Donald Trump
Donald Trump (Amy Beth Bennett)

Donald Trump and the Trump Organization have been sanctioned by a federal judge for not disclosing a $5 million insurance policy that could have been used to settle claims from the failed Trump International Hotel & Tower in Fort Lauderdale.

U.S. District Judge Kathleen Williams in Miami granted legal fees Tuesday against the Trump defendants.

The plaintiffs include Trilogy Properties LLC and seven people who sought to recover deposits on condominium units. The 24-story tower at 551 N. Fort Lauderdale Beach Blvd. was nearly completed when the developer, SB Hotel Associates LLC, defaulted in 2009 on the $139 million construction loan.

That left investors without an economically viable way to take title to their units, and a series of lawsuits were set in motion in state and federal courts. All the defendants but Trump settled.

Plaintiffs attorney Jared Beck of Beck & Lee in Miami requested sanctions Nov. 27, 2013, after being told five days earlier by Trump Organization’s general counsel, Alan Garten, that an AIG insurance policy had “dried up.”

“This was the first time plaintiffs learned of insurance coverage for any defendant, much less that such coverage had been depleted,” Beck stated in his motion.

Beck speculated a recent settlement with investors in Trump Baja, a Mexican project with litigation in California, “may very well be the reason coverage has ‘dried up,’ in Mr. Garten’s words.”

While Williams was considering the sanctions motion, Beck filed other motions seeking additional discovery based on a theory that Trump had a national strategy of not disclosing applicable insurance policies in litigation.

Trump faces litigation related to condominium tower projects in 10 cities across the Americas, including lawsuits in Sunny Isles Beach, Tampa and Panama.

Insurance Disclosures

Trump attorney Herman J. Russomanno of Russomanno & Borrello in Miami argued discovery should go no further because there is no such nationwide litigation strategy.

“In the vast majority of these cases, no disclosure of insurance was required by statute or any procedural rule,” Russomanno told the court.

In the Baja cases, the Trump-related parties disclosed relevant insurance policies in all cases that weren’t settled, he said. The same occurred in the Tampa lawsuit, Aaron, et al. v. Trump Organization, he said.

Russomanno acknowledged the insurance should have been disclosed when discovery began in the Fort Lauderdale cases. But in the Trilogy Properties lawsuit, he argued there should be no sanctions because the plaintiffs were not harmed by the policy’s expiration.

“In fact, no prejudice exists because, per the court’s instruction, the Trump defendants filed an affidavit Jan. 2, 2014, guaranteeing the availability of funds to satisfy any judgment up to and in excess of $5 million in this action,” Russomanno stated in his response.

Williams considered the sanctions in three sessions that ended June 11. On Tuesday, she ordered the Trump defendants to pay all fees in connection with mediation conferences held April 4, 2011, and Feb. 27, 2012, and a settlement conference held Jan. 21, 2014, as well as the time spent on the sanctions motion and Garten’s deposition.

She ordered both sides to submit documents on costs July 9. Trial on the condo deposits is scheduled for the third week of September.

Beck & Lee’s recovery contrasts with an earlier defeat in Trump litigation. The firm represented would-be Fort Lauderdale unit buyers John Taglieri and Deer Valley Realty Inc. in a Broward Circuit Court trial loss in March. Trump is asking Judge Jeffrey Streitfeld to award attorney fees.

Last December, CFLB Partnerships LLC purchased the oceanfront tower for $115 million and began a major renovation in March. It is expected to open next year as a Hilton resort under its luxury Conrad brand.