To initiate a lawsuit, a plaintiff must have standing, otherwise described as the right to sue. Accordingly, the right to sue varies depending on the particular context of the plaintiff’s alleged harm. § 605.0802, Fla. Stat. allows for a member to “maintain a derivative action to enforce a right of a limited liability company,” but the statute does not provide the right to sue individually. A derivative action seeks to “enforce a corporate right or to prevent or remedy a wrong to the corporation,” when “the corporation, because it is controlled by the wrongdoers or for other reasons, fails and refuses to take appropriate action for its own protection.” Salit v. Ruden, McClosky, Smith, Schuster & Russell, P.A., 742 So. 2d 381, 388 (Fla. 4th DCA 1999). Whereas, an individual suit seeks to recover damages that the plaintiff suffered as a result of a wrong done to the corporation. Thus, the right to sue individually as a member of an LLC presents special considerations that were confusing and opaque in Florida until recently.

In Dinuro Investments, LLC v. Camacho, the Third District Court of Appeal used a two-prong test that has been adopted throughout Florida to resolve the issue of individual standing in actions for individual damages in LLC disputes. See Strazzulla v. Riverside Banking Co., 175 So. 3d 879, 884 (Fla. 4th DCA 2015) (“we agree with the Third District[‘s decision in Dinuro Investments, LLC v. Camacho] and adopt a two-prong test”). The South Florida offices of The Mavrick Law Firm represents plaintiff-members and defendant-members in disputes throughout the judicial circuits that are bound by Third and Fourth DCA decisions. In Dinuro Investments, LLC v. Camacho, the court thoroughly examined the three tests routinely are routinely applied to resolve the direct versus derivative claim question: The Direct Harm Test, The Special Injury Test, and The Duty Owed Test. After addressing the pros and cons of each of the tests, and in an attempt to “reconcile nearly fifty years of apparently divergent case law” the court reasoned that a two-prong test was appropriate. See 141 So. 3d at 740.

As mentioned earlier, a member can only individually sue another member for damages if the two-prong test is met, or if the member can prove the existence of a separate duty owed by the defendant-member(s) to the individual plaintiff-member that is based on a contractual or statutory mandate. Dinuro Investments, LLC v. Camacho, 141 So. 3d at 740. Concerning the first prong, direct harm, a member can only bring a direct suit if the damages are unrelated to the damages that are suffered by the LLC, and if the LLC would have no right to recover in its own action. Strazzulla v. Riverside Banking Co., 175 So. 3d 879, 885–86 (Fla. 4th DCA 2015). Regarding the second prong, the plaintiff-member’s injuries must be separate and distinct from the other members. Id. Moreover, unless explicitly stated, an LLC’s operating agreement will not function to impose individual rights and liabilities to individual members. See Dinuro Investments, LLC v. Camacho, 141 So. 3d at 741 (“[w]hen analyzing a claim for breach of an operating agreement, the precise terms of the agreement are critical”). Therefore, potential plaintiff-members should assess the nature of their harm and any individual contractual rights before suing another member of an LLC. A failure to make a thoughtful and reasoned assessment of the factors discussed in this article will likely result in a waste of resources.

Peter T. Mavrick has successfully represented many businesses in non-competition covenant litigation. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.

In Wasser, the purchaser of a 67-year-old apartment building sued the seller for, inter alia, fraudulent misrepresentation based on the seller’s statements that the building was “a very good building” requiring “normal type of maintenance,” and “an excellent deal.” The Third District Court of Appeal found that such statements were merely “puffing” or statements of opinion that could not constitute fraudulent misrepresentations. Based on the foregoing, the court affirmed summary judgment in favor of the seller.

More recently, the Fourth District Court of Appeal was confronted with a fraud claim based on puffery in MDVIP, Inc. v. Beber, 2017 WL 2364729 (Fla. 4th DCA May 31, 2017). The plaintiff brought suit against a personalized healthcare program after a doctor employed by the program failed to diagnose and misdiagnosed the plaintiff’s leg pain, forcing the plaintiff to undergo an above-the-knee amputation. The plaintiff’s fraud claim was based on the defendant’s statements that it would provide “exceptional doctors, exceptional care, and exceptional results.” The plaintiff also alleged the defendant made promises that the plaintiff “would be seen by the finest national specialists with advanced treatment” and defendants claimed to be “a network fraternity of some of the nation’s finest physicians,” among other things. In making its decision, the court relied in part on Wasser and determined that the plaintiff’s fraud claims could not be maintained to the extent they depended on defendant’s alleged statements, as such statements constituted non-actionable puffery or statements of opinion.

Although fraud claims based on puffery will usually be disposed of by the court, businesses still must be cautious when using puffery or statements of opinion to make sales. In Mejia v. Jurich, 781 So.2d 1175 (Fla. 3d DCA 2001), the court provided an exception to the general rule that fraud claims cannot be based on statements of opinion. Mejia states:

Where the person expressing the opinion is one having superior knowledge of the subject of the statement and the plaintiff can show that said person knew or should have known from facts in his or her possession that the statement was false, then the opinion may be treated as a statement of fact.

The Mavrick Law Firm has successfully represented many businesses in fraud cases as well as other business litigation cases throughout the Miami-Dade, Broward, and Palm Beach County areas encompassed by the Third and Fourth District Courts of Appeal, as well as Hillsborough, Sarasota, and other counties encompassed by the Second Circuit Court of Appeals. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311.

• Decisions made by owners or managers of the company
• The alleged breach of fiduciary duties by corporate officers and owners due to disloyalty, self-dealing, or not acting in the best interests of the company
• The terms of corporate buyout agreements, executive salaries and other forms of compensation
• Financial problems arising from capital or operational needs
• Alleged corporate violations of business agreements
• Unauthorized corporate acts

In general, not every dispute that arises will be addressed in the provisions of a shareholder agreement or other type of business contract. While Florida laws are a good starting point in dealing with shareholder disputes, they don’t always speak directly to the issues. As such, it is crucial to work with an attorney to determine your rights and responsibilities and the scope of your legal options. As experienced business litigation attorneys are aware, sometimes litigation can help a troubled business address defects in its management or business model or issues relating to capital and operational needs. Other times, litigation is not recommended under the circumstances. Notwithstanding, an experienced attorney can help you decide what is best for your company.