Article Courtesy of The Daily Business Review
By Samantha Joseph

Published June 20, 2017

Putting on "a numbers case" helped the owners of the Hilton Fort Lauderdale Beach condo hotel defeat a $10 million class action lawsuit by residents fuming over a multimillion-dollar spike in maintenance fees.
 

Q Club Hotel LLC owns the property at 505 N. Fort Lauderdale Beach Blvd., which operates under the Hilton brand and includes six commercial units and 333 condos that individual owners could opt to rent as luxury suites through the hotel. It appeared cornered in December when U.S. District Judge James I. Cohn granted class certification to residents miffed over the spike in maintenance fees for shared spaces. But a team of commercial lawyers, hotel analysts and noted Miami forensic accountant Barry Mukamal helped Q Club justify how annual costs soared to between $2 million and $3 million, up from $46,000.

"This was a numbers case," said Laurence "Larry" Litow of Burr & Forman in Fort Lauderdale. "And these experts, through a tremendous amount of time of and effort, were able to drill down through Hilton's books and records and determine what the actual expenses were."

When the trial ended June 1, a Fort Lauderdale jury found in Q Club's favor.

The defense strategy: Demonstrate the hotel had incurred each charge claimed for shared services, disproportionately covering about $11 million in expenses between 2007 and 2012, thanks to an accounting error. The $46,000 unit owners had paid for years didn't come close to their actual tab, according to the defense.

The misstep occurred when the parties first launched the hotel. The head of accounting at that time mistakenly relied on a budget for a standard residential condominium, instead of one with more than 100 differences for more complex mixed-used hotel condos, according to Litow. When it discovered the error, Q Club adjusted maintenance fees.

"That resulted in the dramatic rise," Litow said. "The hotel owner was shortchanging itself for years, and the unit owners were not paying their fair share."

Litow teamed with Burr & Forman colleague Howard Scott Marks, Hinshaw & Culbertson partner John Charles Lukacs and Pena Garcia & Diz managing partner Ronald Pena to represent the hotel.

"Frequently whenever there's an exponential increase in assessments, owners question and rightly so," said Gelfand & Arpe senior partner Michael Gelfand, a homeowners' association mediator who is not involved in the litigation. "We look at it with 20/20 hindsight. Folks should go back to their documents and determine what the agreement requires. Hopefully the agreement is not only is clear but also makes practical sense under the circumstances."

Robert A. Sweetapple of Sweetapple Broeker & Varkas joined Farmer Jaffe Weissing Edwards Fistos & Lehrman partners Mark S. Fistos, Matthew Douglas Weissing and Steven R. Jaffe in representing the class led by named plaintiff Gary Dear. They did not respond to requests for comment by deadline.

But court documents show residents felt Q Club charged for valet parking and other expenses outside their agreement.

"The problem is there's very little transparency about what is going on as far as the charges," Weissing told the Daily Business Review in December.

The parties are still feuding over a proposed partial judgment, but defense attorneys say the victory will help keep other condo hotel owners and timeshare operators out of the crosshairs of plaintiff lawyers angling for their next big cause.

"Every once in a while something comes along that becomes a hot topic for plaintiff class action attorneys," Litow said. "Their target was shared costs for hotel condominiums, and we were going to be the test case."