Contract analysis

From: Bernard Crawford <bcrawford@calderwoodharkness.com> To: "Devin K. Arroyo" <darroyo@verimarkhotels.com> Cc: Renata Vasquez <rvasquez@calderwoodharkness.com> Date: Sat, 31 Jan 2026 09:47:00 -0000 Subject: Verimark Hospitality Group — Initial Assessment of Garza, Linden & Okafor Demand Letter and Recommended Next Steps [PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION]

I hope this finds you well. As you know, Calderwood & Harkness formally opened this matter yesterday, January 30, 2026, under matter number 1021-00005. I am writing to provide you with our initial assessment of the demand letter from Garza, Linden & Okafor LLP dated January 14, 2026, sent on behalf of their client Daniela M. Serrano, and to outline the immediate next steps we recommend.

Attached for your review and countersignature is the engagement letter dated January 30, 2026. The engagement team for this matter is as follows: myself as Responsible Partner, Renata Vasquez as Billing Partner, Nadia Petrov as Lead Associate, and James Underwood as Working Associate. As you confirmed, the Audit Committee authorized up to $350,000 for the scoping phase at its January 29, 2026 meeting, and we intend t

**I. SUMMARY OF THE DEMAND LETTER ALLEGATIONS**

The GLO demand letter, sent on behalf of former front-desk associate Daniela M. Serrano (employed at the Verimark Regency Tampa from approximately March 2022 through August 2025), asserts five categories of alleged violations:

1. **Overtime.** Failure to pay overtime at one-and-one-half times the regular rate for hours worked in excess of 40 per workweek, in violation of 29 U.S.C. § 207(a).

2. **Automatic Meal-Break Deductions.** Illegal automatic deduction of 30 minutes per shift for meal breaks despite employees allegedly being required to remain on-call and perform duties during those meal periods.

3. **Pre-/Post-Shift Off-the-Clock Work.** Failure to compensate employees for pre-shift and post-shift activities—including donning and doffing uniforms, booting up computer systems, and shift-handover briefings—estimated at 15 to 25 minutes per shift.

4. **Tipped-Employee Minimum Wage.** Failure to pay the Florida minimum wage for tipped employees in compliance with Art. X, § 24, Florida Constitution, applicable to certain front-desk and concierge roles participating in pooled tips.

5. **Misclassification.** Willful misclassification of certain "lead" and "senior" hourly roles as exempt under the FLSA administrative exemption.

The demand letter defines the putative class/collective as all current and former hourly, non-exempt employees at Verimark-branded properties in Florida from January 2023 to present, which GLO estimates encompasses approximately 4,100 to 5,900 individuals across seven Verimark properties in the Tampa Bay, Orlando, and South Florida markets.

The total demand is **$18.5 million**, inclusive of back pay, liquidated damages, and attorneys' fees. The response deadline set by GLO is **February 28, 2026**, leaving us approximately four weeks.

I want to emphasize that the following is highly preliminary and subject to verification through the audit process we are recommending. The team will prepare a formal exposure memorandum once we have access to the underlying data. That said, it is useful to frame the range of potential exposure at the outset:

- **Scenario A (Narrowest):** Overtime claims only, with a 2-year non-willful lookback, limited to approximately 1,895 current hourly employees at the seven at-issue properties. Preliminary estimate: approximately **$8.1 million** (inclusive of liquidated damages).

- **GLO's Demand Letter Figure:** **$18.5 million.** This appears to contemplate a broader set of claims and a larger putative collective than Scenario A.

- **Scenario B (Broadest — Theoretical Ceiling):** All five categories of claims, a 3-year willful FLSA lookback, and the full putative collective of up to 5,900 individuals. The theoretical ceiling under this scenario could exceed **$200 million** before attorneys' fees. I want to be clear that this is a worst-case theoretical number; actual exposure will depend heavily on opt-in rates, proof of individual violation

One point that merits particular attention: the Florida constitutional minimum-wage claims carry a 5-year statute of limitations under Fla. Stat. § 95.11(2)(b), which would extend the lookback period to January 2021 for that category of claims. We will need to analyze this carefully.

Our working mid-range estimate at this stage is **$22 million to $38 million**, inclusive of liquidated damages but exclusive of attorneys' fees. This figure will be refined substantially as data becomes available.

A critical variable in this analysis is whether the willfulness standard is met. A finding of willfulness doubles the FLSA lookback period from two years to three years and significantly increases total exposure. This will be a key focus of our scoping-phase analysis.

I want to commend your team for promptly issuing an internal litigation-hold memorandum on January 17, 2026—the day after you received the demand letter. That was exactly the right step to take.

To supplement VHG's internal memo, Calderwood & Harkness will send a formal litigation-hold advisory letter that specifies in greater detail the categories of data and documents to be preserved and confirms the list of custodians. We have preliminarily identified **23 custodians**: the 7 property-level HR managers, the 7 property-level general managers, Carla Whitfield, Enrique Fuentes, yourself, Malik Jefferson, and

The data systems subject to the hold include: Luminos TimeTrack (account LTT-VHG-2022-0041), VHG email systems, HR information systems, scheduling software, and any local property-level recordkeeping.

In addition, we will send a separate data-preservation request directly to Luminos Payroll Solutions Inc. (contact: Shannon D. Prewitt) to ensure preservation of all time-punch data, the automatic meal-break deduction configuration (rule AR-MEAL-030), payroll registers, and system-audit logs from January 1, 2022 to present.

Calderwood & Harkness will prepare a comprehensive document and data collection request list for VHG covering the following categories: timekeeping data (Luminos TimeTrack exports), payroll registers, wage statements, employee handbooks (current version v.7.2, effective January 1, 2025, and all prior versions), meal-break and uniform policies, tip-pool records, job descriptions, exemption classification documentation

The date range for collection will be **January 2021 to present**, in order to cover the longest applicable limitations period (the 5-year Florida constitutional claims). I would ask that you coordinate with **Carla Whitfield** (VP, HR) and **Enrique Fuentes** (Director, Payroll & Workforce Compliance) as the primary points of contact for document collection.

This item carries a critical deadline. Under VHG's Employment Practices Liability policy with Pinnacle Indemnity Corp. (Policy No. PIN-EPL-2025-44781), VHG must provide written notice to the carrier "as soon as practicable" but no later than **60 days** after receipt of the demand. That makes the outside deadline **March 15, 2026**.

I recommend tendering notice promptly. Calderwood & Harkness will prepare the formal notice-of-claim/tender letter for transmission to Lydia C. Bowman, Senior Claims Examiner at Pinnacle Indemnity. The relevant policy parameters are: $10 million per occurrence, $25 million aggregate, with a **$500,000 self-insured retention** per claim. This means VHG will bear the first $500,000 in defense costs and/or liability out

I should note that coverage for wage-and-hour claims under EPL policies can be contested by carriers, so we will also prepare a coverage analysis to assess the likelihood of a favorable coverage determination.

One of the seven at-issue properties—Verimark Shores Clearwater—is owned by **Palomar Realty Partners LLC** (Ricardo E. Montalvo, Managing Member) and managed by VHG under a Hotel Management Agreement dated June 1, 2021 (reference HMA-2021-0601-PC). VHG directly employs all on-site staff at that property.

This arrangement creates a potential joint-employer question under the FLSA economic-reality test. Our team will analyze whether Palomar could face joint liability and whether VHG should consider entering into a common interest or joint defense agreement with Palomar to facilitate privileged information sharing and coordinate defense strategy. We may also need to review the indemnification provisions in the HMA.

I recommend engaging **Ridgepoint Advisory Group LLC** (Dr. Alicia Tran, CPA, CFF) to perform forensic payroll analytics and damages modeling, including statistical sampling of the Luminos TimeTrack data. The estimated cost for Ridgepoint's engagement is **$85,000 to $120,000**.

Combined with Calderwood & Harkness's estimated scoping-phase legal fees of $175,000 to $225,000, total estimated costs remain within the board-authorized $350,000 cap. Ridgepoint would be engaged under attorney-client privilege and work-product protection, reporting to Calderwood & Harkness. We will circulate a draft engagement letter for VHG's approval.

To be clear, Ridgepoint has not yet been engaged—we are awaiting your and the company's approval before proceeding.

Given the **February 28, 2026** deadline, which is tight in light of the scope of the audit we need to conduct, Calderwood & Harkness will draft a response letter to Marco A. Garza at GLO. The response will acknowledge receipt, reserve all rights and defenses, decline to admit any allegations, and request a reasonable extension of time to allow VHG to complete its internal review. We will circulate a draft to you for

**IV. ENGAGEMENT LETTER — ACTION REQUESTED**

Attached is the executed engagement letter dated January 30, 2026, setting forth:

- The scope of representation (pre-litigation wage-and-hour audit, scoping phase); - The engagement team identified above; - discounted hourly rates reflecting the 10% courtesy discount for VHG's existing client relationship: Crawford $945/hr, Vasquez $895.50/hr, Petrov $607.50/hr, Underwood $472.50/hr; and - The estimated scoping-phase budget of $175,000 to $225,000.

I would appreciate it if you could countersign and return the engagement letter at your earliest convenience so that we can formalize the engagement and proceed without delay.

Devin, I want to underscore the time-sensitive nature of this matter. We are working against two near-term deadlines: the **February 28** response deadline and the **March 15** insurance tender deadline. I would like to suggest that we schedule a call early next week—the week of February 2—with you, Carla Whitfield, and Enrique Fuentes to walk through the data-collection process and address any initial questions.

Renata Vasquez and Nadia Petrov, copied here, will serve as the team's day-to-day contacts during the scoping phase. Please do not hesitate to reach out to any of us in the meantime.

Thank you for your confidence in Calderwood & Harkness. We look forward to working with you on this.

**Bernard Crawford** Partner, Labor & Employment Calderwood & Harkness LLP 100 Southeast Second Street, Suite 3400 Miami, FL 33131 Tel: (305) 555-4200 Email: bcrawford@calderwoodharkness.com

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