Dissatisfied Members in Florida LLCs: Remedies

Abstract

Florida’s 2013 LLC Act locks in members of Florida LLCs to an unprecedented extent by removing the statutory right of members to be bought out. This article begins with a review of the challenges that dissatisfied members will face should they seek relief in court, including the objection that their claims are derivative, rather than direct, and that they have not met the statutory requirements to expel problematic members or dissolve the firm. Florida courts can respond to the difficult plight of members in closely-held LLCs in two basic ways. First, they can recognize that there is no reason in policy to mechanically apply to closely-held LLCs the derivative lawsuit doctrine that has developed either in the context of corporations or in the context of limited partnerships with investors who knew from the outset that they would be locked in to investments over which they had no control. They can join other courts that have recognized direct actions in the case of closely-held LLCs when to do so would not expose the LLC or its members to a multiplicity of suits, result in an unfair advantage over other members, or jeopardize the expectations of creditors. They can point to the comprehensive direct action provision of the 2013 LLC Act, which suggests a simple, single requirement for a direct action, and reflects the desirability of greater uniformity among the states. Second, they can grant dissolution, or lesser remedies such as a buyout, when members are being oppressed in any one of a number of well-recognized ways. These two steps should grant some relief, at least in the case of closely-held LLCs, from the imposition of a corporate model the members probably never anticipated.