Florida/Georgia Personal Injury & Workers Compensation

compliance with the presuit requirements of section 617.07401, Florida Statutes (2009), applicable to nonprofit

...The association’s counsel responded that “the [association is not incorporated under, and consequentially is not subject to, Chapter 607, Florida Statutes,” and a demand under section 607.07401 was “legally invalid.” By demand letter sent on October 7, 2016, the owner corrected the error by citing section 617.07401, Florida Statutes (2016), and demanded to inspect the association’s records. The association responded that it would consider appointing an independent committee to investigate the owner’s allegations at its next Board of Directors meeting. On December 14, 2016, the owner filed a verified complaint, pursuant to section 617.07401, alleging: (1) breach of fiduciary duty; (2) negligence in failing to properly manage the association’s funds and allowing its buildings to deteriorate; and (3) improper management of the association by the board of directors....

...nd failed to state a cause of action. We have de novo review. Haslett v. Broward Health Imperial Point Med. Ctr., 197 So.3d 124, 127 (Fla. 4th DCA 2016). Because the association is a not-for-profit Florida corporation, it is governed by Chapter 617. Section 617.07401(2), Florida' Statutes, provides that a suit cannot be filed before the expiration of ninety days after “the date of the first demand.” Here, the owner first made a demand for action by the association pursuant to Chapter 607....

...ion and marked the beginning of a new ninety-day waiting period. The ninety days expired on January 5, 2016, but the owner filed the verified complaint twenty-two days before the ninety days expired. The trial court properly dismissed the complaint. § 617.07401, Fla. Stat. The trial court also correctly found the verified complaint failed to comply with section 617.07401 by failing to plead an exception to the ninety-day waiting period....

...The verified complaint failed to allege that the demand was “refused or ignored” by the association, that,the demand was rejected in writing by the association prior to the ninety-day period, or that the waiting period would cause irreparable harm to the association. Noncompliance with the pre-suit requirements of section 617.07401 mandates dismissal of the suit....

...officers and directors of the associations owe these members certain fiduciary responsibilities. See § 718.111, Fla. Stat. However, the association has broad powers and duties, including all of those set forth in chapter 617, unless otherwise noted. Id. Section 617.07401, Florida Statutes, restricts the ability of members to bring lawsuits “in the right of” their non-for-profit corporation....

...improperly and the Directors breached their fiduciary duties, resulting in various illegal expenditures and assessments, and losses of Association funds. Iezzi argues that to limit section 718.303(1) actions by requiring that they comply with the pre- suit requirements of section 617.07401, would necessarily create a conflict between the statutes....

...1st DCA 2012). II. ANALYSIS Because it “is axiomatic that statutes must be read with other related statutes,” and courts must “construe related statutory provisions in harmony with one another” when possible, we conclude that sections 718.303(1) and 617.07401 do not conflict....

...1992)). In Part A, we define derivative actions and note that plaintiffs may not evade pre-suit requirements by labeling their complaints a certain way. In Part B, we examine the application of common-injury claims to condominiums since chapter 718’s enactment in 1976. Part C discusses the enactment of section 617.07401 in 2009, and the limited case law following it. We conclude by finding that section 617.07401 applies to the instant action and Iezzi’s failure to comply with its requirements merits dismissal. A....

...It further acknowledges that compliance with derivative procedures has been required in the condominium context. See Collado v. Baroukh, 226 So. 3d 924, 926 (Fla. 4th DCA 2017) (holding that condominium owner’s “[n]oncompliance with the pre-suit requirements of section 617.07401 mandates dismissal of the suit”)....

...association or directors for breaching fiduciary duties. Id. at 1355 & 1355 n.7. Iezzi points to the above cases and others similar for support, while its own suit seeks legal damages and was brought in a purely individual capacity. C. Enactment of Section 617.07401 Despite a possible 1993 attempt to prohibit members of not- for-profit corporations from bringing derivative actions, 4 they 4 For a discussion of the 1993 amendment to chapter 617, and its effect, see Larsen v....

...Island Developers, Ltd., 769 So. 2d 1071 (Fla. 3d DCA 2000), and Fox, 801 So. 2d at 179. 6 were continually permitted, although perhaps to a lesser extent in the condominium context. Not until 2009 did the Legislature enact section 617.07401, providing a pre-suit process for members to bring derivative claims in the right of not-for-profit corporations....

...Section 718.303(1) permits condominium unit owners and associations to take action against each other, as well as directors and tenants. But if the claims are derivative, plaintiffs must comply with the requirements necessary for any not-for-profit corporation under section 617.07401....

...allocating the recovered damages; litigating multiple lawsuits; incurring unnecessary costs incident to having multiple trials; having potentially contradictory adjudications; expediting resolution of controversies; and accomplishing repairs”). Little case law discussing section 617.07401 has developed since its inception....

...alleging breaches of fiduciary duties and fraud, among other charges. In a concurrence, Judge LaRose questioned the plaintiffs’ standing, noting that their cause of action appeared to belong to the corporation, and they did not allege compliance with section 617.07401....

...Id at 956-57 (LaRose, J., concurring); see also Udick v. Harbor Hills Dev., L.P., 179 So. 3d 489, 491 (Fla. 5th DCA 2015) (noting that derivative suit requirements apply to corporations not for profit); Collado, 226 So. 3d at 927 (holding that condominium owner’s action did not adequately comply with section 617.07401). Iezzi cites MacKenzie v....

...pre-suit requirements. III. CONCLUSION Iezzi claims injuries not distinct from any other unit owner, and seeks legal damages for its exclusive benefit. This is a derivative action, and because sections 718.303(1) and 617.07401 do not conflict, the court did not err in dismissing Iezzi’s complaint because Iezzi did not comply with section 617.07401 pre-suit requirements....

...enforce a right of action that exists on behalf of the corporation. Fort Pierce Corp. v. Ivey, 671 So.2d 206, 207 (Fla. 4th DCA 1996). It seeks redress for an injury suffered by the corporation, including nonprofit corporations, such as the HOA. See § 617.07401, Fla....

...that costs are at issue when a lawsuit is brought.”). More recently, the Third District held in Cornfeld that entitlement to an award of costs in the shareholder derivative action was controlled not by section 57.041, but by the more specific provisions of section 617.07401(5), Florida Statutes, that address with particularity the award of costs in such actions and require that certain conditions be met before the party can be entitled to an award of costs....

...The court noted that “[w]ere the law otherwise, a prevailing defendant in a shareholder derivative action could seek an award of costs under the less demanding provisions of Rule 1.420 and section 57.041, evading the more stringent requirements of section 617.07401(5) and rendering that statutory provision meaningless.” Id....

...adjacent to the condominiums, for an alleged contractual breach by RK to repair damages to a sewer main. The Club filed a motion to dismiss, arguing (1) Cornfeld lacked standing to bring the derivative action because he failed to serve a pre-suit demand pursuant to section 617.07401, Florida Statutes (2016); (2) Cornfeld’s claims are barred because the Club is protected by the business judgment rule; (3) Cornfeld failed to join RK as an indispensable party; and (4) Cornfeld failed to state a cause of action for injunctive relief. After the hearing on the Club’s motion to dismiss, the trial court deferred ruling and asked the parties how they wanted to proceed, tracking section 617.07401....

the award of fees in this case, rather than section 617.07401(5), Florida Statutes (2022). We agree

...(the “Association”), and six of the board of directors. Appellant claimed that the directors had violated the Association by-laws by taking out unapproved loans to fund the Association’s improvements. The court dismissed the action pursuant to section 617.07401(3)(b), Florida Statutes (2020), because an independent investigation determined that pursuit of the derivative claim was not in the Association’s best interests....

...nspiracy and aiding and abetting fraud. In September 2020, appellant served the association board of directors with a written letter summarizing her claims and demanding that the board, on the Association’s behalf, sue the directors. Although section 617.07401(2) provides that a member must give a board of directors ninety days’ notice prior to the filing of a derivative claim, appellant filed her first complaint in October. She claimed the Association would suffer irreparable damage without action within ninety days. See § 617.07401(2), Fla....

...(2020) (stating that an association member may not bring a derivative complaint unless a demand made to obtain action by the board was refused or ignored for ninety days, “unless irreparable injury to the corporation would result by waiting for the expiration of the 90-day period”). In accordance with section 617.07401(3), the Association commenced an investigation into the allegations of the complaint....

...independent directors appointed by a majority vote of 2  independent directors present at a meeting of the board of directors, whether or not such independent directors constitute a quorum[.] § 617.07401(3)(b). In December, the majority of Association’s board members who were not named defendants in the complaint voted to appoint two directors, also not defendants, to the committee pursuant to section 617.07401(3)(b). Both committee members filed sworn declarations with the trial court as to their noninvolvement in any of the conduct described in the complaint. The investigation continued, and the committee issued a report which was ci...

...recommendation was reasonable, but instead whether the committee was independent, acted in good faith, and conducted a reasonable investigation. 3  The court found the committee was appropriately appointed pursuant to section 617.07401(3)(b)....

...at a meeting of the board of directors” have “made a good faith determination after conducting a reasonable investigation upon which its conclusions are based” that to maintain the derivative suit is not in the corporation’s best interests. § 617.07401(3)(b), Fla. Stat. (2020). The corporation has the burden of proving the committee is independent, acted in good faith, and has a reasonable and objective basis for its report. § 617.07401(3), Fla....

...4th DCA 1990) (“[A] trial court must make a determination that the committee recommending dismissal is independent, acting in good faith and has a reasonable and objective basis for its report.”) (citing Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981)). However, section 617.07401 does not define what makes a director “independent,” and neither does the general chapter’s “definitions” statute. Where Florida law has not spoken as to a corporate term or statute, courts often look to Delaware law....

...investigation was reasonable and made in good faith. She maintains that the court was required to address the accuracy of the report’s substantive findings. We disagree that the court must independently assess the validity of the report’s conclusions. Section 617.07401(3) permits the court to dismiss a derivative lawsuit when the investigative committee “has made a good faith determination after conducting a reasonable investigation upon which its conclusions are based that the maintenance of the derivative suit is not in the best interests of the corporation.” Section 617.07401(3)(b)’s plain language does not require courts to question a special committee’s recommendation as long as the court found the committee was independent and conducted its investigation reasonably and in good faith....

...Association’s best interest. The court found that the investigation was thorough and conducted in good faith. The court complied with the statutory directive. For the foregoing reasons, we affirm the dismissal of the derivative suit pursuant to section 617.07401(3), Florida Statutes. Affirmed. 1 Atkins concerned section 607.07401(3)(b), Florida Statutes (2004), but section 617.07401(3)(b), Florida Statutes, contains identical language except that the statute applies to “members” of a non-profit corporation instead of “shareholders” of a business corporation. 6 C...

...The association’s counsel responded that “the [a]ssociation is not incorporated under, and consequentially is not subject to, Chapter 607, Florida Statutes,” and a demand under section 607.07401 was “legally invalid.” By demand letter sent on October 7, 2015, the owner corrected the error by citing section 617.07401, Florida Statutes (2015), and demanded to inspect the association’s records. The association responded that it would consider appointing an independent committee to investigate the owner’s allegations at its next Board of Directors meeting. On December 14, 2015, the owner filed a verified complaint, pursuant to section 617.07401, alleging: (1) breach of fiduciary duty; (2) negligence in failing to properly manage the association’s funds and allowing its buildings to deteriorate; and (3) improper management of the association by the board of directors....

...pled, and failed to state a cause of action. We have de novo review. Haslett v. Broward Health Imperial Point Med. Ctr., 197 So. 3d 124, 127 (Fla. 4th DCA 2016). Because the association is a not-for-profit Florida corporation, it is governed by Chapter 617. Section 617.07401(2), Florida Statutes, provides that a suit cannot be filed before the expiration of ninety days after “the date of the first demand.” Here, the owner first made a demand for action by the association pursuant to Chapter 607....

...new demand for action and marked the beginning of a new ninety-day waiting period. The ninety days expired on January 5, 2016, but the owner filed the verified complaint twenty-two days before the ninety days expired. The trial court properly dismissed the complaint. § 617.07401, Fla. Stat. The trial court also correctly found the verified complaint failed to comply with section 617.07401 by failing to plead an exception to the ninety-day waiting period....

...The verified complaint failed to allege that the demand was “refused or ignored” by the association, that the demand was rejected in writing by the association prior to the ninety-day period, or that the waiting period would cause irreparable harm to the association. Noncompliance with the pre-suit requirements of section 617.07401 mandates dismissal of the suit....

...derivative action filed against 1750 James Condominium Association, Inc. (the Association) and various former and current board members. Following Gratz’s filing of the action, the trial court appointed Russell M. Robbins as an “independent panelist” pursuant to section 617.07401(3)(c), Florida Statutes (2021), to investigate Gratz’s claims and to submit a report addressing whether maintaining the derivative action is in the best interest of the Association and its members....

...of dismissal. The trial court adopted Robbins’ findings, including his primary finding that “maintaining the derivative action is not in the best interest of the Association and its members.” The trial court also concluded, pursuant to section 617.07401(3), that Robbins’ determination was “made in good faith and 1 Section 617.07401(3)(c), Florida Statutes, provides that a trial court may dismiss a derivative proceeding if it finds that the court-appointed “panel of one or more independent persons ....

...under the business judgment rule, and failed to “explore all relevant information” by, inter alia, conducting interviews with other unit owners. Gratz further contends the trial court erred in awarding the Association attorney’s fees under section 617.07401(5), Florida Statues (2021), because there was no showing “that the proceeding was commenced without reasonable cause”—a threshold requirement under that statute. 2 2 Section 617.07401(5), Florida Statutes, provides: Upon termination of the proceeding, the court may require the plaintiff to pay any defendant's reasonable expenses, including reasonable attorney's fees, incurred in defending...

...he determination that Robbins was independent and conducted his investigation reasonably and in good faith, and the ultimate determination that maintaining the derivative action is not in the best interest of the Association and its members. See § 617.07401(3), Fla....

...finding that the report was reasonable and conducted in good faith.”) See also Ezer, 358 So. 3d at 433-34 (rejecting the contention that “the court must independently assess the validity of the report’s conclusions” and holding that “[s]ection 617.07401(3)(b)’s plain language does not require courts to question [an investigator’s] recommendation as long as the court found the [investigator] was independent and conducted its investigation reasonably and in good faith....