ALDO DISORBO v. AMERICAN VAN LINES, INC. ( 2023 )

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
ALDO DISORBO,
Appellant,
v.
AMERICAN VAN LINES, INC.,
Appellee.
No. 4D21-2994
[January 4, 2023]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Carol-Lisa Phillips, Judge; L.T. Case No. CACE15-
016745.
Julissa Rodriguez of Shutts & Bowen, LLP, Miami, Jason Gonzalez and
Amber S. Nunnally of Shutts & Bowen LLP, Tallahassee, Elise M. Engle of
Shutts & Bowen LLP, Tampa, and Robert S. Hackleman and Helaina
Bardunias of Katzman, Wasserman, Bennardini & Rubenstein, P.A., Boca
Raton, for appellant.
Paul O. Lopez, Stephanie C. Mazzola, and Jennifer H. Wahba of Tripp
Scott, P.A., Fort Lauderdale, and Kenneth Minerley and Meghan Miller of
Minerley Fein, P.A., Boca Raton, for appellee.
GROSS, J.
Article I, Section 22 of the Florida Constitution guarantees a jury trial
as to those issues triable by a jury at common law, before the first state
constitution became effective in 1845. Complications arise when legal and
equitable causes of action travel in the same complaint; in that situation,
a jury must decide common issues of fact to honor the guarantee of Article
I, Section 22. Here, the trial court erred in severing a breach of contract
claim and trying various equitable claims first. The court’s factual
determinations necessarily foreclosed relief on the pending breach of
contract claim. We therefore reverse.
Factually, the case is not complex. Two brothers were part owners of a
business. They disagreed about the terms under which the business was
to be run and the circumstances surrounding a $200,000 bank loan. The
case was complicated by an eleven-count complaint containing
overlapping causes of action and different requests for relief.
We state the facts below as they were developed at the non-jury trial.
Ownership and Operation of A.S.A.P. Investment
Holdings, LLC
In April 2009, brothers Aldo and Anthony DiSorbo, along with their
cousins Phillip and Stefano Vento, formed A.S.A.P. Investments Holdings,
LLC (“ASAP”). Originally, Aldo and Anthony each owned 32.5% of ASAP,
while Phillip and Stefano each owned 17.5%. ASAP was to serve as a real
estate holding company. Like many family businesses, ASAP was run
informally.
ASAP Purchases a Warehouse
In May 2009, ASAP purchased property that included a roughly 54,000
square foot warehouse. The property cost $2.4 million. ASAP paid for the
property with a $1.9 million loan from Bank of America, along with capital
contributions from the initial members in amounts proportional to their
respective membership interests. Aldo and Anthony each contributed
about $147,000.
Before ASAP’s purchase, the warehouse had been abandoned for three
years and had roof and drainage system problems. According to Anthony,
ASAP’s members “decided not to put the money in the company” to fix
those issues.
The 2009 Leases
Later in 2009, ASAP leased the property to two tenants.
The first lease was with S.V.P. Tile & Marble, Inc. (“SVP Tile”), a
company owned by the Ventos, which rented a portion of the warehouse
for $4,900 per month, plus taxes, insurance, and other costs.
The second lease, for the remaining portion of the warehouse, was with
American Van Lines, Inc. (“AVL”), a company owned by Anthony; that lease
called for rent of $9,100 per month, plus taxes, insurance, and other costs.
On the second lease, Aldo signed on behalf of ASAP and Anthony signed
for AVL.
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At trial, Anthony testified that they put the 2009 AVL lease in place
“because the Bank of America needed a lease in place.” Anthony described
this lease as “a placeholder . . . of what we should be paying, just to show
something to the bank.”
Phillip Vento testified that SVP Tile never wrote a check to ASAP for
$4,900 a month. Instead, the Ventos paid “whatever was due for the
expenses of the month” for “the mortgage, the taxes and insurance.”
Consistent with this trial testimony, the trial judge later found that
“these lease agreements were never formally followed and they merely
served as placeholders.”
Both Aldo and Anthony said that the rental payments were generally
intended to cover building expenses, including the mortgage, taxes,
insurance, and maintenance costs.
After his initial investment, Aldo did not contribute to the debt service,
taxes, insurance, or other expenses, except for a 2010 capital contribution
for maintenance of the building. Aldo viewed his investment was an
“equity play”—he was hoping the building would appreciate in value while
someone else picked up the debt service. Aldo said that ASAP made no
distributions to him and the other co-owners between 2009 and 2012.
During this time, Aldo did not take issue with this arrangement or ask that
the leases be restructured.
Anthony Proposes Purchasing the Ventos’ Interests
In early 2012, Anthony approached the Ventos about purchasing their
membership interests in ASAP. The Ventos were willing to sell their
ownership interests for $288,000, plus the termination of SVP Tile’s lease
obligations and a release of their personal guarantees to Bank of America.
To complete the purchase of the Ventos’ interests, a $200,000 loan from
Bank of America was obtained. The DiSorbo brothers have significant
factual disagreements surrounding this loan transaction.
Aldo testified that Anthony asked him to assist in getting a loan from
Bank of America to purchase the Ventos’ interests in the company, which
would result in Aldo and Anthony each owning 50% of ASAP. Aldo saw
this as a good opportunity, and he told Anthony to take the lead.
By contrast, Anthony denied telling Aldo that they were going to use
the loan proceeds to purchase the Ventos’ interest on a 50/50 basis.
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A credit approval from Bank of America states that “[t]he Ventos,
cousins of DiSorbo, are selling their interest to the brothers who will own
ASAP 50/50.”
However, once the loan was approved, Anthony came to Aldo and said
that he wanted to buy out the Ventos on his own. Aldo initially refused to
guarantee the loan, but he went forward after Anthony said that “he was
going to use his own money to buy out the Ventos.” Aldo also testified that
the loan proceeds were “supposed to go into the ASAP account for business
purposes only to repair the building.” Aldo also claimed that his
participation in the new loan agreement was based on his agreement with
Anthony that ASAP would pay fair market value on a new lease on which
Aldo would realize “about $100,000 to $120,000 a year.”
Anthony denied that any agreement existed about ASAP paying fair
market rent. Anthony claimed that Aldo did not begin demanding an
increase in rent to the fair market value until after a 2013 heated dispute
in which they decided to separate their businesses. Anthony refused to
increase the rent because “the deal was always the same.”
ASAP Obtains a $200,000 Loan, Which Anthony Uses to
Buy Out the Vento Brothers
In April 2012, ASAP obtained a second loan from Bank of America in
the amount of $200,000. Aldo and Anthony each personally guaranteed
the loan.
The loan agreement lists ASAP as the borrower, describes the property
as collateral, requires the loan proceeds to be used “only for business
purposes,” and contains a covenant requiring that ASAP was “[n]ot to sell,
assign, lease, transfer or otherwise dispose of any assets for less than fair
market value.”
Another covenant in the loan agreement stated that the intended use
of the property was “[t]o cause [AVL], an entity affiliated with the Borrower
(the ‘Affiliate’), to occupy the property collateral for the conduct of its
regular business.” This covenant further states:
If the real property is leased to [AVL], the lease will be fully
subordinated to the Bank’s lien. All terms, covenants,
representations, and provisions of this Agreement which
pertain or apply to the Borrower will pertain or apply to [AVL]
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in addition to, or in lieu of, the Borrower, as the context may
require.
Aldo and Anthony each signed the loan agreement on behalf of ASAP.
Attorney Steven Elkin represented ASAP as its corporate counsel and
acted as the settlement and closing agent in connection with the loan.
Aldo was copied on emails from Elkin confirming that Anthony was to
receive the net loan proceeds, the money “was being used to enable
Anthony DiSorbo to purchase the membership interest of Steve Vento and
Phil Vento,” and Aldo “gets no benefit from this transaction.” Aldo did not
inform Elkin, by email or otherwise, that he objected to the proposed
disposition of the loan proceeds.
On April 20, 2012, Elkin distributed the net proceeds of the $200,000
loan to the personal bank account of Anthony and his wife. Aldo was not
copied on Anthony’s email instructing Elkin to “wire the money to my
account.”
Anthony then paid the loan proceeds, along with about $88,000 of his
own money, to the Ventos. Following the Ventos’ receipt of $288,000, they
executed an Assignment Agreement and Resignation, transferring their
interests in ASAP to Anthony. Anthony signed the Assignment Agreement,
but Aldo did not. Anthony did not follow attorney Elkin’s advice about
how to document his purchase of the Ventos’ interests.
In the years following the disbursement of the 2012 loan, Aldo received
K-1 tax schedules reflecting that he was still a 32.5% owner of ASAP.
Likewise, in numerous emails after the closing of the 2012 loan, Aldo made
statements acknowledging that he was a 1/3 owner of the warehouse.
Also, a bookkeeper for AVL testified that it was clear from her discussions
with Aldo that he understood Anthony had used the money from the
second Bank of America loan to buy out the Ventos.
Anthony Allegedly Leases the Warehouse for Below-
Market Rent
Prior to the closing on the $200,000 loan, on April 1, 2012, ASAP and
AVL entered into a new lease that allowed AVL to occupy the entire
warehouse for the same base monthly rent—$9,100 plus taxes, insurance
and other costs. Anthony signed the lease on behalf of both ASAP and
AVL.
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The new lease required AVL at its sole expense to maintain the premises
“in good repair and condition, including but not limited to, the building
and electrical, plumbing and HVAC.” A separate provision of the lease
prohibited AVL from making any improvements or other construction or
work of any structural nature without the prior written consent of ASAP.
Aldo testified that he was unaware of the April 1, 2012 lease when he
signed the loan agreement. However, Aldo signed all the loan documents,
including a subordination agreement referencing the April 2012 lease.
At trial, Anthony admitted that he did not know what the fair market
rent for the warehouse would have been at the time he signed the April
2012 lease. By contrast, Aldo’s expert testified that from 2012 through
the time of trial, AVL paid ASAP about $2.4 million less than fair market
rent.
In 2013 and 2014, Anthony arranged for ASAP to enter into two lease
transactions that benefitted AVL.
In 2013, ASAP leased 2,000 square feet of the warehouse to a third
party, Nextran, at a substantially higher amount per square foot than AVL
was paying. The lease structure was changed in 2014 so that Nextran was
subleasing the space from AVL and making payments to AVL.
Addendum to the 2012 Lease
In April 2014, without consulting with Aldo, Anthony signed an
addendum to the 2012 lease on behalf of both AVL and ASAP, extending
the lease through 2022 on the same terms, including the rental price of
$9,100. Anthony admitted that he did not know whether this addendum
was a fair market value extension of the 2012 lease, but believed it was
fair to ASAP because it was the same deal as before, “that we all agreed
early on [] was fair.”
Repayment of the $200,000 Loan
The $200,000 loan was recorded in ASAP’s books as a liability to Bank
of America. ASAP made repayments on the loan to Bank of America.
However, one of Aldo’s experts conceded that if the purchase of the Ventos’
interests “was an agreed transaction outside the company,” there would
be nothing wrong from an accounting standpoint with correcting the
journal entries. He explained: “That’s done all the time.”
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Another of Aldo’s experts clarified how the repayments were occurring.
In essence, AVL was paying an additional $2,111.60 per month to ASAP,
which was being treated on ASAP’s books as “additional rent.” This
amount “happened to be the monthly payment that ASAP had to make to
the Bank of America loan.”
Anthony’s expert testified that ASAP’s books reflected that the April
2012 loan was “[d]ue from Anthony DiSorbo.” Anthony’s expert explained
that “while the loan is on the books [of ASAP] as a liability, Anthony is
paying that loan every month.”
In 2017, after receiving a civil theft letter during the litigation, Anthony
paid off the remaining balance on the $200,000 loan.
The Lawsuit and the Operative Complaint
On September 25, 2015, Aldo initiated this lawsuit, seeking dissolution
of ASAP and other relief. Pursuant to section 605.0706, Florida Statutes
(2015), Anthony filed and served his election to purchase Aldo’s entire
interest in ASAP in lieu of dissolution.
Aldo eventually filed a Fourth Amended Complaint asserting the
following 11 counts:
Count I – Declaratory Judgment (individual claim), which
sought a declaration that the transfer of the Ventos’
membership interests to Anthony was void or alternatively
that Anthony purchased the Ventos’ membership interests in
trust for ASAP.
Count II – Judicial Dissolution of ASAP (individual claim).
Count III – Breach of Fiduciary Duty (derivative and individual
claim against Anthony).
Count IV – Dissociation as Member under § 605.0602, Fla.
Stat. (derivative and individual claim against Anthony,
seeking to dissociate him as a member of ASAP).
Count V – Breach of Duty of Loyalty (derivative claim against
Anthony).
Count VI – Conversion (derivative and individual claim against
Anthony).
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Count VII – Fraudulent Misrepresentation and Fraudulent
Concealment (derivative and individual claim against
Anthony).
Count VIII – Civil Theft (derivative claim against Anthony).
Count IX – Breach of Contract (individual claim against
Anthony).
Count X – Unjust Enrichment (derivative claim against
Anthony and AVL).
Count XI - Aiding and Abetting Breach of Fiduciary Duty
(derivative claim against AVL).
As we explain below, the legal issue in this case turns on the existence
of common issues of fact that Counts X and XI share with the remaining
counts, with a focus on Count IX. It is therefore necessary to discuss some
of the claims in more detail.
In a nutshell, the Fourth Amended Complaint alleged that Anthony
engaged in unauthorized self-dealing transactions and misappropriated
the $200,000 loan proceeds belonging to ASAP to fund his purchase of the
Ventos’ membership interests in the company. The complaint asserted
that Anthony’s purchase of the Ventos’ membership interests was null and
void because it did not comply with the Operating Agreement. In the
alternative, the complaint asserted that “ASAP is the beneficial owner of
the membership interests Anthony acquired with ASAP’s funds, and
Anthony is required to hold those corporate assets in trust for ASAP.”
Count III alleged that Anthony breached his fiduciary duties to ASAP
and Aldo by, among other things, (i) misappropriating ASAP’s assets,
including the $200,000 loan proceeds, (ii) improper self-dealing, including
causing ASAP to enter into the 2012 AVL lease, (iii) failing to perform roof
maintenance and other required repairs, (iv) usurping company business
opportunities, and (v) wasting of ASAP’s assets. Count III requested
damages for these alleged breaches or, alternatively, the imposition of a
constructive trust over the membership interests Anthony acquired using
ASAP’s loan proceeds. Counts IV and V contained substantially similar
underlying allegations.
Count VI alleged that Anthony converted ASAP’s property by
misdirecting ASAP’s loan proceeds to his personal bank account.
8
Alternatively, Count VI alleged that Anthony converted Aldo’s property by
taking a distribution from ASAP to which he was not entitled without
providing Aldo his pro rata share or by “misappropriating the entire 35%
membership interest purchased with ASAP’s funds for his own personal
benefit.” Count VI requested, among other things, “a judgment against
Anthony for compensatory damages, including the value of the converted
assets[.]”
Count VII alleged that Anthony made fraudulent misrepresentations to
Aldo and ASAP. Although most of the alleged damages were to ASAP,
Count VII also requested that if the loan proceeds were “determined to be
a distribution to Anthony,” the court should award Aldo the value of the
pro rata distribution he should have received. Alternatively, Aldo sought
“the imposition of a constructive trust over the membership interests
Anthony acquired using ASAP’s Loan Proceeds.”
Count IX was pleaded exclusively as an individual claim by Aldo for
breach of contract against Anthony. The count alleged that Anthony
breached his obligations under the Operating Agreement, including
section 12.8 (requiring each member to indemnify the other member for
acts done outside the scope of the Operating Agreement), section 12.9
(stating that no member shall be liable to the other member for actions in
connection with the company, “except in the event of a violation of any
provision of this Agreement, fraud, gross negligence or dishonest
conduct”), section 12.10 (stating that the indemnities provided in the
Operating Agreement “shall include reasonable attorney’s fees”), and
section 14.10 (requiring each member to act in good faith in discharging
their obligations under the Operating Agreement), or, if the loan proceeds
were alternatively determined to be a distribution, section 8.1 (governing
how distributions of net cash flow are to be paid).
Count IX alleged that Aldo suffered damages including “exposing him
to a greater risk under the personal guaranty he provided to Bank of
America in connection with the $200,000 Loan and preventing Aldo or
companies he owns from leasing space at the Warehouse at fair market
rent.” Alternatively, Count IX alleged that “Anthony’s breach of the
Operating Agreement unlawfully diluted Aldo’s ownership percentage in
ASAP.” Count IX requested damages, interest, fees and costs.
Counts X and XI were the only counts against AVL.
Count X primarily sought a judgment against Anthony and AVL “for the
value of benefits and assets transferred to them by ASAP,” alleging that
AVL was unjustly enriched because ASAP conferred a benefit on AVL in
9
the form of “below-market leases and failing to require AVL to make repairs
as required under its lease.”
Count XI alleged that AVL aided and abetted Anthony’s breaches of his
fiduciary duties by actively and knowingly participating in the unlawful
use of ASAP’s assets, including by occupying the property under the new
lease without paying fair market rent to ASAP and failing to perform the
routine roof maintenance and other repairs.
Finally, the Fourth Amended Complaint demanded “a trial by jury on
all issues so triable as of right.”
Over Aldo’s objection, the trial court set Counts II-VIII, X, and XI for
non-jury trial. The court stayed Count IX, Aldo’s breach of contract claim,
pending non-jury trial on all of the other counts. 1
The Disposition in the Trial Court
After a non-jury trial, the circuit court dismissed the civil theft claim
against Anthony and entered an Amended Final Judgment against Aldo as
to every remaining count except Count IX, Aldo’s breach of contract claim.
The court determined that Aldo had a “32.5% interest in the fair value
of ASAP as of December 14, 2015.”
On the issue of the $200,000 loan, the trial court found that “not only
was Aldo aware in 2012 that the BOA Loan Proceeds were being used solely
by Anthony to buy out the Ventos’ membership interest, but that Aldo had
1 Aldo filed a petition for writ of certiorari in this court seeking review of the order
setting the case for trial. The petition argued that the trial court departed from
the essential requirements of law by bifurcating the trial of inextricably
intertwined legal and equitable claims. A different panel of this court declined to
issue the writ, but the panel did not indicate that the denial was on the merits.
Unelaborated denials of certiorari are not deemed denials on the merits. Topps
v. State, 865 So. 2d 1253, 1258 (Fla. 2004). Although a dismissal of the petition
would have been more appropriate procedurally, the panel may well have denied
relief because Aldo had an adequate remedy on direct appeal. The common law
writ of certiorari is an “extraordinary remedy” that will lie only when the order,
departing from the “essential requirements of law,” will leave “no adequate
remedy on appeal.” Mintz Truppman, P.A. v. Cozen O’Connor, PLC, 346 So. 3d
577, 579 n.6 (Fla. 2022). Furthermore, “the time, trouble and expense of going
through an unnecessary trial are not the type of material injuries sufficient to
justify invocation of this court’s certiorari jurisdiction.” Pages v. Dominguez By
& Through Dominguez, 652 So. 2d 864, 868 (Fla. 4th DCA 1995).
10
no objection to same.” The court added that “[t]here was sloppy, improper
tax documents, bookkeeping, credits, etc. but the parties agreed and all
knew what was going to happen and what happened.”
On the issue of below-market rent, the court found:
[T]here was no evidence of any agreement by and between any
of the members of ASAP to pay or charge fair market rent for
the leasing of space at the Property nor was there any evidence
as to any agreement by and between the members of ASAP as
to what amount would constitute fair market rent.
Instead, the court noted, “the course of dealing established by the
members of ASAP from inception was that they would cover all of the
expenses connected to the Property in accordance with their percentage
ownership with the exception of major capital improvements.” The court
explained: “The testimony at trial reflected that the rental amounts
delineated in the [2009 Lease Agreements] served as a rough estimate of
the Property’s monthly expenses, such that the Ventos and Anthony
contributed monies each month to cover the expenses for the building.”
On the issue of the condition of the property, the trial court found that
the property “suffered from significant roofing issues that would require a
roof replacement as well as pre-existing drainage issues” of which Aldo
and Anthony were aware at the time of purchase. The court also ruled
that “the roof, along with [certain other] repair/replacements/additions
are above and beyond mere maintenance, repair issues.”
As to Count I, the trial court determined that the transfer of the Ventos’
membership interests to Anthony was valid, making him a 67.5% owner
of ASAP.
As to Count II, the trial court dismissed Aldo’s petition for dissolution,
concluding that “Anthony properly and timely filed a notice of election to
purchase Aldo’s interest pursuant to Fla. Stat. § 605.0706 (2015).”
As to Counts III and V, the trial court relied upon the business
judgment rule in concluding that Anthony did not breach his fiduciary
duties:
Here, the business judgment rule precludes a finding of
breach of fiduciary duties by Anthony. The evidence
demonstrates that Anthony acted to the benefit of ASAP in
covering all of the Property’s expenses, including the
11
associated mortgages, insurance, taxes, and maintenance.
Moreover, Anthony’s actions were consistent with the original
understanding of how ASAP would be operated.
The evidence does not support a finding of breach under
these circumstances as ASAP’s sole asset has been preserved
and maintained at Anthony’s sole expense since 2012.
(citation and paragraph numbers omitted).
The trial court also ruled against Aldo on each of the remaining counts,
including the two counts involving AVL. As to Count X for unjust
enrichment, the trial court ruled “in favor of Anthony and AVL based on
the record evidence and testimony adduced at trial.” As to Count XI for
aiding and abetting breach of fiduciary duty against AVL, the trial court
ruled that this claim failed because Aldo “cannot prove breaches of
fiduciary duty under the business judgment rule.”
Based on its findings, the trial court ordered that “Final Judgment is
hereby granted in favor of” Anthony and AVL.
After Aldo filed his Notice of Appeal, we dismissed the appeal for lack of
jurisdiction as to Anthony because Count IX was still pending, noting that
dismissal was without prejudice to Aldo seeking appellate review once the
trial court adjudicated the remaining claim involving Anthony. For this
reason, this appeal involves AVL only.
Article I, Section 22 of the Florida Constitution
Guarantees the Right of a Jury Trial of Factual Issues
Common to Equitable and Legal Causes of Action
Among other things, Aldo argues on appeal that the non-jury trial
deprived him of a jury trial on factual issues common to both equitable
and legal claims.
Article I, Section 22 of the Florida Constitution “guarantees the right to
trial by jury in those cases in which the right was enjoyed at the time this
state’s first constitution became effective in 1845.” In re Forfeiture of 1978
Chevrolet Van VIN: CGD1584167858, 493 So. 2d 433, 434 (Fla. 1986). In
construing an earlier version of the Florida Constitution, our supreme
court explained that the jury trial provision was “designed to preserve and
guarantee the right of trial by jury in proceedings, according to the course
of the common law as known and practiced at the time of the adoption of
the Constitution.” Hawkins v. Rellim Inv. Co., 110 So. 350, 351 (Fla. 1926).
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Article I, Section 22 operates to preserve the right to a jury trial where
legal and equitable causes of action travel in the same complaint. Billian
v. Mobil Corp., 710 So. 2d 984, 992 (Fla. 4th DCA 1998). “[I]t is well settled
that where mixed equitable and legal claims are presented on interrelated
facts, the trial court first must have a jury decide the case so as to preserve
the parties’ right to a jury trial.” Kavouras v. Mario City Rest. Corp., 88 So.
3d 213, 214 (Fla. 3d DCA 2011). In Billian, we summarized the law in this
area:
Unless waived, a jury must make findings concerning all facts
which are common to the legal and equitable claims before the
trial court may consider granting an equitable remedy. Where
the fact issues decided by a jury in an action at law are
sufficiently similar to the fact issues on a related equitable
claim, the trial court is bound by the jury’s findings of fact in
making its ruling on the equitable claim. Legal and equitable
issues are “sufficiently similar” or “intertwined” if a jury, in
order to return a verdict in an action at law, would necessarily
have to decide a fact issue of the legal claim which is also a
required element of an equitable claim.
710 So. 2d at 992 (emphasis supplied; citations omitted).
Count IX Alleged a Direct Legal Claim for Breach of
Contract
Count IX of the operative complaint alleged a cause of action for breach
of contract. AVL contends that Count IX is in actuality a derivative claim
for which no right to a jury trial exists. We reject AVL’s contention,
concluding that the count involved a special injury to Aldo that entitled
him to a jury trial on the breach of contract claim.
A direct or individual action is a suit to enforce a right of action existing
in the stockholder or member, while a derivative action is a suit to enforce
a right of action existing in the company. Salit v. Ruden, McClosky, Smith,
Schuster & Russell, P.A., 742 So. 2d 381, 388 (Fla. 4th DCA 1999).
“Historically, a shareholder’s derivative action could be brought only in
equity.” Lanman Lithotech, Inc. v. Gurwitz, 478 So. 2d 425, 426 (Fla. 5th
DCA 1985). Because “the common law in 1845 did not confer a right to
jury trial in equity actions,” no such right exists in a derivative action. Id.
at 427. “This, of course, would not prevent the trial judge from granting a
jury trial as a matter of discretion.” Id. at 427 n.4.
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The right to a jury trial in Florida turns on “whether the party seeking
a jury trial is trying to invoke rights and remedies of the sort traditionally
enforceable in an action at law.” King Mountain Condo. Ass’n v. Gundlach,
425 So. 2d 569, 571 (Fla. 4th DCA 1982). A cause of action for damages
for an alleged breach of contract is one triable by jury at common law.
Olin’s, Inc. v. Avis Rental Car Sys. of Fla., 131 So. 2d 20, 22 (Fla. 3d DCA
1961).
“The mere use of the label ‘damages’ is not sufficient to create a right
to jury trial. Rather, the right to trial by jury turns on the nature of the
right and remedy sought to be enforced.” Gundlach, 425 So. 2d at 571(citation omitted). In Gundlach, we held that the plaintiffs were not entitled
to a jury trial on their claim for breach of fiduciary duty, because they were
seeking “disgorgement of secret profits obtained by the developer-
appointed, initial officers and directors of a condominium association,”
which was an equitable remedy that “does not give rise to a right of trial
by jury.” Id. at 572.
“In order for shareholders to bring a direct action in their individual
capacity, the shareholders must allege both a direct harm and a special
injury.” Strazzulla v. Riverside Banking Co., 175 So. 3d 879, 884–85 (Fla.
4th DCA 2015). Similarly, under the statute governing limited liability
companies, a member maintaining a direct action “must plead and prove
an actual or threatened injury that is not solely the result of an injury
suffered or threatened to be suffered by the limited liability company.” §
605.0801(2), Fla. Stat. (2015). 2
Under this two-prong test, a direct action may be brought only if “(1)
there is a direct harm to the shareholder or member such that the alleged
injury does not flow subsequently from an initial harm to the company
and (2) there is a special injury to the shareholder or member that is
separate and distinct from those sustained by the other shareholders or
members.” Dinuro Invs., LLC v. Camacho, 141 So. 3d 731, 739–40 (Fla. 3d
DCA 2014). A shareholder may also “bring an individual action as an
exception to the two-prong test where there is a separate statutory or
contractual duty owed by the wrongdoer to the individual shareholder.”
Strazzulla, 175 So. 3d at 885.
2 For purposes of this opinion, we will assume, without deciding, that the 2015
statutes apply to this action. See § 605.1108(2), Fla. Stat. (2015) (effective
January 1, 2015, the Florida Revised Limited Liability Company Act “governs all
limited liability companies”).
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“An injury is not direct if it flows first to the company and only
secondarily to the aggrieved shareholder, such that it only damages the
shareholders or members due to the loss in value of their respective
ownership interest.” Arbitrage Fund v. Petty, 307 So. 3d 119, 125 (Fla. 3d
DCA 2020) (emphasis added; internal quotation marks omitted). “[M]ost
corporate self-dealing and mismanagement claims do not meet the special
injury test announced in Dinuro[.]” Id. at 129.
By contrast, where plaintiffs have alleged that the defendants’ “actions
resulted in damages in the form of a loss to their equity ownership in [the]
LLC and a decrease in financial benefits to them,” they have “alleged an
injury separate and distinct from that suffered by other members of the
LLC.” Ayres v. AG Processing Inc., 345 F. Supp. 2d 1200, 1209 (D. Kan.
2004).
Here, Count IX alleged both direct harm and special injury. Count IX
alleged that Anthony breached his obligations under the Operating
Agreement, including section 14.10, which required each party to act in
good faith with respect to discharging their obligations under the
agreement. The factual basis for this breach was that Anthony
misappropriated the $200,000 loan proceeds and entered into self-dealing,
below-market leases on behalf of ASAP. Count IX also included the
allegation that, if the loan proceeds were alternatively determined to be a
distribution, Anthony violated section 8.1 of the Operating Agreement,
governing how distributions of net cash flow are to be paid.
One of the claimed injuries in Count IX was that “Anthony’s breach of
the Operating Agreement unlawfully diluted Aldo’s ownership percentage
in ASAP.” This was a sufficient allegation of direct harm and special injury.
Notably, this alleged injury did not flow first to the company and only
secondarily to Aldo. Rather, the Fourth Amended Complaint alleged that
Aldo suffered a dilution of his ownership percentage in ASAP from 50% to
32.5%, making him a minority owner instead of an equal owner. This was
a special injury to Aldo that was separate and distinct from that
experienced by Anthony—the dilution harmed only Aldo and did not harm
Anthony. 3
3 Because we have determined that the contract claim stated an action at law
entitled to a jury trial, we need not reach the issues of whether the breach of
fiduciary duty, conversion, and fraud counts encompassed direct claims that
would similarly require a jury trial to resolve issues of fact common to the
derivative claims.
15
The Trial Court Erred by Trying the Equitable,
Derivative Claims Separately, While the Breach of
Contract Claim was Still Pending
Aldo’s breach of contract claim was factually intertwined with the
equitable claims, requiring a jury to resolve the common factual issues.
The contract claim and the equitable claims are intertwined because they
all revolve around underlying factual issues regarding Anthony’s
purported mismanagement of ASAP by entering into below-market leases
and his alleged misappropriation of loan proceeds from the second Bank
of America loan to purchase the Vento brothers’ membership interests for
himself.
Thus, the core factual disputes should have been tried to a jury, with
the jury making findings concerning those material facts common to the
legal and equitable claims. Bound by the jury’s findings of fact, the trial
court could then have ruled on the equitable claims. In other words, the
proper procedure is “for the trial court to first proceed with the jury trial,
and then to apply the jury’s factual findings to determine whether [Aldo]
has established entitlement to [his] equitable claims.” Marlette v. Carullo,
347 So. 3d 556, 559 (Fla. 2d DCA 2022).
The trial court mistakenly relied upon the principle that a plaintiff may
not join individual and derivative claims in one action. That principle is a
pleading issue unrelated to the preservation of the right to a jury trial on
certain actions at law.
There is authority that direct claims and derivative claims cannot be
joined in the same action because they are brought in different capacities.
See Fla. R. Civ. P. 1.110(g) (“A pleader may set up in the same action as
many claims or causes of action or defenses in the same right as the
pleader has[.]”) (emphasis added); Gen. Dynamics Corp. v. Hewitt, 225 So.
2d 561, 563 (Fla. 3d DCA 1969) (holding that the plaintiff did not have the
right to join a derivative claim with his individual claims in one action
because “[o]ne cannot in the same action sue in more than one distinct
right or capacity” (quoting 1 Am. Jur. 2d Actions § 125)).
In this case, however, neither Anthony nor AVL moved to dismiss Aldo’s
complaint on the basis that Aldo had joined individual and derivative
claims in one action. This pleading issue has nothing to do with whether
claims should be tried together so as to preserve the right to a jury trial on
a legal claim where the legal and equitable claims are factually intertwined.
16
Had the trial court granted a motion to dismiss, and Aldo filed his non-
derivative claims in a separate lawsuit, he could have moved for a joint
trial or for consolidation of the actions under Florida Rule of Civil
Procedure 1.270(a) because the cases involved common questions of fact.
“Although a shareholder’s derivative action is basically an action in equity,
there is authority for the proposition that in some instances, a trial by jury
may be proper.” Hiles v. Auto Bahn Federalization, Inc., 555 So. 2d 1218,
1220 (Fla. 4th DCA 1989). For example, in Vine v. Scarborough, 517 So.
2d 726, 728 (Fla. 3d DCA 1987), the Third District explained that “the legal
and equitable claims were so intertwined that the parties herein should
have been, and were properly given, a jury trial on all issues.”
The Trial Court Erroneously Relied Upon the Business
Judgment Rule to Decide Count XI
Because the issue might arise on retrial, we address the trial court’s
application of the business judgment rule to decide Count XI.
We conclude that the business judgment rule has no application to this
case.
Under the business judgment rule, “corporate directors generally have
wide discretion in the performance of their duties and a court of equity will
not attempt to pass upon questions of the mere exercise of business
judgment, which is vested by law in the governing body of the corporation.”
Lake Region Packing Ass’n v. Furze, 327 So. 2d 212, 216 (Fla. 1976).
“[C]ourts assume that directors and officers have acted properly and in
good faith, and absent a showing of abuse of discretion, fraud, bad faith or
illegality, will decline to review their actions.” Fed. Deposit Ins. Corp. v.
Copenhaver, 8:13-cv-2037-T-33TBM, 2014 WL 12621202, at *7 (M.D. Fla.
May 10, 2014) (emphasis added). In other words, the business judgment
rule “suggests that the decisions of directors will not be questioned unless
there is a showing of fraud, self-dealing, dishonesty or incompetency.”
Sonny Boy, L.L.C. v. Asnani, 879 So. 2d 25, 27 (Fla. 5th DCA 2004).
The business judgment rule applies only “when a business is operating
according to a reasonable business model.” Cox Enters., Inc. v. News-
Journal Corp., 469 F. Supp. 2d 1094, 1111 (M.D. Fla. 2006). The question
is whether the directors “followed a reasonable process and made an
informed business judgment.” Copenhaver, 2014 WL 12621202, at *7.
But the rule “is not intended to serve as a shield for those who . . . have
acted in their own personal self-interest.” Cox, 469 F. Supp. 2d at 1111.
17
Likewise, the business judgment rule protects only disinterested
directors. United States v. De La Mata, 266 F.3d 1275, 1297 (11th Cir.
2001). “Disinterested directors neither appear on both sides of a
transaction nor expect to derive any personal benefit from it in the sense
of self-dealing—as opposed to a benefit which devolves upon the
corporation or all stockholders generally.” Id.The business judgment rule was codified in section 605.04093, Florida
Statutes (2015), which provides that a member in a member-managed LLC
is not personally liable for damages regarding management or policy
decisions unless, among other things, the member breached or failed to
perform the duties as a manager so as to constitute: 1. “[a] violation of the
criminal law unless the manager or member had a reasonable cause to
believe his, her, or its conduct was lawful or had no reasonable cause to
believe such conduct was unlawful”; or 2. “[a] transaction from which the
manager or member derived an improper personal benefit, directly or
indirectly.” § 605.04093(1)(a), (1)(b)1. & 2., Fla. Stat. (2015). A member
“is deemed not to have derived an improper personal benefit from any
transaction if the transaction has been approved in the manner as is
provided in s. 605.04092 or is fair to the limited liability company as
defined in s. 605.04092(1)(c).” § 605.04093(3), Fla. Stat. (2015).
“Fair to the limited liability company” means “the transaction, as a
whole, is beneficial to the limited liability company and its members,
taking into appropriate account whether it is: 1. Fair in terms of the
member’s or manager’s dealings with the limited liability company in
connection with that transaction; and 2. Comparable to what might have
been obtainable in an arm’s length transaction.” § 605.04092(1)(c), Fla.
Stat. (2015).
In a proceeding challenging the validity of a transaction, the party
challenging the validity has the burden of proving the lack of fairness of
the transaction if:
In a member-managed limited liability company, . . . the
material facts of the transaction and the member’s or
manager’s interest in the transaction were disclosed or known
to the members who voted upon such transaction and the
transaction was authorized, approved, or ratified by a
majority-in-interest of the disinterested members even if the
disinterested members constitute less than a quorum;
however, the transaction cannot be authorized, approved, or
ratified under this subsection solely by a single member[.]
18
§ 605.04092(4)(a)2., Fla. Stat. (2015). If the conditions in subsection (4)(a)
are not satisfied, then the party defending the transaction “has the burden
of proving its fairness in a proceeding challenging the validity of the
transaction.” § 605.04092(4)(b), Fla. Stat. (2015).
Here, the trial court erred in concluding that the business judgment
rule protected Anthony’s conduct, because Anthony was not a
disinterested party to any of the transactions at issue (i.e., the $200,000
loan, the 2012 lease, and the 2014 addendum to the lease). The trial court
thus improperly viewed the case through the deferential lens of the
business judgment rule. Instead, the key inquiry is whether Anthony’s
self-interested transactions were valid under the law governing conflict-of-
interest transactions for limited liability companies. 4
Accordingly, the trial court erroneously relied upon the business
judgment rule in determining that Aldo could not prove his claim against
AVL for aiding and abetting a breach of fiduciary duty.
Conclusion
We reverse the Amended Final Judgment to the extent that it
adjudicated Aldo’s claims against AVL, and we remand for further
proceedings consistent with this opinion.
Reversed and remanded.
LEVINE and CONNER, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
4Believing that an appellate court should not make rulings in the first instance,
we do not reach the issues of whether the transactions were fair to ASAP and
whether there was gross negligence or bank fraud. Without further comment,
however, we reject Aldo’s argument that the trial court’s ruling violated the parol
evidence rule.
19