Can a Florida Shareholder Sue a Corporation’s Board of Directors for Fraud & Misrepresentation? (September 2, 2015 4th DCA case)

If you serve on the board of directors for a Florida company, or if you are a shareholder in a Florida corporation, you should consider reading a September 2, 2015 ruling from the Palm Beach appeals court on an important Florida business litigation lawsuit.  Directors of Florida corporations should understand how to defend a business lawsuit or a shareholder lawsuitin Florida and understand the different types of harms which shareholders may allege.  Likewise, shareholders of Florida corporations, at least in the 4th District Court of Appeal, have a guidepost for suing a Florida corporation or directors of that Florida company.  This is a case which your corporate litigation law firm West Palm Beach will want to read.

Allegations by Shareholders Against Corporate Directors: mis-representation

1. Mid 2000’s: the company started purchasing high risk securities
2. 2007: Bear Stearns collapses
3. March 2008: shareholders meeting in Florida
4. After 2008 shareholders meeting: two directors of the Florida corporation are asked if the bank owns any high risk securities
5. Directors assured shareholders that Florida bank/company assets consist almost entirely of safe investments
6. The complaint alleged that the bank or Florida company did indeed own risky assetswhich caused the value of the shareholders’s stock to become worthless, or to decrease from approximately $6 Million to nothing
7. This case appears, from the Florida 4th DCA appellate opinion, to be a classic case of allegations of corporate directors of a Florida corporation mis-leading or lying to shareholders and the loss of the Florida shareholders stock value; a loss of millions of dollars in a Florida company

Did Directors of Florida Corporation Lie or Committ Fraudulent Misrepresentation?

• Remember: in Florida, a board of directors runs the Florida company and appoints a CEO
• The Florida board of directors has committees which are supposed to make the company run well and function properly.
• This Florida company had an investment committee
• Remember that a board of directors is supposed to help shareholders and work in their best interests
• When someone tells a lie in Florida, and there is a corporation or business partner or director or shareholder involved, can you sue for fraud?
• If you lie, that can be fraud in the state of Florida
• If you owe a duty to someone, a fiduciary duty, and you lie or mis-represent a set of facts, that may be fraud or fraudulent mis-representation
• In this Florida shareholder lawsuit, the amended complaint alleged that the assurances by the Board of Directors’ two memebers, or directors, was negligent misrepresentation and fraudulent misrepresentation
• One element of this business lawsuit Florida or shareholder lawsuit was that the shareholders could have supposedly sold their shares for approximately $6 Millionunder a stock buyback program back at the time the directors supposedly lied to the shareholders

Can Shareholders Sue Florida Company Board of Directors?

• Was the harm or financial damage suffered by the Florida shareholders unique or was it a financial injury common to ALL shareholders?
• This case, at least in Florida’s 4th District Court of Appeal, considers the legal question ofwhether individual shareholders can bring a lawsuit in their individual capacity, as a direct action, as opposed as a derivative action on behalf of the corporation
• In this 4th DCA business litigation case, the 4th DCA held that since the amended complaint alleged a direct harm and a special injury, the shareholders have legalstanding to bring a direct action for this Florida business litigation
• This business litigation case Palm Beach County (Indian River County) appears to be a victory for shareholders
• While this issue has been resolved in Florida’s 4th DCA, those interested in the legal analysis behind it should consider reading two things:
• One, you can read this entire opinion of the 4th DCA by clicking on this link:http://4dca.org/opinions/Sept.%202015/9-02-15/4D14-768.op.pdf
• Two, consider reading Dinuro Investments, LLC v. Camacho, 141 So. 3d 731 (Fla. 3rd DCA, 2014) for a survey of this law in Florida and around the country

How Do I File a Shareholder Lawsuit in Florida

1. Do you know how to allege that you suffered a direct harm under this business litigation case?
2. Do you know how to allege a special injury if you are a Florida shareholder?
3. Are you familiar with the duties owed by a Florida corporation’s board of directors to Florida shareholders?
4. Consider that Florida, still a growing state, attracts businesses and business persons, including professional and non professional service providers who are incorporating Florida businesses daily, and moving other private, and public corporations to Florida
5. Knowing your rights as a Florida shareholder is important, just as it is for directors of a Florida corporation to understand what their duties are to shareholders and the Florida business
6. For a shareholder of a Florida company to bring a direct action in their individual capacity as a shareholder, the complaint or business lawsuit Florida must satisfy a 2 prong test and allege both a direct harm and a special injury or must meet the exception of alleging a special duty to the individual shareholders