PRIVILEGED AND CONFIDENTIAL — 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 reflects the mental impressions, conclusions, opinions, and legal theories of counsel. It is not to be disclosed to any third party without the prior written approval of Priya Anand, Responsible Partner.
INTERNAL MEMORANDUM
January 25, 2023
FROM: Simone Laroche, Senior Associate, Calderwood & Harkness LLP Jeffrey Park, Associate, Calderwood & Harkness LLP
TO: Priya Anand, Responsible Partner, Calderwood & Harkness LLP Douglas Carmichael, Billing Partner, Calderwood & Harkness LLP
RE: Deposition Summary and Analysis — Natalie Gunderson, Vice President, Sales & Commercial, Cardinal Peak Industries
MATTER: Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471, Circuit Court of Cook County, Illinois, County Department, Law Division
C&H MATTER NO.: 1005-00005
CLIENT: Nexford Industrial Holdings Inc.
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I. Executive Summary
On January 18, 2023, we took the deposition of Natalie Gunderson, Vice President, Sales & Commercial, at Cardinal Peak Industries ("CPI"). The deposition was conducted at Calderwood & Harkness LLP's offices, 200 South Wacker Drive, Suite 4400, Chicago, Illinois 60606. Gunderson is the principal CPI representative responsible for commercial pricing, surcharge invoicing, and CPI's relationship with the Nexford Industrial Holdings Inc. ("Nexford") account. She served as CPI's designated fact witness on all surcharge-related matters and had direct, personal involvement in the preparation and delivery of every Surcharge Notice at issue in this litigation.
Gunderson's deposition was defended by Garrett Blackwood and Megan Hsu of Blackwood Stein & Associates LLP, 717 Seventeenth Street, Suite 2200, Denver, Colorado 80202, litigation counsel for Cardinal Peak Industries. The primary examining attorney was Simone Laroche, with assistance from Jeffrey Park. The proceedings were transcribed by a certified court reporter, and the testimony spanned approximately six and one-half hours across morning and afternoon sessions.
Overall Assessment. The deposition produced several significant admissions that are highly favorable to Nexford's defense across all three categories of defenses asserted under MSA Section 7.4 of the Master Supply Agreement (MSA-NIH-CPI-2020-001). Specifically:
• Late Surcharge Notices (Section 7.4(a)). Gunderson confirmed that Surcharge Notices were delivered beyond the contractually mandated 15-business-day deadline for seven of the fourteen disputed months. She acknowledged that these delays were attributable to internal CPI circumstances—staffing shortages and a systems migration—and that no provision of the MSA excused late delivery. She further confirmed that Nexford never waived the notice deadline in writing.
• Methodology Deviation (Exhibit C). Gunderson admitted that CPI's pricing department used an internally developed "blended cost" metric in calculating surcharges rather than the published Ferrous Scrap Index (Platts/SPI) and the Industrial Energy Cost Index prescribed by Exhibit C to the MSA. She conceded that CPI did not seek Nexford's consent before deviating from the contractual methodology and that no amendment to Exhibit C was ever executed to authorize the alternate approach.
• 12% Cap Exceedances (Section 7.4(c)). Gunderson acknowledged that for four months during the disputed period, CPI invoiced surcharges exceeding 12% of the applicable Base Price. She stated unequivocally that CPI did not obtain prior written consent from Nexford for any such exceedance, as required by the express terms of Section 7.4(c).
Taken together, these admissions substantially support Nexford's position that its maximum additional obligation is approximately $0.21 million beyond the $1.68 million already paid during the disputed period, as against Cardinal Peak's claimed total of $4.73 million in outstanding surcharges. The testimony also significantly undermines CPI's unjust enrichment claim (Count II) and account stated claim (Count III). This memorandum provides a detailed analysis of the testimony, organized by subject matter, together with credibility assessments and strategic recommendations.
II. Background on the Deponent
Natalie Gunderson has served as Vice President, Sales & Commercial, at Cardinal Peak Industries since 2019. She initially joined CPI in 2016 as Director of Pricing & Commercial Strategy and was promoted to her current role approximately three years later. In her capacity as Vice President, Gunderson oversees all commercial pricing activities for CPI's flat-rolled steel product lines, including the administration of customer contracts, the calculation and delivery of surcharge invoices, and the management of CPI's sales team.
Gunderson served as CPI's primary point of contact for the Nexford commercial relationship throughout the term of the Master Supply Agreement. She was directly and personally involved in the negotiation of the MSA (MSA-NIH-CPI-2020-001), which was executed on January 15, 2020, working opposite Russell Okonkwo, Vice President of Procurement at Nexford. Her role in the negotiation extended to the drafting and finalization of Exhibit C (the Surcharge Methodology), the establishment of Base Prices under Section 7.2, and the negotiation of the 12% surcharge cap provision in Section 7.4(c).
During the disputed period—March 2021 through May 2022—Gunderson had direct supervisory responsibility for the preparation and issuance of surcharge invoices to Nexford. She worked closely with Harold Briggs, CPI's Controller, who provided the underlying cost data used in surcharge calculations. Gunderson reports directly to Frank Delacroix, President and Chief Executive Officer of Cardinal Peak Industries.
Gunderson's testimony confirmed that she was the CPI executive who authorized the release of each Surcharge Notice to Nexford during the disputed period, that she reviewed the supporting calculations before delivery, and that she was the principal recipient of Nexford's written objections to the invoiced amounts. Her centrality to the facts at issue makes her testimony among the most important in this case.
III. Key Testimony — Surcharge Notice Timing (Section 7.4(a) — 15 Business Day Requirement)
A. The Contractual Requirement
Gunderson confirmed during her testimony that she was aware of, and familiar with, MSA Section 7.4(a), which requires the Seller (CPI) to deliver Surcharge Notices, together with supporting documentation sufficient to enable the Buyer (Nexford) to verify the surcharge calculation, no later than fifteen (15) business days after the end of the applicable calendar month. Gunderson acknowledged that this provision was a negotiated term of the MSA and that she understood its purpose: to provide Nexford with a definite and reasonable window within which to expect, receive, and review surcharge claims before the next billing cycle.
Gunderson further testified that she was the CPI executive responsible for ensuring timely delivery of Surcharge Notices to Nexford. She confirmed that this responsibility was not delegated to any subordinate and that she personally reviewed each Surcharge Notice before authorizing its transmittal to Nexford's procurement department. She stated that she understood that compliance with the notice deadline was an obligation of CPI under the MSA.
B. Admission of Late Delivery for Seven Months
This portion of the testimony constitutes one of the most significant admissions obtained during the deposition. When confronted with CPI's own internal transmittal records and email timestamps documenting the dates on which Surcharge Notices were sent to Nexford, Gunderson admitted that Surcharge Notices were delivered beyond the 15-business-day deadline for seven (7) of the fourteen (14) disputed months within the March 2021 through May 2022 period.
For each of these seven months, we presented Gunderson with the specific transmittal record from CPI's own files (Exhibit 3) alongside the email correspondence (Exhibit 4) reflecting the date Nexford's procurement team actually received the notice. In each instance, Gunderson acknowledged that the notice was delivered after the 15-business-day window had closed. She did not dispute the accuracy of CPI's transmittal records or the email timestamps.
When asked to explain the reasons for the late deliveries, Gunderson attributed the delays to two primary causes: (1) staffing shortages within CPI's pricing department during 2021, which she described as the result of employee departures and difficulty in hiring replacements, and (2) a systems migration that CPI undertook in late 2021, which disrupted the pricing department's workflow and its access to certain cost data for several months. While Gunderson characterized these circumstances as significant operational challenges, she made the critical concession that these were internal CPI issues and were not excused by any provision of the MSA. The following exchange was particularly significant:
Q (Laroche): Ms. Gunderson, is there any provision in the Master Supply Agreement that excuses CPI from delivering Surcharge Notices within the 15-business-day window due to staffing shortages or internal systems issues?
A (Gunderson): Not specifically, no.
Q: Is there any force majeure clause or other provision that you believe would excuse these delays?
A: I don't believe so, but I'd defer to counsel on the legal interpretation.
Q: But sitting here today, you cannot point to any specific contract provision that gave CPI additional time to deliver these Surcharge Notices?
A: No, I cannot.
Gunderson was further asked whether Nexford had ever waived the 15-business-day deadline in writing. She stated that she was not aware of any such written waiver. She could not identify any email, letter, or other communication from any Nexford representative purporting to waive or extend the notice deadline. She was also unable to identify any oral agreement to that effect, though she testified in general terms that the parties had a "collaborative" working relationship.
Additionally, Gunderson conceded that she did not seek a formal extension or amendment of the notice deadline from Russell Okonkwo or any other Nexford representative at any point during the disputed period. She acknowledged that she could have requested an amendment or written extension but did not do so.
The surcharges associated with the seven late-notice months total approximately $2.18 million of Cardinal Peak's claimed $4.73 million in outstanding surcharges. This figure was confirmed by cross-referencing the specific months identified as late against the corresponding Surcharge Notices (Exhibit 2) and CPI's invoicing records.
C. Gunderson's Attempted Mitigation
Gunderson made several attempts during the deposition to mitigate the significance of the late notices. Her primary argument was that Nexford's procurement team—and Russell Okonkwo in particular—was aware of rising raw material costs in real time through market communications, industry publications, and the parties' ongoing commercial dialogue. Gunderson characterized the late delivery of formal Surcharge Notices as a "technicality," asserting that Nexford was not prejudiced because it already knew that costs were increasing and should have anticipated surcharge invoices.
During cross-examination by Mr. Blackwood (defending counsel), Gunderson was directed to elaborate on this point. She attempted to characterize the commercial relationship between CPI and Nexford as one in which strict compliance with notice deadlines had not historically been enforced, suggesting a course of dealing in which both parties operated with a degree of flexibility on procedural requirements. Blackwood elicited testimony that CPI and Nexford had engaged in informal communications about cost trends and that Nexford had not previously raised the timeliness of Surcharge Notices as an issue.
However, on redirect questioning by Laroche, Gunderson was compelled to acknowledge several critical facts that undermine this narrative:
1. The disputed period (March 2021 through May 2022) was the first time CPI had attempted to pass through surcharges of this magnitude under the MSA. Prior surcharge invoices, if any, had been de minimis, and the surcharge pass-through mechanism had not been materially tested before March 2021.
2. The disputed period was the first time Nexford had formally disputed surcharge invoices under the MSA.
3. Given that the surcharge provisions had not been invoked at scale before this period, there was no established course of dealing with respect to the enforcement or non-enforcement of the 15-business-day notice requirement.
These concessions effectively neutralize CPI's potential argument that Nexford acquiesced to late notices through a pattern of prior conduct. Because the surcharge provisions were essentially untested before March 2021, there was no prior pattern of conduct on which CPI can rely.
Assessment. Gunderson's admission of late delivery for seven of the fourteen disputed months is a strong factual foundation for Nexford's condition precedent and/or waiver defense under Section 7.4(a). The absence of any written waiver, any contractual excuse, and any prior course of dealing involving late surcharge notices of material amounts makes this defense both legally and factually robust.
IV. Key Testimony — Exhibit C Surcharge Methodology Deviation
A. Contractual Methodology
Gunderson confirmed that she was thoroughly familiar with Exhibit C to the MSA, which prescribes the Surcharge Methodology to be used by CPI in calculating any surcharges invoiced to Nexford under Section 7.4. Exhibit C establishes two primary cost indices for surcharge calculations:
1. Ferrous Scrap Index, as reported by Drayton Partners LLC ("Platts/SPI"), which serves as the reference point for raw material cost changes in scrap steel pricing.
2. Industrial Energy Cost Index, a published index measuring changes in industrial energy costs, which serves as the reference point for energy-related cost fluctuations.
Gunderson confirmed the agreed baseline scrap cost of $340 per ton and the agreed baseline energy cost of $48 per ton as set forth in Exhibit C. These baselines were established as of the effective date of the MSA (January 15, 2020) and were intended to serve as the fixed reference points against which monthly cost changes would be measured for surcharge purposes.
Gunderson further acknowledged that Section 7.4 requires surcharge components to be "calculated in accordance with the methodology set forth in Exhibit C." She testified that she understood this language to require CPI to apply the specific published indices identified in Exhibit C—namely, the Platts/SPI Ferrous Scrap Index and the Industrial Energy Cost Index—in calculating any surcharges passed through to Nexford. She confirmed that the purpose of specifying published, third-party indices was to ensure objectivity and verifiability in the surcharge calculation process.
B. Admission of Use of Blended Cost Metric
This line of testimony produced the second major category of admissions obtained during the deposition. Gunderson admitted that for the surcharge invoices issued during the entire disputed period (March 2021 through May 2022), CPI's pricing department used an internally developed "blended cost" metric rather than the published Ferrous Scrap Index and Industrial Energy Cost Index specified in Exhibit C to the MSA.
Gunderson explained the composition of CPI's blended cost metric in some detail. She testified that the metric incorporated the following components:
• CPI's actual scrap procurement costs, based on CPI's specific purchase orders and supplier contracts for ferrous scrap, rather than the broadly published Platts/SPI index;
• Energy costs derived from CPI's specific utility contracts, reflecting the actual rates CPI paid under its utility agreements, rather than the published Industrial Energy Cost Index; and
• Alloy costs from CPI's internal purchasing records, a cost component that was not contemplated by Exhibit C at all.
The resulting blended cost figure was a composite that differed materially from the figures that would have been produced using the contractually prescribed published indices. The blended cost metric consistently produced higher surcharge figures than the Exhibit C methodology would have yielded, because CPI's actual procurement costs exceeded the published index values during much of the disputed period and because the metric incorporated alloy costs—an entirely separate cost category—that Exhibit C does not include as a surcharge-eligible component.
When asked why CPI deviated from the contractual methodology, Gunderson testified that CPI's management—including herself, Harold Briggs (Controller), and Frank Delacroix (CEO)—made a deliberate decision to use the blended cost metric because they believed it was "more reflective of actual costs incurred" by CPI. Gunderson further stated that CPI's management believed the published indices "didn't capture the full picture" of CPI's cost increases, particularly with respect to alloy surcharges and the specific utility rate increases CPI experienced during the period. The following exchange captures the essence of Gunderson's testimony on this point:
Q (Laroche): Ms. Gunderson, when was the decision made to use this blended cost metric instead of the published indices?
A (Gunderson): I believe we started looking at it in early 2021 when costs were rising quickly. Harold Briggs and I discussed it, and we felt the published indices weren't keeping up with what we were actually experiencing.
Q: And did you seek Nexford's consent or approval before switching to this methodology?
A: No. We viewed it as a refinement, not a change in methodology.
Q: But you understand that Exhibit C specifies particular published indices?
A: Yes.
Q: And you understand that the surcharges were required to be calculated in accordance with the methodology set forth in Exhibit C?
A: Yes, that's the language.
Q: And no amendment to Exhibit C was executed to authorize the use of this blended cost metric, correct?
A: That's correct.
Gunderson's concession that she did not seek Nexford's consent or approval before switching to the blended cost methodology is particularly significant. It forecloses any argument by CPI that Nexford knowingly acquiesced to or approved the methodological change. Similarly, her acknowledgment that no amendment to Exhibit C was executed to authorize the use of the blended cost metric confirms that CPI acted unilaterally in departing from the contractual framework.
The overstatement attributable to the methodology deviation—that is, the difference between the surcharges CPI invoiced using the blended cost metric and the surcharges that would have been calculated using the Exhibit C indices—is approximately $1.47 million of the claimed $4.73 million. This figure was derived from the side-by-side comparison prepared by Nexford's team (Exhibit 8), which we presented to Gunderson during the deposition.
When asked to reconcile CPI's blended cost figures to the published indices, Gunderson was unable to do so. She acknowledged that she had not previously attempted such a reconciliation and that CPI's internal pricing worksheets (Exhibit 5) did not contain columns or line items referencing the published index values. This inability to reconcile the blended cost figures to the contractual methodology further underscores the extent of the deviation and the absence of any good-faith basis for CPI's claim that it substantially complied with Exhibit C.
C. Documentation Provided with Surcharge Notices
Gunderson's testimony regarding the supporting documentation that accompanied the Surcharge Notices further reinforces Nexford's position. She testified that the supporting documentation CPI provided with each Surcharge Notice consisted of CPI's internal cost summaries—generated from the blended cost metric—rather than references to or calculations derived from the published Ferrous Scrap Index or the Industrial Energy Cost Index.
In other words, the documentation itself reflected the unauthorized methodology. At no point during the disputed period did CPI provide Nexford with surcharge calculations based on the Exhibit C indices, nor did CPI disclose in the Surcharge Notices themselves that it had deviated from the contractual methodology. Nexford's procurement team was left discover the deviation on its own.
Gunderson acknowledged that Russell Okonkwo, Nexford's VP of Procurement, raised objections to the methodology in email correspondence during the disputed period. These objections are documented in the email correspondence marked as Exhibit 4. Despite these contemporaneous objections, Gunderson confirmed that CPI continued to invoice using the blended cost metric for the remainder of the disputed period without reverting to the Exhibit C methodology or seeking an amendment.
Assessment. Gunderson's admissions regarding the methodology deviation are highly significant. CPI's use of an unauthorized, internally developed cost metric—without Nexford's consent, without an amendment to Exhibit C, and in the face of contemporaneous objections—provides a strong factual basis for Nexford's defense that the surcharges were not properly calculated under the MSA. The approximately $1.47 million in overstatement represents a substantial portion of CPI's claim and is directly traceable to CPI's unilateral departure from the agreed methodology.
V. Key Testimony — 12% Surcharge Cap (Section 7.4(c))
A. Awareness of the Cap
Gunderson confirmed that she was aware of Section 7.4(c) of the MSA, which provides that "in no event shall the aggregate monthly surcharge exceed 12% of the applicable Base Price for the relevant product category without prior written consent of Buyer." This provision was, by Gunderson's own testimony, a specifically negotiated term of the MSA and one that Nexford insisted upon as a condition of accepting the surcharge pass-through mechanism.
Gunderson confirmed the applicable Base Prices as set forth in Section 7.2 of the MSA (2020 base prices):
• Hot-Rolled Coil ("HRC"): $620 per ton
• Cold-Rolled Coil ("CRC"): $740 per ton
Applying the 12% cap to these Base Prices yields the following maximum monthly surcharge amounts absent prior written consent:
• HRC: 12% × $620 = $74.40 per ton
• CRC: 12% × $740 = $88.80 per ton
Gunderson confirmed these calculations and acknowledged that she understood the cap to function as an absolute ceiling on the per-ton surcharge amount that CPI could invoice for any given month without first obtaining Nexford's prior written consent.
B. Admission of Cap Exceedances Without Written Consent
Gunderson acknowledged that for four (4) months during the disputed period, the surcharges invoiced by CPI to Nexford exceeded 12% of the applicable Base Price for the relevant product categories. These four months were identified during the deposition by reference to the specific Surcharge Notices (Exhibit 2), and Gunderson confirmed the exceedances after reviewing the invoiced per-ton surcharge amounts for each month.
When asked the critical question—whether CPI obtained prior written consent from Nexford before invoicing surcharges in excess of the 12% cap—Gunderson provided the following testimony:
Q (Laroche): Ms. Gunderson, for the months in which the surcharges exceeded 12% of the applicable Base Price, did CPI obtain prior written consent from Nexford before issuing those invoices?
A (Gunderson): I don't believe we received written consent, no.
This admission was unqualified and unambiguous. Gunderson did not hedge or attempt to identify any document that might constitute written consent. She testified that she believed verbal discussions with Russell Okonkwo about market conditions and the general trajectory of raw material costs constituted sufficient notice to Nexford that surcharges might exceed the cap. However, when pressed on this point, she conceded that Section 7.4(c) specifically requires "prior written consent" and that verbal discussions, regardless of their substance, do not satisfy that contractual requirement.
Gunderson could not produce, and was not aware of, any written communication from any Nexford representative authorizing surcharges above the 12% cap. She testified that CPI's files did not contain any such document and that she had not located any such communication in her preparation for the deposition.
The excess above the 12% cap for the four months in question totals approximately $1.08 million. This figure represents the aggregate difference between the surcharges CPI actually invoiced and the maximum amounts CPI could have invoiced under the 12% cap without obtaining written consent.
C. Assessment. Gunderson's testimony on the 12% cap provision is the most straightforward of the three defense categories. Her concession that CPI did not obtain the prior written consent required by Section 7.4(c) is unequivocal and was given without reservation. The contractual language is clear, the absence of written consent is undisputed, and Gunderson's attempt to substitute verbal discussions for the written consent requirement is foreclosed by the express terms of the MSA. This testimony strongly supports Nexford's defense that the cap-excess amounts—totaling approximately $1.08 million—are not owed.
VI. Key Testimony — Nexford's Payment History and Disputed Amounts
Gunderson's testimony provided a clear overview of the financial landscape of the dispute, confirming key figures that frame Nexford's exposure analysis. The following facts were established through Gunderson's testimony:
• During the disputed period (March 2021 through May 2022), CPI issued Surcharge Notices reflecting total surcharges of $6.41 million.
• Nexford made surcharge payments totaling $1.68 million during the period. These payments represented partial payments on surcharges that Nexford accepted as properly calculated and timely noticed under the MSA. Gunderson confirmed that these payments were applied by CPI to specific invoices and that Nexford was current on all undisputed payment obligations.
• The April 2021 surcharge was paid in full by Nexford and is not in dispute in this litigation. Gunderson confirmed that this month's surcharge was timely noticed, calculated using the Exhibit C methodology, and within the 12% cap.
• CPI's claimed unpaid balance is $4.73 million ($6.41 million invoiced minus $1.68 million paid).
Gunderson also acknowledged receiving Nexford's written disputes during the disputed period. She confirmed that Nexford submitted its objections to the surcharge invoices within the 30-calendar-day dispute window provided by Section 7.4(d) of the MSA for each of the months that Nexford contested. This is significant because it confirms that Nexford preserved its contractual rights to challenge the invoiced surcharges through timely written objection.
Gunderson further testified that CPI escalated certain of the disputes to senior officers, as contemplated by Section 7.4(d), which provides for escalation to designated senior executives of each party in the event the parties' commercial representatives are unable to resolve a surcharge dispute within a specified period. However, Gunderson confirmed that no resolution was reached through the escalation process prior to CPI's formal demand letter dated June 10, 2022. She testified that the escalation discussions were unproductive because the parties' fundamental disagreement—whether CPI was entitled to use the blended cost metric and whether the late notices were excused—remained unresolved.
VII. Key Testimony — The Demand Letter and Pre-Litigation Communications
Gunderson provided testimony regarding the sequence of events leading up to the commencement of this litigation. She confirmed the following:
Engagement of Outside Counsel. The decision to engage outside counsel was made by Patricia Morrow, CPI's General Counsel, in consultation with Frank Delacroix, CPI's President and CEO. Gunderson was not the decision-maker with respect to litigation strategy, but she was closely involved in the process of compiling and organizing the surcharge documentation that was provided to CPI's outside counsel, Blackwood Stein & Associates LLP, for purposes of the formal demand.
The June 10, 2022 Demand Letter. Gunderson confirmed that she assisted in preparing the materials underlying the demand letter issued by Blackwood Stein & Associates LLP on June 10, 2022 (Exhibit 9). She acknowledged that the demand letter sought $4.73 million in unpaid surcharges and referenced CPI's claimed entitlement under MSA Section 7.4. Gunderson reviewed the demand letter before it was sent and confirmed that the amount demanded was consistent with CPI's internal accounting of the unpaid balance.
Nexford's Response. Gunderson confirmed that Nexford responded to the demand letter through Deborah Whitfield, Nexford's General Counsel, by letter dated July 5, 2022 (Exhibit 10). Gunderson acknowledged that Nexford's response letter rejected CPI's demand in its entirety and cited the same three categories of defense that Nexford has asserted in this litigation: (1) untimely delivery of Surcharge Notices, (2) deviation from the Exhibit C methodology, and (3) exceedance of the 12% surcharge cap without written consent.
Absence of Further Pre-Litigation Resolution Efforts. Gunderson testified that after receiving Nexford's July 5, 2022 rejection letter, CPI made no further attempt at commercial resolution before filing the Complaint on August 8, 2022. She confirmed that no additional meetings, telephone calls, or written exchanges aimed at resolving the dispute took place between the July 5, 2022 response and the filing of suit. While this fact does not give rise to a legal defense, it is relevant context for mediation preparation and may be useful in demonstrating CPI's unwillingness to engage in good-faith resolution efforts prior to litigation.
VIII. Key Testimony — MSA Negotiation and Course of Dealing
Gunderson's testimony regarding the negotiation of the MSA and the parties' course of dealing prior to the disputed period provides important context for Nexford's defenses and undermines CPI's potential equitable arguments.
Negotiation of the MSA. Gunderson confirmed that she personally participated in negotiating the MSA, which was executed on January 15, 2020. She was CPI's lead commercial negotiator, and her counterpart at Nexford was Russell Okonkwo, VP of Procurement. The negotiations took place over a period of approximately four months in late 2019 and early 2020.
Negotiation of Exhibit C. Gunderson confirmed that the Exhibit C Surcharge Methodology was specifically negotiated between the parties, with Gunderson representing CPI and Okonkwo representing Nexford. The selection of the published Ferrous Scrap Index (Platts/SPI) and the Industrial Energy Cost Index as the reference indices for surcharge calculations was a deliberate and informed choice. Gunderson testified that both parties wanted an objective, third-party benchmark for surcharge calculations, and the published indices were selected precisely because they provided an independent, transparent, and verifiable measure of cost changes that neither party could manipulate unilaterally.
The 12% Cap Provision. Gunderson acknowledged that the 12% cap provision in Section 7.4(c) was included in the MSA at Nexford's request. She testified that the cap was a material term of the agreement and that CPI accepted it as part of the overall negotiated package in exchange for other commercial concessions. This testimony is significant because it establishes that the cap was not boilerplate language or an oversight—it was a negotiated protection that Nexford bargained for and that CPI accepted.
Course of Dealing Prior to Disputed Period. Gunderson admitted that prior to the disputed period, CPI had not invoked the surcharge pass-through mechanism for material amounts. While there may have been isolated, de minimis surcharge adjustments, the March 2021 through May 2022 period represented the first significant test of the surcharge provisions under the MSA. This testimony is critical because it eliminates CPI's ability to argue that the parties had established a course of dealing in which strict compliance with the surcharge provisions was not enforced. There was simply no prior course of dealing with respect to material surcharges.
Contract Volumes and Estimated Spend. Gunderson confirmed the MSA's estimated annual volumes of approximately 18,000 tons of HRC and 6,500 tons of CRC, for a combined total of approximately 24,500 tons per year. At the applicable Base Prices, this translates to an estimated annual spend of approximately $15.97 million. These figures provide context for the magnitude of the disputed surcharges relative to the overall commercial relationship.
IX. Key Testimony — Unjust Enrichment and Account Stated Claims
In addition to the surcharge-specific testimony summarized above, Gunderson was examined on the factual bases for CPI's alternative causes of action, specifically the unjust enrichment claim (Count II of the Complaint) and the account stated claim (Count III).
Unjust Enrichment (Count II)
Gunderson was asked to describe her understanding of CPI's unjust enrichment claim. She testified that she understood the claim to be premised on the theory that Nexford received steel products at prices that did not reflect CPI's actual increased costs during the disputed period, and that Nexford was thereby unjustly enriched at CPI's expense.
However, when asked the threshold question of whether the MSA governed the pricing relationship between the parties, Gunderson answered affirmatively. She acknowledged that the MSA was in full force and effect throughout the entire disputed period and that the MSA specifically addressed the mechanism by which CPI could pass through cost increases to Nexford—namely, the surcharge provisions of Section 7.4 and Exhibit C. She did not identify any gap in the MSA's coverage that would necessitate resort to an equitable theory.
Assessment. Gunderson's testimony supports Nexford's position that the unjust enrichment claim is precluded by the existence of an express contract governing the same subject matter. Under well-established Illinois law, a party cannot recover under an unjust enrichment theory where the rights and obligations of the parties are governed by a valid, enforceable contract. Gunderson's own testimony confirms that the MSA governed the pricing relationship, including the surcharge mechanism, throughout the disputed period.
Account Stated (Count III)
On the account stated claim, Gunderson testified that CPI's theory was based on the straightforward proposition that CPI sent surcharge invoices to Nexford and Nexford did not pay the full invoiced amounts. Gunderson appeared to believe that Nexford's failure to pay the invoices in full gave rise to an account stated.
However, on examination, Gunderson conceded the critical fact that Nexford timely disputed the surcharge invoices under Section 7.4(d) of the MSA. She confirmed that Nexford submitted written objections to the surcharges within the 30-calendar-day dispute window for each month that Nexford contested. She further confirmed that CPI was aware of these objections at the time they were made and that the disputes were escalated (unsuccessfully) through the MSA's dispute resolution mechanism.
Assessment. Gunderson's testimony undermines the account stated claim because an essential element of an account stated under Illinois law is the absence of a timely objection to the account. Where, as here, the alleged debtor timely and expressly disputed the invoices, no account stated can arise. Gunderson's own confirmation that Nexford's disputes were received within the contractual window is fatal to this theory.
X. Credibility Assessment
We provide the following assessment of Gunderson's credibility as a witness, both with respect to the deposition testimony and as a prospective trial witness.
Overall Demeanor. Gunderson was generally candid and cooperative throughout the deposition. She answered questions directly for the most part and did not engage in evasive or obstructionist behavior. She appeared well-prepared by her attorneys at Blackwood Stein & Associates LLP, demonstrating familiarity with the MSA's key provisions and the chronology of events. However, her preparation could not shield her from making key admissions when confronted with documentary evidence—particularly CPI's own transmittal records and internal pricing worksheets.
Attempts to Characterize Non-Compliance as "Technicalities." Gunderson's principal defense throughout the deposition was an effort to characterize CPI's various instances of contractual non-compliance—late notices, methodology deviations, and cap exceedances—as "industry practice," "refinements," or "technicalities" that did not meaningfully prejudice Nexford. These characterizations were consistently undermined by the specificity of the MSA's provisions and, critically, by Gunderson's own acknowledgments that those provisions were individually negotiated terms that both parties agreed to with full understanding of their import. Her attempts to minimize the significance of CPI's non-compliance are unlikely to be persuasive to a trier of fact, given the unambiguous contractual language and the size of the amounts at stake.
Methodology Deviation. Gunderson's credibility is likely to be challenged most effectively at trial on the methodology deviation issue. Her explanation for using the blended cost metric—that it was "more reflective of actual costs"—conflicts directly with the clear language of Exhibit C, which specifies published third-party indices. The fact that Gunderson participated in the negotiation of Exhibit C and understood why the published indices were selected (objectivity and verifiability) makes it difficult for her to credibly claim that CPI's unilateral substitution of an internal metric was a good-faith "refinement" rather than a deliberate departure from the contractual framework.
Forthrightness on Cap Exceedances. Gunderson was notably forthcoming about the absence of written consent for the surcharges exceeding the 12% cap. Her statement—"I don't believe we received written consent, no"—was delivered without hesitation and without qualification. While this candor is creditable in terms of personal honesty, it limits CPI's ability to argue equitable defenses (such as waiver or estoppel) on this point, because Gunderson herself does not claim that Nexford gave any form of written authorization.
Overall Credibility at Trial. Gunderson presents as a knowledgeable, professional witness who will likely be viewed sympathetically by a jury or judge. However, her key admissions are firmly established in the transcript and corroborated by documentary evidence. Her credibility challenges will arise not from dishonesty but from the tension between her desire to explain CPI's conduct and the unambiguous contractual provisions that constrain those explanations.
XI. Impact on Nexford's Three Categories of Defense
Gunderson's deposition testimony materially advances Nexford's defense position across all three categories. We summarize the impact below.
A. Late Notices ($2.18 Million)
Gunderson's admissions confirm the factual predicate necessary to support Nexford's defense based on untimely Surcharge Notices:
• Seven (7) of the fourteen (14) disputed months had Surcharge Notices delivered after the 15-business-day deadline.
• No written waiver of the deadline was given by Nexford at any time.
• No provision of the MSA excuses late delivery due to internal staffing or systems issues.
• No prior course of dealing existed with respect to material surcharges, and therefore no pattern of non-enforcement can be established.
• Gunderson did not seek a formal extension or amendment of the notice deadline.
The surcharges associated with these seven months total approximately $2.18 million of the $4.73 million claimed.
B. Methodology Deviation ($1.47 Million)
Gunderson's admissions confirm CPI's unauthorized departure from the Exhibit C Surcharge Methodology:
• CPI used an internally developed blended cost metric that incorporated actual procurement costs, CPI-specific utility costs, and alloy costs not contemplated by Exhibit C.
• No amendment to Exhibit C was executed to authorize the use of the blended cost metric.
• Nexford's consent was not sought or obtained before CPI switched to the blended cost methodology.
• Nexford raised contemporaneous objections to the methodology through Russell Okonkwo, but CPI continued to invoice using the unauthorized metric.
• Gunderson was unable to reconcile CPI's blended cost figures to the published index values when presented with Nexford's side-by-side comparison.
The overstatement attributable to the methodology deviation is approximately $1.47 million of the $4.73 million claimed.
C. Cap Excess ($1.08 Million)
Gunderson's testimony conclusively establishes that CPI failed to obtain the prior written consent required by Section 7.4(c):
• Four (4) months during the disputed period had surcharges exceeding 12% of the applicable Base Price.
• CPI did not obtain prior written consent from Nexford before invoicing surcharges in excess of the cap.
• Verbal discussions with Russell Okonkwo are insufficient under the MSA's express written consent requirement.
• No written communication from any Nexford representative authorizing surcharges above the cap has been identified.
The excess above the 12% cap for these four months totals approximately $1.08 million of the $4.73 million claimed.
D. Overlap and Net Exposure
It should be noted that some overlap exists among the three defense categories. Certain months involve more than one category of non-compliance (e.g., a month may have had both a late notice and a cap exceedance). Taking account of this overlap and performing the appropriate netting calculations, Nexford's litigation position remains that its maximum additional obligation is approximately $0.21 million beyond the $1.68 million already paid. This figure represents the residual surcharge amounts that were (a) timely noticed, (b) properly calculated under the Exhibit C methodology, and (c) within the 12% cap. Gunderson's testimony does not disturb this calculation; to the contrary, her admissions reinforce the validity of each deduction.
XII. Strategic Recommendations
Based on our analysis of Gunderson's deposition testimony, we recommend the following actions.
1. Mediation Preparation. Gunderson's admissions should be featured prominently in Nexford's mediation preparation materials. The combination of (a) confirmed late notices for seven months, (b) acknowledged methodology deviations without consent, and (c) admitted cap exceedances without written consent provides Nexford with significant leverage in settlement discussions. We recommend preparing a concise mediation brief incorporating key deposition excerpts alongside the documentary evidence, which should be presented to CPI and the mediator to demonstrate the strength of Nexford's position on each defense category.
2. Dispositive Motions. If the matter does not resolve at mediation, Gunderson's testimony provides a strong factual basis for dispositive motions. In particular, we recommend considering motions for partial summary judgment on:
• The $2.18 million in surcharges associated with the seven late-notice months, arguing that timely delivery of the Surcharge Notice was a condition precedent to CPI's entitlement to the surcharge, and that condition was not satisfied;
• The $1.08 million in cap-excess surcharges, arguing that CPI's failure to obtain prior written consent renders those amounts unrecoverable as a matter of law; and
• Dismissal of the unjust enrichment and account stated claims based on the existence of the MSA and Nexford's timely disputes, respectively.
3. Key Deposition Excerpts to Flag. The following categories of testimony should be catalogued by transcript page reference and prepared for use in motion practice, mediation, and trial:
• Admission of late delivery for seven months (specific pages to be catalogued upon receipt of final transcript);
• Acknowledgment that CPI used a blended cost metric that deviated from the Exhibit C methodology;
• Concession that no written consent was obtained for surcharges exceeding the 12% cap;
• Confirmation that the MSA governed the entire pricing relationship between the parties during the disputed period (supporting the defense to the unjust enrichment claim);
• Confirmation that Nexford timely disputed the surcharge invoices within the 30-calendar-day window under Section 7.4(d) (undermining the account stated claim); and
• Acknowledgment that the Exhibit C methodology and the 12% cap were specifically negotiated terms.
4. Expert Report Coordination. We recommend coordinating with Dr. Anita Rosenthal at Meridian Bridge Consulting LLC, Nexford's damages rebuttal expert, to incorporate Gunderson's admissions regarding the blended cost methodology into the expert report. Specifically, Gunderson's confirmation that CPI used an internal composite metric, her description of its components, and her inability to reconcile the blended cost figures to the published indices should be presented to Dr. Rosenthal so that the damages rebuttal report can quantify the overstatement with precision and anchor the expert's calculations to the deponent's own admissions.
5. Cross-Reference with Document Production. Gunderson's testimony should be cross-referenced with documents produced by CPI in response to Nexford's First Set of Requests for Production, served December 5, 2022. In particular, we should compare Gunderson's description of CPI's internal pricing worksheets and transmittal logs with the documents actually produced, to identify any potential gaps or inconsistencies in CPI's production. If additional documents referenced by Gunderson (such as internal communications regarding the decision to adopt the blended cost metric) have not been produced, a targeted follow-up production request should be served.
6. Preparation for Okonkwo Deposition. The upcoming deposition of Russell Okonkwo, Nexford's VP of Procurement, scheduled for February 7, 2023, should be prepared to corroborate Nexford's contemporaneous objections to the surcharge invoices and to confirm the absence of any written waiver or consent. Okonkwo's testimony should establish that Nexford raised objections in real time, that Nexford did not waive the notice deadline or consent to the methodology deviation or cap exceedances, and that Nexford's payment of $1.68 million was limited to surcharges that Nexford accepted as properly calculated and timely noticed. We will coordinate with Priya Anand on Okonkwo preparation.
XIII. Exhibits Referenced During Deposition
The following exhibits were marked and used during the deposition of Natalie Gunderson on January 18, 2023. Copies of all exhibits are maintained in the C&H matter file and will be included in the exhibit binder for trial preparation purposes.
XIV. Distribution and Confidentiality
This memorandum is protected by the attorney-client privilege and the work product doctrine. It has been prepared by counsel for Nexford Industrial Holdings Inc. in anticipation of litigation and reflects the mental impressions, conclusions, opinions, and legal theories of counsel at Calderwood & Harkness LLP. It is intended solely for use by authorized recipients in connection with the defense of Cardinal Peak Industries v. Nexford Industrial Holdings Inc., Case No. 2022-L-008471.
Distribution of this memorandum is strictly limited to the following individuals:
• Priya Anand, Responsible Partner, Calderwood & Harkness LLP
• Douglas Carmichael, Billing Partner, Calderwood & Harkness LLP
• Simone Laroche, Senior Associate, Calderwood & Harkness LLP
• Jeffrey Park, Associate, Calderwood & Harkness LLP
At counsel's discretion and subject to the direction of Priya Anand, this memorandum may also be shared with the following client representatives:
• Deborah Whitfield, General Counsel, Nexford Industrial Holdings Inc.
• Diana Calloway, Marlowe Asset Management Bluff Capital Partners, LP (private equity sponsor of Nexford)
This memorandum is not to be shared with any third party without the prior written approval of Priya Anand, Responsible Partner.
CALDERWOOD & HARKNESS LLP
By: ________
Simone Laroche Senior Associate