Sun Sentinel Palm Beach Edition
Landlords accused of profiteering
Gelato shop accuses Boca Town Center owner of padding electric bills in lawsuit
A gelato and panini shop owner is accusing the owner of the Town Center at Boca Raton of running a profiteering scheme by inflating what it charges retail tenants for electricity and pocketing the difference.
In a federal lawsuit filed last week in U.S. District Court in Fort Lauderdale, Cafe Gelato & Panini LLC accused Simon Property Group Inc. of deliberately overcharging retail tenants for electricity despite clauses in their leases stating that they would pay only what the mall owners were charged.
“Through a pernicious shell game of corporate entities, Simon for years executed a fraudulent scheme through a criminal enterprise to overcharge small business tenants at all of its shopping malls throughout the United States,” according to the suit, which was filed by Michael Hersh and Seth Miles of the Miamibased law firm Buckner + Miles.
The suit seeks class action status so it can add hundreds of other tenants of Simon’s malls, which it says have been overcharged by millions of dollars. It seeks refunds of alleged overpayments, damages, interest, attorneys fees and other relief.
Simon tried to conceal the scheme, the suit says, by also including in its leases language forbidding tenants from auditing the shopping malls’ electric bills. Whenever tenants raised issues about their electric bills, Simon’s affiliate company, M.S. Management, would tell them they had waived their audit rights and would not be allowed to inspect the actual bills from their utility providers, the suit states.
Simon contracted with another company, Valquest, “to provide false electric audits” to Simon and its tenants “in order to falsely justify and conceal the inflated electrical charges,” the suit charges. Valquest, according to its website, offers energy audits and analyses to schools, hospitals, manufactur
ing plants and shopping centers to identify ways to conserve power.
Representatives of the Simon Property Group did not respond Wednesday afternoon to a request for comment about the lawsuit.
Headquartered in Indianapolis, Ind., Simon owns 209 properties in the U.S., including 22 in Florida. Other Simon-owned malls in South Florida are Coral Square in Coral Springs, Sawgrass Mills in Sunrise, The Falls and Dadeland Mall in Miami, Miami International Mall in Doral and Florida Keys Outlet Marketplace in Florida City.
Cafe Gelato & Panini signed a five-year lease agreement in October 2014 to operate its upscale Italian/Argentinian bistro at the mall.
The shop opened with what the suit called “high-end, energy efficient equipment” that majority owner Julian Manicelli installed to keep his electricity costs low.
While at first the shop was “relatively profitable,” it experienced “a substantial drop” in revenue as shoppers embraced online ordering and began staying away from the mall, Manicelli said.
Despite the drop-off in customers, Cafe Gelato’s electric bills, sent on Simon Group letterhead, remained steady at about $500 a month, the suit states. A spreadsheet filed with the lawsuit shows its monthly electric charges ranged from $402 to $496 and dropped below $457 just three times. The average bill over 12 months from October 2015 to September 2016 was $465.
Ultimately Cafe Gelato stopped paying its rent and asked Simon “for relief … to no avail.” The rent and electric charges “eventually became untenable,” the suit states.
Comments on Cafe Gelato’s Yelp.com review page indicate that the shop was closed permanently in early 2017. Palm Beach County court records show that the mall filed an eviction suit against the tenant in January 2017 but did not pursue the matter further.
While the suit asserts that thousands of tenants suffered more than $100 million in damages, it does not name any other victim beyond Cafe Gelato. Attorneys expect to identify them as the lawsuit moves forward.