Hammocks Settling Suit Against Ex-HOA Attorneys

The Hammocks is settling for $3.5 million another lawsuit against the homeowners association’s former law firms.

The firms had allegedly waged a battle against investigators who were looking into allegations of fraud against an ex-HOA president. The settlement, which isn’t final until approved by the judge, marks the fourth with former HOA attorneys in the wake of an alleged massive scheme by former board members to pillage association coffers.

In 2022, police arrested former HOA President Marglli Gallego and three former board members on charges they hired bogus contractors that did no work, and then misappropriated the association’s payments to the contractors, according to investigators’ arrest affidavit. All five charged have pleaded not guilty. Gallego’s husband, who was also charged, allegedly led many of the purported vendors, the affidavit says.

Since the arrests, court-appointed receiver David Gersten has overseen the Hammocks and filed four lawsuits against former HOA attorneys for their alleged role in the scheme and Gallego’s criminal defense counsel. The Hammocks, one of Florida’s biggest HOAs, is home to over 18,000 residents across 3,800 acres in West Kendall.

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Last year, Gersten sued law firm Rasco Klock Perez & Nieto and attorney Hilton Napoleon II, as well as his law firm, Hilton Napoleon II P.A., for legal malpractice and unjust enrichment. Former HOA leadership had retained Rasco Klock and Napoleon from 2020 to late 2022 to help with litigation against investigators who were checking into Gallego’s dealings, and to push back in court against subpoenas for HOA records.

Napoleon is described as a former partner at Coral Gables-based Rasco Klock in court records, though he testified in a deposition that he was an independent contractor for the firm. Napoleon, who also has his own private practice, is no longer affiliated at all with Rasco Klock, but he is still covered by the settlement.

The settlement payout is expected to be covered by Rasco Klock’s legal malpractice insurer. Under the agreement, Rasco Klock and Napoleon admit to no wrongdoing or breach of duty.

According to Gersten’s complaint, Rasco Klock filed defamation and civil rights lawsuits against Miami-Dade County police officers who were pursuing a criminal investigation into Gallego, as well as defamation suits against homeowners who had concerns about board malfeasance. The suits were filed on behalf of Gallego and the HOA as a whole, according to Gersten’s complaint. The law firm “hastily” filed the suits without a “diligent investigation” into the allegations against Gallego, which would have revealed that she and other board members weren’t acting in the HOA’s best interest, according to Gersten’s complaint.

Also, Rasco Klock and Napoleon litigated against investigators’ subpoenas for HOA records and were involved in the former board’s attempt to quash homeowners’ election recall effort, Gersten’s suit says. Homeowners had complained that polls closed early during the 2022 board election. The Hammocks paid Rasco Klock and Napoleon a combined $1.5 million, according to the complaint.

In a response to The Real Deal, Rasco Klock vigorously denied any malpractice or impropriety and said Napoleon and his private practice were much more involved with the HOA than Rasco Klock. It was Napoleon and his private law firm that “performed a multitude of services,” for which he and his firm billed the HOA separately from Rasco Klock. The receiver hasn’t provided allegations “related to anyone save Mr. Napoleon,” the statement said.

“In fact, Mr. Napoleon frequently was based at the association’s offices,” Rasco Klock said. “The firm’s involvement with the client was minimal, and only as Mr. Napoleon directed.”

Napoleon also denied any wrongdoing, pointing out he didn’t sign the settlement that was reached by Rasco Klock’s malpractice insurer. “I was not part of any negotiations and I did not contribute anything to the settlement,” he said in a statement.

Napoleon reiterated his past statements that all of his work for the Hammocks was well-justified.

“I stand by my representation of the Hammocks based on the information that I had at the time. The receiver has investigated this case for over two years and has been unable to present any evidence whatsoever to suggest I knew about the prior board’s alleged malfeasance,” Napoleon said. “In fact, most of the improper actions occurred in 2019, which is well before I began representing the association.

In court filings, Rasco Klock also has argued that Gersten fails to say how exactly the law firm knew of the ex-board members’ alleged scheme and that Gersten has shown no evidence to back up his allegations.

In separate court filings, Napoleon has said the lawsuits he filed against police officers came after they “slandered, harassed and threatened” Gallego. Also, investigators’ records requests were illegally burdensome, as they called for the production of tens of thousands of HOA documents, according to Napoleon’s court filings.

The $3.5 million settlement is more than the $1.5 million Rasco Klock and Napoleon’s law firm allegedly received from the Hammocks for their work.

The total amount the Hammocks will receive is expected to be reduced to cover attorney fees for Gersten’s counsel in the case from the law firm Damian Valor Culmo. In May, Judge Beatrice Butchko, who is presiding over the receivership case, approved a contingency fee arrangement for Damian Valori for its work on the suit against Rasco Klock and Napoleon.

Damian Valori was paid on an hourly basis for its work on behalf of Gersten, and a contingency fee allows the firm 33.3 percent from any recovery made in the Rasco Klock and Napoleon case. That’s $1.2 million of the settlement amount.

Damian Valori attorneys declined comment on the settlement and their contingency fee arrangement.

Gersten and his team of attorneys from several law firms and forensic accountants have been working to claw back as much money as possible for the Hammocks after the alleged misappropriation of funds. This effort includes lawsuits against former HOA lawyers, vendors and non-criminally charged board members.

Many residents have welcomed the receivership team’s work to make the Hammocks whole again, but the receivership’s fees have become a sticking point for other homeowners. Gersten and his team have recovered nearly $4 million for the Hammocks, excluding the recent settlement, and have charged $3.8 million in fees for their work, according to records.

Gersten previously settled suits against two other ex-HOA law firms for a combined $800,000, as well as against Gallego’s criminal counsel for $106,000.

The settlement with Rasco Klock and Napoleon voids a planned July 8 trial.
Across South Florida, homeowners who live in communities governed by homeowners or condo associations have raised various allegations against board members, including election meddling, hefty assessment hikes, fund misappropriation and retaliation against those who speak out. Many also have suspected corrupt boards are being aided by association attorneys, but the Hammocks is the first known case where association attorneys have been sued for their role in alleged wrongdoing.

Editor’s note: This story has been updated with statements from Rasco Klock and Hilton Napoleon II.