PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT THIS MEMORANDUM IS PROTECTED FROM DISCLOSURE BY THE ATTORNEY-CLIENT PRIVILEGE AND THE WORK PRODUCT DOCTRINE. IT IS PREPARED IN ANTICIPATION OF LITIGATION AND REFLECTS THE MENTAL IMPRESSIONS, CONCLUSIONS, AND LEGAL THEORIES OF COUNSEL. DO NOT DISTRIBUTE OR DISCLOSE WITHOUT THE EXPRESS AUTHORIZATION OF CALDERWOOD & HARKNESS LLP.
DEPOSITION PREPARATION MEMORANDUM — DEREK WHITMORE
MEMORANDUM
FROM: Carlos Espinoza and Hannah Brinkley, Calderwood & Harkness LLP
TO: Linda Osei, Responsible Partner, Litigation, Calderwood & Harkness LLP
CC: Priya Anand, Billing Partner, Litigation, Calderwood & Harkness LLP
DATE: February 10, 2025
RE: Deposition Preparation — Derek Whitmore, Senior Vice President, Head of Special Assets Group, Belmont Ridge Bank NA; Deposition Scheduled February 18, 2025
MATTER: Belmont Ridge Bank NA v. Triton Harbor Industries, LLC, Marcus J. Kappel, and Elaine D. Kappel, Index No. 654871/2024, New York Supreme Court, New York County, Commercial Division (Hon. Althea Marchetti)
C&H Matter No.: 1022-00005
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I. PURPOSE AND SCOPE OF THIS MEMORANDUM
This memorandum is prepared for the Calderwood & Harkness litigation team in connection with the upcoming deposition of Derek Whitmore, Senior Vice President and Head of the Special Assets Group ("SAG") at Belmont Ridge Bank NA ("BRB" or the "Bank"). Mr. Whitmore's deposition has been noticed by defense counsel for February 18, 2025. The deposition will be taken by Theodore "Ted" Huang, a founding partner of Kestrel Voss & Huang LLP, who serves as lead trial counsel for the counterclaim defendants Triton Harbor Industries, LLC ("THI" or "Triton Harbor"), Marcus J. Kappel, and Elaine D. Kappel (collectively, the "Defendants" or the "Kappels"). We anticipate that senior associate Natasha Orlov of Kestrel Voss & Huang LLP will also attend the deposition in a supporting capacity. The deposition will take place at the offices of Calderwood & Harkness LLP, 600 Lexington Avenue, 30th Floor, New York, NY 10022. Linda Osei will defend the deposition on behalf of BRB.
Mr. Whitmore is SVP and Head of BRB's Special Assets Group. He assumed direct management and oversight of the Triton Harbor credit relationship in March 2023, following the internal credit downgrade of the Triton Harbor facilities from "Pass" to "Substandard" (Risk Rating 7) and the corresponding transfer of the account from BRB's Relationship Management Division to SAG. From that point forward, Mr. Whitmore served as the senior BRB officer responsible for the workout of the Triton Harbor credits, a role he held through the execution of the Forbearance and Modification Agreement on October 6, 2023, the subsequent monitoring of the borrower's performance under the forbearance, and the ultimate acceleration of the facilities in April 2024.
Mr. Whitmore is the principal BRB officer alleged by the Defendants to have made fraudulent oral representations during the September 12, 2023 in-person meeting held at BRB's offices at 1200 Avenue of the Americas, 38th Floor, New York, NY 10036. As set forth in the Counterclaims, the Defendants allege that at this meeting, Mr. Whitmore made affirmative misrepresentations regarding BRB's intent to continue the lending relationship, its willingness to consider a new revolving credit facility, and the characterization of the additional collateral demanded by BRB as a mere regulatory "formality." These alleged representations form the factual predicate for the Defendants' counterclaims.
Mr. Whitmore is central to three of the four counterclaims asserted by the Defendants: (1) the First Counterclaim for fraudulent inducement; (2) the Second Counterclaim for negligent misrepresentation; and (3) the Fourth Counterclaim for breach of the implied covenant of good faith and fair dealing. While the Third Counterclaim (economic duress) focuses primarily on the coercive nature of the forbearance terms rather than specific representations attributed to Mr. Whitmore, his testimony will inevitably touch on the circumstances underlying that claim as well.
This memorandum is organized as follows:
(1) Witness background and profile (Section II);
(2) Anticipated lines of questioning by opposing counsel (Section III);
(3) Key documents and anticipated exhibits (Section IV);
(4) Sensitive areas and risk assessment (Section V);
(5) Recommended testimony guidance for Mr. Whitmore (Section VI);
(6) Preparation session logistics and deposition logistics (Section VII);
(7) Coordination with subsequent depositions (Section VIII); and
(8) Summary of key takeaways and action items (Section IX).
This memorandum should be read in conjunction with the Privilege Review Memorandum dated December 18, 2024, the Case Strategy Memorandum dated January 8, 2025, and the deposition preparation memoranda being prepared separately for Joanna Reeves and Philip Aaronson.
II. WITNESS BACKGROUND AND PROFILE
A. Professional Background
Derek Whitmore is 49 years old. He currently holds the title of Senior Vice President and Head of BRB's Special Assets Group. Mr. Whitmore joined Belmont Ridge Bank approximately fifteen years ago, initially in the commercial lending division, and was promoted to head the Special Assets Group approximately six years ago, making him one of the more senior officers in the Bank's credit administration function. In his current role, he manages a team of workout officers and credit analysts who are collectively responsible for managing the Bank's portfolio of distressed and classified credits. This includes credits that have been downgraded to "Special Mention," "Substandard," "Doubtful," or "Loss" under the Bank's internal risk rating system, which is generally aligned with the classification categories used by the Office of the Comptroller of the Currency ("OCC") and other federal banking regulators.
Mr. Whitmore reports directly to Philip Aaronson, Executive Vice President and Chief Credit Officer of BRB. The day-to-day SAG relationship manager assigned to the Triton Harbor account was Joanna Reeves, Vice President, who reported to Mr. Whitmore. Ms. Reeves handled the majority of routine communications with Marcus Kappel and with Mercer Tidwell & Associates LLC, the restructuring advisory firm retained by Triton Harbor (Raymond Mercer, Managing Director). Mr. Whitmore, however, maintained supervisory oversight and was personally involved in the key strategic decisions regarding the account, including the September 12, 2023 meeting and the negotiation of the Forbearance and Modification Agreement.
Mr. Whitmore's educational background and any relevant professional certifications or training should be confirmed during preparation sessions. We will need to verify whether he holds a Certified Turnaround Professional ("CTP") designation or similar credential, which may be relevant to his credibility as a workout professional. We should also confirm the details of his career trajectory prior to joining BRB, including any prior workout or distressed-credit experience at other institutions, which Huang may explore to establish that Mr. Whitmore is a sophisticated professional who knew exactly what he was communicating to the Kappels.
B. Whitmore's Role in the Triton Harbor Relationship
Mr. Whitmore assumed oversight of the Triton Harbor account on or about March 8, 2023, the date on which BRB's Internal Credit Review Committee approved the downgrade of the Triton Harbor credit facilities from "Pass" to "Substandard" (Risk Rating 7) and directed the transfer of the account from the Relationship Management Division to the Special Assets Group. The downgrade was prompted by Triton Harbor's deteriorating financial performance, including the loss of the Port of Bridgehaven municipal services contract (representing approximately $12 million in annual revenue) and the Newark Bay maintenance contract (representing approximately $7.5 million in annual revenue), which together constituted a substantial portion of Triton Harbor's revenue base. These contract losses caused Triton Harbor's revenue run-rate to decline from approximately $68 million (FY2022) to approximately $48 million on an annualized basis by early 2023, and caused trailing twelve-month EBITDA to fall from $9.4 million (FY2022) to approximately $5.1 million (Q1 2023 TTM).
At the time of the account's transfer to SAG, the outstanding balances under the BRB credit facilities were as follows:
These facilities had originally been extended under a Credit Agreement dated June 15, 2021, which provided for a $14,000,000 Term Loan A (bearing interest at SOFR + 275 bps) and an $8,000,000 Revolving Credit Facility (bearing interest at SOFR + 250 bps), for total committed facilities of $22,000,000. At origination, Marcus J. Kappel had provided a limited personal guaranty in the amount of $4,500,000.
From the date of the transfer to SAG through the acceleration of the facilities in April 2024, Mr. Whitmore was the senior BRB officer leading the workout effort on the Triton Harbor account. His involvement included the following key milestones:
• March–September 2023: Led the initial assessment of workout options, including potential restructuring, forbearance, or enforcement. Authorized Joanna Reeves to communicate with Marcus Kappel and Raymond Mercer of Mercer Tidwell & Associates LLC regarding potential workout structures.
• August 22, 2023: Received the Aaronson Memorandum, a memorandum from Philip Aaronson, EVP and Chief Credit Officer, directing SAG to "pursue a structured exit from the Triton Harbor relationship within 120 days" and stating that "further extensions of credit are not contemplated under any workout scenario." This document, which was also copied to Margaret Linden, SVP and General Counsel, is discussed at length below.
• September 12, 2023: Attended the in-person meeting at BRB's offices with Marcus Kappel, Elaine Kappel, and Joanna Reeves. This is the meeting at which the alleged fraudulent oral representations were made.
• September–October 2023: Oversaw the negotiation and execution of the Forbearance and Modification Agreement, which was signed on October 6, 2023.
• October 2023–April 2024: Monitored Triton Harbor's compliance with the forbearance milestones and reported to Aaronson and the Credit Review Committee on the status of the account.
• April 2024: Involved in the decision to issue the Notice of Default and Acceleration on April 15, 2024, following Triton Harbor's failure to satisfy the covenant-cure milestone (FCCR at 0.94x versus the minimum 1.20x required under the Forbearance Agreement as of March 31, 2024).
C. Demeanor and Preparation Observations
Based on our initial meetings with Mr. Whitmore, several observations regarding his communication style and demeanor warrant attention during the preparation sessions. Mr. Whitmore is articulate and confident — qualities that serve him well in his day-to-day role managing workout negotiations but that present potential risks in a deposition setting. He has a tendency to elaborate beyond the question asked, offering context and explanations that, while well-intentioned, may provide opposing counsel with additional avenues for follow-up questioning. This is a pattern we must address directly and repeatedly during preparation. Mr. Whitmore needs to internalize the discipline of answering the question that was asked — and only the question that was asked — and then stopping.
We should confirm at the outset of the first preparation session whether Mr. Whitmore has been deposed in any prior matter, either in connection with his work at BRB or at any prior institution. If he has prior deposition experience, we should discuss how he performed, any issues that arose, and any feedback he received from counsel. If this is his first deposition, we should allocate additional time to the mock examination session to acclimate him to the rhythm and adversarial nature of the process.
It is important that Mr. Whitmore understand the caliber of the opposing examiner. Ted Huang is a skilled and experienced cross-examiner with a well-documented pattern of building damaging narratives through incremental admissions. Huang's approach typically involves a series of seemingly innocuous questions, each of which elicits a small concession, before he pulls the thread together in a line of questioning that presents the witness with a difficult choice between conceding a damaging point or appearing evasive. Mr. Whitmore should be warned about this technique specifically and should understand that each question, no matter how benign it appears, may be a building block in a larger structure. We should use the mock examination session on February 14 to demonstrate this technique in action.
III. ANTICIPATED LINES OF QUESTIONING
The following section identifies the principal lines of questioning we expect opposing counsel to pursue during Mr. Whitmore's deposition, organized by topic. For each area, we describe the likely approach, the documents that may be used, and the factual and legal vulnerabilities implicated.
A. The September 12, 2023 Meeting — Alleged Oral Representations
This is the core of the Defendants' counterclaim case. The September 12, 2023 meeting is the factual locus of the alleged fraudulent inducement and negligent misrepresentation claims. Triton Harbor alleges that at an in-person meeting held at BRB's offices at 1200 Avenue of the Americas, 38th Floor, New York, NY 10036, Mr. Whitmore made the following oral representations to Marcus Kappel and Elaine Kappel:
(i) That BRB was "committed to the long-term relationship" with Triton Harbor;
(ii) That if Triton Harbor successfully completed the forbearance milestones, BRB would "seriously consider" a new $6.5 million revolving credit facility; and
(iii) That the additional collateral requested by BRB — specifically, the pledge of equipment leases appraised at approximately $2,300,000 and the mortgage of the Kappel residence at 14 Birchmont Lane, Westport, CT 06880, appraised at approximately $3,100,000 — was "a formality to satisfy regulators" rather than an indication of BRB's intent to enforce.
These alleged statements are set forth in paragraphs 42 through 58 of the Counterclaims and are the cornerstone of the fraudulent inducement cause of action.
Anticipated Questioning Approach. Huang will devote substantial deposition time to this topic. His approach will be methodical and detailed. We anticipate that he will begin by establishing the basic circumstances of the meeting — who called it, who attended, where it was held, what time it started and ended, and the general purpose of the meeting. He will then attempt to reconstruct the sequence of topics discussed, moving from the general to the specific. Once the framework is established, Huang will zero in on the specific statements attributed to Mr. Whitmore in the Counterclaims.
Specifically, we expect Huang to pursue the following lines of inquiry:
• Exact words used. Huang will attempt to pin down the precise language Mr. Whitmore employed at the meeting. He will ask Mr. Whitmore whether he used the specific phrases attributed to him — "committed to the long-term relationship," "seriously consider," "formality to satisfy regulators" — and whether he recalls making each statement. If Mr. Whitmore denies using these precise words, Huang will ask what words Mr. Whitmore did use, seeking to draw out any language that could be characterized as substantively equivalent.
• Attendees and their roles. Huang will establish that Marcus Kappel, Elaine Kappel, Mr. Whitmore, and Joanna Reeves were present at the meeting. He will ask whether anyone from BRB's Legal Department was present (they were not, to our knowledge). He will ask whether anyone from Mercer Tidwell was present. He will ask whether anyone else — support staff, other BRB officers, outside counsel — was in attendance. The absence of BRB legal personnel at the meeting is a fact Huang will highlight to suggest that no one from BRB's side was monitoring the propriety of Mr. Whitmore's statements.
• Notes and documentation. Huang will ask whether Mr. Whitmore prepared a written agenda or talking points before the September 12 meeting. He will ask whether Mr. Whitmore took notes during the meeting. He will ask whether Ms. Reeves took notes. He will ask whether any post-meeting memorandum or summary was prepared. If no contemporaneous notes exist, Huang will argue that the absence of documentation supports the inference that the meeting was informal and that oral representations were made freely. If notes do exist, Huang will demand their production.
• Duration and setting. Huang will establish the length of the meeting and the physical setting — a conference room, an office, the number of participants — to create a vivid picture for the trier of fact of an intimate, face-to-face interaction in which Mr. Whitmore made personal assurances to the Kappels.
• Authority. Huang will probe whether Mr. Whitmore had the authority to commit BRB to a new revolving credit facility. If Mr. Whitmore acknowledges that he did not have such authority — which is the factually accurate answer — Huang will ask whether Mr. Whitmore disclosed that limitation to the Kappels at the September 12 meeting. If Mr. Whitmore did not disclose the limitation, Huang will argue that Mr. Whitmore's failure to do so was itself misleading, because the Kappels would reasonably have inferred that the senior BRB officer leading the workout had the authority to make or influence credit decisions.
• Characterization of statements. Huang will attempt to establish that Mr. Whitmore's statements at the September 12 meeting constituted affirmative representations of BRB's intent — not merely aspirational expressions of hope or noncommittal pleasantries. He will contrast Mr. Whitmore's alleged statements with the formal, legalistic disclaimers in the subsequently executed Forbearance Agreement, arguing that the oral representations were the "real deal" and the written disclaimers were protective boilerplate.
B. The Aaronson Memorandum (August 22, 2023)
The Aaronson Memorandum is the single most important document in the case from the perspective of the Defendants' counterclaims. It is a memorandum dated August 22, 2023, from Philip Aaronson, Executive Vice President and Chief Credit Officer of BRB, to Derek Whitmore, with a copy to Margaret Linden, Senior Vice President and General Counsel. The subject line reads: "Triton Harbor — Recommended Disposition Strategy."
The substance of the memorandum is unambiguous. Aaronson directed SAG to "pursue a structured exit from the Triton Harbor relationship within 120 days." The memorandum further stated that "further extensions of credit are not contemplated under any workout scenario." These directives were issued approximately three weeks before the September 12, 2023 meeting at which Mr. Whitmore allegedly told the Kappels that BRB would "seriously consider" a new revolving facility, and approximately five weeks before the execution of the Forbearance and Modification Agreement on October 6, 2023.
Privilege Status. The privilege status of this document is currently disputed. We have asserted attorney-client privilege based on the fact that the memorandum was copied to Margaret Linden, SVP and General Counsel, and we have argued that the memorandum was prepared for the purpose of obtaining legal advice regarding the disposition strategy. This position is set forth in our Internal Memorandum re: Privilege Review dated December 18, 2024. Kestrel Voss & Huang has challenged the privilege claim, arguing that the memorandum is a business document reflecting a credit decision, not a communication seeking legal advice, and that the copy to General Counsel was incidental. The privilege motion is pending before Justice Marchetti. If the court orders production of the Aaronson Memorandum, or if the privilege claim fails on appeal, Huang will deploy this document with devastating effect at Mr. Whitmore's deposition and at trial.
Anticipated Questioning. If the Aaronson Memorandum is in evidence or has been produced, Huang will pursue the following lines of inquiry with Mr. Whitmore:
• When did Mr. Whitmore first receive or read the Aaronson Memorandum? Was it on or about the date it was issued, August 22, 2023? Did Mr. Whitmore read it immediately or at some later date?
• Did Mr. Whitmore understand the Aaronson Memorandum as a directive from the Chief Credit Officer? Did he interpret it as mandatory, advisory, or something else?
• After reading the Aaronson Memorandum, did Mr. Whitmore's approach to the Triton Harbor workout change in any way? Did the memorandum influence any aspect of his strategy, his communications with the Kappels, or his negotiations regarding the forbearance terms?
• Did Mr. Whitmore share the content, conclusions, or substance of the Aaronson Memorandum with the Kappels at the September 12, 2023 meeting or at any other time? Did he share it with Raymond Mercer of Mercer Tidwell & Associates LLC? Did he disclose to any representative of Triton Harbor that BRB's Chief Credit Officer had directed a "structured exit" from the relationship?
• How does Mr. Whitmore reconcile the Aaronson Memorandum's instruction that "further extensions of credit are not contemplated under any workout scenario" with his alleged statements at the September 12, 2023 meeting about BRB "seriously considering" a new $6.5 million revolving credit facility? Huang will press this point aggressively, because the factual contradiction is stark and goes directly to scienter.
• Did Mr. Whitmore discuss the Aaronson Memorandum with Joanna Reeves? If so, when? Did he instruct Ms. Reeves to alter her communications with the Kappels or with Mercer Tidwell in light of the memorandum?
• Did Mr. Whitmore respond to the Aaronson Memorandum in writing? Did he seek clarification of the directive? Did he express disagreement, concern, or any alternative view to Aaronson?
• Did Mr. Whitmore raise any objection to the directive with Aaronson or with anyone else in BRB's senior management or Credit Review Committee?
Each of these questions is designed to establish that Mr. Whitmore possessed actual knowledge of BRB's intent to exit the Triton Harbor relationship at the time he allegedly made representations suggesting the contrary. The questions are also designed to establish that Mr. Whitmore took no steps to correct or qualify his statements in light of the Aaronson Memorandum's directive.
C. The Joanna Reeves Emails
Two emails authored by Joanna Reeves are expected to feature prominently in Mr. Whitmore's deposition. Both emails postdate the Aaronson Memorandum and are facially inconsistent with its directive.
September 18, 2023 Email — Reeves to Marcus Kappel. On September 18, 2023, approximately four weeks after the Aaronson Memorandum and six days after the September 12 meeting, Ms. Reeves sent an email to Marcus Kappel stating: "We are optimistic about a path forward and believe this forbearance sets the stage for a renewed credit relationship." This language — particularly the phrase "renewed credit relationship" — directly supports the Defendants' narrative that BRB held out the prospect of continued lending as an inducement for the Kappels to execute the Forbearance Agreement, pledge additional collateral, and expand their personal guarantees.
We anticipate the following lines of questioning from Huang regarding this email:
• Did Mr. Whitmore authorize or review this email before it was sent? Did Ms. Reeves typically seek his approval before sending substantive communications to the borrower?
• Did Mr. Whitmore agree with the sentiment expressed in the email? Specifically, was he "optimistic about a path forward"? Did he believe the forbearance "set the stage for a renewed credit relationship"?
• Was Ms. Reeves acting within the scope of her authority in sending this email? If so, are her statements attributable to BRB?
• Was the email consistent with BRB's actual intent, given the Aaronson Memorandum's directive to pursue a structured exit? If it was not consistent, did Mr. Whitmore take any steps to correct or clarify the email's message to Marcus Kappel?
September 29, 2023 Internal Email — Reeves to Whitmore. On September 29, 2023, Ms. Reeves sent an internal email to Mr. Whitmore forwarding a draft term sheet for a potential new $6.5 million revolving credit facility. The email bore the caveat "for discussion purposes only — not approved." The existence of this draft term sheet is potentially damaging because it suggests that someone within SAG — at a minimum, Ms. Reeves — was actively working on a potential new facility, notwithstanding the Aaronson Memorandum's statement that further extensions of credit were "not contemplated under any workout scenario."
We anticipate the following lines of questioning regarding this document:
• Who directed Ms. Reeves to prepare the draft term sheet? Was it Mr. Whitmore? If not, did she prepare it on her own initiative?
• Did Mr. Whitmore forward the draft term sheet to Aaronson, to Linden, or to anyone else in credit approval or senior management?
• Was the draft term sheet ever presented to any internal committee, including the Credit Review Committee?
• Was the existence of the draft term sheet ever communicated to the Kappels, to Mercer Tidwell, or to anyone outside BRB?
• Why was a draft term sheet prepared at all if the Aaronson Memorandum had foreclosed further extensions of credit? Was the preparation of the draft consistent with the Aaronson Memorandum, or did it represent a departure from the memorandum's directive?
D. The Forbearance and Modification Agreement (October 6, 2023)
The Forbearance and Modification Agreement is a central document in the case, and Huang will examine Mr. Whitmore extensively on its terms. Mr. Whitmore's role in negotiating the agreement — and specifically his role in persuading the Kappels to agree to its key provisions — will be a major focus.
The key provisions we expect Huang to explore include the following:
• Section 9(c) — "No Commitment to Extend Credit." This section provides: "Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility." This is our single strongest contractual defense, and it will be the centerpiece of our argument that any alleged oral representations were superseded by the integrated written agreement. However, Huang will argue that this provision is boilerplate and was not meaningfully negotiated, and that Mr. Whitmore's oral statements induced the Kappels to look past it.
• Section 12(a) — Integration Clause. The standard integration clause provides that the Forbearance Agreement constitutes the entire agreement of the parties and supersedes all prior oral and written representations. This provision reinforces our reliance on the written contract. Huang will attack it on the same grounds — boilerplate, not specifically discussed, and induced by fraud.
• Expansion of Marcus Kappel's Personal Guaranty. Under the original Credit Agreement of June 15, 2021, Marcus Kappel had provided a limited personal guaranty in the amount of $4,500,000. Under the Forbearance Agreement, this guaranty was amended and expanded to an unlimited personal guaranty, exposing Mr. Kappel to personal liability for the full amount of BRB's claims.
• Elaine Kappel's New Unlimited Personal Guaranty. For the first time, Elaine D. Kappel executed an unlimited personal guaranty. She had not been a guarantor under the original Credit Agreement. Her exposure under the guaranty extends to the full amount of BRB's claims. The Defendants allege that this guaranty was procured by fraud.
• Additional Collateral Pledges. The Forbearance Agreement required the pledge of additional collateral, including equipment leases appraised at approximately $2,300,000 and the mortgage of the Kappel residence at 14 Birchmont Lane, Westport, CT 06880, appraised at approximately $3,100,000. Total additional collateral: approximately $5,400,000.
• The 180-Day Forbearance Period. The forbearance period ran from October 6, 2023 through April 3, 2024 — a total of 180 days. During this period, BRB agreed to forbear from exercising its remedies under the Credit Agreement, provided that Triton Harbor satisfied the forbearance conditions, including monthly payments and the covenant-cure milestone.
• Monthly Payments of $125,000. The Forbearance Agreement required Triton Harbor to make monthly payments of $125,000 for six months, totaling $750,000 over the forbearance period. Triton Harbor made all six payments.
• Forbearance Fee. Triton Harbor paid a non-refundable forbearance fee of $87,500, calculated as 0.50% of the approximately $17,500,000 in outstanding principal as of the execution date.
Huang's anticipated questioning will focus on the following points:
• Did Mr. Whitmore explain Section 9(c) to the Kappels? Did he draw their attention to it? Did he tell them what it meant in the context of his prior oral statements about the possibility of a new revolving facility?
• Did Mr. Whitmore tell the Kappels that Section 9(c) was inconsistent with — or intended to override — his oral statements at the September 12 meeting?
• Did Mr. Whitmore, at the time the Forbearance Agreement was executed, believe that BRB had any intention of extending new credit to Triton Harbor? If not, did he disclose that belief to the Kappels?
• How did Mr. Whitmore justify seeking additional collateral — including the Kappels' personal residence — and expanded unlimited personal guarantees from both Marcus and Elaine Kappel, if BRB internally planned a "structured exit"? Was the additional collateral sought to improve BRB's recovery position in a liquidation scenario, rather than to support a continuing lending relationship?
E. The Updated Collateral Appraisal (September 2023)
In September 2023, BRB commissioned an updated appraisal of Triton Harbor's collateral from Ridgeline Appraisal Group, Inc. The appraisal valued Triton Harbor's marine terminal equipment and real property at $11,200,000 — a decline of $7,500,000, or approximately 40.1%, from the $18,700,000 appraised value at origination in June 2021. The decline in collateral value left BRB significantly undersecured on its $17,575,000 in outstanding exposure, with a loan-to-value ratio of approximately 157%.
We anticipate the following lines of questioning regarding the appraisal:
• Was the updated appraisal commissioned at Mr. Whitmore's request, or at the direction of someone else within BRB?
• Did the decline in collateral value factor into the decision to demand additional collateral and expanded personal guarantees as conditions of the forbearance?
• Did Mr. Whitmore share the updated appraisal results with the Kappels or with Mercer Tidwell? If not, should he have?
• Did Mr. Whitmore view the decline in collateral value as relevant to the decision regarding whether to continue the lending relationship or pursue a structured exit?
The appraisal is significant because it provides context for why BRB demanded substantial additional collateral and expanded guarantees. However, it also supports the Defendants' narrative that BRB was securing its enforcement position — not investing in a continuing relationship — when it extracted these concessions from the Kappels.
F. Whitmore's Knowledge of BRB's Internal Disposition Strategy
Beyond the Aaronson Memorandum itself, Huang will explore whether Mr. Whitmore was exposed to other internal communications, meetings, or institutional signals indicating that BRB intended to exit the Triton Harbor relationship. The purpose of this line of inquiry is to establish that the "structured exit" was not merely one officer's recommendation but an institutional consensus, thereby making it even more difficult for Mr. Whitmore to claim he did not know the Bank's actual intent.
Specifically, we anticipate Huang will ask:
• Did Mr. Whitmore attend Credit Review Committee meetings at which the Triton Harbor disposition strategy was discussed? If so, when were those meetings held, who attended, and what was discussed?
• Were there any internal presentations, slide decks, or reports regarding the Triton Harbor workout strategy, apart from the Aaronson Memorandum?
• Did Mr. Whitmore communicate BRB's exit intent to anyone outside BRB, including other lenders, regulatory examiners, or potential purchasers of the Triton Harbor loan?
• Did Mr. Whitmore have conversations with BRB's prior outside counsel, Blakemore & Stern LLP (David Blakemore), prior to October 2023 about the anticipated enforcement action against Triton Harbor? If so, when did those conversations begin, and what was their substance?
• Was there any discussion within BRB of selling the Triton Harbor loan to a third party as part of the "structured exit" strategy? If so, was this discussed before or after the September 12, 2023 meeting?
G. The Acceleration Decision (April 2024)
The Forbearance Agreement's 180-day forbearance period expired on April 3, 2024. The Defendants' performance under the forbearance was mixed: Triton Harbor had made all six required monthly payments, totaling $750,000, and had pledged the additional collateral as required. However, Triton Harbor failed to satisfy the covenant-cure milestone, which required that the borrower achieve a fixed charge coverage ratio ("FCCR") of at least 1.20x by March 31, 2024. As of that date, Triton Harbor's FCCR stood at 0.94x — a shortfall of approximately 22% from the required minimum.
On April 15, 2024, BRB issued a Notice of Default and Acceleration, declaring the full outstanding balance due and payable. The total accelerated amount was $17,456,212, consisting of:
We anticipate that Huang will pursue the following lines of questioning regarding the acceleration:
• Did Mr. Whitmore recommend acceleration to Aaronson or to the Credit Review Committee? Was it his recommendation, or was he implementing a decision made by others?
• Did Mr. Whitmore consider alternatives to acceleration? Specifically, did he consider granting a further extension of the forbearance period, modifying the covenant-cure milestone, or otherwise working with Triton Harbor to cure the default?
• Did Mr. Whitmore recommend any further forbearance to Aaronson or to the Credit Review Committee? If not, why not — given that Triton Harbor had substantially performed under the forbearance (six out of six monthly payments made, all additional collateral pledged)?
• Was the acceleration decision predetermined by the Aaronson Memorandum's directive to pursue a "structured exit" within 120 days? In other words, was the forbearance merely a mechanism to extract additional collateral before an inevitable enforcement, rather than a genuine opportunity for Triton Harbor to rehabilitate the credit?
• How much time elapsed between the expiration of the forbearance period (April 3, 2024) and the issuance of the Notice of Default and Acceleration (April 15, 2024)? Does the twelve-day interval suggest that the acceleration was a considered decision or a predetermined one?
H. Background and Credibility Questions
In addition to the substantive areas discussed above, Huang will likely devote a portion of the deposition to background and credibility questions designed to establish a foundation for the narrative he intends to present. These questions may seem routine, but they serve a strategic purpose.
• Education and career history. Huang will establish Mr. Whitmore's qualifications, including his education, any relevant certifications, and his career history in workout and distressed-credit management. The purpose is to portray Mr. Whitmore as a sophisticated professional who knew exactly what he was doing.
• Training on workout procedures. Huang will ask whether Mr. Whitmore received training on OCC guidance regarding workout practices, including the OCC Handbook on Troubled Debt Restructuring and related supervisory materials. The purpose is to establish that Mr. Whitmore was aware of regulatory expectations regarding transparency and good faith in workout negotiations.
• Understanding of "exploratory discussions" versus "commitments." Huang will ask Mr. Whitmore to articulate the distinction between exploratory or preliminary discussions about potential credit extensions and actual commitments to extend credit. This is a setup for the argument that even if Mr. Whitmore's statements fell short of a formal commitment, they constituted actionable representations upon which the Kappels reasonably relied.
• Prior workout matters. Huang will explore whether Mr. Whitmore has been involved in other workout matters where oral discussions about potential future credit were followed by acceleration and enforcement. If Mr. Whitmore has a pattern of using the prospect of future credit as a negotiating tool in forbearance negotiations, this could be used to establish a modus operandi.
• Compensation and performance incentives. Huang may probe whether Mr. Whitmore's compensation, bonus structure, or performance evaluations are tied to SAG recovery metrics — i.e., whether he is incentivized to maximize recoveries on classified credits. If his compensation is linked to recovery outcomes, Huang will argue that Mr. Whitmore had a personal financial incentive to extract maximum collateral and guarantees before accelerating.
IV. KEY DOCUMENTS AND ANTICIPATED EXHIBITS
A. Documents Expected to Be Marked as Exhibits by Opposing Counsel
Based on our review of the document productions to date, the Counterclaims, and Kestrel Voss & Huang's document requests and deposition notice, we anticipate that the following documents will be marked as exhibits and presented to Mr. Whitmore during his deposition:
Exhibit 1 — Aaronson Memorandum (August 22, 2023). If produced or ordered produced by the court. Subject: "Triton Harbor — Recommended Disposition Strategy." From Philip Aaronson (EVP, Chief Credit Officer) to Derek Whitmore (SVP, Head of SAG), with a copy to Margaret Linden (SVP, General Counsel). Key language: "pursue a structured exit from the Triton Harbor relationship within 120 days"; "further extensions of credit are not contemplated under any workout scenario." This is the most damaging document for BRB's defense, and Huang will use it as the centerpiece of his cross-examination. Whether it is in evidence at the time of the deposition depends on the outcome of the pending privilege motion.
Exhibit 2 — Reeves Email to Marcus Kappel (September 18, 2023). From Joanna Reeves (VP, SAG) to Marcus Kappel. Key language: "We are optimistic about a path forward and believe this forbearance sets the stage for a renewed credit relationship." This email is in the opposing party's possession, having been produced by the Kappels, and is not subject to any privilege claim.
Exhibit 3 — Reeves Internal Email to Whitmore (September 29, 2023). From Joanna Reeves to Derek Whitmore, forwarding a draft term sheet for a potential new $6.5 million revolving credit facility. Key language: "for discussion purposes only — not approved." This document has been produced from BRB's files.
Exhibit 4 — Draft Term Sheet (September 29, 2023). Internal draft term sheet for a potential new $6.5 million revolving credit facility for Triton Harbor. Attached to or accompanying the Reeves internal email. This document has been produced.
Exhibit 5 — Forbearance and Modification Agreement (October 6, 2023). The fully executed agreement. Huang will focus particular attention on Section 9(c) (No Commitment to Extend Credit) and Section 12(a) (Integration Clause), as well as the provisions regarding additional collateral, expanded guarantees, and the forbearance milestones.
Exhibit 6 — Original Credit Agreement (June 15, 2021). The credit agreement governing the $14,000,000 Term Loan A (SOFR + 275 bps) and $8,000,000 Revolving Credit Facility (SOFR + 250 bps), for total committed facilities of $22,000,000. This document establishes the baseline terms of the lending relationship.
Exhibit 7 — Original Personal Guaranty — Marcus J. Kappel (June 15, 2021). Limited personal guaranty in the amount of $4,500,000. This document will be contrasted with the unlimited guaranty executed under the Forbearance Agreement.
Exhibit 8 — Amended Unlimited Personal Guaranty — Marcus J. Kappel (October 6, 2023). Executed in connection with the Forbearance Agreement, expanding Mr. Kappel's exposure from $4,500,000 to unlimited.
Exhibit 9 — Unlimited Personal Guaranty — Elaine D. Kappel (October 6, 2023). New unlimited personal guaranty executed in connection with the Forbearance Agreement. Mrs. Kappel was not previously a guarantor.
Exhibit 10 — Notice of Default and Acceleration (April 15, 2024). BRB's notice declaring the full outstanding balance of $17,456,212 due and payable upon Triton Harbor's failure to satisfy the covenant-cure milestone.
Exhibit 11 — Internal Credit Review Committee Minutes (March 8, 2023). Minutes documenting the downgrade of the Triton Harbor credit facilities from "Pass" to "Substandard" (Risk Rating 7) and the transfer of the account to the Special Assets Group.
Exhibit 12 — Ridgeline Appraisal Group Report (September 2023). Updated appraisal of Triton Harbor's collateral, valuing marine terminal equipment and real property at $11,200,000 (down from $18,700,000 at origination — a decline of $7,500,000, or approximately 40.1%).
Exhibit 13 — Any written notes or agendas from the September 12, 2023 meeting. If any such documents exist, whether prepared by Mr. Whitmore, Ms. Reeves, or anyone else at BRB. We should confirm with Mr. Whitmore during preparation whether any such notes exist.
Exhibit 14 — Mercer Tidwell & Associates LLC engagement letter and correspondence with BRB. This may include the engagement letter between Mercer Tidwell and Triton Harbor, as well as any correspondence between Raymond Mercer and BRB representatives during the workout negotiations.
Exhibit 15 — Triton Harbor financial statements. Including FY2022 audited financials (revenue approximately $68 million, adjusted EBITDA of $9.4 million); Q1 2023 interim financials (TTM EBITDA of approximately $5.1 million; FCCR of 0.87x; Total Leverage of 4.92x); and any subsequent financial reporting through the date of the acceleration.
B. Documents We May Introduce or Reference
The following documents may be useful for BRB's defense and should be available for reference during the deposition, either for redirect examination by Ms. Osei or for Mr. Whitmore to reference in explaining his answers:
1. Forbearance Agreement — Sections 9(c) and 12(a). To be used to reinforce the position that the integrated, written agreement contained express disclaimers of any commitment to extend additional credit and an integration clause superseding all prior oral and written representations. These provisions are our primary contractual defense to the fraudulent inducement and negligent misrepresentation counterclaims.
2. Triton Harbor's financial deterioration data. Documentation of the loss of the Port of Bridgehaven municipal services contract (approximately $12 million per year in revenue) and the Newark Bay maintenance contract (approximately $7.5 million per year in revenue), and the resulting decline in Triton Harbor's revenue run-rate from approximately $68 million to approximately $48 million annualized. This data supports BRB's position that the acceleration was justified by the borrower's inability to meet its financial obligations, not by a preconceived exit strategy.
3. Any contemporaneous notes by Mr. Whitmore. If Mr. Whitmore prepared notes or talking points before the September 12, 2023 meeting, and if those notes are consistent with our position that no firm commitments were made, they should be available for use during redirect examination.
4. Evidence of the Kappels' retention of Mercer Tidwell & Associates LLC. The Kappels' engagement of a professional restructuring advisory firm demonstrates borrower sophistication and access to independent financial advice. This undercuts the Defendants' claim that they were unsophisticated victims who relied solely on Mr. Whitmore's oral statements without conducting independent analysis or seeking independent counsel.
V. SENSITIVE AREAS AND RISK ASSESSMENT
This section identifies the principal areas of vulnerability for BRB's defense as they relate to Mr. Whitmore's deposition testimony and provides an assessment of the associated risks and proposed mitigation strategies.
A. Critical Vulnerability: The Aaronson Memorandum
The most damaging document for BRB's defense of the counterclaims is the Aaronson Memorandum of August 22, 2023. If this document is in evidence at the time of Mr. Whitmore's deposition, it presents a straightforward and potentially devastating factual problem: if Mr. Whitmore received a written directive from BRB's Chief Credit Officer stating that "further extensions of credit are not contemplated under any workout scenario," and then, approximately three weeks later, allegedly told the Kappels at the September 12 meeting that BRB would "seriously consider" a new $6.5 million revolving credit facility, the inference of knowing misrepresentation is powerful and difficult to rebut.
Risk Assessment. If Mr. Whitmore acknowledges (a) that he received and read the Aaronson Memorandum before the September 12 meeting, and (b) that he made statements at the September 12 meeting regarding BRB's willingness to consider new credit, the scienter element of the fraudulent inducement counterclaim is substantially supported. Scienter — the intent to deceive or reckless disregard for the truth — is arguably inferable from the juxtaposition of the memorandum and the alleged statements. Even if Mr. Whitmore denies making the specific statements attributed to him, the Aaronson Memorandum establishes that any statements he did make about potential future credit were inconsistent with what he knew to be the Bank's actual intent, at least as communicated by the Chief Credit Officer.
Mitigation Strategies. The following strategies are recommended to mitigate the impact of the Aaronson Memorandum:
(a) Characterization as a recommendation, not a final decision. Mr. Whitmore should testify that the Aaronson Memorandum represented one input among many in an ongoing internal evaluation — specifically, the Chief Credit Officer's recommendation regarding a disposition strategy — but that it did not constitute a final, binding institutional decision by BRB. Internal memoranda in a banking institution represent the views of the issuing officer; they are not board resolutions or credit committee approvals. Mr. Whitmore should be prepared to explain that workout strategies are inherently fluid and subject to change based on evolving circumstances, including the borrower's performance under a forbearance arrangement.
(b) Distinguish between Aaronson's recommendation and institutional action. The Aaronson Memorandum was directed to Mr. Whitmore; it was not a Credit Review Committee resolution or a directive from BRB's Board of Directors. Mr. Whitmore should testify that, as the Head of SAG, he was responsible for evaluating the Chief Credit Officer's input alongside other factors, including the borrower's willingness to cooperate, the potential for financial recovery, and the relative costs and benefits of acceleration versus forbearance.
(c) Emphasize the fluidity of workout negotiations. Mr. Whitmore should testify that workout negotiations are by their nature dynamic and that a lender's assessment of a borrower's prospects can change based on new information, improved financial performance, or the borrower's demonstrated commitment to restructuring. The fact that the Aaronson Memorandum expressed one view in August 2023 does not mean that view was immutable in September or October 2023.
(d) Contingent and exploratory framing. Mr. Whitmore should be prepared to explain that any discussions about potential future credit were clearly prefaced as exploratory and contingent on multiple factors, including successful completion of forbearance milestones, credit committee approval, regulatory considerations, and market conditions. He should testify that no commitment was made and no reasonable lender — or reasonable borrower — would have understood the discussion as a commitment.
B. Critical Vulnerability: Tension Between the Reeves Emails and the Aaronson Memorandum
The September 18, 2023 email from Ms. Reeves to Marcus Kappel (expressing optimism about "a path forward" and "a renewed credit relationship") and the September 29, 2023 internal email from Ms. Reeves to Mr. Whitmore (forwarding a draft term sheet for a potential new $6.5 million revolving facility) are facially inconsistent with the Aaronson Memorandum's directive to pursue a structured exit and its statement that further extensions of credit were "not contemplated."
Risk. If Mr. Whitmore supervised Ms. Reeves and received the draft term sheet without objecting to its preparation or correcting Ms. Reeves's communications with Marcus Kappel, opposing counsel will argue that Mr. Whitmore used the prospect of new credit as a deliberate lure — a tool to extract additional collateral and expanded personal guarantees from the Kappels under the pretense that a continuing lending relationship was possible. This narrative is particularly damaging because it suggests not mere carelessness but an affirmative, calculated strategy to deceive.
Mitigation. Mr. Whitmore should testify that the draft term sheet was prepared as a contingency planning exercise, not as a commitment or near-commitment to extend new credit. SAG officers routinely model multiple scenarios for distressed credits, including best-case, base-case, and worst-case outcomes. The preparation of a preliminary term sheet for a potential restructuring of the revolving facility was consistent with standard practice and did not reflect a decision to extend new credit. Mr. Whitmore should emphasize the significance of the caveat "for discussion purposes only — not approved," which he should describe as precisely the kind of qualifier that distinguishes internal exploratory work from an actual credit decision.
Regarding Ms. Reeves's September 18 email to Marcus Kappel, Mr. Whitmore should testify that the email's optimistic tone was consistent with the general approach of encouraging a borrower to perform under a forbearance arrangement — maintaining the borrower's cooperation and motivation — without constituting a promise of new credit. Workout officers routinely communicate with borrowers in encouraging terms; such communications are standard practice and should not be interpreted as binding commitments.
C. Credibility Issue: Did Whitmore Disclose BRB's Exit Intent?
The core credibility question at this deposition is whether Mr. Whitmore knew that BRB intended to exit the Triton Harbor relationship and failed to disclose that intent to the Kappels while simultaneously extracting additional collateral and expanded personal guarantees. If Mr. Whitmore is perceived as having deliberately withheld material information from the Kappels while asking them to pledge their personal residence and sign unlimited guarantees, the fraud narrative is compelling and difficult to overcome.
Mitigation. Mr. Whitmore must be prepared to address this issue directly and credibly. The following points should be emphasized:
(a) A lender has no affirmative duty to disclose its internal credit assessments, disposition strategies, or strategic thinking to a borrower. The lender-borrower relationship is commercial, not fiduciary, and the parties deal at arm's length.
(b) The Forbearance Agreement's express terms — particularly Section 9(c) (No Commitment to Extend Credit) and Section 12(a) (Integration Clause) — put the Kappels on clear and unambiguous notice that BRB was not committing to any future credit extension. The Kappels signed a written agreement that contained these provisions. They had the opportunity to review them with counsel and with their financial advisor, Raymond Mercer.
(c) The additional collateral and expanded guarantees were standard components of any forbearance negotiation involving a significantly undersecured credit. Given the decline in collateral value (from $18,700,000 to $11,200,000), BRB's request for additional security was commercially reasonable and not evidence of bad faith.
D. Section 9(c) — The Disclaimer as Shield
Our strongest defense against the fraudulent inducement and negligent misrepresentation counterclaims is the express language of Section 9(c) of the Forbearance Agreement, which provides:
"Nothing herein shall constitute or be deemed to constitute a commitment, agreement, or obligation on the part of Lender to extend additional credit, modify existing facilities, or renew any credit facility."
This language is clear, comprehensive, and directly responsive to the alleged oral representations at issue. If Mr. Whitmore told the Kappels that BRB would "seriously consider" a new revolving facility, the Forbearance Agreement expressly disclaimed any such commitment. And if the Kappels signed the agreement containing this disclaimer, they cannot claim reasonable reliance on prior oral statements that the agreement itself negated.
Mr. Whitmore should be thoroughly familiar with Section 9(c) and prepared to testify that:
(a) The Kappels had the opportunity to review the Forbearance Agreement in its entirety before executing it.
(b) The Kappels were represented by a professional financial advisor, Mercer Tidwell & Associates LLC (Raymond Mercer, Managing Director), and presumably had access to legal counsel.
(c) Section 9(c) was not hidden or obscured — it was a substantive, prominently placed provision of the agreement.
(d) The Kappels executed the agreement with full knowledge of this provision, and their signatures constituted acceptance of its terms.
Risk. Huang will argue that Section 9(c) was boilerplate — a standard provision included in virtually every forbearance agreement — and that Mr. Whitmore's oral statements at the September 12 meeting were the "real deal" that induced the Kappels to sign. Huang will argue that the Kappels would not have pledged their personal residence and signed unlimited guarantees based solely on the written agreement, which contained no promise of future credit; they did so because Mr. Whitmore orally assured them that the forbearance was a bridge to a renewed lending relationship. This is a strong argument, and it is likely to resonate with a fact-finder.
E. Privilege Risks During Testimony
Mr. Whitmore must be carefully cautioned against inadvertently waiving attorney-client privilege during the deposition. There are several categories of privileged communications that Mr. Whitmore may be tempted to reference, and he must be instructed to avoid doing so.
(a) Communications with Margaret Linden, SVP, General Counsel. Any discussions between Mr. Whitmore and Ms. Linden regarding the Triton Harbor workout strategy, the Aaronson Memorandum, the Forbearance Agreement, or the acceleration decision are protected by attorney-client privilege. Mr. Whitmore must not disclose the substance of these communications.
(b) Communications with Thomas Hargreaves, VP, Associate General Counsel. Similarly, any discussions with Mr. Hargreaves are privileged.
(c) Communications with Blakemore & Stern LLP (David Blakemore). BRB's prior outside counsel communications are privileged.
(d) Communications with Calderwood & Harkness LLP. All communications with our firm in connection with this litigation are privileged.