PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney work-product doctrine and the attorney-client privilege. It is prepared in anticipation of litigation and reflects the mental impressions, conclusions, opinions, and legal theories of counsel. It is not to be disclosed to any person or entity outside the firm or the client without the prior written consent of Calderwood & Harkness LLP.
CALDERWOOD & HARKNESS LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-7200 Facsimile: (954) 555-7201
May 22, 2023
MEMORANDUM
TO: Priya Anand, Responsible Partner, Litigation (General) Yuki Nakamura, Lead Associate, Litigation (General)
FROM: Carlos Espinoza, Working Associate, Litigation (General)
RE: Analysis of Defendant's Expert Report — Prof. Grant Hargrove, PhD, CPA (Hargrove Economic Consulting Inc.)
MATTER: Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al., Case No. 1021-00006, Circuit Court of the 17th Judicial Circuit, Broward County, Florida
CLIENT: Verimark Hospitality Group Inc. (Nasdaq: VHMK)
I. EXECUTIVE SUMMARY
On May 15, 2023, defense counsel served the expert report of Professor Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc. (the "Hargrove Report"), on behalf of Defendant Coastal Palms Franchise Holdings LLC ("Coastal Palms"). Professor Hargrove opines that the maximum damages recoverable by Verimark Hospitality Group Inc. ("Verimark") for any underreporting of Gross Room Revenue ("GRR") across Coastal Palms' 22 franchised hotel properties total no more than approximately $6.2 million. This figure is dramatically below our claimed damages of approximately $150 million and is roughly one-third of even the $16.095 million subtotal of direct underpayments alone calculated by our retained expert, Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, in her report served April 14, 2023.
Professor Hargrove reaches his $6.2 million figure through three principal methodological choices, each of which is inconsistent with the plain language of the Franchise License Agreements ("FLAs") and unsupported by the factual record developed through discovery:
1. Narrowed GRR Definition. Hargrove excludes walk-in cash payments processed through Suncoast Room Management Inc. ("Suncoast") and calculates OTA revenues on a net basis (after deduction of OTA commissions) rather than on the gross basis required by the FLAs.
2. Truncated Time Period. Hargrove applies what he calls a "reliability discount" to the 2013–2016 portion of the underreporting period, effectively discarding approximately four years of documented revenue diversion on the theory that the data for those years is insufficiently granular to support Dr. Kettlewell's extrapolation methodology.
3. Omission of Contractual Interest and Liquidated Damages. Hargrove excludes entirely the contractual late-payment interest of 1.5% per month compounded (which Dr. Kettlewell calculated at $28.4 million through the projected judgment date) and the liquidated damages under FLA § 15.3 (which Dr. Kettlewell calculated at $105.5 million), characterizing both as unenforceable "penalties" under Florida law.
As detailed below, this memorandum identifies specific methodological errors, contractual misinterpretations, and evidentiary inconsistencies in the Hargrove Report. The memorandum also recommends rebuttal topics for Dr. Kettlewell's rebuttal report, which is due June 9, 2023, and assesses the potential impact of the Hargrove Report on the trajectory of this case, including settlement dynamics and the advisability of filing a Daubert/Marsh motion to exclude certain of Hargrove's opinions.
II. BACKGROUND AND SCOPE OF HARGROVE'S ENGAGEMENT
Professor Grant Hargrove, PhD, CPA, is the founder and principal of Hargrove Economic Consulting Inc., a Fort Lauderdale–based consulting firm specializing in litigation-support economics, forensic accounting, and damages quantification. According to his curriculum vitae attached as Appendix A to his report, Professor Hargrove holds a PhD in Economics from the University of Virginia and a CPA license in the State of Florida. He has been tenured on the faculty of the University of Miami Department of Economics since 2004, where he teaches courses in applied microeconomics and forensic accounting. He has been retained as a testifying expert in approximately 45 matters over the past fifteen years, with experience in franchise disputes, commercial-lease litigation, and insurance-coverage disputes.
Professor Hargrove was retained by Whitfield, Barrow & Crane LLP, defense counsel for Coastal Palms, under the direction of Nathan Whitfield III, lead partner, with Gabriela Montes handling discovery and motions. Professor Hargrove's engagement letter, which was not produced but is referenced in Section I of the Hargrove Report, indicates that he was initially retained in or around November 2022, shortly after the Court's October 28, 2022 order compelling production of Suncoast Room Management Inc.'s financial records.
The Hargrove Report is dated May 15, 2023 and consists of 86 pages of narrative text plus 14 appendices (designated Appendices A through N). The stated scope of Professor Hargrove's engagement is to "quantify the alleged underreporting of Gross Room Revenue by Coastal Palms Franchise Holdings LLC across its portfolio of 22 franchised hotel properties operating under the Verimark Suites and Verimark Select brands, and to opine on the appropriate measure of damages, if any, owed to Verimark Hospitality Group Inc." Hargrove Report at 3.
The Hargrove Report identifies the following categories of materials reviewed by Professor Hargrove:
• The 22 individual Franchise License Agreements between Verimark and Coastal Palms (or its property-level affiliates), the earliest of which was executed on June 15, 2007 for the Naples, Florida property (the "Naples FLA"), and the most recent of which was executed on September 3, 2019 for the Boca Raton, Florida property (the "Boca Raton FLA"). Eighteen of the 22 properties operate under the Verimark Suites brand; four operate under the Verimark Select brand.
• Coastal Palms' monthly GRR reports submitted to Verimark for the period January 2007 through December 2021, as required by FLA § 4.4.
• Financial records of Suncoast Room Management Inc., produced pursuant to the Court's October 28, 2022 order compelling production, including general ledgers, bank statements, accounts-receivable aging reports, and management-fee schedules.
• Property-level Property Management System ("PMS") data for all 22 properties, covering varying periods depending on the property (generally 2014 or 2015 through 2021, with partial data for some properties extending back to 2012 or 2013).
• OTA contracts between Coastal Palms (or its property-level affiliates) and third-party online travel agencies including Hollowell Industries, Ridgeway & Co. (Bramwell Holdings), and Kestrel Group, as well as OTA payment remittance records.
• The preliminary audit findings prepared by Thornbury & Associates CPAs LLP, delivered to Verimark on January 18, 2022, which covered the top 10 properties (by reported GRR) for the 2019–2021 fiscal years.
• The expert report of Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, served on behalf of Verimark on April 14, 2023.
Notably, the Hargrove Report does not indicate whether Professor Hargrove reviewed the deposition transcripts of key fact witnesses, including Randall Brecker (CEO and majority owner of Coastal Palms, deposed January 9–10, 2023), Janet Kerrigan (former Regional Controller for Coastal Palms, deposed during the January 9 – March 17, 2023 deposition period), or Nolan Prescott (former General Manager of the Fort Lauderdale Verimark Suites property). As discussed in Section V below, this failure to engage with the deposition record is a significant evidentiary gap in the Hargrove Report.
III. SUMMARY OF HARGROVE'S OPINIONS AND DAMAGES CALCULATION
Professor Hargrove's report sets forth three principal opinions, each of which operates to reduce the damages figure. Those opinions, and their cumulative impact on the damages calculation, are summarized below.
A. Opinion 1: Narrowed GRR Definition
Professor Hargrove's first and most consequential opinion concerns the definition of Gross Room Revenue under the FLAs. FLA § 4.1 defines GRR as follows:
"'Gross Room Revenue' or 'GRR' means 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."
Professor Hargrove opines that this definition should be interpreted to exclude two categories of revenue that Dr. Kettlewell included in her underreported-GRR calculation:
(a) Walk-In Cash Payments. Professor Hargrove argues that walk-in cash payments processed through Suncoast Room Management Inc., rather than through the property-level PMS system, should be excluded from GRR on the theory that these payments constituted "service fees" collected by Suncoast for "room-management services" rather than "room revenues" attributable to the franchised hotel properties. Hargrove Report at 24–28. Professor Hargrove characterizes Suncoast as an independent management company that provided "concierge-level accommodation services" to walk-in guests, and contends that the payments collected by Suncoast were compensation for those services rather than revenue from the rental of guest rooms. Id. at 26.
(b) OTA Revenues on a Net Basis. Professor Hargrove further argues that revenues derived from bookings made through online travel agencies (OTAs) should be measured on a net basis — that is, after deduction of OTA commissions — rather than on the gross basis used by Dr. Kettlewell. Hargrove Report at 29–34. His rationale is that the property-level entities "never received" the commission portion of the room rate because OTAs remit only the net amount to the hotel after retaining their commission. Id. at 31. He contends that the GRR definition's reference to "revenues derived from … the rental of guest rooms" should be limited to amounts actually received by the property or its affiliates, not the total amount paid by the guest. Id. at 32.
By applying this narrowed definition of GRR, Professor Hargrove reduces the estimated cumulative underreported GRR for the 2013–2021 period from Dr. Kettlewell's figure of $197.8 million to approximately $82 million. This reduction alone accounts for approximately $115.8 million in revenue that Dr. Kettlewell identified as underreported but that Hargrove excludes from his analysis entirely.
B. Opinion 2: Truncated Time Period
Professor Hargrove's second opinion further reduces the damages base by applying what he calls a "reliability discount" to the 2013–2016 period. He argues that the PMS data for the 22 properties is insufficiently granular for the years 2013 through 2016 to support Dr. Kettlewell's extrapolation methodology with the degree of certainty required of expert testimony. Hargrove Report at 35–44. Specifically, he notes that PMS records for several properties during this period contain gaps, inconsistencies, and formatting changes that he contends make it impossible to verify whether Dr. Kettlewell's estimated underreported revenue figures for those years are accurate. Id. at 38–40.
Professor Hargrove accepts only the 2017–2021 period as having adequate documentation to support a reliable damages calculation. Applying his narrowed GRR definition to this truncated five-year period, he reduces his accepted underreported GRR from approximately $82 million (for 2013–2021) to approximately $54 million (for 2017–2021 only). This time-period truncation thus eliminates an additional approximately $28 million in underreported GRR from his damages model.
C. Opinion 3: Applicable Fee Rates and Damages Components
Professor Hargrove's third opinion addresses the fee rates and damages components that should be applied to his accepted base of approximately $54 million in underreported GRR:
Royalty Underpayments. Professor Hargrove applies the 5% royalty rate specified in FLA § 4.1(a) to his accepted underreported GRR of approximately $54 million, yielding approximately $2.7 million in underpaid royalties. Id. at 45–48.
Marketing-Fund Underpayments. He adds approximately $1.35 million in underpaid marketing-fund contributions, calculated at 2.5% of his $54 million accepted underreported GRR, pursuant to FLA § 4.2. Id. at 49–50.
Technology-Fee Underpayments. He adds approximately $0.85 million in unpaid technology fees under FLA § 4.3, using a lower room count (approximately 160 rooms, as compared to Dr. Kettlewell's 214 rooms) and a shorter average period of underreporting. Id. at 51–53.
Late-Payment Interest — Excluded. Professor Hargrove excludes entirely the contractual late-payment interest provided for in FLA § 4.6, which specifies a rate of 1.5% per month, compounded monthly, on any underpayment of royalties, marketing-fund contributions, or technology fees. Dr. Kettlewell calculated cumulative late-payment interest of $28.4 million through the projected judgment date using the contractual compounding methodology. Professor Hargrove characterizes the 1.5% per month compounded rate — equivalent to approximately 19.56% per annum — as an unenforceable "penalty" under Florida law and excludes it from his damages model. Id. at 54–60.
Liquidated Damages Under FLA § 15.3 — Excluded. Professor Hargrove also excludes entirely the liquidated damages provided for in FLA § 15.3, which specifies that upon termination for cause, Coastal Palms owes liquidated damages equal to three times the trailing-twelve-month royalties for each terminated property. Dr. Kettlewell calculated total liquidated damages of $105.5 million, computed on a property-by-property basis using corrected GRR figures. Professor Hargrove again characterizes these liquidated damages as an unenforceable "penalty" and declines to include them. Id. at 61–68.
"Reasonable" Interest. In lieu of the contractual interest rate, Professor Hargrove includes approximately $1.3 million in what he terms "reasonable" simple interest, though his report does not specify the rate or compounding methodology used to arrive at this figure. Id. at 69–70.
Professor Hargrove's total damages opinion is summarized in the following table:
The $143.8 million gap between the two expert opinions will be a central issue at trial.
IV. DETAILED CRITIQUE OF HARGROVE'S METHODOLOGY
This section analyzes each of Professor Hargrove's principal methodological choices and identifies specific errors, contractual misinterpretations, and evidentiary failures that undermine his conclusions. For each error, this memorandum also recommends rebuttal topics for Dr. Kettlewell's forthcoming rebuttal report.
A. Error 1: Improper Narrowing of the GRR Definition (Walk-In Cash Payments)
Professor Hargrove's treatment of walk-in cash payments processed through Suncoast Room Management Inc. is perhaps the most fundamental error in his report. He characterizes these payments as "service fees" for "room-management services" rather than as room rental revenue, and on that basis excludes them from GRR entirely. This characterization is contradicted by the unambiguous contract language, the deposition record, and basic common sense.
The Contract Language. FLA § 4.1 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." This definition is expansive by design. Three textual features are particularly relevant:
First, the phrase "all revenues derived from or attributable to the rental of guest rooms" is not limited to revenues processed through a particular system or collected by a particular entity. The use of the word "all" is comprehensive and unqualified. A walk-in guest who pays cash at the front desk of a Verimark Suites hotel for a night's stay in a guest room is, by any reasonable interpretation, generating revenue "derived from … the rental of guest rooms at the Hotel."
Second, the phrase "including revenues from any booking channel, direct or indirect" further confirms that the definition is intended to capture revenue regardless of how the guest's reservation was made. Walk-in bookings are a "direct" booking channel. There is no textual basis for excluding them.
Third, the phrase "regardless of the entity collecting such revenue" was specifically designed to capture revenue collected by management companies or affiliated entities. This is precisely the arrangement that Coastal Palms established through Suncoast. The fact that Suncoast — a wholly owned subsidiary of Coastal Palms established in or around January 2013 — collected the cash payment rather than the property-level entity does not remove the revenue from the GRR definition. To the contrary, the "regardless of the entity collecting" language was drafted to prevent exactly this kind of revenue diversion.
The Deposition Record. Professor Hargrove's "service fee" characterization is also directly contradicted by the testimony of Coastal Palms' own CEO, Randall Brecker. During his two-day deposition on January 9–10, 2023, Brecker confirmed that walk-in cash payments were payments for room stays — not for any separate "service" provided by Suncoast. Specifically, Brecker testified as follows:
• Brecker confirmed that walk-in guests who paid cash at the front desk were renting guest rooms at the franchised hotel properties and sleeping in those rooms overnight. Brecker Dep. Day 1, Tr. at 147:8–148:12.
• Brecker confirmed that the only reason walk-in cash payments were routed through Suncoast rather than through the property-level PMS system was to avoid reporting those payments as GRR to Verimark. Brecker Dep. Day 1, Tr. at 162:3–163:19. When asked directly, "Was the purpose of routing these payments through Suncoast to reduce the amount of Gross Room Revenue reported to Verimark?", Brecker responded, "That was one of the reasons, yes." Id. at 163:14–19.
• Brecker acknowledged that Suncoast did not provide any "concierge-level accommodation services" or any service distinct from the ordinary check-in and room-assignment process performed by front-desk staff at the hotel. Brecker Dep. Day 2, Tr. at 54:7–55:22.
This testimony fatally undermines Hargrove's characterization of walk-in cash payments as "service fees." The payments were for room rentals; the routing through Suncoast was a mechanism to conceal revenue, not compensation for a separate service.
The Kerrigan Testimony. Janet Kerrigan, the former Regional Controller for Coastal Palms who was terminated in October 2021 and who filed a whistleblower complaint with Verimark on November 8, 2021, provided corroborating testimony during her deposition. Kerrigan testified that Brecker specifically directed controllers to exclude walk-in cash payments from the monthly GRR reports submitted to Verimark. She further testified that there was no substantive distinction between walk-in guests who paid by credit card (whose payments were processed through the PMS and reported as GRR) and walk-in guests who paid cash (whose payments were routed through Suncoast and excluded from GRR). The sole variable was the method of payment, not the nature of the service provided. Kerrigan Dep. Tr. at 88:14–91:6.
Hargrove's Failure to Engage. Critically, the Hargrove Report does not cite, address, or even acknowledge the Brecker or Kerrigan deposition testimony on this point. An expert who opines that walk-in cash payments were "service fees" rather than room revenue without addressing the sworn testimony of the defendant's own CEO — who admitted the payments were for room stays and the routing was designed to avoid GRR reporting — has failed to engage with the most probative evidence in the record. This omission is not merely a gap; it is a fundamental analytical failure that calls into question the reliability of Hargrove's opinion on this issue.
Recommended Rebuttal Topic for Dr. Kettlewell. Dr. Kettlewell's rebuttal report should include a detailed walk-through of the FLA § 4.1 language, with particular emphasis on the three textual features identified above. The rebuttal should cross-reference the Brecker deposition admissions (both Day 1 and Day 2) and the Kerrigan testimony, demonstrating that walk-in cash payments constitute room rental revenue by any reasonable interpretation of the contractual language. Dr. Kettlewell should also quantify the total walk-in cash payments processed through Suncoast for the full 2013–2021 period, broken down by property and by year, to illustrate the magnitude of the revenue that Hargrove proposes to exclude.
B. Error 2: Net vs. Gross OTA Revenue Treatment
Professor Hargrove's second major definitional error involves his treatment of OTA revenues on a net basis rather than the gross basis required by the FLAs. This error, while less dramatic in its individual impact than the walk-in cash payment exclusion, represents a significant misreading of the contract and is contradicted by Coastal Palms' own financial reporting to its primary lender.
The Contract Language. As noted above, FLA § 4.1 defines GRR as "all revenues derived from or attributable to the rental of guest rooms at the Hotel." When a guest books a room through an OTA such as Aldermere Technologies or Bramwell Holdings and pays $200 per night, the full $200 is "derived from … the rental of guest rooms." The fact that the OTA retains a commission (typically 15–25% of the room rate) and remits only the net amount to the hotel does not change the character of the revenue. The guest paid $200 for the room; the hotel earned $200 in revenue from the rental of the guest room. The commission paid to the OTA is a cost of distribution — an expense incurred in generating the revenue — not a reduction in the revenue itself.
This distinction between gross revenue and net revenue (after distribution costs) is fundamental in accounting and franchise law. Professor Hargrove, as a CPA, should be well aware of it. Franchise agreements, including the FLAs at issue here, typically define the royalty base on a gross-revenue basis precisely to prevent franchisees from reducing the royalty base by deducting distribution costs, marketing expenses, or intermediary commissions. The FLA drafters reinforced this intent by using the phrase "all revenues derived from or attributable to the rental of guest rooms" — language that captures the gross room rate, not the net amount after intermediary retention.
Industry Practice. Professor Hargrove's report provides no analysis of comparable franchise agreements or industry standards for GRR definitions. This is a significant omission. Industry practice in the hotel franchise sector overwhelmingly defines GRR on a gross basis. Major hotel franchisors — including Harborline Corporation, Harborline Enterprises, Brightmoor Group, and Strathmore Corporation — uniformly calculate royalties on gross room revenue, inclusive of OTA commissions. Professor Hargrove's departure from this industry norm required, at minimum, an explanation and supporting analysis. None was provided.
Coastal Palms' Inconsistent Reporting. Perhaps the most damaging evidence against Hargrove's net-revenue approach is Coastal Palms' own financial reporting to Ironclad National Bank. The financial statements submitted by Coastal Palms to Ironclad — produced pursuant to the August 8, 2022 subpoena duces tecum served on Devon Schultz, SVP, Commercial Real Estate Lending at Ironclad — reported OTA revenues on a gross basis and included those gross revenues in total hotel revenue. These financial statements were used to support approximately $94 million in first-lien mortgage loans across 18 of the 22 properties.
The implications of this inconsistency are significant. Coastal Palms represented to its lender that its hotels generated gross OTA revenue (the higher figure), while simultaneously reporting net OTA revenue (the lower figure) to Verimark for purposes of calculating royalties, marketing-fund contributions, and technology fees. This dual-reporting approach is not merely an accounting choice; it reflects a deliberate decision to maximize reported revenue to the lender (to support higher loan balances and more favorable loan terms) while minimizing reported revenue to the franchisor (to reduce royalty payments).
Professor Hargrove's report does not address this inconsistency. He does not mention the Ironclad loan documents or financial statements. He does not attempt to reconcile Coastal Palms' gross-revenue reporting to Ironclad with his own net-revenue approach. This is a glaring evidentiary gap that significantly undermines the credibility of his Opinion 1.
Quantification of the Differential. Based on Dr. Kettlewell's analysis, the difference between gross and net OTA revenue across Coastal Palms' 22-property portfolio for the 2013–2021 period is estimated at approximately $18–23 million. This range reflects the aggregate OTA commissions retained by Hollowell Industries, Ridgeway & Co., and Kestrel Group over the nine-year period, which Hargrove proposes to exclude from the GRR calculation. Even using Hargrove's truncated 2017–2021 time period, the gross/net differential is substantial and warrants detailed quantification in the rebuttal report.
Recommended Rebuttal Topic for Dr. Kettlewell. Dr. Kettlewell's rebuttal report should include a side-by-side comparison of Coastal Palms' revenue reporting to Ironclad National Bank (gross basis) and its revenue reporting to Verimark (net basis), with a property-by-property and year-by-year breakdown demonstrating the inconsistency. The rebuttal should also analyze the OTA contract terms to confirm whether the room rate charged to the guest (the gross amount) constitutes the "revenue derived from the rental of guest rooms" under FLA § 4.1. Finally, Dr. Kettlewell should present a precise quantification of the gross/net OTA revenue differential across the portfolio, which we estimate at approximately $18–23 million of the $197.8 million in total underreported GRR identified in her initial report.
C. Error 3: "Reliability discount" for 2013–2016 Period
Professor Hargrove's application of a "reliability discount" to the 2013–2016 period is analytically unsound and reflects a selective reading of the available evidence. While he frames this as a methodological concern about data quality, his approach ignores the most probative evidence for those years and improperly shifts the burden of proof.
The Available Evidence for 2013–2016. Hargrove's "reliability discount" rests primarily on his observation that property-level PMS records for several properties during the 2013–2016 period contain gaps, formatting inconsistencies, and incomplete data fields. Hargrove Report at 38–40. He argues that these data-quality issues make it impossible to verify Dr. Kettlewell's estimated underreported GRR figures for those years with the precision required for expert testimony.
However, the PMS data is not the only — or even the primary — source of evidence for the 2013–2016 period. The supplemental production of November 18, 2022, which included approximately 312,000 documents from Suncoast Room Management Inc.'s files (produced pursuant to the Court's October 28, 2022 order), contained Suncoast's general ledgers and bank statements for the entire 2013–2021 period. These records provide a direct measure — not an extrapolated estimate — of Suncoast-collected revenue for each year of the underreporting period. Because Suncoast was the vehicle through which Coastal Palms diverted revenue away from GRR reporting, Suncoast's own financial records are the most direct and reliable evidence of the magnitude of the diversion.
Hargrove's Selective Data Reliance. Professor Hargrove's treatment of the Suncoast records is internally contradictory. For the 2017–2021 period, he accepts Suncoast's financial records as sufficiently reliable to support his own (reduced) damages calculation. But for the 2013–2016 period, he rejects those same records — generated by the same entity, maintained in the same accounting system, and produced pursuant to the same court order — as unreliable. His report does not articulate a principled basis for this temporal cutoff.
Indeed, Hargrove's own report undermines his position. At page 47, the Hargrove Report acknowledges that Suncoast collected "substantial revenues" as early as 2013 — the year Suncoast was established — but then inexplicably excludes those years from his damages model. Hargrove Report at 47. This acknowledgment is deeply damaging to his "reliability discount" argument: if Suncoast collected "substantial revenues" in 2013, and the records documenting those collections exist and were produced in discovery, there is no principled basis for excluding those revenues from the damages calculation.
Dr. Kettlewell's Methodology. Hargrove's critique of Dr. Kettlewell's extrapolation methodology for the 2013–2016 period also mischaracterizes her approach. Dr. Kettlewell did not rely solely on the Thornbury & Associates preliminary audit of the top 10 properties for 2019–2021 and then extrapolate backward. Rather, her methodology was anchored in Suncoast's own financial records for the full 2013–2021 period, with the Thornbury audit serving as a cross-check against the Suncoast data for the overlapping 2019–2021 period. The Thornbury audit confirmed that the top 10 properties had underreported GRR by approximately 26% for the 2019–2021 period; Dr. Kettlewell then used the Suncoast records to verify and extend this finding across the broader portfolio and longer time frame. Her extrapolation methodology was conservative relative to the direct Suncoast evidence, which in several instances showed higher underreported amounts than her extrapolated figures.
Recommended Rebuttal Topic for Dr. Kettlewell. Dr. Kettlewell's rebuttal report should demonstrate that the Suncoast bank records and general ledgers provide reliable, direct evidence of underreported revenue for the 2013–2016 period. The rebuttal should present a year-by-year comparison of (a) the Suncoast records for 2013–2016, (b) Dr. Kettlewell's extrapolated figures for 2013–2016, and (c) the Suncoast records for 2017–2021 (which Hargrove accepts as reliable), showing that the data quality and completeness of the Suncoast records is consistent across the full 2013–2021 period. The rebuttal should also affirmatively address Professor Hargrove's PMS data-gap concerns and demonstrate that the PMS gaps do not undermine Dr. Kettlewell's methodology because her primary data source was the Suncoast financial records, not the PMS data. Finally, the rebuttal should note the internal contradiction in Hargrove's acknowledgment (at page 47) that Suncoast collected "substantial revenues" as early as 2013 while simultaneously excluding those years from his damages model.
D. Error 4: Exclusion of Contractual Late-Payment Interest
Professor Hargrove's wholesale exclusion of contractual late-payment interest from his damages model is both methodologically improper and analytically incomplete. While the enforceability of the specific contractual interest rate may ultimately be a legal question for the Court, Professor Hargrove's failure to present any meaningful interest calculation — even under alternative assumptions — constitutes a significant gap in his damages analysis.
The Contractual Provision. FLA § 4.6 provides:
"In the event that Franchisee fails to pay any Royalty Fee, Marketing Fund Contribution, Technology Fee, or other amount due to Franchisor within ten (10) business days of the due date, Franchisee shall pay interest on the unpaid amount at the rate of one and one-half percent (1.5%) per month, compounded monthly, from the due date until the date of payment."
This provision is clear and unambiguous. It specifies a rate (1.5% per month), a compounding methodology (monthly), and an accrual period (from the due date until payment). Dr. Kettlewell applied this provision as written and calculated cumulative late-payment interest of $28.4 million through the projected judgment date.
Hargrove's "Penalty" Characterization. Professor Hargrove excludes all late-payment interest from his damages model on the ground that the 1.5% per month compounded rate — equivalent to approximately 19.56% per annum — constitutes an unenforceable "penalty" under Florida law. Hargrove Report at 54–60. He cites several Florida appellate decisions addressing the enforceability of penalty clauses and argues that the contractual interest rate "bears no reasonable relationship to the anticipated or actual loss caused by the delay in payment." Id. at 57.
Several observations are warranted. First, whether the contractual interest rate is enforceable is a legal question — not an accounting or economics question. Professor Hargrove was retained as a damages expert, not as a legal expert. His role is to quantify damages under various assumptions, not to render legal conclusions about the enforceability of specific contract provisions. His exclusion of contractual interest based on a legal-enforceability determination exceeds the proper scope of his engagement and may be subject to challenge under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and the Florida counterpart, Marsh v. Valyou, 977 So. 2d 543 (Fla. 2007).
Second, even if the Court were ultimately to conclude that the 1.5% per month compounded rate is unenforceable as a penalty, some measure of prejudgment interest would apply to the underpaid amounts. Under Florida law, prejudgment interest is available as a matter of right on liquidated claims. Argonaut Ins. Co. v. May Plumbing Co., 474 So. 2d 212 (Fla. 1985). The Florida statutory prejudgment interest rate, which has ranged from approximately 4.75% to 6.55% per annum during the relevant period, would serve as a floor. Hargrove's failure to present any interest calculation under the statutory rate — or under any alternative rate — is a methodological gap that renders his total damages figure unreliable.
Third, Professor Hargrove's $6.2 million total includes approximately $1.3 million in what he terms "reasonable" simple interest, but his report does not specify the rate used, the compounding methodology (if any), or the accrual period. Hargrove Report at 69–70. This lack of transparency makes it impossible to evaluate or replicate his interest calculation, which is a basic requirement of reliable expert methodology.
Recommended Rebuttal Topic for Dr. Kettlewell. Dr. Kettlewell's rebuttal report should present three alternative interest calculations to address the range of possible outcomes on the legal enforceability question:
(a) Contractual rate of 1.5% per month, compounded monthly, as specified in FLA § 4.6: $28.4 million (the figure already presented in Dr. Kettlewell's initial report).
(b) Contractual rate of 1.5% per month, calculated on a simple-interest basis (i.e., without compounding): this figure should be calculated and presented as an alternative.
(c) Florida statutory prejudgment interest rate, applied on a simple-interest basis to the underpaid amounts from the respective due dates through the projected judgment date: this figure should be calculated and presented as a conservative floor.
Dr. Kettlewell should demonstrate that even under the most conservative interest assumption (option (c)), the total interest figure far exceeds Professor Hargrove's $1.3 million "reasonable" interest figure, and should note that the choice among these alternatives is a legal question for the Court, not a question for the damages expert.
E. Error 5: Exclusion of Liquidated Damages Under FLA § 15.3
Professor Hargrove's exclusion of liquidated damages under FLA § 15.3 is subject to the same fundamental criticism as his exclusion of contractual interest: it involves a legal conclusion masquerading as an expert accounting opinion.
The Contractual Provision. FLA § 15.3 provides:
"Upon termination of this Agreement by Franchisor for cause pursuant to Section 14, Franchisee shall pay to Franchisor, as liquidated damages and not as a penalty, an amount equal to three (3) times the aggregate Royalty Fees paid or payable to Franchisor with respect to the Hotel during the twelve (12) month period immediately preceding the effective date of termination (the 'Trailing Twelve-Month Royalties'). The parties acknowledge and agree that Franchisor's actual damages upon termination for cause would be difficult or impossible to calculate with certainty, and that the foregoing liquidated damages amount represents a reasonable estimate of Franchisor's anticipated damages."
This provision expressly states that the liquidated damages are "not … a penalty" and includes the standard recitals regarding the difficulty of calculating actual damages and the reasonableness of the estimate — precisely the factors that Florida courts consider in determining whether a liquidated-damages provision is enforceable. See Lefemine v. Baron, 573 So. 2d 326, 328 (Fla. 1991) (two-part test: (1) damages must be difficult to ascertain at the time of contracting; (2) the amount must be a reasonable estimate of actual damages).
Hargrove's Legal Conclusion. Professor Hargrove excludes liquidated damages entirely from his damages model, characterizing FLA § 15.3 as an "unenforceable penalty clause" and citing "general Florida law disfavoring penalties." Hargrove Report at 61–68. He argues that a 3× multiplier applied to trailing-twelve-month royalties is "grossly disproportionate" to any actual harm suffered by Verimark and therefore constitutes a penalty rather than a legitimate liquidated-damages provision. Id. at 65.
As with his treatment of contractual interest, Professor Hargrove's analysis on this point exceeds the proper scope of a damages expert's testimony. Whether FLA § 15.3 constitutes an enforceable liquidated-damages provision or an unenforceable penalty is a question of law for the Court. A damages expert's role is to quantify the amounts that would be owed under various assumptions — including the assumption that the provision is enforceable — and to leave the legal determination to the judge.
Professor Hargrove's failure to present even a contingent liquidated-damages calculation (i.e., "if the Court determines that FLA § 15.3 is enforceable, the liquidated damages would be $X") is a significant analytical gap. It leaves the trier of fact without any defense-expert quantification of this component of damages, which could prove problematic for Coastal Palms if the Court determines that § 15.3 is enforceable.
Dr. Kettlewell's Calculation. Dr. Kettlewell calculated total liquidated damages of $105.5 million across all 22 properties, computed on a property-by-property basis using corrected (i.e., including underreported) GRR figures. The trailing-twelve-month corrected royalties for all 22 properties totaled approximately $7.28 million per year; the 3× multiplier varies in its application by property depending on the individual property's corrected revenue levels and the applicable trailing-twelve-month period. While the aggregate figure of $105.5 million is substantial, it reflects the application of a specific contractual formula to a portfolio of 22 properties with a nine-year history of systematic underreporting.
Daubert/Marsh Implications. Professor Hargrove's opinion on the enforceability of FLA § 15.3 is potentially subject to a Daubert/Marsh challenge on the ground that it constitutes an impermissible legal opinion offered by a non-legal expert. The question whether a liquidated-damages provision is an enforceable estimate of anticipated damages or an unenforceable penalty is a question of law, not a question of economics or accounting. While an expert may provide context relevant to the legal analysis — for example, by comparing the liquidated-damages amount to actual or estimated damages — the ultimate enforceability determination is for the Court. Professor Hargrove's flat exclusion of liquidated damages based on his own legal conclusion goes beyond providing context and constitutes a legal opinion that should be excluded.
Recommended Rebuttal Topic for Dr. Kettlewell. Dr. Kettlewell's rebuttal report should present her property-by-property FLA § 15.3 liquidated-damages calculation in detail, including the corrected trailing-twelve-month royalties for each property and the application of the 3× multiplier. The rebuttal should note expressly that whether FLA § 15.3 is enforceable is a separate legal question outside the scope of the damages expert's proper role, and that Dr. Kettlewell's calculation is presented on the assumption that the Court determines the provision is enforceable. Dr. Kettlewell may also wish to note that FLA § 15.3 contains the standard recitals regarding the difficulty of calculating actual damages and the reasonableness of the liquidated-damages estimate, which are relevant to the Court's legal analysis but which are not the province of the damages expert to adjudicate.
F. Error 6: Understated Technology-Fee Underreporting
Professor Hargrove's technology-fee calculation uses a lower room count and a shorter average period of underreporting than Dr. Kettlewell's analysis, resulting in a technology-fee underpayment figure of approximately $0.85 million compared to Dr. Kettlewell's $1.26 million. While the absolute dollar difference ($0.41 million) is modest relative to the overall damages dispute, the room-count discrepancy is emblematic of Hargrove's broader pattern of selectively minimizing inputs to his damages model.
The Room-Count Discrepancy. Dr. Kettlewell identified 214 rooms added across four properties (Sarasota Verimark Suites, 62 rooms added; Tampa Westshore Verimark Suites, 48 rooms added; Fort Myers Verimark Select, 56 rooms added; and Orlando South Verimark Suites, 48 rooms added) without the required notice to Verimark under FLA § 6.2, resulting in unpaid technology fees over the applicable periods. Dr. Kettlewell's room count was derived from property renovation permits filed with the respective county building departments, Ironclad National Bank loan draw requests (which specified the number of rooms being added as part of each renovation project), and Coastal Palms' own internal capital-expenditure reports.
Professor Hargrove uses a lower room count of approximately 160 rooms but does not explain the basis for this figure. His report does not identify which rooms or which properties he excluded from the count, nor does it explain why his room count differs from the figure supported by the documentary evidence. Hargrove Report at 51–53. This lack of transparency is a methodological deficiency.
The Time-Period Discrepancy. Professor Hargrove also uses a shorter average time period for his technology-fee calculation than Dr. Kettlewell. Dr. Kettlewell used an average of approximately 47 months per unreported room, reflecting the time from each room's addition to the portfolio through December 2021 (the last month of the underreporting period). Hargrove's shorter average period appears to reflect his broader "reliability discount" for the 2013–2016 years, but this is not clearly stated, and the resulting calculation is opaque.
CPI Adjustments. FLA § 4.3 provides that the technology fee of $12.50 per room per month is subject to annual adjustment based on the Consumer Price Index, capped at 3% per year. Dr. Kettlewell applied the CPI adjustment in her calculation; it is unclear from the Hargrove Report whether he did the same.
Recommended Rebuttal Topic for Dr. Kettlewell. Dr. Kettlewell's rebuttal report should reconcile the room-count discrepancy with the documentary evidence, presenting a property-by-property schedule of room additions with references to the supporting documents (renovation permits, Ironclad loan draw requests, and capital-expenditure reports). The rebuttal should also present the applicable FLA § 4.3 technology-fee calculations, including CPI adjustments (capped at 3% per year), and the total technology-fee underpayment on a property-by-property and year-by-year basis.
V. INTERNAL INCONSISTENCIES AND EVIDENTIARY GAPS IN THE HARGROVE REPORT
Beyond the specific methodological errors addressed in Section IV, the Hargrove Report contains several internal inconsistencies and evidentiary gaps that undermine its overall credibility and reliability.
A. Inconsistency with Coastal Palms' Own Financial Records
As discussed in Section IV.B above, Professor Hargrove's narrowed GRR definition — particularly his net-revenue treatment of OTA bookings — is directly contradicted by Coastal Palms' own financial statements submitted to Ironclad National Bank. Those financial statements reported OTA revenues on a gross basis and included Suncoast-collected revenues in total hotel revenue.
The significance of this inconsistency extends beyond the OTA-revenue issue. The aggregate outstanding balance on Ironclad's first-lien mortgage loans across 18 of the 22 properties is approximately $94 million. These loans were underwritten based on revenue figures that included the gross OTA amounts and the Suncoast-collected revenues that Hargrove proposes to exclude from GRR. Coastal Palms presumably represented these higher (gross) revenue figures to its lender in order to support its loan applications, maintain compliance with financial covenants, and avoid triggering cross-default provisions.
In other words, Coastal Palms reported higher revenue to its lender when it was beneficial to do so (to support borrowing capacity) and lower revenue to its franchisor when it was beneficial to do so (to reduce royalty payments). Professor Hargrove's adoption of the lower revenue figures, without any acknowledgment of or reconciliation with the higher figures reported to Ironclad, is a significant gap in his analysis. A credible damages expert would, at minimum, address this discrepancy and explain why it does not undermine his conclusions. Professor Hargrove does neither.
B. Failure to Address Brecker Deposition Admissions
Randall Brecker's two-day deposition (January 9–10, 2023; approximately 14 hours of testimony) is among the most important pieces of evidence in this case. Brecker's admissions go directly to the nature, scope, and intent of the revenue diversion that is at the heart of Verimark's claims.
During his deposition, Brecker made the following key admissions, among others:
• He personally directed controllers at Coastal Palms' franchised hotel properties to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. Brecker Dep. Day 1, Tr. at 162:3–163:19.
• Suncoast Room Management Inc. was established in or around January 2013 specifically to collect revenues from three categories of bookings that would otherwise have been reported as GRR to Verimark: (1) walk-in guests who paid cash, (2) corporate-direct contracts negotiated outside the Verimark reservation system, and (3) bookings made through the unbranded website gulfcoastrooms.com, which Coastal Palms operated as an alternative to the Verimark-branded booking platform. Brecker Dep. Day 1, Tr. at 108:6–112:14.
• He acknowledged that these categories of revenue were "derived from the rental of guest rooms" at the franchised properties and that the routing through Suncoast was designed to reduce the GRR reported to Verimark. Brecker Dep. Day 1, Tr. at 163:14–19.
Professor Hargrove's failure to cite, address, or acknowledge this testimony is a significant evidentiary gap. An expert opinion on the proper scope of GRR that does not account for the defendant's own CEO's admission that the revenue in question was deliberately excluded from GRR reports is fundamentally incomplete.
C. Failure to Address Kerrigan Whistleblower Testimony
Janet Kerrigan, the former Regional Controller for Coastal Palms, was terminated in October 2021 and filed a whistleblower complaint with Verimark on November 8, 2021 — the event that triggered Verimark's investigation and ultimately this litigation. Kerrigan's deposition testimony provides detailed, firsthand accounts of the systematic instructions she received from Brecker and other Coastal Palms executives to exclude direct-booking revenues from GRR reports.
Kerrigan also testified about the 12% management fee that Suncoast retained on all revenues it collected. Kerrigan Dep. Tr. at 103:8–105:15. This management-fee structure is directly relevant to the GRR analysis because it establishes that Suncoast was not merely a pass-through entity; it was a profit center designed to capture revenue that would otherwise have been subject to Verimark's 5% royalty, 2.5% marketing-fund contribution, and per-room technology fee. The 12% management fee retained by Suncoast exceeded the combined royalty and marketing-fund rate (7.5%) that would have been payable to Verimark if the revenue had been properly reported, providing a clear financial incentive for the diversion scheme.
Professor Hargrove does not reference Kerrigan's testimony or the Suncoast management-fee structure anywhere in his report. This omission is particularly notable given that Hargrove's "service fee" characterization of walk-in cash payments — the linchpin of his narrowed GRR definition — is directly refuted by Kerrigan's testimony about the true nature and purpose of Suncoast.
D. Selective Reliance on Data
The Hargrove Report exhibits a pattern of selective data reliance that runs throughout his analysis:
First, as noted above, Professor Hargrove relies on Coastal Palms' reported GRR figures as a baseline for his analysis while simultaneously arguing that those figures may overstate true revenue in certain categories. Hargrove Report at 21–23. This is an internally contradictory position. If Coastal Palms' reported GRR figures are unreliable (as Hargrove suggests in certain contexts), then they cannot serve as a reliable baseline for his own damages model.
Second, Professor Hargrove accepts Suncoast's financial records as reliable for the 2017–2021 period but rejects them as unreliable for the 2013–2016 period, without articulating a principled basis for the temporal cutoff. As discussed in Section IV.C, the Suncoast records were maintained in the same accounting system and produced pursuant to the same court order for the entire 2013–2021 period. There is no apparent basis for treating records from the same source as reliable for one time period but unreliable for another.
Third, Professor Hargrove cherry-picks certain data gaps in the 2013–2014 PMS records while ignoring the Suncoast bank-statement evidence that fills those gaps. His report identifies specific PMS data issues — missing fields, formatting changes, incomplete records — for a subset of properties during 2013–2014. Hargrove Report at 38–40. But he does not acknowledge that the Suncoast bank statements and general ledgers for the same period provide an alternative (and in many respects superior) measure of the diverted revenue. This selective focus on the weaknesses of one data source while ignoring the strengths of another is not the hallmark of objective expert analysis.
VI. ASSESSMENT OF IMPACT ON CASE
A. Magnitude of the Gap Between Expert Opinions
The gap between the two expert damages opinions is approximately $143.8 million — a difference that will be among the most significant issues for the trier of fact to resolve:
The gap is not attributable to a single factor but rather to the cumulative effect of Professor Hargrove's methodological choices across multiple dimensions of the damages analysis. The following table breaks down the contributions of each disputed issue to the overall gap:
The Court will need to determine the proper GRR definition under the FLAs, the applicable time period for the damages calculation, the enforceability and rate of contractual late-payment interest, and the enforceability of the FLA § 15.3 liquidated-damages provision. Each of these determinations involves a mix of legal interpretation and factual findings, and the resolution of each will move the damages figure significantly in one direction or the other.
B. Strengths and Weaknesses of Hargrove's Presentation
An honest assessment of the Hargrove Report must acknowledge both its strengths and its weaknesses, as the strengths will require affirmative rebuttal and the weaknesses will provide opportunities for cross-examination and exclusion.
Strengths:
Statistical Analysis of PMS Data Reliability. Professor Hargrove devotes approximately 10 pages of his report (pp. 35–44) to a detailed statistical analysis of the completeness and reliability of property-level PMS data across the 22-property portfolio. This analysis, while ultimately unpersuasive for the reasons discussed in Section IV.C, is technically sophisticated and likely to be accessible and credible to a finder of fact unfamiliar with hospitality-industry data systems. His presentation includes charts, data-completeness percentages, and statistical confidence intervals that lend an air of rigor to his "reliability discount" methodology.
Report Organization and Presentation. The Hargrove Report is well-organized, clearly written, and effectively structured. It presents its opinions in a logical sequence, with each opinion building on the preceding one. The report is accompanied by detailed appendices with supporting calculations, source references, and data tables. This level of presentation quality will make the report accessible to judges and jurors and will require our team to match or exceed its production quality in Dr. Kettlewell's rebuttal.
Penalty-Doctrine Arguments. Professor Hargrove's arguments that the contractual interest rate and liquidated-damages provisions are unenforceable penalties, while improper legal conclusions for a damages expert, may nonetheless resonate with a judge or jury concerned about the magnitude of the total claimed damages. A $150 million damages claim arising from a franchise relationship involving 22 hotel properties may strike some factfinders as disproportionate, and Hargrove's framing of the interest and liquidated-damages provisions as "penalties" taps into that potential intuition. Our rebuttal and trial presentation must address this concern directly, both through the legal briefing on enforceability and through Dr. Kettlewell's presentation of the factual basis for the claimed damages.
Weaknesses:
Narrowed GRR Definition Contradicts Plain Contract Text. Hargrove's exclusion of walk-in cash payments and his net-revenue treatment of OTA bookings are flatly inconsistent with the "all revenues" and "regardless of the entity collecting" language of FLA § 4.1. This is a textual argument that does not require expert testimony to resolve — the contract says what it says — and Hargrove's attempt to rewrite the definition through expert opinion is likely to be viewed skeptically by the Court.
Failure to Address Key Deposition Testimony. As detailed in Section V.B and V.C, Professor Hargrove's failure to address Brecker's admissions and Kerrigan's whistleblower testimony is a significant evidentiary gap that will be a central theme of cross-examination at his deposition and at trial.
Contradicted by Coastal Palms' Own Ironclad Loan Submissions. The fact that Coastal Palms reported gross OTA revenue and Suncoast-collected revenue to its own lender while reporting net and excluded revenue to its franchisor is a devastating inconsistency that Hargrove does not address. This discrepancy will be powerful evidence for the jury and a significant challenge for Hargrove to explain during cross-examination.
Legal Conclusions Beyond Expert Scope. Hargrove's exclusion of contractual interest and liquidated damages based on legal-enforceability determinations exceeds the proper scope of an accounting/economics expert and is vulnerable to a Daubert/Marsh challenge. Even if the Court declines to exclude these opinions entirely, the fact that Hargrove rendered legal conclusions rather than presenting alternative damages scenarios will undermine his credibility as an objective damages expert.
"Reliability discount" Ignores Available Evidence. Hargrove's truncation of the damages period to 2017–2021 ignores the available Suncoast bank records and general ledgers for the 2013–2016 period, which provide direct evidence of diverted revenue. His selective reliance on PMS data gaps while ignoring the Suncoast evidence is analytically indefensible.
C. Daubert/Marsh Challenges
Based on the analysis in this memorandum, we have identified two potential bases for a motion to exclude or limit Professor Hargrove's testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), and the Florida counterpart, Marsh v. Valyou, 977 So. 2d 543 (Fla. 2007):
1. Motion to Exclude Opinions on Late-Payment Interest and Liquidated Damages. Professor Hargrove's opinions that the contractual interest rate under FLA § 4.6 and the liquidated-damages provision under FLA § 15.3 are unenforceable penalties constitute impermissible legal conclusions offered by a non-legal expert. Under Daubert and Marsh, expert testimony must be based on "sufficient facts or data" and "reliable principles and methods" within the expert's field of expertise. Legal-enforceability determinations are questions of law for the Court, not questions of economics or accounting within the expert's competence. A motion to exclude these opinions would argue that Hargrove's legal conclusions exceed the scope of his expertise, are not based on reliable methodology within his discipline, and invade the province of the Court.
2. Motion to Exclude or Limit the "Reliability discount" Methodology. Professor Hargrove's "reliability discount" for the 2013–2016 period could be challenged as lacking sufficient factual foundation given the available Suncoast financial records for those years. Under Daubert and Marsh, an expert methodology must be based on adequate data. Hargrove's decision to discard the 2013–2016 period based on PMS data gaps — while ignoring the directly relevant Suncoast bank records and general ledgers — reflects a selective and unreliable data-selection methodology. A motion could argue that the "reliability discount" is not based on a sound analytical framework because it ignores the most probative evidence for the discounted period.
I recommend that we discuss with Priya Anand the advisability and timing of filing these motions. If filed, they would most appropriately be part of the anticipated dispositive-motions phase after discovery closes on August 4, 2023. However, we may also wish to consider a pre-trial Marsh motion filed on a shorter timeline if we determine that excluding Hargrove's interest and liquidated-damages opinions would significantly alter the settlement dynamics before a potential mediation.
VII. RECOMMENDED REBUTTAL TOPICS FOR DR. KETTLEWELL'S REBUTTAL REPORT
The following is a consolidated summary of all recommended rebuttal topics for Dr. Kettlewell's rebuttal report, organized by the Hargrove errors identified in this memorandum. Dr. Kettlewell's rebuttal report is due June 9, 2023.
1. GRR Definition — Walk-In Cash Payments. Dr. Kettlewell should present a detailed analysis of the FLA § 4.1 language, with particular emphasis on the "all revenues," "any booking channel, direct or indirect," and "regardless of the entity collecting such revenue" phrases. The analysis should be cross-referenced with the Brecker deposition testimony (Day 1, Tr. at 147:8–148:12, 162: