ATTORNEY WORK PRODUCT — PRIVILEGED AND CONFIDENTIAL
This memorandum constitutes attorney work product prepared in anticipation of litigation and is protected from disclosure under Federal Rule of Civil Procedure 26(b)(3) and its New York state-law analogue, CPLR § 3101(c)–(d). This memorandum also contains information protected by the attorney-client privilege. Distribution is strictly limited to the Calderwood & Harkness LLP engagement team and authorized client personnel of Belmont Ridge Bank NA. Any unauthorized review, use, disclosure, or distribution is prohibited.
MEMORANDUM
TO: Linda Osei, Responsible Partner, Litigation Department Priya Anand, Billing Partner, Litigation Department
FROM: Carlos Espinoza, Lead Associate Hannah Brinkley, Working Associate
DATE: March 10, 2025
RE: Deposition Summary and Analysis — Derek Whitmore (Feb. 18, 2025), Joanna Reeves (Feb. 25, 2025), and Philip Aaronson (Mar. 4, 2025)
CLIENT: Belmont Ridge Bank NA
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)
CALDERWOOD & HARKNESS MATTER NO.: 1022-00005
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I. Executive Summary
This memorandum synthesizes the testimony from the three depositions of Belmont Ridge Bank NA ("BRB") witnesses conducted between February 18 and March 4, 2025: (1) Derek Whitmore, SVP, Head of Special Assets Group; (2) Joanna Reeves, VP, Special Assets Group; and (3) Philip Aaronson, EVP, Chief Credit Officer. The purpose of this memorandum is to identify key favorable and unfavorable testimony elicited from each witness, flag material inconsistencies across the three depositions, and assess the implications of the deposition record for BRB's forthcoming summary judgment motion, which is due on September 15, 2025, as set forth in the scheduling order entered by Justice Marchetti on November 19, 2024.
Overall Assessment. BRB's witnesses generally held the defensive line regarding the core contractual framework. All three witnesses confirmed the existence, terms, and enforceability of the Forbearance and Modification Agreement dated October 6, 2023 (the "Forbearance Agreement"), including the critical Section 9(c) disclaimer ("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") and the integration clause set forth in Section 12(a). This testimony provides a solid foundation for BRB's primary defense — that the written agreement is the sole repository of the parties' obligations, that Triton Harbor and the Kappels were sophisticated parties represented by counsel and a financial advisor, and that any alleged oral representations are barred by the integration clause and the specific disclaimer of reliance.
Key Concern. Notwithstanding these favorable aspects, a material inconsistency exists between the testimony of Derek Whitmore and Philip Aaronson that presents the most significant vulnerability in BRB's defense. The inconsistency concerns the nature and effect of the August 22, 2023 memorandum authored by Aaronson and directed to Whitmore, which recommended a "structured exit from the Triton Harbor relationship within 120 days" and stated that "further extensions of credit are not contemplated under any workout scenario." Whitmore characterized this memorandum as a "starting position" or "baseline directive" subject to further evaluation by the Special Assets Group ("SAG"), while Aaronson characterized it as "a directive, not a suggestion" that he "expected to be followed." This internal contradiction was identified and effectively exploited by opposing counsel Theodore Huang of Kestrel Voss & Huang LLP during both depositions. The inconsistency is particularly damaging because it intersects with the most contested factual question in this case: what Whitmore said to the Kappels during the September 12, 2023 meeting regarding the prospect of future credit.
Reeves' Testimony. The deposition of Joanna Reeves produced a mixed record. Her testimony regarding the September 18, 2023 email to Marcus Kappel — in which she stated BRB was "optimistic about a path forward" and that the forbearance "sets the stage for a renewed credit relationship" — and her September 29, 2023 internal draft term sheet for a potential $6.5 million revolving facility creates both favorable and unfavorable dynamics. The "not approved" notation on the internal draft and its non-disclosure to Triton Harbor are favorable facts. However, the existence of the draft during the very period when the Forbearance Agreement was being finalized, and in the wake of Aaronson's directive against further extensions of credit, provides circumstantial support for Triton Harbor's inducement theory.
Upcoming Depositions. The depositions of Marcus J. Kappel (scheduled for March 11, 2025) and Elaine D. Kappel (scheduled for March 18, 2025) remain to be taken. The cross-examination outlines for both witnesses should be revised in light of the testimony summarized herein, with particular attention to securing admissions regarding the Kappels' review and understanding of Sections 9(c) and 12(a) of the Forbearance Agreement, their retention of counsel and restructuring advisory services, and the specificity (or lack thereof) of the alleged oral representations.
discovery Calendar. The close of fact discovery is April 30, 2025. The close of expert discovery is June 30, 2025. Summary judgment motions are due September 15, 2025.
II. Deposition of Derek Whitmore (February 18, 2025)
A. Background and Logistics
Deponent: Derek Whitmore, Senior Vice President, Head of Special Assets Group, Belmont Ridge Bank NA.
Date: February 18, 2025.
Location: Offices of Kestrel Voss & Huang LLP, 780 Third Avenue, 24th Floor, New York, New York 10017.
Examining Counsel: Theodore Huang, Partner, Kestrel Voss & Huang LLP (lead examiner); Natasha Orlov, Associate, Kestrel Voss & Huang LLP (assisted).
Defending Counsel: Carlos Espinoza, Lead Associate, Calderwood & Harkness LLP (first chair); Hannah Brinkley, Associate, Calderwood & Harkness LLP (second chair).
Duration: Approximately six and one-half hours of testimony, excluding breaks for lunch, comfort, and counsel conferences. The deposition commenced at approximately 9:30 a.m. and concluded at approximately 5:15 p.m.
Transcript: A certified copy of the transcript has been received and reviewed. The transcript consists of approximately 287 pages. We have prepared an annotated index of key testimony, which is included as Appendix A to this memorandum.
Exhibits: Huang marked a total of twenty-three exhibits during the Whitmore deposition. The key exhibits included the August 22, 2023 Aaronson Memorandum (Exhibit 7), the Forbearance and Modification Agreement dated October 6, 2023 (Exhibit 9), the September 18, 2023 Reeves email (Exhibit 12), the September 29, 2023 internal draft term sheet (Exhibit 14), the Notice of Default and Acceleration dated April 15, 2024 (Exhibit 18), and the Ridgeline Appraisal Group appraisal report (Exhibit 5). A complete list of exhibits is included in Appendix D.
B. Summary of Key Testimony Topics
1. Assumption of the Triton Harbor Relationship
Whitmore confirmed that he assumed management of the Triton Harbor Industries, LLC ("Triton Harbor") banking relationship in March 2023, following the internal credit downgrade from "Pass" to "Substandard" (Risk Rating 7) on March 8, 2023. He testified that this downgrade triggered the automatic referral of the relationship from BRB's commercial banking group to the Special Assets Group pursuant to BRB's internal Credit Risk Management Policy Manual, Section 4.3.2 (governing the transfer of relationships rated Risk Rating 6 or below to SAG).
Whitmore described SAG's mandate in general terms: to evaluate the credit profile of the distressed borrower, protect the bank's collateral position, and determine the appropriate resolution strategy, which could include forbearance, restructuring, liquidation of collateral, or an orderly exit from the relationship. He testified that SAG typically evaluates each situation on a case-by-case basis, considering the borrower's financial condition, the quality and value of collateral, the likelihood of a successful workout, and the regulatory environment.
With respect to the Triton Harbor relationship specifically, Whitmore confirmed the total outstanding obligations at the time of the SAG transfer as follows:
Whitmore further testified regarding his initial assessment of Triton Harbor's financial deterioration. He stated that at the time of the SAG transfer, the company's trailing twelve-month ("TTM") EBITDA had declined to approximately $5.1 million, down from $9.4 million for the fiscal year ended December 31, 2022 — a decline of approximately 45.7%. This EBITDA compression had pushed the company's Fixed Charge Coverage Ratio ("FCCR") to 0.87x, well below the covenant minimum of 1.20x, and the Total Leverage Ratio to 4.92x, far in excess of the covenant maximum of 3.50x. Whitmore attributed the financial deterioration primarily to the loss of two major contracts: the Port of Bridgehaven terminal services contract (representing approximately $12 million per year in revenue) and the Newark Bay waterway maintenance contract (representing approximately $7.5 million per year in revenue). He also noted that the remaining contract base was subject to competitive pressure and that Triton Harbor's equipment fleet was aging, requiring significant capital expenditure that the company's reduced cash flow could not support.
2. The Aaronson Memorandum (August 22, 2023)
Whitmore confirmed that he received the August 22, 2023 memorandum from Philip Aaronson, Executive Vice President and Chief Credit Officer of BRB (the "Aaronson Memorandum"), which recommended a "structured exit from the Triton Harbor relationship within 120 days" and stated that "further extensions of credit are not contemplated under any workout scenario." The memorandum was marked as Exhibit 7 and Whitmore identified it without objection.
Whitmore's characterization of the Aaronson Memorandum constitutes one of the most significant aspects of his deposition testimony. When asked to describe the memorandum's significance, Whitmore characterized it as a "starting position" or "baseline directive" from the Chief Credit Officer. He testified that the memorandum reflected the credit administration's preliminary assessment of the situation, but that it was "subject to further evaluation as the workout process evolved." He stated that SAG retained the discretion to propose alternative structures to the credit committee if circumstances warranted a different approach. In Whitmore's words, the Aaronson Memorandum was "the credit side's opening view," and SAG's role was to conduct its own independent evaluation through direct engagement with the borrower before finalizing a disposition strategy.
Favorable aspects of this testimony. Whitmore did not deny the existence of the Aaronson Memorandum or attempt to minimize its substance. He acknowledged receiving it and understanding its contents. His testimony was facially consistent with the document itself. This candor prevents any suggestion that BRB witnesses are attempting to conceal material documents or contradict documentary evidence.
Unfavorable aspects of this testimony. Whitmore's characterization of the memorandum as merely a "starting position" is at odds with the directive tone of the document's language. The memorandum does not state that SAG should "consider" an exit or "evaluate" the possibility of further extensions of credit. Rather, it states affirmatively that "further extensions of credit are not contemplated under any workout scenario" — language that is categorical and leaves no room for the kind of open-ended evaluation Whitmore described. Huang pressed Whitmore extensively on this distinction over the course of approximately seventeen transcript pages (pp. 87–104), asking Whitmore to identify any language in the memorandum that suggested it was merely a starting position or that left room for SAG to consider extending new credit. Whitmore was unable to point to any such language and instead relied on his description of SAG's general institutional culture and practices. This line of questioning was effective and created a record that will be difficult to rehabilitate.
Note on privilege. The Aaronson Memorandum was copied to Margaret Linden, SVP and General Counsel of BRB. As addressed in Hannah Brinkley's internal memorandum dated December 18, 2024, the privilege analysis regarding this document remains live. BRB has asserted that the copy to Linden reflects the dual-purpose nature of the document — both a credit directive and a communication made in anticipation of potential workout litigation. As of the date of the Whitmore deposition, the court has not yet ruled on Triton Harbor's motion to compel production of the unredacted version of the memorandum, and the parties have stipulated to the deposition proceeding with the document as marked, reserving all privilege objections. We should continue to monitor this issue closely.
3. The September 12, 2023 Meeting
Whitmore confirmed that an in-person meeting took place on September 12, 2023, at BRB's offices located at 1200 Avenue of the Americas, 38th Floor, New York, New York. The attendees, as confirmed by Whitmore, included himself, Joanna Reeves, Marcus J. Kappel, and Elaine D. Kappel. Whitmore could not recall whether any other BRB personnel attended but stated that he believed it was limited to the four individuals listed. He testified that the meeting lasted approximately two hours.
Whitmore described the purpose of the meeting as follows: to present a "forbearance framework" to the Kappels, under which BRB would refrain from exercising its default remedies in exchange for additional collateral, debt service payments, and expanded personal guaranties. He stated that he used a prepared discussion outline during the meeting, though he could not produce this document (he testified that it was a handwritten set of notes that he did not retain, a point Huang noted for the record).
The September 12, 2023 meeting is the most heavily contested factual event in this case, as the Kappels' counterclaims rest substantially on their version of what was communicated during this meeting. Below is a summary of Whitmore's testimony on the key disputed topics:
Alleged "committed to the long-term relationship" statement. Whitmore denied using the specific phrase "committed to the long-term relationship," as alleged in Paragraph 47 of the Verified Counterclaims. He stated that he may have said that BRB was "willing to work with" Triton Harbor on a forbearance structure, but he testified that this was a qualitatively different statement — one that expressed a willingness to engage in a workout process, not a commitment to the underlying banking relationship beyond the forbearance period.
Alleged promise of a new $6.5 million revolving facility. Whitmore admitted that he "may have referenced the possibility of future credit discussions if the company's financial condition stabilized." However, he categorically denied making any commitment or promise regarding a specific dollar amount or a specific facility structure. He testified that any reference to future credit would have been conditional and qualified — that is, contingent on Triton Harbor achieving the covenant-cure milestones in the forbearance agreement and demonstrating a sustainable business model. He denied that any conversation about future credit was intended to convey a binding obligation on BRB's part.
Alleged "formality to satisfy regulators" characterization of collateral. Whitmore denied stating that the additional collateral — specifically the pledge of the Kappel residence at 14 Birchmont Lane, Westport, Connecticut — was merely "a formality to satisfy regulators," as alleged in Paragraph 52 of the Verified Counterclaims. He testified that the additional collateral was "a substantive requirement of the forbearance" — one that was essential to BRB's willingness to forebear and that reflected the significant decline in the value of the existing collateral base, as documented by the Ridgeline Appraisal Group's updated appraisal.
Critical Inconsistency — Whitmore's "Open Mind" Testimony. The most significant and potentially damaging portion of Whitmore's deposition testimony arose during Huang's examination regarding the relationship between the Aaronson Memorandum (dated August 22, 2023) and the September 12, 2023 meeting. Whitmore testified that at the time of the September 12 meeting, his "thinking had not been finalized" regarding whether new credit was possible and that he "kept an open mind" about the range of outcomes for the Triton Harbor relationship.
This testimony is in direct tension with the Aaronson Memorandum, which was issued three weeks before the September 12 meeting and which stated, in unambiguous terms, that "further extensions of credit are not contemplated under any workout scenario." If the Chief Credit Officer had already directed a structured exit with no further lending, it is difficult to reconcile Whitmore's claim that he was keeping an "open mind" about the prospect of new credit.
Huang highlighted this inconsistency effectively and at length (transcript pp. 118–132). The following exchange is representative:
Q: Mr. Whitmore, I want to make sure I understand your testimony. You received a memorandum from Mr. Aaronson on August 22, 2023, correct?
A: Yes.
Q: And that memorandum stated that further extensions of credit to Triton Harbor were not contemplated under any workout scenario, correct?
A: That's what the document says, yes.
Q: And three weeks later, on September 12, 2023, you sat across the table from Marcus and Elaine Kappel at BRB's offices, correct?
A: Yes.
Q: Is it your testimony, Mr. Whitmore, that you kept an open mind about extending new credit to Triton Harbor despite having received a written directive from your Chief Credit Officer three weeks earlier stating that further extensions of credit were not contemplated under any workout scenario?
A: What I would say is that SAG officers exercise independent judgment. The Aaronson memorandum was one input among several. Our job is to evaluate the borrower's situation firsthand and make recommendations to the credit committee. That process was ongoing at the time of the September 12 meeting.
Whitmore's response was equivocal. He did not directly address the apparent contradiction, instead falling back on a generalized description of SAG's institutional role. Huang pressed the point for several additional pages, attempting to force Whitmore to concede either that he was ignoring the Aaronson directive or that he was concealing BRB's true intentions from the Kappels. Whitmore did not make either concession but was unable to offer a fully satisfactory explanation for how he could maintain an "open mind" about new credit in light of the directive he had received.
Assessment. This inconsistency is the most significant vulnerability in BRB's defense of the fraudulent inducement counterclaim. It could support a finding that Whitmore knew BRB had no intention of extending further credit to Triton Harbor yet held out the possibility of a new revolving facility during the September 12 meeting in order to induce the Kappels to pledge additional collateral — including their personal residence and unlimited personal guaranties. On a summary judgment motion, this creates a triable issue of fact regarding the scienter element of fraudulent inducement. A court applying the standard set forth in Eurycleia Partners, LP v. Padilla & Severin LLP, 12 N.Y.3d 553, 559 (2009), could conclude that a reasonable jury might find that Whitmore acted with knowledge of the falsity of any representations regarding future credit.
4. The Forbearance and Modification Agreement (October 6, 2023)
Whitmore confirmed that he led the negotiation of the forbearance terms on BRB's behalf. He testified that the Kappels were represented by counsel during the negotiation, though he could not recall the name of the attorney (this should be confirmed during the Marcus Kappel deposition). He further confirmed that Triton Harbor had retained Mercer Tidwell & Associates LLC, a restructuring advisory firm, with Raymond Mercer, Managing Director, serving as the primary advisor. Whitmore testified that he had multiple telephone calls and at least one in-person meeting with Raymond Mercer during the negotiation period.
Whitmore confirmed the following key terms of the Forbearance Agreement:
• Forbearance Period: 180 days from execution (October 6, 2023 through approximately April 3, 2024).
• Monthly Debt Service Payments: $125,000 per month during the forbearance period (six payments totaling $750,000).
• Additional Collateral — Equipment Leases: Assignment of two equipment leases with a combined appraised value of $2,300,000.
• Additional Collateral — Kappel Residence: Pledge of the Kappel family residence at 14 Birchmont Lane, Westport, Connecticut, with an appraised value of $3,100,000 (appraisal conducted by Ridgeline Appraisal Group, dated September 28, 2023).
• Guaranty Expansion — Marcus Kappel: Conversion of Marcus Kappel's existing limited personal guaranty ($4,500,000 cap) to an unlimited personal guaranty.
• Guaranty Expansion — Elaine Kappel: New unlimited personal guaranty from Elaine D. Kappel.
• Forbearance Fee: $87,500 (0.50% of the approximately $17,500,000 outstanding at the time of execution), payable upon execution.
• Covenant-Cure Milestone: Triton Harbor was required to achieve an FCCR of at least 1.20x by March 31, 2024, as a condition to continued forbearance.
Whitmore confirmed his awareness of Section 9(c) of the Forbearance Agreement — the "No Commitment to Extend Credit" provision — and testified that this was "standard language" included in all SAG forbearance agreements. He stated that he understood this provision to mean that BRB was making no commitment whatsoever to extend additional credit, modify existing credit facilities, or renew any credit facility, regardless of anything that may have been discussed verbally during the workout process. When asked whether this provision was specifically negotiated, Whitmore testified that it was part of BRB's standard forbearance template but that the Kappels' counsel had the opportunity to review and negotiate all provisions of the agreement.
Favorable aspects. Whitmore's testimony that Section 9(c) was standard industry practice and that the Kappels had the benefit of counsel and a professional restructuring advisor during the negotiation process strongly bolsters BRB's sophisticated-party defense and the integration clause and parol evidence defenses. His testimony provides a factual foundation for the argument that the Kappels cannot claim justifiable reliance on alleged oral statements that are directly contradicted by the express terms of the written agreement they signed.
5. Acceleration Decision
Whitmore testified that the decision to issue the Notice of Default and Acceleration on April 15, 2024, was based on Triton Harbor's failure to achieve the covenant-cure milestone set forth in the Forbearance Agreement. Specifically, Triton Harbor's FCCR for the quarter ended March 31, 2024, was 0.94x, which fell short of the required 1.20x minimum. Whitmore stated that he reviewed the March 31, 2024 financial statements, consulted with the internal credit review team, and prepared a recommendation for acceleration that was reviewed and approved by the credit committee and by Philip Aaronson in his capacity as Chief Credit Officer.
Whitmore characterized the acceleration as a straightforward contractual exercise following a defined event of default under the Forbearance Agreement. He denied that the acceleration was motivated by any retaliatory or bad-faith intent, testifying that BRB had fulfilled all of its forbearance obligations — including refraining from enforcement action for the full 180-day period — and that it was Triton Harbor that had failed to meet its obligations by not achieving the covenant-cure milestone.
Favorable aspects. This testimony firmly establishes the contractual basis for the acceleration and supports BRB's position that the exercise of its contractual remedies was proper and not arbitrary.
C. Overall Assessment — Whitmore
Whitmore was generally a composed and credible witness. He maintained a professional demeanor throughout the deposition, did not become argumentative or evasive (with the notable exception of the Aaronson Memorandum line of questioning), and his testimony was largely consistent with the documentary record. He answered questions directly when the answers were straightforward and favorable, and he did not volunteer unnecessary information that could have created additional exposure.
However, Whitmore's testimony regarding "keeping an open mind" about new credit, in the face of the Aaronson Memorandum that had been issued three weeks before the September 12 meeting, presents a direct and material contradiction that will be exploited by Triton Harbor. Huang was well-prepared for this deposition and effectively boxed Whitmore into the inconsistency through a methodical series of questions that established the timeline, the substance of the Aaronson directive, and Whitmore's own characterization of his state of mind. It is our assessment that this line of testimony was the most consequential of the three depositions.
The Whitmore deposition creates the most significant fact question for summary judgment purposes on the fraudulent inducement claim — specifically the scienter and misrepresentation elements. At summary judgment, BRB must demonstrate that there is no genuine issue of material fact regarding whether Whitmore made the alleged representations and, if so, whether he did so with knowledge of their falsity or with reckless disregard for the truth. The Aaronson Memorandum / "open mind" contradiction makes this showing difficult.
Recommendation. We must address this inconsistency head-on in our summary judgment briefing. The most effective approach is to emphasize the contractual protections — Section 9(c) and Section 12(a) — and to argue that, regardless of what Whitmore may or may not have said during the September 12 meeting, the Kappels' execution of the Forbearance Agreement containing explicit disclaimers forecloses any claim of justifiable reliance as a matter of law. We should also develop the argument that Whitmore's statements, even as characterized by the Kappels, were aspirational and conditional rather than promissory, and that a sophisticated borrower represented by counsel and a restructuring advisor cannot reasonably construe conditional statements as binding commitments in the face of written disclaimers to the contrary.
III. Deposition of Joanna Reeves (February 25, 2025)
A. Background and Logistics
Deponent: Joanna Reeves, Vice President, Special Assets Group, Belmont Ridge Bank NA.
Date: February 25, 2025.
Location: Offices of Kestrel Voss & Huang LLP, 780 Third Avenue, 24th Floor, New York, New York 10017.
Examining Counsel: Theodore Huang, Partner, Kestrel Voss & Huang LLP (lead examiner); Natasha Orlov, Associate, Kestrel Voss & Huang LLP (assisted).
Defending Counsel: Carlos Espinoza, Lead Associate, Calderwood & Harkness LLP (first chair); Hannah Brinkley, Associate, Calderwood & Harkness LLP (second chair).
Duration: Approximately five hours of testimony, excluding breaks. The deposition commenced at approximately 10:00 a.m. and concluded at approximately 4:15 p.m.
Transcript: A certified copy of the transcript has been received and reviewed. The transcript consists of approximately 224 pages. An annotated index of key testimony is included as Appendix B to this memorandum.
Exhibits: Huang marked seventeen exhibits during the Reeves deposition. Many overlapped with the Whitmore exhibits. Key unique exhibits included the September 18, 2023 email from Reeves to Marcus Kappel (Exhibit 12, same Bates number as in the Whitmore deposition), the September 29, 2023 internal draft term sheet email from Reeves to Whitmore (Exhibit 14), and Reeves' handwritten meeting notes from the September 12, 2023 meeting (Exhibit 21). A complete list of exhibits is included in Appendix D.
B. Summary of Key Testimony Topics
1. Role on the Triton Harbor Account
Reeves confirmed that she was the day-to-day relationship manager for the Triton Harbor account within SAG, reporting directly to Derek Whitmore. She testified that she was responsible for the ongoing monitoring of the account, communication with the borrower and its advisors, preparation of internal status reports, and tracking compliance with forbearance milestones. She participated in all key meetings with the Kappels and with Raymond Mercer of Mercer Tidwell & Associates LLC.
Reeves testified that she joined SAG in January 2021 and has served as a relationship manager on approximately fifteen to twenty workout and restructuring engagements during her tenure. She described her role on the Triton Harbor account as "the primary point of contact" between BRB and the borrower, with Whitmore serving as the senior decision-maker and the interface with the credit committee and senior management.
Reeves confirmed that she authored and received numerous emails that are central to the counterclaim allegations in this case. She was generally forthcoming about her role and did not attempt to minimize her involvement in the key communications.
2. September 12, 2023 Meeting
Reeves' account of the September 12, 2023 meeting was largely consistent with Whitmore's regarding the general structure, attendees, and purpose of the meeting. She confirmed that the meeting was held at BRB's offices, that the four individuals she identified — Whitmore, herself, Marcus Kappel, and Elaine Kappel — were present, and that the meeting lasted approximately two hours. She testified that the primary subject was the proposed forbearance framework, including the additional collateral requirements and the expanded guaranty structure.
However, Reeves was notably less categorical in her denials of the specific statements the Kappels allege were made during the meeting. When asked whether Whitmore used the phrase "committed to the long-term relationship," Reeves testified that she "could not specifically recall" whether those words were used. She did not confirm that Whitmore made this statement, but her inability to deny it stands in contrast to Whitmore's categorical denial. Reeves further described the meeting as involving "a lot of discussion about the future" of the banking relationship between BRB and Triton Harbor. She testified that both the Kappels and BRB's representatives discussed "what the relationship might look like going forward" if the forbearance was successful.
Unfavorable aspects. Reeves' inability to firmly deny the alleged statements attributed to Whitmore provides Triton Harbor with at least partial corroboration of the Kappels' version of events. While her testimony does not directly contradict Whitmore's categorical denial, the hedge creates an opening that Triton Harbor will seek to exploit. A factfinder assessing credibility could view Reeves' equivocation as suggesting that Whitmore's denials are not entirely accurate, or alternatively, that the meeting involved more forward-looking discussion about the relationship than BRB's legal position acknowledges. Either interpretation is harmful.
Reeves also confirmed that Marcus Kappel expressed concern at the meeting about pledging the family residence — specifically, that he stated he was uncomfortable putting his family's home at risk and asked whether it was truly necessary. Reeves testified that Whitmore "reassured him" by stating that BRB wanted to find a "path forward" for the relationship and that the additional collateral was part of a structure designed to keep the relationship moving in a positive direction. Triton Harbor will argue that this testimony — coming from a BRB witness — constitutes evidence that Whitmore used the prospect of a continued relationship to overcome the Kappels' resistance to pledging additional collateral, and that this reassurance was a material inducement.
3. September 18, 2023 Email to Marcus Kappel
Reeves was questioned extensively about her September 18, 2023 email to Marcus Kappel (Exhibit 12, BRB-0003871), which stated, in relevant part:
"We are optimistic about a path forward and believe this forbearance sets the stage for a renewed credit relationship. We look forward to working with you and your team as we move through this process."
Huang focused his examination on the phrase "renewed credit relationship," asking Reeves to explain what she intended to convey by that language. Reeves testified that the phrase was intended to describe the ongoing forbearance arrangement — that is, the "renewal" of the parties' working relationship through the forbearance process — and not a promise or indication that BRB intended to extend new credit facilities. She stated that she used the word "renewed" to mean "continuing" or "revitalized" and that she did not intend to convey any commitment regarding a specific new revolving facility or any other extension of credit.
Assessment. Reeves' explanation is somewhat strained and may not be persuasive to a factfinder. The phrase "renewed credit relationship" has a natural connotation that extends beyond the forbearance itself — it suggests a restoration of the lending relationship, including potentially new credit. The word "credit" in particular is difficult to square with Reeves' interpretation that she was merely describing the forbearance arrangement, which was by its nature a standstill on existing obligations rather than a new extension of credit.
Huang pressed Reeves on the plain meaning of her language at considerable length (transcript pp. 98–112), asking her repeatedly whether a reasonable person reading the email would understand "renewed credit relationship" to mean that BRB was contemplating extending new credit. Reeves maintained her interpretation but appeared increasingly uncomfortable with the line of questioning. At one point, Huang asked: "Ms. Reeves, wouldn't you agree that if you had intended to say 'continuing forbearance arrangement,' you would have said 'continuing forbearance arrangement'?" Reeves responded that she "did not choose her words as carefully as she would in retrospect" but maintained that her intent was not to convey a commitment.
Favorable element. Reeves did point out during her testimony that the September 18 email was followed within three weeks by the execution of the Forbearance Agreement, which contained the Section 9(c) disclaimer. She testified that the Forbearance Agreement, as the signed definitive document, superseded any informal email language and that the Kappels should have understood that the written agreement controlled. This argument has merit and aligns with BRB's integration clause defense, though it may be viewed as an after-the-fact rationalization rather than a contemporaneous understanding.
4. September 29, 2023 Internal Email (Draft Term Sheet)
Reeves confirmed that she authored and sent to Derek Whitmore an internal email dated September 29, 2023, attaching a draft term sheet for a potential $6.5 million revolving credit facility for Triton Harbor (Exhibit 14, BRB-0004215). The email bore the notation "for discussion purposes only — not approved" in the subject line, and the attached draft term sheet was watermarked "DRAFT — INTERNAL — NOT FOR DISTRIBUTION."
Reeves testified that the draft term sheet was a "preliminary internal exercise" prepared at Whitmore's request. She stated that Whitmore asked her to "model out what a new revolving facility might look like" if the credit committee were ever to consider one, so that SAG would have a framework to evaluate in the event the forbearance was successful and the borrower's financial condition improved. Reeves characterized this as a routine analytical exercise — the kind of forward-looking modeling that SAG relationship managers regularly perform in the course of evaluating workout options.
Reeves was emphatic on several points regarding the draft term sheet:
• The draft was never shared with Triton Harbor, Marcus Kappel, Elaine Kappel, or any representative of the borrower, including Raymond Mercer of Mercer Tidwell & Associates LLC.
• The draft was never presented to the credit committee for consideration or approval.
• The draft was never reviewed or approved by Philip Aaronson or any member of BRB's credit administration.
• The draft was, in Reeves' words, "a purely internal working document" that was "never intended to be and never was communicated to the borrower in any form."
Favorable aspects. The internal-only nature of the draft term sheet and the "not approved" notation support BRB's position that no commitment was made or communicated to Triton Harbor regarding a new revolving facility. The fact that the draft was never presented to the credit committee or to Aaronson is particularly significant, as it demonstrates that the internal modeling exercise never advanced beyond a preliminary stage.
Unfavorable aspects. Notwithstanding the draft's internal nature, its mere existence — created on September 29, 2023, just one week before the Forbearance Agreement was signed on October 6, 2023 — is problematic. The draft was prepared during the very period when BRB was extracting significant additional collateral from the Kappels (the personal residence, the equipment leases, and the expanded guaranties). Triton Harbor will argue that the draft term sheet is evidence that BRB was actively encouraging its own officers to explore and dangle the prospect of new credit as part of the inducement strategy, even while the Chief Credit Officer had already directed an exit from the relationship. The juxtaposition of the Aaronson Memorandum (August 22, 2023, directing exit) and the draft term sheet (September 29, 2023, modeling new credit) creates a powerful narrative for Triton Harbor — one in which BRB's left hand was planning an exit while its right hand was modeling a new facility to keep the Kappels engaged.
5. Knowledge of the Aaronson Memorandum
Reeves testified that she was not a recipient or copy on the August 22, 2023 Aaronson Memorandum. She confirmed that the memorandum was addressed to Whitmore and copied to Margaret Linden, and that her name did not appear in the distribution. She stated that she first learned of the memorandum's specific content "sometime after the forbearance was signed," possibly in late 2023 or early 2024, when Whitmore referenced it during a team meeting. She could not recall the precise date she became aware of it or the specific context in which Whitmore mentioned it.
Assessment. If credited by the factfinder, Reeves' testimony means that her September 18, 2023 email and the September 29, 2023 draft term sheet were not prepared with knowledge of Aaronson's directive against further extensions of credit. This is a significant point because it partially insulates those communications from a scienter argument — if Reeves genuinely did not know that the Chief Credit Officer had directed a structured exit, then her references to a "renewed credit relationship" and her preparation of the draft term sheet could reflect her own good-faith assessment rather than a knowing misrepresentation.
However, this testimony is a double-edged sword. If the day-to-day relationship manager on the Triton Harbor account — the person who was communicating directly with the borrower and preparing internal analyses of potential new credit — was not informed of the Chief Credit Officer's directive regarding the disposition strategy for that very account, it raises serious questions about BRB's internal communication practices. At minimum, it suggests organizational dysfunction. At worst, it could support an inference of deliberate compartmentalization — that Whitmore intentionally withheld the Aaronson Memorandum from Reeves so that she could credibly communicate optimism to the Kappels without personal knowledge of BRB's true intentions. Triton Harbor will likely advance this argument, and it is one that a factfinder could find plausible.
C. Overall Assessment — Reeves
Reeves was a credible but occasionally imprecise witness. She answered questions directly when the answers were clear-cut, but her hedging on the September 12 meeting — particularly her inability to deny the alleged "committed to the long-term relationship" statement — and her strained interpretation of "renewed credit relationship" in the September 18 email are genuine vulnerabilities in BRB's defense.
Her lack of knowledge of the Aaronson Memorandum is a meaningful factual point that has both defensive and offensive implications. On the defensive side, it reduces her personal scienter and may insulate her specific communications from a fraud theory. On the offensive side, it creates a narrative of organizational dysfunction or deliberate information siloing that Triton Harbor will use to argue that BRB constructed a system in which its front-line officer could make optimistic representations while the institution's senior credit leadership had already decided to exit the relationship.
The key documents from Reeves' production — the September 18 email and the September 29 draft term sheet — will feature prominently in Triton Harbor's summary judgment opposition and, if the case proceeds to trial, in Triton Harbor's case-in-chief. We must be prepared to contextualize these documents through expert testimony and through the cross-examination of the Kappels.
IV. Deposition of Philip Aaronson (March 4, 2025)
A. Background and Logistics
Deponent: Philip Aaronson, Executive Vice President, Chief Credit Officer, Belmont Ridge Bank NA.
Date: March 4, 2025.
Location: Offices of Kestrel Voss & Huang LLP, 780 Third Avenue, 24th Floor, New York, New York 10017.
Examining Counsel: Theodore Huang, Partner, Kestrel Voss & Huang LLP (lead examiner); Natasha Orlov, Associate, Kestrel Voss & Huang LLP (assisted).
Defending Counsel: Linda Osei, Responsible Partner, Calderwood & Harkness LLP (first chair for this deposition, given Aaronson's seniority within BRB); Carlos Espinoza, Lead Associate, Calderwood & Harkness LLP (second chair).
Duration: Approximately five and one-half hours of testimony, excluding breaks. The deposition commenced at approximately 9:15 a.m. and concluded at approximately 4:00 p.m.
Transcript: A certified copy of the transcript has been received and reviewed. The transcript consists of approximately 241 pages. An annotated index of key testimony is included as Appendix C to this memorandum.
Exhibits: Huang marked nineteen exhibits during the Aaronson deposition. Key exhibits included the August 22, 2023 Aaronson Memorandum (Exhibit 7), the Forbearance and Modification Agreement (Exhibit 9), the Ridgeline Appraisal Group appraisal report (Exhibit 5), the original June 15, 2021 Credit Agreement (Exhibit 1), the March 8, 2023 Credit Review Downgrade Memorandum (Exhibit 3), and a transcript excerpt from the Whitmore deposition (Exhibit 22). A complete list of exhibits is included in Appendix D.
B. Summary of Key Testimony Topics
1. The August 22, 2023 Memorandum
Aaronson confirmed that he authored the August 22, 2023 memorandum and stood behind its contents without qualification. His testimony regarding the memorandum was direct, confident, and internally consistent — a marked contrast to Whitmore's more equivocal treatment of the same document.
Aaronson testified that the memorandum reflected his "considered judgment" as Chief Credit Officer, based on the following factors:
(i) Triton Harbor's deteriorating financial condition. Aaronson cited the decline in TTM EBITDA to approximately $5.1 million (from $9.4 million in FY2022), the resulting covenant breaches (FCCR at 0.87x versus the 1.20x minimum; Total Leverage at 4.92x versus the 3.50x maximum), and the company's inability to service its existing debt obligations at the contracted levels.
(ii) Loss of key revenue contracts. Aaronson specifically identified the loss of the Port of Bridgehaven terminal services contract (approximately $12 million per year in revenue) and the Newark Bay waterway maintenance contract (approximately $7.5 million per year in revenue) as the primary drivers of the financial deterioration. He testified that the loss of these two contracts eliminated approximately $19.5 million in annual revenue, which represented a structural impairment to Triton Harbor's business model that could not be remedied through cost-cutting alone.
(iii) Declining collateral values. Aaronson referenced the updated collateral appraisal conducted by Ridgeline Appraisal Group, which showed a decline in the value of BRB's collateral from $18.7 million to $11.2 million — a decline of approximately $7.5 million, or 40.1%. He testified that this decline created a significant collateral shortfall relative to the outstanding obligations of $17,575,000, resulting in an undercollateralized position that further increased BRB's credit risk exposure.
(iv) Structural impairment assessment. Aaronson testified that, in his assessment, Triton Harbor's business model was "structurally impaired" — meaning that the revenue losses were not temporary cyclical events but rather permanent competitive losses that reflected fundamental changes in the marine industrial services market in which Triton Harbor operated. He stated that this assessment informed his conclusion that further extensions of credit would not be prudent, as the company's ability to generate sufficient cash flow to service additional debt was doubtful.
Characterization of the memorandum as a directive. The most significant aspect of Aaronson's testimony regarding the memorandum was his unambiguous characterization of it as a directive. When asked whether the memorandum was a suggestion, a recommendation, or a directive, Aaronson stated clearly: "It was a directive, not a suggestion. I expected it to be followed." He testified that, as Chief Credit Officer, he had the authority to set the credit administration's position on disposition strategies for distressed relationships, and that the Aaronson Memorandum reflected the credit administration's definitive position that BRB should not extend further credit to Triton Harbor.
Critical Inconsistency with Whitmore. Aaronson's characterization of the memorandum as "a directive, not a suggestion" directly contradicts Whitmore's deposition testimony, in which Whitmore described the memorandum as a "starting position" and "one input" subject to SAG's independent evaluation. Huang exploited this inconsistency with precision during the Aaronson deposition (transcript pp. 62–78). After establishing Aaronson's characterization of the memorandum, Huang read back the relevant portions of Whitmore's deposition testimony and asked Aaronson to respond:
Q: Mr. Aaronson, I'd like to read to you from the deposition of Derek Whitmore, taken on February 18, 2025. At page 93, line 14, Mr. Whitmore testified as follows: "I viewed the memorandum from Mr. Aaronson as a starting position, a baseline directive from the credit side that was subject to further evaluation as the workout process evolved." Do you agree with Mr. Whitmore that your memorandum was merely a starting position?
A: No. It was a directive. I expected it to be followed.
Q: And did you intend for your memorandum to be subject to further evaluation by SAG?
A: No. My memorandum reflected credit administration's determination. SAG's role was to implement the disposition strategy, not to substitute its own judgment for the credit determination.
Q: Was Mr. Whitmore authorized to hold out the possibility of future credit to Triton Harbor after receiving your memorandum?
A: That would not have been consistent with the direction set forth in my memorandum.
This exchange is damaging and will be prominently featured in Triton Harbor's summary judgment opposition. The internal contradiction between the bank's Chief Credit Officer and the Head of Special Assets Group regarding the meaning and force of a key document undermines BRB's ability to present a unified institutional position.
Aaronson further testified that he was not aware, prior to this litigation, that Whitmore may have discussed the possibility of future credit with the Kappels during the September 12, 2023 meeting. He stated that such discussions would have been "inconsistent" with his August 22 directive and that, had he known about such discussions, he would have addressed the matter with Whitmore directly. This testimony raises troubling questions about BRB's institutional coordination — either Whitmore was operating outside the boundaries of the Aaronson directive without Aaronson's knowledge, or there was a deliberate decision to allow Whitmore to present a more optimistic picture to the Kappels while the credit side maintained its exit position.
Note on the copy to Margaret Linden. Aaronson confirmed that he copied the memorandum to Margaret Linden, SVP and General Counsel of BRB, because, in his words, "I wanted legal to be aware of the direction we were heading given potential workout litigation." He testified that it was his practice to include the General Counsel on communications regarding distressed relationships where there was a reasonable likelihood of litigation. This testimony has implications for the pending privilege dispute, as it confirms that one purpose of copying Linden was to facilitate legal advice in anticipation of litigation — a fact that supports BRB's assertion of privilege over the document, at least with respect to the copy sent to Linden.
2. Approval of the Forbearance Terms
Aaronson confirmed that he reviewed and approved the final terms of the October 6, 2023 Forbearance and Modification Agreement. He testified that the forbearance terms were presented to the credit committee by Whitmore and that Aaronson participated in the credit committee discussion as Chief Credit Officer. He stated that the credit committee approved the forbearance terms unanimously, with the understanding that the forbearance was a mechanism to improve BRB's collateral position while providing an orderly timeline for Triton Harbor to either cure its defaults or arrange alternative financing.
Aaronson characterized the purpose of the forbearance in language that is both favorable and unfavorable to BRB:
"The forbearance was entered into in good faith to give the borrower time to cure or find alternative financing. It was not entered into with the expectation that BRB would extend new credit."
This statement is significant. On the favorable side, it confirms that the forbearance was entered into in "good faith" — a characterization that cuts against Triton Harbor's argument that the forbearance was a sham designed to extract additional collateral under false pretenses. On the unfavorable side, the statement that the forbearance was "not entered into with the expectation that BRB would extend new credit" is an unvarnished admission that BRB's intention was exit, not continued lending. Triton Harbor will use this admission to argue that BRB entered the forbearance with the predetermined intent to exit the relationship, regardless of Triton Harbor's performance during the forbearance period, and that the forbearance was therefore a vehicle for improving BRB's collateral position in advance of acceleration rather than a genuine accommodation.
Aaronson confirmed that the forbearance was designed to obtain the following additional protections for BRB:
• Additional collateral in the form of the equipment lease assignments ($2,300,000 appraised value) and the pledge of the Kappel residence ($3,100,000 appraised value), together providing approximately $5,400,000 in additional collateral coverage.
• Expanded guaranty protection through the conversion of Marcus Kappel's limited guaranty ($4,500,000 cap) to an unlimited personal guaranty and the new unlimited personal guaranty from Elaine D. Kappel.
• A forbearance fee of $87,500 (0.50% of $17,500,000 outstanding), which Aaronson described as "standard" for forbearance agreements of this size and duration.
Aaronson confirmed that these protections were considered essential to the credit committee's approval of the forbearance, given the significant decline in the value of the existing collateral base.
3. The Acceleration Decision
Aaronson testified that he reviewed and approved the Notice of Default and Acceleration issued on April 15, 2024, following his review of Triton Harbor's March 31, 2024 financial statements, which showed an FCCR of 0.94x — below the covenant-cure milestone of 1.20x set forth in the Forbearance Agreement. He confirmed that the acceleration was recommended by Whitmore and reviewed by the credit committee prior to issuance.
Aaronson characterized the acceleration as "a contractual right exercised upon a defined default" and stated that BRB had no obligation under the Forbearance Agreement to further extend the forbearance period beyond its stated terms. He noted that Triton Harbor had made all six forbearance payments ($750,000 in total) during the forbearance period but had failed to achieve the financial performance milestone that was a condition to continued forbearance.
Aaronson confirmed the total accelerated amount as follows:
Favorable aspects. Aaronson's testimony firmly establishes the contractual basis for the acceleration decision and negates any argument that the acceleration was arbitrary, retaliatory, or made in bad faith. The failure to achieve the FCCR milestone is an objective, measurable default that is not susceptible to subjective interpretation. The credit committee's review and approval of the acceleration further demonstrates that BRB followed its internal governance processes.
4. Prior Credit Decisions
Aaronson confirmed that, in his capacity as Chief Credit Officer, he had approved the original June 15, 2021 credit facility for Triton Harbor, which consisted of a $14 million Term Loan A and an $8 million Revolving Credit Facility. He testified that the original credit approval was based on Triton Harbor's financial performance at the time, which included EBITDA of approximately $11.2 million, an FCCR of approximately 1.85x, and a Total Leverage Ratio of approximately 1.96x — all comfortably within the covenanted levels.
Aaronson also confirmed that he approved the March 8, 2023 credit downgrade from "Pass" to "Substandard" (Risk Rating 7), which triggered the referral of the relationship to SAG. He testified that the downgrade was based on standard credit review protocols and was triggered by the covenant breaches identified during the quarterly financial reporting cycle. He stated that the downgrade was not discretionary but rather was required by BRB's Credit Risk Management Policy Manual, which mandated a downgrade to Substandard for any relationship that had breached financial covenants for two consecutive quarters without a waiver or cure.
C. Overall Assessment — Aaronson
Aaronson was the strongest and most direct of the three BRB witnesses. His testimony was confident, internally consistent, and well-supported by the documentary record. He did not hedge, equivocate, or provide unnecessarily expansive answers. He demonstrated a clear understanding of the questions posed and answered them with precision. His demeanor was professional and authoritative, reflecting his senior position within BRB and his extensive experience as a credit officer. He did not appear evasive or combative, even during Huang's most pointed lines of questioning.
However, Aaronson's very firmness created the pivotal inconsistency with Whitmore. By insisting that the August 22 memorandum was "a directive, not a suggestion" that he "expected to be followed," Aaronson undermined Whitmore's characterization of the memorandum as a "starting position" subject to SAG's independent evaluation. This internal inconsistency is the most damaging development from the three depositions and will be exploited by Kestrel Voss & Huang in opposing summary judgment.
Additionally, Aaronson's testimony that BRB entered the forbearance with the expectation of exit, not continued lending, while legally defensible as a truthful statement of the institution's credit posture, provides significant ammunition for Triton Harbor's narrative. Triton Harbor will argue that the entire forbearance process was a coordinated effort to extract maximum collateral value — including the Kappels' personal residence and unlimited guaranties — under a pretense of good faith, when in reality BRB had already determined to exit the relationship. Aaronson's candor on this point, while admirable from a credibility standpoint, creates a factual record that supports this narrative.
Finally, Aaronson's confirmation that he was not aware of any discussions between Whitmore and the Kappels regarding the possibility of future credit raises questions that cut against BRB regardless of how they are answered. If Whitmore was exceeding his authority by holding out the prospect of new credit contrary to a known directive, then BRB has an internal control problem and Whitmore's conduct may be attributable to BRB under agency principles. If, on the other hand, there was a deliberate decision to allow Whitmore to present an optimistic front while the credit side maintained its exit position, then BRB's institutional conduct supports a finding of fraud. Either interpretation is problematic.
V. Cross-Witness Consistency Analysis
A. Areas of Consistency
All three BRB witnesses — Whitmore, Reeves, and Aaronson — provided testimony that was consistent on the following topics:
1. Financial deterioration of Triton Harbor. All three witnesses testified consistently regarding the material decline in Triton Harbor's financial condition, including the decline in TTM EBITDA from $9.4 million (FY2022) to $5.1 million, the resulting covenant breaches (FCCR at 0.87x versus the 1.20x minimum; Total Leverage at 4.92x versus the 3.50x maximum), and the loss of the Port of Bridgehaven and Newark Bay contracts as the primary drivers of the financial deterioration.
2. Contractual framework. All three witnesses confirmed the key provisions of the Forbearance Agreement, including the Section 9(c) "No Commitment to Extend Credit" disclaimer and the Section 12(a) integration clause. All three confirmed that these provisions were part of the executed agreement and that the Kappels had the opportunity to review the agreement with counsel before signing.
3. Legitimate business reasons for additional collateral. All three witnesses testified consistently that the additional collateral requirements — the equipment lease assignments and the pledge of the Kappel residence — were based on the significant decline in the value of the existing collateral base (from $18.7 million to $11.2 million, as reflected in the updated Ridgeline Appraisal Group appraisal).
4. Contractual basis for acceleration. All three witnesses confirmed that the April 15, 2024 acceleration was triggered by Triton Harbor's failure to achieve the FCCR covenant-cure milestone (0.94x versus the 1.20x minimum) at March 31, 2024, and that the acceleration was reviewed and approved through BRB's internal credit governance process.
5.