PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT — ATTORNEY-CLIENT COMMUNICATION
This memorandum is protected by the attorney-client privilege and the work-product doctrine. It contains confidential legal analysis, mental impressions, conclusions, and opinions of counsel prepared in anticipation of litigation and for the purpose of providing legal advice to the client. This memorandum should not be disclosed to any third party without prior written authorization from Calderwood & Harkness LLP. Any unauthorized disclosure may result in a waiver of applicable privileges.
MEMORANDUM
August 5, 2024
FROM: Catherine Bloom, Partner, and Omar Siddiqui, Associate — Calderwood & Harkness LLP
TO: Rachel Sung, General Counsel, Crestline Packaging Solutions LLC Sarah Engel, Operating Partner, Ridgepoint Capital Partners LP
CC: David Kessler, CEO, Crestline Packaging Solutions LLC Alan Ngo, Billing Partner, Calderwood & Harkness LLP
RE: Mediation Strategy and Settlement Authority — Crestline Packaging Solutions LLC v. Harlow Chemical Supply Inc. et al., Case No. 2:24-cv-00891 (S.D. Ohio, Eastern Division)
MATTER NO.: 1006-00004
I. EXECUTIVE SUMMARY
The purpose of this memorandum is to prepare Crestline Packaging Solutions LLC ("CPS") and Ridgepoint Capital Partners LP ("Ridgepoint") for the mediation session scheduled for August 14, 2024, before retired Judge Franklin DeLuca of Ashford Dispute Resolution Services LLC, 441 Vine Street, Suite 800, Cincinnati, Ohio 45202. This memorandum sets forth our assessment of the case, our evaluation of the strength of CPS's claims and the weaknesses in Harlow's defenses, a comprehensive damages analysis, and our detailed recommendations regarding settlement authority and mediation strategy.
As set forth in detail below, CPS has asserted claims for trade secret misappropriation against Harlow Chemical Supply Inc. ("Harlow"), its CEO and sole shareholder Gerald W. Norris ("Norris"), and its Vice President of Technical Operations Kenneth Fielding ("Fielding"), arising from the reverse engineering and subsequent commercial exploitation of CPS's proprietary barrier coating formulation designated CPS-BC-1147. The evidence developed through discovery — including forensic compositional analysis, damaging deposition testimony from key Harlow personnel, and extensive documentary evidence of Harlow's deliberate reverse-engineering campaign — strongly supports CPS's claims and severely undermines Harlow's asserted independent-development defense.
Summary Recommendation. Calderwood & Harkness recommends that CPS enter mediation with full settlement authority in the range of $9.0 million to $12.6 million, with an opening demand at $14.5 million (inclusive of a partial exemplary damages component and partial attorneys' fees recovery). In addition to the monetary component, CPS should insist on mandatory non-monetary terms, including permanent injunctive relief (entered as a consent order), return and sworn destruction of all trade secret materials, and a five-year non-solicitation covenant covering all current CPS customers. These non-monetary terms should be treated as non-negotiable.
It is our assessment that this case is well-positioned for a favorable resolution at mediation. The Court's grant of a preliminary injunction on April 18, 2024 — reflecting a finding that CPS is likely to succeed on the merits — provides significant mediation leverage. Harlow has been enjoined from selling ShieldCoat Pro 900 since March 4, 2024, creating ongoing financial pressure that incentivizes settlement. Furthermore, the forensic evidence, the documentary record of Harlow's reverse-engineering effort through Archer Material Sciences Inc., and the damaging deposition admissions of Kenneth Fielding collectively present a case that Harlow will find exceedingly difficult to defend at trial. We believe the mediator, retired Judge DeLuca, will recognize the strength of CPS's position and exert appropriate pressure on Harlow to reach a reasonable resolution.
The balance of this memorandum provides a detailed analysis of the factual record, the legal claims, the damages evidence, and our recommended mediation strategy.
II. PROCEDURAL HISTORY AND CURRENT LITIGATION POSTURE
A. Pre-Litigation Phase
CPS's proprietary barrier coating formulation, CPS-BC-1147, was developed by Dr. Margaret Yuen, CPS's Senior Director of Research & Development, and CPS's R&D team over the period from January 2015 through December 2016. The total cumulative R&D investment in developing CPS-BC-1147 was approximately $3.8 million, encompassing personnel costs, laboratory equipment, raw material procurement, and extensive pilot-scale testing. CPS-BC-1147 is a 14-constituent barrier coating formulation with proprietary ratios, a defined order-of-addition protocol, and specified processing temperatures and shear rates. It provides superior moisture, grease, and oxygen barrier performance for food-grade packaging applications and has been a cornerstone of CPS's competitive position in the flexible packaging market since its commercial introduction.
On March 15, 2017, CPS and Harlow entered into a Toll Manufacturing Agreement (the "TMA"), pursuant to which Harlow agreed to manufacture CPS-BC-1147 on behalf of CPS at Harlow's manufacturing facility in Cincinnati, Ohio. In order to enable Harlow to perform its toll manufacturing obligations, CPS disclosed nine of the fourteen formulation constituents of CPS-BC-1147 to Harlow. The remaining five constituents — which represent the most proprietary and competitively sensitive elements of the formulation — were supplied to Harlow exclusively in the form of a pre-blended concentrate designated "CPS Concentrate A." The purpose of this two-tier disclosure structure was to prevent Harlow from obtaining knowledge of the complete formulation. CPS Concentrate A was delivered to Harlow in sealed containers with instructions for incorporation into the manufacturing process, but without disclosure of its underlying composition.
The TMA contained several protective provisions that were critical to CPS's trade secret protection strategy:
• Section 7 (Confidentiality): A comprehensive confidentiality obligation requiring Harlow to hold all CPS confidential information in strict confidence and to use it solely for the purpose of performing its obligations under the TMA.
• Section 8.2 (Reverse-Engineering Prohibition): An express prohibition against Harlow reverse engineering, decompiling, disassembling, or otherwise attempting to derive the composition, structure, or manufacturing methods of any CPS proprietary material, including CPS Concentrate A.
• Section 9.1 (Post-Termination Non-Compete): A three-year post-termination covenant restricting Harlow from manufacturing, selling, or distributing any barrier coating product that competes with CPS-BC-1147 in the food packaging market.
• Section 9.3 (Customer Non-Solicitation): A covenant prohibiting Harlow from soliciting, contacting, or doing business with any CPS customer identified during the term of the TMA for the purpose of selling competing products.
In September 2022 — approximately five months before the TMA's termination — Harlow sent samples of CPS Concentrate A to Archer Material Sciences Inc., located at 9300 Harding Street, Indianapolis, Indiana 46221, for full compositional analysis. This action was directed by Kenneth Fielding, Harlow's Vice President of Technical Operations, as confirmed by his deposition testimony and corroborated by the Archer Material Sciences invoice and correspondence produced in discovery. The compositional analysis was designed to identify all constituents of CPS Concentrate A, including their precise weight percentages — information that was the core of CPS's trade secret.
CPS terminated the TMA effective January 31, 2023, pursuant to the TMA's standard termination provisions, transitioning its toll manufacturing operations to an alternative supplier. Shortly thereafter, in approximately April 2023, Harlow began marketing a barrier coating product designated "ShieldCoat Pro 900," which Harlow positioned as a direct competitor to CPS-BC-1147 in the food-grade packaging market.
CPS first learned of Harlow's competing product and customer solicitation on June 12, 2023, when Mapleridge Paper Corp. — one of CPS's established customers — reported to CPS Sales Director Brian Novotny that Harlow's Sales Director, Amanda Trent, had contacted Mapleridge to offer ShieldCoat Pro 900 at a price approximately 15% below CPS's pricing for CPS-BC-1147. CPS subsequently confirmed that Trent had solicited at least four additional CPS customers: Pinnacle Flexible Films LLC, Orion Paperboard Inc., Great River Packaging Co., and TerraFold Industries LLC. In each instance, Trent offered ShieldCoat Pro 900 as a lower-cost alternative to CPS-BC-1147.
CPS retained Thornburg Analytics LLC, a leading materials science forensic laboratory, on November 8, 2023, to conduct a comparative compositional analysis of ShieldCoat Pro 900 and CPS-BC-1147. Dr. Elena Vasquez of Thornburg Analytics performed the analysis and issued a comprehensive forensic report on December 22, 2023. The Thornburg report confirmed that ShieldCoat Pro 900 matches CPS-BC-1147 in all fourteen constituents within ±0.3% by weight. Dr. Vasquez characterized this level of correspondence as "not achievable through independent development" and "consistent only with access to the complete formulation."
Armed with the Thornburg report, Calderwood & Harkness sent a detailed cease-and-desist letter to Harlow on January 18, 2024, demanding that Harlow immediately cease all manufacturing, marketing, and sale of ShieldCoat Pro 900, return all CPS confidential information, and provide an accounting of all ShieldCoat Pro 900 sales. Harlow, through its counsel Brian Whitaker of Voss Gentry & Whitaker LLP, responded on February 5, 2024, denying any misappropriation and asserting that ShieldCoat Pro 900 was independently developed by Harlow's technical team.
B. Litigation Phase
Following Harlow's refusal to comply with CPS's cease-and-desist demands, Calderwood & Harkness filed a Complaint and Motion for Temporary Restraining Order on February 26, 2024, in the United States District Court for the Southern District of Ohio, Eastern Division, Case No. 2:24-cv-00891, before the Honorable Patricia Langford, United States District Judge. The Complaint asserts five counts against Harlow, Norris, and Fielding:
1. Count I: Misappropriation of Trade Secrets under the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. §§ 1836–1839;
2. Count II: Misappropriation of Trade Secrets under the Ohio Uniform Trade Secrets Act ("Ohio UTSA"), Ohio Rev. Code §§ 1333.61–1333.69;
3. Count III: Breach of Contract (TMA Sections 7, 8.2, 9.1, and 9.3);
4. Count IV: Tortious Interference with Business Relationships (solicitation of CPS customers); and
5. Count V: Unjust Enrichment.
The Court granted CPS's Motion for Temporary Restraining Order on March 4, 2024, restraining Harlow from manufacturing, marketing, selling, or distributing ShieldCoat Pro 900 or any other product derived from CPS's confidential information. The TRO also ordered Harlow to preserve all documents, electronic records, and physical materials related to ShieldCoat Pro 900 and the CPS Concentrate A analysis.
Following expedited briefing and an evidentiary hearing held on April 11, 2024, Judge Langford granted CPS's Motion for Preliminary Injunction on April 18, 2024, continuing the restraints imposed by the TRO and finding that CPS had demonstrated a likelihood of success on the merits, irreparable harm, and that the balance of equities and public interest favored injunctive relief.
Discovery has been substantially completed. Harlow has produced approximately 42,000 documents, and CPS has produced approximately 18,000 documents. The document productions encompass the complete files relating to the TMA, the Archer Material Sciences engagement, the development and marketing of ShieldCoat Pro 900, Harlow's internal communications regarding CPS-BC-1147, Amanda Trent's customer solicitation activities, and Harlow's financial records.
Depositions were completed during the period of May through July 2024. The following witnesses were deposed:
• Gerald W. Norris, CEO and sole shareholder of Harlow;
• Kenneth Fielding, VP of Technical Operations, Harlow;
• Amanda Trent, Sales Director, Harlow;
• Dr. Margaret Yuen, Senior Director of R&D, CPS; and
• Brian Novotny, Sales Director, CPS.
The damages expert report of Jeffrey Callahan, CPA/ABV, CFF, of Meridian Forensic Consulting Group LLC, was issued on June 14, 2024, and sets forth a total estimated damages range of $8.9 million to $12.6 million, as discussed in detail in Section V of this memorandum.
C. Significance of the Preliminary Injunction
The April 18, 2024 preliminary injunction is a critically important development that significantly strengthens CPS's mediation posture. In granting the preliminary injunction, Judge Langford made an express finding that CPS is likely to succeed on the merits of its trade secret misappropriation claims. While this finding is not dispositive of the ultimate merits, it is a powerful signal — both to the mediator and to Harlow — that CPS's claims are well-founded and that Harlow faces substantial risk at trial.
Equally important from a practical standpoint, Harlow has been enjoined from selling ShieldCoat Pro 900 since March 4, 2024 — a period of more than five months as of the mediation date. This injunction has effectively shut down Harlow's competing product line, depriving Harlow of revenue and creating ongoing financial pressure that incentivizes a prompt resolution. Every additional month of litigation increases Harlow's costs and competitive disadvantage without any offsetting revenue from the enjoined product.
III. STRENGTH OF CPS'S CLAIMS
A. Trade Secret Status of CPS-BC-1147
CPS-BC-1147 qualifies as a protectable trade secret under both the federal DTSA (18 U.S.C. §§ 1836–1839) and the Ohio UTSA (Ohio Rev. Code §§ 1333.61–1333.69). Both statutes define a trade secret broadly to include formulas, compositions, compilations, programs, devices, methods, techniques, or processes that derive independent economic value from not being generally known to, and not being readily ascertainable through proper means by, other persons who can obtain economic value from their disclosure or use, and that are the subject of efforts that are reasonable under the circumstances to maintain their secrecy.
CPS-BC-1147 satisfies each element of this definition:
Independent Economic Value. CPS-BC-1147 is a complex 14-constituent formulation with proprietary ratios, a specific order-of-addition protocol, and defined processing temperatures and shear rates that are critical to achieving the formulation's superior barrier performance. The complete formulation — including the identity and proportions of all 14 constituents and the process parameters — is not disclosed in any patent, product data sheet, trade publication, or other public filing. CPS-BC-1147's performance characteristics have made it a leading product in the food-grade barrier coating market, and it accounted for approximately $47.23 million in CPS's fiscal year 2023 revenue, representing approximately 22% of CPS's total 2023 revenue of $214.7 million. This revenue concentration underscores the significant independent economic value that CPS-BC-1147 derives from its secrecy.
Reasonable Measures to Maintain Secrecy. CPS has undertaken and maintained extensive measures to protect the secrecy of CPS-BC-1147, including:
• Partial Formulation Disclosure: When engaging Harlow as a toll manufacturer, CPS disclosed only 9 of the 14 formulation constituents. The remaining 5 constituents — the most proprietary elements — were supplied exclusively as CPS Concentrate A, a pre-blended concentrate designed to mask the identity and proportions of those constituents.
• Restrictive Contractual Provisions: The TMA contained comprehensive confidentiality (Section 7), reverse-engineering prohibition (Section 8.2), post-termination non-compete (Section 9.1), and customer non-solicitation (Section 9.3) provisions.
• Restricted Facility Access: Access to CPS's R&D laboratory and formulation records was limited to authorized personnel with a demonstrated need to know.
• Employee Non-Disclosure Agreements: All CPS employees with access to CPS-BC-1147 formulation information were required to execute non-disclosure agreements as a condition of employment.
These measures collectively demonstrate that CPS took reasonable steps under the circumstances to protect the secrecy of CPS-BC-1147, satisfying the third element of the trade secret definition under both statutes.
B. Evidence of Misappropriation
The evidence of Harlow's misappropriation is compelling and multifaceted.
Forensic Analysis. Dr. Elena Vasquez of Thornburg Analytics LLC conducted a detailed comparative compositional analysis of ShieldCoat Pro 900 and CPS-BC-1147 using gas chromatography-mass spectrometry (GC-MS), Fourier transform infrared spectroscopy (FTIR), and inductively coupled plasma optical emission spectrometry (ICP-OES). The Thornburg forensic report, issued December 22, 2023, confirmed that ShieldCoat Pro 900 matches CPS-BC-1147 in all 14 constituents within ±0.3% by weight. Dr. Vasquez characterized this level of correspondence as "not achievable through independent development" and "consistent only with access to the complete formulation." This conclusion is based on the statistical improbability of independently arriving at the same 14-constituent composition with the same proportional ratios — a conclusion that will resonate strongly with both the mediator and, if necessary, a jury.
Archer Material Sciences Engagement. Documents produced by Harlow in discovery confirm that in September 2022, Harlow — acting through Kenneth Fielding — sent samples of CPS Concentrate A to Archer Material Sciences Inc. at 9300 Harding Street, Indianapolis, Indiana 46221, for full compositional analysis. The Archer Material Sciences invoice and accompanying correspondence make clear that the purpose of the engagement was to identify all constituents of CPS Concentrate A and their weight percentages. This action constitutes a direct and deliberate violation of TMA Section 8.2, which expressly prohibited Harlow from reverse engineering or otherwise attempting to derive the composition of any CPS proprietary material. The deliberate nature of this act — engaging a third-party analytical laboratory specifically to deconstruct a material that was provided in pre-blended form for the express purpose of protecting its composition — is powerful evidence of willful misappropriation.
Kenneth Fielding's Retention of CPS Records. discovery further revealed that Fielding retained CPS batch production records, analytical test results, and process parameter logs on Harlow's servers and on Fielding's personal workstation, beyond the scope of what was permitted under the TMA. These records contained detailed information about the nine disclosed CPS-BC-1147 constituents as well as manufacturing parameters. When combined with the Archer Material Sciences compositional analysis of CPS Concentrate A, these retained records gave Fielding access to the complete CPS-BC-1147 formulation.
C. Evidence of Customer Solicitation
In addition to the misappropriation of CPS-BC-1147, Harlow engaged in systematic solicitation of CPS's customers in violation of TMA Section 9.3. Amanda Trent, Harlow's Sales Director, contacted at least five CPS customers to offer ShieldCoat Pro 900 as a lower-cost alternative to CPS-BC-1147:
1. Mapleridge Paper Corp.
2. Pinnacle Flexible Films LLC
3. Orion Paperboard Inc.
4. Great River Packaging Co.
5. TerraFold Industries LLC
In each instance, Trent offered ShieldCoat Pro 900 at a price approximately 15% below CPS's pricing for CPS-BC-1147. Mapleridge Paper Corp. reported the solicitation to CPS Sales Director Brian Novotny on June 12, 2023, which triggered CPS's investigation. Documentary evidence obtained in discovery — including emails from Trent to representatives of all five customers — confirms the scope of the solicitation campaign and the 15% discount pricing strategy. The solicitation violated both TMA Section 9.3 and constitutes tortious interference with CPS's existing and prospective business relationships.
D. Harlow's Independent-Development Defense
Harlow's sole substantive defense is that ShieldCoat Pro 900 was independently developed by Harlow's in-house technical team without reference to or reliance on CPS's confidential information. This defense was first articulated in Brian Whitaker's February 5, 2024 letter on behalf of Harlow and was reasserted in Harlow's Answer to the Complaint.
The independent-development defense is severely undermined by the evidentiary record and, in our assessment, is not credible. The following evidence fatally contradicts Harlow's claim of independent development:
(i) The Thornburg forensic analysis demonstrates that ShieldCoat Pro 900 matches CPS-BC-1147 in all 14 constituents within ±0.3% by weight. Dr. Vasquez has opined that this level of correspondence is "not achievable through independent development" and is "consistent only with access to the complete formulation." The statistical probability of independently formulating an identical 14-constituent composition with matching ratios is vanishingly small.
(ii) The Archer Material Sciences engagement proves that Harlow deliberately analyzed CPS Concentrate A for the purpose of determining the identity and proportions of its constituent components. This is direct evidence of reverse engineering, not independent development.
(iii) Kenneth Fielding's deposition admissions — discussed in detail in Section IV.B below — establish that ShieldCoat Pro 900's formulation was "finalized" within approximately four weeks of receiving the Archer Material Sciences report, a timeline wholly inconsistent with genuine independent development of a complex 14-constituent barrier coating.
Assessment: The independent-development defense is not credible and would likely fail at trial. The forensic evidence alone creates a near-insurmountable obstacle for Harlow, and the documentary and testimonial evidence of the Archer Material Sciences engagement and Fielding's retention of CPS records eliminates any plausible basis for the defense. We expect the mediator to recognize this and to communicate the weakness of Harlow's position in caucus sessions.
IV. KEY DEPOSITION TESTIMONY
The depositions taken during May through July 2024 yielded testimony that is highly favorable to CPS's position and significantly damages Harlow's defenses. Below is a summary of the key testimony from each deponent.
A. Gerald W. Norris (CEO / Sole Shareholder, Harlow)
Gerald Norris was deposed on May 14–15, 2024. His testimony was evasive, inconsistent, and frequently contradicted by the documentary record.
Norris testified that he was aware that Fielding was "evaluating" barrier coating formulations during the term of the TMA, but he claimed that he did not specifically direct or authorize the Archer Material Sciences analysis of CPS Concentrate A. This testimony is difficult to reconcile with Norris's role as CEO and sole shareholder of a company with approximately 120 employees, and with documents suggesting Norris received reports on Harlow's product development initiatives, including the ShieldCoat program.
Norris further admitted that he approved the commercial launch of ShieldCoat Pro 900 but testified that he believed Harlow's in-house team had developed the formulation "from scratch." When pressed, however, Norris was unable to identify any specific R&D expenditures, laboratory notebooks, development milestones, or other documentation supporting his claim that ShieldCoat Pro 900 was independently developed. The absence of any corroborating documentation is particularly notable given that genuine development of a 14-constituent barrier coating formulation would ordinarily generate a substantial paper trail of experimentation, testing, and iterative refinement over a period of months or years.
With respect to the customer solicitation, Norris acknowledged that Amanda Trent was tasked with identifying "new customer opportunities" in the food packaging space but denied specifically directing her to contact CPS's customers. This testimony is directly contradicted by Trent's deposition testimony, discussed below, in which Trent confirmed that Norris provided her with a list of target customers, several of which were known CPS accounts.
Assessment: Norris's testimony is evasive and inconsistent with the documentary record. His inability to substantiate Harlow's independent-development defense through any contemporaneous documentation is a critical vulnerability. As a named individual defendant and sole shareholder, Norris has personal liability exposure that increases Harlow's incentive to settle and provides additional leverage in mediation.
B. Kenneth Fielding (VP of Technical Operations, Harlow)
Kenneth Fielding was deposed on June 3–4, 2024. His testimony is the most damaging evidence in the case for Harlow and effectively establishes the chain of misappropriation.
Fielding admitted under oath that he retained CPS batch production records and process parameter logs on his personal workstation at Harlow. While he initially suggested these records were retained for "reference purposes" related to ongoing toll manufacturing, he was unable to explain why the records remained on his workstation after the TMA's termination.
When confronted with the Archer Material Sciences invoice and accompanying correspondence, Fielding acknowledged that he directed the submission of CPS Concentrate A to Archer Material Sciences for compositional analysis. Fielding attempted to characterize the analysis as being for "quality assurance" purposes — asserting that he wanted to verify the consistency of the CPS Concentrate A being supplied by CPS. This characterization is wholly inconsistent with the scope and nature of the testing actually performed: the Archer Material Sciences report provided a full compositional breakdown of CPS Concentrate A, identifying each constituent and its weight percentage. A quality assurance test would have measured physical properties, performance characteristics, or batch consistency — not the underlying chemical composition of a proprietary pre-blended material. Moreover, Fielding conceded on cross-examination that he had never previously requested a compositional breakdown of CPS Concentrate A during the five-plus years that Harlow had been manufacturing CPS-BC-1147 under the TMA.
Most significantly, Fielding conceded that ShieldCoat Pro 900's formulation was "finalized" within approximately four weeks of receiving the Archer Material Sciences report. This compressed timeline is wholly inconsistent with genuine independent development of a complex 14-constituent barrier coating. As Dr. Yuen testified, the original development of CPS-BC-1147 required approximately two years of iterative research and testing at a cost of $3.8 million. The notion that Harlow independently arrived at an identical formulation within four weeks — and without any documented R&D process — strains credulity beyond its breaking point.
Assessment: Fielding is the most damaging witness for Harlow. His admissions — the retention of CPS records, the deliberate submission of CPS Concentrate A to Archer Material Sciences for compositional analysis, and the four-week timeline from receiving the Archer report to finalizing ShieldCoat Pro 900 — establish the complete chain of misappropriation. His "quality assurance" characterization of the Archer engagement will not withstand scrutiny from the mediator or a jury. We expect to rely heavily on Fielding's deposition excerpts during the mediation presentation.
C. Amanda Trent (Sales Director, Harlow)
Amanda Trent was deposed on June 18, 2024. Her testimony corroborates both CPS's customer-solicitation claims and the evidence of deliberate price erosion.
Trent confirmed that she contacted Mapleridge Paper Corp., Pinnacle Flexible Films LLC, and Orion Paperboard Inc. to offer ShieldCoat Pro 900. With respect to Great River Packaging Co. and TerraFold Industries LLC, Trent testified that she could not recall whether she had contacted those companies. However, CPS has documentary evidence — in the form of emails sent by Trent to representatives of both companies — confirming that she did in fact contact them. Trent's failure to recall these contacts is either a reflection of the breadth of her solicitation campaign or an attempt to minimize the scope of her activities; in either case, the documentary evidence speaks for itself.
Trent further admitted that she was provided with a list of potential target customers by Gerald Norris and that several of the companies on the list were known to her to be existing CPS customers. This testimony directly contradicts Norris's claim that he did not direct Trent to contact CPS's customers specifically.
Trent also confirmed that the 15% discount pricing strategy for ShieldCoat Pro 900 was established by Norris, not by Trent herself. This testimony is significant because it demonstrates that the price-erosion campaign was a deliberate strategic decision by Harlow's leadership, not an isolated decision by a sales representative.
Assessment: Trent's testimony is damaging to Harlow on multiple fronts. It corroborates the customer-solicitation claim, ties Norris directly to the solicitation strategy, and establishes the deliberate nature of the price-erosion campaign. Her admissions will be useful in the mediation to demonstrate both the scope of Harlow's misconduct and the resulting harm to CPS's customer relationships and pricing structure.
V. DAMAGES ANALYSIS
A. Meridian Forensic Consulting Group LLC Report (June 14, 2024)
CPS's damages expert, Jeffrey Callahan, CPA/ABV, CFF, of Meridian Forensic Consulting Group LLC, 155 North Wacker Drive, Suite 1010, Chicago, Illinois 60606, issued a comprehensive damages report on June 14, 2024. Mr. Callahan is a certified public accountant accredited in business valuation and certified in financial forensics, with over 22 years of experience in commercial damages analysis, including extensive work in trade secret and intellectual property matters. His report provides a thorough, well-supported damages analysis based on CPS's financial records, customer-level revenue data, Harlow's financial disclosures in discovery, and industry data.
Mr. Callahan's total estimated damages range is $8.9 million to $12.6 million, comprising three principal components as detailed below. This range does not include exemplary damages or attorneys' fees, which are available under both the DTSA and Ohio UTSA in cases of willful and malicious misappropriation and are discussed separately in Section V.E.
B. Component 1: CPS Lost Profits from Diverted Sales
Estimated Range: $5.1 million to $7.2 million.
This component represents the profits CPS lost as a result of sales diverted from CPS-BC-1147 to Harlow's ShieldCoat Pro 900 during the period from approximately April 2023 (when Harlow began marketing ShieldCoat Pro 900) through the date of the preliminary injunction. Mr. Callahan employed a "but-for" analysis methodology, comparing CPS's actual sales trajectory for CPS-BC-1147 during the infringement period to projected sales absent the misappropriation. The projection was developed using customer-level revenue data, historical growth trends for CPS-BC-1147 (which had experienced consistent year-over-year growth of approximately 8–11% in the three fiscal years preceding the misappropriation), industry growth data, and CPS's documented pipeline of new customer opportunities.
CPS-BC-1147 accounted for approximately $47.23 million in CPS's fiscal year 2023 revenue. Mr. Callahan's analysis demonstrates that CPS experienced a material decline in CPS-BC-1147 revenue during the infringement period, concentrated among the customers solicited by Amanda Trent, as well as a shortfall in new customer acquisition attributable to competitive displacement by ShieldCoat Pro 900 in the market. The range reflects varying assumptions regarding CPS's projected growth rate and the proportion of lost sales attributable to Harlow's misappropriation versus other market factors.
C. Component 2: Harlow's Unjust Enrichment / Disgorgement
Estimated Amount: $2.3 million.
This component represents Harlow's estimated profits from ShieldCoat Pro 900 sales during the period of infringement. Mr. Callahan calculated Harlow's unjust enrichment based on Harlow's revenues attributable to ShieldCoat Pro 900, less Harlow's directly attributable costs and a reasonable allocation of overhead, yielding an estimated profit figure of $2.3 million. This figure is available as an alternative or supplemental measure of damages under both the DTSA (18 U.S.C. § 1836(b)(3)(B)(ii)) and the Ohio UTSA (Ohio Rev. Code § 1333.63(A)). Disgorgement of the defendant's unjust enrichment is particularly appropriate where, as here, the defendant's gains were achieved through deliberate misappropriation and the plaintiff's losses may not fully capture the economic benefit obtained by the defendant.
D. Component 3: Price Erosion
Estimated Range: $1.5 million to $3.1 million.
This component reflects the damage to CPS's pricing structure resulting from Harlow's systematic strategy of offering ShieldCoat Pro 900 at prices approximately 15% below CPS's pricing for CPS-BC-1147. In order to retain existing customers who were solicited by Harlow, CPS was compelled to offer competitive concessions — including discounts, extended payment terms, and volume rebates — that it would not have offered absent the competitive threat from ShieldCoat Pro 900. These concessions have had an ongoing impact on CPS's margin structure for CPS-BC-1147, which persists even after the preliminary injunction removed ShieldCoat Pro 900 from the market, because CPS's customers now have reference points for lower pricing that inform their ongoing negotiations with CPS.
Mr. Callahan's price-erosion estimate reflects both the direct margin impact of concessions already granted and a forward-looking estimate of the reduced margins CPS will experience over the expected remaining term of its customer relationships. The range reflects varying assumptions regarding the duration and magnitude of the pricing impact.
E. Exemplary Damages and Attorneys' Fees
In addition to the compensatory damages set forth above, both the DTSA and the Ohio UTSA provide for enhanced remedies in cases of willful and malicious misappropriation:
• Exemplary Damages: Under the DTSA, 18 U.S.C. § 1836(b)(3)(C), and the Ohio UTSA, Ohio Rev. Code § 1333.63(B), the court may award exemplary damages of up to two times the compensatory damages award where the misappropriation is shown to be willful and malicious.
• Attorneys' Fees: Under both statutes, the court may award reasonable attorneys' fees to the prevailing party in cases of willful and malicious misappropriation. 18 U.S.C. § 1836(b)(3)(D); Ohio Rev. Code § 1333.63(C).
Harlow's conduct amply supports a finding of willfulness and malice. The deliberate engagement of Archer Material Sciences to reverse-engineer CPS Concentrate A, the retention of CPS's proprietary records beyond the scope of the TMA, the compressed four-week timeline from the Archer report to the "finalization" of ShieldCoat Pro 900, the systematic solicitation of CPS's customers, and the deliberate 15% discount pricing strategy all reflect a calculated scheme to misappropriate CPS's trade secrets and to exploit them commercially at CPS's expense. The evidence also suggests potential destruction or concealment of evidence: Harlow's initial document production was incomplete, and certain communications between Fielding and Archer Material Sciences were produced only after CPS raised deficiency issues during the meet-and-confer process.
Calderwood & Harkness's accrued fees and expenses through the projected mediation date are approximately $1.1 million. Assuming the case proceeds through trial, we estimate total fees and expenses through matter close will approximate $1.42 million. These figures underscore the magnitude of CPS's fee-recovery claim and contribute to Harlow's overall exposure.
The availability of exemplary damages and fee-shifting creates significant upside exposure for Harlow and represents a powerful source of leverage in settlement negotiations. At the high end, Harlow faces potential total exposure of $12.6 million (compensatory) + $25.2 million (2x exemplary) + $1.42 million (fees) = approximately $39.2 million. While we do not expect a court to award damages at this ceiling, the theoretical exposure is a compelling data point for the mediator to communicate to Harlow in caucus.
VI. EVALUATION OF HARLOW'S ABILITY TO PAY
An assessment of Harlow's financial condition is essential to developing a realistic settlement strategy. Based on financial information obtained through discovery, we have evaluated Harlow's capacity to fund a settlement in the recommended range.
Harlow's estimated fiscal year 2023 revenue was approximately $87.3 million, based on financial summaries produced in discovery. Harlow is a privately held company; Gerald W. Norris is its sole shareholder. Harlow was not required to produce audited financial statements, but the financial data produced in discovery — including income statements, balance sheets, and tax returns — indicate that Harlow operates profitably with estimated EBITDA margins that are consistent with the contract manufacturing industry. Specifically, the available data suggests that Harlow's EBITDA margins are in the range of 12% to 15%, which would imply annual EBITDA of approximately $10.5 million to $13.1 million.
There is no indication in the financial data produced in discovery that Harlow is overleveraged or in financial distress. Harlow's balance sheet reflects a moderate level of debt relative to its asset base, and the company appears to maintain adequate working capital and cash reserves.
A settlement in the range of $9.0 million to $12.6 million represents approximately 10% to 14% of Harlow's annual revenue. While this is a significant amount, it is not an existential sum for a company of Harlow's size and profitability. Harlow could fund a settlement in this range through a combination of available cash, borrowing capacity, and, if necessary, a contribution from Norris personally. Norris's personal liability as a named individual defendant and sole shareholder increases Harlow's incentive to settle, because a trial judgment against both Harlow and Norris personally would expose Norris's personal assets and could complicate Harlow's financial planning and access to credit.
Assessment: Harlow has the financial capacity to fund a settlement in the recommended range of $9.0 million to $12.6 million, particularly when viewed against the alternative of a trial judgment that could include compensatory damages, exemplary damages of up to two times the compensatory award, and attorneys' fees. The economic calculus strongly favors settlement from Harlow's perspective, and we expect the mediator to communicate this reality to Harlow during the mediation process.
VII. RECOMMENDED SETTLEMENT STRATEGY
A. Opening Demand
We recommend that CPS present an opening demand of $14.5 million at mediation. This figure is derived from the following components:
• High end of the Meridian damages range: $12.6 million;
• Partial exemplary damages component: $1.5 million (reflecting a modest multiplier well below the statutory 2x maximum, to signal CPS's seriousness while maintaining credibility); and
• Partial attorneys' fees recovery: $400,000.
The opening demand of $14.5 million serves several strategic purposes. First, it anchors the negotiation at a level that is fully supported by the evidence and the applicable legal framework, making it difficult for Harlow or the mediator to characterize CPS's position as unreasonable. Second, it provides meaningful room for negotiation — a reduction from $14.5 million to the target range of $10.0 million to $12.0 million represents a concession of approximately 17% to 31%, which allows CPS to demonstrate flexibility while still achieving a strong result. Third, the inclusion of exemplary damages and fees components sends a clear message that CPS is prepared to pursue the full scope of available remedies at trial if Harlow does not engage constructively in the mediation process.
B. Target Settlement Range
Primary Target: $10.0 million to $12.0 million.
Acceptable Minimum: $9.0 million.
The midpoint of Mr. Callahan's Meridian damages range is approximately $10.75 million. A settlement in the primary target range of $10.0 million to $12.0 million would represent a recovery at or above the midpoint of the compensatory damages estimate — a strong outcome that captures the full measure of CPS's economic harm and avoids the uncertainty, expense, and delay of trial.
A settlement at the acceptable minimum of $9.0 million — which represents approximately the low end of Mr. Callahan's damages range — is still a favorable resolution when considered in light of the following factors:
• Litigation risk: While CPS's case is strong, no outcome at trial is certain. A jury could credit a lower damages figure, particularly with respect to the price-erosion component, which involves forward-looking assumptions.
• Time value of money: A lump-sum payment within 14 business days of settlement execution is worth more than a larger judgment that may not be collected for 12 to 24 months (or longer, in the event of an appeal).
• Collection risk: A negotiated settlement payment eliminates the risk that Harlow may restructure, dissipate assets, or otherwise become judgment-proof before a trial judgment can be enforced.
• Avoidance of additional litigation costs: A settlement at mediation avoids an estimated $300,000 to $500,000 in additional fees and expenses through trial, as well as the indirect costs of continued management distraction.
C. Recommended Settlement Authority
We respectfully request that CPS and Ridgepoint authorize Calderwood & Harkness to negotiate within the following parameters at the August 14, 2024 mediation:
• Monetary Component: Minimum of $9.0 million, payable as a lump sum within 14 business days of execution of a definitive settlement agreement. We recommend against agreeing to any installment arrangement, which would introduce collection risk and administrative burden.
• Non-Monetary Terms: The mandatory non-monetary terms described in Section VIII below must be included in any settlement. These terms — permanent injunctive relief, return and destruction of trade secret materials, and a five-year non-solicitation covenant — are non-negotiable and essential to protecting CPS's long-term commercial interests.
Re-Authorization Requirement. Any settlement below $9.0 million, or any settlement that does not include the mandatory non-monetary terms described in Section VIII, should require express re-authorization from Rachel Sung, David Kessler, and Sarah Engel. Calderwood & Harkness will not agree to any terms outside the authorized parameters without obtaining such re-authorization.
VIII. NON-MONETARY SETTLEMENT TERMS
The non-monetary terms of any settlement are critically important to CPS's long-term trade secret protection and commercial position. The following terms should be treated as mandatory and non-negotiable.
A. Permanent Injunction
Harlow and all of its affiliates, officers, directors, employees, agents, successors, and assigns must be permanently enjoined from manufacturing, selling, marketing, distributing, licensing, or otherwise commercially exploiting ShieldCoat Pro 900 or any other formulation derived from, based upon, or incorporating CPS-BC-1147 or any CPS confidential information. The injunctive relief should extend to any product that is substantially similar to CPS-BC-1147 in composition, formulation, or manufacturing process.
The permanent injunction should be entered as a consent order by the Court in Case No. 2:24-cv-00891 to ensure enforceability through contempt proceedings in the event of a future violation. A contractual non-compete without a court order would require CPS to initiate a new breach-of-contract action to enforce the restriction — a significantly less efficient and less certain remedy. We will prepare a draft consent order for submission to Judge Langford as part of the settlement documentation.
B. Return and Destruction of Trade Secret Materials
Harlow must, within 30 calendar days of the execution of the settlement agreement, return to CPS all technical data, batch production records, analytical test results and reports, formulation information, process parameter logs, quality assurance records, and any and all other documents, materials, and information constituting or containing CPS confidential information, in whatever form (including hard copy, electronic files, and digital media).
In addition, Harlow must certify under oath — through a sworn affidavit executed by Gerald W. Norris and Kenneth Fielding — that all copies of CPS confidential information in Harlow's possession, custody, or control have been destroyed, including but not limited to electronic copies, backup files, archived data, cloud-stored materials, and any copies or materials provided to Archer Material Sciences Inc. or any other third party. The certification must specifically address the disposition of the Archer Material Sciences compositional analysis report and underlying data.
CPS should retain the right to audit Harlow's compliance with this obligation. Specifically, CPS should have the right, upon reasonable notice, to retain a mutually agreed-upon independent forensic IT firm to inspect Harlow's computer systems, servers, backup media, and cloud storage accounts to verify the completeness of the destruction. The costs of any such audit should be borne by Harlow if non-compliance is discovered, and by CPS if compliance is confirmed.
C. 5-Year Non-Solicitation Covenant
Harlow, including its officers, directors, employees, agents, and affiliates, must agree to a five-year non-solicitation covenant covering all current CPS customers. This covenant should prohibit Harlow from directly or indirectly soliciting, contacting, or attempting to do business with any CPS customer for the purpose of selling barrier coating products or any other products that compete with CPS's product offerings.
This covenant is broader than the TMA's original Section 9.3 non-solicitation provision, which covered only the three-year post-termination period and was limited to customers "identified during the term of the TMA." The broader scope is warranted by the severity of Harlow's misconduct — the deliberate misappropriation of CPS's trade secrets and the systematic solicitation of CPS's customers with a misappropriated product at predatory pricing — and by the need to provide CPS with meaningful protection for its customer relationships going forward. The five-year period is reasonable in light of the typical customer relationship lifecycle in the food packaging industry and the time required for CPS to fully restore customer confidence and rebuild its competitive position.
D. No Admission of Liability
We anticipate that Harlow will insist on a "no admission of liability" clause as part of any settlement. This is a standard settlement term, and it is acceptable to CPS provided that all monetary and non-monetary terms described herein are met. The no-admission clause should be drafted narrowly to make clear that the settlement does not constitute an admission by Harlow of any wrongdoing, liability, or obligation, but that the settlement terms (including the consent order) are fully enforceable irrespective of the absence of any such admission.
E. Mutual Confidentiality
Mutual confidentiality of the settlement terms is standard and is acceptable to CPS. The confidentiality provision should be reciprocal, prohibiting both parties from disclosing the terms of the settlement to any third party, subject to the following carve-outs:
• Disclosure to each party's legal counsel, accountants, auditors, and tax advisors, subject to obligations of confidentiality;
• Disclosure by CPS to Ridgepoint Capital Partners LP and its affiliates, partners, limited partners, and advisors, in connection with Ridgepoint's investment in CPS;
• Disclosure by CPS to Keystone Commerce Bank (as CPS's senior secured lender under the $130 million credit facility), in connection with CPS's reporting obligations under the credit agreement;
• Disclosure as required by applicable law, regulation, court order, or governmental or regulatory inquiry; and
• Disclosure in connection with any proceeding to enforce the terms of the settlement agreement.
F. Mutual General Releases
The settlement should include mutual general releases of all claims, demands, causes of action, and liabilities arising from or related to the subject matter of the litigation. The releases should cover all parties — including CPS, Harlow Chemical Supply Inc., Gerald W. Norris, and Kenneth Fielding — and should extend to their respective officers, directors, employees, agents, successors, and assigns.
The releases should contain a carve-out for any claims arising from a breach of the settlement agreement itself. This carve-out is essential to preserving CPS's ability to enforce the settlement terms, including the permanent injunction, the return/destruction obligations, and the non-solicitation covenant.
G. Dismissal with Prejudice
The settlement should be conditioned upon the filing of a joint stipulation of dismissal with prejudice in Case No. 2:24-cv-00891, pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii). The stipulation should provide that the Court retains jurisdiction to enforce the terms of the consent order (permanent injunction) as part of the dismissal.
IX. MEDIATION LOGISTICS AND TACTICAL CONSIDERATIONS
A. Mediator Profile
The mediation will be conducted by retired Judge Franklin DeLuca of Ashford Dispute Resolution Services LLC, located at 441 Vine Street, Suite 800, Cincinnati, Ohio 45202. Judge DeLuca served on the Hamilton County Court of Common Pleas for approximately 18 years before entering private mediation practice. He has extensive experience mediating complex commercial and intellectual property disputes and is well-regarded in the Cincinnati legal community for his thorough preparation and direct communication style.
Assessment: Based on our prior experience with Judge DeLuca and his reputation among practitioners, we expect him to focus heavily on the strength of the forensic evidence and the significance of the preliminary injunction ruling as indicators of CPS's likelihood of success at trial. Judge DeLuca is known for being candid with parties about the strengths and weaknesses of their positions, and we anticipate that he will communicate to Harlow — particularly during private caucus sessions — that the evidentiary record strongly favors CPS and that Harlow faces significant risk at trial. This dynamic should benefit CPS's settlement position.
B. CPS's Mediation Team
We recommend the following attendees for CPS at the mediation session:
• Rachel Sung, General Counsel, Crestline Packaging Solutions LLC — as lead business representative with authority to discuss settlement terms and strategy;
• Sarah Engel, Operating Partner, Ridgepoint Capital Partners LP — to represent Ridgepoint's interests and to signal the PE sponsor's engagement and seriousness;
• Catherine Bloom, Partner, Calderwood & Harkness LLP — as lead counsel for the mediation presentation and negotiations;
• Omar Siddiqui, Associate, Calderwood & Harkness LLP — to support the mediation presentation and manage exhibits and documents.
David Kessler, CPS's CEO, should be available by telephone throughout the mediation but should not attend in person. Mr. Kessler's absence from the room serves two purposes. First, it preserves negotiating flexibility by allowing CPS's representatives to indicate that they need to consult with the CEO before agreeing to any particular term, creating an additional layer of authority that can be used tactically during the negotiation process. Second, it avoids the risk that Mr. Kessler — as a principal with deep personal investment in the company — could inadvertently make concessions or communicate CPS's bottom line through body language or off-the-cuff remarks.
Sarah Engel's attendance carries its own strategic significance. Her presence signals Ridgepoint's active engagement and the seriousness with which the private equity sponsor views the matter. It also subtly communicates to Harlow and the mediator that settlement authority requires PE sponsor approval — a legitimate negotiating tool that reinforces the message that CPS's settlement parameters are carefully considered and not subject to ad hoc adjustment at the mediation table.
C. Anticipated Harlow Strategy
Based on our assessment of Harlow's litigation posture, discovery responses, and counsel's conduct throughout the case, we anticipate the following elements of Harlow's mediation strategy:
• Minimizing the forensic evidence: Harlow is likely to attempt to downplay the significance of the Thornburg forensic report, possibly by questioning the methodology or suggesting that a ±0.3% match in 14 constituents could occur through coincidence or legitimate means. This argument is weak and unsupported by any defense expert report, but Brian Whitaker may present it aggressively in the joint session. We should be prepared to respond firmly with Dr. Vasquez's conclusions and to note the absence of any defense expert rebuttal.
• Emphasizing the independent-development defense: Harlow will likely continue to assert that ShieldCoat Pro 900 was independently developed, notwithstanding the overwhelming evidence to the contrary. This is Harlow's only substantive defense, and it has no credible basis in the record.
• Challenging damages: Harlow may argue that CPS's damages are overstated, particularly the price-erosion component (Component 3, estimated at $1.5 million to $3.1 million), which involves forward-looking assumptions and may be characterized by Harlow as speculative. We should be prepared to defend Mr. Callahan's methodology and to note that the price-erosion estimate is conservative given the 15% discount offered by Harlow and the documented impact on CPS's customer pricing negotiations.
• Pleading inability to pay: Harlow may claim that it lacks the financial resources to fund a settlement in CPS's requested range. Given Harlow's estimated $87.3 million in annual revenue and its apparently profitable operations, this argument is not persuasive. We should be prepared to share with the mediator (in caucus) our assessment of Harlow's financial capacity and to note that a settlement in the recommended range represents approximately 10% to 14% of Harlow's annual revenue — significant but not existential.
• Seeking installment payments: Harlow may propose an installment payment structure as an alternative to a lump-sum payment. As discussed above, we recommend rejecting any installment arrangement to avoid collection risk.
• Norris and Fielding seeking personal releases: Norris and Fielding may attempt to condition settlement on the release of their personal liability as individual defendants. This is expected and acceptable — the mutual general releases described in Section VIII.F contemplate releases covering all individual defendants — but CPS should use this as leverage by signaling that personal releases are available only as part of a comprehensive settlement that meets CPS's monetary and non-monetary terms.
Walk-Away Posture: CPS should be prepared to walk away from mediation if Harlow is unwilling to meet the minimum monetary terms ($9.0 million) and the mandatory non-monetary terms (permanent injunction, return/destruction of trade secrets, five-year non-solicitation). The preliminary injunction already provides significant protection for CPS pending trial, and CPS is well-positioned to achieve a favorable trial outcome. The willingness to walk away is itself a powerful negotiating tool, and the CPS team should project confidence and patience throughout the mediation process.
D. Key Exhibits for Mediation
We will prepare a comprehensive mediation exhibit binder for Judge DeLuca and for use during the joint and caucus sessions. The key exhibits will include:
1. Thornburg Analytics Forensic Report (December 22, 2023) — demonstrating the compositional match in all 14 constituents within ±0.3% by weight, with Dr. Vasquez's expert conclusions;
2. Archer Material Sciences Invoice and Correspondence — documenting Harlow's deliberate engagement of a third-party laboratory to reverse-engineer CPS Concentrate A, in direct violation of TMA Section 8.2;