‘From the Ashes of Calamity’: Lawyers React to Swift $997 Million Resolution of Surfside Condo Collapse Litigatio

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“Next time you hear someone disparage our profession, it is worth remembering some of the exceptional work done here.”

The June 24 collapse of Champlain Towers in Surfside killed 98 people and left dozens injured. Credit: Felix Mizioznikov/Shutterstock.com.

Less than a year after the June 24, 2021, collapse of the Champlain Towers South condominium building killed 98 people in Surfside, a proposed $997 million class action settlement has been reached—to the amazement of many in the legal community.

It’s a result that’s unprecedented in both size and speed, according to Daniel Gielchinsky, founding partner of business law firm DGIM Law, who served as Surfside’s vice mayor from 2018 to 2020.

“From the ashes of this awful calamity arose a principled and fierce determination to ensure that the legal system quickly brought justice to those who needed it most,” said Gielchinsky.

Attorneys for the plaintiffs announced the settlement agreement during a hearing Wednesday. It’s still pending approval from Miami-Dade Circuit Judge Michael Hanzman, who has frequently expressed a desire to resolve the case quickly.

Hanzman previously approved an $83 million settlement covering economic losses such as condominium units and personal property. The final compensation tally could breach $1 billion, as the collapse site will be sold via live auction May 24.

‘Why You Become a Lawyer’

Attorney Brad Sohn of Sohn Law in Miami.

The litigation surrounding the collapse has been a “true whirlwind,” according to Brad Sohn of The Brad Sohn Law Firm in Coral Gables, who was the first attorney to file suit over the tragedy.

“It’s been emotionally exhausting and, at the same time, the amount of pride that I have and the ability to be able to deliver for the victims that had the world’s empathy and sympathies,” said Sohn. “To have this happen in our own backyard is terrible, and the flip side is to able to step up and at least put some of these pieces back together so that they can focus on what’s really important. That’s why you become a lawyer in the first place.”

For Sohn, his biggest challenge was the unrelenting pace of the litigation.

The Key Players

Hanzman has been widely commended for resolving the case so quickly.

The judge called the litigation “heart wrenching” at a March class action litigation forum at the University of Miami, remarking, ”I find it very rare that you have a class action that has both significant economic and significant injury components.”

At Wednesday’s hearing, Hanzman reportedly told the courtroom, “I’m shocked by this result. I think it’s fantastic,” the judge told the courtroom. “This is a recovery that is far in excess of what I had anticipated.”

Among the last defendants to settle were developers Terra Group and 8701 Collins Development, and John Moriarty & Associates, general contractor of the neighboring building Eighty Seven Park condo, accused of destabilizing Champlain Towers during construction work. Paul J. Schwiep of Coffey Burlington represented Terra and Christopher L. Barnett of Greenberg Traurig represented 8701 Collins Development, according to online case files.

Miami attorneys Rachel Furst and Stuart Grossman of Grossman Roth Yaffa Cohen and Harley Tropin of Kozyak Tropin & Throckmorton served as lead counsel to the plaintiffs in the class action.

Akerman partner Michael I. Goldberg served as receiver, represented by Paul Singerman and Jordi Guso of Berger Singerman, while Miami attorney Bruce W. Greer mediated the case.

Mark Raymond, managing partner and complex commercial litigator at Nelson Mullins Riley & Scarborough in Miami, said the plaintiffs team should be commended for what he described as “nothing short of an incredible settlement.”

“To get these defendants and their insurers to settle, knowing full well that there are many meritorious defenses to the claims, speaks volumes about their skills as negotiators and as outstanding lawyers,” said Raymond. “The nearly $1 billion settlement is a Herculean achievement. Judge Michael Hanzman summed it up perfectly: ‘Simply amazing. Outstanding.’  While it will never replace the loss of family members it is, nevertheless, a sensational outcome for the families.”

Likewise, Gielchinsky said he’s astonished that the case is near resolution having been pending for less than a year. He noted many case participants never anticipated a settlement could get anywhere close to $1 billion—especially when the property sold for $120 million last year.

“Cases of this magnitude typically take between three to five years or more to reach this point, and appeals often add several more years to the legal process,” Gielchinsky said. “This remarkably swift pace is a testament to the resolve that Judge Michael Hanzman and receiver Michael I. Goldberg showed in pushing the lawyers and parties to quickly bring a significant measure of closure and compensation to the families of those who were tragically lost.”

Mark Migdal & Hayden partner Etan Mark of Miami. Courtesy photo

Although the settlement is a success, Etan Mark, founding partner of Mark Migdal & Hayden in Miami, said there will never be closure for the victims or their families.

“But there can be a sense of justice within the confines of our judicial system. It is remarkable what has been accomplished here and it is a testament to Judge Hanzman and all of the attorneys involved,” said Mark. “So, next time you hear someone disparage our profession, it is worth remembering some of the exceptional work done here.”

Precedent for HOA Liability?

The settlement should be a wake-up call for HOAs regarding their exposure to liability risks, according to Jeanne Grove, partner and co-chair of the real estate practice group at Kaufman Dolowich & Voluck in California.

“The HOA, along with several other defendants, including the engineers involved in the development, had reportedly already settled with the plaintiffs earlier for approximately $100+ million,” said Grove. “While the HOA’s reported contribution to settlement represents a mere fraction of the total billion-dollar settlement amount, it is significant enough to confirm the HOA’s concern for its substantial liability in the case.”

Although the developers, engineers and other defendants involved in the construction of the building may be deemed ultimately responsible, the HOA’s role in settlement signals how it also played a part in the tragedy, in Grove’s view.

“The HOA faced the prospect of significant liability in the case for failing to identify the defects in the building and for failing to promptly address them,” said Grove.

Grove suspects the settlement could serve as a precedent for HOA liability in future construction defect cases across the country.

“Although HOA boards are usually comprised of volunteers with no requirement of prior experience in any practice area, this case may compel future board members to take on special knowledge in construction, property management and real estate law,” said Grove. “HOAs across the nation would be wise to check in with their counsel and their insurance carrier to ensure they are code compliant and following best practices, particularly with respect to the management of older buildings.”

Keith Poliakoff of Government Law Group. Courtesy Photo

Attorney Keith Poliakoff with Government Law Group in Fort Lauderdale represents real estate developers in the permitting process in South Florida and is a city attorney for Southwest Ranches. He said the litigation will ultimately affect Florida building code processes.

“This unfortunate event has substantially increased the pressure on both companies who perform 40-year recertifications and the municipalities who review them. The failure to flag a substantial life-safety violation in a report and the municipality’s failure to force immediate compliance can lead to cataclysmic results,” said Poliakoff.

Nothing can ever prepare an attorney for a case and tragedy like what happened in Surfside, but Sohn said staying determined and working as a team helped get the job done.

“What made this so different is that everybody experienced … whether you lost your home or lost a loved one, [everybody] lost something unspeakable all at the identical moment in time as well,” said Sohn. “I just think that this is really unique even in the world in which I practice. Always try to make sure you’re the right attorney for your client, that you would want for yourself.”

As the proposed settlement still needs final approval from Hanzman, Sohn said the hope is that victims can start to be compensated by the fall of this year.

Raychel Lean contributed to this report. 

Link: ‘From the Ashes of Calamity’: Lawyers React to Swift $997 Million Resolution of Surfside Condo Collapse Litigation

Author: Melea VanOstrand More from This Author

Does a Noisy Gym Equal Property Damage? ‘Interpretation Is Key’ in This Insurance Suit Against a Florida Condo Association

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Does a noisy gym equal property damage?

It’s a lawsuit that raises questions about how insurance contracts should be interpreted, as this commercial general liability policy defines “property damage” as “physical injury to tangible property.”

The big question in a lawsuit that pits insurance underwriters against a Florida condo association is: does the disruption of a noisy gym constitute property damage?

It’s a lawsuit that raises questions about how insurance contracts should be interpreted, as this commercial general liability policy defines “property damage” as “physical injury to tangible property.”

The underwriters at Lloyd’s of London are seeking declaratory relief and reimbursement after incurring a more than $91,000 bill for defending Bayfront Tower Condominium Association Residential in St. Petersburg from a noise complaint under a policy that provides coverage from property damage.

The lawsuit, found on Law.com/Radar, filed Wednesday in the U.S. District Court Middle District of Florida Tampa Division, argues a loud fitness center isn’t defined as property damage and physical injury to tangible property under its policy.

Jordan Isrow of Government Law Group in Fort Lauderdale.

The outcome of the case will depend on how the court interprets the plain language of the policy, according to Jordan Isrow of Government Law Group in Fort Lauderdale, who is not part of the litigation.

“The starting point of the court’s analysis will be to look at the applicable coverage language, which states that ‘[Lloyd’s] will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.’ Notably, the insurance applies to the building as a whole,” said Isrow.

The association operates Bayfront Tower Condominium and common areas at 1 Beach Drive SE in St. Petersburg. In 2016, it built a 356-square-foot fitness center on the 28th floor, over a unit owned by Ted and Marlene Starr. During construction, sound-suppressing flooring was removed from the 28th floor, which resulted in noise complaints from the couple from August 2016.

The Starrs filed a 2018 petition for arbitration with the Florida Department of Business and Professional Regulations, which alleged they “had to endure continued and severe noise and acoustical problems” from the fitness center, according to the lawsuit.

The Department of Business and Professional Regulations ordered the condo association to fix the noise situation, but the association sought a trial. The Pinellas Circuit Court ultimately affirmed the department’s order and the association appealed to the Second District Court of Appeal, which also affirmed.

According to the lawsuit, the underwriters covered the association’s defense fees and costs throughout litigation.

Removal of the Flooring

In Isrow’s view, there’s no dispute that the association is legally obligated to pay some amount of damages toward remediating the noise situation.

“Given that there has been no allegation by the Starrs as to any bodily injury, the question then becomes whether the removal of the sound suppressing flooring as part of the construction of the fitness center constitutes ‘property damage,’ which is defined under the policy as ‘physical injury to tangible property.’ This is where interpretation is key,” he said.

According to the complaint, the policy says the insurance applies to bodily injury and property damage only if, “prior to the policy period, no insured listed under paragraph one of Section II – Who Is An Insured and no ‘employee’ authorized by you to give or receive notice of an ‘occurrence’ or claim, knew that the ‘bodily injury’ or ‘property damage’ had occurred, in whole or in part. If such a listed insured or authorized ‘employee’ knew, prior to the policy period, that the ‘bodily injury’ or ‘property damage’ occurred, then any continuation, change or resumption of such ‘bodily injury’ or ‘property damage’ during or after the policy period will be deemed to have been known prior to the policy period.”

The policy also includes a construction or development exclusion that says, “This insurance does not apply to, nor shall we have any duty to defend, any claim or ‘suit’ arising out of any construction or development, including the rendering of or failure to render any professional services by you or on your behalf in any way related to such construction or development.”

“One could argue that the removal of the sound-suppressing flooring constitutes a physical injury to the Starrs’ unit because it physically reduced the ceiling/floor’s ability to prevent sound from passing through the barrier between the floors,” said Isrow. “On the other hand, one could also argue that the removal of the sound suppressing flooring does not constitute a physical injury because no physical contact was actually made to the Starrs apartment.”

‘Injury’ vs. ‘Damage’

It’s interesting, in Isrow’s view, that the insurance policy uses the term “injury” rather than “damage,” as “injury is usually reserved for a negative impact on a person, while damage typically refers to a negative impact on a thing.”
The underwriters’ complaint claims there’s no coverage for the condo because the Starrs did not seek damages because of bodily injury or property damage, the association knew of the Starrs’ noise complaint before the underwriter’s policy started, and because the construction or development exclusion applies.

“Based on the facts of the case, in my opinion, a court would find that the damages the association is legally obligated to pay arose out of a physical injury to the building (i.e. faulty/negligent construction), regardless of whether the ultimate impact to the Starrs appears to only be a nuisance,” said Isrow.

Isrow said one final question would be whether cover should be denied based on the exclusion for any claim or suit arising out of any construction or development, but he points out that is subject to the interpretation of the policy exclusion language.

“While reasonable minds could disagree as to whether the work constitutes ‘construction’ or ‘renovation,’ the renovation would have to be part of the insured’s customary operations, which for an association is not building a fitness center,” said Isrow. “As such, more likely than not, the court would find that the work to build out the fitness center constitutes ‘construction’ and therefore, even if the court finds physical injury to tangible property, the claim should be denied for lack of coverage under the policy.”

Clyde & Co. partner Sina Bagadoran in Brickell represents the underwriters and said, ”We don’t have a public comment at this time.”

Legal representation for the defendant is not yet listed in court records.

Link: Does a Noisy Gym Equal Property Damage? ‘Interpretation Is Key’ in This Insurance Suit Against a Florida Condo Association

Author: Melea VanOstrand

Pricey Land Market Confounds Developers

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Last year, prices were up 6 percent, the most in nearly a decade.

The pursuit of land and its price is rising, putting a strain on developers in nearly every market and industry segment.

In 2021, the land market had its best year in nearly a decade as sales rose 6% and outperformed the pace of acquisitions of other commercial real estate types, according to the 2021 Land Market Report from the REALTORS Land Institute (RLI) and the National Association of REALTORS (NAR).

Keith Poliakoff, founding partner, Government Law Group PLLC, tells GlobeSt.com that as the price of land continues to increase, so too are the development costs, which are up nearly 30 percent in the past two years.

“This is causing land to remain undeveloped, which increases the price of developable land even further,” Poliakoff said. “This is an incredibly difficult development cycle, as the demand is there, but the cost to purchase and develop is greater than the economic return.”

Mike Procopio, CEO, The Procopio Companies, tells GlobeSt.com that land prices are having a direct impact on the readability of new development projects.

“Yields are already very tight because of supply and demand imbalances, and the only thing that hasn’t shifted is land costs,” Procopio said. “In Massachusetts, for example, deals are still getting done because of the market’s drivers and their resilience.

“Massachusetts has become the national leader in life sciences, one of the best places for tech, and arguably the mainstays of the ‘Meds and Eds’ remain as sound as ever – all of that is driving multifamily developers to take different approaches to get deals done despite the land-cost constraints.”

Available Land Scarce in Florida

Florida has been a particularly challenging market as well.

Noah Breakstone, Managing Partner and CEO of BTI Partners, tells GlobeSt.com that as large land tracts have become scarcer in South Florida, the company has had to look outside this market area for new opportunities for the past decade.

“As masterplan, land developers, we buy agricultural tracts of land in major population and job growth markets in Florida that are ripe for new housing construction,” Breakstone said. “BTI Partners designs, entitles and builds the major horizontal infrastructure for the land prior to selling subdivisions to public and regional private homebuilders.

“For the past couple of years, we have been seeing increasing tailwinds for ready-to-build land in Florida’s West Coast, Tampa, Orlando and Jacksonville. Homebuilders are seeking to buy land at more affordable prices in those areas to be able to build homes for the price-sensitive, first-time homebuyer.”

Claudio Mekler, CEO, Miami Manager, an investment group that owns shopping centers in South Florida and develops multifamily developments in the region, tells GlobeSt.com, “It has become more challenging to find development sites, but there are still opportunities out there.

“While the process is taking longer than it did a year ago, we have been successful in finding land at the right price for us to develop multifamily with retail on the ground floor. We are currently in negotiations to buy land in Aventura and Boynton Beach.”

Fielding Out-of-State Calls

Luis Flores, partner, Saul Ewing Arnstein & Lehr, tells GlobeSt.com that the number of inquiries he receives from out-of-town real estate investors seeking land opportunities has increased dramatically over the past 12 to 18 months.

“When those calls first started, our clients were seeking land opportunities at an average price of $15 million to $25 million, but now buyers need at least twice that amount to be competitive for similar properties,” Flores said. “In fact, land values have reached a point where many players are being priced out of the South Florida market.”

Link: Pricey Land Market Confounds Developers

As dev site prices soar in Miami, buyers play a “dangerous game”

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Development site deal volume in Greater Downtown Miami rose 155% between 2019 and 2021

Broker Miguel Pinto with developers Toby Moskovits, Jenny Bernell and Harvey Hernandez, who all have projects planned in Greater Downtown Miami (APEX Capital Realty, Moskovits via Sasha Maslov, iStock)

Developer Chaim Cahane bought a development site in Miami’s Wynwood for $6.4 million in December. Three weeks later, a broker called him with an unsolicited all-cash offer: Flip it for 75 percent more.

Then, in March, Cahane’s Forte Capital partnered with investor Jon Krasner to buy a separate Wynwood site from East End Capital for $10.8 million. After closing on that site, they turned down an offer to flip it for a 30 percent gain.

“Every day I’m getting calls to sell,” Cahane said “It’s ridiculous.”

The cost of land and the pace and volume of deals are soaring in South Florida.

The market is so hot that major multifamily sales have become a dime a dozen, and single-family homes are referred to as collectors’ items. At the same time, developers are rolling out dozens of new projects, and selling or leasing them up quickly. Wealthy out-of-staters have “discovered Miami,” pumping up prices of commercial and residential real estate. To those buyers, the city is still a bargain, brokers say.

Miami’s urban core, including Edgewater, Wynwood, the Arts & Entertainment District, downtown and Brickell, has recorded over $1 billion in land sales over the past two years, according to Real Capital Analytics data provided by Colliers International South Florida. In Edgewater, eight development sites traded for more than $185 million last year. That marks a 529 percent increase in sales volume compared with 2020, and a 141 percent increase compared with 2019.

While industry experts are quick to point out that oversupply isn’t yet a concern, record pricing coupled with rising interest rates and inflation could send the market into a tailspin, they say.

“This bubble is about prices getting too high,” said Craig Studnicky, CEO of Aventura-based brokerage ISG World. “What’s happening with prices is obnoxious. How do young people move here? They can’t afford to anymore.”

Sticker shock

In 2019, prior to the pandemic, 24 development sites in Greater Downtown Miami sold for more than $315 million, or about $16 million per acre, according to the Colliers data. Last year, 34 properties traded for over $808 million in the same area, for a price per acre of about $19 million. On a dollar volume basis, that’s an increase of 155 percent in three years.

“A lot of people believed [prices] would hit a wall and not continue to escalate, but all we see are continual new highs for sales of properties,” said attorney Keith Poliakoff, of Government Law Group.

“If we can’t get [costs] under control, if the rents don’t catch up, and people’s incomes don’t catch up… We may be entitling projects three years from now, which happened before when the economy collapsed in 2009,” Poliakoff said. “A lot of those projects we approved just sat in building departments and didn’t move until the economy picked up again.”

When the pandemic first hit South Florida, there was an immediate slowdown in commercial real estate — until demand quickly returned last year.

Take the sale of the Midas store at 2140 Northeast Second Avenue in Miami’s Edgewater neighborhood. Prior to Covid, the listing broker, Miguel Pinto, said he “had a really, really hard time” trying to sell it.

“I couldn’t give it away,” said Pinto, who is broker and owner of Apex Capital Realty. Then, in February, Brooklyn-based Heritage Equity Partners paid $6.3 million for the property, home to a store that was built in 2019. Heritage, led by Toby Moskovits and Michael Lichtenstein, plans to tear it down and build an apartment tower on the site. Land costs typically account for 10 to 15 percent of a project’s budget.

Today, Pinto said it could “very easily flip” for over $400 per square foot. It traded for $283 per square foot.

“There’s been a crazy appetite from developers wanting to enter the market,” who are betting on rents and demand for housing continuing to rise, he said.

Some local developers are selling land on which they planned to build because the offers are just too good to pass up.

On Fisher Island, an exclusive residential enclave that is accessible only by boat or helicopter, developer Heinrich Von Hanau is in contract to sell the last condo development site on the island. The buyer is a partnership led by the Related Group and billionaire Teddy Sagi, paying what is expected to be a record price, according to sources.

The thinking: Prices are still on the rise, and if a developer passes on a purchase, it could eventually sell for 20 percent, 25 percent or 30 percent higher, said Colliers broker Mitash Kripalani.

“Yes the price is high, but there is so much demand,” Kripalani added. “Most of the buyers paying top dollar are a lot of new-to-market developers. “If you’re a local buyer who was buying in Miami five to 10 years ago, you’re experiencing sticker shock.”

Developer Harvey Hernandez locked in a purchase price for the Brickell site of his Lofty project prior to the pandemic, and closed on his $50.5 million acquisition in October. He said he could sell it for more than double that in today’s market.

“People have come to us and tried to buy it from us, but we’re not in the business of selling [land],” he said. Lofty is nearly 90 percent reserved after launching sales in late 2021.

“Developers coming into this market are paying for speed and paying for premium pieces.

They are looking at the market differently,” Hernandez said. “If you’re coming from New York, Chicago, Los Angeles you might see [Miami, where] you can sell for $1,200 a foot as a huge bargain.”

Brokers are using that in their sales pitches.

“All day long, we’re knocking on doors, we’re cold-calling people,” Kripalani said. “We’re chasing our sellers who we know haven’t transacted in a while.”

A dangerous game

The party line for developers is that they are monitoring construction costs (up 30 percent to 35 percent, but that depends on who you ask) and supply chain issues. They say they are locking in pricing on appliances and materials wherever possible, and so far those increases have been offset by gains in rents and home prices.

“The supply chain is still making it incredibly difficult to buy appliances and goods. The price of steel and wood varies dramatically,” attorney Poliakoff said. “What I get worried about is construction prices haven’t seemed to hit the top.”

Interest rate spikes are beginning to slow deals down. Buyers who were bidding on 10 properties are now bidding on two, said lender and broker Aaron Kurlansky, principal of Sheridan Capital and FM Capital. Rent growth projections are also being adjusted. Even on the residential front, some sellers of single-family homes are reducing their prices.

“With the rates rising, it’s really where on a deal previously you had 20 buyers, now you have five or six. It takes a lot of people out very, very quickly,” Kurlansky said. “We’ve definitely seen a little more prudency in the market.”

But developers are optimists who will push the market to its limits before pulling back.

In some cases, buyers are closing on land without taking the time to understand a site’s zoning. And because costs have surged, developers looking to increase the density of their projects have flooded law firms specializing in land use, zoning and entitlement work, Poliakoff and other attorneys say.

“There’s a maximum amount a unit can rent for or sell for,” Poliakoff said. “To be able to pay the higher prices, [developers] have to seek government approval to increase the density of these properties to spread out that purchase price. Long gone are the days where you could pay $25,000 to $35,000 per door for a new development site.”

He cited an example of a property owner who obtained entitlements for a 55-unit apartment project on a site two years ago in order to increase the property’s appeal. A prospective buyer recently told the owner that if the density could not be increased to 85 units, the numbers wouldn’t work and the deal wouldn’t happen, Poliakoff recounted.

New Yorkers and other out-of-state developers are lured by few regulations and the lack of state income tax in Florida, but once they arrive, some are in over their heads, unfamiliar with the building materials that should be used and how local governments work, attorneys say.

Government Law Group’s developer clients are all seeking more density on $2.5 billion worth of projects, Poliakoff said, pointing out three developments backed by New York-based real estate investment trusts that are developing for the first time in South Florida.

“All three are paying more than I have expected someone to pay, but in all instances they feel that the market will continue to go up, and as such they see that the rent today is not going to be the rent when they finish construction two years from now,” Poliakoff said. “I always say that while developers can profit handsomely, it also has enormous risk.”

Major multifamily landlords, who have arrived in South Florida in droves, are now moving into ground-up development because the investment sales market is overheated.

“All of them today have told us the deals they would normally buy are so overpriced, they are unable to make their numbers work,” Poliakoff said.

Pinto of Apex said that buyers have to pay less for land unless construction costs fall.

Institutional buyers have inundated the market, attracted to huge gains in rent growth. Miami led the country in rent hikes during the pandemic, with the median monthly apartment rent rising 58 percent since March 2020 to nearly $3,000, according to a recent report from Realtor.com.

Multifamily rents in Edgewater are at about $3.50 per square foot, according to Pinto. And buyers are underwriting deals with rents at $5 a square foot, two to three years from now.

“Will it get to that point? Maybe. I think people are playing a dangerous game,” he said, referring to rising rates, construction costs and inflation. “There’s a huge demand, and then a culmination of things from a macro perspective that can make the whole sentiment go south.”

Link: As dev site prices soar in Miami, buyers play a “dangerous game”

Protecting Trade Secrets and Avoiding Litigation in the Great Resignation Era

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Arguably one of the biggest changes has been the unprecedented manner in which millions of Americans have quit their jobs in search of new career opportunities that offer greater flexibility, improved work-life balance, higher pay and increased opportunity for advancement.

The times they are a-changin’—and it’s beginning to look like things may never go back to the same way they were pre-pandemic. Indeed, COVID-19 has materially affected just about every aspect of our lives. Arguably one of the biggest changes has been the unprecedented manner in which millions of Americans have quit their jobs in search of new career opportunities that offer greater flexibility, improved work-life balance, higher pay and increased opportunity for advancement. In some cases, these individuals are resigning from their jobs by way of email from home, without even the courtesy of providing the traditional two-weeks’ notice.

This phenomenon, coined the “Great Resignation,” continues to endure even after the precipitous decline in infection and mortality rates, with nearly 4.3 million people quitting their jobs in January alone, according to the March 9 U.S. Department of Labor, Job Openings and Labor Turnover Report. Many of these departing employees were privy to trade secrets that are now at risk of being disclosed to competitors, and the traditional protections may not cover the novel employment arrangements in this new normal.

These recent developments pose a myriad of legal issues that will no doubt give way to a wave of litigation as former employees may be sharing trade secrets with their new employers, violating non-compete agreements, or taking with them corporate intelligence that belongs to their ex-employer. Here are some basic tips to help protect corporate interests from departing employees and mitigate liability related to the hiring of new employees.

  • Take inventory of what assets are worthy of protecting and determine what measures are necessary to keep them secure.

In order to devise an effective strategy for navigating the challenges created by the Great Resignation, it is essential to first conduct an audit of what trade secrets warrant protection, and then perform a comprehensive risk analysis to identify any and all threats to these assets. This should include:

  • an evaluation of what proprietary and trade secret information the company maintains and relies upon that provides it with a competitive advantage;
  • who in the organization has/had access to this information and through what means;
  • what measures are in place to prevent unauthorized access to, and/or wrongful disclosure of, this information by current and former employees; and
  • what security gaps or weaknesses exist that must be corrected.

The results of this exercise, which should be performed by a group of high-level stakeholders from every department of the organization, can serve as a helpful guide in preparing a roadmap to achieve the company’s human resource and information management objectives.

  • Restrictive covenant agreements are a good start, but may not be enough.

Historically speaking, some of the strongest tools that companies have had at their disposal in managing employee turnover and safeguarding its trade secrets are their use of restrictive covenants such as noncompete and nondisclosure agreements. Noncompetes, however, which are required to be reasonably limited in time, geographic location, and line of business, may no longer sufficiently cover work-from-home employees who now have the ability to work for companies all over the world—from anywhere in the world.

Employers should review any active non-compete agreements entered into pre-pandemic with their legal counsel and assess whether any amendments need to be made. For example, consider a greater emphasis on restrictions against working for explicitly named competitors, as opposed to a blanket restriction by industry in a limited specific geographical area.

If used properly these can be extremely helpful as both a prophylactic measure and as a tool of enforcement. For this reason, companies would be wise to audit their records and ensure that all employees who have access to trade secrets have signed non-disclosure and non-compete agreements on file. It may also be helpful to remind departing employees of their legal obligations and even send a courtesy copy of their agreement(s) to their new employers to put them on notice.

On the other side of the coin, to avoid stepping on this proverbial landmine HR departments should add a question to their standard employment application asking whether the candidate is bound by any restrictive covenants. If the answer is yes, then further investigation is required before hiring. If they answer no, and it turns out they actually were bound by an agreement, it at least gives the company a viable defense against willful infringement.

Until the law catches up with the new reality of how people work, companies will have to lean on their IT team to implement additional security measures to mitigate the risks that HR policies and procedures cannot.

  • It is high time for IT to have a seat at the table.

Technology has been one of the greatest blessings during the pandemic, allowing for people to continue making a living from home, thereby keeping businesses running and preventing an economic collapse. Fortunately, it has also given employers new tools for safeguarding their trade secrets.

The implementation of VPN software, utilizing virtual data rooms, and requiring employees to log in through a secure portal to access the network, all have certainly been helpful. So too have restrictions against using USB thumb drives and limitations on printing. But it’s the mandatory computer and mobile device monitoring programs that track everything the employee does, and notifies the organization when certain documents or folders are accessed, that have provided the strongest protections.

As we come out of the pandemic and inflation continues to rise, corporations will need to be vigilant if employees continue resigning at this record pace. While I can’t predict the future, I do expect to see an increase in litigation.

Jordan Isrow is a partner at Government Law Group in Fort Lauderdale, Florida. He focuses his practice on complex litigation, corporate counseling and representation of governmental entities.

Link: Protecting Trade Secrets and Avoiding Litigation in the Great Resignation Era

3 Real Estate Areas To Watch As Russia-Ukraine War Persists

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Law360 (April 1, 2022, 10:58 AM EDT) — As Russia’s invasion of Ukraine enters its second month, U.S. real estate investors are all eyes on supply chain and inflation concerns, while global investors could shift more of their assets into U.S. properties amid growing concerns about the European market.

The U.S. real estate market was already facing supply chain and inflation pressures before Russia’s invasion of Ukraine in late February, but experts say the war has exacerbated those problems and has thrown an additional wrench into the equation, with energy prices now facing additional pressure.

U.S. real estate developers are eying supply chain and inflation concerns, and overseas investors could shift more of their assets into U.S. properties, as Russia’s invasion of Ukraine enters its second month. (AP Photo/Nam Y. Huh)

And while U.S. projects are facing severe delays, the U.S. could see additional capital from overseas investors who are skittish about the Europe market.

Here, Law360 looks at three areas of U.S. real estate to watch.

Supply Chain Issues Have Worsened

Chief among the concerns of developers is the difficulty in getting materials, both basic and specialty, to finish projects on time, and that’s leading to a host of delays and cost increases.

“The supply chain issues still remain at woeful levels, and the war in Ukraine has only made things worse,” said Keith Poliakoff of Government Law Group. “My clients still cannot get the materials necessary for construction, which is holding up the amount of new projects, especially residential units, coming to the markets. Developers are experiencing tremendous cost hikes and supply chain issues and fuel cost increases.”

The supply chain issue is just one of a complex set of global concerns that have worsened since the start of the conflict, such as inflation and fear of a recession.

“The war clearly has exacerbated some of the concerns,” said Seth Weissman, a partner at Jeffer Mangels Butler & Mitchell LLP. “If we head into a recession, overall growth goes down and arguably the availability of people to invest in real estate goes down. But at the same time, you’ve got the issue of inflation. … So it could be the worst of both worlds.”

“If we don’t see an oil shock, that could help to stem some of the concerns,” Weissman added.

And while parties are adjusting their timelines to work with the current supply chain bottlenecks, it might not be enough.

“Supply chain issues are likely to get even worse,” said Robert Ivanhoe, vice chair of Greenberg Traurig LLP. “It’s certainly adding a lot of risk and cost.”

Underwriting Has Changed

While developers are adjusting their timelines when it comes to supply chain concerns, parties are now also changing their underwriting to take into account lower expectations for growth, as well as higher prices.

“When clients underwrite real estate transactions, they have an expectation of return. Those expectations are significantly impaired when the cost of capital goes up. I’m seeing it already,” Weissman said. “I’m seeing people who are looking at deals who wished they had locked in rates 30 days ago. There’s transactional pressure on the professionals to get deals done.”

While companies are redoing their underwriting when it comes to would-be deals, there’s also increased pressure on the rental market. Amid rising prices, owners are forced to either take a financial hit, pass the additional costs onto tenants or some mix of the two.

“It will affect energy prices. … It will affect rents,” Andrew Raines, a founding partner of Raines Feldman LLP, said of the war in Ukraine.

And when it comes to construction, companies are also having to start with a clean slate. In some cases, projects that haven’t gotten off the ground now no longer make financial sense, experts say.

“All of [the developers] have been diligently recalculating the entire cost of the project,” Poliakoff said. “Some of them will not break ground.”

Global Investors Are Eyeing U.S. Real Estate

The U.S. real estate market has long been viewed as a safe haven for foreign investors amid global political and economic upheaval, and the war in Ukraine could make U.S. assets even more attractive to foreign investors.

“Many global investors have always put a significant portion of their investment into Europe. … The perception now seems to be that Europe is much more of a risk to inflation pressures and energy pressures, and that that’s really going to ripple through to real estate,” Ivanhoe said.

There are concerns about the future of the European real estate market, and inflation remains problematic. On the latter point, global investors could look to put more of their capital in U.S. real estate, given that the sector has historically been viewed as a safe haven when it comes to inflationary environments, Ivanhoe said.

“We would hope that as Europe is in a state of flux, that more funds will funnel into the U.S.,” Poliakoff said.

And with the expectation that the European real estate market may get worse, look for more investors to make deals in the U.S.

“People are expecting Europe to become more severe. There’s been more of a focus here as being a safer market. The dollar has strengthened relative to the euro,” Ivanhoe said. “I’ve been getting a number of inquiries from foreign investors who really haven’t invested here before. A lot of them have invested very heavily in Europe. They’re very concerned about Europe right now.”

–Editing by Nicole Bleier and Alyssa Miller.

Link: 3 Real Estate Areas To Watch As Russia-Ukraine War Persists
Auther: Andrew McIntyre

As a luxury sports bar seeks later hours in Delray Beach, it gets caught in noise battle with neighbors

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DELRAY BEACH — The issue of whether more late-night bars in Delray Beach could expand farther out on Atlantic Avenue will likely soon come before the city again as a new sports bar keeps up its fight to receive an exemption to stay open until 2 a.m.

And that will likely set up another contentious battle between business owners who want the freedom to operate later and residents who bought homes outside the city’s entertainment district concerned about late-night noise infiltrating their neighborhoods.

Bounce Sporting Club, an upscale sports bar set for the $300 million Atlantic Crossing development on Atlantic just east of Federal Highway, is planning to open in the fall as one of the cornerstones of the new development. The bar, however, sits outside the city’s entertainment district, which runs from Swinton to Federal Highway and allows businesses to stay open until 2 a.m.

That means Bounce would have to close every night at 12 a.m. unless it’s granted an exemption from the city. Bounce says closing at midnight would significantly hinder its business since so many late-night sporting events such as UFC, boxing and West Coast sports last well past that cut-off point.

Bounce narrowly received preliminary approval from the Planning and Zoning Board, but was forced to temporarily pull its application from a Feb. 1 City Commission meeting after significant backlash from local residents about late-night noise issues made it unlikely the proposal would be granted.

Attorney Neil Schiller, who represents Bounce, said they pulled their proposal so they could “educate” more nearby residents about the bar.

The building that will house the Bounce Sporting Club on East Atlantic Avenue in Delray Beach on Friday December 10, 2021. The $300 million Atlantic Crossing project has generated pushback. Some city officials and residents have expressed concerns the sports bar is out of character for the area and that noise from the late night establishment would be a nuisance to residents (Carline Jean / South Florida Sun Sentinel)

“I know there’s a great concern from the community there’s going to be lines out the door and that all these people are going to be drunk, unruly and noisy and that it’s going to be 1 a.m. and they’re still trying to get in,” Schiller said. “That’s not the case.

“We don’t want our guests to be lined up out the door on Atlantic Avenue. We’re trying to start an upscale sports bar, restaurant and lounge. Upscale places don’t let their guests, especially in Florida, wait in 90-degree heat to come in.”

Schiller said Bounce is willing to make concessions in order for later operating hours, including closing their doors, windows and patio at 11 p.m. and limiting people to one entrance and exit closest to Atlantic and 7th.

Bounce Sporting Club bills itself as combining “elements of a sports bar with the high-end cocktail lounge nightlife experience.” A representative for Bounce, which has additional locations in New York and Chicago, told city officials it would also feature live performances at the Delray Beach location.

Bounce has residential communities both to the north and south, extending east to the Intracoastal. In addition, the Atlantic Crossing complex also will feature 261 luxury apartments by the sports bar.

Some nearby residents, however, fear that allowing Bounce an exemption could create a domino effect where other bars outside the entertainment district would be granted later hours. Rita Rana, who sits on the board of Barr Terrace Condominiums across the Intracoastal from Bounce, said residents aren’t opposed to Bounce, but the potential of them operating past midnight and creating a situation where late-night revelry and noise could potentially cause issues.

“If this were to be approved, it would bust the boundaries of that entertainment district,” Rana said. “And it would change the entire dynamic of an area that has been slated not to have any of that entertainment past midnight.”

While Bounce officials are trying to assuage the fears of nearby residents, Rana said “prior to opening, there is absolutely nothing they could say and nothing they could do” to convince her they should be allowed to stay open until 2 a.m, adding that residents are still “fired up” about the matter.

Schiller believes some of the concerns are being overblown, arguing that some bars outside the entertainment district, such as Hurricane Bar & Lounge and Blue Anchor Pub, are allowed to stay open until 2 a.m. since they were grandfathered in before the boundaries were set.

Bounce is aiming to go before the city commission at some point in the spring, Schiller said. When asked whether Bounce would still open if it was denied the exemption, Schiller said it wasn’t something he could answer, but noted that investors were under the expectation the bar would be allowed to stay open until 2 a.m.

If there’s still heavy pushback, he said there could be the potential for compromise “if they want us to open until 1 a.m. for a period of time and then give us a chance to prove ourselves to get to 2, that’s something we may be in favor of.”

Link: As a luxury sports bar seeks later hours in Delray Beach, it gets caught in noise battle with neighbors
Auther: Wells Dusenbury

Rise Of Florida Mini-Cities Blurring Urban-Suburban Lines

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Among outgrowths of the pandemic has been an explosion of newcomers to Florida. Many recent arrivals to the state are from urban areas in the Northeast and Midwest U.S., where density and walkability have long been part and parcel of daily life.

It’s only appropriate, then, that Florida is witnessing a surge in what might be termed “mini-cities.” These compact urban districts offer a dense, lively, pedestrian-friendly lifestyle fueled by proximity of homes, offices, eateries, shops and nightlife. They’re not that different from areas of New York City, Washington, D.C., Boston and Chicago where many folks get around to everything they need, all without vehicles.

The result is a blurring of the traditional demarcation between city and suburbia in some areas of Florida, where new development has replaced once-blighted landscapes.

Sense of place

Building mixed-use developments in Florida is not a new idea, says Gerard Yetming, executive managing director with Colliers. But the last half decade has ushered in a fresh concept: Creation of large-scale mixed-use areas intended to forge a sense of place in settings once devoid of housing and businesses. “It is clear people want to work and play where they live, which is why we will continue to see developers bringing urban designs to the suburbs, and suburban designs to urban cores,” he says.

Mixed-use developments from Fort Lauderdale-based master developer BTI Partners in Tampa’s Westshore Marina District and Hollywood, Fla.’s Hollywood Young Circle are two fitting examples of the phenomenon. Company CEO Noah Breakstone says the goal is to reimagine the way people live and invent fresh concepts that interweave healthy living, culture, technology, entertainment and work-life balance.

“To be able to achieve this goal, we blend the suburban-urban concepts in creating a new, redefined, walkable, mixed-use lifestyle,” Breakstone says.

Another instance of urban-suburban blurring has taken shape in Miam’s Wynwood enclave. Addition of an office component was the final piece of the puzzle necessary to make Wynwood a mini city, says Shelby Rosenberg, R&B Realty Group head of development and acquisitions, asset and property manager, U.S. portfolio. As it has for some time, the district has continued to serve up key redevelopment opportunities to transform long-abandoned industrial structures into Class A office buildings, chic eateries, upscale condominiums and attention-getting apartment communities.

New York City-based R&B Realty Group’s just-completed office tower Gateway at Wynwood helped trigger other developers to build market-rate apartments, luxury condos and stores. “In the next couple of years, as new projects are completed, people will be able to live, work and play in this area, which is becoming a city within a city,” Rosenberg says.

Replacing neglect

Coralee Penabad, principal at Coral Gables, Fla.-based Urban-X Group, reports that in constructing a mini-city west of downtown Miami, her company sought to become a driver of transformation in an area that for decades had seen only disinvestment.

“We were able to attract big-box retailers, which are often found in the suburbs, to the urban core because retailers recognize people are increasingly choosing to shop where they work and live,” she says. “This generation doesn’t want to drive to the suburbs to do their shopping. They are all about enjoying the benefits of the urban and suburban lifestyle in one submarket, without having to leave their neighborhood.”

One more observer taking note of the mini-cities trend is land-use attorney Keith Poliakoff, founding partner of Fort Lauderdale-headquartered Government Law Group. Poliakoff says well-conceived developments are melding multiple uses to create urban environments in the suburbs, and vice versa.

He credits the leadership and long-term vision of elected officials intent on enhancing the quality of their constituents’ lives. Concludes Poliakoff: “A lot of community planning goes into these large-scale developments so that they can create live-work-play environments where residents never need leave the comforts of their mini-cities.”

Link: Rise Of Florida Mini-Cities Blurring Urban-Suburban Lines
Auther: Jeffrey Steele

A new sports bar in Delray Beach wants to stay open until 2 a.m. Here is why it’s raising major concerns among residents.

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DELRAY BEACH — Delray Beach has long confined the festiveness from its late-night bars and restaurants to a half-mile stretch on Atlantic Avenue, but that could come to an end.

Bounce Sporting Club, an upscale sports bar set for the $300 million Atlantic Crossing development on Atlantic just east of Federal Highway, is hoping to become a new destination site on the Ave. The bar, however, sits outside the city’s entertainment district, which runs from Swinton to Federal Highway and allows businesses to stay open until 2 a.m.

They want an exception to the rule so they can show late-night sporting events such as UFC, boxing and West Coast sports. But city officials and residents have voiced concerns the late-night noise could become a nuisance to the people who live nearby and add “further degradation” to the area.

The surrounding neighborhoods near the Intracoastal Waterway “are precious in the city and they’re under a lot of assault from noise pollution, light pollution, overdevelopment,” Delray Beach Planning and Zoning Board member Joy Howell said during a public meeting.

“I think we should avoid further degradation of the district.”

Officials, who are considering the proposal, fear it could set precedent and create a “domino effect” where restaurants and bars outside the entertainment district could push to remain open until 2 a.m.

Bounce Sporting Club bills itself as combining “elements of a sports bar with the high-end cocktail lounge nightlife experience.” A representative for Bounce, which has additional locations in New York and Chicago, told city officials it would also feature live performances at the Delray Beach location.

Bounce has residential communities both to the north and south, extending east to the Intracoastal. In addition, the Atlantic Crossing complex also will feature 261 luxury apartments by the sports bar.

Claudia Willis, a 25-year Delray Beach resident who lives in the neighborhood 300 feet south of the sports bar, spoke against the late-night hours during a public meeting, saying the applicants don’t fully grasp how much bothersome the noise could be.

She talked of how easily noise travels across the downtown, saying she can “hear every word when there’s an outdoor performance at Old School Square,” which is a half-mile west. “Unless you live downtown, you don’t know.”

“The applicant chooses to ignore us to the south, but also ignores their own [apartments],” Willis said.

The city “needs to decide what kind of town Delray will be and guide that in every decision. It is subtle decisions that are changing our demographics. Many have already left in search of what Delray used to be.”

Atlantic Crossing, a massive 9-acre project by Veterans Park and the Intracoastal Waterway, is the city’s attempt to invigorate the stretch of Atlantic east of Federal, which has remained largely dormant.

The site will also feature restaurants, shops and 83,000 square feet of office space. Construction is projected to be finished by the end of the year, a spokeswoman for the development said.

Bounce Sporting Club, a 5,000-square-foot venue, is one of the cornerstones of the project, operating on the first floor off Atlantic Avenue. Michael Dutko, a representative for Bounce, told the Delray Beach Planning and Zoning Board that Bounce would be an “incredibly valuable addition” to Atlantic, citing the lack of high-end sports bars. He also said noise wouldn’t be an issue, pointing to design measures created to limit noise.

Chris Davey, Chairman of the Planning and Zoning Board, was unconvinced, however. “This isn’t the city that doesn’t sleep and it’s not the Windy City,” he said, referencing Bounce’s other locations in New York and Chicago.

Davey, along with board member Rob Long, also worried that allowing a 2 a.m. exception could set a precedent where other bars and restaurants do the same, creating a possibility for late-night establishments to creep closer and closer to residential areas.

Keith Poliakoff, a Fort Lauderdale attorney who specializes in land use and zoning issues, said a one-time exception wouldn’t create a “strong legal grounds” if a future applicant was denied on a similar proposal.

“Every applicant stands on its own merits,” Poliakoff said. “If they approve this one and deny another one, there’s no strong legal grounds for them to sue a municipality based on that decision. For the same reasons a municipality could oppose two schools going next to each other or two houses of worship.”

Poliakoff said the board is likely referring to precedent in terms of “‘will that create an idea with the community that we’re turning this into an entertainment district as well?’”

Dutko appeared surprised by the pushback from board, saying he didn’t “anticipate it being controversial.” He argued that some bars outside the entertainment district, such as Hurricane Bar & Lounge and Blue Anchor Pub, are allowed to stay open until 2 a.m., but Davey noted those bars were grandfathered in before the boundaries were set.

Bounce representatives plan on revising the proposal to address the noise complaints in an attempt to salvage the late-night hours. The Planning & Zoning Board will issue a final ruling on the proposal during an upcoming meeting.

Link: A new sports bar in Delray Beach wants to stay open until 2 a.m. Here is why it’s raising major concerns among residents.
Auther: WELLS DUSENBURY

South Florida Business Journal Runs Jordan Announcements

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