1019-00001 · Haber Reinhardt Schlosser Partners · Correspondence/Client

monthly-status-report-nov-2022.docx DOCUMENT M&A / Corporate

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

CALDERWOOD & HARKNESS LLP Attorneys at Law

600 Lexington Avenue New York, NY 10022 Telephone: (212) 555-4800 Facsimile: (212) 555-4801 www.calderwoodharkness.com

December 1, 2022

TO:

Dana Prescott Vice President & General Counsel Whitmore Aerospace LLC 4200 Wilson Boulevard, Suite 1100 Arlington, VA 22203

CC:

Marcus J. Whitmore III Chief Executive Officer Whitmore Aerospace LLC

FROM:

Theodore Langston, Partner Calderwood & Harkness LLP

RE:

Monthly Status Report — November 2022 Defense of ICC Arbitration, Case No. 27914/MHM Kestrel Dynamics GmbH v. Whitmore Aerospace LLC

Engagement No.: 1019-00001

Classification: PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

Dear Ms. Prescott:

We are pleased to submit this Monthly Status Report covering activities undertaken in connection with the above-referenced matter during the period from engagement inception on November 2, 2022, through November 30, 2022. This report is intended to provide Whitmore Aerospace LLC ("WAL") with a comprehensive summary of the current status of the matter, a description of the work completed to date, an outline of anticipated next steps, and a preliminary budget estimate for the engagement as a whole.

This report, and all communications between Calderwood & Harkness LLP ("C&H") and WAL in connection with this matter, are protected by the attorney-client privilege and constitute attorney work product. This report should not be disclosed to any third party without prior consultation with this firm.

1. Executive Summary

This report covers the initial month of our engagement, spanning from November 2, 2022, through November 30, 2022. Calderwood & Harkness LLP was formally engaged on November 2, 2022, to represent Whitmore Aerospace LLC as Respondent in ICC Arbitration Case No. 27914/MHM, which was filed by Kestrel Dynamics GmbH ("Kestrel") on November 7, 2022. The arbitration arises out of an alleged material breach of the Master Supply Agreement for Titanium Alloy Turbine Housings dated June 15, 2018 (the "MSA"), under which WAL purchased Ti-6Al-4V ELI titanium alloy turbine housings from Kestrel. Kestrel is seeking approximately €47.3 million in damages across multiple categories, including lost profits, rework costs, and reputational damages.

During the reporting period, the C&H team accomplished the following key milestones:

• Engagement formalization. The engagement letter was executed, the team was assembled, and the engagement was assigned tracking number 1019-00001.

• Litigation hold. A comprehensive litigation hold notice was issued to WAL and acknowledged, ensuring the preservation of all relevant documents and electronically stored information.

• Preliminary case assessment. An internal memorandum was prepared evaluating WAL's defenses and counterclaim prospects, the results of which are favorable to WAL's position.

• Insurance notification. Pinnacle Continental Insurance Co. was notified of the arbitration under the applicable general liability policy. We await their coverage determination.

• MSA and amendments review. A detailed review of the MSA and its two amendments was completed, with particular focus on the quality, termination, and remedies provisions.

• Answer and Counterclaim preparation. Preparation of WAL's Answer and Counterclaim is underway, with filing anticipated by December 12, 2022.

• Arbitrator selection. The process of identifying and vetting candidates for WAL's co-arbitrator nomination was initiated. We have identified a leading candidate and anticipate submission of the nomination by approximately December 19, 2022.

The C&H team assigned to this matter consists of Theodore Langston (responsible partner), Vivienne St. Claire (billing partner), Simone Laroche (lead associate), and Jeffrey Park (working associate). This team configuration provides the depth and expertise necessary to manage a dispute of this complexity and magnitude effectively.

Our initial assessment of WAL's defensive posture is favorable. The MSA's contractual provisions — in particular, the Persistent Quality Failure framework in § 8.4, the termination-for-cause mechanism in § 14.2(b), and the consequential damages waiver in § 8.7 — provide WAL with robust defenses against Kestrel's claims. Additionally, WAL has a strong basis for a counterclaim of approximately €5.17 million arising from the incremental costs of sourcing replacement components.

2. Matter Background

2.1 The Underlying Contract

The dispute arises from the Master Supply Agreement for Titanium Alloy Turbine Housings (Contract No. WAL-KDG-MSA-2018-0615) executed on June 15, 2018 (the "MSA"), between Whitmore Aerospace LLC, as Buyer, and Kestrel Dynamics GmbH, as Seller. Under the MSA, Kestrel agreed to manufacture and deliver Ti-6Al-4V ELI titanium alloy turbine housings (the "Products") to WAL for integration into WAL's aerospace propulsion systems.

The principal terms of the MSA, as modified by two subsequent amendments, are summarized below:

Term. The MSA provides for a five-year base term commencing June 15, 2018, and running through June 14, 2023, subject to two optional one-year renewal periods exercisable solely at WAL's discretion. If exercised, the renewals would extend the MSA through June 14, 2025.

Volume Commitments. Section 4.1 of the MSA establishes an annual volume commitment requiring WAL to purchase a minimum of 2,400 units and permitting a maximum of 3,600 units per contract year. Amendment No. 1, described below, subsequently increased the annual maximum volume to 4,000 units.

Pricing. Section 5.2 sets a base unit price of €4,850 for Contract Year 1 (CY1), with an annual escalation factor of 2.5% per annum, compounded. At minimum annual volume, the aggregate contract value over the five-year base term is approximately €61.2 million.

Amendment No. 1 (February 10, 2020). The first amendment to the MSA added engineering specification WAL-SPEC-TH-410, governing a new high-temperature variant of the turbine housing product line. Amendment No. 1 also increased the maximum annual volume from 3,600 units to 4,000 units to accommodate anticipated demand growth for the high-temperature variant in WAL's next-generation propulsion platform.

Amendment No. 2 (September 3, 2021). The second amendment extended the cure period for non-conforming deliveries from 30 calendar days to 45 calendar days under § 8.4. This extension was implemented in recognition of ongoing supply chain disruptions and logistics challenges attributable to the COVID-19 pandemic. Amendment No. 2 also incorporated a supplemental force majeure carve-out addressing pandemic-related disruptions.

Delivery Terms. The MSA specifies delivery on a DDP (Delivered Duty Paid) basis under Incoterms 2020, with delivery to WAL's primary manufacturing facility located at 8500 Coppermine Road, Manassas, Virginia 20110. Risk of loss accordingly passes to WAL only upon physical delivery at the designated facility.

Governing Law and Dispute Resolution. Section 22.1 of the MSA designates the laws of the State of New York as the governing law, without regard to conflict-of-laws principles. Section 22.3 provides that any dispute arising out of or in connection with the MSA shall be resolved by arbitration administered under the ICC Rules of Arbitration (2021 edition) before a three-member tribunal, with the seat of arbitration in New York, New York.

Quality Standards. The MSA imposes stringent quality requirements on the Products. Kestrel is required to maintain AS9100 Rev D certification throughout the term of the MSA. All Products are subject to incoming inspection by WAL in accordance with WAL's Quality Control Procedure WAL-QCP-100. Section 8.4 provides WAL with a 15-business-day acceptance window following delivery during which WAL may inspect and either accept or reject each delivered lot. Non-conforming lots trigger a cure period (now 45 calendar days, as amended) during which Kestrel must replace or remediate the deficient units.

2.2 The Dispute

The dispute centers on a series of quality failures by Kestrel over a six-month period in 2022. Between March 7, 2022 (Lot KDG-2022-0307) and September 19, 2022 (Lot KDG-2022-0919), WAL's quality control team rejected a total of 14 lots comprising 1,680 individual turbine housing units for non-conformance with the porosity specifications set forth in WAL-SPEC-TH-401, Appendix C, Table 3. The contractual porosity limit is ≤0.25%, a threshold that is clearly and expressly stated in the specification document.

Of the 14 rejected lots, seven remained uncured beyond the 45-calendar-day amended cure period established by Amendment No. 2. Under § 8.4 of the MSA, the occurrence of three or more uncured rejections within any rolling 12-month period constitutes a "Persistent Quality Failure," which triggers WAL's right to terminate the MSA for cause under § 14.2(b). With seven uncured rejections — more than double the contractual threshold — WAL's basis for termination is substantial.

On October 3, 2022, WAL issued a formal Notice of Termination for Cause to Kestrel, invoking § 14.2(b) of the MSA and citing Persistent Quality Failure as the basis for termination. The notice was delivered in accordance with the MSA's notice provisions and recited the specific lots, rejection dates, and cure-period expirations giving rise to the Persistent Quality Failure determination.

On November 7, 2022, approximately five weeks after receiving the termination notice, Kestrel filed its Request for Arbitration with the ICC International Court of Arbitration, commencing ICC Case No. 27914/MHM.

2.3 Kestrel's Claims

In its Request for Arbitration, Kestrel alleges that WAL committed material breach of the MSA by (i) wrongfully rejecting the 14 lots of turbine housings and (ii) issuing a termination notice predicated on fabricated or exaggerated quality deficiencies. Central to Kestrel's theory of the case is the contention that WAL applied an unpublished and more restrictive porosity tolerance of ≤0.15% — rather than the contractual specification of ≤0.25% — when evaluating the rejected lots. Kestrel further alleges that WAL's true motive for the rejections and termination was to replace Kestrel as its turbine housing supplier with a lower-cost domestic supplier, Valkyr Precision Components Inc., based in Tucson, Arizona.

Kestrel seeks total damages of approximately €47.3 million, broken down as follows:

We note that the single largest component of Kestrel's damages claim — the €27.15 million in lost renewal-period profits — is predicated on the assumption that WAL would have exercised both optional one-year renewal terms. As discussed in Section 8 below, we believe this claim is legally vulnerable under New York law, given the discretionary nature of the renewal options.

Kestrel is represented in this matter by Haber Reinhardt Schlosser Partnerschaft mbB ("HRS"), an international law firm with offices in Stuttgart, Germany (Königstraße 35, 70173 Stuttgart) and London, England (30 St Mary Axe, London EC3A 8BF). The HRS team is led by Dr. Maximilian Haber, with associate counsel Katrin Schäfer.

3. Activities Completed During Reporting Period

3.1 Engagement Formalization (November 2, 2022)

On November 2, 2022, Calderwood & Harkness LLP was formally engaged by Whitmore Aerospace LLC to serve as defense counsel in the ICC arbitration. The engagement letter was executed by Dana Prescott, Vice President & General Counsel, on behalf of WAL and by Theodore Langston, Partner, on behalf of C&H. The engagement was assigned internal tracking number 1019-00001.

The following team composition was confirmed for the duration of the engagement:

The fee arrangement is on an hourly-rate basis. No contingency or success fee component is included. Invoices will be rendered on a monthly cycle, with payment due within 30 days of invoice date, consistent with the terms set forth in the engagement letter.

Additional team members, including contract attorneys for document review and paralegal support, may be added as the matter progresses through the document production and hearing preparation phases. Any such additions will be communicated to WAL in advance, along with applicable billing rates.

3.2 Conflict Check (November 1, 2022)

Prior to formalizing the engagement, a comprehensive conflict check was completed on November 1, 2022. The conflict check memorandum was prepared by C&H's General Counsel's Office and confirmed that no conflicts of interest exist with respect to any of the parties or known counsel in the arbitration. Specifically, the conflict check covered:

• Kestrel Dynamics GmbH (Claimant)

• Haber Reinhardt Schlosser Partnerschaft mbB (Claimant's counsel)

• Friedrich Brenner (Kestrel's CEO and signatory to the MSA)

• Luisa Erdmann (Kestrel's CFO)

• Dr. Stefan Voss (Kestrel's VP of Engineering)

• Dr. Maximilian Haber (lead counsel at HRS)

• Katrin Schäfer (associate counsel at HRS)

No current or former client relationships, adverse representations, or other potential conflicts were identified. The conflict check memorandum is on file and available for review.

3.3 Litigation Hold (November 8, 2022)

On November 8, 2022, the day following receipt of Kestrel's Request for Arbitration, Simone Laroche issued a comprehensive litigation hold notice to Dana Prescott, VP & General Counsel, and Gerald Huang, VP of Global Supply Chain Operations, at Whitmore Aerospace LLC. The litigation hold notice was designed to ensure full compliance with WAL's document preservation obligations in connection with the arbitration.

The scope of the litigation hold encompasses all documents, communications, and electronically stored information relating to the MSA and the underlying dispute, including but not limited to:

• Lot inspection records and quality control documentation for all deliveries under the MSA, including the 14 rejected lots;

• Quality control reports prepared under WAL-QCP-100;

• Engineering specifications WAL-SPEC-TH-401 through WAL-SPEC-TH-410, including all drafts, revisions, and internal commentary;

• All correspondence (email, letter, memorandum, or other format) with Kestrel personnel, including Friedrich Brenner (CEO), Luisa Erdmann (CFO), and Dr. Stefan Voss (VP Engineering);

• Internal WAL communications concerning Kestrel's quality performance, the lot rejections, the termination decision, and the engagement of alternative suppliers;

• Supply chain and procurement records relating to the MSA and to the engagement of Valkyr Precision Components Inc.; and

• Any other documents or data reasonably related to the subject matter of the arbitration.

The litigation hold notice requested that WAL confirm implementation of the hold across all relevant departments. We specifically identified the Engineering & Manufacturing division (headed by Dr. Ingrid Vollmer, SVP) and the Supply Chain division (headed by Gerald Huang, VP) as key custodians. WAL acknowledged receipt of the litigation hold notice and confirmed implementation across the identified departments. We will monitor compliance with the hold on an ongoing basis and issue supplemental preservation notices as warranted.

3.4 Insurance Notification (November 14, 2022)

On November 14, 2022, Theodore Langston transmitted a formal notification letter to Pinnacle Continental Insurance Co. ("Pinnacle"), WAL's general liability insurer, advising Pinnacle of the ICC arbitration and Kestrel's claims. The notification was sent to Pinnacle's claims department at 200 Berkeley Street, Boston, Massachusetts 02116, under Policy No. PCE-GL-2021-08854.

The notification letter summarized the nature of the arbitration, identified the claims asserted by Kestrel, and stated the aggregate amount in controversy (approximately €47.3 million). The letter requested that Pinnacle review the claim for coverage and provide a coverage determination at its earliest convenience.

We note, for WAL's information, that we anticipate a coverage reservation or declination from Pinnacle. General liability policies of the type maintained by WAL typically contain commercial-supply exclusions or contractual-liability exclusions that would preclude coverage for disputes arising from commercial supply agreements. We will advise WAL promptly upon receipt of Pinnacle's response and recommend any appropriate next steps, which may include review of WAL's directors and officers liability program or other insurance lines.

3.5 Receipt and Initial Review of Request for Arbitration (November 7, 2022)

Kestrel's Request for Arbitration was received by C&H via the ICC Secretariat on November 7, 2022. Upon receipt, Theodore Langston sent an email communication to Dana Prescott confirming receipt of the filing and outlining the immediate next steps required in connection with the defense. These next steps included the issuance of the litigation hold notice (completed November 8), the commencement of the preliminary case assessment, and the identification of key deadlines under the ICC Rules, including the 30-day deadline for filing WAL's Answer.

As noted above, Kestrel is represented by Haber Reinhardt Schlosser Partnerschaft mbB, a prominent German-headquartered international law firm with particular strength in manufacturing and supply-chain disputes. Their lead counsel, Dr. Maximilian Haber, is a well-regarded arbitration practitioner who has handled numerous ICC arbitrations. We will continue to monitor HRS's litigation history and approach as the matter progresses.

3.6 Preliminary Case Assessment (November 10, 2022)

On November 10, 2022, Simone Laroche and Jeffrey Park completed an internal preliminary case assessment memorandum evaluating WAL's defenses to Kestrel's claims and the viability of a potential counterclaim. The memorandum was circulated to Theodore Langston and Vivienne St. Claire for review and has been finalized. The key conclusions of the preliminary case assessment are as follows:

WAL's Defenses. WAL has strong defenses to Kestrel's material breach allegations. The documented quality failures — 14 rejected lots, of which seven remained uncured past the contractual cure period — provide a compelling factual basis for WAL's termination decision. WAL's quality control records, prepared in accordance with WAL-QCP-100, document the specific porosity levels found in each rejected lot. These records should effectively rebut Kestrel's contention that WAL fabricated or exaggerated the quality deficiencies.

Consequential Damages Waiver. The MSA's exclusive remedy provision at § 8.7 includes a mutual waiver of consequential, incidental, and indirect damages. This waiver should operate to bar Kestrel's claims for lost profits (both base-term and renewal-term), rework costs (to the extent classified as consequential rather than direct damages), and reputational damages. Under well-established New York law, consequential damages waivers between sophisticated commercial parties are routinely enforced.

Termination Propriety. WAL's termination was procedurally and substantively proper under § 14.2(b). The provision requires the occurrence of a Persistent Quality Failure, defined in § 8.4 as three or more uncured rejections in any rolling 12-month period. WAL documented seven uncured rejections — well above the three-rejection threshold — providing ample substantive basis for termination. The Notice of Termination for Cause was issued on October 3, 2022, in compliance with the MSA's notice provisions.

Counterclaim. WAL has a strong basis for asserting a counterclaim of approximately €5.17 million for the incremental cost of sourcing replacement turbine housings from Valkyr Precision Components Inc. ("Valkyr"). Following Kestrel's quality failures and WAL's termination of the MSA, WAL was compelled to engage Valkyr as an alternative supplier at a significantly higher unit price, reflecting the premium costs associated with accelerated qualification and production. The counterclaim calculation is set forth in detail in Section 4.3 below.

Governing Law. The selection of New York governing law is favorable to WAL's position. New York courts have consistently upheld contractual damages limitations, including consequential damages waivers, between sophisticated commercial parties engaged in arm's-length transactions. The enforceability of the § 8.7 waiver under New York law is a key strategic advantage.

3.7 MSA and Amendments Review

During the reporting period, the C&H team completed a detailed review of the MSA (WAL-KDG-MSA-2018-0615) and Amendments No. 1 and No. 2. The review focused on identifying and analyzing the key contractual provisions that are central to both Kestrel's claims and WAL's defenses. The following provisions were subject to particular scrutiny:

• Section 4.1 (Volume Commitments): Establishes minimum and maximum annual volume requirements, relevant to Kestrel's lost-profit calculations.

• Section 5.2 (Pricing and Escalation): Defines the base unit price and annual escalation mechanism, relevant to damages quantification.

• Section 8.4 (Rejection, Cure, and Persistent Quality Failure): The cornerstone of WAL's termination defense. This section sets forth the acceptance/rejection framework, the cure period (as amended to 45 days by Amendment No. 2), and the Persistent Quality Failure threshold of three uncured rejections in any rolling 12-month period.

• Section 8.7 (Exclusive Remedy and Consequential Damages Waiver): Contains the mutual waiver of consequential, incidental, and indirect damages. This provision is the primary legal basis for WAL's motion to limit or dismiss the majority of Kestrel's damages claims.

• Section 14.2 (Termination for Cause): Authorizes termination upon the occurrence of specified events, including Persistent Quality Failure under subsection (b). WAL invoked this provision in its October 3, 2022 termination notice.

• Sections 22.1 and 22.3 (Governing Law and Arbitration): Establish New York law as the governing law and ICC arbitration as the exclusive dispute resolution mechanism.

In addition to the MSA review, the engineering specifications WAL-SPEC-TH-401 through WAL-SPEC-TH-410 were received from Dr. Ingrid Vollmer's Engineering & Manufacturing team for initial review. Of particular importance, our review of Appendix C, Table 3 of WAL-SPEC-TH-401 confirms that the contractual porosity specification is expressly stated as ≤0.25%. This documented specification directly contradicts Kestrel's central factual allegation that WAL applied an unpublished and more restrictive ≤0.15% porosity tolerance. The clarity and accessibility of this specification within the contractual documentation is a significant asset for WAL's defense.

3.8 Lender Notification Considerations

During the course of our initial review, we identified that WAL maintains a senior secured revolving credit facility in the amount of $350 million with Veltrano National Bank, N.A. (One Veltrano Center, Charlotte, NC 28255). Credit agreements of this nature commonly include covenant provisions requiring the borrower to provide notice to the administrative agent of material litigation, arbitration proceedings, or claims that could reasonably be expected to have a material adverse effect on the borrower's financial condition, business, or operations.

Given that Kestrel's aggregate claims total approximately €47.3 million (approximately $49.2 million at current exchange rates), the arbitration may constitute "material litigation" within the meaning of the credit agreement and trigger a disclosure obligation. We have recommended that Dana Prescott and WAL's finance team review the relevant provisions of the credit agreement — typically found in the "Covenants" or "Reporting Requirements" article — to determine whether notification is required and, if so, the applicable notice timeline and procedures.

We will coordinate with WAL's finance team as needed in connection with this analysis. If WAL wishes C&H to review the credit agreement directly, we are prepared to do so upon receipt of a copy.

4. Preparation of Answer and Counterclaim

4.1 Status

Preparation of WAL's Answer and Counterclaim is actively underway. The initial drafting is being led by Simone Laroche and Jeffrey Park, with review and strategic direction provided by Theodore Langston and Vivienne St. Claire.

Under Article 5 of the ICC Rules of Arbitration (2021 edition), the Respondent's Answer to the Request for Arbitration, together with any counterclaim, must be filed within 30 days of receipt of the Request for Arbitration from the Secretariat. Kestrel's Request for Arbitration was received on November 7, 2022, which places the filing deadline at approximately December 7, 2022. However, given the complexity of the matter and the scope of the counterclaim, we intend to request a brief extension from the Secretariat if needed. Our current target filing date is December 12, 2022, which we believe is achievable and which would, if necessary, be within any reasonable extension period granted by the Secretariat.

The Answer will comprehensively deny all of Kestrel's allegations of material breach and wrongful termination, assert all applicable affirmative defenses, and set forth WAL's counterclaim for incremental replacement costs.

4.2 Key Defenses to Be Asserted

The Answer will assert the following principal defenses:

1. The lot rejections were justified. WAL's incoming inspection records, prepared in accordance with WAL-QCP-100, and independent testing data demonstrate that the porosity levels in the 14 rejected lots ranged from 0.19% to 0.38%. Multiple lots therefore exceeded the contractual ≤0.25% porosity limit specified in WAL-SPEC-TH-401, Appendix C, Table 3. WAL's rejections were based on objective, documented quality data and were consistent with the inspection procedures established under the MSA.

2. Termination was proper under § 14.2(b). WAL's termination for cause was procedurally and substantively proper. Seven of the 14 rejected lots remained uncured beyond the 45-calendar-day amended cure period, far exceeding the three-rejection Persistent Quality Failure threshold set forth in § 8.4 of the MSA. The Notice of Termination for Cause was issued in compliance with the MSA's notice requirements.

3. Kestrel failed to cure. Kestrel failed to cure, replace, or remediate the non-conforming units within the contractually prescribed 45-day cure period for five of the seven uncured lots. For the remaining two uncured lots, Kestrel's attempted cure was itself non-conforming and was properly re-rejected. Kestrel's failure to avail itself of the cure mechanism — which was already extended from 30 to 45 days by Amendment No. 2 as an accommodation to Kestrel — underscores the legitimacy of WAL's termination.

4. Consequential damages waiver bars the majority of Kestrel's claims. Section 8.7 of the MSA contains a mutual waiver of consequential, incidental, and indirect damages. Kestrel's claims for lost profits (both base-term and renewal-term), reputational damages, and lost business opportunities are consequential in nature and are barred by this provision. Under well-settled New York law, such waivers are enforceable between sophisticated commercial parties negotiating at arm's length.

5. Kestrel's porosity allegation is contradicted by the express contract terms. Kestrel's central factual contention — that WAL applied an unpublished ≤0.15% porosity standard — is squarely contradicted by the express language of WAL-SPEC-TH-401, Appendix C, Table 3, which clearly states the ≤0.25% porosity limit. There is no "unpublished" or informal standard; the contractual specification is unambiguous and was mutually agreed upon by the parties.

6. WAL's engagement of Valkyr was a mitigation measure, not a pretext. WAL's engagement of Valkyr Precision Components Inc. as an alternative supplier was undertaken as a commercially reasonable mitigation step in response to Kestrel's documented quality failures and the resulting disruption to WAL's production schedule. The chronology of events confirms that WAL's initial contact with Valkyr post-dated the accumulation of quality failures and WAL's termination of the MSA, refuting Kestrel's narrative that the Valkyr engagement was the cause, rather than the consequence, of the termination.

4.3 Counterclaim

WAL's counterclaim will seek recovery of approximately €5.17 million representing the incremental cost incurred by WAL in sourcing replacement titanium alloy turbine housings from Valkyr Precision Components Inc. during the transition period following Kestrel's Persistent Quality Failure and WAL's termination of the MSA.

The counterclaim is calculated as follows:

• Replacement volume: 1,680 units (corresponding to the rejected and undelivered units)

• Valkyr replacement unit price: €8,432.92

• Kestrel CY4 unit price (contractual): €5,222.92

• Price differential per unit: €8,432.92 − €5,222.92 = €3,210.00

• Gross incremental cost: 1,680 units × €3,210.00 = €5,392,800 (approximately €5,393,280 after rounding adjustments)

• Less Valkyr 4.2% introductory discount: €5,393,280 × (1 − 0.042) = €5,393,280 × 0.958 = approximately €5,166,763

• Rounded: approximately €5.17 million

The counterclaim is grounded in WAL's right to recover direct damages arising from Kestrel's breach of the MSA, specifically the incremental cost of cover (i.e., the cost of obtaining substitute performance from an alternative supplier, net of the contract price WAL would have paid Kestrel). Under both the UCC (as incorporated through New York law) and general contract principles, a non-breaching buyer is entitled to recover the difference between the cost of cover and the contract price, provided the cover was made in good faith, without unreasonable delay, and on commercially reasonable terms. WAL's engagement of Valkyr satisfies each of these requirements.

5. Arbitrator Selection Process

5.1 Respondent's Nominee

Under Article 12 of the ICC Rules of Arbitration, each party to the arbitration nominates one co-arbitrator, with the presiding (third) arbitrator to be appointed either by agreement of the parties or by the ICC Court. The nomination of co-arbitrators is a critical strategic decision, and we have been conducting a thorough vetting process to identify candidates who possess the requisite subject-matter expertise, temperament, and availability.

Our leading candidate for Respondent's co-arbitrator is the Honorable Robert A. Castillo, a retired judge of the United States District Court for the Southern District of New York. Judge Castillo served on the federal bench for over two decades and presided over numerous complex commercial disputes, including several involving manufacturing supply agreements and quality-related termination disputes. Following his retirement, Judge Castillo has maintained an active practice as an international arbitrator and has served on multiple ICC, LCIA, and AAA/ICDR tribunals.

We have verified Judge Castillo's independence and impartiality with respect to all parties and counsel in this matter. He has no prior relationship with Kestrel, HRS, or any of their known affiliates. Judge Castillo has confirmed his availability to serve on the tribunal and his willingness to comply with the ICC's time and procedural requirements for this case.

We plan to submit the formal nomination letter to the ICC Secretariat on or about December 19, 2022.

5.2 Presiding Arbitrator

Kestrel has nominated its own co-arbitrator. Based on our review of ICC correspondence, we understand that the nominee is Dr. Hans-Ulrich Perren, a Swiss national and former judge of the Swiss Federal Supreme Court. Dr. Perren is a well-known arbitration practitioner with substantial experience in international commercial disputes. We will complete our review of Dr. Perren's background and prior awards as additional information becomes available.

Under the ICC Rules, the Presiding Arbitrator (chair of the tribunal) is to be appointed by agreement of the two party-nominated co-arbitrators or, failing such agreement, by the ICC Court. We anticipate engaging in discussions with HRS regarding the possibility of identifying a mutually agreeable candidate for the presiding role. Such discussions are common in ICC arbitrations and, when successful, can contribute to a more efficient and constructive proceeding.

5.3 Tribunal Constitution Timeline

Based on standard ICC procedural timelines, and assuming timely submission of both parties' co-arbitrator nominations and a reasonable period for presiding arbitrator selection, we anticipate that the three-member tribunal will be constituted by approximately late January 2023. Following constitution, we expect the tribunal to convene a preliminary procedural conference (commonly referred to as the "Case Management Conference") within approximately four to six weeks, at which Procedural Order No. 1 — establishing the procedural calendar for the arbitration — will be discussed and issued.

6. Preliminary Budget Estimate

6.1 Estimated Fee Range

Based on our preliminary case assessment, the complexity of the dispute, and the anticipated procedural steps that are typical of an ICC arbitration of this nature, we estimate total professional fees for the engagement in the range of $2.2 million to $2.8 million. This estimate encompasses all phases of the arbitration, from the current pleadings phase through final submissions and the issuance of the award.

The estimate is predicated on the following key assumptions:

• A standard ICC procedural calendar extending approximately 14 to 18 months from tribunal constitution to award;

• Two rounds of written submissions (Statement of Claim / Statement of Defense, followed by Reply and Rejoinder);

• A document production phase conducted under IBA Rules on the Taking of Evidence in International Arbitration;

• Retention and coordination of two expert witnesses (one damages expert and one metallurgical expert);

• A five-day evidentiary hearing, including witness examinations and expert testimony;

• Post-hearing submissions and costs submissions.

We emphasize that this estimate is preliminary and is subject to revision as the matter develops, particularly following the constitution of the tribunal and the issuance of the procedural calendar. Variables that may significantly affect fees include the scope of document production, the number of fact witnesses, the complexity of expert issues, and any interim applications (e.g., for provisional measures or document-production disputes).

6.2 Estimated Costs and Disbursements

In addition to professional fees, the engagement will entail various costs and disbursements, including:

• Expert witness fees and expenses (damages expert and metallurgical expert);

• Hearing-related travel and accommodation (for the C&H team, WAL witnesses, and experts);

• Transcript and stenography costs for the evidentiary hearing;

• ICC advance on costs (the ICC Secretariat's administrative fees and arbitrators' fees, advanced by the parties in accordance with ICC practice);

• Research database charges, document hosting and review platform costs, and other technology-related expenses; and

• Courier, translation (if required for German-language documents), and miscellaneous disbursements.

We estimate total costs and disbursements in the range of $500,000 to $700,000.

6.3 Estimated Total Engagement Value

The estimated total engagement value, combining professional fees and costs/disbursements, is in the range of $2.7 million to $3.5 million.

We will provide updated budget estimates as the matter progresses and the procedural calendar is established by the tribunal. We are committed to managing costs efficiently and will communicate proactively with WAL regarding any developments that may materially affect the budget.

6.4 Billing to Date

Professional fees incurred through November 30, 2022, total approximately $87,500. A detailed breakdown of time entries by timekeeper will follow on the monthly invoice for November 2022, which will be transmitted separately.

Disbursements incurred to date are minimal, consisting primarily of research database charges (Westmark Data Systems and ICC jurisprudence databases) and initial ICC filing-related costs. These disbursements will be itemized on the November invoice.

7. Anticipated Next Steps (December 2022 – March 2023)

The following table summarizes the key action items and target dates for the upcoming period:

We will keep WAL informed of developments on each of these items and will provide more detailed timelines as the procedural calendar takes shape.

8. Key Risk Factors and Early Observations

We believe it is important to identify at this early stage the key risk factors and strategic considerations that will shape the development of WAL's defense. While our overall assessment of WAL's position is favorable, the following matters warrant particular attention:

1. Renewal-Period Lost Profits (€27.15 million). The largest single component of Kestrel's damages claim is the €27.15 million in lost profits attributed to the two optional renewal periods (CY6 and CY7). This claim is predicated on the assumption that WAL would have exercised both discretionary renewal options, thereby extending the MSA through June 14, 2025. Under New York law, damages premised on the exercise of discretionary contractual options are generally speculative and non-recoverable, as the option holder has no obligation to exercise. We believe this claim is legally vulnerable and will seek to have it excluded from the damages analysis. Nevertheless, this represents a significant exposure that warrants careful monitoring.

2. Kestrel's Porosity Argument. Kestrel's allegation that WAL applied an unpublished ≤0.15% porosity standard — rather than the contractual ≤0.25% — is the central factual pillar of their case. Our initial review of WAL-SPEC-TH-401, Appendix C, Table 3 confirms the ≤0.25% specification is clearly and expressly stated. However, we must ensure that WAL's internal inspection records, calibration logs, and communications consistently reference the ≤0.25% standard and do not contain any informal or inconsistent references to a lower threshold. Any documentary evidence suggesting internal use of a tighter specification could be exploited by Kestrel. Accordingly, a thorough review of all inspection-related documents is a high priority during the document collection and review phase.

3. Kestrel's Claimed Profit Margin. Kestrel's lost-profit calculations appear to be based on a claimed gross margin of 22.4% on the turbine housing product line. This margin will need to be independently verified through forensic accounting analysis. We may engage Canfield & Thorpe LLP (Sandra Gillespie, CPA/ABV, partner) for this purpose. Ms. Gillespie has extensive experience in international commercial disputes and has served as an expert witness in multiple ICC and LCIA arbitrations. A forensic review of Kestrel's financial data — which will be obtained through the document production process — will be essential to challenging the quantum of Kestrel's lost-profit claims.

4. Valkyr Pretext Narrative. We expect Kestrel to vigorously pursue the argument that WAL's engagement of Valkyr Precision Components Inc. was the true motivation for the lot rejections and termination — i.e., that WAL manufactured the quality failures as a pretext for replacing Kestrel with a lower-cost domestic supplier. This narrative, if accepted by the tribunal, could undermine WAL's good-faith defense of the termination and potentially support Kestrel's bad-faith and reputational-damages claims. To counter this narrative effectively, we must be prepared to demonstrate through contemporaneous documentation that: (a) the quality failures were genuine and documented through objective testing; (b) WAL's initial contact with Valkyr occurred after the accumulation of quality failures and the termination of the MSA; and (c) WAL's engagement of Valkyr was a commercially reasonable mitigation measure, not a pre-planned supplier substitution. The chronological sequence of events is favorable to WAL on this issue, but clear documentation will be critical.

5. Covenant Compliance Risk. The €47.3 million exposure (approximately $49.2 million at current exchange rates), if realized, could have material implications for WAL's covenant compliance under its $350 million senior secured revolving credit facility with Veltrano National Bank, N.A. Even the pendency of the claim may trigger reporting obligations or affect representations and warranties made in connection with draws on the facility. We recommend ongoing coordination between WAL's legal and finance teams to monitor this issue throughout the arbitration.

9. Conclusion and Confirmation

The matter is progressing on schedule. During the initial four-week engagement period, the C&H team has completed all critical administrative and foundational tasks, including engagement formalization, conflict clearance, litigation hold issuance and confirmation, insurance notification, and preliminary case assessment. We are well positioned to file the Answer and Counterclaim by the December 12, 2022 target date.

Our initial assessment of WAL's defenses is favorable. The MSA's contractual framework — particularly the quality specifications in WAL-SPEC-TH-401, the Persistent Quality Failure mechanism in § 8.4, the termination-for-cause provision in § 14.2(b), and the consequential damages waiver in § 8.7 — provides WAL with a strong defensive posture. Additionally, WAL's counterclaim of approximately €5.17 million for incremental replacement costs is well supported and should serve to offset a portion of any exposure, while also demonstrating that Kestrel, not WAL, is the party responsible for the damages arising from this dispute.

We will provide the next monthly status report on or about January 2, 2023, covering activities during December 2022.

We remain available to discuss any aspect of this report, the arbitration strategy, or any related matters at your convenience. Please do not hesitate to contact the undersigned or any member of the C&H team:

Theodore Langston, Partner Telephone: (212) 555-4800

Email: tlangston@calderwoodharkness.com

Simone Laroche, Senior Associate Telephone: (212) 555-4823

Email: slaroche@calderwoodharkness.com

We appreciate WAL's confidence in Calderwood & Harkness LLP and look forward to continuing our representation of Whitmore Aerospace LLC in this matter.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Theodore Langston Partner Engagement No.: 1019-00001

600 Lexington Avenue New York, NY 10022

Date: December 1, 2022

Enclosures/Attachments: None with this report. Copies of the engagement letter, conflict check memorandum, litigation hold notice, insurance notification letter, and preliminary case assessment memorandum are maintained on file at Calderwood & Harkness LLP and are available upon request.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT. This document and all information contained herein are protected by the attorney-client privilege and the work product doctrine. This document is intended solely for the use of Whitmore Aerospace LLC and its authorized representatives. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this document in error, please notify Calderwood & Harkness LLP immediately at (212) 555-4800 and destroy all copies.

Damages Category	Amount
Lost profits for the remaining MSA base term (CY5)	€12.83 million
Lost profits for two discretionary renewal terms (CY6–CY7)	€27.15 million
Unreimbursed rework costs on rejected lots	€3.42 million
Reputational damages / lost business opportunities	€3.90 million
Total	€47.30 million
Team Member	Role	Hourly Rate
Theodore Langston	Responsible Partner	$1,475/hr
Vivienne St. Claire	Billing Partner	$1,425/hr
Simone Laroche	Senior Associate (Lead)	$895/hr
Jeffrey Park	Associate	$625/hr
Target Date	Action Item
December 12, 2022	File Answer and Counterclaim with the ICC Secretariat
December 19, 2022	Submit nomination of the Hon. Robert A. Castillo as Respondent's co-arbitrator to the ICC Secretariat
December 2022	Commence preparation of internal legal memorandum analyzing material breach and termination rights under the MSA
December 2022	Receive and evaluate Pinnacle Continental Insurance Co.'s coverage determination response
January 2023	Commence research memoranda on New York law regarding the enforceability of consequential damages waivers (§ 8.7) and the recoverability of reputational damages in commercial arbitration
Late January 2023	Anticipate constitution of the three-member arbitral tribunal
February 2023	Anticipate preliminary procedural conference (Case Management Conference) and issuance of Procedural Order No. 1, establishing the procedural calendar
March 2023	Identify and engage damages and metallurgical expert witnesses; anticipate issuance of Procedural Order No. 2 addressing the framework for document production

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
CALDERWOOD & HARKNESS LLP Attorneys at Law
600 Lexington Avenue New York, NY 10022 Telephone: (212) 555-4800 Facsimile: (212) 555-4801 www.calderwoodharkness.com
December 1, 2022
TO:
Dana Prescott Vice President & General Counsel Whitmore Aerospace LLC 4200 Wilson Boulevard, Suite 1100 Arlington, VA 22203
CC:
Marcus J. Whitmore III Chief Executive Officer Whitmore Aerospace LLC
FROM:
Theodore Langston, Partner Calderwood & Harkness LLP
RE:
Monthly Status Report — November 2022 Defense of ICC Arbitration, Case No. 27914/MHM Kestrel Dynamics GmbH v. Whitmore Aerospace LLC
Engagement No.: 1019-00001
Classification: PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
Dear Ms. Prescott:
We are pleased to submit this Monthly Status Report covering activities undertaken in connection with the above-referenced matter during the period from engagement inception on November 2, 2022, through November 30, 2022. This report is intended to provide Whitmore Aerospace LLC ("WAL") with a comprehensive summary of the current status of the matter, a description of the work completed to date, an outline of anticipated next steps, and a preliminary budget estimate for the engagement as a whole.
This report, and all communications between Calderwood & Harkness LLP ("C&H") and WAL in connection with this matter, are protected by the attorney-client privilege and constitute attorney work product. This report should not be disclosed to any third party without prior consultation with this firm.
1. Executive Summary
This report covers the initial month of our engagement, spanning from November 2, 2022, through November 30, 2022. Calderwood & Harkness LLP was formally engaged on November 2, 2022, to represent Whitmore Aerospace LLC as Respondent in ICC Arbitration Case No. 27914/MHM, which was filed by Kestrel Dynamics GmbH ("Kestrel") on November 7, 2022. The arbitration arises out of an alleged material breach of the Master Supply Agreement for Titanium Alloy Turbine Housings dated June 15, 2018 (the "MSA"), under which WAL purchased Ti-6Al-4V ELI titanium alloy turbine housings from Kestrel. Kestrel is seeking approximately €47.3 million in damages across multiple categories, including lost profits, rework costs, and reputational damages.
During the reporting period, the C&H team accomplished the following key milestones:
•  Engagement formalization. The engagement letter was executed, the team was assembled, and the engagement was assigned tracking number 1019-00001.
•  Litigation hold. A comprehensive litigation hold notice was issued to WAL and acknowledged, ensuring the preservation of all relevant documents and electronically stored information.
•  Preliminary case assessment. An internal memorandum was prepared evaluating WAL's defenses and counterclaim prospects, the results of which are favorable to WAL's position.
•  Insurance notification. Pinnacle Continental Insurance Co. was notified of the arbitration under the applicable general liability policy. We await their coverage determination.
•  MSA and amendments review. A detailed review of the MSA and its two amendments was completed, with particular focus on the quality, termination, and remedies provisions.
•  Answer and Counterclaim preparation. Preparation of WAL's Answer and Counterclaim is underway, with filing anticipated by December 12, 2022.
•  Arbitrator selection. The process of identifying and vetting candidates for WAL's co-arbitrator nomination was initiated. We have identified a leading candidate and anticipate submission of the nomination by approximately December 19, 2022.
The C&H team assigned to this matter consists of Theodore Langston (responsible partner), Vivienne St. Claire (billing partner), Simone Laroche (lead associate), and Jeffrey Park (working associate). This team configuration provides the depth and expertise necessary to manage a dispute of this complexity and magnitude effectively.
Our initial assessment of WAL's defensive posture is favorable. The MSA's contractual provisions — in particular, the Persistent Quality Failure framework in § 8.4, the termination-for-cause mechanism in § 14.2(b), and the consequential damages waiver in § 8.7 — provide WAL with robust defenses against Kestrel's claims. Additionally, WAL has a strong basis for a counterclaim of approximately €5.17 million arising from the incremental costs of sourcing replacement components.
2. Matter Background
2.1 The Underlying Contract
The dispute arises from the Master Supply Agreement for Titanium Alloy Turbine Housings (Contract No. WAL-KDG-MSA-2018-0615) executed on June 15, 2018 (the "MSA"), between Whitmore Aerospace LLC, as Buyer, and Kestrel Dynamics GmbH, as Seller. Under the MSA, Kestrel agreed to manufacture and deliver Ti-6Al-4V ELI titanium alloy turbine housings (the "Products") to WAL for integration into WAL's aerospace propulsion systems.
The principal terms of the MSA, as modified by two subsequent amendments, are summarized below:
Term. The MSA provides for a five-year base term commencing June 15, 2018, and running through June 14, 2023, subject to two optional one-year renewal periods exercisable solely at WAL's discretion. If exercised, the renewals would extend the MSA through June 14, 2025.
Volume Commitments. Section 4.1 of the MSA establishes an annual volume commitment requiring WAL to purchase a minimum of 2,400 units and permitting a maximum of 3,600 units per contract year. Amendment No. 1, described below, subsequently increased the annual maximum volume to 4,000 units.
Pricing. Section 5.2 sets a base unit price of €4,850 for Contract Year 1 (CY1), with an annual escalation factor of 2.5% per annum, compounded. At minimum annual volume, the aggregate contract value over the five-year base term is approximately €61.2 million.
Amendment No. 1 (February 10, 2020). The first amendment to the MSA added engineering specification WAL-SPEC-TH-410, governing a new high-temperature variant of the turbine housing product line. Amendment No. 1 also increased the maximum annual volume from 3,600 units to 4,000 units to accommodate anticipated demand growth for the high-temperature variant in WAL's next-generation propulsion platform.
Amendment No. 2 (September 3, 2021). The second amendment extended the cure period for non-conforming deliveries from 30 calendar days to 45 calendar days under § 8.4. This extension was implemented in recognition of ongoing supply chain disruptions and logistics challenges attributable to the COVID-19 pandemic. Amendment No. 2 also incorporated a supplemental force majeure carve-out addressing pandemic-related disruptions.
Delivery Terms. The MSA specifies delivery on a DDP (Delivered Duty Paid) basis under Incoterms 2020, with delivery to WAL's primary manufacturing facility located at 8500 Coppermine Road, Manassas, Virginia 20110. Risk of loss accordingly passes to WAL only upon physical delivery at the designated facility.
Governing Law and Dispute Resolution. Section 22.1 of the MSA designates the laws of the State of New York as the governing law, without regard to conflict-of-laws principles. Section 22.3 provides that any dispute arising out of or in connection with the MSA shall be resolved by arbitration administered under the ICC Rules of Arbitration (2021 edition) before a three-member tribunal, with the seat of arbitration in New York, New York.
Quality Standards. The MSA imposes stringent quality requirements on the Products. Kestrel is required to maintain AS9100 Rev D certification throughout the term of the MSA. All Products are subject to incoming inspection by WAL in accordance with WAL's Quality Control Procedure WAL-QCP-100. Section 8.4 provides WAL with a 15-business-day acceptance window following delivery during which WAL may inspect and either accept or reject each delivered lot. Non-conforming lots trigger a cure period (now 45 calendar days, as amended) during which Kestrel must replace or remediate the deficient units.
2.2 The Dispute
The dispute centers on a series of quality failures by Kestrel over a six-month period in 2022. Between March 7, 2022 (Lot KDG-2022-0307) and September 19, 2022 (Lot KDG-2022-0919), WAL's quality control team rejected a total of 14 lots comprising 1,680 individual turbine housing units for non-conformance with the porosity specifications set forth in WAL-SPEC-TH-401, Appendix C, Table 3. The contractual porosity limit is ≤0.25%, a threshold that is clearly and expressly stated in the specification document.
Of the 14 rejected lots, seven remained uncured beyond the 45-calendar-day amended cure period established by Amendment No. 2. Under § 8.4 of the MSA, the occurrence of three or more uncured rejections within any rolling 12-month period constitutes a "Persistent Quality Failure," which triggers WAL's right to terminate the MSA for cause under § 14.2(b). With seven uncured rejections — more than double the contractual threshold — WAL's basis for termination is substantial.
On October 3, 2022, WAL issued a formal Notice of Termination for Cause to Kestrel, invoking § 14.2(b) of the MSA and citing Persistent Quality Failure as the basis for termination. The notice was delivered in accordance with the MSA's notice provisions and recited the specific lots, rejection dates, and cure-period expirations giving rise to the Persistent Quality Failure determination.
On November 7, 2022, approximately five weeks after receiving the termination notice, Kestrel filed its Request for Arbitration with the ICC International Court of Arbitration, commencing ICC Case No. 27914/MHM.
2.3 Kestrel's Claims
In its Request for Arbitration, Kestrel alleges that WAL committed material breach of the MSA by (i) wrongfully rejecting the 14 lots of turbine housings and (ii) issuing a termination notice predicated on fabricated or exaggerated quality deficiencies. Central to Kestrel's theory of the case is the contention that WAL applied an unpublished and more restrictive porosity tolerance of ≤0.15% — rather than the contractual specification of ≤0.25% — when evaluating the rejected lots. Kestrel further alleges that WAL's true motive for the rejections and termination was to replace Kestrel as its turbine housing supplier with a lower-cost domestic supplier, Valkyr Precision Components Inc., based in Tucson, Arizona.
Kestrel seeks total damages of approximately €47.3 million, broken down as follows:
We note that the single largest component of Kestrel's damages claim — the €27.15 million in lost renewal-period profits — is predicated on the assumption that WAL would have exercised both optional one-year renewal terms. As discussed in Section 8 below, we believe this claim is legally vulnerable under New York law, given the discretionary nature of the renewal options.
Kestrel is represented in this matter by Haber Reinhardt Schlosser Partnerschaft mbB ("HRS"), an international law firm with offices in Stuttgart, Germany (Königstraße 35, 70173 Stuttgart) and London, England (30 St Mary Axe, London EC3A 8BF). The HRS team is led by Dr. Maximilian Haber, with associate counsel Katrin Schäfer.
3. Activities Completed During Reporting Period
3.1 Engagement Formalization (November 2, 2022)
On November 2, 2022, Calderwood & Harkness LLP was formally engaged by Whitmore Aerospace LLC to serve as defense counsel in the ICC arbitration. The engagement letter was executed by Dana Prescott, Vice President & General Counsel, on behalf of WAL and by Theodore Langston, Partner, on behalf of C&H. The engagement was assigned internal tracking number 1019-00001.
The following team composition was confirmed for the duration of the engagement:
The fee arrangement is on an hourly-rate basis. No contingency or success fee component is included. Invoices will be rendered on a monthly cycle, with payment due within 30 days of invoice date, consistent with the terms set forth in the engagement letter.
Additional team members, including contract attorneys for document review and paralegal support, may be added as the matter progresses through the document production and hearing preparation phases. Any such additions will be communicated to WAL in advance, along with applicable billing rates.
3.2 Conflict Check (November 1, 2022)
Prior to formalizing the engagement, a comprehensive conflict check was completed on November 1, 2022. The conflict check memorandum was prepared by C&H's General Counsel's Office and confirmed that no conflicts of interest exist with respect to any of the parties or known counsel in the arbitration. Specifically, the conflict check covered:
•  Kestrel Dynamics GmbH (Claimant)
•  Haber Reinhardt Schlosser Partnerschaft mbB (Claimant's counsel)
•  Friedrich Brenner (Kestrel's CEO and signatory to the MSA)
•  Luisa Erdmann (Kestrel's CFO)
•  Dr. Stefan Voss (Kestrel's VP of Engineering)
•  Dr. Maximilian Haber (lead counsel at HRS)
•  Katrin Schäfer (associate counsel at HRS)
No current or former client relationships, adverse representations, or other potential conflicts were identified. The conflict check memorandum is on file and available for review.
3.3 Litigation Hold (November 8, 2022)
On November 8, 2022, the day following receipt of Kestrel's Request for Arbitration, Simone Laroche issued a comprehensive litigation hold notice to Dana Prescott, VP & General Counsel, and Gerald Huang, VP of Global Supply Chain Operations, at Whitmore Aerospace LLC. The litigation hold notice was designed to ensure full compliance with WAL's document preservation obligations in connection with the arbitration.
The scope of the litigation hold encompasses all documents, communications, and electronically stored information relating to the MSA and the underlying dispute, including but not limited to:
•  Lot inspection records and quality control documentation for all deliveries under the MSA, including the 14 rejected lots;
•  Quality control reports prepared under WAL-QCP-100;
•  Engineering specifications WAL-SPEC-TH-401 through WAL-SPEC-TH-410, including all drafts, revisions, and internal commentary;
•  All correspondence (email, letter, memorandum, or other format) with Kestrel personnel, including Friedrich Brenner (CEO), Luisa Erdmann (CFO), and Dr. Stefan Voss (VP Engineering);
•  Internal WAL communications concerning Kestrel's quality performance, the lot rejections, the termination decision, and the engagement of alternative suppliers;
•  Supply chain and procurement records relating to the MSA and to the engagement of Valkyr Precision Components Inc.; and
•  Any other documents or data reasonably related to the subject matter of the arbitration.
The litigation hold notice requested that WAL confirm implementation of the hold across all relevant departments. We specifically identified the Engineering & Manufacturing division (headed by Dr. Ingrid Vollmer, SVP) and the Supply Chain division (headed by Gerald Huang, VP) as key custodians. WAL acknowledged receipt of the litigation hold notice and confirmed implementation across the identified departments. We will monitor compliance with the hold on an ongoing basis and issue supplemental preservation notices as warranted.
3.4 Insurance Notification (November 14, 2022)
On November 14, 2022, Theodore Langston transmitted a formal notification letter to Pinnacle Continental Insurance Co. ("Pinnacle"), WAL's general liability insurer, advising Pinnacle of the ICC arbitration and Kestrel's claims. The notification was sent to Pinnacle's claims department at 200 Berkeley Street, Boston, Massachusetts 02116, under Policy No. PCE-GL-2021-08854.
The notification letter summarized the nature of the arbitration, identified the claims asserted by Kestrel, and stated the aggregate amount in controversy (approximately €47.3 million). The letter requested that Pinnacle review the claim for coverage and provide a coverage determination at its earliest convenience.
We note, for WAL's information, that we anticipate a coverage reservation or declination from Pinnacle. General liability policies of the type maintained by WAL typically contain commercial-supply exclusions or contractual-liability exclusions that would preclude coverage for disputes arising from commercial supply agreements. We will advise WAL promptly upon receipt of Pinnacle's response and recommend any appropriate next steps, which may include review of WAL's directors and officers liability program or other insurance lines.
3.5 Receipt and Initial Review of Request for Arbitration (November 7, 2022)
Kestrel's Request for Arbitration was received by C&H via the ICC Secretariat on November 7, 2022. Upon receipt, Theodore Langston sent an email communication to Dana Prescott confirming receipt of the filing and outlining the immediate next steps required in connection with the defense. These next steps included the issuance of the litigation hold notice (completed November 8), the commencement of the preliminary case assessment, and the identification of key deadlines under the ICC Rules, including the 30-day deadline for filing WAL's Answer.
As noted above, Kestrel is represented by Haber Reinhardt Schlosser Partnerschaft mbB, a prominent German-headquartered international law firm with particular strength in manufacturing and supply-chain disputes. Their lead counsel, Dr. Maximilian Haber, is a well-regarded arbitration practitioner who has handled numerous ICC arbitrations. We will continue to monitor HRS's litigation history and approach as the matter progresses.
3.6 Preliminary Case Assessment (November 10, 2022)
On November 10, 2022, Simone Laroche and Jeffrey Park completed an internal preliminary case assessment memorandum evaluating WAL's defenses to Kestrel's claims and the viability of a potential counterclaim. The memorandum was circulated to Theodore Langston and Vivienne St. Claire for review and has been finalized. The key conclusions of the preliminary case assessment are as follows:
WAL's Defenses. WAL has strong defenses to Kestrel's material breach allegations. The documented quality failures — 14 rejected lots, of which seven remained uncured past the contractual cure period — provide a compelling factual basis for WAL's termination decision. WAL's quality control records, prepared in accordance with WAL-QCP-100, document the specific porosity levels found in each rejected lot. These records should effectively rebut Kestrel's contention that WAL fabricated or exaggerated the quality deficiencies.
Consequential Damages Waiver. The MSA's exclusive remedy provision at § 8.7 includes a mutual waiver of consequential, incidental, and indirect damages. This waiver should operate to bar Kestrel's claims for lost profits (both base-term and renewal-term), rework costs (to the extent classified as consequential rather than direct damages), and reputational damages. Under well-established New York law, consequential damages waivers between sophisticated commercial parties are routinely enforced.
Termination Propriety. WAL's termination was procedurally and substantively proper under § 14.2(b). The provision requires the occurrence of a Persistent Quality Failure, defined in § 8.4 as three or more uncured rejections in any rolling 12-month period. WAL documented seven uncured rejections — well above the three-rejection threshold — providing ample substantive basis for termination. The Notice of Termination for Cause was issued on October 3, 2022, in compliance with the MSA's notice provisions.
Counterclaim. WAL has a strong basis for asserting a counterclaim of approximately €5.17 million for the incremental cost of sourcing replacement turbine housings from Valkyr Precision Components Inc. ("Valkyr"). Following Kestrel's quality failures and WAL's termination of the MSA, WAL was compelled to engage Valkyr as an alternative supplier at a significantly higher unit price, reflecting the premium costs associated with accelerated qualification and production. The counterclaim calculation is set forth in detail in Section 4.3 below.
Governing Law. The selection of New York governing law is favorable to WAL's position. New York courts have consistently upheld contractual damages limitations, including consequential damages waivers, between sophisticated commercial parties engaged in arm's-length transactions. The enforceability of the § 8.7 waiver under New York law is a key strategic advantage.
3.7 MSA and Amendments Review
During the reporting period, the C&H team completed a detailed review of the MSA (WAL-KDG-MSA-2018-0615) and Amendments No. 1 and No. 2. The review focused on identifying and analyzing the key contractual provisions that are central to both Kestrel's claims and WAL's defenses. The following provisions were subject to particular scrutiny:
•  Section 4.1 (Volume Commitments): Establishes minimum and maximum annual volume requirements, relevant to Kestrel's lost-profit calculations.
•  Section 5.2 (Pricing and Escalation): Defines the base unit price and annual escalation mechanism, relevant to damages quantification.
•  Section 8.4 (Rejection, Cure, and Persistent Quality Failure): The cornerstone of WAL's termination defense. This section sets forth the acceptance/rejection framework, the cure period (as amended to 45 days by Amendment No. 2), and the Persistent Quality Failure threshold of three uncured rejections in any rolling 12-month period.
•  Section 8.7 (Exclusive Remedy and Consequential Damages Waiver): Contains the mutual waiver of consequential, incidental, and indirect damages. This provision is the primary legal basis for WAL's motion to limit or dismiss the majority of Kestrel's damages claims.
•  Section 14.2 (Termination for Cause): Authorizes termination upon the occurrence of specified events, including Persistent Quality Failure under subsection (b). WAL invoked this provision in its October 3, 2022 termination notice.
•  Sections 22.1 and 22.3 (Governing Law and Arbitration): Establish New York law as the governing law and ICC arbitration as the exclusive dispute resolution mechanism.
In addition to the MSA review, the engineering specifications WAL-SPEC-TH-401 through WAL-SPEC-TH-410 were received from Dr. Ingrid Vollmer's Engineering & Manufacturing team for initial review. Of particular importance, our review of Appendix C, Table 3 of WAL-SPEC-TH-401 confirms that the contractual porosity specification is expressly stated as ≤0.25%. This documented specification directly contradicts Kestrel's central factual allegation that WAL applied an unpublished and more restrictive ≤0.15% porosity tolerance. The clarity and accessibility of this specification within the contractual documentation is a significant asset for WAL's defense.
3.8 Lender Notification Considerations
During the course of our initial review, we identified that WAL maintains a senior secured revolving credit facility in the amount of $350 million with Veltrano National Bank, N.A. (One Veltrano Center, Charlotte, NC 28255). Credit agreements of this nature commonly include covenant provisions requiring the borrower to provide notice to the administrative agent of material litigation, arbitration proceedings, or claims that could reasonably be expected to have a material adverse effect on the borrower's financial condition, business, or operations.
Given that Kestrel's aggregate claims total approximately €47.3 million (approximately $49.2 million at current exchange rates), the arbitration may constitute "material litigation" within the meaning of the credit agreement and trigger a disclosure obligation. We have recommended that Dana Prescott and WAL's finance team review the relevant provisions of the credit agreement — typically found in the "Covenants" or "Reporting Requirements" article — to determine whether notification is required and, if so, the applicable notice timeline and procedures.
We will coordinate with WAL's finance team as needed in connection with this analysis. If WAL wishes C&H to review the credit agreement directly, we are prepared to do so upon receipt of a copy.
4. Preparation of Answer and Counterclaim
4.1 Status
Preparation of WAL's Answer and Counterclaim is actively underway. The initial drafting is being led by Simone Laroche and Jeffrey Park, with review and strategic direction provided by Theodore Langston and Vivienne St. Claire.
Under Article 5 of the ICC Rules of Arbitration (2021 edition), the Respondent's Answer to the Request for Arbitration, together with any counterclaim, must be filed within 30 days of receipt of the Request for Arbitration from the Secretariat. Kestrel's Request for Arbitration was received on November 7, 2022, which places the filing deadline at approximately December 7, 2022. However, given the complexity of the matter and the scope of the counterclaim, we intend to request a brief extension from the Secretariat if needed. Our current target filing date is December 12, 2022, which we believe is achievable and which would, if necessary, be within any reasonable extension period granted by the Secretariat.
The Answer will comprehensively deny all of Kestrel's allegations of material breach and wrongful termination, assert all applicable affirmative defenses, and set forth WAL's counterclaim for incremental replacement costs.
4.2 Key Defenses to Be Asserted
The Answer will assert the following principal defenses:
1. The lot rejections were justified. WAL's incoming inspection records, prepared in accordance with WAL-QCP-100, and independent testing data demonstrate that the porosity levels in the 14 rejected lots ranged from 0.19% to 0.38%. Multiple lots therefore exceeded the contractual ≤0.25% porosity limit specified in WAL-SPEC-TH-401, Appendix C, Table 3. WAL's rejections were based on objective, documented quality data and were consistent with the inspection procedures established under the MSA.
2. Termination was proper under § 14.2(b). WAL's termination for cause was procedurally and substantively proper. Seven of the 14 rejected lots remained uncured beyond the 45-calendar-day amended cure period, far exceeding the three-rejection Persistent Quality Failure threshold set forth in § 8.4 of the MSA. The Notice of Termination for Cause was issued in compliance with the MSA's notice requirements.
3. Kestrel failed to cure. Kestrel failed to cure, replace, or remediate the non-conforming units within the contractually prescribed 45-day cure period for five of the seven uncured lots. For the remaining two uncured lots, Kestrel's attempted cure was itself non-conforming and was properly re-rejected. Kestrel's failure to avail itself of the cure mechanism — which was already extended from 30 to 45 days by Amendment No. 2 as an accommodation to Kestrel — underscores the legitimacy of WAL's termination.
4. Consequential damages waiver bars the majority of Kestrel's claims. Section 8.7 of the MSA contains a mutual waiver of consequential, incidental, and indirect damages. Kestrel's claims for lost profits (both base-term and renewal-term), reputational damages, and lost business opportunities are consequential in nature and are barred by this provision. Under well-settled New York law, such waivers are enforceable between sophisticated commercial parties negotiating at arm's length.
5. Kestrel's porosity allegation is contradicted by the express contract terms. Kestrel's central factual contention — that WAL applied an unpublished ≤0.15% porosity standard — is squarely contradicted by the express language of WAL-SPEC-TH-401, Appendix C, Table 3, which clearly states the ≤0.25% porosity limit. There is no "unpublished" or informal standard; the contractual specification is unambiguous and was mutually agreed upon by the parties.
6. WAL's engagement of Valkyr was a mitigation measure, not a pretext. WAL's engagement of Valkyr Precision Components Inc. as an alternative supplier was undertaken as a commercially reasonable mitigation step in response to Kestrel's documented quality failures and the resulting disruption to WAL's production schedule. The chronology of events confirms that WAL's initial contact with Valkyr post-dated the accumulation of quality failures and WAL's termination of the MSA, refuting Kestrel's narrative that the Valkyr engagement was the cause, rather than the consequence, of the termination.
4.3 Counterclaim
WAL's counterclaim will seek recovery of approximately €5.17 million representing the incremental cost incurred by WAL in sourcing replacement titanium alloy turbine housings from Valkyr Precision Components Inc. during the transition period following Kestrel's Persistent Quality Failure and WAL's termination of the MSA.
The counterclaim is calculated as follows:
•  Replacement volume: 1,680 units (corresponding to the rejected and undelivered units)
•  Valkyr replacement unit price: €8,432.92
•  Kestrel CY4 unit price (contractual): €5,222.92
•  Price differential per unit: €8,432.92 − €5,222.92 = €3,210.00
•  Gross incremental cost: 1,680 units × €3,210.00 = €5,392,800 (approximately €5,393,280 after rounding adjustments)
•  Less Valkyr 4.2% introductory discount: €5,393,280 × (1 − 0.042) = €5,393,280 × 0.958 = approximately €5,166,763
•  Rounded: approximately €5.17 million
The counterclaim is grounded in WAL's right to recover direct damages arising from Kestrel's breach of the MSA, specifically the incremental cost of cover (i.e., the cost of obtaining substitute performance from an alternative supplier, net of the contract price WAL would have paid Kestrel). Under both the UCC (as incorporated through New York law) and general contract principles, a non-breaching buyer is entitled to recover the difference between the cost of cover and the contract price, provided the cover was made in good faith, without unreasonable delay, and on commercially reasonable terms. WAL's engagement of Valkyr satisfies each of these requirements.
5. Arbitrator Selection Process
5.1 Respondent's Nominee
Under Article 12 of the ICC Rules of Arbitration, each party to the arbitration nominates one co-arbitrator, with the presiding (third) arbitrator to be appointed either by agreement of the parties or by the ICC Court. The nomination of co-arbitrators is a critical strategic decision, and we have been conducting a thorough vetting process to identify candidates who possess the requisite subject-matter expertise, temperament, and availability.
Our leading candidate for Respondent's co-arbitrator is the Honorable Robert A. Castillo, a retired judge of the United States District Court for the Southern District of New York. Judge Castillo served on the federal bench for over two decades and presided over numerous complex commercial disputes, including several involving manufacturing supply agreements and quality-related termination disputes. Following his retirement, Judge Castillo has maintained an active practice as an international arbitrator and has served on multiple ICC, LCIA, and AAA/ICDR tribunals.
We have verified Judge Castillo's independence and impartiality with respect to all parties and counsel in this matter. He has no prior relationship with Kestrel, HRS, or any of their known affiliates. Judge Castillo has confirmed his availability to serve on the tribunal and his willingness to comply with the ICC's time and procedural requirements for this case.
We plan to submit the formal nomination letter to the ICC Secretariat on or about December 19, 2022.
5.2 Presiding Arbitrator
Kestrel has nominated its own co-arbitrator. Based on our review of ICC correspondence, we understand that the nominee is Dr. Hans-Ulrich Perren, a Swiss national and former judge of the Swiss Federal Supreme Court. Dr. Perren is a well-known arbitration practitioner with substantial experience in international commercial disputes. We will complete our review of Dr. Perren's background and prior awards as additional information becomes available.
Under the ICC Rules, the Presiding Arbitrator (chair of the tribunal) is to be appointed by agreement of the two party-nominated co-arbitrators or, failing such agreement, by the ICC Court. We anticipate engaging in discussions with HRS regarding the possibility of identifying a mutually agreeable candidate for the presiding role. Such discussions are common in ICC arbitrations and, when successful, can contribute to a more efficient and constructive proceeding.
5.3 Tribunal Constitution Timeline
Based on standard ICC procedural timelines, and assuming timely submission of both parties' co-arbitrator nominations and a reasonable period for presiding arbitrator selection, we anticipate that the three-member tribunal will be constituted by approximately late January 2023. Following constitution, we expect the tribunal to convene a preliminary procedural conference (commonly referred to as the "Case Management Conference") within approximately four to six weeks, at which Procedural Order No. 1 — establishing the procedural calendar for the arbitration — will be discussed and issued.
6. Preliminary Budget Estimate
6.1 Estimated Fee Range
Based on our preliminary case assessment, the complexity of the dispute, and the anticipated procedural steps that are typical of an ICC arbitration of this nature, we estimate total professional fees for the engagement in the range of $2.2 million to $2.8 million. This estimate encompasses all phases of the arbitration, from the current pleadings phase through final submissions and the issuance of the award.
The estimate is predicated on the following key assumptions:
•  A standard ICC procedural calendar extending approximately 14 to 18 months from tribunal constitution to award;
•  Two rounds of written submissions (Statement of Claim / Statement of Defense, followed by Reply and Rejoinder);
•  A document production phase conducted under IBA Rules on the Taking of Evidence in International Arbitration;
•  Retention and coordination of two expert witnesses (one damages expert and one metallurgical expert);
•  A five-day evidentiary hearing, including witness examinations and expert testimony;
•  Post-hearing submissions and costs submissions.
We emphasize that this estimate is preliminary and is subject to revision as the matter develops, particularly following the constitution of the tribunal and the issuance of the procedural calendar. Variables that may significantly affect fees include the scope of document production, the number of fact witnesses, the complexity of expert issues, and any interim applications (e.g., for provisional measures or document-production disputes).
6.2 Estimated Costs and Disbursements
In addition to professional fees, the engagement will entail various costs and disbursements, including:
•  Expert witness fees and expenses (damages expert and metallurgical expert);
•  Hearing-related travel and accommodation (for the C&H team, WAL witnesses, and experts);
•  Transcript and stenography costs for the evidentiary hearing;
•  ICC advance on costs (the ICC Secretariat's administrative fees and arbitrators' fees, advanced by the parties in accordance with ICC practice);
•  Research database charges, document hosting and review platform costs, and other technology-related expenses; and
•  Courier, translation (if required for German-language documents), and miscellaneous disbursements.
We estimate total costs and disbursements in the range of $500,000 to $700,000.
6.3 Estimated Total Engagement Value
The estimated total engagement value, combining professional fees and costs/disbursements, is in the range of $2.7 million to $3.5 million.
We will provide updated budget estimates as the matter progresses and the procedural calendar is established by the tribunal. We are committed to managing costs efficiently and will communicate proactively with WAL regarding any developments that may materially affect the budget.
6.4 Billing to Date
Professional fees incurred through November 30, 2022, total approximately $87,500. A detailed breakdown of time entries by timekeeper will follow on the monthly invoice for November 2022, which will be transmitted separately.
Disbursements incurred to date are minimal, consisting primarily of research database charges (Westmark Data Systems and ICC jurisprudence databases) and initial ICC filing-related costs. These disbursements will be itemized on the November invoice.
7. Anticipated Next Steps (December 2022 – March 2023)
The following table summarizes the key action items and target dates for the upcoming period:
We will keep WAL informed of developments on each of these items and will provide more detailed timelines as the procedural calendar takes shape.
8. Key Risk Factors and Early Observations
We believe it is important to identify at this early stage the key risk factors and strategic considerations that will shape the development of WAL's defense. While our overall assessment of WAL's position is favorable, the following matters warrant particular attention:
1. Renewal-Period Lost Profits (€27.15 million). The largest single component of Kestrel's damages claim is the €27.15 million in lost profits attributed to the two optional renewal periods (CY6 and CY7). This claim is predicated on the assumption that WAL would have exercised both discretionary renewal options, thereby extending the MSA through June 14, 2025. Under New York law, damages premised on the exercise of discretionary contractual options are generally speculative and non-recoverable, as the option holder has no obligation to exercise. We believe this claim is legally vulnerable and will seek to have it excluded from the damages analysis. Nevertheless, this represents a significant exposure that warrants careful monitoring.
2. Kestrel's Porosity Argument. Kestrel's allegation that WAL applied an unpublished ≤0.15% porosity standard — rather than the contractual ≤0.25% — is the central factual pillar of their case. Our initial review of WAL-SPEC-TH-401, Appendix C, Table 3 confirms the ≤0.25% specification is clearly and expressly stated. However, we must ensure that WAL's internal inspection records, calibration logs, and communications consistently reference the ≤0.25% standard and do not contain any informal or inconsistent references to a lower threshold. Any documentary evidence suggesting internal use of a tighter specification could be exploited by Kestrel. Accordingly, a thorough review of all inspection-related documents is a high priority during the document collection and review phase.
3. Kestrel's Claimed Profit Margin. Kestrel's lost-profit calculations appear to be based on a claimed gross margin of 22.4% on the turbine housing product line. This margin will need to be independently verified through forensic accounting analysis. We may engage Canfield & Thorpe LLP (Sandra Gillespie, CPA/ABV, partner) for this purpose. Ms. Gillespie has extensive experience in international commercial disputes and has served as an expert witness in multiple ICC and LCIA arbitrations. A forensic review of Kestrel's financial data — which will be obtained through the document production process — will be essential to challenging the quantum of Kestrel's lost-profit claims.
4. Valkyr Pretext Narrative. We expect Kestrel to vigorously pursue the argument that WAL's engagement of Valkyr Precision Components Inc. was the true motivation for the lot rejections and termination — i.e., that WAL manufactured the quality failures as a pretext for replacing Kestrel with a lower-cost domestic supplier. This narrative, if accepted by the tribunal, could undermine WAL's good-faith defense of the termination and potentially support Kestrel's bad-faith and reputational-damages claims. To counter this narrative effectively, we must be prepared to demonstrate through contemporaneous documentation that: (a) the quality failures were genuine and documented through objective testing; (b) WAL's initial contact with Valkyr occurred after the accumulation of quality failures and the termination of the MSA; and (c) WAL's engagement of Valkyr was a commercially reasonable mitigation measure, not a pre-planned supplier substitution. The chronological sequence of events is favorable to WAL on this issue, but clear documentation will be critical.
5. Covenant Compliance Risk. The €47.3 million exposure (approximately $49.2 million at current exchange rates), if realized, could have material implications for WAL's covenant compliance under its $350 million senior secured revolving credit facility with Veltrano National Bank, N.A. Even the pendency of the claim may trigger reporting obligations or affect representations and warranties made in connection with draws on the facility. We recommend ongoing coordination between WAL's legal and finance teams to monitor this issue throughout the arbitration.
9. Conclusion and Confirmation
The matter is progressing on schedule. During the initial four-week engagement period, the C&H team has completed all critical administrative and foundational tasks, including engagement formalization, conflict clearance, litigation hold issuance and confirmation, insurance notification, and preliminary case assessment. We are well positioned to file the Answer and Counterclaim by the December 12, 2022 target date.
Our initial assessment of WAL's defenses is favorable. The MSA's contractual framework — particularly the quality specifications in WAL-SPEC-TH-401, the Persistent Quality Failure mechanism in § 8.4, the termination-for-cause provision in § 14.2(b), and the consequential damages waiver in § 8.7 — provides WAL with a strong defensive posture. Additionally, WAL's counterclaim of approximately €5.17 million for incremental replacement costs is well supported and should serve to offset a portion of any exposure, while also demonstrating that Kestrel, not WAL, is the party responsible for the damages arising from this dispute.
We will provide the next monthly status report on or about January 2, 2023, covering activities during December 2022.
We remain available to discuss any aspect of this report, the arbitration strategy, or any related matters at your convenience. Please do not hesitate to contact the undersigned or any member of the C&H team:
Theodore Langston, Partner Telephone: (212) 555-4800
Email: tlangston@calderwoodharkness.com
Simone Laroche, Senior Associate Telephone: (212) 555-4823
Email: slaroche@calderwoodharkness.com
We appreciate WAL's confidence in Calderwood & Harkness LLP and look forward to continuing our representation of Whitmore Aerospace LLC in this matter.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Theodore Langston Partner Engagement No.: 1019-00001
600 Lexington Avenue New York, NY 10022
Date: December 1, 2022
Enclosures/Attachments: None with this report. Copies of the engagement letter, conflict check memorandum, litigation hold notice, insurance notification letter, and preliminary case assessment memorandum are maintained on file at Calderwood & Harkness LLP and are available upon request.
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT. This document and all information contained herein are protected by the attorney-client privilege and the work product doctrine. This document is intended solely for the use of Whitmore Aerospace LLC and its authorized representatives. Any unauthorized review, use, disclosure, or distribution is strictly prohibited. If you have received this document in error, please notify Calderwood & Harkness LLP immediately at (212) 555-4800 and destroy all copies.
Damages Category | Amount
Lost profits for the remaining MSA base term (CY5) | €12.83 million
Lost profits for two discretionary renewal terms (CY6–CY7) | €27.15 million
Unreimbursed rework costs on rejected lots | €3.42 million
Reputational damages / lost business opportunities | €3.90 million
Total | €47.30 million
Team Member | Role | Hourly Rate
Theodore Langston | Responsible Partner | $1,475/hr
Vivienne St. Claire | Billing Partner | $1,425/hr
Simone Laroche | Senior Associate (Lead) | $895/hr
Jeffrey Park | Associate | $625/hr
Target Date | Action Item
December 12, 2022 | File Answer and Counterclaim with the ICC Secretariat
December 19, 2022 | Submit nomination of the Hon. Robert A. Castillo as Respondent's co-arbitrator to the ICC Secretariat
December 2022 | Commence preparation of internal legal memorandum analyzing material breach and termination rights under the MSA
December 2022 | Receive and evaluate Pinnacle Continental Insurance Co.'s coverage determination response
January 2023 | Commence research memoranda on New York law regarding the enforceability of consequential damages waivers (§ 8.7) and the recoverability of reputational damages in commercial arbitration
Late January 2023 | Anticipate constitution of the three-member arbitral tribunal
February 2023 | Anticipate preliminary procedural conference (Case Management Conference) and issuance of Procedural Order No. 1, establishing the procedural calendar
March 2023 | Identify and engage damages and metallurgical expert witnesses; anticipate issuance of Procedural Order No. 2 addressing the framework for document production

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