Case: Craig Wubben et al v. Ralph Kirkland, Ken Franklin Jr. and Legacy Grand Holdings

Case no: AAA32527Y0057709

Description: Fraud, negligent misrepresentation

Filing date: July 20, 2009

Trial dates: Jan. 10-14 and Jan. 21, 2011

Award: $3.8 million

Arbitrator: Gregory Hoffmann, Hoffmann Mediation, Longboat Key

Plaintiff attorneys: Jared Beck and Elizabeth Lee Beck, Beck & Lee, Miami

Defense attorneys: Nahn T. Lee and Brock McClane, McClane Partners, Orlando

Details: In 2007, nine investors from around the country bought individual units in the 295-room Legacy Grand Maingate condo hotel in Kissimmee.

The buyers filed a fraud suit in Orlando federal court. Under terms of the contract, the defendants moved to transfer the case to arbitration.

Plaintiff case: Jared Beck said the investors were deceptively told they were investing in a Holiday Inn and promised significant monthly revenue. The revenue was cut off in 2009, and the hotel went through a series of flag changes and now operates as a Baymont Inn & Suites.

Plaintiffs argued the investment pitch violated federal and state securities laws. They called the hotel manager as a fact witness to testify on the accounting practices of the hotel and a securities law expert, David Phillips of Miami, as an expert witness. Phillips looked at the offering materials for the condo hotel units including the purchase documents, condo documents and sales materials and concluded the developers failed to comply with Securities and Exchange Commission guidelines.

Defense case: The defense did not respond to a call for comment by deadline.

The defense called Miami developer Howard Shapiro, who has developed condo hotels, as an expert witness. He concluded the project did not violate securities laws, Beck said. However, some of his testimony wound up backfiring and helping the plaintiffs, particularly when Shapiro said he would not be comfortable marketing the properties the way the Legacy Grand was marketed and would not give the sales brochures to his own mother, Beck said.

Outcome: In a 40-page opinion, the arbitrator ruled for the plaintiffs, awarding them a total of $3.7 million, including $2.4 million in punitive damages. The arbitrator dictated how the totals would be divided among the plaintiffs, ranging from $168,000 to $270,000 per investor. He basically doubled the compensatory damages for punitives.

Quote: “This is the largest arbitration award we’ve ever gotten,” Beck said. “It’s very unusual to have punitive damages awarded. That’s not something you see a whole lot in arbitration. The arbitrator decided that the conduct in this case rose to a level that punitives were warranted. He wrote a 44-page opinion, which is also very unusual for an arbitration.”

Post award: Beck has presented the opinion to U.S. District Court in Orlando for a final judgment. The defense can attempt to have the federal court vacate the binding arbitration, but their chances are slim, Beck said. He said he has no indication whether the defense will attempt to do so.