Contract analysis

I. INTRODUCTION Verimark Hospitality Group Inc. moves this Court for an order compelling Defendant Coastal Palms Franchise Holdings LLC to produce all financial records of Suncoast Room Management Inc., a Florida corporation wholly controlled by Defendant Randall Brecker ("Brecker"), who simultaneously serves as Coastal Palms' Managing Member and holds a 60% equity interest in that entity. As set forth in detail belo

II. STATEMENT OF RELEVANT FACTS A. The Franchise Relationship Coastal Palms Franchise Holdings LLC entered its first Franchise License Agreement ("FLA") with Verimark on June 15, 2007, for a single Verimark Suites branded property located in Naples, Florida. That initial FLA established the template for the franchise relationship that would grow substantially over the following twelve years. Over the course of that p

Section 8.2 of each FLA grants Verimark the right to audit the franchisee's books and records upon 10 business days' written notice. If such an audit reveals that the franchisee has underreported GRR by more than 2% for any reporting period, the franchisee is responsible for all costs of the audit in addition to any underpayment amounts plus contractual interest. This audit right, coupled with the broad GRR definitio

III. MEMORANDUM OF LAW A. Legal Standard for Motions to Compel Rule 1.350 of the Florida Rules of Civil Procedure authorizes any party to serve upon any other party a request to produce and permit the requesting party to inspect and copy any designated documents or things that constitute or contain matters within the scope of Rule 1.280(b) and that are in the possession, custody, or control of the party upon whom the

1. Coastal Palms Has Possession, Custody, or Control of Suncoast Records. Under Rule 1.350 of the Florida Rules of Civil Procedure, a party is obligated to produce documents that are in its "possession, custody, or control." Florida courts have consistently held that "control" for purposes of Rule 1.350 encompasses not only documents in a party's physical possession, but also documents that the party has the legal ri

2. Suncoast's Records Are Not Protected by Any Privilege. Coastal Palms also invoked the "accountant-client privilege" as a basis for withholding Suncoast's financial records. This assertion is both legally insufficient and substantively meritless. As a threshold matter, Florida does not recognize a broad accountant-client privilege. Section 473.316 of the Florida Statutes provides a limited statutory privilege for "

IV. SPECIFIC CATEGORIES OF DOCUMENTS SOUGHT Verimark requests an order compelling Coastal Palms Franchise Holdings LLC to produce, within twenty-one (21) days of the Court's order, the following categories of Suncoast Room Management Inc. records, in accordance with the Joint E-discovery Protocol Stipulation filed June 20, 2022:

1. Bank Statements. All bank account statements for every account held by or in the name of Suncoast Room Management Inc. from January 1, 2013 through the present, including without limitation accounts at Ironclad National Bank and any other financial institution at which Suncoast maintains or has maintained deposit, operating, or investment accounts.

2. General Ledgers. Complete general ledgers for Suncoast Room Management Inc. for fiscal years 2013 through 2022 (year-to-date), including all journal entries, account codes, and supporting detail.

3. Management-Fee Invoices. All invoices, billing statements, debit memoranda, credit memoranda, or other records reflecting the management fee (reported to be 12% of direct-booking revenue) charged by Suncoast Room Management Inc. to any Coastal Palms property entity, including but not limited to Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and all other property-level LLCs associated with any of the

4. OTA Reconciliation Reports. All reconciliation reports, commission statements, net-rate agreements, merchant-model settlement reports, and related records reflecting revenue received by Suncoast Room Management Inc. from third-party online travel agency channels (including but not limited to Aldermere Technologies, Bramwell Holdings, Drayton Corporation, Drayton Software, Northpoint Corporation, and Penmark Indust

5. Gulfcoastrooms.com Booking Logs. All booking records, reservation logs, revenue reports, payment processing records, website analytics reports, and financial data associated with the website gulfcoastrooms.com operated by or on behalf of Suncoast Room Management Inc.

6. Corporate-Direct Contract Records. All contracts, agreements, rate letters, requests for proposals, and revenue records related to corporate-direct booking arrangements managed by Suncoast Room Management Inc. for any of the 22 franchised properties, including records reflecting the identity of each corporate client, the negotiated rates, and the revenues generated from each such arrangement.

7. Inter-Entity Transfer Records. All records reflecting transfers of funds between Suncoast Room Management Inc. and any Coastal Palms property entity (including Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and all other property-level LLCs), Coastal Palms Franchise Holdings LLC, or any other entity owned or controlled by Randall Brecker, including wire transfer confirmations, ACH transaction records,

8. Tax Returns. Federal and state income tax returns (including all schedules and attachments) filed by or on behalf of Suncoast Room Management Inc. for tax years 2013 through 2021.

9. Financial Statements. All financial statements (whether audited, reviewed, compiled, or unaudited) prepared for, by, or on behalf of Suncoast Room Management Inc. for fiscal years 2013 through 2022 (year-to-date), including balance sheets, income statements, statements of cash flows, and any accompanying notes or management reports.

10. Communications Regarding GRR Reporting. All documents and communications — whether in the form of emails, memoranda, letters, instant messages, text messages, or any other medium — between or among Suncoast Room Management Inc. personnel and Coastal Palms Franchise Holdings LLC personnel (including property-level managers, controllers, accounting staff, and any officers or directors) regarding the reporting or no

V. CONCLUSION AND PRAYER FOR RELIEF Suncoast Room Management Inc.'s financial records lie at the very core of this litigation. They are the records that will reveal the full scope of the alleged nine-year revenue diversion scheme through which Coastal Palms systematically underreported Gross Room Revenue and underpaid royalties, marketing-fund contributions, and technology fees owed to Verimark. They are directly rel

1. Compelling Defendant Coastal Palms Franchise Holdings LLC to produce all documents responsive to the categories identified in Section IV of this Motion within twenty-one (21) days of the date of the Court's order, in accordance with the Joint E-discovery Protocol Stipulation filed June 20, 2022;

2. Awarding Verimark its reasonable attorneys' fees and costs incurred in bringing this Motion, pursuant to Rule 1.380(a)(4) of the Florida Rules of Civil Procedure; and

3. Granting such other and further relief as this Court deems just and proper. CERTIFICATE OF GOOD-FAITH CONFERENCE Pursuant to Rule 1.380(a)(2) of the Florida Rules of Civil Procedure and this Court's standing orders regarding discovery disputes, the undersigned counsel hereby certifies that counsel for Plaintiff conferred in good faith with counsel for Defendants in an effort to resolve the issues raised by this Mo

1. I am an attorney duly admitted to the practice of law in the State of Florida, Florida Bar No. 0119644. I am currently employed as a Lead Associate at the law firm of Calderwood & Harkness LLP, located at 110 SE 6th Street, Suite 2800, Fort Lauderdale, Florida 33301. I have been a member of the Florida Bar for approximately seven years. I have been assigned to this matter since its inception and serve as the Lead

2. On March 7, 2022, Plaintiff Verimark Hospitality Group Inc. ("Verimark") filed a Complaint in this action asserting ten counts against Defendants Coastal Palms Franchise Holdings LLC ("Coastal Palms"), Randall Brecker ("Brecker"), and Suncoast Room Management Inc. ("Suncoast"). The counts include breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent concealment, fraudulent m

3. On July 11, 2022, Verimark served its First Set of Interrogatories (comprising 25 individually numbered interrogatories) and its First Request for Production of Documents (comprising 147 individually numbered requests for production) on Defendant Coastal Palms. Among the 147 requests for production, the following specifically sought the financial records of Suncoast Room Management Inc.: (a) RFP No. 41 requested a

4. True and correct copies of the relevant excerpts of Plaintiff's First Request for Production to Defendant Coastal Palms (served July 11, 2022), including the above-referenced RFPs, are attached hereto as Exhibit 1. Coastal Palms' Deficient Production

5. On August 22, 2022, Defendant Coastal Palms served its objections and responses to Verimark's First Request for Production and produced approximately 84,000 documents. The production was made via the agreed-upon e-discovery platform hosted by Nexagen Document Solutions LLC.

6. I personally reviewed the production and supervised Calderwood & Harkness LLP's review team in analyzing the 84,000 documents produced by Coastal Palms. Based on that review, I can confirm that the production contained zero Suncoast Room Management Inc. financial records. Specifically, the production did not include any bank statements of Suncoast, any general ledger entries for Suncoast, any management-fee invoic

7. Coastal Palms' written objections to the Suncoast-related RFPs (Nos. 41 through 46) asserted three grounds for non-production: (a) that Suncoast Room Management Inc. is a "separate legal entity" and that its records are beyond the scope of discovery from Coastal Palms; (b) that the requests are "overbroad, unduly burdensome, and not reasonably calculated to lead to the discovery of admissible evidence"; and (c) th

8. True and correct copies of Coastal Palms' objections and responses to RFP Nos. 41 through 46 (served August 22, 2022) are attached hereto as Exhibit 2. Meet-and-Confer Efforts

9. On August 30, 2022, I sent a detailed discovery deficiency letter to Gabriela Montes of Whitfield, Barrow & Crane LLP, at 1221 Brickell Avenue, Suite 3000, Miami, Florida 33131. The letter was eight pages in length and identified 23 specific categories of deficient or missing production in Coastal Palms' August 22, 2022 production. Among the identified deficiencies, the letter specifically addressed the complete a

10. On September 6, 2022, I participated in a telephonic conference with Gabriela Montes and Ethan Doyle of Whitfield, Barrow & Crane LLP, counsel for Defendants. The call lasted approximately 45 minutes. During the call, we discussed the 23 categories of deficient or missing production identified in my August 30, 2022 letter. With respect to the Suncoast records, Ms. Montes reiterated the position that Suncoast is a

11. On September 8, 2022, I sent a follow-up meet-and-confer letter to Gabriela Montes memorializing the positions of both parties as discussed during the September 6, 2022 telephonic conference. The letter confirmed the impasse on the Suncoast records issue, documented Coastal Palms' refusal to produce the records voluntarily, and advised that Verimark would seek court intervention if Coastal Palms did not reconside

12. Suncoast Room Management Inc.'s financial records are critical to Verimark's ability to prove its claims and quantify its damages in this action. Based on information provided by the whistleblower, Janet Kerrigan, and corroborated by Thornbury & Associates CPAs LLP's preliminary audit findings, Suncoast was established no later than January 2013 to collect guest-room revenue from direct booking channels — includi

13. The whistleblower, Janet Kerrigan, specifically identified Suncoast as the primary vehicle through which guest-room revenue was diverted away from GRR reports. Thornbury & Associates CPAs LLP's preliminary audit findings, delivered January 18, 2022, indicated that the 10 properties audited had underreported GRR by approximately 26% for the 2019–2021 period. However, a full and precise quantification of underrepor

14. Verimark anticipates retaining a forensic accounting expert who will require Suncoast's financial records to reconstruct true GRR across all 22 properties for the 2013–2021 period. Specifically, Verimark has been in discussions with Ridgeline Forensic Advisory LLC regarding the retention of Dr. Sharon Kettlewell, CPA/CFF, CFE, to perform the forensic analysis. Dr. Kettlewell has advised that she will need Suncoas

15. Randall Brecker holds dual roles in the entities at the center of this case. He is the Managing Member and 60% equity holder of Coastal Palms Franchise Holdings LLC. He is simultaneously the President of Suncoast Room Management Inc. The remaining membership interests in Coastal Palms are held by Theresa Brecker (15% equity; Randall's spouse, who manages payroll and human resources functions for the Coastal Palms

16. Suncoast Room Management Inc. is itself a named de