[sheet: Cover]

[sheet: Cover]
Field | Value
Document Title | Revised Litigation Budget Memorandum
Date | April 15, 2023
Prepared By | Douglas Carmichael, Billing Partner, Calderwood & Harkness LLP
To | Gregory Poole, General Counsel & VP Legal Affairs, Whitmore Aerospace LLC
From | Douglas Carmichael, Calderwood & Harkness LLP
CC | Priya Anand, Responsible Partner; Patrick Gallagher, Lead Associate
Re | Whitmore Aerospace LLC v. Hargrove-Dalton Defense Systems, Inc., No. 1:22-cv-10147-RMB (S.D.N.Y.) — Revised Litigation Budget
Client | Whitmore Aerospace LLC
Client Address | 4200 Commerce Park Drive, Suite 600, Chantilly, VA 20151
Firm | Calderwood & Harkness LLP
Firm Address | 600 Lexington Avenue, 28th Floor, New York, NY 10022
Engagement Letter Date | November 1, 2022
Matter Status | Dormant — Case stayed by Order of Hon. Richard M. Brannigan dated March 17, 2023, pending conclusion of DCMA administrative review
Original Budget Estimate (per Engagement Letter) | $1,800,000 – $2,400,000 (through trial)
Purpose | To revise the litigation budget to reflect reduced activity following the court-ordered stay and to provide updated phase-by-phase cost projections incorporating dormancy-period monitoring costs
Amount in Controversy | $14,726,583 (HDDS indemnification demand)
Underlying Contract | Prime Contract No. FA8620-19-C-0337 (Advanced Tactical Airframe Program)
Teaming Agreement Date | June 12, 2019
Governing Law | New York
Confidentiality | Attorney-Client Privileged / Attorney Work Product
[sheet: Billing Rates]
Timekeeper | Title / Role | Office | Hourly Rate | Experience
Priya Anand | Responsible Partner | New York | $1,150 | 18 years — complex commercial litigation & government-contracts disputes
Douglas Carmichael | Billing Partner | New York | $1,150 | 22 years — co-chair, Government Contracts & Procurement Disputes practice
Patrick Gallagher | Lead Associate | New York | $725 | 6 years — litigation
Simone Laroche | Working Associate | Washington, D.C. | $575 | 3 years — litigation; BS Aerospace Engineering, Virginia Tech
[sheet: Fees Incurred to Date]
Phase | Description | Period | Key Activities | Fees Incurred
Phase 1: Pre-Filing Investigation & Complaint Drafting | Review of Teaming Agreement (dated June 12, 2019), analysis of Section 11.4 indemnity clause and Section 11.5 liability cap ($88,992,000 = 120% × $74,160,000 WP-4 value), review of DCMA COPD dated August 1, 2022, analysis of HDDS indemnification demand ($14,726,583), preparation and filing of Verified Complaint for Declaratory Judgment (28 U.S.C. §§ 2201–2202), Civil Cover Sheet (JS 44), and Summons | Nov. 1, 2022 – Nov. 28, 2022 | Engagement letter execution (Nov. 1, 2022); conflict check (Oct. 28, 2022); litigation hold notice (Nov. 2, 2022); preliminary case assessment memo (Nov. 7, 2022); indemnity clause analysis memo (Nov. 14, 2022); complaint drafting and filing (Nov. 28, 2022) | $112,400
Phase 2: Motion Practice — Stay | Preparation and filing of Memorandum of Law in Support of Motion to Stay (Feb. 10, 2023); Declarations of Catherine Soo-Hyun Park and Priya Anand; Joint Stipulation and Proposed Order filed Feb. 24, 2023; Court granted stay March 17, 2023 (Hon. Richard M. Brannigan) | Jan. 13, 2023 – Mar. 17, 2023 | Analysis of HDDS Answer and Counterclaim (filed Jan. 13, 2023; counterclaim: $14,726,583 + attorneys' fees under § 11.6); Reply to Counterclaim (filed Feb. 3, 2023); motion to stay briefing; coordination with Voss, Trager & Kendall LLP (Leonard Trager / Megan Forsythe) on joint stipulation | $68,750
Phase 3: Insurance Tender & Coverage | Tender of HDDS indemnity demand to Meridian Surety & Insurance Group (D&O Policy No. MSI-DO-2022-07814, $10M aggregate, $250K retention; CGL Policy No. MSI-CGL-2021-33291, $25M aggregate, $500K SIR); analysis of Meridian reservation-of-rights letter (Nov. 1, 2022) reserving on contractual-liability exclusion (Exclusion (b)) and government-contract exclusion (Endorsement GC-04); follow-up correspondence (Mar. 10, 2023) | Sept. 22, 2022 – Mar. 10, 2023 | Tender letter to Rachel Underwood at Meridian (Sept. 22, 2022); internal memo analyzing ROR letter (Nov. 15, 2022); follow-up letter requesting definitive coverage determination (Mar. 10, 2023); Meridian not providing defense or funding DJ action | $37,500
Phase 4: Lender Notification & Compliance | Notification to Ridgeline National Bank, N.A. (David Kreutz, SVP) under Section 6.07(b) of $75M senior secured revolving credit facility (dated Mar. 15, 2021) — claims exceeding $5M threshold; supplemental notice re DJ filing | Sept. 28, 2022 – Dec. 5, 2022 | Initial Section 6.07(b) notice (Sept. 28, 2022); supplemental notice re DJ action filing (Dec. 5, 2022); no event of default; facility fully available; $31.2M currently drawn | $12,500
Phase 5: Administrative Proceeding Monitoring & Coordination | Monitoring DCMA administrative review of cost overruns under Prime Contract FA8620-19-C-0337; coordination with Ashford & Reeves LLP (Harold Reeves, Natalie Cheng) re DCMA process under Contract Disputes Act; analysis of COPD allocation (WP-4: $12,817,441 / 87.03%; non-WP-4: $1,909,142 / 12.97%); coordination protocol letter (Jan. 5, 2023) | Nov. 2022 – Apr. 15, 2023 | DCMA COPD analysis; memo re DCMA administrative process and implications for DJ action (Dec. 20, 2022); coordination protocol with Ashford & Reeves (Jan. 5, 2023); ongoing monitoring of ACO Lt. Col. Sandra M. Vickers status | $43,670
Phase 6: Miscellaneous — Client Communications & Document Preservation | Regular client updates to Marcus J. Whitmore (CEO), Gregory Poole (GC), Catherine Soo-Hyun Park (VP Gov't Contracts); document preservation oversight; ASC 450 coordination with Pinnacle Advisory Partners LLC (Thomas Brennan, CPA) | Nov. 2022 – Apr. 15, 2023 | Litigation hold management; client strategy calls; coordination re FY 2022 audit contingent liability footnote (reasonably possible, up to $14.7M, no accrual) | $25,000
TOTAL FEES INCURRED TO DATE | Nov. 1, 2022 – Apr. 15, 2023 | $299,820
[sheet: Projected Budget]
Phase / Category | Description | Estimated Duration | Low Estimate | High Estimate | Assumptions / Notes
Dormancy-Period Monitoring (Annual) | Joint status reports to court every 120 days (~3 per year at avg. $12,500 each = ~$37,500/yr); ongoing DCMA administrative review monitoring and coordination with Ashford & Reeves LLP (~$50,000/yr); insurance coverage follow-up with Meridian (~$7,500/yr); miscellaneous client communications (~$5,000/yr) | Apr. 2023 – until COFD issued (est. 1–3 years) | $100,000/yr | $120,000/yr | Assumes stay remains in effect; minimal motion practice; 120-day status report cycle per Mar. 17, 2023 stay order (Hon. Brannigan); ACO Lt. Col. Vickers has not indicated COFD timeline
Dormancy Period — Year 1 (Apr. 2023 – Mar. 2024) | Status reports (3); DCMA monitoring; Ashford & Reeves coordination; insurance follow-up | 12 months | $100,000 | $120,000 | Includes first three status reports (Jul. 15, 2023; Nov. 12, 2023; Mar. 11, 2024)
Dormancy Period — Year 2 (Apr. 2024 – Mar. 2025) | Status reports (3); DCMA monitoring; Ashford & Reeves coordination; insurance follow-up; settlement posture analysis | 12 months | $100,000 | $120,000 | Includes status reports 4–6 (Jul. 9, 2024; Nov. 6, 2024; Mar. 6, 2025); may include settlement analysis work
Dormancy Period — Year 3 (if needed, Apr. 2025 – Mar. 2026) | Continued monitoring if COFD still pending | 12 months | $100,000 | $120,000 | Contingent; may not be needed if COFD issues sooner
Litigation Reactivation — Motion to Lift Stay & Case Management | Motion to lift stay or respond to COFD issuance; initial case management conference with Magistrate Judge Kurtz; revised scheduling order | 1–2 months | $25,000 | $40,000 | Triggered by issuance of COFD by DCMA or by party motion
Fact discovery | Document requests and production; interrogatories; depositions (estimated 8–12 depositions including HDDS personnel William Fong, Renee Aldrich; WAL personnel; DCMA witnesses if available); ESI review | 6–9 months | $350,000 | $500,000 | Significant volume anticipated re: WP-4 cost overrun root causes — Ti material escalation ($4.2M), rework/non-conforming tolerances ($5.1M), idle labor/schedule delays ($2.3M), ECP costs ($1.2M); HDDS-supplied engineering specs; government-furnished equipment delays
Expert discovery | Retention and reports from damages expert and government-contracts accounting expert; expert depositions (2–4) | 3–4 months | $150,000 | $225,000 | Experts needed on: (1) cost-overrun causation and allocation; (2) CPIF contract accounting (70/30 overrun share ratio); (3) reasonableness of WP-4 costs
Summary Judgment / Dispositive Motions | Potential motion for partial summary judgment on non-WP-4 overruns ($1,909,142 — no conceivable WAL liability); potential cross-motions on Section 11.4(b) causation and Section 11.5 cap interpretation | 2–3 months | $175,000 | $250,000 | Strong candidate for partial SJ on non-WP-4 component; briefing on causation requirement under New York law
Pre-Trial Preparation | Pre-trial motions in limine; pre-trial memoranda; witness preparation; trial binders; jury instructions (if applicable — likely bench trial given contract dispute) | 2–3 months | $125,000 | $200,000 | Bench trial before Hon. Richard M. Brannigan likely
Trial | Estimated 5–7 day bench trial in S.D.N.Y. | 1–2 weeks | $200,000 | $300,000 | Assumes bench trial; amount could increase if HDDS seeks jury on counterclaim
Post-Trial Motions & Appeal Reserve | Post-trial briefing; potential appeal to Second Circuit | 3–12 months | $75,000 | $150,000 | Reserve estimate; appeal costs highly variable
SUBTOTAL — Dormancy Period (2 years est.) | $200,000 | $240,000 | 2 years × $100K–$120K/yr
SUBTOTAL — Active Litigation (Post-Reactivation through Trial) | $1,100,000 | $1,665,000 | Sum of reactivation ($25K) + fact discovery ($350K) + expert discovery ($150K) + summary judgment ($175K) + pre-trial ($125K) + trial ($200K) + post-trial/appeal ($75K)
TOTAL PROJECTED REMAINING FEES | $1,300,000 | $1,905,000 | Dormancy ($200,000) + Active Litigation ($1,100,000) = $1,300,000 Low; Dormancy ($240,000) + Active Litigation ($1,665,000) = $1,905,000 High
TOTAL ESTIMATED MATTER COST (Incurred + Projected) | $1,599,820 | $2,204,820 | Fees incurred to date ($299,820) + projected remaining ($1,300,000–$1,905,000); original engagement letter estimate was $1,800,000–$2,400,000
[sheet: Budget Comparison]
Category | Original Estimate — Low | Original Estimate — High | Revised Estimate — Low | Revised Estimate — High | Variance — Low | Variance — High | Notes
Pre-Filing & Complaint | $100,000 | $125,000 | $112,400 (actual) | $112,400 (actual) | +$12,400 | -$12,600 | Actual exceeded low estimate due to detailed Section 11.4 analysis; under high estimate
Answer/Counterclaim Response & Stay Motion | $75,000 | $100,000 | $68,750 (actual) | $68,750 (actual) | -$6,250 | -$31,250 | Under budget — joint stipulation reduced briefing costs
Insurance & Lender Compliance | $40,000 | $60,000 | $50,000 (actual) | $50,000 (actual) | +$10,000 | -$10,000 | Within range; combined Phase 3 ($37,500) + Phase 4 ($12,500)
DCMA Monitoring & Coordination (pre-stay) | $30,000 | $50,000 | $43,670 (actual) | $43,670 (actual) | +$13,670 | -$6,330 | Within range
Miscellaneous / Client Communications | $20,000 | $30,000 | $25,000 (actual) | $25,000 (actual) | +$5,000 | -$5,000 | Within range
Dormancy-Period Monitoring (not in original) | $0 | $0 | $200,000 | $360,000 | +$200,000 | +$360,000 | New category — not contemplated in original budget; $100K–$120K/yr × 2–3 years
Fact discovery | $400,000 | $550,000 | $350,000 | $500,000 | -$50,000 | -$50,000 | Reduced: DCMA COFD expected to narrow factual issues
Expert discovery | $175,000 | $250,000 | $150,000 | $225,000 | -$25,000 | -$25,000 | Slightly reduced
Summary Judgment | $200,000 | $275,000 | $175,000 | $250,000 | -$25,000 | -$25,000 | Slightly reduced — partial SJ on non-WP-4 overruns strong
Pre-Trial & Trial | $350,000 | $500,000 | $325,000 | $500,000 | -$25,000 | $0 | Comparable; includes reactivation costs ($25K–$40K) in revised estimate
Post-Trial / Appeal Reserve | $75,000 | $150,000 | $75,000 | $150,000 | $0 | $0 | Unchanged
TOTAL | $1,800,000 | $2,400,000 | $1,599,820 | $2,204,820 | -$200,180 | -$195,180 | Revised estimate within or below original range; dormancy costs offset by anticipated reductions in active litigation phases due to narrowing effect of COFD
[sheet: Exposure Summary]
Item | Amount | Reference / Notes
HDDS Indemnification Demand (Total) | $14,726,583 | Per HDDS demand letter dated September 9, 2022; equals full COPD amount
COPD — WP-4 Overruns (87.03%) | $12,817,441 | Attributable to WAL's Work Package 4 (titanium structural assemblies)
COPD — Non-WP-4 Overruns (12.97%) | $1,909,142 | Not attributable to WAL; WAL contends no liability for this portion
WP-4 Overrun: Titanium Material Escalation | $4,200,000 | Approx. per COPD narrative; WAL asserts force-majeure defense
WP-4 Overrun: Rework (Non-Conforming Tolerances) | $5,100,000 | Approx. per COPD narrative; WAL asserts HDDS-supplied specifications caused rework
WP-4 Overrun: Idle-Labor / Schedule Delays | $2,300,000 | Approx. per COPD narrative; WAL asserts HDDS late delivery of gov't-furnished equipment
WP-4 Overrun: ECP Implementation | $1,200,000 | Approx. per COPD narrative
WP-4 Overrun Subtotal (approx.) | $12,800,000 | Sum of Ti escalation ($4.2M) + rework ($5.1M) + idle labor ($2.3M) + ECP ($1.2M); narrative rounding per COPD
Section 11.5 Indemnity Cap (120% of WP-4 Value) | $88,992,000 | $74,160,000 × 1.20; maximum theoretical exposure under Teaming Agreement
WAL Work Package 4 Value (18% of Target Cost) | $74,160,000 | $412,000,000 × 0.18
Prime Contract Target Cost | $412,000,000 | CPIF contract; target fee 8% ($32,960,000); ceiling price $470,000,000
Prime Contract Target Fee (8%) | $32,960,000 | $412,000,000 × 0.08
Prime Contract Ceiling Price | $470,000,000 | Maximum allowable cost + fee under CPIF structure
CPIF Share Ratio — Overruns | 70% Gov't / 30% Contractor | Per Prime Contract FA8620-19-C-0337
D&O Policy — Aggregate Limit | $10,000,000 | Meridian Surety & Insurance Group, Policy No. MSI-DO-2022-07814; $250,000 retention
CGL Policy — Aggregate Limit | $25,000,000 | Meridian Surety & Insurance Group, Policy No. MSI-CGL-2021-33291; $500,000 SIR
Insurance Coverage Status | Uncertain — ROR issued | Meridian ROR letter dated Nov. 1, 2022; reserves on contractual-liability exclusion (Exclusion (b)) and gov't-contract exclusion (Endorsement GC-04); no defense or funding provided
WAL Credit Facility (Ridgeline National Bank, N.A.) | $75,000,000 | $75M senior secured revolving facility dated Mar. 15, 2021; $31,200,000 currently drawn; Section 6.07(b) notice delivered Sept. 28, 2022 and Dec. 5, 2022; no event of default
WAL FY 2022 Revenue | $287,000,000 | Per audited financial statements (Pinnacle Advisory Partners LLC)
ASC 450 Treatment | Reasonably possible; no accrual | Contingent liability of up to $14.7M disclosed in footnotes to FY 2022 audited financials; assessment unchanged for FY 2023