1045-00004 · Client 1045 · Expert Engagement

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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Linda Osei, Responsible Partner

FROM: Carlos Espinoza, Lead Associate

DATE: April 20, 2025

RE: Expert discovery Strategy — 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)

MATTER NO.: 1022-00005

CC: Priya Anand, Billing Partner; Hannah Brinkley, Working Associate

I. Purpose and Executive Summary

This memorandum analyzes Belmont Ridge Bank NA's ("BRB" or the "Bank") expert discovery needs, assesses the current posture and substance of the expert report being prepared by Dr. Gerald Stokes of Wentworth Risk Advisors LLC, identifies potential requirements for retaining a rebuttal expert on damages issues, anticipates potential Frye challenges by opposing counsel at Kestrel Voss & Huang LLP, and develops a comprehensive strategy for deposing Triton Harbor Industries, LLC's ("THI" or "Triton Harbor") anticipated damages expert. All of these efforts must be coordinated within the June 30, 2025 expert discovery deadline established by the case scheduling order and, critically, must serve the broader objective of filing a dispositive summary judgment motion by September 15, 2025. The recommendations herein are designed to maximize BRB's position at both the expert-admissibility stage and the summary judgment stage.

After a thorough review of the current state of the case, the fact record, and the relevant legal standards, I have reached the following key conclusions:

First, Dr. Stokes' expert report is on track and covers the essential banking-practices opinions necessary to support BRB's summary judgment motion. His opinions regarding the commercial reasonableness of BRB's conduct, the industry-standard nature of the Section 9(c) disclaimer and integration clause, the distinction between preliminary workout discussions and binding lending commitments, and the sophistication of the Kappels as borrowers are well-grounded in his professional experience and in publicly available regulatory guidance. These opinions will reinforce BRB's legal defenses, including the integration clause defense, the parol evidence rule, and the sophisticated-borrower doctrine.

Second, BRB should retain a damages and financial rebuttal expert to challenge the $12,500,000-plus compensatory damages figure advanced by THI, as well as any consequential damages methodology that THI's expert may employ. THI's damages theory rests on several contestable assumptions — most fundamentally, the assumption that BRB would have extended a $6,500,000 revolving facility absent the alleged misrepresentations — and a qualified rebuttal expert can demonstrate that these assumptions are speculative and that THI's damages are not supported with reasonable certainty. This retention must occur no later than May 1, 2025, given the compressed expert discovery schedule.

Third, Frye challenges to Dr. Stokes' testimony are unlikely to succeed, given the nature of his banking-practices opinions and the general-acceptance standard applicable in New York state courts. However, we must proactively address potential challenges, particularly the argument that Dr. Stokes is offering impermissible legal conclusions or that his "industry standard" opinions lack a sufficient empirical foundation. A framework for a Frye hearing brief should be prepared in advance.

Fourth, the deposition of THI's damages expert should be scheduled no later than the week of June 16, 2025, to preserve adequate time for analysis and any supplemental briefing before the June 30, 2025 expert discovery close. The deposition should be structured to obtain admissions that will be directly useful in the summary judgment motion, particularly regarding the speculative nature of the expert's "but for" assumptions and the failure to account for THI's independent financial deterioration.

Each of these conclusions is discussed in detail below, together with specific recommended action items, a proposed timeline, and budget considerations for discussion with the billing partner and BRB's in-house team.

II. Current Status of Expert discovery

A. Discovery Schedule

Under the scheduling order entered by Justice Marchetti, expert discovery in this matter must be completed by June 30, 2025. Summary judgment motions are due September 15, 2025. These dates are firm and, absent extraordinary circumstances, are unlikely to be extended by the Court, particularly given Justice Marchetti's well-known emphasis on adherence to the Commercial Division's scheduling protocols.

As a practical matter, this means that expert reports must be exchanged no later than mid-May 2025 to allow sufficient time for the parties to review opposing experts' reports, prepare rebuttal reports, and conduct depositions — all before the June 30 deadline. Given the complexity of the financial and banking-practices issues in this case, a compressed timeline will require disciplined execution.

No expert scheduling stipulation has yet been entered by the parties. I recommend that we promptly propose a stipulation to Kestrel Voss & Huang LLP providing for the following schedule:

• May 15, 2025: Simultaneous exchange of opening expert reports.

• June 6, 2025: Exchange of rebuttal expert reports (if any).

• June 27, 2025: Completion of all expert depositions.

This proposed schedule provides each side with three weeks to review opposing reports and prepare rebuttals, followed by three weeks for depositions. While tight, this is workable if engagement of our rebuttal expert proceeds immediately and Dr. Stokes' report is finalized on time.

We should raise this proposal with Theodore Huang and Natasha Orlov at Kestrel Voss & Huang promptly — ideally by April 25, 2025, at the latest. If the parties cannot reach agreement on a stipulation, we should move before Justice Marchetti for a scheduling order governing expert discovery. The Commercial Division Rules expressly contemplate such applications, and Justice Marchetti has historically been receptive to proposed scheduling frameworks that ensure orderly completion of expert discovery before the dispositive-motion deadline.

B. Fact discovery Status

Fact discovery closed on April 30, 2025. The fact record is now substantially complete, and the following depositions have been conducted:

Each of these depositions yielded testimony that is directly relevant to the expert opinions at issue in this case, and transcripts have been provided to Dr. Stokes for review and incorporation into his analysis.

Document production has been substantial. BRB produced approximately 34,000 documents in response to THI's requests, including internal credit committee minutes, loan file documents, SAG correspondence, and the communications at the center of the dispute. Triton Harbor's production is also substantially complete, and the parties have resolved the majority of document disputes through the meet-and-confer process.

The following key documents are now in the record and form the documentary foundation for the expert opinions discussed in this memorandum:

• The August 22, 2023 Aaronson Memorandum (the internal credit memorandum from Philip Aaronson directing the Special Assets Group to pursue a "structured exit" from the Triton Harbor credit relationship — to the extent produced or ordered produced following the privilege dispute that was the subject of the January 2025 motion practice before Justice Marchetti);

• The September 18, 2023 Reeves email to Marcus Kappel, in which Joanna Reeves discussed the Bank's willingness to "explore restructuring options" and referenced the possibility of additional credit facilities;

• The September 29, 2023 internal draft term sheet for a proposed $6,500,000 revolving credit facility, circulated among BRB personnel and bearing the legend "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED";

• The Forbearance and Modification Agreement dated October 6, 2023, particularly Section 9(c) (the express disclaimer of any commitment to extend additional credit) and Section 12(a) (the integration clause providing that the Agreement constitutes the entire understanding of the parties with respect to the subject matter thereof);

• The Ridgeline Appraisal Group updated collateral appraisal dated September 2023, valuing Triton Harbor's collateral portfolio at $11,200,000, down from $18,700,000 at origination in June 2021;

• The Mercer Tidwell & Associates LLC engagement materials, reflecting Triton Harbor's retention of Raymond Mercer as a restructuring advisor.

These documents collectively establish the factual framework within which the expert opinions will operate and against which opposing experts' assumptions can be tested.

III. Dr. Gerald Stokes — BRB's Banking Practices Expert

A. Engagement and Qualifications

Dr. Gerald Stokes was retained as BRB's banking-practices expert pursuant to an engagement letter dated December 9, 2024, executed through his consulting firm, Wentworth Risk Advisors LLC, located at 55 East 59th Street, Suite 1410, New York, New York 10022. The engagement was reviewed by this office for compliance with applicable ethical rules and expert-retention protocols, and the terms of the engagement letter (including rate structure and scope of work) were approved by Linda Osei.

Dr. Stokes' qualifications are exceptionally well-suited to the issues in this case. He is a former senior bank examiner with the Office of the Comptroller of the Currency, where he conducted examinations of large national banks with a focus on commercial lending, credit administration, and workout/restructuring practices. Following his career as a bank examiner, Dr. Stokes joined the faculty of the Hartwell University School of Business, where he holds the rank of Professor of Finance (now emeritus) and has published extensively on commercial lending practices, the regulation of bank credit decisions, and the management of distressed loan portfolios. He has served as an expert witness in more than forty commercial litigation matters in both state and federal courts, including numerous cases involving lender-borrower disputes, loan workout and forbearance practices, and claims of lender liability.

Dr. Stokes' qualifications are particularly strong when measured against the Frye general-acceptance standard applicable in New York state courts. His opinions are grounded in decades of professional experience in bank examination and academic research in commercial lending — areas in which "general acceptance" of methodology is demonstrated not through the type of empirical testing and peer review required under Daubert, but through the expert's demonstrated knowledge of and experience within the relevant professional community. Dr. Stokes' combination of regulatory, academic, and consulting experience provides a compelling foundation for his testimony.

B. Scope and Anticipated Opinions

Dr. Stokes' report outline was finalized on April 15, 2025, following extensive consultation between the expert, this office, and the BRB litigation team. Based on that outline, Dr. Stokes is expected to offer the following key opinions in his report:

Opinion 1 — Industry-Standard Forbearance Practices. Dr. Stokes will opine that it is universal commercial banking practice to include explicit disclaimers of any commitment to extend additional credit in forbearance agreements. These disclaimers serve an essential risk-management function by ensuring that the lender's agreement to forbear from exercising default remedies is not construed — by the borrower, by subsequent lenders, or by the bank's regulators — as a commitment to extend new credit or to continue the lending relationship beyond the forbearance period. Dr. Stokes will testify that Section 9(c) of the Forbearance and Modification Agreement dated October 6, 2023, is standard and customary in form and substance, consistent with the disclaimer language used by the vast majority of commercial lenders in comparable workout transactions. This opinion is supported by OCC and FDIC supervisory guidance, published banking treatises, and Dr. Stokes' own extensive experience in examining and advising on forbearance transactions.

Opinion 2 — Reasonableness of Acceleration. Dr. Stokes will opine that BRB's decision to accelerate the loan following the expiration of the 180-day forbearance period was commercially reasonable and consistent with prudent banking practices. The forbearance period expired on April 5, 2024. At that time, Triton Harbor had failed to cure the underlying covenant default: the Fixed Charge Coverage Ratio ("FCCR") stood at 0.94x as of March 31, 2024, well below the covenant minimum of 1.20x required under the Credit Agreement. In light of this continued default, together with the significant decline in collateral values and THI's deteriorating financial performance, BRB's decision to exercise its contractual right to accelerate was commercially reasonable and would have been expected by any prudent lender in BRB's position. Dr. Stokes will further note that failure to accelerate under these circumstances could have exposed BRB to regulatory criticism for maintaining a non-performing asset on its books without adequate protection.

Opinion 3 — Exploratory Discussions vs. Binding Commitments. Dr. Stokes will opine that the distinction between preliminary workout discussions — including the internal circulation of draft term sheets, preliminary credit analyses, and exploratory conversations between relationship managers and borrowers about potential restructuring options — and binding lending commitments is fundamental to commercial banking practice. Banks routinely explore multiple restructuring alternatives during the workout process, and the circulation of draft term sheets and internal discussion memoranda is a standard part of this process. Such exploratory activity does not constitute, and is not understood within the banking industry to constitute, a binding commitment to extend credit. Dr. Stokes will specifically address the Reeves September 29, 2023 internal email forwarding a draft $6,500,000 revolving facility term sheet, which bore the express legend "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED." Dr. Stokes will opine that this document, on its face and in the context of standard banking practice, does not constitute or evidence a lending commitment and would not be understood as such by any sophisticated participant in the commercial lending market.

Opinion 4 — Special Assets Group Mandate. Dr. Stokes will opine that the Special Assets Group's primary obligation is to maximize recovery for the bank on distressed or non-performing credit relationships. SAG officers routinely employ a range of workout tactics — including forbearance, restructuring discussions, collateral revaluation, and, where appropriate, exit planning — in pursuit of this mandate. The exploration of multiple strategic paths simultaneously, including both forbearance/restructuring and structured-exit scenarios, is not only permissible but is considered best practice in bank workout management. The simultaneous consideration of these alternatives does not imply, and should not be construed to imply, that the bank has made a lending commitment or representation to the borrower inconsistent with any of those alternatives.

Opinion 5 — Borrower Sophistication and the Role of Restructuring Advisors. Dr. Stokes will opine that the sophistication of the borrower and the borrower's access to independent professional advice are factors that, as a matter of banking practice, bear directly on the reasonableness of a borrower's claimed reliance on alleged informal representations by bank personnel. In this case, the record demonstrates that Marcus Kappel has more than 30 years of experience in the marine industrial services industry, including extensive experience in commercial borrowing; that Elaine Kappel, as CFO of Triton Harbor, was directly involved in the negotiation of the Credit Agreement, the Forbearance Agreement, and the related documents; and that Triton Harbor retained Mercer Tidwell & Associates LLC (Raymond Mercer, Managing Director) as a restructuring advisor during the forbearance negotiations. Dr. Stokes will opine that, in the context of this level of borrower sophistication and independent advisory engagement, it would be inconsistent with commercial banking practice to credit a claim that the borrower justifiably relied on informal verbal or email communications that were contradicted by the express terms of the executed agreements.

Opinion 6 — Collateral Revaluation and Additional Security. Dr. Stokes will opine that BRB's request for additional collateral during the forbearance negotiations was a commercially reasonable risk-mitigation measure. The collateral securing the Triton Harbor credit facility had declined in appraised value from $18,700,000 at origination in June 2021 to $11,200,000 per the September 2023 updated Ridgeline Appraisal Group appraisal — a decline of approximately 40.1%. In light of this significant deterioration in the Bank's collateral position, BRB's request that Triton Harbor pledge additional collateral — specifically, equipment leases appraised at $2,300,000 and the Kappel residence at 14 Birchmont Lane, Westport, Connecticut, appraised at $3,100,000 — was a standard and prudent exercise of the Bank's risk-management responsibilities. Dr. Stokes will opine that this request is consistent with the practices of similarly situated commercial lenders facing comparable collateral deterioration and does not constitute a predatory extraction of security from the borrower.

C. Documents and Materials Reviewed

Dr. Stokes has been provided with, and has reviewed, the following materials in forming his opinions:

• The original Credit Agreement dated June 15, 2021, between BRB and Triton Harbor Industries, LLC, together with all exhibits, schedules, and amendments thereto;

• The Forbearance and Modification Agreement dated October 6, 2023, including Sections 9(c) and 12(a) and all schedules and exhibits;

• The Aaronson Memorandum dated August 22, 2023, from Philip Aaronson to Derek Whitmore and the SAG team;

• The Reeves emails dated September 18, 2023 (to Marcus Kappel) and September 29, 2023 (internal, forwarding draft term sheet);

• The Ridgeline Appraisal Group collateral appraisals dated June 2021 (origination appraisal; $18,700,000) and September 2023 (updated appraisal; $11,200,000);

• Triton Harbor's audited financial statements for fiscal year 2022, reflecting revenue of approximately $68 million and Adjusted EBITDA of $9.4 million;

• Triton Harbor's interim financial statements for Q1 2023, reflecting trailing twelve-month EBITDA of $5.1 million, an FCCR of 0.87x, and Total Leverage of 4.92x;

• BRB's internal credit committee minutes for all meetings at which the Triton Harbor credit relationship was discussed, including the meetings at which the forbearance and acceleration decisions were approved;

• Deposition transcripts of Derek Whitmore (February 18, 2025), Joanna Reeves (February 25, 2025), Philip Aaronson (March 4, 2025), Marcus J. Kappel (March 11, 2025), and Elaine D. Kappel (March 18, 2025);

• The engagement letter and related materials reflecting Triton Harbor's retention of Mercer Tidwell & Associates LLC (Raymond Mercer, Managing Director) as a restructuring advisor;

• Selected OCC and FDIC supervisory guidance materials on bank workout and forbearance practices, as identified by Dr. Stokes.

This list of reviewed materials will be disclosed in the expert report in accordance with CPLR 3101(d) requirements. Dr. Stokes has confirmed that no additional materials are needed to finalize his opinions, though he reserves the right to supplement if THI produces additional relevant documents or if rebuttal issues arise.

D. Report Drafting Status

The outline of Dr. Stokes' report was finalized on April 15, 2025. Dr. Stokes has begun drafting the full report, and a complete draft is expected by May 1, 2025. Upon receipt of the draft, Carlos Espinoza and Hannah Brinkley will conduct a detailed internal review for legal sufficiency, consistency with the fact record established through depositions and document production, and compliance with Frye admissibility requirements. We will circulate the draft to Linda Osei with a cover memorandum summarizing any recommended revisions.

The target date for finalization and exchange of Dr. Stokes' report is May 15, 2025, in accordance with the proposed expert discovery scheduling stipulation discussed in Section II.A above. This timeline is achievable provided that the internal review process proceeds without significant complications and that no unexpected issues arise in coordinating with Dr. Stokes.

IV. *Frye v. United States* Considerations

A. Applicable Standard

New York applies the Frye general-acceptance standard for the admissibility of expert testimony, as set forth in Frye v. United States, 293 F. 1013 (D.C. Cir. 1923), and adopted by the New York Court of Appeals in People v. Wesley, 83 N.Y.2d 417 (1994). Unlike the federal Daubert standard (Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)), which requires the trial court to evaluate the reliability of an expert's methodology based on factors such as testability, peer review, error rate, and general acceptance, the Frye standard requires only that the expert's methodology be "generally accepted" within the relevant professional community.

The practical significance of this distinction for the present case is considerable. Banking-practices testimony of the type offered by Dr. Stokes is typically opinion testimony based on the expert's specialized knowledge and professional experience, rather than testimony dependent on a novel scientific methodology or technique. The Frye inquiry — whether the methodology is generally accepted within the relevant professional community — is therefore relatively straightforward. Courts in the Commercial Division have routinely admitted banking-practices testimony from qualified experts, and challenges to such testimony under Frye are infrequent and rarely successful. Indeed, in many cases the Frye standard is simply inapplicable to non-scientific expert testimony grounded in professional experience, as the Court of Appeals recognized in Parker v. Mobil Oil Corp., 7 N.Y.3d 434 (2006), where it noted that the Frye test applies to the admissibility of novel scientific evidence rather than to all expert opinion testimony.

B. Anticipated Challenges from Kestrel Voss & Huang

Notwithstanding the favorable legal landscape, we should anticipate that Theodore Huang and Natasha Orlov of Kestrel Voss & Huang LLP may attempt to challenge Dr. Stokes' testimony on several grounds:

Improper legal conclusions. The most likely challenge is that Dr. Stokes' opinions constitute impermissible legal conclusions rather than expert opinions on banking practices. For example, opposing counsel may argue that Dr. Stokes' opinion regarding the legal effect of Section 9(c) — that it constitutes a valid disclaimer of any lending commitment — is a question of law for the Court, not a subject for expert opinion. Similarly, they may argue that Dr. Stokes' opinions bearing on the "justifiable reliance" element of the fraudulent inducement claim impermissibly invade the province of the Court (or jury, if there is a trial). This argument has some surface appeal, and we must ensure that the report is carefully drafted to avoid crossing the line between permissible practice-based opinions and impermissible legal conclusions.

Insufficient empirical foundation for "industry standard" opinions. Opposing counsel may argue that Dr. Stokes' opinions regarding "industry standard" and "customary" forbearance practices lack a sufficiently rigorous empirical basis — that he has not conducted a formal survey of forbearance agreements across the banking industry and is relying solely on his own experience and selected regulatory guidance. While this argument fundamentally misapprehends the Frye standard (which does not require the type of empirical rigor that a Daubert analysis might), it could be raised in an effort to undermine the weight of the testimony even if the admissibility challenge fails.

Opinions regarding the Aaronson Memorandum. Opposing counsel may challenge Dr. Stokes' opinions regarding the Aaronson Memorandum — the internal credit memorandum in which Philip Aaronson directed the SAG team to pursue a "structured exit" from the Triton Harbor credit relationship at the same time that the Bank was negotiating the Forbearance Agreement with THI. The argument would be that this internal direction creates a genuine factual dispute about BRB's intent that cannot be resolved by expert testimony — i.e., that the question of whether BRB intended to honor the Forbearance Agreement or was using it as a vehicle to extract additional collateral while planning an exit is a question of fact for the trier of fact, not a subject for expert opinion. This is a more nuanced challenge, and while we believe Dr. Stokes' opinions on this issue are properly framed as banking-practice opinions rather than factual determinations, we should ensure that the report is drafted with care on this point.

C. Mitigation Strategy

To address these anticipated challenges, we recommend the following mitigation measures:

Framing opinions as practice-based, not legal. Dr. Stokes' report should be carefully drafted to ensure that his opinions are framed as opinions on commercial banking practice — what is customary, standard, prudent, and commercially reasonable within the banking industry — rather than as opinions on the legal effect of contractual provisions or on legal elements of the fraudulent inducement claim. For example, rather than opining that "Section 9(c) is a valid and enforceable disclaimer," Dr. Stokes should opine that "Section 9(c) is consistent in form and substance with the disclaimer language used by commercial banks in forbearance agreements and reflects standard industry practice for managing the risk that a borrower may misconstrue a forbearance arrangement as a commitment to extend additional credit." The legal conclusion — that the disclaimer is enforceable — is for the Court; the factual opinion — that the disclaimer is industry-standard — is for the expert.

Supporting "industry standard" opinions with external sources. Dr. Stokes should support his opinions regarding industry-standard practices with reference to published guidance from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) regarding bank workout and forbearance practices, including the OCC's Comptroller's Handbook on commercial lending and troubled debt restructuring. He should also reference published banking treatises and law review articles discussing the use of disclaimer clauses in forbearance agreements. These external sources, combined with Dr. Stokes' own extensive professional experience — decades of conducting bank examinations and reviewing forbearance transactions — provide a robust foundation for the "general acceptance" inquiry under Frye.

Careful treatment of the Aaronson Memorandum. On the Aaronson Memorandum, Dr. Stokes should be instructed to opine that it is common and prudent for a bank's credit officers to explore multiple strategic paths simultaneously during a workout — including both forbearance/restructuring and exit planning — without those internal deliberations constituting representations to the borrower or creating expectations that the bank will extend additional credit. His opinion should emphasize that the simultaneous consideration of forbearance and exit scenarios is a recognized best practice in bank workout management, reflected in regulatory guidance and standard operating procedures at commercial banks. He should not, however, opine on the ultimate factual question of BRB's subjective intent, which is beyond the proper scope of expert testimony.

Proactive preparation of a *Frye* hearing brief. We recommend preparing a framework for a Frye hearing brief in advance, so that if a challenge is raised, we can respond promptly. The brief should be targeted for filing by late June or early July 2025 if a challenge is made. The brief should address the Frye standard, the admissibility of banking-practice opinion testimony under New York law, Dr. Stokes' qualifications, the methodology underlying his opinions, and the distinction between his permissible practice-based opinions and impermissible legal conclusions.

V. Potential Rebuttal Expert — Damages / Financial Expert

A. Need for a Damages Rebuttal Expert

The need for a damages rebuttal expert is, in my assessment, the most pressing gap in BRB's expert discovery posture. Triton Harbor's complaint and subsequent discovery responses assert compensatory damages of not less than $12,500,000, calculated as follows:

• Value of additional collateral pledged: $2,300,000 (equipment leases) plus $3,100,000 (the Kappel residence at 14 Birchmont Lane, Westport, Connecticut), totaling $5,400,000. THI contends that the Kappels were induced by BRB's alleged misrepresentations to pledge this additional collateral, which they would not otherwise have pledged.

• Alleged consequential damages from the acceleration: THI claims that BRB's acceleration of the loan, following the expiration of the forbearance period, caused consequential damages including lost business value and disruption to Triton Harbor's operations. The specific quantum of consequential damages has not been fully articulated in the pleadings but is expected to be developed through expert testimony.

• Conversion of Marcus Kappel's guaranty: THI contends that, as part of the forbearance transaction, Marcus Kappel's guaranty was converted from a limited guaranty ($4,500,000 cap) to an unlimited guaranty, and that this conversion was induced by BRB's alleged misrepresentations.

• New unlimited guaranty of Elaine Kappel: THI contends that Elaine Kappel was induced to execute a new unlimited personal guaranty as part of the forbearance transaction, which she would not have executed absent the alleged misrepresentations.

In addition to these compensatory damages, THI also seeks unspecified punitive damages on its fraudulent inducement claim. BRB's motion to dismiss the punitive damages claim was filed on January 28, 2025 and remains pending before Justice Marchetti.

THI is expected to retain a financial or forensic accounting expert to quantify compensatory and consequential damages. Without a rebuttal expert, BRB will be unable to effectively challenge the methodology, assumptions, and conclusions of THI's damages analysis at either the expert-admissibility stage or the summary judgment stage.

BRB should retain a rebuttal expert in financial economics or commercial damages to address the following key issues:

(a) Causation. A rebuttal expert can demonstrate that the acceleration of the loan — not the alleged misrepresentations during the forbearance negotiations — was the proximate cause of any harm to THI. The acceleration was a contractual remedy triggered by THI's undisputed failure to cure its covenant defaults, and the alleged misrepresentations (even if credited) relate to the forbearance period, not the acceleration itself.

(b) Mitigation. A rebuttal expert can analyze whether THI failed to mitigate its damages by not securing alternative financing, refinancing the credit facility with another lender, or selling assets to reduce its debt burden. The record suggests that THI made limited efforts to obtain alternative financing and that the Kappels declined to pursue certain asset-sale options recommended by their own restructuring advisor, Raymond Mercer.

(c) Proper measure of damages. Under New York law, the measure of damages for fraudulent inducement is generally the "out-of-pocket" measure — the difference between what the plaintiff parted with and what the plaintiff received — rather than the "benefit of the bargain" measure. A rebuttal expert can analyze whether THI's damages claim improperly seeks benefit-of-the-bargain damages (i.e., the value of the credit facility THI claims it was promised) rather than out-of-pocket damages.

(d) Lost enterprise value. Any claim for lost enterprise value must be assessed against the backdrop of THI's severe financial deterioration, which was driven by factors independent of BRB's conduct. Specifically, THI lost its Port of Bridgehaven municipal contract (approximately $12 million per year in revenue) and its Newark Bay maintenance contract (approximately $7.5 million per year in revenue), causing THI's revenue run-rate to drop to approximately $48 million on an annualized basis. A rebuttal expert can model the impact of these contract losses on THI's enterprise value and demonstrate that any decline in value is attributable to THI's own operational and market challenges, not to BRB's lending decisions.

B. Candidate Identification

We recommend considering engagement of one of the following forensic accounting and commercial damages experts, each of whom has relevant qualifications and experience testifying in New York commercial litigation:

1. Thornfield Consulting Group LLC — Thornfield is a boutique forensic accounting and commercial damages firm based in New York with significant experience in lender-liability and commercial finance disputes. The firm's principals have testified as experts in multiple matters before the Commercial Division and in the United States District Courts for the Southern and Eastern Districts of New York. Thornfield's team has specific experience modeling "but for" scenarios in lender-borrower disputes and analyzing causation issues in the context of loan acceleration and workout transactions.

2. Dr. Patricia Eames of Braxton Economic Advisory LLC — Dr. Eames is a financial economist with a Ph.D. in economics from Columbia University and more than twenty years of experience providing expert testimony on commercial damages issues. She has particular expertise in business valuation, lost-profits analysis, and the quantification of damages in fraud and contract disputes. She has testified in multiple proceedings in New York state and federal courts and has experience with the specific issues raised in this case, including the distinction between out-of-pocket and benefit-of-the-bargain damages and the analysis of mitigation.

3. Graham Aldrich of Pinnacle Forensic LLC — Mr. Aldrich is a certified public accountant and accredited senior appraiser with extensive experience in forensic accounting, commercial damages quantification, and business valuation. He has testified as an expert in approximately thirty matters in New York state and federal courts, including several cases involving claims of lender liability and fraudulent inducement in the commercial lending context.

Key qualifications that we should prioritize in selecting a rebuttal expert include: (i) experience testifying in New York commercial litigation, particularly before the Commercial Division; (ii) familiarity with lender-borrower disputes and the specific damages issues that arise in fraudulent inducement claims; (iii) ability to model alternative scenarios (with and without the alleged misrepresentations) and to present those models clearly and persuasively; and (iv) availability to meet the compressed timeline for this engagement.

We must also confirm that any candidate has no conflicts with BRB, Triton Harbor Industries, the individual defendants, Kestrel Voss & Huang LLP, or any other parties or counsel involved in this litigation. Conflicts checks should be initiated immediately upon selection of our preferred candidate.

C. Timeline. The timeline for the rebuttal expert engagement is extremely compressed, and prompt action is essential:

• By May 1, 2025: Final retention decision and execution of engagement letter.

• May 1–June 6, 2025: Provide all necessary materials to the rebuttal expert, including THI's expert report (upon receipt on or about May 15, 2025), the relevant fact-record documents, financial statements, appraisals, and deposition transcripts. The rebuttal expert will need to review these materials, develop a methodology, and prepare a written rebuttal report.

• June 6, 2025: Rebuttal report due (per proposed stipulation).

• By June 27, 2025: Rebuttal expert deposition to be completed.

Given this timeline, the retention decision must be made no later than May 1, 2025, and ideally sooner. We should begin providing background materials to the selected candidate immediately upon engagement so that the expert can begin familiarizing herself or himself with the case before THI's expert report is received.

VI. Strategy for Deposing Triton Harbor's Anticipated Damages Expert

A. Identification of THI's Expected Expert

As of the date of this memorandum, Triton Harbor has not yet formally disclosed its expert or experts. We anticipate that THI's expert disclosure will occur concurrently with the exchange of opening expert reports — i.e., on or about May 15, 2025, under the proposed stipulation. Based on the nature of THI's damages claims and the pattern of expert retention in similar lender-liability cases, we expect that THI will retain a financial advisor or forensic accountant to opine on the compensatory damages figure of $12,500,000-plus and on any consequential or lost-profits damages theory.

There is also a possibility that THI may retain a separate banking-practices expert to rebut Dr. Stokes' opinions — for example, an expert who would opine that BRB's conduct departed from industry norms, that the Aaronson Memorandum is evidence of bad faith, or that the Section 9(c) disclaimer was unconscionable or misleading in context. We should account for this possibility in our scheduling and deposition planning. If THI retains two experts, we may need to adjust the deposition schedule to accommodate both, and we should ensure that the proposed stipulation provides sufficient time for depositions of all experts on both sides.

B. Deposition Objectives

The deposition of THI's damages expert will be one of the most important events in the expert discovery phase, and it should be structured to achieve the following specific objectives:

1. Pin down the expert's damages methodology and all underlying assumptions. The deposition should begin with a comprehensive exploration of the expert's methodology — how the damages figure was calculated, what model or framework was used, what inputs and assumptions drove the analysis, and what alternative methodologies were considered and rejected. The goal is to establish a complete record of the expert's analytical framework so that it can be effectively challenged in the summary judgment motion and, if necessary, at a Frye hearing.

2. Establish what materials were reviewed and what was not considered. We should determine whether the expert considered the following key documents and, if not, why not: (a) the Section 9(c) disclaimer in the Forbearance Agreement; (b) the integration clause in Section 12(a); (c) the evidence of the Kappels' access to independent professional advice through Mercer Tidwell & Associates LLC; (d) THI's financial statements reflecting the deterioration in financial performance and covenant compliance; and (e) the Ridgeline Appraisal Group updated collateral appraisal. If the expert's damages model does not account for these documents and the facts they establish, this creates a powerful basis for challenging the reliability and weight of the expert's conclusions.

3. Test whether the expert's damages model properly accounts for THI's pre-existing financial deterioration as an independent cause of harm. This is a critical line of questioning. THI's financial condition had deteriorated significantly before and independently of the events at issue in this litigation. The FCCR stood at 0.87x as of Q1 2023 — below the covenant minimum of 1.20x — and Triton Harbor had lost two major contracts (the Port of Bridgehaven municipal contract and the Newark Bay maintenance contract), which together represented approximately $19.5 million in annual revenue. If the expert's damages model does not isolate and account for this independent financial deterioration, the model is fundamentally flawed, and this can be established through deposition questioning.

4. Explore whether the expert assumes a "but for" world in which BRB extended the $6,500,000 revolving facility. THI's damages theory appears to rest on the assumption that, absent the alleged misrepresentations, BRB would have extended the $6,500,000 revolving facility described in the September 29, 2023 draft term sheet, and that this additional credit would have enabled Triton Harbor to weather its financial difficulties and avoid the consequences of the acceleration. This assumption is inherently speculative and can be challenged on multiple grounds: the draft term sheet was marked "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED"; the Aaronson Memorandum directed a structured exit strategy; THI's credit profile as of September 2023 (FCCR of 0.87x, Total Leverage of 4.92x, 40% decline in collateral values) made extension of additional credit commercially unreasonable; and BRB's credit committee had not approved any additional facility. The deposition should force the expert to articulate the basis for this "but for" assumption and to concede, if possible, that it rests on assumptions about BRB's future lending decisions that are inherently speculative.

5. Obtain admissions useful for summary judgment. The overarching objective of the deposition is to obtain testimony that can be cited in BRB's summary judgment motion to demonstrate that THI cannot establish damages with reasonable certainty. Key admissions to pursue include: (a) that the expert's model relies on assumptions about BRB's future lending decisions that are speculative; (b) that the expert has not independently verified whether BRB would have approved the $6,500,000 revolving facility; (c) that the expert's model does not account for the independent impact of THI's contract losses on its financial condition and enterprise value; (d) that alternative explanations for THI's financial deterioration exist and were not fully analyzed; and (e) that the expert was not asked to, and did not, opine on the legal enforceability of the Section 9(c) disclaimer or the integration clause.

C. Deposition Preparation

Lead Examiner. Carlos Espinoza will take the deposition of THI's damages expert. Hannah Brinkley will assist with exhibit preparation, real-time document identification during the deposition, and post-deposition analysis of the transcript.

Key Exhibits. The following documents should be assembled and marked as deposition exhibits in advance:

• The Forbearance and Modification Agreement dated October 6, 2023, with tabs at Section 9(c) (disclaimer) and Section 12(a) (integration clause);

• The Ridgeline Appraisal Group updated collateral appraisal dated September 2023 ($11,200,000 valuation);

• Triton Harbor's financial statements for FY2022 and Q1 2023, with annotations highlighting the FCCR, Total Leverage, and revenue trends;

• The September 29, 2023 internal draft term sheet ($6,500,000 revolving facility), highlighting the "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED" legend;

• The deposition testimony of Marcus J. Kappel regarding his understanding of the terms of the Forbearance Agreement, the significance of the Section 9(c) disclaimer, and his prior experience with commercial loan transactions;

• The engagement letter and related materials reflecting Triton Harbor's retention of Mercer Tidwell & Associates LLC;

• Any reliance letters, engagement materials, or fee arrangements produced by or relating to THI's expert;

• THI's expert report (once received).

Scheduling. The deposition of THI's damages expert should be scheduled no later than the week of June 16, 2025, to preserve sufficient time for analysis of the deposition transcript and any supplemental briefing before the expert discovery close on June 30, 2025. If THI also retains a banking-practices expert, that deposition should be scheduled in the same week or, if necessary, the following week (no later than June 27, 2025).

VII. Coordination with Summary Judgment Strategy

A. Role of Expert Testimony in Summary Judgment Motion

The summary judgment motion is due September 15, 2025, and expert testimony will play a central role in supporting BRB's motion. The motion is expected to argue that THI's fraudulent inducement claim fails as a matter of law on multiple grounds, including: (1) the integration clause and parol evidence rule bar THI's reliance on alleged oral or informal representations that contradict the express terms of the Forbearance Agreement; (2) the Section 9(c) disclaimer forecloses any claim that BRB committed to extend additional credit; (3) the sophisticated-borrower doctrine precludes THI from claiming justifiable reliance; and (4) THI cannot establish damages with reasonable certainty.

Dr. Stokes' banking-practices opinions will support the first three of these arguments by establishing that BRB's conduct was consistent with industry norms, that the disclaimer and integration clauses are standard and customary, that the distinction between exploratory workout discussions and binding commitments is fundamental to commercial banking, and that THI's level of sophistication and access to independent professional advice undermines any claim of justifiable reliance. These practice-based opinions provide the factual underpinning for the legal defenses and demonstrate that no reasonable trier of fact could conclude that BRB's conduct departed from accepted banking practices.

The damages rebuttal expert's opinions will support the fourth argument — that THI cannot establish damages with reasonable certainty. If the rebuttal expert can demonstrate that THI's damages model rests on speculative assumptions, fails to account for independent causes of harm, and improperly uses the benefit-of-the-bargain measure rather than the out-of-pocket measure, this will provide a strong basis for summary judgment on the damages element alone.

Deposition testimony of THI's damages expert will be equally important. If the deposition effectively undermines the expert's methodology and produces favorable admissions, BRB may pursue either or both of the following paths: (i) a motion to exclude THI's expert testimony under Frye on the ground that the methodology is not generally accepted or is unreliable; or (ii) a summary judgment argument that, even crediting the expert's testimony, THI has failed to raise a triable issue of fact on damages. In the best case, the deposition testimony will support both paths simultaneously.

B. Sequencing. The following timeline integrates the expert discovery milestones with the summary judgment preparation schedule:

Expert declarations and affidavits will need to be submitted with the summary judgment motion. We should ensure that both Dr. Stokes and the rebuttal damages expert are available to review, finalize, and execute declarations on the filing timeline. This should be communicated to both experts at the outset of their engagements to avoid scheduling conflicts. Ideally, draft declarations should be prepared during August 2025 and finalized in early September, allowing time for expert review and any necessary revisions before the September 15 filing deadline.

C. Integration with Pending Motions

BRB's motion to dismiss THI's punitive damages claim was filed on January 28, 2025 and remains pending before Justice Marchetti. The resolution of this motion may affect the scope of expert testimony needed and the focus of the summary judgment motion.

If the punitive damages claim is dismissed, the expert discovery effort can be focused entirely on the compensatory and consequential damages claims, and the summary judgment motion can proceed without the need to address punitive damages. This would simplify the analysis and potentially narrow the scope of the rebuttal expert's engagement.

If the punitive damages claim survives the motion to dismiss, we should consider whether Dr. Stokes should offer an additional opinion addressing the absence of egregious, morally reprehensible, or wanton conduct on BRB's part — conduct that would be necessary to support an award of punitive damages under New York law. This opinion must be drafted with particular care to avoid impermissible legal conclusions. Dr. Stokes could permissibly opine that BRB's conduct was consistent with commercially reasonable and prudent banking practices and that nothing in the record suggests conduct that would be viewed within the banking industry as egregious or outside the bounds of accepted practice. However, he should not opine on whether BRB's conduct satisfies or fails to satisfy the legal standard for punitive damages. We should discuss with Linda Osei whether this additional opinion is advisable, given the risk that it could invite a Frye challenge and the possibility that the punitive damages claim may be dismissed before summary judgment.

VIII. Budget and Resource Considerations

The following budget considerations should be discussed with Priya Anand (billing partner) and communicated to Margaret Linden at BRB:

Dr. Stokes — Wentworth Risk Advisors LLC. Dr. Stokes' hourly rate under the engagement letter is $850 per hour. Estimated remaining fees through the expert discovery close include report finalization (estimated 20–30 hours), preparation for deposition (estimated 10–15 hours), and deposition attendance (estimated 8–10 hours), for a total estimated remaining engagement of approximately 38–55 hours, or approximately $32,300–$46,750. These estimates do not include any time that may be required for a Frye hearing or for preparation of a declaration in connection with the summary judgment motion, which would be billed separately.

Rebuttal Damages Expert. The cost of engaging a rebuttal damages expert will depend on the expert selected and the complexity of the analysis required. Based on preliminary inquiries and our experience with comparable engagements, we estimate total fees for report preparation of approximately $60,000–$90,000, plus an additional $15,000–$25,000 for deposition preparation and attendance. The total estimated cost for the rebuttal expert engagement is therefore approximately $75,000–$115,000. This is a significant expenditure, but it is, in my view, essential to the success of the summary judgment motion, and the alternative — leaving THI's damages theory unchallenged at the expert level — creates unacceptable risk.

Associate Hours. Estimated associate hours for expert deposition preparation and attendance are as follows: Carlos Espinoza (deposition preparation, 30–40 hours; deposition attendance, 8–10 hours; total estimated 38–50 hours); Hannah Brinkley (exhibit preparation and deposition support, 20–30 hours; transcript review and analysis, 10–15 hours; total estimated 30–45 hours). These estimates cover the depositions of both THI's damages expert and, if applicable, THI's banking-practices expert, as well as any depositions of BRB's experts taken by opposing counsel.

Updated Budget Communication. We recommend that Priya Anand prepare an updated budget estimate incorporating the expert discovery phase costs and that this estimate be communicated to Margaret Linden at BRB at the earliest practicable date. The bank's litigation team should be apprised of the expected costs before they are incurred, in accordance with the outside counsel guidelines applicable to this engagement.

D&O Insurance Coverage Coordination. BRB maintains directors and officers liability insurance through Pinnacle Omnivrel Insurance Co. under Policy No. PF-DO-2023-08811. Coverage counsel at Crane, Alcott & Shire LLP (Robert Alcott) has been coordinating with the carrier regarding coverage for this litigation. We should confirm with Robert Alcott whether the Pinnacle Fidelity policy reimburses expert witness costs as part of defense costs under the policy and, if so, whether any pre-approval is required before engaging the rebuttal expert. If expert costs are reimbursable, we should ensure that invoices are submitted to the carrier in accordance with the reservation-of-rights protocol established at the outset of the coverage relationship. Prompt coordination with Crane, Alcott & Shire is advisable to avoid any argument by the carrier that expert costs were not properly submitted or that prior approval was required but not obtained.

IX. Recommended Next Steps

Based on the analysis set forth in this memorandum, I recommend the following action items, listed in order of priority and urgency:

1. Propose expert discovery scheduling stipulation to Kestrel Voss & Huang LLP by April 25, 2025. The proposed stipulation should provide for simultaneous exchange of opening expert reports by May 15, 2025, exchange of rebuttal expert reports by June 6, 2025, and completion of all expert depositions by June 27, 2025. If agreement cannot be reached, we should promptly seek a scheduling order from Justice Marchetti.

2. Finalize Dr. Stokes' report by May 1, 2025; conduct internal review session with Linda Osei by May 8, 2025. Carlos Espinoza and Hannah Brinkley will review the draft report for legal sufficiency, consistency with the fact record, and Frye compliance, and will circulate the draft to Linda Osei with a cover memorandum summarizing any recommended revisions.

3. Identify and retain rebuttal damages expert by May 1, 2025. Begin conflicts checks on the identified candidates (Thornfield Consulting Group LLC, Dr. Patricia Eames of Braxton Economic Advisory LLC, and Graham Aldrich of Pinnacle Forensic LLC) immediately and schedule introductory calls for this week. Upon selection and execution of the engagement letter, provide all necessary materials to the expert immediately so that background review can begin before receipt of THI's expert report.

4. Prepare *Frye* hearing brief framework in anticipation of potential challenge to Dr. Stokes. Draft a memorandum of law addressing the Frye standard, the admissibility of banking-practice opinion testimony, and Dr. Stokes' qualifications and methodology. This framework should be substantially complete by late May 2025 so that it can be finalized and filed promptly if a challenge is raised.

5. Upon receipt of THI's expert disclosures, promptly analyze the expert's methodology and begin deposition preparation. This analysis should be completed within one week of receipt of the report. Carlos Espinoza will prepare a detailed deposition outline targeting the objectives identified in Section VI.B above, and Hannah Brinkley will assemble the exhibit set.

6. Coordinate with Priya Anand on updated budget projections for the expert phase. Prepare and circulate an updated budget estimate incorporating all expert discovery costs, including Dr. Stokes' remaining fees, rebuttal expert engagement costs, and associate hours.

7. Coordinate with Margaret Linden and Thomas Hargreaves at BRB regarding expert discovery developments and any additional factual support needed from the Bank. Schedule a call or meeting with the BRB litigation team to discuss the expert discovery strategy, the proposed schedule, and any additional documents or information that may be needed to support the expert analyses.

X. Conclusion

BRB is well-positioned on expert issues in this litigation. Dr. Stokes' banking-practices opinions are strong, well-grounded in his professional experience and in published regulatory guidance, and should survive any Frye challenge that Kestrel Voss & Huang may raise. His opinions will provide essential support for BRB's legal defenses — the integration clause, the parol evidence rule, the sophisticated-borrower doctrine — and will reinforce the argument that BRB's conduct throughout the workout and forbearance process was commercially reasonable and consistent with industry norms.

The primary gap in BRB's expert discovery posture is the absence of a rebuttal damages expert. THI's compensatory damages claim of $12,500,000-plus, and any consequential or lost-profits damages theory, must be challenged at the expert level. A qualified rebuttal expert can demonstrate that THI's damages methodology rests on speculative assumptions, fails to account for THI's independent financial deterioration, and improperly measures damages. This expert must be retained immediately — no later than May 1, 2025 — given the compressed timeline for rebuttal reports and expert depositions.

Effective deposition of THI's damages expert will be critical to the overall summary judgment strategy. If the deposition produces favorable admissions regarding the speculative nature of the expert's "but for" assumptions, the failure to account for independent causes of harm, and the reliance on assumptions about BRB's future lending decisions, these admissions will provide a powerful foundation for summary judgment on the ground that THI cannot establish damages with reasonable certainty as a matter of law.

All expert work in this phase should be driven by, and oriented toward, the September 15, 2025 summary judgment motion deadline. Every expert opinion, every deposition question, and every rebuttal report should be evaluated through the lens of its utility in the summary judgment motion. If we execute the strategy outlined in this memorandum with discipline and on schedule, BRB will be in the strongest possible position to obtain summary judgment on THI's fraudulent inducement claim.

I respectfully request Linda Osei's approval to proceed with the recommended next steps outlined in Section IX above. I am available to discuss any aspect of this memorandum at your convenience.

Carlos Espinoza Lead Associate

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the individuals to whom it is addressed. Any dissemination, distribution, or copying of this memorandum without the express written consent of the author is strictly prohibited.

Deponent	Date	Role / Significance
Derek Whitmore	February 18, 2025	BRB Senior Vice President, Special Assets Group; managed the Triton Harbor workout
Joanna Reeves	February 25, 2025	BRB Vice President, Relationship Manager; primary contact with Marcus Kappel during the forbearance period
Philip Aaronson	March 4, 2025	BRB Chief Credit Officer; author of the August 22, 2023 memorandum directing "structured exit" strategy
Marcus J. Kappel	March 11, 2025	CEO and majority owner of Triton Harbor Industries; individual defendant and guarantor
Elaine D. Kappel	March 18, 2025	CFO of Triton Harbor Industries; individual defendant and guarantor
Date	Milestone
May 15, 2025	Exchange opening expert reports
June 6, 2025	Exchange rebuttal expert reports
June 16–27, 2025	Expert depositions
June 30, 2025	Expert discovery closes
July–August 2025	Draft summary judgment motion and supporting brief
September 15, 2025	File summary judgment motion

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Linda Osei, Responsible Partner
FROM: Carlos Espinoza, Lead Associate
DATE: April 20, 2025
RE: Expert discovery Strategy — 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)
MATTER NO.: 1022-00005
CC: Priya Anand, Billing Partner; Hannah Brinkley, Working Associate
I. Purpose and Executive Summary
This memorandum analyzes Belmont Ridge Bank NA's ("BRB" or the "Bank") expert discovery needs, assesses the current posture and substance of the expert report being prepared by Dr. Gerald Stokes of Wentworth Risk Advisors LLC, identifies potential requirements for retaining a rebuttal expert on damages issues, anticipates potential Frye challenges by opposing counsel at Kestrel Voss & Huang LLP, and develops a comprehensive strategy for deposing Triton Harbor Industries, LLC's ("THI" or "Triton Harbor") anticipated damages expert. All of these efforts must be coordinated within the June 30, 2025 expert discovery deadline established by the case scheduling order and, critically, must serve the broader objective of filing a dispositive summary judgment motion by September 15, 2025. The recommendations herein are designed to maximize BRB's position at both the expert-admissibility stage and the summary judgment stage.
After a thorough review of the current state of the case, the fact record, and the relevant legal standards, I have reached the following key conclusions:
First, Dr. Stokes' expert report is on track and covers the essential banking-practices opinions necessary to support BRB's summary judgment motion. His opinions regarding the commercial reasonableness of BRB's conduct, the industry-standard nature of the Section 9(c) disclaimer and integration clause, the distinction between preliminary workout discussions and binding lending commitments, and the sophistication of the Kappels as borrowers are well-grounded in his professional experience and in publicly available regulatory guidance. These opinions will reinforce BRB's legal defenses, including the integration clause defense, the parol evidence rule, and the sophisticated-borrower doctrine.
Second, BRB should retain a damages and financial rebuttal expert to challenge the $12,500,000-plus compensatory damages figure advanced by THI, as well as any consequential damages methodology that THI's expert may employ. THI's damages theory rests on several contestable assumptions — most fundamentally, the assumption that BRB would have extended a $6,500,000 revolving facility absent the alleged misrepresentations — and a qualified rebuttal expert can demonstrate that these assumptions are speculative and that THI's damages are not supported with reasonable certainty. This retention must occur no later than May 1, 2025, given the compressed expert discovery schedule.
Third, Frye challenges to Dr. Stokes' testimony are unlikely to succeed, given the nature of his banking-practices opinions and the general-acceptance standard applicable in New York state courts. However, we must proactively address potential challenges, particularly the argument that Dr. Stokes is offering impermissible legal conclusions or that his "industry standard" opinions lack a sufficient empirical foundation. A framework for a Frye hearing brief should be prepared in advance.
Fourth, the deposition of THI's damages expert should be scheduled no later than the week of June 16, 2025, to preserve adequate time for analysis and any supplemental briefing before the June 30, 2025 expert discovery close. The deposition should be structured to obtain admissions that will be directly useful in the summary judgment motion, particularly regarding the speculative nature of the expert's "but for" assumptions and the failure to account for THI's independent financial deterioration.
Each of these conclusions is discussed in detail below, together with specific recommended action items, a proposed timeline, and budget considerations for discussion with the billing partner and BRB's in-house team.
II. Current Status of Expert discovery
A. Discovery Schedule
Under the scheduling order entered by Justice Marchetti, expert discovery in this matter must be completed by June 30, 2025. Summary judgment motions are due September 15, 2025. These dates are firm and, absent extraordinary circumstances, are unlikely to be extended by the Court, particularly given Justice Marchetti's well-known emphasis on adherence to the Commercial Division's scheduling protocols.
As a practical matter, this means that expert reports must be exchanged no later than mid-May 2025 to allow sufficient time for the parties to review opposing experts' reports, prepare rebuttal reports, and conduct depositions — all before the June 30 deadline. Given the complexity of the financial and banking-practices issues in this case, a compressed timeline will require disciplined execution.
No expert scheduling stipulation has yet been entered by the parties. I recommend that we promptly propose a stipulation to Kestrel Voss & Huang LLP providing for the following schedule:
• May 15, 2025: Simultaneous exchange of opening expert reports.
• June 6, 2025: Exchange of rebuttal expert reports (if any).
• June 27, 2025: Completion of all expert depositions.
This proposed schedule provides each side with three weeks to review opposing reports and prepare rebuttals, followed by three weeks for depositions. While tight, this is workable if engagement of our rebuttal expert proceeds immediately and Dr. Stokes' report is finalized on time.
We should raise this proposal with Theodore Huang and Natasha Orlov at Kestrel Voss & Huang promptly — ideally by April 25, 2025, at the latest. If the parties cannot reach agreement on a stipulation, we should move before Justice Marchetti for a scheduling order governing expert discovery. The Commercial Division Rules expressly contemplate such applications, and Justice Marchetti has historically been receptive to proposed scheduling frameworks that ensure orderly completion of expert discovery before the dispositive-motion deadline.
B. Fact discovery Status
Fact discovery closed on April 30, 2025. The fact record is now substantially complete, and the following depositions have been conducted:
Each of these depositions yielded testimony that is directly relevant to the expert opinions at issue in this case, and transcripts have been provided to Dr. Stokes for review and incorporation into his analysis.
Document production has been substantial. BRB produced approximately 34,000 documents in response to THI's requests, including internal credit committee minutes, loan file documents, SAG correspondence, and the communications at the center of the dispute. Triton Harbor's production is also substantially complete, and the parties have resolved the majority of document disputes through the meet-and-confer process.
The following key documents are now in the record and form the documentary foundation for the expert opinions discussed in this memorandum:
• The August 22, 2023 Aaronson Memorandum (the internal credit memorandum from Philip Aaronson directing the Special Assets Group to pursue a "structured exit" from the Triton Harbor credit relationship — to the extent produced or ordered produced following the privilege dispute that was the subject of the January 2025 motion practice before Justice Marchetti);
• The September 18, 2023 Reeves email to Marcus Kappel, in which Joanna Reeves discussed the Bank's willingness to "explore restructuring options" and referenced the possibility of additional credit facilities;
• The September 29, 2023 internal draft term sheet for a proposed $6,500,000 revolving credit facility, circulated among BRB personnel and bearing the legend "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED";
• The Forbearance and Modification Agreement dated October 6, 2023, particularly Section 9(c) (the express disclaimer of any commitment to extend additional credit) and Section 12(a) (the integration clause providing that the Agreement constitutes the entire understanding of the parties with respect to the subject matter thereof);
• The Ridgeline Appraisal Group updated collateral appraisal dated September 2023, valuing Triton Harbor's collateral portfolio at $11,200,000, down from $18,700,000 at origination in June 2021;
• The Mercer Tidwell & Associates LLC engagement materials, reflecting Triton Harbor's retention of Raymond Mercer as a restructuring advisor.
These documents collectively establish the factual framework within which the expert opinions will operate and against which opposing experts' assumptions can be tested.
III. Dr. Gerald Stokes — BRB's Banking Practices Expert
A. Engagement and Qualifications
Dr. Gerald Stokes was retained as BRB's banking-practices expert pursuant to an engagement letter dated December 9, 2024, executed through his consulting firm, Wentworth Risk Advisors LLC, located at 55 East 59th Street, Suite 1410, New York, New York 10022. The engagement was reviewed by this office for compliance with applicable ethical rules and expert-retention protocols, and the terms of the engagement letter (including rate structure and scope of work) were approved by Linda Osei.
Dr. Stokes' qualifications are exceptionally well-suited to the issues in this case. He is a former senior bank examiner with the Office of the Comptroller of the Currency, where he conducted examinations of large national banks with a focus on commercial lending, credit administration, and workout/restructuring practices. Following his career as a bank examiner, Dr. Stokes joined the faculty of the Hartwell University School of Business, where he holds the rank of Professor of Finance (now emeritus) and has published extensively on commercial lending practices, the regulation of bank credit decisions, and the management of distressed loan portfolios. He has served as an expert witness in more than forty commercial litigation matters in both state and federal courts, including numerous cases involving lender-borrower disputes, loan workout and forbearance practices, and claims of lender liability.
Dr. Stokes' qualifications are particularly strong when measured against the Frye general-acceptance standard applicable in New York state courts. His opinions are grounded in decades of professional experience in bank examination and academic research in commercial lending — areas in which "general acceptance" of methodology is demonstrated not through the type of empirical testing and peer review required under Daubert, but through the expert's demonstrated knowledge of and experience within the relevant professional community. Dr. Stokes' combination of regulatory, academic, and consulting experience provides a compelling foundation for his testimony.
B. Scope and Anticipated Opinions
Dr. Stokes' report outline was finalized on April 15, 2025, following extensive consultation between the expert, this office, and the BRB litigation team. Based on that outline, Dr. Stokes is expected to offer the following key opinions in his report:
Opinion 1 — Industry-Standard Forbearance Practices. Dr. Stokes will opine that it is universal commercial banking practice to include explicit disclaimers of any commitment to extend additional credit in forbearance agreements. These disclaimers serve an essential risk-management function by ensuring that the lender's agreement to forbear from exercising default remedies is not construed — by the borrower, by subsequent lenders, or by the bank's regulators — as a commitment to extend new credit or to continue the lending relationship beyond the forbearance period. Dr. Stokes will testify that Section 9(c) of the Forbearance and Modification Agreement dated October 6, 2023, is standard and customary in form and substance, consistent with the disclaimer language used by the vast majority of commercial lenders in comparable workout transactions. This opinion is supported by OCC and FDIC supervisory guidance, published banking treatises, and Dr. Stokes' own extensive experience in examining and advising on forbearance transactions.
Opinion 2 — Reasonableness of Acceleration. Dr. Stokes will opine that BRB's decision to accelerate the loan following the expiration of the 180-day forbearance period was commercially reasonable and consistent with prudent banking practices. The forbearance period expired on April 5, 2024. At that time, Triton Harbor had failed to cure the underlying covenant default: the Fixed Charge Coverage Ratio ("FCCR") stood at 0.94x as of March 31, 2024, well below the covenant minimum of 1.20x required under the Credit Agreement. In light of this continued default, together with the significant decline in collateral values and THI's deteriorating financial performance, BRB's decision to exercise its contractual right to accelerate was commercially reasonable and would have been expected by any prudent lender in BRB's position. Dr. Stokes will further note that failure to accelerate under these circumstances could have exposed BRB to regulatory criticism for maintaining a non-performing asset on its books without adequate protection.
Opinion 3 — Exploratory Discussions vs. Binding Commitments. Dr. Stokes will opine that the distinction between preliminary workout discussions — including the internal circulation of draft term sheets, preliminary credit analyses, and exploratory conversations between relationship managers and borrowers about potential restructuring options — and binding lending commitments is fundamental to commercial banking practice. Banks routinely explore multiple restructuring alternatives during the workout process, and the circulation of draft term sheets and internal discussion memoranda is a standard part of this process. Such exploratory activity does not constitute, and is not understood within the banking industry to constitute, a binding commitment to extend credit. Dr. Stokes will specifically address the Reeves September 29, 2023 internal email forwarding a draft $6,500,000 revolving facility term sheet, which bore the express legend "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED." Dr. Stokes will opine that this document, on its face and in the context of standard banking practice, does not constitute or evidence a lending commitment and would not be understood as such by any sophisticated participant in the commercial lending market.
Opinion 4 — Special Assets Group Mandate. Dr. Stokes will opine that the Special Assets Group's primary obligation is to maximize recovery for the bank on distressed or non-performing credit relationships. SAG officers routinely employ a range of workout tactics — including forbearance, restructuring discussions, collateral revaluation, and, where appropriate, exit planning — in pursuit of this mandate. The exploration of multiple strategic paths simultaneously, including both forbearance/restructuring and structured-exit scenarios, is not only permissible but is considered best practice in bank workout management. The simultaneous consideration of these alternatives does not imply, and should not be construed to imply, that the bank has made a lending commitment or representation to the borrower inconsistent with any of those alternatives.
Opinion 5 — Borrower Sophistication and the Role of Restructuring Advisors. Dr. Stokes will opine that the sophistication of the borrower and the borrower's access to independent professional advice are factors that, as a matter of banking practice, bear directly on the reasonableness of a borrower's claimed reliance on alleged informal representations by bank personnel. In this case, the record demonstrates that Marcus Kappel has more than 30 years of experience in the marine industrial services industry, including extensive experience in commercial borrowing; that Elaine Kappel, as CFO of Triton Harbor, was directly involved in the negotiation of the Credit Agreement, the Forbearance Agreement, and the related documents; and that Triton Harbor retained Mercer Tidwell & Associates LLC (Raymond Mercer, Managing Director) as a restructuring advisor during the forbearance negotiations. Dr. Stokes will opine that, in the context of this level of borrower sophistication and independent advisory engagement, it would be inconsistent with commercial banking practice to credit a claim that the borrower justifiably relied on informal verbal or email communications that were contradicted by the express terms of the executed agreements.
Opinion 6 — Collateral Revaluation and Additional Security. Dr. Stokes will opine that BRB's request for additional collateral during the forbearance negotiations was a commercially reasonable risk-mitigation measure. The collateral securing the Triton Harbor credit facility had declined in appraised value from $18,700,000 at origination in June 2021 to $11,200,000 per the September 2023 updated Ridgeline Appraisal Group appraisal — a decline of approximately 40.1%. In light of this significant deterioration in the Bank's collateral position, BRB's request that Triton Harbor pledge additional collateral — specifically, equipment leases appraised at $2,300,000 and the Kappel residence at 14 Birchmont Lane, Westport, Connecticut, appraised at $3,100,000 — was a standard and prudent exercise of the Bank's risk-management responsibilities. Dr. Stokes will opine that this request is consistent with the practices of similarly situated commercial lenders facing comparable collateral deterioration and does not constitute a predatory extraction of security from the borrower.
C. Documents and Materials Reviewed
Dr. Stokes has been provided with, and has reviewed, the following materials in forming his opinions:
• The original Credit Agreement dated June 15, 2021, between BRB and Triton Harbor Industries, LLC, together with all exhibits, schedules, and amendments thereto;
• The Forbearance and Modification Agreement dated October 6, 2023, including Sections 9(c) and 12(a) and all schedules and exhibits;
• The Aaronson Memorandum dated August 22, 2023, from Philip Aaronson to Derek Whitmore and the SAG team;
• The Reeves emails dated September 18, 2023 (to Marcus Kappel) and September 29, 2023 (internal, forwarding draft term sheet);
• The Ridgeline Appraisal Group collateral appraisals dated June 2021 (origination appraisal; $18,700,000) and September 2023 (updated appraisal; $11,200,000);
• Triton Harbor's audited financial statements for fiscal year 2022, reflecting revenue of approximately $68 million and Adjusted EBITDA of $9.4 million;
• Triton Harbor's interim financial statements for Q1 2023, reflecting trailing twelve-month EBITDA of $5.1 million, an FCCR of 0.87x, and Total Leverage of 4.92x;
• BRB's internal credit committee minutes for all meetings at which the Triton Harbor credit relationship was discussed, including the meetings at which the forbearance and acceleration decisions were approved;
• Deposition transcripts of Derek Whitmore (February 18, 2025), Joanna Reeves (February 25, 2025), Philip Aaronson (March 4, 2025), Marcus J. Kappel (March 11, 2025), and Elaine D. Kappel (March 18, 2025);
• The engagement letter and related materials reflecting Triton Harbor's retention of Mercer Tidwell & Associates LLC (Raymond Mercer, Managing Director) as a restructuring advisor;
• Selected OCC and FDIC supervisory guidance materials on bank workout and forbearance practices, as identified by Dr. Stokes.
This list of reviewed materials will be disclosed in the expert report in accordance with CPLR 3101(d) requirements. Dr. Stokes has confirmed that no additional materials are needed to finalize his opinions, though he reserves the right to supplement if THI produces additional relevant documents or if rebuttal issues arise.
D. Report Drafting Status
The outline of Dr. Stokes' report was finalized on April 15, 2025. Dr. Stokes has begun drafting the full report, and a complete draft is expected by May 1, 2025. Upon receipt of the draft, Carlos Espinoza and Hannah Brinkley will conduct a detailed internal review for legal sufficiency, consistency with the fact record established through depositions and document production, and compliance with Frye admissibility requirements. We will circulate the draft to Linda Osei with a cover memorandum summarizing any recommended revisions.
The target date for finalization and exchange of Dr. Stokes' report is May 15, 2025, in accordance with the proposed expert discovery scheduling stipulation discussed in Section II.A above. This timeline is achievable provided that the internal review process proceeds without significant complications and that no unexpected issues arise in coordinating with Dr. Stokes.
IV. *Frye v. United States* Considerations
A. Applicable Standard
New York applies the Frye general-acceptance standard for the admissibility of expert testimony, as set forth in Frye v. United States, 293 F. 1013 (D.C. Cir. 1923), and adopted by the New York Court of Appeals in People v. Wesley, 83 N.Y.2d 417 (1994). Unlike the federal Daubert standard (Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993)), which requires the trial court to evaluate the reliability of an expert's methodology based on factors such as testability, peer review, error rate, and general acceptance, the Frye standard requires only that the expert's methodology be "generally accepted" within the relevant professional community.
The practical significance of this distinction for the present case is considerable. Banking-practices testimony of the type offered by Dr. Stokes is typically opinion testimony based on the expert's specialized knowledge and professional experience, rather than testimony dependent on a novel scientific methodology or technique. The Frye inquiry — whether the methodology is generally accepted within the relevant professional community — is therefore relatively straightforward. Courts in the Commercial Division have routinely admitted banking-practices testimony from qualified experts, and challenges to such testimony under Frye are infrequent and rarely successful. Indeed, in many cases the Frye standard is simply inapplicable to non-scientific expert testimony grounded in professional experience, as the Court of Appeals recognized in Parker v. Mobil Oil Corp., 7 N.Y.3d 434 (2006), where it noted that the Frye test applies to the admissibility of novel scientific evidence rather than to all expert opinion testimony.
B. Anticipated Challenges from Kestrel Voss & Huang
Notwithstanding the favorable legal landscape, we should anticipate that Theodore Huang and Natasha Orlov of Kestrel Voss & Huang LLP may attempt to challenge Dr. Stokes' testimony on several grounds:
Improper legal conclusions. The most likely challenge is that Dr. Stokes' opinions constitute impermissible legal conclusions rather than expert opinions on banking practices. For example, opposing counsel may argue that Dr. Stokes' opinion regarding the legal effect of Section 9(c) — that it constitutes a valid disclaimer of any lending commitment — is a question of law for the Court, not a subject for expert opinion. Similarly, they may argue that Dr. Stokes' opinions bearing on the "justifiable reliance" element of the fraudulent inducement claim impermissibly invade the province of the Court (or jury, if there is a trial). This argument has some surface appeal, and we must ensure that the report is carefully drafted to avoid crossing the line between permissible practice-based opinions and impermissible legal conclusions.
Insufficient empirical foundation for "industry standard" opinions. Opposing counsel may argue that Dr. Stokes' opinions regarding "industry standard" and "customary" forbearance practices lack a sufficiently rigorous empirical basis — that he has not conducted a formal survey of forbearance agreements across the banking industry and is relying solely on his own experience and selected regulatory guidance. While this argument fundamentally misapprehends the Frye standard (which does not require the type of empirical rigor that a Daubert analysis might), it could be raised in an effort to undermine the weight of the testimony even if the admissibility challenge fails.
Opinions regarding the Aaronson Memorandum. Opposing counsel may challenge Dr. Stokes' opinions regarding the Aaronson Memorandum — the internal credit memorandum in which Philip Aaronson directed the SAG team to pursue a "structured exit" from the Triton Harbor credit relationship at the same time that the Bank was negotiating the Forbearance Agreement with THI. The argument would be that this internal direction creates a genuine factual dispute about BRB's intent that cannot be resolved by expert testimony — i.e., that the question of whether BRB intended to honor the Forbearance Agreement or was using it as a vehicle to extract additional collateral while planning an exit is a question of fact for the trier of fact, not a subject for expert opinion. This is a more nuanced challenge, and while we believe Dr. Stokes' opinions on this issue are properly framed as banking-practice opinions rather than factual determinations, we should ensure that the report is drafted with care on this point.
C. Mitigation Strategy
To address these anticipated challenges, we recommend the following mitigation measures:
Framing opinions as practice-based, not legal. Dr. Stokes' report should be carefully drafted to ensure that his opinions are framed as opinions on commercial banking practice — what is customary, standard, prudent, and commercially reasonable within the banking industry — rather than as opinions on the legal effect of contractual provisions or on legal elements of the fraudulent inducement claim. For example, rather than opining that "Section 9(c) is a valid and enforceable disclaimer," Dr. Stokes should opine that "Section 9(c) is consistent in form and substance with the disclaimer language used by commercial banks in forbearance agreements and reflects standard industry practice for managing the risk that a borrower may misconstrue a forbearance arrangement as a commitment to extend additional credit." The legal conclusion — that the disclaimer is enforceable — is for the Court; the factual opinion — that the disclaimer is industry-standard — is for the expert.
Supporting "industry standard" opinions with external sources. Dr. Stokes should support his opinions regarding industry-standard practices with reference to published guidance from the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) regarding bank workout and forbearance practices, including the OCC's Comptroller's Handbook on commercial lending and troubled debt restructuring. He should also reference published banking treatises and law review articles discussing the use of disclaimer clauses in forbearance agreements. These external sources, combined with Dr. Stokes' own extensive professional experience — decades of conducting bank examinations and reviewing forbearance transactions — provide a robust foundation for the "general acceptance" inquiry under Frye.
Careful treatment of the Aaronson Memorandum. On the Aaronson Memorandum, Dr. Stokes should be instructed to opine that it is common and prudent for a bank's credit officers to explore multiple strategic paths simultaneously during a workout — including both forbearance/restructuring and exit planning — without those internal deliberations constituting representations to the borrower or creating expectations that the bank will extend additional credit. His opinion should emphasize that the simultaneous consideration of forbearance and exit scenarios is a recognized best practice in bank workout management, reflected in regulatory guidance and standard operating procedures at commercial banks. He should not, however, opine on the ultimate factual question of BRB's subjective intent, which is beyond the proper scope of expert testimony.
Proactive preparation of a *Frye* hearing brief. We recommend preparing a framework for a Frye hearing brief in advance, so that if a challenge is raised, we can respond promptly. The brief should be targeted for filing by late June or early July 2025 if a challenge is made. The brief should address the Frye standard, the admissibility of banking-practice opinion testimony under New York law, Dr. Stokes' qualifications, the methodology underlying his opinions, and the distinction between his permissible practice-based opinions and impermissible legal conclusions.
V. Potential Rebuttal Expert — Damages / Financial Expert
A. Need for a Damages Rebuttal Expert
The need for a damages rebuttal expert is, in my assessment, the most pressing gap in BRB's expert discovery posture. Triton Harbor's complaint and subsequent discovery responses assert compensatory damages of not less than $12,500,000, calculated as follows:
• Value of additional collateral pledged: $2,300,000 (equipment leases) plus $3,100,000 (the Kappel residence at 14 Birchmont Lane, Westport, Connecticut), totaling $5,400,000. THI contends that the Kappels were induced by BRB's alleged misrepresentations to pledge this additional collateral, which they would not otherwise have pledged.
• Alleged consequential damages from the acceleration: THI claims that BRB's acceleration of the loan, following the expiration of the forbearance period, caused consequential damages including lost business value and disruption to Triton Harbor's operations. The specific quantum of consequential damages has not been fully articulated in the pleadings but is expected to be developed through expert testimony.
• Conversion of Marcus Kappel's guaranty: THI contends that, as part of the forbearance transaction, Marcus Kappel's guaranty was converted from a limited guaranty ($4,500,000 cap) to an unlimited guaranty, and that this conversion was induced by BRB's alleged misrepresentations.
• New unlimited guaranty of Elaine Kappel: THI contends that Elaine Kappel was induced to execute a new unlimited personal guaranty as part of the forbearance transaction, which she would not have executed absent the alleged misrepresentations.
In addition to these compensatory damages, THI also seeks unspecified punitive damages on its fraudulent inducement claim. BRB's motion to dismiss the punitive damages claim was filed on January 28, 2025 and remains pending before Justice Marchetti.
THI is expected to retain a financial or forensic accounting expert to quantify compensatory and consequential damages. Without a rebuttal expert, BRB will be unable to effectively challenge the methodology, assumptions, and conclusions of THI's damages analysis at either the expert-admissibility stage or the summary judgment stage.
BRB should retain a rebuttal expert in financial economics or commercial damages to address the following key issues:
(a) Causation. A rebuttal expert can demonstrate that the acceleration of the loan — not the alleged misrepresentations during the forbearance negotiations — was the proximate cause of any harm to THI. The acceleration was a contractual remedy triggered by THI's undisputed failure to cure its covenant defaults, and the alleged misrepresentations (even if credited) relate to the forbearance period, not the acceleration itself.
(b) Mitigation. A rebuttal expert can analyze whether THI failed to mitigate its damages by not securing alternative financing, refinancing the credit facility with another lender, or selling assets to reduce its debt burden. The record suggests that THI made limited efforts to obtain alternative financing and that the Kappels declined to pursue certain asset-sale options recommended by their own restructuring advisor, Raymond Mercer.
(c) Proper measure of damages. Under New York law, the measure of damages for fraudulent inducement is generally the "out-of-pocket" measure — the difference between what the plaintiff parted with and what the plaintiff received — rather than the "benefit of the bargain" measure. A rebuttal expert can analyze whether THI's damages claim improperly seeks benefit-of-the-bargain damages (i.e., the value of the credit facility THI claims it was promised) rather than out-of-pocket damages.
(d) Lost enterprise value. Any claim for lost enterprise value must be assessed against the backdrop of THI's severe financial deterioration, which was driven by factors independent of BRB's conduct. Specifically, THI lost its Port of Bridgehaven municipal contract (approximately $12 million per year in revenue) and its Newark Bay maintenance contract (approximately $7.5 million per year in revenue), causing THI's revenue run-rate to drop to approximately $48 million on an annualized basis. A rebuttal expert can model the impact of these contract losses on THI's enterprise value and demonstrate that any decline in value is attributable to THI's own operational and market challenges, not to BRB's lending decisions.
B. Candidate Identification
We recommend considering engagement of one of the following forensic accounting and commercial damages experts, each of whom has relevant qualifications and experience testifying in New York commercial litigation:
1. Thornfield Consulting Group LLC — Thornfield is a boutique forensic accounting and commercial damages firm based in New York with significant experience in lender-liability and commercial finance disputes. The firm's principals have testified as experts in multiple matters before the Commercial Division and in the United States District Courts for the Southern and Eastern Districts of New York. Thornfield's team has specific experience modeling "but for" scenarios in lender-borrower disputes and analyzing causation issues in the context of loan acceleration and workout transactions.
2. Dr. Patricia Eames of Braxton Economic Advisory LLC — Dr. Eames is a financial economist with a Ph.D. in economics from Columbia University and more than twenty years of experience providing expert testimony on commercial damages issues. She has particular expertise in business valuation, lost-profits analysis, and the quantification of damages in fraud and contract disputes. She has testified in multiple proceedings in New York state and federal courts and has experience with the specific issues raised in this case, including the distinction between out-of-pocket and benefit-of-the-bargain damages and the analysis of mitigation.
3. Graham Aldrich of Pinnacle Forensic LLC — Mr. Aldrich is a certified public accountant and accredited senior appraiser with extensive experience in forensic accounting, commercial damages quantification, and business valuation. He has testified as an expert in approximately thirty matters in New York state and federal courts, including several cases involving claims of lender liability and fraudulent inducement in the commercial lending context.
Key qualifications that we should prioritize in selecting a rebuttal expert include: (i) experience testifying in New York commercial litigation, particularly before the Commercial Division; (ii) familiarity with lender-borrower disputes and the specific damages issues that arise in fraudulent inducement claims; (iii) ability to model alternative scenarios (with and without the alleged misrepresentations) and to present those models clearly and persuasively; and (iv) availability to meet the compressed timeline for this engagement.
We must also confirm that any candidate has no conflicts with BRB, Triton Harbor Industries, the individual defendants, Kestrel Voss & Huang LLP, or any other parties or counsel involved in this litigation. Conflicts checks should be initiated immediately upon selection of our preferred candidate.
C. Timeline. The timeline for the rebuttal expert engagement is extremely compressed, and prompt action is essential:
• By May 1, 2025: Final retention decision and execution of engagement letter.
• May 1–June 6, 2025: Provide all necessary materials to the rebuttal expert, including THI's expert report (upon receipt on or about May 15, 2025), the relevant fact-record documents, financial statements, appraisals, and deposition transcripts. The rebuttal expert will need to review these materials, develop a methodology, and prepare a written rebuttal report.
• June 6, 2025: Rebuttal report due (per proposed stipulation).
• By June 27, 2025: Rebuttal expert deposition to be completed.
Given this timeline, the retention decision must be made no later than May 1, 2025, and ideally sooner. We should begin providing background materials to the selected candidate immediately upon engagement so that the expert can begin familiarizing herself or himself with the case before THI's expert report is received.
VI. Strategy for Deposing Triton Harbor's Anticipated Damages Expert
A. Identification of THI's Expected Expert
As of the date of this memorandum, Triton Harbor has not yet formally disclosed its expert or experts. We anticipate that THI's expert disclosure will occur concurrently with the exchange of opening expert reports — i.e., on or about May 15, 2025, under the proposed stipulation. Based on the nature of THI's damages claims and the pattern of expert retention in similar lender-liability cases, we expect that THI will retain a financial advisor or forensic accountant to opine on the compensatory damages figure of $12,500,000-plus and on any consequential or lost-profits damages theory.
There is also a possibility that THI may retain a separate banking-practices expert to rebut Dr. Stokes' opinions — for example, an expert who would opine that BRB's conduct departed from industry norms, that the Aaronson Memorandum is evidence of bad faith, or that the Section 9(c) disclaimer was unconscionable or misleading in context. We should account for this possibility in our scheduling and deposition planning. If THI retains two experts, we may need to adjust the deposition schedule to accommodate both, and we should ensure that the proposed stipulation provides sufficient time for depositions of all experts on both sides.
B. Deposition Objectives
The deposition of THI's damages expert will be one of the most important events in the expert discovery phase, and it should be structured to achieve the following specific objectives:
1. Pin down the expert's damages methodology and all underlying assumptions. The deposition should begin with a comprehensive exploration of the expert's methodology — how the damages figure was calculated, what model or framework was used, what inputs and assumptions drove the analysis, and what alternative methodologies were considered and rejected. The goal is to establish a complete record of the expert's analytical framework so that it can be effectively challenged in the summary judgment motion and, if necessary, at a Frye hearing.
2. Establish what materials were reviewed and what was not considered. We should determine whether the expert considered the following key documents and, if not, why not: (a) the Section 9(c) disclaimer in the Forbearance Agreement; (b) the integration clause in Section 12(a); (c) the evidence of the Kappels' access to independent professional advice through Mercer Tidwell & Associates LLC; (d) THI's financial statements reflecting the deterioration in financial performance and covenant compliance; and (e) the Ridgeline Appraisal Group updated collateral appraisal. If the expert's damages model does not account for these documents and the facts they establish, this creates a powerful basis for challenging the reliability and weight of the expert's conclusions.
3. Test whether the expert's damages model properly accounts for THI's pre-existing financial deterioration as an independent cause of harm. This is a critical line of questioning. THI's financial condition had deteriorated significantly before and independently of the events at issue in this litigation. The FCCR stood at 0.87x as of Q1 2023 — below the covenant minimum of 1.20x — and Triton Harbor had lost two major contracts (the Port of Bridgehaven municipal contract and the Newark Bay maintenance contract), which together represented approximately $19.5 million in annual revenue. If the expert's damages model does not isolate and account for this independent financial deterioration, the model is fundamentally flawed, and this can be established through deposition questioning.
4. Explore whether the expert assumes a "but for" world in which BRB extended the $6,500,000 revolving facility. THI's damages theory appears to rest on the assumption that, absent the alleged misrepresentations, BRB would have extended the $6,500,000 revolving facility described in the September 29, 2023 draft term sheet, and that this additional credit would have enabled Triton Harbor to weather its financial difficulties and avoid the consequences of the acceleration. This assumption is inherently speculative and can be challenged on multiple grounds: the draft term sheet was marked "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED"; the Aaronson Memorandum directed a structured exit strategy; THI's credit profile as of September 2023 (FCCR of 0.87x, Total Leverage of 4.92x, 40% decline in collateral values) made extension of additional credit commercially unreasonable; and BRB's credit committee had not approved any additional facility. The deposition should force the expert to articulate the basis for this "but for" assumption and to concede, if possible, that it rests on assumptions about BRB's future lending decisions that are inherently speculative.
5. Obtain admissions useful for summary judgment. The overarching objective of the deposition is to obtain testimony that can be cited in BRB's summary judgment motion to demonstrate that THI cannot establish damages with reasonable certainty. Key admissions to pursue include: (a) that the expert's model relies on assumptions about BRB's future lending decisions that are speculative; (b) that the expert has not independently verified whether BRB would have approved the $6,500,000 revolving facility; (c) that the expert's model does not account for the independent impact of THI's contract losses on its financial condition and enterprise value; (d) that alternative explanations for THI's financial deterioration exist and were not fully analyzed; and (e) that the expert was not asked to, and did not, opine on the legal enforceability of the Section 9(c) disclaimer or the integration clause.
C. Deposition Preparation
Lead Examiner. Carlos Espinoza will take the deposition of THI's damages expert. Hannah Brinkley will assist with exhibit preparation, real-time document identification during the deposition, and post-deposition analysis of the transcript.
Key Exhibits. The following documents should be assembled and marked as deposition exhibits in advance:
• The Forbearance and Modification Agreement dated October 6, 2023, with tabs at Section 9(c) (disclaimer) and Section 12(a) (integration clause);
• The Ridgeline Appraisal Group updated collateral appraisal dated September 2023 ($11,200,000 valuation);
• Triton Harbor's financial statements for FY2022 and Q1 2023, with annotations highlighting the FCCR, Total Leverage, and revenue trends;
• The September 29, 2023 internal draft term sheet ($6,500,000 revolving facility), highlighting the "FOR DISCUSSION PURPOSES ONLY — NOT APPROVED" legend;
• The deposition testimony of Marcus J. Kappel regarding his understanding of the terms of the Forbearance Agreement, the significance of the Section 9(c) disclaimer, and his prior experience with commercial loan transactions;
• The engagement letter and related materials reflecting Triton Harbor's retention of Mercer Tidwell & Associates LLC;
• Any reliance letters, engagement materials, or fee arrangements produced by or relating to THI's expert;
• THI's expert report (once received).
Scheduling. The deposition of THI's damages expert should be scheduled no later than the week of June 16, 2025, to preserve sufficient time for analysis of the deposition transcript and any supplemental briefing before the expert discovery close on June 30, 2025. If THI also retains a banking-practices expert, that deposition should be scheduled in the same week or, if necessary, the following week (no later than June 27, 2025).
VII. Coordination with Summary Judgment Strategy
A. Role of Expert Testimony in Summary Judgment Motion
The summary judgment motion is due September 15, 2025, and expert testimony will play a central role in supporting BRB's motion. The motion is expected to argue that THI's fraudulent inducement claim fails as a matter of law on multiple grounds, including: (1) the integration clause and parol evidence rule bar THI's reliance on alleged oral or informal representations that contradict the express terms of the Forbearance Agreement; (2) the Section 9(c) disclaimer forecloses any claim that BRB committed to extend additional credit; (3) the sophisticated-borrower doctrine precludes THI from claiming justifiable reliance; and (4) THI cannot establish damages with reasonable certainty.
Dr. Stokes' banking-practices opinions will support the first three of these arguments by establishing that BRB's conduct was consistent with industry norms, that the disclaimer and integration clauses are standard and customary, that the distinction between exploratory workout discussions and binding commitments is fundamental to commercial banking, and that THI's level of sophistication and access to independent professional advice undermines any claim of justifiable reliance. These practice-based opinions provide the factual underpinning for the legal defenses and demonstrate that no reasonable trier of fact could conclude that BRB's conduct departed from accepted banking practices.
The damages rebuttal expert's opinions will support the fourth argument — that THI cannot establish damages with reasonable certainty. If the rebuttal expert can demonstrate that THI's damages model rests on speculative assumptions, fails to account for independent causes of harm, and improperly uses the benefit-of-the-bargain measure rather than the out-of-pocket measure, this will provide a strong basis for summary judgment on the damages element alone.
Deposition testimony of THI's damages expert will be equally important. If the deposition effectively undermines the expert's methodology and produces favorable admissions, BRB may pursue either or both of the following paths: (i) a motion to exclude THI's expert testimony under Frye on the ground that the methodology is not generally accepted or is unreliable; or (ii) a summary judgment argument that, even crediting the expert's testimony, THI has failed to raise a triable issue of fact on damages. In the best case, the deposition testimony will support both paths simultaneously.
B. Sequencing. The following timeline integrates the expert discovery milestones with the summary judgment preparation schedule:
Expert declarations and affidavits will need to be submitted with the summary judgment motion. We should ensure that both Dr. Stokes and the rebuttal damages expert are available to review, finalize, and execute declarations on the filing timeline. This should be communicated to both experts at the outset of their engagements to avoid scheduling conflicts. Ideally, draft declarations should be prepared during August 2025 and finalized in early September, allowing time for expert review and any necessary revisions before the September 15 filing deadline.
C. Integration with Pending Motions
BRB's motion to dismiss THI's punitive damages claim was filed on January 28, 2025 and remains pending before Justice Marchetti. The resolution of this motion may affect the scope of expert testimony needed and the focus of the summary judgment motion.
If the punitive damages claim is dismissed, the expert discovery effort can be focused entirely on the compensatory and consequential damages claims, and the summary judgment motion can proceed without the need to address punitive damages. This would simplify the analysis and potentially narrow the scope of the rebuttal expert's engagement.
If the punitive damages claim survives the motion to dismiss, we should consider whether Dr. Stokes should offer an additional opinion addressing the absence of egregious, morally reprehensible, or wanton conduct on BRB's part — conduct that would be necessary to support an award of punitive damages under New York law. This opinion must be drafted with particular care to avoid impermissible legal conclusions. Dr. Stokes could permissibly opine that BRB's conduct was consistent with commercially reasonable and prudent banking practices and that nothing in the record suggests conduct that would be viewed within the banking industry as egregious or outside the bounds of accepted practice. However, he should not opine on whether BRB's conduct satisfies or fails to satisfy the legal standard for punitive damages. We should discuss with Linda Osei whether this additional opinion is advisable, given the risk that it could invite a Frye challenge and the possibility that the punitive damages claim may be dismissed before summary judgment.
VIII. Budget and Resource Considerations
The following budget considerations should be discussed with Priya Anand (billing partner) and communicated to Margaret Linden at BRB:
Dr. Stokes — Wentworth Risk Advisors LLC. Dr. Stokes' hourly rate under the engagement letter is $850 per hour. Estimated remaining fees through the expert discovery close include report finalization (estimated 20–30 hours), preparation for deposition (estimated 10–15 hours), and deposition attendance (estimated 8–10 hours), for a total estimated remaining engagement of approximately 38–55 hours, or approximately $32,300–$46,750. These estimates do not include any time that may be required for a Frye hearing or for preparation of a declaration in connection with the summary judgment motion, which would be billed separately.
Rebuttal Damages Expert. The cost of engaging a rebuttal damages expert will depend on the expert selected and the complexity of the analysis required. Based on preliminary inquiries and our experience with comparable engagements, we estimate total fees for report preparation of approximately $60,000–$90,000, plus an additional $15,000–$25,000 for deposition preparation and attendance. The total estimated cost for the rebuttal expert engagement is therefore approximately $75,000–$115,000. This is a significant expenditure, but it is, in my view, essential to the success of the summary judgment motion, and the alternative — leaving THI's damages theory unchallenged at the expert level — creates unacceptable risk.
Associate Hours. Estimated associate hours for expert deposition preparation and attendance are as follows: Carlos Espinoza (deposition preparation, 30–40 hours; deposition attendance, 8–10 hours; total estimated 38–50 hours); Hannah Brinkley (exhibit preparation and deposition support, 20–30 hours; transcript review and analysis, 10–15 hours; total estimated 30–45 hours). These estimates cover the depositions of both THI's damages expert and, if applicable, THI's banking-practices expert, as well as any depositions of BRB's experts taken by opposing counsel.
Updated Budget Communication. We recommend that Priya Anand prepare an updated budget estimate incorporating the expert discovery phase costs and that this estimate be communicated to Margaret Linden at BRB at the earliest practicable date. The bank's litigation team should be apprised of the expected costs before they are incurred, in accordance with the outside counsel guidelines applicable to this engagement.
D&O Insurance Coverage Coordination. BRB maintains directors and officers liability insurance through Pinnacle Omnivrel Insurance Co. under Policy No. PF-DO-2023-08811. Coverage counsel at Crane, Alcott & Shire LLP (Robert Alcott) has been coordinating with the carrier regarding coverage for this litigation. We should confirm with Robert Alcott whether the Pinnacle Fidelity policy reimburses expert witness costs as part of defense costs under the policy and, if so, whether any pre-approval is required before engaging the rebuttal expert. If expert costs are reimbursable, we should ensure that invoices are submitted to the carrier in accordance with the reservation-of-rights protocol established at the outset of the coverage relationship. Prompt coordination with Crane, Alcott & Shire is advisable to avoid any argument by the carrier that expert costs were not properly submitted or that prior approval was required but not obtained.
IX. Recommended Next Steps
Based on the analysis set forth in this memorandum, I recommend the following action items, listed in order of priority and urgency:
1. Propose expert discovery scheduling stipulation to Kestrel Voss & Huang LLP by April 25, 2025. The proposed stipulation should provide for simultaneous exchange of opening expert reports by May 15, 2025, exchange of rebuttal expert reports by June 6, 2025, and completion of all expert depositions by June 27, 2025. If agreement cannot be reached, we should promptly seek a scheduling order from Justice Marchetti.
2. Finalize Dr. Stokes' report by May 1, 2025; conduct internal review session with Linda Osei by May 8, 2025. Carlos Espinoza and Hannah Brinkley will review the draft report for legal sufficiency, consistency with the fact record, and Frye compliance, and will circulate the draft to Linda Osei with a cover memorandum summarizing any recommended revisions.
3. Identify and retain rebuttal damages expert by May 1, 2025. Begin conflicts checks on the identified candidates (Thornfield Consulting Group LLC, Dr. Patricia Eames of Braxton Economic Advisory LLC, and Graham Aldrich of Pinnacle Forensic LLC) immediately and schedule introductory calls for this week. Upon selection and execution of the engagement letter, provide all necessary materials to the expert immediately so that background review can begin before receipt of THI's expert report.
4. Prepare *Frye* hearing brief framework in anticipation of potential challenge to Dr. Stokes. Draft a memorandum of law addressing the Frye standard, the admissibility of banking-practice opinion testimony, and Dr. Stokes' qualifications and methodology. This framework should be substantially complete by late May 2025 so that it can be finalized and filed promptly if a challenge is raised.
5. Upon receipt of THI's expert disclosures, promptly analyze the expert's methodology and begin deposition preparation. This analysis should be completed within one week of receipt of the report. Carlos Espinoza will prepare a detailed deposition outline targeting the objectives identified in Section VI.B above, and Hannah Brinkley will assemble the exhibit set.
6. Coordinate with Priya Anand on updated budget projections for the expert phase. Prepare and circulate an updated budget estimate incorporating all expert discovery costs, including Dr. Stokes' remaining fees, rebuttal expert engagement costs, and associate hours.
7. Coordinate with Margaret Linden and Thomas Hargreaves at BRB regarding expert discovery developments and any additional factual support needed from the Bank. Schedule a call or meeting with the BRB litigation team to discuss the expert discovery strategy, the proposed schedule, and any additional documents or information that may be needed to support the expert analyses.
X. Conclusion
BRB is well-positioned on expert issues in this litigation. Dr. Stokes' banking-practices opinions are strong, well-grounded in his professional experience and in published regulatory guidance, and should survive any Frye challenge that Kestrel Voss & Huang may raise. His opinions will provide essential support for BRB's legal defenses — the integration clause, the parol evidence rule, the sophisticated-borrower doctrine — and will reinforce the argument that BRB's conduct throughout the workout and forbearance process was commercially reasonable and consistent with industry norms.
The primary gap in BRB's expert discovery posture is the absence of a rebuttal damages expert. THI's compensatory damages claim of $12,500,000-plus, and any consequential or lost-profits damages theory, must be challenged at the expert level. A qualified rebuttal expert can demonstrate that THI's damages methodology rests on speculative assumptions, fails to account for THI's independent financial deterioration, and improperly measures damages. This expert must be retained immediately — no later than May 1, 2025 — given the compressed timeline for rebuttal reports and expert depositions.
Effective deposition of THI's damages expert will be critical to the overall summary judgment strategy. If the deposition produces favorable admissions regarding the speculative nature of the expert's "but for" assumptions, the failure to account for independent causes of harm, and the reliance on assumptions about BRB's future lending decisions, these admissions will provide a powerful foundation for summary judgment on the ground that THI cannot establish damages with reasonable certainty as a matter of law.
All expert work in this phase should be driven by, and oriented toward, the September 15, 2025 summary judgment motion deadline. Every expert opinion, every deposition question, and every rebuttal report should be evaluated through the lens of its utility in the summary judgment motion. If we execute the strategy outlined in this memorandum with discipline and on schedule, BRB will be in the strongest possible position to obtain summary judgment on THI's fraudulent inducement claim.
I respectfully request Linda Osei's approval to proceed with the recommended next steps outlined in Section IX above. I am available to discuss any aspect of this memorandum at your convenience.
Carlos Espinoza Lead Associate
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is intended solely for the use of the individuals to whom it is addressed. Any dissemination, distribution, or copying of this memorandum without the express written consent of the author is strictly prohibited.
Deponent | Date | Role / Significance
Derek Whitmore | February 18, 2025 | BRB Senior Vice President, Special Assets Group; managed the Triton Harbor workout
Joanna Reeves | February 25, 2025 | BRB Vice President, Relationship Manager; primary contact with Marcus Kappel during the forbearance period
Philip Aaronson | March 4, 2025 | BRB Chief Credit Officer; author of the August 22, 2023 memorandum directing "structured exit" strategy
Marcus J. Kappel | March 11, 2025 | CEO and majority owner of Triton Harbor Industries; individual defendant and guarantor
Elaine D. Kappel | March 18, 2025 | CFO of Triton Harbor Industries; individual defendant and guarantor
Date | Milestone
May 15, 2025 | Exchange opening expert reports
June 6, 2025 | Exchange rebuttal expert reports
June 16–27, 2025 | Expert depositions
June 30, 2025 | Expert discovery closes
July–August 2025 | Draft summary judgment motion and supporting brief
September 15, 2025 | File summary judgment motion

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

MATTER NO.: 1022-00005

Record

Parties

Dates

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