INDUSTRIAL ELECTRONICS ASSOCIATES, INC., A FLORIDA CORPORATION, APPELLANT,
v.
EARL L. POTEAT AND JEANNE POTEAT, FOR AND ON BEHALF OF INDUSTRIAL ELECTRONICS ASSOCIATES, INC., A FLORIDA CORPORATION, ET AL., APPELLEES
AI-generated. These summaries, headnotes, and key points are machine-generated and may contain errors or omissions. Always verify against the full opinion text below. Not legal advice.
Industrial Electronics Associates, Inc. appealed an order requiring minority stockholders to post a $2,500 security bond in a derivative suit under Florida Statutes § 608.131(4). The Fourth District affirmed, holding that trial courts have broad discretion in setting security amounts and the appellant failed to demonstrate an abuse of discretion.
The trial court did not abuse its discretion in setting the security amount at $2,500. Trial courts have broad discretion under F.S. § 608.131(4) in determining reasonable security expenses, and appellants must demonstrate an abuse of that discretion to prevail on appeal.
[1] A trial court has broad discretion in setting the amount of security for expenses in a stockholders derivative suit.
[2] A party seeking to overturn a trial court's decision on the amount of security for expenses must demonstrate an abuse of discretion.
Previewing 2 of 5 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“A reading of the statute makes it clear that the legislature intended to give the trial court broad discretion in setting the amount of the security in order to effectuate the remedial purposes of the act.”
Establishes that trial courts have broad discretionary authority under the statute in determining security amounts
Previewing 1 of 3 key quotes on this case — the court’s exact language, pinpointed for members.
Join FLexlaw to unlock all legal intelligenceMinority stockholders Earl L. Poteat and others filed a derivative suit against corporate directors alleging misconduct and breach of fiduciary duty. …
The full statement of facts, procedural history, and disposition for this case are member content.
Join FLexlaw to unlock all legal intelligence© FLexlaw, Inc. — AI-generated enrichments are proprietary. All rights reserved.
Explore caselaw by topic → Browse Reasonable Expenses cases and more on FLexlaw
Appellant, Industrial Electronics Associates, Inc., brings this interlocutory appeal seeking review of an order requiring ap-pellees-plaintiffs, Earl L. Poteat, et al., to post a “security-for-expenses” bond pursuant to Section 608.131(4), Florida Statutes *1361969, F.S.A., in a stockholders derivative suit. We affirm.
Plaintiffs, minority stockholders in the appellant corporation, instituted a stockholders derivative suit against certain directors of the corporation, alleging misconduct and breach of the directors’ fiduciary duty to the corporation. The corporation filed a motion that plaintiffs be required to give security for the corporation’s expenses in connection with the suit, and for any moment in which the corporation might be required to indemnify the defendant directors, under F.S. § 608.131(4), F.S.A. Two affidavits were filed with the motion, to the effect that the expenses in connection with the suit, including attorneys’ fees, would be over $12,000.
The trial court, in the order being appealed, granted the motion for security and ordered plaintiffs to post a bond in the amount of $2500. This appeal followed, appellant contending that the amount of the security was inadequate.
Subsection 608.131(4), Florida Statutes 1969, F.S.A., provides that in a derivative action if the plaintiff stockholder holds less than five per cent of the outstanding shares or his holdings are worth $50,000 or less, plaintiff may be required to give security for reasonable expenses, including attorney’s fees, which may be incurred either by the corporation or by other parties defendant whom the corporation may be required to indemnify The last sentence of F.S. § 608.131(4), F.S.A., provides that the amount of such security may thereafter be increased or decreased in the discretion of the court upon a showing that the security provided has or may become inadequate or excessive.
A reading of the statute makes it clear that the legislature intended to give the trial court broad discretion in setting the amount of the security in order to effectuate the remedial purposes of the act.1 It is therefore incumbent upon appellant to demonstrate an abuse of this discretion. Although no Florida cases precisely on point have been found, courts in other jurisdictions have accorded the trial court broad, though not uncontrolled, discretion in setting the amount of security under similar statutes. See, e. g., Goldstein v. Weisman, S.D.N.Y.1960, 185 F. Supp. 242; Chrysler Corp. v. Dann, Del.1966, 223 A.2d 384; Beyerbach v. Juno Oil Co., 1954, 42 Cal.2d 11, 265 P.2d 1, 9-10. It is only reasonable expenses, in an amount to be determined by the court upon notice and hearing, which plaintiff may be required to secure. Beyerbach v. Juno Oil Co., supra. The court is not limited to consideration of affidavits of the type submitted by appellant in determining “reasonable” expenses. In Marks v. Seedman, S.D.N.Y.1969, 309 F.Supp. 332, 334, the court listed several factors which it had taken into account in fixing the amount of the security. The trial judge may also utilize his own knowledge of legal practice as a factor in determining attorneys’ fees under the statute. Muller v. Tanner, 1970, 2 Cal.App.3d 445, 452, 82 Cal.Rptr. 738, 742.
In view of appellant’s right under the statute to move for an increase in the security whenever it can show that the amount provided in the order being appealed is in fact inadequate, it cannot be said that the trial court abused its discretion in setting the amount of security at $2500.
Accordingly, the order is affirmed.
REED, C. J., and OWEN, J., concur.