PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work-product doctrine. It is prepared in anticipation of litigation and for the sole purpose of providing legal advice. Do not distribute outside the engagement team without prior authorization from the Responsible Partner.
ORAL ARGUMENT PREPARATION MEMORANDUM
FROM: Priya Anand, Responsible Partner (FL Bar No. 0087451)
TO: Douglas Carmichael (FL Bar No. 0093217); Yuki Nakamura (FL Bar No. 0119644); Carlos Espinoza (FL Bar No. 0128903)
DATE: January 12, 2024
RE: Preparation for Oral Argument on Cross-Motions for Summary Judgment — 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
HEARING DATE: January 19, 2024, before the Honorable Richard M. Calloway, Circuit Judge
CLIENT: Verimark Hospitality Group Inc. (Nasdaq: VHMK)
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I. Purpose and Overview
The purpose of this memorandum is to prepare the entire engagement team for oral argument before Judge Calloway on January 19, 2024, concerning the cross-motions for summary judgment pending in Verimark Hospitality Group Inc. v. Coastal Palms Franchise Holdings LLC et al., Case No. 1021-00006. Specifically, the Court will hear argument on two motions:
(1) Verimark's Motion for Partial Summary Judgment on Count I (Breach of Contract — Royalties, calculated at 5% of Gross Room Revenue ("GRR") under Franchise License Agreement ("FLA") § 4.1) and Count II (Breach of Contract — Marketing Fund Contributions, calculated at 2.5% of GRR under FLA § 4.2), filed September 29, 2023; and
(2) Coastal Palms' Cross-Motion for Summary Judgment on all ten counts of the Complaint and seeking affirmative relief on its $12 million counterclaim for alleged brand-standard violations, filed October 13, 2023.
Verimark's motion is intentionally limited to a determination of liability only on Counts I and II, expressly deferring the quantification of damages — including underpaid royalties, underpaid marketing-fund contributions, late-payment interest under FLA § 4.6, and liquidated damages under FLA § 15.3 — to trial. This approach reflects a deliberate strategic judgment: by isolating the liability question, we present the Court with a clean legal issue that can be resolved on the undisputed record without the need to wade into the competing expert opinions on quantum.
Briefing on both motions is now complete. Response briefs were filed on November 17, 2023, and reply briefs were filed on December 8, 2023. No supplemental authority has been filed by either side since the reply briefs.
This memorandum is organized to address the following areas in the order most useful for argument preparation:
(A) The core legal issues the Court is most likely to focus on during argument;
(B) Anticipated questions from Judge Calloway, with recommended responses;
(C) Recommended talking points for Verimark's affirmative presentation;
(D) Key legal authorities to have at the ready;
(E) Concessions to avoid under any circumstances;
(F) Rebuttal preparation for anticipated defense arguments; and
(G) Logistical matters, including courtroom assignments, materials, and post-argument steps.
Each team member should read this memorandum in its entirety, familiarize themselves with the recommended responses to anticipated judicial questions, and be prepared to locate record citations and authority references on short notice during the hearing. A tabbed binder of key materials will be assembled by Carlos Espinoza and distributed to the team no later than January 17, 2024.
II. Procedural Posture
An understanding of the procedural history is essential context for the argument. The key procedural milestones are as follows:
Complaint and Responsive Pleadings. Verimark filed its Complaint on March 7, 2022, asserting ten counts against three defendants: Coastal Palms Franchise Holdings LLC ("Coastal Palms"), Randall Brecker (individually, as managing member of Coastal Palms), and Suncoast Room Management Inc. ("Suncoast"). The ten counts span breach of contract (Counts I–IV), breach of the implied covenant of good faith and fair dealing (Count V), fraudulent concealment (Count VI), civil conspiracy (Count VII), unjust enrichment (Count VIII), declaratory judgment (Count IX), and accounting (Count X). On April 18, 2022, Coastal Palms filed its Answer, asserting fifteen affirmative defenses — including waiver, estoppel, laches, unclean hands, and failure to mitigate — along with a $12 million counterclaim alleging that Verimark failed to maintain brand standards across the 22 franchised properties and engaged in overbilling for technology services.
Case Management and discovery. The Case Management Conference was held on June 14, 2022, and Judge Calloway entered a Case Management Order setting trial for February 2024 and establishing discovery deadlines. Discovery was extensive. Approximately 2.3 million documents were collected, processed (1.1 terabytes processed by Nexagen Document Solutions LLC), reviewed, and produced over the ensuing months. Fact depositions were conducted between January 9 and March 17, 2023, totaling 14 depositions, including: Randall Brecker (two days, January 9–10, 2023, approximately 14 hours of testimony); Janet Kerrigan, former regional controller and whistleblower (January 23, 2023); Deidre Langston, Verimark's SVP of Franchise Operations (February 6, 2023); and ten property-level managers, controllers, and accountants from the Coastal Palms portfolio. Two expert depositions were conducted on June 26–27, 2023: Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC (Verimark's damages expert) and Prof. Grant Hargrove of Hargrove Economic Consulting Inc. (Coastal Palms' damages expert). Discovery closed on August 4, 2023.
Summary Judgment Briefing. Verimark's Motion for Partial Summary Judgment was filed on September 29, 2023, accompanied by a 127-paragraph Statement of Undisputed Material Facts with detailed record citations to deposition transcripts, documentary exhibits, and expert reports. Coastal Palms filed its Cross-Motion for Summary Judgment on October 13, 2023, seeking judgment in its favor on all ten counts of the Complaint and affirmative judgment on its counterclaim. Response briefs were filed by both sides on November 17, 2023. Reply briefs were filed on December 8, 2023.
Trial Date. Trial was originally scheduled for February 2024 pursuant to the June 14, 2022 Case Management Conference Order. Depending on the outcome of the pending motions, it is likely that the trial date will be continued to allow the parties to assess settlement posture and, if necessary, conduct further trial preparation focused on surviving claims and damages.
III. Core Legal Issues for Oral Argument
The Court's analysis of the cross-motions will turn on four interlocking legal issues. We anticipate that Judge Calloway will move through these issues in roughly the order presented below, though the Court may choose to address the cross-motion issues first or interleave questions about both motions. The team should be prepared to address these issues in any order.
A. Issue 1: Whether FLA § 4.1's Definition of "Gross Room Revenue" Unambiguously Includes Revenues Collected by Suncoast Room Management Inc.
This is the threshold issue in the case. If the Court finds that the GRR definition in FLA § 4.1 is unambiguous and includes all revenues collected by Suncoast, Coastal Palms' primary defense collapses on both Counts I and II, and the path to a liability ruling in Verimark's favor is clear.
The Contract Language. FLA § 4.1 defines GRR as follows:
"'Gross Room Revenue' or 'GRR' shall mean 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 broad, categorical, and unequivocal. It captures "all revenues" — not "some," not "net," not "revenues collected by the franchisee." The definition further specifies that it encompasses revenues from "any booking channel, direct or indirect," which plainly covers walk-in reservations, corporate-direct contracts, online travel agency ("OTA") bookings, and revenues generated through the unbranded gulfcoastrooms.com website operated by Suncoast. Most critically, the definition includes the phrase "regardless of the entity collecting such revenue," which eliminates any argument that revenues collected by a third party — including an affiliated management company — fall outside the definition.
Verimark's Position. The phrase "regardless of the entity collecting such revenue" is dispositive. It was included in the FLA precisely to prevent the type of scheme that Coastal Palms employed: routing guest-room revenue through an affiliated entity to avoid royalty and marketing-fund obligations. Suncoast-collected revenues from walk-ins, corporate-direct contracts, and the gulfcoastrooms.com website are squarely within the GRR definition. Under well-settled Florida law, when a contract term is clear and unambiguous on its face, the Court must enforce it as written, without resort to extrinsic evidence. There is no ambiguity here — the contract says what it means and means what it says.
Coastal Palms' Position. Defense counsel (Nathan Whitfield III of Whitfield, Barrow & Crane LLP) argues that § 4.1 is ambiguous as applied to revenues collected by a "separate management entity" not itself a party to the FLA. Coastal Palms contends that the phrase "regardless of the entity collecting such revenue" was intended to apply only to OTA intermediaries and not to management companies operating under separate agreements. They further argue that extrinsic evidence is needed to determine the parties' intent, and that Verimark's awareness of Suncoast's role — because Suncoast was identified in certain property-management agreements submitted during the franchise-application process — supports the inference that the parties did not intend Suncoast's revenues to be included in GRR.
Why This Issue Is Dispositive. If the Court agrees with Verimark that the GRR definition is unambiguous, Coastal Palms' primary defense evaporates. The Court would then need only apply the undisputed facts to the unambiguous contract language to determine whether a material breach occurred. Conversely, if the Court finds the GRR definition ambiguous, summary judgment on Counts I and II would likely be denied, and the issue would proceed to trial. Our argument must therefore focus heavily on demonstrating that the contract language admits of only one reasonable interpretation — one that includes Suncoast-collected revenues.
B. Issue 2: Whether Coastal Palms' Exclusion of Suncoast Revenues Constitutes a Material Breach as a Matter of Law
Assuming the Court resolves Issue 1 in Verimark's favor, the next question is whether the undisputed facts establish that Coastal Palms' conduct constitutes a "material breach" within the meaning of FLA § 14.2(c).
The Contract Language. FLA § 14.2(c) provides:
"Systematic underreporting of Gross Room Revenue shall constitute a material breach of this Agreement that is incapable of cure."
This provision creates a clear contractual standard: if the franchisee's underreporting of GRR is "systematic," the breach is (a) material and (b) incapable of cure, meaning that the franchisor is not required to provide a cure period before exercising its remedies.
The Undisputed Evidence. The record establishes the following facts, which are undisputed or admitted:
• Coastal Palms systematically excluded Suncoast-collected revenues from its monthly GRR reports to Verimark from at least January 2013 through the end of 2021 — a period spanning nine full calendar years across all 22 franchised properties.
• The cumulative underreported GRR totals approximately $197.8 million, based on the preliminary audit extrapolation by Thornbury & Associates CPAs LLP and the independent forensic analysis performed by Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC.
• In FY 2021 alone, Coastal Palms reported GRR of $112.4 million, whereas the estimated true GRR was $145.6 million — an underreporting of $33.2 million, representing approximately 22.8% of actual GRR.
• The overall underreporting percentage ranged from 22% to 31% depending on the specific property and year.
• Randall Brecker, managing member of Coastal Palms, admitted in his deposition (January 9–10, 2023, approximately 14 hours of testimony) that he personally directed property-level controllers to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark.
• Janet Kerrigan, former regional controller and the whistleblower who brought the scheme to Verimark's attention on November 8, 2021, testified that she received explicit instructions from Brecker to exclude direct-booking revenues collected by Suncoast from GRR calculations.
The Court need only find that these undisputed facts constitute "systematic underreporting" within the meaning of § 14.2(c) to grant summary judgment on liability for Counts I and II. Given the duration (nine years), the scope (22 properties), the magnitude ($197.8 million), and Brecker's own admissions, the conclusion is inescapable.
C. Issue 3: Whether Damages Should Be Deferred to Trial
Verimark's motion is deliberately limited to liability on Counts I and II, and expressly defers the quantification of all damages to trial. The rationale for this approach is both legal and tactical.
Scope of the Motion. Verimark seeks a determination that Coastal Palms is liable for underpaid royalties (Count I: $9.89 million = 5% × $197.8 million in underreported GRR) and underpaid marketing-fund contributions (Count II: $4.945 million = 2.5% × $197.8 million in underreported GRR). We expressly defer the quantification of these amounts — as well as late-payment interest ($28.4 million at 1.5% per month compounded under FLA § 4.6) and liquidated damages ($105.5 million under FLA § 15.3) — because the competing expert analyses create genuine disputes of material fact on quantum.
The Damages Dispute. Verimark's total damages claim approaches $150 million across all categories. Coastal Palms' defense expert, Prof. Grant Hargrove of Hargrove Economic Consulting Inc., opines that the maximum underpayment across the entire portfolio is only $6.2 million. The enormous gap between the two figures — driven by fundamental disagreements over the scope of the GRR definition, the proper treatment of OTA commissions, and the applicability of various contract provisions — confirms that genuine disputes of material fact exist on damages.
Tactical Rationale. Bifurcating liability from damages serves Verimark's interests in several important ways. First, it presents the Court with a clean legal question — contract interpretation and breach — that can be resolved on the undisputed record without requiring the Court to evaluate competing expert methodologies. Second, a favorable liability ruling will substantially enhance Verimark's settlement leverage, potentially leading to a resolution before the parties incur the costs of a damages trial. Third, and critically, it avoids the risk that the Court denies the entire motion because it perceives the damages calculation as creating a genuine dispute — a risk that would be significant if we asked the Court to address damages at this stage.
D. Issue 4: Coastal Palms' Cross-Motion — Whether Any Genuine Disputes of Material Fact Preclude Summary Judgment for Defendant
Coastal Palms' cross-motion seeks summary judgment on all ten counts of the Complaint and affirmative judgment on its $12 million counterclaim. The cross-motion rests on three principal arguments:
(i) Ambiguity. Coastal Palms argues that the GRR definition in § 4.1 is ambiguous as applied to revenues collected by a "separate management entity," and that this ambiguity bars Verimark's breach-of-contract claims as a matter of law. As discussed in Issue 1 above, this argument fails because the contract language is unambiguous.
(ii) Waiver/Estoppel. Coastal Palms argues that Verimark's awareness of Suncoast's existence — allegedly demonstrated by the property-management agreements submitted during the franchise-application process — constitutes waiver of or estoppel against Verimark's right to claim that Suncoast revenues should be included in GRR. As we demonstrate in our response brief, awareness of Suncoast's existence as a management entity is not equivalent to awareness or approval of the practice of excluding Suncoast-collected revenues from GRR reports. No Verimark witness testified to knowledge of the revenue-exclusion practice prior to Janet Kerrigan's whistleblower report on November 8, 2021.
(iii) Counterclaim. Coastal Palms seeks affirmative relief on its $12 million counterclaim for alleged brand-standard violations and overbilling. This counterclaim lacks evidentiary foundation. Not a single deposition witness from the Coastal Palms portfolio was able to identify specific, actionable brand-standard deficiencies attributable to Verimark corporate. The counterclaim was not supported by an expert report or any quantitative damages analysis. The depositions of Coastal Palms' own property managers uniformly failed to substantiate the allegations in the counterclaim.
Verimark's position is that the cross-motion should be denied in its entirety. The undisputed record supports Verimark's claims, not Coastal Palms' defenses, and the counterclaim is a litigation tactic designed to create the appearance of a bilateral dispute where none exists on the merits.
IV. Anticipated Questions from Judge Calloway
Based on our review of Judge Calloway's prior rulings on summary-judgment motions, his questioning style during oral argument, and the issues raised in the briefing, we anticipate the following questions. Each team member should internalize the recommended responses below.
A. On the GRR Definition (§ 4.1)
Question 1: "Counsel, why shouldn't this Court look at the property-management agreements submitted during the franchise-application process to determine whether the parties intended Suncoast revenues to be excluded?"
Recommended Response: Your Honor, the FLA contains a comprehensive integration clause at § 21.1, which provides that the FLA constitutes the entire agreement between the parties and supersedes all prior or contemporaneous agreements, representations, and understandings. Under well-settled Florida law, when a contract contains an integration clause and the disputed term is unambiguous, the Court enforces the plain language without resort to extrinsic evidence. But even if the Court were to consider the property-management agreements submitted during the franchise-application process, those documents do not help Coastal Palms. They nowhere state — or even suggest — that Suncoast-collected revenues are excluded from GRR. They merely identify Suncoast as a management entity involved in day-to-day property operations. The FLA's GRR definition expressly encompasses revenue "regardless of the entity collecting such revenue." Suncoast is just such an entity. The property-management agreements are irrelevant to the GRR definition, and the integration clause bars their use to contradict the FLA's plain terms.
Question 2: "What does 'regardless of the entity collecting such revenue' modify? Is it limited to the preceding clause about booking channels?"
Recommended Response: Your Honor, the phrase "regardless of the entity collecting such revenue" is a standalone qualifier that applies to the entire GRR definition, not merely to the preceding clause regarding booking channels. Reading the full definition, it states: "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 conjunction "and" before "regardless" Signals that this is an additional, independent qualifier — it adds a further dimension to the definition. Its purpose is to ensure that a franchisee cannot evade its royalty obligations by routing guest-room revenue through an affiliated entity, a management company, or any other third party. That is precisely what Coastal Palms did here. We would respectfully invite the Court to read the full text of § 4.1 — word by word, the definition captures every dollar of revenue attributable to the rental of guest rooms, no matter who collects it.
Question 3: "Isn't there at least a factual question about whether Verimark knew about and acquiesced to this arrangement?"
Recommended Response: Your Honor, no. Knowledge of Suncoast's existence as a management entity is categorically different from knowledge of or acquiescence to the practice of excluding Suncoast-collected revenues from GRR reports. Not a single Verimark witness testified to awareness that Suncoast-collected revenues were being excluded from GRR. Deidre Langston, Verimark's Senior Vice President of Franchise Operations and the individual most directly involved in the Coastal Palms relationship, testified unequivocally that she understood Suncoast to be a property-management company — not a revenue-diversion vehicle. The scheme was brought to Verimark's attention only on November 8, 2021, when Janet Kerrigan, Coastal Palms' former regional controller, contacted Verimark's compliance hotline as a whistleblower. Prior to that date, there is no document, no email, no memorandum, and no testimony suggesting that any Verimark employee knew that revenues were being excluded from GRR reports. Coastal Palms bore the burden of identifying such evidence on summary judgment, and it has not done so.
B. On Material Breach and § 14.2(c)
Question 4: "If I find § 4.1 unambiguous, can Coastal Palms still argue that the underreporting was not 'systematic'?"
Recommended Response: Your Honor, no genuine factual dispute exists on the question of whether the underreporting was systematic. The undisputed record establishes that the underreporting spanned nine consecutive years — from at least January 2013 through the end of 2021. It occurred across all 22 franchised properties in the Coastal Palms portfolio. The cumulative underreported GRR totals $197.8 million. And Mr. Brecker himself admitted under oath that he personally directed property-level controllers to exclude Suncoast-collected revenues from monthly GRR reports. This was not an isolated error, an oversight, or an occasional miscalculation. It was a deliberate, sustained, portfolio-wide practice directed from the top. That is the very definition of "systematic" as used in § 14.2(c), and no reasonable factfinder could conclude otherwise.
Question 5: "Section 14.2(c) says 'incapable of cure' — does that affect the analysis given the 30-day cure notice issued February 4, 2022?"
Recommended Response: Your Honor, the February 4, 2022 Notice of Material Breach was issued out of an abundance of caution. Section 14.2(c) of the FLA expressly provides that systematic underreporting of GRR "is incapable of cure." This means that, as a matter of contract, no cure period is required. The parties negotiated and agreed to this provision at the time the FLAs were executed. Verimark nonetheless sent the notice to ensure a complete record and to demonstrate good faith. In any event, the notice was sent, the 30-day cure period ran, and Coastal Palms did not tender a cure. To the contrary, Coastal Palms' counsel — Nathan Whitfield III of Whitfield, Barrow & Crane LLP — responded by letter dated February 28, 2022, categorically denying that any breach had occurred. No cure payment was made, no revised GRR reports were submitted, and no corrective action of any kind was taken by the March 6, 2022 deadline. The "incapable of cure" provision thus applies both as a matter of contract and as a matter of fact.
C. On Damages Bifurcation
Question 6: "Why shouldn't I address damages now if I find liability?"
Recommended Response: Your Honor, Verimark's motion expressly seeks partial summary judgment on liability only, as permitted under Florida Rule of Civil Procedure 1.510. The damages dispute involves genuine issues of material fact that are not appropriate for resolution at the summary-judgment stage. Specifically, the gap between Verimark's damages position — which approaches $150 million across all categories — and Prof. Hargrove's opinion that the maximum underpayment is only $6.2 million reflects fundamental disagreements about the methodology for calculating underreported GRR, the treatment of OTA commissions, the proper compounding methodology for late-payment interest under § 4.6, and the enforceability and applicability of the liquidated-damages provision under § 15.3. These are precisely the kinds of factual and mixed legal-factual disputes that are best resolved by a factfinder at trial. A ruling on liability alone would narrow the issues for trial, promote judicial efficiency, and — frankly — may well facilitate a resolution of the case before the parties incur the substantial costs of a damages trial.
Question 7: "What specific damages components do you concede involve fact disputes?"
Recommended Response: Your Honor, Verimark does not concede that any component of its damages claim is incorrect. We stand behind the work of Dr. Kettlewell and the Thornbury audit. However, we acknowledge for purposes of this motion that the following issues present genuine disputes that are appropriate for trial: first, the precise per-property, per-year underreporting figures — while the aggregate is well-supported, the exact allocation among the 22 properties and nine years may be debated; second, Coastal Palms has challenged the compounding methodology for late-payment interest under § 4.6, and the Court may need to construe the compounding provision; and third, the enforceability of the liquidated-damages provision under § 15.3 may present mixed questions of law and fact regarding whether the provision constitutes a permissible liquidated-damages clause or an unenforceable penalty under Florida law. None of these disputes, however, undermine the threshold liability question that is the subject of Verimark's motion. Liability is clear on the undisputed record; the only question that requires a trial is "how much."
D. On Coastal Palms' Cross-Motion
Question 8: "Does Coastal Palms' argument that Verimark waived its rights by accepting the reported GRR for nine years have merit?"
Recommended Response: Your Honor, it does not. Under Florida law, waiver requires clear and unambiguous conduct demonstrating the intentional relinquishment of a known right. The key word is "known." Verimark accepted GRR reports that it had no reason to question — because the very purpose of the underreporting scheme was to conceal from Verimark the fact that Suncoast was collecting substantial guest-room revenues that were not being included in GRR. Verimark did not know that the reports were false until the whistleblower — Janet Kerrigan — contacted Verimark's compliance hotline on November 8, 2021. To hold that Verimark waived its rights by accepting fraudulently understated reports would be to reward the very concealment that gave rise to this lawsuit. Florida courts have consistently rejected waiver defenses in circumstances where the party asserting waiver engaged in concealment that prevented the other party from learning of the right allegedly waived. Verimark did not knowingly relinquish any right — it was deceived.
Question 9: "What about the counterclaim for $12 million in brand-standard violations?"
Recommended Response: Your Honor, the counterclaim is a litigation tactic that lacks any evidentiary foundation. During discovery, not a single deposition witness from Coastal Palms' own portfolio — including property-level general managers, regional directors, and controllers — could identify specific brand-standard deficiencies attributable to Verimark corporate. The witnesses uniformly testified that Verimark provided the brand support contemplated by the FLAs. The counterclaim was not supported by an expert report, a damages analysis, or any quantitative methodology. It is a bare assertion of a $12 million claim with no factual or evidentiary underpinning. Accordingly, Coastal Palms is not entitled to summary judgment on its counterclaim — but neither does the counterclaim create a genuine dispute that would warrant denying Verimark's motion. The cross-motion, including the counterclaim component, should be denied.
E. On Franchise Agreement Structure
Question 10: "There are 22 individual FLAs. Are there any material differences between them that affect my analysis?"
Recommended Response: Your Honor, no. The GRR definition in § 4.1 is identical across all 22 FLAs. The first FLA in the portfolio was executed on June 15, 2007, for the Naples property, and the most recent was executed on September 3, 2019. We have provided the Court with a representative FLA, and we have confirmed in our Statement of Undisputed Material Facts — at paragraphs 11 through 15 — that the following provisions are identical in all 22 FLAs: the GRR definition (§ 4.1), the royalty rate (5% of GRR, § 4.1), the marketing-fund contribution rate (2.5% of GRR, § 4.2), the late-payment interest provision (1.5% per month, compounded, § 4.6), the audit-rights provision (§ 8.2), the material-breach provisions (§§ 14.1 and 14.2(c)), and the liquidated-damages provision (§ 15.3). All 22 FLAs are governed by Florida law, contain mandatory venue provisions designating Broward County, and were executed on Verimark's standard form. There is no variation among the 22 FLAs that would require a property-by-property analysis of the liability question.
V. Key Authorities
The team should have the following authorities readily accessible during argument. Carlos Espinoza will prepare a tabbed binder organized by topic.
A. Contract Interpretation — Unambiguous Terms
The foundational principle is that, under Florida law, when a contract term is clear and unambiguous, the court must enforce the contract according to its plain meaning and may not resort to extrinsic evidence to alter or contradict the written terms. The leading authorities are as follows:
• Acceleration Nat'l Serv. Corp. v. Brickell Fin. Servs. Motor Club, Inc., 541 So. 2d 738 (Fla. 3d DCA 1989) (courts may not rewrite clear and unambiguous contract terms to reach a result inconsistent with the parties' express agreement).
• Friedman v. Virginia Metal Prods. Corp., 56 So. 2d 515 (Fla. 1952) (Florida Supreme Court holding that the plain language of a contract controls when the terms are unambiguous).
• Southeastern Fisheries Ass'n, Inc. v. Department of Natural Res., 453 So. 2d 1351 (Fla. 1984) (holding that clear, unambiguous language must be enforced as written without resort to rules of construction).
• U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007) (reaffirming that "[w]hen a contract is clear and unambiguous, the contract must be interpreted and enforced according to its plain meaning").
In addition, the team should be prepared to cite Florida franchise-specific case law addressing GRR definitions and franchisor audit rights. Carlos Espinoza's research memorandum dated August 18, 2023, which surveys Florida appellate decisions on franchise revenue-reporting obligations, should be brought to the hearing for reference. That memorandum identifies several persuasive decisions from the Florida District Courts of Appeal that have enforced broad GRR definitions in franchise agreements and have held that a franchisee may not unilaterally narrow the contractual definition of reportable revenue by excluding categories of revenue not expressly excepted in the agreement.
B. Material Breach Standard
Florida law permits a court to determine as a matter of law that a breach is "material" where the undisputed facts demonstrate a breach going to the essence of the contract. The relevant authorities include:
• Beefy King Int'l, Inc. v. Veigle, 464 F.2d 1102 (5th Cir. 1972) (applying Florida law; systematic failure to report franchise revenues constitutes a material breach going to the essence of the franchise relationship).
• Abbottott Labs., Inc. v. Gen. Elec. Capital, 765 So. 2d 737 (Fla. 5th DCA 2000) (where the undisputed facts establish a breach that goes to the root of the agreement, the court may grant summary judgment on the materiality question).
• Restatement (Second) of Contracts § 241 (factors for determining materiality, including the extent of the injured party's deprivation of expected benefit, the adequacy of compensation in damages, and the extent to which the breaching party's conduct comported with good faith and fair dealing).
The team should also be prepared to read the critical language of FLA § 14.2(c) aloud to the Court: "Systematic underreporting of Gross Room Revenue shall constitute a material breach of this Agreement that is incapable of cure." This provision establishes a contractual standard that supplements and reinforces the common-law materiality analysis.
Importantly, we must distinguish the cases relied upon by Coastal Palms in which courts found ambiguity in revenue-reporting obligations. In each of those cases, the franchise agreements at issue lacked the critical "regardless of the entity collecting such revenue" language present in the Verimark FLAs. That distinguishing feature is dispositive and should be emphasized if the Court raises Coastal Palms' case law.
C. Waiver/Estoppel Under Florida Law
Florida law imposes a high bar for establishing waiver, requiring clear, unambiguous, and intentional relinquishment of a known right. The authorities include:
• Marlowe Casualty Group v. Vogel, 195 So. 2d 20 (Fla. 3d DCA 1967) (waiver requires intentional relinquishment of a known right; mere silence or inaction is insufficient absent knowledge of the right being waived).
• Globe Life Ins. Co. v. Trisak, 228 So. 2d 400 (Fla. 2d DCA 1969) (waiver is a voluntary and intentional relinquishment; it cannot be inferred from ambiguous or equivocal conduct).
• Drayton Trust Bank Fin. Servs., Inc. v. Saldukas, 896 So. 2d 707 (Fla. 2005) (the party asserting waiver bears the burden of proving that the other party had full knowledge of its rights and deliberately intended to relinquish them).
The critical point for oral argument is that waiver cannot be predicated on the acceptance of reports that were themselves the product of the concealment. Coastal Palms' waiver argument is logically circular: it argues that Verimark waived its right to claim underreporting by accepting reports that Coastal Palms itself fraudulently understated. This bootstrap argument should be rejected.
D. Liquidated Damages (Background Only — Not at Issue on This Motion)
While the enforceability of the liquidated-damages provision under FLA § 15.3 is not before the Court on this motion, the team should be prepared to address this issue if Judge Calloway raises it sua sponte. Carlos Espinoza's research memorandum dated August 25, 2023 addresses the enforceability of § 15.3 under Florida's penalty doctrine in detail, and a copy should be readily accessible during argument.
The key points, in summary, are as follows:
• The § 15.3 formula provides for liquidated damages calculated as three times the trailing-twelve-month royalties per property, totaling $105.5 million across the 22 properties.
• Verimark's position is that this provision is a reasonable pre-estimate of the damages that the franchisor would suffer from a material breach leading to early termination of the franchise relationship — including lost royalty income over the remaining term of each FLA, lost marketing-fund contributions, and the diminished value of the franchise network.
• The provision was negotiated at arm's length, was included in each FLA from inception, and was the product of the parties' agreed assessment of the difficulty of calculating actual damages at the time of contracting.
• If the Court asks, we should state that the provision is enforceable, but that this issue is deferred and is not necessary for resolution of the pending motion for partial summary judgment on Counts I and II.
VI. Talking Points — Affirmative Presentation
Priya Anand will present the oral argument for Verimark. The following talking points are organized in the order in which they should be presented, subject to modification based on the Court's questions and the flow of argument. Douglas Carmichael will serve as second chair and should be prepared to step in on any point if needed.
A. Opening Framing (2–3 Minutes)
The opening must frame the case as straightforward and ground the Court in the essential narrative:
Your Honor, this case is straightforward at its core. A franchisee, operating 22 hotel properties under the Verimark brand, diverted approximately $197.8 million in guest-room revenue over a nine-year period — from 2013 through 2021 — through an affiliated entity called Suncoast Room Management Inc. The purpose and effect of this diversion was to avoid paying royalties and marketing-fund contributions owed to the franchisor, Verimark Hospitality Group.
The franchise agreements are clear. They define "Gross Room Revenue" to include all revenues derived from the rental of guest rooms, "regardless of the entity collecting such revenue." The undisputed facts — including Mr. Brecker's own deposition admissions — establish that Coastal Palms systematically excluded Suncoast-collected revenues from its GRR reports. That is a material breach as a matter of contract and as a matter of law.
Verimark respectfully requests partial summary judgment on liability only for Count I, breach of contract for underpaid royalties, and Count II, breach of contract for underpaid marketing-fund contributions. We expressly defer the quantification of damages to trial.
B. The Revenue Diversion Scheme
After framing, the argument should walk the Court through the revenue-diversion scheme in clear, factual terms, grounded in the summary-judgment record:
Beginning no later than January 2013, Coastal Palms' managing member, Randall Brecker, established Suncoast Room Management Inc. to collect guest-room revenues from three categories of bookings that Brecker chose to route outside the Verimark reporting system: walk-in reservations, corporate-direct contracts, and reservations made through an unbranded website — gulfcoastrooms.com — that Suncoast operated.
The scheme worked as follows. Suncoast collected revenues from these booking channels and retained a 12% "management fee" on the gross amount before forwarding the balance to property-level limited liability companies — specifically, Gulf Breeze Hospitality LLC for the Southwest Florida properties and Savannah Lodging Partners LLC for the coastal Georgia properties. Neither Suncoast's collections nor the 12% management fee was included in the monthly GRR reports that Coastal Palms submitted to Verimark. These reports, which formed the basis for Verimark's royalty and marketing-fund invoices, were systematically understated.
In addition, Coastal Palms also underreported OTA revenue by netting commissions paid to online travel agencies against the gross revenue received from guests — a practice that violates the gross-revenue concept embedded in the § 4.1 GRR definition.
The scope of the underreporting is not in dispute. Mr. Brecker admitted under oath — over two days of deposition testimony on January 9 and 10, 2023 — that he personally directed property-level controllers to exclude Suncoast-collected revenues from the monthly GRR reports. His testimony was corroborated by Janet Kerrigan, Coastal Palms' former regional controller, who testified that she received explicit instructions from Brecker to exclude these revenues. And it was further corroborated by the composite testimony of 10 property-level managers and accountants deposed between January and March 2023.
C. The FLA Language Is Dispositive
The argument should then walk the Court through the text of FLA § 4.1 with deliberate, word-by-word precision:
Your Honor, let me walk you through the language of § 4.1. It defines Gross Room Revenue as:
"All revenues" — not "some revenues," not "net revenues," not "revenues that the franchisee happens to collect directly" — all revenues.
"Derived from or attributable to the rental of guest rooms at the Hotel" — this encompasses every dollar of revenue that is attributable to the rental of a guest room, regardless of the manner in which that revenue is generated or collected.
"Including revenues from any booking channel, direct or indirect" — this clause covers walk-in reservations (a direct booking channel), corporate-direct contracts (a direct channel), OTA bookings (an indirect channel), and bookings through gulfcoastrooms.com (which could be characterized as either direct or indirect — it doesn't matter, because the clause covers both).
"And regardless of the entity collecting such revenue" — this is the key phrase. It was specifically designed to prevent the exact scheme that Coastal Palms employed. It ensures that a franchisee cannot evade its royalty obligations by routing guest-room revenue through an affiliated entity, a management company, or any other third party. Suncoast Room Management Inc. is precisely such an entity.
There is nothing ambiguous about this language. It is clear, it is comprehensive, and it means exactly what it says.
D. Audit and discovery Confirmation
The argument should briefly address the audit and expert evidence confirming the underreporting:
The underreporting revealed by the whistleblower report of November 8, 2021 was promptly investigated and confirmed. Verimark retained Thornbury & Associates CPAs LLP — led by Malcolm Thornbury, CPA — on November 22, 2021. Thornbury's preliminary audit findings, delivered on January 18, 2022, confirmed that GRR had been underreported by approximately 26% across the 10 audited properties for the 2019–2021 period.
Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC subsequently performed a comprehensive forensic analysis spanning all 22 properties for the full 2013–2021 period. Her findings, set forth in her expert report dated April 14, 2023 and her rebuttal report dated June 9, 2023, confirm cumulative underreported GRR of $197.8 million.
It is also worth noting that under FLA § 8.2, if an audit reveals an underpayment exceeding 2% of reported GRR, the franchisee bears all audit costs. Here, the underreporting ranged from 22% to 31% — more than ten times the contractual threshold. This is not a case of marginal underreporting that falls within a zone of reasonable disagreement. This is systematic and substantial revenue diversion.
VII. Concessions to Avoid
The following directives are critical. During oral argument, the team must avoid making any of the following concessions, whether explicitly or implicitly. If the Court presses on any of these points, the recommended approach is to acknowledge the question, redirect to Verimark's affirmative position, and avoid any formulation that could be construed as a concession.
1. Do NOT concede that § 4.1 is ambiguous or susceptible to more than one reasonable interpretation. If the Court begins probing potential ambiguity — asking, for example, whether the phrase "regardless of the entity collecting such revenue" could be read to apply only to OTA intermediaries — redirect firmly to the plain language. Emphasize that the phrase is categorical and all-encompassing, that it uses the word "regardless," and that no reasonable reading of the definition excludes Suncoast-collected revenues. Conceding ambiguity, even as a fallback, would fundamentally undermine the motion.
2. Do NOT concede that Verimark had knowledge of or acquiesced to the revenue-exclusion practice. This distinction is critical: knowledge that Suncoast existed as a management entity is not equivalent to knowledge that Suncoast-collected revenues were being excluded from GRR reports. Maintain this distinction at all times. Do not allow the Court or opposing counsel to conflate these two propositions.
3. Do NOT concede the validity of Prof. Hargrove's $6.2 million damages figure. If the Court asks about the gap between the parties' damages positions, emphasize that damages are not before the Court on Verimark's motion and that Hargrove's methodology improperly narrows the GRR definition in a manner inconsistent with the contract language. Do not validate Hargrove's analysis in any way.
4. Do NOT volunteer analysis of the enforceability of the § 15.3 liquidated-damages provision. If the Court asks, state affirmatively that the provision is a reasonable pre-estimate of harm and is enforceable under Florida law, but emphasize that this issue is deferred and is not necessary for resolution of the pending motion. Do not open the door to a discussion that could derail the argument.
5. Do NOT concede that Coastal Palms' counterclaim has any evidentiary basis. If the Court raises the counterclaim in the context of Coastal Palms' cross-motion, note the absence of expert support, the absence of specific factual foundation in the deposition testimony, and the absence of any quantitative damages analysis. The counterclaim should be characterized as a litigation tactic, not a meritorious claim.
6. Do NOT agree to resolve damages at summary judgment. If the Court suggests that it would be efficient to address damages now, maintain the position that genuine factual disputes on quantum — as demonstrated by the $6.2 million versus $150 million gap — require trial. Express willingness to try damages promptly if liability is established, but do not invite the Court to rule on damages at this stage.
VIII. Rebuttal Preparation — Anticipated Defense Arguments
Based on the briefing and our assessment of Nathan Whitfield III's likely presentation style, we anticipate the following arguments from Coastal Palms during the hearing. The recommended rebuttals are set forth below.
A. "Verimark Knew About Suncoast"
Anticipated Argument: Coastal Palms will argue that Verimark was aware of Suncoast's existence because Suncoast was identified in the property-management agreements submitted during the franchise-application process. They will argue that this awareness constitutes acquiescence or at least creates a factual dispute precluding summary judgment.
Recommended Rebuttal: The distinction between knowledge of Suncoast's existence as a management company and knowledge or approval of the practice of excluding Suncoast-collected revenues from GRR reports is fundamental. No document or testimony supports the proposition that Verimark knew about or approved the revenue-exclusion practice. The property-management agreements listing Suncoast do not address GRR reporting, do not authorize revenue exclusion, and do not purport to modify the FLA's GRR definition. A management company may perform many legitimate functions — housekeeping, maintenance, front-desk staffing — without implicating GRR reporting. Verimark's awareness that a management company existed does not, by any stretch, imply awareness that the management company was being used to divert nearly $200 million in unreported guest-room revenue.
B. "GRR Definition Is Ambiguous Because It Doesn't Specifically Name Suncoast"
Anticipated Argument: Coastal Palms will argue that the GRR definition is ambiguous because it does not specifically name Suncoast Room Management Inc. or refer to "management entities" by category. They will contend that the phrase "regardless of the entity collecting such revenue" was intended to apply only to OTA intermediaries and not to management companies.
Recommended Rebuttal: Contract definitions work by category, not by naming every possible entity. The phrase "regardless of the entity collecting such revenue" is deliberately categorical and all-encompassing. It does not say "regardless of the OTA collecting such revenue." It does not say "regardless of the booking intermediary collecting such revenue." It says "regardless of the entity" — full stop. Suncoast is an entity. It collected revenue attributable to the rental of guest rooms. That revenue falls within the GRR definition. To require the contract to name every conceivable entity that might collect room revenue would render the definition unworkable and would defeat its plain purpose.
C. "OTA Net-Rate Treatment Was Industry-Standard"
Anticipated Argument: Coastal Palms will argue that its practice of netting OTA commissions against gross room revenue before reporting GRR was consistent with industry practice and therefore not a breach of the FLA.
Recommended Rebuttal: FLA § 4.1 requires the reporting of "all revenues derived from or attributable to the rental of guest rooms." The word "revenues" in context clearly means gross revenues, not net revenues. The FLA does not contain a net-revenue provision, a commission-offset clause, or any other mechanism that would authorize the franchisee to deduct OTA commissions before reporting GRR. Under well-settled Florida law, industry custom cannot override unambiguous contract language. Even if the Court were to consider industry custom — which it should not — Coastal Palms failed to present any expert testimony establishing that the practice of netting OTA commissions is, in fact, an industry standard in the hotel franchise context. This argument is both legally and factually unsupported.
D. "The Breach Was Not 'Systematic' — It Was a Good-Faith Disagreement Over Interpretation"
Anticipated Argument: Coastal Palms will characterize the revenue exclusion as a good-faith interpretive disagreement rather than a systematic scheme to underreport revenue. They will argue that Brecker genuinely believed Suncoast revenues fell outside the GRR definition and that this subjective belief precludes a finding of "systematic" underreporting.
Recommended Rebuttal: The characterization of this nine-year, 22-property, $197.8 million revenue diversion as a "good-faith disagreement over interpretation" strains credulity. Brecker established a purpose-built affiliated entity — Suncoast Room Management Inc. — to collect revenues that he then directed to be excluded from GRR reports. He never sought a formal interpretation or advisory opinion from Verimark. He never disclosed the Suncoast booking channel's revenue in GRR reports or in any other communication to Verimark. He never raised the issue of Suncoast's revenues with any Verimark representative at any time during the nine-year period. And when confronted by Verimark following the whistleblower report, he did not offer to cure — his counsel denied any breach entirely. This is not a good-faith interpretive disagreement. This is a systematic scheme, and it is the definition of the conduct that § 14.2(c) was designed to address.
E. "Cure Should Have Been Permitted"
Anticipated Argument: Coastal Palms will argue that, notwithstanding the "incapable of cure" language in § 14.2(c), Verimark was required to provide a meaningful opportunity to cure the breach, and that the 30-day notice period was insufficient.
Recommended Rebuttal: FLA § 14.2(c) expressly states that systematic underreporting of GRR "is incapable of cure." The parties negotiated and agreed to this provision. It means what it says: no cure period is required. But even setting the contract language aside, the facts defeat this argument. Verimark issued a 30-day cure notice on February 4, 2022. The cure period expired on March 6, 2022. During that 30-day window, Coastal Palms did not tender any cure — no payment, no revised GRR reports, no corrective action. Instead, Coastal Palms' counsel responded on February 28, 2022, denying that any breach had occurred. Having denied the breach and refused to cure, Coastal Palms cannot now argue that it was entitled to an opportunity to cure that it never even attempted to exercise.
IX. Logistics and Format
A. Hearing Details
• Date: Friday, January 19, 2024
• Time: To be confirmed with Judge Calloway's chambers. We should assume a morning calendar slot, most likely 9:00 a.m. or 9:30 a.m. Douglas Carmichael will confirm with the judicial assistant by telephone no later than January 16, 2024, and will circulate the confirmed time to the team.
• Location: Broward County Courthouse, 201 SE 6th Street, Fort Lauderdale, Florida 33301, in the courtroom of the Honorable Richard M. Calloway, Circuit Judge.
• Format: Standard oral argument on cross-motions for summary judgment. Verimark argues first, as movant on the earlier-filed motion. Coastal Palms responds and presents its cross-motion. Verimark rebuts. Time allotments have not been specified by the Court; we should plan for approximately 20 minutes for our opening presentation, anticipate significant questioning, and reserve 5–10 minutes for rebuttal.
B. Attendance
The following team members will attend the hearing in the roles specified:
• Priya Anand — Presenting argument. Priya will handle the opening presentation, all questioning from the Court, and the rebuttal.
• Douglas Carmichael — Second chair. Douglas will be seated at counsel table and should be prepared to address any question or topic if Priya defers. Douglas will also handle any procedural or scheduling matters that arise during the hearing.
• Yuki Nakamura — At counsel table. Yuki is responsible for pulling record citations, deposition transcript references, and specific factual details on the fly. Yuki should have electronic access to all deposition transcripts and key exhibits on a laptop, as well as hard-copy excerpts of the most critical deposition testimony.
• Carlos Espinoza — At counsel table. Carlos is responsible for the exhibit binder and authorities management. Carlos will have tabbed copies of all key authorities cited in the briefing, the representative FLA flagged at key provisions, and any additional materials that may be needed during argument.
All team members should arrive at the courthouse no later than 45 minutes before the scheduled hearing time to allow for security screening, courtroom setup, and a final pre-argument conference in the hallway or an available conference room.
C. Materials to Bring
The following materials must be assembled, organized, and brought to the hearing:
1. Tabbed binder of key authorities cited in Verimark's briefing, organized by topic (contract interpretation, material breach, waiver/estoppel), with relevant passages highlighted.
2. Copies of all 22 FLAs. A representative FLA should be flagged with tabs at the following provisions: § 4.1 (GRR definition and royalty obligation), § 4.2 (marketing-fund contribution), § 4.6 (late-payment interest), § 8.2 (audit rights), § 14.1 (general breach provisions), § 14.2(c) (systematic underreporting — material breach incapable of cure), and § 15.3 (liquidated damages).
3. Key deposition transcript excerpts: Randall Brecker (Days 1 and 2, January 9–10, 2023) — flagged at admissions regarding direction to exclude Suncoast revenues; Janet Kerrigan (January 23, 2023) — flagged at testimony regarding instructions from Brecker; and selected property-level managers — flagged at testimony corroborating the underreporting practice.
4. Dr. Sharon Kettlewell's expert report (April 14, 2023) and rebuttal report (June 9, 2023) — with damages summary tables bookmarked for quick reference.
5. Prof. Grant Hargrove's expert report (May 15, 2023) — with the methodology section flagged for impeachment purposes if the Court raises the damages dispute or if opposing counsel relies on Hargrove's conclusions.
6. Courtroom copy of Verimark's Statement of Undisputed Material Facts (127 paragraphs, filed September 29, 2023).
7. One-page summary chart for courtroom reference, presenting the following figures:
Note: This chart is for internal reference and to have available if the Court requests a summary. It should not be handed up to the Court unless specifically requested, as Verimark's motion addresses liability only and we wish to avoid drawing undue attention to the damages figures — particularly the liquidated-damages component — during this argument.
D. Post-Argument Steps
Depending on the outcome of the hearing, the team should be prepared for the following next steps:
If the Court rules from the bench: Immediately confer with the client. Renata Solis-Vega, Verimark's General Counsel, and Martin Holcomb, Verimark's CFO, should be notified of the ruling by telephone within minutes of the hearing's conclusion. If the ruling is favorable, the team should discuss next steps regarding settlement posture, the timing of any trial continuance motion, and the potential for mediation. If the ruling is adverse, the team should discuss the implications for trial preparation and any potential motion for reconsideration.
If the Court takes the motions under advisement: Prepare the team and the client for a likely written order within two to four weeks. Judge Calloway's practice, based on our review of his prior orders, is to issue written rulings on summary-judgment motions within approximately three to four weeks of oral argument.
Regardless of outcome: Begin evaluating mediation and settlement posture in light of the Court's ruling or the Court's questioning during argument (which often provides a strong indication of the Court's leanings). A favorable liability ruling on Counts I and II will substantially enhance Verimark's settlement leverage, as it will effectively establish Coastal Palms' obligation to pay royalties and marketing-fund contributions on the full $197.8 million in underreported GRR, leaving only the amount of damages (and ancillary issues such as interest and liquidated damages) for trial.
If partial summary judgment is granted on Counts I and II: Consider requesting a trial continuance to allow the parties to engage in meaningful settlement discussions before incurring the substantial costs of trial preparation on the remaining counts and damages issues. A 60- to 90-day continuance for mediation would be appropriate and could be presented to the Court as promoting judicial efficiency.