A former client is suing Carlton Fields Jorden Burt and Miami shareholders Merrick L. Gross and Jay A. Steinman for legal malpractice over a derailed $25 million land deal.
Real estate investor 276 Port L.P.’s three-count complaint alleges negligence and breach of fiduciary duty against all defendants and negligent misrepresentation against Carlton Fields and Gross. The company hired the corporate law firm to handle aspects of the acquisition, including devising a litigation strategy for removing long-term leases encumbering the property. Port claims Carlton Fields incorrectly advised it could terminate the leases — advice that ultimately led the would-be buyer to lose a $250,000 deposit when the deal couldn’t close.
The Tampa-based law firm charged $595 per hour with a $10,000 retainer for the analysis and other acquisition services, according to court documents. It denies any wrongdoing and promised to “staunchly defend” itself against the plaintiff’s attempt “to blame Carlton Fields for its own business decisions.”
The dispute stems from the investor’s plan to acquire an 8.5-acre parcel on the 17th Street Causeway opposite Port Everglades in Fort Lauderdale and minutes from Fort Lauderdale International Airport.
Port sought to purchase fee simple title in 2016 despite five ground leases with a remaining term of about 40 years on the property. The tenant was interested in selling the leases, but Port believed “certain perceived defaults” would allow it to terminate them.
“These defaults would provide Port significant leverage to acquire the leases, possibly without litigation, for significantly less than if the leases could not be terminated,” according to the lawsuit filed in Broward Circuit Court and transferred to Palm Beach Circuit Court. “The $25 million purchase price for the property was premised on the assumption that the leases were in default or would be in default at some future time and could be terminated.”
If the leases stayed in place, the $25 million price tag would have “been excessive and unjustified,” according to the complaint.
Port retained Carlton Fields to determine whether it could terminate the leases based on the leaseholder’s removal of a motel and other structures, failure to post surety bonds and other potential defaults.
Gross produced a six-page analysis with a strategy for creating a default notice detailing a “laundry list of violations” to “get the current tenant to the negotiation table.”
“We believe that the likelihood of prevailing on some of these claims, at least in connection with terminating the ground leases, would be greater than 50 percent,” according to Gross’ analysis included in court filings. “There is a lesser chance of collecting money damages, except for rent, because of the speculative nature of lost profits and the timing issues.”
Port said it relied on that opinion, which led it to forfeit its hefty deposit months later when the transaction tanked.
“As it turned out, Carlton Fields was wrong,” plaintiffs attorney James W. Beasley Jr. of Beasley Kramer & Galardi in West Palm Beach said. “If the opinion had been, ‘You can’t terminate the ground leases,’ my client would have gotten their deposit and gone on to do different things.”
Carlton Fields placed responsibility for the botched deal squarely on Port and asked the court to award compensatory damages, pre- and post-judgment interest, reasonable costs and other relief. The firm raised its own allegations in a breach of contract counterclaim against its former client, alleging Port failed to pay its invoices.
“Against Carlton Fields’ advice, Port publicized the litigation strategy to potential investors, which then caused problems between Port and the seller,” said defense attorney David P. Ackerman of Ackerman Link & Sartory in West Palm Beach. “The deal failed to close for this and other reasons unrelated to the firm’s work.”
The case is pending before Palm Beach Circuit Judge Jeffrey D. Gillen.
Carlton Fields’ national and international litigation teams operate from offices in Georgia, New York, California, Connecticut, Florida and Washington. With $223 million in gross revenue in 2015, the firm placed 132nd on The American Lawyer’s 2016 Am Law 200 ranking.