Contract analysis

I. PRELIMINARY STATEMENT Plaintiff Verimark Hospitality Group Inc. ("Verimark") respectfully submits this Memorandum of Law in support of its Motion for Partial Summary Judgment on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund Contributions) of its Verified Complaint against Defendant Coastal Palms Franchise Holdings LLC ("Coastal Palms"). By this motion, Verimark seeks su

II. STATEMENT OF THE CASE A. The Parties Verimark Hospitality Group Inc. is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol "VHMK," with its principal executive offices located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301. Verimark operates and franchises approximately 340 branded hotels across the southeastern United States under three distinc

Section 4.1 — Royalties. Section 4.1 of each FLA requires Coastal Palms to pay Verimark a royalty equal to five percent (5%) of Gross Room Revenue. The term "Gross Room Revenue" or "GRR" is defined in Section 4.1 as follows: "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such

Section 4.2 — Marketing-Fund Contribution. Section 4.2 requires Coastal Palms to contribute two and one-half percent (2.5%) of GRR to the Verimark Marketing Fund, using the same GRR definition set forth in Section 4.1. (SUMF ¶ 42.)

Section 4.3 — Technology Fee. Section 4.3 requires a technology fee of $12.50 per available room per month, adjusted annually for changes in the Consumer Price Index, with a cap of three percent (3%) per year. The technology fee is not calculated on the basis of GRR and is not at issue in this motion. (SUMF ¶ 43.)

Section 4.6 — Late-Payment Interest. Section 4.6 provides that any amounts not timely paid shall bear interest at the rate of one and one-half percent (1.5%) per month, compounded monthly. (SUMF ¶ 44.)

Section 8.2 — Audit Rights. Section 8.2 grants Verimark the right to audit the franchisee's books and records upon ten (10) business days' written notice. If an audit reveals that the franchisee has underpaid amounts due under the FLA by more than two percent (2%) of reported GRR, the franchisee is required to bear all costs associated with the audit. (SUMF ¶ 45.)

Section 14.1 — Cure Period. Section 14.1 provides that, upon written notice of a material breach, the franchisee shall have thirty (30) days to cure the breach to the franchisor's reasonable satisfaction. (SUMF ¶ 46.)

Section 14.2(c) — Incurable Breach. Section 14.2(c) provides, in pertinent part: "Notwithstanding Section 14.1, systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." This provision establishes, as a matter of contractual definition, that the precise conduct at issue in this case — systematic underreporting of GRR — constitutes a material breach that cannot be r

Section 15.3 — Liquidated Damages. Section 15.3 provides that, upon termination of the FLA for cause, the franchisor shall be entitled to liquidated damages equal to three times (3×) the trailing-twelve-month royalties for the affected property. This provision is relevant to damages, not liability, and is not at issue in this motion. (SUMF ¶ 48.) Under the FLAs, Coastal Palms was required to submit monthly GRR report

III. LEGAL STANDARD A. Summary Judgment Under Florida Rule of Civil Procedure 1.510 Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fla. R. Civ. P. 1.510(a). The Court's role at the summary-judgment stage is not to weigh the evidence or to resolve disputed issues of fact, but rather to determine whether, viewing th

IV. UNDISPUTED MATERIAL FACTS The material facts necessary to resolve this motion are set forth in detail in Plaintiff's separately filed Statement of Undisputed Material Facts, which consists of 127 numbered paragraphs, each supported by specific citations to the record. That Statement was filed on September 29, 2023. Verimark summarizes the key undisputed facts below, organized thematically. Unless otherwise noted,

V. ARGUMENT A. Count I: Coastal Palms Breached § 4.1 of Each FLA by Failing to Pay Royalties on All Gross Room Revenue

1. The Elements of Breach of Contract Are Satisfied as a Matter of Law. Under Florida law, the elements of a cause of action for breach of contract are: (1) the existence of a valid contract; (2) a material breach of that contract; and (3) damages resulting from the breach. See Wilsonart, LLC v. Lopez, 308 So. 3d 56, 60 (Fla. 2020); In re Std. Jury Instructions — Contract and Bus. Cases, 116 So. 3d 284, 303 (Fla. 201

2. The FLA's GRR Definition Unambiguously Encompasses Suncoast-Collected Revenue. The Court need look no further than the plain language of the FLAs to resolve the central legal question in this case. Section 4.1 defines Gross Room Revenue as: "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the ent

3. Coastal Palms' Ambiguity Defense Fails as a Matter of Law. Coastal Palms' principal defense is that the GRR definition in Section 4.1 is "ambiguous" as to revenues collected by a "separate management entity" such as Suncoast. This defense fails as a matter of law for three independent reasons. First, the language is not susceptible to more than one reasonable interpretation. Under Florida law, ambiguity arises onl

4. Extrinsic Evidence, Even If Considered, Confirms Breach. Even if this Court were to conclude — over Verimark's objection — that some degree of ambiguity exists in the GRR definition, the extrinsic evidence uniformly supports Verimark's interpretation and confirms Coastal Palms' breach. The Court need not reach this issue because the contract is unambiguous, but Verimark addresses it in the alternative to demonstra

5. The Breach Is Material as a Matter of Law. Under Florida law, the materiality of a breach is ordinarily a question of fact for the trier of fact. See Restatement (Second) of Contracts § 241 (1981) (listing factors bearing on materiality). However, materiality may be resolved as a matter of law where the undisputed facts point in only one direction. See S&A Rest. Corp. v. Leal, 892 So. 2d 1069, 1073 (Fla. 4th DCA 2