**PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT** **DO NOT FORWARD OR DISTRIBUTE WITHOUT PRIOR AUTHORIZATION OF COUNSEL**
Alison, Douglas —
Thank you both for making time this afternoon to discuss the Settlement Authority Memorandum we circulated on November 8. I wanted to memorialize the key points we covered and the decisions reached during the call so that we have a clear record for the file.
As a preliminary matter, I can confirm that Tobias Wren (Stonefield GC) and Marcus Denton (CEO) were separately consulted in advance of our call and are fully aligned with the positions discussed below.
**Settlement Authority**
Ridgeline has authorized settlement authority in the range of **$0–$4.5 million**, consistent with Calderwood & Harkness's recommendation in the November 8 memorandum. We understand and agree that this range reflects a nuisance and litigation-cost-avoidance valuation only, and is in no way an acknowledgment of liability or any concession regarding the merit of Vantor's claims.
As noted in the memorandum, we have identified **$8.2 million** as the maximum defensible exposure, subject to validation once our rebuttal expert, Dr. Evelyn Rosser of Kensington Analytics Group LLC, completes her analysis. Ridgeline views the $8.2 million figure as the absolute ceiling and does not authorize settlement at or near that level at this time.
Both of you made clear — and we want to document — that Ridgeline's strong preference is for an aggressive defense posture rather than early settlement overtures. Douglas, you raised the important concern that any significant settlement could set an adverse precedent across other Ridgeline portfolio companies' vendor contracts and would signal a willingness to pay on disputed terminations. Alison, you flagged the reputational dimension as well, particularly given that Ridgeline Fund III, LP holds approximately 72% of Stonefield's equity and Stonefield Logistics Group carries meaningful visibility within the fund. We are mindful of both considerations and they inform our strategic approach.
**Case Posture and Strategy**
For context, the current procedural posture is as follows. Our **Motion to Dismiss** was filed on October 14, 2022. We believe there are reasonable arguments on the enforceability of the liquidated damages clause — the $67.23 million component of Vantor's claimed damages — though as our research memo assessed, the likelihood of prevailing on the MTD as to that claim is "moderate." We are cautiously optimistic but not counting on a full dismissal.
Vantor's total claimed damages of **$95.4 million** break down as follows:
- Liquidated damages: $67.23M - Lost profits: $18.7M - Stranded assets: $5.2M - Workforce reduction costs: $2.87M - Mitigation costs: $1.4M
We have identified strong arguments to reduce or eliminate multiple categories. In particular, we see significant overlap and duplication between the liquidated damages and lost profits claims, a solid basis to invoke the consequential damages waiver under TSA Section 15.1, and a clear failure-to-mitigate defense given VTS's conduct following termination.
During the call, Ridgeline confirmed its agreement with the **five-pillar defense strategy** outlined in our September 26, 2022 Defense Strategy Outline:
1. Pursue the Motion to Dismiss on liquidated damages and lost profits; 2. Build the factual record through targeted discovery; 3. Retain a damages rebuttal expert (now underway with Kensington Analytics); 4. Pursue summary judgment on the Cause termination basis; and 5. Engage in settlement discussions only as a contingency, and only if discovery produces materially adverse facts regarding the rate-adjustment motive.
Importantly, we agreed that **no settlement overtures should be made to Vantor or its counsel at Caldwell Royce & Shapiro at this time**. Stonefield should wait for the MTD ruling and initial discovery before reassessing.
**Risk Factors**
We discussed candidly the two principal risk areas we have identified:
First, the **September 22, 2021 internal email from Kirkwood to Medina** referencing the diversion of volume to Cascade Freight Systems and Briarwood Trucking, including language about "pull[ing] the plug." This email is problematic because it could be construed as evidence of a premeditated termination plan, undermining our position that the termination was based solely on VTS's performance failures.
Second, the **rate adjustment motive**. Ashford Meridian's February 2022 analysis showed that the April 2022 rate adjustment would increase per-mile rates by approximately 14.3% (from a $2.87 to $3.28 weighted average), adding roughly $6.2 million in annual costs. Vantor will argue that avoiding this rate increase — not VTS's performance — was the true motivation for termination.
These risks must be balanced, however, against the **strong factual record** supporting a for-Cause termination. VTS's Q4 2021 performance failed across all five Service Level Obligations:
- On-time pickup: 78.2% (vs. 95% threshold) - On-time delivery: 81.6% (vs. 93% threshold) - Tender acceptance: 71.4% (vs. 90% threshold) - Equipment availability: 62% (vs. 85% threshold) - Cargo claims ratio: 1.07% (vs. ≤0.5% threshold)
The Cure Notice process was properly followed, and VTS failed to cure within the contractual 30-day period. These are strong facts.
On the Kirkwood email specifically, we noted that the email relates to **Secondary Lanes** (Lanes 8–14 under Schedule C), not the Primary Lanes subject to exclusivity. Simone Laroche's September 30, 2022 analysis supports the position that the exclusivity defense is solid, and we are confident in our ability to contextualize the Kirkwood communication within that framework.
**Budget and Fee Considerations**
For reference, the Preliminary Litigation Budget circulated by Linda Osei on September 12, 2022 estimated **$3.5M–$5.2M in fees** and **$400K–$750K in costs** through summary judgment. Current spend remains modest as we are just entering the Q4 2022 billing period, but you should expect a material increase once the discovery phase begins, which we anticipate will commence in Q1 2023 depending on the timing of the MTD ruling. The Ridgeline portfolio discount of 10% on associate rates remains in effect per the engagement letter. We will continue to provide quarterly billing summaries and periodic case updates.
**Action Items and Next Steps**
To summarize the agreed-upon path forward:
1. **No settlement discussions.** C&H will not initiate any settlement communications with Vantor or Caldwell Royce & Shapiro at this time and will continue the aggressive defense posture.
2. **Motion to Dismiss.** We will promptly advise once the Court rules on the pending MTD.
3. **Expert retention.** The engagement of Kensington Analytics Group LLC (Dr. Rosser) is proceeding pursuant to the October 28, 2022 engagement letter. We expect to finalize the initial scope memorandum shortly.
4. **Settlement authority revisited.** We will revisit the settlement authority range after (a) the MTD ruling, (b) the initial document discovery exchange, and (c) the completion of key depositions. Our estimated timeline for that reassessment is mid-2023.
5. **Inbound settlement overtures.** If Vantor's counsel initiates any settlement communication, C&H will confer with Tobias Wren and Ridgeline before responding.
6. **Brendan Carey.** Brendan, in his capacity as Ridgeline VP and SLG board observer, will be kept informed through Alison as appropriate.
**Closing**
For the file, this email confirms the authorized settlement range of **$0–$4.5 million**. We will share this confirmation with Tobias Wren and Marcus Denton accordingly. Stonefield management is fully aligned with Ridgeline's preference for a vigorous defense, and we are confident in the strategy as currently outlined.
Please do not hesitate to reach out if either of you has questions or would like to discuss any of the above before our next scheduled update. We will continue to keep you apprised of all material developments.
Best regards,
**Samuel Eklund** Partner, Litigation Calderwood & Harkness LLP 200 Park Avenue, 38th Floor New York, NY 10166 Tel: (212) 506-4100 Email: seklund@calderwoodharkness.com
Matter Ref: Calderwood & Harkness Matter No. 1012-00005 *Vantor Holdings Corp. v. Stonefield Logistics Group Inc.*, Case No. 22-cv-07841 (S.D.N.Y.)
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