Wednesday, July 9, 2014

3d DCA Watch -- Trial Judge Merry-Go-Round!


Hi kids, the bunker has decided to grace us this week with a fairly scholarly opinion on shareholder derivative/individual suits, in addition to the usual mix of PCAs and obscure reversals in part that require you to piece together several opinions to understand what actually happened:

Popkin v. Scharlin:

Q: How many trial judges does it take to issue a costs order?
A:  A bunch (see footnotes 3 and 5).

Dinuro v. Camacho:

This is the scholarly opinion looking at when shareholders can sue individually in the closely-held context:
Florida law, as it currently stands, embraces none of these tests individually, but utilizes all three to determine whether an action can be brought directly. As the Florida Supreme Court has not established a rule on this issue, a determination of the current standard requires the synthesis of nearly fifty years of case law developed in the Florida Courts of Appeal.
Here is where Judge Rothenberg winds up:
In short, the current Florida doctrine explaining which actions should be maintained directly and which must be brought derivatively is incredibly opaque, the application often varying from case to case depending on the facts. In our view, the only way to reconcile nearly fifty years of apparently divergent case law on this point is by holding that an action may be brought directly only if (1) there is a direct harm to the shareholder or member such that the alleged injury does not flow subsequently from an initial harm to the company and (2) there is a special injury to the shareholder or member that is separate and distinct from those sustained by the other shareholders or members.
Perhaps a tad restrictive, but a nuanced and well-reasoned opinion.

9 comments:

  1. She can ride my pony.

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  2. Exactly. She had never met a plaintiff she didn't want to fuck.

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  3. It's Rothenberg, not Rothenburg. And the opinion's actually about when members of LLCs may sue other members of LLCs, not about shareholder-derivative suits. Further, I wouldn't encourage the Third DCA to continue to issue 24-page opinions by calling them "scholarly"; I miss the days of one- to two-page opinions. Not only are they easier to read, but they often, though admittedly not always, are clearer about what the law is.

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  4. Oops, thanks. But it is indeed about whether the suit can be maintained as direct or as a derivative action after all those hoops are jumped.

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  5. Because the operating agreements do not authorize suit against the members
    directly for a breach of their terms, and because Dinuro has not alleged a breach of
    the statutory duty of loyalty or care, no separate duty was owed specifically to
    Dinuro, and the trial court properly dismissed Dinuro’s causes of action for lack of
    standing in Dinuro’s individual capacity. These claims should have been brought
    as a derivative action.

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  6. Agreed with you there, SFL. But LLCs don't have shareholders, unless I'm mistaken.

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  7. The opinion deals both with "members" of an LLC or, depending on the situation, "shareholders" of a closely-held corporation. The standard she has articulated will be applicable to both.

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  8. You're certainly right about that, SFL.

    Sorry, I guess I'm still peeved about how long the opinion is, and still nostalgic for the shorter opinions. If the facts of this particular case concern only an LLC, I'm not so sure why the Third DCA should feel the need to pontificate on direct and derivative actions in the corporation context as well. Some would call that dicta.

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