Florida Appellate Court Cites GK Attorneys’ Work As “Textbook Example” Of How Special Litigation Committee Should Operate
On January 31, 2020, an opinion from Florida’s Second District Court of Appeal recognized the work of GK shareholders Peter B. King, Esq. and Jared J. Perez, Esq. as a “textbook example” of how a Special Litigation Committee should operate under the state’s Revised LLC Act. Specifically, Hillsborough County Circuit Court Judge Paul J. Huey appointed Mr. King to serve as the Special Litigation Committee for defendant Downtown St. Pete Properties, LLC (DSPP) regarding certain derivative claims asserted in connection with a long-running real estate and corporate governance dispute. He was tasked with investigating the claims and advising the trial court whether pursuing them was in DSPP’s best interests. Mr. King hired Mr. Perez to assist him with the investigation.
As explained in the opinion, Mr. King and Mr. Perez conduced interviews, reviewed numerous documents (including pleadings, emails, and deposition transcripts) and eventually submitted a 59-page report and hundreds of pages of supporting exhibits. As further explained in the opinion:
The report offered an introduction and summary of the SLC’s investigation, provided a history of the events leading to the derivative action, and set forth the SLC’s analysis and recommendations. The SLC identified the witnesses that it interviewed and the depositions, trial testimony, and documents it reviewed during its investigation. The SLC concluded that pursuing the derivative claims was not in DSPP’s best interest. Consequently, the SLC recommended dismissal “because the claims … lack[ed] merit and the alleged wrongdoing was not the proximate (or sometimes even actual) cause of DSPP’s damage.”
After an evidentiary hearing on the Special Litigation Committee’s independence, good faith, and due diligence, the trial court adopted the Committee’s recommendation and dismissed the derivative claims. The plaintiff sought additional discovery, which the trial court denied. The appellate court affirmed the trial court, noting: “Quite simply, our record reflects a textbook example of how a SLC should proceed.”
Citing to analogous situations and Delaware law, the appellate court concluded that “Chapter 605 does not require the trial court to allow discovery from the SLC.” The court explained that “discovery relating to a SLC’s report is not a matter of right. Rather, the trial court, in its discretion, may determine whether discovery is needed to enable it to make its statutorily-required findings as to the derivative claims.”
A copy of the appellate court’s decision can be found here.