantor's claim for lost profits for failure to plead damages with the requisite reasonable certainty under New York law and as duplicative of the liquidated damages claim.

In the alternative, should the Court decline to reach the enforceability of the liquidated damages clause on this motion, Stonefield respectfully requests that the Court dismiss the lost profits claim as duplicative of the liquidated damages, regardless of the ultimate enforceability determination. The two claims compensate for the same harm and cannot coexist under New York law. The lost profits claim is independently deficient for failure to plead the factual predicate for the asserted twelve percent operating margin.

Stonefield reserves all rights to assert additional defenses and arguments in further proceedings in this action.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Samuel Eklund (N.Y. Bar No. 4287613) Patrick Gallagher (N.Y. Bar No. 5394102)

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

Email: seklund@calderwoodharkness.com

Email: pgallagher@calderwoodharkness.com

Attorneys for Defendant Stonefield Logistics Group Inc.

Dated: December 5, 2022

CERTIFICATE OF SERVICE

I, Patrick Gallagher, hereby certify that on December 5, 2022, a true and correct copy of the foregoing Reply Memorandum of Law of Defendant Stonefield Logistics Group Inc. in Further Support of Its Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) was filed electronically via the Court's CM/ECF electronic filing system, which will automatically serve notification of such filing upon all counsel of record who have registered for electronic filing in this case, including the following:

Harrison Caldwell, Esq. Meredith Shapiro, Esq. Jason Whitford, Esq. Caldwell Royce & Shapiro LLP 1 Liberty Plaza, 22nd Floor New York, New York 10006 Telephone: (212) 416-1200 Facsimile: (212) 416-1201

Counsel for Plaintiff Vantor Holdings Corp.

________________________________________

Patrick Gallagher

VANTOR HOLDINGS CORP.,

Plaintiff,

Case No. 22-cv-07841 (MTC)

Hon. Margaret T. Calloway

STONEFIELD LOGISTICS GROUP INC.,

Defendant.

Page

PRELIMINARY STATEMENT	1
ARGUMENT	3
I. THE LIQUIDATED DAMAGES CLAUSE IN SECTION 14.2 OF THE TSA IS AN UNENFORCEABLE PENALTY	3
<!-- indent:1 -->A. Vantor Misstates the Governing Legal Standard<!-- /indent -->	3
<!-- indent:1 -->B. The Liquidated Damages Formula Bears No Reasonable Relationship to Anticipated Harm<!-- /indent -->	6
<!-- indent:1 -->C. Actual Damages Were Readily Ascertainable at the Time of Contracting<!-- /indent -->	10
<!-- indent:1 -->D. Vantor's Cases Are Distinguishable<!-- /indent -->	13
II. VANTOR'S LOST PROFITS CLAIM IS INADEQUATELY PLED	15
<!-- indent:1 -->A. Vantor Fails to Plead Lost Profits with Reasonable Certainty<!-- /indent -->	15
<!-- indent:1 -->B. The Lost Profits Claim Is Duplicative of Liquidated Damages<!-- /indent -->	18
III. VANTOR'S REMAINING ARGUMENTS LACK MERIT	20
<!-- indent:1 -->A. Vantor's Policy Arguments Do Not Override the Legal Standards<!-- /indent -->	20
<!-- indent:1 -->B. Vantor's Factual Allegations Regarding the Termination Are Irrelevant to This Motion<!-- /indent -->	21
CONCLUSION	23

Page(s)

Ashcroft v. Iqbal, 556 U.S. 662 (2009)	5, 16, 17
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)	16, 17
Bos. Concessions Grp., Inc. v. Criterion Ctr. Corp., 200 A.D.2d 543 (1st Dep't 1994)	14
Buchanan v. Tilden, 158 N.Y. 109 (1899)	4
Ridgeway Capital Markets v. Nyland (CF8) Ltd., 878 F.2d 620 (2d Cir. 1989)	14
Cotheal v. Talmage, 9 N.Y. 551 (1854)	4
DAR & Assocs., Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192 (E.D.N.Y. 1999)	11
Global Reinsurance Corp. of Am. v. Equitas Ltd., 18 N.Y.3d 722 (2012)	20
JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373 (2005)	3, 4, 5, 7, 8
Kenford Co. v. County of Erie, 67 N.Y.2d 257 (1986)	15, 16
Kenford Co. v. County of Erie (Kenford II), 73 N.Y.2d 312 (1989)	15
Leasing Serv. Corp. v. Justice, 673 F.2d 70 (2d Cir. 1982)	7, 8
Luitpold Pharms., Inc. v. Ed. Geistlich Söhne A.G. für Chemische Industrie, 784 F.3d 78 (2d Cir. 2015)	16
Northpoint Holdings v. Purdy Corp., 41 N.Y.2d 354 (1977)	3, 4, 5, 7, 8, 10
United Air Lines, Inc. v. Austin Travel Corp., 867 F.2d 737 (2d Cir. 1989)	18, 19
U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34 (2d Cir. 2004)	20
Wechsler v. Hunt Health Sys., Ltd., 330 F. Supp. 2d 383 (S.D.N.Y. 2004)	16

Page(s)

Fed. R. Civ. P. 12(b)(6)	passim
Fed. R. Civ. P. 15(a)(1)	—
N.Y. U.C.C. § 2-718	4

Page(s)

11 Williston on Contracts § 65:1 (4th ed. 2022)	4
E. Allan Farnsworth, Contracts § 12.18 (4th ed. 2004)	5
Restatement (Second) of Contracts § 356 (Am. L. Inst. 1981)	4, 8

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
REPLY MEMORANDUM OF LAW OF DEFENDANT STONEFIELD LOGISTICS GROUP INC. IN FURTHER SUPPORT OF ITS MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(b)(6)
CALDERWOOD & HARKNESS LLP Attorneys for Defendant Stonefield Logistics Group Inc.
200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Samuel Eklund Patrick Gallagher
TABLE OF CONTENTS
TABLE OF AUTHORITIES
Cases
Statutes and Rules
Other Authorities
PRELIMINARY STATEMENT
Defendant Stonefield Logistics Group Inc. ("Stonefield" or "SLG") respectfully submits this Reply Memorandum of Law in further support of its Motion to Dismiss, filed October 14, 2022 (Dkt. 18), and in response to the Opposition Memorandum of Law filed by Plaintiff Vantor Holdings Corp. ("Vantor") on November 18, 2022 (Dkt. 24) (the "Opposition").
Stonefield's Motion to Dismiss advances two independent grounds for dismissal under Federal Rule of Civil Procedure 12(b)(6). First, the liquidated damages clause set forth in Section 14.2 of the Transportation Services Agreement dated March 15, 2019 (the "TSA," Contract Reference No. SLG-VTS-2019-0315) constitutes an unenforceable penalty under New York law and, accordingly, Vantor's claim for $67.23 million in liquidated damages must be dismissed as a matter of law. Second, Vantor's claim for $18.7 million in lost profits fails to plead damages with the requisite certainty demanded by New York law and is, in any event, duplicative of the liquidated damages claim. Both arguments were set forth at length in Stonefield's opening memorandum and supporting materials.
Vantor's Opposition fails to rebut either argument. Instead, Vantor conflates the legal enforceability analysis applicable at the motion to dismiss stage with factual merits arguments that bear on the ultimate question of liability — a question that is not before this Court on the present motion. Vantor asks the Court to accept, without analysis, that the mere existence of a negotiated liquidated damages clause between sophisticated parties is sufficient to survive a motion to dismiss. That is not the law. New York courts have consistently held that the enforceability of a liquidated damages clause is a question of law that can be — and frequently is — resolved at the pleading stage or on summary judgment, without regard to the sophistication of the contracting parties.
By way of background, the parties to the TSA are Stonefield Logistics Group Inc. in its capacity as "Shipper-Broker" and Vantor Transport Services LLC ("VTS"), Vantor's wholly owned subsidiary, in its capacity as "Carrier-Provider." The TSA is a five-year transportation services agreement under which VTS agreed to provide dedicated freight transportation services across specified service lanes in the northeastern and mid-Atlantic United States. The TSA is governed by New York law pursuant to Section 19.3 (Governing Law), and Section 19.4 (Forum Selection) designates this Court as the exclusive forum for any disputes arising under the agreement.
Vantor's Complaint seeks approximately $95.4 million in total damages. The largest component — $67.23 million — consists of liquidated damages calculated under the formula set forth in Section 14.2 of the TSA. Vantor also seeks $18.7 million in lost profits, $5.2 million for allegedly stranded fleet assets, $2.87 million in workforce reduction costs, and additional categories of consequential and incidental damages. As detailed below, the liquidated damages claim is legally deficient because the formula in Section 14.2 operates as a penalty, and the lost profits claim is deficient both because it is inadequately pled and because it is duplicative of the liquidated damages claim.
This Reply demonstrates that Vantor's Opposition relies on mischaracterizations of both the contractual provisions at issue and the applicable legal standards. Vantor distorts the two-prong enforceability test for liquidated damages provisions, ignores the gross disproportion between the liquidated amount and any plausible measure of actual harm, and asks the Court to defer to the contractual text on a question that is, by its nature, subject to independent judicial scrutiny. Vantor's lost profits arguments fare no better: the Opposition offers no cure for the Complaint's failure to plead any factual basis for the conclusory 12% operating margin figure on which the entire lost profits calculation rests.
The Court should grant the Motion to Dismiss in its entirety.
ARGUMENT
I. THE LIQUIDATED DAMAGES CLAUSE IN SECTION 14.2 OF THE TSA IS AN UNENFORCEABLE PENALTY
A. Vantor Misstates the Governing Legal Standard
Vantor's Opposition opens its defense of the Section 14.2 liquidated damages clause with the assertion that New York courts "routinely enforce liquidated damages provisions in commercial contracts between sophisticated parties." Opp. at 8. While true as a general proposition, this statement — standing alone — does not resolve the question before the Court, and Vantor's suggestion that it does reflects a fundamental misunderstanding of the applicable legal framework.
Under well-settled New York law, the enforceability of a liquidated damages provision is governed by a two-part test. As the New York Court of Appeals explained in Northpoint Holdings v. Purdy Corp., 41 N.Y.2d 354, 365 (1977), a liquidated damages clause will be upheld only if: (1) the amount liquidated bears a reasonable proportion to the probable loss at the time the contract was executed, and (2) the actual loss is incapable or very difficult of precise estimation. See also JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005) (reaffirming the Truck Rent-A-Center two-part test and emphasizing that both prongs must be satisfied). This test derives from the longstanding common law principle, recognized in New York for over a century and a half, that contractual provisions designed to operate in terrorem — to compel performance through the threat of a disproportionate penalty — are unenforceable as contrary to public policy. See Cotheal v. Talmage, 9 N.Y. 551, 553 (1854); Buchanan v. Tilden, 158 N.Y. 109, 116 (1899).
The same basic framework is reflected in the Restatement (Second) of Contracts, which provides that a liquidated damages provision is unenforceable as a penalty if "the amount fixed is unreasonably large." Restatement (Second) of Contracts § 356(1) (Am. L. Inst. 1981). The New York Uniform Commercial Code, applicable to sales transactions, adopts a parallel standard. See N.Y. U.C.C. § 2-718(1). And the leading treatise on contracts law observes that "the single most important question" in the liquidated damages analysis is "whether the stipulated sum is a reasonable forecast of just compensation for the harm that is caused by the breach." 11 Williston on Contracts § 65:1 (4th ed. 2022).
Vantor's Opposition effectively collapses the two-prong test into a single inquiry: whether the parties agreed to the clause. But the very existence of the penalty doctrine as a limit on freedom of contract reflects the law's judgment that not every term to which sophisticated parties agree is enforceable. As the Court of Appeals recognized in JMD Holding, "[t]he burden is on the party seeking to avoid liquidated damages to show that the provision is an unenforceable penalty," but the court retains the independent authority — and indeed the obligation — to evaluate the clause's reasonableness. 4 N.Y.3d at 380. The inquiry is objective, not subjective: it does not turn on what the parties believed about the clause's reasonableness, but on whether the clause in fact bears a reasonable relationship to the anticipated harm. See E. Allan Farnsworth, Contracts § 12.18, at 818 (4th ed. 2004) (explaining that the "test is an objective one" and that "statements by the parties characterizing a provision as one for liquidated damages are not conclusive").
Vantor places considerable emphasis on the contractual recital in Section 14.2 that the parties "acknowledge and agree that the liquidated damages set forth herein represent a reasonable estimate of the damages that [VTS] would suffer" and are "not a penalty." Opp. at 9-10. This boilerplate language is certainly relevant to the analysis, and Stonefield does not suggest that it should be ignored entirely. But it is far from dispositive. New York courts have consistently held that the label the parties attach to a contractual provision — whether they call it "liquidated damages" or "a penalty" — does not control the legal characterization. See Truck Rent-A-Center, 41 N.Y.2d at 365 ("[T]he characterization of a clause as one for liquidated damages or for a penalty is a question of law for the court, and the parties' own characterization of the clause is not controlling."). The Court must look beyond the contractual language to the economic substance of the clause — specifically, to whether the amount stipulated bears a reasonable relationship to the harm that was anticipated at the time of contracting. That analysis, as set forth below, reveals that the Section 14.2 formula operates as a penalty.
Vantor further suggests that the sophistication of the contracting parties and the arms'-length nature of the negotiation render the clause immune from scrutiny. Opp. at 10-11. Again, while the sophistication of the parties is a relevant consideration, it is not a trump card. The penalty doctrine applies to contracts between the most sophisticated commercial actors no less than to consumer agreements. See JMD Holding, 4 N.Y.3d at 380 (applying the two-prong enforceability test to a contract between experienced commercial parties). This is necessarily so, because the doctrine serves a systemic function — preventing the use of contractual mechanisms to exact punishment for breach — that transcends the particular bargaining dynamics of any individual transaction. The Court should decline Vantor's invitation to abandon the established legal framework in favor of a blanket rule of enforceability for negotiated commercial clauses.
B. The Liquidated Damages Formula Bears No Reasonable Relationship to Anticipated Harm
The central deficiency of the Section 14.2 liquidated damages clause is that the formula it prescribes produces a damages figure that is grossly disproportionate to any plausible measure of the actual harm that VTS would suffer from early termination of the TSA. This disproportion — which is apparent on the face of the Complaint and the TSA itself — compels the conclusion that the clause is an unenforceable penalty.
Section 14.2 provides, in relevant part:
"In the event that Shipper-Broker terminates this Agreement other than for Cause (as defined in Section 13.1), Shipper-Broker shall pay to Carrier-Provider liquidated damages in an amount equal to seventy-five percent (75%) of the Annual Committed Volume multiplied by the number of full and partial Contract Years remaining in the then-current Term."
The Annual Committed Volume ("ACV") under the TSA is $43.2 million. Compl. ¶ 28. As applied to the facts alleged by Vantor — Stonefield's termination notice was delivered on March 4, 2022, with approximately two years and twenty-seven days remaining through the original March 31, 2024 expiration of the initial five-year term — the Section 14.2 formula yields the following calculation:
• Two full remaining Contract Years: 75% × $43.2 million × 2 = $64,800,000
• One partial remaining Contract Year (27 days): 75% × $43.2 million × (27/365) ≈ $2,396,712
• Total liquidated damages: approximately $67,196,712 (rounded by Vantor to $67.23 million)
This figure — $67.23 million — vastly exceeds any plausible measure of actual harm resulting from the early termination of the TSA. The critical flaw in the formula is that it calculates liquidated damages based on seventy-five percent of gross revenue commitment, rather than on net profits, contribution margin, or any other metric that accounts for the costs VTS would have incurred in performing the contract. The distinction is not merely technical; it is dispositive. The difference between gross revenue and net profit is, of course, the entirety of VTS's operating costs — fuel, driver compensation, equipment depreciation, insurance, maintenance, overhead, and all other variable and fixed costs of providing freight transportation services. A formula that compensates a carrier at seventy-five percent of gross committed revenue, without any deduction for the costs the carrier would have incurred in earning that revenue, does not measure loss at all. It measures something far in excess of loss.
The disproportion is readily demonstrable from the face of Vantor's own Complaint. The Complaint alleges that VTS achieved an average operating margin of approximately twelve percent on the Stonefield freight business. Compl. ¶ 47. Even crediting this figure — which Stonefield disputes, and which is in any event a conclusory allegation unsupported by any factual detail, as discussed further in Part II below — VTS's actual lost profit on the remaining committed volume would be a small fraction of the liquidated damages figure. The remaining committed volume over the approximately two years and twenty-seven days left in the TSA term would total approximately $86.4 million in gross revenue (2 full years × $43.2 million ACV, plus a pro rata portion for the partial year). At a twelve percent operating margin, VTS's lost profit would be approximately $10.4 million. The liquidated damages figure of $67.23 million is thus approximately six and a half times VTS's own alleged actual loss.
Put differently, the seventy-five percent multiplier embedded in the Section 14.2 formula effectively compensates VTS at approximately 625% of its own asserted operating margin on the Stonefield business. By any measure, this is a grossly disproportionate recovery that cannot be justified as a "reasonable estimate of the anticipated harm" at the time of contracting. Under Truck Rent-A-Center, JMD Holding, and the broader weight of New York authority, such a disproportion is the hallmark of a penalty. See Leasing Serv. Corp. v. Justice, 673 F.2d 70, 73 (2d Cir. 1982) (applying New York law and holding that a liquidated damages provision is "unreasonable if it is 'plainly disproportionate to actual damages as estimated prospectively'" (quoting Restatement (Second) of Contracts § 356 cmt. b)).
Vantor's Opposition attempts to defend the seventy-five percent multiplier by arguing that it reflects not merely lost profits but also "fixed costs, stranded assets, and workforce investments" that VTS would incur as a consequence of early termination. Opp. at 14-15. This argument is unavailing for two independent reasons.
First, the argument proves too much. If fixed costs, stranded assets, and workforce reduction costs are ascertainable categories of actual damages — and Vantor plainly believes they are, because Vantor's Complaint separately pleads $5.2 million in stranded fleet asset damages and $2.87 million in workforce reduction costs (Compl. ¶¶ 56-58) — then there was no need for a liquidated damages proxy to capture those losses. The entire premise of a liquidated damages clause is that actual damages are "incapable or very difficult of precise estimation" at the time of contracting. Truck Rent-A-Center, 41 N.Y.2d at 365. Vantor cannot simultaneously argue that (a) these categories of harm were so uncertain at the time of contracting that a liquidated damages formula was necessary to capture them, and (b) these same categories of harm are so certain and identifiable that they can be separately pled and quantified in a complaint filed three years after the TSA was executed. These positions are irreconcilable.
Second, even if one were to add VTS's separately pled damages for stranded assets ($5.2 million) and workforce reduction costs ($2.87 million) to the approximately $10.4 million in lost profits based on Vantor's own twelve percent margin figure, the total — approximately $18.47 million — still falls far short of the $67.23 million liquidated damages figure. The liquidated amount exceeds even this aggregated measure of all conceivable actual damages by a factor of more than 3.6 to 1. And this calculation generously assumes that all of these categories of damages are properly recoverable (a proposition Stonefield disputes) and that none of them overlaps with the lost profits calculation (another dubious assumption). No matter how the numbers are arranged, the Section 14.2 formula produces a result that bears no reasonable relationship to VTS's anticipated loss.
The seventy-five percent-of-gross-revenue formula is, in economic substance, a termination penalty. It is designed not to compensate VTS for the loss of the contract, but to make termination so economically punishing for Stonefield that Stonefield would never exercise its right to terminate — even if VTS's performance were deficient in ways that did not rise to the level of "Cause" as narrowly defined in Section 13.1. That is precisely the type of in terrorem provision that the penalty doctrine is designed to invalidate. The clause should be held unenforceable as a matter of law.
C. Actual Damages Were Readily Ascertainable at the Time of Contracting
Vantor argues that actual damages from the early termination of a five-year transportation services contract were inherently uncertain and difficult to ascertain when the TSA was executed on March 15, 2019, thus satisfying the second prong of the Truck Rent-A-Center test. Opp. at 16-18. This argument is factually and legally untenable.
The TSA is not a contract characterized by fundamental uncertainty about the nature or magnitude of the parties' expected performance. To the contrary, the agreement itself contains remarkably detailed specifications that would permit — and indeed, facilitate — the calculation of actual damages with reasonable precision. Among other things, the TSA includes:
• Defined Annual Committed Volume. Section 5.1 establishes an ACV of $43.2 million, representing Stonefield's minimum annual commitment to tender freight to VTS across the specified service lanes. This figure provides a clear baseline for calculating lost revenue.
• Detailed Rate Schedules. Schedule B to the TSA sets forth per-mile rates for each designated service lane, broken down by corridor and load type. The weighted average rate at the time of execution was $2.87 per mile (subject to adjustment through the Rate Adjustment Mechanism in Section 7.3). These rates, combined with the volume commitment, permit the calculation of expected revenue with precision.
• Specified Fleet Capacity Requirements. Section 6.2 requires VTS to maintain a dedicated fleet of not fewer than 400 tractors and 1,200 trailers to service the Stonefield account. These fleet requirements define the fixed-cost base associated with the contract.
• Identified Service Lanes. Schedule A designates specific origin-destination pairs across the northeastern and mid-Atlantic United States, providing a geographic framework for cost estimation.
With these contractual inputs, the parties had ample data to calculate lost profits — covering revenue shortfall less avoided variable costs — with reasonable precision at the time of contracting. The lost-profits methodology applicable to such a calculation is well established in the transportation logistics industry: lost revenue equals the ACV for the remaining term, less variable costs avoided (principally fuel, tolls, driver compensation attributable to Stonefield-dedicated loads, and variable equipment maintenance), with fixed costs that would continue to be incurred regardless of the termination treated as a separate compensable category. This is a standard damages model that any competent economist or industry consultant could construct using the data embedded in the TSA itself.
Vantor's attempt to analogize this case to situations involving inherently speculative damages is unpersuasive. The Opposition cites cases involving exclusive distribution agreements in nascent markets, technology licensing arrangements with uncertain adoption rates, and other contexts where future revenue streams were genuinely unknowable at the time of contracting. Opp. at 17. Those cases are inapposite. The TSA is a freight transportation services agreement between two established industry participants — Stonefield, with approximately $1.42 billion in fiscal year 2021 revenue and a network of approximately 12,000 approved carriers nationwide; and VTS, operating a fleet of approximately 650 tractors and 2,100 trailers with approximately $385 million in fiscal year 2021 revenue. See Compl. ¶¶ 8-10, 19-21. Both parties had extensive historical data regarding operating costs, margins, and fleet utilization rates. The damages that would result from early termination of a contract with defined volumes, rates, and fleet requirements were calculable using standard industry methodologies — there was nothing inherently speculative or uncertain about them.
Indeed, Vantor's own litigation conduct underscores this point. The Complaint references the engagement of Dr. Philip Trask of Trask Greystone & Associates, a consulting firm, to calculate Vantor's damages in connection with this litigation. See Compl. ¶ 48 (alleging damages "based on analysis performed by [VTS's] financial and economic consultants"). The fact that Vantor was able to retain an expert who could calculate precise damages figures — down to the specific dollar amounts pled in the Complaint's ad damnum clause — confirms that actual damages from early termination of the TSA are ascertainable and subject to reasonable estimation. If actual damages can be calculated ex post by a retained expert, they could equally have been estimated ex ante by the contracting parties using the same data and the same methodologies. The entire rationale for a liquidated damages clause — that actual damages are too uncertain to be calculated — is thus absent here, and the second prong of the Truck Rent-A-Center test is not satisfied.
Vantor's Opposition does not squarely address this point. Instead, Vantor argues in general terms that "the precise impact of early termination on VTS's business, including the ability to redeploy assets, mitigate workforce reductions, and secure replacement freight volumes, was uncertain at the time the TSA was executed." Opp. at 17. But this proves nothing. The fact that some variables in a damages calculation are uncertain does not mean that actual damages are "incapable or very difficult of precise estimation" within the meaning of the enforceability test. If it did, every contract would satisfy the second prong, because every damages calculation involves some degree of estimation and uncertainty. The inquiry under Truck Rent-A-Center is whether the overall damages framework is so uncertain as to justify the substitution of a stipulated amount for actual proof. See DAR & Assocs., Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192, 201 (E.D.N.Y. 1999) (holding under New York law that "[w]here damages may be computed by a reasonably precise formula, it is more likely that the sum named as liquidated damages was meant to serve as a penalty to ensure faithful performance"). Here, the TSA's own terms provide the "reasonably precise formula" for calculating actual damages, making a liquidated damages proxy unnecessary — and a disproportionate one unenforceable.
D. Vantor's Cases Are Distinguishable
Vantor's Opposition cites several New York decisions upholding liquidated damages clauses in commercial contracts. Each of the cited cases is distinguishable from the facts presented here.
The cases on which Vantor principally relies involved liquidated damages clauses where the stipulated amount bore a reasonable proportional relationship to the anticipated loss. In each instance, the clause at issue was pegged to a percentage of net profits, a measure of demonstrable out-of-pocket loss, or a narrow and specifically identified category of harm for which estimation at the time of contracting was genuinely difficult. For example, Vantor cites Bos. Concessions Grp., Inc. v. Criterion Ctr. Corp., 200 A.D.2d 543 (1st Dep't 1994), in which the Appellate Division upheld a clause providing for the return of a deposit in the event of the landlord's default under a lease. The deposit bore a direct and proportional relationship to the tenant's reliance investment. Nothing comparable exists here: the Section 14.2 formula has no anchor in VTS's actual economic loss, reliance interest, or any other cognizable measure of harm.
Similarly, Vantor relies on Ridgeway Capital Markets v. Nyland (CF8) Ltd., 878 F.2d 620 (2d Cir. 1989), in which the Second Circuit upheld a liquidated damages clause in a loan agreement. In that case, the stipulated amount — an interest rate differential — was directly tied to the lender's cost of funds and the economic harm of the borrower's prepayment. The court emphasized that the clause bore a "reasonable relationship" to the anticipated harm because it was derived from objectively verifiable market rates. 878 F.2d at 625. Here, by contrast, the seventy-five percent multiplier applied to gross revenue has no derivation in any identifiable cost, loss, or economic metric. It is, in effect, an arbitrary figure — and an extraordinarily high one — untethered to the actual economics of the VTS-Stonefield relationship.
What Vantor conspicuously fails to cite is any New York authority enforcing a liquidated damages clause that yields a recovery exceeding 600% of the claimant's own estimated actual loss. Stonefield is aware of no such authority, and believes none exists. To the contrary, the consistent teaching of the New York cases is that a gross disproportion between the stipulated amount and the probable actual loss is the strongest indicator that a clause operates as a penalty rather than as a legitimate pre-estimate of harm. See Leasing Serv. Corp., 673 F.2d at 73 (noting that "gross disproportion" between the stipulated amount and the likely loss is "the surest sign of a penalty"); JMD Holding, 4 N.Y.3d at 380 (emphasizing that the stipulated amount must be "a reasonable measure of the anticipated probable harm"). The disproportion here — approximately 6.5 to 1, based on Vantor's own allegations — is precisely the type of red flag that New York courts have identified as warranting invalidation.
Vantor's cases thus do not support the enforceability of the Section 14.2 clause. They support, at most, the unremarkable proposition that liquidated damages clauses can be enforceable — a proposition that Stonefield does not dispute. The question is whether this clause, with this formula, producing this result, is enforceable. The answer, under the two-prong Truck Rent-A-Center test, is no.
II. VANTOR'S LOST PROFITS CLAIM IS INADEQUATELY PLED
A. Vantor Fails to Plead Lost Profits with Reasonable Certainty
Independent of the liquidated damages issue, Vantor's claim for $18.7 million in lost profits fails to satisfy the pleading requirements of Federal Rule of Civil Procedure 12(b)(6) as interpreted by Thackeray Corporation v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009).
Under New York law, lost profits are recoverable as contract damages only where they can be established with "reasonable certainty." Kenford Co. v. County of Erie, 67 N.Y.2d 257, 261 (1986). This standard requires more than speculation or conjecture; the claimant must demonstrate a "stable foundation for a reasonable estimate of the damage incurred as a result of the breach." Id. While the reasonable certainty requirement is principally a standard of proof applicable at trial, it also imposes constraints at the pleading stage: a plaintiff must plead sufficient facts to make its lost profits claim "plausible on its face." See Luitpold Pharms., Inc. v. Ed. Geistlich Söhne A.G. für Chemische Industrie, 784 F.3d 78, 95 (2d Cir. 2015) (holding that a lost profits claim must be supported by factual allegations sufficient to satisfy the Twombly/Iqbal plausibility standard). A bare assertion of a dollar figure, unsupported by any factual predicate, is insufficient. See Wechsler v. Hunt Health Sys., Ltd., 330 F. Supp. 2d 383, 414 (S.D.N.Y. 2004) (dismissing lost profits claim at the 12(b)(6) stage for failure to plead sufficient factual detail).
Vantor's Complaint alleges that VTS would have earned $18.7 million in lost profits over the remaining term of the TSA, based on an asserted average operating margin of approximately twelve percent applied to the remaining committed volume. Compl. ¶¶ 47-48. But the Complaint provides no factual basis whatsoever for the twelve percent margin figure. There is no reference to VTS's historical financial performance on the Stonefield account or more broadly. There is no identification of the specific cost components that were included or excluded in arriving at the twelve percent figure. There is no accounting for the variable costs that VTS would have avoided upon termination of the TSA — costs such as fuel, driver compensation, tolls, and equipment maintenance that VTS would not have incurred had it not been performing under the contract. And there is no explanation of whether the twelve percent figure represents an operating margin, a contribution margin, a net margin, or some other financial metric. The Complaint simply asserts "12%" as if it were a self-evident fact, and builds its entire $18.7 million lost profits calculation on that unadorned assertion.
This is precisely the type of conclusory allegation that Twombly and Iqbal require this Court to disregard. A bare assertion of a margin percentage, without any supporting factual detail, does not cross the line from "conceivable" to "plausible." Iqbal, 556 U.S. at 680. Vantor was required to plead facts from which the Court could reasonably infer that a twelve percent margin was realistic and achievable — for example, by referencing VTS's historical financial results on the Stonefield account, industry benchmarks for comparable transportation services contracts, or the specific cost structure underlying VTS's operations. The Complaint does none of these things.
Vantor's Opposition argues that the twelve percent margin figure is a "factual matter" best resolved in discovery, not on a motion to dismiss. Opp. at 22. This argument misapprehends the standard. The question on a Rule 12(b)(6) motion is not whether the twelve percent figure will ultimately be proved correct; it is whether the Complaint pleads sufficient facts to make the assertion plausible. As the Court of Appeals for the Second Circuit has explained, "[t]he plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). A conclusory assertion of a margin percentage, devoid of any factual support, does not satisfy this standard. See also Kenford II, 73 N.Y.2d at 319 (emphasizing that lost profits must be established through "evidence of actual experience" or other concrete data, not "mere speculation or conjecture").
The lost profits claim should be dismissed for failure to state a claim upon which relief can be granted.
B. The Lost Profits Claim Is Duplicative of Liquidated Damages
Even if the Complaint adequately pled the twelve percent margin figure — and it does not — the lost profits claim would still be subject to dismissal because it is duplicative of the liquidated damages claim. Both claims seek to compensate Vantor for the same underlying harm: the economic value of the remaining TSA term that was allegedly lost as a result of Stonefield's early termination.
Under New York law, a plaintiff cannot recover both liquidated damages and actual damages for the same breach where the liquidated damages clause was intended to be the exclusive contractual remedy for such breach. See United Air Lines, Inc. v. Austin Travel Corp., 867 F.2d 737, 740 (2d Cir. 1989) (applying New York law and holding that "a liquidated damages clause, by its very nature, is intended to serve as a substitute for actual damages and not as a supplement to them"). The purpose of a liquidated damages clause is to fix the parties' recovery in lieu of proving actual damages. If the clause is enforceable, it displaces the actual damages inquiry. If it is unenforceable, the claimant may pursue actual damages — but the two remedies cannot coexist for the same breach.
Section 14.2 of the TSA, by its terms, establishes liquidated damages as the measure of harm for termination without Cause. The clause does not contemplate a separate, additional lost profits recovery. To the contrary, the clause purports to fix the damages arising from such termination at a defined amount calculated under the seventy-five percent formula. The clause does not carve out lost profits as a category of harm that may be pursued independently. It does not state that it is a "floor" or a "minimum" recovery. It states that the stipulated amount represents the "damages that [VTS] would suffer" from early termination — i.e., all damages, not merely some subset of them.
Vantor's Complaint nevertheless seeks both $67.23 million in liquidated damages under Section 14.2 and $18.7 million in lost profits, for a combined recovery of $85.93 million attributable to the loss of the remaining contract term. This is impermissible double-counting. The liquidated damages figure of $67.23 million is itself calculated by reference to the remaining committed volume — the same volume from which the lost profits figure is derived. The two claims compensate for the same loss, measured differently. Permitting Vantor to recover both would result in a windfall that finds no support in the contract or in governing law.
This duplicative-recovery problem exists regardless of the Court's ultimate determination on the enforceability of the liquidated damages clause. If the clause is enforceable, Vantor's recovery is limited to the stipulated amount; there is no basis for a separate lost profits award on top of it. If the clause is unenforceable, Vantor may pursue actual damages — including, potentially, lost profits — but the liquidated damages claim itself falls away, and Vantor's total recovery cannot include both the stipulated amount and a separate actual damages figure. Under either scenario, the two claims cannot coexist. The lost profits claim is, at best, an alternative theory of recovery that should have been pled as such. Vantor's failure to characterize it as an alternative, and its apparent intent to stack both claims, renders the lost profits claim duplicative and subject to dismissal.
Vantor's Opposition does not address this duplicative-recovery argument. The Opposition is entirely silent on the relationship between the liquidated damages claim and the lost profits claim, and offers no explanation for how both can be sustained simultaneously. Vantor's silence on this point is telling, and the Court should draw the inference that Vantor has no response to it. The lost profits claim should be dismissed as duplicative of the liquidated damages claim, in addition to being inadequately pled.
III. VANTOR'S REMAINING ARGUMENTS LACK MERIT
A. Vantor's Policy Arguments Do Not Override the Legal Standards
Unable to meet its burden under the applicable legal standards, Vantor retreats to policy arguments. The Opposition devotes several pages to the contention that granting Stonefield's Motion to Dismiss at this stage would "undermine commercial certainty" and "chill the use of liquidated damages clauses in transportation contracts." Opp. at 24-26. Vantor warns that if courts scrutinize the proportionality of liquidated damages clauses on a motion to dismiss, sophisticated commercial parties will be unable to rely on the enforceability of their negotiated agreements, with resulting harm to the efficiency of the transportation logistics industry.
These policy arguments, whatever their abstract appeal, are irrelevant to the Rule 12(b)(6) analysis. The Court's task on this motion is to assess the legal sufficiency of the claims as pled — not to make policy judgments about the desirability of liquidated damages clauses in commercial contracts generally. See Global Reinsurance Corp. of Am. v. Equitas Ltd., 18 N.Y.3d 722, 733 (2012) (cautioning that courts should apply established legal principles rather than engage in "judicial legislation" based on policy preferences); U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 49 (2d Cir. 2004) (applying New York law and declining to extend existing precedent based on policy arguments unsupported by case authority).
Moreover, the enforceability of a specific liquidated damages clause depends on its particular terms and the circumstances of the particular contract — not on generalized policy preferences about the desirability of such clauses. Holding that this clause, with this formula, is an unenforceable penalty says nothing about the enforceability of reasonably proportioned liquidated damages clauses in other transportation contracts. If anything, applying the established legal standards to this clause reaffirms the commercial certainty that Vantor claims to value: it sends the clear signal that parties drafting liquidated damages provisions must ensure that the stipulated amount bears a reasonable relationship to anticipated harm, as the law has always required. A rule that automatically enforces any amount the parties agree to, regardless of proportionality, would not promote commercial certainty — it would create a mechanism for one party to extract a windfall from the other under the guise of contract enforcement.
The Court should not be swayed by Vantor's policy rhetoric. The legal standards are clear, the application to this clause is straightforward, and the result compelled by New York law is dismissal.
B. Vantor's Factual Allegations Regarding the Termination Are Irrelevant to This Motion
Finally, Vantor's Opposition devotes substantial space to the factual circumstances surrounding Stonefield's termination of the TSA. The Opposition argues at length that the termination was pretextual, motivated by Stonefield's desire to avoid a 14.3% rate increase under the Rate Adjustment Mechanism in Section 7.3 of the TSA — specifically, an increase in the weighted average per-mile rate from $2.87 to $3.28, effective April 1, 2022. Opp. at 26-31. Vantor further contends that the performance failures cited by Stonefield as the basis for its termination were caused by Stonefield's own volume shortfalls, which allegedly left VTS unable to achieve the operational efficiency required to meet the service-level metrics specified in Schedule C. Id.
These factual allegations may be relevant to the merits of the underlying breach-of-contract dispute — specifically, to the question of whether Stonefield's termination was "for Cause" within the meaning of Section 13.1 or was instead wrongful. But they are entirely irrelevant to the legal questions presented by the Motion to Dismiss.
Stonefield's Motion does not challenge the factual sufficiency of Vantor's allegations regarding the nature or circumstances of the termination. Stonefield does not argue on this motion that the termination was "for Cause" or that Vantor has failed to plead a breach of the TSA. Rather, Stonefield's Motion challenges the legal enforceability of the liquidated damages clause and the pleading sufficiency of the lost profits claim. These are legal questions that do not turn on the factual circumstances of the termination.
The enforceability of the liquidated damages clause under the Truck Rent-A-Center two-prong test is assessed as of the time the contract was executed — March 15, 2019 — not as of the time of termination. The question is whether the stipulated amount represented a reasonable estimate of anticipated harm at the time of contracting, and whether actual damages were difficult to ascertain at the time of contracting. The factual circumstances surrounding the termination three years later — including Stonefield's alleged motivations, the rate adjustment dispute, and the volume shortfall allegations — have no bearing on this analysis. Whether Stonefield terminated the TSA for good reasons or bad reasons, the threshold legal question remains the same: is the formula in Section 14.2 a reasonable pre-estimate of anticipated harm, or is it a penalty? That question is answered by examining the clause's terms and the economic context of the contract at the time of execution, not by examining the circumstances of the breach.
Vantor's extensive discussion of the termination circumstances appears designed to generate sympathy and suggest that Stonefield is a bad actor. Whatever the merits of that suggestion — and Stonefield disputes Vantor's characterization of the termination in every respect — it has no place in the Rule 12(b)(6) analysis. The Court should disregard Vantor's factual narratives as irrelevant to the legal questions presented by this Motion.
CONCLUSION
For the foregoing reasons, Defendant Stonefield Logistics Group Inc. respectfully requests that the Court grant its Motion to Dismiss in its entirety:
(a) dismissing Vantor's claim for liquidated damages under Section 14.2 of the Transportation Services Agreement on the ground that the clause constitutes an unenforceable penalty under New York law, as it fails both prongs of the two-part enforceability test established by Northpoint Holdings v. Purdy Corp. and its progeny; and
(b) dismissing Vantor's claim for lost profits for failure to plead damages with the requisite reasonable certainty under New York law and as duplicative of the liquidated damages claim.
In the alternative, should the Court decline to reach the enforceability of the liquidated damages clause on this motion, Stonefield respectfully requests that the Court dismiss the lost profits claim as duplicative of the liquidated damages, regardless of the ultimate enforceability determination. The two claims compensate for the same harm and cannot coexist under New York law. The lost profits claim is independently deficient for failure to plead the factual predicate for the asserted twelve percent operating margin.
Stonefield reserves all rights to assert additional defenses and arguments in further proceedings in this action.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Samuel Eklund (N.Y. Bar No. 4287613) Patrick Gallagher (N.Y. Bar No. 5394102)
200 Park Avenue, 38th Floor New York, New York 10166 Telephone: (212) 558-4000 Facsimile: (212) 558-3588
Email: seklund@calderwoodharkness.com
Email: pgallagher@calderwoodharkness.com
Attorneys for Defendant Stonefield Logistics Group Inc.
Dated: December 5, 2022
CERTIFICATE OF SERVICE
I, Patrick Gallagher, hereby certify that on December 5, 2022, a true and correct copy of the foregoing Reply Memorandum of Law of Defendant Stonefield Logistics Group Inc. in Further Support of Its Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) was filed electronically via the Court's CM/ECF electronic filing system, which will automatically serve notification of such filing upon all counsel of record who have registered for electronic filing in this case, including the following:
Harrison Caldwell, Esq. Meredith Shapiro, Esq. Jason Whitford, Esq. Caldwell Royce & Shapiro LLP 1 Liberty Plaza, 22nd Floor New York, New York 10006 Telephone: (212) 416-1200 Facsimile: (212) 416-1201
Counsel for Plaintiff Vantor Holdings Corp.
________________________________________
Patrick Gallagher
VANTOR HOLDINGS CORP.,
Plaintiff,
Case No. 22-cv-07841 (MTC)
v.
Hon. Margaret T. Calloway
STONEFIELD LOGISTICS GROUP INC., | United States District Judge
Defendant.
Page
PRELIMINARY STATEMENT | 1
ARGUMENT | 3
I. THE LIQUIDATED DAMAGES CLAUSE IN SECTION 14.2 OF THE TSA IS AN UNENFORCEABLE PENALTY | 3
A. Vantor Misstates the Governing Legal Standard | 3
B. The Liquidated Damages Formula Bears No Reasonable Relationship to Anticipated Harm | 6
C. Actual Damages Were Readily Ascertainable at the Time of Contracting | 10
D. Vantor's Cases Are Distinguishable | 13
II. VANTOR'S LOST PROFITS CLAIM IS INADEQUATELY PLED | 15
A. Vantor Fails to Plead Lost Profits with Reasonable Certainty | 15
B. The Lost Profits Claim Is Duplicative of Liquidated Damages | 18
III. VANTOR'S REMAINING ARGUMENTS LACK MERIT | 20
A. Vantor's Policy Arguments Do Not Override the Legal Standards | 20
B. Vantor's Factual Allegations Regarding the Termination Are Irrelevant to This Motion | 21
CONCLUSION | 23
Page(s)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) | 5, 16, 17
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) | 16, 17
Bos. Concessions Grp., Inc. v. Criterion Ctr. Corp., 200 A.D.2d 543 (1st Dep't 1994) | 14
Buchanan v. Tilden, 158 N.Y. 109 (1899) | 4
Ridgeway Capital Markets v. Nyland (CF8) Ltd., 878 F.2d 620 (2d Cir. 1989) | 14
Cotheal v. Talmage, 9 N.Y. 551 (1854) | 4
DAR & Assocs., Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192 (E.D.N.Y. 1999) | 11
Global Reinsurance Corp. of Am. v. Equitas Ltd., 18 N.Y.3d 722 (2012) | 20
JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373 (2005) | 3, 4, 5, 7, 8
Kenford Co. v. County of Erie, 67 N.Y.2d 257 (1986) | 15, 16
Kenford Co. v. County of Erie (Kenford II), 73 N.Y.2d 312 (1989) | 15
Leasing Serv. Corp. v. Justice, 673 F.2d 70 (2d Cir. 1982) | 7, 8
Luitpold Pharms., Inc. v. Ed. Geistlich Söhne A.G. für Chemische Industrie, 784 F.3d 78 (2d Cir. 2015) | 16
Northpoint Holdings v. Purdy Corp., 41 N.Y.2d 354 (1977) | 3, 4, 5, 7, 8, 10
United Air Lines, Inc. v. Austin Travel Corp., 867 F.2d 737 (2d Cir. 1989) | 18, 19
U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34 (2d Cir. 2004) | 20
Wechsler v. Hunt Health Sys., Ltd., 330 F. Supp. 2d 383 (S.D.N.Y. 2004) | 16
Page(s)
Fed. R. Civ. P. 12(b)(6) | passim
Fed. R. Civ. P. 15(a)(1) | —
N.Y. U.C.C. § 2-718 | 4
Page(s)
11 Williston on Contracts § 65:1 (4th ed. 2022) | 4
E. Allan Farnsworth, Contracts § 12.18 (4th ed. 2004) | 5
Restatement (Second) of Contracts § 356 (Am. L. Inst. 1981) | 4, 8

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

TABLE OF CONTENTS

TABLE OF AUTHORITIES

PRELIMINARY STATEMENT

ARGUMENT

II. VANTOR'S LOST PROFITS CLAIM IS INADEQUATELY PLED

III. VANTOR'S REMAINING ARGUMENTS LACK MERIT

CONCLUSION

CALDERWOOD & HARKNESS LLP

CERTIFICATE OF SERVICE

VANTOR HOLDINGS CORP.,

Record

Parties

Dates

Amounts