# Third District Court of Appeal

State of Florida

Opinion filed May 17, 2017

. Not final until disposition of timely filed motion for rehearing.

________________

Nos. 3D16-479 and 3D16-2229

Lower Tribunal Nos. 13-33823 and 16-18449

________________



### James Louis Fritz

, Appellant,

vs.



### John Calvin Fritz, et al.

, Appellees.

Appeals from the Circuit Court for Miami-Dade County, John W. Thornton

, Jr., Judge.

Joel S. Perwin, P.A., and Joel S. Perwin; Trembly Law Firm, and Fred

Viera

, for appellant.

Homer Bonner Jacobs, and Peter W. Homer and Christopher J. King

, for

appellees.

Before ROTHENBERG, SALTER, and FERNANDEZ, JJ.

ROTHENBERG, J.These consolidated appeals stem from a dispute between five siblings

—

James Louis Fritz, Jennifer Floyd, 1 John Calvin Fritz, Jeffrey Errol Fritz, and Jack

Steven Fritz. In case number 3D16-479, James appeals from the trial court’s order

granting summary judgment in favor of his three brothers, John, Jeffrey, and Jack

(collectively, “the Brothers”), in which the trial court found that James lacked

standing to bring a direct action against the Brothers for breach of fiduciary duty

because the claims “are derivative in nature and not direct as [James] contends,”

and from the subsequently entered final summary judgment (lower tribunal case

number 13-33823). In case number 3D16-2229, James appeals from the trial

court’s order granting the Brothers’ motion to stay the arbitration proceeding

initiated by James on behalf of JW Fritz Partners Limited Partnership and JW Fritz

Partners, Inc., against the Brothers, JW Fritz Partners Limited Partnership, and JW

Fritz Partners, Inc. For the reasons that follow, we affirm.

The Fritz family owns several entities, including Melrose Nursery, Inc.

(“Melrose Nursery”); two limited partnerships, JW Fritz Partners Limited

Partnership and Five Fritz Partners Limited Partnership (collectively, “the limited

partnerships”); and JW Fritz Partners, Inc., the sole general partner of JW Fritz

Partners Limited Partnership. The five siblings are shareholders of Melrose

1 Jennifer Floyd, who was a plaintiff along with James, entered into a mediated

settlement agreement with the Brothers prior to the entry of any of the orders under

review in Case No. 3D16-479.

2Nursery and JW Fritz Partners, Inc. and limited partners of the limited

partnerships.

Melrose Nursery operated on five parcels of land, which were acquired by

the limited partnerships in 2003. In 2005, the limited partnerships sold the five

parcels to a third party, Newsouth, LLC (“Newsouth”), and Newsouth executed

mortgages and promissory notes in favor of the limited partnerships. Although

Newsouth made all of the payments due under the promissory notes and

mortgages, in 2008 Newsouth notified the limited partnerships that it could no

longer make payments. Prior to the filing of a foreclosure action, Newsouth and

the limited partnerships entered into a settlement agreement which allowed

Newsouth to retain two of the five parcels transferred to Newsouth in 2005 in

exchange for Newsouth’s agreement to convey the three remaining parcels to the

limited partnerships or an entity designated by the limited partnerships. Based on

tax advice from the attorney who handled the Fritz family estate matters, the

limited partnerships instructed Newsouth to transfer a ten acre lot, which was

previously owned by JW Fritz Partners Limited Partnership, to Biloxi 3, LLC

(“Biloxi”), which is owned by the Brothers.

Appellate Case Number 3D16-479

In the third amended complaint, James asserted direct claims against the

Brothers, alleging that they breached their fiduciary duty to him regarding two

3matters

— (1) allegedly unearned excessive bonuses and management fees paid by

Melrose Nursery to the Brothers, and (2) the limited partnerships’ 2008 settlement

with Newsouth.

The Brothers moved for summary judgment arguing, in part, that James,

who is a partner of the limited partnerships and a shareholder of Melrose Nursery,

lacks standing in his individual capacity to bring a direct action against the

Brothers, and instead, he should have brought the suit derivatively on behalf of

Melrose Nursery and the limited partnerships. Following a hearing, the trial court

entered an order granting the Brothers’ motion for summary judgment, relying on

this Court’s opinion in Dinuro Investments, LLC v. Camacho

, 141 So. 3d 731 (Fla.

3d DCA 2014), and section 620.2001(2), Florida Statutes (2015).

In applying Dinuro and section 620.2001(2), the trial court concluded that

based on the allegations of the third amended complaint, the claims asserted are

derivative in nature, not direct. Specifically, as to the claims stemming from the

alleged unearned excessive bonuses and management fees paid by Melrose

Nursery to the Brothers, the trial court concluded that James “failed to show a

direct harm and special injury separate and distinct from that sustained by the other

shareholders.” Similarly, as to the limited partnerships’ settlement with Newsouth,

the trial court concluded that James “failed to show a direct harm and a special

injury separate and distinct from that sustained by the other partners.” The trial

4court also concluded that James cannot benefit from the exception to the test set

forth in Dinuro because the third amended complaint “fails to plead a special

contractual or statutory duty owed to [James], much less fraud.” Thereafter, the

trial court entered final summary judgment in favor of the Brothers.

James contends that the trial court erred by granting summary judgment in

favor of the Brothers on the ground that he lacked standing to bring an action

directly against the Brothers for breach of fiduciary duty. Because our review of

the third amended complaint supports the trial court’s determination that the claims

brought by James are derivative in nature, not direct, we affirm.

After reviewing the three tests routinely used to determine whether a

shareholder can bring a direct action, this Court explained in Dinuro as follows:

[A]n action [by a shareholder or a member of a limited liability

company] may be brought directly 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.

We also find that there is an exception to this rule under Florida

law. A shareholder or member need not satisfy this two-prong test

when there is a separate duty owed by the defendant(s) to the

individual plaintiff under contractual or statutory mandates. Thus if

the plaintiff has not satisfied the two-prong test (direct harm and

special injury) or demonstrated a contractual or statutory exception,

the action must be maintained derivatively on behalf of the

corporation or company. Such a rule comports with general standards

of corporate and LLC law by protecting individuals from the

obligations arising out of their relationship to the company, while also

allowing the parties greater freedom to contractually set their

respective obligations.

5Dinuro

, 141 So. 3d at 739-40 (emphasis in original) (citations omitted); see also §

607.07401, Fla. Stat. (2015). As to partnerships, the trial court also relied on

section 620.2001(2), Florida Statutes (2015), which provides: “A partner

commencing a direct action under this section is required to plead and prove an

actual or threatened injury that is not solely the result of any injury suffered or

threatened to be suffered by the limited partnership.”

In the instant case, the trial court correctly concluded that James failed to

show a direct harm and special injury separate and distinct from that sustained by

the other shareholders based on the alleged unearned excessive bonuses and

management fees paid by Melrose Nursery to the Brothers. In Karten v. Woltin

, 23

So. 3d 839 (Fla. 4th DCA 2009), a minority shareholder filed a direct action

against the majority shareholders of a closely held corporation. Id. at 839-40. The

complaint alleged that the majority shareholders breached their fiduciary duty to

the minority shareholder by voting to pay an excessive salary to one of the

majority shareholders, thereby depriving the minority shareholder of profits. Id. at

840. The lower tribunal granted the majority shareholders’ motion for summary

judgment, finding that, because the minority shareholder’s allegations did not set

forth any unique facts of a direct loss to him as the minority shareholder, the

allegations could only be brought as a derivative claim under section 607.07401.

Id. In reviewing the lower tribunal’s decision, the Fourth District explained:

6“Generally, a shareholder cannot sue in the shareholder’s name for injuries to a

corporation unless there is a special duty between the wrongdoer and the

shareholder, and the shareholder has suffered an injury separate and distinct from

that suffered by other shareholders.” Id. (quoting Braun v. Buyers Choice Mtg.

Corp.

, 851 So. 2d 199, 203 (Fla. 4th DCA 2003)). In affirming the grant of

summary judgment, the Fourth District held that the minority shareholder’s

allegations of excessive payment and other examples of mismanagement and waste

did not constitute the type of individualized harm necessary to allow the filing of a

direct action and the avoidance of the strictures of a derivative cause of action

under section 607.07401, even though the alleged excessive payment,

mismanagement, and waste could affect the relative value of the shares owned by

all the shareholders. Id. at 841; see also Orlinsky v. Patraka

, 971 So. 2d 796, 801-

02 (Fla. 3d DCA 2007) ( “A shareholder must file a derivative action for breach of

fiduciary duty, claiming that the payment of excessive compensation constitutes

corporate waste.”).

We also agree with the trial court’s determination that James’s breach of

fiduciary duty claim, which was based on the limited partnerships’ 2008 settlement

with Newsouth, must be brought in a derivative action. As the trial court correctly

determined, if any injury was suffered as a result of the limited partnerships’

handling of the default, which included transferring ten acres to Biloxi rather than

7reverting the ownership back to the former owner, JW Fritz Partners Limited

Partnership, such damage was sustained by the limited partnership, not directly by

the partners, and James failed to show a direct harm and a special injury separate

and distinct from that sustained by the other partners. See Dinuro

, 141 So. 3d at

740 (holding that Dinuro, a member of the LLC, lacked standing to bring a direct

action against two other members of the LLC based on Dinuro’s claim that the

LLC was devalued due to the actions of the two other members, thereby leaving

Dinuro “with nothing to show for its investments”; noting that Dinuro’s action

against the other two members of the LLC should have been brought derivatively).

Thus, we affirm the trial court’s order granting summary judgment in favor of the

Brothers and the subsequently entered final summary judgement. 2

Appellate Case Number 3D16-2229

James also appeals from the trial court’s order granting the Brothers’ motion

2 A few days after the summary judgment hearing, but before the trial court issued

its order granting summary judgment, James moved for leave to file a fourth

amended complaint, which the trial court denied. Thereafter, James moved for

reconsideration of the order denying the motion for leave to file a fourth amended

complaint, which the trial court also denied. Finding no abuse of discretion in the

denial of either motion, we affirm those orders without any further discussion. See

Rodriguez v. Recovery Performance & Marine, LLC

, 38 So. 3d 178, 181 (Fla. 3d

DCA 2010) (holding that “a trial court’s decision whether to grant a motion to

amend a complaint is reviewed for abuse of discretion”); Kohn v. City of Miami

Beach

, 611 So. 2d 538, 539 (Fla. 3d DCA 1992) (“ While there is no magical

number of amendments which are allowed, we have previously observed that with

amendments beyond the third attempt, dismissal with prejudice is generally not an

abuse of discretion.”).

8to stay the arbitration proceeding initiated by James on behalf of JW Fritz Partners

Limited Partnership and JW Fritz Partners, Inc., against the Brothers, JW Fritz

Partners Limited Partnership, and JW Fritz Partners, Inc. Because James waived

his right to arbitration, we affirm.

In May 2016, approximately three months after the trial court entered the

final summary judgment in favor of the Brothers based on James’s lack of

standing, James filed an arbitration action against the Brothers, JW Fritz Partners

Limited Partnership, 3 and JW Fritz Partners, Inc., on behalf of JW Fritz Partners

Limited Partnership and its corporate general partner, JW Fritz Partners, Inc. The

arbitration action relates to the settlement with Newsouth.

The Brothers, JW Fritz Partners Limited Partnership, and JW Fritz Partners,

Inc. filed a petition to enjoin the arbitration action, arguing that James had waived

any right to arbitration because the causes of action asserted in the arbitration

complaint relate to the same matter unsuccessfully litigated by James for three

years in lower tribunal case number 13-33823

— the 2008 settlement with

Newsouth. Following a hearing, the trial court granted the motion to stay the

arbitration pending this Court’s resolution of the appeal in case number 3D16-479,

finding that James waived his right to invoke arbitration because he spent three

years litigating the same matter in lower tribunal case number 13-33823, and

3 The JW Fritz Partners Limited Partnership Agreement contained an arbitration

provision.

9therefore, he has clearly “acted inconsistently with the right to arbitrate and [is]

now forum shopping.” Cassedy v. Hofmann

, 153 So. 3d 938, 942 (Fla. 1st DCA

2014). Finding no error in the trial court’s decision, we affirm the trial court’s

order staying arbitration without further discussion. See Raymond James Fin.

Servs., Inc. v. Saldukas

, 896 So. 2d 707, 711 (Fla. 2005) (recognizing that a party’s

right to arbitrate “may be waived by actually participating in a lawsuit or taking

action inconsistent with that right”; holding that “an arbitration right must be

safeguarded by a party who seeks to rely upon that right and the party must not act

inconsistently”); Cassedy v. Hofmann

, 153 So. 3d 938, 942 (Fla. 1st DCA 2014)

(holding “a claim of waiver of the right to arbitrate based on prior litigation

conduct is presumptively one for the court”).

Any other arguments or issues raised by James do not merit discussion.

Accordingly, we affirm the orders and/or judgments under review in these

consolidated appeals.

Affirmed.

10