Contract analysis

I. Executive Summary This memorandum summarizes the significant developments that occurred during the fourth quarter of 2023 (October 1 through December 31, 2023) in the breach-of-contract litigation captioned Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc., Case No. 1021-00006, pending before the Honorable Richard M. Calloway in the Circuit

II. Case Posture and Procedural Status A. Court and Assigned Judge The case remains assigned to the Honorable Richard M. Calloway, Circuit Judge, in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, Case No. 1021-00006. Judge Calloway has presided over the matter since its filing and is well-acquainted with the factual and legal issues. He has demonstrated a thorough familiarity with

III. Summary Judgment Briefing — Detailed Report A. Verimark's Motion for Partial Summary Judgment (Counts I and II) Verimark's Motion for Partial Summary Judgment was filed on September 29, 2023, the final business day of Q3 2023. Although the filing itself occurred in Q3, the substantive briefing on the motion — including the opposition, replies, and oral-argument preparation — occurred entirely within Q4 and conti

1. Randall Brecker's Deposition Admissions. During his two-day deposition on February 6–7, 2023, Mr. Brecker admitted that he personally directed property-level controllers to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. He further admitted that he understood Verimark would rely on these reports to calculate royalty and marketing-fund obligations. These admissions are bindin

2. Janet Kerrigan's Whistleblower Testimony. Ms. Kerrigan testified that she was explicitly instructed by Brecker's office to maintain two sets of revenue records: one reflecting total guest-room revenue including Suncoast-collected amounts, used for internal management purposes, and a separate set reflecting only revenues processed through Verimark's reservation system, which was submitted to Verimark for franchise-

3. Suncoast Financial Records. The financial records produced by Suncoast pursuant to the Court's October 28, 2022 compulsion order documented substantial revenue flows that were never included in Coastal Palms' GRR reports to Verimark. These records, which included Suncoast's internal revenue ledgers, bank deposit records, corporate-direct contract revenue schedules, and management-fee allocation worksheets, corrobo

4. Dr. Kettlewell's Forensic Analysis. Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC conducted a comprehensive forensic analysis of all available financial records and determined that cumulative underreported GRR across all 22 properties during the period from January 2013 through December 2021 totaled approximately $197.8 million. For Fiscal Year 2021 alone, Coastal Palms reported GRR of $112.4 million, w

1. Whether FLA § 4.1's GRR definition is unambiguous as a matter of law. This is the threshold question. If the Court finds the definition unambiguous, Coastal Palms' primary defense collapses, and the analysis proceeds to whether Coastal Palms' exclusion of Suncoast-collected revenues constitutes a breach. If the Court finds ambiguity, extrinsic evidence would become relevant, and the question would likely need to b

2. Whether Coastal Palms' exclusion of Suncoast-collected revenues constitutes a material breach. Assuming the Court finds the GRR definition unambiguous, it must determine whether the undisputed record establishes that Coastal Palms excluded revenues falling within the definition. Given Brecker's admissions, we believe the answer is yes as a matter of law.

3. Whether any factual issues — particularly Verimark's alleged knowledge of Suncoast — preclude summary judgment on liability. The Court must determine whether Coastal Palms has raised a genuine dispute of material fact sufficient to defeat summary judgment. We expect the Court to closely examine the evidence regarding Verimark's alleged knowledge and to assess whether, even if Verimark knew of Suncoast's existence,

IV. Settlement Posture Analysis A. Current Settlement Dynamics No formal settlement discussions have occurred since the pre-mediation informal exchanges conducted in mid-2023. Those exchanges, which took place through counsel, did not yield meaningful progress, as the parties' positions were substantially apart: Verimark's initial demand was $110 million, and Coastal Palms' initial offer was $4.5 million. Since that

V. Expert Work — Status The expert work in this matter is substantially complete. Both sides' expert reports and rebuttal reports have been served, and both experts have been deposed. The expert record is final and will be presented to the Court and, if necessary, to the jury at trial. Dr. Sharon Kettlewell — Ridgeline Forensic Advisory LLC (Verimark's Damages Expert). Dr. Kettlewell's expert report was served on Apr

VI. Staffing Update The Calderwood & Harkness case team for this matter consists of two partners, two associates, and a support team of paralegals and contract attorneys. Staffing has remained stable throughout Q4 2023, and no changes are anticipated in the near term. The team members and their roles, billing rates, and cumulative hours are as follows: Priya Anand — Responsible Partner (Florida Bar No. 0087451), bill

VII. Budget Update and Financial Summary A. Fees and Costs Through Q4 2023 The following table summarizes cumulative fees and costs billed through the end of Q4 2023 (December 31, 2023), compared to the original budget ranges established at the outset of the engagement: Calderwood & Harkness's attorney fees of approximately $5.98 million reflect the cumulative hours billed by the engagement team: Priya Anand (~1,200