Owners of Regalia Beach and One Thousand Museum file lawsuit against conflicted attorney

Renderings of Regalia and One Thousand Museum

The owners of the One Thousand Museum and Regalia condo developments have filed a lawsuit against their former attorney, Louis R. Montello, claiming he illegally enriched himself at their expense while a company he owns mismanaged the developments.

The plaintiffs are Regalia Beach Developers LLC, owner of the Regalia Condominium development in Sunny Isles Beach, and Regalia OTM Inc., owner of the One Thousand Museum condo development in downtown Miami. The suit was filed in the Circuit Court for the 11th Judicial Circuit in Miami-Dade County.

“At issue are two contracts that Montello negotiated, one with each plaintiff, in which Montello was on both sides of the contract,” the plaintiffs claim in their suit against Montello, his Aventura law firm, Montello & Associates, P.A., and his company MVW Management, LLC.

The contracts put MVW Management in charge of the development of One Thousand Museum and the Regalia Condominium. But the plaintiffs claim that “Montello had a flagrant conflict of interest which he never disclosed: While purporting to zealously represent the interests of the plaintiffs, his true loyalty was to only himself.”

The suit charges the defendants on nine counts including malpractice, breach of fiduciary duty, and breach of contract. The plaintiffs are seeking recovery of unspecified amounts including compensatory damages, prejudgment interest and payments to Montello, his law firm and his development management company.

Montello’s counsel, Scott Cosgrove, responded to the suit via an email sent through a spokesperson, saying that because of Montello’s “outstanding efforts and hard work” over the past five years, Regalia is an “unqualified” success.

“As a result, substantial bonus payments are due Mr. Montello,” he wrote. “But rather than pay what is owed for Mr. Montello’s exemplary results, Gilberto Bomeny (Plaintiffs’ beneficial owner) resorted to baseless allegations in an attempt to shirk the financial obligations outlined in written documents. We look forward to proving Mr. Bomeny’s allegations false, and prevailing in court.”

According to the suit, Montello convinced Regalia Beach in August 2012 to sign a project management agreement with his company MVW, which was retroactively effective on May 1, 2011.

When Montello delivered a final draft of the management agreement to Regalia Beach, he also delivered a consent letter that “purported to be an attempt at informed consent,” according to the suit. “The consent letter falsely states that the transaction contemplated by the draft management agreement was on terms and subject to conditions negotiated in good faith and were fair and reasonable to Regalia Beach.”

Instead, the management agreement “is drafted with Montello’s benefit in mind – the provisions are almost uniformly one-sided,” the suit alleges. Under the agreement, Montello received a monthly salary of $20,000 (retroactive to May 2011). In addition, “he arrogated to himself vast sums upon completion of the project,” including a bonus of $1 million if the Regalia development generated net profit of at least $60 million and $2 million if the net profit hits $75 million or more. Montello also allegedly demanded a 25 percent “developer’s fee” and a 6 percent “net profit fee.”

Regalia Beach claims in the lawsuit that it “agreed to these terms, both because Montello represented that they were reasonable, and because Montello convinced Regalia Beach that there was no need to seek the counsel of a disinterested attorney, who would have recognized how inappropriate the terms were.”

The principal owners of Regalia Beach reside outside the United States so, according to their suit, they “sought out a legal professional that they could entrust to provide quality counsel in connection with the multitude of challenges that a sophisticated development like the Regalia might encounter.”

As the Regalia development at 19505 Collins Avenue in Sunny Isles Beach got under way, Regalia OTM began planning the One Thousand Museum project at 1000 Biscayne Boulevard in Miami. Montello positioned himself as a consultant to the One Thousand Museum project, successfully proposing that Regalia OTM sign a consulting agreement with MVW Management.

But “once again, he never advised Regalia OTM that it should seek counsel from another Florida lawyer … related to the proposed conflict,” according to the lawsuit. Like the MVW management agreement with Regalia Beach, the consulting agreement with Regalia OTM “contained the same kind of self-serving and self-dealing provisions … and the same kind of limitations against oversight and reasonable controls.”

Montello’s compensation under the consulting agreement was set at $180,000 a year, plus 2 percent of Regalia OTM’s net profit of upon completion of One Thousand Museum.

But the suit says that his performance under both the Regalia OTM consulting agreement and the Regalia Beach management agreement was “unsatisfactory, and characterized by an overreach that demonstrated Montello’s inexperience with large-scale developments.”

The plaintiffs allege that Montello’s poor performance included failure to provide operating budgets supported by a business plan, failure to provide detailed marketing budgets and failure to properly manage project-related tax liabilities.

Among other allegations of self-dealing in the lawsuit, it claims that MVW hired Montello’s son as a marketing consultant for the Regalia project in Sunny Isles Beach “even though Montello’s son had little or no prior experience.”

The suit also claims Montello failed to report that he traveled “with his significant other” to Dubai to accept “an award” and arranged for MVW to cover the expenses, “including $8,800 on the company credit for her airfare alone.”