discovery-deficiency-letter.docx

1021-00006 · Client 1021 · Discovery/Correspondence

discovery-deficiency-letter.docx DOCUMENT Litigation

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CALDERWOOD & HARKNESS LLP Attorneys at Law 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 761-8200 Facsimile: (954) 761-8201 www.calderwoodharkness.com

August 30, 2022

VIA EMAIL AND FIRST-CLASS MAIL

Gabriela Montes, Esq. Whitfield, Barrow & Crane LLP 1221 Brickell Avenue, Suite 3000 Miami, Florida 33131

Re: 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

Subject: Deficiencies in Defendant's Responses and Production Pursuant to Plaintiff's First Request for Production of Documents (Served July 11, 2022)

Dear Ms. Montes:

I. Introduction and Purpose

This firm represents Plaintiff Verimark Hospitality Group Inc. ("Verimark") in the above-captioned matter. We write to address material deficiencies that our review has identified in the document production served by your client, Coastal Palms Franchise Holdings LLC ("Coastal Palms"), on August 22, 2022, in response to Plaintiff's First Request for Production of Documents ("First RFP"). The First RFP, which was served on July 11, 2022, contained one hundred forty-seven (147) individual requests directed to the full range of documents and electronically stored information relevant to Verimark's claims in this action.

We acknowledge receipt of the August 22, 2022 production, which comprised approximately eighty-four thousand (84,000) documents produced in native and image formats. While Verimark appreciates Coastal Palms' initial production and the effort that went into assembling it, our ongoing review has identified twenty-three (23) distinct categories of documents that are either entirely absent from the production, materially incomplete, or otherwise non-responsive to the requests as propounded. As described in detail below, the deficiencies span virtually every major subject matter area addressed by the First RFP—from the financial records of Suncoast Room Management Inc. ("Suncoast") to Online Travel Agency ("OTA") contracts, monthly Gross Room Revenue ("GRR") reports, Property Management System ("PMS") data, communications among key principals, lender submissions, and the privilege log required under both the Florida Rules of Civil Procedure and the parties' agreed-upon E-discovery Protocol.

This letter constitutes a good-faith effort to identify and resolve these deficiencies without resort to court intervention, consistent with the requirements of Rule 1.380 of the Florida Rules of Civil Procedure and the Case Management Order entered by the Honorable Richard M. Calloway on June 14, 2022. As you are aware, the Case Management Order expressly requires the parties to engage in meaningful conferral before filing any discovery motions and sets a fact-discovery cut-off that makes prompt resolution of these issues essential.

We respectfully request that Coastal Palms supplement its production to cure all twenty-three (23) categories of deficiencies identified herein within fourteen (14) days of the date of this letter—that is, no later than September 13, 2022. Should Coastal Palms fail to do so, Verimark will have no alternative but to seek relief from the Court, including the filing of a motion to compel under Florida Rule of Civil Procedure 1.380, together with a request for an award of reasonable attorney's fees and costs incurred in connection with the discovery dispute.

II. Background on discovery Requests

To place the identified deficiencies in context, we briefly summarize the scope and purpose of the First RFP.

The First RFP comprises one hundred forty-seven (147) requests organized thematically around the core categories of documents and information relevant to Verimark's claims. Specifically, the requests target:

• Financial records: General ledgers, income statements, balance sheets, trial balances, and related accounting records for Coastal Palms, each of the twenty-two (22) property-level limited liability companies, and Suncoast Room Management Inc.

• Gross Room Revenue ("GRR") reports: All monthly, quarterly, and annual GRR reports submitted by Coastal Palms (or any affiliated entity) to Verimark for each of the twenty-two (22) franchised hotel properties, from the inception of each Franchise License Agreement ("FLA") through the present.

• Suncoast Room Management Inc. agreements and records: All management agreements, operating agreements, financial records, bank statements, and related documents for Suncoast, the affiliated management entity controlled by Defendant Randall Brecker.

• OTA contracts and reconciliation data: All contracts, agreements, rate sheets, amendments, reconciliation reports, commission statements, and net-rate settlement documents with Online Travel Agency platforms (including, without limitation, Aldermere Technologies, Bramwell Holdings, Drayton Software, Drayton Corporation, Penmark Industries, and Northpoint Corporation) for all twenty-two (22) properties.

• Booking-channel data: All records relating to direct bookings made through the unbranded website gulfcoastrooms.com, corporate-direct contracts, walk-in revenue, and any other booking channel used by Coastal Palms or its affiliates.

• Bank statements: All bank and deposit account statements for Coastal Palms, each property-level entity, and Suncoast.

• Tax returns: All federal and state tax returns for each entity within the Coastal Palms portfolio and for Suncoast.

• Communications: All communications (email, text message, and messaging-application communications) among key individuals—including Randall Brecker, Theresa Brecker, Nolan Prescott, and property-level controllers and managers—relating to revenue reporting, GRR calculations, and franchise obligations to Verimark.

• Lender submissions: All loan documents, financial statements, and revenue reports submitted to Ironclad National Bank and any other lender in connection with the approximately $94 million in mortgage financing secured by eighteen (18) of the twenty-two (22) properties.

• Miscellaneous: Franchise application and renewal documents, insurance policies and claims records, technology-fee reconciliation records, marketing-fund contribution calculations, external audit and accounting workpapers, and related categories.

The requests cover the period from January 2013 through the present, which corresponds to the period of alleged systematic underreporting of GRR at the core of Verimark's claims. As alleged in the Complaint, Coastal Palms—acting through its Managing Member, Randall Brecker, and through the affiliated management entity Suncoast Room Management Inc.—systematically diverted revenue through off-platform booking channels and affiliated management entities, including Suncoast and the unbranded booking website gulfcoastrooms.com, thereby understating GRR by an estimated twenty-two percent to thirty-one percent (22%–31%) across its twenty-two (22)-property portfolio, which encompasses approximately 3,740 total guest rooms. The properties include eighteen (18) Verimark Suites locations and four (4) Verimark Select locations situated across the State of Florida and the State of Georgia. The first FLA in the portfolio was executed on June 15, 2007 (the Naples, Florida property), and the most recent was executed on September 3, 2019.

Given the breadth of Verimark's claims and the complexity of the revenue-diversion scheme alleged, the scope of the First RFP is both necessary and proportional to the needs of this case, particularly in light of the magnitude of the damages at issue—which Verimark estimates exceed $18 million in unpaid royalties, marketing-fund contributions, and technology fees, exclusive of liquidated damages, interest, and attorney's fees.

III. General Objections — Response to Blanket Objections

Before addressing the twenty-three (23) specific categories of deficiencies, we must address Coastal Palms' blanket objections, which pervade the written responses accompanying the August 22, 2022 production.

Coastal Palms interposed blanket objections to virtually every one of the one hundred forty-seven (147) requests in the First RFP. These objections recite, in substantially identical language for each request, that the request is purportedly: (a) overbroad in scope and temporal range; (b) unduly burdensome; (c) not relevant to the claims or defenses of any party; (d) not proportional to the needs of the case; (e) protected by the attorney-client privilege; and (f) protected by the work-product doctrine. In most instances, these objections are asserted without any particularized justification, factual support, or explanation of how the objection applies to the specific request at issue.

Blanket or boilerplate objections of this kind are insufficient under Florida law and do not relieve a responding party of its obligation to produce responsive documents. See binger v. King Pest Control, 401 So. 2d 1310 (Fla. 1981) (requiring specific objections to discovery requests rather than general, conclusory assertions); Elkins v. Syken, 672 So. 2d 517 (Fla. 1996) (noting the duty of parties to respond to discovery in good faith). An objection that merely recites the legal standard without explaining its application to the particular request at issue is, in practical effect, no objection at all. Nor does the assertion of a blanket objection permit Coastal Palms to withhold responsive documents in their entirety when only a portion of the documents requested might arguably be subject to a valid objection.

We therefore request that Coastal Palms either (a) withdraw its blanket objections in their entirety, or (b) provide particularized bases for each objection as to each request, identifying with specificity the factual and legal grounds on which each objection rests and the manner in which each objection limits the scope of Coastal Palms' production. Absent such particularization, Verimark will treat the blanket objections as waived and will argue accordingly in any motion to compel.

IV. Identification of 23 Categories of Deficient or Missing Documents

We turn now to the specific categories of documents that are either absent, materially incomplete, or improperly withheld from Coastal Palms' production. Each category is described below with reference to the applicable First RFP request numbers, the nature of the deficiency, and the basis for Verimark's position that production is required.

Category 1: Suncoast Room Management Inc. — Complete Financial Records

Applicable Requests: First RFP Nos. 12–18.

Deficiency: No financial records whatsoever for Suncoast Room Management Inc. were included in the August 22, 2022 production. The production contains no general ledgers, no income statements, no balance sheets, no trial balances, no bank statements, and no management-fee invoices or payment records for Suncoast for any period.

Discussion: First RFP Nos. 12 through 18 specifically requested Suncoast's general ledgers, income statements, balance sheets, bank statements, and management-fee invoices for the period from January 2013 through the present. In its written responses, Coastal Palms objected on the ground that Suncoast is a "separate legal entity" that is not a party to the FLAs and that its records are therefore beyond the scope of permissible discovery in this action.

This objection is meritless. As a threshold matter, the "separate entity" characterization is factually misleading. Randall Brecker—the Managing Member of Coastal Palms Franchise Holdings LLC—is simultaneously the President and sole director of Suncoast Room Management Inc. Mr. Brecker exercises direct operational control over both entities, and the two entities share overlapping management, office space, personnel, and financial systems. Under these circumstances, Suncoast's records are plainly within Coastal Palms' "possession, custody, or control" as that term is understood under the Florida Rules of Civil Procedure. A party cannot shield discoverable records simply by housing them in an affiliated entity that the same individual controls. See, e.g., Shoen v. Shoen, 5 F.3d 1289, 1292 (9th Cir. 1993) (control over documents held by an affiliate or subsidiary satisfies the "possession, custody, or control" standard); In re Citric Acid Litig., 191 F.3d 1090, 1107–08 (9th Cir. 1999).

More fundamentally, Suncoast's financial records are directly relevant to calculating the true GRR under FLA § 4.1. That provision defines GRR 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." To the extent Suncoast collected revenues on behalf of Coastal Palms' hotel properties—which is the core factual allegation in this case—Suncoast's financial records are among the most probative documents in existence for determining the full extent of the revenue diversion scheme.

Demand: Verimark demands production of all Suncoast Room Management Inc. financial records responsive to First RFP Nos. 12–18, including but not limited to general ledgers, income statements, balance sheets, bank statements, management-fee invoices, and all related accounting records, for the period from January 2013 through the present.

Category 2: Suncoast Room Management Inc. — Management Agreements

Applicable Requests: First RFP No. 19.

Deficiency: No management agreements between Suncoast and any property-level entity were produced. This includes any agreements between Suncoast and Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and each of the other twenty (20) property-level limited liability companies in the Coastal Palms portfolio.

Discussion: First RFP No. 19 specifically requested all management agreements, operating agreements, and service agreements between Suncoast and any entity affiliated with Coastal Palms. The management agreements between Suncoast and the property-level LLCs are essential to understanding the structure and terms of the alleged revenue-diversion scheme. Verimark's forensic analysis indicates that Suncoast retained a management fee of approximately twelve percent (12%) on direct-booking revenues processed through gulfcoastrooms.com and other off-platform channels before remitting the balance to the property-level entities. The management agreements will reveal the contractual basis for this fee structure, the parties' obligations with respect to revenue reporting, and the agreed-upon allocation of revenues between Suncoast and the individual property-level LLCs.

Demand: Verimark demands production of all management agreements, operating agreements, service agreements, and any amendments or side letters between Suncoast Room Management Inc. and any Coastal Palms-affiliated entity, for the entire period of each such agreement's existence.

Category 3: Suncoast Room Management Inc. — Bank Statements

Applicable Requests: First RFP No. 15.

Deficiency: Separately from the complete absence of Suncoast financial records noted in Category 1, no bank statements for any account held by or in the name of Suncoast Room Management Inc. were produced.

Discussion: First RFP No. 15 specifically requested all bank and deposit account statements for Suncoast from January 2013 through the present. We emphasize this category separately because bank statements represent an independent, objective source of transactional data that is not subject to the accounting classifications and categorizations applied by Coastal Palms in its internal books. Bank statements for Suncoast's accounts will reflect the actual revenues collected by Suncoast on behalf of the hotel properties, the amounts retained by Suncoast as management fees, and the amounts ultimately remitted to the property-level LLCs. This data is essential for any forensic reconstruction of actual GRR, and Coastal Palms' refusal to produce it on "separate entity" grounds is, for the reasons stated in Category 1, without merit.

Demand: Verimark demands production of all bank and deposit account statements for every account held by or in the name of Suncoast Room Management Inc., from January 2013 through the present.

Category 4: gulfcoastrooms.com Booking Data and Records

Applicable Requests: First RFP Nos. 22–25.

Deficiency: No documents whatsoever relating to the unbranded booking website gulfcoastrooms.com were included in the production.

Discussion: First RFP Nos. 22 through 25 requested all records relating to the operation, booking logs, revenue generation, and hosting and administration of gulfcoastrooms.com. This website, which is operated by Suncoast, was identified in Verimark's Complaint as one of the primary channels through which Coastal Palms diverted guest-room revenue outside the GRR reporting framework. The website enables guests to book rooms at Coastal Palms' franchised hotel properties directly, bypassing both the Verimark central reservation system and the major OTA platforms. Revenues generated through gulfcoastrooms.com were allegedly collected by Suncoast, subjected to the twelve percent (12%) management fee, and remitted to property-level entities without being reported to Verimark as GRR.

The complete absence of gulfcoastrooms.com records from the production is particularly troubling given that the website is actively operational and presumably generates daily transactional data, booking confirmations, payment processing records, and system logs. These records exist and are within Coastal Palms' possession, custody, or control through Randall Brecker's control of Suncoast.

Demand: Verimark demands production of all booking logs, reservation records, transaction records, payment processing records (including records from any third-party payment processor), website analytics data, hosting and domain registration records, and all administrative records for gulfcoastrooms.com, from the inception of the website through the present.

Category 5: OTA (Online Travel Agency) Contracts and Agreements

Applicable Requests: First RFP Nos. 30–35.

Deficiency: The production contains only a small number of OTA agreements, and none of the agreements produced post-date 2016. The production is thus materially incomplete for the six-year period from 2017 through the present.

Discussion: First RFP Nos. 30 through 35 requested all contracts, agreements, rate sheets, commission schedules, and amendments with OTA platforms for all twenty-two (22) properties, covering the period from 2013 through the present. OTA platforms represent a significant booking channel for hotel properties, and the terms of Coastal Palms' agreements with these platforms—including whether rooms were sold on a "merchant model" (where the OTA collects payment from the guest and remits a net amount to the hotel) or an "agency model" (where the hotel collects payment directly and remits a commission to the OTA)—are directly relevant to Verimark's claims. The distinction between gross and net OTA payments is central to the allegation that Coastal Palms improperly netted OTA commissions against GRR in violation of FLA § 4.1's gross-revenue definition.

Given that all twenty-two (22) properties are actively operating hotels that utilize OTA platforms as a core distribution channel, it is not credible that OTA contracts and amendments ceased to exist after 2016. OTA agreements are typically renewed or renegotiated on an annual or biennial basis, and current agreements must exist for all properties.

Demand: Verimark demands production of all OTA contracts, agreements, rate sheets, commission schedules, amendments, and related correspondence for all twenty-two (22) franchised properties, from January 2013 through the present.

Category 6: OTA Revenue Reconciliation Reports

Applicable Requests: First RFP No. 36.

Deficiency: No OTA reconciliation reports, commission statements, or net-rate settlement documents were produced.

Discussion: First RFP No. 36 specifically requested all OTA reconciliation and settlement reports for all twenty-two (22) properties. These reports—typically generated monthly by each OTA platform—document the gross room revenue attributable to OTA bookings, the commissions or fees deducted by the OTA, and the net amount remitted to the hotel property. These records are critical to assessing whether Coastal Palms classified net-rate OTA payments as "commissions receivable" and improperly netted them against GRR in violation of FLA § 4.1's requirement that GRR include the gross amount of revenue from all booking channels. Without these reconciliation reports, Verimark cannot compare the gross OTA revenue to the amounts actually reported to Verimark as GRR.

Demand: Verimark demands production of all OTA reconciliation reports, commission statements, net-rate settlement documents, and related records for all twenty-two (22) properties, from January 2013 through the present.

Category 7: Monthly GRR Reports — Incomplete Set

Applicable Requests: First RFP No. 1.

Deficiency: The production contains monthly GRR reports for only sixteen (16) of the twenty-two (22) franchised properties. For the sixteen properties where reports were produced, the production is missing reports for multiple months and entire calendar years within the 2013–2021 period. No GRR reports were produced for the following six (6) properties: (a) the Verimark Suites — Savannah, GA; (b) the Verimark Suites — Brunswick, GA; (c) the Verimark Select — Jacksonville, FL; (d) the Verimark Select — Tallahassee, FL; (e) the Verimark Suites — Pensacola, FL; and (f) the Verimark Suites — Panama City Beach, FL.

Discussion: First RFP No. 1 requested all monthly GRR reports submitted to Verimark for each of the twenty-two (22) franchised properties for the entire period of each respective FLA. As noted above, the first FLA in the portfolio was executed on June 15, 2007 (the Naples, Florida property), and the most recent was executed on September 3, 2019 (the Verimark Select — Tallahassee property). Complete and uninterrupted sets of monthly GRR reports are required for each property from the inception of its FLA through the present. The GRR reports are the foundational documents for Verimark's royalty-underreporting claims, and the absence of reports for six entire properties—together with gaps in the reports for the remaining sixteen—fundamentally undermines Verimark's ability to quantify its damages.

Demand: Verimark demands production of complete, uninterrupted sets of monthly GRR reports for all twenty-two (22) franchised properties, from the inception of each property's FLA through the present.

Category 8: Internal Revenue Reports and Accounting Workpapers

Applicable Requests: First RFP Nos. 40–44.

Deficiency: No internal accounting workpapers, journal entries, or revenue-classification memoranda were produced.

Discussion: First RFP Nos. 40 through 44 requested all internal financial reports, accounting workpapers, journal entries, and memoranda relating to the classification and reporting of hotel revenues for each of the twenty-two (22) properties. These documents are distinct from the GRR reports submitted to Verimark (addressed in Category 7) and from the external audit and accounting records (addressed in Category 18). Internal accounting workpapers will reveal how Coastal Palms distinguished between revenues reported to Verimark as GRR and revenues excluded from GRR reports—i.e., the internal decision-making process by which certain booking channels and revenue streams were classified as non-reportable. These documents go to the heart of Verimark's allegation that the underreporting was knowing and intentional rather than the result of inadvertent error.

Demand: Verimark demands production of all internal financial reports, accounting workpapers, journal entries, revenue-classification memoranda, and related records for all twenty-two (22) properties, from January 2013 through the present.

Category 9: Property Management System ("PMS") Data Exports

Applicable Requests: First RFP Nos. 50–54.

Deficiency: No PMS data exports or system reports were produced.

Discussion: First RFP Nos. 50 through 54 requested exports from all Property Management Systems used at the twenty-two (22) hotel properties, including daily revenue reports, room-night logs, occupancy data, and average daily rate ("ADR") calculations. PMS data is the primary source for reconstructing actual GRR at each property, as it captures every room transaction at the point of sale, regardless of booking channel. A comparison of PMS data to the GRR figures reported to Verimark is the most direct and reliable method for quantifying the extent of any underreporting. The absence of PMS data from the production is a critical gap that must be remedied.

We note that PMS data is maintained electronically and is readily exportable from standard hotel PMS platforms (such as Opera, Maestro, or RoomKeyPMS). The burden of exporting this data is minimal relative to its evidentiary value, and any objection based on proportionality should be overruled.

Demand: Verimark demands production of complete PMS data exports for all twenty-two (22) properties, including daily revenue reports, room-night logs, occupancy data, ADR calculations, and source-of-booking data, from January 2013 through the present.

Category 10: Corporate-Direct Booking Contracts

Applicable Requests: First RFP Nos. 60–63.

Deficiency: No contracts, rate agreements, or correspondence with corporate-direct booking clients were produced.

Discussion: First RFP Nos. 60 through 63 requested all agreements with corporate clients for direct room bookings at any of the twenty-two (22) properties. Corporate-direct bookings—that is, bookings made pursuant to negotiated rate agreements between Suncoast or Coastal Palms and corporate clients, governmental agencies, or other institutional customers—are a significant component of the allegedly unreported revenue. These bookings were channeled through Suncoast's direct-booking infrastructure rather than through Verimark's central reservation system or OTA platforms, and the revenues from such bookings were allegedly excluded from GRR reports. The corporate-direct agreements will identify the rates, volumes, and payment terms for this category of bookings and are necessary to quantify the corresponding revenue.

Demand: Verimark demands production of all corporate-direct booking contracts, rate agreements, and related correspondence for all twenty-two (22) properties, from January 2013 through the present.

Category 11: Walk-In Revenue Records

Applicable Requests: First RFP No. 65.

Deficiency: No records specifically documenting walk-in guest revenue or cash receipts were produced.

Discussion: First RFP No. 65 requested all records relating to walk-in guests, cash payments, and front-desk revenue for all twenty-two (22) properties. Walk-in revenue—i.e., revenue from guests who book at the front desk without a prior reservation—represents a category of revenue that is particularly susceptible to underreporting because it may not flow through centralized booking systems. Verimark alleges that walk-in revenue was routed through Suncoast's collection system and excluded from GRR reports. Records documenting walk-in transactions, including front-desk receipt logs, cash-register tapes, daily cash summaries, and related documents, are necessary to quantify this component of the alleged underreporting.

Demand: Verimark demands production of all records relating to walk-in guest revenue, cash receipts, and front-desk transactions for all twenty-two (22) properties, from January 2013 through the present.

Category 12: Tax Returns — Entity Level

Applicable Requests: First RFP No. 70.

Deficiency: Federal and state tax returns were produced for Coastal Palms Franchise Holdings LLC for 2019, 2020, and 2021 only. No tax returns for any year prior to 2019 were produced. No tax returns for any property-level LLC—including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC—were produced for any year. No tax returns for Suncoast Room Management Inc. were produced for any year.

Discussion: First RFP No. 70 requested all federal and state tax returns for Coastal Palms, each property-level LLC, and Suncoast Room Management Inc. for the period from 2013 through 2021. The production is deficient in three respects: (a) no tax returns for any entity for the six-year period from 2013 through 2018 were produced; (b) no tax returns for any of the twenty-two (22) property-level LLCs were produced; and (c) no tax returns for Suncoast were produced. Tax returns are discoverable in Florida, and the revenue figures reported to taxing authorities are directly relevant to the question of whether Coastal Palms reported materially different revenue figures to Verimark than to the Internal Revenue Service and the Florida Department of Revenue. Any claim of confidentiality can be addressed through the Confidentiality Stipulation and Protective Order already entered in this case (Dkt. No. 34, entered July 5, 2022).

Demand: Verimark demands production of all federal and state tax returns (including all schedules, attachments, and K-1 forms) for Coastal Palms Franchise Holdings LLC, each of the twenty-two (22) property-level LLCs, and Suncoast Room Management Inc., for the period from 2013 through 2021.

Category 13: Bank Statements — Property-Level Entities

Applicable Requests: First RFP No. 72.

Deficiency: Bank statements were produced for only eight (8) of the twenty-two (22) property-level entities, and for those eight entities, statements were produced only for 2020 and 2021. No bank statements for any property-level entity for the period from 2013 through 2019 were produced.

Discussion: First RFP No. 72 requested bank statements for all property-level entities for the full 2013–2021 period. Complete bank records for all twenty-two (22) property-level entities across the entire discovery period are essential to trace the flow of revenue from booking channels (including OTAs, gulfcoastrooms.com, corporate-direct bookings, and walk-in transactions) through Suncoast and into the property-level entities. Without complete bank records, Verimark's forensic accountants cannot perform the transactional analysis necessary to reconstruct actual GRR and compare it to reported GRR.

Demand: Verimark demands production of all bank and deposit account statements for all twenty-two (22) property-level entities, from January 2013 through the present.

Category 14: Communications Between Randall Brecker and Property Controllers/Managers Regarding Revenue Reporting

Applicable Requests: First RFP Nos. 80–85.

Deficiency: The production contains fewer than two hundred (200) emails between Randall Brecker and property-level controllers, general managers, and accounting staff across all twenty-two (22) properties for the entire 2013–2022 period.

Discussion: First RFP Nos. 80 through 85 requested all communications—including emails, text messages, and messaging-application communications (e.g., Meridian Services Inc., Meridian Solutions, Northgate Data Systems)—between Randall Brecker and any property-level manager, controller, or accountant relating to revenue reporting, GRR calculations, or Verimark franchise obligations. Given that the Coastal Palms portfolio encompasses twenty-two (22) actively operating hotel properties over a period spanning more than nine (9) years, the volume of fewer than two hundred (200) responsive communications is plainly insufficient and strongly suggests that a comprehensive search of all relevant custodians, devices, and platforms has not been conducted.

We note that Mr. Brecker, as the Managing Member of Coastal Palms, would have had regular and frequent communications with property-level management regarding financial performance, revenue targets, expense management, and franchise reporting. Even a conservative estimate of one substantive communication per property per month would yield approximately 2,376 documents over the relevant period. The production of fewer than 200 documents is facially inadequate.

Demand: Verimark demands that Coastal Palms conduct a thorough and comprehensive search of all custodians, devices, email accounts, and messaging platforms and produce all responsive communications, including emails, text messages, and messaging-application communications, between Randall Brecker and any property-level manager, controller, or accountant relating to revenue reporting, GRR calculations, or franchise obligations to Verimark, from January 2013 through the present.

Category 15: Communications Between Randall Brecker and Theresa Brecker Regarding Revenue Reporting

Applicable Requests: First RFP No. 86.

Deficiency: Only twelve (12) documents responsive to communications between Randall Brecker and Theresa Brecker on revenue-related topics were produced.

Discussion: First RFP No. 86 requested all communications between Randall Brecker and Theresa Brecker relating to revenue, financial performance, GRR reporting, or franchise obligations. Theresa Brecker manages payroll and human resources for the entire Coastal Palms portfolio and holds a fifteen percent (15%) equity interest in Coastal Palms Franchise Holdings LLC. Given her involvement in the day-to-day financial operations of the portfolio and her significant ownership stake, it strains credulity that only twelve (12) responsive communications exist over a nine-year period. We note that spousal communications are not privileged in the commercial context at issue here, and any claim that communications between the Breckers on business topics are protected by the marital-communications privilege would be without merit.

Demand: Verimark demands that Coastal Palms conduct a thorough search and produce all communications between Randall Brecker and Theresa Brecker relating to revenue, financial performance, GRR reporting, franchise obligations, Suncoast, gulfcoastrooms.com, or any related topic, from January 2013 through the present.

Category 16: Communications with Nolan Prescott Regarding Financial Performance

Applicable Requests: First RFP No. 87.

Deficiency: Only thirty-four (34) documents reflecting communications with Nolan Prescott about financial matters were produced.

Discussion: First RFP No. 87 requested all communications between Nolan Prescott and any Coastal Palms officer, member, or employee regarding financial performance, revenue, or franchise reporting. Mr. Prescott holds a twenty-five percent (25%) equity interest in Coastal Palms Franchise Holdings LLC and is, by the terms of the Coastal Palms operating agreement, entitled to quarterly financial reporting. At a minimum, quarterly investor communications and financial summaries—encompassing at least thirty-six (36) quarterly periods over the nine-year discovery period—should exist. The production of only thirty-four (34) total documents suggests that investor communications and related financial reports have not been searched for or produced.

Demand: Verimark demands production of all communications between Nolan Prescott and any officer, member, manager, or employee of Coastal Palms or any affiliated entity, relating to financial performance, revenue, franchise reporting, or any related topic, from January 2013 through the present, including all quarterly or periodic investor reports and financial summaries.

Category 17: Ironclad National Bank Loan Documents and Financial Submissions

Applicable Requests: First RFP Nos. 90–93.

Deficiency: No loan documents, financial statements, or revenue reports submitted to Ironclad National Bank in connection with the approximately $94 million in mortgage loans on eighteen (18) of the twenty-two (22) properties were produced.

Discussion: First RFP Nos. 90 through 93 requested all loan agreements, financial covenants, periodic financial reports, and correspondence with lenders for all twenty-two (22) properties. The complete absence of these documents from the production is a significant deficiency. Financial statements submitted to Ironclad National Bank in connection with the mortgage financing are among the most probative documents in this case because they may reflect the actual revenues of the properties—as opposed to the revenues reported to Verimark—and because lender submissions are typically prepared with a high degree of care given the consequences of misrepresentation to a financial institution. A material discrepancy between the revenue figures submitted to Ironclad and the GRR figures reported to Verimark would constitute powerful evidence of intentional underreporting.

We note that Verimark has separately served a Subpoena Duces Tecum on Ironclad National Bank (served August 8, 2022) seeking many of the same categories of documents. However, Coastal Palms' own copies of these submissions—together with loan agreements, covenant compliance certificates, and related correspondence—are independently discoverable and must be produced by Coastal Palms in response to the First RFP, irrespective of the status of the third-party subpoena.

Demand: Verimark demands production of all loan documents, financial statements, covenant compliance certificates, periodic financial reports, and correspondence with Ironclad National Bank and any other lender, for all twenty-two (22) properties, from January 2013 through the present.

Category 18: Audit Workpapers and External Accounting Records

Applicable Requests: First RFP No. 95.

Deficiency: No external audit or review engagement workpapers, reports, or correspondence were produced.

Discussion: First RFP No. 95 requested all workpapers, reports, management letters, and correspondence from any external accountant or auditor engaged by Coastal Palms or any of its affiliated entities. If Coastal Palms engaged any external accounting firm for annual compilations, reviews, or audits of its financial statements—or for the preparation of tax returns—those records are responsive and must be produced. External accounting records may contain adjusting entries, management representations, or analytical procedures that bear directly on the accuracy of the GRR figures reported to Verimark. If no external accounting engagement has ever been performed for Coastal Palms or its affiliates during the relevant period, Coastal Palms should so state in a verified supplemental response.

Demand: Verimark demands production of all external audit and accounting workpapers, reports, management letters, and correspondence for Coastal Palms, each property-level LLC, and Suncoast, from January 2013 through the present. If no such records exist, Coastal Palms should confirm that fact in writing.

Category 19: Franchise Application and Renewal Documents

Applicable Requests: First RFP No. 100.

Deficiency: Franchise application materials were produced for only six (6) of the twenty-two (22) properties. No renewal, transfer, or amendment documents were produced for any property.

Discussion: First RFP No. 100 requested all franchise application, renewal, transfer, and amendment documents submitted to Verimark for all twenty-two (22) properties. The production of application materials for only six properties is incomplete. We note that these documents are particularly relevant in light of Coastal Palms' affirmative defense, asserted in its Answer (Dkt. No. 18), that Verimark was aware of Suncoast's role in the management of the hotel properties through franchise-application submissions. If Coastal Palms intends to maintain this defense, it should produce the franchise application materials for all twenty-two (22) properties so that the Court and the parties can evaluate the factual basis for this contention.

Demand: Verimark demands production of all franchise application, renewal, transfer, and amendment documents for all twenty-two (22) properties.

Category 20: Insurance Policies and Claims Records

Applicable Requests: First RFP No. 110.

Deficiency: No insurance policies or claims records were produced.

Discussion: First RFP No. 110 requested all insurance policies (including property, general liability, and business-interruption coverage) for the twenty-two (22) properties and any related insurance claims. Business-interruption insurance submissions are of particular relevance because they typically require the insured to document actual revenue figures in order to quantify the insured loss. Revenue figures submitted in connection with business-interruption claims—whether arising from hurricane damage, COVID-19-related closures, or other covered events—may reflect actual GRR that differs from the amounts reported to Verimark. Additionally, the existence and terms of insurance coverage are relevant to the valuation of the franchise portfolio and the damages analysis.

Demand: Verimark demands production of all insurance policies and claims records for all twenty-two (22) properties, from January 2013 through the present.

Category 21: Technology Fee Reconciliation Records

Applicable Requests: First RFP No. 115.

Deficiency: No documents specifically addressing the calculation or remittance of the $12.50 per-available-room-per-month technology fee under FLA § 4.3 were produced.

Discussion: First RFP No. 115 requested all records relating to room counts reported to Verimark and technology-fee payments. Verimark's Complaint includes a claim for $1.26 million in underpaid technology fees based on two hundred fourteen (214) guest rooms that were added across four (4) properties without notice to Verimark and without corresponding adjustments to the technology-fee remittances. Records documenting the number of available rooms at each property (including renovation records, construction completion certificates, and room-count adjustments), and the calculations used to determine the monthly technology-fee payments, are essential to this component of Verimark's damages claim.

Demand: Verimark demands production of all records relating to room counts, room additions, technology-fee calculations, and technology-fee payments for all twenty-two (22) properties, from January 2013 through the present.

Category 22: Marketing-Fund Contribution Calculations

Applicable Requests: First RFP No. 120.

Deficiency: The production includes marketing-fund remittance receipts but no underlying calculation workpapers, spreadsheets, or supporting documentation.

Discussion: First RFP No. 120 requested all workpapers, spreadsheets, and calculations used to determine the 2.5% marketing-fund contribution required under FLA § 4.2. While Verimark appreciates the production of the remittance receipts, the receipts alone do not reveal the GRR base upon which the marketing-fund contributions were calculated. The underlying calculation workpapers are necessary to determine whether the marketing-fund contributions were computed on the same understated GRR figures as the royalty payments—which, if true, would result in a separate and additional category of underpayment.

Demand: Verimark demands production of all workpapers, spreadsheets, and calculations used to determine the 2.5% marketing-fund contribution for all twenty-two (22) properties, from January 2013 through the present.

Category 23: Privilege Log

Applicable Requests: All First RFP Nos. where privilege was asserted.

Deficiency: Coastal Palms' written responses to the First RFP assert attorney-client privilege and work-product doctrine objections in connection with numerous requests. However, no privilege log of any kind has been produced.

Discussion: Under both the Joint Stipulation Regarding E-discovery Protocol (filed June 20, 2022, and agreed upon by Calderwood & Harkness LLP and Whitfield, Barrow & Crane LLP) and Rule 1.280(b)(6) of the Florida Rules of Civil Procedure, any party withholding documents on the basis of privilege or work-product protection must provide a privilege log that identifies each withheld document by date, author, recipient(s), general subject matter, and the specific basis for the privilege claim. The failure to provide a privilege log renders the privilege objections inadequate and potentially waived. See Surfside Const. Co. v. Manuel, 429 So. 2d 127 (Fla. 3d DCA 1983) (noting the requirement that privilege claims be supported with sufficient specificity to permit evaluation by the court and opposing counsel).

Demand: Verimark demands production of a complete privilege log identifying each document withheld on the basis of attorney-client privilege, work-product doctrine, or any other privilege, within fourteen (14) days.

V. Summary of Deficiencies

The following table provides a concise summary of all twenty-three (23) categories of deficiencies identified in this letter:

VI. Request for Supplemental Production

In light of the foregoing, Verimark respectfully but firmly demands that Coastal Palms supplement its production to cure all twenty-three (23) categories of deficiencies identified in this letter within fourteen (14) calendar days of the date hereof—that is, no later than September 13, 2022.

We request that Coastal Palms confirm in writing, no later than September 6, 2022, which of the twenty-three (23) categories it will supplement and provide a timeline for any rolling productions. To the extent that Coastal Palms contends that the volume or format of certain categories of documents requires additional time for collection and processing, we are willing to discuss reasonable accommodations for a phased or rolling supplemental production, provided that Coastal Palms commits in writing to producing all responsive documents within a defined and reasonable timeframe.

We note that Verimark's review of the approximately 84,000 documents produced on August 22, 2022 is ongoing, and additional deficiencies may be identified as that review progresses. Verimark reserves the right to raise any such additional deficiencies in a subsequent letter or, if necessary, in a motion to compel.

VII. Reservation of Rights

Verimark expressly reserves all rights to seek relief from the Court in the event that the deficiencies identified in this letter are not cured within the timeframe specified above. Such relief may include, without limitation:

• A motion to compel production under Florida Rule of Civil Procedure 1.380;

• Sanctions for failure to comply with discovery obligations;

• An award of reasonable attorney's fees and costs incurred by Verimark in connection with this discovery dispute, including the fees and costs incurred in preparing this letter and any subsequent motion practice; and

• Such other and further relief as the Court deems just and appropriate.

Verimark further reserves the right to raise the deficiencies identified in this letter at the next scheduled status conference or case-management conference before the Honorable Richard M. Calloway, and to request that the Court enter an order compelling production on an expedited basis if warranted.

We also wish to note that Coastal Palms' continued refusal to produce the financial records of Suncoast Room Management Inc. on the basis of the "separate entity" objection may necessitate a separate motion to compel specifically addressing that issue. Given the centrality of Suncoast's records to Verimark's claims, Verimark will not wait indefinitely for Coastal Palms to reconsider its position on this point, and any such motion will seek attorney's fees and costs attributable to the necessity of briefing this discrete issue.

VIII. Offer to Meet and Confer

Consistent with the requirements of the Florida Rules of Civil Procedure and the prerequisites for any motion to compel, Verimark is willing to meet and confer with Coastal Palms' counsel—whether by telephone, videoconference, or in person—to discuss the deficiencies identified in this letter and Coastal Palms' position with respect to each category before resorting to court intervention.

We propose scheduling a meet-and-confer call during the week of September 5, 2022, at a time mutually convenient for counsel. We are available Monday through Thursday of that week and can accommodate morning or afternoon scheduling. We respectfully request that you contact the undersigned counsel at your earliest convenience to arrange a date and time for this call.

We trust that a productive meet-and-confer discussion will allow the parties to resolve most, if not all, of the identified deficiencies without the need for motion practice. However, in the event that the parties are unable to reach agreement on one or more categories, Verimark will proceed to file a motion to compel promptly after the conclusion of the conferral process.

IX. Closing

Thank you for your prompt attention to this matter. Verimark takes its franchise-system obligations seriously, and it expects the same seriousness from its franchisees with respect to discovery obligations in this litigation. We are confident that Coastal Palms shares our interest in the efficient resolution of these discovery issues and that a complete and timely supplemental production will be forthcoming.

We look forward to your written response and to scheduling a productive meet-and-confer discussion during the week of September 5, 2022.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Yuki Nakamura, Esq. FL Bar No. 0119644

110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 761-8200

Email: ynakamura@calderwoodharkness.com

Counsel for Plaintiff Verimark Hospitality Group Inc.

cc: Priya Anand, Esq., Calderwood & Harkness LLP Nathan Whitfield III, Esq., Whitfield, Barrow & Crane LLP Renata Solis-Vega, SVP & General Counsel, Verimark Hospitality Group Inc.

Encl: None (standalone letter; supporting documentation referenced herein is not enclosed but is available upon request)

No.	Category	First RFP No(s).	Nature of Deficiency
1	Suncoast — Complete Financial Records	12–18	Entirely absent; objected to on meritless "separate entity" grounds
2	Suncoast — Management Agreements	19	Entirely absent
3	Suncoast — Bank Statements	15	Entirely absent
4	gulfcoastrooms.com Booking Data and Records	22–25	Entirely absent
5	OTA Contracts and Agreements	30–35	Materially incomplete; no agreements post-dating 2016
6	OTA Revenue Reconciliation Reports	36	Entirely absent
7	Monthly GRR Reports	1	Incomplete; missing for 6 of 22 properties and multiple periods for remaining 16
8	Internal Revenue Reports and Accounting Workpapers	40–44	Entirely absent
9	PMS Data Exports	50–54	Entirely absent
10	Corporate-Direct Booking Contracts	60–63	Entirely absent
11	Walk-In Revenue Records	65	Entirely absent
12	Tax Returns — Entity Level	70	Materially incomplete; produced for Coastal Palms 2019–2021 only; no property-level or Suncoast returns; no returns for 2013–2018
13	Bank Statements — Property-Level Entities	72	Materially incomplete; produced for 8 of 22 entities, 2020–2021 only
14	Communications — Brecker to Property Controllers/Managers	80–85	Materially incomplete; fewer than 200 documents produced for 22 properties over 9+ years
15	Communications — Randall Brecker to Theresa Brecker	86	Materially incomplete; only 12 documents produced
16	Communications — With Nolan Prescott	87	Materially incomplete; only 34 documents produced
17	Ironclad National Bank Loan Documents and Financial Submissions	90–93	Entirely absent
18	Audit Workpapers and External Accounting Records	95	Entirely absent
19	Franchise Application and Renewal Documents	100	Materially incomplete; produced for 6 of 22 properties only
20	Insurance Policies and Claims Records	110	Entirely absent
21	Technology Fee Reconciliation Records	115	Entirely absent
22	Marketing-Fund Contribution Calculations	120	Incomplete; remittance receipts produced but no underlying calculation workpapers
23	Privilege Log	All Nos. where privilege asserted	Entirely absent; no privilege log produced despite assertion of privilege on multiple requests

CALDERWOOD & HARKNESS LLP Attorneys at Law 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 761-8200 Facsimile: (954) 761-8201 www.calderwoodharkness.com
August 30, 2022
VIA EMAIL AND FIRST-CLASS MAIL
Gabriela Montes, Esq. Whitfield, Barrow & Crane LLP 1221 Brickell Avenue, Suite 3000 Miami, Florida 33131
Re: 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
Subject: Deficiencies in Defendant's Responses and Production Pursuant to Plaintiff's First Request for Production of Documents (Served July 11, 2022)
Dear Ms. Montes:
I. Introduction and Purpose
This firm represents Plaintiff Verimark Hospitality Group Inc. ("Verimark") in the above-captioned matter. We write to address material deficiencies that our review has identified in the document production served by your client, Coastal Palms Franchise Holdings LLC ("Coastal Palms"), on August 22, 2022, in response to Plaintiff's First Request for Production of Documents ("First RFP"). The First RFP, which was served on July 11, 2022, contained one hundred forty-seven (147) individual requests directed to the full range of documents and electronically stored information relevant to Verimark's claims in this action.
We acknowledge receipt of the August 22, 2022 production, which comprised approximately eighty-four thousand (84,000) documents produced in native and image formats. While Verimark appreciates Coastal Palms' initial production and the effort that went into assembling it, our ongoing review has identified twenty-three (23) distinct categories of documents that are either entirely absent from the production, materially incomplete, or otherwise non-responsive to the requests as propounded. As described in detail below, the deficiencies span virtually every major subject matter area addressed by the First RFP—from the financial records of Suncoast Room Management Inc. ("Suncoast") to Online Travel Agency ("OTA") contracts, monthly Gross Room Revenue ("GRR") reports, Property Management System ("PMS") data, communications among key principals, lender submissions, and the privilege log required under both the Florida Rules of Civil Procedure and the parties' agreed-upon E-discovery Protocol.
This letter constitutes a good-faith effort to identify and resolve these deficiencies without resort to court intervention, consistent with the requirements of Rule 1.380 of the Florida Rules of Civil Procedure and the Case Management Order entered by the Honorable Richard M. Calloway on June 14, 2022. As you are aware, the Case Management Order expressly requires the parties to engage in meaningful conferral before filing any discovery motions and sets a fact-discovery cut-off that makes prompt resolution of these issues essential.
We respectfully request that Coastal Palms supplement its production to cure all twenty-three (23) categories of deficiencies identified herein within fourteen (14) days of the date of this letter—that is, no later than September 13, 2022. Should Coastal Palms fail to do so, Verimark will have no alternative but to seek relief from the Court, including the filing of a motion to compel under Florida Rule of Civil Procedure 1.380, together with a request for an award of reasonable attorney's fees and costs incurred in connection with the discovery dispute.
II. Background on discovery Requests
To place the identified deficiencies in context, we briefly summarize the scope and purpose of the First RFP.
The First RFP comprises one hundred forty-seven (147) requests organized thematically around the core categories of documents and information relevant to Verimark's claims. Specifically, the requests target:
•  Financial records: General ledgers, income statements, balance sheets, trial balances, and related accounting records for Coastal Palms, each of the twenty-two (22) property-level limited liability companies, and Suncoast Room Management Inc.
•  Gross Room Revenue ("GRR") reports: All monthly, quarterly, and annual GRR reports submitted by Coastal Palms (or any affiliated entity) to Verimark for each of the twenty-two (22) franchised hotel properties, from the inception of each Franchise License Agreement ("FLA") through the present.
•  Suncoast Room Management Inc. agreements and records: All management agreements, operating agreements, financial records, bank statements, and related documents for Suncoast, the affiliated management entity controlled by Defendant Randall Brecker.
•  OTA contracts and reconciliation data: All contracts, agreements, rate sheets, amendments, reconciliation reports, commission statements, and net-rate settlement documents with Online Travel Agency platforms (including, without limitation, Aldermere Technologies, Bramwell Holdings, Drayton Software, Drayton Corporation, Penmark Industries, and Northpoint Corporation) for all twenty-two (22) properties.
•  Booking-channel data: All records relating to direct bookings made through the unbranded website gulfcoastrooms.com, corporate-direct contracts, walk-in revenue, and any other booking channel used by Coastal Palms or its affiliates.
•  Bank statements: All bank and deposit account statements for Coastal Palms, each property-level entity, and Suncoast.
•  Tax returns: All federal and state tax returns for each entity within the Coastal Palms portfolio and for Suncoast.
•  Communications: All communications (email, text message, and messaging-application communications) among key individuals—including Randall Brecker, Theresa Brecker, Nolan Prescott, and property-level controllers and managers—relating to revenue reporting, GRR calculations, and franchise obligations to Verimark.
•  Lender submissions: All loan documents, financial statements, and revenue reports submitted to Ironclad National Bank and any other lender in connection with the approximately $94 million in mortgage financing secured by eighteen (18) of the twenty-two (22) properties.
•  Miscellaneous: Franchise application and renewal documents, insurance policies and claims records, technology-fee reconciliation records, marketing-fund contribution calculations, external audit and accounting workpapers, and related categories.
The requests cover the period from January 2013 through the present, which corresponds to the period of alleged systematic underreporting of GRR at the core of Verimark's claims. As alleged in the Complaint, Coastal Palms—acting through its Managing Member, Randall Brecker, and through the affiliated management entity Suncoast Room Management Inc.—systematically diverted revenue through off-platform booking channels and affiliated management entities, including Suncoast and the unbranded booking website gulfcoastrooms.com, thereby understating GRR by an estimated twenty-two percent to thirty-one percent (22%–31%) across its twenty-two (22)-property portfolio, which encompasses approximately 3,740 total guest rooms. The properties include eighteen (18) Verimark Suites locations and four (4) Verimark Select locations situated across the State of Florida and the State of Georgia. The first FLA in the portfolio was executed on June 15, 2007 (the Naples, Florida property), and the most recent was executed on September 3, 2019.
Given the breadth of Verimark's claims and the complexity of the revenue-diversion scheme alleged, the scope of the First RFP is both necessary and proportional to the needs of this case, particularly in light of the magnitude of the damages at issue—which Verimark estimates exceed $18 million in unpaid royalties, marketing-fund contributions, and technology fees, exclusive of liquidated damages, interest, and attorney's fees.
III. General Objections — Response to Blanket Objections
Before addressing the twenty-three (23) specific categories of deficiencies, we must address Coastal Palms' blanket objections, which pervade the written responses accompanying the August 22, 2022 production.
Coastal Palms interposed blanket objections to virtually every one of the one hundred forty-seven (147) requests in the First RFP. These objections recite, in substantially identical language for each request, that the request is purportedly: (a) overbroad in scope and temporal range; (b) unduly burdensome; (c) not relevant to the claims or defenses of any party; (d) not proportional to the needs of the case; (e) protected by the attorney-client privilege; and (f) protected by the work-product doctrine. In most instances, these objections are asserted without any particularized justification, factual support, or explanation of how the objection applies to the specific request at issue.
Blanket or boilerplate objections of this kind are insufficient under Florida law and do not relieve a responding party of its obligation to produce responsive documents. See binger v. King Pest Control, 401 So. 2d 1310 (Fla. 1981) (requiring specific objections to discovery requests rather than general, conclusory assertions); Elkins v. Syken, 672 So. 2d 517 (Fla. 1996) (noting the duty of parties to respond to discovery in good faith). An objection that merely recites the legal standard without explaining its application to the particular request at issue is, in practical effect, no objection at all. Nor does the assertion of a blanket objection permit Coastal Palms to withhold responsive documents in their entirety when only a portion of the documents requested might arguably be subject to a valid objection.
We therefore request that Coastal Palms either (a) withdraw its blanket objections in their entirety, or (b) provide particularized bases for each objection as to each request, identifying with specificity the factual and legal grounds on which each objection rests and the manner in which each objection limits the scope of Coastal Palms' production. Absent such particularization, Verimark will treat the blanket objections as waived and will argue accordingly in any motion to compel.
IV. Identification of 23 Categories of Deficient or Missing Documents
We turn now to the specific categories of documents that are either absent, materially incomplete, or improperly withheld from Coastal Palms' production. Each category is described below with reference to the applicable First RFP request numbers, the nature of the deficiency, and the basis for Verimark's position that production is required.
Category 1: Suncoast Room Management Inc. — Complete Financial Records
Applicable Requests: First RFP Nos. 12–18.
Deficiency: No financial records whatsoever for Suncoast Room Management Inc. were included in the August 22, 2022 production. The production contains no general ledgers, no income statements, no balance sheets, no trial balances, no bank statements, and no management-fee invoices or payment records for Suncoast for any period.
Discussion: First RFP Nos. 12 through 18 specifically requested Suncoast's general ledgers, income statements, balance sheets, bank statements, and management-fee invoices for the period from January 2013 through the present. In its written responses, Coastal Palms objected on the ground that Suncoast is a "separate legal entity" that is not a party to the FLAs and that its records are therefore beyond the scope of permissible discovery in this action.
This objection is meritless. As a threshold matter, the "separate entity" characterization is factually misleading. Randall Brecker—the Managing Member of Coastal Palms Franchise Holdings LLC—is simultaneously the President and sole director of Suncoast Room Management Inc. Mr. Brecker exercises direct operational control over both entities, and the two entities share overlapping management, office space, personnel, and financial systems. Under these circumstances, Suncoast's records are plainly within Coastal Palms' "possession, custody, or control" as that term is understood under the Florida Rules of Civil Procedure. A party cannot shield discoverable records simply by housing them in an affiliated entity that the same individual controls. See, e.g., Shoen v. Shoen, 5 F.3d 1289, 1292 (9th Cir. 1993) (control over documents held by an affiliate or subsidiary satisfies the "possession, custody, or control" standard); In re Citric Acid Litig., 191 F.3d 1090, 1107–08 (9th Cir. 1999).
More fundamentally, Suncoast's financial records are directly relevant to calculating the true GRR under FLA § 4.1. That provision defines GRR 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." To the extent Suncoast collected revenues on behalf of Coastal Palms' hotel properties—which is the core factual allegation in this case—Suncoast's financial records are among the most probative documents in existence for determining the full extent of the revenue diversion scheme.
Demand: Verimark demands production of all Suncoast Room Management Inc. financial records responsive to First RFP Nos. 12–18, including but not limited to general ledgers, income statements, balance sheets, bank statements, management-fee invoices, and all related accounting records, for the period from January 2013 through the present.
Category 2: Suncoast Room Management Inc. — Management Agreements
Applicable Requests: First RFP No. 19.
Deficiency: No management agreements between Suncoast and any property-level entity were produced. This includes any agreements between Suncoast and Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and each of the other twenty (20) property-level limited liability companies in the Coastal Palms portfolio.
Discussion: First RFP No. 19 specifically requested all management agreements, operating agreements, and service agreements between Suncoast and any entity affiliated with Coastal Palms. The management agreements between Suncoast and the property-level LLCs are essential to understanding the structure and terms of the alleged revenue-diversion scheme. Verimark's forensic analysis indicates that Suncoast retained a management fee of approximately twelve percent (12%) on direct-booking revenues processed through gulfcoastrooms.com and other off-platform channels before remitting the balance to the property-level entities. The management agreements will reveal the contractual basis for this fee structure, the parties' obligations with respect to revenue reporting, and the agreed-upon allocation of revenues between Suncoast and the individual property-level LLCs.
Demand: Verimark demands production of all management agreements, operating agreements, service agreements, and any amendments or side letters between Suncoast Room Management Inc. and any Coastal Palms-affiliated entity, for the entire period of each such agreement's existence.
Category 3: Suncoast Room Management Inc. — Bank Statements
Applicable Requests: First RFP No. 15.
Deficiency: Separately from the complete absence of Suncoast financial records noted in Category 1, no bank statements for any account held by or in the name of Suncoast Room Management Inc. were produced.
Discussion: First RFP No. 15 specifically requested all bank and deposit account statements for Suncoast from January 2013 through the present. We emphasize this category separately because bank statements represent an independent, objective source of transactional data that is not subject to the accounting classifications and categorizations applied by Coastal Palms in its internal books. Bank statements for Suncoast's accounts will reflect the actual revenues collected by Suncoast on behalf of the hotel properties, the amounts retained by Suncoast as management fees, and the amounts ultimately remitted to the property-level LLCs. This data is essential for any forensic reconstruction of actual GRR, and Coastal Palms' refusal to produce it on "separate entity" grounds is, for the reasons stated in Category 1, without merit.
Demand: Verimark demands production of all bank and deposit account statements for every account held by or in the name of Suncoast Room Management Inc., from January 2013 through the present.
Category 4: gulfcoastrooms.com Booking Data and Records
Applicable Requests: First RFP Nos. 22–25.
Deficiency: No documents whatsoever relating to the unbranded booking website gulfcoastrooms.com were included in the production.
Discussion: First RFP Nos. 22 through 25 requested all records relating to the operation, booking logs, revenue generation, and hosting and administration of gulfcoastrooms.com. This website, which is operated by Suncoast, was identified in Verimark's Complaint as one of the primary channels through which Coastal Palms diverted guest-room revenue outside the GRR reporting framework. The website enables guests to book rooms at Coastal Palms' franchised hotel properties directly, bypassing both the Verimark central reservation system and the major OTA platforms. Revenues generated through gulfcoastrooms.com were allegedly collected by Suncoast, subjected to the twelve percent (12%) management fee, and remitted to property-level entities without being reported to Verimark as GRR.
The complete absence of gulfcoastrooms.com records from the production is particularly troubling given that the website is actively operational and presumably generates daily transactional data, booking confirmations, payment processing records, and system logs. These records exist and are within Coastal Palms' possession, custody, or control through Randall Brecker's control of Suncoast.
Demand: Verimark demands production of all booking logs, reservation records, transaction records, payment processing records (including records from any third-party payment processor), website analytics data, hosting and domain registration records, and all administrative records for gulfcoastrooms.com, from the inception of the website through the present.
Category 5: OTA (Online Travel Agency) Contracts and Agreements
Applicable Requests: First RFP Nos. 30–35.
Deficiency: The production contains only a small number of OTA agreements, and none of the agreements produced post-date 2016. The production is thus materially incomplete for the six-year period from 2017 through the present.
Discussion: First RFP Nos. 30 through 35 requested all contracts, agreements, rate sheets, commission schedules, and amendments with OTA platforms for all twenty-two (22) properties, covering the period from 2013 through the present. OTA platforms represent a significant booking channel for hotel properties, and the terms of Coastal Palms' agreements with these platforms—including whether rooms were sold on a "merchant model" (where the OTA collects payment from the guest and remits a net amount to the hotel) or an "agency model" (where the hotel collects payment directly and remits a commission to the OTA)—are directly relevant to Verimark's claims. The distinction between gross and net OTA payments is central to the allegation that Coastal Palms improperly netted OTA commissions against GRR in violation of FLA § 4.1's gross-revenue definition.
Given that all twenty-two (22) properties are actively operating hotels that utilize OTA platforms as a core distribution channel, it is not credible that OTA contracts and amendments ceased to exist after 2016. OTA agreements are typically renewed or renegotiated on an annual or biennial basis, and current agreements must exist for all properties.
Demand: Verimark demands production of all OTA contracts, agreements, rate sheets, commission schedules, amendments, and related correspondence for all twenty-two (22) franchised properties, from January 2013 through the present.
Category 6: OTA Revenue Reconciliation Reports
Applicable Requests: First RFP No. 36.
Deficiency: No OTA reconciliation reports, commission statements, or net-rate settlement documents were produced.
Discussion: First RFP No. 36 specifically requested all OTA reconciliation and settlement reports for all twenty-two (22) properties. These reports—typically generated monthly by each OTA platform—document the gross room revenue attributable to OTA bookings, the commissions or fees deducted by the OTA, and the net amount remitted to the hotel property. These records are critical to assessing whether Coastal Palms classified net-rate OTA payments as "commissions receivable" and improperly netted them against GRR in violation of FLA § 4.1's requirement that GRR include the gross amount of revenue from all booking channels. Without these reconciliation reports, Verimark cannot compare the gross OTA revenue to the amounts actually reported to Verimark as GRR.
Demand: Verimark demands production of all OTA reconciliation reports, commission statements, net-rate settlement documents, and related records for all twenty-two (22) properties, from January 2013 through the present.
Category 7: Monthly GRR Reports — Incomplete Set
Applicable Requests: First RFP No. 1.
Deficiency: The production contains monthly GRR reports for only sixteen (16) of the twenty-two (22) franchised properties. For the sixteen properties where reports were produced, the production is missing reports for multiple months and entire calendar years within the 2013–2021 period. No GRR reports were produced for the following six (6) properties: (a) the Verimark Suites — Savannah, GA; (b) the Verimark Suites — Brunswick, GA; (c) the Verimark Select — Jacksonville, FL; (d) the Verimark Select — Tallahassee, FL; (e) the Verimark Suites — Pensacola, FL; and (f) the Verimark Suites — Panama City Beach, FL.
Discussion: First RFP No. 1 requested all monthly GRR reports submitted to Verimark for each of the twenty-two (22) franchised properties for the entire period of each respective FLA. As noted above, the first FLA in the portfolio was executed on June 15, 2007 (the Naples, Florida property), and the most recent was executed on September 3, 2019 (the Verimark Select — Tallahassee property). Complete and uninterrupted sets of monthly GRR reports are required for each property from the inception of its FLA through the present. The GRR reports are the foundational documents for Verimark's royalty-underreporting claims, and the absence of reports for six entire properties—together with gaps in the reports for the remaining sixteen—fundamentally undermines Verimark's ability to quantify its damages.
Demand: Verimark demands production of complete, uninterrupted sets of monthly GRR reports for all twenty-two (22) franchised properties, from the inception of each property's FLA through the present.
Category 8: Internal Revenue Reports and Accounting Workpapers
Applicable Requests: First RFP Nos. 40–44.
Deficiency: No internal accounting workpapers, journal entries, or revenue-classification memoranda were produced.
Discussion: First RFP Nos. 40 through 44 requested all internal financial reports, accounting workpapers, journal entries, and memoranda relating to the classification and reporting of hotel revenues for each of the twenty-two (22) properties. These documents are distinct from the GRR reports submitted to Verimark (addressed in Category 7) and from the external audit and accounting records (addressed in Category 18). Internal accounting workpapers will reveal how Coastal Palms distinguished between revenues reported to Verimark as GRR and revenues excluded from GRR reports—i.e., the internal decision-making process by which certain booking channels and revenue streams were classified as non-reportable. These documents go to the heart of Verimark's allegation that the underreporting was knowing and intentional rather than the result of inadvertent error.
Demand: Verimark demands production of all internal financial reports, accounting workpapers, journal entries, revenue-classification memoranda, and related records for all twenty-two (22) properties, from January 2013 through the present.
Category 9: Property Management System ("PMS") Data Exports
Applicable Requests: First RFP Nos. 50–54.
Deficiency: No PMS data exports or system reports were produced.
Discussion: First RFP Nos. 50 through 54 requested exports from all Property Management Systems used at the twenty-two (22) hotel properties, including daily revenue reports, room-night logs, occupancy data, and average daily rate ("ADR") calculations. PMS data is the primary source for reconstructing actual GRR at each property, as it captures every room transaction at the point of sale, regardless of booking channel. A comparison of PMS data to the GRR figures reported to Verimark is the most direct and reliable method for quantifying the extent of any underreporting. The absence of PMS data from the production is a critical gap that must be remedied.
We note that PMS data is maintained electronically and is readily exportable from standard hotel PMS platforms (such as Opera, Maestro, or RoomKeyPMS). The burden of exporting this data is minimal relative to its evidentiary value, and any objection based on proportionality should be overruled.
Demand: Verimark demands production of complete PMS data exports for all twenty-two (22) properties, including daily revenue reports, room-night logs, occupancy data, ADR calculations, and source-of-booking data, from January 2013 through the present.
Category 10: Corporate-Direct Booking Contracts
Applicable Requests: First RFP Nos. 60–63.
Deficiency: No contracts, rate agreements, or correspondence with corporate-direct booking clients were produced.
Discussion: First RFP Nos. 60 through 63 requested all agreements with corporate clients for direct room bookings at any of the twenty-two (22) properties. Corporate-direct bookings—that is, bookings made pursuant to negotiated rate agreements between Suncoast or Coastal Palms and corporate clients, governmental agencies, or other institutional customers—are a significant component of the allegedly unreported revenue. These bookings were channeled through Suncoast's direct-booking infrastructure rather than through Verimark's central reservation system or OTA platforms, and the revenues from such bookings were allegedly excluded from GRR reports. The corporate-direct agreements will identify the rates, volumes, and payment terms for this category of bookings and are necessary to quantify the corresponding revenue.
Demand: Verimark demands production of all corporate-direct booking contracts, rate agreements, and related correspondence for all twenty-two (22) properties, from January 2013 through the present.
Category 11: Walk-In Revenue Records
Applicable Requests: First RFP No. 65.
Deficiency: No records specifically documenting walk-in guest revenue or cash receipts were produced.
Discussion: First RFP No. 65 requested all records relating to walk-in guests, cash payments, and front-desk revenue for all twenty-two (22) properties. Walk-in revenue—i.e., revenue from guests who book at the front desk without a prior reservation—represents a category of revenue that is particularly susceptible to underreporting because it may not flow through centralized booking systems. Verimark alleges that walk-in revenue was routed through Suncoast's collection system and excluded from GRR reports. Records documenting walk-in transactions, including front-desk receipt logs, cash-register tapes, daily cash summaries, and related documents, are necessary to quantify this component of the alleged underreporting.
Demand: Verimark demands production of all records relating to walk-in guest revenue, cash receipts, and front-desk transactions for all twenty-two (22) properties, from January 2013 through the present.
Category 12: Tax Returns — Entity Level
Applicable Requests: First RFP No. 70.
Deficiency: Federal and state tax returns were produced for Coastal Palms Franchise Holdings LLC for 2019, 2020, and 2021 only. No tax returns for any year prior to 2019 were produced. No tax returns for any property-level LLC—including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC—were produced for any year. No tax returns for Suncoast Room Management Inc. were produced for any year.
Discussion: First RFP No. 70 requested all federal and state tax returns for Coastal Palms, each property-level LLC, and Suncoast Room Management Inc. for the period from 2013 through 2021. The production is deficient in three respects: (a) no tax returns for any entity for the six-year period from 2013 through 2018 were produced; (b) no tax returns for any of the twenty-two (22) property-level LLCs were produced; and (c) no tax returns for Suncoast were produced. Tax returns are discoverable in Florida, and the revenue figures reported to taxing authorities are directly relevant to the question of whether Coastal Palms reported materially different revenue figures to Verimark than to the Internal Revenue Service and the Florida Department of Revenue. Any claim of confidentiality can be addressed through the Confidentiality Stipulation and Protective Order already entered in this case (Dkt. No. 34, entered July 5, 2022).
Demand: Verimark demands production of all federal and state tax returns (including all schedules, attachments, and K-1 forms) for Coastal Palms Franchise Holdings LLC, each of the twenty-two (22) property-level LLCs, and Suncoast Room Management Inc., for the period from 2013 through 2021.
Category 13: Bank Statements — Property-Level Entities
Applicable Requests: First RFP No. 72.
Deficiency: Bank statements were produced for only eight (8) of the twenty-two (22) property-level entities, and for those eight entities, statements were produced only for 2020 and 2021. No bank statements for any property-level entity for the period from 2013 through 2019 were produced.
Discussion: First RFP No. 72 requested bank statements for all property-level entities for the full 2013–2021 period. Complete bank records for all twenty-two (22) property-level entities across the entire discovery period are essential to trace the flow of revenue from booking channels (including OTAs, gulfcoastrooms.com, corporate-direct bookings, and walk-in transactions) through Suncoast and into the property-level entities. Without complete bank records, Verimark's forensic accountants cannot perform the transactional analysis necessary to reconstruct actual GRR and compare it to reported GRR.
Demand: Verimark demands production of all bank and deposit account statements for all twenty-two (22) property-level entities, from January 2013 through the present.
Category 14: Communications Between Randall Brecker and Property Controllers/Managers Regarding Revenue Reporting
Applicable Requests: First RFP Nos. 80–85.
Deficiency: The production contains fewer than two hundred (200) emails between Randall Brecker and property-level controllers, general managers, and accounting staff across all twenty-two (22) properties for the entire 2013–2022 period.
Discussion: First RFP Nos. 80 through 85 requested all communications—including emails, text messages, and messaging-application communications (e.g., Meridian Services Inc., Meridian Solutions, Northgate Data Systems)—between Randall Brecker and any property-level manager, controller, or accountant relating to revenue reporting, GRR calculations, or Verimark franchise obligations. Given that the Coastal Palms portfolio encompasses twenty-two (22) actively operating hotel properties over a period spanning more than nine (9) years, the volume of fewer than two hundred (200) responsive communications is plainly insufficient and strongly suggests that a comprehensive search of all relevant custodians, devices, and platforms has not been conducted.
We note that Mr. Brecker, as the Managing Member of Coastal Palms, would have had regular and frequent communications with property-level management regarding financial performance, revenue targets, expense management, and franchise reporting. Even a conservative estimate of one substantive communication per property per month would yield approximately 2,376 documents over the relevant period. The production of fewer than 200 documents is facially inadequate.
Demand: Verimark demands that Coastal Palms conduct a thorough and comprehensive search of all custodians, devices, email accounts, and messaging platforms and produce all responsive communications, including emails, text messages, and messaging-application communications, between Randall Brecker and any property-level manager, controller, or accountant relating to revenue reporting, GRR calculations, or franchise obligations to Verimark, from January 2013 through the present.
Category 15: Communications Between Randall Brecker and Theresa Brecker Regarding Revenue Reporting
Applicable Requests: First RFP No. 86.
Deficiency: Only twelve (12) documents responsive to communications between Randall Brecker and Theresa Brecker on revenue-related topics were produced.
Discussion: First RFP No. 86 requested all communications between Randall Brecker and Theresa Brecker relating to revenue, financial performance, GRR reporting, or franchise obligations. Theresa Brecker manages payroll and human resources for the entire Coastal Palms portfolio and holds a fifteen percent (15%) equity interest in Coastal Palms Franchise Holdings LLC. Given her involvement in the day-to-day financial operations of the portfolio and her significant ownership stake, it strains credulity that only twelve (12) responsive communications exist over a nine-year period. We note that spousal communications are not privileged in the commercial context at issue here, and any claim that communications between the Breckers on business topics are protected by the marital-communications privilege would be without merit.
Demand: Verimark demands that Coastal Palms conduct a thorough search and produce all communications between Randall Brecker and Theresa Brecker relating to revenue, financial performance, GRR reporting, franchise obligations, Suncoast, gulfcoastrooms.com, or any related topic, from January 2013 through the present.
Category 16: Communications with Nolan Prescott Regarding Financial Performance
Applicable Requests: First RFP No. 87.
Deficiency: Only thirty-four (34) documents reflecting communications with Nolan Prescott about financial matters were produced.
Discussion: First RFP No. 87 requested all communications between Nolan Prescott and any Coastal Palms officer, member, or employee regarding financial performance, revenue, or franchise reporting. Mr. Prescott holds a twenty-five percent (25%) equity interest in Coastal Palms Franchise Holdings LLC and is, by the terms of the Coastal Palms operating agreement, entitled to quarterly financial reporting. At a minimum, quarterly investor communications and financial summaries—encompassing at least thirty-six (36) quarterly periods over the nine-year discovery period—should exist. The production of only thirty-four (34) total documents suggests that investor communications and related financial reports have not been searched for or produced.
Demand: Verimark demands production of all communications between Nolan Prescott and any officer, member, manager, or employee of Coastal Palms or any affiliated entity, relating to financial performance, revenue, franchise reporting, or any related topic, from January 2013 through the present, including all quarterly or periodic investor reports and financial summaries.
Category 17: Ironclad National Bank Loan Documents and Financial Submissions
Applicable Requests: First RFP Nos. 90–93.
Deficiency: No loan documents, financial statements, or revenue reports submitted to Ironclad National Bank in connection with the approximately $94 million in mortgage loans on eighteen (18) of the twenty-two (22) properties were produced.
Discussion: First RFP Nos. 90 through 93 requested all loan agreements, financial covenants, periodic financial reports, and correspondence with lenders for all twenty-two (22) properties. The complete absence of these documents from the production is a significant deficiency. Financial statements submitted to Ironclad National Bank in connection with the mortgage financing are among the most probative documents in this case because they may reflect the actual revenues of the properties—as opposed to the revenues reported to Verimark—and because lender submissions are typically prepared with a high degree of care given the consequences of misrepresentation to a financial institution. A material discrepancy between the revenue figures submitted to Ironclad and the GRR figures reported to Verimark would constitute powerful evidence of intentional underreporting.
We note that Verimark has separately served a Subpoena Duces Tecum on Ironclad National Bank (served August 8, 2022) seeking many of the same categories of documents. However, Coastal Palms' own copies of these submissions—together with loan agreements, covenant compliance certificates, and related correspondence—are independently discoverable and must be produced by Coastal Palms in response to the First RFP, irrespective of the status of the third-party subpoena.
Demand: Verimark demands production of all loan documents, financial statements, covenant compliance certificates, periodic financial reports, and correspondence with Ironclad National Bank and any other lender, for all twenty-two (22) properties, from January 2013 through the present.
Category 18: Audit Workpapers and External Accounting Records
Applicable Requests: First RFP No. 95.
Deficiency: No external audit or review engagement workpapers, reports, or correspondence were produced.
Discussion: First RFP No. 95 requested all workpapers, reports, management letters, and correspondence from any external accountant or auditor engaged by Coastal Palms or any of its affiliated entities. If Coastal Palms engaged any external accounting firm for annual compilations, reviews, or audits of its financial statements—or for the preparation of tax returns—those records are responsive and must be produced. External accounting records may contain adjusting entries, management representations, or analytical procedures that bear directly on the accuracy of the GRR figures reported to Verimark. If no external accounting engagement has ever been performed for Coastal Palms or its affiliates during the relevant period, Coastal Palms should so state in a verified supplemental response.
Demand: Verimark demands production of all external audit and accounting workpapers, reports, management letters, and correspondence for Coastal Palms, each property-level LLC, and Suncoast, from January 2013 through the present. If no such records exist, Coastal Palms should confirm that fact in writing.
Category 19: Franchise Application and Renewal Documents
Applicable Requests: First RFP No. 100.
Deficiency: Franchise application materials were produced for only six (6) of the twenty-two (22) properties. No renewal, transfer, or amendment documents were produced for any property.
Discussion: First RFP No. 100 requested all franchise application, renewal, transfer, and amendment documents submitted to Verimark for all twenty-two (22) properties. The production of application materials for only six properties is incomplete. We note that these documents are particularly relevant in light of Coastal Palms' affirmative defense, asserted in its Answer (Dkt. No. 18), that Verimark was aware of Suncoast's role in the management of the hotel properties through franchise-application submissions. If Coastal Palms intends to maintain this defense, it should produce the franchise application materials for all twenty-two (22) properties so that the Court and the parties can evaluate the factual basis for this contention.
Demand: Verimark demands production of all franchise application, renewal, transfer, and amendment documents for all twenty-two (22) properties.
Category 20: Insurance Policies and Claims Records
Applicable Requests: First RFP No. 110.
Deficiency: No insurance policies or claims records were produced.
Discussion: First RFP No. 110 requested all insurance policies (including property, general liability, and business-interruption coverage) for the twenty-two (22) properties and any related insurance claims. Business-interruption insurance submissions are of particular relevance because they typically require the insured to document actual revenue figures in order to quantify the insured loss. Revenue figures submitted in connection with business-interruption claims—whether arising from hurricane damage, COVID-19-related closures, or other covered events—may reflect actual GRR that differs from the amounts reported to Verimark. Additionally, the existence and terms of insurance coverage are relevant to the valuation of the franchise portfolio and the damages analysis.
Demand: Verimark demands production of all insurance policies and claims records for all twenty-two (22) properties, from January 2013 through the present.
Category 21: Technology Fee Reconciliation Records
Applicable Requests: First RFP No. 115.
Deficiency: No documents specifically addressing the calculation or remittance of the $12.50 per-available-room-per-month technology fee under FLA § 4.3 were produced.
Discussion: First RFP No. 115 requested all records relating to room counts reported to Verimark and technology-fee payments. Verimark's Complaint includes a claim for $1.26 million in underpaid technology fees based on two hundred fourteen (214) guest rooms that were added across four (4) properties without notice to Verimark and without corresponding adjustments to the technology-fee remittances. Records documenting the number of available rooms at each property (including renovation records, construction completion certificates, and room-count adjustments), and the calculations used to determine the monthly technology-fee payments, are essential to this component of Verimark's damages claim.
Demand: Verimark demands production of all records relating to room counts, room additions, technology-fee calculations, and technology-fee payments for all twenty-two (22) properties, from January 2013 through the present.
Category 22: Marketing-Fund Contribution Calculations
Applicable Requests: First RFP No. 120.
Deficiency: The production includes marketing-fund remittance receipts but no underlying calculation workpapers, spreadsheets, or supporting documentation.
Discussion: First RFP No. 120 requested all workpapers, spreadsheets, and calculations used to determine the 2.5% marketing-fund contribution required under FLA § 4.2. While Verimark appreciates the production of the remittance receipts, the receipts alone do not reveal the GRR base upon which the marketing-fund contributions were calculated. The underlying calculation workpapers are necessary to determine whether the marketing-fund contributions were computed on the same understated GRR figures as the royalty payments—which, if true, would result in a separate and additional category of underpayment.
Demand: Verimark demands production of all workpapers, spreadsheets, and calculations used to determine the 2.5% marketing-fund contribution for all twenty-two (22) properties, from January 2013 through the present.
Category 23: Privilege Log
Applicable Requests: All First RFP Nos. where privilege was asserted.
Deficiency: Coastal Palms' written responses to the First RFP assert attorney-client privilege and work-product doctrine objections in connection with numerous requests. However, no privilege log of any kind has been produced.
Discussion: Under both the Joint Stipulation Regarding E-discovery Protocol (filed June 20, 2022, and agreed upon by Calderwood & Harkness LLP and Whitfield, Barrow & Crane LLP) and Rule 1.280(b)(6) of the Florida Rules of Civil Procedure, any party withholding documents on the basis of privilege or work-product protection must provide a privilege log that identifies each withheld document by date, author, recipient(s), general subject matter, and the specific basis for the privilege claim. The failure to provide a privilege log renders the privilege objections inadequate and potentially waived. See Surfside Const. Co. v. Manuel, 429 So. 2d 127 (Fla. 3d DCA 1983) (noting the requirement that privilege claims be supported with sufficient specificity to permit evaluation by the court and opposing counsel).
Demand: Verimark demands production of a complete privilege log identifying each document withheld on the basis of attorney-client privilege, work-product doctrine, or any other privilege, within fourteen (14) days.
V. Summary of Deficiencies
The following table provides a concise summary of all twenty-three (23) categories of deficiencies identified in this letter:
VI. Request for Supplemental Production
In light of the foregoing, Verimark respectfully but firmly demands that Coastal Palms supplement its production to cure all twenty-three (23) categories of deficiencies identified in this letter within fourteen (14) calendar days of the date hereof—that is, no later than September 13, 2022.
We request that Coastal Palms confirm in writing, no later than September 6, 2022, which of the twenty-three (23) categories it will supplement and provide a timeline for any rolling productions. To the extent that Coastal Palms contends that the volume or format of certain categories of documents requires additional time for collection and processing, we are willing to discuss reasonable accommodations for a phased or rolling supplemental production, provided that Coastal Palms commits in writing to producing all responsive documents within a defined and reasonable timeframe.
We note that Verimark's review of the approximately 84,000 documents produced on August 22, 2022 is ongoing, and additional deficiencies may be identified as that review progresses. Verimark reserves the right to raise any such additional deficiencies in a subsequent letter or, if necessary, in a motion to compel.
VII. Reservation of Rights
Verimark expressly reserves all rights to seek relief from the Court in the event that the deficiencies identified in this letter are not cured within the timeframe specified above. Such relief may include, without limitation:
•  A motion to compel production under Florida Rule of Civil Procedure 1.380;
•  Sanctions for failure to comply with discovery obligations;
•  An award of reasonable attorney's fees and costs incurred by Verimark in connection with this discovery dispute, including the fees and costs incurred in preparing this letter and any subsequent motion practice; and
•  Such other and further relief as the Court deems just and appropriate.
Verimark further reserves the right to raise the deficiencies identified in this letter at the next scheduled status conference or case-management conference before the Honorable Richard M. Calloway, and to request that the Court enter an order compelling production on an expedited basis if warranted.
We also wish to note that Coastal Palms' continued refusal to produce the financial records of Suncoast Room Management Inc. on the basis of the "separate entity" objection may necessitate a separate motion to compel specifically addressing that issue. Given the centrality of Suncoast's records to Verimark's claims, Verimark will not wait indefinitely for Coastal Palms to reconsider its position on this point, and any such motion will seek attorney's fees and costs attributable to the necessity of briefing this discrete issue.
VIII. Offer to Meet and Confer
Consistent with the requirements of the Florida Rules of Civil Procedure and the prerequisites for any motion to compel, Verimark is willing to meet and confer with Coastal Palms' counsel—whether by telephone, videoconference, or in person—to discuss the deficiencies identified in this letter and Coastal Palms' position with respect to each category before resorting to court intervention.
We propose scheduling a meet-and-confer call during the week of September 5, 2022, at a time mutually convenient for counsel. We are available Monday through Thursday of that week and can accommodate morning or afternoon scheduling. We respectfully request that you contact the undersigned counsel at your earliest convenience to arrange a date and time for this call.
We trust that a productive meet-and-confer discussion will allow the parties to resolve most, if not all, of the identified deficiencies without the need for motion practice. However, in the event that the parties are unable to reach agreement on one or more categories, Verimark will proceed to file a motion to compel promptly after the conclusion of the conferral process.
IX. Closing
Thank you for your prompt attention to this matter. Verimark takes its franchise-system obligations seriously, and it expects the same seriousness from its franchisees with respect to discovery obligations in this litigation. We are confident that Coastal Palms shares our interest in the efficient resolution of these discovery issues and that a complete and timely supplemental production will be forthcoming.
We look forward to your written response and to scheduling a productive meet-and-confer discussion during the week of September 5, 2022.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Yuki Nakamura, Esq. FL Bar No. 0119644
110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 761-8200
Email: ynakamura@calderwoodharkness.com
Counsel for Plaintiff Verimark Hospitality Group Inc.
cc: Priya Anand, Esq., Calderwood & Harkness LLP Nathan Whitfield III, Esq., Whitfield, Barrow & Crane LLP Renata Solis-Vega, SVP & General Counsel, Verimark Hospitality Group Inc.
Encl: None (standalone letter; supporting documentation referenced herein is not enclosed but is available upon request)
No. | Category | First RFP No(s). | Nature of Deficiency
1 | Suncoast — Complete Financial Records | 12–18 | Entirely absent; objected to on meritless "separate entity" grounds
2 | Suncoast — Management Agreements | 19 | Entirely absent
3 | Suncoast — Bank Statements | 15 | Entirely absent
4 | gulfcoastrooms.com Booking Data and Records | 22–25 | Entirely absent
5 | OTA Contracts and Agreements | 30–35 | Materially incomplete; no agreements post-dating 2016
6 | OTA Revenue Reconciliation Reports | 36 | Entirely absent
7 | Monthly GRR Reports | 1 | Incomplete; missing for 6 of 22 properties and multiple periods for remaining 16
8 | Internal Revenue Reports and Accounting Workpapers | 40–44 | Entirely absent
9 | PMS Data Exports | 50–54 | Entirely absent
10 | Corporate-Direct Booking Contracts | 60–63 | Entirely absent
11 | Walk-In Revenue Records | 65 | Entirely absent
12 | Tax Returns — Entity Level | 70 | Materially incomplete; produced for Coastal Palms 2019–2021 only; no property-level or Suncoast returns; no returns for 2013–2018
13 | Bank Statements — Property-Level Entities | 72 | Materially incomplete; produced for 8 of 22 entities, 2020–2021 only
14 | Communications — Brecker to Property Controllers/Managers | 80–85 | Materially incomplete; fewer than 200 documents produced for 22 properties over 9+ years
15 | Communications — Randall Brecker to Theresa Brecker | 86 | Materially incomplete; only 12 documents produced
16 | Communications — With Nolan Prescott | 87 | Materially incomplete; only 34 documents produced
17 | Ironclad National Bank Loan Documents and Financial Submissions | 90–93 | Entirely absent
18 | Audit Workpapers and External Accounting Records | 95 | Entirely absent
19 | Franchise Application and Renewal Documents | 100 | Materially incomplete; produced for 6 of 22 properties only
20 | Insurance Policies and Claims Records | 110 | Entirely absent
21 | Technology Fee Reconciliation Records | 115 | Entirely absent
22 | Marketing-Fund Contribution Calculations | 120 | Incomplete; remittance receipts produced but no underlying calculation workpapers
23 | Privilege Log | All Nos. where privilege asserted | Entirely absent; no privilege log produced despite assertion of privilege on multiple requests

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