post-settlement-insurance-recovery-letter.docx

1038-00007 · Cascade Retail Holdings · Insurance

post-settlement-insurance-recovery-letter.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law 600 South Grand Avenue, Suite 3200 Los Angeles, California 90071 Telephone: (213) 555-7800 Facsimile: (213) 555-7801 www.calderwoodharkness.com

Douglas Carmichael Partner Direct: (213) 555-7824 dcarmichael@calderwoodharkness.com

June 15, 2023

Mr. Leonard Furman Senior Claims Adjuster Pinnacle National Insurance Co. 120 Broadway, Suite 3500 New York, New York 10271

Re: Insurance Recovery Request — Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, Superior Court of California, County of Los Angeles

Insured: Cascade Retail Holdings Inc.

Policy No.: PNG-CGL-2021-04487 (Commercial General Liability)

Our Matter No.: 1038-00007

Dear Mr. Furman:

I. Purpose and Background

This letter is submitted on behalf of our client, Cascade Retail Holdings Inc. ("Cascade" or the "Insured"), and constitutes a formal request for payment of insurance proceeds under Commercial General Liability Policy No. PNG-CGL-2021-04487 (the "Policy") issued by Pinnacle National Insurance Co. ("Pinnacle National") in connection with the settlement of Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, filed in the Superior Court of California, County of Los Angeles (the "Action" or "Litigation").

As you are aware, this firm placed Pinnacle National on notice of the underlying claim by letter dated September 20, 2021, addressed from the undersigned to you in your capacity as Senior Claims Adjuster. That initial coverage notification letter, a copy of which is enclosed herewith for your convenience, set forth the nature of the claims asserted against Cascade and invoked coverage under the Policy for both the defense of the Action and any resulting indemnity obligation. Pinnacle National acknowledged receipt of that notice and has been kept apprised of material developments in the Litigation throughout its pendency.

We are pleased to inform you that the Action has been resolved. The parties executed a confidential Settlement Agreement and Mutual Release on June 12, 2023 (the "Settlement Agreement"), thereby bringing the Litigation to a conclusion on terms acceptable to Cascade and its Board of Directors. An executed copy of the Settlement Agreement is enclosed with this letter. Consistent with the terms of the settlement, a Joint Stipulation of Dismissal with Prejudice was filed with the Superior Court of California, County of Los Angeles, on June 23, 2023, and the court entered the dismissal order on that same date. A conformed copy of the filed stipulation is also enclosed.

Calderwood & Harkness LLP served as lead defense counsel for Cascade Retail Holdings Inc. throughout the entirety of the Litigation, from the time of the initial filing through the execution of the Settlement Agreement and the filing of the stipulated dismissal. We are accordingly in a position to provide Pinnacle National with comprehensive documentation supporting the insurance recovery requested herein.

II. Summary of the Litigation and Claims

A. The Parties

Vantor Holdings Corp. ("Vantor"), a California corporation headquartered at 18500 Von Karman Avenue, Suite 600, Irvine, California 92612, filed the complaint initiating the Action on September 7, 2021, naming Cascade Retail Holdings Inc. as the sole defendant. Cascade is a Delaware corporation whose common stock is listed on the Nasdaq Global Select Market under the ticker symbol "CRHI," with its principal executive offices located at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119.

B. Causes of Action

The complaint asserted three causes of action against Cascade:

1. Tortious Interference with Contractual Relations. Vantor alleged that Cascade knowingly and intentionally induced three of Vantor's exclusive suppliers to breach their existing supply agreements with Vantor by entering into competing supply arrangements directly with Cascade, thereby causing Vantor to lose access to critical supply channels and suffer significant economic harm.

2. Tortious Interference with Prospective Economic Advantage. Vantor further alleged that Cascade engaged in independently wrongful conduct designed to disrupt Vantor's prospective business relationships with additional suppliers, distributors, and retail partners, thereby injuring Vantor's ability to compete effectively in the consumer products marketplace.

3. Unfair Business Practices Under California Business and Professions Code § 17200. Vantor asserted that Cascade's alleged conduct constituted unfair, unlawful, and fraudulent business practices within the meaning of the California Unfair Competition Law, entitling Vantor to restitution and injunctive relief.

C. Factual Basis of the Claims

The claims arose from Cascade's entry into new supply agreements with three suppliers that had previously maintained exclusive supply relationships with Vantor. The three suppliers at issue were:

• Hemsworth Consumer Products LLC, an Oregon limited liability company;

• Tridale Manufacturing Inc., a Nevada corporation; and

• Orion Lifestyle Brands Corp., a California corporation.

Vantor contended that each of these entities was bound by exclusive supply agreements with Vantor at the time Cascade entered into competing arrangements with them, and that Cascade was aware of, or should have been aware of, the existence of those exclusive arrangements.

D. Damages Claimed

Vantor alleged total damages of $87,400,000, comprised of the following amounts attributable to the three supplier relationships at issue:

The claimed damages represented Vantor's estimate of lost profits, increased costs of replacement supply arrangements, and consequential losses allegedly flowing from the disruption of its supplier relationships.

III. Summary of Litigation Outcome

A. Cascade's Defense

Cascade filed its Answer and Affirmative Defenses on October 18, 2021, denying all material allegations and asserting, among other defenses, that the suppliers at issue had voluntarily terminated their relationships with Vantor for cause; that Cascade did not have knowledge of any enforceable exclusivity provisions; that the purported exclusive supply agreements were unenforceable for various contractual and competition-law reasons; and that Vantor's alleged damages were speculative, unsubstantiated, and not proximately caused by any conduct of Cascade.

B. Discovery. The Litigation involved extensive and hard-fought discovery over approximately eighteen months. The scope and volume of discovery is summarized as follows:

• Document Collection from Cascade: 452,316 documents were collected from Cascade's custodians and data sources.

• Document Review: 198,740 documents were reviewed for relevance and privilege.

• Document Production by Cascade: 78,412 documents were produced by Cascade to Vantor.

• Document Production by Vantor: 41,308 documents were produced by Vantor in response to Cascade's discovery requests.

• Third-Party Subpoena Productions: An additional 23,567 documents were obtained through third-party subpoenas served on the three suppliers and other relevant non-parties.

• Depositions: A total of 14 depositions were conducted, including depositions of key Cascade executives, Vantor executives, representatives of the three supplier entities, and expert witnesses.

C. Dispositive Motions

Cascade filed a motion for summary judgment, or in the alternative, partial summary judgment, addressing all three causes of action. The Honorable Judge Patricia A. Mendez of the Superior Court of California, County of Los Angeles, ruled on the motion on April 14, 2023. The court granted Cascade's motion for partial summary judgment on the third cause of action (unfair business practices under Cal. Bus. & Prof. Code § 17200), finding that Vantor had failed to raise a triable issue of material fact as to the existence of independently unlawful or unfair conduct sufficient to sustain a § 17200 claim. The court denied summary judgment on the second cause of action (tortious interference with prospective economic advantage), finding that triable issues of fact remained as to whether Cascade's conduct was independently wrongful. The first cause of action (tortious interference with contractual relations) was not the subject of the summary judgment motion.

D. Settlement. Following the court's ruling on summary judgment, the parties participated in a mandatory settlement conference on April 28, 2023, before the Honorable Judge Robert F. Stein. While the parties did not reach an agreement at the settlement conference, settlement discussions continued thereafter. The parties reached an agreement in principle on May 15, 2023, and the definitive Settlement Agreement and Mutual Release was executed on June 12, 2023.

The key terms of the Settlement Agreement are as follows:

• Settlement Payment: Cascade agreed to pay Vantor the sum of $14,750,000 in full and final settlement of all claims asserted in the Action.

• Non-Admission of Liability: The Settlement Agreement expressly provides that the payment does not constitute, and shall not be construed as, an admission of liability, wrongdoing, or fault by Cascade.

• Mutual Release: Each party granted the other a full, final, and irrevocable release of all claims, known and unknown, arising out of or related to the subject matter of the Action, including a waiver of rights under California Civil Code § 1542.

• Confidentiality: The terms and amount of the settlement are subject to confidentiality obligations binding on both parties and their counsel.

• Mutual Non-Disparagement: Both parties agreed to mutual non-disparagement covenants.

• No Injunctive Relief: The settlement does not include any form of injunctive relief and imposes no restrictions on Cascade's future supplier relationships or business operations.

A joint stipulation of dismissal with prejudice was filed with the Superior Court of California, County of Los Angeles, on June 23, 2023, and the court entered the order of dismissal on the same date.

IV. Request for Insurance Contribution to Settlement Amount

Pursuant to the indemnity provisions of the Policy, we hereby request that Pinnacle National Insurance Co. contribute $6,250,000 toward the $14,750,000 settlement payment made by Cascade to Vantor. After application of Pinnacle National's contribution, Cascade's remaining share of the settlement amount is $8,500,000 (i.e., $14,750,000 minus $6,250,000).

We note that this contribution amount is consistent with prior discussions between Calderwood & Harkness LLP and Pinnacle National's coverage counsel, as well as the coverage analysis conducted during the course of the Litigation regarding the extent to which the settlement payment falls within the scope of covered damages under the Policy. The requested contribution reflects a reasonable and good-faith allocation of the settlement amount between covered and non-covered components, taking into account the nature of the claims, the available policy limits, applicable retentions, and the relationship between the covered occurrences and the settlement terms.

We request that Pinnacle National remit the $6,250,000 settlement contribution by wire transfer directly to the Calderwood & Harkness LLP Client Trust Account, or, at Pinnacle National's election, directly to Cascade Retail Holdings Inc. Payment should be made within the timeframe specified under the Policy for the payment of indemnity obligations following settlement of a covered claim, as discussed further in Section VIII below.

The enclosed executed copy of the Settlement Agreement and Mutual Release provides full documentation of the settlement terms and supports the coverage obligation. We are prepared to provide any additional documentation that Pinnacle National may reasonably require in connection with this request.

V. Request for Reimbursement of Covered Defense Costs

In addition to the settlement contribution requested above, we also request reimbursement of a portion of the defense costs incurred by Cascade in the defense of the Action. The total defense costs incurred in this matter amount to $5,892,400. A detailed breakdown is set forth below.

A. Calderwood & Harkness LLP Legal Fees

Calderwood & Harkness LLP's total legal fees for the defense of the Action are $4,387,500. These fees reflect the work of the following timekeepers, among others:

A complete itemized billing summary, organized by timekeeper and billing period, is included in the enclosed Summary of Defense Costs Incurred.

B. E-discovery Costs

E-discovery services were provided by Krane Investigations LLC, a full-service e-discovery and litigation support vendor, at a total cost of $892,400. Services rendered by Krane Investigations included document collection from Cascade's custodians and data sources, processing and de-duplication of electronically stored information, hosting of the document review platform utilized by the defense team, and management of all document productions in the Action. The primary point of contact at Krane Investigations was Samuel Byrd, Project Manager, located at 333 South Hope Street, Suite 1600, Los Angeles, California 90071. Detailed invoicing from Krane Investigations is included in the enclosed Summary of Defense Costs Incurred.

C. Expert Fees

Cascade retained Archer & Colvin Consulting Group as its damages and economics expert in the Action, at a total cost of $485,000. The engagement was led by Dr. Vivian Ostrowski, Principal, of Archer & Colvin Consulting Group, with offices at 701 Fifth Avenue, Suite 4100, Seattle, Washington 98104. Dr. Ostrowski's scope of work included a comprehensive analysis of Vantor's damages claims, preparation of a rebuttal expert report (which was served on December 22, 2022), deposition testimony in defense of that report (taken on February 3, 2023), and ongoing consulting with the defense team regarding damages analysis and trial preparation. Invoices from Archer & Colvin Consulting Group are included in the enclosed Summary of Defense Costs Incurred.

D. Local Counsel Fees

Wortham & Adair LLP served as California local counsel for Cascade in the Action, at a total cost of $127,500. The engagement was handled by Diana Prescott, Partner, of Wortham & Adair LLP, located at 611 West Sixth Street, Suite 2400, Los Angeles, California 90017. Wortham & Adair provided supplemental litigation support for Cascade in the Los Angeles County Superior Court, including assistance with local procedural requirements, court filings, and hearing appearances as needed. Invoices from Wortham & Adair LLP are included in the enclosed Summary of Defense Costs Incurred.

E. Defense Cost Reimbursement Requested

Of the total defense costs of $5,892,400 set forth above, we request reimbursement of $2,150,000 in covered defense costs from Pinnacle National. This reimbursement amount reflects the portion of defense costs reasonably allocable to the defense of covered claims under the Policy, taking into account the allocation between covered and non-covered claims and consistent with the coverage analysis previously communicated to Pinnacle National during the course of the Litigation. After application of the requested insurance reimbursement, the net defense costs borne by Cascade are $3,742,400 (i.e., $5,892,400 minus $2,150,000).

VI. Total Insurance Recovery Requested

The following table summarizes the total insurance recovery requested from Pinnacle National Insurance Co. in connection with the settlement and defense of the Action:

For informational purposes, the total economic impact to Cascade arising from the Litigation, inclusive of both the settlement payment and net defense costs borne by Cascade after application of the requested insurance recovery, is $18,492,400, calculated as follows:

• Settlement payment to Vantor: $14,750,000

• Less: Insurance settlement contribution: ($6,250,000)

• Net settlement cost to Cascade: $8,500,000

• Total defense costs incurred: $5,892,400

• Less: Insurance defense cost reimbursement: ($2,150,000)

• Net defense costs to Cascade: $3,742,400

• Total net economic impact to Cascade: $8,500,000 + $3,742,400 + $6,250,000 + $2,150,000 = $20,642,400 (gross); $12,242,400 (net after insurance recovery)

We note that the total requested insurance recovery of $8,400,000 represents a fraction of the $87,400,000 in damages originally claimed by Vantor and is well within the applicable policy limits.

VII. Enclosures

The following documents are enclosed with this letter in support of the insurance recovery request:

1. Executed Settlement Agreement and Mutual Release, dated June 12, 2023, between Vantor Holdings Corp. and Cascade Retail Holdings Inc.

2. Summary of Defense Costs Incurred, itemized by category, vendor, and timekeeper, with supporting invoices.

3. Conformed copy of the Joint Stipulation of Dismissal with Prejudice, filed June 23, 2023, in the Superior Court of California, County of Los Angeles, Case No. 21STCV-34872.

4. Copy of the initial coverage notification letter from Douglas Carmichael to Leonard Furman, dated September 20, 2021, placing Pinnacle National Insurance Co. on notice of the claim.

Should Pinnacle National require any additional documentation, including but not limited to copies of specific billing entries, vendor invoices, expert reports, court filings, or correspondence, we are prepared to provide such materials promptly upon request.

VIII. Payment Instructions and Contact Information

We respectfully request that Pinnacle National remit payment of the total insurance recovery amount of $8,400,000 within thirty (30) days of the date of this letter, or such other period as may be provided under Policy No. PNG-CGL-2021-04487 for the payment of indemnity and defense cost reimbursement obligations following settlement of a covered claim. Payment should be made by wire transfer to the following account:

Calderwood & Harkness LLP Client Trust Account Bank: Westvale Securities ABA Routing No.: 321081669 Account No.: 8804-7721-3356 Account Name: Calderwood & Harkness LLP IOLTA Client Trust Account Reference: Cascade Retail Holdings Inc. / Matter No. 1038-00007

Alternatively, if Pinnacle National elects to remit payment directly to the Insured, payment should be made payable to Cascade Retail Holdings Inc. and directed to the attention of David Pruitt, General Counsel & Corporate Secretary, at Cascade's principal office address noted above.

Please direct any questions, requests for additional documentation, or other communications regarding this claim to the undersigned at:

Douglas Carmichael, Partner Calderwood & Harkness LLP 600 South Grand Avenue, Suite 3200 Los Angeles, California 90071 Telephone: (213) 555-7824

Email: dcarmichael@calderwoodharkness.com

A copy of this letter and all enclosures is being provided simultaneously to David Pruitt, General Counsel & Corporate Secretary of Cascade Retail Holdings Inc., at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119.

We appreciate Pinnacle National's cooperation and responsiveness throughout the course of this Litigation and trust that the enclosed documentation provides a complete basis for the prompt processing of the requested insurance recovery. Should you wish to discuss any aspect of the claim, the settlement terms, the defense cost breakdown, or the enclosed documentation, I am available at your convenience. Please do not hesitate to contact me directly at the telephone number or email address listed above.

Thank you for your attention to this matter.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Douglas Carmichael Partner

cc: David Pruitt, General Counsel & Corporate Secretary, Cascade Retail Holdings Inc. Francesca Morano, Partner, Calderwood & Harkness LLP

Enclosures (4)

Supplier	Alleged Damages
Hemsworth Consumer Products LLC	$34,200,000
Tridale Manufacturing Inc.	$22,800,000
Orion Lifestyle Brands Corp.	$30,400,000
Total	$87,400,000
Timekeeper	Role	Hours	Rate ($/hr)	Total Fees
Douglas Carmichael	Partner	312	$1,150	$358,800
Francesca Morano	Partner	487	$1,050	$511,350
Yuki Nakamura	Senior Associate	1,840	$725	$1,334,000
Carlos Espinoza	Associate	2,615	$575	$1,503,625
Other timekeepers and staff	Various	—	—	$679,725
Total Calderwood & Harkness LLP Fees	$4,387,500
Category	Amount
Settlement Contribution	$6,250,000
Defense Cost Reimbursement	$2,150,000
Total Insurance Recovery Requested	$8,400,000

CALDERWOOD & HARKNESS LLP Attorneys at Law 600 South Grand Avenue, Suite 3200 Los Angeles, California 90071 Telephone: (213) 555-7800 Facsimile: (213) 555-7801 www.calderwoodharkness.com
Douglas Carmichael Partner Direct: (213) 555-7824 dcarmichael@calderwoodharkness.com
June 15, 2023
Mr. Leonard Furman Senior Claims Adjuster Pinnacle National Insurance Co. 120 Broadway, Suite 3500 New York, New York 10271
Re: Insurance Recovery Request — Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, Superior Court of California, County of Los Angeles
Insured: Cascade Retail Holdings Inc.
Policy No.: PNG-CGL-2021-04487 (Commercial General Liability)
Our Matter No.: 1038-00007
Dear Mr. Furman:
I. Purpose and Background
This letter is submitted on behalf of our client, Cascade Retail Holdings Inc. ("Cascade" or the "Insured"), and constitutes a formal request for payment of insurance proceeds under Commercial General Liability Policy No. PNG-CGL-2021-04487 (the "Policy") issued by Pinnacle National Insurance Co. ("Pinnacle National") in connection with the settlement of Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, filed in the Superior Court of California, County of Los Angeles (the "Action" or "Litigation").
As you are aware, this firm placed Pinnacle National on notice of the underlying claim by letter dated September 20, 2021, addressed from the undersigned to you in your capacity as Senior Claims Adjuster. That initial coverage notification letter, a copy of which is enclosed herewith for your convenience, set forth the nature of the claims asserted against Cascade and invoked coverage under the Policy for both the defense of the Action and any resulting indemnity obligation. Pinnacle National acknowledged receipt of that notice and has been kept apprised of material developments in the Litigation throughout its pendency.
We are pleased to inform you that the Action has been resolved. The parties executed a confidential Settlement Agreement and Mutual Release on June 12, 2023 (the "Settlement Agreement"), thereby bringing the Litigation to a conclusion on terms acceptable to Cascade and its Board of Directors. An executed copy of the Settlement Agreement is enclosed with this letter. Consistent with the terms of the settlement, a Joint Stipulation of Dismissal with Prejudice was filed with the Superior Court of California, County of Los Angeles, on June 23, 2023, and the court entered the dismissal order on that same date. A conformed copy of the filed stipulation is also enclosed.
Calderwood & Harkness LLP served as lead defense counsel for Cascade Retail Holdings Inc. throughout the entirety of the Litigation, from the time of the initial filing through the execution of the Settlement Agreement and the filing of the stipulated dismissal. We are accordingly in a position to provide Pinnacle National with comprehensive documentation supporting the insurance recovery requested herein.
II. Summary of the Litigation and Claims
A. The Parties
Vantor Holdings Corp. ("Vantor"), a California corporation headquartered at 18500 Von Karman Avenue, Suite 600, Irvine, California 92612, filed the complaint initiating the Action on September 7, 2021, naming Cascade Retail Holdings Inc. as the sole defendant. Cascade is a Delaware corporation whose common stock is listed on the Nasdaq Global Select Market under the ticker symbol "CRHI," with its principal executive offices located at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119.
B. Causes of Action
The complaint asserted three causes of action against Cascade:
1. Tortious Interference with Contractual Relations. Vantor alleged that Cascade knowingly and intentionally induced three of Vantor's exclusive suppliers to breach their existing supply agreements with Vantor by entering into competing supply arrangements directly with Cascade, thereby causing Vantor to lose access to critical supply channels and suffer significant economic harm.
2. Tortious Interference with Prospective Economic Advantage. Vantor further alleged that Cascade engaged in independently wrongful conduct designed to disrupt Vantor's prospective business relationships with additional suppliers, distributors, and retail partners, thereby injuring Vantor's ability to compete effectively in the consumer products marketplace.
3. Unfair Business Practices Under California Business and Professions Code § 17200. Vantor asserted that Cascade's alleged conduct constituted unfair, unlawful, and fraudulent business practices within the meaning of the California Unfair Competition Law, entitling Vantor to restitution and injunctive relief.
C. Factual Basis of the Claims
The claims arose from Cascade's entry into new supply agreements with three suppliers that had previously maintained exclusive supply relationships with Vantor. The three suppliers at issue were:
• Hemsworth Consumer Products LLC, an Oregon limited liability company;
• Tridale Manufacturing Inc., a Nevada corporation; and
• Orion Lifestyle Brands Corp., a California corporation.
Vantor contended that each of these entities was bound by exclusive supply agreements with Vantor at the time Cascade entered into competing arrangements with them, and that Cascade was aware of, or should have been aware of, the existence of those exclusive arrangements.
D. Damages Claimed
Vantor alleged total damages of $87,400,000, comprised of the following amounts attributable to the three supplier relationships at issue:
The claimed damages represented Vantor's estimate of lost profits, increased costs of replacement supply arrangements, and consequential losses allegedly flowing from the disruption of its supplier relationships.
III. Summary of Litigation Outcome
A. Cascade's Defense
Cascade filed its Answer and Affirmative Defenses on October 18, 2021, denying all material allegations and asserting, among other defenses, that the suppliers at issue had voluntarily terminated their relationships with Vantor for cause; that Cascade did not have knowledge of any enforceable exclusivity provisions; that the purported exclusive supply agreements were unenforceable for various contractual and competition-law reasons; and that Vantor's alleged damages were speculative, unsubstantiated, and not proximately caused by any conduct of Cascade.
B. Discovery. The Litigation involved extensive and hard-fought discovery over approximately eighteen months. The scope and volume of discovery is summarized as follows:
• Document Collection from Cascade: 452,316 documents were collected from Cascade's custodians and data sources.
• Document Review: 198,740 documents were reviewed for relevance and privilege.
• Document Production by Cascade: 78,412 documents were produced by Cascade to Vantor.
• Document Production by Vantor: 41,308 documents were produced by Vantor in response to Cascade's discovery requests.
• Third-Party Subpoena Productions: An additional 23,567 documents were obtained through third-party subpoenas served on the three suppliers and other relevant non-parties.
• Depositions: A total of 14 depositions were conducted, including depositions of key Cascade executives, Vantor executives, representatives of the three supplier entities, and expert witnesses.
C. Dispositive Motions
Cascade filed a motion for summary judgment, or in the alternative, partial summary judgment, addressing all three causes of action. The Honorable Judge Patricia A. Mendez of the Superior Court of California, County of Los Angeles, ruled on the motion on April 14, 2023. The court granted Cascade's motion for partial summary judgment on the third cause of action (unfair business practices under Cal. Bus. & Prof. Code § 17200), finding that Vantor had failed to raise a triable issue of material fact as to the existence of independently unlawful or unfair conduct sufficient to sustain a § 17200 claim. The court denied summary judgment on the second cause of action (tortious interference with prospective economic advantage), finding that triable issues of fact remained as to whether Cascade's conduct was independently wrongful. The first cause of action (tortious interference with contractual relations) was not the subject of the summary judgment motion.
D. Settlement. Following the court's ruling on summary judgment, the parties participated in a mandatory settlement conference on April 28, 2023, before the Honorable Judge Robert F. Stein. While the parties did not reach an agreement at the settlement conference, settlement discussions continued thereafter. The parties reached an agreement in principle on May 15, 2023, and the definitive Settlement Agreement and Mutual Release was executed on June 12, 2023.
The key terms of the Settlement Agreement are as follows:
• Settlement Payment: Cascade agreed to pay Vantor the sum of $14,750,000 in full and final settlement of all claims asserted in the Action.
• Non-Admission of Liability: The Settlement Agreement expressly provides that the payment does not constitute, and shall not be construed as, an admission of liability, wrongdoing, or fault by Cascade.
• Mutual Release: Each party granted the other a full, final, and irrevocable release of all claims, known and unknown, arising out of or related to the subject matter of the Action, including a waiver of rights under California Civil Code § 1542.
• Confidentiality: The terms and amount of the settlement are subject to confidentiality obligations binding on both parties and their counsel.
• Mutual Non-Disparagement: Both parties agreed to mutual non-disparagement covenants.
• No Injunctive Relief: The settlement does not include any form of injunctive relief and imposes no restrictions on Cascade's future supplier relationships or business operations.
A joint stipulation of dismissal with prejudice was filed with the Superior Court of California, County of Los Angeles, on June 23, 2023, and the court entered the order of dismissal on the same date.
IV. Request for Insurance Contribution to Settlement Amount
Pursuant to the indemnity provisions of the Policy, we hereby request that Pinnacle National Insurance Co. contribute $6,250,000 toward the $14,750,000 settlement payment made by Cascade to Vantor. After application of Pinnacle National's contribution, Cascade's remaining share of the settlement amount is $8,500,000 (i.e., $14,750,000 minus $6,250,000).
We note that this contribution amount is consistent with prior discussions between Calderwood & Harkness LLP and Pinnacle National's coverage counsel, as well as the coverage analysis conducted during the course of the Litigation regarding the extent to which the settlement payment falls within the scope of covered damages under the Policy. The requested contribution reflects a reasonable and good-faith allocation of the settlement amount between covered and non-covered components, taking into account the nature of the claims, the available policy limits, applicable retentions, and the relationship between the covered occurrences and the settlement terms.
We request that Pinnacle National remit the $6,250,000 settlement contribution by wire transfer directly to the Calderwood & Harkness LLP Client Trust Account, or, at Pinnacle National's election, directly to Cascade Retail Holdings Inc. Payment should be made within the timeframe specified under the Policy for the payment of indemnity obligations following settlement of a covered claim, as discussed further in Section VIII below.
The enclosed executed copy of the Settlement Agreement and Mutual Release provides full documentation of the settlement terms and supports the coverage obligation. We are prepared to provide any additional documentation that Pinnacle National may reasonably require in connection with this request.
V. Request for Reimbursement of Covered Defense Costs
In addition to the settlement contribution requested above, we also request reimbursement of a portion of the defense costs incurred by Cascade in the defense of the Action. The total defense costs incurred in this matter amount to $5,892,400. A detailed breakdown is set forth below.
A. Calderwood & Harkness LLP Legal Fees
Calderwood & Harkness LLP's total legal fees for the defense of the Action are $4,387,500. These fees reflect the work of the following timekeepers, among others:
A complete itemized billing summary, organized by timekeeper and billing period, is included in the enclosed Summary of Defense Costs Incurred.
B. E-discovery Costs
E-discovery services were provided by Krane Investigations LLC, a full-service e-discovery and litigation support vendor, at a total cost of $892,400. Services rendered by Krane Investigations included document collection from Cascade's custodians and data sources, processing and de-duplication of electronically stored information, hosting of the document review platform utilized by the defense team, and management of all document productions in the Action. The primary point of contact at Krane Investigations was Samuel Byrd, Project Manager, located at 333 South Hope Street, Suite 1600, Los Angeles, California 90071. Detailed invoicing from Krane Investigations is included in the enclosed Summary of Defense Costs Incurred.
C. Expert Fees
Cascade retained Archer & Colvin Consulting Group as its damages and economics expert in the Action, at a total cost of $485,000. The engagement was led by Dr. Vivian Ostrowski, Principal, of Archer & Colvin Consulting Group, with offices at 701 Fifth Avenue, Suite 4100, Seattle, Washington 98104. Dr. Ostrowski's scope of work included a comprehensive analysis of Vantor's damages claims, preparation of a rebuttal expert report (which was served on December 22, 2022), deposition testimony in defense of that report (taken on February 3, 2023), and ongoing consulting with the defense team regarding damages analysis and trial preparation. Invoices from Archer & Colvin Consulting Group are included in the enclosed Summary of Defense Costs Incurred.
D. Local Counsel Fees
Wortham & Adair LLP served as California local counsel for Cascade in the Action, at a total cost of $127,500. The engagement was handled by Diana Prescott, Partner, of Wortham & Adair LLP, located at 611 West Sixth Street, Suite 2400, Los Angeles, California 90017. Wortham & Adair provided supplemental litigation support for Cascade in the Los Angeles County Superior Court, including assistance with local procedural requirements, court filings, and hearing appearances as needed. Invoices from Wortham & Adair LLP are included in the enclosed Summary of Defense Costs Incurred.
E. Defense Cost Reimbursement Requested
Of the total defense costs of $5,892,400 set forth above, we request reimbursement of $2,150,000 in covered defense costs from Pinnacle National. This reimbursement amount reflects the portion of defense costs reasonably allocable to the defense of covered claims under the Policy, taking into account the allocation between covered and non-covered claims and consistent with the coverage analysis previously communicated to Pinnacle National during the course of the Litigation. After application of the requested insurance reimbursement, the net defense costs borne by Cascade are $3,742,400 (i.e., $5,892,400 minus $2,150,000).
VI. Total Insurance Recovery Requested
The following table summarizes the total insurance recovery requested from Pinnacle National Insurance Co. in connection with the settlement and defense of the Action:
For informational purposes, the total economic impact to Cascade arising from the Litigation, inclusive of both the settlement payment and net defense costs borne by Cascade after application of the requested insurance recovery, is $18,492,400, calculated as follows:
• Settlement payment to Vantor: $14,750,000
• Less: Insurance settlement contribution: ($6,250,000)
• Net settlement cost to Cascade: $8,500,000
• Total defense costs incurred: $5,892,400
• Less: Insurance defense cost reimbursement: ($2,150,000)
• Net defense costs to Cascade: $3,742,400
• Total net economic impact to Cascade: $8,500,000 + $3,742,400 + $6,250,000 + $2,150,000 = $20,642,400 (gross); $12,242,400 (net after insurance recovery)
We note that the total requested insurance recovery of $8,400,000 represents a fraction of the $87,400,000 in damages originally claimed by Vantor and is well within the applicable policy limits.
VII. Enclosures
The following documents are enclosed with this letter in support of the insurance recovery request:
1. Executed Settlement Agreement and Mutual Release, dated June 12, 2023, between Vantor Holdings Corp. and Cascade Retail Holdings Inc.
2. Summary of Defense Costs Incurred, itemized by category, vendor, and timekeeper, with supporting invoices.
3. Conformed copy of the Joint Stipulation of Dismissal with Prejudice, filed June 23, 2023, in the Superior Court of California, County of Los Angeles, Case No. 21STCV-34872.
4. Copy of the initial coverage notification letter from Douglas Carmichael to Leonard Furman, dated September 20, 2021, placing Pinnacle National Insurance Co. on notice of the claim.
Should Pinnacle National require any additional documentation, including but not limited to copies of specific billing entries, vendor invoices, expert reports, court filings, or correspondence, we are prepared to provide such materials promptly upon request.
VIII. Payment Instructions and Contact Information
We respectfully request that Pinnacle National remit payment of the total insurance recovery amount of $8,400,000 within thirty (30) days of the date of this letter, or such other period as may be provided under Policy No. PNG-CGL-2021-04487 for the payment of indemnity and defense cost reimbursement obligations following settlement of a covered claim. Payment should be made by wire transfer to the following account:
Calderwood & Harkness LLP Client Trust Account Bank: Westvale Securities ABA Routing No.: 321081669 Account No.: 8804-7721-3356 Account Name: Calderwood & Harkness LLP IOLTA Client Trust Account Reference: Cascade Retail Holdings Inc. / Matter No. 1038-00007
Alternatively, if Pinnacle National elects to remit payment directly to the Insured, payment should be made payable to Cascade Retail Holdings Inc. and directed to the attention of David Pruitt, General Counsel & Corporate Secretary, at Cascade's principal office address noted above.
Please direct any questions, requests for additional documentation, or other communications regarding this claim to the undersigned at:
Douglas Carmichael, Partner Calderwood & Harkness LLP 600 South Grand Avenue, Suite 3200 Los Angeles, California 90071 Telephone: (213) 555-7824
Email: dcarmichael@calderwoodharkness.com
A copy of this letter and all enclosures is being provided simultaneously to David Pruitt, General Counsel & Corporate Secretary of Cascade Retail Holdings Inc., at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119.
We appreciate Pinnacle National's cooperation and responsiveness throughout the course of this Litigation and trust that the enclosed documentation provides a complete basis for the prompt processing of the requested insurance recovery. Should you wish to discuss any aspect of the claim, the settlement terms, the defense cost breakdown, or the enclosed documentation, I am available at your convenience. Please do not hesitate to contact me directly at the telephone number or email address listed above.
Thank you for your attention to this matter.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner
cc: David Pruitt, General Counsel & Corporate Secretary, Cascade Retail Holdings Inc. Francesca Morano, Partner, Calderwood & Harkness LLP
Enclosures (4)
Supplier | Alleged Damages
Hemsworth Consumer Products LLC | $34,200,000
Tridale Manufacturing Inc. | $22,800,000
Orion Lifestyle Brands Corp. | $30,400,000
Total | $87,400,000
Timekeeper | Role | Hours | Rate ($/hr) | Total Fees
Douglas Carmichael | Partner | 312 | $1,150 | $358,800
Francesca Morano | Partner | 487 | $1,050 | $511,350
Yuki Nakamura | Senior Associate | 1,840 | $725 | $1,334,000
Carlos Espinoza | Associate | 2,615 | $575 | $1,503,625
Other timekeepers and staff | Various | — | — | $679,725
Total Calderwood & Harkness LLP Fees | $4,387,500
Category | Amount
Settlement Contribution | $6,250,000
Defense Cost Reimbursement | $2,150,000
Total Insurance Recovery Requested | $8,400,000

CALDERWOOD & HARKNESS LLP

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