Contract analysis

I. Introduction and Purpose This memorandum provides our detailed comments and suggested revisions to the draft expert report of Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, which was received by our office on April 1, 2023 (the "Draft Report"). We have reviewed the Draft Report in its entirety, including the narrative text, the nine damages tables, and all fourteen appendices, and we have cross-referenc

II. Executive Summary of Draft Report Before turning to our specific comments, we summarize below the key opinions and findings set forth in the Draft Report so that this memorandum may be read as a self-contained reference document. Dr. Kettlewell's Draft Report opines that Coastal Palms Franchise Holdings LLC, through its affiliate Suncoast Room Management Inc. ("Suncoast") and its principal, Randall Brecker, syste

III. Comments on Overall Structure and Presentation A. Report Organization The Draft Report is currently organized into the following nine sections: (1) Qualifications, (2) Scope of Engagement, (3) Materials Reviewed, (4) Background, (5) Methodology, (6) Findings, (7) Damages Calculations, (8) Conclusions, and (9) Exhibits/Appendices. This structure is generally logical and follows the customary format for forensic a

IV. Comments on Methodology Section — Extrapolation from Audited Properties to Full Portfolio A. Overview of Current Approach The core analytical challenge in this case is that Thornbury & Associates' preliminary audit covered only 10 of the 22 franchised properties, and only for the three most recent fiscal years (2019–2021). The remaining 12 properties and the earlier fiscal years (2013–2018) have not been independ

1. Strengthen the Representativeness Analysis The Draft Report's current discussion of why the 10 audited properties are representative of the full 22-property portfolio is conclusory. Dr. Kettlewell states that the audited properties "are broadly representative of the Coastal Palms franchise portfolio," but she does not provide the supporting data that would allow a reader to independently verify this assertion. We

2. Address Potential Selection Bias We anticipate that Coastal Palms' expert, Prof. Hargrove, will argue that Thornbury's decision to audit the top 10 properties by reported GRR introduces selection bias, because larger properties may exhibit systematically different underreporting patterns than smaller ones. The argument would be that properties generating higher revenue have more complex booking channels and greate

3. Temporal Extrapolation Perhaps the most significant methodological challenge is the backward extrapolation of findings from the 2019–2021 audit period to the full 2013–2021 time frame. The Thornbury audit only confirmed underreporting for three years. The Draft Report extends the underreporting finding back to January 2013, the beginning of the period when Suncoast Room Management was actively diverting revenue. T

4. Year-by-Year Variation The Draft Report notes that the underreporting percentage ranged from 22% to 31% depending on the property and year, but it does not explain the factors driving this variation. We recommend that Dr. Kettlewell add a brief discussion — even a single paragraph would suffice — acknowledging and explaining this variability. Relevant factors include: • The growth of direct-booking channels over t

V. Comments on Damages Tables — Reconciliation and Corrections A. Underreported GRR Summary Table (Draft Table 3) The Draft Report presents its central finding — total underreported GRR across all 22 properties for 2013–2021 — in Draft Table 3. The summary table states the total as $197.8 million. This is the figure upon which all downstream damages calculations (royalties, marketing contributions, interest) are base

I. Grand Total Reconciliation The grand total of damages presented in the Draft Report is: Direct underpayments (royalties + marketing + technology fees): $16,095,000 Late-payment interest: $28,400,000 Liquidated damages: $105,500,000 Grand total: $149,995,000 This figure rounds to approximately $150 million, which is consistent with the damages figure alleged in Verimark's Amended Complaint. The internal arithmetic

VI. Evidentiary Support — Record Citations A. Key Deposition Testimony to Cite The Draft Report references deposition testimony at several points but generally does so in a summary fashion without citing specific transcript pages and line numbers. We recommend that the final report include precise citations for the following key testimony, all of which is directly relevant to the foundation of Dr. Kettlewell's opinio

VII. Anticipated Defense Critiques and Prophylactic Recommendations As part of our review of the Draft Report, we have considered the defense arguments most likely to be raised by Coastal Palms and its expert, Prof. Grant Hargrove of Hargrove Economic Consulting Inc. We set forth below the anticipated critiques and our recommendations for prophylactic language or analysis that Dr. Kettlewell should incorporate into t