Eisenberg v. City of Miami Beach

Decision Date03 March 2014
Docket NumberCASE NO. 13-23620-CIV-ALTONAGA/Simonton
CourtU.S. District Court — Southern District of Florida
PartiesROD EISENBERG, et al., Plaintiffs, v. CITY OF MIAMI BEACH, Defendant.

THIS CAUSE came before the Court for oral argument on January 22, 2014 on Defendant, City of Miami Beach's (the "City['s]") Motion to Dismiss or Strike Plaintiffs' Complaint ("Motion") [ECF No. 16], filed November 22, 2013. The undersigned has carefully considered the parties' written submissions, the record, oral arguments, and applicable law.


This case involves various claims in connection with the Sadigo Court Apartment Hotel (the "Sadigo") located at 334 20th Street in Miami Beach, Florida. (See Compl. ¶ 1). Eisenberg is the president of Eisenberg Development, doing business as the Sadigo. (See id. ¶¶ 1-2). Eisenberg Development is a Florida corporation, with its principal place of business in Miami Beach, Florida. (See id. ¶ 1). The City is a Florida municipal corporation. (See id. ¶ 3).

Eisenberg Development purchased the Sadigo in 1988 and continues to own and operate it. (See id. ¶¶ 6, 9). Built in 1936, the Sadigo is a "contributing historic structure" in the City's Museum Historic District. (Id. ¶ 6).

A. Relationship Between Eisenberg and the City

In 1993, Eisenberg discovered the City's bid selection process was corrupt. (See id. ¶ 10). The City requested bid proposals to lease space in the Old City Hall. (See id.) The City rejected Eisenberg and the Miami Design Preservation League's joint bid without any consideration, selecting a competing bid instead. (See id.). Eisenberg sued the City to reopen the bid process. (See id. ¶ 11). Through discovery, Eisenberg learned the winning bidder was receiving free rent in the Old City Hall during the bid challenge. (See id.). Eisenberg also discovered a City commissioner and his son had "received what amounted to an illegal brokerage commission on a $10 million real estate transaction." (Id.).

Eisenberg subsequently disclosed these instances of City corruption to the media. (See id.). "As a result of [] Eisenberg's disclosures, a scandal ensued which ultimately led to the City manager resigning, and the City attorney being forced out . . . . [T]he Florida Department of Business and Professional Licensing subsequently brought an eleven-count administrative complaint against the City commissioner's son, [the] son's company, and the winning bidder . . . , alleging kickbacks and illegal profits on the real estate transaction." (Id. ¶ 12). The winning bidder agreed to pay fines. (See id.).

In 1995, Eisenberg challenged the City and Miami-Dade County's creation of a redevelopment area related to the Miami Beach Convention Center. (See id. ¶ 11). City officials claimed Eisenberg was taking revenge after losing his earlier lawsuits challenging the bid selection process. (See id.). Plaintiffs do not allege any intervening events between 1995 and 2004.

Between 2004 and 2009, Plaintiffs and others in the neighborhood voiced many complaints about the health and safety risks and Code compliance violations of an abandonedhotel in the neighborhood. (See id. ¶ 20). The City investigated some of these complaints but did not resolve the problems with the building. (See id.). In 2009, Eisenberg urged the City's Zoning Board of Adjustment to handle the Code violations more quickly and deny the building owner's request for a one-year extension to comply with the Code. (See id.). The Zoning Board ultimately required the owner to board the building and remove loose debris before granting the extension. (See id.). In light of this, Eisenberg withdrew his objection, and the Zoning Board later approved the extension. (See id.).

Between 2006 and 2012, multiple City officials were investigated and prosecuted for corruption. In 2006, a City electrical inspector was arrested for soliciting bribes (see id. ¶ 14); in 2008, a City fire protection analyst was fired after reporting suspicions of kickbacks (see id. ¶ 15); also in 2008, a City planner, examiner, and inspector were all caught accepting bribes (see id. ¶ 16); in 2012, City procurement director, Gus Lopez, was charged with sixty-three felony counts, including racketeering, bid-tampering, and illegal compensation (see id. ¶ 17); and also in 2012, seven City Code compliance and fire department inspectors, including the City's lead code compliance officer, Jose Alberto ("Alberto"), were arrested for extortion and accepting bribes in June 2011 to bypass City Code enforcement inspections and fines (see id. ¶¶ 18-19).

B. The Sadigo

The Sadigo originally opened in 1936 as an apartment with transient rentals, and it has continued operating in this fashion without objection from the City. (See id. ¶ 22). The Sadigo is located in an RM-2 zoning district, where the "'main permitted uses' include apartments, apartment hotels, and hotels." (Id. ¶ 23 (quoting CITY OF MIAMI BEACH LAND DEV. CODE (the "City Code") §§ 142-212)). According to the City Code, "hotels" are only intended for occupancy by transient residents, and "apartments" require cooking facilities. (Id. (quoting CityCode § 114-1)). The City Code permits transient rentals for apartment hotels and apartments in RM-2 zones. (See id. ¶ 24). The Sadigo's original City-issued certificates of use and occupancy ("CO[s]") were for use as apartments, and the Sadigo has maintained this status. (See id. ¶ 22). For a period of time, the Sadigo rented units on an annual basis. (See id. ¶ 25).

In 2006, after obtaining a state transient public lodging establishment license from the Florida Department of Business and Professional Regulation's Division of Hotels and Restaurants, the Sadigo resumed transient rentals. (See id. ¶¶ 25-26). The Sadigo is licensed for transient apartment rentals. (See id. ¶ 26). Plaintiffs verified with the City that transient apartment rentals are legally permissible for the zoning district and the COs applicable to the Sadigo. (See id. ¶ 27). Plaintiffs obtained a City Resort Tax Registration Certificate for the Sadigo, required for transient (six months or less) rentals of hotel and apartment units. (See id. (citing City Code §§ 102-306)).

Upon renting to transient guests in late 2006, the Sadigo constructed a cold food preparation area in the Sadigo's interior courtyard "pursuant to a City-approved and issued building permit." (Id. ¶ 29). "After construction was completed and signed[-]off [] by the City, the City informed Plaintiffs that it was a 'hotel[,]' not an 'apartment' . . . ." (Id.). The City required the Sadigo to obtain a new CO as a "hotel" because it rented apartments to transient guests and operated a food preparation area that was actually a "restaurant." (Id.). Plaintiffs complied and applied for a CO as a "hotel" (id. ¶ 31), and afterward, were told the Sadigo must comply with the fire protection standards applicable to "brand new hotel structures" (id. ¶ 32 (internal quotation marks omitted)).

From 2006 to 2012, Plaintiffs received numerous notices of violation and cease and desistorders2 from the City citing the Sadigo for violating City fire safety codes by allowing transient rentals of its apartments. (See id. ¶ 50). The City Building Official issued a decision requiring the installation of a fire sprinkler system and refused to accept an Engineer's Equivalency Report from the Sadigo explaining why a fire sprinkler system was unnecessary. (See App. Exs., Ex. 8 [ECF No. 17-8]). On April 15, 2010, the City Board of Rules and Appeals (the "BORA") considered the Sadigo's appeal of the Building Official's decision. (See id.). The BORA affirmed the Building Official's determination and notified Eisenberg of its decision in an April 21, 2010 letter. (See id.).

Plaintiffs objected to the City's classification of the Sadigo as a new hotel and attended a City Commission meeting on January 19, 2011. (See id. ¶ 29). At the meeting, Plaintiffs submitted a letter and materials explaining the various reasons the Sadigo should not be treated as a new hotel. (See id.). The Mayor, City Commissioners, City Manager, and City Attorney were indifferent and the City Fire Chief took offense to Plaintiffs' claims of unfair treatment. (See id.). Plaintiffs believe the City Fire Marshall told the Sadigo's mortgagee the Sadigo was illegally operating as a hotel. (See id. ¶ 38). On January 21, 2011, the Sadigo's mortgagee advised it would not renew its loan after previously encouraging Plaintiffs to renew the Sadigo's loan. (See id. ¶ 37). Plaintiffs were left with no choice but to refinance the Sadigo at a higher interest rate — an enormous additional cost. (See id.).

In 2011, Eisenberg Development filed a petition in the Eleventh Judicial Circuit Court of Florida seeking a temporary injunction against the City.3 (See App. Exs., Ex. 4 at 2 [ECF No. 17-4]); see also Eisenberg Dev. Corp. v. City of Miami Beach, No. 11-20234 CA 15 (Fla. 11th Cir. Ct. 2012). On January 5 and 6, 2012, the state trial court held an evidentiary hearing regarding compliance with the Florida Fire Prevention Code ("Fire Code"). (See id.). On January 10, 2012, the trial court denied the temporary injunction for failure to satisfy the requirements for injunctive relief. (See id. 5).

In April 2011, the City informed the Sadigo's longstanding client, the Art Basel Foundation, the Sadigo was illegally operating as a hotel. (See Compl. ¶ 39). The Foundation then severed its business relationship with Plaintiffs. (See id.). In June 2011, the City sent undercover police officers to the Sadigo to verify the Sadigo was renting to transient guests. (See id. ¶ 40). After observing transient rental activity, the City's police officers shut down the Sadigo for noncompliance with City fire codes, evicting the Sadigo's tenants and guests. (See id.). This shutdown caused the Sadigo's largest client, responsible for over $100,000 in annual revenue, to sever its business relationship with Plaintiffs. (S...

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