SMITH et al v. WILLIAMS et al

Filing 49

ORDER granting 27 Motion to Dismiss. This case is DISMISSED with prejudice. The Clerk is directed to close this case, and to terminate all pending motions. Signed by JUDGE RICHARD SMOAK on 1/6/2015. (jcw)

Page 1 of 3

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF FLORIDA
PANAMA CITY DIVISION
WILLIAM H. SMITH, et al.,
Plaintiffs,
v.

CASE NO. 5:14-cv-144-RS-EMT

JAMES M. WILLIAMS, JR., et al.,
Defendants.
__________________________________/
ORDER
Before me are Defendants’ Second Amended Motion to Dismiss or, in the
Alternative, Stay the Action (Doc. 27), Plaintiffs’ Response to Defendants’ Second
Amended Motion to Dismiss (Doc. 28), and Plaintiffs’ First Amended Complaint
(Doc. 4). The relief requested in Defendants’ Second Amended Motion to Dismiss
or, in the Alternative, Stay the Action (Doc. 27) is GRANTED.
Rule 12(b)(1) and Rule 12(h)(3) of the Federal Rules of Civil Procedure
require dismissal of claims “[i]f the court determines at any time that it lacks
subject-matter jurisdiction.” See Fed. R. Civ. P. 12(b)(1), 12(h)(3). In Plaintiffs’
First Amended Complaint, Plaintiff alleges that the Plaintiffs and Defendant
Williams entered into a joint business venture in which the parties created Florida
Limited Liability Corporations. Doc. 4. According to Plaintiffs, after Plaintiffs

Page 2 of 3

filed a state law case to obtain an accounting of some of the joint business
ventures, Defendants fraudulently foreclosed on the joint business ventures.1 Id. As
a result of these fraudulent foreclosures, and Defendant Williams breach of
fiduciary duty, Plaintiffs claim Defendants wrongfully divested Plaintiffs of their
ownership interests in the joint venture properties. Id.
Under Florida law, “a member of an LLC [is not permitted] to sue
individually for damages arising out of its status as a member of a company unless
the damages arise from a direct harm and special injury, or if there is a separate
duty owed from the defendant to the plaintiff member.” Dinuro Investments, LLC
v. Camacho, 141 So. 3d 731, 743 (Fla. Dist. Ct. App. 2014). Like the Plaintiff in
Dinuro Investments, Plaintiffs in this case have brought a direct action against
Defendants and not a derivative action. Even assuming that all of Plaintiffs
allegations are true, Plaintiffs injuries are a result of the total devaluation of the
joint venture businesses and are therefore an indirect harm to Plaintiffs. See id. at
740. Accordingly, under Florida law, Plaintiffs are required to bring a derivative
action on behalf of the company, which they have failed to do. Id. at 743.
The Eleventh Circuit has recognized that there is “no question that a
corporation is an indispensable party” in a derivative action brought by members.
In the state law case, Defendant Williams has filed a counterclaim seeking a
declaratory judgment by the state court that he committed “no wrongful actions” in
relation to the LLC’s. See Doc. 27-4.
1

Page 3 of 3

Liddy v. Urbanek, 707 F.2d 1222, 1224 (11th Cir. 1983). The Florida Limited
Liability Corporations are absent indispensable parties that initially should have
been joined as defendants. Id. at 1225. Including the Florida corporations destroys
Plaintiffs claim of diversity jurisdiction.
Accordingly, the relief requested in Defendants’ Second Amended Motion
to Dismiss or, in the Alternative, Stay the Action (Doc. 27) is GRANTED. This
case is DISMISSED with prejudice. The Clerk is directed to close this case, and
to terminate all pending motions.
ORDERED on January 6, 2015.

/S/ Richard Smoak
RICHARD SMOAK
UNITED STATES DISTRICT JUDGE