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What To Know About ‘Demand Futility’ And Shareholder Derivative Lawsuits In Florida


As of January 1st, 2020, the State of Florida modified its procedural requirements for shareholder derivative lawsuits. Plaintiffs in these cases must establish demand futility before they can proceed with legal action. This raises an important question: What is demand futility in a shareholder derivative lawsuit? In this article, our Miami shareholder dispute attorneys answer the question by explaining the key things that you should know about the demand futility standard and shareholder derivative litigation in Florida.

Background: Shareholder Derivative Lawsuits 

As a starting point, it is important to understand how shareholder derivative lawsuits differ from other types of shareholder litigation. A shareholder derivative lawsuit is legal action brought by a shareholder (or group of shareholders) on behalf of the corporation itself. The lawsuits are generally filed when the leadership of a corporation (officers, directors, etc) have declined to take legal action. Most often, that is because a derivative claim is being pursued against one or more of the corporation’s officers, directors, or key decision makers. 

Florida Requires Demand Futility for Shareholder Derivative Litigation 

Shareholder(s) can not immediately file a shareholder derivative lawsuit in Florida. State law requires that certain pre-suit procedures are followed and satisfied before a derivative action can be pursued in court. Most notably, demand futility is required. Under Florida law (Fla. Stat. § 607.0742), the demand futility requirement effectively holds that shareholder derivative litigation can only be pursued when no other viable options are available. There are three main ways to satisfy the demand futility requirement in shareholder derivative litigation in Florida: 

  • Demand Made, Refused: Shareholders can satisfy the demand futility requirement by making a clear demand for action by corporate leaders. If their demands are refused, a derivative lawsuit may be appropriated. When making demands, it is crucial that shareholders provide clear, comprehensive information. Doing so will put them in a better position to take legal action if it proves to be necessary.
  • Demand Made, Ignored for 90 Days: Corporate leaders will not always actively refuse the demands by shareholders. State law provides options to shareholders who have not received a timely response. If a demand has been wholly ignored for 90 days, the requirement can be satisfied.
  • Demand Made and Pending, But Time-Sensitive Matter: A 90-day waiting period is not required in every shareholder derivative case in Florida. An exception can be made by a court if the plaintiffs (shareholders) can prove that it is a time-sensitive matter that requires immediate legal attention.

Call Our South Florida Shareholder Derivative Litigation Attorneys Today 

At Pike & Lustig, LLP, our Florida shareholder derivative lawsuit lawyers are skilled, effective advocates for clients. If you have any questions about the demand futility standard and shareholder derivative litigation, we are more than ready to help. Give us a call now or connect with us directly online to arrange your confidential case review. With offices in West Palm Beach, Wellington and Miami, our law firm handles complex shareholder derivative litigation throughout Southeastern Florida.

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