Miami-Dade County

Miami faces a $122M lawsuit that could wreck city finances. It wants to settle instead.

Flagstone marina on Watson Island, where the developer has a contract to build a $1 billion complex of hotel towers, yacht slips and shops.
Flagstone marina on Watson Island, where the developer has a contract to build a $1 billion complex of hotel towers, yacht slips and shops. emichot@miamiherald.com

Facing a $122 million lawsuit that could devastate Miami’s finances, city administrators have proposed a $20 million settlement that would clear a path for a developer to build a long-delayed hotel project on Watson Island.

The city has negotiated terms with the developer it chose to build Flagstone Island Gardens, a $1 billion hotel and marina complex on city-owned land. A controversial project, approved by voters in 2001, has stirred up fears of traffic jams on the MacArthur Causeway, sparked a wave of lawsuits and stalled in planning hell after 9/11 and the Great Recession. The marina is complete, but the upland development on about 11 acres has stalled for years.

In 2017, commissioners moved to evict Flagstone while contending the developer had missed construction deadlines and failed to secure a necessary loan. Flagstone sued and scored a major legal victory last year when a judge ruled the city breached the contract when it declared Flagstone in default..

Now after a year of lawyering, an important decision lies with Miami’s commissioners.

On Wednesday, the city’s attorneys are scheduled to present the settlement terms at a closed meeting. At Thursday’s regular meeting, commissioners will decide whether to approve the deal or vote it down. A rejection would set the stage for a trial the following week to determine the damages to the Flagstone team, which is led by developer Mehmet Bayraktar.

City Manager Emilio Gonzalez declined to comment on the proposed settlement. Miami administrators have privately acknowledged that losing a trial over the damages could destroy the city’s finances.

“We obviously are pushing a settlement. No one has any interest in bankrupting the city of Miami. No one has any interest in talking about who’s to blame,” said Eugene Stearns, attorney for Flagstone. “It’s time to fix the problems.”

The terms of the settlement include:

An upfront $5 million cash payment to Flagstone for attorney’s fees

Two $2.5 million cash payments due in each of the next two years

Reduced rent for Flagstone to the tune of $10 million over 10 years

Stearns said his client wants to move on from the legal battle and build the project. If approved, the settlement would essentially turn back the clock several years to when Flagstone sought a design change for a seven-story parking garage in the project.

Last year, Miami-Dade circuit Judge William Thomas issued a scathing ruling in favor of Flagstone, dealing a blow to commissioners who defiantly declared Flagstone in breach of a contract to develop a resort on the island — a decision made against the advice of the city’s professional staff and attorneys. The judge ruled that the city breached the contract by declaring Flagstone in default, and the city did not give the developer time to cure the alleged default before trying to evict Flagstone.

Read the proposed resolution below:

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