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Friday, July 12, 2024 | Back issues
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Judge Sees Possible Retaliation in Miami

(CN) - Miami Beach officials may have retaliated against a historic building owner who allegedly exposed a pattern of corruption among them, a federal judge ruled.

Florida businessman Rod Eisenberg bought the Sadigo Court Apartment Hotel, a historic building in Miami Beach, in 1988. Built in 1936 as a short-term rental hotel, the Sadigo is considered a "contributing historic structure" in the city's Museum Historic District.

Eisenberg claims his strained relationship with the city dates back to 1993, when he discovered alleged corruption in the city's bid-selection process. After Eisenberg told the media that Miami Beach officials received illegal kickbacks and brokerage commissions on multimillion-dollar real-estate transactions, several officials, including the city manager and city attorney, resigned or were forced out, according to court papers.

He meanwhile lost a legal challenge to the bid-selection process, and the city claimed that bitter feelings prompted Eisenberg's opposition to a city-development project in the late 1990s. But Eisenberg claimed corruption was rampant among city officials, many of whom were investigated and prosecuted between 2006 and 2012 for soliciting bribes, accepting kickbacks, and extortion.

He said Miami Beach saw an opportunity to retaliate in 2006 when he switched from renting Sadigo apartments on a yearly basis to transient rentals of six months or less.

When Eisenberg sought a license for a "cold food preparation area" and dining room to serve food to transient guests, the city approved the construction and allegedly labeled Sadigo Court a "hotel" rather than an apartment building, for the first time in its history. Miami Beach then claimed the Sadigo needed a certificate of occupancy as a new hotel with a restaurant, according to court papers.

After Eisenberg applied for a new certificate, the city asked him to update his property with sprinkler systems, and issued various notices of violation when the owner refused to comply.

Eisenberg objected to the city's classification of the Sadigo as a new hotel, and claimed the expensive update was unnecessary.

The bank holding the mortgage on the Sadigo refused to renew the loan after the city fire marshal said the Sadigo was illegally operating as a hotel, Eisenberg claimed in his federal complaint against the city. He claimed he had to refinance the Sadigo at a higher interest rate, and lost business when the city shut down the hotel for noncompliance and kicked out its guests during peak rental seasons.

In December 2011, police officers and fire officials shut down the Sadigo while it was hosting an art show and evacuated guests. The city's lead code compliance officer, Jose Alberto, offered to solve Eisenberg's "problems" in exchange for bribes, but Eisenberg refused and was immediately arrested, according to the complaint.

Eisenberg said the Sadigo has not received any code-compliance notices or warnings after Alberto and other officials were arrested in April 2012 for accepting bribes.

Miami Beach moved to dismiss Eisenberg's lawsuit, which it called a "sham." It also said Eisenberg failed to state a claim for relief against its supposedly legitimate, rational and nondiscretionary attempt to enforce the city code. Without a proper fire sprinkler system, the Sadigo did not comply with fire and safety standards, the city said.

Eisenberg countered that hotel fire safety is a "straw man" and "pretextual smoke screen ... to distract from what actually happened."

"The city has created this post hoc justification to hide its true motives: to use its regulatory machine to extort, to punish, and to 'get' the plaintiffs," his motion to dismiss stated.

U.S. District Judge Cecilia Altonaga ruled last week that the Sadigo's citations and two shutdowns over a period of six years do not amount to "an obvious campaign of malicious harassment" against Eisenberg. The judge dismissed Eisenberg's equal protection claim, concluding that the city's actions were not arbitrary or irrational on their face. The city had a legitimate purpose to ensure code compliance and protect the health and safety of the public, according to the March 3 ruling.

In upholding the retaliation claims, however, Altonaga noted that Eisenberg lost clients and refinancing opportunities from the repeated citations, claims of illegal operation, and shutdowns, one of which occurred during a peak weekend.

Coupled with Eisenberg's arrest, these actions are sufficient to deter an ordinary person from engaging in protected speech, especially if improperly motivated as alleged, the 32-page order states.

Miami Beach had argued that many years had lapsed between Eisenberg's alleged unmasking of city corruption in the 1990s and its alleged retaliation after 2006, but the court noted that Eisenberg had complained about the city's failure to enforce the code against an abandoned hotel in 2009 and had challenged the Sadigo's new classification as recently as 2011. The alleged retaliation came soon afterward, supporting a causal connection, the ruling states.

What's more, Eisenberg was arrested immediately after he allegedly refused to bribe compliance officers, according to the order.

As for Eisenberg's due-process claims alleging diminution in value, injury to the Sadigo's reputation, and interference with business, the judge said the complaint tends to show the city had specifically targeted the Sadigo and abused its discretion.

Chiding the city for its lack of supporting documentation, Altonaga refused to address its argument that the issues of a new certificate of occupancy and fire-safety compliance had been litigated in a previous lawsuit.

She dismissed Eisenberg's state-law claims, noting that Florida statutes allow local government to regulate fire-protection systems and related infrastructure requirements.

What's more, Eisenberg's reliance on a subsection that regulates condominiums and timeshares is misplaced, since the Sadigo cannot be classified as a vacation rental, according to the ruling.

Eisenberg's attorney refused to comment on pending litigation.

Attorneys for the city did not respond to a request for comment.

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