1021-00006 · Client 1021 · Pleadings

complaint.docx DOCUMENT Litigation

65 / 75 ← → ✕

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

GENERAL JURISDICTION DIVISION

Case No.: 1021-00006

VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,

Plaintiff,

COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company; RANDALL BRECKER, individually; SUNCOAST ROOM MANAGEMENT INC., a Florida corporation; GULF BREEZE HOSPITALITY LLC, a Florida limited liability company; SAVANNAH LODGING PARTNERS LLC, a Georgia limited liability company,

Defendants.

\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\_/

COMPLAINT

Plaintiff, VERIMARK HOSPITALITY GROUP INC. ("Verimark" or "Plaintiff"), a Delaware corporation, by and through its undersigned attorneys, Calderwood & Harkness LLP, hereby sues Defendants COASTAL PALMS FRANCHISE HOLDINGS LLC ("Coastal Palms"), RANDALL BRECKER ("Brecker"), SUNCOAST ROOM MANAGEMENT INC. ("Suncoast"), GULF BREEZE HOSPITALITY LLC ("Gulf Breeze"), and SAVANNAH LODGING PARTNERS LLC ("Savannah Lodging") (collectively, "Defendants"), and in support thereof alleges as follows:

INTRODUCTORY STATEMENT

1. This action arises from Defendants' systematic and deliberate underreporting of Gross Room Revenue ("GRR") over a nine-year period spanning from 2013 through 2021 in connection with twenty-two (22) Franchise License Agreements ("FLAs") governing hotels operated under Verimark's branded flags, including the "Verimark Suites" and "Verimark Select" hospitality brands. Through a carefully orchestrated revenue-diversion scheme, Defendants funneled millions of dollars in guest-room revenue through an undisclosed affiliated entity, concealed the existence of an unbranded competing booking website, improperly netted online travel agency ("OTA") commissions against gross revenue, and submitted monthly financial reports to Verimark that they knew to be materially false and misleading. These actions deprived Verimark of royalties, marketing-fund contributions, and technology fees to which it was contractually entitled under the FLAs.

2. Verimark brings claims against Defendants for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent concealment, negligent misrepresentation, unjust enrichment, declaratory relief, accounting, and civil conspiracy. Verimark seeks damages of approximately One Hundred Fifty Million Dollars ($150,000,000.00), comprising underpaid royalties, marketing-fund contributions, and technology fees, together with contractual late-payment interest compounded monthly, liquidated damages triggered by the termination of the FLAs for cause, punitive damages, attorneys' fees, and costs.

I. THE PARTIES

A. Plaintiff Verimark Hospitality Group Inc.

3. Plaintiff Verimark Hospitality Group Inc. is a corporation organized and existing under the laws of the State of Delaware and is publicly traded on the Nasdaq Stock Market under the ticker symbol "VHMK." Verimark's principal executive offices and corporate headquarters are located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301.

4. Verimark operates and franchises approximately 340 branded hotel properties across the southeastern United States under three distinct hospitality flags: "Verimark Suites," "Verimark Select," and "Verimark Grand." These flags serve the upper-midscale, upscale, and upper-upscale segments of the hospitality market, respectively, and are widely recognized by business and leisure travelers throughout the region.

5. For the fiscal year ending December 31, 2021, Verimark reported consolidated revenue of approximately $1.42 billion. Of that total, the franchise segment—encompassing royalties, marketing-fund contributions, technology fees, and related franchise-derived income—generated approximately $218 million in revenue, representing a significant and growing component of Verimark's overall business.

6. Renata Solis-Vega serves as Senior Vice President and General Counsel of Verimark. Martin Holcomb serves as Executive Vice President and Chief Financial Officer. Deidre Langston serves as Senior Vice President, Franchise Operations, and oversees franchise compliance, including the monitoring and auditing of franchisee financial performance and reporting obligations.

B. Defendant Coastal Palms Franchise Holdings LLC

7. Defendant Coastal Palms Franchise Holdings LLC is a limited liability company organized and existing under the laws of the State of Florida, with its principal office located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108. Coastal Palms' registered agent is Garrison Registered Agents LLC, located at 100 S. Ashley Drive, Suite 600, Tampa, Florida 33602.

8. Coastal Palms is Verimark's single largest franchise operator. As of the date of this Complaint, Coastal Palms operates twenty-two (22) franchised hotel properties under Verimark's branded flags, consisting of eighteen (18) "Verimark Suites" properties and four (4) "Verimark Select" properties. These properties are located throughout the State of Florida and the coastal region of the State of Georgia and collectively comprise approximately 3,740 total guest rooms.

9. Coastal Palms' principal members and their respective equity interests are as follows: Randall "Randy" Brecker, who serves as Managing Member and holds a sixty percent (60%) equity interest; Theresa Brecker, who holds a fifteen percent (15%) equity interest and is the spouse of Randall Brecker; and Nolan Prescott, who holds a twenty-five percent (25%) equity interest as a passive investor and retired commercial real estate developer. Brecker exercises sole operational control over Coastal Palms and directs all aspects of its business, including the reporting of financial information to Verimark.

10. For the fiscal year ending December 31, 2021, Coastal Palms reported GRR to Verimark of approximately $112.4 million across its twenty-two franchised properties. However, Verimark's forensic accounting analysis, conducted by Thornbury & Associates CPAs LLP as described herein, estimates that Coastal Palms' true GRR for fiscal year 2021 was approximately $145.6 million—reflecting an underreporting of approximately $33.2 million for that single fiscal year alone.

C. Defendant Randall Brecker

11. Defendant Randall Brecker is a natural person residing in Naples, Collier County, Florida. Brecker is approximately fifty-eight (58) years of age. He serves as the Managing Member and sixty percent (60%) equity holder of Coastal Palms Franchise Holdings LLC. He also serves as President of Suncoast Room Management Inc. and as Managing Member of both Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC.

12. Brecker is a former hotel general manager who built the Coastal Palms portfolio from a single Verimark Suites property acquired in 2007 to a twenty-two-hotel portfolio spanning two states. Throughout the relevant period, Brecker personally directed and supervised the revenue-diversion scheme detailed herein, including the establishment of Suncoast as an undisclosed revenue-collection vehicle, the creation and operation of the unbranded booking website gulfcoastrooms.com, and the implementation of the improper OTA commission-netting methodology used to reduce reported GRR.

D. Defendant Suncoast Room Management Inc.

13. Defendant Suncoast Room Management Inc. is a corporation organized and existing under the laws of the State of Florida. Randall Brecker serves as its President and sole director. Suncoast's principal office is located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108.

14. Suncoast was established no later than January 2013 as an affiliated management company. Its primary function was to collect revenues from direct bookings at Coastal Palms' franchised hotel properties, including walk-in guests, corporate-direct contracts negotiated outside of Verimark's central reservation system, and bookings received through the unbranded website gulfcoastrooms.com. Suncoast also operated and maintained gulfcoastrooms.com as an independent booking platform that competed directly with Verimark's branded reservation channels.

15. Upon receiving guest-room revenue from these direct-booking sources, Suncoast retained a twelve percent (12%) "management fee" before remitting the remaining balance to the relevant property-level entities, including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC. Neither Suncoast's collections nor the management fee it retained were reported to Verimark as part of GRR at any time during the 2013–2021 period.

E. Defendant Gulf Breeze Hospitality LLC

16. Defendant Gulf Breeze Hospitality LLC is a limited liability company organized and existing under the laws of the State of Florida. Randall Brecker serves as its Managing Member. Gulf Breeze's principal office is located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108.

17. Gulf Breeze owns and operates six (6) Verimark Suites properties located in Southwest Florida. Gulf Breeze is one of the property-level entities through which diverted revenues were funneled and from which materially understated GRR reports were submitted to Verimark during the relevant period.

F. Defendant Savannah Lodging Partners LLC

18. Defendant Savannah Lodging Partners LLC is a limited liability company organized and existing under the laws of the State of Georgia. Randall Brecker serves as its Managing Member. Savannah Lodging's principal office is located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108.

19. Savannah Lodging owns and operates four (4) Verimark Suites properties located in coastal Georgia, including properties in the Savannah and Brunswick metropolitan areas. Savannah Lodging is one of the property-level entities through which diverted revenues were funneled and from which materially understated GRR reports were submitted to Verimark during the relevant period.

II. JURISDICTION AND VENUE

20. This Court has subject-matter jurisdiction over this action pursuant to Article V, Section 5 of the Florida Constitution and Sections 26.012(2)(a) and 86.011 of the Florida Statutes, as the amount in controversy exceeds Thirty Thousand Dollars ($30,000.00), exclusive of interest, attorneys' fees, and costs, and this action involves claims for declaratory relief under the Florida Declaratory Judgment Act.

21. Venue is proper in Broward County, Florida, pursuant to Section 47.011 of the Florida Statutes and, independently, pursuant to the mandatory forum-selection provision contained in each of the twenty-two (22) FLAs at issue. Specifically, each FLA designates Broward County, Florida, as the exclusive forum for the resolution of any and all disputes arising out of or relating to the FLA or the franchise relationship between the parties. Each FLA further provides that the franchisee consents to the exclusive jurisdiction and venue of the courts of Broward County, Florida, and waives any objection to such venue based on inconvenient forum or any other ground.

22. This Court has personal jurisdiction over Defendant Coastal Palms Franchise Holdings LLC, which is a Florida limited liability company that maintains its principal office in the State of Florida and conducts business throughout the state.

23. This Court has personal jurisdiction over Defendant Randall Brecker, who is a natural person residing in Naples, Collier County, Florida.

24. This Court has personal jurisdiction over Defendant Suncoast Room Management Inc., which is a Florida corporation that maintains its principal office in the State of Florida and conducts business throughout the state.

25. This Court has personal jurisdiction over Defendant Gulf Breeze Hospitality LLC, which is a Florida limited liability company that maintains its principal office in the State of Florida and owns and operates hotel properties within the state.

26. This Court has personal jurisdiction over Defendant Savannah Lodging Partners LLC pursuant to Section 48.193 of the Florida Statutes (Florida's long-arm statute). Savannah Lodging, although organized under the laws of the State of Georgia, transacts substantial and not isolated business activity in the State of Florida, including maintaining its principal office address in Naples, Florida; operating under the direction and control of its Managing Member, Randall Brecker, a Florida resident; entering into franchise agreements governed by Florida law with a Florida-based franchisor; and submitting monthly financial reports to Verimark at its Fort Lauderdale, Florida headquarters. The causes of action asserted herein arise out of Savannah Lodging's business activities in and directed toward the State of Florida.

III. GENERAL ALLEGATIONS

A. The Franchise Relationship

27. On or about June 15, 2007, Coastal Palms entered into its first Franchise License Agreement with Verimark for a single "Verimark Suites" hotel property located in Naples, Collier County, Florida (the "Original FLA"). The Original FLA granted Coastal Palms the right to operate the hotel under the Verimark Suites brand and to use Verimark's trademarks, trade names, proprietary reservation systems, marketing platforms, and operational standards in connection with the operation of that property.

28. Over the ensuing twelve years, Coastal Palms executed a total of twenty-two (22) individual FLAs with Verimark for hotel properties located throughout the State of Florida and the coastal region of the State of Georgia. The most recent FLA was executed on or about September 3, 2019, for a Verimark Select property located in Jacksonville, Duval County, Florida. The property-level entities that are signatories to certain of these FLAs include Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC, each acting under the direction and control of Coastal Palms and Randall Brecker.

29. Each of the twenty-two FLAs has an initial term of twenty (20) years from its respective effective date and is governed by the laws of the State of Florida, as expressly provided in each agreement's choice-of-law provision. While the FLAs were executed at various times over the twelve-year period from 2007 to 2019, each FLA is substantially identical in its material financial terms, including the provisions governing the calculation and payment of royalties, marketing-fund contributions, and technology fees based upon Gross Room Revenue.

B. Key FLA Financial Provisions

30. Royalties (FLA § 4.1). Under Section 4.1 of each FLA, the franchisee is required to pay Verimark a continuing royalty equal to five percent (5%) of Gross Room Revenue. The term "Gross Room Revenue" is defined in Section 4.1 as "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This definition is intentionally broad and was designed to capture all guest-room revenue regardless of the mechanism by which it was generated, the platform through which a reservation was booked, or the corporate entity that initially collected the payment from the guest. The royalty is payable monthly within fifteen (15) calendar days following the close of each calendar month.

31. Marketing-Fund Contribution (FLA § 4.2). Under Section 4.2 of each FLA, the franchisee is required to pay Verimark a marketing-fund contribution equal to two and one-half percent (2.5%) of Gross Room Revenue. These contributions are deposited into Verimark's system-wide marketing fund, which finances national and regional advertising, digital marketing campaigns, loyalty-program operations, and brand-awareness initiatives that benefit all Verimark-branded properties. The marketing-fund contribution is payable monthly, concurrent with the royalty payment.

32. Technology Fee (FLA § 4.3). Under Section 4.3 of each FLA, the franchisee is required to pay a technology fee of Twelve Dollars and Fifty Cents ($12.50) per available room per month. This fee supports Verimark's central reservation system, property-management system interfaces, revenue-management tools, cybersecurity infrastructure, and guest-facing technology platforms. The technology fee is adjusted annually by the Consumer Price Index ("CPI") but is capped at a maximum annual increase of three percent (3%). The franchisee is required to report the total number of available rooms at each property and to notify Verimark promptly of any increase in room count resulting from construction, renovation, or reconfiguration.

33. Reporting Obligations. Under the FLAs, the franchisee is required to report GRR to Verimark on a monthly basis, no later than fifteen (15) calendar days following the close of each calendar month. Each monthly GRR report must be prepared in accordance with Verimark's standard reporting format and must include a certification by an authorized representative of the franchisee that the reported figures are true, complete, and accurate in all material respects.

34. Late-Payment Interest (FLA § 4.6). Under Section 4.6 of each FLA, any amounts not timely paid by the franchisee shall bear interest at the rate of one and one-half percent (1.5%) per month, compounded monthly, from the date such payment was due until the date of payment. This interest provision applies to all underpayments of royalties, marketing-fund contributions, and technology fees.

C. FLA Audit and Breach Provisions

35. Audit Rights (FLA § 8.2). Under Section 8.2 of each FLA, Verimark is entitled to audit the franchisee's books and records, including all financial statements, bank records, tax returns, guest-folio data, property-management system records, and third-party booking-channel statements, upon ten (10) business days' written notice. The franchisee is required to provide full access to all such records and to cooperate with the audit process. If an audit reveals that the franchisee has underreported GRR by more than two percent (2%) of reported GRR for any audited period, the franchisee shall bear all costs of the audit, including fees of the auditing firm, travel expenses, and related professional costs.

36. Cure Period (FLA § 14.1). Under Section 14.1 of each FLA, upon Verimark's delivery of a written Notice of Material Breach, the franchisee must cure any material breach within thirty (30) days of the date of such notice. The cure must be complete and unconditional, including full payment of all amounts owed and implementation of corrective measures satisfactory to Verimark to prevent recurrence.

37. Incurable Breach (FLA § 14.2(c)). Section 14.2 of each FLA identifies certain categories of breach that are deemed "incapable of cure." Among these, Section 14.2(c) provides: "Systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." This provision reflects the parties' shared understanding that the trust and confidence underlying the franchise relationship cannot be restored once the franchisor discovers that the franchisee has engaged in a pattern of deliberate revenue concealment.

38. Liquidated Damages (FLA § 15.3). Under Section 15.3 of each FLA, upon termination of the agreement for cause, the franchisee shall owe Verimark liquidated damages equal to three times (3×) the trailing-twelve-month royalties for the terminated property, calculated on the basis of corrected GRR. The parties agreed at the time of execution of each FLA that actual damages resulting from early termination for cause would be difficult to calculate with certainty and that the liquidated-damages formula represents a reasonable estimate of Verimark's anticipated losses, including lost future royalty income, diminished brand value, system disruption, and the costs of re-franchising the property.

D. Coastal Palms' Revenue Diversion Scheme

39. Beginning no later than January 2013, Defendants implemented a systematic and deliberate scheme to divert hotel guest-room revenue away from Verimark's reporting systems and to understate the Gross Room Revenue upon which royalties, marketing-fund contributions, and technology fees were calculated and paid. The scheme was multi-faceted and evolved over the nine-year period from 2013 through 2021 as Defendants expanded their portfolio and refined their methods of revenue concealment.

40. As a central component of the scheme, Defendant Brecker established Suncoast Room Management Inc. as an affiliated management company whose primary purpose was to collect revenues from direct bookings at Coastal Palms' franchised hotel properties. These direct bookings included walk-in guests who arrived at the hotel without a prior reservation, corporate-direct contracts negotiated by Brecker and his team directly with corporate clients (bypassing Verimark's central reservation system and its affiliated corporate-booking platform), and bookings received through the unbranded website gulfcoastrooms.com, which Brecker caused Suncoast to create and operate.

41. The website gulfcoastrooms.com was designed to function as an independent, unbranded booking platform that listed available rooms at Coastal Palms' franchised properties without any reference to the Verimark brand, the Verimark Suites flag, or the Verimark Select flag. Guests booking through gulfcoastrooms.com were presented with property descriptions, photographs, and room rates that made no mention of the hotels' affiliation with Verimark, thereby creating the false impression that the hotels were independent, non-franchised properties. The website accepted online payments and directed guest-room revenue to bank accounts controlled by Suncoast, rather than to the property-level bank accounts from which GRR was reported to Verimark.

42. Upon collecting guest-room revenue from direct-booking sources, Suncoast retained a twelve percent (12%) "management fee" before remitting the remaining eighty-eight percent (88%) of the revenue to the relevant property-level entities, including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC. The management fee retained by Suncoast was not disclosed to Verimark and was not reported as part of GRR. Furthermore, the remaining eighty-eight percent of the revenue that Suncoast forwarded to the property-level entities was likewise never included in the GRR reports submitted to Verimark.

43. In addition to the direct-booking diversion, Defendants also engaged in a separate but related scheme to underreport revenue from third-party online travel agency ("OTA") channels, including major booking platforms. Specifically, Defendants classified net-rate OTA payments as "commissions receivable" and netted the OTA commissions against gross revenue before reporting GRR to Verimark. This netting methodology was a direct violation of Section 4.1 of each FLA, which defines GRR as "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." Under this unambiguous gross-revenue definition, OTA commissions are not deductible from GRR, and the full amount of the room rate charged to the guest must be reported as revenue, regardless of whether the OTA retains a commission or discount from the payment.

44. The revenue-diversion scheme was deliberately and affirmatively concealed from Verimark throughout the entire nine-year period. At no time between January 2013 and November 2021 did Defendants disclose to Verimark: (a) the existence of Suncoast Room Management Inc. or its role in collecting guest-room revenue; (b) the existence or operation of the gulfcoastrooms.com website; (c) the diversion of direct-booking revenue, including walk-in, corporate-direct, and web-booking revenue, outside of Verimark's reporting systems; (d) the retention of a twelve percent management fee by Suncoast on diverted revenues; or (e) the netting methodology applied to OTA revenues. Defendants affirmatively represented to Verimark, through their monthly GRR reports, that the figures reported therein were true, complete, and accurate, when in fact Defendants knew them to be materially understated.

E. Discovery of the Scheme — Whistleblower

45. On or about November 8, 2021, Janet Kerrigan, a former regional controller employed by Coastal Palms, contacted Verimark's confidential compliance hotline and reported the existence of the systematic revenue-diversion scheme described herein. Ms. Kerrigan had been employed by Coastal Palms as a regional controller from approximately March 2015 through October 2021, during which time she had direct knowledge of the financial reporting practices at multiple Coastal Palms-operated properties. Ms. Kerrigan's employment was terminated by Coastal Palms in October 2021, shortly before she made her report to Verimark.

46. In her initial report and subsequent interviews with Verimark's compliance team, Ms. Kerrigan described in detail: (a) Brecker's standing instructions to property-level controllers and front-desk managers to route walk-in bookings and corporate-direct bookings through Suncoast rather than through the Verimark-branded property-management system; (b) the operation of gulfcoastrooms.com as an unbranded, competing booking channel that diverted guest-room revenue from Verimark's reporting systems; (c) Suncoast's practice of retaining a twelve percent management fee on all diverted revenues; (d) the use of separate bank accounts controlled by Suncoast to receive and hold direct-booking revenue; and (e) Brecker's express direction that revenues collected through Suncoast were not to be included in the monthly GRR reports submitted to Verimark.

47. Ms. Kerrigan's report was received by Verimark's Vice President of Internal Audit, Gerald Farnsworth, who immediately escalated the matter to Senior Vice President and General Counsel Renata Solis-Vega and Senior Vice President of Franchise Operations Deidre Langston. Within forty-eight hours, Verimark assembled an internal investigation team consisting of members of its legal, compliance, internal audit, and franchise operations departments to assess the credibility and scope of the allegations.

F. Pre-Litigation Investigation and Audit

48. On or about November 22, 2021, following its initial internal assessment and determination that Ms. Kerrigan's allegations were credible and supported by preliminary documentary evidence, Verimark engaged Thornbury & Associates CPAs LLP to conduct a comprehensive franchise-compliance audit of Coastal Palms' franchised properties. The engagement was led by Malcolm Thornbury, CPA, Lead Audit Partner, at Thornbury & Associates' offices located at 1551 N. Flagler Drive, Suite 800, West Palm Beach, Florida 33401. Thornbury & Associates is a nationally recognized forensic-accounting firm with extensive experience in franchise-compliance auditing and revenue-verification engagements.

49. The initial phase of the audit focused on Coastal Palms' top ten (10) properties by reported GRR, encompassing hotel locations in Naples, Fort Myers, Sarasota, Tampa, Orlando, Jacksonville, and Savannah, Georgia. The audit team reviewed available property-management system data, bank records, OTA settlement statements, corporate-direct contracts, and tax filings for the fiscal years 2019 through 2021.

50. On or about January 18, 2022, Thornbury & Associates delivered its preliminary audit findings to Verimark. The preliminary findings indicated that the ten audited properties had underreported GRR by approximately twenty-six percent (26%) during the 2019–2021 period. The underreporting was attributable to two primary sources: (a) the complete exclusion of direct-booking revenues collected by Suncoast, which accounted for approximately eighteen percent (18%) of total guest-room revenue at the audited properties; and (b) the improper netting of OTA commissions against gross revenue, which accounted for an additional approximately eight percent (8%) of unrecognized revenue.

51. Based on these preliminary findings, and extrapolating the identified underreporting patterns across all twenty-two (22) Coastal Palms properties and the full nine-year period from 2013 through 2021, Thornbury & Associates estimated that Coastal Palms had underreported total GRR by approximately One Hundred Ninety-Seven Million Eight Hundred Thousand Dollars ($197,800,000.00). The rate of underreporting varied by property and year, ranging from approximately twenty-two percent (22%) to thirty-one percent (31%) depending on the property's mix of booking channels and the volume of direct bookings routed through Suncoast.

G. Notice of Material Breach and Failure to Cure

52. On February 4, 2022, Verimark issued a formal Notice of Material Breach (the "Notice") to Coastal Palms pursuant to Section 14.1 of each FLA. The Notice was sent by certified mail, return receipt requested, and by email to Coastal Palms' principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, and to Brecker individually. A copy of the Notice was simultaneously transmitted to Nathan Whitfield III at Whitfield, Barrow & Crane LLP, counsel of record for Coastal Palms.

53. The Notice identified the systematic underreporting of GRR as a material breach of each of the twenty-two FLAs, specifically citing violations of Sections 4.1 (royalty obligations), 4.2 (marketing-fund contribution obligations), 4.3 (technology-fee obligations), and the monthly GRR reporting requirements. The Notice further stated that, pursuant to Section 14.2(c) of each FLA, "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure," and that Verimark reserved all rights and remedies available to it under the FLAs and applicable law, including the right to terminate each FLA for cause and to pursue liquidated damages under Section 15.3.

54. On or about February 28, 2022, Coastal Palms' counsel, Whitfield, Barrow & Crane LLP, acting through Nathan Whitfield III, responded to the Notice by letter. In that response, Coastal Palms denied that any material breach of the FLAs had occurred. Coastal Palms asserted that the revenues collected by Suncoast were properly excluded from GRR under what it characterized as a "reasonable interpretation" of the FLA's revenue-reporting provisions, contending that Suncoast was a separate entity and that revenues it collected did not fall within the GRR definition. Coastal Palms further asserted that its netting of OTA commissions was consistent with industry practice and the parties' course of dealing. Coastal Palms did not tender any cure, did not offer to pay any amount in satisfaction of underpaid royalties, marketing contributions, or technology fees, and did not take any corrective action to address the underreporting.

55. The thirty-day cure period prescribed by Section 14.1 of each FLA expired on March 6, 2022. No cure was tendered by Coastal Palms or any other Defendant during the cure period or at any time thereafter. Coastal Palms' purported defense—that revenues collected by a wholly controlled affiliated entity in connection with guest-room rentals at Verimark-branded properties somehow fall outside the FLA's comprehensive GRR definition—is without merit and is contradicted by the plain language of Section 4.1, which encompasses "all revenues derived from or attributable to the rental of guest rooms at the Hotel ... regardless of the entity collecting such revenue."

56. Coastal Palms' systematic underreporting of GRR constitutes a material breach of each of the twenty-two FLAs. Such breach is, by the express terms of Section 14.2(c) of each FLA, incapable of cure.

H. Damages Summary

57. Based upon the forensic analysis conducted by Thornbury & Associates CPAs LLP and Verimark's own internal analysis, Verimark's damages are summarized as follows:

58. Cumulative Underreported GRR (2013–2021): Approximately $197,800,000.00. The rate of underreporting ranged from approximately twenty-two percent (22%) to thirty-one percent (31%) depending on the individual property and the fiscal year in question, with the rate of underreporting generally increasing over time as the volume of direct bookings routed through Suncoast grew.

59. Underpaid Royalties (5% of $197.8 Million): Approximately $9,890,000.00. This figure represents the difference between the royalties that Coastal Palms and the property-level entities were required to pay under the FLAs and the royalties they actually paid, based on the understated GRR figures reported to Verimark.

60. Underpaid Marketing-Fund Contributions (2.5% of $197.8 Million): Approximately $4,945,000.00. This figure represents the shortfall in marketing-fund contributions resulting from the underreported GRR.

61. Underpaid Technology Fees: Approximately $1,260,000.00. This figure is based on Defendants' failure to notify Verimark of the addition of approximately 214 guest rooms across four (4) properties over a period averaging approximately forty-seven (47) months. At the contractual rate of $12.50 per available room per month (subject to CPI adjustments), the resulting underpayment totals approximately $1,260,000.00.

62. Subtotal of Direct Underpayments: Approximately $16,095,000.00, representing the sum of underpaid royalties ($9,890,000.00), underpaid marketing-fund contributions ($4,945,000.00), and underpaid technology fees ($1,260,000.00).

63. Contractual Late-Payment Interest: Pursuant to Section 4.6 of each FLA, underpaid amounts bear interest at the rate of 1.5% per month, compounded monthly, from the date each payment was due. As calculated through the projected judgment date, the accrued contractual late-payment interest totals approximately $28,400,000.00.

64. Liquidated Damages (FLA § 15.3): Upon termination of each of the twenty-two FLAs for cause, the franchisee owes liquidated damages equal to three times (3×) the trailing-twelve-month corrected royalties for each terminated property. The trailing-twelve-month corrected royalties for all twenty-two properties aggregate to approximately $7,280,000.00 per year, calculated on a per-property basis using corrected GRR figures that account for the diverted revenue. Applying the 3× multiplier on a per-property basis and aggregating the results across all twenty-two properties yields total liquidated damages of approximately $105,500,000.00.

65. Grand Total Claimed: Approximately $150,000,000.00, comprising direct underpayments of $16,095,000.00, contractual late-payment interest of $28,400,000.00, and liquidated damages of $105,500,000.00. This total does not include punitive damages, consequential damages, attorneys' fees, or costs, which are sought in addition to the foregoing amounts.

IV. COUNTS

COUNT I — BREACH OF CONTRACT (ROYALTIES) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)

66. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

67. Verimark and Coastal Palms, individually and through its property-level entities including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC, entered into twenty-two (22) valid, binding, and enforceable Franchise License Agreements. Each FLA constitutes a legally binding contract supported by adequate consideration, including Verimark's grant of the right to operate a hotel under one of its branded flags, access to its proprietary reservation and management systems, ongoing marketing support, and the goodwill associated with the Verimark brand.

68. Under Section 4.1 of each FLA, the franchisee is required to pay Verimark a continuing royalty equal to five percent (5%) of Gross Room Revenue. The GRR definition in Section 4.1 encompasses "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This definition is clear and unambiguous and was intended by the parties to capture the full universe of guest-room revenue without exception.

69. Verimark performed all conditions, covenants, and obligations required to be performed by it under each FLA, or was excused from performance thereof.

70. Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging materially breached Section 4.1 of each FLA by systematically excluding from their GRR reports revenues collected by Suncoast Room Management Inc., including revenues from direct bookings, walk-in guests, corporate-direct contracts, and bookings through the unbranded website gulfcoastrooms.com. Defendants further breached Section 4.1 by improperly netting OTA commissions against gross revenue, thereby reducing the reported GRR below the true amount of guest-room revenue generated at each property. These exclusions and deductions were contrary to the plain language of the GRR definition and resulted in the systematic underpayment of royalties over the nine-year period from 2013 through 2021.

71. Over the 2013–2021 period, Defendants underreported GRR by an estimated $197,800,000.00, resulting in underpaid royalties of approximately $9,890,000.00 (calculated as 5% of $197,800,000.00 in underreported GRR).

72. In addition to the underpaid royalties, Verimark is entitled to contractual late-payment interest at the rate of 1.5% per month, compounded monthly, on all underpaid amounts from the respective due dates through the date of payment, pursuant to Section 4.6 of each FLA. As calculated through the projected judgment date, accrued late-payment interest totals approximately $28,400,000.00.

73. Verimark is further entitled to liquidated damages upon termination of each of the twenty-two FLAs for cause, in the amount of three times (3×) the trailing-twelve-month corrected royalties for each terminated property, pursuant to Section 15.3 of each FLA. The aggregate liquidated damages across all twenty-two properties total approximately $105,500,000.00.

74. As a direct and proximate result of Defendants' breach, Verimark has suffered damages and will continue to suffer damages.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC, jointly and severally, for underpaid royalties of $9,890,000.00, contractual late-payment interest of approximately $28,400,000.00, liquidated damages of $105,500,000.00 pursuant to FLA § 15.3, attorneys' fees and costs as provided by the FLAs and applicable law, and such other and further relief as this Court deems just and proper.

COUNT II — BREACH OF CONTRACT (MARKETING-FUND CONTRIBUTIONS) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)

75. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

76. Under Section 4.2 of each FLA, the franchisee is required to pay Verimark a marketing-fund contribution equal to two and one-half percent (2.5%) of Gross Room Revenue, payable monthly. These contributions fund Verimark's system-wide marketing initiatives, which benefit all franchised properties in the Verimark system.

77. By systematically underreporting GRR by an estimated $197,800,000.00 over the 2013–2021 period, as described above, Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging underpaid their marketing-fund contribution obligations under Section 4.2 of each FLA.

78. The aggregate underpayment of marketing-fund contributions totals approximately $4,945,000.00, calculated as 2.5% of $197,800,000.00 in underreported GRR.

79. Defendants' systematic underpayment of marketing-fund contributions constitutes a material breach of Section 4.2 of each FLA.

80. In addition to the underpaid marketing contributions, Verimark is entitled to contractual late-payment interest at the rate of 1.5% per month, compounded monthly, on all underpaid amounts from the respective due dates through the date of payment, pursuant to Section 4.6 of each FLA.

81. As a direct and proximate result of Defendants' breach, Verimark has suffered damages and will continue to suffer damages.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC, jointly and severally, for underpaid marketing-fund contributions of $4,945,000.00, contractual late-payment interest on such underpayments, attorneys' fees and costs as provided by the FLAs and applicable law, and such other and further relief as this Court deems just and proper.

COUNT III — BREACH OF CONTRACT (TECHNOLOGY FEES) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)

82. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

83. Under Section 4.3 of each FLA, the franchisee is required to pay a technology fee of $12.50 per available room per month, adjusted annually by the Consumer Price Index but capped at a maximum annual increase of three percent (3%). The franchisee is further required to report the total number of available rooms at each property and to notify Verimark promptly of any increase in room count.

84. Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging added approximately 214 guest rooms across four (4) properties without providing any notice to Verimark and without paying the required technology fees on those additional rooms. These room additions occurred at various times during the relevant period and went unreported for an average of approximately forty-seven (47) months.

85. The resulting underpayment of technology fees totals approximately $1,260,000.00, calculated as 214 rooms multiplied by $12.50 per room per month (subject to CPI adjustments) multiplied by an average of approximately 47 months.

86. Defendants' failure to report the addition of rooms and to pay the corresponding technology fees constitutes a material breach of Section 4.3 of each FLA.

87. In addition to the underpaid technology fees, Verimark is entitled to contractual late-payment interest at the rate of 1.5% per month, compounded monthly, pursuant to Section 4.6 of each FLA.

88. As a direct and proximate result of Defendants' breach, Verimark has suffered damages and will continue to suffer damages.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC, jointly and severally, for underpaid technology fees of $1,260,000.00, contractual late-payment interest on such underpayments, attorneys' fees and costs as provided by the FLAs and applicable law, and such other and further relief as this Court deems just and proper.

COUNT IV — BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (Against Coastal Palms Franchise Holdings LLC and Randall Brecker)

89. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

90. Under Florida law, every contract contains an implied covenant of good faith and fair dealing. The implied covenant obligates each party to a contract to refrain from doing anything that would have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.

91. Each of the twenty-two FLAs between Verimark and Coastal Palms (and its affiliated property-level entities) contains an implied covenant of good faith and fair dealing.

92. Defendants Coastal Palms and Brecker violated the implied covenant of good faith and fair dealing by engaging in the following conduct, each act of which was designed to frustrate Verimark's contractual right to receive accurate GRR reports and the full payment of royalties, marketing contributions, and technology fees:

(a) Establishing Suncoast Room Management Inc. as a vehicle to collect and divert guest-room revenues outside of Verimark's reporting systems, thereby ensuring that a significant portion of GRR would never be reported to or known by Verimark;

(b) Creating and operating gulfcoastrooms.com as an unbranded, competing booking channel that redirected potential guests away from Verimark's branded reservation systems and generated revenue that was deliberately excluded from GRR reports;

(c) Deliberately structuring direct-booking transactions, including walk-in bookings and corporate-direct contracts, to route them through Suncoast rather than through the Verimark-branded property-management systems, thereby circumventing the GRR reporting requirements of the FLAs;

(d) Implementing a netting methodology for OTA commissions that artificially reduced reported GRR below the true level of guest-room revenue, in contravention of the FLAs' gross-revenue definition; and

(e) Actively concealing the foregoing scheme from Verimark for a period of approximately nine years (2013–2021), during which time Defendants submitted monthly GRR reports that they knew to be materially false and misleading.

93. These actions, individually and collectively, frustrated Verimark's contractual right to receive accurate financial information and full payment of all amounts due under the FLAs. Defendants' conduct was undertaken in bad faith and with the deliberate intent to deprive Verimark of the economic benefits of its franchise agreements.

94. As a direct and proximate result of Defendants' breach of the implied covenant of good faith and fair dealing, Verimark has suffered damages and will continue to suffer damages in an amount to be determined at trial.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC and Randall Brecker for damages in an amount to be determined at trial, attorneys' fees and costs as provided by applicable law, and such other and further relief as this Court deems just and proper.

COUNT V — FRAUDULENT CONCEALMENT (Against Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc.)

95. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

96. Defendants Coastal Palms, Brecker, and Suncoast had a duty to disclose to Verimark the true Gross Room Revenue generated at each of the twenty-two franchised hotel properties. This duty arose from the express provisions of the FLAs requiring monthly GRR reporting, from the fiduciary-like obligations inherent in the franchise relationship, and from the fact that Defendants possessed superior knowledge of the true revenue figures that was not available to Verimark through any independent means.

97. Defendants actively and deliberately concealed material facts from Verimark over a period of approximately nine years (2013–2021), including, but not limited to:

(a) The existence of Suncoast Room Management Inc. and its role in collecting guest-room revenue at Coastal Palms' franchised properties;

(b) The creation and operation of gulfcoastrooms.com as an unbranded booking website that listed available rooms at Verimark-branded properties without reference to the Verimark brand or flags;

(c) The diversion of direct-booking revenue—including walk-in bookings, corporate-direct bookings, and web bookings through gulfcoastrooms.com—outside of Verimark's property-management and reporting systems;

(d) Suncoast's retention of a twelve percent (12%) "management fee" on all diverted revenues, which was never disclosed to Verimark and never included in GRR;

(e) The netting of OTA commissions against gross revenue in preparing GRR reports, resulting in the understatement of reported GRR; and

(f) The true aggregate amount of guest-room revenue generated at each franchised property, which was materially higher than the GRR figures reported to Verimark in each month of the nine-year period.

98. Defendants' concealment of these material facts was intentional and deliberate. Defendants knew that Verimark relied on the accuracy of the monthly GRR reports in order to calculate and collect royalties, marketing-fund contributions, and technology fees; to manage and allocate resources within the Verimark franchise system; to assess the financial performance of franchised properties; and to prepare Verimark's own consolidated financial statements for public reporting purposes. Defendants intended to deceive Verimark and to avoid paying the full amount of royalties, marketing contributions, and technology fees owed under the FLAs.

99. Verimark justifiably relied on the GRR reports submitted by Defendants. Verimark had no independent means of verifying the completeness of the reported GRR figures without conducting a forensic audit, which was not triggered until the whistleblower report of November 8, 2021. The FLAs imposed a duty of honest and accurate reporting on the franchisee, and Verimark was entitled to rely on the franchisee's compliance with that duty.

100. As a direct and proximate result of Defendants' fraudulent concealment, Verimark suffered damages in the amount of at least $16,095,000.00 in direct underpayments (comprising underpaid royalties, marketing contributions, and technology fees), plus contractual late-payment interest, plus consequential damages including the costs of investigation and forensic auditing, damage to the integrity of Verimark's franchise system, and harm to Verimark's financial reporting and investor relations.

101. Defendants' conduct was willful, wanton, malicious, and in reckless disregard of Verimark's rights, and warrants the imposition of punitive damages in an amount sufficient to punish Defendants and deter similar conduct in the future.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc., jointly and severally, for compensatory and consequential damages in an amount to be determined at trial, punitive damages, attorneys' fees and costs as provided by applicable law, and such other and further relief as this Court deems just and proper.

COUNT VI — NEGLIGENT MISREPRESENTATION (Against Coastal Palms Franchise Holdings LLC and Randall Brecker)

102. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

103. Defendants Coastal Palms and Brecker owed Verimark a duty of care in preparing and providing financial information under the FLAs, including the monthly GRR reports required by each FLA. This duty arose from the contractual reporting obligations under the FLAs, from the special relationship between franchisor and franchisee, and from the foreseeability that Verimark would rely upon the accuracy and completeness of the information provided.

104. Defendants negligently prepared and submitted monthly GRR reports to Verimark over the period from January 2013 through November 2021 that materially understated the actual guest-room revenue generated at the twenty-two franchised hotel properties. Defendants failed to exercise reasonable care in compiling and reporting GRR by omitting from those reports all revenues collected by Suncoast Room Management Inc. and by improperly netting OTA commissions against gross revenue.

105. Even assuming, arguendo, that Defendants' conduct did not rise to the level of intentional fraud, Defendants at a minimum failed to exercise reasonable care to ensure that their GRR reports were complete and accurate. A reasonable franchise operator exercising ordinary care in the preparation of GRR reports would have included all revenues attributable to the rental of guest rooms at the franchised properties, regardless of the corporate entity that collected such revenue, and would not have netted commissions or fees against gross revenue without prior written authorization from the franchisor.

106. Verimark relied upon the accuracy and completeness of the GRR reports submitted by Defendants in managing its franchise system, allocating marketing resources and brand-development expenditures, evaluating franchisee performance, benchmarking properties against system-wide metrics, and preparing Verimark's own consolidated financial statements and public disclosures to investors and the Securities and Exchange Commission.

107. As a direct and proximate result of Defendants' negligent misrepresentations, Verimark suffered damages, including but not limited to the receipt of underpaid royalties, marketing contributions, and technology fees, and the misallocation of corporate resources based on inaccurate financial information.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC and Randall Brecker, jointly and severally, for compensatory damages in an amount to be determined at trial, attorneys' fees and costs as provided by applicable law, and such other and further relief as this Court deems just and proper.

COUNT VII — UNJUST ENRICHMENT (IN THE ALTERNATIVE) (Against All Defendants)

108. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

109. This Count is pled in the alternative to the breach-of-contract claims set forth in Counts I through III, to the extent that the Court determines that any of the FLAs are unenforceable, ambiguous, or otherwise inapplicable to any Defendant or to any portion of the diverted revenues.

110. Verimark conferred substantial benefits upon Defendants, including the right to operate hotels under the Verimark brand, access to Verimark's proprietary reservation and management systems, participation in Verimark's system-wide marketing campaigns and loyalty programs, and the goodwill and customer recognition associated with the Verimark Suites and Verimark Select flags. These benefits enabled Defendants to generate guest-room revenue at levels far exceeding what independent, unbranded hotel properties would have achieved.

111. Defendants received a direct and quantifiable benefit at Verimark's expense by retaining revenues that should have been reported as GRR and upon which royalties, marketing-fund contributions, and technology fees were owed. By underreporting GRR, Defendants avoided paying at least $16,095,000.00 in contractually required fees. In addition, Suncoast retained a twelve percent (12%) management fee on diverted revenues, further enriching Defendants at Verimark's expense.

112. Defendants had knowledge of the benefits they received and the detriment suffered by Verimark. Defendants deliberately structured their operations to maximize the revenue diverted away from Verimark's reporting systems and to minimize the fees payable to Verimark.

113. Under the circumstances, it would be inequitable and unjust for Defendants to retain these benefits without compensating Verimark. Equity and good conscience require that Defendants disgorge the amounts by which they were unjustly enriched.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against all Defendants, jointly and severally, for restitution in an amount to be determined at trial, and such other and further relief as this Court deems just and proper.

COUNT VIII — DECLARATORY JUDGMENT (FLA TERMINATION) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)

114. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

115. This Court has jurisdiction to render declaratory judgments pursuant to Chapter 86 of the Florida Statutes.

116. A bona fide, actual, present, and practical controversy exists between Verimark, on the one hand, and Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging, on the other hand, regarding Verimark's right to terminate each of the twenty-two FLAs for cause. This controversy is ripe for adjudication. On February 28, 2022, through counsel, Coastal Palms expressly denied that any material breach had occurred, contested Verimark's interpretation of the FLAs' GRR definition, and refused to tender any cure. Accordingly, the parties are in direct and irreconcilable disagreement as to whether Defendants' conduct constitutes a material breach of the FLAs and whether Verimark is entitled to terminate the franchise relationships.

117. Under Section 14.2(c) of each FLA, "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." The allegations set forth herein establish that Defendants engaged in systematic underreporting of GRR over a nine-year period from 2013 through 2021, involving the diversion of direct-booking revenues through an undisclosed affiliated entity, the operation of an unbranded competing booking website, and the improper netting of OTA commissions. This conduct constitutes the paradigm of "systematic underreporting" as contemplated by Section 14.2(c).

118. On February 4, 2022, Verimark issued a Notice of Material Breach pursuant to Section 14.1 of each FLA. The thirty-day cure period expired on March 6, 2022, with no cure tendered. Accordingly, all conditions precedent to Verimark's exercise of its termination rights under the FLAs have been satisfied.

119. Verimark seeks a declaration from this Court that:

(a) Defendants' systematic underreporting of Gross Room Revenue constitutes a material breach of each of the twenty-two FLAs;

(b) Such breach is incapable of cure under Section 14.2(c) of each FLA;

(c) Verimark is entitled to terminate each of the twenty-two FLAs for cause, effective immediately upon the entry of a declaratory judgment or at such earlier date as this Court may determine; and

(d) Upon termination, Verimark is entitled to liquidated damages under Section 15.3 of each FLA, in the aggregate amount of approximately $105,500,000.00.

120. A declaratory judgment in Verimark's favor will serve a useful purpose in resolving the parties' dispute and will afford Verimark relief from the ongoing uncertainty regarding its rights under the FLAs.

WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter a declaratory judgment as described above, together with attorneys' fees and costs as provided by the FLAs, Chapter 86 of the Florida Statutes, and applicable law, and such other and further relief as this Court deems just and proper.

COUNT IX — ACCOUNTING (Against Coastal Palms Franchise Holdings LLC, Suncoast Room Management Inc., Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)

121. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.

122. The complex and intertwined financial relationships among Defendants—including the flow of revenues from hotel guests to Suncoast, the retention of the twelve percent manageme

IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA
GENERAL JURISDICTION DIVISION
Case No.: 1021-00006
VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,
Plaintiff,
v.
COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company; RANDALL BRECKER, individually; SUNCOAST ROOM MANAGEMENT INC., a Florida corporation; GULF BREEZE HOSPITALITY LLC, a Florida limited liability company; SAVANNAH LODGING PARTNERS LLC, a Georgia limited liability company,
Defendants.
\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\_/
COMPLAINT
Plaintiff, VERIMARK HOSPITALITY GROUP INC. ("Verimark" or "Plaintiff"), a Delaware corporation, by and through its undersigned attorneys, Calderwood & Harkness LLP, hereby sues Defendants COASTAL PALMS FRANCHISE HOLDINGS LLC ("Coastal Palms"), RANDALL BRECKER ("Brecker"), SUNCOAST ROOM MANAGEMENT INC. ("Suncoast"), GULF BREEZE HOSPITALITY LLC ("Gulf Breeze"), and SAVANNAH LODGING PARTNERS LLC ("Savannah Lodging") (collectively, "Defendants"), and in support thereof alleges as follows:
INTRODUCTORY STATEMENT
1. This action arises from Defendants' systematic and deliberate underreporting of Gross Room Revenue ("GRR") over a nine-year period spanning from 2013 through 2021 in connection with twenty-two (22) Franchise License Agreements ("FLAs") governing hotels operated under Verimark's branded flags, including the "Verimark Suites" and "Verimark Select" hospitality brands. Through a carefully orchestrated revenue-diversion scheme, Defendants funneled millions of dollars in guest-room revenue through an undisclosed affiliated entity, concealed the existence of an unbranded competing booking website, improperly netted online travel agency ("OTA") commissions against gross revenue, and submitted monthly financial reports to Verimark that they knew to be materially false and misleading. These actions deprived Verimark of royalties, marketing-fund contributions, and technology fees to which it was contractually entitled under the FLAs.
2. Verimark brings claims against Defendants for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent concealment, negligent misrepresentation, unjust enrichment, declaratory relief, accounting, and civil conspiracy. Verimark seeks damages of approximately One Hundred Fifty Million Dollars ($150,000,000.00), comprising underpaid royalties, marketing-fund contributions, and technology fees, together with contractual late-payment interest compounded monthly, liquidated damages triggered by the termination of the FLAs for cause, punitive damages, attorneys' fees, and costs.
I. THE PARTIES
A. Plaintiff Verimark Hospitality Group Inc.
3. Plaintiff Verimark Hospitality Group Inc. is a corporation organized and existing under the laws of the State of Delaware and is publicly traded on the Nasdaq Stock Market under the ticker symbol "VHMK." Verimark's principal executive offices and corporate headquarters are located at 2400 East Las Olas Boulevard, Suite 3100, Fort Lauderdale, Florida 33301.
4. Verimark operates and franchises approximately 340 branded hotel properties across the southeastern United States under three distinct hospitality flags: "Verimark Suites," "Verimark Select," and "Verimark Grand." These flags serve the upper-midscale, upscale, and upper-upscale segments of the hospitality market, respectively, and are widely recognized by business and leisure travelers throughout the region.
5. For the fiscal year ending December 31, 2021, Verimark reported consolidated revenue of approximately $1.42 billion. Of that total, the franchise segment—encompassing royalties, marketing-fund contributions, technology fees, and related franchise-derived income—generated approximately $218 million in revenue, representing a significant and growing component of Verimark's overall business.
6. Renata Solis-Vega serves as Senior Vice President and General Counsel of Verimark. Martin Holcomb serves as Executive Vice President and Chief Financial Officer. Deidre Langston serves as Senior Vice President, Franchise Operations, and oversees franchise compliance, including the monitoring and auditing of franchisee financial performance and reporting obligations.
B. Defendant Coastal Palms Franchise Holdings LLC
7. Defendant Coastal Palms Franchise Holdings LLC is a limited liability company organized and existing under the laws of the State of Florida, with its principal office located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108. Coastal Palms' registered agent is Garrison Registered Agents LLC, located at 100 S. Ashley Drive, Suite 600, Tampa, Florida 33602.
8. Coastal Palms is Verimark's single largest franchise operator. As of the date of this Complaint, Coastal Palms operates twenty-two (22) franchised hotel properties under Verimark's branded flags, consisting of eighteen (18) "Verimark Suites" properties and four (4) "Verimark Select" properties. These properties are located throughout the State of Florida and the coastal region of the State of Georgia and collectively comprise approximately 3,740 total guest rooms.
9. Coastal Palms' principal members and their respective equity interests are as follows: Randall "Randy" Brecker, who serves as Managing Member and holds a sixty percent (60%) equity interest; Theresa Brecker, who holds a fifteen percent (15%) equity interest and is the spouse of Randall Brecker; and Nolan Prescott, who holds a twenty-five percent (25%) equity interest as a passive investor and retired commercial real estate developer. Brecker exercises sole operational control over Coastal Palms and directs all aspects of its business, including the reporting of financial information to Verimark.
10. For the fiscal year ending December 31, 2021, Coastal Palms reported GRR to Verimark of approximately $112.4 million across its twenty-two franchised properties. However, Verimark's forensic accounting analysis, conducted by Thornbury & Associates CPAs LLP as described herein, estimates that Coastal Palms' true GRR for fiscal year 2021 was approximately $145.6 million—reflecting an underreporting of approximately $33.2 million for that single fiscal year alone.
C. Defendant Randall Brecker
11. Defendant Randall Brecker is a natural person residing in Naples, Collier County, Florida. Brecker is approximately fifty-eight (58) years of age. He serves as the Managing Member and sixty percent (60%) equity holder of Coastal Palms Franchise Holdings LLC. He also serves as President of Suncoast Room Management Inc. and as Managing Member of both Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC.
12. Brecker is a former hotel general manager who built the Coastal Palms portfolio from a single Verimark Suites property acquired in 2007 to a twenty-two-hotel portfolio spanning two states. Throughout the relevant period, Brecker personally directed and supervised the revenue-diversion scheme detailed herein, including the establishment of Suncoast as an undisclosed revenue-collection vehicle, the creation and operation of the unbranded booking website gulfcoastrooms.com, and the implementation of the improper OTA commission-netting methodology used to reduce reported GRR.
D. Defendant Suncoast Room Management Inc.
13. Defendant Suncoast Room Management Inc. is a corporation organized and existing under the laws of the State of Florida. Randall Brecker serves as its President and sole director. Suncoast's principal office is located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108.
14. Suncoast was established no later than January 2013 as an affiliated management company. Its primary function was to collect revenues from direct bookings at Coastal Palms' franchised hotel properties, including walk-in guests, corporate-direct contracts negotiated outside of Verimark's central reservation system, and bookings received through the unbranded website gulfcoastrooms.com. Suncoast also operated and maintained gulfcoastrooms.com as an independent booking platform that competed directly with Verimark's branded reservation channels.
15. Upon receiving guest-room revenue from these direct-booking sources, Suncoast retained a twelve percent (12%) "management fee" before remitting the remaining balance to the relevant property-level entities, including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC. Neither Suncoast's collections nor the management fee it retained were reported to Verimark as part of GRR at any time during the 2013–2021 period.
E. Defendant Gulf Breeze Hospitality LLC
16. Defendant Gulf Breeze Hospitality LLC is a limited liability company organized and existing under the laws of the State of Florida. Randall Brecker serves as its Managing Member. Gulf Breeze's principal office is located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108.
17. Gulf Breeze owns and operates six (6) Verimark Suites properties located in Southwest Florida. Gulf Breeze is one of the property-level entities through which diverted revenues were funneled and from which materially understated GRR reports were submitted to Verimark during the relevant period.
F. Defendant Savannah Lodging Partners LLC
18. Defendant Savannah Lodging Partners LLC is a limited liability company organized and existing under the laws of the State of Georgia. Randall Brecker serves as its Managing Member. Savannah Lodging's principal office is located at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108.
19. Savannah Lodging owns and operates four (4) Verimark Suites properties located in coastal Georgia, including properties in the Savannah and Brunswick metropolitan areas. Savannah Lodging is one of the property-level entities through which diverted revenues were funneled and from which materially understated GRR reports were submitted to Verimark during the relevant period.
II. JURISDICTION AND VENUE
20. This Court has subject-matter jurisdiction over this action pursuant to Article V, Section 5 of the Florida Constitution and Sections 26.012(2)(a) and 86.011 of the Florida Statutes, as the amount in controversy exceeds Thirty Thousand Dollars ($30,000.00), exclusive of interest, attorneys' fees, and costs, and this action involves claims for declaratory relief under the Florida Declaratory Judgment Act.
21. Venue is proper in Broward County, Florida, pursuant to Section 47.011 of the Florida Statutes and, independently, pursuant to the mandatory forum-selection provision contained in each of the twenty-two (22) FLAs at issue. Specifically, each FLA designates Broward County, Florida, as the exclusive forum for the resolution of any and all disputes arising out of or relating to the FLA or the franchise relationship between the parties. Each FLA further provides that the franchisee consents to the exclusive jurisdiction and venue of the courts of Broward County, Florida, and waives any objection to such venue based on inconvenient forum or any other ground.
22. This Court has personal jurisdiction over Defendant Coastal Palms Franchise Holdings LLC, which is a Florida limited liability company that maintains its principal office in the State of Florida and conducts business throughout the state.
23. This Court has personal jurisdiction over Defendant Randall Brecker, who is a natural person residing in Naples, Collier County, Florida.
24. This Court has personal jurisdiction over Defendant Suncoast Room Management Inc., which is a Florida corporation that maintains its principal office in the State of Florida and conducts business throughout the state.
25. This Court has personal jurisdiction over Defendant Gulf Breeze Hospitality LLC, which is a Florida limited liability company that maintains its principal office in the State of Florida and owns and operates hotel properties within the state.
26. This Court has personal jurisdiction over Defendant Savannah Lodging Partners LLC pursuant to Section 48.193 of the Florida Statutes (Florida's long-arm statute). Savannah Lodging, although organized under the laws of the State of Georgia, transacts substantial and not isolated business activity in the State of Florida, including maintaining its principal office address in Naples, Florida; operating under the direction and control of its Managing Member, Randall Brecker, a Florida resident; entering into franchise agreements governed by Florida law with a Florida-based franchisor; and submitting monthly financial reports to Verimark at its Fort Lauderdale, Florida headquarters. The causes of action asserted herein arise out of Savannah Lodging's business activities in and directed toward the State of Florida.
III. GENERAL ALLEGATIONS
A. The Franchise Relationship
27. On or about June 15, 2007, Coastal Palms entered into its first Franchise License Agreement with Verimark for a single "Verimark Suites" hotel property located in Naples, Collier County, Florida (the "Original FLA"). The Original FLA granted Coastal Palms the right to operate the hotel under the Verimark Suites brand and to use Verimark's trademarks, trade names, proprietary reservation systems, marketing platforms, and operational standards in connection with the operation of that property.
28. Over the ensuing twelve years, Coastal Palms executed a total of twenty-two (22) individual FLAs with Verimark for hotel properties located throughout the State of Florida and the coastal region of the State of Georgia. The most recent FLA was executed on or about September 3, 2019, for a Verimark Select property located in Jacksonville, Duval County, Florida. The property-level entities that are signatories to certain of these FLAs include Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC, each acting under the direction and control of Coastal Palms and Randall Brecker.
29. Each of the twenty-two FLAs has an initial term of twenty (20) years from its respective effective date and is governed by the laws of the State of Florida, as expressly provided in each agreement's choice-of-law provision. While the FLAs were executed at various times over the twelve-year period from 2007 to 2019, each FLA is substantially identical in its material financial terms, including the provisions governing the calculation and payment of royalties, marketing-fund contributions, and technology fees based upon Gross Room Revenue.
B. Key FLA Financial Provisions
30. Royalties (FLA § 4.1). Under Section 4.1 of each FLA, the franchisee is required to pay Verimark a continuing royalty equal to five percent (5%) of Gross Room Revenue. The term "Gross Room Revenue" is defined in Section 4.1 as "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This definition is intentionally broad and was designed to capture all guest-room revenue regardless of the mechanism by which it was generated, the platform through which a reservation was booked, or the corporate entity that initially collected the payment from the guest. The royalty is payable monthly within fifteen (15) calendar days following the close of each calendar month.
31. Marketing-Fund Contribution (FLA § 4.2). Under Section 4.2 of each FLA, the franchisee is required to pay Verimark a marketing-fund contribution equal to two and one-half percent (2.5%) of Gross Room Revenue. These contributions are deposited into Verimark's system-wide marketing fund, which finances national and regional advertising, digital marketing campaigns, loyalty-program operations, and brand-awareness initiatives that benefit all Verimark-branded properties. The marketing-fund contribution is payable monthly, concurrent with the royalty payment.
32. Technology Fee (FLA § 4.3). Under Section 4.3 of each FLA, the franchisee is required to pay a technology fee of Twelve Dollars and Fifty Cents ($12.50) per available room per month. This fee supports Verimark's central reservation system, property-management system interfaces, revenue-management tools, cybersecurity infrastructure, and guest-facing technology platforms. The technology fee is adjusted annually by the Consumer Price Index ("CPI") but is capped at a maximum annual increase of three percent (3%). The franchisee is required to report the total number of available rooms at each property and to notify Verimark promptly of any increase in room count resulting from construction, renovation, or reconfiguration.
33. Reporting Obligations. Under the FLAs, the franchisee is required to report GRR to Verimark on a monthly basis, no later than fifteen (15) calendar days following the close of each calendar month. Each monthly GRR report must be prepared in accordance with Verimark's standard reporting format and must include a certification by an authorized representative of the franchisee that the reported figures are true, complete, and accurate in all material respects.
34. Late-Payment Interest (FLA § 4.6). Under Section 4.6 of each FLA, any amounts not timely paid by the franchisee shall bear interest at the rate of one and one-half percent (1.5%) per month, compounded monthly, from the date such payment was due until the date of payment. This interest provision applies to all underpayments of royalties, marketing-fund contributions, and technology fees.
C. FLA Audit and Breach Provisions
35. Audit Rights (FLA § 8.2). Under Section 8.2 of each FLA, Verimark is entitled to audit the franchisee's books and records, including all financial statements, bank records, tax returns, guest-folio data, property-management system records, and third-party booking-channel statements, upon ten (10) business days' written notice. The franchisee is required to provide full access to all such records and to cooperate with the audit process. If an audit reveals that the franchisee has underreported GRR by more than two percent (2%) of reported GRR for any audited period, the franchisee shall bear all costs of the audit, including fees of the auditing firm, travel expenses, and related professional costs.
36. Cure Period (FLA § 14.1). Under Section 14.1 of each FLA, upon Verimark's delivery of a written Notice of Material Breach, the franchisee must cure any material breach within thirty (30) days of the date of such notice. The cure must be complete and unconditional, including full payment of all amounts owed and implementation of corrective measures satisfactory to Verimark to prevent recurrence.
37. Incurable Breach (FLA § 14.2(c)). Section 14.2 of each FLA identifies certain categories of breach that are deemed "incapable of cure." Among these, Section 14.2(c) provides: "Systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." This provision reflects the parties' shared understanding that the trust and confidence underlying the franchise relationship cannot be restored once the franchisor discovers that the franchisee has engaged in a pattern of deliberate revenue concealment.
38. Liquidated Damages (FLA § 15.3). Under Section 15.3 of each FLA, upon termination of the agreement for cause, the franchisee shall owe Verimark liquidated damages equal to three times (3×) the trailing-twelve-month royalties for the terminated property, calculated on the basis of corrected GRR. The parties agreed at the time of execution of each FLA that actual damages resulting from early termination for cause would be difficult to calculate with certainty and that the liquidated-damages formula represents a reasonable estimate of Verimark's anticipated losses, including lost future royalty income, diminished brand value, system disruption, and the costs of re-franchising the property.
D. Coastal Palms' Revenue Diversion Scheme
39. Beginning no later than January 2013, Defendants implemented a systematic and deliberate scheme to divert hotel guest-room revenue away from Verimark's reporting systems and to understate the Gross Room Revenue upon which royalties, marketing-fund contributions, and technology fees were calculated and paid. The scheme was multi-faceted and evolved over the nine-year period from 2013 through 2021 as Defendants expanded their portfolio and refined their methods of revenue concealment.
40. As a central component of the scheme, Defendant Brecker established Suncoast Room Management Inc. as an affiliated management company whose primary purpose was to collect revenues from direct bookings at Coastal Palms' franchised hotel properties. These direct bookings included walk-in guests who arrived at the hotel without a prior reservation, corporate-direct contracts negotiated by Brecker and his team directly with corporate clients (bypassing Verimark's central reservation system and its affiliated corporate-booking platform), and bookings received through the unbranded website gulfcoastrooms.com, which Brecker caused Suncoast to create and operate.
41. The website gulfcoastrooms.com was designed to function as an independent, unbranded booking platform that listed available rooms at Coastal Palms' franchised properties without any reference to the Verimark brand, the Verimark Suites flag, or the Verimark Select flag. Guests booking through gulfcoastrooms.com were presented with property descriptions, photographs, and room rates that made no mention of the hotels' affiliation with Verimark, thereby creating the false impression that the hotels were independent, non-franchised properties. The website accepted online payments and directed guest-room revenue to bank accounts controlled by Suncoast, rather than to the property-level bank accounts from which GRR was reported to Verimark.
42. Upon collecting guest-room revenue from direct-booking sources, Suncoast retained a twelve percent (12%) "management fee" before remitting the remaining eighty-eight percent (88%) of the revenue to the relevant property-level entities, including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC. The management fee retained by Suncoast was not disclosed to Verimark and was not reported as part of GRR. Furthermore, the remaining eighty-eight percent of the revenue that Suncoast forwarded to the property-level entities was likewise never included in the GRR reports submitted to Verimark.
43. In addition to the direct-booking diversion, Defendants also engaged in a separate but related scheme to underreport revenue from third-party online travel agency ("OTA") channels, including major booking platforms. Specifically, Defendants classified net-rate OTA payments as "commissions receivable" and netted the OTA commissions against gross revenue before reporting GRR to Verimark. This netting methodology was a direct violation of Section 4.1 of each FLA, which defines GRR as "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." Under this unambiguous gross-revenue definition, OTA commissions are not deductible from GRR, and the full amount of the room rate charged to the guest must be reported as revenue, regardless of whether the OTA retains a commission or discount from the payment.
44. The revenue-diversion scheme was deliberately and affirmatively concealed from Verimark throughout the entire nine-year period. At no time between January 2013 and November 2021 did Defendants disclose to Verimark: (a) the existence of Suncoast Room Management Inc. or its role in collecting guest-room revenue; (b) the existence or operation of the gulfcoastrooms.com website; (c) the diversion of direct-booking revenue, including walk-in, corporate-direct, and web-booking revenue, outside of Verimark's reporting systems; (d) the retention of a twelve percent management fee by Suncoast on diverted revenues; or (e) the netting methodology applied to OTA revenues. Defendants affirmatively represented to Verimark, through their monthly GRR reports, that the figures reported therein were true, complete, and accurate, when in fact Defendants knew them to be materially understated.
E. Discovery of the Scheme — Whistleblower
45. On or about November 8, 2021, Janet Kerrigan, a former regional controller employed by Coastal Palms, contacted Verimark's confidential compliance hotline and reported the existence of the systematic revenue-diversion scheme described herein. Ms. Kerrigan had been employed by Coastal Palms as a regional controller from approximately March 2015 through October 2021, during which time she had direct knowledge of the financial reporting practices at multiple Coastal Palms-operated properties. Ms. Kerrigan's employment was terminated by Coastal Palms in October 2021, shortly before she made her report to Verimark.
46. In her initial report and subsequent interviews with Verimark's compliance team, Ms. Kerrigan described in detail: (a) Brecker's standing instructions to property-level controllers and front-desk managers to route walk-in bookings and corporate-direct bookings through Suncoast rather than through the Verimark-branded property-management system; (b) the operation of gulfcoastrooms.com as an unbranded, competing booking channel that diverted guest-room revenue from Verimark's reporting systems; (c) Suncoast's practice of retaining a twelve percent management fee on all diverted revenues; (d) the use of separate bank accounts controlled by Suncoast to receive and hold direct-booking revenue; and (e) Brecker's express direction that revenues collected through Suncoast were not to be included in the monthly GRR reports submitted to Verimark.
47. Ms. Kerrigan's report was received by Verimark's Vice President of Internal Audit, Gerald Farnsworth, who immediately escalated the matter to Senior Vice President and General Counsel Renata Solis-Vega and Senior Vice President of Franchise Operations Deidre Langston. Within forty-eight hours, Verimark assembled an internal investigation team consisting of members of its legal, compliance, internal audit, and franchise operations departments to assess the credibility and scope of the allegations.
F. Pre-Litigation Investigation and Audit
48. On or about November 22, 2021, following its initial internal assessment and determination that Ms. Kerrigan's allegations were credible and supported by preliminary documentary evidence, Verimark engaged Thornbury & Associates CPAs LLP to conduct a comprehensive franchise-compliance audit of Coastal Palms' franchised properties. The engagement was led by Malcolm Thornbury, CPA, Lead Audit Partner, at Thornbury & Associates' offices located at 1551 N. Flagler Drive, Suite 800, West Palm Beach, Florida 33401. Thornbury & Associates is a nationally recognized forensic-accounting firm with extensive experience in franchise-compliance auditing and revenue-verification engagements.
49. The initial phase of the audit focused on Coastal Palms' top ten (10) properties by reported GRR, encompassing hotel locations in Naples, Fort Myers, Sarasota, Tampa, Orlando, Jacksonville, and Savannah, Georgia. The audit team reviewed available property-management system data, bank records, OTA settlement statements, corporate-direct contracts, and tax filings for the fiscal years 2019 through 2021.
50. On or about January 18, 2022, Thornbury & Associates delivered its preliminary audit findings to Verimark. The preliminary findings indicated that the ten audited properties had underreported GRR by approximately twenty-six percent (26%) during the 2019–2021 period. The underreporting was attributable to two primary sources: (a) the complete exclusion of direct-booking revenues collected by Suncoast, which accounted for approximately eighteen percent (18%) of total guest-room revenue at the audited properties; and (b) the improper netting of OTA commissions against gross revenue, which accounted for an additional approximately eight percent (8%) of unrecognized revenue.
51. Based on these preliminary findings, and extrapolating the identified underreporting patterns across all twenty-two (22) Coastal Palms properties and the full nine-year period from 2013 through 2021, Thornbury & Associates estimated that Coastal Palms had underreported total GRR by approximately One Hundred Ninety-Seven Million Eight Hundred Thousand Dollars ($197,800,000.00). The rate of underreporting varied by property and year, ranging from approximately twenty-two percent (22%) to thirty-one percent (31%) depending on the property's mix of booking channels and the volume of direct bookings routed through Suncoast.
G. Notice of Material Breach and Failure to Cure
52. On February 4, 2022, Verimark issued a formal Notice of Material Breach (the "Notice") to Coastal Palms pursuant to Section 14.1 of each FLA. The Notice was sent by certified mail, return receipt requested, and by email to Coastal Palms' principal office at 9500 Gulf Shore Drive, Suite 450, Naples, Florida 34108, and to Brecker individually. A copy of the Notice was simultaneously transmitted to Nathan Whitfield III at Whitfield, Barrow & Crane LLP, counsel of record for Coastal Palms.
53. The Notice identified the systematic underreporting of GRR as a material breach of each of the twenty-two FLAs, specifically citing violations of Sections 4.1 (royalty obligations), 4.2 (marketing-fund contribution obligations), 4.3 (technology-fee obligations), and the monthly GRR reporting requirements. The Notice further stated that, pursuant to Section 14.2(c) of each FLA, "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure," and that Verimark reserved all rights and remedies available to it under the FLAs and applicable law, including the right to terminate each FLA for cause and to pursue liquidated damages under Section 15.3.
54. On or about February 28, 2022, Coastal Palms' counsel, Whitfield, Barrow & Crane LLP, acting through Nathan Whitfield III, responded to the Notice by letter. In that response, Coastal Palms denied that any material breach of the FLAs had occurred. Coastal Palms asserted that the revenues collected by Suncoast were properly excluded from GRR under what it characterized as a "reasonable interpretation" of the FLA's revenue-reporting provisions, contending that Suncoast was a separate entity and that revenues it collected did not fall within the GRR definition. Coastal Palms further asserted that its netting of OTA commissions was consistent with industry practice and the parties' course of dealing. Coastal Palms did not tender any cure, did not offer to pay any amount in satisfaction of underpaid royalties, marketing contributions, or technology fees, and did not take any corrective action to address the underreporting.
55. The thirty-day cure period prescribed by Section 14.1 of each FLA expired on March 6, 2022. No cure was tendered by Coastal Palms or any other Defendant during the cure period or at any time thereafter. Coastal Palms' purported defense—that revenues collected by a wholly controlled affiliated entity in connection with guest-room rentals at Verimark-branded properties somehow fall outside the FLA's comprehensive GRR definition—is without merit and is contradicted by the plain language of Section 4.1, which encompasses "all revenues derived from or attributable to the rental of guest rooms at the Hotel ... regardless of the entity collecting such revenue."
56. Coastal Palms' systematic underreporting of GRR constitutes a material breach of each of the twenty-two FLAs. Such breach is, by the express terms of Section 14.2(c) of each FLA, incapable of cure.
H. Damages Summary
57. Based upon the forensic analysis conducted by Thornbury & Associates CPAs LLP and Verimark's own internal analysis, Verimark's damages are summarized as follows:
58. Cumulative Underreported GRR (2013–2021): Approximately $197,800,000.00. The rate of underreporting ranged from approximately twenty-two percent (22%) to thirty-one percent (31%) depending on the individual property and the fiscal year in question, with the rate of underreporting generally increasing over time as the volume of direct bookings routed through Suncoast grew.
59. Underpaid Royalties (5% of $197.8 Million): Approximately $9,890,000.00. This figure represents the difference between the royalties that Coastal Palms and the property-level entities were required to pay under the FLAs and the royalties they actually paid, based on the understated GRR figures reported to Verimark.
60. Underpaid Marketing-Fund Contributions (2.5% of $197.8 Million): Approximately $4,945,000.00. This figure represents the shortfall in marketing-fund contributions resulting from the underreported GRR.
61. Underpaid Technology Fees: Approximately $1,260,000.00. This figure is based on Defendants' failure to notify Verimark of the addition of approximately 214 guest rooms across four (4) properties over a period averaging approximately forty-seven (47) months. At the contractual rate of $12.50 per available room per month (subject to CPI adjustments), the resulting underpayment totals approximately $1,260,000.00.
62. Subtotal of Direct Underpayments: Approximately $16,095,000.00, representing the sum of underpaid royalties ($9,890,000.00), underpaid marketing-fund contributions ($4,945,000.00), and underpaid technology fees ($1,260,000.00).
63. Contractual Late-Payment Interest: Pursuant to Section 4.6 of each FLA, underpaid amounts bear interest at the rate of 1.5% per month, compounded monthly, from the date each payment was due. As calculated through the projected judgment date, the accrued contractual late-payment interest totals approximately $28,400,000.00.
64. Liquidated Damages (FLA § 15.3): Upon termination of each of the twenty-two FLAs for cause, the franchisee owes liquidated damages equal to three times (3×) the trailing-twelve-month corrected royalties for each terminated property. The trailing-twelve-month corrected royalties for all twenty-two properties aggregate to approximately $7,280,000.00 per year, calculated on a per-property basis using corrected GRR figures that account for the diverted revenue. Applying the 3× multiplier on a per-property basis and aggregating the results across all twenty-two properties yields total liquidated damages of approximately $105,500,000.00.
65. Grand Total Claimed: Approximately $150,000,000.00, comprising direct underpayments of $16,095,000.00, contractual late-payment interest of $28,400,000.00, and liquidated damages of $105,500,000.00. This total does not include punitive damages, consequential damages, attorneys' fees, or costs, which are sought in addition to the foregoing amounts.
IV. COUNTS
COUNT I — BREACH OF CONTRACT (ROYALTIES) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)
66. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
67. Verimark and Coastal Palms, individually and through its property-level entities including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC, entered into twenty-two (22) valid, binding, and enforceable Franchise License Agreements. Each FLA constitutes a legally binding contract supported by adequate consideration, including Verimark's grant of the right to operate a hotel under one of its branded flags, access to its proprietary reservation and management systems, ongoing marketing support, and the goodwill associated with the Verimark brand.
68. Under Section 4.1 of each FLA, the franchisee is required to pay Verimark a continuing royalty equal to five percent (5%) of Gross Room Revenue. The GRR definition in Section 4.1 encompasses "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This definition is clear and unambiguous and was intended by the parties to capture the full universe of guest-room revenue without exception.
69. Verimark performed all conditions, covenants, and obligations required to be performed by it under each FLA, or was excused from performance thereof.
70. Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging materially breached Section 4.1 of each FLA by systematically excluding from their GRR reports revenues collected by Suncoast Room Management Inc., including revenues from direct bookings, walk-in guests, corporate-direct contracts, and bookings through the unbranded website gulfcoastrooms.com. Defendants further breached Section 4.1 by improperly netting OTA commissions against gross revenue, thereby reducing the reported GRR below the true amount of guest-room revenue generated at each property. These exclusions and deductions were contrary to the plain language of the GRR definition and resulted in the systematic underpayment of royalties over the nine-year period from 2013 through 2021.
71. Over the 2013–2021 period, Defendants underreported GRR by an estimated $197,800,000.00, resulting in underpaid royalties of approximately $9,890,000.00 (calculated as 5% of $197,800,000.00 in underreported GRR).
72. In addition to the underpaid royalties, Verimark is entitled to contractual late-payment interest at the rate of 1.5% per month, compounded monthly, on all underpaid amounts from the respective due dates through the date of payment, pursuant to Section 4.6 of each FLA. As calculated through the projected judgment date, accrued late-payment interest totals approximately $28,400,000.00.
73. Verimark is further entitled to liquidated damages upon termination of each of the twenty-two FLAs for cause, in the amount of three times (3×) the trailing-twelve-month corrected royalties for each terminated property, pursuant to Section 15.3 of each FLA. The aggregate liquidated damages across all twenty-two properties total approximately $105,500,000.00.
74. As a direct and proximate result of Defendants' breach, Verimark has suffered damages and will continue to suffer damages.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC, jointly and severally, for underpaid royalties of $9,890,000.00, contractual late-payment interest of approximately $28,400,000.00, liquidated damages of $105,500,000.00 pursuant to FLA § 15.3, attorneys' fees and costs as provided by the FLAs and applicable law, and such other and further relief as this Court deems just and proper.
COUNT II — BREACH OF CONTRACT (MARKETING-FUND CONTRIBUTIONS) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)
75. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
76. Under Section 4.2 of each FLA, the franchisee is required to pay Verimark a marketing-fund contribution equal to two and one-half percent (2.5%) of Gross Room Revenue, payable monthly. These contributions fund Verimark's system-wide marketing initiatives, which benefit all franchised properties in the Verimark system.
77. By systematically underreporting GRR by an estimated $197,800,000.00 over the 2013–2021 period, as described above, Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging underpaid their marketing-fund contribution obligations under Section 4.2 of each FLA.
78. The aggregate underpayment of marketing-fund contributions totals approximately $4,945,000.00, calculated as 2.5% of $197,800,000.00 in underreported GRR.
79. Defendants' systematic underpayment of marketing-fund contributions constitutes a material breach of Section 4.2 of each FLA.
80. In addition to the underpaid marketing contributions, Verimark is entitled to contractual late-payment interest at the rate of 1.5% per month, compounded monthly, on all underpaid amounts from the respective due dates through the date of payment, pursuant to Section 4.6 of each FLA.
81. As a direct and proximate result of Defendants' breach, Verimark has suffered damages and will continue to suffer damages.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC, jointly and severally, for underpaid marketing-fund contributions of $4,945,000.00, contractual late-payment interest on such underpayments, attorneys' fees and costs as provided by the FLAs and applicable law, and such other and further relief as this Court deems just and proper.
COUNT III — BREACH OF CONTRACT (TECHNOLOGY FEES) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)
82. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
83. Under Section 4.3 of each FLA, the franchisee is required to pay a technology fee of $12.50 per available room per month, adjusted annually by the Consumer Price Index but capped at a maximum annual increase of three percent (3%). The franchisee is further required to report the total number of available rooms at each property and to notify Verimark promptly of any increase in room count.
84. Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging added approximately 214 guest rooms across four (4) properties without providing any notice to Verimark and without paying the required technology fees on those additional rooms. These room additions occurred at various times during the relevant period and went unreported for an average of approximately forty-seven (47) months.
85. The resulting underpayment of technology fees totals approximately $1,260,000.00, calculated as 214 rooms multiplied by $12.50 per room per month (subject to CPI adjustments) multiplied by an average of approximately 47 months.
86. Defendants' failure to report the addition of rooms and to pay the corresponding technology fees constitutes a material breach of Section 4.3 of each FLA.
87. In addition to the underpaid technology fees, Verimark is entitled to contractual late-payment interest at the rate of 1.5% per month, compounded monthly, pursuant to Section 4.6 of each FLA.
88. As a direct and proximate result of Defendants' breach, Verimark has suffered damages and will continue to suffer damages.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC, jointly and severally, for underpaid technology fees of $1,260,000.00, contractual late-payment interest on such underpayments, attorneys' fees and costs as provided by the FLAs and applicable law, and such other and further relief as this Court deems just and proper.
COUNT IV — BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING (Against Coastal Palms Franchise Holdings LLC and Randall Brecker)
89. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
90. Under Florida law, every contract contains an implied covenant of good faith and fair dealing. The implied covenant obligates each party to a contract to refrain from doing anything that would have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.
91. Each of the twenty-two FLAs between Verimark and Coastal Palms (and its affiliated property-level entities) contains an implied covenant of good faith and fair dealing.
92. Defendants Coastal Palms and Brecker violated the implied covenant of good faith and fair dealing by engaging in the following conduct, each act of which was designed to frustrate Verimark's contractual right to receive accurate GRR reports and the full payment of royalties, marketing contributions, and technology fees:
(a) Establishing Suncoast Room Management Inc. as a vehicle to collect and divert guest-room revenues outside of Verimark's reporting systems, thereby ensuring that a significant portion of GRR would never be reported to or known by Verimark;
(b) Creating and operating gulfcoastrooms.com as an unbranded, competing booking channel that redirected potential guests away from Verimark's branded reservation systems and generated revenue that was deliberately excluded from GRR reports;
(c) Deliberately structuring direct-booking transactions, including walk-in bookings and corporate-direct contracts, to route them through Suncoast rather than through the Verimark-branded property-management systems, thereby circumventing the GRR reporting requirements of the FLAs;
(d) Implementing a netting methodology for OTA commissions that artificially reduced reported GRR below the true level of guest-room revenue, in contravention of the FLAs' gross-revenue definition; and
(e) Actively concealing the foregoing scheme from Verimark for a period of approximately nine years (2013–2021), during which time Defendants submitted monthly GRR reports that they knew to be materially false and misleading.
93. These actions, individually and collectively, frustrated Verimark's contractual right to receive accurate financial information and full payment of all amounts due under the FLAs. Defendants' conduct was undertaken in bad faith and with the deliberate intent to deprive Verimark of the economic benefits of its franchise agreements.
94. As a direct and proximate result of Defendants' breach of the implied covenant of good faith and fair dealing, Verimark has suffered damages and will continue to suffer damages in an amount to be determined at trial.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC and Randall Brecker for damages in an amount to be determined at trial, attorneys' fees and costs as provided by applicable law, and such other and further relief as this Court deems just and proper.
COUNT V — FRAUDULENT CONCEALMENT (Against Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc.)
95. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
96. Defendants Coastal Palms, Brecker, and Suncoast had a duty to disclose to Verimark the true Gross Room Revenue generated at each of the twenty-two franchised hotel properties. This duty arose from the express provisions of the FLAs requiring monthly GRR reporting, from the fiduciary-like obligations inherent in the franchise relationship, and from the fact that Defendants possessed superior knowledge of the true revenue figures that was not available to Verimark through any independent means.
97. Defendants actively and deliberately concealed material facts from Verimark over a period of approximately nine years (2013–2021), including, but not limited to:
(a) The existence of Suncoast Room Management Inc. and its role in collecting guest-room revenue at Coastal Palms' franchised properties;
(b) The creation and operation of gulfcoastrooms.com as an unbranded booking website that listed available rooms at Verimark-branded properties without reference to the Verimark brand or flags;
(c) The diversion of direct-booking revenue—including walk-in bookings, corporate-direct bookings, and web bookings through gulfcoastrooms.com—outside of Verimark's property-management and reporting systems;
(d) Suncoast's retention of a twelve percent (12%) "management fee" on all diverted revenues, which was never disclosed to Verimark and never included in GRR;
(e) The netting of OTA commissions against gross revenue in preparing GRR reports, resulting in the understatement of reported GRR; and
(f) The true aggregate amount of guest-room revenue generated at each franchised property, which was materially higher than the GRR figures reported to Verimark in each month of the nine-year period.
98. Defendants' concealment of these material facts was intentional and deliberate. Defendants knew that Verimark relied on the accuracy of the monthly GRR reports in order to calculate and collect royalties, marketing-fund contributions, and technology fees; to manage and allocate resources within the Verimark franchise system; to assess the financial performance of franchised properties; and to prepare Verimark's own consolidated financial statements for public reporting purposes. Defendants intended to deceive Verimark and to avoid paying the full amount of royalties, marketing contributions, and technology fees owed under the FLAs.
99. Verimark justifiably relied on the GRR reports submitted by Defendants. Verimark had no independent means of verifying the completeness of the reported GRR figures without conducting a forensic audit, which was not triggered until the whistleblower report of November 8, 2021. The FLAs imposed a duty of honest and accurate reporting on the franchisee, and Verimark was entitled to rely on the franchisee's compliance with that duty.
100. As a direct and proximate result of Defendants' fraudulent concealment, Verimark suffered damages in the amount of at least $16,095,000.00 in direct underpayments (comprising underpaid royalties, marketing contributions, and technology fees), plus contractual late-payment interest, plus consequential damages including the costs of investigation and forensic auditing, damage to the integrity of Verimark's franchise system, and harm to Verimark's financial reporting and investor relations.
101. Defendants' conduct was willful, wanton, malicious, and in reckless disregard of Verimark's rights, and warrants the imposition of punitive damages in an amount sufficient to punish Defendants and deter similar conduct in the future.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc., jointly and severally, for compensatory and consequential damages in an amount to be determined at trial, punitive damages, attorneys' fees and costs as provided by applicable law, and such other and further relief as this Court deems just and proper.
COUNT VI — NEGLIGENT MISREPRESENTATION (Against Coastal Palms Franchise Holdings LLC and Randall Brecker)
102. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
103. Defendants Coastal Palms and Brecker owed Verimark a duty of care in preparing and providing financial information under the FLAs, including the monthly GRR reports required by each FLA. This duty arose from the contractual reporting obligations under the FLAs, from the special relationship between franchisor and franchisee, and from the foreseeability that Verimark would rely upon the accuracy and completeness of the information provided.
104. Defendants negligently prepared and submitted monthly GRR reports to Verimark over the period from January 2013 through November 2021 that materially understated the actual guest-room revenue generated at the twenty-two franchised hotel properties. Defendants failed to exercise reasonable care in compiling and reporting GRR by omitting from those reports all revenues collected by Suncoast Room Management Inc. and by improperly netting OTA commissions against gross revenue.
105. Even assuming, arguendo, that Defendants' conduct did not rise to the level of intentional fraud, Defendants at a minimum failed to exercise reasonable care to ensure that their GRR reports were complete and accurate. A reasonable franchise operator exercising ordinary care in the preparation of GRR reports would have included all revenues attributable to the rental of guest rooms at the franchised properties, regardless of the corporate entity that collected such revenue, and would not have netted commissions or fees against gross revenue without prior written authorization from the franchisor.
106. Verimark relied upon the accuracy and completeness of the GRR reports submitted by Defendants in managing its franchise system, allocating marketing resources and brand-development expenditures, evaluating franchisee performance, benchmarking properties against system-wide metrics, and preparing Verimark's own consolidated financial statements and public disclosures to investors and the Securities and Exchange Commission.
107. As a direct and proximate result of Defendants' negligent misrepresentations, Verimark suffered damages, including but not limited to the receipt of underpaid royalties, marketing contributions, and technology fees, and the misallocation of corporate resources based on inaccurate financial information.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against Defendants Coastal Palms Franchise Holdings LLC and Randall Brecker, jointly and severally, for compensatory damages in an amount to be determined at trial, attorneys' fees and costs as provided by applicable law, and such other and further relief as this Court deems just and proper.
COUNT VII — UNJUST ENRICHMENT (IN THE ALTERNATIVE) (Against All Defendants)
108. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
109. This Count is pled in the alternative to the breach-of-contract claims set forth in Counts I through III, to the extent that the Court determines that any of the FLAs are unenforceable, ambiguous, or otherwise inapplicable to any Defendant or to any portion of the diverted revenues.
110. Verimark conferred substantial benefits upon Defendants, including the right to operate hotels under the Verimark brand, access to Verimark's proprietary reservation and management systems, participation in Verimark's system-wide marketing campaigns and loyalty programs, and the goodwill and customer recognition associated with the Verimark Suites and Verimark Select flags. These benefits enabled Defendants to generate guest-room revenue at levels far exceeding what independent, unbranded hotel properties would have achieved.
111. Defendants received a direct and quantifiable benefit at Verimark's expense by retaining revenues that should have been reported as GRR and upon which royalties, marketing-fund contributions, and technology fees were owed. By underreporting GRR, Defendants avoided paying at least $16,095,000.00 in contractually required fees. In addition, Suncoast retained a twelve percent (12%) management fee on diverted revenues, further enriching Defendants at Verimark's expense.
112. Defendants had knowledge of the benefits they received and the detriment suffered by Verimark. Defendants deliberately structured their operations to maximize the revenue diverted away from Verimark's reporting systems and to minimize the fees payable to Verimark.
113. Under the circumstances, it would be inequitable and unjust for Defendants to retain these benefits without compensating Verimark. Equity and good conscience require that Defendants disgorge the amounts by which they were unjustly enriched.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter judgment in its favor and against all Defendants, jointly and severally, for restitution in an amount to be determined at trial, and such other and further relief as this Court deems just and proper.
COUNT VIII — DECLARATORY JUDGMENT (FLA TERMINATION) (Against Coastal Palms Franchise Holdings LLC, Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)
114. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
115. This Court has jurisdiction to render declaratory judgments pursuant to Chapter 86 of the Florida Statutes.
116. A bona fide, actual, present, and practical controversy exists between Verimark, on the one hand, and Defendants Coastal Palms, Gulf Breeze, and Savannah Lodging, on the other hand, regarding Verimark's right to terminate each of the twenty-two FLAs for cause. This controversy is ripe for adjudication. On February 28, 2022, through counsel, Coastal Palms expressly denied that any material breach had occurred, contested Verimark's interpretation of the FLAs' GRR definition, and refused to tender any cure. Accordingly, the parties are in direct and irreconcilable disagreement as to whether Defendants' conduct constitutes a material breach of the FLAs and whether Verimark is entitled to terminate the franchise relationships.
117. Under Section 14.2(c) of each FLA, "systematic underreporting of Gross Room Revenue shall constitute a material breach that is incapable of cure." The allegations set forth herein establish that Defendants engaged in systematic underreporting of GRR over a nine-year period from 2013 through 2021, involving the diversion of direct-booking revenues through an undisclosed affiliated entity, the operation of an unbranded competing booking website, and the improper netting of OTA commissions. This conduct constitutes the paradigm of "systematic underreporting" as contemplated by Section 14.2(c).
118. On February 4, 2022, Verimark issued a Notice of Material Breach pursuant to Section 14.1 of each FLA. The thirty-day cure period expired on March 6, 2022, with no cure tendered. Accordingly, all conditions precedent to Verimark's exercise of its termination rights under the FLAs have been satisfied.
119. Verimark seeks a declaration from this Court that:
(a) Defendants' systematic underreporting of Gross Room Revenue constitutes a material breach of each of the twenty-two FLAs;
(b) Such breach is incapable of cure under Section 14.2(c) of each FLA;
(c) Verimark is entitled to terminate each of the twenty-two FLAs for cause, effective immediately upon the entry of a declaratory judgment or at such earlier date as this Court may determine; and
(d) Upon termination, Verimark is entitled to liquidated damages under Section 15.3 of each FLA, in the aggregate amount of approximately $105,500,000.00.
120. A declaratory judgment in Verimark's favor will serve a useful purpose in resolving the parties' dispute and will afford Verimark relief from the ongoing uncertainty regarding its rights under the FLAs.
WHEREFORE, Plaintiff Verimark Hospitality Group Inc. respectfully requests that this Court enter a declaratory judgment as described above, together with attorneys' fees and costs as provided by the FLAs, Chapter 86 of the Florida Statutes, and applicable law, and such other and further relief as this Court deems just and proper.
COUNT IX — ACCOUNTING (Against Coastal Palms Franchise Holdings LLC, Suncoast Room Management Inc., Gulf Breeze Hospitality LLC, and Savannah Lodging Partners LLC)
121. Plaintiff Verimark re-alleges and incorporates by reference the allegations contained in Paragraphs 1 through 65 above as though fully set forth herein.
122. The complex and intertwined financial relationships among Defendants—including the flow of revenues from hotel guests to Suncoast, the retention of the twelve percent manageme

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

GENERAL JURISDICTION DIVISION

COMPLAINT

INTRODUCTORY STATEMENT

I. THE PARTIES

II. JURISDICTION AND VENUE

III. GENERAL ALLEGATIONS

IV. COUNTS

Record

Parties

Dates

Amounts