Simon Property Hit With $100M Class Action Suit Over Electricity Charges

Simon Property Group and its management company, M.S. Management Associates, were hit with a federal tenant class action lawsuit that alleges the defendants artificially inflated electricity costs that were passed on to tenants.

Buckner Miles and Kelley Uustal represent the lead plaintiff, Café  Gelato & Panini LLC, in the Florida suit before the US District Court for the Southern District of Florida. The nationwide class action seeks damages exceeding $100 million from the defendants, due to the alleged “execution of its complex, surreptitious, and illegal mark-up of electricity charges scheme,” according to the complaint.

Café Gelato operates at Town Center at Boca Raton, which is a shopping center owned by Simon and under management from M.S. Management. Simon is a real estate investment trust that focuses on shopping malls, with properties around the nation, while M.S. manages its malls nationwide.

Read the complaint:

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Lawyers for Café Gelato did not respond to request for comment by press time. As of Tuesday, no attorney had entered an appearance for the defendants.

The complaint alleges Simon directed M.S. to use a standard lease agreement that informs tenants that their bills would be around the same amount a local utility provider charges. Despite this, Café Gelato accuses the defendants of engaging in a racketeering enterprise and conspiracy, breaching the lease agreements with tenants, along with violating state laws and regulations by inflating tenants’ electric bills.

To conceal the alleged “wrongful and illegal conduct,” the complaint states, Simon directed M.S. to insert a clause into tenants’ lease agreements at the shopping malls to waive their right to audit shopping malls’ electric bills. That move concealed the undisclosed markups anytime a tenant complained about a bill, the lawsuit alleges.

For instance, Julian Mancinelli, the day-to-day manager of Café Gelato, invested in high-end, energy-efficient equipment to mitigate his electrical costs. Even though foot traffic into the cafe decreased over time, putting a strain on the businesses’ balance sheet, the costs for electricity remained around the same, and was its second-highest expense after accounting for rent payment, the complaint alleges.

The complaint states that defendants lied to tenants, such as Café Gelato, for years when it claimed they were only paying their share of electricity charges.

It alleges, “In truth, for years Café Gelato was tricked into paying thousands of dollars in illicit electricity mark-ups, the vast majority of which were ultimately paid to Simon.”