Contract analysis

I. EXECUTIVE SUMMARY On May 15, 2023, defense counsel served the expert report of Professor Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc. (the "Hargrove Report"), on behalf of Defendant Coastal Palms Franchise Holdings LLC ("Coastal Palms"). Professor Hargrove opines that the maximum damages recoverable by Verimark Hospitality Group Inc. ("Verimark") for any underreporting of Gross Room Revenue ("GRR

1. Narrowed GRR Definition. Hargrove excludes walk-in cash payments processed through Suncoast Room Management Inc. ("Suncoast") and calculates OTA revenues on a net basis (after deduction of OTA commissions) rather than on the gross basis required by the FLAs.

2. Truncated Time Period. Hargrove applies what he calls a "reliability discount" to the 2013–2016 portion of the underreporting period, effectively discarding approximately four years of documented revenue diversion on the theory that the data for those years is insufficiently granular to support Dr. Kettlewell's extrapolation methodology.

3. Omission of Contractual Interest and Liquidated Damages. Hargrove excludes entirely the contractual late-payment interest of 1.5% per month compounded (which Dr. Kettlewell calculated at $28.4 million through the projected judgment date) and the liquidated damages under FLA § 15.3 (which Dr. Kettlewell calculated at $105.5 million), characterizing both as unenforceable "penalties" under Florida law. As detailed be

II. BACKGROUND AND SCOPE OF HARGROVE'S ENGAGEMENT Professor Grant Hargrove, PhD, CPA, is the founder and principal of Hargrove Economic Consulting Inc., a Fort Lauderdale–based consulting firm specializing in litigation-support economics, forensic accounting, and damages quantification. According to his curriculum vitae attached as Appendix A to his report, Professor Hargrove holds a PhD in Economics from the Univers

III. SUMMARY OF HARGROVE'S OPINIONS AND DAMAGES CALCULATION Professor Hargrove's report sets forth three principal opinions, each of which operates to reduce the damages figure. Those opinions, and their cumulative impact on the damages calculation, are summarized below. A. Opinion 1: Narrowed GRR Definition Professor Hargrove's first and most consequential opinion concerns the definition of Gross Room Revenue under

IV. DETAILED CRITIQUE OF HARGROVE'S METHODOLOGY This section analyzes each of Professor Hargrove's principal methodological choices and identifies specific errors, contractual misinterpretations, and evidentiary failures that undermine his conclusions. For each error, this memorandum also recommends rebuttal topics for Dr. Kettlewell's forthcoming rebuttal report. A. Error 1: Improper Narrowing of the GRR Definition

V. INTERNAL INCONSISTENCIES AND EVIDENTIARY GAPS IN THE HARGROVE REPORT Beyond the specific methodological errors addressed in Section IV, the Hargrove Report contains several internal inconsistencies and evidentiary gaps that undermine its overall credibility and reliability. A. Inconsistency with Coastal Palms' Own Financial Records As discussed in Section IV.B above, Professor Hargrove's narrowed GRR definition —

VI. ASSESSMENT OF IMPACT ON CASE A. Magnitude of the Gap Between Expert Opinions The gap between the two expert damages opinions is approximately $143.8 million — a difference that will be among the most significant issues for the trier of fact to resolve: The gap is not attributable to a single factor but rather to the cumulative effect of Professor Hargrove's methodological choices across multiple dimensions of the

1. Motion to Exclude Opinions on Late-Payment Interest and Liquidated Damages. Professor Hargrove's opinions that the contractual interest rate under FLA § 4.6 and the liquidated-damages provision under FLA § 15.3 are unenforceable penalties constitute impermissible legal conclusions offered by a non-legal expert. Under Daubert and Marsh, expert testimony must be based on "sufficient facts or data" and "reliable prin

2. Motion to Exclude or Limit the "Reliability discount" Methodology. Professor Hargrove's "reliability discount" for the 2013–2016 period could be challenged as lacking sufficient factual foundation given the available Suncoast financial records for those years. Under Daubert and Marsh, an expert methodology must be based on adequate data. Hargrove's decision to discard the 2013–2016 period based on PMS data gaps —

VII. RECOMMENDED REBUTTAL TOPICS FOR DR. KETTLEWELL'S REBUTTAL REPORT The following is a consolidated summary of all recommended rebuttal topics for Dr. Kettlewell's rebuttal report, organized by the Hargrove errors identified in this memorandum. Dr. Kettlewell's rebuttal report is due June 9, 2023.

1. GRR Definition — Walk-In Cash Payments. Dr. Kettlewell should present a detailed analysis of the FLA § 4.1 language, with particular emphasis on the "all revenues," "any booking channel, direct or indirect," and "regardless of the entity collecting such revenue" phrases. The analysis should be cross-referenced with the Brecker deposition testimony (Day 1, Tr. at 147:8–148:12, 162: