Filing # 57585940 E-Filed 06/09/2017 08:35:59 PM IN THE CIRCUIT COURT OF THE 11TH JUDICIAL CIRCUIT IN AND FOR MIAMLDADE COUNTY, FLORIDA. COMPLEX BUSINESS LITIGATION FLAGSTONE ISLAND GARDENS LLC, a Delaware Limited Liability Company, and FLAGSTONE DEVELOPMENT CORPORATION, a Delaware Corporation, Plaintiffs, v. CITY OF MIAMI, a Florida municipal corporation, Defendant. COMPLAINT Plaintiffs Flagstone Island Gardens, LLC (“Flagstone”) and Flagstone Development Corporation (“Flagstone Development”) sue Defendant City of Miami (the “City”) for breach of contract, declaratory relief, injunctive relief, and unjust enrichment, and allege: INTRODUCTION 1. Flagstone has spent over fifieen years and over $100 million developing and constructing a mixed-use waterfront development project consistent with the City’s master plan for Watson Island. In 2001, the City invited Flagstone’s founder to submit a proposal for the project based on its founder’s previous experience with award-winning projects, including marinas, shopping centers and hotels in Continental Europe. ‘The City awarded the project to Flagstone after a competitive and rigorous selection process in accordance with Florida's Sunshine Law. By public referendum, the citizens of Miami overwhelmingly ratified STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. nA. Museum Tomer * 150 Wes' Flagle Stree, ute 2200 = Miami, FL33130 * (305) 789-3200Flagstone’s proposal. The City entered into a series of interlocking agreements and leases governing Flagstone’s development of the project. The City then approved the specifics of the project by issuing Flagstone a Major Use Special Permit and extended the boundaries of the Downtown Miami Development of Regional Impact to cover the project’s development scheme. ‘When the project came under attack from obstructionist ants, Flagstone successfully defended the City and the project. As a result, in three separate Lawsuits, the Circuit Court and the Third District ‘Court of Appeal have approved of the project and Flagstone’ role in it 2. All the while —through the Great Recession and its aftermath, notwithstanding the difficulty and intricacy of the waterfront development, and despite delays and additional costs caused by ongoing litigation beyond Flagstone’s control—Flagstone proceeded apace with its development of the project and worked hand-in-hand with the City. Flagstone (1) undertook and achieved sensitive environmental mitigation; (2) obtained all necessary federal, state, county and local permits and approvals for the completion of the first marina of its type in the U.S; @) timely obtained all necessary permits and approvals to commence construction of the retail and parking component of the project; (4) self-financed and obtained millions of dollars in financing for the development; (5) worked with the City to ensure development; (6) paid the City tens of millions of dollars in rent; (7) paid hundreds of thousands of dollars in taxes; (8) spent thousands of hours and tens of millions of dollars on architects, engineers, environmental experts, planning experts, contractors, consultants, lawyers, operations counterparties, and other professionals to ensure completion of the project; (9) completed construction of the marina eight months ahead of the schedule agreed to by the City; and (10) commenced construction of the next major project component, the Retail/Parking component, also eight months prior to the scheduled deadline, 2 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. A. 80 Wes Flagler Sire, Suite 2200 = Mion, FLSS1SO « (305) 789-3200 ‘Museum Tomar #3. Flagstone has adhered to those agreements and relied upon them in investing over $100 million with the reasonable expectation of earning substantial returns warranted by the investment risk, 4, The City affirmatively solicited and approved of each stage of Flagstone’s participation in the development, The City agreed to @ master contract goveming the development; entered into two ground leases for development of the marina and the retail/parking components; and approved scores of resolutions, permits, applications, and other instruments documenting, over and again, Flagstone’s strict adherence to the terms of and obligations under the parties’ agreements. The City, State and County held over 40 public hearings to approve different facets of the project. And as late as last month, the City’s professional staff repeatedly and publicly confirmed Flagstone’s full compliance with all agreements. 5. But on May 30, 2017, the new City Commission abruptly changed course. The City Commission sided with the very same objectors to the project against whom Flagstone, at the City’s encouragement, had successfully defended the City and the project through a decade of litigation. And it repudiated the agreements in an attempt to take the valuable marina Flagstone has built and to extinguish Flagstone’s development rights. The City’s unjustified repudiation breaches the very agreements it cited 6. Flagstone now sues to enjoin the City from depriving Flagstone of the rights the City has recognized for over a decade and for damages to remedy what it has lost. PARTIES AND JURISDICTION 7, This is an action for injunctive and declaratory relief and for damages that exceed 515,000, exclusive of interest, costs, and attorneys” fees, 3 STEARNS WEAVER’ MILLER WEISSLER ALHADEFF & SITTERSON. Pa Mucoum Tower # 150 Wes Flogee Stee, Suite 2200 * Marv, FL 83130 © (305) 789.97008. The Court has jurisdiction over the subject matter of this ease pursuant to Article YV, section 5(b) of the Florida Constitution and Florida Statute Sections 26.012 and 86.011 9, Plaintiff Flagstone is a Delaware limited liability company, authorized to do business in the State of Florida, with its principal place of business located in Miami-Dade County, Florida 10. Plaintiff’ Flagstone Development is a Delaware corporation and the sole and managing member of Flagstone, Flagstone, not Flagstone Development, is a party to the ‘Agreements (as defined below). However, the City named Flagstone Development in jts Notice of Default (as defined below). Flagstone Development joins this action and requests all attendant relief out of an abundance of caution. 11, Defendant City is a municipal corporation of State of Florida. 12. Venue is appropriate in this Court pursuant to Florida Statute § 47.011, because the cause of action arises, and the Defendant is located, in Miami-Dade County. 13. All conditions precedent to bringing this action have been performed or waived." By valid resolutions and duly authorized entry into the Agreements, as described below, the City has expressly waived any sovereign immunity to suit on the claims asserted herein ‘The Island Gardens Project 14. Flagstone is the developer of a mega yacht marina and mixed-use waterfront development on Watson Island, known as Island Gardens (the “Project”). The Project includes two hotel towers, fractional vacation ownership units, a spa, fitness center, restaurants, banquet hall, meeting rooms and reception areas, and commercial space with entertainment, cultural Emphasis is added and citations and internal quotations are omitted throughout the Complaint unless otherwise indicated 4 STEARNS WEAVER MILLER WEISSLER ALHADEEF & SITTERSON. 2A, Musoum Towar # 150 Was Flagler Sitee, Sute 2200. + Miami, FLI3130 * (305] 789-3200facilities and civic art in an intimate village setting facing a 50-slip mege yacht marina in Biscayne Bay. A 100-foot setback along the water's edge will be maintained as a public promenade to preserve the views of downtown Miami, the Port of Miami, and Biscayne Bay Furthermore, in connection with the Project, Flagstone committed to spend at least $1 million on provements to the Southeast portion of Watson Island (which is not part of the Flagstone leased property) for a sculpture garden and other public amenities. 15. An economic impact study has estimated that the Project will bring more than $50 million in economic benefits to the City, more than $150 million in sales tax revenue after the first four years of operation, an estimated 10,000 jobs during construction, and an estimated 2,500 permanent jobs. 16, Development and construction of the Project has been ongoing for over fifteen ‘years—certain portions of the Project have been completed; development and construction for certain components are underway; and development for certain components are proceeding according to the timetable established by the parties. ‘The REP, Public Referendum, and City Resolution in Favor of the Project 17. The Board of Trustees of the Internal Improvement Trust Fund of the State of Florida (“Board of Trustees”) is vested by Florida statute with the authority and power to administer the use of certain lands, 18. The Board of Trustees conveyed to the City certain lands on which the Project is located more particularly described in Deed No. 19477, recorded in 1949 in Book 3130, Page 257 of the public records of Miami-Dade County, Florida (the “Deed”). The Deed contained certain restrictions. The entire real property on which the Project is located is referred to as the “Land.” 5 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. pA Museum Toner # 150 Wes Flagler Strat, Suite 2200 * Mion, FLS310 « (305) 789-920019. The City issued a competitive solicitation process for the Project. 20. On December 14, 2000, the City Commission of Miami (the “City Commission”) adopted a resolution and authorized the publication of a Mega Yacht Marina and Mixed Use Waterfront Development Opportunity ~ Watson Island, Miami, Florida, Request for Proposals, dated February 2001, as amended (the “RFP” 21. The REP included various evaluation criteria in accordanée with Section 29-A of the City Charter, After its receipt of proposals, the City selected a development proposal pursuant to those criteria with the intent of negotiating a lease and development agreement with the successful respondent. 22. The City solicited Flagstone’s participation in the RFP. 23, Flagstone was one of three respondents to the REP. 24. In response to the RFP, Flagstone submitted to the City a proposal entitled “Island Gardens at Watson Island,” dated July 13, 2001 (the “Island Gardens Proposal”), 25. Flagstone spent over $2 million on the Island Gardens Proposal, which included architects, designers, engineers and other consultants and professionals. Flagstone’s comprehensive and detailed proposal for the development contained a mega yacht marina, two luxury hotels, luxury fractional vacation u ownership, world-class retail and restaurants, a water taxi transportation system servicing Miami and the beaches, landscaped gardens, public art installations and civic art, as well as a public promenade overlooking the Miami skyline. 26. After conducting its technical review and evaluation process, the City’s Selection Committee selected Flagstone as the developer for the Project 6 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. 24 Muscum Tower * 150 Ves Flagler Street, Suite 2200 * Moms, FL33130 * (305) 789.9200,27. In accordance with Section 29-C of the City Charter, the City passed a resolution, calling for a referendum for the purpose of submitting the following ballot question to a vote of the electorate (the “Referendum” BALLOT QUESTION NO. 1 AUTHORIZING 45-YEAR LEASE OF CITY-OWNED UPLAND/SUBMERGED LAND ON WATSON ISLAND Shall the City lease City-owned land consisting of 24.2 total upland and submerged acres on Watson Island to Flagstone Properties, LLC for development of a mega yacht marina, fish market, hotels with timeshare units, a maritime museum, public gardens, cultural facilities, restaurants, retail and support facilities, for 45 years with two 15-year renewals, subject to capital investment, subject to a minimum annual guaranteed rent of $2,000,000 and other conditions the City may require? 28. In accordance with this ballot language, the City submitted the question to the City’s electorate. 29, The Island Gardens Proposal was approved by voter referendum by the electorate ofthe City of Miami on November 62001 ata specially-calle, city-wide municipal election 30, The question was approved by 64.84% of the City’s voters 31, The Island Gardens Proposal was by resolution approved by the City Commission on November 15, 2001 32. The City declared Flagstone as “the most qualified, responsive, and responsible bidder to develop and lease” the Project. ‘The Relevant Agreements 33, Pursuant to City Resolution No, 02-1304, the City and Flagstone entered into an Agreement to Enter into a Ground Lease (“Original Agreement to Enter”) and a form of proposed Ground Lease (“Ground Lease”) dated January 1, 2003. 7 ‘STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. A Museum Tower * 150 Wes Flagler Sire, Suite 2200 * Miami, FL33130 = (205) 789-320034. The City and Flagstone then entered into certain amendments to those agreements, 35. On June 24, 2004, the Board of Trustees approved a modification of the restrictions in the Deed, and executed and delivered an instrument entitled “Partial Modification of Restrictions” on March 2, 2005, which was recorded on March 18, 2005 in Book 23181, Page 775 of the public records of Miami-Dade County, Florida, 36. The City and Flagstone entered into an Amended and Restated Agreement to Enter into Ground Lease (the “Amended Agreement to Enter”) and approved the form of the ‘Amended and Restated Ground Lease(s) (‘Amended Ground Leases”), which amended and restated the Original Agreement to Enter, as amended by subsequent first, second and third amendments, dated February 1, 2010. 37. The Project is a phased project consisting of four phases: Phase 1 ~ Marina ‘Component; Phase 2 ~ Retail/Parking Component; Phase 3 ~ Hotel 1 Component; and Phase 4 ~ Hotel 2 Component, 38. On September 23, 2010, the City Commission by Resolution No. 10-0402, authorized entry into the Amended Agreement to Enter and the Amended Ground Leases. 39. On May 8, 2014, the City Commission adopted a resolution and authorized the City Manager to execute a compliance agreement to facilitate the Amended Agreement to Enter and the Amended Ground Leases. 40. On May 13, 2014, the Board of Trustees and the City amended and restated the Partial Modification of Restrictions on the terms set forth in the “Partial Modification of Original Restrictions, Deed No. 19447-H,” effective June 2, 2014, which was recorded on June 6, 2014 in 8 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON, PA. * Museum Tower * 150 Wes Fogler Street, Suite 2200 * Miomi, FLA3120 + (305) 789-3200,Book 29181, Page 2931 of the public records of Miami-Dade County, Florida (the “Second Partial Modification”) 41. On May 30, 2014, the City and Flagstone entered into the Amended and Restated Ground Lease for the Marina Component (“Marina Lease”), 42. On May 31, 2014, the City and Flagstone entered into the State Waiver Compliance Agreement (“Compliance Agreement”) 43. On August 31, 2016, the City and Flagstone entered into the Amended and Restated Ground Lease for the Retail/Parking Component (the “Retail/Parking Lease”). 44, The Amended Agreement to Enter, Compliance Agreement, Second Partial ‘Modification, Marina Lease and Retail/Parking Lease constitute the “Agreements,” which are attached hereto as part of Composite Exhibit 1 Flagstone’s Timely and Complete Performance Under the Agreements 45, Flagstone timely met every contractual obligation required of it under the Agreements 46. Flagstone diligently and timely proceeded with construction of the Major ‘Components, as defined in the Agreements for the development of the Project. 47, Flagstone’s extensive pre-constiuction development efforts in respect of the marina, retail and dining, parking, Iuxury hotel, luxury fractional vacation unit ownership, and lifestyle hotel—for land acquisition, permitting, surveying, inspections, marina engineering, building engineering, transportation engineering, architecture, landscape architecture, interior design, utility relocation, design consultants, development consultants, retail consultants, flood insurance, liability insurance, pollution insurance, workmen compensation, development of a 9 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ea Muneum Tower # 150 Wast Flogler Stee, Suite 2200 * Miomi, FL33130 * (305) 789-2200harbor master, development of a fish market, legal work, marketing, trademarking, and general operations —cost Flagstone nearly $75 million. 48, Flagstone undertook extensive and sensitive environmental mitigation, including: a. Flagstone retained Ocean Consulting LLC as its contractor and Coastal Systems Intemational, Inc. as its Marina engineer b. Ata cost of over $2.2 million, and in consultation with and with the approvals of the South Florida Water Management District, the U.S. Army Corps of Engineers, and the Miami-Dade County Department of Permitting, Environmental and Regulatory Affairs, Flagstone undertook coral relocation, sponge relocation, and seagrass relocation. c. As examples: over 60 oculina diffusa, a coral found mainly on the east coast of central Florida, were identified, removed from the seawall, moved to a staging location at the north end of the bulkhead and attached to concrete blocks with epoxy; over 42 sponges were removed, placed in staging locations, and reattached to relocativin sites; the seagrass was mapped and protected 4. Atacost of roughly $2.3 million, Flagstone constructed an artificial reef. 49, In January 2016, Flagstone completed development of the Marina Component consisting of a mega yacht marina, eight months ahead of schedule, des; encountering significant environmental, permitting and construction issues. 50. More specifically, upon Flagstone’s diligent efforts and at Flagstone’s substantial expense: a, In August 2004, the South Florida Water Management District issued Flagstone and environmental resource permit. 10 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. Pa Musoum Tomer «150 West Flagler Stoe, Suite 2200 * Miami, FL33130 © (205) 789-3200b. In November 2005, the US. Army Corps of Engineers issued Flagstone a marina and dredging permit. In November 2008, the Miami-Dade County Department of Permitting, nvironmental and Regulatory Affairs issued Flagstone a Class I permit. d. In December 2008, Flagstone retained Coastal Construction as its general contractor with respect to the Marina Component. ¢. In October 2013, Flagstone was issued a marine facilities annual operating permit, £ At a cost of roughly $2 million, Flagstone constructed and deep cleaned the Marina seawall. g. Ata cost of roughly $15 million, Flagstone dredged the seabed, barged and shipped the dredged material, and replaced the area with new qualified seabed. hk At a cost of roughly $13 million, Flagstone constructed the marina’s bulkhead, dockage, mooring system, fuel system, and pier work 51. Flagstone continued apace with development of the other phases and Components of the Project, including but not limited to as follows: a. _ In September 2005, Flagstone delivered a hotel management agreement with Starwood Hotel and Resorts to manage a four-star hotel under the Westin flag, b. In June 2005, Flagstone delivered a hotel management agreement with ‘Shangri-La Hotels to manage a five-star hotel, fractional units, and a spa. By year end 2008, Flagstone achieved approximately $70 million in fractional unit ownership pre-sales. ul STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra im Tower + 150 Wes! Flogler Steet, Sure 2200 * Hemi, FL.33180 (305) 789.32004 By year end 2008, Flagstone obtained commitment for over 50% of the planned retail space. e _In August 2015, Flagstone executed a memorandum of understanding for two hotels, a luxury and lifestyle brand, 52. Flagstone negotiated and obtained financing in connection with the Project, including as follows a. In July 2006, Flagstone negotiated and executed construction loan term sheets with Mellon United Bank in connection with the Hotel Components. b. In July 2006, Flagstone negotiated and executed construction loan term sheets with Bank of America for the Marina and Retail/Parking Components, ©. In November 2007, Flagstone delivered an equity joint venture agreement with the Abu Dhabi Investment Authority as an equity partner. 4. In March 2008, Flagstone delivered signed commitment letters with Bank of America for financing in connection with the Marina and Retail/Parking Components. e In March 2008, Flagstone delivered a term sheet and mandate letter with West LB for financing in connection with the five-star Hotel Component. £ __InMay 2008, Flagstone replaced West LB with Societe General In December 2008, a foan in connection with financing the Marina Component closed in escrow. fh. Throughout 2009, in response to the global financial crisis, Flagstone’s lending and equity counterparties struggled to syndicate the loans and with their loan cominitments; several withdrew their commitments and participations. 12 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra ‘Museum Towor # |50 West Flegee Stret, Suite 2200 * Mond, FL 33130 » (205) 789.3200,i, In 2014 and 2016, as more fully described below, Flagstone committed to self-finance construction of the Marina and Retail/Parking Components. j. Flagstone obtained $22 million in financing for the Marina Component. 53, Flagstone timely commenced construction of the Retail/Parking Component while adhering strictly to the requirements set forth in the Agreements and meeting every contractual milestone for its construction. 54, In September 2016, Flagstone obtained approval of its Phased Foundation Permit for the Retail/Parking Component and immediately commenced construction eight months prior to the deadline provided in the Agreements. 55. All of Flagstone’s material plans and permits for the commencement of construction of the Retail/Parking Component were approved and issued prior to May 1, 2017, the deadline in the Agreements 56. More specifically, upon Flagstone’s diligent efforts and at Flagstone’s substantial expense a On June 25, 2015, Flagstone opened a Miami-Dade WASA Master Agreement. b. On February 25, 2016, and on March 21, 2016, Flagstone obtained Miami- Dade WASA water relocation permits. ©. On February 25, 2016, and on September 2, 2016, Flagstone obtained a Miami-Dade WASA sewer relocation permit. 4. On March 21, 2016, Flagstone obtained a Miami-Dade DERM water relocation permit. 3 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. 24 Museum Tower # 150 Wes Flagler Stvee, Sute 2200 * Miomi, FLE3130 * (805) 789-3200On March 24, 2016, Flagstone obtained a Florida Department of Health general permit. £ On August 3, 2016, Flagstone obtained a Florida Deparment of Environmental Protection sewer relocation permit. & On September 1, 2016, Flagstone obtained the Retail/Parking Phased Foundation Permit. fh. On September 2, 2016, Flagstone was issued the Miami-Dade Wastewater Collection/Transmission System construction permit. i, On October 3, 2016, Flagstone obtained a Florida Department of Transportation utility permit j. On February 28, 2017, the private provider for the Project selected by the City conducted an inspection whereby Flagstone received approval of all foundation work completed to date under the Retail/Parking Component. k In March 2016, Flagstone experienced a lapse in the Retail/Parking Phased Foundation Permit in connection with the City’s delayed attention to other work order and permitting approvals; a new Retail/Parking Phased Foundation permit was issued on May 4, 2017. Ln April 26, 2017, Flagstone obtained preliminary approval of the City of Miami Public Works Permit for a non-material public works permit, and the City of Miami Public Works issued the final permit. m, On April 28, 2017, Flagstone actually commenced construction of the utility relocation, which is part of the Retail/Parking Components. 4 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. Pa. ‘Weat Flagler Stes, Suite 2200 + Miami, FL93130 + (805) 789-3200 Museum Fower # 1557. Flagstone also timely complied with any and all rent payments and other equity requirements due to the City in accordance with the Agreements, 58. In sum, Flagstone spent over $49 million in pre-construction costs; over $52 million for the development and construction of the Marina (including environmental mitigation), and approximately $3 million in further development costs during the economic downtum from 2009 through 2012, Flagstone continues to incur hundreds of thousands of dollars per month in carrying costs. City’s Acknowledgment of Flagstone’s Full Compliance 59. Pursuant to section 2.1.3 of the Amended Agreement to Enter, the City could not enter into any Ground Lease unless Flagstone had met “any and all conditions precedent. .for construction of the related Major Project Component(s).” 60. Prior to August 31, 2016, the City administrative department charged with overseeing the Agreements on behalf of the City determined that Flagstone had met all of the preconditions under the Amended Agreement to Enter. 61. On August 31, 2016, Flagstone and the City entered into the Retail/Parking Lease, executed by the City Attomey, City Manager and the Risk Management Interim Director and attested to by the City Clerk. 62, On May 4, 2017, City staff—the Department of Real Estate and Asset ‘Management—~concluded in internal department correspondence and to the public that Flagstone ‘was working “diligently” and was not in default of any of the Lease requirements. 63. On May 5, 2017, City staff further concluded in internal correspondence that “no project has ever required permit from ground excavation to move in ready from the time of groundbreaking. Permits ere obtained as that portion of the work commences (i.e., drywall, 15 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra ‘Musou Tower # 150 Wes Floglee Soe, Suite 2200 * Miami, FL33130 + (308| 789-9200windows, mechanical, ete).” So, “the required permits/approvals were met pursuant to the requirements stated [] in Section 6.1.13(b)” of the Amended Agreement to Enter. 64. On May 6, 2017, City staff assured the public and reiterated, “Flagstone continues to diligently work towards meeting all their deadlines...The city does not believe they [Flagstone] are in default of any of the lease requirements at this time,” as Flagstone’s application for a foundation permit and the excavation work was enough to meet contractual obligations. See David Smiley, “Did Flagstone Island Gardens just break ground? Or break its lease?” MIAMI HERALD, May 6, 2017 65. Just days before the City Commission declared Flagstone in breach of the Agreements, the City Mayor reported that the City Attomey’s position is that Flagstone complied with its contracts. Likewise, the City Manager stated, “Given the information that I have seen, I ‘would advise that they're [Flagstone] not in default.” See David Smiley, “After 16 years, billion dollar project's fate rests in the hands of Miami,” MIAMI HERALD, May 27, 2017, Campaign to Obstruct the Project 66, Since as early as May 2004, outside forces have waged a constant, repeated. vexatious, but ultimately meritless series of attacks to impede or obstruct the development of the Project. 67. _ Flagstone took up the defense of the Project on its behalf and on behalf of the City and its residents and tax payers. 68, For over a decade, Flagstone funded the litigation to defend the Project against the forces of obstruction, 69. Flagstone incurred substantial costs, fees, delays, and other damages as a result of various petitions and lawsuits, ‘Those included financial loss and increased expenses associated 16 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra Musoum Tower # 150 West Fogler Stes! Suite 2200 * Mir, FL33130 = (305) 789-9200with development and construction delay, as well as Flagstone’s attorneys” fees and costs, in defending the actions, moving to intervene and, ultimately, defeating the efforts to obstruct the Project. 70. ‘The obstructive efforts were spurred by @ serial litigant—Stephen Herbits—an undisclosed “outside advisor” to current City Commissioner Ken Russell. Upon information and belief, Herbits has long-standing tes to Commissioner Russell, including providing him substantial financial support in his 2015 election campaign to the Miami City Commission, and is now using Commissioner Russell to advance his agenda to halt the Project. 71. Herbits founded the not-for-profit corporation Coalition Against Causeway Chaos, Inc. CACC”). CACC and Herbits stated that their ultimate goal was to stop the Project at all costs, which included filing and maintaining legal actions. 72, Just after the Project had been approved by the City’s voters, Herbits attempted to dissuade the City from approving a Major Use Special Permit (“MUSP,” as described below) for the Project, 73, Then, in August 2004, Herbits filed the first lawsuit against the Project—a petition for writ of certiorari seeking review of the City’s decision to approve the MUSP. 74, Flagstone succeeded in dismissing Herbits’ first suit. The Eleventh Circuit Appellate Division concluded that “{tJhe [PJroject underwent review and compliance with applicable City, County and State requirements by no less than eight committees and boards.” See Herbits v. City of Miami, 12 Fla, L. Weekly Supp. 432a (Fla. 11th Cir. App. Div. Mar. 1, 2005). ‘The Third District Court of Appeal denied certiorari and affirmed missal. Herbits v City of Miami, 915 So. 24 1218 (Fla, 34 DCA 2005). iW STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. Muzeum Tower #150 Wee flogler Steet, ute 2200. * Miami, FL 33130 + {305} 789-920075. Herbits then sued again to obstruct the Project based on, among other things, flawed arguments that the Project was inconsistent with the City’s Comprehensive Plan and that the Project approvals consisted of unconstitutional spot zoning, 76. From January through November 2005, Flagstone successfully defended this second suit. In October 2005, after Flagstone’s success before the Appellate Division, Herbits entered into a Stipulation for Settlement and Covenant Not to Sue with Flagstone and the City of Miami (the “Covenant Not to Sue”). Herbits agreed to withdraw and dismiss all pending matters against the Project. Herbits additionally agreed not to initiate or pursue any further legal action arising out of the events giving rise to the litigation. 71. Despite the Covenant not to Sue, in September 2014, Herbits sued the City a third time, once again seeking to derail the Project. The suit requested, among other things, a declaration that the lease agreement between the City and Flagstone does not comply with the requirements of the City Charter. 78. Flagstone intervened to defend the suit, and in May 2015, the Circuit Court dismissed Herbits’ equally baseless but third consecutive suit with prejudice, The Third District Court of Appeal affirmed dismissal, See Herbits v. City of Miami, 166 So. 34 790 (Fla. 3d DCA 2015). The Third District Court of Appeal ultimately found that Herbits lacked standing, failed to allege an actionable violation, and was preempted from bringing his claims. See Herbiis v. City of Miami, 207 So. 3d 274 (Fla. 3d DCA 2016). 79, On January 26, 2017, Flagstone was compelled to sue Herbits and CCAC for malicious prosecution and tortious interference with a business relationship, among other claims. ‘That suit is ongoing, 18 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. Museurn Tower # 150 Wee! Flagler Siac, Sua 2200 Mian, FL33130 (808) 789.20080. At each stage, the City requested and accepted Flagstone’s efforts and intervention, and Flagstone successfully defended the Project and the City. 81. But, as a result of the more than decade-long campaign to obstruct the Project, Flagstone was delayed in moving forward with the Project and in its ability to seek debt financing, 82. To date, Flagstone has spent more than $2 million to fight the campaign of obstruction and parade of meritless suits to ensure that the Project can move forward to the benefit of the City and its residents, ‘The City’s Malfeasanee and Repudiation of the Agreements Repudiation of the Agreements 83. Nine months afer the City had effectively declared that Flagstone had fally complied with the Amended Agreement to Enter (and, upon that necessary condition, entered into the Retail/Parking Lease) and less than one month after City staff declared that Flagstone was in full compliance with the Retail/Parking Lease, the City adopted the groundless and unprecedented position that Flagstone had somehow defaulted on the Agreements 84. Commissioner Russell—in line with his undisclosed “advisor,” the CCAC’s Herbits—led the City in its improper repudiation of the Agreements. Specifically, he moved to “direct the administration to issue a notice of default.” 85, In early May 2017, Commissioner Russell requested, as a last-minute “pocket item,” a vote to declare Flagstone in default, But after other Commissioners stated that they were “uncomfortable making a potentially huge decision on such short notice,” he was forced to resolve the issue at a special Commission meeting 19 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. huseum Tonor * 150 Weel Flegler Stat, Sute 2200 * Mlams, FL33130 « (305) 789-9200,86. Commissioner Russell placed on the agenda for the May 30 City Commission meeting a resolution to find that Flagstone was in purported breach of the Agreements. 87. The stated goal was to terminate the Agreements and rescind the Project so that the City could issue a new “REP that has the developer implementing a multimodal transit hub that connects and finances the Baylink and water taxis.” Commissioner Russell explained: Back then, the City was looking to attract signature projects that would pump up our local economy. Midtown didn’t yet exist. Wynwood as we know it today didn’t exist Downtown and Brickell were a shadow of their current form. We didn’t have the arsht [sic], the Frost, the Perez Museums. Most of all, we didn’t have the congestion and infrastructure needs that we do now... [I]s Flagstone even relevant anymore to the vision of what our public land on Watson Island could and should be? Is this project - should it ever be built and I'm pretty skeptical about that — what Miami needs and deserves?... The City has lost millions in undervalued rent. The only silver lining is that we can now look at the land in the context of our needs today. 88, The City Commission, led by Commissioner Russell, changed its mind and decided to tear up its Agreements with Flagstone. The City Commission then invented Flagstone’s default as a pretext 89. Flagstone repeatedly cautioned the City, in a May 26, 2017 letter and at the May 30, 2017 Commission meeting, that any attempt to declare Flagstone in breach of the Agreements would be frivolous, unwarranted, and would cause Flagstone substantial damages. 90. City Mayor Regalado suggested the Commissioners bring in “independent counsel” to determine if Flagstone was truly in default, But, the Commissioners ignored his advice, as well as City staff's firm conclusion that Flagstone was not in default of any of the Agreements, Instead, the Commissioners sided with CCAC and Herbits, which argued that Flagstone had failed to meet the deadlines in the Agreements. 91. Thus, on May 30, 2017, the Commission, in a 5-0 vote, issued resolution number R-17-0263 (File 334) directing the City Manager to issue a notice of default to Flagstone for 20 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. pA Museum Towor * 150 West Flagler Strast, Suite 2200 * Miami, FL 33130 = (205) 789-3200failure to commence construction on the Retail/Parking Component on May 1, 2017 and for the failure to obtain financing under the Amended Agreement to Enter (the “Default Resolution”) 92. The City issued the Default Resolution despite knowing that their purported bases for default had no merit, as there had been no default and, in any event, any purported default had been cured or waived. 93. The City Manager mailed Flagstone a defective notice of default dated June 7, 2017, referencing the Default Resolution, sections 6.1.2 and 12.1.12 of the Agreement to Enter, and Composite Attachment 3 to the Retail/Parking Lease (the “Notice of Default,” attached hereto as part of Composite Exhibit 1) Longstanding and Improper Delays by the City: MUSP 94. In addition to its express repudiation of the Agreements, the City has breached its duties and obligations under the Agreements 95. Pursuant to the RFP, Amended Agreement to Enter, and the Amended Ground Leases, the City is required to process any and all of Flagstone's permit applications and plans in an expedited fashion 96 However, in repeated breach of its duty, the City has delayed the normal penmitting and approval process and improperly impeded the Project. 97. In 2004, the City, on Flagstone’s application and after appropriate vetting and review, approved a MUSP with respect to the Project, 98. The MUSP is required for a development order under the former Miami Zoning Code that allows « project to move forward with development and construction of the Project. a STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. a. Musoum Tower = 150 West Fogler Stree, Suite 2200 * Miami, FL33130 * (805) 789-320099, Upon the City’s request for minor modifications to the 2004-approved MUSP and Flagstone’s submission of such modifications, in 2007, the City approved a minor modification to the MUSP. 100, In September 2013, at considerable expense to Flagstone and after extensive consultation with the City, Flagstone filed a minor modification to its MUSP, seeking to enhance the Project's aesthetics by eliminating the above ground parking structure and relocating the required parking underground. 101, In April 2014, the City issued a referral letter approving Flagstone’s minor modification to the MUSP. 102, By 2014, the City’s revised municipal code (“Miami 21") required a new warrant approval process, which entails among other things a notice and comment period prior to issuance of a final decision on the Warrant for minor modification to the MUSP. 103. Flagstone undertook all actions required to move forward with the watrant approval process 104. Rather than moving forward expeditiously with the warrant approval process, the City left the Warrant with respect to the minor modifications to the MUSP in limbo, 105. In June 2016, Flagstone resubmitted its minor modification to the MUSP to prompt the City to process the Warrant for the minor modification to the MUSP. 106, Despite the City’s issuance of the referral letter in April 2014 as to identical minor modifications to the MUSP, despite Flagstone’s continued engagement with the City, despite Flagstone’ diligent but unnecessary revisions to the minor modification to the MUSP attending, to baseless objections, and outside the normal course of the City's administrative and regulatory 22 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. Pa Museum Tower #150 Wes logis Slow, Suite 2200, * Many, FL 33130 * (305) 789.3200processes, in August, 2016, the City directed Flagstone to begin anew the Warrant application process for minor modifications to the MUSP. 107. Between June and October 2016, on at least a twice weekly basis, Flagstone’s architects and professionals subsnitied revisions to the plans as requested by the City. 108, On September 14, 2016, the City accepted Flagstone’s revised plans —but, improperly and unique to Flagstone, refused to issue a referral letter, preventing the Warrant process from moving forward 109, Between November 2016 and February 2017, the City received from CACC a series of additional unfounded objections to the MUSP minor modification 110. The City suspended or circumvented the normal process for objection and approval, removing the requirement for objectors to pay or bond over sufficient funds meant to protect Flagstone from abuse of the warrant notice and comment process. That payment would have amounted to roughly ninety thousand dollars ($90,000). Flagstone, by contrast, had been required to, and did, pay that amount to undertake the process. 111, On March 3, 2017, to placate the fiivolous issues raised by the objectors and remove any obstacle to the City’s approval, Flagstone acquiesced to the comments made by the objectors to the MUSP minor modification and submitted revised plans addressing the ‘comments 112, Between March and April 2017, the City received more unfounded objections to the MUSP minor modification. 113, At the City's request, on May 4, 2017, Flagstone submitted yet another set of revised plans addressing and resolving to the City’s satisfaction the non-issues raised by the objectors. 23 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. Musoum Towor # |50 West Flog Street, Suto 2200. * Miomi, FL33130 * (305) 789-3200114, Since June 2016, in light of the frivolous series of objections and the City's multi- year delay, Flagstone offered, repeatedly, to withdraw its request for a minor modification to the MUSP and to move forward with the 2007 approved MUSP. 115. The City disagreed and encouraged Flagstone to continue with its proposed minor modification plans. 116. But the City’s multi-year delay persisted 117. The City has yet (o issue a referral letter allowing the Warrant application to be processed 118. The City has still not approved the minor modification to the MUSP. 119. Over three years after Flagstone’s submission of minor modification to the MUSP, and despite Flagstone’s diligent compliance with all of the City’s requests, the City has yet to provide its approval Damages 120, As a direct result of the City’s express and implied repudiation, the City has effectively brought the development of the Project to a halt. 121. As a proximate cause of, and but for the City’s breach of the Agreements, Flagstone incurred compensatory damages of mote than $122 million in investment, loss of its expected profits, and loss of the more than $3.6 billion in expected value Flagstone created in the Project. 122, Flagstone is unable to obtain financing or attract new, or maintain its, investors as ‘a result of the City’s bad faith actions. For instance, as a result of the Default Resolution, Flagstone lost an equity buyer who had submitted a written proposal to purchase a 95% interest in Flagstone’s development rights for $185 million, with $65 million to be paid within 45 days of 24 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. Suite 2200 * Mini, FL33130 + (G05) 789-200 Museum Tower # 150 Wast Fleglerthe execution of the purchase agreement. Flagstone has also suffered damages to its reputation and goodwill. CAUSES OF ACTION COUNT BREACH OF CONTRACT Amended Agreement to Enter & Retail/Parking Lease 123. Flagstone restates and realleges paragraphs 1 through 122 124. The Amended Agreement to Enter and the Retail/Parking Lease are valid and enforceable contracts. 125. Flagstone has fully complied with all of its duties and obligations under the Agreements, including by obtaining the necessary financing, by commencing construction, and by advancing the project as rapidly as possible despite delays beyond the reasonable control of Flagstone. 126. Nevertheless, the City has repudiated and anticipatorily breached both the ‘Amended Agreement to Enter and the Retail/Parking Lease via the Default Resolution and Notice of Default, among other actions, 127. By the Default Resolution and Notice of Default, the City is purporting to exercise its rights under Section 11.2 of the Amended Agreement to Enter, which provides, in relevant part, “If an Event of Flagstone’s Default shall occur, City shall have the right to terminate this Agreement and require full distribution of the... Security Deposits...as liquidated damages.” 128. By the Default Resolution and Notice of Default, the City is also purporting to exercise its rights under Section 25.2(b) of the Retail/Parking Lease, which provides, in relevant part, that in the event of Flagstone’s Default, the City shall have the right to terminate the 25 STEARNS -‘WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. ‘Museum Toner # 150 West Flegler Street, Suite 2200 * Mion, FL 33150 + (205) 789-3200Retail/Parking Lease or terminate Flagstone’s “right to possession of the Property and the Leasehold Improvements,..and repossess and enjoy the Property and the Leasehold Improvements.” 129, Through the Default Resolution and Notice of Default, the City has clearly and positively indicated that it will not comply with its obligations under the Amended Agreement to Enter and the Retail/Parking Lease. Flagstone fully anticipates that the City will not comply with its obligations under the parties” Agreements. 130, Flagstone is entitied to treat the City’s repudiation and anticipatory breach as an immediate breach of the Amended Agreement to Enter and the Retail/Parking Lease 131, The City’s threatened conduct, repudiation, and breach will be to the direct detriment of Flagstone and has cost Flagstone the ability to obtain additional financing, obtain new and maintain its current investors and, ultimately, lose the millions it has spent to date on the Project along with the Project's value and Flagstone’s expected profits. s breach by repudiati 132, As a direct and proximate cause of the Cit ‘Amended Agreement (o Enter and the Retail/Parking Lease, Flagstone has suffered damages, including those described in paragraphs 120 through 122 above. 133. In addition and in the alternative to money damages, to which Flagstone is entitled, Flagstone is also due injunctive relief. The City’s actions and threatened actions have caused Flagstone to suffer irreparable injury which cannot be remedied absent the grant of injunctive relief. Flagstone has protectable interests deserving of immediate protection and has a substantial likelihood of success on the merits. 26 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. Pa Museum Tower #150 Wes Flagler Steet, Sute 2200. * Miami, FL 33130 « (305) 789-3200,134, The public interest will be furthered by enjoining the City, and all those acting on its behalf, from breaching and attempting to wrongfully terminate the Agreements and Flagstone’s private property rights. WHEREFORE, Flagstone respectfully requests that the Court ‘A. Enterjudgment against the City and in favor of Flagstone, B, Award Flagstone damages, including but not limited to compensatory and lost profits, together with the costs of this action; C. Enter a preliminary injunction enjoining and restraining the City, its agents, servants, staff and attorneys and all others in active concert or in participation with it from: i, Altering Flagstone’s quiet enjoyment to the Land, including its access, ingress and egress to the Land, including Flagstone’s business offices thereon; ii. Prohibiting Flagstone from collecting its rents and undergoing its day-to- day operations on the Marina, iii, Enforcing the deadlines for the completion of construction in the Agreements while the matter is pending; D. Enter an Order suspending the deadlines for the completion of construction in the Agreements (including those in Attachment 3 to the Amended Agreement to Enter) while the matter is pending; F, Enter an Order suspending the Lease Term and any permit expirations while the matter is pending; 27 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. Mucoum Tousr # 150 lst Flagler Stee, Suite 2200 * Miami, FL33190 » (305) 789-3200F. Grant any necessary equitable relief to remedy the harm done, including any necessary writs, G. Award fees and costs, H. Grant such other and further relief as the Court may deem just and proper. At the appropriate time, Flagstone may also seck leave to assert claims for punitive damages. COUNT IL BREACH OF CONTRACT Amended Agreement to Enter & Retail/Parking Lease 135, Flagstone restates and realleges paragraphs | through 122. 136. The Amended Agreement to Enter and the Retail/Parking Lease are valid and enforceable contracts. 137, Flagstone has fully complied with all of its duties and obligations under the Agreements, 138. Under section 8.1.1 of the Amended Agreement to Enter, the City is required to “expedite and help deliver construction inspection approvals.” 139. Under section 4.2.1 of the Amended Agreement to Enter, which pertains to “MUSP Approval,” and in which the City confirmed that Flagstone had obtained the 2004 USP and the 2007 approval of minor modifications to the MUSP, the City is required, “[wfith reference to the existing MUSP Approval and any future modifications to the MUSP Approval,” to “reasonably and in good faith cooperate with such efforts, including, without limitation, executing all applications jointly as owner, if necessary.” 140. Under section 14.3 of the Retail/Parking Lease, the is required to “expedite and help deliver construction inspection approvals.” Under section 21.3 to the Retail/Parking, Lease, the City is required to “cooperate with and assist” Flagstone in procuring necessary 28 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. FA Muzcum Tower * 150 Wee! Fogle Steet, Sute 2200 * Miami, FL33130 (305) 789-3200permits. Section 14.2 of the Retail/Parking Lease further prohibits the City from “unreasonably withh[olding}, delayfing] or condition{ing]” any approval with respect to construction of a Major Project Component 141, As more particularly described in paragraphs 94 through 119 above, the City breached those obligations 142, The City did not “expedite and help deliver constrisction inspection approvals” with respect to minor modification to the MUSP from 2013 to present. 143, The City did not “reasonably and in good faith cooperate” with Flagstone’s efforts to obtain approval of minor modifications to the MUSP from 2013 to present. 144, The City did not “cooperate and assist” Flagstone in connection with the minor modifications to the MUSP from 2013 to present, 145, To the contrary, the City unreasonably withheld, delayed and impaired approval ‘of Flagstone’s applications for minor modifications to the MUSP. 146, As a direct and proximate result of the City’s breach of the Amended Agreement to Enter and the Retail/Parking Lease, Flagstone has suffered damages, including but not limited to more than $4 million in upfront costs of the delayed MUSP minor modification process and resulting costs associated with delay of approval of that minor modification. 147. Inasmuch as the City’s delay in approving the minor modification to the MUSP provided the pretext for the City's Notice of Default, the damages to Flagstone flowing from the Notice of Default were also directly and proximately caused by the City’s delay. 148. Further, the City clearly and positively indicated that it will no longer process any permits or applications for the Project. 29 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. Museurn Tower = 150 West Floger Strat, Sute 2200 * Miami, FL33130 « (305) 789-3200149, Accordingly, the City has breached its obligations under the Amended Agreement to Enter, including sections 8.1.1 and 4.2.1 thereto, and the City has breached its obligations under the Retail/Parking Lease, including sections 14.3, 21.3 and 14.2 thereto. 150. Asa direct and proximate result of the City’s breach of the Amended Agreement to Enter and the Retail/Parking Lease, Flagstone has suffered damages, including but not limited to costs associated with delays resulting from the City’s refusal to entertain Flagstone’s applications for permits and approvals. WHEREFORE, Flagstone respectfully requests that the Court A. Enterjudgment i favor and against the City: B. Award compensatory damages to Flagstone, as well as pre-judgment and post-judgment interest, C. Award compensatory damages to Flagstone resulting from the City’s breach of the Amended Agreement to Enter and the Retail/Parking Lease with respect to Flagstone’s applications for permits and approvals, as well as prejudgment and post- judgment interest; D. Require that the City specifically perform under the Amended Agreement to Enter, and specifically sections 8.1.1 and 4.2.1 thereto, and under the Retail/Parking Lease, and specifically sections 14.3, 21.3 and 14.2 thereto, enjoining the City to approve Flagstone’s minor modifications to the MUSP; and E. _ Require that the City specifically perform under the Amended Agreement to Enter, and specifically sections 8.1.1 thereto, and under the Retail/Parking Lease, and specifically section 14.3 thereto, enjoining the City to expedite consideration of and approve Flagstone’s applications for permits and approvals; 30 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. pa coum Tower # 150 West Flagler Street, Suite 2200 * Moni, FL33190 + (308) 789-2200F. Award Flagstone any further relief the Court deems equitable and just. COUNT I DECLARATORY JUDGMENT ‘Amended Agreement to Enter — Retail/Parking Lease 151. Flagstone restates and realleges paragraphs 1 through 122, 152. Composite Attachment 3 to the Retail/Parking Lease provided Flagstone a May 1, 2017 (the stated date of April 30, 2017 being a Sunday) deadline to “Start Construction of both the Retail/Parking Components.” 153, The Retail/Parking Lease, including at section 1.5(n) and Revised Exhibit A to ‘omposite Attachment 3, defines “Start Construction” and “Commence Construction” identically to mean “that all material plans and permits are approved and issued and the actual act of physical construction has begun.” 154. Section 6.1.13(b) of the Amended Agreement to Enter provides, in relevant part: Flagstone shall ... (i) apply to the City for Foundation Permits and commence site utility relocation work by such time period as necessary to begin such site utility work for the applicable Major Project Components, (ii) obtain and provide any other necessary governmental approvals for commencement of construction for the applicable Major Project Component(s), and (iv) continue to use good faith efforts to keep active and in full force and effect such FDOT Approvals, City Approvals, Foundation Permits, other necessary governmental approvals Should any of the FDOT Approvals, the City Approvals, the Foundation Permits, the Miami- Dade County Class I Permit for the Marina, or any other governmental approvals temporarily lapse, (2) such lapse shall not be a reason to extend the Qutside Dates for construction commencement of any Major Project Component, and (ii) such temporary lapse shall not constitute an Event of Flagstone’s Default as long as Flagstone continues to use good faith efforts to reinstate any such lapsed FDOT Approval(s), City Approval(s), Class 1 Permit, the Foundation Permits, or any other governmental approval, as applicable. 155, Upon Flagstone’s obtaining the Phased Foundation Permit for the Retail/Parking Component on September 1, 2016, and Flagstone’s immediate commencement of construction eight months prior to the deadline provided in the Agreements, Flagstone complied with the May 31 STEARNS WEAVER MILLER WEISSLER ALHADEFF & SITTERSON. ra. Museum Tower * 150 Wes Flagler Sheet, Suite 2200 * Miomi, FLIBISO * (205) 789-3200