Contract analysis

I. INTRODUCTION Plaintiff Verimark Hospitality Group Inc. ("Verimark"), a publicly traded hospitality company (Nasdaq: VHMK) headquartered at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301, respectfully moves this Court for partial summary judgment pursuant to Florida Rule of Civil Procedure 1.510 on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund)

II. STATEMENT OF UNDISPUTED MATERIAL FACTS Verimark incorporates by reference the separately filed Statement of Undisputed Material Facts, which sets forth 127 numbered paragraphs supported by specific citations to the evidentiary record. For the Court's convenience, the key undisputed facts are summarized below in narrative form, organized by topic. A. The Parties and Their Franchise Relationship Verimark Hospitalit

Section 4.1 of each FLA imposes a royalty obligation and defines the base upon which that royalty is calculated. The provision states in relevant part: Royalty Fee. Franchisee shall pay to Franchisor a continuing monthly royalty fee ("Royalty Fee") equal to five percent (5%) of Gross Room Revenue. "Gross Room Revenue" or "GRR" shall mean all revenues derived from or attributable to the rental of guest rooms at the Ho

Section 4.2 of each FLA imposes a marketing-fund contribution obligation: Marketing Fund Contribution. Franchisee shall pay to Franchisor a continuing monthly contribution to the Verimark National Marketing Fund ("Marketing Fund Contribution") equal to two and one-half percent (2.5%) of Gross Room Revenue, as defined in Section 4.1 above. (SUMF ¶ 20; Ex. E at § 4.2.)

Section 4.3 of each FLA imposes a technology fee: Technology Fee. Franchisee shall pay to Franchisor a continuing monthly technology fee ("Technology Fee") equal to twelve dollars and fifty cents ($12.50) per available room per month, adjusted annually on January 1 of each calendar year by the percentage change in the Consumer Price Index for All Urban Consumers (CPI-U) for the twelve-month period ending September 30

Section 4.4 requires Coastal Palms to submit monthly GRR reports to Verimark by the fifteenth day of the following month, together with payment of all Royalty Fees, Marketing Fund Contributions, and Technology Fees owed for the preceding month. (SUMF ¶ 22; Ex. E at § 4.4.) The monthly report must set forth total GRR broken down by booking channel (Verimark Central Reservations, Online Travel Agencies, property-direct

Section 4.6 of each FLA imposes late-payment interest: Late Payment Interest. Any amounts owed by Franchisee under this Agreement that are not received by Franchisor within five (5) business days of the applicable due date shall bear interest at the rate of one and one-half percent (1.5%) per month, compounded monthly, from the due date until paid in full. (SUMF ¶ 24; Ex. E at § 4.6.)

Section 8.2 of each FLA grants Verimark the right to audit Coastal Palms' books and records: Audit Rights. Franchisor shall have the right, upon not less than ten (10) business days' prior written notice, to inspect and audit Franchisee's books, records, accounts, tax returns, bank statements, and other documents relating to the Hotel, including all records relating to the calculation and reporting of Gross Room Reve

Section 14.1 of each FLA provides a general cure provision for material breaches: Notice and Cure. In the event of a material breach by either party, the non-breaching party shall provide written notice thereof to the breaching party, specifying the nature of the breach with reasonable particularity. The breaching party shall have thirty (30) days from receipt of such notice to cure the breach to the reasonable satis

Section 14.2(c) of each FLA carves out a critical exception to the cure provision: Incurable Breaches. Notwithstanding Section 14.1, the following shall constitute material breaches that are incapable of cure, and Franchisor may terminate this Agreement immediately upon written notice: . . . (c) systematic underreporting of Gross Room Revenue by Franchisee, whether by omission, misclassification, diversion of revenue

Section 15.3 of each FLA provides for liquidated damages upon termination for cause: Liquidated Damages. Upon termination of this Agreement by Franchisor for cause pursuant to Section 14, Franchisee shall pay to Franchisor, as liquidated damages and not as a penalty, an amount equal to three (3) times the aggregate Royalty Fees paid or payable by Franchisee during the twelve (12) full calendar months immediately prec

Section 17.4 of each FLA contains a no-waiver provision: No Waiver. The failure of either party to enforce any provision of this Agreement shall not constitute a waiver of such provision or the right to enforce it at a later time. All waivers must be in writing and signed by the waiving party to be effective. (SUMF ¶ 30; Ex. E at § 17.4.) C. Establishment of Suncoast Room Management Inc. and the Revenue Diversion Sch

I. Notice of Material Breach and Failure to Cure On February 4, 2022, following receipt and review of Thornbury & Associates' preliminary audit findings, Verimark issued a formal Notice of Material Breach to Coastal Palms pursuant to FLA § 14.1. (SUMF ¶ 94; Ex. UU (Notice of Material Breach dated February 4, 2022).) The Notice was sent by overnight courier (Severin Partners LLC tracking number 7723 4561 8890) to Coas

III. LEGAL STANDARD A. Summary Judgment Under Florida Law Under Florida Rule of Civil Procedure 1.510, summary judgment is appropriate where there is "no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." Fla. R. Civ. P. 1.510(c). The purpose of summary judgment is to avoid the expense and delay of trial where the evidence demonstrates that no genuine factu

IV. ARGUMENT A. Count I — Breach of Contract (Royalties): Coastal Palms Breached FLA § 4.1 by Systematically Excluding Suncoast-Collected Revenues from GRR The evidence in the record establishes, without genuine dispute, that Coastal Palms breached its obligation under FLA § 4.1 to pay a royalty of 5% of Gross Room Revenue. The breach was accomplished by systematically excluding from GRR all revenues collected by Sun

1. The FLA Unambiguously Requires Inclusion of All Guest-Room Revenues in GRR Regardless of the Collecting Entity. The starting point of the analysis is the contractual text. FLA § 4.1 defines Gross Room Revenue as follows: "Gross Room Revenue" or "GRR" shall mean 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 r

2. Coastal Palms' "Separate Entity" Defense Fails as a Matter of Law. Coastal Palms' principal defense to Count I is its assertion that FLA § 4.1's GRR definition is "ambiguous" as applied to revenues collected by Suncoast Room Management Inc. because Suncoast is a legally separate entity from Coastal Palms and was not itself a party to the FLAs. This argument is foreclosed by the plain language of the contract, by t

3. Coastal Palms' Contention That Verimark Was Aware of Suncoast Is Irrelevant. Coastal Palms further contends that Verimark was "aware" of Suncoast's role because Suncoast was identified in certain property-management agreements submitted during the franchise-application process for a subset of the twenty-two properties. Even accepting this contention as true for purposes of this motion — which Verimark does solely