PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT PREPARED IN ANTICIPATION OF LITIGATION
May 2023
MEMORANDUM
TO: Dr. Raymond Chow, Principal Engineer Arclight Materials Science Inc. 7900 Westpark Drive, Suite 200 McLean, VA 22102
FROM: Jeffrey Park, Associate Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022
DATE: May 2023
RE: Expert Report Instructions — Metallurgical Analysis of Rejected Titanium Alloy Turbine Housings
MATTER: Defense of Whitmore Aerospace LLC — ICC Case No. 27914/MHM
ENGAGEMENT NO.: 1019-00001
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I. Introduction and Purpose of This Memorandum
This memorandum provides detailed instructions for the preparation of your expert report in connection with the defense of Whitmore Aerospace LLC ("WAL" or "Respondent") in the arbitration proceeding initiated by Kestrel Dynamics GmbH ("Kestrel" or "Claimant") before the International Court of Arbitration of the International Chamber of Commerce, ICC Case No. 27914/MHM. The purpose of this memorandum is to define the scope of your expert assignment, identify the materials you should review, set forth the specific questions your report should address, and outline the procedural and logistical requirements governing the preparation and submission of your report.
You were retained as a technical expert on behalf of WAL pursuant to the Expert Engagement Letter dated March 2023 between Calderwood & Harkness LLP ("C&H") and Arclight Materials Science Inc. ("Arclight"). Your retention was based on your extensive qualifications in aerospace metallurgy, including your specialization in titanium alloy processing, characterization, and quality assurance for critical aerospace applications. We understand that you hold a Ph.D. in Materials Science and Engineering from the Massachusetts Institute of Technology, have over twenty-five years of experience in the aerospace metallurgy field, and have previously served as an expert witness in multiple proceedings involving metallurgical quality disputes. Your curriculum vitae, which will be appended to your expert report, reflects these and other relevant qualifications.
The expert report is to be submitted in accordance with the procedural calendar established by the Tribunal in Procedural Order No. 1, as subsequently amended. Under the current procedural timetable, expert reports from both parties are to be exchanged simultaneously on October 16, 2023. A rebuttal expert report phase is also contemplated, with rebuttal reports to be exchanged on November 13, 2023. To allow sufficient time for internal review and logistical coordination prior to the exchange deadline, we ask that you deliver your final report to C&H no later than October 9, 2023, as further discussed in Section VI below.
The Tribunal constituted in this arbitration consists of the following arbitrators:
• Prof. Dame Eleanor Fitzwilliam (Presiding Arbitrator)
• Dr. Hans-Ulrich Perren (Claimant's nominee)
• The Honorable Robert A. Castillo (Respondent's nominee)
The seat of arbitration is New York, New York. The arbitration is conducted in English under the ICC Rules of Arbitration (2021 edition). The governing law of the underlying Master Supply Agreement, which is the contract at the center of this dispute, is the law of the State of New York.
This memorandum is protected by the attorney work product doctrine and litigation privilege. It should be treated as strictly confidential and should not be disclosed to any third party without the prior written consent of C&H.
II. Background on the Dispute
The following summary of the relevant factual and contractual background is provided to assist you in understanding the context of your expert assignment. This summary is based on the contractual documents, the parties' pleadings, and relevant correspondence and records produced in the arbitration. You will, of course, review the underlying documents yourself and should form your own understanding of the relevant facts.
A. The Master Supply Agreement
The contract at the center of this dispute is a Master Supply Agreement for Titanium Alloy Turbine Housings (the "MSA"), executed on June 15, 2018, bearing reference number WAL-KDG-MSA-2018-0615. The MSA was entered into between WAL, as Buyer, and Kestrel, as Seller.
The MSA has a five-year initial term running from June 15, 2018 through June 14, 2023, with two optional one-year renewal periods exercisable at WAL's sole discretion. As of the date of WAL's Notice of Termination for Cause (discussed below), the MSA remained in its initial five-year term.
Under the MSA, Kestrel agreed to manufacture and deliver Ti-6Al-4V ELI (Extra Low Interstitial) titanium alloy turbine housings (the "Products") in accordance with WAL's engineering specifications, designated WAL-SPEC-TH-401 through WAL-SPEC-TH-409. These specifications collectively govern dimensional tolerances, material composition, surface finish requirements, and porosity limits for each variant of turbine housing covered by the MSA.
The MSA has been amended twice since its execution:
• Amendment No. 1, dated February 10, 2020, added a new specification, WAL-SPEC-TH-410, to cover a high-temperature variant of the turbine housing. Amendment No. 1 also increased the maximum annual volume from 3,600 units to 4,000 units to accommodate anticipated demand for the new variant.
• Amendment No. 2, dated September 3, 2021, extended the cure period for rejected lots from 30 calendar days to 45 calendar days, acknowledging ongoing logistics disruptions attributable to the COVID-19 pandemic. Amendment No. 2 also added a force majeure carve-out specifically addressing pandemic-related delays in the supply chain.
The MSA establishes minimum and maximum annual volume commitments. The minimum annual volume is 2,400 units, and the maximum annual volume is 3,600 units (increased to 4,000 units following Amendment No. 1). Delivery terms under the MSA are DDP (Delivered Duty Paid) to WAL's facility located at 8500 Coppermine Road, Manassas, Virginia 20110, in accordance with Incoterms 2020.
B. Quality Standards and Specifications
Quality assurance is a central feature of the MSA. As a threshold matter, the MSA requires Kestrel to maintain certification under AS9100 Rev D, the internationally recognized quality management system standard for the aviation, space, and defense industries. AS9100 Rev D incorporates and supplements the requirements of ISO 9001:2015 with additional requirements specific to the aerospace sector, including requirements for product safety, counterfeit part prevention, and configuration management.
Each lot of Products delivered by Kestrel under the MSA is subject to WAL's incoming inspection in accordance with WAL Quality Control Procedure WAL-QCP-100. WAL-QCP-100 establishes the inspection and testing protocols that WAL's quality engineering team applies to incoming deliveries to verify conformance with the applicable WAL specifications. Acceptance or rejection of each lot is to occur within fifteen (15) business days of delivery.
The critical specification at the heart of this dispute is the porosity tolerance for the turbine housings. The contractual porosity limit is expressly set forth in WAL-SPEC-TH-401, Appendix C, Table 3, which specifies a maximum allowable porosity of ≤0.25% (by volume). This porosity limit applies to all turbine housing variants covered by the MSA, as WAL-SPEC-TH-402 through WAL-SPEC-TH-410 each incorporate by reference the porosity requirements of WAL-SPEC-TH-401, Appendix C, Table 3.
In addition to the porosity specification, WAL-SPEC-TH-401 through WAL-SPEC-TH-410 collectively govern other critical parameters, including dimensional tolerances (wall thickness, bore diameter, flange geometry), material composition (including limits on oxygen, nitrogen, hydrogen, iron, and carbon content consistent with ASTM F136 for Ti-6Al-4V ELI), and surface finish requirements (including surface roughness and freedom from specified defects such as laps, seams, and alpha case).
C. The Rejection and Cure Framework
The MSA contains a detailed framework for the rejection of non-conforming lots and the opportunity to cure non-conformances, which is central to the contractual analysis in this dispute.
MSA § 8.4 (Rejection/Cure Provision): If WAL rejects a lot for non-conformance with the applicable WAL specifications following incoming inspection under WAL-QCP-100, Kestrel has forty-five (45) calendar days (as amended by Amendment No. 2; the original cure period was thirty (30) calendar days) to cure the non-conformance by either replacing the rejected lot with a conforming lot or reworking the non-conforming units to bring them into conformance. Section 8.4 further provides that three (3) or more uncured rejections in any rolling twelve (12)-month period constitute a "Persistent Quality Failure."
MSA § 14.2 (Termination for Cause): Either party may terminate the MSA upon (a) a material breach by the other party that remains uncured for sixty (60) days following written notice of such breach, or (b) the occurrence of a Persistent Quality Failure as defined in Section 8.4.
MSA § 8.7 (Exclusive Remedy): The MSA contains a consequential damages waiver and limits WAL's remedies for non-conforming Products to replacement, credit, or, upon the occurrence of a Persistent Quality Failure, termination of the MSA. This provision is relevant to Kestrel's damages claims, which include consequential and reputational damages that WAL contends are barred by Section 8.7.
D. The Lot Rejections
Between March 7, 2022 and September 19, 2022 — a period of approximately six and one-half months — WAL rejected fourteen (14) lots of Products totaling 1,680 units. The first rejected lot was Lot KDG-2022-0307, delivered and inspected in early March 2022. The final rejected lot was Lot KDG-2022-0919, delivered and inspected in mid-September 2022.
Of these fourteen rejected lots, seven (7) remained uncured — that is, Kestrel failed to cure the non-conformances (by replacement or rework) within the forty-five (45)-calendar-day cure period established by Section 8.4 as amended. The seven uncured rejections far exceeded the three (3)-rejection threshold for Persistent Quality Failure under Section 8.4.
On October 3, 2022, WAL issued a Notice of Termination for Cause to Kestrel pursuant to MSA § 14.2(b), citing the occurrence of a Persistent Quality Failure based on the seven uncured rejections within the preceding twelve-month rolling period. The Notice of Termination was signed by Gerald Huang, Vice President of Global Supply Chain Operations, and Dr. Ingrid Vollmer, Senior Vice President of Engineering & Manufacturing, and was delivered to Friedrich Brenner, Managing Director of Kestrel, by courier and email.
E. Kestrel's Claims and Position
Kestrel filed a Request for Arbitration with the Secretariat of the International Court of Arbitration of the ICC on November 7, 2022, alleging material breach of the MSA by WAL. Kestrel is represented in the arbitration by Haber Reinhardt Schlosser Partnerschaft mbB, Stuttgart, Germany, with Dr. Maximilian Haber as lead partner and Katrin Schäfer as co-counsel.
Kestrel's principal claims may be summarized as follows:
First, Kestrel contends that the fourteen rejected lots met all contractual specifications, including the porosity limit of ≤0.25%. Kestrel's central technical contention is that WAL's incoming inspections applied criteria stricter than the contractual specifications — specifically, Kestrel alleges that WAL imposed an unpublished porosity tolerance of ≤0.15% rather than the contractual limit of ≤0.25%. According to Kestrel, WAL unilaterally tightened the acceptance threshold without notice to Kestrel and then used the resulting rejections as a pretext for termination.
Second, Kestrel alleges that WAL's true motive for the rejections and termination was not quality-related but rather commercial: Kestrel contends that WAL sought to replace Kestrel with a lower-cost domestic supplier, Valkyr Precision Components Inc., based in Tucson, Arizona. Kestrel points to WAL's subsequent onboarding of Valkyr as purported evidence of this pretext.
Third, Kestrel claims total damages of €47.3 million, comprising lost profits over the remaining MSA term and renewal periods, unreimbursed rework costs of approximately €3.42 million incurred in connection with cure attempts on some of the rejected lots, and reputational damages arising from what Kestrel characterizes as the wrongful termination of a major supply relationship.
Kestrel has retained as its technical expert Dr. Martina Kessler, Director of Albrecht Prüftechnik GmbH, located at Robert-Bosch-Straße 12, 71229 Leonberg, Germany. Dr. Kessler specializes in non-destructive testing and quality certification for aerospace components. Her expert report is expected to be exchanged simultaneously with yours on October 16, 2023.
F. WAL's Defense
WAL's defense rests on the following principal contentions, which your expert report is intended to support from a technical and metallurgical perspective:
First, WAL contends that the rejections of the fourteen lots were fully justified based on porosity levels in the rejected lots that ranged from 0.19% to 0.38%, with the vast majority of rejected lots exhibiting porosity levels that exceeded the contractual limit of ≤0.25%. WAL's position is that each rejection was based on objective, documented, and contractually specified quality criteria, applied consistently and in accordance with WAL-QCP-100.
Second, WAL maintains that the ≤0.25% porosity standard is expressly stated in WAL-SPEC-TH-401, Appendix C, Table 3, and was not an unpublished, unilaterally imposed, or otherwise secret criterion. WAL contends that this specification was known to Kestrel at all times, was incorporated into the MSA by reference, and was the standard that WAL consistently applied throughout the life of the contract — including during periods when Kestrel's deliveries were accepted without issue.
Third, WAL contends that its termination was procedurally and substantively proper under the MSA: seven uncured rejections in a twelve-month period far exceeded the three-rejection threshold for Persistent Quality Failure under Section 8.4, entitling WAL to terminate under Section 14.2(b).
Fourth, WAL maintains that its decision to onboard Valkyr Precision Components Inc. as a replacement supplier was a commercially reasonable mitigation step taken after — and as a direct consequence of — Kestrel's repeated and uncured quality failures, not a pretext for termination. WAL initiated contact with Valkyr only after the pattern of non-conformances became evident, and the Valkyr onboarding timeline is consistent with this account.
Your expert analysis will be critical in establishing the technical and metallurgical foundation for these defenses.
III. Scope of Expert Assignment
A. Primary Analytical Tasks
We ask you to address the following five primary analytical tasks in your expert report. Each task is described in detail below, together with guidance on the approach we believe would be most helpful to WAL's defense. However, as discussed in Section VI.B below, your overriding duty is to the Tribunal, and all opinions expressed in your report must be your own honest professional opinions based on the evidence and your expertise.
1. Porosity Analysis of Each Rejected Lot
Dr. Chow is asked to conduct an independent metallurgical analysis of the porosity data for each of the fourteen (14) rejected lots, identified as Lot KDG-2022-0307 through Lot KDG-2022-0919. For each lot, you should identify the measured porosity level or range of measurements, describe the testing methodology used by WAL in its incoming inspection, and determine whether the measured porosity levels in each lot exceeded the contractual limit of ≤0.25% as specified in WAL-SPEC-TH-401, Appendix C, Table 3.
Where WAL's inspection data includes multiple measurements per lot (e.g., measurements from different sample locations within a given turbine housing unit, or measurements from multiple units within a lot), you should describe the statistical distribution of the porosity measurements and explain the basis on which a lot-level conformance determination should be made. You should also consider whether the sampling methodology used by WAL (number of samples per lot, sample selection protocol, etc.) was adequate and consistent with accepted practice in the aerospace quality assurance field.
2. Evaluation of WAL's Inspection Methodology
Dr. Chow is asked to review and opine on the reliability and appropriateness of WAL's incoming inspection procedures under WAL Quality Control Procedure WAL-QCP-100. This task encompasses several sub-topics:
• The testing instruments and methodologies used by WAL to measure porosity in the delivered turbine housings, including any non-destructive testing (NDT) techniques (e.g., computed tomography, ultrasonic inspection, or Archimedes density measurement) and any destructive testing techniques (e.g., metallographic cross-sectioning and image analysis) employed;
• The calibration and maintenance records for the testing instruments used, to the extent such records are available in the document production;
• The qualifications and certifications of the WAL personnel who performed the inspections, to the extent relevant and documented;
• Whether WAL's inspection methodology was consistent with industry standards and accepted best practices for porosity measurement in Ti-6Al-4V ELI titanium alloy components; and
• Whether any limitations or sources of measurement uncertainty in WAL's methodology could have affected the porosity measurements in a manner material to the conformance determination.
3. Response to Kestrel's "Unpublished Standard" Argument
Dr. Chow is specifically asked to address Kestrel's central technical contention — namely, the allegation that WAL applied an unpublished porosity tolerance of ≤0.15% rather than the contractual ≤0.25%. This contention, if accepted by the Tribunal, would undermine WAL's position that the rejections were justified.
In addressing this contention, you should evaluate whether WAL's inspection records and testing data are consistent with the application of the ≤0.25% standard or, alternatively, with the alleged ≤0.15% standard. Specifically, you should consider:
• Whether any lots were accepted by WAL with measured porosity levels between 0.15% and 0.25% during the period preceding the rejections at issue (i.e., from the commencement of the MSA through early 2022), which would be inconsistent with the alleged application of a ≤0.15% standard;
• Whether WAL's rejection notices or internal quality records reference a ≤0.15% threshold or, alternatively, consistently reference the ≤0.25% contractual specification;
• Whether WAL's testing data, viewed as a whole, reflects a pattern of acceptance and rejection that is consistent with the ≤0.25% standard.
4. Assessment of Kestrel's Quality Assurance Processes
Dr. Chow is asked to opine on the adequacy of Kestrel's quality assurance ("QA") processes under AS9100 Rev D. Specifically, you should address:
• Whether Kestrel's AS9100 Rev D-certified quality management system, as documented in Kestrel's internal QA procedures produced in this arbitration, included adequate process controls for monitoring and controlling porosity in Ti-6Al-4V ELI titanium alloy turbine housings during the manufacturing process;
• Whether Kestrel's own quality control procedures should have detected the porosity non-conformances prior to shipment — that is, whether the porosity exceedances identified by WAL upon incoming inspection should also have been identified by Kestrel during its own pre-shipment inspection and testing;
• Whether any deficiencies in Kestrel's QA processes contributed to the repeated delivery of non-conforming products over the six-month period from March through September 2022; and
• Whether the pattern of repeated non-conformances — fourteen rejected lots over approximately six months — is indicative of a systemic quality control failure, as opposed to isolated or random defects.
5. Evaluation of Ti-6Al-4V ELI Material Properties
Dr. Chow should opine on the significance of porosity levels in Ti-6Al-4V ELI titanium alloy in the context of aerospace turbine housing applications. This task provides the engineering and safety context for the porosity specification at issue and for WAL's rejection decisions. You should address:
• The general material properties of Ti-6Al-4V ELI and its suitability for use in aerospace turbine housing applications, including its strength-to-weight ratio, fatigue resistance, and corrosion resistance;
• The effects of porosity on the mechanical properties and structural integrity of Ti-6Al-4V ELI components, including the relationship between porosity levels and fatigue life, tensile strength, and fracture toughness;
• The safety and performance implications of porosity levels exceeding ≤0.25% in critical propulsion components such as turbine housings, which are subject to high mechanical loads, thermal cycling, and vibration during service;
• The basis for the ≤0.25% porosity limit in the context of industry standards and specifications applicable to Ti-6Al-4V ELI components in aerospace applications, including any relevant ASTM, AMS, or SAE standards; and
• Whether the ≤0.25% porosity limit specified in WAL-SPEC-TH-401, Appendix C, Table 3, is a reasonable and appropriate quality criterion for titanium alloy turbine housings used in the relevant application.
B. Rebuttal of Claimant's Technical Expert
In addition to the primary analytical tasks described above, Dr. Chow should anticipate and be prepared to rebut the expert report of Dr. Martina Kessler of Albrecht Prüftechnik GmbH, Kestrel's retained technical expert. Dr. Kessler's report is expected to be exchanged simultaneously with yours on October 16, 2023.
Following receipt of Dr. Kessler's report, Dr. Chow may be asked to prepare a rebuttal expert report addressing Dr. Kessler's opinions and methodology. Under the current procedural timetable, rebuttal expert reports are to be exchanged on November 13, 2023. We will provide further instructions regarding the rebuttal report following our review of Dr. Kessler's initial report.
Based on Kestrel's pleadings and the positions Kestrel has advanced to date, we anticipate that the principal areas of disagreement between the parties' technical experts are likely to include the following:
(i) Interpretation and application of the porosity specification: Dr. Kessler may contend that the ≤0.25% specification should be interpreted differently than WAL contends — for example, by arguing that it applies only to specific types of porosity (e.g., gas porosity versus shrinkage porosity), or by advocating for a different measurement methodology or sampling protocol than that used by WAL;
(ii) Reliability of WAL's testing methodology versus Kestrel's own internal testing: Dr. Kessler may challenge the reliability of WAL's inspection methodology under WAL-QCP-100 and may argue that Kestrel's own internal testing — which Kestrel contends showed conforming porosity levels — was more reliable or more appropriate; and
(iii) Adequacy of Kestrel's AS9100 Rev D-compliant QA program: Dr. Kessler may defend the adequacy of Kestrel's QA processes and may argue that Kestrel's AS9100 Rev D certification demonstrates compliance with all applicable quality management requirements.
Your initial report should, to the extent possible, anticipate and preemptively address these areas of disagreement, so that your opinions and methodology are robustly supported against the likely lines of attack.
IV. Materials to Be Reviewed
Set forth below is a list of the principal documents and materials that you should review in connection with the preparation of your expert report. This list is organized by category. We will arrange for delivery of these materials to you in electronic form, with Bates-stamped copies as appropriate. If you identify additional materials that you need to review, please advise us promptly and we will endeavor to obtain them.
A. Contractual Documents
The following contractual documents constitute the governing framework for the dispute:
1. Master Supply Agreement dated June 15, 2018 (WAL-KDG-MSA-2018-0615), including all appendices, schedules, and exhibits thereto;
2. WAL-SPEC-TH-401 through WAL-SPEC-TH-410 (Engineering Specifications for Titanium Alloy Turbine Housings), with particular attention to WAL-SPEC-TH-401, Appendix C, Table 3, which sets forth the porosity specification of ≤0.25%;
3. Amendment No. 1 to the MSA, dated February 10, 2020; and
4. Amendment No. 2 to the MSA, dated September 3, 2021.
B. Quality and Inspection Records
The following quality and inspection records are directly relevant to your primary analytical tasks:
1. WAL Quality Control Procedure WAL-QCP-100, including the current version and any prior versions that were in effect during the relevant period (March 2022 through September 2022);
2. WAL incoming inspection reports and test data for all fourteen (14) rejected lots (Lot KDG-2022-0307 through Lot KDG-2022-0919), including porosity measurements, dimensional inspection data, non-destructive testing results (including any radiographic, ultrasonic, or computed tomography inspection records), and any destructive test results (including metallographic cross-sections and image analysis data);
3. WAL rejection notices issued for each of the fourteen (14) rejected lots, including any accompanying documentation or technical reports;
4. Correspondence between WAL and Kestrel regarding each lot rejection and cure efforts, including communications involving the following individuals:
• On the WAL side: Gerald Huang, Vice President, Global Supply Chain Operations; and Dr. Ingrid Vollmer, Senior Vice President, Engineering & Manufacturing;
• On the Kestrel side: Friedrich Brenner, Managing Director; Luisa Erdmann, Commercial Director; and Dr. Stefan Voss, Head of Quality Assurance.
C. Kestrel's Quality Records (Obtained via Document Production)
The following documents were obtained from Kestrel through the document production process in the arbitration, pursuant to Procedural Order No. 2 dated March 17, 2023:
1. Kestrel's internal quality testing records for the fourteen (14) rejected lots, including Kestrel's own porosity measurements and inspection results;
2. Kestrel's AS9100 Rev D certification documentation and audit records, including internal audit reports and any corrective action records relevant to the period in question; and
3. Kestrel's internal process controls and inspection procedures for Ti-6Al-4V ELI titanium alloy turbine housings, including any standard operating procedures, work instructions, and process flow diagrams governing the manufacturing and quality inspection processes.
D. Physical Samples (If Available)
Dr. Chow should advise whether, in his professional judgment, physical examination or re-testing of retained samples from any of the fourteen rejected lots is necessary or advisable to support his opinions. WAL has indicated that it retained representative samples from a number of the rejected lots at its facility at 8500 Coppermine Road, Manassas, Virginia 20110.
If you determine that physical examination or re-testing is warranted, C&H will coordinate with WAL to arrange access to the retained samples at the Manassas facility, and will work with you to establish an appropriate inspection protocol, including any chain-of-custody requirements. Please advise us as soon as practicable regarding your views on this question, as logistical arrangements may require advance planning.
E. Arbitration Pleadings
The following arbitration pleadings should be reviewed, with particular attention to the technical allegations and contentions advanced by the parties:
1. Kestrel's Statement of Claim, filed April 28, 2023, including all supporting exhibits and witness statements;
2. WAL's Statement of Defense and Counterclaim, filed June 30, 2023, including all supporting exhibits and witness statements;
3. Kestrel's Reply and Defense to Counterclaim, filed August 11, 2023; and
4. WAL's Rejoinder, filed September 29, 2023.
We note that WAL's Rejoinder may not yet have been filed at the time you receive this memorandum; it will be provided to you promptly upon filing. To the extent that additional pleadings or submissions are filed prior to the completion of your expert report, we will provide those to you as well.
V. Specific Questions for Dr. Chow's Expert Report
The following questions should be addressed in your expert report. These questions are organized into four thematic categories corresponding to the principal issues in the case. For each question, your report should set forth your findings, opinions, and the basis and reasoning for each opinion.
A. Porosity Compliance
Question 1. For each of the fourteen (14) rejected lots (Lot KDG-2022-0307 through Lot KDG-2022-0919), what were the measured porosity levels, and did those levels comply with the contractual specification of ≤0.25% as stated in WAL-SPEC-TH-401, Appendix C, Table 3?
Question 2. What is the range of porosity measurements observed across the fourteen rejected lots? WAL's inspection data indicates porosity levels between 0.19% and 0.38%; Dr. Chow should independently verify and confirm this range based on his review of the underlying test data.
Question 3. Were any of the fourteen rejected lots within the contractual ≤0.25% porosity limit? If so, which lots, and by what margin? For any lots that fell within the contractual limit, please provide your analysis of whether the rejection of those lots was nonetheless justified on other grounds (e.g., other specification non-conformances), or whether those lots should have been accepted.
B. The Alleged "Unpublished ≤0.15% Standard"
Question 4. Based on Dr. Chow's review of WAL's inspection records, testing data, and WAL Quality Control Procedure WAL-QCP-100, is there any evidence that WAL applied a porosity tolerance of ≤0.15% rather than the contractual ≤0.25%?
Question 5. Are WAL's rejection decisions for the fourteen lots consistent with the application of the ≤0.25% standard? In other words, would a lot with porosity at or below 0.25% have been accepted under WAL's inspection procedures as documented in WAL-QCP-100? Conversely, if WAL had been applying a ≤0.15% standard, would the pattern of acceptances and rejections over the life of the MSA be consistent with such a standard?
Question 6. Is the ≤0.25% porosity limit in WAL-SPEC-TH-401, Appendix C, Table 3, consistent with industry standards for Ti-6Al-4V ELI titanium alloy in aerospace turbine housing applications? Please identify and discuss any relevant industry standards, specifications, or guidelines (including ASTM, AMS, SAE, or other recognized standards) that bear on the appropriateness of the ≤0.25% porosity limit.
C. Adequacy of Kestrel's Quality Assurance
Question 7. Based on Kestrel's AS9100 Rev D certification records and internal QA procedures (as produced in this arbitration), should Kestrel's own quality assurance processes have identified the porosity non-conformances prior to shipment? In other words, did Kestrel have the capability and the obligation under its own QA system to detect the porosity exceedances that WAL identified upon incoming inspection?
Question 8. Are there deficiencies in Kestrel's QA processes that may explain the repeated delivery of non-conforming lots over a six-month period (March through September 2022)? If so, please identify and describe those deficiencies, including any specific process control, inspection, or testing failures that you have identified in Kestrel's documentation.
Question 9. What quality control measures are standard practice under AS9100 Rev D for monitoring porosity in Ti-6Al-4V ELI aerospace components, and did Kestrel's documented procedures meet those standards? Specifically, please address whether Kestrel's internal inspection protocols included adequate porosity testing at appropriate stages of the manufacturing process, and whether the frequency and methodology of such testing were consistent with industry expectations for a supplier of critical aerospace components.
D. Significance of Porosity Exceedances
Question 10. What are the engineering and safety implications of porosity levels exceeding ≤0.25% in Ti-6Al-4V ELI titanium alloy turbine housings used in propulsion systems? Please address the potential impact on fatigue life, tensile strength, fracture toughness, and overall structural reliability, taking into account the operating conditions (including temperature, pressure, vibration, and cyclic loading) to which turbine housings are subjected in service.
Question 11. In Dr. Chow's expert opinion, was WAL justified from a metallurgical and engineering perspective in rejecting lots with porosity levels in the 0.19%–0.38% range, where those lots exhibiting porosity exceeding 0.25% were non-conforming under the contractual specification? Please address both (a) the technical justification for rejecting lots that exceeded the ≤0.25% specification and (b) whether the rejection of any lots with measured porosity at or below 0.25% (if any) can be justified on metallurgical or engineering grounds.
VI. Format and Requirements for the Expert Report
A. Report Structure
Your expert report should be a comprehensive, self-contained document that can be read and understood by the members of the Tribunal without reference to other materials. While the arbitrators are experienced in resolving complex commercial disputes, they are not metallurgists, and your report should accordingly be written in a manner that is accessible to a non-specialist reader. Technical terminology should be defined where first used, and complex concepts should be explained with sufficient clarity to be understood by a lay audience.
The report should include the following components:
(i) A statement of your qualifications and experience in aerospace metallurgy, titanium alloy quality and compliance, and related fields, including a summary of your educational background, professional experience, publications, and prior expert witness engagements;
(ii) A summary of all materials reviewed in connection with the preparation of your report;
(iii) A clear statement of the questions you were asked to address;
(iv) A description of the methodology you employed in conducting your analysis, including any testing, calculations, or analytical techniques used;
(v) Your findings and opinions on each question, organized in a logical and clearly structured manner;
(vi) The basis and reasons for each opinion, including references to specific documents, data, standards, or other evidence on which you relied; and
(vii) Any reservations, qualifications, or limitations on your opinions, including any areas where the available evidence was insufficient to reach a definitive conclusion, or where your opinions are contingent upon assumptions that should be identified.
B. Independence and Impartiality
We wish to emphasize that your overriding duty in preparing your expert report is to the Tribunal, not to WAL or to C&H as the party and counsel retaining you. The ICC Rules of Arbitration and the Tribunal's procedural orders require that party-appointed experts act independently and impartially. Your report must contain a declaration of independence and impartiality, confirming that your opinions represent your honest and independent professional judgment, that you understand your duty to the Tribunal, and that you have not been influenced by the interests of the party retaining you.
All opinions expressed in your report must be your own honest professional opinions, supported by the evidence you have reviewed and by your expertise in the relevant fields. If, in the course of your analysis, you reach conclusions that are unfavorable to WAL's position on any point, you should communicate those conclusions to us promptly so that we can discuss them and adjust our case strategy accordingly. However, under no circumstances should you alter or suppress an honest opinion in order to align with a preferred outcome.
C. Supporting Exhibits
The report should include as exhibits or appendices the following materials:
(i) Your curriculum vitae, updated to reflect your current qualifications, publications, and professional activities;
(ii) A complete list of all materials reviewed in connection with the preparation of your report, identified by document title, date, and Bates number (where applicable);
(iii) Any test data, charts, graphs, tables, photographs, or other demonstrative materials prepared by you or under your supervision in connection with your analysis, together with a description of the methodology used to generate such materials; and
(iv) Copies of, or full bibliographic references to, any published literature, technical standards, industry guidelines, or other external sources cited or relied upon in your report.
D. Deadline. The expert report must be finalized and provided to Calderwood & Harkness LLP in sufficient time prior to the October 16, 2023 exchange deadline to allow for review, any final revisions, formatting, and logistical coordination. Accordingly, Dr. Chow should deliver the final, signed report to C&H no later than October 9, 2023. We recognize that this timeline is demanding and we are committed to providing you with all necessary materials and support well in advance to facilitate timely completion.
If you anticipate any difficulty in meeting this deadline, please advise us immediately so that we can discuss alternatives and, if necessary, seek an extension from the Tribunal (though we would prefer to avoid any such request if possible).
VII. Coordination and Communication
All communications regarding this engagement should be directed to:
Jeffrey Park (Primary Contact) Associate Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 555-4700
Email: j.park@calderwoodharkness.com
Simone Laroche (Secondary Contact) Senior Associate Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 555-4712
Email: s.laroche@calderwoodharkness.com
Dr. Chow should not communicate directly with WAL personnel — including but not limited to Gerald Huang (VP Global Supply Chain Operations) or Dr. Ingrid Vollmer (SVP Engineering & Manufacturing) — or with Kestrel's counsel (Haber Reinhardt Schlosser Partnerschaft mbB, lead partner Dr. Maximilian Haber, and co-counsel Katrin Schäfer) without prior coordination with C&H. Any requests for information from WAL's engineering or quality assurance teams should be routed through C&H, and we will facilitate the necessary communications.
If you require additional materials, access to physical samples at WAL's Manassas facility, or supplementary information from WAL's engineering team (specifically Dr. Ingrid Vollmer), please advise us promptly and we will make the necessary arrangements. We are committed to ensuring that you have all the materials and access you need to prepare a thorough and well-supported expert report.
All draft reports, working papers, notes, memoranda, and communications prepared or exchanged in connection with this engagement are protected by the attorney work product doctrine and litigation privilege. Draft reports and working papers should be maintained securely and should not be disclosed to any third party. We will provide further guidance on document retention and privilege protocols as appropriate.
VIII. Hearing Testimony
Dr. Chow should expect to testify as an expert witness at the evidentiary hearing in this arbitration. The hearing is currently scheduled for January 8–12, 2024 at the ICC Hearing Centre in New York, New York. While the hearing schedule is subject to change, we anticipate that expert testimony will occupy one to two hearing days, likely on January 10 and/or January 11, 2024.
Your testimony at the hearing may include:
• Direct examination by C&H, during which you will be asked to present and explain the key findings and opinions set forth in your expert report;
• Cross-examination by Kestrel's counsel, Dr. Maximilian Haber and Katrin Schäfer of Haber Reinhardt Schlosser Partnerschaft mbB, who may challenge your methodology, question the basis for your opinions, and attempt to undermine your conclusions; and
• Questions from the Tribunal, as the members of the Tribunal (Prof. Dame Eleanor Fitzwilliam, Dr. Hans-Ulrich Perren, and the Hon. Robert A. Castillo) may pose their own questions to you on any aspect of your testimony.
The Tribunal may also direct that expert testimony be presented in a "hot-tubbing" or concurrent expert evidence format, in which you and Dr. Kessler would present your opinions on specific topics sequentially or in dialogue, with questions from the Tribunal and counsel. We will advise you of the hearing format when it is finalized.
A witness preparation session will be scheduled in advance of the hearing, during which we will review your expert report and testimony, discuss anticipated lines of cross-examination, and prepare you for the hearing format and logistics. Further details regarding the preparation session, including dates and location, will follow in due course.
IX. Confidentiality
All materials provided to you in connection with this engagement — including contractual documents, inspection records, quality records, pleadings, correspondence, and any other documents or information — are strictly confidential. These materials are subject to the confidentiality provisions of the Expert Engagement Letter dated March 2023 between C&H and Arclight, as well as any applicable confidentiality orders or procedural orders issued by the Tribunal.
You should take all reasonable steps to safeguard the confidentiality of these materials, including maintaining them in a secure location (whether in physical or electronic form), restricting access to authorized personnel within Arclight who are directly involved in the preparation of your expert report, and ensuring that electronic copies are stored on password-protected systems with appropriate access controls.
Materials provided in connection with this engagement should not be shared with, disclosed to, or discussed with any third parties — including other clients of Arclight, colleagues not directly involved in this engagement, or any other persons — without the prior written consent of Calderwood & Harkness LLP. If you receive any inquiries from third parties regarding this engagement, please decline to comment and refer the inquiry to C&H immediately.
Upon conclusion of the engagement, or upon request by C&H, all materials should be returned or securely destroyed in accordance with C&H's instructions and the terms of the Expert Engagement Letter.
X. Conclusion
Dr. Chow's metallurgical analysis is central to WAL's defense in this arbitration. The core of WAL's position is that its rejection of the fourteen lots delivered by Kestrel between March and September 2022 was based on objective, documented, and contractually specified quality criteria — specifically, the ≤0.25% porosity limit expressly stated in WAL-SPEC-TH-401, Appendix C, Table 3. Kestrel's allegation that WAL secretly applied an unpublished ≤0.15% porosity standard, and that the rejections were pretextual, is a contention that can and should be refuted through rigorous, independent metallurgical analysis of the inspection data and testing records.
Your expert report will provide the Tribunal with the technical foundation it needs to evaluate the competing claims regarding the porosity specification, the reliability of WAL's inspection methodology, the adequacy of Kestrel's quality assurance processes, and the engineering significance of the porosity exceedances at issue. We are confident that your expertise and independent analysis will materially advance WAL's defense.
We respectfully request that you confirm receipt of this memorandum at your earliest convenience, acknowledge the scope of the assignment as described herein, and advise us of any questions, concerns, or additional requirements you may have. In particular, please advise us promptly regarding the following:
(a) Whether you require any additional materials or information beyond those identified in Section IV above;
(b) Whether you believe physical examination or re-testing of retained samples is necessary or advisable, and if so, the scope and methodology of any such examination or re-testing;
(c) Whether the timeline set forth in this memorandum — with a final report due to C&H by October 9, 2023 — is feasible, or whether you anticipate any scheduling constraints that we should discuss; and
(d) Any other matters you wish to raise regarding the scope, methodology, or logistics of your expert engagement.
We look forward to working with you on this matter and are available to discuss any aspect of this memorandum at your convenience.
Respectfully submitted,