MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: File — ICC Case No. 27914/MHM
From: Theodore Langston, Partner; Simone Laroche, Senior Associate
Date: January 4, 2024
Re: Hearing Strategy — Evidentiary Hearing, January 8–12, 2024; Kestrel Dynamics GmbH v. Whitmore Aerospace LLC, ICC Case No. 27914/MHM
Engagement No.: 1019-00001
Copies: Vivienne St. Claire (Partner); Jeffrey Park (Associate)
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I. Purpose and Overview
This memorandum sets forth the comprehensive hearing strategy for the five-day evidentiary hearing scheduled for January 8 through January 12, 2024, at the ICC Hearing Centre, New York, New York. The memorandum is intended to serve as the central strategic reference document for all members of the hearing team and addresses opening statement themes, witness examination order, key documentary evidence, anticipated challenges and risk factors, expert witness strategy, and tactical considerations vis-à-vis the Tribunal.
Our client, Respondent and Counterclaimant Whitmore Aerospace LLC ("WAL"), is a Delaware limited liability company headquartered at 4200 Wilson Boulevard, Suite 1100, Arlington, Virginia 22203. WAL is a leading supplier of advanced structural and propulsion components for military and commercial aerospace applications. The Claimant and Counter-Respondent, Kestrel Dynamics GmbH ("Kestrel"), is a German limited liability company (Gesellschaft mit beschränkter Haftung) registered at Industriestraße 88, 70565 Stuttgart, Germany. Kestrel is a mid-market European manufacturer of precision-cast titanium alloy components for aerospace and industrial turbine applications.
The dispute arises from the Master Supply Agreement for Titanium Alloy Turbine Housings dated June 15, 2018 (the "MSA"), entered into between WAL and Kestrel for the supply of precision-cast Ti-6Al-4V ELI titanium alloy turbine housings conforming to WAL's proprietary engineering specifications. The MSA was subsequently amended by Amendment No. 1, dated February 10, 2020 (adding WAL-SPEC-TH-410, the high-temperature variant specification, and increasing maximum annual volume to 4,000 units), and Amendment No. 2, dated September 3, 2021 (extending the cure period for non-conforming deliveries from 30 to 45 calendar days and adding a force majeure carve-out).
Kestrel initiated this arbitration alleging material breach by WAL through what Kestrel characterizes as improper rejection of conforming product deliveries and wrongful termination of the MSA. Kestrel seeks approximately €47.3 million in total damages, comprising lost profits for the remaining MSA term, lost profits for two optional renewal periods, unreimbursed rework costs, and reputational damages.
WAL denies material breach, asserts that the termination issued on October 3, 2022 was proper under Section 14.2(b) of the MSA for Persistent Quality Failure (as defined in Section 8.4), and pursues a counterclaim in the amount of €5.17 million for replacement-component costs incurred as a result of Kestrel's quality failures.
The governing law of the MSA is the law of the State of New York (Section 22.1). The arbitration is conducted under the ICC Rules of Arbitration (2021 edition), with the seat in New York, New York, and the language of the arbitration being English (Section 22.3).
This memorandum covers the following topics in detail: (1) an assessment of the Tribunal's composition and its tactical implications; (2) the case themes to be presented in WAL's opening statement; (3) the proposed witness examination order and hearing schedule; (4) the direct examination strategy for WAL's fact witnesses; (5) the cross-examination strategy for Kestrel's fact witnesses; (6) the expert witness strategy for both WAL's experts and the cross-examination of Kestrel's experts; (7) a detailed inventory of key documentary evidence; (8) an analysis of anticipated challenges and risk factors; (9) logistics and administrative matters for the hearing; (10) client communication protocols; and (11) hearing assignments and deadlines.
II. Tribunal Composition and Assessment
An accurate assessment of the Tribunal's composition, predispositions, and likely areas of focus is essential to the effective presentation of WAL's case. The following analysis is based on the known professional backgrounds of the three arbitrators, their published writings and decisions (where available), and our experience in prior proceedings involving each of them.
A. Presiding Arbitrator — Prof. Dame Eleanor Fitzwilliam
Prof. Dame Eleanor Fitzwilliam is a British national, practicing barrister at Essex Court Chambers, and Professor of International Commercial Law at Queen Mary University of London. She was appointed as presiding arbitrator by agreement of the parties following the parties' inability to agree on a sole arbitrator and the co-arbitrators' subsequent consultation. Prof. Dame Eleanor has published extensively on the interpretation of commercial contracts in international arbitration and has sat as presiding arbitrator in over thirty ICC and LCIA proceedings.
Her published scholarship and prior awards (to the extent available through the ICC's limited publication program and peer commentary) reflect a rigorous attention to documentary evidence and a strong preference for textual contract interpretation over parol evidence or implied-term arguments. She is likely to focus closely on the express language of the MSA, and in particular on the porosity specification set forth in WAL-SPEC-TH-401, Appendix C, Table 3. If the contractual language is clear on its face — as we believe it is — Prof. Dame Eleanor is unlikely to entertain Kestrel's invitation to read in additional terms or to override express provisions based on generalized notions of good faith.
We should expect her to be exceptionally well-prepared on the technical evidence. She has presided over arbitrations involving complex engineering disputes in the oil and gas and construction sectors, and she is known for asking detailed questions of technical experts. Accordingly, the presentation of metallurgical expert testimony through Dr. Raymond Chow must be methodical, clear, and supported by visual demonstrative exhibits. Overly complex or jargon-heavy testimony will not serve our interests; Prof. Dame Eleanor will want to understand the science and will credit the expert who explains it most clearly.
Based on her prior writings on limitation-of-liability clauses in commercial agreements, we assess that Prof. Dame Eleanor is likely to be sympathetic to arguments favoring party autonomy and the enforcement of negotiated risk-allocation provisions between sophisticated commercial entities. This is favorable to WAL's position on the enforceability of the consequential damages waiver in Section 8.7 of the MSA.
B. Co-Arbitrator (Claimant's Nominee) — Dr. Hans-Ulrich Perren
Dr. Hans-Ulrich Perren is a Swiss national and a former judge of the Swiss Federal Supreme Court (Bundesgericht), where he served on the First Civil Law Division. He now sits as an arbitrator and mediator based in Bern, with an active international practice. He was nominated by Kestrel and confirmed by the ICC Court.
Dr. Perren's judicial background in the Swiss civil-law tradition warrants careful attention. He may be more sympathetic to Kestrel's arguments rooted in civil-law principles, including good faith obligations, proportionality of contractual remedies, and the relationship between the specific breach alleged and the severity of the termination remedy invoked. While the MSA is governed by New York law — and not Swiss law — Dr. Perren's instincts may lead him to probe whether WAL's rejections were commercially reasonable, whether WAL engaged in any conduct suggesting a pretextual termination, and whether the termination was proportionate to the alleged breach.
We should anticipate probing questions from Dr. Perren regarding the following: (i) whether WAL's lot rejections, particularly those involving porosity measurements in the 0.19%–0.25% range, were consistent with good commercial practice; (ii) whether WAL's onboarding of Valkyr Precision Components Inc. preceded or followed the quality failures, and what inferences should be drawn from the timeline; and (iii) the relationship between the specific rejection threshold in Section 8.4 and the overall contractual framework, including whether three uncured rejections in a rolling twelve-month period is a reasonable trigger for the drastic remedy of termination.
Our preparation must account for the possibility that Dr. Perren will be Kestrel's strongest ally on the Tribunal. However, his influence is limited by his role as a co-arbitrator; the presiding arbitrator will control the proceeding, and a well-reasoned majority award need not adopt his views if they are not shared by at least one other Tribunal member.
C. Co-Arbitrator (Respondent's Nominee) — Hon. Robert A. Castillo
The Honorable Robert A. Castillo is a U.S. national and a retired judge of the United States District Court for the Southern District of New York, where he served for eighteen years before taking senior status and subsequently stepping down to pursue an arbitration practice. He was nominated by WAL and confirmed by the ICC Court.
Judge Castillo brings deep familiarity with New York commercial law, having presided over numerous complex commercial disputes during his tenure on the bench. He is expected to be firmly aligned with strict contract-interpretation principles under New York law, including the parol evidence rule, the presumption of enforceability of limitation-of-liability clauses between sophisticated parties, and the general reluctance of New York courts to imply obligations not expressly stated in a written agreement.
Judge Castillo is likely to credit well-supported expert testimony, particularly when grounded in verifiable data and recognized methodologies. His presence on the Tribunal is favorable to WAL's position on the enforceability of the consequential damages waiver in Section 8.7, and he will serve as an anchor for the Tribunal on questions of New York law, including the standard for termination for cause, the measure of damages in commercial supply agreements, and the enforceability of discretionary renewal options.
We should not take Judge Castillo's vote for granted, however. He is a seasoned jurist who will weigh the evidence independently and will not serve as a rubber stamp for WAL's positions. His questions during the hearing should be treated with the same seriousness as those of the presiding arbitrator.
D. Tactical Implications
The Tribunal composition yields the following tactical implications for the hearing:
1. Tailor presentations to the presiding arbitrator. Prof. Dame Eleanor Fitzwilliam is the likely swing vote on technical credibility issues and will drive the drafting of the award. All presentations should be designed with her priorities in mind: clear contractual language, well-organized documentary evidence, and methodical expert testimony.
2. Ground all arguments in express contractual language. The strongest path to a favorable award runs through the text of the MSA. Textual arguments will resonate with Prof. Dame Eleanor and Judge Castillo. Even Dr. Perren — while potentially sympathetic to good-faith arguments — must acknowledge the primacy of the contractual text under the governing New York law.
3. Anticipate Dr. Perren's civil-law lens. We must prepare thorough responses to questions about proportionality, good faith, and the reasonableness of WAL's conduct. In particular, we must be prepared to address whether WAL's onboarding of Valkyr preceded or followed the quality failures. The timeline evidence is critical on this point, and Gerald Huang must be unshakeable on the chronology during his testimony.
4. Leverage Judge Castillo on legal questions. When presenting legal arguments — particularly on the enforceability of the consequential damages waiver and the standard for expectation damages on unexercised options — we should frame arguments in terms familiar to New York commercial jurisprudence, citing decisions from the New York Court of Appeals and the Southern District.
III. Case Themes for Opening Statement
WAL's opening statement will be delivered by Theodore Langston and is estimated at approximately two hours. The opening should be structured around four interlocking themes that collectively present WAL as the party that honored its contractual obligations, was harmed by Kestrel's quality failures, and is now defending against an overreaching damages claim. The themes are designed to frame the evidentiary presentation that follows and to establish a narrative structure that the Tribunal will carry through the remainder of the hearing.
Theme 1: The Contract Means What It Says
The foundation of WAL's defense is the express language of the MSA and its associated technical specifications. The MSA contained a clear, specific, and unambiguous porosity specification for the titanium alloy turbine housings: a maximum porosity of ≤0.25%, as set forth in WAL-SPEC-TH-401, Appendix C, Table 3. This specification was not hidden in a footnote or buried in an obscure appendix. It was a core quality parameter for safety-critical aerospace components, published in the engineering specifications that Kestrel reviewed, negotiated, and agreed upon as part of the MSA.
Kestrel delivered lots that failed to meet this specification. Independent testing by Dr. Raymond Chow of Arclight Materials Science Inc. confirmed porosity levels ranging from 0.19% to 0.38% across the fourteen rejected lots. The lots that exceeded 0.25% did not conform to the contract. The lots at 0.19% — to the extent they met the porosity specification — were rejected on the basis of other documented non-conformances or because the 0.19% measurement represented a minimum within the lot while other sample points within the same lot exceeded the contractual threshold.
This is not a case of ambiguous standards. It is not a case of shifting goalposts. The specification was clear, it was published, it was agreed upon, and Kestrel failed to meet it. The opening statement should establish this point firmly and return to it throughout the hearing.
Theme 2: WAL Followed the Contract to the Letter
WAL's conduct throughout the relevant period was a model of contractual compliance. WAL conducted incoming inspections of each lot in accordance with its published incoming inspection procedure, WAL-QCP-100, which was referenced in and incorporated by the MSA. When lots failed to meet the specifications, WAL issued rejection notices promptly and in the form required by the MSA. WAL then provided Kestrel with the full cure period — forty-five calendar days, as extended by Amendment No. 2, which Kestrel itself had negotiated precisely because it was having difficulty meeting the original thirty-day cure deadline.
Despite receiving the full cure period, Kestrel failed to cure five of the seven uncured rejections within the forty-five-day window. Seven uncured rejections accumulated during the rolling twelve-month period from March 7, 2022 through September 19, 2022. This far exceeded the threshold of three uncured rejections in a rolling twelve-month period that constitutes "Persistent Quality Failure" under Section 8.4 of the MSA. With seven uncured rejections — more than double the contractual threshold — WAL was not merely entitled to terminate under Section 14.2(b); it would have been commercially imprudent not to do so.
WAL's termination notice, issued on October 3, 2022, was proper in form and substance under Section 14.2(b). It cited the specific contractual provisions, identified the uncured rejections, and provided the required notice. WAL did not act precipitously, did not circumvent the cure process, and did not deviate from the contractual framework. The opening should walk the Tribunal through the timeline methodically, lot by lot, to demonstrate WAL's scrupulous adherence to the contractual process.
Theme 3: Kestrel's Damages Are Barred and Inflated
Even if the Tribunal were to find that WAL's termination was improper — which we submit the evidence does not support — Kestrel's damages claim of approximately €47.3 million is grossly overstated and substantially barred by the express terms of the MSA.
First, the consequential damages waiver in Section 8.7 of the MSA expressly bars claims for lost profits, reputational damages, and loss of business opportunity. This provision was negotiated between sophisticated commercial parties, both represented by counsel, and reflects the agreed-upon allocation of risk in a complex aerospace supply relationship. Under New York law, such waivers are presumptively enforceable.
Second, the largest component of Kestrel's damages claim — €27.15 million in renewal-period lost profits — is based entirely on two optional one-year renewal periods that WAL had absolutely no obligation to exercise. The renewal options were exercisable at WAL's sole discretion. Kestrel had no expectation interest in the renewal periods, no contractual right to renewal, and no basis under New York law to claim damages for an option that the other party was free not to exercise.
Third, Kestrel's claimed margin of 22.4%, as calculated by its damages expert Prof. Dieter Langfeld of Rheinsberg Advisory AG, is inflated and unsupported by Kestrel's own audited financial data. Forensic accounting analysis by Canfield & Thorpe LLP, conducted by Sandra Gillespie, CPA/ABV, indicates that Kestrel's true margin on WAL-related products was closer to 14.8% — a difference of more than seven percentage points that has an enormous impact on the damages calculation.
Fourth, the claimed reputational damages of €3.90 million are speculative, lack any objective evidentiary support, and are calculated using no recognized economic methodology. They are precisely the type of speculative, unquantifiable harm that the consequential damages waiver was designed to exclude.
Theme 4: WAL Is the Injured Party
The opening statement should close by reframing the case from WAL's perspective: WAL is the injured party in this dispute. Kestrel's quality failures forced WAL to scramble for a replacement supplier during a period of high demand for military aerospace components. WAL sourced replacement housings from Valkyr Precision Components Inc. of Tucson, Arizona — the only qualified domestic supplier with available production capacity and the required AS9100 Rev D certification for Ti-6Al-4V ELI components.
The replacement came at a significant cost premium. Valkyr's unit price of €8,432.92 was substantially higher than Kestrel's Contract Year 4 price of €5,222.92 per unit. Even after application of Valkyr's 4.2% introductory discount, the per-unit premium amounted to approximately €3,210 per unit. Across 1,680 replacement units, this yields WAL's counterclaim of approximately €5.17 million.
Critically, the price differential itself refutes Kestrel's "pretext" narrative. If WAL had been seeking to replace Kestrel with a cheaper supplier, it would not have engaged a supplier charging over sixty percent more per unit. WAL's engagement of Valkyr was a commercially reasonable mitigation step necessitated by Kestrel's quality failures — not a pretext for replacing Kestrel on more favorable terms.
The opening should end by asking the Tribunal to find that WAL properly terminated the MSA under Section 14.2(b), to dismiss Kestrel's claims in their entirety, and to award WAL €5.17 million on its counterclaim, together with interest, costs, and the fees of the arbitration.
IV. Witness Examination Order and Schedule
A. Proposed Hearing Schedule
The following proposed schedule is based on the procedural timetable agreed upon by the parties and confirmed by Procedural Order No. 4, dated November 28, 2023. The schedule reflects the Tribunal's instruction that Claimant present its evidence first, followed by Respondent, with expert testimony grouped on Days 4 and 5 by subject matter. Total available hearing time across five days, accounting for breaks and administrative matters, is approximately thirty-five hours.
Day 1 — Monday, January 8, 2024
Day 2 — Tuesday, January 9, 2024
Day 3 — Wednesday, January 10, 2024
Day 4 — Thursday, January 11, 2024
Note: Consider requesting concurrent expert testimony ("hot-tubbing") format for the metallurgical experts if the Tribunal is amenable. Under this format, both Dr. Chow and Dr. Kessler would be seated simultaneously and would respond to questions from the Tribunal and counsel on each disputed technical issue in sequence. We assess that this format will highlight the superiority of Dr. Chow's methodology and his command of the underlying data, as Dr. Kessler's opinions are less well-supported and her sampling methodology is vulnerable. However, we should only request this format if we are confident in Dr. Chow's ability to perform effectively in a less structured setting. Based on our preparation sessions with him, we believe he will perform well.
Day 5 — Friday, January 12, 2024
Note: If insufficient time remains for full closing submissions on Day 5, the parties have agreed (per Procedural Order No. 4) to submit simultaneous post-hearing briefs due February 9, 2024, with reply briefs due March 1, 2024.
B. Estimated Examination Times
The following table summarizes the estimated examination times for each witness. These estimates are based on our review of the witness statements and expert reports and have been communicated to the Tribunal in our pre-hearing submissions. Actual times may vary depending on the pace of examination and Tribunal questions.
Total estimated witness examination time: approximately 27 hours. Combined with opening statements (4 hours) and allowance for Tribunal questions and administrative matters, this is within the approximately 35 available hearing hours across five days.
V. Direct Examination Strategy — Respondent's Fact Witnesses
A. Gerald Huang — Vice President, Global Supply Chain Operations, WAL
Gerald Huang is WAL's primary fact witness and the most important witness in the proceeding. He was the senior WAL executive responsible for managing the procurement relationship with Kestrel under the MSA and was the principal point of contact for all commercial communications with Kestrel during the relevant period. His testimony will establish the factual foundation for WAL's defense on the merits — the quality failures, the cure process, the termination decision, and the engagement of Valkyr as a replacement supplier — and will also support the counterclaim calculation.
Key Testimony Topics
Gerald Huang should be prepared to testify on the following subjects during his direct examination:
1. Overview of WAL's procurement relationship with Kestrel under the MSA. Huang should provide the Tribunal with context regarding the nature of the supply relationship, the types of components procured, the volume of business, and the importance of quality control in the aerospace supply chain. He should explain that titanium alloy turbine housings are safety-critical components subject to rigorous quality standards and that compliance with engineering specifications is not optional or negotiable.
2. The lot rejection process. Huang should describe in detail the process by which WAL received, inspected, and either accepted or rejected incoming lots from Kestrel. This process — documented in WAL-QCP-100 — involved receipt of the lot at WAL's Arlington facility, incoming inspection by the quality assurance team under the supervision of Dr. Ingrid Vollmer, issuance of an inspection report, and, in the event of a non-conformance, issuance of a formal rejection notice to Kestrel. Huang should testify that this process was applied consistently to all suppliers, not selectively to Kestrel.
3. Specific timeline of the fourteen rejected lots. This is the core of Huang's testimony. He should walk the Tribunal through each of the fourteen rejected lots — identified as Lot KDG-2022-0307 through Lot KDG-2022-0919 — totaling 1,680 units. For each lot, Huang should identify the date of receipt, the date of the rejection notice, the specific non-conformance identified (porosity exceeding ≤0.25% and/or other specification failures), whether a cure was attempted by Kestrel, and whether the cure was completed within the forty-five-day amended cure period. Huang should be prepared to present this information lot by lot, using a summary timeline chart as a demonstrative exhibit.
4. Cure-period communications with Kestrel. Huang should describe his communications with Friedrich Brenner (Managing Director) and Luisa Erdmann (Commercial Director) at Kestrel regarding the cure opportunities provided following each rejection. He should emphasize that WAL provided Kestrel with the full forty-five-day cure period for each rejected lot and that WAL did not cut short the cure period, impose additional conditions, or otherwise impede Kestrel's ability to cure. Kestrel's failure to cure five of seven lots within the amended period was due to Kestrel's own production difficulties, not to any obstruction by WAL.
5. Decision to engage Valkyr Precision Components Inc. This is the most sensitive area of Huang's testimony because it directly addresses the "pretext" narrative. Huang must clearly and convincingly establish that WAL's decision to engage Valkyr as a replacement supplier post-dated the quality failures and was a commercially reasonable mitigation step taken in response to a genuine supply-chain crisis. He should testify about the process by which WAL identified Valkyr — a Tucson, Arizona-based manufacturer with AS9100 Rev D certification for Ti-6Al-4V ELI components — evaluated its qualifications, and negotiated pricing and delivery terms. Huang should emphasize that Valkyr's unit price of €8,432.92 was substantially higher than Kestrel's Contract Year 4 price of €5,222.92, and that WAL negotiated a 4.2% introductory discount to partially offset this premium.
6. Counterclaim calculation. Huang should provide the factual basis for WAL's counterclaim of €5.17 million, calculated as follows: 1,680 replacement units × (€8,432.92 – €5,222.92) per-unit premium × 0.958 (reflecting the 4.2% introductory discount) ≈ €5.17 million.
Key Documents to Introduce Through This Witness
The following documents should be introduced through Gerald Huang's testimony:
• Rejection notices for each of the fourteen lots (Lot KDG-2022-0307 through Lot KDG-2022-0919)
• Cure-period correspondence between Huang and Kestrel (Brenner, Erdmann)
• Valkyr Precision Components Inc. purchase orders and pricing agreements
• WAL's internal supply-chain disruption reports documenting the impact of Kestrel's quality failures on WAL's production schedule
• Timeline summary demonstrative exhibit
Anticipated Cross-Examination Themes (HRS)
We anticipate that HRS will focus its cross-examination of Huang on the following areas:
1. Timeline of WAL's initial contact with Valkyr. HRS will attempt to establish that WAL initiated contact with Valkyr before the quality failures arose, supporting Kestrel's theory that the termination was a pretext to replace Kestrel with a preferred domestic supplier. Huang must be prepared to address any pre-existing relationship or preliminary contacts with Valkyr and to explain that any such contacts were routine market intelligence activities, not steps toward replacing Kestrel.
2. Whether WAL explored competitive bids from other suppliers. HRS will argue that WAL's failure to solicit competitive bids from multiple potential replacement suppliers before engaging Valkyr at premium pricing demonstrates either that the replacement was pre-arranged or that WAL failed to mitigate its damages. Huang should be prepared to testify about the limited universe of qualified suppliers and the urgency of the supply situation.
Preparation Notes. Huang must clearly and definitively establish the following chronology: the first rejected lot was received and inspected on or about March 7, 2022; discussions with Valkyr regarding potential replacement supply did not commence until after the fifth or sixth rejection in mid-2022, when it became apparent that Kestrel's quality issues were systemic rather than isolated; and formal engagement of Valkyr occurred only after the October 3, 2022 termination notice. This chronology must be supported by documentary evidence — emails, meeting notes, purchase order dates — and must be unassailable on cross-examination. Coordinate preparation with the cross-examination outline for Friedrich Brenner, which will seek to establish the same timeline from Kestrel's side. The detailed cross-examination outline is contained in the separate working document (cross-examination-outlines-kestrel-witnesses.docx), prepared by Simone Laroche and last updated January 2, 2024.
B. Dr. Ingrid Vollmer — Senior Vice President, Engineering & Manufacturing, WAL
Dr. Ingrid Vollmer is WAL's senior technical witness and will provide the Tribunal with the engineering and quality-assurance perspective on the lot rejections. She holds a Ph.D. in metallurgical engineering from MIT and has over twenty years of experience in aerospace component manufacturing. She oversaw the incoming inspection process under WAL-QCP-100 and was responsible for the technical determination that each of the fourteen rejected lots failed to conform to WAL's engineering specifications.
Key Testimony Topics
Dr. Vollmer should be prepared to testify on the following subjects:
1. WAL's quality-control inspection process under WAL-QCP-100. Dr. Vollmer should provide the Tribunal with a detailed description of the incoming inspection process, including the personnel involved, the equipment used, the testing protocols applied, and the documentation generated for each inspection. She should establish that the inspection process was standardized, documented, and applied consistently to all incoming material — not selectively applied to Kestrel's deliveries.
2. The porosity specification in WAL-SPEC-TH-401, Appendix C, Table 3. This is the central technical issue in the case. Dr. Vollmer should explain the porosity specification clearly, in terms accessible to a non-technical audience (while remaining technically precise). The contractual limit is ≤0.25% porosity, meaning that the total volume fraction of voids or pores in the cast titanium alloy must not exceed 0.25% of the total volume. She should explain why this specification exists — porosity in excess of the limit compromises the structural integrity of the turbine housing, creating potential failure points under the extreme temperature and stress conditions of turbine operation — and why it is an absolute limit rather than a "target" or "guideline."
3. How incoming inspection was conducted. Dr. Vollmer should describe the specific testing methods used, including both standard non-destructive testing (NDT) methods (such as computed tomography scanning and ultrasonic inspection) and metallurgical sampling (destructive testing of sample coupons cut from designated locations within each casting). She should establish that the testing methods used were consistent with industry practice for aerospace-grade Ti-6Al-4V ELI components and compliant with AS9100 Rev D requirements.
4. Rebuttal of Kestrel's "unpublished ≤0.15% standard" claim. This is a critical area. Kestrel's central factual theory is that WAL did not actually apply the ≤0.25% contractual standard but instead applied a more stringent, unpublished internal standard of ≤0.15% porosity — effectively tightening the specification without notice to Kestrel. Dr. Vollmer must firmly and credibly rebut this claim. She should testify that the ≤0.25% standard was the standard consistently applied for acceptance and rejection decisions, that no ≤0.15% standard was applied to Kestrel's deliveries, and that any internal references to ≤0.15% in WAL's quality memoranda reflected internal engineering "targets" or "best practice" aspirations — not the contractual acceptance/rejection criterion.
5. Technical justification for each lot rejection. Dr. Vollmer should be prepared to testify about the specific porosity levels measured in each of the fourteen rejected lots. The measured porosity levels ranged from 0.19% to 0.38% across all lots. For lots where the overall range included measurements both above and below 0.25%, Dr. Vollmer should explain that lot-level acceptance requires all sample points within the lot to conform to the specification — not merely the average or minimum measurement. A lot with some sample points at 0.19% but other sample points at 0.28% still fails the specification.
6. AS9100 Rev D certification requirements and Kestrel's compliance obligations. Dr. Vollmer should testify about the AS9100 Rev D quality management system certification that Kestrel was required to maintain under the MSA. This certification, issued by Kestrel's certifying body, established minimum quality-management requirements for aerospace suppliers. Dr. Vollmer should be prepared to address whether Kestrel's quality issues in 2022 raised any concerns about the adequacy of Kestrel's AS9100 compliance.
7. Engineering specifications WAL-SPEC-TH-401 through WAL-SPEC-TH-410. Dr. Vollmer should provide a brief overview of the full suite of engineering specifications governing the turbine housings, including the addition of WAL-SPEC-TH-410 (the high-temperature variant specification) via Amendment No. 1 in February 2020.
Key Documents to Introduce Through This Witness
• WAL-SPEC-TH-401, including Appendix C, Table 3 (the porosity specification) — this is the single most important exhibit in the case
• WAL-QCP-100 incoming inspection procedures
• Inspection reports for each of the fourteen rejected lots, showing the specific porosity measurements and other non-conformances identified
• Historical acceptance/rejection data showing consistent application of the ≤0.25% standard across multiple contract years and multiple suppliers
Anticipated Cross-Examination Themes (HRS)
We anticipate that Dr. Haber will focus his cross-examination of Dr. Vollmer on the following areas:
1. Internal quality memos referencing a ≤0.15% "target" porosity. HRS will attempt to establish — through internal WAL quality memos obtained during document production — that WAL's engineering department maintained a ≤0.15% porosity "target" that was distinct from the ≤0.25% contractual maximum. HRS will argue that this internal target was the standard actually applied to Kestrel's deliveries, and that lots with porosity between 0.15% and 0.25% were improperly rejected.
2. Historical acceptance of lots in the 0.19%–0.25% range. HRS may attempt to establish that in prior contract years, WAL accepted lots from Kestrel (or from other suppliers) with porosity levels in the 0.19%–0.25% range, and that the rejections in 2022 represented a departure from past practice.
Preparation Notes. Dr. Vollmer must clearly and consistently distinguish between internal engineering "targets" or "best practice" aspirations and the contractual acceptance/rejection standard. The distinction is straightforward: an internal target is an aspiration that the engineering team uses for process improvement and supplier development; it may be communicated to suppliers as a goal but is not the basis for acceptance or rejection decisions. The contractual standard — ≤0.25% as stated in WAL-SPEC-TH-401, Appendix C, Table 3 — is the binding acceptance criterion, and it is the standard that was applied in making the rejection decisions at issue in this case.
Dr. Vollmer should be cautioned to avoid any testimony suggesting that WAL "aspired" to a ≤0.15% standard in a way that could be construed as evidence of a de facto acceptance criterion below the contractual threshold. She should acknowledge the existence of the internal target — it would be incredible to deny it given the documentary evidence — but must clearly frame it as an internal performance metric unrelated to the contractual acceptance/rejection standard.
Additionally, Dr. Vollmer should be prepared to address historical acceptance data. If WAL accepted lots with porosity in the 0.19%–0.25% range in prior years, this is not inconsistent with a ≤0.25% rejection standard — those lots were within specification and were properly accepted. The relevant question is whether WAL rejected lots at or below 0.25% in 2022, and if so, on what basis.
VI. Cross-Examination Strategy — Claimant's Fact Witnesses
A. Friedrich Brenner — Managing Director, Kestrel
Friedrich Brenner is Kestrel's most senior fact witness and the individual most closely associated with Kestrel's commercial decisions throughout the MSA term. He signed the MSA on behalf of Kestrel, negotiated the terms of both amendments, and was the senior Kestrel executive responsible for the overall commercial relationship with WAL. His testimony is likely to be the cornerstone of Kestrel's factual case, and his credibility on the "pretext" narrative will be significant to the Tribunal's assessment.
Objectives. The cross-examination of Brenner should accomplish the following objectives:
1. Establish Brenner's knowledge of the porosity specification. Brenner should be confronted with the porosity specification in WAL-SPEC-TH-401, Appendix C, Table 3 and asked to confirm that he was aware of this specification at the time of MSA execution, that he understood it to be a binding contractual requirement, and that Kestrel agreed to comply with it. This lays the groundwork for the argument that Kestrel cannot now claim that the specification was ambiguous or that WAL applied an "unpublished" standard.
2. Elicit admissions about Kestrel's internal quality-control difficulties in 2022. Through Brenner's own contemporaneous communications — including emails acknowledging receipt of WAL's rejection notices and Kestrel's internal board minutes discussing quality issues — we should establish that Kestrel was aware of its quality-control problems and was struggling to address them. This undermines the "pretext" narrative: if Kestrel itself acknowledged quality difficulties, the rejections were not fabricated.
3. Undermine Kestrel's narrative that WAL fabricated quality deficiencies. Brenner should be asked directly whether he believes WAL's rejection notices were fraudulent and whether he has any evidence — beyond the "unpublished ≤0.15% standard" theory — to support such a claim. The goal is to force Brenner to either make an extreme accusation (that WAL fabricated test results) or to retreat to the weaker claim that WAL applied an excessively stringent interpretation — which still must confront the ≤0.25% contractual language.
4. Probe the negotiation of Amendment No. 2. Amendment No. 2, dated September 3, 2021, extended the cure period from thirty to forty-five calendar days. Brenner should be asked to explain why Kestrel negotiated this extension. The obvious and truthful answer — that Kestrel was having difficulty curing non-conforming deliveries within the original thirty-day period — is an admission that Kestrel was already experiencing quality-control difficulties before the 2022 rejection sequence.
Key Document Confrontations
• Brenner's email correspondence acknowledging receipt of WAL's rejection notices and, in some cases, acknowledging the substance of the non-conformances
• Kestrel internal board minutes from early and mid-2022 discussing quality issues with WAL components (obtained during document production pursuant to the Tribunal's order on document requests)
• Brenner's communications with other Kestrel customers regarding quality concerns (to the extent produced)
• Amendment No. 2 and the negotiation correspondence surrounding it
Cross-Examination Outline Reference
A detailed question-by-question cross-examination outline for Friedrich Brenner has been prepared in a separate working document (cross-examination-outlines-kestrel-witnesses.docx), maintained by Simone Laroche and last updated January 2, 2024. The outline includes specific document references, anticipated answers, and follow-up questions for each line of examination.
B. Luisa Erdmann — Commercial Director, Kestrel
Luisa Erdmann is Kestrel's commercial director and was responsible for the pricing, financial, and commercial aspects of the MSA. She participated in the negotiation of the MSA and both amendments, and she communicated regularly with Gerald Huang on commercial matters including pricing adjustments, volume commitments, and renewal discussions. Her testimony is primarily relevant to Kestrel's damages claims.
Objectives.
1. Challenge the basis for Kestrel's damages claims, particularly the assumed 22.4% margin. Erdmann, as the commercial executive responsible for pricing and margins, should have direct knowledge of Kestrel's actual profitability on the WAL contract. She should be asked to confirm Kestrel's pricing proposals during MSA negotiations, the cost assumptions underlying those proposals, and any internal margin analyses conducted by Kestrel's finance team. This testimony will be used to undermine Prof. Langfeld's assumed margin of 22.4%.
2. Establish that the renewal options were understood by Kestrel to be at WAL's sole discretion. Erdmann should be asked to confirm that the renewal options in the MSA were exercisable by WAL at its sole discretion, that Kestrel had no right to compel renewal, and that Kestrel's own financial planning reflected the discretionary nature of the renewal options. If Kestrel's internal financial projections included a probability-adjusted estimate for renewal — rather than assuming 100% renewal — this would directly undermine the €27.15 million renewal-period damages claim.
3. Probe whether Kestrel had alternative customers or mitigation opportunities. Erdmann should be asked whether Kestrel sought to market its Ti-6Al-4V ELI turbine housing capabilities to other customers following the termination, whether it had existing relationships with other aerospace companies, and what steps it took to mitigate its alleged losses. Failure to mitigate is a complete or partial defense under New York law.
4. Elicit testimony about pricing proposals. Erdmann's testimony about Kestrel's pricing proposals during MSA negotiations may reveal that Kestrel's actual cost basis and expected margins were different from the figures used by Prof. Langfeld. Any discrepancy between Kestrel's internal expectations and the expert's assumptions is valuable on cross-examination of Prof. Langfeld.
Key Document Confrontations
• Kestrel's financial projections provided to its own bank (obtained during document production), which may show margin expectations inconsistent with the 22.4% figure claimed by Prof. Langfeld
• Internal Kestrel margin analyses showing different margin figures
• Erdmann's correspondence with WAL regarding the renewal options, including any communications acknowledging the discretionary nature of the renewal
• Kestrel's commercial proposals and pricing schedules from the MSA negotiation period
C. Dr. Stefan Voss — Head of Quality Assurance, Kestrel
Dr. Stefan Voss is Kestrel's head of quality assurance and is the primary fact witness for Kestrel on the quality issues at the heart of the dispute. He was responsible for Kestrel's internal quality management system, its AS9100 Rev D compliance, and the quality of the turbine housings delivered to WAL. His credibility on the porosity issue is central to Kestrel's case.
Objectives.
1. Establish that Dr. Voss was aware of the contractual porosity limit of ≤0.25%. As the head of quality assurance, Dr. Voss should have been intimately familiar with the engineering specifications governing Kestrel's deliveries, including WAL-SPEC-TH-401, Appendix C, Table 3. He should be asked to confirm his awareness of the ≤0.25% limit and to confirm that this was the acceptance/rejection standard he understood to be applicable.
2. Challenge Dr. Voss's claim that WAL applied an unpublished ≤0.15% standard. Dr. Voss is expected to testify that WAL's rejections were based on an undisclosed internal target of ≤0.15% porosity rather than the contractual ≤0.25% limit. He should be confronted directly with the text of WAL-SPEC-TH-401, Appendix C, Table 3, which states the limit as ≤0.25%, and asked to identify any provision of the MSA, its amendments, or the engineering specifications that establishes a ≤0.15% acceptance criterion. He will not be able to identify such a provision because none exists.
3. Probe the adequacy of Kestrel's cure efforts. For each of the uncured rejections, Dr. Voss should be asked what specific cure steps Kestrel undertook, when those steps were initiated, and why the cure was not completed within the forty-five-day amended period. If Kestrel's cure efforts were delayed by internal production constraints, this is an admission that Kestrel's manufacturing processes were inadequate — not that WAL's rejection standards were unreasonable.
4. Explore AS9100 Rev D certification issues. If Kestrel's AS9100 Rev D certification was the subject of any non-conformance findings, observations, or corrective action requests from its certifying body during the relevant period, this evidence would corroborate WAL's position that Kestrel was experiencing systemic quality issues.
Key Document Confrontations
• Lot-level porosity test results from Kestrel's own internal testing, which may show readings that are discrepant from or consistent with the contractual limits
• Kestrel's cure correspondence and any internal memos acknowledging an inability to cure within the amended forty-five-day window
• AS9100 Rev D audit reports and any findings of non-conformance
• WAL-SPEC-TH-401, Appendix C, Table 3 (the specification itself)
VII. Expert Witness Strategy
A. Dr. Raymond Chow — Metallurgical Expert (Arclight Materials Science Inc.)
Role and Background
Dr. Raymond Chow serves as WAL's independent metallurgical expert. He is a senior materials scientist at Arclight Materials Science Inc. of McLean, Virginia, and holds a Ph.D. in materials science and engineering from Stanford University. He has over fifteen years of experience in the characterization and testing of aerospace-grade titanium alloys, including Ti-6Al-4V ELI, and has served as a metallurgical expert in multiple prior arbitrations and litigations involving aerospace component quality disputes. He was retained by WAL in March 2023. His expert report was filed on October 16, 2023, and his rebuttal report was filed on November 13, 2023, in accordance with the Tribunal's procedural timetable.
Key Opinions. Dr. Chow's key opinions, as set forth in his expert report and rebuttal report, are as follows:
1. Independent testing confirms porosity levels in the 0.19%–0.38% range. Dr. Chow conducted independent metallurgical testing of retained samples from the fourteen rejected lots. His testing confirmed that the porosity levels measured in these lots ranged from 0.19% to 0.38%, with the majority of lots exhibiting porosity levels in excess of the ≤0.25% contractual limit set forth in WAL-SPEC-TH-401, Appendix C, Table 3.
2. The ≤0.25% specification is an industry-standard acceptance criterion. Dr. Chow opines that the ≤0.25% porosity limit for Ti-6Al-4V ELI titanium alloy turbine housings in aerospace applications is consistent with and in many cases less stringent than industry-standard acceptance criteria for comparable components. The specification was not unusual, onerous, or unreasonable.
3. WAL's inspection procedures were consistent with industry practice. Dr. Chow reviewed WAL's incoming inspection procedures under WAL-QCP-100 and opines that they were consistent with industry practice and AS9100 Rev D requirements for incoming material inspection of safety-critical aerospace components.
4. Dr. Kessler's sampling methodology is flawed. In his rebuttal report, Dr. Chow identifies methodological deficiencies in the testing conducted by Kestrel's metallurgical expert, Dr. Martina Kessler of Albrecht Prüftechnik GmbH. Specifically, Dr. Chow opines that Dr. Kessler used a sampling protocol that systematically undersampled high-porosity regions of the castings. By drawing samples predominantly from the gate-end and riser-end regions — where solidification conditions tend to produce lower porosity — Dr. Kessler's testing yielded results that are not representative of the lot as a whole.
Direct Examination Strategy
The direct examination of Dr. Chow will be conducted by Theodore Langston and should follow this structure:
1. Qualifications and methodology. Briefly establish Dr. Chow's credentials, expertise, and the methodology he employed in testing the retained samples. The methodology section should be concise but thorough enough to establish that Dr. Chow followed recognized standards for metallurgical testing of aerospace components.
2. Lot-by-lot testing results. Walk Dr. Chow through the testing results for each of the fourteen rejected lots, presenting the porosity data lot-by-lot with a clear visual comparison to the ≤0.25% contractual limit. Use demonstrative exhibits (charts and micrograph images) to make the data accessible to the Tribunal.
3. Explanation of the safety significance of porosity. Have Dr. Chow explain, in terms accessible to a non-specialist audience, why porosity above 0.25% is a safety concern in aerospace turbine housings. The explanation should be clear and vivid without being alarmist — the Tribunal needs to understand that porosity limits are not arbitrary administrative thresholds but reflect genuine engineering requirements related to structural integrity under extreme operating conditions.
4. Rebuttal of Dr. Kessler's opinions. Address Dr. Kessler's rebuttal points directly and methodically. Dr. Chow should explain why Dr. Kessler's sampling protocol was biased, why her lower porosity measurements do not reflect the true condition of the lots, and why his own testing methodology — which sampled from a statistically representative distribution of locations within each casting — is more reliable.
Anticipated Cross-Examination by HRS
We anticipate that HRS will focus its cross-examination of Dr. Chow on the following areas:
1. Sample selection. HRS will challenge Dr. Chow's sample selection, arguing that the retained samples he tested were not representative of the lots as a whole or that the chain of custody was inadequate.
2. The 0.19%–0.25% range. HRS will argue that some lots with measured porosity of 0.19%–0.25% technically met the ≤0.25% specification and should not have been rejected. This is a valid point for lots where all sample points fell at or below 0.25%, and Dr. Chow should be prepared to address it candidly. For those lots, the basis for rejection may have been other non-conformances (dimensional tolerances, surface finish) rather than porosity alone.
3. Engineering tolerance arguments. HRS will argue that micro-porosity at levels of 0.26%–0.30% — just above the 0.25% threshold — is within acceptable engineering tolerance and does not present a genuine safety risk. Dr. Chow should be prepared to explain that engineering specifications set binary thresholds for a reason: acceptance decisions must be based on objective criteria, not subjective judgments about whether a slight exceedance "matters."
Preparation Notes. Dr. Chow should prepare clear demonstrative exhibits for the Tribunal, including: (i) a lot-by-lot porosity chart showing the measured porosity for each lot against the ≤0.25% contractual limit, with color coding to indicate lots above and below the threshold; (ii) micrograph images showing porosity in representative samples from the rejected lots; and (iii) a comparison chart showing the sampling locations used by Dr. Chow versus those used by Dr. Kessler.
Dr. Chow must be prepared to defend the distinction between lots with porosity at 0.19% (which may have met the porosity specification) and lots with porosity above 0.25% (which did not). He should not overreach by claiming that all fourteen lots failed the porosity specification if some lots may have had measurements entirely within the ≤0.25% limit. For those lots, the basis for rejection may have been non-porosity-related non-conformances, and Dr. Chow should defer to Dr. Vollmer's testimony on the specific grounds for each rejection. Candor on this point will enhance Dr. Chow's credibility on the lots that clearly exceeded the threshold.
B. Dr. Nadia Ostrovsky — Damages Expert (Ridgeline Economic Consulting LLC)
Role and Background
Dr. Nadia Ostrovsky serves as WAL's damages expert. She is a managing director at Ridgeline Economic Consulting LLC in New York and holds a Ph.D. in economics from Columbia University. She has over twenty years of experience in damages quantification and economic analysis in commercial disputes, with particular expertise in aerospace and defense industry disputes. She was retained by WAL in March 2023. Her expert report was filed on October 16, 2023, and her rebuttal report was filed on November 13, 2023.
Key Opinions. Dr. Ostrovsky's key opinions are as follows:
1. Kestrel's total damages claim of €47.3 million is grossly overstated. Dr. Ostrovsky has analyzed each component of Kestrel's damages claim and concludes that the claim is inflated, based on unsupported assumptions, and in significant part barred by the express terms of the MSA.
2. Lost profits for the remaining MSA term (€12.83 million). Dr. Ostrovsky opines that this component is barred by the consequential damages waiver in Section 8.7 of the MSA. Even if recoverable, the claimed amount is based on Prof. Langfeld's inflated margin assumption of 22.4%, which is inconsistent with Kestrel's actual financial performance.
3. Lost profits for renewal terms (€27.15 million). Dr. Ostrovsky opines that this component is not recoverable under any analysis. The renewal options were exercisable solely at WAL's discretion under the express terms of the MSA. Kestrel had no expectation interest in the renewal periods, and no prior exercise or pattern of renewal exists to establish a reasonable expectation of renewal. Under New York law, damages based on the assumption that a party would have exercised a discretionary option are speculative and not recoverable.
4. Unreimbursed rework costs (€3.42 million). Dr. Ostrovsky acknowledges that a portion of the claimed rework costs may be justified as direct damages, but opines that the claimed amount should be reduced to account for the cost of Kestrel's own defective production. To the extent Kestrel incurred rework costs because it produced non-conforming product, those costs are attributable to Kestrel's own quality failures, not to WAL's conduct.
5. Reputational damages (€3.90 million). Dr. Ostrovsky opines that this component is speculative, unsupported by any objective evidence, and barred by Section 8.7. Prof. Langfeld's calculation of reputational damages lacks any recognized economic methodology and is based entirely on conjecture about the impact of the termination on Kestrel's relationships with other customers.
6. Prof. Langfeld's margin assumption is incorrect. Dr. Ostrovsky opines that Prof. Langfeld's assumed margin of 22.4% is inconsistent with Kestrel's actual financial performance as reflected in its financial records. Forensic accounting analysis by Canfield & Thorpe LLP (Sandra Gillespie, CPA/ABV) indicates that Kestrel's true margin on WAL-related products was closer to 14.8%. The difference — more than seven percentage points — has an enormous impact on the lost-profits calculation.
7. WAL's counterclaim of €5.17 million is properly calculated. Dr. Ostrovsky opines that WAL's counterclaim is properly calculated based on the per-unit premium paid to Valkyr (€8,432.92 versus €5,222.92 under Kestrel's CY4 pricing), net of Valkyr's 4.2% introductory discount, across 1,680 replacement units.
Direct Examination Strategy
The direct examination of Dr. Ostrovsky will be conducted by Theodore Langston and should follow this structure:
1. Overview and damages breakdown. Present a clear breakdown of Kestrel's €47.3 million damages claim, identifying each component and its status (barred, overstated, speculative, or potentially valid). Use a demonstrative exhibit — a summary chart — to give the Tribunal a visual roadmap.
2. Consequential damages waiver analysis. Walk Dr. Ostrovsky through her analysis of which components of Kestrel's claim are barred by the consequential damages waiver in Section 8.7. She should explain that lost profits and reputational damages are classic forms of consequential damages that fall squarely within the scope of the waiver.
3. Margin analysis. Use demonstrative exhibits showing the difference between Prof. Langfeld's assumed 22.4% margin and the actual 14.8% margin identified by Canfield & Thorpe. Dr. Ostrovsky should explain the sources of the discrepancy and why the Canfield & Thorpe figure — based on a forensic review of Kestrel's actual financial records — is more reliable than Prof. Langfeld's assumption.
4. Renewal-period damages analysis. Dr. Ostrovsky should explain why renewal-period damages of €27.15 million are speculative, using a decision-tree analysis that accounts for the probability that WAL would have exercised the renewal options. Because the options were discretionary, the probability is not 100% — and Prof. Langfeld's assumption of 100% renewal is unsupportable.
5. Counterclaim calculation. Walk through the counterclaim calculation step by step: 1,680 units × (€8,432.92 – €5,222.92) per-unit premium × 0.958 (4.2% discount) ≈ €5.17 million.
Anticipated Cross-Examination by HRS