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PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Renata Solis-Vega, Senior Vice President & General Counsel, Verimark Hospitality Group Inc.

FROM: Priya Anand, Responsible Partner, Calderwood & Harkness LLP

DATE: January 3, 2024

RE: Quarterly Litigation Status Report — Q4 2023 Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al. Case No. 1021-00006 Circuit Court of the 17th Judicial Circuit, Broward County, Florida

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT. This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of litigation. It is intended solely for the use of the addressee and authorized recipients identified herein. Any disclosure, copying, distribution, or use of this memorandum or its contents by any person other than the intended recipients is strictly prohibited. If you have received this document in error, please contact Calderwood & Harkness LLP immediately.

I. Executive Summary

This memorandum summarizes the significant developments that occurred during the fourth quarter of 2023 (October 1 through December 31, 2023) in the breach-of-contract litigation captioned Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc., Case No. 1021-00006, pending before the Honorable Richard M. Calloway in the Circuit Court of the 17th Judicial Circuit, Broward County, Florida. This report is prepared for the benefit of Verimark's in-house legal team and authorized members of senior management to facilitate informed decision-making regarding the case posture, upcoming proceedings, settlement strategy, and budget management.

Q4 2023 was a pivotal quarter in this litigation, dominated by the completion of the dispositive motions briefing that will shape the trajectory of the remainder of the case. Three primary developments define the quarter:

First, the briefing cycle that began at the close of Q3 with the filing of Verimark's Motion for Partial Summary Judgment on Counts I (Breach of Contract — Royalties) and II (Breach of Contract — Marketing Fund) on September 29, 2023, continued through its full course during Q4. The motion seeks a determination of liability as a matter of law on the two core breach-of-contract claims, reserving the question of damages for trial.

Second, on October 13, 2023, Coastal Palms filed its Cross-Motion for Summary Judgment, seeking summary judgment in its favor on all ten counts of Verimark's Complaint and, additionally, on its $12 million counterclaim alleging brand-standard violations and over-billing. The cross-motion raises the defense that the Franchise License Agreement's ("FLA") definition of Gross Room Revenue ("GRR") is ambiguous as to revenues collected by Suncoast Room Management Inc., a separate management entity controlled by defendant Randall Brecker.

Third, and most significantly, all summary-judgment briefing was completed during Q4: response briefs from both sides were filed on November 17, 2023, and reply briefs were filed on December 8, 2023. The record is now fully developed on the dispositive motions, and the matter is ripe for decision.

Oral argument on the cross-motions for summary judgment has been scheduled for January 19, 2024, before Judge Calloway. This hearing is expected to be the single most consequential proceeding in the litigation to date. Calderwood & Harkness's assessment, based on the strength of the contract language, the evidentiary record, and Randall Brecker's damaging deposition admissions, is that Verimark has a strong likelihood of prevailing on its partial summary judgment motion on Counts I and II (liability only), which we estimate at approximately 75–80% probability.

The trial date has been continued from its original February 2024 setting. Based on the current procedural posture and discussions with Judge Calloway's judicial assistant, trial is now anticipated for approximately May 2024, depending on the timing and outcome of the Court's summary-judgment ruling.

On the settlement front, no formal settlement discussions have occurred since the pre-mediation informal exchanges conducted in mid-2023. However, the summary-judgment ruling will dramatically affect both parties' bargaining positions, and Calderwood & Harkness recommends that Verimark be prepared to initiate settlement discussions — potentially through formal mediation — promptly following a favorable ruling. A preliminary settlement-range analysis is set forth in Section IV below.

Finally, this report includes an updated budget forecast reflecting the current phase of the litigation. Cumulative fees and costs through Q4 2023 total approximately $8.61 million. The revised budget estimate through resolution of the matter is $9.0 million to $10.5 million, as reflected in the Quarterly Budget Update Memorandum to Martin Holcomb dated January 8, 2024. Each of these topics is addressed in detail in the sections that follow.

II. Case Posture and Procedural Status

A. Court and Assigned Judge

The case remains assigned to the Honorable Richard M. Calloway, Circuit Judge, in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, Case No. 1021-00006. Judge Calloway has presided over the matter since its filing and is well-acquainted with the factual and legal issues. He has demonstrated a thorough familiarity with the franchise-agreement provisions at issue, as evidenced by his detailed October 28, 2022 order granting Verimark's Motion to Compel production of Suncoast Room Management Inc.'s financial records. Judge Calloway's courtroom is located in the Broward County Courthouse, 201 SE 6th Street, Fort Lauderdale, Florida. His judicial assistant, Ms. Linda Garrett, has confirmed the January 19, 2024 oral argument date and has indicated that the Court is prepared to allocate up to two hours for argument on the cross-motions.

B. Parties. The parties to this litigation are as follows:

Plaintiff — Verimark Hospitality Group Inc. Verimark is a Delaware corporation with its principal place of business in Atlanta, Georgia. Its common stock is publicly traded on the Nasdaq Global Select Market under the ticker symbol VHMK. Verimark is one of the nation's largest hotel franchise companies, with a portfolio of approximately 4,200 franchise properties across twelve branded tiers. Verimark is represented in this litigation by Calderwood & Harkness LLP, with Priya Anand serving as Responsible Partner, Douglas Carmichael serving as Billing Partner, and Yuki Nakamura and Carlos Espinoza serving as lead and working associates, respectively.

Defendant — Coastal Palms Franchise Holdings LLC. Coastal Palms is a Florida limited liability company organized in 2006 and headquartered in Boca Raton, Florida. Coastal Palms is the franchisee under 22 separate Franchise License Agreements with Verimark covering hotel properties located primarily along the Atlantic coast of Florida, from Palm Beach County to Duval County. Coastal Palms is the principal defendant in this action and the entity against which the majority of Verimark's contract claims are directed.

Defendant — Randall "Randy" Brecker (Individually). Mr. Brecker is the Managing Member and holder of approximately 60% of the equity interests in Coastal Palms. He is a resident of Boca Raton, Florida. He is named individually in Count V (Fraudulent Concealment), Count VI (Negligent Misrepresentation), and Count X (Civil Conspiracy). Mr. Brecker executed a personal guaranty of certain of Coastal Palms' franchise obligations pursuant to FLA § 16.1.

Defendant — Suncoast Room Management Inc. Suncoast is a Florida corporation also controlled by Randall Brecker, incorporated in 2009. Suncoast served as the property-management company for certain of the Coastal Palms hotel properties and is alleged to have been the vehicle through which Coastal Palms diverted guest-room revenues from the GRR calculations reported to Verimark. Suncoast is named in Count VII (Unjust Enrichment — alternative), Count IX (Accounting), and Count X (Civil Conspiracy).

All three defendants are represented by the law firm of Whitfield, Barrow & Crane LLP, with offices in Miami, Florida. Nathan Whitfield III serves as lead counsel, supported by partner Gabriela Montes and associate Ethan Doyle. Mr. Whitfield is a well-known commercial-litigation practitioner in South Florida, and we note that his firm has historically been effective in complex franchise disputes. Calderwood & Harkness has observed professional and competent representation from opposing counsel throughout this matter, and we anticipate vigorous advocacy at the upcoming oral argument and, if necessary, at trial.

C. Claims at Issue

Verimark's ten-count Complaint was filed on March 7, 2022, following an approximately nine-month pre-suit investigation prompted by internal audit findings and corroborated by the testimony of Janet Kerrigan, a former controller at three of the Coastal Palms properties who reported concerns through Verimark's franchise-compliance hotline in February 2021. The Complaint asserts the following claims:

Count I — Breach of Contract (Royalties). Coastal Palms breached FLA § 4.1 by systematically underreporting Gross Room Revenue and thereby underpaying the 5% royalty fee owed to Verimark. The underreporting was accomplished by excluding revenues collected by Suncoast Room Management Inc. through direct-booking channels (walk-in guests, corporate-direct contracts, and Suncoast's proprietary website gulfcoastrooms.com) and by improperly netting revenue from Online Travel Agencies ("OTAs") rather than reporting gross OTA revenue.

Count II — Breach of Contract (Marketing Fund Contributions). Coastal Palms breached FLA § 4.2 by underpaying the 2.5% marketing-fund contribution, which is calculated on the same GRR base as the royalty fee. The underreporting of GRR described in Count I resulted in proportional underpayment of marketing-fund contributions.

Count III — Breach of Contract (Technology Fees). Coastal Palms breached FLA § 4.3 by failing to pay the $12.50 per-room, per-month technology fee for approximately 214 rooms that were managed by Suncoast but not reported in Coastal Palms' room-count certifications to Verimark.

Count IV — Breach of Implied Covenant of Good Faith and Fair Dealing. Coastal Palms breached the implied covenant of good faith and fair dealing by engaging in a deliberate scheme to divert revenues through Suncoast to circumvent its royalty and fee obligations under the FLAs.

Count V — Fraudulent Concealment (Brecker). Randall Brecker fraudulently concealed the diversion of revenues through Suncoast by, among other things, directing property-level controllers to exclude Suncoast-collected revenues from monthly GRR reports and by withholding Suncoast's financial records from Verimark's periodic audits.

Count VI — Negligent Misrepresentation (Brecker). Randall Brecker negligently misrepresented the scope and completeness of the GRR reports submitted to Verimark by certifying their accuracy without adequate verification, or alternatively, with knowledge that the reports excluded material revenue streams.

Count VII — Unjust Enrichment (Alternative — Suncoast). In the alternative to the contract claims, Suncoast was unjustly enriched by retaining revenues that should have been included in Coastal Palms' GRR calculations and on which royalties and fees were owed to Verimark.

Count VIII — Declaratory Judgment (FLA Termination). Verimark seeks a declaratory judgment that the systematic underreporting of GRR constitutes a material and incurable breach under FLA § 14.2(c), entitling Verimark to terminate the FLAs.

Count IX — Accounting. Verimark seeks an accounting from Coastal Palms and Suncoast of all revenues derived from or attributable to the rental of guest rooms at the 22 hotel properties during the relevant period.

Count X — Civil Conspiracy (Brecker & Suncoast). Randall Brecker and Suncoast conspired to defraud Verimark by creating and maintaining a dual-reporting structure designed to conceal guest-room revenues from Verimark's franchise-fee calculations.

Total Claimed Damages. Verimark's total claimed damages are approximately $150 million, broken down as follows: (i) $16.095 million in direct underpayments (royalties, marketing-fund contributions, and technology fees); (ii) $28.4 million in contractual late-payment interest at 1.5% per month, compounded, pursuant to FLA § 4.5; and (iii) $105.5 million in liquidated damages under FLA § 15.3 (calculated as 22 properties multiplied by three times the trailing-twelve-month corrected royalties for each property). As discussed in the risk assessment below, the enforceability of the liquidated-damages provision under Florida law remains a significant open question.

Coastal Palms' Counterclaim. On May 16, 2022, Coastal Palms filed a counterclaim seeking $12 million in damages for alleged brand-standard violations by Verimark, including claims of deferred maintenance at certain properties, inadequate reservation-system uptime, and over-billing for required vendor services. The counterclaim is addressed in greater detail in Section III below.

D. Discovery Status

Fact and expert discovery in this matter closed on August 4, 2023, in accordance with the Amended Case Management Order entered February 10, 2023. There are no outstanding discovery disputes, and the discovery record is complete.

The discovery in this matter was extensive, reflecting the complexity of the revenue-reporting dispute across a 22-property portfolio over an approximately nine-year period (January 2013 through December 2021).

Document discovery. On the Verimark side, approximately 2.3 million documents totaling approximately 1.1 terabytes were collected, processed, and reviewed by Nexagen Document Solutions LLC, the e-discovery vendor retained by Calderwood & Harkness for this engagement. Verimark produced approximately 1.85 million documents to Coastal Palms in multiple rolling productions between June and November 2022.

Coastal Palms initially produced approximately 84,000 documents on August 22, 2022. That initial production was materially deficient, as it excluded virtually all financial records of Suncoast Room Management Inc. Following the Court's October 28, 2022 order granting Verimark's Motion to Compel — in which Judge Calloway found that Suncoast's financial records were directly relevant to the GRR calculation dispute and that Coastal Palms' objections on the basis of separate corporate identity were without merit — Coastal Palms and Suncoast produced an additional 312,000 documents on November 18, 2022. These supplemental documents proved critical to Verimark's case, as they included Suncoast's internal revenue ledgers, bank statements, and management-fee allocation spreadsheets that formed the backbone of Dr. Kettlewell's forensic analysis.

Fact Depositions. A total of 14 fact depositions were completed between January 9 and March 17, 2023. The key depositions included:

• Randall Brecker — Deposed over two days (February 6–7, 2023) for a total of approximately 14 hours. Mr. Brecker's testimony was highly significant, as he admitted on the record that he personally directed property-level controllers to exclude revenues collected by Suncoast from the monthly GRR reports submitted to Verimark. He also acknowledged that Suncoast was established, in part, to manage direct-booking channels that were not integrated into Verimark's reservation system.

• Theresa Brecker — Deposed on February 14, 2023. Ms. Brecker is Randall Brecker's spouse and serves as the Chief Financial Officer of Coastal Palms. Her testimony was largely consistent with prepared talking points; she maintained that the GRR reporting methodology was established before she joined the company and that she relied on the prior controllers' practices.

• Nolan Prescott — Deposed on February 21, 2023. Mr. Prescott is the President and 40% equity holder of Coastal Palms. His testimony established that he was aware of Suncoast's role in collecting direct-booking revenues but deferred to Brecker on reporting methodology.

• Janet Kerrigan (Whistleblower) — Deposed on January 9, 2023. Ms. Kerrigan is a former controller for three Coastal Palms properties who contacted Verimark's franchise-compliance hotline in February 2021. Her testimony corroborated the revenue-diversion scheme and provided detailed descriptions of the dual-reporting system maintained at the property level.

• Ten Property-Level Managers and Accountants — Deposed between January 23 and March 17, 2023. These witnesses provided property-specific testimony regarding revenue collection, booking-channel management, and GRR reporting practices. Several confirmed that they were directed by Brecker or by instructions passed through Theresa Brecker to exclude Suncoast-collected revenues from GRR reports.

Expert Depositions. Two expert depositions were completed on June 26–27, 2023:

• Dr. Sharon Kettlewell (Ridgeline Forensic Advisory LLC) — Verimark's damages expert. Her expert report and rebuttal report are detailed in Section V below. Dr. Kettlewell's deposition testimony was strong and consistent with her reports.

• Prof. Grant Hargrove (Hargrove Economic Consulting Inc.) — Coastal Palms' damages expert. Prof. Hargrove's deposition is also discussed in Section V. He was effectively impeached on several methodology points during cross-examination by Ms. Anand.

III. Summary Judgment Briefing — Detailed Report

A. Verimark's Motion for Partial Summary Judgment (Counts I and II)

Verimark's Motion for Partial Summary Judgment was filed on September 29, 2023, the final business day of Q3 2023. Although the filing itself occurred in Q3, the substantive briefing on the motion — including the opposition, replies, and oral-argument preparation — occurred entirely within Q4 and continuing into Q1 2024. The motion is accordingly treated as a Q4 development for purposes of this report.

The motion is supported by a 42-page Memorandum of Law and a detailed Statement of Undisputed Material Facts containing 127 numbered paragraphs, each supported by citations to deposition testimony, documentary evidence, and expert analysis. The motion was prepared by Yuki Nakamura under the supervision of Priya Anand, with research and drafting assistance from Carlos Espinoza.

The motion seeks summary judgment on liability only for Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund Contributions). By design, the motion does not address damages, which would be reserved for trial even if the motion is granted. This strategic approach was adopted for several reasons: first, it presents the Court with a clean liability question on the two strongest counts; second, it avoids the complexity of requiring the Court to adjudicate the contested damages figures on the summary-judgment record; and third, it preserves Verimark's full damages claim for presentation to the factfinder at trial.

The core argument of the motion is that the plain language of FLA § 4.1 compels a finding of breach. 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 entity collecting such revenue."

The motion argues that this definition is clear and unambiguous. The phrase "regardless of the entity collecting such revenue" was specifically drafted to capture all guest-room revenue, whether collected by the franchisee directly, by a property-management company, by an OTA, or by any other entity. Coastal Palms' practice of systematically excluding revenues collected by Suncoast Room Management Inc. through direct bookings (walk-ins, corporate-direct contracts, and the gulfcoastrooms.com website), and its practice of improperly netting OTA revenues rather than reporting the gross revenue amount, understated GRR by an estimated 22% to 31% across the 22-property portfolio from January 2013 through December 2021.

The motion cites the following key evidence establishing that no genuine dispute of material fact exists on the question of breach:

1. Randall Brecker's Deposition Admissions. During his two-day deposition on February 6–7, 2023, Mr. Brecker admitted that he personally directed property-level controllers to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. He further admitted that he understood Verimark would rely on these reports to calculate royalty and marketing-fund obligations. These admissions are binding on Coastal Palms as party admissions and eliminate any genuine factual dispute regarding the intentional nature of the underreporting.

2. Janet Kerrigan's Whistleblower Testimony. Ms. Kerrigan testified that she was explicitly instructed by Brecker's office to maintain two sets of revenue records: one reflecting total guest-room revenue including Suncoast-collected amounts, used for internal management purposes, and a separate set reflecting only revenues processed through Verimark's reservation system, which was submitted to Verimark for franchise-fee calculations. She described this dual-reporting system as well-established when she assumed the controller position in 2016 and operational across all properties she managed.

3. Suncoast Financial Records. The financial records produced by Suncoast pursuant to the Court's October 28, 2022 compulsion order documented substantial revenue flows that were never included in Coastal Palms' GRR reports to Verimark. These records, which included Suncoast's internal revenue ledgers, bank deposit records, corporate-direct contract revenue schedules, and management-fee allocation worksheets, corroborated the scope and duration of the underreporting.

4. Dr. Kettlewell's Forensic Analysis. Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC conducted a comprehensive forensic analysis of all available financial records and determined that cumulative underreported GRR across all 22 properties during the period from January 2013 through December 2021 totaled approximately $197.8 million. For Fiscal Year 2021 alone, Coastal Palms reported GRR of $112.4 million, whereas Dr. Kettlewell estimated the true GRR to be $145.6 million — an underreporting of $33.2 million, or approximately 29.5%.

The strategic rationale for seeking partial summary judgment on liability was articulated in Calderwood & Harkness's Summary Judgment Strategy Memorandum prepared on September 5, 2023 and shared with the Verimark litigation oversight team. Establishing liability as a matter of law on Counts I and II accomplishes several objectives: it eliminates the risk that a jury might be confused or misled by Coastal Palms' defenses on the contract-interpretation question; it positions Verimark for maximum settlement leverage, as a defendant facing a confirmed liability finding must negotiate against the backdrop of a damages-only trial; and it significantly narrows the trial scope, reducing both the duration and cost of any remaining proceedings.

B. Coastal Palms' Cross-Motion for Summary Judgment

On October 13, 2023, Coastal Palms filed its Cross-Motion for Summary Judgment, seeking summary judgment in defendants' favor on all ten counts of Verimark's Complaint and, separately, on Coastal Palms' $12 million counterclaim. The cross-motion was filed with a 38-page Memorandum of Law and a Counter-Statement of Material Facts with 94 numbered paragraphs.

Coastal Palms' core defense arguments are as follows:

GRR Definition Ambiguity. The primary defense is that FLA § 4.1's definition of GRR is ambiguous as applied to revenues collected by Suncoast Room Management Inc. Coastal Palms argues that the phrase "regardless of the entity collecting such revenue" is insufficiently specific to capture revenues collected by a separate corporate entity (Suncoast) that is not itself a party to the FLA and that performs property-management functions beyond mere revenue collection. Defense counsel contends that the GRR definition was drafted to address booking intermediaries (such as OTAs and travel agents), not separate management companies, and that the definition must be read in context with other FLA provisions that reference "the franchisee" as the revenue-collecting entity.

Verimark's Alleged Knowledge and Acquiescence. Coastal Palms argues that Verimark was aware of Suncoast's role in managing certain of the hotel properties because Suncoast was identified in certain property-management agreements that were submitted to Verimark as part of the franchise-application process for several of the newer properties. Defense counsel contends that Verimark's failure to object to Suncoast's involvement or to require that Suncoast-collected revenues be included in GRR reports constitutes acquiescence or waiver. This argument relies heavily on the testimony of Nolan Prescott, who stated that he believed Verimark was aware of Suncoast's operational role.

Expert Opinion on Limited Damages. The cross-motion relies on Prof. Grant Hargrove's expert report (served May 15, 2023), which opines that the maximum underpayment attributable to any GRR discrepancy is $6.2 million. Prof. Hargrove reaches this figure by applying a narrowed GRR definition that excludes walk-in cash payments (which he characterizes as "incidental revenue" not derived from the "rental of guest rooms" in the contractual sense) and by attributing only net OTA revenue (after deducting OTA commissions) to the GRR calculation. As discussed in Section V below, Dr. Kettlewell's rebuttal report identified significant methodological errors in Prof. Hargrove's analysis.

Counterclaim — Brand-Standard Violations. On the counterclaim, Coastal Palms seeks summary judgment in its favor on its claim that Verimark failed to maintain brand standards at the 22 hotel properties, including allegations of deferred maintenance at select properties, inadequate uptime for Verimark's proprietary reservation system (the "VConnect" platform), and over-billing for required vendor services mandated by the franchise agreements. Coastal Palms claims $12 million in damages, consisting of alleged lost revenue attributable to poor guest satisfaction scores, costs incurred to remedy maintenance deficiencies, and excess charges for vendor services.

C. Response Briefs (November 17, 2023)

Both parties filed their response briefs on November 17, 2023, in accordance with the briefing schedule set by the Court.

Verimark's Response in Opposition to Defendants' Cross-Motion for Summary Judgment. This 35-page brief, prepared by Yuki Nakamura and reviewed by Priya Anand, systematically addressed each of Coastal Palms' arguments and demonstrated that genuine disputes of material fact preclude summary judgment in defendants' favor on each of the ten counts and on the counterclaim.

On the GRR-ambiguity argument, Verimark's response emphasized the unambiguous text of FLA § 4.1, highlighting that the phrase "regardless of the entity collecting such revenue" directly and expressly addresses the precise situation presented in this case. The response cited well-established Florida appellate authority holding that franchise agreements are to be interpreted according to their plain meaning and that ambiguity should not be manufactured by selective reading of contractual terms. Specifically, the response relied on Palm Beach Motor Cars Ltd. v. Honeywell Int'l, Inc., 58 So. 3d 326 (Fla. 4th DCA 2011), and Vacation Break, Inc. v. Meridian Financial, 862 So. 2d 859 (Fla. 3d DCA 2003), for the propositions that (i) courts should not rewrite unambiguous contract terms, and (ii) franchise-agreement revenue-reporting obligations must be interpreted to effectuate the parties' intent as expressed in the plain language of the agreement.

On the knowledge-and-acquiescence defense, Verimark's response demonstrated that the mere inclusion of Suncoast's name in certain property-management agreements submitted during franchise applications does not constitute evidence that Verimark knew or approved of Suncoast collecting guest-room revenues and excluding them from GRR reports. The property-management agreements disclosed Suncoast's role in day-to-day hotel operations, not its role as an alternative revenue-collection vehicle. Moreover, Verimark introduced evidence that its franchise-compliance team had no visibility into Suncoast's financial records and no reason to suspect that guest-room revenues were being channeled through a separate entity and excluded from GRR calculations. The response also noted that even if Verimark had been aware of Suncoast's existence, knowledge of Suncoast's operational role is not equivalent to knowledge or consent to underreporting of GRR. Coastal Palms cited no provision of the FLA authorizing unilateral modification of GRR reporting obligations, and no evidence of any written or oral agreement between the parties to exclude Suncoast-collected revenues.

On the counterclaim, Verimark's response demonstrated that Coastal Palms' brand-standard allegations lack sufficient evidentiary support to survive summary judgment. The response noted that Coastal Palms failed to produce any contemporaneous complaints, cure notices, or correspondence during the relevant period in which Coastal Palms raised brand-standard concerns with Verimark. The $12 million damages figure in the counterclaim is unsupported by any expert analysis or reliable damages methodology. The brand-standard allegations appear to have been raised for the first time in the litigation, well after the revenue-underreporting dispute surfaced, suggesting that the counterclaim was asserted primarily as a litigation tactic rather than in pursuit of legitimate grievances.

Coastal Palms' Opposition to Verimark's Partial Summary Judgment Motion. Coastal Palms also filed its opposition brief on November 17, 2023. The principal argument was that factual disputes exist regarding Verimark's knowledge of and acquiescence to Suncoast's role in collecting guest-room revenues, which, defendants contend, preclude a finding of breach as a matter of law. Coastal Palms also argued that the Court should apply the course-of-dealing doctrine, asserting that the parties' longstanding practice of excluding Suncoast-collected revenues from GRR reports (allegedly with Verimark's tacit knowledge) created an implied modification of the FLA's reporting requirements. Calderwood & Harkness's assessment is that this argument is legally deficient under Florida law, which requires clear and unequivocal evidence of mutual intent to modify a written franchise agreement, and factually unsupported by the record.

D. Reply Briefs (December 8, 2023)

Both parties filed their reply briefs on December 8, 2023, completing the summary-judgment briefing cycle.

Verimark's Reply Memorandum. The reply brief, prepared by Yuki Nakamura and reviewed by Priya Anand, addressed several critical points.

First, the reply reiterated that FLA § 4.1 unambiguously includes all revenues from guest-room rental regardless of the collecting entity. The reply noted that Coastal Palms' ambiguity argument relies on reading the contract provision in isolation from the phrase "regardless of the entity collecting such revenue," which is the very phrase that resolves any potential ambiguity. Under Florida law, a contract provision is not ambiguous simply because the parties disagree about its meaning; ambiguity must arise from the language itself, and no reasonable reading of § 4.1 supports the exclusion of revenues collected by Suncoast.

Second, the reply addressed the knowledge-and-acquiescence defense by noting that Brecker's own deposition admissions foreclose this argument. Brecker admitted that he directed controllers to exclude Suncoast-collected revenues from GRR reports. If Verimark's knowledge were a valid defense, Brecker would have had no reason to conceal the revenue-diversion scheme — he would have simply disclosed it. The affirmative concealment is itself evidence that Coastal Palms understood the revenues were reportable and chose to hide them.

Third, the reply highlighted the significance of FLA § 14.2(c), which provides that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." This provision eliminates any defense based on the FLA's general cure provisions. Even if Coastal Palms could demonstrate some basis for its reporting methodology (which it cannot), the systematic nature of the underreporting — spanning nine years and 22 properties — constitutes a material and incurable breach as a matter of contract.

Fourth, the reply addressed Coastal Palms' course-of-dealing argument, noting that under Florida law, a course-of-dealing cannot contradict or override the express terms of a written agreement, particularly where the agreement contains a merger clause (FLA § 17.1) and a no-oral-modification clause (FLA § 17.4). The reply cited Dows v. Sterling Reach Partners LLC, 846 So. 2d 595 (Fla. 4th DCA 2003), for this proposition.

Coastal Palms' Reply in Support of Its Cross-Motion. Coastal Palms' reply brief, filed the same day, largely reiterated the arguments from its opening brief and opposition. The reply did not introduce significant new arguments or evidence. Coastal Palms continued to emphasize the alleged ambiguity of the GRR definition and the knowledge-and-acquiescence defense. Calderwood & Harkness does not view the reply as having materially strengthened Coastal Palms' position.

E. Oral Argument — January 19, 2024

Oral argument on the cross-motions for summary judgment is scheduled for January 19, 2024, before Judge Calloway. The Court has allocated approximately two hours for the hearing.

Calderwood & Harkness is currently preparing a detailed Oral Argument Preparation Memorandum (the "Bench Memo") with anticipated questions from the Court, key authorities for each issue, and structured talking points. The Bench Memo is expected to be finalized by January 12, 2024. The preparation process includes a moot-court session scheduled for January 15, 2024, in which Priya Anand will conduct a full rehearsal of the oral argument with Douglas Carmichael and Yuki Nakamura posing questions in the role of the Court.

Priya Anand will present the oral argument for Verimark. Yuki Nakamura will serve as second chair, responsible for managing the record references, deposition excerpts, and real-time research support. Carlos Espinoza will be present as a third member of the courtroom team to assist with document management.

We anticipate that Nathan Whitfield III will argue for Coastal Palms, consistent with his role as lead counsel throughout the litigation.

Based on our review of Judge Calloway's prior summary-judgment rulings in commercial cases and on the structure of the briefing, we anticipate that the Court will focus on three primary areas:

1. Whether FLA § 4.1's GRR definition is unambiguous as a matter of law. This is the threshold question. If the Court finds the definition unambiguous, Coastal Palms' primary defense collapses, and the analysis proceeds to whether Coastal Palms' exclusion of Suncoast-collected revenues constitutes a breach. If the Court finds ambiguity, extrinsic evidence would become relevant, and the question would likely need to be resolved at trial.

2. Whether Coastal Palms' exclusion of Suncoast-collected revenues constitutes a material breach. Assuming the Court finds the GRR definition unambiguous, it must determine whether the undisputed record establishes that Coastal Palms excluded revenues falling within the definition. Given Brecker's admissions, we believe the answer is yes as a matter of law.

3. Whether any factual issues — particularly Verimark's alleged knowledge of Suncoast — preclude summary judgment on liability. The Court must determine whether Coastal Palms has raised a genuine dispute of material fact sufficient to defeat summary judgment. We expect the Court to closely examine the evidence regarding Verimark's alleged knowledge and to assess whether, even if Verimark knew of Suncoast's existence, such knowledge constitutes a defense to a breach-of-contract claim based on underreported revenues.

F. Assessment of Likely Outcome

Based on the strength of the briefing, the unambiguous contract language, the evidentiary record, and Randall Brecker's deposition admissions, Calderwood & Harkness assesses the likely outcomes of the summary-judgment proceedings as follows:

Verimark's Partial Summary Judgment Motion (Counts I and II — Liability Only). We assess a strong likelihood — approximately 75% to 80% — that the Court will grant Verimark's motion and enter summary judgment on liability for Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund Contributions). The plain language of FLA § 4.1, combined with Brecker's admissions, presents a compelling case for summary adjudication. The knowledge-and-acquiescence defense is the primary risk, but we believe it is factually and legally insufficient to defeat the motion. Even if the Court views the evidence regarding Verimark's awareness of Suncoast's existence as creating a marginal factual issue, we believe the Court is likely to find that knowledge of Suncoast's operational role is legally distinct from consent to underreporting of GRR.

Coastal Palms' Cross-Motion for Summary Judgment. We assess a high probability — approximately 85% to 90% — that the Court will deny Coastal Palms' cross-motion on all counts. The GRR-ambiguity argument is weak on the contract text and unsupported by extrinsic evidence sufficient to create a genuine dispute, much less to establish Coastal Palms' entitlement to judgment as a matter of law. As to the remaining counts (III through X), genuine issues of material fact clearly exist, and the cross-motion does not present a persuasive basis for summary adjudication.

Coastal Palms' Counterclaim. The counterclaim is likely to survive summary judgment only nominally. The evidentiary support for the brand-standard allegations is thin, and the $12 million damages figure lacks a reliable foundation. However, because the counterclaim raises factual questions that the Court may prefer to have resolved by the factfinder, we believe the Court is more likely than not to allow the counterclaim to proceed to trial, where it is expected to carry minimal weight.

Impact on Trial Schedule. If partial summary judgment is granted, the trial would proceed on damages only for Counts I and II, and on liability and damages for the remaining counts (III through X) and the counterclaim. The trial is expected to be continued from the original February 2024 setting to approximately May 2024, consistent with the Court's current calendar and the need for both parties to adjust their trial preparations to reflect the summary-judgment ruling.

IV. Settlement Posture Analysis

A. Current Settlement Dynamics

No formal settlement discussions have occurred since the pre-mediation informal exchanges conducted in mid-2023. Those exchanges, which took place through counsel, did not yield meaningful progress, as the parties' positions were substantially apart: Verimark's initial demand was $110 million, and Coastal Palms' initial offer was $4.5 million. Since that time, the case has advanced significantly through the completion of discovery, the filing of dispositive motions, and the development of a detailed record.

The summary-judgment ruling will dramatically affect both parties' settlement posture. A favorable ruling for Verimark on liability for Counts I and II would accomplish several important things from a settlement perspective: it would remove the liability question from the negotiating table, transforming the dispute into a pure damages calculation; it would validate Verimark's legal position and undermine Coastal Palms' primary defense; and it would signal to both Coastal Palms and its lender, Ironclad National Bank, that a substantial judgment is likely, increasing the urgency to reach a negotiated resolution.

Conversely, if the Court denies Verimark's motion and the parties proceed to trial on both liability and damages, the settlement dynamics would be more favorable to Coastal Palms, as the uncertainty of trial creates leverage for a reduced settlement. However, even in that scenario, the strength of Verimark's evidence — particularly Brecker's admissions and the Suncoast financial records — would make a defense verdict unlikely.

Coastal Palms' financial position remains a significant consideration in settlement analysis. Ironclad National Bank holds approximately $94 million in first-lien mortgage loans on 18 of the 22 Coastal Palms hotel properties. These loans are secured by the real property and related fixtures. As a result, Coastal Palms' ability to satisfy a large cash judgment is uncertain, and any settlement structure must account for the priority of Ironclad's liens. The four unencumbered properties have an estimated aggregate market value of approximately $71.2 million based on Verimark's internal valuations and publicly available comparable-sales data; these properties represent the most likely source of collateral security in a settlement.

B. Preliminary Settlement Range Assessment

Calderwood & Harkness has conducted a preliminary analysis of the likely settlement range, taking into account the following factors: the probability-weighted expected value of Verimark's claims, the collectibility constraints imposed by Ironclad's lien position, the cost of trial, and the discount for settlement uncertainty.

If partial summary judgment is granted on Counts I and II (liability only), the damages at issue in any subsequent trial would range from a defense floor of $6.2 million (per Prof. Hargrove's expert analysis, which is vulnerable to challenge) to Verimark's full claim of approximately $150 million. The probability-weighted midpoint, reflecting the relative strength of the competing damages analyses and the risk that the liquidated-damages provision may be reduced or struck as a penalty, falls in the range of $70 million to $100 million.

However, the collectibility concern is substantial. Even a full $150 million judgment would be of limited practical value if Coastal Palms lacks the liquidity or unencumbered assets to satisfy it. Accordingly, any settlement should be structured to include:

• Cash component: Substantial upfront cash payment, potentially sourced from refinancing of one or more properties or from Brecker's and Prescott's personal assets.

• Liens on unencumbered assets: First-priority security interests in the four unencumbered hotel properties (estimated aggregate value of $71.2 million) to secure any deferred payment obligations.

• Personal guaranties: Personal guaranties from Randall Brecker and Nolan Prescott to provide additional recovery sources in the event of default on settlement payments.

• Franchise-surrender component: Orderly termination of some or all of the 22 FLAs, with associated de-identification obligations, which has independent value to Verimark in removing underperforming or problematic franchise locations from its branded portfolio.

• Structured payments: A structured payment schedule to accommodate Coastal Palms' liquidity constraints, secured by the liens and guaranties described above.

Taking into account all of these factors, and assuming a favorable summary-judgment ruling, Calderwood & Harkness's preliminary assessment is that a settlement in the range of $75 million to $95 million — combining cash, structured payments, and franchise-surrender value — may be achievable and would be preferable to the risk, expense, and collectibility uncertainty associated with proceeding to trial and post-judgment collection.

Litigation costs through trial are now projected at $9.0 million to $10.5 million all-in (see Section VII below). Additional trial costs beyond the current spend would be approximately $1.5 million to $2.0 million. A settlement that avoids trial would eliminate these additional costs and accelerate the realization of value.

We emphasize that this settlement-range assessment is preliminary and will be updated following the summary-judgment ruling, at which point the parties' relative positions will be more clearly defined.

C. Potential Mediation

If the timing and the Court's ruling permit, Calderwood & Harkness recommends that Verimark consider proposing formal mediation to Coastal Palms' counsel. Mediation would provide a structured forum for settlement negotiations, allow a neutral third party to reality-test both sides' positions, and potentially accelerate resolution.

We recommend engaging a retired judge with experience in franchise litigation as the mediator. The Honorable Patricia Everwood (Ret.) of Everwood Dispute Resolution PLLC in Coral Gables, Florida, is a strong candidate for this role. Judge Everwood served on the Circuit Court bench in the 11th Judicial Circuit (Miami-Dade County) for 18 years before retiring in 2019 and establishing her mediation practice. She has extensive experience in complex commercial disputes, including franchise litigation, and is well-regarded by the bench and bar in South Florida. Her mediation fee is $7,500 per session (full day), and we estimate total mediation costs (including preparation, the mediation session, and follow-up) at approximately $38,000.

We will discuss next steps on settlement strategy and the potential for mediation at our January case-team meeting and following the January 19, 2024 oral argument. Any decision to pursue mediation would, of course, require Verimark's approval and a determination by the in-house team regarding the company's authorized settlement range.

V. Expert Work — Status

The expert work in this matter is substantially complete. Both sides' expert reports and rebuttal reports have been served, and both experts have been deposed. The expert record is final and will be presented to the Court and, if necessary, to the jury at trial.

Dr. Sharon Kettlewell — Ridgeline Forensic Advisory LLC (Verimark's Damages Expert). Dr. Kettlewell's expert report was served on April 14, 2023. Her rebuttal report, responding to Prof. Hargrove's defense expert report, was served on June 9, 2023. Both reports are in the summary-judgment record and were cited extensively in Verimark's briefing.

Dr. Kettlewell's key conclusions are as follows:

• Cumulative Underreported GRR: $197.8 million across all 22 properties during the period from January 2013 through December 2021. This figure was derived from a comprehensive reconciliation of Coastal Palms' reported GRR against Suncoast's internal revenue ledgers, bank deposit records, OTA settlement statements, and corporate-direct contract records.

• FY 2021 Illustration: In Fiscal Year 2021 alone, Coastal Palms reported GRR of $112.4 million, whereas Dr. Kettlewell estimated the true GRR to be $145.6 million — an underreporting of $33.2 million, or approximately 29.5%.

• Underpaid Royalties: $9.89 million (5% of $197.8 million in underreported GRR).

• Underpaid Marketing-Fund Contributions: $4.945 million (2.5% of $197.8 million in underreported GRR).

• Underpaid Technology Fees: $1.26 million, calculated as 214 unreported rooms × $12.50 per room per month × an average of approximately 47 months per property during which the rooms were unreported.

• Late-Payment Interest: $28.4 million, calculated at the contractual rate of 1.5% per month, compounded, pursuant to FLA § 4.5. Dr. Kettlewell calculated the interest on a month-by-month basis, applying the compounding formula from the date each underpayment was due through the date of the expert report.

• Liquidated Damages: $105.5 million, calculated pursuant to FLA § 15.3, which provides for liquidated damages upon termination due to material breach equal to three times the trailing-twelve-month corrected royalties for each property. Dr. Kettlewell calculated this figure using the corrected royalty amounts for each of the 22 properties based on the estimated true GRR.

• Total Damages: Approximately $150 million (sum of all foregoing components).

Prof. Grant Hargrove — Hargrove Economic Consulting Inc. (Coastal Palms' Damages Expert). Prof. Hargrove's expert report was served on May 15, 2023. He opined that the maximum underpayment attributable to any GRR discrepancy is $6.2 million. Prof. Hargrove reached this figure by applying a narrowed interpretation of the GRR definition that excludes walk-in cash payments (which he characterizes as "incidental revenue" outside the scope of § 4.1) and by using net OTA revenue (after deducting OTA commissions of approximately 15–25%) rather than gross OTA revenue. Prof. Hargrove's analysis did not include any calculation of late-payment interest or liquidated damages.

Dr. Kettlewell's rebuttal report (served June 9, 2023) addressed Prof. Hargrove's methodological errors in detail. The principal criticisms were as follows:

• Exclusion of Walk-In Cash Payments. Prof. Hargrove's exclusion of walk-in cash payments is inconsistent with the FLA's definition of GRR, which encompasses "all revenues derived from or attributable to the rental of guest rooms." Walk-in cash payments are by definition derived from the rental of guest rooms and are unambiguously within the GRR definition. Prof. Hargrove offered no textual basis for excluding them.

• Use of Net Rather Than Gross OTA Revenue. Prof. Hargrove's use of net OTA revenue (after deduction of OTA commissions) contradicts the FLA's requirement that GRR include all revenues "regardless of the entity collecting such revenue." When a guest pays $200 per night through an OTA, the full $200 is revenue "derived from or attributable to the rental of guest rooms," even though the OTA retains a commission of $30–$50. The FLA makes no provision for deducting intermediary commissions from GRR. Prof. Hargrove's approach effectively allows the franchisee to reduce its fee obligations by choosing to distribute rooms through OTA channels — a result that is inconsistent with the FLA's structure and purpose.

• Incomplete Data Analysis. Dr. Kettlewell identified several instances in which Prof. Hargrove failed to account for revenue streams reflected in Suncoast's bank records that were not captured in Coastal Palms' reported GRR. These omissions understated Prof. Hargrove's own calculation by at least $2.1 million.

Expert Depositions. Both experts were deposed on June 26–27, 2023. Dr. Kettlewell's deposition testimony was strong, consistent with her reports, and effectively withstood cross-examination by Mr. Whitfield. She demonstrated thorough command of the financial data and articulated her methodology clearly. Prof. Hargrove's deposition was less successful for the defense. During cross-examination by Priya Anand, Prof. Hargrove was impeached on several methodology points, including his admission that he could not identify any provision of the FLA that supports the exclusion of walk-in cash payments from GRR, and his concession that his net-OTA-revenue approach was based on "industry practice" rather than on the contract language.

Engagement Fees. Ridgeline Forensic Advisory LLC's engagement fees through Q4 2023 total approximately $1.72 million, against a total engagement budget of $1.85 million. The remaining $130,000 in budgeted fees is expected to be sufficient to cover trial preparation and testimony, if required. No additional expert engagement is anticipated.

VI. Staffing Update

The Calderwood & Harkness case team for this matter consists of two partners, two associates, and a support team of paralegals and contract attorneys. Staffing has remained stable throughout Q4 2023, and no changes are anticipated in the near term. The team members and their roles, billing rates, and cumulative hours are as follows:

Priya Anand — Responsible Partner (Florida Bar No. 0087451), billing rate $975 per hour. Ms. Anand has served as the lead strategist and client-relationship partner throughout the litigation. During Q4 2023, she led the summary-judgment strategy, authored the Summary Judgment Strategy Memorandum (September 5, 2023), reviewed and approved all summary-judgment briefing (including the initial motion, response in opposition to the cross-motion, and reply memorandum), and directed the team's preparation for oral argument. She will argue the January 19, 2024 oral argument before Judge Calloway. Approximately 1,200 hours have been billed through Q4 2023.

Douglas Carmichael — Billing Partner (Florida Bar No. 0093217), billing rate $925 per hour. Mr. Carmichael oversees budget management, client billing coordination, and engagement compliance for the matter. He reviewed the summary-judgment briefing and participates in case-strategy discussions. He is responsible for the Quarterly Budget Update Memorandum to Martin Holcomb. Approximately 520 hours have been billed through Q4 2023.

Yuki Nakamura — Lead Associate (Florida Bar No. 0119644), billing rate $625 per hour. Ms. Nakamura has been the primary drafter and analytical lead for the case team. She was the principal author of all four summary-judgment briefs: the 42-page Memorandum of Law in support of Verimark's partial summary judgment motion, the 127-paragraph Statement of Undisputed Material Facts, the Response in Opposition to Defendants' Cross-Motion for Summary Judgment, and the Reply Memorandum. She also conducted the detailed analysis of Coastal Palms' Cross-Motion and identified the key weaknesses in the defense arguments. Ms. Nakamura will serve as second chair at the January 19, 2024 oral argument. She is also responsible for the ongoing monitoring of Coastal Palms' financial condition and Ironclad National Bank's lien position for collectibility analysis. Approximately 3,400 hours have been billed through Q4 2023.

Carlos Espinoza — Working Associate (Florida Bar No. 0128903), billing rate $495 per hour. Mr. Espinoza prepared the two key research memoranda on Florida franchise revenue-reporting law (August 18, 2023) and on liquidated-damages enforceability under Florida's penalty doctrine (August 25, 2023). He assisted with the drafting of the summary-judgment briefing, with particular responsibility for the record-citation verification and damages-analysis sections. He also provided research and drafting support for the response and reply briefs. Approximately 2,550 hours have been billed through Q4 2023.

Paralegals and Contract Attorneys. The paralegal and contract-attorney team, led by Senior Paralegal Maria Elena Fuentes, has provided document management, deposition preparation, trial-exhibit organization, and cite-checking support. Approximately 1,100 hours have been billed through Q4 2023 at a blended rate of approximately $285 per hour.

VII. Budget Update and Financial Summary

A. Fees and Costs Through Q4 2023

The following table summarizes cumulative fees and costs billed through the end of Q4 2023 (December 31, 2023), compared to the original budget ranges established at the outset of the engagement:

Calderwood & Harkness's attorney fees of approximately $5.98 million reflect the cumulative hours billed by the engagement team: Priya Anand (~1,200 hours × $975/hour = ~$1,170,000), Douglas Carmichael (~520 hours × $925/hour = ~$481,000), Yuki Nakamura (~3,400 hours × $625/hour = ~$2,125,000), Carlos Espinoza (~2,550 hours × $495/hour = ~$1,262,250), and paralegals and contract attorneys (~1,100 hours × ~$285/hour = ~$313,500). These figures are approximate and subject to final billing reconciliation; detailed billing statements have been provided monthly to Verimark's accounts payable department, with copies to the in-house legal team for review.

B. Revised Budget Estimate Through Resolution

The revised estimate for total fees and expenses through resolution of the matter is $9.0 million to $10.5 million, as communicated in the Quarterly Budget Update Memorandum prepared by Douglas Carmichael and transmitted to Martin Holcomb, Executive Vice President and Chief Financial Officer of Verimark, on January 8, 2024.

The remaining projected costs include the following items:

• Oral-argument preparation (January 2024): Estimated at $35,000–$50,000, reflecting partner and associate time for the Bench Memo, moot-court session, and day-of argument preparation and attendance.

• Post-ruling analysis and strategy update (timing dependent on ruling): Estimated at $15,000–$25,000 for analysis of the ruling, updated settlement-posture assessment, and client advisory memorandum.

• Potential mediation (if pursued): Estimated at $38,000, inclusive of mediator fees (Hon. Patricia Everwood — estimated $7,500/session), preparation of mediation statements and demand documentation, travel, and attorney time for the mediation session.

• Settlement negotiation and documentation (if settlement is achieved): Estimated at $75,000–$125,000, reflecting drafting and negotiation of a comprehensive settlement agreement, release, franchise-surrender documentation, lien and guaranty instruments, and any regulatory filings.

• Alternatively, trial preparation and trial (if the case proceeds to trial, expected May 2024): Estimated additional cost of $1.5 million to $2.0 million beyond current spend, reflecting trial-team preparation (witness preparation, trial briefs, motions in limine, jury instructions, exhibit preparation, and demonstratives), a 2- to 3-week trial with a full trial team, and post-trial motions and proceedings.

The lower end of the $9.0 million to $10.5 million range assumes that the case is resolved through settlement following a favorable summary-judgment ruling, without the need for a full trial. The upper end of the range assumes that trial preparation and a 2- to 3-week trial are required. If both a mediation and a trial are necessary, total costs could approach the upper end of the range.

The original budget of $4.5 million to $7.5 million, established in the engagement letter dated March 10, 2022, has been exceeded due to several factors that were not fully anticipated at the outset:

• The scope and complexity of discovery were substantially greater than originally projected. The 2.3 million documents processed on the Verimark side, 14 fact depositions, and 2 expert depositions significantly exceeded the original discovery budget assumptions.

• The motion-to-compel practice regarding Suncoast Room Management Inc.'s financial records — including briefing, oral argument, and post-order compliance monitoring — added approximately $280,000 to the litigation budget.

• The expert engagement proved more complex and costly than anticipated, principally because Dr. Kettlewell's forensic analysis required reconciliation of records across 22 hotel properties over a nine-year period, involving multiple revenue streams and booking channels.

• The summary-judgment briefing — four major briefs totaling over 150 pages, plus hundreds of pages of exhibits and the 127-paragraph statement of undisputed facts — required substantial attorney hours.

The revised $9.0 million to $10.5 million estimate reflects the true scope and complexity of the matter and has been communicated to Verimark's financial team for budget-planning purposes. Calderwood & Harkness remains committed to managing costs efficiently and to providing advance notice of material budget variances.

C. Insurance Coverage

Pinnacle Indemnity Insurance Co. was notified of the litigation on March 14, 2022, under Policy No. PLI-VHG-2021-08874. Coverage counsel Arthur Baines of Verimark's insurance-recovery team is monitoring the mat

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Renata Solis-Vega, Senior Vice President & General Counsel, Verimark Hospitality Group Inc.
FROM: Priya Anand, Responsible Partner, Calderwood & Harkness LLP
DATE: January 3, 2024
RE: Quarterly Litigation Status Report — Q4 2023 Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al. Case No. 1021-00006 Circuit Court of the 17th Judicial Circuit, Broward County, Florida
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION / ATTORNEY WORK PRODUCT. This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of litigation. It is intended solely for the use of the addressee and authorized recipients identified herein. Any disclosure, copying, distribution, or use of this memorandum or its contents by any person other than the intended recipients is strictly prohibited. If you have received this document in error, please contact Calderwood & Harkness LLP immediately.
I. Executive Summary
This memorandum summarizes the significant developments that occurred during the fourth quarter of 2023 (October 1 through December 31, 2023) in the breach-of-contract litigation captioned Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc., Case No. 1021-00006, pending before the Honorable Richard M. Calloway in the Circuit Court of the 17th Judicial Circuit, Broward County, Florida. This report is prepared for the benefit of Verimark's in-house legal team and authorized members of senior management to facilitate informed decision-making regarding the case posture, upcoming proceedings, settlement strategy, and budget management.
Q4 2023 was a pivotal quarter in this litigation, dominated by the completion of the dispositive motions briefing that will shape the trajectory of the remainder of the case. Three primary developments define the quarter:
First, the briefing cycle that began at the close of Q3 with the filing of Verimark's Motion for Partial Summary Judgment on Counts I (Breach of Contract — Royalties) and II (Breach of Contract — Marketing Fund) on September 29, 2023, continued through its full course during Q4. The motion seeks a determination of liability as a matter of law on the two core breach-of-contract claims, reserving the question of damages for trial.
Second, on October 13, 2023, Coastal Palms filed its Cross-Motion for Summary Judgment, seeking summary judgment in its favor on all ten counts of Verimark's Complaint and, additionally, on its $12 million counterclaim alleging brand-standard violations and over-billing. The cross-motion raises the defense that the Franchise License Agreement's ("FLA") definition of Gross Room Revenue ("GRR") is ambiguous as to revenues collected by Suncoast Room Management Inc., a separate management entity controlled by defendant Randall Brecker.
Third, and most significantly, all summary-judgment briefing was completed during Q4: response briefs from both sides were filed on November 17, 2023, and reply briefs were filed on December 8, 2023. The record is now fully developed on the dispositive motions, and the matter is ripe for decision.
Oral argument on the cross-motions for summary judgment has been scheduled for January 19, 2024, before Judge Calloway. This hearing is expected to be the single most consequential proceeding in the litigation to date. Calderwood & Harkness's assessment, based on the strength of the contract language, the evidentiary record, and Randall Brecker's damaging deposition admissions, is that Verimark has a strong likelihood of prevailing on its partial summary judgment motion on Counts I and II (liability only), which we estimate at approximately 75–80% probability.
The trial date has been continued from its original February 2024 setting. Based on the current procedural posture and discussions with Judge Calloway's judicial assistant, trial is now anticipated for approximately May 2024, depending on the timing and outcome of the Court's summary-judgment ruling.
On the settlement front, no formal settlement discussions have occurred since the pre-mediation informal exchanges conducted in mid-2023. However, the summary-judgment ruling will dramatically affect both parties' bargaining positions, and Calderwood & Harkness recommends that Verimark be prepared to initiate settlement discussions — potentially through formal mediation — promptly following a favorable ruling. A preliminary settlement-range analysis is set forth in Section IV below.
Finally, this report includes an updated budget forecast reflecting the current phase of the litigation. Cumulative fees and costs through Q4 2023 total approximately $8.61 million. The revised budget estimate through resolution of the matter is $9.0 million to $10.5 million, as reflected in the Quarterly Budget Update Memorandum to Martin Holcomb dated January 8, 2024. Each of these topics is addressed in detail in the sections that follow.
II. Case Posture and Procedural Status
A. Court and Assigned Judge
The case remains assigned to the Honorable Richard M. Calloway, Circuit Judge, in the Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, Case No. 1021-00006. Judge Calloway has presided over the matter since its filing and is well-acquainted with the factual and legal issues. He has demonstrated a thorough familiarity with the franchise-agreement provisions at issue, as evidenced by his detailed October 28, 2022 order granting Verimark's Motion to Compel production of Suncoast Room Management Inc.'s financial records. Judge Calloway's courtroom is located in the Broward County Courthouse, 201 SE 6th Street, Fort Lauderdale, Florida. His judicial assistant, Ms. Linda Garrett, has confirmed the January 19, 2024 oral argument date and has indicated that the Court is prepared to allocate up to two hours for argument on the cross-motions.
B. Parties. The parties to this litigation are as follows:
Plaintiff — Verimark Hospitality Group Inc. Verimark is a Delaware corporation with its principal place of business in Atlanta, Georgia. Its common stock is publicly traded on the Nasdaq Global Select Market under the ticker symbol VHMK. Verimark is one of the nation's largest hotel franchise companies, with a portfolio of approximately 4,200 franchise properties across twelve branded tiers. Verimark is represented in this litigation by Calderwood & Harkness LLP, with Priya Anand serving as Responsible Partner, Douglas Carmichael serving as Billing Partner, and Yuki Nakamura and Carlos Espinoza serving as lead and working associates, respectively.
Defendant — Coastal Palms Franchise Holdings LLC. Coastal Palms is a Florida limited liability company organized in 2006 and headquartered in Boca Raton, Florida. Coastal Palms is the franchisee under 22 separate Franchise License Agreements with Verimark covering hotel properties located primarily along the Atlantic coast of Florida, from Palm Beach County to Duval County. Coastal Palms is the principal defendant in this action and the entity against which the majority of Verimark's contract claims are directed.
Defendant — Randall "Randy" Brecker (Individually). Mr. Brecker is the Managing Member and holder of approximately 60% of the equity interests in Coastal Palms. He is a resident of Boca Raton, Florida. He is named individually in Count V (Fraudulent Concealment), Count VI (Negligent Misrepresentation), and Count X (Civil Conspiracy). Mr. Brecker executed a personal guaranty of certain of Coastal Palms' franchise obligations pursuant to FLA § 16.1.
Defendant — Suncoast Room Management Inc. Suncoast is a Florida corporation also controlled by Randall Brecker, incorporated in 2009. Suncoast served as the property-management company for certain of the Coastal Palms hotel properties and is alleged to have been the vehicle through which Coastal Palms diverted guest-room revenues from the GRR calculations reported to Verimark. Suncoast is named in Count VII (Unjust Enrichment — alternative), Count IX (Accounting), and Count X (Civil Conspiracy).
All three defendants are represented by the law firm of Whitfield, Barrow & Crane LLP, with offices in Miami, Florida. Nathan Whitfield III serves as lead counsel, supported by partner Gabriela Montes and associate Ethan Doyle. Mr. Whitfield is a well-known commercial-litigation practitioner in South Florida, and we note that his firm has historically been effective in complex franchise disputes. Calderwood & Harkness has observed professional and competent representation from opposing counsel throughout this matter, and we anticipate vigorous advocacy at the upcoming oral argument and, if necessary, at trial.
C. Claims at Issue
Verimark's ten-count Complaint was filed on March 7, 2022, following an approximately nine-month pre-suit investigation prompted by internal audit findings and corroborated by the testimony of Janet Kerrigan, a former controller at three of the Coastal Palms properties who reported concerns through Verimark's franchise-compliance hotline in February 2021. The Complaint asserts the following claims:
Count I — Breach of Contract (Royalties). Coastal Palms breached FLA § 4.1 by systematically underreporting Gross Room Revenue and thereby underpaying the 5% royalty fee owed to Verimark. The underreporting was accomplished by excluding revenues collected by Suncoast Room Management Inc. through direct-booking channels (walk-in guests, corporate-direct contracts, and Suncoast's proprietary website gulfcoastrooms.com) and by improperly netting revenue from Online Travel Agencies ("OTAs") rather than reporting gross OTA revenue.
Count II — Breach of Contract (Marketing Fund Contributions). Coastal Palms breached FLA § 4.2 by underpaying the 2.5% marketing-fund contribution, which is calculated on the same GRR base as the royalty fee. The underreporting of GRR described in Count I resulted in proportional underpayment of marketing-fund contributions.
Count III — Breach of Contract (Technology Fees). Coastal Palms breached FLA § 4.3 by failing to pay the $12.50 per-room, per-month technology fee for approximately 214 rooms that were managed by Suncoast but not reported in Coastal Palms' room-count certifications to Verimark.
Count IV — Breach of Implied Covenant of Good Faith and Fair Dealing. Coastal Palms breached the implied covenant of good faith and fair dealing by engaging in a deliberate scheme to divert revenues through Suncoast to circumvent its royalty and fee obligations under the FLAs.
Count V — Fraudulent Concealment (Brecker). Randall Brecker fraudulently concealed the diversion of revenues through Suncoast by, among other things, directing property-level controllers to exclude Suncoast-collected revenues from monthly GRR reports and by withholding Suncoast's financial records from Verimark's periodic audits.
Count VI — Negligent Misrepresentation (Brecker). Randall Brecker negligently misrepresented the scope and completeness of the GRR reports submitted to Verimark by certifying their accuracy without adequate verification, or alternatively, with knowledge that the reports excluded material revenue streams.
Count VII — Unjust Enrichment (Alternative — Suncoast). In the alternative to the contract claims, Suncoast was unjustly enriched by retaining revenues that should have been included in Coastal Palms' GRR calculations and on which royalties and fees were owed to Verimark.
Count VIII — Declaratory Judgment (FLA Termination). Verimark seeks a declaratory judgment that the systematic underreporting of GRR constitutes a material and incurable breach under FLA § 14.2(c), entitling Verimark to terminate the FLAs.
Count IX — Accounting. Verimark seeks an accounting from Coastal Palms and Suncoast of all revenues derived from or attributable to the rental of guest rooms at the 22 hotel properties during the relevant period.
Count X — Civil Conspiracy (Brecker & Suncoast). Randall Brecker and Suncoast conspired to defraud Verimark by creating and maintaining a dual-reporting structure designed to conceal guest-room revenues from Verimark's franchise-fee calculations.
Total Claimed Damages. Verimark's total claimed damages are approximately $150 million, broken down as follows: (i) $16.095 million in direct underpayments (royalties, marketing-fund contributions, and technology fees); (ii) $28.4 million in contractual late-payment interest at 1.5% per month, compounded, pursuant to FLA § 4.5; and (iii) $105.5 million in liquidated damages under FLA § 15.3 (calculated as 22 properties multiplied by three times the trailing-twelve-month corrected royalties for each property). As discussed in the risk assessment below, the enforceability of the liquidated-damages provision under Florida law remains a significant open question.
Coastal Palms' Counterclaim. On May 16, 2022, Coastal Palms filed a counterclaim seeking $12 million in damages for alleged brand-standard violations by Verimark, including claims of deferred maintenance at certain properties, inadequate reservation-system uptime, and over-billing for required vendor services. The counterclaim is addressed in greater detail in Section III below.
D. Discovery Status
Fact and expert discovery in this matter closed on August 4, 2023, in accordance with the Amended Case Management Order entered February 10, 2023. There are no outstanding discovery disputes, and the discovery record is complete.
The discovery in this matter was extensive, reflecting the complexity of the revenue-reporting dispute across a 22-property portfolio over an approximately nine-year period (January 2013 through December 2021).
Document discovery. On the Verimark side, approximately 2.3 million documents totaling approximately 1.1 terabytes were collected, processed, and reviewed by Nexagen Document Solutions LLC, the e-discovery vendor retained by Calderwood & Harkness for this engagement. Verimark produced approximately 1.85 million documents to Coastal Palms in multiple rolling productions between June and November 2022.
Coastal Palms initially produced approximately 84,000 documents on August 22, 2022. That initial production was materially deficient, as it excluded virtually all financial records of Suncoast Room Management Inc. Following the Court's October 28, 2022 order granting Verimark's Motion to Compel — in which Judge Calloway found that Suncoast's financial records were directly relevant to the GRR calculation dispute and that Coastal Palms' objections on the basis of separate corporate identity were without merit — Coastal Palms and Suncoast produced an additional 312,000 documents on November 18, 2022. These supplemental documents proved critical to Verimark's case, as they included Suncoast's internal revenue ledgers, bank statements, and management-fee allocation spreadsheets that formed the backbone of Dr. Kettlewell's forensic analysis.
Fact Depositions. A total of 14 fact depositions were completed between January 9 and March 17, 2023. The key depositions included:
• Randall Brecker — Deposed over two days (February 6–7, 2023) for a total of approximately 14 hours. Mr. Brecker's testimony was highly significant, as he admitted on the record that he personally directed property-level controllers to exclude revenues collected by Suncoast from the monthly GRR reports submitted to Verimark. He also acknowledged that Suncoast was established, in part, to manage direct-booking channels that were not integrated into Verimark's reservation system.
• Theresa Brecker — Deposed on February 14, 2023. Ms. Brecker is Randall Brecker's spouse and serves as the Chief Financial Officer of Coastal Palms. Her testimony was largely consistent with prepared talking points; she maintained that the GRR reporting methodology was established before she joined the company and that she relied on the prior controllers' practices.
• Nolan Prescott — Deposed on February 21, 2023. Mr. Prescott is the President and 40% equity holder of Coastal Palms. His testimony established that he was aware of Suncoast's role in collecting direct-booking revenues but deferred to Brecker on reporting methodology.
• Janet Kerrigan (Whistleblower) — Deposed on January 9, 2023. Ms. Kerrigan is a former controller for three Coastal Palms properties who contacted Verimark's franchise-compliance hotline in February 2021. Her testimony corroborated the revenue-diversion scheme and provided detailed descriptions of the dual-reporting system maintained at the property level.
• Ten Property-Level Managers and Accountants — Deposed between January 23 and March 17, 2023. These witnesses provided property-specific testimony regarding revenue collection, booking-channel management, and GRR reporting practices. Several confirmed that they were directed by Brecker or by instructions passed through Theresa Brecker to exclude Suncoast-collected revenues from GRR reports.
Expert Depositions. Two expert depositions were completed on June 26–27, 2023:
• Dr. Sharon Kettlewell (Ridgeline Forensic Advisory LLC) — Verimark's damages expert. Her expert report and rebuttal report are detailed in Section V below. Dr. Kettlewell's deposition testimony was strong and consistent with her reports.
• Prof. Grant Hargrove (Hargrove Economic Consulting Inc.) — Coastal Palms' damages expert. Prof. Hargrove's deposition is also discussed in Section V. He was effectively impeached on several methodology points during cross-examination by Ms. Anand.
III. Summary Judgment Briefing — Detailed Report
A. Verimark's Motion for Partial Summary Judgment (Counts I and II)
Verimark's Motion for Partial Summary Judgment was filed on September 29, 2023, the final business day of Q3 2023. Although the filing itself occurred in Q3, the substantive briefing on the motion — including the opposition, replies, and oral-argument preparation — occurred entirely within Q4 and continuing into Q1 2024. The motion is accordingly treated as a Q4 development for purposes of this report.
The motion is supported by a 42-page Memorandum of Law and a detailed Statement of Undisputed Material Facts containing 127 numbered paragraphs, each supported by citations to deposition testimony, documentary evidence, and expert analysis. The motion was prepared by Yuki Nakamura under the supervision of Priya Anand, with research and drafting assistance from Carlos Espinoza.
The motion seeks summary judgment on liability only for Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund Contributions). By design, the motion does not address damages, which would be reserved for trial even if the motion is granted. This strategic approach was adopted for several reasons: first, it presents the Court with a clean liability question on the two strongest counts; second, it avoids the complexity of requiring the Court to adjudicate the contested damages figures on the summary-judgment record; and third, it preserves Verimark's full damages claim for presentation to the factfinder at trial.
The core argument of the motion is that the plain language of FLA § 4.1 compels a finding of breach. 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 entity collecting such revenue."
The motion argues that this definition is clear and unambiguous. The phrase "regardless of the entity collecting such revenue" was specifically drafted to capture all guest-room revenue, whether collected by the franchisee directly, by a property-management company, by an OTA, or by any other entity. Coastal Palms' practice of systematically excluding revenues collected by Suncoast Room Management Inc. through direct bookings (walk-ins, corporate-direct contracts, and the gulfcoastrooms.com website), and its practice of improperly netting OTA revenues rather than reporting the gross revenue amount, understated GRR by an estimated 22% to 31% across the 22-property portfolio from January 2013 through December 2021.
The motion cites the following key evidence establishing that no genuine dispute of material fact exists on the question of breach:
1. Randall Brecker's Deposition Admissions. During his two-day deposition on February 6–7, 2023, Mr. Brecker admitted that he personally directed property-level controllers to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. He further admitted that he understood Verimark would rely on these reports to calculate royalty and marketing-fund obligations. These admissions are binding on Coastal Palms as party admissions and eliminate any genuine factual dispute regarding the intentional nature of the underreporting.
2. Janet Kerrigan's Whistleblower Testimony. Ms. Kerrigan testified that she was explicitly instructed by Brecker's office to maintain two sets of revenue records: one reflecting total guest-room revenue including Suncoast-collected amounts, used for internal management purposes, and a separate set reflecting only revenues processed through Verimark's reservation system, which was submitted to Verimark for franchise-fee calculations. She described this dual-reporting system as well-established when she assumed the controller position in 2016 and operational across all properties she managed.
3. Suncoast Financial Records. The financial records produced by Suncoast pursuant to the Court's October 28, 2022 compulsion order documented substantial revenue flows that were never included in Coastal Palms' GRR reports to Verimark. These records, which included Suncoast's internal revenue ledgers, bank deposit records, corporate-direct contract revenue schedules, and management-fee allocation worksheets, corroborated the scope and duration of the underreporting.
4. Dr. Kettlewell's Forensic Analysis. Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC conducted a comprehensive forensic analysis of all available financial records and determined that cumulative underreported GRR across all 22 properties during the period from January 2013 through December 2021 totaled approximately $197.8 million. For Fiscal Year 2021 alone, Coastal Palms reported GRR of $112.4 million, whereas Dr. Kettlewell estimated the true GRR to be $145.6 million — an underreporting of $33.2 million, or approximately 29.5%.
The strategic rationale for seeking partial summary judgment on liability was articulated in Calderwood & Harkness's Summary Judgment Strategy Memorandum prepared on September 5, 2023 and shared with the Verimark litigation oversight team. Establishing liability as a matter of law on Counts I and II accomplishes several objectives: it eliminates the risk that a jury might be confused or misled by Coastal Palms' defenses on the contract-interpretation question; it positions Verimark for maximum settlement leverage, as a defendant facing a confirmed liability finding must negotiate against the backdrop of a damages-only trial; and it significantly narrows the trial scope, reducing both the duration and cost of any remaining proceedings.
B. Coastal Palms' Cross-Motion for Summary Judgment
On October 13, 2023, Coastal Palms filed its Cross-Motion for Summary Judgment, seeking summary judgment in defendants' favor on all ten counts of Verimark's Complaint and, separately, on Coastal Palms' $12 million counterclaim. The cross-motion was filed with a 38-page Memorandum of Law and a Counter-Statement of Material Facts with 94 numbered paragraphs.
Coastal Palms' core defense arguments are as follows:
GRR Definition Ambiguity. The primary defense is that FLA § 4.1's definition of GRR is ambiguous as applied to revenues collected by Suncoast Room Management Inc. Coastal Palms argues that the phrase "regardless of the entity collecting such revenue" is insufficiently specific to capture revenues collected by a separate corporate entity (Suncoast) that is not itself a party to the FLA and that performs property-management functions beyond mere revenue collection. Defense counsel contends that the GRR definition was drafted to address booking intermediaries (such as OTAs and travel agents), not separate management companies, and that the definition must be read in context with other FLA provisions that reference "the franchisee" as the revenue-collecting entity.
Verimark's Alleged Knowledge and Acquiescence. Coastal Palms argues that Verimark was aware of Suncoast's role in managing certain of the hotel properties because Suncoast was identified in certain property-management agreements that were submitted to Verimark as part of the franchise-application process for several of the newer properties. Defense counsel contends that Verimark's failure to object to Suncoast's involvement or to require that Suncoast-collected revenues be included in GRR reports constitutes acquiescence or waiver. This argument relies heavily on the testimony of Nolan Prescott, who stated that he believed Verimark was aware of Suncoast's operational role.
Expert Opinion on Limited Damages. The cross-motion relies on Prof. Grant Hargrove's expert report (served May 15, 2023), which opines that the maximum underpayment attributable to any GRR discrepancy is $6.2 million. Prof. Hargrove reaches this figure by applying a narrowed GRR definition that excludes walk-in cash payments (which he characterizes as "incidental revenue" not derived from the "rental of guest rooms" in the contractual sense) and by attributing only net OTA revenue (after deducting OTA commissions) to the GRR calculation. As discussed in Section V below, Dr. Kettlewell's rebuttal report identified significant methodological errors in Prof. Hargrove's analysis.
Counterclaim — Brand-Standard Violations. On the counterclaim, Coastal Palms seeks summary judgment in its favor on its claim that Verimark failed to maintain brand standards at the 22 hotel properties, including allegations of deferred maintenance at select properties, inadequate uptime for Verimark's proprietary reservation system (the "VConnect" platform), and over-billing for required vendor services mandated by the franchise agreements. Coastal Palms claims $12 million in damages, consisting of alleged lost revenue attributable to poor guest satisfaction scores, costs incurred to remedy maintenance deficiencies, and excess charges for vendor services.
C. Response Briefs (November 17, 2023)
Both parties filed their response briefs on November 17, 2023, in accordance with the briefing schedule set by the Court.
Verimark's Response in Opposition to Defendants' Cross-Motion for Summary Judgment. This 35-page brief, prepared by Yuki Nakamura and reviewed by Priya Anand, systematically addressed each of Coastal Palms' arguments and demonstrated that genuine disputes of material fact preclude summary judgment in defendants' favor on each of the ten counts and on the counterclaim.
On the GRR-ambiguity argument, Verimark's response emphasized the unambiguous text of FLA § 4.1, highlighting that the phrase "regardless of the entity collecting such revenue" directly and expressly addresses the precise situation presented in this case. The response cited well-established Florida appellate authority holding that franchise agreements are to be interpreted according to their plain meaning and that ambiguity should not be manufactured by selective reading of contractual terms. Specifically, the response relied on Palm Beach Motor Cars Ltd. v. Honeywell Int'l, Inc., 58 So. 3d 326 (Fla. 4th DCA 2011), and Vacation Break, Inc. v. Meridian Financial, 862 So. 2d 859 (Fla. 3d DCA 2003), for the propositions that (i) courts should not rewrite unambiguous contract terms, and (ii) franchise-agreement revenue-reporting obligations must be interpreted to effectuate the parties' intent as expressed in the plain language of the agreement.
On the knowledge-and-acquiescence defense, Verimark's response demonstrated that the mere inclusion of Suncoast's name in certain property-management agreements submitted during franchise applications does not constitute evidence that Verimark knew or approved of Suncoast collecting guest-room revenues and excluding them from GRR reports. The property-management agreements disclosed Suncoast's role in day-to-day hotel operations, not its role as an alternative revenue-collection vehicle. Moreover, Verimark introduced evidence that its franchise-compliance team had no visibility into Suncoast's financial records and no reason to suspect that guest-room revenues were being channeled through a separate entity and excluded from GRR calculations. The response also noted that even if Verimark had been aware of Suncoast's existence, knowledge of Suncoast's operational role is not equivalent to knowledge or consent to underreporting of GRR. Coastal Palms cited no provision of the FLA authorizing unilateral modification of GRR reporting obligations, and no evidence of any written or oral agreement between the parties to exclude Suncoast-collected revenues.
On the counterclaim, Verimark's response demonstrated that Coastal Palms' brand-standard allegations lack sufficient evidentiary support to survive summary judgment. The response noted that Coastal Palms failed to produce any contemporaneous complaints, cure notices, or correspondence during the relevant period in which Coastal Palms raised brand-standard concerns with Verimark. The $12 million damages figure in the counterclaim is unsupported by any expert analysis or reliable damages methodology. The brand-standard allegations appear to have been raised for the first time in the litigation, well after the revenue-underreporting dispute surfaced, suggesting that the counterclaim was asserted primarily as a litigation tactic rather than in pursuit of legitimate grievances.
Coastal Palms' Opposition to Verimark's Partial Summary Judgment Motion. Coastal Palms also filed its opposition brief on November 17, 2023. The principal argument was that factual disputes exist regarding Verimark's knowledge of and acquiescence to Suncoast's role in collecting guest-room revenues, which, defendants contend, preclude a finding of breach as a matter of law. Coastal Palms also argued that the Court should apply the course-of-dealing doctrine, asserting that the parties' longstanding practice of excluding Suncoast-collected revenues from GRR reports (allegedly with Verimark's tacit knowledge) created an implied modification of the FLA's reporting requirements. Calderwood & Harkness's assessment is that this argument is legally deficient under Florida law, which requires clear and unequivocal evidence of mutual intent to modify a written franchise agreement, and factually unsupported by the record.
D. Reply Briefs (December 8, 2023)
Both parties filed their reply briefs on December 8, 2023, completing the summary-judgment briefing cycle.
Verimark's Reply Memorandum. The reply brief, prepared by Yuki Nakamura and reviewed by Priya Anand, addressed several critical points.
First, the reply reiterated that FLA § 4.1 unambiguously includes all revenues from guest-room rental regardless of the collecting entity. The reply noted that Coastal Palms' ambiguity argument relies on reading the contract provision in isolation from the phrase "regardless of the entity collecting such revenue," which is the very phrase that resolves any potential ambiguity. Under Florida law, a contract provision is not ambiguous simply because the parties disagree about its meaning; ambiguity must arise from the language itself, and no reasonable reading of § 4.1 supports the exclusion of revenues collected by Suncoast.
Second, the reply addressed the knowledge-and-acquiescence defense by noting that Brecker's own deposition admissions foreclose this argument. Brecker admitted that he directed controllers to exclude Suncoast-collected revenues from GRR reports. If Verimark's knowledge were a valid defense, Brecker would have had no reason to conceal the revenue-diversion scheme — he would have simply disclosed it. The affirmative concealment is itself evidence that Coastal Palms understood the revenues were reportable and chose to hide them.
Third, the reply highlighted the significance of FLA § 14.2(c), which provides that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." This provision eliminates any defense based on the FLA's general cure provisions. Even if Coastal Palms could demonstrate some basis for its reporting methodology (which it cannot), the systematic nature of the underreporting — spanning nine years and 22 properties — constitutes a material and incurable breach as a matter of contract.
Fourth, the reply addressed Coastal Palms' course-of-dealing argument, noting that under Florida law, a course-of-dealing cannot contradict or override the express terms of a written agreement, particularly where the agreement contains a merger clause (FLA § 17.1) and a no-oral-modification clause (FLA § 17.4). The reply cited Dows v. Sterling Reach Partners LLC, 846 So. 2d 595 (Fla. 4th DCA 2003), for this proposition.
Coastal Palms' Reply in Support of Its Cross-Motion. Coastal Palms' reply brief, filed the same day, largely reiterated the arguments from its opening brief and opposition. The reply did not introduce significant new arguments or evidence. Coastal Palms continued to emphasize the alleged ambiguity of the GRR definition and the knowledge-and-acquiescence defense. Calderwood & Harkness does not view the reply as having materially strengthened Coastal Palms' position.
E. Oral Argument — January 19, 2024
Oral argument on the cross-motions for summary judgment is scheduled for January 19, 2024, before Judge Calloway. The Court has allocated approximately two hours for the hearing.
Calderwood & Harkness is currently preparing a detailed Oral Argument Preparation Memorandum (the "Bench Memo") with anticipated questions from the Court, key authorities for each issue, and structured talking points. The Bench Memo is expected to be finalized by January 12, 2024. The preparation process includes a moot-court session scheduled for January 15, 2024, in which Priya Anand will conduct a full rehearsal of the oral argument with Douglas Carmichael and Yuki Nakamura posing questions in the role of the Court.
Priya Anand will present the oral argument for Verimark. Yuki Nakamura will serve as second chair, responsible for managing the record references, deposition excerpts, and real-time research support. Carlos Espinoza will be present as a third member of the courtroom team to assist with document management.
We anticipate that Nathan Whitfield III will argue for Coastal Palms, consistent with his role as lead counsel throughout the litigation.
Based on our review of Judge Calloway's prior summary-judgment rulings in commercial cases and on the structure of the briefing, we anticipate that the Court will focus on three primary areas:
1. Whether FLA § 4.1's GRR definition is unambiguous as a matter of law. This is the threshold question. If the Court finds the definition unambiguous, Coastal Palms' primary defense collapses, and the analysis proceeds to whether Coastal Palms' exclusion of Suncoast-collected revenues constitutes a breach. If the Court finds ambiguity, extrinsic evidence would become relevant, and the question would likely need to be resolved at trial.
2. Whether Coastal Palms' exclusion of Suncoast-collected revenues constitutes a material breach. Assuming the Court finds the GRR definition unambiguous, it must determine whether the undisputed record establishes that Coastal Palms excluded revenues falling within the definition. Given Brecker's admissions, we believe the answer is yes as a matter of law.
3. Whether any factual issues — particularly Verimark's alleged knowledge of Suncoast — preclude summary judgment on liability. The Court must determine whether Coastal Palms has raised a genuine dispute of material fact sufficient to defeat summary judgment. We expect the Court to closely examine the evidence regarding Verimark's alleged knowledge and to assess whether, even if Verimark knew of Suncoast's existence, such knowledge constitutes a defense to a breach-of-contract claim based on underreported revenues.
F. Assessment of Likely Outcome
Based on the strength of the briefing, the unambiguous contract language, the evidentiary record, and Randall Brecker's deposition admissions, Calderwood & Harkness assesses the likely outcomes of the summary-judgment proceedings as follows:
Verimark's Partial Summary Judgment Motion (Counts I and II — Liability Only). We assess a strong likelihood — approximately 75% to 80% — that the Court will grant Verimark's motion and enter summary judgment on liability for Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund Contributions). The plain language of FLA § 4.1, combined with Brecker's admissions, presents a compelling case for summary adjudication. The knowledge-and-acquiescence defense is the primary risk, but we believe it is factually and legally insufficient to defeat the motion. Even if the Court views the evidence regarding Verimark's awareness of Suncoast's existence as creating a marginal factual issue, we believe the Court is likely to find that knowledge of Suncoast's operational role is legally distinct from consent to underreporting of GRR.
Coastal Palms' Cross-Motion for Summary Judgment. We assess a high probability — approximately 85% to 90% — that the Court will deny Coastal Palms' cross-motion on all counts. The GRR-ambiguity argument is weak on the contract text and unsupported by extrinsic evidence sufficient to create a genuine dispute, much less to establish Coastal Palms' entitlement to judgment as a matter of law. As to the remaining counts (III through X), genuine issues of material fact clearly exist, and the cross-motion does not present a persuasive basis for summary adjudication.
Coastal Palms' Counterclaim. The counterclaim is likely to survive summary judgment only nominally. The evidentiary support for the brand-standard allegations is thin, and the $12 million damages figure lacks a reliable foundation. However, because the counterclaim raises factual questions that the Court may prefer to have resolved by the factfinder, we believe the Court is more likely than not to allow the counterclaim to proceed to trial, where it is expected to carry minimal weight.
Impact on Trial Schedule. If partial summary judgment is granted, the trial would proceed on damages only for Counts I and II, and on liability and damages for the remaining counts (III through X) and the counterclaim. The trial is expected to be continued from the original February 2024 setting to approximately May 2024, consistent with the Court's current calendar and the need for both parties to adjust their trial preparations to reflect the summary-judgment ruling.
IV. Settlement Posture Analysis
A. Current Settlement Dynamics
No formal settlement discussions have occurred since the pre-mediation informal exchanges conducted in mid-2023. Those exchanges, which took place through counsel, did not yield meaningful progress, as the parties' positions were substantially apart: Verimark's initial demand was $110 million, and Coastal Palms' initial offer was $4.5 million. Since that time, the case has advanced significantly through the completion of discovery, the filing of dispositive motions, and the development of a detailed record.
The summary-judgment ruling will dramatically affect both parties' settlement posture. A favorable ruling for Verimark on liability for Counts I and II would accomplish several important things from a settlement perspective: it would remove the liability question from the negotiating table, transforming the dispute into a pure damages calculation; it would validate Verimark's legal position and undermine Coastal Palms' primary defense; and it would signal to both Coastal Palms and its lender, Ironclad National Bank, that a substantial judgment is likely, increasing the urgency to reach a negotiated resolution.
Conversely, if the Court denies Verimark's motion and the parties proceed to trial on both liability and damages, the settlement dynamics would be more favorable to Coastal Palms, as the uncertainty of trial creates leverage for a reduced settlement. However, even in that scenario, the strength of Verimark's evidence — particularly Brecker's admissions and the Suncoast financial records — would make a defense verdict unlikely.
Coastal Palms' financial position remains a significant consideration in settlement analysis. Ironclad National Bank holds approximately $94 million in first-lien mortgage loans on 18 of the 22 Coastal Palms hotel properties. These loans are secured by the real property and related fixtures. As a result, Coastal Palms' ability to satisfy a large cash judgment is uncertain, and any settlement structure must account for the priority of Ironclad's liens. The four unencumbered properties have an estimated aggregate market value of approximately $71.2 million based on Verimark's internal valuations and publicly available comparable-sales data; these properties represent the most likely source of collateral security in a settlement.
B. Preliminary Settlement Range Assessment
Calderwood & Harkness has conducted a preliminary analysis of the likely settlement range, taking into account the following factors: the probability-weighted expected value of Verimark's claims, the collectibility constraints imposed by Ironclad's lien position, the cost of trial, and the discount for settlement uncertainty.
If partial summary judgment is granted on Counts I and II (liability only), the damages at issue in any subsequent trial would range from a defense floor of $6.2 million (per Prof. Hargrove's expert analysis, which is vulnerable to challenge) to Verimark's full claim of approximately $150 million. The probability-weighted midpoint, reflecting the relative strength of the competing damages analyses and the risk that the liquidated-damages provision may be reduced or struck as a penalty, falls in the range of $70 million to $100 million.
However, the collectibility concern is substantial. Even a full $150 million judgment would be of limited practical value if Coastal Palms lacks the liquidity or unencumbered assets to satisfy it. Accordingly, any settlement should be structured to include:
• Cash component: Substantial upfront cash payment, potentially sourced from refinancing of one or more properties or from Brecker's and Prescott's personal assets.
• Liens on unencumbered assets: First-priority security interests in the four unencumbered hotel properties (estimated aggregate value of $71.2 million) to secure any deferred payment obligations.
• Personal guaranties: Personal guaranties from Randall Brecker and Nolan Prescott to provide additional recovery sources in the event of default on settlement payments.
• Franchise-surrender component: Orderly termination of some or all of the 22 FLAs, with associated de-identification obligations, which has independent value to Verimark in removing underperforming or problematic franchise locations from its branded portfolio.
• Structured payments: A structured payment schedule to accommodate Coastal Palms' liquidity constraints, secured by the liens and guaranties described above.
Taking into account all of these factors, and assuming a favorable summary-judgment ruling, Calderwood & Harkness's preliminary assessment is that a settlement in the range of $75 million to $95 million — combining cash, structured payments, and franchise-surrender value — may be achievable and would be preferable to the risk, expense, and collectibility uncertainty associated with proceeding to trial and post-judgment collection.
Litigation costs through trial are now projected at $9.0 million to $10.5 million all-in (see Section VII below). Additional trial costs beyond the current spend would be approximately $1.5 million to $2.0 million. A settlement that avoids trial would eliminate these additional costs and accelerate the realization of value.
We emphasize that this settlement-range assessment is preliminary and will be updated following the summary-judgment ruling, at which point the parties' relative positions will be more clearly defined.
C. Potential Mediation
If the timing and the Court's ruling permit, Calderwood & Harkness recommends that Verimark consider proposing formal mediation to Coastal Palms' counsel. Mediation would provide a structured forum for settlement negotiations, allow a neutral third party to reality-test both sides' positions, and potentially accelerate resolution.
We recommend engaging a retired judge with experience in franchise litigation as the mediator. The Honorable Patricia Everwood (Ret.) of Everwood Dispute Resolution PLLC in Coral Gables, Florida, is a strong candidate for this role. Judge Everwood served on the Circuit Court bench in the 11th Judicial Circuit (Miami-Dade County) for 18 years before retiring in 2019 and establishing her mediation practice. She has extensive experience in complex commercial disputes, including franchise litigation, and is well-regarded by the bench and bar in South Florida. Her mediation fee is $7,500 per session (full day), and we estimate total mediation costs (including preparation, the mediation session, and follow-up) at approximately $38,000.
We will discuss next steps on settlement strategy and the potential for mediation at our January case-team meeting and following the January 19, 2024 oral argument. Any decision to pursue mediation would, of course, require Verimark's approval and a determination by the in-house team regarding the company's authorized settlement range.
V. Expert Work — Status
The expert work in this matter is substantially complete. Both sides' expert reports and rebuttal reports have been served, and both experts have been deposed. The expert record is final and will be presented to the Court and, if necessary, to the jury at trial.
Dr. Sharon Kettlewell — Ridgeline Forensic Advisory LLC (Verimark's Damages Expert). Dr. Kettlewell's expert report was served on April 14, 2023. Her rebuttal report, responding to Prof. Hargrove's defense expert report, was served on June 9, 2023. Both reports are in the summary-judgment record and were cited extensively in Verimark's briefing.
Dr. Kettlewell's key conclusions are as follows:
• Cumulative Underreported GRR: $197.8 million across all 22 properties during the period from January 2013 through December 2021. This figure was derived from a comprehensive reconciliation of Coastal Palms' reported GRR against Suncoast's internal revenue ledgers, bank deposit records, OTA settlement statements, and corporate-direct contract records.
• FY 2021 Illustration: In Fiscal Year 2021 alone, Coastal Palms reported GRR of $112.4 million, whereas Dr. Kettlewell estimated the true GRR to be $145.6 million — an underreporting of $33.2 million, or approximately 29.5%.
• Underpaid Royalties: $9.89 million (5% of $197.8 million in underreported GRR).
• Underpaid Marketing-Fund Contributions: $4.945 million (2.5% of $197.8 million in underreported GRR).
• Underpaid Technology Fees: $1.26 million, calculated as 214 unreported rooms × $12.50 per room per month × an average of approximately 47 months per property during which the rooms were unreported.
• Late-Payment Interest: $28.4 million, calculated at the contractual rate of 1.5% per month, compounded, pursuant to FLA § 4.5. Dr. Kettlewell calculated the interest on a month-by-month basis, applying the compounding formula from the date each underpayment was due through the date of the expert report.
• Liquidated Damages: $105.5 million, calculated pursuant to FLA § 15.3, which provides for liquidated damages upon termination due to material breach equal to three times the trailing-twelve-month corrected royalties for each property. Dr. Kettlewell calculated this figure using the corrected royalty amounts for each of the 22 properties based on the estimated true GRR.
• Total Damages: Approximately $150 million (sum of all foregoing components).
Prof. Grant Hargrove — Hargrove Economic Consulting Inc. (Coastal Palms' Damages Expert). Prof. Hargrove's expert report was served on May 15, 2023. He opined that the maximum underpayment attributable to any GRR discrepancy is $6.2 million. Prof. Hargrove reached this figure by applying a narrowed interpretation of the GRR definition that excludes walk-in cash payments (which he characterizes as "incidental revenue" outside the scope of § 4.1) and by using net OTA revenue (after deducting OTA commissions of approximately 15–25%) rather than gross OTA revenue. Prof. Hargrove's analysis did not include any calculation of late-payment interest or liquidated damages.
Dr. Kettlewell's rebuttal report (served June 9, 2023) addressed Prof. Hargrove's methodological errors in detail. The principal criticisms were as follows:
• Exclusion of Walk-In Cash Payments. Prof. Hargrove's exclusion of walk-in cash payments is inconsistent with the FLA's definition of GRR, which encompasses "all revenues derived from or attributable to the rental of guest rooms." Walk-in cash payments are by definition derived from the rental of guest rooms and are unambiguously within the GRR definition. Prof. Hargrove offered no textual basis for excluding them.
• Use of Net Rather Than Gross OTA Revenue. Prof. Hargrove's use of net OTA revenue (after deduction of OTA commissions) contradicts the FLA's requirement that GRR include all revenues "regardless of the entity collecting such revenue." When a guest pays $200 per night through an OTA, the full $200 is revenue "derived from or attributable to the rental of guest rooms," even though the OTA retains a commission of $30–$50. The FLA makes no provision for deducting intermediary commissions from GRR. Prof. Hargrove's approach effectively allows the franchisee to reduce its fee obligations by choosing to distribute rooms through OTA channels — a result that is inconsistent with the FLA's structure and purpose.
• Incomplete Data Analysis. Dr. Kettlewell identified several instances in which Prof. Hargrove failed to account for revenue streams reflected in Suncoast's bank records that were not captured in Coastal Palms' reported GRR. These omissions understated Prof. Hargrove's own calculation by at least $2.1 million.
Expert Depositions. Both experts were deposed on June 26–27, 2023. Dr. Kettlewell's deposition testimony was strong, consistent with her reports, and effectively withstood cross-examination by Mr. Whitfield. She demonstrated thorough command of the financial data and articulated her methodology clearly. Prof. Hargrove's deposition was less successful for the defense. During cross-examination by Priya Anand, Prof. Hargrove was impeached on several methodology points, including his admission that he could not identify any provision of the FLA that supports the exclusion of walk-in cash payments from GRR, and his concession that his net-OTA-revenue approach was based on "industry practice" rather than on the contract language.
Engagement Fees. Ridgeline Forensic Advisory LLC's engagement fees through Q4 2023 total approximately $1.72 million, against a total engagement budget of $1.85 million. The remaining $130,000 in budgeted fees is expected to be sufficient to cover trial preparation and testimony, if required. No additional expert engagement is anticipated.
VI. Staffing Update
The Calderwood & Harkness case team for this matter consists of two partners, two associates, and a support team of paralegals and contract attorneys. Staffing has remained stable throughout Q4 2023, and no changes are anticipated in the near term. The team members and their roles, billing rates, and cumulative hours are as follows:
Priya Anand — Responsible Partner (Florida Bar No. 0087451), billing rate $975 per hour. Ms. Anand has served as the lead strategist and client-relationship partner throughout the litigation. During Q4 2023, she led the summary-judgment strategy, authored the Summary Judgment Strategy Memorandum (September 5, 2023), reviewed and approved all summary-judgment briefing (including the initial motion, response in opposition to the cross-motion, and reply memorandum), and directed the team's preparation for oral argument. She will argue the January 19, 2024 oral argument before Judge Calloway. Approximately 1,200 hours have been billed through Q4 2023.
Douglas Carmichael — Billing Partner (Florida Bar No. 0093217), billing rate $925 per hour. Mr. Carmichael oversees budget management, client billing coordination, and engagement compliance for the matter. He reviewed the summary-judgment briefing and participates in case-strategy discussions. He is responsible for the Quarterly Budget Update Memorandum to Martin Holcomb. Approximately 520 hours have been billed through Q4 2023.
Yuki Nakamura — Lead Associate (Florida Bar No. 0119644), billing rate $625 per hour. Ms. Nakamura has been the primary drafter and analytical lead for the case team. She was the principal author of all four summary-judgment briefs: the 42-page Memorandum of Law in support of Verimark's partial summary judgment motion, the 127-paragraph Statement of Undisputed Material Facts, the Response in Opposition to Defendants' Cross-Motion for Summary Judgment, and the Reply Memorandum. She also conducted the detailed analysis of Coastal Palms' Cross-Motion and identified the key weaknesses in the defense arguments. Ms. Nakamura will serve as second chair at the January 19, 2024 oral argument. She is also responsible for the ongoing monitoring of Coastal Palms' financial condition and Ironclad National Bank's lien position for collectibility analysis. Approximately 3,400 hours have been billed through Q4 2023.
Carlos Espinoza — Working Associate (Florida Bar No. 0128903), billing rate $495 per hour. Mr. Espinoza prepared the two key research memoranda on Florida franchise revenue-reporting law (August 18, 2023) and on liquidated-damages enforceability under Florida's penalty doctrine (August 25, 2023). He assisted with the drafting of the summary-judgment briefing, with particular responsibility for the record-citation verification and damages-analysis sections. He also provided research and drafting support for the response and reply briefs. Approximately 2,550 hours have been billed through Q4 2023.
Paralegals and Contract Attorneys. The paralegal and contract-attorney team, led by Senior Paralegal Maria Elena Fuentes, has provided document management, deposition preparation, trial-exhibit organization, and cite-checking support. Approximately 1,100 hours have been billed through Q4 2023 at a blended rate of approximately $285 per hour.
VII. Budget Update and Financial Summary
A. Fees and Costs Through Q4 2023
The following table summarizes cumulative fees and costs billed through the end of Q4 2023 (December 31, 2023), compared to the original budget ranges established at the outset of the engagement:
Calderwood & Harkness's attorney fees of approximately $5.98 million reflect the cumulative hours billed by the engagement team: Priya Anand (~1,200 hours × $975/hour = ~$1,170,000), Douglas Carmichael (~520 hours × $925/hour = ~$481,000), Yuki Nakamura (~3,400 hours × $625/hour = ~$2,125,000), Carlos Espinoza (~2,550 hours × $495/hour = ~$1,262,250), and paralegals and contract attorneys (~1,100 hours × ~$285/hour = ~$313,500). These figures are approximate and subject to final billing reconciliation; detailed billing statements have been provided monthly to Verimark's accounts payable department, with copies to the in-house legal team for review.
B. Revised Budget Estimate Through Resolution
The revised estimate for total fees and expenses through resolution of the matter is $9.0 million to $10.5 million, as communicated in the Quarterly Budget Update Memorandum prepared by Douglas Carmichael and transmitted to Martin Holcomb, Executive Vice President and Chief Financial Officer of Verimark, on January 8, 2024.
The remaining projected costs include the following items:
• Oral-argument preparation (January 2024): Estimated at $35,000–$50,000, reflecting partner and associate time for the Bench Memo, moot-court session, and day-of argument preparation and attendance.
• Post-ruling analysis and strategy update (timing dependent on ruling): Estimated at $15,000–$25,000 for analysis of the ruling, updated settlement-posture assessment, and client advisory memorandum.
• Potential mediation (if pursued): Estimated at $38,000, inclusive of mediator fees (Hon. Patricia Everwood — estimated $7,500/session), preparation of mediation statements and demand documentation, travel, and attorney time for the mediation session.
• Settlement negotiation and documentation (if settlement is achieved): Estimated at $75,000–$125,000, reflecting drafting and negotiation of a comprehensive settlement agreement, release, franchise-surrender documentation, lien and guaranty instruments, and any regulatory filings.
• Alternatively, trial preparation and trial (if the case proceeds to trial, expected May 2024): Estimated additional cost of $1.5 million to $2.0 million beyond current spend, reflecting trial-team preparation (witness preparation, trial briefs, motions in limine, jury instructions, exhibit preparation, and demonstratives), a 2- to 3-week trial with a full trial team, and post-trial motions and proceedings.
The lower end of the $9.0 million to $10.5 million range assumes that the case is resolved through settlement following a favorable summary-judgment ruling, without the need for a full trial. The upper end of the range assumes that trial preparation and a 2- to 3-week trial are required. If both a mediation and a trial are necessary, total costs could approach the upper end of the range.
The original budget of $4.5 million to $7.5 million, established in the engagement letter dated March 10, 2022, has been exceeded due to several factors that were not fully anticipated at the outset:
• The scope and complexity of discovery were substantially greater than originally projected. The 2.3 million documents processed on the Verimark side, 14 fact depositions, and 2 expert depositions significantly exceeded the original discovery budget assumptions.
• The motion-to-compel practice regarding Suncoast Room Management Inc.'s financial records — including briefing, oral argument, and post-order compliance monitoring — added approximately $280,000 to the litigation budget.
• The expert engagement proved more complex and costly than anticipated, principally because Dr. Kettlewell's forensic analysis required reconciliation of records across 22 hotel properties over a nine-year period, involving multiple revenue streams and booking channels.
• The summary-judgment briefing — four major briefs totaling over 150 pages, plus hundreds of pages of exhibits and the 127-paragraph statement of undisputed facts — required substantial attorney hours.
The revised $9.0 million to $10.5 million estimate reflects the true scope and complexity of the matter and has been communicated to Verimark's financial team for budget-planning purposes. Calderwood & Harkness remains committed to managing costs efficiently and to providing advance notice of material budget variances.
C. Insurance Coverage
Pinnacle Indemnity Insurance Co. was notified of the litigation on March 14, 2022, under Policy No. PLI-VHG-2021-08874. Coverage counsel Arthur Baines of Verimark's insurance-recovery team is monitoring the mat

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