One Bal Harbour Resort & Spa keeps spinning out litigation.
After years in bankruptcy and state courts, the condo hotel is once again the key part of a lawsuit. This time the former co-owner of the troubled complex is suing his former business partners, claiming he was defrauded on a $17.5 million loan.
Thomas Sullivan, owner of Virginia-based Lumber Liquidators Holdings Inc., filed suit in Miami-Dade Circuit Court through his company, F9 Investments LLC, against investors Jorge and Juan Arevalo.
Sullivan’s attorney, Melanie Damian, a partner at Damian & Valori in Miami, said her client was repaid a portion of the loan but is still owed roughly $12 million.
“These are Mr. Sullivan’s direct claims that he has had against Mr. Arevelo, and at this point he has decided to pursue those claims,” she said.
Sullivan and Jorge Arevalo purchased the complex for $14.6 million from bankrupt WCI Communities Inc. in 2009. One Bal Habour features 185 residential condominium units and 124 hotel condominium units.
Sullivan left the Arevalos in charge of management of the oceanfront resort, claiming in the lawsuit he was supposed to be paid back on the loan and then receive a share of the profits.
The lawsuit repeats accusations against the Arevalos from the hotel-condo association, which claimed the brothers looted the operation after they dismissed a five-star hotel operator.
“The defendants engaged in fraud, self-dealing and mismanagement,” according to the lawsuit filed Thursday.
The lawsuit claims Jorge Arevalo failed to inform Sullivan that he intended to take a $1 million commission from the loan.
“Jorge Arevalo also failed to disclose that he never intended to perform any of his duties,” the lawsuit states. “Instead, Jorge Arevalo, along with his brother Juan Arevalo, intended to use One Bal Harbour assets and entities relating to them for their own personal gain.”
A receiver was appointed by a Miami-Dade circuit judge to oversee the finances of the condo hotel, and a federal bankruptcy judge in January approved the $13.4 million sale of the complex to the residential condominium association under a Chapter 11 reorganization plan.
A requested discharge from Sullivan was not approved, allowing a $30 million derivative lawsuit against him to stand.
Jorge Arevalo’s attorney, Joseph DeMaria, a partner at Fox Rothschild in Miami, said Sullivan is grasping at straws after being pursued by the liquidating bankruptcy trustee, who inherited the derivative lawsuit.
“He is deflecting attention by blaming Mr. Arevalo,” DeMaria said. “He claims he was left in the dark from the management of One Bal Harbour, and that claim is a lie, and I have emails and documents to prove it.”