Court Opinion

ID: 4392671
Source: CourtListenerOpinion
Date Created: 2019-05-01 15:03:36.74001+00
Date Added: 2024-06-11T14:23:45.261378
License: Public Domain

Third District Court of Appeal
                               State of Florida

                            Opinion filed May 1, 2019.
         Not final until disposition of timely filed motion for rehearing.

                               ________________

                                No. 3D18-270
                          Lower Tribunal No. 16-6319
                             ________________

                           Robert Cornfeld, etc.,
                                    Appellant,

                                        vs.

                Plaza of the Americas Club, Inc., et al.,
                                    Appellees.

      An Appeal from the Circuit Court for Miami-Dade County, Thomas J.
Rebull, Judge.

     Saul Ewing Arnstein & Lehr LLP, and Franklin L. Zemel, Alan R. Poppe
and Ariel R. Deray (Fort Lauderdale), for appellant.

      Vernis & Bowling of Miami, P.A., and Evelyn Greenstone Kammet and
Daniel E. Davis, for appellees.

Before LOGUE, SCALES and HENDON, JJ.

     HENDON, J.
      Robert Cornfeld (“Cornfeld”), derivatively as a shareholder and on behalf of

Plaza of the Americas Club, Inc., appeals from the trial court’s final order

dismissing with prejudice his amended shareholder derivative suit against Plaza of

the Americas Club, Inc. and its directors, Narcisco Alberti, Nila Fernandez, Jospeh

Chavez, Emelina Foyo, Mercy Rodriguez, Marta Arriola, Alba Garcia, Jesus

Garcia, and Ana M. Imery, individually (collectively, the “Club”). We affirm.

Procedural history:

      The Club is a not-for-profit corporation that owns and operates the Plaza of

the Americas condominium complex. Cornfeld1 owns one of the condominium

units and brought this shareholder derivative action pursuant to section 617.0740,

Florida Statutes (2016), alleging the Club breached its fiduciary duty to the unit

owners and asking for injunctive relief. The suit was based on Cornfeld’s

allegations that the Club wrongfully refused to accept an offer of $2.5 million to

purchase a parcel of Club property, and refused to assert a claimed legal right

1 Cornfeld is the owner/manager of a privately held, family owned real estate
investment and management company known as "The Cornfeld Group." The
Cornfeld Group umbrella consists of various corporations and limited liability
companies which are either owned or managed by Dr. Cornfeld himself or by his
immediate family members. The Cornfeld Group's portfolio includes the Newport
Beachside Hotel and Resort ("Newport ") located across the street from the Plaza
of the Americas (Club) on Collins Avenue. Newport currently leases the "boatyard
area" from the Club for parking for the Newport. The area adjacent to the boatyard
and alley is used for ingress and egress to the boatyard and the neighboring RK-
owned shopping center. This property is the primary subject of the derivative
action.

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against RK Centers, LLC (hereinafter “RK”), which is the shopping center

adjacent to the condominiums, for an alleged contractual breach by RK to repair

damages to a sewer main.         The Club filed a motion to dismiss, arguing (1)

Cornfeld lacked standing to bring the derivative action because he failed to serve a

pre-suit demand pursuant to section 617.07401, Florida Statutes (2016); (2)

Cornfeld’s claims are barred because the Club is protected by the business

judgment rule; (3) Cornfeld failed to join RK as an indispensable party; and (4)

Cornfeld failed to state a cause of action for injunctive relief.

      After the hearing on the Club’s motion to dismiss, the trial court deferred

ruling and asked the parties how they wanted to proceed, tracking section

617.07401. That statute provides that, in order to determine whether maintenance

of the derivative action is in the best interest of the corporation, the corporation can

proceed in one of three ways: (1) a majority vote of independent directors at a

Board meeting; (2) a majority vote of a committee of two or more independent

directors appointed by a majority vote at a Board meeting; or (3) a panel of one or

more independent persons appointed by the court upon motion by the corporation.

The Club chose the third option, and the trial court appointed – by unopposed order

– attorney Jordana Goldstein as the independent investigator. Goldstein took five

months to review the allegations.2

2 Goldstein’s investigation included reviewing preliminary position statements
submitted by the parties and hundreds of pages of supporting documents, and

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        After her investigation concluded, Goldstein filed a forty-four (44) page

report with the trial court, exclusive of several hundred pages of exhibits. She

concluded that maintaining the derivative action is not in the best interest of the

Club.    Goldstein recommended the trial court dismiss the action because: (1)

Cornfeld does not adequately represent the interests of the Club’s unit owners

because of his personal motivation for filing the suit, which is contrary to the

interests of the Club membership generally; (2) the Board members’ decisions

were reasonable, were guided by legal advice throughout, and are protected by the

business judgment rule, and the board members are thus immune from the lawsuit;

and (3) the litigation is barred because Cornfeld failed to serve a statutorily

required pre-suit demand on the Board.

        Cornfeld filed his objections to the report. He asserted that the report was

biased and conducted in bad faith, that Goldstein failed to interview the owner of

RK, improperly focused on Cornfeld’s personal business motivations for filing the

derivative suit, and had no reasonable basis to explain why the Club failed to sue

reviewing all record activity including pleadings and discovery. She conducted her
own independent research, and spent sixty hours interviewing eight witnesses
(including the Club’s property manager, board members, counsel, Cornfeld, Philip
Aginsky of GPI, and others). Goldstein went on site to inspect the various involved
properties, and she obtained information from the Miami-Dade County Property
Appraiser, Clerk of Court, the City of Sunny Isles, and the Florida Division of
Corporations on her own volition. Additionally, during the course of the witness
interviews, she requested the parties to supply her with additional documents,
which they did, and she reviewed all of the additional documents provided, which
amounted to hundreds of additional pages of information.

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RK or sell its land. After a one-hour specially set hearing, the trial court found that

Goldstein’s investigation was independent, reasonable, and conducted in good

faith. The trial court expressly adopted Goldstein’s factual findings and legal

conclusions, accepted her recommendation that the matter be dismissed, and

dismissed the amended derivative complaint with prejudice as to Cornfeld.

Analysis

      Our standard of review of a trial court’s order granting a motion to dismiss is

de novo. Grove Isle Ass’n, Inc. v. Grove Isle Assocs., LLLP, 137 So. 3d 1081,

1088 (Fla. 3d DCA 2014).

      The parking property: Cornfeld does not challenge the independence of the

investigator; rather, he argues that there are material issues of disputed fact

regarding the reasonableness and good faith of the investigation. He asserts that

his personal interest in the sale of the Club property is irrelevant to the interests of

the Club’s unit owners. However, our review of the record below evidences self-

interest has motivated his relationship with the Club for many years over his need

for parking spaces for the Newport Hotel, one of his properties. He attempted to

influence the third-party developer GPI’s principal, Philip Aginsky, to purchase the

land from the Club in order to secure parking for the Newport. There is evidence

in the record suggesting that Cornfeld threatened the Club’s attorney with a lawsuit

if she failed to change her mind and convince the Club to sell the property without

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a vote of approval from a majority of the unit owners, in direct contradiction to her

own legal advice and other counsels’ advice to the Club. Indeed, after the Club

declined to sell the property to GPI, which was within its judgment to do, Cornfeld

filed this derivative suit.

       The RK/sewer line issue:      The independent investigator queried many

sources to determine whether the Club breached its fiduciary duty to the unit

owners by failing to sue RK for damage to the Club’s force main sewer line in

1995, which occurred during construction of the RK shopping center.              The

investigator determined that the Club, after consulting its attorneys on the matter,

decided that it would not be cost-effective to sue RK, but rather to pay to fix the

sewer lines itself.3

       Throughout the complicated dealings over the years between the Club, RK,

and Cornfeld, the Club sought the advice of its attorneys, followed its attorneys’

conservative advice, and some of those decisions resulted in assessments passed on

to the unit owners. Cornfeld does not allege, however, and the record below does

not show, that the Club or its individual officers acted fraudulently, illegally,

oppressively or in bad faith – elements necessary to sustain a derivative action on

the corporation’s behalf.     §607.0831(1), Florida Statutes (2018) (providing

3 The record indicates that problems with the sewer lines continued for many years,
the causes for which are unclear, and may have stemmed from improperly sized
pipes, overcapacity, low-lying land that tended to flood, among others.

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insulation for condominium association directors from liability in their individual

capacities absent fraud, criminal activity, self-dealing, or unjust enrichment); see

Sonny Boy, L.L.C. v. Asnani, 879 So. 2d 25, 27 (Fla. 5th DCA 2004) (“[A]bsent

fraud, self-dealing and betrayal of trust, directors of condominium associations are

not personally liable for the decisions they make in their capacity as directors of

condominium associations.”); Farrington v. Casa Solana Condo. Ass'n, Inc., 517

So. 2d 70, 72 (Fla. 3d DCA 1987) (holding the ‘business judgment rule’ will

protect a corporation's board of directors' business judgment as long as the board

acted in a ‘reasonable’ manner in passing the special assessment). Indeed, “[a]

corporation's refusal to sue might be considered unreasonable by one of its

stockholders and still not be wrongful so as to justify a stockholder's derivative

action.” James Talcott, Inc. v. McDowell, 148 So. 2d 36, 38 (Fla. 3d DCA 1962).

      On the issue of the Club’s immunity from liability by virtue of the business

judgment rule, we find no error in the trial court’s acceptance of the facts and legal

conclusions contained in Goldstein’s independent report.        See, e.g., Atkins v.

Topp Comm, Inc., 874 So. 2d 626, 627 (Fla. 4th DCA 2004) (affirming dismissal

of the derivative suit, finding that the dismissal was based on the trial court's

conclusion that the independent investigator acted reasonably and with good faith

in conducting his investigation). Goldstein, the independent investigator in this

case, as did the investigator in Atkins, examined the merits of the proposed claims

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and concluded that the derivative suit was not in the corporation’s best interest.

The record here reflects that Goldstein conducted numerous witness interviews,

reviewed relevant documents, sought input from the attorneys for both sides, kept

both sides advised as the investigation progressed, and presented a lengthy report

to the court. The trial court did not abuse its discretion by adopting Goldstein’s

factual findings and legal conclusions, and finding that the report was reasonable

and conducted in good faith. Given our conclusion that dismissal with prejudice

was correct, we decline to address any remaining issues.

      Affirmed.

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