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.
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PLAINTIFF'S REQUESTS FOR ADMISSION TO DEFENDANT COASTAL PALMS FRANCHISE HOLDINGS LLC
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Plaintiff Verimark Hospitality Group Inc. ("Verimark"), by and through its undersigned counsel, Calderwood & Harkness LLP, and pursuant to Florida Rule of Civil Procedure 1.370, hereby propounds the following Requests for Admission upon Defendant Coastal Palms Franchise Holdings LLC ("Coastal Palms" or "CPFH"). In accordance with Rule 1.370, Coastal Palms is required to serve written answers or objections upon Plaintiff within thirty (30) days after service hereof. Each matter set forth below shall be deemed admitted unless a sworn written answer or objection, addressed to the substance of each Request and signed by the party or the party's attorney, is served within the time prescribed by the Rule. A denial shall fairly meet the substance of the requested admission, and when good faith requires that a party qualify an answer or deny only a part of the matter of which an admission is requested, the party shall specify so much of it as is true and qualify or deny the remainder. An answering party may not give lack of information or knowledge as a reason for failure to admit or deny unless the party states that it has made reasonable inquiry and that the information known to or readily obtainable by the party is insufficient to enable the party to admit or deny.
DEFINITIONS AND INSTRUCTIONS
I. Definitions
As used herein, the following terms shall have the meanings set forth below. These definitions are intended to supplement, and not to limit, the ordinary meaning of any term used in these Requests for Admission.
1. "You," "Your," "Coastal Palms," or "CPFH" shall mean and refer to Coastal Palms Franchise Holdings LLC, a Florida limited liability company, together with its past and present members, managers, officers, employees, agents, representatives, attorneys, successors, assigns, and any other person or entity acting or purporting to act on its behalf, including but not limited to any property-level affiliates, subsidiaries, or special-purpose entities owned, controlled, or managed by Coastal Palms or its principals.
2. "Verimark" or "VHG" shall mean and refer to Verimark Hospitality Group Inc., a Delaware corporation, together with its subsidiaries, affiliates, officers, directors, employees, agents, and representatives.
3. "FLA" or "Franchise License Agreement" shall mean and refer to any Franchise License Agreement executed between Verimark (or any Verimark affiliate) and Coastal Palms (or any property-level entity controlled by Coastal Palms or its principals) for the operation of a hotel under the Verimark Suites or Verimark Select brand, including all amendments, addenda, exhibits, schedules, side letters, and other modifications thereto, whether written or oral.
4. "Gross Room Revenue" or "GRR" shall mean and refer to the term as defined 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."
5. "Suncoast" shall mean and refer to Suncoast Room Management Inc., a Florida corporation, together with its officers, directors, employees, agents, and representatives, including its President, Randall Brecker.
6. "Gulf Breeze" shall mean and refer to Gulf Breeze Hospitality LLC, a Florida limited liability company, together with its members, managers, employees, agents, and representatives.
7. "Savannah Lodging" shall mean and refer to Savannah Lodging Partners LLC, a Georgia limited liability company, together with its members, managers, employees, agents, and representatives.
8. "Brecker" shall mean and refer to Randall "Randy" Brecker, an individual, in his capacities as Managing Member and approximately 60% equity holder of Coastal Palms, Managing Member of Gulf Breeze Hospitality LLC, Managing Member of Savannah Lodging Partners LLC, and President and sole director of Suncoast Room Management Inc., as well as in his individual capacity.
9. "Prescott" shall mean and refer to Nolan Prescott, an individual, in his capacity as a Member and approximately 25% equity holder of Coastal Palms, as well as in his individual capacity.
10. "Kerrigan" shall mean and refer to Janet Kerrigan, an individual who served as Regional Controller of Coastal Palms during portions of the Relevant Period, as well as in her individual capacity.
11. "Properties" shall mean and refer to the twenty-two (22) hotel properties operated by Coastal Palms or its affiliates under FLAs with Verimark, comprising approximately 3,740 total guest rooms across eighteen (18) Verimark Suites–branded hotels and four (4) Verimark Select–branded hotels. A complete list of the Properties, including addresses and FLA execution dates, is set forth in Exhibit A to the Complaint in this action and is incorporated herein by reference.
12. "Relevant Period" shall mean and refer to the period from January 1, 2013 through December 31, 2021, inclusive.
13. "OTA" shall mean and refer to any online travel agency, including but not limited to Aldermere Technologies, Bramwell Holdings, Drayton Software, Drayton Corporation, Northpoint Corporation, Penmark Industries, Brightmoor Industries, and any other internet-based platform or service through which guest-room reservations at the Properties were offered, sold, or facilitated during the Relevant Period.
14. "Direct Bookings" shall mean and refer to guest-room reservations at one or more of the Properties that were made through walk-in, telephone, corporate-direct contracts, the website gulfcoastrooms.com, or any other booking channel that was not processed through Verimark's central reservation system, including but not limited to any reservations booked, collected, or processed by Suncoast or its agents.
15. "Monthly GRR Report" shall mean and refer to the monthly report of Gross Room Revenue that Coastal Palms (or its property-level affiliates) was required to submit to Verimark pursuant to the terms of the FLAs, reflecting the GRR for each Property for the applicable calendar month, upon which royalty payments, marketing-fund contributions, and technology fees were calculated.
16. "Document" shall mean and refer to the term as broadly defined under Florida Rule of Civil Procedure 1.350, and shall include any writing, recording, or other compilation of data or information in any form, whether in hard copy or electronic form, including but not limited to correspondence, memoranda, e-mails, text messages, notes, reports, financial statements, ledgers, spreadsheets, invoices, receipts, contracts, agreements, checks, wire transfer records, bank statements, and metadata associated with any of the foregoing.
II. Instructions
The following instructions shall apply to each Request for Admission set forth herein:
1. Each Request for Admission should be answered separately and fully in writing under oath. Your response to each Request should restate the text of the Request before providing the answer or objection.
2. If any Request cannot be admitted or denied in its entirety, You are required to admit so much of the matter as is true and qualify or deny the remainder, specifying the basis for each qualification or denial with particularity.
3. If You claim that You lack sufficient information or knowledge to admit or deny any Request, You must state that You have made a reasonable inquiry and that the information known to You or readily obtainable by You is insufficient to enable You to admit or deny the matter. A mere statement that You lack information or knowledge, without an affirmation that a reasonable inquiry has been conducted, is not a sufficient response.
4. If You object to any Request, You must state the grounds for the objection with specificity. If You object to a portion of a Request, You must respond to the remaining portion.
5. These Requests for Admission are continuing in nature in accordance with the Florida Rules of Civil Procedure. If, after serving Your responses, You obtain or become aware of additional information or Documents that would render any of Your responses incomplete, inaccurate, or otherwise in need of supplementation, You are obligated to supplement or amend Your responses promptly, and in no event later than as required by applicable rule or court order.
6. Unless otherwise specified, each Request pertains to the Relevant Period as defined above.
REQUESTS FOR ADMISSION
SECTION A: FRANCHISE LICENSE AGREEMENTS — EXISTENCE AND TERMS
Request No. 1
Admit that Coastal Palms Franchise Holdings LLC executed its first Franchise License Agreement with Verimark Hospitality Group Inc. on or about June 15, 2007, for a Verimark Suites hotel property located in Naples, Florida.
Request No. 2
Admit that between June 15, 2007 and September 3, 2019, Coastal Palms (directly or through affiliated entities controlled by Randall Brecker) executed a total of twenty-two (22) individual Franchise License Agreements with Verimark Hospitality Group Inc. for the operation of hotel properties under the Verimark Suites or Verimark Select brand.
Request No. 3
Admit that each of the twenty-two (22) FLAs referenced in Request No. 2 contains a provision at Section 4.1 requiring the franchisee to pay Verimark a continuing royalty fee equal to five percent (5%) of Gross Room Revenue.
Request No. 4
Admit that Section 4.1 of each of the twenty-two (22) FLAs defines "Gross Room Revenue" as "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue."
Request No. 5
Admit that each of the twenty-two (22) FLAs contains a provision at Section 4.2 requiring the franchisee to pay Verimark a marketing-fund contribution equal to two and one-half percent (2.5%) of Gross Room Revenue.
Request No. 6
Admit that each of the twenty-two (22) FLAs contains a provision at Section 4.3 requiring the franchisee to pay Verimark a technology fee of twelve dollars and fifty cents ($12.50) per available room per month, adjusted annually by the Consumer Price Index ("CPI") but capped at a maximum annual increase of three percent (3%).
Request No. 7
Admit that each of the twenty-two (22) FLAs contains a provision at Section 4.6 imposing late-payment interest at a rate of one and one-half percent (1.5%) per month, compounded monthly, on any amounts past due from the franchisee to Verimark under the FLA.
Request No. 8
Admit that each of the twenty-two (22) FLAs contains a provision at Section 8.2 granting Verimark the right to audit the franchisee's books, records, and financial statements upon ten (10) business days' written notice, and further providing that if such audit reveals an underpayment by the franchisee exceeding two percent (2%) of the reported Gross Room Revenue for the audited period, the franchisee shall bear all reasonable costs and expenses incurred by Verimark in connection with the audit, including professional fees.
Request No. 9
Admit that each of the twenty-two (22) FLAs contains a provision at Section 14.2(c) stating that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure."
Request No. 10
Admit that each of the twenty-two (22) FLAs contains a provision at Section 15.3 entitling Verimark to recover liquidated damages equal to three (3) times the trailing-twelve-month royalties for each affected property upon termination of the FLA for cause attributable to the franchisee.
SECTION B: SUNCOAST ROOM MANAGEMENT INC. — FORMATION AND OPERATIONS
Request No. 11
Admit that Suncoast Room Management Inc. is a Florida corporation of which Randall Brecker is the President and sole director.
Request No. 12
Admit that Suncoast Room Management Inc. was incorporated under the laws of the State of Florida and was established as an operating entity no later than January 2013.
Request No. 13
Admit that Suncoast Room Management Inc. collected revenues from direct bookings at one or more of the twenty-two (22) Properties during the Relevant Period, including but not limited to revenues generated through walk-in guests, telephone reservations, corporate-direct contracts, and bookings made through the website gulfcoastrooms.com.
Request No. 14
Admit that gulfcoastrooms.com is a website operated by or on behalf of Suncoast Room Management Inc. that accepted guest-room reservations for one or more of the Properties during the Relevant Period.
Request No. 15
Admit that Suncoast Room Management Inc. retained a twelve percent (12%) "management fee" on revenues collected through direct bookings at the Properties before remitting the balance of such revenues to the respective property-level entities, including but not limited to Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC.
Request No. 16
Admit that the revenues collected by Suncoast Room Management Inc. through direct bookings at the Properties constituted revenues "derived from or attributable to the rental of guest rooms" within the meaning of that phrase as used in Section 4.1 of the FLAs.
Request No. 17
Admit that Randall Brecker directed, authorized, or otherwise approved the creation and implementation of Suncoast's direct-booking operations at the Properties, including the establishment of the website gulfcoastrooms.com and the corporate-direct booking programs.
Request No. 18
Admit that Randall Brecker served simultaneously in the following capacities during the Relevant Period: (a) Managing Member of Coastal Palms Franchise Holdings LLC; (b) Managing Member of Gulf Breeze Hospitality LLC; (c) Managing Member of Savannah Lodging Partners LLC; and (d) President and sole director of Suncoast Room Management Inc.
SECTION C: EXCLUSION OF REVENUE FROM GRR REPORTS
Request No. 19
Admit that Coastal Palms (directly or through its property-level affiliates) submitted Monthly GRR Reports to Verimark for each of the twenty-two (22) Properties during the Relevant Period, as required under the terms of the FLAs.
Request No. 20
Admit that the Monthly GRR Reports submitted by Coastal Palms to Verimark during the Relevant Period did not include revenues collected by Suncoast Room Management Inc. from direct bookings at the Properties.
Request No. 21
Admit that the Monthly GRR Reports submitted by Coastal Palms to Verimark during the Relevant Period did not include the twelve percent (12%) management fee retained by Suncoast Room Management Inc. on direct-booking revenues at the Properties.
Request No. 22
Admit that for fiscal year 2021, Coastal Palms reported aggregate Gross Room Revenue of approximately one hundred twelve million four hundred thousand dollars ($112,400,000) across its twenty-two (22) Properties in its Monthly GRR Reports submitted to Verimark.
Request No. 23
Admit that the true aggregate Gross Room Revenue for Coastal Palms' twenty-two (22) Properties for fiscal year 2021—when revenues collected by Suncoast Room Management Inc. from direct bookings at the Properties are properly included—exceeded the $112,400,000 figure reported in the Monthly GRR Reports.
Request No. 24
Admit that during the Relevant Period, Coastal Palms classified net-rate payments received from third-party OTA channels (including but not limited to Aldermere Technologies, Bramwell Holdings, and Drayton Corporation) as "commissions receivable" and deducted those amounts from Gross Room Revenue in the Monthly GRR Reports submitted to Verimark.
Request No. 25
Admit that the practice of netting OTA net-rate payments against Gross Room Revenue in the Monthly GRR Reports was inconsistent with the gross-revenue definition set forth in 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."
Request No. 26
Admit that Coastal Palms did not disclose to Verimark, at any time during the Relevant Period, that revenues collected by Suncoast Room Management Inc. from direct bookings at the Properties were being excluded from the Monthly GRR Reports submitted to Verimark.
Request No. 27
Admit that Coastal Palms did not disclose to Verimark, at any time during the Relevant Period, that it was netting OTA net-rate payments against Gross Room Revenue in the Monthly GRR Reports submitted to Verimark.
Request No. 28
Admit that one or more property-level controllers, accountants, or other financial personnel employed by Coastal Palms, its affiliates, or its property-level entities were instructed by Randall Brecker or other Coastal Palms management personnel to exclude revenues collected by Suncoast Room Management Inc. from the Monthly GRR Reports submitted to Verimark.
Request No. 29
Admit that the exclusion of Suncoast-collected revenues from the Monthly GRR Reports resulted in an understatement of Gross Room Revenue across the twenty-two (22) Properties in each calendar year of the Relevant Period (i.e., in each year from 2013 through 2021, inclusive).
Request No. 30
Admit that revenues from guest-room bookings made through the website gulfcoastrooms.com were not included in any Monthly GRR Report submitted by Coastal Palms to Verimark at any time during the Relevant Period.
SECTION D: UNDERREPORTED ROOMS AND TECHNOLOGY FEES
Request No. 31
Admit that during the Relevant Period, Coastal Palms (or its property-level affiliates, including but not limited to Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC) added a total of approximately two hundred fourteen (214) guest rooms across four (4) of the Properties through renovation, expansion, or conversion of existing space, without providing written notice to Verimark as required under the terms of the applicable FLAs.
Request No. 32
Admit that Coastal Palms did not pay Verimark the per-room technology fee required under Section 4.3 of the FLAs for the approximately two hundred fourteen (214) unreported guest rooms referenced in Request No. 31 above.
Request No. 33
Admit that the aggregate unpaid technology fees for the approximately two hundred fourteen (214) unreported guest rooms, calculated at the base rate of twelve dollars and fifty cents ($12.50) per room per month for an average of approximately forty-seven (47) months of non-reporting, total approximately one million two hundred sixty thousand dollars ($1,260,000), exclusive of CPI adjustments, late-payment interest, and any other amounts that may be owing.
Request No. 34
Admit that Coastal Palms did not notify Verimark of the addition of any guest rooms at any of the Properties beyond those rooms disclosed to Verimark at the time each respective FLA was executed.
SECTION E: KNOWLEDGE AND INTENT OF COASTAL PALMS' PRINCIPALS
Request No. 35
Admit that Randall Brecker was aware, at all relevant times during the Relevant Period, that Section 4.1 of the FLAs required Coastal Palms to include in the calculation of Gross Room Revenue all revenues derived from or attributable to the rental of guest rooms at the Properties from any booking channel, direct or indirect, and regardless of the entity collecting such revenue.
Request No. 36
Admit that Randall Brecker was aware, during the Relevant Period, that revenues collected by Suncoast Room Management Inc. from direct bookings at the Properties were not being included in the Monthly GRR Reports submitted by Coastal Palms to Verimark.
Request No. 37
Admit that Randall Brecker directed, approved, or otherwise authorized the practice of excluding revenues collected by Suncoast Room Management Inc. from direct bookings at the Properties from the Monthly GRR Reports submitted by Coastal Palms to Verimark.
Request No. 38
Admit that Nolan Prescott received quarterly financial summaries or comparable periodic financial reports from Coastal Palms or Randall Brecker during the Relevant Period that included line items, entries, or other disclosures reflecting revenue collected or processed by Suncoast Room Management Inc.
Request No. 39
Admit that Theresa Brecker, as a member of Coastal Palms and an individual involved in payroll administration, human resources management, or other administrative functions for the Properties, had access to financial reports, accounting records, or other Documents reflecting revenues collected by Suncoast Room Management Inc. during the Relevant Period.
Request No. 40
Admit that Janet Kerrigan, in her capacity as Regional Controller for Coastal Palms, raised concerns, complaints, or questions—whether orally or in writing—to Randall Brecker or other Coastal Palms management personnel regarding the exclusion of Suncoast-collected revenues from the Monthly GRR Reports submitted to Verimark, and that Ms. Kerrigan raised such concerns prior to her termination of employment in or about October 2021.
SECTION F: BREACH, NOTICE, AND FAILURE TO CURE
Request No. 41
Admit that on or about February 4, 2022, Coastal Palms received a formal Notice of Material Breach from Verimark, which was sent via certified mail, return receipt requested, and via electronic mail, addressed to Coastal Palms at its principal office located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, with copies transmitted simultaneously to Coastal Palms' counsel of record, Whitfield, Barrow & Crane LLP, at 1221 Brickell Avenue, Suite 3000, Miami, Florida 33131.
Request No. 42
Admit that the Notice of Material Breach dated February 4, 2022 identified systematic underreporting of Gross Room Revenue—including the exclusion of Suncoast-collected direct-booking revenues and the improper netting of OTA net-rate payments—as the basis for the material breach of the FLAs.
Request No. 43
Admit that the Notice of Material Breach dated February 4, 2022 demanded that Coastal Palms cure the identified material breach within thirty (30) days, as provided under Section 14.1 of the FLAs, by tendering full payment of all underpaid royalties, marketing-fund contributions, and technology fees, together with accrued late-payment interest, and by providing Verimark with a complete and accurate accounting of all Gross Room Revenue for the Relevant Period.
Request No. 44
Admit that Coastal Palms did not tender any cure of the identified material breach within thirty (30) days of receiving the February 4, 2022 Notice of Material Breach—that is, on or before March 6, 2022—nor did Coastal Palms tender any payment of additional royalties, marketing-fund contributions, technology fees, or late-payment interest to Verimark in response to such Notice within the cure period.
Request No. 45
Admit that Whitfield, Barrow & Crane LLP, acting on behalf of Coastal Palms, sent a letter to Verimark dated February 28, 2022, in which it denied that Coastal Palms had committed any material breach of the FLAs and asserted that revenues collected by Suncoast Room Management Inc. were properly excluded from Gross Room Revenue under what it characterized as a "reasonable interpretation" of the FLAs.
SECTION G: DAMAGES AND QUANTIFICATION
Request No. 46
Admit that the royalty payments made by Coastal Palms to Verimark during the Relevant Period were calculated solely on the basis of the Gross Room Revenue figures reported in the Monthly GRR Reports, which excluded revenues collected by Suncoast Room Management Inc. from direct bookings at the Properties and which reflected the netting of OTA net-rate payments against Gross Room Revenue.
Request No. 47
Admit that to the extent the Monthly GRR Reports understated the true Gross Room Revenue of the Properties during the Relevant Period—by excluding Suncoast-collected direct-booking revenues and by improperly netting OTA net-rate payments—the royalty payments (calculated at 5% of GRR), marketing-fund contributions (calculated at 2.5% of GRR), and technology-fee payments (calculated on a per-available-room basis) made by Coastal Palms to Verimark during the Relevant Period were correspondingly understated and underpaid.
Request No. 48
Admit that Coastal Palms has not paid Verimark any additional royalties, marketing-fund contributions, technology fees, late-payment interest, or any other sums beyond those amounts calculated on the Gross Room Revenue figures reflected in the Monthly GRR Reports for the Relevant Period, and that Coastal Palms has made no additional payment to Verimark in response to or following receipt of Verimark's February 4, 2022 Notice of Material Breach.
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Respectfully submitted,
CALDERWOOD & HARKNESS LLP Counsel for Plaintiff, Verimark Hospitality Group Inc. 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-8200 Facsimile: (954) 555-8201
By: ________
Priya Anand, Esq. Florida Bar No. 0087451 E-mail: panand@calderwoodharkness.com
Yuki Nakamura, Esq. Florida Bar No. 0119644 E-mail: ynakamura@calderwoodharkness.com
Date: January 30, 2023
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on January 30, 2023, a true and correct copy of the foregoing Plaintiff's Requests for Admission to Defendant Coastal Palms Franchise Holdings LLC was served via electronic mail upon counsel for Defendants, as follows:
Nathan Whitfield III, Esq. Gabriela Montes, Esq. Ethan Doyle, Esq. Whitfield, Barrow & Crane LLP 1221 Brickell Avenue, Suite 3000 Miami, Florida 33131 Telephone: (305) 555-4400 E-mail: nwhitfield@wbclaw.com E-mail: gmontes@wbclaw.com E-mail: edoyle@wbclaw.com
By: ________
Yuki Nakamura, Esq. Florida Bar No. 0119644