The Florida Bar
www.floridabar.org
The Florida Bar Journal
May, 2014 Volume 88, No. 5
Resistance is Futile: The Myth of Demand Futility

by Etan Mark and Steven D. Weber

Page 10

Despite practice to the contrary, there is no Florida statutory basis for a shareholder of a corporation to bring a lawsuit “on behalf” of a corporate entity without first making a demand on the management of that corporation, regardless of how conflicted or intransigent that management is. Based on the language of the applicable Florida statutes, failure to make a demand should result in dismissal of the action. Courts in Florida, however, continue to apply the “futility exception” to the demand requirement, despite clear statutory language to the contrary.1

This article first discusses the history of Florida’s demand rule for corporations. Next, this article examines whether a futility exception to the demand requirement exists under Florida law. Then, this article explores how courts outside of Florida interpret Florida’s demand rule. Finally, this article explores how certain jurisdictions outside Florida interpret their own demand rules. This article concludes that the Florida Legislature should clarify whether Florida’s statutory law allows an exception to the requirement that a demand must be made prior to instituting a derivative action against a corporation. Indeed, the legislature did just that with Florida’s limited liability company statute, which, effective January 1, expressly does contain a futility exception to the demand requirement.

In a growing number of jurisdictions in the United States, prior to instituting a derivative lawsuit, a shareholder must make a demand on the corporation to induce remedial action.2 Failure to do so will lead to dismissal of the lawsuit unless the shareholder is in a jurisdiction that permits an exception to the rule, such as pleading that a demand would be unavailing, unreasonable, impracticable, or that the alleged wrongdoers are the same as those on whom the demand would be made — in other words, that demand would be futile.

In Florida, the statute governing a corporate derivative action, F.S. §607.07401, as amended in 2003, does not contain a futility exception. Nonetheless, Florida courts continue to recognize such an exception,3 even though courts from other states have found that it does not exist under Florida law,4 and even though the text of Florida’s demand rule appears to be consistent with the demand rules of those states that do not recognize such an exception.5 Old habits die hard, however, and, in a tip of the hat to the vestiges of Delaware corporate law, Florida practitioners routinely plead futility to escape the necessity of a demand prior to instituting a derivative action.6

Florida’s Demand Requirement
The purpose of a presuit demand is to allow a board of directors to either support or oppose a course of action that the shareholder deems necessary in order to preserve or protect corporate integrity.7 The law of the state of incorporation generally determines the requirements related to any demand.8

A number of states have modeled their rules governing the making of a demand after the Model Business Corporation Act, or the Revised Model Business Corporation Act (revised act), which was last updated in 1984.9 The revised act provides that prior to commencing a derivative action a shareholder must make a written demand:

No shareholder may commence a derivative proceeding until:

(1) a written demand has been made upon the corporation to take suitable action; and

(2) 90 days have expired from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.10

Florida’s demand rule, F.S. §607.07401, was last amended in October 2003. Although Florida’s demand rule did not incorporate the entirety of the revised act’s language, it nonetheless requires a litigant to allege that he or she made a demand and incorporates the post-demand time frames that must expire before a party may commence an action:

A complaint in a proceeding brought in the right of a corporation must be verified and allege with particularity the demand made to obtain action by the board of directors and that the demand was refused or ignored by the board of directors for a period of at least 90 days from the first demand unless, prior to the expiration of the 90 days, the person was notified in writing that the corporation rejected the demand, or unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period. If the corporation commences an investigation of the charges made in the demand or complaint, the court may stay any proceeding until the investigation is completed.11

The prior version of Florida’s demand rule, enacted in 1990, similarly provided that a party must plead in their complaint that a demand was made prior to commencing a derivative action:

(2) A complaint in a proceeding brought in the right of a corporation must be verified and allege with particularity the demand made to obtain action by the board of directors and that the demand was refused or ignored. If the corporation commences an investigation of the charges made in the demand or complaint, the court may stay any proceeding until the investigation is completed.12

Notably, the 1990 and 2003 statutes stand in stark contrast to an earlier version of Florida’s demand rule, F.S. §607.147, because that earlier demand rule did not reference the making of a demand at all.13 The absence of any reference to a demand in that earlier version, which was enacted in 1975, was a departure from an even earlier iteration of Florida’s demand rule, F.S. §608.131 (repealed in 1975), which provided: “The complaint must set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors of such corporation or the reasons for not having made such effort.”14 Thus, unlike later versions of Florida’s demand rule, F.S. §608.131 explicitly recognized a futility exception to the demand requirement by allowing litigants to set forth “the reasons for not having made such effort.”15 The Florida Legislature later excised the language excepting futility from the demand requirement, suggesting that futility is no longer a legally viable excuse from the demand rule as it stands today.16

The explicit requirement that a party must allege the making of a demand under Florida’s current demand rule can be seen as a movement toward Florida’s full adoption of the revised act’s demand requirements because the revised act explicitly requires that a demand must be made prior to commencing a derivative action, with no futility exception, and away from prior Florida law that allowed litigants to plead reasons for not making such a demand.17 However, as set forth below, despite statutory language stating that a litigant must plead that a demand has been made, courts are conflicted as to whether the futility exception exists under Florida law.

The Futility Exception to the Demand Requirement
In several jurisdictions, a demand may be excused if the shareholder shows that any demand on the board of directors would be futile.18

Courts typically will excuse the failure to make a demand in those jurisdictions where there has been no opportunity to make it, or where it is apparent that demand would be unavailing, unreasonable, or impracticable.19 In particular, courts have excused the demand requirement “if it would be directed to individuals who, by reason of hostile interest or participation in the alleged wrongdoing, cannot be expected to institute litigation on behalf of the corporation.”20 In those instances, when allowed, the burden is upon the plaintiff in a derivative action to overcome the presumption that the director’s actions were faithful to his or her fiduciary duties, and courts typically require particularized facts at the pleading stage to overcome that presumption.21

Florida Law on Demand Futility
Prior to the 2003 amendment of Florida’s demand rule, Florida courts recognized a futility exception if the demand would be “unavailing.”22 In Orlando Orange Groves Co. v. Hale, 107 Fla. 304, 144 So. 674 (1932), the Florida Supreme Court found that a demand was unnecessary in certain situations:

Dissenting stockholders may sue in their own name to enforce the rights of the corporation without a demand upon the directors if they, whether by reason of hostile interest or guilty participation in the wrongs complained of, cannot be expected to institute suit, or, if they do, it is apparent they will not be the proper parties to conduct the litigation.23

However, Orlando Orange did not cite to any Florida law in support of that finding. Instead, the court cited case law from other jurisdictions and the U.S. Supreme Court’s decision in Hawes v. City of Oakland, 104 U.S. 450, 461 (1881), which acknowledged that a shareholder must make an effort to induce action by the managing body, but that if he does not, “he must show a case…where it could not be done, or it was not reasonable to require it.”24

Similarly, in Conlee Const. Co. v. Cay Const. Co., 221 So. 2d 792, 796 (Fla. 4th DCA 1969), the court found a demand was futile because the presence of an inter-corporate feud prevented the plaintiff from realistically making a demand.25 Despite recognizing that a demand on a board of directors was a “condition precedent” to a derivative action, the Conlee court stated that a demand “is excusable where demand obviously would be unavailing.”26 Such a result was consistent with then-F.S. §608.131, which although not specifically cited by the court for the proposition, allowed a party to set forth “the reasons for not having made” a demand.27

And again, while F.S. §608.131(2) was in effect, in Belcher v. Schilling, 309 So. 2d 32, 35 (Fla. 3d DCA 1975), the Third District Court of Appeal found that the plaintiffs adequately alleged demand futility based on their allegation that the defendants currently controlled the corporation:

It is and would be a futile and useless act for the [p]laintiffs to demand that the [d]efendant [c]ompany remove the individual [d]efendants from their positions of control within said company, and to otherwise rectify the various wrongful and illegal acts performed by the [d]efendants because said individual [d]efendants are now in control of said company.28

Based on that allegation, the court found that any demand was unnecessary because it was “impractical, unreasonable or useless” under Orlando Orange, and that the case law was reinforced by F.S. §608.131(2)’s requirement that a “complaint must set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors of such corporation or the reasons for not having made such effort.”29

Ten years later, in Dutch v. Gordon, 481 So. 2d 1235 (Fla. 3d DCA 1985), the Third District Court of Appeal again considered Florida’s demand rule. There, citing Orlando Orange and Conlee, the court affirmatively stated that “[i]t has been established law in this state that before a stockholder or shareholder derivative action can be maintained it is necessary for the complainant to serve a demand on the corporation and its proper officers requesting action on behalf of the corporation.”30 Moreover, in what appears to be a response to an argument that the Florida Legislature no longer required a demand by amending F.S. §608.131(2) to F.S. §607.147 in 1975 (which did not even reference the necessity of pleading or making a demand), the court found that there was no abolishment of the demand requirement. The court stated that the legislature had no right to control the “practice and procedure” related to making a demand and that “the repeal of th[e] section [governing a demand] was merely a recognition that the prior statute was an infringement on the judicial department.”31 In sum, the court found that the contents of Florida’s demand rule were irrelevant to the requirement that a shareholder must make a demand, as any such rules were more properly decided by the judiciary.32

The first Florida court to consider the futility exception after Florida’s demand rule was amended in 1990 to require a party to plead that a demand was made was the U.S. District Court for the Middle District of Florida in McDonough v. Americom Int’l Corp., 151 F.R.D. 140, 141 (M.D. Fla. 1993). There, the plaintiffs “plead [sic] that a demand would have been futile because the Board of Directors consisted of Defendant Tatum and two other persons under his dominion and control.”33 The defendants filed a motion to dismiss because the plaintiffs did not comply with the demand requirement and the court denied the motion to dismiss. Central to the McDonough court’s holding that futility excused the requirement to make a demand on directors prior to maintaining a derivative action was its finding that Florida law determined the relevant demand requirement because “the law of the state of incorporation is determinative of any demand requirement,”34 for which it cited the U.S. Supreme Court case Kamen v. Kemper Financial Services, Inc., 500 U.S. 90 (1991). Despite the Supreme Court’s finding in Kamen that Florida’s demand rule enacted in 1990 was a “universal demand rule,” and despite that Conlee considered a prior version of Florida’s demand rule, the court cited Conlee for the holding that a “demand on the directors to bring the action, a condition precedent to suit, is excusable where the demand obviously would be unavailing.35 The court found such an “exception to the requirement of a demand harmonizes with exceptions in federal case law to the demand requirement, e.g., where a director is self-dealing or a board is so dominated by defendant directors that a demand would be futile.”36 The court did not cite to then-F.S. §607.07401 and did not indicate any awareness of it.

Since McDonough, in In re Mercedes Homes, Inc., 431 B.R. 869, 877 (Bankr. S.D. Fla. 2009), the court again recognized the necessity of a demand as a prerequisite to a derivative action. Nonetheless, citing Belcher, a 1975 case that considered a prior version of Florida’s demand rule, the court found that “[u]nder Florida law, the sole exception to this demand requirement is where such a demand ‘would be impractical, unreasonable or useless….’”37 While the court appeared to be aware that Florida’s demand rule existed — the court cited to it in a parenthetical regarding the necessity of a demand as a prerequisite to suit — it appears that the court did not undertake an analysis of its text when recognizing a futility exception.38

While Florida courts will often look to Delaware’s well-established corporate governance law for guidance on construing Florida corporate law,39 in this case, Florida’s demand rule is unlike the demand rule employed by Delaware, which expressly recognizes a futility exception.40

Surprisingly, courts outside of Florida have reached a different result from Florida courts when analyzing the futility exception under Florida law. Those courts, relying on the plain text of Florida’s demand rule and the Supreme Court’s decision in Kamen, have found that any such exception was abolished by Florida’s demand rule beginning in 1990.41

In D’Addario v. Geller, No. 2:02CV250, 2005 WL 1667913 at *5-7 (E.D. Va. June 28, 2005), there was no dispute that the plaintiff did not make a demand and a Virginia federal court found that there was no futility exception under Florida law based on the plain text of Florida’s demand rule. The court found the plain text of Florida’s demand rule “makes it mandatory that the plaintiff make a demand on the corporation before suing the corporation in a stockholder derivative action.”42 Moreover, the court found it decisive that “the United States Supreme Court, in Kamen v. Kemper Financial Services, Inc., 500 U.S. 90, 102 at n.7 (1991), acknowledged that the Florida statute was a universal demand rule.”43 The court further noted that McDonough, the sole Florida federal case to consider this issue at the time, “relied on F.R.C.P. 23.1 and Florida cases which predated the July 1, 1999 adoption of Florida Statute §607.07401(2) to decide that a shareholder was not required in all instances to make a demand on the corporation.”44

Similarly, in Garcia v. Deyesso, No. 12-3509-BLS1, 2012 WL 6757530 at *2-3 (Mass. Super. Dec. 4, 2012), the court found that the futility exception did not exist under Florida law. First, the court noted that numerous courts, including the U.S. Supreme Court, found that Florida’s demand rule (since being revised in 1990) and the revised act imposed a “universal demand rule” that abrogated “the former rule that demand may be excused if the plaintiff pleads facts demonstrating that it would be futile, and requiring instead that the plaintiff make and plead demand in any derivative case.”45 Further, the court found that numerous cases from outside of Florida finding that Florida has imposed a universal demand requirement have “both statutory language and simple logic on their side: a requirement that the plaintiff allege, under oath and with particularity, that demand was made is, in purpose and effect, a requirement that demand be made.” Recognizing that two Florida federal courts found the opposite (McDonough in 1999 and Mercedes Homes in 2009), the court found that neither of those cases was decided based on citation to the relevant version of Florida’s demand rule and that both cases cited case law analyzing the pre-1990 Florida demand rule.

Demand and Futility in Other Jurisdictions
Confusion regarding the existence of a futility exception is not isolated to Florida. Even among states that have fully adopted the revised act, which expressly requires that a demand always be made, some courts find the futility exception is abolished, while other courts have found the futility exception lives on.

Arizona’s demand rule, Ariz. Rev. Stat. Ann. §10-742, fully incorporates the revised act’s demand rule and provides:

No shareholder may commence a derivative proceeding until both:

1. A written demand has been made on the corporation to take suitable action.

2. Ninety days have expired from the date the demand was made unless the shareholder has earlier been notified that the demand has been rejected by the corporation or unless the statute of limitations will expire within the ninety days or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety day period.

In Albers v. Edelson Tech. Partners L.P., 31 P.3d 821, 829 (Ariz. Ct. App. 2001), the court found: “Tempting as it might be to imply a futility exception, we must follow the language of A.R.S. §10-742, which is clear and admits of no exception. It requires a pre-suit demand.”

Courts in Connecticut have reached a different result based on the same language used by Arizona’s demand rule. Connecticut courts continue to read a futility exception into Connecticut’s demand rule, Conn. Gen. Stat. §33–722, which fully incorporates the revised act and provides, identically to Arizona’s demand rule, that “[n]o shareholder may commence a derivative proceeding until…[a] written demand has been made upon the corporation to take suitable action.”46

In Rocco v. Furrer, MMXCV136009192, 2013 WL 5879523 at *2 (Conn. Super. Ct. Oct. 17, 2013), the plaintiffs alleged that the defendants engaged in self-dealing and misuse of corporate funds. The defendants filed a motion to dismiss because the plaintiffs “failed to make a pre-suit demand of the entities as is required under General Statutes §33–722, and that futility is not recognized as an exception to the requirement in Connecticut.”47 Without analyzing the text of Connecticut’s demand rule, the court cited prior Connecticut state case law that also did not analyze the text of Connecticut’s demand rule to find that these “type of allegations of self-dealing and fraud by a majority voting bloc” are the type that “would excuse [the plaintiffs] from having to make a demand under §33–722, due to futility.”48

Conclusion
The demand requirement and application of the futility doctrine remains state-specific. In Florida, there appears to be a disconnect between Florida courts and the Florida statute as to whether there remains a futility exception to any demand requirement. This same debate appears to be playing out across the nation, as courts in states that have adopted the revised act, which mandates that a demand be made prior to suit, have nonetheless found that the futility exception lives on.

The Florida Legislature’s May 3, 2013, passage of the Florida Revised Limited Liability Company Act, which became effective on January 1, provides a road map to solving this ongoing debate. The language referring to a derivative action for a limited liability company in Florida’s previous limited liability company, F.S. §608.601, was largely identical to the statute governing a corporation, discussed above.49 And, like Florida’s corporate demand rule, Florida courts interpreting F.S. §608.601, similarly found that the futility exception applies despite an absence of statutory language allowing it. For example, in Dickson v. Heaton, 2009 WL 8625830, (Fla. Cir. Ct. Jan. 6, 2009), the Palm Beach County Circuit Court found (in a footnote and without further analysis) that “derivative plaintiffs have appropriately alleged facts in the [a]mended [c]omplaint demonstrating demand futility.”50

Effective January 1, the “new” LLC statute, which has been substantially amended and codified in F.S. Ch. 605 expressly does contain a futility exception to the demand requirement. Specifically, the new statute expressly holds that a member may maintain a derivative action to enforce a right of an LLC if a demand would be futile:

(1) The member first makes a demand on the other members in a member-managed limited liability company or the managers of a manager-managed limited liability company requesting that the managers or other members cause the company to take suitable action to enforce the right, and the managers or other members do not take the action within a reasonable time, not to exceed 90 days; or

(2) A demand under subsection (1) would be futile, or irreparable injury would result to the company by waiting for the other members or the managers to take action to enforce the right in accordance with subsection (1).51

While this language is more closely aligned with Delaware’s statutes with respect to the futility exception, it is inconsistent with the language applicable to Florida corporations. In other words, effective January 1, the plain language of Florida’s statutes permits a plaintiff to plead demand futility for a limited liability company but not a corporation.

To resolve the incongruity between decisions of Florida courts and the demand requirement set forth in F.S. §607.07401, the Florida Legislature should amend F.S. §607.07401 to clearly state whether a plaintiff may plead demand futility. In the meantime, prospective plaintiffs intending to escape the demand requirement applicable to a corporate derivative action by pleading demand futility face a real possibility of dismissal and, therefore, should proceed with caution. Courts outside of Florida that have analyzed the language of Florida’s demand statute have found that there is no futility exception. Moreover, the new limited liability company statute, within which the legislature expressly chose to include a futility exception, provides a stark reminder to the courts that “in interpreting a statute a court should always turn to one cardinal canon before all others…. [C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there.”52


1 Fla. Stat. §607.07401(2) (“A complaint in a proceeding brought in the right of a corporation must be verified and allege with particularity the demand made to obtain action by the board of directors and that the demand was refused or ignored by the board of directors for a period of at least 90 days from the first demand….”).

2 See, e.g., Johnston v. Box, 453 Mass. 569 (2009) (Massachusetts); Werbowsky v. Collomb, 362 Md. 581 (2001) (Maryland); In re Guidant Shareholders Derivative Litig., 841 N.E.2d 571 (Ind. 2006) (Indiana).

3 See In re Mercedes Homes, Inc., 431 B.R. 869, 877 (Bankr. S.D. Fla. 2009).

4 See D’Addario v. Geller, No. 2:02CV250, 2005 WL 1667913 at *5-7 (E.D. Va. June 28, 2005).

5 See Kamen v. Kemper Financial Services, Inc., 500 U.S. 90, n. 7 (1991).

6 See In re Mercedes Homes, Inc., 431 B.R. 869 (Bankr. S.D. Fla. 2009).

7 19 Am. Jur. 2d Corporations §1961.

8 Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 104 (1991) (“Under state law, the determination whether a derivative representative can initiate a suit without making demand typically is made at the outset of the litigation and is based on the application of the [s]tate’s futility doctrine to circumstances as they then exist.”).

9 Rev. Model Bus. Corp. Act §7.42 (1984); Model Bus. Corp. Act §49; see also Marx v. Akers, 88 N.Y.2d 189, 196 (1996).

10 Rev. Model Bus. Corp. Act §7.42 (1984).

11 Fla. Stat. §607.07401(2) (emphasis added).

12 Fla. Stat. §607.07401, as effective until September 30, 2003.

13 Fla. Stat. §607.147.

14 Belcher v. Schilling, 309 So. 2d 32, 35 (Fla. 3d DCA 1975).

15 Id.

16 See Fla. Stat. §607.07401(2).

17 Belcher v. Schilling, 309 So. 2d 32, 35; Fla. Stat. §608.131(2) (“The complaint must set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors of such corporation or the reasons for not having made such effort.”).

18 See 48 A.L.R.3d 595 §4.

19 Id.

20 13 Fletcher Cyc. Corp. §5965 (2012).

21 Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 845 A.2d 1040, 1049 (Del. 2004) (“The Court must determine whether a plaintiff has alleged particularized facts creating a reasonable doubt of a director’s independence to rebut the presumption at the pleading stage.”).

22 Orlando Orange, 107 Fla. at 315.

23 Id. at 316.

24 Hawes v. City of Oakland, 104 U.S. 450, 461 (1881).

25 Conlee Const. Co. v. Cay Const. Co., 221 So. 2d 792, 796 (Fla. 4th DCA 1969).

26 Id.

27 Fla. Stat. §608.131(2).

28 Belcher, 309 So. 2d at 35 (citing Fla. Stat. §608.131(2)).

29 Id. at 36; Fla. Stat. §608.131(2) (“The complaint must set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the board of directors of such corporation or the reasons for not having made such effort.”).

30 Dutch, 481 So. 2d 1235.

31 Id. at n. 2.

32 The court in First Am. Bank & Trust by Levitt v. Frogel, 726 F. Supp. 1292, 1298 (S.D. Fla. 1989), similarly relied on Orlando Orange for the proposition that a demand may be excused. However, the court additionally found that “Florida courts have turned to Delaware for guidance” and then set forth a two-prong test for determining demand futility: “1) the directors are disinterested and independent; and 2) the challenged transaction was otherwise the product of a valid exercise of business judgment.” Applying this test, the court found that the plaintiff has demonstrated to the court that demand would be futile, and did not cite to Florida’s demand rule.

33 McDonough, 151 F.R.D. 140, 141.

34 Id. at 142.

35 Id. at 143.

36 Id. at 143.

37 In re Mercedes Homes, Inc., 431 B.R. 869, 877 (Bankr. S.D. Fla. 2009).

38 See id.

39 See Williams v. Stanford, 977 So. 2d 722, 727 (Fla. 1st DCA 2008) (“As is often true, however, Delaware case law provides guidance to our construction of the statute.”); Int’l Ins. Co. v. Johns, 874 F.2d 1447, 1459 n. 22 (11th Cir. 1989) (“We rely with confidence upon Delaware law to construe Florida corporate law. The Florida courts have relied upon Delaware corporate law to establish their own corporate doctrines.”); Boettcher v. IMC Mortgage Co., 871 So. 2d 1047, 1052 (Fla. 2d DCA 2004) (observing that Florida courts routinely consult Delaware case law when construing Florida statutory law governing corporations).

40 Delaware’s demand rule, Del. Ch. Ct. R. 23.1(a) (emphasis added), provides, in relevant part, that “The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and the reasons for the plaintiff’s failure to obtain the action or for not making the effort.”

41 Kamen v. Kemper Financial Services, 500 U.S. 90 (1991); Boland v. Engle, 113 F.3d 706, 712 (7th Cir. 1997) (citing Conn. Gen. Stat. §33-722; Fla. Stat. §607.07401(2)) (“Rather, we surmise that the highest court in Indiana would today be persuaded by the general trend in the law towards narrowing, if not eliminating, the exceptions from the demand requirement. Eleven states have statutorily imposed a universal demand requirement.”); In re Ferro Corp. Derivative Litig., 1:04CV1626, 2006 WL 2038659 at *8 (N.D. Ohio Mar. 21, 2006), aff’d, 511 F.3d 611 (6th Cir. 2008) (“Florida has since adopted a universal demand requirement, which abolished the demand futility exception altogether”) (citing Fla. Stat. Ann. §607.07401(2) (2005)).

42 D’Addario v. Geller, No. 2:02CV250, 2005 WL 1667913 at *6 (E.D. Va. June 28, 2005).

43 Id.

44 Id.

45 Id (citing Kamen v. Kemper Financial Services, 500 U.S. 90, 94 (1991)).

46 Trustees of Police & Fire Ret. Sys. of City of Detroit v. Clapp, 08 CIV. 1515 KMKGAY, 2010 WL 1253214 at *1 (S.D.N.Y. Mar. 29, 2010) (stating that while “under Connecticut law, a shareholder must first issue a demand to the corporation before filing a derivative complaint,” several “Connecticut Superior Court cases decided after the enactment of C.G.S. §33–722 have continued to recognize the futility exception”) (listing cases).

47 Rocco v. Furrer, MMXCV136009192, 2013 WL 5879523 at *6 (Conn. Super. Ct. Oct. 17, 2013).

48 Id.

49 Compare Fla. Stat. §608.601 (“A complaint in a proceeding brought in the right of a limited liability company must be verified and allege with particularity the demand made to obtain action by the managing members of a member-managed company or the managers of a manager-managed company and that the demand was refused or ignored. If the limited liability company commences an investigation of the charges made in the demand or complaint, the court may stay any proceeding until the investigation is completed.”), with Fla. Stat. §607.07401 (“A complaint in a proceeding brought in the right of a corporation must be verified and allege with particularity the demand made to obtain action by the board of directors and that the demand was refused or ignored by the board of directors for a period of at least 90 days from the first demand unless, prior to the expiration of the 90 days, the person was notified in writing that the corporation rejected the demand, or unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period. If the corporation commences an investigation of the charges made in the demand or complaint, the court may stay any proceeding until the investigation is completed.”).

50 Dickson, 2009 WL 8625830, fn 2 (Fla. Cir. Ct. January 6, 2009) (citing Fla. Stat. §608.601(2)); but see Starkes v. Flechner, 11-62220-CIV, 2012 WL 718661 at *3 (S.D. Fla. Mar. 6, 2012) (“The Court agrees that Fla. Stat. §608.601(2), rather than Fed. R. Civ. P. 23.1, controls the demand issue. Plaintiff has not put forth case authority that Florida law excuses demand for reasons of futility. Rather, the statute requires [p]laintiff to allege demand with particularity. Plaintiff has not alleged when and in what form he attempted to demand actions by Root LLC. Therefore, [p]laintiff has failed to meet the procedural requirements of §608.601(2). Such allegations need to be included in any amended complaint.”).

51 Fla. Stat. §605.0802 (emphasis added).

52 Connecticut Nat’l Bank v. Germain, 112 S. Ct. 1146, 1149 (1992).



Etan Markis an attorney and certified fraud examiner resident in the Miami office of Berger Singerman LLP. He is a member of the firm’s complex fraud and securities litigation practice group. He concentrates his practice on complex commercial litigation with an emphasis on allegations of fraud, corporate governance matters, and RICO litigation.

Steven D. Weber is an attorney resident in the Ft. Lauderdale office of Berger Singerman LLP. He is a member of the firm’s complex commercial litigation and complex fraud and securities litigation practice areas. His practice includes representing corporations and individuals in connection with matters involving business disputes, construction law, securities litigation, contract disputes, and fraud.

The authors thank Lara O’Donnell for her assistance in writing this article.

[Revised: 05-27-2014]