A contractor’s bid to enforce a $7.59 million Bahamas Supreme Court judgment against a major global hotel chain has been blocked by a Florida appeals court, which ruled the latter was not involved in a $1 billion Bahamian joint venture.

Florida’s third district court of appeal, in a Wednesday ruling, comprehensively overturned a previous jury verdict against Marriott International over the failed Ritz-Carlton Rose Island project.

For besides dismissing American Bridge Bahamas’ bid to enforce its Supreme Court judgment against Marriott, the Florida court also threw out its previously successful claims that it was “fraudulently induced” to enter the Rose Island contract, and was misled over the availability of project financing.

American Bridge, which was hired to construct the project’s marina, obtained a $7.585 million default judgment against its holding company, Ritz-Carlton Rose Island Hotel Company (RCRI), for alleged breach of contract in 2010.

The contractor then sought to enforce the Bahamian judgment against RCRI’s shareholders, which included Marriott and the Miami-based developer, Gencom, in the Miami-Dade Circuit Court.

This resulted in a jury trial and resounding verdict in favour of American Bridge on May 13, 2014, albeit one that has proven shortlived.

Detailing the background to this week’s decision, the Florida appeals court recalled how RCRI was formed by Marriott in November 2005 to own the proposed resort, located just off New Providence’s north-east coast.

“RCRI purchased land on Rose Island and entered into a Heads of Agreement with the Bahamian government, representing that the resort could ultimately bring in hundreds of millions of dollars,” the judgment said.

“In turn, the Bahamian government waived duties and taxes on construction materials and expedited the permitting process.”

The Rose Island project’s impact was somewhat less than expected, and it became another ‘mega resort’ proposal that stalled, and ultimately collapsed, when the 2008-2009 ‘credit crunch’ and subsequent global recession hit.

Before then, Marriott sold a 75 per cent interest in RCRI to GenLB Rose Island Ltd, a company jointly owned by Gencom and the Lehman Brothers investment bank. While ceding majority control, Marriott retained a 25 per cent minority equity stake.

“RCRI’s initial financing for the project called for a budget of $120 million, with $80 million coming from Lehman via a loan to RCRI, and with $40 million coming from shareholder investments,” the Florida court ruled.

“During this initial construction phase, RCRI entered into a contract with American Bridge to build a marina for the resort.”

It was not long before RCRI ran into financial difficulties, even before its main financier and investor, Lehman Brothers, collapsed and sparked the world’s full-blown recession.

“In July 2008, when RCRI was unable to secure enough funding to pay American Bridge’s invoice, RCRI’s shareholders agreed between themselves to loan RCRI $31 million over an 11-month period. RCRI used these installment loans to pay its past-due invoices up until September 2008,” the Florida court recalled.

“However, the infamous Lehman bankruptcy undercut Lehman’s ability to fund the project, and accordingly, it made it impossible for GenLB, which was mostly owned by Lehman, to comply with the $31 million shareholder loan agreement.

“RCRI shareholders then stopped contributing to the shareholder loan agreement, and in October 2008, RCRI notified American Bridge to stop construction. American Bridge was left with unpaid invoices, and RCRI’s shareholders lost the money they had contributed.”

American Bridge successfully obtained a $7.585 million default judgment from the Bahamian courts in summer 2010, after it sued for breach of contract, and headed to Florida.

The Miami-Dade Circuit Court jury, while finding that Marriott could not pierce RCRI’s “corporate veil”, agreed that the Bahamian judgment could be enforced against the hotel group because the project was a joint venture between itself and Gencom.

The appeals court, though, reversed this decision on the grounds that American Bridge had failed to prove that a joint venture over RCRI existed.

“The theory presented by American Bridge to the jury was that Marriott, Gencom and Ritz-Carlton were all members of a joint venture, and this joint venture had as its agent RCRI,” the court ruled.

“Thus, American Bridge contended that when RCRI breached its contract with American Bridge, Marriott was liable as a joint adventurer.”

The court said the contractor’s joint venture argument was based on the fact that the RCRI shareholders shared day-to-day operational control over the project.

Yet it found that none of the RCRI shareholders could legally bind the other, while no evidence was presented by American Bridge to prove joint control.

“Marriott’s control over the project was limited to its role as a minority shareholder of RCRI,” the Florida appeals court found. “And while it is true that Gencom Rose and Gencom Asset Management were able to make decisions regarding the project, their powers/authority to do so were based on their contracts with RCRI, not Marriott or any of the alleged joint adventurers.

“Similar to RCRI’s contract with American Bridge to build the marina, RCRI contracted with Gencom Rose to manage the construction and with Gencom Asset Management to manage the hotel upon its completion. Marriott’s interest in the performance of any of these contracts was as a minority shareholder, and nothing more”

In the absence of a joint venture, the Florida appeals court found it was impossible to make Marriott liable for RCRI”s breach of contract with American Bridge, and therefore the Bahamian judgment was unenforceable.

It also dismissed American Bridge’s other two successful claims, finding that it had failed to prove that Marriott had “either a duty to disclose or [made] a fraudulent statement” in relation to the marina construction contract.

“The third aspect relates to the judgment entered in favour of American Bridge as to its claim that Marriott conspired with others to fraudulently misrepresent the availability of the necessary funds to pay American Bridge for its work after the formation of the contract,”the Florida appeals court said.

“We are equally compelled to reverse on that aspect of the judgment because that claim was never pled in the operative complaint, and thus as a matter of law, it cannot be maintained.”