That Pesky Direct Versus Derivative Distinction

That Pesky Direct Versus Derivative Distinction

      In a recent decision from Florida, the direct versus derivative distinction had the effect of the terminating the lawsuit. Home Title Company of Maryland, Inc. v. LaSalla, Case No. 2017-998, 2018 WL 6005232 (Fla. Dist. Ct. App. 2nd Nov. 16, 2018.

      This dispute arose out of a two-member LLC that owned three residential property lots. One of the members, without authority to do so, directed the title company to transfer those three properties to himself and his spouse. The second member brought suit against the title company for having effected that improper transfer. He prevailed at trial. However, upon appeal, the complaint was set aside. While the suit had been brought by the second member in his name and for his own account, it was held by the court that the actions alleged in the complaint could be resolved only in a derivative action brought in the name and on behalf of the LLC. It was the LLC that had suffered the injury of the unauthorized transfers, so any resolution needed to be for the benefit of the LLC. The suit, not having been brought as a derivative action, was in consequence dismissed.