The Real Deal Miami

Management firm sues developer of Hilton-branded hotels near Dolphin Mall

Suit alleges breach of contract and misappropriation of confidential information

February 27, 2015 12:30PM
By Francisco Alvarado

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Lance Shaner and Phillip Procacci

Lance Shaner and Phillip Procacci

A national hotel development company has filed suit against a Boca Raton commercial real estate developer that is building a pair of Hilton-branded hotels adjacent to Dolphin Mall in West Miami-Dade County, alleging wrongdoing related to a management contract.

Shaner Hotel Holdings L.P., a Pennsylvania firm that developed and owns 75 hotels around the globe, filed the lawsuit on Tuesday in Miami-Dade Circuit Court against Procacci Dolphin LLC, an affiliate of Procacci Development Corp., alleging breach of contract and misappropriation of confidential information.

“Procacci Dolphin wrongfully removed Shaner from a hotel management agreement and reneged on an equity participation agreement to develop a multi-million dollar, dual-branded Hilton Hotel Suites and Hilton Garden Inn hotel complex,” Shaner said in a statement. “Procacci Dolphin also wrongfully attempted to fabricate a basis for terminating the hotel management agreement.”

Phillip Procacci, CEO of Procacci Development, did not return two messages left with his assistant seeking comment. Procacci general counsel Jeff Lapidus also did not respond to a request for comment left on his office voicemail.

According to the lawsuit, Phillip Procacci was negotiating with Shaner CEO Lance T. Shaner  to manage his hotel project in the spring of last year. Between March and April, the CEOs of both firms held discussions about granting Shaner a 20 percent ownership interest. Shaner claims it also offered to secure franchise rights for a Marriott Residence Inn on the site, in addition to the Hilton hotels.

In May, Procacci and members of his executive team flew to Shaner’s corporate headquarters in State College, Pennsylvania aboard Lance T. Shaner’s private jet for a weekend-long consulting session.

“Procacci requested from Shaner the services and advice that one would request from an equity partner,” the lawsuit states. “Based on their extensive experience in hotel ownership and development, Shaner representatives disclosed strategies for negotiating with lenders, including appropriate loan-to-value ratios and the availability of other terms that could be obtained as part of hotel financing packages.”

Before returning to South Florida, Procacci representatives discussed partnering with Shaner on multiple hotel projects, the lawsuit claims. After Procacci finalized the deal with Shaner to manage the Hilton hotels, executives for both companies continued talks regarding the 20 percent stake for several months.

“Reasonably and in good faith relying on the parties’ agreement that Shaner would hold a 20 percent ownership stake in the Dolphin Mall hotel project, Shaner…provided services far beyond Shaner’s obligations under the management agreement,” the lawsuit states.

In addition, the lawsuit claims, Phillip Procacci told numerous people, including attendees at the Nov. 17 groundbreaking, that Shaner was his partner.

In early January, “Procacci did an about face and devised a scheme to wrongfully remove Shaner from the project,” the lawsuit states. “During a meeting at Procacci’s offices, Mr. Procacci informed Mr. Shaner that Procacci would not honor its agreement. Mr. Procacci stated that he had made a substantial investment in the project and that he simply no longer wished to share any equity.”

Phillip Procacci subsequently terminated the management agreement with Shaner, alleging it did not perform services the company was to provide, according to the lawsuit.

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