MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney-client privilege and the work product doctrine. It is prepared in connection with pending litigation and is intended solely for the use of Calderwood & Harkness LLP attorneys working on this matter. This memorandum reflects mental impressions, conclusions, opinions, and legal theories of attorneys. It should not be disclosed to any person outside of Calderwood & Harkness LLP without the express written consent of the responsible partner. Any inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
FROM: Yuki Nakamura, Senior Associate, Calderwood & Harkness LLP
TO: Douglas Carmichael, Partner, Calderwood & Harkness LLP
DATE: October 25, 2021
RE: Analysis of Vantor Exclusive Supply Agreements — Termination-for-Convenience Provisions
MATTER: Cascade Retail Holdings Inc. — Defense of Tortious Interference Claim
MATTER NO.: 1038-00007
CASE: Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, Superior Court of California, County of Los Angeles
I. Purpose and Summary of Conclusions
This memorandum analyzes the termination provisions — specifically the termination-for-convenience clauses — contained in the three exclusive supply agreements between Vantor Holdings Corp. ("Vantor") and each of Hemsworth Consumer Products LLC ("Hemsworth"), Tridale Manufacturing Inc. ("Tridale"), and Orion Lifestyle Brands Corp. ("Orion") (collectively, the "Supplier Agreements"). These three supplier relationships are at the heart of Vantor's complaint filed on September 7, 2021, in which Vantor alleges that our client, Cascade Retail Holdings Inc. ("Cascade"), tortiously interfered with these agreements and with Vantor's prospective economic advantage. The purpose of this memorandum is to evaluate the contractual termination provisions as they bear on Cascade's liability exposure and available defenses, and to identify open factual questions that should be prioritized in discovery.
Based on a detailed review of the three Supplier Agreements and the relevant factual record assembled to date, I have reached the following key conclusions:
1. All three exclusive supply agreements contain express termination-for-convenience clauses permitting either party to terminate the agreement upon written notice, subject to specified notice periods. Specifically, the Hemsworth agreement requires 90 days' prior written notice, the Tridale agreement requires 60 days' prior written notice, and the Orion agreement requires 120 days' prior written notice.
2. Based on the timeline of events, all three suppliers could have — and based on preliminary indications apparently did — properly exercise their respective termination-for-convenience rights prior to entering into new supply agreements with Cascade. The chronology of termination notice dates and Cascade agreement execution dates is consistent with lawful, orderly termination of the existing Vantor relationships.
3. The existence and exercise of these termination-for-convenience clauses significantly undermines Vantor's claim that Cascade "induced breach" of the agreements. A fundamental element of tortious interference with contractual relations under California law is the existence of a valid and enforceable contract that was breached. If the Supplier Agreements were lawfully terminated by the suppliers exercising contractually permitted rights, there was no breach for Cascade to have induced. This conclusion is fatal to the first cause of action in Vantor's complaint.
4. The termination provisions also bear directly on the damages analysis, limiting any cognizable damages to the remaining exclusive term at the time of termination rather than the extended multi-year projections advanced in Vantor's complaint. Vantor has claimed total damages of $87.4 million across the three relationships. Based on our preliminary analysis, the proper measure of damages — if any liability is established at all — would fall in the range of approximately $6.1 million to $11.3 million, before any reduction for Vantor's failure to mitigate.
Each of these conclusions is discussed in detail below.
II. Background
A. The Parties and the Dispute
Cascade Retail Holdings Inc. ("Cascade") is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol CRHI, with its principal place of business at 2200 Elliott Avenue West, Suite 1400, Seattle, Washington 98119. Cascade is a multi-channel retail and e-commerce company operating more than 340 retail locations across 22 states. For fiscal year 2021, Cascade reported annual revenue of approximately $6.8 billion and, as of September 2021, maintained a market capitalization of approximately $14.2 billion. Cascade's business encompasses a broad range of consumer product categories, including home goods, consumer electronics accessories, personal care products, apparel, and sporting goods. Its e-commerce platform, launched in 2017, accounts for approximately 28% of total revenue and has experienced accelerating growth over the past three fiscal years.
Vantor Holdings Corp. ("Vantor") is a California corporation, privately held, with its principal place of business at 18500 Von Karman Avenue, Suite 600, Irvine, California 92612. Vantor operates as a wholesale distribution and specialty retail company, maintaining approximately 85 retail locations concentrated in California, Arizona, Nevada, and Oregon. For fiscal year 2021, Vantor's annual revenue was approximately $1.1 billion. The company was founded in 2003 and is led by Richard "Rick" Ellsworth, who serves as Chief Executive Officer and is the controlling shareholder. Vantor's business model relies heavily on exclusive and semi-exclusive supply relationships with domestic and international manufacturers, which the company leverages to differentiate its retail offerings from larger competitors.
Vantor filed its complaint in the Superior Court of California, County of Los Angeles, on September 7, 2021, bearing Case No. 21STCV-34872. Cascade was served with the summons and complaint on September 28, 2021. Calderwood & Harkness LLP was engaged to represent Cascade in this matter on September 13, 2021, with Douglas Carmichael serving as the responsible partner and Francesca Morano as the billing partner. Cascade's answer and affirmative defenses were timely filed on October 18, 2021. The answer asserts eighteen affirmative defenses, four of which are directly implicated by the termination-for-convenience analysis set forth in this memorandum (discussed in Section VI below).
B. Project Atlas
In February 2021, Cascade launched an internal strategic initiative known as "Project Atlas," the purpose of which was to diversify and strengthen Cascade's supplier network across several key product categories. Project Atlas was conceived in response to supply chain disruptions experienced during fiscal year 2020 and reflected Cascade's broader strategic goal of reducing dependency on a limited number of supplier relationships. The initiative targeted three product categories in particular: home goods, consumer electronics accessories, and personal care products — the same three categories at issue in this litigation.
Project Atlas was led by Annika Bergström, Vice President of Strategic Sourcing, who reported directly to Lena Torvik, Senior Vice President of Supply Chain & Procurement. The initiative received a dedicated budget allocation of $4.2 million for supplier transition costs, including onboarding expenses, quality assurance testing, and initial purchase order commitments. The stated objective was to identify and onboard 25 new suppliers across the three targeted product categories over a 12-month period.
During the course of Project Atlas, Cascade entered into new supply agreements with three suppliers — Hemsworth, Tridale, and Orion — that had previously been under exclusive contract with Vantor. It is these three supplier relationships that form the basis of Vantor's complaint. The circumstances under which these new agreements were negotiated and executed, and the extent to which Cascade's Project Atlas team was aware of the suppliers' existing relationships with Vantor, are factual questions that remain to be fully explored through discovery. However, as discussed in this memorandum, the existence of the termination-for-convenience provisions in the Vantor agreements substantially changes the legal significance of these facts.
C. The Three Supplier Agreements at Issue
During the period from May to August 2021, Cascade entered into supply agreements with each of the three suppliers previously under exclusive contract with Vantor:
• Hemsworth Consumer Products LLC: Cascade and Hemsworth executed a supply agreement on June 1, 2021, covering home goods and kitchen accessories.
• Tridale Manufacturing Inc.: Cascade and Tridale executed a supply agreement on August 15, 2021, covering consumer electronics accessories, including cables, chargers, and protective cases.
• Orion Lifestyle Brands Corp.: Cascade and Orion executed a supply agreement on May 10, 2021, covering personal care and wellness products.
Vantor alleges in its complaint that each of these agreements was entered into while the respective exclusive supply agreement between Vantor and the supplier was still in effect, and that Cascade's conduct in negotiating and executing these agreements constituted tortious interference with Vantor's contractual relations and prospective economic advantage.
The Vantor complaint asserts three causes of action:
1. Tortious Interference with Contractual Relations — alleging that Cascade knowingly and intentionally induced Hemsworth, Tridale, and Orion to breach their exclusive supply agreements with Vantor.
2. Tortious Interference with Prospective Economic Advantage — alleging that Cascade's conduct disrupted Vantor's existing and prospective business relationships with the three suppliers, causing Vantor to lose anticipated future revenues.
3. Unfair Business Practices under Cal. Bus. & Prof. Code § 17200 — alleging that Cascade engaged in unlawful, unfair, or fraudulent business acts or practices by systematically targeting Vantor's exclusive supplier relationships.
Vantor's total claimed damages across the three relationships amount to $87.4 million, broken down as follows: $34.2 million attributed to the Hemsworth relationship, $22.8 million attributed to the Tridale relationship, and $30.4 million attributed to the Orion relationship. These figures are based on projected multi-year revenue streams, as discussed in Section VII of this memorandum.
D. Sources Reviewed
In preparing this memorandum, I have reviewed the following documents and materials:
• Copies of the three exclusive supply agreements between Vantor and each supplier: (i) the Hemsworth–Vantor Exclusive Supply Agreement executed March 15, 2019; (ii) the Tridale–Vantor Exclusive Supply Agreement executed January 10, 2020; and (iii) the Orion–Vantor Exclusive Supply Agreement executed July 1, 2018. These agreements were obtained from Cascade's initial document collection and were provided to the firm by David Pruitt, General Counsel & Corporate Secretary of Cascade, on September 15, 2021.
• Vantor's complaint filed September 7, 2021, in Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, Superior Court of California, County of Los Angeles.
• Cascade's answer and affirmative defenses filed October 18, 2021.
• Preliminary case assessment memorandum dated September 17, 2021, prepared by Douglas Carmichael and Yuki Nakamura and transmitted to David Pruitt, General Counsel of Cascade.
• Research memorandum on California tortious interference law dated October 8, 2021, prepared by Carlos Espinoza, Associate, Calderwood & Harkness LLP.
I have not yet had the opportunity to review the actual termination notices sent by the three suppliers to Vantor, nor have I been able to confirm the precise dates on which those notices were delivered and received. As discussed in Section V, obtaining copies of these notices is the highest-priority discovery objective at this stage of the case.
III. Analysis of Individual Agreements
A. Hemsworth Consumer Products LLC — Vantor Exclusive Supply Agreement
1. Overview of Agreement Terms
The first of the three Supplier Agreements at issue is the Exclusive Supply Agreement between Vantor Holdings Corp. and Hemsworth Consumer Products LLC. Hemsworth is an Oregon limited liability company headquartered at 4720 NW Yeon Avenue, Portland, Oregon 97210. Hemsworth is a manufacturer and distributor of home goods and kitchen accessories, with a particular focus on premium kitchenware, organizational products, and decorative home items. The company's Chief Executive Officer is Janet Kohler, who executed the Vantor agreement on behalf of Hemsworth and who is likely to be a key witness in this litigation.
The Hemsworth–Vantor Exclusive Supply Agreement was executed on March 15, 2019, and was scheduled to expire on March 14, 2022, providing for a three-year initial term. The agreement covers a defined range of home goods and kitchen accessories, organized by product category codes set forth in Exhibit A to the agreement. Under the agreement, Hemsworth agreed to supply products in the specified categories exclusively to Vantor for the duration of the contract term. The exclusivity provision, contained in Section 4.1 of the agreement, states:
"During the Term, Supplier [Hemsworth] shall supply the Products exclusively to Buyer [Vantor] and shall not, directly or indirectly, sell, distribute, or otherwise make available any Products to any third party, including any competitor of Buyer, without the prior written consent of Buyer."
In exchange for this exclusivity commitment, Vantor agreed to a minimum annual purchase commitment of $12.5 million, subject to quarterly reconciliation as described in Section 5.2. The agreement further provides for volume-based pricing tiers, quality assurance standards, delivery schedules, and customary representations and warranties.
2. Termination-for-Convenience Clause
Section 9.2 of the Hemsworth–Vantor agreement sets forth the termination-for-convenience provision. The provision states, in relevant part:
"Either party may terminate this Agreement for any reason or for no reason, in its sole discretion, upon not less than ninety (90) days' prior written notice to the other party. Such notice shall be delivered in accordance with Section 14.3 [Notices] of this Agreement. Upon the effective date of any such termination for convenience, the terminating party's obligations under Section 4.1 [Exclusivity] and Section 5.2 [Minimum Purchase Commitment] shall cease. Notwithstanding the foregoing, all purchase orders accepted by Supplier prior to the date of delivery of the termination notice shall be fulfilled by Supplier and paid for by Buyer in accordance with the terms of this Agreement."
Several aspects of this provision are noteworthy. First, the termination right is mutual — it may be exercised by either Vantor or Hemsworth. Second, the right is unconditional — neither party is required to state a reason for termination, and the exercise of the right is in each party's "sole discretion." Third, the notice period is 90 days, which is a commercially reasonable period intended to provide the non-terminating party with adequate time to make alternative arrangements. Fourth, the provision expressly addresses the effect of termination on the exclusivity obligation: the exclusivity provision ceases as of the effective date of termination. Fifth, the provision includes a tail obligation requiring fulfillment of purchase orders accepted prior to the date of the termination notice.
The notice provision referenced in Section 9.2 — Section 14.3 — requires that all notices under the agreement be in writing and delivered by (a) certified mail, return receipt requested, (b) nationally recognized overnight courier service, or (c) personal delivery, in each case to the addresses specified in the agreement.
3. Application to Facts
The Cascade–Hemsworth supply agreement was executed on June 1, 2021. As of that date, the Hemsworth–Vantor Exclusive Supply Agreement was not set to expire until March 14, 2022, meaning that approximately nine months remained on the exclusive term. Standing alone, this fact would appear to support Vantor's allegation that Cascade entered into a supply agreement with Hemsworth while Hemsworth was still bound by an exclusivity obligation to Vantor.
However, the termination-for-convenience clause fundamentally changes the analysis. If Hemsworth delivered a termination-for-convenience notice to Vantor at least 90 days before June 1, 2021 — that is, on or before approximately March 3, 2021 — the termination would have become effective by June 1, 2021, and the exclusivity obligation would have ceased as of that date. Under such circumstances, Hemsworth would have been free to enter into a supply agreement with Cascade on June 1, 2021, without violating any obligation to Vantor.
We need to confirm with Cascade personnel — specifically Annika Bergström — and with Hemsworth — specifically Janet Kohler — whether and when such a termination notice was delivered. Preliminary indications from the documents reviewed to date suggest that Hemsworth did exercise the termination-for-convenience clause. In particular, internal Cascade communications from the Project Atlas team reference conversations with Hemsworth in which Hemsworth indicated that it had "notified" Vantor of its intent to terminate the exclusive arrangement. However, we do not yet have a copy of the actual notice, nor have we confirmed the precise date of delivery or the method of delivery.
If the termination-for-convenience clause was properly exercised and the notice was timely delivered, there would have been no existing contractual obligation to which the exclusivity provision attached at the time Cascade entered into its agreement with Hemsworth. This would negate the tortious interference with contractual relations claim as to the Hemsworth relationship, because there can be no tortious interference with a contract that has been lawfully terminated.
4. Damages Implications
Vantor claims $34.2 million in lost profits attributable to the Hemsworth relationship. According to the complaint, this figure is based on a projected five-year revenue stream, discounted to present value at a rate of 8.5%, as calculated by Vantor's retained expert, Dr. Harold Pryce of Meridian Forensic Economics LLC. The five-year projection appears to assume not only that the existing Hemsworth–Vantor agreement would have continued for its remaining term, but also that the agreement would have been renewed for at least two additional terms beyond the March 14, 2022 expiration date.
This projection is fundamentally flawed in light of the termination-for-convenience provision. The five-year timeframe far exceeds the remaining term of the Hemsworth–Vantor agreement, which was approximately nine months as of June 1, 2021 (the date of the Cascade–Hemsworth agreement). Furthermore, the assumption that the agreement would have been renewed is entirely speculative: the termination-for-convenience clause demonstrates that either party could have ended the relationship at any time upon 90 days' notice, making the assumption of multi-year renewals unreasonable and unsupported.
Any provable damages should therefore be limited to the remaining exclusive term at the time of termination, not speculative future renewals. Based on the remaining nine-month term and Vantor's minimum annual purchase commitment of $12.5 million, Cascade's preliminary damages assessment — to be formalized in the November 15, 2021 exposure assessment — will likely place Hemsworth-related damages in the range of $2.8 million to $4.9 million, reflecting the margin that Vantor would have earned on purchases during the remaining exclusive term, less amounts that Vantor could have mitigated through alternative sourcing.
B. Tridale Manufacturing Inc. — Vantor Exclusive Supply Agreement
1. Overview of Agreement Terms
The second Supplier Agreement at issue is the Exclusive Supply Agreement between Vantor Holdings Corp. and Tridale Manufacturing Inc. Tridale is a Nevada corporation headquartered at 6300 South Pecos Road, Suite 210, Las Vegas, Nevada 89120. Tridale is a manufacturer and distributor of consumer electronics accessories, including charging cables, power adapters, protective cases, and related items. The company's President is Gregory Fontaine, who executed the Vantor agreement on Tridale's behalf and who will likely be a material witness in this case.
The Tridale–Vantor Exclusive Supply Agreement was executed on January 10, 2020, and was scheduled to expire on January 9, 2022, providing for a two-year initial term. This is the shortest of the three agreements at issue and reflects the relatively more dynamic and fast-moving nature of the consumer electronics accessories market. The agreement covers a defined range of consumer electronics accessories, including cables, chargers, and protective cases, as described in Schedule 1 to the agreement.
Under the agreement, Tridale agreed to supply products in the specified categories exclusively to Vantor for the duration of the contract term. The exclusivity provision, contained in Section 3(a) of the agreement, is substantially similar in substance to the Hemsworth exclusivity clause, though drafted in slightly different form:
"Supplier [Tridale] hereby grants to Buyer [Vantor] the exclusive right to purchase and distribute the Products within the Territory during the Term. Supplier shall not sell, offer to sell, or otherwise provide the Products to any person or entity other than Buyer during the Term without Buyer's prior written consent."
In exchange for this exclusivity commitment, Vantor agreed to a minimum annual purchase commitment of $8.3 million, subject to quarterly reviews and adjustments based on market conditions.
2. Termination-for-Convenience Clause
Section 7.2 of the Tridale–Vantor agreement sets forth the termination-for-convenience provision. The relevant language provides:
"This Agreement may be terminated by either party, with or without cause, upon sixty (60) days' advance written notice to the other party. Written notice shall be delivered in accordance with Section 12 [Notices and Communications]. Upon the effective date of such termination, the exclusivity obligations set forth in Section 3(a) shall terminate and each party shall be released from any further performance obligations under this Agreement, except that all outstanding purchase orders issued prior to the date of notice shall be completed and paid in accordance with the terms hereof."
The mechanics of this provision are substantially similar to those of the Hemsworth agreement. The termination right is mutual and unconditional. The key difference is the notice period: the Tridale agreement requires only 60 days' advance written notice, compared to 90 days under the Hemsworth agreement. This shorter notice period reflects the shorter overall term of the Tridale agreement and the faster-paced nature of the consumer electronics accessories market.
As with the Hemsworth agreement, the termination-for-convenience provision expressly states that the exclusivity obligation ceases as of the effective date of termination, and includes a tail obligation for the fulfillment of outstanding purchase orders placed before the date of the termination notice.
3. Application to Facts
The Cascade–Tridale supply agreement was executed on August 15, 2021. As of that date, the Tridale–Vantor Exclusive Supply Agreement was not set to expire until January 9, 2022, meaning that approximately five months remained on the exclusive term.
Applying the termination-for-convenience analysis: if Tridale delivered a termination-for-convenience notice to Vantor at least 60 days before August 15, 2021 — that is, on or before approximately June 16, 2021 — the termination would have become effective by August 15, 2021, and the exclusivity obligation would have ceased as of that date. Under such circumstances, Tridale would have been free to enter into a supply agreement with Cascade without breaching any obligation to Vantor.
As with the Hemsworth agreement, we need to confirm whether Tridale — specifically Gregory Fontaine — delivered a timely termination notice and the exact date of delivery. Preliminary review of Cascade's internal documents suggests that the termination-for-convenience was exercised; however, we have not yet obtained a copy of the notice itself.
The 60-day notice period applicable to the Tridale agreement is the shortest of the three agreements and therefore presents the least challenging timeline for the defense. Even if Tridale did not decide to terminate until relatively late in the process — for example, not until mid-June 2021 — it would still have been able to terminate the Vantor agreement in time to execute the Cascade agreement on August 15, 2021.
If the termination-for-convenience clause was properly exercised, there would have been no existing contractual obligation for Cascade to have interfered with, and the tortious interference with contractual relations claim as to the Tridale relationship would fail.
4. Damages Implications
Vantor claims $22.8 million in lost profits attributable to the Tridale relationship. This figure is based on a projected four-year revenue stream, discounted to present value at 8.5%, again as calculated by Dr. Harold Pryce. The four-year projection assumes that the two-year Tridale–Vantor agreement would have been renewed for at least one additional two-year term.
This projection suffers from the same fundamental flaw as the Hemsworth projection. Only approximately five months remained on the exclusive term of the Tridale–Vantor agreement as of August 15, 2021. The assumption of renewal is speculative and unsupported, particularly given the termination-for-convenience provision that allowed either party to terminate at any time on 60 days' notice.
Any provable damages should be limited to the remaining exclusive term of approximately five months. Based on Vantor's minimum annual purchase commitment of $8.3 million and the applicable margin, the estimated damages attributable to the Tridale relationship fall in the range of $1.4 million to $2.7 million.
C. Orion Lifestyle Brands Corp. — Vantor Exclusive Supply Agreement
1. Overview of Agreement Terms
The third Supplier Agreement at issue is the Exclusive Supply Agreement between Vantor Holdings Corp. and Orion Lifestyle Brands Corp. Orion is a California corporation headquartered at 1900 Avenue of the Stars, Suite 1050, Los Angeles, California 90067. Orion is a manufacturer and distributor of personal care and wellness products, including skincare, bath products, and health-oriented consumer goods. The company's Chief Executive Officer is Simone Alvarez, who executed the Vantor agreement on behalf of Orion.
The Orion–Vantor Exclusive Supply Agreement was executed on July 1, 2018, and was scheduled to expire on June 30, 2022, providing for a four-year initial term. This is the longest of the three agreements at issue and reflects the deep and longstanding relationship between Vantor and Orion, which predated the formal exclusive supply agreement by several years. The agreement covers an extensive range of personal care and wellness products, organized by product line and SKU in Attachment 1 to the agreement.
Under the agreement, Orion agreed to supply products in the specified categories exclusively to Vantor for the duration of the contract term. The exclusivity provision, contained in Article III, Section 3.01 of the agreement, states:
"During the Term of this Agreement, Orion shall sell and distribute the Products exclusively through Vantor and shall not, directly or indirectly, supply, sell, license, or otherwise make available the Products, or any products substantially similar thereto, to any third party within the Territory without the express prior written approval of Vantor. For purposes of this Section, 'Territory' shall mean the United States of America, including all states and territories."
In exchange for this exclusivity commitment, Vantor agreed to a minimum annual purchase commitment of $14.6 million — the largest of the three agreements — reflecting the scale and significance of the Orion product line to Vantor's business. The agreement further includes provisions for annual price adjustments, quality auditing rights, product liability insurance requirements, and customary representations and warranties.
2. Termination-for-Convenience Clause
Article VIII, Section 8.02 of the Orion–Vantor agreement sets forth the termination-for-convenience provision:
"Notwithstanding any other provision of this Agreement, either party shall have the right to terminate this Agreement at any time, for any reason or for no reason, by delivering written notice of termination to the other party not less than one hundred twenty (120) days prior to the desired date of termination. Such notice shall be delivered in accordance with Article XII, Section 12.04 [Notices]. Upon the effective date of any such termination, the exclusivity obligations set forth in Section 3.01 shall cease, and neither party shall have any further obligation to the other under this Agreement except as specifically set forth in Article X [Surviving Obligations], including the obligation to fulfill all purchase orders that were accepted by Orion prior to the date of the termination notice."
The 120-day notice period in the Orion agreement is the longest of the three agreements, reflecting the deeper and more complex nature of the Orion–Vantor business relationship and the longer time that would be required for either party to make alternative arrangements in the personal care product category. As with the other two agreements, the termination right is mutual, unconditional, and expressly provides for the cessation of the exclusivity obligation upon the effective date of termination.
The Orion agreement also includes a provision in Article X designating certain obligations as surviving termination, including confidentiality obligations (surviving for three years post-termination), product warranty obligations with respect to products sold prior to termination, and indemnification obligations arising from pre-termination conduct.
3. Application to Facts
The Cascade–Orion supply agreement was executed on May 10, 2021 — the earliest of the three Cascade agreements. As of that date, the Orion–Vantor Exclusive Supply Agreement was not set to expire until June 30, 2022, meaning that approximately 13 months remained on the exclusive term. This is the longest remaining term of the three agreements at the time of the respective Cascade agreements, and the Orion relationship represents the largest dollar volume at stake.
Applying the termination-for-convenience analysis: if Orion delivered a termination-for-convenience notice to Vantor at least 120 days before May 10, 2021 — that is, on or before approximately January 10, 2021 — the termination would have become effective by May 10, 2021, and the exclusivity obligation would have ceased as of that date.
The 120-day notice period in the Orion agreement is the longest of the three and presents the tightest timeline for the defense. If Orion did not deliver its termination notice until after January 10, 2021, the termination may not have become effective until a date after the Cascade–Orion agreement was executed on May 10, 2021. This could create a factual issue as to whether the exclusivity provision was still in effect at the time the Cascade–Orion agreement was executed.
For example, if Orion delivered its termination notice on February 1, 2021, the 120-day notice period would not have expired until approximately June 1, 2021 — 22 days after the Cascade–Orion agreement was executed on May 10, 2021. In that scenario, Vantor could argue that the exclusivity provision was still technically in effect on May 10, 2021, even though Orion had already given notice of its intent to terminate.
Preliminary review of the available documents suggests that Orion did exercise the termination-for-convenience clause, but the precise timing of the notice is a critical factual question that must be resolved through discovery. If the notice was timely delivered on or before January 10, 2021, the defense position is strong. If the notice was delivered after that date, we may face a more nuanced argument, though we can still contend that the execution of a supply agreement after notice of termination has been given — but before the notice period has fully run — does not constitute interference with the exclusivity provision, because the exclusive relationship was already in the process of lawful termination.
4. Damages Implications
Vantor claims $30.4 million in lost profits attributable to the Orion relationship — the largest single component of its total damages claim. This figure is based on a projected six-year revenue stream, discounted to present value at 8.5%, as calculated by Dr. Pryce. The six-year projection assumes that the four-year Orion–Vantor agreement would have been renewed for at least one additional term and then extended further through a series of renewals.
As with the Hemsworth and Tridale projections, this methodology is fundamentally unsound in light of the termination-for-convenience provision. Only approximately 13 months remained on the exclusive term of the Orion–Vantor agreement as of May 10, 2021. The assumption of a six-year revenue stream is entirely speculative and unsupported by the terms of the agreement, which allowed either party to terminate at any time on 120 days' notice.
Any provable damages should be limited to the remaining exclusive term of approximately 13 months. Based on Vantor's minimum annual purchase commitment of $14.6 million and the applicable margin, the estimated damages attributable to the Orion relationship fall in the range of $1.9 million to $3.7 million.
IV. Comparative Analysis of Termination-for-Convenience Provisions
A. Summary Table
The following table provides a side-by-side comparison of the key terms of the three Supplier Agreements and the relevant timing of the Cascade supply agreements:
B. Key Observations
Several observations emerge from the comparative analysis of the three termination-for-convenience provisions:
First, all three agreements are terminable for convenience. This is the single most important observation. None of the three Supplier Agreements constitutes an ironclad exclusive arrangement that could only be terminated upon expiration of the stated term or for cause. To the contrary, each agreement expressly permits either party to terminate at any time, for any reason or no reason, upon delivery of the specified notice. Vantor's complaint characterizes the agreements as "exclusive supply agreements" — and they are — but Vantor conspicuously fails to disclose or acknowledge the termination-for-convenience provisions. This omission is significant and potentially misleading, as it creates the impression that the agreements were binding for their full stated terms without any right of early termination.
Second, the termination provisions are mutual. The termination-for-convenience right is not limited to one party or the other; both the supplier and Vantor possessed the right to terminate. This mutuality is significant because it demonstrates that Vantor itself had the ability to terminate the agreements at any time — a fact that undermines any assertion that the agreements represented firm, long-term commitments upon which Vantor could reasonably rely for purposes of calculating multi-year damages.
Third, the notice periods range from 60 to 120 days, all of which are commercially reasonable. The notice periods are calibrated to the complexity and duration of the respective supplier relationships: the shortest term agreement (Tridale, 2 years) has the shortest notice period (60 days), while the longest term agreement (Orion, 4 years) has the longest notice period (120 days). Each notice period would have provided Vantor with sufficient advance warning and an opportunity to seek alternative suppliers or take other mitigating action.
Fourth, Vantor's complaint omits any reference to the termination-for-convenience provisions. As noted above, this omission is striking. The complaint characterizes the supplier agreements as "exclusive supply agreements" that were "in full force and effect" at the time Cascade entered into agreements with the suppliers, without disclosing that the agreements were terminable at will by either party. This omission may provide a basis for challenging the sufficiency of Vantor's pleading and for arguing that Vantor's representations to the court have been incomplete and misleading.
C. Effect on "Breach" Theory
The existence and exercise of the termination-for-convenience provisions have a direct and potentially dispositive impact on Vantor's "breach" theory — specifically, Vantor's first cause of action for tortious interference with contractual relations.
A fundamental element of tortious interference with contractual relations under California law is the existence of a valid and enforceable contract that was breached. See Harborview Industries, 50 Cal. 3d 1118, 1126 (1990); Quelimane Co. v. Stewart Title Guar. Co., 19 Cal. 4th 26, 55 (1998). The plaintiff must demonstrate that the defendant's conduct caused a third party to breach its contractual obligations to the plaintiff. If there was no breach — because the contract was lawfully terminated in accordance with its own terms — then the claim fails as a matter of law.
If the suppliers properly exercised their termination-for-convenience rights before entering into agreements with Cascade, then there was no breach of the Vantor agreements. The agreements were lawfully terminated, the exclusivity obligations ceased, and the suppliers were free to contract with Cascade or any other party. Cascade's conduct in offering competitive supply terms cannot constitute "inducing breach" of an agreement that was no longer in effect.
Even if the termination notices overlapped in timing with the execution of the Cascade agreements — as may be the case with the Orion agreement, depending on the precise date of notice — the suppliers were exercising contractual rights, not breaching contractual obligations. The distinction between inducing a breach of contract and inducing the exercise of a lawful termination right is critical under California tortious interference law. As detailed in Carlos Espinoza's October 8, 2021 research memorandum, California law generally does not recognize tortious interference where the alleged "interferer" merely provided a competitive alternative that caused a party to exercise a lawful termination right. See della Penna v. Crowne Albany Industries, 11 Cal. 4th 376, 392–93 (1995) (emphasizing that liability for interference requires conduct that is independently wrongful, beyond merely offering a better deal); Glenrock Corporation, 29 Cal. 4th 1134, 1153–54 (2003) (discussing the requirement of independently wrongful conduct).
This analysis is particularly powerful when combined with the evidence of independent economic rationale for the suppliers' decisions, as discussed in Section V.C below.
V. Open Factual Questions and Recommended discovery
A. Confirmation of Termination Notices
The most critical open factual question is the confirmation that each of the three suppliers actually delivered timely termination-for-convenience notices to Vantor. While the preliminary evidence suggests that each supplier exercised its termination right, we do not yet have copies of the actual notices, nor have we confirmed the precise dates and methods of delivery. Obtaining this evidence is the single highest priority for the next phase of case development.
The specific documents and information we need to obtain include:
• The written termination notices themselves, including the full text of each notice, the identity of the signatory, and any accompanying correspondence.
• Proof of delivery and receipt, including certified mail return receipts, overnight courier tracking records, or other documentation confirming the date on which each notice was delivered to Vantor.
• Dates of delivery and effective termination, including the date each notice was sent, the date it was received by Vantor, and the calculated effective date of termination based on the applicable notice period.
These documents should be obtainable through multiple channels:
(a) Cascade's own files: If copies of the termination notices were shared with Cascade during negotiations with the suppliers, they may already be in Cascade's document collection. We should follow up with David Pruitt and Annika Bergström to determine whether any such documents are in Cascade's possession.
(b) Third-party subpoenas to the three suppliers: We can serve document subpoenas on each of the three suppliers seeking production of the termination notices and related correspondence with Vantor. The subpoenas should be directed to the following addresses:
• Hemsworth Consumer Products LLC, 4720 NW Yeon Avenue, Portland, OR 97210 (Attn: Janet Kohler, CEO)
• Tridale Manufacturing Inc., 6300 South Pecos Road, Suite 210, Las Vegas, NV 89120 (Attn: Gregory Fontaine, President)
• Orion Lifestyle Brands Corp., 1900 Avenue of the Stars, Suite 1050, Los Angeles, CA 90067 (Attn: Simone Alvarez, CEO)
(c) discovery requests to Vantor: We should include specific requests for the termination notices in our first set of requests for production of documents to Vantor. Vantor is necessarily in possession of the notices, as the notices were required to be delivered to Vantor's designated notice address.
I recommend that we pursue all three channels simultaneously. The discovery requests to Vantor should be included in our first set of written discovery, which I am currently drafting for review. The third-party subpoenas should be prepared and served as soon as practicable. And we should communicate with David Pruitt to determine whether any relevant documents are already in Cascade's possession.
B. Cascade's Knowledge of Exclusivity Provisions
A secondary but important factual question is the extent of Cascade's knowledge of the exclusivity provisions at the time it entered into agreements with the three suppliers. Vantor's complaint alleges that Cascade "knew or should have known" that the suppliers were bound by exclusive supply agreements with Vantor. If Vantor can establish that Cascade had actual knowledge of the exclusivity provisions, it strengthens the inference that Cascade intentionally interfered with the Vantor agreements.
We need to conduct a thorough review of internal Project Atlas communications to assess what members of the Project Atlas team knew about the suppliers' existing relationships with Vantor and the terms of those relationships, including the exclusivity provisions and the termination-for-convenience clauses. The Project Atlas document set currently includes approximately 2,847 emails among team members. Of these, a preliminary keyword search has identified 14 emails that specifically reference Vantor's supplier relationships or the Vantor name. These 14 emails should be reviewed carefully, with particular attention to:
• References to the exclusivity provisions in the Vantor supplier agreements;
• References to the termination-for-convenience provisions;
• Communications with the suppliers regarding their existing Vantor commitments;
• Any legal analysis or advice sought regarding the permissibility of entering into agreements with suppliers under exclusive contract with Vantor.
One of Cascade's key affirmative defenses is that it did not have actual knowledge of the exclusivity provisions at the time it entered into the supply agreements. The termination-for-convenience analysis strengthens this defense in a significant way: even if Cascade had some knowledge of the exclusivity provisions, the termination-for-convenience clauses meant that the suppliers were free to terminate those provisions at any time. Thus, knowledge of the exclusivity provisions does not equate to knowledge that the suppliers were irrevocably committed to Vantor, and any awareness of the exclusivity provisions would have been tempered by the understanding that the suppliers had the right to terminate.
C. Supplier Motivations
A third area of factual investigation concerns the motivations of the three suppliers in terminating their relationships with Vantor and entering into agreements with Cascade. This is relevant to both the tortious interference with contractual relations claim and the tortious interference with prospective economic advantage claim.
We should interview or depose the key contacts at each supplier — Janet Kohler of Hemsworth, Gregory Fontaine of Tridale, and Simone Alvarez of Orion — regarding their reasons for terminating with Vantor and entering into agreements with Cascade. Specifically, we should seek to determine whether the suppliers' decisions were independently motivated by legitimate business considerations, such as more favorable financial terms and access to a broader distribution channel, rather than the result of improper inducement or coercion by Cascade.
The financial comparison between the Vantor and Cascade arrangements strongly supports the conclusion that the suppliers were motivated by independent economic self-interest:
The Cascade commitments are approximately 2.0 to 2.4 times larger than the Vantor commitments. In addition to the higher purchase volume commitments, the suppliers would also have gained access to Cascade's extensive distribution network of more than 340 retail locations across 22 states and its growing e-commerce platform. These factors provide a clear and compelling independent economic rationale for the suppliers' decisions to terminate their Vantor relationships and enter into agreements with Cascade.
If the suppliers' decisions were independently motivated, this significantly undermines Vantor's theory that Cascade "induced" the suppliers to breach or terminate their agreements. Offering better terms in a competitive marketplace is not tortious interference — it is competition. See della Penna, 11 Cal. 4th at 392–93.
VI. Impact on Affirmative Defenses
The termination-for-convenience analysis set forth in this memorandum directly supports at least four of the affirmative defenses asserted in Cascade's answer filed October 18, 2021.
A. Defense No. 1 — Lack of Knowledge
Cascade's first relevant affirmative defense asserts that Cascade did not have actual knowledge of the exclusive supply agreements between Vantor and the three suppliers at the time Cascade entered into its own supply agreements. The termination-for-convenience provisions reinforce this defense in two respects.
First, even if Cascade had some awareness of Vantor's relationships with the suppliers, the termination-for-convenience provisions establish that those relationships were terminable at will. Any awareness Cascade may have had of the exclusivity provisions does not equate to knowledge that the suppliers were irrevocably bound. If Cascade understood — as any reasonable business entity would — that supply agreements of this nature typically contain termination-for-convenience provisions, then Cascade's awareness of the supplier relationships would not have put it on notice that the suppliers were unable to lawfully terminate.
Second, the termination-for-convenience provisions mitigate any inference that Cascade knowingly induced breach of non-terminable obligations. The distinction between knowing that a supplier has an existing relationship with a competitor and knowing that the supplier is bound by an unbreakable exclusive commitment is legally significant, and the termination-for-convenience provisions demonstrate that the latter characterization is inaccurate.
B. Defense No. 2 — Independent Action by Suppliers
Cascade's second relevant affirmative defense asserts that the suppliers acted independently and of their own volition in terminating their relationships with Vantor and entering into agreements with Cascade. The termination-for-convenience clauses are central to this defense.
The termination-for-convenience provisions demonstrate that the suppliers had a contractual right to leave Vantor's network at any time, for any reason. The suppliers' decision to exercise that right and to enter into agreements with Cascade reflects independent business judgment based on superior financial terms and distribution access — not coerced or induced breach of a binding obligation. As discussed in Section V.C above, the Cascade annual purchase commitments are approximately 2.0 to 2.4 times larger than the corresponding Vantor commitments, providing a compelling independent economic rationale for the suppliers' decisions.
C. Defense No. 3 — Proper Exercise of Termination Rights
The third relevant affirmative defense — and the one most directly supported by this memorandum — asserts that the suppliers properly exercised their contractually permitted termination-for-convenience rights, and that as a result, there was no breach of contract for Cascade to have induced.
This is the core of the defense on the tortious interference with contractual relations claim. If the suppliers exercised their termination-for-convenience rights in accordance with the procedures and notice periods specified in the agreements, then the Vantor agreements were lawfully terminated. There was no breach of contract. And if there was no breach, then Cascade cannot be liable for tortious interference with contractual relations, because a necessary element of the claim — the existence of a breach — is absent.
D. Defense No. 4 — Failure to Mitigate
The fourth relevant affirmative defense asserts that Vantor failed to take reasonable steps to mitigate its damages following the termination of the supplier relationships. The termination-for-convenience provisions are directly relevant to this defense because the notice periods — 90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion — would have provided Vantor with advance written notice of the impending termination of each relationship.
During and after the applicable notice periods, Vantor had a duty to take reasonable steps to mitigate its damages, including by seeking alternative suppliers for the affected product categories. Vantor's failure to pursue available alternatives — or its delay in doing so — should substantially reduce or eliminate any cognizable damages. This is particularly significant given that Vantor operates in a marketplace with numerous potential alternative suppliers in each of the affected product categories.
VII. Impact on Damages Analysis
Vantor's claimed damages of $87.4 million are based on projected multi-year revenue streams: a five-year projection for the Hemsworth relationship, a four-year projection for the Tridale relationship, and a six-year projection for the Orion relationship. All three projections are discounted to present value at a rate of 8.5%, as calculated by Vantor's retained damages expert, Dr. Harold Pryce of Meridian Forensic Economics LLC.
These projections rest on a fundamentally flawed premise: they assume that the exclusive supply agreements would have continued far beyond their stated contractual terms, through multiple renewals and extensions. This assumption is entirely speculative and unsupported by the terms of the agreements, which — as this memorandum has demonstrated — permitted either party to terminate the relationship at any time upon the delivery of written notice ranging from 60 to 120 days. The existence of the termination-for-convenience provisions makes it unreasonable to assume that the agreements would have been renewed or extended, and any damages model predicated on such an assumption should be excluded as speculative and unsupported.
The proper measure of damages, if any, should be limited to the remaining exclusive term at the time of the suppliers' terminations. That is, damages should be calculated based on the lost profits Vantor would have earned during the period between the effective date of termination and the contractual expiration date of each agreement — and no longer. The estimated ranges for each agreement are as follows:
The difference between Vantor's claimed damages and the estimated actual damages is staggering: Vantor's figures are approximately eight to fourteen times larger than the reasonable range. This disparity is attributable entirely to Vantor's use of speculative multi-year projections that ignore the termination-for-convenience provisions.
Additionally, Vantor's failure to mitigate its damages during and after the contractual notice periods could further reduce the damages by an estimated 40% to 55%. Applying this mitigation reduction to the estimated actual damages range would yield a potential net exposure of approximately $2.7 million to $6.8 million — a fraction of the $87.4 million claimed in Vantor's complaint.
To support these arguments at trial and in any dispositive motion practice, I recommend that we retain an independent economics expert to prepare a formal rebuttal damages analysis. Our preliminary recommendation is Dr. Vivian Ostrowski of Archer & Colvin Consulting Group, located at 701 Fifth Avenue, Suite 4100, Seattle, Washington 98104. Dr. Ostrowski has extensive experience in commercial damages analysis and has been qualified as an expert in both state and federal courts. The specifics of the expert retention will be addressed in a separate expert retention memorandum, which I anticipate preparing in November 2021.
VIII. Conclusions and Recommendations
A. Summary of Key Findings
Based on the analysis set forth in this memorandum, the key findings are as follows:
1. All three Vantor exclusive supply agreements contain termination-for-convenience clauses with commercially reasonable notice periods. The notice periods are 90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion. The termination rights are mutual — either party, including the supplier, may terminate at any time for any reason or no reason.
2. Based on preliminary review, all three suppliers appear to have exercised their termination-for-convenience rights prior to or contemporaneously with entering into supply agreements with Cascade. The precise dates of the termination notices have not yet been confirmed and represent the highest-priority discovery objective.
3. If the termination-for-convenience clauses were properly exercised, the Vantor agreements were lawfully terminated and there was no breach. This is fatal to Vantor's first cause of action for tortious interference with contractual relations, because a necessary element of the claim — the existence of a breach of contract — would be absent.
4. The termination provisions dramatically reduce the potential damages exposure. Vantor's claimed damages of $87.4 million are based on speculative multi-year revenue projections that assume renewal of the agreements far beyond their stated terms. The proper measure of damages, if any, is limited to the remaining exclusive term at the time of termination, yielding an estimated range of $6.1 million to $11.3 million before any reduction for failure to mitigate.
5. The existence of termination-for-convenience provisions undermines Vantor's characterization of the supplier agreements as unbreakable exclusive commitments. Vantor's complaint omits any reference to these provisions, creating a misleading impression of the nature and scope of the supplier relationships.
B. Recommended Next Steps
Based on the foregoing analysis, I recommend the following next steps:
1. discovery priority — termination notices. The immediate priority should be to obtain copies of the actual termination notices delivered by each supplier to Vantor, including the precise dates of delivery and proof of receipt. This evidence is critical to confirming the defense theory outlined in this memorandum. We should pursue this evidence through three channels simultaneously: (a) a review of Cascade's own files for copies that may have been shared during supplier negotiations, (b) requests for production of documents included in our first set of written discovery to Vantor, and (c) third-party document subpoenas served on Hemsworth, Tridale, and Orion.
2. Witness interviews. We should coordinate with David Pruitt, General Counsel of Cascade, to arrange interviews of Annika Bergström (VP Strategic Sourcing) and Lena Torvik (SVP Supply Chain & Procurement) regarding the Project Atlas team's understanding of the suppliers' existing Vantor commitments and the termination timelines. These interviews should focus on what Cascade knew about the exclusivity provisions, when it learned of the suppliers' intent to terminate, and what role, if any, Cascade played in the suppliers' termination decisions.
3. Third-party witness outreach. We should consider early, informal outreach to counsel for Hemsworth, Tridale, and Orion to preserve cooperative relationships and to explore the possibility of obtaining voluntary production of termination correspondence before formal subpoenas are needed. Cooperative relationships with the suppliers will be valuable throughout the litigation, particularly if we need to call supplier witnesses at trial.
4. Litigation hold. The forthcoming litigation hold memorandum, scheduled for issuance on December 10, 2021, should be expanded to cover all custodians with knowledge of the termination-for-convenience analysis, including individuals who communicated with supplier contacts regarding the termination process. This includes, at a minimum, Annika Bergström, Lena Torvik, and any other members of the Project Atlas team who had direct communications with Hemsworth, Tridale, or Orion.
5. Expert retention. We should begin the process of identifying and retaining a damages expert to prepare a formal rebuttal of Vantor's damages methodology. The expert should specifically opine on the impact of the termination-for-convenience provisions on the damages calculus, including the proper time horizon for damages, the speculative nature of Vantor's renewal assumptions, and the effect of Vantor's failure to mitigate. As noted above, our preliminary recommendation is Dr. Vivian Ostrowski of Archer & Colvin Consulting Group. I will prepare a separate expert retention memorandum for your review.
6. Insurance coordination. This analysis should be shared with Cascade's general liability insurer, Pinnacle National Insurance Co., through the coverage notification process. The relevant policy is Policy No. PNG-CGL-2021-04487, and the designated contact is Leonard Furman, Senior Claims Adjuster. Sharing this analysis will support the argument that Cascade's actual exposure is significantly below Vantor's claimed $87.4 million and may facilitate a more favorable approach to defense cost allocation under the policy.
I am available to discuss this memorandum and the recommended next steps at your convenience. Please let me know if you would like me to proceed with any of the recommended actions or if you have additional questions.
Respectfully submitted,
YUKI NAKAMURA Senior Associate Calderwood & Harkness LLP
By: ________
Yuki Nakamura
Date: October 25, 2021
IX. Attachments / Appendices (Referenced)