McKane Family Ltd. Partnership v. Sacajawea Family Ltd. Partnership

211 So. 3d 117, 2017 WL 363156, 2017 Fla. App. LEXIS 770
CourtDistrict Court of Appeal of Florida
DecidedJanuary 25, 2017
DocketNo. 4D15-2431
StatusPublished
Cited by3 cases

This text of 211 So. 3d 117 (McKane Family Ltd. Partnership v. Sacajawea Family Ltd. Partnership) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McKane Family Ltd. Partnership v. Sacajawea Family Ltd. Partnership, 211 So. 3d 117, 2017 WL 363156, 2017 Fla. App. LEXIS 770 (Fla. Ct. App. 2017).

Opinion

Ciklin, C.J.

This appeal arises out of a business dispute involving a limited liability company. The appellants, the plaintiffs below, appeal the dismissal of their derivative counts brought on behalf of the company, and the claims for breach of contract, civil conspiracy, and unjust enrichment. Because counts IX and XII are interrelated with counts of the complaint still pending below, we dismiss that portion of the appeal relating to those counts. See Mendez v. W. Flagler Family Ass’n, Inc., 303 So.2d 1, 5 (Fla. 1974). However, we take jurisdiction of the remainder of the appeal, which involves the derivative claims and the claim for unjust enrichment, as the dismissal of these causes of action disposed of the entire case as to McKane Family Limited Partnership (“McKane LP”) in its derivative capacity, and as to defendant Jody Robbins, respectively. See Fla. R. Civ. P. 9.110(k). Having taken jurisdiction of these claims, we reverse the dismissal that was entered with prejudice and remand for further proceedings.

We first provide a brief summary of the general allegations contained in the plaintiffs’ complaint. The plaintiffs alleged the following: David McKane was the general partner of McKane LP, and Peter G. Robbins was the general partner of Sacajawea Family Limited Partnership (“Sacajawea LP”). Each of these businesses held a fifty-percent ownership interest in Riverland and Indian Sun, L.C. (“Riverland”). In a scheme to oust McKane, Robbins and the owner of Prager & Co., LLC convinced McKane to execute loan documents with Prager Management Co., LLC (“Lender”). Riverland entered into a loan agreement with Lender, and McKane LP and Lender entered into a Pledge and Security Agreement, which provided that McKane LP put up its membership interest in Riverland as one-half collateral for the loan. McKane executed a Limited Guaranty with Lender, in which he personally guaranteed one-half of the loan. Pursuant to the agreements, Lender was to provide $3 million to River-land to be used solely for capital expenditures, general working capital, and for payment of a specified fee to Lender. The loan proceeds were transferred into River-land’s account, which Sacajawea LP and Robbins had been entrusted by the plaintiffs to handle and control.

For the unjust enrichment claim brought against Sacajawea LP, Robbins, and Robbins’ wife, the plaintiffs essentially alleged that the defendants looted River-land’s account and put the loan proceeds to personal use. The trial court found the claim belonged to Riverland—not to the plaintiffs—and dismissed with prejudice for failure to state a cause of action.

The standard of review of an order dismissing for failure to state a cause of action is de novo. Atkins v. Topp Telecom, Inc., 873 So.2d 397, 398 (Fla. 4th DCA 2004). We do not disagree with the trial court that the claim was Riverland’s to bring. The plaintiffs did not sufficiently allege that they conferred a benefit upon the defendants. See Fito v. Attorneys’ Title Ins. Fund, Inc., 83 So.3d 755, 758 (Fla. 3d DCA 2011) (finding that plaintiff did not establish that it conferred a benefit on the defendants where the evidence did not establish that the funds that were wrongfully [120]*120transferred into appellants’ accounts belonged to the plaintiff).

However, the dismissal should have been without prejudice, as it appears the claim could be brought on Riverland’s behalf, and the cause of action had only been dismissed once before this dismissal, and on different grounds. See Samuels v. King Motor Co. of Fort Lauderdale, 782 So.2d 489, 495 (Fla. 4th DCA 2001) (“If a complaint does not state a cause of action, the opportunity to amend a complaint should be liberally given, unless it is apparent the pleading cannot be amended to state a cause of action.”).

We turn now to the dismissal of- the derivative claims. The plaintiffs filed suit in December 2012. The allegations of the complaint left it less than clear whether derivative claims were brought, but the defendants moved to dismiss such counts if they were in fact pled, arguing that the plaintiffs failed to comply with the pre-suit demand requirement of section 608.601, Florida Statutes (2012), a since repealed statute which governed derivative actions brought by members of limited liability companies.

Before the motion to dismiss was heard, the plaintiffs amended their complaint, alleging that they made a demand by letter dated December 19, 2013. The defendants moved to dismiss, arguing that the letter did not constitute a demand, as it was sent after suit was filed.

After a hearing, the trial court dismissed the derivative counts without prejudice thereby permitting the plaintiffs to amend and allege compliance with the demand requirement. The trial court found that the post-complaint letter could not satisfy the pre-suit demand requirement.

In 2015, the plaintiffs filed an amended complaint. This time, they alleged that they made a demand by two letters dated October 31, 2012. They also re-alleged that the December 19, 2013 letter constituted a sufficient demand. In granting the defendants’ motion to dismiss, the trial court found that the October 2012 letters did not constitute a demand, and again found that the December 2013 letter could not satisfy the pre-suit demand requirement as it was sent after suit was filed.

Section 608.601, in effect when suit was brought in 2012 and, as previously noted, since repealed, provided as follows in pertinent part:

A complaint in a proceeding brought in the right of a limited liability company must ... 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 still stay any proceeding until the investigation is completed.

§ 608.601(2), Fla. Stat. (2012).

We agree with the trial court that the October 2012 letters did not satisfy the demand requirement. The letters do not contain a request that Riverland take some action related to the allegations in the lawsuit.

However, the trial court did not consider whether the December 2013 letter constituted a sufficient demand, because, the trial court reasoned, it was sent after suit was filed.

We have found no case law regarding whether a pre-suit demand requirement under section 608.601 can be cured after suit is filed. Foreign courts have come to different conclusions on this issue in cases involving similar pre-suit demand requirements.

[121]*121In Grossman v. Johnson, 674 F.2d 115, 125 (1st Cir. 1982), for example, the court rejected the claim that a failure to allege the pre-suit demand required by a rule of civil procedure could be cured after suit was filed, reasoning that the rule does not provide for a post-suit demand, and observing that the purpose of the demand requirement is “to alert the director before suit is instituted” so that the directors have “the opportunity to occupy their normal status.” See also Shlensky v. Dorsey, 574 F.2d 131, 141-42 (3d Cir.

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211 So. 3d 117, 2017 WL 363156, 2017 Fla. App. LEXIS 770, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mckane-family-ltd-partnership-v-sacajawea-family-ltd-partnership-fladistctapp-2017.