Hyde Resort & Residences association strikes back at Sotherly Hotels

Broward lawsuit accuses hotel management company of failing its fiduciary responsibilities
By Francisco Alvarado | June 14, 2019 08:45AM

Daniel Rutois and Hyde Resort and Residences

Daniel Rutois and Hyde Resort and Residences

The condo association for Hyde Resort & Residences in Hollywood is not backing down against Sotherly Hotels, the national hospitality company that sued the association president two weeks ago in Miami federal court.

Last week, the association responded by filing its own lawsuit against Sotherly and eight of its affiliates in connection with the Williamsburg, Virginia-based firm’s recently terminated contract to manage Hyde Resort & Residences. The complaint, filed in Broward County Circuit Court, alleges that Sotherly and the affiliates engaged in a “pattern and practice of improperly utilizing [The Hyde association’s] funds to cover the overhead and expenses of unrelated hotel operations.”

An attorney for Sotherly said the company doesn’t comment on pending litigation.

The Hyde association alleges Sotherly and its affiliates failed to honor fiduciary and contractual obligations. “Instead of operating the condominium for the benefit of association, the defendants have effectively converted [the] association into a cash-cow for the benefit of related hotel operations,” the lawsuit states. “Paying [Sotherly and its affiliates] for the ‘benefit’ of having [Sotherly] mismanage or otherwise convert [the] association’s funds for the operation of the Sotherly entities’ own financial interests is certainly not the essence of the bargain struck by the parties.”

The association terminated Sotherly’s contracts when 350 owners, or 75 percent of the membership, voted to oust the company as the property manager for the 407-unit condo-hotel, which was developed by the Related Group. The complaint accuses Sotherly of attempting to interfere with the vote’s outcome by circulating flyers on March 12 offering to pay $1,000 each to the first 50 unit owners who provided proof that they voted no.

In its federal lawsuit filed on May 30, Sotherly accused Hyde association president and commercial broker Daniel Rutois of using “commercial speech to defame and set forth falsehoods” about its management of the Hyde resort, as well as its executives and employees. The complaint accuses Rutois of commercial defamation and tortious interference with a business relationship. Sotherly also alleges Rutois threatened and harrassed it employees and violated association rules by running an unauthorized rental program and employing an individual who solicited business from other unit owners in the building’s lobby.

In an email sent last Friday, Rutois told The Real Deal that the federal lawsuit against him has no merit and is rife with inaccuracies and false allegations. “If telling owners that they have the right to vote ‘yes’ or ‘no’ to cancel the contracts is a defamation, then I’m guilty,” Rutois said. “They are the ones that asked the owners to vote No with a very nice brochure offering $1,000 to owners who voted No.”

Rutois said he did employ an associate as a concierge to help guests renting the units under his purview. “I fired this employee after a few months, Rutois said. “He stayed at the Hyde without my authorization.”

Rutois said he sent the ex-employee a cease-and-desist letter to stop soliciting business in the lobby. “He was taking clients from us and the hotel company that is suing me,” Rutois said.

The Hyde association president also denied using his position to abuse and harass Sotherly employees. “I complained many times to the hotel company about some of its employees that were not doing their jobs,” Rutois said. “One of them got upset and lied to his boss. I told them let’s have a meeting with this employee to see if tells the same lie in front of me. The meeting never happened.”

“You need to understand that [Sotherly is] very upset as they bought one thing and they got something else,” Rutois said. “They blame the messenger and not the seller.”