PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
February 10, 2026
PRIVILEGE LEGEND: This memorandum and all attachments hereto are protected by the attorney-client privilege and the work-product doctrine. This memorandum has been prepared by Calderwood & Harkness LLP at the direction and for the benefit of Verimark Hospitality Group Inc. in anticipation of litigation. It contains confidential legal analysis, mental impressions, conclusions, and strategy of counsel. This memorandum is not to be disclosed, disseminated, distributed, or copied, in whole or in part, to any person or entity without the prior written consent of both Calderwood & Harkness LLP and Verimark Hospitality Group Inc. Inadvertent disclosure does not constitute a waiver of any applicable privilege or protection.
I. PURPOSE OF THIS MEMORANDUM
Calderwood & Harkness LLP ("C&H") has received a formal engagement proposal from Ridgepoint Advisory Group LLC ("Ridgepoint"), a forensic accounting and data-analytics consultancy based in Fort Lauderdale, Florida, to perform forensic payroll analytics and damages modeling in connection with the pre-litigation wage-and-hour audit of Verimark Hospitality Group Inc. ("VHG" or "Verimark"). The purpose of this memorandum is to evaluate Ridgepoint's qualifications, proposed scope of work, fee estimate, and strategic value to VHG's defense posture, and to provide a recommendation to VHG regarding whether to authorize the engagement.
As discussed in greater detail below, C&H proposes that the Ridgepoint engagement be structured to preserve attorney-client privilege and work-product protection, with Ridgepoint retained as a consulting, non-testifying expert under the direct supervision and control of C&H. This structure will afford VHG the maximum degree of protection against discovery of Ridgepoint's analysis and work product in the event that the anticipated litigation proceeds.
This recommendation arises in the context of a demand letter dated January 14, 2026, received by VHG from Garza, Linden & Okafor LLP ("GLO") on behalf of Daniela M. Serrano, a former hourly employee at the Verimark Grand Orlando property. The GLO demand letter threatens the commencement of a collective action under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 et seq., and a parallel class action under applicable Florida wage-and-hour law, with an estimated damages demand of $18.5 million. Based on C&H's preliminary analysis — which necessarily relies on blended averages and assumptions rather than actual payroll data — C&H's mid-range exposure estimate for VHG is in the range of $22 million to $38 million, inclusive of liquidated damages but exclusive of attorneys' fees and costs that would be recoverable by a prevailing plaintiff. C&H's theoretical broad ceiling estimate, which assumes maximum opt-in and class membership rates, willful violation findings, and the longest applicable statute of limitations across all claim categories, approximates $202.4 million. These estimates underscore both the severity of the potential exposure and the critical importance of refining them through data-driven analysis.
The VHG Audit Committee, at its meeting on January 29, 2026, authorized an expenditure of up to $350,000 for the scoping phase of this matter, encompassing both outside legal fees and consultant costs. This memorandum evaluates Ridgepoint's proposal in the context of that authorization and the overall scoping-phase budget.
II. BACKGROUND ON THE ENGAGEMENT NEED
A. Nature of the Claims and Data Challenges
The GLO demand letter, which C&H has previously circulated and analyzed in its initial assessment memorandum dated January 22, 2026, asserts five categories of wage-and-hour violations affecting hourly employees across VHG's seven Florida-branded hospitality properties:
1. Unpaid Overtime. GLO alleges that VHG systematically failed to pay overtime compensation at one and one-half times the regular rate of pay for hours worked in excess of forty in a workweek, in violation of 29 U.S.C. § 207(a). The allegation is that VHG's timekeeping and payroll practices resulted in the systematic undercount of compensable hours, thereby reducing or eliminating overtime entitlements for affected employees.
2. Illegal Automatic Meal-Break Deductions. GLO alleges that VHG maintained and enforced an automatic payroll deduction rule — identified in the Luminos TimeTrack system as auto-deduction rule AR-MEAL-030 — that automatically deducted thirty (30) minutes from each employee's compensable time for any shift of six or more hours, irrespective of whether the employee actually received an uninterrupted, duty-free meal break. GLO contends that employees were frequently required to perform work during their meal periods, respond to guest requests, attend to operational needs, or remain on-call, and that the automatic deduction operated to deprive employees of compensation for time actually worked.
3. Uncompensated Pre-Shift and Post-Shift Work. GLO alleges that VHG's hourly employees were required to arrive at their workstations and perform work-related tasks — including logging into systems, reviewing shift assignments, donning required uniforms or safety equipment, participating in pre-shift briefings, and performing other preparatory activities — for approximately fifteen to twenty-five minutes before the start of their scheduled shifts and after the end of their scheduled shifts, and that VHG failed to compensate employees for this time.
4. Failure to Pay Florida Tipped-Employee Minimum Wage. GLO alleges that certain tipped employees — including front-desk agents and concierge personnel who participate in VHG's tip-pooling arrangements — were not paid at least the applicable Florida tipped-employee minimum wage, as required by Article X, Section 24 of the Florida Constitution. GLO asserts that VHG improperly applied the tip credit to employees who did not regularly and customarily receive tips sufficient to bring their total compensation to or above the applicable minimum wage, and that VHG failed to comply with the notice requirements for claiming the tip credit.
5. Misclassification of "Lead" and "Senior" Hourly Roles. GLO alleges that VHG improperly classified certain hourly employees holding "lead" and "senior" designations — including Lead Housekeeper, Senior Front Desk Agent, Lead Banquet Server, and similar titles — as exempt from the FLSA's overtime requirements. GLO contends that these employees did not satisfy the duties tests for any recognized FLSA exemption and that, despite their titles, they performed substantially the same duties as non-exempt hourly employees and did not exercise the requisite discretion, independent judgment, or supervisory authority.
The putative collective and class period identified in the GLO demand letter extends from January 2023 to the present, though VHG's exposure may extend further depending on the applicable statute of limitations for each claim category. GLO estimates that between 4,100 and 5,900 individuals — encompassing both current and former hourly employees — may be affected across VHG's seven Florida-branded properties.
All payroll processing and timekeeping functions for VHG's Florida properties are administered through the Luminos TimeTrack platform, under account number LTT-VHG-2022-0041, which has been operated by Luminos Payroll Solutions Inc. ("Luminos") since its onboarding on January 1, 2022. VHG's prior payroll and timekeeping vendor, Meridian Workforce Systems, was replaced by Luminos effective that date. Accordingly, the most complete and systematic electronic data set available to VHG commences January 1, 2022. Pre-2022 data resides in archived Meridian systems and may be more difficult to access and analyze, though C&H is separately evaluating the availability and usability of that legacy data.
The central data element at issue in the meal-break claims is auto-deduction rule AR-MEAL-030, which was configured in the Luminos TimeTrack system at VHG's direction. This rule automatically reduces the compensable time recorded for any employee who works a shift of six or more hours by thirty minutes, on the assumption that the employee took a thirty-minute unpaid meal break. The rule does not require a manual clock-out or clock-in by the employee to effect the deduction; rather, it is applied systemically and automatically by the platform. GLO's core contention regarding this claim category is that this automatic deduction operates as a de facto policy of non-payment for work performed during meal periods.
The volume and complexity of the timekeeping data at issue are substantial. Across VHG's seven Florida properties, there are currently approximately 1,895 hourly employees (out of a total workforce of approximately 2,620, including salaried and management personnel). Over the multi-year lookback period — which extends to at least January 2023 under the most conservative limitations analysis and potentially to January 2021 under the Florida constitutional claims — the number of affected individuals may range from 4,100 to 5,900, and the number of individual time-punch records is estimated to be in the millions. This volume of data requires specialized forensic payroll expertise that is beyond C&H's in-house analytical capacity.
C&H has already taken steps to preserve the relevant data. On February 6, 2026, C&H transmitted a data-preservation letter to Shannon D. Prewitt, Senior Account Manager at Luminos Payroll Solutions Inc., directing Luminos to preserve all time-punch records, auto-deduction logs, system-configuration files, audit trails, pay-code mappings, and related data for account LTT-VHG-2022-0041 for the period from January 1, 2022 to the present. C&H has also directed VHG's internal team to implement a litigation hold on all payroll-related documents and communications.
B. Why a Forensic Payroll Consultant Is Necessary
The engagement of a forensic payroll analytics consultant is necessary for several interconnected reasons:
Statistical Sampling Methodology. The sheer volume of time-punch records at issue — spanning seven properties, approximately 1,895 current hourly employees, thousands of former employees, and multiple years of data — makes it impracticable to conduct a record-by-record manual review. A statistically valid sampling methodology must be designed and implemented by a qualified expert in order to produce defensible conclusions about the frequency and magnitude of the alleged violations. The sampling framework must account for variations across properties, departments, job codes, time periods, and the changing Florida minimum-wage rates that apply to different portions of the lookback period. This type of statistical analysis requires expertise in sampling design, confidence intervals, and extrapolation techniques that falls outside the core competency of a law firm.
Damages Reconstruction. The reconstruction of damages requires the reconciliation of multiple data sources, including Luminos TimeTrack exports (time-punch records, auto-deduction logs, pay-code mappings), VHG payroll registers, employee wage statements, scheduling records, and tip-pool distribution records. These data sources must be cross-referenced and reconciled to identify discrepancies between hours actually worked and hours compensated. This reconciliation process is inherently a forensic accounting exercise.
Meal-Break Analysis. Quantifying the actual incidence and duration of meal-break interruptions — as opposed to the blanket thirty-minute auto-deduction applied by rule AR-MEAL-030 — requires the analysis of punch data, system-login activity (e.g., point-of-sale system logins, property management system activity, telephone call logs), and other digital-footprint evidence that may indicate an employee was performing work during a nominal meal break. This analysis requires the ability to process and cross-correlate large volumes of electronic data from multiple systems.
Pre- and Post-Shift Time Analysis. Modeling uncompensated pre-shift and post-shift time requires the comparison of system-login timestamps and badge-swipe data against scheduled shift start and end times. This analysis must account for the variability of login and badge-swipe patterns across different properties, departments, and shifts, and must distinguish between genuinely compensable pre- and post-shift work and incidental, non-compensable activity.
Tip-Credit Compliance. The tip-credit compliance analysis requires the cross-referencing of tip-pool records with hourly wage data on an employee-by-employee basis, adjusted for the applicable Florida tipped-employee minimum-wage rate in effect during each relevant pay period. The Florida minimum wage — and by extension the tipped-employee minimum wage — has increased in stages pursuant to Article X, Section 24 of the Florida Constitution, requiring a period-by-period analysis.
Expert Damages Modeling. Ultimately, VHG requires a comprehensive, data-driven damages model that quantifies its potential exposure under multiple scenarios. This model will be essential to VHG's pre-litigation settlement posture and to informed strategic decision-making by VHG's management, Audit Committee, and board of directors. If litigation proceeds, the damages model will also serve as the foundation for any expert testimony that VHG may need to present, whether through Ridgepoint (if later designated as a testifying expert) or through a separate testifying expert.
Early Engagement Under Privilege. Having a consulting expert engaged early in the pre-litigation phase, under the protection of attorney-client privilege and the work-product doctrine, allows VHG to understand its true exposure before making critical strategic decisions — including whether to seek a pre-litigation resolution, how to respond to GLO's demand, and how to structure its defense if litigation is commenced. The privileged nature of the consulting engagement ensures that VHG's internal assessment of its own vulnerabilities is not subject to discovery.
III. OVERVIEW OF RIDGEPOINT ADVISORY GROUP LLC
A. Firm Profile
Ridgepoint Advisory Group LLC ("Ridgepoint") is a Florida limited liability company organized and existing under the laws of the State of Florida. Its principal offices are located at 500 East Broward Boulevard, Suite 1050, Fort Lauderdale, Florida 33394. Ridgepoint is a boutique forensic accounting and data-analytics consultancy that specializes in employment litigation support, payroll compliance audits, and damages quantification. The firm was founded with a specific focus on providing forensic accounting services to law firms and corporate clients facing complex wage-and-hour disputes, payroll compliance inquiries, and employment-related litigation in both federal and state courts. Ridgepoint maintains a lean but highly specialized team of forensic accountants, data analysts, and payroll-systems experts, and has developed a practice that is concentrated in the hospitality, retail, healthcare, and food-service industries — sectors that are disproportionately affected by wage-and-hour litigation due to the prevalence of hourly workforces, variable schedules, tip-based compensation structures, and complex timekeeping requirements.
B. Principal — Dr. Alicia Tran, CPA, CFF
The engagement would be led by Dr. Alicia Tran, the managing principal of Ridgepoint. Dr. Tran holds the following professional credentials and qualifications:
• Certified Public Accountant (CPA): Licensed by the Florida Board of Accountancy; active and in good standing.
• Certified in Financial Forensics (CFF): Specialty credential granted by the American Institute of Certified Public Accountants (AICPA), recognizing advanced competency in forensic accounting, including fraud detection, litigation support, and financial dispute resolution.
• Academic Background: Dr. Tran holds a doctorate in accounting with a concentration in forensic financial analysis, as well as a master's degree in applied statistics. Her academic training provides her with the dual expertise in forensic accounting methodology and statistical analysis that is directly relevant to the type of large-scale payroll audit contemplated here.
Dr. Tran's practice focuses specifically on forensic accounting with an emphasis on payroll analytics, wage-and-hour compliance, and employment-related damages modeling. She has conducted forensic payroll audits for numerous hospitality and retail-industry clients, involving the analysis of large data sets generated by enterprise timekeeping platforms similar in functionality and complexity to Luminos TimeTrack. Her experience encompasses the full range of wage-and-hour compliance issues, including overtime calculations, meal-break and rest-break deduction practices, off-the-clock work, tip-credit compliance, and employee classification.
Dr. Tran has served as an expert witness in FLSA collective actions and state-law wage-and-hour class actions in multiple jurisdictions, including federal courts in the Southern District of Florida, the Middle District of Florida, and the District of Nevada, as well as state courts in Florida, California, and New York. Her expert reports and testimony have addressed damages quantification, statistical sampling methodology, and payroll-system analysis. It is important to note that the initial engagement of Ridgepoint in this matter would be as a consulting, non-testifying expert, and Dr. Tran would not be designated as a testifying expert unless VHG later determines that such designation is strategically advisable. Her qualifications and testimony experience are nonetheless relevant to VHG's assessment because they confirm the quality and defensibility of her analytical work product and her potential availability as a testifying expert if needed.
C. Relevant Qualifications and Capabilities
Based on C&H's review of Ridgepoint's proposal, Dr. Tran's curriculum vitae (attached hereto as Attachment C), and C&H's prior experience working with Ridgepoint in other matters, C&H has identified the following qualifications and capabilities that are directly relevant to the VHG engagement:
• Luminos TimeTrack Proficiency. Ridgepoint has demonstrated proficiency in extracting, ingesting, and analyzing data from major enterprise timekeeping platforms, including direct experience with the Luminos TimeTrack system. This is a significant advantage, as it will reduce the time and cost associated with the data-acquisition and validation phase and will enable Ridgepoint to navigate the system's data architecture, auto-deduction configurations, pay-code mappings, and audit-log structures with minimal ramp-up.
• Statistical Sampling Methodologies. Ridgepoint has extensive experience designing and implementing statistically valid sampling frameworks for large employee populations in the context of wage-and-hour litigation. This expertise is directly relevant to the analysis of the putative collective of 4,100 to 5,900 individuals across VHG's seven properties.
• Damages-Reconstruction Modeling. Ridgepoint has constructed damages-reconstruction models for overtime violations, off-the-clock work claims, and meal-break deduction claims in prior engagements of comparable scope and complexity. The firm's damages models are typically Excel-based, with adjustable assumptions and scenario-modeling capabilities that allow counsel and the client to test the sensitivity of the exposure estimate to changes in key variables.
• FLSA and Florida Wage-and-Hour Expertise. Ridgepoint is familiar with the substantive legal frameworks applicable to VHG's exposure, including the FLSA's overtime and minimum-wage provisions, the Florida constitutional minimum-wage provisions (including the tipped-employee minimum wage and the annual adjustment mechanism), and the applicable statutes of limitations and damages calculations (including liquidated damages under 29 U.S.C. § 216(b)).
• Hospitality Industry Experience. Ridgepoint has particular expertise in the hospitality industry and has worked with multi-property hotel and resort companies with workforce profiles similar to VHG's. This industry-specific experience is valuable because hospitality operations present distinctive payroll-compliance challenges, including complex shift patterns (including split shifts, overnight shifts, and on-call arrangements), tip-pooling structures, seasonal workforce fluctuations, and the prevalence of tipped and sub-minimum-wage employees. Ridgepoint's familiarity with these operational realities will inform its analytical approach and ensure that its sampling framework and damages model account for the particularities of VHG's workforce.
• Multi-Property Engagements. Ridgepoint has prior experience conducting forensic payroll audits for multi-property hospitality companies, which requires the ability to design property-specific analyses while maintaining a consistent methodology across all properties for aggregation and comparison purposes. This capability is directly relevant to VHG's seven-property portfolio.
IV. RIDGEPOINT'S PROPOSED SCOPE OF WORK
Ridgepoint's engagement proposal describes a three-phase scope of work, as summarized below. C&H has reviewed the proposal in detail and considers the scope to be appropriately tailored to VHG's needs.
A. Phase 1: Data Acquisition and Validation
The first phase of the engagement involves the acquisition, ingestion, and validation of the raw data required for the forensic analysis. Specifically, Ridgepoint proposes to:
• Obtain and ingest raw data exports from Luminos TimeTrack under account LTT-VHG-2022-0041. The data to be obtained includes all time-punch records (clock-in, clock-out, and any manual edits), auto-deduction configurations (including rule AR-MEAL-030 and any other auto-deduction rules in effect during the relevant period), pay-code mappings, job-code assignments, department assignments, property assignments, employee status records, and system-audit logs documenting any modifications to time records.
• Establish the data-collection date range. Ridgepoint proposes to collect data from January 1, 2022 through the present, which corresponds to the full period during which VHG's payroll and timekeeping functions have been administered through the Luminos platform. This date range covers the entirety of the applicable limitations periods for the FLSA claims (two years for non-willful violations and three years for willful violations, measured from the anticipated filing date) and a substantial portion of the five-year limitations period applicable to the Florida constitutional minimum-wage claims. C&H notes that the longest potentially applicable lookback period — five years from the date of the GLO demand letter (January 14, 2026) — extends to January 14, 2021, which predates the Luminos onboarding. Data for the period from January 14, 2021 through December 31, 2021, if needed, would need to be obtained from VHG's legacy Meridian Workforce Systems platform and is not included in Ridgepoint's initial scope. C&H is separately evaluating whether and to what extent pre-2022 data will be required.
• Cross-reference Luminos data against VHG payroll registers and wage statements. Ridgepoint will reconcile the Luminos time-punch data against VHG's payroll registers (which reflect the hours and wages actually paid to employees) and employee wage statements (which reflect the compensation information communicated to employees). This reconciliation is essential to identifying discrepancies between the hours recorded in the timekeeping system and the hours for which employees were actually compensated.
• Validate data integrity. Ridgepoint will perform data-integrity checks to identify gaps, anomalies, inconsistencies, or potential corruption in the data. This includes testing for missing time records, duplicate entries, unexplained edits to time records, and configuration changes to auto-deduction rules during the relevant period.
• Coordinate with Luminos. Ridgepoint will coordinate with Shannon D. Prewitt, Senior Account Manager at Luminos Payroll Solutions Inc., to obtain the technical specifications of data exports, data-field definitions, auto-deduction rule configurations, and system architecture documentation necessary to ensure the accurate interpretation of the data. This coordination will be conducted under C&H's supervision and subject to the data-preservation and confidentiality protocols already established.
B. Phase 2: Statistical Sampling and Analysis
The second phase involves the design and implementation of a statistically valid sampling and analysis framework. Ridgepoint proposes to conduct the following analyses across VHG's seven at-issue properties:
Property Breakdown and Employee Counts. The seven properties at issue, with approximate current hourly-employee counts, are as follows:
The total current employee count across all seven properties (including salaried and management personnel) is approximately 2,620. The total number of potentially affected individuals over the multi-year lookback period — including former employees — is estimated at 4,100 to 5,900.
Sampling Design. Ridgepoint will design a stratified sampling framework that accounts for the following variables:
• Property. Each of the seven properties will be treated as a separate stratum, allowing for property-level analysis and the identification of property-specific patterns or practices.
• Job Code/Department. Within each property, sampling will be stratified by job code and department (e.g., housekeeping, front desk, food and beverage, banquet services, maintenance, spa services) to account for variations in work patterns, shift structures, and tip-eligibility across different job functions.
• Time Period. Sampling will be further stratified by time period to capture changes in the applicable Florida minimum wage (which has increased annually pursuant to the constitutional amendment), any changes in VHG policies or practices during the lookback period, and seasonal workforce fluctuations that are characteristic of the Florida hospitality industry.
Analytical Components. Within the sampling framework, Ridgepoint will conduct the following specific analyses:
• Overtime Calculation Accuracy. Ridgepoint will compare actual hours worked — as reflected in the time-punch data — against the overtime compensation paid, as reflected in payroll registers. This analysis will test whether VHG correctly calculated and paid overtime at one and one-half times the regular rate of pay for all hours worked in excess of forty in each workweek, in compliance with 29 U.S.C. § 207(a). The analysis will also examine whether the automatic meal-break deduction and any uncompensated pre-/post-shift time had the effect of reducing an employee's recorded hours below the overtime threshold when actual hours worked would have exceeded it.
• Automatic Meal-Break Deduction Analysis. Ridgepoint will identify the frequency and incidence of meal-break interruptions by analyzing punch data, system-login activity (including point-of-sale system logins, property-management system activity, guest-service call logs, and other electronic-footprint evidence where available) to determine how often employees were performing work during periods for which the thirty-minute auto-deduction was applied. This analysis will quantify the number of instances in which the auto-deduction under rule AR-MEAL-030 was applied despite the employee not having been fully relieved of all duties for an uninterrupted thirty-minute period.
• Pre-Shift and Post-Shift Time Analysis. Ridgepoint will examine system-login timestamps, badge-in and badge-out times, and scheduled shift start and end times to quantify the actual amount of uncompensated pre-shift and post-shift time worked by employees. The GLO demand letter alleges that employees were required to work approximately fifteen to twenty-five minutes before and after their scheduled shifts without compensation. Ridgepoint's analysis will test this allegation against the actual data to determine the average duration of pre-shift and post-shift work, the frequency of such work, and the variation across properties, departments, and time periods.
• Tip-Credit Compliance Analysis. For tipped employees — including front-desk agents and concierge personnel who participate in VHG's tip-pooling arrangements — Ridgepoint will verify that each such employee received at least the applicable Florida tipped-employee minimum wage during each pay period. As of September 30, 2025, the Florida tipped-employee minimum wage is $10.98 per hour, with the employer permitted to claim a tip credit of $3.02 per hour (against the full Florida minimum wage of $14.00 per hour). Prior rates — which were lower in earlier years — will be applied to the corresponding periods. This analysis requires the cross-referencing of tip-pool records, individual tip distributions, and hourly wage data on a per-employee, per-pay-period basis.
C. Phase 3: Damages Modeling and Reconstruction
The third phase involves the construction of comprehensive damages models. Ridgepoint proposes to:
• Construct damages models for each of the five categories of alleged violations identified in the GLO demand letter (overtime, meal-break deductions, pre-/post-shift time, tip-credit compliance, and misclassification).
• Build property-by-property and aggregate damages estimates. Damages will be calculated for each property individually to enable property-level analysis and, where relevant, the allocation of damages between VHG and Palomar Realty Partners LLC with respect to the Verimark Shores Clearwater property.
• Incorporate multiple scenarios reflecting different assumptions regarding key variables, including:
• Lookback periods: Two-year (non-willful FLSA), three-year (willful FLSA), and five-year (Florida constitutional claims).
• Opt-in/class membership rates: Varying percentages of the putative 4,100–5,900 collective/class, reflecting the range of possible participation rates based on historical data from comparable FLSA collective actions and Florida class actions in the hospitality industry.
• Blended average hourly rate: C&H's preliminary estimate of $16.50 per hour will serve as an initial input, to be refined with actual pay data once Ridgepoint has ingested and analyzed the Luminos payroll records.
• Average weekly hours: C&H's preliminary estimate of 42.5 hours per week will similarly serve as an initial input, to be refined with actual data.
• Overtime premium calculation: Based on the preliminary blended average hourly rate, the overtime premium is calculated as $16.50 × 1.5 = $24.75 per hour, with a premium of $8.25 per overtime hour. This calculation will be refined on an employee-by-employee basis using actual regular rates of pay.
• Reconcile against C&H's preliminary exposure scenarios. Ridgepoint's data-driven damages model will be compared against C&H's preliminary exposure estimates, which are as follows:
• Provide a refined exposure estimate based on actual data analysis, replacing the blended-average assumptions in C&H's preliminary models with calculations grounded in the actual payroll, timekeeping, and tip-distribution data from VHG's seven properties.
D. Deliverables. Ridgepoint's proposed deliverables for the engagement include the following:
1. Data Validation Report. A report documenting the results of the data-integrity validation performed during Phase 1, including the identification of any data gaps, anomalies, or inconsistencies and an assessment of their potential impact on the analysis.
2. Statistical Sampling Methodology Report. A report describing the sampling framework designed for Phase 2, including the stratification variables, sample sizes, confidence levels, and margins of error, along with the justification for the selected methodology.
3. Preliminary Findings Memorandum. A memorandum summarizing Ridgepoint's preliminary analytical findings for C&H and VHG review, to be produced at an interim stage before the completion of the full damages model. This memorandum will allow C&H and VHG to assess the emerging picture and provide feedback before Ridgepoint finalizes its analysis.
4. Detailed Damages Model Workbook. An Excel-based workbook containing the full damages model, with adjustable assumptions and scenario-modeling capabilities. This workbook will be designed to allow C&H and VHG to input different assumptions and generate corresponding damages estimates in real time.
5. Final Forensic Payroll Analysis Report. A comprehensive report setting forth Ridgepoint's findings, methodology, and conclusions, to be prepared as a privileged document at the direction of counsel.
All deliverables will be addressed to C&H and produced under the protections of the attorney-client privilege and the work-product doctrine. No deliverables will be shared with any third party without the prior written consent of both C&H and VHG.
V. FEE ESTIMATE AND BUDGET ANALYSIS
A. Ridgepoint's Fee Proposal
Ridgepoint has proposed an estimated total fee in the range of $85,000 to $120,000 for the engagement, based on a blended hourly rate for Dr. Tran and her team. The fee estimate reflects Ridgepoint's assessment of the scope of data volume and complexity involved, recognizing that the actual fees will depend on factors including the volume and condition of the data received from Luminos, the number of data anomalies requiring resolution, and the complexity of the damages-modeling scenarios. The fee estimate is broken down by phase as follows:
In addition to the professional fees set forth above, Ridgepoint estimates out-of-pocket expenses of approximately $5,000 to $8,000. These expenses include potential travel to VHG properties or Luminos offices for data-collection purposes, data-hosting costs for the secure storage and processing of the timekeeping data, and incidental costs associated with data conversion and formatting. Out-of-pocket expenses are not included in the fee range stated above and would be billed separately.
Ridgepoint proposes to submit invoices on a monthly basis, with payment terms of net thirty (30) days. Invoices would be submitted through C&H for VHG's payment, consistent with the privilege-protection structure described in Section VI below.
B. Fit Within Board-Authorized Budget
The VHG Audit Committee authorized an expenditure of up to $350,000 for the scoping phase of this matter on January 29, 2026. This authorization encompasses both outside legal fees (C&H) and consultant costs (Ridgepoint and any other consultants). The following table illustrates how the Ridgepoint engagement fits within this budget:
At the low end of the combined estimate, the total cost of $260,000 leaves $90,000 in budget headroom within the $350,000 authorization — providing a comfortable margin for unforeseen expenses, additional legal research, or supplemental data analysis. At the high end, the combined total of $345,000 is only $5,000 below the $350,000 cap, leaving virtually no margin for overruns.
C&H recommends targeting the Ridgepoint engagement at the midpoint of the fee range — approximately $100,000 to $105,000 — and negotiating a fee cap at that level, subject to renegotiation if data complexity materially exceeds Ridgepoint's initial assumptions. This approach would place the combined budget estimate in the range of $275,000 to $330,000, providing a more comfortable buffer of $20,000 to $75,000 within the Audit Committee's authorization.
If actual data volume or complexity drives Ridgepoint's fees above the $120,000 upper end of the proposed range, VHG will need to seek supplemental authorization from the Audit Committee. C&H would provide advance notice to VHG before any expenditure exceeding the agreed-upon cap is incurred.
C. Value Proposition
The cost of the Ridgepoint engagement must be evaluated in the context of the potential exposure at stake. The following considerations support the conclusion that the engagement represents a prudent and cost-effective investment:
• Refined Exposure Estimates. Ridgepoint's forensic analysis will replace the blended-average assumptions underlying C&H's preliminary exposure estimates ($22–$38 million mid-range; $202.4 million theoretical ceiling) with calculations grounded in actual payroll and timekeeping data. The resulting exposure estimate will be materially more accurate and defensible, enabling VHG to make better-informed strategic decisions.
• Pre-Litigation Negotiating Leverage. A data-driven damages model will significantly strengthen VHG's negotiating position in any pre-litigation discussions with GLO. The demand response deadline is currently February 28, 2026, though C&H's draft response requests an extension of that deadline. Having a preliminary understanding of VHG's actual exposure — as opposed to GLO's demand figure of $18.5 million or C&H's necessarily preliminary estimates — will give VHG a significant strategic advantage in any settlement discussions.
• Optionality. Engaging Ridgepoint as a non-testifying consulting expert preserves maximum optionality for VHG. If VHG determines that litigation cannot be avoided, Ridgepoint can be redesignated as a testifying expert, providing VHG with a fully prepared damages expert who has been working with the data from the outset. Alternatively, if VHG reaches a pre-litigation resolution, Ridgepoint's work will have informed the settlement valuation without requiring the disclosure of its analysis to opposing counsel.
• Cost Proportionality. The cost of the Ridgepoint engagement ($85,000–$120,000) is modest relative to the mid-range exposure ($22–$38 million), the demand amount ($18.5 million), and even the narrow-scenario estimate ($8.1 million). In percentage terms, the Ridgepoint engagement represents less than 0.5% of the mid-range exposure estimate.
VI. PRIVILEGE PROTECTION CONSIDERATIONS
A. Retention Structure
The preservation of attorney-client privilege and work-product protection over Ridgepoint's analysis and work product is a critical consideration in structuring this engagement. C&H recommends the following retention structure:
• Ridgepoint will be engaged as a consulting expert retained by C&H, at the direction of counsel, in connection with C&H's legal representation of VHG. This structure is designed to bring Ridgepoint's work within the scope of both the attorney-client privilege (by treating Ridgepoint as a functional extension of C&H's legal team) and the work-product doctrine (by establishing that Ridgepoint's analysis is being prepared in anticipation of litigation and at the request of counsel).
• The engagement letter will expressly state that all communications between C&H and Ridgepoint, all data provided to Ridgepoint, all analysis performed by Ridgepoint, and all deliverables produced by Ridgepoint are prepared in anticipation of litigation, at the request and under the direction of counsel, and are protected by the attorney-client privilege and the work-product doctrine.
• Ridgepoint will report exclusively to C&H — specifically to Bernard Crawford (Responsible Partner) and Nadia Petrov (Lead Associate) — and will not communicate directly with VHG management regarding its analysis, findings, or conclusions except through C&H or in C&H's presence. This reporting structure is designed to maintain the integrity of the privilege chain. VHG personnel — including Carla S. Whitfield (VP Human Resources), Marguerite A. Dunning (CFO), Enrique J. Fuentes (Director, Payroll & Workforce Compliance), and others — may provide data and factual information to Ridgepoint, but the substantive direction of Ridgepoint's analytical work and the review of its deliverables will be controlled by C&H.
• VHG will be the contracting party and payor. Although C&H will direct Ridgepoint's work, the engagement contract will be between VHG and Ridgepoint, and VHG will be responsible for payment of Ridgepoint's fees and expenses. Invoices will be submitted through C&H for VHG's processing and payment. This structure is consistent with standard practice for consulting-expert engagements in litigation and pre-litigation matters.
B. Non-Testifying Expert Designation (Initial)
Ridgepoint will be designated initially as a non-testifying consulting expert under Federal Rule of Civil Procedure 26(b)(4)(D) (applicable if litigation is filed in federal court) and analogous state-court rules. This designation provides the strongest available privilege protection for Ridgepoint's work product, as the opinions and work product of non-testifying consulting experts are ordinarily not discoverable absent a showing of exceptional circumstances. See Fed. R. Civ. P. 26(b)(4)(D)(ii).
VHG retains the option to redesignate Dr. Tran as a testifying expert at a later stage of the proceedings, should VHG determine that doing so is strategically advisable. It is important that VHG understand, however, that such redesignation would require Dr. Tran to prepare a formal expert report under Federal Rule of Civil Procedure 26(a)(2)(B) and would waive certain protections over communications between C&H and Dr. Tran and over draft expert reports. The decision regarding redesignation should be deferred until VHG has a clearer picture of the litigation landscape and can assess the strategic trade-offs involved.
C. Data-Handling Protocols
Given the sensitivity and volume of the employee data that Ridgepoint will receive and analyze, C&H will require Ridgepoint to comply with robust data-security and confidentiality protocols, including the following:
• All data received from Luminos TimeTrack, VHG, or C&H must be stored in encrypted, access-controlled environments that meet or exceed industry standards for the protection of personally identifiable information and confidential business data.
• Ridgepoint must limit access to the data to those members of its team who have a need-to-know in connection with the engagement and who have executed individual confidentiality undertakings.
• Ridgepoint will be required to execute a separate Confidentiality and Data-Protection Agreement with VHG, the draft of which will be prepared by C&H and incorporated by reference into the engagement letter.
• Upon completion of the engagement (or upon earlier termination), Ridgepoint must, at C&H's direction, either return or certify the destruction of all client data, work papers, and copies thereof, in accordance with C&H's data-disposition instructions.
VII. COMPARISON TO ALTERNATIVE APPROACHES
C&H has considered three alternatives to the Ridgepoint engagement and, for the reasons discussed below, concludes that none represents a preferable course of action.
A. In-House Analysis by C&H
C&H's legal team does not possess the forensic accounting, data-analytics, or statistical-sampling expertise required to perform the type of forensic payroll analysis contemplated here. While C&H's associates and paralegals are capable of reviewing documents, conducting legal research, and performing basic data analysis, the design and implementation of a statistically valid sampling framework across seven properties and thousands of employees, the forensic reconciliation of timekeeping data against payroll registers, and the construction of a multi-scenario damages model are specialized tasks that require the skills and experience of a qualified forensic accountant.
Moreover, even if C&H's team attempted to perform this work, the result would likely take significantly longer to produce and would be less defensible than the work product of a recognized forensic-accounting firm. C&H's hourly rates for the associates who would be assigned to this work range from $472.50 to $607.50 per hour. At those rates, the cost of an in-house analysis of comparable scope would likely equal or exceed Ridgepoint's fee proposal, while producing a less rigorous and less defensible result.
B. Alternative Consulting Firms
C&H evaluated two alternative forensic-accounting and consulting firms before concluding that Ridgepoint represents the best fit for this engagement. Without identifying the alternative firms by name, C&H considered the following factors in its comparative assessment:
(i) Hospitality-industry experience. Ridgepoint's concentrated focus on the hospitality industry gives it a meaningful advantage over firms with more generalized practices. The operational complexities of multi-property hotel and resort operations — including variable shift patterns, tip-pooling structures, seasonal workforce fluctuations, and the prevalence of tipped and sub-minimum-wage employees — require industry-specific expertise that not all forensic-accounting firms possess.
(ii) Familiarity with Luminos TimeTrack. Ridgepoint's demonstrated proficiency with the Luminos TimeTrack platform will significantly reduce the ramp-up time and cost associated with the data-acquisition and validation phase. One of the alternative firms had no prior experience with Luminos, which would have required additional time and expense for the firm to learn the platform's data architecture and export protocols.
(iii) Geographic proximity. Ridgepoint's Fort Lauderdale location places it in close proximity to several of VHG's Florida properties, facilitating on-site data collection and coordination with VHG personnel. This proximity also reduces travel-related out-of-pocket expenses.
(iv) Competitive fee proposal. Ridgepoint's fee estimate of $85,000–$120,000 is competitive with the proposals received from the alternative firms, one of which quoted a range of $110,000–$155,000 for a comparable scope of work and the other of which quoted a range of $95,000–$140,000.
(v) Dr. Tran's credentials and expert-witness track record. Dr. Tran's CPA and CFF credentials, combined with her experience testifying as an expert witness in FLSA collective actions and state-law class actions, provide an additional layer of confidence in the quality and defensibility of her work product.
In addition, C&H has worked with Ridgepoint in prior matters and has found the firm's work product to be thorough, reliable, and well-suited to the requirements of wage-and-hour litigation support. This prior working relationship allows C&H and Ridgepoint to begin the engagement with an established rapport and a mutual understanding of expectations and work processes.
C. Deferring Consultant Engagement
Deferring the engagement of a forensic payroll consultant is not recommended. The scoping phase is time-sensitive for several reasons:
• The demand response deadline established in GLO's January 14, 2026 demand letter is February 28, 2026. Although C&H's draft response requests an extension of this deadline, there is no assurance that GLO will agree, and VHG must be prepared to respond on the current timeline. A data-driven understanding of VHG's exposure is essential to crafting an effective response.
• Early data analysis directly informs VHG's litigation-avoidance strategy and its posture in any pre-litigation settlement discussions. Without the benefit of Ridgepoint's forensic analysis, VHG would be making strategic decisions based on C&H's preliminary blended-average estimates — which, while useful for initial planning purposes, are necessarily imprecise and may overstate or understate VHG's actual exposure.
• Delaying the engagement would push back the entire scoping-phase timeline, potentially leaving VHG without refined exposure data at the time when critical decisions — including whether to seek a pre-litigation resolution, how to structure a defense, and whether to file a preemptive declaratory-judgment action — need to be made.
VIII. COORDINATION WITH ONGOING SCOPING-PHASE WORKSTREAMS
Ridgepoint's data-acquisition phase (Phase 1) will run in parallel with C&H's ongoing document and data collection efforts. C&H has already transmitted formal data and document collection requests to two key contacts:
• Enrique J. Fuentes, Director, Payroll & Workforce Compliance, VHG — request transmitted February 3, 2026, covering payroll registers, wage statements, employee classification records, tip-pool distribution records, scheduling records, and related documents for all seven at-issue properties.
• Shannon D. Prewitt, Senior Account Manager, Luminos Payroll Solutions Inc. — data-preservation letter and data-export request transmitted February 6, 2026, covering all time-punch records, auto-deduction configurations, pay-code mappings, audit logs, and system-configuration data for account LTT-VHG-2022-0041.
Ridgepoint's data-acquisition efforts will be coordinated with these parallel workstreams to avoid duplication and ensure that data flows efficiently from Luminos and VHG to both C&H and Ridgepoint.
C&H's legal-research memoranda addressing the five categories of claims identified in the GLO demand letter — including the exemption-classification analysis, the meal-break deduction analysis, the pre-/post-shift compensability analysis, the tipped-employee minimum-wage analysis, and the collective-action certification standards analysis — are currently in progress and will be provided to Ridgepoint to inform its analytical focus. Ridgepoint's understanding of the applicable legal standards will ensure that its forensic analysis and damages model are properly calibrated to the substantive legal theories at issue.
Ridgepoint's preliminary findings, once available, will feed directly into the refined exposure assessment that C&H intends to present to VHG's Audit Committee and board of directors. This refined assessment will replace C&H's preliminary blended-average estimates with data-driven calculations and will serve as the foundation for VHG's strategic decision-making regarding the pre-litigation response and any settlement discussions.
Ridgepoint's work will also support C&H's ongoing analysis of joint-employer issues involving Palomar Realty Partners LLC ("Palomar") with respect to the Verimark Shores Clearwater property. That property is managed by VHG under Hotel Management Agreement HMA-2021-0601-PC, and the approximately 190 hourly employees at that property are potentially subject to joint-employer claims involving both VHG and Palomar. Ridgepoint's damages analysis for the Verimark Shores Clearwater property will need to be quantified separately to support any damages-allocation analysis between VHG and Palomar, and to inform any indemnification or contribution claims that VHG may assert against Palomar under the management agreement.
For reference, the complete list of the seven at-issue properties and their approximate current hourly-employee counts is as follows:
1. Verimark Regency Tampa — 295 hourly employees
2. Verimark Grand Orlando — 420 hourly employees
3. Verimark Shores Clearwater — 190 hourly employees (Palomar-owned)
4. Verimark Bayfront St. Petersburg — 245 hourly employees
5. Verimark Resort & Spa Boca Raton — 340 hourly employees
6. Verimark Oceanview Fort Lauderdale — 265 hourly employees
7. Verimark Key West Collection — 140 hourly employees
Ridgepoint's damages model will incorporate data from all seven properties and will be structured to allow both property-level and aggregate analysis.
IX. DRAFT ENGAGEMENT LETTER
A draft engagement letter for Ridgepoint has been prepared separately and is attached to this memorandum as Attachment B (file name: draft-ridgepoint-engagement-letter.docx). The draft engagement letter addresses the key terms of the engagement, which are summarized as follows:
• Scope of Work. The scope is limited to forensic payroll analytics and damages modeling in connection with the pre-litigation wage-and-hour audit of VHG, as described in this memorandum.
• Estimated Fees. Estimated fees of $85,000–$120,000, with a negotiated fee cap to be established at approximately $105,000, subject to renegotiation if data complexity exceeds initial assumptions.
• Direction of Work. All work to be performed at the direction of C&H, with Ridgepoint reporting to Bernard Crawford and Nadia Petrov at C&H.
• Privilege and Work-Product Protections. Express provisions establishing that all communications, analysis, and deliverables are prepared in anticipation of litigation and at the direction of counsel, and are protected by the attorney-client privilege and the work-product doctrine.
• Confidentiality and Data Security. Comprehensive confidentiality and data-security obligations, including encrypted storage, access controls, and data-disposition requirements.
• Non-Testifying Consulting Expert Status. Express designation of Ridgepoint as a non-testifying consulting expert under Fed. R. Civ. P. 26(b)(4)(D), with VHG retaining the option to redesignate at a later date.
• Termination Provisions. Either party may terminate the engagement upon written notice, subject to Ridgepoint's right to compensation for work performed through the date of termination and the obligation to return or destroy all client data upon termination.
The draft engagement letter requires VHG's review and countersignature before Ridgepoint can commence work. C&H requests that VHG review the draft promptly and provide any comments or requested revisions by no later than February 12, 2026, to allow for finalization and execution by February 14, 2026.
X. RECOMMENDATION
Based on the foregoing analysis, C&H recommends that VHG approve the engagement of Ridgepoint Advisory Group LLC at the proposed fee range of $85,000 to $120,000, subject to a negotiated fee cap of approximately $105,000, with a fifteen percent (15%) contingency buffer (approximately $15,750 above the cap) requiring prior written approval from both C&H and VHG before any expenditure exceeding the cap is incurred.
C&H's recommendation is based on the following considerations:
1. Ridgepoint possesses the specialized forensic-accounting, data-analytics, and statistical-sampling expertise required for this engagement, and its hospitality-industry experience and familiarity with the Luminos TimeTrack platform make it particularly well-suited to VHG's needs.
2. Dr. Tran's professional credentials (CPA, CFF) and expert-witness track record provide confidence in the quality and defensibility of Ridgepoint's work product.
3. Ridgepoint's fee proposal is competitive and represents a prudent investment relative to the magnitude of VHG's potential exposure ($22–$38 million mid-range; $18.5 million demand amount; $202.4 million theoretical ceiling).
4. The proposed retention structure — with Ridgepoint engaged as a non-testifying consulting expert under C&H's direction — provides robust privilege and work-product protections while preserving VHG's optionality regarding future testifying-expert designation.
5. The combined budget for C&H and Ridgepoint falls within the $350,000 Audit Committee authorization, with the recommended fee cap providing a comfortable margin.
The engagement should proceed promptly to align with the data-collection timeline and the demand-response schedule. VHG should execute the draft engagement letter (Attachment B) and authorize C&H to direct Ridgepoint to begin Phase 1 (Data Acquisition and Validation) immediately upon execution. C&H will supervise all Ridgepoint work to ensure the integrity of the privilege protections and the alignment of Ridgepoint's analysis with the audit's legal objectives.
If VHG approves the engagement, C&H will coordinate the data transfers between Luminos, VHG, and Ridgepoint, with appropriate confidentiality protections in place, and will ensure that Ridgepoint's work is integrated with the other scoping-phase workstreams described in Section VIII above.
XI. REQUESTED ACTION ITEMS
C&H respectfully requests that VHG take the following actions at the earliest practicable date:
1. VHG General Counsel (Devin K. Arroyo): Review and approve the draft Ridgepoint engagement letter (Attachment B). Please provide any comments or requested revisions to C&H by no later than February 12, 2026.
2. VHG Chief Financial Officer (Marguerite A. Dunning): Confirm budget allocation for the Ridgepoint engagement within the $350,000 Audit Committee authorization dated January 29, 2026, and coordinate with VHG's accounts payable function to establish the invoicing and payment process described in Section V.A above.
3. VHG: Execute the Ridgepoint engagement letter (two original counterparts) and return one fully executed counterpart to C&H for delivery to Ridgepoint.
4. C&H: Upon receipt of the executed engagement letter, transmit the executed counterpart to Dr. Alicia Tran at Ridgepoint and confirm the commencement date for Phase 1.
5. C&H: Coordinate with Enrique J. Fuentes (Director, Payroll & Workforce Compliance, VHG) and Shannon D. Prewitt (Senior Account Manager, Luminos Payroll Solutions Inc.) to arrange the transfer of data to Ridgepoint upon engagement, subject to the confidentiality and data-security protocols established in the engagement letter and the separate Confidentiality and Data-Protection Agreement.
6. Target Timeline:
• Ridgepoint engagement letter executed: February 14, 2026
• Ridgepoint Phase 1 commences: February 17, 2026
• Phase 1 data acquisition and validation completed: target early March 2026
• Phase 2 statistical sampling and analysis initiated: target mid-March 2026
• Preliminary findings memorandum delivered: target mid-March 2026
• Phase 3 damages modeling and final report: target late March / early April 2026
C&H will keep VHG apprised of progress throughout the engagement and will promptly notify VHG of any developments that may affect the scope, timeline, or budget.
We are available to discuss this memorandum and its recommendations at your convenience. Please do not hesitate to contact me or Nadia Petrov with any questions.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Bernard Crawford Responsible Partner, Labor & Employment 100 Southeast Second Street, Suite 3400 Miami, FL 33131 Telephone: (305) 555-7200
Email: bcrawford@calderwoodharkness.com
Matter No. 1021-00005