What a Derivative Lawsuit Is
Picture the standard fact pattern. A manager of a Florida LLC has been paying himself an unapproved salary, routing work to a company his wife owns, and using the business account as a personal one. Every dollar of that harm landed on the company, and the company is the one with the legal claim to get it back. The problem is obvious. The person who decides whether the company sues is the person who would be sued.
The derivative action exists to break that lock. Florida law lets a member bring the company’s claim for it, prosecuting the case the insiders refuse to bring. You are the one driving, but the claim, and the recovery, belong to the company. That structure explains almost every special rule on this page, including the demand requirement, who has standing, where the money goes, and how the company can fight back.
Your Claim or the Company’s? The Test That Decides
Before a Florida court reaches the merits, it sorts every claim into one of two lanes. You may sue in your own name only if you suffered a direct harm separate from the company’s, or if the wrongdoer violated a duty owed specifically to you by contract or statute. Everything else belongs to the company and must be brought derivatively. This is settled law that Florida’s appellate courts continue to apply, most recently in a March 2026 decision affirming dismissal on exactly this ground.
Two examples show where the line falls. Money drained from the company treasury injures you only through your ownership stake, so that claim is derivative, no matter how personally betrayed you feel. But in a 2023 case, a member whose ownership was diluted from 50 percent down to about a third was allowed to sue directly, because that injury, losing his percentage and his control, fell on him rather than flowing through the company.
Real disputes usually contain both kinds of claims, and mixing direct and derivative counts improperly in one complaint invites a motion to dismiss that costs months, even when a court would allow repleading. Getting the lanes right at the pleading stage is not a technicality; it is the difference between litigating the merits and litigating about the lawsuit. The broader landscape of these fights is covered on our business partner disputes page, and when the company is a corporation rather than an LLC, the neighboring question of shareholder oppression has its own page.
The Demand Letter and the 90-Day Rule
Florida’s LLC law makes you knock before you kick the door in. Before filing a derivative suit, a member generally must make a written demand on the managers (or on the other members, if the LLC is member-managed) to cause the company to act, and then give them a reasonable time, capped at 90 days.
There are two exceptions, and one of them fits most closely held companies. You can file without waiting if the demand would be futile, or if the delay would cause irreparable injury to the company. When the LLC has two members and the one you would be demanding action from is the one holding the money, futility is a natural argument, and Florida’s statute was written with exactly these small-company conflicts in mind. But futility must be pleaded with care, not assumed; a sloppy futility allegation is another early exit courts use.
The demand letter itself is a strategic document, not a formality. Done well, it frames the record, starts the clock, forces the insiders to take a position in writing, and often triggers the first real settlement conversation.
Who Can File, and Where the Money Goes
Standing has a timing rule. You must have been a member when the misconduct occurred and still be one when you file. An interest that came to you by inheritance or under the operating agreement from someone who was a member also works. What does not work is selling your interest and then suing over what happened before, so if you suspect looting while negotiating an exit, raise it before you sign away the standing to pursue it.
If the case succeeds, the proceeds belong to the company, and a plaintiff who receives any must hand them over. Before that sounds like a reason not to bother, follow the economics. Value restored to the company flows back into the worth of your interest. The court can award you reasonable attorney’s fees and expenses out of the recovery. And as a matter of leverage, a well-built derivative case rarely ends at a judgment; it ends in a negotiated resolution, very often a buyout at a price corrected for what was taken.
The Company’s Counterweapons
Expect the other side to fight the vehicle before they fight the facts. Beyond attacking your pleading lanes and your demand, Florida law gives the company one purpose-built weapon, the special litigation committee. The company may appoint one or more disinterested, independent people to investigate your claims, and the court can stay your case while they do. If the committee concludes the suit is not in the company’s interest, and the court finds the committee was genuinely independent and did its work in good faith with reasonable care, the court can enforce that conclusion and end the case.
The committee’s burden is the pressure point. It must prove its own independence, and in a small LLC where every candidate is a relative, an employee, or a friend of the defendant, that proof is often not there. One more structural protection is worth knowing. A derivative action cannot be voluntarily dismissed or settled without the court’s approval, so the insiders cannot quietly buy off the named plaintiff and bury the claim.
Watching a partner treat the company like a personal account?
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Book your free consultWhat These Cases Are Really About
On paper, a derivative suit is about restoring value to the company. In practice, it is usually the engine that forces a fair separation. The typical arc begins with a records inspection (Florida law lets a member demand the books, and a court can order them opened at the company’s expense), because the documents convert suspicion into proof. Then the demand letter. Where the facts show actual theft rather than bad judgment, a separate Florida statute allows a claim for up to three times the damages after its own 30-day demand letter, which concentrates minds quickly. Somewhere along that road, the conversation turns to the real question. At what price does one side buy the other out?
That is why building the case and knowing the endgame belong together. The derivative claim creates the leverage; the exit, a buyout, a restructuring, occasionally a dissolution, is what the leverage buys. We plan both from the first meeting.
What It Costs
Derivative litigation is quoted at the consult, after we understand the documents, the money at stake, and what the company is actually worth; no two of these cases price the same. We will give you an honest read on the strength of the claim and whether the fight is justified before you spend anything. Two features of the economics work for you. A successful derivative plaintiff can be awarded fees and expenses out of the recovery, and strong facts often settle at the demand-letter stage, before a complaint is ever filed. The 30-minute consult is free.
Frequently Asked Questions
What Is a Derivative Lawsuit?
It is a lawsuit a member files on the company’s behalf to enforce the company’s own rights, usually against an insider who harmed it, such as a manager who took company money, diverted company opportunities, or dealt with the company on both sides of a transaction. The company itself will not sue because the wrongdoers control it, so the law lets a member step in and drive the company’s claim. It is the standard vehicle for looting, self-dealing, and mismanagement cases in Florida LLCs and corporations.
Can I Sue My Business Partner Directly Instead?
Only if the harm was yours rather than the company’s. Florida courts ask whether you suffered a direct injury separate from the company’s, or whether the wrongdoer violated a duty owed specifically to you by contract or statute. Money drained from the company hurts you only through your ownership, so that claim is derivative. But something like diluting your ownership percentage against the agreement has been treated as a direct claim, because that injury lands on you, not on the company. Many cases contain both kinds of claims, and they must be kept properly separated in the pleadings.
What Is the Demand Requirement, and When Is Demand Futile?
Before filing, you generally send a written demand telling the managers (or the other members, in a member-managed LLC) to make the company act. They get a reasonable time, capped at 90 days. You can skip the demand if it would be futile, or if waiting would cause irreparable injury to the company. In a small LLC where the person you are demanding action from is the person who took the money, futility is a common and often successful argument, but it has to be pleaded properly, not assumed.
If I Win, Do I Get the Money?
The recovery belongs to the company, because the claim was the company’s. That sounds discouraging until you follow the money. Putting stolen value back into the company raises the value of your interest, and the court can award you your reasonable attorney’s fees and expenses out of the recovery. In practice, many derivative cases resolve with a global settlement in which the real outcome is a buyout of one side at a corrected price.
Can the Company Make My Derivative Lawsuit Go Away?
It can try. The company may appoint a special litigation committee of disinterested, independent people to investigate your claims, and the court can pause the case while it works. If the committee concludes the suit should end and the court finds the committee was truly independent and acted in good faith with reasonable care, the court can enforce that determination. The committee carries the burden of proving its independence, which in a small family-run LLC is often a hard sell.
I Sold My Interest. Can I Still Sue?
Generally no. Florida requires the plaintiff to have been a member when the conduct occurred and to still be a member when the action is filed (an interest inherited or received under the operating agreement from someone who was a member also qualifies). If you are negotiating an exit and believe insiders looted the company, raise it before you sell; walking away first can forfeit the claim.
Is It Different for a Corporation Instead of an LLC?
The architecture is the same, a demand, a derivative claim belonging to the company, a possible special litigation committee, but corporations follow their own statute with its own details, and Florida’s corporate law also gives shareholders in smaller corporations some remedies LLC members do not have. The direct-versus-derivative test is materially the same in both worlds, and courts apply the same body of case law.
What Does a Derivative Case Cost?
It is quoted at the consult, like all of our dispute work, after we understand the facts, the documents, and what the company is worth. We will tell you plainly whether the claim justifies the fight. Two features help the economics. A successful plaintiff can be awarded fees from the recovery, and on theft facts a statutory demand letter with the prospect of tripled damages often moves settlement talks before a lawsuit is ever filed. The 30-minute consult is free.
Common Situations
The manager with two payrolls. A minority member of a manager-managed LLC discovers through a records demand that the manager has been paying himself twice the salary the members approved, for three years. The demand letter cites the numbers from the company’s own books; faced with a derivative claim he would be defending with those same books, the manager funds a buyout of the minority interest at a price that reflects the overpayments.
The opportunity that walked next door. Two members build a distribution business; one quietly forms a second company and signs the renewal contracts there. Diverting company opportunities is a classic derivative claim, and because the diverted contracts are documented, futility of demand is straightforward, because the person who would authorize the lawsuit is its target. The case settles with the contracts assigned back and one member exiting.
The plaintiff who almost sold too soon. A member negotiating her exit suspects the books are wrong but plans to close first and investigate later. Her lawyer stops her. Selling the interest would end her standing to bring the company’s claims. The records inspection happens before closing, finds six figures in personal charges, and the exit price changes accordingly.
Sources of Law
- Fla. Stat. §§605.0801 to 605.0806 (Florida Revised LLC Act): direct actions (§605.0801), derivative actions and the demand requirement with its 90-day cap and futility exception (§605.0802), proper plaintiff (§605.0803), special litigation committees (§605.0804), proceeds and fee awards (§605.0805), court approval of dismissal or settlement (§605.0806). Retrieved 2026-08-07.
- Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3d DCA 2014): the direct-versus-derivative test (direct harm and special injury, or a duty owed directly).
- Disorbo v. American Van Lines, Inc., No. 4D21-2994 (Fla. 4th DCA Jan. 4, 2023): dilution of a member’s percentage held a direct claim; self-dealing analyzed outside the business-judgment rule.
- Tasman v. Jusakos, No. 6D2024-1078 (Fla. 6th DCA Mar. 20, 2026), citing Iezzi Family Ltd. Partnership v. Edgewater Beach Owners Ass’n, 254 So. 3d 584 (Fla. 1st DCA 2018): the Dinuro test applied and reaffirmed.
- Fla. Stat. §§607.0741 to 607.0748 (corporations: derivative proceedings); Fla. Stat. §772.11 (civil theft: threefold damages, 30-day written demand).
Updated on August 7, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate and tax planning, business structuring, and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. General information about Florida law, not legal advice, and no attorney-client relationship is created. Outcomes depend on the specific facts; past results do not guarantee a similar outcome. Do not send confidential information until we have agreed to represent you.