Sotherly Hotels sues Hyde Resort & Residences association president

Virginia-based hotel management company accuses broker and unit owner Daniel Rutois of defamation and more, in federal lawsuit

Jun.June 04, 2019 05:30 PM
Daniel Rutois and Hyde Resort and Residences

Daniel Rutois and Hyde Resort and Residences

UPDATED, June 5, 4:55 p.m.: Sotherly Hotels, which previously managed the luxury beachfront development Hyde Resort & Residences in Hollywood, is not taking kindly to Daniel Rutois, a commercial broker who serves as president of the project’s association.

Last week, Sotherly sued Rutois and his firm, KGA Management Group, in Miami federal court for commercial defamation and tortious interference with a business relationship.

The lawsuit alleges that as association president, Rutois abused his authority by threatening employees, breaking condo owner rules and regulations and running an unauthorized rental program, in addition to making false statements about Sotherly’s performance to third parties.

Rutois did not respond to a phone message and two emails detailing the allegations against him and seeking his comment. Philip Kantor, an attorney for Williamsburg, Virginia-based Sotherly, said his client has a policy of not commenting on active litigation.

Darrin Gursky, counsel for the Hyde Resort’s association, said the complaint is without merit. “We view it as a retaliatory lawsuit for the association terminating developer-entered contracts.” Gursky explained that Florida law allows associations to cancel any agreements initiated by a project developer within 18 months of the association being turned over. In this case, more than 350 unit owners voted to terminate Sotherly, which had been brought on board by The Related Group, which built the 407-unit Hyde.

According to the lawsuit, Rutois’ threats and “callous, rude and harassing demeanor” caused Sotherly employees at Hyde to resign, which resulted in a degradation of service levels at the luxury resort as the hotel management firm had to continually hire and train new staff.

“Mr. Rutois has improperly and with no support asserted that as president of the condominium association, the staff must follow his orders and directives,” the complaint states. “Mr. Rutois has spoken down to and in a condescending and threatening manner to [Sotherly’s] employees.”

Meanwhile, Rutois operated a rental program that created a conflict of interest between himself and other unit owners, the suit alleges. He hired an employee to solicit Hyde condo owners to participate in KGA’s rental program from the resort’s lobby, in violation of association rules and regulations, according to the lawsuit.

Sotherly claims that Hyde rentals through KGA caused Sotherly’s rental program to lose money. It forced the company to compete with Rutois and unit owners under his umbrella who charged a lower rate and did not need to spend as much money to maintain their condos, according to the suit.

“KGA’s rental program did not conform to the Resort’s rules and basic industry guidelines with respect to room and product pricing,” the lawsuit states. “Defendants’ failure to follow the rules results in poorly maintained rooms, guest and resident complaints and deterioration of the overall quality of the resort.”

The final straw came when Rutois led a successful campaign convincing other association members to terminate Sotherly’s contract at an April 24 board meeting, according to the suit. Sotherly claims Rutois used “commercial speech to defame and set forth falsehoods” about its management of the Hyde resort, as well as its executives and employees.

“Mr. Rutois has stated openly to such third parties, without any factual support, that [Sotherly] cannot be trusted as the manager to hire financial auditors, engineers and counsel for the Hyde Resort,” the complaint states. “Mr. Rutois has, without any factual support of any kind, made accusations to such third parties that [Sotherly] had a conflict of interest or worse in managing the Hyde Resort.”

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