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

CIVIL DIVISION

CASE NO.: 1021-00006

VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,

Plaintiff,

COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company; RANDALL BRECKER, individually; and SUNCOAST ROOM MANAGEMENT INC., a Florida corporation,

Defendants.

___________/

PLAINTIFF'S REPLY IN SUPPORT OF MOTION TO COMPEL PRODUCTION OF SUNCOAST ROOM MANAGEMENT INC. FINANCIAL RECORDS

Before the Honorable Richard M. Calloway, Circuit Judge Filed: October 14, 2022

Plaintiff Verimark Hospitality Group Inc. ("Verimark" or "Plaintiff") respectfully submits this Reply in Support of its Motion to Compel Production of Suncoast Room Management Inc. Financial Records (the "Motion to Compel") and states as follows:

INTRODUCTION

This Reply responds to the Opposition filed by Defendants Coastal Palms Franchise Holdings LLC ("Coastal Palms"), Randall Brecker ("Brecker"), and Suncoast Room Management Inc. ("Suncoast") (collectively, "Defendants") on or about October 3, 2022 (the "Opposition"), opposing Plaintiff Verimark Hospitality Group Inc.'s Motion to Compel Production of Suncoast Room Management Financial Records, which Verimark filed on September 15, 2022. For the reasons set forth below, the Opposition is without merit, and the Court should grant the Motion to Compel in its entirety.

The Motion to Compel seeks all financial records of Suncoast Room Management Inc., a Florida corporation through which Defendant Brecker collected and managed hotel guest-room revenues generated by no fewer than twenty-two (22) franchised hotel properties operating under the Verimark Suites and Verimark Select flags. The categories of records sought include, without limitation, bank statements, general ledgers and financial statements, management-fee invoices and fee calculations, online travel agency ("OTA") net-rate reconciliation reports, and all records related to the operation of the unbranded booking website gulfcoastrooms.com—a website that Defendants used to capture direct guest bookings without routing the resulting revenues through the Gross Room Revenue ("GRR") reporting mechanisms established by the parties' twenty-two Franchise License Agreements ("FLAs").

Defendants' Opposition rests on two principal arguments, neither of which withstands scrutiny. First, Defendants contend that Suncoast is a "separate legal entity" from Coastal Palms and that discovery directed at Coastal Palms does not encompass the financial records of Suncoast. Second, Defendants assert that the requests at issue are overbroad and unduly burdensome. Both arguments fail as a matter of law and fact.

The separate-entity objection is meritless for the straightforward reason that Suncoast is functionally controlled by the same individual—Defendant Randall "Randy" Brecker—who serves as Managing Member and sixty percent (60%) equity holder of Coastal Palms and as President of Suncoast. Under well-established Florida discovery principles, documents held by an entity under the control of a party are deemed within that party's "possession, custody, or control" for purposes of Florida Rule of Civil Procedure 1.350. Moreover, Suncoast is itself a named Defendant in this action, rendering the separate-entity objection doubly hollow: Suncoast's own records are directly discoverable from Suncoast as a party.

The overbreadth and burden objection fares no better. The requests at issue are narrowly tailored to Suncoast's financial records related to the twenty-two franchised hotel properties for the period 2013 through 2021—the very properties and time period at the heart of this litigation. Defendants have offered no declaration, no affidavit, and no evidence of any kind quantifying the alleged burden of complying with the requests. Conclusory assertions of burden are insufficient under Florida law to defeat a motion to compel production of directly relevant documents.

Most tellingly, Defendants' Opposition does not dispute the critical underlying fact: that Suncoast collected guest-room revenue from at least some of the twenty-two franchised hotel properties. Nor does the Opposition address the express language of FLA § 4.1, which defines Gross Room Revenue to include "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This contractual language was specifically designed to capture precisely the type of revenue-diversion arrangement that Defendants created through Suncoast, and Defendants' silence on this point is deafening.

Suncoast's financial records lie at the very center of this case. Without them, Verimark cannot calculate the true GRR for each franchised property in each year, and Verimark's forensic accounting expert cannot accurately determine the scope of the underpayments that form the basis of Plaintiff's claims. The Court should grant the Motion to Compel and order Defendants to produce all responsive Suncoast financial records within twenty-one (21) days.

I. PROCEDURAL BACKGROUND

A. The Motion to Compel

On September 15, 2022, Verimark filed its Motion to Compel Production of Suncoast Room Management Inc. Financial Records, together with a supporting memorandum of law and the Declaration of Yuki Nakamura (FL Bar No. 0119644), Lead Associate at Calderwood & Harkness LLP, counsel of record for Plaintiff. The Nakamura Declaration provided a detailed account of the discovery deficiencies at issue, attaching as exhibits the relevant Requests for Production, Defendants' deficient responses and objections, the parties' meet-and-confer correspondence, and excerpts from the FLAs.

The Motion to Compel seeks production of Suncoast's financial records as requested in Plaintiff's First Request for Production of Documents, which was served on Defendants on July 11, 2022 and contained one hundred forty-seven (147) individually numbered requests. The requests at issue in this motion are RFP Nos. 42 through 58, 71 through 85, and 112 through 127, which collectively target the following categories of Suncoast documents:

• Bank statements for all accounts through which Suncoast received, held, or disbursed revenues related to the twenty-two franchised hotel properties (RFP Nos. 42–48);

• General ledgers, trial balances, and financial statements of Suncoast for the period January 1, 2013 through December 31, 2021 (RFP Nos. 49–53);

• Management-fee invoices and fee calculation workpapers reflecting the management fees Suncoast charged to the property-level limited liability companies (RFP Nos. 54–58);

• Booking logs, reservation records, guest folios, and revenue data from the gulfcoastrooms.com website (RFP Nos. 71–79);

• Revenue reconciliation reports, settlement statements, and wire-transfer records between Suncoast and the property-level entities, including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC (RFP Nos. 80–85); and

• OTA contracts, net-rate agreements, commission schedules, and net-rate reconciliation reports processed through or managed by Suncoast (RFP Nos. 112–127).

These requests are precise, categorized, and limited to documents directly bearing on the calculation of Gross Room Revenue at the franchised hotel properties during the relevant period.

B. Prior Meet-and-Confer Efforts

Before filing the Motion to Compel, Verimark's counsel undertook good-faith efforts to resolve the discovery dispute without judicial intervention, as required by Florida Rule of Civil Procedure 1.380(a)(2) and Local Rule 7.01.

On August 22, 2022, Defendants served their initial document production in response to Plaintiff's First Request for Production. That production consisted of approximately eighty-four thousand (84,000) documents, comprising primarily property management system ("PMS") reports, selected corporate documents of Coastal Palms, and internal email correspondence. Notably, the production contained no financial records of Suncoast Room Management Inc. whatsoever—not a single bank statement, not a single general ledger entry, not a single management-fee invoice.

On August 30, 2022, Yuki Nakamura of Calderwood & Harkness LLP transmitted a detailed discovery deficiency letter to Gabriela Montes of Whitfield, Barrow & Crane LLP, counsel of record for all Defendants. The letter identified twenty-three (23) categories of deficient or missing documents from Defendants' initial production, including, as a principal category, the complete absence of any Suncoast financial records responsive to RFP Nos. 42–58, 71–85, and 112–127. The letter requested that Defendants supplement their production within fourteen (14) days and invited a telephonic meet-and-confer to discuss the identified deficiencies.

On September 6, 2022, counsel for the parties conducted a telephonic meet-and-confer to discuss the discovery deficiencies identified in the August 30, 2022 letter. During that conference, counsel for Coastal Palms—Ms. Montes—asserted for the first time that Suncoast Room Management Inc. was a "separate legal entity" from Coastal Palms and that, accordingly, discovery directed to Coastal Palms did not encompass Suncoast's records. Ms. Montes took the position that Verimark would need to pursue Suncoast's records through separate discovery or a subpoena. Verimark's counsel, Ms. Nakamura, disagreed with this characterization and advised that Verimark would file a motion to compel if the records were not produced.

On September 8, 2022, Ms. Nakamura sent a follow-up letter to Ms. Montes memorializing the substance of the September 6, 2022 telephonic conference, confirming the parties' inability to resolve the dispute, and reiterating Verimark's position that Suncoast's financial records are within Defendants' possession, custody, and control. Ms. Montes responded by email on September 12, 2022, confirming Defendants' position and declining to supplement the production.

Despite these good-faith meet-and-confer efforts, the parties were unable to resolve the dispute, necessitating the filing of the Motion to Compel on September 15, 2022 and, now, this Reply.

C. Defendants' Opposition

Defendants filed their Opposition to the Motion to Compel on or about October 3, 2022. The Opposition raises two arguments: (1) the "separate entity" objection, asserting that Suncoast is a separate legal entity whose records are beyond the scope of discovery directed at Coastal Palms; and (2) an overbreadth and undue burden objection, asserting that the requests are too broad and would impose an unreasonable burden on Defendants.

What the Opposition does not do is equally significant. The Opposition does not dispute that Suncoast collected guest-room revenue from at least some of the twenty-two franchised hotel properties. It does not address the definition of Gross Room Revenue under FLA § 4.1. It does not explain how Defendants' GRR reports to Verimark accounted for (or failed to account for) revenues collected by Suncoast. And it does not provide any declaration, affidavit, or other evidentiary support for the conclusory assertion that compliance with the requests would be unduly burdensome. These omissions are fatal to Defendants' position.

II. ARGUMENT

A. The Separate-Entity Objection Is Meritless

Defendants' primary argument—that Suncoast is a "separate legal entity" whose financial records cannot be compelled through discovery directed at Coastal Palms—is legally unsound, factually untenable, and transparently designed to shield the central evidence in this case from Plaintiff's review.

1. Randall Brecker Controls Both Coastal Palms and Suncoast. The undisputed record establishes that Defendant Randall "Randy" Brecker exercises complete managerial and operational control over both Coastal Palms and Suncoast, as well as the property-level entities through which the twenty-two franchised hotels are owned and operated.

Brecker is the Managing Member and holds a sixty percent (60%) equity interest in Coastal Palms Franchise Holdings LLC, the entity that executed each of the twenty-two Franchise License Agreements with Verimark and that is responsible for paying royalties, marketing-fund contributions, and technology fees based on reported Gross Room Revenue. As Managing Member, Brecker possesses sole and exclusive authority to manage the business and affairs of Coastal Palms under its operating agreement.

Brecker is simultaneously the President—and, upon information and belief, the sole officer and controlling shareholder—of Suncoast Room Management Inc., a Florida corporation that Brecker established no later than January 2013. As President of Suncoast, Brecker has plenary authority over the corporation's operations, its financial records, and its books and records. There is no officer, director, or shareholder of Suncoast who could or would deny Brecker access to any of Suncoast's records; Brecker is Suncoast.

Brecker also serves as Managing Member of the property-level entities through which individual hotels or groups of hotels are owned and operated, including, without limitation, Gulf Breeze Hospitality LLC (the entity that owns and operates six (6) Verimark Suites properties in Southwest Florida, including locations in Fort Myers, Naples, and Bonita Springs) and Savannah Lodging Partners LLC (the entity that owns and operates four (4) Verimark Suites properties in coastal Georgia, including locations in Savannah and Jekyll Island). These property-level entities are the same entities that received revenue remittances from Suncoast after the deduction of Suncoast's twelve percent (12%) management fee.

The purpose for which Suncoast was created is directly relevant to the claims in this case. Suncoast was established by Brecker to collect revenues from certain categories of direct bookings—including walk-in guests, corporate-direct contract bookings, and bookings made through the unbranded website gulfcoastrooms.com—at the same twenty-two hotel properties that are franchised under the Verimark Suites and Verimark Select flags pursuant to the FLAs at issue in this litigation. Suncoast retained a twelve percent (12%) "management fee" on these bookings before remitting the remaining revenue to the property-level LLCs. The existence of this arrangement, and the question of whether the revenues captured by Suncoast were properly reported as GRR, is the central disputed issue in this action.

In short, there is a complete unity of management and operational control between Coastal Palms, Suncoast, and the property-level entities. All roads lead to Randall Brecker. The suggestion that Suncoast's records are somehow beyond the reach of discovery directed at Defendants—a group that includes both Brecker individually and Suncoast as a named party—is, to put it charitably, untenable.

2. Florida discovery Rules Reach Records in a Party's Possession, Custody, or Control. The governing discovery standard is clear. Florida Rule of Civil Procedure 1.350(a) provides that a party may request another party to produce documents that are "in the possession, custody, or control of the party upon whom the request is served." The term "control" has been consistently and broadly construed by Florida courts to encompass not only documents physically held by the responding party, but also documents that the responding party has the legal right, authority, or practical ability to obtain from another person or entity.

Florida courts have repeatedly held that documents held by a separate entity are within a party's "control" for discovery purposes where the party exercises managerial authority, ownership, or other dominion over the entity holding the documents. See, e.g., Surf Drugs, Inc. v. Vermette, 236 So. 2d 108, 111 (Fla. 1970) (holding that documents of related entities are discoverable where the party has the "practical ability" to obtain them); Ashgrove Savings Bank v. Kaplan, 2015 WL 3442139, at *3 (M.D. Fla. May 28, 2015) (applying Florida law and noting that "control" under discovery rules "is broadly construed" and includes documents that a party could obtain "simply by asking" a related entity). The principle is straightforward: a party cannot avoid its discovery obligations by parking relevant documents in a sister entity that the same individual controls.

Here, Brecker controls both Coastal Palms and Suncoast. As Managing Member of Coastal Palms and President of Suncoast, he has the unquestioned legal right and practical ability to direct Suncoast to produce its financial records. There is no need for Coastal Palms to engage in arm's-length negotiations with a truly independent third party; Brecker can simply direct Suncoast to hand over the documents, just as he can direct any employee or department of Coastal Palms to do the same. Suncoast's financial records are therefore squarely within the "possession, custody, or control" of Defendants Coastal Palms and Brecker for purposes of Rule 1.350.

Moreover, Brecker is individually named as a Defendant in this action. Count X of Verimark's Complaint, filed March 7, 2022, asserts a claim for Civil Conspiracy against Brecker individually, alleging that Brecker conspired with Coastal Palms and Suncoast to divert revenues away from the GRR reporting framework and thereby reduce royalty and fee payments owed to Verimark. As President of Suncoast, Brecker has direct, personal access to and authority over all of Suncoast's financial records. A discovery request directed to Brecker individually plainly reaches documents within his control at Suncoast.

Finally, and dispositively, Suncoast Room Management Inc. is itself a named Defendant in this action. Verimark's Complaint asserts claims against Suncoast directly, including claims for unjust enrichment (Count VII), constructive trust (Count VIII), and civil conspiracy (Count X). As a named party, Suncoast is obligated to respond to discovery requests directed to it and to produce documents in its possession, custody, or control. The notion that Suncoast's own financial records are beyond the scope of discovery in an action in which Suncoast is a party is, quite simply, frivolous.

3. Defendants Cannot Shield Relevant Evidence Behind a Corporate Formality. Defendants' argument that Suncoast is a "separate legal entity" whose records are exempt from discovery directed at Coastal Palms amounts to using the very corporate structure that Defendants created as an instrumentality of revenue diversion to shield evidence of that diversion from judicial scrutiny. This is precisely the type of discovery obstruction that Florida courts have consistently rejected.

The separate-entity objection is unavailing where, as here, the same individual controls both the responding party and the entity holding the documents, and where the documents sought are directly relevant to the claims asserted against the responding party. Courts have recognized that permitting a party to resist production of clearly relevant documents on the basis of formal corporate separateness—where the party has practical control over those documents—would elevate form over substance and frustrate the truth-seeking function of civil discovery. See, e.g., Gertz v. Allen, 850 So. 2d 580, 582 (Fla. 4th DCA 2003) (Discovery rules should be liberally construed to facilitate the ascertainment of truth and the just determination of causes of action).

The contractual language of the FLAs underscores the frivolity of Defendants' position. FLA § 4.1 defines Gross Room Revenue as follows:

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

The phrase "regardless of the entity collecting such revenue" was specifically and deliberately included in the FLA definition to prevent a franchisee from evading its royalty and fee obligations by routing guest-room revenues through a separate entity. The FLA drafters—Verimark's franchising team—anticipated precisely the type of arrangement that Defendants implemented through Suncoast. The contractual definition of GRR sweeps in all guest-room revenues, without regard to whether those revenues are collected by Coastal Palms, by Suncoast, by the property-level LLCs, or by any other entity. Defendants agreed to this definition when they executed each of the twenty-two FLAs.

Against this backdrop, Defendants' assertion that Suncoast's financial records are irrelevant or beyond the scope of discovery is not merely wrong—it is an affirmative attempt to frustrate the discovery process and to prevent Verimark from proving its core claims. The Court should reject this tactic and compel production.

B. Suncoast Records Are Directly Relevant to GRR Calculation and the Claims at Issue

1. The Core Allegation: Systematic Revenue Diversion Through Suncoast. Verimark's Complaint, filed March 7, 2022, sets forth detailed allegations that Coastal Palms, acting through and in concert with Brecker and Suncoast, systematically underreported Gross Room Revenue over a nine-year period spanning from 2013 through 2021. The alleged mechanism of underreporting was twofold: (a) the diversion of direct-booking revenues through Suncoast and the gulfcoastrooms.com website, which revenues were excluded from the GRR reports submitted to Verimark; and (b) the improper classification and netting of net-rate OTA payments, whereby revenues received from online travel agencies were improperly reduced by "commissions" or "platform fees" before being reported as GRR, in violation of FLA § 4.1's gross-revenue definition.

The scope of the alleged underreporting is substantial. Verimark's pre-litigation compliance audit, conducted by Thornbury & Associates CPAs LLP pursuant to FLA § 8.2 (the audit-rights provision), yielded preliminary findings that were delivered to Verimark on January 18, 2022. Those findings indicated that the top ten (10) Coastal Palms properties, ranked by reported GRR, had underreported GRR by approximately twenty-six percent (26%) for the three-year period from 2019 through 2021. The Thornbury audit analyzed PMS data, bank deposit records, and limited STR (Penmark Enterprises) benchmarking data to estimate the magnitude of the discrepancy. However, the audit was constrained by the absence of Suncoast's financial records, which were not made available to Thornbury despite requests.

Extrapolating the preliminary audit findings across all twenty-two franchised properties and the full 2013 through 2021 period—a period coextensive with Suncoast's existence—Verimark estimates that total underreported GRR is approximately $197.8 million. Applying the fee rates specified in the FLAs, the resulting underpayments are as follows:

These figures represent direct underpayments only and do not include contractual interest accruing under FLA § 4.3 (which provides for interest on late or underpaid amounts at the rate of 1.5% per month), liquidated damages, attorneys' fees, or other damages sought in the Complaint.

For fiscal year 2021 alone—the most recent complete year—Coastal Palms reported GRR of $112.4 million across the twenty-two franchised properties. Verimark's forensic analysis, conducted by Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, estimates that the true GRR for FY 2021 was approximately $145.6 million, reflecting an underreporting of $33.2 million, or approximately twenty-two percent (22%) to thirty-one percent (31%) depending on the individual property. The underreporting percentage varied by property, with the highest discrepancies observed at properties in high-demand tourist markets in Southwest Florida and coastal Georgia, where direct bookings—the type of bookings captured by Suncoast—represent a disproportionately large share of total reservations.

2. The Suncoast Records Are the Key Evidence. Suncoast's financial records are not merely relevant to Verimark's claims—they are the single most important category of evidence in this case. Suncoast's bank statements, general ledgers, booking logs, management-fee invoices, and revenue reconciliation records constitute the best and most direct evidence of the revenues that were diverted away from the GRR reports submitted to Verimark under the FLAs.

The importance of these records cannot be overstated. Without access to Suncoast's financial records, Verimark's forensic accounting expert, Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, cannot accurately reconstruct the true Gross Room Revenue for each franchised property in each year of the relevant period and cannot calculate the resulting underpayments with the precision required for trial. Dr. Kettlewell's preliminary analysis has relied on indirect methods—including benchmarking against comparable properties, analysis of PMS occupancy data versus reported revenues, and review of publicly available OTA listing data—but these methods yield estimates, not exact figures. The exact figures reside in Suncoast's books and records, which Defendants have refused to produce.

It bears emphasis that Defendants' initial production of approximately eighty-four thousand (84,000) documents, served on August 22, 2022, contained not a single Suncoast financial record. Not one bank statement. Not one general ledger entry. Not one management-fee invoice. Not one booking log from gulfcoastrooms.com. This complete absence of Suncoast records from the production is not the result of oversight or inadvertence—it is the product of Defendants' deliberate decision to withhold an entire category of directly relevant documents based on a meritless corporate-separateness objection.

The relevance of Suncoast's financial records to the specific counts of Verimark's Complaint is manifest and beyond reasonable dispute:

• Count I (Breach of Contract — Royalties): Suncoast's records will establish the full amount of guest-room revenues collected by Suncoast that should have been included in GRR for royalty-calculation purposes.

• Count II (Breach of Contract — Marketing Fund): The same records will establish the true GRR base upon which marketing-fund contributions should have been calculated.

• Count III (Breach of Contract — Technology Fees): Technology fees under the FLAs are calculated as a function of GRR and occupied room nights, both of which are affected by the diversion of revenues and bookings through Suncoast.

• Count V (Fraudulent Concealment): Suncoast's records are essential to proving that Defendants knowingly concealed the existence and magnitude of Suncoast-collected revenues from Verimark, and that Defendants affirmatively misrepresented GRR in the monthly and annual reports required by FLA § 4.2.

• Count IX (Accounting): Verimark's claim for an accounting necessarily requires access to the complete financial records of all entities involved in the collection and management of guest-room revenues, including Suncoast.

• Count X (Civil Conspiracy): The civil conspiracy claim alleges a concerted scheme among Coastal Palms, Brecker, and Suncoast to divert revenues. Suncoast's financial records are direct evidence of the overt acts in furtherance of the conspiracy.

In short, the Suncoast records are not peripheral or tangential—they are the evidentiary heart of this case. Defendants' refusal to produce them is an attempt to prevent Verimark from proving its claims.

3. OTA Net-Rate Records Are Equally Relevant. In addition to the direct-booking revenue diversion, Verimark's claims encompass the systematic underreporting of GRR through the improper netting of net-rate OTA payments. Verimark's Motion to Compel accordingly seeks Suncoast's records relating to third-party online travel agency contracts, net-rate pricing agreements, and OTA reconciliation reports.

The FLAs' definition of GRR requires reporting of "all revenues derived from or attributable to the rental of guest rooms" without deduction. FLA § 4.1 expressly provides that GRR shall be reported on a gross basis, without offset for commissions, fees, or other charges paid to intermediaries, including OTAs. Notwithstanding this clear contractual requirement, Coastal Palms improperly classified net-rate OTA payments as "commissions receivable" and netted them against GRR in its monthly reports to Verimark. Under this practice, if an OTA remitted a net payment of $85 on a room sold to the guest at $100 (reflecting a 15% OTA commission), Coastal Palms reported only the $85 net payment as GRR rather than the $100 gross room rate.

Suncoast handled many of these OTA relationships on behalf of the franchised properties, negotiating net-rate agreements with OTAs, receiving net-rate remittances, and reconciling OTA payments against reservation data. Suncoast's OTA contracts and reconciliation records are essential to determining the full scope of the netting practice, the total amount of revenue improperly excluded from GRR through netting, and the resulting underpayments of royalties and fees to Verimark.

The relevance of these records is self-evident, and Defendants' Opposition offers no argument to the contrary.

C. The Requests Are Not Overbroad or Unduly Burdensome

1. The Requests Are Narrowly Tailored. Defendants' second objection—that the requests are overbroad and unduly burdensome—is equally meritless. The RFPs at issue are carefully and narrowly tailored to achieve a specific, legitimate discovery objective: obtaining the financial records necessary to calculate the true Gross Room Revenue for each of the twenty-two franchised hotel properties during the relevant period.

The requests are limited in three important respects. First, they are limited to Suncoast's financial records related to the twenty-two franchised hotel properties—the same properties that are the subject of the FLAs at issue in this litigation. The requests do not seek records of any unrelated Suncoast business activities, if any such activities exist. Second, the requests are limited to the period 2013 through 2021, which corresponds to the period during which Suncoast was operational and during which the alleged revenue diversion occurred. Third, the requests seek categories of records that any properly maintained business would have in the ordinary course—bank statements, general ledgers, invoices, and booking logs. These are not exotic or unusual categories of records; they are the fundamental building blocks of any business's financial recordkeeping.

Far from being overbroad, the requests are the minimum necessary to allow Verimark and its forensic accounting expert to reconstruct the true GRR for each property. Any narrower request would leave gaps in the evidentiary record and would prevent the complete and accurate accounting that is both a claim in this case (Count IX) and a predicate to calculating damages on the breach-of-contract claims.

2. Defendants' Burden Argument Is Unsubstantiated. Defendants' Opposition asserts that compliance with the requests would impose an undue burden, but this assertion is entirely conclusory. The Opposition provides no declaration from a records custodian, no affidavit from an information technology professional, and no cost estimate or other evidence quantifying the alleged burden of locating, reviewing, and producing the requested documents. Defendants have not even attempted to explain why producing Suncoast's financial records would be more burdensome than producing the eighty-four thousand (84,000) documents that Defendants have already produced from Coastal Palms and the property-level entities.

Under Florida law, the party resisting discovery bears the burden of establishing that the discovery sought is unreasonable, oppressive, or unduly burdensome. See Fla. R. Civ. P. 1.280(c); Allstate Ins. Co. v. Langston, 655 So. 2d 91, 94 (Fla. 1995) (party seeking protective order must demonstrate "good cause" supported by "particular and specific" facts). Conclusory and unsupported assertions of burden are insufficient to carry this burden. See binger v. King Pest Control, 401 So. 2d 1310, 1314 (Fla. 1981) (Discovery rules are to be liberally construed, and objections to discovery must be specific and supported by evidence).

Defendants' failure to offer any evidence of burden is not surprising, because the burden of producing Suncoast's financial records is, in fact, minimal. Brecker controls both Coastal Palms and Suncoast. There is no need for Coastal Palms to engage in arm's-length requests to a hostile third party or to issue a subpoena to an uncooperative non-party. Brecker can simply direct Suncoast's accounting staff—or, if Suncoast has no dedicated accounting staff, Brecker can direct his own personnel—to collect the financial records at issue and produce them to Verimark through the established e-discovery workflow. The notion that this would impose an undue burden on a party that controls a portfolio of twenty-two hotel properties generating over $100 million in annual revenue is simply not credible.

3. The Joint E-discovery Protocol Accommodates Production of These Records. The parties' Joint E-discovery Protocol, filed with the Court on June 20, 2022, establishes comprehensive procedures for the production of electronically stored information ("ESI") in this action. The Protocol, which was negotiated and agreed upon by counsel for both parties—Calderwood & Harkness LLP for Verimark and Whitfield, Barrow & Crane LLP for Defendants—addresses, among other things, the format of production (TIFF images with extracted text and metadata), de-duplication procedures, search methodology, and privilege-log requirements.

Nexagen Document Solutions LLC is serving as the e-discovery vendor for both parties under the Joint E-discovery Protocol and has the technical capacity and infrastructure to process additional documents efficiently and cost-effectively. The addition of Suncoast's financial records to the universe of produced documents would not require any new vendor engagement, any modification to the Protocol, or any new technological infrastructure. It would simply require Defendants to collect and upload the records to the Nexagen platform for processing and production—a routine step that Defendants have already undertaken with respect to the eighty-four thousand (84,000) documents produced to date.

Furthermore, the Joint E-discovery Protocol includes robust clawback provisions, negotiated pursuant to Federal Rule of Evidence 502(d) (applied by analogy) and the parties' stipulated Clawback Order entered by this Court on June 23, 2022. These provisions protect Defendants against any claim of privilege waiver based on inadvertent production of privileged materials. Defendants therefore have no basis to resist production on the ground that producing Suncoast's records en masse might inadvertently sweep in privileged communications. If any such communications are produced inadvertently, the clawback provisions provide a straightforward mechanism for asserting and preserving the privilege.

D. Defendants' Opposition Does Not Address the FLA's GRR Definition

Perhaps the most significant deficiency in Defendants' Opposition is what it fails to address. Defendants' Opposition does not discuss, analyze, or attempt to distinguish the express language of FLA § 4.1, which defines Gross Room Revenue to encompass "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 omission is telling. The GRR definition is the linchpin of Verimark's claims and the framework within which the relevance of Suncoast's records must be assessed. The definition unambiguously provides that GRR includes revenues from "any booking channel, direct or indirect," which encompasses walk-in bookings, corporate-direct bookings, and bookings through the gulfcoastrooms.com website—precisely the categories of bookings that Suncoast was established to capture. The definition further provides that GRR includes revenues "regardless of the entity collecting such revenue," which expressly contemplates the possibility that revenues might be collected by an entity other than the franchisee itself—such as Suncoast.

Defendants cannot credibly argue that Suncoast's financial records are irrelevant to the calculation of GRR while simultaneously maintaining, as they apparently do, that revenues collected by Suncoast were properly excluded from the GRR reports submitted to Verimark. These two positions are irreconcilable. If Suncoast-collected revenues are part of GRR (as the FLA definition plainly provides), then Suncoast's records are indispensable to calculating the true GRR and, consequently, the underpayments owed to Verimark. If Defendants contend that Suncoast-collected revenues fall outside the GRR definition (a contention that would require Defendants to read out of the FLA the phrase "regardless of the entity collecting such revenue"), then Suncoast's records are equally indispensable to testing that contention—because only Suncoast's records can reveal the nature, source, and amount of the revenues at issue.

To the extent Defendants contend—as stated in the February 28, 2022 counsel letter from Nathan Whitfield III to Verimark's General Counsel, responding to Verimark's Notice of Material Breach dated February 14, 2022—that Suncoast's revenues were properly excluded from GRR under a "reasonable interpretation" of the FLA, the Suncoast records are necessary to test that assertion. Defendants' purported "reasonable interpretation" will need to be evaluated against the actual financial data, and that data resides in Suncoast's books and records. Shielding those records from discovery would effectively allow Defendants to assert a defense while simultaneously preventing Verimark from examining the evidence needed to challenge it.

The Court should not countenance such a result.

III. REQUESTED RELIEF

For the foregoing reasons, Plaintiff Verimark Hospitality Group Inc. respectfully requests that the Court grant the Motion to Compel and enter an order requiring Defendants to produce all responsive Suncoast Room Management Inc. financial records within twenty-one (21) days of the date of the Court's order, including the following categories of documents:

(a) All Suncoast bank statements for accounts receiving revenue from, or related to the operation of, any of the twenty-two (22) franchised hotel properties, for the period January 1, 2013 through December 31, 2021;

(b) Suncoast general ledgers, trial balances, and financial statements (including, without limitation, income statements, balance sheets, and cash flow statements) for the period January 1, 2013 through December 31, 2021;

(c) All management-fee invoices, fee calculation workpapers, and related documentation reflecting the management fees charged by Suncoast to the property-level entities, including but not limited to Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC, for the period January 1, 2013 through December 31, 2021;

(d) All booking logs, reservation records, guest folios, and revenue data from the gulfcoastrooms.com website, for the period from the website's inception through December 31, 2021;

(e) All OTA contracts, net-rate agreements, commission schedules, reconciliation reports, settlement statements, and related documentation processed through or managed by Suncoast, for the period January 1, 2013 through December 31, 2021; and

(f) All communications between Suncoast personnel and property-level managers, general managers, controllers, or other financial personnel regarding revenue reporting to Verimark, the preparation of GRR reports, or the classification or treatment of revenues from any booking channel, for the period January 1, 2013 through December 31, 2021.

Verimark further requests that the Court order Defendants to bear the reasonable costs of production, including costs of document collection, processing, and review, consistent with FLA § 8.2, which expressly provides that audit and compliance costs shall be borne by the franchisee in any instance where underpayment is found to exceed two percent (2%) of reported Gross Room Revenue. The preliminary findings of the Thornbury audit indicate that the underreporting in this case far exceeds that threshold.

Verimark reserves the right to seek sanctions under Florida Rule of Civil Procedure 1.380, including reasonable attorneys' fees and costs incurred in bringing this Motion, if Defendants fail to comply with the Court's order in a timely and complete manner.

IV. CONCLUSION

The separate-entity objection raised by Defendants is a transparent attempt to shield directly relevant evidence from discovery by exploiting a corporate formality that Defendants themselves created for the very purpose of diverting revenues away from the Gross Room Revenue reporting framework established by the parties' Franchise License Agreements. This tactic should not be rewarded.

The facts are straightforward: Randall Brecker controls both Coastal Palms Franchise Holdings LLC and Suncoast Room Management Inc. The financial records of Suncoast are within Defendants' possession, custody, and control. Suncoast is itself a named Defendant in this action. The records sought are central to the core issue in this litigation—whether Coastal Palms systematically underreported Gross Room Revenue by diverting revenues through Suncoast over a nine-year period, resulting in the underpayment of at least $16.095 million in royalties, marketing-fund contributions, and technology fees owed to Verimark. Without these records, Verimark cannot prove its damages, and Verimark's forensic accounting expert cannot perform the analysis necessary to quantify the underpayments with precision.

Defendants' burden objection is unsupported by any evidence—no declaration, no affidavit, no cost estimate. It is a conclusory assertion that does not satisfy Defendants' burden under Florida law to demonstrate that the discovery sought is unreasonable or oppressive.

The Court should grant the Motion to Compel and order Defendants to produce all responsive Suncoast Room Management Inc. financial records within twenty-one (21) days.

RESPECTFULLY SUBMITTED

CALDERWOOD & HARKNESS LLP

By: ________

Priya Anand, Esq. Florida Bar No. 0087451 Responsible Partner

Yuki Nakamura, Esq. Florida Bar No. 0119644 Lead Associate

110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-8200 Facsimile: (954) 555-8201

Email: panand@calderwoodharkness.com

Email: ynakamura@calderwoodharkness.com

Counsel for Plaintiff Verimark Hospitality Group Inc.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on October 14, 2022, a true and correct copy of the foregoing Plaintiff's Reply in Support of Motion to Compel Production of Suncoast Room Management Inc. Financial Records was served via the Court's electronic filing portal and by electronic mail upon the following counsel of record:

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

Email: nwhitfield@wbclaw.com

Email: gmontes@wbclaw.com

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

________________________________________

Yuki Nakamura, Esq. Florida Bar No. 0119644

Fee Category	Rate	Estimated Underpayment
Royalties	5.0% of GRR	$9,890,000
Marketing-Fund Contributions	2.5% of GRR	$4,945,000
Technology Fees	Various (estimated average)	$1,260,000
Total Direct Underpayments	$16,095,000

IN THE CIRCUIT COURT OF THE SEVENTEENTH JUDICIAL CIRCUIT IN AND FOR BROWARD COUNTY, FLORIDA
CIVIL DIVISION
CASE NO.: 1021-00006
VERIMARK HOSPITALITY GROUP INC., a Delaware corporation,
Plaintiff,
v.
COASTAL PALMS FRANCHISE HOLDINGS LLC, a Florida limited liability company; RANDALL BRECKER, individually; and SUNCOAST ROOM MANAGEMENT INC., a Florida corporation,
Defendants.
___________/
PLAINTIFF'S REPLY IN SUPPORT OF MOTION TO COMPEL PRODUCTION OF SUNCOAST ROOM MANAGEMENT INC. FINANCIAL RECORDS
Before the Honorable Richard M. Calloway, Circuit Judge Filed: October 14, 2022
Plaintiff Verimark Hospitality Group Inc. ("Verimark" or "Plaintiff") respectfully submits this Reply in Support of its Motion to Compel Production of Suncoast Room Management Inc. Financial Records (the "Motion to Compel") and states as follows:
INTRODUCTION
This Reply responds to the Opposition filed by Defendants Coastal Palms Franchise Holdings LLC ("Coastal Palms"), Randall Brecker ("Brecker"), and Suncoast Room Management Inc. ("Suncoast") (collectively, "Defendants") on or about October 3, 2022 (the "Opposition"), opposing Plaintiff Verimark Hospitality Group Inc.'s Motion to Compel Production of Suncoast Room Management Financial Records, which Verimark filed on September 15, 2022. For the reasons set forth below, the Opposition is without merit, and the Court should grant the Motion to Compel in its entirety.
The Motion to Compel seeks all financial records of Suncoast Room Management Inc., a Florida corporation through which Defendant Brecker collected and managed hotel guest-room revenues generated by no fewer than twenty-two (22) franchised hotel properties operating under the Verimark Suites and Verimark Select flags. The categories of records sought include, without limitation, bank statements, general ledgers and financial statements, management-fee invoices and fee calculations, online travel agency ("OTA") net-rate reconciliation reports, and all records related to the operation of the unbranded booking website gulfcoastrooms.com—a website that Defendants used to capture direct guest bookings without routing the resulting revenues through the Gross Room Revenue ("GRR") reporting mechanisms established by the parties' twenty-two Franchise License Agreements ("FLAs").
Defendants' Opposition rests on two principal arguments, neither of which withstands scrutiny. First, Defendants contend that Suncoast is a "separate legal entity" from Coastal Palms and that discovery directed at Coastal Palms does not encompass the financial records of Suncoast. Second, Defendants assert that the requests at issue are overbroad and unduly burdensome. Both arguments fail as a matter of law and fact.
The separate-entity objection is meritless for the straightforward reason that Suncoast is functionally controlled by the same individual—Defendant Randall "Randy" Brecker—who serves as Managing Member and sixty percent (60%) equity holder of Coastal Palms and as President of Suncoast. Under well-established Florida discovery principles, documents held by an entity under the control of a party are deemed within that party's "possession, custody, or control" for purposes of Florida Rule of Civil Procedure 1.350. Moreover, Suncoast is itself a named Defendant in this action, rendering the separate-entity objection doubly hollow: Suncoast's own records are directly discoverable from Suncoast as a party.
The overbreadth and burden objection fares no better. The requests at issue are narrowly tailored to Suncoast's financial records related to the twenty-two franchised hotel properties for the period 2013 through 2021—the very properties and time period at the heart of this litigation. Defendants have offered no declaration, no affidavit, and no evidence of any kind quantifying the alleged burden of complying with the requests. Conclusory assertions of burden are insufficient under Florida law to defeat a motion to compel production of directly relevant documents.
Most tellingly, Defendants' Opposition does not dispute the critical underlying fact: that Suncoast collected guest-room revenue from at least some of the twenty-two franchised hotel properties. Nor does the Opposition address the express language of FLA § 4.1, which defines Gross Room Revenue to include "all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue." This contractual language was specifically designed to capture precisely the type of revenue-diversion arrangement that Defendants created through Suncoast, and Defendants' silence on this point is deafening.
Suncoast's financial records lie at the very center of this case. Without them, Verimark cannot calculate the true GRR for each franchised property in each year, and Verimark's forensic accounting expert cannot accurately determine the scope of the underpayments that form the basis of Plaintiff's claims. The Court should grant the Motion to Compel and order Defendants to produce all responsive Suncoast financial records within twenty-one (21) days.
I. PROCEDURAL BACKGROUND
A. The Motion to Compel
On September 15, 2022, Verimark filed its Motion to Compel Production of Suncoast Room Management Inc. Financial Records, together with a supporting memorandum of law and the Declaration of Yuki Nakamura (FL Bar No. 0119644), Lead Associate at Calderwood & Harkness LLP, counsel of record for Plaintiff. The Nakamura Declaration provided a detailed account of the discovery deficiencies at issue, attaching as exhibits the relevant Requests for Production, Defendants' deficient responses and objections, the parties' meet-and-confer correspondence, and excerpts from the FLAs.
The Motion to Compel seeks production of Suncoast's financial records as requested in Plaintiff's First Request for Production of Documents, which was served on Defendants on July 11, 2022 and contained one hundred forty-seven (147) individually numbered requests. The requests at issue in this motion are RFP Nos. 42 through 58, 71 through 85, and 112 through 127, which collectively target the following categories of Suncoast documents:
• Bank statements for all accounts through which Suncoast received, held, or disbursed revenues related to the twenty-two franchised hotel properties (RFP Nos. 42–48);
• General ledgers, trial balances, and financial statements of Suncoast for the period January 1, 2013 through December 31, 2021 (RFP Nos. 49–53);
• Management-fee invoices and fee calculation workpapers reflecting the management fees Suncoast charged to the property-level limited liability companies (RFP Nos. 54–58);
• Booking logs, reservation records, guest folios, and revenue data from the gulfcoastrooms.com website (RFP Nos. 71–79);
• Revenue reconciliation reports, settlement statements, and wire-transfer records between Suncoast and the property-level entities, including Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC (RFP Nos. 80–85); and
• OTA contracts, net-rate agreements, commission schedules, and net-rate reconciliation reports processed through or managed by Suncoast (RFP Nos. 112–127).
These requests are precise, categorized, and limited to documents directly bearing on the calculation of Gross Room Revenue at the franchised hotel properties during the relevant period.
B. Prior Meet-and-Confer Efforts
Before filing the Motion to Compel, Verimark's counsel undertook good-faith efforts to resolve the discovery dispute without judicial intervention, as required by Florida Rule of Civil Procedure 1.380(a)(2) and Local Rule 7.01.
On August 22, 2022, Defendants served their initial document production in response to Plaintiff's First Request for Production. That production consisted of approximately eighty-four thousand (84,000) documents, comprising primarily property management system ("PMS") reports, selected corporate documents of Coastal Palms, and internal email correspondence. Notably, the production contained no financial records of Suncoast Room Management Inc. whatsoever—not a single bank statement, not a single general ledger entry, not a single management-fee invoice.
On August 30, 2022, Yuki Nakamura of Calderwood & Harkness LLP transmitted a detailed discovery deficiency letter to Gabriela Montes of Whitfield, Barrow & Crane LLP, counsel of record for all Defendants. The letter identified twenty-three (23) categories of deficient or missing documents from Defendants' initial production, including, as a principal category, the complete absence of any Suncoast financial records responsive to RFP Nos. 42–58, 71–85, and 112–127. The letter requested that Defendants supplement their production within fourteen (14) days and invited a telephonic meet-and-confer to discuss the identified deficiencies.
On September 6, 2022, counsel for the parties conducted a telephonic meet-and-confer to discuss the discovery deficiencies identified in the August 30, 2022 letter. During that conference, counsel for Coastal Palms—Ms. Montes—asserted for the first time that Suncoast Room Management Inc. was a "separate legal entity" from Coastal Palms and that, accordingly, discovery directed to Coastal Palms did not encompass Suncoast's records. Ms. Montes took the position that Verimark would need to pursue Suncoast's records through separate discovery or a subpoena. Verimark's counsel, Ms. Nakamura, disagreed with this characterization and advised that Verimark would file a motion to compel if the records were not produced.
On September 8, 2022, Ms. Nakamura sent a follow-up letter to Ms. Montes memorializing the substance of the September 6, 2022 telephonic conference, confirming the parties' inability to resolve the dispute, and reiterating Verimark's position that Suncoast's financial records are within Defendants' possession, custody, and control. Ms. Montes responded by email on September 12, 2022, confirming Defendants' position and declining to supplement the production.
Despite these good-faith meet-and-confer efforts, the parties were unable to resolve the dispute, necessitating the filing of the Motion to Compel on September 15, 2022 and, now, this Reply.
C. Defendants' Opposition
Defendants filed their Opposition to the Motion to Compel on or about October 3, 2022. The Opposition raises two arguments: (1) the "separate entity" objection, asserting that Suncoast is a separate legal entity whose records are beyond the scope of discovery directed at Coastal Palms; and (2) an overbreadth and undue burden objection, asserting that the requests are too broad and would impose an unreasonable burden on Defendants.
What the Opposition does not do is equally significant. The Opposition does not dispute that Suncoast collected guest-room revenue from at least some of the twenty-two franchised hotel properties. It does not address the definition of Gross Room Revenue under FLA § 4.1. It does not explain how Defendants' GRR reports to Verimark accounted for (or failed to account for) revenues collected by Suncoast. And it does not provide any declaration, affidavit, or other evidentiary support for the conclusory assertion that compliance with the requests would be unduly burdensome. These omissions are fatal to Defendants' position.
II. ARGUMENT
A. The Separate-Entity Objection Is Meritless
Defendants' primary argument—that Suncoast is a "separate legal entity" whose financial records cannot be compelled through discovery directed at Coastal Palms—is legally unsound, factually untenable, and transparently designed to shield the central evidence in this case from Plaintiff's review.
1. Randall Brecker Controls Both Coastal Palms and Suncoast. The undisputed record establishes that Defendant Randall "Randy" Brecker exercises complete managerial and operational control over both Coastal Palms and Suncoast, as well as the property-level entities through which the twenty-two franchised hotels are owned and operated.
Brecker is the Managing Member and holds a sixty percent (60%) equity interest in Coastal Palms Franchise Holdings LLC, the entity that executed each of the twenty-two Franchise License Agreements with Verimark and that is responsible for paying royalties, marketing-fund contributions, and technology fees based on reported Gross Room Revenue. As Managing Member, Brecker possesses sole and exclusive authority to manage the business and affairs of Coastal Palms under its operating agreement.
Brecker is simultaneously the President—and, upon information and belief, the sole officer and controlling shareholder—of Suncoast Room Management Inc., a Florida corporation that Brecker established no later than January 2013. As President of Suncoast, Brecker has plenary authority over the corporation's operations, its financial records, and its books and records. There is no officer, director, or shareholder of Suncoast who could or would deny Brecker access to any of Suncoast's records; Brecker is Suncoast.
Brecker also serves as Managing Member of the property-level entities through which individual hotels or groups of hotels are owned and operated, including, without limitation, Gulf Breeze Hospitality LLC (the entity that owns and operates six (6) Verimark Suites properties in Southwest Florida, including locations in Fort Myers, Naples, and Bonita Springs) and Savannah Lodging Partners LLC (the entity that owns and operates four (4) Verimark Suites properties in coastal Georgia, including locations in Savannah and Jekyll Island). These property-level entities are the same entities that received revenue remittances from Suncoast after the deduction of Suncoast's twelve percent (12%) management fee.
The purpose for which Suncoast was created is directly relevant to the claims in this case. Suncoast was established by Brecker to collect revenues from certain categories of direct bookings—including walk-in guests, corporate-direct contract bookings, and bookings made through the unbranded website gulfcoastrooms.com—at the same twenty-two hotel properties that are franchised under the Verimark Suites and Verimark Select flags pursuant to the FLAs at issue in this litigation. Suncoast retained a twelve percent (12%) "management fee" on these bookings before remitting the remaining revenue to the property-level LLCs. The existence of this arrangement, and the question of whether the revenues captured by Suncoast were properly reported as GRR, is the central disputed issue in this action.
In short, there is a complete unity of management and operational control between Coastal Palms, Suncoast, and the property-level entities. All roads lead to Randall Brecker. The suggestion that Suncoast's records are somehow beyond the reach of discovery directed at Defendants—a group that includes both Brecker individually and Suncoast as a named party—is, to put it charitably, untenable.
2. Florida discovery Rules Reach Records in a Party's Possession, Custody, or Control. The governing discovery standard is clear. Florida Rule of Civil Procedure 1.350(a) provides that a party may request another party to produce documents that are "in the possession, custody, or control of the party upon whom the request is served." The term "control" has been consistently and broadly construed by Florida courts to encompass not only documents physically held by the responding party, but also documents that the responding party has the legal right, authority, or practical ability to obtain from another person or entity.
Florida courts have repeatedly held that documents held by a separate entity are within a party's "control" for discovery purposes where the party exercises managerial authority, ownership, or other dominion over the entity holding the documents. See, e.g., Surf Drugs, Inc. v. Vermette, 236 So. 2d 108, 111 (Fla. 1970) (holding that documents of related entities are discoverable where the party has the "practical ability" to obtain them); Ashgrove Savings Bank v. Kaplan, 2015 WL 3442139, at *3 (M.D. Fla. May 28, 2015) (applying Florida law and noting that "control" under discovery rules "is broadly construed" and includes documents that a party could obtain "simply by asking" a related entity). The principle is straightforward: a party cannot avoid its discovery obligations by parking relevant documents in a sister entity that the same individual controls.
Here, Brecker controls both Coastal Palms and Suncoast. As Managing Member of Coastal Palms and President of Suncoast, he has the unquestioned legal right and practical ability to direct Suncoast to produce its financial records. There is no need for Coastal Palms to engage in arm's-length negotiations with a truly independent third party; Brecker can simply direct Suncoast to hand over the documents, just as he can direct any employee or department of Coastal Palms to do the same. Suncoast's financial records are therefore squarely within the "possession, custody, or control" of Defendants Coastal Palms and Brecker for purposes of Rule 1.350.
Moreover, Brecker is individually named as a Defendant in this action. Count X of Verimark's Complaint, filed March 7, 2022, asserts a claim for Civil Conspiracy against Brecker individually, alleging that Brecker conspired with Coastal Palms and Suncoast to divert revenues away from the GRR reporting framework and thereby reduce royalty and fee payments owed to Verimark. As President of Suncoast, Brecker has direct, personal access to and authority over all of Suncoast's financial records. A discovery request directed to Brecker individually plainly reaches documents within his control at Suncoast.
Finally, and dispositively, Suncoast Room Management Inc. is itself a named Defendant in this action. Verimark's Complaint asserts claims against Suncoast directly, including claims for unjust enrichment (Count VII), constructive trust (Count VIII), and civil conspiracy (Count X). As a named party, Suncoast is obligated to respond to discovery requests directed to it and to produce documents in its possession, custody, or control. The notion that Suncoast's own financial records are beyond the scope of discovery in an action in which Suncoast is a party is, quite simply, frivolous.
3. Defendants Cannot Shield Relevant Evidence Behind a Corporate Formality. Defendants' argument that Suncoast is a "separate legal entity" whose records are exempt from discovery directed at Coastal Palms amounts to using the very corporate structure that Defendants created as an instrumentality of revenue diversion to shield evidence of that diversion from judicial scrutiny. This is precisely the type of discovery obstruction that Florida courts have consistently rejected.
The separate-entity objection is unavailing where, as here, the same individual controls both the responding party and the entity holding the documents, and where the documents sought are directly relevant to the claims asserted against the responding party. Courts have recognized that permitting a party to resist production of clearly relevant documents on the basis of formal corporate separateness—where the party has practical control over those documents—would elevate form over substance and frustrate the truth-seeking function of civil discovery. See, e.g., Gertz v. Allen, 850 So. 2d 580, 582 (Fla. 4th DCA 2003) (Discovery rules should be liberally construed to facilitate the ascertainment of truth and the just determination of causes of action).
The contractual language of the FLAs underscores the frivolity of Defendants' position. FLA § 4.1 defines Gross Room Revenue as follows:
"Gross Room Revenue" or "GRR" shall mean all revenues derived from or attributable to the rental of guest rooms at the Hotel, including revenues from any booking channel, direct or indirect, and regardless of the entity collecting such revenue.
The phrase "regardless of the entity collecting such revenue" was specifically and deliberately included in the FLA definition to prevent a franchisee from evading its royalty and fee obligations by routing guest-room revenues through a separate entity. The FLA drafters—Verimark's franchising team—anticipated precisely the type of arrangement that Defendants implemented through Suncoast. The contractual definition of GRR sweeps in all guest-room revenues, without regard to whether those revenues are collected by Coastal Palms, by Suncoast, by the property-level LLCs, or by any other entity. Defendants agreed to this definition when they executed each of the twenty-two FLAs.
Against this backdrop, Defendants' assertion that Suncoast's financial records are irrelevant or beyond the scope of discovery is not merely wrong—it is an affirmative attempt to frustrate the discovery process and to prevent Verimark from proving its core claims. The Court should reject this tactic and compel production.
B. Suncoast Records Are Directly Relevant to GRR Calculation and the Claims at Issue
1. The Core Allegation: Systematic Revenue Diversion Through Suncoast. Verimark's Complaint, filed March 7, 2022, sets forth detailed allegations that Coastal Palms, acting through and in concert with Brecker and Suncoast, systematically underreported Gross Room Revenue over a nine-year period spanning from 2013 through 2021. The alleged mechanism of underreporting was twofold: (a) the diversion of direct-booking revenues through Suncoast and the gulfcoastrooms.com website, which revenues were excluded from the GRR reports submitted to Verimark; and (b) the improper classification and netting of net-rate OTA payments, whereby revenues received from online travel agencies were improperly reduced by "commissions" or "platform fees" before being reported as GRR, in violation of FLA § 4.1's gross-revenue definition.
The scope of the alleged underreporting is substantial. Verimark's pre-litigation compliance audit, conducted by Thornbury & Associates CPAs LLP pursuant to FLA § 8.2 (the audit-rights provision), yielded preliminary findings that were delivered to Verimark on January 18, 2022. Those findings indicated that the top ten (10) Coastal Palms properties, ranked by reported GRR, had underreported GRR by approximately twenty-six percent (26%) for the three-year period from 2019 through 2021. The Thornbury audit analyzed PMS data, bank deposit records, and limited STR (Penmark Enterprises) benchmarking data to estimate the magnitude of the discrepancy. However, the audit was constrained by the absence of Suncoast's financial records, which were not made available to Thornbury despite requests.
Extrapolating the preliminary audit findings across all twenty-two franchised properties and the full 2013 through 2021 period—a period coextensive with Suncoast's existence—Verimark estimates that total underreported GRR is approximately $197.8 million. Applying the fee rates specified in the FLAs, the resulting underpayments are as follows:
These figures represent direct underpayments only and do not include contractual interest accruing under FLA § 4.3 (which provides for interest on late or underpaid amounts at the rate of 1.5% per month), liquidated damages, attorneys' fees, or other damages sought in the Complaint.
For fiscal year 2021 alone—the most recent complete year—Coastal Palms reported GRR of $112.4 million across the twenty-two franchised properties. Verimark's forensic analysis, conducted by Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, estimates that the true GRR for FY 2021 was approximately $145.6 million, reflecting an underreporting of $33.2 million, or approximately twenty-two percent (22%) to thirty-one percent (31%) depending on the individual property. The underreporting percentage varied by property, with the highest discrepancies observed at properties in high-demand tourist markets in Southwest Florida and coastal Georgia, where direct bookings—the type of bookings captured by Suncoast—represent a disproportionately large share of total reservations.
2. The Suncoast Records Are the Key Evidence. Suncoast's financial records are not merely relevant to Verimark's claims—they are the single most important category of evidence in this case. Suncoast's bank statements, general ledgers, booking logs, management-fee invoices, and revenue reconciliation records constitute the best and most direct evidence of the revenues that were diverted away from the GRR reports submitted to Verimark under the FLAs.
The importance of these records cannot be overstated. Without access to Suncoast's financial records, Verimark's forensic accounting expert, Dr. Sharon Kettlewell of Ridgeline Forensic Advisory LLC, cannot accurately reconstruct the true Gross Room Revenue for each franchised property in each year of the relevant period and cannot calculate the resulting underpayments with the precision required for trial. Dr. Kettlewell's preliminary analysis has relied on indirect methods—including benchmarking against comparable properties, analysis of PMS occupancy data versus reported revenues, and review of publicly available OTA listing data—but these methods yield estimates, not exact figures. The exact figures reside in Suncoast's books and records, which Defendants have refused to produce.
It bears emphasis that Defendants' initial production of approximately eighty-four thousand (84,000) documents, served on August 22, 2022, contained not a single Suncoast financial record. Not one bank statement. Not one general ledger entry. Not one management-fee invoice. Not one booking log from gulfcoastrooms.com. This complete absence of Suncoast records from the production is not the result of oversight or inadvertence—it is the product of Defendants' deliberate decision to withhold an entire category of directly relevant documents based on a meritless corporate-separateness objection.
The relevance of Suncoast's financial records to the specific counts of Verimark's Complaint is manifest and beyond reasonable dispute:
• Count I (Breach of Contract — Royalties): Suncoast's records will establish the full amount of guest-room revenues collected by Suncoast that should have been included in GRR for royalty-calculation purposes.
• Count II (Breach of Contract — Marketing Fund): The same records will establish the true GRR base upon which marketing-fund contributions should have been calculated.
• Count III (Breach of Contract — Technology Fees): Technology fees under the FLAs are calculated as a function of GRR and occupied room nights, both of which are affected by the diversion of revenues and bookings through Suncoast.
• Count V (Fraudulent Concealment): Suncoast's records are essential to proving that Defendants knowingly concealed the existence and magnitude of Suncoast-collected revenues from Verimark, and that Defendants affirmatively misrepresented GRR in the monthly and annual reports required by FLA § 4.2.
• Count IX (Accounting): Verimark's claim for an accounting necessarily requires access to the complete financial records of all entities involved in the collection and management of guest-room revenues, including Suncoast.
• Count X (Civil Conspiracy): The civil conspiracy claim alleges a concerted scheme among Coastal Palms, Brecker, and Suncoast to divert revenues. Suncoast's financial records are direct evidence of the overt acts in furtherance of the conspiracy.
In short, the Suncoast records are not peripheral or tangential—they are the evidentiary heart of this case. Defendants' refusal to produce them is an attempt to prevent Verimark from proving its claims.
3. OTA Net-Rate Records Are Equally Relevant. In addition to the direct-booking revenue diversion, Verimark's claims encompass the systematic underreporting of GRR through the improper netting of net-rate OTA payments. Verimark's Motion to Compel accordingly seeks Suncoast's records relating to third-party online travel agency contracts, net-rate pricing agreements, and OTA reconciliation reports.
The FLAs' definition of GRR requires reporting of "all revenues derived from or attributable to the rental of guest rooms" without deduction. FLA § 4.1 expressly provides that GRR shall be reported on a gross basis, without offset for commissions, fees, or other charges paid to intermediaries, including OTAs. Notwithstanding this clear contractual requirement, Coastal Palms improperly classified net-rate OTA payments as "commissions receivable" and netted them against GRR in its monthly reports to Verimark. Under this practice, if an OTA remitted a net payment of $85 on a room sold to the guest at $100 (reflecting a 15% OTA commission), Coastal Palms reported only the $85 net payment as GRR rather than the $100 gross room rate.
Suncoast handled many of these OTA relationships on behalf of the franchised properties, negotiating net-rate agreements with OTAs, receiving net-rate remittances, and reconciling OTA payments against reservation data. Suncoast's OTA contracts and reconciliation records are essential to determining the full scope of the netting practice, the total amount of revenue improperly excluded from GRR through netting, and the resulting underpayments of royalties and fees to Verimark.
The relevance of these records is self-evident, and Defendants' Opposition offers no argument to the contrary.
C. The Requests Are Not Overbroad or Unduly Burdensome
1. The Requests Are Narrowly Tailored. Defendants' second objection—that the requests are overbroad and unduly burdensome—is equally meritless. The RFPs at issue are carefully and narrowly tailored to achieve a specific, legitimate discovery objective: obtaining the financial records necessary to calculate the true Gross Room Revenue for each of the twenty-two franchised hotel properties during the relevant period.
The requests are limited in three important respects. First, they are limited to Suncoast's financial records related to the twenty-two franchised hotel properties—the same properties that are the subject of the FLAs at issue in this litigation. The requests do not seek records of any unrelated Suncoast business activities, if any such activities exist. Second, the requests are limited to the period 2013 through 2021, which corresponds to the period during which Suncoast was operational and during which the alleged revenue diversion occurred. Third, the requests seek categories of records that any properly maintained business would have in the ordinary course—bank statements, general ledgers, invoices, and booking logs. These are not exotic or unusual categories of records; they are the fundamental building blocks of any business's financial recordkeeping.
Far from being overbroad, the requests are the minimum necessary to allow Verimark and its forensic accounting expert to reconstruct the true GRR for each property. Any narrower request would leave gaps in the evidentiary record and would prevent the complete and accurate accounting that is both a claim in this case (Count IX) and a predicate to calculating damages on the breach-of-contract claims.
2. Defendants' Burden Argument Is Unsubstantiated. Defendants' Opposition asserts that compliance with the requests would impose an undue burden, but this assertion is entirely conclusory. The Opposition provides no declaration from a records custodian, no affidavit from an information technology professional, and no cost estimate or other evidence quantifying the alleged burden of locating, reviewing, and producing the requested documents. Defendants have not even attempted to explain why producing Suncoast's financial records would be more burdensome than producing the eighty-four thousand (84,000) documents that Defendants have already produced from Coastal Palms and the property-level entities.
Under Florida law, the party resisting discovery bears the burden of establishing that the discovery sought is unreasonable, oppressive, or unduly burdensome. See Fla. R. Civ. P. 1.280(c); Allstate Ins. Co. v. Langston, 655 So. 2d 91, 94 (Fla. 1995) (party seeking protective order must demonstrate "good cause" supported by "particular and specific" facts). Conclusory and unsupported assertions of burden are insufficient to carry this burden. See binger v. King Pest Control, 401 So. 2d 1310, 1314 (Fla. 1981) (Discovery rules are to be liberally construed, and objections to discovery must be specific and supported by evidence).
Defendants' failure to offer any evidence of burden is not surprising, because the burden of producing Suncoast's financial records is, in fact, minimal. Brecker controls both Coastal Palms and Suncoast. There is no need for Coastal Palms to engage in arm's-length requests to a hostile third party or to issue a subpoena to an uncooperative non-party. Brecker can simply direct Suncoast's accounting staff—or, if Suncoast has no dedicated accounting staff, Brecker can direct his own personnel—to collect the financial records at issue and produce them to Verimark through the established e-discovery workflow. The notion that this would impose an undue burden on a party that controls a portfolio of twenty-two hotel properties generating over $100 million in annual revenue is simply not credible.
3. The Joint E-discovery Protocol Accommodates Production of These Records. The parties' Joint E-discovery Protocol, filed with the Court on June 20, 2022, establishes comprehensive procedures for the production of electronically stored information ("ESI") in this action. The Protocol, which was negotiated and agreed upon by counsel for both parties—Calderwood & Harkness LLP for Verimark and Whitfield, Barrow & Crane LLP for Defendants—addresses, among other things, the format of production (TIFF images with extracted text and metadata), de-duplication procedures, search methodology, and privilege-log requirements.
Nexagen Document Solutions LLC is serving as the e-discovery vendor for both parties under the Joint E-discovery Protocol and has the technical capacity and infrastructure to process additional documents efficiently and cost-effectively. The addition of Suncoast's financial records to the universe of produced documents would not require any new vendor engagement, any modification to the Protocol, or any new technological infrastructure. It would simply require Defendants to collect and upload the records to the Nexagen platform for processing and production—a routine step that Defendants have already undertaken with respect to the eighty-four thousand (84,000) documents produced to date.
Furthermore, the Joint E-discovery Protocol includes robust clawback provisions, negotiated pursuant to Federal Rule of Evidence 502(d) (applied by analogy) and the parties' stipulated Clawback Order entered by this Court on June 23, 2022. These provisions protect Defendants against any claim of privilege waiver based on inadvertent production of privileged materials. Defendants therefore have no basis to resist production on the ground that producing Suncoast's records en masse might inadvertently sweep in privileged communications. If any such communications are produced inadvertently, the clawback provisions provide a straightforward mechanism for asserting and preserving the privilege.
D. Defendants' Opposition Does Not Address the FLA's GRR Definition
Perhaps the most significant deficiency in Defendants' Opposition is what it fails to address. Defendants' Opposition does not discuss, analyze, or attempt to distinguish the express language of FLA § 4.1, which defines Gross Room Revenue to encompass "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 omission is telling. The GRR definition is the linchpin of Verimark's claims and the framework within which the relevance of Suncoast's records must be assessed. The definition unambiguously provides that GRR includes revenues from "any booking channel, direct or indirect," which encompasses walk-in bookings, corporate-direct bookings, and bookings through the gulfcoastrooms.com website—precisely the categories of bookings that Suncoast was established to capture. The definition further provides that GRR includes revenues "regardless of the entity collecting such revenue," which expressly contemplates the possibility that revenues might be collected by an entity other than the franchisee itself—such as Suncoast.
Defendants cannot credibly argue that Suncoast's financial records are irrelevant to the calculation of GRR while simultaneously maintaining, as they apparently do, that revenues collected by Suncoast were properly excluded from the GRR reports submitted to Verimark. These two positions are irreconcilable. If Suncoast-collected revenues are part of GRR (as the FLA definition plainly provides), then Suncoast's records are indispensable to calculating the true GRR and, consequently, the underpayments owed to Verimark. If Defendants contend that Suncoast-collected revenues fall outside the GRR definition (a contention that would require Defendants to read out of the FLA the phrase "regardless of the entity collecting such revenue"), then Suncoast's records are equally indispensable to testing that contention—because only Suncoast's records can reveal the nature, source, and amount of the revenues at issue.
To the extent Defendants contend—as stated in the February 28, 2022 counsel letter from Nathan Whitfield III to Verimark's General Counsel, responding to Verimark's Notice of Material Breach dated February 14, 2022—that Suncoast's revenues were properly excluded from GRR under a "reasonable interpretation" of the FLA, the Suncoast records are necessary to test that assertion. Defendants' purported "reasonable interpretation" will need to be evaluated against the actual financial data, and that data resides in Suncoast's books and records. Shielding those records from discovery would effectively allow Defendants to assert a defense while simultaneously preventing Verimark from examining the evidence needed to challenge it.
The Court should not countenance such a result.
III. REQUESTED RELIEF
For the foregoing reasons, Plaintiff Verimark Hospitality Group Inc. respectfully requests that the Court grant the Motion to Compel and enter an order requiring Defendants to produce all responsive Suncoast Room Management Inc. financial records within twenty-one (21) days of the date of the Court's order, including the following categories of documents:
(a) All Suncoast bank statements for accounts receiving revenue from, or related to the operation of, any of the twenty-two (22) franchised hotel properties, for the period January 1, 2013 through December 31, 2021;
(b) Suncoast general ledgers, trial balances, and financial statements (including, without limitation, income statements, balance sheets, and cash flow statements) for the period January 1, 2013 through December 31, 2021;
(c) All management-fee invoices, fee calculation workpapers, and related documentation reflecting the management fees charged by Suncoast to the property-level entities, including but not limited to Gulf Breeze Hospitality LLC and Savannah Lodging Partners LLC, for the period January 1, 2013 through December 31, 2021;
(d) All booking logs, reservation records, guest folios, and revenue data from the gulfcoastrooms.com website, for the period from the website's inception through December 31, 2021;
(e) All OTA contracts, net-rate agreements, commission schedules, reconciliation reports, settlement statements, and related documentation processed through or managed by Suncoast, for the period January 1, 2013 through December 31, 2021; and
(f) All communications between Suncoast personnel and property-level managers, general managers, controllers, or other financial personnel regarding revenue reporting to Verimark, the preparation of GRR reports, or the classification or treatment of revenues from any booking channel, for the period January 1, 2013 through December 31, 2021.
Verimark further requests that the Court order Defendants to bear the reasonable costs of production, including costs of document collection, processing, and review, consistent with FLA § 8.2, which expressly provides that audit and compliance costs shall be borne by the franchisee in any instance where underpayment is found to exceed two percent (2%) of reported Gross Room Revenue. The preliminary findings of the Thornbury audit indicate that the underreporting in this case far exceeds that threshold.
Verimark reserves the right to seek sanctions under Florida Rule of Civil Procedure 1.380, including reasonable attorneys' fees and costs incurred in bringing this Motion, if Defendants fail to comply with the Court's order in a timely and complete manner.
IV. CONCLUSION
The separate-entity objection raised by Defendants is a transparent attempt to shield directly relevant evidence from discovery by exploiting a corporate formality that Defendants themselves created for the very purpose of diverting revenues away from the Gross Room Revenue reporting framework established by the parties' Franchise License Agreements. This tactic should not be rewarded.
The facts are straightforward: Randall Brecker controls both Coastal Palms Franchise Holdings LLC and Suncoast Room Management Inc. The financial records of Suncoast are within Defendants' possession, custody, and control. Suncoast is itself a named Defendant in this action. The records sought are central to the core issue in this litigation—whether Coastal Palms systematically underreported Gross Room Revenue by diverting revenues through Suncoast over a nine-year period, resulting in the underpayment of at least $16.095 million in royalties, marketing-fund contributions, and technology fees owed to Verimark. Without these records, Verimark cannot prove its damages, and Verimark's forensic accounting expert cannot perform the analysis necessary to quantify the underpayments with precision.
Defendants' burden objection is unsupported by any evidence—no declaration, no affidavit, no cost estimate. It is a conclusory assertion that does not satisfy Defendants' burden under Florida law to demonstrate that the discovery sought is unreasonable or oppressive.
The Court should grant the Motion to Compel and order Defendants to produce all responsive Suncoast Room Management Inc. financial records within twenty-one (21) days.
RESPECTFULLY SUBMITTED
CALDERWOOD & HARKNESS LLP
By: ________
Priya Anand, Esq. Florida Bar No. 0087451 Responsible Partner
Yuki Nakamura, Esq. Florida Bar No. 0119644 Lead Associate
110 SE 6th Street, Suite 2800 Fort Lauderdale, Florida 33301 Telephone: (954) 555-8200 Facsimile: (954) 555-8201
Email: panand@calderwoodharkness.com
Email: ynakamura@calderwoodharkness.com
Counsel for Plaintiff Verimark Hospitality Group Inc.
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on October 14, 2022, a true and correct copy of the foregoing Plaintiff's Reply in Support of Motion to Compel Production of Suncoast Room Management Inc. Financial Records was served via the Court's electronic filing portal and by electronic mail upon the following counsel of record:
Nathan Whitfield III, Esq. Gabriela Montes, Esq. WHITFIELD, BARROW & CRANE LLP 1221 Brickell Avenue, Suite 3000 Miami, Florida 33131 Telephone: (305) 555-4400
Email: nwhitfield@wbclaw.com
Email: gmontes@wbclaw.com
Counsel for Defendants Coastal Palms Franchise Holdings LLC, Randall Brecker, and Suncoast Room Management Inc.
________________________________________
Yuki Nakamura, Esq. Florida Bar No. 0119644
Fee Category | Rate | Estimated Underpayment
Royalties | 5.0% of GRR | $9,890,000
Marketing-Fund Contributions | 2.5% of GRR | $4,945,000
Technology Fees | Various (estimated average) | $1,260,000
Total Direct Underpayments | $16,095,000