Posted on Sunday, March 20, 2011
This article has been corrected to show that requests for attorney and accounting fees have yet to be submitted by the plaintiffs to the court. Due to a reporting error, the original version erroneously stated that the fees were included in a final judgment totaling $3.4 million.
In one of the longest-running lawsuits in Palm Beach County, a dispute over an unauthorized $144,000 broker’s commission produced a decision that potentially could be worth nearly $3.4 million in damages, interest, fees and costs.
Bahrain-based Taib Bank, which sued real estate developer Harry Hahamovitch and others, won its claim that it did not have to share profits until it realized $20 million in future earnings – beginning May 31, 2010 – from two shopping centers.
Circuit Judge David Crow ordered Hahamovitch to repay the broker’s commission plus interest for a total estimate of about $500,000. The bank’s attorney also plans to seek a $350,000 fee for the accountant who sorted out the cash-flow value of the disputed properties.
Greenberg Traurig attorney Stephen Mendelsohn also said he would ask for $2.5 million in attorney fees to be split by Becker & Poliakoff, which handled the case until 2007, and Greenberg Traurig, which took over.
The dispute has taken many twists and turns, but Crow is not optimistic it’s resolved.
“This accounting should be the last leg of this marathon litigation,” he wrote in the final judgment entered Monday. “However, this court doubts that this decision in any way will damper the parties’ enthusiasm for litigation, and this case will most probably continue long past this court’s judicial career.”
Defense counsel Robert Sweetapple said he would file a motion for rehearing. Sweetapple of the Boca Raton firm Sweetapple Broeker & Varka said the judge erred when he issued final judgment prior to resolving a counterclaim.
“Our position is the plaintiffs denied my client’s right to purchase,” Sweetapple said.
The feud between the bank and Hahamovitch already has been through two trials. Along the way, one of the defendants was killed by Palm Beach County sheriff’s deputies.
It all began when Hahamovitch tried to buy two shopping centers in 1993, said Stephen Mendelsohn, a Greenberg litigation shareholder in Boca Raton. Hahamovitch approached the bank for a loan. Delray Property Investments and SOSQ Property Investments, subsidiaries of the bank, bought the retail centers, and Hahamovitch was to be the property manager.
The contract provided Hahamovitch a profit-sharing agreement if the properties met certain milestones. But he was not allowed to receive a commission, directly or indirectly, from the acquisition of Plaza la Mer in Juno Beach and South Square in Hernando County.
When the bank discovered Hahamovitch was paid a commission, it sued in 1995 for breach of contract and fraud, Mendelsohn said.
It took 10 years to bring that case to trial. In 2005, a jury found Hahamovitch liable on both counts.
“You would think that would be the end of it,” Mendelsohn said. “But it took another six years to decide the next issue. We asserted that because of their conduct the defendants were not entitled to receive any profits under the participation agreement. The judge disagreed.”
Crow ruled the defendants were entitled to an accounting, regardless of the jury’s fraud finding. A court-appointed accountant, Brad McIver, spent 18 months reconstructing financial records from 1993 to 2010, but the defendants didn’t like his results.
Shortly before the second trial, the defendants moved to disqualify McIver on grounds that he had improper communication with the bank’s accountants. Crow held a bench trial on the issue and rejected the challenge.
A second defendant, former Lauderhill Mall owner Robert Geiserman, had an interest in the profit-sharing agreement.
While the parties waited for a decision on the accounting issues, Geiserman, 69, was shot to death by a sheriff’s SWAT team last July.
His son called police when Geiserman threatened to commit suicide. Deputies found Geiserman at his home with a towel wrapped around what deputies believed was a weapon. He was told to show his hands but instead raised the towel toward a deputy. Geiserman was killed.
His estate was found liable in the final judgment.
Larry Chaleff, a managing director with Taib Bank, said the court found the retail properties never met the threshold that would entitle Hahamovitch to profits.
“The defendants asserted we owed them $3 million,” Chaleff said. “We asserted that until we get more than $20 million, they’re not entitled to anything.”
Sweetapple said the accounting resolves only the first of two issues. Hahamovitch was not able to exercise his right to purchase in part because of a dispute over the valuation.
“What remains to be decided is what relief is he entitled to based on the fact his right to purchase has been denied this entire time,” Sweetapple said.
Hahamovitch also was represented by Joel M. Weissman, a solo practitioner in West Palm Beach.
By Adolfo Pesquera, DAILY BUSINESS REVIEW