INTERNAL DRAFT — PRIVILEGED AND CONFIDENTIAL — FOR PARTNER REVIEW
Draft Date: September 20, 2023
Prepared by: Yuki Nakamura (FL Bar No. 0119644) Carlos Espinoza (FL Bar No. 0128903)
Reviewed by: Priya Anand — Initials: __ Douglas Carmichael — Initials: __
IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA
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 MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNTS I AND II
CALDERWOOD & HARKNESS LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-7400 Facsimile: (954) 555-7401
Priya Anand, FL Bar No. 0087451 panand@calderwoodharkness.com Responsible Partner
Douglas Carmichael, FL Bar No. 0093217 dcarmichael@calderwoodharkness.com
Yuki Nakamura, FL Bar No. 0119644 ynakamura@calderwoodharkness.com
Carlos Espinoza, FL Bar No. 0128903 cespinoza@calderwoodharkness.com
Counsel for Plaintiff Verimark Hospitality Group Inc.
TABLE OF CONTENTS
[Page numbers to be finalized upon partner approval and prior to filing.]
TABLE OF AUTHORITIES
Cases
Statutes and Rules
Secondary Authorities
I. PRELIMINARY STATEMENT
Plaintiff Verimark Hospitality Group Inc. ("Verimark") respectfully submits this Memorandum of Law in support of its Motion for Partial Summary Judgment on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund Contributions) of its Verified Complaint against Defendant Coastal Palms Franchise Holdings LLC ("Coastal Palms"). By this motion, Verimark seeks summary judgment on the issue of liability only, with the quantification of damages to be determined at trial.
This case presents a straightforward application of unambiguous contract language to undisputed facts. Over the course of nine years — from January 2013 through December 2021 — Coastal Palms systematically underreported Gross Room Revenue ("GRR") across all twenty-two of its Verimark-branded franchise properties by diverting revenue through an affiliated entity, Defendant Suncoast Room Management Inc. ("Suncoast"), and an unbranded booking website, gulfcoastrooms.com. By routing walk-in bookings, corporate-direct contracts, and online reservations through Suncoast — and then deliberately excluding those revenues from the monthly GRR reports submitted to Verimark — Coastal Palms systematically underpaid both the five-percent (5%) royalty required by Section 4.1 of each Franchise License Agreement ("FLA") and the two-and-one-half-percent (2.5%) marketing-fund contribution required by Section 4.2. In addition, Coastal Palms improperly netted Online Travel Agency ("OTA") commission payments against GRR, further depressing reported revenue in violation of the FLAs' gross-revenue definition.
The record assembled over seventeen months of intensive discovery — including the Court's own docket, fourteen fact depositions taken between January 9 and March 17, 2023, over 396,000 documents produced in discovery, and the detailed forensic analysis performed by Verimark's expert, Dr. Sharon Kettlewell, CPA/CFF, CFE, of Ridgeline Forensic Advisory LLC — confirms that Coastal Palms underreported GRR by an estimated $197.8 million across all twenty-two franchised properties during the 2013–2021 period. This underreporting ranged from twenty-two percent to thirty-one percent (22%–31%) of actual GRR, depending on the property and year in question. For fiscal year 2021 alone, the underreporting gap was $33.2 million: Coastal Palms reported GRR of $112.4 million, whereas the forensic reconstruction established true GRR of $145.6 million.
The central legal question presented by this motion is whether revenues collected by Suncoast on behalf of Coastal Palms' Verimark-branded hotel properties fall within the GRR definition set forth in Section 4.1 of each FLA. That definition provides — in language that could scarcely be plainer — that 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." The emphasized phrase is an anti-avoidance clause drafted with precision to address the very scenario that unfolded here. It is unambiguous, it is controlling, and it leaves no room for Coastal Palms' assertion that Suncoast-collected revenues were somehow excluded from its reporting obligations.
No genuine dispute of material fact exists on any element of Verimark's breach-of-contract claims. The FLAs are valid and enforceable — their existence is undisputed. The systematic exclusion of Suncoast revenue from GRR reports — and the resulting underpayment of royalties and marketing-fund contributions — constitutes a material breach under both the FLAs' own terms and Florida common law. And the existence of damages, while their precise quantum remains to be determined at trial, is established as a matter of undisputed fact by the gap between reported and actual GRR.
Verimark respectfully requests that this Court grant partial summary judgment on liability for Counts I and II, finding that Coastal Palms breached Sections 4.1 and 4.2 of each of the twenty-two Franchise License Agreements, and reserving the determination of damages for trial.
II. STATEMENT OF THE CASE
A. The Parties
Verimark Hospitality Group Inc. is a Delaware corporation, publicly traded on the Nasdaq Stock Market under the ticker symbol "VHMK," with its principal executive offices located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301. Verimark operates and franchises approximately 340 branded hotels across the southeastern United States under three distinct brand flags: "Verimark Suites," "Verimark Select," and "Verimark Grand." For fiscal year 2021, Verimark reported consolidated revenue of approximately $1.42 billion, of which $218 million was attributable to the franchise segment — that is, royalties, marketing-fund contributions, technology fees, and other franchise-related income collected from its network of franchisees. The franchise segment represents a critical and growing component of Verimark's business model, and the integrity of franchisee GRR reporting is essential to the proper functioning of the franchise system as a whole. (Statement of Undisputed Material Facts ("SUMF") ¶¶ 1–5.)
Coastal Palms Franchise Holdings LLC is a Florida limited liability company with its principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108. Coastal Palms is, by a substantial margin, the single largest Verimark franchise operator, holding twenty-two individual Franchise License Agreements covering eighteen Verimark Suites properties and four Verimark Select properties located across the states of Florida and Georgia. Together, these twenty-two properties comprise approximately 3,740 total guest rooms. Coastal Palms is managed by its Managing Member, Defendant Randall "Randy" Brecker, who holds a sixty-percent (60%) equity interest. The remaining membership interests are held by Theresa Brecker (fifteen percent, 15% equity) and Nolan Prescott (twenty-five percent, 25% equity, passive investor). Mr. Brecker serves as the sole manager of Coastal Palms and exercises day-to-day control over all operations, financial reporting, and strategic decision-making for the franchise portfolio. (SUMF ¶¶ 6–12.)
Suncoast Room Management Inc. is a Florida corporation with its registered agent and principal office at the same Naples address as Coastal Palms. Randall Brecker serves as President and sole director of Suncoast. Suncoast was established no later than January 2013 as an affiliated management company whose stated purpose — as reflected in its articles of incorporation and its management agreements with property-level entities — was to collect revenues from certain categories of direct bookings, including walk-in guests, corporate-direct contracts, and reservations placed through the unbranded website gulfcoastrooms.com. For each such booking, Suncoast retained a twelve-percent (12%) "management fee" from the collected room revenue before remitting the remaining eighty-eight percent (88%) to the applicable property-level limited liability company. At no time did Suncoast or Coastal Palms include any portion of Suncoast's collections — whether the retained management fee or the amounts forwarded to property-level entities — in the GRR reports submitted to Verimark. (SUMF ¶¶ 13–22.)
The property-level entities through which Coastal Palms' individual hotel properties are held include, among others, Gulf Breeze Hospitality LLC (which holds six Verimark Suites properties in southwest Florida), Savannah Lodging Partners LLC (which holds four Verimark Suites properties in coastal Georgia), and approximately a dozen additional single-purpose LLCs. Each of these entities is managed by Randall Brecker in his capacity as Managing Member of Coastal Palms or as an officer of the property-level entity. The organizational structure — with Coastal Palms as the franchise-holding entity, Suncoast as the management-fee collection entity, and the property-level LLCs as the operating entities — was designed and controlled by Mr. Brecker. (SUMF ¶¶ 23–28.)
B. The Franchise Relationship
The franchise relationship between Verimark and Coastal Palms commenced on June 15, 2007, when Coastal Palms executed its first Franchise License Agreement with Verimark for a single Verimark Suites property located in Naples, Florida. Over the ensuing twelve years, the relationship expanded significantly as Coastal Palms entered into twenty-one additional FLAs, the most recent of which was executed on September 3, 2019, for a Verimark Select property in Sarasota, Florida. (SUMF ¶¶ 29–32.)
Each of the twenty-two FLAs is a comprehensive written agreement governing all aspects of the franchise relationship for the applicable hotel property. Each FLA carries an initial term of twenty years, is governed by the laws of the State of Florida, and contains a mandatory venue provision designating Broward County, Florida, as the exclusive forum for the resolution of disputes. Each FLA also contains a broad integration clause providing that the FLA constitutes the entire agreement between the parties with respect to the subject matter thereof and supersedes all prior negotiations, representations, warranties, commitments, offers, and agreements, whether written or oral. Modifications to the FLAs must be made in a writing signed by both parties. (SUMF ¶¶ 33–37.)
The following contractual provisions are central to this motion:
Section 4.1 — Royalties. Section 4.1 of each FLA requires Coastal Palms to pay Verimark a royalty equal to five percent (5%) of Gross Room Revenue. The term "Gross Room Revenue" or "GRR" is defined in Section 4.1 as follows:
"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 identical in all twenty-two FLAs, from the first agreement executed on June 15, 2007, through the most recent agreement executed on September 3, 2019. It is the pivotal contractual provision in this case. (SUMF ¶¶ 38–41.)
Section 4.2 — Marketing-Fund Contribution. Section 4.2 requires Coastal Palms to contribute two and one-half percent (2.5%) of GRR to the Verimark Marketing Fund, using the same GRR definition set forth in Section 4.1. (SUMF ¶ 42.)
Section 4.3 — Technology Fee. Section 4.3 requires a technology fee of $12.50 per available room per month, adjusted annually for changes in the Consumer Price Index, with a cap of three percent (3%) per year. The technology fee is not calculated on the basis of GRR and is not at issue in this motion. (SUMF ¶ 43.)
Section 4.6 — Late-Payment Interest. Section 4.6 provides that any amounts not timely paid shall bear interest at the rate of one and one-half percent (1.5%) per month, compounded monthly. (SUMF ¶ 44.)
Section 8.2 — Audit Rights. Section 8.2 grants Verimark the right to audit the franchisee's books and records upon ten (10) business days' written notice. If an audit reveals that the franchisee has underpaid amounts due under the FLA by more than two percent (2%) of reported GRR, the franchisee is required to bear all costs associated with the audit. (SUMF ¶ 45.)
Section 14.1 — Cure Period. Section 14.1 provides that, upon written notice of a material breach, the franchisee shall have thirty (30) days to cure the breach to the franchisor's reasonable satisfaction. (SUMF ¶ 46.)
Section 14.2(c) — Incurable Breach. Section 14.2(c) provides, in pertinent part:
"Notwithstanding Section 14.1, systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure."
This provision establishes, as a matter of contractual definition, that the precise conduct at issue in this case — systematic underreporting of GRR — constitutes a material breach that cannot be remedied through the ordinary cure process. (SUMF ¶ 47.)
Section 15.3 — Liquidated Damages. Section 15.3 provides that, upon termination of the FLA for cause, the franchisor shall be entitled to liquidated damages equal to three times (3×) the trailing-twelve-month royalties for the affected property. This provision is relevant to damages, not liability, and is not at issue in this motion. (SUMF ¶ 48.)
Under the FLAs, Coastal Palms was required to submit monthly GRR reports to Verimark and to remit corresponding royalty and marketing-fund contribution payments within fifteen (15) days after the end of each calendar month. These reports were the mechanism by which Verimark monitored its franchise revenue, ensured compliance with the FLAs, and managed its marketing-fund budget for the benefit of all franchisees in the system. The accuracy of these reports was a foundational obligation of the franchise relationship. (SUMF ¶¶ 49–51.)
C. The Revenue Diversion Scheme
Beginning no later than January 2013, approximately six years into the franchise relationship, Coastal Palms — through Randall Brecker's creation and direction of Suncoast Room Management Inc. — implemented a systematic scheme to divert guest-room revenue away from the GRR reports submitted to Verimark. (SUMF ¶¶ 52–55.)
The mechanics of the scheme were straightforward but effective. Suncoast was established as a separate corporate entity to collect revenues from three categories of bookings at Coastal Palms' Verimark-branded hotel properties: (1) walk-in guests who arrived at the front desk without a prior reservation; (2) corporate-direct contracts — that is, negotiated rate agreements with corporate accounts that booked rooms directly with the property rather than through Verimark's central reservation system or through an OTA platform; and (3) reservations placed through gulfcoastrooms.com, an unbranded website that Suncoast operated to promote and take bookings for the Coastal Palms properties without identifying them as part of the Verimark brand. (SUMF ¶¶ 56–60.)
For each booking processed through the Suncoast channel, Suncoast collected the full room charge from the guest, retained a twelve-percent (12%) "management fee" from the collected amount, and remitted the remaining eighty-eight percent (88%) to the property-level LLC that operated the applicable hotel (e.g., Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, or one of the other property-level entities). Critically, neither the gross amount collected by Suncoast nor the net amount remitted to the property-level entity — nor any portion thereof — was reported to Verimark as GRR. The Suncoast-collected revenues were treated as if they did not exist for franchise-reporting purposes. (SUMF ¶¶ 61–66.)
In addition to the Suncoast diversion, Coastal Palms engaged in a separate but related practice of improperly netting OTA revenue. For bookings made through third-party OTA channels such as Aldermere Technologies, Bramwell Holdings, and Drayton Software, Coastal Palms classified the OTA's commission payments as "commissions receivable" and deducted those commissions from GRR before reporting, such that only the net amount received after the OTA commission was included in reported GRR. This treatment contravened the FLAs' GRR definition, which calls for "all revenues" on a gross basis and contains no provision authorizing the deduction of commissions or other expenses from reported GRR. (SUMF ¶¶ 67–71.)
The combined effect of the Suncoast diversion and the OTA netting was substantial. Across the entire twenty-two-property portfolio, Coastal Palms' reported GRR was systematically understated by an estimated twenty-two percent to thirty-one percent (22%–31%) of actual GRR, varying by property and reporting period. As a single-year illustration: for fiscal year 2021, Coastal Palms reported GRR of $112.4 million; the forensic reconstruction performed by Dr. Kettlewell established that true GRR for the same period was $145.6 million — an underreporting gap of $33.2 million for that year alone. (SUMF ¶¶ 72–76.)
D. Discovery of the Scheme and Pre-Litigation Events
The revenue diversion scheme came to Verimark's attention through a whistleblower. On November 8, 2021, Janet Kerrigan, the former Regional Controller for Coastal Palms who had been terminated by Coastal Palms in October 2021, contacted Verimark's confidential compliance hotline and reported the existence of the Suncoast revenue-diversion scheme. Ms. Kerrigan provided specific details about the structure of the scheme, the nature and volume of diverted revenues, and the direction she had received from Randall Brecker to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. (SUMF ¶¶ 77–80.)
Following Ms. Kerrigan's report, Verimark promptly engaged Thornbury & Associates CPAs LLP ("Thornbury"), a certified public accounting firm with offices at 1551 N. Flagler Drive, Suite 800, West Palm Beach, Florida 33401. Malcolm Thornbury, CPA, Lead Audit Partner, was retained on November 22, 2021, to conduct a franchise-compliance audit of Coastal Palms' ten largest properties as measured by reported GRR. The scope of the audit encompassed a review of property management system data, bank account records, OTA reconciliation reports, and available financial records for the 2019–2021 period. (SUMF ¶¶ 81–84.)
On January 18, 2022, Thornbury delivered its preliminary audit findings to Verimark's general counsel. The results were stark: the ten audited properties had underreported GRR by approximately twenty-six percent (26%) for the 2019–2021 period. Extrapolated across all twenty-two properties and the full 2013–2021 period — using historical occupancy data, rate comparisons, and available Suncoast financial records — Thornbury estimated total underreported GRR of approximately $197.8 million. (SUMF ¶¶ 85–88.)
Armed with these preliminary findings, Verimark took the following steps:
On February 4, 2022, Verimark issued a formal Notice of Material Breach to Coastal Palms under FLA Section 14.1, identifying the systematic underreporting of GRR through the Suncoast diversion scheme and the OTA netting practice, and demanding that Coastal Palms cure the breach within thirty (30) days by, among other things, submitting corrected GRR reports for all affected periods and remitting the unpaid royalties and marketing-fund contributions, together with applicable late-payment interest. (SUMF ¶¶ 89–91.)
On February 28, 2022, the law firm of Whitfield, Barrow & Crane LLP, by its Senior Partner Nathan Whitfield III, responded on behalf of Coastal Palms. The response denied any material breach. Counsel for Coastal Palms asserted that Suncoast revenues were "properly excluded" from GRR reports under a "reasonable interpretation" of the FLA's GRR definition, contending that the definition applied only to revenues collected by the franchisee itself and not to revenues collected by a "separate management entity" such as Suncoast. The response did not address the OTA netting issue. (SUMF ¶¶ 92–94.)
The thirty-day cure period expired on March 6, 2022, without any cure having been tendered. Coastal Palms did not submit corrected GRR reports, did not remit supplemental royalty payments, did not remit supplemental marketing-fund contributions, and did not take any other action to remedy the identified breaches. (SUMF ¶¶ 95–96.)
E. Procedural History
On March 7, 2022 — the day after the expiration of the cure period — Verimark filed its ten-count Verified Complaint in this Court, asserting claims for breach of contract (Counts I–IV), breach of the implied covenant of good faith and fair dealing (Count V), fraud (Count VI), fraudulent concealment (Count VII), civil conspiracy (Count VIII), unjust enrichment (Count IX), and declaratory relief (Count X), and seeking damages in excess of $150 million. (SUMF ¶ 97.)
On April 18, 2022, Coastal Palms filed its Answer, Affirmative Defenses, and Counterclaim. The Counterclaim asserted a single count for alleged brand-standard violations and over-billing, seeking approximately $12 million in damages. (SUMF ¶ 98.)
On May 2, 2022, Verimark filed its Answer to the Counterclaim, denying all material allegations. (SUMF ¶ 99.)
A Case Management Conference was held on June 14, 2022, before the Honorable Richard M. Calloway, Circuit Judge. The Court entered a Case Management Order establishing discovery deadlines and setting trial for February 2024. The trial date was subsequently continued by order of the Court. (SUMF ¶ 100.)
Written discovery commenced on July 11, 2022, when Verimark served its First Set of Interrogatories (twenty-five interrogatories) and First Request for Production of Documents (one hundred forty-seven requests) on Coastal Palms. (SUMF ¶ 101.)
Coastal Palms produced its initial document production on August 22, 2022, consisting of approximately 84,000 documents. The production was materially deficient, as it excluded all financial records of Suncoast Room Management Inc. — the very entity at the center of the revenue diversion scheme. (SUMF ¶¶ 102–103.)
On September 15, 2022, Verimark filed its Motion to Compel Production of Suncoast Room Management Financial Records. The motion identified specific categories of documents withheld — including Suncoast's general ledgers, bank statements, management-fee reconciliation reports, gulfcoastrooms.com booking data, and inter-company transfer records — and demonstrated their relevance to the claims and defenses in the action. (SUMF ¶¶ 104–105.)
The Court granted the Motion to Compel on October 28, 2022, ordering that all responsive Suncoast records be produced within twenty-one (21) days. The Court further ordered that Coastal Palms bear the reasonable costs of the motion. (SUMF ¶ 106.)
Coastal Palms' supplemental production was completed on November 18, 2022, and comprised approximately 312,000 additional documents, including Suncoast's complete financial records, inter-company transfer documentation, gulfcoastrooms.com booking logs, and corporate-direct contract files. Together with the initial production, total document production exceeded 396,000 documents. (SUMF ¶¶ 107–108.)
Fourteen (14) fact depositions were conducted between January 9, 2023, and March 17, 2023. Among the deponents were:
• Randall Brecker (two-day deposition, January 23–24, 2023);
• Theresa Brecker (January 30, 2023);
• Nolan Prescott (February 3, 2023);
• Janet Kerrigan (February 10, 2023);
• Ten (10) property-level managers and accountants (various dates, February 16 – March 17, 2023).
(SUMF ¶¶ 109–113.)
On April 14, 2023, Verimark served the expert report of Dr. Sharon Kettlewell, CPA/CFF, CFE, a forensic accounting expert with Ridgeline Forensic Advisory LLC. Dr. Kettlewell's report reconstructed actual GRR from Suncoast financial records, OTA reconciliation data, property management system data, and bank records, and concluded that total underreported GRR across all twenty-two properties for the 2013–2021 period was $197.8 million. (SUMF ¶¶ 114–117.)
On May 15, 2023, Coastal Palms served the expert report of Prof. Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc. Prof. Hargrove's report adopted an alternative, narrower definition of GRR and concluded that the maximum potential underpayment was $6.2 million — a figure that, notably, still concedes both the existence of Suncoast-collected revenue and its exclusion from GRR reports, albeit calculated on a substantially reduced basis. (SUMF ¶¶ 118–120.)
On June 9, 2023, Verimark served its rebuttal expert report, in which Dr. Kettlewell responded to Prof. Hargrove's methodology and demonstrated the flaws in his narrower GRR calculation. (SUMF ¶ 121.)
Expert depositions were conducted on June 26–27, 2023, with Dr. Kettlewell deposed on June 26 and Prof. Hargrove deposed on June 27. (SUMF ¶¶ 122–123.)
Discovery closed on August 4, 2023, in accordance with the Court's Case Management Order. (SUMF ¶ 124.)
Verimark now moves for partial summary judgment on liability for Counts I and II of its Verified Complaint.
III. LEGAL STANDARD
A. Summary Judgment Under Florida Rule of Civil Procedure 1.510
Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fla. R. Civ. P. 1.510(a). The Court's role at the summary-judgment stage is not to weigh the evidence or to resolve disputed issues of fact, but rather to determine whether, viewing the evidence in the light most favorable to the non-moving party, there exists a genuine dispute as to any material fact that would preclude judgment as a matter of law.
In 2021, Florida adopted amendments to Rule 1.510 that aligned the state summary-judgment standard with the federal standard articulated by the United States Supreme Court in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), and its progeny. See In re Amendments to Fla. R. Civ. P. 1.510, 309 So. 3d 192 (Fla. 2020) (adopting amended Rule 1.510, effective May 1, 2021). The amended rule eliminated the "slightest doubt" standard that had previously governed summary-judgment practice in Florida state courts — a standard under which courts would deny summary judgment if the record raised "the slightest doubt that an issue might exist." Moore v. Morris, 475 So. 2d 666, 668 (Fla. 1985) (describing former standard). Under the current standard, a court must grant summary judgment where the movant demonstrates the absence of a genuine issue of material fact, and the non-movant fails to come forward with specific facts showing that a genuine dispute exists for trial.
The burden on the moving party is to identify those portions of the record — including depositions, answers to interrogatories, admissions, stipulations, and affidavits — that demonstrate the absence of a genuine issue of material fact. See Fla. R. Civ. P. 1.510(c). The movant need not negate every element of the non-movant's case; rather, the movant may satisfy its burden by pointing to an absence of evidence to support an essential element of the non-moving party's claim or defense. Cf. Celotex, 477 U.S. at 325.
Once the moving party satisfies its initial burden, the burden shifts to the non-moving party to come forward with specific facts demonstrating the existence of a genuine issue for trial. Conclusory allegations, speculative assertions, and bare denials are insufficient to create a genuine issue of material fact. See Dows v. Sterling Reach Partners LLC, 846 So. 2d 595, 601 (Fla. 4th DCA 2003); Shetty v. Palm Beach Cnty., 890 So. 2d 413, 416 (Fla. 4th DCA 2004). The non-movant "must do more than simply show that there is some metaphysical doubt as to the material facts." Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000).
Partial summary judgment on the question of liability is proper where the record establishes liability as a matter of law while genuine factual disputes remain as to the measure of damages. See Fla. R. Civ. P. 1.510(a) (authorizing summary judgment "upon all or any part of a claim"); Lambert v. Berkley S. Condo. Ass'n, 680 So. 2d 588, 590 (Fla. 4th DCA 1996) (affirming partial summary judgment on liability while reserving damages for trial). The entry of partial summary judgment on liability serves the interests of judicial economy by narrowing the issues for trial and eliminating the need for the jury to consider questions that have been resolved as a matter of law.
B. Contract Interpretation Under Florida Law
Florida follows an objective approach to contract interpretation. The court first examines the plain language of the contract to determine the intent of the parties. Dade Cnty. Sch. Bd. v. Radio Station WQBA, 731 So. 2d 638, 643 (Fla. 1999). Where the contract language is clear and unambiguous, the court must enforce the contract according to its plain meaning and may not resort to rules of construction or extrinsic evidence to vary or contradict the expressed intent. Friedman v. Virginia Metal Prods. Corp., 56 So. 2d 515, 517 (Fla. 1952); Volusia Cnty., 760 So. 2d at 131.
Ambiguity exists only where the contract language is "susceptible to more than one reasonable interpretation." Goldstein v. Seaman, 150 So. 3d 1218, 1221 (Fla. 4th DCA 2014). Critically, a contract is not rendered ambiguous merely because one party attaches a different meaning to a term than the other party. Rosen v. Fla. Ins. Guar. Ass'n, 802 So. 2d 291, 295 (Fla. 2001). Nor does a party's subjective intent or post-hoc interpretation create an ambiguity where none exists in the text. Garcia v. Federal Ins. Co., 969 So. 2d 1129, 1132 (Fla. 3d DCA 2007). Whether a contract provision is ambiguous is itself a question of law for the court. Goldstein, 150 So. 3d at 1221.
In construing a contract, the court must read the document as a whole, giving effect to every provision and avoiding any interpretation that would render a provision superfluous, meaningless, or nugatory. Sepe v. City of Safety Harbor, 761 So. 2d 1182, 1185 (Fla. 2d DCA 2000); J.J. Gumberg Co. v. Janis Servs., Inc., 847 So. 2d 1048, 1051 (Fla. 4th DCA 2003). This principle — often referred to as the canon against superfluity — has particular force where, as here, the drafter included a specific clause addressing a specific scenario.
Florida courts have consistently enforced broadly defined revenue terms in franchise agreements, recognizing that franchisors' use of comprehensive revenue definitions serves the legitimate purpose of ensuring that franchisees cannot avoid their payment obligations by manipulating the channel through which revenue is collected. See, e.g., Quality Franchise Sys., Inc. v. Phelps, 780 So. 2d 973, 976 (Fla. 5th DCA 2001) (enforcing franchise agreement's gross-revenue definition and rejecting franchisee's attempt to exclude certain categories of receipts); Burger King Corp. v. Austin, 805 F. Supp. 1007, 1018–19 (S.D. Fla. 1992) (applying Florida law and enforcing broad revenue-reporting definition in franchise agreement). Courts have repeatedly recognized that an expansive revenue definition is a commercial necessity in the franchise context, where the franchisor relies on the franchisee's accurate self-reporting as the basis for royalty calculations and marketing-fund contributions.
IV. UNDISPUTED MATERIAL FACTS
The material facts necessary to resolve this motion are set forth in detail in Plaintiff's separately filed Statement of Undisputed Material Facts, which consists of 127 numbered paragraphs, each supported by specific citations to the record. That Statement was filed on September 29, 2023. Verimark summarizes the key undisputed facts below, organized thematically. Unless otherwise noted, all record citations refer to the Statement of Undisputed Material Facts and the supporting exhibits filed therewith.
A. The FLA GRR Definition Is Unambiguous
Each of the twenty-two Franchise License Agreements between Verimark and Coastal Palms contains an identical definition of Gross Room Revenue in Section 4.1:
"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."
(SUMF ¶¶ 38–40; Exs. A-1 through A-22 (each FLA, § 4.1).)
This language has remained unchanged across all twenty-two FLAs, from the first agreement executed on June 15, 2007, through the most recent agreement executed on September 3, 2019. The definition was not modified, amended, or supplemented at any time during the franchise relationship. (SUMF ¶ 41.)
No FLA contains any exception, carve-out, exclusion, or qualifying language for revenues collected by affiliated management companies, related entities, or entities other than the franchisee. No FLA contains any exception or exclusion for revenues generated through unbranded booking platforms or websites. The GRR definition is comprehensive and all-encompassing. (SUMF ¶¶ 42–44.)
B. Suncoast Collected Guest-Room Revenue Attributable to Coastal Palms Properties
Suncoast Room Management Inc. was incorporated by Randall Brecker under the laws of the State of Florida and began operations no later than January 2013. (SUMF ¶ 52; Ex. B-1 (Suncoast articles of incorporation, filed December 14, 2012).)
Suncoast collected revenues from three categories of bookings at Coastal Palms' Verimark-branded hotel properties: (1) walk-in guests; (2) corporate-direct contracts; and (3) bookings placed through gulfcoastrooms.com, an unbranded website operated by Suncoast. (SUMF ¶¶ 56–60; Exs. C-1 through C-8 (Suncoast management agreements, gulfcoastrooms.com registration records, and corporate-direct contract templates).)
These revenues were, by their nature and in their entirety, "derived from or attributable to the rental of guest rooms at the Hotel" — the very language of the GRR definition. The guests who booked through Suncoast channels stayed in rooms at Verimark-branded properties operated by Coastal Palms. The revenue was generated by the rental of those rooms. There is no dispute on this point. (SUMF ¶¶ 61–63.)
Suncoast retained a twelve-percent (12%) management fee on each booking and remitted the balance to the applicable property-level LLC. Neither the gross amount collected by Suncoast, nor the net amount remitted to the property-level entity, nor the retained management fee, was included in any GRR report submitted to Verimark. (SUMF ¶¶ 64–66; Exs. D-1 through D-14 (Suncoast general ledger entries, inter-company transfer records, and GRR reports).)
Randall Brecker admitted in his deposition that he established Suncoast, that he directed the routing of certain bookings through Suncoast, and that he understood the revenue derived from guest-room rentals at Verimark-branded properties. He further admitted that he directed Coastal Palms' accounting staff to exclude Suncoast-collected revenues from the GRR reports submitted to Verimark. (SUMF ¶¶ 67–70; Brecker Dep. Day 1, pp. 147:3–152:18; Day 2, pp. 48:11–56:22, 201:6–208:14.)
C. Coastal Palms' Monthly GRR Reports Excluded Suncoast Revenue
Monthly GRR reports submitted by Coastal Palms to Verimark from January 2013 through December 2021 did not include any revenue collected by Suncoast. This was not an accidental omission; it was a deliberate and systematic practice, directed by Randall Brecker and implemented by Coastal Palms' accounting staff. (SUMF ¶¶ 71–74.)
Janet Kerrigan, who served as Regional Controller for Coastal Palms from March 2015 until her termination in October 2021, testified at her deposition that she was instructed by Randall Brecker to exclude Suncoast-collected revenues from the monthly GRR submissions to Verimark. Ms. Kerrigan stated that she raised concerns about this practice with Mr. Brecker on multiple occasions and was told to "follow the process" and not to "create problems." Ms. Kerrigan testified that she understood the exclusion of Suncoast revenues from GRR reports violated the FLAs, and that this was a contributing factor in her decision to contact Verimark's compliance hotline after her termination. (SUMF ¶¶ 75–79; Kerrigan Dep., pp. 87:4–96:19, 112:3–118:22, 201:8–209:15.)
The ten property-level managers and accountants deposed in this case uniformly confirmed that they received direction from "corporate" — meaning Randall Brecker and his designees — to route walk-in and corporate-direct bookings through the Suncoast channel and to exclude those revenues from the GRR reports submitted to Verimark. Several property-level witnesses testified that they were specifically instructed to code Suncoast bookings under separate accounting categories that would not be captured by the GRR reporting template provided by Verimark. (SUMF ¶¶ 80–85; Deposition Summary Memorandum — Property-Level Witnesses, dated March 24, 2023, filed as Ex. E.)
D. OTA Revenue Was Improperly Netted
In addition to the Suncoast diversion, Coastal Palms systematically understated GRR by improperly netting OTA commission payments. For bookings made through third-party OTA platforms — including Aldermere Technologies, Bramwell Holdings, Drayton Software, and Penmark Industries — Coastal Palms classified the OTA's commission as "commissions receivable" and deducted that commission from the gross booking revenue before reporting the net amount as GRR to Verimark. (SUMF ¶¶ 86–89.)
The FLAs' GRR definition refers to "all revenues," a term that, by its plain meaning, encompasses gross receipts before the deduction of commissions, fees, or other expenses. No provision of any FLA authorizes the netting of OTA commissions or any other deduction from GRR. Coastal Palms' practice of reporting net OTA revenue rather than gross OTA revenue resulted in a further understatement of GRR beyond the Suncoast diversion. (SUMF ¶¶ 90–92.)
E. Forensic Quantification of Underreported GRR
Dr. Sharon Kettlewell, CPA/CFF, CFE, of Ridgeline Forensic Advisory LLC, was retained by Verimark to reconstruct actual GRR for each of the twenty-two Coastal Palms properties for the 2013–2021 period. Dr. Kettlewell's methodology drew upon four independent categories of source data: (1) Suncoast financial records, including general ledger entries, bank statements, and inter-company transfer documentation; (2) OTA reconciliation data, including gross booking reports obtained directly from OTA platforms via third-party subpoenas; (3) property management system ("PMS") data maintained at each hotel property; and (4) bank records for Suncoast, the property-level LLCs, and Coastal Palms. (SUMF ¶¶ 93–97.)
Dr. Kettlewell's expert report, served on April 14, 2023, reached the following conclusions:
• Total underreported GRR across all twenty-two properties for the 2013–2021 period: $197.8 million.
• The degree of underreporting ranged from 22% to 31% of actual GRR, varying by property and year, with the highest underreporting percentages concentrated in the southwest Florida Verimark Suites properties that had the highest proportion of walk-in and corporate-direct business.
• For fiscal year 2021 specifically: actual GRR was $145.6 million, compared to reported GRR of $112.4 million — an underreporting gap of $33.2 million for that year alone.
• Estimated underpaid royalties (5% of underreported GRR): $9.89 million.
• Estimated underpaid marketing-fund contributions (2.5% of underreported GRR): $4.945 million.
(SUMF ¶¶ 98–104; Ex. F (Kettlewell Expert Report, dated April 14, 2023).)
Verimark notes that the precise damages figures are not at issue in this motion, which is limited to liability. Dr. Kettlewell's findings are cited here solely to establish the undisputed fact that GRR was underreported and that royalties and marketing-fund contributions were underpaid.
F. Coastal Palms Never Disputed the Underlying Data
Coastal Palms' own expert, Prof. Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc., did not dispute that Suncoast collected guest-room revenue from Coastal Palms' Verimark-branded hotel properties. Prof. Hargrove did not dispute that Suncoast-collected revenues were excluded from the GRR reports submitted to Verimark. Prof. Hargrove did not dispute that Coastal Palms netted OTA commissions against GRR before reporting. (SUMF ¶¶ 105–107.)
Prof. Hargrove's disagreement with Dr. Kettlewell was limited to two issues: (1) the proper interpretation of the GRR definition — a legal question on which expert testimony is inadmissible and irrelevant — and (2) the quantum of damages. On the damages question, Prof. Hargrove adopted a narrower GRR definition (one that excluded the Suncoast management fee and a portion of the corporate-direct contract revenue) and calculated a maximum potential underpayment of $6.2 million. That figure, however — even at Prof. Hargrove's substantially reduced estimate — still concedes the existence of underpayment and thus the existence of damages. (SUMF ¶¶ 108–112; Ex. G (Hargrove Expert Report, dated May 15, 2023); Hargrove Dep., pp. 78:4–82:17.)
In its Answer and Affirmative Defenses, Coastal Palms does not deny that Suncoast collected guest-room revenue. Coastal Palms does not deny that Suncoast-collected revenue was excluded from GRR reports. Instead, Coastal Palms asserts only that the GRR definition is "ambiguous" and that Suncoast revenue was "properly excluded" under Coastal Palms' interpretation of the FLAs. (SUMF ¶¶ 113–115; Answer and Affirmative Defenses, ¶¶ 47–53, 67–72.)
G. No Cure Was Tendered
Verimark issued a formal Notice of Material Breach to Coastal Palms on February 4, 2022, demanding cure within thirty (30) days under FLA Section 14.1. The Notice identified the Suncoast revenue diversion and OTA netting practices as the basis for the breach, set forth the applicable FLA provisions, and specified the corrective actions required, including submission of amended GRR reports and payment of all outstanding royalties, marketing-fund contributions, and accrued interest. (SUMF ¶¶ 116–118; Ex. H (Notice of Material Breach, dated February 4, 2022).)
On February 28, 2022, Whitfield, Barrow & Crane LLP, on behalf of Coastal Palms, responded by denying any material breach and asserting that Suncoast revenues were "properly excluded" under a "reasonable interpretation" of the GRR definition. The response did not offer any cure, did not propose corrective action, and did not tender any supplemental payment. (SUMF ¶¶ 119–120; Ex. I (Whitfield Response Letter, dated February 28, 2022).)
The thirty-day cure period expired on March 6, 2022. No cure was ever tendered. No supplemental GRR reports were submitted. No supplemental royalty payments were made. No supplemental marketing-fund contributions were remitted. (SUMF ¶¶ 121–122.)
Under FLA Section 14.2(c), "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." By the FLAs' own terms, the breach identified in this case is incurable, rendering the cure period in Section 14.1 inapplicable as a matter of contract. (SUMF ¶¶ 123–124.)
V. ARGUMENT
A. Count I: Coastal Palms Breached § 4.1 of Each FLA by Failing to Pay Royalties on All Gross Room Revenue
1. The Elements of Breach of Contract Are Satisfied as a Matter of Law. Under Florida law, the elements of a cause of action for breach of contract are: (1) the existence of a valid contract; (2) a material breach of that contract; and (3) damages resulting from the breach. See Wilsonart, LLC v. Lopez, 308 So. 3d 56, 60 (Fla. 2020); In re Std. Jury Instructions — Contract and Bus. Cases, 116 So. 3d 284, 303 (Fla. 2013). Each element is established on this record as a matter of undisputed fact.
Element 1 — Valid Contract. The existence and validity of the twenty-two Franchise License Agreements are undisputed. Coastal Palms does not contend, and has never contended, that the FLAs are invalid, unenforceable, or the product of fraud, duress, mistake, or any other contract-formation defense. Each FLA was executed by authorized representatives of Verimark and Coastal Palms, is supported by adequate consideration, and constitutes a valid, binding, and enforceable agreement under Florida law. (SUMF ¶¶ 29–37; Answer ¶¶ 15–22 (admitting execution and authenticity of the FLAs).)
Element 2 — Material Breach. Coastal Palms' systematic exclusion of Suncoast-collected guest-room revenue from its monthly GRR reports, and its resulting underpayment of the five-percent (5%) royalty required by Section 4.1, constitutes a material breach of each FLA. As demonstrated in Sections V.A.2–5 below, the GRR definition unambiguously encompasses Suncoast-collected revenue; the exclusion of that revenue was deliberate and systematic; and the FLAs themselves classify this conduct as a material breach that is incapable of cure. The materiality of the breach is established both contractually (under § 14.2(c)) and under the common-law factors recognized in Florida jurisprudence.
Element 3 — Damages. Verimark suffered damages in the form of underpaid royalties. The precise amount of damages will be determined at trial, but the existence of damages is established as a matter of undisputed fact: Coastal Palms calculated and paid its royalties based on understated GRR, and the royalties actually paid were less than the royalties owed under the FLAs. Dr. Kettlewell estimates underpaid royalties at $9.89 million (five percent of $197.8 million in underreported GRR); even Coastal Palms' own expert, Prof. Hargrove, concedes underpayment — he simply disagrees about the magnitude. (SUMF ¶¶ 98–112.)
Because this motion seeks summary judgment on liability only, the exact quantum of damages need not be resolved at this stage. The undisputed existence of some damages — a fact that not even Coastal Palms' expert disputes — is sufficient to establish the damages element for purposes of a liability determination. See Lambert, 680 So. 2d at 590; Cox v. CSX Intermodal, Inc., 732 So. 2d 1092, 1097 (Fla. 1st DCA 1999) (partial summary judgment proper where existence of damages is undisputed even though quantum remains contested).
2. The FLA's GRR Definition Unambiguously Encompasses Suncoast-Collected Revenue. The Court need look no further than the plain language of the FLAs to resolve the central legal question in this case. Section 4.1 defines Gross Room Revenue as:
"all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue."
Three distinct textual elements of this definition compel the conclusion that Suncoast-collected revenue falls within the scope of GRR:
First, "all revenues." The modifier "all" is comprehensive, unrestricted, and unqualified. It signals a total, not partial, inclusion of the revenues that follow. Under Florida law, the word "all" in a contractual provision is given its ordinary meaning — i.e., "every; the whole of; the total amount of." See Tele-Media Co. of W. Va. v. Antidormi, 179 So. 3d 422, 427 (Fla. 4th DCA 2015) (giving effect to the word "all" as a comprehensive modifier); Provident Life & Accident Ins. Co. v. Genovese, 138 So. 3d 474, 478 (Fla. 4th DCA 2014) ("The word 'all' is unambiguous and inclusive."). "All revenues" means precisely what it says: every dollar of revenue, without exception.
Second, "any booking channel, direct or indirect." This clause expressly extends the scope of GRR to revenue generated through any booking mechanism, whether the guest books directly (e.g., a walk-in at the front desk or a booking via the property's own website) or indirectly (e.g., through a third-party OTA, a central reservation system, or — as in this case — through an unbranded website such as gulfcoastrooms.com). The phrase "direct or indirect" is a belt-and-suspenders formulation that leaves no gaps in coverage. The three categories of Suncoast bookings — walk-ins, corporate-direct contracts, and gulfcoastrooms.com — are precisely the types of "booking channels, direct or indirect" that this language was designed to capture.
Third, "regardless of the entity collecting such revenue." This clause is dispositive. It is an anti-avoidance provision — a clause whose sole purpose is to foreclose the argument that Coastal Palms now advances. The phrase "regardless of the entity collecting such revenue" means that GRR includes guest-room revenue irrespective of whether the franchisee collects it directly, or whether some other entity — an affiliate, a management company, a booking intermediary, or any other person or entity — collects it on behalf of the property. The inclusion of this language demonstrates that the drafter of the FLAs anticipated the precise maneuver that Coastal Palms executed: interposing a separate entity between the guest payment and the franchisee's books in an attempt to shield the revenue from the GRR definition. The drafter addressed this risk directly, explicitly, and unambiguously.
Read together, these three elements establish a GRR definition of unmistakable breadth and clarity. The definition captures (1) all revenue (2) from all booking channels (3) collected by any entity. Suncoast-collected revenue satisfies each element: it is revenue derived from the rental of guest rooms at Verimark-branded hotels, collected through direct and indirect booking channels, by an entity other than the franchisee itself. The GRR definition covers it.
Under Florida's objective approach to contract interpretation, when the contract language is clear and unambiguous, the court enforces it as written. Friedman, 56 So. 2d at 517. There is nothing to construe. The FLA says what it means, and what it means forecloses Coastal Palms' position.
3. Coastal Palms' Ambiguity Defense Fails as a Matter of Law. Coastal Palms' principal defense is that the GRR definition in Section 4.1 is "ambiguous" as to revenues collected by a "separate management entity" such as Suncoast. This defense fails as a matter of law for three independent reasons.
First, the language is not susceptible to more than one reasonable interpretation. Under Florida law, ambiguity arises only when the contract language "is susceptible to more than one reasonable interpretation." Goldstein, 150 So. 3d at 1221 (emphasis added). The threshold question is not whether a party can imagine an alternative reading, but whether that alternative reading is reasonable. Coastal Palms' proposed interpretation — that "regardless of the entity collecting such revenue" does not encompass an affiliated management company established by the franchisee to collect guest-room revenue at franchised properties — is not a reasonable interpretation. It is a reading that contradicts the plain and ordinary meaning of the words used. The phrase "regardless of the entity" admits of no exception, qualification, or limitation. An affiliated management company is an "entity." Revenue collected by that entity is "revenue." The phrase "regardless of" means without regard to, irrespective of, no matter what. Coastal Palms' interpretation requires the Court to read the words "regardless of the entity" as though they said "except for an affiliated management entity" — a meaning that is the diametric opposite of what the language states.
Second, Coastal Palms' interpretation would render the "regardless of the entity" clause surplusage. Under the canon against superfluity — a bedrock principle of Florida contract interpretation — the Court must construe the contract "so as to give effect to every provision," and must "avoid[] an interpretation that would render any provision superfluous, meaningless, or nugatory." Sepe, 761 So. 2d at 1185; J.J. Gumberg, 847 So. 2d at 1051. If the GRR definition already required reporting of revenue only when collected by the franchisee itself, the phrase "regardless of the entity collecting such revenue" would have no work to do. The only reason this phrase exists in the FLAs is to extend the GRR definition beyond revenue collected by the franchisee to revenue collected by any other entity. Coastal Palms' interpretation — which would limit GRR to franchisee-collected revenue — renders the clause entirely superfluous. This Court should reject an interpretation that nullifies language the parties chose to include. See Baptist Hosp., Inc. v. Baber, 672 So. 2d 42, 45 (Fla. 1st DCA 1996) ("An interpretation which gives a reasonable meaning to all provisions of a contract is preferred to one which leaves a part of the contract useless, inexplicable, or inoperative.").
Third, a contract is not rendered ambiguous merely because a party offers a self-serving alternative reading. Florida courts have repeatedly emphasized that the mere existence of a dispute over the meaning of a contract term does not establish ambiguity. Rosen, 802 So. 2d at 295; Garcia, 969 So. 2d at 1132. "If a court were to find a contract ambiguous whenever the parties disagreed about its meaning, no contract provision would ever be enforced on summary judgment." Vane Kaplan CPAs LLP Seidman, LLP v. Bee, 970 So. 2d 869, 877 (Fla. 4th DCA 2007). Coastal Palms' assertion of ambiguity amounts to nothing more than a litigation-driven reinterpretation of clear contract language — an attempt to manufacture a factual dispute where none exists.
For all of these reasons, the Court should hold, as a matter of law, that the GRR definition in Section 4.1 is unambiguous and that it encompasses all revenue collected by Suncoast from guest-room rentals at Coastal Palms' Verimark-branded properties.
4. Extrinsic Evidence, Even If Considered, Confirms Breach. Even if this Court were to conclude — over Verimark's objection — that some degree of ambiguity exists in the GRR definition, the extrinsic evidence uniformly supports Verimark's interpretation and confirms Coastal Palms' breach. The Court need not reach this issue because the contract is unambiguous, but Verimark addresses it in the alternative to demonstrate that the result is the same under any analytical framework.
Brecker's own admissions confirm breach. Randall Brecker, the Managing Member of Coastal Palms and the individual who conceived and directed the revenue diversion scheme, made the following admissions during his two-day deposition:
• He admitted that he established Suncoast Room Management Inc. in late 2012 and directed that certain categories of bookings be processed through Suncoast rather than through the properties' standard booking and accounting systems. (Brecker Dep. Day 1, pp. 147:3–149:11.)
• He admitted that he understood GRR under the FLAs was intended to include "all room revenue." (Brecker Dep. Day 1, pp. 151:6–152:18.)
• He admitted that he directed Coastal Palms' accounting staff to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. (Brecker Dep. Day 2, pp. 48:11–53:19.)
• He admitted, when confronted with the "regardless of the entity collecting such revenue" clause, that he "didn't really focus on that part" of the GRR definition before establishing Suncoast. (Brecker Dep. Day 2, pp. 201:6–208:14.)
• He acknowledged that one of his purposes in routing bookings through Suncoast was to "keep certain revenues off the books" as far as Verimark was concerned. (Brecker Dep. Day 2, pp. 204:17–206:9.)
These admissions — from the individual who designed the scheme — are devastating to Coastal Palms' defense. They confirm that even Brecker understood GRR was supposed to include all room revenue; that he deliberately directed the exclusion of Suncoast revenue from GRR reports; and that he did so to avoid franchise-payment obligations.
Kerrigan's testimony confirms the scheme and the intent. Janet Kerrigan, the former Regional Controller, testified at length about the mechanics and purpose of the Suncoast diversion. She stated that she was instructed by Brecker to exclude Suncoast-collected revenues from monthly GRR submissions to Verimark; that she understood this instruction to be inconsistent with the FLAs' GRR definition; that she raised concerns with Brecker on multiple occasions; and that she was told to "follow the process" and not to "create problems." (Kerrigan Dep., pp. 87:4–96:19, 112:3–118:22, 201:8–209:15.) Ms. Kerrigan's testimony provides direct corroboration of the deliberate nature of the underreporting.
The course of dealing confirms the parties' original understanding. For the first six years of the franchise relationship — from 2007 through 2012, before Suncoast's establishment — Coastal Palms reported all room revenue as GRR, including revenue from walk-in guests and corporate-direct bookings. During this period, Coastal Palms made no distinction between booking channels for GRR-reporting purposes, and there is no evidence that Coastal Palms ever suggested to Verimark that walk-in or corporate-direct revenue was excluded from GRR. (SUMF ¶¶ 125–127; Kerrigan Dep., pp. 122:7–128:14.) This six-year course of dealing is strong evidence that both parties understood GRR to include all room revenue, regardless of booking channel. The change in 2013 — coinciding with Suncoast's establishment — was not the result of a new or different understanding of the GRR definition; it was the result of a deliberate decision by Brecker to divert revenue.
Property-level witness testimony confirms the scheme. The ten property-level managers and accountants who were deposed in this case uniformly testified that they were directed by "corporate" (Brecker) to route walk-in and corporate-direct bookings through Suncoast and to exclude those bookings from GRR reports specifically for the purpose of avoiding reporting the revenue to Verimark. (SUMF ¶¶ 80–85; Deposition Summary Memorandum, Ex. E.) Multiple witnesses testified that they were told the purpose of the Suncoast channel was to "keep the franchise fees down" and to "handle certain revenue separately." (See, e.g., Deposition Summary Memorandum, pp. 4, 7, 11, 15.)
Coastal Palms' "awareness" argument is unsupported. Coastal Palms contends in its pleadings that Verimark was "aware" of Suncoast's role because Suncoast appeared in certain property-management agreements that were submitted to Verimark during the franchise application process. This argument fails on multiple levels. First, knowledge of an entity's existence is not the same as consent to the exclusion of that entity's revenue collections from a contractually defined reporting obligation. The FLAs define GRR; the mere fact that Verimark may have known Suncoast existed does not constitute a waiver, modification, or reinterpretation of the GRR definition. Second, no Verimark representative ever authorized the exclusion of Suncoast-collected revenue from GRR reports. Third, the FLAs' integration clauses and written-modification requirements preclude any oral or implied modification of the GRR definition. Fourth, the property-management agreements in which Suncoast appeared do not purport to modify, supersede, or override the FLAs' GRR definition, and no reasonable reading of those agreements could be understood to do so.
5. The Breach Is Material as a Matter of Law. Under Florida law, the materiality of a breach is ordinarily a question of fact for the trier of fact. See Restatement (Second) of Contracts § 241 (1981) (listing factors bearing on materiality). However, materiality may be resolved as a matter of law where the undisputed facts point in only one direction. See S&A Rest. Corp. v. Leal, 892 So. 2d 1069, 1073 (Fla. 4th DCA 2004); Sub-Zero, Inc. v. Cunliffe, 305 So.