1021-00006 · Client 1021 · Discovery

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IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA

CIVIL DIVISION

Case No.: 1021-00006

VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,

Plaintiff,

COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company; RANDALL BRECKER, individually; and SUNCOAST ROOM MANAGEMENT INC., a Florida corporation,

Defendants.

PLAINTIFF'S FIRST SET OF INTERROGATORIES TO DEFENDANT RANDALL BRECKER

Plaintiff Verimark Hospitality Group Inc. ("Verimark" or "VHG"), by and through its undersigned counsel, Calderwood & Harkness LLP, hereby propounds the following First Set of Interrogatories to Defendant Randall Brecker ("Brecker" or "You"), to be answered separately and fully, in writing, under oath, in accordance with Florida Rule of Civil Procedure 1.340, within thirty (30) days of service hereof. The following definitions, instructions, and interrogatories are set forth below.

I. DEFINITIONS

As used in these Interrogatories, the following terms shall have the meanings set forth below. These definitions are intended to be as broad and inclusive as permitted by the Florida Rules of Civil Procedure, and any ambiguity shall be construed in favor of producing a complete and responsive answer.

1. "You," "Your," or "Brecker" shall mean Randall Brecker, individually, and in his capacity as Managing Member of Coastal Palms Franchise Holdings LLC, Managing Member of Gulf Breeze Hospitality LLC, Managing Member of Savannah Lodging Partners LLC, and President of Suncoast Room Management Inc., and shall include all agents, employees, representatives, attorneys, and any other persons acting or purporting to act on his behalf.

2. "Coastal Palms" or "CPFH" shall mean Coastal Palms Franchise Holdings LLC, a Florida limited liability company, with its principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, and shall include all officers, managers, members, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.

3. "Suncoast" shall mean Suncoast Room Management Inc., a Florida corporation, of which You are President, and shall include all officers, directors, shareholders, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.

4. "Gulf Breeze" shall mean Gulf Breeze Hospitality LLC, a Florida limited liability company, which owns and/or operates six (6) Verimark Suites properties in Southwest Florida, and shall include all managers, members, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.

5. "Savannah Lodging" shall mean Savannah Lodging Partners LLC, a Georgia limited liability company, which owns and/or operates four (4) Verimark Suites properties in coastal Georgia, and shall include all managers, members, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.

6. "Verimark" or "VHG" shall mean Verimark Hospitality Group Inc., a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol "VHMK," with its principal office and headquarters at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301, and shall include all officers, directors, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.

7. "Franchise License Agreement" or "FLA" shall mean any and all franchise license agreements executed between Verimark (or any predecessor or affiliate thereof) and any entity owned, controlled, managed, or operated by You, including but not limited to the twenty-two (22) individual FLAs executed between June 15, 2007 and September 3, 2019, together with all amendments, addenda, riders, exhibits, schedules, side letters, and modifications thereto.

8. "Gross Room Revenue" or "GRR" shall have the meaning set forth in Section 4.1 of the FLAs, which provides: "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."

9. "Hotel" or "Hotels" or "Properties" shall mean the twenty-two (22) franchised hotel properties — consisting of eighteen (18) "Verimark Suites" branded hotels and four (4) "Verimark Select" branded hotels — located across the State of Florida and the State of Georgia, each operated under the Coastal Palms umbrella of entities, comprising approximately 3,740 total guest rooms.

10. "Relevant Period" shall mean the period beginning January 1, 2007 and continuing through the present date, inclusive.

11. "Document" or "Documents" shall have the broadest meaning permitted under Florida Rule of Civil Procedure 1.280 and shall include, without limitation, all writings, drawings, graphs, charts, photographs, audio recordings, video recordings, electronically stored information ("ESI"), and other data or data compilations stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form. This term shall further be interpreted in accordance with the Joint E-discovery Protocol filed in this action on June 20, 2022.

12. "Person" shall mean any natural person, corporation, limited liability company, partnership, joint venture, association, trust, estate, governmental body or entity, or any other legal or commercial entity, whether or not a party to this action.

13. "Communication" shall mean any oral, written, or electronic exchange of information between two or more persons, including but not limited to letters, memoranda, correspondence, emails, text messages (including messages sent via SMS, Westmark Software, Meridian Services Inc., Harborline Technologies, or any similar messaging platform), facsimile transmissions, telephone calls, voicemail messages, videoconference meetings, in-person conversations, and any other form or method of transmitting or exchanging information.

14. "Identify" (as to a Person) shall mean to state the following information to the extent known or reasonably available: (a) the Person's full legal name; (b) the Person's title or position at the relevant time; (c) the Person's employer or business affiliation at the relevant time; (d) the Person's last known business or residential address; and (e) the Person's telephone number. If any of the foregoing information is not known, so state and provide whatever identifying information is available.

15. "Identify" (as to a Document) shall mean to state the following information to the extent known or reasonably available: (a) the date of the Document; (b) the author(s) or creator(s) of the Document; (c) the recipient(s) or addressee(s) of the Document; (d) the type or nature of the Document (e.g., letter, memorandum, email, spreadsheet, report); (e) the subject matter of the Document; and (f) the present location or custodian of the Document. If any of the foregoing information is not known, so state and provide whatever identifying information is available.

16. "Describe" shall mean to provide a detailed narrative explanation, with sufficient particularity and specificity to fully and completely answer the interrogatory without reference to extrinsic documents, unless production of such documents is also requested.

II. INSTRUCTIONS

The following instructions apply to each and every Interrogatory contained herein:

A. Each Interrogatory shall be answered separately and fully in writing and under oath, in conformity with Florida Rule of Civil Procedure 1.340. Your responses must set forth in full the answer to each Interrogatory, and each answer shall be preceded by the Interrogatory to which it is responsive.

B. If You object to any part of any Interrogatory, state the specific grounds for the objection with particularity. If You object to only a portion of an Interrogatory, You must answer the remainder of the Interrogatory to the fullest extent that is not objectionable. A general or boilerplate objection, without more, shall not be deemed a valid objection under applicable law.

C. If You contend that any Interrogatory, or any subpart thereof, is ambiguous, You shall set forth the manner in which the Interrogatory is ambiguous, state the interpretation You have adopted, and answer the Interrogatory as so interpreted.

D. If You lack sufficient information to fully and completely answer any Interrogatory at the time of Your response, so state and describe in detail all efforts You have made to obtain the information necessary to provide a full response. In addition, provide whatever partial information is available to You and identify any persons or Documents that may contain the information sought.

E. These Interrogatories are continuing in nature in accordance with Florida Rule of Civil Procedure 1.280(e). If, after serving Your responses, You obtain additional or different information responsive to any Interrogatory, You are required to supplement Your answers promptly and without further request from Verimark.

F. Where an Interrogatory asks You to "identify" a Person, provide all information specified in Definition No. 14 above. Where an Interrogatory asks You to "identify" a Document, provide all information specified in Definition No. 15 above.

G. If any information responsive to these Interrogatories is subject to a claim of privilege or work-product protection, You shall identify each such item with sufficient specificity to permit assessment of the claim of privilege, including: (a) the nature of the privilege claimed; (b) the date of the Communication or Document; (c) the identity of each author, sender, recipient, and any person copied; (d) the general subject matter of the Communication or Document; and (e) the factual basis for the privilege claim. Such identification shall be provided in a privilege log in accordance with Florida Rule of Civil Procedure 1.280(b)(6) and the Court's Order on E-discovery Protocol entered June 22, 2022.

H. If You contend that any Interrogatory requests information that is equally available to Verimark from its own records or from some other source, You are not relieved of Your obligation to respond. You may, however, specify the records from which the answer may be derived or ascertained, provided that (i) the burden of deriving the answer is substantially the same for Verimark as for You, and (ii) You specify the records with reasonable particularity, in accordance with Florida Rule of Civil Procedure 1.340(c).

I. If any responsive information is contained in business records maintained by any entity defined herein — including Coastal Palms, Suncoast, Gulf Breeze, Savannah Lodging, or any property-level entity — that is within Your possession, custody, or control (directly or by virtue of Your ownership, management, or officer position in such entity), You are obligated to obtain and produce such information in Your answers.

III. INTERROGATORIES

INTERROGATORY NO. 1

State Your full legal name, date of birth, current residential address, and all positions, titles, or roles You have held at any time during the Relevant Period with Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, Suncoast Room Management Inc., and any other entity involved in the ownership, operation, or management of the Hotels, including the dates during which You held each position and a description of Your duties and responsibilities in each role. In Your response, also state: (a) Your ownership interest (including percentage of equity, membership units, shares, or other form of ownership) in each such entity; (b) a description of the organizational structure showing the relationship among the entities; (c) the identity of all other persons holding ownership interests in each such entity and their respective percentage interests; (d) Your role in the day-to-day operations of each such entity, including whether You had authority to make financial, operational, or strategic decisions on behalf of the entity; and (e) the nature and extent of Your involvement in the growth of the Coastal Palms portfolio from its inception to its current 22-property portfolio comprising approximately 3,740 rooms.

INTERROGATORY NO. 2

Describe in detail the circumstances surrounding the formation and incorporation of Suncoast Room Management Inc., including:

(a) the date of incorporation;

(b) the state of incorporation;

(d) the stated business purpose of Suncoast at the time of its formation, including as reflected in any articles of incorporation, bylaws, operating agreements, or organizational documents;

(e) the actual business activities undertaken by Suncoast from its formation through the present date, described with specificity and broken down by year or by period of activity to the extent practicable;

(f) all ownership interests in Suncoast, identifying each owner by name, their percentage or proportionate interest, the consideration paid for such interest, and any changes in ownership from formation through the present;

(g) the relationship between Suncoast and each of the Hotels, including whether Suncoast had any written management agreements, revenue-sharing arrangements, service contracts, or other agreements with any Hotel or any entity that owns, operates, or manages any Hotel;

(h) the total revenue collected by Suncoast from any source in each year from the date of its formation through 2021; and

(i) the total amount of any "management fees," service fees, administrative charges, or other fees or compensation retained by Suncoast in each year from the date of its formation through 2021, including a description of the methodology used to calculate each such fee.

INTERROGATORY NO. 3

Describe in detail the creation, ownership, operation, and management of the website known as "gulfcoastrooms.com," including:

(a) the date the website was first created, registered, or launched, and the identity of the person or entity that registered the domain name;

(b) the person(s) who directed or authorized its creation, and the reasons for its creation;

(c) the entity or person that currently owns or controls the domain name "gulfcoastrooms.com," and any prior owners or controllers of the domain;

(d) the stated and actual business purpose of the website, including whether the website was designed, in whole or in part, to serve as a booking channel for guest rooms at any of the Hotels;

(e) the specific Hotels for which bookings could be made through the website at any time during the Relevant Period, and the dates during which each such Hotel was bookable through the website;

(f) a detailed description of how revenues from bookings made through the website were collected, processed, deposited, and allocated, including the identity of any bank accounts into which such revenues were deposited, the entity or entities associated with each such bank account, and the flow of funds from initial collection through ultimate allocation to property-level entities;

(g) whether and how revenues from bookings made through the website were reported as Gross Room Revenue to Verimark, and if such revenues were not reported as GRR, the reasons for their exclusion;

(h) the total revenue generated through the website in each year from the date of its launch through 2021;

(i) whether the website bore any Verimark branding, trademarks, or service marks, or was in any way associated with or linked to Verimark's own consumer-facing website or central reservation system; and

(j) whether any employees or agents of Verimark were ever informed of the existence of the gulfcoastrooms.com website, and if so, identify each such person and describe the Communication.

INTERROGATORY NO. 4

Identify and describe all booking channels through which guest rooms at any of the Hotels were sold, rented, or made available for occupancy during the Relevant Period that were not processed through Verimark's central reservation system ("CRS"), including but not limited to:

(a) walk-in reservations made at the front desk of any Hotel;

(b) corporate-direct contracts, negotiated rate agreements, or group booking agreements entered into between any Hotel (or any entity affiliated with any Hotel) and any corporate, governmental, or institutional customer, where the booking was not routed through Verimark's CRS;

(c) bookings made through gulfcoastrooms.com or any other website owned, operated, or controlled by You, Suncoast, Coastal Palms, or any affiliated entity;

(d) bookings made through third-party online travel agencies ("OTAs"), including but not limited to Aldermere Technologies, Bramwell Holdings, Drayton Software, Northpoint Corporation, Penmark Industries, Drayton Corporation, and Brightmoor Industries, where the revenue was collected or processed outside of Verimark's CRS;

(e) bookings made through any mobile application, telephone booking line, or call center operated by or on behalf of any entity other than Verimark; and

(f) any other direct or indirect booking channel, however denominated.

For each such booking channel identified, state:

(i) the approximate date it was first used for bookings at any Hotel;

(ii) the specific Hotels that utilized the channel, and the dates during which each Hotel utilized the channel;

(iii) the entity that collected the revenue generated through the channel, including the identity of the bank account(s) into which such revenue was deposited;

(iv) the approximate annual revenue generated through the channel for each calendar year from 2013 through 2021, broken down by Hotel to the extent practicable;

(v) whether and how such revenue was included in the GRR reports submitted to Verimark, and if not included, the reasons for its exclusion; and

(vi) the total aggregate revenue generated through all non-CRS booking channels for each calendar year from 2013 through 2021, as compared with the total GRR reported to Verimark for the same periods.

INTERROGATORY NO. 5

Describe Your understanding of the term "Gross Room Revenue" as defined in Section 4.1 of each Franchise License Agreement, including:

(a) when You first became aware of the definition of GRR set forth in Section 4.1 of the FLAs, including the specific language providing that GRR includes "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";

(b) whether You received any advice, guidance, interpretation, or opinion from any attorney, accountant, auditor, consultant, or other professional regarding the scope, meaning, or application of the GRR definition in Section 4.1, either before or after the execution of any FLA;

(c) if so, identify each such person, describe the advice, guidance, interpretation, or opinion received, state the date(s) on which it was received, and state whether it was provided orally or in writing;

(d) state whether You understood at any time during the Relevant Period that revenues collected by Suncoast Room Management Inc. — or through gulfcoastrooms.com, walk-in reservations, corporate-direct contracts, or any other non-CRS booking channel — for the rental of guest rooms at any of the Hotels fell within the FLA's definition of Gross Room Revenue and were required to be reported to Verimark as GRR; and

(e) if You contend that any category of revenues collected by Suncoast or through any non-CRS booking channel was not required to be included in GRR, state the basis for that contention in detail, including any contractual provision, legal authority, industry custom, or professional advice on which You rely.

INTERROGATORY NO. 6

State whether You at any time during the Relevant Period directed, instructed, authorized, approved, encouraged, or otherwise communicated to any person — including but not limited to property managers, general managers, regional managers, controllers, accountants, bookkeepers, revenue managers, front-desk supervisors, or any other employees or agents of Coastal Palms, Suncoast, Gulf Breeze, Savannah Lodging, or any Hotel — to exclude revenues collected by Suncoast Room Management Inc. (including revenues collected through gulfcoastrooms.com, walk-in reservations processed through Suncoast, or corporate-direct contracts administered by Suncoast) from the Gross Room Revenue figures reported to Verimark. If so, for each such instance:

(a) identify the person(s) to whom the direction, instruction, authorization, approval, or encouragement was given;

(b) state the date(s) on which the direction was given;

(c) describe the substance of the direction in detail, including the specific revenues or categories of revenue to be excluded and the rationale, if any, that was communicated;

(d) state the method of communication by which the direction was given (e.g., oral instruction, written memorandum, email, text message, telephone call, in-person conversation, group meeting, or other method);

(e) identify any Documents reflecting, referring to, or relating to such direction, including but not limited to emails, memoranda, meeting minutes, training materials, accounting directives, policy manuals, or standard operating procedures;

(f) state whether any person questioned, objected to, or expressed concern about the direction, and if so, identify each such person and describe the substance of the questioning, objection, or concern and Your response thereto; and

(g) state whether the direction was a one-time instruction or a standing or recurring directive, and if recurring, describe its frequency and duration.

INTERROGATORY NO. 7

Describe in detail the "management fee" or any other fee, charge, or compensation retained by Suncoast Room Management Inc. in connection with its collection, processing, or management of revenues from guest-room bookings at any of the Hotels, including:

(a) the percentage, rate, or amount of the management fee as applied during each year from the date of Suncoast's formation through 2021;

(b) when the management fee was first imposed, and the circumstances of that decision, including the identity of all persons who participated in or approved the decision;

(c) the methodology by which the management fee was calculated, including the base amount or revenue pool to which it was applied and any adjustments, caps, or variations by property, time period, or booking channel;

(d) the total dollar amount of management fees retained by Suncoast for each calendar year from 2013 through 2021, broken down by Hotel to the extent practicable;

(e) how the management fee was accounted for in the books and records of Suncoast, including the general ledger accounts or line items used to record the fee, and whether it was treated as revenue, an intercompany transfer, a cost allocation, or some other classification;

(f) how the management fee was accounted for in the books and records of each property-level LLC and in the consolidated books and records of Coastal Palms, including whether it appeared as an operating expense, a management fee payable, an intercompany receivable, or some other classification;

(g) whether the management fee or any portion of the gross revenue from which it was deducted was ever included in the GRR reports submitted to Verimark, and if not, the reasons for its exclusion;

(h) whether any written agreement, contract, or arrangement existed between Suncoast and any Hotel or property-level entity governing the management fee, and if so, identify each such agreement; and

(i) identify all persons who participated in the decision to impose the management fee, the determination of its rate or amount, and the methodology for calculating it, including any persons who reviewed, approved, or ratified any of the foregoing.

INTERROGATORY NO. 8

Describe in detail how revenues received from third-party online travel agencies ("OTAs") for guest-room bookings at the Hotels were reported to Verimark as Gross Room Revenue during each calendar year from 2013 through 2021, including:

(a) whether OTA revenues were reported to Verimark on a gross basis (i.e., the full amount paid by the guest to the OTA for the room) or on a net basis (i.e., the amount remitted by the OTA to the Hotel after deduction of the OTA's commission or markup), and if the methodology changed during the Relevant Period, describe the methodology used in each period;

(b) if OTA revenues were reported on a net basis, describe in detail all deductions, offsets, commissions, adjustments, or other amounts subtracted from the gross revenue figure before it was reported to Verimark as GRR, and state the dollar amount of each such deduction for each calendar year from 2013 through 2021;

(c) state Your understanding of whether Section 4.1 of the FLAs — which 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" — permitted net-rate reporting of OTA revenues, and describe the basis for that understanding;

(d) identify any person — including any attorney, accountant, auditor, revenue manager, controller, or consultant — who advised, instructed, or directed You or any Coastal Palms entity regarding the proper method for reporting OTA revenues as GRR, and describe the advice or instruction provided;

(e) describe the "commissions receivable" classification referenced in Coastal Palms' internal accounting records, including: (i) the date this classification was first adopted; (ii) the person(s) who created or authorized the classification; (iii) the specific types of revenue or revenue-related entries that were recorded under this classification; (iv) how entries in this classification were used in the preparation of GRR reports submitted to Verimark; and (v) the aggregate dollar amount of entries recorded as "commissions receivable" for each calendar year from 2013 through 2021; and

(f) state the total OTA-generated revenue for each calendar year from 2013 through 2021, on both a gross and net basis, and the difference between the two figures for each year.

INTERROGATORY NO. 9

Describe Your knowledge of and compliance with the following provisions of the Franchise License Agreements, setting forth for each provision below: (i) when You first read or became aware of the provision; (ii) Your understanding of the provision; (iii) what steps, if any, You took to ensure compliance with the provision; and (iv) whether You believe that You and the Coastal Palms entities have at all times been in full compliance with the provision, and if so, the basis for that belief:

(a) Section 4.1 — Royalty Payment Obligations: requiring payment to Verimark of a continuing royalty equal to five percent (5%) of Gross Room Revenue, as defined therein, payable monthly within fifteen (15) days following the end of each calendar month;

(b) Section 4.2 — Marketing Fund Contributions: requiring payment to Verimark of a marketing-fund contribution equal to two and one-half percent (2.5%) of Gross Room Revenue, payable monthly within fifteen (15) days following the end of each calendar month;

(c) Section 4.3 — Technology Fee: requiring payment to Verimark of a technology fee of Twelve Dollars and Fifty Cents ($12.50) per guest room per month for each room authorized and available for rental at the Hotel, payable monthly within fifteen (15) days following the end of each calendar month;

(d) Section 4.6 — Late Payment Interest: providing that any amounts owed by franchisee to Verimark that are not paid when due shall bear interest at a rate of one and one-half percent (1.5%) per month, compounded monthly, from the date due until paid in full;

(e) Section 8.2 — Audit Rights: providing that Verimark shall have the right, at any time during normal business hours and upon reasonable notice, to inspect and audit the books, records, and accounts of the franchisee relating to the Hotel, and further providing that if any audit reveals an underpayment of two percent (2%) or more of any amount due to Verimark for any period audited, the franchisee shall reimburse Verimark for all costs and expenses of the audit, including fees of independent auditors;

(f) Section 14.1 — Material Breach and Cure Period: providing that upon the occurrence of a material breach of the FLA, Verimark shall provide written notice to franchisee specifying the breach and granting a cure period of thirty (30) days from the date of notice within which franchisee must cure the breach to Verimark's reasonable satisfaction; and

(g) Section 14.2(c) — Incurable Breach: providing that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure" and that upon the occurrence of such breach, Verimark may terminate the FLA immediately upon written notice, without any obligation to provide a cure period.

INTERROGATORY NO. 10

State whether at any time during the Relevant Period You added, authorized the addition of, or had knowledge of the addition of guest rooms to any of the Hotels without providing notice to Verimark as required under the terms of the applicable FLA. If so, for each such instance:

(a) identify the Hotel at which rooms were added, by name and location;

(b) state the number of rooms added;

(c) state the date(s) on which the rooms were added, became available for occupancy, or were first made available for rental to guests;

(d) describe the nature of the room addition (e.g., new construction, conversion of non-guest-room space, renovation of previously decommissioned rooms, acquisition of adjacent property);

(e) state whether the additional rooms were reported to Verimark for purposes of calculating the technology fee required under Section 4.3 of the FLA (i.e., $12.50 per guest room per month), and if not, explain why;

(f) state the total number of months during which the unreported rooms were in operation without the corresponding technology fee being paid to Verimark;

(g) state the total dollar amount of technology fees that were not paid to Verimark as a result of the failure to report the additional rooms;

(h) explain why notice of the additional rooms was not provided to Verimark;

(i) identify all persons involved in the decision to add rooms, the decision not to notify Verimark, or any Communication regarding the foregoing; and

(j) identify any Documents reflecting the addition of rooms, including but not limited to construction contracts, building permits, certificates of occupancy, property management system records, room-inventory reports, and internal correspondence.

INTERROGATORY NO. 11

Describe all Communications between You and Nolan Prescott and/or Theresa Brecker during the Relevant Period regarding any of the following subjects:

(a) the method, methodology, or procedures used to report Gross Room Revenue to Verimark;

(b) the formation, role, operations, revenues, or management fees of Suncoast Room Management Inc.;

(c) the decision to exclude revenues collected by Suncoast or through any non-CRS booking channel from GRR reports submitted to Verimark;

(d) the creation, operation, or revenues of the gulfcoastrooms.com website;

(e) the methodology for reporting OTA revenues, including the "commissions receivable" classification and the netting of OTA commissions against GRR;

(f) Verimark's audit rights under Section 8.2 of the FLAs, including any discussion of the possibility or consequences of a Verimark audit; and

(g) any actual or contemplated dispute, claim, or litigation between Verimark and Coastal Palms, You, or any affiliated entity.

For each such Communication, state:

(i) the date of the Communication;

(ii) all participants in the Communication;

(iii) the method or medium of the Communication (e.g., in-person conversation, telephone call, email, text message, written memorandum, meeting);

(iv) the substance of the Communication, including the positions or views expressed by each participant;

(v) identify any Documents reflecting, memorializing, or referring to the Communication; and

(vi) state whether any other person was present during, participated in, or was copied on the Communication, and if so, identify each such person.

INTERROGATORY NO. 12

Describe all Communications between You and Janet Kerrigan at any time during her employment as Regional Controller for Coastal Palms and at any time after her termination of employment in or about October 2021, regarding any of the following subjects:

(a) the method, methodology, or procedures used to calculate and report Gross Room Revenue to Verimark;

(b) the exclusion of revenues collected by Suncoast Room Management Inc. from GRR reports submitted to Verimark;

(d) any concerns, questions, objections, or complaints raised by Ms. Kerrigan about the accuracy, completeness, or integrity of GRR reports submitted to Verimark, or about any other aspect of financial reporting to Verimark;

(e) the circumstances of Ms. Kerrigan's termination of employment, including the reason(s) for her termination, the person(s) who made the decision to terminate her employment, and any Communications with Ms. Kerrigan regarding the termination;

(f) any Communications with Ms. Kerrigan after her termination, including any Communications regarding potential legal claims, settlements, non-disclosure obligations, or cooperation with any investigation; and

(g) any knowledge You have regarding Ms. Kerrigan's Communication(s) with Verimark or Verimark's compliance department, including but not limited to any contact with Verimark's compliance hotline on or about November 8, 2021.

For each such Communication, state:

(i) the date of the Communication;

(ii) all participants in the Communication;

(iii) the method or medium of the Communication;

(iv) the substance of the Communication in detail;

(v) whether any other persons were present during, participated in, or were copied on the Communication, and if so, identify each such person; and

(vi) identify any Documents reflecting, memorializing, or referring to the Communication.

INTERROGATORY NO. 13

Describe in detail all actions You took or directed to be taken in response to Verimark's Notice of Material Breach dated February 4, 2022, including:

(a) the date on which You first received or became aware of the Notice, and the manner in which it came to Your attention;

(b) all persons with whom You discussed the Notice, including the date, substance, and method of each discussion;

(c) all steps You took, considered, proposed, or directed to cure the alleged material breach within the thirty (30) day cure period specified in the Notice, which expired on or about March 6, 2022;

(d) the reason(s) why no cure was tendered within the cure period, including whether You or any advisor concluded that no cure was required, that no breach had occurred, or that the alleged breach was not subject to cure;

(e) Your role in the decision to retain the law firm of Whitfield, Barrow & Crane LLP to respond to the Notice on behalf of Coastal Palms, including the date of engagement, the scope of the engagement, and the identity of the attorneys with whom You communicated;

(f) all Communications between You and Nathan Whitfield III, Esq., Gabriela Montes, Esq., Ethan Doyle, Esq., or any other attorney at Whitfield, Barrow & Crane LLP regarding the Notice and Coastal Palms' response thereto, to the extent such Communications are not protected by attorney-client privilege (and to the extent any such Communications are withheld on the basis of privilege, provide a privilege log entry in accordance with Section II.G above);

(g) Your role in the preparation, review, and approval of Coastal Palms' response letter dated February 28, 2022, addressed to Verimark and signed by Nathan Whitfield III, which denied any material breach of the FLAs and asserted that Coastal Palms' reporting methodology reflected a "reasonable interpretation" of the GRR definition;

(h) whether You authorized, reviewed, or approved the specific representations and assertions contained in the February 28, 2022 response letter before it was sent to Verimark; and

(i) all Communications You had with any person — other than counsel — during the period between February 4, 2022 and March 6, 2022 regarding the merits of Verimark's breach allegations, any potential cure, or any potential defense.

INTERROGATORY NO. 14

Identify and describe all financial statements, revenue reports, operating statements, profit-and-loss statements, balance sheets, debt-service-coverage-ratio calculations, borrowing-base certificates, and other financial information that You provided or caused to be provided to Ironclad National Bank (or any predecessor, successor, or affiliate thereof) in connection with the approximately Ninety-Four Million Dollars ($94,000,000) in first-lien mortgage loans held by Ironclad on eighteen (18) of the twenty-two (22) Hotels during the Relevant Period. For each such document or submission:

(a) state the date of submission or delivery to Ironclad;

(b) identify the person(s) who prepared or compiled the document or submission;

(c) describe the revenue figures reported therein, including total revenue, room revenue, and any breakdown by revenue source or booking channel;

(d) state whether the revenue figures included revenues collected by Suncoast Room Management Inc., revenues generated through gulfcoastrooms.com, or revenues generated through any other non-CRS booking channel;

(e) explain any discrepancy between the revenue figures reported to Ironclad National Bank and the GRR figures reported to Verimark for the same property or properties during the same reporting period;

(f) identify the Ironclad National Bank officer(s) or representative(s) to whom the financial information was submitted, including but not limited to Devon Schultz, Senior Vice President, Commercial Real Estate Lending;

(g) state whether any of the financial information submitted to Ironclad was reviewed, certified, or audited by any independent auditor or accounting firm, and if so, identify each such auditor or firm; and

(h) describe any representations, warranties, or certifications You made or caused to be made to Ironclad National Bank regarding the accuracy or completeness of the financial information submitted, and state whether such representations, warranties, or certifications were made in writing or orally.

INTERROGATORY NO. 15

With respect to Coastal Palms Franchise Holdings LLC's Counterclaim filed on April 18, 2022 in this action, which alleges damages in the approximate amount of Twelve Million Dollars ($12,000,000) arising from alleged brand-standard violations and over-billing by Verimark:

(a) describe in detail all facts known to You that support each and every allegation in the Counterclaim, including but not limited to the alleged brand-standard violations, the alleged deferred maintenance at the corporate level, the alleged inadequate reservation-system uptime, and the alleged over-billing, identifying the specific instances, dates, properties, and amounts associated with each allegation;

(b) identify all persons with knowledge of the facts supporting each allegation in the Counterclaim, stating the subject matter of each person's knowledge;

(d) state whether You personally observed or experienced any of the alleged brand-standard violations or over-billing at any of the Hotels, and if so, describe each instance in detail, including the date, the Hotel involved, the nature of the alleged violation or over-billing, and any action You took in response;

(e) describe in detail how the Twelve Million Dollar ($12,000,000) damages figure was calculated, including the methodology, assumptions, data sources, and time period used in the calculation;

(f) identify any person — including any accountant, consultant, appraiser, expert witness, or other professional — who performed or assisted in the calculation of the $12,000,000 damages figure;

(g) state whether any formal complaint, notice of deficiency, demand for cure, or other written communication was sent by You or any Coastal Palms entity to Verimark regarding any of the alleged brand-standard violations or over-billing prior to the filing of the Counterclaim, and if so, identify each such communication; and

(h) describe any efforts You or any Coastal Palms entity undertook to mitigate the damages allegedly caused by the brand-standard violations or over-billing described in the Counterclaim.

IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA
CIVIL DIVISION
Case No.: 1021-00006
VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,
Plaintiff,
v.
COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company; RANDALL BRECKER, individually; and SUNCOAST ROOM MANAGEMENT INC., a Florida corporation,
Defendants.
_
PLAINTIFF'S FIRST SET OF INTERROGATORIES TO DEFENDANT RANDALL BRECKER
Plaintiff Verimark Hospitality Group Inc. ("Verimark" or "VHG"), by and through its undersigned counsel, Calderwood & Harkness LLP, hereby propounds the following First Set of Interrogatories to Defendant Randall Brecker ("Brecker" or "You"), to be answered separately and fully, in writing, under oath, in accordance with Florida Rule of Civil Procedure 1.340, within thirty (30) days of service hereof. The following definitions, instructions, and interrogatories are set forth below.
I. DEFINITIONS
As used in these Interrogatories, the following terms shall have the meanings set forth below. These definitions are intended to be as broad and inclusive as permitted by the Florida Rules of Civil Procedure, and any ambiguity shall be construed in favor of producing a complete and responsive answer.
1. "You," "Your," or "Brecker" shall mean Randall Brecker, individually, and in his capacity as Managing Member of Coastal Palms Franchise Holdings LLC, Managing Member of Gulf Breeze Hospitality LLC, Managing Member of Savannah Lodging Partners LLC, and President of Suncoast Room Management Inc., and shall include all agents, employees, representatives, attorneys, and any other persons acting or purporting to act on his behalf.
2. "Coastal Palms" or "CPFH" shall mean Coastal Palms Franchise Holdings LLC, a Florida limited liability company, with its principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, and shall include all officers, managers, members, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.
3. "Suncoast" shall mean Suncoast Room Management Inc., a Florida corporation, of which You are President, and shall include all officers, directors, shareholders, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.
4. "Gulf Breeze" shall mean Gulf Breeze Hospitality LLC, a Florida limited liability company, which owns and/or operates six (6) Verimark Suites properties in Southwest Florida, and shall include all managers, members, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.
5. "Savannah Lodging" shall mean Savannah Lodging Partners LLC, a Georgia limited liability company, which owns and/or operates four (4) Verimark Suites properties in coastal Georgia, and shall include all managers, members, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.
6. "Verimark" or "VHG" shall mean Verimark Hospitality Group Inc., a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol "VHMK," with its principal office and headquarters at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301, and shall include all officers, directors, employees, agents, subsidiaries, affiliates, predecessors, and successors thereof.
7. "Franchise License Agreement" or "FLA" shall mean any and all franchise license agreements executed between Verimark (or any predecessor or affiliate thereof) and any entity owned, controlled, managed, or operated by You, including but not limited to the twenty-two (22) individual FLAs executed between June 15, 2007 and September 3, 2019, together with all amendments, addenda, riders, exhibits, schedules, side letters, and modifications thereto.
8. "Gross Room Revenue" or "GRR" shall have the meaning set forth in Section 4.1 of the FLAs, which provides: "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."
9. "Hotel" or "Hotels" or "Properties" shall mean the twenty-two (22) franchised hotel properties — consisting of eighteen (18) "Verimark Suites" branded hotels and four (4) "Verimark Select" branded hotels — located across the State of Florida and the State of Georgia, each operated under the Coastal Palms umbrella of entities, comprising approximately 3,740 total guest rooms.
10. "Relevant Period" shall mean the period beginning January 1, 2007 and continuing through the present date, inclusive.
11. "Document" or "Documents" shall have the broadest meaning permitted under Florida Rule of Civil Procedure 1.280 and shall include, without limitation, all writings, drawings, graphs, charts, photographs, audio recordings, video recordings, electronically stored information ("ESI"), and other data or data compilations stored in any medium from which information can be obtained either directly or, if necessary, after translation by the responding party into a reasonably usable form. This term shall further be interpreted in accordance with the Joint E-discovery Protocol filed in this action on June 20, 2022.
12. "Person" shall mean any natural person, corporation, limited liability company, partnership, joint venture, association, trust, estate, governmental body or entity, or any other legal or commercial entity, whether or not a party to this action.
13. "Communication" shall mean any oral, written, or electronic exchange of information between two or more persons, including but not limited to letters, memoranda, correspondence, emails, text messages (including messages sent via SMS, Westmark Software, Meridian Services Inc., Harborline Technologies, or any similar messaging platform), facsimile transmissions, telephone calls, voicemail messages, videoconference meetings, in-person conversations, and any other form or method of transmitting or exchanging information.
14. "Identify" (as to a Person) shall mean to state the following information to the extent known or reasonably available: (a) the Person's full legal name; (b) the Person's title or position at the relevant time; (c) the Person's employer or business affiliation at the relevant time; (d) the Person's last known business or residential address; and (e) the Person's telephone number. If any of the foregoing information is not known, so state and provide whatever identifying information is available.
15. "Identify" (as to a Document) shall mean to state the following information to the extent known or reasonably available: (a) the date of the Document; (b) the author(s) or creator(s) of the Document; (c) the recipient(s) or addressee(s) of the Document; (d) the type or nature of the Document (e.g., letter, memorandum, email, spreadsheet, report); (e) the subject matter of the Document; and (f) the present location or custodian of the Document. If any of the foregoing information is not known, so state and provide whatever identifying information is available.
16. "Describe" shall mean to provide a detailed narrative explanation, with sufficient particularity and specificity to fully and completely answer the interrogatory without reference to extrinsic documents, unless production of such documents is also requested.
II. INSTRUCTIONS
The following instructions apply to each and every Interrogatory contained herein:
A. Each Interrogatory shall be answered separately and fully in writing and under oath, in conformity with Florida Rule of Civil Procedure 1.340. Your responses must set forth in full the answer to each Interrogatory, and each answer shall be preceded by the Interrogatory to which it is responsive.
B. If You object to any part of any Interrogatory, state the specific grounds for the objection with particularity. If You object to only a portion of an Interrogatory, You must answer the remainder of the Interrogatory to the fullest extent that is not objectionable. A general or boilerplate objection, without more, shall not be deemed a valid objection under applicable law.
C. If You contend that any Interrogatory, or any subpart thereof, is ambiguous, You shall set forth the manner in which the Interrogatory is ambiguous, state the interpretation You have adopted, and answer the Interrogatory as so interpreted.
D. If You lack sufficient information to fully and completely answer any Interrogatory at the time of Your response, so state and describe in detail all efforts You have made to obtain the information necessary to provide a full response. In addition, provide whatever partial information is available to You and identify any persons or Documents that may contain the information sought.
E. These Interrogatories are continuing in nature in accordance with Florida Rule of Civil Procedure 1.280(e). If, after serving Your responses, You obtain additional or different information responsive to any Interrogatory, You are required to supplement Your answers promptly and without further request from Verimark.
F. Where an Interrogatory asks You to "identify" a Person, provide all information specified in Definition No. 14 above. Where an Interrogatory asks You to "identify" a Document, provide all information specified in Definition No. 15 above.
G. If any information responsive to these Interrogatories is subject to a claim of privilege or work-product protection, You shall identify each such item with sufficient specificity to permit assessment of the claim of privilege, including: (a) the nature of the privilege claimed; (b) the date of the Communication or Document; (c) the identity of each author, sender, recipient, and any person copied; (d) the general subject matter of the Communication or Document; and (e) the factual basis for the privilege claim. Such identification shall be provided in a privilege log in accordance with Florida Rule of Civil Procedure 1.280(b)(6) and the Court's Order on E-discovery Protocol entered June 22, 2022.
H. If You contend that any Interrogatory requests information that is equally available to Verimark from its own records or from some other source, You are not relieved of Your obligation to respond. You may, however, specify the records from which the answer may be derived or ascertained, provided that (i) the burden of deriving the answer is substantially the same for Verimark as for You, and (ii) You specify the records with reasonable particularity, in accordance with Florida Rule of Civil Procedure 1.340(c).
I. If any responsive information is contained in business records maintained by any entity defined herein — including Coastal Palms, Suncoast, Gulf Breeze, Savannah Lodging, or any property-level entity — that is within Your possession, custody, or control (directly or by virtue of Your ownership, management, or officer position in such entity), You are obligated to obtain and produce such information in Your answers.
III. INTERROGATORIES
INTERROGATORY NO. 1
State Your full legal name, date of birth, current residential address, and all positions, titles, or roles You have held at any time during the Relevant Period with Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, Suncoast Room Management Inc., and any other entity involved in the ownership, operation, or management of the Hotels, including the dates during which You held each position and a description of Your duties and responsibilities in each role. In Your response, also state: (a) Your ownership interest (including percentage of equity, membership units, shares, or other form of ownership) in each such entity; (b) a description of the organizational structure showing the relationship among the entities; (c) the identity of all other persons holding ownership interests in each such entity and their respective percentage interests; (d) Your role in the day-to-day operations of each such entity, including whether You had authority to make financial, operational, or strategic decisions on behalf of the entity; and (e) the nature and extent of Your involvement in the growth of the Coastal Palms portfolio from its inception to its current 22-property portfolio comprising approximately 3,740 rooms.
INTERROGATORY NO. 2
Describe in detail the circumstances surrounding the formation and incorporation of Suncoast Room Management Inc., including:
(a) the date of incorporation;
(b) the state of incorporation;
(c) all persons involved in the decision to form Suncoast, and the role each person played in that decision;
(d) the stated business purpose of Suncoast at the time of its formation, including as reflected in any articles of incorporation, bylaws, operating agreements, or organizational documents;
(e) the actual business activities undertaken by Suncoast from its formation through the present date, described with specificity and broken down by year or by period of activity to the extent practicable;
(f) all ownership interests in Suncoast, identifying each owner by name, their percentage or proportionate interest, the consideration paid for such interest, and any changes in ownership from formation through the present;
(g) the relationship between Suncoast and each of the Hotels, including whether Suncoast had any written management agreements, revenue-sharing arrangements, service contracts, or other agreements with any Hotel or any entity that owns, operates, or manages any Hotel;
(h) the total revenue collected by Suncoast from any source in each year from the date of its formation through 2021; and
(i) the total amount of any "management fees," service fees, administrative charges, or other fees or compensation retained by Suncoast in each year from the date of its formation through 2021, including a description of the methodology used to calculate each such fee.
INTERROGATORY NO. 3
Describe in detail the creation, ownership, operation, and management of the website known as "gulfcoastrooms.com," including:
(a) the date the website was first created, registered, or launched, and the identity of the person or entity that registered the domain name;
(b) the person(s) who directed or authorized its creation, and the reasons for its creation;
(c) the entity or person that currently owns or controls the domain name "gulfcoastrooms.com," and any prior owners or controllers of the domain;
(d) the stated and actual business purpose of the website, including whether the website was designed, in whole or in part, to serve as a booking channel for guest rooms at any of the Hotels;
(e) the specific Hotels for which bookings could be made through the website at any time during the Relevant Period, and the dates during which each such Hotel was bookable through the website;
(f) a detailed description of how revenues from bookings made through the website were collected, processed, deposited, and allocated, including the identity of any bank accounts into which such revenues were deposited, the entity or entities associated with each such bank account, and the flow of funds from initial collection through ultimate allocation to property-level entities;
(g) whether and how revenues from bookings made through the website were reported as Gross Room Revenue to Verimark, and if such revenues were not reported as GRR, the reasons for their exclusion;
(h) the total revenue generated through the website in each year from the date of its launch through 2021;
(i) whether the website bore any Verimark branding, trademarks, or service marks, or was in any way associated with or linked to Verimark's own consumer-facing website or central reservation system; and
(j) whether any employees or agents of Verimark were ever informed of the existence of the gulfcoastrooms.com website, and if so, identify each such person and describe the Communication.
INTERROGATORY NO. 4
Identify and describe all booking channels through which guest rooms at any of the Hotels were sold, rented, or made available for occupancy during the Relevant Period that were not processed through Verimark's central reservation system ("CRS"), including but not limited to:
(a) walk-in reservations made at the front desk of any Hotel;
(b) corporate-direct contracts, negotiated rate agreements, or group booking agreements entered into between any Hotel (or any entity affiliated with any Hotel) and any corporate, governmental, or institutional customer, where the booking was not routed through Verimark's CRS;
(c) bookings made through gulfcoastrooms.com or any other website owned, operated, or controlled by You, Suncoast, Coastal Palms, or any affiliated entity;
(d) bookings made through third-party online travel agencies ("OTAs"), including but not limited to Aldermere Technologies, Bramwell Holdings, Drayton Software, Northpoint Corporation, Penmark Industries, Drayton Corporation, and Brightmoor Industries, where the revenue was collected or processed outside of Verimark's CRS;
(e) bookings made through any mobile application, telephone booking line, or call center operated by or on behalf of any entity other than Verimark; and
(f) any other direct or indirect booking channel, however denominated.
For each such booking channel identified, state:
(i) the approximate date it was first used for bookings at any Hotel;
(ii) the specific Hotels that utilized the channel, and the dates during which each Hotel utilized the channel;
(iii) the entity that collected the revenue generated through the channel, including the identity of the bank account(s) into which such revenue was deposited;
(iv) the approximate annual revenue generated through the channel for each calendar year from 2013 through 2021, broken down by Hotel to the extent practicable;
(v) whether and how such revenue was included in the GRR reports submitted to Verimark, and if not included, the reasons for its exclusion; and
(vi) the total aggregate revenue generated through all non-CRS booking channels for each calendar year from 2013 through 2021, as compared with the total GRR reported to Verimark for the same periods.
INTERROGATORY NO. 5
Describe Your understanding of the term "Gross Room Revenue" as defined in Section 4.1 of each Franchise License Agreement, including:
(a) when You first became aware of the definition of GRR set forth in Section 4.1 of the FLAs, including the specific language providing that GRR includes "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";
(b) whether You received any advice, guidance, interpretation, or opinion from any attorney, accountant, auditor, consultant, or other professional regarding the scope, meaning, or application of the GRR definition in Section 4.1, either before or after the execution of any FLA;
(c) if so, identify each such person, describe the advice, guidance, interpretation, or opinion received, state the date(s) on which it was received, and state whether it was provided orally or in writing;
(d) state whether You understood at any time during the Relevant Period that revenues collected by Suncoast Room Management Inc. — or through gulfcoastrooms.com, walk-in reservations, corporate-direct contracts, or any other non-CRS booking channel — for the rental of guest rooms at any of the Hotels fell within the FLA's definition of Gross Room Revenue and were required to be reported to Verimark as GRR; and
(e) if You contend that any category of revenues collected by Suncoast or through any non-CRS booking channel was not required to be included in GRR, state the basis for that contention in detail, including any contractual provision, legal authority, industry custom, or professional advice on which You rely.
INTERROGATORY NO. 6
State whether You at any time during the Relevant Period directed, instructed, authorized, approved, encouraged, or otherwise communicated to any person — including but not limited to property managers, general managers, regional managers, controllers, accountants, bookkeepers, revenue managers, front-desk supervisors, or any other employees or agents of Coastal Palms, Suncoast, Gulf Breeze, Savannah Lodging, or any Hotel — to exclude revenues collected by Suncoast Room Management Inc. (including revenues collected through gulfcoastrooms.com, walk-in reservations processed through Suncoast, or corporate-direct contracts administered by Suncoast) from the Gross Room Revenue figures reported to Verimark. If so, for each such instance:
(a) identify the person(s) to whom the direction, instruction, authorization, approval, or encouragement was given;
(b) state the date(s) on which the direction was given;
(c) describe the substance of the direction in detail, including the specific revenues or categories of revenue to be excluded and the rationale, if any, that was communicated;
(d) state the method of communication by which the direction was given (e.g., oral instruction, written memorandum, email, text message, telephone call, in-person conversation, group meeting, or other method);
(e) identify any Documents reflecting, referring to, or relating to such direction, including but not limited to emails, memoranda, meeting minutes, training materials, accounting directives, policy manuals, or standard operating procedures;
(f) state whether any person questioned, objected to, or expressed concern about the direction, and if so, identify each such person and describe the substance of the questioning, objection, or concern and Your response thereto; and
(g) state whether the direction was a one-time instruction or a standing or recurring directive, and if recurring, describe its frequency and duration.
INTERROGATORY NO. 7
Describe in detail the "management fee" or any other fee, charge, or compensation retained by Suncoast Room Management Inc. in connection with its collection, processing, or management of revenues from guest-room bookings at any of the Hotels, including:
(a) the percentage, rate, or amount of the management fee as applied during each year from the date of Suncoast's formation through 2021;
(b) when the management fee was first imposed, and the circumstances of that decision, including the identity of all persons who participated in or approved the decision;
(c) the methodology by which the management fee was calculated, including the base amount or revenue pool to which it was applied and any adjustments, caps, or variations by property, time period, or booking channel;
(d) the total dollar amount of management fees retained by Suncoast for each calendar year from 2013 through 2021, broken down by Hotel to the extent practicable;
(e) how the management fee was accounted for in the books and records of Suncoast, including the general ledger accounts or line items used to record the fee, and whether it was treated as revenue, an intercompany transfer, a cost allocation, or some other classification;
(f) how the management fee was accounted for in the books and records of each property-level LLC and in the consolidated books and records of Coastal Palms, including whether it appeared as an operating expense, a management fee payable, an intercompany receivable, or some other classification;
(g) whether the management fee or any portion of the gross revenue from which it was deducted was ever included in the GRR reports submitted to Verimark, and if not, the reasons for its exclusion;
(h) whether any written agreement, contract, or arrangement existed between Suncoast and any Hotel or property-level entity governing the management fee, and if so, identify each such agreement; and
(i) identify all persons who participated in the decision to impose the management fee, the determination of its rate or amount, and the methodology for calculating it, including any persons who reviewed, approved, or ratified any of the foregoing.
INTERROGATORY NO. 8
Describe in detail how revenues received from third-party online travel agencies ("OTAs") for guest-room bookings at the Hotels were reported to Verimark as Gross Room Revenue during each calendar year from 2013 through 2021, including:
(a) whether OTA revenues were reported to Verimark on a gross basis (i.e., the full amount paid by the guest to the OTA for the room) or on a net basis (i.e., the amount remitted by the OTA to the Hotel after deduction of the OTA's commission or markup), and if the methodology changed during the Relevant Period, describe the methodology used in each period;
(b) if OTA revenues were reported on a net basis, describe in detail all deductions, offsets, commissions, adjustments, or other amounts subtracted from the gross revenue figure before it was reported to Verimark as GRR, and state the dollar amount of each such deduction for each calendar year from 2013 through 2021;
(c) state Your understanding of whether Section 4.1 of the FLAs — which 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" — permitted net-rate reporting of OTA revenues, and describe the basis for that understanding;
(d) identify any person — including any attorney, accountant, auditor, revenue manager, controller, or consultant — who advised, instructed, or directed You or any Coastal Palms entity regarding the proper method for reporting OTA revenues as GRR, and describe the advice or instruction provided;
(e) describe the "commissions receivable" classification referenced in Coastal Palms' internal accounting records, including: (i) the date this classification was first adopted; (ii) the person(s) who created or authorized the classification; (iii) the specific types of revenue or revenue-related entries that were recorded under this classification; (iv) how entries in this classification were used in the preparation of GRR reports submitted to Verimark; and (v) the aggregate dollar amount of entries recorded as "commissions receivable" for each calendar year from 2013 through 2021; and
(f) state the total OTA-generated revenue for each calendar year from 2013 through 2021, on both a gross and net basis, and the difference between the two figures for each year.
INTERROGATORY NO. 9
Describe Your knowledge of and compliance with the following provisions of the Franchise License Agreements, setting forth for each provision below: (i) when You first read or became aware of the provision; (ii) Your understanding of the provision; (iii) what steps, if any, You took to ensure compliance with the provision; and (iv) whether You believe that You and the Coastal Palms entities have at all times been in full compliance with the provision, and if so, the basis for that belief:
(a) Section 4.1 — Royalty Payment Obligations: requiring payment to Verimark of a continuing royalty equal to five percent (5%) of Gross Room Revenue, as defined therein, payable monthly within fifteen (15) days following the end of each calendar month;
(b) Section 4.2 — Marketing Fund Contributions: requiring payment to Verimark of a marketing-fund contribution equal to two and one-half percent (2.5%) of Gross Room Revenue, payable monthly within fifteen (15) days following the end of each calendar month;
(c) Section 4.3 — Technology Fee: requiring payment to Verimark of a technology fee of Twelve Dollars and Fifty Cents ($12.50) per guest room per month for each room authorized and available for rental at the Hotel, payable monthly within fifteen (15) days following the end of each calendar month;
(d) Section 4.6 — Late Payment Interest: providing that any amounts owed by franchisee to Verimark that are not paid when due shall bear interest at a rate of one and one-half percent (1.5%) per month, compounded monthly, from the date due until paid in full;
(e) Section 8.2 — Audit Rights: providing that Verimark shall have the right, at any time during normal business hours and upon reasonable notice, to inspect and audit the books, records, and accounts of the franchisee relating to the Hotel, and further providing that if any audit reveals an underpayment of two percent (2%) or more of any amount due to Verimark for any period audited, the franchisee shall reimburse Verimark for all costs and expenses of the audit, including fees of independent auditors;
(f) Section 14.1 — Material Breach and Cure Period: providing that upon the occurrence of a material breach of the FLA, Verimark shall provide written notice to franchisee specifying the breach and granting a cure period of thirty (30) days from the date of notice within which franchisee must cure the breach to Verimark's reasonable satisfaction; and
(g) Section 14.2(c) — Incurable Breach: providing that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure" and that upon the occurrence of such breach, Verimark may terminate the FLA immediately upon written notice, without any obligation to provide a cure period.
INTERROGATORY NO. 10
State whether at any time during the Relevant Period You added, authorized the addition of, or had knowledge of the addition of guest rooms to any of the Hotels without providing notice to Verimark as required under the terms of the applicable FLA. If so, for each such instance:
(a) identify the Hotel at which rooms were added, by name and location;
(b) state the number of rooms added;
(c) state the date(s) on which the rooms were added, became available for occupancy, or were first made available for rental to guests;
(d) describe the nature of the room addition (e.g., new construction, conversion of non-guest-room space, renovation of previously decommissioned rooms, acquisition of adjacent property);
(e) state whether the additional rooms were reported to Verimark for purposes of calculating the technology fee required under Section 4.3 of the FLA (i.e., $12.50 per guest room per month), and if not, explain why;
(f) state the total number of months during which the unreported rooms were in operation without the corresponding technology fee being paid to Verimark;
(g) state the total dollar amount of technology fees that were not paid to Verimark as a result of the failure to report the additional rooms;
(h) explain why notice of the additional rooms was not provided to Verimark;
(i) identify all persons involved in the decision to add rooms, the decision not to notify Verimark, or any Communication regarding the foregoing; and
(j) identify any Documents reflecting the addition of rooms, including but not limited to construction contracts, building permits, certificates of occupancy, property management system records, room-inventory reports, and internal correspondence.
INTERROGATORY NO. 11
Describe all Communications between You and Nolan Prescott and/or Theresa Brecker during the Relevant Period regarding any of the following subjects:
(a) the method, methodology, or procedures used to report Gross Room Revenue to Verimark;
(b) the formation, role, operations, revenues, or management fees of Suncoast Room Management Inc.;
(c) the decision to exclude revenues collected by Suncoast or through any non-CRS booking channel from GRR reports submitted to Verimark;
(d) the creation, operation, or revenues of the gulfcoastrooms.com website;
(e) the methodology for reporting OTA revenues, including the "commissions receivable" classification and the netting of OTA commissions against GRR;
(f) Verimark's audit rights under Section 8.2 of the FLAs, including any discussion of the possibility or consequences of a Verimark audit; and
(g) any actual or contemplated dispute, claim, or litigation between Verimark and Coastal Palms, You, or any affiliated entity.
For each such Communication, state:
(i) the date of the Communication;
(ii) all participants in the Communication;
(iii) the method or medium of the Communication (e.g., in-person conversation, telephone call, email, text message, written memorandum, meeting);
(iv) the substance of the Communication, including the positions or views expressed by each participant;
(v) identify any Documents reflecting, memorializing, or referring to the Communication; and
(vi) state whether any other person was present during, participated in, or was copied on the Communication, and if so, identify each such person.
INTERROGATORY NO. 12
Describe all Communications between You and Janet Kerrigan at any time during her employment as Regional Controller for Coastal Palms and at any time after her termination of employment in or about October 2021, regarding any of the following subjects:
(a) the method, methodology, or procedures used to calculate and report Gross Room Revenue to Verimark;
(b) the exclusion of revenues collected by Suncoast Room Management Inc. from GRR reports submitted to Verimark;
(c) the creation, operation, or revenues of the gulfcoastrooms.com website;
(d) any concerns, questions, objections, or complaints raised by Ms. Kerrigan about the accuracy, completeness, or integrity of GRR reports submitted to Verimark, or about any other aspect of financial reporting to Verimark;
(e) the circumstances of Ms. Kerrigan's termination of employment, including the reason(s) for her termination, the person(s) who made the decision to terminate her employment, and any Communications with Ms. Kerrigan regarding the termination;
(f) any Communications with Ms. Kerrigan after her termination, including any Communications regarding potential legal claims, settlements, non-disclosure obligations, or cooperation with any investigation; and
(g) any knowledge You have regarding Ms. Kerrigan's Communication(s) with Verimark or Verimark's compliance department, including but not limited to any contact with Verimark's compliance hotline on or about November 8, 2021.
For each such Communication, state:
(i) the date of the Communication;
(ii) all participants in the Communication;
(iii) the method or medium of the Communication;
(iv) the substance of the Communication in detail;
(v) whether any other persons were present during, participated in, or were copied on the Communication, and if so, identify each such person; and
(vi) identify any Documents reflecting, memorializing, or referring to the Communication.
INTERROGATORY NO. 13
Describe in detail all actions You took or directed to be taken in response to Verimark's Notice of Material Breach dated February 4, 2022, including:
(a) the date on which You first received or became aware of the Notice, and the manner in which it came to Your attention;
(b) all persons with whom You discussed the Notice, including the date, substance, and method of each discussion;
(c) all steps You took, considered, proposed, or directed to cure the alleged material breach within the thirty (30) day cure period specified in the Notice, which expired on or about March 6, 2022;
(d) the reason(s) why no cure was tendered within the cure period, including whether You or any advisor concluded that no cure was required, that no breach had occurred, or that the alleged breach was not subject to cure;
(e) Your role in the decision to retain the law firm of Whitfield, Barrow & Crane LLP to respond to the Notice on behalf of Coastal Palms, including the date of engagement, the scope of the engagement, and the identity of the attorneys with whom You communicated;
(f) all Communications between You and Nathan Whitfield III, Esq., Gabriela Montes, Esq., Ethan Doyle, Esq., or any other attorney at Whitfield, Barrow & Crane LLP regarding the Notice and Coastal Palms' response thereto, to the extent such Communications are not protected by attorney-client privilege (and to the extent any such Communications are withheld on the basis of privilege, provide a privilege log entry in accordance with Section II.G above);
(g) Your role in the preparation, review, and approval of Coastal Palms' response letter dated February 28, 2022, addressed to Verimark and signed by Nathan Whitfield III, which denied any material breach of the FLAs and asserted that Coastal Palms' reporting methodology reflected a "reasonable interpretation" of the GRR definition;
(h) whether You authorized, reviewed, or approved the specific representations and assertions contained in the February 28, 2022 response letter before it was sent to Verimark; and
(i) all Communications You had with any person — other than counsel — during the period between February 4, 2022 and March 6, 2022 regarding the merits of Verimark's breach allegations, any potential cure, or any potential defense.
INTERROGATORY NO. 14
Identify and describe all financial statements, revenue reports, operating statements, profit-and-loss statements, balance sheets, debt-service-coverage-ratio calculations, borrowing-base certificates, and other financial information that You provided or caused to be provided to Ironclad National Bank (or any predecessor, successor, or affiliate thereof) in connection with the approximately Ninety-Four Million Dollars ($94,000,000) in first-lien mortgage loans held by Ironclad on eighteen (18) of the twenty-two (22) Hotels during the Relevant Period. For each such document or submission:
(a) state the date of submission or delivery to Ironclad;
(b) identify the person(s) who prepared or compiled the document or submission;
(c) describe the revenue figures reported therein, including total revenue, room revenue, and any breakdown by revenue source or booking channel;
(d) state whether the revenue figures included revenues collected by Suncoast Room Management Inc., revenues generated through gulfcoastrooms.com, or revenues generated through any other non-CRS booking channel;
(e) explain any discrepancy between the revenue figures reported to Ironclad National Bank and the GRR figures reported to Verimark for the same property or properties during the same reporting period;
(f) identify the Ironclad National Bank officer(s) or representative(s) to whom the financial information was submitted, including but not limited to Devon Schultz, Senior Vice President, Commercial Real Estate Lending;
(g) state whether any of the financial information submitted to Ironclad was reviewed, certified, or audited by any independent auditor or accounting firm, and if so, identify each such auditor or firm; and
(h) describe any representations, warranties, or certifications You made or caused to be made to Ironclad National Bank regarding the accuracy or completeness of the financial information submitted, and state whether such representations, warranties, or certifications were made in writing or orally.
INTERROGATORY NO. 15
With respect to Coastal Palms Franchise Holdings LLC's Counterclaim filed on April 18, 2022 in this action, which alleges damages in the approximate amount of Twelve Million Dollars ($12,000,000) arising from alleged brand-standard violations and over-billing by Verimark:
(a) describe in detail all facts known to You that support each and every allegation in the Counterclaim, including but not limited to the alleged brand-standard violations, the alleged deferred maintenance at the corporate level, the alleged inadequate reservation-system uptime, and the alleged over-billing, identifying the specific instances, dates, properties, and amounts associated with each allegation;
(b) identify all persons with knowledge of the facts supporting each allegation in the Counterclaim, stating the subject matter of each person's knowledge;
(c) identify all Documents that support, relate to, or refer to the allegations in the Counterclaim;
(d) state whether You personally observed or experienced any of the alleged brand-standard violations or over-billing at any of the Hotels, and if so, describe each instance in detail, including the date, the Hotel involved, the nature of the alleged violation or over-billing, and any action You took in response;
(e) describe in detail how the Twelve Million Dollar ($12,000,000) damages figure was calculated, including the methodology, assumptions, data sources, and time period used in the calculation;
(f) identify any person — including any accountant, consultant, appraiser, expert witness, or other professional — who performed or assisted in the calculation of the $12,000,000 damages figure;
(g) state whether any formal complaint, notice of deficiency, demand for cure, or other written communication was sent by You or any Coastal Palms entity to Verimark regarding any of the alleged brand-standard violations or over-billing prior to the filing of the Counterclaim, and if so, identify each such communication; and
(h) describe any efforts You or any Coastal Palms entity undertook to mitigate the damages allegedly caused by the brand-standard violations or over-billing described in the Counterclaim.
VERIFICATION
Defendant Randall Brecker is reminded that the foregoing Interrogatories must be answered under oath in accordance with Florida Rule of Civil Procedure 1.340. The responses shall be signed by the party making them, and the oath shall be as follows or substantially similar:
Under penalties of perjury, I declare that I have read the foregoing Interrogatories and answers thereto, and the answers are true and correct to the best of my knowledge and belief.
ATTORNEY CERTIFICATION
Respectfully submitted,
CALDERWOOD & HARKNESS LLP Counsel for Plaintiff Verimark Hospitality Group Inc. 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301
By: ________
PRIYA ANAND, ESQ. Florida Bar No. 0087451 Responsible Partner Telephone: (954) 761-8200
Email: panand@calderwoodharkness.com
DOUGLAS CARMICHAEL, ESQ. Florida Bar No. 0093217 Billing Partner
YUKI NAKAMURA, ESQ. Florida Bar No. 0119644 Lead Associate Telephone: (954) 761-8247
Email: ynakamura@calderwoodharkness.com
CARLOS ESPINOZA, ESQ. Florida Bar No. 0128903 Working Associate
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing Plaintiff's First Set of Interrogatories to Defendant Randall Brecker was served on this 11th day of July, 2022, via electronic mail and U.S. Mail, postage prepaid, on the following:
Nathan Whitfield III, Esq. Gabriela Montes, Esq. Ethan Doyle, Esq. Whitfield, Barrow & Crane LLP 1221 Brickell Avenue, Suite 3000 Miami, Florida 33131 Telephone: (305) 579-4400
Email: nwhitfield@wbclaw.com
Email: gmontes@wbclaw.com
Email: edoyle@wbclaw.com
Counsel for Defendant Coastal Palms Franchise Holdings LLC, Defendant Randall Brecker, individually, and Defendant Suncoast Room Management Inc.
By: ________
PRIYA ANAND, ESQ. Florida Bar No. 0087451 Calderwood & Harkness LLP
Propounding Party: | Plaintiff Verimark Hospitality Group Inc.
Responding Party: | Defendant Randall Brecker, individually
Set Number: | First
Date Served: | July 11, 2022