1021-00006 · Client 1021 · Pleadings/Summary Judgment

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IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA

CIVIL DIVISION

Case No.: 1021-00006

VERIMARK HOSPITALITY GROUP INC.,

Plaintiff,

COASTAL PALMS FRANCHISE HOLDINGS LLC; RANDALL BRECKER; and SUNCOAST ROOM MANAGEMENT INC.,

Defendants.

PLAINTIFF VERIMARK HOSPITALITY GROUP INC.'S REPLY MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNTS I AND II

Filed: December 8, 2023

Prepared by:

CALDERWOOD & HARKNESS LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-7200 Facsimile: (954) 555-7201

Attorneys for Plaintiff Verimark Hospitality Group Inc.

• Priya Anand, Esq. — FL Bar No. 0087451 — Responsible Partner

• Douglas Carmichael, Esq. — FL Bar No. 0093217 — Billing Partner

• Yuki Nakamura, Esq. — FL Bar No. 0119644 — Lead Associate

• Carlos Espinoza, Esq. — FL Bar No. 0128903 — Working Associate

TABLE OF AUTHORITIES

Cases

Statutes and Rules

Secondary Authorities

INTRODUCTION

Plaintiff Verimark Hospitality Group Inc. ("Verimark") filed its Motion for Partial Summary Judgment on September 29, 2023, seeking judgment as a matter of law on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) on the issue of liability only. That motion was accompanied by a comprehensive Statement of Undisputed Material Facts containing 127 numbered paragraphs, each supported by specific record citations to deposition transcripts, produced documents, and expert reports generated through the course of more than eighteen months of intensive discovery. Verimark demonstrated that the undisputed facts establish, as a matter of contract interpretation and without any genuine issue of material fact, that Defendants Coastal Palms Franchise Holdings LLC ("Coastal Palms"), Randall Brecker ("Brecker"), and Suncoast Room Management Inc. ("Suncoast") (collectively, "Defendants") systematically excluded guest-room rental revenues from the Gross Room Revenue ("GRR") reports required under twenty-two separate Franchise License Agreements ("FLAs"), thereby underpaying both the five-percent royalty obligation under Section 4.1 and the two-and-a-half-percent marketing-fund contribution under Section 4.2 of each FLA.

Coastal Palms filed its Opposition on November 17, 2023 (the "Opposition"). The Opposition runs to twenty-nine pages and advances four principal arguments: (1) that FLA Section 4.1's definition of "Gross Room Revenue" is ambiguous as to revenues collected by a separate management entity; (2) that Verimark "knew" about Suncoast Room Management Inc.'s existence and therefore acquiesced in its revenue-collection practices; (3) that the netting of online travel agency ("OTA") net-rate payments against GRR was "standard industry practice"; and (4) that Coastal Palms' counterclaim for alleged brand-standard violations and over-billing creates a triable issue precluding summary judgment. None of these arguments withstands scrutiny.

The central pillar of Coastal Palms' Opposition — the claimed "ambiguity" of Section 4.1 — is foreclosed by the plain language of the contract, by the parol-evidence rule, and by the deposition admissions of Coastal Palms' own Managing Member, Randall Brecker. Section 4.1 defines GRR to include "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." The final clause — "regardless of the entity collecting such revenue" — was designed precisely to prevent the kind of diversion at issue here. Coastal Palms' assertion that this language is somehow ambiguous because it does not specifically name "affiliated management companies" is a contortion of contract-interpretation law that no Florida court has endorsed.

Coastal Palms does not dispute that Suncoast Room Management Inc. collected revenues from the rental of guest rooms at the franchised hotel properties. It does not dispute that those revenues were excluded from the monthly GRR reports submitted to Verimark. It does not dispute that Brecker directed property-level controllers to implement the exclusion. The only question presented is whether the FLAs required the inclusion of Suncoast-collected revenues in GRR. The answer, as a matter of contract interpretation, is unambiguously yes.

For the reasons detailed below and in Verimark's opening memorandum, the Court should grant partial summary judgment on liability for Counts I and II, reserving the determination of damages for trial.

I. STANDARD OF REVIEW

Under Florida Rule of Civil Procedure 1.510, a movant is entitled to summary judgment "if the pleadings and summary judgment evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fla. R. Civ. P. 1.510(c); Vireo National Bank v. Gorbaty, 345 So. 3d 376, 381 (Fla. 3d DCA 2022). A genuine issue of material fact exists only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Bohannon v. Carnival Corp., 320 So. 3d 258, 261 (Fla. 3d DCA 2021). The nonmoving party must come forward with specific facts showing that there is a genuine issue for trial; it may not rest upon the mere allegations or denials of its pleading. Estate of Githens ex rel. Seaman v. Bon Secours-Maria Manor Nursing Care Ctr., Inc., 928 So. 2d 1272, 1274 (Fla. 2d DCA 2006).

Critically, where a contract's terms are unambiguous, their interpretation is a question of law that may be resolved on summary judgment. Volusia Cty. v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 131 (Fla. 2000). A court need not — and, indeed, may not — resort to extrinsic evidence to alter the clear and unambiguous terms of a written agreement. Lafayette Fed. Sav. & Loan Ass'n v. Palm Beach Fin. Co., 511 So. 2d 337, 339 (Fla. 4th DCA 1987). These principles are dispositive here.

This Reply brief addresses only the arguments raised in Coastal Palms' Opposition. Verimark incorporates by reference all arguments set forth in its opening memorandum filed September 29, 2023, and its Statement of Undisputed Material Facts (Paragraphs 1 through 127, with supporting record citations). Nothing in the Opposition warrants alteration of any argument advanced in Verimark's opening submission.

II. THE FLA'S GRR DEFINITION IS UNAMBIGUOUS AND INCLUDES ALL REVENUES FROM GUEST-ROOM RENTAL REGARDLESS OF THE COLLECTING ENTITY

A. The Plain Language of FLA § 4.1 Admits of Only One Reasonable Interpretation

The starting point for any contract-interpretation analysis under Florida law is the text of the agreement itself. Avante at Leesburg, Inc. v. Nandan, 254 So. 3d 1123, 1126 (Fla. 5th DCA 2018). When the language of a contract is clear and unambiguous, the court must enforce that language according to its plain meaning and may not look beyond the four corners of the document. First Baptist Church of Cape Coral, Fla., Inc. v. Compass Constr., Inc., 115 So. 3d 1069, 1074 (Fla. 2d DCA 2013); 11 Fla. Jur. 2d Contracts § 109 (2023). A provision is ambiguous only when it is "susceptible to more than one reasonable interpretation." Citrus Cty. Hosp. Bd. v. Citrus Mem'l Health Found., Inc., 150 So. 3d 1169, 1176 (Fla. 5th DCA 2014). The mere fact that one party assigns a different meaning to a contractual term does not, by itself, create an ambiguity; the alternative reading must be objectively reasonable. Sepe v. City of Safety Harbor, 761 So. 2d 1182, 1185 (Fla. 2d DCA 2000).

Section 4.1 of the FLAs at issue provides, in pertinent part:

"Gross Room Revenue" or "GRR" means all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue. GRR shall include, without limitation, room charges, premiums, and surcharges imposed on guests in connection with the occupancy of guest rooms, but shall exclude applicable state and local room taxes separately stated on the guest folio.

Statement of Undisputed Material Facts ("SUMF") ¶ 14 (citing FLA § 4.1, Composite Exhibit A to the Amended Complaint). This definition appears verbatim in all twenty-two FLAs executed between June 15, 2007 and September 3, 2019. SUMF ¶¶ 14–35. There is no variation across the agreements that supports Coastal Palms' claimed ambiguity.

The definition employs deliberately expansive language at every turn. First, it captures "all revenues derived from or attributable to the rental of guest rooms" — not some revenues, not revenues "received by the Franchisee," but all revenues bearing a causal or attributional nexus to guest-room rentals. Second, the phrase "including revenues from any booking channel, direct or indirect" eliminates any argument that the source of the booking matters. Third, and most critically, the clause "regardless of the entity collecting such revenue" expressly forecloses the very distinction that Coastal Palms seeks to draw between revenues collected by the franchisee entity itself and revenues collected by its affiliated management company, Suncoast.

Coastal Palms' Opposition argues that Section 4.1 is ambiguous because it "does not specifically name 'affiliated management companies' or 'off-platform booking channels.'" Opp'n at 10. This argument fundamentally misapprehends the nature of contractual catch-all clauses. The entire purpose of the phrase "regardless of the entity collecting such revenue" is to avoid the need to enumerate every possible entity through which a franchisee might route its revenue. The Florida courts have long recognized that expansive, all-inclusive contractual language should be given its natural and intended breadth. Coastal Petroleum Co. v. Mobil Oil Corp., 583 So. 2d 718, 720 (Fla. 1st DCA 1991). As the Fourth District explained in Goldcoast Acquisitions Corp. v. Premiere Lodging Grp., 318 So. 3d 145, 152 (Fla. 4th DCA 2021), a franchise agreement's revenue definition "must be construed in light of its evident commercial purpose — to ensure that the franchisor's royalty base encompasses the full scope of revenue-generating activity at the franchised location." See also William L. Killion, Franchise Agreements: Drafting, Negotiation, and Analysis § 6.03, at 6-14 (2d ed. 2022) (observing that modern franchise agreements include "entity-neutral" GRR definitions precisely to prevent revenue diversion through affiliated entities).

Under Florida's well-established rules of contract construction, a court must give effect to every word of a contract and may not render any provision surplusage. Avante at Leesburg, 254 So. 3d at 1127; Sepe, 761 So. 2d at 1185. Coastal Palms' proposed interpretation would render the clause "regardless of the entity collecting such revenue" entirely meaningless. If GRR encompassed only revenues collected by the franchisee entity itself — as Coastal Palms contends — there would have been no reason to include that clause at all. The parties could simply have defined GRR as "revenues received by the Franchisee" and left it at that. The fact that they instead used the phrase "regardless of the entity collecting such revenue" demonstrates that the definition was intended to reach revenues collected by entities other than the franchisee — precisely the situation presented here.

The Fourth District's decision in Holiday Hosp. Franchising, Inc. v. Tropical Innkeepers Ltd., 286 So. 3d 329 (Fla. 4th DCA 2019), is instructive. In that case, the court held that a franchise agreement's gross-revenue definition encompassing "all revenues from the operation of the Hotel, from whatever source" included revenues from food-and-beverage operations conducted by a separately incorporated restaurant entity controlled by the franchisee. Id. at 336. The court reasoned that the "from whatever source" language was "plainly intended to capture the totality of revenue-generating activity" and that the franchisee's attempt to carve out revenues flowing through an affiliated entity was "inconsistent with the contract's unambiguous terms." Id. at 337. The same analysis applies with even greater force here, where the FLA's GRR definition not only uses the broad phrase "all revenues derived from or attributable to the rental of guest rooms" but adds the explicit catch-all "regardless of the entity collecting such revenue."

Similarly, in Seastar Hospitality Corp. v. Grandmark Franchise Partners, 275 So. 3d 811 (Fla. 4th DCA 2019), the court enforced a gross-revenue definition that captured "all revenue from room rentals and related charges, however collected or received." The franchisee in Seastar had argued that revenues routed through a third-party management company were not "received" by the franchisee and therefore fell outside the GRR definition. The Fourth District rejected this argument, holding that the words "however collected or received" made the identity of the collecting entity irrelevant. Id. at 818–19. The court emphasized that "the franchise agreement's broad revenue definition was designed to prevent exactly the type of revenue shifting that the franchisee undertook." Id. at 819.

The language of FLA Section 4.1 is at least as broad — if not broader — than the revenue definitions at issue in Holiday Hospitality and Seastar. The phrase "regardless of the entity collecting such revenue" is as clear and direct as contractual language can be. It eliminates the distinction between revenues collected by the franchisee entity and revenues collected by any other entity, including Suncoast. Coastal Palms' claim that this language is ambiguous is simply untenable as a matter of contract interpretation, and the Court should so hold.

B. Coastal Palms' "Reasonable Interpretation" Defense Fails as a Matter of Law

Unable to overcome the plain language of Section 4.1, Coastal Palms advances a fallback argument: that its exclusion of Suncoast-collected revenues was a "reasonable interpretation" of the provision because Suncoast was "a separate legal entity" and GRR should encompass only revenues flowing through the franchisee's own bank accounts. Opp'n at 12–15. This argument fails for multiple reasons.

First, as demonstrated above, the argument is directly contradicted by the phrase "regardless of the entity collecting such revenue." A contractual interpretation that requires the court to ignore specific, express language is not a "reasonable" interpretation — it is an unreasonable one. Florida law is clear that an interpretation "must not be strained or distorted" and must harmonize all provisions of the contract. Friedman v. Virginia Metal Prods. Corp., 56 So. 2d 515, 517 (Fla. 1952); Intervest Constr., Inc. v. Canterbury Estate Homes, Inc., 554 So. 2d 1178, 1182 (Fla. 5th DCA 1989). Coastal Palms' interpretation is not merely strained — it is impossible to reconcile with the express catch-all clause. As a leading franchise-law treatise explains, "entity-neutral" revenue definitions are "specifically drafted to foreclose the argument that revenues collected by an affiliated management company or operating entity fall outside the franchisee's reporting obligations." Barkoff & Selden, Fundamentals of Franchising 147 (4th ed. 2015); see also 11 Fla. Jur. 2d Contracts § 113 (2023) ("Where the contract contains language of unequivocal import, the court will not torture the language to create an ambiguity.").

Second, even if the Court were to consider extrinsic evidence to resolve the alleged ambiguity — which it should not, given the unambiguous text — the extrinsic evidence uniformly supports Verimark's reading and undermines Coastal Palms' position. Three categories of extrinsic evidence are particularly relevant:

The FLA's Purpose Clause. Section 1.2 of each FLA provides that "the Franchisee acknowledges that the protection of the Franchisor's royalty revenue stream is a central purpose of this Agreement and that the Franchisee's reporting and payment obligations are designed to ensure the complete and accurate accounting of all revenues subject to the royalty and marketing-fund provisions herein." SUMF ¶ 13. This purpose clause confirms that the parties understood GRR to capture the broadest possible measure of room-rental revenue. A reading that permits franchisees to route revenues through affiliated entities to reduce their reporting obligations is diametrically opposed to this stated purpose.

The Marketing-Fund Contribution in Section 4.2. The marketing-fund contribution under Section 4.2 is keyed to the same GRR base as the royalty under Section 4.1 — the franchisee is obligated to pay two and a half percent of GRR into Verimark's national marketing fund. SUMF ¶ 36. This linkage confirms that GRR was intended to serve as the comprehensive measure of guest-room revenue against which all revenue-based obligations would be calculated. Under Coastal Palms' reading, a franchisee could reduce both its royalty and its marketing-fund contributions simply by routing revenues through an affiliated entity — a result that no reasonable businessperson would have intended or expected.

The Audit Rights in Section 8.2. Section 8.2 of each FLA entitles Verimark to "audit all books and records of the Franchisee and any affiliated entity relating to the operation of the Hotel." SUMF ¶ 40. The inclusion of "any affiliated entity" in the audit-rights provision confirms that the parties recognized and anticipated that affiliated entities might play a role in the collection of hotel revenues. If Suncoast-collected revenues were not intended to be part of GRR, there would be no reason for the FLA to grant Verimark audit rights over affiliated entities' books and records. The audit-rights clause and the GRR definition work in tandem: the former ensures transparency, and the latter ensures that all revenues captured by the audit are subject to reporting. See Goldcoast Acquisitions, 318 So. 3d at 153 (noting that "the scope of the audit-rights clause informs the scope of the revenue definition, and vice versa"); Pinnacle Brands Int'l v. Coastal Franchise Sys., 301 So. 3d 452, 460 (Fla. 4th DCA 2020) (same).

Third, Coastal Palms' reliance on the "separate legal entity" concept is particularly unavailing given the undisputed identity of interests among the Defendant entities. Randall Brecker is the Managing Member of Coastal Palms Franchise Holdings LLC; the Managing Member of Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC (which are the direct operators of certain franchised properties); and the President and sole shareholder of Suncoast Room Management Inc. SUMF ¶¶ 3–7. All of these entities operate out of the same office at 4700 North Federal Highway, Suite 420, Boca Raton, Florida. SUMF ¶ 8. Brecker exercises plenary control over all of them. SUMF ¶ 9. The notion that the interposition of a separately incorporated entity controlled by the same individual should permit the exclusion of guest-room rental revenues from GRR is precisely the kind of formalistic manipulation that the "regardless of the entity collecting such revenue" clause was designed to prevent.

Coastal Palms' "reasonable interpretation" defense thus fails both on the contract's plain language and on the extrinsic evidence. The defense amounts to nothing more than an after-the-fact rationalization for conduct that the contract expressly prohibits. It does not create a genuine issue of material fact, and it does not preclude summary judgment.

C. Brecker's Deposition Admissions Foreclose the Ambiguity Defense

Even if the contract language were susceptible to more than one reading — and it is not — Coastal Palms' ambiguity defense would still fail because the deposition admissions of its own Managing Member, Randall Brecker, establish the operative facts beyond dispute.

Brecker sat for a two-day deposition on January 9 and 10, 2023, spanning approximately fourteen hours of testimony. During that deposition, he made a series of critical admissions that eliminate any colorable claim of ambiguity or genuine factual dispute regarding the nature of the revenues at issue and the manner of their exclusion:

Admission 1: Suncoast was established to handle "direct bookings" at Verimark-branded hotels. Brecker testified that Suncoast Room Management Inc. was established in January 2013 specifically to handle what he described as "direct bookings" — encompassing walk-in guests, corporate-direct contracts, and bookings through the unbranded website gulfcoastrooms.com — at the franchised hotel properties. Brecker Dep. Day 1, 84:6–85:14; 91:3–92:18. He explained that Suncoast was created because "we wanted a separate entity to manage the direct-booking side of the business" and that its formation was part of a "restructuring" of the Coastal Palms portfolio. Brecker Dep. Day 1, 93:2–94:7. This testimony confirms that Suncoast was created for the express purpose of collecting guest-room rental revenues at Verimark-branded properties.

Admission 2: Suncoast revenues were derived from "the rental of guest rooms." When asked whether the revenues collected by Suncoast through the direct-booking channels were "derived from the rental of guest rooms at the Verimark-branded hotels," Brecker answered: "Yes, they were room revenues." Brecker Dep. Day 1, 112:4–9. He further confirmed that Suncoast did not generate revenue from any source other than the rental of rooms at the franchised properties. Brecker Dep. Day 1, 114:17–115:3. This admission is devastating to the ambiguity defense because it establishes that the Suncoast-collected revenues fall squarely within the first clause of the GRR definition — "all revenues derived from or attributable to the rental of guest rooms at the Hotel."

Admission 3: Brecker personally directed the exclusion of Suncoast revenues from GRR reports. Brecker admitted that he "personally directed" property-level controllers to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. Brecker Dep. Day 2, 47:11–48:22. He testified that the exclusion was implemented through an accounting instruction to "report only PMS-channel revenues on the Verimark GRR template" and to "book Suncoast revenues separately." Brecker Dep. Day 2, 49:1–50:16. This admission is corroborated by the testimony of Janet Kerrigan, Coastal Palms' former Regional Controller, who confirmed that she received the instruction from Brecker and relayed it to property-level accounting staff. Kerrigan Dep. 63:7–64:19; 71:2–72:14. It is further corroborated by the depositions of ten property-level managers and accountants, who uniformly testified to a recurring pattern of direction from "corporate" — meaning Brecker — to route walk-in and corporate-direct bookings through the Suncoast channel and to exclude those revenues from Verimark GRR reports. See Deposition Summary Memorandum — Property-Level Witnesses, filed September 29, 2023.

Admission 4: Brecker never sought a written interpretation from Verimark regarding Suncoast revenues. Brecker conceded that he never sought a written interpretation, clarification, or ruling from Verimark regarding whether Suncoast-collected revenues should be included in GRR, notwithstanding the plain language of Section 4.1. Brecker Dep. Day 2, 88:3–89:12. He was asked: "Did you ever write to Verimark and ask whether Suncoast-collected revenues needed to be included in GRR?" His answer was: "No, I did not." Brecker Dep. Day 2, 88:14–18. He was further asked: "Did you ever have any oral conversation with any Verimark representative about this issue?" His answer was: "Not that I recall." Brecker Dep. Day 2, 89:3–6. This admission undercuts the suggestion that there was any genuine uncertainty about the meaning of Section 4.1. A party who genuinely believes that a contract term is ambiguous would be expected to seek clarification from its counterparty. Brecker's failure to do so is a powerful indication that he understood the clause's meaning and chose to disregard it.

Admission 5: Brecker acknowledged the "regardless of the entity" clause but subjectively "didn't think" it applied. Perhaps most damaging of all, Brecker acknowledged that he read Section 4.1 before executing the FLAs but testified that he "didn't think" the clause about "regardless of the entity collecting such revenue" applied to Suncoast because Suncoast was "a different company." Brecker Dep. Day 2, 91:4–92:11. When pressed on cross-examination, he was unable to articulate any principled basis for reading the clause to exclude revenues collected by Suncoast other than his subjective belief that Suncoast's separate corporate status removed it from the definition's reach. Brecker Dep. Day 2, 93:1–95:22. This testimony does not create an ambiguity. Under Florida law, a party's subjective, unilateral interpretation of an unambiguous contract provision cannot manufacture an ambiguity where none exists in the text. Goldcoast Acquisitions, 318 So. 3d at 154 ("A party's subjective understanding of a clear contract term does not render the term ambiguous; ambiguity must arise from the language itself, not from the parties' conflicting interpretations.").

The whistleblower testimony of Janet Kerrigan provides further confirmation. Kerrigan served as Regional Controller for Coastal Palms from March 2015 until her termination in October 2021. She contacted Verimark's compliance hotline on November 8, 2021, and subsequently cooperated with the ensuing investigation. In her deposition, Kerrigan confirmed that Brecker specifically instructed controllers to exclude direct-booking revenues collected by Suncoast from GRR reports, and that she understood this instruction to be in violation of the FLA's reporting requirements. Kerrigan Dep. 63:7–64:19; 71:2–72:14; 108:3–109:18. She testified that she raised the issue with Brecker on at least two occasions — in April 2019 and again in February 2021 — and that Brecker responded by telling her to "mind your own lane" and to "let the lawyers worry about the contract." Kerrigan Dep. 110:4–112:7. Kerrigan further testified that she was terminated in October 2021, approximately three weeks before she contacted the Verimark hotline, in what she believed was retaliation for her continued internal objections to the reporting practice. Kerrigan Dep. 121:3–124:16.

The depositions of ten property-level managers and accountants, taken between January and March 2023, provide still further corroboration. Each testified to substantially the same pattern: a directive from "corporate" (i.e., Brecker) to route walk-in and corporate-direct bookings through Suncoast's booking channel and to exclude the resulting revenues from the monthly GRR reports transmitted to Verimark. SUMF ¶¶ 68–92. Witnesses at eight of the twenty-two properties testified that the practice began in 2013, contemporaneously with Suncoast's formation, and continued through 2021. SUMF ¶¶ 72, 76, 79, 82, 85, 87, 90, 92.

In summary, the undisputed record establishes that: (1) Suncoast collected revenues "derived from … the rental of guest rooms at the Hotel" — the exact statutory predicate of GRR; (2) Brecker knew about and directed the exclusion of those revenues from GRR reports; (3) Brecker read the "regardless of the entity collecting such revenue" clause but chose to disregard it based on a subjective and legally untenable interpretation; and (4) Brecker never sought clarification from Verimark. Where the contract language is plain and the defendant's own principal admits the underlying facts, there is no genuine factual dispute regarding liability. The Court should so hold.

III. COASTAL PALMS' CLAIM THAT VERIMARK "KNEW" ABOUT SUNCOAST DOES NOT CREATE A TRIABLE ISSUE ON BREACH

A. Knowledge of Suncoast's Existence Is Not Knowledge of Revenue Diversion

Coastal Palms devotes a substantial portion of its Opposition to the argument that Verimark was "aware of Suncoast's role" and therefore acquiesced in the exclusion of Suncoast-collected revenues from GRR. Opp'n at 17–20. In support, Coastal Palms points to the fact that Suncoast was identified in certain property-management agreements submitted during the franchise-application process for several of the later-executed FLAs. Id. at 17–18 (citing Exs. D-1 through D-8 to the Opposition).

This argument rests on a fundamental conflation: it equates awareness that an affiliated management company existed with awareness that the management company was being used to siphon guest-room revenues out of the GRR reporting stream. These are entirely different propositions. Verimark does not deny that it was aware, in general terms, that Coastal Palms utilized a management company — Suncoast — in the day-to-day operations of certain franchised properties. Verimark was not, however, aware that Suncoast was serving as a vehicle to collect guest-room revenues that were then excluded from the monthly GRR reports submitted to Verimark.

The property-management agreements submitted during the franchise-application process described Suncoast's role in general operational terms — "overseeing front-desk operations, housekeeping, and maintenance services," among other tasks. SUMF ¶ 47. They did not disclose that Suncoast would directly collect guest-room revenues through parallel booking channels and retain a twelve-percent "management fee" on those revenues. SUMF ¶¶ 48–49. There is nothing inherently suspicious about a franchisee's use of an affiliated management company; such arrangements are commonplace in the hotel industry. What is improper — and what the FLA expressly prohibits — is the exclusion of revenues collected by the management company from the GRR computation.

Critically, Coastal Palms cites no communication, letter, email, memorandum, or other document in which Verimark was informed that Suncoast-collected revenues were being excluded from GRR reports. This omission is particularly significant given the scope of discovery in this case. Discovery encompassed approximately 2.3 million documents and 1.1 terabytes of electronic data processed by Nexagen Document Solutions LLC. SUMF ¶ 95. Coastal Palms produced approximately 396,000 documents in response to Verimark's requests for production. SUMF ¶ 96. Among these 396,000 documents, not a single one evidences Verimark's knowledge of — much less acquiescence in — the exclusion of Suncoast-collected revenues from GRR. The absence of any such evidence is telling. If Coastal Palms had genuinely believed that its reporting practice was sanctioned by Verimark, one would expect to find at least one written communication memorializing that understanding. The record is devoid of any such communication.

Nor does the record contain any evidence that Verimark's franchise-development officers, relationship managers, or brand-compliance auditors were ever informed of the specific accounting treatment of Suncoast-collected revenues. Andrew Donahue, Verimark's Vice President of Franchise Relations, testified that he understood Suncoast to be an operational management company and that he had "no knowledge" that Suncoast was collecting guest-room revenues that were being excluded from GRR reports. Donahue Dep. 43:7–44:19. Lisa Tran, Verimark's Director of Brand Compliance, similarly testified that she was "never told" that any Coastal Palms affiliate was collecting revenues outside of the reported GRR. Tran Dep. 78:12–79:6.

Coastal Palms' argument that Verimark "knew" about Suncoast therefore amounts to nothing more than an assertion that Verimark was aware of Suncoast's corporate existence. That awareness, without more, does not establish knowledge of the revenue-diversion scheme and does not create a triable issue on the breach-of-contract claims.

B. Neither Waiver Nor Estoppel Applies

Coastal Palms raises the affirmative defenses of waiver and estoppel in both its Amended Answer and Affirmative Defenses (filed May 26, 2022) and its Opposition. Neither defense is supported by the record.

Waiver. Under Florida law, waiver is "the voluntary and intentional relinquishment of a known right, or conduct which implies the voluntary and intentional relinquishment of a known right." Sheen v. Lyon, 485 So. 2d 422, 425 (Fla. 1986); Green Cos. v. Kendall Racquet Club Dev. Corp., 658 So. 2d 1076, 1079 (Fla. 3d DCA 1995). The party asserting waiver bears the burden of proving both knowledge of the right and a deliberate intention to relinquish it. Friedman, 56 So. 2d at 518. The evidence must be "clear and unequivocal." Green Cos., 658 So. 2d at 1079.

Coastal Palms cannot meet this burden. As established in Section III.A above, Verimark did not know that Suncoast-collected revenues were being excluded from GRR reports until the November 8, 2021 whistleblower complaint from Janet Kerrigan. SUMF ¶ 97. Upon receipt of that complaint, Verimark acted promptly and decisively. On November 22, 2021 — just fourteen days after the whistleblower complaint — Verimark retained Thornbury & Associates CPAs LLP ("Thornbury") to conduct a franchise-compliance audit of the Coastal Palms portfolio. SUMF ¶ 99. Thornbury issued its preliminary findings on January 18, 2022, confirming underreporting of approximately twenty-six percent across the ten most revenue-productive properties for the 2019–2021 period. SUMF ¶ 101. Verimark then issued a formal Notice of Material Breach to Coastal Palms on February 4, 2022, demanding cure within thirty days in accordance with FLA Section 14.1. SUMF ¶ 103. This timeline — from discovery of the problem to formal notice of breach in fewer than ninety days — demonstrates the opposite of waiver. It demonstrates prompt enforcement of Verimark's contractual rights.

Coastal Palms' waiver argument hinges entirely on the premise that Verimark "should have known" about the revenue diversion because Suncoast's existence was disclosed during the franchise-application process. As demonstrated above, however, awareness of Suncoast's corporate existence is not equivalent to knowledge that Suncoast-collected revenues were being excluded from GRR. Constructive knowledge based on the mere existence of a management company is insufficient to establish the "clear and unequivocal" evidence of intentional relinquishment that waiver requires. See Vane Kaplan CPAs LLP Seidman, LLP v. Banco Espirito Santo Int'l, Ltd., 38 So. 3d 874, 879 (Fla. 3d DCA 2010) (holding that "mere failure to block" a breach does not constitute waiver of the right to enforce the underlying obligation).

Moreover, FLA Section 14.3 contains a no-waiver provision: "No failure or delay by the Franchisor in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right or remedy." SUMF ¶ 42. While a no-waiver clause is not an absolute bar to a waiver defense, Florida courts have held that such clauses raise the bar significantly and confirm the parties' intent that contractual rights not be lost through inaction. Dows v. Sterling Reach Partners LLC, 846 So. 2d 595, 601 (Fla. 4th DCA 2003). The no-waiver clause in FLA Section 14.3 reinforces the conclusion that waiver has not occurred here.

Estoppel. Equitable estoppel requires, among other elements, that the party seeking estoppel show: (1) a representation by the party against whom estoppel is asserted; (2) reliance on that representation by the party seeking estoppel; and (3) a change of position to the detriment of the party seeking estoppel. Drayton Trust Bank Fin. Servs., Inc. v. Saldukas, 896 So. 2d 707, 711 (Fla. 2005). Coastal Palms has failed to identify any affirmative representation by Verimark — whether oral or written — that Suncoast-collected revenues could be excluded from GRR. Coastal Palms has not pointed to a single email, letter, phone call, or meeting in which any Verimark representative communicated, suggested, or implied that the exclusion of Suncoast revenues from GRR was acceptable. Silence in the face of conduct that is unknown to the silent party does not constitute a representation. Dows, 846 So. 2d at 602.

In any event, FLA Section 14.2(c) provides that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." SUMF ¶ 41. This provision reflects the parties' agreement that systematic GRR underreporting is a uniquely serious breach — one so fundamental to the franchise relationship that no cure, waiver, or estoppel argument should be available. The express incurability provision, agreed to by Coastal Palms at arm's length, further supports the entry of summary judgment on liability. See Holiday Hosp. Franchising, 286 So. 3d at 340 (enforcing "incapable of cure" provision in franchise agreement with respect to revenue-reporting breach).

IV. COASTAL PALMS' OTA NET-RATE NETTING ARGUMENT ALSO FAILS

In addition to the Suncoast revenue diversion — which constitutes the primary basis for underreporting — Verimark demonstrated in its opening brief that Coastal Palms further underreported GRR from third-party online travel agency ("OTA") channels by classifying net-rate OTA payments as "commissions receivable" and netting them against GRR. SUMF ¶¶ 107–116. Coastal Palms' Opposition devotes several pages to this issue, arguing that its OTA netting practice was "standard industry practice" and therefore permissible. Opp'n at 22–24. This argument fails on the plain language of the FLA.

Section 4.1 defines GRR as "all revenues derived from or attributable to the rental of guest rooms." The contractual definition employs a gross measure, not a net measure. The word "Gross" in "Gross Room Revenue" is itself dispositive of the parties' intent. A "gross" measure, by definition, captures total revenues before the deduction of expenses, commissions, or fees. See Seastar Hospitality Corp., 275 So. 3d at 820 ("The use of the term 'gross' in a franchise agreement's revenue definition signals that the franchisor intended to capture the full amount of revenue before the subtraction of any expenses, including OTA commissions."); William L. Killion, Franchise Agreements: Drafting, Negotiation, and Analysis § 6.03, at 6-17 (2d ed. 2022) ("The distinction between 'gross' and 'net' revenue is a fundamental one in franchise economics. A gross-revenue definition captures top-line revenue; a net-revenue definition permits certain deductions."). The FLA does not use the word "net" anywhere in the GRR definition, nor does it authorize the deduction of OTA commissions or management fees from GRR.

Coastal Palms' reliance on "standard industry practice" is unavailing. Even assuming arguendo that some hotel operators net OTA commissions against their internal revenue figures for purposes of management accounting, the question here is not what industry practice may be, but what the contract requires. The FLA's GRR definition controls. Where the contract unambiguously defines GRR as a gross measure, a party may not invoke industry custom to read in a netting deduction that the contract does not authorize. See Holiday Hosp. Franchising, 286 So. 3d at 338 ("A franchisor's revenue definition, when clear on its face, cannot be overridden by the franchisee's resort to industry practice or custom."); Pinnacle Brands Int'l, 301 So. 3d at 461 ("[T]he parol evidence rule bars the introduction of extrinsic evidence of trade usage or industry custom to vary the terms of an unambiguous contract.").

Dr. Sharon Kettlewell, CPA/CFF, CFE, of Ridgeline Forensic Advisory LLC, Verimark's forensic-accounting expert, addressed the OTA netting issue in her expert report served April 14, 2023, and in her rebuttal report served June 9, 2023. Dr. Kettlewell opined that the OTA netting practice was inconsistent with Section 4.1's gross-revenue definition and that the netting contributed to the cumulative $197.8 million in underreported GRR over the 2013–2021 period. Kettlewell Expert Report at 47–52; Kettlewell Rebuttal Report at 18–23. Dr. Kettlewell specifically analyzed the OTA net-rate arrangements at each of the twenty-two franchised properties, reviewed the booking-level data produced by the third-party OTA platforms in response to subpoenas duces tecum, and determined that the gross room rates charged to guests through OTA channels were systematically higher than the net rates reported to Verimark. SUMF ¶¶ 112–116. The difference — which Dr. Kettlewell estimated at approximately $14.3 million over the nine-year period — was treated by Coastal Palms as a "commission" and deducted from GRR. SUMF ¶ 116. Under the FLA's gross-revenue definition, however, this deduction was impermissible.

Defendants' expert, Professor Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc., does not dispute the legal premise that Section 4.1 employs a gross-revenue measure. Hargrove Expert Report at 22 ("The contractual definition of GRR is a gross-revenue measure as that term is commonly understood."). Rather, Professor Hargrove disputes the quantum of damages flowing from the breach, opining that Verimark's damages are overstated and limiting his estimate of total underpayments to $6.2 million. Hargrove Expert Report at 34. But the Hargrove report addresses the magnitude of the breach, not its existence. Even under Professor Hargrove's most conservative assumptions and most favorable damage methodology, he concedes at least $6.2 million in underpayments of royalties and marketing-fund contributions — meaning that he concedes breach. Id. at 34–36. The difference between Dr. Kettlewell's estimate and Professor Hargrove's estimate is a question of damages, not a question of liability.

The implications for summary judgment are straightforward. The question before the Court on Verimark's motion is not how much GRR was underreported, but whether it was underreported. The answer, as established by the undisputed record — including Defendants' own expert's concession — is yes. Because liability is established as a matter of law regardless of which expert's damages figure the jury ultimately adopts, damages should be reserved for trial and partial summary judgment should be granted on liability for Counts I and II.

V. COASTAL PALMS' RESPONSE TO VERIMARK'S STATEMENT OF UNDISPUTED MATERIAL FACTS DOES NOT CREATE A GENUINE DISPUTE

A. Coastal Palms' Purported Disputes Are Immaterial or Unsupported

Verimark's Statement of Undisputed Material Facts, filed September 29, 2023, sets forth 127 numbered paragraphs, each supported by specific record citations to deposition transcripts, produced documents, and expert reports. Coastal Palms' Response to the Statement of Facts, filed November 17, 2023, purports to dispute a handful of these paragraphs. Upon examination, however, none of Coastal Palms' purported "disputes" creates a genuine issue of material fact warranting denial of summary judgment.

Coastal Palms' disputes fall into two categories, neither of which defeats summary judgment:

First, several of Coastal Palms' purported disputes contest the amount of underreporting. For example, Coastal Palms' Response to SUMF ¶ 118 states that "Coastal Palms disputes the $197.8 million figure and contends that any underreporting was substantially less, as demonstrated by the Hargrove Expert Report." Coastal Palms' Resp. to SUMF ¶ 118. But the quantum of underreporting is a damages issue, not a liability issue. Verimark is seeking partial summary judgment on liability only. Whether the underreported GRR amounts to $197.8 million (Dr. Kettlewell's estimate) or some lesser figure (Professor Hargrove's estimate) does not affect the threshold determination of whether the FLA was breached. Even under Professor Hargrove's most favorable analysis, he concedes that GRR was underreported and that royalties and marketing-fund contributions were underpaid. The dispute over the magnitude of the underreporting is properly reserved for trial.

Second, Coastal Palms' remaining disputes are not factual disputes at all — they are legal conclusions repackaged as factual disagreements. For example, Coastal Palms' Response to SUMF ¶ 14 states: "Coastal Palms disputes the characterization of § 4.1 as 'unambiguous' and contends that the provision is susceptible to more than one reasonable interpretation." Coastal Palms' Resp. to SUMF ¶ 14. Whether a contract provision is ambiguous is a question of law, not a question of fact. It is for the Court to determine, on the face of the contract, whether Section 4.1 admits of more than one reasonable interpretation. As demonstrated in Section II above, it does not. Coastal Palms' legal disagreement with Verimark's interpretation cannot masquerade as a factual dispute sufficient to preclude summary judgment.

Setting aside these insufficient "disputes," the following core facts remain undisputed:

• The existence and terms of the twenty-two FLAs, each containing materially identical Section 4.1 GRR definitions. SUMF ¶¶ 10–35.

• The establishment of Suncoast Room Management Inc. no later than January 2013. SUMF ¶ 50.

• Suncoast's collection of guest-room rental revenues through direct bookings, walk-ins, corporate-direct contracts, and the unbranded website gulfcoastrooms.com. SUMF ¶¶ 51–58.

• Suncoast's retention of a twelve-percent "management fee" on direct-booking revenues. SUMF ¶ 59.

• The exclusion of Suncoast-collected revenues from monthly GRR reports to Verimark. SUMF ¶¶ 60–67.

• Brecker's personal direction to property-level controllers to exclude those revenues. SUMF ¶¶ 68–92.

• The OTA net-rate netting practice applied to third-party booking channels. SUMF ¶¶ 107–116.

• Thornbury & Associates' preliminary findings of approximately twenty-six percent underreporting across ten audited properties for the 2019–2021 period. SUMF ¶ 101.

• Dr. Kettlewell's estimate of cumulative underreported GRR of $197.8 million over the 2013–2021 period across all twenty-two properties. SUMF ¶ 118.

Each of these facts is supported by specific record evidence. None is genuinely disputed by Coastal Palms. Taken together, they establish, without room for reasonable debate, that Coastal Palms breached its obligations under Sections 4.1 and 4.2 of the FLAs.

B. The Quantum of Underreporting Is a Damages Issue Reserved for Trial

Verimark acknowledges — and has always acknowledged — that the parties' experts disagree on the quantum of damages. Dr. Kettlewell estimates cumulative underpaid royalties at $9.89 million (five percent of $197.8 million in underreported GRR) and underpaid marketing-fund contributions at $4.945 million (two and a half percent of $197.8 million). Kettlewell Expert Report at 63. Professor Hargrove limits total underpayments to $6.2 million, principally by challenging Dr. Kettlewell's assumptions regarding the occupancy rates and average daily rates attributable to Suncoast's direct-booking channel. Hargrove Expert Report at 34–36.

This disagreement is a classic battle of the experts on damages. It is precisely the type of dispute that is appropriately resolved by the trier of fact at trial. See Harbor One Condo. Ass'n, Inc. v. Fin. Dev. Corp., 197 So. 3d 99, 104 (Fla. 4th DCA 2016) ("Where the existence of liability is established as a matter of law but the quantum of damages is genuinely disputed, partial summary judgment on liability with damages reserved for trial is the appropriate disposition.").

What the disagreement is not is a dispute about liability. Even under Professor Hargrove's most favorable assumptions, he concedes at least $6.2 million in underpayments. Hargrove Expert Report at 34. Six million two hundred thousand dollars in underpayments necessarily means that GRR was underreported and that royalties and marketing-fund contributions were underpaid. Professor Hargrove's concession, standing alone, eliminates any genuine dispute as to whether a breach occurred. The only question remaining is how large the breach was — and that question is properly reserved for trial.

Verimark seeks partial summary judgment on liability only and is content to try damages. The Court should enter judgment on liability for Counts I and II and permit the damages dispute to proceed to trial, where both experts will have the opportunity to present their competing analyses to the jury.

VI. THE COURT SHOULD REJECT COASTAL PALMS' ARGUMENT THAT ITS COUNTERCLAIM PRECLUDES SUMMARY JUDGMENT

Coastal Palms' Opposition devotes its final substantive section to the argument that its $12 million counterclaim for alleged brand-standard violations and over-billing "creates a triable issue" that precludes the entry of partial summary judgment on Verimark's breach-of-contract claims. Opp'n at 25–27. This argument reflects a fundamental misunderstanding of the relationship between independent claims and counterclaims in the summary-judgment context.

The counterclaim is legally and factually independent of Counts I and II. The counterclaim alleges that Verimark failed to maintain adequate brand standards at the franchised properties — including allegedly deficient property-inspection protocols, delayed approval of renovation plans, and the imposition of excessive brand-compliance fees — and that these failures entitled Coastal Palms to damages of $12 million. Amended Answer and Counterclaim ¶¶ 89–114. Whether Verimark maintained adequate brand standards has no bearing on whether Coastal Palms fulfilled its independent, affirmative obligation to report GRR accurately and to pay royalties and marketing-fund contributions. A franchisee's obligation to report and pay under a franchise agreement is not conditioned upon the franchisor's performance of its separate brand-standard obligations. See Pinnacle Brands Int'l, 301 So. 3d at 462 ("A franchisee's counterclaim for the franchisor's alleged failure to maintain brand standards does not excuse the franchisee's independent obligation to report and pay royalties."); Suburban Leisure Ctr., Inc. v. AMF Bowling, Inc., 468 So. 2d 1071, 1074 (Fla. 4th DCA 1985) ("A party may not unilaterally withhold performance of an independent covenant based on the other party's alleged breach of a separate covenant.").

Even if the counterclaim had merit — which Verimark denies — it would not constitute a defense to Coastal Palms' affirmative obligation to report and pay under the FLA. The FLA contains no "set-off" provision that would entitle a franchisee to reduce its royalty or marketing-fund payments on account of alleged franchisor shortcomings. SUMF ¶ 43. To the contrary, Section 4.4 of the FLA expressly provides: "The Franchisee's obligation to report Gross Room Revenue and to pay the royalty and marketing-fund contribution shall not be subject to any deduction, set-off, or counterclaim, except as expressly provided herein or ordered by a court of competent jurisdiction." SUMF ¶ 44. This provision reflects the parties' bargained-for agreement that the franchisee's payment obligations are unconditional and may not be unilaterally reduced by the franchisee. See Jakobi v. Kings Creek Vill. Townhouse Ass'n, Inc., 665 So. 2d 325, 327 (Fla. 3d DCA 1995) (enforcing anti-set-off clause). Florida law does not recognize a franchisee's unilateral right to withhold contractual payments based on alleged franchisor shortcomings absent a court order. Holiday Hosp. Franchising, 286 So. 3d at 341; Pinnacle Brands Int'l, 301 So. 3d at 462.

The counterclaim may proceed to trial on its own merits. But its existence does not create a triable issue on Verimark's breach-of-contract claims, and it does not preclude the entry of partial summary judgment on Counts I and II.

Coastal Palms' Cross-Motion for Summary Judgment on its counterclaim, filed October 13, 2023, should be separately evaluated and denied for the reasons set forth in Verimark's Response in Opposition to Defendants' Cross-Motion for Summary Judgment, filed November 17, 2023, which is incorporated herein by reference.

VII. THE MATERIAL BREACH FINDING SUPPORTS LIABILITY ON BOTH COUNTS I AND II

Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) both arise from the same underlying conduct: the systematic exclusion of Suncoast-collected revenues from GRR, resulting in the underpayment of the five-percent royalty under Section 4.1 and the two-and-a-half-percent marketing-fund contribution under Section 4.2. Because both the royalty and the marketing-fund contribution are calculated as percentages of GRR, and because GRR is defined identically in both provisions, the same material breach underlies both counts. The elements of each claim are satisfied on the undisputed record.

Under Florida law, the elements of a breach-of-contract claim are: (1) the existence of a valid contract; (2) a material breach of the contract; and (3) damages. Suburban Leisure Ctr., 468 So. 2d at 1073. The first element is undisputed — the twenty-two FLAs are valid, enforceable contracts whose existence and terms are not contested. The second element — material breach — is established by the undisputed evidence of systematic GRR underreporting. The third element — damages — is not at issue on this motion, as Verimark seeks partial summary judgment on liability only.

With respect to materiality, Section 14.2(c) of each FLA classifies "systematic underreporting of Gross Room Revenue" as "a material breach that is incapable of cure." SUMF ¶ 41. This contractual classification is significant for two reasons. First, it establishes the parties' own assessment of the seriousness of the breach — they agreed, at arm's length, that systematic GRR underreporting would constitute a material breach sufficient to justify termination of the franchise relationship. Second, the "incapable of cure" designation reflects the parties' recognition that revenue-reporting fraud is qualitatively different from ordinary operational defaults and cannot be remedied after the fact. See Holiday Hosp. Franchising, 286 So. 3d at 340 (enforcing "incapable of cure" designation for revenue-reporting breach and noting that "the parties' contractual allocation of materiality is entitled to substantial weight").

The undisputed facts establish that the underreporting at issue here was systematic by any measure. It occurred across all twenty-two franchised properties. SUMF ¶¶ 60–92. It spanned a nine-year period, from at least January 2013 (when Suncoast was established) through 2021 (when the whistleblower complaint was received). SUMF ¶¶ 50, 97. It was implemented through a uniform corporate directive from Brecker to property-level controllers. SUMF ¶¶ 68–92. And it resulted in the underreporting of at least $197.8 million in GRR — or, even under Defendants' expert's most favorable analysis, at least tens of millions of dollars in GRR. This is not a case of isolated errors or inadvertent miscalculations; it is a case of deliberate, centrally directed revenue diversion over nearly a decade.

Verimark satisfied all conditions precedent to suit. Upon receipt of the Thornbury audit findings on January 18, 2022, Verimark issued a formal Notice of Material Breach on February 4, 2022, in accordance with FLA Section 14.1. SUMF ¶ 103. The Notice identified the specific nature of the breach — systematic underreporting of GRR through the exclusion of Suncoast-collected revenues — and demanded cure within thirty days. SUMF ¶ 104. Coastal Palms' counsel at Whitfield, Barrow & Crane LLP responded by letter dated February 28, 2022, denying any breach and refusing to tender any cure. SUMF ¶ 105. The thirty-day cure period expired on March 6, 2022, without any cure having been offered or tendered. SUMF ¶ 106. Verimark filed this action the following day, March 7, 2022. SUMF ¶ 1.

All conditions precedent to suit have been satisfied. The existence of valid contracts is undisputed. The material breach — systematic underreporting of GRR — is established by the undisputed record, including Brecker's own deposition admissions and the concessions of Defendants' own expert. Liability on Counts I and II is established as a matter of law.

CONCLUSION

For the foregoing reasons, and for the reasons set forth in Verimark's opening memorandum filed September 29, 2023 (incorporated herein by reference), Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court:

1. Grant Verimark's Motion for Partial Summary Judgment on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) as to liability;

2. Reserve the determination of damages on Counts I and II for trial;

3. Deny Defendants' Cross-Motion for Summary Judgment in its entirety; and

4. Grant such other and further relief as this Court deems just and proper.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on this 8th day of December, 2023, a true and correct copy of the foregoing Plaintiff Verimark Hospitality Group Inc.'s Reply Memorandum of Law in Support of Its Motion for Partial Summary Judgment on Counts I and II was filed with the Clerk of Court via the Florida Courts E-Filing Portal and served by electronic mail upon the following counsel of record:

Nathan Whitfield III, Esq. Gabriela Montes, Esq. WHITFIELD, BARROW & CRANE LLP 1221 Brickell Avenue, Suite 3000 Miami, Florida 33131 Telephone: (305) 555-4400 Facsimile: (305) 555-4401

Email: nwhitfield@wbclaw.com

Email: gmontes@wbclaw.com

Counsel for Defendants Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-7200 Facsimile: (954) 555-7201

Counsel for Plaintiff Verimark Hospitality Group Inc.

By: ________

Priya Anand, Esq. Florida Bar No. 0087451

Email: panand@calderwoodharkness.com

Responsible Partner

Douglas Carmichael, Esq. Florida Bar No. 0093217

Email: dcarmichael@calderwoodharkness.com

Billing Partner

Yuki Nakamura, Esq. Florida Bar No. 0119644

Email: ynakamura@calderwoodharkness.com

Lead Associate

Carlos Espinoza, Esq. Florida Bar No. 0128903

Email: cespinoza@calderwoodharkness.com

Working Associate

Page

INTRODUCTION	1
I. STANDARD OF REVIEW	3
II. THE FLA'S GRR DEFINITION IS UNAMBIGUOUS AND INCLUDES ALL REVENUES FROM GUEST-ROOM RENTAL REGARDLESS OF THE COLLECTING ENTITY	4
A. The Plain Language of FLA § 4.1 Admits of Only One Reasonable Interpretation	4
B. Coastal Palms' "Reasonable Interpretation" Defense Fails as a Matter of Law	8
C. Brecker's Deposition Admissions Foreclose the Ambiguity Defense	11
III. COASTAL PALMS' CLAIM THAT VERIMARK "KNEW" ABOUT SUNCOAST DOES NOT CREATE A TRIABLE ISSUE ON BREACH	14
A. Knowledge of Suncoast's Existence Is Not Knowledge of Revenue Diversion	14
B. Neither Waiver Nor Estoppel Applies	16
IV. COASTAL PALMS' OTA NET-RATE NETTING ARGUMENT ALSO FAILS	19
V. COASTAL PALMS' RESPONSE TO VERIMARK'S STATEMENT OF UNDISPUTED MATERIAL FACTS DOES NOT CREATE A GENUINE DISPUTE	22
A. Coastal Palms' Purported Disputes Are Immaterial or Unsupported	22
B. The Quantum of Underreporting Is a Damages Issue Reserved for Trial	24
VI. THE COURT SHOULD REJECT COASTAL PALMS' ARGUMENT THAT ITS COUNTERCLAIM PRECLUDES SUMMARY JUDGMENT	26
VII. THE MATERIAL BREACH FINDING SUPPORTS LIABILITY ON BOTH COUNTS I AND II	28
CONCLUSION	30
CERTIFICATE OF SERVICE	32

Page(s)

Avante at Leesburg, Inc. v. Nandan, 254 So. 3d 1123 (Fla. 5th DCA 2018)	4, 5, 7
Vane Kaplan CPAs LLP Seidman, LLP v. Banco Espirito Santo Int'l, Ltd., 38 So. 3d 874 (Fla. 3d DCA 2010)	17
Bohannon v. Carnival Corp., 320 So. 3d 258 (Fla. 3d DCA 2021)	3
Citrus Cty. Hosp. Bd. v. Citrus Mem'l Health Found., Inc., 150 So. 3d 1169 (Fla. 5th DCA 2014)	5

Coastal Petroleum Co. v. Mobil Oil Corp., 583 So. 2d 718 (Fla. 1st DCA

IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA
CIVIL DIVISION
Case No.: 1021-00006
VERIMARK HOSPITALITY GROUP INC.,
Plaintiff,
v.
COASTAL PALMS FRANCHISE HOLDINGS LLC; RANDALL BRECKER; and SUNCOAST ROOM MANAGEMENT INC.,
Defendants.
PLAINTIFF VERIMARK HOSPITALITY GROUP INC.'S REPLY MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION FOR PARTIAL SUMMARY JUDGMENT ON COUNTS I AND II
Filed: December 8, 2023
Prepared by:
CALDERWOOD & HARKNESS LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-7200 Facsimile: (954) 555-7201
Attorneys for Plaintiff Verimark Hospitality Group Inc.
• Priya Anand, Esq. — FL Bar No. 0087451 — Responsible Partner
• Douglas Carmichael, Esq. — FL Bar No. 0093217 — Billing Partner
• Yuki Nakamura, Esq. — FL Bar No. 0119644 — Lead Associate
• Carlos Espinoza, Esq. — FL Bar No. 0128903 — Working Associate
TABLE OF CONTENTS
TABLE OF AUTHORITIES
Cases
Statutes and Rules
Secondary Authorities
INTRODUCTION
Plaintiff Verimark Hospitality Group Inc. ("Verimark") filed its Motion for Partial Summary Judgment on September 29, 2023, seeking judgment as a matter of law on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) on the issue of liability only. That motion was accompanied by a comprehensive Statement of Undisputed Material Facts containing 127 numbered paragraphs, each supported by specific record citations to deposition transcripts, produced documents, and expert reports generated through the course of more than eighteen months of intensive discovery. Verimark demonstrated that the undisputed facts establish, as a matter of contract interpretation and without any genuine issue of material fact, that Defendants Coastal Palms Franchise Holdings LLC ("Coastal Palms"), Randall Brecker ("Brecker"), and Suncoast Room Management Inc. ("Suncoast") (collectively, "Defendants") systematically excluded guest-room rental revenues from the Gross Room Revenue ("GRR") reports required under twenty-two separate Franchise License Agreements ("FLAs"), thereby underpaying both the five-percent royalty obligation under Section 4.1 and the two-and-a-half-percent marketing-fund contribution under Section 4.2 of each FLA.
Coastal Palms filed its Opposition on November 17, 2023 (the "Opposition"). The Opposition runs to twenty-nine pages and advances four principal arguments: (1) that FLA Section 4.1's definition of "Gross Room Revenue" is ambiguous as to revenues collected by a separate management entity; (2) that Verimark "knew" about Suncoast Room Management Inc.'s existence and therefore acquiesced in its revenue-collection practices; (3) that the netting of online travel agency ("OTA") net-rate payments against GRR was "standard industry practice"; and (4) that Coastal Palms' counterclaim for alleged brand-standard violations and over-billing creates a triable issue precluding summary judgment. None of these arguments withstands scrutiny.
The central pillar of Coastal Palms' Opposition — the claimed "ambiguity" of Section 4.1 — is foreclosed by the plain language of the contract, by the parol-evidence rule, and by the deposition admissions of Coastal Palms' own Managing Member, Randall Brecker. Section 4.1 defines GRR to include "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." The final clause — "regardless of the entity collecting such revenue" — was designed precisely to prevent the kind of diversion at issue here. Coastal Palms' assertion that this language is somehow ambiguous because it does not specifically name "affiliated management companies" is a contortion of contract-interpretation law that no Florida court has endorsed.
Coastal Palms does not dispute that Suncoast Room Management Inc. collected revenues from the rental of guest rooms at the franchised hotel properties. It does not dispute that those revenues were excluded from the monthly GRR reports submitted to Verimark. It does not dispute that Brecker directed property-level controllers to implement the exclusion. The only question presented is whether the FLAs required the inclusion of Suncoast-collected revenues in GRR. The answer, as a matter of contract interpretation, is unambiguously yes.
For the reasons detailed below and in Verimark's opening memorandum, the Court should grant partial summary judgment on liability for Counts I and II, reserving the determination of damages for trial.
I. STANDARD OF REVIEW
Under Florida Rule of Civil Procedure 1.510, a movant is entitled to summary judgment "if the pleadings and summary judgment evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fla. R. Civ. P. 1.510(c); Vireo National Bank v. Gorbaty, 345 So. 3d 376, 381 (Fla. 3d DCA 2022). A genuine issue of material fact exists only when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Bohannon v. Carnival Corp., 320 So. 3d 258, 261 (Fla. 3d DCA 2021). The nonmoving party must come forward with specific facts showing that there is a genuine issue for trial; it may not rest upon the mere allegations or denials of its pleading. Estate of Githens ex rel. Seaman v. Bon Secours-Maria Manor Nursing Care Ctr., Inc., 928 So. 2d 1272, 1274 (Fla. 2d DCA 2006).
Critically, where a contract's terms are unambiguous, their interpretation is a question of law that may be resolved on summary judgment. Volusia Cty. v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 131 (Fla. 2000). A court need not — and, indeed, may not — resort to extrinsic evidence to alter the clear and unambiguous terms of a written agreement. Lafayette Fed. Sav. & Loan Ass'n v. Palm Beach Fin. Co., 511 So. 2d 337, 339 (Fla. 4th DCA 1987). These principles are dispositive here.
This Reply brief addresses only the arguments raised in Coastal Palms' Opposition. Verimark incorporates by reference all arguments set forth in its opening memorandum filed September 29, 2023, and its Statement of Undisputed Material Facts (Paragraphs 1 through 127, with supporting record citations). Nothing in the Opposition warrants alteration of any argument advanced in Verimark's opening submission.
II. THE FLA'S GRR DEFINITION IS UNAMBIGUOUS AND INCLUDES ALL REVENUES FROM GUEST-ROOM RENTAL REGARDLESS OF THE COLLECTING ENTITY
A. The Plain Language of FLA § 4.1 Admits of Only One Reasonable Interpretation
The starting point for any contract-interpretation analysis under Florida law is the text of the agreement itself. Avante at Leesburg, Inc. v. Nandan, 254 So. 3d 1123, 1126 (Fla. 5th DCA 2018). When the language of a contract is clear and unambiguous, the court must enforce that language according to its plain meaning and may not look beyond the four corners of the document. First Baptist Church of Cape Coral, Fla., Inc. v. Compass Constr., Inc., 115 So. 3d 1069, 1074 (Fla. 2d DCA 2013); 11 Fla. Jur. 2d Contracts § 109 (2023). A provision is ambiguous only when it is "susceptible to more than one reasonable interpretation." Citrus Cty. Hosp. Bd. v. Citrus Mem'l Health Found., Inc., 150 So. 3d 1169, 1176 (Fla. 5th DCA 2014). The mere fact that one party assigns a different meaning to a contractual term does not, by itself, create an ambiguity; the alternative reading must be objectively reasonable. Sepe v. City of Safety Harbor, 761 So. 2d 1182, 1185 (Fla. 2d DCA 2000).
Section 4.1 of the FLAs at issue provides, in pertinent part:
"Gross Room Revenue" or "GRR" means all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue. GRR shall include, without limitation, room charges, premiums, and surcharges imposed on guests in connection with the occupancy of guest rooms, but shall exclude applicable state and local room taxes separately stated on the guest folio.
Statement of Undisputed Material Facts ("SUMF") ¶ 14 (citing FLA § 4.1, Composite Exhibit A to the Amended Complaint). This definition appears verbatim in all twenty-two FLAs executed between June 15, 2007 and September 3, 2019. SUMF ¶¶ 14–35. There is no variation across the agreements that supports Coastal Palms' claimed ambiguity.
The definition employs deliberately expansive language at every turn. First, it captures "all revenues derived from or attributable to the rental of guest rooms" — not some revenues, not revenues "received by the Franchisee," but all revenues bearing a causal or attributional nexus to guest-room rentals. Second, the phrase "including revenues from any booking channel, direct or indirect" eliminates any argument that the source of the booking matters. Third, and most critically, the clause "regardless of the entity collecting such revenue" expressly forecloses the very distinction that Coastal Palms seeks to draw between revenues collected by the franchisee entity itself and revenues collected by its affiliated management company, Suncoast.
Coastal Palms' Opposition argues that Section 4.1 is ambiguous because it "does not specifically name 'affiliated management companies' or 'off-platform booking channels.'" Opp'n at 10. This argument fundamentally misapprehends the nature of contractual catch-all clauses. The entire purpose of the phrase "regardless of the entity collecting such revenue" is to avoid the need to enumerate every possible entity through which a franchisee might route its revenue. The Florida courts have long recognized that expansive, all-inclusive contractual language should be given its natural and intended breadth. Coastal Petroleum Co. v. Mobil Oil Corp., 583 So. 2d 718, 720 (Fla. 1st DCA 1991). As the Fourth District explained in Goldcoast Acquisitions Corp. v. Premiere Lodging Grp., 318 So. 3d 145, 152 (Fla. 4th DCA 2021), a franchise agreement's revenue definition "must be construed in light of its evident commercial purpose — to ensure that the franchisor's royalty base encompasses the full scope of revenue-generating activity at the franchised location." See also William L. Killion, Franchise Agreements: Drafting, Negotiation, and Analysis § 6.03, at 6-14 (2d ed. 2022) (observing that modern franchise agreements include "entity-neutral" GRR definitions precisely to prevent revenue diversion through affiliated entities).
Under Florida's well-established rules of contract construction, a court must give effect to every word of a contract and may not render any provision surplusage. Avante at Leesburg, 254 So. 3d at 1127; Sepe, 761 So. 2d at 1185. Coastal Palms' proposed interpretation would render the clause "regardless of the entity collecting such revenue" entirely meaningless. If GRR encompassed only revenues collected by the franchisee entity itself — as Coastal Palms contends — there would have been no reason to include that clause at all. The parties could simply have defined GRR as "revenues received by the Franchisee" and left it at that. The fact that they instead used the phrase "regardless of the entity collecting such revenue" demonstrates that the definition was intended to reach revenues collected by entities other than the franchisee — precisely the situation presented here.
The Fourth District's decision in Holiday Hosp. Franchising, Inc. v. Tropical Innkeepers Ltd., 286 So. 3d 329 (Fla. 4th DCA 2019), is instructive. In that case, the court held that a franchise agreement's gross-revenue definition encompassing "all revenues from the operation of the Hotel, from whatever source" included revenues from food-and-beverage operations conducted by a separately incorporated restaurant entity controlled by the franchisee. Id. at 336. The court reasoned that the "from whatever source" language was "plainly intended to capture the totality of revenue-generating activity" and that the franchisee's attempt to carve out revenues flowing through an affiliated entity was "inconsistent with the contract's unambiguous terms." Id. at 337. The same analysis applies with even greater force here, where the FLA's GRR definition not only uses the broad phrase "all revenues derived from or attributable to the rental of guest rooms" but adds the explicit catch-all "regardless of the entity collecting such revenue."
Similarly, in Seastar Hospitality Corp. v. Grandmark Franchise Partners, 275 So. 3d 811 (Fla. 4th DCA 2019), the court enforced a gross-revenue definition that captured "all revenue from room rentals and related charges, however collected or received." The franchisee in Seastar had argued that revenues routed through a third-party management company were not "received" by the franchisee and therefore fell outside the GRR definition. The Fourth District rejected this argument, holding that the words "however collected or received" made the identity of the collecting entity irrelevant. Id. at 818–19. The court emphasized that "the franchise agreement's broad revenue definition was designed to prevent exactly the type of revenue shifting that the franchisee undertook." Id. at 819.
The language of FLA Section 4.1 is at least as broad — if not broader — than the revenue definitions at issue in Holiday Hospitality and Seastar. The phrase "regardless of the entity collecting such revenue" is as clear and direct as contractual language can be. It eliminates the distinction between revenues collected by the franchisee entity and revenues collected by any other entity, including Suncoast. Coastal Palms' claim that this language is ambiguous is simply untenable as a matter of contract interpretation, and the Court should so hold.
B. Coastal Palms' "Reasonable Interpretation" Defense Fails as a Matter of Law
Unable to overcome the plain language of Section 4.1, Coastal Palms advances a fallback argument: that its exclusion of Suncoast-collected revenues was a "reasonable interpretation" of the provision because Suncoast was "a separate legal entity" and GRR should encompass only revenues flowing through the franchisee's own bank accounts. Opp'n at 12–15. This argument fails for multiple reasons.
First, as demonstrated above, the argument is directly contradicted by the phrase "regardless of the entity collecting such revenue." A contractual interpretation that requires the court to ignore specific, express language is not a "reasonable" interpretation — it is an unreasonable one. Florida law is clear that an interpretation "must not be strained or distorted" and must harmonize all provisions of the contract. Friedman v. Virginia Metal Prods. Corp., 56 So. 2d 515, 517 (Fla. 1952); Intervest Constr., Inc. v. Canterbury Estate Homes, Inc., 554 So. 2d 1178, 1182 (Fla. 5th DCA 1989). Coastal Palms' interpretation is not merely strained — it is impossible to reconcile with the express catch-all clause. As a leading franchise-law treatise explains, "entity-neutral" revenue definitions are "specifically drafted to foreclose the argument that revenues collected by an affiliated management company or operating entity fall outside the franchisee's reporting obligations." Barkoff & Selden, Fundamentals of Franchising 147 (4th ed. 2015); see also 11 Fla. Jur. 2d Contracts § 113 (2023) ("Where the contract contains language of unequivocal import, the court will not torture the language to create an ambiguity.").
Second, even if the Court were to consider extrinsic evidence to resolve the alleged ambiguity — which it should not, given the unambiguous text — the extrinsic evidence uniformly supports Verimark's reading and undermines Coastal Palms' position. Three categories of extrinsic evidence are particularly relevant:
The FLA's Purpose Clause. Section 1.2 of each FLA provides that "the Franchisee acknowledges that the protection of the Franchisor's royalty revenue stream is a central purpose of this Agreement and that the Franchisee's reporting and payment obligations are designed to ensure the complete and accurate accounting of all revenues subject to the royalty and marketing-fund provisions herein." SUMF ¶ 13. This purpose clause confirms that the parties understood GRR to capture the broadest possible measure of room-rental revenue. A reading that permits franchisees to route revenues through affiliated entities to reduce their reporting obligations is diametrically opposed to this stated purpose.
The Marketing-Fund Contribution in Section 4.2. The marketing-fund contribution under Section 4.2 is keyed to the same GRR base as the royalty under Section 4.1 — the franchisee is obligated to pay two and a half percent of GRR into Verimark's national marketing fund. SUMF ¶ 36. This linkage confirms that GRR was intended to serve as the comprehensive measure of guest-room revenue against which all revenue-based obligations would be calculated. Under Coastal Palms' reading, a franchisee could reduce both its royalty and its marketing-fund contributions simply by routing revenues through an affiliated entity — a result that no reasonable businessperson would have intended or expected.
The Audit Rights in Section 8.2. Section 8.2 of each FLA entitles Verimark to "audit all books and records of the Franchisee and any affiliated entity relating to the operation of the Hotel." SUMF ¶ 40. The inclusion of "any affiliated entity" in the audit-rights provision confirms that the parties recognized and anticipated that affiliated entities might play a role in the collection of hotel revenues. If Suncoast-collected revenues were not intended to be part of GRR, there would be no reason for the FLA to grant Verimark audit rights over affiliated entities' books and records. The audit-rights clause and the GRR definition work in tandem: the former ensures transparency, and the latter ensures that all revenues captured by the audit are subject to reporting. See Goldcoast Acquisitions, 318 So. 3d at 153 (noting that "the scope of the audit-rights clause informs the scope of the revenue definition, and vice versa"); Pinnacle Brands Int'l v. Coastal Franchise Sys., 301 So. 3d 452, 460 (Fla. 4th DCA 2020) (same).
Third, Coastal Palms' reliance on the "separate legal entity" concept is particularly unavailing given the undisputed identity of interests among the Defendant entities. Randall Brecker is the Managing Member of Coastal Palms Franchise Holdings LLC; the Managing Member of Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC (which are the direct operators of certain franchised properties); and the President and sole shareholder of Suncoast Room Management Inc. SUMF ¶¶ 3–7. All of these entities operate out of the same office at 4700 North Federal Highway, Suite 420, Boca Raton, Florida. SUMF ¶ 8. Brecker exercises plenary control over all of them. SUMF ¶ 9. The notion that the interposition of a separately incorporated entity controlled by the same individual should permit the exclusion of guest-room rental revenues from GRR is precisely the kind of formalistic manipulation that the "regardless of the entity collecting such revenue" clause was designed to prevent.
Coastal Palms' "reasonable interpretation" defense thus fails both on the contract's plain language and on the extrinsic evidence. The defense amounts to nothing more than an after-the-fact rationalization for conduct that the contract expressly prohibits. It does not create a genuine issue of material fact, and it does not preclude summary judgment.
C. Brecker's Deposition Admissions Foreclose the Ambiguity Defense
Even if the contract language were susceptible to more than one reading — and it is not — Coastal Palms' ambiguity defense would still fail because the deposition admissions of its own Managing Member, Randall Brecker, establish the operative facts beyond dispute.
Brecker sat for a two-day deposition on January 9 and 10, 2023, spanning approximately fourteen hours of testimony. During that deposition, he made a series of critical admissions that eliminate any colorable claim of ambiguity or genuine factual dispute regarding the nature of the revenues at issue and the manner of their exclusion:
Admission 1: Suncoast was established to handle "direct bookings" at Verimark-branded hotels. Brecker testified that Suncoast Room Management Inc. was established in January 2013 specifically to handle what he described as "direct bookings" — encompassing walk-in guests, corporate-direct contracts, and bookings through the unbranded website gulfcoastrooms.com — at the franchised hotel properties. Brecker Dep. Day 1, 84:6–85:14; 91:3–92:18. He explained that Suncoast was created because "we wanted a separate entity to manage the direct-booking side of the business" and that its formation was part of a "restructuring" of the Coastal Palms portfolio. Brecker Dep. Day 1, 93:2–94:7. This testimony confirms that Suncoast was created for the express purpose of collecting guest-room rental revenues at Verimark-branded properties.
Admission 2: Suncoast revenues were derived from "the rental of guest rooms." When asked whether the revenues collected by Suncoast through the direct-booking channels were "derived from the rental of guest rooms at the Verimark-branded hotels," Brecker answered: "Yes, they were room revenues." Brecker Dep. Day 1, 112:4–9. He further confirmed that Suncoast did not generate revenue from any source other than the rental of rooms at the franchised properties. Brecker Dep. Day 1, 114:17–115:3. This admission is devastating to the ambiguity defense because it establishes that the Suncoast-collected revenues fall squarely within the first clause of the GRR definition — "all revenues derived from or attributable to the rental of guest rooms at the Hotel."
Admission 3: Brecker personally directed the exclusion of Suncoast revenues from GRR reports. Brecker admitted that he "personally directed" property-level controllers to exclude Suncoast-collected revenues from the monthly GRR reports submitted to Verimark. Brecker Dep. Day 2, 47:11–48:22. He testified that the exclusion was implemented through an accounting instruction to "report only PMS-channel revenues on the Verimark GRR template" and to "book Suncoast revenues separately." Brecker Dep. Day 2, 49:1–50:16. This admission is corroborated by the testimony of Janet Kerrigan, Coastal Palms' former Regional Controller, who confirmed that she received the instruction from Brecker and relayed it to property-level accounting staff. Kerrigan Dep. 63:7–64:19; 71:2–72:14. It is further corroborated by the depositions of ten property-level managers and accountants, who uniformly testified to a recurring pattern of direction from "corporate" — meaning Brecker — to route walk-in and corporate-direct bookings through the Suncoast channel and to exclude those revenues from Verimark GRR reports. See Deposition Summary Memorandum — Property-Level Witnesses, filed September 29, 2023.
Admission 4: Brecker never sought a written interpretation from Verimark regarding Suncoast revenues. Brecker conceded that he never sought a written interpretation, clarification, or ruling from Verimark regarding whether Suncoast-collected revenues should be included in GRR, notwithstanding the plain language of Section 4.1. Brecker Dep. Day 2, 88:3–89:12. He was asked: "Did you ever write to Verimark and ask whether Suncoast-collected revenues needed to be included in GRR?" His answer was: "No, I did not." Brecker Dep. Day 2, 88:14–18. He was further asked: "Did you ever have any oral conversation with any Verimark representative about this issue?" His answer was: "Not that I recall." Brecker Dep. Day 2, 89:3–6. This admission undercuts the suggestion that there was any genuine uncertainty about the meaning of Section 4.1. A party who genuinely believes that a contract term is ambiguous would be expected to seek clarification from its counterparty. Brecker's failure to do so is a powerful indication that he understood the clause's meaning and chose to disregard it.
Admission 5: Brecker acknowledged the "regardless of the entity" clause but subjectively "didn't think" it applied. Perhaps most damaging of all, Brecker acknowledged that he read Section 4.1 before executing the FLAs but testified that he "didn't think" the clause about "regardless of the entity collecting such revenue" applied to Suncoast because Suncoast was "a different company." Brecker Dep. Day 2, 91:4–92:11. When pressed on cross-examination, he was unable to articulate any principled basis for reading the clause to exclude revenues collected by Suncoast other than his subjective belief that Suncoast's separate corporate status removed it from the definition's reach. Brecker Dep. Day 2, 93:1–95:22. This testimony does not create an ambiguity. Under Florida law, a party's subjective, unilateral interpretation of an unambiguous contract provision cannot manufacture an ambiguity where none exists in the text. Goldcoast Acquisitions, 318 So. 3d at 154 ("A party's subjective understanding of a clear contract term does not render the term ambiguous; ambiguity must arise from the language itself, not from the parties' conflicting interpretations.").
The whistleblower testimony of Janet Kerrigan provides further confirmation. Kerrigan served as Regional Controller for Coastal Palms from March 2015 until her termination in October 2021. She contacted Verimark's compliance hotline on November 8, 2021, and subsequently cooperated with the ensuing investigation. In her deposition, Kerrigan confirmed that Brecker specifically instructed controllers to exclude direct-booking revenues collected by Suncoast from GRR reports, and that she understood this instruction to be in violation of the FLA's reporting requirements. Kerrigan Dep. 63:7–64:19; 71:2–72:14; 108:3–109:18. She testified that she raised the issue with Brecker on at least two occasions — in April 2019 and again in February 2021 — and that Brecker responded by telling her to "mind your own lane" and to "let the lawyers worry about the contract." Kerrigan Dep. 110:4–112:7. Kerrigan further testified that she was terminated in October 2021, approximately three weeks before she contacted the Verimark hotline, in what she believed was retaliation for her continued internal objections to the reporting practice. Kerrigan Dep. 121:3–124:16.
The depositions of ten property-level managers and accountants, taken between January and March 2023, provide still further corroboration. Each testified to substantially the same pattern: a directive from "corporate" (i.e., Brecker) to route walk-in and corporate-direct bookings through Suncoast's booking channel and to exclude the resulting revenues from the monthly GRR reports transmitted to Verimark. SUMF ¶¶ 68–92. Witnesses at eight of the twenty-two properties testified that the practice began in 2013, contemporaneously with Suncoast's formation, and continued through 2021. SUMF ¶¶ 72, 76, 79, 82, 85, 87, 90, 92.
In summary, the undisputed record establishes that: (1) Suncoast collected revenues "derived from … the rental of guest rooms at the Hotel" — the exact statutory predicate of GRR; (2) Brecker knew about and directed the exclusion of those revenues from GRR reports; (3) Brecker read the "regardless of the entity collecting such revenue" clause but chose to disregard it based on a subjective and legally untenable interpretation; and (4) Brecker never sought clarification from Verimark. Where the contract language is plain and the defendant's own principal admits the underlying facts, there is no genuine factual dispute regarding liability. The Court should so hold.
III. COASTAL PALMS' CLAIM THAT VERIMARK "KNEW" ABOUT SUNCOAST DOES NOT CREATE A TRIABLE ISSUE ON BREACH
A. Knowledge of Suncoast's Existence Is Not Knowledge of Revenue Diversion
Coastal Palms devotes a substantial portion of its Opposition to the argument that Verimark was "aware of Suncoast's role" and therefore acquiesced in the exclusion of Suncoast-collected revenues from GRR. Opp'n at 17–20. In support, Coastal Palms points to the fact that Suncoast was identified in certain property-management agreements submitted during the franchise-application process for several of the later-executed FLAs. Id. at 17–18 (citing Exs. D-1 through D-8 to the Opposition).
This argument rests on a fundamental conflation: it equates awareness that an affiliated management company existed with awareness that the management company was being used to siphon guest-room revenues out of the GRR reporting stream. These are entirely different propositions. Verimark does not deny that it was aware, in general terms, that Coastal Palms utilized a management company — Suncoast — in the day-to-day operations of certain franchised properties. Verimark was not, however, aware that Suncoast was serving as a vehicle to collect guest-room revenues that were then excluded from the monthly GRR reports submitted to Verimark.
The property-management agreements submitted during the franchise-application process described Suncoast's role in general operational terms — "overseeing front-desk operations, housekeeping, and maintenance services," among other tasks. SUMF ¶ 47. They did not disclose that Suncoast would directly collect guest-room revenues through parallel booking channels and retain a twelve-percent "management fee" on those revenues. SUMF ¶¶ 48–49. There is nothing inherently suspicious about a franchisee's use of an affiliated management company; such arrangements are commonplace in the hotel industry. What is improper — and what the FLA expressly prohibits — is the exclusion of revenues collected by the management company from the GRR computation.
Critically, Coastal Palms cites no communication, letter, email, memorandum, or other document in which Verimark was informed that Suncoast-collected revenues were being excluded from GRR reports. This omission is particularly significant given the scope of discovery in this case. Discovery encompassed approximately 2.3 million documents and 1.1 terabytes of electronic data processed by Nexagen Document Solutions LLC. SUMF ¶ 95. Coastal Palms produced approximately 396,000 documents in response to Verimark's requests for production. SUMF ¶ 96. Among these 396,000 documents, not a single one evidences Verimark's knowledge of — much less acquiescence in — the exclusion of Suncoast-collected revenues from GRR. The absence of any such evidence is telling. If Coastal Palms had genuinely believed that its reporting practice was sanctioned by Verimark, one would expect to find at least one written communication memorializing that understanding. The record is devoid of any such communication.
Nor does the record contain any evidence that Verimark's franchise-development officers, relationship managers, or brand-compliance auditors were ever informed of the specific accounting treatment of Suncoast-collected revenues. Andrew Donahue, Verimark's Vice President of Franchise Relations, testified that he understood Suncoast to be an operational management company and that he had "no knowledge" that Suncoast was collecting guest-room revenues that were being excluded from GRR reports. Donahue Dep. 43:7–44:19. Lisa Tran, Verimark's Director of Brand Compliance, similarly testified that she was "never told" that any Coastal Palms affiliate was collecting revenues outside of the reported GRR. Tran Dep. 78:12–79:6.
Coastal Palms' argument that Verimark "knew" about Suncoast therefore amounts to nothing more than an assertion that Verimark was aware of Suncoast's corporate existence. That awareness, without more, does not establish knowledge of the revenue-diversion scheme and does not create a triable issue on the breach-of-contract claims.
B. Neither Waiver Nor Estoppel Applies
Coastal Palms raises the affirmative defenses of waiver and estoppel in both its Amended Answer and Affirmative Defenses (filed May 26, 2022) and its Opposition. Neither defense is supported by the record.
Waiver. Under Florida law, waiver is "the voluntary and intentional relinquishment of a known right, or conduct which implies the voluntary and intentional relinquishment of a known right." Sheen v. Lyon, 485 So. 2d 422, 425 (Fla. 1986); Green Cos. v. Kendall Racquet Club Dev. Corp., 658 So. 2d 1076, 1079 (Fla. 3d DCA 1995). The party asserting waiver bears the burden of proving both knowledge of the right and a deliberate intention to relinquish it. Friedman, 56 So. 2d at 518. The evidence must be "clear and unequivocal." Green Cos., 658 So. 2d at 1079.
Coastal Palms cannot meet this burden. As established in Section III.A above, Verimark did not know that Suncoast-collected revenues were being excluded from GRR reports until the November 8, 2021 whistleblower complaint from Janet Kerrigan. SUMF ¶ 97. Upon receipt of that complaint, Verimark acted promptly and decisively. On November 22, 2021 — just fourteen days after the whistleblower complaint — Verimark retained Thornbury & Associates CPAs LLP ("Thornbury") to conduct a franchise-compliance audit of the Coastal Palms portfolio. SUMF ¶ 99. Thornbury issued its preliminary findings on January 18, 2022, confirming underreporting of approximately twenty-six percent across the ten most revenue-productive properties for the 2019–2021 period. SUMF ¶ 101. Verimark then issued a formal Notice of Material Breach to Coastal Palms on February 4, 2022, demanding cure within thirty days in accordance with FLA Section 14.1. SUMF ¶ 103. This timeline — from discovery of the problem to formal notice of breach in fewer than ninety days — demonstrates the opposite of waiver. It demonstrates prompt enforcement of Verimark's contractual rights.
Coastal Palms' waiver argument hinges entirely on the premise that Verimark "should have known" about the revenue diversion because Suncoast's existence was disclosed during the franchise-application process. As demonstrated above, however, awareness of Suncoast's corporate existence is not equivalent to knowledge that Suncoast-collected revenues were being excluded from GRR. Constructive knowledge based on the mere existence of a management company is insufficient to establish the "clear and unequivocal" evidence of intentional relinquishment that waiver requires. See Vane Kaplan CPAs LLP Seidman, LLP v. Banco Espirito Santo Int'l, Ltd., 38 So. 3d 874, 879 (Fla. 3d DCA 2010) (holding that "mere failure to block" a breach does not constitute waiver of the right to enforce the underlying obligation).
Moreover, FLA Section 14.3 contains a no-waiver provision: "No failure or delay by the Franchisor in exercising any right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right or remedy." SUMF ¶ 42. While a no-waiver clause is not an absolute bar to a waiver defense, Florida courts have held that such clauses raise the bar significantly and confirm the parties' intent that contractual rights not be lost through inaction. Dows v. Sterling Reach Partners LLC, 846 So. 2d 595, 601 (Fla. 4th DCA 2003). The no-waiver clause in FLA Section 14.3 reinforces the conclusion that waiver has not occurred here.
Estoppel. Equitable estoppel requires, among other elements, that the party seeking estoppel show: (1) a representation by the party against whom estoppel is asserted; (2) reliance on that representation by the party seeking estoppel; and (3) a change of position to the detriment of the party seeking estoppel. Drayton Trust Bank Fin. Servs., Inc. v. Saldukas, 896 So. 2d 707, 711 (Fla. 2005). Coastal Palms has failed to identify any affirmative representation by Verimark — whether oral or written — that Suncoast-collected revenues could be excluded from GRR. Coastal Palms has not pointed to a single email, letter, phone call, or meeting in which any Verimark representative communicated, suggested, or implied that the exclusion of Suncoast revenues from GRR was acceptable. Silence in the face of conduct that is unknown to the silent party does not constitute a representation. Dows, 846 So. 2d at 602.
In any event, FLA Section 14.2(c) provides that "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." SUMF ¶ 41. This provision reflects the parties' agreement that systematic GRR underreporting is a uniquely serious breach — one so fundamental to the franchise relationship that no cure, waiver, or estoppel argument should be available. The express incurability provision, agreed to by Coastal Palms at arm's length, further supports the entry of summary judgment on liability. See Holiday Hosp. Franchising, 286 So. 3d at 340 (enforcing "incapable of cure" provision in franchise agreement with respect to revenue-reporting breach).
IV. COASTAL PALMS' OTA NET-RATE NETTING ARGUMENT ALSO FAILS
In addition to the Suncoast revenue diversion — which constitutes the primary basis for underreporting — Verimark demonstrated in its opening brief that Coastal Palms further underreported GRR from third-party online travel agency ("OTA") channels by classifying net-rate OTA payments as "commissions receivable" and netting them against GRR. SUMF ¶¶ 107–116. Coastal Palms' Opposition devotes several pages to this issue, arguing that its OTA netting practice was "standard industry practice" and therefore permissible. Opp'n at 22–24. This argument fails on the plain language of the FLA.
Section 4.1 defines GRR as "all revenues derived from or attributable to the rental of guest rooms." The contractual definition employs a gross measure, not a net measure. The word "Gross" in "Gross Room Revenue" is itself dispositive of the parties' intent. A "gross" measure, by definition, captures total revenues before the deduction of expenses, commissions, or fees. See Seastar Hospitality Corp., 275 So. 3d at 820 ("The use of the term 'gross' in a franchise agreement's revenue definition signals that the franchisor intended to capture the full amount of revenue before the subtraction of any expenses, including OTA commissions."); William L. Killion, Franchise Agreements: Drafting, Negotiation, and Analysis § 6.03, at 6-17 (2d ed. 2022) ("The distinction between 'gross' and 'net' revenue is a fundamental one in franchise economics. A gross-revenue definition captures top-line revenue; a net-revenue definition permits certain deductions."). The FLA does not use the word "net" anywhere in the GRR definition, nor does it authorize the deduction of OTA commissions or management fees from GRR.
Coastal Palms' reliance on "standard industry practice" is unavailing. Even assuming arguendo that some hotel operators net OTA commissions against their internal revenue figures for purposes of management accounting, the question here is not what industry practice may be, but what the contract requires. The FLA's GRR definition controls. Where the contract unambiguously defines GRR as a gross measure, a party may not invoke industry custom to read in a netting deduction that the contract does not authorize. See Holiday Hosp. Franchising, 286 So. 3d at 338 ("A franchisor's revenue definition, when clear on its face, cannot be overridden by the franchisee's resort to industry practice or custom."); Pinnacle Brands Int'l, 301 So. 3d at 461 ("[T]he parol evidence rule bars the introduction of extrinsic evidence of trade usage or industry custom to vary the terms of an unambiguous contract.").
Dr. Sharon Kettlewell, CPA/CFF, CFE, of Ridgeline Forensic Advisory LLC, Verimark's forensic-accounting expert, addressed the OTA netting issue in her expert report served April 14, 2023, and in her rebuttal report served June 9, 2023. Dr. Kettlewell opined that the OTA netting practice was inconsistent with Section 4.1's gross-revenue definition and that the netting contributed to the cumulative $197.8 million in underreported GRR over the 2013–2021 period. Kettlewell Expert Report at 47–52; Kettlewell Rebuttal Report at 18–23. Dr. Kettlewell specifically analyzed the OTA net-rate arrangements at each of the twenty-two franchised properties, reviewed the booking-level data produced by the third-party OTA platforms in response to subpoenas duces tecum, and determined that the gross room rates charged to guests through OTA channels were systematically higher than the net rates reported to Verimark. SUMF ¶¶ 112–116. The difference — which Dr. Kettlewell estimated at approximately $14.3 million over the nine-year period — was treated by Coastal Palms as a "commission" and deducted from GRR. SUMF ¶ 116. Under the FLA's gross-revenue definition, however, this deduction was impermissible.
Defendants' expert, Professor Grant Hargrove, PhD, CPA, of Hargrove Economic Consulting Inc., does not dispute the legal premise that Section 4.1 employs a gross-revenue measure. Hargrove Expert Report at 22 ("The contractual definition of GRR is a gross-revenue measure as that term is commonly understood."). Rather, Professor Hargrove disputes the quantum of damages flowing from the breach, opining that Verimark's damages are overstated and limiting his estimate of total underpayments to $6.2 million. Hargrove Expert Report at 34. But the Hargrove report addresses the magnitude of the breach, not its existence. Even under Professor Hargrove's most conservative assumptions and most favorable damage methodology, he concedes at least $6.2 million in underpayments of royalties and marketing-fund contributions — meaning that he concedes breach. Id. at 34–36. The difference between Dr. Kettlewell's estimate and Professor Hargrove's estimate is a question of damages, not a question of liability.
The implications for summary judgment are straightforward. The question before the Court on Verimark's motion is not how much GRR was underreported, but whether it was underreported. The answer, as established by the undisputed record — including Defendants' own expert's concession — is yes. Because liability is established as a matter of law regardless of which expert's damages figure the jury ultimately adopts, damages should be reserved for trial and partial summary judgment should be granted on liability for Counts I and II.
V. COASTAL PALMS' RESPONSE TO VERIMARK'S STATEMENT OF UNDISPUTED MATERIAL FACTS DOES NOT CREATE A GENUINE DISPUTE
A. Coastal Palms' Purported Disputes Are Immaterial or Unsupported
Verimark's Statement of Undisputed Material Facts, filed September 29, 2023, sets forth 127 numbered paragraphs, each supported by specific record citations to deposition transcripts, produced documents, and expert reports. Coastal Palms' Response to the Statement of Facts, filed November 17, 2023, purports to dispute a handful of these paragraphs. Upon examination, however, none of Coastal Palms' purported "disputes" creates a genuine issue of material fact warranting denial of summary judgment.
Coastal Palms' disputes fall into two categories, neither of which defeats summary judgment:
First, several of Coastal Palms' purported disputes contest the amount of underreporting. For example, Coastal Palms' Response to SUMF ¶ 118 states that "Coastal Palms disputes the $197.8 million figure and contends that any underreporting was substantially less, as demonstrated by the Hargrove Expert Report." Coastal Palms' Resp. to SUMF ¶ 118. But the quantum of underreporting is a damages issue, not a liability issue. Verimark is seeking partial summary judgment on liability only. Whether the underreported GRR amounts to $197.8 million (Dr. Kettlewell's estimate) or some lesser figure (Professor Hargrove's estimate) does not affect the threshold determination of whether the FLA was breached. Even under Professor Hargrove's most favorable analysis, he concedes that GRR was underreported and that royalties and marketing-fund contributions were underpaid. The dispute over the magnitude of the underreporting is properly reserved for trial.
Second, Coastal Palms' remaining disputes are not factual disputes at all — they are legal conclusions repackaged as factual disagreements. For example, Coastal Palms' Response to SUMF ¶ 14 states: "Coastal Palms disputes the characterization of § 4.1 as 'unambiguous' and contends that the provision is susceptible to more than one reasonable interpretation." Coastal Palms' Resp. to SUMF ¶ 14. Whether a contract provision is ambiguous is a question of law, not a question of fact. It is for the Court to determine, on the face of the contract, whether Section 4.1 admits of more than one reasonable interpretation. As demonstrated in Section II above, it does not. Coastal Palms' legal disagreement with Verimark's interpretation cannot masquerade as a factual dispute sufficient to preclude summary judgment.
Setting aside these insufficient "disputes," the following core facts remain undisputed:
• The existence and terms of the twenty-two FLAs, each containing materially identical Section 4.1 GRR definitions. SUMF ¶¶ 10–35.
• The establishment of Suncoast Room Management Inc. no later than January 2013. SUMF ¶ 50.
• Suncoast's collection of guest-room rental revenues through direct bookings, walk-ins, corporate-direct contracts, and the unbranded website gulfcoastrooms.com. SUMF ¶¶ 51–58.
• Suncoast's retention of a twelve-percent "management fee" on direct-booking revenues. SUMF ¶ 59.
• The exclusion of Suncoast-collected revenues from monthly GRR reports to Verimark. SUMF ¶¶ 60–67.
• Brecker's personal direction to property-level controllers to exclude those revenues. SUMF ¶¶ 68–92.
• The OTA net-rate netting practice applied to third-party booking channels. SUMF ¶¶ 107–116.
• Thornbury & Associates' preliminary findings of approximately twenty-six percent underreporting across ten audited properties for the 2019–2021 period. SUMF ¶ 101.
• Dr. Kettlewell's estimate of cumulative underreported GRR of $197.8 million over the 2013–2021 period across all twenty-two properties. SUMF ¶ 118.
Each of these facts is supported by specific record evidence. None is genuinely disputed by Coastal Palms. Taken together, they establish, without room for reasonable debate, that Coastal Palms breached its obligations under Sections 4.1 and 4.2 of the FLAs.
B. The Quantum of Underreporting Is a Damages Issue Reserved for Trial
Verimark acknowledges — and has always acknowledged — that the parties' experts disagree on the quantum of damages. Dr. Kettlewell estimates cumulative underpaid royalties at $9.89 million (five percent of $197.8 million in underreported GRR) and underpaid marketing-fund contributions at $4.945 million (two and a half percent of $197.8 million). Kettlewell Expert Report at 63. Professor Hargrove limits total underpayments to $6.2 million, principally by challenging Dr. Kettlewell's assumptions regarding the occupancy rates and average daily rates attributable to Suncoast's direct-booking channel. Hargrove Expert Report at 34–36.
This disagreement is a classic battle of the experts on damages. It is precisely the type of dispute that is appropriately resolved by the trier of fact at trial. See Harbor One Condo. Ass'n, Inc. v. Fin. Dev. Corp., 197 So. 3d 99, 104 (Fla. 4th DCA 2016) ("Where the existence of liability is established as a matter of law but the quantum of damages is genuinely disputed, partial summary judgment on liability with damages reserved for trial is the appropriate disposition.").
What the disagreement is not is a dispute about liability. Even under Professor Hargrove's most favorable assumptions, he concedes at least $6.2 million in underpayments. Hargrove Expert Report at 34. Six million two hundred thousand dollars in underpayments necessarily means that GRR was underreported and that royalties and marketing-fund contributions were underpaid. Professor Hargrove's concession, standing alone, eliminates any genuine dispute as to whether a breach occurred. The only question remaining is how large the breach was — and that question is properly reserved for trial.
Verimark seeks partial summary judgment on liability only and is content to try damages. The Court should enter judgment on liability for Counts I and II and permit the damages dispute to proceed to trial, where both experts will have the opportunity to present their competing analyses to the jury.
VI. THE COURT SHOULD REJECT COASTAL PALMS' ARGUMENT THAT ITS COUNTERCLAIM PRECLUDES SUMMARY JUDGMENT
Coastal Palms' Opposition devotes its final substantive section to the argument that its $12 million counterclaim for alleged brand-standard violations and over-billing "creates a triable issue" that precludes the entry of partial summary judgment on Verimark's breach-of-contract claims. Opp'n at 25–27. This argument reflects a fundamental misunderstanding of the relationship between independent claims and counterclaims in the summary-judgment context.
The counterclaim is legally and factually independent of Counts I and II. The counterclaim alleges that Verimark failed to maintain adequate brand standards at the franchised properties — including allegedly deficient property-inspection protocols, delayed approval of renovation plans, and the imposition of excessive brand-compliance fees — and that these failures entitled Coastal Palms to damages of $12 million. Amended Answer and Counterclaim ¶¶ 89–114. Whether Verimark maintained adequate brand standards has no bearing on whether Coastal Palms fulfilled its independent, affirmative obligation to report GRR accurately and to pay royalties and marketing-fund contributions. A franchisee's obligation to report and pay under a franchise agreement is not conditioned upon the franchisor's performance of its separate brand-standard obligations. See Pinnacle Brands Int'l, 301 So. 3d at 462 ("A franchisee's counterclaim for the franchisor's alleged failure to maintain brand standards does not excuse the franchisee's independent obligation to report and pay royalties."); Suburban Leisure Ctr., Inc. v. AMF Bowling, Inc., 468 So. 2d 1071, 1074 (Fla. 4th DCA 1985) ("A party may not unilaterally withhold performance of an independent covenant based on the other party's alleged breach of a separate covenant.").
Even if the counterclaim had merit — which Verimark denies — it would not constitute a defense to Coastal Palms' affirmative obligation to report and pay under the FLA. The FLA contains no "set-off" provision that would entitle a franchisee to reduce its royalty or marketing-fund payments on account of alleged franchisor shortcomings. SUMF ¶ 43. To the contrary, Section 4.4 of the FLA expressly provides: "The Franchisee's obligation to report Gross Room Revenue and to pay the royalty and marketing-fund contribution shall not be subject to any deduction, set-off, or counterclaim, except as expressly provided herein or ordered by a court of competent jurisdiction." SUMF ¶ 44. This provision reflects the parties' bargained-for agreement that the franchisee's payment obligations are unconditional and may not be unilaterally reduced by the franchisee. See Jakobi v. Kings Creek Vill. Townhouse Ass'n, Inc., 665 So. 2d 325, 327 (Fla. 3d DCA 1995) (enforcing anti-set-off clause). Florida law does not recognize a franchisee's unilateral right to withhold contractual payments based on alleged franchisor shortcomings absent a court order. Holiday Hosp. Franchising, 286 So. 3d at 341; Pinnacle Brands Int'l, 301 So. 3d at 462.
The counterclaim may proceed to trial on its own merits. But its existence does not create a triable issue on Verimark's breach-of-contract claims, and it does not preclude the entry of partial summary judgment on Counts I and II.
Coastal Palms' Cross-Motion for Summary Judgment on its counterclaim, filed October 13, 2023, should be separately evaluated and denied for the reasons set forth in Verimark's Response in Opposition to Defendants' Cross-Motion for Summary Judgment, filed November 17, 2023, which is incorporated herein by reference.
VII. THE MATERIAL BREACH FINDING SUPPORTS LIABILITY ON BOTH COUNTS I AND II
Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) both arise from the same underlying conduct: the systematic exclusion of Suncoast-collected revenues from GRR, resulting in the underpayment of the five-percent royalty under Section 4.1 and the two-and-a-half-percent marketing-fund contribution under Section 4.2. Because both the royalty and the marketing-fund contribution are calculated as percentages of GRR, and because GRR is defined identically in both provisions, the same material breach underlies both counts. The elements of each claim are satisfied on the undisputed record.
Under Florida law, the elements of a breach-of-contract claim are: (1) the existence of a valid contract; (2) a material breach of the contract; and (3) damages. Suburban Leisure Ctr., 468 So. 2d at 1073. The first element is undisputed — the twenty-two FLAs are valid, enforceable contracts whose existence and terms are not contested. The second element — material breach — is established by the undisputed evidence of systematic GRR underreporting. The third element — damages — is not at issue on this motion, as Verimark seeks partial summary judgment on liability only.
With respect to materiality, Section 14.2(c) of each FLA classifies "systematic underreporting of Gross Room Revenue" as "a material breach that is incapable of cure." SUMF ¶ 41. This contractual classification is significant for two reasons. First, it establishes the parties' own assessment of the seriousness of the breach — they agreed, at arm's length, that systematic GRR underreporting would constitute a material breach sufficient to justify termination of the franchise relationship. Second, the "incapable of cure" designation reflects the parties' recognition that revenue-reporting fraud is qualitatively different from ordinary operational defaults and cannot be remedied after the fact. See Holiday Hosp. Franchising, 286 So. 3d at 340 (enforcing "incapable of cure" designation for revenue-reporting breach and noting that "the parties' contractual allocation of materiality is entitled to substantial weight").
The undisputed facts establish that the underreporting at issue here was systematic by any measure. It occurred across all twenty-two franchised properties. SUMF ¶¶ 60–92. It spanned a nine-year period, from at least January 2013 (when Suncoast was established) through 2021 (when the whistleblower complaint was received). SUMF ¶¶ 50, 97. It was implemented through a uniform corporate directive from Brecker to property-level controllers. SUMF ¶¶ 68–92. And it resulted in the underreporting of at least $197.8 million in GRR — or, even under Defendants' expert's most favorable analysis, at least tens of millions of dollars in GRR. This is not a case of isolated errors or inadvertent miscalculations; it is a case of deliberate, centrally directed revenue diversion over nearly a decade.
Verimark satisfied all conditions precedent to suit. Upon receipt of the Thornbury audit findings on January 18, 2022, Verimark issued a formal Notice of Material Breach on February 4, 2022, in accordance with FLA Section 14.1. SUMF ¶ 103. The Notice identified the specific nature of the breach — systematic underreporting of GRR through the exclusion of Suncoast-collected revenues — and demanded cure within thirty days. SUMF ¶ 104. Coastal Palms' counsel at Whitfield, Barrow & Crane LLP responded by letter dated February 28, 2022, denying any breach and refusing to tender any cure. SUMF ¶ 105. The thirty-day cure period expired on March 6, 2022, without any cure having been offered or tendered. SUMF ¶ 106. Verimark filed this action the following day, March 7, 2022. SUMF ¶ 1.
All conditions precedent to suit have been satisfied. The existence of valid contracts is undisputed. The material breach — systematic underreporting of GRR — is established by the undisputed record, including Brecker's own deposition admissions and the concessions of Defendants' own expert. Liability on Counts I and II is established as a matter of law.
CONCLUSION
For the foregoing reasons, and for the reasons set forth in Verimark's opening memorandum filed September 29, 2023 (incorporated herein by reference), Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court:
1. Grant Verimark's Motion for Partial Summary Judgment on Count I (Breach of Contract — Royalties) and Count II (Breach of Contract — Marketing Fund) as to liability;
2. Reserve the determination of damages on Counts I and II for trial;
3. Deny Defendants' Cross-Motion for Summary Judgment in its entirety; and
4. Grant such other and further relief as this Court deems just and proper.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 8th day of December, 2023, a true and correct copy of the foregoing Plaintiff Verimark Hospitality Group Inc.'s Reply Memorandum of Law in Support of Its Motion for Partial Summary Judgment on Counts I and II was filed with the Clerk of Court via the Florida Courts E-Filing Portal and served by electronic mail upon the following counsel of record:
Nathan Whitfield III, Esq. Gabriela Montes, Esq. WHITFIELD, BARROW & CRANE LLP 1221 Brickell Avenue, Suite 3000 Miami, Florida 33131 Telephone: (305) 555-4400 Facsimile: (305) 555-4401
Email: nwhitfield@wbclaw.com
Email: gmontes@wbclaw.com
Counsel for Defendants Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP 110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-7200 Facsimile: (954) 555-7201
Counsel for Plaintiff Verimark Hospitality Group Inc.
By: ________
Priya Anand, Esq. Florida Bar No. 0087451
Email: panand@calderwoodharkness.com
Responsible Partner
Douglas Carmichael, Esq. Florida Bar No. 0093217
Email: dcarmichael@calderwoodharkness.com
Billing Partner
Yuki Nakamura, Esq. Florida Bar No. 0119644
Email: ynakamura@calderwoodharkness.com
Lead Associate
Carlos Espinoza, Esq. Florida Bar No. 0128903
Email: cespinoza@calderwoodharkness.com
Working Associate
Page
INTRODUCTION | 1
I. STANDARD OF REVIEW | 3
II. THE FLA'S GRR DEFINITION IS UNAMBIGUOUS AND INCLUDES ALL REVENUES FROM GUEST-ROOM RENTAL REGARDLESS OF THE COLLECTING ENTITY | 4
A. The Plain Language of FLA § 4.1 Admits of Only One Reasonable Interpretation | 4
B. Coastal Palms' "Reasonable Interpretation" Defense Fails as a Matter of Law | 8
C. Brecker's Deposition Admissions Foreclose the Ambiguity Defense | 11
III. COASTAL PALMS' CLAIM THAT VERIMARK "KNEW" ABOUT SUNCOAST DOES NOT CREATE A TRIABLE ISSUE ON BREACH | 14
A. Knowledge of Suncoast's Existence Is Not Knowledge of Revenue Diversion | 14
B. Neither Waiver Nor Estoppel Applies | 16
IV. COASTAL PALMS' OTA NET-RATE NETTING ARGUMENT ALSO FAILS | 19
V. COASTAL PALMS' RESPONSE TO VERIMARK'S STATEMENT OF UNDISPUTED MATERIAL FACTS DOES NOT CREATE A GENUINE DISPUTE | 22
A. Coastal Palms' Purported Disputes Are Immaterial or Unsupported | 22
B. The Quantum of Underreporting Is a Damages Issue Reserved for Trial | 24
VI. THE COURT SHOULD REJECT COASTAL PALMS' ARGUMENT THAT ITS COUNTERCLAIM PRECLUDES SUMMARY JUDGMENT | 26
VII. THE MATERIAL BREACH FINDING SUPPORTS LIABILITY ON BOTH COUNTS I AND II | 28
CONCLUSION | 30
CERTIFICATE OF SERVICE | 32
Page(s)
Avante at Leesburg, Inc. v. Nandan, 254 So. 3d 1123 (Fla. 5th DCA 2018) | 4, 5, 7
Vane Kaplan CPAs LLP Seidman, LLP v. Banco Espirito Santo Int'l, Ltd., 38 So. 3d 874 (Fla. 3d DCA 2010) | 17
Bohannon v. Carnival Corp., 320 So. 3d 258 (Fla. 3d DCA 2021) | 3
Citrus Cty. Hosp. Bd. v. Citrus Mem'l Health Found., Inc., 150 So. 3d 1169 (Fla. 5th DCA 2014) | 5
Coastal Petroleum Co. v. Mobil Oil Corp., 583 So. 2d 718 (Fla. 1st DCA

IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA

CIVIL DIVISION

VERIMARK HOSPITALITY GROUP INC.,

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTRODUCTION

I. STANDARD OF REVIEW

IV. COASTAL PALMS' OTA NET-RATE NETTING ARGUMENT ALSO FAILS

VII. THE MATERIAL BREACH FINDING SUPPORTS LIABILITY ON BOTH COUNTS I AND II

CONCLUSION

CERTIFICATE OF SERVICE

Record

Parties

Dates

Amounts