summary-judgment-strategy-memo.docx

1021-00006 · Client 1021 · Motions & Briefing

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MEMORANDUM

FROM: Priya Anand, Responsible Partner, Litigation (General)

TO: Douglas Carmichael, Billing Partner; Yuki Nakamura, Lead Associate; Carlos Espinoza, Working Associate

DATE: September 5, 2023

RE: Strategy for Motion for Partial 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

CLIENT: Verimark Hospitality Group Inc. (Nasdaq: VHMK)

I. Purpose and Executive Summary

This memorandum outlines the recommended strategy for filing a Motion for Partial Summary Judgment on behalf of our client, Verimark Hospitality Group Inc. ("Verimark" or "VHG"), on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) of the Complaint filed in the above-captioned matter. Having carefully analyzed the evidentiary record developed over the course of extensive discovery, the applicable law, the tendencies of the assigned judge, and the broader litigation dynamics, I believe this motion presents a high-probability opportunity to secure a decisive strategic advantage for our client at a critical juncture in the case.

Recommendation: The engagement team should seek summary judgment on liability only on Counts I and II, deferring all issues related to damages quantification to trial or subsequent proceedings.

The rationale for limiting the motion to liability is threefold. First, this approach maximizes the probability of a favorable ruling by presenting the cleanest possible factual record to the Court. The question of whether Coastal Palms Franchise Holdings LLC ("Coastal Palms") breached the Franchise License Agreements ("FLAs") by systematically excluding revenues collected through Suncoast Room Management Inc. ("Suncoast") from its Gross Room Revenue ("GRR") reports is fundamentally a question of contract interpretation — one that the unambiguous language of FLA § 4.1 resolves squarely in our favor. Second, by deferring damages quantification, we avoid giving Judge Calloway any reason to deny the motion based on the genuinely disputed calculations surrounding the total amount of underreported GRR and the applicable interest. The gap between our expert, Dr. Sharon Kettlewell, and the defense expert, Prof. Grant Hargrove, is significant, and injecting that dispute into the summary-judgment record would introduce precisely the type of "genuine issue of material fact" that courts seize upon to deny summary judgment motions. Third, a liability ruling alone provides decisive settlement leverage. If the Court rules as a matter of law that Coastal Palms committed a material breach of the FLAs by underreporting GRR, the defense loses its principal argument — the GRR-ambiguity theory — and the case shifts entirely to a negotiation about the quantum of damages. The threat of substantial damages at trial, including up to $105.5 million in liquidated damages under FLA § 15.3, becomes dramatically more credible once liability is established.

I further recommend against seeking summary judgment on the remaining counts (Counts III through X) at this time. As discussed in detail in Section III.C below, each of those counts presents either heightened factual disputes (Counts V, VI, X), legal complexity that is better suited for full trial presentation (Counts IV, VII, VIII), or involves damages of insufficient magnitude to justify the risk of an adverse ruling that could infect the broader case (Count III). By keeping the motion tightly focused on Counts I and II, we present the strongest possible case and avoid the risk that the Court's analysis of weaker claims colors its view of our strongest ones.

The target filing date for the Motion for Partial Summary Judgment is September 29, 2023, which is consistent with the Court's dispositive-motion deadline established at the June 14, 2022 Case Management Conference. Discovery closed on August 4, 2023, and the record is fully developed. No outstanding discovery disputes or supplementation obligations remain that could affect the filing.

The anticipated result, if the motion is granted, is as follows: Verimark will enter any subsequent trial or settlement negotiation with established liability on the two largest contract claims in the case. The dispute will be limited to the quantum of damages owed on Counts I and II and to the remaining Counts III through X and the defense counterclaim. This posture dramatically increases settlement pressure on Coastal Palms and its principals — Randall Brecker, Theresa Brecker, and Nolan Prescott — who face the prospect of certain damages exposure on the contract claims, compounding late-payment interest, and potential liability on the remaining counts, including civil conspiracy and fraudulent concealment. The practical effect will be to transform this case from a contested liability dispute into a damages negotiation, with Verimark holding all of the structural advantages.

II. Background — Procedural Posture and Record

A. Litigation Timeline to Date

For the benefit of the engagement team and to ensure our motion papers accurately reflect the procedural history, the following is a comprehensive summary of the key events in this litigation to date.

Verimark filed its Complaint on March 7, 2022, asserting ten counts against Coastal Palms Franchise Holdings LLC, Randall Brecker individually, and Suncoast Room Management Inc. The Complaint was the product of extensive pre-litigation investigation, including the compliance audit conducted by Thornbury & Associates CPAs LLP and the initial analysis of documents produced by the whistleblower, Janet Kerrigan. The ten counts encompass breach of contract (royalties, marketing fund, and technology fees), breach of the implied covenant of good faith and fair dealing, fraudulent concealment, negligent misrepresentation, unjust enrichment, declaratory judgment regarding FLA termination rights, accounting, and civil conspiracy.

Coastal Palms filed its Answer, Affirmative Defenses, and Counterclaim on April 18, 2022. The Answer asserted sixteen affirmative defenses, including contract ambiguity, waiver, estoppel, laches, statute of limitations, failure to mitigate, and setoff. The Counterclaim sought $12 million in damages for alleged brand-standard violations, including claims that Verimark failed to maintain adequate reservation-system infrastructure, imposed unreasonable property-improvement mandates, and overbilled for technology-platform services. Verimark filed its Answer to the Counterclaim on May 2, 2022, denying all material allegations.

The Case Management Conference was held on June 14, 2022, before the Honorable Richard M. Calloway. Judge Calloway set the case on a standard complex-litigation track, with discovery to close on August 4, 2023, and trial originally scheduled for February 2024. The Court also set the dispositive-motion deadline for September 29, 2023, which is the deadline we intend to meet with this filing.

discovery in this matter has been extensive, reflecting the scope and complexity of the alleged revenue-diversion scheme. Verimark served its first set of discovery on July 11, 2022, including 25 interrogatories and 147 requests for production directed to Coastal Palms and Suncoast. Coastal Palms' initial document production, consisting of approximately 84,000 documents, was served on August 22, 2022. The initial production was incomplete, particularly with respect to Suncoast Room Management's financial records, which Coastal Palms claimed were not within its possession, custody, or control. Verimark filed a Motion to Compel production of Suncoast financial records on September 15, 2022, which the Court granted on October 28, 2022, finding that Coastal Palms and Suncoast were under common control by Randall Brecker and that Coastal Palms could not credibly disclaim access to Suncoast's records. The supplemental production of approximately 312,000 documents was completed on November 18, 2022, and included Suncoast's general-ledger data, bank statements, revenue reports, and internal memoranda spanning the 2013–2022 period.

Fact depositions were conducted during the period of January 9 through March 17, 2023. A total of 14 fact depositions were taken, including:

• Randall Brecker — Two-day deposition (January 18–19, 2023). Brecker is the President and controlling member of both Coastal Palms and Suncoast. His testimony contained critical admissions regarding his understanding of the FLA's GRR definition and his reasons for establishing the Suncoast booking channel, as discussed in detail in Section IV.B below.

• Theresa Brecker — One-day deposition (January 25, 2023). Theresa Brecker serves as Secretary of Coastal Palms and is Randall Brecker's spouse. Her testimony established her awareness of the Suncoast revenue-collection structure and her involvement in reviewing monthly GRR reports submitted to Verimark.

• Nolan Prescott — One-day deposition (February 1, 2023). Prescott is the Chief Financial Officer of Coastal Palms and had direct responsibility for overseeing the GRR reporting process. His testimony confirmed the methodology by which Suncoast revenues were excluded from GRR calculations.

• Janet Kerrigan — One-day deposition (February 8, 2023). Kerrigan is the former regional controller for Coastal Palms' Gulf Coast portfolio (10 properties), who was terminated in October 2021 and subsequently contacted Verimark's compliance hotline on November 8, 2021. Her testimony provides direct evidence that Brecker personally instructed accounting personnel to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark.

• Ten property-level managers and accountants — Depositions conducted between February 15 and March 17, 2023. These witnesses include general managers, front-desk supervisors, and on-site accountants from various Coastal Palms properties across the portfolio. Their composite testimony confirms a consistent, top-down directive from "corporate" (i.e., Brecker) to route walk-in, corporate-direct, and gulfcoastrooms.com bookings through the Suncoast channel and to exclude those amounts from GRR reports.

Expert reports were exchanged on the following schedule:

• Dr. Sharon Kettlewell, of Ridgeline Forensic Advisory LLC, served her expert report on April 14, 2023. Dr. Kettlewell's report reconstructs true GRR for all 22 Coastal Palms properties across the 2013–2021 period, based on an analysis of Suncoast financial records, property-management-system data, bank-account reconciliations, and OTA settlement statements.

• Prof. Grant Hargrove, of Hargrove Economic Consulting Inc., served his defense expert report on May 15, 2023. Prof. Hargrove disputes both the methodology and quantum of Dr. Kettlewell's findings, offering a significantly lower estimate of total underpayment.

• Dr. Kettlewell served her rebuttal report on June 9, 2023, addressing and rebutting Prof. Hargrove's criticisms.

Expert depositions of Dr. Kettlewell and Prof. Hargrove were taken on June 26–27, 2023. During his deposition, Prof. Hargrove made several important concessions that bear on the summary-judgment motion, including his acknowledgment that certain revenues collected by Suncoast were excluded from GRR reports — his disagreement being limited to whether those revenues fall within the contractual definition of GRR.

discovery closed on August 4, 2023. The record is now fully developed for purposes of dispositive motions.

It is worth noting the scale of the e-discovery effort in this matter. Nexagen Document Solutions LLC, our e-discovery vendor, processed approximately 2.3 million documents (approximately 1.1 terabytes of data) on Verimark's side alone. The defense production, including the court-ordered Suncoast supplemental production, totaled approximately 396,000 documents. The review, analysis, and organization of this documentary record has been a significant undertaking and provides the evidentiary foundation for the motion we now recommend.

B. The Franchise License Agreements — Key Provisions

The contractual framework at the center of this dispute consists of 22 individual Franchise License Agreements ("FLAs") executed between Coastal Palms (or its property-level affiliates) and Verimark. The first FLA was executed on June 15, 2007, for the Naples property, and the most recent was executed on September 3, 2019. Each FLA carries a 20-year initial term, is governed by Florida law, and contains a mandatory venue provision designating Broward County as the exclusive forum for any disputes arising under the agreement. The FLAs are substantively identical in all material respects relevant to the motion; each was executed on Verimark's standard franchise-agreement form, with the only variations being property-specific information (address, room count, opening date, etc.).

The following provisions are of particular importance to the summary-judgment motion:

FLA § 4.1 — Royalty. Section 4.1 requires the franchisee to pay Verimark a royalty equal to 5% of Gross Room Revenue ("GRR"). GRR is defined as:

"all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue."

This definition is broad and all-encompassing. It expressly captures revenues from "any booking channel, direct or indirect" and includes revenues "regardless of the entity collecting such revenue." As discussed below, this language is the linchpin of our summary-judgment argument. It was specifically designed to ensure that a franchisee could not avoid royalty obligations by routing revenue through a separate entity — precisely the scheme that Coastal Palms implemented through Suncoast.

FLA § 4.2 — Marketing-Fund Contribution. Section 4.2 requires the franchisee to contribute 2.5% of GRR to the Verimark Brand Marketing Fund. This contribution is calculated on the identical GRR base used for the royalty calculation under § 4.1. As a result, any underreporting of GRR that affects the royalty calculation necessarily and equally affects the marketing-fund contribution.

FLA § 4.3 — Technology Fee. Section 4.3 requires the franchisee to pay a technology fee of $12.50 per available room per month, adjusted annually by CPI with a cap of 3% per year. This provision is relevant to Count III but is not the subject of the recommended summary-judgment motion.

FLA § 4.6 — Late-Payment Interest. Section 4.6 provides that any amounts not paid when due shall accrue interest at the rate of 1.5% per month, compounded monthly. Given the length of the underreporting period (at least 2013 through 2021), the late-payment interest on unpaid royalties and marketing-fund contributions is substantial — Dr. Kettlewell calculates $28.4 million in compounded interest through the date of her report — and constitutes a significant damages component that is better reserved for trial.

FLA § 8.2 — Audit Rights. Section 8.2 entitles Verimark to audit the franchisee's books and records upon 10 business days' written notice. Importantly, the provision further provides that the franchisee shall bear all costs of the audit if the audit reveals an underpayment exceeding 2% of reported GRR. This provision is relevant to Verimark's claim for audit costs and may be cited in the motion as part of the contractual framework governing GRR reporting and compliance.

FLA § 14.1 — Notice and Cure. Section 14.1 establishes a 30-day cure period from the date of written notice of breach. Verimark issued a Notice of Material Breach on February 4, 2022. Coastal Palms' counsel responded on February 28, 2022, denying the existence of any breach, but no cure was tendered. The 30-day period expired on March 6, 2022 — one day before the Complaint was filed.

FLA § 14.2(c) — Incurable Breaches. Section 14.2(c) provides that:

"systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure."

This provision is significant because it eliminates the cure defense entirely with respect to the type of breach alleged here. Even if Coastal Palms were to argue that Verimark's Notice of Material Breach was deficient or that the 30-day cure period was insufficient, the nine-year pattern of systematic underreporting through the Suncoast channel constitutes an incurable breach under § 14.2(c).

FLA § 15.3 — Liquidated Damages. Section 15.3 provides for liquidated damages of 3× trailing-twelve-month royalties per property upon termination for cause. This provision carries enormous financial implications for Coastal Palms: across 22 properties, the liquidated-damages exposure totals approximately $105.5 million. As discussed in Section VII below, the enforceability of this provision under Florida law is a contested question, and I recommend against including it in the summary-judgment motion.

C. The Revenue Diversion Scheme — Undisputed Record Evidence

The factual record developed through discovery establishes a clear and largely undisputed picture of the revenue-diversion scheme at the heart of this case. While the parties vigorously dispute the legal significance of the relevant facts — particularly whether the GRR definition requires inclusion of revenues collected by Suncoast — the underlying facts themselves are, for purposes of summary judgment, materially undisputed.

Formation of Suncoast Room Management Inc. Beginning no later than January 2013, Coastal Palms, through its controlling principal Randall Brecker, established Suncoast Room Management Inc. as a separate Florida corporation. Brecker serves as President and sole director of Suncoast. The stated purpose of Suncoast, according to its articles of incorporation and Brecker's deposition testimony, was to "manage direct-channel bookings and corporate accounts" for the Coastal Palms hotel portfolio. In practice, Suncoast served as a revenue-collection vehicle for bookings that did not originate through Verimark's branded reservation channels. Specifically, Suncoast collected revenues from three principal sources: (a) walk-in guests who booked directly at the front desk; (b) corporate-direct contracts negotiated by Coastal Palms' sales team with local and regional businesses; and (c) bookings through gulfcoastrooms.com, an unbranded website established and operated by Suncoast that marketed rooms at Coastal Palms properties without reference to the Verimark brand.

The Suncoast Revenue Flow. Revenues collected by Suncoast were processed as follows: Suncoast retained a 12% "management fee" before remitting the balance to property-level limited liability companies (including Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and others) that operated the individual hotel properties. Neither the gross revenues collected by Suncoast nor the 12% management fee retained by Suncoast were included in the GRR reports submitted to Verimark. The result was that a substantial portion of guest-room revenue generated at Coastal Palms properties was systematically excluded from the royalty and marketing-fund calculations.

OTA Netting. In addition to the Suncoast diversion, Coastal Palms underreported revenue from online travel agency ("OTA") channels by netting commissions against gross revenue. Under the standard OTA merchant model, the hotel receives the full room rate from the guest and pays a commission to the OTA. Under FLA § 4.1, GRR is defined as gross revenue, and commissions paid to OTAs are a cost of doing business that does not reduce the GRR base. Coastal Palms, however, classified net-rate OTA payments as "commissions receivable" in its internal accounting and reported only the net amount — i.e., the gross rate minus the OTA commission — as GRR. This practice further reduced the reported GRR and, consequently, the royalties and marketing-fund contributions paid to Verimark.

The Whistleblower. The revenue-diversion scheme was first brought to Verimark's attention on November 8, 2021, when Janet Kerrigan, former Regional Controller for Coastal Palms' Gulf Coast portfolio (10 properties), contacted Verimark's compliance hotline. Kerrigan had been terminated by Coastal Palms in October 2021, reportedly for raising internal concerns about the GRR-reporting methodology. Her initial report to Verimark described the Suncoast revenue-collection structure and the OTA netting practices in substantial detail and provided documentary support in the form of internal memoranda and spreadsheets.

The Thornbury Audit. In response to the Kerrigan disclosure, Verimark retained Thornbury & Associates CPAs LLP on November 22, 2021, to conduct a compliance audit of Coastal Palms' GRR reporting. Malcolm Thornbury, CPA, served as Lead Audit Partner. Thornbury's preliminary findings were delivered on January 18, 2022, and revealed that, for the 2019–2021 period, the top 10 properties underreported GRR by approximately 26%. These findings formed the basis for Verimark's decision to issue the Notice of Material Breach and subsequently to file the Complaint.

The Scope of Underreporting. Dr. Kettlewell's forensic analysis, which used the full Suncoast financial record (produced under court order) together with property-management-system data, bank-account reconciliations, and OTA settlement statements, estimates that total underreported GRR across all 22 properties for the full 2013–2021 period is approximately $197.8 million. For FY 2021 alone, Coastal Palms reported GRR of $112.4 million, whereas Dr. Kettlewell estimates true GRR of $145.6 million — an underreporting of $33.2 million, representing a variance of approximately 22% to 31% depending on the property and year. These figures form the basis for the damages calculations but, as discussed above, we recommend deferring all damages issues and citing Dr. Kettlewell's work only for the fact and methodology of underreporting, not for quantum.

Notice and Failure to Cure. Verimark issued a formal Notice of Material Breach on February 4, 2022, pursuant to FLA § 14.1, demanding cure within 30 days. The Notice identified the Suncoast revenue-diversion scheme and the OTA netting practices and demanded that Coastal Palms (a) immediately report corrected GRR for all affected periods, (b) pay all unpaid royalties, marketing-fund contributions, and late-payment interest, and (c) take all steps necessary to ensure accurate GRR reporting going forward. Coastal Palms' counsel, Nathan Whitfield III of Whitfield, Barrow & Crane LLP, responded by letter dated February 28, 2022, denying any breach and asserting that Suncoast revenues were not within the scope of the FLA's GRR definition. No cure was tendered. The 30-day cure period expired on March 6, 2022, with Coastal Palms in continuing default. The Complaint was filed the following day.

III. Recommended Scope of the Motion — Counts I and II Only (Liability)

A. Why Counts I and II Present the Strongest Case for Summary Judgment

Having reviewed the full evidentiary record, the applicable law, and the available defenses, I am confident that Counts I and II present the strongest possible vehicle for partial summary judgment. The reasons are as follows.

Count I (Breach of Contract — Royalties). Coastal Palms' obligation to pay a royalty equal to 5% of GRR under FLA § 4.1 is unambiguous. The definition of GRR expressly includes revenues from "any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This language was carefully drafted to capture the full scope of guest-room revenue, regardless of the mechanism by which it was collected or the identity of the collecting entity. Suncoast-collected revenues — whether derived from walk-ins, corporate-direct bookings, or the gulfcoastrooms.com website — plainly fall within this definition. They are revenues "derived from or attributable to the rental of guest rooms at the Hotel," collected through a "direct" booking channel, by an entity other than the franchisee. The GRR definition captures each of these attributes explicitly.

The undisputed record establishes that Coastal Palms, through its controlling principal Randall Brecker, systematically excluded Suncoast-collected revenues from the GRR reports submitted to Verimark over a period of at least nine years (2013–2021). There is no dispute that these revenues existed, that they were collected by Suncoast, that they were not included in GRR, and that lower royalties were paid as a result. The only dispute is whether the GRR definition requires their inclusion — a legal question of contract interpretation that the Court can and should resolve on summary judgment.

Count II (Breach of Contract — Marketing Fund). The 2.5% marketing-fund contribution under FLA § 4.2 is calculated on the identical GRR base used for the royalty calculation. The analysis applicable to Count I applies with equal force to Count II. If the Court determines that Suncoast revenues must be included in GRR for royalty purposes, it follows automatically that the same revenues must be included for purposes of the marketing-fund contribution. There is no independent contractual provision or defense that would allow Coastal Palms to prevail on Count II if it loses on Count I. For this reason, Counts I and II should be briefed together as a unified contract-interpretation question.

The core legal question presented by both Counts — whether Coastal Palms' exclusion of Suncoast-collected revenues from GRR constitutes a material breach of the FLAs — is a question of contract interpretation suitable for resolution as a matter of law. Under Florida's well-established contract-interpretation principles, when the language of a contract is clear and unambiguous, the court must enforce the contract as written, and there is no occasion for judicial construction. The GRR definition in FLA § 4.1 is clear on its face. The motion should present this as a straightforward application of the plain-meaning rule.

B. Why Liability Only (Deferring Damages)

The recommendation to limit the motion to liability and defer all damages issues is a critical strategic judgment that I want the full team to understand and support.

The damages computation in this case involves genuinely contested expert opinions. Dr. Kettlewell opines on $197.8 million in underreported GRR and derives total direct underpayments of approximately $16.095 million, consisting of $9.89 million in unpaid royalties, $4.945 million in unpaid marketing-fund contributions, and $1.26 million in unpaid technology fees, plus $28.4 million in compounded late-payment interest under FLA § 4.6. Prof. Hargrove, the defense expert, disputes both the methodology and the quantum of these figures. Prof. Hargrove limits his estimate of total underpayment to a maximum of $6.2 million, based on a narrowed interpretation of the GRR definition that excludes certain categories of Suncoast revenue and applies different assumptions regarding the OTA netting issue. The gap between these expert opinions — $16.095 million (plus $28.4 million in interest) versus $6.2 million — is substantial and represents a genuine dispute of material fact on the question of damages.

Including damages in the summary-judgment motion would inject this dispute into the record and provide the Court with grounds for denial even on the liability question. Florida courts, like courts generally, are reluctant to resolve motions for summary judgment where expert testimony conflicts on material issues. There is a real risk that, if we present the motion as an all-or-nothing request for summary judgment on both liability and damages, Judge Calloway will identify the expert disagreement on quantum as a reason to deny the motion in its entirety — forcing us to prove liability at trial despite the strength of our position on the contract-interpretation question.

A liability-only ruling, by contrast, is strategically more valuable than a combined ruling on liability and damages. A determination that Coastal Palms breached the FLAs by excluding Suncoast revenues from GRR eliminates Coastal Palms' primary defense — the GRR-ambiguity argument — and establishes the legal framework within which all damages will be determined. Once the Court rules that GRR includes Suncoast-collected revenues, the only remaining question is how much revenue was collected and how much was underpaid. The defense expert's position — that GRR does not include certain Suncoast revenues — collapses. The damages trial then becomes a straightforward forensic-accounting exercise, heavily favoring Verimark.

Florida law supports the bifurcation of liability and damages in breach-of-contract summary judgment motions. Florida Rule of Civil Procedure 1.510(a) expressly permits a party to move for summary judgment on "the issue of liability alone although there is a genuine issue as to the amount of damages." This procedural authorization reinforces the propriety of our recommended approach and should be cited prominently in our motion papers.

C. Counts Not Included in the Motion — and Why

The following is a count-by-count analysis of the remaining claims in the Complaint and the reasons each should be excluded from the summary-judgment motion.

Count III (Breach of Contract — Technology Fees). Count III alleges that Coastal Palms underpaid technology fees under FLA § 4.3 by failing to report 214 additional rooms added across four properties (the Sarasota, Tampa Bay, Clearwater, and Marco Island locations) without providing notice to Verimark as required by the FLA. While the facts regarding the unreported rooms are favorable to Verimark — the rooms are documented in county occupancy-tax records and property-management-system data — the room-count dispute introduces a factual question that could complicate the motion. Coastal Palms contends that certain of the added rooms were "seasonal" or "temporary" and not subject to the technology-fee calculation. This factual dispute, while likely resolvable in Verimark's favor at trial, is the type of issue that could give the Court pause on summary judgment. Moreover, the technology-fee underpayments total approximately $1.26 million — a relatively small amount compared to the royalty and marketing-fund claims. The cost-benefit analysis of including this count in the motion does not favor inclusion. It is better addressed at trial, where the full context of the property expansions can be presented.

Count IV (Breach of Implied Covenant of Good Faith and Fair Dealing). Florida law recognizes an implied covenant of good faith and fair dealing in every contract, but imposes a high standard for claims based on the implied covenant. Coastal Palms will argue — with some basis in Florida case law — that the implied-covenant claim is duplicative of the express-contract claims asserted in Counts I and II. Several Florida appellate decisions have held that an implied-covenant claim cannot be maintained where the alleged conduct is expressly addressed by the terms of the contract. Including Count IV in the motion risks an adverse ruling on this point, which defense counsel could then cite in pre-trial motions to dismiss Count IV or in jury-instruction disputes. The safer course is to reserve Count IV for trial, where it can be presented in the broader context of Coastal Palms' course of conduct and where the equitable dimensions of the implied-covenant theory can be fully explored.

Count V (Fraudulent Concealment). Count V alleges that Coastal Palms, through Brecker and others, fraudulently concealed the revenue-diversion scheme from Verimark. To prevail on a fraudulent-concealment claim under Florida law, Verimark must prove: (a) a duty to disclose a material fact; (b) concealment of that fact; (c) intent to deceive; and (d) justifiable reliance resulting in damages. While the evidence of intentional diversion through Suncoast is strong — Brecker's deposition admissions, Kerrigan's testimony regarding direct instructions to exclude Suncoast revenues, and property-manager depositions showing direction from "corporate" all support an inference of deliberate concealment — Coastal Palms will vigorously contest the intent element. Defense counsel will argue that Brecker's establishment of Suncoast was a legitimate business decision, that the GRR reporting reflected a good-faith interpretation of the FLA, and that there was no intent to deceive. Summary judgment on fraud claims faces heightened skepticism from courts, which are generally reluctant to resolve issues of intent and state of mind on summary judgment. This claim is better suited for trial, where the jury can assess the credibility of the witnesses and draw its own inferences regarding Brecker's intent.

Count VI (Negligent Misrepresentation). Count VI alleges that the monthly GRR reports submitted by Coastal Palms to Verimark constituted negligent misrepresentations. Similar concerns apply as with Count V. While the GRR reports were unquestionably inaccurate, the defense will argue that the reporting was performed by accounting personnel who believed in good faith that the reports reflected the correct interpretation of GRR, and that issues of reliance and duty present triable issues of fact. The negligent-misrepresentation claim adds modest incremental value to the case and is not worth the risk of an adverse summary-judgment ruling.

Count VII (Unjust Enrichment — Alternative). Count VII is pleaded as an alternative to the contract claims and alleges that Coastal Palms was unjustly enriched by retaining royalties and marketing-fund contributions that should have been paid to Verimark. If we prevail on summary judgment on Counts I and II, Count VII becomes effectively moot, as the unjust-enrichment theory provides no additional recovery beyond what is available under the express contract. If, for any reason, we do not prevail on the contract claims, the unjust-enrichment theory depends on equitable considerations — including the relative positions of the parties, the nature and extent of the benefit conferred, and the equities of the situation — that are not well suited for summary adjudication.

Count VIII (Declaratory Judgment — FLA Termination). Count VIII seeks a declaratory judgment that Verimark has the right to terminate the FLAs for cause based on Coastal Palms' material breach. This count is intertwined with the remedy phase of the case and involves considerations — including the enforceability of the liquidated-damages provision in FLA § 15.3, the question of whether Verimark has elected to terminate or merely to seek damages for breach, and the practical consequences of termination for the ongoing operations of 22 hotel properties — that are better addressed after liability has been established. Seeking a declaratory judgment at this stage would prematurely force the Court to grapple with termination-related issues that are more appropriately deferred to trial or to post-liability-ruling proceedings.

Count IX (Accounting). Count IX seeks an accounting of all revenues collected by Coastal Palms, Suncoast, and their affiliates in connection with the 22 hotel properties. An accounting is an equitable remedy that is inherently fact-intensive and dependent on the Court's exercise of discretion. It is not suitable for summary judgment.

Count X (Civil Conspiracy — Brecker & Suncoast). Count X alleges that Randall Brecker and Suncoast conspired with Coastal Palms to commit the revenue-diversion scheme. Under Florida law, a civil-conspiracy claim requires proof of an agreement between two or more parties to commit an unlawful act, together with an overt act in furtherance of the conspiracy and resulting damages. While the record supports the conspiracy theory — Brecker controlled both Coastal Palms and Suncoast and directed the revenue-diversion scheme — conspiracy claims typically present jury questions regarding the existence of an agreement and the parties' respective roles. Additionally, the defense will raise the intracorporate-conspiracy doctrine, arguing that Brecker, as the controlling officer of both entities, cannot conspire with himself. While this defense is subject to significant limitations under Florida law, litigating it on summary judgment would add complexity and risk without commensurate benefit. This claim is better reserved for trial.

IV. Strength of the Evidence — Key Record Support for Counts I and II

A. Contract Language Is Unambiguous

The foundation of our summary-judgment motion is the plain language of FLA § 4.1, which defines GRR to include all revenues "regardless of the entity collecting such revenue." This language is not ambiguous, not susceptible to multiple reasonable interpretations, and not the subject of any genuine dispute of material fact. It means exactly what it says: the identity of the entity collecting guest-room revenue is irrelevant to the GRR calculation.

The phrase "regardless of the entity collecting such revenue" was included in the FLA specifically to address scenarios in which a franchisee might attempt to avoid royalty obligations by routing revenue through a separate entity. The drafting history of the Verimark standard FLA form confirms this intent, but such extrinsic evidence is unnecessary — the language is clear on its face. The GRR definition also encompasses revenues from "any booking channel, direct or indirect," which captures the walk-in, corporate-direct, and gulfcoastrooms.com channels used by Suncoast.

Importantly, all 22 FLAs contain identical language. There is no variation across the portfolio in the GRR definition, the royalty percentage, or the marketing-fund-contribution percentage. This uniformity simplifies the summary-judgment analysis and permits the Court to address all 22 FLAs in a single ruling.

Under Florida's plain-meaning rule, when contract language is clear and unambiguous, the court must enforce the contract as written without resort to extrinsic evidence. See, e.g., Acceleration Nat'l Serv. Corp. v. Brickell Fin. Servs. Motor Club, Inc., 541 So. 2d 738, 739 (Fla. 3d DCA 1989) ("When a contract is clear and unambiguous, the court must interpret the contract in accordance with the plain language of the contract."); Friedman v. Virginia Metal Prods. Corp., 56 So. 2d 515, 517 (Fla. 1952). There is no occasion for judicial construction, parol-evidence analysis, or extrinsic-evidence inquiry. The Court should enforce § 4.1 as written and determine, as a matter of law, that revenues collected by Suncoast fall within the GRR definition.

B. Coastal Palms' "Ambiguity" Defense Is Foreclosed by the Record

Coastal Palms' principal defense on Counts I and II is the contention that FLA § 4.1's GRR definition is ambiguous as applied to revenues collected by a "separate management entity" like Suncoast. Coastal Palms further contends that Verimark was aware of Suncoast's role because Suncoast was identified in certain property-management agreements submitted during the franchise-application process for several properties, and that Verimark's failure to object to Suncoast's involvement constituted an implied acceptance that Suncoast revenues were excluded from GRR.

This defense fails on multiple grounds, each of which should be developed in the summary-judgment brief.

First, the phrase "regardless of the entity collecting such revenue" directly and explicitly addresses the question of third-party revenue collection. This is not a case where the contract is silent on the issue and the Court must infer the parties' intent. The contract speaks directly to the very scenario at issue, and its answer is unequivocal: the identity of the collecting entity does not matter. If the drafters had intended to limit GRR to revenues collected by the franchisee itself, they would have omitted the "regardless of the entity" language entirely. That they included it — and that they used the word "regardless" — forecloses any argument that revenues collected by Suncoast (or any other entity) are outside the definition.

Second, Brecker's own deposition testimony undermines the ambiguity defense. On Day 1 of his deposition (January 18, 2023), Brecker admitted that he understood the FLA required reporting of all guest-room revenue. When pressed on why direct bookings were routed through Suncoast rather than through property-level accounting, Brecker testified that one of the reasons was to "keep the numbers looking right" for Verimark reporting purposes. This admission is devastating to any claim that Coastal Palms genuinely believed Suncoast revenues were excluded from GRR. It suggests, at minimum, an awareness that the revenues should have been reported and a deliberate decision to exclude them. At most, it constitutes a confession that the entire Suncoast structure was designed, at least in part, to evade royalty obligations.

Third, even if Verimark knew Suncoast existed as a management entity, knowledge of Suncoast's existence is not consent to the exclusion of its revenues from GRR. The FLAs contain no provision permitting oral or implied modification. Each FLA includes a standard integration clause providing that the FLA constitutes the entire agreement between the parties and supersedes all prior or contemporaneous representations, agreements, or understandings. Each FLA further provides that no modification, amendment, or waiver of any provision shall be effective unless set forth in a writing signed by both parties. Coastal Palms has not identified — because it cannot identify — any written agreement, amendment, or waiver in which Verimark agreed to exclude Suncoast revenues from GRR. The implied-acceptance theory cannot overcome these express contractual bars.

Fourth, Janet Kerrigan's testimony provides direct, unrebutted evidence that Brecker personally instructed controllers to exclude Suncoast revenues from the monthly GRR reports submitted to Verimark. Kerrigan testified that, upon assuming the Regional Controller position in 2017, she was directed by Brecker to maintain "two sets of numbers" — one reflecting actual guest-room revenue (including Suncoast collections) for internal management purposes, and another reflecting only branded-channel revenue for submission to Verimark as GRR. This practice was consistent across all 10 properties in Kerrigan's portfolio and, based on depositions of property-level accountants at other properties, appears to have been portfolio-wide.

Fifth, the composite deposition testimony of 10 property-level witnesses confirms a consistent, top-down directive from "corporate" — i.e., from Brecker and his senior team — to use the Suncoast channel for walk-in and corporate-direct bookings and to exclude those amounts from the GRR reports submitted to Verimark. The consistency of this testimony across multiple witnesses at different properties, many of whom had no communications with one another regarding the litigation, powerfully corroborates the existence of a deliberate and systematic scheme.

C. Expert Findings Corroborate the Breach

Dr. Kettlewell's forensic analysis, contained in her April 14, 2023 report and June 9, 2023 rebuttal report, provides comprehensive independent corroboration of the revenue-diversion scheme. Using Suncoast's general-ledger data, bank-account records, property-management-system data, and OTA settlement statements, Dr. Kettlewell reconstructed true GRR for all 22 properties across the 2013–2021 period. Her analysis concluded that total underreported GRR during this period was approximately $197.8 million.

These findings are consistent with the preliminary audit conducted by Thornbury & Associates CPAs LLP, which found approximately 26% underreporting for the top 10 properties during the 2019–2021 period. The consistency between Dr. Kettlewell's comprehensive forensic reconstruction and Thornbury's independent preliminary audit reinforces the reliability of the findings and underscores the pervasiveness of the underreporting scheme.

It is important to note the specific contours of Prof. Hargrove's disagreement with Dr. Kettlewell, because the nature of that disagreement actually supports our summary-judgment argument. While Prof. Hargrove limits total underpayment to $6.2 million — a dramatically lower figure than Dr. Kettlewell's $16.095 million in direct underpayments — he does not dispute that some revenues collected by Suncoast were excluded from GRR reporting. His disagreement is not about the fact that revenues were excluded; it is about the scope of the GRR definition. Prof. Hargrove contends that certain categories of Suncoast-collected revenue — particularly revenues from corporate-direct contracts and from gulfcoastrooms.com — should not be treated as GRR because they were not "derived from the rental of guest rooms at the Hotel" within the meaning of § 4.1. In other words, Prof. Hargrove's position is a legal argument about the proper interpretation of the GRR definition — not a factual dispute about what actually occurred. If the Court agrees with Verimark's reading of § 4.1 — that GRR includes all guest-room revenue regardless of the collecting entity or booking channel — then the fact of breach is established. The only remaining question is how much revenue was underreported, which is a damages issue properly deferred to trial.

D. No Cure Was Tendered

The record on the cure issue is straightforward and undisputed. Verimark issued a formal Notice of Material Breach on February 4, 2022, pursuant to FLA § 14.1, demanding cure within 30 days. The Notice was sent by certified mail and by email to Coastal Palms' registered address and to Randall Brecker personally.

Coastal Palms' counsel, Nathan Whitfield III of Whitfield, Barrow & Crane LLP, responded by letter dated February 28, 2022. The letter denied the existence of any breach, asserted that the GRR reporting was consistent with the FLAs, and stated that Coastal Palms had no intention of changing its reporting methodology. Critically, the letter did not tender cure — i.e., Coastal Palms did not offer to pay any amount of underpaid royalties or marketing-fund contributions, did not submit corrected GRR reports for any period, and did not agree to change its reporting practices going forward.

The 30-day cure period expired on March 6, 2022, with no cure tendered. The Complaint was filed the following day, March 7, 2022.

Additionally, as noted above, FLA § 14.2(c) provides that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." The nine-year pattern of systematic exclusion of Suncoast revenues from GRR reports — affecting all 22 properties and involving hundreds of millions of dollars in unreported revenue — plainly constitutes "systematic underreporting" within the meaning of § 14.2(c). This provision makes the cure defense potentially irrelevant, as the breach alleged here is, by the terms of the FLA itself, incapable of cure regardless of whether Coastal Palms had attempted to cure.

E. Proposed Statement of Undisputed Material Facts

The Statement of Undisputed Material Facts is a critical component of the motion and must be prepared with meticulous attention to detail. Yuki Nakamura will take the lead on preparing this document, in coordination with Carlos Espinoza on record citations.

I recommend that the Statement contain approximately 120–130 numbered paragraphs, organized in the following thematic categories:

1. The FLA Provisions (approximately 15–20 paragraphs): Setting forth the key provisions of the FLAs, including the GRR definition in § 4.1, the royalty and marketing-fund obligations in §§ 4.1 and 4.2, the late-payment-interest provision in § 4.6, the audit-rights provision in § 8.2, the cure provision in § 14.1, the incurable-breach provision in § 14.2(c), and the integration and no-modification clauses. Each provision should be quoted verbatim and supported by citation to the relevant FLA (use the Naples FLA, Ex. A to the Complaint, as the primary reference, with a footnote confirming that all 22 FLAs contain identical language).

2. Coastal Palms' Formation and Portfolio (approximately 8–10 paragraphs): Establishing the identity and structure of Coastal Palms, its relationship with property-level LLCs, and the scope of the hotel portfolio (22 properties, dates of FLA execution, geographic locations).

3. Suncoast's Establishment and Operations (approximately 15–18 paragraphs): Documenting the formation of Suncoast in or about January 2013, Brecker's role as President and sole director, Suncoast's stated purpose, the types of revenue collected by Suncoast, the 12% management fee, and the flow of funds from Suncoast to property-level LLCs.

4. The Gulfcoastrooms.com Booking Channel (approximately 8–10 paragraphs): Describing the establishment and operation of the gulfcoastrooms.com website, including its marketing of rooms at Coastal Palms properties without reference to the Verimark brand, the volume of bookings processed through the site, and the treatment of those revenues in Coastal Palms' GRR reports.

5. OTA Netting Methodology (approximately 8–10 paragraphs): Describing Coastal Palms' practice of netting OTA commissions against gross revenue for GRR-reporting purposes, including the "commissions receivable" accounting treatment and the resulting understatement of reported GRR.

6. Brecker's Admissions (approximately 12–15 paragraphs): Setting forth key excerpts from Brecker's two-day deposition, including his admission that he understood the FLA required reporting of all guest-room revenue, his explanation that direct bookings were routed through Suncoast partly to "keep the numbers looking right," and his acknowledgment that he personally directed the establishment of the Suncoast channel.

7. Kerrigan's Testimony (approximately 10–12 paragraphs): Setting forth key excerpts from Kerrigan's deposition and her contemporaneous internal communications, including her testimony regarding Brecker's instructions to exclude Suncoast revenues from GRR reports and to maintain "two sets of numbers."

8. Property-Level Witness Testimony (approximately 12–15 paragraphs): Summarizing the composite testimony of the 10 property-level witnesses regarding the top-down directive to route direct bookings through the Suncoast channel and to exclude those amounts from GRR.

9. The Notice of Material Breach and Failure to Cure (approximately 8–10 paragraphs): Documenting the issuance of the Notice of Material Breach on February 4, 2022, Coastal Palms' response on February 28, 2022, and the failure to tender cure within the 30-day period.

10. Thornbury's Preliminary Audit (approximately 6–8 paragraphs): Describing the retention of Thornbury & Associates, the scope of the preliminary audit, and the key findings (26% underreporting for the top 10 properties, 2019–2021 period).

11. Kettlewell's Forensic Findings on the Fact of Underreporting (approximately 10–12 paragraphs): Setting forth Dr. Kettlewell's conclusions regarding the existence and methodology of the revenue-diversion scheme, without reference to specific dollar amounts of damages. The focus should be on Dr. Kettlewell's findings that Suncoast revenues were systematically excluded from GRR reports, that the exclusion was consistent across all 22 properties, and that the exclusion resulted in underpayment of royalties and marketing-fund contributions. This maintains the liability-only posture of the motion.

Each numbered paragraph must be supported by specific record citations — deposition transcripts (with page-and-line references), produced documents (with Bates numbers), and expert reports (with page references). The goal is to present a meticulously documented factual record that leaves no room for Coastal Palms to create a genuine dispute on any material fact relevant to liability.

V. Anticipated Defense Arguments and Our Responses

This section analyzes the principal arguments that Coastal Palms is likely to raise in opposition to the motion and sets forth our recommended responses. The team should treat this section as a roadmap for drafting both the affirmative sections of the memorandum of law and the reply brief (if one is permitted by local practice).

A. GRR Definition Ambiguity

Anticipated argument: Coastal Palms will argue that FLA § 4.1's GRR definition is ambiguous as applied to revenues collected by a separate legal entity — Suncoast Room Management Inc. — that is not a party to the FLA. Defense counsel will contend that the phrase "regardless of the entity collecting such revenue" was intended to address scenarios involving third-party booking platforms (such as OTAs), not scenarios involving an affiliate management company that provides independent services. Coastal Palms may also argue that the GRR definition creates an ambiguity when read in conjunction with other FLA provisions addressing the franchisee's reporting obligations, which reference "the Hotel's" revenue rather than revenue collected by third parties.

Response: The "regardless of the entity collecting such revenue" language is dispositive. It contains no limitation — it does not say "regardless of the third-party booking platform collecting such revenue" or "regardless of the OTA collecting such revenue." It says "regardless of the entity collecting such revenue," which means exactly what it says: no entity is excluded. Florida contract-interpretation principles require enforcement of plain language. When a contract uses broad, unqualified language, courts must give it its natural and broad meaning. The Court need not resort to extrinsic evidence, parol evidence, or contextual analysis. The plain language of § 4.1 resolves the question.

Additionally, any argument that § 4.1 was intended to address only OTA-type scenarios is belied by the separate reference to "any booking channel, direct or indirect." The inclusion of "direct" booking channels — walk-ins, corporate-direct bookings, and direct website bookings — demonstrates that the drafters contemplated precisely the type of non-OTA revenue at issue here. The GRR definition was drafted to be comprehensive and to foreclose the exact type of revenue-diversion scheme that Coastal Palms implemented.

B. Verimark's Knowledge of Suncoast / Waiver / Estoppel

Anticipated argument: Coastal Palms will argue that Verimark knew about Suncoast's existence and role in managing direct bookings for the hotel portfolio, and that Verimark's failure to object to Suncoast's involvement over a period of years constituted an implied acceptance of the exclusion of Suncoast revenues from GRR. Defense counsel may frame this as a waiver or estoppel defense, arguing that Verimark cannot now claim breach based on a practice that it knew about and acquiesced in.

Response: This defense fails for several independent reasons.

First, knowledge of Suncoast's existence is not consent to the exclusion of its revenues from GRR. Verimark may have been aware that Coastal Palms engaged a management company to handle certain operational functions — this is not uncommon in the hotel-franchise industry. But awareness of a management company's existence is fundamentally different from knowledge that the management company was collecting guest-room revenue and that such revenue was being excluded from GRR reports. The record does not support the inference that Verimark knew about the revenue-diversion scheme. To the contrary, Verimark did not learn of the scheme until the Kerrigan whistleblower complaint on November 8, 2021.

Second, the FLAs contain no provision permitting oral or implied modification. Each FLA includes an integration clause providing that the FLA constitutes the entire agreement between the parties. Each FLA further requires that any modification, amendment, or waiver be set forth in a writing signed by both parties. Coastal Palms has not identified — and cannot identify — any written modification or waiver in which Verimark agreed to exclude Suncoast revenues from GRR. Under Florida law, a no-oral-modification clause is generally enforceable, and a party seeking to establish a waiver or modification of a contract containing such a clause bears a heavy burden.

Third, equitable estoppel requires, among other elements, a material misrepresentation or concealment by the party against whom estoppel is asserted. Here, Verimark made no misrepresentation and concealed nothing. It was Coastal Palms that concealed the revenue-diversion scheme. The estoppel defense is therefore inapplicable on its face.

C. Statute of Limitations / Laches

Anticipated argument: Coastal Palms will argue that claims for underreporting prior to 2017 are time-barred under Florida's five-year statute of limitations for actions on written contracts, Fla. Stat. § 95.11(2)(b). Defense counsel may also raise a laches defense, arguing that Verimark's delay in bringing suit should bar recovery for older periods.

Response: Multiple doctrines preserve Verimark's claims for the full 2013–2021 period.

First, the discovery rule tolls the statute of limitations because Coastal Palms actively concealed the underreporting scheme. Under Florida's discovery rule, the statute of limitations does not begin to run until the plaintiff knew or should have known, through the exercise of due diligence, of the facts giving rise to the cause of action. Here, Coastal Palms affirmatively concealed the Suncoast revenue-diversion scheme through its reporting practices and through Brecker's instructions to maintain "two sets of numbers." Verimark did discover the scheme until the Kerrigan whistleblower complaint in November 2021 and could not reasonably have discovered it earlier given the systematic nature of the concealment. Application of the discovery rule would toll the statute for the entire period of concealment, preserving claims going back to 2013 or earlier.

Second, each monthly GRR report submitted by Coastal Palms constituted a separate, independent breach of the FLAs. Under the continuing-violation or recurring-breach theory, the statute of limitations runs separately as to each monthly breach. Even under a strict application of the five-year statute, all monthly breaches from March 2017 forward would be timely, given the March 7, 2022 filing date. This theory preserves the vast majority of Verimark's damages claim even without application of the discovery rule.

Third, and most importantly for purposes of the summary-judgment motion, the statute-of-limitations argument goes to damages, not to liability. Whether the recoverable period extends back to 2013 or is limited to 2017 has no bearing on the threshold question of whether Coastal Palms breached the FLAs. If the Court finds that Suncoast revenues must be included in GRR, then Coastal Palms breached the FLAs for every period in which it excluded those revenues — regardless of whether some of those periods are time-barred. This reinforces our decision to seek liability-only summary judgment: the statute-of-limitations defense affects the measure of damages, not the existence of a breach.

D. The Counterclaim as a Setoff

Anticipated argument: Coastal Palms will argue that its $12 million counterclaim for alleged brand-standard violations and overbilling provides a setoff against Verimark's claims, creating a genuine dispute that precludes summary judgme

PRIVILEGED AND 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 reflects the mental impressions, conclusions, opinions, and legal theories of counsel. Do not distribute, copy, or disclose this memorandum or its contents to any person outside the engagement team without the express written consent of Priya Anand or Douglas Carmichael.
MEMORANDUM
FROM: Priya Anand, Responsible Partner, Litigation (General)
TO: Douglas Carmichael, Billing Partner; Yuki Nakamura, Lead Associate; Carlos Espinoza, Working Associate
DATE: September 5, 2023
RE: Strategy for Motion for Partial 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
CLIENT: Verimark Hospitality Group Inc. (Nasdaq: VHMK)
I. Purpose and Executive Summary
This memorandum outlines the recommended strategy for filing a Motion for Partial Summary Judgment on behalf of our client, Verimark Hospitality Group Inc. ("Verimark" or "VHG"), on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) of the Complaint filed in the above-captioned matter. Having carefully analyzed the evidentiary record developed over the course of extensive discovery, the applicable law, the tendencies of the assigned judge, and the broader litigation dynamics, I believe this motion presents a high-probability opportunity to secure a decisive strategic advantage for our client at a critical juncture in the case.
Recommendation: The engagement team should seek summary judgment on liability only on Counts I and II, deferring all issues related to damages quantification to trial or subsequent proceedings.
The rationale for limiting the motion to liability is threefold. First, this approach maximizes the probability of a favorable ruling by presenting the cleanest possible factual record to the Court. The question of whether Coastal Palms Franchise Holdings LLC ("Coastal Palms") breached the Franchise License Agreements ("FLAs") by systematically excluding revenues collected through Suncoast Room Management Inc. ("Suncoast") from its Gross Room Revenue ("GRR") reports is fundamentally a question of contract interpretation — one that the unambiguous language of FLA § 4.1 resolves squarely in our favor. Second, by deferring damages quantification, we avoid giving Judge Calloway any reason to deny the motion based on the genuinely disputed calculations surrounding the total amount of underreported GRR and the applicable interest. The gap between our expert, Dr. Sharon Kettlewell, and the defense expert, Prof. Grant Hargrove, is significant, and injecting that dispute into the summary-judgment record would introduce precisely the type of "genuine issue of material fact" that courts seize upon to deny summary judgment motions. Third, a liability ruling alone provides decisive settlement leverage. If the Court rules as a matter of law that Coastal Palms committed a material breach of the FLAs by underreporting GRR, the defense loses its principal argument — the GRR-ambiguity theory — and the case shifts entirely to a negotiation about the quantum of damages. The threat of substantial damages at trial, including up to $105.5 million in liquidated damages under FLA § 15.3, becomes dramatically more credible once liability is established.
I further recommend against seeking summary judgment on the remaining counts (Counts III through X) at this time. As discussed in detail in Section III.C below, each of those counts presents either heightened factual disputes (Counts V, VI, X), legal complexity that is better suited for full trial presentation (Counts IV, VII, VIII), or involves damages of insufficient magnitude to justify the risk of an adverse ruling that could infect the broader case (Count III). By keeping the motion tightly focused on Counts I and II, we present the strongest possible case and avoid the risk that the Court's analysis of weaker claims colors its view of our strongest ones.
The target filing date for the Motion for Partial Summary Judgment is September 29, 2023, which is consistent with the Court's dispositive-motion deadline established at the June 14, 2022 Case Management Conference. Discovery closed on August 4, 2023, and the record is fully developed. No outstanding discovery disputes or supplementation obligations remain that could affect the filing.
The anticipated result, if the motion is granted, is as follows: Verimark will enter any subsequent trial or settlement negotiation with established liability on the two largest contract claims in the case. The dispute will be limited to the quantum of damages owed on Counts I and II and to the remaining Counts III through X and the defense counterclaim. This posture dramatically increases settlement pressure on Coastal Palms and its principals — Randall Brecker, Theresa Brecker, and Nolan Prescott — who face the prospect of certain damages exposure on the contract claims, compounding late-payment interest, and potential liability on the remaining counts, including civil conspiracy and fraudulent concealment. The practical effect will be to transform this case from a contested liability dispute into a damages negotiation, with Verimark holding all of the structural advantages.
II. Background — Procedural Posture and Record
A. Litigation Timeline to Date
For the benefit of the engagement team and to ensure our motion papers accurately reflect the procedural history, the following is a comprehensive summary of the key events in this litigation to date.
Verimark filed its Complaint on March 7, 2022, asserting ten counts against Coastal Palms Franchise Holdings LLC, Randall Brecker individually, and Suncoast Room Management Inc. The Complaint was the product of extensive pre-litigation investigation, including the compliance audit conducted by Thornbury & Associates CPAs LLP and the initial analysis of documents produced by the whistleblower, Janet Kerrigan. The ten counts encompass breach of contract (royalties, marketing fund, and technology fees), breach of the implied covenant of good faith and fair dealing, fraudulent concealment, negligent misrepresentation, unjust enrichment, declaratory judgment regarding FLA termination rights, accounting, and civil conspiracy.
Coastal Palms filed its Answer, Affirmative Defenses, and Counterclaim on April 18, 2022. The Answer asserted sixteen affirmative defenses, including contract ambiguity, waiver, estoppel, laches, statute of limitations, failure to mitigate, and setoff. The Counterclaim sought $12 million in damages for alleged brand-standard violations, including claims that Verimark failed to maintain adequate reservation-system infrastructure, imposed unreasonable property-improvement mandates, and overbilled for technology-platform services. Verimark filed its Answer to the Counterclaim on May 2, 2022, denying all material allegations.
The Case Management Conference was held on June 14, 2022, before the Honorable Richard M. Calloway. Judge Calloway set the case on a standard complex-litigation track, with discovery to close on August 4, 2023, and trial originally scheduled for February 2024. The Court also set the dispositive-motion deadline for September 29, 2023, which is the deadline we intend to meet with this filing.
discovery in this matter has been extensive, reflecting the scope and complexity of the alleged revenue-diversion scheme. Verimark served its first set of discovery on July 11, 2022, including 25 interrogatories and 147 requests for production directed to Coastal Palms and Suncoast. Coastal Palms' initial document production, consisting of approximately 84,000 documents, was served on August 22, 2022. The initial production was incomplete, particularly with respect to Suncoast Room Management's financial records, which Coastal Palms claimed were not within its possession, custody, or control. Verimark filed a Motion to Compel production of Suncoast financial records on September 15, 2022, which the Court granted on October 28, 2022, finding that Coastal Palms and Suncoast were under common control by Randall Brecker and that Coastal Palms could not credibly disclaim access to Suncoast's records. The supplemental production of approximately 312,000 documents was completed on November 18, 2022, and included Suncoast's general-ledger data, bank statements, revenue reports, and internal memoranda spanning the 2013–2022 period.
Fact depositions were conducted during the period of January 9 through March 17, 2023. A total of 14 fact depositions were taken, including:
• Randall Brecker — Two-day deposition (January 18–19, 2023). Brecker is the President and controlling member of both Coastal Palms and Suncoast. His testimony contained critical admissions regarding his understanding of the FLA's GRR definition and his reasons for establishing the Suncoast booking channel, as discussed in detail in Section IV.B below.
• Theresa Brecker — One-day deposition (January 25, 2023). Theresa Brecker serves as Secretary of Coastal Palms and is Randall Brecker's spouse. Her testimony established her awareness of the Suncoast revenue-collection structure and her involvement in reviewing monthly GRR reports submitted to Verimark.
• Nolan Prescott — One-day deposition (February 1, 2023). Prescott is the Chief Financial Officer of Coastal Palms and had direct responsibility for overseeing the GRR reporting process. His testimony confirmed the methodology by which Suncoast revenues were excluded from GRR calculations.
• Janet Kerrigan — One-day deposition (February 8, 2023). Kerrigan is the former regional controller for Coastal Palms' Gulf Coast portfolio (10 properties), who was terminated in October 2021 and subsequently contacted Verimark's compliance hotline on November 8, 2021. Her testimony provides direct evidence that Brecker personally instructed accounting personnel to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark.
• Ten property-level managers and accountants — Depositions conducted between February 15 and March 17, 2023. These witnesses include general managers, front-desk supervisors, and on-site accountants from various Coastal Palms properties across the portfolio. Their composite testimony confirms a consistent, top-down directive from "corporate" (i.e., Brecker) to route walk-in, corporate-direct, and gulfcoastrooms.com bookings through the Suncoast channel and to exclude those amounts from GRR reports.
Expert reports were exchanged on the following schedule:
• Dr. Sharon Kettlewell, of Ridgeline Forensic Advisory LLC, served her expert report on April 14, 2023. Dr. Kettlewell's report reconstructs true GRR for all 22 Coastal Palms properties across the 2013–2021 period, based on an analysis of Suncoast financial records, property-management-system data, bank-account reconciliations, and OTA settlement statements.
• Prof. Grant Hargrove, of Hargrove Economic Consulting Inc., served his defense expert report on May 15, 2023. Prof. Hargrove disputes both the methodology and quantum of Dr. Kettlewell's findings, offering a significantly lower estimate of total underpayment.
• Dr. Kettlewell served her rebuttal report on June 9, 2023, addressing and rebutting Prof. Hargrove's criticisms.
Expert depositions of Dr. Kettlewell and Prof. Hargrove were taken on June 26–27, 2023. During his deposition, Prof. Hargrove made several important concessions that bear on the summary-judgment motion, including his acknowledgment that certain revenues collected by Suncoast were excluded from GRR reports — his disagreement being limited to whether those revenues fall within the contractual definition of GRR.
discovery closed on August 4, 2023. The record is now fully developed for purposes of dispositive motions.
It is worth noting the scale of the e-discovery effort in this matter. Nexagen Document Solutions LLC, our e-discovery vendor, processed approximately 2.3 million documents (approximately 1.1 terabytes of data) on Verimark's side alone. The defense production, including the court-ordered Suncoast supplemental production, totaled approximately 396,000 documents. The review, analysis, and organization of this documentary record has been a significant undertaking and provides the evidentiary foundation for the motion we now recommend.
B. The Franchise License Agreements — Key Provisions
The contractual framework at the center of this dispute consists of 22 individual Franchise License Agreements ("FLAs") executed between Coastal Palms (or its property-level affiliates) and Verimark. The first FLA was executed on June 15, 2007, for the Naples property, and the most recent was executed on September 3, 2019. Each FLA carries a 20-year initial term, is governed by Florida law, and contains a mandatory venue provision designating Broward County as the exclusive forum for any disputes arising under the agreement. The FLAs are substantively identical in all material respects relevant to the motion; each was executed on Verimark's standard franchise-agreement form, with the only variations being property-specific information (address, room count, opening date, etc.).
The following provisions are of particular importance to the summary-judgment motion:
FLA § 4.1 — Royalty. Section 4.1 requires the franchisee to pay Verimark a royalty equal to 5% of Gross Room Revenue ("GRR"). GRR is defined as:
"all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue."
This definition is broad and all-encompassing. It expressly captures revenues from "any booking channel, direct or indirect" and includes revenues "regardless of the entity collecting such revenue." As discussed below, this language is the linchpin of our summary-judgment argument. It was specifically designed to ensure that a franchisee could not avoid royalty obligations by routing revenue through a separate entity — precisely the scheme that Coastal Palms implemented through Suncoast.
FLA § 4.2 — Marketing-Fund Contribution. Section 4.2 requires the franchisee to contribute 2.5% of GRR to the Verimark Brand Marketing Fund. This contribution is calculated on the identical GRR base used for the royalty calculation under § 4.1. As a result, any underreporting of GRR that affects the royalty calculation necessarily and equally affects the marketing-fund contribution.
FLA § 4.3 — Technology Fee. Section 4.3 requires the franchisee to pay a technology fee of $12.50 per available room per month, adjusted annually by CPI with a cap of 3% per year. This provision is relevant to Count III but is not the subject of the recommended summary-judgment motion.
FLA § 4.6 — Late-Payment Interest. Section 4.6 provides that any amounts not paid when due shall accrue interest at the rate of 1.5% per month, compounded monthly. Given the length of the underreporting period (at least 2013 through 2021), the late-payment interest on unpaid royalties and marketing-fund contributions is substantial — Dr. Kettlewell calculates $28.4 million in compounded interest through the date of her report — and constitutes a significant damages component that is better reserved for trial.
FLA § 8.2 — Audit Rights. Section 8.2 entitles Verimark to audit the franchisee's books and records upon 10 business days' written notice. Importantly, the provision further provides that the franchisee shall bear all costs of the audit if the audit reveals an underpayment exceeding 2% of reported GRR. This provision is relevant to Verimark's claim for audit costs and may be cited in the motion as part of the contractual framework governing GRR reporting and compliance.
FLA § 14.1 — Notice and Cure. Section 14.1 establishes a 30-day cure period from the date of written notice of breach. Verimark issued a Notice of Material Breach on February 4, 2022. Coastal Palms' counsel responded on February 28, 2022, denying the existence of any breach, but no cure was tendered. The 30-day period expired on March 6, 2022 — one day before the Complaint was filed.
FLA § 14.2(c) — Incurable Breaches. Section 14.2(c) provides that:
"systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure."
This provision is significant because it eliminates the cure defense entirely with respect to the type of breach alleged here. Even if Coastal Palms were to argue that Verimark's Notice of Material Breach was deficient or that the 30-day cure period was insufficient, the nine-year pattern of systematic underreporting through the Suncoast channel constitutes an incurable breach under § 14.2(c).
FLA § 15.3 — Liquidated Damages. Section 15.3 provides for liquidated damages of 3× trailing-twelve-month royalties per property upon termination for cause. This provision carries enormous financial implications for Coastal Palms: across 22 properties, the liquidated-damages exposure totals approximately $105.5 million. As discussed in Section VII below, the enforceability of this provision under Florida law is a contested question, and I recommend against including it in the summary-judgment motion.
C. The Revenue Diversion Scheme — Undisputed Record Evidence
The factual record developed through discovery establishes a clear and largely undisputed picture of the revenue-diversion scheme at the heart of this case. While the parties vigorously dispute the legal significance of the relevant facts — particularly whether the GRR definition requires inclusion of revenues collected by Suncoast — the underlying facts themselves are, for purposes of summary judgment, materially undisputed.
Formation of Suncoast Room Management Inc. Beginning no later than January 2013, Coastal Palms, through its controlling principal Randall Brecker, established Suncoast Room Management Inc. as a separate Florida corporation. Brecker serves as President and sole director of Suncoast. The stated purpose of Suncoast, according to its articles of incorporation and Brecker's deposition testimony, was to "manage direct-channel bookings and corporate accounts" for the Coastal Palms hotel portfolio. In practice, Suncoast served as a revenue-collection vehicle for bookings that did not originate through Verimark's branded reservation channels. Specifically, Suncoast collected revenues from three principal sources: (a) walk-in guests who booked directly at the front desk; (b) corporate-direct contracts negotiated by Coastal Palms' sales team with local and regional businesses; and (c) bookings through gulfcoastrooms.com, an unbranded website established and operated by Suncoast that marketed rooms at Coastal Palms properties without reference to the Verimark brand.
The Suncoast Revenue Flow. Revenues collected by Suncoast were processed as follows: Suncoast retained a 12% "management fee" before remitting the balance to property-level limited liability companies (including Gulf Breeze Hospitality LLC, Savannah Lodging Partners LLC, and others) that operated the individual hotel properties. Neither the gross revenues collected by Suncoast nor the 12% management fee retained by Suncoast were included in the GRR reports submitted to Verimark. The result was that a substantial portion of guest-room revenue generated at Coastal Palms properties was systematically excluded from the royalty and marketing-fund calculations.
OTA Netting. In addition to the Suncoast diversion, Coastal Palms underreported revenue from online travel agency ("OTA") channels by netting commissions against gross revenue. Under the standard OTA merchant model, the hotel receives the full room rate from the guest and pays a commission to the OTA. Under FLA § 4.1, GRR is defined as gross revenue, and commissions paid to OTAs are a cost of doing business that does not reduce the GRR base. Coastal Palms, however, classified net-rate OTA payments as "commissions receivable" in its internal accounting and reported only the net amount — i.e., the gross rate minus the OTA commission — as GRR. This practice further reduced the reported GRR and, consequently, the royalties and marketing-fund contributions paid to Verimark.
The Whistleblower. The revenue-diversion scheme was first brought to Verimark's attention on November 8, 2021, when Janet Kerrigan, former Regional Controller for Coastal Palms' Gulf Coast portfolio (10 properties), contacted Verimark's compliance hotline. Kerrigan had been terminated by Coastal Palms in October 2021, reportedly for raising internal concerns about the GRR-reporting methodology. Her initial report to Verimark described the Suncoast revenue-collection structure and the OTA netting practices in substantial detail and provided documentary support in the form of internal memoranda and spreadsheets.
The Thornbury Audit. In response to the Kerrigan disclosure, Verimark retained Thornbury & Associates CPAs LLP on November 22, 2021, to conduct a compliance audit of Coastal Palms' GRR reporting. Malcolm Thornbury, CPA, served as Lead Audit Partner. Thornbury's preliminary findings were delivered on January 18, 2022, and revealed that, for the 2019–2021 period, the top 10 properties underreported GRR by approximately 26%. These findings formed the basis for Verimark's decision to issue the Notice of Material Breach and subsequently to file the Complaint.
The Scope of Underreporting. Dr. Kettlewell's forensic analysis, which used the full Suncoast financial record (produced under court order) together with property-management-system data, bank-account reconciliations, and OTA settlement statements, estimates that total underreported GRR across all 22 properties for the full 2013–2021 period is approximately $197.8 million. For FY 2021 alone, Coastal Palms reported GRR of $112.4 million, whereas Dr. Kettlewell estimates true GRR of $145.6 million — an underreporting of $33.2 million, representing a variance of approximately 22% to 31% depending on the property and year. These figures form the basis for the damages calculations but, as discussed above, we recommend deferring all damages issues and citing Dr. Kettlewell's work only for the fact and methodology of underreporting, not for quantum.
Notice and Failure to Cure. Verimark issued a formal Notice of Material Breach on February 4, 2022, pursuant to FLA § 14.1, demanding cure within 30 days. The Notice identified the Suncoast revenue-diversion scheme and the OTA netting practices and demanded that Coastal Palms (a) immediately report corrected GRR for all affected periods, (b) pay all unpaid royalties, marketing-fund contributions, and late-payment interest, and (c) take all steps necessary to ensure accurate GRR reporting going forward. Coastal Palms' counsel, Nathan Whitfield III of Whitfield, Barrow & Crane LLP, responded by letter dated February 28, 2022, denying any breach and asserting that Suncoast revenues were not within the scope of the FLA's GRR definition. No cure was tendered. The 30-day cure period expired on March 6, 2022, with Coastal Palms in continuing default. The Complaint was filed the following day.
III. Recommended Scope of the Motion — Counts I and II Only (Liability)
A. Why Counts I and II Present the Strongest Case for Summary Judgment
Having reviewed the full evidentiary record, the applicable law, and the available defenses, I am confident that Counts I and II present the strongest possible vehicle for partial summary judgment. The reasons are as follows.
Count I (Breach of Contract — Royalties). Coastal Palms' obligation to pay a royalty equal to 5% of GRR under FLA § 4.1 is unambiguous. The definition of GRR expressly includes revenues from "any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This language was carefully drafted to capture the full scope of guest-room revenue, regardless of the mechanism by which it was collected or the identity of the collecting entity. Suncoast-collected revenues — whether derived from walk-ins, corporate-direct bookings, or the gulfcoastrooms.com website — plainly fall within this definition. They are revenues "derived from or attributable to the rental of guest rooms at the Hotel," collected through a "direct" booking channel, by an entity other than the franchisee. The GRR definition captures each of these attributes explicitly.
The undisputed record establishes that Coastal Palms, through its controlling principal Randall Brecker, systematically excluded Suncoast-collected revenues from the GRR reports submitted to Verimark over a period of at least nine years (2013–2021). There is no dispute that these revenues existed, that they were collected by Suncoast, that they were not included in GRR, and that lower royalties were paid as a result. The only dispute is whether the GRR definition requires their inclusion — a legal question of contract interpretation that the Court can and should resolve on summary judgment.
Count II (Breach of Contract — Marketing Fund). The 2.5% marketing-fund contribution under FLA § 4.2 is calculated on the identical GRR base used for the royalty calculation. The analysis applicable to Count I applies with equal force to Count II. If the Court determines that Suncoast revenues must be included in GRR for royalty purposes, it follows automatically that the same revenues must be included for purposes of the marketing-fund contribution. There is no independent contractual provision or defense that would allow Coastal Palms to prevail on Count II if it loses on Count I. For this reason, Counts I and II should be briefed together as a unified contract-interpretation question.
The core legal question presented by both Counts — whether Coastal Palms' exclusion of Suncoast-collected revenues from GRR constitutes a material breach of the FLAs — is a question of contract interpretation suitable for resolution as a matter of law. Under Florida's well-established contract-interpretation principles, when the language of a contract is clear and unambiguous, the court must enforce the contract as written, and there is no occasion for judicial construction. The GRR definition in FLA § 4.1 is clear on its face. The motion should present this as a straightforward application of the plain-meaning rule.
B. Why Liability Only (Deferring Damages)
The recommendation to limit the motion to liability and defer all damages issues is a critical strategic judgment that I want the full team to understand and support.
The damages computation in this case involves genuinely contested expert opinions. Dr. Kettlewell opines on $197.8 million in underreported GRR and derives total direct underpayments of approximately $16.095 million, consisting of $9.89 million in unpaid royalties, $4.945 million in unpaid marketing-fund contributions, and $1.26 million in unpaid technology fees, plus $28.4 million in compounded late-payment interest under FLA § 4.6. Prof. Hargrove, the defense expert, disputes both the methodology and the quantum of these figures. Prof. Hargrove limits his estimate of total underpayment to a maximum of $6.2 million, based on a narrowed interpretation of the GRR definition that excludes certain categories of Suncoast revenue and applies different assumptions regarding the OTA netting issue. The gap between these expert opinions — $16.095 million (plus $28.4 million in interest) versus $6.2 million — is substantial and represents a genuine dispute of material fact on the question of damages.
Including damages in the summary-judgment motion would inject this dispute into the record and provide the Court with grounds for denial even on the liability question. Florida courts, like courts generally, are reluctant to resolve motions for summary judgment where expert testimony conflicts on material issues. There is a real risk that, if we present the motion as an all-or-nothing request for summary judgment on both liability and damages, Judge Calloway will identify the expert disagreement on quantum as a reason to deny the motion in its entirety — forcing us to prove liability at trial despite the strength of our position on the contract-interpretation question.
A liability-only ruling, by contrast, is strategically more valuable than a combined ruling on liability and damages. A determination that Coastal Palms breached the FLAs by excluding Suncoast revenues from GRR eliminates Coastal Palms' primary defense — the GRR-ambiguity argument — and establishes the legal framework within which all damages will be determined. Once the Court rules that GRR includes Suncoast-collected revenues, the only remaining question is how much revenue was collected and how much was underpaid. The defense expert's position — that GRR does not include certain Suncoast revenues — collapses. The damages trial then becomes a straightforward forensic-accounting exercise, heavily favoring Verimark.
Florida law supports the bifurcation of liability and damages in breach-of-contract summary judgment motions. Florida Rule of Civil Procedure 1.510(a) expressly permits a party to move for summary judgment on "the issue of liability alone although there is a genuine issue as to the amount of damages." This procedural authorization reinforces the propriety of our recommended approach and should be cited prominently in our motion papers.
C. Counts Not Included in the Motion — and Why
The following is a count-by-count analysis of the remaining claims in the Complaint and the reasons each should be excluded from the summary-judgment motion.
Count III (Breach of Contract — Technology Fees). Count III alleges that Coastal Palms underpaid technology fees under FLA § 4.3 by failing to report 214 additional rooms added across four properties (the Sarasota, Tampa Bay, Clearwater, and Marco Island locations) without providing notice to Verimark as required by the FLA. While the facts regarding the unreported rooms are favorable to Verimark — the rooms are documented in county occupancy-tax records and property-management-system data — the room-count dispute introduces a factual question that could complicate the motion. Coastal Palms contends that certain of the added rooms were "seasonal" or "temporary" and not subject to the technology-fee calculation. This factual dispute, while likely resolvable in Verimark's favor at trial, is the type of issue that could give the Court pause on summary judgment. Moreover, the technology-fee underpayments total approximately $1.26 million — a relatively small amount compared to the royalty and marketing-fund claims. The cost-benefit analysis of including this count in the motion does not favor inclusion. It is better addressed at trial, where the full context of the property expansions can be presented.
Count IV (Breach of Implied Covenant of Good Faith and Fair Dealing). Florida law recognizes an implied covenant of good faith and fair dealing in every contract, but imposes a high standard for claims based on the implied covenant. Coastal Palms will argue — with some basis in Florida case law — that the implied-covenant claim is duplicative of the express-contract claims asserted in Counts I and II. Several Florida appellate decisions have held that an implied-covenant claim cannot be maintained where the alleged conduct is expressly addressed by the terms of the contract. Including Count IV in the motion risks an adverse ruling on this point, which defense counsel could then cite in pre-trial motions to dismiss Count IV or in jury-instruction disputes. The safer course is to reserve Count IV for trial, where it can be presented in the broader context of Coastal Palms' course of conduct and where the equitable dimensions of the implied-covenant theory can be fully explored.
Count V (Fraudulent Concealment). Count V alleges that Coastal Palms, through Brecker and others, fraudulently concealed the revenue-diversion scheme from Verimark. To prevail on a fraudulent-concealment claim under Florida law, Verimark must prove: (a) a duty to disclose a material fact; (b) concealment of that fact; (c) intent to deceive; and (d) justifiable reliance resulting in damages. While the evidence of intentional diversion through Suncoast is strong — Brecker's deposition admissions, Kerrigan's testimony regarding direct instructions to exclude Suncoast revenues, and property-manager depositions showing direction from "corporate" all support an inference of deliberate concealment — Coastal Palms will vigorously contest the intent element. Defense counsel will argue that Brecker's establishment of Suncoast was a legitimate business decision, that the GRR reporting reflected a good-faith interpretation of the FLA, and that there was no intent to deceive. Summary judgment on fraud claims faces heightened skepticism from courts, which are generally reluctant to resolve issues of intent and state of mind on summary judgment. This claim is better suited for trial, where the jury can assess the credibility of the witnesses and draw its own inferences regarding Brecker's intent.
Count VI (Negligent Misrepresentation). Count VI alleges that the monthly GRR reports submitted by Coastal Palms to Verimark constituted negligent misrepresentations. Similar concerns apply as with Count V. While the GRR reports were unquestionably inaccurate, the defense will argue that the reporting was performed by accounting personnel who believed in good faith that the reports reflected the correct interpretation of GRR, and that issues of reliance and duty present triable issues of fact. The negligent-misrepresentation claim adds modest incremental value to the case and is not worth the risk of an adverse summary-judgment ruling.
Count VII (Unjust Enrichment — Alternative). Count VII is pleaded as an alternative to the contract claims and alleges that Coastal Palms was unjustly enriched by retaining royalties and marketing-fund contributions that should have been paid to Verimark. If we prevail on summary judgment on Counts I and II, Count VII becomes effectively moot, as the unjust-enrichment theory provides no additional recovery beyond what is available under the express contract. If, for any reason, we do not prevail on the contract claims, the unjust-enrichment theory depends on equitable considerations — including the relative positions of the parties, the nature and extent of the benefit conferred, and the equities of the situation — that are not well suited for summary adjudication.
Count VIII (Declaratory Judgment — FLA Termination). Count VIII seeks a declaratory judgment that Verimark has the right to terminate the FLAs for cause based on Coastal Palms' material breach. This count is intertwined with the remedy phase of the case and involves considerations — including the enforceability of the liquidated-damages provision in FLA § 15.3, the question of whether Verimark has elected to terminate or merely to seek damages for breach, and the practical consequences of termination for the ongoing operations of 22 hotel properties — that are better addressed after liability has been established. Seeking a declaratory judgment at this stage would prematurely force the Court to grapple with termination-related issues that are more appropriately deferred to trial or to post-liability-ruling proceedings.
Count IX (Accounting). Count IX seeks an accounting of all revenues collected by Coastal Palms, Suncoast, and their affiliates in connection with the 22 hotel properties. An accounting is an equitable remedy that is inherently fact-intensive and dependent on the Court's exercise of discretion. It is not suitable for summary judgment.
Count X (Civil Conspiracy — Brecker & Suncoast). Count X alleges that Randall Brecker and Suncoast conspired with Coastal Palms to commit the revenue-diversion scheme. Under Florida law, a civil-conspiracy claim requires proof of an agreement between two or more parties to commit an unlawful act, together with an overt act in furtherance of the conspiracy and resulting damages. While the record supports the conspiracy theory — Brecker controlled both Coastal Palms and Suncoast and directed the revenue-diversion scheme — conspiracy claims typically present jury questions regarding the existence of an agreement and the parties' respective roles. Additionally, the defense will raise the intracorporate-conspiracy doctrine, arguing that Brecker, as the controlling officer of both entities, cannot conspire with himself. While this defense is subject to significant limitations under Florida law, litigating it on summary judgment would add complexity and risk without commensurate benefit. This claim is better reserved for trial.
IV. Strength of the Evidence — Key Record Support for Counts I and II
A. Contract Language Is Unambiguous
The foundation of our summary-judgment motion is the plain language of FLA § 4.1, which defines GRR to include all revenues "regardless of the entity collecting such revenue." This language is not ambiguous, not susceptible to multiple reasonable interpretations, and not the subject of any genuine dispute of material fact. It means exactly what it says: the identity of the entity collecting guest-room revenue is irrelevant to the GRR calculation.
The phrase "regardless of the entity collecting such revenue" was included in the FLA specifically to address scenarios in which a franchisee might attempt to avoid royalty obligations by routing revenue through a separate entity. The drafting history of the Verimark standard FLA form confirms this intent, but such extrinsic evidence is unnecessary — the language is clear on its face. The GRR definition also encompasses revenues from "any booking channel, direct or indirect," which captures the walk-in, corporate-direct, and gulfcoastrooms.com channels used by Suncoast.
Importantly, all 22 FLAs contain identical language. There is no variation across the portfolio in the GRR definition, the royalty percentage, or the marketing-fund-contribution percentage. This uniformity simplifies the summary-judgment analysis and permits the Court to address all 22 FLAs in a single ruling.
Under Florida's plain-meaning rule, when contract language is clear and unambiguous, the court must enforce the contract as written without resort to extrinsic evidence. See, e.g., Acceleration Nat'l Serv. Corp. v. Brickell Fin. Servs. Motor Club, Inc., 541 So. 2d 738, 739 (Fla. 3d DCA 1989) ("When a contract is clear and unambiguous, the court must interpret the contract in accordance with the plain language of the contract."); Friedman v. Virginia Metal Prods. Corp., 56 So. 2d 515, 517 (Fla. 1952). There is no occasion for judicial construction, parol-evidence analysis, or extrinsic-evidence inquiry. The Court should enforce § 4.1 as written and determine, as a matter of law, that revenues collected by Suncoast fall within the GRR definition.
B. Coastal Palms' "Ambiguity" Defense Is Foreclosed by the Record
Coastal Palms' principal defense on Counts I and II is the contention that FLA § 4.1's GRR definition is ambiguous as applied to revenues collected by a "separate management entity" like Suncoast. Coastal Palms further contends that Verimark was aware of Suncoast's role because Suncoast was identified in certain property-management agreements submitted during the franchise-application process for several properties, and that Verimark's failure to object to Suncoast's involvement constituted an implied acceptance that Suncoast revenues were excluded from GRR.
This defense fails on multiple grounds, each of which should be developed in the summary-judgment brief.
First, the phrase "regardless of the entity collecting such revenue" directly and explicitly addresses the question of third-party revenue collection. This is not a case where the contract is silent on the issue and the Court must infer the parties' intent. The contract speaks directly to the very scenario at issue, and its answer is unequivocal: the identity of the collecting entity does not matter. If the drafters had intended to limit GRR to revenues collected by the franchisee itself, they would have omitted the "regardless of the entity" language entirely. That they included it — and that they used the word "regardless" — forecloses any argument that revenues collected by Suncoast (or any other entity) are outside the definition.
Second, Brecker's own deposition testimony undermines the ambiguity defense. On Day 1 of his deposition (January 18, 2023), Brecker admitted that he understood the FLA required reporting of all guest-room revenue. When pressed on why direct bookings were routed through Suncoast rather than through property-level accounting, Brecker testified that one of the reasons was to "keep the numbers looking right" for Verimark reporting purposes. This admission is devastating to any claim that Coastal Palms genuinely believed Suncoast revenues were excluded from GRR. It suggests, at minimum, an awareness that the revenues should have been reported and a deliberate decision to exclude them. At most, it constitutes a confession that the entire Suncoast structure was designed, at least in part, to evade royalty obligations.
Third, even if Verimark knew Suncoast existed as a management entity, knowledge of Suncoast's existence is not consent to the exclusion of its revenues from GRR. The FLAs contain no provision permitting oral or implied modification. Each FLA includes a standard integration clause providing that the FLA constitutes the entire agreement between the parties and supersedes all prior or contemporaneous representations, agreements, or understandings. Each FLA further provides that no modification, amendment, or waiver of any provision shall be effective unless set forth in a writing signed by both parties. Coastal Palms has not identified — because it cannot identify — any written agreement, amendment, or waiver in which Verimark agreed to exclude Suncoast revenues from GRR. The implied-acceptance theory cannot overcome these express contractual bars.
Fourth, Janet Kerrigan's testimony provides direct, unrebutted evidence that Brecker personally instructed controllers to exclude Suncoast revenues from the monthly GRR reports submitted to Verimark. Kerrigan testified that, upon assuming the Regional Controller position in 2017, she was directed by Brecker to maintain "two sets of numbers" — one reflecting actual guest-room revenue (including Suncoast collections) for internal management purposes, and another reflecting only branded-channel revenue for submission to Verimark as GRR. This practice was consistent across all 10 properties in Kerrigan's portfolio and, based on depositions of property-level accountants at other properties, appears to have been portfolio-wide.
Fifth, the composite deposition testimony of 10 property-level witnesses confirms a consistent, top-down directive from "corporate" — i.e., from Brecker and his senior team — to use the Suncoast channel for walk-in and corporate-direct bookings and to exclude those amounts from the GRR reports submitted to Verimark. The consistency of this testimony across multiple witnesses at different properties, many of whom had no communications with one another regarding the litigation, powerfully corroborates the existence of a deliberate and systematic scheme.
C. Expert Findings Corroborate the Breach
Dr. Kettlewell's forensic analysis, contained in her April 14, 2023 report and June 9, 2023 rebuttal report, provides comprehensive independent corroboration of the revenue-diversion scheme. Using Suncoast's general-ledger data, bank-account records, property-management-system data, and OTA settlement statements, Dr. Kettlewell reconstructed true GRR for all 22 properties across the 2013–2021 period. Her analysis concluded that total underreported GRR during this period was approximately $197.8 million.
These findings are consistent with the preliminary audit conducted by Thornbury & Associates CPAs LLP, which found approximately 26% underreporting for the top 10 properties during the 2019–2021 period. The consistency between Dr. Kettlewell's comprehensive forensic reconstruction and Thornbury's independent preliminary audit reinforces the reliability of the findings and underscores the pervasiveness of the underreporting scheme.
It is important to note the specific contours of Prof. Hargrove's disagreement with Dr. Kettlewell, because the nature of that disagreement actually supports our summary-judgment argument. While Prof. Hargrove limits total underpayment to $6.2 million — a dramatically lower figure than Dr. Kettlewell's $16.095 million in direct underpayments — he does not dispute that some revenues collected by Suncoast were excluded from GRR reporting. His disagreement is not about the fact that revenues were excluded; it is about the scope of the GRR definition. Prof. Hargrove contends that certain categories of Suncoast-collected revenue — particularly revenues from corporate-direct contracts and from gulfcoastrooms.com — should not be treated as GRR because they were not "derived from the rental of guest rooms at the Hotel" within the meaning of § 4.1. In other words, Prof. Hargrove's position is a legal argument about the proper interpretation of the GRR definition — not a factual dispute about what actually occurred. If the Court agrees with Verimark's reading of § 4.1 — that GRR includes all guest-room revenue regardless of the collecting entity or booking channel — then the fact of breach is established. The only remaining question is how much revenue was underreported, which is a damages issue properly deferred to trial.
D. No Cure Was Tendered
The record on the cure issue is straightforward and undisputed. Verimark issued a formal Notice of Material Breach on February 4, 2022, pursuant to FLA § 14.1, demanding cure within 30 days. The Notice was sent by certified mail and by email to Coastal Palms' registered address and to Randall Brecker personally.
Coastal Palms' counsel, Nathan Whitfield III of Whitfield, Barrow & Crane LLP, responded by letter dated February 28, 2022. The letter denied the existence of any breach, asserted that the GRR reporting was consistent with the FLAs, and stated that Coastal Palms had no intention of changing its reporting methodology. Critically, the letter did not tender cure — i.e., Coastal Palms did not offer to pay any amount of underpaid royalties or marketing-fund contributions, did not submit corrected GRR reports for any period, and did not agree to change its reporting practices going forward.
The 30-day cure period expired on March 6, 2022, with no cure tendered. The Complaint was filed the following day, March 7, 2022.
Additionally, as noted above, FLA § 14.2(c) provides that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." The nine-year pattern of systematic exclusion of Suncoast revenues from GRR reports — affecting all 22 properties and involving hundreds of millions of dollars in unreported revenue — plainly constitutes "systematic underreporting" within the meaning of § 14.2(c). This provision makes the cure defense potentially irrelevant, as the breach alleged here is, by the terms of the FLA itself, incapable of cure regardless of whether Coastal Palms had attempted to cure.
E. Proposed Statement of Undisputed Material Facts
The Statement of Undisputed Material Facts is a critical component of the motion and must be prepared with meticulous attention to detail. Yuki Nakamura will take the lead on preparing this document, in coordination with Carlos Espinoza on record citations.
I recommend that the Statement contain approximately 120–130 numbered paragraphs, organized in the following thematic categories:
1. The FLA Provisions (approximately 15–20 paragraphs): Setting forth the key provisions of the FLAs, including the GRR definition in § 4.1, the royalty and marketing-fund obligations in §§ 4.1 and 4.2, the late-payment-interest provision in § 4.6, the audit-rights provision in § 8.2, the cure provision in § 14.1, the incurable-breach provision in § 14.2(c), and the integration and no-modification clauses. Each provision should be quoted verbatim and supported by citation to the relevant FLA (use the Naples FLA, Ex. A to the Complaint, as the primary reference, with a footnote confirming that all 22 FLAs contain identical language).
2. Coastal Palms' Formation and Portfolio (approximately 8–10 paragraphs): Establishing the identity and structure of Coastal Palms, its relationship with property-level LLCs, and the scope of the hotel portfolio (22 properties, dates of FLA execution, geographic locations).
3. Suncoast's Establishment and Operations (approximately 15–18 paragraphs): Documenting the formation of Suncoast in or about January 2013, Brecker's role as President and sole director, Suncoast's stated purpose, the types of revenue collected by Suncoast, the 12% management fee, and the flow of funds from Suncoast to property-level LLCs.
4. The Gulfcoastrooms.com Booking Channel (approximately 8–10 paragraphs): Describing the establishment and operation of the gulfcoastrooms.com website, including its marketing of rooms at Coastal Palms properties without reference to the Verimark brand, the volume of bookings processed through the site, and the treatment of those revenues in Coastal Palms' GRR reports.
5. OTA Netting Methodology (approximately 8–10 paragraphs): Describing Coastal Palms' practice of netting OTA commissions against gross revenue for GRR-reporting purposes, including the "commissions receivable" accounting treatment and the resulting understatement of reported GRR.
6. Brecker's Admissions (approximately 12–15 paragraphs): Setting forth key excerpts from Brecker's two-day deposition, including his admission that he understood the FLA required reporting of all guest-room revenue, his explanation that direct bookings were routed through Suncoast partly to "keep the numbers looking right," and his acknowledgment that he personally directed the establishment of the Suncoast channel.
7. Kerrigan's Testimony (approximately 10–12 paragraphs): Setting forth key excerpts from Kerrigan's deposition and her contemporaneous internal communications, including her testimony regarding Brecker's instructions to exclude Suncoast revenues from GRR reports and to maintain "two sets of numbers."
8. Property-Level Witness Testimony (approximately 12–15 paragraphs): Summarizing the composite testimony of the 10 property-level witnesses regarding the top-down directive to route direct bookings through the Suncoast channel and to exclude those amounts from GRR.
9. The Notice of Material Breach and Failure to Cure (approximately 8–10 paragraphs): Documenting the issuance of the Notice of Material Breach on February 4, 2022, Coastal Palms' response on February 28, 2022, and the failure to tender cure within the 30-day period.
10. Thornbury's Preliminary Audit (approximately 6–8 paragraphs): Describing the retention of Thornbury & Associates, the scope of the preliminary audit, and the key findings (26% underreporting for the top 10 properties, 2019–2021 period).
11. Kettlewell's Forensic Findings on the Fact of Underreporting (approximately 10–12 paragraphs): Setting forth Dr. Kettlewell's conclusions regarding the existence and methodology of the revenue-diversion scheme, without reference to specific dollar amounts of damages. The focus should be on Dr. Kettlewell's findings that Suncoast revenues were systematically excluded from GRR reports, that the exclusion was consistent across all 22 properties, and that the exclusion resulted in underpayment of royalties and marketing-fund contributions. This maintains the liability-only posture of the motion.
Each numbered paragraph must be supported by specific record citations — deposition transcripts (with page-and-line references), produced documents (with Bates numbers), and expert reports (with page references). The goal is to present a meticulously documented factual record that leaves no room for Coastal Palms to create a genuine dispute on any material fact relevant to liability.
V. Anticipated Defense Arguments and Our Responses
This section analyzes the principal arguments that Coastal Palms is likely to raise in opposition to the motion and sets forth our recommended responses. The team should treat this section as a roadmap for drafting both the affirmative sections of the memorandum of law and the reply brief (if one is permitted by local practice).
A. GRR Definition Ambiguity
Anticipated argument: Coastal Palms will argue that FLA § 4.1's GRR definition is ambiguous as applied to revenues collected by a separate legal entity — Suncoast Room Management Inc. — that is not a party to the FLA. Defense counsel will contend that the phrase "regardless of the entity collecting such revenue" was intended to address scenarios involving third-party booking platforms (such as OTAs), not scenarios involving an affiliate management company that provides independent services. Coastal Palms may also argue that the GRR definition creates an ambiguity when read in conjunction with other FLA provisions addressing the franchisee's reporting obligations, which reference "the Hotel's" revenue rather than revenue collected by third parties.
Response: The "regardless of the entity collecting such revenue" language is dispositive. It contains no limitation — it does not say "regardless of the third-party booking platform collecting such revenue" or "regardless of the OTA collecting such revenue." It says "regardless of the entity collecting such revenue," which means exactly what it says: no entity is excluded. Florida contract-interpretation principles require enforcement of plain language. When a contract uses broad, unqualified language, courts must give it its natural and broad meaning. The Court need not resort to extrinsic evidence, parol evidence, or contextual analysis. The plain language of § 4.1 resolves the question.
Additionally, any argument that § 4.1 was intended to address only OTA-type scenarios is belied by the separate reference to "any booking channel, direct or indirect." The inclusion of "direct" booking channels — walk-ins, corporate-direct bookings, and direct website bookings — demonstrates that the drafters contemplated precisely the type of non-OTA revenue at issue here. The GRR definition was drafted to be comprehensive and to foreclose the exact type of revenue-diversion scheme that Coastal Palms implemented.
B. Verimark's Knowledge of Suncoast / Waiver / Estoppel
Anticipated argument: Coastal Palms will argue that Verimark knew about Suncoast's existence and role in managing direct bookings for the hotel portfolio, and that Verimark's failure to object to Suncoast's involvement over a period of years constituted an implied acceptance of the exclusion of Suncoast revenues from GRR. Defense counsel may frame this as a waiver or estoppel defense, arguing that Verimark cannot now claim breach based on a practice that it knew about and acquiesced in.
Response: This defense fails for several independent reasons.
First, knowledge of Suncoast's existence is not consent to the exclusion of its revenues from GRR. Verimark may have been aware that Coastal Palms engaged a management company to handle certain operational functions — this is not uncommon in the hotel-franchise industry. But awareness of a management company's existence is fundamentally different from knowledge that the management company was collecting guest-room revenue and that such revenue was being excluded from GRR reports. The record does not support the inference that Verimark knew about the revenue-diversion scheme. To the contrary, Verimark did not learn of the scheme until the Kerrigan whistleblower complaint on November 8, 2021.
Second, the FLAs contain no provision permitting oral or implied modification. Each FLA includes an integration clause providing that the FLA constitutes the entire agreement between the parties. Each FLA further requires that any modification, amendment, or waiver be set forth in a writing signed by both parties. Coastal Palms has not identified — and cannot identify — any written modification or waiver in which Verimark agreed to exclude Suncoast revenues from GRR. Under Florida law, a no-oral-modification clause is generally enforceable, and a party seeking to establish a waiver or modification of a contract containing such a clause bears a heavy burden.
Third, equitable estoppel requires, among other elements, a material misrepresentation or concealment by the party against whom estoppel is asserted. Here, Verimark made no misrepresentation and concealed nothing. It was Coastal Palms that concealed the revenue-diversion scheme. The estoppel defense is therefore inapplicable on its face.
C. Statute of Limitations / Laches
Anticipated argument: Coastal Palms will argue that claims for underreporting prior to 2017 are time-barred under Florida's five-year statute of limitations for actions on written contracts, Fla. Stat. § 95.11(2)(b). Defense counsel may also raise a laches defense, arguing that Verimark's delay in bringing suit should bar recovery for older periods.
Response: Multiple doctrines preserve Verimark's claims for the full 2013–2021 period.
First, the discovery rule tolls the statute of limitations because Coastal Palms actively concealed the underreporting scheme. Under Florida's discovery rule, the statute of limitations does not begin to run until the plaintiff knew or should have known, through the exercise of due diligence, of the facts giving rise to the cause of action. Here, Coastal Palms affirmatively concealed the Suncoast revenue-diversion scheme through its reporting practices and through Brecker's instructions to maintain "two sets of numbers." Verimark did discover the scheme until the Kerrigan whistleblower complaint in November 2021 and could not reasonably have discovered it earlier given the systematic nature of the concealment. Application of the discovery rule would toll the statute for the entire period of concealment, preserving claims going back to 2013 or earlier.
Second, each monthly GRR report submitted by Coastal Palms constituted a separate, independent breach of the FLAs. Under the continuing-violation or recurring-breach theory, the statute of limitations runs separately as to each monthly breach. Even under a strict application of the five-year statute, all monthly breaches from March 2017 forward would be timely, given the March 7, 2022 filing date. This theory preserves the vast majority of Verimark's damages claim even without application of the discovery rule.
Third, and most importantly for purposes of the summary-judgment motion, the statute-of-limitations argument goes to damages, not to liability. Whether the recoverable period extends back to 2013 or is limited to 2017 has no bearing on the threshold question of whether Coastal Palms breached the FLAs. If the Court finds that Suncoast revenues must be included in GRR, then Coastal Palms breached the FLAs for every period in which it excluded those revenues — regardless of whether some of those periods are time-barred. This reinforces our decision to seek liability-only summary judgment: the statute-of-limitations defense affects the measure of damages, not the existence of a breach.
D. The Counterclaim as a Setoff
Anticipated argument: Coastal Palms will argue that its $12 million counterclaim for alleged brand-standard violations and overbilling provides a setoff against Verimark's claims, creating a genuine dispute that precludes summary judgme

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