INTERNATIONAL COURT OF ARBITRATION
OF THE INTERNATIONAL CHAMBER OF COMMERCE
ICC ARBITRATION CASE NO. 27914/MHM
BEFORE THE ARBITRAL TRIBUNAL
Prof. Dame Eleanor Fitzwilliam, Presiding Arbitrator Dr. Hans-Ulrich Perren, Co-Arbitrator Hon. Robert A. Castillo, Co-Arbitrator
KESTREL DYNAMICS GmbH (Claimant)
v.
WHITMORE AEROSPACE LLC (Respondent)
RESPONDENT'S REJOINDER
Seat of Arbitration: New York, New York Language of Arbitration: English Applicable Rules: ICC Rules of Arbitration (2021 Edition)
Filed: September 29, 2023
Submitted on behalf of Respondent, Whitmore Aerospace LLC, by:
CALDERWOOD & HARKNESS LLP
600 Lexington Avenue New York, NY 10022
1750 K Street NW Washington, DC 20006
Theodore Langston, Partner Vivienne St. Claire, Partner Simone Laroche, Senior Associate Jeffrey Park, Associate
Counsel for Respondent
I. INTRODUCTION
1. Respondent Whitmore Aerospace LLC ("WAL" or "Respondent") respectfully submits this Rejoinder in ICC Arbitration Case No. 27914/MHM, in accordance with the procedural timetable established by Procedural Order No. 1 and as further confirmed by the Tribunal's directions at the case management conference held on May 19, 2023. This Rejoinder is filed in response to Claimant Kestrel Dynamics GmbH's ("Kestrel" or "Claimant") Reply and Defense to Counterclaim dated August 11, 2023 (the "Reply").
2. WAL filed its Statement of Defense and Counterclaim on June 30, 2023 (the "Statement of Defense"), in which it set forth a comprehensive factual account of the events giving rise to this dispute, demonstrated that WAL's termination of the Master Supply Agreement for Titanium Alloy Turbine Housings dated June 15, 2018 (Ref. WAL-KDG-MSA-2018-0615) (the "MSA") was both procedurally and substantively proper under § 14.2(b) of the MSA for Persistent Quality Failure, and advanced a counterclaim for €5.17 million in replacement-component costs that WAL was compelled to incur as a direct result of Kestrel's manufacturing deficiencies.
3. Having now reviewed Claimant's Reply in detail, Respondent confirms that the Reply fails to rehabilitate Kestrel's claim for €47.3 million in alleged damages. The Reply introduces no new evidence of substance. It does not produce a single document, test result, or contemporaneous record that contradicts the comprehensive evidence of Kestrel's quality failures already before this Tribunal. Instead, the Reply relies principally on a mischaracterization of the applicable porosity specification — an argument that, as Respondent demonstrates below, is factually baseless and legally irrelevant.
4. More specifically, Claimant's Reply rests on the premise that WAL applied an undisclosed porosity tolerance of ≤0.15% to incoming inspections, rather than the contractual standard of ≤0.25% set forth in WAL-SPEC-TH-401, Appendix C, Table 3. This premise is flatly contradicted by the text of WAL-QCP-100, by WAL's inspection records for every rejected lot, and by the independent metallurgical analysis conducted by Dr. Raymond Chow of Arclight Materials Science Inc. Even accepting Claimant's factual premises arguendo, multiple rejected lots exceeded the ≤0.25% threshold, rendering the ≤0.15% argument irrelevant to the disposition of the claims.
5. WAL further reaffirms its counterclaim for €5.17 million in replacement-component costs incurred in sourcing Ti-6Al-4V ELI titanium alloy turbine housings from Valkyr Precision Components Inc. ("Valkyr") following the termination. As set forth in Section VI below, Kestrel's defenses to the counterclaim — including its arguments on causation, mitigation, and quantum — are without merit. The counterclaim is supported by purchase orders, invoices, and the expert damages report of Dr. Nadia Ostrovsky of Ridgeline Economic Consulting LLC.
6. This Rejoinder is structured as follows:
• Section II sets forth corrections and clarifications to the factual background, including the terms and amendments of the MSA and the errors in Claimant's factual narrative.
• Section III addresses the porosity specification dispute, demonstrating that the contractual standard is ≤0.25% and that Claimant's ≤0.15% argument is without merit, including a comparative assessment of the competing expert metallurgical analyses.
• Section IV demonstrates that WAL's termination of the MSA was proper under § 14.2(b) for Persistent Quality Failure, and rebuts Claimant's arguments regarding cure compliance and alleged pretext.
• Section V addresses Claimant's €47.3 million damages claim, including the application of the consequential damages waiver under § 8.7 and specific rebuttals to each category of claimed damages.
• Section VI reaffirms WAL's counterclaim for €5.17 million and rebuts Claimant's defenses to that counterclaim.
• Section VII responds to the new arguments raised for the first time in Claimant's Reply, including the alleged waiver of WAL's right to terminate and the force majeure/COVID-related arguments.
• Section VIII sets forth Respondent's prayer for relief.
II. FACTUAL BACKGROUND — CORRECTIONS AND CLARIFICATIONS
A. The MSA and Its Amendments
7. The MSA was executed on June 15, 2018, between Whitmore Aerospace LLC, a Delaware limited liability company with its principal place of business in Manassas, Virginia, as Buyer, and Kestrel Dynamics GmbH, a company organized under the laws of the Federal Republic of Germany with its registered office in Stuttgart, Baden-Württemberg, as Seller. The MSA bears the internal reference number WAL-KDG-MSA-2018-0615, and the executed original is in the record as Exhibit R-1.
8. The MSA is governed by the laws of the State of New York, without regard to its conflict of laws principles, as expressly provided in § 22.1 of the MSA. Disputes arising under or in connection with the MSA are subject to arbitration under the ICC Rules of Arbitration (2021 edition) before a three-member tribunal, with the seat of arbitration in New York, New York, as provided in § 22.3. The Parties do not dispute the jurisdiction of this Tribunal or the applicability of the governing law.
9. Under the MSA, Kestrel agreed to manufacture and deliver to WAL precision-engineered Ti-6Al-4V ELI (Extra Low Interstitial) titanium alloy turbine housings (the "Products"), conforming to WAL's engineering specifications designated WAL-SPEC-TH-401 through WAL-SPEC-TH-409. These specifications, which total over 340 pages of detailed engineering requirements, cover dimensional tolerances, material composition, surface finish, heat treatment protocols, non-destructive testing requirements, and — critically for this dispute — maximum permissible porosity levels. The Products are high-precision aerospace components intended for integration into WAL's WT-7000 series turbine assemblies, which are used in both commercial and military aviation applications. The exacting quality requirements reflected in the WAL-SPEC documents are not arbitrary; they reflect the safety-critical nature of the components and the regulatory environment in which WAL operates.
10. The MSA established a five-year term commencing on June 15, 2018, and expiring on June 14, 2023, with two optional one-year renewal periods exercisable by WAL at its sole discretion. Section 3.2 of the MSA states in relevant part:
"Buyer shall have the option, exercisable in its sole and absolute discretion, to extend the term of this Agreement for up to two (2) additional periods of one (1) year each, by providing written notice to Seller no later than ninety (90) calendar days prior to the expiration of the then-current term."
11. The importance of this provision to the present dispute cannot be overstated. The two renewal periods were options vested exclusively in WAL's discretion. Kestrel had no right to compel renewal, and WAL had no obligation to exercise either option. This fact bears directly on Kestrel's claim for €27.15 million in renewal-period lost profits, which, as discussed in Section V.C.2 below, constitutes over 57% of its total damages demand.
12. The MSA established an annual volume commitment of a minimum of 2,400 units and a maximum of 3,600 units per contract year ("CY"). Unit pricing was set at a CY1 base price of €4,850 per unit, escalating at a rate of 2.5% per annum, compounded annually, as provided in § 5.2. Applying this escalation formula, the CY4 unit price was €5,222.92, and the CY5 unit price would have been €5,353.49. These pricing provisions are material to the damages analysis set forth in Section V below.
13. Delivery terms were specified as DDP (Delivered Duty Paid) per Incoterms 2020, with the designated delivery point being WAL's manufacturing facility located at 8500 Coppermine Road, Manassas, Virginia 20110. Under DDP terms, Kestrel bore all costs and risks associated with transporting the Products to WAL's facility, including import duties, customs clearance, and transportation.
14. Quality standards under the MSA were rigorous and multi-layered. Section 6.1 required Kestrel to maintain AS9100 Rev D certification throughout the term of the MSA, a quality management system standard specifically developed for the aviation, space, and defense industries. Section 6.2 required that all Products conform to the engineering specifications WAL-SPEC-TH-401 through WAL-SPEC-TH-409 as a condition of acceptance. Section 6.3 provided for incoming inspection of delivered lots by WAL in accordance with WAL's Quality Control Procedure WAL-QCP-100, with acceptance or rejection to be communicated to Kestrel within fifteen (15) business days of delivery.
15. The MSA was amended twice during its term. Amendment No. 1, dated February 10, 2020 (Exhibit R-2), added a new engineering specification, WAL-SPEC-TH-410, governing a high-temperature variant of the turbine housing designed for the WT-7000HT application. Amendment No. 1 also increased the maximum annual volume from 3,600 to 4,000 units to accommodate anticipated demand for the high-temperature variant.
16. Amendment No. 2, dated September 3, 2021 (Exhibit R-3), was negotiated in response to ongoing supply chain disruptions arising from the COVID-19 pandemic. Amendment No. 2 extended the cure period under § 8.4 from thirty (30) calendar days to forty-five (45) calendar days, providing Kestrel with additional time to replace or rework non-conforming lots before a rejection would be deemed uncured. Amendment No. 2 also added a force majeure carve-out for pandemic-related delays in delivery, though — as discussed in Section VII.B below — this carve-out addressed delivery delays, not manufacturing defects.
17. Respondent notes that the extension of the cure period under Amendment No. 2 was a concession made by WAL in recognition of the genuine logistical challenges created by the pandemic. It reflects WAL's good faith in the commercial relationship and its willingness to accommodate Kestrel's operational difficulties. The suggestion in Claimant's Reply that WAL acted in bad faith in terminating the MSA must be viewed against this backdrop of WAL's demonstrated flexibility and accommodation.
B. Corrections to Claimant's Factual Narrative in the Reply
18. Claimant's Reply contains a number of factual misrepresentations and omissions that Respondent must correct for the Tribunal's benefit. These are not mere matters of emphasis or characterization; they go to the chronology, nature, and severity of the quality failures that precipitated WAL's termination of the MSA.
19. First, the Reply misrepresents the chronology and scope of the lot rejections. The correct facts, as documented in WAL's lot rejection notices (Exhibits R-7 through R-20), are as follows: between March 7, 2022 (Lot KDG-2022-0307, the first rejection) and September 19, 2022 (Lot KDG-2022-0919, the final rejection), WAL rejected a total of fourteen (14) lots comprising 1,680 individual turbine housing units. Each rejection was communicated to Kestrel in writing within the fifteen (15) business day inspection period required by § 6.3, and each rejection notice identified the specific non-conformance, referenced the applicable WAL-SPEC provision, and included the porosity measurement data from WAL's incoming inspection.
20. Second, and critically, seven (7) of the fourteen (14) rejected lots remained uncured after the expiration of the forty-five (45) calendar day amended cure period provided under Amendment No. 2. This is more than double the three-rejection threshold required to constitute a "Persistent Quality Failure" under § 8.4 of the MSA. The Reply's attempt to characterize certain cure attempts as timely or improperly rejected is addressed in Section IV.B below.
21. Third, WAL issued its Notice of Termination for Cause on October 3, 2022, invoking § 14.2(b) of the MSA — the Persistent Quality Failure provision — and not § 14.2(a) (which provides for termination upon a single material breach remaining uncured after notice). The distinction is important because § 14.2(b) applies specifically to a pattern of quality failures, which is precisely what occurred here. The Reply's references to § 14.2(a) at several points appear designed to conflate the two provisions and to suggest that WAL's termination rested on a single isolated incident. It did not.
22. Fourth, the Reply's characterization of WAL's termination as based on "fabricated or exaggerated quality deficiencies" (Reply ¶ 37) is not only unsupported by the evidence but is affirmatively contradicted by the independent metallurgical testing conducted by Dr. Raymond Chow of Arclight Materials Science Inc. Dr. Chow's analysis, which examined samples from all fourteen rejected lots using industry-standard testing protocols consistent with AS9100 Rev D requirements, confirmed porosity levels ranging from 0.19% to 0.38% — all in excess of the ≤0.25% contractual limit established in WAL-SPEC-TH-401, Appendix C, Table 3. The accusation that WAL fabricated quality deficiencies is serious and irresponsible, and it is entirely without evidentiary foundation.
III. THE POROSITY SPECIFICATION: CLAIMANT'S ≤0.15% ARGUMENT IS WITHOUT MERIT
A. The Contractual Standard: ≤0.25% Porosity
23. The central technical issue in this arbitration is the permissible porosity level for the Ti-6Al-4V ELI turbine housings manufactured by Kestrel under the MSA. Porosity — the presence of microscopic voids within a cast or forged metal component — is a well-recognized quality concern in aerospace manufacturing. Excessive porosity can compromise the structural integrity of a component, leading to fatigue cracking, stress concentration, and ultimately component failure under operational loads. For this reason, aerospace industry specifications routinely set maximum permissible porosity levels, and compliance with those levels is a critical quality requirement.
24. The contractual porosity limit applicable to the Products under the MSA is unambiguous. WAL-SPEC-TH-401, Appendix C, Table 3 — one of the core engineering specifications incorporated into the MSA by § 6.1 — states in relevant part:
"Maximum permissible porosity, as measured by the Archimedes method per ASTM B962-17 or equivalent, shall not exceed 0.25% by volume for all Ti-6Al-4V ELI turbine housing components delivered under this specification."
25. This specification has been part of the MSA since its execution on June 15, 2018. It was not subsequently amended or modified by either Amendment No. 1 or Amendment No. 2. It was expressly incorporated by reference into the MSA at § 6.1, which states:
"All Products shall conform in all material respects to the engineering specifications set forth in WAL-SPEC-TH-401 through WAL-SPEC-TH-409, as may be amended from time to time by mutual written agreement of the Parties. In the event of any conflict between the terms of this Agreement and the engineering specifications, the engineering specifications shall govern with respect to technical requirements."
26. Kestrel acknowledged and accepted these engineering specifications as binding quality requirements at the inception of the contractual relationship. Kestrel's own letter of acceptance dated June 15, 2018 (Exhibit R-4), signed by Dr. Friedrich Heim, then Kestrel's Managing Director, states in relevant part:
"Kestrel Dynamics GmbH hereby confirms that it has received, reviewed, and accepted the engineering specifications designated WAL-SPEC-TH-401 through WAL-SPEC-TH-409, and acknowledges that compliance with these specifications constitutes a condition of acceptance for all Products delivered under the Master Supply Agreement dated June 15, 2018."
27. There is, accordingly, no ambiguity regarding the applicable porosity standard. The contractual standard is ≤0.25%. Kestrel knew this standard, accepted it, and was bound by it throughout the term of the MSA.
B. Rebuttal of Claimant's "Unpublished ≤0.15% Standard" Argument
28. Despite the clarity of the contractual language, Claimant's Reply dedicates considerable attention (Reply ¶¶ 43–58) to the allegation that WAL's incoming inspections under WAL-QCP-100 applied an undisclosed, unpublished porosity tolerance of ≤0.15% — a standard materially stricter than the contractual ≤0.25% limit. On this theory, Claimant contends that the lot rejections were based not on genuine non-conformance with the contractual specification but rather on WAL's unilateral imposition of a more demanding standard that Kestrel had never agreed to and could not reasonably have been expected to meet.
29. This allegation is factually baseless and is contradicted by the documentary evidence before the Tribunal. Respondent addresses each element of the argument in turn.
30. First, WAL-QCP-100 — WAL's Quality Control Procedure governing incoming inspection of supplier deliveries — expressly references and incorporates WAL-SPEC-TH-401, Appendix C, Table 3 as the governing porosity specification for all Ti-6Al-4V ELI turbine housing inspections. Section 4.3.2 of WAL-QCP-100 (Exhibit R-6) states:
"Porosity measurements for Ti-6Al-4V ELI turbine housings shall be conducted in accordance with the acceptance criteria set forth in WAL-SPEC-TH-401, Appendix C, Table 3. Acceptance or rejection shall be determined by reference to the maximum permissible porosity levels stated therein."
31. WAL-QCP-100 does not contain an independent porosity threshold. It does not state, suggest, or imply a ≤0.15% standard. The procedure simply directs WAL's quality inspectors to apply the engineering specification — which, as established above, sets the limit at ≤0.25%.
32. Second, WAL's inspection records for all fourteen (14) rejected lots — which have been produced in full and are in evidence as Exhibits R-7 through R-20 — document porosity measurements against the ≤0.25% standard. Each lot rejection form identifies the applicable specification as "WAL-SPEC-TH-401, App. C, Table 3 (max. 0.25%)" and records the measured porosity level for the rejected samples. In no instance does any rejection form reference a ≤0.15% threshold as the basis for rejection.
33. Third, the independent metallurgical analysis conducted by Dr. Raymond Chow of Arclight Materials Science Inc. (Exhibit R-21) confirms that the rejected lots exhibited porosity levels ranging from 0.19% to 0.38%. Critically, every one of the fourteen rejected lots measured above the ≤0.25% contractual limit. Dr. Chow's analysis was conducted using the Archimedes method per ASTM B962-17, the same methodology specified in WAL-SPEC-TH-401, and his measurements are fully consistent with the porosity levels recorded in WAL's inspection data.
34. Respondent acknowledges that WAL's quality control process, like many quality assurance systems in the aerospace industry, involves a multi-stage inspection protocol. It is standard industry practice for an initial screening pass to flag samples that fall within a "caution zone" — for example, samples measuring above 0.15% porosity — for more detailed analysis. This preliminary screening is a quality management tool designed to identify potential non-conformances early and to ensure that borderline results receive additional scrutiny. It is not, and has never been, the acceptance or rejection criterion. Claimant's Reply confuses these preliminary screening measurements with final acceptance/rejection criteria. The distinction is elementary and should not require extended explanation before this Tribunal.
35. WAL's final rejection determinations were in every instance based on the contractual ≤0.25% standard. The screening threshold of ≤0.15% was not a rejection criterion but rather an internal quality management trigger for further investigation — a practice that any competent quality assurance professional would recognize as standard and entirely unremarkable.
36. Finally, and dispositively, even accepting Claimant's factual premises arguendo, the ≤0.15% argument is irrelevant to the ultimate outcome of this dispute. Even if WAL had initially flagged certain lots based on a preliminary ≤0.15% screening threshold, the lots were ultimately rejected because they exceeded the contractual ≤0.25% limit. Multiple lots — indeed, all fourteen rejected lots, according to Dr. Chow's independent analysis — exhibited porosity in excess of 0.25%. Claimant's own expert, Dr. Kessler, acknowledged in her report that several lots measured above 0.25%. The ≤0.15% argument is therefore a red herring: it cannot change the fact that the rejected lots were non-conforming under the contractual standard.
C. Dr. Chow's Metallurgical Analysis Versus Dr. Kessler's
37. The competing expert metallurgical analyses submitted by the Parties warrant careful comparison, as the Tribunal will be called upon to assess their relative reliability and probative value.
38. Dr. Raymond Chow, Respondent's metallurgical expert, is a Principal Scientist at Arclight Materials Science Inc., located in McLean, Virginia. Dr. Chow holds a Ph.D. in Materials Science and Engineering from the Massachusetts Institute of Technology and has over twenty-five years of experience in the analysis of titanium alloys used in aerospace applications. His expert report (Exhibit R-21) presents a comprehensive porosity analysis of samples from all fourteen rejected lots, conducted using the Archimedes method per ASTM B962-17 and cross-validated by micro-computed tomography ("micro-CT") scanning. Dr. Chow's methodology is fully consistent with the testing protocols referenced in WAL-SPEC-TH-401 and with the requirements of AS9100 Rev D.
39. Dr. Chow's analysis yielded the following key findings:
(a) All fourteen rejected lots exhibited porosity levels in excess of the ≤0.25% contractual limit, with measured values ranging from 0.19% (on individual samples within otherwise non-conforming lots) to 0.38%.
(b) The predominant type of porosity observed was gas porosity, consistent with inadequate vacuum conditions during the casting or hot isostatic pressing ("HIP") process — a manufacturing defect attributable to Kestrel's production processes.
(c) The porosity distribution was non-random and concentrated in specific regions of the turbine housing geometry, suggesting a systematic process control issue rather than isolated or sporadic quality excursions.
(d) The micro-CT cross-validation confirmed the Archimedes method results within an acceptable margin of error (±0.02%), lending further confidence to the accuracy of the porosity measurements.
40. By contrast, Dr. Martina Kessler, Claimant's metallurgical expert from Albrecht Prüftechnik GmbH in Leonberg, Germany, submitted an expert report that Respondent contends was materially deficient in several respects.
41. First, Dr. Kessler tested only a subset of the rejected lot samples. Specifically, her analysis covered samples from eight of the fourteen rejected lots, leaving six lots unexamined. Dr. Kessler's report does not provide a satisfactory explanation for this omission. A comprehensive analysis covering all rejected lots is plainly necessary to support the sweeping conclusions that Claimant draws from her report, particularly the assertion that WAL's rejections were based on fabricated or exaggerated quality deficiencies.
42. Second, Dr. Kessler's measurement approach did not comply with the specific protocols referenced in WAL-SPEC-TH-401. While Dr. Kessler employed the Archimedes method, she used a variant of the testing procedure that deviated from ASTM B962-17 in certain respects, including the sample preparation methodology and the liquid medium used for density measurement. These deviations, while they may appear minor in isolation, can introduce systematic measurement bias, particularly when applied to the fine-grained Ti-6Al-4V ELI alloy at issue. Dr. Chow addresses these methodological concerns in detail at Section 5.3 of his expert report.
43. Third, and most significantly, Dr. Kessler acknowledged in her own report that several of the lots she tested measured above the ≤0.25% contractual porosity threshold. Specifically, Dr. Kessler's Table 4.2 reports porosity values of 0.27%, 0.31%, 0.29%, and 0.26% for four of the eight lots she examined. These results directly undermine Claimant's position that the rejections were improper. If Claimant's own expert confirms that at least half of the lots she tested exceeded the contractual limit, the foundation for Claimant's case crumbles.
44. For these reasons, the Tribunal should credit Dr. Chow's comprehensive and methodologically rigorous analysis over Dr. Kessler's incomplete and methodologically deficient work. Dr. Chow's analysis covers all fourteen rejected lots, employs the precise methodology specified in the contractual documents, and produces results that are internally consistent and externally validated by micro-CT scanning. The conclusion is clear: the rejected lots were non-conforming.
IV. WAL'S TERMINATION WAS PROPER UNDER § 14.2(b)
A. The Persistent Quality Failure Standard
45. Having established that the fourteen rejected lots were non-conforming under the applicable contractual standard, Respondent now turns to the question of whether WAL's termination of the MSA was proper under § 14.2(b). The answer is unequivocally yes.
46. Section 8.4 of the MSA establishes a structured process for addressing non-conforming deliveries. When WAL rejects a lot for non-conformance with the engineering specifications, Kestrel has forty-five (45) calendar days (as amended by Amendment No. 2) to cure the non-conformance by delivering replacement conforming units or by reworking the non-conforming units to bring them into compliance. If Kestrel fails to effect a cure within the forty-five (45) calendar day period, the rejection is deemed "uncured." Section 8.4 further provides that three (3) or more uncured rejections in any rolling twelve-month period constitute a "Persistent Quality Failure."
47. The relevant language of § 8.4 reads:
"In the event that Seller fails to cure a non-conformance within the cure period specified herein, such failure shall be deemed an 'uncured rejection.' If three (3) or more uncured rejections occur within any rolling twelve (12) month period, such pattern of uncured rejections shall constitute a 'Persistent Quality Failure' for purposes of Section 14.2(b) of this Agreement."
48. Section 14.2(b) provides:
"Either Party may terminate this Agreement upon written notice to the other Party in the event of a Persistent Quality Failure as defined in Section 8.4."
49. The application of these provisions to the facts of this case is straightforward. Between March 7, 2022 (the date of the first lot rejection, Lot KDG-2022-0307) and September 19, 2022 (the date of the final lot rejection, Lot KDG-2022-0919), WAL documented fourteen lot rejections, of which seven (7) remained uncured after the expiration of the forty-five (45) calendar day cure period. All seven uncured rejections occurred within a twelve-month rolling period. The threshold of three uncured rejections was therefore exceeded by a factor of more than two.
50. WAL issued its Notice of Termination for Cause on October 3, 2022 (Exhibit R-23), invoking § 14.2(b) of the MSA. The notice was issued only after the Persistent Quality Failure threshold had been indisputably exceeded and only after WAL had exhausted the cure process with respect to each rejected lot. The termination was procedurally proper in all respects.
B. Rebuttal of Claimant's Arguments on Cure Compliance
51. Claimant's Reply (¶¶ 71–82) advances the argument that certain of Kestrel's cure attempts were improperly rejected by WAL, such that the number of uncured rejections did not in fact meet the Persistent Quality Failure threshold. This argument does not withstand scrutiny.
52. The facts regarding the seven uncured rejections are as follows:
53. For five of the seven uncured lots, Kestrel failed to deliver any replacement or reworked units whatsoever within the forty-five (45) calendar day cure period. For these five lots, there is no cure attempt to evaluate — Kestrel simply did not perform. Kestrel's Reply does not dispute this fact with respect to these five lots; instead, it focuses its argument on the remaining two lots. But even if Claimant's arguments regarding the remaining two lots were to succeed — which they should not — the five undisputed uncured rejections alone would exceed the three-rejection threshold, and the termination would remain proper.
54. For the remaining two lots (Lot KDG-2022-0614 and Lot KDG-2022-0722), Kestrel contends that it delivered cure shipments that were improperly rejected by WAL. The evidence tells a different story. Kestrel's own internal shipping records — produced during the document production phase of these proceedings and admitted as Exhibit R-25 — confirm that the cure shipments for both lots were dispatched after the expiration of the forty-five (45) calendar day cure period. Specifically:
(a) For Lot KDG-2022-0614, the cure period expired on July 29, 2022 (forty-five calendar days from the rejection date of June 14, 2022). Kestrel's shipping records show that the replacement shipment was dispatched from Kestrel's Stuttgart facility on August 2, 2022, and arrived at WAL's Manassas facility on August 11, 2022 — thirteen calendar days after the cure deadline.
(b) For Lot KDG-2022-0722, the cure period expired on September 5, 2022 (forty-five calendar days from the rejection date of July 22, 2022). Kestrel's shipping records show that the replacement shipment was dispatched on September 8, 2022, and arrived at WAL's facility on September 18, 2022 — also well past the deadline.
55. WAL's rejection of these late cure attempts was entirely consistent with § 8.4's clear deadline. The cure period is a defined period with a fixed endpoint, and the MSA does not provide for any extension or grace period beyond the forty-five calendar days. WAL was under no obligation to accept late-delivered cure shipments, and its refusal to do so was contractually proper.
56. Claimant's suggestion (Reply ¶ 78) that WAL should have exercised discretion to accept late cure deliveries "in the interest of the ongoing commercial relationship" has no basis in the contractual language. The MSA establishes a clear framework: if Kestrel fails to cure within the specified period, the rejection is deemed uncured. There is no discretionary element in this provision. Moreover, by the time Kestrel belatedly dispatched the cure shipments for these two lots, the relationship was already characterized by a pattern of persistent non-conformance that had eroded WAL's confidence in Kestrel's ability to meet the contractual quality requirements.
C. Pretext Argument: WAL's Engagement of Valkyr Precision Components Inc.
57. Claimant's Reply (¶¶ 83–95) advances the theory that WAL's true motive for terminating the MSA was not Kestrel's quality failures but rather WAL's desire to replace Kestrel with a lower-cost alternative supplier — specifically, Valkyr Precision Components Inc. ("Valkyr"), based in Tucson, Arizona. On this theory, the quality failures were either fabricated or exaggerated as a pretext to justify what was in reality an opportunistic supplier switch.
58. This pretext theory is contradicted by the evidence in virtually every respect.
59. First, the timing of WAL's engagement with Valkyr undermines rather than supports the pretext theory. WAL first contacted Valkyr in August 2022, several months after the quality failures had commenced (the first lot rejection was on March 7, 2022) and after multiple cure periods had lapsed without successful remediation. WAL's outreach to Valkyr was a prudent and commercially necessary step to ensure continuity of supply in the face of an increasingly apparent pattern of quality failures by Kestrel. It was a response to the crisis created by Kestrel's non-performance, not a cause of the termination.
60. Second, and dispositively, the economics of the Valkyr engagement negate any suggestion that WAL was motivated by cost savings. Valkyr's unit price for the Ti-6Al-4V ELI turbine housings is €8,432.92 — substantially higher than Kestrel's CY4 unit price of €5,222.92. The per-unit premium of approximately €3,210 represents a price increase of over 61% compared to the Kestrel price. Even after applying Valkyr's 4.2% introductory discount — a one-time concession that Valkyr offered in connection with the initial order — the effective per-unit cost remained far in excess of what WAL was paying Kestrel. No rational commercial actor would terminate a supply agreement with a lower-cost supplier in order to engage a higher-cost supplier unless compelled to do so by the lower-cost supplier's performance failures.
61. Third, the magnitude of the replacement-component costs that WAL has incurred — the subject of WAL's €5.17 million counterclaim — itself demonstrates that the termination was not cost-motivated. WAL suffered real and quantifiable financial harm as a result of transitioning to Valkyr. These are not the actions of a company seeking to exploit a pretext for commercial gain; they are the actions of a company forced to take expensive remedial measures because its primary supplier repeatedly failed to deliver conforming products.
62. Fourth, the pretext theory cannot be reconciled with the objective evidence of quality failures. As established in Section III above, all fourteen rejected lots exhibited porosity levels in excess of the ≤0.25% contractual limit. These are not fabricated numbers; they are independently verified test results confirmed by Dr. Chow's metallurgical analysis. Claimant's own expert, Dr. Kessler, acknowledges that at least four of the eight lots she tested exceeded the contractual porosity threshold. The quality failures are real, documented, and independently confirmed.
63. For all of these reasons, the pretext theory is without merit and should be rejected by the Tribunal.
V. CLAIMANT'S DAMAGES CLAIMS ARE WITHOUT MERIT
A. Overview of Claimant's €47.3 Million Damages Claim
64. Claimant seeks total damages of €47.3 million, broken down as follows:
65. As Respondent demonstrates below, each category of Claimant's damages claim fails as a matter of law, as a matter of fact, or both. The bulk of the claim — the €27.15 million in renewal-period lost profits — rests on the speculative assumption that WAL would have exercised both discretionary renewal options, an assumption for which there is no evidentiary support. The remaining categories are barred by the consequential damages waiver in § 8.7 of the MSA, unsupported by proper methodology, or both.
B. The Consequential Damages Waiver Under § 8.7
66. Section 8.7 of the MSA contains a comprehensive consequential damages waiver, which provides in relevant part:
"IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS, LOST REVENUES, LOSS OF BUSINESS OPPORTUNITIES, OR REPUTATIONAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, WHETHER BASED IN CONTRACT, TORT, STRICT LIABILITY, OR ANY OTHER THEORY OF LIABILITY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. BUYER'S SOLE AND EXCLUSIVE REMEDY FOR NON-CONFORMING PRODUCTS SHALL BE REPLACEMENT, CREDIT, OR TERMINATION UPON PERSISTENT QUALITY FAILURE AS PROVIDED IN SECTIONS 8.4 AND 14.2(b)."
67. Under New York law — the governing law of the MSA — contractual limitations of liability and waivers of consequential damages between sophisticated commercial parties negotiating at arm's length are routinely enforced. The New York Court of Appeals has consistently held that such provisions represent a legitimate allocation of risk between the parties and will be given effect absent fraud, unconscionability, or other recognized grounds for invalidation. See, e.g., Metropolitan Life Ins. Co. v. Noble Lowndes Int'l, Inc., 84 N.Y.2d 430, 436 (1994) (enforcing contractual limitation of liability between sophisticated commercial entities); Biotronik A.G. v. Conor Medsystems Ireland, Ltd., 22 N.Y.3d 799 (2014) (noting New York's strong policy favoring enforcement of contractual limitations of damages).
68. Both WAL and Kestrel are sophisticated commercial entities with extensive experience in the aerospace supply chain. The MSA was negotiated over a period of several months, with both parties represented by counsel. The consequential damages waiver in § 8.7 was a negotiated allocation of risk, and Kestrel accepted it with full knowledge of its implications. There is no suggestion — nor could there be — that the waiver was the product of unequal bargaining power, procedural unconscionability, or fraud.
69. Kestrel's claims for lost profits (both remaining-term and renewal-period), reputational damages, and loss of business opportunities are quintessentially consequential in nature. They represent the downstream financial consequences that Kestrel alleges flowed from WAL's termination of the MSA, rather than direct damages arising from the termination itself. As such, they fall squarely within the scope of the § 8.7 waiver and are barred.
70. Claimant's Reply (¶¶ 104–112) attempts to circumvent the § 8.7 waiver by arguing that it is unenforceable because WAL acted in bad faith in terminating the MSA. This argument fails for two independent reasons.
71. First, as demonstrated in Section IV above, WAL's termination was proper and was not made in bad faith. The termination was based on documented quality failures that were independently verified by Dr. Chow's metallurgical analysis and that exceeded the Persistent Quality Failure threshold by a substantial margin.
72. Second, and more fundamentally, the text of § 8.7 contains no bad-faith carve-out or exception. The waiver is absolute and unconditional: it applies "IN NO EVENT" and regardless of the theory of liability. Had the parties intended to create an exception for alleged bad faith, they could have done so — but they did not. The Tribunal should enforce the provision as written. Under New York law, courts and arbitral tribunals do not rewrite contracts to include exceptions that the parties themselves did not negotiate. See Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569 (2002) ("A written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.").
C. Rebuttal of Claimant's Lost-Profit Calculations
1. Remaining-Term Lost Profits (€12.83 Million).
73. Even if the § 8.7 waiver did not bar Claimant's lost-profit claim for the remaining MSA term (CY5) — which it does — the claim fails on its own terms because Claimant's calculation is methodologically flawed and produces a materially inflated figure.
74. Claimant's damages expert, Prof. Dieter Langfeld of Rheinsberg Advisory AG, Glenrock Assurance, calculates CY5 lost profits of €12.83 million based on a claimed profit margin of 22.4% applied to an assumed annual volume of 3,600 units at the CY5 unit price of €5,353.49. Respondent identifies two fundamental errors in this calculation.
75. First, the claimed profit margin of 22.4% is inflated. Respondent's forensic accounting review, conducted by Sandra Gillespie of Canfield & Thorpe LLP, examined Kestrel's financial records produced in these proceedings, including Kestrel's internal cost accounting data, production cost reports, and audited financial statements. Ms. Gillespie's analysis demonstrates that Kestrel's actual realized margin on the MSA was materially lower than the 22.4% figure used by Prof. Langfeld. Prof. Langfeld's margin calculation excludes certain categories of costs — including allocated overhead, quality assurance costs, and logistics expenses — that are properly attributable to the MSA and that reduce the margin substantially. Dr. Nadia Ostrovsky's damages analysis, submitted in conjunction with Ms. Gillespie's forensic review, confirms that the proper margin figure, using standard cost accounting methodologies, is significantly below the level assumed by Prof. Langfeld.
76. Second, Prof. Langfeld's calculation assumes an annual volume of 3,600 units — the original maximum contractual volume. This assumption is unjustified. The MSA specified a range of 2,400 to 3,600 units (or 4,000 units after Amendment No. 1), with the minimum volume of 2,400 units being the only volume to which WAL was contractually committed. Under well-established principles of damages law, lost-profit calculations should be based on the minimum contractual commitment rather than the maximum, unless there is evidence establishing that the higher volume would have been achieved with reasonable certainty. No such evidence has been presented. Prof. Langfeld's adoption of the maximum volume without evidentiary support inflates the base for the lost-profit calculation by 50% and renders the resulting figure unreliable.
77. Application of the proper margin and minimum contractual volume produces a lost-profit figure for CY5 that is substantially lower than the €12.83 million claimed by Kestrel. However, Respondent's primary position remains that the entire remaining-term lost-profit claim is barred by § 8.7 and need not be quantified.
2. Renewal-Period Lost Profits (€27.15 Million).
78. The renewal-period lost-profit claim — at €27.15 million, the single largest component of Claimant's damages demand, representing over 57% of the total — is the weakest element of Kestrel's case and must be dismissed in its entirety.
79. As set forth in paragraph 10 above, the two optional one-year renewal periods were exercisable solely at WAL's discretion. Section 3.2 of the MSA vests the renewal decision exclusively in WAL: "Buyer shall have the option, exercisable in its sole and absolute discretion, to extend the term." Kestrel had no right to compel WAL to exercise either renewal option, and WAL had no obligation to do so.
80. Under New York law, an option to renew a contract that is exercisable at one party's sole and absolute discretion creates no obligation on the part of the option holder and no legally cognizable expectation interest on the part of the other party. The option holder's decision whether to exercise the option is entirely voluntary, and the other party cannot recover lost profits for periods that the option holder had no obligation to extend. See Kenford Co. v. County of Erie, 73 N.Y.2d 312, 319 (1989) (requiring that lost profits be established with "reasonable certainty" and rejecting speculative damages claims); Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 403 (1993) (noting that lost-profit damages must be "capable of proof with reasonable certainty" and not "merely speculative, possible or imaginary").
81. Kestrel has adduced no evidence that WAL would have exercised either renewal option. To the contrary, the commercial context suggests that renewal was far from certain: the quality failures that precipitated the termination began in CY4, well before the CY5 expiration and the first renewal decision point. Even absent the termination, WAL's experience with Kestrel's quality performance in CY4 would have provided ample grounds for declining to exercise the renewal options.
82. Prof. Langfeld's inclusion of renewal-period profits in his damages calculation rests on the speculative and wholly unsupported assumption that WAL would have exercised both renewal options. His report does not identify any evidence supporting this assumption; instead, it simply projects the CY5 revenue and margin figures forward through two additional years, compounding the pricing escalation. This is the kind of "might have been" speculation that New York law expressly precludes as a basis for damages.
83. The renewal-period claim of €27.15 million must be dismissed in its entirety.
3. Unreimbursed Rework Costs (€3.42 Million).
84. Kestrel claims €3.42 million in unreimbursed rework costs, representing expenses allegedly incurred in attempting to cure defective lots by reworking non-conforming units. This claim is misconceived.
85. The rework costs that Kestrel incurred were cure obligations arising from Kestrel's own non-conformance with the contractual specifications. Under the MSA, the cost of cure — whether by replacement or rework — is borne by the non-conforming party. Section 8.4 provides:
"In the event of a lot rejection for non-conformance, Seller shall, at Seller's sole cost and expense, either (a) replace the non-conforming units with conforming units, or (b) rework the non-conforming units to bring them into compliance with the applicable engineering specifications, within the cure period specified herein."
86. The language could not be clearer: cure is "at Seller's sole cost and expense." Kestrel manufactured non-conforming products. Kestrel was obligated to cure those non-conformances at its own cost. Kestrel cannot now recover from WAL the very costs that Kestrel was contractually obligated to bear as a consequence of its own quality failures. To permit such recovery would stand the contractual allocation of risk on its head.
87. Even if the rework costs were in principle recoverable — which they are not — the claimed amount of €3.42 million is inadequately documented. Kestrel's supporting documentation consists principally of internal cost estimates and summary spreadsheets, without detailed breakdowns of labor hours, material costs, or third-party charges attributable to specific rework activities for specific lots. Ms. Gillespie's forensic accounting review identified significant deficiencies in the documentation supporting this claim, including the inclusion of costs that appear to relate to routine production activities rather than rework.
88. The rework cost claim of €3.42 million must be dismissed.
4. Reputational Damages (€3.90 Million).
89. Kestrel's claim for €3.90 million in reputational damages and loss of business opportunities is barred by the consequential damages waiver in § 8.7, which expressly encompasses "reputational damages" and "loss of business opportunities." This alone is sufficient to dispose of the claim.
90. Even absent the § 8.7 waiver, the reputational damages claim is speculative and fails to meet the standard required under New York law. To recover reputational damages, a claimant must establish a concrete and demonstrable link between the defendant's conduct and the loss of specific business opportunities. Generalized assertions of harm to reputation, unaccompanied by evidence of lost customers, declined contracts, or reduced revenue attributable to the alleged reputational injury, do not suffice.
91. Kestrel has not identified a single customer, contract, or revenue stream that it lost as a result of WAL's termination of the MSA. Its claim is premised entirely on the assertion that the termination "sent a negative signal to the aerospace market" (SOC ¶ 101) and "undermined Kestrel's standing as a reliable supplier" (Reply ¶ 116). These are vague and conclusory assertions, unsupported by any objective evidence. Prof. Langfeld's damages report quantifies the reputational claim by applying an assumed "reputation discount" of 3.5% to Kestrel's projected non-WAL revenues for a five-year period — a methodology that is entirely arbitrary and has no foundation in the evidence or in accepted damages valuation practice.
92. The reputational damages claim of €3.90 million must be dismissed in its entirety.
D. Summary on Damages
93. For the reasons set forth above, Kestrel's entire €47.3 million damages claim fails. The claim is barred by the contractual consequential damages waiver in § 8.7 of the MSA. Even absent the waiver, the individual components of the claim are unsupported by proper methodology (remaining-term lost profits), speculative and legally unfounded (renewal-period lost profits), misconceived as a matter of contractual allocation (rework costs), and unsubstantiated (reputational damages). The Tribunal should dismiss the claim in its entirety.
VI. RESPONDENT'S COUNTERCLAIM — REBUTTAL OF CLAIMANT'S DEFENSES
A. Summary of WAL's Counterclaim
94. As set forth in its Statement of Defense, WAL asserts a counterclaim for €5.17 million in replacement-component costs that WAL was compelled to incur as a direct result of Kestrel's quality failures and the consequent termination of the MSA.
95. Following the termination, WAL engaged Valkyr Precision Components Inc. ("Valkyr"), an AS9100 Rev D-certified manufacturer of precision aerospace components based in Tucson, Arizona, to supply replacement Ti-6Al-4V ELI turbine housings. The counterclaim is calculated as follows:
(a) Replacement quantity: 1,680 units (corresponding to the non-conforming units from the fourteen rejected lots).
(b) Valkyr unit price: €8,432.92.
(c) Kestrel CY4 unit price: €5,222.92.
(d) Per-unit premium: €8,432.92 − €5,222.92 = €3,210.00.
(e) Gross replacement cost premium: €3,210.00 × 1,680 units = €5,392,800.00.
(f) Less: Valkyr's 4.2% introductory discount: €5,392,800.00 × 0.958 = €5,166,322.40.
(g) Net counterclaim amount: approximately €5.17 million (rounded).
96. This calculation is supported by Valkyr's purchase orders and invoices (Exhibit R-27), by Kestrel's CY4 unit pricing under the MSA (§ 5.2), and by the damages report of Dr. Nadia Ostrovsky of Ridgeline Economic Consulting LLC (Exhibit R-22), who independently verified the counterclaim quantum using the documentary evidence in the record.
B. Rebuttal of Claimant's Defenses to the Counterclaim
1. Causation.
97. Claimant argues (Reply ¶¶ 120–128) that WAL caused its own damages by wrongfully terminating the MSA, and that the counterclaim therefore fails for lack of causation. This argument is circular: it assumes the very proposition that is in dispute — namely, that WAL's termination was wrongful. As Respondent has demonstrated in Sections III and IV above, the termination was proper under § 14.2(b) of the MSA.
98. The causal chain supporting WAL's counterclaim is straightforward and unbroken:
(a) Kestrel manufactured and delivered non-conforming turbine housings with porosity levels exceeding the contractual ≤0.25% limit.
(b) WAL rejected the non-conforming lots in accordance with § 6.3 and provided Kestrel with the opportunity to cure under § 8.4.
(c) Kestrel failed to cure seven of the fourteen rejections within the forty-five (45) calendar day cure period, triggering a Persistent Quality Failure under § 8.4.
(d) WAL properly terminated the MSA under § 14.2(b).
(e) WAL was required to source replacement components from an alternative supplier (Valkyr) to maintain its production schedule and meet its own contractual obligations to downstream customers.
(f) The replacement components cost significantly more than the Kestrel components they replaced, resulting in a per-unit premium of €3,210 and a total additional cost of approximately €5.17 million.
99. Each link in this chain is established by documentary evidence and expert analysis. The but-for cause of WAL's replacement-component costs is Kestrel's failure to deliver conforming products. Absent Kestrel's quality failures, WAL would not have needed to terminate the MSA, would not have needed to engage Valkyr, and would not have incurred the premium. The causation element of WAL's counterclaim is satisfied.
2. Mitigation.
100. Claimant argues (Reply ¶¶ 129–134) that WAL failed to mitigate its damages by not seeking competitive bids from alternative suppliers before engaging Valkyr. On this theory, WAL's damages should be reduced or eliminated because WAL could have found a less expensive alternative than Valkyr.
101. Respondent acknowledges that WAL could, in hindsight, have explored additional alternative suppliers sooner than it did. However, the duty to mitigate under New York law does not require perfection; it requires that the aggrieved party take reasonable steps to minimize its losses. See, e.g., Wilmington Trust Co. v. Manufacturers Life Ins. Co., 749 F.2d 694, 699 (11th Cir. 1985) (applying New York law and noting that "the duty to mitigate requires only reasonable efforts, not the best possible efforts").
102. Several factors demonstrate the reasonableness of WAL's mitigation efforts:
(a) The aerospace supply market for Ti-6Al-4V ELI turbine housings is highly specialized, with a limited number of qualified manufacturers worldwide capable of meeting the stringent quality requirements set forth in the WAL-SPEC documents. This is not a commodity market in which multiple interchangeable suppliers compete on price.
(b) Valkyr was one of a small number of alternative suppliers that held AS9100 Rev D certification and had demonstrated experience manufacturing Ti-6Al-4V ELI components to comparable aerospace specifications.
(c) WAL faced an urgent production timeline. The rejected lots represented 1,680 units that WAL needed to replace to maintain its own production schedule and meet its contractual obligations to downstream customers. WAL could not afford a protracted competitive bidding process.
(d) Valkyr was able to meet WAL's timeline and quality requirements. The 4.2% introductory discount that Valkyr offered reflected a commercial concession that partially offset the price premium.
103. In these circumstances, WAL's decision to engage Valkyr was commercially reasonable. Any mitigation reduction that the Tribunal might consider should be modest, given the constrained supplier landscape and the urgency of WAL's needs. Respondent respectfully submits that no reduction is warranted, but in any event, the mitigation defense does not eliminate WAL's counterclaim — at most, it could reduce the quantum.
3. Quantum.
104. Claimant challenges the per-unit premium calculation underlying WAL's counterclaim, but the challenge lacks substance. The calculation is transparent and based on documented figures:
(a) Valkyr's unit price of €8,432.92 is established by the purchase orders and invoices issued by Valkyr and paid by WAL, all of which are in the record as Exhibit R-27.
(b) Kestrel's CY4 unit price of €5,222.92 is established by the pricing provisions of the MSA (§ 5.2) and the applicable annual escalation.
(c) The resulting per-unit premium of €3,210.00 is a simple arithmetic calculation.
(d) The application of Valkyr's 4.2% introductory discount reduces the gross premium to yield a net counterclaim of approximately €5.17 million.
105. Dr. Ostrovsky's damages report independently verifies this calculation and confirms that the methodology is appropriate for a replacement-cost damages claim under New York law. Claimant has not identified any specific error in the arithmetic or methodology. The counterclaim quantum is well-supported and should be awarded in full.
VII. RESPONSE TO CLAIMANT'S NEW ARGUMENTS IN THE REPLY
A. Alleged Waiver of Right to Terminate
106. Claimant's Reply introduces, for the first time at ¶¶ 96–103, the argument that WAL waived its right to terminate the MSA by continuing to place orders with Kestrel after certain early lot rejections. On this theory, WAL's continued engagement with Kestrel during the period of quality failures constituted an implicit acceptance of the status quo and a relinquishment of WAL's termination rights under § 14.2(b).
107. This argument fails for multiple independent reasons.
108. First, WAL's continued placement of orders during the period of lot rejections and cure attempts was entirely consistent with — indeed, required by — WAL's contractual obligations. The MSA established minimum annual volume commitments, and WAL was obligated to continue placing orders to meet those commitments during the cure and termination process. WAL could not simply cease ordering and claim compliance with its own contractual obligations. The suggestion that WAL should have stopped placing orders as a prerequisite to preserving its termination rights would have exposed WAL to a breach claim by Kestrel for failure to meet the minimum volume commitment — a perverse result that the MSA plainly does not contemplate.
109. Second, New York law requires a clear and unequivocal manifestation of intent to waive a contractual right. See, e.g., Fundamental Portfolio Advisors, Inc. v. Tocqueville Asset Mgmt., L.P., 7 N.Y.3d 96, 104 (2006) ("Waiver requires the voluntary and intentional abandonment of a known right which, but for the waiver, would have been enforceable."). Continued performance pending the resolution of disputes does not constitute waiver of contractual rights, particularly where the party continuing to perform expressly reserves those rights. The mere fact that WAL continued to place orders while the cure process was ongoing is not a "clear and unequivocal" relinquishment of its termination rights.
110. Third, and critically, WAL expressly reserved its rights in each lot rejection notice issued during the March–September 2022 period. Each rejection notice included the following or substantially similar language:
"Nothing in this notice, or in Buyer's continued performance under the Agreement during the cure period or thereafter, shall be construed as a waiver of any rights or remedies available to Buyer under the Agreement, including but not limited to Buyer's right to terminate the Agreement under Section 14.2(b) in the event of a Persistent Quality Failure as defined in Section 8.4."