pre-settlement-conference-strategy-memo.docx

1038-00007 · Cascade Retail Holdings · Settlement

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MEMORANDUM

April 20, 2023

TO: David Pruitt, General Counsel & Corporate Secretary Cascade Retail Holdings Inc. 2200 Elliott Avenue West, Suite 1400 Seattle, WA 98119

FROM: Douglas Carmichael, Partner Calderwood & Harkness LLP 600 South Grand Avenue, Suite 3200 Los Angeles, CA 90071

RE: Pre-Settlement Conference Strategy — Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, Superior Court of California, County of Los Angeles

C&H MATTER NO.: 1038-00007

COPIES: Francesca Morano (Partner), Yuki Nakamura (Senior Associate) — Calderwood & Harkness LLP

I. Purpose and Executive Summary

This memorandum sets forth our strategic analysis and recommendations in advance of the mandatory settlement conference scheduled for April 28, 2023, before the Superior Court of California, County of Los Angeles, in Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872. The purpose of this memorandum is to provide Cascade Retail Holdings Inc. ("Cascade") with a comprehensive assessment of the current posture of the case, the risks and merits of the remaining claims, the range of possible trial outcomes, and a recommended negotiation strategy and target settlement range for the upcoming conference.

The case has reached a critical juncture following the court's April 14, 2023 ruling on Cascade's motion for partial summary judgment. As discussed in detail below, the court granted summary judgment on Vantor's third cause of action under California Business & Professions Code § 17200 (the "UCL claim"), eliminating the risk of statutory remedies, restitution, and injunctive relief. However, the court denied summary judgment on the second cause of action for tortious interference with prospective economic advantage, finding that the 14 internal "Project Atlas" emails created triable issues of material fact regarding whether Cascade's conduct constituted independently wrongful conduct. As a result, two causes of action remain for trial: (1) tortious interference with contractual relations and (2) tortious interference with prospective economic advantage.

Based on our assessment of the trial risks, the strength of Cascade's remaining defenses, the expert damages analyses, the insurance contribution available from Pinnacle National Insurance Co., and the costs and management distraction associated with continued litigation through trial, we recommend a target settlement range of $12 million to $18 million, with an optimal target of approximately $14 million to $15 million. This range is informed by a risk-adjusted expected exposure analysis that accounts for both the probability of an adverse verdict and the range of potential damages outcomes.

Cascade's commercial general liability insurer, Pinnacle National Insurance Co. (Policy No. PNG-CGL-2021-04487), has been providing defense cost coverage throughout this matter and is expected to contribute approximately $5 million to $7 million toward any settlement within the recommended range. If Pinnacle contributes in that range, Cascade's net settlement cost at the optimal target would be approximately $8 million to $9 million — a figure that compares favorably with the risk-adjusted cost of trial, inclusive of additional litigation expenses.

We recommend that Cascade attend the settlement conference with clear authority to settle within the recommended range, subject to any board or executive approval requirements from Margaret Prumvane, CEO & President, and Raj Subramanian, CFO. We further recommend scheduling a strategy call prior to April 28, 2023, to finalize the negotiation approach and confirm settlement authority parameters.

II. Current Case Posture

A. Summary of the Court's April 14, 2023 Ruling on Partial Summary Judgment

On February 28, 2023, Cascade filed its motion for partial summary judgment, targeting two of Vantor's three remaining causes of action: the second cause of action for tortious interference with prospective economic advantage and the third cause of action for unfair business practices under California Business & Professions Code § 17200 (the "UCL claim"). The motion was fully briefed, with Vantor's opposition filed on March 20, 2023, and Cascade's reply filed on March 27, 2023. The court heard oral argument on April 7, 2023, and issued its written ruling on April 14, 2023.

Section 17200 Claim — Granted. The court granted Cascade's motion for summary judgment on the UCL claim, agreeing with Cascade's argument that Vantor's § 17200 cause of action was duplicative of and substantively predicated upon the same factual allegations underlying the tortious interference claims. The court found that Vantor had not identified any independent unfair, unlawful, or fraudulent business practice apart from the alleged interference with supplier relationships that formed the basis of the first and second causes of action. The court further noted that Vantor's UCL theory was essentially a repackaging of the tortious interference claims in statutory garb, and that permitting both to proceed to trial would risk jury confusion and duplicative recovery. This ruling is significant because it eliminates the risk of statutory remedies available under the UCL, including restitution, disgorgement, and — most critically — injunctive relief. Prior to this ruling, there existed a meaningful risk that the court could enter an injunction restricting Cascade's future supplier relationships, which would have had significant operational implications for Cascade's supply chain strategy. That risk is now eliminated.

Prospective Economic Advantage Claim — Denied. The court denied Cascade's motion for summary judgment on the second cause of action for tortious interference with prospective economic advantage. In its ruling, the court acknowledged that mere competitive conduct — including offering better terms to a competitor's suppliers — does not, standing alone, constitute the independently wrongful conduct required to sustain a claim for tortious interference with prospective economic advantage under California law. However, the court found that Vantor had raised triable issues of material fact regarding whether Cascade's conduct went beyond mere competition. The court specifically cited the 14 internal Project Atlas emails that reference Vantor's supplier relationships as evidence from which a reasonable jury could infer that Cascade was aware of and intentionally targeted Vantor's supplier base, even if Cascade did not have actual knowledge of the specific terms of the exclusivity provisions contained in Vantor's supplier agreements. The court stated that the emails, viewed in the light most favorable to the nonmoving party, could support a reasonable inference that Cascade's sourcing strategy was designed not merely to secure competitive supply agreements but to disrupt a known competitor's existing supplier network. This ruling is a setback, but it is not unexpected given the deferential standard applied on summary judgment. The ruling does not reflect the court's assessment of the ultimate merits; it reflects only that a triable issue of fact exists.

Net Effect of the Ruling. Two causes of action remain for trial:

(1) First Cause of Action: Tortious interference with contractual relations; and

(2) Second Cause of Action: Tortious interference with prospective economic advantage.

The elimination of the UCL claim narrows the case, removes the risk of equitable relief, and simplifies the trial presentation. However, the survival of the prospective economic advantage claim preserves Vantor's ability to present the Project Atlas emails to the jury and to argue for damages extending beyond the remaining terms of the supplier contracts.

B. Remaining Claims and Legal Exposure

First Cause of Action: Tortious Interference with Contractual Relations. To prevail on this claim, Vantor must prove each of the following elements: (i) the existence of a valid contract between Vantor and each of the three suppliers — Hemsworth Consumer Products LLC ("Hemsworth"), Tridale Manufacturing Inc. ("Tridale"), and Orion Lifestyle Brands Corp. ("Orion"); (ii) Cascade's knowledge of those contracts; (iii) intentional acts by Cascade designed to induce a breach or disruption of the contracts; (iv) an actual breach or disruption of the contracts; and (v) resulting damages. The existence of the contracts is not disputed; however, the remaining elements are contested. Cascade's key defensive arguments on this claim are as follows:

• Lack of Actual Knowledge of Exclusivity Provisions. While Cascade may have been generally aware that Vantor had supply relationships with Hemsworth, Tridale, and Orion, Cascade did not have actual knowledge of the specific exclusivity provisions contained in those agreements. Knowledge of a competitor's general supplier relationships, without knowledge of the particular contractual terms at issue, is insufficient to establish the knowledge element.

• Independent Exercise of Termination-for-Convenience Clauses. Each of the three supplier agreements contained broad termination-for-convenience provisions. The suppliers independently exercised those contractual rights — Hemsworth with 90 days' notice, Tridale with 60 days' notice, and Orion with 120 days' notice — before entering into new agreements with Cascade. Where a supplier exercises a contractual right to terminate, there is no "breach" in the relevant sense, and any disruption of Vantor's contractual relationships resulted from the suppliers' own voluntary decisions rather than from any wrongful conduct by Cascade.

• No Inducement or Improper Means. Cascade's conduct consisted of offering competitive terms — including higher annual purchase commitments — to suppliers in an open market. Offering better business terms to a third party is not inducement through improper means; it is lawful competitive activity.

Second Cause of Action: Tortious Interference with Prospective Economic Advantage. This claim requires Vantor to prove that Cascade engaged in independently wrongful conduct — that is, conduct that is wrongful by some legal measure other than the fact of the interference itself — to disrupt Vantor's prospective economic relationships with suppliers beyond the existing contract terms. The "independently wrongful conduct" requirement is a significant hurdle for Vantor, and the court's ruling on summary judgment acknowledged that mere competition does not satisfy this standard. Nevertheless, the court found that the 14 Project Atlas emails create a fact question as to whether Cascade's conduct crossed the line from aggressive-but-lawful competition into independently wrongful targeting of a competitor's supplier base. This is a claim that will turn heavily on the jury's interpretation of the emails and the credibility of the witnesses.

C. Discovery and Record Summary

Discovery in this matter has been extensive and is now substantially complete. The following summarizes the scope of the discovery record:

Document discovery:

• Total documents collected from Cascade: 452,316

• Documents reviewed by Cascade's review team: 198,740

• Documents produced by Cascade: 78,412

• Documents produced by Vantor: 41,308

• Documents produced by third parties (Hemsworth, Tridale, and Orion) via subpoena: 23,567

• Entries on Cascade's privilege log: 3,214

Deposition discovery:

A total of 14 depositions have been taken in this matter — eight by Vantor and six by Cascade. The key fact depositions include:

• Annika Bergström (Cascade VP, Strategic Sourcing) — deposed October 12, 2022. Bergström was the senior Cascade executive most directly involved in Project Atlas and the negotiations with Hemsworth, Tridale, and Orion. Her testimony is discussed in detail in Section III.B below.

• Thomas Brennecke (Vantor VP, Supplier Relations) — deposed October 26, 2022. Brennecke testified regarding Vantor's relationships with the three suppliers and the impact of the suppliers' departures on Vantor's operations. His testimony regarding damages provides the foundation for Dr. Pryce's expert analysis.

• Lena Torvik (Cascade SVP, Supply Chain & Procurement) — deposed November 18, 2022. Torvik is the executive to whom Bergström reported and who approved the Project Atlas budget and strategy. Her testimony is discussed in Section III.B below.

Additionally, depositions of the three supplier executives — Janet Kohler (Hemsworth CEO), Gregory Fontaine (Tridale President), and Simone Alvarez (Orion CEO) — were taken by Cascade and provided testimony favorable to the defense regarding the independence of their companies' decisions.

Expert discovery:

• Dr. Harold Pryce (Meridian Forensic Economics LLC, Vantor's damages expert) — expert report served December 9, 2022; deposition taken January 20, 2023. Dr. Pryce opines that Vantor's total damages are $87.4 million.

• Dr. Vivian Ostrowski (Archer & Colvin Consulting Group, Cascade's damages expert) — rebuttal report served December 22, 2022; deposition taken February 3, 2023. Dr. Ostrowski opines that provable damages are limited to $6.1 million to $11.3 million.

III. Assessment of Trial Risks

A. Strengths of Cascade's Defense

We have identified several significant strengths in Cascade's defense that would support a favorable outcome at trial and that should be leveraged during settlement negotiations:

1. Termination-for-Convenience Clauses. The single most important defense to the tortious interference with contractual relations claim is the existence of termination-for-convenience provisions in all three of Vantor's supplier agreements. Each supplier properly exercised its contractual right to terminate before entering into a new agreement with Cascade. The relevant contractual details are as follows:

• Hemsworth–Vantor Supply Agreement: Executed March 15, 2019; term expiring March 14, 2022; 90-day termination-for-convenience notice period. Hemsworth provided Vantor with written notice of termination on September 3, 2021 — well within the contractual notice period.

• Tridale–Vantor Supply Agreement: Executed January 10, 2020; term expiring January 9, 2022; 60-day termination-for-convenience notice period. Tridale provided Vantor with written notice of termination on August 11, 2021.

• Orion–Vantor Supply Agreement: Executed July 1, 2018; term expiring June 30, 2022; 120-day termination-for-convenience notice period. Orion provided Vantor with written notice of termination on October 1, 2021.

The proper exercise of these termination-for-convenience rights fundamentally undermines Vantor's claim that any "breach" was induced by Cascade. Where a party exercises a contractual right to terminate, there is no breach, and the question of inducement becomes moot with respect to the first cause of action. Vantor's response — that the terminations were a pretext orchestrated by Cascade — requires the jury to disbelieve the testimony of three independent supplier executives and to infer a level of coordination that is not supported by the documentary record.

2. Lack of Knowledge of Exclusivity Terms. Cascade's internal records, including the full universe of 2,847 Project Atlas emails (of which only 14 reference Vantor's supplier relationships), do not demonstrate that Cascade had actual knowledge of the specific exclusivity provisions contained in the Vantor supplier agreements. The 14 emails at issue reference Vantor only as a competitor in the consumer products and retail market — not as a party to exclusive supply contracts with Hemsworth, Tridale, or Orion. Several of the emails discuss Vantor's product lines, pricing strategies, and market positioning in the context of competitive analysis, which is standard practice for a company evaluating new supplier relationships. None of the 14 emails reference the terms "exclusivity," "exclusive supply," or "exclusive arrangement," nor do they reference the specific contractual provisions at issue. This absence of documentary evidence is significant and distinguishes this case from the typical tortious interference case in which the defendant is shown to have known about the specific contractual rights being interfered with.

3. Independent Supplier Decision-Making. Deposition testimony from each of the three supplier executives strongly supports Cascade's position that the suppliers independently chose to pursue agreements with Cascade based on the significantly more favorable commercial terms offered. In particular:

• Janet Kohler (Hemsworth CEO): Testified that Hemsworth's decision to terminate its agreement with Vantor was driven by the substantially higher annual purchase commitments offered by Cascade — $28.0 million annually compared to $12.5 million annually under the Vantor agreement — and that Cascade did not request or suggest that Hemsworth terminate its Vantor agreement. Kohler testified that the decision was made by Hemsworth's board of directors and that the opportunity to more than double its annual revenue from a single customer was "the most significant growth opportunity Hemsworth had seen in five years."

• Gregory Fontaine (Tridale President): Testified similarly, noting that Cascade's annual purchase commitment of $19.5 million compared to Vantor's $8.3 million. Fontaine testified that Tridale's management team independently evaluated the opportunity and concluded that the Cascade relationship offered superior long-term value. He stated that at no point did any Cascade representative suggest that Tridale should terminate its Vantor agreement.

• Simone Alvarez (Orion CEO): Testified that Orion's decision was driven by Cascade's offer of $31.0 million in annual purchase commitments compared to $14.6 million under the Vantor agreement. Alvarez testified that Orion had already been considering diversifying its customer base and that the Cascade opportunity aligned with Orion's strategic growth plan.

This testimony is critical because it demonstrates that the suppliers were motivated by legitimate business considerations and that Cascade did not use improper means to induce the terminations. The fact that three independent companies, each represented by sophisticated management teams, reached the same conclusion independently is powerful evidence that Cascade's conduct was lawful competitive behavior.

4. Damages Rebuttal. Dr. Vivian Ostrowski's expert report, served December 22, 2022, persuasively limits the universe of provable damages to $6.1 million to $11.3 million. Dr. Ostrowski's analysis confines damages to the remaining exclusive terms under each supplier agreement at the time of the alleged breach, rather than projecting speculative future revenue streams over periods of five to six years as Dr. Pryce does. Dr. Ostrowski further applies a mitigation reduction of 40% to 55%, reflecting Vantor's failure to take reasonable steps to secure alternative suppliers following the terminations. Dr. Ostrowski identified at least seven potential alternative suppliers that Vantor could have engaged within 60 to 90 days of the termination notices and presented evidence that Vantor did not begin seeking alternative suppliers until approximately five months after the first termination notice was received. This analysis is well-supported and should be persuasive to a jury, particularly when contrasted with the aggressive assumptions underlying Dr. Pryce's $87.4 million figure.

5. Elimination of the § 17200 Claim. The court's grant of summary judgment on the UCL claim removes the risk of restitutionary remedies and, most importantly, injunctive relief. Prior to this ruling, Vantor had sought injunctive relief that, if granted, could have required Cascade to divest its supplier relationships with Hemsworth, Tridale, and Orion or to modify the terms of those relationships. The elimination of this risk is a significant strategic advantage and should be highlighted during the settlement conference.

B. Weaknesses and Trial Risks

Despite the strengths of Cascade's defense, we have identified several significant risks that could adversely affect the outcome at trial:

1. The 14 Project Atlas Emails. These emails represent the most significant vulnerability in Cascade's case. While the emails do not demonstrate actual knowledge of Vantor's exclusivity provisions, as discussed above, several of the emails reference Vantor's supplier relationships by name and discuss the strategic opportunity to "transition" suppliers away from competitors, including Vantor. At least three of the emails use language that, when read in isolation and presented to a jury by a skilled plaintiff's attorney, could be interpreted as evidence of a deliberate campaign to poach Vantor's suppliers rather than a lawful competitive sourcing initiative.

The court's ruling denying summary judgment on the prospective economic advantage claim relied specifically on these emails as evidence from which a reasonable jury could infer independently wrongful conduct. At trial, Martin Kessler — lead trial attorney for Kessler, Brandt & Whitfield LLP and an experienced plaintiff's litigator — will almost certainly build his narrative around these emails. Kessler is likely to select the most inflammatory language from the emails, present them to the jury out of context, and argue that they reveal a coordinated plan to strip Vantor of its supplier base. We anticipate that Kessler will use visual aids — blown-up excerpts, email chains displayed on screens — to maximize the emotional and persuasive impact of these documents. Our ability to provide context for the emails through live testimony will be important, but there is an inherent risk that the jury will focus on the most damaging excerpts rather than the full context of the Project Atlas initiative.

2. Jury Perception: "David vs. Goliath." The disparity in size between Cascade and Vantor creates a significant jury perception risk, particularly in Los Angeles County. Cascade is a $6.8 billion revenue (FY 2021), Nasdaq-listed public company with a market capitalization of approximately $14.2 billion and more than 340 retail locations across 22 states. Vantor, by contrast, is a privately held, mid-market company with approximately $1.1 billion in annual revenue and approximately 85 retail locations concentrated in California, Arizona, Nevada, and Oregon. Vantor may be perceived by a Los Angeles County jury as a local, smaller business that was victimized by a large, publicly traded national competitor. This "David vs. Goliath" dynamic is difficult to overcome, and Kessler's firm has a well-documented track record of exploiting this narrative in similar cases. Los Angeles County juries have historically been plaintiff-friendly in commercial disputes involving allegations that a large corporation engaged in predatory conduct against a smaller competitor.

3. Annika Bergström's Deposition Testimony. While Bergström's deposition testimony was generally favorable to Cascade's defense, certain answers she gave regarding her awareness that the three suppliers were supplying Vantor could be taken out of context by opposing counsel. Specifically, Bergström acknowledged that she conducted competitive analysis of Vantor's supplier base as part of the Project Atlas initiative and that one of the objectives of Project Atlas was to identify suppliers that were currently supplying competitors, including Vantor, in order to evaluate whether those suppliers could be recruited to supply Cascade. While this testimony reflects a standard and lawful competitive practice, Vantor's counsel will frame it as evidence that Cascade specifically targeted Vantor's suppliers — transforming what was a general competitive sourcing initiative into an alleged scheme directed at Vantor.

4. Lena Torvik's Deposition Testimony. Torvik, as the SVP of Supply Chain & Procurement and Bergström's direct supervisor, acknowledged during her deposition that the $4.2 million Project Atlas budget included "transition costs" intended to incentivize suppliers to transition from existing supply relationships to Cascade. Torvik explained that these transition costs included financial assistance for retooling, onboarding support, and volume guarantees — all of which are standard industry practices. However, the use of the phrase "incentivize suppliers to move from existing relationships" could be characterized by Vantor's counsel as an admission that Cascade used financial inducements to lure suppliers away from their contractual commitments. While we believe this characterization is inaccurate — transition incentives are a routine feature of supplier onboarding — the language is susceptible to a negative interpretation before a jury.

5. Magnitude of Vantor's Damages Claim. Although Dr. Ostrowski's analysis persuasively limits provable damages to $6.1 million to $11.3 million, Vantor's expert, Dr. Harold Pryce, has opined that Vantor's total damages are $87.4 million. This figure, while aggressive and based on speculative assumptions regarding contract renewals and expanded supplier relationships, establishes a powerful anchoring effect. Behavioral economics research consistently demonstrates that juries tend to anchor to high initial figures, even when those figures are subsequently challenged. Even if the jury rejects Dr. Pryce's methodology in its entirety, there is a meaningful risk that the jury will "split the difference" between the two experts' figures, potentially arriving at a damages number well above Dr. Ostrowski's range. This anchoring risk is particularly acute on the prospective economic advantage claim, which allows for forward-looking damages based on anticipated future business relationships.

6. Remaining Prospective Economic Advantage Claim. The survival of this claim following the court's ruling on summary judgment is the most concerning development in the case from a damages perspective. The prospective economic advantage claim allows Vantor to present evidence of anticipated future business relationships with the three suppliers beyond the existing contract terms. Unlike the tortious interference with contractual relations claim — which is limited to damages arising from the disruption of existing contracts — the prospective advantage claim opens the door to speculative future damages, including lost profits from renewals that were never guaranteed and from expanded supplier relationships that may never have materialized. This claim provides the evidentiary hook for Dr. Pryce's $87.4 million figure and substantially expands the potential damages universe beyond the remaining contract terms that form the basis of Dr. Ostrowski's more conservative analysis.

C. Probability Assessment

Based on our assessment of the strengths and weaknesses discussed above, including an analysis of the trial record, the applicable legal standards, the anticipated jury pool in Los Angeles County, and the experience and skill of opposing counsel, we estimate the following probabilities:

• Estimated probability of defense verdict at trial on all remaining claims: 55% to 65%.

• Estimated probability of plaintiff verdict on at least one claim: 35% to 45%.

• If plaintiff prevails, estimated damages range: $8 million to $25 million. The low end of this range reflects a scenario in which the jury accepts much of Dr. Ostrowski's methodology but awards damages modestly above her range. The high end reflects the anchoring effect of Vantor's $87.4 million claim and the risk that the jury awards significant damages on the prospective advantage claim.

• Risk-adjusted expected exposure (probability-weighted): Approximately $5 million to $11 million. This figure is calculated by multiplying the estimated probability of an adverse verdict (35%–45%) by the estimated range of adverse verdicts ($8 million–$25 million).

• Additional trial costs if the case proceeds: Estimated $1.5 million to $2.5 million in additional attorney fees, expert fees, and trial preparation costs, inclusive of the amounts detailed in Section VII.A below.

We note that these probability estimates carry inherent uncertainty. Jury trials, particularly in commercial tort cases involving large companies and significant damages claims, are unpredictable. The estimates above reflect our best professional judgment based on our experience with similar cases and our assessment of the specific facts of this matter.

IV. Damages Analysis for Settlement Purposes

A. Vantor's Claimed Damages

Vantor claims total damages of $87.4 million, based on the expert report of Dr. Harold Pryce of Meridian Forensic Economics LLC (2049 Century Park East, Suite 1200, Los Angeles, CA 90067), served December 9, 2022. Dr. Pryce's damages analysis is broken down by supplier relationship as follows:

Dr. Pryce's methodology projects damages extending well beyond the existing contract terms, assuming that each supplier agreement would have been renewed at expiration and that the relationships would have expanded over time. Dr. Pryce relies on historical growth rates in Vantor's supplier relationships and industry benchmarks to project future revenue streams. His analysis does not account for the termination-for-convenience provisions — which would have permitted the suppliers to exit the relationships at any time — and does not apply any meaningful mitigation reduction, asserting that Vantor took reasonable but unsuccessful steps to find alternative suppliers. While this methodology is aggressive and subject to significant challenge at trial, it establishes an anchor that will influence settlement negotiations. We anticipate that Vantor's opening settlement position will reference the $87.4 million figure prominently, even though both sides understand that the number significantly overstates Vantor's likely recovery at trial.

B. Cascade's Expert Damages Analysis

Dr. Vivian Ostrowski of the Archer & Colvin Consulting Group (701 Fifth Avenue, Suite 4100, Seattle, WA 98104) opines in her rebuttal report, served December 22, 2022, that Vantor's provable damages are limited to a range of $6.1 million to $11.3 million. Dr. Ostrowski's analysis differs from Dr. Pryce's in several critical respects:

• Damages Period. Dr. Ostrowski limits the damages analysis to the remaining exclusive terms under each supplier agreement at the time of the alleged breach, rather than projecting speculative future revenue streams over multi-year periods. This approach is consistent with the legal principle that damages for breach of contract should be measured by the value of the performance that was lost, not by speculative future benefits that may never have been realized. The remaining exclusive terms at the time of the alleged breach were as follows:

• Hemsworth: Approximately 9 months of remaining exclusive term — damages range of $2.8 million to $4.9 million.

• Tridale: Approximately 5 months of remaining exclusive term — damages range of $1.4 million to $2.7 million.

• Orion: Approximately 13 months of remaining exclusive term — damages range of $1.9 million to $3.7 million.

• Mitigation Reduction. Dr. Ostrowski applies a mitigation reduction of 40% to 55%, reflecting Vantor's failure to take reasonable steps to secure alternative suppliers following receipt of the termination notices. Dr. Ostrowski identified at least seven potential alternative suppliers that could have partially replaced the volume lost from Hemsworth, Tridale, and Orion within 60 to 90 days of the termination notices. Vantor did not begin seeking alternative suppliers until approximately five months after the first termination notice was received — a delay that Dr. Ostrowski characterizes as unreasonable under the circumstances.

Dr. Ostrowski's analysis is well-supported, methodologically sound, and would be persuasive to a jury. However, we note that her analysis is confined to the tortious interference with contractual relations claim. The survival of the prospective economic advantage claim potentially expands the damages framework beyond remaining contract terms, which could allow Dr. Pryce to present his projections of future revenue streams to the jury even on a claim where the contractual basis for damages is less clear. This is one of the reasons why the recommended settlement range exceeds the high end of Dr. Ostrowski's analysis.

C. Recommended Settlement Range

Based on the foregoing analysis of Vantor's claimed damages, Dr. Ostrowski's rebuttal analysis, the trial risk assessment set forth in Section III.C, and the insurance contribution considerations discussed in Section V, we recommend the following settlement parameters:

Floor: $12 million. This amount is slightly above the high end of Dr. Ostrowski's provable damages range of $11.3 million. A floor of $12 million reflects the reality that the surviving prospective economic advantage claim creates risk exposure beyond the remaining contract terms used in Dr. Ostrowski's analysis, and that jury unpredictability — including the anchoring effect of Vantor's $87.4 million claim — justifies a modest premium above the defense expert's range. It is unlikely that Vantor will accept a figure below $12 million at a settlement conference, given the strength of the evidence supporting at least some damages and the risk profile that Kessler will present to the settlement judge.

Target: $14 million to $15 million. This range reflects a balanced assessment of trial risk, the strength of Cascade's remaining defenses (particularly the termination-for-convenience defense and the supplier independence testimony), the elimination of the § 17200 claim, and the uncertainty associated with jury verdicts in a case of this nature. A settlement in this range would represent a significant discount from Vantor's claimed damages, would be defensible to Cascade's board and shareholders, and would reflect a rational allocation of risk between the parties.

Ceiling: $18 million. This is the maximum amount that is justified by the risk-adjusted analysis, accounting for worst-case jury outcomes on the prospective advantage claim and the full cost of continued litigation. A settlement above $18 million would begin to approach the high end of the estimated adverse verdict range and would not represent a meaningful discount for the risk and cost avoidance achieved through settlement. We would not recommend exceeding $18 million unless circumstances at the conference reveal information that materially alters our risk assessment.

Anticipated Vantor Opening Position. Based on our assessment of Kessler's typical negotiation style and the headline $87.4 million damages claim, we anticipate that Vantor's opening position at the settlement conference will be in the range of $40 million to $50 million. This opening will be strategically designed to anchor the negotiation well above the range that the evidence supports and to create the appearance of significant concessions as Vantor moves downward during the conference. We should be prepared for this dynamic and should not be moved by Vantor's opening number.

V. Insurance Coverage Considerations

Cascade's commercial general liability insurer, Pinnacle National Insurance Co. ("Pinnacle"), has been participating in the defense of this matter since notification of the claim on September 20, 2021. Coverage is provided under CGL Policy No. PNG-CGL-2021-04487. Pinnacle has been reimbursing Cascade's defense costs on an ongoing basis throughout the litigation, and to date, approximately $2,150,000 in defense costs have been submitted for reimbursement or are expected to be reimbursed by Pinnacle.

Based on recent discussions between our office and Leonard Furman, Senior Claims Adjuster at Pinnacle National Insurance Co. (120 Broadway, Suite 3500, New York, NY 10271), Pinnacle is expected to contribute toward any reasonable settlement of this matter. Preliminary indications from Mr. Furman suggest that Pinnacle will contribute approximately $5 million to $7 million toward a settlement in the recommended range. The specific contribution amount will depend on the final settlement figure, the terms of the settlement agreement, and Pinnacle's assessment of the coverage issues, which are being managed separately by Pinnacle's coverage counsel. We note that Pinnacle has reserved its rights on certain coverage defenses but has to date participated in the defense without invoking those reservations in any material way.

If Cascade settles at the target of approximately $14 million to $15 million and Pinnacle contributes $6 million to $7 million toward the settlement payment, Cascade's net settlement cost would be approximately $8 million to $9 million. This net exposure figure is within the risk-adjusted expected exposure range of $5 million to $11 million identified in Section III.C and represents a rational economic outcome for Cascade.

It is essential that any settlement agreement include appropriate language to preserve and secure Pinnacle's contribution obligations. Specifically, the settlement agreement should:

• Provide for Pinnacle's contribution as a separate payment obligation or require Cascade's payment to be conditioned on receipt of Pinnacle's contribution;

• Include representations that the settlement was reached in good faith and without collusion;

• Avoid any language that could be construed as an admission of liability that might trigger coverage exclusions; and

• Preserve Cascade's right to seek additional reimbursement from Pinnacle for defense costs incurred through the date of settlement.

We recommend that David Pruitt contact Leonard Furman prior to the settlement conference to confirm Pinnacle's contribution parameters and to ensure that Pinnacle consents to participate in the settlement at the anticipated contribution levels.

VI. Settlement Conference Strategy

A. Negotiation Framework

Cascade should enter the settlement conference on April 28, 2023, with clear authority to settle within the recommended range of $12 million to $18 million, ideally targeting $14 million to $15 million. Margaret Prumvane (CEO & President) and Raj Subramanian (CFO) should be available by telephone throughout the conference in the event that settlement discussions progress to a point requiring authority beyond the pre-authorized range or requiring executive-level business decisions.

Opening Position. Cascade should open at $5 million to $6 million, reflecting the low end of Dr. Ostrowski's damages range after application of the mitigation adjustment. This opening position is designed to achieve several objectives:

• signal confidence in the strength of Cascade's defense position and the persuasiveness of Dr. Ostrowski's expert analysis;

• Establish a low anchor that counteracts Vantor's expected high opening;

• Preserve sufficient negotiating room to move upward through the course of the conference while arriving at a settlement within the target range; and

• Demonstrate to the settlement judge that Cascade has engaged in a good-faith assessment of the merits and is not simply offering a nuisance payment.

Movement Strategy. We recommend a graduated concession pattern — moving in decreasing increments to signal that Cascade is approaching its limits. For example, an initial move from $5.5 million to $8 million (a $2.5 million concession), followed by a move to $10.5 million ($2.5 million), then to $12.5 million ($2 million), then to $14 million ($1.5 million), and potentially to $15 million ($1 million) if necessary. This pattern communicates increasing firmness and signals to both Vantor and the settlement judge that Cascade is nearing its ceiling.

Throughout the negotiation, we should emphasize the court's grant of summary judgment on the § 17200 claim as evidence that the case is narrowing and that Vantor's exposure to an unfavorable outcome is increasing. We should also highlight the strength of the termination-for-convenience defense and the independent decision-making testimony from the supplier witnesses, both of which significantly undermine Vantor's remaining claims.

B. Key Messaging Points for Settlement Judge

The following points should be communicated clearly to the settlement judge during caucus sessions:

1. Supplier Independence. The suppliers independently chose to enter into agreements with Cascade based on significantly higher purchase commitments — in some cases more than double Vantor's annual minimums. The testimony of Janet Kohler, Gregory Fontaine, and Simone Alvarez uniformly confirms that the decision to transition to Cascade was driven by legitimate business considerations, not by any improper conduct by Cascade.

2. Termination-for-Convenience. Each of the three supplier agreements contained termination-for-convenience provisions, and each supplier properly exercised those rights before entering into a relationship with Cascade. There was no "breach" in the traditional sense — the suppliers exercised their contractual rights.

3. Speculative Damages. Vantor's $87.4 million damages figure is wildly speculative and premised on multi-year projections of contract renewals and expanded relationships that were never guaranteed and may never have materialized. Dr. Pryce's analysis ignores the termination-for-convenience clauses, which meant that the suppliers could have exited their Vantor relationships at any time regardless of Cascade's conduct.

4. Narrowing Case. The court has already eliminated the § 17200 claim, demonstrating that Vantor's legal theories are weaker than initially presented. The case has narrowed significantly, and the remaining claims face substantial defenses.

5. Lawful Competition. Cascade's conduct was lawful competitive behavior entirely consistent with the principles of free market competition. Offering better terms to a supplier is not wrongful conduct — it is the foundation of a competitive marketplace.

C. Concessions and Red Lines

Acceptable Settlement Terms:

• Monetary payment within the recommended range of $12 million to $18 million;

• Non-admission of liability — the settlement agreement must expressly state that Cascade denies all allegations and that the settlement does not constitute an admission of wrongdoing;

• Mutual general release of all claims arising from or related to the matters alleged in the lawsuit, including any potential cross-claims or counterclaims;

• Confidentiality of all settlement terms, including the settlement amount — to be maintained by both parties and their counsel;

• Mutual non-disparagement provision prohibiting either party from making derogatory public statements about the other in connection with the lawsuit or the settlement.

Red Lines — Non-Negotiable:

• No injunctive relief restricting Cascade's future supplier relationships. This is a fundamental business imperative. The elimination of the UCL claim removed the legal basis for injunctive relief, and Cascade should not agree to any voluntary restrictions on its supply chain strategy as part of a settlement.

• No admission of liability or wrongdoing. Any admission could have collateral consequences for Cascade's ongoing supplier relationships, its position in pending or future commercial negotiations, and its public reputation.

• No public statements regarding the settlement. The settlement should be entirely confidential, with a jointly agreed form of statement to be used if the parties are asked about the resolution of the case (e.g., "The matter has been resolved to the mutual satisfaction of the parties").

Preferred Structure:

• Lump-sum payment within 30 days of execution of the settlement agreement. Installment payments should be avoided, as they create ongoing administrative obligations and the risk of disputes over payment timing. A single lump-sum payment provides finality.

D. Attendees at Settlement Conference

The following individuals should attend the settlement conference on April 28, 2023:

• David Pruitt (Cascade General Counsel & Corporate Secretary) — authorized representative with settlement authority within the pre-approved range.

• Douglas Carmichael (Calderwood & Harkness LLP, Responsible Partner) — lead counsel, responsible for presenting Cascade's position and conducting negotiations.

• Francesca Morano (Calderwood & Harkness LLP, Partner) — supporting counsel, available for legal analysis and strategy consultations during caucus sessions.

• Yuki Nakamura (Calderwood & Harkness LLP, Senior Associate) — supporting counsel, available for factual details, document references, and expert testimony summaries as needed during the conference.

Additionally, Margaret Prumvane (CEO & President) and Raj Subramanian (CFO) should be available by telephone throughout the duration of the conference. If the settlement conference progresses to a point where the parties are approaching agreement at a figure that requires authority beyond David Pruitt's pre-authorized levels, or where business considerations arise that require executive-level input, we will need to be able to reach them promptly.

We anticipate that the opposing side will be represented by the following individuals:

• Martin Kessler and Natalie Whitfield (Kessler, Brandt & Whitfield LLP) — Vantor's trial counsel.

• Richard "Rick" Ellsworth (Vantor Founder & CEO) and/or Patricia Sung (Vantor COO) — as Vantor's authorized representatives.

VII. Financial Analysis: Settlement vs. Trial

A. Cost of Continued Litigation Through Trial

If the case does not settle at the April 28 conference and proceeds to trial, we estimate the following additional costs:

These estimates assume a trial of approximately three to four weeks in duration and include costs for final trial preparation, jury selection, witness preparation, trial exhibits, daily trial attendance by the litigation team, and post-trial briefing. They do not include any costs associated with post-trial motions or appeal.

Combined with existing defense costs to date — total defense costs are approximately $5.5 million at the time of this memorandum, trending toward approximately $5.9 million through the date of the settlement conference — total defense costs through the conclusion of trial could reach approximately $7.2 million to $7.9 million.

B. Economic Comparison

The following scenarios illustrate the comparative economic analysis supporting a settlement resolution:

Settlement at $14.75 Million (Illustrative Midpoint of Target Range):

• Gross settlement payment: $14,750,000

• Less estimated Pinnacle insurance contribution toward settlement: ($6,250,000)

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

• Total defense costs (estimated through settlement): approximately $5,900,000

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

• Net defense costs to Cascade: approximately $3,750,000

• Total net economic impact to Cascade: approximately $12,250,000

• Total gross economic impact before insurance: approximately $20,650,000

Trial Scenario — Adverse Verdict at $15 Million (Illustrative):

• Judgment: $15,000,000 (plus potential prejudgment interest, which could add $1 million to $2 million or more depending on the accrual period and applicable rate)

• Additional trial costs beyond current spending: $1,300,000 to $2,025,000

• Total defense costs through trial: $7,200,000 to $7,900,000

• Risk of a higher verdict — up to $25 million or more, as discussed in Section III.C

• Reputational costs associated with an adverse verdict in a public trial

• Ongoing management distraction through trial and potential post-trial proceedings

• Post-trial motions and potential appeal: additional 12 to 24 months of litigation and estimated $500,000 to $1,000,000 in additional legal fees

• Insurance recovery on any judgment: uncertain and subject to coverage disputes

Trial Scenario — Defense Verdict:

• No settlement or judgment payment

• Total defense costs through trial: $7,200,000 to $7,900,000

• Net savings compared to settlement at $14.75 million: settlement amount ($14.75 million less insurance contribution of $6.25 million = $8.5 million net) minus additional trial costs over current spending ($1.3 million to $2.0 million) = net financial benefit of approximately $6.5 million to $7.2 million

• However, this outcome is estimated at only 55% to 65% probability and carries the significant risk of an adverse outcome

• Management time and distraction from core business operations through trial is significant and difficult to quantify

C. Recommendation

Settlement in the recommended range of $12 million to $18 million represents a rational resolution of this matter. At the optimal target of $14 million to $15 million, with an anticipated Pinnacle insurance contribution of $6 million to $7 million, Cascade's net settlement cost would be approximately $8 million to $9 million. This net cost falls well within the risk-adjusted expected exposure range and provides Cascade with the following benefits:

• Certainty of outcome — eliminating the risk of a substantially higher adverse verdict;

• Elimination of additional litigation costs — avoiding approximately $1.3 million to $2.0 million in additional trial-related expenses;

• Finality — avoiding the prospect of post-trial motions, appeal, and potentially years of continued litigation;

• Reduced management distraction — allowing Cascade's executive team to focus on core business operations rather than trial preparation and attendance; and

• Reputational protection — avoiding the negative publicity associated with a public trial and the risk of an adverse verdict.

We recommend pursuing settlement within the target range at the April 28, 2023 conference.

VIII. Pre-Conference Action Items

In preparation for the mandatory settlement conference on April 28, 2023, we recommend the following action items be completed before that date:

1. Confirm Settlement Authority. David Pruitt should confirm settlement authority with Margaret Prumvane (CEO & President) and Raj Subramanian (CFO). If Cascade's corporate governance procedures require board authorization for settlements above a certain dollar threshold, that authorization should be obtained in advance of the conference. We recommend seeking authority to settle within the full recommended range of $12 million to $18 million to ensure flexibility during negotiations.

2. Contact Pinnacle National Insurance Co. David Pruitt or his designee should contact Leonard Furman (Senior Claims Adjuster, Pinnacle National Insurance Co.) to confirm the parameters of Pinnacle's anticipated contribution toward settlement, to discuss the range within which Pinnacle is prepared to participate, and to ensure that Pinnacle consents to the settlement process. Mr. Furman should be informed of the settlement conference date and the recommended settlement range so that Pinnacle can provide timely confirmation of its contribution.

3. Prepare Settlement Conference Brief. If the settlement judge requires or permits the submission of a settlement conference brief, our team will prepare a concise brief summarizing Cascade's position on liability and damages, the court's ruling on the § 17200 claim, and the key defense arguments. We will circulate a draft of the brief for David Pruitt's review no later than April 25, 2023.

4. Coordinate Availability. David Pruitt should confirm his availability for the full day on April 28, 2023, as settlement conferences can extend into the evening. Margaret Prumvane and Raj Subramanian should be advised that they may need to be available by telephone at any time during the conference and should plan accordingly.

5. Prepare Updated Damages Comparison Chart. Our team will prepare an updated side-by-side comparison of Dr. Pryce's and Dr. Ostrowski's damages analyses for use at the conference. This chart will be designed as a clear visual aid that can be presented to the settlement judge to demonstrate the disparity between Vantor's speculative damages figure and Cascade's well-supported analysis of provable damages.

6. Review Project Atlas Emails. The legal team should conduct a final review of the 14 Project Atlas emails that were specifically referenced in the court's April 14, 2023 ruling. We should be prepared to address any questions the settlement judge may have regarding the content of these emails and to provide context that demonstrates the emails reflect standard competitive analysis rather than evidence of a targeted scheme to interfere with Vantor's supplier relationships.

IX. Conclusion

The mandatory settlement conference scheduled for April 28, 2023, presents a strong opportunity to resolve this matter on terms that are favorable to Cascade and that represent a rational economic outcome given the risks, costs, and uncertainties of continued litigation.

The court's grant of summary judgment on the § 17200 claim materially strengthens Cascade's negotiating position by eliminating the risk of statutory remedies and injunctive relief and by demonstrating that the case is narrowing. Cascade's core defenses remain strong: the termination-for-convenience provisions in the supplier agreements undermine the contractual interference claim; the lack of documentary evidence of Cascade's knowledge of exclusivity provisions weakens Vantor's case on both remaining claims; and the testimony of the three supplier executives supports the conclusion that the suppliers independently chose to pursue business with Cascade based on superior commercial terms.

At the same time, the 14 Project Atlas emails and the survival of the prospective economic advantage claim following the denial of summary judgment present meaningful trial risks that must be taken seriously. The jury perception dynamics in Los Angeles County, the anchoring effect of Vantor's $87.4 million damages claim, and the inherent unpredictability of jury deliberations all counsel in favor of a negotiated resolution that provides certainty and finality.

A settlement in the recommended range of $12 million to $18 million, with an optimal target of $14 million to $15 million, reflects a balanced assessment of these competing considerations. With Pinnacle National Insurance Co.'s anticipated contribution of $5 million to $7 million, Cascade's net settlement cost would be approximately $7 million to $10 million — a figure that compares favorably with the risk-adjusted expected exposure and that eliminates the costs, distraction, and uncertainty of trial.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is prepared in anticipation of litigation and for the purpose of providing legal advice. Do not forward, copy, or disclose this memorandum or its contents to any person or entity without the prior written authorization of Calderwood & Harkness LLP.
MEMORANDUM
April 20, 2023
TO: David Pruitt, General Counsel & Corporate Secretary Cascade Retail Holdings Inc. 2200 Elliott Avenue West, Suite 1400 Seattle, WA 98119
FROM: Douglas Carmichael, Partner Calderwood & Harkness LLP 600 South Grand Avenue, Suite 3200 Los Angeles, CA 90071
RE: Pre-Settlement Conference Strategy — Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872, Superior Court of California, County of Los Angeles
C&H MATTER NO.: 1038-00007
COPIES: Francesca Morano (Partner), Yuki Nakamura (Senior Associate) — Calderwood & Harkness LLP
I. Purpose and Executive Summary
This memorandum sets forth our strategic analysis and recommendations in advance of the mandatory settlement conference scheduled for April 28, 2023, before the Superior Court of California, County of Los Angeles, in Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872. The purpose of this memorandum is to provide Cascade Retail Holdings Inc. ("Cascade") with a comprehensive assessment of the current posture of the case, the risks and merits of the remaining claims, the range of possible trial outcomes, and a recommended negotiation strategy and target settlement range for the upcoming conference.
The case has reached a critical juncture following the court's April 14, 2023 ruling on Cascade's motion for partial summary judgment. As discussed in detail below, the court granted summary judgment on Vantor's third cause of action under California Business & Professions Code § 17200 (the "UCL claim"), eliminating the risk of statutory remedies, restitution, and injunctive relief. However, the court denied summary judgment on the second cause of action for tortious interference with prospective economic advantage, finding that the 14 internal "Project Atlas" emails created triable issues of material fact regarding whether Cascade's conduct constituted independently wrongful conduct. As a result, two causes of action remain for trial: (1) tortious interference with contractual relations and (2) tortious interference with prospective economic advantage.
Based on our assessment of the trial risks, the strength of Cascade's remaining defenses, the expert damages analyses, the insurance contribution available from Pinnacle National Insurance Co., and the costs and management distraction associated with continued litigation through trial, we recommend a target settlement range of $12 million to $18 million, with an optimal target of approximately $14 million to $15 million. This range is informed by a risk-adjusted expected exposure analysis that accounts for both the probability of an adverse verdict and the range of potential damages outcomes.
Cascade's commercial general liability insurer, Pinnacle National Insurance Co. (Policy No. PNG-CGL-2021-04487), has been providing defense cost coverage throughout this matter and is expected to contribute approximately $5 million to $7 million toward any settlement within the recommended range. If Pinnacle contributes in that range, Cascade's net settlement cost at the optimal target would be approximately $8 million to $9 million — a figure that compares favorably with the risk-adjusted cost of trial, inclusive of additional litigation expenses.
We recommend that Cascade attend the settlement conference with clear authority to settle within the recommended range, subject to any board or executive approval requirements from Margaret Prumvane, CEO & President, and Raj Subramanian, CFO. We further recommend scheduling a strategy call prior to April 28, 2023, to finalize the negotiation approach and confirm settlement authority parameters.
II. Current Case Posture
A. Summary of the Court's April 14, 2023 Ruling on Partial Summary Judgment
On February 28, 2023, Cascade filed its motion for partial summary judgment, targeting two of Vantor's three remaining causes of action: the second cause of action for tortious interference with prospective economic advantage and the third cause of action for unfair business practices under California Business & Professions Code § 17200 (the "UCL claim"). The motion was fully briefed, with Vantor's opposition filed on March 20, 2023, and Cascade's reply filed on March 27, 2023. The court heard oral argument on April 7, 2023, and issued its written ruling on April 14, 2023.
Section 17200 Claim — Granted. The court granted Cascade's motion for summary judgment on the UCL claim, agreeing with Cascade's argument that Vantor's § 17200 cause of action was duplicative of and substantively predicated upon the same factual allegations underlying the tortious interference claims. The court found that Vantor had not identified any independent unfair, unlawful, or fraudulent business practice apart from the alleged interference with supplier relationships that formed the basis of the first and second causes of action. The court further noted that Vantor's UCL theory was essentially a repackaging of the tortious interference claims in statutory garb, and that permitting both to proceed to trial would risk jury confusion and duplicative recovery. This ruling is significant because it eliminates the risk of statutory remedies available under the UCL, including restitution, disgorgement, and — most critically — injunctive relief. Prior to this ruling, there existed a meaningful risk that the court could enter an injunction restricting Cascade's future supplier relationships, which would have had significant operational implications for Cascade's supply chain strategy. That risk is now eliminated.
Prospective Economic Advantage Claim — Denied. The court denied Cascade's motion for summary judgment on the second cause of action for tortious interference with prospective economic advantage. In its ruling, the court acknowledged that mere competitive conduct — including offering better terms to a competitor's suppliers — does not, standing alone, constitute the independently wrongful conduct required to sustain a claim for tortious interference with prospective economic advantage under California law. However, the court found that Vantor had raised triable issues of material fact regarding whether Cascade's conduct went beyond mere competition. The court specifically cited the 14 internal Project Atlas emails that reference Vantor's supplier relationships as evidence from which a reasonable jury could infer that Cascade was aware of and intentionally targeted Vantor's supplier base, even if Cascade did not have actual knowledge of the specific terms of the exclusivity provisions contained in Vantor's supplier agreements. The court stated that the emails, viewed in the light most favorable to the nonmoving party, could support a reasonable inference that Cascade's sourcing strategy was designed not merely to secure competitive supply agreements but to disrupt a known competitor's existing supplier network. This ruling is a setback, but it is not unexpected given the deferential standard applied on summary judgment. The ruling does not reflect the court's assessment of the ultimate merits; it reflects only that a triable issue of fact exists.
Net Effect of the Ruling. Two causes of action remain for trial:
(1) First Cause of Action: Tortious interference with contractual relations; and
(2) Second Cause of Action: Tortious interference with prospective economic advantage.
The elimination of the UCL claim narrows the case, removes the risk of equitable relief, and simplifies the trial presentation. However, the survival of the prospective economic advantage claim preserves Vantor's ability to present the Project Atlas emails to the jury and to argue for damages extending beyond the remaining terms of the supplier contracts.
B. Remaining Claims and Legal Exposure
First Cause of Action: Tortious Interference with Contractual Relations. To prevail on this claim, Vantor must prove each of the following elements: (i) the existence of a valid contract between Vantor and each of the three suppliers — Hemsworth Consumer Products LLC ("Hemsworth"), Tridale Manufacturing Inc. ("Tridale"), and Orion Lifestyle Brands Corp. ("Orion"); (ii) Cascade's knowledge of those contracts; (iii) intentional acts by Cascade designed to induce a breach or disruption of the contracts; (iv) an actual breach or disruption of the contracts; and (v) resulting damages. The existence of the contracts is not disputed; however, the remaining elements are contested. Cascade's key defensive arguments on this claim are as follows:
• Lack of Actual Knowledge of Exclusivity Provisions. While Cascade may have been generally aware that Vantor had supply relationships with Hemsworth, Tridale, and Orion, Cascade did not have actual knowledge of the specific exclusivity provisions contained in those agreements. Knowledge of a competitor's general supplier relationships, without knowledge of the particular contractual terms at issue, is insufficient to establish the knowledge element.
• Independent Exercise of Termination-for-Convenience Clauses. Each of the three supplier agreements contained broad termination-for-convenience provisions. The suppliers independently exercised those contractual rights — Hemsworth with 90 days' notice, Tridale with 60 days' notice, and Orion with 120 days' notice — before entering into new agreements with Cascade. Where a supplier exercises a contractual right to terminate, there is no "breach" in the relevant sense, and any disruption of Vantor's contractual relationships resulted from the suppliers' own voluntary decisions rather than from any wrongful conduct by Cascade.
• No Inducement or Improper Means. Cascade's conduct consisted of offering competitive terms — including higher annual purchase commitments — to suppliers in an open market. Offering better business terms to a third party is not inducement through improper means; it is lawful competitive activity.
Second Cause of Action: Tortious Interference with Prospective Economic Advantage. This claim requires Vantor to prove that Cascade engaged in independently wrongful conduct — that is, conduct that is wrongful by some legal measure other than the fact of the interference itself — to disrupt Vantor's prospective economic relationships with suppliers beyond the existing contract terms. The "independently wrongful conduct" requirement is a significant hurdle for Vantor, and the court's ruling on summary judgment acknowledged that mere competition does not satisfy this standard. Nevertheless, the court found that the 14 Project Atlas emails create a fact question as to whether Cascade's conduct crossed the line from aggressive-but-lawful competition into independently wrongful targeting of a competitor's supplier base. This is a claim that will turn heavily on the jury's interpretation of the emails and the credibility of the witnesses.
C. Discovery and Record Summary
Discovery in this matter has been extensive and is now substantially complete. The following summarizes the scope of the discovery record:
Document discovery:
• Total documents collected from Cascade: 452,316
• Documents reviewed by Cascade's review team: 198,740
• Documents produced by Cascade: 78,412
• Documents produced by Vantor: 41,308
• Documents produced by third parties (Hemsworth, Tridale, and Orion) via subpoena: 23,567
• Entries on Cascade's privilege log: 3,214
Deposition discovery:
A total of 14 depositions have been taken in this matter — eight by Vantor and six by Cascade. The key fact depositions include:
• Annika Bergström (Cascade VP, Strategic Sourcing) — deposed October 12, 2022. Bergström was the senior Cascade executive most directly involved in Project Atlas and the negotiations with Hemsworth, Tridale, and Orion. Her testimony is discussed in detail in Section III.B below.
• Thomas Brennecke (Vantor VP, Supplier Relations) — deposed October 26, 2022. Brennecke testified regarding Vantor's relationships with the three suppliers and the impact of the suppliers' departures on Vantor's operations. His testimony regarding damages provides the foundation for Dr. Pryce's expert analysis.
• Lena Torvik (Cascade SVP, Supply Chain & Procurement) — deposed November 18, 2022. Torvik is the executive to whom Bergström reported and who approved the Project Atlas budget and strategy. Her testimony is discussed in Section III.B below.
Additionally, depositions of the three supplier executives — Janet Kohler (Hemsworth CEO), Gregory Fontaine (Tridale President), and Simone Alvarez (Orion CEO) — were taken by Cascade and provided testimony favorable to the defense regarding the independence of their companies' decisions.
Expert discovery:
• Dr. Harold Pryce (Meridian Forensic Economics LLC, Vantor's damages expert) — expert report served December 9, 2022; deposition taken January 20, 2023. Dr. Pryce opines that Vantor's total damages are $87.4 million.
• Dr. Vivian Ostrowski (Archer & Colvin Consulting Group, Cascade's damages expert) — rebuttal report served December 22, 2022; deposition taken February 3, 2023. Dr. Ostrowski opines that provable damages are limited to $6.1 million to $11.3 million.
III. Assessment of Trial Risks
A. Strengths of Cascade's Defense
We have identified several significant strengths in Cascade's defense that would support a favorable outcome at trial and that should be leveraged during settlement negotiations:
1. Termination-for-Convenience Clauses. The single most important defense to the tortious interference with contractual relations claim is the existence of termination-for-convenience provisions in all three of Vantor's supplier agreements. Each supplier properly exercised its contractual right to terminate before entering into a new agreement with Cascade. The relevant contractual details are as follows:
• Hemsworth–Vantor Supply Agreement: Executed March 15, 2019; term expiring March 14, 2022; 90-day termination-for-convenience notice period. Hemsworth provided Vantor with written notice of termination on September 3, 2021 — well within the contractual notice period.
• Tridale–Vantor Supply Agreement: Executed January 10, 2020; term expiring January 9, 2022; 60-day termination-for-convenience notice period. Tridale provided Vantor with written notice of termination on August 11, 2021.
• Orion–Vantor Supply Agreement: Executed July 1, 2018; term expiring June 30, 2022; 120-day termination-for-convenience notice period. Orion provided Vantor with written notice of termination on October 1, 2021.
The proper exercise of these termination-for-convenience rights fundamentally undermines Vantor's claim that any "breach" was induced by Cascade. Where a party exercises a contractual right to terminate, there is no breach, and the question of inducement becomes moot with respect to the first cause of action. Vantor's response — that the terminations were a pretext orchestrated by Cascade — requires the jury to disbelieve the testimony of three independent supplier executives and to infer a level of coordination that is not supported by the documentary record.
2. Lack of Knowledge of Exclusivity Terms. Cascade's internal records, including the full universe of 2,847 Project Atlas emails (of which only 14 reference Vantor's supplier relationships), do not demonstrate that Cascade had actual knowledge of the specific exclusivity provisions contained in the Vantor supplier agreements. The 14 emails at issue reference Vantor only as a competitor in the consumer products and retail market — not as a party to exclusive supply contracts with Hemsworth, Tridale, or Orion. Several of the emails discuss Vantor's product lines, pricing strategies, and market positioning in the context of competitive analysis, which is standard practice for a company evaluating new supplier relationships. None of the 14 emails reference the terms "exclusivity," "exclusive supply," or "exclusive arrangement," nor do they reference the specific contractual provisions at issue. This absence of documentary evidence is significant and distinguishes this case from the typical tortious interference case in which the defendant is shown to have known about the specific contractual rights being interfered with.
3. Independent Supplier Decision-Making. Deposition testimony from each of the three supplier executives strongly supports Cascade's position that the suppliers independently chose to pursue agreements with Cascade based on the significantly more favorable commercial terms offered. In particular:
• Janet Kohler (Hemsworth CEO): Testified that Hemsworth's decision to terminate its agreement with Vantor was driven by the substantially higher annual purchase commitments offered by Cascade — $28.0 million annually compared to $12.5 million annually under the Vantor agreement — and that Cascade did not request or suggest that Hemsworth terminate its Vantor agreement. Kohler testified that the decision was made by Hemsworth's board of directors and that the opportunity to more than double its annual revenue from a single customer was "the most significant growth opportunity Hemsworth had seen in five years."
• Gregory Fontaine (Tridale President): Testified similarly, noting that Cascade's annual purchase commitment of $19.5 million compared to Vantor's $8.3 million. Fontaine testified that Tridale's management team independently evaluated the opportunity and concluded that the Cascade relationship offered superior long-term value. He stated that at no point did any Cascade representative suggest that Tridale should terminate its Vantor agreement.
• Simone Alvarez (Orion CEO): Testified that Orion's decision was driven by Cascade's offer of $31.0 million in annual purchase commitments compared to $14.6 million under the Vantor agreement. Alvarez testified that Orion had already been considering diversifying its customer base and that the Cascade opportunity aligned with Orion's strategic growth plan.
This testimony is critical because it demonstrates that the suppliers were motivated by legitimate business considerations and that Cascade did not use improper means to induce the terminations. The fact that three independent companies, each represented by sophisticated management teams, reached the same conclusion independently is powerful evidence that Cascade's conduct was lawful competitive behavior.
4. Damages Rebuttal. Dr. Vivian Ostrowski's expert report, served December 22, 2022, persuasively limits the universe of provable damages to $6.1 million to $11.3 million. Dr. Ostrowski's analysis confines damages to the remaining exclusive terms under each supplier agreement at the time of the alleged breach, rather than projecting speculative future revenue streams over periods of five to six years as Dr. Pryce does. Dr. Ostrowski further applies a mitigation reduction of 40% to 55%, reflecting Vantor's failure to take reasonable steps to secure alternative suppliers following the terminations. Dr. Ostrowski identified at least seven potential alternative suppliers that Vantor could have engaged within 60 to 90 days of the termination notices and presented evidence that Vantor did not begin seeking alternative suppliers until approximately five months after the first termination notice was received. This analysis is well-supported and should be persuasive to a jury, particularly when contrasted with the aggressive assumptions underlying Dr. Pryce's $87.4 million figure.
5. Elimination of the § 17200 Claim. The court's grant of summary judgment on the UCL claim removes the risk of restitutionary remedies and, most importantly, injunctive relief. Prior to this ruling, Vantor had sought injunctive relief that, if granted, could have required Cascade to divest its supplier relationships with Hemsworth, Tridale, and Orion or to modify the terms of those relationships. The elimination of this risk is a significant strategic advantage and should be highlighted during the settlement conference.
B. Weaknesses and Trial Risks
Despite the strengths of Cascade's defense, we have identified several significant risks that could adversely affect the outcome at trial:
1. The 14 Project Atlas Emails. These emails represent the most significant vulnerability in Cascade's case. While the emails do not demonstrate actual knowledge of Vantor's exclusivity provisions, as discussed above, several of the emails reference Vantor's supplier relationships by name and discuss the strategic opportunity to "transition" suppliers away from competitors, including Vantor. At least three of the emails use language that, when read in isolation and presented to a jury by a skilled plaintiff's attorney, could be interpreted as evidence of a deliberate campaign to poach Vantor's suppliers rather than a lawful competitive sourcing initiative.
The court's ruling denying summary judgment on the prospective economic advantage claim relied specifically on these emails as evidence from which a reasonable jury could infer independently wrongful conduct. At trial, Martin Kessler — lead trial attorney for Kessler, Brandt & Whitfield LLP and an experienced plaintiff's litigator — will almost certainly build his narrative around these emails. Kessler is likely to select the most inflammatory language from the emails, present them to the jury out of context, and argue that they reveal a coordinated plan to strip Vantor of its supplier base. We anticipate that Kessler will use visual aids — blown-up excerpts, email chains displayed on screens — to maximize the emotional and persuasive impact of these documents. Our ability to provide context for the emails through live testimony will be important, but there is an inherent risk that the jury will focus on the most damaging excerpts rather than the full context of the Project Atlas initiative.
2. Jury Perception: "David vs. Goliath." The disparity in size between Cascade and Vantor creates a significant jury perception risk, particularly in Los Angeles County. Cascade is a $6.8 billion revenue (FY 2021), Nasdaq-listed public company with a market capitalization of approximately $14.2 billion and more than 340 retail locations across 22 states. Vantor, by contrast, is a privately held, mid-market company with approximately $1.1 billion in annual revenue and approximately 85 retail locations concentrated in California, Arizona, Nevada, and Oregon. Vantor may be perceived by a Los Angeles County jury as a local, smaller business that was victimized by a large, publicly traded national competitor. This "David vs. Goliath" dynamic is difficult to overcome, and Kessler's firm has a well-documented track record of exploiting this narrative in similar cases. Los Angeles County juries have historically been plaintiff-friendly in commercial disputes involving allegations that a large corporation engaged in predatory conduct against a smaller competitor.
3. Annika Bergström's Deposition Testimony. While Bergström's deposition testimony was generally favorable to Cascade's defense, certain answers she gave regarding her awareness that the three suppliers were supplying Vantor could be taken out of context by opposing counsel. Specifically, Bergström acknowledged that she conducted competitive analysis of Vantor's supplier base as part of the Project Atlas initiative and that one of the objectives of Project Atlas was to identify suppliers that were currently supplying competitors, including Vantor, in order to evaluate whether those suppliers could be recruited to supply Cascade. While this testimony reflects a standard and lawful competitive practice, Vantor's counsel will frame it as evidence that Cascade specifically targeted Vantor's suppliers — transforming what was a general competitive sourcing initiative into an alleged scheme directed at Vantor.
4. Lena Torvik's Deposition Testimony. Torvik, as the SVP of Supply Chain & Procurement and Bergström's direct supervisor, acknowledged during her deposition that the $4.2 million Project Atlas budget included "transition costs" intended to incentivize suppliers to transition from existing supply relationships to Cascade. Torvik explained that these transition costs included financial assistance for retooling, onboarding support, and volume guarantees — all of which are standard industry practices. However, the use of the phrase "incentivize suppliers to move from existing relationships" could be characterized by Vantor's counsel as an admission that Cascade used financial inducements to lure suppliers away from their contractual commitments. While we believe this characterization is inaccurate — transition incentives are a routine feature of supplier onboarding — the language is susceptible to a negative interpretation before a jury.
5. Magnitude of Vantor's Damages Claim. Although Dr. Ostrowski's analysis persuasively limits provable damages to $6.1 million to $11.3 million, Vantor's expert, Dr. Harold Pryce, has opined that Vantor's total damages are $87.4 million. This figure, while aggressive and based on speculative assumptions regarding contract renewals and expanded supplier relationships, establishes a powerful anchoring effect. Behavioral economics research consistently demonstrates that juries tend to anchor to high initial figures, even when those figures are subsequently challenged. Even if the jury rejects Dr. Pryce's methodology in its entirety, there is a meaningful risk that the jury will "split the difference" between the two experts' figures, potentially arriving at a damages number well above Dr. Ostrowski's range. This anchoring risk is particularly acute on the prospective economic advantage claim, which allows for forward-looking damages based on anticipated future business relationships.
6. Remaining Prospective Economic Advantage Claim. The survival of this claim following the court's ruling on summary judgment is the most concerning development in the case from a damages perspective. The prospective economic advantage claim allows Vantor to present evidence of anticipated future business relationships with the three suppliers beyond the existing contract terms. Unlike the tortious interference with contractual relations claim — which is limited to damages arising from the disruption of existing contracts — the prospective advantage claim opens the door to speculative future damages, including lost profits from renewals that were never guaranteed and from expanded supplier relationships that may never have materialized. This claim provides the evidentiary hook for Dr. Pryce's $87.4 million figure and substantially expands the potential damages universe beyond the remaining contract terms that form the basis of Dr. Ostrowski's more conservative analysis.
C. Probability Assessment
Based on our assessment of the strengths and weaknesses discussed above, including an analysis of the trial record, the applicable legal standards, the anticipated jury pool in Los Angeles County, and the experience and skill of opposing counsel, we estimate the following probabilities:
• Estimated probability of defense verdict at trial on all remaining claims: 55% to 65%.
• Estimated probability of plaintiff verdict on at least one claim: 35% to 45%.
• If plaintiff prevails, estimated damages range: $8 million to $25 million. The low end of this range reflects a scenario in which the jury accepts much of Dr. Ostrowski's methodology but awards damages modestly above her range. The high end reflects the anchoring effect of Vantor's $87.4 million claim and the risk that the jury awards significant damages on the prospective advantage claim.
• Risk-adjusted expected exposure (probability-weighted): Approximately $5 million to $11 million. This figure is calculated by multiplying the estimated probability of an adverse verdict (35%–45%) by the estimated range of adverse verdicts ($8 million–$25 million).
• Additional trial costs if the case proceeds: Estimated $1.5 million to $2.5 million in additional attorney fees, expert fees, and trial preparation costs, inclusive of the amounts detailed in Section VII.A below.
We note that these probability estimates carry inherent uncertainty. Jury trials, particularly in commercial tort cases involving large companies and significant damages claims, are unpredictable. The estimates above reflect our best professional judgment based on our experience with similar cases and our assessment of the specific facts of this matter.
IV. Damages Analysis for Settlement Purposes
A. Vantor's Claimed Damages
Vantor claims total damages of $87.4 million, based on the expert report of Dr. Harold Pryce of Meridian Forensic Economics LLC (2049 Century Park East, Suite 1200, Los Angeles, CA 90067), served December 9, 2022. Dr. Pryce's damages analysis is broken down by supplier relationship as follows:
Dr. Pryce's methodology projects damages extending well beyond the existing contract terms, assuming that each supplier agreement would have been renewed at expiration and that the relationships would have expanded over time. Dr. Pryce relies on historical growth rates in Vantor's supplier relationships and industry benchmarks to project future revenue streams. His analysis does not account for the termination-for-convenience provisions — which would have permitted the suppliers to exit the relationships at any time — and does not apply any meaningful mitigation reduction, asserting that Vantor took reasonable but unsuccessful steps to find alternative suppliers. While this methodology is aggressive and subject to significant challenge at trial, it establishes an anchor that will influence settlement negotiations. We anticipate that Vantor's opening settlement position will reference the $87.4 million figure prominently, even though both sides understand that the number significantly overstates Vantor's likely recovery at trial.
B. Cascade's Expert Damages Analysis
Dr. Vivian Ostrowski of the Archer & Colvin Consulting Group (701 Fifth Avenue, Suite 4100, Seattle, WA 98104) opines in her rebuttal report, served December 22, 2022, that Vantor's provable damages are limited to a range of $6.1 million to $11.3 million. Dr. Ostrowski's analysis differs from Dr. Pryce's in several critical respects:
• Damages Period. Dr. Ostrowski limits the damages analysis to the remaining exclusive terms under each supplier agreement at the time of the alleged breach, rather than projecting speculative future revenue streams over multi-year periods. This approach is consistent with the legal principle that damages for breach of contract should be measured by the value of the performance that was lost, not by speculative future benefits that may never have been realized. The remaining exclusive terms at the time of the alleged breach were as follows:
• Hemsworth: Approximately 9 months of remaining exclusive term — damages range of $2.8 million to $4.9 million.
• Tridale: Approximately 5 months of remaining exclusive term — damages range of $1.4 million to $2.7 million.
• Orion: Approximately 13 months of remaining exclusive term — damages range of $1.9 million to $3.7 million.
• Mitigation Reduction. Dr. Ostrowski applies a mitigation reduction of 40% to 55%, reflecting Vantor's failure to take reasonable steps to secure alternative suppliers following receipt of the termination notices. Dr. Ostrowski identified at least seven potential alternative suppliers that could have partially replaced the volume lost from Hemsworth, Tridale, and Orion within 60 to 90 days of the termination notices. Vantor did not begin seeking alternative suppliers until approximately five months after the first termination notice was received — a delay that Dr. Ostrowski characterizes as unreasonable under the circumstances.
Dr. Ostrowski's analysis is well-supported, methodologically sound, and would be persuasive to a jury. However, we note that her analysis is confined to the tortious interference with contractual relations claim. The survival of the prospective economic advantage claim potentially expands the damages framework beyond remaining contract terms, which could allow Dr. Pryce to present his projections of future revenue streams to the jury even on a claim where the contractual basis for damages is less clear. This is one of the reasons why the recommended settlement range exceeds the high end of Dr. Ostrowski's analysis.
C. Recommended Settlement Range
Based on the foregoing analysis of Vantor's claimed damages, Dr. Ostrowski's rebuttal analysis, the trial risk assessment set forth in Section III.C, and the insurance contribution considerations discussed in Section V, we recommend the following settlement parameters:
Floor: $12 million. This amount is slightly above the high end of Dr. Ostrowski's provable damages range of $11.3 million. A floor of $12 million reflects the reality that the surviving prospective economic advantage claim creates risk exposure beyond the remaining contract terms used in Dr. Ostrowski's analysis, and that jury unpredictability — including the anchoring effect of Vantor's $87.4 million claim — justifies a modest premium above the defense expert's range. It is unlikely that Vantor will accept a figure below $12 million at a settlement conference, given the strength of the evidence supporting at least some damages and the risk profile that Kessler will present to the settlement judge.
Target: $14 million to $15 million. This range reflects a balanced assessment of trial risk, the strength of Cascade's remaining defenses (particularly the termination-for-convenience defense and the supplier independence testimony), the elimination of the § 17200 claim, and the uncertainty associated with jury verdicts in a case of this nature. A settlement in this range would represent a significant discount from Vantor's claimed damages, would be defensible to Cascade's board and shareholders, and would reflect a rational allocation of risk between the parties.
Ceiling: $18 million. This is the maximum amount that is justified by the risk-adjusted analysis, accounting for worst-case jury outcomes on the prospective advantage claim and the full cost of continued litigation. A settlement above $18 million would begin to approach the high end of the estimated adverse verdict range and would not represent a meaningful discount for the risk and cost avoidance achieved through settlement. We would not recommend exceeding $18 million unless circumstances at the conference reveal information that materially alters our risk assessment.
Anticipated Vantor Opening Position. Based on our assessment of Kessler's typical negotiation style and the headline $87.4 million damages claim, we anticipate that Vantor's opening position at the settlement conference will be in the range of $40 million to $50 million. This opening will be strategically designed to anchor the negotiation well above the range that the evidence supports and to create the appearance of significant concessions as Vantor moves downward during the conference. We should be prepared for this dynamic and should not be moved by Vantor's opening number.
V. Insurance Coverage Considerations
Cascade's commercial general liability insurer, Pinnacle National Insurance Co. ("Pinnacle"), has been participating in the defense of this matter since notification of the claim on September 20, 2021. Coverage is provided under CGL Policy No. PNG-CGL-2021-04487. Pinnacle has been reimbursing Cascade's defense costs on an ongoing basis throughout the litigation, and to date, approximately $2,150,000 in defense costs have been submitted for reimbursement or are expected to be reimbursed by Pinnacle.
Based on recent discussions between our office and Leonard Furman, Senior Claims Adjuster at Pinnacle National Insurance Co. (120 Broadway, Suite 3500, New York, NY 10271), Pinnacle is expected to contribute toward any reasonable settlement of this matter. Preliminary indications from Mr. Furman suggest that Pinnacle will contribute approximately $5 million to $7 million toward a settlement in the recommended range. The specific contribution amount will depend on the final settlement figure, the terms of the settlement agreement, and Pinnacle's assessment of the coverage issues, which are being managed separately by Pinnacle's coverage counsel. We note that Pinnacle has reserved its rights on certain coverage defenses but has to date participated in the defense without invoking those reservations in any material way.
If Cascade settles at the target of approximately $14 million to $15 million and Pinnacle contributes $6 million to $7 million toward the settlement payment, Cascade's net settlement cost would be approximately $8 million to $9 million. This net exposure figure is within the risk-adjusted expected exposure range of $5 million to $11 million identified in Section III.C and represents a rational economic outcome for Cascade.
It is essential that any settlement agreement include appropriate language to preserve and secure Pinnacle's contribution obligations. Specifically, the settlement agreement should:
• Provide for Pinnacle's contribution as a separate payment obligation or require Cascade's payment to be conditioned on receipt of Pinnacle's contribution;
• Include representations that the settlement was reached in good faith and without collusion;
• Avoid any language that could be construed as an admission of liability that might trigger coverage exclusions; and
• Preserve Cascade's right to seek additional reimbursement from Pinnacle for defense costs incurred through the date of settlement.
We recommend that David Pruitt contact Leonard Furman prior to the settlement conference to confirm Pinnacle's contribution parameters and to ensure that Pinnacle consents to participate in the settlement at the anticipated contribution levels.
VI. Settlement Conference Strategy
A. Negotiation Framework
Cascade should enter the settlement conference on April 28, 2023, with clear authority to settle within the recommended range of $12 million to $18 million, ideally targeting $14 million to $15 million. Margaret Prumvane (CEO & President) and Raj Subramanian (CFO) should be available by telephone throughout the conference in the event that settlement discussions progress to a point requiring authority beyond the pre-authorized range or requiring executive-level business decisions.
Opening Position. Cascade should open at $5 million to $6 million, reflecting the low end of Dr. Ostrowski's damages range after application of the mitigation adjustment. This opening position is designed to achieve several objectives:
• signal confidence in the strength of Cascade's defense position and the persuasiveness of Dr. Ostrowski's expert analysis;
• Establish a low anchor that counteracts Vantor's expected high opening;
• Preserve sufficient negotiating room to move upward through the course of the conference while arriving at a settlement within the target range; and
• Demonstrate to the settlement judge that Cascade has engaged in a good-faith assessment of the merits and is not simply offering a nuisance payment.
Movement Strategy. We recommend a graduated concession pattern — moving in decreasing increments to signal that Cascade is approaching its limits. For example, an initial move from $5.5 million to $8 million (a $2.5 million concession), followed by a move to $10.5 million ($2.5 million), then to $12.5 million ($2 million), then to $14 million ($1.5 million), and potentially to $15 million ($1 million) if necessary. This pattern communicates increasing firmness and signals to both Vantor and the settlement judge that Cascade is nearing its ceiling.
Throughout the negotiation, we should emphasize the court's grant of summary judgment on the § 17200 claim as evidence that the case is narrowing and that Vantor's exposure to an unfavorable outcome is increasing. We should also highlight the strength of the termination-for-convenience defense and the independent decision-making testimony from the supplier witnesses, both of which significantly undermine Vantor's remaining claims.
B. Key Messaging Points for Settlement Judge
The following points should be communicated clearly to the settlement judge during caucus sessions:
1. Supplier Independence. The suppliers independently chose to enter into agreements with Cascade based on significantly higher purchase commitments — in some cases more than double Vantor's annual minimums. The testimony of Janet Kohler, Gregory Fontaine, and Simone Alvarez uniformly confirms that the decision to transition to Cascade was driven by legitimate business considerations, not by any improper conduct by Cascade.
2. Termination-for-Convenience. Each of the three supplier agreements contained termination-for-convenience provisions, and each supplier properly exercised those rights before entering into a relationship with Cascade. There was no "breach" in the traditional sense — the suppliers exercised their contractual rights.
3. Speculative Damages. Vantor's $87.4 million damages figure is wildly speculative and premised on multi-year projections of contract renewals and expanded relationships that were never guaranteed and may never have materialized. Dr. Pryce's analysis ignores the termination-for-convenience clauses, which meant that the suppliers could have exited their Vantor relationships at any time regardless of Cascade's conduct.
4. Narrowing Case. The court has already eliminated the § 17200 claim, demonstrating that Vantor's legal theories are weaker than initially presented. The case has narrowed significantly, and the remaining claims face substantial defenses.
5. Lawful Competition. Cascade's conduct was lawful competitive behavior entirely consistent with the principles of free market competition. Offering better terms to a supplier is not wrongful conduct — it is the foundation of a competitive marketplace.
C. Concessions and Red Lines
Acceptable Settlement Terms:
• Monetary payment within the recommended range of $12 million to $18 million;
• Non-admission of liability — the settlement agreement must expressly state that Cascade denies all allegations and that the settlement does not constitute an admission of wrongdoing;
• Mutual general release of all claims arising from or related to the matters alleged in the lawsuit, including any potential cross-claims or counterclaims;
• Confidentiality of all settlement terms, including the settlement amount — to be maintained by both parties and their counsel;
• Mutual non-disparagement provision prohibiting either party from making derogatory public statements about the other in connection with the lawsuit or the settlement.
Red Lines — Non-Negotiable:
• No injunctive relief restricting Cascade's future supplier relationships. This is a fundamental business imperative. The elimination of the UCL claim removed the legal basis for injunctive relief, and Cascade should not agree to any voluntary restrictions on its supply chain strategy as part of a settlement.
• No admission of liability or wrongdoing. Any admission could have collateral consequences for Cascade's ongoing supplier relationships, its position in pending or future commercial negotiations, and its public reputation.
• No public statements regarding the settlement. The settlement should be entirely confidential, with a jointly agreed form of statement to be used if the parties are asked about the resolution of the case (e.g., "The matter has been resolved to the mutual satisfaction of the parties").
Preferred Structure:
• Lump-sum payment within 30 days of execution of the settlement agreement. Installment payments should be avoided, as they create ongoing administrative obligations and the risk of disputes over payment timing. A single lump-sum payment provides finality.
D. Attendees at Settlement Conference
The following individuals should attend the settlement conference on April 28, 2023:
• David Pruitt (Cascade General Counsel & Corporate Secretary) — authorized representative with settlement authority within the pre-approved range.
• Douglas Carmichael (Calderwood & Harkness LLP, Responsible Partner) — lead counsel, responsible for presenting Cascade's position and conducting negotiations.
• Francesca Morano (Calderwood & Harkness LLP, Partner) — supporting counsel, available for legal analysis and strategy consultations during caucus sessions.
• Yuki Nakamura (Calderwood & Harkness LLP, Senior Associate) — supporting counsel, available for factual details, document references, and expert testimony summaries as needed during the conference.
Additionally, Margaret Prumvane (CEO & President) and Raj Subramanian (CFO) should be available by telephone throughout the duration of the conference. If the settlement conference progresses to a point where the parties are approaching agreement at a figure that requires authority beyond David Pruitt's pre-authorized levels, or where business considerations arise that require executive-level input, we will need to be able to reach them promptly.
We anticipate that the opposing side will be represented by the following individuals:
• Martin Kessler and Natalie Whitfield (Kessler, Brandt & Whitfield LLP) — Vantor's trial counsel.
• Richard "Rick" Ellsworth (Vantor Founder & CEO) and/or Patricia Sung (Vantor COO) — as Vantor's authorized representatives.
VII. Financial Analysis: Settlement vs. Trial
A. Cost of Continued Litigation Through Trial
If the case does not settle at the April 28 conference and proceeds to trial, we estimate the following additional costs:
These estimates assume a trial of approximately three to four weeks in duration and include costs for final trial preparation, jury selection, witness preparation, trial exhibits, daily trial attendance by the litigation team, and post-trial briefing. They do not include any costs associated with post-trial motions or appeal.
Combined with existing defense costs to date — total defense costs are approximately $5.5 million at the time of this memorandum, trending toward approximately $5.9 million through the date of the settlement conference — total defense costs through the conclusion of trial could reach approximately $7.2 million to $7.9 million.
B. Economic Comparison
The following scenarios illustrate the comparative economic analysis supporting a settlement resolution:
Settlement at $14.75 Million (Illustrative Midpoint of Target Range):
• Gross settlement payment: $14,750,000
• Less estimated Pinnacle insurance contribution toward settlement: ($6,250,000)
• Net settlement cost to Cascade: approximately $8,500,000
• Total defense costs (estimated through settlement): approximately $5,900,000
• Less estimated Pinnacle defense cost reimbursement: ($2,150,000)
• Net defense costs to Cascade: approximately $3,750,000
• Total net economic impact to Cascade: approximately $12,250,000
• Total gross economic impact before insurance: approximately $20,650,000
Trial Scenario — Adverse Verdict at $15 Million (Illustrative):
• Judgment: $15,000,000 (plus potential prejudgment interest, which could add $1 million to $2 million or more depending on the accrual period and applicable rate)
• Additional trial costs beyond current spending: $1,300,000 to $2,025,000
• Total defense costs through trial: $7,200,000 to $7,900,000
• Risk of a higher verdict — up to $25 million or more, as discussed in Section III.C
• Reputational costs associated with an adverse verdict in a public trial
• Ongoing management distraction through trial and potential post-trial proceedings
• Post-trial motions and potential appeal: additional 12 to 24 months of litigation and estimated $500,000 to $1,000,000 in additional legal fees
• Insurance recovery on any judgment: uncertain and subject to coverage disputes
Trial Scenario — Defense Verdict:
• No settlement or judgment payment
• Total defense costs through trial: $7,200,000 to $7,900,000
• Net savings compared to settlement at $14.75 million: settlement amount ($14.75 million less insurance contribution of $6.25 million = $8.5 million net) minus additional trial costs over current spending ($1.3 million to $2.0 million) = net financial benefit of approximately $6.5 million to $7.2 million
• However, this outcome is estimated at only 55% to 65% probability and carries the significant risk of an adverse outcome
• Management time and distraction from core business operations through trial is significant and difficult to quantify
C. Recommendation
Settlement in the recommended range of $12 million to $18 million represents a rational resolution of this matter. At the optimal target of $14 million to $15 million, with an anticipated Pinnacle insurance contribution of $6 million to $7 million, Cascade's net settlement cost would be approximately $8 million to $9 million. This net cost falls well within the risk-adjusted expected exposure range and provides Cascade with the following benefits:
• Certainty of outcome — eliminating the risk of a substantially higher adverse verdict;
• Elimination of additional litigation costs — avoiding approximately $1.3 million to $2.0 million in additional trial-related expenses;
• Finality — avoiding the prospect of post-trial motions, appeal, and potentially years of continued litigation;
• Reduced management distraction — allowing Cascade's executive team to focus on core business operations rather than trial preparation and attendance; and
• Reputational protection — avoiding the negative publicity associated with a public trial and the risk of an adverse verdict.
We recommend pursuing settlement within the target range at the April 28, 2023 conference.
VIII. Pre-Conference Action Items
In preparation for the mandatory settlement conference on April 28, 2023, we recommend the following action items be completed before that date:
1. Confirm Settlement Authority. David Pruitt should confirm settlement authority with Margaret Prumvane (CEO & President) and Raj Subramanian (CFO). If Cascade's corporate governance procedures require board authorization for settlements above a certain dollar threshold, that authorization should be obtained in advance of the conference. We recommend seeking authority to settle within the full recommended range of $12 million to $18 million to ensure flexibility during negotiations.
2. Contact Pinnacle National Insurance Co. David Pruitt or his designee should contact Leonard Furman (Senior Claims Adjuster, Pinnacle National Insurance Co.) to confirm the parameters of Pinnacle's anticipated contribution toward settlement, to discuss the range within which Pinnacle is prepared to participate, and to ensure that Pinnacle consents to the settlement process. Mr. Furman should be informed of the settlement conference date and the recommended settlement range so that Pinnacle can provide timely confirmation of its contribution.
3. Prepare Settlement Conference Brief. If the settlement judge requires or permits the submission of a settlement conference brief, our team will prepare a concise brief summarizing Cascade's position on liability and damages, the court's ruling on the § 17200 claim, and the key defense arguments. We will circulate a draft of the brief for David Pruitt's review no later than April 25, 2023.
4. Coordinate Availability. David Pruitt should confirm his availability for the full day on April 28, 2023, as settlement conferences can extend into the evening. Margaret Prumvane and Raj Subramanian should be advised that they may need to be available by telephone at any time during the conference and should plan accordingly.
5. Prepare Updated Damages Comparison Chart. Our team will prepare an updated side-by-side comparison of Dr. Pryce's and Dr. Ostrowski's damages analyses for use at the conference. This chart will be designed as a clear visual aid that can be presented to the settlement judge to demonstrate the disparity between Vantor's speculative damages figure and Cascade's well-supported analysis of provable damages.
6. Review Project Atlas Emails. The legal team should conduct a final review of the 14 Project Atlas emails that were specifically referenced in the court's April 14, 2023 ruling. We should be prepared to address any questions the settlement judge may have regarding the content of these emails and to provide context that demonstrates the emails reflect standard competitive analysis rather than evidence of a targeted scheme to interfere with Vantor's supplier relationships.
IX. Conclusion
The mandatory settlement conference scheduled for April 28, 2023, presents a strong opportunity to resolve this matter on terms that are favorable to Cascade and that represent a rational economic outcome given the risks, costs, and uncertainties of continued litigation.
The court's grant of summary judgment on the § 17200 claim materially strengthens Cascade's negotiating position by eliminating the risk of statutory remedies and injunctive relief and by demonstrating that the case is narrowing. Cascade's core defenses remain strong: the termination-for-convenience provisions in the supplier agreements undermine the contractual interference claim; the lack of documentary evidence of Cascade's knowledge of exclusivity provisions weakens Vantor's case on both remaining claims; and the testimony of the three supplier executives supports the conclusion that the suppliers independently chose to pursue business with Cascade based on superior commercial terms.
At the same time, the 14 Project Atlas emails and the survival of the prospective economic advantage claim following the denial of summary judgment present meaningful trial risks that must be taken seriously. The jury perception dynamics in Los Angeles County, the anchoring effect of Vantor's $87.4 million damages claim, and the inherent unpredictability of jury deliberations all counsel in favor of a negotiated resolution that provides certainty and finality.
A settlement in the recommended range of $12 million to $18 million, with an optimal target of $14 million to $15 million, reflects a balanced assessment of these competing considerations. With Pinnacle National Insurance Co.'s anticipated contribution of $5 million to $7 million, Cascade's net settlement cost would be approximately $7 million to $10 million — a figure that compares favorably with the risk-adjusted expected exposure and that eliminates the costs, distraction, and uncertainty of trial.
I am available to discuss this memorandum at your convenience and recommend that we schedule a call prior to April 28, 2023, to finalize our strategy and confirm settlement authority. Please do not hesitate to contact me directly.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Douglas Carmichael Partner 600 South Grand Avenue, Suite 3200 Los Angeles, CA 90071 Telephone: (213) 555-4200
Email: dcarmichael@calderwoodharkness.com
References: This memorandum references and relies upon the following documents, which are not enclosed but are maintained in the case file: (1) Expert Report of Dr. Harold Pryce, Meridian Forensic Economics LLC (December 9, 2022); (2) Rebuttal Expert Report of Dr. Vivian Ostrowski, Archer & Colvin Consulting Group (December 22, 2022); and (3) Order on Defendant Cascade Retail Holdings Inc.'s Motion for Partial Summary Judgment, dated April 14, 2023, the Honorable Judge [name redacted for privilege purposes], Superior Court of California, County of Los Angeles, Case No. 21STCV-34872.
Supplier Relationship | Claimed Damages | Methodology
Hemsworth Consumer Products LLC | $34.2 million | Projected 5-year revenue stream, discounted at 8.5%
Tridale Manufacturing Inc. | $22.8 million | Projected 4-year revenue stream, discounted at 8.5%
Orion Lifestyle Brands Corp. | $30.4 million | Projected 6-year revenue stream, discounted at 8.5%
Total | $87.4 million
Cost Category | Estimated Range
Calderwood & Harkness LLP — trial preparation and trial | $1,000,000 – $1,500,000
Dr. Vivian Ostrowski — trial testimony preparation and trial testimony | $150,000 – $250,000
Krane Investigations LLC — e-discovery and trial exhibit preparation | $100,000 – $200,000
Wortham & Adair LLP (Diana Prescott) — local counsel fees | $50,000 – $75,000
Total Estimated Additional Costs | $1,300,000 – $2,025,000

MEMORANDUM

C&H MATTER NO.: 1038-00007

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