I was referred to Robert by Ruge Law Group when they were actually KRG Law Group. They handled a car accident I was involved in. This was a business debt collection levied against our company by an employee’s debt collector. He and his colleagues handled it flawlessly. He and his staff are beyond impressive and do everything they can to take the cases brought before them. I came back to them with a very big case. I don’t want to dox anyone in the office other than the name on the business. However, they handled it in the most professional, respectful, and caring way possible. J, you did an amazing job and due diligence! Robert, I wanted to personally thank you for representing us in the past and in the future. You and your paralegals are above Top Shelf. This firm is straight Louis XIII.
Derivative or Direct Action Against a Shareholder?
What is appropriate…a derivative or direct action against a shareholder?
Many people are not aware of the difference between a derivative vs. direct action against a shareholder and which is appropriate for their lawsuit. A derivative action is a lawsuit brought by a shareholder on behalf of the corporation or company. A derivative action allows shareholders to redress harm to the corporation caused by management where it is unlikely that management will redress the harm itself. A derivative action needs to allege two distinct wrongs: the act where the corporation suffered damages and a wrongful refusal by the corporation to redress the act. See Kaplus v. First Cont’l Corp., 711 So. 2d 108, 110 (Fla. 3d DCA 1998). If the shareholder wins the lawsuit, the corporation will receive the damages from the case.
On the other hand, a direct action is where a shareholder brings forth a claim asserting that the defendants harmed the shareholder himself. The shareholder is seeking a legal remedy for his own benefit and not for the corporation. An action may be brought directly only if it meets a two prong test: (1) there is a direct harm to the shareholder or member of a company 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. See Dinuro Invs, LLC v. Camacho, 141 So.3d 731 (Fla. 4th DCA 2014).
If a plaintiff cannot satisfy the two-prong test or demonstrate a contractual or statutory exception, the plaintiff will have to bring his claim derivatively on behalf of the corporation or company. The classification of claims as direct or derivative is significant because special procedures apply to derivative claims, such as requiring shareholders to make a pre-suit demand on the board to take certain action with particularity or show that a demand would be futile. Chapter §605.0802, Florida Statutes (2015 as amended). For more information on business organizations see Florida Statute Chapters §§605-623.
If you have questions regarding your specific case, call us today for a consultation.
Samantha Plummer is an associate with the Law Office of Robert Eckard & Associates. Samantha’s practice areas include business litigation, family law, and bankruptcy.
The Law Office of Robert Eckard & Associates (LORE) has not been retained for any matter by you until such time as a duly executed retainer is signed by you and an authorized agent of LORE and any retainer deposit paid and returned to us. Nothing contained herein is intended to create an attorney client relationship or be considered legal advice, as such, no conflict of interest shall be presumed in the event LORE is later retained by an adverse party. See Rule 4-1.18 et. al., 2006 Florida Supreme Court.