The Real Deal Miami

Forty investors who bought rooms in Miami Beach’s Shelborne Hotel lose contentious lawsuit

Attorney for 40 owners say they plan to appeal judge's ruling

Russell Galbut, Shelborne South Beach and Keith Menin

Five years after suing Miami Beach hotelier Keith Menin, their condo association and companies tied to developer Russell Galbut for allegedly authorizing nearly $30 million in illegal assessments to renovate and repair the Shelborne Hotel, 40 investors who bought rooms in the historic property have lost their battle.

Miami-Dade Circuit Court Judge Beatrice Butchko last Friday issued a final judgment in favor of the defendants Menin, Joan Brent, Justo Carlos Padron, Martin Wasserman, and the Shelborne Ocean Beach Hotel Condominium Association, Shelborne Property Associates and Shelborne Operating Associates.

State incorporation records show Galbut is a manager for Shelborne Property and Shelborne Operating. Ronald Rosengarten, a Greenberg Traurig shareholder who represented the Galbut entities, said Butchko’s ruling confirms that the assessments were proper, appropriate and above board.

“Shelborne Property Associates, Shelborne Operating Associates and condo association board members have endured years of unwarranted personal attacks on their character and reputation by the plaintiffs,” Rosengarten said in a statement. “All Shelborne unit owners should be pleased that their investment has been enhanced by owning units in a building whose commercial areas have been totally and beautifully refurbished, and where life-safety and aging conditions have been responsibly addressed and rectified.”

Kevin Malek, lead attorney for the 40 owners, said his clients plan to appeal Butchko’s ruling, as well as her earlier decisions to dismiss most of the counts against the defendants. He declined further comment.

Officially known as the Shelborne South Beach, the hotel is a historic Art Deco building that has gone through an extensive renovation that the 40 owners alleged was done in violation of Florida law. The landmark property has been a condo hotel for more than 10 years. Investors who purchased rooms rent the units out to tourists.

The lawsuit had alleged, among other things, that the association and certain board members breached their fiduciary duty in assessing unit owners for construction work that did not constitute necessary repairs and maintenance, and which therefore required a vote of all unit owners. The plaintiffs accused the association and board members of conspiring with Shelborne Property Associates and Shelborne Operating Associates to have the unit owners pay for construction that allegedly was done for the benefit of  the two entities’ hotel program.

According to Rosengarten and Alice K. Sum, a Fowler White Burnett shareholder who represented the condo board, the 40 owners failed to produce evidence to support their claims. Sum said the association properly performed its duties and assessed owners for the work to the common areas to address a number of required life-safety and maintenance issues for the benefit of all unit owners.

“That work included sealing fire wall separations, and replacing old wiring, rusted water pipes and other components that had substantially deteriorated or reached the end of their useful life,” Sum said in a statement. “We are very pleased with the outcome of this case.”